Family Law Case Studies - Volume 10, Number 1
Published and Unpublished Appellate Court Opinions for January 2012
Published as a service to the Family Law Bar Association.
Compiled by the Hon. E. J. Burke, 1035 Palm Street, Room 355, San Luis Obispo, CA 93408, email@example.com.
Published and unpublished slip opinions can be secured from www.courts.ca.gov/opinions.htm.
There were very few family law opinions filed in October. Here are the highlights.
Irmo Sorge (2012) ___ Cal.App.4th ___ (CA 4/1 – Opinion filed January 5, 2012)
1. It is not error to disregard operating losses and to base a child support order on earning capacity and assets.
2. Once a final order of child support is entered, FC § 721 no longer applies and the parties are not required to disclose material change in their income and expenses.
Husband and Wife married in 1983 and separated in 2000. Wife’s dissolution petition was filed in Wyoming in November 2000. A 2003 Wyoming judgment of dissolution incorporated the parties’ MSA that provides for the parenting and support of their three children. Husband was ordered to pay child support of $8,500 per month - an amount that was based on Husband's gross income of about $800,000 per year. Husband also agreed to pay Wife $12,000 per month in non-modifiable spousal support for 120 months. The judgment was registered in California.
Wife's 2007 OSC to Modify Child Support and for Attorney Fees
In 2007, Wife moved to modify custody and child support. She also asked for an award of attorney fees to equalize the litigating power of the parties.
Wife’s 2008 schedule of assets and debts showed $14.2 million in assets and $43,214 in monthly expenses. Husband's I&E declared his 2008 monthly income included a salary of $10,980, dividends and interest of $224,867, and investment income of $426,556. Husband said his monthly expenses averaged $62,539.
The parties jointly retained a forensic accountant to analyze their income and assets. The expert’s preliminary report presented Husband's income in two ways; viz., one recognizing his net losses from a number of start-up companies that he founded after selling his company in 2007 for about $100 million. The other approach excluded those losses from the analysis of the income he had available for support.
In the final report, the expert detailed the significant operating losses in 2007 and 2008 of the companies that Husband started after selling his company. The final report presented Husband's income using the same “with and without” methods noted above. By recognizing both income and losses from Husband's start-up companies, Husband’s net monthly loss in 2007 was $9,100. In 2008, the loss was $235,600. Without reflecting the losses in the startup companies, Husband’s net positive monthly cash flow was $320,800 in 2007 and $229,100 in 2008.
In October 2008, Wife moved to compel the production of documents and sought sanctions of $125,000 for Husband's failure to produce various data and documents. Specifically, Wife complained that Husband failed to disclose that he received more than $3 million in income during 2006, failed to disclose that he received more than $9 million in cash in 2007 from the sale of his company’s stock, and failed to disclose that he received more than $100 million in cash from the sale of his company. She alleged that even though the judgment of dissolution was entered in 2003, his failure to disclose this new income was a breach of his fiduciary duty to her.
The trial court declined to consider the losses of Husband’s start-up companies and increased his child support obligation to $18,000 per month. As to attorney fees, the trial court ruled they were warranted by (1) Husband’s failure to disclose changes in his income in 2006 and thereafter; (2) Husband’s frustration of settlement, and (3) by the fact he received 80% of the parties' combined incomes and approximately 85% of the combined liquid assets. He was ordered to pay $200,000 in attorney fees and costs to Wife.
Husband appealed. REVERSED AS TO THE FINDING HUSBAND BREACHED A FIDUCIARY DUTY BY NOT DISCLOSING CHANGES IN HIS INCOME.
The Trial Court Properly Disregarded Husband’s Business Losses in Calculating Child Support
The CA rejected Husband’s argument that the trial court could not properly determine his income without considering the losses suffered by his startup companies. The CA observed that FC § 4058 specifically permits the trial court to consider a parent’s “earning capacity” rather than his or her actual income.
The CA pointed out that the existing child support order was based on Husband’s $800,000 gross income in 2003. The sale of Husband’s company in 2007 netted him about $100 million and in 2008 his non-real property investment portfolio generated unearned income of more than $2.35 million. As to the losses in the startup companies he founded, the trial court ruled he would not be permitted to fund his investment adventures with the child support owed to his children.
Citing Irmo Berger (2009) 170 Cal.App.4th 1070 the trial court observed that although Husband was not deferring the receipt of a salary as in Berger, Husband was "ask[ing] the court to shield a portion of his income from support" by playing the losses from his new enterprises against his substantial income. Under Husband’s theory, Wife would have owed him child support unless the court made findings required to deviate from the guideline support.
The trial court observed that Husband maintained "an affluent, even wealthy lifestyle despite those business losses" and said he had no right to put his business interests before his children's right to receive support by divesting himself of his earnings. “Husband may not take a break from his child support obligation in favor of his business investments.” (Cf., Berger at pp. 1082 and 1083.)
The CA approved the trial court’s findings and orders. “In setting guideline support, the courts are required to adhere to certain principles, including these: 'A parent's first and principal obligation is to support his or her minor children according to the parent's circumstances and station in life.' (§ 4053 (a).)” “'[A]dherence to the guidelines is mandatory. (§§ 4052, 4053 (k). The guideline amount of child support … is presumptively correct. … “The presumption of [§ 4053 (a)] … may be rebutted by admissible evidence showing that application of the formula would be unjust or inappropriate in the particular case ….” Citing § 4057(b)(5), the CA said a “deviation from the guideline amount may be appropriate where "[a]pplication of the formula would be unjust or inappropriate due to special circumstances in the particular case."
Citing § 4058(a)(2), Husband argued the trial court was required to "reduce" the income that he received each month by the monthly losses necessary to operate his new companies. The CA disagreed. “[FC § 4058 (b)] provides a trial court with discretion to determine a parent's annual gross income on a basis different from that parent's actual income.” Here, the CA said the trial court properly rejected the use of Husband's actual income in favor of a calculation of income that was based on an amount that it was fair to impute to him in view of his decision to invest in companies that would predictably operate at a loss for some period of time.
The CA added, “Irmo Destein (2001) 91 Cal.App.4th 1385, 1391 makes it clear that a trial court has discretion to consider not only a parent's earning capacity with respect to income from labor, but also "to impute a reasonable rate of return on the supporting parent's underutilized or non-income-producing investment assets in order to calculate guideline child support in the best interests of the child." (See also Irmo Dacumos (1999) 76 Cal.App.4th 150, 154–155.)
Husband Did Not Have a Fiduciary Duty to Disclose Material Information About His Income
The trial court awarded Wife sanctions in the amount of $75,000 pursuant to sections 271 and 2107 “for failing to disclose material changes in his income beginning 2006, failing to disclose material facts about his income from the date of her filing in August 2007 to the date of formal discovery in March 2008, failing to produce material information and documents concerning various trusts, [and] providing misleading financial and tax information …."
The CA agreed with Husband that after the final judgment of dissolution was entered, he no longer owed Wife any fiduciary duties. The CA disapproved the trial court’s conclusion that FC § 2102 (c) required financial disclosures “until the court loses jurisdiction to make a child support order.”
FC § 2102(c) provides, "From the date of separation to the date of a valid, enforceable, and binding resolution of all issues relating to child or spousal support and professional fees, each party is subject to the standards provided in FC § 721 as to all issues relating to the support and fees, including immediate, full, and accurate disclosure of all material facts and information regarding the income or expenses of the party." A violation requires the trial court to impose monetary sanctions and to award reasonable attorney fees. (§ 2107 (c).) FC § 271 (a) permits an award of fees as a sanction for uncooperative behavior. “Together, sections 271 and 2107 ‘give the trial court authority to order sanctions and the payment of attorney fees for breach of a party's fiduciary duty of disclosure and for conduct which frustrates the policy of promoting settlement.’ (Irmo Feldman (2007) 153 Cal.App.4th 1470, 1474.)”
The CA concluded FC § 2012 (c) does not impose on divorced parties a continuing fiduciary duty to disclose all material facts regarding a party's income after a final custody and support order has been entered, as opposed to interim, temporary, or pendente lite, child support orders. In this case, the Wyoming divorce decree stated the parties’ MSA was “a final and complete settlement of all rights and obligations between the parties, including those concerning their property, the support and maintenance of each of them and their children." The CA ruled that “as of the time the Wyoming divorce decree was entered, the parties in this case were no longer required to disclose ‘all material facts and information regarding the income or expenses of the party’ to the other pursuant to [§ 2102 (c)].” The sanctions imposed against Husband were reversed and the question was remanded to the trial court for reconsideration.
The Award of Appellate Fees Was Not Error
The CA approved the trial court’s award of appellate fees on the basis of Husband’s superior ability to pay. It rejected Husband’s argument that Wife had no need for assistance in paying her attorney fees since she is “worth $14 million, … receiv[es] in excess of $16,000 per month in spousal and child support, and was just awarded $414,444 in retroactive child support for a child in her care 50% of the time ….” The CA said, “Husband's argument … fails to acknowledge that the statute is concerned with relative need, and, thus, that the trial court may appropriately consider the fact that Husband has a significantly greater net worth than Wife in deciding whether to award her some or all of the attorney fees that she requested."
Irmo Hill & Dittmer (2012) ___ Cal.App.4th ___ (CA 2/6 Opinion filed December 19, 2011, ordered published January 18, 2012)
1. A PMA cannot be said to be involuntary where two attorneys assisted wife during the several months the agreement was being negotiated.
2. The amendment to FC § 1615 that requires presentation of a PMA seven days before the wedding is not retroactive.
Wife and Husband met in 1998 and married in 2001. They were both accomplished, successful persons who brought substantial separate property estates to the marriage. Before they married, Husband told Wife a premarital agreement would be required and they began discussing its terms several months before the ceremony.
An Illinois attorney represented Husband. In January 2001, Wife’s estate-planning Wife’s estate planning attorney sent a draft of a PMA to a family law specialist for review. Wife’s attorney said she wanted to draft the Agreement and Husband’s attorney agreed. Several drafts were reviewed and discussed.
The first draft waived spousal support and agreed to full disclosure of the parties' assets and liabilities. One revision Husband requested was a recital acknowledging that he provided Wife's counsel with full and complete access to Husband's financial information and an opportunity to consult with him, any of his accountants and other representatives as to the nature, value and cash flow from any of his assets and the nature and extent of his liabilities. Wife did not seek any financial disclosures from Husband. The final Agreement stated that Husband had "an approximate net worth of $40,000,000" and Wife had an "approximate net worth of $10,000,000."
Husband and Wife executed the final Agreement three days later, just prior to their wedding ceremony.
In 2008, Wife filed a petition to dissolve their marriage. She alleged Husband misrepresented his wealth in the Agreement and commenced discovery attempting to determine the full extent of Husband's assets. Husband requested a protective order on the ground that the waiver language in the Agreement precluded a challenge to its validity.
The trial court issued an order for limited discovery. The issue of the validity of the Agreement was severed and after a three-day hearing, the trial court concluded the Agreement was valid, that the current version of FC § 1615 was inapplicable, and that Husband had not misrepresented his wealth. Wife appealed. AFFIRMED
The Agreement is Valid
The CA rejected Wife’s contention that the PMA is invalid because Husband falsely stated in it that he had an approximate net worth of $40 million.
The CA said, “Parties contemplating marriage may validly contract as to their property rights, both as to property then owned and as to property and earnings that may be acquired during the marriage. (Irmo Dawley (1976) 17 Cal.3d 277, 349.)” But the statute in effect at the time Wife signed the Agreement, states a PMA will not be enforced if the party resisting enforcement can demonstrate that he or she did not enter into the contract voluntarily. It can also be invalidated by a showing the contract was unconscionable when entered into and that the complaining party did not have actual or constructive knowledge of the assets and obligations of the other party and did not voluntarily waive knowledge of such assets and obligations. (FC § 1615 (a)(2).)
Proof that a premarital agreement was involuntary may be shown through (1) the coercion that arises from an agreement that is presented at a time close to the wedding, (2) from surprise; (3) from the presence or absence of independent counsel; (4) from inequality of bargaining power; and (5) whether the parties' knew rights were being waived under the agreement. (Irmo Bonds (2000) 24 Cal.4th 1, 19, 18, 23, 37.)
