In re the Marriage of Richard and Roberta Kubek
Presented by Ron J. Anfuso, CPA, ABV, CFF, CDFA, FABFA
Ron’s Corner
In 2015, we presented the appeal of In re Marriage of Dawnel and Frank Bonvino. The appeal of this case reversed the trial court’s decision, which concluded that Frank had not transmuted his separate property to the community and he failed to act in good faith and adequately explain the effects of a quitclaim deed he encouraged Dawnel to sign. His entire separate property funds were sufficiently traced to overcome the burden of proof that was required by the assumption that all property belonged to the community if it was acquired during the marriage.
The only evidence that the property was community was Dawnel’s testimony concerning a verbal agreement by the parties to add her to the title. However, there was no expressed declaration made, joined in, consented to, or accepted by Frank, whose interest in the property had been adversely affected by the trial court’s decision.
The Appeal Court found it was clear that Frank’s traceable separate property investment retained its distinct property character, and both separate property and community property interests were evidenced by the formula established in Auguth and Moore, earlier cases that the Appeal Court referred to in making its decision. Thus, the Court of Appeal remanded the trial court to calculate the separate and community interests using the Moore/Marsden Formula. Via the Moore/Marsden calculation, Frank’s share based on the down payment and payoff of the home resulted in an apportioned interest in the property.
The problem with the Bonvino case was that the Court of Appeal failed to recognize the residence as community property, and held that since Husband had not transmuted his separate property, he still owned it and the pro rata share of the asset was purchased with it. In addition, since the quitclaim deed was invalid and the property was acquired with community property credit, it was community property into which a down payment was made with separate property. This entitled the separate estate to be reimbursed, not a pro tanto interest. The result was an opinion that tipped 30 years of consistent case law off its axis.
The appeal we provide here was a dispute between parties concerning a commercial manufacturing facility that Husband had purchased in his name only while married to Respondent. This case had similarities to the Bonvino case and was considered by the Court of Appeal in making its decision.
If you have questions concerning the case presented here, please contact me.
Ron
Is Bonvino’s Theory Still Lurking?
An appeal of the trial court’s decision arose from a dispute between Richard and Roberta Kubek regarding the characterization of a commercial manufacturing building that Richard purchased while married to Roberta. The trial court had issued a statement of decision and a series of orders, including that the building was community property but that Richard had a right to reimbursement of his separate property contribution to the purchase of the building. Richard appealed, contending the building was his separate property.
Richard and Roberta were married in April of 2001. In February 2015, they separated, and Roberta petitioned to dissolve the marriage. In January 2021, their marital status was terminated.
Background
The facts of the trial included the testimony of Richard and Roberta considering the characterization of Richard’s manufacturing building. Richard ran a computer parts assembly business that he started in 1995. In 2012, Richard began looking for a larger production facility to run his growing business in the Stockton, California area.
Richard testified that before the building was purchased, the parties discussed separation and agreed they should keep their businesses separate. (Roberta owned a female fitness gym.) To that end, Richard purchased the building in his name only with the intent of keeping it as separate property. They agreed that the building would be in his name only. Richard also testified that Roberta did not want “to be involved” in the purchase and that she never attended meetings with his real estate agent.
Roberta testified that they discussed renting the building in the future for their retirement. She also testified that although she did not have a full understanding of the purchase, she trusted Richard would do what was best for the family. Thus, she signed the deed.
The building was purchased for $561,000 with a $56,000 down payment. The remainder was financed through a Small Business Administration loan. On October 12, 2011, the deed was recorded. Richard testified that, as of February 2021, the property value was estimated at $1.65 million.
On February 21, 2021, the trial court rendered its final statement of decision. The court opined that Roberta had a community property interest in the building. Regarding the interspousal transfer grant deed, the court opined the property met the technical form requirements of a valid transmutation under Family Code Section 852. The court also noted that the case was subject to examination for undue influence under Section 721, subdivision (b). As a result of the testimony, the court concluded that a presumption of undue influence did exist. The court stated that Richard had gained an unfair advantage over Roberta when she signed the interspousal transfer grant deed, as it gave Richard full ownership of the building. In addition, the court observed that Roberta’s testimony supported the finding that she did not sign the interspousal transfer grant deed freely, voluntarily, and with full knowledge of the facts and understanding of the effect of the transaction.
The statement of decision ended with the following conclusions: 1) the building should be characterized as community property, 2) Richard was entitled to the down payment reimbursement of the amount he used to purchase the property, and 3) pursuant to Section 2550 et seq., all community property should be divided equally.
On March 9, 2021, Richard filed a motion requesting the court to certify that there was probable cause for an immediate appellate review of the orders contained in the statement of decision. The motion was deemed granted by operation of law pursuant to California Rules of Court, Rule 5.292 (b)(3).
Richard’s Contention for Appeal
Richard contended that the trial court erred in characterizing the building as community property because he acquired it with separate property funds. He asserted that if Roberta had no property interest in the building, she then would have given up nothing by executing the deed. Richard argued that the validity of the interspousal transfer grant deed was irrelevant and that the court erred in analyzing the question of whether the building was community property. Alternatively, Richard maintained that because the interspousal transaction was free from undue influence, it validly transmuted the building from community property to his separate property.
In the appeal, did the Appellate Court agree with the trial court that the building was entirely community property? In the following issue of Forensic Accounting Today, I will reveal the Appellate Court’s decision concerning the community property contention and what precedents were relied upon in drawing its conclusion.
