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Litke O'farrell, LLC v. Marcia Tipton

April 10, 2012

LITKE O'FARRELL, LLC, PLAINTIFF AND RESPONDENT,
v.
MARCIA TIPTON, DEFENDANT AND APPELLANT.



Trial Court: City and County of San Francisco Superior Court Trial Judge: Hon. Loretta M. Giorgi (San Francisco City & County Super. Ct. No. CGC-07-464972)

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

CERTIFIED FOR PUBLICATION

Nondebtor spouse Marcia Tipton appeals from a postjudgment order granting respondent Litke O'Farrell, LLC (Litke) a charging order against what she asserts has become her separate property interest in certain partnerships and limited liability companies that were divided pursuant to a marital settlement agreement (MSA). The charging order was designed to satisfy a judgment entered against her husband, Richard Tipton. The trial court concluded that under Family Code*fn1 section 916, subdivision (a) (section 916(a)), her interest in such property did not become shielded from creditors until entry of judgment of dissolution or separation, which occurred after Litke's charging liens in this case attached. We agree with appellant that upon entering into an enforceable MSA, the parties accomplished a division of their community estate such that the community property awarded to her became her separate property prior to attachment of the charging liens. Accordingly, we reverse the judgment.

I. BACKGROUND

In August 2009, the trial court entered judgment for $523,979.28 in favor of Litke and against Richard Tipton and others. We affirmed the judgment. (Litke O'Farrell, LLC v. Tipton (Oct. 29, 2010, A126563) [nonpub. opn.].)

On January 18, 2011, Litke commenced serving a motion to charge the interests of Richard Tipton and others in certain partnerships and limited liability companies. Actual service on Richard Tipton was effected January 24, 2011, the same date Litke filed the motion in court. Meanwhile, on January 21, 2011, notice was given that an action for dissolution of the Tiptons' marriage was filed December 15, 2010, and that the parties had executed an MSA with a signature and the effective date of January 18, 2011. The MSA divided the community property assets in question, confirming half to Marcia Tipton and half to Richard Tipton as their sole and separate property, while saddling Richard Tipton with sole responsibility for the judgment debt owed to Litke. The MSA also provided that at the time judgment of dissolution is obtained, the original of the MSA shall be attached to the stipulated judgment and the court shall be requested to (1) approve the agreement as fair and equitable; (2) order the parties to comply with its executory provisions; and (3) incorporate the MSA into the judgment of dissolution. Nevertheless, the MSA also stated that it would be independently valid and binding whether or not incorporated into a final judgment of dissolution.

On January 28, 2011, Litke served a second motion on Marcia Tipton and Richard Tipton, specifically charging the interests of Marcia Tipton in the various partnerships and limited liability companies subject to the first motion, and also charging both parties' interest in a newly disclosed entity.

The court entered judgment of dissolution incorporating the MSA on January 31, 2011.

Marcia Tipton opposed the motion for a charging order against her property. The trial court ruled in favor of Litke's charging motion; this appeal followed.

II. DISCUSSION

Appellant is adamant that the division of property occurred when the parties signed the MSA and it became effective, not when the court entered judgment of dissolution. We agree.

In general, the community estate is liable for debts incurred by either spouse before or during marriage and prior to dissolution of marriage or legal separation. (§§ 902, 910; Lezine v. Security Pacific Fin. Services, Inc. (1996) 14 Cal.4th 56, 63-64.)

Section 916(a)(2) in turn provides: "(a) [A]fter division of community and quasi-community property pursuant to Division 7 (commencing with Section 2500): [¶] . . . [¶] (2) The separate property owned by a married person at the time of the division and the property received by the person in the division is not liable for a debt incurred by the person's spouse before or during marriage, and the person is not personally liable for the debt, unless the debt was assigned for payment by the person in the division of the property. Nothing in this paragraph affects the liability of property for the satisfaction of a lien on the property."

Under the plain terms of the statute, property received by a nondebtor spouse escapes liability for the debtor spouse's debt only "after division" of the community property. The ...


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