IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)
August 31, 2011
IN RE THE MARRIAGE OF MARTHA LOUISE AND DENTON EDWARD CARLSON. MARTHA LOUISE CARLSON, RESPONDENT,
DENTON EDWARD CARLSON, APPELLANT.
(Super. Ct. No. 05FL07127)
The opinion of the court was delivered by: Hoch , J.
Marriage of Carlson CA3
NOT TO BE PUBLISHED
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
This appeal challenges an order requiring appellant Denton Edward Carlson to pay $100,000 in sanctions under Family Code section 271*fn1 for "being the primary aggressor" in exacerbating the marital dissolution case filed by respondent Martha Louise Carlson.*fn2 Denton contends (1) the trial court erred by imposing sanctions before the case concluded, and (2) the evidence failed to support the order imposing sanctions.
We affirm the sanctions order.
FACTUAL AND PROCEDURAL HISTORY
Martha and Denton married in June 1994 and separated sometime between January and June 2005. The parties have two minor children from the marriage. Shortly after separating, Martha and Denton agreed to share time equally with their children.
Martha filed a petition for dissolution of marriage in September 2005.
Prior to separation, the parties jointly operated Denton Outdoor Media, Inc. (the business). The business provides advertising for new houses and residential subdivisions. Martha continued to work for the business until Denton excluded her from its operations in January 2006.
In March 2006, Denton also took over $274,000 held in a joint investment account with Charles Schwab by moving the funds into an account held in his name alone.
1. Violation of Child Support and Temporary Spousal Support Order
After Denton took over the business and the Schwab account funds, Martha filed a motion for child and temporary spousal support. The parties resolved the support issues by stipulation in June 2006. They agreed that Denton would not use the Schwab account funds without prior written agreement from Martha. Denton also stipulated that he would pay $3,600 in child support and $5,600 in temporary spousal support per month to Martha. The stipulation was confirmed by court order.
In August 2007, Denton filed a motion to reduce his support obligations based on the claim that his income from the business had decreased. He asked that his combined child and spousal support payments be modified from $9,200 to $5,657 per month. Before securing a court ruling, Denton reduced his child and spousal support payments to $51 per month for the entire calendar year of 2008. At the time, the children lived with Martha half of the time. In 2009, Denton ceased payment of child and spousal support.
2. Continued Use of the Schwab Account in Violation of Court Order
Despite the order not to use the Schwab account funds without Martha's prior written authorization, Denton continued to withdraw funds from the account. In February 2009, Martha filed a motion to have the Schwab account transferred to her. The motion was granted, and the trial court admonished: "There shall be no withdrawals or other use of the Schwab account by [Denton] prior to the transfer to [Martha] with the exception of any funds required to complete the installation of a railing on the Sea Ranch residential property." Denton was personally present in court when the motion was granted. Nonetheless, he continued to use funds from the investment account without Martha's authorization. Altogether, Denton withdrew approximately $66,000 from the Schwab account.
3. Interference with the Children's Counseling
At some point, the private school attended by the parties' children recommended that both children receive counseling. When the parties' son was suspended from his private school in May 2008, the school conditioned his return on participation in counseling. Denton looked into the circumstances of the incident leading to the suspension. He concluded that the story regarding his son's involvement in a fight had been concocted. Denton did not obtain counseling for either child, and the school expelled both.
Martha filed an ex parte motion to obtain counseling for the children. Denton stipulated to Jack Love, M.A., M.F.T. serving as the children's counselor, and the stipulation was confirmed by order of the court in May 2008. However, Denton subsequently refused to allow Love to provide any counseling services to the children.
4. Delay in the Close of Escrow for the Sea Ranch Property
In early 2008, the parties decided to sell their Sea Ranch property. Martha asked Denton to sign a joint listing agreement to allow a real estate agent to advertise the property, but Denton declined. The next day, Denton announced that he had found buyers and wanted a finder's fee. He told Martha that he would not disclose the buyers until she agreed to pay him an $18,000 finder's fee; Martha did not agree to pay a finder's fee. Martha soon learned that the buyers were the property's neighbors, and that it had been the neighbors who approached Denton about a possible sale.
In speaking with the buyers, Martha learned that they needed to close escrow by June 13, 2008. Thus, she and Denton needed to sign escrow documents by June 11, 2008. Martha signed in early June. However, the escrow agent subsequently informed Martha that Denton had not signed the escrow documents by June 13 and that the buyers threatened to sue as a result.
