Opinion
D071322
10-06-2017
In re the Marriage of WILLIAM D. POWELL and CARA POWELL. WILLIAM DANIEL POWELL, Respondent, v. CARA POWELL, Appellant.
Patrick L. McCrary, for Appellant. James M. Ratzer, for Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. D551547) APPEAL from a judgment of the Superior Court of San Diego County, Gerald C. Jessop, Judge. Affirmed. Patrick L. McCrary, for Appellant. James M. Ratzer, for Respondent.
In a judgment of marital dissolution, the trial court denied Cara Powell's request for reimbursement of community contributions to William D. Powell's legal education, finding that Cara had not sufficiently shown that William's legal education substantially enhanced his earning capacity. (Fam. Code, § 2641, subd. (b)(1); In re Marriage of Graham (2003) 109 Cal.App.4th 1321, 1325 (Graham).) Cara appeals, contending that the court (1) misunderstood the legal standard under section 2641 and considered only William's current income rather than his earning capacity, (2) misapplied the legal standard under section 2641, and (3) erred in excluding the parties' income and expense declarations from evidence. We conclude that Cara's contentions lack merit and affirm the judgment.
Further unspecified statutory references are to the Family Code.
FACTUAL AND PROCEDURAL BACKGROUND
In October 2014, William filed a petition for dissolution of marriage. The court conducted a trial in July 2016 to resolve the issues of division of community property and spousal support, including whether the community should be reimbursed for community contributions to William's legal education under section 2641. Prior to trial, the parties stipulated to a list of exhibits that were admissible in evidence, which included the parties' filed income and expense declarations. Despite signing the stipulation as an order, the trial court clarified its intentions by orally directing the parties at the start of trial that exhibits "just don't come in," and that an exhibit would not be admitted unless the proponent explained its relevance to a disputed issue and specifically referenced the document. The parties proceeded accordingly.
William and Cara married in July 2009 and separated in August 2014. During the marriage, William worked full time as a home theater installer for Schmidt Electric. He earned an hourly wage of $36 or around $65,000 a year from his employment with Schmidt Electric. At time of trial, William was 47 years old, in good health, and still worked full time for Schmidt Electric.
In August 2009, William began attending Western Sierra Law School, which is an unaccredited law school. He passed the "baby bar" examination after his first year of law school. In 2013, William sat for the California bar exam; the following year, he became licensed to practice law. While attending law school, William completed two unpaid legal internships, but received no offers of legal employment. After graduating, he began tutoring law students and trying to build an estate planning legal practice, usually at night and in his spare time. In 2013, according to his 2014 tax return, William had a total profit of $545 from legal services and tutoring. In 2014, according to his 2015 tax return, William had a total profit of $3,967 from legal services and tutoring. From 2015 forward, William estimated that he grossed $1,000 or less a month from legal services and tutoring, and incurred expenses for advertising, marketing, continuing education, malpractice insurance, and other practice-related fees, of about $600 a month, on average.
Students of unaccredited law schools must pass the first-year law student's examination, commonly referred to as the "baby bar," to be eligible to sit for the California bar examination after graduation. They also typically must attend an additional year of law school compared to students of accredited law schools. (Goehring v. Chapman University (2004) 121 Cal.App.4th 353, 359 & fn. 1.)
William testified that his legal practice was worth "nothing" because "there's no real book of business." He did not maintain a physical law office, and marketed his legal services through a website. William estimated that he spent 28 hours a week on his "legal business," including writing, marketing, maintaining his website, and studying. He did not believe that his legal education had substantially enhanced his earnings. The main source of William's income, both during marriage and post separation, was his earnings from Schmidt Electric. There was "no chance" that William could support himself through his tutoring jobs and legal work.
According to Cara, the couple used community funds to pay William's law school tuition, including funds from a 2013 loan that the parties took from Cara's 401(k) account. The parties stipulated at trial that Cara had paid off a certain portion of the 401(k) loan using her separate funds and that William would reimburse her for half of that amount.
