Marriage of Cantarella




Filed 1/11/11 Marriage of Cantarella CA4/3






NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.






IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

In re Marriage of JOSEPH S. and TANYA M. CANTARELLA.
JOSEPH S. CANTARELLA, Respondent, v. TANYA M. CANTARELLA, Appellant; ORANGE COUNTY DEPARTMENT OF CHILD SUPPORT SERVICES, Intervener and Respondent.	G042115 (Super. Ct. No. 08D006783) O P I N I O N

Appeal from an order of the Superior Court of Orange County, Clay M. Smith, Judge. Affirmed.
Law Offices of Sarah A. Stockwell and Sarah A. Stockwell for Appellant.
Law Offices of Michael J. Rand and Michael J. Rand for Respondent.
No appearance for Intervener and Respondent, Orange County Department of Child Support Services.
* * *
Tanya M. Cantarella (wife) and Joseph S. Cantarella (husband) entered into a marital settlement agreement (the Agreement). The court entered a judgment dissolving their marriage and dividing their property in accordance with the Agreement. Wife later moved to set aside part of the judgment and the Agreement, contending the family business was mistakenly undervalued. The court denied her motion. Wife appeals.[1] We affirm.

FACTS

On July 25, 2008, the parties entered into the Agreement, which governed property division, child custody, and spousal and child support in the event they should divorce. Under the Agreement, wife was to receive $30,000 “as payment for accumulated assets”; she would also retain the family car. Husband was to retain the family home and the family business (the business), assume any debts, and be responsible for household expenses. Wife was to transfer to husband her interest in the house and “any controlling interest” in the business. Each party was to retain their respective checking account and individual retirement account(s).
Three days later, husband, acting in propria persona, petitioned for dissolution of marriage and referenced the Agreement. The next day, wife, acting in propria persona, asked the court to determine property rights. Wife identified the community assets as a home, a car, and a business.
That same day, each party filed with the court a declaration of service on the other party of a preliminary declaration of disclosure and an income and expense declaration. The parties exchanged identical disclosure documents with each other. The documents stated the family home was worth $605,000 and bore an encumbrance of $575,000. The documents did not list the business as an asset.
On October 28, 2008, the parties filed a joint waiver of final declaration of disclosure pursuant to Family Code sections 2105 and 2106.[2] They exchanged declarations of income and expenses, and declarations of assets and debts, identical to those they had previously filed.
That same day, at an uncontested hearing, both parties confirmed to the court that they believed the Agreement provided for a fair division of property and debt, for fair financial arrangements, and for an equal division of the marital estate. The court entered a judgment of dissolution effective January 30, 2009. The court ordered the property to be divided in accordance with a form attachment incorporating the Agreement.
Four months later, wife, now represented by counsel, moved to set aside those portions of the Agreement and the judgment governing the division of the home and the business. She noted both she and husband filed declarations of disclosure listing the value of the house as $605,000 (encumbered by $575,000 debt) and that these declarations did not mention the business. She declared she had already transferred her interest in the home and the business to husband and he had paid her $30,000. She alleged “a material mistake regarding the value” of the home and the business had resulted in an unfair division of property.
With respect to the business, wife submitted a “preliminary business evaluation performed by Wayne Lorch,” a forensic accountant and financial analyst, showing the business had a “preliminary assessment business value” of at least $172,000. (Lorch, however, prefaced his report by saying, “We do not have all the necessary documentation at this time that we would typically obtain in order to opine as to a value of a business.” Missing information included: accounts receivable aging; payroll tax returns; fair market value of equipment; lease agreement; credit card statements; and promissory notes for any outstanding loans.)
