In re Brace
Justice Kruger filed a concurring and dissenting opinion.
In re BRACE
S252473
Many married couples in our state use community funds to acquire real estate and take title in joint tenancy. Does that property presumptively belong to the community because the couple acquired the property during marriage with community funds? Or is the property presumptively the separate property of the spouses because they took title in joint tenancy? The Legislature has enacted a presumption that characterizes this property as community in a divorce. The United States Court of Appeals for the Ninth Circuit has asked us to determine which presumption governs the characterization of joint tenancy property in a dispute between a couple and the bankruptcy trustee of one of the spouses.
More precisely, the question here is whether the form of title presumption set forth in
The issue in this case requires us to untangle a “snarl of conflicting presumptions” (Estate of Luke (1987) 194 Cal.App.3d 1006, 1010) in the evolution of California‘s treatment of joint tenancies
Because these presumptions are default rules, they are not always conclusive. Just as the presumptions themselves have evolved over time, the cognizable ways of rebutting the presumptions have also evolved. We thus answer a further question: When a married couple uses community funds to acquire property as joint tenants, is the joint tenancy deed alone sufficient to transmute the community character of the property into the separate property of the spouses?
As we elucidate below, “California‘s treatment of joint tenancies has a long and tortuous history and is still the subject of considerable legal concern and disagreement.” (Blumberg, Community Property in California (1987) p. 157.) The Legislature may wish to examine whether current statutes are aligned with the expectations of married couples and third parties when spouses use community funds to acquire property as joint tenants. That said, we emphasize that nothing in our decision today precludes spouses from holding separate property as joint tenants or from transmuting community property into separate property held in joint tenancy as long as the applicable transmutation requirements are met. Nor does our opinion disturb the operation of the right of survivorship that typically accompanies joint tenancy title at death.
This case arises from a petition under Chapter 7 of the
A Chapter 7 bankruptcy petition creates an estate to satisfy creditors’ claims. The estate generally includes “[a]ll interests of the debtor and the debtor‘s spouse in community property” at the time the bankruptcy case is filed. (
The bankruptcy trustee in this case sought a declaration that the Redlands and San Bernardino properties are community property under
The bankruptcy court found that “‘the properties were acquired by [Clifford and Ahn] Brace during the marriage with community assets and they presumptively constitute community property under applicable law. Defendants failed to establish that the . . . [p]ropert[ies] were not community in nature and, therefore, they constitute property of the Estate. . . .‘” (In re Brace (Bankr. 9th Cir. 2017) 566 B.R. 13, 17.) The Ninth Circuit Bankruptcy Appellate Panel affirmed. (Id. at p. 16.) Citing In re Marriage of Valli (2014) 58 Cal.4th 1396 (Valli), which held that property acquired during marriage from a third party with community funds is community property upon divorce unless the statutory transmutation requirements have been met, the panel reasoned that public policy and statutory construction support the extension of Valli‘s holding to the bankruptcy context. (In re Brace, supra, 566 B.R. at pp. 21-27.) The Braces appealed to the Ninth Circuit, which certified the question to this court. (In re Brace, supra, 908 F.3d at p. 535.)
A central point of disagreement between the parties concerns the applicability of two statutes:
Statutory exceptions to the community property presumption explicitly provide for separate property treatment. For example, property that a person acquired before marriage is that person‘s separate property. (
In 1965, the Legislature enacted
In drafting
In Valli, we briefly addressed the intersection of the Family Code and
In the case before us, the bankruptcy trustee contends that Valli‘s rule extends beyond the marital dissolution context to preclude application of
In order to understand the applicability of these various rules, it is necessary to examine the history of the relevant statutes and their consequences for various property ownership arrangements. As we explain, the history reveals the gradual evolution of common-law separate property concepts based on form of title into a unified community property framework.
III.
