VALLI, MARRIAGE OF

Respondent, Frankie Valli, Petition for Review

Cal.June 24, 2011

§$193990 Supreme Court Case No. IN THE SUPREME COURT OF THE STATE OF CALIFORNIA SUPREME COURT RANDY VALLI FlLED Appellant JUN 2 4 2011 vs. Frederick K. Obltich Clerk FRANKIE VALLI _ _Respondent Court of Appeal Second Appellate District Case No.: B222435 Superior Court County of Los Angeles Case No.: BD 414038 PETITION FOR REVIEW Peter Walzer, Esq. Garrett C. Dailey Christopher C. Melcher, Esq. Attorney at Law Walzer & Melcher, LLP SBN: 76180 SBNs: 101477 and170547 2915 McCluare Street 21700 Oxnard Street, Suite 2080 Oakland, California 94609 Woodland Hills, CA 91367 Tel: (510) 465-3920 Tel: (818) 591-3700 Fax: (510) 465-7348 Fax: (818) 591-3774 Attomeys for Respondent FRANKIE VALLI Supreme Court Case No. IN THE SUPREME COURT OF THE STATE OF CALIFORNIA RANDY VALLI Appellant vs. FRANKIE VALLI Respondent Court of Appeal Second Appellate District Case No.: B222435 Superior Court County of Los Angeles Case No.: BD 414038 PETITION FOR REVIEW Peter Walzer, Esq. Garrett C. Dailey Christopher C. Melcher, Esq. Attorney at Law Walzer & Melcher, LLP SBN: 76180 SBNs: {01477 and170547 2915 McCluare Street 21700 OxnardStreet, Suite 2080 Oakland, California 94609 Woodland Hills, CA 91367 Tel: (510) 465-3920 Tel: (818) 591-3700 Fax: (510) 465-7348 Fax: (818) 591-3774 Attorneys for Respondent FRANKIE VALLI TABLE OF CONTENTS Issues Presented And Explanation Of Need For Review Introduction Summary Of The Facts I. Life Insurance Policies Acquired During Marriage With Community Property Funds Are Community Property I. The Opinion Erodes The Community Property Presumption Il. The Form of Title Presumption Should Not Apply in Marital Cases IV. The Opinion Conflicts With Existing Law By Putting The Burden On Frankie To Establish UndueInfluence Rather Than On Randy To RebutIt A. The Presumption of Undue Influence Arose By Operation of Law B. Randy Failed To rebut The Undue Influence Presumption C. Fiduciary Duty Applies To All Transactions During Marriage Vv. Acquiring An Asset During Marriage With Community Property In One Spouse’s Name Is A Transmutation Triggering Family Code §852 Conclusion Certificate of Compliance Opinion Page Number 1 4 13 16 21 21 23 25 30 37 38 Attachment | TABLE OF AUTHORITIES Cases Bazzell v. Endriss (1940) 41 Cal.App.2d 463, 465, Blethen v. Pacific Mut. Life Ins. Co. of Calif. (1926) 198 C.91, 99, 243 P. 431 Brison v. Brison (1888) 75 Cal. 525, 529 (Brison I) Dixon Lumber Co. v. Peacock (1933)_ 217 Cal. 415, 418 Estate ofBaratta-Lorton v. C.I.R. (1985) T.C. Memo. 1985-72, 1985 WL 14707 Estate ofFoy (1952) 109 Cal.App.2d 329, 333 Estate ofLevine (1981) 125 Cal.App.3d 701, 705 Estate ofMacDonald (1990) 51 Cal.3d 262 Estate ofMendenhall (1960) 182 Cal.App.2d 441, 444, 6 Cal.Rptr. 45 Estate ofMiller (1937) 23 Cal.App.2d 16, 18 17 P.2d 1117 Estate of Wedemeyer (1952) 109 Cal.App.2d 67, 71, 240 P.2d 8 Fidelity & Cas. Co. ofNew York v. Mahoney (1945) 71 Cal.App.2d 65, 69, 161 P.2d 944 Field v. Bank ofAmerica (1950) 100 Cal.App.2d 311, 314-315 In re Marriage ofBaragry (1977) 73 Cal.App.3d 444, 448 In re Marriage ofBarneson (1999) 69 Cal.App.4" 583 In re Marriage ofBenson (2005) 36 Cal.4" 1096 In re Marriage ofBurkle (Burkle II) (2006) 139 Cal.App.4" 712, 730 In re Marriage ofElmont 91995) 9 Cal.4" 1026, 1039 Page Number(s) 10 10 19 12 112 11,12 32 6, 33, 34, 36 10 11 10 10 15 6, 32 6 22, 23,24, 27 11 Cases In re Marriage ofHaines (1995) 33 Cal.App.4" 277, 296 In re Marriage ofLange (2002) 102 Cal.App.4gh 360, 364 In re Marriage ofMahone (1981) 123 Cal.App.3d 17, 23 In re Marriage ofMathews (2005) 133 Cal.App.4" In re Marriage of Valli (2011) 195 Cal.App.4" 776 In re Sears’ Estate (1960) 182 Cal.App.2d 525, 530-531 Johnston v. Johnston (1951) 106 Cal.App.2d 775, 779 Life Ins. Co. ofNorth America v. Cassidy (1984) 35 Cal.3d 599, 605 Marriage ofBrooks & Robinson (2008) 169 Cal.App.4" 176, 186-187 Marriage of Campbell (1999) 74 Cal.App.4" 1058, 1065 Marriage of Cross (2001) 94 Cal.App.4" 1143, 1147 Marriage ofDelaney (2003) 111 Cal.App.4" 991, 997-998 Marriage ofEttefagh (2007) 150 Cal.App.4" 1578, 1584 Marriage ofFossum (____) 192 Cal.App.4" Marriage ofLund 92009) 174 Cal.App.4” 40, 55 Marriage of Steinberger (2001) 91 Cal.App.4" 1449, 1465 1466 Marriage of Weaver (1990) 224 Cal.App.3d 478, 484-485 McBride v. McBride (1936) 11 Cal.App.2d 521, 523-524 Meyer v Kinzer and Wife (1859) 12 Cal. 247 Mundt v. Connecticut General Life Ins. Co. (1939) 35 Cal.App.2d 416, 421 il Page Number(s) 17, 18, 19, 32 16, 22, 23 37 16 1, 30, 36, 37 11, 12 12 11, 13 14, 30, 31, 36, 37 32 32 17 14 18, 24 24 34 32, 33 I] 15 Cases Nelson v. Municipal Court (1972) 28 Cal.App.3d 889, 892 New York Life Ins. Co. v. Bank ofItaly (1923) 60 Cal.App. 602, 214 O’Connor v. Travelers Ins. Co. (1959) 169 Cal.App.2d 763, 765, 337 P.2d 893 Patillo v. Norris (1976) 65 Cal.App.3d 209, 217, 135 Cal.rptr. 210 Polk v. Polk (1964) 228 Cal.App.2d 763, 781, 39 Cal.Rtpr. 824 Shaw v. Board ofAdministration, State Employees’ Retirement System (1952) 109 Cal.App.2d 770, 774, 241 P.2d 635 Starr v. Starr (2010) 189 Cal.App.4" 277 Travelers’ Ins.Co.v. Fancher 219 Cal. 351, 26, P.2d 482 Tyre v. Aetna Life Ins. Co. (1960) 54 C.2d 399, 402, 6 Cal.Rptr.13, 353, P.2d 725 Statutes Civil Code §5 110.730 [former] Corporations Code § 16403 Corporations Code §16404 Corporations Code §16503 Evidence Code §604 Evidence Code §662 Family Code §721 Family Code $721(b) Family Code §$721(b)(3) Family Code $760 Family Code $852 Family Code §852(a) Family Code §1100(e) Family Code 1 102(a) il Page Number(s) 28 10 10 10 10, 12 19 10 10, 11 33 26 26 26 18 3, 16, 17, 18, 19, 20 21, 25, 26, 27, 28, 29 18 27 13, 14, 15 1, 3,4, 6, 30, 33, 34, 35, 36 33 27 206, 27 Statutes Probate Code §143 Probate Code §144 Probate Code §1870 Probate Code §16040 Probate Code §16047 Rules of Court California Rules of Court, Rule 8.500(b)(1) California Rules of Court, Rule 8.504(d)(1) Resources 11 Witkin, Summary 10" (2005) Comm.Prop., 847 39A Cal. Jur. 3d, Insurance Contracts (2010) §367 Attorney’s BriefCase, California Family Law, FL.2010.1, Card CmPr929 Bassett, California Community Property Law §5:44 (2010 ed.) Gray & Wagner, Complex Issues in California Family Law (2009 ed.), §C3.01[1] Gray & Wagner, Complex Issues in California Family Law (2009 ed.), 8J6.11 Recommendation Relating to Marital Property Presumptions and Transmutations (Sept. 1983) 17 Cal. Law Revision Com. Rep. (1984) 205, 213-214 Rutter Group, 2 Family Law §8:331 Webster’s Seventh New Collegiate Dictionary Page Number(s) 26 26 27 26 26 10, 11 1] 31 33 31 10 27 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA RANDY VALLI Appellant VS. FRANKIE VALLI Respondent / PETITION FOR REVIEW After a Unanimous Published Decision By The Second Appellate District, Division Five’ ISSUES PRESENTED AND EXPLANATION OF NEED FOR REVIEW > Doesthe record title presumption apply to property acquired by spouses during marriage with community funds in the absence of any independent evidence that they intended that said property be characterized as the titled-spouse’s separate property? > Does Fam. Code §852’s requirement of a writing to change character apply to property acquired during marriage? > If the asset was acquired from a third party, is the spouse who benefitted from the transaction subject to the interspousal fiduciary duty? ' In re Marriage of Valli (2011) 195 Cal.App.4th 776 [“the Opinion”], attached hereto. > What showing is required to overcome the presumption of undue influence when one spouse benefits from a transaction during matriage? The Los Angeles County Superior Court determined that a $3.75 million life insurance policy with a cash value of $365,032 was community property becauseit was acquired during marriage and the premiumswere paid with community property. Randy (the wife) appealed, arguing that the policy was her separate property because she had been namedthe policy’s owner. During marriage, Randy suggested to Frankie (the husband) that they obtain the policy whenhe wasin the hospital suffering from a heart condition. Neither party presented evidence other than thefact that Randy was named the owner of the policy that Frankie intended to makea gift of either the policyitself or its cash value, which accumulated rapidly during marriage. The only evidence presented about the acquisition of the policy was that Frankie agreed with Randy’s suggestion to obtain life insurance because he had no planson separating from Randy and wantedto take care of her and their children if he wereto die. The Court of Appeal reversed the Superior Court on a straight presumption- of-title rationale.It held: e Because Randy was named the owner of the policy, Frankie had the burden to prove by clear and convincing evidence that Randy is not the sole ownerofthe policy. e Because the policy was originally acquired in Randy’s name alone, the community property presumption did not apply. e Becausethe parties acquired the policy from a third party (the insurance company), Randy owed nofiduciary duty to Frankie in connection with the transaction. e Because the policy was acquired from a third party, the protections of Fam. Code §852 did not apply, and therefore the policy’s substantial cash value was her separate property all of the premium payments made with community funds during marriage weregifts to her. e The presumption of undue influence did not arise, even though Randy would receive a substantial asset which was acquired with community funds without payment of any consideration to Frankie. e Frankie had the burden to prove undue influence, rather than requiring Randyto rebut the presumption that she acquiredtitle to the policy by undueinfluence. This opinion resulted from confusionas to the relationship between the Evidence Code section 662 title presumption and the common law presumption of undue influence that arises whenever one spouse gains an advantage overthe other spouse in a transaction involving community property. The opinion underminesthe fiduciary duty between spousesbyrelying on recordtitle rather than the community property presumption and putting the burden on the disadvantaged spouse to prove undueinfluence rather than on the benefitting spouse to rebutit. INTRODUCTION Reviewis important to secure uniformity of decision andto settle an important question of law that can adversely impact spouses who do not have control over the family finances. (Calif. Rules of Ct., rule 