Court Opinion

ID: 9565899
Source: CourtListenerOpinion
Date Created: 2023-08-21 19:29:49.363237+00
Date Added: 2024-06-11T09:19:52.500394
License: Public Domain

ARABIAN, J., Dissenting.—
Introduction
If the decedent in extremis had in her last breath uttered the question, “Oh death, where is thy sting?,” the majority garbed in grim shrouds would have whispered, “At probate.”
It has been said that no good deed goes unpunished. Unhappily, there is a kernel of truth in this otherwise cynical aphorism, perfectly illustrated in the majority opinion, which begins its journey attempting to protect spouses against questionable transmutations of community property, and ends by negating the estate plan of the decedent herein, and of others who, like decedent, can no longer dictate their intentions. Worse, in exalting form over substance, the majority impose unnecessarily rigid requirements on the drafting and interpretation of future transfers between spouses. In the pro*275cess, they undermine the deference that trial courts deserve and merit on review. Therefore, I must respectfully dissent.
Background
In August 1984, Margery MacDonald (hereafter Margery or decedent) sadly learned that she had terminal cancer. Faced with mortality, she undertook the labor of finalizing her estate. Fortunately, it was a task to which she was well suited.
Margery had worked for many years as a bookkeeper with the accounting firm of Hemming-Morse in San Mateo. Indeed, it was there that she met her second husband, Robert MacDonald, who employed the firm to oversee the corporate accounts of his business, Robert F. MacDonald Company. After the couple married in 1973 (it was a second marriage for Robert, as well), Margery became employed as the bookkeeper for her husband’s firm. In that capacity she kept the books, the balance sheets, the income statements, tax returns and payroll. In addition, she took responsibility for the couple’s personal finances and was exceptionally aware of their assets.
Both Margery and Robert had children from their prior marriages. Margery wished to leave the bulk of her estate to her four children. Accordingly, the couple’s immediate goal became the apportionment of their property into separate estates. To that end, the MacDonalds consulted with their personal accountant, Elizabeth Gommel, regarding their holdings and the division of assets. As Ms. Gommel recalled, “[Decedent’s] immediate objective was to separate her assets . . . and have an entirely separate estate .... She wanted it as easy to administer as it possibly could be, that all assets would be separate, so there would be no reason for difficulties to arise between her heirs and Mr. MacDonald.”
The MacDonalds divided their stock holdings and Margery sold her half and placed the proceeds into her separate account. In addition, she prepared a schedule of all the couple’s real property holdings (in addition to their home in Hillsborough, the couple owned residences in Foster City, Pacific Grove, San Carlos, Sacramento, and Roseville), valued the properties and divided them with her husband; Robert paid $33,000 in cash to equalize the division.
Several months later, in November 1984, Robert reached the age of 65, and his company pension plan was terminated. On March 21, 1985, he received his pension disbursement of over $266,000; the money was imme*276diately deposited into three IRA accounts in separate financial institutions. These pension funds had not been previously addressed in the couple’s efforts to divide their estate, although it was undisputed that Margery was aware of their existence.
The three IRA accounts were opened solely in Robert’s name. The designated beneficiary of each was a living trust that Robert had established in 1982. The terms of the trust gave the bulk of the corpus to Robert’s children from his earlier marriage. Each of the three IRA documents, entitled “Adoption Agreement and Designation of Beneficiary” (agreement), provided space for the signature of a spouse not designated as the sole primary beneficiary to allow consent for the designation. Margery signed the consent portion of each agreement.
Three months later, on June 17, 1985, Margery died. Her will bequeathed the residue of her estate to her four children. Thereafter, her daughter and executrix of her estate, Judith Bolton, filed a petition to establish decedent’s community property interest in the IRA funds. Following a probate hearing, the trial court denied the petition, concluding that the IRA funds were not assets of decedent’s estate. The court’s conclusion was based on the following express findings: “1. Decedent Margery MacDonald, both because of her occupation and as a result of advice received from professionals was both competent to [s/c] and sophisticated in the administration of her assets; [fl] 2. Decedent was active in the business of Respondent Robert F. MacDonald and was aware of the financial decisions being made in that business, particularly in terms of the pension plan itself; []J] 3. Decedent was aware of the terms of the Living Trust which left the bulk of Respondent’s estate to Respondent’s children and left Decedent a life interest in the estate; [fl] 4. Decedent made conscious and substantial choices regarding her assets and sought to put her estate in order to eliminate the possibility of any dissension between her children and her spouse; [fl] 5. Decedent, in executing the Adoption Agreement for the three IRA’s, intended to waive any community property right she had in those IRA’s and in fact to transmute her share of that community property asset to the separate property of Respondent.”