“In community property [s]tates, ownership turns on the method and timing of acquisition, while the traditional view in common-law [s]tates is that ownership depends on title.” (Hisquierdo v. Hisquierdo (1979) 439 U.S. 572, 578.) Although California has always been a community property state, “for most of the state‘s history California‘s marital property law has contained strong elements of a separate property system.” (Prager, The Persistence of Separate Property Concepts in California‘s Community Property System, 1849-1975 (1976) 24 UCLA L.Rev. 1, 81.) For example, the Family Code provides that spouses may hold property “as joint tenants or tenants in common, or as community property, or as community property with a right of survivorship.” (
Community real property, by contrast, generally cannot be alienated by one spouse without the consent of the other spouse. (
The various forms in which a married couple can vest title to property do not invariably reflect the underlying nature of the couple‘s ownership. The Braces’ situation is not uncommon: Many couples use community funds to purchase a home and take title as “husband and wife as joint tenants” without an additional indication in the deed as to whether the property is community or separate. In a 1965 Final Report on Domestic Relations, the Assembly Interim Committee on the Judiciary noted: “The major problem . . . is the fact that husbands and wives take property in joint tenancy without legal counsel but primarily because deeds prepared by real estate brokers, escrow companies, and by title companies are usually presented to the parties in joint tenancy form. The result is that they don‘t know what joint tenancy is, that they think it is community property, and then find out upon death or divorce that they didn‘t have what they thought they had all along. . . .” (Assem. Interim Com. on Judiciary, Final Rep. Relating to Domestic Relations (Jan. 11, 1965) p. 124 (Domestic Relations).)
This lack of clarity has created difficulties for courts attempting to harmonize common-law presumptions based on form of title with the statutory community property framework. Over the years, the Legislature has “so alter[ed] the original provisions of each of the systems as to allow them both a place in our jurisprudence.” (Siberell, supra, 214 Cal. at p. 771.) The evolution of various statutory presumptions is relevant to understanding the operation of community property law as it relates to this case.
A.
The general community property presumption in
These presumptions did not always fit neatly together. The married woman‘s presumption, when applied together with the community property presumption, sometimes led to claims by married women for more than a half interest in property jointly deeded to husband and wife. Our court first addressed this issue in Dunn v. Mullan (1931) 211 Cal. 583 (Dunn), a dispute between the administrator of a deceased husband‘s estate and the administrators of his deceased wife‘s estate. Whether the wife‘s property was separate or community at her death would determine how the property passed to the respective estates. Applying
A year later, this court in Siberell considered a dissolution action in which the wife, invoking
“Secondly, on its face section 164 has no application to a case where ‘a different intention is expressed in the instrument’ and it seems to us to be clear . . . that a joint tenancy, the evidence of which the law requires to be on the face of the conveyance creating it, is of necessity an expression of the intention to hold the property otherwise than as community property and that the equal interest of the spouses must therefore be classed as their separate but joint estate in the property.” (Siberell, supra, 214 Cal. at p. 773.)
In rejecting the wife‘s contention that her claim of a 75 percent interest followed directly from
Second, the court in Siberell expressly limited its decision to actions between the spouses: “It should be noted here that we are dealing strictly with the situation as between the parties to the marriage and are not dealing with the characteristics of the property as against the claims of judgment creditors or other third persons as was the case in Hulse v. Lawson.” (Siberell, supra, 214 Cal. at p. 772.) Less than a year before Siberell, in Hulse v. Lawson (1931) 212 Cal. 614 (Hulse), this court reached a different conclusion in a dispute between a wife and her husband‘s creditor over
In 1935, the Legislature added language to
B.
