Beach Wire & Cable v. Winsayer

Filed 5/15/07 Beach Wire & Cable v. Winsayer CA2/6

Appendix not available electronically

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

Beach Wire and Cable, Inc. ("Beach Wire") appeals a judgment entered in favor of defendant Gail Winsayer following a court trial. We affirm.

FACTS AND PROCEDURAL HISTORY

In 1986, Jim and Gail Winsayer married.[1] In October, 1997, Jim formed a business installing data communication cable. He named the business "National Data Cabling" ("NDC") and incorporated it in 1998.[2] Jim was its president and sole shareholder.

Initially, Gail worked for NDC arranging travel for its employees. Later, she became an NDC salesperson and earned a net monthly salary between $4,000 and $5,000, with an occasional bonus. Gail was the Vice-President of NDC, although she testified that she did not "act in any management capacity."

In 1997, Jim applied as an individual for a $25,000 line of credit from Beach Wire, a supplier of insulated wire and cable. Beach Wire commenced supplying material to Jim's "start-up" business, and allowed him 30 days and later, 60 days to pay. By the second month, however, Jim fell behind in payments. Nevertheless, Beach Wire continued to provide wire and cabling to NDC due to its policy of customer service and Jim's assurances of payment.

Over the following two and one-half years, NDC made partial payments on its account, described by Beach Wire as progress payments "to keep the [material] pipeline going." By November, 1999, NDC owed Beach Wire approximately $264,000. Jim promised payment and later informed Beach Wire that he was pursuing financing and a loan against the equity in his Carpinteria ranch.

Meanwhile, in early 1999, Gail learned that Jim was romantically involved with another woman. Gail moved to a separate bedroom in their Carpinteria residence, and determined to divorce Jim. At trial, a neighbor testified that he visited Gail in March, 1999, and she informed him of Jim's infidelity and her plans for a divorce. The neighbor stated that he believed Jim and Gail "had lived separate lives for quite a while." Gail testified that following Jim's admission of infidelity, she "had nothing more to do with him."

Marilyn Fendrick and Vanessa Herndon also testified that in 1999, Gail lived separately from Jim. Fendrick saw the small bedroom that Gail occupied, and Herndon, a coworker, observed that Gail and Jim arrived at the office in separate vehicles at different times.

Gail did not discuss her intentions with others because she did not wish to interfere with her daughter's upcoming wedding. At the wedding, Gail and Jim arrived separately.

In July, 1999, Gail decided to purchase real property in Maui, Hawaii, to hold and use as her separate property. She used $48,000 of her separate property funds plus a $30,000 loan from Jim as down payment upon the property. At the mortgage broker's suggestion, Jim and Gail applied for the $165,000 mortgage together and took title to the property as husband and wife.

Several weeks later, Jim executed a transmutation agreement and a quitclaim deed, transferring the Hawaii real property to Gail as her separate property.[3] Jim did not pay the mortgage or property taxes upon the real property nor did he live there.

On May 3, 2000, Jim informed his employees and creditors that NDC was ceasing to do business and would be dissolved. Gail stated that she was "[s]tunned" and "flabbergasted" to learn of Jim's decision because she believed the business was doing well.

In 2001, Jim and Gail dissolved their marriage. On June 1, 2001, they executed a marital settlement agreement that Gail prepared without legal advice. Among other things, the agreement confirmed the Hawaii property as Gail's separate property. The agreement also divided the $462,366 net proceeds from the sale of the Carpinteria ranch, and reimbursed Jim for the $30,000 down payment for the Hawaii property.

The marital settlement agreement also states a separation date of December 1, 2000. Gail testified that she believed the separation date reflected the date that she "moved from the [Carpinteria] ranch," after its sale.

In April 2002, Gail exchanged the Hawaii property for a duplex located at 419-421 East Anapamu Street in Santa Barbara. She realized a profit of $298,551 from the Hawaii property.

On May 7, 2004, Beach Wire obtained a $369,613 default judgment against NDC and Jim in Orange County Superior Court. (Beach Wire & Cable, Inc. v. National Data CablingServices, Inc. (Super. Ct. Orange County, 2004, No. 03CC11236).)

