Retroactivity of Family Code Section 70*
On July 20, 2015, the California Supreme Court issued In re Marriage of Davis, 61 Cal. 4th 846 (2015) (Davis). For the purpose of determining when a couple is “separated” and thus no longer acquiring community property, Davis adopted the reasoning from Norviel1 and construed the phrase “living separate and apart” as requiring that the parties occupy separate residences. Consistent with Norviel, footnote 7 of Davis concedes that it did not consider whether there could be circumstances in which a court could find that parties were “living separate and apart” even if they occupy the same residence, as it did not need to reach that question in the case. However, Davis has been universally interpreted as requiring separate residences as a threshold to “separation.”
After the Supreme Court issued its opinion in Davis, the family law bar was unified in its effort to address the bright-line test announced in the decision and in seeking to overturn the threshold requirement for “separation” that parties no longer reside under the same roof to prove “separation” first announced by the Sixth District in Norviel. After months of meetings and discussions, a committee of family law practitioners proposed legislation to overturn Davis and return the law to its pre-Davis state, which is to give judicial officers discretion to determine a date of separation based on all relevant factors.
The committee refined its proposal, found a sponsor, and Senate Bill (SB) 1255 was introduced on February 18, 2016. After several amendments, the Governor signed it on July 25, 2016. It enacts new Family Code section 702 effective on January 1, 2017. This new section expressly rejects the holdings in Davis and Norviel in favor of the trial court’s exercise of discretion in making a factual determination about when the parties separated based on the totality of the circumstances.
The legislative history reveals that the author of SB 1255 abandoned the automatic retroactivity language to leave retroactivity to a case-by-case determination under Family Code section 4, which was viewed as preferable to ensure that people who are currently separating would be able to avail themselves of the new law. As enacted, section 70’s legislative history leaves the issue of retroactive application to the trial court under section 4(h). Whether this legislative intent will survive a constitutionality challenge is the subject of this article.
Section 4: The Family Code’s Retroactivity Presumption
The Family Code contains an automatic retroactivity provision for additions to the Code. Section 4 was enacted effective January 1, 1994, as part of the new Family Code. Section 4(a)(2)(B) defines “new law” as, among other things, any “act that makes a change in this code, whether effectuated by amendment, addition, or repeal of a provision of this code.” According to section 4(c),
(s)ubject to the limitations provided in this section, the new law applies on the operative date to all matters governed by the new law, regardless of whether an event occurred or circumstance existed before, on, or after the operative date, including, but not limited to, commencement of a proceeding, making of an order, or taking of an action.
So, all Family Code amendments apply to cases pending as of its effective date regardless of when the actions in question took place, unless the enacting legislation specifically states otherwise. Subsection 4(h) provides an escape hatch:
If a party shows, and the court determines, that application of a particular provision of the new law or of the old law in the manner required by this section or by the new law would substantially interfere with the effective conduct of the proceedings or the rights of the parties or other interested persons in connection with an event that occurred or circumstance that existed before the operative date, the court may, notwithstanding this section or the new law, apply either the new law or the old law to the extent reasonably necessary to mitigate the substantial interference.
The question is, in cases pending as of January 1, 2017 in which the date of separation has not yet been decided, whether the court has the discretion to apply new section 70 to determine that they separated on some date before January 1, 2017, even though they were still living in the same residence. In other words, must the court decide all date of separation issues in cases pending as of January 1, 2017, with pre-2017 “separation facts” under Davis, or can it apply new section 70 “retroactively” to determine the separation issue under facts occurring prior to its effective date?
Family Code section 4(c) presumptively authorizes the court to do so unless it finds that section 4(h) applies, i.e.,
that application of a particular provision of the new law or of the old law in the manner required by this section or by the new law would substantially interfere with the effective conduct of the proceedings or the rights of the parties or other interested persons in connection with an event that occurred or circumstance that existed before the operative date.
The existence of this retroactivity rule and the exception means that there is the potential for two rules for the date of separation—the bright-line Davis rule and the totality of the circumstances specified in section 70—for similarly situated parties based on the court’s factual determination of whether to apply section 4(h) and thus refuse to apply section 70 retroactively.
