Opinion
NOT TO BE PUBLISHED
CONSOLIDATED APPEALS from a judgment and postjudgment orders of the Superior Court of San Diego County, Super. Ct. No. D483710 Thomas Ashworth III, Judge.
O'ROURKE, J.
In this marital dissolution action between Saracia Shannahan and William P. Shannahan, William appeals from the final judgment determining the division of property and from certain postjudgment orders. William contends the court erred by (1) ruling that two residential real properties known as the Virginia Way property and Brookmead property were community property and that he breached his fiduciary duty to Saracia by transferring them to other entities without her knowledge, consent, or adequate compensation to the community; (2) ruling that all contributions to certain retirement accounts during the marriage were community property; (3) ruling that to the extent there were insufficient community retirement funds to "equalize" Saracia's share of community property, he was required to pay Saracia one-half of the deficiency from his separate portion of a retirement fund known as "Shannahan Vista IRA # 1;" (4) ordering him postjudgment to pay certain attorney fee awards to Saracia from his share of the retirement accounts; (5) ordering him postjudgment to pay Saracia's attorney fees incurred in federal litigation against an insurance company arising out of the destruction of the Brookmead Property by fire; (6) ordering him to pay Saracia $150,000 in attorney fees from his separate property in addition to attorney fees awarded to her as a charge against community property; (7) including indemnification language in the judgment; and (8) including alter ego language in the judgment. In Case No. D055292, William contends the court erred by directing him to satisfy a postjudgment attorney fee award to Saracia from his private retirement account.
As is customary in family law cases, we will refer to the parties by their first names for convenience and clarity, intending no disrespect.
Virginia Way, LP (VWLP), the limited partnership to which William, as trustee of a marital trust transferred the Virginia Way property, appeals the portion of the judgment awarding Saracia exclusive use and possession of the Virginia Way property until she receives her full share of the community assets. VWLP contends the award was in excess of the court's jurisdiction because it impacts the interests of third parties who were not joined to the case, and the Virginia Way property was not community property. VWLP also contends the award is duplicative of the award of $575,000 to Saracia as her one-half, presumed interest in the Virginia Way property.
Saracia also appeals from the judgment, contending the court erred by (1) not setting aside William's transfer of the Virginia Way property to VWLP and awarding the property to her; (2) finding a separate property component in William's commingled retirement accounts instead of ruling the retirement accounts were entirely community property; (3) not awarding her attorney fees under Family Code section 1101, subdivision (g), as a remedy for William's breach of fiduciary duty; and (4) denying her request for sanctions under section 271.
All subsequent statutory references are to the Family Code unless otherwise specified.
Saracia additionally contends that if any of the property distribution is modified, the case should be remanded for increased spousal support and redetermination of her attorney fee award under section 2030, and that if any award payable from the retirement accounts is reversed, the court should enter a money judgment in the same amount.
We reverse the portion of the judgment denying Saracia's requests for attorney fees under section 1101, subdivision (g), and sanctions under section 271 and remand for consideration of those requests. We otherwise affirm the judgment and the postjudgment orders that William appeals.
FACTUAL AND PROCEDURAL BACKGROUND
William and Saracia were married in 1983. William was a practicing attorney and at the time of marriage he owned the Virginia Way property (the parties' marital residence) through a trust. He also had a retirement account valued at about $300,000. Saracia worked as an airline stewardess before marriage and her assets at the time of marriage included a condominium in La Jolla and a note receivable for a condominium she had sold. The marriage produced two children. The parties separated and Saracia filed for dissolution in April 2004.
The Virginia Way property
William and Saracia first separated in February 1986 and reconciled in the fall of that year. During the period of separation, William met with Saracia and told her he wanted to continue the marriage and that he would give her 50 percent of the Virginia Way property if she would move back in with him. She agreed and in April 1987, William transmuted the Virginia Way property to community property by granting it, as trustee of "UTA October 23, 1981" to himself and Saracia, husband and wife, as community property. William and Saracia then transferred the property by quitclaim deed to themselves as trustees of the Shannahan Marital Trust (the Marital Trust). William told Saracia he was giving her half of the property, but it had to go into the Marital Trust to avoid taxes. Saracia asked him if it would still be community property and he said yes.
"UTA October 23, 1981"on the grant deed transferring the Virginia Way property to William and Saracia as community property apparently is a reference to the Shannahan Family Trust dated October 23, 1981 (the Family Trust), William's separate property trust, also known as the Shannahan Separate Property Trust.
The Marital Trust document named both William and Saracia as trustees and provided that "the action of any Trustee is sufficient to bind the Trust property." William showed her the trust document and she asked him if it was okay. He said yes and she signed it. At trial, she testified, "I don't get the financial stuff, I really don't. I don't have the head for the financial thing, I never have." She also testified, "He did business; I did home. And that's kind of how it was. I didn't question him. He was... telling me what to do and that was his expertise, and I said fine, I'll do it." After she signed the Marital Trust document, she and William never had another discussion about the ownership of the Virginia Way property or any changes in its ownership.
In May 1989, the Marital Trust sold the Virginia Way property to Northwest Financial, Ltd. under a land contract to obtain certain tax deferral benefits in connection with the purchase of the Brookmead property. In October 1989, William and Saracia created the Shannahan Children's Trust (the Children's Trust) for the benefit of their two children. In September 1998, William formed VWLP as a vehicle to transfer to the Children's Trust the land contract receivable held by the Marital Trust from the 1989 sale of the Virginia Way property. However, in 1998, Northwest Financial, Ltd. and the Marital Trust entered into a settlement agreement whereby Northwest Financial, Ltd. paid off the contract receivable by surrendering its vendee interest in the land contract to the Marital Trust.
In September 1998, William, acting as co-trustee of the Marital Trust, transferred the Virginia Way property by quitclaim deed from the Marital Trust to VWLP. In exchange, the Marital Trust received a 4 percent interest in VWLP as general partner and a 96 percent interest in VWLP as limited partner. In October 1998, the Marital Trust made a gift of 48 percent of VWLP to the Children's Trust, leaving the Marital Trust with a 52 percent interest in the partnership. In December 1998, the Family Trust (William's separate property trust) contributed marketable securities worth about $160,000 to VWLP in exchange for a 50 percent limited partner interest in VWLP. A restatement of limited partnership agreement apparently executed in late 1999 shows that as of November 1, 1999, the respective percentages of interest in VWLP were as follows: the Family Trust: 50 percent; Marital Trust: 26 percent; and the Children's Trust: 24 percent.
The relevant restatements of the VWLP partnership agreement state that the value of the Family Trust's initial contribution to VWLP was $158,000.
The date of execution stated on that restatement is January 1, 1999, but the restatement elsewhere refers to the admission of additional limited partners "effective November 1, 1999."
In December 1999, the Marital Trust transferred an additional 20 percent interest in VWLP to the Children's Trust. As a result, the respective percentages of interest in VWLP became: the Family Trust: 50 percent; Marital Trust: 6 percent; and the Children's Trust: 44 percent. In 2000, the Marital Trust transferred its remaining 6 percent interest in VWLP to the Children's Trust as a gift, resulting in the Family Trust and the Children's Trust each holding a 50 percent interest in the partnership - the Family Trust as general partner and the Children's Trust as limited partner. Until the instant divorce proceedings, Saracia thought the Virginia Way property was community property held by the Marital Trust. She was unaware that title to the property was held by VWLP.
The Brookmead property
In late 1987, after the birth of the first of their two children, William and Saracia acquired the Brookmead property because they were planning on having more children and wanted a larger house. Saracia testified that William told her title to the Brookmead property would be held by Northwest Financial, Inc. (Northwest Financial), a Nevada corporation, "because he was going to challenge [Proposition] 13 and didn't want anybody knowing who owned the house." Saracia's understanding was that Northwest Financial would be put into the Marital Trust.
The Brookmead property was initially purchased by Northwest Financial for $730,000 and then simultaneously sold to the Marital Trust for $750,000 under a land contract. Northwest Financial borrowed $300,000 of the purchase price from Torrey Pines Bank and $250,000 from Lomas Santa Fe Executive Plaza, Inc. Saracia contributed $50,000 toward the purchase price from her separate property, William contributed $50,000 from his separate property, and William's former professional law corporation, William P. Shannahan, Inc., contributed another $100,000. Each of those contributions is reflected by a promissory note from Northwest Financial in the amount of the contribution, executed by William as vice president of Northwest Financial. After it was purchased, William assured Saracia many times "through the years" that the Brookmead property was held as community property.
In his opening brief and in certain papers filed in the trial court, William has asserted that this additional $100,000 contribution was from Shannahan Investments, Inc., his separate property corporation. The promissory note reflecting that contribution identifies the payee as William P. Shannahan, Inc., but William later changed the name of the corporation to Shannahan Investments, Inc.
Escrow closed in November 1987 and William and Saracia moved into the Brookmead property in March 1988 after the interior of the house was remodeled. From the time they acquired the Brookmead property through 1992, an additional $450,000 was spent on improvements to the property. Northwest Financial loaned those funds to the Marital Trust, increasing the amount owing under the Northwest Financial's land contract to $1.2 million. Saracia never signed any documents on behalf of Northwest Financial and did not know who its officers or shareholders were.
A "FOURTH AMENDMENT TO AGREEMENT FOR SALE OF REAL ESTATE (INSTALLMENT LAND CONTRACT)" dated January 1, 2003, between the Marital Trust and Northwest Financial, Ltd., a limited partnership of which Northwest Financial was the general partner, increased the purchase price under the land contract to $1.2 million, stating the additional $450,000 consisted of "additional improvements of $350,000 and a home equity loan of $100, 00." The amendment was signed by William on behalf of vendee Marital Trust as trustee, and on behalf vendor Northwest Financial as its president.
In January 2003, William created Brookmead Partners, a general partnership between his then professional law corporation, William P. Shannahan, APLC (APLC) and the Marital Trust for the stated purpose of owning residential real estate. Through a complicated series of transactions, the Marital Trust, acting through William as co-trustee, transferred interests in the Brookmead property to Brookmead Partners. In this litigation, William claims that the purpose of those transactions was to convert the Marital Trust's debt under the land contract to equity in a manner that would avoid a reappraisal of the Brookmead property under Proposition 13, avoid income recognition for tax purposes, ensure an estate planning benefit, and allow Saracia and the children to live at the Brookmead property free of a burdensome debt.
On January 1, 2003, the Marital Trust "assigned" a two percent interest as vendee in the Brookmead property land contract to APLC. The Marital Trust and APLC then immediately assigned their entire interest in the Brookmead property (i.e., land contract) to Brookmead Partners. In connection with (or as part of) that assignment, the Marital Trust and APLC sold one-third of their interest in the Brookmead property land contract to Brookmead Partners for $840,000, and simultaneously made a capital contribution of their remaining two-thirds interest to Brookmead Partners in exchange for interests in the partnership. William signed all the relevant documents in his various capacities as president or sole director of APLC on behalf of APLC itself or for APLC as managing partner of Brookmead Partners, and as trustee of the Marital Trust.
In June 2003, Northwest Financial, Ltd. and BLLJ Investments Limited Partnership (BLLJ) were admitted as new partners to Brookmead Partners upon execution of a restatement of the Brookmead Partners general partnership agreement. The contributions of Northwest Financial, Ltd. and BLLJ to the partnership were valued at $550,000 and $650,000, respectively, for a combined contribution of $1.2 million, which, according to William's opening brief, was a contribution of Northwest Financial, Ltd. and BLLJ's combined receivables on the land contract.
William testified that Northwest Financial, Ltd. owed BLJJ $650,000 and was the vendor on the land contract with equity of $550,000 in the contract. The $650,000 that Northwest Financial, Ltd. owed to BLLJ consisted of BLLJ's purchase of the $300,000 Torrey Pines note and a $300,000 Lomas Santa Fe Executive Plaza note, plus an additional $50,000 that BLLJ loaned to Northwest Financial, Ltd.
On June 1, 2003, the Marital Trust contributed to Brookmead Partners a $440,000 note the partnership had given it in the sale of the one-third interest in the Brookmead property land contract, and BLLJ contributed an additional $80,000 to the partnership in exchange for an additional partnership interest. After those contributions, the ownership percentages of Brookmead Partners were as follows: Marital Trust: 48 percent; BLLJ: 30 percent; Northwest Financial, Ltd.: 21 percent; and APLC: 1 percent.
