Wednesday, July 22, 2015

California Supreme Court Decides "Separate and Apart" Requires Separate Residences

In Davis v. Davis, decided Monday, the California Supreme Court held that spouses must live separately in different residences to claim that property they accumulate is not community property.  California Family Code section 760 makes all property acquired by spouses during a marriage community property "[e]xcept as otherwise provided by statute," including section 771(a): "earnings and accumulations of a spouse...while living separate and apart from the other spouse, are the separate property of the spouse."  The court held that spouses are not "living separate and apart" when they live together.

Mr. and Mrs. Davis married in 1993 and had two children. Mrs. Davis testified that by 2004, they were "living entirely separate lives" but in the same house.  When Mrs. Davis petitioned for divorce in December 2008, she listed their date of separation as June 1. 2006.  Mr. Davis listed the date of separation as July 1, 2011.

The California Supreme Court considered the history of the 1870 Act in which section 771(a) originated entitled "An Act to protect the rights of married women in certain cases."  The first section of the 1870 Act provided that "[t]he earnings and accumulations of the wife...., while the wife is living separate and apart from her husband, shall be the separate property of the wife."  And, it provided that a wife who was living "separate and apart from her husband" had "sole and exclusive control [over] her separate property," and could sue and be sued without joinder of the husband. Section 4 of the Act provided a means for a wife "living separate and apart" to convey her separate real property without her husband's consent by recording a declaration containing a description of her real estate, the name of her husband, and stating "her own place of residence" and that she is "living separate and apart from her husband." 1870 Act sec. 4.

Before the 1870 Act was adopted, married women had no control over separate or marital property. The husband had absolute right of "management and control" of community property, including the power to sell assets.  Under the predecessor 1850 statute, "rents and profits of separate property" were deemed community property subject to the husband's sole control, and the husband had the exclusive right to manage the wife's separate property "during the continuance of the marriage" subject only to the requirement that to sell or encumber the wife's separate property, the transaction must be documented in an instrument signed by both spouses.  The court concluded that the 1870 Act provided married women some protection from the oppressive effect of the prior law.  As a result of the 1870 Act, a married women who was not physically living with her husband could control her own earnings and control and dispose of her separate property.  Early cases interpreting the scope of the exception in section 771(a) considered not whether separate residences were required, but whether the wife had to show something more, e.g., whether one spouse had "abandoned" the other as part of a "separation which [they] intended to be final."  Tobin v. Galvin, 49 Cal. 34, 36-37.  A married couple was not "living separate and apart" if they were residing in separate places for economic or social reasons, but only when they were living in separate locations and have "no present intention of resuming marital relations and taking up life together under the same roof."  Makeig v. United Security Bank &Trust Co., 112 Cal. App. 138 (1931).

Mrs. Davis cited the dissent  in In re Marriage of Norviel, 102 Cal. App. 4th 1152 (2002) as support for her contention that spouses can be "living separate and apart" while living together.  In that case, the majority recognized that under California law, spouses may live apart (in separate residences) and not be separated.  But, the Norviel majority held, the reverse is not true.   However, the dissent in Norviel found that the evidence introduced at trial supported the trial court's finding that the date of separation predated the husband's physical departure from the marital home, because the husband had communicated his intent to end the marriage before he moved out, and the parties' conduct thereafter was consistent with that expressed intent.  The dissent thought that the majority rule requiring that the couple live in separate residences would not permit the couple "a transition period to take the necessary steps to untangle the financial, legal and social ties incident  to their decision."  Id. at 1166.

The California Supreme Court considered the policy implications of a bright line rule requiring physical separation to establish "living separate and apart."  Mrs. Davis argued as a matter of public policy that spouses may need to reside together in the same residence as "roommates" after they mutually intend an end to their marriage for pressing financial reasons, and one spouse who wants to separate and stay in the marital home may find it difficult to compel the other spouse to move out. The court held that although the rule may impose hardships, it does what a bright line rule does-- it provides predictability of outcome and clear guidance to judges. And, it reduces strategic behavior invited by a more flexible standard.  The bright line rule requiring physical separation "retains the presumption of community property for earnings and accumulations acquired during marriage during a period of time likely to be prior to the institution of court proceedings and any court order of support, thereby protecting the lower earning spouse."

The bright line may not be all that bright.  In a concurring opinion, Justice Liu agreed that "living separate and apart" refers to separate residences, but noted that the majority did not foreclose the possibility of circumstances where a couple could live "separate and apart" with the requisite separate residences "even though they continued to literally share one roof."  Justice Liu added to the history of California's community property laws amendments in the 1970's through which the Legislature afforded both spouses equal control rights in community property, and adopted no-fault divorce, with the effect that by the end of the 1970's the "living separate and apart" exception was not necessary to protect married women.  Rather, the exception now serves to recognize that separation before divorce ends the community "in situations where the spouses have effectively though not formally ended their marriage."  Justice Liu noted that "countervailing considerations of family economics and parenting suggest that the physical separation need not assume the precise form that the Legislature in 1870 envisioned, namely, separate addresses."  Citing the dissent in In re Marriage of Norviel, Justice Liu wrote that the test for whether the parties are "living separate and apart" is whether they can demonstrate not only intention to separate, but also unambiguous, objectively ascertainable conduct amounting to physical separation under the same roof."

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