VALLI, MARRIAGE OF

Respondent, Frankie Valli, Reply Brief on the Merits

Cal.December 16, 2011

Case No. S193990 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA RANDY VALLI Appellant SUPREME COURT eiEP vs. , DEC 16 201 FRANKIE VALLI Frederick K Ohinch Clerk Respondent ~ Deputy Court of Appeal Second Appellate District Case No.: B222435 Superior Court County of Los Angeles Case No.: BD 414038 RESPONDENT?’S REPLY BRIEF Peter Walzer, Esq. Garrett C. Dailey Christopher C. Melcher, Esq. Attorney at Law Walzer & Melcher, LLP SBN: 76180 SBNs: 101477 and170547 2915 McClure 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 Case No. S193990 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 RESPONDENT’S REPLY BRIEF Peter Walzer, Esq. Garrett C. Dailey Christopher C. Melcher, Esq. Attorney at Law Walzer & Melcher, LLP . SBN: 76180 SBNs: 101477 and170547 2915 McClure 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 TABLE OF CONTENTS I. Randy’s Reasoning Is Circular; She Admits ThatTitle Doesn’t Control Until The Community Property Presumption is Dispelled But Then Relies On Title To DispelIt II. Randy’s Argument That Consent To Titling An Asset In One Party’s Name Results In A Waiver Of The Community’s Interest Violates The Law Of Waiver UI. While Title Is Relevant In Determining Character In A Marital Dissolution Case — It Is Subservient To Family Code §760 IV. Family Code §852 Applies To Newly Acquired Assets As Well As To Transfers Between The Parties V. Randy Never Discusses The Requirements To Overcome The Presumption Of Undue Influence A. Randy Introduced No Evidence To Satisfy The Second and Third Prongs Of The Showing Necessary to Overcome The Presumption of Undue Influence B. The Court of Appeal Failed to Make Inferences In Favor Of the Judgment VI. What Result Favors Public Policy? VU. A Potential Right Of Reimbursement Does Not Make The Community Whole Conclusion Page Number 2 12 16 17 18 18 19 TABLE OF AUTHORITIES Cases Brison v. Brison [Brison II] (1891) 90 Cal. 323, Denham v. Superior Court (1970) 2 Cal.3d 557, 564 Estate ofCaswell (1930) 105 Cal.App. 475, 484 Estate ofMacDonald (1990) 51 Cal.3d 262 In re Marriage ofBarneson (1999) 69 Cal.App.4" 583, 593 In re Marriage ofBenson (2005) 36 Cal.4" 1096, 1106 Inre Marriage ofBonds (2000) 24 Cal.4"" 1, 29 In re Marriage ofBrooks & Robinson (2008) 169 Cal.App.4" 176 In re Marriage ofBurkle (2006) 139 Cal.App.4" 712 In re Marriage ofCampbell (1999) 74 Cal.App.4"" 1058 In re Marriage ofFossum (2011) 192 Cal.App.4" 336 In re Marriage ofHaines (1995) 33 Cal.App.4™ 277 In re Marriage ofHoffmeister (1987) 191 Cal.App.3d 351, 358 In re Marriage ofHoltemann (2008) 166 Cal.App.4" 1166 In re Marriage ofLange (2002) 102 Cal.App.4™ 360, 364 In re Marriage ofLusby (1998) 64 Cal.App.4" 459, 470 In re Marriage ofMoore (1980) 113 Cal.App.3d 22, 27 In re Zeth S. (2003) 31 Cal.4" 396, 405 Life Ins. Co. ofNorth America v. Cassidy (1984) 35 Cal.3d 599, 605-606 Page Number(s) 10 17 10 9, 10, 19 14, 15 19 16 12, 13,15 17 12 14 17 16 13 Ringler Associates Inc. v. Maryland Cas. Co. (2000) 80 Cal.App.4"” 1165, 1188 Starr v. Starr (2010) 189 Cal.App.4" 277 Statutes Civil Code §1575 Evidence Code §662 Family Code §721 Family Code §760 Family Code §852 Resources 11 Witkin, Summary 10" ed. (2005) Comm.Prop. §47 Gray & Wagner, Complex Issues in California Family Law (2011) Equitable Remedies 4.05 Wagner, 2011-7 Cal. Family Law Monthly 6 (LexisNexis, 2011) il 12, 16 2, 7, 8, 12, 9, 7 4, 8,9, 10, 11, 12 13 11 In the Supreme Court of the State of California RANDY VALLI Appellant vs FRANKIE VALLI Respondent RESPONDENT’S REPLY BRIEF This is not a unique case nor an unusualset of facts. On the contrary, the ownership ofcountless life insurancepolicies,' as well as automobiles, residences, banking accounts, securities accounts,in fact any assettitled in one spouse’s name alone with the knowledgeofthe other spouse, will be determinedbyit. It is fair to say thatit will come as a huge shock when one spouselearns that, because an asset was acquired in one spouse’s name, an unintentional gift was made. Yet, that is precisely the outcome that Randy advocates. 