The Court of Appeal, with one justice dissenting, reversed. A majority of the court concluded that decedent’s consent to the IRA agreements did not satisfy the provisions of Civil Code section 5110.730, subdivision (a),1 which requires that transmutations of property be “made in writing by an express declaration that it is made, joined in, consented to, or accepted by the *277spouse whose interest in the property is adversely affected.” Justice Holmdahl, in dissent, would have held that the IRA agreements satisfied both the language and purpose of section 5110.730, subdivision (a).
Discussion
The narrow issue presented is whether, in order to satisfy the requirements of section 5110.730, subdivision (a), a writing must expressly state that the writer is effecting a transmutation of property. Conceding that the statutory language yields no ready answer, the majority turn to legislative history. From their reading of the pertinent sources, they conclude that the statute was intended to foreclose the courts from the use of extrinsic evidence to ascertain the writer’s intent. An examination of those same historical sources, however, reveals that the majority’s conclusion is fundamentally flawed; the plain evidence shows that the Legislature intended a simple writing requirement akin to the statute of frauds—a formality that would admit the use of collateral evidence to clarify the writer’s meaning.
The primary source relied on by the majority is the California Law Revision Commission (Commission) Report to the Legislature recommending enactment of section 5110.730. (Recommendations Relating to Marital Property Presumptions and Transmutations, 17 Cal. Law Revision Com. Rep. (1984) (Commission report) pp. 205-227.) The Commission report is indeed enlightening, although it leads to a conclusion precisely the opposite of that reached by the majority. The salient portion of the Commission report reads as follows: “Under California law it is quite easy for spouses to transmute both real and personal property; a transmutation can be found based on oral statements or implications from the conduct of the spouses. [Fn. omitted.] ffl] California law permits an oral transmutation or transfer of property between the spouses notwithstanding the statute of frauds. [Fn. omitted.] ... It encourages a spouse, after the marriage has ended, to transform a passing comment into an ‘agreement’ or even to commit perjury by manufacturing an oral or implied transmutation, [fl] Most people would find an oral transfer of such property, even between spouses, to be suspect and probably fraudulent, either as to creditors or between each other, [fl] California law should continue to recognize informal transmutations for certain personal property gifts between the spouses, but should require a writing for the transmutation of real property or other personal property.” (Commission report, supra, at pp. 213-214, italics added.)
As the text of the Commission report thus makes clear, the statute was designed to overrule those decisions that had permitted transmutations “based on oral statements or implications from the conduct of the spouses.” *278The Commission report’s frequent references to “oral” agreements and the possibility of “fraudulent” conveyances demonstrate that the purpose of section 5110.730 was to “require a writing” in the nature of the “statute of frauds.” (Commission report, supra, at pp. 213-215.)
The Commission comment accompanying the text of section 5110.730 makes that intent even more plain: “Section 5110.730 imposes formalities on interspousal transmutations for the purpose of increasing certainty in the determination whether a transmutation has in fact occurred. Section 5110.730 makes clear that the ordinary rules and formalities applicable to real property transfers apply also to transmutations of real property between the spouses. See Civil Code §§ 1091 and 1624 (statute of frauds) .... This overrules existing case law. See, e.g., Woods v. Security First Nat’l Bank, 46 Cal.2d 697, 701, 299 P.2d 657, 659 (1956). Section 5110.730 also overrules existing law that permits oral transmutations of personal property . . . .” (Commission report, supra, at pp. 224-225, italics added.)
The Commission’s explicit reference to “the ordinary rules and formalities applicable to real property transfers,” in conjunction with its express citation to the statute of frauds (§ 1624), leaves no doubt as to the nature of the writing requirement contemplated by the statute’s authors. The plain statement of intention to overrule Woods v. Security-First Nat. Bank (1956) 46 Cal.2d 697 [299 P.2d 657] (transmutation of real property based on oral agreement of the spouses) and the Commission report’s explicit criticism of In re Marriage of Lucas (1980) 27 Cal.3d 808 [166 Cal.Rptr. 853, 614 P.2d 285] (finding a transmutation on the basis of a mobilehome document of title) underscore the legislative intent to create a simple writing requirement analogous to the statute of frauds. (Commission report, supra, at pp. 211, 222.)
