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Q: Moore Marsden Exception ( Answered 5 out of 5 stars,   0 Comments )
Question  
Subject: Moore Marsden Exception
Category: Relationships and Society > Law
Asked by: keepthemhome-ga
List Price: $200.00
Posted: 27 Dec 2005 22:04 PST
Expires: 26 Jan 2006 22:04 PST
Question ID: 610347
In California, when a spouce inherits real estate during a marriage
that property is excluded from participation in the "community" and
therefore is not included in the division of assets during a divorce.
Are there any actions or activities that would bring this inherited
property into the community (refinance, promise, fraud)? Can
references to "our house" or similar for a number of years (10+)
demonstrate an intent to include the real estate as community
property? Are there any mitigating circumstances?

Request for Question Clarification by webadept-ga on 28 Dec 2005 05:26 PST
Hi, 

Just to verify this situation you are bringing up here. The way I'm
reading this is that :

a) First the woman is widowed (can be man but trying to simplify things right now).

b) woman inherits house from this widowing

c) woman remarries

d) woman divorces second husband

the question is (in California law), "Is there a way to bring the
house she inherited from the first marriage, into the community
property inventory of the second marriage?"

webadept-ga

Request for Question Clarification by webadept-ga on 28 Dec 2005 06:01 PST
Also, 

were you paying mortgage or did you refinance the home during the last
10 years, or was the home (as in my example question above) paid for
going into the current marriage?

webadept-ga

Clarification of Question by keepthemhome-ga on 28 Dec 2005 14:57 PST
Hi, as a clarification. The Husband, inherited his families home about
4 years into the marriage. The house was paid for, free and clear at
the time of the inheritance. Around 2 years later, a mortgage was
taken out on the home for round 150,000. This mortgage was signed and
paid for by the community. Approximately 2 years later, the husband
refinanced the mortgage and at that time had the wife sign a
quickquit. It is my understanding that the loan depended on the wife's
income and he claimed she needed to sign the quickquit in order to
protect the home from a business in which she was a 50% owner.

The community paid all loans, taxes, maintenance, etc. from the time
they took possession of the house and currently continue to pay all
associated costs.

The husband always stressed that the quickquit (or quitclaim) was
inacted soley to protect the house from being lost should the wife's
business be sued. FYI - the quickclaim was signed under duress and
without legal consultation.

Hope this clarifies both questions

Thankd You!

Request for Question Clarification by webadept-ga on 28 Dec 2005 23:34 PST
Thanks for the Clarification. I'm waiting for a few emails to arrive
so that I can finish this up for you.

Thanks again, 

webadept-ga

Clarification of Question by keepthemhome-ga on 29 Dec 2005 12:02 PST
I appreciate it, thanks!

Request for Question Clarification by pafalafa-ga on 31 Dec 2005 06:21 PST
Hello there,

Along with my fellow-researcher webadept, I've also been looking into
your question.

I'd like to clarify what you're after.  

The question's title is "Moore Marsden Exception".  However, my
understanding of Moore-Marsden is that it established the principle
that a spouse's property can become community property if the
community contributed to its financing.

Here's how it was described in one prominent case:

=====
When community property is used to reduce the principal balance of a
mortgage on one spouse's separate property, the community acquires a
pro tanto interest in the property...This well-established principle
is known as "the Moore/Marsden rule." ...The Moore/Marsden rule has
been extended to cases involving separate commercial property...It has
also been applied where the parties refinanced a separate residential
mortgage during marriage.
=====

Are you looking for an exception to this?  

Or are you looking to *affirm* that, in the situation you describe,
the property should be considered joint property?


I would be glad to provide information on the key cases in California
that have established the parameters of Moore-Marsden, if that would
serve your needs.  However, don't expect perfect clarity as to your
own situation -- as is often the case in law, it's difficult to apply
precedence to a new case, with a new set of unique circumstances.

