Opinion
B164411.
11-13-2003
In re Marriage of COLIN and GWENDOLYN GUNN ROACH. COLIN ROACH, Appellant, v. GWENDOLYN GUNN ROACH, Respondent.
Rehm & Rogari and Joanna Rehm for Appellant. Law Offices of Thomasina M. Reed and Thomasina M. Reed for Respondent.
Appellant Colin Roach (Husband) appeals from that part of a judgment of dissolution awarding three real properties to his former wife, respondent Gwendolyn Gunn Roach (Wife), as her sole and separate property. The properties were purchased during the marriage. In 1992, Husband transferred the properties to Wife as her sole and separate property. Husband contends the family law court erroneously applied a presumption, based on the form of title, that the properties were Wifes separate property and required Husband to prove by clear and convincing evidence that they were community property. Husband contends the family law court should have applied a presumption that the properties were community property because they were acquired during marriage and a presumption that the transaction transferring the properties to Wife was unfair, both of which would have placed the burden of proof on Wife. We affirm.
FACTS AND PROCEDURAL BACKGROUND
In accordance with the standard of review, the facts have been stated in the light most favorable to the judgment. (In re Marriage of Nichols (1994) 27 Cal.App.4th 661, 670.)
The Marriage
In 1986, Husband owned a condominium he had purchased for $ 33,000 in 1979. He had a bank account at Founders Savings and Loan Association and owed undergraduate and graduate school student loans. Wife owned a three-unit property on 102nd Street in Los Angeles she had purchased in 1978 and property on Crenshaw Boulevard purchased in 1981.
On June 28, 1986, Husband and Wife entered into an antenuptial agreement. The parties agreed that the condominium would remain Husbands separate property "to use and dispose of as he sees fit and as if no marriage had been entered into." They also agreed the Crenshaw Boulevard and 102nd Street properties would remain Wifes separate property "to use and dispose of as she [sees] fit and as if no marriage had been entered into."
Husband and Wife married on July 3, 1986. They lived in two of the three units on the 102nd Street property. The monthly mortgage payment for the property was $358.22 and the tenant living in the third unit paid $625. The rent from the tenant paid all the expenses of the property.
During the parties marriage, Wife managed the community funds, paid the bills, reviewed bank statements, maintained necessary documents, and prepared the parties tax returns. The parties filed separate tax returns under the filing status of "single." Wife had more than one separate bank account and the parties had a joint account for community bills. Husbands bank account at Founders Savings became a joint account. Wife worked intermittently. She worked or drew unemployment benefits for part of almost every year of the marriage.
Wifes brother and sister-in-law owned property in Victorville. They were divorcing and planned to abandon the property. In March 1987, Wife paid them $3,000 or $4,000 from her separate property. On March 10, 1987, the passbook for the Founders Savings account showed a balance of 66 cents. Wife prepared a grant deed to transfer the title to the property from her brother and his wife to herself and Husband as joint tenants. She arranged to take title in joint tenancy because she felt she should include her new husband in her purchase. On March 13, 1987, Husband and Wife took title to the Victorville property subject to the existing mortgage of $75,000.
On October 1, 1987, Husband sold his condominium for $64,000 and received net proceeds of approximately $30,000. Wife was not involved in the sale. Wife called Husbands creditors and negotiated reduced payments for Husbands outstanding debts. Husband used funds from the sale of the condominium to pay his debts and improve his credit standing. Husband had funds remaining from the sale after payment of debts.
Parties Enter Into Oral Agreement
Husband had steady employment and a retirement account through his work. He was in the process of improving his credit in order to buy property. Wife wanted to take money out of her real properties in order to build on her investments for retirement, but she was not working and could not qualify for a loan. In late 1987 or early 1988, the parties orally agreed that Husband would purchase real property for Wife for her retirement. Wife suggested Husband take title to the properties as a single man, because he had an income, could obtain credit and could take advantage of the tax benefits, whereas Wife worked only intermittently. They agreed Husband would return the property to Wife at her request.
