Marriage of Antoniadis CA4/1 ( 2016 )

Filed 2/19/16 Marriage of Antoniadis CA4/1
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
In re the Marriage of CHRISTINE and
ROBERT ANTONIADIS.
D066644
CHRISTINE ANTONIADIS,
Respondent, (Super. Ct. No. D540433)
v.
ROBERT ANTONIADIS,
Appellant.
APPEAL from a judgment of the Superior Court of San Diego County, David B.
Oberholtzer, Judge. Affirmed.
Merker & McDonald and Danny R. McDonald for Defendant and Appellant.
Stephen Temko and Dennis G. Temko for Plaintiff and Respondent.
Robert Antoniadis (Husband) appeals several aspects of the disposition of property
in this judgment of dissolution. He initially contends that the trial court erred as a matter
of law in ruling that respondent Christine Antoniadis (Wife) is entitled to receive as her
separate property a family residence that was purchased during the marriage (the
residence). Husband contends the Family Code section 760 presumption that property
acquired during marriage is community property must be dispositive, and thus the court
erred in applying methods for tracing and crediting Wife's separate property funds that
were utilized to make the down payment and mortgage payments on the residence.1
(In re Marriage of Valli (2014) 58 Cal. 4th 1396, 1406 (Valli).) Alternatively, Husband
argues Wife failed to present substantial evidence in support of her showing she could
trace her separate property contributions that paid for the residence, either through direct
tracing or the family expense method. (In re Marriage of Walrath (1998) 17 Cal. 4th 907,
920, fn. 5.)
Husband presents a separate contention that the trial court erred in concluding that
the parties' 2003 estate plan, which included placement of the residence into family trust
ownership, did not result in transmutation of the residence into community property.
(§ 852, subd. (a);2 In re Marriage of Starkman (2005) 129 Cal. App. 4th 659 (Starkman).)
In the alternative, Husband contends he is entitled to reimbursement for payments that the
1 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." All further statutory
references are to this code unless noted.
2 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."
2
community had presumably made toward paying down the mortgage on the residence.
(§ 2640.)3
Finally, Husband argues the trial court erred in placing a value on the community
real estate business, RACA, by including the value of certain commissions received after
the date of separation, although the court's special master had not taken them into
account. (See In re Marriage of Duncan (2001) 90 Cal. App. 4th 617, 631 (Duncan)
[valuation is a factual issue]; Evid. Code, § 730 [court appointed expert].) Having
reviewed the record and the arguments, we find sufficient evidence supports the
judgment, and there was no abuse of discretion in the court's findings. We affirm.
I
OVERVIEW OF RECORD
A. Assets and Disputes
After Husband and Wife were married in 1988, they developed and worked at a
distribution business in Vermont. In 2000, Husband filed for personal bankruptcy and
the business failed. Wife and their two children moved to California, and Husband soon
followed. When Wife's parents, who had lived in Canada, passed away in the early
2000's, she received an inheritance of over $1.2 million in U.S. dollars ($1.6 million in
Canadian dollars), as her separate property. She deposited it all into a Royal Bank of
Canada inheritance account (the Canadian account).
3 Section 2640, subdivision (b) provides in part that "unless a party has made a
written waiver of the right to reimbursement . . . , the party shall be reimbursed for the
party's contributions to the acquisition of property of the community property estate to
the extent the party traces the contributions to a separate property source."
3
Instead of renting a family residence, the couple decided in 2002 that Wife would
use her separate property to acquire a home in Mission Beach (724 Seagirt Court; the
residence). The purchase price was $675,000, and Wife used $249,871 of her separate
property funds (designated $250,000 here) as the down payment. Title was taken by
Wife as her separate property, and she was responsible for the mortgage. As part of the
mortgage transaction, Husband signed a quitclaim deed in Wife's favor. As part of the
couple's 2002-2003 estate plan involving a revocable and restated trust, title to the
residence was transferred several times between trust ownership and Wife's separate
property, until the parties separated on December 31, 2012.
After receiving the inherited funds, Wife regularly withdrew money from her
Canadian account for family living expenses and mortgage payments, depositing it in a
community property Wells Fargo account (also in her name alone). She had an
accounting degree and kept the books for the family, which maintained a comfortable
middle class lifestyle, including private schools for the children. Husband testified that
from 1986 to 2007, his income varied from zero to $300,000.
