BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Hannah-Beth Jackson, Chair 2015-2016 Regular Session SB 1255 (Moorlach) Version: February 18, 2016 Hearing Date: May 3, 2016 Fiscal: No Urgency: No NR SUBJECT Dissolution of marriage: date of separation DESCRIPTION This bill would define "date of separation" for purposes of the Family Code as the date that a complete and final break in the marital relationship has occurred, as evidenced by a spouse's expression of his or her intent to end the marriage and conduct that is consistent with that intent, and would update the Family Code to reflect this definition. BACKGROUND California is a community property state. Except as otherwise provided by statute, community property is generally defined as all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in California. (Fam. Code Sec. 760.) Under a community property system, one-half the earnings of each spouse is owned by the other spouse. Separate property, which is property acquired before marriage, by gift or inheritance, or after the spouses are living "separate and apart," is the separate property of that spouse. (Fam. Code Secs. 770-771.) Unlike a determination of spousal support where courts are given certain amounts of discretion to create a fair award based on the circumstances of the parties (see Fam. Code Sec. 4320), the disposition of separate and community property are strictly governed by statute. Existing case law over the past 140 years (with the exception of the Supreme Court's decision In re SB 1255 (Moorlach) Page 2 of ? Marriage of Davis (2015) 61 Cal.4th 846) has required that to qualify as living "separate and apart" a party must have no intention of resuming marital relations and that the conduct of the party evidences a complete and final break in the marital relationship. Davis and In re Norviel (2002) 102 Cal.App.4th 1152 are the only published cases to analyze the circumstances of a party claiming to be separated while living in the same residence, and both cases concluded that living in separate residences is a threshold requirement. In Davis, the husband argued that spouses cannot be living "separate and apart" while maintaining a single residence. He contended that this bright-line rule served to provide clear guidance to judges and offered predictability to litigants. Inversely, the wife argued that the court should instead consider the totality of the circumstances when determining the date of separation based on the conduct of the spouse(s) "evidencing a complete and final intent to part ways with no plan of resuming the marital relationship, even if at that time they are still living in the same residence." (Davis at 850.) Both parties claimed that the other spouse's proposed interpretation was unworkable and would lead to harsh results. The California Supreme Court reversed the lower court's decision, thereby affirming Norviel which held that "living in separate residences is an indispensable threshold requirement for finding that spouses are "living separate and apart" for the purposes of determining what is separate, and not community, property. (Davis at 865.) Chief Justice Tani Cantil-Sakauye, writing for a unanimous Supreme Court, emphasized both the plain language and historical interpretations of the statute, and the public policy considerations behind the statutory language, namely that a bright-line rule protects the lower earning spouse. This bill, seeking to restore the discretion that many courts exercised in determining the date of separation, would abrogate both the Davis and Norviel cases, and would define "date of separation" as the date that a complete and final breakdown of the marital relationship has occurred, as evidenced by a spouse's express intent to end the marriage, coupled with conduct consistent with that intent, and would require the court to consider all relevant evidence when determining a date of separation. SB 1255 (Moorlach) Page 3 of ? CHANGES TO EXISTING LAW Existing law provides that, except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in California is community property. (Fam. Code Sec. 760.) Existing law provides that the earnings and accumulations of a spouse while living separate and apart are the separate property of the spouse. (Fam. Code Sec. 771.) Existing law provides that the community estate is liable for a debt incurred before or during marriage, which does not, subject to agreement, include any period during which the spouses are living separate and apart. (Fam. Code Secs. 910, 914, and 4302.) This bill would define "date of separation" to mean the date that a complete and final break in the marital relationship has occurred, as evidenced by the spouse's expression of his or her intent to end the marriage and conduct that is consistent with that intent. This bill would require a court to consider all relevant evidence in determining the date of separation. This bill would recast provisions of the Family Code in terms of "date of separation" rather than any period in which spouses are "living separate and apart." This bill would state that the Legislature intends to abrogate In re Marriage Davis and In re Marriage Norviel. COMMENT 1.Stated need for the bill According to the author: Currently, under the California Family Code, in order to establish date of separation in anticipation of dividing property through divorce proceedings, a couple must demonstrate that they are "living separate and apart." In the recent case of In re Marriage of Davis (2015), the