The Community Acquires a Right to Reasonable Compensation from Community Efforts Devoted to Separate Property, if the Business Has Increased in Value During the Marriage and the Increase was Due Primarily to the Efforts of the Spouse

In Cozzi, Husband brought into the marriage separate real property and other investments.  During the marriage Husband’s only income was derived from these investments.  At the divorce trial Wife’s divorce lawyer argued that she had acquired an interest in Husband’s investments because they both contributed community labor to manage the investments during their marriage.  The divorce court ruled that the investments were Husband’s separate property and Wife’s divorce attorney appealed.

The Second District Court of Appeal affirmed the divorce court’s ruling, stating, “Assuming the care and maintenance of income properties owned by [husband] to be a ‘business,’ it is not the profits of the business, but only the ascertained earnings of the [husband] from his individual efforts in managing, laboring on and caring for such property, in the nature of salary, wages or the equivalent thereof, which would be community property.”  Because Wife’s divorce attorney failed to show what reasonable compensation should have been for Husband, the divorce court could properly conclude that the earnings from the business supported the community and thus the community had been adequately compensated for Husband’s efforts.  Therefore, the community acquired no interest in the increase in value of Husband’s separate property investments other than what had already been used to support the community during the marriage.

Cozzi v. Cozzi (1947) 81 Cal. App. 2d 229