IN RE: MARRIAGE OF Leon J. and Elayne C. EPSTEIN. Leon J. EPSTEIN, Petitioner and Respondent, v. Elayne C. EPSTEIN, Respondent and Appellant.
Appellant, Elayne C. Epstein (hereafter wife), appeals from an interlocutory judgment of dissolution of marriage from respondent, Leon J. Epstein (hereafter husband), and “Order re Support and Property Division.” She contends that the trial court erred (1) in terminating spousal support on April 15, 1981, without retaining jurisdiction to modify; (2) in fixing her spousal support at $750 per month; (3) in failing to consider capital gains tax consequences upon the court-ordered sale of the family residence; (4) in allowing respondent to use community funds to pay income taxes on post-separation separate property income; and (5) in allowing reimbursement to respondent of separate funds he expended to preserve and maintain the family home during the pendente lite period.
The parties were married on August 8, 1954, and separated on April 15, 1972. At the time of trial the wife was 48 years old and husband was 57. There were two children of the marriage, a daughter, over 18 at the time of trial and in college, and a son, age 16, residing with the wife.
Wife had not been employed during the marriage. Prior to the marriage she had held a temporary job as a doctor's receptionist for six months, had worked for her father for a brief period in his business, and for a wholesale firm in Los Angeles for slightly less than a year. She had a B.A. degree from the University of California, where she had majored in social work. However, due to lacking certain units, she had received her degree in general curriculum. She testified, without rebuttal, that she did not have sufficient education to qualify for social work, that, as far as she knew, she would need at least a Masters Degree for a job in that field. Although she had not sought employment or job training during the two and one-half year interval between separation and trial, attributing this to the demands of running the family home and responsibility for the children, she intended to seek job training and employment in the future.
The husband is a medical doctor, specializing in psychiatry, and employed as Professor of Psychiatry and Chairman of the Department of Psychiatry at University of California Medical School. He also has a part-time private practice in psychiatry. His gross income from all sources in 1973 was $67,000; his net after mandatory tax deductions, retirement and deduction for certain health and life insurance premiums was about $2,600 per month. He would be subject to mandatory retirement at age 67 on July 1, 1984.
The parties community property exceeded $200,000 in value, including the family residence which had an equity of approximately $106,000.
The trial court awarded spousal support to wife in the amount of $750 per month, retroactive to January 1, 1975, and continuing through April 14, 1981. The order provided that spousal support would terminate on April 15, 1981, and the court would have no further jurisdiction to award spousal support. The court also ordered husband to pay child support for the parties' son, living with the wife, in the sum of $200 a month.
The trial court also made certain orders with respect to community property, the facts of which will be set forth in connection with the parties' contentions.
Termination of Spousal Support Without Reservation of Jurisdiction to Modify
The wife contends that the trial court abused its discretion in ordering spousal support terminated on April 15, 1981, without retaining jurisdiction to award spousal support after that date.1
At the time of trial of this matter there was some uncertainty among the Courts of Appeal regarding the propriety of termination of support after lengthy marriages without retention of jurisdiction to modify. We need not recount that history, as any uncertainty has been put to rest by the recent decision in In re Marriage of Morrison (1978) 20 Cal.3d 437, 143 Cal.Rptr. 139, 573 P.2d 41, which holds that a trial court should not terminate jurisdiction to extend a future support order after a lengthy marriage, unless the record clearly indicates that the supported spouse will be able to adequately meet his or her financial needs at the time selected for termination of jurisdiction.
In the present case there was no evidence that the wife would be self-supporting after April 15, 1981. The wife was 48 years old and was not employed at the time of trial. She had not been employed during the marriage, almost 18 years, and had had only brief and intermittent employment before the marriage. Although she had a Bachelor of Arts degree and indicated a willingness to seek employment, it was clear that she would have to undertake considerable training before she would be qualified to compete in the job market. Furthermore, there was no evidence of any specific employment opportunity available to her upon completion of such training. By retaining jurisdiction to modify in the event that her good faith efforts did not provide for her needs as of April 15, 1981, the court would be able to extend support in an amount which it considered reasonable at that time. Under these circumstances, and applying the standard of Morrison, it was an abuse of discretion not to retain jurisdiction to modify support.
