Timothy Patrick Peabody Family Law Blog on Lawyers.com

FIDUCIARY OBLIGATIONS FOR REAL ESTATE TRANSFERS

The Fourth Appellate District’s decision in In re Marriage of Brooks & Robinson, (2008) 169 Cal. App. 4th 176 specifically excluded from its findings any discussion regarding issues of undue influence, breach of fiduciary duties or any misappropriation of community assets. (See Footnote 8 to the opinion attached hereto).

Specifically, the Brooks & Robinson court stated: 8 “The form of title presumption does not apply when it conflicts with the presumption of undue influence by one spouse over the other. (Haines, supra, 33 Cal.App.4th at pp. 301–302.) Here, there is no contention that title to the Property in Robinson's name was due to any undue influence exerted by Robinson.”  (In re: the Marriage of Brooks & Robinson, (2008) 169 Cal. App. 4th 176 at page 20)

In the majority of family law cases specific claims of undue influence as well as breach of fiduciary duties are always present.  Therefore, the Brooks & Robinson holding by the admission of the court is inapposite in many cases.

A more useful analysis of fiduciary obligations and grant deed transfer issues may be obtained by looking at the following cases:

Application of Haines and Section 721

Statutorily, spouses have the right to enter into transactions with each other as well as other persons. (§ 721, subd. (a).) However, interspousal transactions must comport with the rules controlling the actions of persons occupying confidential roles with each other. (§ 721, subd. (b).) Section 721, subdivision (b) provides: [I]n 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.” Section 721, subdivision (b) requires interspousal transactions to be “pleasing to the fiduciary standard.” ( Haines, supra, 33 Cal.App.4th at p. 293.) If one spouse secures an advantage from the  transaction, a statutory presumption arises under section 721 that the advantaged spouse exercised undue influence and the transaction will be set aside.

For section 721 to apply the following must be present: (1) there exists an interspousal transaction; and (2) one spouse has obtained an advantage over the other. ( Haines, supra, 33 Cal.App.4th at p. 301.) Generally, a spouse obtains an advantage if that spouse's position is improved, he or she obtains a favorable opportunity, or otherwise gains, benefits, or profits. ( Bradner v. Vasquez (1954) 43 Cal.2d 147, 152 [272 P.2d 11].) In the present case, Husband and Wife entered into an interspousal transaction by signing a quitclaim deed permitting the residence to be acquired in Husband's name only. Through this transaction, the residence was acquired as Husband's separate property. Husband received an advantage or benefit from Wife's execution of the quitclaim deed when the residence became his separate property. Because the prerequisite elements are met, the statutory presumption of section 721 and Haines apply to the instant case.

In Haines a quitclaim deed conveying her joint interest in the property to the  husband, making it his separate property. The wife testified she did so under considerable emotional and physical duress; the husband disputed this, characterizing the transaction as “calm and businesslike.”During a period of reconciliation, the husband reconveyed his separate property interest in the property to himself and his wife as joint tenants. After the parties later separated, the wife filed for dissolution.

In the division of property, the trial court awarded the husband reimbursement for the full value of the property at the time of the second transfer to joint property as his separate property contribution to the community.   Concluding the presumption of undue influence trumped the conflicting presumption of record title and the husband had not rebutted the wife's claim of duress in the transaction, this court reversed the trial court's reimbursement of the husband's separate property interest.

Although the facts of Haines differ from those here, the reasoning and  analysis supporting the applicability of section 721 is the same in both cases. The rationale of Haines applies to any  interspousal property transaction in which the evidence shows one spouse obtained an advantage over the other. ( In re Marriage of Delaney (2003) 111 Cal.App.4th 991, 999 [4 Cal. Rptr. 3d [*630]  378] (Delaney).) Nothing in Haines confines its holding to situations in which the interspousal property conveyance was the result of actual fraud, deceit or coercion.

“When an interspousal transaction advantages one spouse, ‘[t]he law, from considerations of public policy, presumes such transactions to have been induced by undue influence.’ [Citation.] ‘Courts of equity … view gifts and contracts which are made or take place between parties occupying confidential relations with a jealous eye.’” (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 293–294 [39 Cal. Rptr. 2d 673].) “Thus, the requirements of section 852 are prerequisites to a valid transmutation but do not necessarily in and of themselves determine whether a valid transmutation has occurred.” (In re Marriage of Barneson (1999) 69 Cal.App.4th 583, 588 [81 Cal. Rptr. 2d 726].)
“When a presumption of undue influence applies to a transaction, the spouse who was advantaged by the transaction must establish that the disadvantaged spouse's action ‘was freely and voluntarily made, with full knowledge of all the facts, and with a complete understanding of the effect of’ the transaction.” (In re Marriage of Burkle (2006) 139 Cal.App.4th 712, 738–739 [43 Cal. Rptr. 3d 181].) “The question ‘whether the spouse gaining an advantage has overcome the presumption of undue influence is a question for the trier of fact, whose decision will not  be reversed on appeal if supported by substantial evidence.’” (Id. at p. 737.)