1 Over $14 billion in premiumswerecollected in the State of California in 2010, according to the California Life & Annuity Insurance Industry 2010 Market Share Report ‘by the California Department of Insurance (May 2011). I. RANDY’S REASONING JIS CIRCULAR: SHE ADMITS THAT TITLE DOESN’T CONTROL UNTIL THE COMMUNITY PROPERTY PRESUMPTIONIS DISPELLED, BUT THEN RELIES ON TITLE TO DISPEL IT Randyreaches her conclusionthattitle dictates the characterization of marital property through onebasic leap ofreasoning — that knowledgethattitle is being taken in the other spouse’s name equates to an agreement to makea gift, which dispels the community property presumption.” Her reasoningis circular — title does not matter unless there is evidence of an agreement to makea gift, yet that agreement is shownbytitle. She admits that Evidence Code section 662 does not comeinto play until “the evidence adducedattrial” dispels the community property presumption.’ She further admits that “[i]ntroduction of bare documentary evidence ofseparate title might not alone | be enoughto rebut the community property presumption.” Thus, the question is what evidence is necessary? We knowthatit is more than baretitle. At page 16 of her brief, Randystates: “[T]he presumption of title doesn't ‘trump’ the general community property presumption. The presumption of community property is ‘trumped’ by the evidence of the facts necessary to establish the presumption of title- documentary title and consent untainted by breach of fiduciary duty. The presumption oftitle does not arise until long after the community property presumption has been dispelled by a preponderance of the evidence. The form of title presumption, by its express terms, does not apply until ‘undisputed legaltitle’ has been established.” 2 See, e.g., Randy’s Brief, pp.17, 19, 20, 23, etc. > Randy’s Brief, pp.13&16. 4 Randy’sBrief, pp.19-20, 23. Thus, she concedesthat title is not enough. There must first be evidence ofintent to dispel the community property presumption. So, what is required to do so? First, both parties would agree that no agreement is binding unless it is voluntary. But merely showing that a marital transaction was “voluntary” is not enough.” To dispel the community property presumption, there must also be evidence of “a clear understanding that ... changes the character or ownership ofspecific property.”° Throughout Randy’s brief, she repeatedly states that “the evidence adducedat trial”’ showed Frankie’s agreement to change what would have otherwise been a community property asset into her separate property. However, the evidence only showed Frankie knew that the policy was taken in her name. The “evidence” to which Randycites is set forth on pages 5—7 of herbrief: e The policy was purchased during marriage; e Frankie obtained the policy because he was hospitalized with heart problems and wanted to assure the family that they would betakencareof:* e He caused Dennis Gilbert, an insurance agent, to obtain the $3.75 million life insurancepolicy; e The life insurance premiums were paid from the joint account; e Randy was named as the ownerofthe policy; and 5 In re Marriage ofBarneson (1999) 69 Cal.App.4th 583, 593. 6 In re Marriage ofBenson (2005) 36 Cal.4th 1096, 1106. 7 See, e.g., pp.3, 4, 11, 13, 14, 16, 19, 20, 22, 29, 32, 33, 37 & 39,all referring to how “the evidence”at trial showed Frankie’s agreementto divest himself ofall right, title and interest(i.e., “to transmute”) the policy and/or how it rebutted the presumption ofundue influence. 8 Randy characterizes this as Frankie being “under no pressure.” (Randy’s Brief, p.22.) 3 e Randy understood that she would bethe beneficiary.” Whatis missing is any evidence, except the actoftitling the property in her name, that Frankie intended to divest himself of his community property interest. Randy admits thattitle is insufficient; you mustfirst dispel the community property presumption. So how doesshe “dispel” the community property presumption — bytitle. She argues that one can infer Frankie’s intent to waive his community property interest from his conduct, i.e., by listing her as the owner. But, here again you have tautological reasoning — title equals agreement and agreementis provedbytitle. Her only evidence of his intent was that the policy wastitled in her name with his consent — in other words, the act was voluntary. Is this enough to waive his