Marriage of Wulf CA4/3 ( 2015 )

Filed 4/28/15 Marriage of Wulf CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
In re Marriage of MICHELE A. and
GERALD W. WULF.
MICHELE A. WULF,
G049636
Appellant,
(Super. Ct. No. 10D000079)
v.
OPINION
GERALD W. WULF,
Respondent.
Appeal from a judgment of the Superior Court of Orange County, Nancy
Wieben Stock, Judge. Reversed and remanded with directions.
Michele A. Wulf, in pro. per., for Appellant.
Ludwig Law Center, Inc., Eric S. Ludwig and Michelle P. Ludwig, for
Respondent.
* * *
Michele A. Wulf appeals from the judgment dissolving her marriage to
Gerald W. Wulf. Because the parties share the same last name, we refer to them by their
first names for the sake of clarity. Michele challenges very specific provisions of the
judgment, including the trial court’s treatment of particular financial items, and a last-
minute change to the parties’ previously established custody order. We conclude
Michele’s challenge to the court’s alteration of custody has merit. As Gerald expressly
concedes, the final judgment altered an aspect of the prior custody order that specified
which parent would pick up the minor child, even though the court had clearly stated the
trial on reserved issues did not encompass child custody matters. The court’s “inherent
power” to modify custody orders does not permit it to do so in the absence of proper
notice and an opportunity to be heard.
We also agree the court erred by treating the obligation to repay a $50,000
post-separation loan Gerald took from a community account as a community obligation
for which Gerald was given repayment credit on the marital balance sheet. As Michele
points out, Gerald’s repayment of the loan goes back into the same account, which was
awarded to Gerald in the dissolution. Consequently, Gerald’s repayment is effectively a
payment to himself. Further, we note that because Gerald’s loan was taken
postseparation, the obligation to repay it was Gerald’s separate obligation, rather than an
obligation of the community. Thus, it should not have been included on the marital
balance sheet.
We consequently reverse the judgment, and remand the case to the trial
court with directions to: (1) reinstate the provisions of the custody order in effect at the
time the court announced its tentative decision following the trial on financial issues, and
to incorporate those provisions into the judgment; and (2) recalculate the marital balance
sheet, and the equalizing payment Gerald owes to Michele, without giving Gerald credit
for his repayment of the $50,000 loan.
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FACTS
Michele and Gerald were married in March 1996, and were granted a
status-only divorce in December 2011. They have one child, born in 1999. Child
custody orders were entered in September 2011 – apparently by stipulation, although the
record is not entirely clear on this point. The parties were unable to resolve their disputes
over financial matters; however, and the case proceeded to trial on those issues in
October 2012.
In January 2013, the court held a hearing to announce its oral tentative
ruling on the financial disputes addressed in the trial. The court stated that “this
trial on reserved issues did not involve child custody matters. And in that regard I have
to . . . share with the parties that that is a good thing. It’s difficult enough to try cases on
property and financial matters, but trying them on child custody matters can be extremely
difficult. So obviously, the parties exercised your leadership and your parenting instincts
to arrive at your understandings before you came here on those issues.” (Italics added.)
The court then proceeded to give its oral statement of decision on the
financial issues, explaining that if nothing else were said or done, that statement would
become the court’s formal statement of decision. The court also directed Gerald to
submit a proposed judgment and serve it on Michele within 30 days of receiving the
reporter’s transcript of the hearing. The court instructed Gerald that the proposed
judgment he submitted should be a “unified” one, meaning he “should go back and pick
up, for example, the child custody orders that were entered on September 1, 2011, and
any other significant orders that would be judgment-worthy, that are final in
nature . . . so we have a unified judgment and not just a series of handwritten prior
orders.” (Italics added.)
Among other things, the court found that both parties had breached their
fiduciary duty to the other: Michele had purchased $33,000 worth of jewelry without
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Gerald’s knowledge or consent, and Gerald took a $50,000 postseparation loan from a
community account without Michele’s consent. The court concluded that both should be
sanctioned pursuant to Family Code section 1101.