We are aware of husband's contention that to award support beyond his mandatory retirement date (July 1, 1984), would defeat the requirement of Civil Code section 4800, subdivision (a), that community property be divided equally. Husband contends that as his interest in his retirement fund was awarded to him in his share of community property, then if wife were to subsequently receive spousal support out of his retirement fund, she would, in effect, be receiving a portion of community property previously awarded to him. This contention must fail for several reasons. First, the trial court terminated child support on a date almost three years prior to husband's retirement. Secondly, in every case where one spouse receives permanent spousal support from the other spouse, the source is from the then separate property of the paying spouse, including his earnings or property which was once the community property of both spouses. Most importantly, there was no evidence that husband's only income upon retirement would be his pension. Husband testified that he wanted to reduce his private practice, but did not indicate that he intended to eliminate it entirely. He admitted that he would pursue the practice of forensic psychiatry after he retired. Noting husband's position of eminence in his profession, it is reasonably inferable that he would have an ample market for his abilities in private practice. In short, the question of husband's financial position at the time of his retirement is simply a factual one that a court would have to consider upon a motion to modify.
Amount of Spousal Support
The wife contends that the trial court abused its discretion in setting spousal support at the amount of $750 per month. Specifically, she contends that the court failed to consider the previous standard of living of the parties, the husband's earnings, and lower income taxes resulting to the husband because of the deductibility of the spousal support paid to the wife. The record indicates that husband's net income from his salary, after mandatory deductions and medical and life insurance premiums (the latter being certainly necessary if the husband was to protect the source of the family income), amounted to $2,471 a month. He netted an additional $9,700, before taxes, in 1973 from his private practice, but $9,000 of this went to pay estimated tax payments to compensate for the fact that he was “underwithheld” on his salary. The court commented from the bench that husband's monthly net income from all sources was approximately $2,600, which appears to be correct. His expenses amounted to approximately $1,750 per month. This included $350 per month as the cost of the parties' daughter, Lisa's, college education expense, which the court indicated that it had considered.2 Indeed, wife has not suggested that it was improper to consider this expense. Thus, the available income for support amounted to $850, which is less than the total spousal and child support ordered $950.
It is true that the amount ordered would not maintain the wife's previous standard of living. However, it is clear that the court considered the matter but did not feel it was possible to achieve that.3 The factor of the wife's previous standard of living must be considered in the light of the husband's ability to provide. (In re Marriage of Lopez (1974) 38 Cal.App.3d 93, 113 Cal.Rptr. 58 (disapproved on other grounds In re Marriage of Morrison, supra, 20 Cal.3d 437-453, 143 Cal.Rptr. 139, 573 P.2d 41).)
Although husband will be able to claim spousal support as a deduction, the record indicates that this will be partially offset in the loss of the deduction for taxes and interest on the residence, and husband's less favorable status as a single taxpayer. The record does not indicate that the deduction is of such significance as to bring into question the court's finding.
An abuse of discretion occurs only when it can be said, after a calm and careful reflection of the entire record, that no judge reasonably could have made the same order. (In re Marriage of Lopez, supra, 38 Cal.App.3d at p. 114, 113 Cal.Rptr. 58.) We do not find error.
Failure to Consider Capital Gains on Sale of the Residence
The trial court ordered the family residence sold and, after reimbursement to husband of certain expenditures, the balance of the proceeds divided so as to equalize the division of community property. Wife contends that the trial court erred in not providing for allocation of capital gains taxes upon sale.
The only evidence at trial regarding capital gains tax was the testimony of the wife, as follows: “I would really prefer to buy a home because if I sell the house, I have to pay a capital gain tax on that and if I buy another house, I don't have to.”
A trial court is not required to consider future tax consequences following a division of community property where the record does not show immediate and specific tax liability. (In re Marriage of Fonstein (1976) 17 Cal.3d 738, 749, 131 Cal.Rptr. 873, 552 P.2d 1169; Weinberg v. Weinberg (1967) 67 Cal.2d 557, 63 Cal.Rptr. 13, 432 P.2d 709.) Wife's own testimony indicates that whether or not capital gains liability would be incurred would depend on whether she bought another house. Further, there is no evidence as to the specific monetary effect on her of such liability even if it were incurred. Proof of future diminution in value of an asset due to application of tax laws must be presented to the court for its consideration and is not a matter that can be determined from judicial notice of tax legislation. (In re Marriage of Folb (1975) 53 Cal.App.3d 862, 876, 126 Cal.Rptr. 306 (disapproved on other grounds In re Marriage of Fonstein, supra, 17 Cal.3d at p. 749, fn. 5, 131 Cal.Rptr. 873, 552 P.2d 1169)) We find no error.
