Important Note

The following is a compilation of what the author considers to be the most significant California appellate court decisions affecting the practice of family law in California. It is intended as general information and should not be considered legal advice. The author does not represent that this summary is an all-inclusive listing of all decisions that pertain to or impact upon family law. In particular, this article does not list or analyze tax, dependency court, adoption, parentage, or international custody decisions. To obtain more detailed information you should directly contact a qualified attorney in your geographic area. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

          
TABLE OF CONTENTS

CHILD CUSTODY 
Bonnie P. v. Superior Court (San Diego)  
Deborah M. V. Superior Court  
In re Marriage of Dupree 
Osgood v. Landon 
Grahm v. Superior Court (Zohar) 

CHILD SUPPORT 
In re Marriage of Riddle 
In re Marriage of Henry 
In re Marriage of McClellan 
In re Marriage of Eggers  
In re Marriage of Calcaterra and Badakhsh  
County of Orange v. Smith  
In re Marriage of Sherman  

SPOUSAL SUPPORT 
In re Marriage of Benson 
In re Marriage of Eggers 
In re Marriage of Schmir 

PROPERTY 
In re Marriage of Weaver  
In re Marriage of Starkman  
Filip v. Bucurenciu 
Marriage of Klug  
In re Marriage of Mathews 
In re Marriage of Sherman  
In re Marriage of McTiernan and Dubrow

ATTORNEYS FEES AND SANCTIONS 
Orange County Dept. of Child Support Servs. v. Superior Court (Ricketson) 
In re Marriage of Freeman  
In re Marriage of McTiernan and Dubrow 

PROCEDURE 
In re Marriage of Meagher & Maleki  
 

CHILD CUSTODY

Bonnie P. v. Superior Court (San Diego) 
(2005) 134 CA4 1249
4th DCA Div. 1, Justice McConnell
San Diego County, Judge Kelety

   
Holding: Trial court’s order granting a minor’s petition for declaration of emancipation held not supported by substantial evidence that the minor had her parents’ consent or acquiescence and that she was managing her own financial affairs.

Facts: The 16-year old minor, Jacqueline, gave birth to a child and left her parents’ home and began living with the baby's father. Two weeks later Jacqueline filed a motion for emancipation. In her income and expense declaration Jacqueline stated that she had monthly income of only $600, with expenses of $2,070, which were paid by other persons. Jacqueline’s father, Gary, filed an opposition to the petition. At the hearing of Jacqueline’s petition, the investigating court officer informed the court that Jacqueline was requesting emancipation because of her parents’ drug abuse and because they were on welfare. The court did not receive any sworn testimony. The court was presented with conflicting information from unsworn witnesses regarding the quality of life that Jacqueline and her baby would receive if Jacqueline lived with her parents as compared with living with the father’s parents.

Trial Court Ruling: Jacqueline’s petition was granted. The trial court found that Jacqueline had a child and was doing well in school, that Jacqueline’s mother had not been of assistance to Jacqueline, that Gary was not financially or otherwise able to provide a stable home, and that the father’s family provided Jacqueline with support.

Ruling on Appeal: Reversed.

Gary’s claims of lack of due process were held valid. Citing Troxel, the District Court of Appeal held that “the Due Process Clause of the Fourteenth Amendment protects against governmental interference with the fundamental liberty interest of parents in making decisions concerning the care, custody, control, and education of their children.” Even though emancipation proceedings are intended to be as “simple and inexpensive as possible” (Family Code §7110), there is no statutory authorization for courts to dispense with the basic requirements of the Evidence Code for evidentiary hearings. Moreover, there was no evidence that Jacqueline’s parents consented to or acquiesced in her living apart from them or that Jacqueline was able to support herself.

Cross-References: Family Code §§ 7110, 7120. Troxel v. Granville (2000) 530 U.S. 57.

Deborah M. v. Superior Court 
(2005) 125 Cal. App. 4th 1181
4th  DCA Div.1,  Justice Nares
San Diego County, Judge Clements

   
Holding: Under Family Code §3041.5 the trial court cannot order hair follicle tests.  Federal rules do not provide for tests other than urine tests.

Facts: Husband filed an order to show cause seeking a modification of custody and visitation and the drug testing of mother. In his order to show cause, father submitted a declaration of the parties’ 18-year-old son in which he said that mother had been using drugs.  Father also said that the parties’ 14-year-old son claimed to have found drugs belonging to mother.  Mother claimed she had stopped using drugs and was opposed to any drug testing. Family Court Services recommended that the parties have joint legal custody but that father would have primary physical custody.  The mediator also recommended drug testing of mother.

Trial Court Ruling: The court denied father’s request for a change of custody.  However, the trial court conditioned its order on mother’s submitting to hair follicle drug testing. 

Ruling on Appeal: Reversed. 

The court recited the history behind Family Code section 3041.5, which was enacted in response to Wainwright.  The court held that as of the date of its decision, the federal government only allowed urine tests under the mandatory guidelines, which had been recently amended to place stricter controls on laboratories conducting urine tests.
The court said that the federal mandatory guidelines are strictly applied and that trial courts must be conscious of the constitutional problems of court-ordered drug testing.  The Court of Appeal also stated that the Legislature was aware of the text of the mandatory guidelines when it enacted the current section.  So, the Legislature knew that the mandatory guidelines allowed only urine tests.  The term “least intrusive method of testing” means that if and when additional tests are permitted, the least intrusive method must be used.  So, Deborah could not be compelled to submit to a hair follicle test.

Cross-References: Family Code §3041.5(a).  Wainwright v. Superior Court (2000) 84 Cal.App.4th 262.

Comment: In its decision the Court ruled that, “[b]ecause section 3014.5 requires testing to be performed in conformance with the procedures and standards established by the Department of Health and Human Services and it’s mandatory guidelines at present only allow urine tests, we conclude that the court erred in requiring Deborah to take a hair follicle test pursuant to the terms of section 3041.5(a).”

In re Marriage of Dupree
(2005) 127 CA4 1517
3RD DCA, Justice Raye
Sacramento County,  Judge Kobayashi

   
Holding: Family Code section 3027.1 does not require the trial court to make a finding of a false report in an order to show cause.

Facts: The nine-year-old daughter told her father about inappropriate sexual behavior by the daughter of her mother’s boyfriend.  Father contacted his attorney, requesting an ex parte application. The ex parte was granted and the court suspended the mother’s custody or visitation rights.  However, after a report from Family Court Services was received, the court reinstated the mother’s custody and visitation but ordered the child to have no contact with the daughter of the boyfriend. Mother then filed an order to show cause against father’s attorney for sanctions under Family Code section 3027.1, on the basis that he had made false allegations of sexual misconduct.

Trial Court Ruling: The attorney’s motion to dismiss was granted, based on the court’s finding that the issue of falsity should have been dealt with in the underlying custody order to show cause. 

Ruling on Appeal: Reversed.

The trial court erred in finding that section 3027.1 requires a finding of falsity in the underlying custody proceeding. Nothing in that section can be interpreted as requiring that findings of falsity must be made in the custody proceedings as a prerequisite to a sanction order.  To do so would result in reading something into the statute that does not exist. “The statute requires a false statement to be made during a custody proceeding; the statute does not require the falsity to be established during the custody proceeding.”

Cross-References: Family Code §3027.1.

Osgood v. Landon
(2005) 127 CA4 425
3rd  DCA , Justice Morrison
El Dorado County, Judge Smith 

  
Holding: The trial court did not err in applying the changed circumstances standard in a move-away case where prior custody order was a final order and the father failed to show that the move would cause detriment to the child.

Facts: In a 1998 default paternity judgment, mother was awarded sole legal and sole physical custody of the child. In 2001, the parties stipulated to joint legal custody. In 2002 father filed an order to show cause, requesting custody by reason of mother’s pending move to Tennessee.

Trial Court Ruling: Father’s order to show cause was denied because there was no showing that the move would be detrimental to the child.  

Ruling on Appeal: Affirmed.

Montenegro v. Diaz applies only to stipulations, not to default judgments.  The trial court in a move-away case has the widest discretion with regard to the question of detriment. There was substantial evidence that the child would not be detrimentally affected by the move-away.  The noncustodial parent bears the initial burden of showing that a proposed relocation of the children’s residence would cause detriment to the children. If the noncustodial parent makes such an initial showing of detriment, the court must perform the delicate and difficult task of determining whether a change in custody is in the best interests of the children. Here, father failed to make such a showing.