Parties negotiating a premarital agreement are not presumed to be in a confidential relationship that would give rise to fiduciary duties owed between spouses or to the presumption of undue influence when a transaction benefits one of the parties.
Here, Wife’s contention that the Agreement is tainted by fraudulent and inadequate disclosures is refuted by evidence that Wife, both in the Agreement itself and in her conduct during the many months of negotiation, waived this claim. She had the advice of two attorneys specializing in family law and estate planning during the nine months the Agreement was being discussed and negotiated. Wife's lawyer drafted the Agreement and revised drafts of the Agreement in consultation with Husband and his attorney. These facts, coupled with Wife's professional background and evident skills are strong evidence that she entered into the Agreement voluntarily.” (Compare, Irmo Pendleton and Fireman (2000) 24 Cal.4th 39.)
Amendments to Section 1615 Do Not Apply Retroactively
In 2001, when the Agreement was executed, FC § 1615 provided a premarital agreement is not enforceable if the party against whom enforcement is sought proves either (1) That party did not execute the agreement voluntarily or (2) the agreement was unconscionable when it was executed and three conditions apply.
In 2002, § 1615 was amended to create a presumption that a premarital agreement was not executed voluntarily unless the court makes five designated findings. (Irmo Friedman (2002) 100 Cal.App.4th 65, 72.) These include the finding that the party against whom enforcement is sought had at least seven calendar days between the date he or she was "first presented" with the agreement and the time he or she signed the agreement.
The CA rejected Wife’s contention that the amended version of section 1615 applies retroactively and that the Agreement is invalid because she was not "presented with" the Agreement until the day of the wedding. Her argument was raised and specifically rejected in Irmo Howell (2011) 195 Cal.App.4th 1062, 1074-1075.) “Section 1615 (c)(2), like section 1612, subdivision (c), added substantive, not procedural, provisions concerning representation by independent legal counsel. Thus, the trial court correctly determined that section 1615 did not apply retroactively.”
Moreover, even if §1615 (c)(2) has retroactive application, it does not support Wife's argument that she did not have seven days to review the Agreement before she signed it. In Irmo Cadwell-Faso and Faso (2011) 191 Cal.App.4th 945, 962, the court interpreted § 1615 (c)(2), as applying only when a party is unrepresented by counsel. Here, of course, not only was Wife represented throughout the negotiation of the Agreement by two lawyers, her lawyers were responsible for preparing all drafts of the Agreement.
E.C. v. J.V. (2012) ___ Cal.App.4th ___ (CA 3 – Opinion filed January 19, 2012)
The focus of a trial about whether an alleged parent openly held out a child as his or her natural child must be on whether the alleged parent has demonstrated an abiding commitment to the child and the child's well-being.
During J.V.’s pregnancy in 2002, her same-sex friend E.C. took J.V. to her doctor’s appointments acted as her Lamaze partner and often spent the night. E.C. was with J.V. during the birth of the child and cut the umbilical cord. When the child was three months old they moved into E.C.’s home. E.C. and J.V.’s friendship eventually developed into an intimate relationship.
E.C. took the child to doctor’s appointments and to her extracurricular activities. When E.C. was deployed out of town, J.V. and the child lived with E.C.’s mother. E.C. enrolled the child in Kindergarten and listed herself as the child’s “step-parent or legal guardian.”
When E.C. and J.V.’s relationship ended in 2008, they agreed E.C. would have “visitation” with the child and shared holidays. The child asked for E.C. to attend her kindergarten graduation. But in February 2009, communication between E.C. and J.V. broke down and J.V. thereafter refused E.C. access to the child. E.C. promptly responded with a petition to establish a parental relationship.
At the hearing, E.C.’s mother, testified that she perceived E.C., J.V., and the child as a “family unit.” She also said E.C. told people the child was her daughter and that treated her as her own granddaughter. E.C.’s sister also testified they were a “family unit,” called her “Auntie M.,” and M.A.’s children to be her cousins. Other witnesses also described the various ways J.V., E.C. and the child appeared to be a family and referred to J.V. and E.C. as the child’s two moms.
J.V. presented testimony from her mother, her sister, one of her friends, and the child’s godfather. Each said E.C. was referred to as the child’s Godmother and that they did not regard E.C. as her other mother. J.V. testified that she did not consider E.C. to be the child’s “parent” though she admitted E.C. “was there for the child since day one.” J.V. acknowledged she and E.C. had a long-term, committed relationship, with some stops and starts.
The trial court focused principally on the nature and quality of the relationship between E.C. and J.V.. The court found for example that the parties did not register as domestic partners, did not participate in a commitment ceremony and did not decide to have a child and raise it as theirs before the child was born. The court also found E.C. and J.V. did not live together immediately after the child was born or at any time continuously. They did not give the child E.C.’s surname and she was not listed on the birth certificate as a parent. Finally, the court found J.V. never intended E.C. to be another parent but was rather only a Godmother and J.V.’s long-term girlfriend. Based on these findings the trial court concluded E.C. had failed to prove by a preponderance of the evidence that she was a presumed parent under section 7611(d).
E.C. appealed. REVERSED AND REMANDED
FC § 7611(d)
Whether E.C. is, or is not, a presumed parent of the child is governed by the UPA. Under the UPA, a woman is presumed to be the natural mother of a child if she “receives the child into [her] home and openly holds out the child as [her] natural child.” (§ 7611(d).) Once satisfied, this two-pronged test produces a presumption that, once it arises, “‘may be rebutted … only by clear and convincing evidence.’” (In re J.O. (2009) 178 Cal.App.4th 139, 147-148.)
To be a presumed parent, a person does not have to be married to the other parent (Johnson v. Calvert (1993) 5 Cal.4th 84, 88-89) or registered as his or her domestic partner (Elisa B. v. Superior Court (2005) 37 Cal.4th 108, 114, 125). A presumed parent need not have ever lived with the child’s other parent (In re A.A. (2003) 114 Cal.App.4th 771, 784) and may not have even known the other parent (In re Salvador M. (2003) 111 Cal.App.4th 1353, 1355-1356, 1358.).
Nevertheless, a presumed parent is not just a casual friend of the other parent, or even a long-term boyfriend or girlfriend, but someone who has entered into a familial relationship with the child: someone who has demonstrated an abiding commitment to the child and the child’s well-being, regardless of his or her relationship with the child’s other parent. (See In re Sabrina H. (1990) 217 Cal.App.3d 702, 708.)
Receiving a Child Into A Home and Holding Out the Child as a Natural Child
Here, the CA first concluded that the first half of the parentage test under FC § 7611(d) was undeniably met since it was undisputed E.C. received the child into her home. The CA rejected the observation by the trial court that E.C. and J.V. did not live together immediately after the child was born was not determinative. “Whether E.C. and J.V. ever lived together is inessential to the legal question presented under section 7611(d). A person can obtain presumed parent status without ever living with the other parent. … The essential consideration is whether E.C. received the child into her home, which she undeniably did.”
The CA next observed that the determination of whether an alleged parent held the child out as his or her natural child must focus upon the evidence that does, or does not, show the alleged parent as someone who has entered into a familial relationship with the child: someone who has demonstrated an abiding commitment to the child and the child’s well-being.
This judgment is made without regard to the nature of the relationship of the child with the other parent.
The CA then discussed the various ways in which E.C.’s conduct demonstrated her commitment to the child and the child’s well-being - - facts that distinguished her as someone who had entered into a familial relationship with the child from someone who has not. (Sabrina H. at p. 708.) The CA said the trial court’s error was to consider facts that were irrelevant to the determination of whether E.C. demonstrated a genuine commitment to the child. And it said, even “to the extent the court considered relevant facts, the court considered them only in assessing J.V. and E.C.’s relationship, not in evaluating how their relationship may have demonstrated E.C.’s commitment to the child. This too was error.”
The CA said the nature and quality of the relationship between E.C. and J.V. simply does not inform a decision about E.C.’s commitment to the child. Whether E.C. and J.V. were only close friends when the child was born and whether they had a sexual relationship when the child was born is irrelevant.
The CA compared this case to Salvador M. where the child’s adult half sister, Monica, was found to be his alleged parent because of her “stalwart commitment to Salvador’s well-being not whether Monica had a sexual relationship with either of his parents. (Salvador M. at pp. 1358-1359.)” The CA emphasized, “The relationship between a child’s alleged parent and biological parent is legally irrelevant in determining whether the alleged parent held out that child as his or her natural child. The relevant relationship is that between the child and the alleged parent.”
J.V.’s testimony that she never intended for E.C. to be the child’s other mother could be relevant but only to the extent she manifested that intent through her conduct by precluding E.C. from holding out the child as her natural child. “J.V.’s ‘intent’ does little to demonstrate E.C.’s commitment to the child or lack thereof, because while J.V. may not have intended for E.C. to obtain any legal rights to the child, the record is replete with evidence that she allowed, even encouraged, E.C. to co-parent the child from the beginning.”
The CA also criticized the trial court’s reliance on the fact “E.C. and J.V. did not orchestrate J.V.’s pregnancy in order to raise a child as their own. [G]ay and lesbian couples cannot accidentally have children. … Thus, if a gay or lesbian couple has made the decision to have a child and has successfully pursued that process, such circumstances may be relevant to determining an alleged parent’s commitment to that child.” The CA said the other side of that coin is not necessarily true. “The failure to plan for a child does not demonstrate an alleged parent’s lack of commitment to that child’s well-being; it is the alleged parent’s conduct after the child’s conception and birth that does so.”
Similarly, the CA added that the fact E.C. did not claim the child as a dependent, put her name on the birth certificate, and did not give the child her surname may be relevant but could be entitled to little weight if, for example, if an alleged parent is precluded by law from claiming a child on his or her tax returns.
The CA reversed and remanded the matter to the trial court with instructions to reassess the question with its explanation in mind.
Please note: The following digests of unpublished opinions of the California Courts of Appeal are presented as case studies to illustrate how commonly recurring family law disputes were resolved in trial and appellate courts.
Caution: Rule 8.1115 (a), California Rules of Court, prohibits courts and parties from citing or relying on any unpublished opinion in any action or proceeding, except in the limited circumstances specified by rule 8.1115 (b).
Irmo Carlos – Unpublished opinion of District 2, Division 6 (Filed January 4, 2012)
Husband's presence in wife's residence a couple of days each week to wash his clothes did not legally or factually diminish her exclusive possession and control of the residence. Watts charges were appropriate.
Wife filed a petition for dissolution in 2006 after 42 years of marriage. In 2007, the court entered a judgment of dissolution distributing Husband's pension and IRA equally. Since Husband began receiving pension benefits in 1998 and had not paid Wife her one-half share, the court ordered Husband to pay Wife $66,924. The court reserved jurisdiction over the issues of spousal support, community real property, and Wife's request for attorney fees.
In 2009, following a trial of the reserved issues, the trial court awarded a residence in Ventura to Wife and a property in Kern County property to Husband. Husband was entitled to an equalizing payment of $82,000 based on the stipulated values of the two properties that was offset by the $81,680 he owed Wife in unpaid pension benefits through the date of trial.
The trial court also charged Wife with the reasonable rental value of the Ventura residence between 1996 and the date of trial. (Irmo Watts (1985) 171 Cal.App.3d 366.) The court rejected Wife’s argument that she should not be charged because she did not have sole use and possession since Husband came to the house about 2 days a week to bathe, wash his clothes, etc. After charges to Husband for his use of the Kern County property were set off, Wife was assessed $96,000 for the period from 1996 to 2009.
Wife appealed. AFFIRMED
FC § 2550 requires the trial court, upon dissolution of marriage, to divide the community estate of the parties equally. (Irmo Fonstein (1976) 17 Cal.3d 738, 748.) In equalizing the division of community property, the trial court may order a spouse to reimburse the community for the value of the exclusive use of a community asset between the date of separation and the date of trial. (Watts, supra, 171 Cal.App.3d at p. 374; Irmo Duncan (2001) 90 Cal.App.4th 617, 631-632.)
