In re Marriage of Hardiman
Filed 1/25/13 In
re Marriage of Hardiman CA1/1
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
In re the Marriage of ROY C. and JOLYNN HARDIMAN.
ROY C. HARDIMAN,
Respondent,
v.
JOLYNN HARDIMAN,
Appellant.
A133266
(Marin County
Super. Ct. No.
FL033068)
Jolynn Hardiman and Roy C. Hardiman
terminated their marriage in 2005 and stipulated to a judgment on reserved
property and support issues that was entered in 2007. Jolynn appeals from postjudgment rulings that
(1) Roy’s receipt of approximately $14 million in proceeds from his exercise of
certain Genentech, Inc. (Genentech) stock options in 2005 and 2009 did not
increase his child support obligations for those years; (2) Roy was entitled to
$40,000 in attorney fees as sanctions for her litigation conduct; and (3) she
was not entitled to fees incurred in the postjudgment proceeding based on Roy’s
greater wealth. We affirm the trial
court’s rulings.
Roy and Jolynn separated in 2003
after more than 10 years of marriage, and Roy initiated a
year. They have two minor children from
the marriage. Roy worked for
Genentech throughout the marriage and continued that employment until shortly
after Genentech was purchased by Roche Holdings, Ltd. (Roche) in 2009. As a Genentech executive, Roy received a
significant part of his compensation in the form of stock option grants issued
to him from time to time.
The parties settled support and
property issues in stages, culminating in a stipulated judgment on reserved
issues entered May 22, 2007 (hereafter 2007
Judgment). In 2010, Roy moved to modify
child support because of the change in his employment and an increase in the
percentage of time he had physical custody of his daughter. Jolynn responded with a motion seeking child
support arrearages, division of an omitted asset, and attorney fees and
costs. The present appeal arises from
rulings made by the court after an evidentiary hearing on the parties’
cross-motions.
A.
Roy served a preliminary
declaration of disclosure with a schedule of assets and debts on April 27, 2004. The disclosure listed all
of his Genentech stock options, including option grant No. 048498 issued in
2002 for 45,000 shares, along with the prices at which each numbered option
grant could be exercised and the potential gain from exercising them at then
current stock prices.
name="_ftnref2" title="">[2] Jolynn’s forensic accountant, James Sheehy,
received an update of the option schedule as of September 24, 2004, which reflected, among other things, the effect of a two-for-one
stock split that increased the number of shares in grant No. 048498 to 90,000,
of which 45,000 were then exercisable under the terms of the grant.
In November 2004, the parties
stipulated to an order for temporary support under which Roy would pay
Jolynn $8,026 in family support per month as of November 1, 2004, continuing until further order of the court. This was the guideline amount based on
stipulated financial assumptions. The
stipulation also provided for community property division of Roy’s 2003 bonus
of $133,000 received in 2004 and for additional child and spousal support to be
payable from Roy’s share of bonus income calculated using an agreed “bonus
table.†The stipulation and order
entered by the court on March 15, 2005 included the
declarations required by Family Code
section 4065, subdivision (a) for court approval of a stipulation for child
support below the guideline formula.
B.
Roy supplemented
his 2004 asset disclosures with a report by forensic accountant Richard
Schiller dated May 31, 2005, which again
disclosed all stock options he held, and identified them as the parties’
biggest asset on the date of separation, valuing them at over $9 million net of
income tax.
On June 23, 2005, the parties stipulated to bifurcation and termination of marital
status. On July 27, 2005, the parties
entered into a “Memorandum of Agreement†(hereafter 2005 Memorandum of
Agreement) concerning the division of assets and liabilities under which they
agreed, among other things, to divide the unvested Genentech stock options held
on the date of separation according to a method known as the “sequential
method,†which was originally proposed by Jolynn’s counsel and was used by Schiller
in preparing his May 31, 2005 report.
grant No. 048498 were classified as community property and the rest (of the
90,000 shares) as Roy’s separate property. The
Memorandum of Agreement also required Schiller to prepare a report of financial
transactions for a period beginning January 1, 2005
and ending when the community bank and brokerage account assets were actually
divided.
C.