Cross-References: Montenegro v. Diaz (2001) 26 Cal.4th 249; Burchard v. Garay (1986) 42 Cal.3d 531; In re Marriage of Burgess (1996) 13 Cal.4th 25; In re Marriage of La Musga (2004) 32 Cal.4th 1072.

Grahm v. Superior Court (Zohar)
(2005) 132 CA4 1193
 2nd DCA, Div.4, Justice Hastings
Los Angeles County, Judge Steinberg

   
Holding: One parent’s move to another state with children did not necessarily terminate children’s substantial connection with California. The ruling in Kumar v. Superior Court has not been abrogated by the enactment of the UCCJEA.

Facts: In October 2003, the parties stipulated to a judgment of dissolution which awarded the parties joint custody of their twin girls, born in California in October 2001.  Physical custody was awarded to mother. One month before entry of the judgment, mother moved with the twins to New York, with the consent of father.  Four months later, mother applied for an order in the New York court to modify custody. The New York court dismissed her motion on the ground that it lacked jurisdiction. The mother appealed the dismissal, and the New York appellate court affirmed. One month later father filed a motion to modify visitation orders and a motion to modify custody, requesting sole legal custody and primary physical custody of the children.

Trial Court Ruling: The court declined to exercise jurisdiction, relying upon Family Code section 3422, which provides that the court’s exclusive jurisdiction is terminated when “… neither the child, nor the child and one parent… have a significant connection with this state and [where] substantial evidence is no longer available in this state.” 

Ruling on Appeal: Reversed.

Father cited Kumar, which held that a “significant connection” to the original state continues to exist as a matter of law as long as a parent who is exercising visitation rights still lives in that state. Mother countered that the holding in Kumar was abrogated by the Legislature’s adoption of the UCCJEA.

Under the former UCCJA, a California court retained jurisdiction to modify a California custody order if “…the child and his parents, or the child and at least one contestant, have a significant connection with this state and there is available in this state substantial evidence concerning the child’s present or future care, protection, training, and personal relationships.” The current statute says essentially the same thing, but it is phrased in the negative, i.e., exclusive jurisdiction is terminated when “… neither the child, nor the child and one parent…  have a significant connection with this state and [where] substantial evidence is no longer available in this state…”

The Court referenced decisions that have held that an amendment that does not substantively change the statute should be interpreted in the same way as its predecessor. Repeated reenactment of a statute following judicial interpretation of that statute suggests legislative adoption of that interpretation. The term “significant connections” was repeatedly used in the UCCJA and is still present in the UCCJEA. Thus, the Legislature intended to adopt the holding in Kumar.

Moreover, the goals of the UCCJEA are the same as the UCCJA, i.e., to retain modification jurisdiction in the decreeing state until all of the connection between the parent and the child is lost. Citing the works of two prominent writers, the Court held that if the remaining parent continues to assert and exercise his visitation rights, then the parent-child relationship has not deteriorated sufficiently to terminate jurisdiction.

The negative wording of the new statute reinforces the Legislature’s intent that California courts have continuing exclusive jurisdiction unless two conditions are met. Those conditions are (i) that neither the child, nor the child and the parent, have a significant connection with the state, and (ii) substantial evidence is no longer available in this state.

The trial court focused on the wrong parent in making its ruling. Its inquiry should have been the determination of the extent to which the father was exercising his visitation rights and whether the relationship between the father and the children had not deteriorated to the point at which the exercise of jurisdiction would be unreasonable. In addition, the trial court must clarify its ruling regarding the availability of substantial evidence regarding the children’s care, protection, training, and personal relationships, which the Court found to be ambiguous.

Cross-References: Family Code §3422; Kumar v. Superior Court (1982) 32 Cal.3d 689; Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249 [statutory interpretation].

CHILD SUPPORT

In re Marriage of Riddle 
(2005) 125 CA4 1075
4th DCA Div.3, Justice Sills 
Orange County, Judge Pollard

Holding: The calculation of income for determining child and spousal support orders must be based on fair and representative sampling period.  “Income,” as defined in the Family Code, is not synonymous with cash flow. Income can be imputed only where there is evidence justifying imputation. The fact that husband earned a certain level of income in the past does not necessarily mean he will earn it in the future.

Facts: Husband was a commissioned financial advisor for a major investment firm. Prior to separation, husband received a $1 million advance as an inducement to work for his current firm. Husband received the $1 million before the date of separation and the parties proceeded to spend it.  For tax purposes the employment arrangement provided that husband would be required to “repay” the advance, with interest, on a monthly basis.  Simultaneously, husband would be “forgiven” the loan by the employer in an amount equal to the installments. Wife filed an order to show cause requesting pendente lite child support and spousal support.

Trial Court Ruling: Husband was ordered to pay temporary child support of $3,619 plus 16 percent of any income in excess of $21,950 in a month. In addition, he was ordered to pay spousal support of $4,338 plus 20 percent of any income in excess of $21,950 per month. Those orders were based on the court’s finding that husband’s monthly gross income was $21,950. The court determined that amount by considering the draw, commissions, and loan forgiveness that husband earned in January and February 2003, from which the court deducted the amount of the repayment.

Ruling on Appeal: Reversed and remanded.

1.  Cash Flow Is Not Necessarily "Income"
The court disagreed with husband’s expert who opined that husband’s income was equal to his “cash flow” of only $1,700 per month. The definition of “income” in the Family Code was derived from the Internal Revenue Code definition, which includes forgiveness of debt as a form of income. Kirk allows the court to ignore “phantom income.” However, that does not mean that phantom income as imputed by the tax laws is any less “income” for purposes of Family Code § 4058 (a). There was evidence that contradicted the accountant’s opinion, including husband’s W-2 form and the employer’s earnings statement.

2. Time Samples Must Be Fair and Representative to Determine Fluctuating Income
The trial court used an erroneous sample to determine husband’s income. Husband’s income would have been an average of $7,591 if it had been based on the prior fourteen months. The prior twelve calendar month (2002) average would have been only $6,611. The average for the last twelve months would have been $8,394. Even though Rosen concerned itself with the calculation of income for purposes of determining goodwill in a law practice, it is an abuse of discretion to take so small a sliver of time to figure income that the determination essentially becomes arbitrary. The trial court’s use of only the husband’s last two months of income was arbitrary. The court held that 12 months or “annual” income is a “benchmark” for the calculation of support, which is consistent with income tax laws.

3.  There Was No Basis To Impute Income to Husband
It was improper for the trial court to impute income to husband based on historical data. Elements that were present in other reported decisions where imputation of income was upheld are not present here.  It is illogical to assume that husband would do in the immediate future what he did in his best of recent years. It is also contrary to the rule in Rosen that samples must be representative.  

Cited References: Fam. Code, §§ 4058, 4059, 4060 and 4064; In re Marriage of Schulze (1997) 60 Cal.App.4th 519; In re Marriage of Kirk (1990) 217 Cal.App.3d 597; In re Marriage of Loh (2001) 93 Cal.App.4th 325 [presumptive correctness of tax returns]; In re Marriage of Hall (2000) 81 Cal.App.4th 313 [court must arrive at a stable number]; County of Placer v. Andrade (1997) 55 Cal.App.4th 1393 [purpose of having a  stable number is to have a reasonable predictor of what each spouse or parent will earn in the immediate future]; In re Marriage of Rosen (2002) 105 Cal.App.4th 808 [time period on which income is calculated must be long enough to be representative, as distinct from extraordinary]; In re Marriage of Destein (2001) 91 Cal.App.4th 1385 [imputed income from potential sale of real property];  In re Marriage of Hinman (1997) 55 Cal.App.4th 988 [income imputed where noncustodial parent capable of employment]; In re Marriage of Padilla (1995) 38 Cal.App.4th 1212 [income imputed where parent voluntarily terminated work].

In re Marriage of Henry 
(2005) 126 CA4 111
4th  DCA, Div.3,  Justice Fybel
Orange County,  Commissioner Vogl

Holding: An increase in the fair market value of husband’s residence cannot be considered as income in determining child support.

Facts: In the dissolution action husband was ordered to pay $500 per month for each of the two children. Three years later wife filed an order to show cause to modify the child support order. Wife was suffering from a difficulty pregnancy that had disabled her from working.

Trial Court Ruling: Husband was ordered to pay $735 per month for the remaining minor child.  This was based on the trial court’s findings that that wife’s income was $6,461 per month and that husband earned $8,000 per month. Even though wife was unemployed at the time of the hearing, the court ruled that her reduction of income was “temporary.” The court also found that the fair market value of the home that wife owned with her current husband had increased by $240,000, yielding average appreciation of $13,000 per month, one-half of which the court attributed to wife.