On April 23, 2004 (after the parties' separation), William served notice of termination of the Marital Trust on Saracia. William's position in this litigation is that as a result of the termination of the Marital Trust, his and Saracia's ownership interests in Brookmead Partners through the trust reverted to separate property interests equal to each party's percentage of contribution to the partnership. Thus, according to William, the court should have confirmed the ownership of Brookmead Partners as follows: BLLJ: 30 percent; Northwest Financial: 21 percent; APLC: 1 percent; Saracia: 12.5 percent; and William: 35.5 percent (consisting of a 12.5 percent contribution by William and a 23 percent contribution by William's separate property corporation, Shannahan Investments, Inc.).
William inconsistently states in other places in his opening brief that Saracia's ownership percentage of Brookmead Partners should be 12.25 percent. The reasoning underlying William's 12.5 or 12.25 percent calculation is not explained, but may be as follows: William and Saracia each contributed $50,000 of separate property funds toward the $200,000 "equity" or down payment on the Brookmead property. William's separate property corporation contributed $100,000. Thus, Saracia and William each held a 25 percent interest, and William's corporation held a 50 percent interest in the equity. The last restatement of Brookmead Partners stated that the Marital Trust held a 48 percent interest in the partnership, which owned the property. One-fourth of 48 percent is 12 percent; thus Saracia's 12.25 or 12.5 percent interest (based on her initial contribution) is approximately one-fourth of the Marital Trust's 48 percent interest. It is unclear by what reasoning William would conclude that the ratio of each party's initial separate property contribution toward the down payment for the Brookmead property to the total amount of the down payment should be the same ratio (approximately) used in dividing the Marital Trust's 48 percent interest in Brookmead Partners between William, his separate property corporation, and Saracia.
The judgment
The court entered its final judgment on reserved issues in August 2008. The judgment includes the finding that both the Virginia Way property and Brookmead property "are the community property of the parties and this community property interest overcomes the claim of title or other title interests claimed by [William] to be in other entities, joined or otherwise." The court found that William breached his fiduciary duties to Saracia under sections 721 and 1100 by transferring the Virginia Way property and Brookmead property "to other entities without her specific knowledge, written consent or adequate compensation to the community." The court further found that William "is the one common denominator and alter ego in all of these other entities." However, the court ruled that William's "conduct in these various transfers is neither fraudulent nor illegal."
The judgment awarded Saracia a one-half interest in the equity of both properties. Finding the Virginia Way property had a fair market value of $1,550,000 and debt of $400,000, the court ordered William to pay Saracia $575,000 as her one-half share of that property. The judgment noted that the stipulated value of the Brookmead property was $4,100,000 and that there was "no recognizable debt against the property." Accordingly, the court ordered William to pay Saracia $2,050,000 for her share of the Brookmead property. Noting the residence on the Brookmead property had been destroyed by fire, the court reserved jurisdiction over the disposition of proceeds from the insurance policy on the property.
We will present additional facts as they become relevant to our discussion.
DISCUSSION
I. WILLIAM'S APPEAL (D053701)
A. Breach of Fiduciary Duty
Under California law, spouses occupy confidential relations with each other and, therefore, are subject to the general rules governing fiduciary relationships. (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 287; § 721, subd. (b).) The confidential and fiduciary relationship between spouses imposes a duty of the highest good faith and fair dealing on each spouse and prohibits either from taking any unfair advantage of the other. (§ 721, subd. (b).)
Section 1100, subdivision (e) provides: "Each spouse shall act with respect to the other spouse in the management and control of the 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...." (Italics added.)
Although section 1100 generally addresses community personal property, in contrast to community real property, subdivision (e) of section 1100 references and applies to "all assets in which the community has or may have an interest" (italics added), without distinguishing between real and personal property.
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." (Italics added.)
The existence of a fiduciary duty is a question of law; breach of the duty is a question of fact. (Kirschner Brothers Oil, Inc. v. Natomas Co. (1986) 185 Cal.App.3d 784, 790; see also Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 32.) William does not dispute the existence of a fiduciary duty to Saracia; he essentially argues that the court's breach of fiduciary duty findings are not supported by substantial evidence or that, based on undisputed facts, there was no breach of fiduciary duty as a matter of law. "In reviewing a challenge to the sufficiency of the evidence, we are bound by the substantial evidence rule. All factual matters must be viewed in favor of the prevailing party and in support of the judgment. All conflicts in the evidence must be resolved in favor of the judgment." (Heard v. Lockheed Missiles & Space Co. (1996) 44 Cal.App.4th 1735, 1747.)
In two separate footnotes, William notes that he filed objections to the court's proposed statement of decision, seeking clarification of the factual and legal basis on which the court ruled that he breached his fiduciary duties with respect to Virginia Way and Brookmead properties and how his transfers of those properties caused Saracia any damages. William contends that the court did not provide the clarification he requested in its final statement of decision and that its failure to do so by itself is sufficient ground to reverse the judgment. We decline to address this contention because it is raised only in footnotes and is not specified by a separate heading or subheading as required by California Rules of Court, rule 8.204(a)(1)(B). (Sierra Club v. City of Orange (2008) 163 Cal.App.4th 523, 542; Roberts v. Lomanto (2003) 112 Cal.App.4th 1553, 1562 [reviewing court may disregard contention asserted in footnote but not raised in a properly headed argument]; Ranch Partners v. County of Placer (2001) 91 Cal.App.4th 1336, 1343, fn. 9; Opdyk v. California Horse Racing Bd. (1995) 34 Cal.App.4th 1826, 1830-1831, fn. 4 [failure to head an argument as required by former California Rules of Court, rule 15(a) (currently rule 8.204(a)(1)(B)) constitutes a waiver].)
Virginia Way property
We conclude that sufficient evidence supports the court's finding that William breached his fiduciary duty to Saracia by transferring the Virginia Way property to other entities without Saracia's specific knowledge, written consent, or adequate compensation to the community, and that his conduct violated sections 721 and 1100. It is undisputed that William transmuted the Virginia Way property to community property by granting it to himself and Saracia as community property before he effected the transfer of the property to the Marital Trust. As noted, Saracia testified that she left the family financial matters to William because she did not "have the head for it, " and that William handled business matters and she "did home." She did not question him regarding financial matters but did what he told her to do because "that was his expertise." Based on this testimony and Saracia's testimony that she thought the Virginia Way property was community property held by the Marital Trust until the instant litigation, the court could reasonably find that William gradually eliminated the marital community's entire interest in the Virginia Way property without disclosing to Saracia what he was doing, and that he knew Saracia would not investigate or question his actions concerning the property because she trusted his financial and business expertise. Accordingly, the court could reasonably conclude that William breached his fiduciary duty to Saracia by engaging in a series of transactions that detrimentally impacted or impaired her one-half interest in the community estate within the meaning of section 1101, subdivision (a), and breached his fiduciary obligation under section 1100, subdivision (e), to make full disclosure to Saracia of all the material facts and information regarding the community property status of the Virginia Way property.
William construes the court's reference in the judgment to his "transferring the Brookmead and Virginia Way residences to other entities" as referring only to his initial transfer of the Virginia Way property to VWLP and his transfer of the Brookmead property to Brookmead Partners. Thus, he asserts that this appeal is not about "any of those 'downstream' transfers and transactions that [Saracia] obsessed on, unsuccessfully, at trial." We construe the court's reference to "other entities" as including all of the entities involved in the series of William's transactions that detrimentally impacted or impaired Saracia's interest in the community estate. Our construction is supported by the next sentence in the judgment, which reads: "[William] is the common denominator in all of these other entities." (Italics added.) The court's use of the word "all" indicates the court's breach of fiduciary duty finding encompassed more than just two entities (VWLP and Brookmead Partners) in its breach of fiduciary duty finding.
William contends the court's ruling that he breached his fiduciary duty with respect to the Virginia Way property was erroneous because it disregards the Family Trust's separate property interest in VWLP. The court did not disregard the Family Trust's interest in VWLP; it effectively found that the Family Trust acquired its interest in VWLP (and thus the Virginia Way property) as a result of William's breach of fiduciary duty to Saracia - i.e., his engaging in a "pattern or series of transactions" (§ 1101, subd. (a)) that caused Saracia to lose her community property interest in the Virginia Way property. Under section 1101, subdivision (g), the court was authorized to award Saracia "an amount equal to 50 percent, of any asset... transferred in breach of fiduciary duty." Accordingly, the court properly ordered William to pay Saracia an amount equal to one-half of the equity in the Virginia Way property, or $575,000.
William also argues he did not breach his fiduciary duty by transferring the Virginia Way property without Saracia's consent because the Marital Trust instrument expressly authorized him to take that action as co-trustee. The Marital Trust document authorized William to bind the trust without her consent, but did not eliminate his fiduciary duties to deal with her fairly and in good faith and to not take unfair advantage of her. The court could reasonably find he took unfair advantage of her by (1) telling her it was necessary to create a marital trust for tax purposes and to transfer title of the Virginia Way property to the trust; (2) directing her to sign a marital trust document that allowed him to unilaterally bind the trust without her consent, knowing that she trusted him with the family financial and business decisions and would not appreciate the power her signature would give him to dispose of community assets; and then (3) using his power to unilaterally bind the trust to entirely transfer away her community property interest in the Virginia Way property through a series of transactions that he did not disclose to her and of which she became aware only through this litigation.
William also contends the court's breach of fiduciary duty finding was erroneous because the transfer changed only the form, and not the value, of Saracia's ownership interest. He argues that Saracia's interest in the Virginia Way property was identical to the interest she held in the VWLP after William transferred the property from the Marital Trust to VWLP. This argument ignores the fact that William did not stop with the transfer of the Virginia Way property to VWLP; he went on to engage in a series of transactions, including gifts, that caused Saracia to lose the entire interest she had in the Virginia Way property through the Marital Trust. The evidence sufficiently supports the court's breach of fiduciary duty finding with respect to the Virginia Way property.
Brookmead property
We also conclude sufficient evidence supports the court's finding that William breached his fiduciary duty to Saracia by transferring the community's interest in the Brookmead property to other entities without Saracia's knowledge and consent.
" 'The status of property as community or separate is normally determined at the time of its acquisition.' [Citations.] Such status is not dependent on the form in which title is taken." (In re Marriage of Buol (1985) 39 Cal.3d 751, 757.) Section 760 provides that "[e]xcept as otherwise provided by statute, all property, real or personal... acquired by a married person during the marriage while domiciled in this state is community property." "Generally, property acquired during marriage by either spouse, other than by gift or inheritance, is community property. [Citations.] This is a rebuttable presumption affecting the burden of proof...." (In re Marriage of Weaver (2005) 127 Cal.App.4th 858, 864.)
Section 2581 provides that "[f]or the purpose of division of property on dissolution of marriage or legal separation of the parties, property acquired by the parties during marriage in joint form, including property held in tenancy in common, joint tenancy, or tenancy by the entirety, or as community property, is presumed to be community property." "Under section 2581, all property held in joint title by spouses during marriage is presumed to be community property upon dissolution, rebuttable only by written evidence to the contrary. [Citations.] Such evidence must consist of either '[a] clear statement in the deed or other documentary evidence of title by which the property is acquired that the property is separate property and not community property, [¶]... [or by p]roof that the parties have made a written agreement that the property is separate property.' (§ 2581.) Thus, under section 2581 spouses cannot hold property in joint title while preserving the property's separate property characterization through oral or implied agreements." (In re Marriage of Weaver, supra, 127 Cal.App.4th at p. 865.)
The Brookmead property is presumptively community property under section 2581, as well as under section 760, because William and Saracia acquired the property in joint form as co-trustees of the Marital Trust. The community property presumption is not rebutted by the fact that William and Saracia both contributed separate property funds to purchase the property. Tracing proceeds contributed toward the acquisition of property during marriage to a separate property source generally does not defeat a presumption that the property is community property; it simply establishes the right to reimbursement under section 2640 in a marital action dividing the community estate. (In re Marriage of Cochran (2001) 87 Cal.App.4th 1050, 1057.)
Section 2640, subdivision (b) provides: "In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party's contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source. The amount reimbursed shall be without interest or adjustment for change in monetary values and may not exceed the net value of the property at the time of the division."
Saracia testified that after they acquired the Brookmead property, William assured her many times "through the years" that it was held as community property. William testified that he had no discussion with Saracia before drafting the Brookmead Partners partnership agreement and signing the agreement on behalf of both APLC and the Marital Trust, or before transferring the Marital Trust's interest in Brookmead property land contract to the new partnership. Nor did he discuss with Saracia the Marital Trust's assignment of a two percent interest in the Brookmead property land contract to APLC, or the Marital Trust and APLC's subsequent assignment of their interests in the land contract to Brookmead Partners, or any of the other transactions that resulted in the reduction of the Marital Trust's interest in Brookmead Partners to 48 percent.
