Opinion
D072625
09-17-2019
In re the Marriage of JERRY L. ALLEN and EVE M. ALLEN. JERRY L. ALLEN, Respondent, v. EVE M. ALLEN, Appellant.
Law Offices of Beatrice L. Snider, John L. Romaker for Appellant. Stephen Temko for Respondent.
ORDER MODIFYING OPINION AND DENYING REHEARING NO CHANGE IN JUDGMENT THE COURT:
It is ordered that the opinion filed on September 17, 2019, be modified as follows:
1. On page 4, delete the second sentence of the first full paragraph and replace with the following sentence:
"The proceeds were eventually invested in a certificate of deposit."
2. On page 8, delete the third sentence and replace with the following sentence:
"The statement of decision largely followed the court's tentative rulings, but did change the division of assets in the account funded by the sale of
the Little Italy property and ordered Jerry to pay Eve an equalizing payment of $12,338."
3. On page 24, delete the second sentence of the second full paragraph and replace with the following sentence, including the existing footnote 13:
"Because that line of credit was community property, however, the court's reimbursement determination must be reassessed on remand to account for the community assets used to pay off the Little Italy condominium.13"
There is no change in the judgment.
The petition for rehearing is denied.
McCONNELL, P. J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. D547825) APPEAL from an order of the Superior Court of San Diego County, David B. Oberholtzer, Judge. Reversed and remanded with directions. Law Offices of Beatrice L. Snider, John L. Romaker for Appellant. Stephen Temko for Respondent.
This appeal arises after the marital dissolution proceedings of Eve M. and Jerry L. Allen. Eve appeals the final statement of decision characterizing the marital home as Jerry's separate property. For reasons explained post, we agree with Eve the court erred by concluding that the marital home was Jerry's separate property. Further, this error infected the court's determination on the apportionment of the home and the proceeds of another community asset sold by the parties before this proceeding.
To avoid confusion, we refer to the parties by their first names. We intend no disrespect by doing so.
Accordingly, we reverse and remand with directions to the superior court to recalculate Jerry's entitlement to reimbursement under Family Code section 2640 with respect to the marital home and the proceeds on the sale of a condominium in Little Italy previously owned by the parties. We reject Eve's other challenges to various evidentiary rulings and factual findings made by the court, as well as an argument she raises concerning payment of her attorney fees.
Subsequent statutory references are to the Family Code unless otherwise noted.
FACTUAL AND PROCEDURAL BACKGROUND
Jerry and Eve were married on May 2, 1998, when Jerry was 65 and Eve was 49. At the time of the marriage, Jerry had been retired from his career as an airline pilot for five years and owned a home in La Jolla that he purchased in 1988 for $480,000, as well as various retirement accounts funded by a lump sum distribution of his airline pension. Jerry also owned a minority interest in a rental property and a life insurance policy. After marriage, Eve continued to work as a flight attendant. Throughout their marriage, the couple lived together in the La Jolla home (marital home). The parties also shared a joint bank account, although Eve did not contribute any money to that account until very late in the marriage.
Both parties have adult children from prior relationships.
During the marriage, in September 1998, Jerry refinanced the La Jolla residence and used the equity to purchase a house in Mira Mesa for Eve's elderly mother to reside. In connection with the refinance, Eve signed a quitclaim deed in October 1998, transferring her interest in the La Jolla property to Jerry and an "Interspousal Grant Deed" in January 1999, transferring her interest in the Mira Mesa home to Jerry. In 2003, the Mira Mesa home was sold. The proceeds of the sale, plus proceeds from another refinance of the La Jolla property, were used to purchase a home that Jerry and Eve operated as a senior living facility where Jerry's mother resided. That property was eventually sold, and the proceeds invested in other real estate that was later foreclosed.
Eve retired in August 2004, and thereafter received monthly pension and social security payments. In November 2004, the parties created a family trust and transferred some assets into the trust. In August 2006, with funds from his separate retirement accounts, Jerry purchased a condominium in Little Italy with title in his name only. Eve also executed an "Interspousal Grant Deed" transferring any interest in the new property to Jerry. Eve's adult son lived in the condominium, and Eve and her daughter-in-law also later used the property as a vacation rental.
In November 2009, Jerry again refinanced the La Jolla home and, in August 2010, used the proceeds to pay off the mortgage on the Little Italy condominium. At the time of the refinance, Jerry executed a grant deed transferring the marital home from the family trust to Jerry and Eve, as joint tenants. In March 2010, Jerry executed a quitclaim deed transferring his interest in the La Jolla home back to the family trust.
In December 2012, the Little Italy condominium was sold to Eve's adult children for $170,000. The proceeds were invested in a certificate of deposit at City National Bank. In November 2012, the La Jolla residence was again refinanced with the family trust as the borrower on the new mortgage.
On March 7, 2014, at age 82, Jerry filed a petition for dissolution of marriage. Shortly after, the parties entered a temporary agreement that Jerry would maintain sole possession of the couple's home in La Jolla and pay Eve $50,000 as an advance distribution of the division of the community estate or spousal support. The court approved the agreement on May 30, 2014. Thereafter, Jerry and Eve engaged in significant litigation concerning the categorization and division of their property, and the appropriate amount of support for Eve.
On August 26, 2014, in response to various requests for orders by the parties, the family court issued a long form order ruling on several disputed issues. The court found that: (1) a "Marital Property Declaration" signed by Jerry and Eve on November 11, 2004, at the time of the creation of the family trust was not effective to transmute Jerry's premarital separate property into community property under section 852; (2) section 2640 is applicable to the case; (3) section 2640 is not limited to real property, but also applies to personal property; and (4) the fact of marriage did not transmute Jerry's separate property to community property.
In November 2014, Eve filed a request for order seeking $10,000 per month in temporary spousal support, $50,000 for her attorney fees, and a $50,000 distribution of community funds for her living expenses. On January 7, 2015, the court ordered Jerry to pay Eve $49,871, the proceeds from a recent stock sale, and reserved jurisdiction over the distribution of funds to later characterize them as spousal support or an attorney fees contribution. On March 20, 2015, the court found that some of Eve's requested expenses were excessive and set her temporary spousal support at $7,000 per month.
