In re Marriage of Benson

• Decision Date: 11 August 2005
• Docket Number: No. S122254.,S122254.
• Court: California Supreme Court
• Parties: In re the MARRIAGE OF Diane L. and Douglas BENSON. Diane L. Benson, Appellant, v. Douglas Benson, Respondent.

32 Cal.Rptr.3d 471

36 Cal.4th 1096

116 P.3d 1152

In re the MARRIAGE OF Diane L. and Douglas BENSON.

Diane L. Benson, Appellant, v. Douglas Benson, Respondent.

No. S122254.

Supreme Court of California

August 11, 2005.

Ricks & Associates, Gary R. Ricks and Brigham J. Ricks, Santa Barbara, for Appellant.

Griffith & Thornburgh, John R. Rydell II and John C. Eck, Santa Barbara, for Respondent.

BAXTER, J.

Family Code section 852, subdivision (a)¹ (section 852(a)) provides that a "transmutation," or an interspousal transaction changing the character of community or separate property (id. at § 850), "is not valid unless made in writing by an express declaration" approved by the adversely affected spouse. In Estate of MacDonald (1990) 51 Cal.3d 262, 264, 272 Cal.Rptr. 153, 794 P.2d 911 (MacDonald), this court held that a writing satisfies the "express declaration" requirement only if it states on its face that a change in the character or ownership of the subject property is being made. MacDonald made clear that this construction of section 852(a) precludes the use of "extrinsic evidence" to prove that the writing effected a transmutation. (MacDonald, supra, 51 Cal.3d at p. 264, 272 Cal.Rptr. 153, 794 P.2d 911.) MacDonald explained that the Legislature, in enacting these requirements and abrogating prior case law, sought to increase certainty and honesty in marital property disputes, and to decrease the burden on the courts in resolving such matters.

In this dissolution case, Douglas Benson (Husband) claims he conveyed to Diane Benson (Wife) his community property interest in their home after she orally promised to waive, in writing, her community property interest in Husband's retirement accounts. No such writing was ever made. Despite section 852(a) and MacDonald, supra, 51 Cal.3d 262, 272 Cal.Rptr. 153, 794 P.2d 911, the lower courts ruled that Husband's performance of his part of the bargain, as evidenced by the deed he signed in Wife's favor, served as an adequate substitute for Wife's express written statement changing the retirement accounts into Husband's separate property.

We disagree. Section 852(a) does not operate like the general statute of frauds (Civ.Code, § 1624, subd. (a) (Civil Code section 1624(a))), in which the requirement of a basic writing is subject to an implied exception for "part performance" of the contract's terms. Even assuming Husband's transfer of the deed constituted part performance of Wife's promise to transmute the retirement accounts, section 852(a) requires such agreements to be both written and express, and seeks to prevent transmutations under circumstances like those present here. By insisting upon a special writing expressly changing the character of the disputed property, MacDonald all but decided that section 852(a) is not satisfied where no such writing exists at all. Thus, the lower courts erred in accepting Husband's transmutation claim and in denying Wife a community property interest in his retirement plans. We will reverse the judgment.

FACTS

The parties married in 1983. They subsequently had two children, and accumulated property together. Separation occurred in 2000. In 2001, Wife petitioned for dissolution of the marriage. At trial, the parties litigated various issues, including the division of property. The record contains the following evidence.

During the marriage, Husband worked full-time as a truck driver for a food wholesale company. Through his employer, he participated in a stock ownership plan, and contributed to a 401(k) retirement plan. Wife worked part-time as a nurse at a hospital. She also had a retirement plan through her employer.

At the start of the marriage, Wife's father, Dr. Robert L. Maahs, owned the Santa Barbara house in which the couple lived. Husband and Wife contributed some money each month towards use of the house. However, it appears these payments did not cover the mortgage bill or reflect the fair rental value of the property.

Wife is the beneficiary of an irrevocable trust. Her father is the trustee. During the marriage, and apparently for his own estate planning purposes, Wife's father gave the couple a 100 percent ownership interest in the Santa Barbara house. This transfer occurred incrementally, over several years. At some point during this process, Wife's father asked the couple to convey the house to the trust. They agreed. Hence, in two transfers occurring in late 1996 and early 1997, the couple signed grant deeds giving the trust a 100 percent ownership interest in the house.

