Droeger v. Friedman, Sloan & Ross

• Decision Date: 29 July 1991
• Docket Number: No. S014984,S014984
• Citation: 812 P.2d 931,283 Cal.Rptr. 584,54 Cal.3d 26
• Court: California Supreme Court
• Parties: , 812 P.2d 931, 60 USLW 2157 John E. DROEGER, Plaintiff and Appellant, v. FRIEDMAN, SLOAN & ROSS, Defendant and Respondent.

Page 584

283 Cal.Rptr. 584

54 Cal.3d 26, 812 P.2d 931, 60 USLW 2157

John E. DROEGER, Plaintiff and Appellant, v. FRIEDMAN, SLOAN & ROSS, Defendant and Respondent.

No. S014984.

Supreme Court of California,

In Bank.

July 29, 1991.

Cory A. Birnberg, San Francisco and William A. Reppy, Jr., Duke University, School of Law, Durham, N.C., for plaintiff and appellant.

Friedman, Sloan & Ross, James A. Dorskind, Jeffrey S. Ross, Howard, Rice, Nemerovski, Canady, Robertson & Falk and Jerome B. Falk, Jr., San Francisco, for defendant and respondent.

Lorraine C. Gollub, Culver City, Ronald Melin Supancic, Woodland Hills, Sandra Blair, San Francisco, James Scott Veltmann, San Diego, Ronald Rosenfeld, Beverly Hills, E. Stephen Temko, Denny Kershek, San Diego, Frieda Gordon Daugherty, Los Angeles and Dianna Gould-Saltman, Culver City, as amici curiae, on behalf of defendant and respondent.

PANELLI, Justice.

We granted review to determine whether a security interest in community real property given by one spouse to secure attorney fees during a pending marital dissolution proceeding is valid under Civil Code section 5127. ¹ Resolution of this question requires that we clarify the general rules governing transfers ² by one spouse in violation of section 5127. ³

We conclude that pursuant to section 5127, both spouses must consent to the transfer of community real property. Consequently, when a nonconsenting spouse, during the marriage, timely challenges a transfer made in violation of section 5127, the transfer is voidable. In the present case, after the parties had separated, Joanna Droeger unilaterally encumbered two parcels of community real property. Her husband, John E. Droeger, did not join in the execution of the encumbrance. Before the couple's marriage dissolution proceedings were completed, John Droeger challenged the validity of the encumbrance. As his consent was required under section 5127 to effect the encumbrance, we conclude that he is entitled to invalidate the encumbrance in its entirety.

I. Facts and Proceedings

In 1982, Joanna Droeger (Wife) commenced a marital dissolution proceeding against appellant John Droeger (Husband). Wife retained Friedman, Sloan & Ross (Friedman) as her counsel in the proceeding. In October 1986, Friedman moved in the family law court for an order awarding attorney fees and costs of over $50,000 pendente lite pursuant to section 4370, subdivision (a) (authorizing court orders for payment of attorney fees pendente lite). However, the court only granted the motion in part, awarding Friedman $9,600, and reserving consideration of the request for additional attorney fees and costs until the time of trial.

On November 3, 1986, Wife executed a promissory note in the amount of $31,158.66 in favor of Friedman for attorney fees and costs. On the same day, Wife executed a deed of trust on two parcels of the community's real property securing the note. Husband did not join in the execution of the note or the deed of trust.

Husband commenced action in superior court to quiet title to the community realty that is encumbered by the deed of trust. Relying on Mitchell v. American Reserve Ins. Co. (1980) 110 Cal.App.3d 220, 167 Cal.Rptr. 760 (Mitchell ), Friedman demurred to Husband's second amended complaint, claiming that the deed of trust was enforceable against Wife's one-half interest in the property. The court sustained the demurrer without leave to amend and entered a judgment of dismissal. Husband's motion for reconsideration was denied.

Concluding that the intent of section 5127 was to prevent division of community real property except by agreement of both spouses, or by the death of one spouse, or by dissolution of the marriage, the Court of Appeal reversed. The Court of Appeal held that Husband was entitled to void the encumbrance in its entirety. We affirm.

II. Section 5127

Section 5127, which applies to the management and control of community real property, states in part, "either spouse has the management and control of the community real property ..., but both spouses either personally or by duly authorized agent, must join in executing any instrument by which such community real property or any interest therein is leased for a longer period than one year, or is sold, conveyed, or encumbered...."

