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In re Marriage of Burwell

California Court of Appeals, Fifth District

October 31, 2013

In re the Marriage of BECKY and GARY BURWELL.
v.
CYNTHIA BURWELL, Objector and Appellant. BECKY BURWELL, Movant and Appellant, v.

Ordered Filed Date 11/21/13

APPEAL from a judgment of the Superior Court of Kern County No. S1501-FL-591767. Susan M. Gill, Judge.

Bowman and Associates, Stacy H. Bowman; Klein, DeNatale, Goldner, Cooper, Rosenlieb & Kimball, Catherine E. Bennett, and Thomas V. DeNatale, Jr., for Objector and Appellant.

Stephen Temko for Movant and Appellant.

ORDER MODIFYING OPINION AND DENYING PETITION FOR REHEARING

BY THE COURT:

The opinion herein, certified for partial publication and filed October 31, 2013, is modified as follows:

1. On page 23, in the first full paragraph after the sentence beginning with “In this scenario…” add the following:

The term life insurance policy at issue here also had a suicide clause whereby the insurer was not obligated to pay the proceeds if the insured committed suicide within two years of the policy date. In a petition for rehearing, Becky contends the reasoning we apply above with respect to premium caps and renewal rights should also apply to the suicide clause. We disagree.

In our discussion of premium caps and renewal rights above, we acknowledge situations where the separate estate may appropriate the community’s contractual rights to obtain the policy proceeds. And, when one spouse appropriates a community asset for separate use, he or she must reimburse the community. (Marriage of Elfmont, supra, 9 Cal.4th at p. 1039 (conc. & dis. opn. of George, J.) Thus, it is the separate estate’s appropriation of a community asset (e.g., the renewal right, premium cap) that triggers the duty to reimburse. In contrast to the renewal right, the right to avoid payment of the proceeds in the event of suicide belongs to the insurer, not the community estate. (See Civ. Code § 1458 [“A right arising out of an obligation is the property of the person to whom it is due…”].) Thus, in the context of suicide clauses, the separate estate has not appropriated contractual rights belonging to the community.

2. On page 24, in the first paragraph after the sentence ending “… because there is an insufficient factual record” add a new footnote 21 with the following language:

In her petition for rehearing, Becky argues that even under the test we announce in this opinion, there was substantial evidence the proceeds were entirely community property. Specifically, she contends there was substantial evidence Gary paid the final premium payment with community funds. We disagree.

“ ‘Substantial evidence’ is evidence of ponderable legal significance, evidence that is reasonable, credible and of solid value. [Citations.] ‘Substantial evidence … is not synonymous with ‘any’ evidence.’ … Speculation or conjecture alone is not substantial evidence.” (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 651.) Becky points to her declaration as substantial evidence that Gary paid the final premium payment on the policy with community funds, including the following quotation: “All premiums paid on the Reassure America Policy came either from the community property earnings of BCI or from the $2, 800, 000 of community property funds Mr. Burwell removed from BCI without my knowledge or consent.” The disjunctive wording of this statement implies what the very next sentence confirms: Becky did not know whether the funds Gary used to pay the premiums were community property. The next sentence of the declaration reads: “If Mr. Burwell commingled the $2, 800, 000 he misappropriated with his other earnings, the presumption is and must be that the community property in his possession was used to pay the community property premiums.” (Italics added.) Becky’s speculation that Gary might have commingled funds and her presumption he used those commingled funds to pay the premiums is not substantial evidence. On remand, Becky is free to produce any reasonable, credible, solid evidence that Gary paid the premiums with community property. She has not yet done so.

3. Subsequent footnotes are to be renumbered accordingly.

This modification does not affect the judgment. The petition for rehearing is denied.

CERTIFIED FOR PARTIAL FOR PARTIAL PUBLICATION [*]

OPINION

POOCHIGIAN, ACTING P.J.

INTRODUCTION

Are the proceeds of a term life policy community property or separate property of the spouse who pays the final premium? Our answer is an all too familiar one: it depends. We hold that the characterization “will depend on the … premium for the final term of the policy.” (Minnesota Mut. Life Ins. Co. v. Ensley (9th Cir. 1999) 174 F.3d 977, 983 (Minnesota Mut. Life Ins. Co.).) The effect of the rules governing characterization of term life insurance proceeds depends on multiple factors, including whether the policy contains certain contractual provisions, and the insurability of the insured spouse. The result is an unfortunately intricate methodology for allocating proceeds of term life insurance policies. Were we free to abandon community property jurisprudence and craft a simpler holding we might do so. We are not.

