Opinion
NOT FOR PUBLICATION
MEMORANDUM DECISION
PETER W. BOWIE, Chief Judge United States Bankruptcy Court
Prior to their marriage in 1990 David Folsom, the debtor herein, and Pamela Brodwolf-Folsom, entered into a "Premarital Contract" which dictates how the property of David and Pamela will be held. At issue in this case are eight condominiums in Bransen West, Missouri (the Condominiums). Title to the Condominiums are held in Pamela's name. David and Pamela contend that the Condominiums are the separate property of Pamela. The Trustee seeks summary judgment that under the provisions of the Premarital Contract, the Condominiums are held as community property, and thus they are property of David's bankruptcy estate.
The Trustee, and to a lesser extent, David and Pamela, rely for their positions on the terms of the Premarital Contract. The Court agrees that the terms of the Premarital Contract are controlling on this issue. The Premarital Contract generally provides that each party's premarital property, the proceeds therefrom, and all property acquired with such proceeds, would remain their separate property. See Paragraphs D, 1, 3 and 5 of the Premarital Contract. The Premarital Contract also provides that under certain circumstances, the separate property of each could become community property.
The Trustee bases his case on paragraph 6 of the Premarital Contract which provides in relevant part:
Community Property: The parties do not intend to establish joint checking and savings accounts. In the event that any joint accounts are established, the funds deposited in said accounts shall be community property of the parties.... Any assets acquired from funds in the parties joint accounts will be community property. The parties acknowledge that the foregoing accounts and property so acquired shall constitute their only community property. The parties further agree that no community property or community property interest can be created except as provided herein or as provided in a separate written agreement of the parties.
Notwithstanding the stated intent of the parties as of October 1990, Davis and Pamela did in fact establish at least one joint checking account - Bank of America checking account number XXXXX-X2952, which was held in both of their names (Checking Account). Pamela and David argue that, notwithstanding the fact that David was a signatory to the account, it was not actually a joint account, because David was added to the account solely for Pamela's convenience and that he had no right to access. This may well have been the informal agreement of David and Pamela. However, they have provided no evidence or authority which would preclude David from withdrawing funds from the Checking Account had he chosen to do so. Under California law, this is sufficient to create a "joint account." California Probate Code § 5130 provides:
"Joint account" means an account payable on request to one or more of two or more parties whether or not mention is made of any right of survivorship.
Thus the Checking Account was a "joint account, " and thus under the terms of the Premarital Contract funds placed therein and any property purchased with those funds would be community property. It is undisputed that the Condominiums were purchased with funds from the Checking Account. Thus, under Paragraph 6 of the Premarital Contract, the Condominiums would be community property.
David and Pamela argue that Paragraph 6 was not meant to be an operative provision - that is, it was not intended to transmute separate property funds into community property by placing them in a joint account. Rather, it was a statement of intent and a directive that only community property would be placed in joint accounts. They base this rather tortured reading of Paragraph 6, by pointing to Paragraph 13 which provides:
Transmutat ion: Except as otherwise provided herein, property or interests therein, now owned or hereafter acquired by the parties, which by the terms of this Agreement are classified as the separate property of one of them, can become the separate property of the other or the community of jointly-owned property of the parties only by a written instrument executed by the party whose separate property is thereby reclassified.
David and Pamela argue that since Paragraph 13 of the Premarital Contract requires a separate written instrument to effectuate a transmutation, it would be illogical to consider the Premarital Contract itself to be such a written instrument. At first blush the argument seems reasonable. It fails though, upon closer scrutiny.
Paragraph 13 itself begins "[e]xcept as otherwise provided herein, " indicating clearly that the method of transmutation set forth in Paragraph 13 was not exclusive. Further, as set forth above, Paragraph 6 provides "no community property or community property interest can be created except as provided herein or as provided in a separate written agreement of the parties." (Emphasis added.) Clearly, under the Premarital Contract there were two methods for transmuting separate property into community property - a separate writing (Paragraph 13) or depositing funds into a joint account (Paragraph 6). The answer then is straightforward. The funds used to purchase the Condominiums were taken from a joint account. Since the funds were in a joint account, they were community property under the terms of the Premarital Contract. The property acquired therewith were also community property, and the Condominiums are thus property of David's bankruptcy estate. The Trustee's motion for summary judgment is granted.
The Trustee shall lodge an order consistent herewith within thirty days (30) of the date of service of this Memorandum Decision.
IT IS SO ORDERED.