Thus, the evidence shows that similar to his actions with respect to the Virginia Way property, William initially arranged for the Brookmead property to be held entirely by the Marital Trust and then, through a series of transactions that he did not disclose to Saracia, gradually reduced the Marital Trust's interest in the partnership to 48 percent before dissolving the trust, knowing that Saracia would not question his actions because she trusted his financial and business expertise. Accordingly, the court could reasonably conclude, as it did regarding the Virginia Way property, that William breached his fiduciary duty to Saracia by engaging in a series of transactions that detrimentally impacted or impaired her interest in the community estate within the meaning of section 1101, subdivision (a), and breached his fiduciary obligation under section 1100, subdivision (e), to make full disclosure to Saracia of all the material facts and information regarding the community property status of the Brookmead property.
William contends the court's breach of fiduciary duty finding is erroneous with respect to the Brookmead property because (1) it disregards both parties' separate property contributions; (2) it disregards the ownership interests of Shannahan Investments, Inc., Northwest Financial, APLC, and BLLJ in the property; (3) the Marital Trust authorized him to act unilaterally as co-trustee; and (4) Saracia suffered no damages because the transfer of interests in the property only changed the form of Saracia's interest, not its value.
Because the court found William breached his fiduciary duty through his transactions that impaired the community's interest in the Brookmead property, the court was authorized to award Saracia her one-half share of the stipulated value of the property under section 1101, subdivision (g), notwithstanding William's transfer of interests in the property to other entities that he controlled. Regarding the parties' separate property contributions toward the purchase of the Brookmead property, as we noted above, such contributions do not rebut the presumption that the property was acquired as community property; they merely give rise to a right of reimbursement under section 2640.
Regarding William's authority under the Marital Trust to act unilaterally in managing trust assets, we reiterate that the trust document's grant of that authority did not eliminate William's fiduciary duty to deal with Saracia fairly and in good faith. Finally, William's argument that there was no breach of fiduciary duty because he merely changed the form, rather than the value, of Saracia's ownership interest ignores the fact that William engaged in a series of transactions that reduced the community's interest in the property through the Marital Trust from 100 percent to 48 percent. The evidence sufficiently supports the court's breach of fiduciary duty finding with respect to the Brookmead property.
As we discussed in footnote 13, ante, we do not view the court's breach of fiduciary duty as being limited to William's initial transfers of the Virginia Way property and Brookmead property to VWLP and Brookmead Partners, respectively.
B. Retirement Accounts
The judgment identified and characterized various retirement accounts in William's name as follows: (1) "Defined Benefit Pension # 1 and # 2: 23.1 percent community property, 76.9 percent separate property; (2) WPS Defined Contribution Plan: 100 percent community property; (3) Vanguard IRA #9928286871: 59.01 percent community property, 40.99 percent separate property; (4) Janus IRA #203215731: 59.01 percent community property, 40.99 percent separate property; (5) USB Rollover Roth IRA #VR 4977934: 59.01 percent community property, 40.99 percent separate property; and (6) USB Rollover IRA #VR 4978034: 81.78 percent community property, 18.22 percent separate property."
Together, these pensions consisted of four separate individual retirement accounts or IRA's.
The judgment states that the WPS plan consists of a $400,000 note receivable from VWLP and an interest in BLLP partnership valued at $369,240.
The court based its apportionment of the retirement accounts between community and separate property on testimony and demonstrative evidence presented by William's expert witness Cary Mack, who presented several different theories as to how the court could apportion the retirement accounts between community and separate property. The court adopted a theory presented by Mack that treated contributions during the marriage, including the parties' temporary separation, as community property, but characterized portions of the accounts as William's separate property based on tracing certain assets in the accounts to pre-marriage contributions by William.
William contends the court erred in ruling that all contributions during the marriage to six retirement accounts were community property. He contends the court should have ruled that all of the contributions in question consisted of his separate property. In her appeal, Saracia contends the court erred by finding any separate property component in William's commingled retirement accounts instead of ruling that the accounts were entirely community property. Because William's contention and Saracia's contention challenge the same ruling, we will consider them together.
Facts regarding the retirement accounts
William worked at the law firm of Higgs, Fletcher & Mack (the Higgs firm) from June 1967 through September 1981 and participated in the firm's Keogh retirement plan. In 1978, he formed William P. Shannahan, Inc., which he later renamed Shannahan Investments, Inc., to become a partner in the Higgs firm. William's purpose in converting to a professional corporation and having the corporation become a partner in the Higgs firm was to enable him to obtain greater retirement benefits than were offered under the firm's Keogh plan. The corporation adopted a defined contribution retirement plan (the William P. Shannahan Defined Contribution Plan) and the funds in William's Keogh account were directly transferred to William as trustee of the new plan.
In 1981 William left the Higgs firm and his corporation became a partner in the law firm of Aylward, Kintz, Stiska, Wassenaar & Shannahan (the Aylward firm) and adopted Defined Benefit Pension # 1, referenced in the judgment. The corporation terminated the William P. Shannahan Defined Contribution Plan, which had run from 1978 through 1981, and rolled the plan's assets into Defined Benefit Pension # 1. William worked as a partner in the Aylward firm until it dissolved on February 28, 1987.
Under the Aylward firm's formula for distributing profits each partner received, on a monthly basis, 70 percent of the amount of the partner's collected gross billings less certain expenses. The remaining 30 percent of each partner's billed collections, along with collections from other employees, was allocated to a "capital pool" account from which the firm's operating expenses were paid. The funds remaining in the capital pool account were distributed to the firm's five "capital partners" in proportion to the number of capital points each held. Since there were 500 capital points and each capital partner, including William's corporation, held 100 points, each capital partner received a distribution of 20 percent of the capital pool as a share of profits.
In 1985, after William and Saracia were married, William's corporation adopted Defined Benefit Pension # 2. William testified that he created Defined Benefit Pension # 2 after Saracia filed a petition for dissolution "to separate retirement funds following separation of the parties and not to commingle it with Plan No. 1." He testified that Defined Benefit Pension # 2 was the same plan as Defined Benefit Pension # 1 with a different starting date. William and his expert witness, Mack both testified regarding various demonstrative trial exhibits showing different theories as to how the court could apportion the retirement accounts in question between community and separate property, including the theory that the funds and assets in Defined Benefit Pension #1 and #2 were entirely William's separate property because their source was his share of the Aylward firm's capital pool.
William and Mack also addressed theories reflected in various exhibits that allocated portions of the retirement accounts to community property.
The court equitably apportioned the retirement accounts
William's position in this litigation is that the distributions he received from the Aylward firm's capital pool were entirely his separate property because they were compensation for his ownership interest in the firm and not compensation for any work he performed. He contends the evidence shows that his separate property capital pool distributions were the source of all funds and assets in Defined Benefit Pensions # 1 and # 2, and that those accounts were the source of all funds and assets in the other retirement accounts in question. Therefore, he argues, all of the retirement accounts at issue are entirely his separate property and the trial court erred in finding a community property component in any of the accounts.
In her appeal, Saracia contends that Mack used an invalid "proportionality" analysis that used tax returns and trial balances to identify contributions to the various retirement plans. She argues that the funds in the retirement accounts must be deemed entirely community property because they were commingled with community property, and no portion of them can be properly traced to a separate source.
The court took a middle course. In its statement of decision, the court stated that William's "claim that contributions [to the retirement accounts] were made from his separate law corporation's equity return from the [Aylward] partnership, rather than community earnings, lacks legal authority and, in any event, [William] has not met his burden to trace the source of these funds." Regarding Saracia's claim that all of the retirement accounts are community property because of commingling, the court ruled: "[Saracia's] claim that Cary Mack's annual reconciliation from the tax documentation was inadequate [to trace funds and assets in the retirement accounts], and all the funds are commingled and now community property, is denied. This method is adequate when [William] came into the marriage with more than $400,000 in retirement funds, and the present separate [property] value represents reasonable appreciation over the past 23 years. Also the evidence showed only transfers and not withdrawals from these separate funds."
Mack testified that he could show "the activity that occurs in each and every year for Defined Pension Benefit Plan No. 1 by way of a beginning balance, contributions made, earnings on the plan assets, and an ending balance, which reconciles to a tax return[, ] which reconciles to a working trial balance, so I know the composite of the assets that are set forth in that plan for each of the years." He testified that he did "the same thing with respect to the Defined Benefit Pension Plan No. 2."
We find no error in the court's disposition of the retirement accounts. "Appellate review of a trial court's finding that a particular item is separate or community property is limited to a determination of whether any substantial evidence supports the finding." (In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 849.) "Community property 'may include the right to retirement benefits accrued by the employee spouse as deferred compensation for services rendered.... The right to retirement benefits "represent[s] a property interest; to the extent that such [a] right[ ] derive[s] from employment' during marriage before separation, it 'comprise[s] a community asset...." [Citation.] "[The California Supreme Court has] always recognized that the community owns all [such] rights attributable to employment during marriage" before separation.' " (In re Marriage of Sonne (2010) 48 Cal.4th 118, 124 (Sonne).) Accordingly, "[i]n a dissolution proceeding, '[t]he superior court must apportion an employee spouse's retirement benefits between the community property interest of the employee spouse and the nonemployee spouse and any separate property interest of the employee spouse alone. [Citations.] It has discretion in the choice of methods.... Whatever the method that it may use, however, the superior court must arrive at a result that is "reasonable and fairly representative of the relative contributions of the community and separate estates." ' " (Ibid.; In re Marriage of Gowan (1997) 54 Cal.App.4th 80, 88 [court has very broad discretion to fashion an apportionment that is equitable under the circumstances].)
William does not cite any legal authority that specifically supports his characterization of the distributions he received from the Aylward firm's capital pool during marriage as separate property. Income attributable to a spouse's skill, efforts and industry during marriage is community property, and the community should receive a fair share of the profits derived from the spouse's devotion of more than minimal time and effort to a separate property business. (Beam v. Bank of America (1971) 6 Cal.3d 12, 17 (Beam).) In apportioning profits from a separate property business between separate and community property, " 'courts have developed no precise criterion or fixed standard, but have endeavored to adopt a yardstick which is most appropriate and equitable in a particular situation... depending on whether the character of the capital investment in the separate property or the personal activity, ability, and capacity of the spouse is the chief contributing factor in the realization of income and profits... ' " (Id. at p. 18.) "The courts have recognized that '[a]t any given moment the major assets of most law firms are not capital assets, but those related to the direct rendering of professional services, most particularly accounts receivable and work in process.' " (In re Marriage of Kilbourne (1991) 232 Cal.App.3d 1518, 1522.)
Here, the court could reasonably view the distributions William received during marriage from the Aylward firm's capital pool as business profits that were due to his rendering of professional services - i.e., as income attributable to his "skill, efforts and industry." (Beam, supra, 6 Cal.3d at p. 17.) The capital pool consisted largely of 30 percent of each capital partner's billed collections, and a decrease in the partner's average billings over a three-year period could result in a downward adjustment of the partner's capital points and corresponding share of profits. To the extent the capital pool distributions were the source of contributions to the retirement accounts during marriage, the court's treating them as community property and treating William's premarriage contributions to the retirement accounts as establishing a separate property component to the accounts was an appropriate and equitable method of apportioning the accounts between community and separate property under the circumstances of this case.
We further conclude that sufficient evidence supports the court's apportionment of the retirement accounts between community and separate property. William asserts that the evidence he presented tracing the source of the retirement accounts entirely to his separate property was "detailed, meticulous, and undisputed, " and he offers a number of citations to the record as examples. However, even if the distributions William received from the Aylward firm's capital pool during marriage were properly deemed his separate property, the specific record citations he offers do not show that the capital pool distributions were the source of contributions to his retirement accounts during the marriage. William's record citations show rollovers of retirement account assets into successor accounts and various theories regarding the characterization of the assets between community and separate property, but they do not show the source of contributions to the retirement accounts.
