Dividing JOINTLY TITLED PROPERTY Acquired Before Marriage (or RDP) - Family Law Act or Partition?

Family Court Jurisdiction to Divide Jointly Titled Properties Acquired Before Marriage or Domestic Partnership Registration:

Family Code Section 2650

My office seems to be the final resting place for a number of complex property and support cases that have gone sideways under the management of prior counsel. Probably half of all the cases we accept involve a client who has paid thousands of dollars to an attorney who has billed for work that was of questionable utility, or worse. Some of these lawyers have failed to identify the issues properly, because they are civil lawyers who believe they can practice family law. This is dangerous: Matrimonial law has become far too complex for casual practitioners to safely navigate.

I urge you to investigate your attorney's reputation before handing over a retainer that might be enough to buy you a car, and suggest that you inquire diligently about their level of expertise. People tend to be too trusting or embarrassed to broach the hard questions of the lawyers they interview. Warning: A wrong turn is more than a detour. If the case is wrecked, someone has to clean up the mess (if you have the money to go another round). It adds to the insult that these clients must almost start from the beginning to undo the harm. Sometimes the damage cannot be corrected. True, self-represented parties cause this injury to themselves all the time. But when you hire a divorce lawyer you trust that you are buying something that is better than if you are on your own.

Reactivity and the Resulting Divorce Trance -

A Story of Jane and Sophia

Here is a divorce horror story that touches upon these themes, while illustrating an important point about the family court's jurisdiction to deal with certain property transactions between people that not uncommonly occur before they marry or register as domestic partners. The legal principles mentioned apply equally to marital and partnership disso's. The names are changed to protect the parties' privacy.

A couple lived together for ten years before becoming registered domestic partners in 2007. "Jane" was retired when they met, and is in her seventies. She had accumulated a significant separate property estate, including rental properties that were free and clear. She counted on the income from rents to get her through her remaining days with comfort and dignity. The other party, "Sophia", was fifteen years younger. She had significantly less by way of net worth, although she makes good money in a retail store she owned when the two registered.

I have written about the unexpected challenges that same-sex couples tend to face when thrust into the legal conflicts that opposite sex couples take as a rite of passage - like divorce. Given the changing frontier, these folks are particularly vulnerable to making uninformed choices, which they discover only once the relationship disintegrates. This leads to unique power imbalances between same-sex partners, if they find themselves litigating over property and support rights.

The Seductive Perils of Joint Tenancy

Prior to becoming RDP's, Sophia convinced Jane to place Sophia on title to Jane's rental properties. Sophia told Jane that if Jane were to die (Jane being 15 years' older), Sophia would not be adequately protected unless Jane made her a joint tenant to the rentals. Superficially this made some sense, but for the danger of unrecognized and unintended consequences.

The purpose of holding property in "joint tenancy" is to create a right of survivorship that inures to the benefit of the surviving co-owner. The party who survives inherits all of the interest in the jointly titled property, without the need for any kind of probate proceeding. Upon one joint tenant's death, by operation of law, the other tenant receives 100% of the deceased party's interest upon the recordation an affidavit and certificate that proves the joint tenant's death. Joint tenancies can be created in a variety of situations - most commonly they are used with respect to real property (i.e., the family residence), but bank accounts and many types of personal property can be jointly titled. Joint tenancy situations are one of the most common traps for unwary spouses (or unmarried cohabitants). They can come to be created in seemingly innocent ways - for instance, many lenders require a married couple to become joint owners if they are to lend money on real estate loans for which both parties are pledging their credit. Or, where parties decline to become joint tenants the lender will require the other spouse or domestic partner to sign off on any claims to the property title, as with a Quitclaim deed. That leads to a different set of problems. This article talks about the consequences of adding people to title. The inverse situation is where a party deeds off for convenience only, where for example they may have terrible credit, and later learns that they hold only a very limited legal interest in the property upon divorce.

