Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. FL001572
Judge of the Monterey County Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Respondent Charles Schleich filed for dissolution of his marriage to appellant Lori Schleich. (For clarity, we will refer to the parties by their first names; we intend no disrespect in doing so.) (In re Marriage of Cheriton (2001) 92 Cal.App.4th 269, 280, fn. 1 (Cheriton).) This appeal arises out of a proceeding to modify temporary spousal support, for pendente lite attorney fees and costs, and for sanctions based on Charles’s failure to disclose income.
Lori raises five issues on appeal. First, she contends the trial court abused its discretion and violated her due process rights when it allowed Charles’s forensic accounting expert to testify about Charles’s income and ability to pay after Charles asserted his Fifth Amendment privilege against self-incrimination and refused to testify at his deposition regarding certain aspects of his income. Second, Lori contends the court abused its discretion when it determined that Charles had not waived the privilege against self-incrimination by making his income an issue in the dissolution proceeding. Third, she argues the court abused its discretion by not imputing additional income to Charles over and above his full time salary based on money he earned from side businesses for six years before filing for dissolution. She also argues that the court’s temporary support order was “contrary to its findings” about the side business income. Fourth, Lori contends the court abused its discretion by failing to consider and apply the statutory factors for an award of pendente lite attorney fees, since the evidence showed a significant income disparity between the parties yet the court awarded only a portion of the fees Lori requested. Fifth, she contends the court abused its discretion by taking her request for sanctions under submission rather than ruling on her motion. We find no abuse of discretion and will affirm the family court’s order.
Factual and Procedural History
Because an understanding of the factual and procedural record is important to evaluating the trial court’s orders, we review that history and the parties’ contentions at some length here.
Charles and Lori met at work at Atmel Corporation (Atmel). They started living together in 1992 and were married on November 20, 1999. Charles filed for dissolution of the marriage on February 3, 2009. At that time, he was 56 years old and worked for Atmel as the director of manufacturing. Lori was 48 years old and had not worked since 1992. Charles and Lori did not have any children together.
Initially, the couple lived in Cupertino, California. Lori’s life-long dream was to raise and train horses. In January 1997, prior to marriage, Charles purchased a ranch in Lemon Cove, in Tulare County, California consisting of 250 to 300 acres of undeveloped land. In June 1999, also prior to marriage, Charles purchased approximately 455 acres of land adjacent to the ranch. Over the years, Charles and Lori built a house, a barn, and stables on the ranch; they landscaped and fenced the property; they purchased horses, vehicles, and equipment necessary to operate the ranch. Charles lived and worked in Santa Clara County during the week and flew home to the ranch on the weekends. Lori lived at the ranch throughout the week and took care of the property and their animals. By the time Charles filed for divorce, they owned 15 horses, eight dogs, nine cars or trucks, an airplane, two Airstream travel trailers, a boat, six motorcycles, three horse trailers, and three tractors.
According to Lori, the house was 5, 500 square feet in size; Charles estimated that the house was 2, 160 square feet in size, excluding the small shop, bedroom and bathroom under the main house.
In 2004, Charles and Lori purchased a second ranch in Exeter, in Tulare County, California. (Charles’s accounting expert refers to the ranch in Lemon Cove as the “Upper Ranch” and to the ranch in Exeter as the “Lower Ranch.” We will do the same and will refer to them collectively as “the Properties.”) Improvements on the Lower Ranch include a 400-square foot guest cottage. Except for one pick-up truck and a leased car, the parties owned all of their property “free and clear.”
According to Charles, the Lower Ranch was five acres in size; according to Lori, it was 16 acres.
Lori’s OSC re Spousal Support, Attorney Fees, and Use of the Residence
On March 11, 2009, Lori filed an order to show cause (OSC) regarding spousal support, attorney fees, and exclusive use of the residence. The matter was set for hearing on April 23, 2009. Lori asked the court to award her $7,100 per month in temporary spousal support, $75,000 in pendente lite attorney fees, and exclusive use of the Upper Ranch. She also asked the court to order Charles to pay $10,000 per month to cover the cost of operating the Properties and for an accounting of cash and property in the parties’ safe. Lori alleged that Charles had removed $200,000 in cash and some gold bars from the safe.
In her declaration, Lori stated that she and Charles bought horses to breed and sell, but never realized any income from the horses. Lori estimated that the operating expenses for the Properties were $7,300 per month and stated that they had earned $10,000 in 2009 by leasing some of their land for grazing. Lori alleged that she had no information regarding the couple’s finances and had limited access to their bank accounts. However, after being served with the dissolution petition, she withdrew funds from one of their accounts: $10,000 to cover the retainer fee for her attorney and $7,500 for ranch expenses. Lori stated that she had no information regarding Charles’s income. She asserted that his claim that he earned $204,000 per year from his employment with Atmel did not make sense in light of their expenses and that he must have another source of income. She noted that Charles claimed there had been only $40,000 in the safe. Lori’s attorney provided a declaration estimating that the cost of litigating the case for the first six to 12 months would be $75,000.
Charles’s Opposition to OSC & Lori’s Supplemental Declaration
In his response to the OSC, Charles consented to “guideline” spousal support of $6,233 per month; he asked the court to impute $40,000 per year in income to Lori and order employment efforts, a vocational evaluation, and a medical evaluation. He alleged that Lori had withdrawn $32,900 of community property assets from three bank accounts between February 18 and April 2, 2009.
On April 8, 2009, Lori’s counsel filed a supplemental declaration in which she alleged that Lori’s attorney fees through that date (less than one month after she filed her initial pleading) were already $52,060.20. Counsel stated that additional fees were necessary to discover assets Charles had hidden from Lori and that the initial fee request of $75,000 was insufficient. Lori increased her initial request for attorney fees to $150,000. Counsel asserted that Charles had omitted assets and income from his disclosures and that his income in 2008 was actually $775,858.94, and not the $207,372 he declared.
Charles’s Motion for Sale of “Horse Hobby”
Charles filed a motion to sell or reduce the cost of the “horse hobby” and asked the court to order Lori to take responsibility for expenses related to the horses. The motion was set for hearing on April 23, 2009, the same day as Lori’s OSC.
Charles alleged that he had invested a lot of money, most of it separate property, in Lori’s dream of owning horses. He complained that Lori had turned down opportunities to sell one of their horses for significant amounts of money and that she never tried to turn her hobby into a business. He stated that he spent an average of $11,831 per month in 2008 ($141,966 for the year) to sustain the “horse hobby.” Charles stated that he did not have enough income to cover these expenses and that he used his credit union account or sold assets to support the horses. He declared that he had sustained the “horse hobby” for 10 years at $140,000 per year and that he did not have the financial means to do so anymore. He alleged that the marriage dissolved in the fall of 2008, when he told Lori that he would no longer pay for the horses.
Charles’s forensic accountant estimated that it cost $10,000 per month to maintain the horses.
Lori’s Opposition to Motion re Horse Hobby
Lori opposed the motion, arguing that Charles shared her passion for horses. In a declaration, she stated that they were both “avid” members of three horse associations and that Charles showed horses in competition. She told the court that since February of 2009, she had reduced expenses by selling two horses, changing the horses’ feed, removing her sister’s horses, and reducing training costs. Lori estimated that the “bare minimum” necessary to maintain the horses was $180 per horse per month. However, she continued to board two performance horses in Ojai, which cost an additional $1,530 per month. Lori said she would continue to sell horses, but wanted to keep four horses, two trailers, and two trucks.
Lori declared that based on a review of their bank accounts, it looked like Charles earned $17,281 per month from Atmel and had additional income from “unidentified sources” that averaged $19,520 per month, with total earnings of $775,858.94 for 2008. She complained that Charles had removed cash, gold, their gun collection, and vehicles from the Upper Ranch without providing an accounting.
In reply, Charles stated he did not oppose Lori’s request to keep four horses, but said she would have to pay him for his interest in the horses.
Lori’s Reply Papers in Support of Her OSC
Lori filed a declaration from Keith Tromel in support of her OSC. Tromel declared that since 2002, he and Charles had operated a “complicated side-business” known as ChipTest Designs (CTD), which produced parts for Atmel. Charles had asked Tromel, an engineer, to design parts that Atmel used in its manufacturing process. Tromel designed the parts and Charles took the designs to a machinist who manufactured the parts. Charles told Tromel what prices to use in CTD’s quotes to Atmel. Tromel opined that the prices Charles gave him were twice the actual cost of producing the parts. In addition to designing the parts, Tromel generated all of the paperwork, including quotations, packing slips, and invoices. But Tromel never saw the parts, which were delivered directly to Charles. In 2004, Tromel moved from San Jose to the Lower Ranch at Charles’s request to work at both CTD and the Properties. Tromel received 15 percent of the gross revenues of CTD and the remaining 85 percent went to Charles. Tromel stated that Charles “had a deal with the machinist that was similar to ours” but did not say what Charles paid the machinist for the parts. According to Tromel, CTD received its last order from Atmel in November 2008, received its last payment from Atmel in February 2009, and wrote a check to Charles for $58,650 that same month. Between 2003 and 2009, Charles received $1,126,655.38 from CTD.