On August 30, 2004, Beach Wire brought this action to set aside the conveyance of the Hawaii property to Gail as her separate property. Beach Wire alleged that the Winsayers committed a fraudulent transfer within the meaning of Civil Code section 3439 et seq. ["Uniform Fraudulent Transfer Act"]. Beach Wire sought to attach the Santa Barbara property to satisfy the unpaid default judgment against Jim.

Following trial, the trial court decided that Beach Wire did not prove its cause of action for fraudulent transfer nor did it provide sufficient evidence that either NDC or the community was insolvent at the time of the Hawaii property acquisition in November, 1999. In its statement of decision, the trial court noted that the parties owned their Carpinteria ranch in November 1999, and sold it for $850,000 the following year. The trial court also expressly found that Gail's testimony was credible concerning her "intention to divorce and the motivation to purchase and transfer the Hawaii Property to herself as her separate property. . . ."

As an alternative basis for its decision, the trial court found that the community was not liable for the Beach Wire debt because Jim and Gail lived separate and apart in February, 1999 when Gail moved into a different bedroom. It also found that the Beach Wire obligation arose after February, 1999. (Fam. Code,  910; In reMarriage of Norviel (2002) 102 Cal.App.4th 1152, 1163-1164 [dictum that parties may live apart physically under same roof].)

Several months later, the Orange County Superior Court set aside the default judgment against Jim because he had not received service of process. We have granted Gail's request for judicial notice of the set-aside order, among other Orange County court documents.

Beach Wire appeals and contends that: 1) the trial court erred by determining that the debt was not a community debt; and 2) transmutation of the Hawaii property to Gail's separate property and division of the proceeds from the sale of the Carpinteria ranch constitute fraudulent transfers.

DISCUSSION

I.

Beach Wire argues that the community is liable for the Beach Wire debt because it was incurred during the Winsayers' marriage. (Fam. Code,  910, subd. (a).) It asserts that the trial court's express finding that the Winsayers separated in February, 1999, is contrary to the court's comments during argument.

Beach Wire also contends that insufficient evidence supports the finding of a February, 1999, separation date as the "complete and final break" in the marital relationship. (In reMarriage of von der Nuell (1994) 23 Cal.App.4th 730, 734 [separation date determined by conduct evidencing a complete and final break in the marital relationship].) Beach Wire points to evidence that the Winsayers filed joint tax returns, applied for a mortgage jointly, and presented to the world in 1999, and thereafter, that they were married. (In re Marriage of Norviel, supra, 102 Cal.App.4th 1152, 1164 [parties' separation requires separate residences]; In re Marriage of Baragry (1977) 73 Cal.App.3d 444, 449 [discussing factors determining date of parties' separation].) It adds that the martial settlement agreement states a December 1, 2000, separation date.

Beach Wire also asserts that Gail deceived the property taxing authorities and the financial institution that lent funds upon the Hawaii property by representing the transaction as a community purchase. It adds that she did not bear her burden of proof to establish that the funds used for the Hawaii property down payment were separate property funds. (Fam. Code,  760 [defining community property as "all property, real or personal . . . acquired by a married person during the marriage . . . ."].)

Family Code section 910, subdivision (a), generally provides that "the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt." Subdivision (b), defines "during marriage" and excludes "the period during which the spouses are living separate and apart before a judgment of dissolution of marriage . . . ."

The date of a marital separation occurs "when either of the parties does not intend to resume the marriage and his or her actions bespeak the finality of the marital relationship." (In re Marriage of Manfer (2006) 144 Cal.App.4th 925, 930.) The date of separation is a factual issue to be determined by a preponderance of the evidence. (Ibid.) On review, we determine whether the trial court's factual determinations are supported by substantial evidence. (Ibid.)

Here sufficient evidence supports the trial court's determination that Gail intended to separate from Jim in February, 1999, when she moved into a separate bedroom and informed her neighbor and friend that she intended to divorce. Gail's coworker noted that she arrived at work in a different vehicle at different times from Jim. Although Gail did not move into a separate residence, her words and actions indicated that she "perceived the rift in [the marriage] as final." (In re Marriage ofManfer, supra, 144 Cal.App.4th 925, 930.) Her conduct evidenced a physical separation "under the same roof." (In re Marriage ofNorviel, supra, 102 Cal.App.4th 1152, 1164 [dictum that spouses may live separate and apart while occupying same residence]; In re Marriage of von der Nuell, supra, 23 Cal.App.4th 730, 734 [occupying separate residences is but one factor determining date of separation].) The trial court expressly found Gail's testimony credible regarding her intention to divorce Jim and her motivation to purchase the Hawaii property.