Pursuant to their agreement, the parties arranged for Wife to "sell" the 102nd Street property to Husband. They agreed the 102nd Street property would remain Wifes separate property and the proceeds from the sale would also be her separate property to use for investments. The purchase price was $160,000. The down payment plus the escrow costs and fees totaled $20,000. Wife falsely told the escrow company that Husband had given her $20,000 in cash. However, Husband did not deposit any money into the escrow or pay Wife any money. Husband obtained a loan for approximately $144,000. On March 10, 1988, Wife executed a grant deed stating that for valuable consideration, "[Wife], a single woman, who acquired title as Gwendolyn Katherine Gunn, an unmarried woman hereby grants to [Husband], a single man" the 102nd Street property. Wifes loan on the property from Family Savings of $37,095.84 was paid, and Wife received net proceeds of $119,806.35.
Wife deposited the proceeds into her separate property account at First Interstate Bank. Before the deposit, the account had a balance of $961. Her account statement reflects a deposit of $119,806.35 on July 5, 1988, and a withdrawal of $67,640.70 on July 6, 1988. Wife opened an account at Great American Bank (GA 1). She placed funds from her First Interstate account into GA 1 in order to begin buying investment property.
Pursuant to the parties agreement that Husband would buy all of the properties and return them to Wife at an unspecified time in the future as her separate property, Wife quitclaimed the Victorville property to Husband on July 20, 1988. Wife executed the quitclaim deed so that Husband could hold title in his name, potentially refinance the loan on the property, and later sell the property for investment purposes for Wife. The rental income from the property was sufficient to pay the property expenses.
In November 1988, a property was purchased on Gladwick Street in Carson for $125,000. Wife paid $21,000 from GA 1, and Husband took out a loan of $103,000. Husband took title to the Gladwick property as "a single man." The property was never rented. Wife spent approximately $10,000 from GA 1 for repairs and renovation. Gladwick was sold on May 2, 1989, for $165,000. After accounting for mortgage payments and other expenses, Wifes net profit was approximately $25,000. She deposited the proceeds from the sale into GA 1.
On May 12, 1989, Wife opened a second account at Great American Bank (GA 2) in her name as "trustee" for Husband and deposited $ 19,250 to the account. She deposited an additional $15,500 on May 23, 1989. The total account balance was $34,750. The deposits to GA 2 came from the withdrawal ten months earlier on July 6, 1988 of $67, 640.70 from First Interstate. Wife deposited the funds she had withdrawn from First Interstate into GA 2 so that Husband could buy property for her. Wife was the only signatory to GA 2. She put Husbands name on the account to make it appear to third parties that he had available funds.
On August 16, 1989, the Victorville property was sold. The grant deed lists the grantor as "[Husband], a married man as his separate property." The sale price was $99,000. After paying the mortgage and brokers commission, the net profit was approximately $ 15,000. Escrow was opened on October 6, 1989, to purchase a property on 103rd Street in Los Angeles. The proceeds from the sale of Victorville were transferred directly into the escrow account for 103rd Street.
Another escrow was opened to purchase a property on Leapwood in Carson. The purchase price was $187,000. The grant deed is dated October 14, 1989. Husband took title to Leapwood as "an unmarried man." The sellers notarized the grant deed on October 19, 1989. Husband obtained a loan for $149,600 for Leapwood. On November 13, 1989, Wife wrote a check to Husband for $10,000 from GA 2 and on November 27, 1989, Wife wrote a check to Husband for $5,000 from GA 2. Husband was supposed to deposit the checks into GA 1 and use the funds to purchase Leapwood. The total down payment was approximately $38,000. Wife had several accounts and used funds from the Great American accounts, First Interstate or other accounts of hers to make the down payment. The grant deed and the deed of trust for the Leapwood property were recorded on December 1, 1989.
The parties moved from 102nd Street to Leapwood. The parties had a joint account at Home Savings and Loan that was opened earlier in the year. They used the account to pay joint expenses including the Leapwood mortgage until the date of separation. Wife occasionally deposited rents into the joint account. From 1987 through 1989, Wifes income ranged between $5,000 and $10,000, whereas Husbands income ranged between $35,000 and $42,000.
