Q. I have been occupying the home after my wife left over a year ago. I
pay all the interest-only mortgage, property taxes, and insurance with
no help from her. Does she owe me half of any of this?
A. You may be owed you something, but not necessarily one-half of what
you have paid out. This situation involves at least three potential legal issues:
- Epstein Credits
- Watts Credits
- Jeffries Credits
This particular Blog addresses your question in terms of Epstein's
- the next blog deals specifically with
Watts and Jeffries credits.
I have described
Epstein Reimbursements in another Blog. "Epstein credits" is a doctrine derived from
the case of
Marriage of Epstein (1979) 24 Cal.3d 76, 84-85. It holds that as a general rule, courts must
reimburse one spouse by crediting them on the community property 'balance
sheet' for their contribution of post-separation earnings, or other
separate funds (loans from parents or inheritances), made
after separation to pay pre-existing community obligations. This commonly occurs with credit
cards where there was a balance remaining when the parties separated,
that one or the other spouse pays after. Epstein's don't apply
to new debt on an old credit card account that was run up after separation.
Depending upon the parties' financial circumstances, it therefore
can make the
"date of separation" a more important disputed issue than elsewise. This rule is not limited
to credit cards but applies to almost any class of debt.
Courts may be unwilling to order this reimbursement if under the circumstances
it would be unreasonable for the paying spouse to have expected reimbursement.
In almost any conversation you might have with an opposing lawyer, they
will back down on demanding the offset UNLESS you derived some beneficial
use from it.
If there was an agreement that a party would not be reimbursed for these
payments, or if the paying spouse intended the payment as a gift, or if
the payment is made on account of a debt for an asset that the paying
spouse was or is exclusively enjoying, and the amount was not substantially
in excess of the value of that use, the Court may decline to order reimbursement.
This idea of the
value of use of some item of property that was acquired through a debt that continues
to exist after the date of separation underlies the concepts of
Watts credits and
Jeffries credits, and is obviously implicated in your question since you occupy
the house for which you seek credits and reimbursements. Few family court
judges will want to hear testimony about what the portions were that were
paid towards interest after the DOS, as opposed to principal, on the debt.
You are pretty much stuck with the principal amount due at separation
as the credit you can claim, even if principal plus interest for monthly
payments over that time period amounts to more - at least unless these
relative numbers are large. This creates unfair results in cases that
take years to resolve, but arguably the parties should have moved the
case to conclusion sooner.
So, Epstein's are almost always granted as to post-separation payments
for expenses, for goods and services, that didn't leave a tangible
asset behind that is now being exclusively enjoyed by only one of the
As an example of how this works if there is $15,000 owing Visa for that
trip to Hawaii, some groceries, and a child's school tuition at the
time of separation and one party pays it off or makes monthly installments
on the debt with their earnings or other separate property after that
date, a benefit has been conferred upon the community because a joint
obligation has been extinguished or reduced. That benefit must be equalized
by a payment to the payor of one-half the amount paid or a credit or set-off
against other property that gets divided. One-half is paid because the
paying spouse owed their half anyway. Any portion paid before the DOS
(date of separation) ordinarily will not be reimbursed.
This is generally true even if only one of the parties actually took the
trip to Hawaii, unless that trip was in breach of a marital or fiduciary
duty (if the husband snuck off with his paramour to Hawaii, an argument
exists that he should not be reimbursed for paying that portion of the
debt over the wife's objection).
Family Code section 2625 directs courts to award a debt incurred by one spouse to them alone if
debt was not "incurred for the benefit of the community."
Family Code section 2602 empowers courts to "award ... the amount the court determines to
have been deliberately misappropriated by the party to the exclusion of
the interest to any other party in the community estate." FC section
2625 is a powerful and much underused statute (many attorneys seem to
be unaware of it or try to bluff as though it didn't exist).
Compare this with a situation where a credit card was used to buy a dishwasher
that the paying spouse possesses or receives in the divorce - since they
are retaining a tangible asset it may not be fair to allow them to both
keep the asset and get reimbursed for one-half its costs. Applying Epstein's
can become fairly fact specific.
In situations involving use of a family residence or other tangible assets
that continue to exist after separation and which are used and enjoyed
by only one of the spouses, an Epstein analysis provides only a part of
the answer to the reimbursement question. In effect first the amount of
the Epstein reimbursements are determined, and then the question requires
a Watts analysis to determine under equitable principles whether it is
fair to actually order reimbursement and, if so, in what amount.
Hence, to resolve your issue you would begin by adding up the costs of
everything related to the house that is spent to preserve or protect the
asset. Property taxes are included, but utilities are not. The utilities
you used after the physical separation are your obligation anyway, because
they were not incurred during 'the marriage.'
(Please see the Blog Category "Physical Separation.") Mortgage payments and insurance are considered, and probably the pool
man or gardener as well.
Please continue on to the next blog for detailed information concerning
Epstein Credits and Fiduciary Duty Issues
Sometimes a spouse or domestic partner will raid the credit cards and take
cash advances or buy a new wardrobe, or fix a car, during the weeks prior
to separating. If it later appears that their intention was to stick the
other spouse for one-half of this expense, the presumption that this is
a community debt (because incurred during marriage) may be overcome and
so it may be assigned to the one spouse alone. It is not fair to hold
both parties responsible for debts incurred in anticipation of separation.
However, when one partner incurs a debt frivolously as opposed to recklessly
before separation, in a situation not amounting to a breach of fiduciary
duty - even over the prior objection of the other spouse - it is likely
to be equally divided and Epstein reimbursements ordered. Both spouses
have, under California law, equal rights of management and control of
the community property and community credit.
Courts in my experience are reluctant to find breaches of fiduciary duty
in Esptein situations unless the behavior was fairly egregious. Charging
10 pairs of shoes at Macy's a month before separation may not be viewed
as a big deal. If the debt was incurred in pursuit of an illegal activity
like supporting a drug habit or sex addiction, many judges are less reluctant
to declare a breach.
To illustrate another twist, if the credit card was used to pay the spouse's
tuition expense instead of a child's schooling, as in my example above,
it may also be unfair to charge the non-schooled parent with one-half
the tuition portion of the credit card balance. A court is likely to look
at whether this schooling benefited the community in some way before splitting
that debt between the parties - i.e., because of the schooling did the
student spouse earn more money which was then contributed to the community
standard of living and so confer a benefit on both?
Pure student loans are usually awarded to the party who incurred the debt
as their separate property obligation.