In re the Marriage of Richard and Roberta Kubek
Presented by Ron J. Anfuso, CPA, ABV, CFF, CDFA, FABFA
Ron’s Corner
Welcome to part two of Is Bonvino’s Theory Still Lurking? If you have not read Part 1, I suggest you do. You can visit our website and download the PDF at https://anfusocpa.com/forensic-accounting-newsletters if you do not have a copy. It’s newsletter issue 76.
For background information, you might also wish to review our newsletters on the Bonvino case, Forensic Accounting Today issues 34 and 35. This was a similar case to the “Kubek” case addressed in this and our previous newsletter.
Because this case has not been published, I changed the names of the parties involved as well as the names of the entities.
In the Bonvino case, the Court of Appeal failed to recognize the residence as community property. The Court held that since Husband had not transmuted his separate property, he still owned it, as well as the pro rata share of the asset that was purchased.
The appeal that I discussed here was a dispute between parties concerning a manufacturing facility that Husband had purchased in his name only while married to Respondent. The Bonvino case was considered by the Court of Appeal in making some decisions on this case.
If you have questions or comments concerning the “Kubek” or Bonvino case, I welcome you to contact me.
Ron
Is Bovino’s Theory Still Lurking? (Part 2)
Richard’s Contentions for the Appeal
Richard contended in the appeal 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 would have given up nothing by executing the deed. Richard also claimed that the validity of the interspousal transfer grant deed was irrelevant and that the interspousal transaction was free from undue influence. If the Appellate Court were to agree, the facility’s character effectively transmuted from community property to husband’s separate property.
The Community Property Presumption
“The character of property as separate or community is determined at the time of acquisition.” (See v. See (1966) 64 Cal.2d 778, 783) superseded by statute on other grounds as
stated in In re Marriage of Perkal (1988) 203 Cal.App3d 1198, 1201-1202. Property acquired during the marriage is presumed to be community property under Section 760, while property acquired prior to marriage or after separation, or at any time by gift, bequest, or devise, is separate property. (§§ 770, subd. (a)771, subd.).
.The presumption that property acquired during a marriage is always community property is rebuttable, which was ruled on based on my testimony in the case of (In re Marriage of Ciprari (2019) 32.CalApp 5th 83, 91). It may be overcome by tracing the source of the funds used to acquire the property to separate property. (In re Marriage of Bonvino (2015) 241 Cal.App.4th 1411, 1423).
“Property that a spouse purchased with separate property funds continues to be separate property. Property that is separate at the time of acquisition also remains separate, except for any increase in value due to community efforts or contributions.” (Bonvino, supra, 241 Cal.App.4th at p. 1423).
Richard argued that the trial court erred in not considering the building as separate property because the down payment came from a gift from his mother. Roberta claimed that the down payment was made with community funds they received from Richard selling their gold coins. The Court resolved this conflict in favor of Richard, thus entitling him to the deference. (See Bonds, Supra, 24 Cal.4th at p. 31). Therefore, the record supported the Court’s finding that Richard used separate property funds for the down payment.
Richard conceded that the building was financed by a loan during the marriage, thus presuming the property to be community. (In re Marriage of Grinius (1985) 166 Cal.App3d 1179, 1187). “There is a rebuttal presumption that property acquired on credit during marriage is community property),” (superseded by statute on the grounds as stated in In re Marriage of Steinberger (2001) 91 Cal.app.4th 1449, 1466). Consequently, without satisfactory evidence of the lender’s intent, the general presumption prevailed.
Transmutation
“A married person may transmute the character of property from separate to community or from community to separate by agreement or transfer, with or without consideration, but the transmutation must meet the statutory requirements to be valid.” (Bonvino, supra, 241 Cal.App.4th at p. 1428). A valid transmutation of property requires an express declaration in writing that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected. (Family Code § 852, subd.). Even if it complies under Section 721, it still calls for an examination of the transaction for undue influence. Thus, the presumption is undue influence when a transaction provides an advantage to one spouse over the other.
The Court of Appeal found the trial court’s ruling that the building was entirely community property was not supported by substantial evidence. The evidence revealed that the building’s purchase price was both Richard’s separate property (the down payment) and community property (the loan proceeds). Additionally, the record failed to establish that there was a transmutation of either the separate or community property interest. Therefore, the property interest retained its character due to Richard never signing a written declaration transmuting his separate property to the community.
The Appellate Court’s Ruling
As a result, the Court of Appeal found the lender intended to rely on community property, thus the loan proceeds were community. The Appellate Court reversed the order of reimbursement due to there being no evidence that Richard purported to transmute his separate property interest into community property, and he retained a separate property pro rata interest in the building. The matter was remanded to the trial court for further proceedings consistent with these opinions.