community property interest? As discussed below, waiver requires far more. This is why we have Family Code §852 — to eliminate disputes by requiring explicit writings changing character before a transfer of community property to separate property will be recognized. There wasabsolutely no evidence that Frankie intended to divest himself ofhis community property interest in the policy, any more than Randy would have would have lost her interest in the policy hadit beentitled in his name with her knowledge. All the evidence showed wasthat she was named the owner with Frankie’s consent. From this Randy infers an intention to divest himselfofall right, title and interest in the policy,i-e., to make an unconditionalgift. 9 In herrecitation of facts, Randy fails to include that while Frankie wasin the hospital being treated for heart problems, she suggested that he obtain the policy and that she took part in the discussions with Frankie’s business managerto obtain it. (RT,pp.728:5-22.) As discussed below, these are serious omissions which supported an implied finding of undueinfluence. So, the question is whether proofthat title was taken in the name of one spouse with knowledge and/or consent of the other spouse is enoughto dispel the community property presumption. Does knowledgeoftitle: > Establish the requisite intent to waive all community property interest in the asset acquired? > Shift the burden ofproof to the non-titled spouse to prove undueinfluence, rather than leave it with the benefitting spouse to rebut it? Since Randyagrees that there must be evidence of intent to makea gift to rebut the community property presumption before title controls, there must be evidence of something more than knowledgeoftitle to show intent to make a gift. Otherwise we are just saying title proves agreement and agreementis provedbytitle. I. RANDY’S ARGUMENT THAT CONSENT TO TITLING AN ASSET IN ONE PARTY’S NAME RESULTSIN A WAIVER OF THE COMMUNITY’S INTEREST VIOLATES THE LAW OF WAIVER The lynchpin of Randy’s argument is that Frankie’s consenttotitle being taken in Randy’s nameresulted in Frankie waiving his interest in the policy. However, waiver requires both knowledgeofthe right and the express intent to relinquishit.'° “Waiver requires a voluntary act, knowingly done, with sufficient awareness of the relevant circumstances and likely consequences. There must be actual or constructive knowledge of the existence of the right to which the person is entitled. The burden is on the party claiming a waiver 10 See discussion in Gray & Wagner, Complex Issues in California Family Law (2011) Equitable Remedies §4.05. to prove it by evidence that does not leave the matter doubtful or uncertain and the burden must besatisfied by clear and convincing evidence that does not leave the matter to speculation. This rule particularly applies to cases involving a right favored in law....”"! Community property is a right favored in law, certainly more so than the divestment of that right by naked title. Thus, to prove a waiver, Randy needs to show more than simply that an asset wastitled in her name. That act alone is insufficient to show a knowing waiver of a valuable community property right. When those elements are missing, the court should decide against waiver: “Waiver requires the intentional relinquishment of a known right upon knowledge.of the facts. The burden is on the party claiming a waiver of right to prove it by clear and convincing evidence that does not leave the matter to speculation. As a general rule, doubtful cases will be decided . . : 12 against the existence of a waiver.” Thus, it was Randy who properly bore the burden of showing that Frankie understood that, by naming her as the owner, he was waiving his valuable community property rights in the policy. To meet this burden, she had to show more than just knowledgeoftitle, or the proofis tautological and meaningless. 11 Inre Marriage ofMoore (1980) 113 Cal.App.3d 22, 27; see also In re Marriage of Perkal (1988) 203 Cal.App.3d 1198 [Written waiver must show knowledgeof existence ofright of reimbursement andintention to relinquishit.] 12 Ringler Associates Inc. v. Maryland Cas. Co. (2000) 80 Cal.App.4th 1165, 1188. 