8.500(b)(1). ) As will be discussed in more detail below, the appellate courts disagree asto the effect to give title when characterizing property between spousesin marital dissolution actions. Although the trial court properly found that the life insurance policy was community property because it was acquired during marriage with community funds, the SecondDistrict panel reversed on a straight presumption-of-title rationale.It held that regardless of the lack of any writing transmuting the property from community into Randy’s separate property, the mereact oftaking title in her name removedit from the community property presumption andthe protections of Family Code section 852, resulting in an unintendedgift from Frankie to Randy of $365,032 in cash value, plus $3.75 million dollars in death benefit proceedsthat Frankie intended would be used for his children’s support and protection. All wholelife insurance policies are acquired with one party or the other as the named owner. Dozensofpublished opinions have characterized such policies as community property based upon the acquisition of the policy during marriage or the use of community funds to pay the premiums. Thisis the first published opinion to hold that, regardless of the policy’s community attributes and the application ofthe communityproperty presumption, such a policy is the separate property ofthe spouse designated as its owner. If this case stands, hundreds of thousands of California spouses will get a nasty surprise when they learn that that the policies on which community property has been paying the premiumsforyearsare, in fact, the named owner’s separate property. This opinion affects far more than life insurance policies. Pension plans and other retirement accounts are alwaysheld in the name of the employee spouse. Underthis opinion, such assets are now the separate property of the employee spouse, evenif all ofthe benefits were earned during marriage. Housesandcars may beheld in the nameofone spouse because the other spouse has poorcredit and the parties could not qualify for a loan to acquire the asset if they boughtit jointly. Those houses and cars are now separate property if this opinion is allowed to stand. The opinion also takes away the interspousal fiduciary duty in any marital transaction that is between one spouse anda third party. Since property purchased during marriage is almost always acquired from third party, this case carves a huge hole in marital fiduciary obligations by exemptingall property originally acquired by one spouse from a third party during marriage with community funds. Case law has been consistent that, under Family Code section 852, a writing which expressesa clear intent to transmute is required to change the character of property. (See, e.g., Estate ofMacDonald (1990) 51 Cal.3d 262, In re Marriage of Benson (2005) 36 Cal.4th 1096, In re Marriage ofBarneson (1999) 69 Cal.App.4th 583.) By holding that section 852’s writing requirement does not apply to assets acquired from third parties, community funds used to acquire a new asset are suddenly transmuted into separate property (a newasset titled in one spouse’s name). This creates’a major exception in the otherwisestrict requirements for a writing “in which the adversely affected spouse expresses a clear understanding that the document changes the character or ownership of specific property.” Un re Marriage ofBenson, supra, 36 Cal.4th at pp. 1106-1107.) Pursuant to this opinion, a self-serving spouse can create separate property out of community funds by arranging for newly acquired property to betitled in his or her name. This cannot be what this Court intended. SUMMARYOF THE FACTS Eighteen monthsprior to separation, Frankie acquired the $3.75 millionlife insurance policy insuring his life. (RT 181:15-20; RT 244:15-17 & 293:4-11; JA 20-24 & 56:7-10.) Randytestified that they talked about it while Frankie was in the hospital with heart problemsand agreedto obtain a life insurance policy “to protect [her] future.” (RT 728:18-22 & 729:4-9.) She testified that Frankie told her that he was “going to make[her] the owner.” (RT 728:23-28.) WhenFrankie obtained the policy, he had no plans to separate from Randy. (RT 181:21-23.) He had medical problems and wantedto be certain that his family would be taken care of and his children could go to college. (RT 181:24-182:2.) The purposeofthe policy wasto provide financial security for them when hedied. (JA 56:9-10.) As Randy putit: “[The purpose was] to prepare for my future in case something did happen to Frankie.” (RT 729:4-9.) There was no evidence of any agreement or understandingasto the policy’s character. Its cash value ofthe policy as of September 12, 2008, was $365,032. (RT 245:12-18.) It named Randyas “the owner.” (RT 247:24-248:1.) Barry Siegel had been the business manager for Frankie Valli and The Four Seasons since 1994. (RT 289:10-25.) His office made the premium payments on the policy. Between March 7, 2003, whenthe first premium payment was made and December3, 2008, $512,675.75 in payments were madeonit. (RT 291:5- 7 292:5 & 293:9-12; Trial Exhibit 52 [JA 155-158].) Randy never offered to contribute to the cost of the premiumsonthe policy. Frankie paid them all. (RT 188:13-20.) The parties offeredlittle testimony about the policy. Frankie testified that he did not want Randyto be the beneficiary of a policy on hislife after separation because he wanted the death benefits to go to his children. (RT 188:3-12.) He testified that he had established a child support trust to secure his child support obligation. (RT 866.) He was concerned about the estate taxes his children will have to pay upon his death. He wouldlike them to be able to keep the Four Seasons music catalog intact as itwould be a source of income for them. The insurance that he obtained waspart of the plan to help keep the catalog in the family after his death. (RT 184:28-185:11.) Randy admitted that she had paid Frankie nothing to be listed as the ownerofthe policy. (RT 450.) At one point, the Court assumed that because Frankie purchasedthe policy during marriage, it was community property and asked if everyone agreed. (RT 450:22-451:3.) Randy’s attorney replied: “depending on how the evidence goes,it may be separate property, depending on the reasons why - that he acquired the policy and put her nameonit.” (RT 451:4-8.) Randy offered no evidence as to why she waslisted as the ownerrather than just the beneficiary. She offered no testimony of any substanceasto their discussions, her actions, or anything related to the acquisition beyondthat it was a joint decision andthat: “[The purpose for obtaining the policy was] to [protect/prepare for] my future in case something did happen to Frankie.” (RT 728:5-729:9.) She also presented no evidence that Frankie understood that by naming herthe policy owner, he was makinga gift to her of policy’s substantial cash value that rapidly accumulated and its death benefits. The Trial Court applied the community property presumption and held that the policy was a community asset, awarded it to Frankie and ordered him to reimburse Randy for half of its cash value. The Court of Appeal reversed in a published opinion. No request for rehearing was made in the Court of Appeal. I. LIFE INSURANCE POLICIES ACQUIRED DURING MARRIAGE WITH COMMUNITY PROPERTY FUNDS ARE COMMUNITY PROPERTY The Court of Appeal held that the character of an insurance policy acquired and paid for during marriage with community funds is determined bytheact of designating one ofthe spouses as the “owner.” Thefirst and most obvious problem with this holdingis that it is simply incorrect as a matter of black letter law; this issue has been settled in California for probably a hundred years. Asstated in Mundt v. Connecticut General Life Ins. Co. (1939) 35 Cal.App.2d 416, 421: “From the leading case of New York Life Ins. Co. v. Bank ofItaly, 60 Cal.App. 602, 214 P. 61, through the manyintervening cases, down to Travelers' Ins. Co. v. Fancher, 219 Cal. 351, 26 P.2d 482, the only test applied to this problem has been whether the premiums (on a policy issued onthe life of a husband after coverture) are paid entirely from community funds. If so, the policy becomes a community asset...” Witkin succinctly states: [§ 47] Whole Life Insurance. (1) General Rule. Where the premiums on a spouse's life insurance policy are paid with community funds, the chose in action represented by the policy is community property. (See Blethen v. Pacific Mut. Life Ins. Co. of Calif: (1926) 198 C. 91, 99, 243 P. 431; Tyre v. Aetna Life Ins. Co. (1960) 54 C.2d 399, 402, 6 C.R. 13, 353 P.2d 725, infra, §141; New York Life Ins. Co. v. Bank ofItaly (1923) 60 C.A. 602, 605, 214 P. 61; Mundt v. Connecticut General Life Ins. Co. (1939) 35 C.A.2d 416, 421, 95 P.2d 966; Bazzell v. Endriss (1940) 41 C.A.2d 463, 465, 107 P.2d 49; Estate of Wedemeyer (1952) 109 C.A.2d 67, 71, 240 P.2d 8; Fidelity & Cas. Co. ofNew York v. Mahoney (1945) 71 C.A.2d 65, 69, 161 P.2d 944,infra, §113 [must show that premium was paid with community funds]; O'Connor v. Travelers Ins. Co. (1959) 169 C.A.2d 763, 765, 337 P.2d 893 [same]; Estate ofMendenhall (1960) 182 C.A.2d 441, 444, 6 C.R. 45; Polk v. Polk (1964) 228 C.A.2d 763, 781, 39 C.R. 824; Patillo v. Norris (1976) 65 C.A.3d 209, 217, 135 C.R. 210; 18 Pacific L. J. 969; 54 A.L.R.4th 1203 [valuation]; Rutter Group, 2 Family Law §8:331.) (2) Distinction: Spouse as Beneficiary. If the spouse is the beneficiary of the insured spouse's policy, this is a gift of community property to the beneficiary spouse. At the death of the insured 10 spouse, the proceeds vest in the beneficiary spouse_as his or her separate property. (Estate ofMiller (1937) 23 C.A.2d 16, 18, 71 P.2d 1117; Shaw v. Board ofAdministration, State Employees' Retirement System (1952) 109 C.A.2d 770, 774, 241 P.2d 635.)