California Supreme Court ruled that in order to be living separate and apart, a couple must have separate residences. SB 1255 (Moorlach) Page 4 of ? The Court's ruling removes the ability for a divorcing couple to continue to co-parent their children in the same house during the divorce proceedings and still keep their finances separate. This forces at least one spouse to find and pay for alternative housing in order to establish a date of separation earlier than the final court order date at a time when families are trying to closely monitor their spending and transition the family unit through a trying time. Often, one spouse cannot afford to move to a separate residence, and can only afford such a move once a divorce is finalized. This bill would remedy this situation, ensuring nobody is forced to either continue in a bad marriage, or face being thrown out in the streets. 2.This bill would require a court to evaluate parties' opposing evidence in determining a date of separation This bill would require a court to look at the particulars of a situation and determine a date of separation that reflects both a party's express intent and actions supporting that intent. If courts are required to determine the date of separation based on evidence, the parties may benefit from the court's ability to apply the facts of the case to the law and determine what is fair given the parties' unique circumstances. However, creating a rule which relies heavily on judicial discretion encourages parties to litigate the facts of each case, which results in more litigation and higher attorney's fees. Money spent on these disputes often comes out of the community estate, thereby reducing the award to both parties. In addition, discretionary rules arguably also open the door for manipulation of the facts. Unless a physical separation is required for a married couple to be "living separate and apart," one spouse may be able to manipulate the finances by "back-dating" the date of separation upon filing for dissolution to a date during which the parties continued to reside together but the marriage was rocky and difficult. Thus the higher-earning spouse may continue to reap the benefits of living in the home - eating meals, doing laundry, and receiving mail - and then years later, upon filing for dissolution, refer back to other, more subtle conduct as evidencing a breakdown in the marriage and claim that all earnings form that day forward are separate. (See, e.g., In re Marriage of Baragry (1977) 73 Cal.App.3d 444, 446-448.) SB 1255 (Moorlach) Page 5 of ? The proposed legislation would also affect cases falling outside the Davis scenario (see Background). Specifically, existing law provides for a "period of separation" where the parties are living separate and apart and have the requisite intent to make a final and complete break. Nothing in the existing law, however, has been interpreted to foreclose the possibility of multiple periods of separation. For example, Family Code Section 4336 refers to "periods of separation" in determining whether a marriage is of long duration. By requiring that a court pinpoint a final break in determining a "date of separation," this bill could inadvertently prevent a court from finding multiple periods of separation. This could arguably require parties, who have separated but later reconcile, to account for all of their earnings and accumulations that they may have spent or given away, based on a genuine belief that they had the right to do so, during "separation." A party may also end up being liable for debts incurred by the other party during the period they believed that they were separated. This may have the unintended consequence of discouraging separated parties from reconciling, which is contrary to California's stated public policy of preserving marriages. Additionally, this bill would not account for "conditional separations," such as where one spouse separates in all respects not intending to return unless the other spouse corrects some undesired behavior (substance abuse, infidelity, gambling, inattention, etc.). 3.Judicial discretion versus bright-line rule This bill would abrogate both In re Davis and In re Norviel, which established a bright-line rule that required parties to live separately in order for income to be considered separate property. The bill would instead define "date of separation" to mean the date that a complete and final break in the marital relationship has occurred as evidenced by a party's express intent to end the marriage and conduct consistent with that intent. In 2002, the Sixth District in Norviel created a bright-line rule that parties cannot live together and yet be separated. The court specifically held that, in the absence of what it termed unambiguous, objectively ascertainable conduct amounting to a physical separation under the same roof, parties could not be deemed living separate and apart under Family Code Section 771 while they still lived in the same house. (Norviel at 1164.) Bright-line rules generally provide clear directives and SB 1255 (Moorlach) Page 6 of ? guidance to judges and a measure of predictability to attorneys and litigants. They create uniformity among courts in the dispensing of justice and the enforcement of statutes. Uniformity, in turn, encourages a general understanding that laws are applied fairly, without an undue subjectivity that would allow certain people to be treated differently than others. Pointing out practical benefits of bright-line rules in the