Filed 10/5/18 Marriage of Daggett and Bauldry CA1/4

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION FOUR

Lane Bauldry appeals from an order denying his request to divide a community property asset that was not previously adjudicated by a judgment in this marital dissolution case. (Fam. Code, § 2556).[1] The trial court denied Bauldry’s request because it found that the asset in question, a 401k retirement account held in the name of Bauldry’s former wife, Mona Daggett, had already been adjudicated by the court. We affirm.

I. STATEMENT OF FACTS

A. Background

Bauldry and Daggett were married in February 2000 and had a daughter together in 2003. In May 2010, Daggett filed a petition to dissolve the marriage. Thereafter, the parties exchanged preliminary declarations of disclosure, as required by the Family Code. (See §§ 2102–2104.) The only disclosure form we find in the appellate record is a “Schedule of Assets and Debts” that Daggett completed in January 2011. On that schedule, Daggett listed 26 bank and/or investment accounts held either individually or jointly by the parties. This list includes two accounts that are held in Daggett’s name at RBC Dain Rauscher: an “Investment” account, with an estimated value of $63,460; and an “IRA” with an estimated value of $196,088.

In January 2015, the parties agreed to waive the Family Code requirement to file final declarations of disclosure. (See § 2105.) Later that year, the court commenced a bench trial concerning the division of the parties’ assets and debts, requests for reimbursement, and claims for breach of fiduciary duty and attorney fees. The trial was held over four sessions on October 29, 2015; December 1, 2015; February 25, 2016; and March 3, 2016.

On October 29, 2015, the court stated that all remaining unresolved matters in the case were to be addressed at trial. The focus would be financial issues because the trial court did not intend to alter existing custody orders. On December 1, 2015, the court bifurcated the issue of marital status and dissolved the marriage as of that date. The court also reiterated that the “the trial that we’re in the midst of now is a trial on all remaining issues.” On February 25, 2106, the issue of child support was bifurcated and taken under submission. On March 3, 2016, the parties submitted their case for decision and agreed to file written closing arguments.

B. The Statement of Decision

1. The Tentative Statement of Decision

On July 1, 2016, the trial court filed a 14-page tentative Statement of Decision (SOD), which resolved issues pertaining to the value and disposition of assets, outstanding tax liabilities, and claims for reimbursements. In addition, the court found that Bauldry breached his fiduciary duty to Daggett by: (1) failing to file tax returns for a period of four years during the marriage; and (2) liquidating a retirement account held in his name, which was referred to as the “Inserity 401k,” and keeping 100 percent of the proceeds. Also, the court awarded Daggett $10,000 in attorney fees under sections 271 and 1101, subdivision (g), finding that Bauldry had failed to appear at settlement conferences, failed to respond to settlement offers, and breached his fiduciary duty to Daggett. However, the court also found that Daggett was not entitled to the full amount of her fee request because she exacerbated tensions with Bauldry “in the context of the disposition of the family home and the assets inside it (including the wine collection).”

2. The Parties’ Financial Accounts

Section I, paragraph 6 of the tentative SOD contained the following orders dividing the parties’ financial accounts:

“a. The bank and/or investment accounts in each party’s name at the time of trial are confirmed as that party’s separate accounts(s). These include Mr. Bauldry’s Charles Schwab and RBC Dain Rauscher accounts.

“b. The existing retirement accounts in each party’s name at the time of trial are awarded to that party as his/her separate property, without offset.

“c. Mr. Bauldry violated the Automatic Temporary Restraining Orders in the Summons and breached his fiduciary duty under Family Code Section 1101[, subdivision ](a) by liquidating his Inserity 401k and keeping 100% of the proceeds. The Court orders Mr. Bauldry compensate Ms. Daggett one-half the sum in the account when liquidated, $19,946.12, with further interest of 5% through the first day of trial. The Court will not permit an offset based on Ms. Daggett’s existing retirement accounts given the breach of fiduciary duty. The Court declines to award a further sanction beyond these sums.”

The trial court’s findings and analysis in support of these three orders were set forth in Section IV of the SOD, which stated, in pertinent part:

“Bank and Investment Accounts [¶] The Court confirms the bank accounts in each party’s name at the time of trial are that party’s separate accounts. The Court further confirms the investment accounts in each party’s name at the time of trial are that party’s separate accounts. This includes Mr. Bauldry’s Charles Schwab and RBC Dain Rauscher accounts, which Mr. Bauldry established were his separate accounts dating prior to the marriage and that were not commingled with community funds during the marriage. See Exhibits V, W.”

“Retirement Accounts [¶] Ms. Daggett indicates that she believes the parties ‘do not dispute that they will retain the retirement accounts in his or her own name,’ Petitioner’s Closing Arguments, filed 4/8/16, at 8. But, Mr. Bauldry is, in fact, asking that the 401k retirement account in Ms. Daggett’s name be divided as an offset against Ms. Daggett’s claims that Mr. Bauldry breached his fiduciary duty to her by liquidating his Inserity 401k account after he was served with the Summons in this case, which includes Automatic Temporary Restraining Orders. [¶] Given the mandate of Family Code Section 1101, the Court declines to allow Mr. Bauldry an offset against what he owes Ms. Daggett based on his breach of fiduciary duty. The Court will therefore simply confirm that the retirement accounts in each party’s name at the time of trial are confirmed to that party alone as his/her sole and separate property.” (Italics omitted.)

