Opinion
D040353.
10-23-2003
In re the Marriage of PATRICIA and DENNIS TAYLOR. PATRICIA TAYLOR, Respondent, v. DENNIS TAYLOR, Appellant.
In this marital dissolution action we affirm a reimbursement award to a donor spouse. The trial court reimbursed the donor in the amount of equity which existed in a home she owned as separate property as of the time she conveyed title to it to herself and her husband as joint tenants.
Although some reduction in the amount of reimbursement may have been warranted because community funds had been used to pay the mortgage prior to the joint tenancy conveyance, the donee spouse did not ask the trial court for any such reduction and did not provide the trial court with any means of calculating such a reduction. Thus we are in no position on appeal to reverse the trial courts order on the basis of a theory which was not asserted in the trial court and for which no adequate record was presented.
SUMMARY
In 1974, when she was a single woman, respondent Patricia Taylor (Patricia) purchased a home. Patricia paid for the home by obtaining a substantial mortgage. In 1979 she married appellant Dennis Taylor (Dennis). Between 1979 and 1990 community funds were used to pay the principal and interest on the mortgage. In 1990 Patricia and Dennis refinanced the home and in conjunction with the refinancing Patricia conveyed the home to herself and Dennis as joint tenants. At the time of the refinancing the home had a value of $140,000 and encumbrances of $35,000.
In 1997 Dennis and Patricia decided to refinance the home again. Because of Patricias poor credit history, she quitclaimed her interest in the home to Dennis as a condition of obtaining the new financing. In 2000, shortly before the parties separated, a deed reconveying the home to joint tenancy property was recorded.
At trial Patricia argued that the community should reimburse her under Family Code section 2640 for the equity she had in the home in 1990, when she conveyed the home to herself and Dennis as joint tenants. In opposing Patricias section 2640 claim in the trial court, Dennis took an "all or nothing approach." The only argument Dennis raised in the trial court was that Patricias 1997 conveyance of her interest in the house to him deprived her of any right to make a claim for reimbursement for any pre-1997 contribution she had made to the communitys interest in the property. Dennis made no claim Patricias reimbursement should be reduced because community assets were used to make mortgage payments before 1990. More importantly Dennis presented no evidence of how much the communitys mortgage payments reduced the initial cost of the home.
All further statutory references are to the Family Code unless otherwise specified.
In his opening statement, Denniss counsel said in pertinent part: "The evidence is going to show that the parties in 1997 conducted a transaction whereby Mrs. Taylor conveyed all of her ownership right, title and interest in the residence to Mr. Taylor as his sole and separate property; that we have provided the court with points and authorities, and the deed transaction has significance . . . . [¶] . . . [¶] And in this case it has the significance that it breaks all of the ownership interest that the wife had in the residence. . . . [& para;] . . . [¶] [T]ransfer by Mrs. Taylor in 1997 severed any of her right to deal with 2640s." In his closing brief Denniss counsel reiterated this position: "Upon the execution of that Deed, the Petitioner no longer had any right, title, or interest in the property. Said transfer eliminates any claims pursuant to F.C. § 2640."
The trial court found the 1997 conveyance was a matter of convenience executed in order to facilitate the 1997 re-financing and that it did not alter the community s interest in the property or Patricias ability to seek reimbursement from the community under section 2640. Accordingly, the court ordered that Patricia be reimbursed the $105,000 in equity she held in the home in 1990, when she conveyed the home to herself and Dennis.
DISCUSSION
Section 2640, subdivision (b), states: "In the division of the community estate under this division, unless a party had 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 partys contributions to the acquisition of the property 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 shall not exceed the net value of the property at the time of the division." Under the statute "the court is required to determine the equity value of the contributing spouses property at the time of the gift and restore to him or her the value of that property." (In re Marriage of Witt (1987) 197 Cal.App.3d 103, 108; see also In re Marriage of Walrath (1998) 17 Cal.4th 907, 915.) "Under section 2640, the separate property contribution is reimbursed prior to the division of community property. [Citations] [ A reimbursement award comes off the top of the community property item in question before the [community property] interest in that property is divided.]" (In re Marriage of Walrath, supra, 17 Cal.4th at p. 913.) On the other hand, "[u]nder this rule, if the property has since appreciated in value, the community is entitled to the appreciation." (Id. at p. 915.)
