Marr. of Valli ( 2014 )

Filed 5/15/14 Reposted to correct Court of Appeal docket number; no change to opinion text
IN THE SUPREME COURT OF CALIFORNIA
In re the Marriage of FRANKIE )
and RANDY VALLI. )
____________________________________)
)
FRANKIE VALLI, )
)
Respondent, )
) S193990
v. )
) Ct.App. 2/5 B222435
RANDY VALLI, )
) Los Angeles County
Appellant. ) Super. Ct. No. BD414038
____________________________________)
During a marriage the husband used community property funds to purchase
an insurance policy on his life, naming his wife as the policy‟s only owner and
beneficiary. Upon dissolution of the marriage, is the life insurance policy
community property or the wife‟s separate property? We conclude that, unless the
statutory transmutation requirements have been met, the life insurance policy is
community property. Because the Court of Appeal reached a different conclusion,
we reverse that court‟s judgment.
I
After a 20-year marriage, Frankie Valli (husband) and Randy Valli (wife)
separated in September 2004. Their three children were minors at the time of
separation but have since become adults. Before the separation, in March 2003,
husband used community property funds from a joint bank account to buy a $3.75
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million insurance policy on his life, naming wife as the sole owner and
beneficiary. Until the parties separated, the policy premiums were likewise paid
with community property funds from a joint bank account.
At the marital dissolution proceeding, wife testified that she and husband,
while he was in the hospital for “heart problems,” had talked about buying a life
insurance policy. Wife said that husband and their business manager, Barry
Siegel, told her that they would make her the policy‟s owner. Husband testified
that he “put everything in [wife‟s] name, figuring she would take care and give to
the kids what they might have coming” and that he had no plans to separate from
wife when he bought the policy.
The trial court ruled that the insurance policy was community property
because it was acquired during marriage with community funds. The court
awarded the policy to husband and ordered him to buy out wife‟s interest in the
policy by paying her $182,500, representing one-half of the policy‟s cash value at
the time of trial. The Court of Appeal reversed, holding that the insurance policy
was wife‟s separate property.
II
In a marital dissolution proceeding, a court‟s characterization of the parties‟
property — as community property or separate property — determines the
division of the property between the spouses. (In re Marriage of Benson (2005)
36 Cal. 4th 1096, 1102; In re Marriage of Haines (1995) 33 Cal. App. 4th 277, 291.)
Property that a spouse acquired before the marriage is that spouse‟s separate
property. (Fam. Code, § 770, subd. (a)(1).) Property that a spouse acquired
during the marriage is community property (id., § 760) unless it is (1) traceable to
a separate property source (In re Marriage of Lucas (1980) 27 Cal. 3d 808, 815; In
re Marriage of Mix (1975) 14 Cal. 3d 604, 610, 612), (2) acquired by gift or
bequest (Fam. Code, § 770, subd. (a)(2)), or (3) earned or accumulated while the
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spouses are living separate and apart (id., § 771, subd. (a)). A spouse‟s claim that
property acquired during a marriage is separate property must be proven by a
preponderance of the evidence. (In re Marriage of Ettefagh (2007) 150
Cal. App. 4th 1578, 1591; see Estate of Murphy (1976) 15 Cal. 3d 907, 917 [a
spouse asserting that property acquired by purchase during a marriage is separate
property must prove that the property is not community].)
Here, as mentioned earlier, husband during the marriage took out a $3.75
million insurance policy on his life, designating wife as the policy‟s sole owner
and beneficiary. The parties do not dispute that the policy was purchased with
community property funds from a joint bank account. What they do dispute is the
policy‟s characterization. Husband argues that the policy is community property
because it was purchased during the marriage with community funds. (See Tyre v.
Aetna Life Ins. Co. (1960) 54 Cal. 2d 399, 402 [“A policy of insurance on the
husband‟s life is community property when the premiums have been paid with
community funds.”]; Grimm v. Grimm (1945) 26 Cal. 2d 173, 175 [same].) Wife
argues that the policy is her separate property because husband arranged for the
policy to be put solely in her name, thereby changing the policy‟s character from
community property to separate property.
Married persons may, through a transfer or an agreement, transmute — that
is, change — the character of property from community to separate or from
separate to community. (Fam. Code, § 850.) A transmutation of property,
however, “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.” (Id., § 852, subd. (a).) To satisfy the requirement
of an “express declaration,” a writing signed by the adversely affected spouse
must expressly state that the character or ownership of the property at issue is
being changed. (Estate of MacDonald (1990) 51 Cal. 3d 262, 272.) The “express
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declaration” requirement “does not apply to a gift between the spouses of clothing,
wearing apparel, jewelry, or other tangible articles of a personal nature that is used
solely or principally by the spouse to whom the gift is made and that is not
substantial in value taking into account the circumstances of the marriage.”