In her points and authorities, Lori alleged that Charles “was hiding income and secreting information about illicit business dealings” and that he was “swindling his employer out of millions of dollars by fraudulently inducing Atmel into business dealings with [his] alter ego companies, and taking an 85% cut of the profit.” She asserted that Charles “was engaged in several confederate schemes that resulted in double- and triple- billing his employer for the same purchase order.” Lori stated that she was “completely left in the dark” regarding the community finances. Finally, she alleged that Charles’s “ ‘other income’ was never reported on the parties’ tax returns....”
Lori continued to live at the Upper Ranch until March 2009. She told the court that Charles had come home for a weekend in mid-March and “was acting very angry and strange.” She alleged that Charles entered her bedroom at night and that he left some bullets in the guest room where he was staying. Fearing for her safety, she moved to the Lower Ranch. Lori said she used $23,400 in community property funds to pay her attorneys ($10,000 for the retainer and $13,400 for fees).
April 2009 Hearing on Lori’s OSC and Charles’s Motion
Prior to the hearing on Lori’s OSC and Charles’s motion, the court met with the parties for an “extended time” in chambers to discuss the case. At that time, Charles admitted that he earned income from a “side business, ” but stated that he had not participated in the business since the fall of 2008.
The court ordered Charles to pay Lori $6,233 per month in temporary spousal support retroactive to March 11, 2009, and since Charles received periodic bonuses from Atmel, spousal support would be subject to a Smith-Ostler analysis. The court denied Charles’s request to impute income to Lori, ordered Lori to submit to vocational and medical evaluations, but stayed the order on the medical evaluation pending the outcome of the vocational assessment. The court ordered the parties to split “any reasonable and necessary” expenses associated with the horses. The court ordered Charles to pay Lori $75,000 in attorney fees by May 29, 2009. All other issues, including a review of temporary spousal support, were reserved for the long-cause hearing, which was set for July 7, 2009. The parties did not appeal the April 2009 order.
In re Marriage of Ostler & Smith (1990) 223 Cal.App.3d 33.
Lori’s Motion to Compel Answers to Deposition Questions and for Evidence Sanctions
In May 2009, Lori’s counsel took Charles’s deposition. At deposition, Charles answered questions about income from his regular employment at Atmel, but invoked the Fifth Amendment privilege against self-incrimination in response to 59 questions about his income from other sources.
In May 2009, Lori’s counsel took the deposition of Renee Frias. Frias testified that she and Charles had a business together known as R & T Enterprises (RTE), which sold parts to Atmel. Frias did the paperwork and earned 15 percent of the profits for her efforts. Frias never saw their product; she did not know who manufactured the parts or how much money Charles made since he paid for the parts out of his share of the profits. Frias testified that Lori did not know about RTE. Lori claimed Charles earned $51,453 from RTE in 2008.
On June 23, 2009, Lori filed a motion to compel Charles’s answers to deposition questions, requesting $11,540 in monetary sanctions and evidence sanctions. She argued that her right to discovery outweighed Charles’s privilege against self-incrimination. She asserted that Charles waived the privilege against self-incrimination (1) by placing his income at issue in the dissolution proceeding; (2) by opposing her claim for temporary support and filing the motion regarding the horse hobby; and (3) by disclosing some facts about his income but not others. She argued Charles had not shown that his answers would expose him to any verifiable fear of incrimination. She told the court that Charles had failed to disclose income from CTD or RTE or any other outside source in his income and expense declarations and other declarations filed with the court.
In opposition to the motion, Charles argued that he invoked his privilege against self-incrimination because of the allegations Lori made in her reply papers, accusing him of fraudulent, illicit business dealings and swindling his employer. He argued that Lori’s right to information did not outweigh his privilege against self-incrimination and that the privilege must be claimed in the context of a particular question. He told the court that he had hired a tax attorney to assist him in filing amended tax returns and that the community may be responsible for additional income taxes. He argued that he may be facing civil and criminal charges such as tax fraud, criminal fraud, and embezzlement. He asserted that Lori had obtained thousands of pages of primary source documents through discovery and that consequently there were no obstacles to fair litigation of the dissolution action. He argued that he had not waived the privilege against self-incrimination by placing his income at issue because his income from 2008 was irrelevant to the question of his present ability to pay temporary spousal support since he no longer operated the parts businesses. He argued that he was not subject to sanctions since he had substantial justification for asserting the privilege against self-incrimination. He asserted that evidence sanctions were inappropriate, since he had not willfully violated any discovery orders.
The Parties’ Supplemental Briefs for Long-Cause Hearing
In July 2009, Charles filed a supplemental brief for the long-cause hearing in which he stated that his refusal to continue to participate in the parts businesses led to the demise of the marriage. Citing authority, he argued that the court cannot require him to work excessive hours or a second job and that the proper measure of income is an objectively reasonable work regimen. He objected that the continued expenses of training horses in Ojai were unreasonable. Charles’s forensic accounting expert, James Butera, reviewed records obtained in discovery and concluded that Lori’s accounting expert, Jack Zuckerman, had overstated the income from the parts businesses. Butera criticized Zuckerman’s report for including bonus income as regular income, including business income that no longer exists, mischaracterizing deposits from non-business sources and the repayment of a loan as income, and counting some CTD income twice. Butera’s preliminary analysis of bank records indicated that Charles’s other income ranged from $112,092 to $151,138 per year between 2003 and 2008. Charles argued that his assets were being depleted by attorney fees and expert fees.
In a supplemental brief, Lori told the court that her expert determined the income available for support was $65,327 per month based on Charles’s 2008 earnings. She urged the court to set temporary spousal support at $25,386 per month. Lori told the court that Charles received a $19,939.50 bonus from Atmel in March 2009 that he had failed to disclose.
Lori’s Motion in Limine to Exclude Evidence of Charles’s Income
On July 1, 2009, Lori filed a motion in limine to exclude any evidence offered by Charles relating to his income, including his declarations and the reports by his accounting expert. She argued that Charles had breached his fiduciary duty to disclose all assets, income and liabilities to her; that discovery had revealed his disclosures were inaccurate; and that under the circumstances, an evidentiary sanction was appropriate. She argued that Charles had precluded her from obtaining or verifying information about his income by hiding behind the privilege against self-incrimination and that Butera’s reports should be excluded because they relied on information provided by Charles. In response, Charles argued that the prerequisites to imposition of a discovery sanction had not been met, since he had not willfully failed to comply with a discovery order.
Lori’s Motion for Additional Attorney Fees & Costs, Plus Evidentiary and Monetary Sanctions
In July 2009, Lori filed a motion for additional attorney fees and monetary and evidentiary sanctions. Lori presented evidence that Charles “likes to deal” in cash and argued that the true extent of his dealings may therefore never be known. She complained of various property transactions he had engaged in since filing for divorce, reiterated her arguments regarding his failures to disclose income, and argued that his true income remains uncertain due to his failure to cooperate in discovery. Lori asked for an evidence sanction precluding Charles from introducing (1) any evidence regarding expenses that he claims prevent him from paying spousal support and (2) his accounting expert’s reports to the extent that they rely on information obtained from Charles that was not produced in discovery. Lori argued that Charles violated his fiduciary duty during marriage by concealing money and dispersing community property without her knowledge and that he continued to violate his fiduciary duty by providing inadequate disclosures in the dissolution action. She complained that Charles had lent $200,000 to Uyen-Chi Ly and invested $200,000 in Ecopeds (a company that sells electric bicycles) without her knowledge and that the funds were community property. Lori asked for $122,531.23 in sanctions to cover the cost of the sanctions motion, the motion to compel, and discovery.
Lori told the court that she had incurred $237,670.62 in attorney fees and costs during the first four and one half months of the litigation. Lori requested an additional $150,900 in attorney fees to cover her outstanding attorney fees, expert fees, and the costs of discovery.
Charles opposed the motion, arguing that he could not afford to pay additional attorney fees because he had already paid $75,000 and was paying $6,233 per month in temporary spousal support plus half the cost of supporting the horses. He asserted that his “liquid assets” had quickly diminished and that most of his assets were separate property of a kind that is difficult to sell. He argued that he had responded fully to each of Lori’s discovery requests, that he had substantial justification for asserting the Fifth Amendment privilege, and that, based on Lori’s allegations, he was forced to hire a tax attorney. He argued that Lori’s attorney fees were exorbitant and that she could afford to pay for them out of spousal support since her living expenses were minimal. He argued that his side businesses have no bearing on his ability to pay temporary support, since that activity ceased in 2008.
