Recent Blog Posts in September 2010 |
| September 25, 2010 |
| My ex-Husband's Mother Is FORECLOSING a TRUST DEED On COMMUNITY PROPERTY - What Can I do? |
| Posted By Thurman Arnold |
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Q. Our property has not yet been divided. My husband has tried every trick in the book to delay the proceedings and has lied to the Court, and his family has lied along with him. Now I just received in the mail a Notice of Default from his mother's attorney. Before we separated we bought a commerical property off of El Paseo, in Palm Desert, in the name of our family trust. "Ed" claims that the money we used to buy that building was from his mom as a loan to us. I never heard of this until a long time after we separated.
In 2007 Ed's mom recorded a trust deed that Ed signed alone. It is dated a week before he filed for divorce, but it was recorded with Riverside County more than two years later. All of this was outside of escrow. The note is for $400,000, all due in 2008. The trust deed was notarized by her sister (a notary in Beverly HIlls) and I don't believe for a minute that it was signed by Ed when it says it was signed.
I have also learned in Ed's interrogatory answers that his mother may have placed money into one of his accounts at about the same time as the property escrow closed. She has money, and is paying Ed's lawyer too. They were planning this all along.
My attorney said that under the law and under the family trust agreement that Ed had equal management rights to our property, and so she could obligate us both only with his signature. She seems distracted and I am worried. We have about two months left before Ed's mother steals the property from us - or at least from me. What can I do?
"Carol"
A. Hi Carol. Fortunately you do have options and remedies, and I will describe one tactic. The short answer is that Ed's mother needs to be joined as a party to the divorce proceedings, and a restraining order obtained from the family court to stay the foreclosure to protect the community estate until the validity of the trust deed has been determined. There is a procedure for bifurcating trials in family law cases to fast track pivotal issues in a kind of mini-trial. Whether the Court joins her or not, I recommend a bifurcation and a separate trial on the validity of the both the note and the obligation itself.
My purpose here is to give you an overview of what joinder is and how it might help you.
BTW, this is a type of conduct that defines high conflict divorce cases, making divorces unnessarily ugly, complex and expensive. When family members with money underwrite their adult child's divorce agenda (or even write the script), the adversary divorce experience can feel quite overwhelming. It is doubly sad for the children of couples in divorce when grandparents want to help crush the other parent since kids see the hatred for what it is, and this insight doesn't strengthen the grandparent/grandchild bond, model positive behaviors, and tends to alienate children from everyone involved - and from themselves.
The foreclosure process requires a 90 Day Notice of Default, and must be followed with a 21 day Notice of Trustee's Sale, before title can be transferred to a creditor.
Your attorney's first task is to stop the foreclosure. That should not be difficult under these facts. I would be surprised if a well reasoned letter to the other attorneys didn't back off on the foreclosure under these facts. Ed's mom bears some significant risks if she continues on this course. She may end up funding your attorney in defending against the Notice of Default (NOD) and in reimbursing most or all of your attorney fees on the joinder, and the Court may declare her to be owed nothing or to be an unsecured creditor of her son only.
Next, she needs to file a joinder petition within the dissolution action - probably whether or not the mother ceases the foreclosure - because the validty of the trust deed needs to be determined and you are far better off doing this within your dissolution proceeding. Family Code section 2021 authorizes courts to order the joinder of a person or entity.
California Rules of Court, Rule 5.150 and
Rule 5.154 amplify the description of who can be joined and what needs to be shown. oinders are common when dealing with pension plans, but of course that is not your issue today.
You want the joinder because once Mom becomes a joined party to the proceedings the family court has jurisdiction over not only her, but with what to do with the property and to declare the trust deed invalid. If she is not joined, then the Court can only determine rights as between you and your husband - it has no jurisdiction over Mom directly and so no authority to render any binding decisions upon her. Moreover, if the trust deed is set aside this means Ed's mom becomes an unsecured general creditor of the estate - or possibly only a creditor of Ed's. This may have the effect ensuring that the Palm Desert building is owned by the community free and clear, and that so dramatically increase the value of your share since it may be that the mother's money really did fund the purchase (since she deposited money into Ed's account at about the time escrow closed).
