California Family Law Concept: Mohler Pro Tanto Rule

Concept: Mohler Pro Tanto Rule

Citation: In re Marriage of Mohler (2020) 47 Cal.App.5th 788; Family Code § 771(a) (post-separation earnings are separate property); In re Marriage of Moore (1980) 28 Cal.3d 366; In re Marriage of Marsden (1982) 130 Cal.App.3d 426.

Explanation: The Mohler “pro tanto” rule is a principle governing how the community is reimbursed for mortgage payments on a spouse’s separate property home during and after the marriage. Under the well-established Moore/Marsden formula, when community funds (earnings during marriage) are used to pay down the principal of a mortgage on one spouse’s separate property, the community acquires a proportional (pro tanto) interest in that property. This means the community is entitled to reimbursement of the principal it paid and a share of any increase in the property’s value attributable to those community payments. For example, if 30% of the original loan principal was paid off with community money during the marriage, the community is considered to have a 30% equitable interest in the home’s equity growth during the marriage.

Mohler clarified that this community interest stops growing once the spouses separate (absent further community payments). By California law, a spouse’s earnings after the date of separation are that spouse’s separate property, not community property. Therefore, if one spouse continues to make mortgage payments with their own separate income after separation, those payments do not increase the community’s percentage interest in the property. In other words, the community’s pro tanto share is essentially “locked in” as of the separation date. The community still benefits from its established percentage of any appreciation in the property’s value (since property is generally valued at divorce trial), but post-separation contributions by one party only augment that party’s separate interest. In Mohler, the trial court had erroneously increased the community’s share of the home because the husband paid the mortgage for years after separation. The Court of Appeal corrected this, ruling that only payments made with community funds (during the marriage) generate a community property interest.

However, Mohler also recognized that fairness may require a separate accounting for one spouse’s exclusive use of a home that the community partly owns. The decision confirmed that a Watts charge (from Marriage of Watts (1985) 171 Cal.App.3d 366) can be applied even when the property is partially community. A “Watts charge” is essentially rent reimbursement to the community. If a home is, say, 30% community by the Moore/Marsden calculation, and one spouse lives in that home alone after separation, the court can require that spouse to compensate the community for 30% of the home’s fair rental value for that period. This ensures the community is fairly compensated for the spouse’s post-separation use of a partly community asset, without altering the ownership percentages. In summary, the Mohler pro tanto rule means post-separation mortgage payments by a spouse do not boost the community’s ownership stake, though the community can recover a share of rental value for exclusive use through Watts charges.

Examples:

Suppose Alice owns a house before marriage, and its purchase price was $200,000. During the marriage, Alice and her husband Bob use community funds to pay down $50,000 of the mortgage principal. By the time they separate, the community has effectively acquired a 25% interest in the property (because $50k is 25% of the $200k purchase price). After separation, Alice continues to pay the mortgage on that house using her own salary (her separate property). Under the Mohler pro tanto rule, the community’s interest remains capped at 25%. Alice’s post-separation payments do not increase Bob’s share. When they divorce, the community will be reimbursed the $50,000 it paid toward principal, and it will receive 25% of any appreciation in the home’s value that accrued during the marriage. Any equity gained from Alice’s post-separation payments belongs solely to Alice as her separate property.
As another example, consider John and Maria. Maria brought a home into the marriage, and community earnings paid off a portion of the mortgage, giving the community a 40% Moore/Marsden interest in the house. After separation, Maria stayed in the home and kept paying the mortgage with her separate income. According to the Mohler rule, the community’s ownership percentage stays at 40% – it does not climb higher just because Maria paid down more principal after separating. However, since Maria lived in a residence that the community partly “owned,” the court could order Maria to reimburse the community for 40% of the home’s reasonable rental value for the time she lived there post-separation (a Watts charge). This way, John would get compensated for Maria’s exclusive use of a partially community asset, but Maria’s extra mortgage payments after separation only benefit her own separate share of the equity.

Cases:

In re Marriage of Moore (1980) 28 Cal.3d 366 – Landmark California Supreme Court case establishing that when community funds are used to reduce the mortgage on a spouse’s premarital separate property, the community obtains a proportional share of the property’s equity. Moore provided the original formula for apportioning separate vs. community interests based on contributions to principal.
In re Marriage of Marsden (1982) 130 Cal.App.3d 426 – Appellate decision that refined the Moore formula. Marsden held that any appreciation in the property’s value before the marriage remains the owner’s separate property. The community’s pro tanto percentage (based on principal paid during marriage) applies only to the appreciation that occurs during the marriage. Together, Moore and Marsden define the “Moore/Marsden” rule for dividing equity in mixed separate/community property.
In re Marriage of Mohler (2020) 47 Cal.App.5th 788 – In this case, the wife argued the community’s share of a house should grow because the husband paid the mortgage after separation. The Court of Appeal disagreed, holding that the community’s interest was fixed at 33.66% (based on pre-separation payments) and that post-separation payments with separate income did not increase it. Mohler also established that a Watts rent charge can be applied to a partially community home to compensate the community for one spouse’s exclusive use after separation.
In re Marriage of Freeman (2025) ___ Cal.App.5th ___ – A recent Court of Appeal decision citing Mohler. Freeman reiterates that the community’s pro tanto percentage interest in a separate property is calculated as of the date of separation, while the property’s value for division is determined near the time of trial. It underscores that the Moore/Marsden percentage should not increase due to any post-separation mortgage payments by one party.

Formula:

The Moore/Marsden formula is used to calculate the community’s interest in a mixed-character property. First, determine the community’s fraction of the property by dividing the amount of principal paid with community funds by the property’s original purchase price. Next, calculate the community’s share of appreciation by multiplying that fraction by the increase in value during the marriage (from the time of marriage to the time of division). Finally, add the community-paid principal to that amount to get the total community interest.

In formula form: Community’s percentage interest = (Community principal paid ÷ Purchase price). Then, Community’s equity share = Community principal paid + (Community’s percentage × (Value at divorce – Value at marriage)). Each variable is defined as follows:

Community principal paid: The total amount of mortgage principal reduction paid with community funds during the marriage (before separation).
Purchase price: The original price of the property (or total principal debt if a mortgage was used). Using this as the denominator accounts for the entire investment in the property.
Value at marriage: The fair market value of the property at the time the community began investing in it (often the date of marriage, or when community payments started). This is used to isolate how much the property’s value increased during the marriage.
Value at divorce: The fair market value of the property at the time of division (usually near the trial date). Under Family Code § 2552, assets are generally valued as close to the trial as practicable, unless the court orders a different valuation date.
Increase in value during marriage: The amount the property’s value rose from the date of marriage to the date of division (Value at divorce minus Value at marriage). This represents the appreciation that occurred while the community was contributing to the property.

Using these values, the community’s interest is calculated by reimbursing the community for its direct contributions to principal and giving the community a proportional share (pro tanto) of the property’s appreciation during the marriage. The remaining equity and any post-separation enhancements in value (beyond the community’s percentage) belong to the owning spouse’s separate estate. In short, the formula ensures that the community is fairly paid back for what it put into the property, including a fair portion of the profits (appreciation) attributable to those community-funded contributions.