Opinion ID: 1427701
Heading Depth: 2
Heading Rank: 3

Heading: Apportionment of community property improvements to a separate property residence.

Text: Having classified the improvements as community property, we must now decide how to apportion them. Apportionment of improvements must be analyzed separately from the apportionment of home equity pursuant to the modified Moore standard. The community property improvements to Kenneth's separate property residence raise a new apportionment issue: should these contributions toward improvements be presumed gifts, be measured by simple reimbursement or be measured by some other method which gives credit for appreciation due to the improvements? We conclude that in most cases simple reimbursement without interest is the appropriate measure for both separate and community property improvements. Other legal authorities support the establishment of a reimbursement measure for both separate and community property improvements. While they do not agree on the precise measure of reimbursement, several courts have required some compensation to the community for community property improvements to separate property. See Portillo v. Shappie, 97 N.M. 59, 636 P.2d 878 (1981); Elam v. Elam, 97 Wash.2d 811, 650 P.2d 213 (1982); Fisher v. Fisher, 104 Idaho 68, 656 P.2d 129 (1982); Honnas v. Honnas, 133 Ariz. 39, 648 P.2d 1045 (1982). We reject the rule that community property improvements to separate property themselves become separate property. But see In re Marriage of Camire, 105 Cal. App.3d 859, 164 Cal. Rptr. 667 (1980). We further note that California recently enacted a statute establishing the principle of reimbursement of the separate property for separate property contributions to community property. See Cal.Civ. Code § 4800.2 (West Supp. 1989). Although this case does not involve separate property improvements to community property, we note that we see no good reason why the reimbursement measure ought not apply to separate property improvements to community property as well. In most cases we believe reimbursement will be a fair and adequate measure of the separate or community property contribution. Common experience informs us that, in most cases, improvements add little to the market value of a residence above the cost of the improvement. Indeed, the cost of improvements to residential housing often exceeds any increase in the market value of the residence attributable to the improvements. Moreover, in this case, both separate and community property already have shared in any added market value attributable to the improvements, based on application of the apportionment formulae applied above. While reimbursement is the general rule, we note that in some cases reimbursement may not be the appropriate measure, and the district court may deviate from the reimbursement measure where necessary to effectuate a proper apportionment. For example, where the improvements actually decrease the value of the property, reimbursement may be too generous a measure. Alternatively, reimbursement may be too stingy a measure where the vast bulk of appreciation is due to the improvements. This may be the case, for example, when community funds are used to substantially renovate or rebuild a dilapidated residence, or when community funds pay to construct a house on formerly unimproved separate real property. In such cases, an appreciation share may be the fairest measure of the community or separate property improvement contribution. If a party can prove that the appreciation is almost exclusively due to improvements, and not to market forces, a court may in its discretion apportion this appreciation entirely to the contributing property. Additionally, if the improvement is purchased with credit and both separate and community property contributions are made to the improvement, apportionment of interests in the improvement would be possible based on a separate application of the formulae stated above. This case-by-case approach is consistent with the well-reasoned opinion of the New Mexico Supreme Court in Portillo, supra, and this approach furthers our overriding goal of equitable divisions of marital property. In the present case, however, there is no evidence that the appreciation of the Wedekind residence was due almost exclusively to the improvements, and the improvements were not purchased on credit with both separate and community property contributions. Accordingly, the proper measure of compensation for the improvements in this case is simple reimbursement. Section 4800.2 of the California Civil Code specifies the scope and precise measure of reimbursement of separate property for separate property contributions to community property. We adopt the rules stated in Section 4800.2 for community property contributions toward improvements of separate property; we believe that the same rules should apply to separate property contributions toward improvement of community property. Specifically, reimbursable improvements do not include maintenance, tax, interest, insurance payments, or inflation adjustments. Reimbursement must not exceed the market value of the entire property at the time of division. Accordingly, in reaching the initial division of property in the present case the district court should have simply credited the community with full reimbursement in the amounts of $25,000 for the kitchen remodeling and $37,707 for the greenhouse. The district court should have done this separately and independently of the calculation of the parties' shares in appreciation.