Ruling on Appeal: Reversed.

The Court held that Destine [imputation of return on parent’s non-income earning assets can be imputed to the parent] does not apply to a residence that is occupied by the parent. In fact, the Court observed that the wife in Destine had not requested that the husband be imputed with the potential income that could be earned from his residence and the Destine court expressly stated that it was not addressing that issue. Although the language of Family Code section 4058 is expansive, it is not limitless.

The court did not include any of the necessary findings to support an “earning capacity” calculation under section 4058(b). Husband bore the burden of offering evidence of wife’s job qualifications, salary payable, and job opportunities. Husband failed to meet this burden.

Cited References: Family Code §4058 (a); In re Marriage of Dacumos (1999) 76 Cal.App.4th 150; In re Marriage of Destein (2001) 91 Cal.App.4th 1385; Mejia v. Reed (2003) 31 Cal.4th 657; In re Marriage of LaBass & Munsee (1997) 56 Cal.App.4th 1331.

In re Marriage of McClellan
(2005) 130 CA4 247
4th DCA  Div.1, Justice O' Rourke
San Diego County, Commissioner Lowe

   
Holding: A court cannot retroactively modify or terminate child support arrearages. An arrearage order is not a new installment, so the court does not have the power to suspend the imposition of interest.

Facts: In 1986 Father was ordered to pay child support. By December1994 he had built up an arrearage of $16,491.78 plus $9,254.43 in interest. The December 1994 order directed father to make monthly payments of $250 toward the arrearages, which would increase to monthly payments of $400 six months later. The trial court did not expressly rule that interest would continue to accrue, but it did make statements on the record that “impliedly assumed” that interest would accrue. In 1996 the county notified Father that he had to pay a total of $27,492.53.  In 2003, at Father’s request, the county conducted an audit which showed that Father’s total arrearages were $80,739.88, of which $27,631 was interest, for the pre-December 1994 period. The county also concluded that father owed an additional arrearage of $17,075.97, including $1,072 in interest, for support payments missed since June 1995. 

Father contended that the December 1994 order had the legal effect of stopping the future accrual of interest on all pre-December 1994 arrearages. He further argued that the amendment to Family Code §155 could not be applied retroactively.

Trial Court Ruling: Interest continued to accrue on the arrearages because the amendment to Family Code §155 controlled the legal effect of the December 1994 order.

Ruling on Appeal: Affirmed.

With respect to a child support order, interest at 10% simple commences to accrue as to each installment on the date the installment becomes due. A court cannot retroactively modify or terminate child support arrearages. An arrearage order is not a new installment, so the court does not have the power to suspend the imposition of interest. The question before us is whether the amendment to Family Code section 155 applies to the accrual of interest on child support arrearages that were the subject of arrearages orders entered before the amendment took effect on January 1, 2003.

Family Code §155, which was enacted January 1, 2003, specifically abrogated the holding in Dupont, which held that the trial court could curtail the accrual of interest on a support order.  A court can retroactively apply a statute only if it contains express language of retroactivity or if other sources provide a clear and unavoidable implication that the Legislature intended retroactive application. But a statute cannot be retroactively applied if it would deprive a person of a vested right without due process of law. The question, then, was whether the amendment to Family Code §155 was a restatement of existing law, which would allow it to be retroactively applied.

Evidence of the Legislature’s intent is relevant to this determination, but not controlling. The court is the ultimate decision-maker. After reviewing evidence of legislative intent, the Court held that the Legislature indicates an intent to merely clarify existing law where, as here, it “promptly reacts to the emergence of a novel question of statutory interpretation” caused, for instance, by “the disruptive effect of [a] Court of Appeal’s decision.”  Dupont departed from existing law. The amendment to Family Code section 155 merely clarified the law as it existed prior to Dupont by removing one of the assumptions on which Dupont was based, namely, that an arrearages order is a new money judgment payable in installments.

The Court concluded that the amendment to Family Code §155 merely clarified existing law that was already plainly set forth in Code of Civil Procedure section 685.010: A money judgment continues to accrue interest until it is satisfied.

Cited References: Code of Civil Procedure §§685.010(a), 685.020; Family Code §155; In re Marriage of Hubner (2004) 124 Cal.App.4th 1082; In re Marriage of Thompson (1996) 41 Cal.App.4th 1049; Dupont v. Dupont (2001) 88 Cal.App.4th 192; In re Marriage of Buol (1985) 39 Cal.3d 751.

In re Marriage of Eggers 
(2005) 131 CA4 695
4th  DCA Div. 3,  Justice  Rylaarsdam
Orange County, Commissioner Hickman

   
Holding: Father, who was fired due to his own misconduct, could not be imputed with the income he was earning in that job. The trial court abused its discretion by imputing income to father without addressing whether father had the ability and opportunity to work or whether there were eligible assets that could be used for support.

Facts: Father, who had been ordered to pay child support and spousal support, was fired because of his own misconduct. A representative of father’s employer testified that father had violated the employer’s equal opportunity policies and had emailed sexually offensive materials to another employee using the employer’s in-house email system. Father moved to reduce his support obligations, citing his firing as a change of circumstances. Father, who was 55 years old, testified that he had sent out between forty and fifty resumes.

Trial Court Ruling: Father’s order to show cause was denied. The trial court equated his termination with an intentional reduction of income and imputed to father the income he had been earning prior to his termination. The trial court acknowledged that father’s age was “uniquely difficult” and that he was “overqualified.”  

Ruling on Appeal: Reversed.

Family Code §4058(b) permits the court, in its discretion, to substitute actual income with earning capacity if consistent with the child’s best interests. Per Regnery, “Earning capacity is composed of (1) the ability to work . . .; (2) the willingness to work . . .; and (3) an opportunity to work which means an employer who is willing to hire.”  The Court distinguished this case from those in which the payor quit. In the latter, the trial court has discretion to conclude the parent’s conduct reflected a divestiture of resources required for child support obligations. It may refer to the former job as the basis for its findings of ability and opportunity and may impute income to the parent based on his or her prior earnings. However, when a supporting parent loses a job, the trial court may impute income to that parent based on his or her earning capacity if the amount of income imputed is supported by evidence of opportunity and ability to work reflecting that level of income.

The Court could not find any prior decisions in which a support payor who lost his job for misconduct was imputed with the income he was earning in that job. The Court stated that “[t]here may be situations where the supporting parent’s conduct warrants considering a claimed involuntary termination of employment as actually voluntary for purposes of determining the parent’s earning capacity.” However, it said that this was not one of those situations.

On remand, father must show that, despite reasonable efforts, he cannot secure employment despite qualifications. This will require proof that he either lacked the ability to find employment or had no reasonable opportunities to obtain employment. As part of his case, father must provide evidence of the nature of the job he was seeking. Moreover, the trial court must also consider father’s assets that might be available to pay support.

Cited References: Family Code §4058(b); State of Oregon v. Vargas (1999) 70 Cal.App.4th 1123;  In re Marriage of Regnery (1989) 214 Cal.App.3d 1367; In re Marriage of Padilla (1995) 38 Cal.App.4th 1212; In re Marriage of Ilas (1993) 12 Cal.App.4th 1630; In re Marriage of LaBass & Munsee (1997) 56 Cal.App.4th 1331; In re Marriage of Henry (2005) 126 Cal.App.4th 111.

Comment: Family Code §4058(b) provides as follows: “The court may, in its discretion, consider the earning capacity of a parent in lieu of the parent’s income, consistent with the best interests of the children.”

The Court observed that “. . . the rules pertaining to the imputation of income for purposes of spousal and child support may differ.” However, because father did not raise that issue the Court did not have to address it. Nevertheless, the Court stated that, on remand, the trial court is not precluded “. . . from applying the appropriate rules for each.”

In re Marriage of Calcaterra and Badakhsh 
(2005) 132 CA4 28
 2nd DCA Div. 6, Justice Yegan
Ventura County, Judge De Law Torre

   
Holding: Evidence supported upward modification of child support after father lied about his income.

Facts: In December 1992 father was ordered to pay child support of $350 per month.  In December 2003, the county, acting on behalf of mother, requested an increase in child support.  This request was based on mother’s loss of her job and physical inability to work because of a medical condition.

Father, who owned a gas station and rental properties, testified that his gross income for the prior year was $30,483.  He further testified that his gross income for 2002 was $28,267. At the trial, father was confronted with two loan applications that were inconsistent with his testimony. The first application, which father denied signing, stated a net rental income of $3,118 per month and monthly employment income of $11,830 per month. The application also stated that father’s net worth was $1.3 million.  The second application, which was signed six months after the first one, stated that father had a net rental income of $1,570.19, a monthly employment income of $22,300, and net assets of $870,000.   

