IN RE: the MARRIAGE OF Mark Jaye and Janet Linnea SULLIVAN. Mark Jaye SULLIVAN, Appellant, v. Janet Linnea SULLIVAN, Appellant.
OPINION ON REHEARING
The action in the trial court, on husband's petition, was for dissolution, with all issues customary in such cases before the court. The “bifurcated judgment on remaining issues” of May 1, 1980, included a joint custody order, awarded wife $250 per month child support for one daughter, reserved jurisdiction over spousal support for five years without fixing any current amount, and allowed wife's application for $1,250 attorney's fees and $1,000 costs.
Both parties appealed. Wife assigned as error the court's granting of husband's motion in limine, which order operated to foreclose introduction of evidence on the value of husband's medical education, pursued and completed entirely during the course of the marriage. Wife also excepted to a partial summary judgment which adjudicated that husband's medical degree was not community property. Husband's cross-appeal challenged the award to wife of attorney's fees and costs as arbitrary because there was no showing of necessity and because a substantial portion thereof had been incurred in an effort to make “new law.” Wife also challenged the court's refusal to award her spousal support currently.
In our initial opinion, the trial court judgment was reversed in part with directions and affirmed in part. The reversal was directed at the order in limine, our view then being that the evidence excluded by such order would have been relevant in calculating, on behalf of the community, the amounts by which, on several possible theories, the value of the separate property interest of the husband in his medical education had been enhanced or contributed to during the marriage. Otherwise, the judgment was affirmed.
Husband's petition for rehearing was granted and the matter is again before us for disposition.
SYNOPSIS OF THE TRIAL COURT PROCEEDINGS
In husband's petition, certain items not material to the appeal were listed as community property. Husband also requested that his medical practice be confirmed as his separate property. In her response, wife listed among the items of community property the husband's medical practice.
The proceeding was bifurcated to enable immediate dissolution of the marriage and award of joint custody of the parties' minor daughter, reserving to the latter phase of the case trial of the remaining issues.
About fourteen months later, husband moved for a partial summary judgment that his medical education was not community property, this although, insofar as the record reflects, there had, up to that time, been no reference whatsoever in the pleadings to husband's medical education. As noted, wife's response alleged only that the husband's medical practice was community property. Simultaneously, husband moved for an order in limine which would exclude any and all evidence of the value of husband's medical education.
In connection with these motions, it was revealed to the court that, several months before, the parties through counsel had stipulated “That the accounts receivable, equipment, patients, goodwill and other assets of the medical practice of Petitioner, with the exception of the value of [husband's] medical doctorate (education), as a community asset and the interest attributable thereto in his practice, shall be deemed the separate property of [husband]. This Stipulation does not constitute acknowledgement by [husband] of a community interest in the medical doctorate (education) or any resulting interest attributable thereto in the practice.”
Otherwise, in the declaration of husband's counsel, filed in support of the motion for partial summary judgment, he acknowledged that “[wife] seeks to establish that [husband's] medical education is a community asset which is capable of division and valuation.” The declaration further noted that “[husband] and [wife] have divided most, if not all, of their community property assets with the sole exception of the issue of whether [husband's] professional medical education may be characterized as a community asset, as distinct and apart from the medial [sic] practice of [husband], and, if so, the value of the professional education.”
The declaration of husband's counsel filed in support of the motion for an order in limine was essentially the same as the companion declaration except that it further acknowledged that the wife had retained the services of an expert witness who was prepared to testify “regarding characterization of a professional education as a community asset, and valuation of that asset.”
The two motions were heard and argued at the same time. Both were granted after an offer of proof of what wife's expert witness would testify to was made and stipulated to solely for the purpose of making a record on appeal. No evidence of what happened during the marriage was taken at this hearing, although a trial brief, later made a part of the record on appeal, was submitted by wife's counsel, seemingly as a further offer of proof of facts relevant to the issues raised by the two motions noted.
In granting the motions, the trial court stated that “․ the law seems to be abundantly clear that there is no divisible property right in a medical education, according to the cases of Todd [v. Todd, 272 Cal.App.2d 786, 78 Cal.Rptr. 131] and Aufmuth, and, therefore, I'm going to have to grant the motion in limine to exclude testimony to that issue ․ based on the present law.” The court continued, “With regard to the motion for partial summary judgment, I think that also should be granted based on my other ruling.” Finally, the court said, “So you have a complete record for appeal, let me state the reason the court is granting the motion in limine to preclude testimony on that subject matter, and also granting the motion for partial summary judgment, [it] is the language contained in the case of In re Marriage of Aufmuth, ․ 89 CA3 446 [152 Cal.Rptr. 668].”
The bifurcated phase of the case proceeded to trial a week later and resulted in the judgment earlier recited. The testimony at the trial was limited to the issues of child support, spousal support, and attorney's fees and costs, if any, to be awarded the wife.
The parties were married September 7, 1967. There is some dispute as to the date of separation. The husband cited June 15, 1977, the wife April 15, 1978. Because of the stipulation that the medical practice is separate property in which the community claims no interest, the actual date of separation is of no consequence to any issue on appeal.
As referable to wife's principal assignment of error, the critical facts are those which occurred between marriage and separation and include the schools attended by the parties, the costs of going to school, the jobs the parties held and for what periods, the earnings therefrom, sources of other funds received and expended by them, and the results of their academic pursuits.
In wife's opening brief she purports to set out a “Summary of Facts” covering the foregoing kinds of things for the period 1967 to 1978. In doing so, wife makes not even one reference to the record in support of her recitation of the facts as required by the rules on appeal. In pursuing our own search of the record to verify such recitations, we discovered that the apparent source of these “facts” was a similar account contained in wife's “trial brief” submitted to the trial court at the time the two pretrial motions were argued. That document was made a part of the record on appeal by means of an augmentation stipulated to by counsel. Moreover, as stated in husband's petition for rehearing, “That stipulation was entered into at the request of Counsel for Appellant so that she might have the Points and Authorities therein before this Court, a request not considered objectionable by Counsel for Respondent.”
In any event, there is at best an ambiguity in the record concerning whether these factual recitations in the trial brief of March 13, 1980, actually came to the attention of the court that day or whether the facts therein stated were taken into account by the court in making its ruling. The reporter's transcript sheds scant light on the matter. At the outset of the March 13, 1980, hearing, counsel for wife stated, “As part of our offer of proof, I would like to submit the responsive pleadings that I filed, which, because of time, just were really my trial brief, which that was all I had time to do.” Counsel then went on to refer to items having to do with the expert witness wife had retained to testify to certain matters as earlier noted in this opinion.
There is nothing further in the way of reference to these “trial brief” facts in terms of which witness would testify to what, should such witness be called to testify. Moreover, the stipulation of opposing counsel went only to what the expert witness would testify to were he called. More particularly, counsel for husband, in response to the court's inquiry into what he would stipulate to, said, “We agreed to stipulate to the offer of proof to the extent that the medical education was acquired during the time of the marriage. I wasn't certain how extensive this [evidence] would be. [¶] Our W–2 form summary ․ will indicate that during the years 1968 through 1976—the parties separated in early 1977 according to our petition—Doctor Sullivan provide[d] somewhere in the neighborhood of ․ $30,000 more in the way of income to the community than [did] the respondent.”
The record continues:
“THE COURT: You do stipulate that if called as a witness Professor Eaton would be competent to testify to those things, and that would be his testimony?
“MR. SORENSON [husband's counsel]: To the analysis of the economical aspects of the future earnings of a doctor, he'd be competent to testify to that, we won't deny that. We would deny his competency to testify as to anything that pertained to the earning processes themselves, the manner and—
“THE COURT: I just asked those things she related. You would agree that if called to testify he'd testify to those things?
“MR. SORENSON: To what he has scheduled in there, it would appear he's competent to testify.”
In sum, the offer of proof as stipulated to was confined to matters pertaining to the possible testimony of the expert witness. Otherwise, the record is devoid of either a stipulation to or a rejection of wife's offer of proof of any of the facts recited in her trial brief of March 13, 1980. Moreover, none of the “trial brief” facts were otherwise presented under oath, and there were no declarations filed concerning, or any witnesses present who testified to, any of the factual matters which received national notoriety in the media following our initial opinion. In particular, there was not one shred of evidence before the trial court to demonstrate that this case was one where the wife had “put hubbie through” as was widely represented in the media.
In other words, the factual basis on which the case was argued and on which our initial opinion proceeded was largely hypothesized. Even so, because of the decision we reach here, this aspect of the case presents no significant infirmity, for even if all of the facts recited in the wife's respective briefs were assumed to be true, it is now our opinion that they are of no consequence in providing the wife with any legal ground to challenge successfully the trial court rulings of which she complains on appeal.
This case has attracted the attention it has because it included, in our initial opinion, a holding that the professional education of the husband, more exactly his enhanced earning capacity, is property, albeit his separate property, and that the community in some manner or other had contributed to that enhancement. These conclusions led to a decision that the community should in some way participate monetarily in this enhancement.
Upon further reflection, we have recognized that the starting premise for the holding previously reached is wrong.
All seem to agree that husband's medical education is not community property, and existing authority in California, as noted by the trial court, fully supports such proposition. The cases of Todd v. Todd, 272 Cal.App.2d 786, 791, 78 Cal.Rptr. 131, and In re Marriage of Aufmuth, 89 Cal.App.3d 446, 461, 152 Cal.Rptr. 668, overruled on other grounds in In re Marriage of Lucas, 27 Cal.3d 808, 815, 166 Cal.Rptr. 853, 614 P.2d 285, expressly held that a professional education acquired during marriage is not community property.
We carry those decisions one step further and hold that such an education so acquired is not separate property either. Although discussing community property, the court in Franklin v. Franklin, 67 Cal.App.2d 717, 155 P.2d 637, observed that property must “have certain attributes, namely, those of being susceptible of ownership in common, of transfer and survival.” (Id. at p. 725, 155 P.2d 637.)
Neither the professional education acquired by husband during the marriage of the parties, nor any professional education, has any of these three attributes, and that circumstance is dispositive of those contentions by wife that the trial court's order in limine and the pretrial summary judgment were error.
Accordingly insofar as the judgment was based upon those two orders, it will be affirmed.
As earlier noted, the wife assigned as error the trial court's refusal to award her spousal support currently. The court, however, did retain jurisdiction of that issue for five years. In any event, the simple answer to wife's contention here is that she did not demonstrate any current need for spousal support. At the time of trial, wife's earnings were about $26,400 per year. The trial court concluded that “a fairly recent appellate decision in San Diego” (presumably In re Marriage of Cobb, 68 Cal.App.3d 855, 137 Cal.Rptr. 670) prevented it from making an award of spousal support on the facts before it. Under the circumstances, we find no abuse of discretion.
That brings us to husband's cross-appeal directed at the award of attorney's fees and costs to the wife. As correctly observed by wife in her reply brief, in awarding attorney's fees the court “must consider the respective incomes and needs of the husband and wife,” citing In re Marriage of Janssen, 48 Cal.App.3d 425, 428, 121 Cal.Rptr. 701. This proposition reflects language in Perry v. Superior Court, 7 Cal.App.3d 236, 86 Cal.Rptr. 607, where the court said, “Awarding of fees is proper only upon a finding of necessity; ․” (Id. at p. 243, 86 Cal.Rptr. 607.)
The testimony at the trial was inconclusive on the fact of necessity in terms of wife's entitlement to attorney's fees. The record otherwise contains copies of the financial declarations of both parties filed March 17, 1980. From these filings it appears that the earnings of the respective parties were substantially the same at the time of trial.
