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In Marriage of Casey O.

October 1, 2010


APPEAL from a judgment of the Superior Court of Tulare County. William Silveira, Jr., Judge. (Retired Judge of the Tulare Superior Court assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) (Super. Ct. No. VFL225027).

The opinion of the court was delivered by: Cornell, Acting P.J.



Our system of justice presumes that court orders will be obeyed. When they are not, a litigant who ignores the orders can greatly frustrate the judge and other litigants. The frustration will be even greater in a family law matter where the emotional toll is frequently beyond the control of the litigants. This will cause the parties to act in ways that do not promote the resolution of the dispute and increase the cost, thus dissipating the estate, and maybe irreparably damage the relationship of the parties with their children. That is what occurred here. The only method available to bring a case such as this under control is to equalize the abilities of the parties to litigate the dispute and impose sanctions against the party who ignores court orders. That did not occur here.

Mary Beth Tharp is the respondent in a marital dissolution proceeding filed more than three years ago by her husband, Casey O. Tharp, after 14 years of marriage and three children. Casey*fn1 was employed by and was a shareholder of his family's multimillion-dollar corporate business. Mary Beth was a homemaker. Mary Beth appeals from orders denying attorney fees and costs incurred, and to be incurred, for trial, contending the family court abused its discretion in denying an award of fees and sanctions against Casey. Mary Beth also requests that this court direct all matters in the marital dissolution proceedings be assigned to another judicial officer. We agree with Mary Beth's contentions and will reverse with directions that all matters be assigned to a different judicial officer.


Mary Beth and Casey were married on October 11, 1992. On August 27, 2007, Casey filed for dissolution of his marriage to Mary Beth. Casey was represented by attorney Robert Koligian, Jr. Casey stated in the petition that there was an antenuptial agreement signed by both parties and counsel, which confirmed that all property owned by Casey was his separate property and all income of Casey's before, during, and after the marriage was his separate property. No schedule of assets and debts was included. The petition stated the schedule of assets and debts would be filed in a timely manner. Casey asked that the parties have joint legal and physical custody of their three minor children, Brandon, Chelsea, and Hayley.

In her response Mary Beth asked that the parties have joint legal custody of the children, with Mary Beth to have physical custody. Her response stated that the nature and extent of community property assets and debts would be "discovered at a later date." Mary Beth was represented by attorney Dale R. Bruder.

On November 6, 2007, Mary Beth filed an order to show cause. She sought spousal and child support, an advance of $50,000 for attorney fees and $20,000 for a forensic accountant, and a parental assessment for purposes of determining child custody and visitation.

In her declaration in support of the order to show cause, Mary Beth provided information regarding Casey's income, the family expenses, and the expenses paid by E.M. Tharp, Inc. (hereafter the corporation). Mary Beth reported Casey's income in 2005 to be $132,534, which did not include the family expenses paid by the corporation. The corporation paid for the family cars, all expenses for those vehicles, property taxes and insurance for the family home, housekeepers and ranch hands employed at the family home, all utilities, cellular telephones, health insurance, country club dues, and credit card bills for personal credit cards used by the family.

Mary Beth also set forth the reasons she was requesting a psychological and parental assessment for purposes of determining custody and visitation. Mary Beth's moving papers alleged that Casey was a recovering alcoholic who had commenced drinking again and appeared to be abusing prescription drugs. Mary Beth also claimed that Casey had begun physically punishing the children inappropriately.

The request for fees for a forensic accountant was made because the corporation owned several subsidiary companies with combined annual sales of approximately $52 million and assets worth $40 million. Casey was employed as the corporate vice-president and was the sole heir of his parents, who held the majority of the stock in the corporation. Additionally, Casey had told Mary Beth at various times during their marriage that they had acquired at least a partial ownership interest in no less than nine companies. Mary Beth also declared that she had concerns Casey was exercising complete control over their assets, was attempting to transfer community property, and had moved the location of a community-owned business without her knowledge or consent. Mary Beth further declared that she had not signed any premarital agreement and that Casey had failed to produce any such document, despite requests from her and her counsel.

