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In re Marriage of Claudia

Court of Appeals of California, Second District, Division Four.
Nov 5, 2003
No. B156379 (Cal. Ct. App. Nov. 5, 2003)

Opinion

B156379.

11-5-2003

In re Marriage of CLAUDIA and JACK J. ESKENAZI. CLAUDIA ESKENAZI, Respondent, v. JACK J. ESKENAZI, Appellant.

Law Offices of M. Lynda Sheridan and M. Lynda Sheridan for Appellant. Robert S. Gerstein for Respondent.


Jack Eskenazi (Husband) appeals from the judgment in the dissolution of his marriage to Claudia Eskenazi (Wife). He challenges the trial courts characterization of real property as Wifes separate property; the calculation of the communitys interest in the property; the award of reimbursement to Wife for post-separation payments on loans; the failure to reimburse the community for satisfying a lien of $125,000; the award to Wife for her credit card balances; and the order that he pay $80,000 of Wifes attorneys fees as a sanction.

We conclude that the trial court properly characterized the family residence as Wifes separate property and correctly allocated the community and separate interests in the payments made on the property. We find no error in the reimbursements. Husband received adequate notice of, and an opportunity to be heard, on the sanctions issue. The trial court did not abuse its discretion in making the award. The judgment is affirmed.

FACTUAL AND PROCEDURAL SUMMARY

The parties were married in 1966. In 1973, they bought a house at 4109 Aleman Drive (Aleman property) for $89,500. In 1979, Wife decided to end the marriage. At that time, Husband was going into bankruptcy. The parties reconciled, and agreed that Wife would keep the Aleman property as her separate property. Husband executed a quitclaim deed in favor of Wife. The Aleman property was encumbered by the following debt when the quitclaim was executed: (1) $60,000 balance of the purchase money mortgage; and (2) second trust deed for $125,000 in favor of Federal Wholesale Toys. The trial court found that the Aleman property was worth $225,000 when the quitclaim was executed.

Husband spells the street on which the family home was located as "Alamen." We follow the usage of the trial court in the judgment, "Aleman."

In 1989, an interest-only loan was taken, encumbering the Aleman property for $150,000. The proceeds were used to pay community expenses. Finally, in 1994, a fourth encumbrance was placed on the Aleman property by a Small Business Administration (SBA) loan for $20,300 to repair damage caused by the Northridge earthquake. The proceeds of this loan also were used to pay community debts. At the time of trial, the parties stipulated that the Aleman property was valued at $520,000, with $20,000 remaining due on the original purchase money mortgage.

The parties separated on July 6, 1997 after 31 years of marriage. The primary issue at trial was characterization of the Aleman property. In the judgment, the trial court found that Husband "validly transferred" the Aleman property by quitclaim deed, transmuting it from community property to Wifes separate property. It set the communitys interest in the Aleman property at $81,277. Husband filed a timely appeal.

DISCUSSION

I

The first issue is whether the quitclaim deed executed by Husband on January 5, 1979, was an effective transmutation of the Aleman property from community property to Wifes separate property. Because this involves the interpretation of the written quitclaim deed, the trial courts determination that there was a transmutation is subject to our independent review. (In re Marriage of Barneson (1999) 69 Cal.App.4th 583, 588.)

During marriage, spouses may agree to change the status of any or all of their property through a property transmutation. (Fam. Code, § 850.) As used here, transmutation is an interspousal transaction or agreement that works a change in the character of the property. (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 293.) The Aleman quitclaim deed was executed before enactment of former Civil Code section 5110.730 (now codified as § 852), which established statutory formalities for a transmutation of real property. Under the law in effect at the time, a transmutation could be found based on oral statements or implications from the conduct of the spouses. (Estate of MacDonald (1990) 51 Cal.3d 262, 269.) As we shall discuss, we conclude that the 1979 quitclaim deed was a valid transmutation, which satisfies even the more stringent requirements now applicable.

All statutory references are to the Family Code unless otherwise indicated.

