Marriage of Kahn
Filed 4/2/12 Marriage of Kahn CA1/3
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opinion has not been certified for publication or ordered published for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
THREE
In re the
Marriage of BARBARA KAHN and MELVIN KAHN.
BARBARA
KAHN,
Appellant,
v.
MELVIN
KAHN,
Respondent.
A128001
(Alameda
County
Super. Ct.
No. RF08412139)
Barbara
Kahn appeals from the judgment dissolving her marriage to Melvin Kahn. Barbara argues that the court
erroneously: (1) failed to apportion to
her interests in Melvin’s separate properties based on community services
rendered to those properties; (2) denied her reimbursement for community
property payments made for the benefit of his separate properties; and (3)
granted him reimbursement for his equity in a separate property that was
transmuted to community property during the marriage. Her other principal contention is that the
judge should have been disqualified for bias.
Her arguments lack merit and we affirm the judgment.
BACKGROUND
Barbara,
presently 82 years old, and Melvin, who is 91 years old and has been blind
since age 19, were married for almost 48 years.
She petitioned for separation in September 2008, he responded and
requested dissolution of the marriage.
The
parties had no significant assets other than these properties in Alameda: (1) a commercial rental property at 2319
Santa Clara Avenue (hereafter Santa Clara Avenue); commercial rental spaces at
473 and 475 Central Avenue, and a six-unit apartment complex at 1407 Fifth
Street (collectively Fifth Street); their residence at 467 Central Avenue
(Home); a garage and workshop at 469 Central Avenue (Garage Lot); and
residential rental units at 1411, 1413, and 1415 Fifth Street (the Victorian).
Melvin
acquired Santa Clara Avenue
and Fifth Street before
marrying Barbara in 1960. The Home and
Garage Lot were purchased in 1963, with Melvin taking title in his name “as his
separate property.” The Victorian was
purchased in 1969, with Melvin taking title in his name as “a married
man.” In 1991 and 1992, Melvin executed
deeds to the Home and Victorian to himself and Barbara, “husband and wife as
joint tenants.” Melvin did not dispute
that the Home and the Victorian were community property, but maintained that Santa
Clara Avenue, Fifth
Street, and the Garage Lot were his separate
property. Barbara argued that the latter
three properties were transmuted to community property during the marriage.
The
issues in the case were tried in three phases.
The first phase, submitted on documentary
evidence, addressed whether Santa Clara Avenue,
Fifth Street, or the Garage
Lot remained Melvin’s separate property.
The court found that these properties had been transmuted to community
property by an agreement the parties executed in May 2005.
Appraisers
appointed by stipulation of the parties reported on the properties’ current
values and their values when they were transmuted. The values at the time of transmutation
were: on May 17, 2005 Santa Clara
Avenue was worth $800,000, Fifth Street
was worth $1,200,000 and the Garage Lot was worth $240,000; on September 11, 1991 the Home was worth
$240,000; and on September 14, 1992
the Victorian was worth $300,000. As of
July 2009 Santa Clara Avenue was
worth $950,000, Fifth Street
was worth $1,200,000, the Garage Lot was worth $150,000, the Home was worth
$480,000, and the Victorian was worth $550,000 for a total aggregate value of
$3,330,000. The Home was considered to
be “underwater” because it was encumbered by mortgages totaling $515,000.
The
second phase of the trial considered the presumption of undue influence
applicable to interspousal transactions that favor one of the spouses. Testimony was taken as to whether Melvin had
entered into the 2005 community property agreement freely, with knowledge of
the facts, and an understanding of the transaction.
Evidence
submitted on the undue influence issue included the declaration of attorney
Michael Ferguson, who prepared the 2005 agreement and notarized the parties’
signatures to it. Ferguson’s
notes of a meeting with the parties in 2003 showed that they wanted an
agreement confirming that all their property was community property. Ferguson
declared that Melvin did most of the talking at the meeting and gave most of
the instructions. Ferguson
had “absolutely no doubt that [Melvin] signed [the community property
agreement] in my presence, and that he knew what he was signing when he signed
it.” Ferguson testified that he did not
read the agreement to Melvin on the day it was executed, but noted that he had
sent the document to the parties two years before they signed it, and said that
he “would be stunned” if no one had ever read it Melvin.
Melvin
testified that he was not aware of the community property agreement until after
Barbara filed for separation. He did not
sign the agreement because the signature consisted of the letter “M,” and he
never executed documents with his initials.
He did not know why he and Barbara met with Ferguson,
and he did not tell Ferguson that
he wanted a community property agreement.
His relationship with Barbara deteriorated beginning in 2000, when she
refused to let him touch her because he would not change his separate property
to community property. Around the time
they met with Ferguson, she was
threatening to divorce him over the property he held as separate property. He worked “14, 19 hours a day” earning the
money to buy Santa Clara Avenue and Fifth Street before he got married, and
“those two buildings I said to myself will always be mine.” He feared that Barbara would “load[] up” the
properties with debt if they became community property.
Melvin
had moved out of the Home in September 2008, and moved back in November
2008. He testified that he tape recorded
all of his meetings with attorneys, and kept the tapes in locked drawers in his
locked home office. When he was allowed
access to the Home to retrieve personal effects while he was living away, he
discovered that these tapes were gone, along with all of his legal
documents.
Barbara
testified that she was not threatening Melvin with divorce when they consulted Ferguson
in 2003. She testified, consistent with Ferguson’s
notes, that they told him they had for a long time treated what had been
Melvin’s separate property as community property. She said that Ferguson
read the community property agreement to Melvin.
