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Nessinger v. Nessinger (In re Marriage of Nessinger)

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE
Feb 23, 2018
A138764 (Cal. Ct. App. Feb. 23, 2018)

Opinion

A138764

02-23-2018

In re the Marriage of EDWARD J. and ANGELINA L. NESSINGER. EDWARD J. NESSINGER, Appellant, v. ANGELINA L. NESSINGER, Appellant.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SFL32232)

Angelina Nessinger (Angelina) appeals from a judgment entered in her dissolution of marriage action against her former husband Edward Nessinger (Ed). She contends the trial court: (1) distributed the parties' property using an improper method; (2) made various property valuation errors; (3) violated the doctrine of res judicata by reconsidering another judge's prior rulings; (4) erred in applying the mediation privilege to exclude Ed's financial disclosure documents from evidence; and (5) abused its discretion in issuing sanctions against her. Ed cross-appeals and contends the court abused its discretion in awarding spousal support to Angelina. We reject both parties' contentions and affirm the judgment.

We refer to the parties by their first names, as is customary in family law matters. (See In re Marriage of Schaffer (1999) 69 Cal.App.4th 801, 803, fn. 2.) We refer to Edward Nessinger as Ed, as both parties do in their briefs, and did below.

FACTUAL AND PROCEDURAL BACKGROUND

The Original Marital Settlement Agreement and Judgment

Angelina and Ed were married on January 1, 1998 and separated on October 15, 2005. There have no children together. Angelina has an adult son from a prior marriage. At the end of the trial, Angelina was 54 years old and Ed was 47 years old.

Angelina has an undergraduate degree in architectural engineering, an "A" general contracting license, and a C-27 landscaping specialty license. She attended law school during the marriage and is also a practicing attorney. Ed has a twelfth grade education and holds a C-27 landscaping specialty license. At the time the two met in 1996, Angelina was working as an environmental engineer, and Ed owned and operated a landscaping business. Ed's business grew and Angelina began working full time for the company in 1997.

In 1999, Angelina and Ed formed a construction company, Nessco Construction, Inc. (Nessco). Throughout their marriage they were active in Nessco and two other community property businesses—Nessinger, Inc., and Nessinger Properties LLC, a real estate holding company. At the time of separation, their combined annual adjusted gross income was $895,415 and net worth was close to $7 million.

In November 2005, Angelina and Ed retained attorney Peter Renkow as their mediator and began the process of dividing their marital assets. The parties were not represented by independent counsel in the mediation. In May 2006, Angelina was diagnosed with breast cancer. She underwent surgery and radiation therapy and experienced severe pain for which she took morphine and other medications. The parties suspended their mediation negotiations from May to September 2006.

In September 2006, Angelina stopped taking medications and was cleared to return to work full-time; she returned to her law practice the following month. The parties resumed mediation and executed a Marital Settlement Agreement (MSA) on December 12, 2006. They signed Preliminary Declarations of Disclosures and Schedules of Assets and Debts, all of which were prepared by their mediator. Ed filed his Declaration Regarding Service of Declaration of Disclosure the day after the MSA was signed, and the parties waived service of Final Declarations of Disclosures. A Judgment of Dissolution of Marriage was filed on December 19, 2006. The parties submitted their MSA to the court for review but requested that it be returned to them after entry of Judgment so that their privacy would be preserved.

Under the MSA, Angelina received various real properties, a 50 percent interest in another real property, a bank account known as Exchange Bank Account 3420 that was funded with $1 million, and two promissory notes from Ed: (1) a $190,000 note secured by a property known as 505 Tropical Cliff; and (2) a $151,367.42 note secured by a property known as 538 Mendocino. Because the property division was unequal, the parties negotiated a separate agreement known as the Responsible Managing Officer Agreement (RMO). Under the RMO, Ed agreed to pay $60,000 per year plus benefits to Angelina, even though she was not required to work in order to receive the money and benefits. All of the many written drafts of the RMO contained a provision that the agreement was to be "integrated by reference into [the MSA]." The parties never signed the RMO but followed its terms until 2008 as if it had been signed. Ed paid a total of about $400,000 to Angelina under the RMO.

Ed received various real properties, a 50 percent interest in another real property, and the three companies—Nessco, Nessinger, Inc., and Nessinger Properties LLC. The parties waived spousal support. Ed raised most of the $1 million for Angelina's Exchange Bank Account 3420 and the $341,307 in promissory note monies by refinancing or liquidating community properties, both before and after the MSA was executed.

Angelina spent most of the $1 million from Exchange Account 3420 on investments and to purchase and remodel a home. In November 2005, she spent approximately $127,000 towards a property known as the Village Side property. In March 2006, she made a down payment of approximately $200,000 towards the purchase of a home known as the Millbrook property, and spent an additional $125,000 to $150,000 remodeling the home. In October 2006, she invested $100,000 into a commercial project at 150/170 Professional Center in Rohnert Park.

In March 2007, Angelina made an $800,000 loan—the Christopherson Note—to real estate developer Keith Christopherson. Christopherson was an important client of the community businesses during the marriage, and Angelina hoped to maintain an ongoing business relationship with him after dissolution of the marriage. By early 2007, Christopherson had fallen substantially behind on accounts payable it owed to the Nessinger companies. Ed, Angelina, and Christopherson agreed that Christopherson would use the $800,000 he borrowed from Angelina to pay down its accounts payable to the Nessingers companies.

Angelina wished to enter into this loan agreement but did not have sufficient funds remaining in Exchange Bank Account 3420 to make the loan. Ed therefore agreed to pay off his obligations to her under the promissory notes early to provide her with the necessary capital. The Christopherson Note was to be for a one-year period, at 10 percent interest, with monthly interest-only payments to Angelina of $6,666.66. The note was to be secured by four homes that Christopherson was developing at the time, and the parties agreed the loan would be paid off as the homes sold. Ed agreed to act as a guarantor of the loan and to cover the shortfall, if any, from the sales of the four properties. Angelina made the loan entirely from money Ed transferred to her under the MSA.