In Fellows,3 the high court addressed whether Family Code section 4502(c) [disallowing the laches defense to a support obligation] applied retroactively and barred a payor parent from relying on laches to defend an action to enforce a child support order. In its analysis, the Fellows court considered the effect of section 4, holding that the Legislature enacted the section intending to change the general rule against retroactivity absent specific retroactivity language in a statutory enactment. Thus, it held that under the section, “as a general rule, future changes to the Family Code apply retroactively.” Fellows, 39 Cal. 4th at 186.
The panel then held that none of the exceptions to retroactivity in section 4 applied to the statute at issue. Citing Fabian,4 Bouquet5 and Heikes,6 it analyzed the statute using the Bouquet factors, discussed below. It found a compelling state interest in preventing support payors from escaping justice by hiding from the child support system long enough to gain the defense of laches to shield them from paying child support. It also held that Mr. Fellows did not reasonably rely upon the former law of laches, nor did retroactivity impermissibly restrict his due process rights, citing section 4(h). Thus, the existence of section 4(h)’s “escape hatch” rendered section 4(c) constitutional where there is a compelling state interest behind the “new law” and no reasonable reliance on the “old law.”
How will courts evaluate retroactivity of section 70 under these cases? Arguably, the analysis under section 4(h) is essentially the same as the Bouquet factors, so although there is a presumption that the section will apply retroactively, the only practical effect will be to frame the issue as a section 4(h) argument rather than simply a general challenge to retroactive application. This will shift the burden of persuasion to the party challenging retroactive application of the new statute, i.e., the party who wants the court to apply Davis to the facts regarding the parties’ separation occurring before January 1, 2017, rather than the “traditional” burden on the party arguing in favor of retroactive application where the presumption was against such application. In sum, section 4 simply switches the burden of proof, but the standards under which the court decides the issue will most likely be the same. Therefore, it is vital that counsel be aware of these factors and consider how they play out in a date of separation context.
The History of Retroactive Application of Family Law Statutory Enactments
California intermediate appellate decisions and California Supreme Court decisions have often addressed the question of whether statutory enactments can withstand constitutional scrutiny if retroactively applied in the family law setting. In Addison,7 the California Supreme Court addressed challenges to the quasi-marital property statute when applied to a division of property upon dissolution of marriage as distinguished from its application to inheritance rights. The trial court had held that the quasi-marital property statute was unconstitutional. In reversing, the Addison majority held that the state has an inherent interest in proceedings involving marital relations, including protection of children, protecting support and property rights, and enforcing marital responsibilities.
Husband unsuccessfully argued that the change in the quasi-community property law occurred after the filing of the dissolution proceeding and prior to judgment, and thus deprived him of property without due process. In what may be overly-broad language, the Addison majority held that the change in the law was being applied prospectively and that the law at the time of judgment is controlling, and remanded for further proceedings concerning the application of the quasi-community property law then in effect.
The next serious challenge to the retroactive application of family law statutes in the modern era occurred when the Legislature eliminated the concept of gender-based discrimination between husband and wife. The question of constitutional retroactivity that had the effect of depriving wife of a property right came before the Supreme Court when it decided Bouquet. Under older statutes, after separation, the wife’s acquisitions became her separate property8 but the husband’s remained community property. Amended Civil Code section 5118 extended equal treatment of post-separation earnings and acquisitions to the husband. In Bouquet, the statute was amended after the petition was filed but before entry of the interlocutory judgment.
The court recognized the clear nexus between the issue of the date of separation and property rights, which are foundational elements of the California community property system. However, it also recognized the policy limitations on challenges to statutes based on their retroactive application. Simply put, this “hands off policy” assured that the intent of the Legislature be given effect so long as it does not offend constitutional principles. Bouquet opines that the older version of Civil Code section 5118 blatantly discriminated based on gender by protecting the wife’s earnings as her separate property while not extending the same protection to those of the husband. Gender-based classifications are inherently suspect, so the immediate question was whether such classifications advance a legitimate state interest. The Bouquet court noted that in Addison,
(t)he application of the quasi-community property legislation to property acquired before its effective date clearly impaired the husband’s vested property rights; prior to the enactment of the legislation he had been the sole owner of certain property and afterwards the property belonged to the community. Nevertheless, we deemed the retroactive application of the legislation a proper exercise of the police power. The state’s paramount interest in the equitable distribution of marital property upon dissolution of the marriage, we concluded, justified the impairment of the husband’s vested property rights. [n. omitted.]
