IN RE: MARRIAGE OF William A. and Ruth M. HEWETT. (1979)

Appellant William A. Hewett (husband) appeals from two portions of an interlocutory judgment of dissolution.   He contends that the court erred (1) by failing to divide the wife's accrued vacation pay as a community asset, and (2) by finding that $9,600 deposited in a community investment bank account was the wife's separate property.

(1) Did the court err by failing to divide the wife's accrued vacation pay?

At the trial, the wife testified that as of the time of separation, she had accumulated eight days of paid vacation.   The record does not establish whether she was entitled to receive a lump sum payment in lieu of vacation.   The court made no disposition with regard to this accrued vacation.

There was a fairly extensive discussion of the husband's vacation benefits.   At the time of trial, he had accumulated about 33 days of vacation.   The court ordered that a sum equivalent to the amount of pay for 33 working days was community property and was to be divided equally.   The husband contends that, because of this disposition, the court erred in failing to make a correlative division of the wife's accrued vacation.

Respondent concedes that the issue of vacation pay was raised at the hearing below but argues for affirmance on two grounds:  first, there was a failure of proof because the husband at trial did not establish whether the wife's paid vacation had accrued prior to or after separation;  and second, appellant, by appealing from only two specific portions of the judgment, has failed to raise the issue in a proper manner for this court.

 The second objection seems unnecessarily technical.   The husband appealed from two portions of the judgment.   Paragraph 17, dealing with his vacation pay, and paragraph 19, which deals with the interest-bearing investment account (BIP account).   Since the question of the wife's vacation time was omitted from the judgment, the husband undoubtedly chose to appeal from paragraph 17 because he felt it was the paragraph which dealt with the general issue of vacation pay and hence was the logical way to notice the appeal.   It does not seem that that should bar him from raising a meritorious point of appeal.  Rule 1(a) of the California Rules of Court states:  “․ ․ ․  A notice of appeal shall be liberally construed in favor of its sufficiency.  ․ ․ ․”   To bar the husband on this ground would contravene that provision.

 Furthermore, the record seems to contain sufficient testimony from the wife to make a determination of the issue:

QUESTION:  Mrs. Hewitt, you worked part time during the time that you and Mr. Hewitt were living together;  is that correct?

ANSWER:  Yes.

QUESTION:  When did you start full time employment?

ANSWER:  After we separated.

QUESTION:  As a part-time worker, did you have any paid vacation coming?

ANSWER:  In proportion to the number of hours that I worked.

QUESTION:  And do you know what your paid vacation was for the year 1977 prior to the time that you began working full time?

ANSWER:  Eight days.

Clearly, then, the eight days were community property.   While not an issue of major importance, it does appear that the court erred by failing to divide that money in the same way it did the husband's.

(2) Did the court err in finding $9,600 in the BIP account to be the wife's separate property?

 The following facts are relevant to determine the character of $9,600 deposited in the community bank account:

The parties were married for 27 years.   In 1976, they joined an investment program.   They refinanced the family residence and used the proceeds from the refinancing (approximately $54,000) to establish a BIP account.   Subsequently, four deposits were made:  $2,400 from the parties' joint checking account, $9,600 received by the wife as an inheritance from her father's estate, and a total of $6,728 (made in two separate deposits) as refunds from state and federal income taxes.

The husband stated that whenever they were given an investment proposal, the two discussed the investment in great detail and made a joint decision about the investment.   The wife generally telephoned the bank to authorize the withdrawal from the account after they had agreed to make an investment.

When the wife received the inheritance check, she kept it for several weeks before depositing it in the BIP account.   She made the deposit on her own initiative with the idea that the balance of the account should be higher than it was.

The wife said nothing to her husband about an intention to have the $9,600 retain its separate character.   The husband testified that she treated the money as she treated all community assets.   When asked at trial as to her intention with regard to the money, she stated that she had hoped to spend it as she wanted and:  “My intention was to get it into a bank because I wasn't decisive about what I was going to do with it, because I thought I saw a need in our BIP account and I was hoping that at a later date it could be used for an investment.”   From the time of the deposit until the time of separation, the balance of the account did not fall below $9,600.

The husband contends that the court erred in finding that the $9,600 deposited by the wife in the BIP account retained its separate character.   We agree with his contention.   The testimony of both parties convinces us that respondent's separate property was transmuted into community property when she deposited it in the joint account.