On October 19, 2005, Jolynn instructed Roy to exercise 9,216 shares of grant No. 048498—her half of the
shares allocated to the community in the 2005 Memorandum of Agreement. Roy executed the sale, resulting in proceeds of $805,745 for
Jolynn. In two transactions in November
2005, Roy exercised a total of 40,000 options from grant No. 048498,
resulting in approximately $3.8 million in proceeds. On February 1, 2006,
Schiller issued a postseparation accounting for the year ending December 31, 2005 per the 2005 Memorandum of Agreement. The accounting reflected both Jolynn’s and
Roy’s 2005 option sales and the allocation of their proceeds, as well as other
transactions during the year. The report
stated the community interest in grant No. 048498 had been “liquidated in [its]
entirety.†A copy of the report was provided
to Jolynn’s attorney and transmitted by the attorney to her forensic accountant
within a week thereafter. Sheehy later
admitted he did not read the Schiller accounting until November or December of
2006.
D.
In August 2006, Roy submitted a
final “Declaration of Disclosure and Income & Expense Declaration†(2006
Final Declaration of Disclosure). He
reported the number of vested and unvested Genentech options he held as an
asset, with a potential aggregate value for the vested options exceeding $10.4
million. His income and expense
declaration (covering his income for the preceding 12 months) reported his
monthly salary as well as a bonus payment of $190,000 received in 2006, but
made no mention of his 2005 option sales.
In October 2006, Jolynn moved for an order including the bonus payments Roy received in
2005 and 2006 in calculating additional child and spousal support for those
years. The motion was granted by order
entered on December
6, 2006.
The court found the parties intended (in their March 15, 2005 temporary support stipulation) to include future bonus payments in
the calculation of support, not just the 2004 bonus payment, a result which it
found “compatible with the law on income available for support.â€
On December 6, 2006, Jolynn’s counsel served a “Bench/Bar Conference Statement†on Roy attaching
Schiller’s February
1, 2006 accounting report. The statement indicated the parties were
disputing the extent of any community interest in Genentech stock options that
were unvested on the date of separation.
The bench/bar settlement conference
was held on December 20, 2006. The major
bone of contention was the method to be used to characterize the Genentech
options. Jolynn’s accountant, Sheehy, proposed
a method known as the “Nelson method†in lieu of the sequential method
previously agreed to in connection with the 2005 Memorandum of Agreement. He
presented a one-page spreadsheet he had prepared the day before comparing the
different allocations of options between separate and community property that
would result from using the Nelson method versus the sequential method. The spreadsheet erroneously categorized
80,784 of the stock options from grant No. 048498 as “unsold†(90,000 minus
only the 9,216 shares sold by Jolynn).
At the settlement conference, the parties agreed Roy would pay Jolynn
$500,000 as a “buy-out†of her claim to any additional stock options over those
allocated to her as her one-half community interest under the sequential method
agreed to in the 2005 Memorandum of Agreement.
There was no mention or discussion during the December 2006 settlement
proceedings of Roy’s options sales from grant No. 048498.
The full settlement terms were read
into the record and later incorporated into the 2007 Judgment.
allocated to Jolynn in the 2005 Memorandum of Agreement were confirmed as her
separate property. These were circled on
the Sheehy chart, which was attached as exhibit A to the settlement agreement
and designated as “Group 1†on the exhibit.
The settlement confirmed 62,411 options that had been claimed as
community property by Jolynn under the Nelson method as Roy’s separate property
by virtue of his agreement to the $500,000 buyout. These were designated as “Group 2†on exhibit
A. Besides the agreement concerning the
division of options, the parties agreed to the disposition of several parcels
of real estate, four vehicles, various accounts, retirement plan benefits,
limited partnership investments, and personal property collections, with
equalizing payments from Roy to Jolynn totaling just over $1 million.
With respect to support issues, the
parties agreed to a mutual, permanent waiver of spousal support. Regarding child support, the parties
stipulated in paragraph No. 5 of the 2007 Judgment (hereafter Paragraph 5) to
certain assumptions as to Roy’s base salary, income to be imputed to Jolynn,
and unearned income for purposes of calculating a guideline support amount. They agreed Roy would pay additional child
support from his “bonus income†according to a bonus table attached to the
judgment. Paragraph 5 further
provided: “Exercise of the community
stock options which are identified as ‘Group 3’ of Exhibit A, consisting of
. . . 260,993 . . . stock options shall not be considered as income in any determination of child
support. However, the proceeds from
ROY’s exercise of any separate property stock options, including those
identified as ‘Group 4’ of Exhibit A,[
consisting of . . . 63,007 . . . stock options
of child support. ROY shall provide an
accounting of proceeds realized of exercises of separate options for the
preceding calendar year by January 10 . . . of each year.
