Marriage of De Los Cobos
Filed 8/14/13 Marriage of De Los Cobos CA2/7
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IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
SEVEN
In re the Marriage of MARK D.
and ELEANOR J. DE LOS COBOS.
B237332
(Los Angeles
County
Super. Ct.
No. GD043561)
MARK D. DE LOS COBOS,
Respondent,
v.
ELEANOR J. DE LOS COBOS,
Appellant.
APPEAL from
a judgment of the Superior Court
of
County, Mary Lou Katz, Temporary Judge. (Pursuant to Cal.
Const., art. VI, § 21.) Affirmed in
part; reversed in part with directions.
Law Office
of John A. Tkach and John A. Tkach for Appellant.
County
Law Center
and Marc A. Duxbury for Respondent.
____________________
>
INTRODUCTION
Mark and
Eleanor De Los Cobos were married on May
19, 1990 and separated more than 15 years later on August 1, 2005.
marriage on November 21, 2008,
and Eleanor filed her response on February
10, 2009. After a trial on September 13, 2011, the trial court
entered a judgment dissolving the marriage and adjudicating various property
rights. In this appeal Eleanor
challenges only the court’s findings that the parties’ family residence, which
Mark quitclaimed to Eleanor as her separate property, was community property,
and that each party received half of the proceeds of an investment property
that Mark sold in 2006. We affirm in
part and reverse in part.
FACTUAL AND PROCEDURAL BACKGROUND
A. The
Trial
During the
marriage the parties purchased a family residence in West
Covina. The
grant deed recorded on December 17,
1991 reflects that Mark and Eleanor took title to the property as
joint tenants.
In 2000
Mark began to buy and sell real estate.
On May 10, 2001 Mark
and Eleanor, “husband and wife as joint tenants,†quitclaimed the family residence
to Eleanor, “a married woman as her sole and separate property.†Mark testified that he quitclaimed his
interest in the West Covina
property to Eleanor because their lender told them that his “credit score was
not as good as hers†and if he were not on title and “quitclaimed off [they]
could get a better rate.†Mark said he
did not intend to give up his community property interest in the West
Covina property.
In other words, Mark did not intend the transfer of his interest in the
house to Eleanor to be a real transfer, but merely part of the parties’ efforts
to mislead their lender.
name="_ftnref2" title="">[2]
Eleanor
painted a markedly different picture.
She testified that Mark told her he would quitclaim the West
Covina property to her, he was trying to acquire an
investment property in Azusa, and
there would be an exchange. When asked
why Mark signed the quitclaim deed, Eleanor answered: “An assumption that it’s a gift, an exchange
for whatever future property that he will buy.â€
Mark acknowledged that the word “gift†is written on the quitclaim deed,
but he claimed that he could not recognize the writing.
Although
Mark attempted to acquire the Azusa
property in 2001, he did not actually acquire it until 2004. On September
24, 2004 the seller executed a grant deed transferring the Azusa
property to Mark, a married man as his sole and separate property. On September
28, 2004 Eleanor executed an interspousal transfer grant deed
granting any interest she has in the Azusa
property to Mark, “a married man as his sole and separate property.†Eleanor testified that she gave up her right
to the Azusa property “[b]ecause
[Mark] told me it was for his investment.â€
She thought the agreement was that she would keep the West
Covina property and Mark would keep the Azusa
property.
Mark could
not recall having such an agreement with Eleanor. He claimed that Eleanor quitclaimed her
interest in the Azusa property “in
the normal course of business.†He
stated, “we had agreed that’s how I did my real estate business,†and that
“every property I was involved [with] she would quitclaim on.†Mark explained that “depending on the title
company I would use they would usually have to do it as sole and separate
property in order for me to transact business.
Again, this was agreed upon in the marriage that I would do this. She was involved. She knew all the deals.â€
On May 10, 2005 Eleanor executed a
equity line of credit from Citibank on the West Covina
property. The parties recorded this deed
on May 18, 2005. The parties obtained this line of credit so
that Mark could draw on it to pay for repairs and improvements to the Azusa
property. Mark drew on the line of
credit over time as he “needed the money to make the repairs†on the Azusa
property until he sold it. Although only
Eleanor signed the deed, both her name and Mark’s name appeared on the line of
credit statements from Citibank.
