Opinion
A165422
10-24-2023
In re the Marriage of LUTCHIE WILLNER and CLAUDE WILLNER. v. CLAUDE WILLNER, Respondent. LUTCHIE WILLNER, Appellant,
NOT TO BE PUBLISHED
(Sonoma County Super. Ct. No. SFL-076841)
Miller, J.
Lutchie Willner (Wife) appeals from the judgment of dissolution of her marriage to Claude Willner (Husband) with respect to two issues. First, she argues that the trial court erred in awarding Husband reimbursement of $187,000 for the family home. Second, she argues that it was error to find that an account containing about $40,000 was Husband's separate property. We agree with Wife as to the first issue, but not the second. Accordingly, we shall reverse in part and remand the matter to the trial court.
FACTUAL AND PROCEDURAL BACKGROUND
Husband and Wife married in 2005, and separated at some point in 2017. That same year, Wife petitioned for dissolution, and a trial was held over two days in April 2021 on various issues, only two of which are pertinent to this appeal.
A. The Shadetree Residence
The facts concerning the family home, which the parties refer to as "the Shadetree residence," are undisputed.
During a previous marriage, Husband and his then-wife jointly owned the Shadetree residence. When they divorced, Husband bought out his former wife's interest in the house for $187,000, using funds he had inherited from his father. Husband owned the Shadetree residence as his separate property at the time he and Wife were married in 2005.
In 2009, Wife was placed on the title to the house as a joint tenant and Husband and Wife refinanced the property. At that time, the fair market value of the house was $290,000 and the unpaid balance of the mortgage was $213,000, leaving an equity value of $77,000.
B. The Jackson National Account
The parties disputed whether funds of about $40,000 in an account with Jackson National Life Insurance Company (the Jackson National account) were community property or Husband's separate property. The Jackson National account was opened in 2015 in Husband's name.
At trial, the executor of Husband's father's estate testified that Husband inherited $304,000 from his father, who died in 2004, and that the funds were distributed to Husband in 2005, 2006, and 2007.
Husband testified that he used $187,000 of the inheritance to acquire the Shadetree residence, and deposited the rest of the money into an account of his at Bank of the West, then into another account there, and then into the Jackson National account. Husband did not remember "what those [Bank of the West accounts] were," and he provided no documentation concerning those accounts, but he testified that the money "went in there like 70 something thousand and it dwindled as it went on."
Husband testified that at different times during the marriage he sent thousands of dollars from his inheritance to Wife's family in the Philippines, at Wife's request. And he testified that he gave Wife $30,000 from his inheritance to start a business. He testified that sometime after Wife started her business, Wife initiated a change of banks from Bank of the West to Redwood Credit Union, at which point funds remaining from his inheritance were transferred to the Jackson National account, which was affiliated with Redwood Credit Union.
C. Judgment
The judgment of dissolution, entered on May 2, 2022, included a statement of decision in which the court concluded on the basis of the undisputed facts and section 2640 of the Family Code that Husband was entitled to reimbursement of the $187,000 he paid from his separate property inheritance to acquire the Shadetree residence.
All statutory references are to the Family Code unless otherwise stated.
As to the Jackson National account, the court stated that there was testimony from the executor of Husband's father's estate that Husband received an inheritance "in excess of $40,000" from his father, and that Husband "testified, without supporting documentation, that some of the inherited funds were deposited into an account of his and ultimately ended up in the Jackson National account." On the basis of the testimony from the executor and Husband, the court found that the funds in the account were Husband's separate property.
Wife timely appealed.
DISCUSSION
A. Standard of Review
Our standard of review is well-established: "In reviewing a judgment based upon a statement of decision following a bench trial, we review questions of law de novo. [Citation.] We apply a substantial evidence standard of review to the trial court's findings of fact. [Citation.] Under this deferential standard of review, findings of fact are liberally construed to support the judgment and we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings. [Citation.] [¶] A single witness's testimony may constitute substantial evidence to support a finding. [Citation.] It is not our role as a reviewing court to reweigh the evidence or to assess witness credibility. [Citation.] 'A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness.' [Citation.] Specifically, '[u]nder the doctrine of implied findings, the reviewing court must infer, following a bench trial, that the trial court impliedly made every factual finding necessary to support its decision.' [Citation.]" (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.) B. The Shadetree Residence
Wife argues that Husband is entitled to be reimbursed for only the $77,000 in equity that existed in 2009, when Wife was placed on the title to the Shadetree residence as a joint tenant and the house became community property. Husband argues that he is entitled to be reimbursed for all the amounts he paid to acquire the house as his separate property, including the $187,000 he paid his previous wife when he bought out her interest, which he had done by the time of his marriage to Wife in 2005. Wife has the better argument.