The quitclaim deed executed by Husband states: "FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, Jack Joseph Eskenazi hereby REMISE(S), RELEASE(S) AND FOREVER QUITCLAIM(S) to Claudia Eskenazi a married woman, as her separate property" the Aleman Drive property. (Our italics.) The California Supreme Court has held that the phrase "release, remise and quitclaim" is commonly used in quitclaim deeds and effects a transfer of "`all right and title of the grantor." (City of Manhattan Beach v. Superior Court (1996) 13 Cal.4th 232, 239, quoting Sullivan v. Davis (1854) 4 Cal. 291, 292; see also In re Marriage of Broderick (1989) 209 Cal.App.3d 489.) The Supreme Court explained: "As with the use of `quitclaim, reference to `remise and `release generally signifies a relinquishment of all interest held by the grantor. (See Blacks Law Dict. [(4th ed. 1968)] p. 1454, col. 1 [`release]; id., p. 1458, col. 2 [`remise].)" (City of Manhattan Beach, supra, 13 Cal.4th at p. 239, fn. 4, italics added.)

Estate of Bibb (2001) 87 Cal.App.4th 461 was decided after the enactment of requirements that a transmutation be in writing with an express declaration of an intent to change the characterization or ownership of the property. Nonetheless, the decision is instructive. The court construed a grant deed which conveyed husbands separate real property to himself and his wife as joint tenants. The deed expressly stated that Mr. Bibb "grant(s)" the property to himself and his wife as joint tenants. (Id. at p. 468, fn. 3.) Observing that the word "grant" is the historically operative term for transferring interests in real property, the court concluded "there is no doubt that [husbands] use of the word `grant to convey the real property into joint tenancy satisfied the express declaration requirement of section 852, subdivision (a)." (Id. at pp. 468-469.) Based on that conclusion, the court found a valid transmutation. (Id. at p. 469.)

Here Husbands use of the standard quitclaim language for transfer of an entire interest in property established his intent to transfer his entire interest in the Aleman property to Wife as her separate property. We conclude the quitclaim worked a transmutation of the interests in the property from community to Wifes separate property. Not only did the 1979 quitclaim establish a transmutation under the then existing law, it satisfied the later stringent standards of section 852, subdivision (b) because it was effected by a writing that expressed Husbands intent to change the ownership of the property.

According to Husband, Wife relied on In re Marriage of Broderick, supra, 209 Cal.App.3d 489, 496 to suggest the quitclaim deed presumptively characterized the Aleman property as her separate property under Evidence Code section 662. In fact, she does not make that argument on appeal and we need not rely on the presumption arising from the form of title in which the property is held to find a transmutation. As we have discussed, there is substantial evidence that Husband knowingly transferred his entire interest to Wife when he executed the quitclaim deed. We must address Husbands argument that the transmutation should be disregarded as the product of undue influence.

In addition, we note that the general presumption of title codified in Evidence Code section 662 is not applicable in family law cases where the specific presumption of undue influence arising from the marital fiduciary relationship, section 721, subdivision (b), is invoked. (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 301.) We discuss that issue next.

He relies on the presumption of undue influence codified in section 721, subdivision (b). "[W]hen any interspousal transaction advantages one spouse to the disadvantage of the other, the presumption arises that such transaction was the result of undue influence. (In re Marriage of Haines,[supra,] 33 Cal.App.4th 277, 287, 293-294, 301-302 . . . [`[u]nder California community property law, because spouses occupy confidential relations with each other, when an interspousal transaction advantages one spouse over the other, a presumption of undue influence arises]; see also In re Marriage of Bonds (2000) 24 Cal.4th 1, 27 [99 Cal.Rptr.2d 252, 5 P.3d 815] (Bonds) [`persons, once they are married, are in a fiduciary relationship to one another (Fam. Code, § 721, subd. (b)), so that whenever the parties enter into an agreement in which one party gains an advantage, the advantaged party bears the burden of demonstrating that the agreement was not obtained through undue influence].)" (In re Marriage of Delaney (2003) 111 Cal.App.4th 991, 996.)