. . . [¶] The parties shall attempt to reach an agreement
regarding the payment of any additional child support by January 30th, of each
year [using a mediator if required]. If
no agreement is reached either party may file an action in Court.†(Italics added.) Paragraph 5 also included the declarations
required by section 4065, subdivision (a) for court approval of a
stipulation for child support below the guideline formula.
of 2009
Genentech was purchased by Roche in
March 2009. As a result, all outstanding
employee stock options were required to be exercised on October 30, 2009, and
Roy’s employment with Genentech ended.
Roy’s gross proceeds from the forced cash out of his stock options were
$10,241,825.74. Jolynn’s remaining
options were also cashed out involuntarily and she realized just over $1
million in proceeds from them in 2009.
In September 2009, Jolynn and Roy’s
minor daughter began to live with Roy on a full-time basis, spending only
alternate weekends in Jolynn’s care.
F.
Roy filed a motion to modify child
support in May 2010, citing his daughter’s change of physical custody and his
loss of employment with Genentech.
Jolynn filed a cross-motion, alleging Roy had not made a full and accurate
disclosure of assets and liabilities because he had failed to disclose his
exercise of 40,000 options from grant No. 048498 in 2005, the proceeds he
obtained from them, or what he had done with the proceeds. She alleged he failed to disclose that
information in his 2006 Final Declaration of Disclosure or in response to
discovery requests she made in 2005 and 2006.
She further alleged she and her accountants did not become aware of the
2005 sales until January 2010. Jolynn
requested relief equal to at least 50 percent of the proceeds of the “omitted
asset,†and asserted she had brought her claim within three years of the date
she acquired actual knowledge of the transactions disposing of 40,000 stock
options.
arrears for Roy’s bonus
name="_ftnref8" title="">[8]
and stock option income for 2009 and 2010 based on the bonus income schedule
made a part of the judgment, and sanctions in the form of her attorney and
accountant fees. Jolynn also sought her
attorney fees under section 2030 based the parties’ respective incomes and
abilities to pay.
Roy filed a motion for Code of Civil
Procedure section 128.7 sanctions against Jolynn’s counsel for filing
Jolynn’s assertedly baseless “omitted asset†claim, followed by a motion for
sanctions under Family Code section 271 in connection with all of the issues
raised in Jolynn’s cross-motion.
Court’s Rulings
An
2010. Roy brought a motion in limine to
exclude portions of the direct testimony of Jolynn’s new accounting expert,
Stuart Weil, that were based on Jolynn’s claim the proceeds of Roy’s 2005
options sales were an undisclosed omitted asset subject to the March 2005
stipulation and order for temporary support.
After hearing testimony concerning the alleged nondisclosure, the court
granted Roy’s motion, finding the 40,000 options from grant No. 048498 sold by
Roy in 2005, and their proceeds, were not omitted or concealed, there was no
legal basis for an award of additional spousal or child support based on them,
and such an award would be an “impermissible award of retroactive
support.†Those findings were later
incorporated in the court’s statement of decision and order, entered August 12,
2011.
The court found the $306,850
retention bonus Roy was paid in 2009 was subject to the bonus child support
table attached to the 2007 Judgment, while the 2010 bonus, which was paid out
in installments that year, was subject to a guideline child support calculation,
adjusted for the change in the timeshare of their daughter and other changed
circumstances in 2010.
Respecting the 2009 forced option
exercises, the court ruled it had discretion under Paragraph 5 of the 2007
Judgment to decide whether an award of additional child support based on
treating the $10 million as 2009 income for support purposes was appropriate
under all the circumstances presented.
It found such an award would constitute an unreasonable windfall to
Jolynn and result in a support order vastly in excess of the children’s needs
in 2009 and unnecessary in order for Jolynn to equalize the lifestyle they
experienced in Roy’s custody. The court
noted Jolynn would be receiving bonus child support of $27,295 for 2009 based
on Roy’s 2009 retention bonus, in addition to the $45,620 she had already
received for that year.
Finally, the court denied Jolynn’s
motion for attorney fees and costs, denied Roy’s motion for sanctions under
Code of Civil Procedure section 128.7 on procedural grounds, and granted
his motion under Family Code section 271 in the amount of $40,000 for fees
incurred in defending against Jolynn’s claims for relief based on nondisclosure
of the 2005 option sales.
Jolynn timely appealed from the
trial court’s August 12, 2011 order.