In
its statement of decision on the undue influence issue, the court found that
Melvin’s testimony was not credible in numerous respects. The court wrote that whether Melvin knowingly
assented to the community property agreement “comes down to credibility, and on
this point [Melvin] ‘has issues.’ For
example, the court finds his denial of Ferguson’s
account of their initial meeting (supported by contemporaneous notes) to be not
credible. Similarly, the account of
other witnesses as to how Ferguson
was initially identified is far more credible than [Melvin’s] claim that [Barbara]
‘dragged’ him there. The court finds
[Melvin’s] claim of a therapist counseling him to ‘out-shout’ his wife not
credible, as well as his remembrance of November 21, 2007, as the date he acted on this
advice. His disagreement with the
testimony of his neighbor that it was his voice that was repeatedly heard
yelling over his wife’s more muted protestations was also not credible. The court finds his testimony regarding
[Barbara’s] withdrawal of affection in the 2000-03 period not credible in light
of the contemporaneous family trips to Florida,
Spain, etc. and
the observations of other witnesses. The
court finds his testimony that he never cut his wife off financially to be
false in light of the testimony of his wife and others that he cancelled credit
cards and otherwise blocked her access to bank accounts and the like. The court finds his testimony that he has
been cut off from his grandchildren and misses them terribly to be not credible
in light of his subsequent admission that he has never once tried to call
them. The court finds incredible
[Melvin’s] claim to have taped – only to have [Barbara] destroy – all of the
interviews he had with various probate attorneys over the years when he never
called a single one of these attorneys to testify that they recall such
taping. Because of these and other
peculiar features of [Melvin’s] testimony, a very dark cloud is cast over his
entire account of the marriage and the history of the 2005 Agreement.”
The
court went on to find that Melvin was “indeed a master of control,” and that
“[g]iven his intelligence, sophistication and experience, it is inconceivable
that he would sign the 2005 Agreement without knowing exactly what it said. . . . [T]here is no doubt that his execution
of that agreement was a very deliberate and fully informed act on his part and
that his trial testimony was false.” The
court thus concluded that Barbara had rebutted the presumption of undue
influence that arose from the benefit she received from the agreement. The agreement was therefore enforceable, and Santa
Clara Avenue, Fifth
Street, and the Garage Lot were confirmed to have
been transmuted to community property in May 2005.
Following
unsuccessful attempts at settlement when the parties were assisted by the trial
judge, the court filed a trial setting order that stated: “The court assumes that both parties are
aware that a trial in this matter will result in higher fees and probably the
sale of more properties than might otherwise be possible through settlement and
that such a sale will result in substantial capital [gains] taxes that could
otherwise be avoided. The net result
will be fewer resources than would otherwise be available to sustain these two
parties in their final years. If they
must each eventually live in reduced circumstances than might have been the
case if they had settled, they will have only themselves to blame. This trial will have no winners.”
order filed a few days later.
Melvin
filed an income and expense declaration listing monthly income of $2,000 and
monthly expenses of $10,110. Barbara
filed an income and expense declaration listing monthly income of $2,645 and
monthly expenses of $4,067. The parties’
income consisted of net rents from the Alameda
properties, which were being split 55 percent to Barbara and 45 percent to
Melvin. Apart from $1,000 in cash listed
by Melvin, the parties listed no assets other than the Alameda
properties. Melvin stated that he had
paid his attorneys $34,000 and owed them an additional $91,000. Barbara stated that she owed her attorney
over $93,000.
When
the issues of division and reimbursement were tried in September 2009, the
parties stipulated to admission of the declarations filed and testimony taken
at the trial on undue influence. Barbara
had lodged a declaration stating that she left her career as a social worker
when the children were born and thereafter “worked full time on our real estate
properties. I always did the books,
because [Melvin] is blind. I was the one
who would place the ads to get tenants, collect their deposits and rent,
deposit everything into our joint accounts, pay all of the bills, organize big
repairs, and make smaller repairs either by myself, or with [Melvin] trying to
help me by giving me suggestions or instructions. For a number of years [Melvin] and I had a
Laundromat business at [Fifth Street], and I used to have to collect the monies
from the machines, deposit them into our joint account, and haul the washers
out of their spots to get behind them to make repairs. [Melvin] often understood what was wrong and
could visualize it in his mind and tell me what to do. We were a partnership.” Barbara testified at the trial that she
stopped working as a social worker in 1963, and that she worked 20 hours per
week on the laundry business from 1961 until it was sold in 1981. She was never compensated for her work on the
rental properties or the laundry.
James
Mills, a forensic economist, testified for Barbara that she provided $786,496
in services to Melvin’s separate properties from 1961 up to the time they were
transmuted in 2005. He assumed that she
worked 40 hours per week on the rental properties, and allocated 10 hours of
her time to each of four job categories:
property and real estate manager; janitor and cleaner; maid and
housekeeper; and maintenance and repair.
Using government-compiled wage statistics for the categories, he
determined that a person performing those services would have made $38,539 in
2008. He then adjusted the 2008 earnings
for inflation to come up with the total in services for the years in
question. Mills valued Barbara’s
services to the laundry business at $78,438, based on assumptions that she
worked for the business 20 hours per week from 1961 to 1981, and spent 10 hours
each week as a laundry/dry cleaner worker and 10 hours as a home appliance
repairer.
Mills
calculated various rates of return for Santa Clara
Avenue and Fifth Street
from 1961 to 2005 based on the $66,000 value Barbara gave him for those
properties in 1961. He determined that
statutory interest yielded a higher rate of return during this period than the
average 10-year government bond yield, and the average annual changes in the
Dow Jones Industrial Average and the S&P 500 index. Thus, if the properties had earned a return
equal to interest at the statutory rate, they would have appreciated in value
to $310,200 by 2005.
Lisa
Fowler, a partner at Gallagher & Lindsey, the company that took over
management of the parties’ properties in January 2009, testified that her
company managed a total of about 1500 rental units and charged a fee of six
percent of the rents collected. Fowler
said that the Kahn’s tenants were paying rents that were generally 10 percent
above market. In her opinion the
residential units had been well maintained.
One unit had an upgraded kitchen, and some had nice carpeting and were
nicely painted. Fowler said that three
of the 15 rental units were vacant, and that a fourth vacancy was
anticipated. Barbara testified that she
and Melvin never had any vacancies when they managed the properties. The Kahn’s daughter, Sylvia, testified that
Barbara painted the apartments, and strengthened the tenancies by establishing
personal relationships with the tenants.