The court also struggled somewhat with how to properly account for the
loan taken by Gerald: “That’s the question I had as to how we are accounting for the
$50,000 item. It didn’t show up as a charge to husband on anybody’s balance sheet, at
least not in that amount. So I wasn’t sure how we were accounting for it.” The court
then noted that both the debt and the obligation should be on the marital balance sheet:
“If he’s being charged the 50,000 and he’s also picking up the debt for the 50,000, they
probably should both be on the marital property balance sheet. . . . [¶] So we should do
that, or just take it off the balance sheet.” The court then reiterated, “I currently . . . don’t
have him being charged the 50[,000] because he’s picking up the debt without credit.”
Additionally, the court made it clear that Gerald was entitled to no credit for the $25,000
sanction levied against him in connection with the loan. When his counsel suggested that
“if he’s taking the loan and he’s being charged $25,000 for taking a loan, that means he’s
being charged $75,000 against that asset,” the court stated that the sanction was “a
completely separate area of the balance sheet. That’s not a property division. That’s the
imposition of a statutory penalty; completely different concept.”
When Gerald’s counsel again complained that it was unfair to penalize
Gerald on the balance sheet for taking out the loan, and then also require him to pay it
back without credit, the court again emphasized that the sanction items were not part of
the property division: “I stuck [the penalties] on the marital property balance sheet, just
so we could possibly use it for equalization. . . . [¶] . . . We could have that just be a
separate item. But I went ahead for the sake of discussion and rolled it in as a part of the
equalization so we could get a single dollar figure that would be the final figure for
everybody at the table here. [¶] So that’s why I’ve got the double-sided entry. You
could draw a line right below Vanguard Accounts Already Divided.’ At that point we
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have left the property balance sheet and everything below that is things like penalties and
attorney’s fees. But I thought we might want to roll them up and get this all handled in
one equalization.”
Gerald’s loan also decreased the value of the community account – a
Pacific Life Teachers Savings Account (TSA) held solely in his name – from which he
had taken it. The court calculated the starting account value as $132,000, but the current
value as $91,000, after accounting for the loan. The court awarded the $91,000 cash
value of that asset to Michele.
After the court set out its tentative findings on the financial issues, it
allowed the parties to ask questions and make comments and suggested they take a break
to meet and confer about the court’s tentative findings. After the break, the parties each
made suggestions to clarify certain aspects of the court’s findings, and addressed other
issues. At the conclusion of the hearing, the court indicated its expectation that the
parties would continue to meet and confer about the provisions of the proposed judgment.
The parties were unable to agree on the terms of a proposed final judgment,
and the court permitted the parties to file letter briefs and set the matter for a review
hearing on December 9, 2013. The court’s docket reflects that while Michele filed a brief
on December 4, Gerald did not.
The parties appeared in court for the review hearing, but our record
includes no transcript of what occurred. The court’s minute order reflects it signed and
filed the final judgment, which includes an 18-page attachment setting forth terms on the
same day as that review hearing. Four and a half pages of that attachment detail the
terms of child custody. Six pages of the attachment detail the division of property,
creditor’s claims and assumptions of obligations. Among other things, this part of the
judgment confirms that while Michele is awarded the “specific sum” of $91,000 from the
TSA, the account itself was confirmed to Gerald as his sole and separate property. It also
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states that “the parties have no community debts” and Gerald assumes the debt obligation
for the loan he took against his TSA “as his sole and separate property.”