6 IIL. WHILETITLE IS RELEVANT IN DETERMINING CHARACTER IN A MARITAL DISSOLUTION CASE, IT IS SUBSERVIENT TO FAM. CODE §760 Randy seemsto agree that Evidence Code section 662 (the recordtitle presumption) is subservient to Family Code section 760 (the community property presumption) when characterizing property in a marital dissolution, and that the presumption oftitle does not comeinto play until after the community property presumption has been dispelled." She also seemsto agree with the well-recognizedrule of statutory interpretation that the more specific statute prevails over the general. But, she then states “[p]resumptions oftitle are more specific than, and prevail over, the general community property presumption.” Thus,it is unclear what position she advocates, except that she is relying heavily on “the evidence adducedattrial” to support her position that the community property presumption had been dispelled and the only remaining presumption wasthatoftitle. However, since the only evidence “dispelling” the community property | presumption wasthattitle was taken voluntarily, she is arguing that the presumption of title trumps Family Code §760. As explained in the Opening Brief on the Merits, pages 12 to 13, the presumption applies to “all property, real or personal, whereversituated, acquired by a married person during the marriage.” “All property” includestitled 13 Randy’s Brief, pp.16-20. 14 Randy’s Brief, p.16. property. It is a narrow and specific presumption that applies only in cases of marital property. Evidence Code §662, on the other hand,is a general non-family law presumption applicable to a broad range of situations. As between the two, the formeris the more specific. When there is a conflict between the twostatutes, the presumption of community property should prevail. It should also prevail because it honors the public policy favoring community property. Randyis on the right track when shestates that the presumptionoftitle does not comeinto play until after the community property presumption has been dispelled. However, as discussed below, the way that the community property presumptionis dispelled should not be by nakedtitle, but by an 852writing that specifies that the parties intend that ownership be reflected by recordtitle. Then, the burden would properly be on the party contesting title to overcomeit by clear and convincing evidence.If it were as Randy advocates, nakedtitle alone would be sufficient to shift the burden to the community to establish its interest in property acquired during marriage with community funds by the heightened standard of proof. Obviously, that runs counter to California public policy favoring community property. IV. FAMILY CODE §852 APPLIES TO NEWLY-ACQUIRED ASSETS AS WELL AS TO TRANSFERS BETWEEN THE PARTIES Randy defends the Court ofAppeal’s opinion, relying on Marriage ofBrooks & Robinson’s’” holding, that section 852 has no applicability to newly-acquired marital assets. She fogets that all assets “acquired during marriage” are acquired from third parties. Frankie does not believe that this insulates those transactions from the reach of fiduciary duty. In arguing that such transactions are not subject to fiduciary duty, Randy focuses on the phrase “in transactions between themselves” in section 721. What she forgetsis that earlier she argued that the “agreement” between the parties, as evidenced by taking title in her name alone, dispelled the community property presumption suchthattitle prevailed. It is the “agreement”thattitle be taken in one party’s namethatis the “transaction”that is subject to scrutiny under the fiduciary standard. When property is acquired from a third party and titled in one spouse’s namewith the other’s knowledge or consent, the implied gift which Randysaysresults is a “transaction between spouses”. If Frankie madea gift of the policy to Randy, then there was a transaction between Frankie, as donor, and Randy,as donee. Thefact that the property wasfirst acquired from a third party is irrelevant. When community funds are used to acquire an asset of a non-personal nature during marriage, 15 In re Marriage ofBrooks & Robinson (2008) 169 Cal.App.4th 176. 