## Facts

- Before marriage, the husband owned a Lucerne, California residence as separate property.
- After the parties married, the husband deeded the Lucerne residence to both spouses as joint tenants, and the parties treated it as community property.
- At transmutation, the residence was worth about $228,000, subject to an $82,000 mortgage, for equity of about $146,000.
- The wife later paid $20,000 of her separate funds to reduce the mortgage principal on the Lucerne residence.
- The parties refinanced the Lucerne residence, borrowing $180,000 against its equity.
- By stipulation, the refinance proceeds were used to: (a) pay down the Lucerne loan, (b) pay off a Nevada property mortgage, (c) acquire and improve a Utah property, and (d) fund a joint savings account.
- The parties agreed the refinance proceeds, the Nevada and Utah properties, and the joint account were community property.
- In the dissolution, the trial court found both spouses made separate-property contributions to the community acquisition of the Lucerne residence but limited Family Code § 2640 reimbursement to the Lucerne residence’s equity and denied reimbursement from the Nevada and Utah properties and the joint account.

## Issues

1. Under Family Code § 2640, does a spouse’s reimbursement right for separate-property contributions to a community acquisition extend to other community assets later acquired with proceeds from the original community property, so long as the contribution is traceable?

## Decision

- The California Supreme Court reversed.
- The court held that, absent a written waiver, a spouse’s § 2640 reimbursement right for a separate-property contribution to a community acquisition carries through to other community property acquired with proceeds from the original acquisition, to the extent the contribution is traceable.
- The case was remanded for further proceedings consistent with this interpretation.

## Legal Principles

- Family Code § 2640(b) creates a statutory right to reimbursement for separate-property contributions to the acquisition of community property, absent a written waiver.
- Reimbursement is conditioned on tracing the contribution to a separate-property source.
- The reimbursement right is not confined to the specific asset first acquired or improved with the contribution; it persists through changes in form and may be satisfied from community property into which the contribution can be traced.
- The reimbursement right operates as a charge against the community estate, rather than a right limited to a single asset, when traceable proceeds have been converted into other community assets.

## Conclusion

The court held that Family Code § 2640 reimbursement for separate-property contributions follows traceable proceeds into successor community assets, requiring recognition of reimbursement rights against the broader community estate rather than only the original property’s equity.


In re Marriage of Walrath, 17 Cal. 4th 907 (Cal. 1998)