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Date: 04-23-2020
Case Style:
Rose Safarian v. Harry Govgassian
Case Number: B291387
Judge: Moor, J.
Court: California Court of Appeals Second Appellate District, Division Five on appeal from the Superior Court, County of Los Angeles
Plaintiff's Attorney: Armen M. Tashjian
Defendant's Attorney: Steven H. Stone, Gerald M. Serlin and Wendy S. Albers
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A married couple filed a fraud action against multiple
defendants. While the fraud action was pending, husband
filed for divorce. Husband and wife entered into a written
marital property agreement that characterized any recovery
in the fraud action as the separate property of each spouse.
Judgment was entered against the defendants in the fraud
action, but husband filed for bankruptcy prior to
enforcement of the judgment. The fraud defendants, aware
of the marital property agreement, entered into a settlement
with the bankruptcy trustee. Next, they moved to stay
collection proceedings brought by wife in the fraud action on
the ground that the entire amount of the judgment was
community property included in husband’s bankruptcy
estate and settled by the bankruptcy trustee. Wife argued
that under the marital property agreement, her interest in
the fraud judgment was her separate property, which was
not part of husband’s bankruptcy estate. Defendants argued
the marital property agreement was ineffective because it
did not meet the transmutation requirements of Family
Code section 852,
1 which precludes extrinsic evidence to
resolve ambiguities. The trial court interpreted the marital
property agreement to have had no effect on the character of
the judgment proceeds. The agreement specifically
identified the fraud action, but it referred to the spouses’
separate claims in the action; in fact, all of the claims in the
fraud action were brought jointly. The trial court found the
1 All further statutory references are to the Family
Code unless otherwise specified.
3
agreement was impermissibly vague, so it failed to
transmute the community property judgment proceeds to
separate property interests. The trial court granted the
protective order.
On appeal, wife contends the fraud defendants do not
have standing to challenge the property agreement based on
the transmutation requirements of section 852. We conclude
a transmutation that does not meet the requirements of
section 852 is voidable, rather than void. Since the
defendants are not parties to the marital property
agreement, they cannot rely on section 852 to invalidate the
agreement. We reverse and remand for further proceedings
to determine the effect of the marital property agreement
under ordinary rules of contract interpretation.
FACTUAL AND PROCEDURAL BACKGROUND
Fraud Trial and Marital Property Agreement
On March 20, 2008, plaintiff and appellant Rose
Safarian (Wife) and her husband Armen Sanamyan
(Husband) filed an action against defendants and appellants
Harry Govgassian and Alisa Agadjanian, as well as against
Elsagav S. Shaham, M.D., Hippocratic Management
Services, Inc., and Silka Enterprises Inc., doing business as
Salud Family Medical Clinic, for fraud and other claims
arising out of an investment in a medical clinic (the fraud
action).
4
Two months later in May 2008, Husband filed a
petition for dissolution of marriage. Wife and Husband
executed a “marital settlement agreement” at the end of July
2008. The express purpose of the agreement was to make a
final and complete settlement of all rights and obligations
between them, including all property rights. Provision 1,
subdivision j, of the agreement stated, “Except as otherwise
expressly provided in this Agreement, each Party, hereby
releases the other from all inter-spousal obligations whether
incurred before or after the effective date, and all claims to
the property of the other. This release extends to all claims
based on the rights that have accrued before the marriage,
including, but not limited to, property and support claims.
Additionally, it is agreed that each Party, while engaged in
joint prosecution, will be entitled to maintain his or her
separate claims for damages pertaining to the alleged fraud
actions pertaining to two litigation matters, in reference to
Ummba Grill Restaurant and Silka Enterprises, Inc.,
(collectively referred to as ‘Govgassian Fraud Cases’). The
proceeds recovered from these actions will be the separate
property of each Party. The parties have considered such
claims in this agreement.”