The transaction was executed on March 12, 2017. Eric Simon, an attorney Angelina was dating at the time, prepared the paperwork, including the note and deeds of trust and a personal guaranty for Ed to sign. Simon was supposed to record the deeds to create a security interest in the collateral, but Angelina and Simon broke up as a couple in April 2007 and Simon became severely depressed. He did not record the deeds until June 20, 2007.

Thereafter, escrow on the first two of the four properties that secured the Christopherson Note closed in July 2007, without payment to Angelina. Around the same time, Ed was driving past those two properties when he noticed people moving into them. He immediately called Angelina to see whether Christopherson had paid her back; she told him he had not. Angelina acknowledged she was not keeping track of the status of the properties, and that she first learned of the sales when Ed called her.

Christopherson told Angelina he was not going to repay her because the deeds were never recorded. Ed angrily called Christopherson's office to say that Angelina should have been paid when the houses that secured the note sold. At trial, Christopherson claimed he did not learn until December 2010 that Simon had in fact recorded the deeds before the homes sold. Angelina claimed she learned when the deeds were recorded for the first time at trial, but was impeached on this point by a letter she wrote that showed she knew as of September 19, 2007 that all of the deeds had been recorded on June 20, 2007.

Thereafter, on September 28, 2007, escrow closed on the third property that secured the Christopherson Note, with cash proceeds of approximately $160,000. Angelina did not make a demand on escrow, then signed a request for full reconveyance and an acknowledgment that Christopherson would be paid all of the proceeds from the sale. She therefore received nothing from the sale of this property.

On October 26, 2007, Angelina entered into an amended note with Christopherson in which they agreed to extend the term of the original note. By this time, Angelina knew the deeds had been recorded but she did not tell Ed, who continued to believe they had not been timely recorded. Under the amended note, Angelina released her security interest in the two properties that sold in July 2007 and substituted as collateral a property in a development in Placerville. She did not conduct due diligence on the Placerville development property, which was only in the "approval process," was never approved, and was lost to foreclosure. Angelina received nothing from that security interest, and Christopherson stopped making payments on the amended note.

On July 8, 2008, Angelina received a payment of $88,000 when the last of the four properties that originally secured the note sold. Angelina and Christopherson agreed to allocate the payment to interest instead of principal. Angelina did not pursue Christopherson for the balance due and allowed the statute of limitations to lapse on any claims against Christopherson, the title companies, or Eric Simon. Angelina was paid approximately $80,000 in interest under the original note, plus the $88,000 interest from the fourth property that secured the note, for a total of $168,000 in interest.

Angelina's Motion to Set Aside the MSA and Judgment

On June 26, 2008, Angelina filed a motion to set aside the MSA and Judgment on the grounds of "duress," "mental incapacity," and "failure to comply with disclosure requirements." She submitted a declaration stating she "was not mentally competent to make decisions in my own best interest" "[d]uring the period that the [MSA] was being discussed and drafted" because she was suffering from breast cancer and the effects of radiation and mind-altering medication. She indicated she did not fully understand what she was signing because Ed controlled the finances. She was "emotionally fragile, often confused, and was both intimidated by Ed and dependent on him to look out for me." She claimed the MSA was unfair to her, and asked that the MSA and Judgment be set aside. A hearing on Angelina's motion to set aside was scheduled for September 11, 2008.

Before the hearing, the parties' attorneys agreed the matter should be set on the court's trial calendar. They agreed to participate in mediation and also agreed Ed did not have to file an opposition to the motion. Ed's attorney, Mike Watters, had a scheduling conflict and asked Angelina's then-attorney, Patrick Grattan, to appear at the September 11, 2008 hearing and request a continuance to the trial calendar on his behalf.

The day before the hearing, the trial court, Judge Cerena Wong, issued the following tentative ruling: "The application for set aside of the [MSA] and Judgment of Dissolution is GRANTED on the grounds of Family Code §2122 that Wife signed the agreement when she was very ill, therefore under much stress and duress. She was not the person in control of the finances and did not have enough information to make an informed decision either. Her illness, her emotional distress, her lack of knowledge all combined to the stress and duress to make her intelligent, willing and voluntary agreements void."

Grattan appeared at the hearing and requested a continuance to the trial calendar. Judge Wong denied the request, noting she had already issued a tentative ruling and that Watters had failed to file an opposition or a request to be heard on the tentative ruling. Judge Wong adopted the tentative ruling and added, "[Angelina] could not enter into a knowing, willing, intelligent waiver. It's all set aside . . . So everything is back on the table, as far as the court is concerned."

Thereafter, Grattan and Watters agreed to file a stipulation vacating Judge Wong's ruling and to schedule the issue of the set aside for trial. Watters prepared a Stipulation and Order, which Grattan signed. Watters did not file the Stipulation and Order promptly because other issues between the parties arose. Grattan therefore withdrew his consent to the stipulation. The Findings and Order After Hearing granting Angelina's motion to set aside was filed on October 27, 2008.

On February 13, 2009, after mediation and voluntary settlement conferences, the parties entered into a Memorandum of Understanding (MOU). The MOU provided, among other things, that Ed and Angelina would jointly pursue potential sources of recovery on the Christopherson Note and that Ed would guaranty up to $400,000 of the funds due under the note. Ed agreed to share in the cost of litigation against Christopherson and sent Angelina $5,000 to retain an attorney for the both of them.