The parties disputed the circumstances surrounding the transfer of the house to Wife's trust. Husband offered two different versions of events in the trial court, neither of which matched Wife's account.

Initially, Husband maintained that he acquired a community property interest in the house, and that he did not surrender this interest by deeding the property to Wife's trust. To enforce this claim, Husband successfully moved before trial to join the trustee, Wife's father, as a party to the dissolution proceeding. However, while trial was underway, Husband settled all claims against the trust for an agreed-upon amount. The court promptly dismissed the trustee from the case with prejudice.

Later, Husband testified that an oral agreement between the parties changed the community character of both the house and his retirement accounts, as follows: In 1996, when the couple signed the first deed in favor of Wife's trust, Husband agreed to forgo any community interest in the house and Wife agreed to forgo any community interest in his retirement accounts. Wife said she would sign a writing transforming Husband's retirement accounts into his separate property. However, no writing was ever made. Husband knew that such a document could easily have been prepared and signed at the same time he deeded the house to Wife's trust. He did not press the issue because he trusted Wife, and because they had no plans to divorce at the time. Husband admitted at trial that he failed to mention any oral transmutation agreement or to identify the retirement accounts as separate property during discovery and other pretrial proceedings.

Wife denied making any promise to waive or change her community interest in Husband's retirement accounts. She testified that such conversations were limited to the house, and to her father's request that it be conveyed to the trust. Wife reportedly told Husband that they should repay her father's generosity by returning the house to him as trustee.

Consistent with testimony on both sides, the trial court concluded that Husband relinquished his community interest in the house when he deeded it to Wife's trust. However, the court also agreed with Husband that Wife relinquished her community interest in his retirement accounts. The court reasoned that section 852(a)'s writing requirement is subject to implied exceptions that traditionally have been applied in other statutory contexts. Under this approach, Husband's act of deeding the house to the trust constituted "part performance" of the oral transmutation agreement he described, and permitted its enforcement against Wife. In all other respects, the trial court's judgment resolved property, support, and child custody issues not relevant here.

The Court of Appeal affirmed the judgment. The appellate court adopted and applied the reasoning of the trial court.

In seeking review, Wife claimed the lower courts erred in finding a valid transmutation of Husband's retirement accounts under section 852(a), and in denying her a community property interest in those accounts. We now address Wife's concerns.

DISCUSSION

The characterization of property as community or separate determines its division upon dissolution of the marriage. Each spouse owns a one-half interest in all community property. (§ 751.) In general, community property is divided equally in the aggregate when the marriage ends. (§ 2550; see §§ 2600-2604.) However, separate property is not subject to a similar division, and belongs only to the owner spouse. (§ 752.)

In determining the community or separate nature of property, the statutory scheme starts from the premise that all property acquired during the marriage is community property. (§ 760.) As pertinent here, this general rule, or "presumption" (§ 802), covers both real property (§ 760) and employee retirement plans. (§ 2610; In re Marriage of Lehman (1998) 18 Cal.4th 169, 177, 74 Cal.Rptr.2d 825, 955 P.2d 451; In re Marriage of Brown (1976) 15 Cal.3d 838, 841-842, 126 Cal.Rptr. 633, 544 P.2d 561.) By its own terms, the definition of community property in section 760 applies "[e]xcept as otherwise provided by statute." It therefore exempts property defined as separate under other provisions. (E.g., §§ 770 [property acquired by gift or inheritance], 771 [earnings and accumulations while living separate and apart].)

Individuals may alter their property rights under these statutes. (§ 1500.) One set of rules authorizes and regulates contracts made by prospective spouses that take effect upon their marriage. (§§ 1600-1617.) Critical here is the separate scheme governing transactions between spouses that "transmute" or change the character of property during an ongoing marriage. (§§ 850-853.)

In particular, section 850 allows contracts or other transfers transmuting the separate property of one spouse to either the separate property of the other spouse or the community property of both spouses. Community property also may become separate property under this section. Consideration may, or may not, be exchanged. (Ibid.) However, a companion statute, section 852(a), imposes certain requirements.² Section 852(a) states that 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."

Here, there is no dispute that Husband's...