Opinion
No. 11699.
April 26, 1929.
Heskett, Weinberger Miller, of San Diego, Cal., for trustee.
James J. Breckenridge, of San Diego, Cal., for bankrupt.
In the matter of William A. Jarrell, bankrupt. Objections were made by bankrupt to exemptions set off by the trustee, and claim was made for homestead exemption. The referee sustained the bankrupt's objections and set off to bankrupt the property claimed as homestead, and the trustee petitions for review. Order of referee confirmed.
The decision of the referee, F.F. Grant, was as follows:
"1. A declaration of homestead, filed by a bankrupt prior to his adjudication in bankruptcy upon property held by himself and his wife as joint tenants, is valid, where the evidence shows that the property was purchased with community funds, that the husband did not give to the wife an undivided half interest, and that the property was so held in their joint names for convenience. See cases cited in opinion herewith, Collins on Bankruptcy, 316, 317.
"2. Where the property upon which a declaration of homestead is filed exceeds the legal quantity, it must be reduced by cutting off the excess; or if it exceeds the value limit where the limit is by value, it must be divided, if it can be done without material injury to the homestead. Where lots cannot be divided, they must be sold and the proceeds to the value named taken in lieu thereof, and when the residence is primarily the home of the family and there are smaller houses upon the same property used for rental purposes, the smaller residences are only incidental to the use of the property and cannot bar a valid homestead by a declaration upon the whole property. Collier on Bankruptcy (1926) 319, 320. See cases cited in opinion herewith, and Matter of Shepardson (D.C.) 28 F.2d 353, 12 Am. Bankr. Rep. (N.S.) 445.
"3. The only tests of homestead rights in property are use and value, and, where the main buildings upon city lots are used for a residence, it is immaterial as to how many smaller buildings used for rental purposes are on the same property, as the use to which it is made and the value of the property are the conditions upon which said right is based. 24 C.J. 854, and cases cited thereunder.
"This is a proceeding to determine a homestead of a bankrupt. William A. Jarrell was adjudicated a bankrupt on July 17, 1928, and in due course Ralph W. Wallace was elected and qualified as the trustee in said bankruptcy matter. On September 20, 1928, said trustee made a report of exempted property which included only personal property to the value of $70. The trustee states in his proposed exemption that `the bankrupt is not entitled to any exemptions under said section (690 of the Code of Civil Procedure of the State of California) of any real property and/or of the real property described in schedule B-5 of the schedules of the bankrupt filed herein on August 3, 1928 which said real estate is described in said Schedule B-5 as: Part of Lots 45, 46-48 inclusive, block 27, H.M. Higgins Addition to the City of San Diego, County of San Diego, State of California.' That the bankrupt filed, on September 26, 1928, objections to the exemptions as set off by the trustee, and claims that the said bankrupt is entitled to have the said real property set apart to him by virtue of the exemption law of the state of California, as provided in said 690 of the Code of Civil Procedure and the sections covering homesteads in the Civil Code of the state of California.
"A hearing was had upon said matters on August 23, 1928, and on November 20, 1928, respectively, and the matter submitted to the court with written briefs by the trustee and the bankrupt.
"The evidence discloses that the bankrupt and his wife engaged in the mercantile business in San Diego, Cal., during the years 1920 to July, 1928, and that on June 28, 1928, the bankrupt filed declaration of homestead upon said described property, and the same was recorded in Book 14, at page 185, of declaration of homestead in the county of San Diego, state of California; that during 1920 and 1921 the bankrupt purchased said real estate in question; and that the title was taken in the name of the bankrupt and his wife, Anna Jarrell, as joint tenants. The evidence also discloses that the property was purchased with funds accumulated by the bankrupt and his wife and that the same was community funds; that the title was taken in this manner for convenience; and that the bankrupt at the time title was taken exercised full dominion over the property, had full control of it, paid the taxes, all assessments, all improvements, and the wife took no responsibility or exercised no dominion over it, and that his activity continued thus until his wife died on July 9, 1928. The evidence also discloses that neither of the parties knew anything about the effect of taking the property as joint tenants, but, as the evidence discloses, it was taken for `convenience'; and that the bankrupt did not at any time intend to, nor did he, make a gift to his wife of a part or an interest in said property; that the property at all times was considered as community property; and that no change in the actual facts was intended or considered, even though the property was taken as joint tenants.
