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From
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:
Eric
F.
Proposition
Eisenlauer
58 -
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This
is
Richard
involving
benefits
property
(child)
“f..
in response
to your memorandum of August
i8,
1988 to Mr.
Ochsner
in which’you
ask whether
a sale
and purchase
.Cal-Vet
financing
preclu’de
granting
Proposition
58
since
the Department
of Veterans
Affairs
“acquires”
the
from the owner (parent)
before
selling
it to the veteran
by a contract
of sale.
The Cal-Vet
program was summarized
Department
of Veterans
Affairs
v.
149 as follows:
by the Court of Appeal
in ’
Duerksen
(1982)
138 Cal.App.3d
Act of’1974
(Act)
Mil..
“The ‘\i’eterans’ Farm a.id gone Purchase
Vet Code,
§ 987.50
et seq..[fn.
omitted]
was enacted
‘to
provide
veterans
with the opportunity
to acquire
farms and
the Department
is
Under the Act,
homes. ’ .(S 987.51.)
owners
and sell
empowered
to buy farms and homes from their
back to eligible veterans under
long-term
the properties
installment
contracts
at a iow rate of interest
. . . Since
the sale is by instaliments
(SS 987.69,
987.711,
the
Department
retains
legal
title
to a property
until
the price
(See Eisley
v. Kohan (1948) 31 Cal.2d
has been paid in full.
637,
643 . . . .I Funds fcr Department’s
purchase
are provided
by the public
through
general
obligation
bonds.
. . .
h
contra.ct
must agree
that he
“A veteran
who seeks
a Cal-Vet
family
will
actually
reside
on
or the members of his
immediate
If ‘he
(S 987.60.)
the property
until
it is paid off
o: soid.
later
wishes
to transfer,
assign,,
encumber,
lease,
let or
sublet
his property
before
be has paid the full
price,
he must
The
first
obtain
the written
consent
of the Department.
‘may give
its
written
consent
. . . for
good cause
Department
subject
to the interest
of the department
and
shown,
(S 987.73,
subd.
’
consistent
with the purposes’
of the Act.
In the event
of an approved
assignment
to a person
who’
(a). 1
that
person
does not enjoy, the special
lqw
is not a veteran,
but pays a higher
rate “as
fixed
by the
_ /
rate
of interest,
(5 987.72.)
department
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1988,
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“pnfy
one farm or home purchased
under the Act may be owned,:
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by a veteran
at any one time..
(5 ?87.86,,
‘subd.
(c).)
‘.
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However,
, .:’ -.
a veteran
who has paid his contract
in full
may in
certain
circumstances
be granted
a subsequent
opportunity
to’.
: :
purchase
another
farm or horn& under the-Act.
(S 987.86,
’
-cl
subds.
.. ‘1.
(a)‘,
(‘b:,
(d),
tel.1
.I
:
“If
a veteran
fails’
to comply with any of the terms of his
contractual
obligations
the Department
may cancel
the
contract:
in such-event
all
payments
m,ade to the Department
up.
_.
to that
time are forfeited
as rental
paid ‘for occupancy,
and
,
.:,
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..-..
the Department
is entitled
to thke possession
of the
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property.
(S 987.77.)”
:
58 amended article
XIIIA of the.
As you know, Proposition
California
Constitution
to provide
among other
things
that the
terms
in ownership”
do not include
the
“purchase”
and “change
purchase
or transfer
of the principal
residence
and the first
,$l
cash
value
of other
real
property
between
million
of the full
of 1987 (AB “47)
parents
and children.
Chapter
48 0,6 the Statutes
Chapter
48 !’
legislation
for Proposition
58.
is the implementing
added section
63.1 to the Revenue
and Taxation
Code and applies
to’
of real
property
completed
on or after
purchases
and transfers
Novem!ber 6, 1986.
,.
is defined
by section
67 as “a change
in
The term “purchase“
“Change in ownership”
is defined
by
ownership
for consideration.”
interest
in real property,
of a present
section
60 “as a transfer
including
the beneficiai
use thereof,
the value
of which is
Thus,
if a
substantiaily
eguai
to the -vaiue of the fee interest.”
oarent
transfers
t%o a child
(or vice
versa),
an interest
in real
property
as described
in section
60, the -Lransfer
is excluded
from
change
1 n ownership
pursuant
to Proposition
58 and section
63.1.