Davis controversy, the petitioner argued that "family courts have enough difficulty trying to determine date of separation in contested cases without the standard for 'living separate and apart' to include couples who continue to live together. While the existence of separate residences is easy enough to prove, the existence of objective conduct evidencing 'a final break in marriage' and trying to determine when that occurred based upon the totality of the circumstances is not." (Petitioner's Opening Brief On the Merits (2014) WL 1674529, p. 6.) However, in support of this bill, the Executive Committee of the Family Law Section of the State Bar (FLEXCOM) argues that a bright-line rule creates harsh results. FLEXCOM writes: The Supreme Court's ruling removes the ability for a divorcing couple to continue to co-parent their children in the same house during the divorce proceedings and still keep their finances separate. This forces at least one spouse to find and pay for alternative housing in order to establish a date of separation earlier than the final court order date at a time when families are trying to closely monitor their spending and transition the family unit through a trying time. Often, one spouse cannot afford to move to a separate residence, and can only afford such a move once a divorce is finalized. This bill would remedy this situation, ensuring nobody is forced to either continue in a bad marriage, or face being forced out of the residence. While the reasoning noted by FLEXCOM supports a discretionary rule in a situation where both parties have adequate income to support themselves because both parties would be equally effected by the division of community property, a question remains as to whether a discretionary rule best protects a lower earning (or unemployed) spouse when the breadwinner decides to "separate" but remains in the home. A discretionary rule in this situation allows the breadwinner, who presumably has resources to attain an attorney, to backdate the "date of separation" without the knowledge or consent of the economically SB 1255 (Moorlach) Page 7 of ? vulnerable spouse. The further back in time the "date of separation," and the longer it takes to resolve the disputed "date of separation,"the more community property an economically vulnerable spouse stands to lose. Thus, if a divorce is not finalized until years later, the economically vulnerable spouse (who arguably contributed to the household with domestic activities and caretaking) may lose a significant amount of money that would otherwise have been community property and could have helped her establish a new residence after dissolution. At the same time, a discretionary rule would allow a court to protect a party against a spouse that refuses to contribute or to move out, and thereby drains the community estate. That being said, staff notes that the court in both Norviel and Davis did not foreclose on the possibility that a couple may live "separate and apart" even though they continued to share a residence. (See, e.g., In re Davis, fn. 7, stating: "Under the facts presented by this case, we have no occasion to consider, and expressly reserve the question, whether there could be circumstances that would support a finding that the spouses were 'living separate and apart,' i.e., that they had established separate residences with the requisite objectively evidenced intent, even though they continued to literally share one roof;" see also In re Norviel at 1164.) Ultimately, either approach will, in at least some situations, yield unfair or harsh results. As a matter of public policy, the Legislature should seek to approve the method by which fair and just results are most often achieved, taking into account the growing percentage of self-represented litigants in family law and the continuing stress on judicial resources. 4.Retroactivity This bill would apply retroactively to cases pending on January 1, 2017. Proponents argue that Norviel was an "outlier" and courts typically looked to a "totality of the circumstances" in determining the legal date of separation, and therefore retroactivity is necessary to provide uniform treatment to cases filed prior to the Supreme Court's decision in Davis through the enactment of this bill. As a matter of public policy, it is preferable to ensure that bills apply prospectively, so as not to change the outcome of SB 1255 (Moorlach) Page 8 of ? ongoing litigation in favor of one party. Looking specifically at marital property classification, applying this bill retroactively will affect thousands of cases and awards that would have otherwise been governed by the holdings in Norviel and Davis. Such retroactive application could unconstitutionally affect property rights. Given the concerns that arise with retroactive application of any bill, the Committee may wish to consider whether the bill should be limited to apply prospectively only. The following amendment would remove the retroactive language, as well as the language that would affect pending litigation. Author's amendment: Section 6 reads: This act shall apply to all cases filed on or after January 1, 2017. Support : American Academy of Matrimonial Lawyers, Southern California Chapter; Association of Family Conciliation Courts; Executive Committee of the Family Law Section of the State Bar; Family Law Section Beverly Hills Bar Association Opposition : None Known HISTORY Source : Author Related Pending Legislation : None Known Prior Legislation : None Known **************