There are no specific guidelines for determining when Watts charges should or should not be awarded. Rather, the trial court has broad discretion and must consider all the circumstances when determining whether it is equitable, fair, and reasonable to order reimbursement in a particular case. (Watts at p. 374; Irmo Braud (1996) 45 Cal.App.4th 797, 818-819.)
The CA noted the trial court’s finding that Wife removed Husband's possessions from the Ventura residence and that he used only one room in the family residence twice a week. “Husband's presence in the residence a couple of days a week to wash his clothes did not legally or factually diminish Wife's exclusive possession and control of the Ventura residence.” Assessment of Watts charges was not error.
Needleman v. Needleman – Unpublished opinion of District 2, Division 4 (Filed January 4, 2012
1. An MSA must be interpreted to give force and effect to every provision and must not read in a way that renders clauses meaningless.
2. A set aside motion for fraud must be brought within 1 year of discovery. Duress claims must be filed within 2 years.
Husband and Wife married in 1995 and separated in 2003. In December 2003, Wife was granted exclusive use of the couple’s marital home, and Husband was ordered to pay her temporary spousal support of $7,600 a month until either party’s death, Wife’s remarriage, or further court order. Husband was additionally charged with paying all the bills for the home. In 2005, they listed it for sale at $8.9 million.
A November 2006 stipulated judgment requires Husband to pay Wife $7,600 per month and all the bills for the family home “until the close of escrow on the home, either party’s death, Wife’s remarriage, or further court order.” After the close of escrow, Husband was to pay Wife “$18,500 a month until the death of one of them, Wife’s remarriage or November 9, 2007.”
In September 2007, Husband announced that his spousal support payments of $7,600 would end on November 9, 2007 even though the family home had not yet been sold. After November 2007, Wife received no further payment of spousal support.
Buyers showed little interest in the family residence in spite of several price reductions. Side agreements between the parties about the sale and refinancing of the residence failed and in 2008, the trial court ordered her to leave the family home and deed it to Husband.
In May 2009, Wife obtained a writ of execution based on the 2006 judgment and started enforcement proceedings against Husband’s assets. Husband responded with an OSC seeking an order that his spousal support was paid in full.
In November 2009, the trial court found that spousal support terminated on November 9, 2007 and no arrears were due. The trial court quashed the writ of execution and awarded Husband $75,000 in FC § 271 sanctions.
In 2010, Wife moved to set aside the 2006 stipulated judgment. The family court found that the fraud-based claims were untimely, and that there was no evidence of duress.
Wife appealed. REVERSED AS TO THE SPOUSAL SUPPORT ORDERS, AFFIRMED AS TO THE FRAUD-BASED CLAIMS
The Proper Interpretation of the Parties’ MSA
Two provisions of the judgment address spousal support.
First, under the heading “Spousal Support Payments Made Directly to Respondent Until Close of Escrow of Family Residence,” the judgment requires Husband to pay Wife “$7,600 per month … until … (1) the close of escrow of the Family Residence, (2) the death of either party, (3) the remarriage of [Wife], or (4) further order of court.”
The second provision about spousal support applies only after the house is sold. Under the heading “Spousal Support Payments Upon Close of Escrow,” the judgment requires Husband to pay Wife $18,000 per month commencing on “the first day of the month following the close of escrow [until] the earliest of (1) the death of Petitioner, (2) the death of Respondent, (3) the remarriage of Respondent, and (4) November 9, 2007.”
The CA said the parties specifically provided that “the close of escrow” was one of the four conditions that would trigger the end of the payment of $7,600 in spousal support. The termination of this element of Husband’s spousal support obligation was not tied to a specific date. And, “by its own terms, [the second provision] is triggered after the close of escrow, and only the increased payment of spousal support provided for in that section is to end on November 9, 2007.”
The CA explained that this interpretation of the MSA was required because “[c]ontractual language must be interpreted to give ‘force and effect to every provision,’ and not to render clauses ‘nugatory, inoperative or meaningless.’” (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473.) “The only reasonable interpretation of the parties’ agreement is that the increased spousal support obligation was never triggered because escrow did not close before November 2007. The parties did not condition the termination of Husband’s obligation to pay $7,600 per month in spousal support on anything other than the close of escrow, either party’s death, Wife’s remarriage, or further court order. The termination of his obligation to pay the mortgage, insurance, taxes, and bills for the home … was conditioned solely on the close of escrow. The family court incorrectly concluded that Husband was required to make these additional payments only while Wife was in possession of the home.”
Other arguments supporting Husband’s interpretation of the agreement as one intended to provide only temporary support were also rejected. “If the parties intended that the home sell before November 2007, they had the option of applying to the court for additional orders to enforce performance of their obligations.” The matter was remanded to the trial court to calculate the accrued installments of spousal support of $7,600 per month from November 2007 to the date of the close of escrow for the sale of the residence.
Wife’s Motion to Set Aside the Judgment for Fraud and Duress
Wife’s motion to set aside the 2006 judgment and the 2008 orders was based upon Husband’s alleged promissory fraud and duress. Section 2122 provides that a judgment may be set aside “where the defrauded party was kept in ignorance or … prevented from fully participating in the proceeding.” Such an action must be brought within one year after the fraud is discovered or should have been discovered. An motion based upon duress must be brought within two years after the date of entry of judgment.”’
The CA ruled that the trial court properly found that Wife’s 2010 motion to set aside the judgment was time-barred by the one-year statute of limitations in section 2122 (a). And although the motion based upon duress was timely, denying it was supported by substantial evidence.
The CA rejected Wife’s argument that she was deprived of her entire interest in the marital estate when the couple’s home was finally sold in December 2009 and her claim of fraud accrued only then. The CA acknowledged that promise to do something without any intention to perform is actionable as promissory fraud. (Locke v. Warner Bros., Inc. (1997) 57 Cal.App.4th 354, 368.) But, “Were we to assume that Husband absolutely refused to perform under any of the parties’ three agreements (an assumption that is not supported by the record), his failure to pay spousal support after November 2007 and his occasional failure to keep the mortgage and taxes on the home current were known to Wife long before the home was finally sold, and certainly before the end of 2008. That the home was eventually sold in a bankruptcy proceeding she initiated has nothing to do with the enforceability of the stipulated judgment and orders. All of Wife’s fraud-based claims are untimely under section 2122.”
The CA also rejected Wife’s duress claims because substantial evidence supported the trial court’s finding that the orders were not the product of duress. (Citing Irmo Baltins (1989) 212 Cal.App.3d 66, 87.) “Unlike the wife in Baltins, Wife was represented by independent counsel at all relevant times. Nor was it shown that she was in such a weakened emotional state that she was unable to confront Husband. There was no abuse its discretion in denying the motion to set aside the stipulated judgment and orders.”’
Irmo Walker – Unpublished opinion of District 6 (Filed January 10, 2012)
Post separation disability allowance payments are not community property.
Husband and Wife married in 1993 and separated in 2008. Husband had worked as a public school teacher since 1988 and continued in that employment until January 2008 when he left due to a disability. Husband has been a member of CalSTRS since 1986.
Husband applied for a CalSTRS disability allowance after the couple separated, and CalSTRS granted his application retroactive to December 2008. In June 2009, CalSTRS notified Wife that she would be entitled to 36.2% of Husband’s disability allowance based on the application of “the time rule” and said her “community interest” could be segregated. Based upon these representations, Husband agreed to the preparation of a DRO that diverts 36.2% of his disability benefits to Wife.
In August 2010, Husband moved to set aside the DRO, claiming he was mistaken in believing the representations in the CalSTRS letter, by Wife’s attorney and from the DRO attorney that Wife had a community property interest in his CalSTRS disability allowance. Husband claimed that he had not learned the truth until his new attorney told him so in July 2010.
Wife resisted the relief sought, saying CalSTRS had informed them that Husband’s disability benefits were not “separate” from his other CalSTRS benefits, depended upon his contributions to his defined benefit account, and were being paid out of his defined benefit account, in which Wife had a community property interest.
The trial court denied Husband’s motion to set aside the 2009 orders, finding his CalSTRS disability benefits were not his separate property. The court also found that Husband did not make a mistake because, in fact, Wife had a community property interest in Husband’s disability allowance. In the court’s view, Husband’s disability allowance was “a service-connected disability pension which is meant to replace his retirement pension.” “[T]he disability benefits are being paid in lieu of a longevity pension . . . .” REVERSED
A disability allowance and disability retirement are “ ‘[d]isability benefit[s]’ ” provided by CalSTRS to its members. (Ed. Code, § 22127.2.) But the two benefits are not the same.
The amount of the disability allowance is not necessarily dependent on the member’s years of service because the amount of the disability allowance is the lesser of the amounts produced by two different calculation methods. One method takes into account the member’s years of service while the other does not. (Ed. Code, §§ 24006, 24007.) The result is that a member with 20 years of service, such as Husband, will receive 70% of his final compensation until he reaches normal retirement age. The disability allowance then terminates and he becomes eligible for a service retirement. (Ed. Code, § 24213 (a).)
A disability retirement allowance is never based on years of service. It is instead an allowance equal to 50% of final compensation payable in monthly installments plus 10% for each dependent child. Thus a member with fewer years of service than Husband or with more dependent children could receive a larger amount as a disability retirement allowance than the member would be eligible to receive as a disability allowance.
Both disability benefits are distinguishable from a CalSTRS “service retirement.” A CalSTRS service retirement is not available until the member is 55 years of age or older. If a member retires at age 60, the normal retirement age, the member receives an allowance equal to 2% per year of service multiplied by final compensation.
The CalSTRS statutes explicitly provide for the division of a community property interest in a CalSTRS member’s “retirement allowance or retirement benefit.” (Ed. Code, § 22655.) There are no parallel provisions providing for division of a member’s “disability allowance.” Instead, the only role that a disability allowance plays with respect to a nonmember spouse’s community property interest in a member’s CalSTRS benefits is where the disability allowance commenced prior to the couple’s separation. (Ed. Code, § 22664, subd. (e).].) Here, Husband’s disability allowance commenced after the couple’s separation, so it has no impact on Wife’s community property interest in Husband’s CalSTRS retirement benefits.
The CA digested and discussed three appellate court opinions treating this issue; viz., Irmo Jones (1975) 13 Cal.3d 457; Irmo Mueller (1977) 70 Cal.App.3d 66; Irmo Stenquist (1978) 21 Cal.3d 779.
Jones establishes that while vested retirement benefits attributable to employment during marriage are a community asset, “disability pay” must be be treated differently. The distinction is based upon the fact “disability pay does not serve primarily as a form of deferred compensation for past services.” (Jones at pp. 461-462.)
Mueller establishes that a spouse eligible for a service retirement who elects to accept a disability retirement because of the tax advantages must share the portion of the benefit that would have been received as a retirement benefit. (Mueller at p. 71.)
Stenquist establishes that a disabled spouse who is eligible for a military service retirement but who elects to take a more remunerative disability retirement cannot escape his or her obligation to divide the portion of the benefit earned during the marriage. There, the amount of the disability retirement was computed based in part on the disabled spouse’s years of service, and thus “the [disability] pension’s function of compensating the [disabled spouse] for loss of earning capacity or providing recompense for personal suffering is secondary to the primary objective of providing retirement support.” (Stenquist at p. 787.) Other cases were also discussed. (Irmo Briltz (1983) 141 Cal.App.3d 17; Irmo Justice (1984) 157 Cal.App.3d 82; Irmo Saslow (1985) 40 Cal.3d 848; and Irmo Elfmont (1995) 9 Cal.4th 1026.)
Characterization of Husband’s Disability Allowance
Here, Wife was not deprived of her community property share of Husband’s service retirement by Husband’s receipt of a CalSTRS disability allowance. She received her entire community property share of Husband’s service retirement when the DRO ordered CalSTRS to place her community property share of Husband’s service retirement (service credits, contributions, and interest) into a separate nonmember CalSTRS account, over which she has independent control.
