Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Contra Costa County Super. Ct. No. D98-01581
Margulies, J.
The trial court awarded Christina Geraci a community property interest in certain real property to which her former husband, Scott Lawton, held record title at the time of trial. Lawton appeals, contending that the trial court erred in (1) finding that the 1993 transaction whereby Geraci and Lawton conveyed their community property interest in the property to Lawton’s mother raised a presumption of undue influence, and (2) requiring the parties to forgo live direct testimony under a local family law rule later declared invalid by the California Supreme Court. We hold that the trial court properly applied the presumption of undue influence and that Lawton has forfeited his objection to the trial procedures followed by failing to object in the trial court. We therefore affirm the judgment.
I. BACKGROUND
Geraci and Lawton were married in 1989, and separated in November 1997. Geraci petitioned for dissolution of the marriage in March 1998, and the marriage was dissolved in November 1998. The issue of the characterization of certain real property located on Flora Street in Crockett (hereafter, the Flora property) remained outstanding until trial on that issue was completed on June 22, 2006. The trial was conducted in accordance with a trial scheduling order that required the parties to submit written declarations in lieu of direct testimony. At the trial on June 22, the parties waived opening statements and cross-examination, and limited themselves to evidentiary objections and closing arguments.
The trial scheduling order was in accordance with former rule 12.5(b)(3) of the Superior Court of Contra Costa County Local Rules, which stated in relevant part: “Direct examination on factual matters shall not be permitted except in unusual circumstances or for proper rebuttal. The Court may decide contested issues on the basis of the pleadings submitted by the parties without live testimony.” (Elkins v. Superior Court (2007) 41 Cal.4th 1337, 1346 (Elkins).)
The evidence regarding the Flora property may be summarized as follows:
Lawton and Geraci bought the Flora property (consisting of two 2,000-square-foot residential units located on a 5,000-square-foot parcel) in July 1992. Lawton and Geraci took title to the property as “husband and wife, as joint tenants.” They assumed the seller’s mortgage loan of $105,000. As a condition for allowing Lawton and Geraci to assume the loan, the lender required payment of approximately $10,000 in prepaid mortgage obligations and other fees. Geraci and Lawton borrowed money from Geraci’s mother for that purpose. Geraci and Lawton rented one of the units back to the seller for $500 per month. The loan from Geraci’s mother was eventually repaid with personal injury compensation Lawton received from the military.
In January 1993, Lawton told Geraci that they needed to refinance the property but could not qualify for a refinance loan on their own. According to Geraci, Lawton handled the family finances. He told Geraci that they needed to have his mother on title to get a new loan on the property. Lawton presented Geraci with an individual grant deed filled out to add his mother, Joan Lawton, to the Flora property title as a joint tenant. Geraci signed it. Three months later, Lawton told Geraci that they needed to sign new copies of the deed to correct the deed papers in order to close the loan on the property. In April 1993, Lawton had Geraci execute what she thought were two copies of the same deed. In fact, the two documents were not identical. One document changed title to add Joan Lawton as a joint tenant, but the second document transferred Geraci and Lawton’s entire interest in the property to Joan Lawton. Both documents were recorded consecutively in the county recorder’s office on May 3, 1993.
Without understanding the true nature of the transactions, Geraci signed both deeds. According to Geraci, Joan Lawton never paid anything of value for the transfer of the Flora property to her, and Geraci never received anything in return for giving up her interest in the property. At the same time, Geraci and Lawton continued to make all of the mortgage, insurance, and tax payments for the property until they separated in 1998, while Joan paid nothing. Geraci did not realize she was no longer an owner of the property until she learned, after the dissolution action was filed, that Joan Lawton had gifted the property back to her son, Scott, in April 2000.
Lawton’s declarations tell a different story. According to Lawton, the family’s income, consisting of his self-employment income and the nominal amount of rent they were receiving from the Flora property, made it impossible to continue making mortgage payments and maintain their ownership interest in the property. Although interest rates had fallen, he and Geraci were also unable to qualify for a refinance loan. In lieu of losing their investment, Geraci and Lawton asked Lawton’s mother for her assistance. Originally, it was agreed that Joan Lawton would be added as a joint tenant for purposes of qualifying for a new loan. Geraci and Lawton executed an individual grant deed placing the property into joint tenancy with Joan Lawton in January 1993. Joan Lawton thereafter applied for a new loan on the property in her name solely. She did this so that Geraci and Lawton would not lose the Flora property, which was their primary residence. Joan Lawton further agreed that Geraci and Lawton would pay the mortgage, taxes, and insurance from their own income, including rental income from the second unit, and that they could keep any excess income from the property for themselves.