In the wake of Siberell and these evolving statutory presumptions, courts tended to treat joint tenancy title as signifying separate property interests between the spouses, even when the property was acquired during marriage with community funds. Like Siberell, these cases typically dealt with divorce or other interspousal disputes. (See, e.g., Delanoy v. Delanoy (1932) 216 Cal. 23, 25 [dispute between wife and husband‘s mother over husband‘s conveyance of his joint tenancy interest to his mother; wife had previously obtained a judgment against husband]; Machado v. Machado (1962) 58 Cal.2d 501, 506 (Machado)
Notwithstanding this express limitation of Siberell‘s holding, some courts applied Siberell‘s rule to disputes involving third-party creditors. (See Application of Rauer‘s Collection Co. (1948) 87 Cal.App.2d 248, 258-259 [community property held as joint tenancy is separate property for the purpose of creditor claim on homestead]; Oak Knoll Broadcasting v. Hudgings (1969) 275 Cal.App.2d 563, 568-569 [presumption of separate property from joint tenancy title rebutted where couple used community funds and had no intent to take separate property interests]; Hansford v. Lassar (1975) 53 Cal.App.3d 364, 373 (Hansford) [same].) Courts also applied Siberell‘s rule at death to give effect to the right of survivorship. (See Socol v. King (1950) 36 Cal.2d 342, 346 (Socol) [probate case where “a true joint tenancy is created by a conveyance to husband and wife in that form, although the property is purchased with community funds“].)
At the same time, courts struggled to reconcile community property presumptions with the incidents of separate property in joint tenancy when dividing ownership of the family home at divorce. Because a joint tenancy deed was sufficient to create a presumption of separate property, courts were often unable to award the family home to one of the spouses. (See Machado, supra, 58 Cal.2d at pp. 506-507.) To more closely conform property division with couples’ expectations, the Legislature in 1965 amended
In 1973, the Legislature made a more far-reaching change to the community property system. Consistent with evolving norms of gender equality, the Legislature enacted landmark reforms that allocated equal management rights to the wife over community property. Whereas previously “[t]he husband ha[d] the management and control of the community real property” subject to certain veto rights by the wife (Stats. 1917, ch. 583, 19
By securing to both spouses equal management rights over community property, the Legislature eroded the original impetus for facilitating the wife‘s ownership of separate property. Accordingly, the Legislature in the same bill amended
Justice Kruger reads Siberell as entirely unaltered by the 1973 amendments because Siberell established a “common law transmutation rule.” (Conc. & dis. opn., post, at p. 6.) While one may reasonably debate the extent to
Thus, as a result of the 1973 legislation, the form of title in property jointly held by a married couple can defeat the general community property presumption only for property acquired before 1975. For property acquired during marriage on or after January 1, 1975, the earlier form of title presumptions no longer apply; instead, the general community property presumption applies.
After the 1973 amendments, a number of courts relied on the “different intention” language in
But, as Justice Kruger details (conc. & dis. opn., post, at pp. 10–11), not all observers understood the 1973 amendments to abrogate Siberell. During the 1983 amendments to the predecessor of
The same is true of our opinion in Lucas, supra, 27 Cal.3d 808, which could be read as continuing the effect of the married woman‘s presumption. (See Recommendation Relating to Marital Property Presumptions and Transmutations (Jan. 1984) 17 Cal. Law Revision Com. Rep. (1984) pp. 209–210 & fn. 9 [describing Lucas as one of the cases that “continue[d] the effect of the title presumptions by creating an inference of a gift as to property acquired before or after January 1, 1975“].) In Lucas, the divorcing couple bought a motorhome in 1976 using community funds to pay 25 percent of the price and separate funds of the wife to pay 75 percent. The purchase contract was made out in the husband‘s name, but title and registration were put in the wife‘s name. (Lucas, at p. 817.) The court noted that the wife “wished to have title in her name alone, and [the husband] did not object.” (Ibid.) Lucas held that the trial court‘s award of the motorhome to the wife as her separate property was supported by substantial evidence because “[t]itle was taken in [the wife‘s] name alone” and the husband “was aware of this and did not object.” (Id. at p. 818.) The decision made no mention of how
C.
Against the backdrop of the reformed default rules governing characterization of marital property, the Legislature in 1984 substantially altered the mechanism for couples to depart from those default rules. Seeking to curb the risk of fraud, undue influence, and litigation arising from informal agreements between spouses that purported to change the character of property, the Legislature enacted our present-day transmutation statutes. (Recommendation Relating to Marital Property Presumptions and Transmutations, 17 Cal. Law Revision Com. Rep. (1984) pp. 224–225; see Estate of MacDonald (1990) 51 Cal.3d 262, 269 (MacDonald).) The legislation provides that for property acquired on or after January 1, 1985, a transmutation “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.” (Stats. 1984, ch. 1733, § 3, p. 6302, codified at
Finally, the Legislature in 1992 enacted the Family Code to unify “the dispersion of family law in several codes.” (22 Cal. Law Revision Com. Reports, Fam. Code (1992) p. 7.) The Legislature assigned the various rules and presumptions discussed above to different sections of the Family Code: The transmutation requirements in the former sections of the Civil Code were moved, without substantive change, to
IV.
