Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-02440/USCOURTS-casd-3_10-cv-02440-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

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28 1 Pamela Brodwolf-Folsom did not join in the filing of debtor’s bankruptcy petition.

10cv2440

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

IN RE DAVID FOLSOM, 

Debtor.

 

DAVID FOLSOM; PAMELA

BRODWOLF-FOLSOM,

 Appellants,

v.

GERALD H. DAVIS, Chapter 7 Trustee,

 Appellee.

 

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Civil No. 10cv2440 L (NLS)

Bankruptcy No. 09-08919-B7

Adversary No. 10-90142-B7

ORDER AFFIRMING THE

DECISION OF THE BANKRUPTCY

COURT

Debtor David Folsom and Pamela Brodwolf-Folsom1

 appeal the decision of the

Bankruptcy Court granting the Chapter 7 Trustee’s motion for summary judgment. The appeal

has been fully briefed. For the reasons set forth below, the decision of the Bankruptcy Court is 

affirmed.

I. Factual Background

Debtor and Pamela Brodwolf-Folsom entered into a premarital contract on October 26,

1990, concerning, inter alia, community property. 

Case 3:10-cv-02440-L-NLS Document 17 Filed 08/08/11 Page 1 of 6
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28 2 Record on Appeal.

2 10cv2440

Community Property: The parties do not intend to establish joint checking and

joint savings accounts. In the event that any joint accounts are established, the

funds deposited in said accounts shall be the community property of the parties.

Any property, real or personal, acquired after marriage and held by the parties

jointly, shall be the community property of the parties. Any assets acquired from

the funds in the parties joint accounts will be community property.

(Premarital Contract, ¶6, RA2

, Exh. 1, A)

In 2006, Debtor and Pamela Brodwolf-Folsom opened a joint checking account, i.e., the

account was held in both names, at Bank of America. Moneys were deposited into the joint

account and those funds were wired out of the account to Great American Title Co. in order to

purchase eight condominiums in Missouri. Title to the condominiums was conveyed to “Pamela

Brodwolf-Folsom, as a married woman.” There are no liens or encumbrances on the

condominiums. 

In the answer to the complaint filed in the Bankruptcy Court, Brodwolf-Folsom states that

she owned other real property, specifically her Fuerte Drive property, that was her separate

property under the premarital contract. She borrowed money using her separate property as

security for repayment and used the separate property loan proceeds to purchase the Missouri

condominiums. As a result, Debtor and Brodwolf-Folsom contend that no community property

or funds were used to purchase the Missouri condominiums, David has no community property

interest in the condominiums, and the condominiums are not property of the bankruptcy estate. 

The Bankruptcy Court disagreed finding that based on the language of their Premarital

Contract, the joint account appellants opened was community property and thus the

condominiums purchased with the funds from the account were the property of the bankruptcy

estate. 

II. Standard of Review

When considering an appeal from the bankruptcy court, a district court applies the same

standard of review that a circuit court would use in reviewing a decision of a district court. See

Ford v. Baroff (In re Baroff ), 105 F.3d 439, 441 (9th Cir. 1997). On appeal, a district court must

review a bankruptcy court's findings of fact under the clearly erroneous standard and its

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3 10cv2440

conclusions of law de novo. FED. R. BANKR. P. 8013; see also Sigma Micro Corp. v.

Healthcentral.com (In re Healthcentral.com), 504 F.3d 775, 783 (9th Cir. 2007). The test for

clear error is not whether the appellate court would make the same findings, but whether the

reviewing court, based on all of the evidence, has a definite and firm conviction that a mistake

has been made. Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985). A reviewing court

may not overturn a decision, even if it would have weighed the evidence in a different manner,

so long as the trial court's view of the evidence is plausible in light of the entire record. Id. at

573-74, 105 S. Ct. 1504. In applying the clearly erroneous standard, the appellate court views the

evidence in the light most favorable to the party who prevailed below. Lozier v. Auto Owners

Ins. Co., 951 F.2d 251, 253 (9th Cir. 1991).

A grant of summary judgment is reviewed de novo. United States v. City of Tacoma, 332

F.3d 574, 578 (9th Cir. 2003). Under the Federal Rules of Civil Procedure, a court shall grant

summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as to any material

fact and that the moving party is entitled to a judgment as a matter of law.” FED. R. CIV. P. 56(c).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of

material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323. The burden then shifts to the

nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.” FED.