9 and that asset is then allegedly gifted by one spouseto the other, fiduciary dutyis implicated. A spouse who claimsthat there was an agreement to makea gift in such instances must show an express written declaration whichsatisfies the requirements of section 852'° and overcomethe presumption of undueinfluence. Randyalso needs to show that the “confidence which [Frankie] reposed in her was not misplaced” whenthis “agreement” was reached.’’ Asstated in Estate ofCaswell(18 “Confidential relations are presumed to exist between husband and wife, and, in [her] dealings with [her husband, the wife, if she] obtains any advantage over [him], must stand unimpeached of any abuse of the confidence presumptively reposed in [her by her husband] andresulting from the marital relation, and failing in this [she] must bear the burden of showing that the transaction was fair and just and fully understood by the party from whom the advantage was obtained.”!” For this reason, both Brooks & Robinson and the appellate court below were incorrect when they held that acquiring an asset in the nameofone party is nota “transmutation.” “Consent, agreeing, or acquiescing to the taking of title in one spouse's name, which vitiates the presumption of community and creates a presumption of separate, is an agreement or transaction which changes '® All gifts between spousesare transmutations. To bevalid, the gift musteither be evidenced by an 852 writing or be property of a personal nature whichis not substantial in light of the circumstances of the marriage (in which case no writing is required to effect a transmutation of that property). The clear implication of subdivision (c)is that all gifts of a non-personal nature are transmutations which must meet the writing requirement. By arguing that Frankie made a gift, Randy squarely places that alleged transaction within the ambit of section 852. The policy is not an asset of a “personal nature,” so the exception in subdivision (c) does not apply. A writing is required. 17 Brison v. Brison (1891) 90 Cal. 323; Civ. Code §1575. 18 Estate ofCaswell (1930) 105 Cal.App.475, 484. 19 Genders switched to avoid confusion. 10 character from community to separate. Thus, the transaction/consent/agreement/acquiescence is a transmutation, by definition, which must comply with the rules relating to a transmutation.””” Giventhat, by definition, all newly-acquired marital assets are from third parties, exempting them from the protections of section 852 would undermine the goal of increasing certainty as to whether a transmutation had occurred and limit case law requiring a transmutation to be both written and express.”! If the parties are going to acquire an asset that is presumptively community property in the nameof one ofthem and intend that it be that person’s separate property, that is a “transmutation” and a writing memorializing that decision should be required. ”” This is equally as important in newly acquired assets as in transmutations of separate assets. Otherwise, we find ourselvesprecisely in the situation before us where the benefiting party is arguing “an agreement” to rebut the community property presumption based upon conductand inferred intent. That is precisely what 852 was designed to prevent.”? Does anyone believe that if Frankie had told Randy that he was acquiring the policy with himself as owner and heras beneficiary, she would have objected? Regardless, that act should not define the character of a valuable asset such as this—or any other asset for that matter. This would encourage sharp practice and unequal divisions of community property. As stated in Marriage ofBonds: 20 Wagner, 2011-7 Cal. Family Law Monthly 6 (LexisNexis, 2011). 21 In re Marriage ofBenson, supra, 36 Cal.4th at p.1100. 22 Id. at pp.1106-1107. 23 Estate ofMacDonald, supra, 51 Cal.3d 262. 11 “{C]Jommunity property law expresses a strong state interest in the equal division of property obtained during a marriage, so that any agreement in derogation of equal distribution should be subject to searching scrutiny for . 24 fairness....” Is there anything “fair” about permitting the act of taking title to determine how that asset is characterized in a marital dissolution?”It is for this reason that the 852 protections should apply to newly-acquiredassets. If the parties want a presumptively community property asset to be the separate property, there needs to be a writing that provides the adversely affected spouse with a clear understanding that character will be other than community.”