Opinion
G056677
06-23-2020
In re Marriage of STEPHEN and WENDY SAWYER. STEPHEN SAWYER, Respondent, v. WENDY SAWYER, Appellant.
Buchalter, Michael W. Caspino, Robert M. Dato, and Megan M. Holbrook for Appellant. Robie & Matthai, Edith R. Matthai and T. John Fitzgibbons for Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 13D003452) OPINION Appeal from a judgment of the Superior Court of Orange County, Franz E. Miller, Judge. Affirmed. Request for judicial notice. Granted. Buchalter, Michael W. Caspino, Robert M. Dato, and Megan M. Holbrook for Appellant. Robie & Matthai, Edith R. Matthai and T. John Fitzgibbons for Respondent.
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I
INTRODUCTION
This appeal is a companion to the appeal and cross-appeal in Sawyer v. Sawyer (G056510) (Appeal #1). At the risk of oversimplification, Appeal #1 challenged the judgment in a civil action Wendy Sawyer (Wendy) and her companies filed against her ex-spouse Stephen Sawyer (Stephen), their son Jason Sawyer (Jason), and Jason's law firm, alleging breach of fiduciary duty, and other claims.
Because the parties to this appeal share the same surname, we refer to them by their first names for simplicity's sake. No disrespect is intended.
The instant appeal is from a postjudgment order in Wendy and Stephen's marital dissolution proceeding. The 2014 dissolution judgment incorporated the parties' marital settlement agreement (MSA), including a provision requiring Wendy to make a $1.16 million equalization payment to Stephen (the equalization provision). The equalization payment obligation was memorialized in a five-year note (the equalization note), secured by a trust deed on Wendy's home. The note was payable in monthly installments of $15,000, and two balloon payments, one due in October 2016 and the last due in May 2019 for the balance of the note. The note stated it was "not subject to offset, decrease, reductions, deductions, or counterclaims of any kind or nature whatsoever."
In December 2017, Wendy moved to vacate the equalization provision in the divorce judgment. Wendy filed the motion to vacate under Family Code section 2122, which allows a party to seek relief from a dissolution judgment on grounds of fraud within one year of discovering the fraud.
Family Code section 2122 provides in pertinent part as follows: "The grounds and time limits for a motion to set aside a judgment, or any part or parts thereof, are governed by this section and shall be one of the following: [¶] (a) Actual fraud where the defrauded party was kept in ignorance or in some other manner was fraudulently prevented from fully participating in the proceeding. An action or motion based on fraud shall be brought within one year after the date on which the complaining party either did discover, or should have discovered, the fraud." (All further undesignated statutory references are to the Family Code.)
Wendy's motion to vacate asserted, essentially, that Jason, an attorney, "assisted Wendy with her dissolution proceeding," but "[u]nbeknownst to her, Jason was conspiring with [Stephen] to defraud her out of approximately $1 million at or around the time the 6/4/14 judgment was being finalized." The motion further asserted that, had Wendy known of that "fraud/self-dealing/coercion . . . Wendy would not have agreed to the approximately $1.1 million equalization payment or that it be secured by her [home]."
Wendy admits in the motion to vacate she discovered Stephen and Jason's conspiracy to defraud her in May 2016 when Jason "decided to come clean" and confessed to her he had embezzled thousands of dollars from her and her companies. Within weeks of Jason's confession, Wendy and her companies filed the above-mentioned civil action (Sawyer 1) against Stephen, Jason, and Jason's law firm, alleging all three defendants were responsible for Jason's thefts.
Wendy based her theory of liability against Stephen in Sawyer 1 on breach of fiduciary duties he owed her and her companies as a partner in the Sawyer & Sawyer law firm, of which the plaintiffs were clients. We held in Appeal #1 substantial evidence supported the jury's finding Stephen was not a partner of the firm and, accordingly, he owed Wendy and her companies no fiduciary duties.
Wendy waited until December 2017, 18 months after learning of the embezzlement, to file the motion to vacate the divorce judgment's equalization provision. Although Wendy filed the motion beyond the one-year limitations period in section 2122, she nonetheless argued the motion was timely because the doctrine of equitable tolling applied. The family court disagreed and denied the motion to vacate as untimely, and on the additional ground of res judicata based on the jury's then-recent verdict in Sawyer 1, which absolved Stephen of having breached fiduciary duties to Wendy and her companies.
