Marriage of Contrers

Filed 3/22/06 Marriage of Contrers CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Margie G. Woods, Judge. Affirmed in part; reversed in part with directions.

Enedina Navarez appeals from a dissolution judgment awarding her spousal support and ordering reimbursement to Jose Contreras for his separate property contributions to the community. She challenges the amount of spousal support and the reimbursement rulings. We conclude the trial court did not abuse its discretion as to the amount of spousal support. However, we find error in the court's reimbursement rulings. Accordingly, we reverse the judgment as to the reimbursement rulings and remand the matter for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

The parties were married for 28 years and 4 months. They married in January 1975 and were separated in May 2003. For financial reasons, they continued to reside in the same residence after separation. Upon separation, Jose^[1] was ordered to pay temporary spousal support of $300 per month, and to pay the monthly mortgage, utilities, and debts.

When the parties married in 1975, Jose was retired on disability from his job as a construction worker. At the time of the 2004 dissolution proceedings, he was 76 years old. He receives net monthly income of $970 from Social Security and $470 from his pension, giving him a total net monthly income of $1,440.^[2]

During the marriage, Enedina did not work outside the home, except for selling Shaklee products for a short time. When she turned 62 in February 2004, Enedina began receiving $374 per month from Social Security. Enedina has a fifth-grade education from Mexico. She is currently attending classes to improve her English skills.

Enedina reports suffering from rheumatoid arthritis, a heart condition, and asthma. She submitted medical records confirming her asthma and rheumatoid arthritis, and

showing that in June 2000 she was hospitalized for four hours for acute asthmatic and bronchial attacks. In 2004, her doctor reported that her rheumatoid arthritis was improving and her condition was stable. Enedina stated that given her lack of education and work experience and her physical ailments, she did not know what she could do for work. However, she stated that she would like to continue her education, and believed she could then find work in the future. Jose asserted that Enedina's health conditions were not disabling and that she should be able to work. Enedina's health benefits, which have been provided through Jose's union pension plan, will terminate upon dissolution.

In 1976, the parties purchased a residence in Chula Vista, valued in 2004 at $434,000. Luis agreed that Enedina and her daughter from another marriage (who is currently also residing in the residence) could refinance and buy out his one-half community interest in the residence.^[3] Jose stated he would then rent a place to live and use the equity payment to support himself.

Prior to the parties' marriage, Luis purchased a residence in Pacoima, California. After their marriage, the Pacoima home was rented to other persons. According to Jose, he borrowed $18,000 from the equity in the Pacoima home to improve property owned by Enedina near Mazatlan, Mexico. Enedina denied that Jose spent $18,000 improving the Mexico property. She stated the $18,000 loan was used to fix the Pacoima property, and that Jose only contributed $4,000 to the Mexico property. Enedina submitted a

declaration from a construction worker in Mexico stating that in 1989 Jose hired him to construct a residence in Mexico that cost $4,000. Further, Enedina claimed that because of a disagreement between Jose and her sister in Mexico, her family gave her $5,000 to buy out her interest in the Mexico property and she gave one-half of that money to Jose and the other half to her brother. Jose acknowledged that Enedina sold her interest in the property for $5,000, but stated that she only gave him $1,000 from the buy out.^[4]

In 2000, Jose sold the Pacoima property to his son from another marriage, Raymond Contreras. As part of the sale transaction, Raymond paid several community property debts, which payments were credited towards the amount Raymond owed his father for the Pacoima residence. These payments, made in April 2000 and totaling $15,638, consisted of the following: $366.01 (Bankcard Services, for credit card); $640.39 (Bankcard Services, for credit card); $1,282.17 (Household Credit Services, for home computer); $735.76 (Household Bank, credit card); $11,621 (Franklin Capital, for automobile loan), and $642.67 (Chase MasterCard, for credit card). Further, in March 2002, Raymond paid $5,000 for a 1993 Volvo purchased for Jose and Enedina, which payment was also credited against his debt to Jose for the Pacoima residence.

At the dissolution proceedings, Jose requested that Enedina receive no spousal support. Jose also requested that he be reimbursed for his separate property contributions

from the Pacoima property to the community and to Enedina's separate property in Mexico.

