Marriage of Neal, In re

• Decision Date: 16 March 1984
• Citation: 200 Cal.Rptr. 341,153 Cal.App.3d 117
• Court: California Court of Appeals Court of Appeals
• Parties: In re the MARRIAGE OF Patricia Jesse NEAL and Henry D. Neal. Patricia Jesse NEAL, Respondent, v. Henry D. NEAL, Appellant. A023421.

Page 341

200 Cal.Rptr. 341

153 Cal.App.3d 117

In re the MARRIAGE OF Patricia Jesse NEAL and Henry D. Neal.

Patricia Jesse NEAL, Respondent, v. Henry D. NEAL, Appellant.

A023421.

Court of Appeal, First District, Division 5, California.

March 16, 1984.

Rehearing Denied April 11, 1984.

Hearing Denied May 24, 1984.

James T. Danaher, Danaher & Klynn, W. Richard Such, Palo Alto, for respondent.

David S. Maguire, Germino, Layne, Brodie, Runte, Maguire & MacKay, Palo Alto, for appellant.

KING, Associate Justice.

In this case we hold that a residence owned by a putative spouse prior to marriage is her separate property, but is presumed to be the community property of the parties when, during the marriage, she places title to the property in joint tenancy with her spouse. This presumption cannot be rebutted by an oral agreement between the parties that the property is to remain her separate property. Thus, adding a spouse's name in joint tenancy to title of pre-marital separate property causes it to become "property acquired by the parties during marriage in joint tenancy form" pursuant to Civil Code section 4800.1. We further hold, for purposes of tracing and valuing the separate property contribution of the transferring spouse which must be reimbursed pursuant to Civil Code section 4800.2, that value is fixed by determining the value of her separate property interest as of the date of the property's conversion into joint tenancy, absent any other separate property "contributions to the acquisition of the property" as defined in Civil Code section 4800.2.

When Patricia Jesse Neal and Henry D. Neal were married on July 1, 1976, unbeknownst to Patricia, Henry was already married. In a judgment annulling the marriage on this ground, the court confirmed certain assets to Patricia as her separate property, finding there was an oral agreement between the parties that although title to Patricia's separate property was placed in joint tenancy with Henry, it was to remain her separate property. At the time of the trial court's decision, the controlling law had been provided by our Supreme Court's decision in In re Marriage of Lucas (1980) 27 Cal.3d 808, 166 Cal.Rptr. 853, 614 P.2d 285 [acquisition of residence in joint tenancy during marriage raises presumption of community property in absence of agreement or understanding to the contrary]. Subsequently, in part to overturn the holding in Lucas, Assembly Bill No. 26 was enacted. Because this legislation is applicable to this case, ¹ we reverse At the time of the marriage Patricia owned a house in Redwood City. It was undisputably her separate property. In 1980 the house was refinanced to obtain a $90,000 loan. The lender required Patricia to transfer title to herself and Henry as joint tenants. Both parties' incomes were stated on the loan application. From the proceeds of the loan a $21,500 down payment was made on a house in Fremont, title to which was also taken in joint tenancy, $10,000 was used to buy a Lincoln automobile, furniture was purchased for the Redwood City house, and other payments were made not pertinent to the present appeal.

the judgment in part and affirm it in part.

Patricia testified that she and Henry had orally agreed when they married that "His assets were for his kids. My assets were for my kids." She testified that the Fremont home was purchased so that both her children would have houses: "we had discussed the fact that the kids would never be able--my children would never be able to buy houses in the Bay Area and to proceed with that and that way each one of them would have a house and they could take over the loan payments eventually." She also testified that "the original intent of the thing was to buy a house for each one of those kids and they were my kids, because they could not afford to get anything in this day and age," that "[i]t was understood that it was for the children," and that the parties had discussed signing the Fremont deed over to Patricia's children when the children became of age. Patricia's brother testified that in a 1976 conversation at which Henry was present, "the conversation came out" that Henry's assets "would be left for the children and Pat also said that her home was for her children and herself."