From 2007 until their separation, the parties co-owned and worked at a real estate
business, RACA. Husband obtained real estate licenses and he worked up to 70 hours
per week, while Wife spent about 10 hours a week on its office work. After starting the
business, Husband waived some of his real estate commissions for the purpose of
increasing his professional profile, and he did not take significant income from the
4
business until after 2010. By the time the couple separated, Wife's Canadian account had
approximately $130,000 left in it.4
We will set forth additional relevant details from the record in connection with
discussing the characterization of the residence, through the tracing of Wife's separate
property funds. (Pt. II, post.) More facts will be provided during our discussion of the
transmutation issues, concerning the placement of the residence, at times, into family
trust ownership. (Pt. III, post.) We also defer outlining the facts relevant to Husband's
claims of insufficient evidence to support the ruling that disposed of the couple's RACA
business. (Pt. IV, post.)5
B. Summary of Statements of Decision
At the conclusion of trial, Husband requested a written statement of decision
limited to the characterization of the residence property. Regarding the award of the
RACA business to Husband, the court analyzed the expert testimony presented and made
an oral statement of decision. To provide background for the issues raised on appeal, we
next summarize the trial court's rulings.
The written statement of decision first discussed the proper characterization of the
residence, referring to evidence about Wife's separate property contributions to the down
4 As of the time of trial, June 2014, Wife's Canadian account had a balance of
$52,150. Husband testified about his January to July 2013 income and expense
declarations which said he had zero income, although in July 2013, he had a business
cashier's check on hand for $50,000, which he used to avoid paying child support.
5 Although the judgment resolved other issues between the parties, including
spousal support and attorney fees and costs, none of those orders is challenged on appeal.
5
payment and monthly payments on the debt for the residence. Although she testified she
used a total of $520,761 in checks and withdrawals from her Canadian account, toward
expenses of the residence, she could only provide a portion of the financial records, but
insisted there were more.
The court concluded that the only plausible reason for Wife making the large
withdrawals from her Canadian account, many of which were in round numbers, was to
pay down the principal on the mortgage. That evidence supported her claim that the
residence was her separate property when it was purchased. Husband had not made any
objections at trial to her testimony that her separate property was consistently used to pay
down the mortgage and to pay living expenses, through use of the Wells Fargo family
account.
Regarding the community assets, Husband had testified to earning only modest
commissions before 2010. The court therefore found it was more likely than not that
Wife was making the mortgage payments from her Canadian accounts while the couple
was transferring the residence in and out of their family trust in 2002 and 2003.
With respect to the transmutation issues argued, the court outlined the evidence
about the various deeds for the residence, which showed that Wife took title to the
residence in June 2002 as her separate property. The parties then decided to establish a
revocable trust as an estate planning device, and in December 2002, Wife signed a
quitclaim deed to Husband and herself as community property. That deed and a
Husband/Wife deed transferring title to the family trust were recorded in February 2003.
In June 2003, to facilitate refinancing the residence, the trust deeded the property back to
6
Wife as her separate property. There were no more deeds produced in evidence except
for a recorded March 2011 trust transfer deed by Husband and Wife as joint tenants
(signed Jan. 4, 2011), transferring the residence to the family trust. The restated family
trust was also dated January 4, 2011. The court's statement of decision noted, "No one
can explain why the March 2011 deed stated the grantors were Robert and Christine as
joint tenants, which they were not--the last deed recorded before that had listed Christine
as the sole owner."
From that evidence, the court concluded that placing title to the residence into the
trust did not support any inference that the parties intended to transmute it into
community property, particularly since they had also placed the Canadian accounts in the
trust, but it was undisputed that the Canadian accounts never were or became community
property.
To finally resolve the dispute about the division of the residence interests, the
court acknowledged the presumption under section 760 that property acquired during the
marriage is presumed to be community property, unless acquired by gift or bequest. Wife
had the burden to prove otherwise by a preponderance of the evidence. (§ 760.) The
court then concluded that Wife had satisfied her burden of proof to show the residence
was purchased as separate property, by tracing the purchase funds to her separate
property as of the time of acquisition. At that time, the community was bankrupt and still
recovering from the Vermont business failure in 2000.
The court next addressed whether Husband had satisfied his burden to prove under
section 850 that the residence was later transmuted to community property. This statute
7
required an express written declaration by Wife unambiguously indicating a change in the
character or ownership of the property. The court concluded that the family trust deeds,
both in 2002 and 2003 and in March 2011, were insufficient to prove an express
transmutation. Because of that failure of proof, the court declined to make a
determination of whether there had been any undue influence exercised between spouses
or any violation of fiduciary duties. (§§ 721, 1100.) Consequently, the court was not
required to make any express findings on any right to reimbursement issues for the
purchase and payments on the residence. (§ 2640, subd. (a) [" 'Contributions to the
acquisition of property,' as used in this section, include down payments, payments for
improvements, and payments that reduce the principal of a loan used to finance the
purchase or improvement of the property but do not include payments of interest on the
loan or payments made for maintenance, insurance, or taxation of the property."].)