Husband did not elect to receive a disability allowance in lieu of a service retirement. He was not eligible for a service retirement at the time when he became disabled, and his disability allowance will terminate when he becomes eligible for a service retirement, if not sooner if he ceases to remain disabled. Under these undisputed facts, Husband’s disability allowance cannot be deemed to provide retirement income but can only be properly seen as replacing his lost earnings during the period of his preretirement disability.
Irmo Venziano & Zendel – Unpublished opinion of District 2, Division 4 (Filed January 10, 2012)
A final temporary spousal support order may not be retroactively modified. Litigating the amount due under a percentage order is not a retroactive modification.
In 2008, after a marriage of less than four years, the court ordered Husband to pay temporary spousal support of $7,000 per month and $12,000 toward Wife’s attorney fees and costs. The order was based upon a finding that his income pursuant to an employment contract with ICON Productions was $23,000 per month. A few days after this order was entered, Husband filed an OSC to modify the spousal support orders based upon his allegation that ICON terminated his employment contract and he had no income. The court reduced his temporary spousal support obligation to zero prospectively but reserved jurisdiction to make it retroactive following a further hearing.
One day later, an entertainment periodical reported that Husband worked for Myriad Pictures as a sales consultant. Wife confirmed the employment and filed an OSC to modify spousal support. In December 2008, following yet another hearing, the court ordered Husband to pay $3,100 per month plus 28% of his gross income from any source to Wife and to “account to her” about his compensation. The trial court refused to make a final retroactive support order for any earlier months, explaining that circumstances were too uncertain to do so, and continued the matter.
At the next hearing in March 2009, the court denied Wife’s request for spousal support and terminated the temporary support order as of January 2009. Wife then filed a new OSC to modify spousal support seeking a continuation of the earlier order. While these proceedings were pending, Wife filed a number of motions and OSCs seeking contempt orders and additional discovery. She also sought a modification of the spousal support order based upon new information about Husband’s income and her financial situation.
Wife said she learned that Husband sued ICON for wrongful termination of his employment contract and that he settled his claims in January 2009 receiving $448,000 after fees and costs were deducted. Wife also obtained a redacted copy of the settlement agreement but the portion of the agreement describing the nature of the claims asserted on behalf of respondent was blacked out.
At the hearing on her OSC, Wife took the position that the settlement was income to Husband and that spousal support should be retroactively raised to $7,000 or more per month commencing in July 2008. Husband argued that none of the proceeds of the ICON settlement should be considered income for purposes of determining spousal support.
Following a hearing, the court instructed Husband to pay $2,600 for March 2009; $3,100 for April 2009; $3,100 for May 2009 and $1,800 for June 2009. The court stated its ruling was made “without prejudice to the trial issue of the affect of the ICON settlement,” and explained that its decision to retain jurisdiction over the final amount of temporary support from March 2009 to the present was made with this unsettled issue in mind.
In March 2010, Wife moved for reconsideration of the court’s order, offering new evidence from ICON that the sum paid to Husband was income. She sought allocation of the payment over the period it represented, retroactive increases in spousal support back to July 2008, and prospective increases in spousal support from March 2010 forward. In June 2010, the trial court denied the motion for reconsideration. Wife appealed. REVERSED IN PART, AFFIRMED IN PART
Retroactive Modification of Support Orders
A temporary support order is to maintain the living conditions and standards of the parties as closely as possible to the status quo, pending trial and the division of the assets and obligations of the parties.” (Irmo McNaughton (1983) 145 Cal.App.3d 845, 849.) A temporary support order is immediately appealable. (Irmo Gruen (2011) 191 Cal.App.4th 627, 637; Irmo Skelley (1976) 18 Cal.3d 365, 368-369.)
Here, the 2008 order for the months before February 2009 were final, were not appealed and are not subject to modification. “Accordingly, … neither this court nor the court below could retroactively change the support orders for those periods and award Wife a new or different amount, even though Wife discovered evidence indicating Husband’s income was higher than he represented. (See Greene v. Superior Court (1961) 55 Cal.2d 403, 405 [“An order granting or denying temporary alimony is not merely a procedural ruling made during the course of the action that the court may reconsider at any time before final judgment . . . .”]; Irmo Murray (2002) 101 Cal.App.4th 581, 595 [“[A] court may not retroactively modify a prior order for temporary spousal support.”].)
Orders for temporary spousal support may be modified prospectively “at any time” during the pendency of a dissolution proceeding by motion ….” (FC § 3603.) Therefore, Wife’s new OSC in 2009 to modify support prospectively was properly before the court as was her request that the trial court address the effect of the order requiring Husband pay her 28% of his gross income on the ICON settlement. But the trial court could not also amend the December 2008 order reducing the amount of support for January 2009 from 28% to zero and limiting the amount awardable in December 2008 to 28% received from Myriad.
The CA agreed that it was error for the trial court to exclude the $448,000 received by Husband from ICON in calculating the amount of spousal support due in December 2008 and January 2009 pursuant to the court’s December 2008 order awarding her 28% of his “income.”
A reason the court ordered Husband to pay a percentage rather than a fixed sum was that Husband’s monthly income from Myriad was highly variable. Additionally, the court shared Wife’s concern that Husband was receiving and failing to report income from ICON and thus retained jurisdiction to adjust spousal support for certain months. The CA said it was “clear that when the court issued the December 2008 order, Husband was in the process of negotiating a settlement with ICON for its wrongful termination of his employment contract and that he had withheld this information from Wife and the court.” The settlement executed in the following month compensated Husband for the 27 months that remained on his contract when he was terminated. Thus, Husband received compensation for December 2008 and January 2009 within the meaning of the court’s December 2008 order and the amount to allocate for those months was easily calculable.
The matter was remanded for recalculation of the amount due Wife for spousal support in December 2008 and January 2009.
Irmo Miller – Unpublished opinion of District 4, Division 1 (Filed January 12, 2012)
1. Reducing spousal support may be an appropriate remedy for interfering with custody and visitation
2. A principal repayment on a loan is not income available for support.
Husband and Wife married in 1987 and separated in 2004. They have three children. The parties' stipulated judgment required Husband to pay spousal of $3,500 per month and child support of $4,000 per month.
In 2007, the trial court restricted Wife’s access to the children because of her various efforts to alienate the children from Husband. Between 2007 and 2009, she interfered with the work of court-appointed professionals, filed a complaint against the children's therapist, and refused to cooperate with a court-appointed expert. The trial court characterized Wife’s actions in the parenting litigation as “all out warfare.” She "repeatedly made false accusations of Husband's physical abuse of the children and repeatedly refused to comply with the terms of both unsupervised and supervised contact with the children.” The trial court concluded that if the younger daughter remained in her care, the child would not have a relationship with Husband within only a few months.
At a 2010 hearing on support, and attorney fees, Husband argued that Wife’s frustration of and interference with his custody and visitation right warranted a reduction in spousal support. The trial court concluded that it could not rule on reducing Wife’s support “because Husband did not present any evidence of the FC § 4320 factors or the marital standard of living.” His request was denied.
The trial court’s support order included a finding that Husband made a shareholder loan of $900,000 to his business to guarantee the continued operation of the entity. In 2010, the borrower repaid $50,000 of the balance due on the loan. Husband used it to pay his son's tuition at Georgetown and his own attorney fees. The court included the loan repayment in calculating the income Husband's had available for support and added it to his earnings of $34,267 and interest income of $2,347. Child support was set at $3,736 per month.
Husband appealed. A DIVIDED COURT REVERSED
A Reduction in Spousal Support May Be A Remedy for Interference With Custody and Visitation
Courts recognize a non-statutory remedy for a reduction/termination of spousal support as a sanction for the supported spouse's interference with custodial rights. (Moffat v. Moffat (1980) 27 Cal.3d 645.) Citing Irmo Ciganovich (1976) 61 Cal. App. 3d 289, 293, the California Supreme Court identified the termination or reduction of spousal support as and appropriate sanction when a parent frustrates or destroys visitation rights. Another remedy is to change physical custody.
The CA concluded that it is not necessary to address FC § 4320 factors in initially determining if such a sanction is warranted. “This is so because such a remedy is a sanction for the offending party's behavior, not a determination that support should be modified because of a change in the parties' financial status or other factors. [In this circumstance,] courts must initially focus on whether one party's conduct is sufficiently egregious to warrant such a sanction.”
Here, ample evidence was presented that could support an order granting the relief requested by Husband. “The trial court had no basis for declining to rule on Husband's request solely on the basis that he had not presented evidence relevant to the section 4320 factors.”
After the court determines that the sanction is appropriate, relevant FC § 4320 factors may assist in determining the amount by which support should be reduced or whether it should be eliminated.
The majority emphasized, however, that consideration of 4320 factors is not mandatory in a circumstance like this one. “In a particularly egregious case, such as where a spouse's conduct completely thwarts the other spouse's custody and visitation rights, the ultimate sanction of termination of spousal support may be acceptable even without consideration of the section 4320 factors.” (Cf., Irmo Condon 62 Cal.App.4th at p. 548 [courts may reduce or eliminate spousal support payments as a punishment should the moving spouse frustrate custody and visitation orders made in California].)
A Principal Repayment on a Loan is Not Income Available For Support
The CA also concluded it was error to characterize the $50,000 loan repayment as income available for support. Citing Irmo Pearlstein (2006) 137 Cal.App.4th 1361, Irmo Loh (2001) 93 Cal.App.4th 325, 332-333 and Irmo Alter (2009) 171 Cal.App.4th 718, 734-735 the CA reasoned that a return of principal on a loan is not taxable "income" because it is not a gain, but rather a return of capital. Similarly, gifts are not income because they are not “ ‘the gain or recurrent benefit that is derived from labor, business, or property or from any other investment of capital.’” (Irmo Heiner (2006) 136 Cal.App.4th 1514, 1521.)
Here, the $900,000 loan was an investment of capital and a proper business expense. A one-time repayment of that capital is not "income." Only the interest paid to Husband on that loan that was income to be considered in setting support.
The dissenting justice voted to affirm the trial court’s denial of Husband's request because Husband failed to provide an adequate record on appeal by omitting his declaration and "moving papers."
The dissenting justice also differed because the opinions cited by the majority that establish the non-statutory remedy for the frustration of visitation, do not discuss the role of financial factors in setting the amount of a non-statutory sanctions award. “In my view, the family court should be required in a non-statutory sanctions motion to consider evidence concerning the parties' financial circumstances, and not to impose a sanction that imposes an unreasonable financial burden on the sanctioned party.”
Irmo Coy – Unpublished opinion of District 2, Division 5 (Filed January 12, 2012)
1. Changed circumstances warranted modification of support.
2. An agreement to pay for wife's health insurance until age 65 is not modifiable by a change in husband's financial circumstances.
Husband and Wife married in 1989 and separated 12 years later in 2001. They had twins in 1995. A 2002 judgment incorporating the terms of their MSA distributes their property and debts, sets out custodial orders and a parenting plan and provides for support. The judgment also declares Husband’s gross monthly income was $10,000.
Child and spousal support were set by the MSA and judgment and Husband was required to keep the children covered by his health insurance and to pay the cost of their orthodontic care. He was also required to pay Wife’s orthodontist and Wife’s car insurance. Husband agreed to co-sign for the purchase of a new home by Wife and, finally, to pay her health insurance premiums until she reached age 65.
Husband’s first OSC in 2005 was denied because the trial court concluded he failed to show changed financial circumstances. In January 2009, Husband filed a second OSC to modify child and spousal support, claiming the collapse in the automobile sales industry had collapsed and his commissions had fallen to about $8,000 per month. Wife opposed the relief requested and requested, among other things, a child support security fund.
Following a hearing in 2009, the trial court found Husband’s income was materially less and reduced child support to a base amount of $1,900 per month plus 25% of his income exceeding $8,300. The trial court also ordered Husband to pay the cost of the children’s orthodontic treatment and extracurricular activities, maintain insurance on his life and to keep the children insured.
The court also reduced spousal support to $1,100 plus 15% of his income over $8,300 per month. The court deleted provisions requiring Husband to pay for Wife’s orthodontic treatment, to co-sign on a new home loan for Wife, to pay her car insurance and maintain life insurance for her benefit. The court limited the term of Husband’s obligation to pay her health insurance to the date a judgment of dissolution was entered.