After both sides rested their cases at trial and were about to begin closing arguments, Cara sought to reopen her case to admit several exhibits that she had referenced during live testimony but had not moved to admit in evidence. The trial court granted Cara's request, and counsel proceeded with closing arguments. As Cara's counsel was arguing that Cara was entitled to spousal support, William objected on the ground that Cara's counsel was referring to evidence that had not been admitted in evidence, namely, Cara's income and expense declaration. At that point, Cara moved to reopen her case to admit the parties' income and expense declarations, but the court denied the motion. The court discussed that declarations are not automatically admitted in evidence and that any relevant statements contained in Cara's income and expense declaration had to be elicited through her live testimony and subjected to cross-examination. Further, the court stated that it had already received certain evidence regarding Cara's employment history and earnings based on her testimony.
In its final judgment, the trial court denied Cara's request that William be required to reimburse the community for community contributions to his legal education under section 2641. The court stated:
The trial court denied Cara's section 2641 request under a stand-alone category entitled "Husband's Educational Expense," separate from the allocation or division of other community assets and liabilities, such as the loan from Cara's 401(k) account.
"As to the 2641 education reimbursements, Family Code Section 2641 requires the reimbursement where the educational training of a party, quote, substantially enhances the earning capacity of the party, close quote. [¶] The [c]ourt in In Re Marriage of Graham . . . decline[d] to find as a matter of law that a law-school education substantially enhances earnings. [¶] There must be evidence that the education substantially or demonstratively enhances earnings. That evidence is missing. It's speculative at best. Consequently, the Court is denying that request."The trial court went on to grant Cara spousal support of $300 a month until February 2019. Cara filed a timely appeal.
DISCUSSION
THE COURT DID NOT ERR IN DENYING CARA'S SECTION 2641 REQUEST OR IN
EXCLUDING THE PARTIES' INCOME AND EXPENSE DECLARATIONS
A. Standard of Review
We review a trial court's rulings regarding the division of community property for an abuse of discretion. (In re Marriage of Honer (2015) 236 Cal.App.4th 687, 694.) "Insofar as the trial court made factual determinations . . . we accept those facts as true so long as they are supported by substantial evidence. [Citations.] To the extent our decision turns on the interpretation and application of a statute, it involves a pure question of law subject to de novo review." (Ibid.)
We review a trial court's rulings on the admissibility of evidence for an abuse of discretion. (People v. Waidla (2000) 22 Cal.4th 690, 717.) B. Analysis of Cara's Section 2641 Request
Section 2641, subdivision (b), provides in pertinent part, "[s]ubject to the limitations provided in this section, upon dissolution of marriage or legal separation of the parties: [¶] (1) The community shall be reimbursed for community contributions to education or training of a party that substantially enhances the earning capacity of the party." (Italics added.) We assume for purposes of our analysis that the parties paid William's educational expenses using community funds and that William did not reimburse some portion of those expenses, leaving only the question whether William's legal education substantially enhanced his earning capacity within the meaning of section 2641, subdivision (b)(1).
A legal degree is not presumed to result in a substantially enhanced earning capacity as a matter of law, for purposes of reimbursing the community for educational expenses paid from community funds. (Graham, supra, 109 Cal.App.4th at pp. 1324-1325.) The party requesting reimbursement under section 2641 must establish a sufficient factual basis to support a finding that the other party's earning capacity was substantially enhanced by the education or training to which the community contributed. (Id. at pp. 1325-1326 [legal education must be shown to have either "substantially or demonstrably enhanced" earning capacity].) We give the words "substantially enhances" as used in section 2641, subdivision (b)(1), their plain and commonsense meaning since the statute does not give them a special meaning. (See People v. Cardwell (2012) 203 Cal.App.4th 876, 881-882.)
Though not statutorily defined, appellate decisions discussing "earning capacity" in marital dissolution cases suggest that earning capacity "represents the income the spouse is reasonably capable of earning based upon the spouse's age, health, education, marketable skills, employment history, and the availability of employment opportunities." (In re Marriage of Simpson (1992) 4 Cal.4th 225, 234 (Simpson); In re Marriage of Lim & Carrasco (2013) 214 Cal.App.4th 768, 775.) A party's earning capacity is not necessarily equivalent to his or her actual income. (E.g., Simpson, supra, at pp. 229, 236.) "[E]arning capacity generally should not be based upon an extraordinary work regimen, but instead upon an objectively reasonable work regimen . . . ." (Id. at pp. 234-235.)
