Conditional Transmutation of Community Property

Laguna Settlement Agreement Attorneys - Orange County Divorce and Property Division Case

In a recent unpublished opinion coming out of Orange County, California, In re Marriage of Hoang & Tran (District 4, Division 3, and filed August 31, 2010) the Court of Appeals found that a written agreement conditionally transmuting separate property to community property automatically returns the property to separate property upon divorce. 

In the Hoang case, the Husband bought a piece of land in Laguna Niguel in 1988 and began building a home on the property.  Prior to marrying Wife in 1990, Husband spent his separate funds to pay for grading, permits, and reports, and financed $300,000 to pay for the construction of the house.  Husband used his separate property funds (i.e. property acquired prior to the date of marriage) to pay down the loan over the course of the marriage.   

In 1996, Husband desired to refinance his loan.  The lender required Wife’s signature on the loan documents.  Husband testified that he and Wife agreed that Wife’s name would appear on title as record owner, but only for so long as the parties stayed married to each other.  Husband handwrote a document entitled, “Change of Title Agreement” that reflected their understanding.  Wife testified that she did sign the document, but that she never saw it. 

The trial court concluded that the property was Husband’s separate property because he brought the property into the marriage and paid for it during marriage with funds traceable to his separate property.  The trial court also concluded that the loan taken during marriage, even though Wife’s name was added to the title of the property and both parties’ names were on the loan, was also Husband’s separate property.  The court employed the “lender’s intent doctrine”, in which the court looks to whether the mortgage loan company relied on community property to secure the loan or relied on community property earnings to repay the loan. 

Additionally, the trial court found no evidence of undue influence with respect to the Change of Title Agreement – i.e., Husband did not take advantage of Wife.  Specifically, the court found that since Wife did not own the property in the first place, she was not giving up anything.  Generally, spouses may transfer property to each other during marriage, without giving anything in return for the transfer, so long as neither party takes unfair advantage of the other.  The leading and instructive case discussing undue influence and breach of fiduciary duty is Haines (1995) 33 Cal. App. 4^th 277.

While the Hoang case is unpublished and therefore cannot be cited as instructive law, it is reflective of the California court system’s acknowledgment and approval of certain “conditional conveyances” and “conditional transmutation agreements.”  Many spouses enter into post-nuptial or community property agreements, which may cover similar terms.

When contemplating or participating in a divorce or dissolution case, it is imperative to review all deeds, changes of title, transfer of interests in property, and agreements between spouses.  Generally, the words appearing on a title document create a rebuttable presumption that the title reflects the true character of the property.  Only clear and convincing evidence can be provided to rebut the presumption of title, which is a significant burden on the spouse trying to show that the title is not correct, but not impossible to overcome. 

If you have questions regarding characterization of property, post-nuptial or divorce settlement agreements, call our experienced attorneys immediately.  It is important to have a legal family law expert ensure that your petition or response, and preliminary declarations of disclosure are completed properly.  If these documents are filed or served and the characterization is incorrect or not stated with specificity, a party may waive their right to go back and change their documents and therefore waive their right to obtain orders in their favor.

Feel free to call us today at (714) 667-0045 or email us to schedule your free, initial and private consultation with our attorneys.