In his response to the order to show cause, Casey agreed to "guideline" spousal and child support. He also agreed to pay $1,000 worth of Mary Beth's attorney fees. He stated that a forensic accountant was unnecessary. Casey did not directly respond to statements made by Mary Beth about his personal life or his handling of the community assets. Instead, he asserted he would not dignify the "misleading allegations" with a reply, the allegations would be "totally ignored as irrelevant," and that allegations of this type were inappropriate in a case involving minor children.

On December 18, 2007, the family court made an order in which it found that Casey had been employed in the family business, earning $10,100 per month, but that the vast majority of the family's expenses were paid by the corporation and not reflected as taxable income to the parties. A temporary order of family support in the amount of $5,000 payable by Casey to Mary Beth was ordered. Mary Beth was to have physical custody of the children, with "nominal timeshare" by Casey.

In addition, Casey also was ordered to continue to pay certain expenses through his employment, as previously paid by the corporation, including utilities, phone service, homeowner's insurance and property taxes for the family home, and health insurance for Mary Beth and the children. The family court reserved jurisdiction to characterize these payments as additional income to Casey and to recalculate support in the event Casey sought to have these additional payments characterized as support. Mary Beth also was directed to use her best efforts to seek and maintain employment, with an expectation that she be employed full time by June 1, 2008. Casey was ordered to pay $2,500 to Mary Beth's attorney based on disparity of income and to pay $2,500 for an "accounting evaluation."

On January 25, 2008, Mary Beth asked the family court to designate the dissolution proceedings as "complex," pursuant to Family Code section 2032, subdivision (d).*fn2 The request was based in part on the multiple companies in which Casey and/or Mary Beth had an ownership interest. Mary Beth again requested that Casey be ordered to advance $50,000 for her attorney fees and $20,000 for a forensic accountant. Mary Beth stated that she was unemployed, had no independent financial means to pay for an attorney or accountant, and that the services of these professionals were necessary in order to prepare and represent her adequately in the case.

The family court denied the request to designate the proceedings as complex under section 2032, instead finding the case to be complex and ordering a case management plan be developed and implemented pursuant to section 2451. The family court set a case management conference, directed counsel for both parties to meet with accountants to develop a plan setting forth the scope of work to be completed by a forensic accountant, and ordered Casey to pay the sum of $20,000 to Mary Beth's attorney, reserving for the future a determination of whether that amount should be deducted from Mary Beth's share of the community property.

Robert H. Bernstein, Ph.D., was designated by the family court to prepare a custody evaluation. He submitted his report on March 21, 2008. Bernstein found Casey to be "self-absorbed," and Casey consistently "conveyed anger and contempt" for Mary Beth. Mary Beth generally was "confident, resilient and optimistic." Bernstein recommended individual and family therapy and joint custody.

At the March 28, 2008, case management conference, Mary Beth presented a discovery plan. Casey had substituted in new counsel to represent him, C.D. Harbottle, who asked for a continuance. The case management conference was continued to May 8, 2008. In April 2008, Mary Beth moved to compel Casey to respond to discovery, specifically, form interrogatories, special interrogatories, and document production, to be heard at the same time as the case management conference. Mary Beth also moved to join the corporation and The Morris A. and Carol R. Tharp Family Limited Partnership (hereafter limited partnership) as parties in the case.

On May 2, 2008, the family court judge personally selected Janet M. Hunsaker, M.A., to implement Bernstein's suggestion for individual and family therapy. At the time Hunsaker was appointed, there was no indication in the record that she had disclosed to Mary Beth or Bruder any connections to the Tharp family or the corporation prior to her appointment. The family court judge specifically stated that Hunsaker had no conflicts of interest.

At the May 8, 2008, hearing, the family court initially addressed Casey's failure to pay the $20,000 in attorney fees ordered two months earlier. Casey was informed that unless proof of payment was presented to the court, a writ of execution would be signed. The family court found that Casey had failed to answer the special interrogatories adequately and granted the motion to compel further responses to the special interrogatories, directing Casey to pay $1,500 in attorney fees to Mary Beth's counsel as a sanction. The other two motions to compel were not addressed.

Joinder of the corporation was ordered, but joinder of the limited partnership was denied without prejudice. The state and federal tax returns of the limited partnership, however, were ordered produced. The stock book and other corporate records of the corporation were ordered produced. Casey was ordered to produce within 45 days numerous documents requested by the forensic accountant, Michael Smith.

The issue of the premarital agreement and its validity was bifurcated at the request of Casey's counsel and set for trial on July 28, 2008. Casey and his counsel were ordered to produce a signed copy of the alleged agreement, and, if they could not produce a signed copy, to notify the family court and opposing counsel and remove the matter from calendar.

On May 30, 2008, the family court addressed the two motions to compel still pending, specifically, the motion to compel the production of documents and further responses to form interrogatories. Harbottle asked for a continuance of the hearing. The family court responded by stating that it previously had indicated the types of responses required and that it was "most distressed" about the case apparently moving "backward." The family court also noted that Casey had not made all the payments he had been ordered to make in the case. Harbottle opined that the orders were "kind of unheard of." The family court disagreed and stated this was now the third hearing on compelling Casey's compliance with discovery matters.

The family court ordered the appointment of a discovery referee to handle all future discovery disputes. Michael G. Karby was agreed to by the parties. The family court ordered Karby to hold a hearing on the pending motions to compel admissions and production of documents requested by Mary Beth.

Also at the May 30 hearing, Harbottle asked that all discovery be put on hold until the forensic accountant, Smith, completed his work. The family court responded by pointing out that it had rejected this same request at the May 8 hearing.

On July 22, 2008, Mary Beth filed an order to show cause seeking to have Casey held in contempt for failing to comply with the May 8 order of the family court. Casey had not produced the stock ledger or other documents required of the corporation, and he had not answered the special interrogatories as ordered.

On July 24 Mary Beth sought another order to permit her, Bruder, and her accountant to meet with Smith to discuss Smith's findings and conclusions and to obtain copies of documents relied upon by Smith. She also sought an award of attorney fees and sanctions against Casey.

On July 28, the date set for trial on the validity of the alleged premarital agreement, Casey and Harbottle did not appear. Instead, Harbottle sent a letter via facsimile to the family court stating that there was no executed premarital agreement. Bruder and Mary Beth were present for the trial.

On September 17, 2008, the family court considered the order to show cause filed on July 24. Although the family court denied the request for attorney fees and sanctions, it ordered Casey to provide to Mary Beth, at his expense, copies of all documents he had provided Smith. The family court opined that Casey "continues to labor under the impression that he may produce copies of documents to Mr. Smith without also making the same documents directly available" to Mary Beth and her counsel.

On October 7, 2008, the family court addressed the July 22 motion for contempt and Casey's failure to provide responses to discovery as previously ordered. The family court asked Casey to waive his privilege against self-incrimination to allow the discovery referee to make findings on Casey's failure to comply; Harbottle would not allow Casey to do so. The family court asked Mary Beth to dismiss her contempt action, without prejudice, in order that the discovery referee could make findings; she agreed. During the hearing, Harbottle represented that she and her client, Casey, were attempting to avoid running up attorney fees and costs over discovery issues. The family court responded that this comment by Harbottle was a "total mystery" when "you yourself are creating these kinds of obstacles."

On November 26, 2008, Mary Beth filed a motion for attorney fees, forensic accounting fees, and sanctions. A hearing was set for January 7, 2009.

In her declaration in support of the motion, Mary Beth stated the financial information revealed that Casey's monthly income was approximately $47,000 and that Casey owned about 26 percent of the corporation. Her declaration also listed additional companies in which Casey had an ownership interest, the subsidiary companies owned by the corporation, and the additional income received by Casey. She also provided details on Casey's failure to respond to discovery and to comply with court orders on discovery. Mary Beth declared that she had no separate or community source of income with which to pay attorney fees and costs, her only asset was a small 401k account, and her income was the temporary spousal support of $5,000 that had been awarded. As of July 18, 2008, Mary Beth had paid $12,770 in attorney fees from her income, separate and apart from the $22,500 the family court had ordered Casey to pay.

Bruder also provided a lengthy declaration, with time records attached, detailing the $160,154.54 in attorney fees incurred to that date by Mary Beth and noting that a contribution of $22,500 per court order had been received. Mary Beth also had incurred forensic accounting fees in the amount of $5,066, for which she had received a contribution of $2,300. Bruder's declaration also set forth the future work he felt would be reasonably necessary to prepare Mary Beth's case for trial and estimated future attorney fees and costs at $150,000. The total current and future attorney fees requested were approximately $310,000.

Bruder's declaration noted that this case had been designated as a complex case on motion by Mary Beth and that numerous motions had been filed and multiple hearings held, including (1) a request for temporary spousal support; (2) a motion for parental assessment; (3) multiple motions to compel Casey to respond to discovery; (4) the motion to join the corporation and limited partnership; (5) contested custody hearings; (6) motions to obtain access to corporate records; (7) the hearing on the premarital agreement brought by Casey; and (8) multiple meetings and hearings with the discovery referee. All the motions brought by Mary Beth had been granted in whole or in part, including all of the motions filed to compel Casey to respond to discovery.

Bruder's declaration set forth a 53-page chronological, procedural, and substantive history of the case. The declaration explained each motion and action taken in the case on Mary Beth's behalf, the reasons therefore, and the results, including the numerous rulings granting Mary Beth's many motions. Attached to the declaration were copies of the work, including the discovery requests, meet and confer letters, and briefing letters prepared at the request of the discovery referee. Bruder opined that Casey's pattern of failing to respond to discovery requests -- avoiding disclosure of basic facts, business holdings, true cash and in-kind income, and asserting that a signed premarital agreement existed and that community assets were his separate property -- unnecessarily increased the cost of litigating the case.

Mary Beth requested that Casey be sanctioned under sections 271 and 2100 et seq. for his bad faith conduct and his failure to disclose assets and debts.

On December 17, 2008, the discovery referee, Karby, filed his statement of decision and recommendations. Karby found that Mary Beth's order to show cause regarding contempt had merit in that Casey had failed to respond to discovery for over four months, after being ordered to respond. Casey did not respond until after the contempt motion was brought, and Karby recommended that Mary Beth be awarded attorney fees and costs for having to bring the motion.

Karby also found that Mary Beth's motions to compel had merit because Casey did not answer until after motions to compel were filed. Again, Karby recommended that Mary Beth be awarded attorney fees and costs and that Casey be sanctioned under Code of Civil Procedure section 2030.300, subdivision (d). Karby also found that Casey had delayed responding to discovery, without substantial justification, even after being ordered to respond. Karby recommended sanctions. Finally, Karby stated that Bruder's work had significantly aided the discovery referee in dealing with Casey's delays in responding to discovery. Karby opined that the $31,286.40 of attorney fees incurred in time spent assisting the discovery referee was time well spent and earned.

On January 21, 2009, Casey filed opposition to the motion, including his own declaration. On January 27, Casey filed a declaration correcting errors in his January 21 declaration.

Mary Beth's motion for attorney fees was heard on February 6, 2009. The family court ruled from the bench, denying the motion and declining to award any attorney fees, past or future, to Mary Beth. The family court declined to award any sanctions against Casey. The family court suggested that if Mary Beth needed additional funds for attorney fees, she could execute a lien in favor of Bruder on her share of community assets.

In its written order on the motion filed March 11, 2009, the family court stated that it was denying Mary Beth's request for attorney fees and costs based on disparity of income under section 2032, finding no basis for a further award of needs-based fees. The family court reiterated that if Mary Beth needed additional money for attorney fees and costs, she could encumber her share of community property pursuant to section 2033.

Prior to the written order being signed, Mary Beth filed a motion for reconsideration of the family court's ruling from the February 6 hearing. The motion for reconsideration asked the family court to consider four new pieces of evidence in evaluating the request: (1) Casey's newly filed schedule of assets and debts showing no equity in the family home; (2) a Key Banc credit application submitted by the corporation showing four and one-half years of financial information; (3) Casey's new income and expense declaration; and (4) declarations from the corporation's comptroller, accountant, and administrative vice-president. The declarations and income and expense statement had been served on Mary Beth at the February 6 hearing but were not considered by the family court at that time. The Key Banc application had been served late on February 5 but also was not considered previously by the court.

In her motion for reconsideration, Mary Beth pointed out that Casey and the corporation had incurred $125,491 in attorney fees and costs, with the corporation paying virtually all of the fees and costs. In contrast, Mary Beth had been awarded $22,500 in attorney fees and costs. Bruder's accompanying declaration opined that much of the fees and costs incurred by Casey and the corporation were spent in furtherance of frustrating Mary Beth's efforts to obtain financial information about the corporation and its stock ownership.

Mary Beth again pointed out that her only income was $5,000 a month in support, from which she was obligated to make a monthly $1,800 mortgage payment on the family home. The balance of $3,200 was needed for food, clothing, and school expenses for herself and the three children. She stated she had no other liquid assets or sources of income. Mary Beth also pointed out that Casey had filed a motion to cut the support payments from $5,000 to $2,082 per month and to reduce the in-kind payments made by the corporation for expenses at the family home.

Bruder's declaration pointed out that a lien against Mary Beth's share of the community property would not be enforceable until after trial and thus would not provide access to funds for payment of attorney fees and costs in order to prepare properly for trial. Additionally, Bruder noted that Casey's schedule of assets and debts listed the only real property, the family residence, as having a value of $480,000, but with encumbrances of $885,000. Consequently, there was no equity in the real property that could be used as future payment.

Casey opposed the motion for reconsideration, stating that the real value of the family home was closer to $800,000, according to a local real estate appraiser. Mary Beth submitted a reply to the opposition.

At the March 11, 2009, hearing on the motion for reconsideration, the family court denied the motion. In denying the motion, the family court stated that taking "all of your argument at face value and your billing sheets, that the request for fees is grossly excessive."

The family court's written ruling on the motion for reconsideration made 32 findings that placed much of the blame for the protracted litigation on Mary Beth, including that she had made excessive discovery requests. The family court also found that Mary Beth had not found employment as she had been directed. The family court stated that it had no assurances that Mary Beth's counsel would remain in the case as he had already attempted on two occasions to be relieved as counsel. The ruling stated that Mary Beth had means with which to pay the attorney fees, specifically, from her $5,000 monthly support or by executing a lien against her share of the community property. Mary Beth had given Bruder such a lien. The family court, however, ordered it expunged.

The family court, at finding number 31, stated:

"The court finds it is not the obligation of the court to ferret out and determine, based on the billing statements of [Mary Beth's] attorney, which fees were fair and which were unfair. The court finds such fees, taken as a whole, to be 'grossly excessive.'"

On March 26, 2009, Mary Beth filed a third and final motion seeking to secure an award of attorney fees. This time, Mary Beth requested an award of $180,977.86, a reduction from the previous request. This amount included projected attorney fees and costs of $23,300, assuming Casey would be compliant and cooperative with all future discovery, and a request for past fees and costs of $157,677.86.

Mary Beth's third motion again pointed out that (1) she had been a homemaker for over eight years prior to separation; (2) she had no income other than the temporary support; (3) her only asset was a 401k in the amount of about $30,000; (4) she had returned to school to obtain a pharmacy technician degree and become self-supporting, as previously ordered by the court; and (5) her monthly expenses for herself and her children exceeded $5,900.

Casey filed an opposition to the third motion for attorney fees, attacking the reasonableness of the requested fees. Mary Beth filed a reply to the opposition, including an additional detailed declaration from Bruder. Bruder's declaration included a history of the discovery disputes, a summary of the discovery referee's findings and recommendations, and a reply to the attack on the reasonableness of the fees incurred. On April 13, 2009, the day of the hearing on the third motion for attorney fees, Casey filed a motion to strike the reply documents filed by Mary Beth.

In its ruling on this third motion, the family court was critical of Bruder's efforts to determine the value of the corporation and Casey's financial holdings, finding that Mary Beth engaged in "pro-longed and protracted discovery efforts regarding issues which are far removed from the facts before the court." The family court denied the request for an award of attorney fees and costs previously incurred, again stating the fees and costs "are grossly excessive and unreasonable."

This time, however, the family court did make an award of future attorney fees to cover the costs through trial, including pending custody matters. The award was for $20,000, but was payable upon the conclusion of trial and was subject to a request by Casey to charge ...

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