Jolynn contends the trial court
erred in (1) failing to award additional child support based on Roy’s 2005
option sales, (2) failing to award additional child support calculated by
applying the state’s mandatory child support guidelines to Roy’s options sales
in 2005 and 2009, (3) awarding sanctions against her under section 271, and (4)
failing to award her fees under section 2030.
A.
Jolynn maintains the March 15, 2005
stipulation and order, the child support order in effect at the time of Roy’s
2005 options sales, is ambiguous as to whether its provision for the payment of
additional child and spousal support based on Roy’s 2003 bonus ($133,000 paid
in March 2004) also encompasses the proceeds he received from selling separate
property stock options from grant No. 048498 later in 2005.
The pertinent language of the
stipulation under the heading “Additional Support†dealt exclusively with Roy’s
2003 bonus. The stipulation provided
half of that bonus was community property because it had been earned before the
parties’ separation on July 8, 2003, and Jolynn’s community share would be payable to her as additional taxable
temporary spousal support of $33,250.
The stipulation addressed the balance of the 2003 bonus as follows: “The balance of Husband’s 2003 bonus, in the
amount of $66,500, is subject to additional support obligations. Wife’s portion of this portion of the 2003
bonus [equaling a total of $53,323 in total family support] has been determined
as follows [showing calculations of $5,368.50 in child support and $14,704.50
in spousal support using a “bonus table†attached to the stipulation and adding
the $33,250 paid as taxable temporary spousal support to reach the total of
$53,323]. [¶] . . . [¶] Therefore the portion owing to Wife is
$53,323.00. Of this amount $47,954.50
shall be considered taxable income to Wife and tax deductible to Husband. $5,368.50 apportioned to child support shall
not be tax deductible.â€
Jolynn does not quote any of this
language or explain why we should find ambiguity in it as to whether it also
covers Roy’s income from selling stock options later in 2005. It is true as Jolynn points out the trial
court later determined the stipulation covered “bonus income†Roy received in 2005
and 2006, notwithstanding that its language refers only to the single $133,000
bonus Roy received in 2004. Whether the
court’s analysis on this point was correct or not is not before us. We find nothing in the 2006 order to suggest
the court also found ambiguity as to whether the stipulation covered Roy’s
postseparation stock option sales. When that issue did come before the trial
court in 2011, it ruled there was no such ambiguity: “In their March 15, 2005 Stipulation and
Order Roy and Jolynn agreed that the bonus support schedule would be applied
only to Roy’s employment bonuses. This
Court may not now add language to the 2005 Order to impose a support obligation
which does not appear in that order.â€
The court went on to hold an order extending the 2005 stipulation to
cover option sales would be a retroactive modification of support, made
impermissible by section 3653.
name="_ftnref9" title="">[9]
Jolynn fails to make any affirmative
showing the trial court erred in finding the 2005 stipulation unambiguous. She identifies no ambiguity in the text of
the stipulation, does not explain how the text is reasonably susceptible to the
interpretation she proposes, and does not point us to any extrinsic evidence in
the record supporting her interpretation.
We find no ambiguity, and would be unable on the showing Jolynn has
made, to resolve such an ambiguity in her favor even if we did find it.
Jolynn contends in the alternative
that Paragraph 5 of the 2007 Judgment supports her right to additional child
support for 2005 based on Roy’s stock option sales. She maintains the judgment’s child support
provisions specifically reserved to the court the right to make an additional
child support order based on Roy’s receipt of proceeds from the sale of any
separate property stock options, including the 40,000 he had sold two years
earlier from grant No. 048498. She
focuses on the following language from Paragraph 5: “[T]he proceeds from ROY’s exercise of any separate
property stock options, including those identified as ‘Group 4’ of Exhibit A,
consisting of Sixty-Three Thousand and Seven (63,007) stock options may be
considered as income for purposes of child support.â€
Jolynn ignores the text that
immediately followed the quoted language:
“ROY shall provide an accounting of proceeds realized of exercises of
separate options for the preceding calendar year by January 10 . . .