(Fam. Code, § 852, subd. (c), italics added.)
Here, husband contends that because the express written declaration
requirement was not satisfied, his act of placing the life insurance policy in wife‟s
name did not transmute the policy, which was purchased during the marriage with
community funds, into a separate property asset of wife. Wife argues that the
transmutation requirements apply only to transactions between spouses, and not to
one spouse‟s acquisition of property from a third party. Here, she argues, the only
transaction was between husband and the insurance company issuing the policy.
Because there was no interspousal transaction, in her view the transmutation
requirements do not apply.
The Legislature adopted the statutory transmutation requirements in 1984
upon a recommendation of the California Law Revision Commission. (Estate of
MacDonald, supra, 51 Cal.3d at p. 268.) In its report to the Legislature, the
commission observed that under then existing law it was “ „quite easy for spouses
to transmute both real and personal property‟ ” because a transmutation could be
proved by evidence of an oral agreement between the spouses or by
“ „implications from the conduct of the spouses.‟ ” (Id. at p. 269.) This “ „rule of
easy transmutation . . . generated extensive litigation in dissolution proceedings‟ ”
where it encouraged spouses “ „to transform a passing comment into an
“agreement” or even to commit perjury by manufacturing an oral or implied
transmutation.‟ ” (Ibid.) As this court has concluded, therefore, in adopting the
statutory transmutation requirements the Legislature intended “to remedy
problems which arose when courts found transmutations on the basis of evidence
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the Legislature considered unreliable.” (Ibid.; accord, In re Marriage of Benson,
supra, 36 Cal.4th at p. 1106 [the transmutation statute “blocks efforts to transmute
marital property based on evidence — oral, behavioral, or documentary — that is
easily manipulated and unreliable”].)
The distinction that wife here urges us to draw between interspousal
property transactions (which are subject to the transmutation statutes) and property
acquisitions from third parties (which would not be subject to those statutes even
when it has the claimed effect of changing community property funds to a separate
property asset or vice versa) bears no relation to these legislative concerns, and it
produces arbitrary and irrational results that the Legislature could not have
intended. A few hypothetical examples illustrate this point.
Suppose a husband, shopping at a jewelry store, uses community funds to
buy a particularly expensive diamond necklace that is “substantial in value taking
into account the circumstances of the marriage” (Fam. Code, § 852, subd. (c)),
intending to give it to his wife a few days later as a birthday present. Because of
the particular necklace‟s value in comparison to the particular couple‟s financial
situation, the gift exception does not apply. Under the analysis urged here by
wife, the transmutation statutes would not apply to the necklace‟s purchase
because it was a third party transaction with the jewelry store. But because the
husband used community funds to buy the necklace and did not immediately
transfer title or possession to the wife, the purchase itself did not cause any
transmutation, and the necklace would be community property at least until the
wife‟s birthday. On that day, the husband‟s act of giving the necklace to the wife,
together with the wife‟s act of accepting the husband‟s gift, would be an
interspousal transaction to which the transmutation requirements would apply
even under the analysis urged here by wife. Absent an express written declaration,
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therefore, the necklace would remain community property even after the wife
received it as a birthday gift from the husband.
Next, suppose that instead of buying the necklace for his wife before her
birthday, the husband, on his wife‟s birthday, promises to buy a diamond necklace
of her choice. They go to a jewelry store, the wife selects a particular necklace
that is “substantial in value taking into account the circumstances of the marriage”
(Fam. Code, § 852, subd. (c)), the husband pays for it with community funds, and
they leave the store with the wife wearing the new jewelry. In this scenario, there
would appear to be a single transaction, the jewelry store purchase. Under the
analysis urged here by wife, the transmutation statutes would not apply to that
single transaction because it was a purchase from a third party, and thus no
“express declaration” would be required to transmute the community property
funds to the wife‟s separate property asset.
For purposes of the transmutation statutes, it is difficult to conceive any
justification for treating these two hypothetical scenarios differently. Under either
scenario, the husband could present evidence, in a later dissolution proceeding,
that he and the wife had discussed the advantages of diamonds as an investment,
that they had orally agreed the necklace would eventually be passed on to their
daughter, and that it was therefore understood between them that although this
very expensive necklace would be the wife‟s to wear on special occasions, it
would remain a community asset. To rebut the husband‟s evidence, the wife could
deny having any conversation with the husband about investing in diamonds or
purchasing jewelry as a family legacy, and she could present evidence of a
contrary understanding that the necklace was to be hers alone. If the transmutation
statutes did not apply, and in the absence of a writing expressly memorializing the
parties‟ understanding and intent, the trial court in the dissolution proceeding
would be obliged to base its decision regarding the necklace‟s character as
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community or separate property on a difficult assessment of the spouses‟
credibility as witnesses. (See, e.g., In re Marriage of Steinberger (2001) 91
Cal. App. 4th 1449, 1456.) Putting the trial court in such a position is what the
transmutation statutes were enacted to prevent.