As this history shows, our community property system has gradually evolved toward one that affords both spouses equal interests and control over community assets. At the same time, the rules characterizing property as community or separate based on form of title have faded in the contemporary statutory framework. The provisions of
As noted, the form of title presumption in
Moreover, when we look to other statutes that refer to community property, we find that the Legislature has explicitly applied the
In Valli, we held that the statutory transmutation requirements apply to purchases made by one or both spouses from a third party using community funds and that
The Braces urge us to limit Valli to the context of marital dissolutions. But we see no basis in the text, purpose, or history of
The Braces argue that
Thus, the import of
The Braces also rely on Hansford, supra, 53 Cal.App.3d 364, a dispute between a wife and her husband‘s creditor who was trying to reach their home held in joint tenancy. The court held that “[i]n view of the express language of [the predecessor statute to Family Code section 2581], the community-property presumption has no application to the instant case as it involves a dispute with a third party, rather than one between husband and wife in a dissolution of marriage or legal separation proceeding. The presumption that is applicable in this case at bench is that of a joint-tenancy ownership that is the presumed fact which flows from the basic fact of a deed that is joint tenancy in form.” (Id. at p. 371.) But the property at issue was acquired well before 1975, and at the time, the relevant statutes provided that a designation of joint tenancy on the conveyance served to displace the general community property presumption. (Ante, at pp. 14–16, 19–21.) The presumptions in effect today are different. The rule displacing the community property presumption when “a different intention is expressed in the instrument” conveying title jointly to “husband and wife” is now confined to property acquired before 1975. (
The Braces further contend that limiting the application of community property presumptions to interspousal disputes would promote stability of title. By presumptively giving effect to form of title,
But when property is held in joint tenancy, both tenants are on record title. And recorded deeds commonly indicate the marital status of the
It is true that
Further, our approach does not undermine the stability of title in the context of probate. The Braces argue that the inapplicability of
To the contrary, the Legislature has acted in a manner consistent with the case law. In 1994, the Legislature amended
In addition, the rule that form of title controls at death was a key motivation for the Legislature‘s 2000 enactment of Assembly Bill No. 2913, which created a new form of title: community property with a right of survivorship. (Assem. Bill No. 2913 (1999–2000 Reg. Sess.) ch. 645, § 1, pp. 4203–4204, codified at
Moreover, the Legislature has imported community property characterization rules into the Probate Code to prevent full operation of the right of survivorship in certain situations.
The coexistence of the general community property presumption and the form of title rule at death highlights a precept implicit in the various legislative enactments we have discussed: The particular manner in which property is acquired, titled, or held by a married couple is conceptually and legally distinct from the underlying character of the spouses’ ownership of the property as separate or community. Our decision in Siberell elided these concepts in order to avoid the “manifestly inequitable” division of marital property arising from the married woman‘s presumption. (Siberell, supra, 214 Cal. at p. 773.) Today, with that presumption no longer in effect for property acquired during marriage on or after January 1, 1975, there is nothing inequitable in a general presumption that such property held in joint tenancy is community property. (See id. at p. 773 [“A joint tenancy is one estate and in it the rights of the spouses are identical and coextensive.“];
To be sure, the rule that form of title controls at death is not absolute. In practice, putative heirs or devisees have sought to rebut this form of title presumption in order to access the decedent‘s share of real property through intestacy or devise. (See Socol, supra, 36 Cal.2d at pp. 345–346; Estate of Petersen, supra, 28 Cal.App.4th at p. 1747; Estate of Blair, supra, 199 Cal.App.3d at p. 167; Bibb, supra, 87 Cal.App.4th at pp. 464–465.) But such litigation is not an artifact of what we hold in this case. Our decision today does not alter the well established default rule that form of title controls at death, nor does it alter the procedures through which a surviving joint tenant may clear title to real property held in joint tenancy. (
Finally, the Braces argue that our holding will undermine the expectations of spouses and third-party creditors. Applying the community property presumption to third-party disputes outside of the dissolution context, the Braces say, “would . . . subject the interests of innocent spouses to the debts of their spouses, and in the case of bankruptcy subject their one-half interest to administration by the bankruptcy court.”