In its oral statement of decision on the RACA business, the court assigned a value
to the business of $47,681 as of the date of separation, and awarded it to Husband,
conditioned on his making an equalizing payment to Wife of half that amount. The court
determined that contrary to a portion of the appointed expert's report and testimony, there
was additional business income from three identified real estate listings that were entered
into shortly before the date of separation. Since those deals had closed shortly after the
date of separation, the value of those commissions was essentially earned when they were
signed up and they were community property assets.6 There was a lack of evidence
6 During that time frame, Husband sold three Point Loma properties, Del Cerro,
Nipoma, and Locust, and received commissions. For many other sales, including the
8
about the value of a fourth such waived commission (Plum) and the court accepted the
expert's deletion of the worth of that commission from the business value.
Judgment was prepared accordingly and Husband appeals.
II
CHALLENGES TO THE COURT'S FINDINGS ON TRACING
OF SEPARATE PROPERTY
A. Nature of Inquiry on Appeal
Section 760 reads, "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." Initially, Husband seeks to have this
court begin and end the analysis with section 760, by concluding that the residence,
acquired during the marriage, cannot be other than community property. He argues for
de novo review of the trial court's decision on the residence characterization, solely as a
matter of statutory construction. (See, e.g., Kizer v. Hanna (1989) 48 Cal. 3d 1, 8 [plain
meaning rule]; see In re Marriage of Pearlstein (2006) 137 Cal. App. 4th 1361, 1371-1372
[de novo review of scope of statute].)
Husband acknowledges that other portions of the Family Code create exemptions
from the statutory community property definition for certain types of separate property,
such as gifts, inheritances, and earnings while spouses are separated. (§§ 770, 771; In re
Marriage of Benson (2005) 36 Cal. 4th 1096, 1103.) He relies on a debate in case law on
whether "a common law rule codified in Evidence Code section 662" should have equal
fourth such property (Plum), Husband waived receiving a commission, in order to obtain
benefits from his business's increased visibility in the community.
9
effect with Family Code presumptions in an action between spouses, on a determination
of whether property acquired during a marriage is community or separate. (Valli, supra,
58 Cal. 4th 1396, 1406 [majority opinion, declining to decide between effectiveness of
companion presumptions]; see pp. 1407-1412 [concurring opinion, J. Chin]; In re
Marriage of Haines (1995) 33 Cal. App. 4th 277, 294-295 (Haines) [effect of Evidence
Code section 662 in this context].)
Husband's theory that the terms of section 760 control the analysis would require
us to disregard numerous California Supreme Court opinions that have applied its
provisions and presumptions to various fact situations. The majority opinion in Valli,
supra, 58 Cal. 4th 1396, 1399-1400, discusses previous case law on whether the parties'
assets are community property or separate property, stating that while the analysis begins
with section 760, it continues through a tracing process on whether an asset's acquisition
was "(1) traceable to a separate property source [citations, e.g., In re Marriage of Mix
(1975) 14 Cal. 3d 604, 610 [(Mix)]), (2) acquired by gift or bequest [§ 770, subd. (a)(2)]
or (3) earned or accumulated while the spouses are living separate and apart [§ 771, subd.
(a)]." (Valli, supra, at p. 1400.) A preponderance of the evidence is required to prove the
effect of a traced separate property source on the characterization of property, or on rights
of reimbursement. (Ibid.)
When the Legislature enacted the Family Code in 1992, it did not intend to make
major substantive revisions to existing family law. (11 Witkin, Summary of Cal. Law
(10th ed. 2005) Community Property, § 2, p. 531.) California Supreme Court
jurisprudence accepting there is a methodology for tracing separate property interests in
10
community property goes back at least to See v. See (1966) 64 Cal. 2d 778, 783 (See). (11
Witkin, Summary of Cal. Law, supra, § 17, pp. 544-546.)7 The classic analyses
applicable to tracing separate property contributions, as set forth in Mix, supra, 14 Cal. 3d
604, 610-614, are grounded in statutory presumptions and legal applications of them. As
an intermediate appellate court, we are unable to accept Husband's invitation to create
what he would consider to be "the better rule" for applying section 760, i.e., to conclude
that "no nonstatutory exception continues to have viability . . . ." (Auto Equity Sales v.
Superior Court (1962) 57 Cal. 2d 450, 455.) We are constrained to apply established
rules in this context.
