In re Donner

OPINION VOLINN, Bankruptcy Judge. This is an appeal from an order allowing a claim of exemption. The trial court held that the debtor-appellee had effectively abandoned a prior homestead and was therefore free to acquire a new homestead which he was entitled to claim exempt in his bankruptcy proceeding. We affirm. I. The debtor and his wife separated in November, 1976 and filed a petition for dissolution of their marriage January 6, 1977. On March 11,1977, the debtor’s spouse filed a declaration of homestead for a head of household pursuant to California Civil Code § 1260, for the benefit of herself and the debtor on their home in La Canada. The dissolution hearing was held and the debtor, pursuant to a property settlement agreement, executed a quit claim deed for the La [625] Canada house to his spouse on August 10, 1977. The deed was recorded the following day. A final decree dissolving the marriage and approving the property settlement agreement was entered on April 19, 1978. The debtor thereafter purchased a home in Tustin, on which he declared a homestead in March, 1981. The following month the appellant, Western Craft Paper Group, obtained a judgment against him. Debtor and his former spouse remarried on July 3, 1981. The debtor filed an individual petition in bankruptcy on September 16, 1981. He claimed a homestead exemption on the Tustin property in the bankruptcy case. Appellant objected, contending debtor’s homestead in the Tustin property was invalid because he continued to have a homestead in the La Canada property. The trial court overruled the objection, holding that after delivery of the deed and entry of the divorce decree, the husband had no homestead in La Canada. The basic issue presented by appellant to the court below waá that “The quitclaim deed ... did not extinguish or cause an abandonment of debtor’s homestead rights in said La Canada residence” under California Civil Code § 1243(3) enacted in 1979, which provides that “a homestead can be abandoned only by: A declaration of abandonment or a conveyance by which one spouse conveys the homestead to the other spouse without expressly reserving his or her homestead rights.” Appellant contends that the debtor, not having properly abandoned the La Canada homestead, is debarred from claiming another homestead by virtue of C.C.P. 690.--31(b)(1) which, in effect, precludes claims to a second homestead where one already exists. II. This appeal raises the question of whether a married person may abandon or otherwise terminate a homestead by conveying his or her entire interest in the property to the other spouse during a marriage that is subsequently dissolved. At the outset, we note that the remarriage-does not affect the problem. The trial court concluded that an issue involving the remarriage was not presented and made no ruling with respect thereto. In any event, the debtor has filed bankruptcy in his separate capacity. His claim to the Tustin homestead was the only one before the court. It is this claim which was contested by the creditor. The debtor has not claimed a homestead in the La Canada property. The spouse’s claim thereto, whether as a present or former wife, was not before the court. III. The principles set forth in the case of In re Teel’s Estate, 34 Cal.2d 349, 210 P.2d 1 (1949) are applicable to the issue before us. In re Teel involved the claim of a husband, who had been divorced shortly before the death of his former wife, to a homestead in the former home despite his having signed a property settlement agreement wherein he quit claimed his interest in the home to her. He expressly abandoned any claim for family allowance or homestead therein. (She filed a homestead declaration unbeknownst to him.) The interlocutory decree approved the agreement. The husband prayed for vacation of the interlocutory decree alleging a reconciliation and an oral agreement to cancel the deed. The court, denying the husband’s application, held that while the deed was not the equivalent of a declaration of abandonment, it was a transfer of all the husband’s interest in the property including any interest by way of homestead. Such is the case here. As stated by the court below: “Certainly the combination of the deed to the former spouse plus the interlocutory and final decree of divorce operated to convey to the former spouse all interest of the husband in the subject property and also operated to terminate whatever homestead interest the former husband [626] may have had in what then became the separate property of the former wife.”1 The foregoing language is consistent with In re Winslow, 121 Cal. 92, 53 P. 362 (1898), which holds that given sufficient evidence of intent, a homestead can be abandoned by deed pursuant to a dissolution. IV. Appellant’s position, if accepted, would mean § 1243 prescribes that abandonment must be accomplished by the grantee spouse. Such a result would create a paradox whereby the transferor, having been divested of any interest in the property homesteaded during the former marriage, is nevertheless precluded from claiming a homestead to which he would be otherwise entitled, so long as the former spouse chooses not to terminate a homestead right in property which is exclusively hers. This interpretation disregards case law and statutes based in the realities of divorce and attendant distribution of property of the parties. There is little functional difference between total divestiture of an interest in property by virtue of a court decree and a deed given pursuant thereto, and abandonment of all interest in the same property. Cases such as California Bank v. Schlesinger, 159 Cal.App.2d Supp. 854, 324 P.2d 119, 122 (1958), and Bonner v. Superior Court, 63 Cal.App.3d 156, 133 Cal.Rptr. 592 (1976), are consistent with this perspective. In Schlesinger, supra, the wife, in a divorce proceeding, was awarded the family home, on which a homestead was declared during the marriage. The husband, pursuant to the decree, quit-claimed the property to her. Subsequently, certain judgment creditors levied on proceeds of a foreclosure sale. The wife contended that her homestead attached to the proceeds. The judgment creditors contended that the divorce, ipso facto, terminated the homestead exemption. The court stated: “(p. 122) In a case, such as this, the homestead of the ex-wife continued after the divorce and after the ex-husband’s relinquishment of his property interest to her.. . ” “(p. 128) We are satisfied that Civil Code §§ 146 and 1265 continued the homestead protection to defendant . .. and in her alone after quitclaim from her husband ...” Emphasis Added. In Bonner, supra the wife, similarly was awarded the homesteaded property. The husband was to receive approximately one-half the equity in the home or $5,000 payable over three years. Not having been paid, he levied on the homestead contending that the divorce decree awarding her the property made no provision for a homestead. The court, citing Sehlesinger, upheld the validity of a wife’s homestead rights in joint tenancy property which had been quit-claimed by a husband after a divorce in which no disposition was made of the property. It also stated that the portions of the Civil Code dealing with distribution of property in divorce proceedings (e.g., relinquishment of interests in property) “to the extent there is an apparent conflict” must control over general provisions of the Civil Code relating to force sale of property (e.g., requirements as to abandonment). The reasoning was stated at 133 Cal.Rptr. p. 598: “It is apparent, however, that Civil Code section 4800 is more specific than Civil Code section 1240, because the former deals expressly with homesteads in the context of dissolution proceedings, whereas the latter deals with homesteads in relation to judgments in general.” [627] CONCLUSION While the language of California Civil Code § 1243(3) is somewhat ambiguous, it may be read consistently with the purpose of the exemption statutes and its relationship to inter-spousal transfers; that where there is a conveyance from one spouse to another “without expressly reserving his or her homestead rights” the transferee spouse becomes the sole beneficiary of the homestead interest. The' transferring spouse, having relinquished all interest in the property, has nothing to abandon and is therefore not precluded, by virtue of the prior homestead, from selecting another. AFFIRMED. Footnotes [1] The court further cited the following: “I find no California case precisely upon the point, but in 37 Cal.Jur.3d 454 the statement is made: ‘Accordingly, in the absence of such an express reservation of rights, the homestead would appear to terminate as to the spouse conveying, and to vest in the other spouse as though he were the survivor, being freely alienable in his hands and retaining as a homestead characteristic only the exemption from forced sale.’ ”