Never sign off of title to property, and never add people as joint tenants to your property, without a separate written agreement that spells out your intentions. If you want to protect your beloved in the event of death so long as you are a successful couple, but not to waive an interest in your valuable assets if the relationship fails, use a revocable trust!

Someone whom Jane trusted and who was supposed to be knowledgeable, (and whose sympathies were allied with Sophia) urged that Sophia be placed on the deeds "just in case you die" "so she doesn't need to hire a lawyer and go through probate" and "for convenience purposes only." As often occurs, Sophia assured Jane that she would never make claim to a beneficial ownership in the properties, except upon Jane's death. Pillow talk included "oh honey, I love you so much." Jane's father had been ill for years, and this caused Jane to think a lot about her own mortality. Jane was not emotionally hardwired to suspect that Sophia might have undisclosed motives or intentions; indeed maybe, at that time, Sophia really had no hidden agenda - but those feelings can change and, in my experience, they usually do. The parties had what the law calls a "confidential relationship" because since they lived together, they reasonably reposed trust and confidence in each other. This is what people in intimate relationships are expected to do, and something that we humans are conditioned to do. But this trust may later seem naive.

You get the drift - and you know where this is headed but ... hey, no one steps in front of a bus that they cannot see on a foggy night expecting to get hit. This is where I find so many of you when you walk into my office, or write me to share your stories after bumping into my website, once the inevitable impact has sent you reeling.

So Jane placed Sophia on title to the properties that Jane had invested an entire lifetime accumulating. A few years later Jane and Sophia 'married' as registered domestic partners. That lasted another five years. During those years Jane and Sophia acquired several more pieces of property together, and title to those properties were also taken in joint tenancy. This was not a problem because as to those properties each partner made an equal contribution to their acquisition. The Family Law Act (i.e., the family code statutes and cases interpreting them) only applies to couples once they have entered into a legally recognized relationship; otherwise, contract law governs the rights of unmarried, non-RDP, couples.

Family Code Section 2650 and Actions for Partition -

How to Double Your Fun At Thrice the Price

Fast forward to separation, and the costly litigation that was to ensue. Sophia became convinced that Jane had betrayed her with another woman, and that obsessive fear ate at Sophia. The idea enraged and outraged her, and Sophia began to scheme about how she could get even for the humiliation and abandonment that she perceived was unfolding. Whatever Sophia's real intentions were at the time she convinced Jane to place her onto title for the rentals, now confronted with her own mind's story how the relationship was ending and that Jane was about to depart into the sunrise with a younger, more beautiful, new partner it became easy for Sophia to rationalize an entitlement to "her share" of the rental property equity. It didn't bother Sophia that she had contributed zero dollars to the acquisition of these properties, or that stripping Jane of one-half their worth would devastate Jane financially at a stage of life where Jane could not recover - indeed, this is what Sophia longed for. Divorce trance is always selfish, and therefore rotten at the core.

Sophia had another ace to play in order to punish Jane for her (imagined) adultery. Her sister worked for a big law firm in Los Angeles, and it has a reputation for stubborn litigation viciousness (something they are quite proud of). You know, just the type of aggressive litigators that people filled with pain and hurt hope to find and use to destroy their once beloved partners. Sophia and her lawyers believed that they could outspend Jane, and the law firm itself took a personal interest in the case. We don't call this extortion - in fact, under our system of justice this isn't extortion. It is just a practical consequence of who has the money, or in this case the power (access to counsel) and persistence, a principle that seems to guide this country and our collective psyche in particularly obvious ways in this election year. It deserves to be said that lawyers' conduct tends to reflect the same values of their clients, and in that sense we cannot blame them for providing services in a style and manner that consumers demand. Our judicial systems rewards "zealous advocacy", and does not yet recognize that attorneys have larger obligations to their clients, and to society, by serving as guides. Sophia's lawyers are paid assassins, and they revel in that guise. (Interestingly, it might be natural for the reader to think "wow, I'd like to know who they are - that's what I need!" Problem is, you will find they are only loyal to their purses).

