Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County Super. Ct. No. D488375, William J. Howatt, Jr., Judge.
McCONNELL, P. J.
We must determine whether a one-page typewritten agreement entitled "GEORGE AND SHERRYE McCREADY FINANCIAL AGREEMENT" (Financial Agreement) between George McCready (George) and Sherrye McCready (Sherrye) satisfies the rigorous statutory requirements of Family Code section 852, subdivision (a), to alter the legal classification of personal property as community or separate. We conclude the interspousal transfers of personal property to Sherrye, as contemplated by the Financial Agreement, do not satisfy the requirements of section 852, subdivision (a), because the Financial Agreement does not expressly and unambiguously state the characterization or ownership of such property is being changed to the separate property of Sherrye. (§ 852, subd. (a).) We therefore reverse the judgment and remand for the limited purpose of determining the parties' interests in the property transfers subject to the Financial Agreement.
All section references are to the Family Code unless noted otherwise.
FACTUAL AND PROCEDURAL BACKGROUND
Sherrye and George were married in September 2001. They separated in January 2005. They had no children together during their marriage.
The record is silent regarding the date their divorce became final.
In late June 2004, Sherrye and George signed the Financial Agreement. It contains 18 "bullet points" primarily governing the expenditure of joint and separate funds in connection with their living expenses, the sale and disposition of assets from real property located on Hillside Drive, La Jolla, California (Hillside property), and the payoff of a note and improvements on property located on Catalan Street (Catalan property).
The first three bullet points in the Financial Agreement pertain to the Catalan property, and provide:
"[Bullet point No. 1] * Sherrye to pay off $140,000 Catalan note from joint Downey savings account immediately[;]
"[Bullet point No. 2] * Sherrye to be provided $20,000 for Catalan improvements immediately[; and]
"[Bullet point No. 3] * Above two items to be covered by existing $60,000 joint funds in Sherrye's personal Union Bank checking account with the remainder ($100,000) to come from joint Downey savings account[.]"
Another key provision in the Financial Agreement is bullet point No. 13, which provides: "Upon [close of escrow] of Hillside property, Sherrye to be provided a lump sum of $700,000 to be deposited in her personal Union Bank account[.]"
George filed an order to show cause requesting a bifurcated trial on the issue of the validity of the property transfers to Sherrye under the parties' Financial Agreement, and to exclude parol evidence in connection with that determination. George argued the property transfers to Sherrye were invalid under section 852, subdivision (a), and he therefore was entitled to (1) a one-half interest in the $700,000 of "community funds" deposited into Sherrye's separate bank account (bullet point No. 13), and (2) an interest in the Catalan property based on the $160,000 of "separate property funds" he invested to pay off the mortgage and make improvements to that property (bullet point Nos. 1, 2 and 3).
In his motion to bifurcate, George stated the $700,000 was community funds. In his opening brief, however, George claims the $700,000 is actually his separate property. (George's Opening Brief, at p. 5; see also George's Reply brief, at p. 7.) Because we reverse the judgment and remand, we need not, nor can we on the record before us, determine the parties' property interests in the payments received by Sherrye.
Sherrye opposed the motion, contending the Financial Agreement was "very clear" because the term "provided" therein was synonymous with the word "give." She further contended bullet point No. 13 was itself an "express declaration" by George to change the characterization or ownership of the $700,000 payment into Sherrye's sole and separate property, inasmuch as the money was deposited into Sherrye's personal bank account, and she could do whatever she wanted with the money. Sherrye lodged a portion of George's deposition transcript and pages from the Merriam-Webster dictionary and thesaurus to support her position. George responded by lodging his own pages from the Merriam-Webster dictionary to show the word "provide" was ambiguous.
The court ruled the personal property subject to the Financial Agreement was a valid transmutation to Sherrye's separate property because the "language of the agreement constitutes a very direct, unequivocal and direct 'express declaration' as to the disposition of the property of the parties." In a subsequent proceeding, the court awarded Sherrye $140,000 as her sole and separate property based on its earlier finding the Financial Agreement satisfied section 852, subdivision (a). George appeals.
At the subsequent proceeding, the court addressed "other issues" between the parties, including valuation and distribution of furniture, joint crypts, spousal support and Sherrye's request for attorneys' fees and costs from George. None of these "other issues" are challenged on appeal.
DISCUSSION
I.
A. Standard of Review
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 (Barneson); Cox Cable San Diego, Inc. v. City of San Diego (1987) 188 Cal.App.3d 952, 958.)
B. Transmutation Formalities─The Application of Section 852, Subdivision (a)
The question before us is whether the payments to Sherrye of $160,000 (bullet point Nos. 1, 2 and 3) and $700,000 (bullet point No. 13), as contemplated by the parties' Financial Agreement, satisfy the requirements in section 852, subdivision (a) regulating interspousal transfers of property. 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." (Italics added.)
