Marriage of Aufmuth, In re

• Decision Date: 20 February 1979
• Citation: 89 Cal.App.3d 446,152 Cal.Rptr. 668
• Court: California Court of Appeals Court of Appeals
• Parties: In re the MARRIAGE of Marcia A. and Lawrence A. AUFMUTH. Marcia A. AUFMUTH, Appellant, v. Lawrence A. AUFMUTH, Appellant. Civ. 42316.

Page 668

152 Cal.Rptr. 668

89 Cal.App.3d 446

In re the MARRIAGE of Marcia A. and Lawrence A. AUFMUTH Marcia A. AUFMUTH, Appellant, v. Lawrence A. AUFMUTH, Appellant.

Civ. 42316.

Court of Appeal, First District, Division 4, California.

Feb. 20, 1979.

As Modified on Denial of Rehearing March 20, 1979.

Hearing Denied April 19, 1979.

Walter T. Winter, Barbara R. Dornan, San Francisco, for appellant Marcia Aufmuth

Morgan, Beauzay, Hammer, Ezgar, Bledsoe & Rucka, Paul E. Jacobs, Philip L. Hammer, San Jose, for appellant Lawrence Aufmuth.

McGUIRE ^*, Associate Justice.

Marcia Aufmuth (hereinafter "wife") appeals from an interlocutory judgment dissolving the parties' marriage. Lawrence Aufmuth ("husband") cross-appeals from certain provisions of the judgment.

The parties were married on August 19, 1967. Husband was then a law student and part-time clerk, and wife was a teacher. Wife worked until February, 1969, when the first child of the marriage was born. During the marriage thereafter, she was a housewife. To enable husband to complete his third year of law school, the parties secured a student loan. The balance due on the loan was $1,230.98 when they separated.

In July, 1971, the parties purchased a family residence for $66,500 with a down payment of $16,500. The $50,000 balance was paid from a real estate loan evidenced by a promissory note and a deed of trust executed by both parties. Title to the property was taken in both names and as community property, and all subsequent payments and costs connected with it were paid from community earnings during the marriage. The parties agreed at trial that the fair market value of the residence was $125,000, and that the balance on the house loan was $47,000, at that time.

In January, 1974, husband became a 5% Shareholder in a corporate law firm in exchange for promissory notes which he executed in the sum of $16,300. His interest in the corporation was held subject to a repurchase agreement which fixed the purchase price of his stock according to a prescribed formula.

The parties separated on September 1, 1975. There were two children at the time of trial, ages 4 and 7.

In 1976, husband's gross salary was $63,000 with a net take-home of $37,300. He also received three quarterly bonuses and a fourth year-end bonus payable in September of each year.

The following determinations by the trial court are challenged by wife's appeal and husband's cross-appeal:

1. At the time the residence was purchased, wife had a separate property interest in it valued at $16,500 (the amount of the down payment) and the community interest in it was worth $50,000.

2. At the time of trial, wife's separate property interest in the residence was worth $31,014 and the community interest in it was worth $46,986.

3. Husband's legal education was not property to be valued for division purposes, but the loan for his legal education was a community obligation.

4. In valuing the 5% Stock interest in the corporate law firm, the factor of goodwill was to be excluded and the value was to be set as of the time of trial and not the date of separation.

5. Wife was awarded $1,000 per month in spousal support, with no fixed termination date.

6. Wife was awarded $3,500 in attorney's fees.

THE FAMILY RESIDENCE

Wife contends that the trial court erred in failing to find that the home is her separate property, subject to the community's right of reimbursement. She argues that where, as here, the down payment on a home is made entirely with separate property of one spouse, and the balance of the purchase price was obtained through a loan secured by that property, the home is the separate property of that spouse.

On the other hand, husband contends on his cross-appeal ¹ that the trial court erred in failing to find that the equity in the home was entirely community property. He argues that wife failed to rebut the presumption that all property acquired during marriage is community property (See v. See (1966) 64 Cal.2d 778, 781, 51 Cal.Rptr. 888, 415 P.2d 776; Civ.Code, § 5110), and that the down payment from wife's separate property should be treated as a gift to the community. Neither argument is well taken.

Character Of The Down Payment

All property owned by a husband or wife before marriage, and "that acquired afterwards by gift, bequest, devise or descent, with the rents, issues, and profits thereof," is the separate property of the acquiring spouse. (Civ.Code, §§ 5107, 5108; In re Marriage of Mix (1975) 14 Cal.3d 604, 610, 122 Cal.Rptr. 79, 536 P.2d 479.) Property purchased with separate property funds is likewise the separate property of the acquiring spouse. (In re Marriage of Mix, supra, at p. 610, 122 Cal.Rptr. 79, 536 P.2d 479.) Such separate property does not change its character as a result of the marriage or of its mere use in the marital relationship. (Patterson v. Patterson (1966) 242 Cal.App.2d 333, 340, 51 Cal.Rptr. 339.) Nor does separate property lose its character as such merely because of a change in form or identity. (Id.; Thomasset v. Thomasset (1953) 122 Cal.App.2d 116, 124, 264 P.2d 626.)