Holding that “(t)he infringement of the wife’s vested property rights in this case finds support in the same state interest that justified the retroactive application of the legislation in Addison,” the Bouquet panel unanimously held that the newly-enacted Civil Code section 5118 applied to the case. Newly enacted section 70 contains no gender-based classification. Therefore, it does not raise the same social interest as equal application of the law based on gender present in Addison and Bouquet. Thus, if section 70 offends constitutional restrictions, it does so on different grounds than were presented in Bouquet.
Bouquet did discuss the question of whether retroactive application of amended section 5118 constituted an unconstitutional deprivation of the wife’s property rights, noting that retroactive application of this change in the law “denudes the wife of certain vested property rights.”9 To determine whether retroactivity offends the due process clause,
we consider such factors as the significance of the state interest served by the law, the importance of the retroactive application of the law to the effectuation of that interest, the extent of reliance upon the former law, the legitimacy of that reliance, the extent of actions taken on the basis of that reliance, and the extent to which the retroactive application of the new law would disrupt those actions.10 Emphasis added.
These tests are restated in many post-Bouquet cases and can be summarized as:
- Significance of State Interest: As demonstrated, merely affecting a property right generally does not justify retroactive application;
- Importance of Retroactivity: The change in Civil Code section 5118 cured a rank injustice in the law based on the suspect gender-based discrimination between husbands and wives;
- Legitimacy in Reliance upon Former Law: While stated, no court, including the Bouquet court, easily addresses this factor. If reliance upon the former law constitutes reliance upon an unfair provision, the reliance may not be legitimate;
- Extent to which Actions are Taken on the Basis of the Reliance: This factor calls for a factual determination, but no such determination was made in Bouquet. The burden to show reliance upon the former law rests with the person challenging it, and in Bouquet, wife was not able to demonstrate the extent to which she relied upon the prior law. This may be an important consideration in challenges to section 70’s retroactive application. Counsel seeking to rely on the bright line test from Davis should be prepared to show the extent of their client’s reliance on the prior law in the event a court is inclined to apply section 70 to a separation that occurred before January 1, 2017, under section 4(h);
- Extent to which Retroactive Application of the New Law Disrupts those Actions: As with the reliance factor, the person challenging prospective application of the new “totality of the circumstances” approach contained in section 70 should be prepared to present evidence on the potential for disruption of actions undertaken in reliance on Davis.
Applying the Bouquet analysis to the retroactivity of new section 70, the question is whether couples who organized their financial affairs under Davis assuming that they would not be separated as long as they continued living under the same roof had a legitimate interest in relying on Davis’s bright-line living-apart standard.11 Can section 70 be challenged as unconstitutional as applied, or does section 4(h) give the court sufficient discretion to decide that retroactive application of section 70 offends the rights of a particular spouse in a given situation? And by what standard will the new rule be applied to earlier separations?
The next serious challenge to the retroactive application of a family law statute came in response to a fairly common problem. What happens to the separate property contribution of a spouse who invests his/her separate property into an asset taken in joint names? Lucas12 permitted reimbursement to the contributing spouse only if he or she could demonstrate an agreement or understanding that his/her separate property was protected. Unsettled by this holding, the Legislature quickly enacted Civil Code sections 4800.1 (now Family Code section 2581) and 4800.2 (now Family Code section 2640).13
These statutes purported to overrule the portion of Lucas that denied reimbursement of any separate property contribution to the acquisition of a jointly titled asset in the absence of an agreement or understanding for reimbursement. Lucas subordinated any right of reimbursement to the title presumption absent evidence of an agreement or understanding. When the Legislature stepped into this issue and drafted proposed Assembly Bill 26 to enact section 4800.2, it asked the Law Revision Commission (LRC) to comment. The LRC ultimately issued a report noting that the new statute overruled the Lucas interpretation of the Civil Code section 5110 presumption and other community property presumptions by permitting a party to recover separate property contributions to the acquisition of the property through a reimbursement right at dissolution of marriage. The statutes went into effect on January 1, 1984. The legislation was classified as a legislative policy decision; there was little or no discussion of how retroactive application would impact parties’ property rights.
