In re: Clifford Allen Brace, Jr.
*1 FILED
MAR 15 2017 SUSAN M. SPRAUL, CLERK ORDERED PUBLISHED U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: ) ) CLIFFORD ALLEN BRACE, JR., ) ) ) BAP No. CC-16-1041-LNTa
Bk. No. 6:11-26154-SY Debtor. Adv. No. 6:11-02053-SY ______________________________)
) ) CLIFFORD ALLEN BRACE, JR., INDIVIDUALLY AND AS THE ) TRUSTEE OF THE CRESCENT TRUST ) ) DATED JULY 30, 2004; ANH N. BRACE, INDIVIDUALLY AND AS ) THE TRUSTEE OF THE CRESCENT ) ) TRUST DATED JULY 30, 2004, ) ) ) ) ) ) ) ) )
Appellants, v. OPINION
STEVEN M. SPEIER, Chapter 7 Trustee,
Appellee. ______________________________)
Argued and Submitted on January 19, 2017
at Pasadena, California
Filed - March 15, 2017
Appeal from the United States Bankruptcy Court for the Central District of California
Honorable Scott Ho Yun, Bankruptcy Judge, Presiding _________________________
Appearances: Stephen R. Wade argued for appellants; Matthew W. Grimshaw of Marshack Hays LLP, argued for appellee.
_________________________
Before: LAFFERTY, TAYLOR, and NOVACK, [*] Bankruptcy Judges.
LAFFERTY, Bankruptcy Judge:
INTRODUCTION
The bankruptcy court found that Debtor’s transfers of marital property into a trust for the benefit of his non-debtor spouse were avoidable as actually fraudulent conveyances. In a separate unpublished memorandum decision, we affirmed that aspect of the bankruptcy court’s ruling.
Relying on a recent California Supreme Court decision, Valli
v. Valli (In re Marriage of Valli),
Appellants contend that, notwithstanding Valli, the
community property presumption applies only in the context of
property division in a marital dissolution or legal separation.
They assert that the bankruptcy court should have applied the
record title presumption of
For the reasons set forth below, we AFFIRM the bankruptcy court’s determination that the community property presumption applies in this context.
FACTS
During their marriage, Debtor and his non-debtor spouse,
Anh N. Brace, acquired their residence in Redlands, California, a rental property in San Bernardino, California, and a parcel of real property in Mohave, Arizona (collectively, thе “Properties”). Appellants took title to each of the Properties as “husband and wife as joint tenants.”
On July 30, 2004, Debtor formed the Crescent Trust. The instrument creating the Crescent Trust states that it is an irrevocable trust and that Debtor is the sole trustee; Ms. Brace is the beneficiary of the trust. The trust instrument was not recorded. Shortly thereafter, Debtor executed and had recorded trust transfer deeds transferring his interests in the Redlands and San Bernardino properties into the Crescent Trust for no consideration. At the time of the transfers, Debtor was a defendant in litigation in San Bernardino County Superior Court, and a judgment in that litigation was entered a few weeks after the transfers occurred.
Debtor filed a chapter 7 [1] petition on May 16, 2011, and Robert L. Goodrich was appointed chapter 7 trustee (“Trustee”). [2] In December 2011 Trustee filed an adversary proceeding against Appellants, individually and in their capacities as trustees of the Crescent Trust, [3] seeking: a declaration that the Properties were property of the bankruptcy estate; a judgment quieting title to the Properties in the bankruptcy estate; turnover of any of
the Properties determined to be property of the estate; avoidance
and recovery of Debtor’s transfers of the Redlands and San
Bernardino properties into the Crescent Trust as actually and/or
constructively fraudulent transfers under
After trial on the Fraudulent Transfer Claims, the bankruptcy court ruled in favor of Trustee on the actually fraudulent transfer and alter ego claims, finding, among other things, that the transfers of the Redlands and San Bernardino properties into the Crescent Trust were avoidable and that all three Properties were recoverable in their entirety by the estate. The bankruptcy court found not credible Appellants’ testimony that they had intended the Properties to be held separately and that the transfers were done for estate planning purposes.
