How Courts "Apportion" Separate vs. Community interests in businesses owned before Marriage

Two very old cases dictate the approaches used by California Courts to determine interest and appreciation of a Separate Property Business (Owned or started before marriage).     The two (2) cases are Van Camp v. Van Camp (1921) 53 Cal. App.17, and Pereira v. Pereira (1909) 156 Cal. 1.     

PEREIRA ANALYSIS

Frank Pereira and Anna Pereira were married in 1900.   Frank previously owned a Saloon and Cigar business that were highly profitable.    Frank claimed the business, started before the marriage with his separate capital, was entirely his separate property.    The Court disagreed, stating "It is true that it is very clearly shown that the principal part of the large income was due to the personal character, energy, ability, and capacity of the husband. This share of the earnings was, of course, community property."    

Based upon the evidence presented, the Court believed that the great success of the business was the result of Frank's actual work efforts and labor, and his physical presence, decision making, and day-to-day involvement in the business.  Therefore, the Pereira analysis usually involves small businesses wherein the management and efforts of the owner is significant in the success of the business, and it is assumed the business would not have the same success without the owner's efforts.

VAN CAMP ANALYSIS

The Van Camp case came from the well-known family that canned foods and sold them in markets throughout the country.   Frank Van Camp arrived in Los Angeles in 1914 from Indianapolis to open a sea food cannery in San Pedro.      He had a successful packing company in Indianapolis and arrived with money to start his new venture and buy property.    The Court stated he "brought to California property of great value, consisting largely of cash and stock securities."   Van Camp at 20.

He was married in 1916 to Euphrasia, whom he had met in the local post office.     Aside from the various other factual claims made in the case, the Court examined Frank's work time at the new company during the marriage, and how that time impacted the appreciation of the business.

The wife relied on the holding of the Pereira case, that the Sea Food Company  "was a mere agency through which defendant conducted his business, and since its enormous income was due to the skill and ability with which defendant conducted the business, the community estate should be accredited with all the profits derived therefrom" Van Camp at 27.

The Court disagreed, and stated "In our opinion, the circumstances attending the Pereira case are not *28 applicable to the facts involved herein. While it may be true that the success of the corporation of which defendant was president and manager was to a large extent due to his capacity and ability, nevertheless without the investment of his and other capital in the corporation he could not have conducted the business" Van Camp at 28.

The Court determined that because of the large initial investment Frank made in the Sea Food Company before marriage and with his separate property funds, the business increased in value due to the initial investment, various assets and employees of the business, and not  because of Frank's work efforts alone during the marriage.

SUMMARY

The two (2) different approaches look to the need of the actual efforts of the spouse during the marriage, and whether or not those were significant to the growth or success of the business.     Other issues also occur in marriages as to whether or not employment during a marriage is really a business at all.  (See In Re: The Marriage of McTiernan and Dubrow (2005) as to what is a "business".  Court found Director's company was not  a business with value at all, but instead his employment)


Call Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879 to find out more about your particular business valuation or property valuation issue.

Understanding the impact of Name on Title vs. ownership of Real Property in a California Divorce

Title on real property can be held in many forms in California.     Particularly, title on deeds can be held by individuals, couples and other entities.      Many married couples often take title to deeds as either "Joint Tenants" with right of survivorship, or as community property.

Often, the deed will state that both parties are "married".       In these cases, the property is commonly "community" in ownership nature and there may not be a dispute as to the extent of ownership by either party.      A more common problem occurs when one party either takes title during the marriage, as "a married person as their sole and separate property", or when a person owns property before marriage as "a single person."

Even if the title is in one spouse's name, that may not mean that the property is 100% theirs.

Starting with a line of family law cases in the 1980's, the California courts have analyzed a common problem- that if "community earnings during the marriage" are used to pay-down the mortgage on a property belonging to one spouse, the other spouse can actually gain an interest, or what is known as
a "pro-tanto community interest".      This theory is based upon the cases of Marriage of Moore (1980)288 Cal 3d. 366, and Marriage of Marsden (1982) 130 Cal. App.3d. 426, now more commonly known as the "Moore/Marsden" interest.

The Moore/Marsden theory basically looks at the percentage the mortgage or encumbrance was paid down during the marriage as well as the increase in property value, and "awards" the community (both spouses equally) a fractional share in the property.

This effect has been compounded over recent years because of the case of Marriage of Branco (1996)
47 Cal. App.4th. 1621, which states that if a property is refinanced "by the community" instead of by the spouse individually, the community gets an even larger interest in the property proportional to the new "community" encumbrance or debt.

