Winn v. Winn

Citation673 P.2d 411,105 Idaho 811
Decision Date08 December 1983
Docket NumberNo. 14529,14529
PartiesVirgil George WINN, Plaintiff-Appellant, v. Alfreda E. WINN, Defendant-Respondent.
CourtUnited States State Supreme Court of Idaho

Craig Marcus and Claude V. Marcus, Boise, for plaintiff-appellant.

James E. Risch, Boise, for defendant-respondent.

HUNTLEY, Justice.

By this appeal we deal with the recurring problem of the division of property acquired during marriage when all or substantially all payments on the debt were made from the separate property of one spouse.

Virgil and Alfreda Winn were married on June 3, 1972. A home was purchased in November of the same year for $27,346.14. Virgil paid $200 earnest money and the down payment of $3,146 from his separate funds. Title was deeded to both parties. The $24,000 balance was paid by procuring a loan secured by a deed of trust on the house. The note and deed of trust were signed by both spouses. All payments on the note, during and after the marriage, were made from Virgil's separate funds.

The Winns were separated in early 1977 and Alfreda moved out of the house. Virgil has at all times continued to live in the house. In March of 1977 Virgil filed for divorce, and a decree granting the same was subsequently entered.

Three judges have considered and ruled on this case. In proceedings in the magistrate's division of the district court, the magistrate held that the house was community property and that Virgil would be liable to Alfreda for rent for her one-half interest therein should he continue to reside in the house. This decision was appealed to the district court and the district judge concluded that the property was separate because the funds used to acquire it were traceable to separate property. The district court nevertheless ordered a trial de novo. However, a third judge presided over the trial de novo and came to the same conclusion that the magistrate reached in the first proceeding, that the home was community property and that Virgil would owe Alfreda rent for the period that he had sole and exclusive possession of the house. The court further held that Virgil was entitled to reimbursement for the payments made by him from his separate funds.

The character of all property acquired by either spouse during marriage is presumed to be community. Stanger v. Stanger, 98 Idaho 725, 571 P.2d 1126 (1977). The party asserting that the property is separate has the burden of overcoming this presumption by proving such separate character. Estate of Freeburn, 97 Idaho 845, 555 P.2d 385 (1976).

Virgil asserts that he has met this burden, as he has shown conclusively that the source of all payments on the loan was his separate property. His argument is premised on an incorrect application of the rule that the property or thing acquired partakes of the same nature as the property or funds used to acquire it, de Funiak & Vaughn, Principles of Community Property, § 77 (2d ed. 1971), or otherwise stated: "[t]he crucial question in determining the status of ... property is the source of the funds with which it was purchased," Rose v. Rose, 82 Idaho 395, 399, 353 P.2d 1089 (1960); accord Stanger v. Stanger, supra; In re Estate of Cook, 96 Idaho 48, 524 P.2d 176 (1974); Cargill v. Hancock, 92 Idaho 460, 444 P.2d 421 (1968); Stewart v. Weiser Lumber Co., Ltd., 21 Idaho 340, 121 P. 775 (1912). Accordingly, the rule proceeds, when separate property is used to acquire an asset, that asset becomes the separate property of the acquiring spouse. Idaho Code § 32-903. Likewise, property gained through an exchange of community property is a community asset. See Stanger, supra. This principle is applied with relative ease in the case of a straight trade or purchase for cash; however the application of the rule is more difficult when classifying credit acquisitions. There is a distinct lack of consistency of approach to this area of law. Brockelbank, Community Property law of Idaho, § 4.3 (J. Henderson Ed.1982). The confusion generated by this subject is not limited to Idaho. See de Funiak & Vaughn, Principles of Community Property, supra, § 78.

Although it is a sound principle that property acquired takes on the same character as that of the funds or property used to acquire it, before the principle may be applied, the asset actually given in exchange for the property purchased must be identified. In the typical credit acquisition case, the proceeds of a loan are the asset by which the property is purchased, and the procurement of the loan and the application of the proceeds thereof to the purchase price are part of the acquisition process.

It is also crucial to ascertain when property purchased through credit is "acquired" for the purposes of the law of community property. The answer lies in the basic rule that "[t]he character of an item of property as community or separate vests at the time of its acquisition." Freeburn, supra.

Applying this analysis to the home purchased by the Winns, it is clear that the character of the house vested in November 1972 when it was acquired in substantial part with the proceeds of the loan. The contention that the general presumption in favor of community property is overcome by payments subsequent to that date is thus without merit. 1

We now turn to the trial court's determination of the character of the loan proceeds used to purchase the house, for that establishes the community or separate character of the property. 2

"[A]s a rule, property purchased with money borrowed by either spouse during the existence of the community is community property." Chaney v. The Gauld Co., 28 Idaho 76, 84, 152 P. 468 (1915). This follows logically from the general presumption because the borrowed money is property received during marriage and because the community is generally liable for the debt. Therefore, to rebut the presumption that the house is community property, Virgil must prove with reasonable certainty and particularity that the proceeds of the loan were his separate property.