August 2009 Hearing on Lori’s Motion to Compel and Motion for Sanctions
In August 2009, the court heard Lori’s motion to compel answers to deposition questions and her motion for sanctions. At the hearing, the court observed that “the elephant in the living room” was the “back tax liability that may exist.” The court also inquired whether it should rely on the continuation of “ill-gotten gains” to set support. Lori’s counsel told the court that she believed there was even more income that Lori did not know about.
After extensive argument, the court concluded that it was appropriate for Charles to exercise his privilege against self-incrimination, found no waiver, and denied Lori’s motion to compel. The judge stated that he had balanced “the rights, liabilities, and prejudices as to each of the parties, ” acknowledged that his ruling may result in some prejudice for Lori, and reserved on the issues of attorney fees and sanctions. The matter was continued to October 9, 2009, for further hearing.
Our summary of the trial court’s order is based on the reporter’s transcript of the hearing on the motion to compel. Lori’s appendix does not contain a written order on the motion to compel, an order which she appeals.
October 2009 Long-Cause Hearing
Lori submitted a further declaration from Tromel in which he stated that CTD still had an active business license and bank account and that Charles could continue to operate CTD if he wanted to. Tromel also stated that Charles had told him that he was interested in developing a solar energy business with a friend but did not want Lori to get half of it. To that end, Charles had visited solar facilities in California and Arizona and attended some trade shows.
In her own declaration, Lori relied on Frias’s deposition testimony that Charles had stopped RTE because of the divorce and that Charles could restart RTE at any time. Lori advised the court that in September 2009, Charles discontinued his participation in Ecopeds and argued that he was depressing his income and estate to avoid paying her “sizable support.” Lori alleged that Charles was selling assets without notice and had spent money on “unnecessary” landscaping and home improvements.
In a reply declaration, Charles stated that due to Lori’s “continued abuse of the discovery process, ” including three subpoenas to Atmel, he feared the he might lose his job and was exploring other business options. He characterized the improvements to the Upper Ranch as required repairs and maintenance and provided an itemized list of the repairs and the cost of each.
Charles’s declaration was not signed under penalty of perjury; we shall therefore treat it as argument rather than evidence.
At the hearing, Lori renewed her motion in limine and objected to the admission of Butera’s reports, arguing that it was unclear what he had relied on. Charles advised the court that Butera’s reports were based on the approximately 10, 000 pages of documents produced in discovery and did not rely on information Butera obtained solely from Charles, which Lori had not had an opportunity to question Charles about because of his invocation of the privilege against self-incrimination. The court concluded if that was the case, then the Fifth Amendment issue was moot.
On the issue of Charles’s ability to pay temporary spousal support, Lori argued that since Charles withheld information regarding his income, the court has the power and obligation to impute income to him in accordance with his 2008 earnings. Charles argued that based on her allegations of embezzlement, Lori was effectively asking the court to order him to continue embezzling from his employer. He argued that in spite of the discovery of over 10, 000 documents, there was no evidence that he continued to receive income from any outside businesses.
Testimony of Lori’s Accounting Expert
Lori’s expert, Zuckerman, reviewed the documents obtained in discovery and concluded that, in addition to the $228,212 Charles earned from his job at Atmel, Charles had business income of $413,014 in 2008, for total earnings of $641,226 in 2008. Zuckerman acknowledged that the parties disputed whether $178,750 Charles received from Ly in 2008 was the repayment of a loan or income. He provided two calculations for spousal support, depending on the court’s finding regarding the characterization of those funds. Assuming it was income, Zuckerman testified that Charles’s average gross monthly income for the 12-month period ending in February 2009 was $53,436 per month and that, according to the Dissomaster, spousal support should be $20,189 per month. Assuming it was a loan repayment, then Charles earned an average of $38,540 per month and temporary spousal support should be $13,926 per month. Zuckerman treated Charles’s bonuses from Atmel as regular income since he received bonuses two years in a row. But he testified that bonus income is not guaranteed and is typically subject to a Smith-Ostler calculation. Zuckerman did not have enough evidence to come to any conclusions about Charles’s income in 2009. On cross-examination, Zuckerman agreed that excluding the $58,650 payment from CTD in February 2009, Charles has not earned $53,436 in any month in 2009.
Testimony of Charles’s Accounting Expert
Butera told the court that Zuckerman had overstated the business income and that the correct business income for the 14-month period from January 2008 through February 2009 was $175,616 or $12,544 per month ($150,528 per year). Butera testified that Zuckerman erred (1) by treating the $58,650 Charles received from CTD in 2009 as income since Charles immediately reinvested that money in Ecopeds; (2) by treating Charles’s bonuses as income since the bonuses were subject to a Smith-Ostler calculation; and (3) by treating the payment from Ly as income. On cross-examination, Butera agreed that the $58,650 would have been available for support if Charles had not deposited it in the Ecopeds account. With regard to the $178,650 paid by Ly, the records showed that Charles had previously paid Ly $200,000, which supported the conclusion that the money received was the repayment of a loan and not income.
Butera criticized Zuckerman’s report because it did not address the threshold question whether there was any continuing income from the parts businesses. Butera focused on the income currently available for support and testified that nothing in the records indicated that there was any business income after February 2009. Butera testified that Charles was not able to pay either $20,189 or $13,926 per month in support and opined that support should be based solely on Charles’s regular income from Atmel, plus bonuses. The Dissomaster calculation based on that income results in support of $6,259 per month.
Both experts testified that Charles did not include income from CTD or RTE in his income and expense declarations. And although his income and expense declarations did not include the March 2009 bonus, Charles did declare average bonus income of $1,667 per month.
Butera updated Charles’s schedule of assets and debts for the hearing. In October 2009, Charles had “liquid assets with a value of $36,278, less current debts of $258,263, for net liquidity of negative $221,985.” Although Lori has a community property interest in some of Charles’s stock options, all of the options were “under water, ” meaning that the exercise price exceeded the fair market value of the stock. Charles invested approximately $230,000 in Ecopeds, but Ecopeds did not have any value because it was not making money. Butera did not determine the value of the parties’ vehicles or personal property, since those items had not been appraised. Butera traced the parties’ ownership interests in their real property and opined that the Upper Ranch was Charles’s separate property and that Charles’s separate property interest in the Lower Ranch exceeded its fair market value. Butera analyzed Charles’s two retirement accounts and determined that their total value was $274,233.11, of which $75,733.68 was community property. Charles had $193,000 in an E-Trade account in January 2008 and $35,000 in the same account in February 2009. Neither Butera nor Zuckerman considered this account in their analyses. Butera determined that the parties’ largest liability was their tax liability for 2004 through 2008, which he estimated at $394,308 including interest and penalties. Charles’s other liabilities include accounting fees, attorney fees, and a small amount of credit card debt.
At first blush this figure seems inconsistent with Butera’s testimony that the parties’ tax liability was $394,308. However, Butera attributed only 50 percent of the tax liability to Charles. Charles’s other debts included $16,311 in accounting fees; $40,552 in attorney fees; and $4,246 in credit card debt.
Lori’s Testimony and Offers of Proof
Lori lived at the Upper Ranch for 10 years. She provided the court with photographs of both ranches. Lori testified that she does not spend all of the spousal support she receives because, given the uncertainty of her financial situation, she has “suppressed her spending” and is saving some of it to pay taxes.
February 2010 Order After Long-Cause Hearing
In its order of February 2010, from which Lori appeals, the court found that Charles’s gross base salary from Atmel was $208,212 per year and that any bonuses would be subject to a Smith-Ostler analysis. The court declined to follow Butera’s conclusion that the $58,650 Charles received from CTD in 2009 was not income. The court stated, “The evidence reveals that [Charles] has shown an unwillingness or inability to completely self-report income” and that it could not “trust that [Charles] was reinvesting in good faith rather than attempting to avoid additional support obligations.” The court therefore concluded that the $58,650 was income available for support in 2009. The court also found that the $178,750 Charles received from Ly in 2008 was income, rather than repayment of a loan, since there was no evidence of any loan agreements or other documents supporting the existence of a loan. The court denied Lori’s request to impute income to Charles based on his past earning capacity, stating “there was an insufficient showing of ability, capacity and opportunity at the hearing” to impute income to Charles.