Here, there is no dispute the parties' Financial Agreement satisfies the statute of frauds' "writing" requirement of section 852, subdivision (a). The pivotal issue is whether the specific bullet points in the Financial Agreement, or the Financial Agreement itself, are an "express declaration" by George, within the meaning of section 852, subdivision (a) to transmute the personal property at issue into Sherrye's sole and separate property.
Sherrye contends the Financial Agreement "easily" satisfies the "express declaration" requirement, arguing the Financial Agreement is not ambiguous because under California law, the parties were not required to use terms such as "transmutation," "community property" or "separate property" for a valid transmutation, and because the word "provide," in the context of the Financial Agreement, is a synonym for the word "give."
George argues the Financial Agreement contains no language unequivocally expressing an intent to change the characterization or ownership of the personal property transferred to Sherrye. He further argues the Financial Agreement contains no historically operative language showing a change of ownership, such as the word "grant" in a grant deed, or language unambiguously showing the personal property transferred to Sherrye was a gift from George.
We disagree with Sherrye's assessment this is an easy transmutation case. We nevertheless conclude neither the parties' Financial Agreement as a whole, nor any of the specific bullet points therein, satisfy the rigorous "express declaration" requirement of section 852, subdivision (a), as that term was defined by the Supreme Court in Estate of MacDonald (1990) 51 Cal.3d 262, 272 (MacDonald).
To avoid confusion, we refer to section 852 throughout this opinion, rather than its identical predecessor statute, Civil Code section 5110.730, analyzed by the MacDonald court.
In MacDonald, husband and wife agreed to divide their property into separate estates because wife had terminal cancer. Both had children by previous marriages. After dividing their estates, husband received pension money that was community property. Wife signed form documents attempting to waive her community property interest in the pension funds so the money would pass to husband's children from a previous marriage. (MacDonald, supra, 51 Cal.3d at p. 265)
Wife's estate filed a petition to determine wife's interest in the pension funds. The trial court found wife waived her community interest in the money. The court of appeal reversed, concluding that regardless of wife's intent, the form documents she signed did not comply with the "express declaration" requirement of section 852, subdivision (a). (MacDonald, supra, 51 Cal.3d at p. 266.) The Supreme Court affirmed.
The MacDonald court noted the Legislature did not articulate what words or information were required to satisfy the "express declaration" requirement in section 852, subdivision (a). (MacDonald, supra, 51 Cal.3d at p. 268.) To aid in the construction of section 852, subdivision (a), the court turned to the legislative history of the statute, the historical circumstances surrounding its enactment and other statutes with requirements similar to those found in section 852. (MacDonald, at pp. 269-272.) 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, at p. 272.) 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 MacDonald court held wife's signature on the form documents was insufficient for a transmutation of the pension funds from the community to husband's separate property. Not only did the form documents not identify the property being transmuted, but they also lacked language showing wife was "aware that the legal effect of her signature might be to alter the character or ownership of her interest in the pension funds." (MacDonald, supra, 51 Cal.3d at pp. 272-273.) The court thus concluded the writings lacked language "expressly stating that decedent [wife] was effecting a change in the character or ownership of her interest." (Id. at p. 273.)
The MacDonald court observed the "express declaration" requirement in section 852, subdivision (a) did not require use of particular terms such as "transmutation," "community property" or "separate property." The court suggested the form documents would have complied with section 852, subdivision (a) if they included the additional sentence "I [wife] give to the account holder any interest I have in the funds deposited in this account." (MacDonald, supra, 51 Cal.3d at p. 273 .)
Since MacDonald, courts have wrestled with whether a writing constitutes an "express declaration" for purposes of section 852, subdivision (a). For example, one court concluded a husband's written order to his brokerage firm to "transfer" or "journal" stock from his to his wife's account did not satisfy section 852, subdivision (a). (Barneson, supra, 69 Cal.App.4th at p. 583.) The typewritten letter signed by husband in Barneson stated, " 'This is written instruction as per our phone conversation. I [, husband,] would like to combine these (4) four stock certificates into one[;] I would like to transfer these same stocks into the name of [wife]. Thank you.' " (Id. at p. 585.) In addition to the typewritten letter, husband also signed a form, guaranteed by an officer of a financial institution, transferring the stock certificates to wife, signed 10 forms for the transfer of other stocks into wife's name, and sent several stock certificates, including some in wife's name "c/o" husband, and "eight bond powers," to his financial institution asking to " 'transfer [to wife] the ones you can, and put the remainder on deposit.' " (Id. at p. 586.)
