Those who quickly glance at the headline of this article might think the topic is focused on some oddly named law firm. In actuality, Moore Marsden refers to a pair of famous California court cases dealing with community property issues (dividing assets in divorce). The cases resulted in a calculation still in use by courts today for determining how mortgage payments are figured as community property when only one spouse to owned the property in question prior to the marriage.
The cases sought to answer questions such as whether payments made on the house during the marriage constitute community property? To what extent are they community property? How does market appreciation factor in? How does a court determine the percentage of community property in these cases?
This article was written to discuss some complex community property issues as well as the formula for determining how community property is determined in specific types of divorce cases.
It’s important to remember that nothing on this page is intended as legal advice, and the Moore Marsden calculation is a particularly complicated part of a divorce proceeding. If you have questions about a specific family legal issue, contact our Orange County family lawyer’s office to see how we can help.
Moore Marsden, a Little History
When family lawyers mention the Moore Marsden they’re referring to two separate divorce cases that occurred in California in the early 1980s. Both of these cases dealt with the formulas used for dividing community property.
In the marriage of Moore, which the State Court of Appeals ruled on in October 1980, the case focused on payments made during a marriage on a house whose deed purchased by one party before the marriage.
In that case, the wife purchased a house six months before the couple married. She made a down payment of $16,640.57, and secured a loan for the balance of the purchase price, which was $56,640.57.
The marriage lasted about ten years, during which time the couple made mortgage payments out of community funds.
At the time of the divorce, the couple agreed that the community had an interest in the property. However, the couple disagreed as to how the interest was to be determined. The husband, David Moore, argued that interest and taxes should be calculated into the determination. The court did not agree, arguing such expenditures don’t increase the equity of the property. The community property in this case was calculated by dividing the community payments by the amount in which they reduced the principal.
In the marriage of Marsden, which the State Court of Appeals ruled on in April of 1982, a number of different issues were considered. But pertinent to this article, the husband in the case, Sullivan Marsden, took issue with the way in which the community property calculation was determined on the interest in a house owned by the couple.
Sullivan had leased the property 10 years before the couple was married, and taken out a loan in order to build a house on the property. Community funds established during the marriage were used to reduce the principal due on the loan.
Under a formula used by the lower court, the husband’s interest in the property was determined by crediting the down payments, and the full amount of the loan; less the amount the community property payments reduced the principal balance of the loan.
Sullivan argued that the lower court erred in not crediting him nine years of appreciation in the value of the property before the marriage occurred. The court agreed. The appeals court, using a revised figure based on the fair market value of the property at the time of the marriage, bumped his interest in the property from 75 .98 percent to 85.85 percent.
What Do These Cases Mean For Divorcing Couples?
Taking these two cases together, courts continue to follow a formula known as the Moore Marsden analysis. In addition to information about mortgage payments made during a marriage, this formula requires a few other pieces of information—the value of the home at the time of purchase, as well as the fair market value of the home at the time the analysis is conducted, as well as when the marriage occurred.
The Moore Marsden Calculation, an Example
In the Marsden case, the original cost of the property in 1962 was $38,300. The amount of principal paid down by community funds after the couple married in 1971 was $9,200.
Using the fair market value of the house at the time of the marriage, it is possible to determine that (prior to the marriage) the value of the property appreciated by $26,700. This is separate (non community equity).
Using the fair market value of the house at the time of the divorce, it’s possible to calculate that there was an appreciation of $117,500 during the marriage. This goes toward the community interest.
Looking at the separate property reduction of $9,200 in relation to the purchase price of the house, we can find that Sullivan Marsden paid down 24 percent of the house on his own. By taking 24 percent of $117,500 and adding that to the principal reduction of $9,200, the community is entitled to roughly $37,400. To be clear, this amount doesn’t go to one person or the other. Rather, it is split equally as community property.
While some view this formula as confusing or not entirely fair, it is the law of the land. The basic reasoning behind this type of calculation suggests that courts side more favorably with those who make an initial investment in a home prior to a marriage. Because the fluctuations of the housing market happen independent of the community’s actions, the court doesn’t view as fair an arrangement that allows a spouse to share in 50 percent of the increased equity, when he or she didn’t contribute to that equity.
Consulting a Lawyer
By now, this should all be as clear as mud. But if you’re still having trouble figuring out how the Moore Marsden calculation works, it could be time to speak with a lawyer. In all seriousness, family law can be incredibly complex. While community property is supposed to be divided equally among the divorcing parties, there are lots of questions as to how this is done in a real world situation.
And while figuring property appreciation with the Moore Marsden calculation is difficult in the most basic of cases, it can be even more challenging in cases where a couple has refinanced a home.
If you are involved in a family separation, and property owned prior to the marriage is a point of contention, consider scheduling a consultation with our family lawyer. As this page has no doubt illustrated, things can get complicated quickly, and a good lawyer can be indispensible in helping you sort things out.