After the bankruptcy court entered judgment on the Fraudulent Transfer Claims, Appellants timely moved to amend the judgment, arguing that the judgment should have provided that the Properties, as recovered, were owned one half by Debtor and one half by Ms. Brace as tenants in common [4] and that only Debtor’s interests in the Properties, but not Ms. Brace’s, were property of the estate. The bankruptcy court disagreed, finding
that although these properties are returned to joint tenancy between the Debtor and Defendant Anh Brace, the
properties were acquired by the Debtor and Anh Brace
during the marriage with community assets and they
presumptively constitute community property under
applicable law. Defendants failed to establish that
the Redlands Property, San Bernardino Property, or
[Mohave] Property were not community in nature and,
therefore, they constitute property of the Estate
pursuant to
Appellants timely appealed the amended judgment. [5]
JURISDICTION
The bankruptcy court had jurisdiction pursuant to
ISSUE
Whether the bankruptcy court erred in determining that, upon avoidance of the transfers of the Properties, those properties were held by Appellants as community property and were thus property of the estate.
STANDARDS OF REVIEW
We review the bankruptcy court’s findings of fact for clear
error, and its conclusions of law de novo. Carrillo v. Su
(In re Su),
clearly erroneous “when although there is evidence to support it,
the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.”
Anderson v. City of Bessemer City, N.C.,
We review de novo the bankruptcy court’s interpretation of
state law. Salven v. Galli (In re Pass),
prior decisions interpreting state and federal law).
DISCUSSION
We look to relevant non-bankruptcy law to determine the
nature and extent of a debtor’s interest in property. Butner v.
United States,
A. California Presumptions Affecting Property Ownership
In this appeal, we are concerned with two California
presumptions affecting determinations of the ownership of
property. The first is
The second is CFC
The community property presumption applies to property
acquired during marriage unless it is: (1) traceable to a
separate property source; (2) acquired by gift or bequest; or
(3) earned or accumulated while the spouses are living separate
and apart. Valli,
The record title presumption promotes California’s public policy in favor of the stability of titles to property.
In re Marriage of Haines,
On the other hand, the community property presumption “is
perhaps the most fundamental principle of California’s community
property law.” Valli,
third parties, by creating and enforcing consistent and reliable “rules of the road,” rebuttable by written and contemporary evidence to the contrary, for characterizing property ownership. In the absence of such clear and consistent rules the parties, and the courts called upon to decide disputes between them, would be forced to revert to admittedly unreliable evidence concerning dubious assertions of intent and prior understandings.
The record title presumption and the community property
presumption each promote fundamentally important, but nonetheless
fundamentally different, public policies favoring the integrity
of property transactions. And as the California Supreme Court
stated in Valli, because of the differences between these
competing policies, which turn on the longstanding rules in
California concerning ownership of property by married couples,
the policy in favor of the general stability of titles embodied
in the record title presumption is “largely irrelevant to
characterizing property acquired during the marriage in an action
between the spouses.” Id. at 1410. As such, the Valli court
determined that
applicability of the community property presumption in other contexts.
Of course, these presumptions come into play only when a dispute arises about the parties’ respective rights and liabilities as to a particular marital asset. The question
raised by this appeal is whether the same rules concerning presumptions should apply to disputes concerning the ownership of property arising in other contexts (such as bankruptcy) that require a determination of the respective spouses’ rights in marital property.
Appellants contend that the community property presumption applies only in the marital dissolution or separation context and that the record title presumption applies in all other disputes over marital property involving third parties.
We disagree. Although there may be instances where the record title presumption could apply to marital property, for the reasons explained below we hold that, as a general rule, California’s community property presumption applies in disputes in bankruptcy involving the characterization of marital property. Our holding is based on controlling California case law interpreting the relevant statutes and the policies expressed therein, which we believe apply equally in disputes between spouses over property division and in bankruptcy matters that require a determination of the characterization of marital property.
