Marriage of Flynn CA4/3 ( 2023 )

Filed 1/10/23 Marriage of Flynn 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 DENNIS L. and SHERI
N. FLYNN.
DENNIS L. FLYNN,
G059927
Respondent,
(Super. Ct. No. 14D006727)
v.
OPINION
SHERI N. FLYNN,
Appellant.
Appeal from a judgment of the Superior Court of Orange County, Nancy
Wieben Stock, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed in
part as modified and remanded with instructions.
Law Offices of Lisa R. McCall, Lisa R. McCall and Erica Baca for
Appellant.
Law Offices of Steven E. Briggs and Steven E. Briggs for Respondent.
INTRODUCTION
Sheri Flynn appeals from a judgment entered on December 21, 2020,
ending her marriage to respondent Dennis Flynn and making certain orders regarding
attorney fees, spousal support, and disposition of community property. The case was
tried in two phases over 10 days in 2019 and 2020 to a private judge.
Sheri disputes the court’s spousal and attorney fee awards, arguing that they
are insufficient. She also faults the court for accepting inadmissible evidence about
certain disbursements of community property funds and, as a result, for failing to
penalize Dennis for a breach of his fiduciary duty. Finally she contends that Dennis
received a “double-dip” by receiving credit for paying a community debt and getting a
write-off for the same debt.
We affirm the judgment in all respects except one. The family court made
an erroneous assumption that adversely affected its resolution of the double-dip issue.
We return the matter to the family court to correct the marital balance sheet and/or the
value assigned to Dennis’ business. We review the remaining issues for abuse of
discretion, and we cannot find that the court abused its discretion in its rulings.
FACTS
We recite only the facts that are pertinent to the issues Sheri has raised in
her appeal.
Sheri and Dennis separated in August 2014, after a marriage of nearly 33
years. The couple had three children, who were adults at the time of trial.
Dennis is an architect with his own sole proprietor business, Dennis Flynn
Architects, Inc. (DFA). At the conclusion of trial, the court valued the business at
$267,140 and awarded it to Dennis.
Sheri was a full-time housewife during most of the marriage. Although she
was licensed as a medical technologist, she was primarily responsible during the marriage
for child-rearing. In 2013, she took a job as a cashier at a nursery/hardware store. She
2
was temporarily disabled, and her disability benefits had run out as of the second phase of
trial.
At Christmas in 2007, Dennis “surprised” the family by presenting it with a
1
motorhome. The motorhome was sold in November 2014, after separation, at a loss. To
make up the shortfall, Dennis borrowed a little over $35,000 from DFA, giving his
personal promissory note. He used this money to pay off the debt to the lender, and he
2
received an Epstein credit on the marital balance sheet for this payment. The amount he
still owed as of December 2014 was reflected on the company valuation schedule for
2014 a “loan to shareholder.”
Dennis conducted his business from an office on Euclid Street in Fullerton.
The couple owned this commercial property through a limited liability company. Dennis
was the managing partner of the LLC. The property was sold in 2009 for $448,643.
Dennis did not disclose the full amount of the sale proceeds to Sheri until March 2017,
during the litigation regarding the divorce. The court concluded that his failure to
disclose the full amount of the proceeds constituted a violation of his fiduciary duty of
transparency under Family Code sections 721 and 1101.3 The court also concluded
Dennis had used the undisclosed funds to pay community obligations.
At the beginning of trial, Sheri asked for a contribution from Dennis in the
amount of $175,000 for her attorney fees. The court awarded $100,000. Sheri disputes
this amount as insufficient. The court also awarded Sheri $7,500 per month in permanent
spousal support. On appeal, Sheri asserts that the court did not consider all the factors of
1
The surprise apparently was not well received. Not only had he not consulted Sheri about this
large purchase, Dennis had failed to sound out the children as to whether they would be interested in RV vacations.
As it turned out, “he mis-judged the level of resistance from family members for this type of vacation.”
2
In re Marriage of Epstein (1979) 24 Cal.3d 76 (Epstein), superseded by statute on other grounds.
A spouse who after separation uses separate funds to pay community obligations should be reimbursed out of
community property upon dissolution. (Id. at p. 84.)
3
All further statutory references are to the Family Code unless otherwise indicated.
3
section 4320 and the amount was also insufficient. She also asserts the court erred in
refusing to award temporary spousal support retroactively.
The trial was conducted in two phases before a private temporary judge at
JAMS. The first phase took place between April and June 2019. The court issued a
statement of decision after the first phase, with some issues reserved for the second
phase. The second phase took place in August and September 2020. The court issued a
final statement of decision after this phase and corrected a few calculation errors made in
the first statement of decision.
As they pertain to the issues Sheri raised on appeal, in addition to the
attorney fee and spousal support awards mentioned above, the court ruled that the “loan
to shareholder,” which was written off, was not the promissory note Dennis used to pay
off the balance of the motorhome debt. He was therefore entitled to an Epstein credit for
using his separate funds to pay a community debt. In addition, although Dennis had
breached his fiduciary duty by failing to disclose the entire amount of the proceeds from
the sale of the Fullerton property to Sheri, he had adequately explained what he had done
with the undisclosed portion of the funds: he had paid community obligations with the
money. Accordingly the court refused to award Sheri 50 percent of the undisclosed
amount as a penalty for breach of fiduciary duty under section 1101, subdivision (g). The
court reasoned that the cases awarding this penalty all involved spouses who had spent
the money on themselves or frittered it away, not spouses who had used the money to pay
community expenses.