B. Standard of Review; Methods of Tracing
We examine the legal and factual bases for the trial court's conclusion that the
residence was and remained Wife's separate property. The court found that she had
provided sufficient evidence to trace her separate property Canadian account funds, both
in making the down payment and the bulk of the subsequent mortgage payments. (We
defer until pt. III, post, analysis of whether Husband was nevertheless able to show that
the residence was transmuted into community property at one or more points, such that
7 Early cases discussing family living expense tracing and direct tracing arose in the
legal context of property characterization rather than reimbursement. (See, supra, 64
Cal. 2d 778, 783; Mix, supra, 14 Cal. 3d 604, 612; Estate of Murphy (1976) 15 Cal. 3d 907,
918; Hicks v. Hicks (1962) 211 Cal. App. 2d 144, 157.) The same tracing methodologies
are now employed in cases where tracing is conducted to obtain reimbursement under
section 2640. (Walrath, supra, 17 Cal.4th at p. 920, fn. 5; In re Marriage of Braud
(1996) 45 Cal. App. 4th 797, 823-824 (Braud); In re Marriage of Stoll (1998) 63
Cal. App. 4th 837, 841 (Stoll).)
11
he should obtain a right to reimbursement for community contributions under section
2640.)
"Whether the spouse claiming a separate property interest has adequately traced an
asset to a separate property source is a question of fact for the trial court, and its finding
must be upheld if supported by substantial evidence." (Braud, supra, 45 Cal. App. 4th
797, 823.) A reviewing court examines the record in the light most favorable to the
judgment. (NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal. App. 4th 64, 71.)
"It is hornbook California family law that tracing is done either directly, or by a
process of elimination whereby a spouse shows the exhaustion of available community
funds at the time of acquisition." (Stoll, supra, 63 Cal. App. 4th 837, 841.) "Under the
'direct tracing' method, the disputed asset . . . is traced to the withdrawal of separate
property funds from the commingled account. This method requires specific records
reconstructing each separate and community property deposit, and each separate and
community property payment as it occurs. Separate property status cannot be established
by mere oral testimony of intent or by records that simply total up all separate property
funds available during the relevant period and all the separate expenditures during that
period; such records do not adequately trace to the source of the purchase at the time it
was made." (Braud, supra, 45 Cal.App.4th at p. 823; original italics.)
The second method, a "family living expense" approach, does not require very
detailed records that show each transaction in the parties' financial accounts. For
purposes of tracing under the family living expense method, "[c]ommunity expenses may
be shown by circumstantial evidence." (Price v. Price (1963) 217 Cal. App. 2d 1, 8.)
12
"Under the 'family living expense' or 'recapitulation' method, it is assumed that
family living expenses are paid out of community property funds. [Citations.] Payments
may be traced to a separate property source by showing community income at the time of
the payments or purchase was exhausted by family expense, so that the payments or
purchase necessarily must have been made with separate property funds. [Citations.]
The recapitulation must be sufficiently exhaustive to establish not only that separate
property funds were available to make the payments, but that they were actually used.
[Citation.] [T]he record must demonstrate that community income was depleted at the
time the particular asset was acquired." (Braud, supra, 45 Cal.App.4th at pp. 823-824;
Mix, supra, 14 Cal.3d at p. 612.)
C. Relevant Record on Tracing Issues; Analysis
At trial, Wife presented evidence on each method of tracing. First, regarding
direct tracing, it was essentially not disputed at trial that the $250,000 down payment on
the residence was Wife's separate property. Husband argued in closing that assuming the
residence should be designated community property, Wife should then be entitled to a
$250,000 credit for her separate property contribution (down payment). (§ 2640.)
The matter was contested on whether the ongoing mortgage payments on the
residence were provided exclusively or largely by Wife's separate property. Husband
argues that Wife failed to provide a sufficient number of checks and bank statements to
support her testimony that she contributed $520,761 in separate property funds toward
paying the mortgage and improvements to the residence (new flooring). From the year
2000 through 2012, Wife withdrew funds from her Canadian account to pay for the home
13
purchase and mortgage payments, as well as other family living expenses. She had a
practice of depositing the Canadian checks into a family Wells Fargo checking account.
In that way, she used $250,000 from the Canadian account to make the down payment,
and she estimated there was another $250,000 used from it for mortgage payments on the
residence. Through 2012, up to $1.5 million (Canadian dollars) of her separate property
inheritance funds were spent on the purchase and mortgage for the residence and other
family living expenses. The evidence had showed that in 2002, Wife and Husband
originally agreed to place title to the home in her own name. Although several trust
transactions followed, they were not directly discussed by the court in this context.
