Estate of MacDonald

• Decision Date: 09 August 1990
• Docket Number: No. S012304,S012304
• Citation: 794 P.2d 911,272 Cal.Rptr. 153,51 Cal. 3d 262
• Court: California Supreme Court
• Parties: , 794 P.2d 911 In re ESTATE OF Margery M. MacDONALD, Deceased. Judith BOLTON, as Executrix, etc., Contestant and Appellant, v. Robert F. MacDONALD, Claimant and Respondent.

Page 153

272 Cal.Rptr. 153

51 Cal.3d 262, 794 P.2d 911

In re ESTATE OF Margery M. MacDONALD, DeceasedJudith BOLTON, as Executrix, etc., Contestant and Appellant, v.Robert F. MacDONALD, Claimant and Respondent.

No. S012304.

Supreme Court of California In Bank.

Aug. 9, 1990.

As Modified Sept. 6, 1990.

Hersh & Hersh, Jill Hersh, Dan Bolton and Philip D. Humphreys, San Francisco, for contestant and appellant.

McClintock & Quadros, Gordon E. McClintock, Brent A. Babow and William A. Reppy, Jr., Durham, N.C., for claimant and respondent.

PANELLI, Justice.

Civil Code section 5110.730, subdivision (a)(section 5110.730(a)) provides: "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."

In this casewe are asked to decide what type of writing is necessary to satisfy the statute's requirements.In our view, section 5110.730(a) must be construed to preclude reference to extrinsic evidence in the proof of transmutations.Accordingly, we conclude a writing is not an "express declaration" for the purposes of section 5110.730(a) unless it contains language which expressly states that a change in the characterization or ownership of the property is being made.Thus, we affirm the judgment of the Court of Appeal.

FACTS AND PROCEEDINGS BELOW

Decedent Margery M. MacDonald ("Margery" or "decedent") married respondentRobert MacDonald ("Robert") in 1973.Both had been married previously, and each had children by a previous spouse.Robert was president of R.F. MacDonald Company("the company"), where he participated in a defined benefit pension plan.

In August 1984, Margery learned that she had terminal cancer, and she and Robert made plans to divide their property into separate estates.Wishing to leave her property to her own four children, Margery divided the couple's jointly held stock, sold her half, and placed the proceeds in her separate account.The MacDonalds thereafter consulted with their personal accountant and attorney regarding the division of their jointly held real property.These properties were appraised and divided; Robert paid Margery $33,000 to equalize the division.

Robert was covered by a company defined benefit pension plan which came into existence on January 1, 1977.The designated beneficiary of Robert's interest in the pension plan was a revocable living trust he had established in 1982.The terms of the trust left the bulk of the corpus to Robert's children.In November, 1984 Robert turned 65 and his defined pension plan was terminated.On March 21, 1985, Robert received a disbursement of $266,557.90 from the plan.It is undisputed that Margery possessed a community property interest in the plan's benefits.¹ The pension funds were not divided or otherwise accounted for at the time of the couple's previous division of their jointly held assets.These community funds were deposited into IRA accounts at three separate financial institutions.

The IRA accounts were opened solely in Robert's name, the designated beneficiary of each being the revocable living trust which had been designated as beneficiary of the pension plan.The three form documents prepared by the financial institutions for signature by IRA account holders, each entitled "Adoption Agreement and Designation of Beneficiary"("adoption agreements"), provided space for the signature of a spouse not designated as the sole primary beneficiary to indicate consent to the designation.² Robert signed the adoption agreements, indicating his agreement to the terms of the IRA account agreements and designating his trust as beneficiary; Margery signed the consent portions of the adoption agreements ("consent paragraphs").

Margery died on June 17, 1985, bequeathing the residue of her estate to her four children.Executrix Judith Bolton filed a petition to determine title to personal property (Prob.Code, § 851.5), seeking to establish decedent's community property interest in the funds held in the IRA accounts.The trial court found that, in signing the consent paragraphs of the adoption agreements, decedent intended to waive any community property interest in the pension funds and to transmute her community property share of those funds into Robert's separate property.The court denied Bolton's petition, ruling that decedent had either waived her community property interest in the pension funds or, alternatively, transmuted it to Robert's separate property.