"The property in question is on the northwest corner of Broadway and Twenty-Sixth streets, San Diego, Cal., and is 85 feet in width on Broadway and about 140 feet in length; that the parties interested herein caused a plat to be made of said property, which plat was admitted in evidence as `Parties Exhibit A.' Said property consists of the east 10 feet of lot 45, lot 46 (25 feet), lot 47 (25 feet), lot 48 (25 feet), in block 27, H.M. Higgins addition to the city of San Diego. The plat also reveals that there are four residences and a garage on this property. House No. 1, being the principal house and the residence of the bankrupt and his family, covering part of lots 48, 47 and 46; house No. 2 is situated on part of the east 10 feet of lot 45, and part of lot 46; house No. 3 is situated on a part of lots 45 and 46; house No. 4 is situated on a part of lots 48, 47, and 46; and the garage is situated on part of lots 46 and 45. Houses Nos. 2, 3, and 4 are smaller houses than No. 1 and are used for rental purposes. The garage is used by the bankrupt and his family, and the west 5 feet of the east 10 feet of lot 45 is used as a garden by the bankrupt, and between the various buildings bankrupt uses the ground for gardens, walks, pagodas, etc. The evidence further shows that there are incumbrances upon the said lots in the aggregate sum of $19,500, and about $1,200 for street improvements, making a total of over $20,500 incumbrances, and the appraisement, by a board of appraisers, appointed by this court, fixed the aggregate value upon said property at $25,000, which includes lots 43, 44, and west 15 feet of lot 45 of the same block; and that the equity in said property is less than $5,000. We find that the entire premises were, during all the times involved in this controversy, necessary and convenient for the use of the bankrupt and his family as a place of residence, and that the smaller residences, that is, houses 2, 3, and 4, were incidental and subordinate to the use by the bankrupt and his family of the said premises; and the evidence further shows that the entire premises is impressed with the homestead character.
"1. One of the questions presented in this matter is whether the declaration of homestead as filed by the bankrupt on June 28, 1928, is a valid declaration of homestead, it being on the property held by the bankrupt and his wife as joint tenants. The law seems to be well settled in this state that where property is held by husband and wife as joint tenants, the intention and acts of the parties at the time of taking the conveyance of the property should govern. The uncontradicted facts are that this property was taken in the name of the bankrupt and his wife as joint tenants for convenience, and that he did not intend nor did he give her an interest in said property which would be her separate property in any event; that his acts at the time do not show that he so intended to give the property to her, and his acts subsequent to the purchase of said property do not change or alter that condition. Some of the leading cases in California on this subject we find are as follows:
"`The character of the ownership of property, whether separate or community, is to be determined by proof showing the mode of acquisition, rather than by any declarations of one of the parties that the property was or was not community property.' Goucher v. Goucher, 82 Cal.App. 456, 255 P. 892, 895; Potter v. Smith, 48 Cal.App. 162, 191 P. 1023; Bias v. Reed, 169 Cal. 33, 145 P. 516; Hammond v. McCollough, 159 Cal. 639, 115 P. 216.
"It is contended that the wife `named as sole grantee in the conveyances to the disputed property, the presumption of separate property, created by Section 164 of the Civil Code, must determine the character of ownership thereof. We find no merit in the point for the reason that such presumption is a disputable one, in the form of evidence, and may be controverted by other evidence, direct or indirect (Stafford v. Martinoni, 192 Cal. 724, 221 P. 919); and whether or not it is so controverted is a question of fact for the trial court, its conclusions, unless manifestly without sufficient support in the evidence, being conclusive on appeal.' Goucher v. Goucher, 82 Cal.App. 457, 458, 255 P. 892, 895, and cases cited.
"` Husband and Wife — Deed to Both — Presumption — Separate Property — Under section 164 of the Civil Code as amended in 1889 (Stat. 1889, p. 328), a conveyance of property to a married woman and her husband presumptively vested an undivided one-half interest in the wife as her separate property.'
"` Rebuttable Presumption — Such presumption is not conclusive, except with respect to a bona fide purchaser for value, and may be overcome by evidence showing that, notwithstanding the form of the conveyance, the property belongs to the community.'
"` Community Character — Burden of Proof — Where a deed of conveyance has been made to a husband and wife, the burden of proving the community character of the property rests on the husband.'
"` Property Acquired with Community Funds — Gift — Intent — Where property conveyed to husband and wife is purchased with community funds, the property acquired would be Community Property unless there was an intent on the part of the husband to make a gift to the wife of the interest transferred to her name.'
"` Evidence — Form of Conveyance — The fact that a conveyance of property purchased with community funds is made in form to both the husband and the wife is itself some evidence of an intent on the part of the husband to make a gift to the wife of the interest conveyed to her.'
"` Question of Fact — The husband's testimony in such case that he did not intend to make a gift to the wife is not conclusive, but the intent accompanying the act is to be inferred by the court or jury from all the circumstances.'