On October 18, 2005 Mark executed a
short form deed of trust listing Eleanor as beneficiary and referencing a
$50,000 promissory note to Eleanor. Mark
stated he did so because he was using funds from the line of credit on the West
Covina property to improve the Azusa
property, and Eleanor was concerned that Mark would not use the Azusa
property proceeds to pay back the line of credit. To make Eleanor feel secure, Mark gave her a
note and deed of trust secured by the Azusa
property to show he would pay back the funds he used.
Sometime
after the parties separated, and without telling Eleanor, Mark changed the
mailing address on the Citibank line of credit statements to his address
because he “needed to get [his] mail.â€
As of November 10, 2005
the parties had not yet borrowed any money on the line of credit. Thereafter, Eleanor wrote a check for
$10,582.27 in November 2005, a check for $10,582.27 in January 2006, and a
check for $21,164.54 in May 2006.
Eleanor made each check payable to a contractor who had performed work
on the Azusa property. Unbeknownst to Eleanor, who was no longer
receiving Citibank statements for the line of credit, Mark also took advances
totaling $32,700 on the line of credit.
10, 2006 the total outstanding balance on the line of credit was
$75,540.45.
title="">[4] Only Eleanor made payments on the line of
credit.
Eventually
Eleanor called Citibank to find out why she was no longer receiving bank
statements for the line of credit. When
she heard the outstanding balance on the automated system, she was shocked. She talked to someone at the bank who advised
her that the bank was mailing the statements to Mark’s address.
After
making this discovery, Eleanor asked Mark who would be responsible for paying
off the balance of the line of credit.
Mark said he would pay back whatever he withdrew from the account. According to Eleanor, Mark agreed to pay
$100,000 to cover all of the money he borrowed.
This amount also included $25,000 for money that had been taken out of
Eleanor’s paycheck to pay for Mark’s Lasik surgery and for adoption fees they
had paid when they planned to adopt.
On August 21, 2006, a little more than
one year after the parties separated, Mark sold the Azusa
property for $530,000. The Seller’s
Final Settlement Statement reflected a payoff of $50,000 to Eleanor, as well as
settlement fees of $50,000 to Eleanor “per agreement.†After all of the deductions, Mark received
$98,985.69. The final statement reflects
two $50,000 payments to Eleanor: one for
the promissory note that Mark had given her and one for money Mark had borrowed
from Citibank on the equity line of credit.
Mark testified: “As far as I’m
concerned it was 50-50 community property and that was her fair share of this
house, and I felt that was 50 percent hers.â€
Eleanor
claimed that while the Azusa
property was in escrow, she and Mark had a telephone conversation during which
they discussed the money Mark was going to repay her. They also discussed that the Azusa
property would be Mark’s and the West Covina
property would be hers.
In
conjunction with the closing of escrow on the Azusa
property, Mark signed numerous documents.
One of these was an “Agreement Concerning Marital Property†(postnuptial
agreement) that Eleanor’s trial counsel drafted. The postnuptial agreement referenced a quiet
title action that Eleanor had filed against Mark (De Los Cobos v. De Los Cobos, Los Angeles Superior Court case No.
BC356927).
acknowledges and represents to the other, for the other to rely on in entering
into this Agreement, that each party considers the execution of this Agreement
a determination of their marital and/or community property rights concerningâ€
the West Covina property. The
postnuptial agreement further provided that in consideration for dismissal of
the quiet title action, Eleanor would own the West Covina
property as her sole and separate property.
The parties signed this postnuptial agreement on August 18, 2006.
Mark, who was not represented by counsel, claimed that he did not know
he was signing a postnuptial agreement.
B. Trial
Court’s Ruling and Judgment
The trial
court ruled: “With respect to the West
Covina property, let’s talk about this a little bit,
gentlemen. I find with respect to
Exhibit 9, the so-called post-nuptial agreement, there’s nothing about this
that I understand and nothing about this that I’m buying. I don’t find either party’s testimony about
this to be particular[ly] credible at all.
I don’t think it’s credible that [Mark] just kind of signed it in a stack
of stuff and doesn’t really remember it.