However, the trial court apparently concluded that wife had demonstrated that her own resources were insufficient to meet her litigation expenses, without impairment of the capital of her very limited estate and therefore she was entitled to an award of attorney's fees. (See In re Marriage of Jafeman, 29 Cal.App.3d 244, 263–264, 105 Cal.Rptr. 483.) There was also before the trial court sufficient circumstantial evidence of husband's ability to pay for the court to conclude that husband could afford to pay the relatively nominal amount of $1,250 for wife's attorney's fees. Based upon the foregoing, we cannot say as a matter of law that the trial court abused its discretion in making the award of attorney's fees.
The same cannot be said for the determination of wife's entitlement to costs. The record shows that the fee of the wife's expert witness was $800. Because of the result we reach here, that is an impermissible item to be taxed to the husband, and the judgment will be modified to strike this item.
That portion of the judgment awarding costs to wife is modified to strike the item of $800 representing the fee paid to Professor Eaton. As modified, the judgment is affirmed. Each party shall bear its own costs and attorney's fees on appeal.
I fully concur in the majority opinion, but in view of the necessity for a rehearing in this case and the thoughts expressed in the dissenting opinion, I deem it appropriate also to separately concur to record a few additional observations.
The appellant's entire position and the result espoused in the dissent are based upon a partly unarticulated and wholly unsupported perceived injustice in the law's not providing compensation to the supporting spouse on account of the benefit afforded the educated spouse by the expenditure of community funds and effort during the marriage. While I think there can be little doubt but that the educated spouse has benefited, I am not at all persuaded of the existence of the perceived injustice. In fact, because California courts are prohibited from inquiring into or considering which party is at fault or most at fault in the termination of the marriage, the court in a dissolution action is deprived of the most essential fact necessary for a determination of whether any injustice exists.
I do not believe that a spouse who works and contributes to the education of the other spouse during marriage normally does so in the expectation of compensation. The spouses have equal rights to management and control of the community personal property (Civ.Code, § 5125) and the expenditure of community funds by mutual consent of the parties during marriage is presumably made with a donative intent, even if one spouse benefits more than the other. It is well settled that when the separate property of one spouse is spent for community purposes with his or her acquiescence or consent, a gift is presumed and that spouse is not entitled to reimbursement from the community or separate property of the other spouse in the absence of an agreement between the parties to that effect.1 (E.g., Weinberg v. Weinberg (1967) 67 Cal.2d 557, 570, 63 Cal.Rptr. 13, 432 P.2d 709; See v. See (1966) 64 Cal.2d 778, 784–785, 51 Cal.Rptr. 888, 415 P.2d 776; In re Marriage of Smith, supra, 79 Cal.App.3d at p. 743, 145 Cal.Rptr. 205; In re Marriage of Cosgrove (1972) 27 Cal.App.3d 424, 430–431, 103 Cal.Rptr. 733.) The presumption of gift would apply a fortiori to community property expended for community purposes. And I have no doubt that expenditures for the education of a spouse during marriage are made for a community purpose. While they may in the event of an early dissolution of the marriage prove to be of greater benefit to the educated spouse than the supporting spouse, at the time the expenditures are made they are no doubt made in the expectation of a continuation of the marriage and benefit to the community.
So what we have is an unfulfilled expectation that the marriage would continue with mutual benefit accruing from the additional education afforded one spouse. Whether early dissolution of the marriage has resulted in an injustice may well depend, either wholly or in part, on which spouse was at fault or most at fault in bringing about termination of the marriage. Under the Family Law Act, of course, California courts may not receive evidence with respect to nor may they consider marital fault in dissolving a marriage or in dividing the marital property. (Civ.Code, §§ 4509, 4800.) Moreover, gifts of all kinds are frequently given during marriage by one spouse to the other using community property funds. It has never been the law that the donor spouse is entitled to reimbursement or return of the gifts upon dissolution of the marriage.
Even if some perceived injustice might be thought to require compensation to the supporting spouse from the educated spouse, there seem to me to be two insuperable obstacles to a California court's awarding such compensation in a dissolution action. First, by statute California courts must divide community property equally (Civ.Code, § 4800) and while some discretion in respect to the specific allocation of assets and debts is reposed in the court, the court in marital dissolution proceedings does not exercise general equity powers. (See Cal.Rules of Court, rule 1212; In re Marriage of Pilcher (1975) 51 Cal.App.3d 142, 149, 123 Cal.Rptr. 868.)
Secondly, even if a professional education could somehow be classified as a kind of property susceptible to division upon dissolution, under California law there is no way in which its value can appropriately be determined. Under any method of valuation suggested by the dissent (as distinguished from mere reimbursement) its value would have to be determined at least in part on the basis of the educated spouse's enhanced future earning power. But earnings of a spouse after separation are separate property (Civ.Code, § 5118), and even a community property interest in the goodwill of a professional business or practice may not be valued with reference to future earnings. (In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, 461, 152 Cal.Rptr. 668 disapproved on an unrelated point in In re Marriage of Lucas (1980) 27 Cal.3d 808, 815, 166 Cal.Rptr. 853, 614 P.2d 285; In re Marriage of Fortier (1973) 34 Cal.App.3d 384, 388, 109 Cal.Rptr. 915.) That rule would apply a fortiori to the valuation of an education; the value of an education is entirely dependent upon the future efforts of the educated spouse.
It is perfectly permissible for spouses to enter into an agreement for compensation to the supporting spouse by the educated spouse in the event of dissolution of the marriage (Civ.Code § 5103), but, in the absence of such an agreement, no such compensation may or should be had by way of division of the marital property in an action for dissolution of marriage.2
I respectfully concur in part and dissent in part.
I agree with the majority opinion that the provisions in the interlocutory judgment of dissolution with respect to spousal support and attorney's fees and costs should be affirmed for the reasons set forth above in the majority opinion.
I also agree with the majority opinion to the extent that it holds that the acquisition of an education, degree or license to practice a profession (because of their very nature) cannot constitute community property for purposes of a marital dissolution proceeding.
I also agree with the majority opinion when it says that the exact factual situation that existed with regard to the respective earnings of the parties during the marriage is not really important because what we are actually called upon to determine is whether the lower court erred in deciding a pure question of law. That question was whether the trial court was required (by certain language contained in the case of In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, 152 Cal.Rptr. 668) to grant the husband's motions for an order in limine and also for partial summary judgment.1 In essence, what the trial court was called upon to decide was the legal question of whether the husband's medical education could either be the community property of both parties, or if not, at least the husband's separate property with the community possibly having a financial interest in same, depending on the proof at trial.
I disagree with the holding of the majority opinion that the pretrial order in limine and partial summary judgment should also be affirmed. It is my view that to the extent that the earning capacity of either party was enhanced as the result of the acquisition during the marriage of an education, degree or license to practice, the community might have a financial interest in same. As to whether the community actually had an ascertainable interest in same would have depended on the proof at trial. That proof at trial was, in my view, erroneously barred by the pre-trial order in limine and the partial summary judgment.
It cannot be disputed that an educational degree is “personal to the holder” and “cannot be assigned, sold, transferred, conveyed, or pledged.” (See In re Marriage of Graham (1978) 194 Colo. 429, 574 P.2d 75, 77.) Further, “[a]n advanced degree is a cumulative product of many years of previous education, combined with diligence and hard work.” (Ibid.) The same things are also true with respect to a license to practice a profession.2
Inasmuch as the acquisition of an education, degree and license to practice are the result of a process that goes on for many years and are the cumulative product of those many years of previous study and training, it is apparent that such process was commenced long before the date of marriage. Therefore, even if they could constitute “property” for some purposes, it is an item of “property” that the possessor of same has brought into the marriage. It cannot be something that was totally acquired during the marriage.
Thus, by its very nature, any “property” interest that can exist in an education, degree,3 or license to practice 4 must be the separate property of the possessor of same and cannot be characterized as community property.5
However, I respectfully disagree with the conclusion reached by the majority opinion to the effect that even where the acquisition of a professional education during the marriage has enhanced the earning capacity of the recipient, that the community may not participate monetarily in such enhancement (citing as its authority a trilogy of cases, namely, Franklin, Todd and Aufmuth ). The majority opinion apparently concludes that simply because an education, degree or license to practice are not “susceptible of ownership in common, of transfer and of survival” they cannot constitute “property” as determined some 37 years ago by the Franklin court (67 Cal.App.2d at p. 725, 155 P.2d 637). I respectfully submit that the present state of the law in California does not support that conclusion and that the reliance of the majority on Franklin, Todd and Aufmuth is misplaced. It is misplaced for the many reasons which will be outlined below.
A review of each of the three Court of Appeal decisions relied upon by the majority is in order as a starting point.
A review of the Franklin case should cause one to conclude that the suggestion in Franklin that the right to practice a profession is not a property right which can be classified as community property was clearly dicta. The issue before the Franklin court was simply whether the cause of action the husband had acquired for personal injuries he had sustained subsequent to the entry of an interlocutory decree was a community asset so that he could be required to divide the proceeds received from such claim with his wife. The Franklin case had absolutely nothing to do with the precise question which was before the Todd and Aufmuth courts and is now before this court (i.e., the question of whether a professional education acquired during a marriage can constitute a community asset). Consequently, to the extent that the Todd and Aufmuth decisions were based on the above-mentioned language taken from Franklin and not on any other authority, those decisions were based on dicta 6 and not on solid authority.
Also, both the Franklin and Todd cases were decided before the enactment by the Legislature of the California Family Law Act effective January 1, 1970. Prior to the enactment of the so-called “no-fault divorce law” by the Legislature in 1969, California trial courts were not required to divide all of the assets and liabilities acquired by the community in an equal manner as is now required by Civil Code section 4800(a). Therefore, there was not the great concern prior to 1970 that there now exists in our trial and appellate courts to properly determine the extent of the community property and to accurately divide same in an equal manner. As will be illustrated below, California appellate courts have since 1970 come to recognize many types of community assets that were not previously recognized as constituting items of community property. Prior to 1970, any inequity that existed in any fact situation could be resolved by an unequal division by a trial court of the community assets and liabilities. That is exactly what happened in the Todd case. The matter of the husband's education, degree and license to practice law which were acquired during the marriage was presumably resolved by an unequal division of the other property acquired by the community in order to obviate any inequity to the wife. Therefore, the result in Todd is clearly not controlling in this appeal.
Therefore, Aufmuth 7 is the only one of the trilogy which was decided under the current statutory scheme that is in force here in California. The fact situation in Aufmuth is similar to the facts in the case at bench to the extent that Aufmuth also involved a situation where the wife of a professional man (i.e., a lawyer) sought to have his professional education determined to be a community asset because it was acquired during the marriage. In Aufmuth, as in the case at bench, the trial court refused to permit the wife to offer any evidence at trial regarding the value of her husband's legal education as a community asset.8
On appeal, the wife raised for the first time the issue of the value of her husband's legal education. She contended that the value of the legal education acquired by her husband during the duration of their marriage was a community asset which offset the community obligation owed Stanford University for the cost of said education. Nevertheless, she did not claim that a value in excess of the balance outstanding on the student loan should be placed on her husband's education, nor did she make any offer of proof by expert testimony to establish any value for the education.
The appellate court in Aufmuth (i.e., the First District) held that the wife was precluded from raising that issue on appeal except to the extent that she was seeking to offset the community obligation of the student loan by the value of the husband's legal education.