The court below expressly based its decision on the case of In re Marriage of Mix (1975) 14 Cal.3d 604, 122 Cal.Rptr. 79, 536 P.2d 479.   In that case, the court upheld certain of the wife's separate property claims regarding property purchased during the marriage.   The wife had commingled her separate property with community property in several accounts.   The court found that the wife had satisfactorily traced the source of the payments to her separate property funds.   However, “The court [in Mix ] did not deal with the sufficiency of  ․ ․ ․  evidence [use of separate funds and of one party's intent] to overcome the effects of acquisition of title in the names of both spouses in joint tenancy or as husband and wife.”  (In re Marriage of Trantafello (1979) 94 Cal.App.3d 533, 544, 156 Cal.Rptr. 556, 563.)

Were this merely a matter of deciding whether property which was conceded to be separate was traceable, there would be no issue to decide since the husband rightly concedes that the $9,600 amount is clearly traceable.   But tracing assumes that the funds were separate property which had been commingled with community funds.   In In re Marriage of Mix, supra, the husband apparently did not contend that there had been any transmutation by agreement or gift of the wife's separate property into community property.   The issue was whether the property had become community solely by commingling.

This case presents a threshold question as to the character of the property, a question the court did not address in Mix.   While the property acquired by the wife in this case was unquestionably her separate property when it came into her hands, her subsequent actions and her testimony at trial indicate that she transmuted those funds into community property.   That she took an inconsistent position during the dissolution proceedings does not negate the effect of that transmutation.

During the 27-year marriage, as the husband's uncontradicted testimony at trial established, everything which the husband acquired during the marriage, even property from a separate property source, was treated as community property.   This included over $17,000 derived from the husband's separate property funds.   Similarly, the parties' salaries were deposited in joint checking accounts and used for community expenses.

While ownership to the BIP account was taken in joint tenancy, the court found, and the evidence amply supports, that the account was community property.

When the wife received the $9,600, she knew that she could put it in a separate account if she wished.   When she chose to deposit it in the BIP account, she did not indicate to her husband that she wanted the deposit to remain her separate property;  indeed, her testimony indicates that she put it in the account, not merely for safekeeping, but for a community purpose.

 Separate property may be transmuted into community property by an agreement between a husband and wife.   While the agreement may be written or oral, it is not essential to show an express agreement, but the status of the property may be shown by the very nature of the transaction, or may appear from the surrounding circumstances.  (Lawatch v. Lawatch (1958) 161 Cal.App.2d 780, 789–790, 327 P.2d 603;  Pruyn v. Waterman (1959) 172 Cal.App.2d 133, 139, 342 P.2d 87.)   Similar actions may lead to the conclusion that one party made a gift of separate property to the community.

The facts of this case are similar to those in Weinberg v. Weinberg (1967) 67 Cal.2d 557, 63 Cal.Rptr. 13, 432 P.2d 709.   In that case, the wife had received a separate property award of $4,400 from a personal injury settlement.   She indorsed and delivered it to the husband.   He deposited it in a community bank account, then transferred it to another joint checking account used by both parties to pay community expenses.   The court reversed the trial court's finding that this was separate property, and held that, under the circumstances, the wife was presumed to have made a gift of the separate property unless there was an express agreement to repay her.   The court rejected the wife's contention that she gave the check to her husband merely for safekeeping, noting that she gave it up voluntarily and imposed no restriction on how it was to be used, and could not allege an agreement for reimbursement.  (See also In re Marriage of Epstein (1979) 24 Cal.3d 76, 82, 154 Cal.Rptr. 413, 592 P.2d 1165.)

The facts of this case point even more clearly to a finding that the wife effected a transmutation or gift of the property to the community.   She herself made the decision to deposit the money in the BIP account, and noted that the decision was made with the thought of benefitting the community account.   As in Weinberg v. Weinberg, supra, 67 Cal.2d 557, 63 Cal.Rptr. 13, 432 P.2d 709, there was no agreement by appellant, express or otherwise, to reimburse her.   That those particular funds might still be traceable, since the separation occurred fairly soon after the deposit, is purely coincidental.   Once having effected a transmutation, the ability to trace did not undo the transmutation of the property, that ability became irrelevant.   The $9,600 should have been divided as community property.

We conclude that the wife's action in depositing the money in the BIP account transmuted the funds into community property in light of the pattern of sharing which had been established during the marriage and in light of her testimony that she put the money into the account to serve a community purpose.

The judgment is reversed and remanded for further proceedings not inconsistent with this opinion.

FEINBERG, Associate Justice.

WHITE, P. J., and SCOTT, J., concur.