In this appeal, Wendy challenges the family court's rulings on both timeliness and res judicata. We need not discuss the court's erroneous res judicata ruling, which Stephen does not defend. Stephen agrees with Wendy res judicata did not apply because the judgment in Sawyer 1 was not final when the trial court ruled on the set-aside motion. (See Sandoval v. Superior Court (1983) 140 Cal.App.3d 932, 936 ["pending appeal a trial court judgment is not final and will be not given res judicata effect"].)
In contesting the family court's timeliness ruling, Wendy argues the court erred in rejecting her claim the motion was timely due to equitable tolling. We disagree and therefore affirm.
II
DISCUSSION
A. The Doctrine of Equitable Tolling
"The equitable tolling of statutes of limitations is a judicially created, nonstatutory doctrine. (See Elkins v. Derby (1974) 12 Cal.3d 410, 420 & fn. 9 [(Elkins)]; Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 650.) It is 'designed to prevent unjust and technical forfeitures of the right to a trial on the merits when the purpose of the statute of limitations—timely notice to the defendant of the plaintiff's claims—has been satisfied.' [Citation.] Where applicable, the doctrine will 'suspend or extend a statute of limitations as necessary to ensure fundamental practicality and fairness.' (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 370 [(Lantzy)].)" (McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, 99 (McDonald).) "Broadly speaking, the doctrine applies '"[w]hen an injured person has several legal remedies and, reasonably and in good faith, pursues one.'" (Elkins [], supra, 12 Cal.3d at p. 414.)" (McDonald, supra, 45 Cal.4th at p. 100.)
In McDonald, supra, 45 Cal.4th 88, the Supreme Court explained the doctrine of equitable tolling requires "a showing of three elements: 'timely notice, and lack of prejudice to the defendant, and reasonable and good faith conduct on the part of the plaintiff.' [Citations.]" (Id. at p. 102, fn. omitted.)
In this appeal, Wendy and Stephen dispute whether the doctrine of equitable tolling applies to section 2122. The parties agree the issue is one of first impression and they each rely on different cases to support their respective arguments on the issue.
Stephen relies heavily on Lantzy, supra, 31 Cal.4th 363, which held equitable tolling does not apply to extend the 10-year statute of limitations for actions on latent construction defects. Stephen argues Lantzy provides crucial guidance for resolving whether equitable tolling applies to extend other statutes of limitations. For example, he cites Lantzy's statement equitable tolling does not apply if the statute includes a clear expression of legislative intent "'to disallow tolling under any circumstances not enumerated in the statute. [Citation.]"' (Lantzy, supra, 31 Cal.4th at p. 371.) Stephen also cites Lantzy's statement equitable tolling does not apply "if it is inconsistent with the text of the relevant statute" [citations] or contravenes clear legislative policy. [Citation.]" (Lantzy, supra, 31 Cal.4th at p. 371.)
Citing these admonitions in Lantzy, supra, 31 Cal.4th 363, Stephen argues we should hold equitable tolling does not apply to section 2122 because allowing tolling under these unenumerated circumstances would conflict with both the text of section 2122 and an expression of legislative intent in the immediately adjacent statute, section 2121, subdivision (a), to prohibit tolling on any grounds other those specified in 2122 ("Section 2121(a) provides a spouse may move to set aside a judgment 'based on the grounds, and within the time limits, provided in this chapter.'"). Stephen also contends the discovery provision in section 2122, subdivision (a), stating the one-year limitations period begins to run only upon discovery of the fraud, is itself a form of tolling which makes equitable tolling unnecessary.
On the other side of the debate, Wendy relies on cases in which courts have allowed equitable tolling to extend various statutes of limitation despite language in these statutes containing the same "general" expressions of legislative intent to limit tolling as exists in sections 2122 and 2121. Based on this case law, Wendy argues the "general" language in section 2122 lacks the clear expression of legislative intent required to prohibit equitable tolling.
Wendy cited cases applying equitable tolling to a Government Code provision related to discrimination claims (McDonald, supra, 45 Cal.4th at p. 106), a six-month limit for filing unemployment insurance claims (Tarkington v. California Unemployment Ins. Appeals Bd. (2009) 172 Cal.App.4th 1494, 1502), and a 49-day limit for actions under Public Resources Code section 30621 (Mt. Holyoke Homes LP v. California Coastal Com. (2008) 167 Cal.App.4th 830, 840 (Mt. Holyoke)).
We need not resolve this issue of law, however, because, as explained below, we conclude even if equitable tolling applies to set-aside actions under section 2122, Wendy's motion did not satisfy the elements of an equitable tolling claim.
B. The Family Court Did Not Err in Concluding Wendy's Motion Failed to Satisfy the Elements of Equitable Tolling
Stephen filed a request for judicial notice of certain family court and trial court orders, attached to the request, which were issued in the proceedings discussed here. The request for judicial notice is granted.