R. CIV. P. 56(e). The nonmoving party must identify factual disputes that “might affect the

outcome of the suit under governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986). 

III. Issue on Appeal

Did the Bankruptcy Court err in finding as a matter of law that a joint account the Debtor

and his wife was community property under a premarital contract and therefore, the funds from

that account that were used to purchase condominiums were the property of David Folsom’s

bankruptcy estate notwithstanding evidence showing a lack of intent to create community

property.

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28 3 California Family Code § 1500.

4 10cv2440

IV. Discussion

As noted above, the Debtor and Brodwolf-Folsom entered into a valid Premarital

Contract3 on October 26, 1990, that provides for the parties’ intent to retain property as separate

but also specifically allows and provides for the creation of community property: “In the event

that any joint accounts are established, the funds deposited in said accounts shall be the

community property of the parties.” (Premarital Contract, ¶6, Record on Appeal (RA), Exh. 1,

A. (emphasis added))

Under California’s Probate Code, a joint account means an account payable on request to

one or more of two or more parties whether or not mention is made of any right of survivorship.

CAL. PROB. CODE § 5130. It cannot be disputed that the Debtor and Brodwolf-Folsom opened a

joint checking account at Bank of America, i.e., the Bank of America account was held in both

Debtor’s and Brodwolf-Folsom’s names. But Debtor and Brodwolf-Folsom provide declarations

that the joint account was created for the convenience of Brodwolf-Folsom, and Debtor had no

right to access the account without the express permission of Brodwolf-Folsom. Notwithstanding

these declarations, appellants present no evidence that Debtor could not have accessed the funds

in the joint account had he wanted to do so. Appellants’ declarations do not and cannot alter their

Premarital Contract or California’s Probate Code. 

Appellants also argue that the Premarital Contract, ¶ 6, requires that community funds be

deposited into the joint account in order for the joint account to acquire the status of community

property. The Premarital Contract neither states nor suggests such a reading. Instead, as provided

in the Premarital Contract, it is the establishment of the joint account that creates the community

property and “the funds deposited in said accounts shall be the community property of the

parties.” (Premarital Contract, ¶6, Record on Appeal, Exh. 1, A)

Because the account was in both parties’ names, both parties had access to and control

over the account under California law, and the Premarital Contract is valid and enforceable, the

account funds are community property notwithstanding appellants’ declarations to the contrary.

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5 10cv2440

Between March 30, 2006 and April 26, 2006, the joint checking account statement from

Bank of America shows total deposits of $282,233.76 for Pamela M. Brodwolf- Folsom and

David Folsom. Three withdrawals during that period were used to make payment for the

condominiums. The deeds transferring title to the eight condominiums were conveyed to

“Pamela Brodwolf Folsom, a Married Person.”

The funds used to purchase the condominiums were from appellants’ joint checking

account and those funds were community property. Property acquired with community funds or

property is also community property. Katz v. U.S., 382 F.2d 723, 728 (9th Cir. 1967).

Appellants argue that their declarations concerning their intent have been overlooked by

the Bankruptcy Court. In their reply memorandum, appellants appear to concede that they made

a mistake in creating the joint account and a transmutation cannot be caused by such a mistake.

In other words, appellants are not arguing that the Premarital Contract is invalid nor are they

seeking to rescind the Premarital Contract. Instead, they contend that in this instance they made

a mistake in setting up a joint account which, under their valid Premarital Contract, created a

community property situation. Although sympathetic to appellants’ situation, their alleged error

in setting up the joint account as expressed in their declarations is not determinative given the

valid and unmistakable terms of the Premarital Contract. The Premarital Contract provides for

either a separating writing, under paragraph 13, or the depositing of funds into a joint account,

under paragraph 6, for transmuting separate property into community property. Notwithstanding

their stated error in creating the joint account, the terms of the Premarital Contract cannot be

legally ignored or voided.

V. Conclusion

Based on the foregoing, IT IS ORDERED affirming the decision of the Bankruptcy

Court. 

IT IS SO ORDERED.

DATED: August 8, 2011

M. James Lorenz

United States District Court Judge

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COPY TO: 

HON. NITA L. STORMES 

UNITED STATES MAGISTRATE JUDGE

ALL COUNSEL/PARTIES

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