Use of Community Funds to Pay Income Taxes on Separate Property Income
Wife contends that the trial court erred in not providing that the community be reimbursed for a payment made by husband from community funds on his income taxes on his separate property income. We agree.
In January 1974 husband withdrew from a Crocker Bank savings account conceded to contain only community funds the sum of $2,250 and used it to pay his quarterly estimated tax payment on 1973 income, all of which, being post-separation, was separate property. The trial court deducted that sum from the amount in the account on separation before dividing the balance equally between the parties.
Where community funds are used by the husband for payment of taxes relating to his separate property, the community is entitled to reimbursement. (Somps v. Somps (1967) 250 Cal.App.2d 328, 338, 58 Cal.Rptr. 304; Estate of Turner (1939) 35 Cal.App.2d 576, 96 P.2d 363.) Accordingly the sum withdrawn by husband should have been charged to his share of the community property. Husband's contention that the sum withdrawn was substantially offset by a deposit by husband of $2,051 in separate property funds into a Gibralter Savings and Loan account is without merit. True, husband's accumulated unused vacation paycheck in the sum of $4,700 (two-fifths of which, or $2,051, represented his separate property) was deposited in Gibralter Savings and Loan Account No. 58-20000-37-1-52. However, only the amount in that account at separation, $13,839.12, was found to be community property. The additional balance at trial, $2,050.88, remained husband's separate property.
Reimbursement to Husband of Separate Funds Expended to Maintain the Residence
Wife contends that the trial court erred in allowing reimbursement to husband of separate funds he expended during the pendente lite period to maintain the family residence.
During the period between separation and trial, wife and the children continued to live in the family residence. Husband, who had vacated the residence, voluntarily paid to wife a certain sum of cash each month and in addition made direct payment on the residence mortgage, taxes, and insurance.4
The trial court found that “Since the date of the parties' separation, no pendente lite order for temporary spousal and child support was ever entered. Since that date, however, petitioner has voluntarily paid the mortgage, real property taxes, real property insurance, and various repair bills on account of the home at 3535 Clay Street, which is a community asset. . . .” The court, after ordering that the home be sold, provided that from the net proceeds of sale, the husband would first “be reimbursed for any and all traceable separate funds5 he has expended during the period of the parties' separation in order to preserve and maintain this community asset, including, but not limited to, mortgage payments, real property taxes, house insurance, and ordinary and necessary repair bills.” The balance of the sales proceeds were then to be divided equally.
Wife contends that the direct payments by the husband to maintain the family residence were in the nature of spousal and child support, and that reimbursement to the husband is precluded by the rule that a spouse who uses his or her separate property for community purposes is entitled to reimbursement from the community only if there was an agreement between them for such reimbursement. (Weinberg v. Weinberg, supra, 67 Cal.2d 557, 570, 63 Cal.Rptr. 13, 432 P.2d 709; See v. See (1966) 64 Cal.2d 778, 51 Cal.Rptr. 888, 415 P.2d 776; In re Marriage of Cosgrove (1972) 27 Cal.App.3d 424, 430-431, 103 Cal.Rptr. 733.) Husband contends that the stated rule does not apply to the use of separate funds for such purposes after separation where there was no pendente lite order nor any agreement between the parties for support.6
The applicability of the no-reimbursement rule of See v. See, supra, 64 Cal.2d 778, 51 Cal.Rptr. 888, 415 P.2d 776, to post-separation payments out of separate property was recently considered, in a related context, in In re Marriage of Smith (1978) 79 Cal.App.3d 725, 145 Cal.Rptr. 205. In Smith, husband sought reimbursement for payments which he made after separation on preexisting community debts. In considering the no-reimbursement rule of See, the court first noted that See and the cases following it had all involved expenditures of separate funds for community purposes prior to the separation of the parties. (See, e. g., Weinberg v. Weinberg, supra, 67 Cal.2d at p. 570, 63 Cal.Rptr. 13, 432 P.2d 709; In re Marriage of Cosgrove, supra, 27 Cal.App.3d at pp. 430-431, 103 Cal.Rptr. 733.) The Smith court then, noting that See was based largely on the presumption that the paying spouse intended a gift, stated that after separation there is no rational basis for presuming such an intention. Further, it indicated that the practical reality of marital dissolution proceedings is that parties upon separation frequently have unpaid community debts, and that application of the no-reimbursement rule would mean that community obligations which would otherwise be charged against community property and borne by the spouses equally would be charged exclusively to the paying spouse, and that this would discourage the payment of community debts after separation. The court concluded that as a general rule, a spouse who, after separation of the parties, uses earnings or other separate funds to pay preexisting community obligations should be reimbursed therefor out of the community property upon dissolution.