The court in Barneson held husband's instructions were not an "express declaration" for purposes of section 852, subdivision (a) because husband had not " 'expressly state[d] that the characterization or ownership of the property [was] being changed.' " (Barneson, supra, 69 Cal.App.4th at p. 590.) The court noted the word " 'transfer' is not a word with a single meaning." After examining possible definitions of the word "transfer," the Barneson court concluded, "while the term 'transfer' could refer to a change in ownership, it does not necessarily do so. The fact that the term 'transfer' carries multiple definitions demonstrates the ambiguity in [husband's] direction to 'transfer' stock." (Ibid.)
The court rejected wife's argument that husband's direction to "transfer" stock to her demonstrated a change in "ownership" of the property. "[Wife's] assertion that [husband] 'directed that "ownership" be changed' is incorrect [;] [husband] only directed 'transfer' of the stocks to [wife], without specifying what interest was to be transferred." (Barneson, supra, 69 Cal.App.4th at p. 590, italics added.) The Barneson court noted section 852, subdivision (a) as interpreted by MacDonald, required more than a mere intention to transfer property because "MacDonald does not speak in terms of 'transfers' but requires 'language which expressly states that the characterization or ownership of the property is being changed.' " (Barneson, at p. 590) Although "a transmutation may be effected by means of a transfer," the court concluded "a transfer is not necessarily a transmutation." (Id. at p. 591.)
The Barneson court also rejected wife's argument that husband's direction to place his stock in wife's name showed a change in ownership of the property. The court noted a request by one spouse to transfer stock into the other spouse's name "does not unambiguously indicate" the ownership of stock is being changed. (Barneson, supra, 69 Cal.App.4th at p. 591.) "For example, [husband] may simply have intended to enable [wife] to more easily manage his financial affairs for him after his stroke -- in other words, he may have intended to transfer management of the property without changing its ownership or characterization. Nothing on the face of the documents upon which the transmutation claim is based precludes the possibility the transfer was made in trust. While no such indication appears on the documents themselves, a trust need not be created in a single instrument [citation]; here, since securities and not real property are at issue, the stocks could even have been made the subject of an oral trust. [Citations.] We do not suggest there is evidence of such a trust in the present case, nor that we could directly consider such evidence in determining whether [husband's] directives transmuted his property within the meaning of section 852, subdivision (a) -- as stated above, the determination whether the MacDonald test has been met must be made without resort to parol evidence. [Citation.] The point is simply that a direction by a spouse to transfer stock into his spouse's name does not unambiguously indicate the ownership of the stock is being changed." (Ibid.)
In holding the requirements of section 852, subdivision (a) were not met, the Barneson court confirmed the trial court properly excluded evidence wife unduly influenced husband to make the transfers of his stock. The court noted a valid transmutation requires a two-step analysis: first, the court independently determines, without regard to parol evidence, whether the rigorous requirements of section 852 are satisfied (Barneson, supra, 69 Cal.App.4th at pp. 588-589); and second, if those requirements are satisfied, a transmutation will be valid only if the advantaged spouse can rebut the presumption of undue influence imposed by public policy considerations. (Id. at p. 589.) The Barneson court therefore concluded the trial court "correctly" refused to admit evidence showing wife's boyfriend had prepared the letter to the brokerage firm signed by husband, in deciding whether the requirements of section 852 were satisfied. (Barneson, at p. 589, fn. 7.)
In re Marriage of Starkman (2005) 129 Cal.App.4th 659 (Starkman) is also instructive here. In Starkman, husband transferred his separate property into a revocable trust created by husband and wife for estate planning purposes. The trust provided property transferred to the trust " 'is the community property of both of them unless such property is identified as the separate property' " of either spouse. (Id. at p. 662.) Husband and wife also executed a "general assignment" that conveyed "any asset, whether real, personal, or mixed" they owned, or which they may own in the future, to the trust. The general assignment did not exclude any property as separate property. (Ibid.)
One month after husband and wife executed the trust and general assignment, they received a letter from their estate planning attorney warning of the community property presumption for assets placed into the trust. (Starkman, supra, 129 Cal.App.4th at p. 662.) In addition, husband subsequently executed various stock brokerage transfer forms to convey specific assets to the trust, without describing whether the assets were community or separate property. However, the transfer forms provided the assets would be held by husband and wife as trustees of the trust.
Relying on the MacDonald and Barneson decisions, among others, the court in Starkman held the trust instruments did not meet the "express declaration" requirement in section 852, subdivision (a), because husband and wife created the trust to avoid probate and to administer their estate in the event of death, and not to transmute husband's substantial separate property into community property. (Starkman, supra, 129 Cal.App.4th at pp. 664-665.) In making this determination, the court refused to consider the attorney "warning letter" because it was extrinsic to the writings, and thus inadmissible. (Id. at p. 665, citing MacDonald, supra, 51 Cal.3d at pp. 271-272.) The court in dicta observed the "express declaration" requirement might have been satisfied if the trust contained language stating the property transferred to the trust "becomes" or "is changed into" the community property of the parties. (Starkman, at p. 665.)