The purchase price for 103rd Street was $163,500. In addition to the proceeds transferred directly into escrow from the sale of the Victorville property, on February 12, 1990, Wife wrote a check to Husband for $5,000 from GA 2 to use for the purchase of 103rd Street. Wife paid a total of $7,000 in addition to the Victorville proceeds. The escrow documents for 103rd Street reflect an initial deposit of $15,761.79 and a total credit of $22,901.71. Although the grant deed is dated October 6, 1989, Husband obtained a loan of $147,150 for 103rd Street on February 22, 1990. Husband took title to 103rd Street as "an unmarried man." The deed of trust lists the trustor as "an unmarried man." The sellers signature on the grant deed was notarized on February 26, 1990, and the deed was recorded on March 1, 1990. The monthly mortgage on the property was approximately $1,200 and the tenants paid $1,140.
In November 1991, Husband and Wife discussed purchasing a car for Husbands son from a previous relationship who was living in New York. Wife needed to buy a car and did not want Husband to purchase a car for his son. Husband disregarded her opinion. On November 13, 1991, Husband purchased a car for his son without Wifes knowledge. Husband was the owner of the car. On November 15, 1991, Husbands son was in an automobile accident in New York. A man was injured in the accident and a woman was killed. Wife learned about the accident shortly afterward. Husband and Wife were having marital difficulties, and Wife discovered Husband was having an affair. She asked him to return the title to her properties to her name and he agreed.
On December 13, 1991, Husbands sons insurance company wrote to the son regarding coverage for the accident. The letter stated: "A serious question as to coverage exists. We are unable to locate a policy which is in force covering your vehicle for the above captioned date of loss."
Wife located an attorney. On December 19, Husband and Wife visited the law firm. Husband paid a retainer of $1,000 from his separate property. They explained their agreement concerning the properties. The attorney asked Wife to leave the room and he spoke with Husband individually. There was no discussion in Wifes presence about the car accident or protecting the properties in the event of a lawsuit resulting from the accident. She believed that transferring property to avoid paying a judgment would be illegal. The attorney opened a file in Husbands name labeled as a real estate transfer matter. On January 2, 1992, Husband left a message for the attorney to call the claims officer at the insurance company. He also sent the attorney copies of documents from sons insurance company.
On January 13, 1992, Husband signed a grant deed stating that for valuable consideration, he granted Wife, "a married woman, as her sole and separate property" the 103rd Street property. He signed similar grant deeds for 102nd Street and Leapwood. He understood that he was transferring the properties to Wife as her sole and separate property. In addition, Husband signed a document for each property stating that no tax was due. Each of those documents contained that statement, "This conveyance establishes sole and separate property of a spouse." Once the deeds and property tax documents had been completed, Wife paid the law firm $400.
In January 1992, the balance of the Leapwood mortgage was $ 142,000, the balance of the 102nd Street mortgage was 145,000, and the balance of the 103rd Street mortgage was $142,000. The real estate market had declined and the values of the properties were less than had originally been paid. The loans remained in Husbands name and the tax statements from the lender came in his name. 103rd Street was a negative property for tax purposes. Wife prepared the parties tax returns through 1998. Although title to the properties had been transferred to Wife, Wife continued to honor the parties original oral agreement by allowing Husband to claim 103rd Street and Leapwood on his taxes. She claimed the other properties on her tax returns.
Wife deposited rents into her separate property accounts and the joint account. From the time of transfer in 1992 to the time of separation, the units at 102nd Street and 103rd Street were rented continuously. The total rental income from 102nd Street and 103rd Street paid all of the expenses for the rental properties and no community funds were ever needed to pay the mortgage or other expenses. Community funds were used to pay the mortgage and expenses for Leapwood.
On June 5, 1992, Husbands sons insurance company filed a complaint for declaratory relief against the son, Husband, and the parties injured in the accident seeking a declaration that the car had not been validly insured. The insurance company alleged that no insurance coverage had been in effect, and therefore, the insurance company had no duty to defend Husband or his son in the personal injury and wrongful death lawsuits that were pending against them. On August 13, 1992, Husbands son received notification that his insurance company would be withdrawing the lawsuit to deny coverage and a defense. Husband never asked Wife to re-transfer title into his name or their names jointly.
