An unpublished opinion out of Orange County helps us to understand when a house acquired during the marriage is community property or separate property. Michael and Jane were married. During the marriage a house was purchased in Newport Beach.
The house was purchased in December 2000 for about $1.155 million. Title was only in Michael’s name. The grant deed read: “to Michael R. Carey, a married man as his sole and separate property.” At the time of the mortgage the parties had been married about five years. They would not separate until about six years later. The $1.155 million consisted of a down payment of $300,000 and a loan of $855,000. The $300,000 down payment was entirely husband Michael’s separate property. Only Michael’s name was on the loan. In fact, Jane told Michael “I’m not going to go on the loan if I’m not going to be on the title.”
Is the house Michael's separate property? No.
The salient issue is the character of the proceeds of the loan, i.e., the source of about 74 percent of the funds used to acquire property. (See In re Marriage of Rossin (2009) 172 Cal.App.4th 725, 731 [“‘In the absence of a controlling statutory presumption to the contrary, the character of property as community or separate will be determined by the source of assets used to produce it.’”].)
Even though only Michael was on the loan, he was married at the time. Because the loan was made during the marriage, the intent of the lender -- to look to either community income or assets, separate income or assets, or some combination of the two -- controls, regardless of whether the loan was to Michael only. (Gudelj v. Gudelj (1953) 41 Cal.2d 202, 210 [“There is a rebuttable presumption that property acquired on credit during marriage is community property. . . . In accordance with this general principle, the character of property acquired by a sale upon credit is determined according to the intent of the seller to rely upon the separate property of the purchaser or upon a community asset.”]; In re Marriage of Grinius (1985) 166 Cal.App.3d 1179, 1186 [“the character of credit acquisitions during marriage is ‘determined according to the intent of the lender to rely upon the separate property of the purchaser or upon a community asset’”].)
The Court also discusses the idea of undue influence, and opines that the quitclaim deed that Jane signed was signed by her under duress, and in therefore invalid.
[T]here was substantial evidence, in the form of the timing of the signing of the quitclaim deed, that the deed was signed under duress. (See In re Marriage of Delaney (2003) 111 Cal.App.4th 991, 996 (Delaney) [construing Family Code section 721: “when any interspousal transaction advantages one spouse to the disadvantage of the other, the presumption arises that such transaction was the result of undue influence”].) Jane was presented with the quitclaim deed on the eve of closing. She had no practical choice to say no. Accordingly, whatever presumption that might arise from title was rebutted. (See id. at p. 997 [“The court concluded that in every such instance, the presumption based on the confidential fiduciary relationship between spouses must prevail over the presumption based on record title.”].)
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