Section 721, subdivision (b) provides in pertinent part: "Except as provided [in specified sections of the Probate Code], in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, . . ."

In Haines, supra, 33 Cal.App.4th at p. 296, the court held that a spouse in whose favor a quitclaim deed is executed bears the burden of rebutting the presumption of undue influence. The spouse in this position must prove the quitclaim deed "`was freely and voluntarily made, and with a full knowledge of all the facts, and with a complete understanding of the effect of the transfer." (Id. at pp. 296, 302, quoting Brown v. Canadian Indus. Alcohol Co. (1930) 209 Cal. 596, 598; see also In re Marriage of Delaney, supra, 111 Cal.App.4th at p. 996.) Extrinsic evidence is admissible to prove undue influence. (In re Marriage of Barneson, supra, 69 Cal.App.4th at p. 592.)

The record establishes that Husband is a sophisticated businessman who was trained as a realtor and taught real estate at California State University, Northridge. He testified that he signed the quitclaim deed under the pressure of large debt, unpaid taxes, and the pending execution of a $250,000 judgment against him.

Husband admitted that his claimed ownership interest in the Aleman property was not listed as an asset in his bankruptcy petition and that he did not disclose it at any of the creditors meetings. He acknowledged that he signed both the quitclaim and the bankruptcy petition. He tried to explain why: he had been advised by counsel that the quitclaim deed would act as a trust to hold the property as a community asset. Husband testified that he thought that "changing the vesting of the property from joint tenancy to community does not change my . . . equity ownership in the house," the quitclaim worked a "change of vesting, not a change of ownership."

Husband admitted that after executing the quitclaim, he had repeatedly asked Wife to give him back a half interest in the Aleman property. According to him, she said that she would do so only when they were out of debt, a condition which never was satisfied.

Wifes version was different. She testified that her 1979 reconciliation with Husband was conditioned on the house remaining in her name only. She disputed Husbands testimony that she was not really getting the Aleman property as her separate property, but was simply holding it for Husband. That never was her understanding. She never transferred any interest in the house back to Husband, and never agreed, either verbally or in writing, to transmute the house back into community property. She never intended to change it from her separate property to community property. Wife testified that Husband asked her many times to give him a community property interest in the Aleman property and that she refused.

After the reconciliation in the late 1970s, there were times Wife allowed the Aleman property, as her separate property, to be used as collateral for loans she and Husband obtained. But she would not sign any document unless it specified that the Aleman property was her separate property. Husband remained a loss payee on the insurance policy covering the Aleman property from 1979 through 1997.

Wife paid the original mortgage (first trust deed) after the separation and the SBA loan. The SBA loan was used primarily to pay community debts. Wife had no idea what the Federal Wholesale Toys loan was used for, or how it was paid off. She did was not aware of any source of income Husband could have used to pay off the Federal Wholesale Toys loan.

The trial court found that the quitclaim was a valid transfer of Husbands interest in the Aleman property. It also found that Husband knew what he was doing when he executed the quitclaim and then represented in the bankruptcy court, under penalty of perjury, that he no longer owned an interest in the Aleman property. The trial court stated that it would hold Husband to that representation. In essence, the court credited Wifes testimony and did not credit the version of events offered by Husband.

There is solid evidence to support the trial courts conclusion. In order to rebut the presumption of undue influence, Wife was required to show the quitclaim "`was freely and voluntarily made, and with a full knowledge of all the facts, and with a complete understanding of the effect of the transfer." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 296, 302.) The evidence established that Husband was trained as a real estate agent, was advised by counsel in executing the quitclaim, and was a sophisticated businessman. Moreover, he represented to the bankruptcy court, under penalty of perjury, that he had no interest in the Aleman property. Wife rebutted the presumption of undue influence. The transmutation was valid and the house was Wifes separate property. Nevertheless, by the time of separation, the community had an interest in the property by reason of the post-quitclaim use of community funds to service debt on the house. We treat the extent of that interest in the next section of this discussion.