The record items that William cites include the Defined Benefit Pension #2 plan document; two demonstrative trial exhibits showing the value of assets in Defined Benefit Pension #1's component IRA's and different theories for apportioning the assets between separate and community property; three demonstrative trial exhibits showing contributions to Defined Benefit Plan # 2 in 1986, 1987, and 1988, the value of the plan's assets (WPS Investments, Inc., BLLJ Partnership Interest, and Janus IRA), that the assets were transferred on termination of the plan to William P. Shannahan, APLC Defined Contribution Trust, and different theories for characterizing the assets either as entirely William's separate property or 71 percent community property and 29 percent William's separate property; the SSS Investment Corp. Defined Benefit Pension Plan (dated December 31, 1990) document; demonstrative exhibits prepared for trial showing a contribution of $75,441 to SSS Investment Corp. Defined Benefit Pension Plan, stating value of the plan's asset (BLLJ Partnership Interest) as $180,000, and characterizing the plan assets as entirely community property or, alternatively, as entirely William's separate property; a demonstrative exhibit prepared for trial showing contributions to the William P. Shannahan, APLC Defined Contribution Plan dated January 2, 1994 from 1994 through 2003, stating the value of assets (Solomon-Smith Barney and Northern Trust Bank), noting: "DEFINED BENEFIT PLAN #2 ASSETS RECEIVED ON TERMINATION OF PLAN #, " including a page entitled "TRANSMUTATION SEPARATE" showing Saracia and William's gross salaries, a "ratio" percentage (Saracia 20 percent, William 80 percent), gross assets and net assets (after Saracia's receipt of a QDRO) of $10,581 to Saracia and $162,326 to William; a Preferred Client Statement for William P. Shannahan TTEE from Shearson Lehman Brothers for the period of September 30 through November 30, 1991; a 1991 Year End Summary for William P. Shannahan TTEE from Shearson Lehman Brothers, including 1099-INT and 1099-DIV statements for 1991; Preferred Client Statements for William P. Shannahan, Inc. Defined Benefit Pension Plan (1981) from Solomon-Smith Barney for periods of November 30 through December 31, 1998 and June 28 through July 31, 1999, showing that most of balance was rolled over into IRA account 65098, and a letter from William to a Solomon-Smith Barney representative instructing that two accounts be closed and the assets rolled over into IRA account 65098; and Preferred Client Statements for William P. Shannahan, Inc. Defined Benefit Pension Plan (1985) from Solomon-Smith Barney for periods of September 28 through December 31, 1998 and June 28 through July 31, 1999, showing most of balance was rolled over into IRA account 65098.
Regarding Saracia's contention that the court erred in finding any separate property component in William's commingled retirement accounts and should have found the accounts were entirely community property, we conclude the court's apportionment of the accounts between community and separate property is sufficiently supported by Mack's testimony and the accounting option he presented that allocated a portion of the retirement accounts to William's separate property based on his pre-marriage contributions. As noted, the court has discretion in choosing the method of apportioning an employee spouse's retirement benefits between the community property and any separate property interest of the employee spouse alone, as long as the method used achieves " 'a result that is "reasonable and fairly representative of the relative contributions of the community and separate estates." ' " (Sonne, supra, 48 Cal.4th at p. 124.)
The court adopted Mack's analysis that apportioned the assets in Defined Benefit Pension #1 as 76.9 percent William's separate property and 23.1 percent community property, and apportioned the assets in three other accounts (Vanguard IRA #9928286871, Janus IRA #203215731, and USB Rollover Roth IRA # VR 4977934) 59.01 percent community property and 40.99 percent separate. Mack explained that on February 28, 1983 (preceding the date of marriage), the value of Defined Benefit Pension # 1 was $410,385. Mack then determined the "increase in the value of each of the contributions made, proportionately, based upon the date made and the value of that pension plan as of... the cutoff dates... February 28, [1984] or February 28, [1985]." Mack apportioned the $117,788 contributed to the plan in fiscal 1983-1984 (March 1, 1983 through February 29, 1984) between separate and community property based on the 206 days before the date of marriage (September 24, 1983) - i.e., since 206 is about 58 percent of 365, he determined that 58 percent of the $117,788 or $66,478 was William's separate property. He determined a rate of return on William's premarriage beginning balance, which he viewed as 100 percent separate property, and calculated the community property and separate property percentages of the balance at the end of the first fiscal year after marriage (February 29, 1984) to be 90.67 percent separate property and 9.33 percent community property. For each successive fiscal year during the marriage, he determined the community property and separate property percentages at the end of the year based on any contributions made that year (characterized as community property) and used "the ending balance [to determine] the rate of return required to get those component balances equitably to a level that [would] accumulate to that ending balance...." At the end of the first full fiscal year of marriage (February 28, 1985), Mack calculated that the separate property portion of the account was reduced from 90.67 percent to 76.52 percent, and the community property portion was increased. Continuing with that method, Mack calculated the proportions after the fiscal year ending on February 28, 1986 to be 76.9 percent William's separate property and 23.1 percent community property.
Mack explained how he arrived at the 59.01 percent community property and 40.99 percent separate property apportionment that the court applied to the Vanguard, Janus, and USB IRA's as follows: He determined that the source of those accounts was 53 percent Defined Benefit Pension Plan # 1 and 46 percent Defined Benefit Pension Plan #2. For purposes of this analysis, he viewed all of the contributions from Defined Benefit Pension Plan #2 as community property, and the contributions from Defined Benefit Pension Plan #1 as being 23.1 percent community property and 76.9 percent William's separate property. He then arrived at a "blended average" through a calculation that involved multiplying the 53 percent representing contributions from Defined Benefit Pension Plan #1 by the 76.9 separate property percentage to derive 40.99 as the separate property percentage and 59.01 as the community property percentage.
The demonstrative trial exhibit presenting this analysis, which the court adopted, shows the apportionment of USB Rollover IRA #VR 4978034 to be 81.78 percent community property and 18.22 percent separate property. Mack did not address this apportionment in his trial testimony, but presumably performed a similar "blended average" calculation to determine those percentages.
The court noted that Mack's analysis was not a direct tracing but a "proportionate" tracing. Mack testified that there were elements he could directly trace to certain accounts, but he "tried to develop an equitable method, in light of the totality of what I have got, to address the problem." He testified that his function was to provide the current plan balances "and then to give the Court an indication, based on their source, of what portion would represent under varying and alternative [analyses] separate property or community property."
On cross-examination, Mack testified that the tracing or apportionment approach he used was appropriate under the circumstances of this case. Mack explained that although his tracing of the retirement account assets and funds was not a direct tracing based on bank statements, he had "seen a multitude of other financial statements, actuary reports, working trial balances, deposit activity and then withdrawal activity [in the retirement accounts]... " When asked whether it was an "analysis" rather than a "direct tracing, " Mack responded, "I think it's a tracing that has direct elements to it and has other competent evidence [consisting of] documentation prepared contemporaneous with the years at issue here. I would not characterize it as a direct tracing from the standpoint of it being a mechanical tracing because I don't think that application would apply here." When asked again whether it was "more an analysis than a tracing, " he added, "It is clearly a tracing. I don't know of any tracing that could exist without analysis, that significant analysis. So it's both."
The court stated that "Mr. Mack was pretty evenhanded as far as his approach in separate versus community property[, ]" and that it was "not willing, in a case where it is obvious... that a large portion of the retirement plans have a genesis before marriage, to treat everything as community property." We conclude the court acted well within its discretion in choosing the method it used to apportion the retirement accounts between community and separate property. The method it chose was an alternative offered by William's own expert witness that was sufficiently supported by evidence of the sources of the assets in the accounts and achieved a result that was " ' "reasonable and fairly representative of the relative contributions of the community and separate estates." ' " (Sonne, supra, 48 Cal.4th at p. 124.)
C. Judgment and Order Directing Equalization Payment and Postjudgment Order Directing Attorney Fee Payments From Retirement Accounts
As noted, the judgment deems the WPS Defined Contribution plan to be 100 percent community property and notes that it consists of a $400,000 note receivable from VWLP and an interest in BLLP partnership valued at $369,240. The judgment further provides: "The Virginia Way note and the BLLJ Partnership interest are awarded to [William] as part of his one-half share of the community property. [Saracia] is awarded the value of the two assets of $769,240 from the remaining community retirement accounts to equalize, with any excess divided equally. To the extent the remaining community retirement funds are insufficient to equalize, [William] shall pay [Saracia] one-half of the deficiency from his separate portion of Shannahan Vista IRA #1."
William contends the court erred by requiring him to invade his private retirement account to make an equalization payment to Saracia. He also contends the court erred by ordering him, after judgment was entered, to pay certain attorney fee awards to Saracia from his share of other private retirement accounts. The postjudgment order in question directed William to pay Saracia, from various retirement accounts, attorney fees in the amounts of $5,000 for her appellate counsel, $30,000 for her counsel in federal litigation known as Brookmead Partners v. AAA Insurance Exchange et al., and $200,000 to satisfy two family law attorney real property liens (FLARPL) filed by her trial counsel. William contends these rulings violate Code of Civil Procedure section 704.115, subdivision (b), which exempts from judgment enforcement procedures "[a]ll amounts held, controlled, or in the process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan...."
In a marital dissolution, the trial court has broad discretion in discharging its duty to divide community property in a way that is not only mathematically equal but practical and equitable as well. (In re Marriage of Fink (1979) 25 Cal.3d 877, 885; §§ 2550, 2010, subd. (e).) Section 2610, subdivision (a), provides that, with certain exceptions not applicable here, "the court shall make whatever orders are necessary or appropriate to ensure that each party receives the party's full community property share in any retirement plan, whether public or private...."
Code of Civil Procedure section 704.115, and the cases William cites to support his contention that the court erred by ordering him to make an equalization payment and pay attorney fees from private retirement plans, concern statutory exemptions that a judgment debtor can claim by filing a claim of exemption under Code of Civil Procedure section 703.510 et seq. in proceedings to enforce a money judgment or in bankruptcy court; they do not concern the scope of a court's authority in a marital dissolution action to equally divide community property or its broad discretion to fashion whatever orders are necessary or appropriate to effect a proper division of community property retirement benefits (§ 2610, subd. (a)) and award attorney fees (§ 2032, subd. (a); In re Marriage of Cheriton (2001) 92 Cal.App.4th 269, 314). Because no judgment enforcement or bankruptcy proceedings are presently involved in this case, there is no issue here concerning any statutory exemption from execution of judgment.
As William states in his own reply brief regarding Saracia's argument that he waived his exemption claim: "[Saracia's] argument... derives entirely from California Code of Civil Procedure sections 704.115 ['Private retirement plans; exemption'], 703.030 ['Claiming exemptions'], and 703.520 ['Claim of exemptions']. Those code sections, however, are all found in title 9 of the Code dealing with 'Enforcement of Judgments'..., and all concern the timing of an exemption claim during a levy on a judgment. Those sections may become relevant if the [j]udgment against [William] is affirmed on appeal and becomes final, but they simply had no application in the trial court where [Saracia] was merely trying to establish her community property interest in the retirement accounts."
We agree with William's analysis, and note that it undermines his contention that the portion of the judgment requiring him to make an equalization payment and the postjudgment order requiring him to pay various attorney fee awards from his separate portion of private retirement accounts must be reversed on the ground they violate Code of Civil Procedure section 704.115. As William points out, Code of Civil Procedure section 704.115 applies to proceedings to enforce a money judgment; it does not govern the division of community property retirement plans or attorney fee awards in marital dissolution cases.
William's exemption argument essentially raises the following question: Does the statutory scheme exempting private retirement plans from enforcement of judgment by writ of execution preclude a family law court from ordering a party in a marital dissolution action to pay funds from an exempt retirement account to the other party as an equalization payment in the division of community property or for any other purpose? William does not cite any authority addressing that point, and we have found none directly on point. However, Code of Civil Procedure section 704.115 is analogous to former Government Code section 21201 concerning public employee retirement benefits, which provided that "[t]he right of a person to any benefit or other right under this part and the money in the Retirement Fund is not subject to execution, garnishment, attachment, or any other process whatsoever, and [is] unassignable...." In Phillipson v. Board of Administration (1970) 3 Cal.3d 32 (Phillipson), the California Supreme Court held that Government Code section 21201 did not apply to division of retirement funds as community property, stating that "although we have interpreted [Government Code] section 21201 to bar creditors who seek to levy upon the pension funds, [the former wife of the retiree] vindicates a different and distinguishable right: the right of ownership in the funds. Further, since the board in the present case cannot, and does not, contend that an award of pension rights is a prohibited assignment under the code sections, it must inferentially recognize that, if such rights embrace community property, the court has both the power and obligation to divide such property equitably." (Phillipson, at p. 43, italics added, overruled on another point in In re Marriage of Brown (1976) 15 Cal.3d 838, 851, fn. 14; Verner v. Verner (1978) 77 Cal.App.3d 718, 725-726.) Noting the former wife of the retiree claimed "not as a creditor, but as an owner", the Supreme Court stated: "The recognition of an ownership claim cannot be described as the levy of execution, garnishment, attachment or assignment of the property." (Phillipson, supra, 3 Cal.3d at p. 44, fn. omitted.)