Mother testified that she was receiving monthly disability income of only $2,600, which was approximately $1,000 per month less than she was making when the current order was made.
 
Trial Court Ruling: The trial court found that both parties had intentionally misrepresented their incomes and expenses. In particular, the Court found that mother had been depositing $6,000 into her bank account, indicative of an annual net income of $72,000. The Court further found father not credible in his testimony that he did not sign the first loan application and found his net monthly income to be $27,997. Based on those two levels of income, the Court increased father’s child support payments by $1,439 to $1,789 and denied father’s motion for reconsideration.

Ruling on Appeal: Affirmed.

The Court held that father’s 2002 loan application coupled with his 2003 federal income tax return constitute substantial evidence supporting the finding that father’s gross monthly income was $27,996.80. Father claimed that the trial court erred in basing its ruling on the loan applications, instead of his income tax returns. The Court held that the presumption of correctness of recent tax returns may be rebutted by a statement of income on a loan application where, as here, the parent owns his own business. This is consistent with the ruling in Chakko, where the court based its child support order on the father’s loan application, where the father had not offered his tax return as evidence of his income.  Here the father did offer his tax returns, but the court held that the loan applications were more credible in light of the “huge discrepancy between the tax returns, the 2002 and 2003 loan applications, his income and expense declaration, and testimony. . .” The District Court of Appeal further held that the trial court could disregard father’s claim that a substantial portion of the first loan application was that of father’s new wife, by reason of the father’s lack of credibility. “The variances in his tax returns, loan applications, income and expense declaration, and his testimony compel but one conclusion, the one drawn by the trial court, i.e. father committed perjury.”

For the first time on appeal, father claimed that one-half of the business income is that of his current wife by reason of the fact that the business was community property of that marriage. The District Court of Appeal held that this argument should have been raised in the trial court and that “. . . any errors must be brought to the trial court’s attention at the trial level while the [theoretical] error can still be expeditiously corrected.”

Cited References: In re Marriage of Chakko (2004) 115 Cal.App.4th 104; In re Marriage of Loh (2001) 93 Cal.App.4th 325; In re Marriage of Whealon (1997) 53 Cal.App.4th 132.

Comment: The District Court of Appeal provided perjurers with an ominous warning regarding the potential consequences of failures to testify truthfully:

“Cases like this one are far too common. Income and expense declarations are executed under penalty of perjury. Some, like father's 2004 declaration, just don’t ‘add up.’ We are confident that family law courts can determine which declarations have the ‘ring of truth’ and which do not.

The courts cannot prevent parties to a dissolution from lying to each other. But, when they lie to the court they do so under penalty of perjury, subjecting themselves to criminal prosecution. A trial court is not required to refer such cases to the district attorney or the Internal Revenue Service and Franchise Tax Board when it believes a crime has been committed. But, it should not be faulted for doing so. . . If a trial court, in the exercise of its discretion, elects to report a crime to an appropriate agency, it should not become an advocate. It should simply make the referral and let the agency exercise its powers whether or not to go forward.

A judgment based upon factual truth is a legitimate goal of any judicial proceeding. Neither the trial court, nor this court, knows the true state of father’s financial affairs. That is his fault. Family law court is a court of equity. . . father is in no position to complain that the trial court drew adverse inferences in modifying child support. The trial court’s order is supported by substantial evidence and the reasonable inferences which flow therefrom.”

County of Orange v. Smith 
(2005) 132 CA4 1434
4th DCA Div.3. Justice Moort
Orange County, Judge Franz E. Miller

   
Holding: Rent received by the support payor from a subtenant is income that should be considered in the determination of child support.

Facts: Husband was in the business of cabinet installation. Prior to his separation from wife, he rented a home with sufficient space to house his business operation. After the separation, he continued to live in that rental home, operating his business at that location. He also took in a roommate, who paid $600 per month in rent. Father collected the rent from the roommate and applied it towards the total $1,600 rental bill. He construed $600 as his own personal rent and allocated $400 to his business operation.

In the initial order to show cause, husband claimed that he had earned $16,800 in the preceding 12 months. In September 2001, the trial court ordered husband to pay temporary child support of $224 per month. In November 2001, the parties stipulated to a custody order under which husband had the child 56% of the time. In December 2002, husband filed an order to show cause in which he requested a reduction in child support. The decision does not indicate the disposition of that order to show cause.

In March 2003, the County filed an order to show cause for child support. In response, husband stated his annual income to be $13,415.40. In July 2003, a commissioner made findings that husband should pay current child support of $31 per month and a child support arrearage of $4,282, payable at the rate of $80 per month. The commissioner did not attribute any income to husband by reason of the rent received from the subtenant.  The findings and recommendation of the commissioner were not adopted and never became the final order of the court.

Nothing further occurred until April 2004, when the trial court established the amount of husband’s child support arrearage as $4,855 and ordered him to pay child support including arrearages in the amount of $119 per month. This was based on the court’s finding that husband had netted $972 per month in 2003 and that the $600 per month that he was receiving from the subtenant was income to husband.

Trial Court Ruling: In determining the amount of child support that husband would have to pay, the court considered the $600 monthly payments from the roommate in calculating his income. The court specifically ruled that the $600 rental payment constituted income to the father. Alternatively, the court ruled that there were special circumstances under Family Code section 4057, subdivision (b)(5) that made it appropriate to consider the roommate’s $600 rental payments in setting child support.  Because of the low incomes of both parents, the trial court ruled that it would be unjust to ignore the effect of the roommate’s $600 monthly rental payment on the ability of husband to pay child support.

Ruling on Appeal: Affirmed.

The $600 monthly payments may be construed as either sublease income under Family Code §4058(a)(1) or a special circumstance to be considered when evaluating the cash flow available to provide for the child, under Family Code §4057.

Family Code §4058: The fact that husband did not report the rent as income on his tax return does not preclude the court from considering it. Per Loh, the contents of a tax return are only presumptively correct and evidence may be admitted to demonstrate that the information contained in the tax returns is in fact incorrect. Family Code §4058(a)(1) includes rent as income to be considered. Of significance to the Court were the facts that husband was the initial tenant of the residence and that he collected the money from the roommate and paid it over to the landlord, thus implying that the roommate was obligated to make payment to husband and not to the landlord.

Family Code §4057: Per Loh, the Court should first calculate the guideline level of child support, and then adjust it to account for special circumstances, such as husband’s rent received from the subtenant.

Cited References: Family Code §§ 4057, 4058; In re Marriage of Loh (2001) 93 Cal.App.4th 325; In re Marriage of Scheppers (2001) 86 Cal.App.4th 646.

Comment: Family Code §4058(a)(1) provides that “(a) The annual gross income of each parent means income from whatever source derived, . . . and includes, but is not limited to, the following:
(1) Income such as . . .  rents. . . ”

The Court emphasized the significance of the subtenant’s payment to husband. “Inasmuch as Family Code section 4058, subdivision (a)(1) states that rent constitutes income, the trial court’s holding is proper, so long as the housing arrangement with the roommate is properly characterized as a sublease and the roommate’s payments are properly characterized as sublease rental payments owing to the father.”

In re Marriage of Sherman 
(2005) 133 CA4 795
2nd DCA Div.7, Justice Johnson
Los Angeles County,  Judge Paul   

[SEE PROPERTY SECTION]

SPOUSAL SUPPORT

In re Marriage of Benson
(2005) 36 C4 1096
California State Supreme Court, Justice Baxter
Santa Barbara County. Judge Brown   

Holding: Family Code section 852(a) is not analogous to a general statute of frauds in which the requirement of a writing is subject to an implied exception for “part performance” of the contract’s terms. Even if husband’s transfer of the deed was performance, section 852(a) requires transfer agreements to be express and in writing.

Facts: During the marriage husband participated in an employee stock ownership plan and a 401(k) plan. As part of an estate plan, wife’s father gave husband and wife a house in Santa Barbara.  Subsequently, and at the request of wife’s father, husband and wife deeded the house to the father’s revocable trust. This was done incrementally. In the divorce, husband claimed that the house was community property and that the transfer to the trust did not change that.

Husband said that when he signed the first deed wife rarely agreed to waive any interest he had in husband’s retirement accounts. Husband testified that he trusted that the wife would follow through with the agreement. Husband did not mention the oral agreement and in discovery in pretrial procedures.

Trial Court Ruling: The trial court agreed with husband, and the District Court of Appeal affirmed.

Ruling on Appeal: Reversed. 