That goal is evidenced further by the Commission’s favorable reference to Reppy, Debt Collection from Married Californians: Problems Caused by Transmutations, Single-Spouse Management, and Invalid Marriage (1980) 18 San Diego L.Rev. 143 (hereafter Reppy). Like the Commission report itself, this article criticizes California’s case law tradition of “easy transmutation,” singling out for particular censure such cases as Lucas, supra, and Woods, supra, as well as Pacific Mut. Life Ins. Co. v. Cleverdon (1940) 16 Cal.2d 788 [108 P.2d 405] (husband’s act of depositing funds into wife’s separate account supports finding of intent to transmute to wife’s separate property) and O’Connor v. Travelers Ins. Co. (1959) 169 Cal.App.2d 763 [337 P.2d 893] (wife’s deposit of earnings to her separate account transmutes funds to her separate property). Consistent with the Commission’s ultimate recommendation, the article calls for legislative enactment of a *279“statute of frauds” to govern transmutations of property between spouses. (Reppy, supra, at p. 240.)
Thus, the historical sources—the very sources cited and relied on by the majority—demonstrate irrefutably that the underlying purpose of section 5110.730 was to overrule decisions permitting transmutations ’’based on oral statements or implications from the conduct of the spouses” (Commission report, supra, at p. 213), and to create the equivalent of a statute of frauds to govern transmutations of property between spouses. (Id. at p. 222.)2
California’s general statute of frauds provides that certain specified contracts are invalid “unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party’s agent.” (§ 1624.) To satisfy the statute, it is well settled that a writing must contain only the essential terms of an agreement, and that what is essential depends on the particular agreement and its context. (Seaman’s Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 762-763 [206 Cal.Rptr. 354, 686 P.2d 1158].)
The modern trend of the law favors a liberal construction of writings in order to carry out the intentions of the parties. (Sunset-Sternau Food Co. v. Bonzi (1964) 60 Cal.2d 834, 838, fn. 3 [36 Cal.Rptr. 741, 389 P.2d 133]; Okun v. Morton (1988) 203 Cal.App.3d 805, 817 [250 Cal.Rptr. 220]; Hennefer v. Butcher (1986) 182 Cal.App.3d 492, 500-501 [227 Cal.Rptr. 318].) *280Ultimately, if the parties have completed a transaction in which it appears that they intended to make a contract, “the court should not frustrate their intention if it is possible to reach a fair and just result, even though this requires a choice among conflicting meanings and the filling of some gaps that the parties have left.” (Okun v. Morton, supra, 203 Cal.App.3d at p. 817, quoting 1 Corbin on Contracts (1963) § 95, p. 400.) As we have previously explained, an “ ‘agreement will not be held deficient [under the statute of frauds] for the failure to express that which is clearly implied when the writing is interpreted in accordance with the intentions of the parties.’ [Citations.]” (Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at p. 763, quoting Seck v. Foulks (1972) 25 Cal.App.3d 556, 568 [102 Cal.Rptr. 170], original italics.)
In light of these settled principles, it is evident that the Legislature could not have contemplated the strict test for compliance with section 5110.730 formulated by the majority. As noted, the legislative history reveals an intent to apply the “ordinary rules and formalities” associated with the statute of frauds. (Commission report, supra, at p. 225.) The Legislature, therefore, must have envisaged the introduction of extrinsic evidence where the writing, “ ‘interpreted in accordance with the intentions of the parties’ ” (Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at p. 763), demonstrates at least an intent to transmute property pursuant to section 5110.730.
Applying this test to the case at bar, it is clear that such an intention is readily discernible from the face of the IRA agreements. The transfer of the pension disbursement to Robert’s IRA accounts involved a transfer of community property funds. The agreements contained an express declaration that the funds were being placed in Robert’s name only. Decedent, the spouse whose interest was adversely affected, expressly consented to the designation of Robert’s living trust, not herself, as the beneficiary. Thus, as contemplated by section 5110.730, the IRA documents plainly involved a transfer of property and contained an express consent to that transfer by the spouse whose interests were adversely affected.
To be sure, the agreements did not explicitly describe the pension funds as community property or expressly state that decedent intended to transfer her interest to Robert. By requiring her consent, however, the documents clearly alerted decedent to the fact that she had an interest in the funds for which a waiver was required.