The final two pages of the attachment are a “CFLA Propertizer” marital
balance sheet, which lists each item of what the court’s judgment otherwise identified as
marital community property or community debt, and entries for attorney fees awards and
sanctions. The CFLA Propertizer balance sheet then details the value attributed to each
asset and debt, and shows whether the court assigned it to Michele or Gerald. The initial
reconciliation of these assets and debts showed that Gerald, who received the marital
residence as an asset, was obligated to make an equalizing payment of $90,105 to
Michele. However, the court interlineated by hand two additional items on the balance
sheet – a double-sided entry for “[Family Code section] 1101 sanctions against wife in
favor of husband,” showing a credit to Gerald of $16,500, and a debit to Michele in the
same amount. The second interlineated item was an entry giving Gerald a $50,000 credit
for paying “Pacific Life TSA community debt,” but without any corresponding entry
charging him for receiving the TSA loan funds. After those items were incorporated into
the balance sheet, Gerald’s equalizing payment was reduced to $48,605.
DISCUSSION
1. Standard of Review
“A judgment or order of the trial court is presumed to be correct, and all
intendments and presumptions are indulged to support it on matters as to which the
record is silent. [Citation.] It is the appellant’s burden to affirmatively demonstrate
error.” (In re Marriage of Gray (2002) 103 Cal. App. 4th 974, 977-978.)
And while Michele did not provide a reporter’s transcript of the trial – she
provided only a transcript reflecting the court’s recitation of its statement of decision –
and elected to proceed with this appeal based solely upon a clerk’s transcript which
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included some trial exhibits, this qualifies as an appeal from the judgment roll. (Allen v.
Toten (1985) 172 Cal. App. 3d 1079, 1082-1083.) “In a judgment roll appeal based on a
clerk’s transcript, every presumption is in favor of the validity of the judgment and all
facts consistent with its validity will be presumed to have existed. The sufficiency of the
evidence is not open to review. The trial court’s findings of fact and conclusions of law
are presumed to be supported by substantial evidence and are binding on the appellate
court, unless reversible error appears on the record.” (Bond v. Pulsar Video Productions
(1996) 50 Cal. App. 4th 918, 924.)
2. Child Custody
Michele first argues the court erred by changing the custody order in its
judgment, pointing out that such alteration is inconsistent with the court’s own clear
statement that “this trial on reserved issues did not involve child custody matters,” as well
as with its direction that Gerald prepare a proposed judgment which incorporated “the
child custody orders that were entered on September 1, 2011.”
We agree. Although our very limited record in this appeal does not include
a copy of the September 2011 custody orders, and thus we cannot compare those orders
to the custody provisions in the judgment, Gerald admits the court’s judgment “made a
change to the custody orders that provided that the receiving parent pick-up the minor
child.” He defends this alteration of the custody order in the judgment on the basis that
the court has “inherent power to modify custody orders,” and he implies the issue was
one he raised in a letter brief to the court prior to the December 2013 hearing at which the
court entered judgment.
However, as we have already noted, while the record reflects the court
permitted both sides to file letter briefs in connection with the December 2013 hearing,
there is no indication in the docket that Gerald actually filed one – let alone any
suggestion that his letter might have sought any change in custody terms. And even if he
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had, the court could not alter custody terms based solely upon a request thrown into a
party’s posttrial brief following a trial that had been explicitly limited to financial issues.
The court’s exercise of its “inherent power” to modify custody orders, like
its exercise of other powers, must be done in accordance with the requirements of due
process. “[A] dissolution court cannot grant unrequested relief against a party who
appears without affording that party notice and an opportunity to respond. [Citations.]
Due process requires affording a litigant a reasonable opportunity, by continuance or
otherwise, to respond to evidence or argument that is new, surprising, and relevant.” (In
re Marriage of O’Connell (1992) 8 Cal. App. 4th 565, 574.) “Since the interest of a parent
in the companionship, care, custody, and management of his children is a compelling
one, ranked among the most basic of civil rights [citations], the state, before depriving a
parent of this interest, must afford him adequate notice and an opportunity to be heard.
(In re B.G. (1974) 11 Cal. 3d 679, 688-689.)
