Opinion
NOT TO BE PUBLISHED
Marin County Super. Ct. No. FL084581
Sepulveda, J.
Stephanie Decker-Carlson appeals from the order denying her motion to set aside the parties’ marital settlement agreement and the judgment incorporating that agreement. She argues that the settlement agreement and judgment should have been set aside based on mistake (Fam. Code, § 2122, subd. (e)), because she learned after the parties settled the matter that respondent Eric Carlson’s employee stock options, which were awarded solely to him, were more valuable than he had previously disclosed. Finding no abuse of discretion, we disagree and affirm.
All statutory references are to the Family Code unless otherwise specified.
I. Factual and Procedural Background
Eric and Stephanie were married in February 2003. They both previously had been married, and they have no children together. Stephanie later stated in a settlement conference statement that Eric “came into the marriage with almost nothing except debt.” Beginning in April 2006, Eric worked as a managing director in the investment banking group of Imperial Capital Group, LLC (Imperial Capital). Eric petitioned to dissolve his and Stephanie’s marriage in September 2008.
According to Eric, there are two types of ownership interests in his employer, “Class A Units” and “Class B Units” (hereafter Class A and Class B units). Class A units are full equity shares in Imperial Capital, and Class B units are options to purchase Class A units. During Eric’s marriage to Stephanie, he was awarded two Class B units as part of his employment package. He paid $1,000 for each unit. Eric explained in a declaration, “It is my understanding from the Class B Units Rights Awards Agreement that I could only convert my Class B Units into Class A Units after a three-year vesting period and only if I was still employed and paid the threshold price of $625,000 per unit to convert each unit.” Eric reached the three-year vesting period in March 2009.
Throughout the proceedings below, Stephanie propounded discovery on both Eric and Imperial Capital seeking documents regarding the company. Among other documents Stephanie received were copies of Imperial Capital’s “Class B Units Rights Award Agreement” and Imperial Capital’s “Description of Class B Units.”
On July 28, 2009, Stephanie filed a bench/bar settlement conference statement in advance of an August 10 settlement conference set by the trial court. She stated that “[l]arge numbers” of documents had not been produced during discovery, and that she had filed a motion to compel production of those documents. As for the information already known to her, Stephanie described the Class B units as follows: “When Eric was hired by Imperial Capital, the parties purchased two (2) Class B Equity interests in Imperial Capital Group, LLC for $2,000.00 that are non-transferable. The value of these interests are [sic] unknown. Husband and Imperial Capital have, to date, resisted all discovery attempts to obtain information on the value of these interests. Discovery is still outstanding. However, this problem can be resolved by having Husband hold one of these interest[s] as a fiduciary for the benefit of Wife.” In Eric’s bench/bar settlement conference statement dated July 27, 2009, Eric stated that the Class B units would vest only if he paid the threshold price, but that he “cannot pay the threshold price as he has no funds to do so, nor would it be economically beneficial even if he had the funds.”
After the parties filed their settlement conference statements, but before their settlement conference, the trial court held a hearing on Stephanie’s motion to compel the production of documents. Stephanie claimed, among other things, that Eric had not complied with discovery requests to produce all requested documents regarding his employment at Imperial Capital. The trial court ordered that Eric produce a complete employment agreement, but otherwise concluded that there was no good cause for further production of documents.
Following the parties’ settlement conference on August 10, in which the parties were both represented by counsel, they agreed to settle the matter. The next day, they filed a stipulation and order confirming the settlement pursuant to Code of Civil Procedure section 664.6. Eric agreed to pay Stephanie $500,000, tax free, by June 30, 2011. The settlement agreement awarded Eric both Class B units. Qualified domestic relations orders were to be prepared dividing Eric’s retirement accounts, the parties’ wine collection was to be divided equally, Stephanie was awarded the parties’ Napa Valley Reserve membership, airline mileage and reward points were to be divided equally, the “Camanche stock” was awarded solely to Eric, and both parties waived spousal support.