Barbara
detailed expenditures for improvements to the properties, which she said were
paid, along with family expenses, from collected rents. She testified that the parties’ income from
the rental properties and the laundry business always exceeded their living
expenses, which she estimated at $15,000 per year. She estimated that the couple spent $1,200
per month on food for meals at home, and said that they ate out once or twice a
week, during the last five years of their marriage. However, she characterized their home as
sparsely furnished, and said she did not buy expensive clothes or jewelry.
Melvin
agreed that Barbara did not purchase expensive clothes or jewelry, but
testified that their home was very well furnished, with many antiques. Melvin had previously testified that Barbara
spent all of their money, “probably mainly on the children,” without consulting
him about the expenditures. He said that
“[s]he had the checkbook and, being blind, she took advantage of it and just
spent whatever she wanted to. At the end
of almost every month there was nothing left.”
Barbara acknowledged that she and Melvin had incurred mortgage and
equity line debts of more than $500,000, and that none of that money had been
used to purchase their properties.
Barbara had “no idea” where the money went.
Barbara
also testified that their home was “awash in tapes” when Melvin moved out in
September 2008. She said that she
disposed of the tapes she did not give to her attorney.
tapes, she answered, “I just did.”
The
court filed a proposed decision on September
28, 2009. The court first
explained that Barbara’s testimony about disposing of Melvin’s tapes caused it
to reconsider its decision on the issue of undue influence. The court explained: “During the third trial, [Barbara’s]
testimony contained one surprise, and it was a big one. After months of back-and-forth between the
parties as to whether [Barbara] had turned over in discovery all of the tapes
she found when she cleaned out the office [Melvin] had used during the
marriage, [Barbara] testified that she had found a ‘bunch’ of tapes but had
‘disposed’ of them.” In light of
Barbara’s belated revelation, the court amended its prior decision and found
that Barbara did not rebut the presumption of undue influence as to the May
2005 community property agreement.
Thus,
Santa Clara Avenue, Fifth
Street, and the Garage Lot remained Melvin’s
separate properties. Of those
properties, only Santa Clara Avenue
had appreciated in value after the 2005 agreement was executed. By virtue of the reversal of the undue
influence ruling, Barbara lost half the appreciation in Santa
Clara Avenue, a sum of $75,000.
The
court explained why it rejected Barbara’s claims that she acquired a community
property interest in Melvin’s separate properties based on services she
provided to those properties during the marriage (the “Pereira/Van Camp” claims; Pereira
v. Pereira (1909) 156 Cal. 1; Van
Camp v. Van Camp (1921) 53 Cal.App. 17) and her claims that she acquired an
interest in those properties because community funds were used to pay for
separate property expenses and improvements (the “Moore/Marsden” claims; In re
Marriage of Moore (1980) 28 Cal.3d 366; In
re Marriage of Marsden (1982) 130 Cal.App.3d 426). The court granted Melvin a reimbursement
claim of $205,000 based upon his equity in the Victorian when it was transmuted
to community property in 1992. The court
determined that Barbara was entitled to spousal support of $3,300 per month,
and separately ordered the establishment of a trust, initially including all of
the income-producing properties, to ensure that Barbara received adequate
support for the rest of her life.
Both
sides filed objections to the proposed decision, and Barbara moved to
disqualify the judge for cause. The
court filed a statement of decision in October 2009, responding to the parties’
objections and elaborating further on its reasoning. The court increased Barbara’s monthly support
from $3,300 to $3,400.
The
statement of decision also rejected Barbara’s allegations of bias and
prejudice. The court added a footnote
stating that this case “is one of the two or three most shocking examples of
wasteful family court litigation seen by this bench officer in nearly three
years of service to the department. . . . The policies reflected in section 271
[attorney’s fees as sanctions] can only be realized if family law practitioners
realistically assess the merits of their respective cases and seek an informed
resolution rather than advance their respective client’s feeling of entitlement
regardless of legal (as opposed to moral or emotional) merit.”
The
judge filed a verified answer to the motion for disqualification, followed by
an order striking the motion. Barbara
petitioned this court for a writ of mandate disqualifying the judge. We summarily denied the petition.
Melvin
filed a notice of intention to set
aside portions of the “judgment,” and a declaration of counsel stating that
“[f]rom the moment [she] began representing [Melvin], it became very clear to
me that the court did not like my client and was biased against him. The entire record of this case reflects the
court’s poor opinion of [Melvin] as the Court itself points out. The contents of the Proposed Decision and the
Statement of Decision did not change my opinion of the court’s negative opinion
of [Melvin].”
The
court filed an amended statement of decision and a judgment on November 19, 2009. The amended statement of decision, like the
prior statement of decision, omitted observations about attorney’s fees as
sanctions the court originally expressed, but otherwise contained the language
we have quoted above from the prior decisions without material change. The 30-page proposed decision expanded to 44
pages in the amended statement of decision.
The
judgment confirmed Santa Clara Avenue,
Fifth Street, and the
Garage Lot to Melvin as his separate property, and declared the Home and the
Victorian to be community property. The
Home was awarded to Melvin with an equalization payment of $6,000 to
Barbara. The Victorian was ordered to be
sold, and the net proceeds distributed in the following priority: “(a) to cover capital gains taxes, (b) to pay
[Melvin’s] $205,000 reimbursement claim, and (c) to pay any and all community
property credit card debt,” with “any remainder [to] be held in a blocked
account pending resolution of outstanding disputes regarding attorney’s fees
and litigation costs.” Barbara’s
she was awarded monthly support of $3,400 effective November 1, 2009.
Pending sale of the Victorian, she would receive 60 percent of the net
rental proceeds from the properties up to $3,400 per month.