The substance of former Government Code section 21201 is continued in Government Code section 21255, which provides: "The right of a person to any benefit or other right under this part and the money in the retirement fund are not subject to execution or any process whatsoever except to the extent permitted by Section 704.110 of the Code of Civil Procedure, and are unassignable, except as specifically provided in this part."
By analogy, although Code of Civil Procedure section 704.115 bars judgment creditors from levying on private retirement accounts, Saracia is not presently in the position of creditor; she is a party with ownership rights in the community estate, which included portions of the subject retirement accounts. Her right to the equalization payment in question embraces community property, which the court has the power and duty to equitably divide, and her right to the attorney fee awards in question are related to her interests and assertion of rights in the community estate. In discharging its duty to divide the community estate in an equal, practical, and equitable manner, the trial court had the power to order an equalization payment and payment of attorney fees from William's separate property, including his share of a private retirement account. The statutory scheme governing enforcement of judgments and exemptions to enforcement does not limit the trial court's authority and broad discretion to equitably divide the community estate and make related orders for attorney fees and costs.
Claims of exemption frequently involve questions of fact and are therefore properly adjudicated in the first instance by trial courts in the context of judgment enforcement proceedings rather than by appellate courts. (See Yaesu Electronics Corp. v. Tamura (1994) 28 Cal.App.4th 8, 14 [whether a private retirement plan is used for retirement purposes such that it qualifies as exempt asset under Code of Civil Procedure section 704.115 is a question of fact to be decided by the trial court and reviewed under the substantial evidence standard of review on appeal]; Schwartzman v. Wilshinsky (1996) 50 Cal.App.4th 619, 626 [the extent to which a judgment debtor needs an IRA for support presents a factual issue to the trial court on which the judgment debtor has the burden of proof].) An order granting or denying a claim of exemption is appealable. (Ibid., Code Civ. Proc., § 703.600.)
D. Order to Pay Saracia's Attorney Fees in Federal Litigation
The Brookmead property was destroyed by fire in December 2007. The court ordered that the insurance proceeds of $957,525.23 paid on the loss be held in a segregated trust account by William's counsel for the benefit of William and Saracia. William's counsel then filed an interpleader action in federal court on behalf of Brookmead Partners and joined itself to the action. The federal court stayed the interpleader and ordered that the insurance proceeds remain in William's counsel's trust account. Saracia retained counsel separate from her counsel in the present case to represent her in the federal litigation, and requested the court in this case to order William to pay her attorney fees in the federal litigation. As noted, the court ordered William to pay Saracia attorney fees of $30,000 for the federal litigation. William contends the court did not have the authority to award those fees because the federal litigation is unrelated to the dissolution case and he has disavowed any personal interest in it. He cites no authority to support that contention.
"[A] motion for attorney fees and costs in a dissolution proceeding is left to the sound discretion of the trial court. [Citations.] In the absence of a clear showing of abuse, its determination will not be disturbed on appeal. [Citations.] '[T]he trial court's order will be overturned only if, considering all the evidence viewed most favorably in support of its order, no judge could reasonably make the order made.' " (In re Marriage of Sullivan (1984) 37 Cal.3d 762, 768-769.) It is, of course, the appellant's burden to make that showing on appeal. (Denham v. Superior Court (1970) 2 Cal.3d 557, 566.)
Section 2030, subdivision (c), authorizes the court in a dissolution action to "augment or modify the original award for attorney's fees and costs as may be reasonably necessary for the prosecution or defense of the proceeding, or any proceeding related thereto, including after any appeal has been concluded." (Italics added.) This statutory language gives the court broad discretion to determine whether an action is "related" to a family law proceeding. (In re Marriage of Green (1992) 6 Cal.App.4th 584, 590.) The court's determination is normally a factual question that is reviewed on appeal for sufficiency of the evidence to support the trial court's findings. (Id. at p. 591.)
William has not met his burden of showing that the court erred in awarding Saracia attorney fees for the federal litigation. The judgment awarded Saracia the monetary value of her community interest in the Brookmead property, and the check for the insurance proceeds from the destruction of the house was made out to both her and William. Consequently, she asserted a community property interest in the insurance proceeds from the destruction of the house to partially satisfy that portion of the judgment. William through Brookmead Partners, which he controlled, and his trial counsel filed the federal interpleader action instead of joining Brookmead Partners in this action and having the trial court adjudicate the various parties' rights to the insurance proceeds. That strategy forced Saracia to participate in the federal litigation, in which she and William were both named as defendants, to protect her rights and interest in the insurance proceeds. The court here noted, and William's counsel agreed, that the dispute in the federal litigation was "between Brookmead Partners and the parties [to this action] relating to [the] insurance proceeds." Thus, the court reasonably viewed the federal litigation as being related to this action within the meaning of section 2030, subdivision (c), regardless of whether William disavowed any personal interest in it. The court did not abuse its discretion in awarding Saracia attorney fees for her participation in the federal litigation.
Under William's own analysis, Saracia held a 12.25 or 12.5 percent interest in Brookmead Partners.
Regarding the insurance funds being tied up in the federal litigation, the court questioned whether "something [is] about to happen to them that is going to make it difficult - more difficult than it already is for [Saracia] to reach them as a means of satisfying her judgment."
E. $150,000 Attorney Fee Award from William's Separate Property
The judgment notes that Saracia's counsel was paid a court-ordered advance of $150,000 from the proceeds of the sale of a condominium in Mammoth, and that the advance "shall continue to be a charge against the community and not reallocated." The judgment adds that "[William] shall pay [Saracia], from his separate property and not from or charged to a community property source, the sum of $150,000 as a contribution toward her fees and costs. Otherwise, each party shall be responsible for his or her fees and costs." In its statement of decision, the court explained that the award was "based on the fact that [William's] assets are greater than [Saracia's] and it was reasonably necessary for [Saracia] to incur more fees in the discovery process."
William contends the erred in awarding Saracia $150,000 in attorney fees from his separate property in addition to the fees awarded to her as a charge against community property. He does not cite any legal authority in support of that contention; he simply argues it was inequitable to award Saracia fees of $150,000 from his separate property in light of the size of the judgment awarded to her; the court's finding that her "assets have the potential to produce sufficient income to provide for reasonable support[;]" the fact that although the parties stipulated to share the fees for JAMS equally, he was compelled to pay essentially all of the fees, which exceeded $105,000; and the court's finding that "both parties' conduct contributed to the substantial attorney's fees and costs incurred in this case."
Section 2030, subdivision (a)(1), requires the court in a marital dissolution proceeding to "ensure that each party has access to legal representation to preserve each party's rights by ordering, if necessary based on the income and needs assessments, one party... to pay to the other party, or to the other party's attorney, whatever amount is reasonably necessary for attorney's fees and for the cost of maintaining or defending the proceeding during the pendency of the proceeding." Section 2030, subdivision (a)(2), provides that "[w]hether one party shall be ordered to pay attorney's fees and costs for another party, and what amount shall be paid, shall be determined based upon, (A) the respective incomes and needs of the parties, and (B) any factors affecting the parties' respective abilities to pay."
Under section 2032, subdivision (a), "[t]he court may make an award of attorney's fees and costs under Section 2030... where the making of the award, and the amount of the award, are just and reasonable under the relative circumstances of the respective parties." Section 2032, subdivision (b), provides that "[i]n determining what is just and reasonable under the relative circumstances, the court shall take into consideration the need for the award to enable each party, to the extent practical, to have sufficient financial resources to present the party's case adequately, taking into consideration, to the extent relevant, the circumstances of the respective parties described in Section 4320 [for determining the appropriate amount of spousal support to be ordered]." In addition to other specified considerations, section 4320, subdivision (e), directs the court to consider "the obligations and assets, including the separate property, of each party[, ]" and subdivision (n), directs the court to consider "[a]ny other factors the court determines are just and equitable."
It is William's burden to show the court abused its broad discretion in awarding Saracia attorney fees and costs - i.e., that no judge could reasonably make the award he challenges. (In re Marriage of Sullivan, supra, 37 Cal.3d at pp. 768-769; Denham v. Superior Court, supra, 2 Cal.3d at p. 566.) The court based the award on the fact that William's assets are greater than Saracia's - a relevant factor under section 4320, subdivision (e) - and the amount of attorney fees Saracia was reasonably required to incur in the discovery process - a factor the court could reasonably determine to be "just and equitable" under section 4320, subdivision (n). William has not addressed either factor and, accordingly, has not met his burden of showing the court abused its discretion as to either the basis or the amount of the attorney fee and cost award to Saracia.
F. Indemnification Language in Judgment
William contends the court erred by including in the judgment two provisions requiring him to indemnify Saracia from liability for his "corporations, partnerships, and business entity interests." One of those provisions concerns general "liabilities, obligations, liens, and encumbrances" and the other concerns claims for unpaid taxes. William cites no authority in connection with this assignment of error, but contends the indemnification provisions are "outrageous" and "ridiculously broad and thus legally unsupportable." He further contends that the issue of general indemnification was never raised by Saracia in her pleadings and that the indemnification provisions in the judgment were not even suggested by Saracia until after the court denied his post-trial motion for a new trial.
The general indemnity provision states: "[William] shall assume and hold [Saracia] harmless from all liabilities, obligations, liens, and encumbrances on [William's] corporations, partnerships, and business entity interests created during marriage and after date of separation. If any claim, action or proceeding exists or is brought in the future seeking to hold [Saracia] liable for these liabilities, obligations, liens or encumbrances, [William] shall, at his sole expense, defend [Saracia] against any claim, action or proceeding."
Saracia rejoins with citations to the record showing that she raised the issue of indemnification, including a request in her trial brief that William "hold [her] harmless from all lien and tax obligations[;]" argument in her written closing statement that William's "assumption of liability and indemnity to [her] should also include all tax liability past and future[;]" and a specific request in her closing statement for an order"[t]hat William hold [her] harmless from all liens and encumbrances, that he indemnify her, and that all assets be charged with a [j]udicial lien to provide security for said indemnification[.]"
Saracia argues that the indemnity provisions are authorized by section 1100, subdivision (g), as a remedy for William's breach of fiduciary duty, because that subdivision provides that remedies for breach of fiduciary duty "shall include, but not be limited to, "an amount equal to 50 percent of any asset... transferred in breach of fiduciary duty." (Italics added.) Saracia construes the italicized phrase "but not be limited to" as authorizing the court to fashion remedies in addition to an award of 50 percent of assets transferred in breach of fiduciary duty.
We find no error in the inclusion of the indemnity provisions in the judgment. "Trial courts have broad equitable power to fashion any appropriate remedies. [Citation.] In doing so, they may consider any unjust or harsh results, and adopt means to avoid them. [Citation.] 'Equitable relief is by its nature flexible, and the maxim allowing a remedy for every wrong [citation] has been invoked to justify the invention of new methods of relief for new types of wrongs.' " (Shapiro v. Sutherland (1998) 64 Cal.App.4th 1534, 1552.) Family law courts in particular have broad discretion to select appropriate enforcement remedies and terms based on the equities of the situation. (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2010) ¶ 18:1.5, pp. 18-1 to 18-2; quoting § 290 ["Judgments or orders made or entered under the Family Code are enforceable by the family court by 'execution, ... or by any other order as the court in its discretion determines from time to time to be necessary.' " (Italics added by Hogoboom & King.)].)
The indemnity provisions in the judgment limit William's indemnity obligations to the liabilities of the various corporations, partnerships and business entity interests that he created during the marriage and after separation. William argues that the provision regarding tax liabilities could be construed as obligating him to indemnify Saracia for any future tax liability, regardless whether it involved him or one of his related entities. We reject that construction.
"The meaning and effect of a judgment are determined according to the rules governing the interpretation of writings generally." (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 766.) Accordingly, we interpret the language of the judgment in context rather than in isolation. (See Legacy Vulcan Corp. v. Superior Court (2010) 185 Cal.App.4th 677, 688.) The second sentence of the indemnity provision concerning tax liabilities, read in isolation, requires William to hold Saracia harmless and defend her "against any tax claim, action or proceeding, including any assessments of interest and penalties." However the immediately preceding sentence states the William "shall pay, indemnify and hold [Saracia] harmless from all claims for taxes unpaid, audits, or other proceedings caused by taxing authorities regarding any of the corporations, partnerships, and business entity interests created by [William] during the marriage or after date of separation." (Italics added.) Accordingly, we construe the second sentence, in context, to likewise limit William's indemnity obligations to "any tax claim, action or proceeding" regarding a corporation, partnership or business entity interest that he created during the marriage or after separation. Regarding William's concern that this provision in the judgment could be construed more broadly, we note that "[t]he construction given to a judgment of the lower court by [a reviewing] court, in determining an appeal therefrom, constitutes the law of the case, and is binding on the lower court in all subsequent proceedings and whenever its interpretation is material." (Gallatin v. Corning Irr. Co. (1912) 163 Cal. 405, 422.)