The Family Code has a separate scheme that governs transactions between spouses that change the character of property during the marriage. Family Code section 850 allows separate property to be transmuted to community property. It also allows community property to be transmuted to the separate property of one of the spouses. However, Family Code section 852(a) imposes specific requirements for such transfers.

That the Legislature intended a requirement from which the spouses cannot deviate is evidenced from: (1) the negative wording of Family Code section 852(a), which states that an agreement to transmute property is not effective unless it is expressed and in writing; (2) the absence of any exception to the requirement of an express written declaration.

In enacting Family Code §852(a), the Legislature intended to eliminate the “easy transmutation rule” which it felt “generated extensive litigation and unseemly tactics in dissolution cases” and “encouraged spouses to transform a passing comment into an agreement or even to commit perjury by manufacturing an oral or implied transmutation.” 

Husband referenced the Law Revision Commission statement that “the ordinary rules and formalities applicable to real property transfers apply also to transmutations of real property between the spouses.”  However, the court saw no evidence that the Legislature intended to incorporate traditional exceptions to the statute of frauds into Family Code section 852.  The reference to “ordinary rules and formalities” meant that transmutation would entail less formality than transactions subject to the statute of frauds.

Cross-References: Family Code §§850-853; In Estate of MacDonald (1990) 51 Cal.3d 262; Droeger v. Friedman, Sloan & Ross (1991) 54 Cal.3d 26; Estate of Bibb (2001) 87 Cal.App.4th 461; In re Marriage of Barneson (1999) 69 Cal.App.4th 583; Recommendation Relating to Marital Property Presumptions and Transmutations (Jan. 1984) 17 Cal. Law Revision Com. Rep. (1984) pp. 213-214 (Commission Report).

In re Marriage of Eggers 
(2005) 131 CA4 695
4th  DCA Div. 3,  Justice  Rylaarsdam
Orange County, Commissioner Hickman 

[SEE CHILD SUPPORT SECTION] 

In re Marriage of Schmir
(2005)  134 CA4 43
2nd DCA Div.7, Justice Johnson
Los Angeles County, Judge Paul

   
Holding: Trial court could not reduce spousal-support to zero without giving wife fair advance notice and opportunity to find employment. Trial court could consider income that wife could draw from her IRA account.

Facts: In their marital settlement agreement the parties, who were married 27 years, agreed that husband would pay wife spousal support of $5,800 indefinitely. The judgment did not give any Richmond or Gavron admonitions. At the time wife was 49 years old and unemployed, even though she was a LCSW. In addition, wife had unreimbursed medical expenses of $2,000 per month. Fourteen years later husband filed an order to show cause to terminate spousal support.

Based on testimony by a vocational expert, the trial court found that wife could earn $2,500 per month. The Court referenced the expert’s testimony regarding wife’s recent experience as the secretary and treasurer of her condominium association and the fact that wife had maintained her LCSW license.

Wife was now 61 years old and was eligible to withdraw up to $2,200 per month from her $500,000 IRA account. In addition, wife’s unreimbursed medical expenses had decreased to $638 per month. Husband claimed that, in effect, wife’s net monthly income had increased by $6,062, including the imputed income, her ability to draw on her IRA account, and her decreased medical expenses.

Trial Court Ruling: The spousal support order was reduced to zero in three weeks.  

Ruling on Appeal: Affirmed as to the change of circumstances, but reversed as to the effective date of the reduction.

The Court held that before a reduction to zero can be ordered, wife had to be given a reasonable amount of time to obtain work. The trial court had the discretion to consider the income that wife could have by making withdrawals from her IRA account. The trial court could reasonably find that the “life altering stressors” that wife said interfered with her efforts to work were no longer affecting her.

The Court restored the $5,800 per month until (1) wife obtained employment earning at least $2,500; (2) ceased to make a good faith effort to obtain such employment; or (3) wife’s 65th birthday, at which time the amount would revert to zero. Husband could request review hearings no more frequently than every three months.

Cross-References: Family Code §4330; In re Marriage of Olson (1993) 14 Cal.App.4th 1; In re Marriage of Richmond (1980) 105 Cal.App.3d 352; In re Marriage of Gavron (1988) 203 Cal.App.3d 705, 712.

PROPERTY

In re Marriage of Weaver 
(2005) 127 CA4 858
4th DCA Div.2,  Justice Gaut
San Bernardino County, Commissioner Bryan

   
Holding: Real property acquired by the parties before marriage, and which was commingled with community property during the marriage held divisible as community property, subject to husband’s Family Code Section 2640 reimbursement. Under section Family Code §2581 spouses cannot hold property in joint title while preserving the property's separate property characterization through oral or implied agreements

Facts: Scandia Drive residence: Two days before the marriage the property was purchased by the parties as joint tenants. $17,478.50 for the $10,600 downpayment and additional closing costs came from husband’s separate property. During the marriage community property funds were used to make the mortgage payment and the loan was refinanced for improvements. One year later the parties moved into the residence, made about $33,000 in special improvements, and obtained a second  mortgage of $32,500 to pay for improvements. Six years later the parties borrowed $124,000 against the property. The mortgage had a principal balance of $170,750 at the date of separation. Wife claimed that Family Code Section 2640 did not apply because the property was acquired before the parties married.

Thule Lane residence: Mother and her husband (father) purchased the Thule residence in 1989, using their earnings and proceeds from the sale of their desert home in 1989. Title was held by mother, father, and husband as joint tenants. Wife waived any interest in the home. Husband and wife did not contribute anything to the purchase of the home. After father died in 1997, mother changed title on the Thule residence and moved in with husband and wife at the Scandia residence. Wife was included as a joint tenant along with mother and husband. Mother testified that she did not know that wife’s name was on the title and that she did not want wife’s name on the title. Husband testified that wife’s name was put on the title by “mistake,” but conceded that wife held a joint tenancy title. After the dissolution was filed husband and mother changed the title so that wife’s joint tenancy interest became a tenancy in common.
 
Trial Court Ruling: Scandia Drive residence: Husband was awarded a 2640 reimbursement of $10,600, based on a fair market value of $215,000 with a balance owing of $107,770. The reimbursement amount was the difference between the purchase price of $85,000 less the original loan of $73,400. Even though the property was acquired before the parties married

Thule Lane residence: The trial court held that wife was not entitled to any interest in the Thule residence, based upon its finding that no community property funds were used to acquire the residence and mother did not intend a gift to wife.
 
Ruling on Appeal: Scandia Drive residence: Affirmed.

There was a transmutation of the Scandia property to community property as a consequence of commingling the parties' separate property interest with community property used to pay the mortgage and home improvements during the marriage. Family Code §852(a) does not apply because of the commingling of separate and community property.

Thule Lane residence: Reversed.

Under section Family Code §2581 spouses cannot hold property in joint title while preserving the property's separate property characterization through oral or implied agreements. The community property presumption was not rebutted by a writing preserving husband's separate property interest in the Thule residence in the event of marital dissolution. However, husband is entitled to reimbursement pursuant to Family Code section 2640.

The case was remanded to trial court on remand, with instructions to determine the value of the husband's one-half separate property interest in the Thule residence at the time wife was added as a joint tenant and reimburse husband for that separate property contribution to the couple's acquisition of their two-thirds joint tenancy interest in the property. Any increase in the equity value of the separate property contribution thereafter is community property and shall be divided equally between husband and wife.

Cited References: Scandia Drive residence: Family Code §§2640, 2650; In re Marriage of Rico (1992) 10 Cal.App.4th 706.

Thule Lane residence: Family Code § 2581; In re Marriage of Haines (1995) 33 Cal.App.4th 277; In re Marriage of Perkal (1988) 203 Cal.App.3d 1198; In re Marriage of Anderson (1984) 154 Cal.App.3d 572; In re Marriage of Neal (1984) 153 Cal.App.3d 117;  In re Marriage of Witt (1987) 197 Cal.App.3d 103.

In re Marriage of Starkman 
(2005) 129 CA4 659
2nd DCA Div. 6. Justice Gilbert
San Luis Obispo County. Judge Woolpert   

Holding: Clause in revocable trust agreement providing that trust property was community property absent other indication did not serve to transmute separate property into community property.

Facts: As part of their estate plan a husband and wife established a revocable trust into which husband transferred all of his separate property. A paragraph in the trust agreement provided that the property transferred to the trust was community property unless husband or wife as transferor identified it as separate property. Husband did not so identify the property.

The parties also executed a general assignment that "any asset, whether real, personal, or mixed . . . [they] now own or which we may own in the future" to the Trust. Moreover, the general assignment did not specifically exclude any property that Christopher intended to remain as his separate property.

