Family Law

Edward and Sandra Fossum bought a house.  They refinanced the property several times.  However, Sandra had bad credit, so before each refinance Sandra would quiclaim the property to Edward so that he could get a loan in his name only at a better interest rate.  Each time she did so because Edward promised to  transfer it into both of their names after the loans went through.  Guess what?  After the final refi the marriage broke down, and Edward refused to put the property in both names.

At trial Edward's argument was that the property was titled in his name only, and thus should have been confirmed to him as his separate property.  He loses.

Spouses have the right to enter into property-related transactions with each other.  (§ 721, subd. (a).)  However, spouses occupy a confidential and fiduciary relationship with each other.  (§ 721, subd. (b).)  The nature of this relationship ?imposes a duty of the highest good faith and fair dealing? on each spouse as to any interspousal transaction.  (Ibid.)  ?If one spouse secures an advantage from the transaction, a statutory presumption arises under section 721 that the advantaged spouse exercised undue influence and the transaction will be set aside.?  (In re Marriage of Mathews (2005) 133 Cal.App.4th 624, 628?629 (Mathews); In re Marriage of Haines (1995) 33 Cal.App.4th 277, 293?294 (Haines).)  Generally speaking, if an interspousal transaction results in one spouse obtaining an advantage over the other, a rebuttable presumption of undue influence will attach to the transaction.  (Bonds, supra, 24 Cal.4th at pp. 27?28; In re Marriage of Delaney (2003) 111 Cal.App.4th 991, 996.)

            ??When a presumption of undue influence applies to a transaction, the spouse who was advantaged by the transaction must establish that the disadvantaged spouse's action ???was freely and voluntarily made, with a full knowledge of all the facts, and with a complete understanding of the effect of?? the transaction.?  [Citation.]?  (In re Marriage of Lund (2009) 174 Cal.App.4th 40, 55.)  The advantaged spouse must show, by a preponderance of evidence, that his or her advantage was not gained in violation of the fiduciary relationship.  (Haines, supra, 33 Cal.App.4th at p. 296.)  ??The question ?whether the spouse gaining an advantage has overcome the presumption of undue influence is a question for the trier of fact, whose decision will not be reversed on appeal if supported by substantial evidence.??  [Citation.]?  (Lund, at p. 55.)

            Here, the trial court found Edward failed to rebut the presumption of undue influence.  Edward contends that the trial court erred by failing to adhere to the rule that the ?form of title? in the third quitclaim deed must control over Sandra?s claim of the existence of an oral agreement contradicting that instrument.

            Under the ?form of title? presumption, the description in a deed as to how title is held presumptively reflects the actual ownership status of the property.  (In re Marriage of Brooks and Robinson (2008) 169 Cal.App.4th 176, 184?185 (Brooks); Haines, supra, 33 Cal.App.4th at p. 292.)  This common law presumption is codified in Evidence Code section 662, which states, ???The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.???  The presumption is based the promotion of a public policy that favors the stability of titles to property.  (Brooks, at p. 185.)  Accordingly, absent a showing to the contrary, the status declared by the instrument through which a party acquired title will control.  (Ibid.; see generally Hogoboom & King, Cal. Practice Guide:  Family Law (The Rutter Group 2010) ¶ 8:32, p. 8-9.)  As the court in Brooks observed, ?[t]he presumption can be overcome only by evidence of an agreement or understanding between the parties that the title reflected in the Deed is not what the parties intended.?  (Brooks, at p. 189.)[1]

            The problem with Edward?s argument is that it essentially ignores the rule that the form of title presumption simply does not apply in cases in which it conflicts with the presumption that one spouse has exerted undue influence over the other.  (Brooks, supra, 169 Cal.App.4th at p. 190, fn. 8; Haines, supra, 33 Cal.App.4th at pp. 301?302.)  That is the factual scenario addressed in the trial court, and the record we review.  Although Edward contends there is insufficient evidence that he exerted any undue evidence over Sandra, the trial court found otherwise.  We resolve the action in light of that factual finding.

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[1] Significantly, when it applies, the form of title presumption may not be ?rebutted by evidence that title was taken in a particular manner merely to obtain a loan.?  (Brooks, supra, 169 Cal.App.4th at p. 190; cf. In re Marriage of Kahan (1985) 174 Cal.App.3d 63, 69 [when title was taken by spouses as joint tenants to obtain loan, property was presumptively held in joint tenancy].)

There is a second interesting issue in this case.  Prior to commencing the dissolution Sandra took a $24,000 advance against a credit card -- purportedy to support herself during the divorce.  She did not report the advance to Edward.  The trial court found that she had thus violated her fiduciary duty to him.  Edward argued that in light of that finding he should have received an award of attorney's fees (which the trial court did not award). The trial court ruled that it had discretion to deny attorney's fees, and on that basis did not award fees to Edward.

On this issue the Court of Appeal agreed with Edward.

Once a breach is shown, the trial court lacks discretion to deny an aggrieved spouse?s request for attorney fees.  (See In re Marriage of Brewer & Frederici (2001) 93 Cal.App.4th 1334, 1344 [a spouse?s statutory fiduciary duty of care arises ?without reference to any wrongdoing?].)  Accordingly, the trial court lacked discretion to deny Edward?s fee request.  (Ibid.)[1]  The trial court erred when it denied any award to Edward for attorney fees attributable to Sandra?s violation of section 721.[2]  The matter must be remanded to permit the trial court to determine the amount of attorney?s fee to which Edward is entitled, under section 1101, subdivision (g), due to Sandra?s violation of section 721.

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