of each year . . . . [¶] The parties shall attempt to reach an
agreement regarding the payment of any additional child support by January
30th, of each year [using a mediator if required]. . . . If no
agreement is reached either party may file an action in Court.†In other words, the provision Jolynn is
relying on was intended to operate prospectively
on separate property stock options Roy exercised from 2007 forward. As to any proceeds from such
established a procedure for disclosure of the sales by a date certain, followed
by a procedure for the parties to try to reach an agreement about the support
implications of the proceeds, followed if no agreement was reached by
conferring or mediation, by a court determination of the amount, if any, of
additional child support that should be paid on account of the prior year
proceeds in dispute. Nothing in the 2007
Judgment appeared to contemplate that proceeds Roy received back in 2005—which
had been disclosed to Jolynn’s attorney and accountant 10 months before the
parties agreed to the terms of the stipulation for judgment —would be subject
to a retroactive award of additional child support. Had the parties intended the 2005 proceeds to
be covered by the child support provisions of the judgment, they would not have
chosen the language used in the judgment which describes a procedure for
determining the treatment of Roy’s future
disposition of stock options. In fact,
the record shows Jolynn’s accountant erroneously believed Roy still held the
40,000 stock options sold in 2005 even though the sales had been disclosed to
him.
stipulated judgment was intended by both parties to cover only Roy’s
negotiate a provision for additional support based on the 2005 sales had her
attorney or accountant reported them to her in 2006, this affords us no basis
to contort the language of the judgment to cover such sales now.
B.
Drawing on section 4053, Jolynn
asserts the court’s child support orders must be reversed because they fail to
reflect the following principles embodied in the state’s mandatory child
support guidelines: “In implementing the
statewide uniform guideline, the courts shall adhere to the following
principles: [¶] (a) A parent’s first and principal obligation is to
support his or her minor children according to the parent’s circumstances and
station in life. [¶] . . . [¶] (c) The guideline takes into
account each parent’s actual income and level of responsibility for the
children. [¶] . . . [¶] (f) Children should share in the
standard of living of both parents.
Child support may therefore appropriately improve the standard of living
of the custodial household to improve the lives of the children.
[¶] . . . [¶] (i) It is presumed that a parent having
primary physical responsibility for the children contributes a significant
portion of available resources for the support of the children. [¶]
. . . [¶] (k) The guideline is intended to be presumptively
correct in all cases, and only under special circumstances should child support
orders fall below the child support mandated by the guideline formula.
[¶] (l) Child support orders
must ensure that children actually receive fair, timely, and sufficient support
reflecting the state’s high standard of living and high costs of raising
children compared to other states.â€
According to Jolynn, the court’s failure to consider Roy’s $14 million
in option sales proceeds (for 2005 and 2009) failed to reflect these
principles.
As the opening sentence of section
4053 makes clear, the child support principles Jolynn refers to apply “[i]n
implementing the statewide uniform guideline.â€
We need not consider whether the court properly considered these
principles because it was not engaged in implementing the guideline, nor was it
required to do so. It was applying and
enforcing the child support provisions in Paragraph 5 of the parties’
stipulated judgment which (1) did not encompass the 2005 sales, for the reasons
explained above; and (2) did not automatically
require Roy’s 2009 stock option sales be considered income for child support
purposes, but left that threshold determination to the trial court’s discretion. Paragraph 5 stated Roy’s proceeds from future
stock option sales “may be considered
as income for purposes of child support.â€
(Italics added.) Unless and until
the trial court found in the exercise of its discretion under Paragraph 5 that
Roy’s option sales should be
“considered as income for purposes of child support,†the guideline principles
set forth in section 4053 never come into play and are irrelevant.
The parties could have specified in
the judgment that the court must
consider guideline principles in exercising its discretion under Paragraph 5,
but no such specification was bargained for or made. Jolynn is asking this court in substance to
imply as a matter of law a provision the parties never agreed upon. While guideline principles are the norm, the
parties may depart from them, in circumstances specified by statute, including
by court-approved stipulation.
(§§ 4052; 4065, subd. (a).)
Here, the parties—both represented by family law specialists—expressly
stipulated to a judgment on child support departing from the guidelines, as
permitted by section 4065, made the declarations required by that section,
jointly applied for and obtained court approval for their stipulation, and had
that stipulation entered as part of a final judgment of the court on all
reserved issues in 2007. If the parties
had intended guideline principles to apply to Roy’s stock option proceeds, they
would not have set that one form of employment compensation apart in the
judgment, leaving it up to the court to decide—if Roy and Jolynn could not
agree—what amount of additional child support, if any, Roy would owe based on
it.
Paragraph 5’s text—the use of the
word “may†rather than “must†or “shall,†and the procedures established for
the parties to try to reach agreement or a court determination—clearly
evidences the parties’ intent that in the absence of agreement a court would
have full discretion over whether to treat Roy’s stock option proceeds as
income for child support purposes. The
court’s discretion was underscored by the colloquy that took place when the
stipulation was put on the record, when Jolynn’s counsel said Group 4 of
exhibit A “identifies separate options of 63,007, which will be considered when
exercised as income available for child support.†Roy’s counsel immediately corrected her: “Which may be considered,†and Jolynn’s
counsel concurred: “May be
considered.†When these provisions of
Paragraph 5 were being negotiated, Jolynn was under no illusions about the
potential value of Roy’s stock options.