It was not unreasonable for the court to decide that William should be solely responsible for any liabilities, including tax-related liabilities, of the various corporations, partnerships and business entities that he created during the marriage and after separation. We conclude the court acted within its broad equitable power and discretion to fashion appropriate remedies by including the indemnity provisions in the judgment.
G. Alter Ego Language in Judgment
As noted, the judgment's breach of fiduciary duty ruling includes the following language: "[William] breached his fiduciary duties to [Saracia], in violation of [sections] 721 and 100, by transferring the Brookmead and Virginia Way residences to other entities without her specific knowledge, written consent or adequate compensation to the community. [William] is the one common denominator and alter ego in all of these other entities[.]"
William contends the court erred by including the "alter ego" reference in the judgment. He argues the issue was not adequately raised at trial and there was no evidence of any of the recognized factors for determining alter ego liability and no alter ego finding in the court's statement of decision. He further argues that the court's alter ego finding is actually a "third party or 'outside' reverse piercing of the corporate veil, by which the corporate veil is pierced [by amending a judgment to add a corporation as judgment debtor] to permit a third party creditor to reach corporate assets to satisfy claims against an individual shareholder." (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1512-1513 (Postal Instant Press).) In a case of first impression, the Postal Instant Press court declined to accept the doctrine of outside reverse piercing of the corporate veil as the law of this state.
The California Supreme Court denied review of the Postal Instant Press decision on August 27, 2008.
We reject William's contention that the alter ego finding in the judgment was not sufficiently raised at trial. When the parties and the court during trial view an issue as being presented for adjudication, both parties are estopped from later claiming that the issue was not in controversy, even though it was not actually raised by the pleadings. (Auer v. Frank (1964) 227 Cal.App.2d 396, 405, citing Miller v. Peters (1951) 37 Cal.2d 89, 93.) Saracia's respondent's brief includes citations to the record showing the alter ego issue was raised and considered by the court, including an assertion in her trial brief that VWLP, Brookmead Partners, WPS, Inc., the Marital Trust, Northwest Financial, and BLLJ "are all [William's] alter ego[;]" her counsel's statement at the beginning of trial that "we will be able to show... there was a circular transfer of money by Mr. Shannahan that was really just taking it out of one pocket and putting it into the other[;]" and comments by the court during trial acknowledging the issue.
After Saracia concluded her presentation of evidence, the court stated that "in general terms, these entities that are set up for estate planning and to avoid tax consequences are not sufficient to defeat community property claims. Usually you can get behind trusts and other entities where... essentially the ownership all gets back to one of the parties. On the other hand, ... piercing the corporate veil here may have some fairly dramatic effects on undoing whatever tax benefits there were...." The court later expressed the view that "[William], in one form or another, controls almost all of these entities as a practical matter and has exercised control over them." The court also acknowledged Saracia's position that the entities in question were "all simply a different form of Mr. Shannahan, which is what she is obviously pressing for here, that we ought to just look through all this, and he is the middle of it anyway, and carve out what's his separate." William submitted a proposed judgment that contained no alter ego reference; Saracia submitted one with the alter ego reference, and the court signed the judgment that Saracia submitted.
The alter ego doctrine typically arises in civil litigation "when a plaintiff comes into court claiming that an opposing party is using the corporate form unjustly and in derogation of the plaintiff's interests." (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300.) " 'When a corporation is used by an individual or individuals, or by another corporation, to perpetrate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, a court may disregard the corporate entity and treat the acts as if they were done by the individuals themselves....' " (In re Marriage of Dick (1993) 15 Cal.App.4th 144, 161-162.) " 'The issue is not so much whether, for all purposes, the corporation is the 'alter-ego' of its stockholders or officers, nor whether the very purpose of the organization of the corporation was to defraud the individual who is now in court complaining, as it is an issue of whether in the particular case presented and for the purposes of such case justice and equity can best be accomplished and fraud and unfairness defeated by a disregard of the distinct entity of the corporate form.' " (Mesler v. Bragg Management Co., at p. 300-301, italics added.)
Justice and equity may require extension of the alter ego doctrine and similar principles to entities other than corporations. (See In re Marriage of Dick, supra, 15 Cal.App.4th at p. 161 [rule that a trust created for the purpose of defrauding creditors or other persons is illegal and may be disregarded has been applied to a trust created with the intention of preventing the grantor's spouse from reaching property]; Filo America, Inc. v. Olhoss Trading Co., L.L.C. (M.D. Ala. 2004) 321 F.Supp.2d 1266, 1269 [noting commentators who have discussed the issue as a nationwide matter and courts in states that have considered the issue have concluded that the veil-piercing doctrine applies to limited liability companies]; C.F. Trust, Inc. v. First Flight Ltd. Partnership (E.D. Va. 2000) 111 F.Supp.2d 734, 744 ["The alter ego test was developed to provide creditors with a means of disregarding the corporate or limited partnership form when that legal fiction has been abused by corporate insiders."]; Buffalo Valley Golf Club Partnership v. U.S. (U.S. Dist. Ct., E.D. Tenn., July 19, 1994, No. 2:93-CV-172) 1994 WL 574119 [finding that trust and partnership were "sham entities or alter egos" for individual taxpayer and that any conveyance of taxpayer's interest in golf club property to those entities was fraudulent].)
"[T]wo conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone." (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.) "Because it is founded on equitable principles, application of the alter ego 'is not made to depend upon prior decisions involving factual situations which appear to be similar.... "It is the general rule that the conditions under which a corporate entity may be disregarded vary according to the circumstances of each case." ' " (Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1248.)
We do not view the court's alter ego finding as an application of the "outside reverse piercing" doctrine rejected by the Postal Instant Press court. Outside reverse piercing involves amending a judgment to add a corporation or other business entity as judgment debtor to enable a third party judgment creditor to reach corporate assets to satisfy claims against an individual shareholder. (Postal Instant Press, supra, 162 Cal.App.4th 1510 at 1512-1513, 1518.) The judgment here does not add a corporation or other business entity controlled by William entity as a judgment debtor - the practice disapproved in Postal Instant Press. (See Postal Instant Press, supra, 162 Cal.App.4th at pp. 1512-1513, 1517, 1523.) The judgment imposes liability solely on William to pay sums representing the value of Saracia's share of community property, plus attorney fees. The court, in the interest of justice and equity, ruled that William was the alter ego of the various entities he created in the context of ruling that he breached his fiduciary duty to Saracia by engaging series of transactions concerning the Virginia Way and Brookmead properties that impaired her interest in the community estate - i.e., the court's alter ego finding was simply a basis for its broader finding that William breach fiduciary duties by transferring community property to other entities whose separate identities could be disregarded because, in essence, they were him.
The evidence sufficiently supports the court's alter ego finding. The factors relevant to determining an alter ego relationship include "the commingling of funds and other assets, the failure to separate the assets of separate entities, the treatment of the corporation's assets as those of an individual or other corporation, holding out that the individual or other corporation is personally liable for the first corporation's debts, the failure to maintain separate records or the commingling of the records of the entities, identical equitable ownership in the two entities, the equitable owners' domination and control of the entities, the use of the same business location, an identity of employees or attorneys in separate entities, the use of the corporation as a mere shell or instrumentality for the conduct of the affairs of another entity, the failure to maintain arm's length transactions between entities and the diversion of assets." (United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 343, superseded by statute on another point; Associated Vendors, Inc. v. Oakland Meat Co. (1962) 210 Cal.App.2d 825, 838-839.) These factors are not exclusive but may be considered among others to determine whether the alter ego doctrine should be applied under the particular circumstances of each case. (Morrison Knudsen Corp. v. Hancock, Rothert & Bunshoft (1999) 69 Cal.App.4th 223, 250; Sonora Diamond Corp. v. Superior Court, supra, 83 Cal.App.4th at p. 539.)
The evidence showed that William controlled all of the relevant entities he created and commingled their funds. Trez Investments (Trez), formed in November 1991, was a partnership consisting of WPS Investments Inc., a Nevada corporation; Shannahan Investments, Inc, a Nevada corporation; and William P. Shannahan, trustee of the SSS Investment Corporation retirement Plan. William was the president of Shannahan Investments Inc., the trustee of SSS Investment Corp., and president of WPS Investments Inc., which was the general partner of BLLJ. Trez was merged or consolidated into BLLJ.
William testified that the sole shareholder of Northwest Financial was the Boyle Trust. William was the trustee of the Boyle Trust and was Northwest Financial's sole director, president, and secretary. The only asset of Northwest Financial was a one percent general partnership interest in Northwest Financial, Ltd, a partnership between the Boyle Trust and Northwest Financial. William signed the Brookmead Partners partnership agreement on behalf of both his law corporation APLC and the Marital Trust. He signed a restatement of the Brookmead Partners agreement on behalf of APLC, the Marital Trust, Northwest Financial, Ltd., and BLLJ.
William was the sole signatory on the Marital Trust checking account and other accounts that were in his name, including APLC and BLLJ. He testified that the "Shannahan Marital Trust" account was actually his personal account. He was a signatory on a VWLP account, and account statements for all the entities were mailed to his business address. Although he was not the trustee of the Children's Trust, when the trustee refused to sign a restatement of the VWLP partnership agreement eliminating the Marital Trust as a general partner, William signed the trustee's name "by William P. Shannahan, power of attorney, " claiming under his signature that the VWLP partnership agreement gave him power of attorney to sign for the trustee. The trustee testified that "whatever administrative things needed to be done, [William] was taking care of [the Children's Trust] administratively."
Checks in amounts of $14,000 and $20,000 were drawn from BLLJ's account to William (signed by William), and checks in the amounts of $7,000 and $5,000 from BLLJ's account were written to VWLP. William testified that VWLP did not have an interest in BLLJ and he did not know why the checks were written. He signed a check from BLLJ to Citibank in the amount of $11,810.95 and testified it was probably a credit card payment, but BLLJ did not have a credit card. He closed bank accounts with VWLP, Northwest Financial and BLLJ and "consolidated" those accounts into a personal account under the name of Shannahan Corp. Saracia thought William was VWLP. Substantial evidence supports the court's finding that William was "the one common denominator and alter ego in all of these other entities."
II. VWLP'S APPEAL
VWLP contends the court erred in awarding Saracia exclusive use and possession of the Virginia Way property until she receives her full share of the community assets. VWLP contends the award was in excess of the court's jurisdiction because it impacts the interests of third parties who were not joined to the case, and the Virginia Way property was not community property. VWLP also contends the award is duplicative of the award of $575,000 to Saracia as her one-half, presumed interest in the Virginia Way property.
In her appeal, Saracia contends the court erred in concluding that because the Family Trust and the Children's Trust, as partners in VWLP, were indispensable parties that had not been joined, it could not award her the Virginia Way property. Saracia argues the court was not precluded from awarding her the Virginia Way property because the partners of VWLP did not own an interest in the property; they held only a personal property interest in the partnership. Because William and Saracia both assign error to court's disposition of the Virginia Way property, we will address their contentions together.
Before trial, the court issued an order that allowed Saracia to occupy the Virginia Way property as a tenant and included the finding that VWLP, the Family Trust, and the Children's Trust were separate entities. In its statement of decision, the court ordered William to pay Saracia monthly spousal support of $5,000 until she received her share of the community estate, at which time the support would be reduced to zero. The court further ordered that Saracia "shall also be permitted to continue to occupy the Virginia Way residence during this period, with [William] responsible for the lease payments...."
The court later issued an order finding it had "the inherent power to correct and change its ruling prior to the signing of the Judgment...." The court revised its statement of decision in a number of ways, including the addition of the following: "Both the Virginia Way and Brookmead residences are community property. The real properties may be titled in the names of third parties, but [Saracia] and [William] own equal and overriding community interests in the actual real property. The ownership interests in the third parties have not been determined. The entities were not named as parties to the action except... [VWLP] as record title holder to the Virginia Way residence. The Brookmead residence was acquired during marriage and used as the marital residence at the time of separation. The Virginia Way residence was transferred to community property during the marriage and also used as the marital residence prior to the acquisition of Brookmead. The evidence [William] presented at trial was insufficient to overcome the presumption of community property. Therefore both residences are owned by the parties as community property."