1. Standard of Review
"[T]he trial court's exercise of discretion in refusing to set aside a judgment under section 2122 is subject to reversal on appeal only if we find an abuse of that discretion. . . . [T]his court must not merely substitute its own view as to the proper decision: '[T]he showing on appeal is wholly insufficient if it presents a state of facts . . . which . . . merely affords an opportunity for a difference of opinion. An appellate tribunal is neither authorized nor warranted in substituting its judgment for the judgment of the trial judge.' [Citation.]" (In re Marriage of Varner (1997) 55 Cal.App.4th 128, 138.)
In ruling the set-aside motion was untimely, the family court made the implied finding Wendy failed to prove the elements required for equitable tolling (notice, lack of prejudice, good faith). Wendy asserts that finding is subject to de novo review because "the pertinent facts surrounding Wendy's claim for equitable estoppel are undisputed. All three factors for invoking the doctrine are satisfied." Wendy cites Mt. Holyoke, supra, 167 Cal.App.4th 830, for the rule that equitable estoppel is "a question of law when the facts are undisputed and only one reasonable conclusion can be drawn from them." (Id. at p. 840.)
We agree the de novo standard of review applies to the family court's finding on equitable tolling. The court's finding was based not on disputed evidence, but rather what is alleged in the pleadings. (See Parsons v. Bristol Develop. Co. (1965) 62 Cal.2d 861, 865-866 [in the absence of conflicting extrinsic evidence, the meaning of a writing is a question of law subject to de novo review].) As explained below, our review of the pleadings leads us to conclude as a matter of law Wendy failed to prove the elements of notice and lack of prejudice required for equitable tolling.
2. The Relevant Facts
Just weeks after Wendy filed Sawyer 1, she sought an ex parte application seeking to avoid paying Stephen the monthly installments due on the equalization note. Wendy asserted in the ex parte application she "recently discovered that Stephen Sawyer, in conspiracy with his son Jason Sawyer . . . has been embezzling and stealing large sums of money from her, her companies, and other firm clients since 2011." She informed the court she had litigation currently pending against Stephen, Jason, and their law firm, and Stephen had filed a notice of default on the equalization note and was threatening to initiate foreclosure proceedings for nonpayment. Wendy asked the court to allow "all loan payments due from her to Stephen Sawyer, under the terms of the Note, be placed in trust with this Court pending the outcome of the litigation and the California State Bar investigation." The family court denied the relief without prejudice.
Months later, in October 2016, Wendy renewed in family court her application seeking to deposit the loan payments with the court rather than to pay the money to Stephen. Again, the family court Miller denied the application without prejudice.
In February 2017, Wendy filed a new civil action against Stephen for money damages (Sawyer 2). Essentially, this complaint alleged that during the period between 2007 and 2011, when Stephen was acting as attorney for Wendy and her separately owned businesses, he committed legal malpractice and breached his fiduciary duties by using his position of trust as Wendy's husband and attorney to convince her to give away to him 50 percent of her interest in those companies, which comprised her inherited separate property. According to the Sawyer 2 complaint, Stephen tricked Wendy into allowing him to create two new companies to serve as repositories for the income from Wendy's "separate property" companies, and to "nam[e] himself a 50% owner" of each company. Wendy alleged this deceptive self-dealing by Stephen effectively converted half of her inherited separate property into community property, without her informed consent.
The complaint alleged it was that earlier deceptive conversion of her separate property into community property which enabled Stephen in the dissolution proceedings "to lay claim to 50% of the inherited separate marital property[.]" "But for [Stephen] performing legal services under blatant conflicts of interest, he would never have been able to lay claim to 50% of the inherited separate marital property of [Wendy.]" The complaint did not allege any fraud in the dissolution proceedings, only in the business reorganizations Stephen implemented years earlier. The complaint sought $1 million in damages; it did not challenge any provision in the dissolution judgment.
In March 2017, Stephen recorded a notice of default on the $1.16 million equalization note. A foreclosure sale on the trust deed to Wendy's home, which secured the equalization note, was set for June 2017. In early May 2017, Wendy filed a complaint against Stephen seeking a preliminary injunction and a temporary restraining order to prevent the foreclosure sale (Sawyer 3). She alleged in Sawyer 3 she did not owe the equalization payment because she had a right of set off for her claims against Stephen in Sawyer 1. The court issued the temporary restraining order staying the foreclosure sale. In November 2017, the trial court denied Wendy's request for preliminary injunction in Sawyer 3 and dissolved the temporary restraining order.