° V. RANDY NEVER DISCUSSES THE REQUIREMENTS TO OVERCOME THE PRESUMPTION OF UNDUE INFLUENCE Randy admits that, for an interspousal transaction to be valid, it must be “untainted by a breach offiduciary duty.””’ But, she never discusses the requirements to overcome the presumption of undue influence. The reasonis that they were not met. As explained 29in Starr v. Starr,”® relying on Marriage ofHaines: “When that presumption [of undue influence] arose, it trumped the competing presumption created by Evidence Code section 662. Therefore, 24 In re Marriage ofBonds (2000) 24 Cal.4th 1, 29. ‘25 This should be distinguished from an express, unambiguousact, such as transmuting property with an 852 writing to obtain a tax benefit such as occurred in Marriage of Holtemann (2008) 166 Cal.App.4th 1166. 26 See In re Marriage ofBenson, supra, 36 Cal.4th at pp.1106-1107. 27 Randy’sBrief, p.16. 28 Starr v. Starr (2010) 189 Cal.App.4th 277, 282. 29 In re Marriage ofHaines (1995) 33 Cal.App.4th 277 [hereafter “Haines’’]. 12 the husband had to show that the deed ‘ “was freely and voluntarily made, and with a full knowledge of all the facts, and with a complete understanding ofthe effect of the transfer.” Thus,if the presumption of undue influence arose, it was Randy’s burden to show: 1) That the decision to name her as owner wasfreely and voluntarily made. She met this burden, but that is where the evidence stopped. All evidence wentsolely to this prong. However, she still had to prove: 2) Frankie namedher as the owner with a full knowledgeofall the facts, and 3) With a complete understanding of the effect of the transfer. Randy introduced no evidence on either of these prongs of the Haines test. Nor could she — there was none. The law in California has always been that characteroflife insurance policies is determined by the character of funds used to pay the premiums. (11 Witkin, Summary 10th ed. (2005) Comm.Prop, §47, p.578.)°” Thus, there is no way that Frankie couldhave understood that by naming her as the owner he wasrelinquishingall interest in the policy. Randytries to avoid that outcome by urging that the presumption of undue influence neverarose for various reasons, starting with the illusion that she did not “unfairly benefit’. This is silly. Before the transaction, Frankie was uninsured. 30 Each and every oneofthese life insurance characterization cases cited by Witkin rebuts Randy’s argumentat p.24 ofher Brief whereshestates: “It is true that once the presumptionoftitle is raised, it cannot be rebutted by tracing the funds used to maintain the policy to a community source. When the presumption oftitle applies, the character of funds used to acquire the property is irrelevant to determine ownership.” See, e.g., Life Ins. Co. ofNorth America v. Cassidy (1984) 35 Cal.3d 599, 605-606 [““Whenlife insurance premiumsare paid with community property funds, the resulting policy is an asset of the community.”] 13 Afterwards, Randy owneda life insurance policy with a cash value of $346,000 and a death benefit of $3.75 million. She paid no consideration for this. Yet, she did not unfairly benefit? The argumentstrains credibility. The Court of Appeal explained that there was no unfair advantage because Frankie “acquired the policy for the benefit of his family. There is no indication the acquisition of the policy was intendedto be an allocation of assets or a savings device.” (Slip.Op., p.10.) This conclusionis inconsistent with the holding that Frankie did intend a reallocation of the community funds to Randy’s separate property. The decision also overlooks the savings device whichis a part of a universal life insurance policy, which accumulates cash value based on the premiumspaid (here, $346,000 in a short period). Whatis required to show an “unfair benefit’? Randy relies on Marriage of Burkle*', yet it does not help because Mrs. Burkle received $1 million per year ina bargained-for-exchange. What did Frankie receive? Of course Randy benefited from the transaction. As stated in Marriage ofLange: “Generally, a fiduciary obtains an advantage if his position is improved, he obtains a favorable opportunity, or he otherwise gains, benefits, or profits.” *” Randy admits that she paid nothing for the assignment, yet argues that consideration is not required for an interspousaltransaction.