The court ordered temporary spousal support for 2009 at the rate of $7,600 per month, retroactive to March 11, 2009. The court ordered temporary spousal support for 2010 at $6,800 per month and provided for any arrearages to be paid at $200 per month. The court ordered Charles to pay Lori $30,000 in additional attorney fees and reserved on the “issues of breach of fiduciary duty and Family Code § 271 claims against each other.”
Discussion
Record on Appeal
Before addressing the merits of Lori’s appeal, we address a threshold issue regarding the record on appeal. This is an appendix appeal, with only an appellant’s appendix. The appendix contains Charles’s petition for dissolution, Lori’s response, the parties’ motions and the other papers they filed prior to the long-cause hearing. In addition to appealing the court’s order after the long-cause hearing, Lori appeals the court’s order on the motion to compel.
In his brief, Charles argues that much of the material in the appendix is not properly before this court and that our review is limited to what he calls the “Appropriate Record, ” which he defines as the reporter’s transcript of the long-cause hearing and the exhibits admitted at that hearing. However, the long-cause hearing was a motion proceeding on Lori’s OSC for temporary spousal support and attorney fees and her motion for sanctions. It was not the trial of permanent spousal support, status, or property division issues. In our view, it was therefore appropriate for the court to consider all of the papers in support of or in opposition to the motions at issue, including the declarations and evidentiary materials attached to those papers.
An appendix may only include accurate copies of documents that have been filed with the superior court. (In re Steroid Hormone Product Cases (2010) 181 Cal.App.4th 145, 151, fn. 6.) We have carefully reviewed Lori’s appendix and the only materials in the appendix that do not appear to have been filed in the superior court are the parties’ expert witness disclosures, which we shall disregard on appeal. The remaining materials in the appendix are properly before this court and we shall consider them.
Standard of Review
We apply the abuse of discretion standard to all of the issues on appeal. (People v. Waidla (2000) 22 Cal.4th 690, 717 [any ruling on the admissibility of evidence]; In re Marriage of Murray (2002) 101 Cal.App.4th 581, 594 (Murray) [awards of temporary spousal support]; Cheriton, supra, 92 Cal.App.4th at p. 283 [attorney fees awards in marital dissolution cases]; In re Marriage of Feldman (2007) 153 Cal.App.4th 1470, 1478 [sanctions orders under Fam. Code, §§ 271 and 2107, subd. (c) ; In re Marriage of Sachs (2002) 95 Cal.App.4th 1144, 1150-1151 (Sachs) [privilege against self-incrimination].)
All further statutory citations are to the Family Code, unless otherwise stated.
“Although precise definition is difficult, it is generally accepted that the appropriate test of abuse of discretion is whether or not the trial court exceeded the bounds of reason, all of the circumstances before it being considered.” (In re Marriage of Connolly (1979) 23 Cal.3d 590, 598.) An abuse of discretion is also shown where “it can ‘fairly be said’ that no judge would reasonably make the same order under the same circumstances.” (In re Marriage of de Guigne (2002) 97 Cal.App.4th 1353, 1366.)
Issues on Appeal
1.Admission of Butera’s Testimony
Lori contends the court abused its discretion and violated her due process rights by allowing Charles’s expert to testify about Charles’s current income and ability to pay support after Charles asserted his Fifth Amendment privilege against self-incrimination in response to certain deposition questions related to his income and assets. Charles argues that Lori is either estopped from raising this issue or has waived the issue by not objecting on the same ground below or by failing to obtain a ruling on her objections.
A. Background
Charles answered deposition questions about his income from his regular employment at Atmel, but invoked the privilege against self-incrimination and refused to testify about his income from other sources (including CTD and RTE) and the sources of funds deposited in certain brokerage accounts or invested in other business ventures. Charles answered questions about the operation of Ecopeds, but invoked the privilege when asked about the source of the funds he invested in Ecopeds. In ruling on Lori’ motion to compel answers to deposition questions, the court concluded that Charles had appropriately invoked the privilege and denied her motion.
In her motion in limine, Lori argued that Butera’s reports must be excluded because they relied primarily on information that Charles provided to Butera regarding his financial condition, including Charles’s schedule of assets and debts. She asserted that Charles had precluded her from “obtaining or verifying this information by hiding behind an invocation of the Fifth Amendment at his deposition” and that Butera’s reports should be excluded because he relied on “the self-serving representations made by [Charles] to his hired expert.”
At the long-cause hearing, Charles’s counsel advised the court that Butera’s reports were based on the documents produced in discovery and did not rely on information Butera obtained solely from Charles. The court concluded if that is the case, then the Fifth Amendment issue was moot. Butera testified that early in the case, he talked to Charles about the business income, but that those conversations did not inform his opinions. Instead, Butera relied on the bank account, brokerage account, business, and other subpoenaed records, as well as the other discovery materials, including depositions and witness declarations. Butera testified that everything he relied on was provided to Lori through discovery and that his reports did not rely on Charles’s self-reporting. He testified that much of his work was responsive to Zuckerman’s reports and that after he pointed out errors in Zuckerman’s analysis, Zuckerman corrected his reports. By the time of the long-cause hearing, there were only a few issues the accountants disagreed on, notably the characterization of the $58,650 payment from CTD in February 2009 and the $178,750 payment from Ly in 2008.
While Butera testified, Lori renewed her objection three times and asked that portions of Butera’s report be stricken or that his testimony be deemed a waiver of Charles’s privilege against self-incrimination. The court ruled that it would allow Butera to answer and that it would give his testimony whatever weight it deserved.
B. Forfeiture/Estoppel
Charles argues that Lori is estopped from raising this issue on appeal because she failed to timely object on the same grounds (i.e., that Charles was using the Fifth Amendment as both a shield and a sword) in the trial court and has forfeited the issue because she failed to obtain rulings on her objections to Butera’s testimony. The record does not support these assertions. Lori’s motion in limine discussed using the privilege against self-incrimination as both a shield and a sword and specifically requested that Butera’s testimony and reports be excluded. Lori’s counsel renewed her objections orally at the hearing. The court overruled the objection by allowing Butera to testify. There was no estoppel or forfeiture.
C. Analysis
Lori argues the court abused its discretion when it allowed Charles to present evidence through Butera that his “former income had evaporated without explanation and without consequence.” She argues that Charles “used Butera to offer the select evidence that [Charles] wanted the court to have (i.e., that his income had been significantly reduced) without having to explain why (i.e., he did not want [Lori] to get more money).” She contends that the court abused its discretion by accepting and relying on evidence that told only one side of the story. Lori complains that despite her presentation of “undisputed” evidence that Charles earned $413,014 from the parts businesses during the 12 months preceding the divorce, the court accepted Charles’s representation “that the only income available for support going forward was his Atmel salary and bonus of approximately $228,000 per year” and that as a result, the court ordered Charles to pay only $6,800 per month rather than the over $20,000 per month that Zuckerman had calculated as support.
We perceive no abuse of discretion or denial of due process in allowing Butera to testify. The question of the amount of Charles’s income in 2008 was fully litigated by the parties, with both sides presenting expert testimony regarding the extent of Charles’s earnings from both his regular employment with Atmel (hereafter “employment income”) and his side businesses (hereafter “business income”). At the long-cause hearing, Charles did not dispute that he had significant business income in 2008. However, contrary to Lori’s assertion on appeal that it was “undisputed” that Charles’s business income was $413,014 in 2008, the experts disagreed about the extent of his business income. After revising his initial reports and estimates, Zuckerman concluded that Charles had $413,014 in business income during the 12 months prior to February 2009 or $34,418 per month. Butera disagreed and opined that the business income for the 14-month period from January 2008 through February 2009 was $175,616 or $12,544 per month (or $150,528 for the year). The experts disagreed about whether the final CTD payment ($58,650 in 2009), the Ly payment ($178,750 in 2008) and the Atmel bonus should be treated as income and the trial court made specific findings on those disputed factual issues.
Moreover, Lori conducted extensive discovery on the question of Charles’s income. She subpoenaed bank and brokerage account records and records from Atmel, CTD, RTE, Ecopeds and Signal Probe, another business she suspected Charles was involved with. Charles responded to her requests for production of documents, form interrogatories, special interrogatories, requests for admission, and many of her deposition questions. According to his counsel, by the time of the long-cause hearing, 30 subpoenas had issued and approximately 10, 000 documents had been produced. Lori deposed Robert Fenton (Charles’s partner in Ecopeds and the owner of Signal Probe) and Frias of RTE and obtained two declarations from Tromel. Both experts relied on the documents produced in discovery and had opportunities to respond to each other’s reports.
