Even if spouse freely and voluntarily signs a Quitclaim Deed during marriage, if there is a promise to restore title to joint ownership, the Deed may be set aside
In Fossum, (2011) (CA 2/1 – Opinion filed January 28, 2011), a Husband and Wife married in 1994 and purchased a home jointly thereafter. To secure a better interest rate, Wife quit-claimed her interest in the home to Husband. Husband promised to convey the property to the community after the loan closed, and did so about 10 months later. In 1998, the parties refinanced to secure a lower interest rate. Wife again quit-claimed to Husband and relied on his promise to reconvey back to the community. Wife admitted that she freely and voluntarily signed the quitclaim deed knowing that the title would be held by Husband solely. However, Husband never reconveyed title to the community.
The Court of Appeal decided that the property was community property because it was acquired during marriage. Property transactions between spouses are affected by the confidential and fiduciary relationship between spouses, including a duty of good faith and fair dealing. If one spouse secures an advantage in the transaction, there is a presumption that undue influence occurred. If undue influence is presumed, the advantaged spouse has to prove that the other spouse acted freely, voluntarily and with full knowledge of all the facts and understood the effect of the transaction.
Husband argued that “form of title” should prevail. The Court disagreed, ruling, “The form of title presumption simply does not apply in cases in which it conflicts with the presumption that one spouse has exerted undue influence over the other.” The Court acknowledged Wife’s admission that she freely and voluntarily signed the document; however, she did so only because Husband promised to re-title the property in joint names at a later date.
It is common for spouses to enter into agreements with each other during marriage regarding holding title of property. Many times it is necessary to achieve better interest rates or loan terms. However, entering such agreements may have significant legal effects. Our attorneys are experienced in litigating the characterization of marital property, asset and debt division, and setting aside legal documents. Contact our attorneys today if you have questions in your San Diego divorce case concerning the characterization of assets or if you have questions whether a document is legal binding.