The parties separated in August 1981. On July 15, 1982, Patricia filed a petition for nullity of marriage. The court determined that the Redwood City house was Patricia's separate property, declaring in a statement of decision that "there was an oral agreement that this property be retained as petitioner's separate property, and the joint tenancy deed was created solely for the purpose of refinancing the property." The court also found that the Lincoln automobile and the furniture acquired during the marriage, having been purchased with the proceeds of the loan, were Patricia's separate property. Finally, the court found the Fremont house to be quasi-marital property, ² but ordered Henry to execute a note and deed of trust in favor of Patricia in the amount of $21,500, the amount of the loan proceeds from refinancing her Redwood City house which were used for the down payment on the Fremont house. ³

Henry challenges the sufficiency of the evidence to support the court's determination that the parties intended the Redwood City house would remain Patricia's separate property. He argues that Civil Code section 4800.1 ⁴ now governs this case ⁵ and requires a writing to rebut the presumption of community property where property is acquired during marriage in joint tenancy, and that the judgment here must be reversed for want of such a writing. ⁶

Section 4800.1, establishes a presumption that "property acquired by the parties during marriage in joint tenancy form is presumed to be community property." (Emphasis added.) The Redwood City house was acquired by Patricia as her separate property before the marriage, but a change in the form of title to joint tenancy with Henry took place during the marriage upon the insistence of the lending institution refinancing the property. Thus, the issue before us is whether section 4800.1 is applicable to the Redwood City house. A review of the legislative history of Assembly Bill No. 26 adopting section 4800.1 discloses that the bill as originally introduced upon the recommendation of the California Law Revision Commission ⁷ was applicable to joint tenancy property "wherever situated and whenever acquired," but as ultimately enacted the statute is applicable only to "property acquired by the parties during marriage in joint tenancy form." ⁸ If section 4800.1 applies to the Redwood City house, the holding in Lucas is inapplicable: Lucas dealt with the presumption deleted from section 5110 by Assembly Bill No. 26 that a single-family residence acquired in joint tenancy during marriage was presumed to be community property. The Legislature in passing Assembly Bill No. 26 enacted sections 4800.1 and 4800.2 for the purpose of changing the rule in Lucas. ⁹

Although the foregoing sequence of amendments could be construed as reflective of legislative intent that section 4800.1 not apply to separate property of one spouse owned prior to marriage which is placed in joint tenancy with the other spouse during the marriage, there is a direct declaration of legislative intent to the contrary. As it passed the Assembly, Assembly Bill No. 26 provided that the presumption in section 4800.1 was applicable to property "acquired by the parties during marriage in joint tenancy form." It then passed the Senate with the same language. The Chairman of the Senate Judiciary Committee, when reporting on the bill on the floor of the Senate, moved that a revised report of the California Law Revision Commission Concerning Assembly Bill No. 26 be printed in the Senate Journal as evidence of legislative intent. ¹⁰ That report stated, in comments about section 4800.1 in its final form, "It also governs property initially acquired before marriage, the title to which is taken in joint tenancy form by the spouses during marriage. The measure of the separate property contribution under Section 4800.2, in such a case, is the value of the property at the time of its We therefore conclude the change in the form of title of the Redwood City house caused a presumption to arise pursuant to section 4800.1 that Patricia made a gift of the house to the community, and this presumption was rebuttable only by a writing. ¹² The Redwood City house, which Patricia owned as her separate property prior to marriage, was thus converted into community property when it was placed into joint tenancy, even though placing it in joint tenancy was required by the lending institution refinancing the property. Additionally, the measure of the value of Patricia's separate property contribution to be reimbursed to her pursuant to section 4800.2, is the value of the separate property equity in the property as of the date of its conversion into joint tenancy, to be increased by any other separate property "contributions to the acquisition of the property" as defined in section 4800.2.

conversion to joint tenancy form." (83 Sen.J. (1983 Reg.Sess.) pp. 4865-4866.) ¹¹

Henry contends that the $90,000 obtained from refinancing Patricia's Redwood City house was a community asset because it was granted on the strength of both parties' earnings, so that the subsequently acquired property characterized by the court as Patricia's separate property (the down payment on the Fremont house, the Lincoln automobile, and the furniture) was actually quasi-marital property, and the $21,500 lien upon the Fremont house (representing Patricia's separate property contribution to the purchase of that house) should not have been imposed. This argument lacks merit: the security for the loan pursuant to a first deed of trust (the Redwood City house) was Patricia's separate property, and "funds procured by the hypothecation of separate property of a spouse...