Marriage of Young

Filed 7/27/07 Marriage of Young CA1/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION THREE

This is an appeal from the trial courts judgment on certain reserved issues in the marriage dissolution proceedings of appellant Erin Young (Wife) and respondent Bruce Young (Husband). The trial court entered the judgment after amending its earlier proposed statement of decision, which had found Husband transmuted his separate real property into property held by both parties in joint tenancy. After hearing Husbands objections to the proposed statement of decision, the trial court concluded that no transmutation occurred because there was no writing evidencing Husbands intent to transfer part of his ownership interest in the property to Wife. Wife contends the trial courts changed decision amounted to error, and seeks to vacate the judgment on reserved issues and have the earlier proposed statement of decision entered as the judgment. We conclude the trial court erred as a matter of law in concluding that no transmutation had occurred.

FACTUAL AND PROCEDURAL BACKGROUND

The parties began cohabitating in March 1995 after several months of dating. In 1997, Husband purchased residential real property (the Property) in Livermore in his own name. Wife resided in the house on the Property and made periodic payments for rent, utilities, and other home expenses and improvements.

The parties son was born in August 1999, and they married October 12, 1999.The marriage occurred because Husband was having health problems and the parties decided both would benefit from having him covered by Wifes employer-provided health insurance.

In January or February 2001, Husband sought to refinance the Property to use the proceeds to pay off a truck and a line of credit. Husbands loan officer advised him to place Wife on the Propertys title to facilitate the transaction because Wife had better access to credit.[1] Accordingly, in connection with the refinance, Husband executed a grant deed conveying the Property, at the time his separate property, to Wife and himself as joint tenants. The deed was recorded on February 6, 2001.[2] It stated: This instrument is recorded at the request of United Title Company as an accommodation only. It has not been examined as to its execution or as to its effects upon title.

Approximately five months later, Wife executed a quitclaim deed, recorded on July 16, 2001, that removed her name from the title and rendered the Property once again the sole and separate property of Husband. The new deed stated: It is the express intent of the grantor, being the spouse of the grantee, to convey all right, title and interest of the grantor, community or otherwise, in and to the herein described property, to the grantee as his/her sole and separate property. On the same day the instrument was recorded, escrow closed on a loan in Husbands name.[3]

Wife filed a petition to dissolve the marriage on September 5, 2002. Proceedings were initiated to address a variety of issues, including division of the parties property, child custody and visitation.

On January 24 and June 2, 2005, the trial court conducted the trial regarding, among other things, the parties claims to ownership of the Property. The parties disagreed on why Wife was placed on, then taken off, the Propertys title. Wife testified Husband placed her on the title so they could jointly own the Property based on her significant contributions to the home and their desire to solidify the marriage. She was then removed from the title a few months later only to facilitate the opening of a line of credit.[4] She agreed to execute the quitclaim deed removing herself from the title, however, based upon Husbands promise to place her back on the title once the transaction was completed. Husband, she claimed, failed to honor his promise.

Husband, to the contrary, testified Wife was placed on the title for only the limited purpose of refinancing the Property. Husband further testified that, once the refinance was accomplished, both parties intended that Wife would be removed from the title. Husband pointed out Wife was removed from the title the same day escrow closed on a loan in his name from a home mortgage company.

The trial court issued its proposed statement of decision on November 10, 2005. The trial court found, among other things, that Husband transmuted the Property from his separate property to both parties property as joint tenants when he executed the grant deed adding Wifes name to the title in early 2001. The trial court further found Husband used trickery to cause Wife to execute the quitclaim deed removing her name from the title in July 2001, based on his false promise to put her back on the title once another refinancing transaction was completed. The trial court thus concluded Husband had breached the fiduciary duty he owed Wife.

Husband thereafter objected to the trial courts proposed statement of decision and Wife moved to have it implemented as an order of the court. Many months went by until, on May 3, 2006, the trial court conducted a hearing on both parties requests.