Less than two weeks later, and one week before the scheduled foreclosure sale, Wendy made an emergency appeal to the family court for the relief denied her in the trial court: Wendy applied ex parte for a temporary restraining order to enjoin the foreclosure sale set for November 27, 2017, or alternatively, for an order shortening time for a hearing on a motion to vacate the June 4, 2014 dissolution judgment. In this ex parte application, Wendy raised for the first time the equalization provision in the divorce judgment should be vacated for fraud.
In the ex parte application, Wendy stated she previously had sought in the trial court an injunction against the pending foreclosure sale, but the court had denied that requested relief. She asserted her present claim for injunctive relief was stronger than her earlier application because, "[i]n addition to the facts and circumstances set forth in [the prior application in the trial court], [Wendy] believes that [Stephen's] actions during their marriage and during the dissolution proceedings before this Court rise to the level of fraud." After briefly summarizing the facts constituting the purported fraud, Wendy asserted she was "confident that the fraudulent actions taken during the dissolution proceedings warrant vacating the Judgment, rendering the Note void and the foreclosure sale improper."
The family court granted the temporary restraining order "pending a ruling on the motion to vacate the judgment." With the temporary restraining order in place, Wendy quickly filed an amended complaint in Sawyer 2. While the original complaint in Sawyer 2 had alleged Stephen engaged in deceptive conduct which cheated her of her separate property between 2007 and 2011, the first amended complaint added new allegations of "self-dealing" and conflict of interest on the part of Stephen and the Sawyer & Sawyer law firm during the 2013-2014 dissolution proceedings. Wendy now alleged she signed the MSA "under false pretenses, undue influence, and after material misrepresentations had been made to her by [Stephen and Sawyer & Sawyer]." Accordingly, she alleged, she was seeking to set aside the dissolution judgment, the MSA, the equalization note, and "any release agreement related thereto."
The trial court earlier had sustained Stephen's demurrer to the original complaint with leave to amend. Eventually, the trial court sustained Stephen's demurrer to this amended complaint without leave to amend. --------
3. The Motion to Set Aside the Equalization Provision
One week later, on December 8, 2017, Wendy filed in the family court her motion to set aside the dissolution judgment under section 2122. The motion asserted: "[P]ortions of the Judgment should be set aside . . . on the grounds of actual fraud. Throughout the [dissolution] litigation . . . [Jason, an attorney] assisted Wendy with her dissolution proceeding. Unbeknownst to her, Jason was conspiring with [Stephen] to defraud her out of approximately $1 million at or around the time the 6/4/14 Judgment was being finalized. But for the conduct of [Stephen] and/or Jason in the fraud/self-dealing/coercion . . . , Wendy would not have agreed to the approximately $1.1 million equalization payment or that it be secured by her [home]. Accordingly, Wendy requests that the Court set aside the [equalization provision] based on actual fraud under [] section 2122."
In addition to this new allegation of "collusion" between Stephen and Jason during the dissolution proceedings, the set-aside motion also included Wendy's allegations from Sawyer 2 concerning Stephen's conduct in "wrongfully us[ing] his position as her husband and attorney to change title on" her separate properties. Additionally, the motion also recounted the allegations from Sawyer 1 concerning Jason's embezzlement of hundreds of thousands of dollars from Wendy, and the claim Stephen, "[d]espite having clear knowledge of" Jason's actions, failed to stop the thefts or warn her of the thefts, and even "actively concealed the embezzlements[.]"
The set-aside motion included an argument the motion was timely filed based on equitable tolling. Wendy contended she had given Stephen "[t]imely notice" of her fraud claim by filing Sawyer 1 within the statutory period. Consequently, she argued, "[T]here is no prejudice to [Stephen] as he had ample opportunity to gather and preserve evidence as part of the civil matter."
Stephen opposed the set-aside motion on two grounds: (1) Wendy had not shown extrinsic fraud, as required by section 2122, and (2) Wendy's motion was barred by the one-year limitations period in the statute. In a supplemental letter, Stephen informed the family court of the jury's verdict in Sawyer 1 clearing Stephen of any wrongdoing in Jason's embezzlement.
After argument, the family court denied Wendy's set-aside motion on grounds it was untimely and barred by res judicata.
4. The Pleadings Establish Wendy Failed to Satisfy the Elements of Equitable Tolling
Wendy argues the family court erred in finding her set-aside motion was untimely because "undisputed" evidence demonstrated she satisfied the three elements of equitable tolling: notice, lack of prejudice to the defendant, and good faith on her part. (McDonald, supra, 45 Cal.4th at p. 102.) Wendy is wrong. The pleadings establishes as a matter of law Wendy failed to satisfy the elements of the equitable tolling doctrine.