In response to these enactments, the Supreme Court held in Buol14 that section 4800.1 could not be constitutionally applied to cases pending on its effective date because so applied, the section impaired vested property rights without due process. The Buol court applied the reasoning from Bouquet and found that the impairment of property rights resulting from this retroactive application was not constitutional because it deprived parties of property rights that vested at the time of the acquisition of the property in question and that the change in the law could not permissibly be applied to adversely affect those rights at the time of the division of the asset. Moreover, held the court, under the Bouquet standards the enactment of section 4800.1 did not cure a rank injustice such as gender-based discrimination.
The Fourth District decided Lachenmyer15 after Buol, and observed that the rule derived from Addison and Bouquet prohibited legislative interference with vested property rights absent the need to protect the health, safety, morals, and general well being of the people.16 In Addison, the court permitted retroactive application of changes in the law concerning quasi-marital property while Bouquet upheld retroactive application of laws protecting the separate property rights of husbands with the same protection previously afforded only to the wife. In both of these settings, the Supreme Court was satisfied that retroactive application cured a rank injustice inherent in California property division laws.
In contrast, in Lachenmyer, the panel held that under Buol, the application of section 4800.2’s reimbursement right to separate property contributions made prior to its effective date would provide the contributing spouse with a “windfall to which he was not entitled when the community property interest was created,” and that the non-contributing spouse’s “vested community property interest not subject to reimbursement cannot constitutionally be impinged by retroactive application of section 4800.2.” In other words, the non-contributing spouse had a vested right in NOT having to reimburse the other for the contribution, and would lose property if required to do so.
The Lachenmyer court considered how retroactive application of the statute would unsettle the actions of parties that had taken action presumably in reliance on the former state of the law. As applied retroactively, the statute would change the rules by which those acquisitions of property were analyzed and divided. The Lachenmyer court determined that retroactive application of the reimbursement rights under section 4800.2 did nothing to protect the state’s interest in a fair division of the marital estate. It observed:
Retroactive application of section 4800.2 only minimally serves the state interest in equitable division of marital property in cases such as this where the character of the property as community property is undisputed and the sole question is reimbursement. The section changes the rules of the game by adding a writing requirement with which it is impossible to comply and which the Supreme Court deemed constitutionally infirm in the context of section 4800.1 in Buol. The section’s due process violation is compounded by the reversal of the presumption itself and the new requirement of an agreement for nonreimbursement where none at all was required before. This makes for a stronger case than in Buol where retroactive application of section 4800.1 would have vitiated the parties’ oral agreement establishing the house as separate property, which the trial court found to be valid and enforceable under existing law. (Buol, supra, 39 Cal.3d at p. 763.) Section 4800.2’s reversal of the presumption of gift and its addition of the requirement of a writing to waive the right to reimbursement serve to make the new 4800.2 presumption more conclusive when applied retroactively than that of 4800.1. (See Buol, supra, at pp. 757‑763.)17
In Fabian, the high court commented on the history of section 4800.2’s enacting legislation, stating that the section was intended to provide a fair result by reimbursing a party’s separate contributions regardless of when those contributions were made, as long as the court proceeding occurred after the enactment date.18 The Fabian court found this “time of division of property” rule undermined a vested property right based on the “time of acquisition.”19 For this reason, it deemed section 4800.2 unconstitutional if applied retroactively to transactions occurring before January 1, 1984, its effective date. The case was “pending” for this purpose if the issue had not yet been adjudicated, if the court expressly reserved jurisdiction to make the adjudication, or if the adjudication was still subject to appellate review.
The Fabian court denied retroactive application of section 4800.2, holding what Lachenmyer had—that because of the state of the law at the time the contribution was made, wife had a vested property interest in the asset without reimbursement and could not be deprived of that interest by subsequently-enacted legislation absent some compelling state interest, which was lacking. In sum, by applying a different set of criteria for division of property retroactively, a party was deprived of a property right for reasons that could not withstand scrutiny, and the situation was made even more unfair by the retroactive application to facts that had been determined by the trial court based on the Lucas standard, and which, as urged by the husband, should be reviewed under section 4800.2.
From these cases, it is plain that when the Legislature acts to cure what it thinks is a rank injustice in a family law property decision such as Lucas, or a property-impacting decision, a reviewing court will not necessarily agree. Lucas only determined the parties’ property rights based on the law as found by the court. Not surprisingly, in Buol and Fabian the court did not find that a rank injustice was in fact being cured by the Legislature’s attempt to overturn Lucas; they held that retroactive application only minimally served to advance the state’s interest in property division upon dissolution (citing Buol, 39 Cal. 3d at 761) and refused to retroactively apply sections 4800.1 and 4800.2. To state it bluntly, to apply the statutes retroactively, the high court would have had to admit that its decision in Lucas perpetrated a rank injustice. Obviously, it was not willing to do so.