Lori attached materials she obtained in discovery to her declarations, all of which were before the court at the long-cause hearing, to support her assertion that Charles purposefully reduced his business income because “he did not want [Lori] to get more money.” This point was not lost on the trial court, which concluded that it could not “trust that [Charles] was reinvesting in good faith rather than attempting to avoid additional support obligations.” In light of the extensive evidence before the court and the vigorous discovery and advocacy by Lori’s counsel, we cannot say that the court’s admission of Butera’s testimony and reports prevented Lori from telling her “side of the story.”
Lori’s evidence included Tromel’s declaration in which he stated that Charles was interested in getting involved in the solar energy business, had gone to trade shows and visited solar energy research facilities, but was concerned about doing business with Conley “because he didn’t want [Lori] to ‘get half.’ ” Lori submitted excerpts from Frias’s deposition in which she stated that Charles stopped doing business as RTE because of the divorce and because “he didn’t want to give [Lori] any more money.” Tromel also stated that CTD could resume business activity at any time.
Citing Butera’s testimony that he received documents from Charles, spoke with Charles during the early stage of the case, and reviewed Charles’s deposition testimony, Lori argues that the court abused its discretion when it relied on this “one-sided testimony.” She asserts that “[b]y admitting this one-sided evidence, ” the trial court gave Charles the ability to cut Lori off “from his money and from knowing what happened to the hundreds of thousands of dollars he received in 2008.” In making this argument, Lori overlooks Butera’s testimony that his conversations with Charles did not inform his opinions, that he relied solely on materials obtained in discovery, that everything he relied on had been provided to Lori through discovery, and that his reports did not rely on Charles’s self-reporting. This point was addressed repeatedly at the hearing and the court was satisfied that Butera’s opinions were not based on information he obtained solely from Charles. In addition, Butera testified that much of his work was in response to Zuckerman’s reports. Lori’s assertions do no persuade us that the admission of Butera’s testimony prevented her from presenting her case.
It is not hard to figure out “what happened to the hundreds of thousands of dollars [Charles] received in 2008”: $140,000 went to the horse hobby; $230,000 went to Ecopeds; $200,000 went to Ly; $75,000 went to Lori’s attorney fees; and Lori used $23,400 for attorney fees shortly after being served. These payments add up to $668,400, which is more than what Zuckerman said Charles made in 2008, including his Atmel income.
Although she acknowledges that the court ruled in her favor on the issue, Lori contends that the court erred when it admitted Butera’s testimony that the money from Ly was the repayment of a loan and not income. To prevail on appeal, a party must demonstrate both error and that the error was prejudicial. (Pool v. City of Oakland (1986) 42 Cal.3d 1051, 1069.) Since she prevailed on the issue, we fail to see how the admission of this evidence was prejudicial to Lori.
Lori asserts that the court erred when it refused to strike Butera’s testimony that Charles no longer had any business income. However, Lori’s own evidence (Frias’s deposition testimony and Tromel’s declarations) indicated that Charles stopped operating the parts businesses and corroborated Butera’s testimony. Thus, it can hardly be said that Butera’s testimony was one-sided or that the court erred in admitting it.
For all these reasons, we conclude that the court did not abuse its discretion when it admitted Butera’s expert testimony related to Charles’s income and assets and ability to pay temporary spousal support.
2.Waiver of Privilege Against Self-Incrimination
Lori contends the court abused its discretion when it determined that Charles did not waive the privilege against self-incrimination by making his income an issue in the dissolution proceeding.
The Fifth Amendment to the United States Constitution states that “[n]o person... shall be compelled in any criminal case to be a witness against himself....” That same right is guaranteed by the California Constitution (Cal. Const., art. I, § 15) and by state statute (Evid. Code, § 940). “ ‘To invoke the privilege, a witness need not be guilty of any offense; rather, the privilege is properly invoked whenever the witness’s answers “would furnish a link in the chain of evidence needed to prosecute” the witness for a criminal offense.... [A] trial court may compel the witness to answer only if it “clearly appears to the court” that the proposed testimony “cannot possibly have a tendency to incriminate the person claiming the privilege.” ’ [Citation.] ‘The privilege “can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory....” ’ ” (Sachs, supra, 95 Cal.App.4th at p. 1151.) A “ ‘blanket refusal to testify is unacceptable; a person claiming the Fifth Amendment privilege must do so with specific reference to particular questions asked or other evidence sought.... [O]nce this is done, the trial court must undertake a particularized inquiry with respect to each specific claim of privilege to determine whether the claimant has... establish[ed] that the testimony or other evidence sought might tend to incriminate him.’ ” (Id. at p. 1151.) In determining whether the privilege applies, the court weighs the parties’ competing interests, with a view toward accommodating the interests of both parties if possible. (Id. at p. 1156.) In appraising the claim of privilege the trial judge “must be governed as much by his personal perception of the peculiarities of the case as by the facts actually in evidence.”...’ [Citation.] On appeal, we review the trial court’s ruling for an abuse of discretion.” (Id. at p. 1151.)
Citing Fremont Indemnity Co. v. Superior Court (1982) 137 Cal.App.3d 554, 560 (Fremont) and Newson v. City of Oakland (1974) 37 Cal.App.3d 1050, 1055-1057 (Newson), Lori argues that a plaintiff in a civil case can waive the privilege against self-incrimination on issues raised in the complaint by asking the court to resolve those issues.
The plaintiff in Fremont sued his insurance company after the insurer refused to pay for fire damages at his restaurant. After being indicted for arson, the plaintiff asserted his privilege against self-incrimination and refused to appear for his deposition. The Fremont court described the issue presented as whether a person may “initiate a lawsuit and then by reliance upon the privilege against self-incrimination effectively prevent the party sued from getting at the facts by way of discovery, and thus prejudice preparation of [the] defense.” (Fremont, supra, 137 Cal.App.3d at p. 557.) The court analyzed the issue by reviewing cases in which the commencement of litigation waived the privilege at issue. (Id. at pp. 557-559, discussing Newson, supra, 37 Cal.App.3d at p. 1050 [privilege against self-incrimination; plaintiff asserting claim for lost wages compelled to disclose his failure to file income tax returns]; City & County of S. F. v. Superior Court (1951) 37 Cal.2d 227 [plaintiff waived physician-patient privilege by placing his physical condition at issue in personal injury action]; Wilson v. Superior Court (1976) 63 Cal.App.3d 825 [by initiating malpractice action against her accountant with respect to tax advice she received, the plaintiff tendered issues involving the existence and content of her income tax returns and was precluded from asserting the taxpayer’s privilege regarding her income tax returns].) The Fremont court held that the “plaintiff’s filing of an action to recover on the fire insurance policy operated to waive his constitutional privilege against self-incrimination with reference to any factual issues, particularly as to the applicability of the arson exclusion, tendered by the complaint. Even so, plaintiff finally may yet claim his privilege, but he will have to dismiss his lawsuit if he persists in doing so.” (Fremont, supra, 137 Cal.App.3d at p. 560.)
In our view, the situation here is distinguishable from that in Fremont. Unlike the plaintiff in Fremont, Charles did not refuse to appear for his deposition. He attended the deposition, answered some questions, and properly asserted the privilege against self-incrimination on a question-by-question basis. He produced documents and Lori obtained thousands of pages of records on the issue of income by way of subpoena. Charles’s invocation of the privilege neither prevented Lori from obtaining facts through discovery nor prejudiced the preparation of her case.
Lori’s reliance on Newson is misplaced. At the trial in Newson, a personal injury action with a claim for lost wages, the plaintiff testified that prior to the accident, he worked as a salesman, warehouseman, and self-employed painter and earned $700 to $1,000 per month. On cross-examination, the plaintiff objected to a question pertaining to the filing of his tax returns on Fifth Amendment grounds. After the trial court overruled the objection, the plaintiff testified that he had not filed any tax returns and the court told the jury that the plaintiff had a choice of answering the question or withdrawing his claim for lost earnings. (Newson, supra, 37 Cal.App.3d at p. 1055.) The appellate court held that the trial court’s “ruling and underlying rationale was proper and amply supported by the law of this state in the analogous physician-patient privilege.” (Ibid.) The court also cited cases from other jurisdictions, the United States Supreme Court’s decision in Brown v. United States (1958) 356 U.S. 148 [one who testifies on his own behalf in a civil case forgoes the right to invoke the privilege against self-incrimination on cross-examination regarding matters made relevant by the direct examination], and a passage from an annotated reporter. (Newson, supra, 37 Cal.App.3d at p. 1055-1056.) The Newson court’s conclusion that there was no abuse of discretion in finding a waiver of the privilege in that case does not persuade us that there was an abuse of discretion in finding no waiver here. The rule that Lori advocates would essentially require the trial court to find a waiver of the privilege against self-incrimination in every dissolution case with a support claim because the parties’ income is always an issue in such cases. We cannot endorse such a blanket rule.