In this case, Michele contends the court’s alteration of the custody
provision specifying who would pick up the parties’ child created a significant problem
for her, because she suffers from a spinal cord injury that makes it extremely painful and
dangerous for her to drive a significant distance in the evenings. She points out that the
court made an explicit finding in the judgment that she is “disabled, has been in such a
condition for some period of time, and would work if she could.” Gerald counters that
the court’s determination Michele was disabled from working did not establish she was in
any way disabled from driving, and notes there is nothing in the record that states she is.
But that simply highlights the due process problem.
Michele’s contention is that if she had understood in advance the court was
contemplating a last-minute change in the custody order – one which would require her to
drive a significant distance in the evening to pick up the parties’ child – she would have
been able to produce “an affidavit from her doctor about her condition and limitations.”
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But because Michele was deprived of that opportunity, there is no such evidence in the
record.
The usual method employed by a party seeking modification of a custody
order is to file a formal order to show cause (OSC). And conspicuously missing from the
trial court’s docket is any indication that Gerald filed such an OSC seeking any
modification of the custody order between the end of the trial (when the court declared no
child custody issues were involved) and the judgment. In these circumstances, the
custody modification inserted into the judgment cannot stand.
3. The Visa Bill
Michele complains the “court erred in finding [a] $8,713 Visa bill, as a
debt,” even though she describes it in her opening brief as a bill that “was due and owed
during the marriage.” She seems to be arguing the court’s error was its failure to
acknowledge that Michele had already paid this bill from her “personal money” prior to
the judgment, and apparently believes the court should have removed the debt from the
marital balance sheet and instead forced Gerald “to pay his equal share.”
We reject her contention because what Michele fails to understand is that
by including the debt on Michele’s side of the “CFLA Propertizer” marital balance sheet
incorporated into the judgment, the court gave her the very outcome she now seeks; i.e.,
it forced Gerald to bear his fair share of that previously paid community debt.
The purpose of a marital balance sheet is to ensure that each side ends up
with the same net amount of community assets after all community debts are satisfied.
When an exact division of the assets is not possible – such as in cases where one party
takes sole ownership of the marital home and there are not enough other assets to equal
its value – the party who retains the greater amount of assets is required to make an
equalizing payment to the other, to achieve the ultimate goal of balance between the
values received by each party.
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As part of achieving that balance, the court must ensure that if either party
is assigned responsibility to pay a community debt, that liability is also included on the
balance sheet and offset by other community assets assigned to the party, so that each
party’s net share of community assets remains equal. In this case, the marital balance
sheet incorporated into the judgment shows that for purposes of the judgment, Michele
was assigned that community Visa debt, and thus credited with having paid it. That
meant her share of community assets had to be increased to account for her earlier
payment of that community debt. And because the total amount of community assets is a
fixed number, the increase on Michele’s side required a corresponding decrease on
Gerald’s. It was through that decrease that Gerald effectively paid his “fair share” of the
Visa bill.
Even assuming Michele did pay this Visa bill before the judgment was
entered, as she claims, the retention of that community debt on her side of the marital
balance sheet was appropriate, as it was the only way the court could ensure she received
proper credit for having done so. In short, the Visa debt was assigned to Michele in the
judgment, she was given credit for paying it, and she paid it. Whether that payment came
before, or after, the judgment is of no moment.
4. The Jewelry
Michele next challenges the judgment’s treatment of jewelry she purchased
at a cost of $33,000, during the marriage. The court found that her purchase of the
jewelry, using community funds, was a breach of fiduciary duty, which she does not
contest. In its statement of decision, the court acknowledged there was some evidence
Michele’s intent had been to resell the jewelry as a business, but noted there was no effort
by Michele to execute the second half of such a plan; i.e., to sell the jewelry. The court
stated it was “inclined to enter on her part of the balance sheet the sum of $33,000, which
is as close as we can ascertain in the court’s view from the credit card receipts the likely
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monies paid out of community property funds for the assets. And I would award her
those assets.” The court also tentatively awarded Gerald $1,800 in attorney fees, tied
specifically to Michele’s “fiduciary duty issue.”