At the hearing, the trial court changed course, and found Husband did not transmute the Property because no writing evidenced his clear intent to do so. The trial court appeared to be persuaded that authority cited by Husband compelled such a result. (In re Marriage of Benson (2005) 36 Cal. 4th 1096 [Benson].) Husbands counsel argued there was no document between the parties sufficient to satisfy the statutory requirements for a valid transmutation.

No revised statement of decision followed, but on June 5, 2006, the judgment on reserved issues was entered, which confirmed the trial courts conclusion that no transmutation had occurred.)

DISCUSSION

Wife contends the trial court erred, procedurally and substantively, when it reversed its earlier ruling that Husband had transmuted the Property from his separate property to the parties community property held in joint tenancy. As set forth above, in its proposed statement of decision, the trial court concluded a transmutation had occurred. In drawing that conclusion, the trial court found Husband voluntarily placed Wife on the title in connection with the refinancing of the Property as valid consideration for: (1) Wifes agreement to marry him when he was sick so that he could receive coverage under her insurance policy, (2) her energy and devotion during marriage, and (3) her financial contributions to the Property before marriage. The trial court further found Husband used trickery to cause Wife to reverse the transmutation. Specifically, in breach of his fiduciary duties, Husband persuaded Wife to remove herself from the title in July 2001 to facilitate another financial transaction based on his false promise to put her back on the title once the transaction was completed. The trial court thus ordered each party to receive one half of the increase in the Propertys equity value as of January 2001.

During a subsequent hearing on Husbands objections to the proposed statement of decision, the trial court reversed course and ruled that no transmutation had occurred. The trial court reasoned that, regardless of whether Husband tricked Wife into removing her name from the title, there was no valid transmutation because the law requires a writing . . . [and] there never was a writing. The trial court explained:

I still believe that your client misrepresented to the petitioner that he would put her name back on [the title]. But by putting her name back on it, I cannot find anywhere in the record or in any written document an intention to transmute the property into community property. Those are apples and oranges.

The trial court then issued the judgment on reserved issues, confirming its decision that no transmutation had occurred.

In reviewing the trial courts change of course, we first examine the procedural steps it took to ensure Wife received adequate notice and an opportunity to be heard on the issue. We then examine the legal principles governing interspousal transmutations of property to ensure the trial court properly applied the law.

I. Wife received adequate notice and an opportunity to be heard before the trial court reversed its transmutation finding.

Wife contends the trial court erred by reversing its initial finding in the statement of decision that a transmutation had occurred without notice or . . . a motion to do so. The record, we conclude, proves otherwise.

The trial court issued the statement of decision which contained its initial transmutation finding on November 10, 2005. A copy was mailed to each party. Husband filed objections to the statement of decision on November 28, 2005. Allowing for the statutorily-mandated 5 additional days for mailing, Husbands objections were thus timely filed. (Code Civ. Proc.,  1013, subd. (a); Cal. Rules of Court, rule 3.1590, subd. (f) [[a]ny party affected by the judgment may, within 15 days after the proposed statement of decision and judgment have been served, serve and file objections to the proposed statement of decision or judgment].)

Then, on January 13, 2006, Wife filed a motion for, among other things, implementation of the trial courts statement of decision as a court order. With the motion, Wife submitted a proposed order calling for [e]ach party [to] . . . receive one-half of the increase in the equity value of the property from and after January 2001. Husband filed a response to Wifes motion, asking the trial court to reserve ruling on it until the court first ruled on Husbands objections to the statement of decision.

On May 3, 2006, a hearing was held on both Wifes motion to implement and Husbands objections to the statement of decision. Both parties appeared represented by counsel at the hearing. On the record, the trial court first clarified the statement of decision was a proposed decision, not a final decision, subject to objections under California Rules of Court, rule 232, subdivision (d) (the predecessor to rule 3.1590, subd. (f), which became effective January 1, 2007). The trial court then stated its intention to reverse its earlier finding that a transmutation had occurred. Wifes attorney had the opportunity, but failed, to respond before the matter was submitted. The trial court shortly thereafter issued its judgment on reserved issues, which contained the new finding that no transmutation had occurred.