Lori’s citation of Rogers v. United States (1951) 340 U.S. 367 is also unavailing. Rogers arose out of an investigation by the federal grand jury in Colorado. Rogers, the treasurer of the Communist Party of Denver until January 1948, appeared before the grand jury after that date pursuant to subpoena and testified that she had given membership lists and dues records to another person upon leaving office, but refused to identify the person because she did not want to “ ‘subject a person or persons to the same thing she was going through.’ ” (Id. at p. 368, fn omitted.) Rogers was committed to the custody of the marshall and advised of her right to counsel. The following day, she appeared before the grand jury and refused to answer the question again. She was brought back to court and charged with contempt and then, for the first time, asserted her privilege against self-incrimination. (Id. at pp. 369-370.) The district court found that her refusal to answer was not privileged and sentenced her to four months in jail for contempt. (Id. at p. 370.) The Supreme Court affirmed, concluding that Rogers had waived the privilege by failing to invoke it at the first hearing. It also held that the privilege cannot be used to protect another from testifying before a grand jury, that records kept in a representative, rather than personal, capacity cannot be the subject of the privilege, and that Rogers’ claim of the privilege “was pure afterthought.” (Id. at p. 371.) Finally, the court held that since Rogers had freely answered self-incriminating questions about her connection to the Communist party, she could not refuse to answer further questions that would not subject her to a real danger of further incrimination. (Id. at pp. 372-374.) The court stated that “[d]isclosure of a fact waives the privilege as to the details.” (Id. at p. 373.) Lori’s waiver claim does not rely on Charles’s disclosure of any facts related to his business income. Instead, Lori’s argument is based on Charles’s failures to disclose his business income. Since Lori’s argument does not rely on any affirmative disclosures of the business income, this case is distinguishable from Brown.
For all these reasons, we conclude that the trial court did not abuse its discretion when it found that Charles had not waived his privilege against self-incrimination in ruling on the motion to compel.
3.Failure to Consider or Impute Business Income in Setting Temporary Support
Lori argues that the court abused its discretion when it failed to impute income to Charles based on his actual earnings in 2008. She also contends that the court abused its discretion by making a support order that was inconsistent with its findings that the $58,650 payment from CTD in 2009 and the $178,750 payment from Ly in 2008 were income. She argues that since the court found those two payments to be income, then it should also have concluded that other payments Charles received from CTD and RTE in 2008, which total $175,615, were income. As we explain below, a single analysis disposes of both contentions.
“ ‘Awards of temporary spousal support do not serve the same purposes, nor are they governed by the same procedures, as awards for permanent spousal support.’ [Citation.] ‘Temporary spousal support is utilized to maintain the living conditions and standards of the parties in as close to the status quo position as possible pending trial and the division of their assets and obligations.’ [Citation.] On the other hand, ‘[t]he purpose of permanent spousal support is not to preserve the preseparation status quo but to provide financial assistance, if appropriate, as determined by the financial circumstances of the parties after their dissolution and the division of their community property.’ ” (Murray, supra, 101 Cal.App.4th at p. 594, fn omitted.) Unlike permanent support, which is constrained by numerous statutory factors, “[a]wards of temporary spousal support rest within the broad discretion of the trial court and may be ordered in ‘any amount’ (§ 3600) subject only to the moving party’s needs and the other party’s ability to pay.” (Ibid.) In exercising its discretion, the family court may properly consider the “ ‘big picture’ ” concerning the parties’ assets and income available for support in light of the marital standard of living. (In re Marriage of Wittgrove (2004) 120 Cal.App.4th 1317, 1327 (Wittgrove).) Subject only to the general “ ‘need’ ” and “ ‘ability to pay’ ” criteria, the amount of temporary spousal support lies within the court’s sound discretion, which will be reversed on appeal only on a showing of a clear case of abuse. (Ibid.)
Even though the court resolved the disputed factual issues surrounding the $58,650 payment from CTD in 2009 and the $178,750 payment from Ly in 2008 in Lori’s favor and found that those payments should be treated as business income rather than the repayment of a loan (the Ly payment) or monies properly reinvested (the CTD payment), the court was not required to base its temporary support order on the business income. After it determined that these payments were business income, the court was then faced with the question whether temporary spousal support should be based on Charles’s employment income alone or his employment income plus his previous business income.
The cases Lori cites, Meagher v. Meagher (1961) 190 Cal.App.2d 62 (Meagher), In re Marriage of Regnery (1989) 214 Cal.App.3d 1367 (Regnery) and In re Marriage of Simpson (1992) 4 Cal.4th 225 (Simpson), do not support her position.
In Meagher, the husband was employed as a vice president of a family-owned business for a number of years. He owned 410 shares in the corporation and during the last 22 months of his employment earned $2,083 per month. One month prior to filing for divorce, the husband quit his job at the family-owned business and went to work for another company, which the family-owned business was in the process of purchasing, as a salesman earning only $624.05 per month. (Meagher, supra, 190 Cal.App.2d at p. 63.) The family court ordered the husband to pay approximately $750 per month in temporary spousal and child support to his wife and children. (Id. at pp. 62, 63.) The appellate court concluded that the family court had not abused its discretion in making the support order. It observed that the husband had terminated his favorable association with the family business at the same time that he deserted his family and that the family court could properly conclude, after examining the total situation, that the husband’s potential and interest in the family business indicated an ability to pay $750 per month. (Id. at p. 64.) Meagher did not address the situation presented here, where Charles has both regular employment income and secondary business income.
Lori’s reliance on Regnery is also misplaced. In Regnery, the husband was gainfully employed throughout the parties’ 20-year marriage and remained employed for the first 15 months after they separated. (Regnery, supra, 214 Cal.App.3d at p. 1373.) He was subsequently unemployed for a period of almost two years. (Id. at pp. 1373-1374.) On appeal, he argued that the court erred in applying the capacity to earn standard in determining permanent support at a time when he was unemployed and that the court abused its discretion in not reducing the permanent support payments after he demonstrated a change in circumstances. (Id. at pp. 1370-1371.) The appellate court found no abuse of discretion. It relied on the trial court’s implied finding that the husband’s claim that he was unable to find gainful employment for almost two years was a sham to avoid paying support. The court considered that the husband had willfully failed to pay support even when he was employed, that he was employed for 20 years and able to support his family throughout the marriage, and that he quit a well-paying job without concern for his legal or moral obligations to his family without first securing alternate employment. (Id. at pp. 1373-1375.)
Nothing in Regnery persuades us that the court erred in this case by refusing to impute income to Charles based on his earning capacity as evidenced by his earnings from the parts businesses. This case is also factually distinguishable from Regnery. First, Regnery involved permanent support, which as we have stated, is subject to different standards than the temporary support at issue here. Second, Charles has paid support as ordered and has remained employed at all times, although he has discontinued his side businesses. Third, like Meagher, Regnery did not address the situation presented here involving both regular employment income and secondary business income.
Simpson, the third case cited by Lori, informs our analysis. In Simpson, the husband, a member of the theatrical workers’ union, worked for 17 years as a stage hand for both theater and television. (Simpson, supra, 4 Cal.4th at p. 228.) He had attained a high level of seniority with the union and often worked “two to three jobs each day, working nights and weekends, and sometimes 16 hours a day.” (Ibid.) At trial, he testified that he worked this schedule to enable his wife to go to school to earn a teaching credential, but that he could not continue working 16 hours per day. (Id. at p. 229.) During the three years prior to separation, the husband earned $61,000, $62,000, and $70,695 per year. (Id. at p. 228.) Shortly after the court made temporary child and spousal support orders, the husband “shifted from theater work to lesser-compensated television work earning approximately $2,200 per month” ($26,400 per year). (Id. at p. 229.) He testified that the “theater work, which required long hours and nights and weekends, was overly stressful” and that the television work, which “comprised a normal eight-hour day” enabled him to spend more time with his daughter. (Ibid.) The trial court based its permanent spousal and child support orders on the husband’s earning capacity of $60,000 per year and concluded that he had “ ‘voluntarily reduced his ability to earn’ ” during the divorce proceedings and that the change “was unjustified” and “purposeful.” (Ibid.)