DISCUSSION
I. Epstein Credit/Value of DFA
Sheri contends that Dennis received a double-dip with respect to the money
used to pay off the motorhome. On the one hand, she says, Dennis’ promissory note was
subtracted from DFA’s net tangible assets, thereby decreasing the company’s value. On
4
the other hand, Dennis received an Epstein credit for paying off the loan. So he got the
benefit of both the decrease in value for DFA and the credit.
There was considerable confusion about this issue at trial, and the briefing
on appeal is not much help.
The dispute began with Dennis’ purchase of a motorhome that apparently
did not have the intended family bonding effect. Dennis bought it in 2007 for $196,000.
He sold it, after separation, in November 2014 at a loss. To pay the difference to the
lender, Dennis borrowed $35,365.40 from DFA on November 20, 2014, signing a
4
promissory note in that amount at 2.5 percent interest. The note included a payment
schedule; the first payment was due on December 19, 2014. After this first payment, the
balance owing was $34,427.68. Dennis testified that he paid principal and interest for
some years, after which the loan was converted to interest only. He acknowledged that
he still had a balance on the note as of June 2019, the first phase of trial.
Fast forward to 2019 and the parties’ two forensic accounting experts’
valuation of DFA as community property. The experts submitted two valuations, one for
the year ending December 2014, the date closest to separation, and the other for the year
ending December 2018, the date closest to the first phase of trial.
Dennis’ expert listed a loan to shareholder of $34,428 as a DFA asset as of
December 31, 2014.5 He testified during the first trial phase that he subtracted this asset
from the company’s value – i.e., recorded it as a negative number – because it was a
community debt. Customarily, he said, in family law matters, community debts are
canceled out of a company’s valuation because these debts are usually written off.
Dennis’ expert also testified that the source of the $34,428 loan to shareholder was the
payoff of the motorhome debt. He removed it from the valuation of the business because
4
The payment schedule states that the date of the loan is November 20, 2019. We assume the year
is in error.
5
Sheri’s expert listed the same amount on his 2014 valuation of DFA.
5
it was a community obligation, and the community would have an offsetting liability to
the company. On cross-examination, he reiterated his reason for subtracting the $34,428
loan to shareholder: “There’s no reason to confuse everyone with that number because
it’s not going to be paid back.”
During phase one of the trial, the court adopted the reasoning of Dennis’
6
expert for eliminating the loan from the business. The court found that the motorhome
loan was a community debt and stated, “Had [Dennis] paid the money to himself and then
paid the debt, he would have received an Epstein credit, resulting in the same calculation
on the Marital Balance Sheet. This treatment skips a step, with no prejudice to either
party.” The court agreed that Dennis would get an Epstein credit or a cancellation of the
debt, but not both.
The experts also valued DFA as of December 31, 2018, the date closest to
phase one of the trial. By this time, the loan to shareholder category on the valuation of
Sheri’s expert had increased to $69,734.7 During the first phase, Dennis’ expert testified
that this same amount of loan to shareholder in 2018, $69,734, which he recorded as a
negative number, indicated additional borrowing after separation, but it included the
$34,428 from December 2014. In the second phase, however, Dennis’ expert changed
the 2018 value of the loan to shareholder category. For phase two, he recorded the loan
to shareholder category as negative $34,662, consisting of the 2014 loan of $34,428 and a
small balance left over from 2013.
6
The amount of the adjustment in the first statement of decision was given as $36,446. The source
of this number is not clear.
7
Sheri’s expert listed loan to shareholder on one page of his DFA valuation as of the end of
December 2018 as $69,734. On the next page, the “adjusted” total was $69,405. This second schedule included a
note: “This loan was taken out after separation by [Dennis]. We have therefore left the asset asset less the amount
that existed as of the date of [sic]” The difference between the two amounts, $329, is the same as the amount of the
loan to shareholder that existed as of December 31, 2013, before separation.
6
The cause of the increase in the loan to shareholder category between the
8
beginning of 2015 and the end of 2018 was not explained at trial. Moreover, although
Sheri’s expert showed a decrease in the loan balance in 2015 and 2016, before a sizeable
increase in 2017, there was no testimony about the amount of repayment of the 2014
9
loan.
The issue boils down to whether the ultimate valuation of DFA included the
2014 loan to shareholder as an asset, that is, as a positive number. If it included the loan,
then the value of DFA on Dennis’ side of the ledger was increased, and he was entitled to
an offsetting Epstein credit for using his separate property to pay off a community debt.
If the asset was not included, then DFA had a lower value, beneficial to Dennis, and he
would not get an Epstein credit because, in essence, there was no debt to pay off.