The Aufmuth court went on to affirm the determination of the trial court that evidence regarding the value of the husband's legal education as a community asset was not admissible. Basing its decision on the ruling by the Todd court, the court in Aufmuth stated (89 Cal.App.3d at p. 461, 152 Cal.Rptr. 668) as follows:
“A similar argument was rejected in Todd v. Todd (1969) 272 Cal.App.2d 786 [78 Cal.Rptr. 131]. In that case, the trial court stated that the value of an education as a claimed asset is ‘ “nothing $–0–.” ’ (Id. at p. 790, 78 Cal.Rptr. 131.) Wife appealed the trial court's valuation of the asset. The Court of Appeal held that if a spouse's legal education can be said to be community property (a proposition which the court termed ‘extremely doubtful’), it is manifestly of such character that a value for division between the spouses cannot be placed upon it. (Id. at p. 791, 78 Cal.Rptr. 131.)
“Wife invites this court to reexamine the twin issues of characterization and valuation of a spouse's professional education. She contends that the underlying rationale of the Todd court's conclusions is invalid. We are satisfied that the holding in Todd regarding characterization and valuation of a professional education is sound. It is well established that the word ‘property,’ as used in the statutes relating to community property, does not encompass every property right acquired by either husband or wife during marriage, such as the right to practice a profession. (Franklin v. Franklin (1945) 67 Cal.App.2d 717, 725 [155 P.2d 637].)” (Emphasis supplied.)
For the reasons that will be outlined at length below, it is submitted that the holding of Aufmuth should also not be followed by this court in deciding this appeal.
The word “property” is defined in Black's Law Dictionary, 5th Ed. (at pp. 1095–1096) as “[T]hat which is peculiar or proper to any person; that which belongs exclusively to one. In the strict legal sense, an aggregate of rights which are guaranteed and protected by the government. [Citation.] The term is said to extend to every species of valuable right and interest ․ The word ‘property’ is also commonly used to denote everything which is subject to ownership, corporeal or incorporeal, tangible or intangible, visible or invisible, real or personal; everything that has an exchangeable value or which goes to make up wealth or estate. It extends to every species of valuable right and interest, and includes real and personal property, easements, franchises, and incorporeal hereditaments, and includes every invasion of one's property rights by actionable wrong. (Labberton v. General Cas. Co. of America (1958) ․ [53 Wash.2d 180] 332 P.2d 250, 252, 254.)” (Emphasis supplied.)
The definition of “property” for purposes of classification as community or separate property in California, (and as marital property in other jurisdictions) has traditionally been limited to tangible assets. However, the definition of “property” in California has been greatly broadened in recent years to include many forms of intangible property which were never previously recognized as such for divorce or dissolution purposes.
This broadening of the definition of property in California was primarily caused by two events. First was the enactment by the California Legislature of the California Family Law Act which was effective on January 1, 1970. This so-called “no-fault” divorce law treats marriage as an equal partnership and makes a conclusive presumption that the overall financial and nonfinancial contributions of each spouse are of equal worth. Therefore, the statutes (i.e., Civil Code, § 4800 et seq.) mandate an equal division of the community assets and liabilities.
The new California statutory scheme differs from our old statutes and also from the Uniform Marriage and Divorce Act adopted by many states in that 1970 California legislation replaced the vague standard of a “just” or “equitable” division with an equal division of community net assets. The Uniform Act, however, leaves a great deal of discretion in the division of marital property in the trial judge, subject to the judge's own standards of equity.
This new rule has focused much more attention on the nature and extent of the assets and liabilities accumulated during a marriage so as to insure an equal monetary division of same by the trial courts where settlements have not been reached by the parties. This greater focus on the nature and extent of assets and liabilities has caused the trial and appellate courts of this state to gradually re-evaluate many kinds of assets and liabilities.
The most significant re-evaluation occurred in the decision of the California Supreme Court in the case of In re Marriage of Brown (1976) 15 Cal.3d 838, 126 Cal.Rptr. 633, 544 P.2d 561. In its landmark decision in Brown, our high court overturned a 35 year old precedent of its own in the case of French v. French (1941) 17 Cal.2d 775, 112 P.2d 235. In French, the high court had held that nonvested pension rights could not constitute community property because they were a “mere expectancy.” In Brown, the Supreme Court specifically held that nonvested pension rights were not an expectancy, but rather a contingent interest in property. Therefore, to the extent that such interest was earned during a marriage, the community could have an interest therein.
The importance of the Brown decision on the question of the definition of “property” for purposes of classification as community or separate property is the fact that Brown overruled the French determination that nonvested pension rights (although possibly community in origin), were not “property” because they were classified as mere expectancies. (Id. at p. 844, 126 Cal.Rptr. 633, 544 P.2d 561.) Under French, because such rights were not “property,” they were not subject to division on dissolution of the marriage.
Therefore, Brown recognized as an item of “property” for dissolution purposes, a right that had not previously been recognized as such.
Once having determined that such right was “property” for dissolution purposes, then the Brown court felt compelled by Civil Code section 4800(a) to determine the community interest in such property and then to award each spouse an equal share of the total community interest in same. (Id. at p. 847, 126 Cal.Rptr. 633, 544 P.2d 561.)
As the result of its momentous decision in the Brown case, the California Supreme Court certainly rejected the very narrow Franklin/Todd limitation on the definition of “property,” if not expressly, at least by implication. Rather, the high court seems to have recognized that under modern law “property” is anything that has an ascertainable or exchangeable value. An unvested pension right is clearly not something that is susceptible to common ownership, transfer and survival. Rather, it is at most a contingent property interest. Nevertheless, the Brown court held that such property interest can have a present value and, therefore, the community and the non-employee spouse may properly share in it. (Id. at pp. 851–852, 126 Cal.Rptr. 633, 544 P.2d 561.)
Since the Brown decision in 1976, many other types of intangible assets have been determined by various California appellate courts (including this court) 9 to constitute “property” for purposes of classification as either community or separate property, or both, which were not previously recognized as such. Some examples are: (1) contingent retirement benefits (In re Marriage of Forrest (1979) 97 Cal.App.3d 850, 852, 159 Cal.Rptr. 229); (2) ERISA retirement benefits (In re Marriage of Mantor (1980) 104 Cal.App.3d 981, 164 Cal.Rptr. 121); (3) G. I. educational benefits (In re Marriage of Shea (1980) 111 Cal.App.3d 713, 169 Cal.Rptr. 490); and (4) term life insurance benefits (Biltoft v. Wootten, supra, 96 Cal.App.3d 58, 62, 157 Cal.Rptr. 581.)
It is indeed ironic that even under the old Franklin/Todd definition of property, the right to practice medicine and similar professions was held to be a property right. (See Franklin, supra, 67 Cal.App.2d at p. 725, 155 P.2d 637 and also Todd, supra, 272 Cal.App.2d at p. 791, 78 Cal.Rptr. 131.)
It is clear that not only is the right to practice a profession a property right, but the right to practice a profession is also a valuable property right. The California Supreme Court has so held on a number of occasions involving different professions.
In the case of Hewitt v. State Board of Medical Examiners (1906) 148 Cal. 590, 592, 84 P. 39, the high court held that “[t]he right to practice medicine is, like the right to practice any other profession, a valuable property right, in which, under the [C]onstitution and laws of the state, one is entitled to be protected and secured.” (Emphasis supplied.) In the later case of In re Riccardi (1920) 182 Cal. 675, 679, 189 P. 694, the Supreme Court called the right to practice law “a valuable property right.” In the still later case of Cavassa v. Off (1929) 206 Cal. 307, 314, 274 P. 523 (which was a case involving a pharmacist's license), the high court stated: “The right of a person to practice the profession for which he has prepared himself is property of the very highest character.” (Citing as authority the Hewitt case; emphasis supplied.) 10
If something which is as speculative, contingent and intangible as the community interest in a nonvested pension right or in term insurance benefits are “property” for purposes of classification in a dissolution proceeding, can there be any doubt that the community's interest in something as real as the proven enhancement in earning capacity must also be considered as “property” for dissolution purposes?
I referred to enhancement of earning capacity rather than the value of an education, degree, or license to practice because I agree with the majority that the enhancement in earning capacity is the question we are really dealing with in this case.
The Aufmuth court (relying on several appellate decisions rendered by courts in sister states), also recognized this important point.11 After discussing decisions by the highest courts of Colorado, Iowa, and New Jersey, in the cases of Graham v. Graham, supra, 574 P.2d 75, In re Marriage of Horstmann (1978) Iowa, 263 N.W.2d 885, and Stern v. Stern (1975) 66 N.J. 340, 331 A.2d 257, respectively, the Aufmuth court concluded (89 Cal.App.3d at p. 461, 152 Cal.Rptr. 668) that:
“The value of a legal education lies in the potential for increase in the future earning capacity of the acquiring spouse made possible by the law degree and innumerable other factors and conditions which contribute to the development of a successful law practice․” (Emphasis supplied.)
In the dissent in the 4–3 decision of the Colorado Supreme Court in the case of Graham v. Graham, supra, 574 P.2d at p. 79, this distinction was aptly stated as follows:
“While the majority opinion focuses on whether the husband's master's degree is marital ‘property’ subject to division, it is not the degree itself which constitutes the asset in question. Rather it is the increase in the husband's earning power concomitant to that degree which is the asset conferred on him by his wife's efforts. That increased earning capacity was the asset appraised in the economist's expert opinion testimony as having a discounted present value of $82,000.” (Emphasis supplied.)
In the case of In re Marriage of Horstmann, supra, 263 N.W.2d 885, the Iowa Supreme Court (after discussing the aforementioned Graham decision of the Colorado Supreme Court) stated that it had no quarrel with the pronouncement by the majority in Graham which would mean that the law degree and the certificate of admission to practice law in the Iowa courts “․ do not themselves constitute an asset of the parties for court consideration in making distribution upon dissolution of the marriage.” (Id. at p. 891.) The Horstmann court then went on to state (also at p. 891):
“However, it is the potential for increase in future earning capacity made possible by the law degree and certificate of admission conferred upon the husband with the aid of his wife's efforts which constitutes the asset for distribution by this court.” (Emphasis supplied.)
On the other hand, the New Jersey Supreme Court in the case of Stern v. Stern (1975) 66 N.J. 340, 331 A.2d 257, held that the trial court had erred when it considered the future earning capacity of the husband lawyer as a separate item of property in its allocation of the marital assets pursuant to New Jersey statutes. The New Jersey Supreme Court stated (331 A.2d at p. 260) as follows:
“We agree with defendant's [husband's] contention that a person's earning capacity, even where its development has been aided and enhanced by the other spouse, as is here the case, should not be recognized as a separate, particular item of property within the meaning of N.J.S.A. § 2A:34–23. Potential earning capacity is doubtless a factor to be considered by a trial judge in determining what distribution will be ‘equitable’ and it is even more obviously relevant upon the issue of alimony. But it should not be deemed property as such within the meaning of the statute. [Fn. omitted.]”
In the above quoted language from the opinion of the Aufmuth court there is recognition of the fact that a legal education and law degree are some of the innumerable factors and conditions which contribute to the development of a successful law practice. That is interesting, because California courts have recognized for many years the fact that the community may have a property interest in the goodwill of a professional practice where the practice has been built up during the marriage. (In re Marriage of Mueller (1977) 70 Cal.App.3d 66, 137 Cal.Rptr. 129; Golden v. Golden (1969) 270 Cal.App.2d 401, 75 Cal.Rptr. 735.)