But it is a basic feature of the community property system that “the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt,” unless a statute expressly provides otherwise. (
Importantly, our decision today does not prevent an innocent or estranged spouse from protecting his or her interests in separate property. For purposes other than dissolution, a spouse can prove separate ownership in jointly titled property and rebut the
In sum, we hold that the community property presumption in
V.
Having elucidated the default rules that govern characterization of property during marriage, we now answer a further question posed by the bankruptcy trustee and amici in this case: When spouses use community funds to acquire property from a third party and take title in a joint tenancy deed, does the form of the deed constitute an express declaration that transmutes the community funds into separate property? (See Cal. Rules of Court, rule 8.548(f)(5); see also Peabody, supra, 59 Cal.4th at p. 665, fn. 1.)
As noted, spouses can change the character of property during marriage by satisfying the transmutation requirements. (
For property acquired on or after January 1, 1985, 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.” (
We further explained that “section 5110.730(a) [now Family Code section 852, subdivision (a)] does not require use of the term ‘transmutation’ or any other particular locution. . . . [A] writing signed by the adversely affected spouse which contains the words ‘I give to the account holder any interest I have in the funds deposited in this account,’ or ‘I give to the account holder my entire interest in the funds deposited in this account,’ would be sufficient, because it would expressly state that the character or ownership of the property is being changed.” (MacDonald, supra, 51 Cal.3d at p. 273.) In Valli, we held that the “express declaration” requirement “precludes the use of extrinsic evidence to prove a transmutation” of property acquired on or after January 1, 1985. (Valli, supra, 58 Cal.4th at p. 1400.)
The question here is whether the “express declaration” requirement is satisfied when a married couple uses community funds to obtain a joint tenancy deed from a third party. Our case law has answered this question in the negative. In Bibb, supra, 87 Cal.App.4th at page 468, the Court of Appeal held that a grant deed “signed by the [adversely affected spouse] transferring his separate property interest in the property to himself and [his spouse] as joint tenants” satisfied the express declaration requirement because it was in the form of a grant deed, which is “the standard vehicle used to transfer title to real property.” The court noted that because the grant deed contained “on its face” “language which expressly state[d] that the characterization or ownership of the property [was] being changed,” it satisfied the MacDonald standard. (Id. at pp. 468–469.)
But the court in Bibb also considered whether a DMV printout showing that an automobile had been registered in the name of the husband “or” the wife was an express declaration. The court held it was not, because it contained “no language which expressly states that the characterization or ownership of the property is being changed.” (Bibb, supra, 87 Cal.App.4th at p. 469.) The court noted that “the certificate of ownership ‘does not contain a signature of the party whose interest is adversely affected.’ ” (Id. at pp. 469–470.) And because the certificate of title did not “contain a clear, unequivocal expression of intent to transmute” the property, it was not a valid transmutation. (Id. at p. 470.)
More recently, in Valli, we held that the wife‘s “ownership of the [life insurance] policy” — which she had acquired from a third party using community funds — was “a matter of agreement between her and the insurer, to which [the husband] was not a party.” (Valli, supra, 58 Cal.4th at p. 1406.) Even though the husband “consented to the use of community funds to purchase the policy,” he did not “execute a writing containing the express declaration of transmutation required by
As Valli and Bibb make clear, the “express declaration” requirement “is not satisfied where, as here, there is no writing signed by the adversely affected spouse that expressly states that the character or ownership of the property is being changed.” (Valli, supra, 58 Cal.4th at p. 1406.) A third-party deed does not itself constitute an express declaration of transmutation. (See id. at pp. 1404–1405.)