The parties shed little light on the value of this asset. According to Stephanie’s bench/bar settlement conference statement, she learned that in December 2008, Eric was awarded 13, 000 shares of Comanche. Although the parties had separated by December 2008, Stephanie claimed that “the Comanche transaction was concluded before the parties separated.”
The parties exchanged final declarations of disclosure; Eric’s disclosure stated that the value of the Class B units was $2,000. Judgment was entered on October 15, 2009, and a notice of entry of judgment was filed on October 22. That same day (October 22), Stephanie learned that Imperial Capital had filed an S-1 registration statement with the United States Securities and Exchange Commission (SEC) on October 21, and that Imperial Capital planned an initial public offering (IPO) of Imperial Capital Class A stock to the public. She also learned that the company had restructured to become Capital Group, Inc., a Delaware corporation.
Proceeding without an attorney, Stephanie filed a motion to set aside the judgment and the underlying settlement agreement on October 29, 2009. She alleged that Eric failed to make a full disclosure of all material facts and information regarding the Class B units, which he had represented at various points had an “unknown value” or a value of $2,000, and that she had agreed to award both units to Eric only because she mistakenly understood that they were worth $1,000 each. Stephanie also claimed that Eric never disclosed during the divorce proceedings that his employer planned to take the company public, and that Eric “was well aware that if I had known about the changes at Imperial Capital Group, LLC I would not have given up my 1 (one) Class B share.” Stephanie sought to set aside the judgment and the underlying settlement agreement on several grounds, including mistake (§ 2122, subd. (e)), fraud (§ 2122, subd. (a)), and failure to comply with disclosure requirements (§ 2122, subd. (f)). She requested that discovery be opened regarding what Eric knew about Imperial Capital; she also requested an accounting of the Class B units.
Eric opposed Stephanie’s motion. He submitted a declaration stating that he was not part of the planning process to file the S-1 with the SEC, and that he was not informed of Imperial Capital’s intent to file an S-1 application until October 15, 2009, which was more than two months after the parties signed their settlement agreement, and which was the day after his counsel submitted the stipulated judgment to the trial court for the court’s signature. Eric said that his final declaration of disclosure signed on September 23, 2009, was true and accurate. He further explained that to his knowledge, his Class B units had not been transferred, conveyed, or changed in any way. Eric also stated that “Stephanie knew of the Class B Units, had the LLC agreement that governed the Class B Units rights and values and signed a Spousal Consent form on June 10, 2006 acknowledging that she had copies of all such documentation. Furthermore, she acknowledged her right to consult with independent counsel regarding her community property rights in the Class B Units.”
In support of Eric’s opposition, an executive vice president at Imperial Capital submitted a declaration stating that in his role as managing director and co-head of the investment banking group, he was informed in late July or early August 2009 that senior management was considering an IPO. He was “instructed that this information was highly confidential and should only be transmitted to Imperial Capital employees who were necessary to prepare the S-1 registration statement.” The vice president did not inform Eric before October 15, 2009, that Imperial Capital was considering an IPO, and he was not aware that anyone else informed Eric about the plan to file an S-1 registration statement before October 15.
After Eric filed his response, Stephanie submitted a declaration from Jeffrey L. Gottfredson, a person with more than 25 years of experience in investment banking and the financial services industry. Mr. Gottfredson was asked to render an opinion on the value of the two Class B units, and to opine on the effect on liquidity of the Class B units as a result of Imperial Capital filing an S-1 registration statement with the SEC. He opined that the Class B units had “two lucrative characteristics.” First, the units could be treated and valued in a similar way as most traditional employee stock ownership plans, permitting employees to participate in the appreciation of Imperial Capital above the value as determined at the time the units were issued. Second, if the threshold price is paid and the Class B units are converted to Class A units, the units entitle the holder to participate in allocations and distributions of profits among all the holders of the Class A units. According to Mr. Gottfredson, Eric “fail[ed] to recognize or correctly report the true economic value” of the Class B units, because they were “very valuable securities by providing the holder the option to participate in a very lucrative distribution stream generated by Imperial Capital and paid to the Class A holders.”