It seems clear to us that the 2014 loan-to-shareholder category included the
motorhome debt. The amount, $34,428, is exactly the balance on the 2014 note that
Dennis had signed the previous month to obtain the funds to pay the lender. In keeping
with his practice as explained in his testimony during the first phase of trial, Dennis’
expert subtracted this amount from his calculation of net tangible assets for the year
ending December 31, 2014. This exhibit also showed a subtraction of $69,734 in net
tangible assets for loan to shareholder as of the year ending December 31, 2018. This
figure represented further borrowing from DFA between 2015 and 2018.
After learning that the court intended to value DFA as of the end of 2018,
Dennis’ expert produced another exhibit, which he called an addendum. The calculation
of net tangible assets for 2014 was unchanged. For 2018, however, the amount for loan
8
Sheri asserted in her declaration for attorney fees that Dennis was using DFA as his “personal
piggy bank” to pay for divorce lawyers and accountants. If that is so, then the additional borrowings would not be
community debts.
9
A schedule from Sheri’s expert showed a decrease in the loan balance from $34,428 at the end of
2014 to $22,019 at the end of 2015. The loan balance had decreased to $16,201 by the end of 2016. According to
the payment schedule of the 2014 promissory note, the balance at the end of 2015 was supposed to be $22,019. By
the end of 2016, the balance was supposed to be $9,264.
7
to shareholder as a net tangible asset changed from a negative $69,734 to a negative
$34,662. This figure was broken out to $34,428 (the amount of the motorhome loan
balance in 2014) and $234. This had the effect of lowering the negative value for net
tangible assets and therefore increasing DFA’s overall value from the first estimate.
The balance of the loan to shareholder asset left in DFA as a positive
10
number as of 2018 is $35,072. To put it another way, this amount was not subtracted
from net tangible assets as a community debt paid off by the community, unlike the
motorhome loan.
Sheri’s expert calculated the loan to shareholder category as of 2018 at
$69,734, the same number that Dennis’s expert used. He adjusted it to remove $329,
which appears to be the balance of a loan to shareholder from 2013, before separation.
The resulting amount is $69,405. The difference between this amount and the $35,072
that represents the 2018 balance of the loan to shareholder is $34,333. This is the amount
that Sheri sought to have added to DFA’s net tangible assets as the motorhome loan.
The court refused to make this adjustment because it deemed Sheri’s
assumption – that the motorhome loan had been excluded (subtracted) as a DFA asset –
incorrect. It stated the motorhome debt had been “picked up in subsequent years,” that is,
in years after 2014. The source of this error seems to have been Dennis’ expert, who
testified during the second phase that the motorhome was sold in 2015. The court
awarded Dennis an Epstein credit of $35,365, the full amount of the promissory note, for
paying this debt.
The motorhome was unquestionably sold in 2014 and the debt was incurred
in that year. The loan to shareholder amount on both experts’ schedules for the end of
2014 is $34,428, which is also the exact amount of the balance on the promissory note as
of December 31, 2014. This same amount was written off on Dennis’ expert’s schedule
10
$69,734 (unadjusted loan to shareholder as of 2018) – $34,662 (total of loans to shareholder
removed from net tangible assets in 2018) = $35,072.
8
for 2018, thereby canceling the debt. So Dennis received an Epstein credit for paying a
debt that was substantially canceled.
We are not going to get involved in fixing this. There are too many moving
parts, and the calculations involved are far beyond what we could perform. In addition,
we have found nothing in the record to account for how much Dennis paid on the loan,
for which he might be eligible for an Epstein credit, compared to how much was written
off, for which he would get no credit. One expert’s schedule suggested that the loan was
at least partly paid off in 2015 and 2016, but the amount showing on the schedule for
2018 was the full amount of the loan balance in 2014, as if no payments had been made.
Accordingly we are returning this portion of the judgment to the family
court to make the necessary calculations and adjustments, based on our conclusion that
the $34,428 written off of DFA’s 2018 net tangible assets was the motorhome loan debt.
Or the parties can agree between themselves and stop spending money on attorneys,
accountants, and private judges.
II. Breach of Fiduciary Duty
Sheri makes two arguments with respect to the court’s finding that Dennis
had breached the fiduciary duty of disclosure. First, she says she is entitled to 50 percent
of the amount from the sale of the Fullerton property that Dennis failed to disclose to her,
under section 1101, subdivision (g), because the evidence of where this money went was
insufficient. Second, the same code section entitles her to attorney fees, which the court
failed to award.
Section 721, subdivision (b), imposes a fiduciary duty on spouses to act in
the “highest good faith and fair dealing” in their transactions with each other. The
fiduciary duty set out in section 721 includes “[r]endering upon request, true and full
information of all things affecting any transaction that concerns the community
property.” (§ 721, subd. (b)(2).) Section 1100, subdivision (e) provides, “Each spouse
shall act with respect to the other spouse in the management and control of the
9
community assets and liabilities in accordance with the general rules governing fiduciary
relationships which control the actions of persons having relationships of personal
confidence as specified in Section 721, until such time as the assets and liabilities have
been divided by the parties or by a court. This duty includes the obligation to make full
disclosure to the other spouse of all material facts and information regarding the
existence, characterization, and valuation of all assets in which the community has or
may have an interest and debts for which the community is or may be liable, and to
provide equal access to all information, records, and books that pertain to the value and
character of those assets and debts, upon request.”