Also, while the law is not settled on this point, a party joined to dissolution case may be liable for attorney's fees incurred by the other parties relative to this issues for which they are joined.
In order to be entitled to an order joining a party it must be shown to the court that the person involved claims an interest in the community property or community debts. This includes creditors like Ed's mother. By the way, she herself has the right to request that she be joined but has little incentive to do so.
There is much more to say. If your attorney doesn't understand this strategy or the procedure, find yourself a competent family law specialist. The stakes are simply too high.
T.W. Arnold III
September 25, 2010 |
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| September 23, 2010 |
| What METHODS OF TRACINGS Do Family Courts Use? |
| Posted By Thurman Arnold |
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Q. What rules apply to how tracings are performed in California dissolutions and what must be shown?
A. In order to unwind transactions during marriage where monies and property with separate and community property attributes have been mixed together, the "separatizer" (the party seeking to establish their separate property contributions to the community or separate property of the other spouse or partner) has the burden of proof to present reliable tracing evidence to the Court. In order to settle even mildly complex disso's as between the parties without going to trial, this information must be provided to convince the other side that you have the ability to meet your burden.
Here are some of the rules that apply the mechanics of tracings in dissolution actions and legal separations.
If the commingled funds are used to purchase property, the party who deposited the separate funds may attempt to trace the source of the funds used to purchase the property to establish that it is separate because separate funds were used to purchase it. This may overcome the presumption that property acquired during marriage is community. Marriage of Mix (1975) 14 C3d 604.
If separate and community property or funds are commingled in such a manner that it is impossible to trace the source of the property or funds, the whole must be treated as community property. Marriage of Mix, supra.
If the title to the property was taken jointly, tracing cannot be used to overcome the presumption from the form of title. Marriage of Lucas (1980) 27 C3d 808, 813–814.
Direct tracing and tracing through family expenses are two independent methods of tracing to establish that property purchased with commingled funds is separate property.
Direct Tracing
Separate funds do not lose their separate character when commingled with community funds in a bank account so long as the amount of separate funds can be ascertained. Marriage of Mix (1975) 14 C3d 604.
If money is withdrawn to purchase specific property, questions of fact that must be determined include (Marriage of Mix, supra):
• Whether separate funds continue to be on deposit; and
• Whether the drawer intended to withdraw separate funds.
The party seeking to establish a separate interest in presumptive community property must keep adequate records. The party must show the exact amount of money allocable to separate property and the exact amount of money allocable to community property before it can be said that the money allocable to separate property is not so commingled that all funds in the account are community property. Marriage of Frick (1986) 181 CA3d 997. If the payments claimed to be separate were made periodically, each payment must have been made when separate property funds were in the account and must have been accompanied by an intent to use those funds rather than community funds.
Marriage of Higinbotham (1988) 203 CA3d 322, 329.
Tracing Through Family Expenses
The second method of tracing to establish that property purchased with commingled funds is separate property requires a consideration of family expenses. This tracing method is based on the presumption that family expenses are paid from community funds.
If at the time the property is acquired it can be shown that all community income in a commingled account was exhausted by family expenses, then all funds remaining in the account at the time the property was purchased were necessarily separate funds. Marriage of Mix, supra.
This method can be used only when, through no fault of the spouse claiming separate property, it is not possible to ascertain the balance of income and expenditures at the time property was acquired. See v See (1966) 64 C2d 778, 784.
The spouse claiming separate property must keep adequate records to overcome the presumption that property acquired during marriage is community property. See v See, supra. Most people don't.
If you are contemplating a divorce and have tracing issues, protect your records now so that they do not 'disappear.' It can be very expensive to obtain bank statements and canceled checks dating back years, and with all of the bank failures and mergers today these records may become impossible to obtain. If you cannot meet your tracing burden of proof, you lose on the particular reimbursement issue....
T.W. ARNOLD
www.ThurmanArnold.com |
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| September 21, 2010 |
| My Wife Says She Wants to Get RETRAINED. Does the Alimony Obligation End Once She Does? |
| Posted By Thurman Arnold |
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Q. My Wife tells me that she wants to be retrained so that she can become independent. What can I do to ensure this happens?