Because Sophia had been added to title to the rental properties before the parties had become registered domestic partners, Sophia had the option of pursuing a civil case against Jane for what is called "partition" of their jointly titled interests. Since no legal relation had existed when Sophia was added to title, the Family Law Act ("FLA") did not appear to apply. Had these parties never registered as domestic partners, partition would have been the only way to resolve their competing claims as to ownership of the properties. Partition is a means by which properties owned in co-tenancy (whether as joint tenants or as tenants in common) between unmarried persons can be ordered sold, with the proceeds divided equally, and the costs of litigation shared from what the properties net after sale.

Accordingly, instead of filing for dissolution of the domestic partnership - even though the relationship was quite definitely over and despite the fact that only the family court can grant the inevitable dissolution, Sophia filed an action for partition on the civil side of the California Superior Court. Sophia's attorneys knew, but hoped Jane and her lawyer would not notice, that the partition action wasn't necessary because of a special FLA statute, Family Code section 2650. They thus chose the most expensive possibly strategy, even though a dissolution action was inevitable since it provides the only mechanism for restoring people to the status of unmarried persons (or here, unregistered partners). At all times the parties' entire dispute could have been efficiently resolved in one action, but that route would deprive Sophia of the ability to inflict financial and litigation hardship on Jane.

Section 2650 was enacted to avoid exactly what has happened to Jane. A deliberate decision was made by Sophia's team to file in civil court instead.

Family Code section 2650 reads:

"In a proceeding for division of the community estate, the court has jurisdiction, at the request of either party, to divide the separate property interests of the parties in real and personal property, wherever situated and whenever acquired, held by the parties as joint tenants or tenants in common. The property shall be divided together with, and in accordance with the same procedure for and limitations on, division of community estate."

If you want to destroy the other party, a civil partition action is better than invoking Family Code section 2650 because civil actions are far more expensive to defend. For instance, in civil cases lawyers may file demurrers and other motions that cannot be filed in family law cases (Cal.Rules of Court, Rule 5.108), and these are expensive for both sides (indeed, Sophia's law firm generated some $100,000 in fees in their civil law and motion skirmishes).

Moreover, in this context Sophia viewed the family law court as having far too much power to be fair and equitable. The civil court doesn't have anywhere near the flexibility that family law courts have in dividing property. The family law court's obligation is to divide the parties' community estate equally per Family Code section 2550. This can usually be accomplished without selling anything, but instead by making adjustments on the marital balance sheet and requiring equalizing payments. In contrast, in a partition action the subject property MUST be sold. In family court there may be other ways to affirm a party's interest without a forced sale AND the family law court has full jurisdiction to set aside the transfer deed on any grounds that the civil court could rely upon (i.e., fraud, lack of consideration, duress, breach of fiduciary duty if applicable, constructive trust, resulting trust, etc.).

If you don't want to litigate a relationship dispute involving property economically, a civil action for partition will serve your aims. However, you may be brought up short if the other side files a FLA action for dissolution or legal separation, and then asks the family court to exercise jurisdiction over the jointly titled assets acquired before marriage. Assuming the defending party has an attorney who actually knows the applicable law.

Again, it is only because Sophia went on title BEFORE the RDP that the partition avenue existed. If the deed transfers adding Sophia to title had occurred after registration or marriage, the family court would have exclusive jurisdiction to decide all the competing claims concerning title. Family Code section 2650 was enacted by the legislature in 1985 expressly to avoid people litigating these claims in civil court where they could otherwise be resolved under the FLA.

Unfortunately for Jane, she hired a civil lawyer to defend a civil partition action that Sophia filed five days after Sophia walked out the parties' house. Even though it should have been obvious that a dissolution of the RDP was required because marriages and RDP's can only be dissolved under the FLA, Jane's civil lawyer had no clue that this was so. He had never heard of Family Code section 2650.

