Weinberg v. Weinberg

• Decision Date: 30 October 1967
• Citation: 63 Cal.Rptr. 13,432 P.2d 709,67 Cal.2d 557
• Court: California Supreme Court
• Parties: , 432 P.2d 709 Joan Muriel WEINBERG, Plaintiff and Appellant, v. Francis Stephen WEINBERG, Defendant and Appellant. L.A. 28919.

Page 13

63 Cal.Rptr. 13

67 Cal.2d 557, 432 P.2d 709

Joan Muriel WEINBERG, Plaintiff and Appellant, v. Francis Stephen WEINBERG, Defendant and Appellant.

L.A. 28919.

Supreme Court of California In Bank.

Oct. 30, 1967.

Rehearing Denied Nov. 29, 1967.

Ward & Heyler and Charles A. Druten, Beverly Hills, for plaintiff and appellant.

Edward Sumner, Los Angeles, for defendant and appellant.

TRAYNOR, Chief Justice.

Both parties appeal from an interlocutory judgment granting a divorce to each, awarding alimony to plaintiff wife, determining the property rights of the parties, and awarding fees and costs. Neither party challenges the part of the judgment granting the divorce, but each contends that in other respects the trial court committed various errors.

Plaintiff and defendant married on June 2, 1959, and separated on October 30, 1963. They have no children. Plaintiff had virtually no property at the time of the marriage. Defendant's net worth was $489,208.19, including all of the shares of All Metal Fabricators, Inc. and Alpha Engineering Corporation, 50 percent of the shares of Airborne Electonics Corporation, interests in employee profit sharing and retirement plan trust funds of two of the corporations, and several checking accounts. The trial court found that the net worth of both parties increased during the marriage to not less than $2,487,928.08, of which $338,164.93 was community property.

Defendant has two children by a previous marriage, which also ended in divorce. The decree in that case awarded custody of the children to defendant's former wife, incorporated a property settlement agreement, and ordered defendant to pay $1,800 per month alimony and $600 per month child support. During his second marriage defendant used community funds to pay the alimony and child support. The trial court held that defendant must reimburse the community for the alimony payments but that the child support was an obligation he could charge against the community estate. Plaintiff contends that neither the alimony nor the child support payments benefited the community and that therefore both should have been charged against defendant's separate property. Defendant contends that both obligations were debts he was entitled to discharge from community property. (See Civ.Code, § 172; Grolemund v. Cafferata (1941) 17 Cal.2d 679, 688, 111 P.2d 641.)

The policy of protecting the husband's creditors outweighs the policy of protecting family income even from premarital creditors of the husband. Community property is therefore available to such creditors. (Grolemund v. Cafferata, supra, 17 Cal.2d 679, 689, 111 P.2d 641; Nichols v. Mitchell (1948) 32 Cal.2d 598, 610, 197 P.2d 550; Odone v. Marzocchi (1949) 34 Cal.2d 431, 440, 211 P.2d 297, 212 P.2d 233, 17 A.L.R.2d 1109.) As such a creditor, a husband's first wife can levy against the community property of his second marriage for alimony payments due. (Bruton v. Tearle (1936) 7 Cal.2d 48, 57, 59 P.2d 953, 106 A.L.R. 580; Yager v. Yager (1936) 7 Cal.2d 213, 220, 60 P.2d 422, 106 A.L.R. 664.) As manager of the community property 'with like absolute power of disposition, other than testamentary, as he has of his separate estate' (Civ.Code, § 172), the husband may also voluntarily discharge such obligations from community property. In California, there are ordinarily no separate as distinguished from community debts of the husband. With exceptions not relevant here, 'our community system is based upon the principle that all debts which are not specifically made the obligation of the wife are grouped together as the obligations of the husband and the community property.' (Grolemund v. Cafferata, supra, 17 Cal.2d 679, 688, 111 P.2d 641, 645.) It does not follow, however, that the community can never claim reimbursement from the husband's separate estate when community property has been used to discharge a husband's obligation. The husband's legal right of management and control has long been recognized to imply correlative duties to his wife. His duties are analogous to those of a partner; he cannot obtain an unfair advantage from the trust placed in him as a result of the marital relationship. (Vai v. Bank of America (1961) 56 Cal.2d 329, 337--339, 15 Cal.Rptr. 71, 364 P.2d 247; Fields v. Michael (1949) 91 Cal.App.2d 443, 447--448, 205 P.2d 402.) Thus, in Provost v. Provost (1929) 102 Cal.App. 775, 283 P. 842, the community was held to be entitled to reimbursement to the extent of community funds used by the husband for the improvement of his separate property. 'To hold otherwise would be to permit the authority of the husband in controlling the community property, given him in the interest of greater freedom in its use and for its transfer for the benefit of both himself and his wife, to become a weapon to be used by him to rob her of every vestige of interest in the community property with which the law has expressly invested her. Such a conclusion would violate every sense of justice, and outrage every principle of fair dealing, known to the law. The provisions of our Code do not require us to so hold, nor do the prior decisions of this jurisdiction compel or warrant a ruling which would thus uphold the marital marauding of the wife's estate. * * *' (Provost v. Provost, supra, 102 Cal.App. 775, 781, 283 P. 842, 844; see also Estate of Turner (1939) 35 Cal.App.2d 576, 580, 96 P.2d 363; White v. White (1938) 26 Cal.App.2d 524, 530, 79 P.2d 759.)