Does the same logic apply to the retroactive application of section 70, which was intended to overturn Davis where the case was tried based on the state of the law at the time of trial? More to the point, if a family law court applied the section retroactively under section 4(c), would the Supreme Court be willing to reverse that ruling and prohibit retroactive application if doing so would require it to hold that its decision in Davis had perpetrated a rank injustice that section 70 cured? The Fabian court observed:
Retrospective legislation, however, may not be applied where such application impairs a vested property right without due process of law. (Buol, supra, 39 Cal.3d 761.) As was true in Buol, the unconstitutional impairment in the present case is manifest.
The legislative history reveals two concerns: the need for a community property presumption affecting joint tenancy property to aid the courts in the division of marital property, and an unexplained desire to abrogate the rule, attributed solely to Lucas, supra, 27 Cal.3d 808, that precluded recognition of the separate property contribution of one of the parties to the acquisition of community property. (Sen. Com. on Judiciary Rep. on Assem. Bill No. 26 (July 14, 1983) 3 Sen. J. (1983 Reg. Sess.) pp. 4865‑4867.) Implicit in the later concern appears to be a legislative judgment that it would be fairer to the contributing party to allow separate property reimbursement upon dissolution.
This perceived need for reform does not, however, represent a sufficiently significant state interest to mandate retroactivity. The rank injustice of former law that we identified in Bouquet (former law made only the wife’s postseparation earnings separate property) and in Addision (lack of protection for the innocent spouse prior to passage of quasi‑community property law) is not apparent. Prior to adoption of section 4800.2’s right to reimbursement, the spouse contributing separate property to the acquisition of a community asset could readily preserve the separate property character of the contribution by agreement, either written or oral, with the other spouse. Absent such an understanding, it could reasonably be assumed that by investing in a community asset, the contributing spouse intended to bestow a permanent benefit on the community. In leaving the agreement option open to the contributing spouse, prior law was not inherently inequitable or unfair.
Absent patent unfairness in the former law, retroactivity of section 4800.2 is wholly unnecessary. As noted in Buol, the record is silent as to why the Legislature sought to make the statute applicable to those dissolution proceedings already underway at the time of enactment. (39 Cal.3d at p. 761.) We find no discernible benefit to the state’s interest in the equitable dissolution of the marital partnership in such retroactivity.
The disruptive effect of retroactive application of this type of statutory change is keenly felt in this area of the law. “The net effect of retroactive legislation is that parties to marital dissolution actions cannot intelligently plan a settlement of their affairs nor even conclude their affairs with certainty after a trial based on then applicable law.” (Buol, supra, at p. 763, quoting In re Marriage of Taylor (1984) 160 Cal.App.3d 471 (Sims, J. dis.).) In the interest of finality, uniformity and predictability, retroactivity of marital property statutes should be reserved for those rare instances when such disruption is necessary to promote a significantly important state interest.20
It is entirely possible that the high court would be equally as reluctant to hold that Davis perpetrated a “patent unfairness” that was cured by section 70. That would make it unlikely that it would rule against the retroactive application of section 70 under section 4(c) or uphold a trial court’s denial of retroactivity under section 4(h). In short, however the retroactivity issue is presented, it is more likely that the Supreme Court will uphold retroactivity than deny it.
After Fabian, the Legislature attempted to articulate a basis for retroactivity when it modified section 4800.1 by adding codified language of intent calling for uniform treatment of property by returning to the separatizer the property regardless of the date of acquisition of the property. This attempt failed. This development, and the questions it left unanswered, were summarized by the Fifth District in Griffis.21 Griffis followed Fabian and held that regardless of what the Legislature said or intended, the spouse of a party who made a separate property contribution to a community property acquisition prior to January 1, 1984, had a vested interest in the property being community without being subject to a reimbursement right, and that there was no state interest here compelling enough to override that interest. Griffis focused the analysis on when property rights accrue and recited the axiomatic principle that rights generally accrue at the time of acquisition. Is the law at the time of acquisition different in the date of separation setting?