B. Appellants’ Arguments
Because the Appellants’ arguments have shifted somewhat during the course of this dispute, in an apparent attempt to respond to the California Supreme Court’s holding in Valli, we believe it would be helpful to describe in some detail the evolution of Appellants’ arguments.
In the bankruptcy court, Appellants did not dispute that the community property presumption applied; instead they argued that
the fact that they took title as joint tenants rebutted the
community property presumption, citing Summers. There, the Ninth
Circuit held that, under California law, the community property
presumption is rebutted when a married couple acquires property
from a third party as joint tenants and that the written
transmutation requirements of CFC § 852(a) apply only to
interspousal transactions and not to transactions whereby a
married couple acquires property from a third party. In re
Summers,
On appeal, and in response to the bankruptcy court’s amended
judgment that relied on Valli in rejecting Summers, Appellants
have modified their argument to assert that the bankruptcy court
should have applied the record title presumption of
C. The Transmutation Doctrine in California Courts
1. In re Summers: The Ninth Circuit’s Pre-Valli Interpretation of California’s Transmutation Requirements
In Summers, the Ninth Circuit held that under California
law, the community property presumption is rebutted when a
marriеd couple acquires property from a third party as joint
tenants.
Citing several California Courts of Appeal decisions, the
Ninth Circuit held that under California law the transmutation
requirements applied only to intersрousal transactions. In so
holding, the Summers court relied on the California courts’
definition of “transmutation” as “an
interspousal transaction or
agreement
that works a change in the character of the property.”
In re Summers,
noted that seemingly contrary California cases all involved interspousal transactions and thus did not mandate a different outcome. [7]
2.
Valli: The California Supreme Court rejects Summers.
In Valli, the California Supreme Court expressly rejected
the Ninth Circuit’s interpretation of California law, holding
that California’s transmutation statutes also applied to
transactions in which spouses acquired property from a third
party.
The relevant facts in Valli are not complex. During a marriage husband had used community funds to purchase a life insurance policy on his life, naming wife as the sole owner and beneficiary. At dissolution, husband argued that the insurance policy was community property because it was purchased with community funds and because the trаnsmutation requirements of CFC § 852 had not been complied with. Wife argued that the policy was her separate property because husband had put the policy solely in her name, changing the policy’s character from community property to separate property. She contended that the transmutation requirements did not apply to the purchase of the life insurance policy because it was not an interspousal transaction. The California Supreme Court rejected this argument.
The California Supreme Court observed that the California legislature adopted the written transmutation requirements
because, under prior law, spouses’ ability to transmute property
by oral or implied agreement generated extensive litigation in
dissolution proceedings and “encouraged spouses to transform a
passing comment into an agreement or еven to commit perjury by
manufacturing an oral or implied transmutation.” Valli, 58 Cal.
4th at 1401 (citation omitted). Thus, the legislature adopted
the written requirements to “remedy problems which arose when
courts found transmutations on the basis of evidence the
Legislature considered unreliable.” Id. (citation omitted).
Next, the California Supreme Court observed that
interpreting the transmutation statutes to apply only to
interspousal transactions would “produce arbitrary and irrational
results that the Legislature could not have intended.” Id. It
gave hypothetical examples to illustrate the point. Id. at 1401-
04. The California Supreme Court expressly rejected the
definition of transmutation relied upon by the Ninth Circuit
Court of Appeals in Summers: “an
interspousal
transaction or
agreement which works a change in the character of the property.”
(emphasis added). The California Supreme Court noted that none
of the cases relied upon in Summers for this definition involved
the question of whether a transaction in which property was
acquired from a third party was subject to the transmutation
requirements. In fact, Summers was the first case to consider
the question, followed by In re Marriage of Brooks & Robinson,
persuasive insofar as they purport to exempt from the
transmutation requirements purchases made by one or
both spouses from a third party during the marriage.