A. Whether your spousal support obligation will end if and when your wife gets retrained depends upon a number of factors, including those set forth in California Family Code section 4320. The length of your marriage is a major factor, specifically in terms of whether it was more or less than 10 years (if more than 10, different rules apply). But many other considerations may apply.
However, it is possible to obtain from the Court a "Contingent Order" which terminates support upon the happening of some event. Family Code section 4334.
The most common example is when the supported spouse is attending college, graduate school, vocational retraining, or some other form of education that will allow her to enter the work force. Perhaps, if she drops out of school, your support order can be ordered to terminate upon that contingency.
You will need to plan ahead for these contingencies. Hire a lawyer that has been handling these types of cases for many years.
T.W. Arnold
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| September 16, 2010 |
| What Does TRACING Refer to in CALIFORNIA DIVORCE CASES? |
| Posted By Thurman Arnold |
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Q. What is meant by tracings in California in the context of divorce, domestic partnership dissolution, or legal separation?
A. Married people routinely combine cash and assets in ways that must be disentangled if either party later claims that some of those assets were their separate property and wants it returned - I rarely see a case where they don't. In the absence of a prenup agreement saying otherwise, money or property acquired through the time, skill, or industry of either spouse between the date of marriage or registered domestic partnership and physical separation is presumed to be the community property of both parties. Property owned or acquired by either before marriage or after the date of separation, or inherited or gifted to them during marriage, is considered to be that party's separate property to the extent it can be shown to still exist. Separate property is not reimbursed where it has been spent on living expenses, although it may be reimbursed when spent on certain other categories of items. Usually the question involves who is entitled to what share of some asset which is still in existence.
Typical examples include:
- One spouse has money in a savings or investment account before marriage. They then deposit earnings into that account after marriage. The account is used for living expenses. At the end of the relationship, what portion of what remains is separate and what is community?
- The other party is added to a formerly separate property deposit account, for instance so that the account can be held in joint tenancy to avoid probate in the event of death.
- Spouse A inherits $500,000 from grandma during the marriage. This separate property inheritance gets put into a jointly titled bank account, into which other monies flow in and out. How is the balance divided?
- Spouse A then contributes some of this inheritance to the purchase of a new residence. Title is taken jointly. When the couple splits, Spouse A naturally wants their contribution back. How is this achieved?
- A married couple decides to establish a Living Trust to protect them both in the event of death or incapacity. They fund the Trust by transferring cash and real estate into it. A common mistake made by Estate lawyers is to describe the trust property as "community property" and to add a provision that says that if the parties divorce, this property will not be considered to be community and will be restored to each contributing party. Unfortunately, once separate property is declared in such instruments to be community a transmutation has occurred and the language that it is to be restored is of no legal effect - only a new transmutation will resurrect the status quo before the transfer. However, Family Code section 2640 provides that separate property contributions will nonetheless be reimbursed to the extent that the amounts can be separated out and established. The person seeking to confirm their SP contribution must trace the funds in order to receive this reimbursement.
- One spouse places their separate property into the name of the other spouse, possibly to hide it from creditors or other family members. Upon separation, the receiving spouse claims it was a gift and wants to keep it all.
- During the marriage one spouse's separate property is used to build an addition to the jointly titled home that significantly increases its value. When the house is valued and ordered sold, or purchased by one of the two partners, this contribution to improvements may be reimbursed if it can be traced to a separate property source.
Variations of this theme are endless because people when they get married just don't contemplate the relationship failing, don't understand the legal consequences of what they do, are reassured by their spouse in pillow talk that they will be reimbursed, and so blindly throw assets into a common pot in which the character and value of the contributions become mixed and muddied.
The separation of these interests all require tracings, often involving transactions spanning many years. Maybe bank and other records still exist, but maybe they have been lost, destroyed, or hidden by the other. Even attorneys with some years in family law practice don't have a firm grasp on what tracings require in determining community separate property interests. When separate property and community property are commingled in an account, tracing issues arise.
Sometimes these accountings are relatively simple. Frequently they require the use of a forensic accountant.
Thurman W. Arnold, CFLS
www.ThurmanArnold.com
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