The most recent discussion of the issue occurred in Heikes, in which the Supreme Court once again held that the court could not constitutionally apply Family Code section 2640(b) to separate property contributions made prior to January 1, 1984, the effective date of former Civil Code section 4800.2. It discussed Buol and Fabian as well as Griffis and chastised the trial court for failing to follow them and for instead finding a factual distinction because the dissolution proceeding had been commenced after January 1, 1984, although all of the contributions at issue were made before that date. It concluded that although the Legislature had amended the section to state a compelling state interest in applying the section retroactively,
(t)he Courts of Appeal, however, held that even the expanded legislative recitals in the new version of section 4800.1 were insufficient to demonstrate the compelling state interest found lacking in Fabian, supra, 41 Cal.3d 440, 224 Cal.Rptr. 333, 715 P.2d 253. Accordingly, they continued to reject claims for reimbursement under section 4800.2 for contributions to community property made from separate property before January 1, 1984, as violative of due process, even in proceedings that had commenced after that date and had not culminated in any judgment before January 1, 1987.
Apart from the case now under review, the foregoing six published decisions appear to be the only ones that have considered the constitutionality of requiring reimbursement of pre–1984 separate property contributions to community property under the post-Fabian modifications of section 4800.2. All six hold that retroactive application of the reimbursement requirement would violate due process. Yet, the present Court of Appeal refused to follow those decisions because of what it correctly characterized as “dictum” by this court in In re Marriage of Hilke, supra, 4 Cal.4th 215, 14 Cal.Rptr.2d 371, 841 P.2d 891 (hereafter Hilke).22
Among other things, the panel said that “to let the retroactive application of section 4800.2 depend upon factual variations in particular parties’ actual reliance on prior law would unacceptably undermine the public interest in establishing uniform, predictable rules for the division of marital property.” The same argument can be made with regard to retroactive application of section 70.
Prior to January 1, 2017, under Davis, parties are generally not “living separate and apart” unless they live in separate residences absent application of a footnote 7 exception for couples who continue to reside in the same residence. As of January 1, 2017, under section 70, the court has discretion to hold exactly the same thing, but also has the discretion to hold that they were “living separate and apart” as a result of other considerations even though they were still living in the same residence. The core question is whether or not this change in the law, if applied to cases pending as of January 1, 2017, operates to deprive a party of vested property rights without due process, or whether this is simply an expansion of the trial court’s discretion to consider various factors.
If the parties’ separation date under Davis and its bright-line determination would be January 1, 2015, but based on the retroactive application of section 70, the trial court had discretion to determine the date of separation was an earlier date, say January 1, 2014, while they were still living in the same residence, does one spouse have property rights that are substantially changed and that cannot be preserved or protected by the parties themselves? Moreover, should families be subject to different rules concerning how a particular judge decides the date of separation based on his/her exercise of discretion?
Parties typically try the date of separation issue because of the financial impact of determining when the community property acquisition presumption terminates. Do property rights vest under the law differently for one family as compared to another based on which rule the trial court decides to apply? Is this uniform treatment of property rights permissible simply because the Legislature shields it under section 4(h)? There are presently no answers to those questions.
No other issue in family law better defines the status of a relationship and which presumption will apply than the concept of date of separation, because it affects all families regardless of their economic status or the size, extent, and complexity of their community estate. Acquisitions between the date of marriage and the date of separation are presumptively community property and acquisitions after the date of separation are not. These core concepts apply to things as small as a monthly contribution to a 401(k) or credited service to a defined benefit pension plan and to things as significant as an ownership interest in a family residence or as complex as a stock option. Moreover, property rights vest (in the family law sense of “vesting” as not subject to a condition precedent) at the time of acquisition.
Buol and Fabian both decried the attempt to change the rules concerning events that happened at an earlier time (the impact of retroactivity). Also, the Davis court simply interpreted legislative intent in requiring that spouses “live separate and apart” and thus announced what the law had always been, namely that physical separation was the hallmark of living separate and apart. By moving away from the bright line test Davis announced was the law by enacting section 70, the Legislature is redefining the method by which courts determine if a couple is separated by changing the analysis. It defines “date of separation” as
the date that a complete and final break in the marital relationship has occurred, as evidenced by both of the following: (1) The spouse has expressed to the other spouse his or her intent to end the marriage. (2) The conduct of the spouse is consistent with his or her intent to end the marriage.