However, I don’t find it credible at all, even a little, that [Eleanor]
had it done and yet there was no conversation about it before or since. And, oh, yeah, he must have known about it
because the escrow officer explained everything. This whole thing just stinks, and I don’t get
it in any way at all, even a little. It
says on page 2 that Party A and Party B acknowledge that they have been
represented by independent counsel. We
know that [Mark] didn’t have counsel. We
know that [Eleanor] did have counsel, but apparently her litigation position is
that she didn’t have counsel. So all the
court can do is throw its arms up in the air and say I’m not giving this any
weight. This is nothing other than it
makes me distrust everything [Eleanor] says, and I also distrust everything
[Mark] says. I think I’m completely not
getting the whole story here . . . . With respect to the West Covina property I am
not inclined to enforce the grant deed because the only testimony that I have
about the purpose of the grant deed was that it was to facilitate this real
estate flipping business, the quitclaim deed in favor of [Eleanor], to
facilitate this real estate flipping business, and if [Eleanor] had really
taken title many years before there would have been no need for this
post-nuptial agreement. And again, I
don’t believe [Eleanor], and I don’t find her to be credible and view her
testimony with suspicion, and although I tend to view [Mark’s] that way too, at
least his explanation makes sense. In
addition [Eleanor’s] idea — and there’s — there was a sense throughout the
entire proceeding that these two conducted themselves with separate finances,
but nobody every came out and said that, and the parties are proceeding as though
the community property law were in effect.
They’re seeking to enforce their rights under California community
property law. So therefore I do not find
that they had separate finances. So at
the end of the day it appears that each party has received about half of the
Azusa property, and I find that based upon the entire course of conduct between
the parties, what I can glean from whatever tiny, tiny little bits of something
approaching the truth may have been sprinkled throughout this interesting afternoon
of story telling, I find that the West Covina residence is community property,
and it was purchased during the marriage . . . .â€
The trial
court entered judgment on September 13, 2011 adjudicating the rights of the
parties on a variety of issues. Under
the heading “COMMUNITY PROPERTY†the court listed the West Covina and Azusa
properties. The court found that “the
West Covina property is community property and it was purchased during the
marriage.†The court ordered counsel “to
meet and confer regarding valuation†and “reserve[d] jurisdiction over the
value of the marital residence.†With
respect to the Azusa property, the court noted, “Each party has received half
of the Azusa property.†The court
further determined that “[o]n the second line of credit, [Eleanor] has been
reimbursed. [Mark] bears no further
responsibility for making payments on the line of credit to the extent that
they represent advances made prior to the closing of the Azusa property.†Finally, the judgment provides: “The Court could not make heads or tails of
the post-nuptial agreement with any confident, credible admissible
testimony. The Court has no choice but
to give it no effect whatsoever.â€
A.
Eleanor
challenges the trial court’s finding that the West Covina property was
community property.
title="">[6] As best as we can discern from her briefs,
Eleanor argues that Mark had the burden of demonstrating that the transaction
in which he quitclaimed his interest in the West Covina property to her was
unfair and that, because Mark failed to meet his burden, the trial court should
have awarded the property to her as her separate property. Eleanor is mistaken.
Evidence
Code section 662 (section 662) codifies the common law “form of title†presumption. “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.†(
Fossum (2011) 192 Cal.App.4th 336, 344;
(2008) 169 Cal.App.4th 176, 189.)
Section 662 creates a presumption rebuttable only by clear and
convincing evidence that title to property is held as specified in a deed. (In re
Marriage of Starr (2010) 189 Cal.App.4th 277, 282; In re Marriage of Brooks
& Robinson, supra, at p.189.)
Under
Family Code section 721 (section 721), however, transactions between spouses
“are subject to the general rules governing fiduciary
relationships which control the actions of persons occupying confidential relations
with each other. This confidential
relationship imposes a duty of the highest good faith and fair dealing on each
spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary
relationship subject to the same rights and duties of nonmarital business
partners . . . .†(
189 Cal.App.4th at p. 281.)
“Because of this, our courts have long held that when an interspousal
transaction advantages one spouse, public policy considerations create a
presumption that the transaction was the result of undue influence. [Citation.]