As for whether Eric had disclosed all relevant documents regarding the value of the Class B units (as Eric claimed he had done), Mr. Gottfredson opined that Stephanie “was not in possession of the most important piece of information to determine value that Mr. Carlson is: -which is [sic] intimate first hand knowledge of Imperial Capital’s growth and success that is available during a monthly management conference call he is on with the 34 equity partners associated with the firm.”
Although Mr. Gottfredson acknowledged that an “exact calculation” of the value of the Class B units was “indeterminate, ” he opined that “the value of these Class B Units has materially increased above [the] $625,000 Threshold price. They are well ‘in the money, ’ a fact that is easily discernable by even the most junior Investment Banker using what data that is disclosed in the S-1 and industry comparisons....” Stated differently, Mr. Gottfredson opined that “the Class B units have materially appreciated in value and are worth far more than when issued in April, 2006, ” but again did not specify a price.
Eric has requested that this court take judicial notice of financial documents upon which Stephanie’s expert relied, as well as a document showing that Imperial Capital cancelled its scheduled IPO. Stephanie opposes the request, and has filed a declaration of Mr. Gottfredson explaining that the documents do not affect the conclusion that the value of the Class B units is higher than Stephanie understood when she settled the case. We decline to take judicial notice of the documents, because they were not before the trial court. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3 [appellate court will not take judicial notice of matters not presented to the trial court absent “exceptional circumstances”].)
The trial court denied Stephanie’s motion. The court stated in its minute order that the parties had engaged in extensive discovery, and it disagreed with Stephanie’s assumption that Eric “must have known” about the pending IPO at the time of the settlement: “Employment, even [i]n a managerial position, does not translate to knowledge of high level decisions.” The court concluded: “A case must be adjudicated or settled at some point in time. Often assets increase or decrease in value after the date of adjudication or settlement. This is inevitable-but is not grounds to set aside a judgment.” Stephanie timely appealed.
II. Discussion
Stephanie advanced alternative theories in the trial court as to why the judgment should have been set aside, but in this court she argues only that the judgment should have been set aside based on mistake (§ 2122, subd. (e)). She requests that this court remand the matter with an instruction to “divide the two Class B Units equally in kind.” Motions to set aside judgments in dissolution actions are governed by section 2122, which sets forth the exclusive grounds upon which to seek relief, including mistake. (In re Marriage of Brewer & Federici (2001) 93 Cal.App.4th 1334, 1344.) “To set aside a stipulated or uncontested judgment based upon mistake, the mistake may be ‘either mutual or unilateral, whether mistake of law or mistake of fact.’ (Fam. Code, § 2122, subd. (e).)” (Id. at p. 1345.) “In addition to establishing mistake, the party seeking relief must also establish that ‘the facts alleged as the grounds for relief materially affected the original outcome and that the moving party would materially benefit from the granting of the relief.’ (Fam. Code, § 2121, subd. (b).)” (Ibid.) “In other words, the moving party must establish both the presence of at least one of the five factors listed in section 2122, and that this resulted in material disadvantage to the moving party.” (In re Marriage of Rosevear (1998) 65 Cal.App.4th 673, 685, fn. 11 (Rosevear), original italics.)
We review the trial court’s ruling on a motion to set aside a judgment under section 2122 for abuse of discretion. (In re Marriage of Brewer & Federici, supra, 93 Cal.App.4th at p. 1342; Rosevear, supra, 65 Cal.App.4th at p. 682; In re Marriage of Varner (1997) 55 Cal.App.4th 128, 138.) “The trial court’s exercise of discretion will not be disturbed on appeal in the absence of a clear showing of abuse, resulting in injury sufficiently grave as to amount to a manifest miscarriage of justice. [Citations.] ‘ “The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.” ’ [Citations.] The burden is on the complaining party to establish abuse of discretion. [Citations.] The showing on appeal is insufficient if it presents a state of facts which simply affords an opportunity for a difference of opinion. [Citations.]” (Rosevear, supra, at p. 682.)