One could argue, perhaps, that the second hypothetical scenario, like the
first, can and should be viewed as two transactions — a purchase from a third
party and an interspousal giving of a gift — that are legally distinguishable even
though they occurred simultaneously. Adopting that approach, one would
conclude that the interspousal gift transaction was subject to the transmutation
statutes in the second scenario just as in the first. But if the second jewelry gift
scenario can be parsed into two simultaneous but legally separable transactions,
then so here could husband‟s purchase of the life insurance policy, with title taken
in wife‟s name. If, as wife here claims, the effect of the policy purchase with
money from a joint bank account was to convert community property funds into
her separate property asset, then the purchase necessarily involved a gift from
husband to wife because wife has never maintained that she gave husband
anything in exchange for his community interest in the purchase money. If the
policy was a gift by husband to wife, then the giving and receiving of that gift was
an interspousal transaction to which the transmutation statutes apply. (Cf. Burkle
v. Burkle (2006) 141 Cal. App. 4th 1029, 1036, fn. 5 [the elements of a gift include
“ „delivery, either actual or symbolical‟ ” and “ „acceptance, actual or
imputed‟ ”].)
This point can be further illustrated by another hypothetical. Suppose in
this case husband had initially taken title to the insurance policy jointly in his and
wife‟s names, and then on a later date, after receiving estate planning advice and
discussing the matter with wife, he had instructed the insurer to transfer the title to
wife‟s name alone. In that situation, where wife acquired sole title to the policy
7
some time after the policy‟s purchase, it appears that wife would concede the
transmutation statutes‟ applicability to any claim by her, in a marital dissolution
proceeding, that the change in title changed the character of the policy from
community to separate property.1 Therefore, under the analysis urged here by
wife, whether the transmutation statutes apply to the insurance policy depends
upon the entirely fortuitous circumstance of when she acquired sole title to the
insurance policy, whether during the purchase or after the purchase of the policy.
We are unwilling to conclude the Legislature intended application of the
transmutation statutes to turn on such fortuitous distinctions.
We recognize that some court decisions have stated that a transmutation
requires an interspousal transaction and that one spouse‟s acquisition of an asset
from a third party is therefore exempt from the statutory transmutation restrictions.
Those decisions are unpersuasive, however.
The notion that third party transactions cannot be transmutations may be
traced to the Court of Appeal‟s 1995 decision in In re Marriage of Haines, supra,
33 Cal. App. 4th 277. There, the Court of Appeal said that a transmutation is “an
interspousal transaction or agreement which works a change in the character of the
property.” (Id. at p. 293.) Referring to the wife‟s signing of a quitclaim deed
conveying the family residence to the husband during the marriage, the court
concluded that this was a transmutation subject to the statutory express declaration
1 Wife here might argue that instructing the insurance company to transfer
title after the policy‟s purchase would be a third party transaction, like the initial
purchase of the policy, because it could be done without her knowledge or
participation. If we were to accept that argument, however, the result would be
drawing an arbitrary distinction between assets as to which title transfers are
always made through a third party, such as the insurance company here, and assets
such as real property, as to which title transfers are normally made by deed or
similar conveyances between the affected parties.
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requirement. (Ibid.) The court did not consider whether any other transaction was
a transmutation, and in particular it did not consider whether one spouse‟s
purchase of property from a third party could be a transmutation.
The statement that a transmutation is “an interspousal transaction or
agreement” (In re Marriage of Haines, supra, 33 Cal.App.4th at p. 293) was later
repeated in the Court of Appeal decisions in In re Marriage of Campbell (1999) 74
Cal. App. 4th 1058, 1062 and In re Marriage of Cross (2001) 94 Cal. App. 4th 1143,
1147 (Cross). But neither decision exempted a third party transaction from the
transmutation requirements on the basis that it was not “interspousal.” Indeed,
Cross said that the transmutation statutes address situations such as “where a wife
buys a car for her husband with community property funds” (Cross, at pp. 1147-
1148), a typical third party transaction. (See also In re Marriage of Buie &
Neighbors (2009) 179 Cal. App. 4th 1170, 1173-1175 [applying transmutation
statutes to a husband‟s purchase of a car for himself using the wife‟s separate
funds].) In 2005, this court likewise stated that a transmutation is an “interspousal
transaction” (In re Marriage of Benson, supra, 36 Cal. 4th 1096, 1100), but we did
not consider whether this definition excludes spousal purchases during the
marriage from third parties with community funds.