The court's revised statement of decision also included the following language concerning spousal support: "[Saracia] has the use of the Virginia Way residence until such time as she has received all of the assets she has been awarded under the Judgment. This portion of her spousal support (the use of the property) shall be provided as non-includible spousal support to [Saracia] and non-deductible to [William]. [William] shall pay [Saracia] $3,000 per month in taxable spousal support until the Judgment is entered, as well as the use of the Virginia Way residence as stated above. Upon entry of the Judgment, [Saracia's] taxable spousal support shall increase to $5,000 per month, as well as the use of the Virginia Way residence as stated above, until such time as she has received all of the assets she has been awarded under the Judgment. The combined award to [Saracia] is both a permanent order for spousal support and an order for spousal support pending appeal." The judgment reflects these provisions of the revised statement of decision.
We conclude the court did not abuse its discretion in awarding Saracia possession of the Virginia Way property until she receives her full share of the community estate. The court could properly conclude that the Virginia Way property was community property, even though VWLP held title, based on the findings that after transmuting the Virginia Way property to community property, William transferred the property to VWLP without Saracia's knowledge and consent in breach of his fiduciary duty to her, and that he further breached his fiduciary duty by orchestrating a series of transactions as the alter ego of the various entities involved for the purpose of eliminating the community's interest in the property. The court could reasonably decide that under the circumstances of this case, it could best accomplish justice and equity and defeat unfairness by disregarding VWLP's separate identity for the purpose of determining the community's interest in the Virginia Way property, and by finding the property to be community property notwithstanding the evidence of title.
VWLP argues the court's finding that William is "the alter ego in all of these other entities" should not be read to vitiate the more specific finding that VWLP is a "separate entity." However, when a court disregards the separate identity of a corporation or other business entity under the alter ego doctrine, it does not dissolve the entity. (Mesler v. Bragg Management Co., supra, 39 Cal.3d at p. 300.) The fact that an "entity has been disregarded for some purposes does not warrant its being disregarded for all purposes." (Grant v. Weatherholt (1954) 123 Cal.App.2d 34, 49.) The court could disregard the separate identities of William's alter ego entities for the purpose of its breach of fiduciary duty findings and determination of the community's interest in the Virginia Way property, but respect their separate identities in determining to award Saracia the cash equivalent of her share in the property rather than award her the property itself, since doing the latter would have eliminated VWLP's sole asset to the detriment of the Children's Trust.
VWLP suggests that the court relied on the presumption of community property under section 760 in finding the Virginia Way property to be community property and argues that under section 2581, the documentary evidence of title rebutted that presumption. We do not view the court's community property determination as to the Virginia Way property as being based on the statutory presumption of community property. In the judgment, the court ruled that the Virginia Way property was community property and that "this community property interest overcomes the claim of title or other title interests claimed by [William] to be in other entities, joined or otherwise." Section 2581 does not apply to the Virginia Way property because the Virginia Way property was not acquired during marriage; it was transmuted during marriage from separate to community property. "[S]ection 2581 by its terms expressly applies to property 'acquired by the parties during marriage in joint form.' The acquisition of property during marriage by purchase or gift is clearly different from an interspousal transmutation of property already owned by one or both spouses." (In re Marriage of Delaney (2003) 111 Cal.App.4th 991, 998.) Thus, there is no issue of whether evidence of title overcomes a statutory community property as to the Virginia Way property.
In its revised statement of decision, the court noted that the Brookmead property was "acquired during marriage, " but stated that the Virginia Way property "was transferred to community property during the marriage." The court then stated that "[t]he evidence [William] presented at trial was insufficient to overcome the presumption of community property." Unlike the revised statement of decision, the judgment does not refer to a presumption of community property; it simply finds "that both properties are the community property of the parties and this community property interest overcomes the claim of title or other title interests claimed by [William] to be in other entities, joined or otherwise." To the extent the court intended its statement in the revised statement of decision that William's evidence was insufficient to overcome the presumption of community property to be a reference to the community property presumption under section 2581, we construe the statement as applying to the Brookmead property only. To the extent the court intended the statement to apply to both properties, as to the Virginia Way property we construe it to mean that the evidence was insufficient to overcome the undisputed transmutation of the property to community property.
We reject VWLP's contention that the order allowing Saracia to occupy the Virginia Way property until she receives her share of the community estate was erroneous because it impacts the interests of third parties who were not joined to the case. No third party interests were harmed because court's alter ego finding applied to all of the "other entities" involved in William's series of transactions regarding the Virginia Way property. Thus, the property is effectively being held solely by William. Additionally, the ownership interests of VWLP's constituent entities were not harmed because Saracia was not awarded ownership of the property; she was awarded only use of the property until she receives her share of the community estate as ordered in the judgment.
Moreover, the interests of the partners in VWLP were adequately represented by the joinder of VWLP in the action. It has been held that "[a] partnership in the eyes of the law is not a legal entity even though it may be sued under the firm name, by reason of the provisions of section [369.5] of the Code of Civil Procedure. [Citations.]... [¶] 'When a firm's name is used, it is only a convenient method for denoting those persons who compose the firm at the time when that name is used and a plaintiff who sues partners in the name of their firm in truth sues them individually, just as much as if he had set out all their names.' " (Rudnick v. Delfino (1956) 140 Cal.App.2d 260, 266-267.) Accordingly, the parties' stipulation to join VWLP as a claimant in the action protected the interests of its constituent members.
We note that the Court of Appeal in Epstein v. Frank (1981) 125 Cal.App.3d 111, 120 observed that "[a] limited partnership is regarded as an entity separate and apart from its partners when it is sued, when it is served with process, and when executing upon its assets." However, the Epstein court also observed that "[t]he authorities do not clearly delineate when a partnership will be regarded as an aggregate of individuals and when it will be considered as a separate entity. An analysis of the cases demonstrates that the concept to be utilized in any given case is dependent largely upon policy considerations and upon which concept will achieve a fair and equitable disposition of the issues in controversy." (Epstein v. Frank, supra, 125 Cal.App.3d at p. 119, italics added.) Here a fair and equitable disposition of the issues in controversy is best achieved by viewing VWLP's appearance in this action as also being an appearance by its two constituent members (the Family Trust and the Children's Trust), because William was the alter ego of or controlled both entities.
We also reject VWLP's contention that the award to Saracia of possession of the Virginia Way property is duplicative of the award of $575,000 to Saracia as her one-half, presumed interest in the property. The court's revised statement of decision and the judgment clearly state that Saracia's use and possession of the Virginia Way property until she receives her full share of the community estate is nontaxable spousal support. Accordingly, the award is not part of the court's division of the community estate.
"An award of spousal support is a determination to be made by the trial court in each case before it, based upon the facts and equities of that case, after weighing each of the circumstances and applicable statutory guidelines. [Citation.] In making its spousal support order, the trial court possesses broad discretion so as to fairly exercise the weighing process contemplated by section 4320, with the goal of accomplishing substantial justice for the parties in the case before it. 'The issue of spousal support, including its purpose, is one which is truly personal to the parties.' [Citation.] In awarding spousal support, the court must consider the mandatory guidelines of section 4320. Once the court does so, the ultimate decision as to amount and duration of spousal support rests within its broad discretion and will not be reversed on appeal absent an abuse of that discretion. [Citation.] 'Because trial courts have such broad discretion, appellate courts must act with cautious judicial restraint in reviewing these orders.' " (In re Marriage of Kerr (1999) 77 Cal.App.4th 87, 93, fn. omitted.)
The judgment here reflects the court's consideration of the mandatory guidelines of section 4320 and there is no contention in this appeal that it did not consider them.
" 'Support' is broadly defined as 'a source or means of living; subsistence, sustenance, or living. In a broad sense the term includes all such means of living as would enable one to live in the degree of comfort suitable and becoming to his station of life. It is said to include anything requisite to housing, feeding, clothing, health, proper recreation, vacation, traveling expense, or other proper cognate purposes; also, proper care, nursing, and medical attendance in sickness, and suitable burial at death.' " (In re Marriage of Benjamins (1994) 26 Cal.App.4th 423, 429, quoting Black's Law Dict. (5th ed. 1979) p. 1291, col. 1, italics added, italics added by Benjamins removed.) "Thus, 'support' and 'maintenance' are merely general terms used to describe a wide variety of various types of assistance designed to cover everyday living expenses...." (Benjamins, at p. 429.) A support obligation can be ordered discharged indirectly, in whole or part, in the form of noncash benefits. (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2010) ¶¶ 6:1076, 6:1077, p. 6-400.)
We conclude the court acted within its broad discretion and equitable powers in awarding Saracia, as spousal support, possession of the Virginia Way property until she receives her full share of the community estate. The court could reasonably anticipate that William would resist complying with its orders regarding division of the community estate. Accordingly, the court could reasonably fashion a support order that ensured Saracia would have a place to live until his compliance affords her the means to move elsewhere. VWLP (or its successor entity) could obtain possession of the Virginia Way property and render this issue moot by William's satisfying the judgment. As Saracia points out, William is essentially asking the court to eject her from the Virginia Way property regardless whether he complies with the judgment's orders regarding division of the community estate.
The court stated, regarding the award of possession of the Virginia Way property as support: "I was just anticipating - normally I wouldn't have this kind of arrangement.... But... it did not seem to me that it was likely that Mr. Shannahan was going to write a check to Ms. Shannahan here or transfer over sufficient assets to satisfy... what I found her interest in the community was. And given the pace of other aspects of the case, she still needs a place to live, and so I made these orders.
Regarding Saracia's appeal, we conclude the court acted within its broad discretion and equitable powers in awarding her cash equivalent of her share of the Virginia Way property instead of awarding her the property in kind. As we discussed above, although the court could properly disregard the separate identities of VWLP and its constituent entities for certain purposes (Mesler v. Bragg Management Co., supra, 39 Cal.3d at p. 300; Grant v. Weatherholt, supra, 123 Cal.App.2d at p. 49), including the determination of the community's interest in the Virginia Way property, it could also properly respect their separate identities for the purpose of equitably ruling that the Virginia Way property, as the sole asset of VWLP, should not be taken from the partnership - if for no other reason than that to do so would be detrimental to the children, who hold a beneficial interest in the Virginia Way property through the Children's Trust. We will not disturb the court's orders concerning the Virginia Way property.
III. SARACIA'S APPEAL
A. Attorney Fees for Breach of Fiduciary Duty and Sanctions
Saracia's remaining contentions on appeal are that the court erred in denying her request for attorney fees under section 1101, subdivision (g), as a remedy for William's breach of fiduciary duty, and her request for sanctions under section 271. Section 1101, subdivision (g), provides, in relevant part: "Remedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney's fees and court costs." (Italics added.)
Section 271 authorizes the court to award attorney's fees and costs "in the nature of a sanction" when the conduct of a party or attorney "furthers or frustrates the policy of the law to promote settlement of litigation and, where possible, to reduce the cost of litigation by encouraging cooperation between the parties and attorneys." We review an order denying section 271 sanctions for abuse of discretion (In re Marriage of Burgard (1999) 72 Cal.App.4th 74, 82.) We will overturn the order only if, viewing the evidence in the light most favorable to the order, we determine that no judge could reasonably make it. (In re Marriage of Daniels (1993) 19 Cal.App.4th 1102, 1106.)
Saracia contends the court denied attorney fees under section 1101, subdivision (g), and sanctions under section 271 because it wanted to defer ruling on those issues until the breach of fiduciary duty issue was decided on appeal. Saracia cites In re Marriage of Hokanson (1998) 68 Cal.App.4th 987 for the proposition that attorney fees are mandatory under section 1101, subdivision (g), upon a finding of breach of fiduciary duty and the court had no discretion to deny them. She also contends that William's conduct warrants an award of sanctions under section 271 and it was an abuse of discretion for the court to defer that issue pending the outcome of this appeal. Accordingly, she requests that we remand the matter for the trial court to consider both attorney fees under section 1101, subdivision (g), and sanctions under section 271.
In its statement of decision, the court stated: "Requests for [section] 271 sanctions or additional fees for breaches of fiduciary duty are denied. As set forth in section VI above, both parties' conduct contributed to the substantial attorneys' fees and costs incurred in this case." However, the court's revised statement of decision states: "The court declines to award additional attorney fees, costs or sanctions at this time. The court reserves jurisdiction over [Saracia's] request for sanctions per [section] 271." (Italics added.) The judgment simply states: "[Saracia's] requests for [section] 271 sanctions, or additional fees for [William's] breaches of fiduciary duties, are denied."