Section 1101, subdivision (a), provides, “A spouse has a claim against the
other spouse for any breach of the fiduciary duty that results in impairment to the
claimant spouse’s present undivided one-half interest in the community estate, including,
but not limited to, a single transaction or a pattern or series of transactions, which
transaction or transactions have caused or will cause a detrimental impact to the claimant
spouse’s undivided one-half interest in the community estate.” Section 1101, subdivision
(g), provides that “[r]emedies 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 attorney’s fees and court costs.”
In this case, the court found that Dennis had violated his fiduciary duty with
respect to the sale of the real property “in not promptly providing the information
tracking the expenditures of the sale proceeds.” It did not, however, award Sheri 50
percent of the undisclosed amount, reasoning that Sheri had not shown any “impairment”
to or detrimental impact on the community resulting from the non-disclosure; Dennis
showed he had used all the money from the sale to benefit the community.
Sheri does not dispute the court’s reasoning that the remedy of section
1101, subdivision (g), requires impairment of a community asset. Instead, she contends
10
that the court’s finding of no impairment rested on insufficient evidence, specifically on
Quickbooks printouts and check registers of several different accounts, including Dennis’
personal checking accounts, instead of individual source documents such as invoices,
checks, and bank statements. She contends that the printouts and registers do not qualify
as business records under Evidence Code section 1271 because they were not trustworthy
11
and because a record of Dennis’s personal checking accounts was not a business record.
They also do not qualify under Evidence Code section 1552 because they were not
“computer-generated.”
12
“The trial court has wide discretion to determine whether there is a
sufficient foundation to qualify evidence as a business record; [a reviewing court] will
overturn its decision to admit such records only upon a clear showing of abuse.”
(Conservatorship of S.A. (2018) 25 Cal.App.5th 438, 447.)
DFA’s office manager/bookkeeper, Veronica Keohane, testified at length
about the evidence supporting the disbursement of the proceeds from the sale of the
Fullerton property. She had held her position at DFA for 14 years as of 2020 and had
used Quickbooks the entire time. Her duties included billing, receivables, payroll, and
invoice processing. She was solely responsible for entries into Quickbooks. She also did
all of the accounting for the limited liability company that owned the Fullerton property,
11
Evidence Code section 1271 provides, “Evidence of a writing made as a record of an act,
condition, or event is not made inadmissible by the hearsay rule when offered to prove the act, condition, or event if:
[¶] (a) The writing was made in the regular course of a business; [¶] (b) The writing was made at or near the time of
the act, condition, or event; [¶] (c) The custodian or other qualified witness testifies to its identity and the mode of
its preparation; and [¶] (d) The sources of information and method and time of preparation were such as to indicate
its trustworthiness.”
12
Evidence Code section 1552, subdivision (a), provides, “A printed representation of computer
information or a computer program is presumed to be an accurate representation of the computer information or
computer program that it purports to represent. This presumption is a presumption affecting the burden of
producing evidence. If a party to an action introduces evidence that a printed representation of computer
information or computer program is inaccurate or unreliable, the party introducing the printed representation into
evidence has the burden of proving, by a preponderance of evidence, that the printed representation is an accurate
representation of the existence and content of the computer information or computer program that it purports to
represent.”
11
and she oversaw deposits and disbursements from some of Dennis’ personal checking
accounts at different banks.
Keohane testified that she would enter an invoice into the Quickbooks
system within a day of receiving it. Checks issued from the account would be entered
into the system on the day of issuance. She followed the same procedures for Dennis’
personal checking accounts.
Sheri objected to the evidence on the ground that the Quickbook printouts
were hearsay and worthless without the source documents. She argued, “[I]n order for
the schedule to be admitted, each and every line of that schedule would need to be
independently corroborated by evidence that is admitted before the court.”
The court ruled the exhibits satisfied the requirements of the business
records exception to the hearsay rule; “[t]he key is whether there are reliable features
associated with the preparation of the record, including whether it’s done regularly,
whether it’s at or near the time of the act or event, how it’s been prepared and other
indicia of reliability.” The court also ruled that Sheri had not overcome the presumption
of Evidence Code 1552, and therefore the computer printouts were admissible.
Sheri’s argument that the registers from Dennis’ personal checking
accounts were not business records in this case is incorrect. Evidence Code section 1271
does not include a requirement about where the records are kept. A business record entry
must be made in the regular course of a business, it must be made at or near the time of
the event, and a qualified witness must testify as to its mode of preparation. Keohane’s
testimony provided all this information.
The “business” was the limited liability company that owned the Fullerton
property. The issue was where the proceeds from the sale of the business’ property went.
Keohane traced the proceeds through several accounts, including Dennis’ personal
checking accounts, to their ultimate destinations. Because Dennis had a fiduciary
responsibility to account for it, this money did not become his personal money regardless
12
of where it was deposited. The check registers were business records created in the
regular course of a business to the extent that they recorded deposits and disbursements
of company money, even if some of the registers also recorded private disbursements for
gas and groceries.