The trial court was undoubtedly entitled to reverse its initial finding in the proposed statement of decision that a transmutation had occurred and declare its final conclusion and judgment that no transmutation had occurred:

 [A] court is not bound by its statement of intended decision and may enter a wholly different judgment than that announced. [Citation.] Neither an oral expression nor a written opinion can restrict the power of the judge to declare his [or her] final conclusion in his [or her] findings of fact and conclusions of law. [Citation.] The findings and conclusions constitute the final decision of the court and an oral or written opinion cannot be resorted to for the purpose of impeaching or gainsaying the findings and judgment. [Citation.] (In re Marriage of Ditto (1988) 206 Cal.App.3d 643, 646-647. (Raville v. Singh (1994) 25 Cal.App.4th 1127, 1132; see also Code Civ. Proc.,  632.)

Moreover, the record set forth above establishes Wife had adequate notice of and an opportunity to respond to the trial courts change of course. Wife was served with Husbands objections to the statement of decision, which challenged the trial courts finding that a transmutation had occurred, and was present with her attorney at the hearing where the trial court announced its intention to reverse that finding. She offered no response. We therefore reject her claim of procedural error.[5]

II. The trial court erred in finding that no transmutation was made.

A transmutation is an interspousal transaction or agreement which works a change in the character of the property. (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 293.) Whether a valid transmutation has been made is governed by Family Code section 852, subdivision (a), which 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.

Our Supreme Court in Estate of MacDonald (1990) 51 Cal.3d 262, 272 [MacDonald] interpreted Civil Code section 5110.730, subdivision (a), the identical predecessor to Family Code section 852, subdivision (a), as requiring language expressly stating that a change in the characterization or ownership of the property is being made. Recently, in In re Marriage ofBenson (2005) 36 Cal.4th 1096, the Supreme Court confirmed MacDonalds holding. (Id. at p. 1107 [under MacDonald, a valid transmutation necessitates not only a writing, but a special kind of writing, i.e., one in which the adversely affected spouse expresses a clear understanding that the document changes the character or ownership of specific property); see also In re Marriage of Barneson (1999) 69 Cal.App.4th 583, 588.) The determination whether the language of a writing purporting to transmute property meets the MacDonald test must be made by reference to the writing itself, without resort to parol evidence. (Barneson, supra, 69 Cal.App.4th at p. 588; see also Benson, supra, 36 Cal.4th at p. 1106 [the writing must reflect a transmutation on its face, and must eliminate the need to consider other evidence in divining this intent].) Moreover, the determination of the writings proper interpretation is subject to our independent review (Barneson, supra, 69 Cal.App.4th at p. 588), although we uphold the trial courts factual findings supporting its interpretation so long as those findings are based upon substantial evidence. (In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 849.)

The reviewing courts inquiry does not necessarily end, however, with a determination of whether a writing purporting to transmute property meets the requirements of Family Code section 852, subdivision (a). For a transmutation between spouses to be valid, it must meet not only Family Code section 852, subdivision (a), but also the rules governing fiduciary relationships set forth in Family Code section 721. (Barneson, supra, 69 Cal.App.4th at p. 588 [the requirements of section 852 are prerequisites to a valid transmutation but do not necessarily in and of themselves determine whether a valid transmutation has occurred]). Under Family Code section 721, in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. . . .

Family Code section 721 thus establishes that with respect to property transactions, married couples are subject to the same standards of disclosure toward each other applicable to any confidential fiduciary relationship. As a consequence, when any interspousal transaction advantages one spouse to the disadvantage of the other, the presumption arises that such transaction was the result of undue influence. (Haines, supra, 33 Cal.App.4th at p. 287). (In re Marriage of Delaney (2003) 111 Cal.App.4th 991, 996; see also Haines, supra, 33 Cal.App.4th at pp. 293-294 [[c]ourts of equity . . . view gifts and contracts which are made or take place between parties occupying confidential relations with a jealous eye].)