Neither decision attempts to reconcile such an
exemption with the legislative purposes in enacting
those requirements, which was [sic] to reduce excessive
litigation, introduction of unreliable evidence, and
incentives for perjury in marital dissolution
proceedings involving disputes regarding the
characterization of property. Nor does either decision
attempt to find a basis for the purported exemption in
the language of the applicable transmutation statutes.
Valli,
The California Supreme Court expressly rejected the argument
that the title presumption of
3. Subsequent bankruptcy decisions have applied Valli in bankruptcy disputes concerning ownership of marital assets.
California bankruptcy courts have interpreted Valli to
require application of the community property presumption outside
the marital dissolution context. See In re Obedian,
In Obedian, a married couple purchased real property during the marriage, taking title as joint tenants. Thereafter, a judgment was entered against husband only. During wife’s
subsequent chapter 7 proceeding, she moved to avoid the judgment
lien, which required the bankruptcy court to determine whether
the real property was held in joint tenancy or as community
property. Relying on Valli’s holding that the transmutation
statutes override the title presumption, the bankruptcy court
applied the community property presumption, finding that the
presumption was not rebutted even though the parties had taken
title as joint tenants. The bankruptcy court rejected the
chapter 7 trustee’s contention that the title presumption under
In this matter the bankruptcy court expressly considered
whether it was bound to follow the Ninth Circuit Court of
Appeals’ holding in Summers, or whether it should follow the
intervening and contrary California Supreme Court holding in
Valli. In determining that it need not follow Summers, the
bankruptcy court relied on Miller v. Gammie,
must not be pursued at the expense of creating an inconsistency between our circuit decisions and the reasoning of state or federal authority embodied in a decision of a court of last resort. We hold that the issues decided by the higher court need not be identical in order to be controlling. Rather, the relevant court of last resort must have undercut the theory or reasoning underlying the prior circuit precedent in such a way that the cases are clearly irreconcilable.
Id. at 900. In such a circumstance, the circuit instructed that any future three-judge panel of the court of appeals and district courts “should consider themselves bound by the intervening higher authority and reject the prior opinion of this court as having been effectively overruled.” Id.
In deciding to apply Valli to the present dispute, rather than to rely on Summers, or to await a subsequent decision by the Ninth Circuit that would have followed Valli, the bankruptcy court followed the directive of Miller v. Gammie in the same manner that a district court would undoubtedly have done. Wе see no error in this analysis. [8]
D. California case law, principles of statutory construction,
and public policy all support the conclusion that the community property presumption may apply in contexts other than disputes between spouses.
Appellants contend that Summers and Valli are irrelevant to our analysis because those cases involved transmutation questions, whereas here, Appellants do not contend that any transmutation took place; rather, they argue that under the record title presumption, the fact that they took title as joint tenants establishes the presumption that the spouses held their interests in the Properties separately. In support of their position, Appellants cite principles of statutory construction, state and bankruptcy cases decided prior to Valli, and the concurrence in Valli.
We find none of these arguments persuasive.
1. Principlеs of statutory construction do not support Appellants’ argument.
As an initial matter, Appellants argue that the record title presumption should apply as a matter of statutory construction, based on their interpretation of the inter-workings of sections of the California Family Code. We disagree, for numerous reasons.
Appellants note that CFC § 750 authorizes spouses to hold title to property as community property, or as joint tenants or
tenants in common.
[9]
And CFC § 2581 provides that, regardless of
how a couple takes title, for purposes of property division in a
dissolution or legal separation, all property is presumed to be
community property.
[10]
Appellants contend that the “specific”
provision of CFC § 2581 takes precedence over the “general”
community property presumption of CFC
We cannot agree. A specific statutory provision does
prevail over a general one relating to the same subject. Pac.