** True, but that doesn’t diminish that fact that the lack of consideration is one of the hallmarks of an unfair advantage: 31 In re Marriage ofBurkle (2006) 139 Cal.App.4th 712. 32 In re Marriage ofLange (2002) 102 Cal.App.4th 360, 364. 33 Randy’s Brief, p.29. 14 “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, whoreceives nothing in return. The advantage obtained in these cases, too, may be reasonably characterized as a species of unfair advantage.””‘ Likewise, Burkle held: “A presumption of undue influence does not arise in an interspousal transaction unless one spouse obtains an unfair advantage or obtains property for which no or clearly inadequate consideration has been given.”*> That Randy obtained highly valuable property for no consideration necessarily raised the presumption of undue influence, which triggered her burden to rebutit. Nevertheless, the Court ofAppeal found that “the evidence,” which showed nothing more than that thetitling decision was voluntary, was enough to overcome the presumption and shift the burden to Frankie to prove undueinfluence. But that turns the presumption of undue influence on its head. If adopted, the Haines presumption is greatly weakened becauseall one need dois identify some nonmonetary benefit to the grantor, such as love and affection, and the presumptionis dispelled and the burdenis shifted to the dispossessed party to prove undueinfluencerather than on the benefitting spouse to rebut it. 4 Burkle at p.731, emphasis added. 35 Id. at p.717, emphasis added. 15 A. Randy Introduced No Evidence to Satisfy the Second and Third Prongs of the Showing Necessary to Overcome the Presumption of Undue Influence The second andthird prongs required proofthat Frankie had a full knowledge of the facts and a complete understanding of the effect of making Randy the ownerofthe policy. Randy failed to provethisattrial. Randyasserts: “Undisputed evidence also showedthat there was no undue influence and no unfair advantagetaken.”*° In support ofthis bold statementshecites not to the record, but to the opinion of the Court ofAppeal. Here, she makesherfirst mistake. No such finding was madebythetrial court, whose sole provinceit is to make factual determinations.” Likewise, she repeatedly states, or quotes the Opinion that “the presumption of undueinfluence was rebutted by the evidenceat trial.” But, as seen in Randy’s Briefat pages 5-7, the only evidence showedthat Frankie knew that Randy was being named both beneficiary and ownerofthe policy. There was no evidence as to the second and third prongs of the requirements to overcomethe presumption of undueinfluence. In both Starr v. Starr? and Marriage ofFossum’’, the wivessignedthe quit claim deeds “voluntarily,” yet the transactions were voided. Why? Because the second and third prongsofthe undue influence requirements weren’t met. *° Randy’s Brief, p.2. 37 In re Zeth S. (2003) 31 Cal.4th 396, 405. 38 Starr v. Starr, supra, 189 Cal.App.4th 277. 39 In re Marriage ofFossum (2011) 192 Cal.App.4th 336. 16 B. The Court of Appeal Failed to Make Inferences in Favor of the Judgment Randy repeatedly relies on the Opinion’s holding that there was no evidence of undueinfluence. In doing so, she ignores the rule that reviewing courts are required to draw all inferences based on substantial evidence in favor of the validity of the judgment, including implied findings that reasonably arise from the evidence.”” Instead of makingall inferences in favor of the trial court's implied evidentiary findings, the Court ofAppeal drewall inferences against the judgment. There was evidence ofactual (rather than just presumed) undue influence, namely Randy’s asking her husband, whowasin the hospital being treated for heart problems and obviously understress, to obtain a large life insurance policy for her benefit.” Randyalso took part in the discussion with Frankie’s business managerto obtain the policy. Shetestified: “We then spoke to Barry about taking out a life insurance policy to protect myfuture”? . Either of these facts alone wassufficient to sustain an implied finding of undue influence. Thus,if it were Frankie’s burden — he metit. But it wasn’t his burden. This was a marital transaction that unfairly benefited Randy,triggering the presumption of undueinfluence. She presented no evidenceto overcometwoofthe three requirements necessary to rebut it. The Court ofAppealflip- 40 In re Marriage ofLusby (1998) 64 Cal.App.4th 459, 470; In re Marriage of Hoffmeister (1987) 191 Cal.App.3d 351, 358; Denham v. Superior Court (1970) 2 Cal.3d 557, 564. 