“[T]he failure of a spouse to disclose the existence or the value of a community asset... constitutes a basis for setting aside a judgment on the grounds of mistake under section 2122.” (In re Marriage of Varner, supra, 55 Cal.App.4th at p. 144.) A trial court may grant relief based upon mistake, whether or not there has been a finding of wrongdoing. (In re Marriage of Brewer & Federici, supra, 93 Cal.App.4th at p. 1347.) The Family Code presumes that spouses will have sufficient, accurate information from which informed decisions may be made, and it requires disclosure of all material facts and information regarding the valuation of assets contended to be community property. (Ibid.; § 2105, subd. (a)(2).)
Relying on the forgoing principles, Stephanie contends that the trial court erred in not setting aside the stipulated judgment on the ground of mistake, because Eric failed to provide a complete and accurate disclosure about the value of the Class B units. The parties vigorously dispute whether Eric complied with his disclosure obligations, and whether he was even obligated to produce the financial documents that Stephanie claims were withheld from her. Even assuming that Eric did not mislead Stephanie and revealed all information known to him, the trial could have granted relief based on mistake, regardless of a finding of wrongdoing. (In re Marriage of Brewer & Federici, supra, 93 Cal.App.4th at p. 1347.)
Stephanie first notes that she was unaware that Imperial Capital had been planning to reorganize, file an S-1 registration statement with the SEC, and proceed with an IPO. However, Eric provided uncontradicted evidence that he was unaware of the reorganization efforts and potential IPO, and the trial court rejected the contention that Eric concealed information about these events from Stephanie. The fact that Stephanie did not know about the IPO therefore could not have led the trial court to conclude that there was a unilateral mistake based on Eric’s failure to disclose. (Cf. In re Marriage of Varner, supra, 55 Cal.App.4th at p. 144.) However, the fact that neither party was aware of the IPO arguably could have supported a finding of mutual mistake. (§ 2122, subd. (e); In re Marriage of Brewer & Federici, supra, 93 Cal.App.4th at p. 1346, fn. 11.)
This mutual mistake could be the basis of overturning the judgment, however, only if Stephanie could show that the mistake materially affected the original outcome, and that she would materially benefit from the granting of relief. (§ 2121, subd. (b); In re Marriage of Brewer & Federici, supra, 93 Cal.App.4th at p. 1345; Rosevear, supra, 65 Cal.App.4th at p. 685, fn. 11.) Stephanie failed to show below that any mistake materially affected the original settlement agreement. She argues that, whether or not Imperial Capital planned an IPO, she was mistaken about the value of the Class B units because she did not have access to “the annual financial statements and other financial documents, embedded in the S-1 Statement, that evidenced the enhanced value of the Class B Units.” However, it is unclear whether the Class B units in fact had a different value than Eric represented as of the date of the settlement agreement. Even after Stephanie’s expert reviewed the S-1 registration statement, he acknowledged that he could not specify the value of the Class B units.
“The value of unexercised stock options is inherently speculative, because it lies in the potential that a difference may arise, by the time the options are exercised, between the strike price and the market price.” (In re Marriage of Pearlstein (2006) 137 Cal.App.4th 1361, 1374, italics added.) As the trial court observed at the hearing on Stephanie’s motion, “It’s clear that the information provided was the issue price for this stock, a thousand dollars, and a strike price, and at no point did anybody opine a fair market value, ” and there was no fair market value for the units at the time of the hearing. Eric represented in his bench/bar settlement statement that he did not have the means to pay the $625,000 price per unit to purchase Class A units, and it is undisputed that, as of the time of the motion to set aside the judgment, Eric had not exercised his option to purchase Class A units. The value of his Class B units lies, as it always has, in the potential for investment in the future, when it is unknown how the company may be performing or what value its Class A units may have.