With respect to the house, wife submitted an appraisal obtained by husband on September 29, 2008 (one month before the uncontested hearing and the parties’ waiver of final declarations of disclosure), showing the home was worth $655,000, not $605,000. Thus, the equity in the house at the time of trial was $80,000, not $30,000 as previously valued. Wife declared: “In return for my transferring my 50% interest in this residence to [husband], I should have received the sum of $40,000.00. Instead, I only received the sum of $30,000.00.”
Wife contended the parties did not exchange final declarations of disclosure and did not waive them, and failed to exchange statements of material facts regarding community assets, obligations, and business opportunities. She noted the parties entered into the Agreement before exchanging preliminary declarations of disclosure. She alleged husband breached his fiduciary duty to her by (1) obtaining an appraisal on the home showing the equity was higher than shown on the schedule of assets he served on her, and (2) failing to disclose material information about the business’s value. She asked that the Agreement and the judgment be set aside as to the home and the business.
Husband, now represented by counsel, opposed wife’s motion. He contended no mistake had been made with respect to the Agreement or the judgment. He asserted wife “was the only person who handled the income, expenses, accounting, bookkeeping, etc.” of the business and “as the sole accountant, throughout the marriage was the most knowledgeable person with respect to [their] business and marital assets and debts.” He alleged wife had drafted the Agreement (a point wife concedes on appeal), and had stated at trial, under penalty of perjury, that she understood the terms of the Agreement “and was agreeable.” Husband alleged wife had proposed the sum of $30,000 she received. He noted that Lorch was unable to complete a full appraisal of the business due to a lack of certain documents; husband asserted wife “was in possession” of those documents and presumably did not give them to Lorch because they revealed the business’s outstanding debt, outdated equipment, depressed accounts receivable, and high expenses, as well as that wife has never had any shares in the business. Husband asserted the parties had exchanged preliminary declarations of disclosure and waived the final declaration of disclosure. He asserted that if the judgment were set aside and the business and home revalued as of the time of trial, due to the business’s debt, wife’s “share of the community assets [would] be less than the $30,000 she received in October 2008.”
Wife replied: (1) their waiver of the final declaration of disclosure was not timely; (2) she is a bookkeeper, not a forensic accountant, and does not know how to value a business; and (3) husband told her if she even talked to an attorney, husband would make sure she got nothing.
On April 6, 2009, the court granted wife’s motion and set aside the judgment as to the marital residence only, finding husband failed to disclose the house’s appraised market value. In its minute order, the court noted wife had not specifically declared she was unaware of the appraisal, but neither had she said she was aware of it. The court concluded that, “although the issue is not free from doubt, the better interpretation of the factual record is that [wife] was not aware of the appraisal . . . .”[3] The court ruled wife was entitled to $40,000, her half of the $80,000 equity in the house. But as to the business, the court denied wife’s motion, finding (1) both parties were fully aware of the business’s existence; (2) wife had “superior information regarding its value”; (3) both parties omitted mention of the business from their preliminary declarations of disclosure; (4) the parties negotiated a disposition of the business “as one piece of a comprehensive settlement adopted by the judgment”; (5) the parties “waived the final Declaration of Disclosure and jointly requested the court to enter the Judgment based on their agreement”; (6) wife’s declaration did not state what material mistake occurred as to the business’s value, “no mistake has been alleged[,] and no actual failure of disclosure occurred”; (7) the “technical failure (omission from the Preliminary Declaration of Disclosure) was mutual”; and (8) the facts alleged by wife did not show the judgment “terms as a whole were unfair,” or that failure to disclose the business’s value materially affected “the outcome of the parties’ negotiated dissolution of the entire community estate,” or that granting of the relief would materially benefit her.

