The lender intent rule in California family law is, at once, one of the most consequential and one of the most unfathomable rules.
The general idea is this: if a loan is incurred during the marriage, that loan, and any proceeds acquired with said loan, will presumed to be a community obligation/property. The burden then falls on the party seeking to show that the loan is separate to produce evidence to that effect. What exactly is that burden? Well, therein lies the rub.
In Gudelj v. Gudelj, the California Supreme Court held that the burden on the party trying to overcome the community property presumption only had to show that the lender “primarily relied upon the purchaser’s separate property in extending credit.” This seems to mean that as long as the party trying to overcome the community property presumption shows that the lender relied mostly on that party’s separate property, the presumption will be overcome. So 50.1% would do.
Several decades later, the Grinius Court of Appeals case held that the party trying to overcome the presumption had to show that the lender solely relied upon the purchaser’s separate property in extending the credit. Going from “primarily” to “solely” is quite a change. What is also different about this case is that the Grinius Court, an intermediate court of appeals, appeared to change a rule established by the California Supreme Court. So how did this lower court “overrule” the California Supreme Court? The Grinius Court reasoned that the California Supreme Court made a mistake using the word “primarily,” arguing that they meant to use the word “solely” as that was consistent with precedent up to that point.
A recent case out of San Diego, Marriage of Brandes, cited the rule in Gudelj v. Gudelj, not Grinius. This may indicate that the Court of Appeals in San Diego did agree not with the reasoning that permitted the Grinius court to disavow Supreme Court precedent.
So where does that leave us? Right back to the beginning. What exactly is the lender intent rule? No one knows.
Feel free to contact us if you are considering a divorce from your spouse, a legal separation, or have questions regarding child custody and visitation. Nancy J. Bickford is the only Certified Family Law Specialist (CFLS) in San Diego County who is also a licensed Certified Public Accountant (CPA) with a Master of Business Administration (MBA). Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.