Joan’s loan application was approved and grant deeds were prepared in conjunction with the loan by which title to the Flora property was transferred from Geraci and Lawton to Joan. The escrow officer personally advised both Geraci and Lawton when they executed the deeds that they were transferring their entire interest in the property to Joan Lawton. The result was that Geraci and Lawton’s mortgage payment was reduced to an amount they could afford, going from over $1,100 per month to $681 per month.
The trial court held that a presumption of undue influence arose from the April 1993 transactions under Family Code section 721 and In re Marriage of Haines (1995) 33 Cal.App.4th 277, and that Lawton failed to rebut the presumption. Since the section 721 presumption of undue influence prevails over the presumption under Evidence Code section 662 that Lawton, as the owner of record title to the Flora property, has full beneficial title to it, the court held that the Flora residence was community property. The court awarded Geraci $178,791.50, as the value of her community property interest in the Flora property.
Family Code section 721 provides in pertinent part: “[I]n 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. . . .”
“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.)
Evidence Code section 662 provides: “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.”
Judgment was entered December 18, 2007, and this timely appeal followed.
II. DISCUSSION
Lawton contends that the trial court erred in (1) finding that the transaction whereby Geraci conveyed her interest in the Flora property to Lawton’s mother raised a presumption of undue influence, and (2) requiring the parties to submit declarations from their witnesses rather than permit live direct testimony.
A. Presumption of Undue Influence
As an initial matter, Lawton points out that the judgment makes an unsupported finding that Geraci transferred her interest in the Flora property to her husband in April 1993. The judgment states: “The presumption of undue influence arose here when wife, at husband’s direction, signed over her rights to her community property share of the property to husband without receiving any discernible gain, benefit or profit.” (Italics added.) Lawton points out that Geraci and Lawton transferred their interests to Lawton’s mother in the 1993 transaction, and that Lawton did not become the record title holder until his mother gifted the property to him in 2000. There is in fact no dispute between the parties that, nominally at least, Joan Lawton, rather than Scott Lawton was the ultimate transferee in the 1993 grant deeds.
While the wording of the judgment may somewhat misstate the record, the trial court’s intent is nonetheless clear from its on-the-record statements after the trial and its statement of decision. The court believed that the 1993 transaction advantaged Lawton over Geraci because it eliminated Geraci’s community interest in the property, and placed title in the hands of a person closely aligned with Lawton who held the property for his benefit, not the community’s. As the trial court viewed the evidence, although Geraci may not have signed over her community property interest to her husband in 1993 in form, she did so in substance. We therefore do not regard the court’s judgment in that regard as being wholly unsupported by the record.
Lawton nonetheless argues that the trial court misapplied Family Code section 721. He argues that for a presumption of undue influence to arise there must have been some benefit to him in the transaction that was to Geraci’s disadvantage. He maintains that the minimum requirement for section 721 to apply is that one spouse must obtain an unfair advantage over the other “at the time of the transaction.” According to Lawton, the effect of the 1993 transactions was that both spouses identically lost their interest in whatever equity existed in the Flora property and, in return, the community gained a reduction in its monthly housing expense from $1,150 to $681.01. Although Lawton may have also gained an “expectancy” that he would inherit the property from his mother if she predeceased him, such a “mere expectancy” is not property and conveyed no enforceable rights to him. (See Estate of Mitchell (1999) 76 Cal.App.4th 1378, 1392–1393.)
In our view, the trial court correctly applied Family Code section 721 in this case. Section 721 imposes on each spouse “a duty of the highest good faith and fair dealing” and precludes either spouse from taking “any unfair advantage of the other.” (§ 721, subd. (b), italics added.) Geraci presented evidence, which the court found credible, that Lawton asked her to sign the 1993 grant deeds and deliberately deceived her about their effect. In particular, he concealed from her that by executing the deeds she was signing away her community property interest in the Flora property. It may be inferred from this deception that Lawton knew Geraci would not have willingly given up her interest in the property had she known the true facts. That in itself tends to negate Lawton’s claim that both spouses stood to gain and lose equally in the transaction. Had that been the case, no deception by one spouse would have been necessary to obtain the other spouse’s signature.