Husband finished repaying his student loans in 1997. In 2001, the parties credit card accounts for community debts were overdue and had been forwarded to collection agencies. Wife negotiated the balances owed on the credit card debts. In February 2001, Husband withdrew more than $11,000 from his pension plan, leaving a balance of $938. He deposited the funds into a joint checking account at Washington Mutual Bank. Husband used the funds to pay the collection agencies. He did not have any other source of funds from which to pay the debts. The parties agreed to separate on April 29, 2001. The following day, Wife withdrew $2,500 from the Washington Mutual account. She used a portion of the withdrawal for the Leapwood mortgage payment. On May 2, 2001, Husband withdrew the balance of $5,444 and closed the joint account at Washington Mutual. He used the funds to open a new account solely in his name. He did not share any of the funds with Wife, nor did he account to Wife for his use of the money, because he considered it to be his money.
At the time of the parties separation, the balance of the mortgage on Leapwood was $65,000, 102nd Street was $125,000, and 103rd Street was $125,000. Wife borrowed money from her brother to pay off the Leapwood mortgage. As a result, Husband received a refund of $1,300 that had been collected for property taxes by the lender.
Dissolution Proceedings
On May 2, 2001, Husband filed a petition for dissolution. He requested a declaration that Leapwood and 103rd Street were community property. At trial, he additionally claimed that 102nd Street was community property. Trial commenced on the property issues on March 12, 2002. Judgment was entered terminating marital status as of February 2, 2002. At the end of the parties evidentiary presentation, the family law court stated: "I have to say that this case presents some challenges because neither party seems to have any qualms about misrepresenting facts to the tax authorities or to the escrow companies or lenders about whether theyre married or not married or who owns the property or who doesnt own the property. And I think that neither party has any qualms about misrepresenting to the court what the true facts are if its going to stand to their benefit. [¶] So its difficult to discern from these complicated dealings just what the parties intended or where the truth lies. What that leaves me with is to simply test this testimony against the standard of common experience. And I havent made up my mind, of course, which way Im going to go on this, but you have the benefit of my thinking thus far. [¶] [Wifes] testimony that the parties wanted to fund her own retirement program through [Husbands] credit readiness has some appeal. She was working intermittently and didnt have a work history on which to base a credit application. [& para;] I also think [Husbands] contention that all of the property was deeded back to her was in order to insulate assets in connection with this pending or potential legal problem. That whole scenario strikes me as a not very clever and sort of a clumsy approach especially using a law firm of the caliber that I think this firm was. [¶] On the other hand, we find in the file a phone memo from an insurance representative evidently in connection with this lawsuit. So its hard to know exactly what the theory was. I think that perhaps both motivations were at play. I tend to believe [Wifes] testimony that she was never made aware of this accident and this problem with the potential liability. I found her testimony generally more credible than [Husbands]. She was candid about facts that did not weigh in her favor, and [Husband] was never candid in that regard. [¶] One thing that I need you to address, [Husbands counsel], is the theory that it was the communitys credit that enabled [Wife] to end up with these properties that she now claims are her separate property. We havent really heard that theory of events by [Husband], but Ive considered it. I need to do some investigation in that regard myself. That seems plausible to me." The parties filed their closing arguments in writing.
The family law court issued a tentative ruling on August 1, 2002, awarding the Crenshaw, 102nd Street, 103rd Street and Leapwood properties to Wife as her sole and separate property. The family law court made no award of spousal support, stating: "The parties have had a modest middle class lifestyle. The wife has an education, good health, and even has work experience. The evidence at trial did not disclose any reason why she did not work during marriage, except to manage the parties financial affairs, buy and sell real estate, and oversee her rental properties. She has been, and remains, fully capable of supporting herself through earnings and rental income. From her own testimony, this marriage has dedicated itself to funding her retirement plan, which she now enjoys."