Sheri’s other argument is that the Quickbooks printouts were not
“trustworthy” because the underlying source documents were not included. At trial, her
counsel argued that “[t]hose documents are, in fact, bank statements, checks, invoices,
things of that nature which would have to be independently admitted into evidence
through the proper foundation for the exhibit [i.e., the Quickbooks printouts] to be able to
stand on its own.”13 Counsel apparently failed to recognize that bank statements, checks,
and invoices are themselves hearsay. To avoid a hearsay objection, every enterprise that
sent an invoice would have to send a representative, one with personal knowledge of the
transaction, to testify as to the amount the enterprise charged for goods or services
provided to the limited liability company. Dennis would have to go through every check
he wrote and testify that this was the amount he dispatched to the payee. The business
records exception was created to make such an extravagant waste of time unnecessary.
(See People v. Crosslin (1967) 251 Cal.App.2d 968, 975 [“The object of the statute is, of
course, to eliminate the necessity of calling each witness and to substitute the record of
the transaction instead.”])
The court did not abuse its discretion in admitting the Quickbooks printouts
and the check registers. There is no question that the first three conditions for admission
under Evidence Code section 1271 were met. The court’s decision that the records were
trustworthy was also well within its discretion.
13
At one point during trial, Sheri’s counsel argued that the banks’ custodians of records would be
the proper people to lay a foundation for the documents. The banks’ custodians of records could state only that the
statements accurately recorded money coming in or going out. They could not testify on personal knowledge as to
where the money came from and where it went, the issue before the court.
13
Evidence Code section 1552 creates a presumption affecting the burden of
producing evidence that the printed representation of computer information is presumed
to be an accurate representation of that information in the computer itself. “The burden
of producing evidence as to a particular fact is initially on the party having the burden of
proof as to that fact. [Citations.] Once the plaintiff presents evidence to establish each
element of its case, the defendant has the burden of going forward with its own evidence
as to those issues. [Citations.] Where the opposing party produces evidence undermining
the presumption, the presumption is disregarded and the trier of fact must decide the
question without regard to it. . . . [¶] Evidence Code sections 1552 and 1553 provide a
presumption for both the existence and content of computer information and digital
images that the printed versions purport to represent, and establish, preliminarily, that a
computer’s print function has worked properly.” (People v. Rekte (2015) 232
Cal.App.4th 1237, 1245.)
“It is settled computer systems that automatically record data in real time,
especially on government-maintained computers, are presumed to be accurate. Thus, a
witness with the general knowledge of an automated system may testify to his or her use
of the system and that he or she has downloaded the computer information to produce the
recording. No elaborate showing of the accuracy of the recorded data is required. Courts
in California have not required ‘testimony regarding the “‘acceptability, accuracy,
maintenance, and reliability of . . . computer hardware and software’” in similar
situations. [Citations.] [¶] The rationale is that while mistakes may occur, such matters
may be developed on cross-examination and should not affect the admissibility of the
printout or recording of the data itself. [Citations.]” (People v. Dawkins (2014) 230
Cal.App.4th 991, 1003.)
In this case, the Evidence Code section establishes a presumption that the
printouts Keohane testified to were accurate representations of what was in the
Quickbooks system. Sheri failed to produce evidence to rebut that presumption, that is,
14
evidence that the information in the system was not the same as the printed documents.
The court was therefore correct in overruling this objection.
People v. Hawkins (2002) 98 Cal.App.4th 1428 (Hawkins), on which Sheri
relies, deals with a different situation. In that case, a trade secrets case, the issue was
whether the computer accurately recorded the date and time when certain internal files
were accessed. (Id. at p. 1446.) The trial court held that the computer records were
admissible based on an offer of proof that the computer’s clock was functioning properly.
The reviewing court held that the records were properly admitted. (Id. at p. 1450.)
The Quickbooks printouts were admissible under Evidence Code section
1552 because Sheri failed to rebut the presumption that they accurately reflected what
was in the system. “This presumption operates to establish only that a computer’s print
function has worked properly.” (Hawkins, supra, 98 Cal.App.4th at p. 1450.) Then
Keohane testified to the preparation of the information the printouts contained,
establishing the business records exception to the hearsay rule for the information.14
These records were properly admitted at trial.
As to attorney fees under section 1101, subdivision (g), an award is, by
reason of the statutory language, mandatory. (In re Marriage of Fossum (2011) 192
Cal.App.4th 336, 348; In re Marriage of Hokanson (1998) 68 Cal.App.4th 987, 993.)
The code section, however, does not require a separate award.
In this case, the court folded attorney fees for violation of Dennis’ fiduciary
duty to disclose into the general discussion of attorney fees. It is clear from the
discussion of attorney fees in the second statement of decision that the court was
factoring the breach of fiduciary duty into its decision.
14
In Hawkins, there was no second step, because the only issue was whether the “computer-
generated” information, i.e., the date and time stamps, was accurate. (Hawkins, supra, 98 Cal.App.4th at pp. 1449-
1450.) There was no issue regarding the admissibility of “computer-stored” information, i.e., data input by a person.