Lumber Co. v. State Water Res. Control Bd.,
that CFC
Moreover, two other provisions of the Family Code bolster the conclusion that the Legislature intended the community property presumption to apply in disputes with parties outside the marital couple: first, CFC § 852 provides that a transmutation of real property is not effective as to third parties without notice unless it is recorded; and second, CFC § 851 provides that “[a] transmutation is subjеct to the laws governing fraudulent transfers.” These provisions presuppose that, as a general rule, third parties are entitled to rely on the community property presumption in transactions involving marital property.
Appellants’ contrary interpretation–-that CFC
replaced specific statutory provisions enumerated in former
Nor, candidly, can we readily discern the significance of
Appellants’ reference to CFC § 750’s enumeration of the different
forms in which married couples may hold property as supporting an
argument that CFC
For all of these reasons, we find Appellants’ statutory construction arguments unpersuasive.
2.
Prior case law does not compel a different result.
Appellants cite Hansford v. Lassar,
non-dissolution cases decided before Valli, the courts applied the record title presumption to marital property rather than the community property presumption. Importantly though, in both of these cases, one spouse had taken title as “sole and separate property” and the other spouse had executed and recorded a document relinquishing his or her interest in the subject property. Thus, in In re Fadel, the spouses effectively transmuted the character of the property when it was acquired (thereby satisfying the requirements of CFC § 852); the title documents reflected an unequivocal intent to hold the properties separately. In that circumstance, applying the record title presumption was appropriate. Moreover, Hansford, and the authorities cited therein, have largely been superceded by subsequent statutes and case law; to thе extent they conflict with Valli, they are no longer good law.
3. The Valli concurrence does not compel the conclusion that the community property presumption is limited to the marital dissolution context.
Lastly, Appellants attempt to bolster their argument that
Valli cannot be applied outside of the marital dissolution
context by pointing to language in the concurring opinion in
which three of the justices recognized in dicta the possibility
that
Significantly, the statutory presumption regarding property in the form of joint tenancy applies “[f]or the purpose of division of property on dissolution of marriage.” (Fam. Code, § 2581; see Civ. Code, former§ 5110 .) This language suggests that rules that apply to an action between the spouses to characterize property acquired during the marriage do not necessаrily apply to a dispute between a spouse and a third party.
Valli,
We do not agree that the quoted language either limits the holding in Valli strictly to marital dissolutions or makes the policies inherent in the Valli decision inapplicable to the disputes concerning property ownership that arise in bankruptcy.
As an initial matter, we note that the decision in Valli was unanimous and that the comments on which Appellants rely are set forth in a concurrence joined by less than a majority of the court. Thus, even were the concurring justices expressing concerns with the holding in Valli--and for the reasons set forth below, we do not believe that they were--such concerns would not have limited the holding of this decision by the highest authority in California.
Second, we note the inescapable facts that in Valli the California Supreme Court expressly addressed and rejected the interpretation of California law relied on in Summers--and that Summers clearly arose in a bankruptcy context. Surely, if the California Supreme Court were concerned to limit the scope of its holding regarding the applicability of presumptions concerning marital property, it could easily have done so when rejecting the rationale for a decision that dealt with a dispute concerning a bankruptcy estate’s interest in marital property.
Third, we are reluctant to read the quoted comment as
broadly as Appellants suggest, i.e., that the community property
presumption of CFC
apply, they did reinforce a fundamental distinction that the
opinion also noted, i.e., the difference between the purposes of
the general evidentiary title presumption of
4. The policies expressed in Valli compel the conclusion that the community property presumption must apply here.
As noted in both the majority opinion and the concurrence in Valli, the purpose behind the property ownership presumptions of the California Family Code is to create a uniform and reliable set of “rules of the road,” application of which will serve to avoid the unsavory but all too common circumstance in which one member of the community seeks through unreliable or even perjurious evidence to bolster an unfair and inaccurate assertion of property ownership during a dispute. See Valli, 58 Cal. 4th at 1405. That the California Family Code presumptions are entirely consistent with the expectation that, in most instances, a married couple in this state acquiring property during a marriage, except in certain enumerated instances, will intend to hold and will hold the property as a community asset, is hardly surprising. Further, the fact that such presumptions are rebuttable by written evidence of intent to hold property as other than a community asset preserves the ability of a married couple to deviate from the expectation of community ownership for any number of legitimate, but necessarily verifiable, reasons.
