Estate of Silverman


Filed 4/18/11 Estate of Silverman CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

ESTATE OF SAM SILVERMAN, Deceased	B222477 (Los Angeles County Super. Ct. No. BP105571)
JEANEANE SILVERMAN, Petitioner and Appellant, v. DONNA SILVERMAN et al., Objectors and Respondents.

APPEAL from an order of the Superior Court of Los Angeles County, Reva G. Goetz, Judge. Affirmed.
Miller & Miller and Robert Miller for Petitioner and Appellant.
Freeman, Freeman & Smiley, Stephen M. Lowe, and Duncan P. Hromadka for Objectors and Respondents.


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Jeaneane Silverman and Sam Silverman (decedent) were married from 1986 until decedent’s passing in 2007. Prior to the marriage, decedent purchased two condominiums. After his passing, appellant filed a spousal property petition alleging a community property interest in the appreciation value of the condominiums. Appellant argues the trial court erred in finding that the units were decedent’s separate property and that the community has no interest in them. She argues that a community interest was created because community funds were used to satisfy encumbrances on the units, her name appears on the mortgage payment statements, and because she acted as a property manager for both units. We affirm the trial court’s ruling.
FACTUAL & PROCEDURAL SUMMARY
Appellant was the fourth wife of decedent. Respondents Donna Silverman and Rhonda Rosen are decedent’s children from a previous marriage. Decedent and appellant were married in March 1986 in California, and remained married till his death in April 2007.
Decedent had substantial separate property at the time of their marriage in 1986, including the two condominiums in Pasadena, stock, and an ongoing jewelry business (Boxx Jewelers). After decedent’s death, appellant filed a spousal property petition, alleging community property rights in the condominiums, decedent’s stock, and Boxx Jewelers. Of these only the condominiums are contested in this appeal.
In April 1978, decedent and his sister, as joint tenants, purchased a condominium at 125 North Allen Avenue (Condominium 1) for $36,450, with a $7,300 down payment and a 30-year note for $29,150 due on September 1, 2008. Decedent’s sister died in January 1986, and decedent obtained full ownership of the property by right of survivorship. The unit was sold in May 2009 and the proceeds of the sale were $248,976.
Decedent purchased a second condominium at 65 North Allen Avenue (Condominium 2) in September 1978, and took title as “Sam Silverman an unmarried man.” He purchased the unit for $38,450, with a $3,850 down payment and a 30-year note for $34,600 also due on September 1, 2008.
Shortly after their marriage in 1986, decedent and appellant opened two joint checking accounts (the joint checking accounts). The condominiums expenses, including the mortgages, were paid from either the joint checking accounts or Boxx Jeweler’s separate checking account. Appellant was in charge of making the payments, starting almost immediately after their marriage. Automatic deductions from the Boxx Jewelers account for the condominiums’ mortgages started approximately two years before decedent’s death. Until 2005, all rental income received from the condominiums went into the joint checking accounts. After 2005, rental income was either deposited or cashed by decedent for his use. None of the rental income was deposited into the Boxx Jewelers account.
Title to the condominiums remained in decedent’s name until his death, although appellant made several unsuccessful requests to decedent to add her name onto the titles. At a court hearing in August 2009, appellant claimed a community property interest of half the equity in both units between the date of marriage and the date of death. She assigned three reasons for her claim. First, she argued there is a community interest because she and decedent used community time and efforts to care for the properties—such as replacement of carpets, plumbing repairs, and repainting—and to deal with tenants, rental agents, and the homeowner’s association. Appellant contended that the value of her labor in performing management and maintenance duties was equivalent to one-half of the increase in the unit of equity during their marriage. Second, she claimed the rental income for both units was deposited into a joint checking account, where it was commingled with other community income, and expenses for the units were paid from those accounts. Finally, she asserted a community interest because her name is on the statement of payment of the encumbrances for both units, of which there remains an approximate balance of $3,355 for Condominium 1 and $3,331 for Condominium 2.
Appellant offered expert testimony to appraise the value of the condominiums and the community’s interest under a Moore/Mardsen calculation.[1] The trial court deferred the testimony until the character of the property was established. The court addressed and rejected all three of appellant’s arguments. The court held that community income was not used to pay the mortgages because the source of funds used to pay the encumbrances was separate property income from Boxx Jewelers, and the rental income from the units was sufficient to meet the operating expenses except in cases of large repairs, which were funded by Boxx Jewelers. Next, the court held that appellant’s efforts with respect to the units were not sufficient to establish a community property interest in the units because she offered no specific evidence of her activities as a property manager. The court also found that the presence of her name on the mortgage payment statements did not alone create a community interest, and she did not present evidence that she was an actual named party to the encumbrances. Finally, the court held that testimony from both appellant and respondents established that decedent did not want to place appellant’s name on the title to the condominiums, and appellant presented no evidence that decedent made an express declaration of intent to transmute his separate property into community property.
The property order was filed on December 28, 2009 and this timely appeal followed.
DISCUSSION
I
Appellant argues the court erred in finding that the use of community funds to reduce the encumbrances on the condominiums did not create a community interest in the units.