Moreover, this presumption of undue influence in cases involving interspousal property transfers effectively trumps the general presumption under property law, rebutable only by clear and convincing evidence, that title to property reflects its actual ownership.(Haines, supra, 33 Cal.App.4th at p. 302; see also Evid. Code,  662.)[6]

Applying these principles, we thus turn to the issue at hand: whether substantial evidence supported the trial courts finding that no transmutation of the Property from Husbands separate property to community property occurred.

A. The February 2001 Grant Deed.

Husband admits he executed a grant deed recorded in February 2001 that transferred his separate interest in the Property to Wife and himself as joint tenants. He claims, however, that the transfer was intended to be only temporary, for the limited purpose of having Wife cosign on the Propertys refinance, and thus did not amount to a transmutation. Wife, to the contrary, contends that in executing the grant deed Husband intended to, and did, permanently transfer his separate ownership interest in the Property to them both as joint tenants. She claims he did so to solidify the marriage and as consideration for her significant contributions to the home.

The trial court found in favor of Husband, concluding no written document contained an intention to transmute the [P]roperty into community property. Although the record is unclear, we infer by this ruling the trial court determined the February 2001 grant deed was insufficient under Family Code section 852 to affect a valid transmutation. As set forth above, in determining whether the trial courts ruling was proper, we apply the principals of MacDonald. (MacDonald, supra, 51 Cal.3d at pp. 271-272; Benson, supra, 36 Cal.4th at p. 1106; and Barneson, supra, 69 Cal.App.4th at p. 588.) Accordingly, we look to the grant deed itself, not to parol evidence, for language expressly stating that a change in the characterization or ownership of the Property was being made. (MacDonald, supra, 51 Cal.3d at pp. 271-272; Benson, supra, 36 Cal.4th at p. 1106; Barneson, supra, 69 Cal.App.4th at p. 588.) As a matter of interpretation of written documents, the determination is subject to independent review by this court. (Barneson, supra, 69 Cal.App.4th at p. 588.)

We conclude the grant deed indeed contains language which characterizes the property assertedly being transmuted and, further, that it is possible to tell from the face of [the deed] [that] [Husband] was aware that the legal effect of [his] signature [would] be to alter the character or ownership of [his] interest in the [Property]. (Cf. Barneson, 69 Cal.App.4th at p. 593.) The grant deed states: For valuable consideration, receipt of which is hereby acknowledged, Bruce Allen Young, a single man, hereby Grant(s) to Bruce Allen Young and Erin E. Young, husband and wife as joint teants [sic] the following described real property in the City of Livermore . . . . Such language did not merely direct a transfer of property into a spouses name. Rather, contrary to the trial courts implied finding, it connote[d] an intention to change beneficial ownership. (Barneson, supra, at pp. 591, 593.)

Our colleagues in the Court of Appeal, Fourth District, Division Two, are in accord: A deed, which changes title to joint tenancy during a marriage . . . sufficiently conveys in writing the intent of the donor to waive his separate property interest and transmute the separate property interest to community property. (In re Marriage of Weaver (2005) 127 Cal.App.4th 858, 870.) Moreover, as this court has previously explained, [s]ince grant is the historically operative word for transferring interests in real property, there is no doubt that [the spouses] use of the word grant to convey the real property into joint tenancy satisfied the express declaration requirement of [Family Code] section 852, subdivision (a). (Estate of Bibb (2001) 87 Cal.App.4th 461, 468-469.)

In so concluding, we acknowledge the language in the grant deed indicating it was recorded at the request of [the title company] as an accommodation only. This language does not affect our conclusion. An accommodation recording signifies the title company is recording the document without assuming liability for its correctness or validity because, for example, no title insurance is being issued to cover the transaction. (See Rooz v. Kimmel (1997) 55 Cal.App.4th 573.) An accommodation recording does not necessarily signify, however, the absence of an intent to change beneficial ownership.