Husband also argues the quitclaim deed is not enforceable for lack of adequate consideration. But inadequacy of consideration does not defeat the validity of a deed in the absence of fraud. (In re Marriage of Broderick, supra, 209 Cal.App.3d at p. 500.) Husband cites no evidence of fraud, and we find none.

Finally, we agree with Wife that Husband is judicially estopped from taking inconsistent positions regarding his interest in the Aleman property. In the bankruptcy proceeding, he stated under oath that he had no interest in the property. His testimony made it clear that he executed the quitclaim deed in an attempt to prevent his interest in the family home from being claimed by his many creditors, which included both the United States and State of California. That is the reason the Aleman property was not included as an asset in Husbands bankruptcy proceedings. He may not now be heard to claim in this family law proceeding that the quitclaim was a sham executed for purposes of defrauding the bankruptcy court and his creditors. (See Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183-184.)

II

Husband argues the trial court erred in apportioning community and separate property interests in the Aleman property (Moore/Marsden calculation). He contends the apportionment should have been based on the original purchase price. Wife argues the trial court properly based its calculation on the value of the property at the time of the quitclaim deed. Wife has the better argument.

This common reference to the calculation of community and separate property interests is taken from the landmark cases of In re Marriage of Moore (1980) 28 Cal.3d 366 and In re Marriage of Marsden (1982) 130 Cal.App.3d 426.

The substantial evidence standard applies to our review of the trial courts factual findings as to the existence and character of the parties property. (Bono v. Clark (2002) 103 Cal.App.4th 1409, 1421.) We independently review questions of law relating to the selection of a rule. (Ibid.) "[W]here mixed questions of fact and law require `a critical consideration, in a factual context, of legal principles and their underlying values, the question is predominantly legal and its determination is reviewed independently. [Citation.] (Ibid.; cf. In re Marriage of Dekker [(1993)] 17 Cal.App.4th [842] at p. 849, fn. 11.)" (Ibid.)

Because the quitclaim deed worked to transfer Husbands entire interest in the property, including previous community payments on the mortgage and appreciation, we conclude that the Moore/Marsden calculation of the respective community and separate property interests must be based on the value of the property at the time of the quitclaim deed.

In re Marriage of Broderick, supra, 209 Cal.App.3d 489 addresses the apportionment of community and separate property interests in a family residence in a similar factual situation. In Broderick, husband and wife bought a $23,500 home after they were married, using community property funds of $ 3,800 as a down payment (including costs) and financing $20,400 through a mortgage with monthly payments of $154. Four years later, wife left the marriage and quitclaimed her interest in the house to husband. At that time, the fair market value of the home was $45,000 and the mortgage had been paid down to $18,000. Husband continued to live in the home during the separation. The spouses later reconciled and made mortgage payments with community funds. Ultimately, the reconciliation failed and dissolution proceedings were filed.

The Broderick court concluded that the quitclaim deed transmuted the community interest into separate property, which included the communitys interest in the payments made on encumbrances before the quitclaim deed was executed. (In re Marriage of Broderick, supra, 209 Cal.App.3d at p. 503.) At dissolution, only community payments made after the quitclaim were considered. Husbands argument that we disregard the quitclaim and use the original purchase price and mortgage balances in the apportionment is contrary to Broderick and is incorrect.

The trial court properly followed Broderick in calculating the apportionment from the quitclaim deed. Husband does not challenge the sufficiency of the evidence to support the trial courts actual calculation from that point. We find no error in the Moore/Marsden apportionment.

III

Husband also argues the trial court erred in awarding Wife reimbursement for her post-separation payments on loans encumbering the Aleman property. He claims the reimbursement was inappropriate for three reasons: (1) the payments preserved an asset used exclusively by Wife, (2) the monthly debt payments (under $2,000) were not substantially in excess of its rental value, and (3) Wife was not entitled to interest on the reimbursement claim. Wife responds that there is substantial evidence that the proceeds from the encumbrances against the house were used to pay community debts rather than preserving the property, citing In re Marriage of Branco (1996) 47 Cal.App.4th 1621.