In light of the relatively light burdens imposed by such requirements, we find it hard to agree with Appellants’ dire
predictions expressed during argument in this matter that our ruling will wreak havoc on marital communities throughout the state.
A rule that the community property presumption generally
aрplies in disputes over rights to marital property is not in
conflict with the policy of stability of titles expressed in
Moreover, we believe that the Appellants’ implied reliance on a distinction that they contend the court in Valli drew between the presumptions that should govern in a marital dissolution and those that should pertain to a dispute involving either or both members of the community and third party creditors misconceives the issues that arise when one or both members of a community files a bankruptcy.
As we are all aware, immediately upon the filing of a bankruptcy, an estate is created, comprised of all assets of the debtor, wherever located; and a trustee is appointed whose duty it is promptly to collect and hold those assets, and to maximize
their value for the benefit of the debtor’s creditors. In taking such actions the trustee is, in the first instance, stepping into the shoes of the debtor, and succeeds to the property interests of the debtor, as provided by nonbankruptcy (state) law. [11] While the trustee may act for the benefit of creditors, he is in the first instance merely exploiting the existing property rights of the debtor. To suggest that different presumptions оf marital property ownership must apply in bankruptcy is to ignore a fundamental purpose of the bankruptcy system: to permit the trustee to assert the rights of the debtor in property for the benefit of the debtor’s creditors. [12]
Appellants point to no policy that would be furthered by
treating marital property differently in disputes with a bankruptcy trustee. The community property presumptions and the transmutation statutes acknowledge that spouses stand in a confidential relationship, with its attendant risk of undue influence; these presumptions and provisions are intended to protect against that risk. And the transmutation statutes further protect married persons from the risk of unreliable evidence and incentives for perjury. As the Valli court held, these policy concerns apply equally in actions between spouses and in actions between spouses and third parties.
Because the bankruptcy trustee succeeds to the marriеd debtor’s interests and thus also to any dispute over the characterization of that marital property, failure to apply the community property presumption in such matters would produce inconsistent results without furthering any of the policies embodied in the relevant California Family Code provisions. In short, Appellants have demonstrated no convincing authority or plausible policy reason to conclude that the record title presumption should trump the community property presumption under the facts presented here.
Based on the foregoing, we hold that the bankruptcy court correctly applied the community property presumption. It is undisputed that the Properties were acquired during the marriage with community funds. Despite Appellants’ assertion that there was no transmutation, the act of taking title as joint tenants was (if their testimony is to be believed) an attempt to recharacterize their interests in the Properties from community to separate. Under Summers and the California cases cited
therein, the act of taking title as joint tenants would have been effective to do so. But Valli explicitly abrogated Summers’ holding that the transmutation requirements do not apply to transactions where property is acquired from a third party by a married couple. As such, Appellants had to provide additional evidence that they intended to hold their interests separately. Because the bankruptcy court found not credible Appellants’ assertion that they intended to hold the Properties separately, Appellants failed to overcome that presumption notwithstanding that they originally took title to the Properties as joint tenants. [13]
CONCLUSION
For all of these reasons, the bankruptcy court did not err in concluding that uрon avoidance and recovery, the Properties were property of the estate subject to administration by Trustee. Accordingly, we AFFIRM.
Notes
[*] Hon. Charles Novack, United States Bankruptcy Judge for the Northern District of California, sitting by designation.