Trial Court's Ruling

In March 2005, the trial court ordered dissolution of the marriage, and ordered that Jose pay Enedina $300 monthly spousal support. In deciding to award spousal support, the court considered that the marriage was of long duration, and Enedina was the supported spouse. The court also considered Enedina's educational background, work experience, and health. The court found that her health was fair to moderate. The court retained jurisdiction over future spousal support and gave Enedina a "Gavron^[5] warning," advising her that she must continue to take steps to become self-supporting. The court declined to order that Jose pay for health insurance for Enedina after dissolution.

The court found that the $15,638 community debts and the $5,000 for the Volvo were paid from the sale of the Pacoima real property, the latter which was Jose's separate property. The court ordered that Jose receive reimbursement credits for these separate property expenditures for the community. The court found there was insufficient evidence that Jose spent $18,000 of his separate property monies on Enedina's Mexico property. Instead, the court credited Jose with a separate property contribution of $4,000 towards improvements of Enedina's separate property in Mexico, "irrespective of the ultimate proceeds received by [Enedina] upon the sale of that property to her relatives."

The court ordered that either party could buy out the one-half equity interest of the other party in the community residence, and reserved jurisdiction over the division of this asset. The court divided the parties' vehicles, awarding the 1988 and 1972 Chevrolets to Jose at charges of $500 and $100 respectively, and awarding Enedina the Volvo at a charge of $3,975.

Enedina appeals.

DISCUSSION

Amount of Spousal Support to Enedina

Enedina argues the court abused its discretion in awarding her only $300 monthly spousal support and that she should have been awarded a larger sum. She points out that she has lost her medical coverage because of the dissolution, and requests additional money to pay for medical insurance.

Family Code^[6] section 4320 requires the court to consider a variety of circumstances in determining the issue of spousal support, including such factors as job skills, the need for retraining and education, lack of employment during marriage to perform domestic duties, the supporting party's earning capacity and income, the duration of the marriage, age and health of the parties, and the balance of the hardships. "An award of spousal support is a determination to be made by the trial court in each case before it, based upon the facts and equities of that case, after weighing each of the circumstances and applicable statutory guidelines. [Citation.] In making its spousal support order, the trial court possesses broad discretion so as to fairly exercise the weighing process contemplated by section 4320, with the goal of accomplishing substantial justice for the parties in the case before it. . . . 'Because trial courts have such broad discretion, appellate courts must act with cautious judicial restraint in reviewing these orders.'" (In re Marriage of Kerr (1999) 77 Cal.App.4th 87, 93.) An abuse of discretion "'only occurs when it can be said that no judge reasonably could have made the same order.'" (In re Marriage of Meegan (1992) 11 Cal.App.4th 156, 161.)

The trial court's award of $300 monthly spousal support, combined with Enedina's receipt of a $374 monthly Social Security payment, provides Enedina with a monthly income of $674. Based on his payment of $300 monthly spousal support, Jose will have a net monthly income of $1,140 ($1,440 minus $300). The trial court found this was a difficult case because neither party was in a comfortable financial position. As noted by the court, if the parties carry through with their plan to have Enedina and her daughter buy out Jose's share of the community residence, Jose will receive his share of equity in liquid assets, but he will no longer have a home to live in and will have to rent. The trial court could reasonably credit Jose's statement that he would have to draw on the equity payment to meet his monthly expenses. Enedina will be able to remain in the community residence, and will have the assistance of her daughter to make the new mortgage payment. Given the probable need for Jose to find a rental home, the court's ruling was a reasonable exercise of its discretion. Further, the court was not required to order additional support to compensate Enedina for her loss of medical coverage. The court was entitled to conclude that given Jose's limited financial resources, $300 was a proper amount to award Enedina. (See In re Marriage of Morrison (1978) 20 Cal.3d 437, 455.)