Wife appealed. AFFIRMED EXCEPT AS TO THE ORDER LIMITING Husband’s obligation to pay for the cost of Wife’s health insurance
“Current” Income & Expense Declarations and Production of Tax Returns
Husband’s I&E was filed about five weeks before the hearing on his OSC but the court’s findings were not issued until months later. Wife argued that the trial court’s ruling had to be set aside because Husband’s I&E was not current (CRC 5.128). Citing Irmo Tydlaska (2003) 114 Cal.App.4th 572, 576 the CA rejected the argument. Husband’s I&E was “current” because it was completed within three months of the hearing.
Counsel for DCSS filed a pleading reminding Husband to bring a copy of his latest tax return to the court hearing pursuant to L.A. County Rule 14.9. Husband failed to attach it to his OSC to modify support and, although he brought the returns to the hearing, neither DCSS, nor Wife nor the court asked for it and did not object to proceeding in its absence. Nevertheless, Wife argued that the trial court erred in modifying Husband’s support obligations without considering it.
The CA concluded that Rule 14.9 requires the parties to bring copies of their State and Federal Income tax returns for the last two years but “he was not required unilaterally to produce them to Wife at the hearing.” And, although FC § 3552 (b) provides that Wife ‘may’ examine the tax returns, and ‘may’ examine Husband as to their contents, Wife did not make such a request to do so at the hearing.” The CA added, “Husband had the burden of showing a material change of circumstances since the last support order was made. … [and] ran the risk of failing to carry that burden by not lodging the tax returns with the trial court, but he was not required to do so. Although Husband may not refuse to submit the tax returns to the trial court (§ 3552 (a)), the trial court never requested that he submit them.”
Material Change in Circumstances
The CA concluded there was substantial support in the record for the trial court’s modification of spousal support based upon a material change in Husband’s earnings and Wife’s failure to take steps to become self-supporting.
A “‘change of circumstance’ means a reduction or increase in the supporting spouse’s ability to pay and/or an increase or decrease in the supported spouse’s needs. It includes all of the factors affecting need and the ability to pay.” (Irmo West (2007) 152 Cal.App.4th 240, 246.) In considering a request to modify or terminate a spousal support order, “the court considers the same criteria set forth in section 4320 as it considered when making the initial order . . . .” (Ibid.) Further, in considering these factors, the trial court must keep in mind “[t]he goal that the supported party shall be self-supporting within a reasonable period of time.” (§ 4320 (l).)
Wife’s argument that changed circumstances did not warrant a modification of support was based upon her average of his earnings for the five-year period from 2004 to 2008 ($11,112) – an increase over the $10,000 in the stipulated judgment. The CA criticized the argument as without authority. “It was appropriate for the trial court to average Husband’s earnings for 2007 and 2008 because by mid-summer of 2007, Husband’s income decreased to about $8,000 per month, and commencing on September 1, 2007, Husband experienced a change in employers, positions and compensation.” The CA also said the fact Wife’s financial condition had not changed was of no consequence.
Effecting the Parties’ Intent in the MSA
“[I]n determining what constitutes a change in circumstances the trial court is bound to give effect to the intent and reasonable expectations of the parties as expressed in their agreement. [¶] Thus, the trial court’s discretion to modify the spousal support order is constrained by the terms of the marital settlement agreement. The court may not simply reevaluate the spousal support award.” (Modglin v. Modglin (1966) 246 Cal.App.2d 411, 415; Irmo Aninger (1990) 220 Cal.App.3d 230, 238.)
Here, the judgment required Husband to pay child and spousal support, insurance premiums, medical and dental treatment, the children’s extracurricular activities and to co-sign a loan for Wife’s purchase of a new home. The CA concluded that Husband’s obligations were premised on his $10,000 per month income and that because the parties’ agreement did not forbid modification, eliminating or reducing these obligations does not disregard the intent and reasonable expectations of the parties.
Wife’s Health Insurance and Her Request for a Security Deposit
The CA determined that is was error for the court to reduce the scope of Husband’s obligation to pay for Wife’s health insurance until she reached the age of 65. “There is no relationship between this obligation and the change of circumstance. [R]educing the duration of the obligation is contrary to the parties’ intent set forth in the Stipulated Judgment and should not be modified.”
Although Wife twice requested a ruling on her request for a child support security deposit (FC § 4560) the trial court neglected to do so. The CA agreed with Wife that she was entitled to a ruling on this unresolved issue.
Irmo Nelipovich – Unpublished opinion of District 4, Division 1 (Filed January 13, 2012)
The proceeds of a loan secured by separate property is presumptively separate property.
Husband and Wife married in 1997. In 1996, while he and Wife were living together but before their marriage, Husband purchased a house for $155,296. The purchase was financed through a VA loan that did not require Husband to provide a down payment. Husband took title as a single man and the mortgage was in his name alone.
Husband and Wife resided in the property throughout their marriage. All mortgage payments and household expenses were paid from a joint checking account.
Husband refinanced the property three times during the marriage. In 1999, the lender did not require Husband to create equity in the property by paying down the existing mortgage but instead relied on the equity already in the property. Wife did not co-sign the loan documents but did execute a quitclaim deed to Husband conveying any interest she might have to him "as his sole and separate property."
Husband refinanced the property a second time in August 2002. This time, Husband received about $35,000 that was used to pay off the debt attached to Wife's vehicle. Record title to the property remained in Husband's name after the second refinance, and the deed of trust indicated that Husband held the property as his sole and separate property.
Husband refinanced the property for a final time in 2003. This time a portion of the new loan was used to pay off the debt attached to another vehicle purchased during the marriage. Once again, Wife did not cosign any of the loan documents for the third refinance, and the lender did not require a quitclaim deed. Husband continued to hold title to the property in his name after the third refinance.
In 2006, while the petition for dissolution was pending, Husband sold the property for $475,000, and received net sale proceeds of $204,623. Husband and Wife agreed to divide one half of the sale proceeds and to submit the question of the character of the balance to a special master.
The special master concluded that the amount previously taken from the equity in the property and applied to community debt ($90,580) exceeded the value of the Moore/Marsden community interest. Following a trial, the trial court found that the property was Husband's separate property and there was no community property interest due to Wife under a Moore/Marsden analysis. It also found Husband did not breach any fiduciary duty owed to Wife.
Wife appealed. AFFIRMED
The Character of Loan Proceeds
Citing Irmo Aufmuth (1979) 89 Cal.App.3d 446 and In re Branco (1996) 47 Cal.App.4th 1621, Wife argued that the 1999 refinancing converted the property to a community asset. The CA disagreed.
The CA pointed out that the property was purchased before the parties married and was titled in Husband's name as a single man. It was his separate property. Whether its characterization changed in 1999 depends on the intent of the lender. (See Irmo Grinius (1985) 166 Cal.App.3d 1179.) Loan proceeds acquired during marriage are presumptively community property unless there is a “sufficient showing that "the lender intended to rely solely upon a spouse's separate property …."
Here, Wife was not involved with the second and third refinances. In 1999 when the property was refinanced the first time, the security for the loan was Husband's separate property. “‘[F]unds procured by the hypothecation of separate property of a spouse are separate property of that spouse.’” (Gudelj v. Gudelj (1953) 41 Cal.2d 202, 210; see also Bank of California v. Connolly (1973) 36 Cal.App.3d 350, 375.)
Although Husband and Wife paid down the loans from community funds, this did not require a finding that the new loan proceeds were community property or that the original mortgage was paid off with community funds. “The evidence showed the lender required Wife to sign a quitclaim deed in connection with the transaction, but Wife otherwise did not sign the loan application or any other refinancing documents, and she provided no information to the lender concerning her income. Thus, substantial evidence supports the family court's implied finding that the lender was relying upon the equity in Husband's house as the source of security for the loan, rather than the strength of both parties' earnings. The loan proceeds were thus Husband's separate property.”
The CA distinguished Branco, supra, because there, the parties' joint loan application used both their names and listed both of their earnings. They both signed the note and new deed of trust.
Breach of Fiduciary Duty
The court also rejected Wife’s argument that a presumption of undue influence arose from her execution of the 1999 quitclaim deed. (Irmo Haines (1995) 33 Cal.App.4th 277, 291; Irmo Mathews, supra, 133 Cal.App.4th 624.) The CA said the record amply supported the trial court’s conclusion that Wife executed the quitclaim deed in 1999 “‘freely and voluntarily … with full knowledge of all the facts, and with a complete understanding of its effect of making the residence [Husband's] separate property.’”
"Spouses 'may enter into any transaction with the other, or with any other person, respecting property, which either might if unmarried.' (§ 721(a).) But when an inter-spousal transaction unfairly advantages one spouse, “[t]he law ... presumes such transactions to have been induced by undue influence."
And “When a presumption of undue influence applies to a transaction, the spouse who was advantaged by the transaction must establish that the disadvantaged spouse's action was freely and voluntarily made, with a full knowledge of all the facts, and with a complete understanding of the effect of the transaction.
Here, the property was Husband's separate property when it was refinanced in 1999. It remained so thereafter, and Wife's execution of the quitclaim deed did nothing to change the property's character to Husband's advantage. “This court explained in Mathews in a similar context that "a spouse obtains an advantage if that spouse's position is improved, he or she obtains a favorable opportunity, or otherwise gains, benefits, or profits." (Mathews, supra, 133 Cal.App.4th at p. 629.)” Absent any advantage to Husband by Wife's execution of the quitclaim deed, the presumption of undue influence does not arise.
Irmo Restaino – Unpublished opinion of District 4, Division 3 (Filed January 13, 2012)
1. The cost of the marital standard of living does not trump the other 4320 factors.
2. A settlement agreement providing for payment to Husband of a portion of the fees earned on the firm’s cases quantified his interest in the firm and were not bonuses for work done on the cases before and after the date of separation.
The parties separated in November 2004. In 2006, Husband’s property statement listed his “equity share” in a law firm specializing in plaintiffs’ claims against pharmaceutical companies as a community asset. A status-only judgment of dissolution was entered shortly thereafter.
Later in 2006, Husband filed an OSC to modify a temporary spousal support order based upon his assertion the law firm was being wound down by an arbitrator. He said a confidential agreement governed the termination of his interest in the firm.
In 2007, the parties entered into a stipulation that Husband was entitled to “specified monies” under the confidential agreement but noted that the separate or community character of those payments was still in dispute. The parties then agreed to further preliminary distributions to each person and reserved the characterization of the balance to the court.
Later, Husband took the position that the confidential agreement was not a buy-out of his equity interest because a contingency firm was too hard to value. He said the shareholders had agreed the money derived from past and future settlements and verdicts would be distributed as bonuses based upon their respective partnership interest.
The marital standard of living was “high.” The parties owned a six-bedroom, 8,000- square-foot home in Newport Beach they bought for $1.76 million and furnished with expensive furniture and art. They purchased expensive jewelry and clothes, entertained and traveled extensively and routinely dined at expensive restaurants. Husband 2001 wages and bonus exceeded $1.3 million. In 2002 it was $502,020.
Following a trial, the court found the cost of the marital standard of living was $250,000 and awarded Wife $6,000 in post judgment spousal support. The trial court concluded that the payments pursuant to the confidential agreement were bonuses for the work Husband did on cases before and after the parties’ separation and that the timing of the bonuses should govern their characterization. The court directed the parties’ attorneys to obtain an accounting of the payments received by Husband and characterize them as determined by the judgment.
Wife appealed the award of spousal support and the characterization of the “bonus” payments. AFFIRMED AS TO SPOUSAL SUPPORT; REVERSED AS TO THE BONUS ORDER
The CA rejected Wife’s argument that the award of spousal support should be reversed because substantial evidence does not support the trial court’s finding that the annual cost of the marital standard of living was only $250,000. Wife argued that FC § 4332 requires the trial court to “make specific factual findings with respect to the standard of living during the marriage.”