The first decision to hold that a spousal purchase from a third party during a
marriage was not subject to the statutory transmutation requirements was In re
Summers (9th Cir. 2003) 332 F.3d 1240, which was a bankruptcy proceeding
rather than a marital dissolution proceeding. There, the federal appellate court was
attempting to construe and apply California law “to determine whether the
requirements of California‟s transmutation statute . . . must be met when realty is
transferred from a third party to spouses as joint tenants.” (In re Summers, at
p. 1242.) Relying on the statement by the California Court of Appeal in Cross that
a transmutation is an “ „interspousal transaction or agreement‟ ” (Cross, supra, 94
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Cal.App.4th at p. 1147), the federal court concluded “that the transmutation
requisites had no relevance to the conveyance in this case.” (In re Summers, at
p. 1245.)
The year 2008 saw the first decision by a California state appellate court
exempting from the transmutation requirements a spousal purchase from a third
party: In re Marriage of Brooks & Robinson (2008) 169 Cal. App. 4th 176. In that
marital dissolution proceeding, the husband and the wife disputed ownership of
residential property they had purchased during the marriage, taking title solely in
the wife‟s name. (Id. at pp. 179-180.) On appeal, the husband argued, among
other things, that the purchase of the property in the wife‟s name alone was an
attempted transmutation that was invalid because it did not comply with the
statutory transmutation requirements. (Id. at p. 191.) Rejecting the husband‟s
argument, the Court of Appeal stated that there were “no facts suggesting a
transmutation, valid or otherwise” because the property “was acquired in [the
wife‟s] name in a transaction with a third person, not through an interspousal
transaction.” (Ibid.)
As mentioned earlier, these last two decisions (In re Summers, supra, 332
F.3d 1240; In re Marriage of Brooks & Robinson, supra, 169 Cal. App. 4th 176) are
not persuasive insofar as they purport to exempt from the transmutation
requirements purchases made by one or both spouses from a third party during the
marriage. Neither decision attempts to reconcile such an exemption with the
legislative purposes in enacting those requirements, which was to reduce excessive
litigation, introduction of unreliable evidence, and incentives for perjury in marital
dissolution proceedings involving disputes regarding the characterization of
property. Nor does either decision attempt to find a basis for the purported
exemption in the language of the applicable transmutation statutes. Also, these
decisions are inconsistent with three Court of Appeal decisions stating or holding
10
that the transmutation requirements apply to one spouse‟s purchases from a third
party during the marriage. (In re Marriage of Buie & Neighbors, supra, 179
Cal.App.4th at pp. 1173-1175; Cross, supra, 94 Cal.App.4th at pp. 1147-1148; In
re Marriage of Steinberger, supra, 91 Cal.App.4th at pp. 1463-1466.)
Our examination of the statutory language leads us to reject the purported
exemption for spousal purchases from third parties. As we have said (ante, p. 4),
the transmutation statutes provide an express exemption for gifts of relatively
inexpensive personal items. (Fam. Code, § 852, subd. (c).) Because spouses most
often use community funds to purchase such gifts for each other, the statutory
exemption necessarily implies that gifts not qualifying for the exemption (because
they are “substantial in value” or because they are not items “of a personal
nature”) are transmutations subject to the express declaration requirement,
notwithstanding that a great many, if not most, involve purchases from third
parties.2
As mentioned, the Court of Appeal here concluded that the transmutation
statutes were “not relevant to this case” because the disputed life insurance policy
“was acquired from a third party and not through an interspousal transaction.”
After stating that conclusion, which we have determined to be erroneous, the court
added: “Moreover, [wife] did not contend in the trial court, and does not contend
2 Enactment of the transmutation statutes (Fam. Code, §§ 850-853) abrogated
earlier judicial decisions that were inconsistent with the statutory requirements.
One such decision was In re Marriage of Lucas, supra, 27 Cal. 3d 808, in which
this court upheld a trial court‟s characterization of a motor home acquired during a
marriage as entirely the wife‟s separate property. From the husband‟s failure to
object when title was taken in the wife‟s name alone the trial court inferred that
the husband had made a gift to the wife of his interest in community funds used to
purchase the motor home. (In re Marriage of Lucas, at pp. 817-818.) That
portion of the decision is no longer good law.
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on appeal, that the policy is her separate property through transmutation. Instead,
[wife] contends that the policy is her separate property by operation of the form of
title presumption.” Referring to Evidence Code section 662, which states that
“[t]he owner of the legal title to property is presumed to be the owner of the full
beneficial title,” the Court of Appeal here asserted that “because the form of title
presumption applies . . . a transmutation theory is not involved.”