15
Sheri does not point us to any document or testimony in which she broke
out the fees specifically attributable to Dennis’ failure to disclose. Under these
circumstances, we do not believe the court abused its discretion in making a global award
of attorney fees, one clearly focused on Dennis’ breach as well as the other factors
pertinent to a fee award.
III. Attorney Fees
Section 2030, subdivision (a)(2), provides in pertinent part: “When a
request for attorney’s fees and costs is made, the court shall make findings on whether an
award of attorney’s fees and costs under this section is appropriate, whether there is a
disparity in access to funds to retain counsel, and whether one party is able to pay for
legal representation of both parties. If the findings demonstrate disparity in access and
ability to pay, the court shall make an order awarding attorney’s fees and costs.”
Sheri initially sought a contribution from Dennis of $175,000 for her
attorney fees. Dennis had previously paid $5,400 toward Sheri’s fees. She had also
received a $10,000 distribution from community funds to pay attorneys in March 2014.
During phase two, she testified about additional fees in incurred between phase one and
phase two, in part because she had changed lawyers between the two phases.
The court noted a “disparity in income-earning capacity” between Dennis
and Sheri, especially as both were now in their 60s. The court also noted that the money
for fees would come from the proceeds of the sale of the family home, then in trust, so
Dennis would not have to pay immediately out of his own pocket and was “in the
superior position to obtain earnings and wealth to make it up.”
The court’s decision finally rested on the reasonableness of Sheri’s request,
“in light of all the circumstances of the case, including the parties’ litigation conduct.”
As the court stated, “No one party can claim an ultimate victory. Sheri accused Dennis of
fiduciary duty violations when he bought a family motor home and took out student loans
for college educations. Dennis sought portions of a personal injury settlement fund,
16
which was received decades earlier, for which there was little notice to Sheri (the injured
party) that these would be treated as anything other than her recovery. Both parties
sought full trial treatment of a discrepancy in the value of [DFA], which was unlikely to
15
yield more than a $16,000 difference. This issue prevented the trial from being
completed on a timely basis and resulted in two forensic CPAs, two lawyers and a private
judge taking up significant time on the issue.” The court also referred to Dennis’
withholding of the information regarding the sale of the commercial property: “Dennis’
initial failure to provide reconciling documentation on the handling of the Euclid Street
sales proceeds pervaded almost the entire 4-year period of separation. It prevented the
case from settling by fostering continued acrimony over what Sheri telegraphed was a
key issue to her. Ultimately, the documents necessary to satisfactorily explain the flow of
funds were simple and easily obtained.” Finally the court noted that Sheri had liquid
assets “from the division of community property and existing separate property cash and
investments.” Her fees were paid up, whereas Dennis had to borrow to pay trial costs and
still owed his lawyers $43,000.
We review an award of attorney fees under section 2030 for abuse of
discretion. (In re Marriage of Pearson (2018) 21 Cal.App.5th 218, 234-235.) That
discretion includes evaluating productivity and counter-productivity in litigation.
(Karton v. Ari Design & Construction, Inc. (2021) 61 Cal.App.5th 734, 746.) The court
“may consider a number of factors, including the nature and complexity of the litigation,
the efforts of the parties to resolve as many areas of disagreement as possible without
judicial intervention, and its own experience in determining the reasonable value of the
services rendered.” (In re Marriage of Pearson, supra, 21 Cal.App.5th at p. 234.) It also
considers trial tactics and litigation conduct. (See In re Marriage of Nakamoto & Hsu
(2022) 79 Cal.App.5th 457, 469.) “Financial resources are only one factor for the court
15
This reference appears to be to the double dip/Epstein issue.
17
to consider in determining how to apportion the overall cost of the litigation equitably
between the parties under their relative circumstances.” (§ 2032, subd. (b).)
Sheri contends that the court abused its discretion by awarding her
16
$100,000 in fees. She naturally focuses on the court’s criticisms of Dennis’ conduct
while ignoring her own positions. She also does not mention her separate cash and
investments as sources of payment for her lawyers.
In this case, the court discussed at length the factors it considered when it
made its fee award, including Dennis’ breach of fiduciary duty. It considered the
disparity between the earning power of each spouse. It considered the resources available
to each spouse. It gave substantial weight to the litigation conduct of each spouse – Sheri
as well as Dennis – and concluded that each of them had prolonged the litigation through
taking and sticking to unreasonable or petty positions.
Sheri argues that the court showed its “hurried approach” to the attorney fee
issue by not receiving the billing statements from her counsel. This grossly misrepresents
the record. On the next to last day of trial in 2020, Sheri was asked to authenticate
exhibit No. 61, her declaration from 2019 regarding her attorney fees. The court admitted
both her declaration and exhibit No. 62, the declaration filed by a former attorney
regarding her request for fees, also prepared in 2019. This latter declaration was the
source of the $175,000 figure used by the court as Sheri’s request. The attorney’s
declaration also attached three pages of bills.