She understood during the marriage the “stock options were the largest
asset of the marriage by far.†Roy’s
2006 Final Declaration of Disclosure valued his vested stock options at $10.46
million and disclosed unvested options potentially worth another $5 million
when exercisable. Whatever their
motivations, the parties bargained for the treatment of Roy’s stock option
proceeds to be left to court discretion, and we will not rewrite the explicit
terms to which they agreed. Accordingly,
we find all of Jolynn’s arguments based on the assertedly controlling force of
guideline principles to be beside the point.
Our review of the court’s
determination is two-fold. First, we
independently review whether the trial court properly construed its role in
enforcing Paragraph 5 of the judgment. (
(1973) 10 Cal.3d 351, 372.)
name="_ftnref12" title="">[12] Second, we review under an abuse of
discretion standard whether the trial court properly exercised the discretion
left to it under the judgment. Abuse of
discretion review is circumscribed. We
consider only whether the court’s determinations are supported by substantial
evidence and whether the court acted within the bounds of reason in exercising
its discretion. “We do not substitute
our judgment for that of the trial court, but confine ourselves to determining
whether any judge could have reasonably made the challenged order.†(In re
Marriage of De Guigne (2002) 97 Cal.App.4th 1353, 1360;
Cal.App.4th 175, 184.)
The court found as an initial matter
the 2007 Judgment required it to exercise its discretion to determine whether
an award of $705,013—the amount of additional child support Jolynn sought for
2009 based on applying the bonus table to Roy’s $8,582,807 separate property
option proceeds— or some lesser amount, was “appropriate under all the
circumstances presented.†Our de novo
review of the 2007 Judgment leads us to the same conclusion. No ambiguity in the judgment requires resort
to extrinsic evidence. The language of
Paragraph 5 evidences an intent to give the trial court the broadest possible
discretion in (1) determining whether the proceeds of Roy’s separate property
stock options would be considered income for child support purposes; and (2) if
they are to be so considered, in determining how much additional child support
is owing on account of them. As to the
threshold question—whether the proceeds would be considered income for child
support purposes—the trial court analyzed whether considering the proceeds as
income is “appropriate under all of the circumstances presented.†We find this faithfully carried out the
intent of Paragraph 5 by giving the parties wide latitude to bring in whatever
facts and evidence they could show were logically relevant to the question of
whether Roy’s 2009 option proceeds should trigger additional child support
obligations, including the involuntary nature of the option sales, whether the
children had unmet needs, Jolynn’s likely use of the additional child support,
Roy’s use of the sale proceeds, and any disparity in lifestyles between the two
parents’ households. This gave both
parties a fair opportunity to persuade the court as to whether the sale
proceeds should be subject to a child support obligation. How the amount of additional child support
would or should have been calculated if any of the proceeds in issue had been
classified as income for that purpose is not before us.
The court considered evidence of the
following circumstances: (1) the
substantial amount of child support Jolynn had received in 2009 ($155,610,
consisting of $45,610 in base support plus $110,000 in additional child support
agreed to for Roy’s 2007 and 2008 option exercises) and the additional amount
of $27,295 she was being awarded out of Roy’s 2009 retention bonus; (2) the
extent to which an additional $705,013 in child support to Jolynn for 2009
would in fact be necessary to meet the children’s needs or to equalize the
lifestyle the children have while in Roy’s custody; and (3) based on her
testimony and spending pattern in 2009,
whether Jolynn’s actual motivation in seeking $705,013 in bonus child support
was to pay for the children’s unmet needs or to increase her own wealth so that
she could maintain her existing lifestyle without ever having to return to
work. The court concluded the additional
$705,013 in child support Jolynn was seeking “would constitute an unreasonable
windfall to Jolynn and result in a support order vastly in excess of the
children’s needs in 2009,†and unnecessary for Jolynn to replicate the
children’s lifestyle in Roy’s custody.
Jolynn contends the court’s reasons
were insufficient because (1) there was no evidence she was neglecting the
children’s needs, and (2) how she was likely to spend the additional child
support was not a basis to deviate from the guideline. We agree the evidence did not show Jolynn was
neglecting the children’s needs. But as
we read the statement of decision, the trial court did not draw or rely upon
any such inference from the evidence.