In addition, provision 10 of the agreement stated, “The
parties acknowledge that they have previously divided all of
their community assets and liabilities as well as their
separate property, between them to their satisfaction. Each
party hereby confirms such division and transfers to the
other as his or her separate property all such property in
5
their personal possession or title, including but not limited to
the items stated in 1(j) above.”
The agreement stated it was valid and enforceable
“upon signing by both parties regardless whether a judgment
for dissolution is entered or not.” The effective date of the
agreement was the date of execution by both parties.
Husband signed the agreement on July 21, 2008, and Wife
signed the agreement on July 22, 2008.
Three years later, on August 20, 2012, judgment was
entered after a jury trial in the fraud action in favor of Wife
and Husband. Hippocratic’s default had been entered. The
jury found the defendants conspired to defraud the plaintiffs,
whose total damages were $460,000 as follows: $240,000 for
loss of investment or loans, $20,000 for Wife’s unpaid wages,
$100,000 for Wife’s noneconomic losses, and $100,000 for
Husband’s noneconomic losses. The jury also found the
defendants liable for punitive damages as follows: $250,000
as against Govgassian, $125,000 as against Agadjanian,
$100,000 as against Shaham, and $25,000 as against Silka.
The judgment ordered recovery of $460,000 to Wife and
Husband from the defendants jointly and severably, an
additional $250,000 from Govgassian, an additional
$125,000 from Agadjanian, an additional $100,000 from
Shaham, and an additional $25,000 from Silka.
Govgassian and Agadjanian filed a notice of appeal, as
did Shaham. But on December 18, 2012, the appeal filed by
Govgassian and Agadjanian was dismissed based on their
default.
6
Bankruptcy Filing
On December 13, 2013, Husband filed a petition for
bankruptcy under Chapter 7 of the Bankruptcy Code. He
expressly stated that it was not a joint case and he was
unmarried. He listed the dissolution proceeding as a
pending action to which he was a party as well as other civil
litigation not relevant here. Husband did not list the fraud
action in his original bankruptcy petition. The record on
appeal does not contain an amended petition, but
Govgassian and Agadjanian have represented in pleadings
in this matter that Husband filed an amended bankruptcy
petition on February 11, 2014, listing the judgment in the
fraud action. The bankruptcy court granted a discharge to
Husband on April 7, 2014.
Four months later, this appellate court affirmed the
judgment against Shaham in the fraud action in an
unpublished opinion. (Safarian v. Shaham (Oct. 9, 2014,
B244709).)
Govgassian and Agadjanian contacted bankruptcy
trustee Howard Ehrenberg to discuss settlement of the
judgment in the fraud action. In early 2016, Ehrenberg
provided notice in the bankruptcy proceedings of a motion to
approve a proposed settlement with the judgment debtors.
In response, the attorney who represented Wife and
Husband in the fraud action expressed concern that the
proposed settlement might compromise Wife’s interest in the
judgment. Ehrenberg did not believe he had settled Wife’s
7
claim and assured the attorney that the judgment debtors
did not include Wife’s interest in the settlement. The
following week, Ehrenberg changed his assessment and
stated he could not confirm that the settlement did not
extend to Wife’s interest, because the judgment was a
community asset included in the bankruptcy estate.
Husband’s bankruptcy attorney provided Ehrenberg with a
copy of the marital property agreement, and Ehrenberg
withdrew his motion to approve the settlement. Ehrenberg
concluded Wife had an interest in the fraud judgment that
was separate from the bankruptcy estate, and he did not
have any authority to compromise Wife’s interest. Separate
mediations were held.
On August 19, 2016, Ehrenberg entered into an
agreement with Govgassian and Agadjanian to accept
payment in settlement of Husband’s rights and interest to
collect on the judgment. The bankruptcy court approved the
settlement of the judgment in November 2016, and
Govgassian and Agadjanian completed payment of the
judgment in May 2017. On July 26, 2017, the bankruptcy
trustee executed a satisfaction of judgment that clearly
stated it was in full satisfaction of Husband’s interest only.