Provisions
for the trust that would ensure Barbara’s lifetime support evolved based upon
the parties’ counter proposals.
name="_ftnref3" title="">[3] When the court filed its statement of
decision, it was “unclear as between [Santa Clara
Avenue] or [Fifth Street]
which should be in the trust.” The
amended statement of decision ordered that the corpus be Santa Clara Avenue,
and provided guidance as to how the trust should be managed to “protect
[Barbara] in the event that inflation, unexpected medical costs, the need for
long-term care or other contingencies might make the current award
insufficient.” If the trust was unable
to pay Barbara $3,400 in any month, Melvin was responsible for the
difference. The court “reject[ed] the
proposal that [Melvin] should manage the trust property and be responsible for
the full monthly payment. Given the
history of these parties, that only invites trouble. The court would order an annuity or life
insurance policy before it would be comfortable leaving [Melvin] to manage the
trust corpus.”
On
December 4, 2009, Barbara
filed a timely notice of intent to
move for a new trial. The court filed
its order denying her motion for new trial on February 11, 2010.
Barbara timely appealed from the judgment.
DISCUSSION
A. The Pereira/Van Camp
“[I]n
California, property acquired
prior to marriage is separate, while property acquired during the marriage is
presumed community property.
[Citations.] Income from separate
property is separate, but the fruits of the community’s expenditures of time,
talent, and labor are community property.
[Citations.] [¶] . . .
[¶] Where community efforts increase the value of a separate property
business, it becomes necessary to quantify the contributions of the separate
capital and community effort to the
increase. . . . [¶] . . . [¶] . . . [T]he necessity of apportionment arises when,
during marriage, more than minimal community effort is devoted to a separate
property business. . . . [¶] The community is entitled to the increase in
profits attributable to the community endeavor.
[Citations.] Accordingly, courts
must apportion profits derived from community effort to the community, and
profits derived from separate capital are apportioned to separate property.” In re
Marriage of Dekker (1993) 17 Cal.App.4th 842, 850-852, fn. omitted (
be affirmed if they are supported by substantial evidence. (Id.
at p. 849.)
“California
courts have developed two alternative approaches to allocating business
profits. The
approach is to allocate a fair return to the separate property investment and
allocate the balance of the increased value to community property as arising
from community efforts. [Citations.] The Van
Camp approach is to determine the reasonable value of the community’s
services, allocate that amount to community property and the balance to
separate property. [Citations.] [¶] . . . [Courts] have endeavored to
adopt that formula which is most appropriate and equitable under the
circumstances. [Citation]. The court is not bound to adopt a
predetermined percentage as a fair return on separate business capital, nor need
it limit the community interest to a salary as reward for a spouse’s efforts,
but may select whichever formula will effect substantial justice between the
parties.” (Dekker, supra, 17
Cal.App.4th at pp. 852-853, fns. omitted.)
Additionally,
there is a “fundamental distinction between the total community
derived from the Van Camp formula,
and the community estate existing at
the dissolution of the marriage. The
resulting community estate is not equivalent to total community income so long
as there are any community expenditures
to be charged against the community income.
A long line of California decisions has established that ‘it is presumed
that the expenses of the family are paid from community rather than separate
funds [citations] [and] thus, in the absence of any evidence showing a
different practice, the community earnings are chargeable with these
expenses. [Citations.]’ [Citations.]
This ‘family expense presumption’ has been universally invoked by prior California
decisions applying either the Pereira
or Van Camp formula. [Citations.]
Under these precedents, once a court ascertains the amount of community
income, through either the Pereira or the Van Camp approach, it deducts the community’s living expenses from
community income to determine the balance of the community property.” (Beam
v. Bank of America (1971) 6 Cal.3d 12, 20-21 (Beam).)
This
approach has since been discredited insofar as it directs the deduction of
community expenses when applying the Pereira formula. (In re
Marriage of Frick (1986) 181 Cal.App.3d 997, 1019 (Frick).) Since the spouse
claiming apportionment in Beam
conceded that she could not prevail under the
formula, the court’s discussion of that formula was nonbinding dicta. (See id.
at p. 1019, fn. 12.) However,
it requires deduction of community expenses when a court applies the
argue otherwise.
Consistent
with the foregoing authorities, the court ruled that Barbara had the burden
under Pereira “[1] of proving that a
portion of the pre-transmutation appreciation of any of [Melvin’s] separate
properties [was] attributable to community effort as opposed to general market
conditions and [2] of proving the amount of the appreciation to be attributed
to such efforts.” Under the
proving that the reasonable compensation for management of the properties
exceeded family expenses.” The court
explained at length why it concluded that she had not met either burden.
The
court rejected Mills’s expert testimony as “based on unreasonable assumptions
unsupported by the record,” and ultimately “too speculative to be given any
weight.” As for Mills’s
calculations, “it
was never clear why Mills used interest rates, government bonds and the like to
measure the return that might be attributable to the increase in value of the
underlying real estate. There are presumably numerous sources available to see
what returns have been earned on California real estate (and Bay Area real estate in
particular) over the years, but Mills never explained why these were not
available, could not be used or might be inappropriate.”
As
for Mills’s Van Kamp testimony, the
court wrote:
“[T]here was no credible effort to relate the work [Barbara]
in fact performed to the six different [salary data] categories he used to
value her services, and it was totally arbitrary to assume that she spent 10
hours a week for 52 weeks a year in each of the six categories from 1961
through 1981 and then 10 hours a week in the remaining four categories from
1981 through the date of separation.
These categories and time assumptions were used without any regard for
the number of units the parties in fact managed at different time periods, how the resulting fluctuations might
relate to full time or part time work, etc.
The time attributions were no more than a guess. Third, there was no attempt to use other
information available in the record to value [Barbara’s] services. For example, there was evidence that
professional property management firms charge 6% of gross rents as a fee for a
bundle of services [Barbara] in fact provided.
That factor could have been applied to historical rents and used as a
measure for a portion of the parties’ efforts and then interviews or other
methods rooted in the parties’ testimony might have been used to value the
balance. Instead of trying to assemble a detailed factual record
for Mills to work with, [Barbara] had him simply make
a series of gross assumptions and apply some rudimentary techniques to those
assumptions.