This is further supported by the Legislature‘s stated intent in enacting the transmutation statutes. The 1984 legislation was a response to several cases that had permitted “the community property presumption [to] be overcome by evidence of an oral agreement or understanding between the spouses.” (Recommendation Relating to Marital Property Presumptions and Transmutations, 17 Cal. Law Revision Com. Rep. (1984) p. 224.) The Law Revision Commission noted that “the rule of Siberell . . . that the spouses’ acceptance of a joint tenancy deed to property purchased with community funds” could be a transmutation “ha[d] encouraged litigation and has allowed the separate property of a spouse to be transmuted to community property by evidence of an oral agreement or a common understanding.” (Id. at p. 224, fn. 32.) The Commission stated that ” ‘the most common instance of transmutation is the case where real property is purchased with community funds and title is taken in joint tenancy to provide for the right of survivorship.’ ” (Id. at p. 224.) The Commission recommended the “express declaration” requirement as a way to “overcome the rule of Siberell.” (Id. at p. 224, fn. 32.)
As we have noted, the 1973 reform legislation established that for property acquired on or after January 1, 1975, the ” ‘different intention’ ” language of
In this case, the Braces acquired their property in 2011 with community funds and took title as “husband and wife as joint tenants.” Because the property was acquired during marriage after January 1, 1975, the community property presumption of
VI.
For the reasons stated above, we answer the certified questions as follows:
LIU, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
CUÉLLAR, J.
GROBAN, J.
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.” (
In MacDonald, we explained that the transmutation requirements are not satisfied by just “any writing.” (MacDonald, supra, 51 Cal.3d at p. 269.) The adversely affected party must make an ” ‘express declaration’ ” in an instrument that “contains language which expressly states that the characterization or ownership of the property is being changed.” (Id. at p. 272.) We reasoned that an IRA account consent agreement did not satisfy this requirement
By contrast, the Court of Appeal in Bibb found the express declaration requirement satisfied where a husband signed a grant deed conveying his interest in his separate property to him and his wife as joint tenants. (Bibb, supra, 87 Cal.App.4th at pp. 468–469.) The court reasoned that the deed was in the statutory form required to convey an interest in property. (Id.at p. 468; see
In this case, we do not address interspousal deeds by which one spouse conveys his or her separate property to both spouses as joint tenants, as in Bibb, or by which both spouses deed their community property to each other as joint tenants. Instead, we focus here on the common scenario of a married couple using community funds to buy property from a third party. Such a conveyance typically occurs through a grant deed signed by the third-party grantor. (
Professor Blumberg, as amicus curiae, argues that the Braces relinquished “the incidents of community property ownership . . . when the parties accepted title in a deed specifying an alternative and mutually exclusive form of joint-and-equal ownership.” (See Blumberg, supra, at p. 150 [joint tenancy “title creates a presumption of transmutation“]; see id. at p. 156.) But the Legislature and the courts have repeatedly lamented that spouses do not understand what effect, if any, joint tenancy title has on the characterization of property purchased with community funds. (See In re Marriage of Buol (1985) 39 Cal.3d 751, 762–763; Schindler, supra, 126 Cal.App.2d at p. 601; ante, at pp. 10–11.) If anything,
Against this backdrop, we see no basis to assert that married couples intend joint tenancy title to result in separate property interests with regard to third-party claims. Indeed, the mere fact that spouses choose to take title as joint tenants appears to be the kind of “unreliable” evidence that the Legislature intended to target with the transmutation statute. (MacDonald, supra, 51 Cal.3d at p. 269; see Schindler, supra, 126 Cal.App.2d at p. 601 [“It is common knowledge that innumerable husbands and wives with little or no information about estates in real property acquiesce without reflection in the suggestion that they place purchased property in joint tenancy.“].) Under
Nor is a joint tenancy deed exempt from the express declaration requirement on the ground that neither spouse‘s ownership interest is adversely affected. It is true that holding property as joint tenants does not completely deprive one spouseof possession, as is the case when one spouse takes community property with sole title. (See Valli, supra, 58 Cal.4th at p. 1399.) Taking title in joint tenancy also does not change the 50 percent interest that each spouse has in community property. But a property right is not simply the percentage share a person holds in a particular asset. It encompasses a “bundle of rights and privileges as well as of obligations” (Union Oil Co. v. State Bd. of Equal. (1963) 60 Cal.2d 441, 447, fn. omitted), such as the right to possess, lease, encumber, or alienate the property. Shared management and control is a defining feature of our community property system and has driven the evolution of our community property laws. (