Within a few days of executing the MOU, Angelina met with a new attorney. Ed thought Angelina intended to hire the attorney in accordance with the MOU—i.e., to jointly pursue recovery of the Christopherson Note—but Angelina instead hired the attorney to sue Ed on the original guaranty. On June 17, 2009, the parties signed a Stipulation and Order setting aside the MOU. On June 8, 2010, Angelina filed suit against Ed on the guaranty, then dismissed it without prejudice when Ed demurred. On August 20, 2010, she filed an identical action against Ed and moved to consolidate it with the instant family law case. The trial court denied the motion but reserved jurisdiction to decide the issue at trial. While the parties were actively litigating the case and conducting extensive discovery regarding their community assets and debts, the stock market crashed, and the subsequent economic downturn dramatically changed the parties' financial circumstances.

The trial

By the time the case came to trial on September 10, 2010, the net value of the parties' assets had dropped to about $2.6 million. As a result of events that occurred during the years between the MSA and the trial, including the parties' refinance and purchase and sale of various properties and the impact of the recession, the trial court faced a challenge in unwinding matters. Judge Wong had retired, and the trial took place before a new judge, who heard the matter in over 40 court days over the course of ten months. The court noted: "After years of litigation during [a] historically poor economy, there is little left between the parties but enmity."

The parties testified regarding all issues related to property division and spousal support. In addition, Ed cross-examined Angelina regarding the statements she made in the declaration she filed with her motion to set aside the MSA and Judgment. During that portion of the testimony, Angelina admitted she was not under the influence of mind-altering drugs and did not lack the mental capacity to contract when she signed the MSA; she also acknowledged she had returned to work by October 2006, two months before she signed the MSA.

The trial court took the matter under submission on October 15, 2011. Submission was followed by a tentative decision, an amended tentative decision, two proposed statements of decision by the parties, the court's own statement of decision, a myriad of objections, extensive supplemental briefing, and supplemental rulings by the court. The court ultimately issued a 58-page final statement of decision on February 28, 2013. The court then reviewed briefing on the issue of attorney's fees and sanctions and issued a 10-page order relating to those issues on March 19, 2013. Judgment was entered on March 25, 2013.

In its Statement of Decision, the trial court first addressed the parties' credibility. It found that both parties engaged in "improper, inequitable, and generally unkind behaviors toward one another," but that it had "serious reservations about [Angelina's] credibility." The court devoted ten pages of its statement of decision to providing examples of instances in which Angelina made material misrepresentations, changed her sworn testimony, was thoroughly impeached, engaged in unfair tactics, made untenable legal arguments, misled the court, and changed her position on issues after the close of evidence, when she was no longer subject to cross-examination. As to Ed's credibility, the court stated it was concerned with his testimony regarding his current earnings and with some of his behaviors outside of court, including cyber stalking Angelina and failing to respond to her repeated requests for assurance that her health insurance would be maintained.

The trial court awarded to Ed the businesses and real properties and certain personal properties for a total of $1,058,372. The court valued the real properties as of the date of trial, and the businesses as of the date of separation.

The trial court awarded Angelina the $1 million in Exchange Bank Account 3420 and the $190,000 and $151,307 in note payoffs she had received. The court found she received the monies by way of the original MSA and should be held accountable for that money. The court also ordered Angelina to reimburse the community for $419,873 in salary she had received from under the RMO, deeming the payments to have been a "sham" community property equalizing payment under the original MSA. The court denied Angelina's request for reimbursement of her $169,115 separate property down payment for the marital residence on Lichau Road on the ground that there was no longer enough equity in the property to reimburse her. The court further found that Angelina breached her fiduciary duties in the handling of the Christopherson Note because she failed to make any attempt to recover the money. After an award of certain reimbursements to Angelina, the net value of the items awarded to her was $1,666,128. Angelina therefore owed $303,878 to Ed in equalization, which the court ordered her to pay in monthly installments of $1,772.62 per month, due and payable within twenty years. The court ordered Ed to pay spousal support of $5,000 per month for four years, for a total of $240,000.

In its attorney's fee order, the trial court found Angelina had incurred $214,023.21 in reasonable fees and costs. The court also found a disparity favoring Angelina as to need and ability to pay and ordered Ed to pay $214,023.21 to Angelina. However, the court also issued sanctions against Angelina in the same amount—$241,023.21—for taking unreasonable positions at trial and causing Ed to incur unnecessary fees and costs. The end result was that each party was responsible for his or her own attorney's fees and costs.

DISCUSSION

1. Trial Court's Method of Distributing Property

Angelina contends the trial court made a "fundamental" error when it held a trial on all issues and "retroactively treated millions of dollars in already distributed properties, years after the fact, as if it were an undivided marital estate." She asserts the court "created an accounting nightmare" by requiring the parties to trace their cash distributions and refinance proceeds, and revalue real properties years after they were originally awarded to the parties. She argues that instead, the court should have "treated the assets already divided under the MSA as an ordinary preliminary distribution" and "simply correct[ed] any imbalance in the assets awarded under the MSA."

Angelina does not cite to the part of the record in which she asked the trial court to distribute the parties' property in the way she now asserts the court should have done. She has therefore forfeited the issue for appeal. (Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308, 1336 [an objection must be both timely and specific or it is waived].) Even assuming there was no forfeiture, we conclude her contention fails on the merits.

Family Code, section 2125, provides that when ruling on a motion to set aside a judgment, the trial court may set aside either a portion of the judgment or the entire judgment. Angelina chose to seek—and obtained—a set aside of the entire MSA and Judgment on the ground that she lacked the mental capacity to enter into a contract at the time she signed the documents. She did not seek a set aside of only certain portions of the MSA that she felt were unfair, nor did she assert there were any omitted assets that should have been distributed, or that the values of certain distributed properties were inaccurate. Rather, her motion was made on the ground that she was in an "emotionally fragile" and "confused" state, and was "not able to properly assess . . . or . . . resist" any of the terms of the MSA. When she obtained the set aside, she understood that the effect of it was that "everything is back on the table," as Judge Wong said in granting the set aside, i.e., it was as if the properties had not yet been divided. Having had the entire MSA and Judgment set aside, Angelina was not entitled to seek enforcement of the portions of the MSA that were favorable to her, and have the court reconsider only the portions of the MSA that she believed were unfavorable.

All further statutory references are to the Family Code unless otherwise stated.

Angelina cites In Marriage of Brewer & Federici (2001) 93 Cal.App.4th 1334 and In re Marriage of Varner (1998) 68 Cal.App.4th 932 in support of her position that the court should have conducted a more piecemeal reallocation of assets. The cases are inapposite because they address the circumstances under which a court may grant a motion to set aside a judgment, and do not discuss the court's duties following set aside.

As noted, during the years between the set aside and the trial, the parties did not reach a settlement on any issue relating to property division or spousal support; thus, all issues were properly before the trial court at the time the matter came on for trial. The court properly fulfilled its mandate to divide the entire community estate.

2. Valuation

a. Businesses and Real Properties

Angelina contends the trial court made various valuation and characterization errors. She claims that one such error was in valuing Ed's businesses as of the date of separation while valuing the real properties held by those businesses as of the time of trial. We reject the contention.

Section 2552 provides: "[T]he court shall value the assets and liabilities as near as practicable to the time of trial, except that . . . the court for good cause shown may value all or any portion of the assets and liabilities at a date after separation and prior to trial to accomplish an equal division of the community property . . . in an equitable manner." "Case law has established that good cause generally exists for a professional practice [such as a law office] to be valued as of the date of separation." (In re Marriage of Duncan (2001) 90 Cal.App.4th 617, 625.) "This exception to trial date valuation applies because the value of such businesses, 'including goodwill, is primarily a reflection of the practitioner's services . . . and not capital assets such as desks, chairs, law books and computers. Because earnings and accumulations following separation are the spouse's separate property, it follows the community interest should be valued as of the date of separation—the cutoff date for the acquisition of community assets.' " (Id. at pp. 625-626.)

"Moreover, '[t]he rationale for the general exception to trial date valuation is not limited to small law practices. It applies with equal logic to other small businesses which rely on the skill and reputation of the spouse who operates them.' [Citation.]" (In re Marriage of Duncan, supra, 90 Cal.App.4th at p. 626.) In In re Marriage of Stevenson (1993) 20 Cal.App.4th 250, for example, a small general contracting business was properly valuated as of the date of separation because its value devolved largely from the personal skill, industry and guidance of the operating spouse, as opposed to its capital assets. "[S]ection 2552, subdivision (b) gives the trial court considerable discretion to divide the community property in order to assure an equitable settlement is reached." (In re Marriage of Duncan, supra, 90 Cal.App.4th at p. 625.)

In addition to the above principles, section 2126, which applies specifically to the division of property after a set aside, authorizes the trial court to choose other dates of valuation for equitable reasons. The statute provides: "As to assets or liabilities for which a judgment or part of a judgment is set aside, the date of valuation shall be subject to equitable considerations. The court shall equally divide the asset or liability, unless the court finds upon good cause shown that the interest of justice require an unequal division." The court's decision regarding valuation dates is reviewed for an abuse of discretion. (In re Marriage of Nelson (2006) 139 Cal.App.4th 1546, 1560.)

Here, the trial court valued the businesses as of the date of separation, presumably because they qualified as businesses falling under the exception to trial date valuation, or because the court found it was equitable to do so. Angelina does not cite to any evidence to support her purported position that the businesses did not fall under the exception to trial date valuation. As to equity, she asserts that it "defies logic and is unfair" for the court to value the real estate businesses as of the date of separation while using a trial date valuation for the real estate owned by those businesses. It appears her argument is that if the court valued the real properties as of the time of trial, it should also have valued the businesses that held those real properties as of the time of trial. We note the court essentially did this by attributing the same value to Nessinger Properties, LLC—a real estate holding company—as it did to the real properties, stating: "Nessinger Properties LLC is a holding company for Husband's real estate. There was no evidence that it has intrinsic value other than its real estate holdings and therefore its value is the sum of the equities of its properties." Finally, we note Angelina has failed to show prejudice. She does not assert—or point to anywhere in the record that supports her position—that valuing the businesses as of the date of trial would have benefited her.

We conclude the trial court also did not abuse its discretion in valuing the real properties as of the date of trial. As noted, the economic downturn caused the value of the parties' assets, primarily their real properties, to drop significantly between the time they signed the MSA in December 2006 and the trial in September 2010. Angelina asked the trial court to value the real properties as of December 2006 based on equitable principles under section 2126. She argued that Ed engaged in egregious conduct by understating the values of some of the properties in the preliminary financial disclosure documents that the parties exchanged during the first mediation with Peter Renkow in 2006. She argued this conduct constituted fraud, which justified using an alternate valuation date that was more favorable to her. She also took the position that this alleged fraudulent conduct was one of the grounds upon which Judge Wong set aside the MSA and Judgment. The court disagreed, noting that Ed's preliminary disclosure documents were not even before Judge Wong when she issued her decision. "Thus, it cannot be contended that the Motion to Set Aside, or the order granting it, was based in any way on the Preliminary Declarations of Disclosure." Ed responded that Angelina was not entitled to an alternate valuation date because she had engaged in far worse conduct and had come to the court with "unclean hands."

The trial court agreed with Ed and found that Angelina's conduct, including her "material misrepresentations to Judge Wong concerning her mental status, . . . and the basic fairness of the property division under the MSA, which have come to light during this trial and post-trial proceedings," prohibited her from seeking an alternate valuation date based on equitable principles. The court also noted that valuing the real properties as of the date of trial was fair, given that the drastic change in value of the properties occurred "solely due to market factors," and not as a result of faulty conduct on the part of either party. The court did not abuse its discretion in declining to use an alternate valuation date for the real properties.

b. Lichaud Property

Angelina contends the trial court erred in declining to reimburse her $169,115 separate property contribution toward the marital residence located on Lichaud Road (Lichau Property). We reject the contention.

As noted, the trial court found that Angelina had made a separate property contribution of $169,115 towards the Lichau Property, and that she "would be entitled to reimbursement of her separate property contribution" "[i]f there was equity in the [Lichau Property]." At the time of division, however, Lichau Property had a negative net value of approximately $210,000. The court ruled: "Based on the value of this property as found by the court, there is no equity from which Wife's contribution can be repaid. (Fam. C. § 2640(b).)"

Section 2640, subdivision (b), provides: "In the division of the community estate under this division, . . . 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 value and may not exceed the net value of the property at the time of the division." (Emphasis added.) The plain language of the statute provides that the party that makes a separate property contribution to a community property asset is entitled to reimbursement only to the extent there is net value remaining in the property at the time of the division.

Angelina does not dispute that the Lichau Property had insufficient equity from which she could have been reimbursed. She argues she is nevertheless entitled to reimbursement under In re Marriage of Walrath (1998) 17 Cal.4th 907 (Walrath). In Walrath, the husband made a separate property contribution to a community property home. (Id. at pp. 910-911.) The parties sold that home during the marriage but used the proceeds from the sale of that home to acquire a new home. (Id. at p. 911.) The parties then separated, and the second home was subject to property division. (Ibid.) The Supreme Court held the husband's right to reimbursement under section 2640 was not limited to the original home to which he made the separate property contribution, but also applied to the second home, as long as he could trace his separate property contribution to the second home. (Id. at p. 918.)

Angelina argues that Walrath supports her reimbursement claim because the evidence shows that Ed borrowed approximately $383,000 against the Lichau Property in 2007 in order to pay her as part of the $1 million he owed her under the MSA. She asserts she has therefore successfully traced the $383,000 (which included her $169,115 separate property contribution) from the Lichau Property to a new community property asset—her Exchange Bank Account 3420. Angelina's argument fails because, as she concedes, she spent the $383,000 on investments that have no current value. As noted, section 2640 allows for reimbursement only to the extent there is net value remaining in the community asset that is to be divided. Because Angelina has failed to trace her separate property contribution to a new community property asset that has sufficient equity from which she can obtain reimbursement, the trial court did not err in declining her reimbursement request.

According to Ed, Angelina spent the $383,000 on the Christopherson Note, which currently has no value. According to Angelina, she spent the $383,000 on failed real estate investments, which also have no value.

c. Colgan Property

Angelina contends the trial court erred in charging the entire mortgage debt on a community property known as the Colgan Property to the community. She asserts that following separation, while the Colgan Property was under Ed's exclusive control, the mortgage debt on the Colgan Property increased by $565,213. Ed testified at trial that he used up to $400,000 from this refinance to make payments to Angelina under the MSA, but Angelina complains that he never explained where the remaining $165,213 went. She argues that because he "provided no explanation whatsoever for the remaining $165,213 increase in mortgage debt," the court erred in charging the community with the entire $565,213 debt.

Angelina's contention fails for several reasons. First, she has not shown that she raised this issue below; she has therefore forfeited it. Second, she has not provided an adequate record for us to evaluate the issue. She does not point to any part of the record in which the remaining $165,213 was discussed, and the statement of decision contains no specific findings on any issues relating to the mortgage debt on the Colgan Property. A trial court's judgment is presumed to be correct, and it is the appellant's burden to affirmatively show error by providing an adequate record and legal argument to support her position. (Gee v. American Realty & Construction, Inc. (2002) 99 Cal.App.4th 1412, 1414, 1416; Niko v. Foreman (2006) 144 Cal.App.4th 344, 368 [one cannot simply say the trial court erred and leave it to the appellate court to figure out how].) Angelina has not done so. Finally, she has failed to show how she was prejudiced by the court's finding because she acknowledges that the $165,213 "might have been used by Ed to make other MSA payments to Angelina." In other words, she also does not know where the $165,213 went. Angelina has failed to show the court erred by charging the full mortgage debt on the Colgan Property to the community.

d. Ferdinand and Mendocino versus Millbrook and Professional Center

Angelina contends the trial court erred because it allowed Ed to benefit from the losses in value of two real properties that were awarded to him—1800 Ferdinand Court (Ferdinand) and 538 Mendocino (Mendocino)—while requiring her to bear the losses on two real property investments that were attributed to her—3192 Millbrook (Millbrook) and 150/170 Professional Center (Professional Center). We reject the contention on the ground that the court had a reasonable basis to treat these two sets of properties differently.

The trial court found that Ferdinand and Mendocino were community property assets with negative values. In light of our conclusion above that the court did not err in valuing these properties as of the date of trial, we conclude the court properly awarded the properties to Ed at their current negative values. As for Millbrook and Professional Center, these were properties in which Angelina invested using the $1 million she received under the original MSA. Although we empathize that Angelina lost the $1 million on failed investments, the fact of the matter is that she received the money as her share of the community property; thus, the court properly held her accountable for the $1 million she received.

To the extent Angelina disagrees with the values that were given to these real properties, we conclude she forfeited the issue. Angelina maintained below that the real properties should be valued as of December 2006, and declined to present any evidence of the current values of the properties. The trial court stated: "Wife has acknowledged that as a matter of trial strategy, she did not introduce evidence of community real properties . . . as of the time of trial. Accordingly, the court based the values of the real property . . . on the evidence introduced by Husband."

To the extent Angelina is arguing that Millbrook and Professional Center should have been divided as part of the community estate, we conclude she forfeited the issue by not raising it below. In any event, unlike Ferdinand and Mendocino, it is questionable whether Millbrook and Professional Center even existed as assets that could be divided at the time of trial, as Angelina had sold Millbrook at a loss in 2008, and had already lost her investment in Professional Center. The trial court had reasonable grounds on which to treat these two sets of properties differently, and did not err in doing so.

e. Christopherson Note

Angelina contends the trial court erred in attributing the entire loss on the Christopherson Note to her. We disagree.

Section 721, subdivision (b), states in part: "[I]n transactions between themselves, spouses are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided [by the Corporations Code]." Section 1100 further delineates the scope of a managing spouse's accountability and not only prohibits a spouse from disposing of a community property asset for less than fair and reasonable value, but also requires the spouse to act as a fiduciary toward the other in the management of community assets "in accordance with the general rules governing fiduciary relationships . . . as specified in Section 721, until such time as the assets and liabilities have been divided by the parties or by a court." (Italics added; see also § 2100 [fiduciary obligations bind spouses after separation until final distribution of assets].)

Here, the trial court found that after the MSA and Judgment were set aside in 2008, Angelina made no efforts to recover the $800,000 from Christopherson and instead hired an attorney to sue Ed on the guaranty. The court found that Angelina's "intentional conduct in allowing the statute of limitations on her legal claims against Eric Simon, the Title Company, Christopherson, and any other parties potentially liable on the Christopherson Note/Amended Note to lapse, despite Husband's offer to share the litigation costs in trying to recover on the Christopherson Note from those actually responsible for the default, was a breach of fiduciary duties Wife owed to Husband and to the community . . . ." The court further found that Angelina "has sought to maximize the recovery under the Guaranty and to retain all of the funds recovered as her separate property, to the detriment of the community, and to the even greater detriment of Husband. Wife has intentionally and in bad faith attempted to delay recovery of the Christopherson Note as long as possible in order to increase the amount of interest due and to retain all of the proceeds, to the exclusion of the community." "As a result, Wife is charged with receipt of the funds used to make the Christopherson loan," and "[t]he loss on the note is allocated to Wife." The court awarded the note to Ed at zero value, and also assigned the guaranty to him, "as it is the separate debt of Husband." The court further ordered: "Husband will be ordered to reimburse the community in the amount of $60,000 under the Guaranty as part of the judgment in this matter, that amount being the likely shortfall to the holder of the Christopherson Note/Amended Note, if the payments had been made out of all four escrows as intended, including interest at ten percent." Finally, the court found: "Husband in no way took unfair advantage of Wife in this transaction. In fact, he tried to get Wife involved in a good deal—and did."

We conclude the trial court's ruling was well-reasoned and that there was sufficient evidence to support its factual findings. Angelina asserts it was unfair for the court to attribute the entire loss to her, but fails to point to any evidence challenging the finding that she acted in bad faith. She argues there was insufficient evidence to support the court's finding that the $800,000 would have been recoverable in full, but fails to cite to any evidence in the record other than pointing out for the first time to this court that Ed's calculations on which the court relied contained some inaccurate figures. In determining the sufficiency of the evidence to support a judgment, a reviewing court does not reweigh the evidence. Instead, it must resolve all conflicts in favor of the prevailing party and view the evidence in the light most favorable to that party. (Hasson v. Ford Motor Co. (1982) 32 Cal.3d 388, 398.) We conclude Angelina has failed to show the court's decision was in error.

Angelina also raises a new argument on appeal—that the community should have had no reasonable expectation of collecting on the Christopherson Note because her loan was made to Christopherson Homes, Inc., while commissions were paid to Christopherson Homes Realty, Inc. She has filed a request for judicial notice of records from the California Secretary of State to show that Christopherson Homes, Inc., and Christoperson Homes Realty, Inc., were two separate entities. Because Angelina did not raise this argument below, the trial court never evaluated this evidence. We therefore decline to address the argument or take judicial notice of the records. (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 482 [a reviewing court will not take judicial notice of records that were not presented to the trial court or are not relevant to the appeal].)

3. Res Judicata

Angelina contends the trial court violated the doctrine of res judicata by reconsidering Judge Wong's prior rulings. She argues that by allowing Ed's attorney to cross-examine her regarding the declaration she filed in support of her motion to set aside the MSA and Judgment, the court was essentially "second-guessing the merits of the set aside" that Judge Wong had already resolved. Angelina fails to cite to any part of the record that shows she objected to this line of questioning on res judicata grounds. She has therefore forfeited the issue. Even assuming there was no forfeiture, we conclude her contention fails on the merits.

"Res judicata" describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion, "precludes relitigation of issues argued and decided in prior proceedings." (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341.) "Under the doctrine of res judicata, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a judgment for the defendant serves as a bar to further litigation of the same cause of action." (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 897-898.)

Here, the record shows the trial court allowed Ed to cross-examine Angelina regarding the statements she made in her declaration not because it was "second-guessing" Judge Wong's ruling setting aside the MSA and Judgment, but because it was relevant to the issue of Angelina's request for an alternate valuation date based on equitable grounds. The court stated in its statement of decision: "Wife has asked the court to set an alternate valuation date in this case based on equitable considerations. (Fam. C. § 2126.) Accordingly, the court will review her credibility first."

The trial court went on to discuss Angelina's credibility issues, including "[her] material misrepresentations to Judge Wong concerning her mental status, her capacity to contract, and the basic fairness of the property division under the MSA, which have come light during this trial and post-trial proceedings, [and] relate directly to her request to value the property based upon the set aside of the [MSA] in this case. Wife claims that the court is precluded from considering her wrongful conduct because that would amount [to] reconsideration of the set-aside order. As the court has repeatedly stated: Judge Wong's decision is the law of the case. This court is not reconsidering the decision setting aside the 2006 MSA and Judgment. In ruling on Wife's request for an alternate valuation date pursuant to Family Code § 2126, this court was deciding an entirely different issue, which was not before Judge Wong and it had the benefit of extensive evidence received over months of trial. Regardless of the extent to which Judge Wong may have considered Wife's June 26, 2006 Declaration or Memorandum of Points and Authorities in ruling on Wife's set-aside motion, the Declaration and the Memorandum were admitted into evidence and this court may consider them for any purpose." (Italics added.)

The trial court noted that Angelina's "admissions that she was not under the influence of mind-altering drugs when she signed the MSA and did not lack the mental capacity to contract at that time, as well as her belated acknowledgment that the MSA was not unfair to her, and her admitted concealment of her long-term relationship with Eric Simon during the relevant time period [of when she signed the MSA], are all facts that the court can, may, and should consider in reaching its determination whether equitable considerations support Wife's request for a December 2006 valuation date, rather than the time of trial."

Credibility of a witness is always an issue at trial, and prior inconsistent statements and admissions are admissible for impeachment purposes. (Evid. Code, § 780, subd. (g).) In this case, there was even more reason for the trial court to evaluate Angelina's conduct because of her request to use an alternate valuation date based on equitable grounds. Judge Wong's ruling setting aside the MSA and Judgment did not immunize Angelina from cross-examination regarding representations she had previously made under oath. The court therefore did not violate the doctrine of res judicata by using Angelina's declaration—and her subsequent admission that she had been untruthful in that declaration—in evaluating Angelina's credibility as a witness and in balancing the equities between the parties.

4. Declarations of Disclosure and Mediation Privilege

Angelina contends the trial court erred in applying the mediation privilege to exclude evidence of Ed's preliminary declaration of disclosure into evidence. We conclude the court erred but that Angelina has failed to show prejudice.

As noted, Angelina asserted below that Ed understated the values of certain real properties in the preliminary disclosure documents the mediator prepared. Ed offered to waive the mediation privilege but Angelina declined to do so. She also asserted the mediation privilege whenever Ed attempted to cross-examine her regarding the property values. The trial court ruled that Ed's disclosure documents were prepared by the mediator during the course of mediation and were therefore confidential. The court noted that while Angelina was entitled to assert the mediation privilege, her refusal to waive confidentiality prevented Ed and/or the mediator from providing an explanation as to the documents prepared during mediation. Accordingly, the court excluded Ed's disclosure documents from evidence.

Mediation confidentiality statutes are strictly construed and broadly applied. (Wimsatt v. Sup.Ct. (2007) 152 Cal.App.4th 137, 155.) Statutory interpretation is reviewed de novo. (Ailanto Properties, Inc. v. City of Half Moon Bay (2006) 142 Cal.App.4th 572, 582.) In Lappe v. Superior Court (2014) 232 Cal.App.4th 774, 787, the court held that mediation confidentiality statutes do not apply to divorce declarations of disclosure "because they are prepared and exchanged to comply with the Family Code's mandate, regardless of whether the parties chose to mediate." Similarly, here, the parties would have prepared financial disclosure documents regardless of whether they engaged in mediation. Thus, the mediation privilege did not apply to the disclosure documents.

As the appellant, however, Angelina has the burden of demonstrating both that the evidence at issue was erroneously admitted, and that the error was prejudicial. (Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1122.) "Evidentiary rulings will be deemed harmless if the record demonstrates the judgment was supported by the rest of the evidence properly admitted." (Ibid.) Here, Angelina has failed to show prejudice.

Angelina asserts the trial court's ruling led to the exclusion of testimony and analysis by her expert who would have proved the MSA gave Ed more than an equal division of the original estate. Unequal division, however, is not a reason to set aside an MSA, (§ 2123), and there is no law requiring the parties to divide their property equally. (Mejia v. Reed (2003) 31 Cal.4th 657, 666.) Moreover, because Angelina had already sought—and obtained—a full set aside of the original MSA and Judgment, a showing that she had received less than half of the estate would not have been relevant to the issues before the court.

At most, admission of the evidence could have placed Ed's credibility into question. The evidence showed, however, that the disclosure documents were prepared by the mediator, not by Ed. Moreover, because Angelina asserted the mediation privilege, Ed and the mediator were unable to explain why the real estate values were listed as they were in the preliminary disclosure documents. Thus, even if the admission of the disclosure documents had shown that some of the listed values were undervalued, this fact likely would have had little significance in light of the fact that the documents were not even prepared by Ed, and the fact that trial court would not have had the benefit of hearing Ed's or the mediator's explanation regarding the listed values. We also observe that the equities in this case were balanced heavily against Angelina based on her egregious conduct throughout the years of litigation and at trial. Thus, a finding that Ed understated the values of some of the real properties in 2006 would not have had a significant effect on the court's consideration of the equities in this case. We conclude Angelina has not met her burden of showing prejudice.

Ed also points out that Angelina's preliminary disclosure documents, also prepared by the mediator, were identical to his in every respect.

5. Attorney's Fees and Sanctions

Angelina contends the trial court abused its discretion in issuing sanctions against her under section 271. We disagree.

Section 271, subdivision (a), provides: "Notwithstanding any other provision of this code, the court may base an award of attorney's fees and costs on the extent to which the conduct of each 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. An award of attorney's fees and costs pursuant to this section is in the nature of a sanction. In making an award pursuant to this section, the court shall take into consideration all evidence concerning the parties' incomes, assets, and liabilities. The court shall not impose a sanction pursuant to this section that imposes an unreasonable financial burden on the party against whom the sanction is imposed. In order to obtain an award under this section, the party requesting an award of attorney's fees and costs is not required to demonstrate any financial need for the award." The statute vests family courts with discretion to enforce the public policy of promoting settlement, while reducing costs through mutual cooperation. (In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 827-828.) An award of attorney's fees and costs under section 271 is reviewed for abuse of discretion. (Parker v. Harbert (2012) 212 Cal.App.4th 1172, 1177.)