“19. As if these difficulties were not enough,
this record presents the additional
problem of how to apply the family expense presumption. As already noted, even if one could value
[Barbara’s] labors, the sum total of those labors over the length of the
marriage does not equate to the community interest as of the date of
separation. At best, one would have a
figure for gross community earnings
and need to deduct from that the family expenses presumably paid from those
earnings. This was not done, or at least
not in any credible fashion. Instead,
[Barbara] simply estimated that $15,000/year was a good approximation of the
couple’s average living expenses over the course of the marriage. There was no credible explanation as to why
the court should credit her $15,000/year estimate in this context. This is especially true when one notes that
Barbara uses the $17,674/year developed by Mills as the average community
earnings — leaving a net margin of only $2,674/year. The narrowness of that spread between the estimate of the
value of community income and the estimate of family expenses is
significant. It illustrates how
sensitive the exercise is to whatever underlying assumptions may be used. If one posits family expenses consistent with
either of [Barbara’s] recent estimates of the living expenses for her alone
(and remember, she testified to being frugal), either of those annualized
figures would be higher than the Mills figure for 2008 community earnings
($38,539). In short, no serious effort
was made at trial to develop a picture of this family’s living expenses
consistent with any of [Barbara’s] recent [income and expense declarations], to
discount that number in some fashion to derive an estimate for each of the 48 years in question and then to compare that
year-by-year expense data to a reasonable year-by-year estimate of income
attributable to the skill, efforts and industry of the spouses.”
The
court further noted that “Mills made no use of the parties’ tax returns, and this
is said to be explained by the fact that the returns for the years prior to
1984 were unavailable. What is
unexplained, however, is why the tax returns since 1984 were not used. They were available and could have been used
at least as a check on his assumptions for the latter years. If that check supported the reasonableness of
his assumptions and methods for the period of 1985 to 2005, one might be more
willing to credit his methodologies for the earlier period. In other words, the fact that good data is
available for ‘only’ 20 of the 40 years is not a good argument for ignoring all
case-specific data in favor of a far more generalized set of assumptions and
methods.”
The
deficiencies in Mills’s and Barbara’s testimony were not cured by property
manager Fowler’s testimony that “[Barbara’s] efforts resulted in rental income that
was (at least in recent years) approximately 10% above market. This, too, might have been a way to value
[Barbara’s] contributions above the 6% an ordinary property manager might
charge. But as with some of the other
alternatives, such an approach might well have resulted in insufficient
community income to offset family expenses.
[Barbara] testified that there was never a year when community expenses
exceeded ‘the money coming in,’ but that bare fact does not help one determine
whether there were years when community expenses did not exceed
years when there may have been ‘excess community funds’ how much they were.”
The
court determined, in sum, “that [Barbara] failed to carry her burden of proving
(a) that a portion of the pre-transmutation appreciation of any of [Melvin’s]
separate properties was attributable to community effort as opposed to general
market conditions, (b) that, if there was such a portion, the actual amount of
the appreciation that should be attributed to such efforts, (c) what was the
value of the community’s efforts in managing the properties, (d) the amount by
which that value exceeded community expenses in any given year of the time
period as a whole, or (e) where any ‘excess community earnings’ went.”
The
court thus provided many cogent reasons for rejecting Barbara’s apportionment
claims. Barbara submits that she
presented substantial evidence that could have supported a different result,
but that argument is unavailing on appeal.
The court weighed her evidence and found it wanting. She “in effect ask[s] us to reweigh the
evidence, which is not our province to do.”
(County of Los Angeles v. Kling
(1972) 22 Cal.App.3d 916, 921.)
Barbara
contends that she was erroneously assessed the burden of proof, but as the
party asserting claims against Melvin’s separate properties she was properly
required to substantiate them. (Evid.
Code, § 500 [party generally has the burden of proving each fact essential
to a claim for relief].) Barbara argues
Melvin should have borne the burden of proof because he “controlled the
finances” during the marriage. However,
courts do not shift the burden of proof in response to such a general and
unspecified claim. Rather, they require
the party who otherwise would have the burden
of proof to show that information is not available to them. (See Estate
of Kampen (2011) 201 Cal.App.4th 971, 1001.) Here, the court identified evidence available
to Barbara such as Alameda real estate data, tax returns, and income
and expense declarations that might have supported her position. Under the circumstances, Melvin cannot be
held responsible for her failure of proof.
Barbara
suggests that, if the court deemed her showings under Pereira and Van Camp to
be inadequate, it was required “to substitute its own calculations” to
determine the apportionment to which she was entitled. Here again, the court adequately addressed
her claim: “[Barbara] has suggested, in effect, that the court
should use the information presented by the forensic economist, the testimony
of the parties and the income tax returns and other exhibits as a tool kit and
simply apply the most reasonable inferences and techniques to fashion a result
that will, in the words of the Beam court,
achieve ‘substantial justice between the parties.’[
fundamentally misconstrues the role of the court and is an extremely broad
reading of the passage quoted in Beam. In any given situation, the law imposes
on one party or the other the burden of proof and it is for that party to carry
that burden through the presentation of sufficient, admissible evidence. While the trier of fact may from time to time
credit a party’s presentation but adjust certain portions to make it more
reasonable, it is an entirely different matter to use a party’s presentation as
a tool kit to construct whatever result seems ‘just.’ To permit such latitude would be to relieve
the party with the burden of proof from carrying that burden and instead invite
the court to use whatever is in the record, no matter how limited, to engineer
on its own initiative whatever result it may wish.”
Barbara
emphasizes that in this case, unlike many involving Pereira/Van Camp claims, both spouses, not just one, provided
community services to a separate property “business” – the management of
Melvin’s rental properties. However, she
did not seek apportionment based on the value of Melvin’s community property
contribution in addition to her own, and does not explain how both parties’
participation in the business should have changed the outcome.