This reasoning by the Court of Appeal, we also conclude, is erroneous. We
need not and do not decide here whether Evidence Code section 662‟s form of title
presumption ever applies in marital dissolution proceedings. Assuming for the
sake of argument that the title presumption may sometimes apply, it does not
apply when it conflicts with the transmutation statutes. (See In re Marriage of
Barneson (1999) 69 Cal. App. 4th 583, 593.)
For the reasons we have given, the transmutation requirement of an express
written declaration applies to wife‟s claim, in this marital dissolution proceeding,
that the life insurance policy husband purchased during the marriage with
community funds is her separate property. Wife does not contend that she
presented evidence at trial sufficient to satisfy the express declaration requirement,
nor does our examination of the record disclose such evidence. Husband never
expressly declared in writing that he gave up his community interest in the policy
bought with community funds. Accordingly, we agree with the trial court‟s
characterization of the insurance policy as community property.
Because it concluded that the trial court had erred in characterizing the
policy as community property, the Court of Appeal did not reach wife‟s
contentions “that the trial court erred in awarding ownership solely to [husband] at
the policy‟s cash value and that it abused its discretion in failing to maintain [wife]
as a beneficiary on the policy as spousal support.” The Court of Appeal will
address those contentions by wife on remand.
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DISPOSITION
The Court of Appeal‟s judgment is reversed and the matter is remanded to
that court for further proceedings consistent with this opinion.
KENNARD, J.*
WE CONCUR:
CANTIL-SAKAUYE, C. J.
BAXTER, J.
WERDEGAR, J.
CHIN, J.
CORRIGAN, J.
LIU, J.
* Retired Associate Justice of the Supreme Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
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CONCURRING OPINION BY CHIN, J.
I agree with the majority opinion, which I have signed. I write separately to
discuss a threshold question that has been the primary focus of the briefs of the
parties and amici curiae: What role, if any, does a common law rule codified in
Evidence Code section 662 (section 662) have in determining, in an action
between the spouses, whether property acquired during a marriage is community
or separate?
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.”
Family Code section 802 refers to the “presumption that property acquired during
marriage is community property.” In combination, these statutes provide a
presumption that property acquired during the marriage is community property.
(In re Marriage of Benson (2005) 36 Cal. 4th 1096, 1103.) (I will sometimes refer
to this presumption as the section 760 presumption.) It appears this presumption
can be overcome by a preponderance of the evidence. (In re Marriage of Ettefagh
(2007) 150 Cal. App. 4th 1578.)
Although the section 760 presumption is rebuttable, not just any evidence
can overcome the presumption, but only evidence showing that another statute
makes the property something other than community property. “By its own terms,
the definition of community property in section 760 applies „[e]xcept as otherwise
1
provided by statute.‟ It therefore exempts property defined as separate under other
provisions. (E.g., [Fam. Code,] §§ 770 [property acquired by gift or inheritance],
771 [earnings and accumulations while living separate and apart].)” (In re
Marriage of Benson, supra, 36 Cal.4th at p. 1103.) Thus, the general rule is that
property acquired during marriage is community unless the preponderance of the
evidence establishes that a specifically enumerated statutory exemption applies to
make it something else.
As applied here, this presumption means that the life insurance policy is
presumed to be community property, but that wife can overcome that presumption
if she can show, by a preponderance of the evidence, that some other statutory
provision makes it her separate property. There is, or should be, nothing
particularly complex or difficult about this rule.
But wife, in arguing that the policy is her separate property, and the Court
of Appeal, in so concluding, rely heavily on a different presumption found in the
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.” Because legal title in the policy was
in wife‟s name, wife argues, and the Court of Appeal found, the policy is
presumed to be her separate property, a presumption rebuttable only by clear and
convincing evidence.
Obviously, both presumptions cannot be given effect. The life insurance
policy cannot both be presumed to be community property (because acquired
during the marriage) and to be wife‟s separate property (because placed in her
name). One statutory presumption must yield to the other.
In my view, as in the view of all amici curiae to appear in this case — law
professors and attorneys specializing in the field — the section 760 presumption
controls in characterizing property acquired during the marriage in an action
2
between the spouses. Section 662 plays no role in such an action. The detailed
community property statutes found in the Family Code, including section 760, are
self-contained and are not affected by a statute found in the Evidence Code. I
explain why.
California is, and always has been, a community property state. “The
community property system originated in continental Europe, came to Mexico
from Spain, and became California law through the treaty of 1848.” (11 Witkin,
Summary of Cal. Law (10th ed. 2005) Community Property, § 1, p. 529.) “From
the inception of its statehood, California has retained the community property law
that predated its admission to the Union and consistently has provided as a general
rule that property acquired by spouses during marriage, including earnings, is
community property.” (In re Marriage of Bonds (2000) 24 Cal. 4th 1, 12.) “The
general theory is that the husband and wife form a sort of partnership, and that
property acquired during the marriage by the labor or skill of either belongs to
both.” (11 Witkin, Summary of Cal. Law, supra, Community Property, § 1, p.