Sheri’s counsel then tried to get exhibit No. 57 admitted, which he
characterized as “essentially the back-up to the attorney fee declaration – back-up to
16
Sheri’s counsel’s declaration, filed in connection with phase one of the trial, asked for 50 percent
of $349,921 or $174,996. This is the amount the court used when it calculated attorney fees. The total of attorney
fees to which she testified at trial amounts to under $400,000, $120,000 of which was disputed. On appeal, Sheri
contends that her fees and costs amounted to $482,300 by the end of phase two.
In her objections to the tentative and final statements of decision from phase two, Sheri did not tell
the court that it had relied on an incorrect amount of attorney fees or direct the court to evidence of additional fees.
She objected only that the court had not allocated fees between those for breach of fiduciary duty and those based on
need, and she asked only for the legal and factual basis of the award, which the court had already given.
18
[exhibit] 62 is exhibit 57, which are the billing statements, records from prior counsel.”
The court declined to admit exhibit No. 57 because it already had billing records attached
to declarations, and the fees had been “fully documented.” Counsel then questioned
Sheri regarding the amounts she had paid to each of her previous six law firms and also
regarding the amount she owed his firm. There is no evidence of “hurry” or carelessness
on the court’s part in these pages from the transcript, only a desire not to add duplicate
pages to an already significant pile of paper.
Sheri now contends that it is this testimony – not her prior counsel’s
declaration – and a subsequent declaration by her newest counsel that she had paid an
additional $44,000 that the court should have used to determine the total amount of fees
she had incurred. She did not, however, inform the court of her contention it had relied
on incorrect evidence or an incorrect declaration when it determined the amount of
attorney fees, although she objected to the fee award in both the tentative and final
statements of decision on other grounds.
It appears to us the court carefully weighed the relevant factors when it
arrived at its decision. We cannot find the court abused its discretion in awarding Sheri
$100,000 in fees.
IV. Spousal Support
Sheri makes two arguments with respect to spousal support. First, the
permanent support order of $7,500 per month was insufficient. Second, the court
incorrectly decided she was not entitled to temporary spousal support for the period
between May 16, 2018, and July 31, 2019.
19
A. Permanent Support
With respect to the permanent spousal support award, Sheri states that the
17
court must consider and weigh all the factors of section 4320. This is true, and the court
discussed the statutory factors in detail in the statement of decision it issued after phase
one of the trial. It listed Sheri’s current assets, including an inheritance of more than a
half million dollars and a mortgage-free house. The court also calculated what she could
expect from investment income.
We review an award of spousal support for abuse of discretion. (In re
Marriage of Campi (2013) 212 Cal.App.4th 1565, 1572). “[W]e do not substitute our
judgment for that of the trial court, and we will disturb the trial court’s decision only if no
judge could have reasonably made the challenged decision.” (In re Marriage of Cryer
(2011) 198 Cal.App.4th 1039, 1046-1047.)
In her opening brief, Sheri did not point to any factor or factors that the
family court failed to consider or weighed incorrectly. She simply complained that the
17
Section 4320 provides in pertinent part, “In ordering spousal support under this part, the court
shall consider all of the following circumstances: [¶] (a) The extent to which the earning capacity of each party is
sufficient to maintain the standard of living established during the marriage, taking into account all of the following:
[¶] (1) The marketable skills of the supported party; the job market for those skills; the time and expenses required
for the supported party to acquire the appropriate education or training to develop those skills; and the possible need
for retraining or education to acquire other, more marketable skills or employment. [¶] (2) The extent to which the
supported party’s present or future earning capacity is impaired by periods of unemployment that were incurred
during the marriage to permit the supported party to devote time to domestic duties. [¶] (b) The extent to which the
supported party contributed to the attainment of an education, training, a career position, or a license by the
supporting party. [¶] (c) The ability of the supporting party to pay spousal support, taking into account the
supporting party’s earning capacity, earned and unearned income, assets, and standard of living. [¶] (d) The needs of
each party based on the standard of living established during the marriage. [¶] (e) The obligations and assets,
including the separate property, of each party. [¶] (f) The duration of the marriage. [¶] (g) The ability of the
supported party to engage in gainful employment without unduly interfering with the interests of dependent children
in the custody of the party. [¶] (h) The age and health of the parties. [¶] . . . [¶] (j) The immediate and specific tax
consequences to each party. [¶] (k) The balance of the hardships to each party. [¶] (l) The goal that the supported
party shall be self-supporting within a reasonable period of time. Except in the case of a marriage of long duration
as described in Section 4336, a ‘reasonable period of time’ for purposes of this section generally shall be one-half
the length of the marriage. However, nothing in this section is intended to limit the court’s discretion to order
support for a greater or lesser length of time, based on any of the other factors listed in this section, Section 4336,
and the circumstances of the parties. [¶] (m) The criminal conviction of an abusive spouse shall be considered in
making a reduction or elimination of a spousal support award in accordance with Section 4324.5 or 4325. [¶] (n)
Any other factors the court determines are just and equitable.”
20
18
disparity between her support award and Dennis’ income is an abuse of discretion. We
therefore have no basis for a finding that the court failed to consider any relevant factor
of section 4320 or weighed it incorrectly and thereby abused its discretion.
B. Temporary Support
The dispute over temporary spousal support dates back to August 2018.