However, the Smith court went on to state that there are a number of situations in which reimbursement is inappropriate. Included in such situations were those in which the payment was in reality a discharge of the paying spouse's obligation to support the other spouse or a dependent child of the parties: “Likewise, reimbursement should not be ordered where the payment on account of a preexisting community obligation constituted in reality a discharge of the paying spouse's duty to support the other spouse or a dependent child of the parties. Both spouses have a duty to support their dependent children. (Civ. Code, ss 242, 4700.) Similarly, the spouses owe to each other mutual duties of support. (Civ. Code, ss 242, 5100, 5132.) Following separation, the preferred source for payment of support is the separate property of the supporting spouse that would have been community property if the spouses were not separated. (Civ. Code, s 4805.) Payment of a debt, of course, may constitute payment of spousal or child support. (See Gay v. Gay, 146 Cal. 237, 243, 79 P. 885; Bushman v. Superior Court, 33 Cal.App.3d 177, 181-183, 108 Cal.Rptr. 765; In re Hendricks, 5 Cal.App.3d 793, 797-798, 85 Cal.Rptr. 220; cf. Civ. Code, s 4358.) When in fact it does, reimbursement is inappropriate. (See v. See, supra, 64 Cal.2d at p. 784, 51 Cal.Rptr. 888, 415 P.2d 776.)” (79 Cal.App.3d at pp. 747-748, 145 Cal.Rptr. at p. 216.)
We agree with this analysis, and conclude that it applies equally to a claim for reimbursement for post-separation payments out of separate funds to preserve and maintain a community residence asset. The no-reimbursement rule of See was, as suggested by the above quoted passage, also grounded in the duty of support. Although generally, for the reasons stated in Smith, reimbursement for payment to preserve and maintain a community asset should be allowed, where the payment is a necessary component of the obligation to support, reimbursement should not be allowed, in the absence of an agreement or prior court order to that effect. It is common in marital dissolutions for the supported spouse and the minor children to remain during the pendente lite period in a family residence which is subject to a mortgage. The payment on the mortgage is, along with food, one of the most important factors in the support picture. To allow reimbursement to the paying spouse for such payments simply because they are made direct to the lender rather than being included in the lump sum support payment, would have the effect of charging a supported spouse, often unemployed and unemployable, at least during the pendente lite period, with one-half the expense of housing for the supported spouse and the minor children. In other words, for example, a wife with no earnings, no employment history, and minor children to take care of, would, upon conclusion of a marital dissolution proceeding be required to retroactively, out of her share of the community property, reimburse the supporting husband for one-half the monthly cost of the family housing, even though he may have had ample ability to fully provide for the expense of such support during the pendente lite period, all because the husband made the house payment direct rather than including it in a lump sum support payment. Such would not be consistent with the duty of support expressed in Civil Code section 5100. We conclude, therefore, that where a post-separation payment out of separate funds to preserve and maintain a community residence asset is, in fact, a fulfillment of the obligation of support, that no reimbursement should be allowed in the absence of an agreement between the parties to that effect, or prior court order.
Husband contends that reimbursement should, nevertheless, be allowed because in the present situation there was no agreement between the parties for support, and that under Civil Code section 51317 husband had no obligation to support his wife during separation in the absence of an order or such agreement. We do not feel extensive discussion is necessary to demonstrate that Civil Code section 5131 is not applicable here. An examination of cases which have arisen under section 5131 make clear that it is intended to apply to situations where husband and wife expressly agree to live separate. The cases all involve constructions of such express agreements and subsequent claims for support based upon them. (Verdier v. Verdier (1950) 36 Cal.2d 241, 223 P.2d 214; Estate of Bose (1910) 158 Cal. 428, 111 P. 258; Bird v. Bird (1957) 152 Cal.App.2d 99, 312 P.2d 773.) Clearly this section is not intended to apply to the situation where two spouses separate simply as a preliminary to filing a marital dissolution proceeding. As wife pointed out, if section 5131 were applicable in such an instance, then a court would have no jurisdiction to order support to a spouse who at the time of a marital break up had not obtained an agreement that the other would pay support during separation. To state the proposition is to answer it.