Protective Order to Stay Collection Proceedings
On March 6, 2018, Govgassian and Agadjanian filed a
motion in the fraud action for a protective order staying all
collection proceedings. They argued that even if a marital
8
settlement agreement existed, the causes of action and
recovery in the fraud case were community property as a
matter of law, because no judgment of dissolution or
approval of the agreement dividing the property had been
entered. Community property, including the non-debtor’s
spouse’s share, became part of the bankruptcy estate by law.
As a result, the satisfaction of judgment signed by the
bankruptcy trustee satisfied the entire fraud judgment.
Govgassian and Agadjanian submitted Ehrenberg’s
declaration in support of their motion. Ehrenberg stated
that the fraud judgment was an asset of the bankruptcy
estate, but the bankruptcy court had not ruled on whether
the judgment was community or separate property. On
August 19, 2019, Ehrenberg entered into a settlement
agreement with Govgassian and Agadjanian to accept
payment in full and final settlement of the bankruptcy
debtor’s rights and interest to collect upon the judgment.
Because the payment extinguished the entire asset held by
the bankruptcy estate, Ehrenberg executed a satisfaction of
judgment which states that it is as to Husband’s interest
only. Ehrenberg did not want to prejudice any rights that
Wife might have in the judgment. It was his understanding
that if the judgment were a community asset, the entire
judgment was satisfied by the payment.
Wife opposed the motion for a protective order. She
argued that under her agreement with Husband, she held
her interest in the fraud judgment as her separate property,
9
and therefore, her interest was never part of Husband’s
bankruptcy estate.
She submitted her attorney’s declaration, as well as a
reporter’s transcript of an April 4, 2018 hearing in
bankruptcy court. Ehrenberg testified at the hearing that
the first time Wife’s interest was raised to him was when her
attorney in the fraud action expressed concern on January
20, 2016, about the proposed settlement. The settlement
agreement that Ehrenberg signed with Govgassian and
Agadjanian was solely with respect to Husband’s interest in
the judgment.
Wife also submitted Ehrenberg’s declaration, her own
declaration, the dissolution petition, and the property
agreement. She declared that she had no involvement in the
bankruptcy proceedings.
Govgassian and Agadjanian filed a reply. They argued
the provisions of the property agreement were ambiguous
and failed to transmute Wife’s community property interest
in the fraud judgment into a separate property interest,
citing section 852 for the first time.
With the reply, Govgassian and Agadjanian submitted
the declaration of family law specialist Evan Itzkowitz.
Itzkowitz opined that the terms of the property agreement
were not sufficient to transmute the causes of action and
recovery in the fraud action from community property to the
separate property of Wife and Husband. They also
submitted a copy of the settlement agreement that they
10
entered into with Ehrenberg, and an email exchange
between Ehrenberg and the attorney in the fraud action.
Wife objected to the new evidence filed with the reply.
A hearing was held on June 4, 2018. Itzkowitz argued at the
hearing on behalf of Govgassian and Agadjanian that the
court could not “interpret” the property agreement. Section
852 required an express declaration that the character of the
property was being changed to effect a transmutation, and
no extrinsic evidence was permitted. Itzkowitz insisted the
agreement lacked the type of granting language required to
change the character of the property, such as “I grant it to
you” or “I give it to you.” Wife’s attorney responded that the
language of the agreement was clear, it divided Wife and
Husband’s property, and the parties to the agreement had no
confusion or disagreement over the terms. Itzkowitz replied
that the agreement was vague, because it referred to
separate claims for damages, when there were no separate
claims for damages. Wife’s attorney responded that the
agreement was sufficiently specific to accomplish the
division of property, because it referred to the specific
litigation and the proceeds of any recovery. The trial court
sustained Wife’s objections to the new material submitted
with the reply and took the matter under submission.