At this point, Dennis does not question that Patricia was entitled to reimbursement for her contribution to the home under section 2640, subdivision (b), or that the amount of her reimbursement should be calculated on the basis of the equity she held at the time of her 1990 joint tenancy conveyance. Rather, on appeal Dennis contends the trial court erred in failing to reduce Patricias reimbursement by an amount which would represent the community funds which were used to reduce principal on the mortgage before the 1990 joint tenancy was created. Dennis relies on the general principle set forth in In re Marriage of Moore (1980) 28 Cal.3d 366, 372 (Moore ), and In re Marsden (1982) 130 Cal.App.3d 426, 436-440 (Marsden), that the community is entitled to be compensated for contributions it makes to a spouses separate property.
In Moore one spouse purchased a house shortly before marriage. She supplied a down payment and secured a loan for the balance of the purchase price. Although the property was never conveyed to joint tenancy or to the community, after the parties marriage community funds were used to make the loan payments. Consistent with existing authority, the parties agreed that the communitys contributions had given it an interest in the home. In determining how that interest would be calculated, the court stated: "Where community funds are used to make payments on property purchased by one of the spouses before marriage the rule developed through decisions in California gives to the community a pro tanto community property interest in such property in the ratio that the payments on the purchase price with community funds bear to the payments made with separate funds." (In re Moore, supra, 28 Cal.3d at pp. 371-372.) Thus, the community was given a percentage of the equity in the home at the time of separation determined by dividing the principal paid by the community by the initial purchase price. (Id. at p. 374.)
However, in Moore the court rejected the argument that in calculating the communitys contribution, the amount of interest and taxes should be included. "Since such expenditures do not increase the equity value of the property, they should not be considered in its division upon dissolution of marriage." (In re Moore, supra, 28 Cal.3d at p. 372.) Thus, under Moore the community is only credited with the amount by which mortgage payments reduce principal. (Ibid.) That amount may then be used to calculate the communitys proportionate interest in the separate property. (Ibid.)
In Marsden this rule was modified to account for the fact that in Marsden substantial appreciation had occurred between the time the home was purchased and the time of marriage. The court found that where such pre-nuptial appreciation had occurred, the community should not share in it. (In re Marsden, supra, 130 Cal.App.3d at pp. 438-439.)
Although there is some superficial appeal to Denniss argument that in light of Moore/Marsden the amount of Patricias reimbursement should be reduced to reflect the communitys pre-1990 payment on the mortgage, the argument does not withstand analysis. First, as Patricia points out, the Moore/Marsden rule has thus far only been applied to separate property held by one of the parties at the end of a marriage. Here, of course, by the time the marriage ended the home was community property and in fact the community had received the post-1990 appreciation. This is more than a formal difference. Giving the community both a pro tanto proportional share of the pre-1990 equity, as required under Moore/Marsden, as well as the post-1990 appreciation, would seem to directly conflict with the scheme provided by section 2640 under which the donor spouses reimbursement is not calculated on a pro tanto proportional basis, but is based on the value of the donors contribution and taken "off the top," leaving the community with any remaining value, including any post-gift appreciation. (See In re Marriage of Walrath, supra, 17 Cal.4th at pp. 913, 915.)
Arguably, instead of providing the pro tanto interest recognized in Moore/Marsden, we could avoid the analytical conflict by directing the trial court to compute the communitys interest in the pre-1990 equity and, instead of providing it to the community on a pro tanto basis, simply reduce Patricias reimbursement by that amount and direct that the reduced amount be paid first to Patricia in conformance with the statute. Alternatively, and perhaps more consistent with the reimbursement theory of section 2640, we could simply reduce any reimbursement by the actual amount by which the communitys contribution reduced the principal owing on the mortgage.
However, even if we were willing to adopt either of these approaches as consistent with the terms of section 2640, we could not do so here. Aside from the fact that neither party has briefed us on the foregoing alternatives, as we have noted, Dennis did not argue for any such reduction in the trial court and most importantly he did not provide the trial court with any evidence as to how much in the way of principal payments the community made on the pre-1990 mortgage. It is axiomatic that "The theory upon which a case was tried in the court below must be followed on appeal. An exception to this rule is where a question of law only is presented on the fact appearing in the record. [Citation.] "But if the new theory contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at the trial the opposing party should not be required to defend against it on appeal." [Citations.]" (Strasberg v. Odyssey Group, Inc. (1996) 51 Cal.App.4th 906, 920.) Without any factual record to support any calculation that would be necessary under Moore/Marsden or any variant we adopted, we are in no position to provide Dennis with any relief from the trial courts reimbursement award.
Order affirmed.
WE CONCUR: OROURKE, J., and AARON, J.