Barbara’s
apportionment arguments appear at bottom to rest on sheer incredulity that the
community could acquire no equity interest in the separate property she and
Melvin spent a good deal of their time managing. She maintains that the court’s
“relegated [her] to the status of an indentured servant who slaved for [Melvin]
for 48 years in return for room and board,” and that the result cannot be
squared with “California’s partnership model of marriage.” (Dekker,
supra, 17 Cal.App.4th at p.
851.) But to borrow from the trial
court, Barbara cannot prevail based on “feelings of entitlement” that may have
“moral or emotional . . . merit.” She must demonstrate that the court committed
reversible legal error, and has failed to do so with respect to her
apportionment claims.
Barbara
asserted Moore/Marsden claims seeking
reimbursement of community funds used to pay off a mortgage on Fifth
Street, and mortgages on the Home and the
Victorian prior to their transmutations to community property. She also sought reimbursement of community
funds used to pay for improvements to Santa Clara
Avenue and Fifth Street,
and improvements to the Home and the Victorian before their transmutation. She challenges the court’s conclusion that
her claims were “not well-founded.”
Cal.3d 366 and In re Marriage of Marsden,
supra, 130 Cal.App.3d 426, lead a line of cases “giving the community a pro
tanto interest in separate property – real property, typically – purchased,
paid down, or improved with community funds.”
(Patrick v. Alacer Corp.
(2011) 201 Cal.App.4th 1326, 1344.) “Generally,
‘[w]hen community property is used to reduce the principal balance of a
mortgage on one spouse’s separate property, the community acquires a pro tanto
interest in the property.
[Citations.] This
well-established principle is known as “the Moore/Marsden
rule.” ’ ” (In re Marriage of Nelson (2006) 139 Cal.App.4th 1546, 1552.) “Where community funds are used to make
capital improvements to a spouse’s separate real property, the community is
entitled to reimbursement or a pro tanto interest under the
Marriage of Allen (2002) 96 Cal.App.4th 497, 501, citing
Cal.App.4th 962, 972.) The court’s
factual findings on Moore/Marsden
issues are reviewed for substantial evidence.
(See Bono v.
Cal.App.4th 1409, 1421.)
The
court began its analysis by pointing out that Barbara’s claims rested largely
on the false premise that all of the rents collected by the community “property
management business” were community income.
The court observed, “This is like saying that the Gallagher &
Lindsey business income is the rent it collects for its clients. Not so.
The rental receipts it collects are the income of its clients, while
G&L’s income is the fees it is paid by those clients.” As another court has stated, “Assuming the
care and maintenance of income properties owned by [the husband] to be a
‘business,’ it is not the profits of the business, but only the ascertained
earnings of the [husband] from his individual efforts in managing, laboring on
and caring for such property, in the nature of salary, wages or the equivalent
thereof, which would be community property.”
(Cozzi v. Cozzi (1947) 81
Cal.App.2d 229, 232.)
The
rents collected from Santa Clara Avenue
and Fifth Street, Melvin’s
separate properties, were also his separate property. (Fam. Code, § 770, subds. (a)(1),
(a)(3).) Rents from the Victorian were
likewise not community property until the Victorian was transmuted to community
property in 1992. The community had no
rental income apart from the post-1992 rents from the Victorian.
the community was based upon its earnings for the “property management
business.” The community had no other
sources of income during the marriage other than money Barbara earned from
employment before 1964, and earnings generated by the laundry business before
1982.
The
court separately addressed the community contributions to each of the
properties in explaining why Barbara was entitled to no reimbursements, but in
essence it rejected her claims because Barbara had not established that any of
the allegedly reimbursable expenditures were made with community funds rather
than the rents earned from Melvin’s separate properties. As with her Pereira/Van Camp claims, she again failed to overcome the family
expense presumption and show that community income exceeded community expenses.
The
court’s findings were supported by substantial evidence. As explained above, the community income was
not measured by all the rents received as argued by Barbara. Melvin’s brief asks, if community income
exceeded community expenses, “where is the excess There was no cash to divide.” He has a point. The parties borrowed over $500,000 against
their community properties, and ended up with no substantial assets other than
the real estate they bought in the 1960’s.
Barbara acknowledged at trial that the mortgages were not incurred to
purchase the properties, and she had “no idea” where the loan proceeds
went. It thus appears that the parties’
community expenses were greater than all
of their combined income, whether separate or community.
In
her discussion of Moore/Marsden
issues, Barbara makes passing reference to the rule that “[p]ayments made from
a commingled source are presumed community property payments unless traced to a
separate property source.” She does not
elaborate on the point except to state that “[t]he testimony at trial was the
parties had one joint account after marriage, into which all of the money
went.” This statement appears in another
section of her brief on a different issue, but is not supported by any citation
to the record.
The
court recognized that commingling of community and separate income was a
possibility after transmutation of the Victorian in 1992, but found that
Barbara had failed to prove that commingling occurred. It appeared to the court that “the revenues
and expenses related to the Victorian were not separately accounted for and
separate bank accounts were not maintained segregating the transactions
relevant to the Victorian. [Barbara] made no attempt, however, to show what
accounts (if any) were infected by commingling. Her view seems to be that, at this point, all
accounts must be viewed as community accounts and [Melvin] had the burden of
proving that, as to any past transaction, it was a separate property as opposed
to a community transaction. The court
finds that [Barbara] needed to do more to shift the burden to [Melvin] as to
any historical transaction she might wish to challenge.”
Barbara
cannot effectively challenge these factual findings without citing to the
appellate record. (See Eisenberg et al.,
Cal. Practice Guide: Civil Appeals and
Writs (The Rutter Group 2011) ¶ 9:36, pp. 9-12 – 9-13 (rev. #1 2011) [when
opening brief fails to support arguments with appropriate citations to the
record, court may treat the argument as waived].) Moreover, the trial testimony was not that
“the parties had one joint account after marriage, into which all of the money
went.” When Barbara was asked about
sources of deposits into an account she had maintained in her name alone, she
answered, “From money that either [Melvin] gave me or from . . . another
account that we had. We transferred
money back and forth all the time for some reason. And it was . . . even
confusing to [their accountants]. They
told me that. Because things got paid
out of this account or that account, money got moved from here to there. Not by me.”