Although Wife did not supply full documentation of the decade of mortgage and
banking transactions, she was able to show the availability of her separate Canadian
account funds on given dates. Wife's testimony that her separate Canadian account was
gradually becoming depleted through spending on expenses for the residence, as well as
other living expenses, was deemed credible by the trial court. (Price v. Price, supra, 217
Cal. App. 2d 1, 8 [community expenses may be shown by circumstantial evidence].) In
the statement of decision, the court relied on several trial exhibits as backing up her
testimony, the available checks and statements, payable to the mortgage servicing
company or cash. Since some of the checks were in even dollar amounts (e.g., $ 4,000-
$5,000), while the mortgage bills were for odd amounts (e.g., $3,692.82), the court
surmised that some large checks to the mortgage company were being used to pay down
the principal on the loan, as would be consistent with Wife's claim to the residence as her
separate property.
14
Generally, the evidence showed that the salaries of the couple were minimal
compared to their community expenses, at least through 2010, when Husband began to
earn significant commissions. Around 2006, Husband obtained a loan of $62,000 from
Wife's brother. The court noted that Husband had not controverted the testimony that the
main source of the funds in the family Wells Fargo account was Wife's separate Canadian
account. No other consistent sources of community income had been identified for that
period. Moreover, the court relied on the evidence that the business failure in Vermont
had bankrupted the community, to conclude that as of the time of acquisition in 2002, the
community did not have income or a down payment to qualify for the mortgage on the
residence. (See Haines, supra, 33 Cal. App. 4th 277, 291 [time of acquisition of property
determines its status as community or separate].) From the available evidence and
testimony, the court concluded that Wife had satisfactorily traced the money from her
Canadian account into the bills for expenses of the residence, as direct tracing, especially
since there was no significant controverting showing by husband. (See Mix, supra, 14
Cal.3d at p. 613.) The record substantially supports this finding.
Although the court did not expressly rely on the alternate method of tracing
(family living expense), evidence was presented to show there were insufficient
community funds to have contributed significantly to the acquisition of and payment for
the residence between 2002 and 2010. The RACA business was not incorporated until
2007, Husband did not earn significant commissions until at least 2010, and separation
occurred in 2012. The court discussed the ongoing use of Wife's Canadian account funds
for various family living expenses, and took note of the evidence showing that the
15
community was bankrupt for some time after 2000. The court made express and implied
findings that the community funds had been exhausted and thus it was unlikely that the
residence expenses were paid by the community, for most of the relevant time period.
(Braud, supra, 45 Cal.App.4th at p. 823.)
Moreover, the trial court's statement of decision expressed concern about the
credibility of the parties, noting that each of them testified at times to things they wished
were true but were probably not true, understandably with respect to long ago events.
The court then noted that Husband had testified about several items that he knew not to
be true, and therefore, when the parties' testimony differed on the financing of the
residence, the court tended to favor Wife's view. The court was entitled to take into
account the respective credibility of the witnesses and on appeal, we have been given no
basis to contradict it. (Braud, supra, 45 Cal. App. 4th 797, 823 [trial court's resolution of
disputed factual issues to be upheld where supported by substantial evidence].)
Before we can draw any final conclusions about the sufficiency of the trial court's
findings that the residence was and is the separate property of Wife, we turn to the related
transmutation issues arising from the parties' use of the family trust as an estate planning
device.
III
TRANSMUTATION ISSUES
Husband contends the trial court should have analyzed the evidence as showing
that even if the residence were originally deemed to be Wife's separate property, the deed
from Wife to "Husband and Wife" as community property (executed in Dec. 2002 but
16
recorded in Feb. 2003), clearly satisfied the standards of section 852. Subdivision (a) of
that section requires a transmutation from separate property to community to be in
writing by "express declaration." Husband claims that when the factual context of estate
planning and the use of a revocable trust is properly considered, the recorded deed and
the related trust transactions (including the 2011 trust transfer deed from the couple as
joint tenants) sufficed to indicate a change in the character and the ownership of the
property. (Starkman, supra, 129 Cal.App.4th at p. 664.)
A. Applicable Legal Principles
In Estate of MacDonald (1990) 51 Cal. 3d 262 (MacDonald), the court concluded a
writing signed by the adversely affected spouse is not an "express declaration" for
purposes of section 852, subdivision (a), "unless it contains language which expressly
states that the characterization or ownership of the property is being changed."
(MacDonald, supra, at p. 272; original italics.)8 The court further concluded the
determination of whether a writing meets the "express declaration" requirement must be
made without resort to extrinsic evidence. (Ibid.) The determination of whether a written
document constitutes a transmutation is subject to de novo review. (In re Marriage of
Barneson (1999) 69 Cal. App. 4th 583, 588, 591 (Barneson) [a "transmutation may be
8 The court in MacDonald, supra, 51 Cal. 3d 262, 267-272, was analyzing a
predecessor statute, Civil Code section 5110.730, which also invalidated attempts to
transmute property unless certain conditions were met. The court's statements apply
equally to current section 852. (Starkman, supra, 129 Cal. App. 4th 659, 663-664.)