Martha became concerned and had her attorney e-mail Denton to request cooperation with closing escrow on the property. Denton responded by blaming Martha and her attorney for the delay in closing escrow and for being part of the problem by filing motions to escalate the legal fees and filing dishonest declarations. Martha filed an ex parte motion to compel Denton to sign escrow documents. Denton did not show up at the ex parte hearing. While Martha was waiting in court for the ex parte matter to be heard, she called the escrow officer who informed her that Denton was signing documents at the title company.
5. Failure to Disclose a New Business Account
The court's financial expert testified that Denton deposited $177,000 from the business in an undisclosed account at a time when he was obligated to disclose his assets. The expert testified that if Denton had properly deposited his business income, the business would not have needed to borrow money and incur borrowing costs.
Martha discovered the undisclosed account in early 2008 after she subpoenaed records from one of the business's clients making payments to the business and spoke with one of Denton's employees about a discrepancy in the monthly invoicing report regarding these payments. Denton's accountant did not post the account until November 2008, and did not add the $177,000 to the business's books until January 2009.
6. Sanctions Order
In February 2009, Martha filed a motion for $175,000 in sanctions against Denton. In her supporting declaration, she explained that she had incurred more than $200,000 in attorney fees in the case. Denton responded by seeking an order for sanctions against Martha for more than $481,000 in attorney fees, legal costs, and expert fees. A hearing on the sanctions motions was combined with requests by the parties for modification and back payment of support orders.
A three-day hearing culminated in the court's ruling that Denton owed Martha $77,295 in temporary spousal support and $50,190 in child support for the period from October 2007 through December 2008. The court also ordered Denton to pay $100,000 in sanctions under section 271.
In imposing sanctions, the court explained that the testimony and exhibits "received in evidence in this matter are replete with the fact that [Denton's] actions which caused numerous court proceedings and time consuming investigative work, not the least of which is the fact that [Denton] opened a separate account in which to place some of the income received by the business in the amount of $177,000. [Denton] did nothing to specifically disclose and make [Martha] aware of the existence of this new account until the court's expert noticed some apparent tampering with the business records and until [Martha] subpoenaed records from the business entity making payments to [Denton]. The record also reflects recalcitrance on the part of [Denton] in completing the sale of property causing involvement by the court, actions concerning the children's school causing involvement by the court, and [Denton's] violation of agreements and court orders causing additional attorney work for [Martha]. For example, [Denton] attempts to justify his use of the community property liquid assets contained in the parties' Charles Schwab account by indicating that it had always been used as an overdraft account. He fails to see how his continued use of the community funds to cover his post separation expenses somehow violated his agreement and court order that neither party was to 'remove' any more funds from that account. Although [Martha] is not without blame, the actions of [Denton] clearly evidence him as being the primary aggressor in this matter."
As a consequence, the court awarded "$100,000 in attorney fees and costs pursuant to  Section 271 due to [Denton's] actions which have frustrated the policy of the law to promote settlement of litigation and which have increased the cost of litigation due to lack of cooperation."
Denton timely filed a notice of appeal from the July 28, 2009, order.
Principles of Review
Generally, the propriety of "[a] sanctions order under section 271 is reviewed for abuse of discretion. (Feldman, supra, 153 Cal.App.4th at p. 1478.) Accordingly, we will overturn such an order only if, considering all of the evidence viewed most favorably in its support and indulging all reasonable inferences in its favor, no judge could reasonably make the order. (Ibid; In re Marriage of Petropoulos, supra, 91 Cal.App.4th at pp. 177-178.) 'We review any findings of fact that formed the basis for the award of sanctions under a substantial evidence standard of review.' (Feldman, at p. 1479.)" (In re Marriage of Corona (2009) 172 Cal.App.4th 1205, 1225-1226.) In assessing whether substantial evidence supports the trial court's order, "all conflicts must be resolved in favor of the [prevailing party], and all legitimate and reasonable inferences indulged in [order] to uphold the [finding] if possible." (In re Marriage of Feldman (2007) 153 Cal.App.4th 1470, 1479 (Feldman).) However, we review questions of statutory interpretation de novo without deference to the trial court's conclusions. (Ibid.)
Imposition of Sanctions During Marital Dissolution Proceedings
Denton argues that section 271 disallows the trial court from imposing sanctions prior to the conclusion of a marital dissolution action. We disagree.
Section 271 provides, in pertinent part, that "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."