1. Applicable Law
Section 2640, formerly Civil Code section 4800.2, provides a right to reimbursement upon dissolution for the spouse who contributed separate property to the acquisition of property held in joint title, absent a written waiver of the right to reimbursement. (In re Marriage of Weaver (2005) 127 Cal.App.4th 858, 865 (Weaver).)
Section 2640 states, "In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party's contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division." (§ 2460, subd. (b), italics added.) For purposes of section 2640, "contributions to the acquisition of property" is defined to include down payments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property but do not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property." (§ 2640, subd. (a).)
The California Law Revision Commission comment to section 2640 explains, "Under Section 2640, in a case of dissolution of the marriage, a party making a separate property contribution to the acquisition of the property . . . is entitled to reimbursement for the separate property contribution at dissolution of marriage. The separate property contribution is measured by the value of the contribution at the time the contribution is made. Under this rule, if the property has since appreciated in value, the community is entitled to the appreciation. If the property has since depreciated in value, reimbursement may not exceed the value of the property." (Cal. Law Revision Com. com., West's Ann. Cal. Fam. Code, foll. § 2640.)
2. Analysis
The Shadetree residence was converted from Husband's separate property to community property when Husband deeded the residence to himself and Wife as joint tenants in 2009, during their marriage. (§ 2851 ["[f]or the purpose of division of property on dissolution of marriage . . ., property acquired by the parties during marriage in joint form, including property held in . . . joint tenancy . . ., is presumed to be community property"]; In re Marriage of Neal (1984) 153 Cal.App.3d 117, 120-121 [discussing former Civ. Code § 4800.1], disapproved on other grounds by In re Marriage of Fabian (1986) 41 Cal.3d 440, 451, fn. 13 (Fabian).)
Under section 2640, Husband is entitled to reimbursement of his separate property contribution to the couple's joint tenancy interest in the property. And, as courts interpreting section 2640 have consistently held, the amount to which he is entitled is the equity value of the property at the time of its conversion to joint form, a value which the parties agree is $77,000. (In re Marriage of Rico (1992) 10 Cal.App.4th 706, 710 [where family residence was the separate property of one party and converted to joint tenancy during marriage, "the measure of reimbursement is the fair value of the residence at the time of conversion to joint tenancy, less outstanding encumbrances"]; In re Marriage of Benart (1984) 160 Cal.App.3d 183, 189 [measure of reimbursement is" 'the value of the separate property equity in the property at the time of conversion, that is, the fair market value of the property less outstanding encumbrances' "] (Benart), disapproved on other grounds by Fabian, supra, 41 Cal.3d ap p. 451, fn. 13; see also Weaver, supra, 127 Cal.App.4th at pp. 870, 872 [where husband and his mother held one-half joint tenancy interests in property and wife is added to title as one-third joint-tenancy owner, on dissolution husband is entitled to reimbursement for the equity value of his one-half separate property interest in residence at the time wife was added to title]; In re Marriage of Perkal (1988) 203 Cal.App.3d 1198, 1202, fn. 4 [where husband transferred title of house to husband and wife as joint tenants, his reimbursement on dissolution is the difference between the value of the house at the time of the transfer and the then-unpaid balance on the mortgage].)
Husband's claim that he is entitled to the $187,000 he paid to acquire the Shadetree residence from his previous wife rests on his contention that the $187,000 "was a contribution to his acquisition of the property." But the phrase "contributions to the acquisition of the property" in section 2640, subdivision (b), "refers to the acquisition of the property by the community and not an earlier acquisition as separate property by one of the spouses." (Benart, supra, 160 Cal.App.3d at p. 190.)
We are not persuaded by Husband's contention that the trial court had the discretion to use the amount of Husband's separate property investment in acquiring the house from his previous wife as the measure of reimbursement. In re Marriage of Anderson (1984) 154 Cal.App.3d 572, which Husband argues is "in accord with" his position, does not help him. In Anderson, the parties disputed whether a residence was community property. (Id. at p. 576.) The Court of Appeal held that it was (id. at p. 580), and concluded that the husband had "made a substantial contribution to the community when he unwittingly executed a joint tenancy deed" to the residence, which had been in his family for the last 25 years. (Id. at p. 581.)
The Court of Appeal recognized that the husband was entitled to reimbursement of" 'the value of the property at the time of its conversion to joint tenancy form, '" (italics added) and remanded for the trial court to determine the amount of the award because there were "no findings and little evidence as to the value of [husband's] separate property contribution." (Ibid.) Anderson supports our conclusion that Husband is entitled to be reimbursed for the equity value of the Shadetree residence at the time of conversion to community property.