?:ilitary and $I_,
~+eians Code provides
(S 987.68)
that the
department,
before
consummating
a purchase
(from
the owner),
shall’
to
be
purchased
to
be
cause
the title
of the property
sought
examined
and may requi:e
an abstract,
an unlimited
certificate
of
title
or a policy
of title
insurance
and may refer
the.same
to the.
” [t lhe department
After
that,
Attbrney
General
for his opFnion.
Sk21 1 then
enter
into
a contract
with the veteran
for the sale
Of
(S’987.69.)
t:?e property
to the veteran.
. . .”
?- .h. e
It is settied
law that
the vendee
of a contract
of sale
with the
Affairs
is the owner of the property
for
Deoartment
of Veterans
all
purposes
and that .the Department
retains
mere legal
title
as
security
for payment of the,contract
purchase
price
(Eisley
vEohan,
supra. 1
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Walton
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1988 :
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sells
property
to the department
under the
when a parent
Cal-Vet
financing
program,
the departmen!
.is then statutorily
obligated
to enter
into
a contract
of sale
k:ith the veteran
(child)
by which the veteran
is the equitable’owner
of the
3ecause
of the.
;>roperty
and the department
owns mere.leqa?
title.
statutory
requirement
to contract
with the; veteran,
the department,
(:oes
not have the right
to the beneficial
use of the property
That right
passes
from the owner (parent.)
through
the
purchased.
department
to the veteran
(child).
‘-_i:L1s ,
’
in trust
for the
The situation
here is analogous
to a transfer
present
,benefit
of a child
of the trustor
which in .,our opinion
to Assessors
See Letter
qualifies
for the parent-child
exclusion.
In either
case,
property
is
dated
September
11, 1987,
No. 87/72.
‘transferred
to a party
who is under a legal
obligation
to make the’
beneficial
use or benefits
of the property
available
to another.
_
the legal
obligation
is imposed
by the .’
In the case of a trust,
trust’instrument
while
in this
case the legal
obligation
is
In either
case,
the
imposed
by statute
as indicated
above.
transferee
of the legal
title
to the projerty
owns only the ‘mere
legal
title
to the property
(Eisley,
supra;
Estate
of Feuereisen
(1971k
17 Cal.App.3d
717,
720; Allen
v. Setter
County soard
of
Equalization
(19831’139
Cal.App.3d87,
89C.j
there
is a transfer.
to,‘the
veteran
in our opinion,
Therefore,
(child)
from the owner (parent)
of a present
interest
in real
use thereof,
which is equal
to
Froperty
including
,the beneficial
of
the
transaction
The
substance
the value
of the fee interest.
had purchased
the property
is no different
than if the child
from his parent
using
conventional
financing
in which
directly
case
there
would be no question
regarding
;:?e al:plicability
of
In either
case,
:he sarerit
receives
mcney for
the
Proposition
58.
sale
of the property,
the child
is at least
:he,equitable
owner of
and a third
party
collects
2rinaipal
and interest
!
the property,
See Eisley
v. Ko’:an,
supra,
wherein
the
payments
from the child.
M;i;Jhere
beneficial
court
quoted
with ,approval
at page GC3 :)_a:
interest
has passed
to a vendee,
the retention
of legal
title
does
significant
difference
from the situation
cf a deed wit!,not give
a lien
retained
or a mortgage
back to secure
the purchase
money.
that
it is the
S-?cti’on.2
of Stats.
of 1987,
Chap. 48, Fr.o\jided
intent
of the Legislature
that
the provisions
of section
63.1
shall
be liberally
construed
in order
‘to carry
out the intent
of
?:oposition
58 to exclude
from change
in ownership
purchases
or
transfers
between
parents
and their
children
described
therein.
to treat
transactions
between
parents
and children
In our view,
differently
depending
upon whether
Cal-Vet
financing
or:mor$
convcntional,financing
is used would frustrate
the expresseq
intent
of the Legislature
that
section
63.1
be liberally
construed.
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Richard H. Ochsner
.Mr. Robert H. Gustafson
Mr.
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