On April 1, 2015, Eve filed another request for order, this time seeking to set aside the court's prior finding that the 2004 "Marital Property Declaration" did not constitute a valid property transmutation and arguing that the prior determination was based on a mistake of fact because "the court did not consider the context of the entire trust document in determining whether there was a valid transmutation." On June 3, 2015, Eve filed a request for order asking for a bifurcated trial to determine the validity of the same declaration and to designate all property acquired after the trust was created as community property. At the hearing on both requests on September 1, 2015, Eve withdrew the first request, which argued mistake. The court denied the request for a bifurcated trial, confirming its earlier finding that the declaration did not transmute Jerry's separate property to community property.
Eve also sought a domestic violence restraining order against Jerry during this timeframe, which the court denied on September 15, 2015, after an evidentiary hearing.
On October 1, 2015, Jerry filed a request for order seeking to modify Eve's spousal support downward retroactively to April 2015. On April 22, 2016, after several hearings concerning the appropriate amount of support, the court lowered spousal support to $4,500 per month. On November 24, 2015, Eve filed another request for order seeking $100,000 for attorney fees. The court ordered Jerry to pay Eve $65,000 for fees.
Eve filed two additional requests for fees on September 1, 2016 and September 16, 2016, which were both denied.
The trial over the disputed assets and Eve's spousal support finally began in October 2016. Jerry and Eve; their experts, including accountants and personal and real property appraisers; their financial advisor; and friends and a family member testified at trial. After closing arguments, on November 8, 2016, the court issued various tentative rulings from the bench, finding: (1) the Little Italy condominium was community property; (2) the marital home and Mira Mesa property were Jerry's separate property and had not been transmuted to community property; (3) the limited liability company established by the parties to operate the senior living facility was worth nothing and, thus, Jerry was entitled to no reimbursement from the community for the asset; (4) all of Jerry's investment accounts were his separate property; (5) the certificate of deposit purchased with the proceeds from the sale of the Little Italy condominium consisted of $5,143 in Eve's separate property, $70,068 in Jerry's property, and community property of $105,533; and (6) Eve was entitled to monthly spousal support of $4,500 and $100,000 for attorney fees. Thereafter, the court also confirmed that all mortgage payments on the La Jolla home were made from Jerry's separate property.
In November, Jerry filed a request for statement of decision seeking a determination on the amount of overpaid spousal support he was owed under the court's April 22, 2016 temporary order, the division of certain accounts and the community estate, and the amount of an equalizing payment in light of the court's tentative decision concerning the characterization of the La Jolla and Little Italy properties. The next day, Eve filed her own request for a statement of decision, identifying 44 issues for the court's determination. She also filed a motion to reopen the case, asserting the court's application of the presumption of undue influence to the 2009 quitclaim deed transferring the La Jolla home to joint title was an improper surprise and also arguing reopening the case was necessary to address Jerry's attorney fees and costs in the 10 days leading up to the trial.
At the December 19, 2016 hearing on Eve's motion to reopen, the trial court denied the motion, but permitted the parties to submit additional financial analysis from their experts based on the court's tentative rulings with respect to the characterization of the marital home and the Little Italy condominium. The parties submitted revised calculations from their experts and Eve filed additional objections to Jerry's submission. On February 6, 2017, the court issued a proposed statement of decision and both parties filed various objections.
On April 10, 2017, Jerry filed two proposed judgments, one using the court's February 6, 2017 proposed statement of decision and a second based on the changes he requested in his objections to that statement. A hearing on the objections took place on April 13, 2017, during which the court rejected Eve's assertion that revised calculations by Jerry's expert based on the court's tentative rulings regarding the characterization of property as either separate or community was improper new evidence after trial. Thereafter, the court issued its final statement of decision and judgment was entered on June 29, 2017. The statement of decision largely followed the court's tentative rulings, but did change the division of assets in the City National Bank account funded by the sale of the Little Italy property and ordered Jerry to pay Eve an equalizing payment of $12,338. The court also ordered Jerry to pay an additional $30,000 for attorney fees. Eve timely appealed.
DISCUSSION
I
Eve's primary argument on appeal concerns the characterization of the La Jolla home as Jerry's separate property. She asserts Jerry did not contest the fact that the home was community property and, therefore, the court's contrary finding was error. In support of this argument, Eve relies on Jerry's petition for dissolution, which "alleges '7625 Caminito Avola, La Jolla, CA 92037' is community property"; her response to the petition likewise alleging the home to be community property; and Jerry's trial brief, which states that "Jerry and Eve, as trustees of the Trust, transferred the family residence to themselves as joint tenants on November 19, 2009" and "Jerry does not assert any claims of undue influence in this transmutation."
Eve also argues that the court impermissibly used extrinsic evidence to impeach the 2009 deed transferring the ownership of the marital home to Jerry and Eve. Because we agree with Eve that the court erred by determining the house was Jerry's separate property, we do not reach this argument.
Jerry responds that neither his petition nor his trial brief constitutes a concession because the characterization of the property as separate or community is a legal question, incapable of determination by a judicial admission. He further contends the trial court's finding that Eve failed to rebut the presumption of undue influence that applied to the 2009 deed is adequately supported by the record.
A
Additional Background
As Eve asserts, Jerry's form petition for dissolution of the marriage identified the marital home as community property. The petition also requested that his section 2640 reimbursement rights be determined "on all assets." In his trial brief, Jerry stated that his petition requested that the court confirm the La Jolla home as his separate property. The trial brief, however, also stated that the home's equity was $1,299,101, and of that, "Jerry has a FC 2640 claim[] for $969,000" and "[t]he community property is $330,101." In addition, the trial brief asserted that the court previously ruled the transfer of the house into the family trust in 2004 did not transmute the asset into community property and that the property was transferred into joint title in 2009 "without undue influence." (Emphasis added.)