In the earlier case of Brawman v. Brawman (1962) 199 Cal.App.2d 876, 882, 19 Cal.Rptr. 106, the court held that on divorce and dissolution of the community “․ a professional practice goes automatically to the spouse licensed to practice it․ Effectually, it is the case of a silent partner withdrawing from a going business. And, if such a partner is to receive fair compensation for her share, on her enforced retirement, it should be so evaluated.” The Brawman court stated further that where a lucrative law business had been built by the husband during the marriage, “the business is community property and it has a substantial value.” (Id. at p. 882, 19 Cal.Rptr. 106.)
In the later case of Fritschi v. Teed (1963) 213 Cal.App.2d 718, 29 Cal.Rptr. 114, the reviewing court stated (at p. 726, 29 Cal.Rptr. 114) that:
“On divorce and dissolution of the community a professional practice perforce remains in the hands of the spouse licensed to practice it. Nevertheless, in terms of its existing economic potential, it may have a substantial worth which must be taken into account in evaluating the community estate for divorce purposes.” (Emphasis supplied.)
There is one California appellate decision which has recognized “educational benefits” as an item of property for purposes of characterization as either community or separate property. In the fairly recent case of In re Marriage of Shea, supra, 111 Cal.App.3d 713, 169 Cal.Rptr. 490, the reviewing court was faced with the question of determining whether veterans' educational benefits were the separate property of the husband who had been in military service or rather the community property of both him and his wife. The Shea court reiterated the rule that under the community property system, each spouse's time, skill and labor are community assets, and whatever each spouse earns from them during marriage is community property. (See In re Marriage of Hillerman (1980) 109 Cal.App.3d 334, 338, 167 Cal.Rptr. 240.)
Because the husband in Shea had served in the armed forces before marriage and the educational benefits which he earned were earned entirely as a fringe benefit of his employment, the court in Shea held that such veteran's educational benefits were the husband's separate property, even if he actually received them during the marriage.
Under the rationale of the Shea decision, if the husband had served in the armed forces at any time during the marriage, presumably the community would have had some financial interest in the value of those benefits even if they were not received by the veteran until after the date of separation.
It should also be noted that in 1978, the Legislature amended Civil Code section 4800 so that it now includes a provision that in the division of the community property and quasi-community property of the parties, the trial court shall assign educational loans “to the spouse receiving the education in the absence of extraordinary circumstances rendering such an assignment unjust.” (Civ.Code, § 4800, subd. (b)(4).) Therefore, by statute, presumably such a debt is now treated as a separate obligation of the recipient of the education for which the loan was obtained.
The enactment of this new statute would seem to indicate a recognition by the Legislature of the unfairness of treating an educational loan as a community obligation even though incurred during the marriage particularly where only one of the parties to the marriage has benefits from the acquisition of the education.
In her very scholarly article that appeared in a recent edition of the UCLA Law Review,12 Professor Lenore J. Weitzman concludes (at p. 1210) that “we are on the brink of a critical expansion of the traditional definition of community property, and that California courts will soon recognize career assets as a part of the community property to be divided upon divorce.” She then discusses the rationale and legal trends leading in that direction.
Professor Weitzman first observed (as was noted above) that the definition of community property in California, and of marital property in other states, has traditionally been limited to tangible assets. However, she points out that “[m]ost married couples ․ have career assets of considerable value, and these assets are typically acquired and developed in the course of a marriage in much the same manner as tangible property is acquired.” (Id.)
She then uses the following example to illustrate this point:
“[C]onsider first the family in which the husband is the sole wage earner. Such a family typically devotes a great deal of time, energy, and money to building the husband's career. The wife may abandon or postpone her own education ‘to put him through school’ or help him get established; she may quit her job to move with him, or even use her own highly marketable job skills, without expectation of remuneration, to aid and advance his career. 13 This couple has invested in the ‘human capital’ of the breadwinning spouse.”
Professor Weitzman then goes on to state (at pp. 1211–1212) that:
“As a result of these concerted efforts, the husband acquires valuable education or training, and may obtain a license to practice a trade or profession, or perhaps membership in a trade union or professional association that assures work and salary and an array of other benefits. While some of the assets which are by-products of this couple's concerted efforts (such as the goodwill built up in a business or profession) are currently recognized as community property in California, similar assets, such as an education and professional license, are not. The distinction between the two sets of assets is arbitrary. In the case at hand, for example, all of these career assets have been acquired with community resources in the course of the marriage, and all of them have a clear monetary value. In fact, for the many couples who have little physical property to divide at divorce, it is likely that the monetary value of career assets will considerably exceed the value of their physical property.
“The issue is often no less pressing in two-earner families. Even though both spouses may have worked during the marriage, it is likely that, as a marital unit, they have chosen to give priority to one spouse's career in the expectation that both will share in the benefits of that decision.
“From these examples, it should be clear that a career that is developed in the course of a marriage is just as much a product of community efforts and resources as is the income earned by one spouse in the course of a marriage, or the real property accumulated during marriage. Recent years have brought an increased social recognition of this reality and there is now a discernible trend in both community and common law property states toward increased legal recognition as well. California has already taken two major steps in this direction by recognizing the community's interest in the goodwill value of a business or profession and in non-vested pensions and retirement programs. Other states have begun to recognize and divide a professional education and a license.” (Emphasis supplied; fns. omitted.)
In another recent law review article,14 Professor Joan Krauskopf argues that a community property marriage is based on equal partnership principles comparable to those in a business partnership. To achieve maximum utility of resources in a business, it is sometimes necessary to make sacrifices for the good of the whole. In the case of the wife's supporting her husband's education (or vice versa), the wife is making an investment in his “human capital”—his skills and knowledge acquired through school. She expects her investment to improve the status of the partnership as a whole, and expects to share those improvements as any business partner would.
There is existing authority in California which supports this conclusion of Professor Krauskopf that a marital community must be treated much like a business partnership upon dissolution. In the case of In re Marriage of Mulhern (1973) 29 Cal.App.3d 988, 106 Cal.Rptr. 78, the Second District, in passing on the propriety of an order increasing spousal support and attorney fees, reversed the order of the trial court because the wife had failed to establish any change in her circumstances since the entry of the interlocutory decree. The Mulhern court stated (at p. 995, 106 Cal.Rptr. 78) as follows:
“Under the New Family Law Act, as between the spouses, the dissolution process is not unlike the dissolution of a business partnership. An equal distribution of assets, liabilities and responsibilities is mandated to the end that upon entry of the dissolution decree the parties are to the extent possible placed in a position of economic parity. The provisions for awarding spousal support to either party is one element of that parity.” (Emphasis supplied.)
Also in the Brawman case discussed above, the reviewing court analogized a marital dissolution to the dissolution of business partnership when it stated that upon a marital dissolution, the position of the wife of a professional spouse who is in private practice is much like “a silent partner withdrawing from a going business.” (See Brawman, supra, 199 Cal.App.2d at p. 882, 19 Cal.Rptr. 106.)
An increase in the earning capacity of the spouses during a marriage has long been a factor that California courts have taken into consideration, but so far only in connection with support, not the division of property.
In the case of In re Marriage of Rosan (1972) 24 Cal.App.3d 885, 101 Cal.Rptr. 295, this court reversed the order for spousal support which contained a so-called “step-down” and termination provision covering only three years as being an abuse of discretion. Justice Kaufman, speaking for this court, stated (at p. 898) as follows:
“In a long marriage during which the wife has not taken outside employment but has devoted herself to wifely and parental duties, the wife has not only failed to develop her own earning capacity, she has presumably contributed to the development of the husband's earning capacity. In many, if not in most, cases the established employment or earning capacity of the husband constitutes the most valuable economic assets of the parties. While this economic attribute is not of such a character as will permit its division as property (Todd v. Todd, 272 Cal.App.2d 786, 793 [78 Cal.Rptr. 131] ), it is not to be ignored in considering the problem of continuing support. (See Todd v. Todd, supra; Brawman v. Brawman, supra, 199 Cal.App.2d at pp. 882–883, 19 Cal.Rptr. 106.)”(Italics added.)
In her recent background study for the California Law Revision Commission entitled “The Definition of Marital Property in California: Toward Parity and Simplicity” (1981) Professor Carol S. Bruch, discusses (at pp. 62 and 63) the concept of enhanced personal earning capacity (human capital). She states that:
“Recent divorce cases from sister states have recognized financial claims by one spouse based on an educational degree that was obtained by the other spouse during the couple's marriage. The reasoning parallels that of the goodwill cases: efforts during the marriage have produced an asset (the education) that can be expected to provide returns in the future beyond those that would have been available in its absence. Although various methods have been applied to value this asset, and the theories and rules for compensating the nonstudent spouse differ from state to state, there is a striking similarity in the facts that have initially prompted judicial relief:
‘Typically, one spouse attains a degree while the other provides support; then a divorce occurs soon after graduation. Usually there are few assets immediately available, but one spouse leaves the marriage with an education and increased earning potential, while the other spouse is given nothing for her efforts.’
“A New Jersey judge who recently recognized the property interests of a wife in the medical education of her husband pointed out:
‘Either a professional degree and/or license is or is not property․ To find out that a non-licensed spouse in one case is entitled to [a property] distribution and a non-licensed spouse in another case is not, is to substitute legal mumbo-jumbo for legal analysis and application.’ [Lynn v. Lynn, supra ]
“In California, where recognition of a property interest would require that its value be subject to equal division, the characterization issue is not yet settled. Neither the California Supreme Court nor the Legislature has addressed the issue. One trial court's restitutionary award was later interpreted as an enforceable award of lump sum alimony. [See Aarons v. Brasch (1964) 229 Cal.App.2d 197, 40 Cal.Rptr. 153] Other appellate opinions suggest, however, that nothing more is required than a traditional division of other community assets or an award of modifiable spousal support. [Citing Todd, supra, and Aufmuth, supra.]
“These latter appellate cases are poorly reasoned. Past indicia of enhanced earnings support rather than negate the claim that one spouse will reap continuing benefits from increased earnings after divorce. And, assertions previously made to avoid ownership treatment of goodwill and pensions, that modifiable spousal support can redress property division inequities, have proven false. First, significant support awards are rarely made. Second, they are infrequently enforced. Third, support may terminate long before recompense has been made, since court-awarded support ends upon the death of either spouse or the remarriage of the supported spouse. Perhaps most importantly, the nonstudent spouse is often capable of self-support, although at a much more modest standard of living than that in store for the educated spouse. If so, no ownership recompense at all may be received. (Emphasis supplied.)
Of course, the latter situation is exactly what we have in the instant case. The wife does not qualify for an award of spousal support because she is clearly capable of self-support with the assistance of child support payments.
There is also a growing recognition in the field of economics of the concept referred to as “human capital” which is similar in some respects to Professor Weitzman's concept of “career assets.” Many economists recognize that the investment of time, money, and effort to obtain an education, degree and license to practice a profession is really no different than investing in a capital asset.15
Similar to the conclusions reached by the legal commentators and economists discussed above, I am also unable to see any legal or economic distinction between the use of community funds, time and effort to increase the value of other separate assets such as a residence, a business, or a professional practice, with the expenditure of community funds, time, and effort to acquire an expensive professional education, degree and license to practice a profession.