Expressing the intent to end the marriage to the other spouse has always been one of the factors cited by the courts, but it has never been required as it will be after January 1, 2017. Arguably, this constitutes a change in the requirements for establishing a separation date, but does that requirement, by itself, alter a party’s property rights?
It is easy to imagine how parties acted differently in reliance upon Davis. For instance, a party is concerned about whether she is separated from her spouse because her husband remains in the residence. She is ambivalent because they are not getting along, but she does not want to be separated because he has a substantial upcoming bonus. She consults with counsel and learns that if they are living under the same roof, it is extremely likely under Davis that the court will determine they are not living apart and they are not separated. Because there is no other reason to press him to move out (such as domestic violence, substance abuse, or other mistreatment of her or the children), she abandons the plan to ask him to move out. She relied upon the state of the law under Davis and did not press her husband to move out, preferring instead to enjoy the benefit of the presumption that the bonus would be characterized as community property.
At trial after January 1, 2017, the court may choose to apply section 70 retroactively or choose to refuse to do so under section 4(h). Its decision will hugely impact Wife in that if Davis applies and not section 70, the bonus would be community property. If section 70 applies retroactively and the other factors indicate an earlier separation date notwithstanding that the parties remained under the same roof, the bonus would be entirely Husband’s. How is this materially different from the results eschewed by the Buol and Fabian courts in applying the Bouquet test of reliance upon the former law? Indeed, this is the very disruptive about-face discussed by the Fabian court in denying retroactive application of section 4800.2 because of the effect of “turning the tables” on a party who relied on the former law.
On the other hand, parties can use the Davis bright-line rule as a weapon. Absent a residence exclusion order, nothing prevents a spouse who learned about Davis from moving back into the family residence in 2016 for the sole purpose of “re-establishing” the community and later arguing that the other spouse’s acquisitions for what may have been years of living apart now belong to both of them. In this action, the other spouse may see an opportunity for a reconciliation, not knowing the other’s design, or the “moving in” spouse may actively mislead the other into believing they are reconciling. Given that there can be only one date of separation and no interim separations,23 a court prohibited from applying section 70 retroactively would be unable to address the inequity caused by the spouse’s intentional actions taken only to gain an interest in property while the other spouse remained in ignorance of Davis, which requires this result. Is it a breach of fiduciary duty to intentionally “resume marriage” when the existing law is clear that by doing so, he or she gains property? Probably not, particularly given the strong public policy in favor of marriage.
The essence of the argument for or against retroactivity is whether the “new law” actually changes property rights, or whether that is simply a consequence of a procedural change. The law under Davis defined the requirements for “separation”—move out of the residence and objectively manifest an intention to be living separate and apart—for parties who wanted to avail themselves of the protection afforded by separation (i.e., the cessation of presumptive increase in the community estate for acquisitions after separation). Section 70 does not change the parties’ rights to an equal division of the community estate or the protection of their separate property. Rather, it changes the factors that the court can use in determining when the community property presumption no longer applies.
In reality, all that section 70 does is extend the court’s discretion to hold that “residing together” is only one factor, rather than a threshold requirement, when determining “separation.” Does the extension of the trial court’s discretion deprive the parties of vested property rights analogous to mandating reimbursement for separate property contributions to community assets when, under prior law, no reimbursement was permitted absent an agreement? Arguably not.
What remains unchallenged in any case is whether the trial court’s discretion under section 4 has the potential to result in different treatment of different families with the same facts and if so, whether that is reason enough to preclude retroactive application. By what standard is this measured? Velez24 discussed the retroactive application of statutes concerning domestic partnership; and it reminded us that: ‘“A right is ‘vested’ when it is ‘already possessed’ or ‘legitimately acquired.’”25 Property rights presumptively vest as community or separate property based on the date of separation. “The character of property as separate or community is determined at the time of its acquisition.” See v. See, 64 Cal. 2d 778, 783 (1966).
For a variety of reasons, parties often plan when they will separate long before the actual separation. Such reasons include the property example given above, the impact on the children or other family members, or an intervening family crisis such as a child’s illness, a spouse’s illness, or a death in the family. Couples have an interest in intelligently planning the settlement of their affairs regarding their financial and relational affairs with the same certitude about their date of separation. Given the social interest in finality, uniformity, and predictability, retroactivity of family law statutes should be reserved for those rare instances when such disruption is necessary to promote a significantly important state interest. Arguably there is no such interest in applying section 70 to couples who separated before January 1, 2017. Thus, trial courts should avoid the temptation of “being a rule unto themselves” by applying section 70 retroactively under section 4(c).