Case law describes the close interplay between the notice and "lack of prejudice" elements of equitable tolling. In Collier v. City of Pasadena (1983) 142 Cal.App.3d 917 (Collier), the court explained these two elements as follows: "The timely notice requirement essentially means that the first claim must have been filed within the statutory period. Furthermore the filing of the first claim must alert the defendant in the second claim of the need to begin investigating the facts which form the basis for the second claim. Generally this means that the defendant in the first claim is the same one being sued in the second. . . .
"The second prerequisite [lack of prejudice] essentially translates to a requirement that the facts of the two claims be identical or at least so similar that the defendant's investigation of the first claim will put him in a position to fairly defend the second. Yet the two 'causes of action' need not be absolutely identical. The critical question is whether notice of the first claim affords the defendant an opportunity to identify the sources of evidence which might be needed to defend against the second claim. . . . So long as the two claims are based on essentially the same set of facts timely investigation of the first claim should put the defendant in position to appropriately defend the second. Once he is in that position the defendant is adequately protected from stale claims and deteriorated evidence." (Collier, supra, 142 Cal.App.3d at p. 924-925, fn. omitted, italics added.)
The pleadings reveal Wendy did not meet the "timely notice requirement" the Collier court described: The facts of the three timely civil actions (collectively, "the first claim") and later untimely set-aside motion ("the second claim") were not "identical" or "so similar" that Stephen's investigation of the "first" claims put him "in a position to fairly defend the second." (Collier, supra, 142 Cal.App.3d at p. 925.) That is because none of the three civil actions alleged fraud in the marital dissolution, which was the specific "set of facts" upon which Wendy based her motion to set aside the equalization provision.
Wendy concedes Sawyer 1 did not give Stephen notice she would seek to vacate the equalization provision for fraud in the dissolution. She argues, however, Sawyer 2 and Sawyer 3 "put Stephen on notice of Wendy's allegations of his allegedly fraudulent conduct as a lawyer and its impact on the dissolution judgment." The argument lacks merit.
While Sawyer 2 did assert a fraud claim against Stephen based on his "conduct as a lawyer," that conduct preceded the dissolution by at least two years. Sawyer 2 alleged Stephen deceived and manipulated Wendy in the years 2007- 2011 during the marriage when, acting as Wendy's attorney, Stephen tricked Wendy into allowing him to set up new businesses which effectively gave him 50 percent of her separate property wealth. In other words, Sawyer 2 did not claim Stephen committed fraud in the dissolution; more specifically, Sawyer 2 did not mention "collusion" between Jason and Stephen to benefit Stephen in negotiating the marital property division incorporated into the judgment.
This comparison of the pleadings in Sawyer 2 and the set-aside motion leads inescapably to only one conclusion: The fraud claims in the two actions are not "based on essentially the same set of facts[,]" and Sawyer 2, accordingly, did not give Stephen notice of the fraud claim in the later action. (Collier, supra, 142 Cal.App.3d at p. 925.)
Nor did Sawyer 3. That action for a preliminary injunction merely asserted Wendy did not owe the equalization payment because her damages claim against Stephen in Sawyer 1 gave her a right of set off. We conclude the record, therefore, establishes as a matter of law Wendy's three actions filed within the statutory period did not give Stephen the notice required for equitable tolling in the set-aside motion.
It necessarily follows Wendy also failed to satisfy the "lack of prejudice" element of equitable tolling. Because the three civil actions gave Stephen no notice of the fraud claim in the untimely set-aside motion, Stephen's investigation of the earlier, timely claims did not "put him in a position to fairly defend the second." (Collier, supra, 142 Cal.App.3d at p. 925.) Without timely notice, Stephen was not in a "position" to be "adequately protected from stale claims and deteriorated evidence." (Ibid.) As a result, Wendy did not demonstrate the requisite lack of prejudice required for equitable tolling.
We conclude the family court properly found the doctrine of equitable tolling did not apply to Wendy's set-aside motion, and the motion was untimely under section 2122, subdivision (a). Given those findings, we further conclude the family court did not abuse its discretion in denying Wendy's motion to set aside the equalization provision for fraud.
III
DISPOSITION
The order denying Wendy's motion to vacate the part of the dissolution judgment requiring her to pay Stephen a $1.16 million equalization payment is affirmed. Stephen is entitled to his costs on appeal.
ARONSON, ACTING P. J. WE CONCUR: FYBEL, J. IKOLA, J.