The Ungrounded Bedrock of Lawyer Ethics

Accordingly, the parties litigated in civil court (with Jane naturally accepting what her "expert" warrior representative told her should happen), over the form of the pleadings only, for a year before it occurred to her lawyer that maybe he should file a dissolution action. Even then he had no idea about section 2650; indeed, Sophia's lawyers filed briefs in the family law case arguing that that court had no jurisdiction over the pre-marital property, and failed to disclose the existence of section 2650. Maybe they knew no more than Jane's lawyer - maybe not. If the latter, they likely violated California Rules of Professional Conduct, Rule 5-200. This states:

"In presenting a matter to a tribunal, a member:

(A) Shall employ, for the purpose of maintaining the causes confided to the member such means only as are consistent with truth;

(B) Shall not seek to mislead the judge, judicial officer, or jury by an artifice or false statement of fact or law;

(C) Shall not intentionally misquote to a tribunal the language of a book, statute, or decision;

(D) Shall not, knowing its invalidity, cite as authority a decision that has been overruled or a statute that has been repealed or declared unconstitutional; and

(E) Shall not assert personal knowledge of the facts at issue, except when testifying as a witness."

Good luck holding lawyers accountable under this section however, except in extreme circumstances with 'smoking gun' quality proof. "Zealous advocacy" is easily abused.

During that year Sophia's lawyers ran up $150,000 in billings fighting over motions in the partition action that could never have been filed in family court. Jane's lawyer charged Jane $60,000 to respond to them and file her own counter-motions. This all could have been avoided. By the time that Jane realized she lacked a competent attorney, two years had been wasted and the parties had racked up almost $300,000 in combined fees. Moreover, Sophia hasn't exacted enough retribution yet: Her attorneys are violently opposed to having two overlapping sets of facts and claims heard in one proceeding. Why would that be?

Jane's only remedy is to file a motion in the family court seeking an injunctive order staying the continued prosecution of the civil partition action, so that the family court can assume jurisdiction per section 2650 over the jointly titled rental properties and adjudicate that dispute. She must also seek an order in family court bifurcating for separate trial the claims and defenses surrounding Sophia coming onto title, which is a smart move because that issue can be tried and decided relatively quickly.

This should all be a matter of common sense. But these days, in a world where presidents and candidates distort the truth without compunction, and "pundits" and "talking heads" flood the airwaves with demonstrable falsehoods, no behavior seems to be off limits, and this is increasingly personified in lawyer ethics. Rather, the conventional wisdom is to say the most outrageous things with a straight face, and to expect that the likelihood of success some of the time justifies the small risks of being exposed. Journalist Michael Scherer has written an outstanding cover article for Time Magazine for the week of October 15, 2012 entitled "Blue Truth/Red Truth" that describes with clarity how we increasingly inhabit a political "landscape where accuracy is in the eye of the beholder." So too all our institutions. But I confess that I digress (sorry!).

Not All Lawyers Are Equally Competent - Do Your Due Diligence!

There are a number of other fascinating issues in this case that I may blog. But one immediate take-away is the importance of retaining competent legal counsel in complex family law actions. Lawyers themselves have an ethical obligation not to accept cases they are not competent to handle (California Rules of Professional Conduct, Rule 3-110(A)). Penalties for attorneys who don't take that responsibility seriously include suspension or disbarment Bowles v. State Bar (1988) 48 Cal.3d 100. But as with all shades of grey, competency is a relative concept. Accountability is more reliably imposed from what resides within a person, not without.

As it turns out, even though Jane's prior attorney's retainer agreement stated he had malpractice insurance this was a lie - that attorney has proudly proclaimed he has never had malpractice insurance because he has never been sued (a violation of CRPC, Rule 3-410).

If Jane is ever to be made whole for the damage his management caused her, she will have to go after his personal assets. And the last thing that Jane wants is another lawsuit, and a further set of attorney fees.

Which is what Sophia is counting on in her hope that Jane will, in the face of crippling legal fees, just give up.