We review the trial court’s factual findings regarding the character of property under the substantial evidence standard. (In re Marriage of Sivyer-Foley & Foley (2010) 189 Cal.App.4th 521, 526; see also In re Marriage of Rossin (2009) 172 Cal.App.4th 725, 734 [appellate review of a trial court finding that item is separate or community property is limited to determination whether substantial evidence supports the finding].) However, de novo review is appropriate “where resolution of ‘the issue of the characterization to be given (as separate or community property) . . . requires a critical consideration, in a factual context, of legal principles and their underlying values, the determination in question amounts to the resolution of a mixed question of law and fact that is predominately one of law.’” (Ibid.)
Where community funds are used to make payments on property purchased by one of the spouses before marriage, the community is entitled to full reimbursement. In addition, “‘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.’ [Citations.]” (In re Marriage of Moore, supra, 28 Cal.3d at pp. 371-372.) This is the case even when one spouse consents to the use of community property to reduce the encumbrance on the other spouse’s separate property. (See In re Marriage of Gowdy (1986) 178 Cal.App.3d 1228, 1234 [holding that payment of community funds to reduce encumbrance on husband’s separate property, even though done with knowledge and apparent consent of wife, gave community pro tanto interest in that separate property in proportion to husband’s prior separate property payments for down payment and loan principal, whether premarital or postmarital].) But this rule only applies to payments on principal and excludes payments for interest and taxes. (In re Marriage of Moore, supra, 28 Cal.3d at p. 372.)
Here, it is undisputed that the payments on the encumbrances were made from either appellant and decedent’s joint checking account or the Boxx Jewelers checking account. When funds are taken from a commingled account, the presumption is that the funds are community funds. (In re Marriage of Mix (1975) 14 Cal.3d 604, 610-611.) Here, however, the court found that “mortgage payments . . . were made from proceeds from Boxx Jewelers that were either paid through a joint checking account” or directly from the Boxx Jewelers account. Appellant does not challenge this finding. Concurrently, the court found that Boxx Jewelers was decedent’s separate property and that the community had no property interest in the company. Appellant also does not challenge this finding on appeal. Rather, she testified at trial that she worked at the jewelry store before and throughout her marriage with decedent, and in lieu of issuing a salary check for themselves, appellant and decedent used the Boxx Jewelers checking account to directly pay for personal expenses, including the mortgage payments.[2] The expenditures were then listed on appellant and decedent’s joint tax return, not on any corporate tax return filed by Boxx Jewelers. Thus, appellant seems to contend that the funds in the Boxx Jewelers account included her employee earnings, and therefore, the mortgage payments drawn from that account included at least some community funds.
However, appellant presents no evidence as to what proportion of the Boxx Jewelers checking account consisted of her salary earnings. Nor is there any evidence of a set hourly wage rate or an annual salary figure. Appellant does not challenge the trial court’s finding that the jewelry company, and all profits and earnings derived from the business, remained decedent’s separate property. Because appellant has made no measurable claim as to a community interest in the jewelry business by her labor, she did not conclusively demonstrate that community funds were used to reduce the encumbrances on decedent’s separate property.
In any event, the court found evidence that supports a finding that the rental income from the units, which was deposited into the joint checking account until 2005, exceeded the condominium expenses, including mortgage payments. Thus, any community expenditures made to reduce the mortgages were offset by the rental income from the units that was enjoyed by the community. Appellant challenges this finding.
On cross-examination of appellant and decedent’s personal accountant, Allen Brumer, respondents’ counsel introduced joint tax returns for several years, including 1996, 2000, 2002, 2003, 2005, and 2007. Brumer stated the tax returns demonstrated that the rental income from the condominiums exceeded the total expenditures on those units, and that in effect, the condominiums paid for themselves in those years. In response, appellant points to Brumer’s testimony on redirect examination. Brumer clarified that the tax returns did not reflect principal payments and that if principal was included, one could not conclude from the tax returns that the condominiums paid for themselves in those years. This further supports the finding that appellant made no concrete showing as to community expenses on the mortgage payments. Appellant also contends that respondents only presented tax returns for six or seven years, a third of the 21-year marriage between appellant and decedent, and that Condominium 1 was occupied by appellant’s son and then to decedent’s granddaughter for roughly 10 years without generating any rental income during that period. Even assuming this to be so, it was still appellant’s burden to demonstrate not only that some community funds were used but also to quantify the amount expended on the units and that the amount spent exceeded the income derived from the units. Appellant makes no quantitative showing that the mortgage payments exceeded the rental income over the 21-year marriage, let alone that community funds were spent in excess of the income.
II
Appellant argues her efforts in maintaining and improving the condominiums created a community interest in the condominiums. We do not agree.