A spouse who gained an advantage from a transaction with the other
spouse can overcome that presumption by a preponderance of the evidence. [Citation.]â€
(In re Marriage of Starr,
Cal.App.4th 624, 631.) When these two
statutory presumptions conflict, as they do in this case, section 721 prevails
over section 662. (In re Marriage of Fossum, supra,
192 Cal.App.4th at pp. 344-345; In re
Marriage of Delaney (2003) 111 Cal.App.4th 991, 997-998;
Cal.App.4th 277, 283.)
“The
prerequisite elements for the statutory presumption under section 721 to apply
are: (1) there exists an interspousal
transaction; and (2) one spouse has obtained an advantage over the other. [Citation.]
Generally, a spouse obtains an advantage if that spouse’s position is
improved, he or she obtains a favorable opportunity, or otherwise gains,
benefits, or profits. [Citation.]†(In re
Marriage of Mathews, supra, 133
Cal.App.4th at p. 629.)
Mark
and Eleanor entered into an interspousal transaction by signing a quitclaim
deed transferring the family residence in West Covina to Eleanor as her sole
and separate property, thus effecting a transmutation. (Fam. Code, § 850 et seq.; see
supra, 169 Cal.App.4th at p. 191 [“‘A
“transmutation†is an interspousal
transaction or agreement that works to change the character of property the
parties[] already own.’â€];
[transmutation is “an interspousal transaction or agreement which works a
change in the character of the propertyâ€].)
As a result of this transaction Eleanor received an advantage over
Mark—the West Covina property became her separate property. Therefore, she had the burden to overcome the
presumption of unfair advantage by establishing that Mark’s “signing of the
quitclaim deed was freely and voluntarily made, with full knowledge of all the
facts, and with a complete understanding of its effect of making the residence
[Eleanor’s] separate property.†(
accord, In re Marriage of Fossum,
In
the trial court, neither party mentioned the section 721 presumption or any
other presumption. In its oral ruling
the trial court did not expressly conduct a section 721 analysis, and the
trial court did not issue a statement of decision because neither party asked
for one. The trial court stated that it
did not believe either party, castigated both sides for “storytelling†instead
of testifying, and effectively concluded that everything was community
property.
On
appeal we presume the judgment of the lower court is correct. (In re
Marriage of LaMusga (2004) 32 Cal.4th 1072, 1093; In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) The burden is on the appellant to demonstrate
reversible error. (Aguayo v. Amaro (2013) 213 Cal.App.4th 1102, 1109;
(2012) 206 Cal.App.4th 1467, 1484.)
“Because we review the correctness of the judgment, and not the court’s
reasons, we must affirm the judgment if it can be supported on any legal
theory, even if the trial court misapplied or misunderstood the law.†(Aguayo,
supra, at p. 1115.)
In
addition, a party “cannot rely on the trial court’s oral comments or
announcement of intended decision to impeach its judgment.†(In re
Marriage of Green (1989) 213 Cal.App.3d 14, 20.) Statements by the trial court during
the trial are not a substitute for a statement of decision. Even if such comments suggest that the trial
court misunderstood the applicable law, “[a]bsent contrary indication in the
final judgment or statement of decision, the appellate court will assume that,
during the period before rendition of judgment, the trial court realized any
error and corrected it.†(Shaw v.
County of Santa Cruz (2008) 170 Cal.App.4th 229, 268.) And “[w]here, as here, no statement of
decision was requested, all intendments will favor the trial court’s ruling and
it will be presumed on appeal that the trial court found all facts necessary to
support the judgment.†(
Cal.App.3d 643, 649, fn. omitted; accord, Schubert
v. Reynolds (2002) 95 Cal.App.4th 100, 104.) The only issue on appeal is whether the
implied findings are supported by substantial evidence. (Fair
v. Bakhtiari (2011) 195 Cal.App.4th 1135, 1148, fn. 11.)