"` Evidence Sustaining Findings — Evidence found sufficient to sustain a finding of fact supporting the presumption that a conveyance to a husband and wife vested the undivided one-half of the property in the wife.' Gilmour v. North Pasadena Land, etc., Co., 178 Cal. 6, 171 P. 1066.
"`The alleged error in excluding evidence of intent relates to a question asked of B.E. Tilden as a witness, inquiring whether at the time when the Lot 6, in block "E" of tract 342 was placed in the name of B.E. Tilden and Mary C. Tilden, he had any intention to give it to his wife, and two further questions inquiring whether at any time he gave or intended to give any of this property to his wife. The witness was permitted to state that he did not tell his wife that he was going to give or had given the property to her. We are of the opinion that the rejected evidence was admissible, and that its exclusion was erroneous. Such seems to have been the opinion of the Supreme Court as expressed in Gilmour v. North Pasadena Land, etc., Co., 178 Cal. 6, at page 9, 171 P. 1066. See, also, Potter v. Smith, 48 Cal.App. 162, 169, 191 P. 1023. [8] It also appears, however, that the question of the alleged donor's intention should be determined from his acts, declarations, and conduct at the time of the transaction; and such evidence easily may be more important and convincing than his subsequent declaration that he did not intend to make such gift. [9] In view of all of the evidence produced in this case, we are satisfied that even if these questions had been answered, and B.E. Tilden had testified that he did not intend to make these gifts to his wife, such testimony would not have changed the findings which were made by the court. For it was manifest throughout the trial that he was contending that he had never intended to make such gift or gifts.' Tilden v. Tilden, 81 Cal.App. 544, 254 P. 310, 314.
"2. The next question presented in this matter is, can the property be divided in such a way as to retain to the bankrupt a homestead.
"In Gregg v. Bostwick, 33 Cal. 220, at page 226, 91 Am. Dec. 637, our court says: `If the homestead when ascertained exceeds the quantity named, where the limitation is by quantity, it must be reduced by cutting off the excess; or if it exceeds the value named, where the limitation is by value, as in this state it must be divided, if it can be done without material injury to the homestead, or if not, it must be sold and the proceeds to the value named taken in lieu thereof.'
"We determine that the property herein cannot be divided for the reason that the principal building and the gardens and the lawns and pagodas are all a part of the homestead property and cover all parts of the said described property.
"The evidence shows without conflict that the property was paid for out of community funds, and as the bankrupt did not give a portion of the property to his wife, and as his declarations and acts at the time of acquisition do not impress us that he so intended, we find that the property is community property and that a husband has a right under the law to declare a homestead upon community property, which he did. Sections 164, 687, 1238, and 1261, Civil Code.
"`If, as appears to have been the case here, the purchase price consisted of community funds the property acquired would become community property unless there was an intention on the part of the husband to make a gift to the wife of the interest transferred to her name.' Fanning v. Green, 156 Cal. 279, 104 P. 308.
"We find that the purchase price did consist of community funds and that there was no intention on the part of the bankrupt to make a gift to his wife of an interest transferred in her name.
"The character of the ownership of property is to be determined by showing the mode of acquisition, rather than by any declarations of one of the parties. The mode of acquisition is clearly that the property was purchased from community funds and that it was the intention that that character should be maintained in this ownership.
"We find in the case of Potter v. Smith, 48 Cal.App. at page 168, 191 P. 1023, 1025, the following declaration, to wit:
"`The Supreme Court has on several occasions expressed the view that the character of the ownership of property, whether separate or community, is to be determined by the proof showing the mode of acquisition, rather than by any declarations of one of the parties that the property was or was not community property. Bias v. Reed, 169 Cal. 33, 42, 145 P. 516; Hammond v. McCollough, 159 Cal. 639, 649, 115 P. 216; Estate of Granniss, 142 Cal. 1, 4, 75 P. 324. The court will decide the question of the alleged donor's intention from his acts, declarations, and conduct at the time of the transaction. Killian v. Killian, 10 Cal.App. 312, 319, 101 P. 806; Woods v. Whitney, 42 Cal. 358. When the controversy, under such circumstances, is between the husband and the legal representative of the wife, the presumption may be controverted by other evidence, direct or indirect, and it is only where it is not so controverted that the court is bound to find in accordance with the presumption. [4] Whether or not it is so controverted, or is sustained, is a question of fact, for the trial court, and the conclusions of that tribunal are conclusive upon an appellate court, unless it be manifestly without sufficient support in the evidence. Fanning v. Green, 156 Cal. 279, 282, 104 P. 308. [5] The presumption, one way or the other, although disputable, is itself evidence, and it is for the trial court to say whether the evidence offered to support or overthrow the presumption has sufficient weight to effect that purpose. Gilmour v. North Pasadena Land, etc., Co., 178 Cal. 6, 171 P. 1066; Pabst v. Shearer, 172 Cal. 239, 242, 156 P. 466.