Let us know your thoughts on this...and a most Happy New Year to you and yours.


pafalafa-ga

Clarification of Question by keepthemhome-ga on 02 Jan 2006 21:40 PST
Hi

The case you sited goes more to the intent of my question. Pro Tantum
(as it is applied by Moore Marsden) would only apply to the ammount of
the mortgage, not the value of the house. In this case, when the
community took a mortgage on the seperately held propert, the home was
appraised at approximately 450,000. When the husband refinanced that
mortgage and had the wife sign the quitclaim, the home was not
appraised. However, during the course of time between the mortgage and
the refinance the real etate values in Califirnia were on a meteoric
rise. The home's current approximate value is 900,000 (about 4 years
after the refinance and quitclaim signing). In that same time period,
my home's value rose 100%
By reading the case law you sited, my better question may have been,
is there an exception to Pro Tantum - or are there any actions or
statements by the husband that would bring the seperately held
property completely into the communuty. In other words is there anyway
to show that they should split the house? When he asked her to join
him in securing the 150,000 mortgage (her income was required), did he
then bring the home into the community?
She did not want to sign the quitclaim becasue she told him she feared
she was relenguishing her part of their home. He assurred her the only
reason he wanted her signature was to protect the home from any
possible lawsuits against her business that may jeopordise the home by
piercing her corporate veil.
He is trying to use the home against her in determing the amount of
custody he should get (wants to remain as primary address - because
this is where the children have grown up - they are 6 and 13). He is
also trying to leverage the house as a means to control with the
children. The core of the entire issue is if there is any way to put
the house in play so that it can not be used against the wife, which I
assumed (foolish, I know to assume) was at the core of Moore Marsden,
hence my seeking execptions.

Thank you for taking time during the holidays, especially for an issue like this!

Request for Question Clarification by pafalafa-ga on 04 Jan 2006 05:57 PST
kth-ga,

Thanks for the additional information.  But I'm not really sure how to
proceed at this point.

Google Answers Researchers are not permitted to provide legal advice
(see disclaimer, at the page bottom).  Even if we were, it wouldn't
make sense to do so, since I have no specific expertise in CA law or
in division of property during a divorce.

The best I can offer, I think, is to identify the key cases in
California that bear on Moore Marsden.

If you are familiar with these already, then I don't know what else I can add.  

If you're not familiar with them, then a thorough review of these
cases should be a huge help in understanding the existing precedents. 
Whether they will get you to your ultimate goal, though, is hard to
say.

Let me know your thoughts on this.

And best of luck, in the new year.  


paf

Request for Question Clarification by hagan-ga on 17 Jan 2006 14:09 PST
Keepthemhome, at the risk of driving you mad with one more
clarification request, let me see if I understand the situation
correctly.

Husband inherited home worth $450K.
Community refinanced home during marriage for $150K.
Home was primary residence of children during marriage.
Wife signed quitclaim deed to husband during marriage.
Home has since appreciated to $900K.

Question: Is there any argument under California law that would result
in the home being considered 100% community property?

Do I have it right?

Clarification of Question by keepthemhome-ga on 17 Jan 2006 15:05 PST
Greetings Hagan-ga

Your summary is exactly right.

Thanks!
Answer  
Subject: Re: Moore Marsden Exception
Answered By: hagan-ga on 18 Jan 2006 09:31 PST
Rated:5 out of 5 stars
 
Keepthemhome, there is an argument that can be made.  It's complex,
and even if it were successful, Husband would still be entitled to
reimbursement for his separate property contribution of $300K or so,
but there is an argument for the house being considered community
property.

Please note that the following IS NOT LEGAL ADVICE.  You should engage
a skilled, experienced family law attorney to assist you -- ESPECIALLY
with so much at stake.  The following is simply a review of the
relevant legal principles.

At the outset, let me indicate an assumption.  Since you state that
Wife signed a quitclaim deed on the property during the marriage, her
name must have been on the property at one point.  I assume that the
Husband put the property in both their names when the original $150K
mortgage was taken out.  Correct?

When Husband put the property in both their names, it is presumed that
the property became community property at that point -- UNLESS there
was a written agreement to the contrary.  Family Code Section 2581.

From the case _In re Marriage of Weaver_ (2005) 127 Cal.App.4th 858, 865:
"Under section 2581, all property held in joint title by spouses
during marriage is presumed to be community property upon dissolution,
rebuttable only by written evidence to the contrary. [Citation.]  Such
evidence must consist of either '[a] clear statement in the deed or
other documentary evidence of title by which the property is acquired
that the property is separate property and not community property, []
. . . [or by p]roof that the parties have made a written agreement
that the property is separate property.' ( 2581.) Thus, under section
2581 spouses cannot hold property in joint title while preserving the
property?s separate property characterization through oral or implied
agreements."

So, IF the property was put into joint title at the time of the $150K
mortgage, the presumption is that it became community property AT THAT
POINT.

However, the Husband would still be entitled to reimbursement from the
community for his separate property interest.  Family Code Section
2640.

"But even if property held in joint tenancy loses its separate
property characterization under section 2581, section 2640 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.