° (11 Witkin, Summary 10th (2005) Comm.Prop, §47, p.578 (emphasis added).) Cal.Jur.3d concurs: “A policy of insurance on a spouse's life is community property where the premiums have been paid with community funds.” (39A Cal. Jur. 3d Insurance Contracts (2010) §367.) Bassett, California Community Property Law §5:44 (2010 ed.)states: “Under California community property law a life insurance policy purchased with community funds is an asset of the community. Life insurance paid for by an employer as a benefit of employment is community property.” Literally dozens of published opinions haveflatly held that “(a) policy of insurance on the husband'slife is community property when the premiumshave been paid with community funds.” (Tyre v. Aetna Life Ins. Co, supra, 54 Cal.2d at p. 402; see also, In re Marriage ofElfmont (1995) 9 Cal.4th 1026, 1039 (J. George concurring and dissenting), Life Ins. Co. ofNorth America v. Cassidy (1984) 35 Cal.3d 599, 605; McBride v. McBride (1936) 11 Cal.App.2d 521, 523-524; Estate ofFoy (1952) 109 Cal.App.2d 329, 333; In re Sears' Estate (1960) 182 Cal.App.2d * This is actually an important, albeit unrelated point, namely thatthe gift of policy benefits, if any, takes place upon the death of the insured, not upon the acquisition of the policy. 11 525, 530-531; Dixon Lumber Co. v. Peacock (1933) 217 Cal. 415, 418; Estate of Foy, (1952) 109 Cal.App.2d 329, 333; Estate ofSears (1960) 182 Cal.App.2d 525, 530; Field v. Bank ofAmerica (1950) 100 Cal.App.2d 311, 314-315; Johnstonv. Johnston (1951) 106 Cal.App.2d 775, 779; Polk v. Polk (1964) 228 Cal.App.2d 763, 781; and Estate ofBaratta-Lorton v. C..R. (1985) T.C. Memo. 1985-72, 1985 WL 14707.) In each of these cases, one spouse or the other was the named ownerofthe policy; however, that did not control its character. Rather, the factors that determined character were: 1) when wasthe policy acquired, and 2) who made the premium payments.In other words, if the policy was acquired during marriage and the community madethe payments, then the policy was community property - period. Notwithstanding this unbrokenline of cases, the Court of Appeal held that it does not matter that the community acquired and made the payments on the policy - all that matters is who was designatedits “owner.” All will agree that spouses designate a policy owner for manyreasons, probably none of whichrelate to its character in the event of a divorce. At page 18 of her opening brief, Randy stated: “Tt can be inferred that [designating Randy as the owner] was also done for estate planning purposesas is often the case when one spouse is made the ownerof an insurancepolicy as part of the estate plan of the other spouse.” 12 In spite of one spouse’s being named as ownerfor a totally unrelated purposeorfor no particular reason at all, the Opinion held that whichever spouse happensto be so namedisalso the policy’s absolute ownerfor all purposes, including characterization upon divorce. That will be an unpleasant surprise to half of the California spouses who believe that such policies are community property and represents a dramatic 180-degree departure from a hundred years of California law. II. THE OPINION ERODES THE COMMUNITY PROPERTY PRESUMPTION “When life insurance premiumsare paid with community property funds, the resulting policy is an asset of the community. [Citations.|” (Life Ins. Co. ofNorth America v. Cassidy, supra, 35 Cal.3d 599, 605.) Community property is defined as “all property” which is acquired by “a married person” during marriage, “[e]xcept as otherwise provided by statute.” (Fam. Code §760.) The definition includes property acquired during marriage by one spouseacting alone and in one spouse’s sole name, unless anotherstatute characterizes it as separate property. In dissolution actions, the party claiming that the property is separate always bears the burden of proof to overcome the community property presumption and establish by a preponderanceof evidence that an asset acquired during marriageis 13 not community property. (Marriage ofEttefagh (2007) 150 Cal.App.4th 1578, 1584.) Because Frankie acquired the policy during marriage with community funds,it falls within the definition of community property. (Fam. Code §760.) Nevertheless, the trial court held that it was Randy’s separate property simply because he designated her as its owner. How did this happen? Relying on Marriage ofBrooks & Robinson (2008) 169 Cal.App.4th 176, 186-187 [“Brooks”’], the Opinion held “ ‘the act of taking title to property in the nameofone spouse during marriage with the consent of the other spouse effectively removes that property from the general community property presumption. In that situation, the property is presumably the separate property of the spouse in whose nametitle is taken. [Citations.]’ ” (Opinion, p.783.) And, that presumption can only be rebutted by clear and convincingproof. (Jbid.y’ ; Brooks is a modelfor the axiom that bad facts make bad law. Thetrial court in Brooks was addressing the issue of whethera third party (a business that purchased distressed properties) which boughta residencetitled in the name of one of the spouses wasa bonafide purchaser for value. The case did not deal with whetherthe title property presumption trumpsthe fiduciary duties between spouses and the marital presumptions. The Brooks court acknowledgedthat the form of title presumption doesnot apply in a dispute between spouses regarding the character to property where onehasreceived an unfair advantage over the other. The husband, who wasinpro per, never argued that wife’s acquisition oftitle in her name was dueto any undueinfluence. (/d., 169 Cal-App.4th at p.190, fn.8. ) But Brooks is now being cited for the unfortunate proposition that thetitle presumption will prevail over the lawsrelating to transmutation and fiduciary duty. 14 Suddenly, instead of the presumption being that property acquired during marriage is community as provided by Family Code section 760,if the property is acquired in one spouse’s name,as insurance policies usually are, the presumption is flipped andtheasset is presumedto be separate property, requiring the non-titled spouse to present clear and convincing evidenceto the contrary to bring it back into the community property fold. This conflicts with virtually all published marital property cases in the last 150 years of California history and is simply wrong. The community property presumption applies to all property acquired during marriage and shifts the burden to the party claiming it separate to prove it by a preponderanceof evidence. Thatis its purpose. (Fam. Code §760; Meyer v. Kinzer and Wife (1859) 12 Cal. 247; In re Marriage ofBaragry (1977) 73 Cal.App.3d 444, 448 [“"Property acquired during a legal marriage is strongly presumed to be community property. [Citations.] That presumption is fundamentalto the community property system...”].) Yet, the Opinion established a major exception, holding that the community property presumption does not apply to assets acquired in one spouse’s nameduring marriage. That cannotstand. 15 IIL. THE FORM OF TITLE PRESUMPTION SHOULD NOT APPLY IN MARITAL CASES The Opinion relied on the form oftitle presumption in Evidence Code section 662 to hold that the policy was Randy’s separate property. Evidence Code section 662 states: The ownerofthe legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof. In marital situations, that presumption will invariably conflict with the presumption of undue influence because the spouse in whose namethepropertyis taken will usually have benefited in comparison to the other spouse. “Generally, a fiduciary obtains an advantageifhis position is improved, he obtains a favorable opportunity, or he otherwise gains, benefits, or profits.” (im re Marriage ofLange (2002) 102 Cal.App.4th 360, 364 [“Zange’’].) There is no doubt that Randy benefited from the acquisition of this policy. Per the Opinion,she receives $365,032 in cash value plus $3.75 million in death benefit proceeds despite having almost no insurable interest on Frankie. The presumption of undue influence arises without any showingof“actual fraud, deceit or coercion” Un re Marriage ofMathews (2005) 133 Cal.App.4" at pp. 629-630.); 16 thus, in this case it was presumed by operation of law and Frankie should not have had to prove undueinfluence. It is well established that the form oftitle presumption is inapplicable in a dispute between spouses whenthe application of that presumption conflicts with the more specific presumption of undue influence. Um re Marriage ofHaines (1995) 33 Cal.App.4th 277, 296 [“Haines’”’]; Marriage ofDelaney (2003) 111 Cal.App.4th 991, 997-998.) Haines found that the form oftitle presumption and the presumption of undue influence “are in irreconcilable conflict” (Haines, at p.296) and that the undueinfluence trumps the title presumption basedon strong policy considerations of preventing overreaching by spouses. Thus, Randy “properly should have borne the burden of rebutting the presumption of undue influence... (t)o demonstrate the advantage wasnot gained in violation of the confidential relation between marital partners....” ([bid.) Evidence Codesection 662 places the burden of proof on the party disputing recordtitle to show byclear and convincing evidence that the holder oflegaltitle is not the owneroffull beneficialtitle. Until that showing is made, a court is required to assumethat the record owneris the full beneficial owner. Likeall presumptions, once proofofthe basic fact is made, a court is required “to assumethe existence of the presumed fact ‘unless and until evidence is introduced which would support a 17 finding of its nonexistence... .’” (Haines, at pp.296-297, quoting Evid. Code §604.) The undue influence presumption, on the other hand, places the burden of proof on a spouse whoreceives an unfair advantage over the other spouse in a transaction to show that there was no breachoffiduciary duty. (Haines, at p.296.) “The presumption that the advantage was gained by the exercise of undue influence continues until it is dispelled.” bid.) The two presumptions conflict. The sameset of facts cannot lead to dueling presumptions. Both parties cannot have the burden of proof on a single issue. A court cannot be required to assume the existence of two presumedfacts which are mutually exclusive ofthe other. In resolving the conflict, Haines noted “that where two presumptionsare in conflict, the more specific presumption will control over the more general one.[Citation.| (Id. at p.301.) The Court concludedthat: [A]pplication of section 662 is improper whenit is in conflict with the presumption of undue influence that emanates from former section 5103, subdivision (b) (Fam. Code §721(b)). Any other result would abrogate the protections afforded to married persons and denigrate the public policy of the state that seeks to promote and protect the vital institution of marriage. (/d. at p.302.) This wasreiterated in Marriage ofFossum, supra, 192 Cal.App.4"™at p.345: “TTjhe form oftitle presumption simply does not apply in cases in which it conflicts with the presumption that one spouse has exerted undue influence overthe other.” 