Later that day, the trial court granted the motion for a
protective order. The court found there were no separate
claims by either Wife or Husband in the fraud action. All of
the claims in the action were joint, and there was no
separate damages recovery. “Therefore, the language in the
11
Marital Settlement Agreement is impermissibly vague and
unenforceable, thus cannot be considered to have
transmuted any such property from ‘community’ to ‘separate’
property. Accordingly, since there was no separate property
as part of the proceeds of this lawsuit – it was all community
property – the entirety of the judgment against Harry
Govgassian and Alisa Agajanian was satisfied through the
bankruptcy court proceedings.” Wife filed a timely notice of
appeal from the order.
DISCUSSION
Standard of Review
Marital property settlement agreements are favored
under California law (Adams v. Adams (1947) 29 Cal.2d 621,
624), and governed by general contract principles (Tanner v.
Tanner (1997) 57 Cal.App.4th 419, 424).2 “We review the
2 Because we conclude Govgassian and Agadjanian do
not have standing to raise section 852, we need not address
whether the principles that typically apply to interpret a
contract in the absence of extrinsic evidence also apply to
determine the validity of a transmutation under section 852.
These principles include the fundamental goal of contract
interpretation “to give effect to the mutual intention of the
parties.” (Civ. Code, § 1636; Bank of the West v. Superior
Court (1992) 2 Cal.4th 1254, 1264.) In general, we
determine the intent of the parties from the written contract
alone, but may consider the circumstances under which the
12
interpretation of a statute and its application to undisputed
facts de novo. (MacIsaac v. Waste Management Collection &
Recycling, Inc. (2005) 134 Cal.App.4th 1076, 1081–1082.) ‘In
interpreting the statutory language at issue, “[w]e begin
with the fundamental rule that our primary task is to
determine the lawmakers’ intent.” [Citation.] The process of
interpreting the statute to ascertain that intent may involve
up to three steps. [Citations.] As other courts have noted,
the key to statutory interpretation is applying the rules of
statutory construction in their proper sequence. [Citations.]
We have explained this three-step sequence as follows: “we
first look to the plain meaning of the statutory language,
then to its legislative history and finally to the
reasonableness of a proposed construction.” [Citation.]’ (Id.
at p. 1082.)” (In re Marriage of Bonvino (2015) 241
Cal.App.4th 1411, 1422.)
contract was made and its subject matter. (Civ. Code,
§§ 1639, 1647; Hess v. Ford Motor Co. (2002) 27 Cal.4th 516,
524 (Hess).) We interpret the provisions within the context
of the contract as a whole, not in isolation, with the aim of
giving effect to every provision, rather than assigning a
meaning that makes it inoperative, inequitable, or absurd.
(Civ. Code, §§ 1641, 1643; Camacho v. Target Corp. (2018) 24
Cal.App.5th 291, 306.) For a contract to be ambiguous, the
language must be reasonably susceptible of more than one
construction. (In re Marriage of Begian & Sarajian (2018)
31 Cal.App.5th 506, 512.)
13
Statutory Scheme Governing Transmutations
To determine whether third parties have the power to
invalidate marital property agreements that fail to meet the
requirements of section 852, we must review the statutory
scheme governing transmutations. The property rights
provided to spouses by statute may be altered through a
marital property agreement. (§ 1500; Litke O'Farrell, LLC v.
Tipton (2012) 204 Cal.App.4th 1178, 1183.) Married people
can transmute community property to separate and separate
property to community by agreement or transfer. (§ 850,
subds. (a) & (b).)3
Under section 852, a transmutation “is not valid unless
made in writing by an express declaration that is made,
joined in, consented to, or accepted by the spouse whose
interest in the property is adversely affected.” (§ 852, subd.
(a).)4 The writing must contain an “express declaration” that
3 Section 850 provides: “Subject to Sections 851 to 853,
inclusive, married persons may by agreement or transfer,
with or without consideration, do any of the following: [¶]
(a) Transmute community property to separate property of
either spouse. [¶] (b) Transmute separate property of either
spouse to community property. [¶] (c) Transmute separate
property of one spouse to separate property of the other
spouse.”