Although it has been a law in California for many years that generally the expenditure of community funds to improve the separate property of one spouse does not affect the separate character of the property (In re Marriage of Camire (1980) 105 Cal.App.3d 859, 866–867, 164 Cal.Rptr. 667; In re Marriage of Jafeman (1972) 29 Cal.App.3d 244, 256, 105 Cal.Rptr. 483; Cozzi v. Cozzi (1947) 81 Cal.App.2d 229, 232, 183 P.2d 739; Spreng v. Spreng (1931) 119 Cal.App. 155, 159, 6 P.2d 104), the law has also recognized that at a minimum the community is entitled to reimbursement for the actual expenditures made from community funds to improve separate property in the absence of any agreement between the parties to the contrary. (See cases collected at 32 Cal.Jur.3d, Family Law, § 432, pp. 496–498.)
It has also been held that where the husband has used community funds to increase his separate estate, the court must determine the increase in his equity in the property before and after the marriage and also the fair market value of the property before and after marriage. The community is entitled to a minimum interest in the property represented by the ratio of the community interest to the total separate and community investment in the property. In the event the fair market value has increased disproportionately to the increase in equity, the community is entitled to participate in that increment in a similar proportion. (See In re Marriage of Denney (1981) 115 Cal.App.3d 543, 549, 171 Cal.Rptr. 440; In re Marriage of Jafeman, supra, 29 Cal.App.3d 244, 257, 105 Cal.Rptr. 483; Bare v. Bare (1967) 256 Cal.App.2d 684, 690, 64 Cal.Rptr. 335.)
In the recent case of In re Marriage of Moore (1980) 28 Cal.3d 366, 168 Cal.Rptr. 662, 618 P.2d 208, the California Supreme Court reiterated this rule by holding at pp. 371–372, 168 Cal.Rptr. 662, 618 P.2d 208 that:
“Where community funds are used to make payments on property purchased by one of the spouses before marriage ‘the rule developed through decisions in California gives to the community a pro tanto community property interest in such property in the ratio that the payments on the purchase price with community funds bear to the payments made with separate funds.’ (Forbes v. Forbes, supra, 118 Cal.App.2d 324, 325 [257 P.2d 721]; see also Bare v. Bare (1967) 256 Cal.App.2d 684, 690 [64 Cal.Rptr. 335]; In re Marriage of Jafeman (1972) 29 Cal.App.3d 244, 257 [105 Cal.Rptr. 483]; Estate of Neilson (1962) 57 Cal.2d 733, 744 [22 Cal.Rptr. 1, 371 P.2d 745].)”
It has also long been the law in California that if an increase in the value of separate property is attributable to the ability, activity, or capacity of either spouse, that increase in value is ordinarily considered to be the property of the community. (See 32 Cal.Jur.3d, Family Law, §§ 412, 413, pp. 460–470.) This rule is based on the recognition by California courts that “[t]he time, efforts, and skill of the husband are assets of the community and when they are used for the enrichment of the separate property of the husband, the community must be compensated.” (Strohm v. Strohm (1960) 182 Cal.App.2d 53, 62, 5 Cal.Rptr. 884. See In re Marriage of Lopez (1974) 38 Cal.App.3d 93, 105, 113 Cal.Rptr. 58 (disapproved on other grounds, In re Marriage of Morrison (1978) 20 Cal.3d 437, 143 Cal.Rptr. 139, 573 P.2d 41); Somps v. Somps (1967) 250 Cal.App.2d 328, 332–333, 58 Cal.Rptr. 304.) The First Division of this court has in two decisions recently reiterated the rule that under the community property system, each spouse's time, skill, and labor are community assets, and whatever each spouse earns from them during the marriage is community property. (See In re Marriage of Shea, supra, 111 Cal.App.3d 713, 717, 169 Cal.Rptr. 490; In re Marriage of Hillerman, supra, 109 Cal.App.3d 334, 338, 167 Cal.Rptr. 240.)
The principal examples of the practical application of this general rule relates to the situations where one of the parties to a marriage devotes his or her time, efforts, and skills during the marriage to the management of a separate property business or the engagement in a separate property professional practice.
I would therefore hold that absent an agreement to the contrary, where the community has not received any real economic benefit from the acquisition by one of the parties of an education, degree and/or professional license during the marriage, that as a minimum the community should be reimbursed for the amount of any community funds that were expended to acquire the education, degree and license. Not to provide for at least this minimal remedy in this type of situation would have the effect of countenancing a situation where spouses in the position of the husband herein would be allowed to walk away from a marriage with a “windfall” that might have great value.
I would also hold that where there has been an ascertainable increase in the earning capacity of the student-spouse due directly to the acquisition of an education, degree or license to practice during the duration of a marriage, then the community also possesses a pro tanto interest in such enhancement in earning capacity. (In re Marriage of Moore, supra.)
The husband contends that even if it is determined that a community might have some financial interest in his professional education, degree and license, that the value of such interest is incapable of determination. The wife, of course, disagrees and so do I.
The difficulty of determining the value of an economic interest in a particular item of property is not a proper basis upon which to deny the existence of such an interest. Three examples of other areas in which the courts of this state have recognized the existence of a community interest in certain property where the determination of such value is often extremely difficult are the areas mentioned above of determining the community interest in (1) the earnings of a separate property business, (2) the goodwill of a business or professional practice, and (3) the unvested pension or retirement benefits of either spouse.
The courts have held that the determination of what amount of the profits of a separate property business conducted by one of the spouses is due to the personal efforts of that spouse as opposed to the amount attributable to his or her capital investment must be made from the surrounding facts and circumstances in each case. (Estate of Gold (1915) 170 Cal. 621, 623, 151 P. 12; Pereira v. Pereira (1909) 156 Cal. 1, 7, 103 P. 488; Brown v. Harper (1953) 116 Cal.App.2d 48, 52–53, 253 P.2d 95; Logan v. Forster (1952) 114 Cal.App.2d 587, 598–602, 250 P.2d 730.) In making such an apportionment between separate and community property, the appellate courts have not developed any precise criteria or fixed standard, but have endeavored to adopt that yardstick which is most appropriate and equitable in a particular situation, depending on whether the character of the capital investment in the separate property or the personal activity, ability, and capacity of the spouse is the chief contributing factor in the realization of income and profits. (Beam v. Bank of America (1971) 6 Cal.3d 12, 17–24, 98 Cal.Rptr. 137, 490 P.2d 257; Logan v. Forster, supra, 114 Cal.App.2d 587, 598–602, 250 P.2d 730.)
Even though this apportionment is often a difficult task in many cases, nevertheless, equity and justice have required that such an apportionment be made. Over the years, the courts have evolved two quite distinct, alternative approaches to allocating earnings between separate and community income in such cases. One method of apportionment, the so-called “Van Camp Method,” traces its derivation to the early case of Van Camp v. Van Camp (1921) 53 Cal.App. 17, 199 P. 885. This particular method seeks to simply determine the reasonable value of the spouse's services in the separate property business, allocate that amount as community property, and treat the balance as separate property.
Another method of apportionment, first applied in another early case, namely, the case of Pereira v. Pereira, supra, 156 Cal. 1, 103 P. 488, and hence is called the “Pereira Method,” allocates a fair return on the investment to the separate property and allocates the excess to the community property as arising from the spouse's efforts.
Finally, in allocating as between community and separate property, earnings attributable to a spouse's devotion of time and effort to handling that spouse's separate property, a trial court is not bound to adopt either a predetermined percentage as a fair return on the separate property business capital invested in the business (the Pereira approach), or to limit the community interest to a salary fixed as the reward for a spouse's service (the Van Camp method), but may select whichever or whatever formula will achieve substantial justice and equity between the parties. (See 32 Cal.Jur.3d, Family Law § 413, p. 466.)
There are various methods that a trial court could employ to make the required determination.
First of all, the trial court could determine from the evidence presented the amount of community funds and time expended to acquire the education, degree or license during the marriage.
Secondly, the trial court could determine the loss of income that the community experienced as the result of one of the spouses attending school rather than being employed full-time at a job for which such spouse was qualified without having the benefit of the additional education.
Thirdly, the trial court could compare the earning capacity of the student-spouse at the time of marriage with the earning capacity of the same spouse at the time of trial (or at the time of separation if proper notice has been given pursuant to Civil Code section 4800, subdivision (a)). Because this latter method is so akin to the method used to ascertain damages for loss of earnings in tort or wrongful death cases,16 a body of knowledge already exists in the field of economics to make this type of determination.17
With reference to the third method, Justice Kaufman, in his concurring opinion, concludes that “even if a professional education could somehow be classified as a kind of property susceptible to division upon dissolution, that under California law there is no way in which its value can appropriately be determined “because any method of valuation would have to be determined at least in part on the basis of the educated spouse's enhanced future earning capacity (citing as authorities the Fortier and Aufmuth decisions).
I disagree with that conclusion. The value of enhanced earning capacity can be determined by statistical projections to determine present value without offending the statutory rule that earnings of a spouse after separation are separate property. (Civ.Code, § 5118.) Several California decisions, which have dealt with the analogous question of the value of the community interest in the goodwill of a separate property business or professional practice, have already recognized the validity of the use of statistical projections to determine present value without offending the so-called “post-marital income” rule.
In In re Marriage of Foster (1974) 42 Cal.App.3d 577, 117 Cal.Rptr. 49, the First District Court of Appeal held that market value was not determinative of the value of community goodwill. Nothing that “market value” might not accurately reflect the “true value” of the asset, Foster (at p. 584, 117 Cal.Rptr. 49) reiterated the rationale of Golden v. Golden (1969) 270 Cal.App.2d 401, 75 Cal.Rptr. 735:
“ ‘․ in a matrimonial matter, the practice of the sole practitioner husband will continue, with the same intangible value as it had during the marriage. Under the principles of community property law, the wife, by virtue of her position of wife, made to that value the same contribution as does a wife to any of the husband's earnings and accumulations during marriage. She is as much entitled to be recompensed for that contribution as if it were represented by the increased value of stock in a family business.’ ”
“In sum we conclude the applicable rule in evaluating community goodwill to be that such goodwill may not be valued by any method that takes into account the post-marital efforts of either spouse but that a proper means of arriving at the value of such goodwill contemplates any legitimate method of evaluation that measures its present value by taking into account some past result. Insofar as the professional practice is concerned it is assumed that it will continue in the future.”
In In re Marriage of Lopez, supra, 38 Cal.App.3d 93, 108, 113 Cal.Rptr. 58, the Third District Court of Appeal also cited the Golden language, and then continued:
“Mindful of the nebulous area into which we venture, we believe that for purposes of a marital dissolution, the parties are primarily concerned with the existence, value and consequences of the ‘goodwill’ of a professional business in an economic sense, as distinguished from legal or accounting concepts. As stated by Professor Norton M. Bedford, University of Illinois: “ ‘ “It seems to be well established in the literature of economics that the economic value of any asset depends upon the future net receipts which the asset will produce․ Since the future is unknown, different individuals and business entitlies will have different expectations as to what these future receipts will be. Thus, there is no certainty in any one valuation of an asset. To the contrary, a considerable amount of uncertainty attaches to any valuation. But subject to this variability, the conceptual view of the economic value of any asset is based on the future receipts which the asset will produce.” ’ ” (Original emphasis.)