We also note Husbands testimony that he executed the grant deed for the limited purpose of facilitating a refinancing transaction. Such testimony is parol evidence, and thus does not influence our interpretation of the grant deed. (MacDonald, supra, 51 Cal.3d at pp. 271-272; Benson, supra, 36 Cal.4th at p. 1106; Barneson, supra, 69 Cal.App.4th at p. 588.) And in any event, regardless of why Husband executed the grant deed, there is no evidence he failed to understand that the legal effect of his action was to transfer part ownership interest in the Property to Wife. (In re Marriage of Neal (1984) 153 Cal.App.3d 117, 120-121, disapproved on another point in In re Marriage of Buol (1985) 39 Cal.3d 751, 763, fn. 10 [wifes premarital separate property was transmuted to property held by both spouses in joint tenancy where husbands name was added to the title at the insistence of a lender involved in refinancing the property].) Nor is there any claim he executed the grant deed under undue influence from Wife, making relevant extrinsic evidence relating to the parties dealings.[7] (See Haines, supra, 33 Cal.App.4th at pp. 293-294.)

As such, contrary to the trial court, we interpret the grant deed to have effected a valid transmutation. Indeed, to interpret the grant deed otherwise would be to ignore its plain language altering the separate character of the Property, thereby undermining the legal significance afforded title instruments merely to facilitate a financial transaction. We decline to take that course of action.

B. The July 2001 Quitclaim Deed.

Wife also raises an issue on appeal regarding whether the quitclaim deed she executed in July 2001 affected another transmutation of the Property. Here, as below, Wife contends Husband tricked her into executing the quitclaim deed that removed her name from the Propertys title by promising, falsely, to put her back on the title once a financial transaction was completed.

Wifes contentions resemble those raised in Haines, supra, 33 Cal.App.4th 277 [Haines]. There, during marriage, the husband deeded his separate property to himself and his wife as joint tenants. (Id. at pp. 283-284.) Four years later, the wife executed a quitclaim deed conveying her joint interest in the property back to the husband, rendering it again his separate property. (Id.) The wife claimed she agreed to do so only under duress from her husband. The husband, to the contrary, claimed wife was calm and businesslike when she executed the deed conveying the property back to him. (Id. at pp. 283-285.) A year later, during a period of reconciliation, the husband again conveyed his separate property interest in the property to himself and his wife as joint tenants. (Ibid.)

During subsequent marriage dissolution proceedings, the trial court in Haines awarded the husband reimbursement for the full value of the property at the time of the second transmutation to joint property as his separate property contribution to the community. (Haines, supra, 33 Cal.App.4th at pp. 285-286.) The appellate court reversed, however, concluding the husband had failed to rebut the wifes claim of duress in executing the quitclaim deed that reconveyed the property to the husband as his separate property. (Id. at pp. 301-302.)

Here, in the proposed statement of decision, the trial court initially agreed with Wife that Husband breached his fiduciary duties by tricking her into executing the quitclaim deed that removed her name from the Propertys title. However, when the trial court reversed course and rendered its ultimate conclusion that the Property was never transmuted from Husbands separate property into community property, it concluded any evidence of Husbands trickery in connection with execution of the quitclaim deed was irrelevant. At that time, the trial courts error in finding no transmutation led logically to its unwillingness to consider the question of undue influence: [A]bsent a transmutation that otherwise satisfies [Family Code] section 852(a), there is no basis for applying the presumption of undue influence under [Family Code] section 721(b). (Benson, supra, 36 Cal.4th at p. 1112.)