Section 852, subdivision (b) pertains to the requirements for a transmutation of real
property (not effective as to third parties without notice, unless recorded), and it does not
appear to apply here. Likewise, subdivision (c) of the section does not apply (gifts
between spouses).
17
effected by means of a transfer, but a transfer is not necessarily a transmutation"]; Cox
Cable San Diego, Inc. v. City of San Diego (1987) 188 Cal. App. 3d 952, 958.)
The court in Starkman, supra, 129 Cal. App. 4th 659, addressed whether documents
that transferred the husband's separate property into a revocable trust, created by the
husband and wife for estate planning purposes, satisfied the requirements of MacDonald,
supra, 51 Cal.3d at page 272, for an "express declaration" under section 852, subdivision
(a) (i.e., changing the characterization or ownership of the property). In Starkman, the
court held the trust instruments were insufficient to constitute a transmutation, relying on
the record showing that the husband and wife had created the trust to avoid probate and to
administer their estate in the event of death. It was not evidently the purpose of the trust
to transmute the husband's substantial separate property into community property.
(Starkman, supra, at p. 664.) The court declined to consider extrinsic evidence beyond
the trust documents, such as an attorney warning letter. (Id. at p. 665, citing MacDonald,
supra, 51 Cal.3d at pp. 271-272.) "A party does not 'slip into a transmutation by
accident.' " (Starkman, supra, at p. 664.)
In re Marriage of Holtemann (2008) 166 Cal. App. 4th 1166 (Holtemann)
distinguished the analysis of Starkman, supra, 129 Cal. App. 4th 659, because the
documents before the court in Holtemann had used the "unique and specific term of art,"
"transmutation," leading to the conclusion that the parties had clearly chosen that
disposition of property. (Holtemann, supra, at p. 1173.) There, the main document was
entitled, "Spousal Property Transmutation Agreement," and the trust document expressly
transmuted certain of Husband's identified separate property to community property. (Id.
18
at pp. 1169-1170.) "Regardless of the parties' motivations underlying the documents,
they contained the requisite express unequivocal declarations." (Id. at p. 1173.)
B. Relevant Record on Estate Planning/Trust Issues
In the original June 2002 deed, Wife took title to the residence as her separate
property. In connection with establishing their estate plan in December 2002, Wife
signed a quitclaim deed to Husband and herself as community property. Both that deed
and a deed transferring title to the family trust were recorded in February 2003. In July
2003, to facilitate refinancing the residence in Wife's name, Husband and Wife, as
trustees, deeded the property back to Wife as her separate property. No other deeds were
produced in evidence except for the March 2011 trust transfer deed from Husband and
Wife as joint tenants, granting the residence to the family trust. The 2011 restated trust
was also admitted into evidence.
During closing argument, Husband's attorney mainly argued that despite the
sequencing of the deeds, there was an understanding between the parties that the
residence would be community property. He claimed that the use of the separate
property designations was merely for financing and refinancing, because of Husband's
bankruptcy and bad credit, such that Wife had a fiduciary duty to reconvey title to the
community.
As noted, the court's statement of decision observed that the record was unclear
"why the March 2011 deed stated the grantors were Robert and Christine as joint tenants,
which they were not -- the last deed recorded before that had listed Christine as the sole
owner." The burden had shifted to Husband to prove, by a preponderance of the
19
evidence, that the residence had been transmuted into community property. (§ 852,
subd. (a).) Pursuant to the authority of MacDonald, supra, 51 Cal. 3d 262, the court
declined to consider testimony or other extrinsic evidence. Husband's only admissible
evidence, the written deeds transferring the residence into the family trust and the restated
trust, did not provide a showing with the requisite specificity that Wife had made an
express written declaration to unambiguously indicate her intent to change the character
or ownership of the property. (Starkman, supra, 129 Cal.App.4th at p. 662.)
In particular, the court noted that the restated trust, at its paragraph 2.A, declared
that the property described in the attached schedule (the residence and the Canadian and
Wells Fargo bank accounts) was their community property, and that community property
transferred into the trust retained its character as such. However, since Husband had
conceded the Canadian account was never community property, the trust documents
likewise did not support any inference that the parties had intended to transmute the
separate property residence into community property. (Barneson, supra, 69 Cal.App.4th
at p. 591 [a transfer is not necessarily a transmutation].)
The court concluded that Husband's evidence did not satisfy his burden of proof
for transmutation, and consequently, "the court has no call to analyze the spouses'
fiduciary duties to one another [citations] or a presumption of undue influence."9
9 "Section 721 . . . creates a broad fiduciary relationship between spouses in their
transactions with each other. This 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.' " (In re Marriage of Simmons (2013) 215 Cal. App. 4th 584, 590.) Section 1100
recognizes the fiduciary duty of spouses in the management and control of community
personal property, and section 1101 provides remedies for breaches of same.