More generally, Husband argues that reimbursing him for the equity value of the property at the time of transmutation would be "equitable when the value of the property has risen between the time of the separate property purchase and the valuation date," but is not equitable in a case like this one where, he says, there was a "temporary loss in market value" of the property (the details of which are not explained) in the time between his acquisition of the property and the time of transmutation. The argument is unpersuasive. Husband provides no argument or authority to support his contention that the method of valuing his reimbursement should depend upon whether the value of the property increased or decreased between its acquisition by him as separate property and its subsequent conversion to community property.
Based on the undisputed facts, we conclude that as a matter of law Husband is entitled to reimbursement of his equity interest in the Shadetree residence at the time during his marriage to Wife when it was converted from his separate property to community property, which amounts to $77,000. Therefore, the trial court erred in awarding Husband the $187,000 he paid to acquire the Shadetree residence as his separate property before his marriage to Wife.
C. The Jackson National Account
1. Applicable Law
Section 760 states that, except as otherwise provided by statute, all property acquired by a married person during the marriage is presumptively community property. (In re Marriage of Ettefagh (2007) 150 Cal.App.4th 1578, 1585.) Under section 770, all property acquired by a person by bequest, whether before or after marriage, is separate property. (§ 770, subds. (a)(1) &(2).) "[T]he effect of these two statutes has been stated as a single rule: 'Generally, property acquired during marriage by either spouse, other than by gift or inheritance, is community property.'" (Ettefagh, supra, 150 Cal.App.4th at p. 1590.) In a case like this one, where sections 760 and 770 come into play and where "only money is at stake and both spouses share an equal risk that the court may err in classifying the property," the community property presumption of section 760 may be overcome by a preponderance of the evidence. (Id. at p. 1591.) As the spouse who asserts the separate character of the Jackson National account, it is Husband's burden to overcome the community property presumption. (Estate of Murphy (1976) 15 Cal.3d 907, 917 (Murphy).)
2. Analysis
Because the Jackson National account was acquired during the marriage, it is presumptively community property. (§ 760.) There was evidence from Husband's testimony that the money with which that account was funded originated in the separate property inheritance Husband received from his father (§ 770), after passing through an account that belonged to Husband and another account. In the absence of any evidence that separate property funds and community property funds were commingled in those two accounts, Husband's testimony is substantial evidence that overcomes by a preponderance of the evidence the presumption that the Jackson National account is community property, and it supports the trial court's finding that the account is Husband's separate property. (See In re Marriage of Mix (1975) 14 Cal.3d 604, 614 [testimony of a single witness, even a party to a marital dissolution, may constitute substantial evidence of status of funds as separate property].)
Relying on inapposite cases, Wife contends that Husband cannot establish the separate property status of the Jackson National account by oral testimony, and that he was required to trace the source of the funds in the account to his inheritance by producing specific records documenting each deposit and withdrawal, which he failed to do. But "[t]he need for specific records and documents is . . . predicated on the existence of a commingled account," which is an account in which separate and community property funds have been combined. (In re Marriage of Ficke (2013) 217 Cal.App.4th 10, 25, italics added.) Once separate property and community property have been commingled, a spouse" 'assumes the burden of keeping records adequate to establish the balance of community income and expenditures at the time an asset is acquired with commingled property.'" (Murphy, supra, 15 Cal.3d at p. 919.) Although Husband here could not recall details about the Bank of the West accounts through which his inheritance had passed, there was no showing that Husband's inheritance was ever commingled with community funds. This is unlike the situation in Murphy, where the trial court found that separate income had been commingled with community funds in checking and savings accounts, and there were no records to identify any portions of the commingled funds as being derived from community or separate property sources. (Id. at p. 918.) And it is unlike In re Marriage of Braud (1996) 45 Cal.App.4th 797, 822, where there was no question that the funds in dispute had run through a commingled checking account into which Husband deposited not only money from an inheritance but also his community property paychecks, and In re Marriage of Higginbotham (1988) 203 Cal.App.3d 322, 327-328, where rents from a property acquired before marriage were paid into accounts where the rents were commingled with community property.
Accordingly, Wife fails to show that the trial court erred in finding that the Jackson National account was Husband's separate property.
DISPOSITION
The portion of the judgment awarding Husband reimbursement for the $187,000 he paid to acquire his previous wife's interest in the Shadetree residence is reversed, and the issue is remanded to the family court with instructions to award Husband reimbursement in an amount equal to the equity value of the Shadetree residence at the time it was converted to community property ($77,000). In all other respects the judgment is affirmed. The parties shall bear their own costs on appeal.
WE CONCUR: Richman, Acting P.J. Markman, J. [*]
[*] Judge of the Alameda Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.