Enedina also challenges the court's Gavron advisement. A Gavron warning is a "fair warning to the supported spouse he or she is expected to become self-supporting." (In re Marriage of Schmir (2005) 134 Cal.App.4th 43, 55.) The purpose of the warning is to give the supported spouse notice that he or she should make good faith efforts to become self-supporting, and to prevent unfair surprise from a later ruling reducing or terminating support. (See In re Marriage of Gavron, supra, 203 Cal.App.3d at p. 712.) Section 4330, subdivision (b), gives the court discretion to make this warning, and also contains a caveat that the court may refrain from giving the warning when it determines "in the case of a marriage of long duration . . . this warning is inadvisable." The statute's discretionary language is designed "to accommodate the reality that in many marriages of long duration it would be unreasonable to put the burden on supported spouses to become self-sufficient just as they enter their 'senior, non-income producing years.'" (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2005) ¶ 6:1034.2.)

Given Enedina's age and lack of work experience, certainly the trial court was not required to give the Gavron advisement. However, we cannot say no reasonable judge could give the warning. The trial court observed Enedina at trial, and we will not second- guess its determination that she may be employable. However, if Enedina is unsuccessful in obtaining employment and Jose seeks to reduce or terminate spousal support, he will need to overcome the strong inference against employability arising from her age and lack of experience. (See In re Marriage of Morrison, supra, 20 Cal.3d at p. 453.)

Reimbursement for Jose's Separate Property Contributions

to the Community

Enedina argues the court erred in ordering that Jose be reimbursed for his separate property contributions to the community derived from Jose's son's payments from the sale of the Pacoima separate property residence. Enedina asserts that because the separate property payments were made during the marriage, they are considered a gift to the community and may not be reimbursed.

As a general rule, a party is entitled to reimbursement from the community for separate property contributions made after separation to pay community obligations. (In re Marriage of Epstein (1979) 24 Cal.3d 76, 84 (Epstein).) In contrast, absent an agreement to the contrary, separate property contributions made during the marriage to pay community obligations are generally not reimbursable, unless the contributions fall within a statutory exception to this no-reimbursement rule set forth in section 2640. (In re Marriage of Nicholson & Sparks (2002) 104 Cal.App.4th 289, 294-295 (Nicholson). As we shall explain, section 2640 creates a right of reimbursement for separate property contributions used to acquire or improve property in the community estate; however, this statutory exception does not extend to contributions to pay community debts that are unrelated to the acquisition or improvement of community property.

The law has long applied a general presumption that separate property used for community purposes during the marriage is a gift. (Nicholson, supra, 104 Cal.App.4th at p. 294; see In re Marriage of Heikes (1995) 10 Cal.4th 1211, 1218 (Heikes).) The rationale for this rule is derived from the "'natural feelings of mutual affection and generosity presumably attending the marital state[,]'. . . . [which support] the inference that expenditures of separate property in behalf of the community are intended as gifts." (Epstein, supra, 24 Cal.3d at p. 83.) Section 2640 represents a limited legislative rejection of this general presumption. (Nicholson, supra, 104 Cal.App.4th at p. 294.) The no-reimbursement rule has been legislatively voided only regarding property that is part of the community property estate as defined in section 2640. (Nicholson, supra, at p. 294.)

Under Section 2640, "when community property is divided upon dissolution of the marriage, either spouse shall be reimbursed for his or her contributions of separate property to the acquisition [or improvement] of any property being divided as community property, unless the contributing spouse has waived the right of reimbursement in writing." (Heikes, supra, 10 Cal.4th at p. 1213; § 2640, subd. (b).)^[7] The contribution is reimbursable to the extent it consists of "downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property," but it is not reimbursable for "interest on the loan or payments made for maintenance, insurance, or taxation of the property." (§ 2640, subd. (a).)^[8]

Reimbursement under section 2640 comes "'off the top'" of the community property item in question before the community property interest is divided. (In re Marriage of Walrath (1998) 17 Cal.4th 907, 913 (Walrath).) Reimbursement is applied on an asset-by-asset basis, and is measured by the value of the contribution at the time the contribution is made. (Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶¶ 8:461, 8:466.7 to 8:467.) Thus, if at the time of division the community property has appreciated in value, the community is entitled to the appreciation. (Cal. Law Revision Com. com., 29D West's Ann. Fam. Code (2004 ed.) foll. § 2640, p. 590.) However, if at the time of division the community property has depreciated in value, the reimbursement is limited to "the net value of the property at the time of the division." (§ 2640, subd. (b); Cal. Law Revision Com. com., 29D West's Ann. Fam. Code, supra, foll. § 2640, p. 590.) "If there is insufficient equity at the time of dissolution in the property to which the contribution was made to fully reimburse the contribution, the entire asset [or its value] is awarded to the contributing spouse." (Walrath, supra, 17 Cal.4th at p. 913; Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶¶ 8:463, 8:466.7 to 8:467.)