The CA observed that the trial court satisfied FC § 4322 by making findings about their “very high standard of living” that included a large well-furnished home and a valuable collection of books, coins and wine. The parties were also noted to participate in “sporting activities,” use of “a personal trainer and a yoga instructor,” and taking vacations commensurate with the parties’ upper income status. The CA acknowledged that the trial court’s finding about the cost of the marital standard of living appeared to be “low,” but explained that this was not the only measure of spousal support.
Irmo Smith (1990) 225 Cal.App.3d 469 explains, “[T]he Legislature intended the marital standard of living to be what case law has described it to be, viz. reasonable needs commensurate with the parties’ general station in life. It is a general description, not intended to specifically spell out or narrowly define a mathematical standard.”
Here, even if the quantification of the standard of living was lower than it should have been, the CA said that that alone does not require reversal of the spousal support award. The marital standard of living is merely a reference point against which all of the statutory factors may be weighed. (Irmo Nelson (2006) 139 Cal.App.4th 1546, 1560.) The trial court found the parties enjoyed a “very high standard of living” and even if the court’s quantification of that status was inaccurate, Wife did not challenge the support award itself or any of the other factors considered by the court in determining the amount of support she is to receive. There was no abuse of discretion in the findings and support orders.
Husband’s Interest in His Former Law Firm
It was undisputed that Husband’s equity interest in the law firm was a community asset. The firm retained clients on a contingency fee basis, but Husband maintained time records documenting the hours he worked on assigned matters to assist in calculating the firm’s fee award or its proportion of fees distributed to participating law firms from a common benefit fund upon settlement of an action.
In 2005, the firm encountered financial problems, lost over $1.5 million, and decided to dissolve. In late 2006, Husband agreed to terminate his interest and signed a confidential settlement agreement and release that provided for various payments to Husband as salary and benefits through the end of 2006, plus $20,000 per month through 2007 to assist the firm in certain existing cases and projects. In addition, Husband was awarded payments from three categories of pharmaceutical litigation.
The trial court ruled the payments to Husband were “bonuses.” Some were community property, some were separate property and some were both. The CA concluded however that the trial court erred by construing the confidential settlement agreement and release as a vehicle for distributing Husband’s compensation for his continued handling of some of the firm’s ongoing cases.
Generally, “all property . . . acquired by a married person during the marriage while domiciled in this state is community property.” (FC § 760.) Husband joined the firm and became one of its shareholders during the parties’ marriage. At separation, he held an equity interest in the law firm. Thus, as between husband and wife, this interest constituted a community asset. (Kenworthy v. Hadden (1978) 87 Cal.App.3d 696, 701.)
Case law has recognized that “‘[i]n determining the value of a law practice or interest therein, the trial court should’” consider several factors, including “‘(a) fixed assets … (b) other assets, including … aged accounts receivable, costs advanced …; work in progress …, and work completed but not billed; (c) goodwill …; and (d) liabilities.’” (Irmo Kilbourne (1991) 232 Cal.App.3d 1518, 1522.)
The CA noted that a practice based on contingency fees does “not preclude valuation of husband’s interest in it.” (Kilbourne at p. 1524, fn. 5.) But “[i]n assessing whether to use a formula set forth in a buy-sell agreement, the trial court should consider (1) the proximity of the date of the agreement to the date of separation to ensure that the agreement was not entered into in contemplation of marital dissolution; (2) the existence of an independent motive for entering into the buy-sell agreement, such as a desire to protect all partners against the effect of a partnership dissolution; and (3) whether the value resulting from the agreement’s purchase price formula is similar to the value produced by other approaches.” (Irmo Nichols (1994) 27 Cal.App.4th 661, 672.)
Here, there was no prior agreement concerning the scope of each shareholder’s interest in the firm. Husband’s confidential settlement and release concerning his rights as a shareholder was crafted after he and Wife separated and she filed this marital dissolution action. The CA said, “Merely because husband agreed to alter the manner in which he would receive payment of his equity interest should not affect wife’s right to her portion of it.”
The CA concluded that the members of the firm and the arbitrator crafted the confidential settlement so that shareholders would continue to work on specific cases still being serviced by the firm until those matters were completed. “While it is true some of this litigation arose after separation, to the extent husband agreed to continue working on cases in return for a portion of the fees earned on those matters, considering the agreement as a whole, we construe the non-salary and independent contractor payments as a quantification of his interest in the firm. Thus, except for the sums designated as husband’s post-separation salary and independent contractor compensation, the payments awarded to him under the confidential settlement and release constitute his equity interest in the firm and the trial court erred in characterizing these sums based on when husband began work on each case.”
Irmo Kroft – Unpublished opinion of District 4, Division 3 (Filed January 18, 2012)
1. The party who seeks to characterize post-separation income as community property has the burden of proving the amount that vested before the date separation.
2. Pereira and Van Camp are generally only used when a spouse’s business is a sole proprietorship, partnership, or closely held corporation.
Husband and Wife married in 2002 and separated in 2005. Husband was a CPA. In 2005, his earnings were $225,000.
Husband’s 2005 salary included “incentive compensation” that was earned in 2004 but that was not paid to him until after the parties separated. The incentive pay was included in Husband’s 2005 W2 but it was not separately listed.
Neither party produced any evidence regarding the amount of the 2005 incentive payment. Wife argued that because Husband failed to provide her with any accounting of the incentive income, all of his 2005 income should be deemed community property. Husband asserted it was Wife’s burden to prove the amount of the post-separation earnings were from community efforts.
Earnings From Separate Property Assets
Husband invested substantial sums of his separate property into the company that employed him and he received periodic payments. Wife contended these periodic payments were community property.
The trial court made no findings as to character of the incentive compensation and did not include it as an asset to be distributed in the judgment. The court also concluded the periodic payments attributable to Husband’s separate property investment in his company was not community property.
Wife appealed. AFFIRMED
“Before a trial judge can effect an equal division of community property as mandated by Civil Code section 4800, subdivision (a), the nature and extent of the parties’ community assets must be ascertained.” (Lehman v. Superior Court (1986) 179 Cal.App.3d 558, 562.) “A spouse’s time, skill, and labor are community assets and his earnings during marriage are community property. (FC § 760.) After separation, earnings and accumulations of a spouse are separate property. (FC § 771.)” (Irmo Doherty (2002) 103 Cal.App.4th 895, 899.)
The critical question in determining the character of property is when the right to that stream of income accrued. (See Irmo Lehman (1998) 18 Cal.4th 169, 177.) The timing of receipt of the benefits themselves is irrelevant. (Irmo Shea (1980) 111 Cal.App.3d 713, 717.) In this case, Husband’s incentive compensation was marital property if it was “earned” during the marriage even if it was not received until after the divorce was over, so long as an enforceable legal right to receive the bonus existed on the date of separation.
But “the burden of proving what portion of Husband’s post-separation income actually vested before separation fell on Wife. The CA explained that the statutory presumption that Husband’s post-separation earnings and accumulations are his separate property required her to prove he had a legal right to receive the bonus before the date of separation. Since she failed to show the amount of the compensation and failed to prove Husband’s right to receive it, “the trial court could reasonably conclude the presumption of separate property was not rebutted. We find no reason to disturb the judgment.”
Earnings from Separate Property
“Profits from a spouse’s business (sole proprietorship, partnership, or closely-held corporation) are ‘earnings’ to the extent attributable to either spouse’s participation in the business. Conversely, income and profits not reflective of either spouse’s labor or skill are strictly a return on the capital investment, characterized in accordance with the separate or community property status of the original investment.” (Hogoboom and King, California Practice Guide: Family Law (The Rutter Group 2011) ¶ 8.135, p. 8-41.)
California courts have developed two alternative approaches to allocating the separate property profits. The Pereira approach (Pereira v. Pereira (1909) 156 Cal. 1), involves an apportionment of profits, where the separate property owner spouse is allocated a fair return on the investment. The Van Camp approach (Van Camp v. Van Camp (1921) 53 Cal.App. 17, 27-28) is to determine the reasonable value of the community services.
The CA said Pereira and Van Camp are generally used when a spouse’s business is a sole proprietorship, partnership, or closely held corporation, because in such cases more than minimal community effort is devoted to the separate property investment. The CA said trial court correctly determined these approaches could not be applied here because there were six members on the company’s management team and there was no evidence the profits were reflective of Husband’s labor or skill or any evidence as to a reasonable rate of return.
“The trial court was correct. These approaches are generally used when a spouse’s business is a sole proprietorship, partnership, or closely held corporation, because in such cases more than minimal community effort is devoted to the separate property investment.” Just being on the management team is not enough. “The profits must be traced to a spouse’s time, talent, or efforts rather than the underlying capital investment. (Beam v. Bank of America (1971) 6 Cal.3d 12, 17.) Wife failed to prove that after Husband invested money in U.S. Holdings, profits were derived from his involvement in the company and not just earnings generally attributed to the underlying equity owners.”
Irmo Troy – Unpublished opinion of District 2, Division 6 (Filed January 19, 2012)
Approving payments to third parties in lieu of spousal support is a commonly approved practice.
Appellant Wife Troy and respondent Husband Troy were marred in 2000. They separated in July 2008. The couple has two children. Wife has been unemployed since July 2008. Husband was employed by the City of Santa Monica, beginning in 1998. Husband was enrolled in the City's deferred compensation plan that had a value at the time of separation of approximately $5,537. The only other asset the couple had at the time of separation was a used car.
In 2009, the trial court ordered Husband to pay Wife $503 per month for spousal support and Wife to pay $32 per month for child support. In 2010, the trial court granted Husband request for sole legal and physical custody of the children because of Wife’s drug abuse.
Later in 2010, Wife filed an order to show cause for modification of child and spousal support, attorney fees and determination of spousal support arrears. Wife alleged Husband stopped making spousal support payments and was in arrears in the amount of $4,239. Husband countered with a declaration showing he made payments on Wife's behalf to Priority Bail Bonds, toward the purchase of a vehicle for Wife and made other purchases for Wife in the total amount of $4,787. Wife never paid the court-ordered child support to Husband.
The trial court rejected Wife's arguments that Husband’s payments to others on her behalf were not in lieu of spousal support. Spousal and child support was reduced to zero. Wife appealed. AFFIRMED
The CA rejected Wife’s argument that Husband must pay court-ordered spousal support directly to her and that the amount paid on her behalf to others must be counted as an arrearage.
First, retroactive modification of a temporary spousal support order is not permissible. (FC § 3603; Irmo Murray (2002) 101 Cal.App.4th 581, 596.) Moreover, orders approving payments to third parties for a spouse's benefit in lieu of spousal support is a common, approved practice. (FC § 2023; Irmo Garcia (1990) 224 Cal.App.3d 885, 892.)
Here, the evidence shows that Husband made payments to Priority Bail Bonds on Wife's behalf, made her car payments and paid some of her living expenses. There was no error in the findings and order of the trial court.
Irmo Jenkins – Unpublished opinion of District 5 (Filed January 20, 2012)
It was not error to deny a motion to modify spousal support made 15 years after the end of a 21-year marriage.
A 1994 judgment of dissolution terminated Husband and Wife’s 21-year marriage. The judgment required Husband to pay spousal support of $2,000 per month. There judgment did not require Wife to become self-supporting.
At the time the judgment was entered Husband earned $150,000 per year. Wife earned about $900 per month and her expenses averaged $7,329. In addition to working for the family business, Wife took care of their children.
During the marriage, Wife received a new car every two years and the family lived in a 4,000-square-foot home that cost $585,000 to build.
In 2009, Husband filed an OSC to modify spousal support. His I&E stated that he averaged $10,000 per month in salary, $2,672 per month in dividends, and $2,962 per month in additional income. His assets included $716,000 in cash, $1,335,054 in stocks and bonds, and $750,000 in rental property. His expenses were over $17,000 per month, including an $8,104 monthly payment on a home in Pismo Beach.
Wife’s I&E said her average monthly income was $929 from working as a nanny and $2,000 in spousal support. She listed assets of $24,000 in cash, $284,000 in stocks and bonds, and $200,000 worth of real and personal property. Her monthly expenses were approximately $3,000. At the time of the hearing, Wife was working three days a week, for a total of approximately 31 hours as a nanny, for which she was paid $10 per hour.