4 Section 852 provides in full: “(a) A transmutation of
real or personal property is not valid unless made in writing
by an express declaration that is made, joined in, consented
14
“expressly states that the characterization or ownership of
the property is being changed.” (Estate of MacDonald (1990)
51 Cal.3d 262, 272 (MacDonald); In re Marriage of Benson
(2005) 36 Cal.4th 1096, 1100 (Benson).) Specific
terminology, such as “transmutation,” “community property”
or “separate property,” is not required, but “the writing must
reflect a transmutation on its face, and must eliminate the
need to consider other evidence in divining this intent.”
(Benson, supra, 36 Cal.4th at p. 1106.)
Prior to the enactment of section 852, spouses could
easily transmute property, including through oral
statements or implications from conduct. (MacDonald,
to, or accepted by the spouse whose interest in the property
is adversely affected. [¶] (b) A transmutation of real
property is not effective as to third parties without notice
thereof unless recorded. [¶] (c) This section does not apply
to a gift between the spouses of clothing, wearing apparel,
jewelry, or other tangible articles of a personal nature that is
used solely or principally by the spouse to whom the gift is
made and that is not substantial in value taking into
account the circumstances of the marriage. [¶] (d) Nothing
in this section affects the law governing characterization of
property in which separate property and community
property are commingled or otherwise combined. [¶] (e)
This section does not apply to or affect a transmutation of
property made before January 1, 1985, and the law that
would otherwise be applicable to that transmutation shall
continue to apply.”
15
supra, 51 Cal.3d at pp. 268–269.)5 The California Law
Revision Commission (the Commission) reported to the
Legislature that “California law permits an oral
transmutation or transfer of property between the spouses
notwithstanding the statute of frauds. The 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 comment into 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
5 “MacDonald, supra, 51 Cal.3d 262, addressed former
Civil Code section 5110.730. (Added by Stats. 1984, ch.
1733, § 3, p. 6302.) After MacDonald was decided, and as
part of a comprehensive reorganization of the law, the
Legislature repealed former Civil Code section 5110.730
(Stats. 1992, ch. 162, § 3, p. 464), and replaced it with
Family Code section 852. (Stats. 1992, ch. 162, § 10, p. 492,
operative Jan. 1, 1994.) Both versions contain the same
language. We will refer solely to section 852, even when
discussing its predecessor under MacDonald.” (Benson,
supra, 36 Cal.4th at pp. 1104–1105, fn. 4.) As in Benson,
references to section 852 include its predecessor.
16
formality in dealings with personal property involving
documentary evidence of title, 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. [¶] California law should continue to
recognize informal transmutations for certain personal
property gifts between the spouses, but should require a
writing for the transmutation of real property or other
personal property.” (Recommendation Relating to Marital
Property Presumptions and Transmutations (Nov. 1983) 17
Cal. Law Revision Com. Rep. (1984) pp. 213–214, fns.
omitted (Commission Report).)
The Legislature enacted the writing requirement of
section 852 to prevent transmutations based on easily
manipulated and unreliable evidence. (MacDonald, supra,
51 Cal.3d at p. 269; Benson, supra, 36 Cal.4th at p. 1106.)
The Legislature sought to increase certainty that a
transmutation occurred, discourage perjury in marital
property disputes, and reduce litigation to resolve such
matters. (Benson, supra, 36 Cal.4th at p. 1100.) Extrinsic
evidence is not admissible to prove a writing effected a
transmutation. (Ibid.) The Legislature intended “to create a
writing requirement which enables courts to validate
transmutations without resort to extrinsic evidence and,
thus, without encouraging perjury and the proliferation of
litigation.” (MacDonald, supra, 51 Cal.3d at p. 272.)
