IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Placer)
November 9, 2011
IN RE THE MARRIAGE OF ROD R. AND DONNA L. HOGUE. ROD R. HOGUE, APPELLANT,
DONNA L. HOGUE, RESPONDENT.
(Super. Ct. No. SDR0027759)
The opinion of the court was delivered by: Raye , P. J.
Marriage of Hogue
NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Petitioner Rod Hogue challenges the trial court's characterization of an escrow account as community property and the award of the account to him in the division of the community assets of his 27-year marriage despite his failure to comply with court orders to provide an accounting, his failure to introduce sufficient evidence at trial to rebut the presumption the asset was community property, and his failure on appeal to provide a reporter's transcript of the entire trial. On this paltry record, we must affirm the judgment.
During their lengthy marriage, Rod and Donna Hogue achieved a moderately high standard of living with a large home in Granite Bay, a boat, a motor home, a second home in Kona, Hawaii, and a business that provided a stable source of income including income to invest in development property and stock accounts. By 2006, when Rod petitioned the court for a dissolution of the marriage, however, their lives were unraveling. By the time of trial in 2009, their son, an Iraq war veteran, had committed suicide, Rod had been arrested for violating a restraining order, their homes had no value, Donna alone operated the family business, and Rod had either encountered and/or caused major obstacles to developing 24 acres of land in Granite Bay.
This appeal involves, however, a solitary escrow account. The relevant facts pertain only to this account. The parties owned 24 acres of undeveloped property known as the Granite Lakes East project. Rod managed the development of the property. Before the parties separated in 2006, Russel Kuhn and John Masha deposited $950,000 into a Placer Title escrow account to provide the funds for development. The development hit many snags for a variety of reasons, and as a result, the court found that the value of the project at the time of trial was zero.
As for the escrow account, we are hampered by Rod's failure to account for his unilateral withdrawals and to present evidence at trial. Shortly after separation, Donna requested, and Rod was ordered to provide, an accounting of all disbursements made from the account. Yet the trial court found that "[f]or nearly three years, despite repeated reminders and requests to produce such an accounting, he failed and refused to do so. As late as 45 days before the trial, Rod maintained in a declaration to the court that: (1) the funds were not community, and (2) that Donna's possession of an escrow statement (exhibit 59) showing the persons to whom draws and withdrawals were made was a sufficient accounting." (Fn. omitted.)
Nevertheless, at the outset of trial, the court denied Donna's motion in limine to bar Rod from presenting evidence regarding the withdrawals from the Placer Title account as a sanction for his flagrant disregard of the court orders during discovery. (Code Civ. Proc., § 2023.010, subd. (g).) Donna also requested the court to charge the proceeds in the escrow account entirely to Rod except for those amounts traced to the community property joint checking account. The court initially denied this request as well, without prejudice.
There is only a partial reporter's transcript of part of the first day of trial. Many of the exhibits referred to by Rod were never introduced into evidence at trial. The court eventually ruled: "The court denied each of these motions without prejudice, but allowed the issues and requests to remain open during the course of the trial to determine, upon hearing the evidence, whether those motions should be granted. After having heard the evidence and arguments of counsel, the court now finds that the motions are well-taken and each is now granted. Evidence presented by Rod regarding withdrawals from the Placer Title escrow account is hereby stricken, and Rod is charged with the net amount of funds received and not otherwise accounted for. As a result, Rod is granted the entirety of the escrow account proceeds as his distribution of community property, save and except those amounts which Donna was able to verify and agree were legitimate withdrawals. The net amount to be attributed to Rod is $840,332.00."
Much to Rod's disappointment, Donna was awarded the Aquatique Pool Business she had been operating pursuant to court order for several years. The court found Rod had "actively sought to damage" the business, sowed seeds of dissension, and deliberately attempted to influence employees to "side with him." The court determined that "awarding this business to Rod would place the principal asset of the community in the hands of a spouse who failed to make any genuine effort at accounting for substantial sums over which he had control for the Granite Lakes East project. His failure to do so renders his reliability as an obligor to Donna in substantial doubt."
Rod appeals. He contends the escrow account was not community property as a matter of law, and the distribution of the entirety of the escrow account to him constitutes an abuse of discretion as does the granting of Donna's in limine motion at the conclusion of trial. The threshold question is whether the court properly characterized the escrow account as community property.
The pertinent legal principles are familiar. All property, whether real or personal, acquired by a married person during marriage is, except as otherwise provided by law, community property. (Fam. Code, § 760.) If property is acquired during marriage, it is presumed to be community property. (In re Marriage of Ettefagh (2007) 150 Cal.App.4th 1578, 1585-1586.) And the community estate must be divided equally. (Fam. Code, § 2550.)
Rod insists that the Placer Title escrow account was not community property, the trial court did not have jurisdiction over it, and the division of the community estate was unequal. He urges us to review the trial court's characterization of the account de novo. The standard of review is not determinative here; whether framed as a question of law or fact, the hard truth for Rod to bear is that he failed to rebut the presumption that the account was community property. De novo review cannot compensate for the abject failure of proof at trial.
The funds were deposited into Rod and Donna's Placer Title escrow account during their marriage. Thus, the proceeds in the account are presumed to be community. (In re Marriage of Benson (2005) 36 Cal.4th 1096, 1103.) Rod insists that because the source of the funds was third parties, he rebutted the presumption. Not so. While it is true that if the source of the funds had been his separate property and the source was traceable the funds would retain their separate property character, Rod cites no authority for the proposition that the deposit of funds received from a third party into a community account does not constitute community property. We do not accept his premise that, because the source of the funds was extramarital, no community interest could attach to them when deposited into a community account and exclusively managed by a married party.
The problem in this case is not characterization, but the absence of an adequate accounting. Certainly, if Rod had demonstrated that the funds were deposited exclusively for the purpose of developing the Granite Bay property and that they had all been disbursed for that purpose, the community asset would have been exhausted and Donna would have no interest in a nonexistent asset. But in over three years of litigation, Rod never provided such an accounting despite a court order to do so. By his own admission, he retained the exclusive right to management and control of the funds. Not only did he breach his fiduciary obligation to Donna to account for the disbursements, but he failed to provide the very evidence he needed to demonstrate that there was no community asset or, at least, that it was far less than the $840,322 he was credited.
Rod argues that the one page settlement account provided by the title company constitutes an adequate accounting and demonstrates that substantial sums were paid to the project engineer, among others. The trial court rejected this argument and so do we. The court explained, "The discovery orders in this case issued in October of 2006 - over three years prior to trial, and compelling an accounting by Petitioner. He failed to produce any accounting, despite continual attempts from Respondent to obtain information on how the construction funds were spent. Rod cannot be heard to complain that he has been awarded the amounts of money which were accessed and spent by him, when he ignores an accounting to Donna which was ordered so that she can verify the appropriateness of the expenditures. Her ability to verify those expenditures is inextricably tied to the information which Rod provides. [¶] . . . [¶]
"Despite a court order to produce an accounting, Rod failed and/or refused to produce a single document verifying the proper expenditure of funds under his control. Instead, he relied on an escrow statement of the title company showing the names of person [sic] or companies who allegedly received funds. There was no evidence of backup, invoices, receipts, communications, authorizations, which might have gone to show that expenditures were proper, and that Rod did not funnel some or all of the payments back to himself through intermediaries."
In short, the funds deposited in the Placer Title escrow account were presumed to be community and Rod failed to present evidence to the contrary. Moreover, he failed to provide an accounting to support the notion that there was nothing left to divide because the funds had been properly expended on behalf of the community. There was no mischaracterization of the property. Thus, we must now examine whether the court abused its discretion in either one of the two ways alleged by Rod: by distributing the escrow account to him without a setoff for disbursements and by granting Donna's in limine motion at the end of the trial proceedings.
Although the trial court was obligated to divide the community estate equally, it had broad discretion to allocate the assets "'by whatever method or formula will "achieve substantial justice between the parties."' [Citation.]" (In re Marriage of Gowan (1997) 54 Cal.App.4th 80, 88; see In re Marriage of Cooper (2008) 160 Cal.App.4th 574, 580.) We cannot substitute our judgment for that of the trial court and must affirm its division of the community in the absence of a manifest abuse of discretion. (In re Marriage of Aylesworth (1980) 106 Cal.App.3d 869, 876.)
Rod, throughout his dissolution proceedings, had a statutory obligation to fully disclose all the material facts about the Placer Title escrow account and to provide equal access to all books and records. (Fam. Code, §§ 1100, subd. (e), 2100.) Indeed, when he failed to do so, the court ordered him to account for the disbursements. As quoted above, the trial court found that Rod "failed and/or refused to produce a single document verifying the proper expenditure of funds under his control." He blames the trial court, under the guise of an abuse of discretion allegation, for his own malfeasance.
While not a perfect fit, In re Marriage of Quay (1993) 18 Cal.App.4th 961 provides a helpful template. While the parties were separated and against his wife's wishes, the husband loaned a friend almost $990,000. The court assigned to him the whole face value of the note, rejecting the husband's request to split the note evenly between the parties, because he had breached his fiduciary duty to the community. The Court of Appeal found the trial court had not abused its discretion by awarding the note to the husband. (Id. at pp. 972-973.)
Because Rod, like the husband in Quay, breached his fiduciary duty by failing to comply with the court order to provide an accounting, we actually do not know whether his conduct was more or less egregious than his counterpart's in Quay. Rod failed to provide any documentation or support for the legitimacy of the disbursements he made from the account. If, as he contends, they were honest and legitimate construction expenses, then perhaps his conduct was less egregious. But he failed to explain the thousands of dollars he was personally paid from the account and to verify that none of the other disbursements were funneled to him through intermediaries. Thus, based on his failure to account, the trial court was unable to assess whether community funds had been expended to satisfy community obligations. In any event, Quay demonstrates that a court retains the discretion to allocate a community asset entirely to the one spouse who had exclusive management and control over the asset and, in the exercise of that control, breached his fiduciary duty to the community.
Rod insists that any suggestion of wrongdoing is based on nothing more than mere suspicion and innuendo and far short of the clear and convincing standard of proof necessary to satisfy Family Code section 1101, subdivision (h) and Civil Code section 3294. Section 1101, subdivision (h) of the Family Code provides: "Remedies for the breach of the fiduciary duty by one spouse, as set forth in Sections 721 and 1100, when the breach falls within the ambit of Section 3294 of the Civil Code shall include, but not be limited to, an award to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset undisclosed or transferred in breach of the fiduciary duty." And subsection (a) of section 3294 of the Civil Code states: "In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant."
We note that Rod is merely speculating that the court relied on these sections as the court does not cite to either of them in its tentative ruling or final judgment. Assuming, arguendo, that Family Code section 1101 provides the basis for the ruling, we have no trouble finding substantial evidence, even clear and convincing evidence, that Rod breached his fiduciary duty by failing to account as ordered by the court. His recalcitrance for over three years was sufficient to justify the court's exercise of discretion. Moreover, in the absence of an accounting, the court could not make the findings Rod complains are lacking on appeal.
We also reject Rod's misguided notion that the burden of proof shifted to Donna once she obtained a copy of Placer Title's settlement sheet. In the absence of the books, records, and accounting, Donna could not be expected to demonstrate that Rod had been guilty of malfeasance. It was Rod who, as the spouse with exclusive management and control of the account, retained an ongoing fiduciary duty of disclosure, and it was Rod who had been ordered by the court to do so. His ongoing attempts to deflect responsibility onto others is to no avail.
We emphasize that we have no reporter's transcript to review. We must ignore any representations in the briefs purporting to describe the testimony of any of the parties or witnesses at trial. We must treat this as an appeal "on the judgment roll." (Nielsen v. Gibson (2009) 178 Cal.App.4th 318, 324.) "'In a judgment roll appeal every presumption is in favor of the validity of the judgment and any condition of facts consistent with its validity will be presumed to have existed rather than one which will defeat it. [Citation.] The sufficiency of the evidence to support the findings is not open to review. [Citation.]' [Citation.]" (Estate of Kievernagel (2008) 166 Cal.App.4th 1024, 1031.) On the record presented to us, we can find no abuse of discretion.
Rod also asserts that the trial court abused its discretion by granting Donna's three page in limine motion, which was filed a few days before trial in violation of a local rule. (Super. Ct. Placer County, Local Rules, rule 30.16(D).) On the first day of trial, the court denied the motion without prejudice, thereby affording Rod the opportunity to introduce evidence that he had accounted for the disbursements he made from the Placer Title escrow account. The court reserved jurisdiction to reconsider its ruling at the end of trial. After the court heard the evidence and the arguments of counsel, it granted the motion.
Because the motion was denied at the beginning of trial, Rod suffered no prejudice from any technical rule violation. He was afforded ample opportunity throughout the trial to introduce evidence regarding his withdrawal of funds from the Placer Title account. We cannot accept his feeble excuse that he did not have time to prepare a response and presumably to garner the evidence he needed to defeat the motion. The evidence sought to be excluded was nothing more than the accounting he had been ordered to produce three years earlier. Moreover, the motion was denied without prejudice, and therefore the court continued to afford him the opportunity to demonstrate that the withdrawals were proper and the community asset had been legitimately depleted. On the record before us, there is no evidence that a proper accounting was ever produced or admitted. Without more, we cannot say the trial court abused its discretion in overlooking a minor transgression in the timing of the filing when Rod had the duration of the trial to respond to the motion and produce the accounting as evidence of his claims.
The judgment is affirmed.
We concur: BLEASE , J. HOCH , J.
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