There
are no grounds to overturn the Moore/Marsden
determinations.
Other Arguments on the Merits
Barbara
argues that the court erred when it granted Melvin a $205,000 reimbursement
from the sales proceeds of the Victorian as compensation for his equity when it
was transmuted to community property in 1992.
(See generally In re Marriage of
Geraci (2006) 144 Cal.App.4th 1278, 1286 [separate property contributions
to community property are reimbursed before division of remaining community
property].) She argues that he could not
obtain this reimbursement without tracing the funds used to purchase the
Victorian in 1969 to a separate property source. Her argument is based on Family Code section
2640, subdivision (b), which provides in relevant part: “In the division of the community estate . .
. [a] party shall be reimbursed for the party’s contributions to the acquisition
of property of the community property estate to the extent the party traces the
contributions to a separate party source.”
However,
as we stated in the preceding section of our discussion, the court had
substantial evidence from which to find that community expenses exceeded
community income throughout the marriage, a fact that, as Barbara concedes,
obviates the tracing obligation. She
recognizes that, if community expenses were greater than community income, “any
money [Melvin] took to purchase the Victorian ‘must have been’ his separate property.” “ ‘Evidence that there was no excess of
community income over living expenses is as effective to prove that all assets
of the estate are separate property as a specific showing from which separate
source each asset flowed.’ ” (
770, 793.)
Barbara
notes that property purchased with funds from an account in which separate and
community property are commingled is presumed to be community property (see
explained why Barbara has no viable commingling argument.
The
court did not err in granting Melvin’s reimbursement claim.
Barbara
contends that the court’s proposed decision, statement of decision, and amended
statement of decision were “materially different,” and that she was improperly
deprived of an opportunity to object to the latter two. However, the decisions were consistent with
respect to the issues raised in this appeal.
The text expanded as the court’s thinking evolved, but the decisions
consistently rejected Barbara’s Pereira/Van
Camp and Moore/Marsden claims,
and granted Melvin’s reimbursement from the sale of the Victorian. Barbara was given ample opportunity to argue
all facets of her case below and fully availed herself of that opportunity,
filing among other things a 41-page closing argument, 42 pages of objections to
the proposed decision, and a 36-page memorandum of points and authorities in support
of her motion for new trial.
The
court answered Barbara’s “three decisions” argument when it denied her new
trial motion: “As to two of the
‘decisions,’ there was nothing unusual:
the court issued a tentative decision and, after receiving objections
and proposals from the parties, issued its Statement of Decision. In this respect, the court followed the
process set forth in the Code. (C.C.P.
§ 632.) The ‘third’ decision was
the Amended Decision issued coincident with the judgment. The Amended Decision made some relatively
minor adjustments, in some instances going back to the original tentative. . . . As noted by [Barbara] in
the context of her new trial motion, the court has inherent power to modify any
interim order or decision . . . , and the Amended Decision
is simply an application of that principle.
There was nothing ‘irregular’ in what occurred here with respect to the
so-called ‘three decisions.’ ”
Barbara
does not identify any error in this reasoning, or any prejudice caused by the
sequence of decisions. We therefore
reject the “three decisions” argument.
Barbara
asserts broadly that “the trial court failed to do equity.” We disagree.
To once again borrow the trial court’s language, “even a justifiable
feeling of entitlement is no substitute for proof consistent with the precepts
of the Family Code.”
In
her opposition to Melvin’s Pereira/Van
Camp briefing below, Barbara wrote:
“In the end, the Court should achieve substantial justice by awarding
[Santa Clara Avenue] to [her] as her separate property, and [Fifth Street] to
[Melvin] as his separate property. . . . A less permanent solution, but one
that would guarantee [Barbara] a stream of income during her life, is to award
[her] a life estate in [Santa Clara Avenue] and a portion life estate in [Fifth
Street] so that she has sufficient spousal support for the remainder of her
life.”
The
court took care to ensure that Barbara would have adequate spousal support for
life. Although it did not award her an
ownership interest in Santa Clara Avenue,
it ordered that it be placed into a trust and managed so as to meet Barbara’s
current and future needs. It was
apparent to the court that the “support award need[ed] to be secured so that [Barbara] will receive
support if [Melvin] predeceases her and chooses to leave his estate to
others. This fundamental fact has been
obvious from the very beginning of the case, and throughout the litigation all
the property and reimbursement disputes have played out against this backdrop
and the realization that — whatever the outcome of those disputes — the
economic benefit flowing from these properties would be shared. The only issue has been the extent [Barbara]
would share that benefit as an owner of a large portion of the assets or
through spousal support secured by [Melvin’s] larger asset base or by some
combination of the two.”
Although
Barbara did not achieve the result she sought, the result the court reached was
close enough to the one she envisioned to belie her allegations of gross
unfairness.
Barbara
moved to disqualify the judge for bias on the grounds that he prejudged the
case, and “did not treat the litigants equally or give impartial consideration
of the evidence.” Her motion was
supported by the declaration of her counsel stating, among other things, that
in her 16 years of practice she had never before challenged a judge for cause,
and was “do[ing] so now with great regret.”
The allegations of judicial bias are renewed on appeal. They are without merit.