Many people are surprised to learn of this situation, but they are common in divorce cases.     If you have a question about title to real property or your interest in property during the marriage, contact Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879.

Unbundled Legal Sevices - Limited Representation of Lawyer

Traditionally, clients hired a lawyer for a specific case or in a specific are of law (i.e. Divorce).
The lawyer was retained and either filed the documents or "substituted into the case."    Either way, the lawyer was "Attorney of Record" for all aspects of the case.    This was good for many clients because the lawyer handled all aspects of the case, communications with the other party, etc.   However, many clients, particularly those with limited financial means found this practice cost prohibitive.

Many clients were looking for lawyers to only handle limited parts of the case, because they could handle the balance of tasks, making the Divorce Lawyer more affordable.    

In the early 2000's, the California Bar created rules for "Limited Scope Representation" in a divorce or family law matter.     In Limited Scope cases, the Attorney and client can decide which "parts" of the case the lawyer should work on, and whcih court appearances (if any) the lawyer should make.

By clearly spelling out the terms of the representation, both the lawyer and client understand each others roles.   This practice can save time, save money, and allow the litigant a way to receive affordable legal care for their case.     If you are interested in "Unbundled Legal Services" or Limited Scope Representation for your family law matter, please contact Palos Verdes Divorce Lawyers and Torrance Divorce Lawyer Kevin J. Kensik at 310-704-0879.

Modification of Support - Child and Alimony After Divorce

Parties often agree to support amounts in the initial divorce, or the amounts are ordered by the court.

After the divorce judgment is "final", that parties have what is referred to as a "Permanent Support Order."     However, that order is only as "permanent" as the parties' financial situations remain unchanged.     Some factors that might cause a reduction, increase, or termination of support are as follows:

1)    The supported party remarries.     Once the supported ex-spouse remarries, Alimony or Spousal Support ends.     However, child support can continue depending on other factors.

2)     Either party dies.    If either the supported party or the paying party ends, the support will also terminate.    However, if there are minor children and the payor survives, child support may continue if the children do not live with the payor.    Also, it is often to have a life insurance policy in place for the payor to preserve income.    Talk to a qualified Palos Verdes Divorce Lawyer such as Kevin J. Kensik about this issue.

3)     A child turns 18 and finishes high school or turns 19.    Once a minor child reaches age of majority and completes high school, that child's support will end unless there are extenuating circumstances.    However, support for other siblings may continue and Alimony may change.

4)     Either the paying spouse's income changes significantly or the supported spouses income changes.    The amount of support paid is determined by both parties' incomes.   If there is a "change in circumstances" meaning a significant change in either party's financial position, the court will consider modifying support.

5)     The supported party is "cohabitating" with another person.   If the supported party is receiving financial assistance, housing or "commingling" funds or expenses with a partner whom they are living with, the court may consider reducing or terminating support.    The reason is a "presumption" of less need for support from the paying ex-spouse.

6)     The paying party retires.   Once a payor turns 65 years of age, the court will not impute income from employment to that party if they chose to retire.     However, if the paying party continues to work after age 65, or if that party has additional passive income, the court may consider that income in a future support order.

These are just some of the factors involved in changes in support.    Consult an experiencedTorrance Divorce Attorney or Mediator such as Kevin J. Kensik.

Support Modification - Post Judgment

Many people are unaware that support can be modified after their divorce is completed. The support can be modified down or up, depending on a number of factors. The factors the court can consider usually must create a "Change in Circumstances" for the court to modify the amount.

Some factors or reasons for modifying support are:

1) Spousal Support (Alimony) terminates but Child Support continues. Many times the reduction in Spousal Support will cause the "Guideline" Child Support amount to increase. The courts have ruled that termination of spousal support is a "Change in Circumstances.";

2) The Payor’s income increases or decreases. The support that is set by the court or agreed by the parties is based primarily on both parties’ gross incomes. If the payor’s income decreases, a support reduction may be in order. The same is true that an income increase could create a support increase. Also, regarding income reduction by the payor, the court will inquire as to the reasons for the loss in income to determine if it is legitimate and reasonable;

3) The Payee’s (supported spouse) income increases or decreases; The same is true of changing income of the Payee (supported spouse) as is of the Payor. If the payee begins making much more income, the court assumes a "reduced need for support.";

4) The Payor retires. The payor is allowed to retire at or over age 65 and the court will not "impute" income even if the party is capable of working and earning. However, workers retiring before age 65 may have income "imputed" to them for purposes of calculating support, even if they are eligible to retire before age 65;

5) The supported party remarries or cohabitates; Once a supported party remarries, there is a presumption the new spouse will support that person, and support ends. If a supported party is found to be "cohabitating" (defined as living with a person of the opposite sex, generally, and having a romantic relationship), the cohabitation may not "terminate" the spousal support, but it creates a "presumption" of reduced need.