Husband requested a statement of decision. The family law court ordered Wife to prepare a proposed statement of decision. The proposed statement of decision stated the legal basis for the family law courts order awarding the properties to Wife as follows: "The Court may enforce a written prenuptial agreement under general contract law provisions, as long as there is no evidence of duress or undue influence or fraud, and both parties were represented by counsel. [California law] requires evidence to show a partys `free will was overborne by the exercise of undue influence, fraud, menace or duress to invalidate a premarital agreement. Family Code section 852 governing transmutations permits a spouse to transmute separate property into community property or vice versa, provided there is a clear recitation in the deed or other writing of such intent and stating that the character is changed. [Citations.] The deeds executed by [Husband] satisfied these requirements. Title transferred by quitclaim or interspousal transfer deed to a spouse as her sole and separate property is presumed to be the separate property of the grantee spouse. [Citation.] Evidence Code section 662 creates a rebuttable presumption that the owner of legal title is presumed to be the owner of the full beneficial title, and may only be rebutted by clear and convincing proof. This section is applicable to Family Law actions. [Citation.]
"Under each of these legal principles, the Court concluded that [Husband] had agreed that each of the real properties were the sole and separate property of [Wife]. [Husband] made no claim to Crenshaw and 102nd by his Petition. If there were any community interests in any of the properties, either based on acquisition or otherwise, when [Husband] executed the deeds in 1992, he transmuted the property to the separate property owned by [Wife]. [Husband] did not overcome the presumption of Evidence Code section 662 by clear and convincing proof at trial. He had no recollection as to many events. He failed to produce documentary evidence to show the source of any funds. Thus, the Court found that the properties are [Wifes] sole and separate property. The Court did find that the community was entitled to reimbursement for the amount that the principal owed for the mortgage used to purchase the Leapwood property had been reduced during the marriage with the use of community funds. Evidence was presented as to that amount during trial. No evidence was presented that community funds were used to reduce any other mortgage principal balance for the other real properties."
A hearing was held on November 5, 2002. Additional testimony was apparently taken, but a reporters transcript for this date is not part of the record on appeal. The family law court received the proposed statement of decision and proposed judgment. On December 3, 2002, the family law court found no objections had been filed, and therefore, adopted the proposed statement of decision and entered judgment. The family law court found Wife owned as her separate property: (1) Crenshaw; (2) 102nd Street; (3) 103rd Street; and (4) Leapwood. The family law court found Husbands separate property consisted of post-separation contributions and earnings in the California Manufacturing and Technical Retirement Account. The family law court awarded the following community property with a net value of $18,299 to Husband as his separate property: (1) an income tax refund of $3,784; (2) a retirement incentive plan of $2,847; (3) $4,244 from a joint checking account; (4) the communitys interest of $982 in the pension plan; (5) a 1989 car valued at $3,055; (6) property tax impounds of $1,387; and (7) personal property valued at $2,000. The family law court awarded the following community property with a net value of $80,981 to Wife as her separate property: (1) a 1998 truck valued at $5,685; (2) personal property valued at $2,000; (3) credit card debt of $11,304; and (4) the communitys payments of $84,600 to reduce the balance of the loan on the Leapwood property. The family law court denied reimbursement to the community for payments made on Husbands student loans. The family law court also found no reimbursement was due to Husband for post-separation payments made on the Leapwood property. The family law court awarded Husband an equalizing payment of $31,341. Husband was assigned as his separate property all debts and obligations in his name. Wife was assigned as her separate property all debts and obligations in her name. The family court found the parties had a lengthy marriage and reserved jurisdiction to award support to Wife. The parties were ordered to pay their own attorneys fees and costs without contribution from the other. Husband filed a timely notice of appeal.
Husband does not contest the allocation of the Crenshaw property to Wife as her sole and separate property.
DISCUSSION
Standard of Review
"A trial courts findings regarding a propertys separate or community character is binding and conclusive on review when supported by substantial evidence [citations], even though evidence conflicts or supports contrary inferences. [Citations.]" (In re Marriage of Grinius (1985) 166 Cal.App.3d 1179, 1185.)
Property Characterization Presumptions
Husband makes a series of contentions on appeal concerning presumptions he asserts the family law court should have applied to determine the character of the 102nd Street, 103rd Street, and Leapwood properties. Husbands contentions are incorrect.