Implied
in the trial court’s judgment characterizing the West Covina property as
community property is a finding, based on the rebuttable presumption in section
721, that the quitclaim deed was invalid because Mark executed it as a result
of undue influence. As the
appellant, Eleanor has the burden of demonstrating reversible error. (California
Pines Property Owners Assn. v. Pedotti (2012) 206 Cal.App.4th 384,
392.) To meet this burden, she must show
that the trial court’s implied finding that she failed to rebut the presumption
of undue influence under section 721 is not supported by substantial
evidence. (See In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1519-1520
[appellant had the burden of showing the trial court’s “implied finding that
[the appellant] did not rebut the presumption†of undue influence under section
721 “by a preponderance of the evidence†was not supported by substantial
evidence].) Eleanor has made no attempt
to do so, however, because she mistakenly asserts that Mark had the burden of
proving that the transaction was unfair.
Although we have the discretion to treat the sufficiency of the evidence
issue as waived (Estate of Cairns
(2010) 188 Cal.App.4th 937, 949), we elect to resolve the issue (see
(2012) 205 Cal.App.4th 436, 451, fn. 4).
Mark
testified that the reason he decided to quitclaim his interest in the West
Covina property to Eleanor was that “[o]ur lender told us if I wasn’t on title
since my credit score was not as good as hers that if I quitclaimed off we
could get a better rate.†He therefore
admitted that his decision to transfer the property to Eleanor was voluntary,
intentional, and for a specific reason.
Although the trial court found both Mark and Eleanor not particularly
credible, it was undisputed that Mark was in the business of buying and selling
real estate and, to assist him in conducting his business, he routinely
arranged for Eleanor to quitclaim her interest in the investment properties
that he purchased. Mark also testified
that he had “entered into contract on quite a few, maybe six or eight,â€
contracts to purchase real property. It
is a very reasonable if not inescapable inference from these facts that Mark
understood the significance of the quitclaim that he executed in favor of
Eleanor. He knew exactly what he was
doing and why he was doing it: to get
better loan terms. He executed the
quitclaim deed not because of any undue influence by Eleanor, but because of
the business needs of his real estate investment venture. This substantial evidence rebuts the section
721 presumption. Therefore, Eleanor was
entitled to the West Covina property as her separate property. (See
B.
Eleanor
quite understandably does not challenge the trial court’s finding that the
Azusa property was community property at the time Mark sold it.
court’s finding that Citibank was reimbursed for the amounts it had advanced
from the line of credit, and that Mark had no further responsibility “for
making payments on the line of credit to the extent that they represent
advances made prior to the closing of the Azusa property.†She does take issue, however, with the
court’s finding that she and Mark each “received half of the Azusa
property.†She argues that she was
entitled to but did not receive one-half of the net proceeds from the sale of
the Azusa property. She is legally and
economically correct.
The $100,000
that Eleanor “received†upon the closing of escrow represented money that she
and Mark borrowed from the line of credit and that should have been used to pay
Citibank first, before any distribution of the net sale proceeds. The $100,000 from escrow was not for her, but
was to repay on behalf of the community the money the community had borrowed to
finance the development of the investment property. Therefore, because the net proceeds from the
sale were $98,985.69, Eleanor should have received one-half of this amount, or
$49,492.85, separate and apart from the $100,000 that went to repay Citibank.
DISPOSITION
That
portion of the judgment characterizing the West Covina property as community
property is reversed. The trial court is
ordered to amend the judgment by awarding the West Covina property to Eleanor
as her separate property. That portion
of the judgment finding that each party received half of the Azusa property is
also reversed. The trial court is
directed to amend the judgment by awarding Eleanor one-half of the net proceeds
from the sale of the Azusa property, or $49,492.85. In all other respects, the judgment is
affirmed. Eleanor is to recover her
SEGAL,
J.
We concur:
WOODS,
Acting P. J. ZELON,
J.
name="_ftn1" title="">[1] We will refer to the parties by their first names to avoid confusion. No disrespect is intended. (In re
Marriage of Campi (2013) 212 Cal.App.4th 1565, 1567, fn. 1;
& Foley (2010) 189
Cal.App.4th 521, 523, fn. 1.)
name="_ftn2" title="">[2] If,
as Mark testified, someone from the lender suggested transferring title to
Eleanor, then Mark and Eleanor were actually conspiring with their lender to
defraud the United States rather than misleading their lender.