In Nicholson, the court held that the section 2640 exception did not apply to payments of community credit card debts with separate property during marriage, even though on the facts before it the debt reduction allowed the parties to qualify for the purchase of a residence. (Nicholson, supra, 104 Cal.App.4th. at pp. 294-296, and fn. 10.) The court in Nicholson observed that if the credit card debts had been for the costs of improvement to community real property, the separate property payments on these debts would have been reimbursable. (Id. at p. 296, fn. 11.) However, the court concluded the mere fact that the debt reduction allowed the parties to later obtain a residential loan did not qualify the debt payments as contributions to the acquisition of property within the meaning of section 2640. (Nicholson, supra, at p. 296.) The Nicholson court reasoned that "[i]f the Legislature intended such a result it would have had to enact a much broader statute providing for reimbursement of separate property used to pay community debts. It did not do so. Instead, in enacting section 2640 it limited reimbursement to the use of separate property for 'acquisition' or 'improvement' of community property." (Id. at p. 297.)

The record shows that the Pacoima separate property was used to pay off various community debts in 2000, and to purchase the Volvo in 2002. The parties separated in

2003; thus, all the separate property contributions were made during the marriage.^[9]

These contributions are not reimbursable, unless there was an agreement to this effect or the debts were incurred for the acquisition or improvement of community property within the meaning of section 2640. Apart from the Volvo expenditure, the record does not show that the debts are traceable to the purchase or improvement of community property that is now being divided as part of the community estate so as to fall within the ambit of section 2640. Further, Jose has cited no evidence reflecting an agreement that he would be reimbursed for the use of the Pacoima property to pay the community debts.

The record suggests that the court was unaware of the reimbursement limitations for separate property contributions made during the marriage. The record reveals no mention of the gift presumption or the statutory exception thereto set forth in section 2640. Jose asked the court to reimburse him for his use of the Pacoima separate property to pay off the community debts, but he did not provide the court with any legal authority to support his request other than a broad reference to "Epstein credits." Also without citation to authority, Enedina argued, in somewhat unclear fashion, that although she was not seeking a one-half interest in the Pacoima residence, there was no issue of separate property contribution derived from this residence because Jose was making "a gift of the house to the community."^[10] When evaluating the issue of reimbursement for payment of the debts, the trial court simply referred to "Epstein credits." This reference was erroneous because Epstein credits apply postseparation, and it is clear the payments here were preseparation. (See Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶¶ 8:459, 8:845.)

It appears that the trial court improperly assumed that all separate property contributions to the community were reimbursable regardless of when they were made and for what purposes. Further, it appears that the court was unaware of the gift presumption generally applicable to separate property contributions made during marriage that are unrelated to the acquisition or improvement of community property.

Under these circumstances, we conclude the interests of justice require reversal of the judgment and remand for rehearing. We are not persuaded by Jose's argument that the issue was not adequately raised before the trial court and therefore waived on appeal. Although Enedina's argument did not specifically mention the gift presumption, it was sufficient to raise the issue of whether the separate property contributions were a gift to the community. Given the well-established gift presumption that is generally applicable to the use of separate property to pay community debts during the marriage, we conclude it is proper to remand the matter for a full adjudication of this issue. If section 2640 does not apply to the community debts at issue in this case, the trial court may not order reimbursement to Jose unless he overcomes the presumption that the contributions were a gift to the community by showing a contrary agreement.

Reimbursement for Jose's Separate Property Contribution

to Enedina's Separate Property

The trial court awarded Jose a $4,000 reimbursement for his use of funds from his property in Pacoima to improve Enedina's separate property in Mexico. Enedina testified that she sold her interest in the Mexican property to her family, giving half the money to Jose and half to her brother. Jose conceded he received $1,000 from this sale.