529.)
The presumption, now codified in the Family Code, that property acquired
during the marriage is community, is perhaps the most fundamental principle of
California‟s community property law. “ „This presumption is fundamental in the
community property system and is an integral part of the community property law
not only of this state but of other states and countries where the system is in
operation.‟ ” (11 Witkin, Summary of Cal. Law, supra, Community Property,
§ 15, p. 542, quoting Wilson v. Wilson (1946) 76 Cal. App. 2d 119, 126.)
Section 662 may not nullify this fundamental presumption whenever, as is
often the case, the contested property is in the name of one of the spouses. I agree
with the amici curiae that, as the brief of the Northern California chapter of the
American Academy of Matrimonial Lawyers and the Association of Certified
3
Family Law Specialists puts it, “section 662 has no place in the characterization of
property in actions between spouses.” As that brief further states, applying section
662 to disputes between spouses “would subvert basic tenets of California family
law.”
This is not a recent concept. Nine years after California became a state, this
court, in an opinion authored by Justice Field, rejected the argument that common
law rules regarding title apply to the characterization of property acquired during
the marriage. (Meyer v. Kinzer and Wife (1859) 12 Cal. 247 (Meyer).) In Meyer,
the husband and wife sold certain property acquired during the marriage and
received in return a note and mortgage on the property that was in both the
husband‟s and wife‟s names. Later the husband, without the wife joining,
assigned the note and mortgage to another party. The wife claimed that, because
the mortgage was in her name as well as her husband‟s, one-half of the note and
mortgage was her separate property. This court disagreed.
In concluding that the mortgage was community property, this court cited
statutory provisions including, as relevant here, a provision substantially similar to
section 760: “ „[A]ll property acquired after marriage, by either husband or wife,
except such as may be acquired by gift, bequest, devise or descent, shall be
common property.” (Meyer, supra, 12 Cal. at p. 251.) The court explained that
these provisions “are borrowed from the Spanish law, and there is hardly any
analogy between them and the doctrines of the common law in respect to the rights
of property consequent upon marriage. The statute proceeds upon the theory that
the marriage, in respect to property acquired during its existence, is a community
of which each spouse is a member . . . . To the community all acquisitions by
either, whether made jointly or separately, belong. No form of transfer or mere
intent of parties can overcome this positive rule of law.” (Ibid., italics added.)
4
Absent proof that the purchase was made with separate funds of either
spouse, the Meyer court explained, the presumption that property acquired after
marriage is community property “was absolute and conclusive, and it made no
difference whether the conveyance was taken in the name of one or the other, or in
the names of both.” (Meyer, supra, 12 Cal. at p. 252.) The court quoted with
approval an opinion from Louisiana, another community property state, that
involved, as does this case, property purchased during the marriage but placed in
the wife‟s name: “ „All property acquired by either spouse during the existence of
the community, the law presumes to belong to it . . . . If the wife sets up a separate
claim, she must make legal proof of it. The title being in her name does not raise
even a presumption in her favor.‟ ” (Id. at p. 253, italics added in Meyer.) The
opinion additionally explained that “common law authorities are entirely
inapplicable under our system. The statute prescribes the effect of the acquisition
of property by either spouse, and its operation cannot be defeated or evaded by the
form of the conveyance, or the intention of the husband, in taking it in the name of
his wife. In every form the community character of the property continues.” (Id.
at p. 255, italics added.)
As relevant here, these principles still generally apply. The statutes
governing California‟s community property law are found in the Family Code; a
statute outside of the community property law, such as Evidence Code section
662, cannot nullify those statutes. This circumstance was recognized when section
662 was enacted. (Stats. 1965, ch. 299, § 2, p. 1297.) The Law Revision
Commission comment to that section states that it “codifies a common law
presumption recognized in the California cases.” (Cal. Law Revision Com. com.,
29B pt. 2 West‟s Ann. Evid. Code (1995 ed.) foll. § 662, p. 210.) But California‟s
community property law has no common law roots. It derives from the European
continent, not England. In its comment, the Law Revision Commission cited
5
Olson v. Olson (1935) 4 Cal. 2d 434. (See People v. Semaan (2007) 42 Cal. 4th 79,
88 [recognizing “that § 662 codifies the rule of Olson v. Olson”].) But that case
indicates the common law presumption does not apply in the marital context:
“The deed of gift, a written instrument, signed and acknowledged by appellant,
and unimpaired by any presumption of undue influence arising out of a marital
relation between the parties [the parties were not married at the critical time], was
entitled to the full credit given to it by the trial court . . . .” (Olson v. Olson, at p.