Here, there is no language in the Financial Agreement showing a clear and unambiguous intent to change the characterization or ownership of the personal property received by Sherrye. In bullet point No. 1, the parties agreed Sherrye would "pay off $140,000 Catalan note from joint Downey savings account." Bullet point No. 1 does not indicate an intent to change the characterization or ownership of the $140,000 payment into Sherrye's separate property. The fact Sherrye received, or was entitled to receive, a transfer of property under the Financial Agreement does not satisfy the "express declaration" requirement. A "transmutation may be effected by means of a transfer, but a transfer is not necessarily a transmutation." (Barneson, supra, 69 Cal.App.4th at p. 591.) We conclude bullet point No. 1 contains no language, much less clear and unambiguous language, changing the characterization or ownership of the $140,000 payment received by Sherrye.
Bullet point No. 2 states Sherrye is "to be provided $20,000 for Catalan improvements immediately." As was the case in bullet point No. 1, no language in bullet point No. 2 unambiguously provides a change in the characterization or ownership of the $20,000 payment to Sherrye to improve the Catalan property. The $20,000 payment is discussed in bullet point No. 3, which provides the $140,000 and $20,000 payments shall be "covered by existing $60,000 joint funds in Sherrye's personal Union Bank checking account with the remainder ($100,000) to come from joint Downey savings account." (Italics added.) Bullet point No. 3 merely provides the source of the payments identified in bullet point Nos. 1 and 2. But like its predecessors, it includes no language, much less language that is clear and unambiguous, showing the characterization or ownership of those funds is being changed.
Sherrye argues the word "provide" in bullet point No. 2 is a synonym for "give," and the term "give" in turn is a synonym for the word "gift," thus satisfying the "express declaration" requirement of section 852, subdivision (a). The court in Barneson rejected a similar argument when it concluded the word "transfer" could refer to a change in ownership, but it did not necessarily do so. (Barneson, supra, 69 Cal.App.4th at p. 590.) The court in Barneson determined the term "transfer" has multiple definitions, showing the ambiguity in husband's direction to "transfer" stock to wife. (Ibid.) So too here, the term "provide" has multiple definitions, including "to take precautionary measures," "to make a proviso or stipulation," and "to make preparation to meet a need" including "to supply something for sustenance or support." Although "give" may be a synonym for the term "provide," other synonyms for "provide" include "deliver," "dispense," "feed," furnish," "hand," "hand over," "supply," "transfer," and "turn over." The fact "provide" could refer to a change in ownership of the personal property received by Sherrye does not satisfy the rigorous test for "express declaration" articulated by the court in MacDonald.
As to bullet point No. 13, we reach the same conclusion as we did in connection with bullet point Nos. 1, 2 and 3. Bullet point No. 13 states Sherrye is "to be provided a lump sum of $700,000 to be deposited in her personal Union Bank account." Bullet point No. 13 does not contain language showing a clear and unambiguous expression of intent to change the characterization or ownership of the $700,000 payment into Sherrye's separate property.
With respect to a change in the characterization of the $700,000 payment, the fact the money was to be deposited into Sherrye's personal bank account does not show a clear and unambiguous intent to transmute the property. The Financial Agreement itself points out the ambiguity of this language, inasmuch as bullet point No. 3 refers to "joint funds" of the parties kept in Sherrye's personal bank account. Thus, the mere act of depositing the $700,000 into Sherrye's personal bank account does not satisfy the test to change the characterization of the property into Sherrye's separate property.
Moreover, even without the "joint funds" language in bullet point No. 3, bullet point No. 13 is not sufficiently clear and unambiguous to satisfy the requirements of section 852, subdivision (a). There is no language in the Financial Agreement stating Sherrye's personal bank account is her separate property, or more importantly, the characterization of the $700,000 is being changed into Sherrye's separate property.
With respect to a change in the ownership of the $700,000 payment, we conclude the term "provide" in bullet point No. 13 is ambiguous on whether the payment would change into Sherrye's sole and separate property.
We perceive no meaningful difference between this case and the Barneson and Starkman decisions. In both those cases, as here, the writings did not clearly and unambiguously establish an intent to change the characterization or ownership of the property at issue. The mere fact there was a property transfer between George and Sherrye, or the fact the property transfer to Sherrye could refer to a change in the characterization or ownership of the property, is insufficient to satisfy the rigorous transmutation requirements of section 852, subdivision (a). "A party does not 'slip into a transmutation by accident.' " (Starkman, supra, 129 Cal.App.4th at p. 664.)
DISPOSITION
The judgment is reversed and the case remanded for the limited purpose of determining the parties' interests in the property transferred to Sherrye under the Financial Agreement.
WE CONCUR: NARES, J., O'ROURKE, J.