"Characterization of property, for the purpose of community property law, refers to the process of classifying property as separate, community, or quasi-community. . . . [¶] Generally, factors determinative of whether property is separate or community are the time of the propertys acquisition; operation of various presumptions, particularly those concerning the form of title; and whether the spouses have transmuted or converted the property from separate to community or vice versa." (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 291.) "Where property status cannot otherwise be proved, characterization is determined by applicable presumptions." (Ibid.)
"[T]he most basic characterization factor is the time when property is acquired in relation to the parties marital status." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 291.) Family Code section 760 provides: "Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property." "Property bought during marriage by either spouse is rebuttably presumed to be community property [citations], and typically the spouse asserting its separate character must overcome this presumption." (In re Marriage of Grinius, supra, 166 Cal.App.3d at pp. 1185-1186.) "Since this general community property presumption is not a title presumption, virtually any credible evidence may be used to overcome it, including tracing the asset to a separate property source, showing an agreement or clear understanding between parties regarding ownership status and presenting evidence the item was acquired as a gift." (In re Marriage of Haines, supra, 33 Cal.App.4th at pp. 289-290.) "For example, spouses can indicate their intent with respect to the character of the property initially by specifying the form of title in which it is held, or spouses can later transmute the character of the property as between each other." (Id. at p. 291.)
The form of title presents another set of presumptions. (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 291.) The general common law presumption in favor of title is codified in Evidence Code section 662: "The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof." "Therefore, absent a contrary statute, and unless ownership interests are otherwise established by sufficient proof, record title is usually determinative of characterization." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 291.) "The presumption arising from the form of title could be overcome by evidence of an agreement or understanding between the parties that the interests were to be otherwise. [Citations.] It could not be overcome, however, `solely by evidence as to the source of the funds used to purchase the property. [Citation.] Nor could it `be overcome by testimony of a hidden intention not disclosed to the other grantee at the time of the execution of the conveyance. [Citations.]" (In re Marriage of Lucas (1980) 27 Cal.3d 808, 813.)
The common law title presumption is superseded by statutory title presumptions in some circumstances. For example, Family Code section 2581 provides a rebuttable presumption that property acquired by the parties during marriage in joint form is community property for purposes of division upon dissolution of marriage. This presumption affects the burden of proof and may be rebutted by either (1) a clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is separate property and not community property, or (2) proof that the parties made a written agreement that the property was separate property. In the instant case, Family Code section 2581 applied to the Victorville property because the parties acquired it in joint form. However, as discussed further in the text, Husband transmuted any interest he had in the 103rd Street property that might have been traced to the Victorville proceeds. The parties have not raised any issues concerning Family Code section 2581.
"It is the affirmative act of specifying a form of ownership in the conveyance of title that removes such property from the more general presumption [that property acquired during marriage is community property]. [Citation.] It is because of this express designation of ownership that a greater showing is necessary to overcome the presumption arising therefrom than is necessary to overcome the more general presumption that property acquired during marriage is community property. In the latter situation, where there is no written indication of ownership interests as between the spouses, the general presumption of community property may be overcome simply by tracing the source of funds used to acquire the property to separate property. [Citations.] It is not necessary to show that the spouses understood or intended that property traceable to separate property should remain separate." (In re Marriage of Lucas, supra, 27 Cal.3d at pp. 814-815.)
"Both before and during marriage, spouses may agree to change the status of any or all of their property through a property transmutation. ([Fam. Code,] § 850.) A transmutation is an interspousal transaction or agreement that works a change in the character of the property. [Citation.] In order for a transmutation of property to occur, statutory formalities must be met." (In re Marriage of Campbell (1999) 74 Cal.App.4th 1058, 1062.) Family Code section 852, subdivision (a) provides: "A transmutation of real or personal property is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected." An "express declaration" requires "language which expressly states that a change in the characterization or ownership of the property is being made. The determination whether the language of a writing purporting to transmute property meet the [express declaration] test must be made by reference to the writing itself, without resort to parol evidence." (In re Marriage of Barneson (1999) 69 Cal.App.4th 583, 588.)
