Apportionment: Calculating Community Interest In Separate Property.

• Author: Walzer, Peter M.
• Position: Practice specialization

Apportionment the principle methods of determining a community interest in separate property businesses were established in the cases of Pereira v. Pereira (1909) and Van Camp v. Van Camp (1921). The doctrines established in these cases have been applied to a variety of assets. Pereira is often applied in cases where the principle engine of growth is the personal efforts of a spouse and Van Camp is usually applied where the engine of growth is either capital appreciation or market factors--or both.

The Pereira approach, which uses a calculation to determine the community property in the business, generally favors the community and the Van Camp approach, which requires no valuation and favors the separate property estate. In Beam v. Bank of America (1971), the Supreme Court of California declared that, in determining which method to use, the court must use the method that will achieve substantial justice. In other words, there is no bright line rule that determines which method a court should use. Rather, a court should look at each set of facts to determine what would be most equitable.

The Brandes Marriage

Nothing in Van Camp or Pereira precludes a court from using both methods in one case--which is exactly what happened in In Re Marriage of Brandes (2015). The court applied the Pereira method for the years that the husband's efforts were the primary factor in the company's growth. During the last years of the marriage, however, the court found that the growth of the company was chiefly attributable to factors other than the husband's personal efforts, and so allocation under the Van Camp approach was proper.

Mrs. Brandes argued that there was no basis for the court's use of a hybrid method and that use of this method did not achieve the "substantial justice" required by Beam. The appellate court, however, disagreed and ruled that all payments in excess of his reasonable compensation were his separate property.

Post-Brandes, trial courts may take a more nuanced view of community appreciation in a separate property business by applying this hybrid approach. It could be argued, for example, that a court could view each year individually, or that a determination could be made at varying phases of the businesses' growth.

A hybrid approach was proposed by George Norton and Jennifer F. Wald in their 1992 article, "Equitable Apportionment of a Separate Property Business" (Family Law News, State Bar of California Family Law Section Vol. 20, No. 2 (Summer 1997).

Norton and Wald suggest that an approach used in a 1945 United...