California Supreme Court Case: Property Transmutation and Premarital Agreements, Exams of Property Law

Download California Supreme Court Case: Property Transmutation and Premarital Agreements and more Exams Property Law in PDF only on Docsity! UNIVERSITY OF CALIFORNIA COURSE EXAMINATION SCHOOL OF LAW FALL 2001 LAW 281.2: CALIFORNIA MARITAL PROPERTY INSTRUCTOR: HERMA HILL KAY TIME ALLOWED: 2 2 HOURS CLOSED BOOKS EXAMINATION NUMBERS: Please be sure to put your correct Fall exam number on each page of the exam (if typed) or on each blue book. COMPLETION: DO NOT CONTINUE WRITING AFTER TIME HAS BEEN CALLED. Please do NOT leave your bluebook or typed answers on the desk. Exams MUST be turned in to the person in charge. If you finish early, you must turn your exam in to the Registrar=s office in room 270 Simon Hall. I. 50% Credit After its decision upholding Barry and Sun Bonds= premarital agreement, the California Supreme Court remanded the case to the Court of Appeal for determination of Sun=s remaining claims. One of these claims was Athat in applying the premarital agreement, the trial court erred ... in determining whether certain purchases constituted a gift to the community or a transmutation pursuant to the premarital agreement...@. [Footnote 15, Marriage of Bonds.] The Apurchases@ referred to in footnote 15 include the following transactions: 1. In July 1989, Barry used his earnings to purchase an unimproved lot in Murietta, California [Lot 81]. Title to the lot was taken as ABarry L. Bonds and Susann M. Bonds, Husband and Wife, as Community Property.@ The same title Page 1 of 9 designation was used in a Deed of Trust securing a construction loan for the property. Neither Barry nor Sun signed the deed, but both signed the deed of trust. 2. In 1989, Barry used his earnings to purchase a residence in Pennsylvania. Title to the residence was taken as ABarry Bonds and Sun Bonds, Husband and Wife.@ 3. In 1991, Barry and Sun traded the unimproved lot 81 in Murietta for lot 8, also in Murietta. Title to Lot 8 was taken as ABarry Bonds and Sun Bonds, as Husband and Wife.@ Barry subsequently built a house on Lot 8. 4. In 1993, Barry used his earnings to purchase a home in Atherton, California. Title was taken as ABarry Bonds and Sun Bonds, as Husband and Wife, as Joint Tenants.@ Neither Barry nor Sun signed the deed, but both signed the deed of trust securing the purchase, in which the property was described as held by ABarry Bonds and Sun Bonds, as Husband and Wife.@ On remand, the Court of Appeal considered these purchases in light of Paragraphs 11 and 15 of the premarital agreement. Paragraph 11 read as follows: AExcept as otherwise provided by this agreement, property or interests now owned or hereafter acquired by the parties, which by the terms of this agreement is classified as the separate property of one or the other, may become the separate property of the other or the parties= community/joint property only by written instrument executed by the parties whose separate property is thereby reclassified.@ Paragraph 15 provided that, upon dissolution of the marriage, the community property and the community property debts shall be divided equally. [Paragraph 10, which was the focus of the California Supreme Court=s scrutiny, provided in part as follows: AWe agree that all the earning and accumulations resulting from the other=s personal Page 2 of 9 ...Once Barry and Sun signed written instruments classifying these purchases which had been Barry=s separate property, Barry=s separate property became Areclassified.@ * * * Accordingly we hold that the grant deeds and the deeds of trust satisfied the requirements for transmutation under the premarital agreement executed by the parties.@ Assume that Barry filed a petition for hearing with the California Supreme Court, and that the Court granted the petition. How and why should the case be decided? Discuss fully. Page 5 of 9 Question II. 25% Credit H and W were married in California in January, 2000. Prior to the marriage, W had been the owner-operator of a consulting agency located in California that specialized in training political candidates in public speaking, media contacts, and fund raising. Her candidates were so successful that her services were much in demand and fetched a very high price. A liberal Democrat, she worked only with like-minded candidates. H also was highly successful in the same business and also operated out of California but he was a conservative Republican. Prior to their marriage, H and W frequently worked for opposing candidates. Despite their political differences, they fell in love and were married in January, 2000. During the Presidential campaign of 2000, H worked for Bush and W worked for Gore. In the summer of 2002, H=s services during the 2004 campaign were contracted for by the Committee to Re-elect the President. Given the narrow margin of the 2000 election, H would like to prevent W from agreeing to work for the Democrats in 2004. He asked her, out of deference for him, to sit out the Presidential election and to limit her activities to the Senate races. Treating H=s request as a joke, W refused. After W=s refusal of his request, H secretly enlisted a wealthy conservative Republican to offer to buy W=s consulting business for double its appraised value, and to pay W not to compete in the political consulting field for a 10 year period at an annual amount twice what she had earned in her highest- earning year. When W told H about the offer, he urged her to accept it, saying that he hoped she would retire for a time so that they could raise a family. W was torn, but finally accepted the offer and signed the non- competition agreement. In January, 2003, W became pregnant, and their child was born in October. In November, 2004, the President was re-elected in a landslide. At an election night party, W learned that H had been the Page 6 of 9 moving force behind her sale of the consulting business. She is outraged, moves out of the family home the next day, and files suit for divorce. ANSWER THE FOLLOWING QUESTIONS AND DISCUSS FULLY: 1. Assume that the assets held by the parties at the time of separation include the following: a. H=s consulting business; b. The remaining proceeds of W=s sale of her consulting business; c. W=s projected income for the next eight years pursuant to the non-competition agreement; and d. The family home. The home was acquired by H in his name alone two weeks prior to the marriage for $400,000 which included a down payment of $80,000 from his separate property and a $320,000 loan to him from a bank secured by a 30 year deed of trust at 7% on the property. H made the monthly payments after the marriage from his consulting business. At the time of separation, the principal debt had been reduced by $14,400, and the home was valued at $800,000. You are the trial court judge. How and why should these assets be divided? 2. What rights, if any, does W have against H for his activities in connection with the sale of her business? Page 7 of 9