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C. Analysis; No Transmutation; No Undue Influence Issues Resolved
We examine whether the deeds and trust relied upon by Husband amounted to
Wife's "express declaration" of transmutation within the meaning of section 852,
subdivision (a). This was a revocable trust, stating at its paragraph 8 that on revocation,
the settlors would receive their property back. The trial court could reasonably conclude
that merely listing both community and separate property on the trust's Schedule A did
not serve as an express transmutation. The original deeds and trust transactions did not
contain clear and unambiguous language to change the characterization or ownership of
property. (Barneson, supra, 69 Cal.App.4th at p. 590 [term "transfer" has multiple
definitions and can be ambiguous].)
Husband seeks to characterizes the trust's 2003 deed transferring the residence to
Wife as her separate property as merely a financing device that was consistent with
continued community property status. However, the 2011 trust transfer deed from the
couple as joint tenants to the trust still had no foundation in any deed back from Wife to
the community. Husband does not explain how the 2011 deed originated or how it
became effective. He cannot show error in the trial court's conclusion that the writings in
evidence did not clearly and unambiguously establish an intent to change the
characterization or ownership of the residence as separate property. There is again no
need to reach any issues of undue influence.
D. Alternate Argument for Reimbursement
Finally, Husband argues that even if the trial court were correct in designating the
residence to be Wife's separate property, there was still a basis in the evidence to grant
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credits to the community for its presumed contributions of funds to reduce the principal
of the loans on the residence, either as monetary reimbursement or as an percentage
interest in the equitable ownership of the residence. (§ 2640; In re Marriage of Nelson
(2006) 139 Cal. App. 4th 1546, 1556-1557 (Nelson) [to apply a Moore/Marsden
calculation to allow a community interest according to amounts the community
expended, sufficient supporting evidence must be presented].)10
To show the existence of such community contributions toward the payments on
the mortgage, Husband essentially argues that separate property funds must have been
commingled with community funds, such as through the use of the Wells Fargo family
account. Husband has not pointed to any proof he presented of community contributions
toward paying down the mortgage, and instead he merely assumes there must have been
some, apparently because his income varied widely and he admitted to earning significant
amounts after 2010. As supporting evidence in the record, he points to a 2014 mortgage
bill with both names on it, and estimates there should be a community property interest of
nearly $75,000. Evidently, the premise of Husband's argument is that the residence
qualified as part of the community estate to be divided, but that premise fails. He did not
provide proof that he made contributions qualifying him for reimbursement under section
2640, subdivision (b), for his "contributions to the acquisition of property of the
10 Under In re Marriage of Moore (1980) 28 Cal. 3d 366, 371-372, the community
has a pro tanto community property interest in acquired property " 'in the ratio that the
payments on the purchase price with community funds bear to the payments made with
separate funds.' " (See In re Marriage of Marsden (1982) 130 Cal. App. 3d 426, 436-439.)
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community property estate to the extent the party traces the contributions to a separate
property source." (Italics added.)
Also, Wife argues that no such issue was raised at trial and it should be deemed
forfeited. On appeal, the parties do not argue any effect of section 852, subdivision (d),
and due to a failure of proof by Husband, we need not address its provisions, reading:
"Nothing in this section affects the law governing characterization of property in which
separate property and community property are commingled or otherwise combined."
Although it is not clear whether this issue was properly brought before the trial
court, it is moot in light of our determination on the other issues presented. It is
unnecessary to address any reimbursement issues. Sufficient evidence supports the trial
court's findings that the residence was and is the separate property of Wife.
IV
CONDITIONAL AWARD OF RACA
The parties stipulated to the December 31, 2012 separation date for valuation of
the business, and evidence was presented about RACA's proceeds. In its oral statement
of decision on the RACA business, the court assigned a value of $47,681 as of the date of
separation, and awarded it to Husband, conditioned on his making an equalizing payment
to Wife of half that amount.
Husband contends the trial court erroneously failed to accept the valuation as
estimated by the special master appointed by the court, Dennis Pearson. (Evid. Code,
§ 730 [court's appointed expert].) Pearson used the time rule and found that the value to
the community of eligible real estate commissions was $25,627.78. The court examined
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the evidence and the witnesses, and determined that there was a basis to allocate to the
community an additional three commissions that were payable after the date of
separation. Husband thus argues insufficient evidence supports the higher valuation the
court assigned to the business.