The court then cited the concern of the Fortier court that “a community property interest can only be acquired during the marriage, and it would be inconsistent with that philosophy to assign value to the post-marital efforts of either spouse.” Holding that the trial court must make a specific finding with respect to the existence and value of goodwill, the court cautioned:
“In so holding, we do not imply that every professional business as a going concern necessarily has a valuable goodwill, or that if found to exist the value thereof may be precisely fixed in terms of so many dollars. Instead, there are certain factors, assuredly not all inclusive, which may tend to provide the trial court with broad latitude in resolving these questions, with one objective being the determination of the fair economic value of all the community property for equal division purposes.” (In re Marriage of Lopez, supra, 38 Cal.App.3d 93, 109, 113 Cal.Rptr. 58.)
It, therefore, seems apparent that there is no present prohibition under California law to the determination of the present value of the amount of enhancement of earning capacity through the use of statistical projections. This approach has already been sanctioned in good will cases by the Foster and Lopez decisions and no logical reason exists to bar the use of this approach in the situation at bench.
The wife has also contended that she should have been granted legal or equitable relief by the trial court based upon either an express or implied-in-law agreement between her former husband and her based on the holdings of the California Supreme Court in the landmark case of Marvin v. Marvin (1976) 18 Cal.3d 660, 134 Cal.Rptr. 815, 557 P.2d 106, or upon the theory of unjust enrichment.
The husband, on the other hand, argues that the record in the case at bench does not support the existence of either an express or implied-in-law agreement between his former wife and himself. He also argues that no grounds exist under the evidence presented to the trial court for that court to have granted his former wife any relief on the basis of the theory of unjust enrichment.
The present record in this case does not support the existence of any express agreement between the parties concerning any subject except for possibly the joint custody arrangement and the division by the parties of the limited items of property that they recognized were community property.
With reference to the question as to whether the wife was entitled to any relief in this marital dissolution proceeding based on the theories of an implied-in-law agreement pursuant to the Marvin decision or unjust enrichment, the majority has not addressed those issues.
In our original opinion in this case, we found it unnecessary to address these issues in view of the new remedy we had fashioned therein.
I believe, however, that these are issues that should be addressed by this court and be ruled on in view of the basic thrust of the majority opinion.
The Marvin court did recognize the availability of a cause of action founded on theories of implied contract or equitable relief to the parties of a nonmarital relationship. The Supreme Court (at p. 684, 134 Cal.Rptr. 815, 557 P.2d 106) stated as follows:
“We conclude that the judicial barriers that may stand in the way of a policy based upon the fulfillment of the reasonable expectations of the parties to a nonmarital relationship should be removed. As we have explained, the courts now hold that express agreements will be enforced unless they rest on an unlawful meretricious consideration. We add that in the absence of an express agreement, the courts may look to a variety of other remedies in order to protect the parties' lawful expectations.
“The courts may inquire into the conduct of the parties to determine whether that conduct demonstrates an implied contract or implied agreement of partnership or joint venture (see Estate of Thornton (1972) 81 Wn.2d 72 [499 P.2d 864] ), or some other tacit understanding between the parties. The courts may, when appropriate, employ principles of constructive trust (see Omer v. Omer (1974) 11 Wash.App. 386 [523 P.2d 957] ) or resulting trust (see Hyman v. Hyman (Tex.Civ.App.1954) 275 S.W.2d 149). Finally, a nonmarital partner may recover in quantum meruit for the reasonable value of household services rendered less the reasonable value of support received if he can show that he rendered services with the expectation of monetary reward. (See Hill v. Estate of Westbrook, supra, 39 Cal.2d 458, 462, 247 P.2d 19.)” 18
Even prior to the Marvin decision, it had been the law in California for a number of years that a woman who cohabits with a man, believing in good faith that she is married to him, though in fact the marriage was invalid, could recover from her supposed husband the value of her services over and above the value of the support and maintenance furnished her by him. (See 32 Cal.Jur.3d, § 475, pp. 567–571.) A putative wife could recover not only for the value of her services as a housewife, but also for aid rendered to the de facto husband in his business (Marsh v. Marsh (1926) 79 Cal.App. 560, 571, 250 P. 411), and for her contributions to the household expenses (Lazzarevich v. Lazzarevich (1948) 88 Cal.App.2d 708, 712, 200 P.2d 49). In the case of Vallera v. Vallera (1943) 21 Cal.2d 681, 134 P.2d 761, the Supreme Court held (at pp. 683–684, 134 P.2d 761) as follows:
“It is well settled that a woman who lives with a man as his wife in the belief that a valid marriage exists, is entitled upon termination of their relationship to share in the property acquired by them during its existence [citations]. The proportionate contribution of each party to the property is immaterial in this state [citation], for property is divided as community property would be upon the dissolution of a valid marriage.”
Marvin also held (18 Cal.3d at p. 684, 134 Cal.Rptr. 815, 557 P.2d 106) that a nonmarital partner may also recover in quantum meruit for the reasonable value of household services rendered, less the reasonable value of support received, if it can be shown that the services were rendered with the expectation of monetary rewards. Of course, the question of whether such services were actually rendered is always a question of fact for the trial court to determine. (See Hill v. Estate of Westbrook (1952) 39 Cal.2d 458, 462, 247 P.2d 19.)
In addition to the recognition by the California courts of the availability of a cause of action to the parties to a nonmarital relationship founded on the equitable theories of implied contract or unjust enrichment, the highest courts of at least two other jurisdictions have recognized the availability of such relief to spouses upon the breakdown of a marital relationship. Those two out-of-state decisions are Hubbard v. Hubbard, supra, 603 P.2d 747, and In re Marriage of DeLa Rosa (Minn.1981) 309 N.W.2d 755.
In the Hubbard case the trial court awarded the wife $100,000 in lieu of a division of the marital property. In making such an award, the trial court stated the following:
“The court finds that the plaintiff helped support the defendant and the family by being employed throughout the time the defendant attended pre-medical school and medical school, and has contributed to such support during the defendant's internship and residency training. That the plaintiff has been the stabilizing force through all of defendant's training to be a doctor, and has contributed materially to his medical education.
“The court further finds that during the more than twelve years that plaintiff worked and helped defendant obtain his medical degree and train to be a doctor, she could look forward to the time when she would enjoy the prestige and position, as well as the financial comfort, of a doctor's wife. That the granting of a divorce, through no fault of plaintiff, prevents her from reaping those rewards. She is relegated to her premarital status, except for the acquiring of an insubstantial amount of property, not recompensed for the years she has helped the defendant to attain his professional standing.
“The court further finds that the defendant is now on the threshold of a successful professional life, an able-bodied man, and has a present income of some $20,000 annually. That as a medical doctor his reasonable anticipated income will be $30,000 to $60,000 per year.
“The court finds that the plaintiff has a vested interest in the defendant's medical profession, which is deemed to be a valuable property right. The only means of awarding her that property right is by alimony in lieu of division of property.
'“The court further finds that the defendant is reasonably expected to earn $500,000 over the first twelve years of his beginning practice of medicine, with a net income of not less than $250,000. That the plaintiff is entitled to forty percent (40%) thereof as alimony in lieu of division of property. That plaintiff is therefore entitled to judgment as permanent alimony in lieu of a division of property in the amount of $100,000 payable as set out herein below.”' (Emphasis supplied.)
On appeal, the husband, relying on the Colorado case of In re Marriage of Graham (1978) 194 Colo. 429, 574 P.2d 75, contended that the trial court's award improperly considered his future earnings as jointly acquired property. He argued that his future earnings and his medical license were not “property” which could be divided upon divorce.
In Hubbard, the Oklahoma Supreme Court stated (at p. 750) that:
“We have no quarrel with the Graham majority's resolution of the ‘property’ question. Clearly a professional degree or license is the intangible and indivisible ‘property’ of its holder and no other person has a vested interest therein. This determination does not mean, however, that Ms. Hubbard is thereby precluded from receiving an award in lieu of property division, for this case presents broad questions of equity and natural justice which cannot be avoided on such narrow grounds.” (Emphasis added.)
After adopting what it considered to be the persuasive reasoning of the Graham dissent and also the holding by the Kentucky Court of Appeals in Inman v. Inman (1979) 578 S.W.2d 266, the Oklahoma high court (in a 6–3 decision) held (at p. 751) that Ms. Hubbard had a right to be compensated for the amount of her investment in Dr. Hubbard's education and training to prevent his unjust enrichment.
The Hubbard court stated (at pp. 751–752) that:
“Equity would not be served by holding, as Appellant suggests, that Ms. Hubbard's recovery be limited to alimony for support and maintenance. To do so would force her to forego remarriage and perhaps even be celibate for many years simply to realize a return on her investments and sacrifices of the past twelve years.”
The Hubbard court then went on to state (at p. 752):
“We agree in principle with the trial court that Ms. Hubbard is entitled to a cash award in lieu of property settlement, but we limit the factors determining that award to fair compensation for her past investment, rather than a ‘vested interest’ in his future earnings.”
The majority in Hubbard stated in summary that all they had done was to “allow Ms. Hubbard a return on her investment to prevent Dr. Hubbard's unjust enrichment.” (603 P.2d at p. 752.)
The court in Hubbard also stated (at p. 752) that:
“We view this recovery as limited by the facts of the case before us. Different considerations would obviously apply to situations where both parties of a marriage had increased their earning capacities through joint and reciprocal efforts, or where the nonlicense holder had already realized a financial benefit from his or her investment in the other's earning capacity, or where conventional marital property existed which could be divided to work equity․”
In the fairly recent decision of the Minnesota Supreme Court in In re Marriage of DeLa Rosa, the Minnesota high court held (at pp. 757–758) that:
“[A]lthough dissolution is a statutory action and the authority of the trial court is limited to that provided by statute [citation], the district courts are guided by equitable principles in determining the rights and liabilities of the parties upon a dissolution of the marriage relationship. [Citation.] The district court therefore has inherent power to grant equitable relief ‘as the facts in each particular case and the ends of justice may require.’ [Citation.]”
The Minnesota high court therefore affirmed the order of the trial court awarding “restitution” to the respondent wife for the financial support she provided the petitioner husband so that he could attend college full-time.19
For the various reasons which I will now discuss, I have concluded, however, that the equitable relief that is available to nonmarital partners in California (pursuant to the Marvin decision and its progenitors) and also to marital partners in Oklahoma and Minnesota is not available here in California in a proceeding for a marital dissolution (or for a nullity or for legal separation).
Proceedings for dissolution of marriage in California (along with proceedings for legal separation, or for nullity of marriage), are governed by the provisions of the Family Law Act (Civ.Code, § 4350 et seq.), as supplemented by the Family Law Rules adopted by the Judicial Council (Cal.Rules of Court, rule 1201 et seq.), as specifically authorized by a provision of the Family Law Act (Civ.Code, § 4001). The term “proceeding,” as used in the Family Law rules (unless the context or subject matter otherwise requires), means a proceeding pursuant to the Family Law Act for dissolution of marriage (or for nullity of marriage, or for legal separation of the parties). (Rules of Court, 1201, subd. (c).) And it is expressly provided by rule that the Family Law Rules govern all proceedings as so defined. (See Rules of Court, rule 233.) In addition to other matters, the rules specifically prescribe the various forms of pleadings and other papers to be used in the proceedings. (Rules of Court, rule 1215.) For example, rule 1281 provides for the exclusive form of “petition” that must be used in a family law proceeding and rule 1282 provides for the mandatory form of “response.”