One month after the trust was executed, the attorney who prepared it sent a letter to the parties which stated that "the Trust provides that there is a presumption that all trust assets are your community property unless you clearly specify otherwise. Therefore, it is very important that separate property be clearly identified as such."

Husband transferred his separate property stock into the trust, using stock brokerage transfer forms. After the parties separated, husband purported to revoke the trust. Wife asserted that the assets that husband conveyed to the trust by the forms had been transmuted into community property.

Trial Court Ruling: Husband did not transmute his separate property to community property because he did not state "any express declaration of transmutation" in the stock brokerage transfer forms or in any "document at all."

Ruling on Appeal: Affirmed.

The court held that in order to qualify as a transmutation, there would have to have been words indicative of a change in the character from separate to community. An express declaration under Family Code §852(a) does not require use of the terms "transmutation," "community property," "separate property," or particular words. However, the express declaration must unambiguously indicate a change in character or ownership of property.

The stated purpose of the trust was to avoid probate. It was not to transmute husband’s assets from separate property to community property.

The letter from the attorney could not be considered because extrinsic evidence cannot be used to interpret the operative document. In deciding whether a transmutation has occurred, the written instrument must be interpreted independently, without resort to extrinsic evidence.

Cross-References: Family Code §§ 850-853; Estate of MacDonald (1990) 51 Cal.3d 262, 272-273; In re Marriage of Barneson (1999) 69 Cal.App.4th 583.

Comment: The paragraph in question provided as follows: “Settlors agree that any property transferred by either of them to the Trust . . . is the community property of both of them unless such property is identified as the separate property of either Settlor. If either Settlor claims that a portion of the Trust Estate is separate property, the Settlor making such a claim agrees to indemnify the Trust and the Trustee from all costs and liability incurred in establishing or defending such claim." It also states that "Settlors declare that any community property transferred to the Trust shall retain its character as such, notwithstanding the transfer to the Trust.”

The court observed that this might have qualified as a transmutation if it provided that any property transferred to the Trust by either of them "becomes" or "is changed into" the community property of the parties. It also would have helped wife’s cause if the trust purposes set forth in the face of the document might have included as a purpose that Christopher was transmuting the entirety of his separate estate to community property.

Filip v. Bucurenciu
(2005) 129 CA4 825
3RD DCA. Justice Hull
Placer County.  Judge Garbolino

   
Holding: Uniform Fraudulent Transfer Act [“UFTA”] applied to former spouses' marital dissolution and property settlement agreement.

Facts: A third party creditor sued husband for damages. After the complaint was filed, husband and wife created a trust into which was transfered ownership of four real properties. The creditor obtained a judgment against husband for $249,000. The creditor had then discovered that husband had transferred his assets to a corporation, the stock of which was owned by husband and wife. The creditor then filed a lawsuit under the UFTA and for constructive trust. Two weeks after the judgment was entered husband and wife signed a marital settlement agreement, which stated that there was no community property or community debts and awarded two of the four properties to wife.  The parties subsequently transfered two of the properties to the corporation.

Trial Court Ruling: Judgment was entered against husband, wife, and the other named defendants in the amount of  $547,574.94.

Ruling on Appeal: Affirmed.

There was substantial evidence to support the trial court’s decision. The factors indicative of fraudulent intent in the UFTA do not create a mathematical formula to be used to determine if there was fraudulent intent. The factors are intended to provide the court with guidance in determining this issue. The transfers occurred after wife knew that a judgment against husband  might be forthcoming. Transfers made under those circumstances do not evidence good faith.

Cross-References: Civil Code §3439, et. seq.; Mejia v. Reed (2003) 31 Cal.4th 657, 663.

Marriage of Klug 
(2005) 130 CA4 1389
3rd DCA, Justice Cantil-Sakuaye
Placer County,  Commissioner Nichols

Holding: Wife’s malpractice judgment received afer the date of separation was not community property.

Facts: Prior to the date of separation the parties retained the attorney to protect their assets from a medical malpractice action that was filed against husband who was a doctor. Read a family limited partnership.  Lee, community assets were placed into the partnership. Before the date of separation, husband withdrew money from the partnership account and deposited it in an account overseas.

After the dissolution was filed husband sold his interest in two corporations and, with the assistance of the attorney, transferred the proceeds to overseas accounts. Husband also transferred other community property money overseas, again with the assistance of the attorney. The attorney apparently never told wife about the asset transfers. Wife filed suit against husband and the attorney for breach of by fiduciary duty and malpractice. Wife and husband settled their case. Two years later wife’s over malpractice case for $346,000. Husband then filed a motion to divide the missed asset.

Trial Court Ruling: Wife’s settlement was for separate property and not subject to division as an omitted asset.       

Ruling on Appeal: Affirmed.

Family Code section 2556 authorizes trial court should divide omitted assets. The division of damages are governed by Family Code sections 781 and 2603. Family Code section 781 says that personal injury damages arising after the date of separation are the separate property of the injured spouse. Family Code section 2603 provides that community property personal injury damages are to be assigned to the injured spouse, unless they have been comingled with other community property. A cause of action does not exist until injury is suffered. In a malpractice case the cause of action does not arise until actual damages are suffered by the plaintiff. Therefore, the primary question is whether wife’s cause of action against the attorney arose before or after the date of separation.

There is a difference between when a cause of action accrues and when it arises. When a cause of action accrues for purposes of the statute of limitations is irrelevant to the question of when wife’s cause of action arose. The cause of action for legal malpractice usually rises and accrues at the same time, but the delay of discovery can delay the accrual date. There’s no reason why the characterization of wife’s cause of action should depend upon when the injury was discovered.

Houston says in that the cause of action arose when the attorney created the partnership. Husband cited CCP section 340.6, which establishes the statutory limitations for malpractice causes of action and the circumstances under which they are tolled. But, as stated above, when the cause of action accrues for purposes of the statute of limitations is irrelevant. Wife did not sustain any damages until after the date of separation. This is because the attorney assisted husband in moving the community property assets overseas after the date of separation. Wife was not consulted about these post-separation transactions. The mere drafting of the partnership documents did not have an immediate adverse financial effect on wife. Prior to the date of separation, wife did not have a reason to question the attorney’s representation of her. Wife recovered the part of the community property that she was not able to get because of the attorney’s malpractice. It would be inequitable for husband to get a part of the money wife was awarded in the malpractice case. 

Cross-References: Family Code §§781, 2603. In re marriage of Shaffer (1999) 69 Cal. App. 4th  801.

In re Marriage of Mathews
(2005) 133 CA4 624
4th DCA Div.1,  Justice McDonald
San Diego County,  Judge Howatt

   
Holding: Actual fraud and duress do not have to be present in order for the presumption of undue influence under Family Code §721 to arise. However, that presumption may be overcome by a preponderence of the evidence. There was substantial evidence supporting the court's findings that no undue influence existed. Thus, the disputed residence was husband's separate property.

Facts: In 2002 the parties purchased the residence for $156,655. In order to obtain a more favorable interest rate on the mortgage, wife quitclaimed her interest in the residence to husband, and the residence was acquired in his name alone. Wife testified that she believed her name would be added to the title at a later date. Both parties testified that they believed the residence was community property. It was only after the separation that they discovered title to the residence was in husband’s name alone.

Wife claimed that because Japanese was her first language she did not fully understand the nature and consequences of the transaction. However, wife had been employed as a translator of written and oral communications for a United States-based Japanese company. Prior to moving to the U.S. from Japan, wife completed an entrance exam for college and received a 98 percent grade in English proficiency. She also managed the marital household finances and various bank accounts.

Trial Court Ruling: The trial court declined to apply a presumption of undue influence on husband and held that wife entered into the transaction freely, voluntarily, and with a full understanding of the quitclaim deed. The court concluded the quitclaim deed was executed in good faith and characterized the residence as husband's separate property. Wife requested a de novo review of the trial court's decision. 

Ruling on Appeal: Affirmed.

Husband was the advantaged spouse because the residence was acquired as husband's separate property as a result of wife’s execution of the quitclaim deed. As a result, husband has the burden of rebutting the Family Code §721 presumption of undue influence. Nothing in Haines confines its holding to situations in which the interspousal property conveyance was the result of actual fraud, deceit, or coercion.

Nothing in Family Code §721 requires that the presumption of undue influence be overcome by clear and convincing evidence. The weight of authority concludes the burden of rebutting the presumption of undue influence is by a preponderance of the evidence.

