When a married couple in California purchases a home or other asset, a provision of the Family Code says it is presumed to be community property.

But what if the home is purchased with only one spouse’s funds and title is not jointly held? A different law may come into play – and sometimes the two statutes are in direct conflict.

That’s what happened in a case recently decided by the California Court of Appeal (Wall v Wall).

Benny Wall died in 2016, at age 77. He had two children from his first marriage, which court testimony suggests was not an entirely happy one. In 1998 he lost his home to foreclosure and had to move in with his adult daughter and her husband.

In 2006, Benny inherited $44,000 from his father. Benny told his children he wanted to use the inheritance to buy a home in the future.

Then, in 2007, Benny met Cindy. The two wed in 2008 and the couple lived with Benny's daughter in her home until 2010.

Because Benny's first marriage ended in a bitter divorce, Benny was determined not to be taken advantage of again. As a result, Benny and Cindy did not commingle their assets or hold joint accounts.

Then, in 2010, Benny bought a home using $99,000 of his separate funds for the down payment and financing the remainder of the $134,000 price. The title to the home read “Benny M. Wall, a married man as his sole and separate property.”

Shortly after the purchase, Benny advised Cindy to sign a quitclaim deed. Cindy did as Benny asked, effectively (and unknowingly) giving Benny full ownership of the property.

During the marriage, Benny’s only income was from his pre-marriage pension and Social Security payments. He deposited these into his bank account, from which he paid the mortgage. He refinanced the home in 2013, listing only himself as the borrower. Cindy's name was not on the loan or the deed.

Benny died unexpectedly in 2016. Cindy told the San Joaquin County Probate Court that she could not find a will. Cindy asked the Court to determine that the home, although in Benny’s name alone, was community property. Cindy cited to Family Code §760 which states:

“Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.”

Benny's children objected to Cindy's assertion that the home be classified as community property. The children cited Evidence Code §662 which provides:

“The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”

Because the two provisions cited by Cindy and Benny's children are contradictory, the court had to resolve this conflict in the laws by attempting to establish the intention of the parties.

The Court noted that the title to the home was in Benny’s name alone when he bought it, and he kept it that way when he refinanced it several years later. However, the home was acquired while the couple was married and living in California so, under this provision, the home belonged jointly to Benny and Cindy.

The probate judge ultimately ruled that the Family Code presumption of community property was the proper basis for deciding ownership of the home.

The adult children appealed, arguing that the court should have applied Evidence Code §662 and ruled that ownership of the home was as set forth in the legal title.

Although acknowledging that the two sections of the law “give rise to conflicting presumptions in this case,” the appellate court ruled in favor of Cindy, declaring that the home was community property.

The appellate court based its ruling on several factors. First, it noted that Cindy gave Benny $2,500 to help with the purchase of the home, paid for improvements to the property, and helped with its upkeep.

Next, the testimony of the real estate agent who sold the home said his understanding was that the couple was buying the home together. Additionally, the mortgage broker who handled the loan testified that Cindy’s name was left off the application only because her credit was poor. The broker believed that both were owners of the home and that Cindy’s name would be added to the title later.

Moreover, Cindy's testimony clarified why she willingly signed a quitclaim deed. Cindy testified that shortly after they completed the transaction, an escrow officer said she needed to sign another document – the quitclaim deed. Cindy stated she did not know what a quitclaim was and that Benny told her it had no meaning. Further, Cindy stated Benny confirmed she was an owner of the property and that her name would be added to the title at a later date.

The appellate court noted that married couples have a fiduciary duty to treat each other fairly and not take undue advantage of one another. Because Benny’s conduct violated this obligation, they said the lower court was justified in disregarding the form in which the title to the home was held. Therefore, the Court ruled in favor of the presumption that the home was community property and, under these circumstances, the issue was not subject to the Evidence Code presumption.

The appellate court, noting that both sides had presented compelling arguments for their positions, ordered each to bear its own costs on appeal.

By Jessica Stemple