On the other hand, the Legislature enacted a presumption in favor of retroactivity in section 4(c). Is that sufficient notice to parties—who are “presumed to know the law”26—that the rules can change at any time? It appears as if the Legislature intended that the longstanding retroactivity analysis would proceed by way of an argument under section 4(h), but whether such a challenge will be successful, and upheld on appeal, remains to be seen.
As someone once said, there are no easy answers, only intelligent choices. Any time the Legislature changes the rules, it is our job to test those changes and seek to apply or not apply them according to the facts and our client’s interests. The enactment of section 70 was widely supported by the family law bar, if only because the court’s discretion in sensitive issues of marital separation is seen as better than a bright-line rule. Such rules may make outcomes easier to predict, but do not necessarily further justice. How the courts apply the new section remains to be seen, but it will surely be interesting to watch.
* The opinions expressed herein are for educational purposes; and are not an expression of how a judge would or should rule on a particular issue.
1 In re Marriage of Norviel, 102 Cal. App. 4th 1152 (2002).
2 Further unspecified statutory references are to the Family Code.
3 In re Marriage of Fellows, 39 Cal. 4th 179 (2006).
4 In re Marriage of Fabian, 41 Cal. 3d 440 (1986).
5 In re Marriage of Bouquet, 16 Cal. 3d 583 (1976).
6 In re Marriage of Heikes, 10 Cal. 4th 1211 (1995).
7 Addison v. Addison, 62 Cal. 2d 558 (1965).
8 Among other things, the court recognized that the date of separation clearly impacted property rights.
9 Bouquet, 16 Cal. 3d at 592.
10 Id. at 593 (emphasis added).
11 A separate question is whether or not a party has a fiduciary duty to clearly announce his or her intention to be separated while still living together. Under what circumstances, and to what extent, the failure to state an intention to be separated constitutes a breach of a fiduciary duty is beyond the scope of this article, but it does raise a legitimate question for parties, and most certainly for counsel who are advising parties who continue to reside under the same roof.
12 In re Marriage of Lucas, 27 Cal. 3d 808 (1980).
13 A robust discussion of the property provisions of section 4800.2 and how those differ from changes in section 2640 is beyond the scope of this article. Readers are invited to consider Gray & Wagner, Complex Issues in California Family Law, Vol. D, Tracing Separate and Community Funds, § D3.05 (Matthew Bender 2016).
14 In re Marriage of Buol, 39 Cal. 3d 751 (1985).
15 In re Marriage of Lachenmyer, 174 Cal. App. 3d 558 (1985).
16 Bouquet, 16 Cal. 3d at 592.
17 Lachenmyer, 174 Cal. App. 3d at 563.
18 S. Comm. on Judiciary Rep. on Assem. B. No. 26, 3 S. Journal (1983).
19 In the date of separation setting, the time of acquisition is determined based on the date of separation; and our Family Code clearly demarks the presumptive termination of community property acquisitions based on the date of separation.
20 Fabian, 41 Cal. 3d at 447-450.
21 In re Marriage of Griffis, 187 Cal. App. 3d 156 (1986).
22 Heikes, 10 Cal. 4th at 1221-22.
23 See Marriage of Baragry, 73 Cal. App. 3d 444, 448 (1977). (“The question is whether the parties’ conduct evidences a complete and final break in the marital relationship.”).
24 Velez v. Smith, 48 Cal. App. 4th 1154 (2006) (review denied). Velez was severely criticized for failing to extend the doctrine of putative spouses to domestic partners. See In re Domestic P’ship of Ellis, 162 Cal. App. 4th 1000 (2008), disapproved of on other grounds by Ceja v. Rudolph & Sletten, Inc. ,56 Cal. 4th 1113 (2013).
25 Velez, 48 Cal. App. 4th at 1171 (citations omitted).
26 See Hale v. Morgan, 22 Cal. 3d 388, 396 (1978). (“[A] constitutional distinction between those persons who have actual knowledge of a law and those who do not, directly offends the fundamental principle that, in the absence of specific language to the contrary, ignorance of a law is not a defense to a charge of its violation.”).