There are numerous other reasons why support might be modified, including hardships, unforeseen circumstances, expenses and medical reasons. Be sure to contact Kevin J. Kensik, Attorney to discuss the unique facts of your case.

The Importance of Date of Separation in a California Divorce

What is "Date of Separation" and what does it mean?

Most people often confuse "Date of Separation" with a "Judgment of Separation" and there is even more confusion with the term "Living Separate and Apart."    What does all of this mean?


JUDGMENT OF SEPARATION
After parties file a Petition with the court, whether for divorce, annulment, or separation, they may obtain a Judgment of Separation.     This means that the parties have separated, and have made some type of agreement regarding finances, custody or support and property division.      However, they are technically still married.      To obtain a judgment of separation, both parties must agree to the judgment of separation.   If one party does not, the Court must either terminate the marriage through divorce, or find a "nullity" of marriage. (annulment)

What are the benefits of a Judgment of Separation?
One benefit is that this usually resolves all of the financial issues in the case.     However, people previously got judgments of separation because many employers kept medical and health coverage benefits in place.     This is generally no longer the case.      Make sure to consult Attorney Kevin J. Kensik to determine your rights.

DATE OF SEPARATION
The Date of Separation is the date parties typically decide to live "Separate and Apart" and also decide to end the marriage.     This date can be critical because it may determine some of the following issues:
                                          -    Duration of Alimony (Spousal Support)
                                          -    Amount of Retirement Benefits
                                          -    Amount of other benefits, such as employment bonuses,
                                                awards, business values and other items.

Previously for about the last 10 years, one of the parties had to move out of the residence.
(Marriage of Norviel (2002) 102 Cal.App.4th, 1152) and Family Code 771.)

This is no longer the case.    A recent case, however, the Norviel standard was considered "unduly rigid" and in fact severely modified.    (Irmo Davis (2013)

How can you know what dates are critical?   Contact Palos Verdes Divorce Attorney Kevin J. Kensik
at 310-891-2300 or 310-704-0879.

The Difference between Domestic Partnership and Same-Sex Marriage in California

Many people are confused about the differences between and domestic partnership and or a same-sex marriage in California.    A brief review is in order:

DOMESTIC PARTNERSHIPS

Domestic Partnership licenses were first issued in California in 2001 as a way of having the State recognize marriages between same-sex couples and also non-same-sex couples.     However, under Federal Law, this was not recognized as a marriage.   The laws were modified in 2003, 2005 and again in 2012.     The most recent changes prevent non-same-sex couples under age 62 from obtaining a Domestic Partnership license.     The reason people, particularly those of 62 years of age may want to obtain a Domestic Partnership license instead of marriage is to preserve social security and retirement benefits that were earned before marriage.       Parties to a Domestic Partnership license do not enjoy the same marriage benefits under Federal Law as either a traditional marriage or same-sex marriage.

SAME-SEX MARRIAGES

Same sex marriages began in California in 2004 when the Mayor of San Francisco began issuing marriage licenses to same-sex applicants in 2004.     However, those orders were later considered "void" by the California Supreme Court.   In June 2008, the State of California began issuing marriage licenses until late 2008 when the licenses were halted due to the filing of a Federal Lawsuit challenging the State's authority to issue licenses under "Proposition 8."   After being heard in District, Appellate and the U.S. Supreme Court, marriage licenses again resumed being issued in June 2013.

WHAT DOES THIS MEAN FOR YOU?

Both Domestic Partnerships and Same-Sex Marriages or terminated by a similar process to a Divorce.    Contact Attorney Kevin J. Kensik to find out about your rights.

Law Offices of Kevin J. Kensik

Located in Palos Verdes, the Law Offices of Kevin J. Kensik helps clients throughout the South Bay resolve their family law disputes.

Attorney Kevin Kensik is a member of the Los Angeles County Bar, the Beverly Hills Bar Association and the South Bay Bar Association. Mr. Kensik is also a member of the Tax Court and is licensed in federal court in the Central District of California. For more information about the Law Offices of Kevin J. Kensik, please refer to my biography below.

• Kevin J. Kensik