18 Haines noted that the form oftitle presumption is “concerned primarily with the stability of titles, which obviously is an important legal conceptthat protects parties to a real property transaction, as well as creditors.” Ud. atp.294.) The stability oftitle is less of a concern whenthe issue is how to characterize property in a marital dissolution action between spouses, wherethe rights of a third party bonafide purchaseror creditor is not involved. (/d., 294-295.) The recent case ofStarr v. Starr (2010) 189 Cal. App. 4th 277, carefully analyzed these competing presumptions, as follows: The Haines court quoted Brison v. Brison (1888) 75 Cal. 525, 529 (Brison I) for the proposition that when a spouse gained an advantage from a transaction with the other spouse, “‘[t]he law, from considerations of public policy, presumes such transactions to have been induced by undueinfluence.’” (Haines, supra, 33 Cal.App.4th at p. 293.) When that presumption arose, it trumped the competing presumption created by Evidence Code section 662. (Id., at pp. 297, 299-301.) Therefore, the husband had to show that the deed “‘was freely and voluntarily made, and with a full knowledgeofall the facts, and with a complete understanding of the effect of the transfer.’” (Jd. at p. 282. Emphasis added.) The Opinion acknowledged this general rule, but then proceededto carve out an enormous exception by holding that because the policy was acquired from a 19 broker, “Randy could not have owed a fiduciary duty to Frankie in a transaction in whichshedid notparticipate.” (Opinion, p.786.)* The problem with this logic is that almost any time an asset is purchased during marriage,it is from a third party. Also, Frankie did not suddenly decide to purchasea life insurance policy -- Randy requested that he acquire one. (RT 728:5- 22.) He acquiredit as a result of her request. Yet, somehow, because he purchased it from a third party, Randy is completely exempted from fiduciary duty and the resulting presumption of undue influence. The Opinionheld that because Randy did notparticipate in the final stage of acquiring the policy fiduciary duty was not implicated. That is simply wrong. The acquisition was the result of one continuoustransaction that started with her request. She benefited from the transaction. That triggered the presumption of undue influence that trumped the presumption-of-title. Evidence Code section 662 did not control the outcome, and should have had norole in the process. The Opinion creates confusion by suggesting that it shouldcontrol. * The Opinion also left open the very real question of whether Family Codesection 721 applies to transactions during marriage with third parties. By suggesting that this is a viable argument, the Opinion invites others to argue that somehow marital transactions are exemptfrom fiduciary duty if they involve third parties. (See discussion in section IV. C., below.) 20 IV. THE OPINION CONFLICTS WITH EXISTING LAW BY PUTTING THE BURDEN ON FRANKIE TO ESTABLISH UNDUE INFLUENCE RATHER THAN ON RANDY TO REBUTIT Frankie raised the breach offiduciary duty argumentat trial in response to Randy’s form oftitle argument. He argued that a presumption of undue influence would arise if the policy were characterized as Randy’s separate property because she did not pay any consideration for her sole ownership of the policy, which had been purchased with community funds. Frankie argued that the form oftitle presumption wastrumped by the undue influence presumption. (RT 961:2-11.) The Trial Court agreed, but the Court of Appeal did not. A. The Presumption ofUndue Influence Arose by Operation of Law: The “confidential relationship [between spouses] imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantageofthe other.” (Fam. Code §721(b).) The word ‘advantage,’ in this context, plainly does not mean merely that a gain or benefit has been obtained. Taking ‘advantage of another’ necessarily connotes an unfair advantage, not merely a gain or benefit obtained in a mutual exchange. * * * Cases... involving property transfers without consideration, necessarily raise a presumption of undue influence, because one spouse obtains a benefit at the expense of the other, who receives nothing in return. The advantage obtained in these cases, too, may be reasonably characterized as 21 a species of unfair advantage. (Marriage of Burkle (Burkle II) (2006) 139 Cal.App.4th 712, 731 (emphasis added) [“Burkle”’].) Lange, supra, 102 Cal.App.4"at p.364, broadly defined the type ofbenefitthat triggers the presumption of undueinfluence: [A] fiduciary obtains an advantage if his position is improved, he obtains a favorable opportunity, or he otherwise gains, benefits, or profits. [Citation.] The burden of dispelling the presumption of undue influence rests upon the spouse who obtained an advantage or benefit from the transaction. Randy wasdefinitely advantaged to Frankie’s detriment. > Sherequested that he buy the policy. (RT 728:5-22.) > Hepurchasedit with community funds. (JA 875; RT351:12-15) >» The premiumswere paid on the policy with community funds through the date of separation. (JA155; RT 291:9-26.) > Between March 7, 2003, whenthefirst premium payment was made and December3, 2008, $512,675.75 in payments were made onit. (RT 291:5-292:5, 293:9-12; Trial Exhibit 52 [JA155-158].) > The policy had a cash value of $365,032. (JA 875.) > Randy gave Frankie no consideration for the policy to be characterized as her separate property. (RT 450:10-15.) > Randy will receive $3.75 million in death benefits on Frankie’s life with virtually no insurable interest.” ° Frankie has provided a child support trust and Randy’s spousal support is only $5,000 per month. 22 Despite this, the Opinion states: “No such advantage was obtained here.” (Opinion, p.786.) In other words, the Opinion found that Randy did not benefit and thus the presumption of undue influence wasnottriggered. This is contrary to Lange andother cases which have defined “unfair advantage” broadly. Since, under the Opinion, Randy receives an unfair advantage by having the policy deemed to be her separate property even though it was acquired with community funds, the presumption of undue influence arose. She had to rebut that presumption or see the policy characterized as community. Once the undue influence presumption arose, the case should have been analyzed solely under the undue influence presumption. The form oftitle presumption should have been disregarded. B. Randy Failed to Rebut the Presumption ofUndue Influence: “When a presumption of undueinfluence applies to a transaction, the spouse who wasadvantagedbythe transaction must establish that the disadvantaged spouse's action ‘was freely and voluntarily made, with full knowledge ofall the facts, and with a complete understanding of the effect of’ the transaction.” (Burkle, supra, 139 Cal.App.4th at p. 738-739.) This is important. Since Randy was the advantaged spouse, to overcome the presumption ofundue influence it was her burden to establish: 1) The transaction wasfreely and voluntarily made; 23 2) With full knowledge ofall the facts; and 3) With a complete understanding of the effect of the transfer. She arguably provedthat the transaction was free and voluntary. However, she offered no evidenceto establish that Frankie had “full knowledgeofthe facts” and a “complete understanding” that by naming her the owner he was making a gift to her for all purposes of 100% of the premiums, the cash value, and death benefits. (See Burkle, supra, 139 Cal.App.4th at p. 738-739; Marriage ofLund (2009) 174 Cal.App.4th 40, 55; Marriage ofFossum, supra, 192 Cal.App.4" at p.344; etc.) There is absolutely no evidencein the record that Randy or anyoneelse explained to Frankie the significance of naming Randy as the ownerofthe policy. There is absolutely no evidence that he (or anyone else) understood that naming Randyas the “owner” waseffectuating a transmutation of the policy from community property (as provided for in an unbrokenline of cases going back almost 100 years) to her separate property, along with 100% ofall premium payments thereafter made with community property. Since Randy benefited, it was her burden to overcome the presumption of undue influence which arose as a matter of law. The Opinion, however, put the burden on Frankie to prove undueinfluence.It held: “There is not substantial evidence ofundue influence.” (Opinion, pp.786, 786-787.) In other words, Frankie 24 had to prove it. That is not the test. Undue influence was presumed. It was Randy’s burden to rebut that presumption and she did not do so. The Opinion places the burden on the wrongparty. It is contrary to every published opinion discussing the presumption of undue influence. Since Randy offered no evidence as to points (2) and (3), how could she overcomethe presumption? She couldn’t - and didn’t. The Opinion has greatly muddiedthe law. C. Fiduciary Duty Applies to All Transactions During Marriage: Randyargued that the presumption of undueinfluence could not havearisen because she owednofiduciary duty to Frankie in taking ownership ofthe policy. Citing Family Code section 721, Randy claimedthat the fiduciary duty which spouses oweeachother only applies “in transactions between themselves.” (AOB 13.) Randy stated: “This wasnot a transaction ‘between’ Frankie and Randy.It wasa transaction with a third party. .. .” Id.) Accordingly, she argued, the undue influence never came into play, so the form oftitle presumption should be allowed to operate. (AOB 13-14.) The Opinion did not resolve whetherthe duty applied, finding instead that Randy prevailed whetherit did or not. (Opinion, p.786.) This is unfortunate because by leaving this question unresolved, the Opinion invites morelitigation over the question. 