Court Rules that Rejected Deed Made the Marital Home a Community Asset

In this case, the Fourth District affirmed a San Diego County family court’s determination that a wife had “rejected” an interspousal transfer deed a husband had executed to the family residence. The husband “testified that Anna rejected the deed, and Anna testified that she was surprised when Grzegorz presented the executed deed to her but that she ultimately took possession of it. Over the next six years, the deed was not recorded and both parties appear to agree that it remained in the martial residence. In 2012, after an incident in which a protective order was granted in favor of Grzegorz and against Anna, Anna took possession of the deed and recorded it.”

At trial, the wife asserted that the deed itself effected a transmutation of the husband's interest. However, the court “concluded that Anna had rejected the deed in 2006, and that as a result, no transmutation had been consummated between the parties at that time,” and held that the property was a community asset. On appeal, the Fourth District held “that the trial court did not err in its analysis of the law regarding the transmutation of property between spouses and that the court’s findings are supported by substantial evidence.”

It reasoned that "while the existence of a writing that meets the requirements of section 852, subdivision (a) is one of the formalities necessary to effectuate the transmutation of spousal property, it is not, in and of itself, sufficient to establish that a valid transmutation has occurred. Rather, a court must make a finding, based on the evidence before it, that a valid transmutation has actually occurred under section 850, and that the transmutation was not the result of undue influence (see In re Marriage of Bonds (2000) 24 Cal.4th 1, 27). In order to determine whether a valid transmutation has been transacted, we look to section 850, the statute that grants spouses the ability to transmute property during a marriage, to understand how spouses may change the characterization of their property during a marriage."

"That provision states in relevant part that 'married persons may by agreement or transfer, with or without consideration' transmute their separate property to community property or the separate property of the other spouse, or transmute their community property interest to a separate property interest. It is thus clear that parties may transmute community property to one spouse’s separate property by way of an 'agreement' or by way of a 'transfer.' Anna argues that the term 'transfer' is intended to provide for the unilateral shifting of a property interest from one spouse to the other.  According to Anna, because Grzegorz 'chose[ ] the mechanism of [a] deed to transfer his interest in the real property,' the transfer 'was complete at the time he executed the deed' and '[n]o further act was necessary by wife for the trans[mutation] to be complete.' "

"She contends that 'gift law [does] not apply' to spousal transmutations of property. Under Anna’s proposed interpretation of the transmutation law, spouse A can, without the knowledge or consent of spouse B, transfer A’s property interest to B merely by executing a document that meets the requirements of section 852, subdivision (a) (i.e., by executing a writing that evinces spouse A’s intent to transfer a property interest to B). We are not convinced that this is the proper interpretation of section 850."

View the court's full opinion here.

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