The majority, nevertheless, assert that there is no substantial evidence to support the trial court’s finding that decedent knew she had a community *281property interest in the pension funds and intended to waive or transmute that interest. This is a patently selective reading of the record, contrary to the fundamental rule that a reviewing court must indulge all reasonable inferences in favor of the judgment. (People v. Johnson (1980) 26 Cal.3d 557, 576 [162 Cal.Rptr. 431, 606 P.2d 738, 16 A.L.R.4th 1255].) The trial court found, and the undisputed evidence showed, that decedent had worked as a bookkeeper for her husband’s business and had managed the family’s financial affairs. She was aware of her husband’s pension plan. She consented to the designation of Robert’s living trust as the beneficiary of the IRA funds. The amount was in excess of $250,000. For what conceivable reason would an intelligent and financially sophisticated woman consent to relinquish so large an interest to which she was not even entitled? It is an insult to the decedent, and a distortion of the appellate review process, to insinuate that decedent was ignorant of her interest in the IRA funds.
In applying the “ordinary rules and formalities” to transfers under section 5110.730, the Legislature intended to preserve the traditional rules that govern the interpretation of writings where the intent of the parties is in dispute and may depend, in part, on the evaluation of extrinsic evidence. (See Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861 [44 Cal.Rptr. 767, 402 P.2d 839].) The trial court here was in the best position to judge decedent’s purpose, construed in light of the documents, the evidence, and the testimony and demeanor of the witnesses. In overruling that court’s considered judgment, we not only contravene the legislative intent, but repudiate the necessary deference accorded trial courts in making such difficult determinations.
Worse, however, is the injury that the majority visits upon the decedent and others similarly situated. As her personal accountant testified, Margery’s overriding interest, upon learning of her impending death, was to effect a clear allocation of assets in order to avoid any possibility of acrimony between Robert and her children. Her children were well provided for, having received substantial separate property and stock assets. The pension funds, though community property, were essentially the product of Robert’s 35 years in business, most of which preceded his marriage to decedent; thus, Margery’s election to waive and transfer any interest in those funds was eminently reasonable.3
There is no evidence of overreaching here, nor any hint of exploitation. There is only an effort by an obviously intelligent and courageous woman to *282set her estate in order before her passing, to effectuate a clear and fair allocation of her assets. Her intentions were good, but as Shakespeare observed, “The evil men do lives after them; the good is oft interred with their bones.”4 The majority, sadly, prove the truth of that statement.
On September 6, 1990, the opinion was modified to read as printed above.

 Unless otherwise indicated, all statutory references are to the Civil Code.

 In response to the obvious thrust of the Commission report and the Reppy article, the majority advance two arguments. Neither is persuasive. First, they suggest that a simple writing requirement analogous to the statute of frauds would render mere surplusage the statutory language, “unless made in writing by an express declaration . . . .” (§ 5110.730, subd. (a).) This begs the question, of course, since the very issue we must decide is, an “express declaration” of what? The majority would require specific language stating that the writer is effecting a transmutation of property. The legislative history, however, demonstrates that the purpose was simply to impose a statute-of-frauds equivalent; as explained in the discussion which follows, any writing that evidences an intent to alter the character of property fulfills this requirement.
The majority also assert that the Legislature “cannot have intended that any signed writing whatsoever” would suffice, because some of the cases the statute was designed to overrule involved writings. Of course, the Commission report does not suggest that “any” signed writing would satisfy the statute, only those that meet the formalities of the statute of frauds. Moreover, the cases cited by the majority, Nevins v. Nevins (1954) 129 Cal.App.2d 150 [276 P.2d 655] and In re Marriage of Lucas, supra, 27 Cal.3d 808, plainly fail to meet this standard. Neither involved a writing that even remotely evidenced, on its face, an intent to change the character of property. Nevins held that a husband’s intent to transfer his community property could be inferred from his income tax return. Lucas, as noted earlier, inferred an intent to transmute property from the title document to a mobilehome. Neither of the writings at issue in Nevins and Lucas would have complied with section 5110.730.

 Robert’s defined benefit pension plan became effective in January 1977 and matured seven years later, in 1984; the distribution came to over $250,000. Although the payments into the plan occurred during the course of his marriage to decedent, Robert’s substantial contributions during the seven short years that the plan was in existence were plainly the product of his three decades in business, most of which preceded his second marriage.

 Shakespeare, Julius Caesar, act III, scene 2.