Here, the trial court failed to make findings sufficient to determine proper characterization of the proceeds. Therefore, we vacate the court’s order, and remand for further factual findings and application of the rules we set forth herein.[1]

FACTS

In 1996, during the marriage of Becky J. Burwell[2] and Gary J. Burwell, a term life insurance policy was purchased (hereafter the “term life policy” or “the policy.”) Gary was the insured and Becky was the named beneficiary until October 7, 2008.

In September 2004, Becky petitioned for dissolution of her marriage with Gary.

Automatic Temporary Restraining Orders

Gary was served with a summons along with Becky’s petition. The summons contained a number of automatic temporary restraining orders (ATROs). (See Fam. Code, § 2040; Cal. Rules of Court, rule 5.50(b).) The ATROs included the following text:

“Starting immediately, you and your spouse are restrained from: [¶] … [¶]

“2. cashing, borrowing against, cancelling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage including life, health, automobile, and disability held for the benefit of the parties and their minor child or children;

“3. transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life; and

“4. creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer, without the written consent of the other party or order of the court. Before revocation of a nonprobate transfer can take effect, or a right of survivorship to property can be eliminated, notice of the change must be filed and served on the other party.”

Gary Remarries

A status-only judgment of dissolution was entered in August 2005, and the court retained jurisdiction over all other issues. In November 2006, [3] Gary married Cynthia Burwell (Cynthia).

August 2008 Stipulated Judgment

In August 2008, Gary and Becky stipulated to a “further” judgment resolving some property issues. Though the stipulated judgment indicates that “the parties have reached an agreement with regard to the division of their marital property, ” five issues were explicitly reserved for a trial. One of the issues reserved for trial was “claims for breach of spousal fiduciary duty.”

The stipulated judgment, signed by both parties, also states:

“16. Full Disclosure of Assets and Gifts. Each party has warranted to the other that he or she has no ownership interest in or claim to any property of any kind, other than the property described in this Further Judgment, and that he or she has not made, without the knowledge of the other, any gift or transfer of community property within the past five years for less than full and adequate consideration.

“17. After-Discovered And Concealed Assets. If additional assets of a community property nature are subsequently discovered, the existence of which were in good faith unknown or forgotten by both parties, such assets shall be divided equally between the parties. All other after-discovered assets shall be divided as determined by a court of competent jurisdiction. This court specifically retains jurisdiction over all concealed or after-discovered assets.”

The judgment also fixed the separation date at September 21, 2004.

Change of Beneficiary

On October 7, 2008, Gary changed the beneficiary on the term life policy from Becky to Cynthia. Gary had not listed the policy in his preliminary or final disclosure declarations in the dissolution action. (See Fam. Code, §§ 2104, 2105.)

Trial on Reserved Issues

The trial on reserved issues contemplated by the prior stipulated judgment commenced in June 2009 before Judge John Somers and continued over several months. Several issues were adjudicated at the trial. The most contentious issue involved a community-asset business called Burwell Concrete, Inc. (BCI). The court was tasked with deciding whether approximately $2.5 million in postseparation income from BCI was community income or Gary’s separate income. The trial also dealt with claims of breach of fiduciary duty.

The court eventually issued its ruling on May 16, 2011. First, the court ruled that (1) BCI had been awarded to Gary on August 21, 2008, and (2) postseparation income from BCI prior to August 21, 2008, was community income.

The court then ruled on the breach of fiduciary duty claims as follows:

“[T]he court does not find a breach of fiduciary obligation in this case. There is no evidence that petitioner failed to meet her obligations of disclosure, or of good faith and fair dealing, in any way. Respondent’s [i.e., Gary’s] conduct is more problematic. Despite counsel’s best efforts, there were often significant delays or problems in the disclosure of relevant financial information.… The disclosure issues, while problematic, are not sufficient in the court’s view to establish breach of a fiduciary obligation in this case.”

The court also ruled that Gary owed Becky (1) $105, 195.49 in “back [spousal] support payments and interest”; (2) $125, 000 in attorney fees; (3) $1, 524, 531 in reimbursements and credits for Becky’s portion of community property less $44, 283.14 in Gary’s reimbursements; and (4) $95, 102 in previously ordered equalization payments.

Gary’s Suicide and Becky’s Civil and Probate Actions

In April 17, 2010, after trial had commenced, but before the court had issued its aforementioned ruling, Gary committed suicide. Shortly after Gary’s death, Becky filed a civil action to prevent the term life policy’s proceeds from going to Cynthia. Becky also filed a probate action seeking letters of administration for Gary’s estate.

Becky moved to consolidate the civil action with the dissolution proceeding. Cynthia opposed consolidation. In her opposition papers, Cynthia argued that there were “no remaining issues left to be determined in the family law matter.” Her opposition papers further stated that she “is not a party to the action nor does she have any real interest in the ...


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