DISCUSSION

In challenging the court’s denial of her motion to set aside the judgment and Agreement as to the business, wife contends (1) husband breached his fiduciary duty by failing to disclose the business’s value; (2) due to a mistake, she transferred to husband her interest in the business for no consideration; (3) husband gained an unfair advantage through presumptive undue influence; and (4) the parties failed to comply with mandatory disclosure requirements.[4]
We review for an abuse of discretion the court’s order denying wife’s motion to set aside part of the judgment and Agreement. (In re Marriage of Brewer & Federici (2001) 93 Cal.App.4th 1334, 1346 (Brewer).) The complaining party bears the burden of establishing an abuse of discretion. (In re Marriage of Rosevear (1998) 65 Cal.App.4th 673, 682.) We review for substantial evidence the court’s factual findings, viewing the evidence in the light most favorable to the prevailing party. We resolve all conflicts in the prevailing party’s favor, and indulge all legitimate and reasonable inferences so as to uphold the court’s finding if possible. (In re Marriage of Rossi (2001) 90 Cal.App.4th 34, 40.)
We first address wife’s contention husband breached a fiduciary duty by failing to disclose the value of the business. In dissolution of marriage proceedings, “from the date of separation to the date of the distribution of the community or quasi-community asset . . . in question,” each party has a fiduciary duty to the other party to accurately and completely disclose all assets, and to immediately augment these disclosures if a material change occurs. (§ 2102, subd. (a)(1).) This fiduciary duty is “of the highest good faith and fair dealing . . . .” (§ 721, subd. (b).)
Wife alleges husband failed to list the business in his disclosure declarations either through mistake or breach of fiduciary duty. She acknowledges “[t]here is a dearth of evidence on” whether husband had any superior knowledge of the business’s value, and that the record does not disclose whether husband knew the business had any divisible value. She fails to identify any evidence in the record that husband had information about the business’s value he failed to disclose to her. She therefore fails to meet her burden of proof to show the court erred by finding no breach of a fiduciary duty by husband.
We next consider wife’s contention a mistake occurred that warranted setting aside the judgment and Agreement as to the business. Under section 2122, subdivision (e), a party may move to set aside all or part of an uncontested judgment on grounds of mistake. The party seeking relief must establish that a mistake occurred and “that the facts alleged as the grounds for relief materially affected the original outcome and that the moving party would materially benefit from the granting of the relief.” (§ 2121, subd. (b).) In order for a court to set aside a judgment, the circumstances of the case must be “‘sufficient to overcome the strong policy favoring the finality of judgments.’” (In re Marriage of Baltins (1989) 212 Cal.App.3d 66, 81.) “[A] judgment may not be set aside simply because the court finds that it was inequitable when made, nor simply because subsequent circumstances caused the division of assets or liabilities to become inequitable, or the support to become inadequate.” (§ 2123.)
Here, the court found wife failed to state what material mistake occurred with respect to the business. The court noted that although wife alleged Lorch had preliminarily valued the business at $172,000, wife failed to “state what her belief, impression, or opinion of the value of the business was.”
On appeal, wife describes the mistake as follows: she did not know “whether the business had any value” or that it “had a computable, divisible value for community property purposes,” and she did not list the business (or ascribe any value to it) in her declarations “due to oversight or insufficient knowledge.” She stresses that she declared below that she is “a bookkeeper, not a forensic accountant,” had “never valued a business,” and did not “in any way investigate what this business would be worth.”
Wife has failed to meet her burden of establishing there was a statutory basis for relief from the judgment under section 2122, subdivision (e) and that the alleged mistake “materially affected the original outcome” (id., subd. (b)). The mistake she describes is not one that warrants relief under section 2122, subdivision (e). Granted, a mistake may be cognizable under that subdivision “regardless of a finding of wrongdoing” (Brewer, supra, 93 Cal.App.4th at p. 1347) and regardless of whether it is an intrinsic mistake (resulting from the complaining party’s own negligence). (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2010) ¶ ¶ 16:122, pp. 16-26 to 16-27, 16:88, p. 16-35.) But here, the evidence conflicted as to whether a mistake actually occurred, i.e., whether the parties undervalued the business in arriving at the property settlement memorialized in the Agreement. Lorch’s report — submitted by wife to support her contention the business was worth $172,000 — contained the caveat that it was prepared without the supporting documentation typically required to evaluate a business. Husband filed his opposing declaration that the business had high expenses, outstanding debt, outdated equipment, and depressed accounts receivable, and that wife failed to disclose this