17
The Commission’s comment to the statutory text
explained that “[Section 852] imposes formalities on
interspousal transmutations for the purpose of increasing
certainty in the determination whether a transmutation has
in fact occurred. [Section 852] makes clear that the ordinary
rules and formalities applicable to real property transfers
apply also to transmutations of real property between the
spouses. See Civ. Code §§ 1091 and 1624 (statute of frauds),
1213–1217 (effect of recording). This overrules existing case
law. See, e.g., Woods v. Security First Nat’l Bank, 46 Cal.2d
697, 701, 299 P.2d 657, 659 (1956). [Section 852] also
overrules existing law that permits oral transmutation of
personal property; however, transmutation by gift of certain
personal property is recognized.” (Commission Report,
supra, at pp. 224–225.)
Standing to Raise Section 852
Wife contends Govgassian and Agadjanian do not have
standing to challenge the validity of the marital property
agreement under section 852.6 We agree.
6 Although Wife did not specifically raise the issue of
standing in the trial court, both parties agree this court has
discretion to consider this threshold issue on appeal. (In re
Marriage of Oliverez (2019) 33 Cal.App.5th 298, 316, citing
San Mateo Union High School Dist. v. County of San Mateo
(2013) 213 Cal.App.4th 418, 436 [“‘even where a legal
argument was not raised in the trial court, we have
discretion to consider it when the theory raised for the first
18
A. Third Party Standing Depends on Whether a
Defective Transmutation is Void or Merely
Voidable
“In general, California law does not give a party
personal standing to assert rights or interests belonging
solely to others. (See Code Civ. Proc., § 367 [action must be
brought by or on behalf of the real party in interest];
Jasmine Networks, Inc. v. Superior Court (2009) 180
Cal.App.4th 980, 992.)” (Yvanova v. New Century Mortgage
Corp. (2016) 62 Cal.4th 919, 936, fn. omitted (Yvanova).)
Whether a third party can invalidate a transmutation
agreement that fails to meet the requirements of section 852
depends whether the defective agreement is void or simply
voidable.
“A void contract is without legal effect. (Rest.2d
Contracts, § 7, com. a, p. 20.) ‘It binds no one and is a mere
nullity.’ (Little v. CFS Service Corp. (1987) 188 Cal.App.3d
1354, 1362.) ‘Such a contract has no existence whatever. It
has no legal entity for any purpose and neither action nor
inaction of a party to it can validate it . . . .’ (Colby v. Title
Ins. and Trust Co. (1911) 160 Cal. 632, 644.)” (Yvanova,
supra, 62 Cal.4th at p. 929.)
“A voidable transaction, in contrast, ‘is one where one
or more parties have the power, by a manifestation of
election to do so, to avoid the legal relations created by the
time on appeal is a pure question of law applied to
undisputed facts.’”].)
19
contract, or by ratification of the contract to extinguish the
power of avoidance.’ (Rest.2d Contracts, § 7, p. 20.) It may
be declared void but is not void in itself. (Little v. CFS
Service Corp., supra, 188 Cal.App.3d at p. 1358.) Despite its
defects, a voidable transaction, unlike a void one, is subject
to ratification by the parties. (Rest.2d Contracts, § 7;
Aronoff v. Albanese (N.Y.App.Div. 1982) 85 A.D.2d 3.)”
(Yvanova, supra, 62 Cal.4th at p. 930.)
Only the contracting parties have the power to ratify or
avoid a voidable agreement; “the transaction is not void
unless and until one of the parties takes steps to make it so.”
(Yvanova, supra, 62 Cal.4th at p. 936 [discussing void and
voidable assignments].) A litigant who alleges an agreement
is void, however, is not enforcing the terms, but instead
asserting that the agreement is void ab initio. (Ibid.)
“Unlike a voidable transaction, a void one cannot be ratified
or validated by the parties to it even if they so desire. (Colby
v. Title Ins. and Trust Co., supra, 160 Cal. at p. 644; Aronoff
v. Albanese, supra, 446 N.Y.S.2d at p. 370.)” (Yvanova,
supra, 62 Cal.4th at p. 936.)
B. The Statutory Language of Section 852
Supports an Interpretation that Defective
Transmutations are Voidable, not Void
Section 852 provides that a transmutation is “not
valid” unless made in a writing meeting the statutory
20
requirements. We must determine the meaning of the
phrase “not valid” within the context of section 852.