Because the value of the Class B units was speculative, this is not a situation such as in In re Marriage of Brewer & Federici, supra, 93 Cal.App.4th 1334, where a wife failed to disclose the value of a pension, which was “one of the largest community assets, an asset which is financial in nature and whose monetary value [was] easily ascertainable.” (Id. at p. 1347, italics added.) This case is also distinguishable from In re Marriage of Varner, supra, 55 Cal.App.4th 128, in which a motion to set aside a judgment was supported by appraisals of community property that differed greatly from the valuations that were provided by husband before a settlement agreement. (Id. at pp. 132, 134, 143-144.) Here, by contrast, the value of Eric’s unexercised options are by nature speculative, and Stephanie’s own expert cannot specify their value. Whatever the value of the Class A units, Eric still holds only the option to purchase them.
“[U]nless [Stephanie] was able to establish that the judgment was in fact inequitable to her, there could be nothing for her to have been mistaken about in stipulating to that judgment.” (Rosevear, supra, 65 Cal.App.4th at p. 685, fn. 11.) Eric stated in his declaration in opposition to Stephanie’s motion to set aside the judgment that “Stephanie was assigned more cash assets with no risk and I was assigned the majority of assets in which there was substantial risk that they would be of little to no value in the future.” Eric also declared that Stephanie was given “nearly all the cash at my disposal and substantial percentages of my future income.” Stephanie acknowledges on appeal that “it would be counterintuitive for Eric to have paid her $500,000 in ‘tax free cash’ to obtain one of two Units that he valued at [only] $1,000 apiece.” To the contrary, such a division would make sense if the settling parties recognized that the Class B units could one day be converted into Class A units, which would then have a value of more than $2,000. Stephanie asserts on appeal that it is her “recollection” that “the $500,000 cash payment resolved her claims against Eric for unpaid, past-due temporary spousal support under existing orders in the total amount of approximately $324,881.” However, she directs this court to no evidence submitted to the trial court in support of her motion to set aside the judgment supporting this “recollection.” Instead, she relies on statements made before the parties settled regarding Eric’s support obligations, an issue that was disputed before the parties settled the matter. In short, Stephanie cannot show that the judgment was inequitable to her. Under all the circumstances, she has failed to show that the trial court abused its discretion in denying her motion. (Id. at p. 682.)
We also reject Stephanie’s argument, raised for the first time on appeal, that she should not have borne the burden of proof in her motion to set aside the judgment, because there was a presumption of undue influence. Stephanie did not claim below that she was subject to undue influence, and specifically stated that she understood that she had the burden of proof; she therefore arguably has waived the issue of undue influence. (North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 28-29.) Even if the argument was not waived, it lacks merit. First, the presumption would apply only if the marital settlement agreement favored Eric and disadvantaged Stephanie, something that was not shown. (Cf. In re Marriage of Kieturakis (2006) 138 Cal.App.4th 56, 84, 90.)
Second, this court previously has held that a presumption of undue influence does not apply when a marital settlement agreement is achieved through mediation, because to hold otherwise would undermine the state’s strong policy encouraging settlements. (In re Marriage of Kieturakis, supra, 138 Cal.App.4th at p. 87.) It is presumed that most divorce mediators work to balance the negotiating power between parties, which results in agreements that are more fair and voluntary, as opposed to coerced. (Id. at p. 85.) Although the settlement agreement here was reached during a bench/bar conference, as opposed to mediation, the same principles apply. Two bench/bar panelists worked with the parties at the settlement conference, which lasted from 9:00 a.m. to 7:00 p.m. The day after the conference, Stephanie’s counsel told the trial court that she wanted to thank the panelists, because “it was only by their extraordinary efforts that a settlement was achieved.” Such public praise for the process that led to the settlement agreement is contrary to any suggestion that Stephanie was subject to undue influence. We reject Stephanie’s undue influence argument.
III. Disposition
Eric’s request for judicial notice is denied. The trial court’s order is affirmed. Eric shall recover his costs on appeal.
We concur: Reardon, Acting P.J., Rivera, J.