Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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C

170.0000 COLLECTION OF TAX BY BOARD

Annotation 170.0008.950

(a) IN GENERAL

170.0008.950 Lien on Property Held as Community Property. A husband borrowed $100,000 from his wife's separate property and issued a note which required payment from his separate property or his one-half interest in community property. The note was to be secured by a trust deed on real property owned by the couple as community property. Later, a deed of trust was recorded on the property in which the husband and wife as trustees of a family trust were identified as trustor and the wife as a beneficiary. Apparently, this action was intended to hold the community property asset in a trust in such a manner that if the husband did not repay the loan, the wife would obtain the property as her sole property.

The deed of trust cannot be valid because even if the property was somehow deemed to have been transferred to the family trust, there was no record of such a transfer on which subsequent lienholders could have had actual or constructive notice of the transfer. The family trust did not borrow any funds and is not liable for paying any borrowed funds to the wife. Additionally, the deed of trust is also invalid because it seeks to grant a lien on real property to a person who is listed as a record owner of the property (the husband and wife). An owner of property cannot have a lien on it. (See Lee v. Joseph (1968) 267 Cal.App.2d 30.) Under California law, one spouse may mortgage his or her separate property to the other spouse but cannot create a lien on community property by mortgage. (Freiermuth v. Steigleman (1900) 130 Cal. 392.) 5/19/97.