The trial court awarded Wife $150,868 credit for all post-separation payments of interest on the $150,000 interest-only loan and $16,063 for post-separation payments of principal and interest on the $20,300 SBA loan. Wife was ordered to assume the two loans subject to these credits.

There was substantial evidence that both the $150,000 interest-only loan and the SBA loan were used to pay community expenses and debts. As the court observed in In re Marriage of Branco, supra, 47 Cal.App.4th at page 1629, it is inappropriate to require one spouse to bear the entire liability for loans that benefited husband and wife jointly since the loan proceeds were used to pay debts having nothing to do with the acquisition of the house. The trial court properly awarded Wife credit for her payments on these two loans.

Husband also contests the award of interest to Wife for use of her separate property for payments on these community debts. The trial court awarded Wife a credit of $105,868 for all the post-separation payments she made on the $150,000 interest-only loan, including 10 percent interest. She also was credited with $16,063, representing reimbursement for her post-separation payments on the SBA loan plus 10 percent interest.

"Epstein credits" are used to reimburse a spouse who has used separate property to pay a preexisting community obligation after separation. (In re Marriage of Epstein (1979) 24 Cal.3d 76, 84.) "`However, there are a number of situations in which reimbursement is inappropriate, so reimbursement should not be ordered automatically." (Ibid., quoting In re Marriage of Smith (1978) 79 Cal.App.3d 725, 747.) Husband cited the first of these "Epstein" factors, "`[r]eimbursement should not be ordered . . . where the payment was made on account of a debt for the acquisition or preservation of an asset the paying spouse was using and the amount paid was not substantially in excess of the value of the use." (Id. at pp. 84-85, quoting In re Marriage of Smith at p. 747.) But in this case, substantial evidence demonstrates that the loans at issue were used for general community expenses during the marriage rather than to preserve the house.

Husbands argument against the interest awarded Wife runs afoul of the rule that "case law does not require that reimbursement be limited to principal reduction payments only. . . . [E]pstein . . . allows the trial court discretion to order reimbursement in an amount that is equitable. [Citation.]" (In re Marriage of Hebbring (1989) 207 Cal.App.3d 1260, 1272, fn. omitted.) The record reflects no abuse of the trial courts exercise of discretion. Husband has not shown that Wife received any sum not warranted by equity.

IV

Husband argues the trial court erred in refusing to reimburse $125,000 to the community for satisfying a lien by Federal Wholesale Toys which encumbered the Aleman property. We are not required to consider this argument because Husband fails to support his position with citations to evidence in the record on appeal. (City of Lincoln v. Barringer (2002) 102 Cal.App.4th 1211, 1239.) Nevertheless, having already reviewed the entire record, we conclude that Husband failed to present substantial evidence that the community paid $125,000 to satisfy this loan.

It was Husbands burden to trace the payment of this loan to community funds in order to warrant reimbursement. (In re Marriage of Feldner (1995) 40 Cal.App.4th 617, 624.) Husbands testimony was contradictory. First he testified that he had paid off the lien with a combination of cash and services. Wifes expert, Kenneth Walheim, examined the financial records from the marriage and Husbands records and could find no resources from which Husband could have satisfied the Federal Wholesale Toys lien. After hearing this testimony, Husband testified that his father had paid off the lien as a gift to him. Wife contradicted this evidence by testifying that Husbands father lived on a limited income in a small apartment in Van Nuys. She had been told that the father had some savings in gold. The trial court did not believe Husbands testimony that the lien had been satisfied from community funds or his own funds. Based on this record, we find no error or abuse of discretion in that ruling.

V

Husband argues the trial court erred by awarding Wife prejudgment interest on her credit card balances. He cites no authority in support of this argument thereby abandoning the issue. We therefore decline to address it further. (Harding v. Harding (2002) 99 Cal.App.4th 626, 635.)

VI

Finally, Husband asserts the trial court erred by ordering him to pay $80,000 in attorneys fees to Wifes attorneys as sanctions pursuant to section 271. He contends the order was made in violation of his due process and statutory rights to notice and an opportunity to be heard.

