Opinion ID: 1427701
Heading Depth: 2
Heading Rank: 4

Heading: Calculation of community and separate property interests in a marital residence after taking into account improvements.

Text: In cases not involving improvements, the district court will calculate the final equity shares as stated in Part I of this opinion. Additionally, where the residence is acquired solely by community or separate property, there is no modified Moore apportionment issue and improvements will generally be measured by simple reimbursement. The present case, however, presents a hybrid problem: the residence was acquired by a mixture of community and separate property, and there were community improvements to a separate property residence. In these hybrid cases, the district court may, in its discretion, order the community or separate property reimbursement shares to be paid in at least two ways. First, the district court may award the party who makes the improvements other community assets of a value which offsets that party's reimbursement share. If the district court here ultimately chooses this approach, the parties' interests in the home equity will be calculated by the method set forth in Part I of this opinion. Second, the court can award the reimbursement share from the proceeds of sale of the residence before applying the modified Moore formulae. We recognize that, in the present case, the residence will not actually be divided until some future date, by which time the residence may have appreciated further and Kenneth will presumably have made several more mortgage payments from his separate property. Nevertheless, by way of example, we apply the second method for paying out reimbursement to the facts of this case as set forth in Part I of this opinion; we stress that this example will differ from the final result in this case, because the residence will not actually be divided until some time in the future. First, $62,707 would be paid off the top to the community as reimbursement for the money expended for improvements. Next, the modified Moore formulae would be applied to the remaining value of the residence. The remaining market value of the house here, including the mortgage thereon, would be $152,293 ($215,000 minus the $62,707 in improvements). Subtracting the purchase price of $36,500 from $152,293 gives us the remaining appreciation of $115,793. Applying Kenneth's 18.97% appreciation share to the remaining appreciation (18.97% X $115,793) would give Kenneth an interest in the remaining appreciation of $21,965.93. Adding to this Kenneth's separate property contributions of $3,537 fixes Kenneth's final separate property interest in the remaining equity value of the house at $25,502.93. The community interest in the remaining value of the house would be calculated by applying the community property appreciation share of 81.03% to the remaining appreciation (81.03% X $115,793), giving us $93,827.07. To this must be added the community property contributions that reduced the loan in the amount of $14,463, for a final community share in the remaining value of the house of $108,290.07. In summary, the total community interest in the residence, if divided at the time of trial, would be $170,997.07, representing $62,707 in reimbursement for community improvements plus the $108,290.07 community interest in appreciation. The total separate property interest would be $25,502.93. The total community interest of $170,997.07 stated in our example is not vastly different from the community interest in the home equity reached by the district court (approximately $146,392). Additionally, the residence itself will not actually be divided until some time in the future. For these reasons, we do not anticipate that the district court will need to readjust its initial community property division in any significant manner due to this opinion. We further anticipate that the court will eventually allocate the property shares in the residence according to the second method of paying out the improvements just discussed. Nevertheless, we remand this case to the district court to permit readjustment of the initial division of property if the court deems this necessary in light of this opinion. At the future time when the residence is actually divided, the district court should utilize the modified Moore formulae explained in this opinion.