The trial court found the marital standard of living was “enhanced” and that Wife’s earning capacity was not sufficient to maintain that standard of living. Husband had the ability to continue paying spousal support and, since the needs of the parties had not changed significantly, Husband would not suffer any hardship by maintaining the current level of support.
The trial court found a change in circumstances in the fact Wife could work additional hours as a nanny, and adjusted spousal support downward to $1,656. It did not set a fixed termination date. Husband was ordered to pay $15,175 in attorney fees to Wife. Husband appealed. AFFIRMED
Failure to Set a Termination Date
Here, there was nothing in the judgment or the MSA that called for Wife to become self-supporting. The judgment specifically provided that spousal support would continue until Wife’s remarriage or the death of one of the parties.
Modification of spousal support depends upon a showing of a material change of circumstances since the last spousal support order. (Irmo Stephenson (1995) 39 Cal.App.4th 71, 76-77.) Generally speaking, this means it must be proved that the supporting spouse’s ability to pay changed and/or that there was a change in the supported spouse’s needs. (Irmo McCann (1996) 41 Cal.App.4th 978, 982.) In ruling on a request for modification, the trial court must reconsider the factors set forth in FC § 4320.
Here, Husband argued that the trial court erred by failing to set a date on which support would once and for all terminate. The CA rejected the argument, noting that while FC § 4320 (l) now provides that the supported party must be self-supporting within a reasonable period of time,” this statutory goal did not exist until two years after the parties divorced. The CA pointed out, however, that Irmo Richmond (1980) 105 Cal.App.3d 352 had been published 14 years before the judgment of dissolution was entered.
This decisional law created “Richmond” orders; specifically, orders “that set spousal support for a fixed period based upon evidence that the supported spouse will be self-supporting by the end of the period.” (Irmo Prietsch & Calhoun (1987) 190 Cal.App.3d 645, 665.) Although he could have, in this instance Husband did not request a Richmond order and the CA said, “It would have been an abuse of discretion to penalize Wife for not becoming self-supporting, or taking action to become self-supporting, when she had not been told that was the expectation. (Irmo West (2007) 152 Cal.App.4th 240, 251; Gavron at pp. 711-712.)
Application of FC § 4320
The CA rejected Husband’s argument the trial court erred by finding Wife had the ability to work an additional eight hours per week, instead of an additional 16 hours per week. First, Wife was working about 32 hours per week at the time of the trial; the family court determined that she had the opportunity and ability to work an additional eight hours per week, for a total of 40 hours per week. The 40-hour workweek that was imputed to Wife generally is considered full-time employment. (See Lab. Code, § 515 (c).) Wife was 54 years of age at the time of the hearing and suffered from health issues, such as arthritis, tendonitis, and high blood pressure, which impacted her employment abilities. “Forty hours per week is an objectively reasonable work regimen.”
Award of Attorney Fees
The CA dismissed Husband’s claim it was error to award attorney fees to Wife. He argued Wife should have acceded to his demands to modify spousal support without requiring him to go to court and claimed the award was not just and reasonable.
Husband cited no authority for the proposition that Wife was required to agree to his demand to reduce support as well as to agree to a fixed end point for support as a condition to obtaining an award of attorney fees. “The decision of the family court completely refutes this implication.”
The CA distinguished Alan S. v. Superior Court (2009) 172 Cal.App.4th 238 where the trial court ordered fees to be paid by the husband that left him unable to afford counsel. “Such is not the case here. Husband had $716,000 in cash at the time of trial; Wife had $24,000.” The CA added that the family court properly applied sections 2030 and 2032 to its award.
Irmo Stevenson – Unpublished opinion of District 4, Division 3 (Filed January 23, 2012)
A religious restriction on a parent’s obligation to pay educational expenses is unenforceable.
A 1993 judgment of dissolution required Husband and Wife each to pay one-half of their daughter’s educational expenses “through a private school (primary and secondary grades) and college or university.” The college obligation was limited to four years and was contingent upon the child attending full-time and maintaining a “C” average. The document also required the child “to be raised in the Catholic religion, including but not limited to, enrolling [her] in a Catholic school whenever available.”
In 1996, Wife and their daughter moved to North Carolina. In 2010, Wife filed an OSC to compel Husband to pay one half of the cost of their daughter’s education at the University of North Carolina. Husband resisted the relief and pointed out that upon Wife’s move to North Carolina, “the issue of education was a primary issue” and therefore the court’s 1996 move-away order specified their daughter was “to attend Catholic primary, secondary, college and university.”
The trial court said the judgment requires the parties to divide the cost of an education at a private primary and secondary private school. As to the cost of a college or university, the court found the only condition on Husband’s obligation was that their daughter attend full-time and maintain a ‘C’ average. The court concluded that neither the MSA nor the stipulated judgment limit her attendance to private universities or colleges. The trial court also found that even if the judgment required her to attend a Catholic college or university, the requirement was void as contrary to California public policy, the First Amendment to the United States and California Constitutions, citing Irmo Martin and Weiss 42 Ca1.App.4th 106, Irmo Mentry 142 Cal.App.3d 260 and Irmo Murga 103 Cal.App.3d 498.
Husband was ordered to pay the cost of his daughter’s public university education. He appealed. AFFIRMED
The CA rejected Husband’s contention that the marital settlement agreement did not require him to the cost of his daughter’s expenses at a public university. He said the MSA limited his obligation to a private, Catholic college or university and required Wife to consult him first. After restating the principles governing the interpretation of an MSA, the CA said, the second sentence of the provisions about education states that the party’s obligation to pay half of their daughter’s college expenses is limited to four years and is conditioned on their daughter attending full time and maintaining at least a C grade average. Nothing more.
“The detail and clarity of this sentence … suggests that if the parties desired to condition their obligation to pay college expenses on the private status of the institution, they would have so stated in the second sentence. ¶ [W]e interpret both the 1992 agreement and the 1993 judgment to require each party to pay one-half of their daughter’s expenses at a public university.”
The CA also observed that “even if we interpreted the provision to apply to the parties’ obligation to pay college expenses, the religious restriction is unenforceable (Weiss at p. 109; (Zummo v. Zummo (Pa. 1990) 574 A.2d 1130, 1141.)
Irmo Izmaylovskaya & Leonidov – Unpublished opinion of District 1, Division 5 (Filed January 24, 2012)
Wife’s suspicion that husband never intended to consumate the marriage was not “full knowledge of the facts constituting the fraud” that disqualifies her from seeking an annulment.
About 25 years ago, Wife and Husband married in the Ukraine. In 1995, the parties divorced. Wife immigrated to the United States and eventually became a citizen.
In 2006, Wife and Husband rekindled their relationship while Wife was vacationing in the Ukraine. Eventually, she divorced her then husband and borrowed $30,000 from a friend, to bring Husband to the United States. They remarried in January 2008 after Husband arrived in the United States.
Wife and Husband lived together in her condominium. Wife worked to support the family while Husband learned English. Husband admitted that he kept in touch with other women in the Ukraine.
In March 2008, Wife came to believe that Husband was continuing a relationship with a woman in the Ukraine, who was pregnant with his child. Husband did not deny the relationship and in mid-March returned to the Ukraine. Just before Husband left for the Ukraine he transferred $57,500 to a joint account. Wife explained that the transfer was made to ease Husband’s fears that “others” were seeking access to his money. Husband testified that the funds were transferred at Wife’s insistence.
The other woman’s baby was born in June 2008. Wife said that when Husband discovered that his return to the Ukraine was considered an abandonment of his application to adjust status in the United States, he declared his love for Wife, insisted he made a mistake with the other woman, and stated that he wanted to return to the United States and make a family with Wife. Wife believed him and submitted another visa application so that Husband could return to the United States.
In November 2008, Husband returned to the United States and resided with Wife until about March 2009. Wife testified that the marriage was never consummated - even after Husband returned from the Ukraine. In about February 2009, Wife overheard Husband telling another person on the telephone to be patient, that he needed “ ‘to have some time in the marriage . . . to prove that it was valid.’ ” This conversation convinced Wife that “he kept faith to that woman, he probably loved her. It’s probably his intention to bring her. . . . [¶] [E]very action to me was clearly stating to me that he never intended to live with me, to build a relationship with me, to go through all things with me.” Wife said that she believed Husband married her only so that he could obtain residency in the United States. Husband disputed her conclusion.
The trial court found the facts presented by Wife warranted nullification of the marriage. Husband appealed. AFFIRMED
A marriage is voidable and may be adjudged a nullity if the consent of either party was obtained by fraud. (FC § 2210 (d).) Fraud can be found only in those rare instances where a party’s misrepresentation goes to the very essence of the marriage relation; i.e., when it relates to a matter of substance and directly affects the purpose of the party deceived in entering the marital contract. Fraudulent intent not to perform a duty vital to the marriage state must exist in the offending spouse’s mind at the moment the marriage contract is made.
Grounds for an annulment cannot be found in such matters as character, habits, chastity, business or social standing, financial worth or prospects. (Millar v. Millar (1917) 175 Cal. 797; Hardesty v. Hardesty (1924) 193 Cal. 330; Vileta v. Vileta (1942) 53 Cal.App.2d 794; Irmo Liu [(1987)] 197 Cal.App.3d 143 [wife married husband in Taiwan to acquire a green card and never consummated the marriage].) (Irmo Ramirez (2008) 165 Cal.App.4th 751, 757–758.)
The CA concluded Wife’s evidence supported the trial court’s finding that Husband fraudulently induced her to marry him solely to obtain a “green card,” and that he had no intention of consummating the marriage. The CA noted that the facts here are indistinguishable from those presented in Liu where husband married his wife in Taiwan, returned to the United States, and was asked by her to apply for a “green card” to allow her entry to the United States. But, after he did and she joined him in his home, they never had sex.
The CA rejected Husband’s attempt to distinguish Liu by arguing that Wife ratified the voidable marriage by freely cohabiting with him after learning about the “other woman.” (See Schaub v. Schaub (1945) 71 Cal.App.2d 467, 480; § 2210, subd. (d) [“[a] marriage is voidable . . . if . . . [t]he consent of either party was obtained by fraud, unless the party whose consent was obtained by fraud afterwards, with full knowledge of the facts constituting the fraud, freely cohabitated with the other as husband or wife”].) The CA said the evidence did not compel a finding of ratification.
The CA said Wife’s suspicions did not amount to “full knowledge of the facts constituting the fraud” until she overheard Husband’s telephone conversation with another woman and discovered that he was physically capable of sex.
Irmo Iverson – Unpublished opinion of District 1, Division 2 (Filed January 26, 2012)
It was not error to use a 50/50 timeshare in setting child, even though the parties' daughter spent nearly all of her time with her mother.
Husband and Wife shared legal and physical custody of their two children pursuant to a parenting plan that divided the children’s time with their parents equally. In 2010, Husband moved to modify child support based upon changes in the parties’ income. Their dispute centered on Wife’s contentions about the actual timeshare.
Wife testified that their son lived with her approximately 65% and that since late January their daughter began living exclusively with her.
Husband acknowledged that their daughter began spending spent most of her time with her mother to deal with depression and problems at school. But he pointed out that she had been at his home for prolonged periods of time—three or four weeks on one occasion and a couple of two-week periods. He also noted that she took antidepressant medication and called him when she was feeling poorly after her medication ran out and her mother said she couldn’t afford to replace it. Husband filled the prescription and brought it to her. Husband asked her to resume the visitation schedule and their daughter said she would but that he had to “be patient.”
The trial court found the parties evenly divided the time spent with their son but that currently, their daughter spent no time at all with her father. The court also found the parties “did not demand strict adherence to the shared custody plan, but accommodated the needs of the children.” The trial court acknowledged that although the parties’ daughter was struggling with some medical issues and has not visited her father for several months, “both parents are deeply involved in the lives of their children and are committed to their success.”
The trial court added that Husband “has responded to his daughter’s medical needs and not demanded compliance with the shared custody order [but] has supported her in her choices while making it clear that he wants to see her when she is ready.” The trial court said neither party would be rewarded or penalized through a child support order for doing what was necessary to support their daughter.