The court focused instead on whether providing Jolynn a total of nearly
$900,000 in child support for a single year, for two healthy children who in
combination lived with her for substantially less than 50 percent of the time, was necessary to meet any unmet
needs of the children, or was in fact likely to be used to benefit them. While these factors may be irrelevant for
guideline purposes, we cannot say it was outside the bounds of reason for the
trial court to consider them in trying to carry out the intent of the parties’
stipulated judgment.
We find substantial evidence
supports the trial court’s findings.
There was credible evidence the parents’ homes are similar in value and
offer equivalent amenities. The children
both attend public schools and both are healthy and have no special needs. While Roy took the children on a one-time
extraordinary vacation to Africa and London, Jolynn also took them on vacations
to Hawaii, Virgin Gorda in the British Virgin Islands, and possibly Mexico
(although Jolynn was not sure the Mexico trip took place in 2009). In 2009, Jolynn had investment earnings of
$483,880, and sold Genentech options for proceeds of $549,023, in addition to
receiving child support payments of $155,610.
At the same time, all of her child-related expenses for the year came to
$186,964 according to the testimony of Roy’s expert, of which $103,125 went for
home mortgage payments. This evidence
substantiates the court’s conclusions that an additional $700,000 in child
support would be a windfall to Jolynn that would not be used to fill unmet
child support needs and was not necessary to equalize the children’s
experiences in the parents’ households.
We find no legal error or abuse of
discretion in the trial court’s determination that none of the proceeds of
Roy’s 2009 forced stock option sales would be considered income for child
support purposes under the 2007 judgment.
271 Sanctions
Section 271 provides in pertinent part as follows: “[T]he 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.†(§ 271,
subd. (a).)
A sanctions order under section 271
is reviewed for abuse of discretion. (
Cal.App.4th 1205, 1225.) We will
overturn such an order only if, considering all of the evidence viewed most
favorably in its support and indulging all reasonable inferences in its favor,
no judge could reasonably make the order.
(Id. at pp. 1225–1226.)
Here, the trial court imposed
section 271 sanctions against Jolynn of $40,000 attributable to the fees Roy
incurred to defend the portion of her cross-motion alleging Roy’s nondisclosure
of his 2005 stock option sales. The
court found the motion was not reasonable, not supported by evidence, and not
supported by law. For the reasons
discussed earlier, we agree Jolynn’s “omitted asset†claims were baseless as a
matter of fact and law. Not only did Roy
timely disclose the sales and proceeds to Jolynn, but her “omitted assetâ€
claims would have had no legal substance even if the sales had not been
properly disclosed, since the options Roy sold had been allocated to him as his
separate property by agreement with Jolynn in 2005. Further, her persistence in those claims
after Roy’s 2006 disclosure of his option sales was first called to her
attention caused Roy to incur needless litigation expenses that cannot be
attributed to mere inadvertence by Jolynn’s former counsel and forensic
accountant.
Viewing the evidence most favorably
in support of the trial court’s ruling and indulging all reasonable inferences
in its favor, we find the trial court did not abuse its discretion in sanctioning
Jolynn under section 271.
to Award Fees Under Section 2030
Section 2030 provides in relevant
part as follows: “[I]n any [related]
proceeding subsequent to entry of a . . . judgment [in a marital
dissolution action], the court shall ensure that each party has access to legal
representation . . . to preserve each party’s rights by ordering, if
necessary based on the income and needs assessments, one party . . .
to pay to the other party . . . whatever amount is reasonably
necessary for attorney’s fees and for the cost of maintaining or defending the
proceeding during the pendency of the proceeding. [¶] . . . When
a request for attorney’s fees and costs is made, the court shall make findings
on whether an award of attorney’s fees and costs under this section is
appropriate, whether there is a disparity in access to funds to retain counsel,
and whether one party is able to pay for legal representation of both
parties. If the findings demonstrate
disparity in access and ability to pay, the court shall make an order awarding
attorney’s fees and costs. . . .†(§ 2030, subds. (a)(1), (2).)
We review an attorney fee award
under section 2030 for abuse of discretion.
(In re Marriage of Drake
(1997) 53 Cal.App.4th 1139, 1166 (Drake).) The trial court’s decision in a particular
case will not be disturbed on appeal absent a clear showing of abuse of
discretion. (In re Marriage of Bergman (1985) 168 Cal.App.3d 742, 763.) We must affirm the court’s order unless
“ ‘no judge could reasonably make the order made.’ †(In re
Marriage of Sullivan (1984) 37 Cal.3d 762, 769.)
