In re Brace - Case Brief

In re Brace

Case Number: S252473

Court: Cal.

Date Filed: 2020-07-23

Case Brief – In re Brace

Court: California Court of Appeal
Date: 2025‑09‑05
Case Number: S252473
Disposition: The court affirmed the bankruptcy court’s determination that the Redlands residence and the San Bernardino rental are community property under Family Code § 760, rejecting the application of Evidence Code § 662.

Holding

The court held that when a married couple acquires real‑estate with community funds and takes title as joint tenants on or after January 1, 1975, the property is presumptively community property under Family Code § 760; the form‑of‑title presumption of Evidence Code § 662 is displaced by the community‑property presumption, and a joint‑tenancy deed alone does not effect a transmutation to separate property unless the statutory writing requirements of Family Code § 852 are satisfied.

Narrative

Lead – In a decision that untangles a century‑old tangle of presumptions, the California Court of Appeal affirmed that community‑funded joint‑tenancy homes purchased after 1975 belong to the marital community, not to the separate estates of the spouses. The ruling resolves a split among lower courts on whether the “form‑of‑title” presumption of Evidence Code § 662 can override the community‑property presumption of Family Code § 760 in bankruptcy proceedings.

Procedural backdrop – Clifford Brace filed a Chapter 7 petition in the Central District of California in 2011. The bankruptcy trustee, Steven Speier, moved to include the Braces’ Redlands residence and a San Bernardino rental in the estate, arguing that both were community property under Family Code § 760. The trustee’s declaration would allow the trustee to reach the full value of the properties, not merely Clifford’s one‑half interest. The bankruptcy court agreed, and the Ninth Circuit Bankruptcy Appellate Panel affirmed. The Braces appealed, and the Ninth Circuit certified the question to the California Supreme Court, which, under rule 8.548(f)(5), delegated the issue to the Court of Appeal.

Factual matrix – Clifford and Ahn Brace married in 1972. Around 1977–78 they bought a family home in Redlands; later they acquired a rental in San Bernardino. In each case the deed listed “Clifford and Ahn Brace, husband and wife, as joint tenants.” The purchase price was paid with community earnings. Ahn Brace never filed a bankruptcy petition.

Legal conflict – Two statutory presumptions collided.

Family Code § 760 – “All property… acquired by a married person during the marriage… is community property,” subject only to the explicit exceptions in §§ 770, 771, and the transmutation rules of § 852.
Evidence Code § 662 – “The owner of the legal title… is presumed to own the full beneficial title,” a presumption that can be rebutted only by clear and convincing proof. Historically, § 662 codified the common‑law rule that title alone determines ownership, a rule that predates modern community‑property doctrine.

The trustee argued that § 662 should control, rendering the joint‑tenancy deed a conclusive indication of separate interests (each spouse owning a one‑half undivided share). The Braces contended that the community‑property presumption of § 760 governs, especially in a creditor context, and that § 662 was never intended to supersede § 760.

Historical tour – The opinion traces the evolution of California’s marital‑property regime. Early statutes (Civil Code former §§ 164, 5110) allowed a “married‑woman’s presumption” that a conveyance to a wife created a separate interest, and a 1935 amendment added a “husband‑and‑wife” presumption of community property “unless a different intention is expressed in the instrument.” The 1935 language was effectively nullified by the sweeping 1973 reforms that eliminated the married‑woman’s presumption and equalized management rights. Those reforms made clear that, for property acquired on or after January 1, 1975, the default is the community‑property presumption of § 760, regardless of the form of title.

The Court notes that the “Siberell” line of cases—beginning with Siberell v. Siberell (1932) and extending through Hulse v. Lawson (1931)—treated joint‑tenancy deeds as creating separate interests, but those decisions were confined to dissolution actions. Subsequent statutes (1965, 1983) expressly extended the community‑property presumption to joint‑tenancy homes in divorce and later to all joint‑tenancy property, requiring a written transmutation under § 852 to rebut the presumption.