A transmutation must be proven by clear and convincing evidence. (In re Marriage of Weaver (1990) 224 Cal.App.3d 478, 486-487.) This standard of proof for a transmutation is derived from Evidence Code section 662. (Ibid.) Under Evidence Code section 662, property is presumed to be owned as shown in the record title and only clear and convincing evidence rebuts the presumption. Therefore, in order to find that the original character of property has been changed, the transmutation must be proven by clear and convincing evidence. (Ibid.)
A transaction that fails to satisfy the express declaration requirements of Family Code section 852, but is sufficient to transfer title, implicates both the requirement that transmutations must be proven by clear and convincing evidence and the presumption that the character of the property is shown by the title. (In re Marriage of Barneson, supra, 69 Cal.App.4th at pp. 592-593.) If Evidence Code section 662 applied, a transfer of legal title would necessarily demonstrate a transmutation under Family Code section 852, subdivision (a) in every case. (Id. at p. 592.) This is because the party opposing transmutation cannot rely on extrinsic evidence, and therefore could not show by clear and convincing evidence that the transaction did not constitute a transmutation. (Ibid.) Therefore, where a transaction purportedly resulting in a transmutation of property falls short of the express language test, the title presumption of Evidence Code section 662 should not be applied. (Id. at p. 593.)
Another factor affecting the validity of a transmutation is that spouses are subject to special standards of disclosure towards each other with respect to property, based on their confidential and fiduciary relationship. (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 293; Fam. Code, § 721.) "Under 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." (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 287.) "To demonstrate the advantage was not gained in violation of the confidential relation between marital partners, [the advantaged spouse has the] burden . . . to prove [that the transaction] `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. [Citations.]" (Id. at p. 296.)
Where one spouse receives an advantage from an interspousal property transfer by deed, both the presumption of undue influence arising from the advantage and the presumption that title is as shown in the deed are implicated. (In re Marriage of Haines, supra, 33 Cal.App.4th at p.294.) If title were presumed to be held by the advantaged spouse as shown in the deed, a presumption of undue influence would not be sufficient to satisfy the clear and convincing evidence required to rebut the title presumption, and thus, the undue influence presumption would never be applied to require the advantaged spouse to prove the transaction was fair. (Id. at p. 301.) "[A]pplication of [Evidence Code] section 662 in such situations can significantly weaken protections the Legislature intended to provide for spouses who are taken advantage of in interspousal transactions. This cannot be in keeping with the intent of the Legislature, which conditioned the power of spouses to transact with each other on their compliance with the fiduciary standard." (Ibid.) "Finally, we note that where two presumptions are in conflict, the more specific presumption will control over the more general one." (Ibid.) Therefore, "where there is a conflict between the common law presumption in favor of title as codified in [Evidence Code] section 662 and the presumption that a husband and wife must deal fairly with each other, application of [Evidence Code] section 662 is improper." (Id. at p. 287.)
In this case, the family law court properly found the title presumption of Evidence Code section 662 applied and did not conflict with other statutory presumptions. At the time of the parties separation, Wife held title to the three properties at issue as her separate property. Therefore, unless a conflicting presumption applied, Husband was required to prove his claim that the properties were community property by clear and convincing evidence.
First, Husband contends that Wife acquired the properties in 1992 in her name as her separate property, and therefore, application of the presumption under Family Code section 760 that property acquired by a married person during marriage belongs to the community conflicts with the title presumption of Evidence Code section 662. Husband contends that under these circumstances, the family law court should have applied the community property presumption of the Family Code and shifted the burden to Wife to prove by a preponderance of the evidence that the properties were not community assets. However, it is well settled that the affirmative act of specifying a form of ownership in the conveyance of title removes property from the more general community property presumption. (In re Marriage of Lucas, supra, 27 Cal.3d at p. 815; In re Marriage of Broderick (1989) 209 Cal.App.3d 489, 496; contra, In re Marriage of Haines, supra, 33 Cal.App.4th at p. 292 [suggesting in dicta that generally, where the title presumption of Evidence Code section 662 conflicts with the presumption that property acquired during marriage is presumed to be community property, the statutory community property presumption should predominate and the property should be characterized as community]; see also In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 848, fn. 8.) Accordingly, the general community property presumption was rebutted in this case by Husbands act of transferring title to Wife as her separate property and specifying the separate property nature of her interest in the grant deed.
