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In Re Marriage of Marci and Gary Fong. v. Gary Fong

March 3, 2011

IN RE MARRIAGE OF MARCI AND GARY FONG. MARCI KINGTON, RESPONDENT,
v.
GARY FONG, APPELLANT.



APPEAL from an order of the Superior Court of Los Angeles County, Glenda Veasey, Temporary Judge. Los Angeles County Super. Ct. No. YD042895

The opinion of the court was delivered by: Croskey, J.

CERTIFIED FOR PUBLICATION

(Pursuant to Cal. Const., art. VI, § 21.) Affirmed in part and reversed in part.

Gary Fong appeals an order imposing $200,000 in monetary sanctions against him under Family Code section 2107, subdivision (c)*fn1 for failure to comply with his disclosure obligations and imposing an additional $100,000 in attorney fees and costs under section 271. He contends Marci Kingston is not entitled to an award of monetary sanctions under section 2107, subdivision (c) as a matter of law because she failed to comply with her disclosure obligations. He also contends the trial court failed to consider his ability to pay in awarding attorney fees and costs under section 271, challenges the awards on other grounds, and also contends the failure to issue a statement of decision was reversible error.

We conclude that Marci is not entitled to an award of monetary sanctions under section 2107, subdivision (c) because the statute only authorizes an award in favor of a "complying party," and Marci was not a complying party at the time of her motion because she had failed to comply with her own disclosure obligations. We also conclude that Gary has shown no error in the award of attorney fees and costs under section 271 and that no statement of decision was required. We therefore will affirm the order in part and reverse it in part.

FACTUAL AND PROCEDURAL BACKGROUND

Gary and Marci separated in March 2002 after five years of marriage. They had no children together.

Marci filed a petition in May 2002 to dissolve the marriage and divide the community property. She did not attempt to list the community property or serve a preliminary declaration of disclosure (§ 2104) at that time, but instead stated that the community's assets and obligations would be determined at the time of trial. Marci served her preliminary declaration of disclosure three years later, on June 1, 2005. Gary filed his response to the petition on June 7, 2005, and served his preliminary declaration of disclosure on June 25, 2005.

Marci, through her counsel, made a written settlement offer to Gary, through his counsel, in December 2005. Gary did not respond. Marci made another written settlement offer in June 2008. Again, Gary failed to respond.

The trial court entered a judgment of dissolution in January 2006, reserving jurisdiction over all other issues. The judgment prohibited the parties from encumbering or transferring any real or personal property, acquired during the marriage and before the separation, in which the community may have an interest without the prior written permission of the other party, excepting only "items of nominal value in the usual course of business or items of a personal nature that would not be considered an asset with a value in excess of $500.00."

Marci commenced a proceeding in British Columbia, Canada for spousal support and property division in February 2007. She filed a certificate of pending litigation stating that she claimed an interest in several parcels of real property in Canada.

Marci filed a motion in this proceeding in February 2007, seeking (1) a division of the proceeds from the sale of stock; (2) an accounting of rents; (3) an accounting of the proceeds from the refinancing of real property; (4) monetary and non-monetary sanctions for the misuse of discovery; (5) a stay of further discovery by Gary until he fully complied with all discovery orders; (6) an order prohibiting Gary from encumbering or transferring any real or personal property without her written permission or a court order; (7) an order requiring Gary to sign forms authorizing the release of records by the Canadian banks; and (8) awards of $50,000 in attorney fees and $50,000 in accountant fees. Gary agreed to sign the authorization forms but otherwise opposed the motion.

The trial court filed an order ruling on the motion on March 21, 2007, bifurcating for trial the issue of the characterization of stock; ordering Gary to provide an accounting of rents, including the disposition of those funds; ordering Gary to provide an accounting of all refinancing proceeds on any real property that he owned since the date of marriage; staying any discovery by Gary until he fully complied with all outstanding discovery requests by Marci; prohibiting Gary from encumbering or transferring any real or personal property, except in the usual course of business or for the necessities of life; ordering Gary to sign a form authorizing the release of records by the Canadian banks, subject to a protective order to be agreed to by the parties; and awarding Marci a total of $100,000 in attorney fees and accountant fees, subject to any future reallocation. The court continued the hearing on the requested discovery sanctions.