Section VI of the statement of decision, entitled "CREDIBILITY AND REASONABLENESS, " states: "The Court does not find [Saracia] to be entirely credible. [Saracia] attempted to conceal her inheritance and has never been forthcoming about its value. She also attempted to claim the Brookmead residence had a value of $6 to $7 million after entering into a stipulation that it had a value of $4.1 million. [William], on the other hand, attempted to force this case to an early trial, knowing that [Saracia] and her counsel had almost to information concerning the parties' finances or the basis for [William's] claim that there was no community property following a 20-plus year marriage. [William] also resisted [Saracia's] efforts to occupy [the Virginia Way property] or provide her with other suitable lodging while he was residing in the $4.1 million Brookmead residence."
At a hearing after the court issued its final statement of decision but before it issued its revised statement of decision or entered judgment, the court stated: "I intend to defer, just so we don't have to come back to this, these requests for fees sanctions and so forth, because... I would probably like to see the result of that appeal ultimately in deciding on that issue whether - in other words... I have some problems with sanctioning or ordering section 271-type fees [against] Mr. Shannahan - only to find out from the appellate court that Mr. Shannahan is right about certain things, that I'm wrong, and, therefore, he hasn't violated any fiduciary duties, just as an example. So that's why I'm reluctant to get into that. But I want to keep that ability to do that... so that when we get all finished with this and the dust settles and we look at how much this has cost everybody, I can deal with it.... And so but that to me is the time to do that." The court later stated that from the point it awarded Saracia attorney fees of "$150,000 forward, is fair game for a request for additional fees at the end of this. I did not intend to revisit the breaches of fiduciary duty that occurred leading up to the judgment, unless I get some new direction from the appellate court."
Although the judgment simply denies Saracia's requests for attorney fees under section 1101, subdivision (g), for breach of fiduciary duty and sanctions under section 271, it is clear from the overall record that the court declined to exercise its discretion under either statute until after disposition of this appeal, indicating that its decision on attorney fees for breach of fiduciary duty and sanctions would depend largely on whether this court affirmed its breach of fiduciary duty ruling. The court erred in deferring its ruling on these issues.
Although an award of attorney fees for breach of fiduciary duty is mandatory under section 1101, subdivision (g) (In re Marriage of Hokanson, supra, 68 Cal.App.4th at p. 993), the court must still exercise discretion as to the amount. (In re Marriage of Schaffer (1984) 158 Cal.App.3d 930, 935.)
When a matter is committed in the first instance to the trial court's discretion, the court must weigh the evidence and argument, make a reasoned choice, and leave the matter of whether it abused its discretion to the appellate court. (Gardner v. Superior Court (1986) 182 Cal.App.3d 335, 338-340 [Under our judicial hierarchy, "the trial court makes decisions and [the appellate court] reviews them."].) The trial court's failure to exercise its discretion under a statute is itself an abuse of discretion. (Fletcher v. Superior Court (2002) 100 Cal.App.4th 386, 392; Richards, Watson & Gershon v. King (1995) 39 Cal.App.4th 1176, 1180; In re Marriage of Cheriton, supra, 92 Cal.App.4th 269 [although a court has considerable discretion in fashioning a need-based attorney fee award the record must show the court actually exercised that discretion], In re Marriage of Lynn (2002) 101 Cal.App.4th 120, 132 [failure to exercise discretion to award spousal support]; In re Marriage of Gray (2007) 155 Cal.App.4th 504, 515 [failure to exercise discretion to equitably apportion and divide pension benefit]). Accordingly, we will remand the matter for the trial court to exercise its discretion in ruling on Saracia's request for attorney fees under section 1101, subdivision (g), and request for sanctions under section 271.
This court in Gardner encouraged the trial judge, who had failed to exercise discretion in granting relief from a default judgment, to "to shoulder his responsibilities as a player on the field of the common law, and leave the determination of hits and errors to the official scorer." (Gardner v. Superior Court, supra, 182 Cal.App.3d at p. 340.)
IV. WILLIAM'S APPEAL (D055292)
In Case No. D055292, William appeals a postjudgment order awarding Saracia a total of $67,000 in fees and costs to defend William's appeals and directing him to "roll [the] additional $62,000 into an IRA account of [Saracia's] designation." William contends the order directing him to satisfy this attorney fee award from his private retirement account was erroneous because it violates Civil Procedure section 704.115, subdivision (b) (see section I. C., ante), and the preemption provisions of the federal Employee Retirement Income Security Act of 1974 (ERISA).
The $67,000 award consists of $62,000 plus the previous $5,000 award noted above.
Although the account or accounts from which William is to roll the additional $62,000 are not specified in the order, presumably the source accounts are those specified in the court's December 17, 2008 order directing that the $5,000 portion of the $67,000 award and other fee awards were to be transferred from UBS IRA #1 and UBS IRA #2 in William's name. The parties' briefs indicate it is undisputed that the source accounts are IRA's "qualified under Section 408 or 408A of [the Internal Revenue Code]" within the meaning of Code of Civil Procedure section 704.115, subdivision (b). For example, William states in his opening brief that the order challenged in this appeal directed him "to transfer $62,000 from an IRA account in his name to an IRA account designated by [Saracia]...."
As we discussed above, Code of Civil Procedure section 704.115, subdivision (b), exempts from judgment enforcement procedures "[a]ll amounts held, controlled, or in the process of distribution by a private retirement plan, for the payment of benefits as an annuity, pension, retirement allowance, disability payment, or death benefit from a private retirement plan...." Code of Civil Procedure section 704.115 concerns exemptions that a judgment debtor can claim in proceedings to enforce a money judgment or in bankruptcy court; it does not govern the division of community property retirement plans or attorney fee awards in marital dissolution cases and, accordingly, does not limit the trial court's authority and discretion in those areas.
William's contention that ERISA's preemption provisions deprived the court of jurisdiction to order the rollover of funds from his IRA is without merit because, as the Ninth Circuit Court of Appeals made clear in Charles Schwab & Co., Inc. v. Debickero (9th Cir. 2010) 593 F.3d 916 (Charles Schwab), ERISA does not apply to a personal IRA. "By ERISA's own terms, employee benefit protections apply only to an 'employee benefit plan' that is 'established or maintained' by an employer, employee organization, or both." (Charles Schwab, supra, 593 F.3d at p. 919; 29 U.S.C. § 1003(a).)
William cites AT&T Management Pension Plan v. Tucker (C.D. Cal. 1995) 902 F.Supp. 1168, for the proposition under ERISA's preemption provisions, an ERISA-governed plan or plan fiduciary cannot be ordered to pay section 2030 need-based attorney fees. However, the retirement plan in question in that case was undisputedly an employee pension benefit plan subject to ERISA. (Id. at p. 1169.)
Charles Schwab involved a dispute over the ownership of a decedent's IRA with Charles Schwab & Company between the decedent's children, who were named beneficiaries of the IRA, and his surviving spouse. Among other arguments, the surviving spouse claimed that she was entitled to the funds under an ERISA provision requiring that " 'in the case of a vested participant who dies before the annuity starting date and who has a surviving spouse, a qualified preretirement survivor annuity shall be provided to the surviving spouse....' " (Charles Schwab, supra, 593 F.3d at p. 918.) The appellate court noted that "ERISA's surviving spouse provisions may apply only when an ERISA-qualified plan is implicated" and concluded that although the decedent "was at one time a participant in an employee benefit plan subject to ERISA's protections and limitations, ERISA ceased to apply when, long before his marriage to [the surviving spouse], [the decedent] terminated his participation in the employee benefit plan and transferred the proceeds to an independent IRA." (Id. at p. 919.)
The Charles Schwab court explained that " 'Congress enacted ERISA to ensure the proper administration of employee benefit plans, including pension plans, both during the years of an employee's active service and after retirement.' [Citation.] That scope may be substantial, but it is also inherently limited. By ERISA's own terms, employee benefit protections apply only to an 'employee benefit plan' that is 'established or maintained' by an employer, employee organization, or both. [Citation.] The term 'employee benefit plan' or 'plan' is likewise defined as an employee 'welfare plan' or 'pension plan' that is 'established or maintained by an employer or by an employee organization, or by both.' [Citation.] The Schwab IRA at issue here was established and maintained by [the decedent] personally and not by his employer or any employee organization, and thus it falls outside these basic coverage limits." (Charles Schwab, supra, 593 F.3d at p. 919.)
The Charles Schwab courtconcluded it was immaterial that the decedent's IRA funds were traceable to an employee benefit plan that fell under ERISA protection, stating: "It is beside the point that the IRA proceeds originated as employee benefits within an ERISA-qualified plan. Section 1003(a) delineates ERISA's coverage not in terms of 'employee benefits, ' but in terms of 'employee benefit plans.' [Citation.] 'The focus of the statute thus is on the administrative integrity of benefit plans - which presumes that some type of administrative activity is taking place.' [Citation.] 'Only "plans" involve administrative activity potentially subject to employer abuse.' [Citation.]... [¶] If that were not enough, IRAs are specifically excluded from ERISA's coverage. Consistent with the statutory definitions and coverage limits discussed above, federal regulations clarify that so long as the involvement of an employer or employee organization is strictly limited, 'the terms "employee pension benefit plan" and "pension plan" [as defined in § 1002(2)(A)] shall not include an individual retirement account described in section 408(a) of the [Internal Revenue] Code....' [Citation.] Moreover, ERISA itself excludes IRAs categorically from the participation and vesting provisions of Part 2 of Title I, 29 U.S.C. §§ 1051-1061, which includes the joint and survivor annuity requirements of § 1055 at issue here. 'This part shall apply to any employee benefit plan described in section 1003(a) of this title... other than... an individual retirement account or annuity described in section 408 of Title 26....' " (Charles Schwab, supra, 593 F.3d at pp. 919-920, fns. omitted.)
Accordingly, ERISA does not apply to William's private retirement accounts. Neither Code of Civil Procedure section 704.115 nor ERISA's preemption provisions barred the court from ordering William to satisfy the $67,000 attorney fee award from a private retirement account.
DISPOSITION
The portion of the judgment denying Saracia's requests for sanctions under Family Code section 271 and additional fees for William's breaches of fiduciary duties is reversed and the cause is remanded to the superior court with directions to exercise its discretion in ruling on those requests. The judgment is otherwise affirmed. The postjudgment orders directing William to pay Saracia's attorney fees incurred in the federal litigation, to pay attorney fee awards to Saracia from his share of private retirement accounts, and to satisfy the $67,000 award of attorney fees from a private retirement account are affirmed. Saracia is awarded her costs on appeal.
WE CONCUR: BENKE, Acting P.J., McDONALD, J.
Under William's view of the trial court's breach of fiduciary duty finding and issue on appeal, as long as his initial transfer of a property to a partnership entity, viewed in isolation, did not constitute a breach of fiduciary duty, it is immaterial whether any subsequent "downstream" transfers of the property impaired Saracia's interest in the community estate. This view is contrary to section 1101, subdivision (a), which gives a spouse a claim against the other spouse for breach of the fiduciary duty, "including... a pattern or series of transactions [that] have caused or will cause a detrimental impact to the claimant spouse's undivided one-half interest in the community estate." (Italics added.)
William also cites a number of trial exhibits that were not included in the record on appeal (MM, TT, UU-3, VV, and VV-1).
The indemnity provision concerning tax liability states: "[William] shall pay, indemnify and hold [Saracia] harmless from all claims for taxes unpaid, audits, or other proceedings caused by taxing authorities regarding any of the corporations, partnerships, and business entity interests created by [William] during the marriage or after date of separation. [William] shall hold [Saracia] harmless and defend, at his sole expense, [Saracia] against any tax claim, action or proceeding, including any assessments of interest and penalties."
In any event, " 'the failure to join an "indispensable party" is not "a jurisdictional defect" in the fundamental sense; even in the absence of an "indispensable" party, the court still has the power to render a decision as to the parties before it which will stand. [Citations.] It is for reasons of equity and convenience, and not because it is without the power to proceed, that the court should not proceed with a case where it determines that an "indispensable party" is absent and cannot be joined.' " (McKeon v. Hastings College (1986) 185 Cal.App.3d 877, 890, quoting Kraus v. Willow Park Public Golf Course (1977) 73 Cal.App.3d 354, 364.) Here, equity and convenience do not compel joinder of VWLP's constituent members because their interests are effectively represented through the joinder of VWLP.