Initially (in May 2015) Dennis was ordered to pay Sheri $11,400 per month in support.
In August 2018, the parties entered into a stipulation that reduced the support to $5,800
per month, based on Dennis’ gross monthly wages of $17,280 per month. In addition, the
stipulation provided that if Dennis’ earned income exceeded $17,280 per month, he
would pay Sheri 33 percent of that amount.
The stipulation also reserved jurisdiction over retroactivity. It provided for
retroactive calculation for the period between May 20, 2018, and further order of the
court. Further orders were issued after phase one of the trial, as of July 31, 2019.
At trial in 2020, Sheri claimed Dennis’ earned income exceeded $17,280
per month, so he owed her 33 percent of the excess back to May 2018. Dennis denied his
earned income exceeded $17,280 per month.
The court explained that in its experience such stipulations and orders are
often crafted before the accountants have finished their analysis of such issues as
“controllable cash.” “When there is doubt about the [supporting spouse’s] access to
additional compensation over time, language can be included in support orders to allow
for additional information to be reported for possible additional support calculations.”
The court concluded that the stipulation between Dennis and Sheri was one such
stipulation.
18
Sheri did not discuss her other resources (e.g., a rent-free home, liquid assets of over $50,000).
In her reply brief, Sheri discussed in detail some factors of section 4320 that she claimed the court
overlooked or disregarded. We do not consider arguments raised for the first time in a reply brief, as the opposing
party has no opportunity to address them. (See Mansur v. Ford Motor Co. (2011) 197 Cal.App.4th 1365, 1388-
1389.)
21
The court then turned to the phrase “earned income” to determine what the
parties meant by that term when they entered into the contract/stipulation. (See Civ.
Code, § 1636.) The court reasoned that since Dennis’ monthly wages never exceeded
$17,280, the only possible basis for an “Ostler and Smith bump” was the amount of
19
Dennis’ personal expenses paid by DFA, such as health insurance and car expenses.
Accountants use these “add-backs” to determine the controllable cash available for
support.
The court concluded the stipulation did not reflect an intention to include
add-backs as if they were a bonus and part of Dennis’ earned income. Instead, “the
parties intended to handle the ultimate calculation of controllable cash through the
inclusion of a reservation of jurisdiction for retroactivity.” Until the accountants have
finished their work, controllable cash cannot be accurately calculated, and certainly not
monthly. Therefore extra income, assuming there is any, cannot be calculated or paid.
Sheri might be entitled to arrears based on controllable cash, the court
reasoned, pursuant to the retroactivity provision of the August 2018 stipulation. She did
not, however, make any such claim or provide evidence for a retroactive payment of
additional spousal support. Instead she asked for 33 percent of monthly excess income.
The court determined that the stipulation did not allow recovery of this kind, and since
this was the only claim she had made, she had waived temporary support.20
On appeal, Sheri argues that section 4058 provides a definition of “income”
that is much broader than what the family court used. There are two problems with this
argument. The first is that the code section concerns child support, not spousal support.
(See In re Marriage of Williamson (2014) 226 Cal.App.4th 1303, 1315 [statutes
19
In re Marriage of Ostler & Smith (1990) 223 Cal.App.3d 33. In this case, the reviewing court
held that the family court had correctly included a percentage of the husband’s yearly bonus, should he receive it, in
the support order. (Id. at p. 48.)
20
The court performed some rough dissomaster calculations and concluded that, using only the
salary figures for each, Dennis had overpaid temporary support. Using controllable cash produced an underpayment
“in the modest, 4-figure range.”
22
governing spousal support do not define income].) The second is that the stipulation in
this case uses the term “earned income” to identify the source of the money from which
spousal support is to be calculated. The code section deals with income in general and –
understandably – appears to be bent on casting as broad a net as possible to ensure proper
support of children.
We review a matter of contract interpretation de novo. When the court has
relied on extrinsic evidence to interpret an ambiguous contract term, here “earned
income,” we independently review whether the contract is reasonably susceptible to the
interpretation urged. (In re Marriage of Minkin (2017) 11 Cal.App.5th 939, 948.)
In this case, the court drew on its experience with the way temporary
support matters are typically handled in family law to assist it in interpreting the meaning
of “earned income” in this stipulation. “A contract may be explained by reference to the
circumstances under which it was made, and the matter to which it relates.” (Civ. Code,
§ 1647.)
We believe the court’s interpretation of the August 2018 stipulation, using
its experience in family law matters, was correct. The stipulation allowed Sheri to apply
for additional support based on controllable cash when it was finally calculated. She just
failed to do it.
DISPOSITION
The matter is remanded to the trial court to adjust the monetary value of
Dennis Flynn Architects, Inc., or the portion of the marital balance sheet awarding an
Epstein credit to Dennis Flynn for payment of the motorhome debt, or both, to reflect our
conclusion that $34,428 is the initial balance of the motorhome debt as of December 31,
23
2018, on exhibits No. 1 and No. 29. In all other respects, the judgment is affirmed. The
parties are to bear their own costs on appeal.
BEDSWORTH, J.
WE CONCUR:
O’LEARY, P. J.
MOTOIKE, J.
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