“Not valid” does not necessarily mean “void.” (See
Guthman v. Moss (1984) 150 Cal.App.3d 501, 507–508
(Guthman) [statute providing that liquidated damages
provisions are “invalid” unless separately signed by the
parties interpreted to mean that provisions failing to meet
statutory requirements are voidable at the buyer’s option,
not void].) “Where a word of common usage has more than
one meaning, the court should adopt the one which will best
attain the purposes of the Legislature, keeping in mind the
objectives sought to be achieved as well as the evil to be
prevented.” (Id. at p. 507.)
“Unless a statute expressly deprives the parties of their
right to sue on a contract made in violation of that statute,
the right to recover on the contract will not be denied, if
denial of recovery would be out of proportion to the demands
of public policy. (6 Williston (4th ed. 1995) Illegal
Agreements, § 12:4, pp. 47–51.) ‘Thus, unless no other
conclusion is possible from the words of a statute, it should
not be held to make agreements contravening it totally void.’
(Ibid.)” (Residential Capital v. Cal-Western Reconveyance
Corp. (2003) 108 Cal.App.4th 807, 814–815.)
Section 852 does not expressly provide that a defective
transmutation is “void.” Section 852 is a “statute of frauds”
for the property transmutations of married people. (Sterling
v. Taylor (2007) 40 Cal.4th 757, 766, fn. 5.) Nothing in the
statute or the legislative history suggests that spouses
21
cannot affirm or ratify a defective transmutation agreement
through a subsequent valid agreement. A marital property
agreement that does not contain an express declaration of
transmutation is not void, illegal, or inherently wrong
because it fails to comply with the requirements of section
852. Section 852 establishes a rule of evidence, similar to
the statute of frauds. We conclude a transmutation that
fails to meet the requirements of section 852 is voidable, not
void. A spouse may elect to invoke the protection of the
statute or affirm the property agreement, but a stranger to
the agreement does not have standing to claim the spouses
will not abide by their agreement regardless of the defect. A
third party who is not a successor in interest to the rights of
one of the parties to the agreement cannot raise the
invalidity of a transmutation under section 852.
C. Contracts Violating Similar Statutes of
Frauds are Voidable
Our interpretation of the phrase “not valid” in section
852 is supported by case law interpreting the term “invalid”
in similar statutes. “‘The meaning of the language of the
statute can appear either on [its face] or from any
“established . . . common law meaning.” [Citation.]’ (People
v. Mirmirani (1981) 30 Cal.3d 375, 384, per Bird, C. J., with
two justices concurring and one justice specially
concurring.)” (Guthman, supra, 150 Cal.App.3d at p. 509.)
22
Contracts that violate similar statutes have been held to be
voidable, rather than void.
California’s statute of frauds, Civil Code section 1624,
subdivision (a) provides, “The following contracts are invalid,
unless they, or some note or memorandum thereof, are in
writing and subscribed by the party to be charged . . . .” It is
well established under California law that “a contract falling
within the operation of the statute, but made in
contravention thereof, is not invalid in the sense that it is
void. It is merely voidable.” (O’Brien v. O’Brien (1925) 197
Cal. 577, 586; see also Ayoob v. Ayoob (1946) 74 Cal.App.2d
236, 242 (Ayoob).) “‘Such a contract, if otherwise valid,
remains so, and the sole effect of the statute is to render it
unenforceable by one party against the will of the other who
abandons or repudiates it.’ [Citations.]” (O’Brien, supra, at
p. 586.)
“Similarly, in Estate of Reardon (1966) 243 Cal.App.2d
221, 229, the court held: ‘The word[ ] . . . “invalid,” when
appearing in statutes which are not for the benefit of the
public at large, [is] regarded as equivalent to “voidable”
where none other than a particular person or class of
persons is the object of the statutory protection.’ Thus, the
idea that invalid may mean voidable only is not novel to
California law. And, when legislation has been applied in
judicial decisions and then a subsequent statute on an
analogous subject employs identical language, it is presumed
that the Legislature intended the language be given a like
interpretation in applying the new enactment. (Nishikawa
23
Farms, Inc. v. Mahony (1977) 66 Cal.App.3d 781, 787.)”