25 The answeris that fiduciary duty applies to all dealings between spouses, or between one ofthem and a third party, concerning property. Family Code section 721 provides: (a) Subject to subdivision (b), either husband or wife may enter into any transaction with the other, or with any other person, respecting property, which either might if unmarried. (b) Except as provided in Sections 143, 144, 146, 16040, and 16047 of the Probate Code, in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including, but not limited to, the following: 2 kK (3) Accounting to the spouse, and holding as a trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the community property. (Fam. Code §721 (emphasis added).) Randyis incorrectin asserting that the fiduciary duty only applies to contractual agreements between spouses. If her position were correct, there would be no breach offiduciary duty if a spouse sold a community assetto a third party without the consent of the other spouse, since it was not a “transaction between 26 spouses.” (See, contra, Fam. Code §1102(a) - requiring joinder of both spousesin the sale of community real estate). Thelast sentence ofFam. Code §721(b)“is clear, prohibiting either spouse from taking ‘any unfair advantageofthe other.’” (Burkle, supra, 139 Cal.App.4"at p. 730.) The fiduciary duty applies not only to interspousaltransactions, but any time a spouse deals with community property, even if he or she acts alone.For example, Family Code section 721, subdivision (b)(3) provides that a spouse may not profit from “any transaction by one spouse without the consentofthe other spouse” concerning communityproperty. If the fiduciary duty were limited to contracts between spouses, there would be no need for a spouse to disgorgeprofits madein a “transaction by one spouse.” Thefiduciary duty also extendsto a spouse’s management and control of community property, even if that spouseacts alone. (Fam. Code §1100(e).) Although Fam. Codesection 721 does not define the word “transaction,”it should be given a broad meaning consistent with the protections afforded spouses by the fiduciary duty.“Transaction”has been defined broadly in other contexts. For example, Probate Code section 1870 defines “transaction”for purposes of a conservatorship as including “makinga contract, sale, transfer, or conveyance, incurring a debt or encumbering property, making a gift, delegating a power, and waiving a right.” As a further example, “Webster’s Seventh New Collegiate 27 Dictionary defines a ‘transaction’ as an ‘act,’ and a ‘fact’ as ‘a thing done.” (Nelson v. Municipal Court (1972) 28 Cal.App.3d 889, 892, fn.4 (dealing with transactional immunity).) The word “transaction” as used in Family Code section 721 is not limited to contracts between spouses.It includes any fact or dealing between spouses, or any conductby either of them, concerning their property. The acquisition of the insurance policy in this case qualifies as a transaction between spouses. Randy asked Frankie to take out the policy and she participated in the acquisition of the policy by discussing it with Frankie and their business manager. (RT 728:5-22.) Frankie did not obtain the policy unilaterally without Randy’s knowledgeor participation. The policy washer idea and she participated in the process of obtaining it. Her conversations with Frankie about the policy, when Frankie was in the hospital, obviously worried, under stress and very vulnerable, were dealings between spousesregarding the acquisition of property. Randy was the one who stood to gain from the policy. Had she not asked Frankie to take out the policy, it might never have been obtained. Frankie’s testimony that he put the policy in Randy’s name,trusting that she would use the proceeds ofthe policy for the support of their children, demonstrates that he was relying on their confidential relationship in obtaining the policy. 28 The fact that Frankie used community funds to acquire the policy in Randy’s nameis further evidence that the transaction resulted from the trust and confidence imposed by the marital relationship. The parties were married to each other when he purchasedthe policy, with no plans of separation. The parties occupied a confidential relationship that imposed a duty on each of them notto take advantage of the other. The acquisition of the policy was part of a seamless transaction that began with Randy’s request. Thefacts are sufficient to constitute a “transaction between spouses” for purposes of Family Codesection 721. The argumentthat spousesare not subject to fiduciary duty vis-a-vis each other in their dealings with third parties is a dangerous one with the potential to destabilize the growing body of law regarding interspousal duties. As discussed above,fiduciary duty applies in transactions between Frankie and third parties involving Randy - especially whensheinitiated the transaction. To holdthatit doesn’t, as the Opinion does, not only conflicts with existing law, but creates a huge new loophole though whichfiduciary obligations between spouseswill be eroded. 29 V. ACQUIRING AN ASSET DURING MARRIAGE WITH COMMUNITY PROPERTY IN ONE SPOUSE’S NAME IS A TRANSMUTATION TRIGGERING FAM. CODE 8852 The policy was acquired during marriage and paid for with community earnings, and after separation with Frankie’s separate earnings. It was thus presumably community property. Although she denied doing so, Randyreally claimedthat this community property asset became, i.e., was “transmuted”into, her separate property by the act of her name being entered by the agent in the blank on the application for “policy owner.” Relying on Brooks, supra, the Opinion held that the initial acquisition ofproperty from a third party does not constitute a transmutation. "A "transmutation" is an interspousal transaction or agreement that works to change the character of property the parties' already own. By contrast, the initial acquisition of property from a third person does not constitute a transmutation and thus is not subject to the [Family Code section 852, subdivision (a)] transmutation requirements © {citation]."” (Opinion, at p.783.) Thus, both Brooks and Valli hold that the writing requirement in Family Code section 852 for interspousal transactions which changethe character of property does not apply to initial acquisitions. (Opinion, p.787; Brooks, supra, 169 Cal.App.4th at p.191.) 30 The Brooks decision has been criticized by several legal commentators. (See, e.g., Gray & Wagner, Complex Issues in California Family Law (2009 ed.), §J6.11, pp.J6-68 to J6-75; Attorney's BriefCase California Family Law, FL2010.1, card CmPr 929).) It is respectfully submitted that the Brooks decision is incorrect in excluding assets acquired from third parties during marriage in one spouse’s namefrom the definition of transmutation. Pursuant to Brooks, an asset that is undeniably community, such as life insurance policy acquired during marriage with community funds, becomesthe separate property of one of the spouses based upon a decision tolist one rather than the other as the policy owner. Insurancepolicies will typically be owned by one spouseor the other, often unbeknownstto the parties when they acquire it. That decision is often made by the insurance agent completing the application form. Does this mean that they are determining its character in the event of dissolution of matriage? This is an important point. As Randy argued below: [A] life insurance policy is not the same as a house, a business, or other traditional assets. Unlike those assets, which are meant to be utilized during life, a life insurance policy is meantto be utilized after the insured’s death. Consistent with this purpose, the owners of life insurance policy deliberately designate the individual who standsto obtain the benefits of the policy whenthe insured dies.... (JA 51:3-9.) She is correct. Life insurance policies are different. They are acquired for different reasons than a houseor car. The designation of the policy owneris madefortax or 31 estate planning reasons, or simply becausethat is the way the agent completed the application. People are not characterizing it as “community property” or “separate property.” Moreover, it would be a surprise to most to even knowthat they have the option of taking ownershipofa life insurance policy jointly. If it stands, the Opinion will affect far more than just insurancepolicies.It applies to any asset acquired in one spouse’s namealone during marriage. As demonstrated in Marriage ofBarneson (1999) 69 Cal.App.4th 583, “you don't just slip into a transmutation by accident."® That is precisely what Randy asks this Court to decree. While Randy argues that what happened here wasnot technically a “transmutation,” her argumentgivesit precisely the same effect - a community asset becameseparate. A transmutation is an “‘agreement or common understanding between the spouses’” to change character to property. (See Marriage of Weaver (1990) 224 Cal.App.3d 478, 484-485, quoting Estate ofLevine (1981) 125 Cal.App.3d 701, 705.) It has also been defined as “an interspousal transaction or agreement which works a changein the character of the property.” (Haines, supra, 33 Cal.App.4th 277, 293; Marriage ofCross (2001) 94 Cal.App.4th 1143,1147 (same).) Or, as “a transfer of property rights between spouses whichresults in a changeoflegal or beneficial ownership of the property, either expressly or by operation of law.” ° As quoted in Marriage ofCampbell (1999) 74 Cal.App.4th 1058, 1065. 32 (Gray & Wagner, Complex Issues in California Family Law (2009 ed.), §C3.01[1], p.C3-2.) Prior to January 1, 1985, the law recognized transmutations involving oral or written agreements, or understandings inferred from conduct or statements which evidenced an intention to change the character of property. (Weaver, supra, 224 Cal.App.3d at pp.484-485.) This led to lengthy trials involving dubious testimony as parties attempted to establish an agreement or understanding to overcome record ~ title. The Opinion invited that exact sort of testimony in this case. (Opinion, p.784.) To remedy the problems which arose from transmutations based on unreliable evidence, the Legislature enacted Civil Code section 5110.730 (now Fam. Code §852) on January 1, 1985, invalidating any transmutation whichis not in writing. (Estate ofMacDonald (1990) 51 Cal.3d 262, 269.) Fam. Code §852 states: “A transmutation ofreal or personal property is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whoseinterest in the property is adversely affected.” (Fam. Code §852(a).) (Fam. Code §852(a) (emphasis added).) To satisfy the express declaration requirement, the “writing signed by the adversely affected spouse[is not valid unless it contains] language which expressly states that the 33 characterization or ownership of the property is being changed.” (MacDonald, supra, 51 Cal.3d at p.272.) Fam. Code section 852 does not define “transmutation.” The statute only recognizesthe validity of those transmutations which meetthe stringent writing requirementit establishes, and declaresall other transmutations invalid. Section 852 was enacted to end matrimoniallitigation as to oral agreements or conduct by a spousethat allegedly changed the character ofproperty. As was explained in Marriage ofSteinberger (2001) 91 Cal.App.4th 1449, 1465-1466: In enacting section 852 . . ., the Legislature made a policy decision balancing competing concerns. When the rule now codified in section 852 was being considered, the Law Revision Commission stated as follows: ‘California law permits an oral transmutation or transfer of property between the spouses notwithstanding the statute of frauds. This rule recognizes the convenience and practical informality of interspousal transfers. However, the rule of easy transmutation has also generated extensive litigation in dissolution proceedings. It encourages a spouse, after the marriage has ended, to transform a passing commentinto an ‘agreement’ or even to commit perjury by manufacturing an oral or implied transmutation. [{] The convenience and practice of informality recognized by the rule permitting oral transmutations must be balanced against the danger of fraud and increased litigation caused by it. The public expects there to be formality and written documentation of real property transactions,just as it expects there to be formality in dealings with personal property involving documentary evidence oftitle, such as automobiles, bank accounts, and shares of stock. 