Indeed, it is not difficult to see why a spouse‘s claim of a separate interest arising from joint tenancy title causes the other spouse‘s interest to be “adversely affected.” (
In sum, for property acquired with community funds on or after January 1, 1985, the titling of a deed as a joint tenancy is not an express written declaration sufficient to transmute the property into separate property under
CONCLUSION
We answer the Ninth Circuit‘s question as follows:
If such property was acquired before 1985, the parties can show a transmutation from community property to separate property by oral or written agreement or a common understanding. (
Nothing in our decision precludes spouses from holding separate property as joint tenants or from transmuting community property into separate
LIU, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CHIN, J.
CORRIGAN, J.
CUÉLLAR, J.
GROBAN, J.
A married couple uses community funds to purchase real estate and takes title as joint tenants. Decades later, one spouse declares bankruptcy. Now, to determine just how much of the real estate the bankruptcy trustee can reach, the bankruptcy court must decide: Under California law, is the real estate the spouses’ community property (and therefore reachable in full), or is it instead the jointly held but separate property of the spouses (and therefore reachable only as to the debtor spouse‘s one-half interest)?
I agree with much of the majority‘s answer to the question. At one time the law presumed that real estate acquired in this manner was the jointly held, separate property of the spouses. (See Siberell v. Siberell (1932) 214 Cal. 767 (Siberell).) But today, the presumption runs in the other direction: When a couple purchases property with community funds, the property generally continues to belong to the community unless the spouses expressly declare an intent to change—or “transmute“—it to separate property under
Where I part ways with the majority is on the timing of this change in the governing law. I would identify that date as 1985, when the transmutation rule presently codified in
The relevant history begins with our 1932 decision in Siberell, which established the separate property presumption. Siberell was decided against the backdrop of various statutory presumptions governing the characterization of marital property. One of these presumptions, still substantively in effect today, was the presumption that property acquired by spouses during marriage is community property. (
The question in Siberell was whether the relevant statutes required the same result when spouses acquired property deeded in joint tenancy. We said no, for reasons specific to jointtenancies. We explained, as an initial matter, that the spouses could not have different interests in the same property because joint tenancies require unity of interest, meaning that the joint tenant spouses must have identical and coextensive interests in the property. This unity of interest, we explained, would be destroyed if “a wife hold[s] half the property as her separate estate and the husband hold[s] the other half as community property, . . . [because] the interest of the wife would be unequal
This latter point was at the core of Siberell‘s holding, and it rested on what was, fundamentally, a transmutation theory—namely, that when spouses use community funds to purchase property titled in joint tenancy, they are agreeing to transmute their community property into separate, jointly held property. Indeed, Siberell itself used this very term in describing the issue, asking whether, when the spouses took title as joint tenants, “was not the common property, by the consent of thespouses, then and there transmuted into one estate, the separate property of each and held jointly by them?” (Siberell, supra, 214 Cal. at p. 769, italics added.)
To be sure, Siberell‘s transmutation reasoning was not beyond reproach. The Siberell court evidently believed that spouses could claim the chief benefit of a joint tenancy—the right of survivorship at death—only if they also intended to claim the property as separate during life. (Siberell, supra, 214 Cal. at p. 773.) So the court refused to treat the spouses’ property as community during life, lest it deprive them of the right of survivorship at death. To hold otherwise, Siberell said, would have been “manifestly inequitable and a subversion of the rights of both husband and wife,” because “following the demise of either,” community interests in the property would “bring[] into operation the law of descent, administration, rights of creditors and other complications which would defeat the right of survivorship.” (Ibid.) This particular concern was misplaced, for reasons the majority alludes to: A couple who takes property in joint tenancy may secure the right of survivorship and other incidents of separately held property at death, even if the property belongs to the community during life. (Maj. opn., ante, at pp. 36–37.)