Cross-References: Evidence Code §115; Family Code §721; In re Marriage of Haines (1995) 33 Cal.App.4th 277 ; Bradner v. Vasquez (1954) 43 Cal.2d 147; In re Marriage of Delaney (2003) 111 Cal.App.4th 991; Estate of Stephens (2002) 28 Cal.4th 665; Estate of Gelonese (1974) 36 Cal.App.3d 854.

Comment: The Mathews court has both helped and hindered disadvantaged spouses in property acquisition cases. On the one hand, it held that it is not necessary to show actual fraud or duress for the undue influence presumption to arise. That presumption arises simply by virtue of the fact that a spouse gained an advantage on the other spouse in the transaction.

On the other hand, the Court made it easier for the advantaged spouse to overcome the presumption of undue influence. It did so by first downgrading the burden of proof from “clear and convincing evidence” [See Bank of America v. Crawford (1945) 69 Cal.App.2d 697, 701] to the Evidence Code §115 preponderance of the evidence standard. That section provides as follows: “Except as otherwise provided by law, the burden of proof requires proof by a preponderance of the evidence.” The court held that this Code section, coupled with the absence of a definition of the burden of proof in Family Code §721, allows the finding that the presumption of undue influence can be overcome by a preponderence of the evidence.

The Court then held that the advantaged spouse [husband] did not have to show that the disadvantaged spouse [wife] understood the legal consequences of the quitclaim deed. The Court held that wife’s knowledge of English, plus her experience in handling family finances, was sufficient to overcome the presumption of undue influence.

In re Marriage of Sherman 
(2005) 133 CA4 795
2nd DCA Div.7, Justice Johnson
Los Angeles County,  Judge Paul

   
Holding: Marital property must be valued as of date of trial unless one spouse shows that his or her individual efforts greatly increased property value following separation. Wife’s claim for reimbursement by reason of husband’s use of community property to pay his pre-existing child support obligation held barred by the 3-year statute of limitations. Wife failed to show that husband had non-exempt separate income available at the time that spouse used community funds to make a particular support payment. 

Facts: Family Residence: Husband owned the family residence before the marriage. During the marriage community property funds were used to pay down the mortgage. At the date of separation the residence was worth $3.5 million and at the date of trial it was worth $4 million. Husband argued that the date of separation value should be used, and wife argued for the date of trial.

Reimbursement for Child Support Payments: Wife alleged that husband received $184,295 of nonexempt separate property income which was available to pay his child support and spousal support obligations to his former spouse, but which was not used for that purpose.

Trial Court Ruling: Family Residence: The residence was valued as of the date of separation. 

Reimbursement for Child Support Payments: Wife’s reimbursement claim is time-barred by the applicable statute of limitations.

Ruling on Appeal: Reversed as to the family residence. Affirmed as to reimbursement for child support payments.

Family Residence:  Family Code §2552 [assets are to be valued as of the date of trial] required that the date of trial value be used. The Court distinguished Bono [use of date of separation value] from Marsden on two grounds: (1) Bono was a probate case and (2) the community property improvements [the basis of the claim] began 17 years after the date of marriage. The Court also disapproved of the Bono court’s inclusion of premarital appreciation into its formula. The Moore/Marsden formula “credit[s] the husband’s separate property estate with premarital appreciation, but it [does] not incorporate that premarital appreciation into its calculation of the respective separate and community percentage interests.”

In reversing the trial court, the DCA directed the trial court shall modify the judgment to reflect the community property interest in the residence was $936,230. The trial court was also ordered to conduct further proceedings to determine the manner in which wife will be compensated for her share of the additional community property interest in the residence. 

Reimbursement for Child Support Payments: Wife did not treat each support payment as a separate obligation for purposes of her reimbursement claim. She did not demonstrate that Husband actually had any nonexempt separate income available at the time he made any specific support payment using community funds. Under Family Code §915(b) the court must  treat each support payment as a separate obligation or debt. To secure reimbursement under section 915, a party must show the other spouse had nonexempt separate income available at the time that spouse used community funds to make a particular support payment. 

Cross-References: Family Residence: Family Code §2552; Marriage of Moore (1980) 28 Cal.3d 366; Marriage of Marsden (1982) 130 Cal.App.3d 426; Bono v. Clark (2002) 103 Cal.App.4th 1409.

Reimbursement for Child Support Payments: Family Code §§ 915(b), 920.

Comment: The Sherman case tells us that Bono should be limited to its unique facts; i.e., where the claim is based on improvements that take place long after the parties were married. It appears that even the Bono court would not apply its rule to the run-of-the mill case where the claim is based on community property funds used to pay down the principle balance of the mortgage.  

In re Marriage of McTiernan and Dubrow
(2005) 133 CA4 1090
 2nd DCA Div. 8, Justice Cooper
Los Angeles County, Judge Montes

   
Holding: There is no community property interest in the reputation of a highly successful motion picture director. Trial court’s order requiring husband to reimburse wife one-half of the lost value of stock liquidated to pay community property bills affirmed. Trial court’s limitation of spousal support to two years after a 9-year marriage held reversible error.

Facts: The parties lived together as husband and wife from 1988 through 1997. During the marriage husband earned $15 million as the director of blockbuster films, such as  “Die Hard,” “The Hunt for Red October,” and “The Thomas Crown Affair.” Before marriage, wife earned $195,000 as a motion picture producer, earning $1 million during the marriage.  After the dissolution was filed, and without wife’s knowledge, husband liquidated community property stock to, in part, pay community expenses. Wife claimed husband’s use was a violation of the ATRO.

Wife filed her order to show cause for spousal support in July 1997. The parties stipulated to several $27,000 monthly pendente lite payments, without prejudice as to their characterization.

Trial Court Ruling: Applying the “excess earnings” approach, the trial court ruled that husband’s business as a motion picture director had goodwill worth $1.5 million, which was community property. Husband must reimburse wife's share of profits that were lost after husband sold certain community securities without her consent, and in violation of the automatic injunctive order imposed upon commencement of the proceedings.

Husband was ordered to pay wife $284,087, representing the profit that wife lost as a result of the liquidation. The trial court specifically found that husband had not acted maliciously. The court noted that husband could have consulted wife, and if she had not agreed to sell he could have sought court approval -- but "he did neither.”

The money paid to wife between the filing of her order to show cause and trial were held to be advance distributions of community property to wife, instead of retroactive spousal support as wife had requested.

The trial court made the following findings: Husband's current monthly income was $115,640 and wife’s “passive” income from investments was $5,777 per month; wife had an earning capacity of $11,000 per month. The marital living standard had consumed community expenditures of $147,000. The trial court limited wife’s post-dissolution spousal support to two years and further ordered that its spousal support order was non-modifiable as to duration. The trial court also referenced the fact that wife was getting $5 million in assets, which was $4 million more than she had at the beginning of the marriage.

Wife incurred fees and costs of $2 million. In addition to the $500,000 he had already paid, husband was ordered to make an additional contribution of $850,000 to wife’s fees and costs. However, if wife ended up with assets exceeding $5 million, the $850,000 would be reduced by 50 cents for every dollar over the $5 million level.

Ruling on Appeal: Affirmed, in part, and reversed, in part.

Goodwill: Reversed. The "excess earnings" method is a method that is commonly used to determine the value of the goodwill in a professional practice.  The "good will" of a business is the expectation of continued public patronage, but, there is more to goodwill than expectation of continued patronage. “A business” refers to a professional, commercial, or industrial enterprise with assets, i.e., an entity other than a natural person. No California case has held that a natural person, apart and distinct from a "business," can create or generate goodwill.  Nor can it be said that  “A person doing business” is logically included in the term “a business.” Transferability is a component of a business and husband’s "elite professional standing" cannot be sold or transferred.

Sale of Asset: Affirmed. In a footnote, the Court ruled that the use of community property money to pay a community property debt is not ipso facto the payment of a necessity of life so as to be in compliance with the ATRO. The trial court’s remedy for husband’s use of community property “precisely paralleled” the remedy provided for a spouse’s violation of his/her fiduciary duties. It was not inappropriate to treat in the same manner husband's violation of an injunctive order, designed to preserve the parties' property interests from unilateral disposition.

Pendente Lite Payments: Affirmed. Wife had not specifically requested that the court’s spousal support order be retroactive. Moreover, the interim payments met wife’s needs. The Court held that Cheriton ["the trial court's exercise of its discretion regarding retroactivity of temporary support must be guided by two overriding concerns: the supported spouse's need and the supporting spouse's ability to pay"] did not apply because here wife had not requested a retroactive spousal support order.