438, italics added.) Neither the common law rule nor section 662, which codified
that rule, ever applied to characterizing property acquired during marriage in
actions between the spouses.
Section 662‟s purpose is to promote the public policy in favor of “the
stability of titles to property” (Evid. Code, § 605; see In re Marriage of Haines
(1995) 33 Cal. App. 4th 277, 294 (Haines).) That policy is largely irrelevant to
characterizing property acquired during the marriage in an action between the
spouses. Haines is instructive. The Haines court held that section 662 “must yield
to” another presumption within California‟s community property law — “the
presumption arising from the requirement that a husband and wife occupy a
confidential relationship in their transactions with each other.” (Haines, at p. 283;
see Fam. Code, § 721.)
Haines explained that section 662‟s “presumption is based on promoting
the public „policy . . . in favor of the stability of titles to property.‟ (See [Evid.
Code,] § 605.) „Allegations . . . that legal title does not represent beneficial
ownership have . . . been historically disfavored because society and the courts
have a reluctance to tamper with duly executed instruments and documents of
legal title.‟ [Citation.] [¶] Section 662 is concerned primarily with the stability of
titles, which obviously is an important legal concept that protects parties to a real
property transaction, as well as creditors. Here, however, our focus is on
6
characterization of marital property as effected by a transmutation by quitclaim
deed. The issue is how property should be divided between spouses upon
dissolution. This case does not involve third parties nor does it place at risk the
rights of a creditor. . . . Thus, concerns of stability of title are lessened in
characterization problems arising from transmutations that do not involve third
parties or the rights of creditors.” (Haines, supra, 33 Cal.App.4th at pp. 294-295,
fn. omitted.)
The presumption of undue influence exists to protect married persons.
(Haines, supra, 33 Cal.App.4th at p. 301.) “[A]pplication of 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 . . . . Application of section 662
would . . . in effect . . . abrogate the protections afforded to married persons under”
what is now Family Code section 721, subdivision (b). (Haines, at p. 301.)
Accordingly, the Haines court “conclude[d] that application of section 662 is
improper when it is in conflict with the presumption of undue influence . . . . Any
other result would abrogate the protections afforded to married persons and
denigrate the public policy of the state that seeks to promote and protect the vital
institution of marriage.” (Id. at p. 302; see In re Marriage of Fossum (2011) 192
Cal. App. 4th 336, 344-345 [following Haines]; In re Marriage of Delaney (2003)
111 Cal. App. 4th 991, 997 [following Haines].)
What Haines said about the presumption regarding undue influence applies
just as much, if not more so, to the more fundamental presumption that property
acquired during the marriage is community. Section 662 may not abrogate the
more fundamental presumption just as it may not abrogate the less fundamental
presumption. Much property acquired during marriage is in the name of one of
the spouses, such as salaries, stock options, retirement benefits, and the like.
7
Applying section 662 to all such property — and concluding that it is separate
property unless shown to be otherwise by clear and convincing evidence — would
largely nullify the presumption that property acquired during marriage is
community.
In concluding that section 662 applies, the Court of Appeal relied heavily
on two cases: In re Marriage of Lucas (1980) 27 Cal. 3d 808 (Lucas) and In re
Marriage of Brooks & Robinson (2008) 169 Cal. App. 4th 176 (Brooks). Neither
case supports the conclusion.
In Lucas, this court was concerned primarily with deciding “the proper
method of determining separate and community property interests in a single
family dwelling acquired during the marriage with both separate property and
community property funds.” (Lucas, supra, 27 Cal.3d at p. 811.) Most of the
opinion concerns the characterization of a house in which title was in the form of
joint tenancy. Although it discusses presumptions at length, Lucas never cites
section 662 even though that section had been enacted long before the opinion.
Rather, it discusses two statutory presumptions, both of which used to be found in
Civil Code former section 5110 and are now found in two separate sections of the
Family Code. (Fam. Code, §§ 760, 2581.) One is the familiar presumption that
property acquired during marriage is community property. (Id., § 760.) The other
is a presumption, found in a statute within the community property law and fully
consistent with the general presumption, that specifically governs real property
designated as a joint tenancy. (Lucas, at p. 814.) As quoted in Lucas, that statute
provided: “ „When a single-family residence of a husband and wife is acquired by
them during marriage as joint tenants, for the purpose of the division of such
property upon dissolution of marriage or legal separation only, the presumption is
that such single-family residence is the community property of the husband and
wife.‟ ” (Id. at p. 814, fn. 2, quoting Civ. Code, former § 5110 [see now Fam.
8
Code, § 2581].) Both of these presumptions favor a finding of community
property, and thus they are compatible.
