When a person transfers real property, it is typically required that the person's appropriate title be listed on the deed. For example, if John Smith owned 123 Green Street as trustee of their trust, the deed would show that designation. Failure to denote John Smith's designation on the deed would normally invalidate the transfer. However, a recent appellate case surprisingly did not follow that line of thinking.
Carne v. Washington, Fourth District Court of Appeal, Case # D067756
In 1985, Mr. Liebler executed a revocable trust and funded it through a recorded deed, the Via Regla property. In 2009, Mr. Liebler executed an irrevocable trust. It stated, "I transfer to my Trustee the property listed in Schedule A, attached to this agreement." The Via Regla property was listed on Schedule A. However, Mr. Liebler never executed a deed transferring title for the Via Regla property to the 2009 Trust.
On October 3, 2012, Mr. Liebler passed away.
A dispute then arose regarding ownership of the Via Regla property, i.e. was its disposition controlled by the 1985 Trust or the 2009 Trust? Since the beneficiaries for each trust differed, litigation ensued.
A beneficiary of the 1985 Trust argued that no valid conveyance had occurred because Mr. Liebler never transferred the property out of the 1985 Trust. Mr. Liebler transferred the property to his 1985 Trust in that same year and title remained in the 1985 Trust until his death in 2012. Therefore, the 1985 Trust should control according to the 1985 Trust beneficiary.
Conversely, the beneficiary of the 2009 Trust argued that Mr. Liebler "only failed to execute a deed of transfer through ignorance, oversight or negligence." Thus, the 2009 Trust should control according to the 2009 Trust beneficiary.
The trial court agreed with the 1985 Trust beneficiary, finding that a unilateral declaration regarding the Via Regla property was insufficient to transfer title to the 2009 Trust. A deed transferring title from the 1985 Trust to the 2009 Trust was needed.
On appeal, the appellate court reversed finding that Galdjie v Darwish (2003) 113 CA4th 1331 permits a conveyance involving a revocable trust even if the individual did not state their title, i.e. trustee, on the document provided the individual has the power to transfer real property. Since the 1985 Trust was revocable and Mr. Liebler had the power to transfer real property, his declaration in the 2009 Trust was sufficient to convey title of the Via Regla property to his 2009 Trust.
Of note, the opinion made multiple references to Estate of Heggstad (1993) 16 Cal.App.4th 943, albeit to note that this published decision was inapposite to Heggstad.
From my perspective, it seems as if the appellate court wanted to elevate substance over form. Mr. Liebler's form in handling the transfer of the Via Regla property was poor. Any competent estate planning attorney would've insisted that Mr. Liebler execute a deed transferring title to the 2009 Trust from the 1985 Trust. Still, it is rather easy to see what Mr. Liebler wanted to accomplish, i.e. title to the Via Regla property be vested in the 2009 Trust. The proof being that Mr. Liebler clearly expressed in the 2009 Trust that he wanted the Via Regla property to be part of the 2009 Trust (see Schedule A).