In this case, as William aptly points out, Cara argued that William's legal education substantially enhanced his earning capacity because he became capable of practicing law as an attorney and that the only reason that William had gone to law school was to increase his earning capacity, but presented little or no evidence to demonstrate that his legal education in fact substantially enhanced his earning capacity. For example, Cara presented no expert witnesses to testify regarding the income that William was reasonably capable of earning based on his personal attributes and the employment market. (See, e.g., In re Marriage of Mosley (2008) 165 Cal.App.4th 1375, 1391 [vocational expert testified that the wife, who graduated in the top of her law school class at Brigham Young University and previously worked as an associate at Latham and Watkins, had an approximate earning capacity of $95,000 per year to start, but it might take her over six months to find a position].) Like the Graham court, we decline to presume a substantial enhancement of earning capacity. (Graham, supra, 109 Cal.App.4th at p. 1325.) "A law degree is not a ticket to prosperity." (Ibid.)
On this record, it is highly speculative whether William's legal education substantially enhanced his earning capacity. William possessed marketable skills as a full-time electrician installing home theaters, and he had been steadily employed in that capacity for at least seven years. There was no evidence in the record that he had a reasonable prospect of being hired or earning more as a full-time attorney. In fact, the evidence showed that William had received no offers of full time employment as an attorney. His income increased somewhat after he graduated law school because of tutoring jobs and occasional legal work. However, William also incurred many expenses in connection with trying to build a legal practice. As in Graham, "[William] might find that what he can make [at Schmidt Electric] looks pretty good compared with trying to scratch out a living in the legal field." (Graham, supra, 109 Cal.App.4th at p. 1326.) We discern no abuse of discretion by the court, which cited the correct legal standard and relevant case law, in its finding that there was insufficient evidence that William's legal education substantially increased his earning capacity.
Cara argues on appeal that the trial court misunderstood the relevant legal standard and considered only William's current income in denying her request for reimbursement. As we have discussed, Cara's argument lacks merit. Following Graham, the court properly refused to presume an enhancement of earning capacity based solely on William's obtaining of a law degree and considered the proffered evidence that was relevant to the issue, including William's current employment status and income. As an indicator of the court's purported error, Cara highlights these comments by the court: "[Cara's] sacrifice enabled [William] to obtain a degree for which he has yet to realize any income or any substantial income, and he may in the future. [¶] Now, I'm making this observation because one wonders about the wisdom of that decision should he decide not to pursue what was an expensive education." The court's comments were made in the context of deciding whether to grant spousal support to Cara. (See § 4320, subd. (b) [in ordering spousal support, court considers the extent to which one spouse contributed to the other party's attainment of an education or training].) The court's comments do not indicate that the court misunderstood the legal standard under section 2641, which covers reimbursements to the community for educational expenses. The court did not err in denying Cara's request for reimbursement. C. Analysis of Court's Decision to Exclude Income and Expense Declarations
The court's award of spousal support to Cara is unchallenged on appeal. --------
Cara contends that the trial court erred in refusing to admit in evidence, and to consider, the parties' income and expense declarations. However, Cara does not assert that she was harmed by the court's decision. She does not point to any evidence on which she would have relied if the declarations had been admitted or explain how she has been prejudiced by their exclusion. Indeed, William testified to his income and expenses. Under Code of Civil Procedure section 475, we may not reverse a judgment unless an error was prejudicial and a different result was probable if the error had not occurred. "Prejudice is not presumed." (In re Marriage of Shimkus (2016) 244 Cal.App.4th 1262, 1269.)
In addition, Cara's income and expense declaration contained hearsay statements, and she did not argue any exceptions to the general rule excluding hearsay evidence. (See Elkins v. Superior Court (2007) 41 Cal.4th 1337, 1354-1355.) The court did not abuse its discretion in excluding the parties' declarations.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to William.
AARON, J. WE CONCUR: McCONNELL, P. J. NARES, J.