The court’s judgment confirmed the finding that Michele had breached her
fiduciary duty, and stated she would be charged one-half the cost of the jewelry as a
sanction pursuant to Family Code section 1101. Subdivision (g) of that statute provides
that “[r]emedies for breach of the fiduciary duty by one spouse . . . 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
attorney’s fees and court costs.”
The court’s judgment expressly states that Michele was being charged
“one-half (1/2) the community expense of the asset ($33,000)” and that it was “enter[ing]
double entries on each side of the balance sheet.” And the CFLA Propertizer balance
sheet included in the judgment demonstrates that (1) Michele was assigned the jewelry as
a community asset valued at its cost, and (2) she was charged $16,500 as “[Family Code]
1101 sanctions” in double entries – one entry showing an asset of $16,500 on her side of
the community property balance sheet, and the other showing a debit in the same amount
on Gerald’s side of the sheet. The combined effect of those two $16,500 entries was that
Michele reimbursed the community for the entire $33,000 cost of the jewelry she had
purchased in violation of her fiduciary duty.
Michele first argues the court’s judgment is inconsistent with its statement
of decision, which she believes gave her both the jewelry valued at $33,000 and its
monetary value after finding she had breached her fiduciary duty in connection with the
jewelry’s purchase. She believes “there were no sanctions involved” in the statement of
decision.
Michele has simply misread the record. The court’s statement of decision
reflects a finding that Michele breached her fiduciary duty to Gerald through her
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expenditure of $33,000 in community funds on the jewelry, and thus its reference to
“enter[ing] on her part of the balance sheet the sum of $33,000, which is as close as we
can ascertain [is] the likely monies paid out of community property funds for the assets,”
meant the court was holding her liable to the community for that entire cost as a sanction.
The court did not mean it was awarding her the jewelry’s monetary value as a benefit.
Having effectively required Michele to reimburse the community for the cost of the
jewelry, the court’s tentative decision also awarded her the jewelry as a community asset,
valued at its cost.
The court’s judgment is consistent with the tentative ruling. Although
Michele is concerned that the judgment’s reference to “double entries on each side of the
balance sheet” means she was charged $66,000 for the jewelry, she is incorrect. The
“double entry” referenced by the court merely reflects that Michele’s $16,500 sanction
was entered both on her side of the community property balance sheet and on Gerald’s
side, so that the combined effect of those entries was that she reimbursed the community
for the entire $33,000 cost of the jewelry – exactly what the court’s tentative decision
stated would occur.
And because Michele owned an undivided 50 percent of the community’s
assets, she also benefitted from that reimbursement to the community in an amount equal
to half the total. Consequently, the ultimate effect of the sanction on Michele was the
same as if she had paid Gerald half that $33,000 community reimbursement – i.e.,
$16,500 – out of her separate funds. Thus, the court’s treatment of the sanction on the
balance sheet was consistent with both its statement of decision and the provisions of the
judgment. We find no error.
5. Accounting for Loan Taken by Gerald from the TSA
Michele also challenges the court’s accounting for the $50,000 loan taken
by Gerald against the TSA, which was a community asset. The court found Gerald had
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also breached his fiduciary duty when he took out a $50,000 loan against the TSA,
“without consent or sufficient notice to [Michele.]” Thus, the court again “impose[d] the
remedy called for and mandated by Family Code section 1101, which is 50% of the
amount ($25,000).” The CFLA Propertizer balance sheet incorporates this $25,000
charge, referring to it explicitly as “[f]iduciary Duty Breach by H re: $50K loan.” And
just as with Michele’s sanction, the court entered Gerald’s $25,000 sanction on both sides
of the balance sheet, which combined for a total of $50,000, equal to the size of the loan
Gerald took in violation of his fiduciary duty.