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. [f] 34 (Recommendation Relating to Marital Property Presumptions and Transmutations (Sept. 1983) 17 Cal. Law Revision Com.Rep.(1984) 205, 213-214, footnotes omitted.) Application of Family Code section 852 to the facts of this case serve the policy goals of this state. Randy, in essence, is claiming that there was an implied . understanding with Frankie to make the insurance policy her separate property. (See RT 728:5-22.) Randy also argues that the act of naming her as policy owneris evidence of Frankie’s intention to make the policy her separate property. (AOB 17.) The Opinioninvites parties to litigate their intentionsa trial. This is exactly the type of dispute that the Legislature sought to avoid by enacting Family Code section 852. Randy relied on conductor oral statements by Frankie as evidence that he intended to make the insurance policy her separate property. No written evidence documenting the transmutation was introduced, not even the policy itself or the application. Hertheory is nothing more than transmutation by conduct. The Opinion dealt with this obvious point succinctly as follows: “Frankie's attempt to recast Randy's theory as ‘transmutation by conduct’ is to no avail because the form oftitle presumption applies, and therefore a transmutation theory is not involved.” (Opinion, p. 787.) A valuable community property insurance policy became Randy’s separate property - yet no transmutation occurred. The Opinion holds that the presumption- of-title trumps transmutation and the body ofthe law that has built up overthelast 35 25 years. Despite $365,032 of community property suddenly becoming separate property, the Opinion, and also Brooks, cleavesto the fiction that there was no transmutation. This reasoning is erroneous and brings California law right back to the pre-1985 era of proving “agreements or understandings.” The Supreme Court in MacDonald, supra, noted that Fam. Code section 852 wasintended to remedy the problems created underprior law, which allowed transmutations to be founded upon oral agreements or implications from spousal conduct. (MacDonald, supra, 51 Cal.3d at p.269.) The Brooks decision, and now Valli, conflicts with earlier cases which define transmutation. The narrow definition of transmutation adopted by the Brooks and Valli encourages expensive or perjured testimony by spouses attempting to transform comments or conduct by one spouse into an agreement to change the character to property acquired during marriage, the very problem which Fam. Codesection 852 addresses. Both Brooks and the Opinion recognize that record title can be overcome by clear and convincing evidence of an “oral agreementor understanding.” In other words, “pillow talk.” Isn’t this exactly what Fam. Code section 852 was designed to avoid? According to Brooks and Valli, any time an asset is acquired during marriage in the name of one spouse, we needto litigate the existence of whether there was an “agreement,” “understanding,” or perhaps an “inference of an 36 understanding” Un re Marriage ofMahone (1981) 123 Cal.App.3d 17, 23) to avoid the presumption-of-title. We are back to pre-1985 law. CONCLUSION Brooks and now Valli have greatly muddied the law with regard to the effect of the presumption-of-title and role of fiduciary duty involving assets acquired during marriage. Frankie asks that this Court grant review andclarify the law with regard to the complex and pervasive issues raised by this Opinion. Dated: June 24, 2011 Respectfully submitted, Peter M. Walzer, Esq. Christopher C. Melcher, Esq. WALZER & MELCHER LLP PeontA Garrett C. Dailey Attorneys for Respondent Frankie Valli 37 CERTIFICATE OF COMPLIANCE I, Garrett C. Dailey, attorney for Respondent Frankie Valli, hereby certify that, pursuant to Cal. Rules of Court, rule 8.504(d)(1),this brief contains approximately 8,208 words, including footnotes, as computed by the Microsoft AeroWL) Garrett C. Dailey Word 2007 word counter. 38 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OFCALIFORNIA SECOND APPELLATE DISTRICT DIVISION FIVE In re Marriage ofFRANKIE and RANDY B222435 VALLL. (Los Angeles County FRANKIE VALLI, Petitioner and Respondent, V. RANDYVALLI, Respondent andAppellant. Super. Ct. No. BD414038) COURT OF APPEAL- SECONDDIS: IF I ILIJE D MAY 18 2011 JOSEPH A. LANE Clerk C y wW UD APPEAL from ajudgment ofthe SuperiorCourt ofLos AngelesCounty, Mark Tuhas, Judge. Reversed and remanded. Jaffe and Clemens, William S. Ryden, Nancy Braden-Parker for Respondent and Appellant. Walzer & Melcher, Christopher C. Melcher; Garrett C. Dailey for Petitioner and Respondent. ATTACHMENT1 INTRODUCTION . Respondent and appellant Randy Valli (Randy) appeals from thetrial court’s order in the parties’ martial dissolution proceeding awardingpetitioner andrespondent Frankie Valli (Frankie)' a $3.75 million:insurance policy on Frankie’s life issued by Manulife during their marriage,” with Randy as the owner and beneficiary. We hold that underthe circumstances of this case, the policy listingRandyas the policy owner when taken out by Frankie and Randy is Randy’s separate property underthe “form oftitle’? presumption. BACKGROUND In 1984, Frankie and Randy were married. Frankie and Randy separated some 20 years later on September 23, 2004, and Frankiefiled a petition for dissolution of marriage _ the next day. At the time Frankie filed the petition for dissolution of marriage, he and Randy had three minorchildren together.’ In March 2003, Frankie acquired a $3.75 million insurance policy omhis life (the policy).° Randytestified that she and Frankie had discussed acquiring such life insurance when Frankie was in the hospital with “heart problems.” The purposeofthe policy was “[t]o prepare for [Randy’s] future in case something did happen to Frankie.” Frankie testified that he obtained the policy because he had been experiencing medical problems and wanted to makesure that he took care of his family. Frankie desired that his children I “As is customary in family law cases, we refer to the parties by their first names for purposes ofclarity and not out of disrespect.” (Kuehn v. Kuehn (2000) 85 Cal.App.4th 824, 828, fn. 2.) ? The John Hancock Life Insurance Company subsequently took over Manulife. 3 In re Marriage ofFossum (2011) 192 Cal.App.4th 336, 344. 4 Onechild is now an adult, and the two remaining children will reach adulthoodin June 2012. >. Thepolicy is referred to as a “blended universal life contract.” 2 be able to goto college and that “there would be money for everybody.” When he | obtained the policy, Frankie did not have plans to separate from Randy.. Dennis Gilbert, a life insurance agent, testified that his companysold the policy to the Vallis. According to Gilbert, Randy is the owner and beneficiary of the policy. Randytestified that Frankie and Barry Siegel, Frankie’s business manager,told herthat “they were going to make[her] the owner,” and that sheunderstood that she would be the beneficiary. Frankie testified that he “put everything in Randy’s name, figuring she wouldtake care andgive to the kids what they might have coming.” As of September 12, 2008-during the trial-the “cash value” ofthe policy was $365,032. Siegel provided business management and personal services for Frankie, including paying Frankie’s bills. During the Vallis’ marriage, Siegel also had a business relationship with Randy, which relationship ended onthe Vallis’ separation. Siegel’s office “facilitated” paymentofthe policy’s premiumsforthe Vallis. During the Vallis’ matriage, the premiums werepaidout of a joint account. The parties agree that the funds used topay the premiums-atleastpriorto their separation, were community property.° The trial court foundthat the policy.is community property. The bases for thetrial court’s finding werethat the policy was acquired during marriage and the policy’s premiumswere paidduring marriage. Randy’s argumentthat she should be awarded the policy because she, and not Frankie,is the policyholder was rejected bythetrial court, apparently on the grounds that Randy had not requested a finding on transmutation and there was noevidenceofa transmutation. Thetrial court awarded the policy to Frankie on the condition that he pay Randy $182,500 for her one-half community property interest in the policy because thepolicy was on Frankie’s life and there was no. showing that such an award would prejudice Randy. 