Melvin’s
threshold position is that Barbara’s claims of bias are not cognizable in this
appeal because her writ petition on the subject was her sole remedy and it was
unsuccessful. We disagree. Code of Civil Procedure section 170.3,
subdivision (d) provides that an order regarding disqualification of a judge is
not appealable and may be reviewed only by a writ of mandate. However, Barbara preserved her right to argue
the issue of bias on appeal by petitioning for such a writ, and our summary
denial of the petition did not establish law of the case on this issue. (See People
v. Brown (1993) 6 Cal.4th 322, 336 [defendant whose Code Civ. Proc.,
§ 170.3, subd. (d) petition was summarily denied could raise
constitutional due process claim of judicial bias]; see also Code Civ. Proc.,
§ 170.3, subd. (b)(2)(A) [a claim that a judge is personally biased or
prejudiced against a party is not waivable]; compare In re Sheila B. (1993) 19 Cal.App.4th 187, 194-195 [summarily
denied petition did not raise disqualification issue].)
Under
Code of Civil Procedure section 170.1, “(a) A judge shall be disqualified if any one or
more of the following are true . . . (6)(A) . . . (iii) A person aware of the facts might reasonably
entertain a doubt that the judge would be able to be impartial. (B)
Bias or prejudice toward a lawyer in the proceeding may be grounds for
disqualification.” “When reviewing a
charge of bias, ‘ . . . the litigants’ necessarily partisan views should not
provide the applicable frame of reference.
[Citations].’ [Citation.] Potential bias and prejudice must clearly be
established [citation] and statutes authorizing disqualification of a judge on
grounds of bias must be applied with restraint.
[Citation.]” (
Brokerage Co. (1998) 62 Cal.App.4th 716, 724 (Roitz).)
“Bias or
prejudice consists of a ‘mental attitude or disposition of the judge towards a
party to the litigation . . . .’ ” (
objectively by asking whether a reasonable person “ ‘ “ ‘would
entertain doubts concerning the judge’s impartiality.’ ” ’ ” (Hall
v. Harker (1999) 69 Cal.App.4th 836, 841 (Hall), disapproved on other grounds in People v. Freeman (2010) 47 Cal.4th 993, 1006-1007, fn. 4, and
Cal.4th 336, 349.) Neither “strained
relations between a judge and an attorney” (Roitz,
supra, 62 Cal.App.4th at p. 724), nor
a judge’s expressions of “understandable frustration” (People v. Brown (1993) 6 Cal.4th 322, 337; Hall, supra, 69
Cal.App.4th at p. 843) establish bias.
Code of
Civil Procedure section 170.2, subdivision (b) states, with exceptions not
pertinent here (see Roth v. Parker
(1997) 57 Cal.App.4th 542, 549), that “[i]t shall not be grounds for
disqualification that the judge . . . [h]as in any capacity expressed a view on
a legal or factual issue presented in the proceeding.” Thus, “ ‘[w]hen the state of mind of the
trial judge appears to be adverse to one of the parties but is based upon
actual observance of the witnesses and the evidence given during the trial of
an action, it does not amount to that prejudice against a litigant which
disqualifies him in the trial of the action.’ ” (Pacific,
supra, 82 Cal.App.3d at pp.
82-83.) On the other hand, a judge who
expresses opinions on the merits before hearing the evidence may be deemed to
have improperly prejudged the case. (
pretrial motions, the judge wrote a letter to counsel stating “I believe the
award of damages will be enormous” and “[c]ontinued litigation may prove
devastating to all concerned”; this “midstream gratuitous blast” from the judge
was outside the scope of his duty to rule on the matters before him].)
In his
answer to Barbara’s petition, the judge denied prejudgment of any part
of the case. He acknowledged that
“during the settlement conferences . . . I may have stated views regarding
legal and factual issues. If and when I
did so, it was always with the express or implied proviso that I had not yet
heard the trial testimony, which would control any factual determination, and
my views on the law were subject to authorities and argument that counsel might
present. . . . [¶] Both in settlement conferences and on the record at
motion hearings and status conferences, I did urge the parties to settle and I
expressed the views recounted in footnote 35 of the Decision [describing the
case as “shocking example[] of wasteful family court litigation”]. That view was and is that, given that both
parties are in their eighties and have been married for close to 50 years,
regardless of who won or lost the property division issues, spousal support
would be dramatically affected by those rulings and adjusted so that the
economic impact of the property division might not be as great as the parties
believe. That states the obvious given
the way Family Code section 4320 [factors to be considered in ordering spousal
support] is drafted and typically applied.
Further, I expressed the view that the litigation was irrational because
(a) they were running up attorneys’ fees that could only be satisfied by the sale
of assets both parties were relying on for support in their waning years and
(b) as they ran up those fees, more property would have to be liquidated and,
due to the fact that most had a tax basis pegged to the 1960’s, a large portion
of the proceeds would then have to be paid to the IRS to satisfy the resulting
capital gain tax liability. [¶] In making comments such as those above and
similar remarks regarding the importance of settling the case, I was not
prejudging the case but exercising what I saw (and see) as my responsibility as
a bench officer to promote settlement.”
We
find no reason to doubt the judge’s explanation. The situation here is like that in
Cal.App.3d 413, where the defendant moved to disqualify the judge because the
judge had advised in a chambers conference before trial that it “ought to
settle the lawsuit because there appeared to be clear liability.” (
against any of the parties or any commitment as to the outcome,” noting that
his comment as to liability “was made in the context of trying to settle the
case prior to trial, an attempt he [made] with every personal injury
case.” (Id. at p. 423.) The
motion for disqualification was denied, and the appellate court “agree[d] with
the decision below that the facts indicate that there was no prejudice in this
instance. Expressions of opinion of this
nature by a judge, in what he conceives to be a discharge of his official
duties, do not evidence a bias or prejudice which would prevent him from being
entirely fair and impartial in the trial.”
(Ibid.)
| Description | Barbara Kahn appeals from the judgment dissolving her marriage to Melvin Kahn. Barbara argues that the court erroneously: (1) failed to apportion to her interests in Melvin’s separate properties based on community services rendered to those properties; (2) denied her reimbursement for community property payments made for the benefit of his separate properties; and (3) granted him reimbursement for his equity in a separate property that was transmuted to community property during the marriage. Her other principal contention is that the judge should have been disqualified for bias. Her arguments lack merit and we affirm the judgment. |
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