The key case on such matters is In re Marriage of Moore, 28 Cal.3d 366 (1980) from the California Supreme court. [http://scocal.stanford.edu/opinion/re-marriage-moore-30599]
Now, if we were to pretend that many years ago a person took a class on such matters and the professor gave a couple problems to the class to see if the case were understood, we might also pretend that computers store much information and it could be found again if searched for. One poor son of a gun's answer might look something like the following:
1. Wanda buys a house in Fresno for $100,000, paying $20,000 down and signing a note (secured by a mortgage) for the $80,000 balance. Thereafter, until her marriage to Harold, Wanda makes mortgage payments that reduce the loan balance by $10,000 (to $70,000). After the marriage, Wanda continues to make the mortgage payments out of her salary until the note is paid in full in 1997. W dies in 1999, leaving a will that devises “all my property” to her nephew Norman. The house is now worth $400,000. Who takes what?
When there is no longer any debt on an installment purchase before marriage, payment with CP funds after marriage, or during marriage W inherits land subject to mortgage, pays off not with CP funds, the Proration or Buy-In rule applies.
The community estate takes a pro rate portion of the property measured by the amount of principal debt reduction attributable to the expenditure of community funds.
Numerator is the principal debt reduction attributable to CP ($70,000) and the denominator is the purchase price ($100,000). Here the CP interest is 7/10 times the value at trial of $400,000 for $280,000 CP.
2. Wanda buys a house in Fresno for $100,000, paying $10,000 down and signing a note (secured by a mortgage) for a $90,000 balance. Thereafter, until her marriage to Harold, Wanda makes mortgage payments that reduce the loan balance by $10,000 (to $80,000). Wanda and Harold are divorced in 2001. At the time of the divorce, the house is valued at $400,000, and the principal balance of the note has been reduced by $20,000 with community funds (Wanda’s salary). Who takes what?
The same rule applies here. The numerator is the principal debt reduction attributable to CP ($20,000) with the denominator the purchase price ($100,000). Here the CP interest ratio is 1/5.
The note is not paid off, however, so we can’t just apply it to the whole house. That would give too much to the Community. In Re Moore now takes the calculation to SP dealing with equity and all that ****. Here, we’ll stay in CP. We must now find how much the house has appreciated in value. We’ll take the CP interest in that and add in any CP funds paid for the total CP interest in the property.
At time of trial the house is $400,000 it was purchased for $100,000 so has appreciated $300,000. (Time of trial value minus purchase price.) We multiply that by the CP ratio (From the principal debt reduction calculated—proration/buy-in rule.) of 1/5 and find the CP interest is $60,000.
The community also directly put in some funds. Here it was $20,000. We add these “DIP” funds (Down payment, Improvements, Principle reduction-subject to the whole other set of rules of CP to SP. But, all problems on the house do not seem to include this calculation although might include “trick” numbers of insurance or taxes.) to our CP portion of appreciation ($60,000) and get a CP interest on the house of $80,000.