As to the statutory scope of jurisdiction of a family law trial court, Civil Code section 4351 provides as follows in pertinent part:
“In proceedings under this part, the superior court has jurisdiction to inquire into and render such judgments and make such orders as are appropriate concerning the status of the marriage, the custody and support of minor children of the marriage, the support of either party, the settlement of the property rights of the parties and the award of attorneys' fees and costs․” 20
Rule 1212 provides that: “[N]either party to the [family law] proceeding may assert against the other party or any other person any cause of action or claim for relief other than for the relief provided in these rules in the Family Law Act.” (Emphasis added.) Reading Civil Code section 4351 and rule 1212 together, the Judicial Council, working in conjunction with the Legislature, apparently intended that the jurisdiction of a superior court hearing a dissolution proceeding is restricted to the specific matters enumerated in section 4351. Therefore, no other cause of action or claim for relief not directly related to one of the enumerated issues can be considered by the family law court as a part of the dissolution proceeding. Of course, such other causes of action or claims for relief could be made the subject of an independent action that could be consolidated with the dissolution proceeding for purposes of trial. (See Porter v. Superior Court (1977) 73 Cal.App.3d 793, 802–805, 141 Cal.Rptr. 59.)
In another fairly recent case, the Fifth District reached the same conclusion that the jurisdiction of a superior court hearing a marital dissolution proceeding is restricted by Civil Code section 4351 to the enumerated subject matters set forth in that particular statute. In the case of Perry v. Superior Court (1980) 108 Cal.App.3d 480, 166 Cal.Rptr. 583, the question arose as to whether the trial court had jurisdiction to award visitation privileges to a spouse who was not a parent, either natural or adoptive, of the minor child of the other spouse. The Perry court concluded that the trial court did not have jurisdiction to make such an order because Civil Code section 4351 expressly limits the jurisdiction of the superior court to deal with custody or visitation matters relating to minors who are “children of the marriage.” The Perry court stated (at p. 484, 166 Cal.Rptr. 583) as follows:
“The plain fact, however, is that in a marital dissolution proceeding the legislative grant of authority to the court to deal with custody or visitation matters is constricted by Civil Code section 4351 to the ‘minor children of the marriage.’ It follows that the court in such a proceeding is limited in regard to visitation orders in the same way as it is limited to adjudicating the rights of the parties in marital property (see Porter v. Superior Court (1977) 73 Cal.App.3d 793, 803–805 [141 Cal.Rptr. 59] ) and to ordering parents to pay child support (see Clevenger v. Clevenger (1961) 189 Cal.App.2d 658, 665–666, 672–676 [11 Cal.Rptr. 707, 90 A.L.R.2d 569].)” (Emphasis supplied.)
In the case of Porter v. Superior Court, supra, 73 Cal.App.3d 793, 141 Cal.Rptr. 59, the petitioner wife and the real party in interest husband had married in 1972. Three years later, the husband deeded a residence (which the wife acknowledged had been owned by the husband) to himself and his wife, as joint tenants. At or about the time the deed was recorded, the wife commenced her first action for dissolution. The husband filed a response. However, that action was dismissed when the parties attempted a reconciliation.
A few months later, the parties separated again and the wife filed her second dissolution action. In her petition, she treated the residence as community property subject to disposition in the dissolution proceedings. In the response filed by the husband, he requested that the residence be confirmed as his separate property. The husband also filed a separate action to set aside the joint tenancy deed. The wife's demurrer to the husband's complaint in the independent action on the ground that another action was pending was overruled by the trial court on the basis that the relief requested in the husband's action was “appropriately independent of the dissolution proceeding.”
Thereafter, the dissolution action was set for trial whereas the husband's independent action was not. The husband therefore moved for a continuance of the trial date. That motion was denied. He then sought to have the two cases consolidated for trial. That motion was also denied.
Due to some appellate proceedings the original trial date had been continued a couple of times. Ultimately, the husband brought a motion to have the dissolution proceeding removed from the trial calendar pending the trial of his independent action. The husband had insisted that he was entitled to a separate trial of his independent action because a nonjury trial of the issues raised in his complaint of alleged fraud and deceit by his wife, which induced him to execute the joint tenancy deed, would deprive him of his constitutional right to a jury trial. The wife then sought a writ of mandate from the Court of Appeal.
The reviewing court issued a peremptory writ of mandate directing the trial court to vacate and set aside its unconditional order removing the marriage dissolution proceeding from the trial calendar and to proceed with the trial of all issues, including a determination of the community property of the parties, subject only to the exercise of its discretion to abate the dissolution action as to any property it determines to be the separate property of either or both of the spouses and the subject of an independent action.
The Porter court held that in light of the fact that the husband's complaint established that his action was equitable in nature, seeking a judgment cancelling the joint tenancy deed, he was not entitled to a jury trial. The reviewing court also held that although the trial court in a marriage dissolution proceeding does have jurisdiction to determine whether or not a given piece of property is or is not community property (Civ.Code, §§ 4351, 4800), such court does not have the authority to dispose of either spouse's separate property. Thus, the trial court erred in unconditionally removing the dissolution proceedings from the trial calendar, since the court had jurisdiction to at least make a determination of whether the residence was the separate property of the husband as he contended.
The Porter court stated (73 Cal.App.3d at p. 805, 141 Cal.Rptr. 59) as follows:
“From the foregoing it is clear that the parties could try the issue of the validity of the deed in the dissolution action if they were both minded so to do. The husband, however, has insisted on his right to a separate action. He cannot, however, by so doing prevent the court from proceeding with the dissolution action insofar as it involves the status of the parties and the wife's claim that the property is community property. If she is successful in that claim, it would put an end to the matter. On the other hand, if the court found, as appears to be the fact, that at the time of the conveyance the property was the husband's separate property, and, in addition, that by the conveyance into joint tenancy, the husband created separate property interests in himself and his wife, there may be a serious question as to whether the court could determine the validity of the deed in the dissolution proceedings over the husband's objection. In such event, discretion indicates that the court in the dissolution proceedings abate proceedings concerning the property in question, and reserve jurisdiction to act if the property is not disposed of in the collateral action. In view of our conclusion as to the lack of the husband's right to a jury trial in the second action, the actions could be ordered consolidated despite the prior order to the contrary. In any event we conclude that the trial court erred in unconditionally removing the dissolution proceedings from the trial calendar.” (Emphasis supplied.)
In the case of In re Marriage of Pilcher (1975) 51 Cal.App.3d 142, 123 Cal.Rptr. 868, which was decided by this court, the interlocutory judgment of dissolution of marriage which was signed and entered in 1972, contained an order awarding custody of the minor son of the parties to the respondent wife. The petitioner husband was ordered to pay child support to the respondent for the benefit of the minor child at a specified amount “until such time as said minor child dies, marries, becomes emancipated, reaches the age of 21 years, or until further order of this court.” The petitioner father fulfilled his obligations to pay child support until his son reached the age of 18 years, at which time, he discontinued making support payments because he believed that his son was no longer a minor under California law and was therefore emancipated. The respondent wife then proceeded to secure a writ of execution to collect the amount of child support that had accrued after her son's 18th birthday. The petitioner husband then brought a motion for modification of the child support provision in the interlocutory judgment by terminating such provision on the ground that his son was no longer a minor.
The trial court denied the requested modification because the court had found that at the time of the dissolution hearing, the parties had stipulated and agreed in open court that the petitioner father would support his minor son “until he becomes emancipated or reaches the age of 21 years.” The trial court then determined that a valid oral agreement had been reached by the parties whereby the petitioner father had agreed to pay child support for the benefit of his son even after his 18th birthday.
On appeal, the petitioner father contended, inter alia, that the trial court lacked jurisdiction to provide for child support beyond the age of 18 years and that his son was emancipated as a matter of law when he reached his 18th birthday.
In a per curiam opinion, this court reversed the order of the trial court and held that the record did not support the finding of an oral agreement to pay child support beyond the age when the son was emancipated. Also, because the decree did not reflect the existence of a property settlement agreement providing for extended support payments and since no special circumstances were shown to exist, the former husband's liability for child support payments terminated pursuant to Civil Code section 4351 when the son attained 18 years of age. That statute provides that a court has jurisdiction to provide for the support of children only during their minority.
In Pilcher, we also indicated (at pp. 149–150, 123 Cal.Rptr. 868) that we did not reach a determination as to whether a valid oral agreement existed between the parties therein because such purported agreement had not been integrated into the interlocutory decree. We stated (at p. 150, 123 Cal.Rptr. 868) that “[I]f in truth and in fact a valid oral agreement was executed, respondent's remedy is an action for declaratory relief or for breach of contract.” Any action for breach of contract would have had to be the subject of an independent action between the parties and presumably either party would have had the right to a jury trial.
Two years later, the Second District in the case of In re Marriage of Whitney (1977) 71 Cal.App.3d 179, 139 Cal.Rptr. 324, mentioned our Pilcher decision in its opinion but came to the opposite conclusion than this court did in Pilcher. The Whitney case involved a divorce decree that had incorporated a marriage settlement agreement in which the husband had agreed to support each of his children until the child died, became 21 years of age, married, or was otherwise emancipated. Such agreement had been executed after Civil Code section 25 had been amended to lower the age of majority from 21 years to 18 years of age. After one of the minor children reached the age of 18 years, the husband filed a petition seeking an order to modify the child support provisions of the divorce decree so that he would no longer have the duty of supporting such child who had attained the age of 18 years. The trial court denied the husband's petition and he appealed.
The Second District affirmed the order of the trial court. That court held that based on the written agreement between the parties, the trial court did have jurisdiction to order support of the children of the parties beyond their minority and therefore the trial court had properly refused to terminate the husband's support obligation. The reviewing court held that because the parties entered into their marital settlement agreement after Civil Code section 25 had been amended to lower the age of majority to age 18, the parties were presumed to have contracted with knowledge of that law (citing as authority the case of Mahlstedt v. Fugit (1947) 79 Cal.App.2d 562, 566, 180 P.2d 777). The Whitney court also observed (71 Cal.App.3d at p. 182, 139 Cal.Rptr. 324) that “[I]n Sheldon v. Superior Court (1967) 257 Cal.App.2d 541, at page 544, 65 Cal.Rptr. 59, the court noted that it was entirely proper for a court to include, in a judgment of divorce, provisions for the support of a child past minority, but that enforcement of such a provision could be only by way of a plenary suit for breach of contract and not by contempt.” (Emphasis supplied.) 21
A fairly common situation that raises this problem of jurisdiction is where marital partners have lived together in a nonmarital relationship for a period of time prior to their marriage and in the process acquired some property together. It would seem that the trial court in a dissolution action would not have jurisdiction to adjudicate the rights of the parties to any property acquired before the date of marriage. However, if a separate Marvin type action were also filed and consolidated for trial with the dissolution action, then the trial court would possess jurisdiction to adjudicate all of the issues between the parties, both premarital and marital.
Particularly because of the clear limitations of Civil Code section 4351 as interpreted by the Porter and Perry courts and also by this court in Pilcher, it would appear that the jurisdiction of a superior court in a marital dissolution proceeding is limited in nature rather than general in scope. Such jurisdiction is not broad enough to have permitted the trial court to have granted the wife the equitable relief that she claims should have been granted to her. Therefore, the decision by the trial court in this regard was proper and should be affirmed. The wife's only available remedy in this regard would be to file a separate independent action following the lead of Mr. Porter in the aforementioned Porter case.
In summary, I do not believe that either Todd or Aufmuth are controlling with regard to the instant case. It is apparent that there are several significant distinctions between the facts in Aufmuth and the facts in the instant case. By the time the Aufmuths separated, they had accumulated a fair amount of community property whereas the Sullivans had acquired very little in the way of community assets. Further, by the time of trial, Mr. Aufmuth had an established law practice with a proven earnings record whereas Dr. Sullivan had not even established his medical practice by the time of separation and he was just getting his practice underway by the time of trial. The evidence also suggests that as of the time of trial Dr. Sullivan's level of income was far below its ultimate potential.