The Simpson court framed the issue as follows: “whether, when a supporting spouse has worked an abnormally high number of hours during the marriage in order to increase the family’s income, the trial court in determining the supporting spouse’s ‘earning capacity’ should look to the income generated by the unusually rigorous work regimen or, instead, to the income which the supporting spouse would be capable of earning on the basis of a ‘normal’ (i.e., objectively reasonable) work schedule.” (Simpson, supra, 4 Cal.4th at pp. 227-228.) The court held that “an award of support following dissolution of a marriage generally should not penalize for his or her efforts a supporting spouse who voluntarily has undertaken an extraordinarily rigorous work regimen during the marriage, by locking that spouse into an excessively onerous work schedule.” (Id. at p. 228.) The court concluded that the trial court’s decision to consider the husband’s earning capacity in setting support was not an abuse of discretion, but held that “earning capacity generally should not be based upon an extraordinary work regimen, but instead upon an objectively reasonable work regimen as it would exist at the time the determination of support is made.” (Id. at pp. 234-235.) The court explained that its conclusion is “compelled by equitable considerations and is consistent with the legislative policies enunciated in the statutes governing family support. Setting support at a level which contemplates a work regimen considered extraordinary under current societal standards is contrary to section 4801’s guideline authorizing spousal support that is ‘just and reasonable’ (§ 4801, subd. (a))....” (Id. at p. 235.) The court also explained that a “reasonable work regimen, as opposed to an extraordinary regimen, however, is not readily or precisely determined and is dependent upon all relevant circumstances, including the choice of jobs available within a particular occupation, working hours, and working conditions. Established employment norms, such as the standard 40-hour work week, are not controlling but are pertinent to this determination. In certain occupations a normal work week necessarily will require in excess of 40 hours or occasional overtime and thus perhaps an amount of time and effort which may be considered reasonable under the circumstances. A regimen requiring excessive hours or continuous, substantial overtime, however, generally should be considered extraordinary.” (Id. at pp. 235-236.)
Since the record in Simpson did not indicate whether the trial court had determined earning capacity in accordance with the standard of an objectively reasonable work regimen, the case was remanded for further proceedings on that issue. (Simpson, supra, 4 Cal.4th at p. 236.)
Although Simpson involved permanent support, in an appropriate case, the trial court may consider either party’s earning capacity, as well as actual income, in fixing temporary support, subject to the same limitations on imputing income that apply to the adjudication of permanent spousal support. More specifically, there must be competent evidence that the party to whom income is imputed has both the ability and the opportunity to earn the imputed amount. (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2010) ¶5:159.5, pp. 5-67 to 5-68, citing Wittgrove, supra, 120 Cal.App.4th at p. 1329.)
In our view, the court did not abuse its discretion by failing to impute business income to Charles. The record established that Charles was employed full time by Atmel as the director of manufacturing and that he worked at least 40 hours per week. He had worked for Atmel since 1985. Although there was no evidence regarding the number of hours Charles devoted to his side businesses and it is not clear from the evidence whether the parts businesses involved, “excessive hours or continuous, substantial overtime, ” the court did not err in failing to impute income based on those businesses given that there was no change in Charles’s full time employment with Atmel. In her pleadings, Lori accused Charles of illicit business dealings and swindling his employer based on the parts business “scheme.” On appeal, she essentially argues that the court erred in not imputing the allegedly ill-gotten gains to Charles for the purpose of determining temporary spousal support. As the trial court recognized at the hearing on Lori’s motion to compel and her motion for sanctions, it would be inappropriate for the court to order spousal support at a level that requires Charles to continue the allegedly illicit parts businesses.
The court asked Lori’s counsel, “[I]s it appropriate for the Court to issue a support order based on income from ill-gotten gains? And going forward, should the Court then rely on a continuation of ill-gotten gains to set support? Can I tell someone-not in this case. Pardon me. This is no inference to anybody in this case. But can I tell someone, ‘Gee, he’s been a fantastic bank robber. So I want you to continue robbing banks so you can keep the support going at the level that the community has enjoyed all these years’? I can’t do that, of course.”
Another factor supports our conclusion that there was no abuse of discretion here. In setting temporary spousal support, the court considers two factors: the moving party’s needs and the other party’s ability to pay. (Murray, supra, 101 Cal.App.4th at p. 594) Lori lived at the Lower Ranch rent free. She did not use all of the support she was already receiving and, in fact, was able to save some of it for anticipated taxes. On appeal, she complains that she lives in the small cottage on the Lower Ranch, while Charles lives in the larger home on the Upper Ranch. We note that Lori initially asked the court to award her exclusive use of the residence on the Upper Ranch, but she moved to the cottage on the Lower Ranch of her own accord before that request could be heard, and she did not pursue it further. The record suggests that Charles paid her vehicle registration fees and, pursuant to court order, half the cost of maintaining the horses. Thus, Lori has not shown a need for additional temporary support over and above that awarded by the court.
For these reasons, we conclude that the trial court did not abuse its discretion by not imputing business income to Charles.
4. Attorney Fees
Lori contends the court abused its discretion in awarding pendente lite attorney fees because its order does not reflect consideration of Charles’s ability to pay, the litigation needs of each party, or the parties’ relative circumstances. She argues that the court did not consider various section 4320 factors, including Charles’s ability to pay, the parties’ obligations and assets, the age and health of each party, and the balance of the hardships. Lori lists 14 factual matters that the court allegedly failed to consider in making its attorney fees award. She argues that the court’s award of only $30,000 of the $150,900 requested left her owing over $120,000 to her attorneys with no ability to pay. She argues that the $105,000 in total fees awarded ($75,000 in April 2009 and $30,000 after the long-cause hearing) was $60,000 less than the fees Charles had incurred over the same period of time, and that the court therefore abused its discretion by awarding her “only two-thirds of the fees spent by the obstructive party.”
A. Legal Principles Governing Pendente Lite Attorney Fees Awards
A need-based award of attorney fees and costs is authorized by statute in dissolution proceedings. The overall objective of such an award is to “ensure that each party has access to legal representation” during the dissolution proceeding. (§ 2030, subd. (a)(1).) The purposes of a need-based award are “to ensure that the parties have adequate resources to litigate the family law controversy and to effectuate the public policy favoring ‘parity between spouses in their ability to obtain legal representation.’ ” (In re Marriage of Braud (1996) 45 Cal.App.4th 797, 827 (Braud); see also In re Marriage of Sullivan (1984) 37 Cal.3d 762, 768.) As the court explained in In re Marriage of Hobdy (2004) 123 Cal.App.4th 360, 371, “[t]he vicissitudes of family law proceedings dictate that trial judges must have maximum flexibility in ensuring that each party has the means to pay for counsel. To hold otherwise would frustrate those policies.”
The court is empowered to award attorney fees under section 2030 “where the making of the award, and the amount of the award, are just and reasonable under the relative circumstances of the respective parties.” (§ 2032, subd. (a).) The statute provides: “In determining what is just and reasonable under the relative circumstances, the court shall take into consideration 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, taking into consideration, to the extent relevant, the circumstances of the respective parties described in Section 4320. The fact that the party requesting an award of attorney’s fees and costs has resources from which the party could pay the party’s own attorney’s fees and costs is not itself a bar to an order that the other party pay part or all of the fees and costs requested. Financial resources are only one factor for the court to consider in determining how to apportion the overall cost of the litigation equitably between the parties under their relative circumstances.” (§ 2032, subd. (b).)
Section 2032, subdivision (b) “does not ‘endorse any fixed measure or percentage as a way to demonstrate need or the lack thereof.’ ” (In re Marriage of Duncan (2001) 90 Cal.App.4th 617, 631.) In making assessments of the parties’ relative needs and the ability to pay, “the court may consider all evidence concerning the parties’ current incomes, assets and abilities, including investment and income-producing properties.” (In re Marriage of Drake (1997) 53 Cal.App.4th 1139, 1167.) The trial tactics employed by the parties may also be considered in addressing a motion for attorney fees. (Ibid.) In addition to what would be “just and reasonable under the relative circumstances of the respective parties” (§ 2032, subd. (a)), in determining a reasonable fee award the court must consider “ ‘the nature of the litigation, its difficulty, the amount involved, the skill required and the skill employed in handling the litigation, the attention given, the success of the attorney’s efforts, his learning, his age, and his experience in the particular type of work demanded [citation]; the intricacies and importance of the litigation, the labor and the necessity for skilled legal training and ability in trying the cause, and the time consumed.’ ” (In re Marriage of Cueva (1978) 86 Cal.App.3d 290, 296; see also Braud, supra, 45 Cal.App.4th at p. 828, fn. 30.)
Trial courts are vested with broad discretion in making attorney fee awards in marital proceedings. (Cheriton, supra, 92 Cal.App.4th at p. 314; In re Marriage of O’Connor (1997) 59 Cal.App.4th 877, 881.) “ ‘In the absence of a clear showing of abuse, its determination will not be disturbed on appeal.’ [Citation.] Thus, we affirm the court’s order unless ‘ “no judge could reasonably make the order made.” ’ ” (In re Marriage of Duncan, supra, 90 Cal.App.4th at p. 630.)
