Marriage of Brandes CA4/1
239 Cal. App. 4th 1461
| Cal. Ct. App. | 2015Background
- Charles founded Brandes Investment Partners (BIP) in 1974; he owned 90% at marriage (1986). BIP grew from ~$20M AUM at marriage to ~$85B by 2004 separation.
- Parties separated 2004; Phase I (2008) and Phase II (2011) trials addressed characterization and division of BIP, stock purchases, profit distributions, valuation, and spousal support.
- Trial court found BIP remained Charles's separate property, applied Pereira for 1986–1991 (attributing growth to Charles’s efforts) and Van Camp for 1992–2004 (attributing growth to other factors), and awarded the community an equitable allocation (stipulated $3.6M at end of Pereira period).
- Court ruled profit distributions in excess of reasonable compensation were Charles’s separate property, denied prejudgment interest, and awarded Linda $450,000/month spousal support.
- Charles bought Brown’s 10,000 shares in two transactions (4,000 and 6,000); down payments came from funds labeled W-2 and joint accounts, and a promissory note financed part of the 6,000-share purchase.
Issues
| Issue | Linda's Argument | Charles's Argument | Held |
|---|---|---|---|
| Whether BIP lost separate-property character during marriage | BIP became a "new" business during marriage and thus is (mostly) community property | BIP remained separate; any community interest limited to compensation (Van Camp) or equitable allocation | Affirmed: BIP remained separate; hybrid Pereira (1986–1991)/Van Camp (1992–2004) allocation appropriate (no abuse of discretion) |
| Treatment of profit distributions labeled W-2 | Distributions were community property despite labeling; unclean-hands/unlawful tax scheme | Payments were legitimately structured by accountants to address tax issues for minority shareholder; no wrongdoing | Affirmed: distributions in excess of reasonable compensation are Charles's separate property; Linda waived further appellate argument |
| Characterization of 10,000 Brown shares (4,000 and 6,000) | 4,000 and 6,000 shares (or most) are community because purchases used joint/community funds or credit during marriage | 4,000 shares separate by inception-of-title; Charles traced funds and family expenses exceeded community income, so purchases were separate; promissory note rebutted? | Partially reversed: 4,000 shares probate/tracing finding upheld as to down payment tracing; 6,000 shares reversal — lender's-intent doctrine applies to note-funded portion; remand to determine precise separate vs. community share percentages, valuation, reimbursement, and post-acquisition distributions |
| Prejudgment interest & spousal support | Sought prejudgment interest on community's Pereira-period share; challenges to $450K/month support | Charles contends prejudgment interest and support award improper/excessive; argues Linda’s separate estate could generate needed income (§4322) | Prejudgment interest issue waived and rejected on fiduciary-breach theory; spousal-support decision not finally resolved — remand required because community/individual asset adjustments (from stock recharacterization) may affect support calculation; court must reconsider support on remand |
Key Cases Cited
- Pereira v. Pereira, 156 Cal. 1 (allocating fair return to separate capital; remainder to community)
- Van Camp v. Van Camp, 53 Cal.App. 17 (allocating reasonable value of spouse’s services to community; remainder to separate property)
- Beam v. Bank of America, 6 Cal.3d 12 (trial court discretion in choosing allocation method; equitable apportionment principles)
- Dekker, In re Marriage of, 17 Cal.App.4th 842 (discussion of Pereira and Van Camp allocation approaches)
- Mueller v. Mueller, 144 Cal.App.2d 245 (commingling/tracing facts can convert separate business to community property)
- Alacer v. Alacer, 201 Cal.App.4th 1326 (rejecting Moore/Marsden approach for separate-business growth; endorsing equitable allocation via Pereira/Van Camp)
- Gudelj v. Gudelj, 41 Cal.2d 202 (inception-of-title and tracing principles for down payment purchases)
- Moore, In re Marriage of, 28 Cal.3d 366 (Moore/Marsden rule: pro tanto community interest when community funds reduce separate-property principal)
- Marsden, In re Marriage of, 130 Cal.App.3d 426 (application of Moore rule)
- Grinius, In re Marriage of, 166 Cal.App.3d 1179 (lender’s intent doctrine and tracing loan proceeds)
- Somps v. Somps, 250 Cal.App.2d 328 (separate funds used to purchase property not per se a fiduciary breach)