The property came up briefly at the hearing on the parties' motions in limine. The court asked about the November 2009 refinancing of the home stating, "[D]o I understand this correctly that as part of a [refinance] of the house on November 19, 2009, they executed a grant deed taking the house out of the trust, and they owned it as joint tenants, and then after the refi only husband quitclaimed it back to the trust?" Eve's attorney responded that was correct. Jerry's attorney stated, referring to the quitclaim deed, that "we're going to be able to prove that's a fraudulent deed" and that was a "key issue here."
In his opening trial statement, Jerry's counsel stated that "from the period between marriage and November 2009, there [were] two or three instances where Ms. Allen both on the La Jolla residence and other property would sign a quitclaim deed or an interspousal deed where they, for example, refinanced to waive any interest in the property. So clearly, the parties' intent through all of this paperwork—was that it was still—in Jerry's name alone." Jerry's counsel continued "the last deed . . . the one we think is valid is November 2009." (Italics added.)
During his opening statement, Eve's counsel, Edward Castro, stated that the deed transfers during the marriage were subject to a presumption of undue influence that Jerry would be required to rebut, and "that all of the deeds in this matter, especially the deed in 2010 when Mr. Allen transferred his interest back to the Jerry and Eve Allen trust, that those deeds—assuming that the burden of undue influence is overcome, . . . were valid transactions." The court then interrupted to state: "So the way I look at these transfers is 852, Ha[i]nes, 2640. I'm going to do it in that order. Is there a valid [transmutation]? . . . [H]as the party that benefited overcome the Ha[i]nes [undue influence] presumption? And then is there a right to reimbursement?" Castro tried to clarify the issue, stating that after the determination under Ha[i]nes, the question is "whether it's a right of reimbursement or an interest in the assets. . . . For instance, on the deed if there was a genuine transmutation you are looking at apportionment not reimbursement."
In re Marriage of Haines (1995) 33 Cal.App.4th 277 (Haines).
During the evidentiary phase of trial, the parties proceeded under the assumption that there was no undue influence in the transfer of the property to joint title in 2009 as part of a refinance of the home. Jerry's counsel repeatedly indicated there was no dispute that the house was jointly titled as of November 19, 2009, transmuting the asset to community property. At one point he told the court: "Your honor, the house is jointly titled. It's community property." To which the court asked, "[t]he house is community property?" Jerry's attorney then confirmed again, "[y]eah. It was transferred to joint tenancy in November 2009." Further, Jerry's expert, Tony Yip, testified that his calculations were based on this assumption. Yip opined that under section 2640, Jerry was entitled to reimbursement from the community for the house of $989,000, the difference between its value when the transmutation occurred in November 2009 (appraised at that time at $1.6 million), and the proceeds from the cash out refinance the following year of $611,000. Yip also testified that the proceeds of the 2009 refinance are a community debt based on his assumption that the property was transmuted to a community asset at the time of the refinance. Jerry's position was never that the home was his separate property after November 19, 2009, it was that he was entitled to reimbursement from the community under section 2640.
This position was further emphasized during Jerry's closing argument. His counsel stated explicitly that there was no dispute the La Jolla house was put in joint title in 2009. Under questioning from the court concerning whether there was evidence of undue influence in that transaction, Jerry's counsel responded that neither party had any distinct recollection of any of the transactions concerning the house and stated that "there has to be an unfair advantage for the person who is adversely affected" and "in each of these situations, there was no unfair advantage." The trial court continued its line of questioning, asking if Moore Marsden was at issue, to which Jerry's counsel responded, "No. 2640. Moore Marsden only applies when it's a sole owner. But as of 2009, you're out of Moore Marsden and you accept the increase in value on the property." Despite the court's earlier ruling that no transmutation occurred in 2004, during his closing argument, Castro continued to advance his client's position that the marital home was transmuted to a community asset in 2004, when the title was placed in the family trust, and that Eve had overcome the presumption of undue influence with respect to that transaction. In sum, the record shows Jerry and Eve did not dispute that the marital home became community property. Rather, they disagreed about when the home became community property.
In closing, Jerry's counsel did not separately address the issue of whether there was undue influence with respect to the 2009 transfer to joint title, but did argue that Eve had not shown any undue influence with respect to the transmutation of the Little Italy condominium or the Mira Mesa house into separate property.
Before the court issued its tentative rulings at the conclusion of the trial, the court raised the issue of whether the 2009 transfer was valid given the presumption of undue influence. Eve's attorney, Castro, responded that the "presumption is pretty darn important if someone is raising the issue," but "no one has raised the issue." Castro then stated that the "Court can globally come to the determination that the presumption of undue influence would have been rebut[ted], especially because [Jerry] was the managing spouse in this household." Jerry's counsel made no comment on the issue.
Thereafter, the court ruled from the bench that the "presumption of undue influence regarding the deed which transferred the house out of the trust and into . . . joint tenants between Mr. Allen and Mrs. Allen . . . is not rebutted." The court stated it needed "evidence that Mr. Allen freely and voluntarily did that with full knowledge of all the facts and its effect and with a complete understanding of the effect of transfer." The court continued that its "finding is bolstered by the fact that the transfer to joint tenants was done as part of a refinance. And it was, obviously, Mr. Allen's understanding or the understanding of people advising him that the house would go back into the trust . . . and so his complete understanding of the effect of the transfer was that it was just for a refi; not completely changing the character of ownership of his home, which, of course, he owned and was his separate property at the beginning of the marriage." The court concluded by stating its finding that Eve "did not acquire any interest in the home by virtue of that deed."
After trial, as a result of this ruling, Eve filed a motion seeking to reopen the evidence asserting the court had, "on its own motion, set aside all of the interspousal transfer deeds based on a finding on the presumption of undue influence" despite the fact that "neither party had offered any material, oral, and documentary evidence to prove or rebut the presumption." Eve asserted this surprise constituted good cause to reopen the case to "provide additional material, oral, and documentary evidence concerning the presumption." She argued that she had relied on Jerry's trial brief, which stated specifically that "Jerry does not assert any claims of undue influence" with respect to the 2009 transfer from the family trust to joint title, and asserted she had not had the opportunity to present evidence to rebut the presumption because the issue was not raised for trial. At the argument on Eve's motion, Jerry's counsel asserted that before trial, the court was clear that it wanted evidence on the issue before trial. Jerry's counsel also argued that the court could infer from Eve's failure to proffer evidence with her motion to reopen that she could not show a lack of undue influence.
After argument, the court denied Eve's motion to reopen, finding there was no surprise because the court applied the law as it stood. The court reiterated its view that the 2009 transfer to joint title was intended only to facilitate the refinancing of the house and there was no evidence in the record to show that Jerry intended to transmute the property from his separate property to the community. To the contrary, the court found that the fact the house was quitclaimed back into the family trust was evidence that it was not intended as a transmutation.
B
General Legal Principles of Justiciability and the Characterization of Property
In a divorce proceeding, the petition constitutes a pleading. (Cal. Rules of Court, rules 5.60 and 5.74.) "The admission of fact in a pleading is a 'judicial admission.' Witkin describes the effect of such an admission: 'An admission in the pleadings is not treated procedurally as evidence; i.e., the pleading need not (and should not) be offered in evidence, but may be commented on in argument and relied on as part of the case. And it is fundamentally different from evidence: It is a waiver of proof of a fact by conceding its truth, and it has the effect of removing the matter from the issues. Under the doctrine of "conclusiveness of pleadings," a pleader is bound by well pleaded material allegations or by failure to deny well pleaded material allegations. [Citations.]' (4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 413, pp. 510-511)." (Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4th 1264, 1271, italics omitted.)
Additionally, it is well settled that " ' "[a] judicial tribunal ordinarily may consider and determine only an existing controversy, and not a moot question or abstract proposition. . . . [A]s a general rule it is not within the function of the court to act upon or decide a moot question or speculative, theoretical or abstract question or proposition, or a purely academic question, or to give an advisory opinion on such a question or proposition. . . ." ' " (In re I.A. (2011) 201 Cal.App.4th 1484, 1490.) This rule is grounded in the concept "that courts should not render decisions absent a genuine need to resolve a real dispute. Unnecessary decisions dissipate judicial energies better conserved for litigants who have a real need for official assistance." (Id. at pp. 1489-1490.)
"In a marital dissolution proceeding, a court's characterization of the parties' property—as community property or separate property—determines the division of the property between the spouses. [Citations.] Property that a spouse acquired before the marriage is that spouse's separate property. (Fam. Code, § 770, subd. (a)(1).) Property that a spouse acquired during the marriage is community property (id., § 760) unless it is (1) traceable to a separate property source [citations], (2) acquired by gift or bequest (Fam. Code, § 770, subd. (a)(2)), or (3) earned or accumulated while the spouses are living separate and apart (id., § 771, subd. (a)). A spouse's claim that property acquired during a marriage is separate property must be proven by a preponderance of the evidence." (In re Marriage of Valli (2014) 58 Cal.4th 1396, 1399-1400 (Valli).)
"Under section 2581, all property held in joint title by spouses during marriage is presumed to be community property upon dissolution, rebuttable only by written evidence to the contrary. (§ 2581; In re Marriage of Perkal (1988) 203 Cal.App.3d 1198, 1201.) Such evidence must consist of either '[a] clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is separate property and not community property, [¶] . . . [or by p]roof that the parties have made a written agreement that the property is separate property.' (§ 2581.) Thus, under section 2581 spouses cannot hold property in joint title while preserving the property's separate property characterization through oral or implied agreements. But even if property held in joint tenancy loses its separate property characterization under section 2581, section 2640 provides a right to reimbursement upon dissolution for the spouse who contributed separate property to the acquisition of property held in joint title, absent a written waiver of the right to reimbursement." (In re Marriage of Weaver (2005) 127 Cal.App.4th 858, 865.)
Section 2640 states in full: "(a) 'Contributions to the acquisition of property,' as used in this section, include downpayments, payments for improvements, and payments that reduce the principal of a loan used to finance the purchase or improvement of the property but do not include payments of interest on the loan or payments made for maintenance, insurance, or taxation of the property. [¶] (b) In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party's contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division. [¶] (c) A party shall be reimbursed for the party's separate property contributions to the acquisition of property of the other spouse's separate property estate during the marriage, unless there has been a transmutation in writing pursuant to Chapter 5 (commencing with Section 850) of Part 2 of Division 4, or a written waiver of the right to reimbursement. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division."
Additionally, "[a] married person may transmute the character of property from separate to community or from community to separate by agreement or transfer, with or without consideration. [Citation.] However, the transmutation must meet statutory requirements to be valid. [Citation.] 'A transmutation of real or personal property is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.' " (In re Marriage of Lafkas (2015) 237 Cal.App.4th 921, 937 (Lafkas); see also Valli, supra, 58 Cal.4th at p. 1400.) This requirement " 'imposes formalities on interspousal transmutations for the purpose of increasing certainty in the determination whether a transmutation has in fact occurred.' " (Lafkas, at pp. 937-938; see also Valli, at p. 1401 [summarizing legislature's intent in adopting statutory transmutation requirements].)
"An 'express declaration' is a writing signed by the adversely affected spouse 'which expressly states that the characterization or ownership of the property is being changed.' [Citation.] 'An "express declaration" does not require use of the terms "transmutation," "community property," "separate property," or a particular locution. [Citation.]' [Citation.] 'Though no particular terminology is required [citation], the writing must reflect a transmutation on its face, and must eliminate the need to consider other evidence in divining this intent. [Citation.]' [Citation.] 'The express declaration must unambiguously indicate a change in character or ownership of property. [Citation.] A party does not "slip into a transmutation by accident." ' " (Lafkas, supra, 237 Cal.App.4th at p. 938.)
A grant deed signed by a spouse transferring a separate property interest in real property to both spouses as joint tenants meets this test. "[S]ince 'grant' is the historically operative word for transferring interests in real property, there is no doubt that [Husband's] use of the word 'grant' to convey the real property into joint tenancy satisfied the express declaration requirement of section 852, subdivision (a)." (Estate of Bibb (2001) 87 Cal.App.4th 461, 468-469; see also Haines, supra, 33 Cal.App.4th at pp. 293-294 [summarily concluding quitclaim deed is express declaration].)
C
Analysis
As discussed, Eve argues that the court's application of the undue influence presumption to find that the 2009 grant deed was not a valid transmutation of the La Jolla home was error because the issue was not in dispute. In response, Jerry contends his petition for dissolution and the statements in his trial brief could not constitute a judicial admission because those statements amount to a legal conclusion, not an issue of fact that can be conceded. Revealingly, to support this argument, he states that " '[w]hen the matter admitted is a legal conclusion, . . . courts have allowed the pleader to present contradictory evidence.' " (Quoting Rutter, Civ. Proc. Before Trial, § 10.152, italics added.)
Jerry's argument is gravely wounded by the record before this court, which shows that during trial he presented no evidence to contradict his petition admitting the property was a community asset. Rather, as outlined ante, throughout trial Jerry consistently took the position that the grant deed the parties executed on November 19, 2009, was a valid transmutation and, specifically, that Eve had not exercised any undue influence in the transaction. The record is clear that, until the trial court found otherwise, Jerry's position was that the house was transmuted to community property by his execution of that deed. Indeed, his experts based their calculations for trial on the 2009 transmutation. Because the issue was not in dispute, the court erred by reaching it. (See In re I.A., supra, 201 Cal.App.4th at pp. 1489-1490.)
The cases Jerry relies on to support his argument that the court was free to disregard his characterization of the property as a community asset do not lead us to conclude otherwise. In Bahan v. Kurland (1979) 98 Cal.App.3d 808, the Court of Appeal held that a mistaken legal conclusion by the defendant in his answer did not amount to a judicial admission for purposes of summary judgment, particularly "when the action has been only recently instituted so that an amendment to the pleadings to correct the mistaken conclusion would likely be permitted by the court upon proper application." (Id. at pp. 812-813.) Here, the record makes clear that there was no mistaken legal conclusion on Jerry's part that he later sought to correct or clarify at trial. Rather, his position from the outset and through trial was that the house had been transmuted to community property by the 2009 grant deed.
In Berman v. Bromberg (1997) 56 Cal.App.4th 936, 949 (Berman), the Court of Appeal rejected the application of the sham pleading doctrine where the plaintiff's amendments to his complaint did not alter the underlying facts, but merely pleaded new causes of action based on the same facts. (Berman, at p. 949.) Berman has no relevance to the issues framed here. Likewise, CytoDyn of New Mexico, Inc. v. Amerimmune Pharmaceuticals, Inc. (2008) 160 Cal.App.4th 288, 299 (CytoDyn) does not help Jerry's argument. There, the defendants obtained attorney fees under the Uniform Trade Secrets Act (UTSA), which are available for the bad faith prosecution of UTSA claims. At the outset of the case, however, the trial court sustained a motion to strike the damages sought by the plaintiffs in their complaint under the UTSA, finding that the complaint failed to state a claim under that law. (CytoDyn, at p. 294.) In holding that UTSA attorney fees were improperly granted, the court pointed to the defendants' answer which expressly stated the complaint did not adequately allege any claim under the UTSA. (CytoDyn, at p. 299.) CytoDyn does not hold, as Jerry asserts, that a pleading containing a legal conclusion cannot constitute a judicial admission. Rather, it suggests the opposite. (CytoDyn, at page 299.)
"Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment. [Citations.] A noted commentator has explained, 'Allegations in the original pleading that rendered it vulnerable to demurrer or other attack cannot simply be omitted without explanation in the amended pleading. The policy against sham pleadings requires the pleader to explain satisfactorily any such omission.' " (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425-426 (Deveny), fn. omitted, quoting Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2005) [¶] 6.708, p. 6-142.1.) The sham pleading doctrine enables courts to prevent abuses of process, but does not prevent plaintiffs from correcting ambiguous facts. (Deveny, at p. 426.) If a plaintiff corrects a pleading by omitting a harmful allegation, the plaintiff must explain how that allegation was the result of mistake or inadvertence. (Hendy v. Losse (1991) 54 Cal.3d 723, 743.)
Stroud v. Tunzi (2008) 160 Cal.App.4th 377, 384, is also inapposite. There, the Court of Appeal rejected the plaintiffs'/appellants' claim that the defendant's general denial in its unverified answer to the verified complaint constituted a judicial admission of the complaint's allegations. (Id. at pp. 383-384.) Here, the judicial admission is contained in the petition itself, which specifically asserted the property was a community asset.
Jerry also argues that the parties were advised before trial that the court intended to evaluate whether the 2009 grant deed was a valid transmutation. The record, however, belies this assertion. At most, the record shows confusion and miscommunication between the court and Jerry's counsel about the 2009 deed. The court indicated that it would evaluate each transfer, but it never specifically identified the 2009 grant deed, and Jerry's counsel explained to the court more than once that Jerry considered the 2009 deed a valid transmutation to community property. The court itself recognized Eve would be surprised by its finding, noting in the statement of decision in the section denying her motion to reopen evidence that "Eve pointed out that Jerry's trial brief stated he was not asserting undue influence as a defense" and " '[c]onceding this could have misled Eve to her detriment. . . .' " The court's statements concerning its intention to evaluate each transaction did not give Eve warning that the court would consider the characterization of a transaction that was not in dispute.
Jerry also contends that Eve's appeal is meritless because she failed to proffer evidence to support her motion for reconsideration. This argument is not persuasive. Eve did not pursue testimony at trial concerning any undue influence in the 2009 transmutation because there was no dispute between the parties concerning the characterization of the property after that date. Further, the limited evidence proffered about the transaction during trial showed Jerry was the managing spouse, supporting an inference that Eve had not exercised any undue influence in the process.