(Guthman, supra, 150 Cal. App. 3d at p. 509.)
A transferee or successor in interest to the rights of the
contracting party, such as the party’s grantee, heir, or
personal representative, can take advantage of the statute of
frauds in the same manner as the contracting party could
have. (O’Banion v. Paradiso (1964) 61 Cal.2d 559, 562
(O’Banion).) “There are no similar policies involved where
the third person seeking to raise the statute is not in privity
with a party to the contract. If such persons were able to
assert the statute to invalidate a contract, they could
invalidate contracts which the parties themselves were in
favor of enforcing.” (O’Banion, supra, 61 Cal.2d at p. 563;
see also Wood Estate Co. v. Chanslor (1930) 209 Cal. 241,
250–251; Bumb v. Bennett (1958) 51 Cal.2d 294, 302.)
The California Supreme Court’s decision in Benson
does not alter our conclusion that a marital property
agreement in violation of Section 852 is merely voidable.
The Benson court found that the Legislature did not intend
to incorporate traditional exceptions to the general statute of
frauds, such as part performance, as a substitute for Section
852’s requirement of an express written statement. (Benson,
supra, 36 Cal.4th at pp. 1100, 1109.) “By insisting upon a
special writing expressly changing the character of the
disputed property, MacDonald all but decided the section
852(a) is not satisfied where no such writing exists at all.”
(Id. at p. 1100.) However, the court’s holding that section
852 is not satisfied by anything less than an express
24
declaration in writing does not preclude the statute from
allowing parties to affirm or ratify a defective transmutation
through a subsequent agreement that meets the writing
requirements of the statute.
Contracts violating a similar writing requirement
enacted for the protection of spouses in section 1102,
formerly Civil Code section 5127, have been interpreted to be
voidable, rather than void. Under section 1102, an
instrument selling, conveying, encumbering, or leasing
community property for more than one year must be
executed by both spouses. (§ 1102, subd. (a).) An
instrument that falls within section 1102 which is not signed
by both spouses is not void, however, but merely voidable.
(Clar v. Cacciola (1987) 193 Cal.App.3d 1032, 1036–1037.) A
stranger to the agreement has no standing to challenge its
validity on the ground that it was not signed by both spouses
in accordance with section 1102. (Id. at p. 1037.) “[Section
1102] was designed to protect a spouse from the
unauthorized alienation or encumbering of marital property
by the other spouse; it has never been interpreted in such a
way as to provide a means whereby a third party creditor of
the married couple may challenge and void instruments
signed by only one of the spouses.” (Ibid.)
We note the Law Revision Commission studying
transmutations reported that “[m]ost 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.” (Recommendation Relating to Marital
25
Property Presumptions and Transmutations (Nov. 1983) 17
Cal. Law Revision Com. Rep. (1984) p. 214.) Two provisions
were enacted as part of the statutory scheme governing
transmutations to specifically protect the rights of creditors
and third parties. Section 851, former Civil Code section
5110.720, states that transmutations are subject to the laws
governing fraudulent transfers. (§ 851.) Subdivision (b) of
section 852 provides that a transmutation of real property is
not effective as to third parties without notice unless the
transmutation is recorded. Neither of these provisions
enacted to protect the rights of creditors and third parties
apply in this case.
Govgassian and Agadjanian cannot invalidate the
marital property agreement under section 852. To the
extent the terms of the marital property agreement are
ambiguous, the intent of the parties should be determined on
remand in accordance with ordinary principles of contract
interpretation.
Outcome: The post-judgment order granting a protective order is
reversed and remanded for further proceedings. Appellant
Rose Safarian is awarded her costs on appeal.
Plaintiff's Experts:
Defendant's Experts:
Comments: