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In re Marriage of Corona

April 7, 2009

IN RE THE MARRIAGE OF RICHARD D. AND CLAIRE L. CORONA.
RICHARD D. CORONA, APPELLANT,
v.
CLAIRE L. CORONA, RESPONDENT.



APPEAL from postjudgment orders of the Superior Court of San Diego County, Lisa Foster, Judge. Affirmed in part and dismissed in part. (Super. Ct. No. D378014).

The opinion of the court was delivered by: O'rourke, J.

CERTIFIED FOR PUBLICATION

Richard Corona appeals from postjudgment orders (1) confirming an arbitration award providing his former spouse Claire Corona*fn1 with certain distributions and sales proceeds from a formerly community property asset; (2) ordering him to pay $36,208 plus interest as his share of Claire's 2005 federal and state income tax obligation; and (3) imposing $5,000 in sanctions for taking an unreasonable position in connection with Claire's request for unpaid support in the form of specified housing costs. With respect to the order confirming arbitration, Richard contends the arbitrator impermissibly modified the parties' final judgment in their dissolution action and thus exceeded his authority by, inter alia, forcing a liquidation of Claire's interest in a general partnership in lieu of continued spousal support. Richard further contends the court erred by requiring him to pay an unnecessary and excess amount of Claire's 2005 tax liability due to her chosen tax filing status. Finally, Richard contends the court abused its discretion by ordering him to pay sanctions.

We grant Claire's motion to dismiss Richard's appeal from the family court's order confirming the arbitration award because the order is interlocutory. Otherwise, we affirm the trial court's orders.

FACTUAL AND PROCEDURAL BACKGROUND

In 1998, in connection with the dissolution of their marriage, Richard and Claire entered into a marital settlement agreement (MSA), which was incorporated into a supplemental judgment. Among other things, the MSA addressed the parties' 90 percent community interest in an office complex known as Mission Grove Properties (the Mission property), awarding Richard a separate interest of 67.5 percent and Claire a separate interest of 22.5 percent to be held as tenants in common. The MSA also sets out Richard's spousal support obligations, which "shall terminate upon the death of Husband or the death of Wife, whichever occurs first, but shall not terminate upon Wife's remarriage."

Under the MSA, Richard is required to pay Claire $8,500 per month for support and maintenance commencing September 1, 1995, through and until December 31, 2006. Additionally, the MSA obligates Richard to pay a portion of Claire's income taxes: he "shall pay a sum equal to one-half (1/2) of Wife's federal and state income tax obligation directly attributable to Wife's receipt of spousal support paid by Husband in the tax years 1996 through 2006, such income tax payable either to Wife or on behalf of Wife, at Husband's election, which shall be as and for non-taxable/non-deductible spousal support."

The MSA addresses Claire's support after December 31, 2006, as follows: "Commencing January 1, 2007, and continuing each month thereafter, Husband shall only pay support and maintenance to Wife in a sum as is necessary, if at all, to assure that Wife's monthly income, including that which Wife derives from her twenty-two and one-half percent (22.5 %) interest in Mission Grove Properties . . ., at least equals the sum of $5,000 plus Wife's housing costs for the Renaissance Residence [Claire's condominium] as those housing costs are hereinabove defined."*fn2 Claire's "housing costs" were defined in the MSA as "mortgage principal, mortgage interest, property taxes, and homeowner's fees on the Renaissance Residence." With respect to the provision for support after December 2006, the MSA states such support "is based upon the fact that Wife will have no financial responsibility for the children of the parties, who will be well beyond minority and upon the fact that this Section provides for the continuity of spousal support payable to Wife irrespective of her remarriage."

A. The Arbitration

Disputes arose between the parties, and in 2002 they agreed to submit various issues to binding arbitration before an identified arbitrator. That arbitrator was replaced in November 2005 and following hearings, the arbitrator in May 2007 issued an interim arbitration award relating to Claire's entitlement to distributions or proceeds from a 1999 refinance and 2004 sale of the Mission property. The arbitrator declined to award Claire a conveyance of title to the Mission property. However, he found she was entitled to a 25 percent share of net distributions made to Richard or for his benefit from the 1999 refinancing. As to that award, the arbitrator stated, "The amount, if any, to be distributed to [Claire] would have to be based upon an accounting, which was not stipulated to be before the undersigned." The arbitrator further determined that if distributions from the 1999 refinancing were made to Richard, Claire was entitled to a distribution equaling 25 percent of Richard's original 90 percent interest in the net sale proceeds of the Mission property. The arbitrator concluded that by stipulation and consent, Claire's distribution from the net sale proceeds would terminate her spousal support derived from the net rental income provision in the MSA. The arbitrator again stated that the amount of such proceeds would have to be based on a later accounting that he was not authorized to conduct.

Claire thereafter petitioned to confirm and enter judgment on the interim arbitration award. Richard responded by claiming the arbitrator had exceeded his power and that the award constituted a material modification of the MSA and final judgment of dissolution. He argued the MSA's express terms prevented the arbitrator from implying new, material terms liquidating Claire's interest in the Mission property partnership or awarding her distributions generated in 1999, because the MSA stated she would not receive distributions from that property until 2007. According to Richard, the award undermined the MSA by modifying its spousal support provisions and liquidating Claire's interest as of 2004 without terminating (or crediting) support paid by Richard after that time. Richard asked the court to deny Claire's petition and vacate the award.

In August 2007, the arbitrator issued a final award addressing the bifurcated issue of attorney fees and costs. Claire thereafter filed an amended petition to confirm the final award as well as a motion for an accounting to establish the amount of the arbitrator's award and for an order that Richard pay certain income taxes, arrears and sanctions that were the subject of a prior court ruling (discussed post).

B. Orders to Show Cause re Claire's 2005 Income Taxes and Housing Costs

While the arbitration proceedings were pending, Claire in April 2006 filed an order to show cause asking the trial court to determine Richard's share of her 2005 income tax liability and appoint a special master to make a recommendation on other "extras" assertedly due her under the MSA, including payments for her telephone long distance bills and automobile insurance. Claire maintained her 2005 income tax liability was more complex than in prior years because she had been awarded arrears and interest by the arbitrator, and she presented a letter from her accountant, James Helfand, explaining that she had incurred $80,094 in tax liability, of which $40,047 was Richard's share. Richard opposed the motion, asserting that Claire's claim was based on an unfiled tax return as well as hearsay statements, unqualified legal opinions, and incompetent conclusions from Helfand. In part, he argued he was entitled to the full benefit of Claire's Schedule A itemized deductions (Form 1040, Schedule A) in calculating his portion of her tax liability. In an accompanying declaration, Richard averred that Claire had asked him to effectively pay taxes on substantial nonspousal support income; that his calculation of taxes owed on "basic spousal support income" was $12,935.50, which he had paid to Claire by a check for $8,734.22 and application of $4,201.28 in debt he claimed Claire owed to him. Claire responded in part with objections to Richard's declaration. She argued she was entitled to $40,047 from Richard for her 2005 income tax liability based on the unambiguous terms of their integrated MSA, which was drafted by Richard, then a practicing attorney.

In May 2006, the family court judge (the Hon. Thomas Hendrix) appointed a special master, set the matter of Claire's 2005 income taxes for an evidentiary hearing, and ordered Richard to pay an approximate disputed amount into an interest bearing trust account. Thereafter, in August 2006, Claire filed an order to show cause requesting an order that Richard pay interest on his unpaid portion of her 2005 income tax obligation. She submitted another declaration from accountant Helfand who set forth his criticisms of Richard's calculation of Claire's 2005 income tax liability, as well as her own declaration stating she had not overpaid her 2005 income taxes.

Following the parties' evidentiary hearing with the special master, Richard filed supplemental points and authorities challenging Claire's calculation of her 2005 tax liability under her chosen tax filing status ("married filing separately"), arguing that her filing status unnecessarily and substantially increased her tax obligation. He maintained Claire had a duty to mitigate and minimize her tax liability under the covenant of good faith and fair dealing and the express terms of the MSA; that the amount she could recover from him was limited to that which a reasonable person under the same circumstances would have incurred. Richard asked the court to adopt his methodology that would calculate her 2005 income tax liability to be $16,280 under a "married, filing jointly" status.

At about the same time Richard raised the issue of Claire's tax filing status, Claire moved to establish support arrears owed to her in the amount of $1,977, which she asserted represented one-half of her actual housing costs. She argued the MSA required Richard to pay her the greater of 25 percent of the net rental income from the Mission property or the guaranteed sum of $5,000 per month plus her housing costs. Claire stated Richard had paid her only $6,977, which was $5,000 plus one-half of her housing costs, and had refused to pay the remaining housing costs on grounds her current spouse had paid that expense. She asked the family court to award her attorney fees and costs for Richard's conduct in forcing her to file the motion, as well as sanctions on grounds that as an attorney and drafter of the agreement Richard was well aware of his obligations.

On July 16, 2007, the family court judge (the Hon. Lisa Foster) considered arguments on Claire's claim as to her 2005 income taxes and motion for housing costs arrears, as well as Claire's request for an order awarding her attorney fees and sanctions in connection with her requests. Finding it could not dictate how Claire could designate her tax filing status, the court ruled that Richard's obligation under the most fair method of calculating Claire's 2005 income tax liability would be to pay one half of $72,416, which was $36,208. Applying Richard's prior payments, it found Richard was to pay an arrearage of $27,473.78 plus interest. As for Claire's housing costs, the court found Richard's arrearage to be $11,778.36, based on its view that Richard's obligation as set out in the MSA was not contingent on Claire's remarriage or on any other person paying her expenses. The family court reserved the issue of attorney fees, but found based on the MSA's plain language Richard's position and his unilateral action with respect to Claire's housing costs was unreasonable and taken in bad faith. It ordered Richard to pay $5,000 in sanctions with respect to that issue.

In November 2007, Richard filed an order to show cause asking the family court to clarify its prior orders and to determine certain credits he claimed were due him for overpaid spousal support. He stated that at the time of its ruling, the court was unaware that in 1999 Claire had refinanced her residence, increasing the principal amount of the loan by $120,000 to pay for new vehicles, and also that her new husband was paying one-half of the mortgage. He asked that his obligation be reduced by 25 percent and then halved based on Claire's actual monthly mortgage expense. Richard further argued that the order awarding $5,000 in sanctions was inappropriate because his adjustments to his obligations were based on his good faith belief about the MSA's requirements. As for the order pertaining to Claire's 2005 income taxes, Richard expressed confusion as to the court's calculation ...


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