Michele first complains the court’s judgment does not account for the loan
proceeds as a marital asset to be divided. However, absent of a complete record of the
evidence admitted at trial, containing undisputed evidence that the loan proceeds still
existed in divisible form at the time the marital assets were divided, we must presume
there were no proceeds to divide. (In re Marriage of Gray, supra, 103 Cal.App.4th at pp.
977-978.) We consequently find no error in the court’s failure to list those loan proceeds
as a divisible community asset.
Michele also argues the court erred by giving Gerald $50,000 credit in the
marital balance sheet for his obligation to repay the TSA loan. This time, we agree.
Michele’s specific point is that the loan was taken from the funds contained
in the TSA, a marital asset that was ultimately awarded to Gerald, and she claims the
terms of the loan require the funds be repaid back into that same account. Thus, she
contends that when Gerald repays the loan, he is actually depositing funds into his own
account – and that consequently, the repayment obligation is not actually a net liability
for Gerald.
While the court made no explicit finding on that point, we can nonetheless
discern from the record that Michele is correct. The judgment itself confirms that
Gerald’s loan was actually taken “from” the TSA, and the court explained in its statement
of decision that Gerald’s loan decreased the balance in that account. Given that fact, it is
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beyond dispute that Gerald’s obligatory repayment of that same loan would replenish the
value of that account. There is no third party recipient of the loan payments. And since
that account was awarded to Gerald, we agree that Gerald’s loan repayment is effectively
a payment to himself. He was entitled to no credit on the marital balance sheet for such
payments.
Further, we also agree with Michele for a different reason. The court’s
statement of decision adopts Michele’s characterization of the loan, which is that “after
separation, [Gerald] took $50,000 in loan value as against the Teacher’s Savings
Account.” (Italics added.) An obligation incurred unilaterally by a party following
separation does not qualify as a community obligation. (Fam. Code, § 910.) More
significant, the court’s judgment explicitly confirms the separate nature of this obligation,
stating first that “the parties have no community debts” (italics added), and then that the
loan obligation to the TSA is Gerald’s “sole and separate property.”
Because Gerald took out the loan after separation, it did not create any
community obligation that had to be accounted for on the marital balance sheet. The
$50,000 loan – and the resulting debt – were Gerald’s alone. Moreover, even if that were
not true, the fact that Gerald’s repayment of the loan would directly replenish the value of
an account that was awarded to him in the dissolution means the repayment obligation
did not reflect a true liability for Gerald. For both of these reasons, we conclude the court
erred when it gave Gerald credit for repaying the $50,000 loan to the TSA on the marital
balance sheet.
6. Valuation of the TSA
Michele also complains that the court erred by valuing the TSA at $91,000,
rather than at $132,000, when it awarded her the value of that account in the judgment.
She argues “there was substantial evidence” that the account was actually worth
$132,000. However, as we have already explained, in the absence of a complete record
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of the evidence admitted at trial, “[t]he sufficiency of the evidence is not open to review.
The trial court’s findings of fact and conclusions of law are presumed to be supported by
substantial evidence and are binding on the appellate court, unless reversible error
appears on the record.” (Bond v. Pulsar Video Productions, supra, 50 Cal.App.4th at p.
924.) Consequently, we cannot address this claim.
DISPOSITION
The judgment is reversed, and we remand the case to the trial court with
directions to: (1) reinstate the provisions of the custody order in effect at the time the
court announced its tentative decision following the trial on financial issues; (2)
recalculate the marital balance sheet, and the equalizing payment Gerald owes to
Michele, without giving Gerald credit for his obligation to repay the $50,000 loan to the
TSA; and (3) incorporate those provisions into a new judgment that is otherwise
unchanged. Michele shall recover her costs on appeal.
RYLAARSDAM, ACTING P. J.
WE CONCUR:
IKOLA, J.
THOMPSON, J.
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