Moreover, Gail's intention to conceal the separation from her daughter gives rise to a "compelling inference [that there] was a separation to hide." (In re Marriage of Manfer,supra, 144 Cal.App.4th 925, 930, fn. 5.) The test of the date of separation concerns not what society at large perceives, but upon the parties' subjective intent as determined objectively from evidence of theirconduct during the disputed time. (Id., at p. 934.) Sufficient evidence supports the trial court's determination.

The trial court's comments made following summation are not "findings" that impeach the statement of decision, e.g., the trial judge's comment whether separation must be "published . . . to the world." Here we review the written statement of decision which adequately sets forth the factual and legal basis for the trial court's decision. (Code Civ. Proc.,  632, subd. (a).)

Finally, Gail testified that she used approximately $48,000 in separate property funds as down payment upon the Hawaii property. The residential loan application that Gail completed lists several bank accounts in her name alone. The trial court found her to be a credible witness. From this evidence the trial court could draw reasonable inferences to conclude the down payment came from Gail's separate funds.

II.

Beach Wire argues that the trial court erred by not finding the transmutation as well as the division of the proceeds from the sale of the Carpinteria residence to be acts of fraud against creditors. (Fam. Code,  851 ["A transmutation is subject to the laws governing fraudulent transfers."]; Mejia v. Reed (2003) 31 Cal.4th 657, 669 [law prohibiting fraudulent transfers applies to marital settlement agreements].) Beach Wire asserts that the Hawaii real property transmutation and the division of the sale proceeds of the Carpinteria ranch occurred when the Winsayers were unable to pay their debts. It contends that it established that the transfers were made with the "actual intent to hinder, delay, or defraud" within the meaning of Civil Code section 3439.04, subdivisions (a) and (b). Beach Wire asserts that the Winsayers were insolvent before and after the acquisition of the Hawaii property, and thus also committed constructive fraud. (Civ. Code,  3439.02 [defining insolvency for purposes of Uniform Fraudulent Transfer Act].)

For several reasons, the trial court did not err. First, Beach Wire did not establish how Jim is personally liable for the debts of NDC, a corporation. In 1997, Jim applied as an individual for a line of credit of $25,000 from Beach Wire; soon after, NDC became incorporated and Beach Wire presented no evidence that Jim executed a written guaranty or agreed to pay the debts of the corporation. (Civ. Code,  2793 ["Except as provided by [Civ. Code  2794], a suretyship obligation must be in writing, and signed by the surety. . . ."].)

Second, the Orange County Superior Court has vacated the default judgment that Beach Wire obtained against Jim because he was not served with a summons and complaint. Thus, there is no outstanding judgment in Beach Wire's favor against Jim.

Third, Beach Wire did not bear its burden of establishing that the Winsayers possessed the actual intent to defraud. One asserting a fraudulent transfer bears the burden of showing the transferor's fraudulent intent. (Vaughn v.Coccimiglio (1966) 241 Cal.App.2d 676, 679.) Here the trial court considered the evidence and drew reasonable inferences therefrom and concluded that Beach Wire did not establish the requisite fraudulent intent.

Fourth, Beach Wire did not establish that at the time of the 1999 transmutation, the Winsayers were insolvent or would be rendered insolvent. One year later, the Winsayers sold the Carpinteria ranch and realized a profit of approximately $462,000, after payment of past-due mortgage payments and property taxes. This sum exceeded the amount owed to Beach Wire in November 1999.

The judgment is affirmed. Appellant to bear costs on appeal.

NOT TO BE PUBLISHED.

GILBERT, P.J.

We concur:

COFFEE, J.

PERREN, J.

Denise de Bellefeuille, Judge

Superior Court County of Santa Barbara

______________________________

Anita Pieratt, Marc JD Ellis for Plaintiff and Appellant.

Hollister & Brace, and Marcus S. Bird for Defendant and Respondent.

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[1] We refer to the Winsayers as Jim and Gail, not from disrespect, but to ease the reader's task.

[2] We refer to the sole proprietorship and the incorporated business as NDC, except where clarity demands that we draw a distinction.

[3] We attach a photocopy of the November 1, 1999, transmutation agreement to this opinion as an appendix.