By claiming that both spouses stood in exactly the same position, Lawton is asking this court to pretend that Lawton’s mother stood in the same relationship to both spouses and that he had no more influence over her actions with respect to the property than Geraci did. But the law requires no such pretense. Whether Lawton had an enforceable agreement with his mother is not the relevant inquiry. It does not matter that Lawton could not have sued his mother for title to the property in a court of law. She was in fact aligned with him due to their familial bond. Any possible inference of neutrality or independence on her part is dispelled by the evidence that Lawton practiced deception in obtaining Geraci’s signature on the grant deed. Based on the evidence it found credible, the trial court correctly found that a transfer of the community’s interest in the property to Lawton’s mother gave Lawton an advantage at Geraci’s expense.
There is also no evidence showing a benefit to the community. Geraci and Lawton paid for their right to occupy the property by having to incur mortgage, tax, insurance, and maintenance expenses for a property in which they held no record interest and were accumulating no equity. Given that Geraci and Lawton were essentially renting their residential unit, there is no evidence that their rental expenses were below market for comparable properties.
Finally, we reject Lawton’s contention that Family Code section 721 does not apply because the 1993 transaction was not between husband and wife but between the community and Lawton’s mother. For the reasons discussed, the trial court was entitled to look beyond the form of the transaction and to infer from the deception practiced and the relationship between Lawton and his mother that he gained in the transaction at his wife’s expense.
The trial court did not err in determining that (1) a presumption of undue influence applied to the 1993 transfers, (2) Lawton failed to overcome the presumption, and (3) Geraci is entitled to the value of her community property interest in the Flora residence.
B. Trial Procedure
In Elkins, the California Supreme Court held that the same local rule that was applied in this case, requiring the trial court in contested dissolution proceedings to receive written declarations in evidence in lieu of direct testimony, was invalid because it conflicted with the hearsay rule. (Elkins, supra, 41 Cal.4th at pp. 1359–1360.) In Elkins, the husband had failed to submit declarations establishing the foundation for 34 of his 36 exhibits in a contested property proceeding. (Id. at p. 1348.) The trial scheduling order specified that if a party wished to put exhibits in evidence, the foundation for each exhibit must be completely set forth in that party’s declarations. (Id. at p. 1347.) Since the husband was not allowed to offer foundational testimony orally under the local rule, and he had not complied with the order requiring that the foundation for his exhibits be established by declaration, the trial court held that the 34 exhibits were inadmissible. (Id. at pp. 1348–1349.) After objecting on the record that the court’s exclusion of his exhibits effectively prevented him from defending his position in the property dispute, husband rested his case. (Id. at p. 1349.) He sought writ relief in the appellate court on the theory that the local rule was invalid on various statutory and constitutional grounds. (Id. at p. 1350.)
As a threshold matter, the wife in Elkins contended that husband had forfeited his claims by failing to object in the trial court. (Elkins, supra, 41 Cal.4th at p. 1363.) The Supreme Court rejected wife’s forfeiture claim, in part. The court found that husband’s objection to the exclusion of nearly all of his evidence preserved his claim with respect to the rule regarding the admissibility of exhibits even if it may not have preserved his objection to the exclusion of oral testimony. (Id. at pp. 1363–1364.) Of relevance here, Elkins therefore establishes that a person seeking to challenge the application of former rule 12.5(b)(3) of the Superior Court of Contra Costa County Local Rules must have interposed a timely objection to its application in the trial court, or the claim is forfeited.
Lawton effectively concedes that he raised no objection in the trial court, but contends that he was not required to do so because “[d]efects of legal substance are not waived by failure to raise them in the trial court.” We are not persuaded. The trial procedures followed in this case were not noncurable defects of substance, such as an entire lack of jurisdiction. (See, e.g., Twine v. Compton Supermarket (1986) 179 Cal.App.3d 514, 518.) If they were, the Supreme Court in Elkins would have disposed of the respondent’s forfeiture claim on that basis. Nor were such procedures “an interlocutory order or decision, finally determining the rights of the parties” for purposes of Code of Civil Procedure section 647. They were rules of local procedure, not determinations, interlocutory or otherwise, of the merits of any controversy.
Code of Civil Procedure section 647 provides in relevant part: “All of the following are deemed excepted to: the verdict of the jury; the final decision in an action or proceeding; an interlocutory order or decision, finally determining the rights of the parties, or some of them . . . .”
Lawton failed to preserve his claim that the Contra Costa local rule denied him a fair trial.
III. DISPOSITION
The judgment is affirmed.
We concur: Marchiano, P.J., Swager, J.