Holding and reasoning – The Court reaches three interlocking conclusions:

Supersession of § 662 – When the two statutes conflict, the specific community‑property presumption of § 760 controls. The Court emphasizes that § 662 was never drafted to address marital‑property characterization and does not reference the Family Code. Accordingly, the “form‑of‑title” presumption cannot defeat the statutory community‑property presumption.
Temporal line – For property acquired on or after January 1, 1975, the default is community property, even if the deed creates a joint tenancy. For property acquired before January 1, 1975, the older presumption that joint tenancy creates separate interests remains viable. The Braces’ properties, bought in the late 1970s, fall squarely in the post‑1975 regime.
Transmutation requirement – A joint‑tenancy deed alone does not constitute a valid transmutation to separate property for acquisitions on or after January 1, 1985. The statutory writing requirement of Family Code § 852 (formerly Civ. Code § 5110.730) must be satisfied—an express, signed declaration, joined in, consented to, or accepted by the adversely affected spouse. For acquisitions between 1975 and 1984, the deed is insufficient to prove a transmutation, though oral agreements or a “common understanding” may be considered.

Applying these rules, the Court affirmed the bankruptcy court’s finding that the Redlands and San Bernardino properties are community property. Consequently, the trustee may reach the full value of both homes to satisfy Clifford Brace’s debts.

Policy considerations – The opinion underscores the legislature’s intent to simplify marital‑property expectations and to protect third parties—creditors, heirs, and title insurers—from the uncertainty created by divergent title‑based presumptions. By aligning the bankruptcy context with the divorce context, the Court eliminates a loophole that would allow a spouse to shield community assets from creditors merely by electing joint tenancy.

Closing analysis – The decision clarifies that, for modern California couples, the form of title is largely irrelevant to the characterization of property acquired with community funds after 1975. The ruling will likely prompt bankruptcy trustees to invoke § 760 more aggressively, and it may encourage spouses to execute written transmutation agreements when they wish to carve out separate interests.

Unresolved questions remain regarding pre‑1975 joint‑tenancy property that was never expressly transmuted. Courts will still need to parse historical deeds and the intent of the parties, potentially reviving the “different intention” analysis that the Court now confines to the pre‑1975 era. Additionally, the decision leaves open how the presumption operates when a spouse’s separate‑property funds are intermingled with community earnings—a factual inquiry that will continue to generate litigation in both bankruptcy and probate contexts.

Referenced Statutes and Doctrines

Family Code §§ 760, 770, 771 – General community‑property presumption and exceptions.
Family Code § 852 (formerly Civ. Code § 5110.730) – Written transmutation requirements (effective 1/1/1985).
Evidence Code § 662 – Form‑of‑title presumption of full beneficial ownership.
11 U.S.C. § 541(a)(2) – Inclusion of community property in a bankruptcy estate.
Bankruptcy Code – Chapter 7 estate definition and creditor reach.

Key cases

In re Marriage of Valli, 58 Cal.4th 1396 (2014) – Community‑property presumption for property bought with community funds; transmutation requirements.
In re Brace, 566 B.R. 13 (Bankr. 9th Cir. 2017) – Bankruptcy court’s finding of community property.
Siberell v. Siberell, 214 Cal. 767 (1932) – Joint tenancy as a “different intention” from community property (limited to dissolution actions).
Hulse v. Lawson, 212 Cal. 614 (1931) – Joint tenancy property purchased with community funds is community property for creditor purposes.
Dunn v. Mullan, 211 Cal. 583 (1931) – “Husband and wife” deed creates tenancy in common, presuming separate interest for the wife.
In re Marriage of Lucas, 27 Cal.3d 808 (1984) – Application of joint‑tenancy presumption to pre‑1975 property (later disapproved).
Peabody v. Time Warner Cable, Inc., 59 Cal.4th 662 (2014) – Rule permitting California courts to restate certified questions.
In re Marriage of Haines, 33 Cal.App.4th 277 (1995); Brooks & Robinson, 169 Cal.App.4th 176 (2008); Estate of Gallio, 33 Cal.App.4th 592 (1995) – Cases discussing the distinction between Siberell’s presumption and Evidence Code § 662.

These authorities collectively shape the modern rule that, for property acquired with community funds after 1975, the community‑property presumption of Family Code § 760 prevails over any title‑based presumptions, and only a written transmutation can alter that characterization.