As thoroughly set forth above, there was ample evidence from which the trial court could reasonably determine that Angelina unnecessarily prolonged the litigation and increased attorney's fees and costs. The court detailed its concerns about Angelina's conduct in its statement of decision including, among other things, her prior inconsistent statements, omission of critical facts, unfair litigation tactics, and breach of fiduciary duties. In the portion of her appellate briefs addressing the sanctions award, Angelina does not challenge any of the specific findings that were made against her. Instead, she simply states that "in light of the destitution the court has left [her] in," the court should not have issued "a net [attorney's fee] award of $0" to her. In light of the overwhelming evidence of conduct on the part of Angelina that caused the parties to incur unnecessary attorney's fees and costs, we conclude the court did not abuse its discretion in issuing sanctions against Angelina.

6. Ed's Appeal Spousal Support

Ed contends the trial court abused its discretion in awarding spousal support to Angelina in the amount of $5,000 per month for four years, for a total of $240,000. We conclude there was no abuse of discretion.

In making an award of spousal support, the trial court must consider 14 factors listed in section 4320. "The trial court has broad discretion balancing and determining the appropriate weight to be given to each factor, ' "with the goal of accomplishing substantial justice for the parties in the case before it." ' [Citation.]" (In re Marriage of Schleich (2017) 8 Cal.App.5th 267, 288.) We review spousal support orders under the deferential abuse of discretion standard. (In re Marriage of Blazer (2009) 176 Cal.App.4th 1438, 1443.) " '[W]e do not substitute our judgment for that of the trial court, and we will disturb the trial court's decision only if no judge could have reasonably made the challenged decision." (In re Marriage of Williamson (2014) 226 Cal.App.4th 1303, 1312.)

The 14 factors are: (1) The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage; (2) The extent to which the supported party contributed to the attainment of an education, training, a career position, or a license by the supporting party; (3) The ability of the supporting party to pay spousal support, taking into account the supporting party's earning capacity, earned and unearned income, assets, and standard of living; (4) The needs of each party based on the standard of living established during the marriage; (5) The obligations and assets, including the separate property, of each party; (6) The duration of the marriage; (7) The ability of the supported party to engage in gainful employment without unduly interfering with the interests of dependent children in the custody of the party; (8) The age and health of the parties; (9) Documented evidence, including a plea of nolo contendere, of any history of domestic violence between the parties or perpetrated by either party against either party's child, including consideration of any history of violence against the supporting party by the supported party; (10) The immediate and specific tax consequences to each party; (11) The balance of the hardships to each party; (12) The goal that the supported party shall be self-supporting within a reasonable period of time (which is generally defined as one-half of the length of the marriage unless it is a long term marriage of over ten years); (13) The criminal conviction of an abusive spouse; (14) Any other factors the court determines are just and equitable.

Ed challenges the trial court's decision on the ground that it allows Angelina to benefit from "her own inexplicable failure to become self-supporting." He points out that Angelina is highly educated and has an "impressive resume." He also notes that the six years that passed between the parties' date of separation and the date of entry of final judgment should have been sufficient time for her to become self-supporting, and that she was not entitled to an additional four years of support. Noting that Angelina received ample assets under the MSA—including $2.6 million in cash, $95,000 in disability benefits, and $6,666 per month under the Christopherson Note—Ed argues that Angelina's claimed "need" was caused by her excessive spending, and that he should not be required to pay for it. Finally, he claims the presumption of decreased need for support applied because Angelina was cohabiting with a partner.

The record shows the trial court evaluated each of the 14 factors under section 4320 in great detail in reaching its decision. We observe that its evaluation included an adequate discussion of all of the factors about which Ed complains. For example, the court reviewed Angelina's educational background and work history and made findings regarding her income and expenses. It also found there were concerns with Ed's credibility as it related to his current income, and found he was earning significantly more than Angelina was. The court also considered the fact that Angelina was living with a partner and took note of her prior testimony that the person with whom she cohabitates pays for half of the household expenses. The court further found that regardless of whether Angelina's current financial status was caused by improvident spending on her part, the balance of hardships tipped in her favor, as she had lost virtually all of the assets that had been distributed to her, and she had "suffered a dramatic reduction in her standard of living, while dealing with very serious health problems."

In addition to evaluating the above factors, the trial court considered the parties' "upper class standard of living during the marriage," the parties' respective obligations and assets, the duration of the marriage, and the age and health of the parties. The court found that while there was no evidence of domestic violence during the marriage, there was substantial evidence that Ed cyber-stalked Angelina by monitoring her financial transactions on the internet. The court also found Ed engaged in certain intimidation tactics—such as in the way he handled the health insurance issues—that caused Angelina great anxiety and stress. Taken together, all of the factors supported the court's spousal support award. There was no abuse of discretion.

DISPOSITION

The judgment is affirmed. The parties shall bear their own costs on appeal.

/s/_________

McGuiness, Acting P.J. We concur: /s/_________
Siggins, J. /s/_________
Jenkins, J.

Retired Presiding Justice of the Court of Appeal, First Appellate District, Division Three, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------


Summaries of

Nessinger v. Nessinger (In re Marriage of Nessinger)

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE
Feb 23, 2018
A138764 (Cal. Ct. App. Feb. 23, 2018)
Case details for

Nessinger v. Nessinger (In re Marriage of Nessinger)

Case Details

Full title:In re the Marriage of EDWARD J. and ANGELINA L. NESSINGER. EDWARD J…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION THREE

Date published: Feb 23, 2018

Citations

A138764 (Cal. Ct. App. Feb. 23, 2018)