Like considerations are present here. Defendant's alimony and child support obligations were incurred before his second marriage. They represent a continuing obligation, however, based on both his community and separate incomes. (Webber v. Webber (1948) 33 Cal.2d 153, 160, 199 P.2d 934; Mueller v. Mueller (1956) 144 Cal.App.2d 245, 253, 301 P.2d 90; Civ.Code, § 139.) During the second marriage the parties' net worth increased by approximately $2,000,000, of which only $338,000 was community property. Under these circumstances, it would be unjust to plaintiff to allow defendant to preserve his separate estate by using only community funds to meet alimony and child support obligations totaling more than $130,000 that were substantially based on his large separate income.

An apportionment of defendant's alimony and child support obligations between his separate income and the community income is both practical and fair. Defendant's total separate and community income during the period of his second marriage should be used to determine the proportionate amounts that his separate and community property will be charged. Although his earnings from separate property are sufficient to pay the whole, it would be inequitable to charge the obligations wholly to his separate income, since the obligations are continuing and based in part on his community earnings. In determining the proportion, however, his separate income must include capital increases in investments, even though the gains are not realized, for otherwise defendant would be free to use unrealized capital gains to deplete the community for the benefit of his personal estate.

Defendant contends that plaintiff received an income tax benefit from alimony expense deductions, and that the actual depletion of the community estate was therefore the net after-tax cost of the payments, not the gross amount of the payments. No specific computation of the actual benefit to plaintiff or detriment to defendant appears, but the record shows that both parties shared the benefit of the deductions for alimony, which were taken on joint tax returns. Defendant had the option of filing a separate return or a joint return and could choose whichever he felt was the most advantageous. That choice did not depend on whether defendant paid the alimony from separate or community income. Had the payments been correctly allocated against separate and community property, the tax would have been the same. Accordingly, no adjustment for the benefit either party received from the alimony tax deduction need be made.

At the time of his second marriage, defendant owned all the stock of All Metal Fabricators, Inc. and Alpha Engineering Corporation, worth approximately $130,000. The trial court found that during the marriage the value of the stock increased by approximately $225,000 and that $95,000 of the increase could be attributed to growth of 7 percent per annum as a fair return on investment. (Pereira v. Pereira (1909) 156 Cal. 1, 11--12, 103 P. 488, 23 L.R.A.,N.S., 880.) It found that the balance of $160,000 was attributable to defendant's labor and skill, and was therefore community property. It ordered defendant to pay plaintiff half the balance in money. (See DeBurgh v. DeBurgh (1952) 39 Cal.2d 858, 874, 250 P.2d 598; Webster v. Webster (1932) 216 Cal. 485, 488, 14 P.2d 522.)

Defendant contends that a 7 percent return is not currently considered to be a fair or adequate return on risk capital invested in a small, closely-held corporation and that the increase in net worth of his wholly-owned corporations was partially attributable to inflation and other general economic and business factors. Since he offered no evidence of current returns, however, the trial court correctly adopted the rate of legal interest. (Pereira v. Pereira, supra, 156 Cal. 1, 11--12, 103 P. 488, 23 L.R.A.,N.S., 880; cf. Tassi v. Tassi (1958) 160 Cal.App.2d 680, 691, 325 P.2d 872.) Since he also offered no evidence of the effect of inflation and other economic factors on his corporations, the trial court properly disregarded those factors. Cf. Logan v. Forster (1952) 114 Cal.App.2d 587, 601, 250 P.2d 730.)

Defendant raises a number of contentions concerning the tax consequences of liquidating his interests to pay his wife her share of the community estate. He bases some of these contentions on an erroneous statement of the trial court's findings. The trial court found profits and accruals in excess of defendant's separate...