6 Frankie presented evidence that after the parties separated, hepaid the policy’s. | premiumsthen due. DISCUSSION The Trial Court Erred When It Determined ThatThe Policy IsCommunity © Property | Randy contendsthat the trial court erred in findingthatthe policy is community property and not her separate property. Randy contends that the policy is her separate property under the form oftitle presumption because she was listed as the policy’s owner when the policy wastaken out. A. ' Standard ofReview Generally, we review for substantial evidence thefactual findings that underpin a trial court’s determination ofwhether property is community or separate property. (In re Marriage ofRossin (2009) 172 Cal.App.4th 725, 734.) When, however, the determination “requires a critical consideration, in a factual context, oflegal principles andtheirunderlying values,’ the determination in question athounts to the resolution of a mixed question of law andfact that is predominantly one of law. [Citations.] As such,it is examined de novo. [Citation.]” Wn re Marriage ofLehman (1998) 18 Cal.4th 169, 184.) | B. Application ofRelevant Principles Absent an agreementby the parties, Family Code section 2550’ imposes on the trial court in marital dissolution proceedings ‘athandatory, nondelegable duty tovalue and divide equally the parties’ community property estate.® (See Jn re Marriage ofCream (1993) 13 Cal-App.4th 81, 89; In re Marriage of.Knickerbocker (1974) 43 Cal.App.3d 1039, 1044; see also In re Marriage of Walrath (1998) 17 Cal.4th 907, 924.) To do so, q All statutory citations are to Family Code unless otherwisenoted. 8 Section 2550 provides in relevantpart, “Except upon the written agreementofthe parties, or on oral stipulation ofthe parties in open court, or as otherwise providedin this division,in‘aprocéeding fordissolution ofmarriageor for legal separation ofthe parties, the court shall . . . divide the community estate of the parties equally.” the trial court mustfirst determine which property ownedbytheparties is part of the community property estate-thatis, the trial court must “characterize” the property. “Characterization of property, for the purpose of community property law, refers to the processofclassifying property as separate, community, or quasi-community. Characterization musttake placein order to determine the rights andliabilities of the parties with respect to a particular asset or obligation andis an integral part of the division ofproperty on marital dissolution. [{] Generally, factors determinative of whether property is separate or community are the time of the property’s acquisition; operation ofvarious presumptions, particularly those concerningthe form oftitle; and whetherthe spouses have transmuted or converted the property from separate to community or vice versa....” (In re Marriage ofHaines (1995) 33 Cal.App.4th 277, 291; see generally, Hogoboom,etal., California Practice Guide: Family Law (The Rutter Group 2010). 8:30, p. 8-9 (rev. # 1, 2010) (Family Law).) In general, a spouse maintainsashis or her separate property all property acquired prior to marriage; property acquired during the marriage that can be traced to a separate property source; and property acquired during the marriage by gift, bequest, devise or descent. (§ 770, subd.(a)’; see In re Marriage of Weaver (1990) 224 Cal.App.3d 478, 484.) “[E]arnings and accumulationsofa spouse . . . while living separate and apart from the other spouse, are the separate property of the spouse.” (§ 771, subd. (a).) Other property acquired by a married person during the marriage presumptively is community property. (§ 760"; In re Marriage ofBonds(2000):24 Cal.4th1,12; see generally. Family Law, supra, § 8:77, p. 8-19.) The party claiming suchproperty acquired during 9 Section 770, subdivision (a) provides, “Separate property of a married person includesall of the following: [{]]_ (1) All property ownedby the person before matriage. [{] (2) All property acquired by the personafter marriage bygift, bequest, devise, or descent. [{] (3) Therents, issues, and profits of the property describedin this section.” 10 Section 760 provides, “Exceptas otherwise provided bystatute, all property,real or personal, whereversituated, acquiredby a married personduring the marriage while domiciled in this state is community property.” the marriage ashis or her separate property has the burden of overcomingthis presumption by a preponderance of the evidence. (/n re Marriage ofEttefagh (2007) 150 Cal.App.4th 1578, 1585, 1591.) Randy contendsthat the form oftitle presumption in Evidence Code section 662!! establishes the policy as her separate property. “The presumption arising from the form oftitle is to be distinguished from the general presumption set forth in [Family Code section 760] that property acquired during marriage is community property. Itis the affirmative act of specifying a form of ownership in the conveyanceoftitle that removes such property from the more general presumption.” (Jn re Marriage ofLucas (1980) 27 Cal.3d 808, 814-815, superseded by statute on other grounds asstated in Jn re Marriage ofBrooks & Robinson (2008) 169 Cal.App.4th 176, 187-189; In re Marriage ofBrooks & Robinson, supra, 169 Cal.App.4th at p. 186.) “Thus, the merefact that property was acquired during marriage does not .. . rebut the formoftitle presumption; to the contrary, the act of takingtitle to property in the nameofonespouse during marriage with the consent ofthe other spouse effectively removes that property from the general communityproperty presumption. In that situation, the property is presumably the separate property of the spouse in whose nametitle is taken. [Citations.]” (Un re Marriage ofBrooks & Robinson, supra, 169 Cal.App.4th at pp. 186-187; Family Law, - supra, | 8:33.5, p. 8-10.) A party can overcomethe form oftitle presumption “only by evidence of an agreementor understanding betweentheparties that thetitle reflected in the deed is not whattheparties’ intended.” (In re Marriage ofBrooks & Robinson, supra, 169 Cal.App.4th at pp. 189-190; see In re Marriage ofFossum, supra, 192 Cal.App.4th at p. 344.) “This presumption may berebutted only by clear and convincing proof.’ The presumptionis based on the promotion of a public policy that favors the stability oftitles to property.” (in re Marriage ofFossum, supra, 192 Cal.App.4th at p. 344.) The form of 1! Evidence Codesection 662 provides, “The ownerofthe legaltitle to property is presumed to:be the owner ofthe full beneficial title. This presumption may be rebutted only by clear and convincing proof.” title presumption does not apply if the spouse who doesnothold record title was unaware that title was taken solely in the other spouse’s name. (Jn re Marriage ofBrooks & | Robinson, supra, 169 Cal.App.4th at p. 186, fn. 6.) ““Property’ includes real and personal property and anyinterest therein.” (§ 113.) “An insurancepolicy is property. It can be sold, assigned or bequeathed by the owner. Its pecuniary value is the same as though the ownerheld a promissory note of the insurance company payable on condition.” (Estate ofMendenhall (1960) 182 Cal.App.2d 441, 444.) A spouse’s insurable interest in his or her spouse’s life at the inception of a life insurance policy is not extinguished by the dissolution ofthe spouses’ marriage. (See In re Marriage ofBratton (1994) 28 Cal.App.4th 791, 794.) Theproperty at issue in this matter-the policy-was acquired during marriage with community property funds. Thus,if the general presumption that property acquired during marriage is community property applies, then the policy properly would be characterized as community property. (§ 760; Jn re Marriage ofBonds, supra, 24 Cal.4th at p. 12; see generally Family Law,supra, { 8:77, p. 8-19.) Notwithstandingthe general community property presumption, however, based on the evidence adduced at trial, the _ form oftitle presumption applies, and the policy properly is characterized as Randy’s separate property. The evidenceattrial established that Randy is the ownerofthe policy. Randy testified that the policy was taken outto prepare for her future in case something happened to Frankieandthat Frankie and Siegel told herthat “they were going to make » [her] the owner”ofthe policy. Frankie did not introduce contrary evidence. Indeed Frankie’s own testimony andthe testimony from his witness, Gilbert, support Randy’s position that she is the ownerofthe policy. Frankie testified that he “caused” the policy to be purchased from Gilbert’s company. Gilbert testified that Randy is the ownerofthe policy. Frankie testified that he did not intend to separate from Randy whenhe obtained the policy and that he “put everything. in Randy’s name, figuring she would take care and give to the kids what they might have coming.” Frankie’s attorney’s argumentto the trial court supports Randy’s position. Frankie’s attorney stated, “The policy was issuedin Randy’s name as the owner duringmarriage... .” - . . Frankie contends that Randy failed to prove that she holdslegaltitle to the policy becausethe policywas not introducedinto evidence, no evidence was adducedas to the specific form oftitle that she took, and herclaim oftitle rests solely on Gilbert’s testimony. Frankie cites no authority for the proposition that “title” for purposes of the - form oftitle presumption mustbe established through documentary evidence. That the policy was taken solelyin Randy’s nameis established not just through Gilbert’s testimony, but also through testimony ofRandy and Frankie. Becausetitle to the policy was taken solely in Randy’s name during marriage with Frankie’s consent, the form of title presumption and not the community property presumption applies. (In re Marriage ofLucas, supra, 27 Cal.3d at pp. 814-815; In re Marriage ofBrooks & Robinson, supra, 169 Cal.App.4th at pp. 186-187.) Frankie failed to overcomethe form oftitle presumption: Frankie did not present evidence of an agreementor understanding with Randy that when the policy was placed solely in Randy’s name as owner, they intendedtitle to thepolicyto be other than. Randy’s separate property. (In re Marriage ofBrooks, supra, 169 Cal.App.4th atp. 189.) Likewise, Frankie did not present evidence that he was unawarethattitle tothe policy was taken solely in Randy’s name. (/d. at p. 186; fn. 6.) That Frankie knew the policy wastaken solely in Randy’s nameis supported by substantial evidence. Frankietestified that he “put everythingiin Randy’s name,» and Randy testified that Frankieand Siegel told herthat “they were going to make [her] the owner” ofthe policy. Frankie contendsthat the form oftitle presumption in Evidence Code section662 _ does not arise because ofthepresumption of undue influence emanating from a fiduciary duty Randy owed Frankie under section 721’? in connection with the acquisition ofthe 12 Section 721 provides, “(a) Subject to subdivision (b), either husband or wife may enter into any trarisaction with the other, or with any other person, respecting property, which either might if unmarried. [{] (b) Except