Lastly, Jerry argues that any error was not prejudicial. However, Eve's appellate briefing shows that the court's error impacted its apportionment of the value of the marital home (Jerry's expert placed the community's portion at $330,101 in his report for trial) and its evaluation of the proceeds of the sale of the Little Italy condominium because the mortgage on the condominium was paid off using community proceeds from the line of credit taken out on the home in 2010. If the family court had not invalidated the transmutation to community property, it would necessarily have determined that Eve was entitled to a greater portion of the marital home and Jerry was entitled to a smaller reimbursement under section 2640 of the proceeds on the sale of the condominium. Thus, Eve has shown that the family court would have reached a result far more favorable to her in the absence of its error.
In his testimony concerning the line of credit transaction, which occurred on August 27, 2010, Yip explained that the proceeds of that loan were "a community obligation" used to extinguish the mortgage on the Little Italy condominium.
II
Eve next asserts that the family court's decision that Jerry was entitled to reimbursement of $168,110 for his contributions to the Little Italy condominium was not supported by substantial evidence. This argument is premised on the court's recharacterization of the marital home as Jerry's separate property. Eve asserts that if the La Jolla home is properly characterized as joint property as of November 19, 2009, then the apportionment of the proceeds of the sale of the condominium must be reassessed. We agree.
The basis for the majority of the court's reimbursement to Jerry of the proceeds on the sale of the condominium was the court's erroneous determination that the funds used to pay off the mortgage on the condominium in 2010 were Jerry's separate property. Because that line of credit was community property, however, the court's reimbursement determination on the City National Bank account must be reassessed on remand to account for the community assets used to pay off the Little Italy condominium.
As discussed in part III of this opinion, we reject Eve's claim that the court's determination that all the monthly mortgage payments on the La Jolla home could be traced to Jerry's separate property. Eve has not shown on appeal that insufficient evidence supported this determination.
III
Eve next challenges various factual findings and evidentiary rulings made by the family court related to (1) the tracing of the La Jolla home before it was transmuted to community property in 2009 and (2) what Eve contends were commingled accounts. These arguments are not well-taken.
A
" 'Property acquired by purchase during a marriage is presumed to be community property, and the burden is on the spouse asserting its separate character to overcome the presumption. [Citations.] The presumption applies when a husband purchases property during the marriage with funds from an undisclosed or disputed source, such as an account or fund in which he has commingled his separate funds with community funds.' " (In re Marriage of Marsden (1982) 130 Cal.App.3d 426, 441 (Marsden).) However, " ' "the mere commingling of separate with community funds in a bank account does not destroy the character of the former if the amount thereof can be ascertained." . . . ' "If the property, or the source of funds with which it is acquired, can be traced, its separate property character remains unchanged. [Citations.] But if separate and community property or funds are commingled in such a manner that it is impossible to trace the source of the property or funds, the whole will be treated as community property. . . ." ' " (Id. at pp. 441-442.)
The need for a tracing "is the product of two factors: (1) the combination of commingling of separate and community funds and (2) the general presumption that property acquired during marriage is community property. A burden of recordkeeping logically arises out of the very act of commingling funds during marriage so the general community property presumption is not thwarted." (In re Marriage of Ficke (2013) 217 Cal.App.4th 10, 25 (Ficke).) " 'Generally speaking there are two methods of carrying the burden of showing property purchased during the marriage to be separate: (1) direct tracing to a separate property source or (2) proof that at the time of purchase all community income was exhausted by family expenses.' " (Marsden, supra, 130 Cal.App.3d at p. 442.) The need for specific record tracing does not arise unless there is a commingled account. (Ficke, at p. 25.) "Whether the spouse claiming a separate property interest has adequately met his or her burden of tracing to a separate property source is a question of fact and the trial court's holding on the matter must be upheld if supported by substantial evidence." (In re Marriage of Cochran (2001) 87 Cal.App.4th 1050, 1057-1058.)
A trial court's decision to admit or exclude evidence is generally subject to the abuse of discretion standard of review. (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773 (Sargon); Pannu v. Land Rover North America, Inc. (2011) 191 Cal.App.4th 1298, 1317.) In challenging a court's evidentiary ruling on appeal, the appellant has the burden to show the ruling exceeded the bounds of reason or was arbitrary, capricious, or whimsical. (Estate of Gilkison (1998) 65 Cal.App.4th 1443, 1450.) Alternatively stated, the appellant must show the ruling is " 'so irrational or arbitrary that no reasonable person could agree with it.' " (Sargon, at p. 773.)
B
First, Eve asserts that the tracing done by Jerry's expert, Yip, to determine Jerry's reimbursement claim to the La Jolla property did not adequately account for Eve's contributions to the community during the marriage. Eve, however, provides inadequate support for her argument, citing only to an irrelevant sentence in the court's statement of decision and testimony by Jerry's expert concerning a line of credit taken on the home at the time it was Jerry's separate property. Accordingly, this argument is waived. (See Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246 (Nwosu) [" '[I]f a party fails to support an argument with the necessary citations to the record, . . . the argument [will be] deemed to have been waived.' "].)
Eve next challenges the trial court's finding, based on Yip's opinion, that the AXA Equitable Retirement Cornerstone Contract is entirely Jerry's separate property. Specifically, she contends that Yip failed to provide a basis for the characterization of $21,936 (of the total of $146,939) that Jerry used to purchase a predecessor contract to the AXA fund as separate property. Substantial evidence, however, supported the trial courts findings.
Yip testified that in July 2004, Jerry exchanged a Lincoln Benefit life insurance policy valued at $289,469 for a new policy. Prior to the exchange, Jerry was required to pay off a $132,873 loan on the policy and to pay a $7,818 surrender charge. Yip determined these two expenses were funded by the proceeds from a $125,000 home equity line of credit on the La Jolla property (which at that time was Jerry's separate property) and traced the remaining amount to Jerry's separate assets using a recapitulation analysis, in which he determined that no community income was available to contribute to the payment. Contrary to Eve's assertions, this record shows that Yip's opinion and the court's commensurate finding based on that opinion, were supported by sufficient evidence.
