Marriage of Mokreva and Thomas

Filed 10/29/07 Marriage of Mokreva and Thomas 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

Appeal from a judgment of the Superior Court of Orange County, Robert H. Gallivan, Judge. Affirmed.

Law Offices of Carlos F. Negrete and Carlos F. Negrete for Appellant.

Minyard Morris, Thomas W. Tuttle; Snell & Wilmer and Richard A. Derevan for Respondent.

* * *

In the division of property in this dissolution case, the trial court stuck the husband with two dubious investments he had unilaterally made, at the face value of his initial investment. In this appeal he challenges that aspect of the division, arguing that the trial court was required to divide the investments equally. We affirm.

I

Here are the facts: At the end of September 2004 -- that is, just prior to the October 1, 2004 date of separation -- Juliana Mokreva (wife) tried to freeze a line of credit on the community property condo in Irvine she owned with Maxim Thomas (husband). A significant amount of community property was at stake: The condo had a value of $500,000, there was a first mortgage on it of about $230,000, so somewhere around $200,000 of the couples equity could be easily withdrawn via the line of credit. Earlier that March, husband had, without first obtaining wifes consent, taken out $50,000 to invest in a company specializing in flipping real estate. (That is, it would buy property, fix it up, and resell it at a profit.)

Actually, wife did manage to freeze the line of credit, at least for a little while. But it turned out that unfreezing the line of credit was relatively easy, and could be unilaterally done by the husband. The facts behind the unfreezing are: Immediately after the freeze, wifes attorney left a voicemail with husband asking him to call the attorney back. It is a reasonable inference that the very fact of the message from an attorney representing wife alerted husband to possibility of a divorce, and in any event it is certain that that very day husband went to the bank, discovered that the line of credit had been frozen, and submitted a letter to the bank unfreezing the line of credit. Thereupon he withdrew $99,500 from the line of credit and invested at least $64,000 of that in a matchmaker business that helps American men meet Russian women.

In the ensuing dissolution, the trial court awarded the investments in the flipper company and the matchmaker company to the husband, at $50,000 and $64,000 respectively he had unilaterally put into each investment. At the time neither had yielded any return.

In terms of hard assets, Wife was awarded the remaining equity in the condo ($60,000) and a Mitsubishi Spider worth $12,000; husband got a $23,000 Infiniti. A Florida condo owned by the couple was divided equally, that is, the judgment provided that it would be sold and the proceeds divided equally.

All in all, counting various credits and debits, the judgment required an equalizing payment of about $60,000 to wife. The equalizing payment was to come out of the husbands share of the proceeds of the Florida condo.

Husband, whose equalizing judgment is in large measure the result of having been stuck (our phrase) with the flipper and matchmaker investments, has appealed. The appeal is solely confined to the trial courts award of the two investments to him at the amount he put into them.

II

A

Husbands main argument, ironically, is premised upon the correctness of a finding by the trial court that he indeed breached his fiduciary duty to wife by, as the statement of decision put it, in particular the unfreezing of the line of credit. He reasons that under subdivision (g) of Family Code section 1101, given the express finding of breach of fiduciary duty, the trial court was obligated to award 50 percent of the two dubious assets to wife. As he puts it, If the Court finds such a breach has occurred, the remedy is to award half of the asset obtained through the breach back to the non-breaching spouse, making them whole.

No. Here is the text of the statute: Remedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorneys fees and court costs. The value of the asset shall be determined to be its highest value at the date of the breach of the fiduciary duty, the date of the sale or disposition of the asset, or the date of the award by the court. (Italics added.)

Husbands briefing never quite comes to grips with that but not be limited to language. Of course, in a case where -- unlike this one -- a spouse, in breach of fiduciary duty, obtains a valuable asset, awarding half of its value to the non-breaching spouse makes perfect sense.

But in a case like this one -- which involves essentially the waste of community funds by their unilateral dissipation in dubious investments -- awarding half the value of asset actually rewards the breaching spouse for his or her financial recklessness: Both spouses, regardless of moral fault, would have to share in the loss. Of course that doesnt make sense, which is why the statute allows for other options.

B

Husband also argues that the evidence was insufficient in the first place to sustain the courts finding of breach of fiduciary duty. Here, his theory is that he did not actually know about the instigation of divorce proceedings when he withdrew the $99,500 (therefore it was a stretch to suggest he had notice), and in any event the evidence was uncontradicted that husband was the chief investment officer for the family, and always invested for the familys benefit, not his own.

This argument is unavailing, because even if it were correct, the trial court has the discretion to award high-risk assets to the spouse better able to afford to retain them. (In re Marriage of Connolly (1979) 23 Cal.3d 590, 603.)

The rule works both ways -- for both good and bad investments. Connolly, for example illustrates the good investment side of the rule. There, wife initially agreed that certain shares of stock should be awarded to her husband, then discovered they had dramatically gone up in value, and sought to vacate the judgment so she could share in the bounty. As husband does here, wife in Connolly argued, among other things, that the trial court had been obligated to make an in kind division of the investment. The Supreme Court rejected the argument, observing in the process that there was no duty on the part of the trial court to divide the stock in kind, but could award it to the spouse with a high income who could afford to retain high-risk assets. (Connolly, supra, 23 Cal.3d at p. 603.)

By contrast, In re Marriage of Quay (1993) 18 Cal.App.4th 961, 971 illustrates, as does the present case, the bad investment side of the rule. In Quay the husband lent over $900,000 to start-up manufacturing company. He even had a court order giving him the right to manage the funds invested and outside advice that it was a prudent investment. (Id. at pp. 971-972.) That loan had similar success to the investments here. On appeal the assignment of the entire amount to the husband was upheld. The trial courts discretion in awarding the unilateral and dubious investments to the higher-income spouse who made them was readily reasonable.

III

The judgment is affirmed.

SILLS, P. J.

WE CONCUR:

ARONSON, J.

FYBEL, J.

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