Gary retained new counsel in April 2007 and filed a motion for reconsideration of the order of March 21, 2007. He stated that he was in the business of real estate investment and that he had recently sold two properties in Canada that he believed were his separate property. He requested that the order be amended to clarify that he was permitted to buy and sell property in the ordinary course of business. Marci opposed the motion. The trial court denied the motion for reconsideration in May 2007. The court also ruled on the motion for discovery sanctions at that time, awarding Marci $5,000 and denying her request for non-monetary sanctions.

The bifurcated trial on the issue of stock characterization was continued to September 2007 and then taken off calendar. The court later scheduled a trial on the issue of the characterization of three parcels of real property in Canada. The trial on that issue eventually was scheduled to commence on April 21, 2008. Gary served his final declaration of disclosure and income and expense declaration on April 17, 2008.

Gary moved in October 2007 for permission to sell the real property in Canada. Marci opposed the motion. The trial court denied the motion in November 2007.

A bifurcated trial was conducted in April 2008 on the characterization of the real property in Canada. The trial court concluded in its statement of decision that the three parcels of real property in Canada were community assets and that the debt on the properties was community debt. A bifurcated trial on another issue involving the characterization and value of shares of stock was conducted in June 2008. The trial court concluded that the stock was community property.

Marci filed a motion on July 11, 2008, seeking (1) $400,000 in monetary sanctions "to discourage [Gary's] continued breach of his fiduciary duties to Petitioner"; (2) an order staying discovery by Gary until he fully complied with prior court orders; (3) an order directing Gary to instruct the Canadian banks in a conference call with counsel for both parties to produce business records to the court; and (4) $150,000 in attorney fees pursuant to section 271 "for frustrating settlement and causing increased costs of litigation in this matter." She filed declarations by her attorneys in support of her motion.

Marci argued in the motion that Gary had failed to comply with his statutory obligation to disclose his assets and failed to respond to formal discovery, that he produced at trial documents that he had failed to produce before trial despite her prior requests, and that he had failed to comply with prior court orders. She sought $400,000 in monetary sanctions under section 2107, subdivision (c). She also argued that Gary's failure to comply with court orders to provide discovery, failure to respond to discovery, and making evasive responses to discovery constituted misuses of the discovery process under Code of Civil Procedure section 2023.010 and justified both a stay of Gary's discovery and an award of $150,000 in attorney and accountant fees under section 271. Her attorney declared that Marci had incurred approximately $350,000 in attorney fees in this proceeding. Gary opposed the motion.

The trial court scheduled an evidentiary hearing on the motion, requested supplemental briefs, and authorized depositions of the parties. The hearing commenced in January 2009, took place on four separate days, and concluded in April 2009. The trial court filed a minute order on April 7, 2009, ruling on the motion. The order states:

"After hearing and review of the pleadings filed herein with respect to Petitioner's Motion for Attorney Fees, Costs and Sanctions, [f]iled July 11, 2009 [sic], and heard by this Court on January 23, 2009, February 11, 2009, March 10, 2009, and April 1, 2009, the Court finds and rules as follows:

"The facts and circumstances of this case show that though Respondent has produced voluminous documents to the Petitioner and her counsel over the course of this litigation, Respondent has not provided the documents and information required of him in a complete or timely fashion, without unnecessary delay, as required under the fiduciary duty statutes, and in accordance with In re Marriage of Brewer and Federici (2001) 93 Cal.App.4th 1334 and In re Marriage of Feldman (2007) 153 Cal.App.4th 1470. Respondent herein has been in a superior position to obtain and produce information throughout the pendency of this litigation, and has been under an ongoing obligation to obtain and disclose all such information in a full, complete and timely manner, through formal discovery, court orders, and the disclosure and fiduciary responsibility provisions of the Family Code.

"The conduct of Respondent has not fostered 'full disclosure and cooperative discovery' so as to reduce the adversarial nature of this marital dissolution action and the costs attendant thereto, as set forth in FC Section 2100. Further, Respondent's conduct has served to frustrate any realistic ...


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