Appellant testified that she managed or helped manage the units for 18 years. Her duties included finding tenants, reviewing applications, collecting rent, hiring people to paint and replace the carpet, and cleaning up vacated units for rental. She also assisted decedent in an unlawful detainer action against a tenant by advising decedent to seek an attorney and by cooperating with the attorney. She could not estimate how many hours per week she spent managing the property. In the late 1990’s or early 2000’s, appellant arranged the hiring of a management company to handle repairs, rentals, credit applications, and payments. The management company handled these duties until decedent’s passing in 2007.
“Where community funds are used to make capital improvements to a spouse’s separate real property, the community is entitled to reimbursement or a pro tanto interest under the Moore/Marsden rule . . . .” (See In re Marriage of Allen (2002) 96 Cal.App.4th 497, 501 [Moore/Marsden rational applies because capital improvements to property, like reduction of an encumbrance, also enhances property’s equity]; see also In re Marriage of Wolfe (2001) 91 Cal.App.4th 962, 967[“there is no logical basis for denying a spouse reimbursement for a community-funded improvement to the other spouse’s separate property. The rule we discard—that is, the presumption of a gift in those circumstances—is also outside the mainstream of community property principles applied in other American jurisdictions”].) Here, appellant does not seek reimbursement or a community interest in the condominiums for community funds spent on improving the units, but rather, for her efforts in managing them. Appellant offers no authority for the proposition that these efforts created a community interest in the units. Rather, we note that the “possession and management by one spouse of the separate property of another does not in and of itself demonstrate that the spouse to whom the property belonged intended to relinquish it to the community. However, such an intent may be shown by the nature of the transaction or by the surrounding circumstances.” (In re Marriage of Jafeman (1972) 29 Cal.App.3d 244, 257.)
In any event, the trial court’s finding that appellant’s services were insufficient to create a property interest in the units is supported by the record. The court noted in its August 5, 2009 minute order: “[Appellant] testified that sometimes she acted as the property manager for activities related to the rental(s) of the condominiums. However, she provided no specific evidence about the periods of time when she performed [those] services.” Appellant testified to performing managerial services for the units over the course of 18 years but could not estimate how many hours she worked per week. She did not provide evidence of her role in capital improvements that enhanced the equity of the units, and instead, merely stated that she helped clean the units and arranged for others to do repair work. Any contributions she made were reduced by the employment of a property management company for roughly half of the 18 years she performed managerial duties. But again, appellant could not say as to how long the company was employed and how it reduced her role. Thus, the court was given very little evidence as to her actions as a property manager, and no evidence as to how those actions qualitatively enhanced the equity value of the units.
Appellant argues the trial court should not have rested its finding on the fact that appellant did not demonstrate how much her efforts enhanced the equity of the units because the court prohibited her witness from testifying as to the community’s interest in the units under Moore/Marsden. The record does not bear that out. First, the record demonstrates that appellant’s witness was to testify as to the present and past market value of the units and the community’s interest in the units by virtue of the mortgage payments. The record does not show that appellant offered any witness or other evidence of the impact of her managerial services on the units’ respective values. Moreover, the trial court’s factual finding did not rest on appellant’s offer of proof, but rather, on the fact that the evidence concerning the extent and nature of her efforts was insufficiently specific.
III
Finally, appellant argues that the presence of her name on mortgage payment statements demonstrates that the community was held liable for decedent’s purchase loans, thus creating a community interest in the condominiums. We do not agree.
When a loan is obtained to purchase property during marriage, whether the lender intended to rely on separate or community property for satisfaction, determines whether the loan proceeds acquired during marriage are separate or community property. (In re Marriage of Grinius (1985) 166 Cal.App.3d 1179, 1186.) Here, decedent obtained a loan to purchase the condominiums prior to his marriage with appellant. “Except as otherwise expressly provided by statute, the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.” (Fam. Code, § 910, subd. (a).) Although the community is entitled to reimbursement when community funds are used to satisfy a spouse’s separate debt or obligation (Fam. Code, § 920), appellant offers no authority for the proposition that the community’s potential liability on a purchase loan obtained by a spouse prior to marriage alone creates a proportional community interest in the property. As we have discussed, where community funds are used to make payments on property purchased by one of the spouses before marriage, the community obtains a pro tanto interest in such property. That appellant’s name appears on the payment statements of loans acquired by decedent prior to the marriage does not independently create a community interest in the condominiums.
More fundamentally, there is substantial evidence to support the court’s finding that appellant was not a party to the purchase loans. Appellant could not explain why or how her name was placed on the payment statements, and her name does not appear on any of the loan documents or the deeds of trust. Moreover, the payment statements, while addressed to both appellant and decedent, only named decedent as the mortgagor on the loan. The court noted that decedent declined appellant’s multiple requests to place her name on the title, demonstrating an explicit intent to maintain full ownership of the units as his separate property.
DISPOSITION
The order is affirmed. Costs awarded to respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.


EPSTEIN, P. J.

We concur:


WILLHITE, J. SUZUKAWA, J.

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