The two cases can also be distinguished on the basis that Mrs. Aufmuth received an award of spousal support of $1,000 per month whereas because Mrs. Sullivan could not show a present need, she did not receive any spousal support but merely a reservation of jurisdiction by the court to give the court the power to make a future award if circumstances changed.
I am also mindful of the fact that the Todd court resolved the equitable problem that it faced by awarding Mrs. Todd more than half of the community property which was still legally permissible when the Todd case was decided in 1969, before Civil Code section 4800 had gone into effect.22 The solution reached by the Todd court is no longer legally possible because Civil Code section 4800, subdivision (a), now mandates an equal division of the community property absent an agreement to the contrary by the parties.
It should also be noted that the determination by the Aufmuth court that a professional education and right to practice a profession were not items of community property may have been influenced to some extent by the result of its overall decision in the case. The Aufmuth court commented (89 Cal.App.3d at p. 461, 152 Cal.Rptr. 668) as follows:
“It should be noted in the present case that, to the extent community assets were the product of husband's legal education, wife has realized their value in the award of these assets to her. Additionally, the trial court must have considered husband's earning capacity in awarding spousal and child support. [Citation.]”(Italics added.)
In the case at bench very little community property was acquired by the parties during the duration of their marriage which lasted for about 10 years. However, even if they had acquired some community property such as was the case in Todd and Aufmuth, an unequal division of such property is no longer legally possible in California. Also, the wife is not presently entitled to spousal support because she did not show any need for some. Therefore, these two remedies that were employed by the Todd and Aufmuth courts are not available in this case.
I submit that under the current definition of “property” as recognized by California appellate courts, that another remedy should finally be recognized. The acquisition by a spouse of an education, degree or license to practice a profession should be considered to be the separate property of the recipient spouse. Therefore, where any portion of these achievements are shown to have been acquired during the course of a marriage and where it can also be shown that the earning capacity of the recipient spouse has been directly enhanced thereby, then the community's financial interest in same should be recognized by California courts.
I also submit that even should the view of the majority herein ultimately prevail as the law in this regard, that the non-student spouse has another potential remedy available that is already recognized by the highest courts of some of our sister states. That remedy is in the form of an independent action for equitable relief on the grounds of implied-in-law agreement or unjust enrichment. California courts already recognize the existence of the right of one spouse to bring an independent action against the other spouse, particularly for relief not afforded under the California Family Law Act, as discussed at length above.
I would therefore affirm all of the provisions of the interlocutory judgment of dissolution but I would reverse the pretrial order in limine and for partial summary judgment. I would then remand the case back to the trial court for further proceedings consistent herewith.
1. The presumption of a gift is based upon the natural feelings of mutual affection and generosity presumably attending the marital state. (See In re Marriage of Smith (1978) 79 Cal.App.3d 725, 746, 145 Cal.Rptr. 205.)
2. Whether in appropriate circumstances the amount or duration of spousal support might be affected by one spouse having been provided a professional education during the marriage is a question not at issue in this case.
1. In granting the husband's pretrial motions, Judge (now Justice) Trotter states that: “So you have a complete record for appeal, let me state the reason the court is granting the motion in limine to preclude testimony on that subject matter [i.e., the value of any community interest in Mark's medical degree], and also granting the motion for partial summary judgment, is the language contained in the case of In re Marriage of Aufmuth, ․ 89 CA3 446 [152 Cal.Rptr. 668].”
2. See also Hubbard v. Hubbard (1979) Okl., 603 P.2d 747 wherein the Oklahoma Supreme Court (in a 6 to 3 decision) also mentioned the Graham decision and then observed (at p. 750) that “[c]learly a professional degree or license is the intangible and individual ‘property’ of its holder and no other person has a vested interest therein.”
3. However, see the case of Inman v. Inman (1979) 578 S.W.2d 266, where the Kentucky Court of Appeals held that it was reasonable and necessary for the trial court to have the power to find that the wife had a “property” interest in her husband's professional degree where there was little or no marital property acquired during the marriage through the husband's increased earning capacity as the result of the degree and training he obtained with his wife's support.
4. In the case of Daniels v. Daniels (1961) 185 N.E.2d 773, 775, the Ohio Court of Appeals held that “the right to practice medicine, being in the nature of a franchise, constitutes property which the trial court had a right to consider in making the award of alimony.” (Emphasis supplied.) Also, a New York state trial court recently held in the case of O'Brien v. O'Brien, that a license to practice medicine was “marital property” and therefore the wife who put her husband through medical school was entitled to a share of its value. The trial judge determined the present value of the husband's medical degree to be $472,000 and also determined the wife's contribution to the marriage to amount of $103,000. He ruled that the wife was entitled to 40 percent of the value of the license, or $188,000. (See article on p. 1, Los Angeles Daily Journal, June 23, 1982.)
5. See the trial court opinion which was published in The Family Law Reporter (vol. 7, No. 9, Jan. 6, 1981) for the case of Lynn v. Lynn which was decided on December 5, 1980 by the New Jersey Superior Court (Chancery Division, Bergen County). The very scholarly opinion by Judge Krafte contains a very thorough summary of all of the reported appellate decisions around the country on the question of whether a professional education or a license to practice medicine obtained during a marriage is property subject to equitable distribution upon divorce. Judge Krafte came to the conclusion that they were subject to distribution under New Jersey law.
6. It has been stated that a legal proposition that is stated in broader terms than is called for by the facts to which it is applied has little value as precedent when invoked in a different factual situation. In other words, a court's statements that go beyond the question before the court are dicta and are not binding as precedent. (See People v. Goree (1966) 240 Cal.App.2d 304, 310, 49 Cal.Rptr. 392; Windsor v. Windsor (1941) 42 Cal.App.2d 464, 466, 109 P.2d 363; 16 Cal.Jur.3d, Courts, §§ 138–140, pp. 248–255.)
7. Overruled on other grounds by the California Supreme Court in In re Marriage of Lucas (1981) 27 Cal.3d 808, 815, 166 Cal.Rptr. 853, 614 P.2d 285.
8. Specifically, during the cross-examination of the husband by wife's counsel regarding his student loan, he was asked: “Do you think there is value to the legal education you got?” The trial court sustained the objection of husband's counsel.
9. In the case of Biltoft v. Wootten (1979) 96 Cal.App.3d 58, 157 Cal.Rptr. 581, another panel of this same court determined that even something as intangible and contingent as term life insurance benefits must be apportioned between community and separate property under circumstances where premiums on the policy were paid from both community and separate funds.
10. See also 34 American Law Reports, Property, as including business or profession, page 716, and 51 California Jurisprudence Third, Property, section 3, Subjects of Property, pages 8–11.
11. After properly recognizing that the real issue is enhancement of earning capacity rather than value of education, degree or license to practice, the Aufmuth court unfortunately came to the mistaken conclusion that a determination that such an asset as earning capacity is community property would require a division of post-dissolution earnings which would be contrary to the holding of In re Marriage of Fortier (1973) 34 Cal.App.3d 384, 388, 109 Cal.Rptr. 915. That conclusion was mistaken for reasons that will be discussed below.
12. (See Weitzman: The Economics of Divorce: Social and Economic Consequences of Property, Alimony and Child Support Awards (Aug. 1981) 28 U.C.L.A. L.Rev. 1181.)
13. “Hannah Papaneck has suggested that in most single-income families, the single career might well be conceptualized as a “two-person career,” the product of a cooperative effort by the partners. (Papaneck, Men, Women, and Work: Reflections on the Two-Person Career, 78 Am.J.Soc. 852 (1973).)” (28 UCLA L.Rev. at p. 1210, fn. 93.)
14. (See Krauskopf, Recompense for Financing Spouse's Education: Legal Protection for the Marital Investor in Human Capital, 28 Kan.L.Rev. 379 (1980).)
15. See G. Becker, A Treatise on the Family (1981); G. Becker, Human Capital, Second Edition, 1975, National Bureau of Economic Research, Columbia University Press; Investment in Human Capital. (B. Kiker, ed. 1971.)
16. See B.A.J.I. No. 14.50 for approved jury instruction for the measure of damages resulting from the death of an adult.
17. See G. Becker, Human Capital (2d ed. 1975); Investment in Human Capital (B. Kiker ed. 1971); G. Mumey, Personal Economic Planning (1972); T. Schultz, Investment in Human Capital (1971); T. Schultz, The Economic Value of Education (1963); L. Thurow, Investment in Human Capital (1970); Hansen, Total and Private Rates of Return to Investment in Schooling, in Kiker supra this note, at 211; Comment, The Interest of the Community in a Professional Education, 10 Cal.Western L.Rev. 590 (1974). Also see generally, Krauskopf, supra, note 17, at 381–385.
18. Marvin also points out (18 Cal.3d at p. 673, 134 Cal.Rptr. 815, 557 P.2d 106) that: “ ‘All contracts for marriage settlements must be in writing [Civ.Code, § 5134]’ ․ A marriage settlement, however, is an agreement in contemplation of marriage in which each party agrees to release or modify the property rights which would otherwise arise from the marriage. (See Corker v. Corker (1891) 87 Cal. 643, 648 [25 P. 922].) The contract at issue here does not conceivably fall within that definition, and this is beyond the compass of section 5134.” (Fn. omitted.)However, the statutory bar provided by Civil Code section 5134 is not applicable to the case at bench because neither party has contended that he or she entered into any agreement whatsoever in contemplation of their marriage.
19. In the In re Marriage of DeLa Rosa, supra, case, the Minnesota Supreme Court held that the trial court did not abuse its discretion by awarding the respondent wife an equitable recovery equal to the financial support she provided to the petitioner husband while he was acquiring a medical school education. However, the award should be limited to the monies expended by her for his living expenses and also for contributions made toward his direct educational expenses.The formula developed by the Minnesota high court in its DeLa Rosa decision worked as follows:1. Determine total earnings of wife as the working spouse, the total living expenses of both parties and the total educational expenses.2. Subtract from wife's total earnings her own one-half of the total living expenses. (This had the effect of imputing one-half of the living expenses and all of the educational expenses to her husband as the student spouse.)3. The result is the amount of the “equitable award” which is due to the wife as the working spouse. (309 N.W.2d at p. 759.)
20. Presumably the phrase “in the proceedings under this part” refers to title 1.5 entitled “General Provisions, Chapter 1,” entitled “Termination of Marriage and Jurisdiction” which was enated by the Legislature in 1970 as an urgency measure. (See Stats.1970, ch. 311, p. 703, § 1, urgency measure effective July 6, 1970.)
21. However, see the case of In re Marriage of Valle (1975) 53 Cal.App.3d 837, 843, 126 Cal.Rptr. 38, where the reviewing court held that where the issue of parentage is actually raised in a marital dissolution proceeding and sufficient evidence establishing it by direct estoppel is presented, the court has jurisdiction to decide that issue. Presumably, the rationale for this holding by the Valle court is the fact that the trial court in Valle clearly had jurisdiction to inquire into and render such judgments and make such orders as are appropriate concerning the matters of the custody and support of minor children of the marriage pursuant to Civil Code section 4351.
22. The California Family Law Act, of which Civil Code section 4800 is a part, did not become effective until January 1, 1970.
McDANIEL, Associate Justice.
KAUFMAN, Acting P. J., concurs.