Since 1975, when reforms of the community property laws (discussed post ) became effective, the appellate courts have reached inconsistent results in determining the effect of violations of section 5127 where one spouse has made a transfer without obtaining the other spouse's signature or authorization. Both lines of cases agree that a deed of trust, signed by only one spouse, cannot create a valid lien on the entire community real property; the nonconsenting spouse has authority to void the lien on his or her one-half interest in the property. The cases differ, however, on whether the nonconsenting spouse has the authority to void the lien entirely. (See Mitchell, supra, 110 Cal.App.3d 220, 167 Cal.Rptr. 760; Andrade Development Co. v. Martin (1982) 138 Cal.App.3d 330, 187 Cal.Rptr. 863 (Andrade ).)

The conflict in the Court of Appeal cases cannot be understood or resolved without examining the history of section 5127. The language of section 5127 is substantially derived from that found in former section 172a, which dates back to 1917. The history of former section 172a and section 5127 reveals the evolution of the recognition of the wife's equal status in California community property law. As will be seen, however, the evolving recognition of the wife's equality has not always been reflected in the case law.

At the beginning of the California community property system in 1849, the husband was regarded as the full and complete owner of the community property and had the exclusive management and control of the community property. The wife's interest was an expectancy which was limited to the rights she would accrue only if she survived the termination of the marriage. (See Prager, The Persistence of Separate Property Concepts in California's Community Property System (1977) 24 UCLA L.Rev. 1, 35.) The first provision of our statutory law on the subject of the rights of the husband and wife in community property was section 9 of the Community Property Act of April 17, 1850 (Stats. 1850, ch. 103, § 9, p. 254). Under section 9 of the Act "[t]he husband shall have the entire management and control of the common property, with the like absolute power of disposition as of his own separate estate."

Construing the Community Property Act, early cases held that, during the marriage, the estate of the husband in the community property was absolute, while that of the wife was a mere expectancy, as that of an heir. (See Spreckels v. Spreckels (1916) 172 Cal. 775, 158 P. 537 (Spreckels ).) Section 9 of the Community Property Act of 1850 remained in force until the enactment of the Civil Code in 1872. The substance of section 9 of the act was covered by section 172 of the Civil Code. In 1891, section 172 was amended to read, "[t]he husband has the management and control of the community property, with the like absolute power of disposition, other than testamentary, as he has of his separate estate; provided, however, that he cannot make a gift of such community property, or convey the same without a valuable consideration, unless the wife, in writing, consent [sic] thereto."

Interpreting the 1891 proviso, the Spreckels court upheld the concept of the husband's almost absolute power over the community property. According to the court, the proviso did not "vest in the wife, during the marriage, any present interest or estate in the community property given away by the husband without her written consent.... If [the proviso] confers upon her, during the marriage, any right respecting such gifts, it is nothing more than a right to revoke the gift and, if necessary, sue to recover the property, not as her separate estate, but to reinstate it as a part of the community property, with the title vested in the husband and subject to sale by him, as before." (Spreckels, supra, 172 Cal. at p. 782, 158 P. 537.)

Dargie v. Patterson (1917) 176 Cal. 714, 169 P. 360 (Dargie ) addressed the question left unanswered by Spreckels, i.e., whether the wife could avoid a deed in its entirety, or "only so far as is necessary to protect her rights." (Id. at p. 718, 169 P. 360.) In Dargie the husband had made a gift of community real property during the marriage without the knowledge or consent of the wife. After the husband died, the wife filed an action to set aside the transfer. We held that "the only logical conclusion is that the wife's right to assail the conveyance where, as here, the action is brought after the husband's death, is limited to an undivided half of the property." (Ibid.) The rationale for the decision was that because the husband had died, his testamentary power existed and the widow need not be given greater rights than she would have enjoyed if the gift had never been made. Consequently, we invalidated the transfer only as to the wife's portion of the community property.

In 1917 former section 172a was added to the Civil Code. (Stats.1917, ch. 583, § 2, p. 829.) Former section 172a continued to uphold the husband's sole management and control of the community real property, but, significantly, provided that "the wife must join with him in executing any instrument by which such community real property or any interest therein is leased for a longer period than one year, or is sold, conveyed, or encumbered...."

The concept of a wife's interest in community property as being no more than a mere expectancy was abrogated in 1927. Legislation enacted in 1927 (Stats.1927, ch. 265, § 1, p. 484) gave the wife a "present, existing, and equal interest" in the community property. (See Byrd v. Blanton (1983) 149 Cal.App.3d 987, 992, 210 Cal.Rptr. 458.) This enactment, however, was...