Section 271 subdivision (a) empowers the court to award sanctions: "[T]he court may base an award of attorneys fees and costs on the extent to which the conduct of each party or attorney furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys." Subdivision (b) of the statute codifies due process requirements: "An award of attorneys fees and costs as a sanction pursuant to this section shall be imposed only after notice to the party against whom the sanction is proposed to be imposed and opportunity for that party to be heard." "A sanction order under Family Code section 271 is reviewed under the abuse of discretion standard. `"[T]he trial courts order will be overturned only if, considering all the evidence viewed most favorably in support of its order, no judge could reasonably make the order . . . ." [Citations.] (In re Marriage of Daniels (1993) 19 Cal.App.4th 1102, 1106 .)" (In re Marriage of Burgard (1999) 72 Cal.App.4th 74, 82.)

Husbands claim that he never had notice of possible sanctions under section 271 is belied by the record. Counsel for Wife notified the court and counsel for Husband several times that Wife intended to seek section 271 sanctions. On November 9, 2001, counsel for Wife stated in open court that her client planned to proceed according to court rules and to submit pleadings and invoices on the issue of attorneys fees within 10 days of the end of trial.

On the last day of trial, Wifes attorney again raised the attorneys fee issue. Counsel for Husband objected, acknowledging that counsel and the court had discussed resolving the fees by motion. Counsel for Wife continued, asking that Husband be ordered to pay at least 90 percent of Wifes attorneys fees and accounting fees as sanctions. He stated that a detailed declaration would be presented to the court on that issue within 10 days, according to the stipulation of the parties. Counsel for Husband made no further response or objection to this statement. The trial court ruled on some issues, set a further hearing for remaining issues, and gave counsel ten days from that date to file the request for attorneys fees.

Ten days after the trial court issued a minute order with its rulings on the trial issues, Wife filed declarations in support of a fee award under section 271, supported by billing records and correspondence between counsel in the case. That pleading was served on counsel for Husband by mail on December 10, 2001. The record does not contain a response by Husband. The trial court did not issue its order awarding sanctions until January 29, 2002.

We conclude that Husband received adequate notice of Wifes application for a sanctions award under section 271. (In re Marriage of Petropoulos (2001) 91 Cal.App.4th 161, 179.) Moreover, a separate oral hearing on the sanction issue is not required and may be waived if there is no timely request for a hearing. (Ibid.) Husband fails to cite the record where he requested a hearing on the sanctions issue. We have found no such request. Under these circumstances, Husband waived an opportunity to be heard.

Husband also argues the sanctions award imposes an extreme financial burden on him in violation of section 271. Section 271, subdivision (a) instructs the trial court to take into consideration all evidence concerning the parties incomes, assets, and liabilities in making the award. "The court shall not impose a sanction pursuant to this section that imposes an unreasonable financial burden on the party against whom the sanction is imposed." (§ 271, subd. (a).)

There is no suggestion in this record that the trial court failed to consider the financial burden on Husband imposed by the sanctions award. Moreover, Husband fails to cite us to record evidence of such a burden. (In re Marriage of Petropoulos, supra, 91 Cal.App.4th at p. 180.) The record is replete with evidence of Husbands obstreperous conduct in the course of this dissolution proceeding. We find no abuse of the trial courts discretion.

DISPOSITION

The judgment of dissolution is affirmed. Wife is to have her costs on appeal.

We concur: VOGEL (C.S.), P.J., CURRY, J.


Summaries of

In re Marriage of Claudia

Court of Appeals of California, Second District, Division Four.
Nov 5, 2003
No. B156379 (Cal. Ct. App. Nov. 5, 2003)
Case details for

In re Marriage of Claudia

Case Details

Full title:In re Marriage of CLAUDIA and JACK J. ESKENAZI. CLAUDIA ESKENAZI…

Court:Court of Appeals of California, Second District, Division Four.

Date published: Nov 5, 2003

Citations

No. B156379 (Cal. Ct. App. Nov. 5, 2003)