"`The burden was on the plaintiff to rebut the presumption, on the one hand, that he did not intend to make a gift to his wife of the money and notes transferred to her and from which the home was purchased and furnished, and to sustain, on the other hand, the presumption arising from the acquisition of the real property before the amendment to the code section, that it was community property. Alferitz v. Arrivillaga, 143 Cal. 646, 648, 77 P. 657.'
"The dispute, as will be seen, is whether the property was deeded to the bankrupt and his wife as joint tenants, which, of course, would give her an interest in the property as her separate property; or whether it was to remain as community property by standing in her name for the sake of convenience. From all the facts in the case we have resolved the question in favor of the property being held in the names of the bankrupt and his wife as community property, `for the sake of convenience,' irrespective of the presumption and the instrument. Tolbard v. Cline, 180 Cal. 240, at pages 245, 246, 180 P. 610.
"The evidence that the bankrupt intended to make a gift of an interest in this said property to his wife must be clear and convincing, and we cannot say that the evidence is that he so intended, and find that he did not so intend. Tolbard v. Cline, supra. And, `The presumption that payments made by a husband on property, title to which was taken jointly in him and his wife, were intended as gifts to the wife, may be rebutted by proof that they were made with the intention or agreement that they should not be gifts.' Ringold v. Ringold, 93 N.J. Eq. 357, 116 A. 690, 691.
"The evidence shows that it was not the intention and therefore the property was subject to the homestead declaration as filed on the said property at the time above set out.
"The property claimed as a homestead herein is primarily the home of the family, and the smaller houses on the same said property, the evidence shows, are for rental purposes, and that the bankrupt has had them rented a part of the time during the last eight years, and that the said smaller residences are only incidental to the use of the property and not the primary use of the property. The bankrupt and his family use all the premises in controversy, and all of the property is necessary and convenient for the use of the bankrupt and his family as a place of residence, independent of the smaller residences upon said property which are rental properties. The homestead exemption statutes must be liberally construed in order to effect the causes of protection and the humane object which the Constitution of the state and the acts of the Legislature are intended to give expression to. Warren v. Warren, 144 Cal. 615, 78 P. 24; Simonson v. Burr, 121 Cal. 582, 54 P. 87; McKay v. Gesford, 163 Cal. 243, 124 P. 1016, 41 L.R.A. (N.S.) 303, Ann. Cas. 1913E, 1253; Heathman v. Holmes, 94 Cal. 291, 29 P. 404; section 1237, Civil Code of California, which declares that: `The homestead consists of the dwelling-house in which the claimant resides, and the land on which the same is situated, selected as in this title provided.'
"3. The main dwelling house on this property is situated on lots 46, 47, and 48, and the gardens on the east 10 feet of lot 45. Consequently we feel that the whole of this land and lots should be set aside and exempted to the bankrupt as his homestead hereinbefore referred to. The home is the main thing, and the smaller residences on this same property used to enable the parties to maintain a home are conditions upon which a homestead may be founded, and it may represent a dwelling house at which the family resides with the usual and customary appurtenances, including outbuildings of every kind necessary or convenient for family use, and the lands used for the purpose thereof. If situated in the country, it may include a garden or farm; if situated in the city or town, it may include one or more lots or one or more blocks. In either case it is unlimited by extent merely. In short, the only tests are use and value. Gregg v. Bostwick, supra; Matter of Shepardson (D.C.) 28 F.2d 353, 12 Am. Bankr. Rep. (N.S.) 445.
"Viewing the evidence and the entire surrounding circumstances, we are compelled to hold that at the time the declaration of homestead was filed by the bankrupt, that is, on June 28, 1928, upon the herein described property, said property was community property and that the said declaration of homestead is valid. Civil Code, § 1238; 29 C.J. 854 and citations thereunder.
"The other question raised in this proceeding we feel it is unnecessary to determine at this time, for the reason that the conclusion we have reached, as above indicated, disposes of the matter as presented.
"In conclusion the objection of the bankrupt to the exemptions set off by the trustee is sustained, and the said property, that is, the east 10 feet of lot 45, lots 46 to 48, inclusive, block 27, H.M. Higgins addition to the city of San Diego, be and it is hereby exempt as a homestead and is included in the trustee's exemptions as set off by him, and it is so ordered."
The order of the referee herein, dated January 17, 1929, is confirmed.