But the court’s discretion is not without boundaries. As this court has explained, “In ruling on a need-based request for fees, a trial court is required to actually exercise its discretion. [Citation.] The court has a duty to make a just and reasonable award of attorneys’ fees and costs, if warranted under the circumstances of the case before it.” (Cheriton, supra, 92 Cal.App.4th at p. 318.) In Cheriton, we concluded that the trial court had abused its discretion by failing to consider the merits of the applicant’s fee request. (Ibid.) Likewise, Braud held that where there was a significant disparity in the parties’ respective income and assets and there was no challenge to the reasonableness of the fees requested by the applicant, a fee award that was a “drastic reduction” of the requested amount constituted an abuse of discretion by the trial court. (Braud, supra, 45 Cal.App.4th at p. 828.)
B. Analysis
We begin with a review of the court’s order after the long cause hearing. With regard to attorney fees, the order stated: “The Court has reviewed the needs and abilities of the parties. Husband has been the primary earner during the marriage. Wife has been out of the work force for years and is not currently employed. Restoration of the standard of living during the marriage following separation is often difficult to accomplish. It is rare where a single income will provide for two separate households at the exact same level previously enjoyed in one household. The parties have real estate holdings, though the community holdings and other assets appear to be subject to additional litigation. Wife left the larger marital residence and now resides in the smaller ranch property. Husband has been less than forthright with all his financial dealings and disclosures. He will have new support to pay and to do so may deprive him [of] the ability to continue to pay attorney fees. He has paid $75,000 to Wife’s attorney per a previous Order. There is disparity in the financial condition of the parties. [¶] Husband is ordered, at this time, to pay Wife $30,000 in additional attorney fees.”
The record does not support many of Lori’s factual assertions in support of her argument. For example, Lori argues that the court failed to consider Charles’s 2008 earnings or the $1.2 million he earned from CTD during the six years prior to the dissolution. However, the court heard evidence regarding the business income and resolved disputed factual issues regarding the business income in Lori’s favor. Thus, it can hardly be said that the court failed to consider the business income in making its order. Lori argues that the court failed to consider the community’s “alleged tax debt of $394,308 for 2004-2008” in making its order. However, the court specifically mentions the tax liability in its order when discussing the history of the case (“Husband’s counsel acknowledged the existence of significant tax liabilities regarding unreported income from a secondary business....”). The court also raised the issue of the tax liability at the hearing on the motion to compel, describing it as the “elephant in the living room.” Lori argues that the court failed to consider that Charles was hiding assets or his attempts to sell property without her consent. However, the court expressly found that “Husband has been less than forthright with all his financial dealings and disclosures.” She contends that the court failed to consider her lack of income, but the attorney fee portion of the order specifically states that: “Wife has been out of the work force for years and is not currently employed.” Thus, none of these contentions has any merit.
According to Charles’s accounting expert, Butera, Charles had liquid assets of $36,278, but when considered in light of his current debts, he had a net liquidity of negative $221,985. His stock options were “under water” and the community was facing a large tax liability. Although Charles had considerable income from the parts businesses, that income ceased as of February 2009 and there was no evidence of business income after that date. Charles had already paid $75,000 toward Lori’s attorney fees and she had also taken $23,400 from their community property accounts to pay her counsel. In addition to the parties’ tax liability, Charles’s debts included $16,311 in accounting fees; $40,552 in unpaid attorney fees; and $4,246 in credit card debt. All this evidence cast serious doubt on Charles’s ability to pay an additional $150,900 in attorney fees.
In addition to questioning his ability to pay, Charles challenged the reasonableness of Lori’s fee request, arguing that it was both unreasonable and unconscionable. He argued that Lori’s counsel was making this a complex case, when it was not complex. In fact, within the first four months, Lori had incurred $237,670.62 in attorney fees and costs. Her fees included $12,000 for “criminal counsel” at the rate of $750 per hour, including his time to appear at a mediation. Charles questioned why Lori needed criminal counsel. The fees incurred for this aspect of the case appear excessive in light of the issues. The record reflects that Lori had two attorneys at almost every court appearance and that two attorneys were present during Charles’s deposition. Given the size of the marital estate, it does not appear that Lori or her counsel have made the most prudent decisions about how to spend their resources.
During their court appearances prior to the long cause hearing, the trial court spent considerable time talking with the parties in chambers about the case, and the court’s comments on the record demonstrate that it clearly grasped the issues, in particular the allegations of illicit business dealings and the pending tax liability. Its order after the long-cause hearing was thoughtful and well-reasoned.
For all these reasons, we find no abuse of discretion when the court awarded Lori an additional $30,000 in pendente lite attorney fees after the long cause hearing, resulting in a total fee award of $105,000 on top of the $23,400 in community funds she had already spent.
5.Failure to Rule on Sanctions
Lori argues that the trial court abused its discretion when it failed to rule on her request for evidentiary and monetary sanctions “[d]espite overwhelming evidence of [Charles’s] financial and personal misconduct.”
Lori relies on the following language from section 2107, subdivision (c): “If a party fails to comply with any provision of this chapter, the court shall, in addition to any other remedy provided by law, impose money sanctions against the noncomplying party. Sanctions shall be in an amount sufficient to deter repetition of the conduct or comparable conduct, and shall include reasonable attorney’s fees, costs incurred, or both, unless the court finds that the noncomplying party acted with substantial justification or that other circumstances make the imposition of the sanction unjust.”
Section 2107 provides in subdivisions (a) and (b): “(a) If one party fails to serve on the other party a preliminary declaration of disclosure under Section 2104 or a final declaration of disclosure under Section 2105, or fails to provide the information required in the respective declarations with sufficient particularity, and if the other party has served the respective declaration of disclosure on the noncomplying party, the complying party may, within a reasonable time, request preparation of the appropriate declaration of disclosure or further particularity. [¶] (b) If the noncomplying party fails to comply with a request under subdivision (a), the complying party may do one or more of the following: [¶] (1) File a motion to compel a further response. [¶] (2) File a motion for an order preventing the noncomplying party from presenting evidence on issues that should have been covered in the declaration of disclosure. [¶] (3) File a motion showing good cause for the court to grant the complying party’s voluntary waiver of receipt of the noncomplying party’s preliminary declaration of disclosure... or final declaration of disclosure.... The voluntary waiver does not affect the rights enumerated in subdivision (d).”
Lori also relies on section 271, subdivision (a), which provides: “Notwithstanding any other provision of this code, the court may base an award of attorney’s fees and costs on the extent to which the conduct of each party or attorney furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys. An award of attorney’s fees and costs pursuant to this section is in the nature of a sanction. In making an award pursuant to this section, the court shall take into consideration all evidence concerning the parties’ incomes, assets, and liabilities. The court shall not impose a sanction pursuant to this section that imposes an unreasonable financial burden on the party against whom the sanction is imposed. In order to obtain an award under this section, the party requesting an award of attorney’s fees and costs is not required to demonstrate any financial need for the award.”
Lori alleges 14 ways in which Charles “not only failed to comply with financial disclosure requirements” but “consistently frustrated attempts to promote settlement and reduce the costs of litigation.” She argues that Charles violated his fiduciary duty during marriage “by concealing multiple sources of income and by disbursing community funds without [her] knowledge” and that he violated his fiduciary duty after separation by failing to provide complete and accurate information about their income and assets and by failing to cooperate in reducing the level of litigation. Lori argues that sanctions are mandatory under section 2107, and that the court abused its discretion by not issuing sanctions because “[n]o judge could reasonably defer” ruling on her sanctions request, “given the breadth and depth of [Charles’s] misconduct” and his threats to her about the litigation (i.e., that he would not settle until she got rid of her attorneys; that he would litigate until there was nothing left to divide).
In our view, the court did not abuse its discretion by reserving judgment on the sanctions issue. Section 271 is permissive, i.e., sanctions “may” be imposed in certain circumstances. Although section 2107 contains mandatory language, it also provides that sanctions shall not be imposed if “the court finds that [Charles] acted with substantial justification or that other circumstances make the imposition of the sanction unjust.” (§ 2107, subd. (c).) Lori does not cite any authority that requires the court to rule on the sanctions motion when it is presented or that precludes the court from deferring its ruling on the motion until further proceedings are completed. By postponing its ruling on the sanctions motion, the trial court kept the prospect of sanctions hanging over Charles’s head. At the same time, the denial of Lori’s attorney fees request in the form of a sanction may slow what appear to be runaway attorney fees and litigation expenses. There was no abuse of discretion here.
Disposition
The court’s order on the motion to compel and its order after the long-cause hearing, which was filed on February 22, 2010, are affirmed.
WE CONCUR: PREMO, ACTING P.J., ELIA, J.