Eve next asserts that the court erred by admitting unofficial copies of Jerry's tax returns into evidence. She argues that Jerry failed to provide a foundation to authenticate the returns and the returns also constituted inadmissible hearsay. " 'Authentication of a writing is required before it may be received in evidence.' (Evid. Code, § 1401.) 'Authentication' means '(a) the introduction of evidence sufficient to sustain a finding that it is the writing that the proponent of the evidence claims it is or (b) the establishment of such facts by any other means provided by law.' (Evid. Code, § 1400.) A trial court's finding that sufficient foundational facts have been presented to support admissibility is reviewed for abuse of discretion." (People v. Smith (2009) 179 Cal.App.4th 986, 1001.)
The tax returns, though not signed versions, were authenticated by Jerry, who testified that they were copies of the same returns he filed with the IRS. The trial court did not abuse its discretion by overruling Eve's objection based on lack of authentication. With respect to Eve's assertion that the returns were inadmissible hearsay, as Jerry's appellate counsel points out, Eve did not object to the tax returns on the basis of hearsay during trial. By not objecting, Eve has waived any challenge on this basis on appeal. (Evid. Code, § 353.)
Eve also argues the court erred by admitting into evidence (1) Jerry's checking account registers, (2) Jerry's income and expense declaration, and (3) a document prepared by Jerry's financial advisor, titled "Transaction by Investor." She argues the checking account registers were inadmissible hearsay. Like the tax returns, however, Eve did not object to their admission on the basis of hearsay. Rather, her counsel asserted the documents were inadmissible because Jerry had not provided a proper foundation for their authenticity and because some were produced after trial began. By failing to object on the basis of hearsay, Eve has no basis to challenge the evidence on this ground on appeal. (Evid. Code, § 353.)
Eve's brief also includes a section titled "Judicial Notice of Foundational Factual Pre-requisites is not allowed." This section provides no citations to the record and it is not clear what evidence Eve is attempting to challenge by this argument.
Eve's argument concerning her income and expense declaration also has no merit. She notes that the declarations were not admitted into evidence, but argues Yip improperly relied on them. The testimony from Yip that Eve cites, however, does not show he relied on the declarations for his analysis. Rather, Yip mentioned he had reviewed the declarations and those documents confirmed the conclusion he drew (from admissible evidence) that only Jerry's separate property was available to repay the loan on his life insurance policy in order to execute the policy exchange in July 2004. Further, Eve's counsel made no objection to the testimony he was eliciting that Eve now complains is improper.
Eve next challenges the admission of a document titled "Transaction by Investor," which is a chronological list of financial transactions in an account managed by Eve and Jerry's financial advisor, Eric James Schindler. Eve asserts the document was improperly admitted into evidence over her hearsay and authentication objections. With respect to authentication, Schindler testified that the document showed transactions in an account managed by Schindler and maintained by his broker-dealer, Pershing. Schindler also testified that the document was requested by one of his employees from the broker- dealer. Jerry testified that the document contained a list of transactions he made. Jerry's other accounting expert, Peggy Swearingen, testified that she received the document after requesting the information from Schindler's office.
Eve objected to the evidence on the basis of authentication and hearsay. The court overruled both objections, stating that a proper foundation had been provided for the authentication of the document, specifically noting that the entries corresponded with other admissible evidence and that the document did not "appear to be slapdash, some sort of thing that somebody just typed up . . . purporting to be account statements." With respect to Eve's hearsay objection, the court concluded the documents fell under the business records exception to the hearsay rule. The testimony of Schindler, Swearingen, and Jerry supported the court's finding that the document was prepared by the account's broker-dealer at the request of Schindler's office and supported the court's decision to overrule both Eve's authentication and hearsay objections. (See People v. Williams (1973) 36 Cal.App.3d 262, 275 ["The foundation for admitting the record (under the business records exception to the hearsay rule) is properly laid if in the opinion of the court, the sources of information, method and time of preparation were such as to justify its admission. This places a broad discretion in the trial court which will not be disturbed on appeal."].)
IV
Eve next argues that the allocation of attorney fees should be reversed. She asserts the court improperly recharacterized the $50,000 that Jerry disbursed to Eve at the outset of the proceeding as attorney fees because the stipulated order providing for that distribution stated that the funds would be characterized later as either an advance on Eve's equalization payment or support. Eve contends this order precluded the court from later allocating the distribution to attorney fees.
A
As Eve notes, the court did enter a stipulated order on May 30, 2014, that Jerry would have "temporary exclusive use and possession of the marital residence" as soon as he paid Eve $50,000. The order also stated that the court "shall reserve jurisdiction to characterize the payment to wife as an advance distribution of division of the community estate or support, or any combination thereof." The May 2014 order states explicitly that it is temporary. The court's final statement of decision addressed the $50,000 payment, as well as the $49,872 advance the court ordered Jerry to pay Eve on January 7, 2015, for which it also reserved jurisdiction to later characterize as spousal support or fees for Eve's counsel. The court concluded both sums should be deemed contributions to Eve's attorney fees. The court noted that the stipulated order did not include attorney fees as an available option, but found that to apply the payment to either the community estate or spousal support would work a hardship to Eve since it would result in a significant equalization payment from Eve to Jerry.
B
In a marriage dissolution proceeding, sections 2030 and 2032 authorize the court to order one party to contribute to the other party's attorney fees. Section 2030 requires the trial court to "ensure that each party has access to legal representation" by awarding fees "if necessary based on the income and needs assessments" and in "whatever amount is reasonably necessary" to maintain or defend the proceeding. (Id., subd. (a)(1).) The statute requires the trial court to make findings as to whether an award of fees is appropriate, whether there is a disparity in access to funds to retain counsel, and whether one party is able to pay for both parties' representation. (Id., subd. (a)(2).) If the court finds there is a disparity in access and ability to pay, it should award fees. (Ibid.)
