## Facts

- A husband and wife married in 1939 and divorced after 29 years; the trial court granted a divorce to both on grounds of extreme cruelty.
- During the marriage, the husband inherited approximately $1.63 million in cash and securities and primarily managed that separate estate rather than working for wages.
- The husband actively traded securities and pursued real-estate ventures, including development of two resort properties (Cabana Holiday I and II), with overall performance described as poor relative to a reasonable passive return.
- Family living expenses throughout the marriage were paid from income generated by the husband’s separate property.
- The trial court found the only community property at trial was a $38,000 promissory note (awarded to the wife) and found all other property to be the separate property of the party possessing it.
- The court awarded the wife spousal support and ordered child support while children were in her care.
- The wife appealed the property characterization and allocation; after her death, the executor of her estate was substituted as appellant.

## Issues

1. Whether gains from managing a spouse’s separate investment estate during marriage must be allocated to the community as attributable to the managing spouse’s skill, efforts, and labor.
2. Whether, in allocating any community component, the court may treat family living expenses as first chargeable against community funds even when expenses were actually paid from separate-property income.
3. Whether substantial evidence supported classifying specific assets (including resort properties and certain bonds) as the husband’s separate property, and whether any conduct showed an intent to transmute separate property into community property.

## Decision

- The Supreme Court of California affirmed the interlocutory judgment in full.
- The court upheld the finding that no net community property resulted from the husband’s management of his separate estate beyond the $38,000 note.
- The court approved charging family living expenses against any community component under the accounting approach used.
- The court held substantial evidence supported the separate-property classification of the challenged assets, including the resort properties, and rejected claims of transmutation for lack of clear intent.
- The court found no abuse of discretion in the support and custody-related rulings challenged on appeal.

## Legal Principles

- When separate capital and a spouse’s marital efforts both contribute to economic results, courts may allocate between separate and community property using Pereira, Van Camp, or a tailored variation, selecting the method that achieves substantial justice under the facts.
- Under Pereira, a reasonable return on separate capital is allocated to separate property and any excess is treated as community; where actual results do not exceed a reasonable passive return, the community may take nothing from the increase.
- Under Van Camp, the community is credited with the reasonable value of the managing spouse’s services, and from that amount family living expenses may be deducted; only any surplus is community property.
- In reconstructing marital accounts, courts may presume family living expenses are paid first from community funds where community income is available, even if expenses were in fact paid from separate-property income; this may eliminate any net community accumulation.
- Separate property is not converted to community property absent clear evidence of intent or agreement to transmute; spousal participation in ventures or use of separate-property income for family support is insufficient by itself.
- On appeal, property classifications supported by substantial evidence will be upheld, and appellate courts will not reweigh conflicts in the evidence.

## Conclusion

The court affirmed the divorce property division, holding that the husband’s inherited estate and related acquisitions remained separate property because the evidence did not show community-attributable gains beyond a reasonable return, any community component would have been consumed by family expenses, and there was no clear intent to transmute separate assets into community property.


Beam v. Bank of Am., 6 Cal. 3d 12 (Cal. 1971)