as provided in Sections 143, 144, 146, 16040, and 16047ofthe Probate Code, in transactions between themselves, a husband 8 policy and the advantageshe obtained over Frankie. The “confidential spousal | relationship imposesa duty of the highest goodfaith andfair dealing on each spouse, and neither shall take any unfair advantageofthe other.’” (In re Marriage.ofHaines, supra, 33 Cal.App.4th at pp. 295-296, citing § 721, subd. (b).) “‘The marriage relationship alone will not support a presumption ofundue influenceby one spouse overthe other where, the transaction between them is shown to be fair. But, where one spouse admittedly secures anadvantage over the other, the confidential relationship will bring into operation apresumption ofthe use and abuseofthat relationship by the spouse obtaining the advantage.’” (In re Marriage ofHaines, supra, 33 Cal.App.4th at p. 296, citing In re Marriage ofBaltins (1989) 212 Cal.App.3d 66, 88.) Theparties disagree about the reach ofthe fiduciary duties codified in section 721. Randy argues that the fiduciary duties in section 721 apply only to transactions between spouses and notto transactionsbetween one spouse anda third party. Accordingly, . Randy argues, becausethe policy was notthe result of a transaction between spouses, but between a spouse-Frankie-anda third party insurance company, the fiduciary duties in section 721 donot apply. Frankie argues that the fiduciary duties in section 721 apply not only to transactions between spouses butalso to transactions between a spouse and a third party. Neither party cites any authority interpreting section 721 with regard to such and wife are subject to the general rules governing fiduciary relationships which control the actions ofpersons occupying confidential relations with each other. This confidential - relationship imposes a duty ofthehighest goodfaith andfair dealingoneach spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the samerightsand duties ofnonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including, butnotlimitedto, the following: []] (1) Providing each spouseaccessatall times to anybooks kept regarding a transaction forthe’purposes ofinspectionand copying. [{] (2) Rendering uponrequest, trueand full informationofall things affecting any transaction which concems the community property. Nothingin this section is" intended to impose a duty for either-spouseto keep detailed books-and records of community property transactions. [§] (3) Accounting to:the spouse, and holding asa trustee, any benefit or profit derivedfrom any transaction by one spouse without the consent of the other spouse which concerns the community property.” 9 third party transactions. Weneed not resolve this issue, however, because Randy prevails undereither theory. If Randy’s theory is correct, she prevails because the acquisition of the policy resulted from a third party transaction and not from a transaction between spouses. If Frankie’s theory is correct, Randystill prevails because the thirdparty transaction at issue was between Frankieanda third party and not between Randy and a third party. Randy could not have owed a fiduciary duty to Frankie in a transaction in which she did not participate. Underthe theory that the fiduciary duties in section 721 apply to transactions between a spouseanda third party, the fiduciary duty wouldapply only when the transacting spouse gains an advantage overthe spouse whois not.a party to the transaction. (See Jn re Marriage ofHaines, supra, 33 Cal.App.4th at p. 296.) No such advantage was obtainedhere. Frankie expressed his desire that the policy be acquired for the benefit of his family. Thereis no indicationthe acquisition ofthe policy wasto be an allocation ofassets or a savingsdevice. Frankie argues that Randy participated inthe acquisition of the policy because she discussed the acquisition of ingurance on Frankie’s life in connection with Frankie’s. hospitalization. Randy’s discussion does not establish that she participated in the puichase ofthe policy or in the decision to nameheras the ownerofthe policy. | Evenifthe fiduciary duties in section 721 apply to transactions between a spouse anda third party, the presumption of undue influence was rebutted by the evidenceat trial. Although Randy and Frankie first discussed purchasing life insurance on Frankie whenFrankie wasin the hospital, Frankie, and not Randy, arranged for the purchase of the policy from Gilbert’s company. Frankie testified that he obtained the policy. because he wanted to make sure that he took care of his family-he wantedhischildren to be able to go to college and: that “there would be money for everybody.”. Frankie andthe. business manager, Siegel,informed Randy that shé would be made the ownerofthe policy. No evidence was presented that Randy played anyrole inbeing named the owner ofthe policy. Thereis notsubstantial evidence ofundueinfluence. | 10 Frankie argues that the presumption oftitle for property obtained during marriage with community funds should not apply absent evidence that he and Randy “intended that title control ownership.” This argumentseems to be a combination ofhis contentions discussed above. There is substantial evidence that the parties intended Randy own the policy, and there is not any significant evidence of undueinfluence, or that would otherwise rebut the presumption oftitle. Randyis the beneficiary of the policy. The policy was intendedto be for theprotection ofRandy andthe childrenin the event Frankie died. There was no indication it was intended to be a savings device. Thus,there is no evidence that anyone other than Randy was intended to “control”the policy. (See In re Marriage ofBrooks & Robinson, supra, 169 Cal.App.4th at p. 190 [“Norcan the presumption be rebutted by evidencethattitle was taken in a particular manner merely to obtain a loan”].) Frankie contendsthat there was novalid transmutation ofthe policy. Thetrial court’s statement of decision provides, “Ms. Valli argues that she should be awarded the policy on Mr. Valli’s life as-she, not he, is the policyholder. The court made no finding of transmutation as there was no such findingrequested and there wasno evidence of transmutation before the court.” ““A “transmutation”is an interspousaltransaction or agreementthat works to change the characterofproperty the parties’ already own. By contrast, the initial acquisition ofproperty from a third person does notconstitute a transmutation and thus is not subject to the [Family Code section 852, subdivision (a)] transmutation requirements [citation].’ (Hogoboom & King, Cal. Practice Guide: Family Law, supra, { 8:471.1, p. 8-129 (rev. # 1, 2008).)” (In re Marriage ofBrooks & | l//Robinsen:supra,169 Cal.App.4th at p. 191; In re Summers (2003) 332 F.3d 1240, 1244- {le 5[thefundsised to,acquire property from a third party are not subjectto the section transmutation guidelines whenthe funds themselvesare not transferred from one he-o ecause the property in this case-the policy-was acquired from atty-and-notthrough aninterspousaltransaction, section 852 and the authorities concerning transmutation are not relevantto this case. (In re Marriage ofBrooks & | ‘Robinson, supra, 169 Cal.App.4th at p. 191.) Moreover, Randy did not contendin the 1] trial court, and does not contend on appeal, that the policy is her separate property through transmutation. Instead, Randy contendsthat the policy is her separate property by operation of the form oftitle presumption. Frankie’s attempt to recast Randy’s theory as “transmutation by conduct”is to no avail because the form oftitle presumption applies, and therefore a transmutation theory is not involved. Accordingly, the trial court erred in finding that the policy is community property and the judgmentis reversed. Because wehold that thetrial court erred in findingthat the policy is community property, we do not need to reach Randy’s contentionsthat the trial court erred in awarding ownership solely to Frankie at the policy’s cash value and that it abused its discretion in failing to maintain Randy asa beneficiary onthe policy as spousal support. Upon remand, weleaveto the trial court any reallocation of assets or award of reimbursementin light of our holding. DISPOSITION _ The judgmentis reversed, and the matter is remanded. Randy Valli is awarded her costs on appeal. CERTIFIEDFOR PUBLICATION MOSK,J. We concur: ARMSTRONG,ActingP. J. MAY 20 20l1 KUMAR, J.” Judge of the Los Angeles Superior Court assigned by the Chief Justice pursuantto article VI, section 6 of the California Constitution. 12 PROOF OF SERVICE 1, BRENDA K. BUTLER,declare as follows: I am overeighteen years of age and not a party to the within action; my business address is 2915 McClure Street, Oakland, California 94609; I am employed in Alameda County, California. I am familiar with my employer’s practices for the collection and processing of materials for mailing with the United States Postal Service, and that practice is that materials are deposited with the United States Postal Service the same day of office collection in the ordinary course of business. On June 24, 2011, I served a copy of the following document(s): PETITION FOR REVIEW On the addressee(s): xX BY MAIL-- by placing a true copy of the above-referenced document(s) enclosed in a sealed envelope, with postage fully prepaid, in the United States mail at Oakland, California, addressed as set forth below, on the date set forth above. BY FACSIMILE-- by transmitting via facsimile the document(s) listed above to the fax number(s) set forth below, on the date set forth above, before 5:00 p.m. Clerk of the Court (via hand-delivery) (original + 14 copies) SUPREME COURT 350 McAllister Street San Francisco, California Clerk of the Court (via UPS) COURT OF APPEAL 300 So. Spring Street, 2" Floor North Tower Los Angeles, California 90013-1230 Honorable Mark Juhas (via UPS) SUPERIOR COURT 111 North Hill Street Los Angeles, California 90012 William S. Ryden, Esq. (via UPS) JAFFE & CLEMENS 433 North Camden Drive, Suite 1000 Beverly Hills, California 90210 Peter Walzer, Esq. (via UPS) Christopher C. Melcher, Esq. WALZER & MELCHER, LLP 21700 Oxnard Street, Suite 2080 Woodland Hillis, California 91367 Frankie Valli (via UPS) [private address] I declare under penalty of perjury underthe laws of the State of California that the foregoing is true and correct and that this declaration was executed on June 24, 2011, at Oakland, California. Brenda K. Butler