However, because we have reversed the trial courts finding that no transmutation occurred, issues exist as to whether Wifes execution of the quitclaim deed affected another transmutation of the Property and, if so, whether, as in Haines, a presumption of undue influence arose. (Haines, supra, 33 Cal.App.4th at pp. 296, 301-302; Delaney, supra, 111 Cal.App.4th at p. 996.) Under the principles set forth above, if the trial court concludes Wifes execution of the quitclaim deed was a transmutation that advantage[d] one spouse over the other (Haines, supra, 33 Cal.App.4th at p. 287), Husband will have the burden to establish Wifes decision to remove herself from the Propertys title was freely and voluntarily made, with full knowledge of all the facts, and with a complete understanding of the effect of [the Propertys] transfer from [a joint interest to his unencumbered separate interest]. (Delaney, supra, 111 Cal.App.4th at p. 1000; see also Haines, supra, 33 Cal.App.4th at p. 296.) Given the trial courts initial and undisturbed finding that Husband tricked Wife into executing the quitclaim deed in breach of his fiduciary duties, the final judgment is inconsistent with the factual findings and legal conclusions contained in the tentative statement of decision.

We thus remand this matter to the trial court for its consideration of these issues consistent with the principles set forth in this opinion.

DISPOSITION

The judgment on reserved issues is reversed to the extent it concludes that no valid transmutation of the Property was made when Husband executed the grant deed in February 2001. The cause is remanded to the trial court for further proceedings, consistent with this decision, to determine whether another valid transmutation of the Property was made when Wife executed the quitclaim deed in July 2001.

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Parrilli, J.

We concur:

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McGuiness, P. J.

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Siggins, J.

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[1] Wife was a full-time salaried employee. Husband owned his own tile business and generally made less money.

[2] There was confusion regarding whether Husband signed the deed on December 1, 2001 or February 1, 2001. It appeared on the face of the instrument that Husband signed it December 1, 2001. Husband testified he did not recall when he signed it. The instrument was recorded, however, on February 6, 2001, so it is highly unlikely Husband signed it many months afterwards, in December 2001. The trial court found this discrepancy would go to the documents weight.

[3] Husband testified Wife executed the quitclaim deed that removed her name from the title in connection with refinancing the Property. Wife testified she executed the deed in connection with opening a line of credit.

[4] According to Wife, her credit score at the time of the July transaction was unusually low based on a number of erroneous charges on her credit report. Accordingly, the loan officer recommended Wife be temporarily removed from the title so as not to hold up the transaction while she straightened out the errors on her credit report.

[5] Wife complains the trial court ignored her request for a statement of decision that she made on May 11, 2006, following the hearing on her motion to implement and Husbands objections to the proposed statement of decision. Wife, however, cites nothing in the record, and we have found nothing, that evidences her May 11 request, or the trial courts alleged disregard of it. Accordingly, we decline to consider the issue in this appeal.

[6] As this court has previously explained: The Haines court based its holding on the unique protected status of marriage, and the fact that applying the presumption of Evidence Code section 662, with its higher evidentiary standard, would in every case inevitably defeat the spousal protection intended by the Legislature in enacting section 721. (Haines, supra, 33 Cal.App.4th at pp. 286-294, 301.)In addition, the court cited the principle that where two presumptions are in conflict, the more specific presumption applicable in particular cases must control over the more general presumption arising under ordinary circumstances. (Id. at p. 301, citing [Citations].) (Delaney, supra, 111 Cal.App.4th at p. 997.)

[7] We acknowledge the ambiguity in the record regarding when Husband signed the grant deed. At trial, Husband could not recall when he signed the deed, but it appears on the face of the instrument that he signed it December 1, 2001. It is undisputed, however, the deed was recorded February 6, 2001. It makes little sense that Husband signed the deed December 1, 2001 -- eleven months after it was recorded. The trial court ruled this ambiguity would go to the evidentiary weight afforded the grant deed, however the record is unclear whether the court ultimately concluded the deed was invalid or unreliable. We conclude the ambiguity does not render the deed invalid or unreliable, because both parties admit the basic facts underlying its execution, including the fact it was recorded in early 2001 in connection with refinancing the Property. It is most likely a typographical error on the face of the instrument, interposing 2001 instead of 2000 for the year the deed was signed, to which we afford no significance. (See Caven Memorial Corp. v. Requa (1970) 5 Cal.App.3d 345, 358 [concluding an erroneous date on the deed was of no significance where it was undisputed the deed was in fact executed and recorded].)