Further, section 2032 authorizes the court to make the section 2030 award if it is "just and reasonable under the relative circumstances" of the parties, based on a consideration of "the need for the award to enable each party, to the extent practical, to have sufficient financial resources to present the party's case adequately," and considering all relevant circumstances including income, assets, debts, earning capacity, and any other equitable factors. (§§ 2032, subds. (a), (b), and 4320; In re Marriage of Duncan (2001) 90 Cal.App.4th 617, 630 (Duncan).) We review the trial court's attorney fees award for abuse of discretion. (Duncan, at p. 630.) Under this standard, we must affirm the court's order unless no judge could reasonably make the ruling. (Ibid.)
Eve argues that the court could not at the time of final judgment characterize the $50,000 distribution as attorney fees because of the prior stipulated order. As Jerry points out, however, the recharacterization of the distribution as attorney fees benefited Eve. The court's final order used $10,000 to offset the equalization payment Eve would have been required to pay to account for the retroactively reduced spousal support and the characterization of the remaining $89,872 as attorney fees resulted in Eve obtaining the fees she was requesting. This conclusion was reasonable under the analysis required by sections 2030 and 2032, and did not constitute an abuse of the court's wide discretion to award fees.
Eve argues that the court suggested her trial counsel advance her costs rather than order Jerry pay attorney fees. To support this assertion she cites to Jerry's declaration in response to her request for an order for attorney fees, but she provides no citation to the court actually making this suggestion.
V
Eve next asserts that Jerry violated the automatic temporary restraining orders (ATRO's) that took effect when the proceeding was initiated by his payment of his own attorney fees throughout the case. Jerry responds reversal is not required because any ATRO's violation was not prejudicial since all payments to his attorney were made from his separate property.
In every dissolution proceeding, four standard mutual ATRO's bind the petitioner (on filing the petition and issuance of summons) and the respondent (on personal service or waiver of service of the petition and summons). (§§ 233, subd. (a) and 2040, subd. (a); see In re Marriage of McTiernan & Dubrow (2005) 133 Cal.App.4th 1090, 1102.) The ATRO's bar both parties from, among other things, "transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life . . . ." (§ 2040, subd. (a)(2)(A).)
Section 2040, subdivision (a)(2)(B) further provides: "Notwithstanding the foregoing, nothing in the restraining order shall preclude a party from using community property, quasi-community property, or the party's own separate property to pay reasonable attorney's fees and costs in order to retain legal counsel in the proceeding. A party who uses community property or quasi-community property to pay his or her attorney's retainer for fees and costs under this provision shall account to the community for the use of the property. A party who uses other property that is subsequently determined to be the separate property of the other party to pay his or her attorney's retainer for fees and costs under this provision shall account to the other party for the use of the property." This provision creates an exception to the ATRO's, permitting a party's use of community, quasi-community, or separate property to pay attorney fees and costs for retaining legal counsel in their dissolution proceeding.
Eve is correct that payment of attorney fees, outside of the initial retention of counsel, without the court's permission is a violation of the ATRO's. However, Eve has failed to show that Jerry's expenditures were made without court permission or that she was harmed by the payments. She cites only an income and expense declaration filed by Jerry on April 10, 2016, stating he had paid $502,329 in attorney fees and costs, and that he owed an additional $236,993. The declaration states that the source of payment was "personal checking and personal credit cards." Eve provides no explanation as to how this amount relates to the community estate. Further, the trial court's final statement of decision concluded that all payments to Jerry's attorneys were made from his separate property and Eve cites nothing in the record to support a contrary conclusion. Reversal on this issue is not warranted. (See Nwosu, supra, 122 Cal.App.4th at p. 1246 [" '[I]f a party fails to support an argument with the necessary citations to the record, . . . the argument [will be] deemed to have been waived.' ")
Although not addressed in any reported decision, the legislative history of section 2040 makes clear that only fees to retain counsel are excluded from the ATRO's. Subdivision (a)(2) of the statute was enacted to "cure an anomaly in current law which prevents a party in a dissolution proceeding from using his or her own separate property to pay attorney's fees and costs incurred in retaining legal counsel." (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 357 (1999-2000 Reg. Sess.) as amended Mar. 18, 1999.) Thus, the Legislature proposed to include a party's use of quasi-community property and separate property within the above exception for payment of reasonable attorney fees in order to retain counsel. (Sen. Com. on Judiciary, com. on Sen. Bill No. 357 (1999-2000 Reg. Sess.) as amended Mar. 18, 1999.) The Senate Judiciary Committee's analysis states that "the restraining order . . . is intended to preserve the community assets and to prevent waste or concealment of property that may otherwise be determined to belong to the community." (Ibid.) However, the use of the property for the exception for payment of attorney fees is "restricted to attorney's fees and costs to retain legal counsel." (Ibid.) The committee analysis states, "The original intent of existing law in allowing use of community property for payment of attorney's fees is to facilitate a party's ability to retain legal counsel. Thus, the exception is allowed only for the purpose of retaining legal counsel. [¶] This bill would similarly allow the use of quasi-community or separate property only for payment of attorney's fees and costs in order to retain legal counsel. [¶] Additional expenses for attorney's fees and costs can be taken care of by applying to the court for an order for such expenditures." (Ibid., italics added.)
Eve makes reference to a withdrawal by Jerry of $147,000 from a joint account, but provides no citation to the record to support this claim.
VI
Eve's final argument is that the court erred by allowing Jerry's experts to submit supplemental reports after taking the matter under submission at the end of trial. Her argument appears to be premised on the court's determination that the marital home was not transmuted to community property in November 2009. As discussed, this determination was error and impacts the apportionment of the value of the home and the proceeds of the sale of the Little Italy condominium. Our holding that the trial court erred moots Eve's arguments concerning the court's request for new calculations after trial. On remand, the trial court is directed to determine the proper apportionment of these assets in light of this court's holding that the marital home was transmuted to community property on November 19, 2009.
DISPOSITION
The order finding the marital home is Jerry's separate property is reversed and the case is remanded to the trial court to recalculate Jerry's entitlement to reimbursement under section 2640 with respect to both the marital home and the proceeds of the sale of the Little Italy condominium. Respondent to bear the costs of appeal.
BENKE, J. WE CONCUR: McCONNELL, P. J. AARON, J.