In making a determination under
section 2030, the trial court may consider all evidence concerning the parties’
current incomes, assets, and abilities, including investment and income-producing
properties, as well as the applicant’s litigation tactics. (
p. 1167.) A disparity between the
parties’ relative circumstances may support an award even if the applicant
spouse has the funds to pay his or her own fees. (Ibid.;
§ 2032, subd. (b).)
In its statement of decision, the
trial court analyzed Jolynn’s fee request under section 2030 as follows: “Good cause has not been demonstrated for a
need based fee award pursuant to Family Code § 2030. According to her income and expense
declaration Jolynn had liquid assets of $2,900,000 when her motion was filed
and at all times she had sufficient financial resources to pay for her own
representation. Moreover, nearly all of
the claims asserted by Jolynn in this post Judgment proceeding were without
substantial merit. The exercise of
discretion by the Court in the matter of attorney fees includes an evaluation
of whether counsel’s skill and effort were wisely devoted to the disposition of
the case. Services which have no
apparent effect other than to prolong and complicate litigation cannot be
deemed reasonably necessary and may be disregarded in determining whether and
in what amount to order one party to contribute to the cost of the other’s
representation. In re Marriage of Behrens (1982) 137 C.A.3d 562.â€
Jolynn argues the court made
unsupported findings on the appropriateness of awarding fees to her based on
its rejection of the positions she had taken in the litigation, and failed to
make findings concerning either the disparity in wealth between her and Roy or
whether Roy was financially capable of paying for the legal representation of
both parties. (See § 2030, subd.
(a)(2).) For the latter point, she cites
In re Marriage of Sorge (2012) 202
Cal.App.4th 626 (Sorge) in which the
Court of Appeal affirmed a need-based fee order to a wife with $14 million in
assets and income in excess of $30,000 per month, based on the fact the husband
was far wealthier. (Id. at pp. 633, 636–637, 662.)
The court in Sorge noted the
husband had $64 million in liquid assets compared to the wife’s $7.5 million in
liquid assets, and relied primarily on this wealth disparity to find the trial
court had not abused its discretion. (
We do not find Sorge persuasive in the circumstances presented here. First, Sorge
merely found an award of fees to a very wealthy ex-spouse was within the trial
court’s discretion under section 2030 since the payor was eight times
wealthier. It did not hold the trial
court would have abused its discretion had it denied a fee award to the less wealthy spouse in those
circumstances. Second,
comparable to that shown in the record here.
According to the parties’ 2011 financial disclosures, Jolynn reported
assets of $5 million including liquid investments and real estate, while Roy’s
net worth was under $9 million on a comparable basis. While Jolynn asserts the “ratio of the
parties’ relative net worth in this case is about the same as it was in
point with any citation to facts in the record.
Jolynn fails to establish the trial court abused its discretion in
denying her a fee award based on the parties’ relative net worth. (Cf. In
re Marriage of Duncan (2001) 90 Cal.App.4th 617, 631 [well within
trial court’s discretion to deny wife’s fee request where husband had superior
ability to pay, but both parties had adequate resources to litigate the
controversy].)
title="">[14]
Jolynn also maintains the trial
court abused its discretion by judging the merits and good faith of her
litigation positions too harshly.
However, whether Jolynn’s fees were incurred wisely toward an
expeditious resolution of the case is a relevant factor under section 2030. (In re
Marriage of Kelso (1998) 67 Cal.App.4th 374, 384–385.) Since it does appear at least some of the
positions Jolynn took in the litigation lacked substantial merit and resulted
in lengthier litigation and avoidable fees, we cannot say the trial court
abused its discretion by relying in part on this factor to deny Jolynn’s fee
request.
The postjudgment order of August 12,
2011 is affirmed.
_________________________
Margulies,
J.
We concur:
_________________________
Marchiano, P.J.
_________________________
Banke, J.
name="_ftn1" title="">[1] For ease of reference, and meaning no disrespect to the parties, we
will refer to them hereafter by their first names.
name="_ftn2" title="">[2] Insofar as relevant here, the parties immediately sold all
Genentech stock obtained by exercising stock options. The terms “sale†and “exercise†will be used
here interchangeably to encompass both the exercise of options and the ensuing
sale of the stock obtained.