The Court of Appeal reversed, holding that the adoption agreements did not satisfy section 5110.730(a).(The court also declined to apply the "terminable interest rule" to the pension funds.Robert's petition for review does not challenge the Court of Appeal's opinion in this regard.)A dissenting justice argued that because decedent, in signing the consent paragraphs, had taken "specific, clear and final [action to] accomplish both [a] transfer and a subsequent transmutation[, t]he language and purpose of the statutory requirement were fully satisfied."

We granted review to construe section 5110.730(a).

DISCUSSION

It is undisputed that Margery possessed a community property interest in Robert's pension funds at the time they were disbursed to him.However, in California, married persons may by agreement or transfer, with or without consideration, transmute community property to separate property of either spouse.³

In this case, the trial court made a factual finding that "[d]ecedent, in executing the Adoption Agreement[s] for the three IRA's, intended to waive any community right she had in those IRA's and in fact to transmute her share of that community property asset to the separate property of Respondent."However, we defer to a trial court's factual findings only when they are supported by substantial evidence.(Crawford v. Southern Pacific Co.(1935)3 Cal.2d 427, 429, 45 P.2d 183.)

Our close review of the record reveals that no substantial evidence supported the finding that Margery intended a transmutation.⁴The Court of Appeal incorrectly stated that Robert presented his own testimony and that of decedent's accountant as to decedent's state of mind when she signed the adoption agreements.In fact, there is absolutely no record evidence relating to Margery's intentions or state of mind when she signed the adoption agreements.The only testimony presented as to her state of mind during her estate planning activities relates to when she and her husband arranged an equal division of their jointly held real properties.The couple's accountant testified that she did not assist them in the division of any other assets.

Even if the trial court's findings as to Margery's intent were supported by substantial evidence, however, they would not support a finding of transmutation in this case.The statute providing for transmutation by transfer is by its own terms "[s]ubject to Sections 5110.720 to 5110.740, inclusive"(Civ.Code, § 5110.710), including, obviously, section 5110.730(a).Section 5110.730(a) invalidates attempts to transmute real or personal property unless certain conditions are met.We must therefore determine whether Margery's actions, whether or not they were intended to transfer her interest in the pension funds, were effective under section 5110.730(a) to transmute those funds from community property to Robert's separate property.We are of the opinion that they were not.⁵

Section 5110.730(a) requires that a valid transmutation be made, not just in writing, but 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."(§ 5110.730(a)emphasis added.)There is no dispute that the consent paragraphs in the adoption agreements, and decedent's signatures thereon, are "made in writing."These writings are manifestly "made, joined in, consented to or accepted by the spouse whose interest in the property is adversely affected," viz., decedent.Thus, the sole remaining issue to be decided is whether they constitute "an express declaration" for the purposes of section 5110.730(a).

It is a fundamental rule of statutory construction that a court"should ascertain the intent of the Legislature so as to effectuate the purpose of the law."(Select Base Materials, Inc. v. Board of Equalization(1959)51 Cal.2d 640, 645, 335 P.2d 672.)In determining such intent "[t]he court turns first to the words themselves for the answer."(People v. Knowles(1950)35 Cal.2d 175, 182, 217 P.2d 1.)

It is not immediately evident from a reading of section 5110.730(a) what is meant by the phrase "an express declaration."Examination of the words of the statute and their arrangement reveals only that the "express declaration" called for is to be one "by" which "[a] transmutation of real or personal property" is "made."The statute does not state what words such an "express declaration" must include, what information it must convey, or even what topics it should discuss.

Since the words of section 5110.730(a) themselves, including the phrase "an express declaration," are unclear and ambiguous, it is necessary to resort to other indicia of the intent of the Legislature to determine what meaning the statute should be given.(Lungren v. Deukmejian(1988)45 Cal.3d 727, 735, 248 Cal.Rptr. 115, 755 P.2d 299;In re Lance W.(1985)37 Cal.3d 873, 886, 210 Cal.Rptr. 631, 694 P.2d 744.)In doing so, we consider the historical circumstances of the statute's enactment, as well as its legislative history.(California Mfrs. Assn. v. Public Utilities Comm.(1979)24 Cal.3d 836, 844, 157 Cal.Rptr. 676, 598 P.2d 836.)

Section 5110.730(a) was adopted in 1984.(Stats.1984, ch. 1733, § 3, p. 6302.)Both parties refer to a 1983 report of the California Law Revision Commission("Commission") to ascertain the intent of the...