Significantly, the statutory presumption regarding property in the form of
joint tenancy applies “[f]or the purpose of division of property on dissolution of
marriage.” (Fam. Code, § 2581; see Civ. Code, former § 5110.) This language
suggests that rules that apply to an action between the spouses to characterize
property acquired during the marriage do not necessarily apply to a dispute
between a spouse and a third party.
Thus, the form-of-title presumption the Lucas court discussed is a specific
statutory presumption found within California‟s community property law, not the
more general presumption found in section 662. That this is so is made clear later
in the opinion when the court stated that certain “evidence and findings are
insufficient to rebut the presumption arising from title set forth in Civil Code
section 5110 [i.e., current Fam. Code, § 2581].” (Lucas, supra, 27 Cal.3d at p.
815, italics added.) Lucas does not address section 662‟s role in an action between
the spouses.
Brooks also did not present this question. At the appellate level, the dispute
in Brooks, supra, 169 Cal. App. 4th 176, did not involve an action between the
spouses. Rather, on appeal, the sole dispute was between a third party, to whom
the wife had sold certain real property, and the husband, who claimed an interest
in the property and sought to set aside the sale. The wife did not even appear in
the appeal. The Court of Appeal used section 662 to help resolve the dispute in
favor of the third party, whom the trial court found to be a bona fide purchaser
who had purchased the property without knowing of any community property
claim the husband might have had. The Court of Appeal noted that the trial “court
did not expressly determine whether the Property was a community property
asset.” (Brooks, at pp. 182-183.) Rather, the trial court had merely held that the
9
third party was a bona fide purchaser and, as such, “ „takes it[s] title free of any
unknown community property claim [the husband] may have with respect to the
Property.‟ ” (Id. at p. 183.) The Court of Appeal agreed with this conclusion. It
emphasized section 662‟s purpose of promoting the stability of titles to property.
(Id. at p. 185.) Unlike in the case of an action between the spouses, this policy
does play a role in a dispute between a spouse and an innocent third party
purchaser.
The Brooks court stressed that the appeal “does not involve a division of
the community estate between [husband and wife]. Whether [the wife] might be
obligated to reimburse [the husband] for his contributions to the Property was not
before the trial court and is not an issue on appeal.” (Brooks, supra, 169
Cal.App.4th at p. 188.) Accordingly, Brooks concerned the rights of a third party
that purchased property in good faith not knowing of any possible community
property claims. Brooks might have been correct to apply section 662 to an action
between one of the spouses and a third party bona fide purchaser. That question is
not implicated here, and I express no opinion on it. To the extent Brooks said
anything suggesting section 662 would apply to an action between the spouses, it
mistakenly relied on Lucas, supra, 27 Cal. 3d 808, and is, accordingly,
unpersuasive.
In short, the statutes in the Family Code governing community property,
including the section 760 presumption, are sufficient unto themselves. Evidence
Code section 662‟s common law presumption does not nullify the community
property statutes. All property acquired during the marriage is presumed to be
community property. Evidence that certain property is in the name of one spouse
might, depending on the circumstances, be relevant to help overcome the
presumption if and only if it demonstrates that one of the statutory exemptions to
the presumption applies. But that evidence does not itself reverse the
10
presumption. Future courts resolving disputes over how to characterize property
acquired during the marriage in an action between the spouses should apply the
community property statutes found in the Family Code and not section 662.
CHIN, J
WE CONCUR:
CORRIGAN, J.
LIU, J.
11
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.
Name of Opinion In re Marriage of Valli
__________________________________________________________________________________
Unpublished Opinion
Original Appeal
Original Proceeding
Review Granted XXX 195 Cal. App. 4th 776
Rehearing Granted
__________________________________________________________________________________
Opinion No. S193990
Date Filed: May 15, 2014
__________________________________________________________________________________
Court: Superior
County: Los Angeles
Judge: Mark A. Juhas
__________________________________________________________________________________
Counsel:
Jaffe and Clemens, William S. Ryden and Nancy Braden-Parker for Appellant.
Garrett C. Dailey; Walzer & Melcher, Peter Walzer and Christopher C. Melcher for Respondent.
Charlotte K. Goldberg and Herma Hill Kay as Amici Curiae on behalf of Respondent.
Grace Ganz Blumberg and Herma Hill Kay as Amici Curiae on behalf of Respondent.
Sideman & Bancroft and Diana E. Richmond for Northern California Chapter of the American Academy of
Matrimonial Lawyers and the Association of Certified Family Law Specialists as Amici Curiae on behalf of
Respondent.
__
Law Office of Kim W. Cheatum and Kim W. Cheatum as Amici Curiae on behalf of Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):
William S. Ryden
Jaffe and Clemens
433 North Camden Drive, Suite 1000
Beverly Hills, CA 90210
(310) 550-7477
Garrett C. Dailey
2915 McCluare Street
Oakland, CA 94609
(510) 465-3920