See also:
_In re Marriage of Anderson_ (1984) 154 Cal.App.3d 572
_In re Marriage of Neal_ (1984) 153 Cal.App.3d 117
_In re Marriage of Perkal_ (1988) 203 Cal.App.3d 1198

So under this theory, when Wife's name was originally put on the title
in order to get the loan, that creates a presumption that the house is
now community property; Husband is entitled to reimbursement for the
value of the house up to that time --
and here's the important part --
and any appreciation taking place after that BELONGS TO THE COMMUNITY.

"Under Section 2640, in case of dissolution of the marriage, a party
making a separate property contribution ... 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."
_In re Marriage of Weaver_ (2005) 127 Cal.App.4th 858, 866, quoting
from Cal. Law Revision Com., reprinted at 29D West?s Ann. Fam. Code
(2004 ed.) foll.  2640, at p. 590.

But -- what about the quitclaim deed?  If the deed is upheld as valid,
then Wife has waived her right to any community interest in the home. 
And it is difficult to set aside a deed.  However, there is an
argument to be made that the quitclaim deed should be set aside as a
result of undue influence. I can't say that the argument would
necessarily succeed -- but there is case law that would support the
argument.

As I understand it, the argument is that the quitclaim deed was never
actually intended to relinquish Wife's interest, and was executed only
as a result of assurances by Husband that the house was still
"theirs", and that he only wanted to protect "their" property from
Wife's potential business liabilities.  So the argument is that the
quitclaim deed was obtained as a result of fraud, mistake, or undue
influence, and should be set aside.

There are two statutes at play here, and they conflict.
Evidence Code Section 662 provides a strong presumption in favor of
the validity of title, and requires "clear and convincing evidence" to
overturn a facially valid deed.
However, Family Code Section 721 provides that husband and wife are in
a confidential and fiduciary relationship with each other:  "This
confidential relationship imposes a duty of the highest good faith and
fair
dealing on each spouse, and neither shall take any unfair advantage of the other."
Accordingly, when married people engage in a transaction that clearly
favors one of them over the other, that transaction will be presumed
to be invalid unless the benefited spouse can prove that the
transaction was fair.

From _In re Marriage of Baltins_ (1989) 212 Cal.App.3d 66, 88:
"The marriage relationship alone will not support a presumption of
undue influence by one spouse over the other where the transaction
between them is shown to be fair. But, where one spouse admittedly
secures an advantage over the other, the confidential relationship
will bring into operation a presumption of the use and abuse of that
relationship by the spouse obtaining the advantage."

I think it's pretty clear that the quitclaim of the house, with no
payment in exchange, gave Husband an advantage over Wife in this case.

Under these circumstances, there is case law to support the argument
that Family Code Section 721 prevails over Evidence Code Section 662,
and it should be Husband's burden to prove that the transaction was
fair.

In _In re Marriage of Haines_ (1995) 33 Cal.App.4th 277, the husband
had a house as his separate property prior to the marriage.  During
the marriage, he conveyed the house to himself and his wife as joint
tenants, in order to refinance the mortgage.  (Sound familiar?)  But
after that, he demanded that she quitclaim her interest back to him. 
She refused, but he persisted.  Ultimately, when they were about to
split up, he demanded a quitclaim in exchange for co-signing a car
loan with her, because she needed a car and couldn't qualify on her
own.  She signed a quitclaim.

The Court stated that it was up to the husband, in that case, to prove
that the quitclaim deed was NOT obtained by undue influence.  The
Court said that the Husband must "prove the quitclaim deed was freely
and voluntarily made, and with a full knowledge of all the facts, and
with a complete understanding of the effect of the transfer."  _In re
Marriage of Haines_ (1995) 33 Cal.App.4th 277 at page 298.  Because
the husband had failed to prove that the wife gave up the property
"freely and voluntarily..., with a full knowledge of all the facts,"
the quitclaim deed was set aside by the court.

Now, you should note that this would not deprive Husband, in your
case, of his right to seek reimbursement from the community for the
value of the property as of the time he put Wife's name on it.  But --
under this argument -- the community, and not the Husband, would be
entitled to the appreciation of the property since then.

I hope this information has been helpful. I can't stress enough,
however, that you MUST obtain professional legal advice.  The above is
just information about California law.  What to do with that
information is what you need a lawyer for.

Best of luck!
keepthemhome-ga rated this answer:5 out of 5 stars
This was a very complex question and the calrification requests and
response were in keeping with that complexity. This was very helpful
and well worth the expense.

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