Addressing one party's separate property contributions to the other party's separate property, section 2640, subdivision (c), provides: "A party shall be reimbursed for the party's separate property contributions to the acquisition of property of the other spouse's separate property estate during the marriage, unless there has been a transmutation in writing . . . , or a written waiver of the right to reimbursement. The amount reimbursed shall be without interest or adjustment for change in monetary value and may not exceed the net value of the property at the time of the division."

Because Enedina no longer owns an interest in the Mexico property, and there is no evidence that she owns separate property traceable to the Mexico property, on this record the court's reimbursement order is not sustainable. There must be a showing that there is a "separate property estate" traceable to the Mexico property to reimburse Jose, and any such reimbursement must be limited to the net value of the separate property at the time of division. (See Walrath, supra, 17 Cal.4th at pp. 915, 918-919; Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶¶ 8:466.7 to 8:467 [reimbursement must be tied or traced to specific asset for which contribution made].)

Given that we are reversing the judgment and remanding for further proceedings regarding the reimbursement for payment of community debts, the reimbursement for improvements to the Mexico property should also be readjudicated on remand.

Volvo Reimbursement

For the first time in her reply brief, Enedina asserts that the trial court erred when it gave Jose a $5,000 credit for his separate property contribution for the Volvo, and then also charged her $3,975 for the value of the Volvo when the vehicle was awarded to her. Normally, issues raised for the first time in a reply brief are deemed waived. (American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453.) In any event, as we shall explain, there was no error in the court's methodology of giving Jose a credit and Enedina a charge for the Volvo. However, there does appear to be an error in the amount of the Volvo reimbursement. Because the judgment must be reversed to readjudicate the community debts reimbursement issue, in the interests of justice the amount of the Volvo reimbursement should also be readjudicated on remand.

Unlike the community debts reimbursement, the trial court could properly reimburse Jose for his contribution for the Volvo because the acquisition of the Volvo provided property of value to the community estate that was being divided at the time of dissolution. (See Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶ 8:464.) However, the Volvo has depreciated in value to $3,975, and under section 2640, subdivision (b), the reimbursement "may not exceed the net value of the property at the time of the division." Accordingly, on remand, after giving the parties an opportunity to address the issue, the trial court should redetermine the amount of Jose's reimbursement credit based on the restriction set forth in section 2640, subdivision (b).

As to Enedina's argument that she should not be charged with the value of the Volvo if Jose receives reimbursement for the Volvo, the assertion is unavailing. The charge to Enedina for her receipt of the Volvo is merely the balance sheet methodology used to calculate the division of the community property. Under this methodology, reimbursements for separate property contributions are listed as credits (money owed from the community estate to the party) and awards of community property are listed as charges (value awarded from the community estate to the party). In the final equalization calculation, the charge to Enedina will, in effect, be used to pay Jose's reimbursement for the Volvo.

DISPOSITION

The judgment is reversed as to the reimbursement rulings, and remanded for further proceedings. In all other respects the judgment is affirmed. Parties to bear their own costs on appeal.

HALLER, J.

WE CONCUR:

HUFFMAN, Acting P. J.

McDONALD, J.

Publication courtesy of California free legal advice.

Analysis and review provided by Carlsbad Apartment Manager Attorneys.

^[1] For simplicity, we refer to the parties by their first names.

^[2] He also received $435.23 per month for payments for a separate property residence in Pacoima that he sold to his son in 2000 (discussed below). However, these payments were to end in February or June of 2005.

^[3] The current remaining mortgage on the community residence is about $6,000 to $10,000.

^[4] The record does not indicate when Enedina sold her interest in the Mexico property.

^[5] In re Marriage of Gavron (1988) 203 Cal.App.3d 705.

^[6] Subsequent statutory references are to the Family Code.

^[7] Subdivision (b) of 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, a 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."

^[8] Subdivision (a) of section 2640 states: "'Contributions to the acquisition of property,' as used in this section, include downpayments, 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."

^[9] On appeal, Jose argues the record can support deeming the community debts as paid after separation based on Raymond's mortgage payments to Jose which continued until 2005. As Jose concedes, the record shows Raymond paid the community debts in 2000, and thereby reduced the amount of the mortgage owed to his father. It is not reasonable to construe the debt payments as part of the monthly mortgage payments when this is not how the transaction was structured.

^[10] To support this theory, Enedina testified that Jose repeatedly told her that whatever he had was hers.