In the instant case the trial court, naturally not having the benefit of the opinion in Smith, did not make a finding as to whether or not the payments on the home mortgage and other maintenance expenses were in fact a fulfillment of the husband's duty to support. Accordingly, the order for husband's reimbursement will be reversed with directions to the trial court to make such a finding, and then to make an appropriate order in accordance with the principles stated herein. In making its determination the trial court should consider whether or not the payments in question were in addition to reasonable support already being provided by the husband. (In re Marriage of Smith, supra, 79 Cal.App.3d 725, 748, 145 Cal.Rptr. 205.)
The judgment is reversed with respect to the failure to retain jurisdiction to modify spousal support and failure to provide for reimbursement to the community by husband of community funds used for his separate income tax payment. The case is remanded for further proceedings with respect to the issue of reimbursement to husband for separate funds used to preserve and maintain the family residence. The judgment is affirmed in all other respects.
1. Wife's brief discussed the issue in terms of “termination” without distinguishing between termination with and termination without retention of jurisdiction to modify. However, in the course of oral argument, counsel advised that wife challenges the trial court determination only insofar as it failed to retain jurisdiction.
2. The court stated: “(S)o, he's paying somewhere in the vicinity of three hundred to three-hundred-and-fifty dollars a month so, the amount that would ordinarily be awarded to you may be reduced in half that amount so that you're indirectly contributing to Lisa.”
3. The court stated: “. . . and I can tell you that taking the community property and dividing it in half and giving the doctor half and giving you half isn't going to give you the same standard of living that you would have if you were trying to run one household with the whole thing together instead of trying to run two households on half of what you have.”
4. Husband's testimony at trial regarding his arrangement with wife for support of her and the family was as follows:“Q. Did you and your wife enter into any arrange arrangements between yourselves for the support of her and the family at the time when you moved out of the family home?“A. The arrangement continued to be the arrangement that had existed before.“Q. Which was what?“A. Namely: that I would deposit a sum of money in her account each month; actually, I would not deposit it myself, but would give my wife a check which she would deposit and only she drew checks from that account. And, in addition to which, I paid for the utilities, telephone, department store bills, gardener, gasoline card, house insurance; its possible I missed something I don't recall (sic).“Q. Did you pay the mortgage?“A. I beg your pardon. Mortgage and house taxes.“. . . . . .r p“Q. Approximately how much money per month did you deposit in your wife's checking account?“A. It would not vary much from $650. . . .”In January 1974 husband's attorneys sent wife's attorney a letter containing the following: “We propose that beginning February 1, 1974, Mrs. Epstein receive as temporary spousal and child support $1,300.00; $350.00 of which is the mortgage payment on the family home, and Dr. Epstein will continue to pay that directly and deduct it from the $1,300.00. Mrs. Epstein will receive $950.00 from which she will be expected to pay all household expenses, including utilities, telephone, gardening, department stores, as well as her car expenses and all other payments she has made heretofore, such as food, maintenance, drugs, incidentals, etc.” Although the proposal was never accepted, husband adjusted his “arrangement” accordingly:“Q. Dr. Epstein, starting in February of 1974, did you initiate a different fashion of supporting your wife and family?“A. I did.“Q. Specifically, what did you do?“A. In lieu of the prior arrangement, a sum of $950 was deposited each month in my wife's account plus the mortgage payment and house taxes which I paid separately from which she was expected to pay department store bills, gardener, food, clothes, household help. I would continue to pay medical bills, also.”
5. In its findings the trial court stated “These expenditures have been made by petitioner, both out of community property savings, which are in his custody and control, and out of his current income.” The court did not make an express finding as to the precise amount of such expenditures that were made out of husband's post-separation income. The parties have made no issue of that on appeal, and have apparently argued the issue on the assumption that most, if not all, payments were from husband's post-separation earnings.
6. Neither party contends that the “arrangement” between them described in the quoted testimony above constituted an agreement for support.
7. A spouse is not liable for the support of the other spouse when the other spouse is living separate from the spouse by agreement unless such support is stipulated in the agreement. (Civ. Code, s 5131.)
SATER, Associate Justice.* FN* By assignment of the Chairperson of the Judicial Council.
RACANELLI, P. J., and ELKINGTON, J., concur.