Section 271 does not impose any restriction on when a court may impose sanctions. (Feldman, supra, 153 Cal.App.4th at p. 1495.) Feldman involved a claim that a sanction under section 271 "was improper because attorney fees may not be ordered under section 271, subdivision (a) until the end of the lawsuit." (Feldman, supra, 153 Cal.App.4th at p. 1494.) The Feldman court rejected the contention and explained: "The text of section 271 contains no requirement that the trial court impose the sanction at the end of the lawsuit. Indeed, the only procedural requirement in the statute is that an award of attorney fees and costs as a sanction may be imposed 'only after notice to the party against whom the sanction is proposed to be imposed and opportunity for that party to be heard.' (§ 271, subd. (b).) Further, as we have stated, section 271 is meant to 'advance the policy of the law "to promote settlement and to encourage cooperation which will reduce the cost of litigation."' (Petropoulos, supra, 91 Cal.App.4th at p. 177.) As a matter of logic, to promote cooperation a trial court must be able to apply sanctions during the course of the litigation when the uncooperative conduct arises in order to encourage better behavior as the litigation progresses." (Feldman, supra, at p. 1495.)
We agree with Feldman, supra, 153 Cal.App.4th 1470, "that based on the statutory language and the express purpose of section 271, a trial court may impose sanctions under section 271 before the end of the lawsuit." (Feldman, supra, at p. 1495; accord Robert J. v. Catherine D. (2009) 171 Cal.App.4th 1500, 1521.)
Denton relies on section 2335 to contend that a court may not impose any sanctions prior to the conclusion of a marital dissolution action. Section 2335 provides: "Except as otherwise provided by statute, in a pleading or proceeding for dissolution of marriage or legal separation of the parties, including depositions and discovery proceedings, evidence of specific acts of misconduct is improper and inadmissible."
Section 2335 is inapposite because it does not address sanctions orders. Instead, section 2335 provides for "no-fault" marital dissolution in California. Under this statute, "[f]ault is simply not a relevant consideration in the legal process by which a marriage is dissolved. Recovery in no-fault dissolution proceedings 'is basically limited to half the community property and appropriate support and attorney fee orders -- no hefty premiums for emotional angst.' (Askew v. Askew (1994) 22 Cal.App.4th 942, 960.)" (Diosdado v. Diosdado (2002) 97 Cal.App.4th 470, 473-474.) Section 2335 does not implicate a court's ability to sanction litigants under section 271.
Denton also relies on Niko v. Foreman (2006) 144 Cal.App.4th 344, and In re Marriage of Freeman (2005) 132 Cal.App.4th 1, 6 (Freeman). Neither case supports his argument. Niko v. Foreman does note that sanctions under section 271 are "'ordinarily [imposed] at the end of the litigation . . . when the "extent and severity of the party's bad conduct can be judged[.]"' ( Hogoboom & King, Cal. Practice Guide: Family Law [(The Rutter Group 2011)] ¶ 14:265, p. 14-.)" (Niko v. Foreman, supra, 144 Cal.App.4th at p. 369, italics added.) Niko v. Foreman, however, does not hold that a court cannot impose sanctions during the marital dissolution proceedings. (See ibid.)
Similarly, Freeman notes that section 271 "contemplates that sanctions be assessed at the end of the lawsuit, 'when the extent and severity of the party's bad conduct can be judged.'" (132 Cal.App.4th at p. 6, quoting In re Marriage of Quay (1993) 18 Cal.App.4th 961, 970.) Freeman addressed whether section 271 authorizes sanctions for pursuing a frivolous appeal. (Freeman, supra, 132 Cal.App.4th 1, 6-7.) Although the Freeman court concluded that sanctions may be imposed under section 271 for improper appeal, it did not hold that sanctions may be imposed only after entry of judgment. (See Freeman at pp. 6-7.)
Section 271 did not require the trial court in this case to await conclusion of the marital dissolution proceedings before imposing sanctions.
Claimed Failure to Make Necessary Findings Under Section 271
Denton contends the sanctions order must be reversed because the trial court failed to find that he had an ability to pay the sanction or that the sanction was based on "actual work done by [Martha's] legal counsel." We disagree.
Section 271 does not require the trial court to find an ability to pay or to match the amount of sanctions with the opposing party's legal fees. "'While the court must take into consideration all evidence concerning the parties' incomes, assets and liabilities, the only stricture imposed by section 271 is that the sanction may not impose "an unreasonable financial burden" on the party sanctioned.' (Burkle v. Burkle (2006) 144 Cal.App.4th 387, 403.) [Moreover,] a sanctions award under section 271 need not 'be limited to the cost to the other side resulting from the bad conduct.' (In re Marriage of Quay (1993) 18 Cal.App.4th 961, 970 [addressing Civ. Code, former § 4370.6, the substantively identical predecessor statute to § 271].) Because section 271 is not a need-based statute and does not require a correlation between the sanctioned conduct and specific attorney fees, it was not essential that [the moving party] demonstrate her current financial situation and attorney fees by submitting an income and expense declaration. (See Burkle v. Burkle, supra, 144 Cal.App.4th at p. 403 [failure to submit income and expense declaration as required by Cal. Rules of Court, rule 5.128 does not create jurisdictional barrier to § 271 award].)" (Marriage of Corona, supra, 172 Cal.App.4th at pp. 1226-1227.)