But whatever concerns underlay Siberell‘s reasoning, the critical point is that we instructed courts to presume that joint tenancy property is separate property because the spouses implicitly agreed to a transmutation—and not because the statutory scheme required this result. That is not to say the
Over the next 50 years, both this court and the Courts of Appeal repeatedly applied Siberell‘s common law transmutation rule in a variety of contexts to hold that joint tenancy property was presumptively the separate property of the spouses. It is worth noting that none of this case law describes Siberell as rooted in any particular operation of the statutory presumptions; the cases instead describe Siberell in the language of transmutation.3 (See, e.g., Delanoy v. Delanoy,supra, 216 Cal. 23, 26 [citing Siberell for the proposition that when spouses purchase joint tenancy property with community funds, “the community interest must be deemed severed by consent“]; Tomaier v. Tomaier, supra, 23 Cal.2d 754, 757–758 [applying transmutation principles to hold that spouses could rebut the Siberell presumption with evidence that they intended to retain community interests in the property]; Socol v. King (1950) 36 Cal.2d 342, 345–346 [holding that, under established transmutation principles, the Siberell presumption controls unless both spouses intended to hold community interests in the property]; Schindler v. Schindler (1954) 126 Cal.App.2d 597, 602 [” ‘The form of the conveyance is itself some evidence of the intent to change it from community property, and creates a rebuttable presumption to that effect.’ “].)
This brings us to 1973, when the Legislature prospectively eliminated the married woman‘s presumption for property acquired on or after January 1, 1975. This amendment changed the legal background against which Siberell was decided. But nothing in the 1973 amendments changed the Siberell rule itself—that spouses who take title to property as joint tenants are presumed to have intended to transmute their community property to separate property. It was not until the precursor to
It makes sense, then, that contemporary authorities assumed Siberell‘s transmutation rule survived the 1973 amendments. Lower courts continued to apply the Siberell rule to property acquired after January 1, 1975. (See, e.g., Estate of Levine (1981) 125 Cal.App.3d 701, 705 [applying Siberell presumption to joint tenancy property acquired after January 1, 1975]; cf. Estate of Blair (1988) 199 Cal.App.3d 161, 167, quoting Levine, at p. 705 [“Before January 1, 1985, the form of title presumption“—i.e., Siberell‘s presumption—“could be rebutted by showing the character of the property had been changed by oral or written ‘agreement or common understanding between the spouses.’ “]; maj. opn., ante, at pp. 22–23.) Legislative history accompanying relevant statutory amendments in 1983 suggests the Legislature held the same understanding. (See Assem. Com. on Judiciary, Analysis of Assem. Bill No. 26 (1983–1984 Reg. Sess.) as amended Apr. 4, 1983, p. 2 [“The Siberell [form-of-title] presumption still holds even though a general presumption favoring community property was raised with the 1973 statutory change which gives a wife equal management and control of the community assets.“]; Annual Rep. (Dec. 1983) 17 Cal. Law Revision Com. Rep. (1984) appen. VII, p. 864 [noting that
Again, the underpinnings of Siberell‘s transmutation reasoning were open to question, for reasons the majority correctly identifies and now clarifies. (Maj. opn., ante, at pp. 36–37.) But this clarification comes too late for those who, like the Braces, acquired property in joint tenancy between 1975 and 1985 with the reasonable expectation that the property wouldbe presumed separate under Siberell‘s longstanding rule.7 Because the Braces were entitled to rely on the law as it then stood, I would hold that, in a suit against a bankruptcy trustee, property acquired by spouses in joint tenancy on or before December 31, 1984, is presumptively the spouses’ separate property, while property acquired since then is presumptively the property of the community.
KRUGER, J.