A. Standard of Review and Valuation Methods
On a showing of good cause, the trial court may value a community asset at an
alternate valuation date from the date of trial. (§ 2552, subds. (a), (b); Nelson, supra, 139
Cal. App. 4th 1546, 1550.) "In this regard, the trial court has considerable discretion to
divide community property in order to assure that an equitable settlement is reached. 'As
long as the court exercised its discretion along legal lines, its decision will be affirmed on
appeal if there is substantial evidence to support it.' " (Ibid., citing Duncan, supra, 90
Cal. App. 4th 617, 625; In re Marriage of Nichols (1994) 27 Cal. App. 4th 661, 670
[discretionary valuation ruling affirmed so long as within the range of evidence
presented].)
In determining the status of property as separate or community property, the court
may apply an inception of title theory, which determines when equitable title becomes
incipient, as well as the time in which title is extended and perfected. In some cases,
ownership of an asset may not become complete until the original right "matures" into
full title. (Giacomazzi v. Rowe (1952) 109 Cal. App. 2d 498, 500; 11 Witkin, Summary of
Cal. Law, supra, Community Property, § 7, p. 534; In re Marriage of Joaquin (1987) 193
Cal. App. 3d 1529, 1533.) This "inception of title" theory is commonly applied to
determine when property acquired before marriage retains a separate property character,
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but Husband has not shown why it must be confined to that context. (Ibid.; see, e.g., In
re Marriage of Kilbourne (1991) 232 Cal. App. 3d 1518, 1526 [trial court could properly
accept expert's value of a law practice by considering work in progress as of the date of
separation].)
B. Relevant Record; Analysis
At trial, Husband testified that the income from RACA was the product of work
performed prior to receiving the income. The value of many waived commissions was
discussed, according to Husband's practice of representing certain clients on that basis
(such as the Plum property), to increase his professional visibility in the community.
Real estate commissions paid in January and February were the result of work done in
November and December. Certain listed properties, Del Cerro, Nipoma, and Locust,
were signed up in December 2012 and closed in January and February.
In Pearson's report and testimony, he gave his valuation opinion based on RACA's
closed listings, including waived commissions. He considered as the relevant dates:
(1) listing, (2) closing of escrow, and (3) the percentage of time in the listing periods that
occurred prior to December 31, 2012. He concluded that as of the date of separation, the
community's commissions value was $25,627.78. Also, there were $8,160 in net tangible
business assets, for a combined $33,787 community value.
The court treated the determination of the community business's value as a
question of fact. (Duncan, supra, 90 Cal.App.4th at p. 631.) It considered the special
master's report and inquired about the methods in it. Pearson responded that he utilized
the time rule to arrive at the community commission value, and apportioned commissions
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into two separate groups. He only included commissions he believed were earned prior
to separation, for a $25,627 value. The court asked Pearson whether a fee is earned at the
time the professional contract is signed, and compared valuation methods used in other
contexts (bankruptcy). Pearson said he was not familiar with such an inception of rights
theory, but he agreed with Wife's counsel that it would be possible to allocate the
aggregate of commissions according to the time of listing, as opposed to the time of
completion of payment.
In issuing its ruling, the court said it would be speculative to allocate all of the
disputed waived commissions to the value of the business. Specifically as to the expert's
straight line allocation of all listings and his omission of the value of those closing shortly
after separation, the court disagreed with that method. Three such commissions had
closed between 29 and 79 days after listing, and the court ruled they were essentially
earned when signed up. The court made a finding that the value of those three
commissions was part of the community property. However, the fourth waived
commission (Plum), had been on the market longer and there was no evidence about
when effort was put in to make that sale, and it was properly omitted. The court assigned
a $47,681 value to RACA, and required Husband to buy Wife out by making a payment
of half that.
The trial court was granted "considerable discretion to divide community property
in order to assure that an equitable settlement is reached." (Nelson, supra, 139
Cal. App. 4th 1546, 1550; Duncan, supra, 90 Cal. App. 4th 617, 625.) Under that approach,
the court had a substantial basis in the evidence to conclude that the three listings signed
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before separation, but paid shortly thereafter, were earned when listed. The court had the
discretion to question the expert's methods and to decide not to accept the expert's
recommendation in full. (Evid. Code, § 730 [discretionary language, court "may" appoint
expert to assist it]; In re Conservatorship of McKeown (1994) 25 Cal. App. 4th 502, 509
[trier of fact may reject expert testimony]; 1 Witkin, Cal. Evidence (5th ed. 2012)
Opinion Evidence, § 86, p. 728.) The decision placing a value on the community
business had a legal basis and was within the range of the evidence presented. No abuse
of discretion is apparent, and we affirm the judgment in full.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to Wife.
HUFFMAN, Acting P. J.
WE CONCUR:
NARES, J.
PRAGER, J.*
* Judge of the San Diego Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.
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