Regardless of the parties interests prior to 1992, the parties changed the characterization of the properties through interspousal transactions. There was no issue in this case as to whether the deeds transferring the properties to Wife constituted valid transmutations under Family Code section 852. The deeds clearly stated that Husband was transferring property to Wife, a married woman, as her sole and separate property. He understood that he was transferring the properties to her as her sole and separate property. He also signed the tax documents stating that the transfers conveyed properties to Wife as her sole and separate property. Both parties testified that the grant deeds transferred the properties to Wife as her sole and separate property. They merely disagreed as to the reason for the transfers. Wife stated that the transfers were made pursuant to an agreement to return the properties to her at her request. Husband stated that the properties were transferred to protect them from creditors. Even under Husbands version, his whole purpose was to transfer the properties so that he would not have any interest that could be reached by creditors. Under both versions, the properties were transferred to Wife as her sole and separate property. Husbands testimony that he thought the properties were still community property despite the transfers was not credible, for if he thought the properties would still be community property after transferring them to Wife, then there would have been no purpose for the transfers. There was no testimony that the parties had an agreement that the properties would remain community property despite the transfers. Rather, the family law court found Wifes testimony credible that she was not aware of any potential litigation from the car accident. Even if Husband secretly intended for the properties to remain community property, the deeds met the requirements for a transmutation and he understood that he was transferring the property to Wife as her separate property. Without any agreement or knowledge by Wife, Husbands secret intent for the property to be community property does not invalidate the transfer in which he understood what he was doing was transferring the properties to Wife as her separate property.
The transfers advantaged Wife, and therefore, the presumption of undue influence was implicated. However, Husband never claimed that he transferred the properties as a result of duress or undue influence. He testified that he transferred the properties to avoid potential creditors. The transfers were unrelated to any undue influence by Wife, and therefore the presumption arising from advantage was not applicable to this case.
Because evidence of transmutation and no undue influence was not in question, the family law court properly applied Evidence Code section 662 and required Husband to prove the properties were community property by clear and convincing evidence. Husband completely failed to meet this burden. Husband had no records documenting the purchases. He estimated the purchase prices for the properties based on the documentary transfer tax paid for each purchase. Based on this information, he estimated the parties profit from each transaction. However, he did not include brokers commissions or escrow fees. He did not know the exact amounts of the profits received from the sales of properties. He produced no documentary evidence to trace the funds used for any of the purchases. He had very little recall of most of the events. His evidence consisted of estimates, assumptions based on the timing of the real estate transactions and his employment record, and unsupported assertions. Husband could not recall the names of the banks where the parties held accounts during their marriage. Although Husband testified that he thought the properties were community property despite the 1992 transfers to Wife, Husband did not prove by clear and convincing evidence that the properties were community property. He did not provide evidence of any oral or written agreement between the parties that the properties would be community property despite the transfers to Wife as her sole and separate property. The fact that Husband continued to claim two of the properties on his tax return was ambiguous under the circumstances of this marriage in which the parties had repeatedly made misrepresentations to the tax authorities, such as by claiming they were "single," and therefore, the fact that Husband claimed two properties on his tax return did not rise to the level of clear and convincing evidence of community property.
The family law court properly applied the title presumption of Evidence Code section 662 in this case. Husband raises additional contentions on appeal concerning Wifes inability to adequately trace the source of the funds used to purchase the properties. As shown above, Wife did not have the burden to prove that the properties were her separate property. Moreover, all of Husbands contentions concern the character of the property prior to 1992. The 1992 grant deeds transferred Husbands interest, if any, to Wife as her sole and separate property. Therefore, the character of the contributions to the purchases prior to 1992 are irrelevant. In any event, it appears that from an equitable standpoint, the three properties in question can be traced to Wifes original separate property.
Nothing in our decision precludes Husband from requesting clarification in the trial court concerning the mortgages in his name on 102nd Street and 103rd Street.
DISPOSITION
The judgment is affirmed. Respondent Gwendolyn Gunn Roach is awarded her costs on appeal.
We concur: TURNER, P. J., and ARMSTRONG, J.