In determining the nature of the proceeds of a loan, examination must be made of the basis of the extension of the credit. The proceeds of loans made upon the security of a spouse's separate estate are separate, Speer v. Quinlan, 96 Idaho 119, 525 P.2d 314 (1974); Lepel v. Lepel, 93 Idaho 82, 456 P.2d 249 (1969); Shovlain v. Shovlain, 78 Idaho 399, 305 P.2d 737 (1956), and those made upon the security of the community estate are community, see Speer v. Quinlan, supra, 96 Idaho at 130, 525 P.2d 314. This rule is based upon the fact that the estate providing the security is the primary source of repayment. However, when the collateral for the loan is the very asset for which the loan was obtained, a different approach is required.

Consistent with the importance attached to interspousal agreements, if there exists between the spouses an actual, articulated intent that the obligation be separate or community in character, that intent shall control. See, Hooker v. Hooker, supra; Shovlain v. Shovlain, supra; Stewart v. Weiser, supra. The Winns present a more typical situation however, in that no such intent was expressed nor exists on the part of either husband or wife. In such a case trial courts look to several factors to determine the characterization of the property as a matter of policy. A review of Idaho law reveals that a variety of considerations have been found to bear on this issue.

Principally, we remain mindful of the overarching policy in favor of community property, as evidenced by the general presumption and the strong standard of proof necessary to rebut the presumption.

The liability of the community for the loan is significant, Freeburn, supra, 97 Idaho 845, 555 P.2d 385; Chaney v. The Gauld Co., supra, 28 Idaho 76, 152 P. 468, as is the source of repayment, see Speer v. Quinlan, supra; Shovlain v. Shovlain, supra. Related to these concepts is the basis of credit upon which the lender relies in making the loan. 3 Shovlain v. Shovlain, supra; Gapsch v. Gapsch, 76 Idaho 44, 277 P.2d 278 (1954).

The nature of the down payment, Cargill v. Hancock, 92 Idaho 460, 444 P.2d 421; Stewart v. Weiser Lumber Co., Ltd., supra, 21 Idaho 340, 121 P. 775, and the names on the deed, Northwestern & Pacific Hypotheek v. Rauch, 7 Idaho 152, 61 P. 516 (1900), are probative of the parties' intent. Also relevant is who signed the documents of indebtedness. Gapsch v. Gapsch, supra.

The presence or absence of any or all of the above listed factors is relevant in determining the character of the credit by which a loan is obtained. None is conclusive. We deliberately refrain from selecting one item as dispositive. Such an approach is too rigid in light of our ultimate purpose of determining the likely intent of the spouses...

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25 cases
  • Hoskinson v. Hoskinson
    • United States
    • United States State Supreme Court of Idaho
    • 21 Noviembre 2003
    ...that the property is separate has the burden of showing with reasonable certainty that the property is separate. Winn v. Winn, 105 Idaho 811, 813, 673 P.2d 411, 413 (1983). Elizabeth argues that she is entitled to one half of $15,000 Reed withdrew from his investment plan because Reed has n......
  • In re Herter
    • United States
    • United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Idaho
    • 2 Septiembre 2011
    ...Idaho's community property scheme is a presumption that all property acquired during marriage is community property. Winn v. Winn, 105 Idaho 811, 673 P.2d 411, 413 (1983) (citing Stanger v. Stanger, 98 Idaho 725, 571 P.2d 1126 (1977)). To rebut that presumption, a party must prove property'......
  • Hoskinson v. Hoskinson, 2003 Opinion No. 116 (Idaho 11/21/2003), Docket No. 27786.
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    • United States State Supreme Court of Idaho
    • 21 Noviembre 2003
    ...asserting that the property is separate has the burden of showing with reasonable certainty that the property is separate. Winn v. Winn, 105 Idaho 811, 813, 673 P.2d 411, 413 Elizabeth argues that she is entitled to one half of $15,000 Reed withdrew from his investment plan because Reed has......
  • Batra v. Batra, 26026.
    • United States
    • Court of Appeals of Idaho
    • 16 Enero 2001
    ......Thus, if an asset purchased during the marriage is purchased with separate property, that asset too becomes separate property. Winn v. Winn, 105 Idaho 811, 813, 673 P.2d 411, 413 (1983) . However, "before the principle may be applied, the asset actually given in exchange for the ......
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