41 RT,pp.728/18-22, 729/4-9. 42 RT,p.728/21-22, emphasis added. 17 flopped the burden.It was not Frankie’s burden to prove undue influence — it was Randy’s to rebut it. She did not doso. VI. WHAT RESULT FAVORS PUBLIC POLICY? At page 29 ofher brief, Randy argues that finding that the asset is community property amounts to “[a]bsurd and bad policy!” This is an argument Randy cannot win. Public policy should encourage spouses to provide life insurance for their families. Whichresult is likely to foster that — Randy’s, i.e., you can lose your community property interest based on which namethe agentinserts on the application, or Frankie’s, where both parties preserve their rights absent a transmutation agreement free of undue influence? If spouses believe that by placing a policy in the nameofthe other they give up their community rights, they may think twice. This would adversely impact California families. The act of naming an ownerto a policy should not define the character of a valuable asset such as this—or any other asset for that matter. This would encourage sharp practice and unequal divisions of community property. VII. A POTENTIAL RIGHT OF REIMBURSEMENT DOES NOT MAKE THE COMMUNITY WHOLE Randy stresses repeatedly that the issue ofwhether Frankie wasentitledto any reimbursement for the payments made on “Randy’s”insurance policy has been remanded, inferring that somehowthis will make the community whole. A right of 18 reimbursement for premiumsdoes not compare to the $3.75 million death benefit. What reimburses Frankie for the loss of the death benefit proceeds which he had plannedto use to pay the estate taxes on his death so that his children could keep his “Four Seasons” music catalog intact?" | CONCLUSION Both the opinion below andthat ofBrooks & Robinson on whichit relied were incorrectly decided andresult in bad policy. “All property” acquired during marriage is presumed community property. Yes, spouses can change that by express agreement. They should not, however, “slip into a transmutation by accident”.“* That is whatthe Court of Appeal found happened here. HMI M1 H/ MI 43 RT,pp.184:28-185:11. * In re Marriage ofCampbell (1999) 74 Cal.App.4th 1058, quoting Marriage of Barneson. 19 The Decision of the Court of Appeal should be reversed and the finding ofthe trial court that the policy was community property affirmed. Dated: December 15, 2011 Respectfully submitted, Garrett C. Dailey Peter M. Walzer Christopher C. Melcher WALZER & MELCHER LLP Attorneys for Respondent Frankie Valli 20 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 4,167 words, including footnotes, as computed by the Microsoft Garrett C.A onLea Word 2007 word counter. 21 PROOF OF SERVICE I, BRENDA K. BUTLER, declare as follows: I am over eighteen 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 dayofoffice collection in the ordinary course of business. On December 16, 2011, I served a copy of the following document(s): RESPONDENT?’S REPLY BRIEF Onthe addressee(s): X__ BY MAIL-- byplacing 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-- bytransmitting via facsimile the document(s) listed aboveto the fax number(s) set forth below, on the date set forth above, before 5:00 p.m. William S. Ryden, Esq. JAFFE & CLEMENS 433 North Camden Drive, Suite 1000 Beverly Hills, California 90210 The Honorable Mark Juhas Los Angeles County Superior Court 111 North Hill Street, Dept. 67 Los Angeles, CA 90012 [LASC Case BD 414 038] California Court of Appeal Second Appellate District, Division 5 350 McAllister Street San Francisco, California 94102-4797 [2d Civil No. B 222 435] I declare under penalty of perjury under the laws ofthe State of California that the foregoing is true and correct and that this declaration was executed on December 1 2011,at Oakland, California. “Rueda WoBa Brenda K. Butler