Community Property Interest Created in Separate Property due to Principal Pay Down
Presumption on Community Credit
“There is a rebuttable presumption that property acquired on credit during marriage is community property. [Citations] But “funds procured by the hypothecation of separate property of a spouse are separate property of that spouse.” [Citations] The proceeds of a loan made on the credit of separate property are governed by the same rule. [Citations]] In accordance with this general principle, the character of property acquired by a sale upon credit is determined according to the intent of the seller to rely upon the separate property of the purchaser or upon a community asset. [Citations]] In the absence of evidence tending to prove that the seller primarily relied upon the purchaser’s separate property in extending credit, the trial court must find in accordance with the presumption.” Gudelj v. Gudelj, (1953) 41 Cal.2d 202, 211
What is the amount of the community interest?
Moore cited Aufmuth as the authority for parsing out the community interest. It is basically the reduction of principal and does not allow for reimbursement for property taxes, interest or insurance. “Although many formulae have been suggested, we are not persuaded that any of them would be an improvement over a formula based on the reasoning of In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, which was approved In re Marriage of Lucas (1980) 27 Cal.3d 808. We were there concerned with determining the respective community and separate interests in a residence purchased during marriage with a combination of community and separate funds where the community contributed the loan and subsequent payments on it and there was an agreement or understanding that the party contributing the separate property down payment was to retain a pro rata separate property interest. The formula we used there recognized the economic value of the loan taken to purchase the property. In the formula postulated in Lucas the proceeds of the loan were treated as a community property contribution on the assumption that the loan was made on the strength of the community assets” In re Marriage of Moore, 28 Cal. 3d 366, 374
Marriage of Aufmuth Formula
The Aufmuth court’s opinion stated: “It was stipulated that the home had a fair market value of $125,000, an increase in value of $58,500 over the original $66,500 purchase price. The mortgage balance at the date of separation was $47,000. The community contributed $50,000, and wife contributed $16,500 of her separate funds, to the original purchase price. The community interest in the property was therefore 75.19 percent ($50,000 divided by $66,500), and the remaining 24.81 percent interest was wife’s separate property, when the residence was acquired.
In accordance with this formula, the trial court found that “the present value of the $16,500 initial investment in said residence is $31,014 and the present value of the joint investment is $46,986.” Although not expressly stated, it is apparent that the court calculated the $ 31,014 figure by adding the amount of capital appreciation attributable to separate funds (24.81 percent of $58,500) to the amount of the equity paid by separate funds ($16,500); the $46,986 figure, by adding the amount of capital appreciation attributable to community funds (75.19 percent of $58,500) to the amount of equity paid by community funds ($50,000 minus $47,000).” In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, 458