[1] Unless otherwise indicated, all chapter and section
25
references are to the Bankruptcy Code,
[2] Appellee Steven M. Speier was substituted as chapter 7 27 trustee after Mr. Goodrich resigned in December 2015. 28
[3] Ms. Brace is not a trustee of the Crescent Trust.
[4] It is not clear from the record why Appellants argued that 28 the Properties should be deemed held as tenants in common, given that they had originally taken title as joint tenants.
[5] Because the amended judgment did not dispose of all the 27 claims in the adversary proceeding, the parties obtained a second amended judgment from the bankruptcy court that сontained a 28 certification pursuant to Rule 54(b) that there was no just reason to delay entry of a final judgment on the Fraudulent Transfer Claims.
[6] For transmutations occurring prior to 1985, a
transmutation may be shown by evidence of an oral or implied
agreement to do so. See Woods v. Sec. First Nat’l Bank of Los
Angeles,
[7] See Bolton v. MacDonald (Estate of MacDonald), 51 Cal. 3d 262; McGirr v. Barneson (In re Marriage of Barneson), 69 Cal. App. 4th 583 (1999); Bibb v. Bibb (Estate of Bibb), 87 Cal. App. 4th 461 (2001).
[8] The bankruptcy court in Obedian reached a similar
conclusion, relying on different authority. The court noted
that, as a general rule, Ninth Circuit published authority is
binding within the Circuit to the same extent as Supreme Court
precedent. However, if state courts subsequently disagree with
the prior panel, the later Ninth Circuit panel is not bound to
follow the prior panel; in interpreting state law, the Ninth
Circuit must follow the decisions of the state’s highest court.
Obedian,
[8] (...continued)
Id. at 421-22 (citing Valli,
[9] CFC § 750 provides that “[s]pouses may hold property as joint tenants or tenants in common, or as community property, or as community property with a right of survivorship.”
[10] CFC § 2581 provides: 25 For the purpose of division of property on dissolution 26 of marriage or legal separation of the parties, property acquired by the parties during marriage in 27 joint form, including property held in tenancy in common, joint tenancy, or tenancy by the entirety, or 28 as community property, is presumed to be community property.
[11] To be sure, the trustee may also exercise certain 15 special rights created by, or incorporated into, the Bankruptcy Code, including, for example, the right to recover fraudulent 16 transfers. See §§ 544 and 548. And in this context, it bears repeating that CFC § 852 contains an explicit requirement that 17 certain transmutations be made in writing, and be recorded, to avoid the reach of California’s Uniform Fraudulent Transfer Act. 18 See Subsection A, supra. 19
[12] And, not to belabor the point, but it would be difficult 20 to imagine a starker example of the need for consistent, reliable “rules of the road” to aid in the characterization of marital 21 property in a dispute in bankruptcy than this case. Although not elaborated in this Opinion, our companion Memorandum describes in 22 great detail the pre-bankruptcy conduct of the Appellants that 23 the trial court found was taken with intent to defraud creditors, as well as the trial court’s conclusion that Appellants’ 24 evidentiary presentation concerning their bona fides was not credible in any respect. Clearly, were Appellants proceeding on 25 a theory that they had effected a transmutation of the ownership of the Properties, the trial court would have had ample 26 justification to reject any such assertion, whether operating 27 under the written documents requirements of CFC § 852 (enacted in 1985) or its predecessor rule, which still required credible 28 evidence of a pre-existing arrangement or understanding.
[13] We note that Valli interpreted the community property 22 presumption in light of CFC § 852’s requirement of a written express declaration to prove a transmutation, finding that in 23 light of that requirement, the manner in which a married couple takes title is insufficient by itself to rebut the presumption 24 and that the record title presumption should not be applied when it conflicts with the transmutation statutes. Here, the writing 25 requirement may not apply because CFC § 852 became effective in 26 1985. However, even if CFC § 852 does not apply, this does not mean that Valli is inapplicable: the only impact of the 27 codification of the writing requirement was to modify the manner in which a party may rebut the community property presumption. 28