If property is separate at the time of its acquisition, "it remains so with the exception of such increase thereof as may have been due to the contribution of the community by virtue of capital or industry." (Thomasset v. Thomasset, supra, at p. 123, 264 P.2d at p. 631.)

There is a statutory presumption that property acquired by either spouse during marriage is community. (Civ.Code, § 5110; See v. See, supra, 64 Cal.2d 778 at p. 783, 51 Cal.Rptr. 888, 415 P.2d 776.) This presumption is rebuttable (In re Marriage of Mix, supra, at p. 611, 122 Cal.Rptr. 79, 536 P.2d 479), and it may be overcome by a preponderance of evidence. (Patterson v. Patterson, supra, 242 Cal.App.2d 333 at p. 341, 51 Cal.Rptr. 339.) Whether or not the presumption has been rebutted is a question of fact for the trial court (Gudelj v. Gudelj (1953) 41 Cal.2d 202, 212, 259 P.2d 656), and its findings must be upheld if supported by substantial evidence. (In re Marriage of Smith (1978) 79 Cal.App.3d 725, 742, 145 Cal.Rptr. 205.) The form of the instrument under which the parties hold title is not conclusive of the status of the property. (Gudelj v. Gudelj, supra, at p. 212, 259 P.2d 656.)

The evidence established that the source of the funds for the down payment on the residence was a savings account which was held in trust for wife by her parents in another state. There was testimony that at the time these funds were used for the down payment there was no intent by the parents or wife to make a gift to the community. At that time, and at all times prior to the commencement of the dissolution proceeding, neither party communicated with the other as to the property status of the funds used. Thus, although title to the property was taken in both names as community property, there is substantial evidence to support the trial court's finding that the down payment was and continued to be a separate property interest held by wife in the residence. This finding is supported on the basis of an adequate tracing of the wife's separate property. It need not be based on any understanding between the parties as to the separate property character of the down payment. (In re Marriage of Mix, supra, 14 Cal.3d 604 at p. 614, 122 Cal.Rptr. 79, 536 P.2d 479.)

Classification Of Balance Of Purchase Price

The trial court was also justified in determining that the balance of the purchase price on the home, obtained with a $50,000 loan, was paid from community funds.

The character of property acquired upon credit during marriage is determined according to the intent of the lender to rely upon the separate property of the purchaser or upon a community asset. (Gudelj v. Gudelj, supra, 41 Cal.2d 202 at p. 210, 259 P.2d 656; Hogevoll v. Hogevoll (1943) 59 Cal.App.2d 188, 193-194, 138 P.2d 693.)

There is a presumption that the proceeds of a loan acquired during marriage are community property. (Civ.Code, § 5110.) The presumption may be overcome only by a showing that the loan Was extended on the faith of existing separate property belonging to the acquiring spouse. (Estate of Ellis (1928) 203 Cal. 414, 416, 264 P. 743; Estate of Abdale (1946) 28 Cal.2d 587, 592, 170 P.2d 918.) In the absence of evidence tending to show this, the trial court must find in accordance with the presumption. (Gudelj v. Gudelj, supra, at p. 210, 259 P.2d 656.)

Although no testimony was presented concerning the intent of the real estate lender in extending credit to the parties, it is apparent that the credit was extended on the strength of the community earnings. Wife had no separate property other that the $16,500 before the purchase of the home, she was not employed, and she had no appreciable earnings. Husband was a practicing attorney at the time and his income was the sole source of support of the community. Under these circumstances, we decline to disturb the trial court's implied finding in accordance with the presumption that the proceeds of the loan were community funds.

Separate And Community Property Interests In The Family Residence

It follows that both separate and community interests in the family home were established. The presumption that all property acquired during marriage is community is controlling Only when it is impossible to trace the source of the specific property. (In re Marriage of Bjornestad (1974) 38 Cal.App.3d 801, 806, 113 Cal.Rptr. 576.) Thus, "(w)here community and separate property are commingled and property is purchased with the mixed funds, . . . and each contribution is clearly ascertainable, the character of the funds remains unchanged. . . . There is both a community and a separate interest in property purchased with separate and community funds where each contribution is clearly ascertainable." (Faust v. Faust (1949) 91 Cal.App.2d 304, 309, 204 P.2d 906, 909.)

The amounts of separate and community funds are...