information to Lorch. As the court pointed out, wife’s declaration failed to specify even an approximate value that the parties had mistakenly ascribed to the business. The court further found that the facts alleged by wife did not show the judgment “terms as a whole were unfair,” or that failure to disclose the business’s value materially affected “the outcome of the parties’ negotiated dissolution of the entire community estate.” The record supports the court’s finding. Under paragraph 1 of the Agreement drafted by wife, she was to receive $30,000 “as payment for accumulated assets” and in addition she was to be removed from all debt accounts; in return she was to transfer her interest in the house and the business to husband. Under subsequent paragraphs of the Agreement, wife was to receive the family car and husband was to assume all household utilities and expenses.[5] According to husband’s declaration, pursuant to the Agreement, he assumed, inter alia, loans encumbering the business of approximately $75,000, wife’s credit card debt of over $40,000, and “the $4,100/month mortgage on the family home.” The Agreement does not specify what wife was to receive solely for her interest in the business, e.g., whether it was cash, the car, or husband’s assumption of debt, or some combination of parts of these. Because it is unclear what value the parties ascribed to the business or how such value was reflected in the negotiated property settlement, the court did not err in finding wife failed to establish that a mistake occurred that would justify setting aside the judgment and Agreement as to the business.
Brewer, supra, 93 Cal.App.4th 1334 — on which wife relies to support her contention she made an adequate showing of mistake — does not compel a contrary conclusion. Brewer affirmed a trial court’s grant of the husband’s motion to set aside a judgment and marital settlement agreement on grounds the parties were mistaken about the number and value of the wife’s pension plans. (Id. at p. 1340.) But Brewer is distinguishable from the case at hand in at least five critical aspects. First, in Brewer the parties conceded that “the valuation of [the pension plans] materially affected the original outcome and [the husband] would materially benefit from the granting of the relief.” (Id. at p. 1346.) Here, such a conclusion is vigorously disputed by husband. Second, in Brewer the husband believed the wife had only one pension plan, when in fact she had two. (Id. at p. 1339 & fn. 3.) Here, in contrast, wife was fully aware of the business’s existence. Third, Brewer imposed a fiduciary duty of disclosure on the “spouse who is in a superior position to obtain records or information from which an asset can be valued . . . .” (Id. at p. 1348.) Here, the court found wife’s knowledge of the business’s value was superior to husband’s. (Wife argues the court’s finding is unsupported by substantial evidence, but husband’s declaration is replete with evidence wife “was the most knowledgeable person with respect to [their] business and marital assets and debts.” Moreover, as the business’s bookkeeper [by her own admission, familiar with its day to day transactions], wife was in a prime position to obtain or inspect records and information about it.) Fourth, in Brewer the “two pension plans were financial assets whose monetary values were easily ascertainable” (id. at p. 1348); the wife in Brewer could readily “obtain current and accurate valuation information” about the pension plans from her employer (ibid.) without “expend[ing] considerable funds on experts” (id. at p. 1347). Here, wife asserts the business could not be easily evaluated. Finally, the trial court in Brewer set aside the entire judgment and agreement, except for the termination of the parties’ marital status. (Id. at p. 1340.) Here, wife sought a set aside of only those portions of the judgment and Agreement concerning the business. In short, Brewer is readily distinguishable from the one before us.
As to wife’s assertion husband presumptively exerted undue influence, her argument is twofold. She asserts (1) the consideration received by each party was disparate, and (2) husband threatened she would get “nothing” if she hired an attorney. Under section 721, spouses may enter into transactions with each other respecting property, but each spouse bears a duty of the highest good faith and fair dealing as to the other, “and neither shall take any unfair advantage of the other.” (Id., subd. (b).) “Under California community property law, because spouses occupy confidential relations with each other, when an interspousal transaction advantages one spouse over the other, a presumption of undue influence arises.” (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 287.) Here, as discussed above, wife failed to show the negotiated property division was uneven; therefore, she failed to show husband was unfairly advantaged. As to her claim husband threatened her, her credibility was for the court to determine. (Lohman v. Lohman (1946) 29 Cal.2d 144, 149 [“a trial judge is not required to accept as true the sworn testimony of a witness, even in the absence of evidence directly contradicting it, and this rule applies to an affidavit”].)
