Legal Question in Real Estate Law in California
Because of loss of income, I recently had a lien put on my rental property for an unpaid debt. It is both me and my wifes property. I was separated from my wife at the time but we still work the business together. Although me and this creditor agreed to a modification work out plan, my wife came up with the idea to transfer title over to her temporarily in order to protect it from other creditors until I can get all collection activity taken care of. I was against this at first but between her and a notary, they say this transfer is something that is done routinely to protect property from creditors. Prior to signing, I told them this is not a "GIFT" since I knew gifts could not be used in settlements and this is by no means relinquishing my share. Notary says I would still have 50% share. Wife agreed that this is not a gift or anything, just a temporary transfer until I settle things with the creditors. I would not sign if word "GIFT" appeared anywhere. Again, both her and the notary agreed this is not a "GIFT". After signing and notorizing, for my records, I had a copy made of the deed immediately. The wife took the deed to file the next day. I still did not feel comfortable doing this so I seeked advice from Real Estate agent who helped my mom with her foreclosure. I later learned that by doing this transfer, it may not have saved property from creditors since it can be a fraudulent conveyance and challenged by the creditors and it could do more harm than good. I told my wife this but she did not want to reverse the action. I satisfied my creditors as agreed but she breached the agreement and would not reverse the action thereby refusing to put the deed back into its original state. We are divorcing now and I had a realtor pull the deed that was filed. We see it had the word "GIFT" added, but this was done after the deed was signed and notorized and out of my sight. I pulled my copy of the same deed with signatures and stamps and the word "GIFT" is not there so agent tells me it looks like it was added the next day. Agent says if this was done, it constitutes "FRAUD" since the deed is a legal document and cannot be altered after signatures and stamps are attained, especially without my knowledge. Is this "FRAUD"?
2 Answers from Attorneys
Gee. First you get bad legal advice from your ex. Then you consult a notary for bad legal advice. Then some more legal advice from a real estate agent. What's wrong with this picture? You did a fraudulent conveyance, and now I suppose you want the divorce court to help you put the toothpaste back in the tube. Don't count on it. Very likely the court will shrug its shoulders and say that you attempted fraud on your creditors, so go pound sand. Or maybe not. But consult a lawyer for your legal advice from now on, OK? If I were you I would ask the lawyer who is representing you in your divorce. Or did you hire a plumber?
Calling it fraud is not going to help. Regardless of what your wife wrote on the deed, or when it was written, it was certainly your intent to transfer title to her. What is worse, is that I have the feeling that you did not have her sign a written document, which would clarify that the arrangement was not to give her title to the property.
Your divorce court will more than likely believe that you gave her title as a gift. At best, you may be able to get the court to realize that your deed to her triggers a presumption of undue influence, but that may be easily rebutted by your wife.
In the future, don't ask your realtor for legal advice. They aren't supposed to give it, and usually aren't qualified to give it. They have only one interest in mind when you walk into their office - making a commission from a sale or purchase of property.
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