## Facts

- Thomas M. Shea served in the U.S. Navy from January 1969 to January 1973.
- Beginning in May 1973, Thomas received veterans’ education benefits, generally continuing through December 1978.
- In June 1974, before marriage, Thomas purchased a residence in his name, making a down payment and financing the balance with a mortgage; monthly installments included principal, interest, taxes, and insurance.
- Thomas and Sandra E. Shea married on November 27, 1974, and separated on May 17, 1979.
- During marriage, Thomas continued receiving the education benefits and claimed they funded most mortgage payments made during the marriage.
- In the dissolution proceedings, the trial court (1) treated the education benefits received during marriage as community property and (2) calculated the community’s interest in the residence using the full amount of monthly mortgage payments made during marriage.
- The trial court did not allow Thomas to present evidence concerning the source of funds used for the mortgage payments during marriage.

## Issues

1. Whether veterans’ education benefits received during marriage are community property when the military service establishing eligibility occurred before marriage.
2. Whether the community’s interest in a spouse’s separately acquired residence may be calculated using total mortgage payments (including interest, taxes, and insurance), or must be limited to the portion reducing loan principal.
3. Whether it was error to exclude evidence regarding the source of funds used to make the mortgage payments during marriage.

## Decision

- The Court of Appeal affirmed the classification of veterans’ education benefits received during marriage as community property.
- The Court of Appeal reversed the residence equity calculation and remanded for recomputation using only community-funded principal reduction, consistent with the Moore line of cases.
- The Court of Appeal directed the trial court on remand to permit evidence regarding the source of funds used for the mortgage payments during marriage.

## Legal Principles

- Property acquired during marriage is presumptively community property unless shown to be separate.
- Veterans’ education benefits paid as periodic allowances and received during marriage are treated as community property, notwithstanding that eligibility derived from premarital military service.
- When the community makes payments on a mortgage encumbering one spouse’s separate real property, the community obtains a proportional ownership interest only to the extent community funds reduce the loan principal; amounts paid for interest, taxes, and insurance are not counted as equity contributions.
- A proper allocation of separate and community interests requires consideration of the character and source of funds used to make payments during marriage.

## Conclusion

The court held that veterans’ education benefits received during marriage are divisible community property, but it required recalculation of the community’s interest in a separately owned residence by counting only community contributions to principal reduction and allowing evidence on the source of the payments.


In re Marriage of Shea, 111 Cal. App. 3d 713, 169 Cal. Rptr. 490 (Cal. Ct. App. 1980)