Falk v. Falk

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
SHANNON FALK, No. 07-10865
Debtor(s).
______________________________________/
SHANNON FALK,
Plaintiff(s),
v. A.P. No. 07-1080
MICHAEL FALK,
Defendant(s).
_______________________________________/
Memorandum on Cross Motions for Summary Judgment
_________________
Chapter 11 debtor in possession and plaintiff Shannon Falk is the former wife of defendant Michael
Falk. In this adversary proceeding, she seeks a determination that certain New York Limited Partnership
interests which were formerly the separate property of Michael are now marital community property. The
parties have each filed a motion for summary judgment.
Michael has objected to extrinsic evidence offered by Shannon to prove that the limited partnership
interests were transmuted to community property. It appearing that transmutation is to be determined by
documentary evidence alone, those objections will be sustained and the court will consider only the
documents.
Entered on Docket
January 22, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 07-01080 Doc# 27 Filed: 01/22/08 Entered: 01/22/08 08:59:52 Page 1 of 3

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While they were married to each other, Michael and Shannon established a marital trust dated
December 1, 2001. On June 2, 2004, Michael and Shannon signed three documents. One was entitled
“Property Agreement” and provided, in pertinent part:
1. Except as otherwise provided in this Agreement, we declare that all property owned by
us on the date of this Agreement, or hereafter acquired by us, title to which is held (i) in both our
names, including property held in joint tenancy form, or (ii) titled in the MICHAEL T. AND
SHANNON M. FALK MARITAL TRUST dated December 1, 2001, (unless specifically
designated as the separate property of either of us), is our community property. We hereby agree to
change the character of any such joint property to community property if it is not already titled as
community property.
2. We declare that any property, or interest in property, owned by either of us before our
marriage or acquired by either of us at any time by gift or inheritance and that is registered or
otherwise held in either of our names alone or that is designated as separate property under our
Trust is the separate property of that spouse.
On the same day, Michael executed a document entitled “ASSIGNMENT OF INTEREST IN
LIMITED PARTNERSHIP” which provided:
FOR VALUE RECEIVED, the undersigned does hereby grant, assign and transfer to
MICHAEL T. FALK and SHANNON M. FALK, as Trustees under the MICHAEL T. AND
SHANNON M. FALK MARITAL TRUST dated December 1, 2001, all his right, title and
interest in and to all his NEW YORK LIMITED PARTNERSHIPS.
Also on the same day, Michael and Shannon executed an amendment to the Trust which provided
that they “have transferred and conveyed to the Trustees the property described in Exhibit “A” to this
agreement.” Exhibit “A,” entitled “COMMUNITY PROPERTY TRANSFERRED TO THE TRUST,”
includes “New York Limited Partnerships.”
The documents clearly show that the limited partnership interests were transmuted to community
property. The assignment transferred them to the trust. The Property Agreement provided that any property
held in the name of the trust was changed to community property, and Exhibit “A” to the amendment to the
trust acknowledged the interests as community property.
Michael argues that “a spouse’s simple transfer of his or her separate property to a marital trust for
Case: 07-01080 Doc# 27 Filed: 01/22/08 Entered: 01/22/08 08:59:52 Page 2 of 3

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management and inheritance purposes does not effect a change of the character and ownership of such
property.” This is a correct statement of the law. However, we do not have a “simple transfer” here. We
have a transfer together with an agreement to change the character of the property and an express
acknowledgment that the transferred property is community property. These facts distinguish this case from
the cases Michael cites.
Michael’s reliance on the second paragraph of the Property Agreement is misplaced. That paragraph
says that notwithstanding the first paragraph separate property held in the name of either spouse alone or
designated as separate property in the trust remains separate property. However, the partnership interests
are neither. The are held in the name of the trust, not Michael, by virtue of the assignment. They are not
designated as separate property in the trust. Therefore, the second paragraph of the Property Agreement
does not apply to them.
Nor does paragraph C of section I of the trust avail Michael. That section merely says that property
transferred to or withdrawn from the trust retains its character after transfer or withdrawal. That means that
transfer or withdrawal, by itself, does not change the property. As noted above, it is not the transfer to the
trust which changed the property but rather the Property Agreement. Paragraph C merely means that the
limited partnership agreements, having been transmuted to community property, remain community property
even if withdrawn from the trust.
For the foregoing reasons, Shannon’s motion for summary judgment will be granted and Michael’s
will be denied. Counsel for Shannon shall submit an appropriate form of order so providing and an
appropriate form of judgment.
Dated: January 21, 2008
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 07-01080 Doc# 27 Filed: 01/22/08 Entered: 01/22/08 08:59:52 Page 3 of 3