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Law School Case Brief

In re Marriage of Brandes - 239 Cal. App. 4th 1461, 192 Cal. Rptr. 3d 1 (2015)

Rule:

Under California's community property law, the characterization of property as separate, community, or quasi-community is an integral part of the division of property on marital dissolution. Courts recognize several factors relevant to this task, but the most basic characterization factor is the time when property is acquired in relation to the parties' marital status. With certain exceptions, property acquired during the marriage and before separation is presumptively community property under Fam. Code, § 760, and property acquired before the marriage, and rents, issues, and profits from such property are presumptively separate property.

Facts:

Charles founded a company, BIP, to provide investment advisory services in exchange for fees based on the percentage of clients' assets under management. Charles and Linda met in 1983, when BIP was only marginally successful. Charlie and Linda got married and eventually separated. The issue was how the community's interest in BIP should be characterized. Linda argued the community owned 100 percent of BIP because during the marriage it became a completely different business. In other words, Charles effectively “started a new business during the marriage.” 

Issue:

Did the trial court err when it awarded a husband a business he founded before the marriage as his separate property?

Answer:

No

Conclusion:

A business did not lose its separate property character under Fam. Code, § 770, subd. (a), by substantial growth because a stipulation to the separate property value on the date of marriage meant there was no community property presumption under Fam. Code, § 760, based on commingling. There was no evidence that BIP was a different business after the marriage, BIP remained the same business, it became only bigger and more successful. Growth cannot and does not alone cause a complete transmutation of the character of a business.

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