Here, the trial court considered the parties' financial circumstances when sanctioning Denton under section 271. The sanction was imposed in the same order in which the court also ruled on the parties' requests for modification of support and for payment of past-due support. The parties submitted evidence and testimony that showed their financial condition not long before the hearing on the support and sanctions requests. The court's statement of decision provides three pages of details about Denton's and Martha's finances.
With regard to section 271 sanctions, the trial court found "[d]uring the entire calendar year of 2008, [Denton] paid a total of $51.00 per month for each month for the support of [Martha] and to support their children while they were living with [Martha] 50% of the time. His testimony indicated that he paid that amount because he calculated (or his attorney calculated based on information supplied to the attorney by [Denton]) that amount would be the extent of his obligation. He ceased making any payments whatsoever in 2009. Therefore, [Martha] has had only the funds ordered to be advanced by this court from the parties' community property liquid cash resources and borrowings to pay for her needs, the children's needs, and to pay her attorney fees and costs. For the calendar years 2007 and 2008 combined, [Denton] had a gross income from his business of $657,008. [Martha]'s income was $zero."
Based on the evidence and findings, the trial court properly considered the parties' respective financial circumstances when it sanctioned Denton under section 271.
Substantial Evidence Supports the Sanctions Order
Denton devotes the majority of his opening brief to a marshalling of evidence in support of his argument that the trial court ignored evidence in his favor. Essentially, Denton asks us to reconsider the evidence on appeal in order to conclude that credible evidence supported his claims that he did not hide assets, violate court orders, or escalate Martha's legal bills.
As an appellate court, we do not reweigh the evidence or second guess witness credibility. (People v. De Paula (1954) 43 Cal.2d 643, 649.) As we have noted, in determining whether substantial evidence supports the sanctions order, we view the evidence in the light most favorable to the order. (Feldman, supra, 153 Cal.App.4th at p. 1479.) Our review of the record leads us to conclude that each of the grounds for the sanctions cited in the trial court's order is supported by substantial evidence.
First, the record shows that Denton agreed to pay child and temporary spousal support of more than $9,000 per month to Martha. Even though the stipulation was confirmed by court order, Denton unilaterally decided to reduce his payments to $51 per month in 2008 before ceasing to make payments in 2009. By disregarding the support order, he eliminated Martha's sole source of income, requiring her to borrow and draw from the community's cash reserves.
Second, Denton's own testimony established that he continued to use the Schwab investment account funds after he stipulated to refrain from doing so without prior written permission from Martha. Even though a court order confirmed the stipulation, Denton continued to withdraw funds.
Third, the record shows that Denton prevented the children from receiving counseling from the therapist to whom he had stipulated. Consequently, Martha had to resort to legal action to compel the counseling required by the children's private school.
Fourth, Martha's testimony sufficed to show that Denton's role in the sale of the Sea Ranch property was sufficiently uncooperative that she needed to involve her attorney to communicate with him. Rather than resolving the matter, Denton's e-mail response required Martha to seek court assistance to ensure that the escrow documents would be signed by Denton.
Finally, the testimony provided by Martha and the court's financial expert establish that Denton failed to fulfill his obligation to disclose his assets. The asset was a bank account containing $177,000 in cash. Martha discovered the account only after she subpoenaed records from one of the business's clients making payments to the business and discovered that these payments were not included in the monthly invoicing report.
This evidence supports the trial court's conclusion that Denton's conduct frustrated the policy of promoting settlement and cooperation in marital dissolution actions. His conduct caused numerous court proceedings and time consuming investigative work by the court's financial expert and Martha. The record also shows that Martha incurred more than $200,000 in legal fees by the time of the hearing on her motion for sanctions.
Substantial evidence supports the trial court's imposition of a $100,000 sanction on Denton.
Attorney fees on Appeal
Martha requests her legal fees on appeal. A request for attorney fees arising from an appeal should be addressed to the trial court in the first instance. (In re Marriage of Petropoulos (2001) 91 Cal.App.4th 161, 180; Haywood v. Superior Court (2000) 77 Cal.App.4th 949, 957, fn. 6.) Accordingly, Martha may seek attorney fees incurred on appeal in the trial court following issuance of the remittitur in this case.
The July 28, 2009, order requiring Denton Edward Carlson to pay $100,000 to Martha Louise Carlson under Family Code section 271 is affirmed. Martha Louise Carlson shall recover her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)
We concur: RAYE , P. J. BLEASE , J.