The trial court ruled the parties’ timeshare was 50/50 and based its child support order on that value. Wife appealed. AFFIRMED
Trial Court Discretion in Setting “Guideline” Child Support
Child support in California is based upon an algebraic formula. (FC § 4055.) Although it is said to be a “guideline” this characterization is misleading because the value produced by the formula is presumed to be correct. (FC §§ 4053 (k), 4057 (a).) The presumption “may be rebutted by admissible evidence showing that application of the formula would be unjust or inappropriate in the particular case.” (§ 4057(b); Irmo Cryer (2011) 198 Cal.App.4th 1039, 1047-1048.)
A trial court’s discretion in determining whether a reason exists to deviate from the formula is circumscribed by the statutory framework. (Hogoboom and King, Family Law, ¶ 6:151, p. 6-62.) FC § 4053 sets forth a number of principles to guide the court’s exercise of its discretion, the foremost among them being the protection of the child's best interest. (§ 4053 (e).) And FC § 4057 (b)(5) adds that if the formula can be disregarded if applying it is unjust or inappropriate because of special circumstances. “These special circumstances include, but are not limited to, the following: [¶] (A) Cases in which the parents have different time-sharing arrangements for different children. [¶] (B) Cases in which both parents have substantially equal time-sharing of the children and one parent has a much lower or higher percentage of income used for housing than the other parent. [¶] (C) Cases in which the children have special medical or other needs that could require child support … greater than the formula amount.”
Thus, trial courts have “considerable discretion to approach unique cases on an ad hoc basis.” (County of Lake v. Antoni (1993) 18 Cal.App.4th 1102, 1106; Irmo Fini (1994) 26 Cal.App.4th 1033, 1043 [‘the court, in child support cases, is not just supposed to punch numbers into a computer and award the parties the computer’s result without considering circumstances in a particular case which would make that order unjust or inequitable’].) The trial court has ‘broad discretion’ to determine when special circumstances apply. (Irmo de Guigne (2002) 97 Cal.App.4th 1353, 1361; Cryer at p. 1049.)
“The timeshare component of the guideline calculation is not determined by the amount of time a parent has physical custody, but by calculating the approximate percentage of time that a parent has or will have primary physical ‘responsibility’ for a child. (DaSilva v. DaSilva (2004) 119 Cal.App.4th 1030, 1033.)” The CA observed, “As DaSilva, recognized, on any given day, responsibilities for the child are shared by both parents to some degree. ‘[M]any families have complex arrangements (and various backup plans) for dealing with transportation issues, school hours, and related extracurricular activities that can change on a daily basis. In recognition of this reality, courts are asked to “approximate” hours of responsibility and have the discretion to apportion time for school hours depending on the particular parent’s overall level of involvement in the school day routine.’ (DaSilva, at p. 1035.)”
Here, the parties shared custody and did not demand strict adherence to the shared custody plan, but instead accommodated the needs and schedules of the children. Their daughter had been at her father’s home for prolonged periods of time before she decided to live solely with her mother. “He agreed with this arrangement in order to support his daughter in her struggle with depression and he continued to encourage her to resume visiting him. Further, when his daughter was in trouble, having run out of medication, she called him. He immediately responded, obtaining the medication she needed and encouraging her to visit with him. Finally, within a week before the hearing, the daughter stated her intent to resume visiting with her father. This statement of her intent is significant, as the H% component of the guideline states that it is equivalent to the ‘approximate percentage of time that the high earner has or will have primary physical responsibility for the children compared to the other parent.’ (§ 4055 (b)(1)(D).) Hence there was evidence that the balance of visitation between parents would shortly be restored.”
The CA concluded there was no error in using a 50% timeshare to determine the amount of “guideline” child support. The CA added that using this value in the formula was not a deviation from the formula because of “special circumstances” but was, rather, an exercise of the court’s discretion in determining the timeshare component. Thus the court was not required to state either the amount of support that would have been ordered under the guideline formula or the reasons the amount of support ordered differs from the guideline formula amount.
Irmo Lean & Stewart – Unpublished opinion of District 1, Division 1 (Filed January 26, 2012)
1. The death of a party after entry of the judgment does not prevent the judgment from becoming final.
2. Uunless the parties otherwise agree, a family court may not resolve a Marvin breach of contract claim.
3. Actual prejudice be shown when challenging a judgment based upon the failure of a party to file a final declaration of disclosure.
Husband and Wife married in 1994. Husband claimed that a year before they married, they entered into a Marvin v. Marvin (1976) 18 Cal.3d 660 agreement to hold their property in a common pool. Before the parties married, Wife purchased a ranch in Humboldt County in her own name as “a single woman” and she and Husband took up residence there so that he could care for the property and Wife who suffered from multiple sclerosis.
More than 10 years later, in early 2005, Husband asked a legal document preparer to complete an inter-spousal deed transferring the property to him and Wife as “husband and wife as community property with right of survivorship.” The deed was executed in the presence of the document preparer.
In 2007, Wife filed a petition for dissolution of the marriage. Husband’s response alluded to the Marvin agreement, claiming everything they owned was owned jointly. In 2008, Husband amended his response to request the marriage be annulled. Later in 2008, Husband filed a civil action against Wife for breach of the alleged Marvin-style agreement. Earlier, Husband had filed a petition to establish a conservatorship of Wife’s person and property and sought appointment as conservator.
In December 2008, with the conservatorship proceeding and Marvin civil suit still pending, the family court commenced a two-day trial in the dissolution proceeding. The court refused to hear any evidence about the alleged Marvin agreement. It also refused to allow Husband to pursue his claim that the marriage should be declared a nullity, rather than dissolved.
The parties presented conflicting testimony about whether Husband obtained the inter-spousal transfer deed by undue influence. Wife, who took medication for her multiple sclerosis, testified she had no recollection of signing the deed, did not know who prepared it, and was not told what the deed would accomplish. The document preparer testified Wife was competent at the time she signed the deed and acted voluntarily.
Following the trial, the family court found Wife was competent, despite Husband’s objections and the still pending conservatorship proceeding. The court also found the inter-spousal deed invalid on the ground Husband had not rebutted the statutory presumption of undue influence applicable to such inter-spousal transfers. It ruled the ranch and certain other properties were Wife’s separate property. A judgment was entered in February 2009.
On February 20, 2009, Husband filed a motion for a new trial and a motion to vacate the judgment.
Three days later, on February 23, 2009, Wife died.
On March 9, 2009, without a hearing, the family court issued an order denying Husband’s post-trial motions. Husband appealed. AFFIRMED
Impact of Wife’s Death
Wife died after the judgment was entered but while Husband’s post-trial motions were pending. The CA rejected Husband’s argument Wife died a “married” woman by virtue of FC § 2341 (b), that her death terminated the marriage and left him the surviving spouse.
First, while FC § 2341 provides for a stay of a dissolution judgment pending review by an appellate court, it does not preclude an affirmance and subsequent finality of the judgment. “FC § 2344 (a) expressly provides: ‘The death of either party after entry of the judgment does not prevent the judgment from becoming a final judgment.’ … Indeed, a family court has ‘power in a marital dissolution action to enter a judgment on all issues submitted to the court for decision before the death of a party.’ (Irmo Mallory (1997) 55 Cal.App.4th 1165, 1176; [and see C.C.P. § 669: ‘If a party dies after trial and submission of the case . . . and before judgment, the court may nevertheless render judgment thereon.’]”
Thus, Wife’s death post-judgment did not terminate the dissolution proceedings, void the judgment and leave Husband a married man.
The Marvin Agreement
The CA rejected Husband’s argument that the family court was required to recognize that the premarital Marvin agreement governed the ownership of the ranch and other property. In general, unless the parties otherwise agree, a family court may not resolve a Marvin breach of contract claim. (Velez v. Smith (2006) 142 Cal.App.4th 1154, 1175.) And the court is not required to delay a dissolution proceeding involving property allegedly governed by a Marvin agreement pending disposition of the latter by a civil court. (See Porter v. Superior Court (1977) 73 Cal.App.3d 793, 805.)
Thus, there was no error in the family court’s ruling denying Husband’s motion to sever his Marvin-style claim after he filed a civil action seeking the same relief. The family court likewise did not err in proceeding with trial in the dissolution proceeding, excluding evidence of the asserted Marvin-style agreement and leaving Husband to pursue his Marvin-style claim in the separate civil action.
The Inter-spousal Transfer Deed
The family court invalidated the deed on two grounds. First, it found no evidence Wife intended to pass title immediately. Second, it found Husband had not rebutted the presumption of undue influence that attaches to inter-spousal transactions that benefit one spouse over the other. The CA found no error in the findings and orders of the trial court.
FC § 721 creates a presumption that an interspousal transaction is the result of undue influence when the transaction “advantages one spouse to the disadvantage of the other.” (Irmo Delaney (2003) 111 Cal.App.4th 991, 996.) The burden is on the spouse who was advantaged to overcome the presumption by a preponderance of evidence.
The CA concluded substantial evidence supported the family court’s determination Husband did not rebut the presumption of undue influence. The trial court properly credited Wife’s testimony that she was on medication, had no recollection of signing the deed, did not know who prepared it, and was not told what it would accomplish. Husband, on the other hand, never took the stand and provided no testimony concerning the deed.
Wife’s Competency and Capacity
The CA rejected Husband’s argument that Wife was incompetent to participate in the dissolution proceeding on the ground she lacked the mental capacity to seek dissolution. “A person is incompetent and disqualified to be a witness if he or she is ‘[i]ncapable of expressing himself or herself concerning the matter so as to be understood, either directly or through interpretation by one who can understand him’ (Evid. Code, § 701 (a)(1)) or is ‘[i]ncapable of understanding the duty of a witness to tell the truth’ (Evid. Code, § 701 (a)(2).)” A witness’s competence “is determined exclusively by the court” and the “ ‘a trial court’s determination will be upheld in the absence of a clear abuse of discretion.’ ” (People v. Lewis (2001) 26 Cal.4th 334, 360.)
Here, the family court repeatedly found Wife understood the proceedings and competently responded to questions. The trial court noted her severe disabilities but noted her unimpaired ability to listen and answer the questions. The record revealed no abuse of discretion in the trial court’s determination.
Final Declaration of Disclosure
The CA rejected Husband’s argument that FC § 2107(d) required reversal because neither Wife nor Husband properly served a final declaration of disclosure setting forth assets and liabilities as required by FC § 2105. Citing Irmo Steiner & Hosseini (2004) 117 Cal.App.4th 519, 527-528, the CA noted Husband’s argument runs afoul of the California Constitution’s prohibition on setting aside a judgment due to a procedural error unless the error resulted in a “miscarriage of justice.” (Steiner, at pp. 526-527, citing Cal. Const., art. VI, § 13.) The Ca said, “[N]umerous cases have embraced Steiner’s holding and required that actual prejudice be shown when challenging similar procedural defects on appeal. (E.g., Irmo Dellaria (2009) 172 Cal.App.4th 196, 205.)
Husband made no showing of prejudice in the family court and was foreclosed from doing so on appeal.
Various other arguments presented by Husband were also rejected either on the ground they were without merit or, even if the demonstrated error, no prejudice resulted that warranted setting aside the judgment.
Once the parties enter into a settlement agreement, the trial court has no authority to quarrel with the parties about their division or divide the parties’ property in a manner other than that specified in the agreement.
FC § 2550 provides for the equal division of community property, “[e]xcept upon the written agreement of the parties, or on oral stipulation of the parties in open court.” Thus, where “the parties agree upon the property division, no law requires them to divide the property equally, and the court does not scrutinize the [settlement agreement] to ensure that it sets out an equal division.” (Mejia v. Reed (2003) 31 Cal.4th 657, 666.)
“The court must accept the parties’ written agreement or in-court stipulation regarding the disposition of their property. The court’s ‘only role with regard to a proper stipulated disposition of marital property is to accept the stipulation and, if requested, to incorporate the disposition into the judgment.’” (Irmo Dellaria & Blickman-Dellaria (2009) 172 Cal.App.4th 196, 201.) (Irmo Chima – Unpublished opinion of District 2, Division 7 – filed January 24, 2012.)