Filed 3/25/15 Donshen Testile v. Studio CL CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

DONSHEN TEXTILE (HOLDINGS) LTD.,
Plaintiff and Appellant,

v.
STUDIO CL CORPORATION et al.,
Defendants and Respondents. B253970
(Los Angeles County Super. Ct. No. BC469979)

APPEAL from an order of the Superior Court of Lo s Angeles County. Mark Mooney, Judge. Affirmed. Hallstrom, Klein & Ward, Grant J. Hallstr om, Paul J. Kurtzhall for Plaintiff and Appellant. Schwimer Weinstein, Michael E. Schw imer, Zev Weinstein for Defendants and Respondents.

___________________ ________________2 Donshen Textile (Holdings) Ltd. obtained a judgment ag ainst Leonard Rabinowitz and levied on his real property located in Los Angeles County, including his home, and sought to have the home sold in partial satisfaction of the judgment. At an order to show cause hearing, Donshe n Textile argued the ho me was the community property of Leonard
and his wife, Kristen, 1 its value exceeded all encumbrances, and it should therefore be ordered sold. Leonard opposed the application, arguing he owned no interest in the home because it was Kristen’s separate property, and even if he did own so me portion of it, the
value of his interest was le ss than the combined encumbrances and exemptions, and
therefore it could not be ordered sold.
The trial court denied Donshen Textile’s application on the ground that Donshen failed to establish the home was community property or to prove Leonard’s interest
exceeded all encu mbrances, liens and exemptions.
We affirm.
BACKGROUND In 2004, Kristen purchased a home on 107 27 Wilshire Boulevard, in Los Angeles (the Wilshire property) using proceeds from the sale of he r separate property as down payment. Leonard cosigned the purchase mone y loan and he and Kristen took title as joint tenants. In 2005, th ey transferred the property to the Kristen and Leonard Rabinowitz Revocable Trust, which they had created in 2000 and am ended in 2004, and as to which they were both trustors and cotrustees. The trust contained the following restriction on alienability of real property: “The signature of both Trustors shall be required to sell, purchase, mortgage, or otherwise encumber, pledge or create restri ctions on any real estate held by the Trustee.” The trust also provided, in section 2.1 (as amended in 2004), that “[u]pon revocation, community property shall be distributed to the Trustors and separate property shall be distributed to
the Trustor who contributed it.”