Spousal Support: Reversed. The trial court failed to consider some of the factors specified in Family Code §4320, such as husband’s ability to pay and wife’s needs. Wife’s income, as determined by the trial court, was only “. . . 14.5 percent of husband's, and hardly one-tenth of the former lifestyle expenditures.”  The court’s finding that wife could earn $11,000 per month was not supported by the evidence. There was “. . .evidentiary uncertainty that wife could and would independently support herself, at an appropriate level, within the limited time.”  Most of the income that wife made during the marriage was as a producer on husband’s films. The value of the community property assets being awarded to wife ($5 million) and the fact that she only had $1 million when the parties married was “gratuitous” and had nothing to do with the duration of the spousal support order.

Attorney's Fees: Family Code §2032 does not establish any fixed measure or percentage as a way to demonstrate need or the lack thereof. The trial court expected wife to have a separate estate of $5 million and this was not an unreasonable way to approach the fee issue. However, the reversal of the trial court’s finding of goodwill reduces the community estate by $1.5 million and wife’s share by $750,000. This will require a recalculation by the trial court.

Cross-References: Goodwill: Bus. & Prof. Code §§14100, et seq.; In re Marriage of Rives (1982) 130 Cal.App.3d 138, 153; In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446;  In re Lyons (1938) 27 Cal.App.2d 293; Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2005) ¶ 8:1445.

Sale of Asset: Family Code §§233(a), 1101, 2040(a)(2); In re Marriage of Hokanson (1998) 68 Cal.App.4th 987, 992.

Pendente Lite Payments:  In re Marriage of Cheriton (2001) 92 Cal.App.4th 269.

Spousal Support: Family Code §4320.

Attorney's Fees: Family Code §2032; In re Marriage of Sullivan (1984) 37 Cal.3d 762, 768-769; In re Marriage of O' Connor (1997) 59 Cal.App.4th 877; In re Marriage of Kerry (1984) 158 Cal.App.3d 456, 464.

 
ATTORNEYS FEES AND SANCTIONS
                                                                          

Orange County Dept. of Child Support Servs. v. Superior Court (Ricketson)
(2005) 129 Cal.App.4th 798
4th DCA Div.3, Justice Rylaarsdam
Orange County,  Judge Pollard

   
Holding. In a father’s motion for sanctions against the DCSS for prosecuting a nonmeritorious contempt proceeding, the trial court erred in not having the judicial officer who heard the case decide the sanction issues.

Facts. Father was cited for contempt by the Department of Child Support Services [DCSS]. DCSS demanded that father produce his payroll checks, but he refused, citing the pending criminal case. At the hearing father produced the checks, but DCSS refused to dismiss the contempt. The court found father innocent and he then filed a motion for sanctions.

Trial Court Ruling. The court awarded fees and sanctions totaling $6,500. DCSS was ordered to pay sanctions of $1,000 and fees of $1,000. The prosecuting attorney was ordered to pay $1,500 as sanctions and $1,000 as attorney's fees, and the mother was ordered to pay $1,000 as sanctions and $1,000 as fees. DCSS filed a writ.

Ruling on Appeal. Writ granted.

Father’s request could only be granted under Code of Civil Procedure §128.5, because it was a pre-1995 case. This means that father had to show subjective bad faith. Sanctions under Family Code §271 could not be ordered against DCSS or the prosecuting attorney, because they are only available against a party. The judge hearing the sanction request could not make a finding of subjective bad faith, because she was not in a position to make such a judgment. The commissioner’s refusal to grant a nonsuit after the close of DCSS case is inconsistent with the finding that the proceeding was frivolous.

A contempt must be heard by the original judicial officer. The original stipulation to the commissioner for the hearing of the contempt does not extend to the hearing of the sanctions motion, but that did not make a difference here.

Cross-References: Code of Civil Procedure §§ 128.5, 128.7; Family Code § 271; Reisman v. Shahverdian (1984) 153 Cal.App.3d 1074, 1095; Nierenberg v. Superior Court (1976) 59 Cal.App.3d 611.

Comment: This decision can be used to challenge the ability of the commissioner who heard the trial from also hearing any enforcement or modification proceeding. That is because such post-judgment proceedings are “ancillary” and not the “direct progeny” of the original cause, the latter term being a reference to those proceedings which are a continuation of the stipulated cause or question its finality, such as motions to vacate or reconsider.

 
In re Marriage of Freeman 
(2005) 132 CA4 1
2nd  DCA Div.4. Justice Epstein
Los Angeles County,  Commissioner Levanas

   
Holding: Family Code §271 sanctions should be considered at the end of the case.

Facts: In the dissolution action husband was ordered to make an equalizing payment of $315,774 to wife. Wife appealed the trial court’s order and husband filed for bankruptcy. Husband asked wife to dismiss her appeal, but she refused. Wife’s appeal was denied and the District Court of Appeal denied husband’s Family Code §271 motion because he had not filed a formal motion. Ninety days after the District Court of Appeal ordered remittutur, husband filed his Family Code §271 motion. In that motion, husband requested sanctions of $67,129.34 for fees incurred in the bankruptcy case and another $48,845 for fees incurred in the appeal.

Trial Court Ruling: The trial court ordered wife to pay fees of $48,845 to husband pursuant to Family Code §271.  

Ruling on Appeal: Reversed.

Trial courts are empowered to assess costs incurred on appeal against a spouse whose conduct falls within the description in Family Code §271. Family Code §271 is aimed at conduct that furthers or frustrates settlement of family law litigation and at reduction of litigation cost. It does not require frivolous or delaying conduct, which were discussed in Flaherty. Conduct on appeal that warrants Flaherty sanctions also qualifies for sanctions under section 271. The statute contemplates that sanctions be assessed at the end of the lawsuit, when the extent and severity of the party's bad conduct can be judged.

On appeal, a request for Family Code §271 sanctions must be filed within the same time period for claiming costs. A party claiming costs on appeal must serve and file in the superior court a verified memorandum of costs within 40 days after the clerk sends notice of issuance of the remittitur. Husband filed his Family Code §271 request long after this time had expired. For that reason, the trial court’s award of sanctions was erroneous.

Cross-References: Family Code §271; California Rules of Court, Rule 870.2(c); In re Marriage of Flaherty (1982) 31 Cal.3d 637; In re Marriage of Melone (1987) 193 Cal.App.3d 757; In re Marriage of Daniels (1993) 19 Cal.App.4th 1102; In re Marriage of Abrams (2003) 105 Cal.App.4th 979; In re Marriage of Quay (1993) 18 Cal.App.4th 961.

In re Marriage of McTiernan and Dubrow
(2005) 133 CA4 1090
 2nd DCA Div. 8, Justice Cooper
Los Angeles County, Judge Montes

[SEE PROPERTY SECTION]

PROCEDURE
                                                

In re Marriage of Meagher & Maleki 
(2005) 131 CA4 1
1st DCA, Div.2,  Justice Ruvolo
Marin County, Judge/Commissioner Hueback

 
Holding: Wife who was misled by husband regarding his financial situation is not entitled to a judgment of nullity. To substantiate a nullity based on fraud, the misrepresentation must relate in some way to the sexual or procreative aspects of marriage.

Facts: Prior to the marriage husband told wife that he was wealthy and wife believed him to be telling the truth. After the parties married, wife learned that husband did not have as much money as she had been led to believe.  At one point, husband insisted that wife put all of her separate property assets into joint tenancy and allow him to manage the assets. At trial, husband admitted that he fraudulently induced her to invest in a business venture with him. Wife filed a nullity action. In the absence of fraud involving the party's intentions or abilities with respect to the sexual or procreative aspect of marriage, the longstanding rule is that neither party may question the validity of the marriage upon the ground of reliance upon the express or implied representations of the other with respect to such matters as character, habits,  chastity, business or social standing, financial worth or prospects, or matters of a similar nature.

Trial Court Ruling: Wife’s request for a judgment of nullity was granted.  

Ruling on Appeal: Reversed.

An annulment of marriage may be granted on the basis of fraud only in an extreme case where the particular fraud goes to the very essence of the marriage relation. Annulments on the basis of fraud are generally granted only in cases where the fraud related in some way to the sexual or procreative aspects of marriage.

Cited References: Marshall v. Marshall (1931) 212 Cal. 736; Barnes v. Barnes (1895) 110 Cal. 418; In re Marriage of Liu (1987) 197 Cal.App.3d 143, 156; Handley v. Handley (1960) 179 Cal.App.2d 742, 746; Millar v. Millar (1917) 175 Cal. 797;  Douglass v. Douglass (1957) 148 Cal.App.2d 867.