We reach wife’s final contention — that the parties failed to comply with statutorily mandated disclosure requirements. She argues (1) the parties’ preliminary declarations of disclosure were defective because the parties did not list the business; (2) as a result, the parties’ purported waiver of final declarations of disclosure was defective; and (3) the alleged failure to disclose or valuate the business caused her substantial economic prejudice.
Under section 2104, each party must serve on the other party a preliminary declaration of disclosure, along with an income and expense declaration (unless a current income and expense declaration has already been provided). (§ 2104, subds. (a) & (e).) The preliminary declaration must be served “after or concurrently with service of the petition for dissolution” (id., subd. (a)) and must set forth “[t]he identity of all assets in which the declarant has or may have an interest” (id., subd. (c)(1)). Under section 2105, subdivision (a), each party must serve on the other party a final declaration of disclosure and a current income and expense declaration, “unless the parties mutually waive the final declaration of disclosure.” The parties may agree to mutually waive the final declaration of disclosure by signing a waiver representing that the parties: (1) have exchanged completed preliminary declarations of disclosure and current income and expense declarations, (2) have fully augmented the preliminary declarations of disclosure to include all material facts and information regarding the valuation of assets contended to be community property, and (3) are knowingly and voluntarily waiving the requirement of a final declaration of disclosure . . . .” (Id., subd. (d)(1)-(4).) The final declaration of disclosure, unless waived, must be served “before or at the time the parties enter into an agreement for the resolution of property.” (Id., subd. (a).) “These duties arise without reference to any wrongdoing.” (Brewer, supra, 93 Cal.App.4th at p. 1344.) Section 2107, subdivision (d) provides: “Except as otherwise provided in this subdivision, if a court enters a judgment when the parties have failed to comply with all disclosure requirements of this chapter, the court shall set aside the judgment. The failure to comply with the disclosure requirements does not constitute harmless error.”
Here, the court discussed the documentary disclosure issue at length in its minute order. The court noted that, although the business was not identified in the parties’ preliminary declarations of disclosure, it was expressly covered by the Agreement and therefore the judgment. The court stated: “Certainly, [the business] should have been identified on the Preliminary Declaration of Disclosure. That obligation of disclosure, however, belonged to both parties. [Wife] is equally at fault for failing to identify this asset and disclose its existence and her belief as to its value to [husband]. To upset the Judgment merely because the business was not identified on the Preliminary Declaration of Disclosure would be to permit [wife] to take advantage of her own neglect or misconduct.” The court found both parties were aware of the business but omitted it from their preliminary declaration of disclosure, and both parties waived the final declaration of disclosure. It stated, “The technical failure (omission from the Preliminary Declaration of Disclosure) was mutual.”
In In re Marriage of Steiner and Hosseini (2004) 117 Cal.App.4th 519 (Steiner), this court “conclude[d] that the failure on the part of two divorcing spouses to exchange final declarations of disclosure . . . does not constitute a ‘get-a-new-trial-free’ card, giving either one of them the automatic right to . . . reversal on appeal when there is no showing of a miscarriage of justice.” (Id. at p. 522.) “To the degree . . . that section 2107, subdivision (d) is read for the proposition that a judgment must be set aside . . . solely because of a failure to exchange final declarations of disclosure, it is not consistent with our state’s Constitution” (id. at p. 527), which prohibits a court from setting aside a judgment for a procedural error without a showing of a miscarriage of justice (id. at p. 526). According to Steiner, to read section 2107, subdivision (d) to mean that a non-complying party can unilaterally undo a judgment “creates a most perverse set of incentives: . . . [A] party could deliberately not comply with disclosure requirements, keep mum, see if the trial results in an acceptable judgment, and then have the opportunity to obtain a better result by pulling the non-disclosure card out of his or her sleeve on appeal . . . .” (Id. at p. 528.)
Although Steiner involved a failure to exchange final declarations of disclosure, its rationale applies equally to the case at hand, where both parties failed to include the business as an asset in their preliminary declarations of disclosure, even though they were aware of the asset’s existence and provided for it in the Agreement. As discussed above, wife failed to show the original outcome was affected by the alleged undervaluation of the business. It follows that the technical non-disclosure in the preliminary declarations did not result in a miscarriage of justice. The court did not abuse its discretion by denying wife’s motion to set aside the judgment and the Agreement as to the business.

DISPOSITION

We affirm the court’s order denying wife’s motion to set aside the judgment and the Agreement. Husband shall recover his costs on appeal.



IKOLA, J.

WE CONCUR:



O’LEARY, ACTING P. J.



MOORE, J.



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