## Facts

- The State Board of Equalization assessed delinquent sales taxes, interest, and penalties against James K. Ho arising from the Monsoon Restaurant.
- The Board obtained and upheld a judgment against Ho for the tax liability.
- In 1995, the Board notified Ho’s spouse, Doreen H.Y. Woo, that it intended to seek an earnings withholding order against her wages to satisfy Ho’s tax debt.
- After receiving notice, Woo and Ho executed a marital agreement transmuting their future earnings into separate property.
- Woo later earned substantial wages as an employee of Wells Fargo Bank.
- In 1999, the Board applied for an earnings withholding order for taxes against Woo’s wages; Woo opposed, arguing the transmutation prevented the Board from reaching her earnings because they were “future” and therefore not a transferable asset of Ho.
- The trial court ordered Wells Fargo to withhold $3,000 per month from Woo’s earnings; Woo appealed.

## Issues

1. Whether a marital transmutation agreement characterizing spouses’ future earnings as separate property can bar a creditor from collecting a spouse’s tax debt from the other spouse’s earnings that would otherwise be community property.
2. Whether the post-notice transmutation of future earnings is unenforceable against the tax authority as a fraudulent transfer under the Uniform Fraudulent Transfer Act and Family Code section 851.

## Decision

- The Court of Appeal affirmed the earnings withholding order.
- The court held the marital transmutation did not defeat the Board’s ability to reach Woo’s earnings that would otherwise be community property for satisfaction of Ho’s tax debt.
- The court concluded the transmutation was unenforceable against the Board because it functioned as a fraudulent transfer under creditor-rights law incorporated by Family Code section 851.

## Legal Principles

- Earnings acquired during marriage are presumptively community property, and community property is generally liable for debts incurred by either spouse during marriage, including tax debts.
- Spouses may transmute property between themselves, but a transmutation cannot impair third-party creditor rights; transmutations are subject to fraudulent transfer law. (Fam. Code § 851.)
- A transfer is fraudulent if made with actual intent to hinder, delay, or defraud a creditor; courts may infer such intent from timing and context, including execution after a known debt and notice of collection efforts.
- Statutory language delaying when a “transfer is made” until the debtor acquires rights in the asset does not protect anticipatory arrangements aimed at placing future community earnings beyond the reach of an existing creditor.

## Conclusion

The court upheld wage garnishment against the nondebtor spouse’s earnings, ruling that a post-debt, post-notice marital agreement transmuting future earnings into separate property could not be used to defeat the state tax authority’s collection rights and was voidable as a fraudulent transfer as to the creditor.


State Bd. of Equalization v. Woo, 82 Cal. App. 4th 481, 98 Cal. Rptr. 2d 206 (Cal. Ct. App. 2000)