1 We refer to Leonard and Kristen Rabinowitz by their fi rst names for clarity only.3 On May 30, 2013, Donshen Textile obtai ned a judgment against Leonard in the amount of $902,502.98. On A ugust 23, 2013, pursuant to a Writ of Execution, the Los Angeles County Sheriff levied on all of Leonard’s real prope rty located in Los Angeles County, including the Wilshire property. On August 28, 2013, Donshen Textile filed an ex parte motion for an order to sell the Wilshire property, contending the pr operty was acquired during Leonard and Kristen’s marriage and was therefore commun ity property. Donshen Textile contended the value of the property was approximately $2,000,000, it was encumbered by two deeds of trust securing debts of $1,150,000 and $200,841, and it was subject to a $175,000 homestead exemption, leaving a net realizable value of $474,159. Leonard opposed the motion on the ground s that the Wilshire property was Kristen’s separate property, and therefore he had no interest in it, and even if he owned
some interest its value woul d be less than the debt secu red by the property plus his homestead exemption, and therefore would not be realized in any forced sale. In reply,
Donshen Textile admitted Kris ten and Leonard took ownership of the property as joint tenants in 2004 but argued th ey transmuted it to community property by transferring it to
the trust in 2005. After a hearing, the trial c ourt found Donshen Te xtile failed to establish either that the Wilshire property was community property or that the value of any interest held by
Leonard would be realized in a forced sale. It consequently discharged the OSC. Donshen Textile appealed.
DISCUSSION A court may order the sale of an intere st in residential property to satisfy a judgment lien if the sale is likely to pr oduce a bid that exceeds the amount of any homestead exemption plus all liens and encu mbrances. (Code Civ. Proc., §§ 704.780, 704.800.) It is undisputed that the Wilshire pr operty had a fair market value of approximately $2,000,000 but secured two loans and was subject to a homestead exemption that added up to $1,525,841. It therefore had a net realizable value of4 $474,159, and in the abstract could be orde red sold to wholly or partially satisfy a judgment creditor’s lien. But the property could be sold to satisfy Donshen Textile’s lien against Leonard only if it belonged to Leonard himself, either as his separate property or as community property, because although a community estate is liable for debt incurred by either spouse regardless of whether the ot her spouse is party to the debt or to a judgment for it (Fam. Code, § 91 0), a spouse owns no interest in the separate property of the other spouse (Fam. Code, § 752). It is undisputed that Leonard and Kristen he ld title to the Wilshire property as joint tenants in 2004 before placing it in trust in 2005, and that pr operty held in joint tenancy is separate property. (Civ. Code , § 683.) Donshen Textile cont ends the Wilshire property may nevertheless be sold because it was tr ansmuted to commun ity property when
Leonard and Kristen transferred it to their family trust. We disagree. Spouses may hold property as community or separate property. (Fam. Code, § 750.) All property acquired during marriag e is presumed to be community property unless otherwise provided by statute. (Fam. Code, § 760.) Separate property of a married person includes property owned before marriage, acqui red after marriage by gift or inheritance, or held in joint tenancy. (F am. Code, §§ 750, 770.) Each spouse holds an equal interest in community property (Fam. Code , § 751), but neither owns an interest in the separate property of the other (Fam. Code , § 752). The community estate is liable for debt incurred by either sp ouse. (Fam. Code, § 910.) Spouses may transmute separate property to community property by agreement or transfer. (Fam. Code, § 850.) For a transm utation to be valid, it must be “made in writing by an express declaration that is made, joined in, cons ented to, or accepted by the spouse whose interest in the property is adversely affected .” (Fam. Code, § 852.) An “express declaration” need not use the terms “transmutation,” “community property,” or “separate property,” but it must “expressly stat e[] that the characterization or ownership of the property is being changed.” ( Estate of MacDonald (1990) 51 Cal.3d 262, 272-273 [no particular locution required].) For exam ple, the language “I give to the account holder any interest I have in the funds depo sited in this account,” would suffice to5 establish transmutation. ( Id . at p. 273.) “The express declaration must unambiguously indicate a change in character or ownership of property. [Citation.] A party does not ‘slip into a transmutation by accident.’ [Citation.]” ( In re Marriage of Starkman (2005) 129 Cal.App.4th 659, 664.) Mere transfer of property into a revocab le family trust does not transmute the character of the property. ( Id. at p. 665.) Whether property is separate or community property is a question of law that is subject to de novo review when the facts are undisputed. ( Diamond Benefits Life Ins. Co.
v. Troll (1998) 66 Cal.App.4th 1, 5.) Whether a written instrument effects a transmutation is also subject to independent review. ( In re Marriage of Starkman
, supra , 129 Cal.App.4th at p. 664 [“In deciding whether a transmutation has occurred, we interpret the written instruments independently, without resort to extrinsi c evidence”].) Donshen Textile argues that because the tr ust’s restriction on alienability of trust property is effectively identical to a rest riction on community property found in the Family Code, Leonard and Kristen impliedly agr eed to transmute the Wilshire property to community property when they transferred it into the tr ust. The argument is without merit. Family Code section 852 provides th at transmutation can occur only by express written declaration, not by implication. No trust documents contain such a declaration. The purpose of the Kristen and Leonard Rabinowitz Revo cable Trust appears to be to provide for the orderly administration of th e trustors’ property in the event of their deaths. To this end, the trust documents prov ide that in the event of one trustor’s death, the trustee shall distribute a specified gift to the deceased trustor’s family and distribute
the remainder of the trust estate to the surv iving trustor, who may opt to direct that the estate remain in trust. Upon the second trustor’s death, the tr ust estate is directed to be distributed to the trustors’ families. Nothing in the trust documents reflects an intent or agreement to transmute separate to community property. For example, nothing states that property transferred to the tr ust “becomes” or “is changed into” the commun ity property.
Section 2.2 of the trust decl aration supports our interpretation. It provides that upon revocation, community prop erty would be distributed to both trustors but separate property would go only to the trustor who contributed it. A reasonable inference from6 this language is that community and separate property were intend ed to retain their
characterization while held in trust. We recognize that the trust provides that “[ t]he signature of both Trustors shall be required to sell, purchase, mortgage, or otherw ise encumber, pledge or create restrictions on any real estate held by the Trustee,” and that this provis ion compares with subdivision (a) of Family Code section 11 02, which provides that “both spouses . . . must join in executing any instrument by which . . . community real property or any interest therein is . . . sold, conveyed, or en cumbered.” But a coincident al similarity between trust property and community property, without more, is unremarkable and immaterial. Property becomes trust property by way of a deed transfer in favor of a trustee. The
trustors dictate the terms under which the property will be held—the trust terms—and may at their option limit the trustee’s power to retransfer the property. Such a limitation arises solely from the trustors ’ intent, not the Family Code, and applies irrespective of the separate or community nature of the property or any family relation between the parties. In sum, nothing in the reco rd suggests transfer of the Wilshire property to
Leonard’s and Kristen’s revocab le family trust was intended to effect a change in the separate character of the property. Donshe n Textile therefore failed to establish the property as a whole was part of a commun ity estate that woul d be liable for debts incurred by Leonard alone. Donshen Textile made no attempt to esta blish the value of Leonard’s separate interest in the Wilshire prop erty and no attempt to estab lish the value of any partial community interest in it, e.g., an interest deriving from Leonard possibly having contributed to mortgage payments. (See In re Marriage of Green (2013) 56 Cal.4th 1130, 1142 [“‘Where commun ity funds are used to make payments on property purchased by one of the spouses before marriage “the rule developed through decisions in California gives to the community a pro ta nto community property interest in such property in the ratio that the payments on the purchase price with community funds bear to the payments made with separate funds”’”] .) Even if such in terests exist, Donshen
Textile failed to establish what their values might be, much less that they would have7 exceeded $1,525,841, th e sum of the exemption plus encu mbrances. Therefore, no sale of the property was permitted under Code of Civil Procedure se ctions 7 04.780 and
704.800.
DISPOSITION The judgment is affirmed. Respondent s are to recover their costs on appeal.
NOT TO BE PUBLISHED.

CHANEY, Acting P. J.

We concur:

JOHNSON, J.

BENDIX, J. 

 Judge of the Los Angeles Superior Cour t, assigned by the Ch ief Justice pursuant to article VI, section 6 of the California Constitution.