“Mr. Bauldry’s Breach of Fiduciary Duty Regarding His Insperity 401k Account [¶] The Summons included Standard Family Law Restraining Orders (also sometimes known as Automatic Temporary Restraining Orders or ‘ATROs’). These include a prohibition against ‘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.’ Summons, filed May 17, 2010, at 2.

“In 2012, well after he was served with the Summons in this case, Mr. Bauldry liquidated his Inserity 401k account. It held approximately $39,892. Exhibit YY. He did not notify Ms. Daggett. He did not provide her any portion of the funds in the account. Ms. Daggett contends that Mr. Bauldry’s conduct was a breach of fiduciary duty. See Family Code § 1101.

“Mr. Bauldry does not make any excuse for his conduct, and he does not appear to dispute that he owes Ms. Daggett her community share of the funds withdrawn from the Inserity account. The Court orders that Mr. Bauldry compensate Ms. Daggett one-half the sum in the account when liquidated, $19,946.12, plus 5% interest through the first day of trial.”

3. Bauldry’s Objection to the Tentative SOD

Bauldry objected to the orders in section I, paragraph 6a and paragraph 6b on the ground that they were overbroad. He requested that the court modify language in those orders to provide that only those bank, investment, and retirement accounts that were “presented at the time of trial” were confirmed as the separate property of the account holder.

Bauldry argued his proposed modification was appropriate for the following reasons: “The reality is that the parties have now, and have had in the past, numerous retirement and investment accounts held by various financial institutions. In addition, the parties did not update their Disclosures prior to trial and the most recent Schedule of Assets and Debts filed for Petitioner was in 2012. This combined with the overall contentiousness of the proceedings, lends itself to the likelihood, if not probability, that an asset may have been inadvertently omitted from the court’s consideration . . . .”

In support of his objection to the tentative SOD, Bauldry filed a declaration of counsel. Bauldry’s trial counsel stated that she did not realize until after the trial was completed that there was not one but two accounts in Daggett’s name at RBC Dain Rauscher. Counsel admitted that the account she overlooked was an IRA that had been listed on Daggett’s disclosure statement as a community asset. She purported to accept responsibility for this error, but also blamed Daggett’s counsel for allegedly failing “ensure that all community property assets and debts were included in the court’s adjudication at trial.” Under these circumstances, Bauldry’s counsel requested that the court limit its orders to apply only to accounts that were specifically discussed at trial so as to avoid unjustly enriching one party at the expense of the other.

Daggett opposed Bauldry’s proposed modification to the tentative SOD. She argued that the orders dividing the parties’ accounts were proper because “oth parties testified at trial that there were no joint assets or debts other than the mortgage and the outstanding tax debt,” and because she had specifically requested that all accounts be confirmed as the separate property of the account holder.[2] Daggett also argued that Bauldry’s proposed modification would “open the proverbial door for [him] to make further claims of dividing assets, leading to prolonged litigation and postponement of a final decision.”

[b]4. The July 20, 2016 Order

On July 20, 2016, the trial court filed an order overruling Bauldry’s objection and adopting the tentative SOD as the final SOD of the court.

C. Bauldry’s Request to Adjudicate an Omitted Asset

On September 22, 2016, Bauldry filed a Request for Order to divide the parties’ interest in the IRA held in Daggett’s name at RBC Dain Rauscher (the Daggett IRA). In a supporting declaration, Bauldry alleged that the Daggett IRA was a community property asset valued at more than $200,000, and the trial court did not have knowledge of this account when it prepared the SOD.

Bauldry’s request was made pursuant to section 2556, which states: “In a proceeding for dissolution of marriage, for nullity of marriage, or for legal separation of the parties, the court has continuing jurisdiction to award community estate assets or community estate liabilities to the parties that have not been previously adjudicated by a judgment in the proceeding. A party may file a postjudgment motion or order to show cause in the proceeding in order to obtain adjudication of any community estate asset or liability omitted or not adjudicated by the judgment. In these cases, the court shall equally divide the omitted or unadjudicated community estate asset or liability, unless the court finds upon good cause shown that the interests of justice require an unequal division of the asset or liability.”

Bauldry argued the trial court had continuing jurisdiction to adjudicate the Daggett IRA as an omitted asset because evidence about this account had not been presented at trial due to his trial counsel’s mistake. Bauldry reasoned that, because evidence about this asset was not before the trial court when it issued the SOD, the Daggett IRA was not adjudicated by the dissolution judgment.

Opposing Bauldry’s request, Daggett highlighted the following facts: The Daggett IRA was disclosed in Daggett’s Preliminary Declarations of Disclosure. At trial, Bauldry requested that the Daggett IRA be used to offset any damage resulting from his unauthorized use of funds in his Insperity 401k. The SOD contains express orders dividing the parties’ retirement accounts and refusing to use the Daggett IRA as an offset for damages resulting from Bauldry’s breach of fiduciary duty. Under these circumstances, Daggett argued, the Daggett IRA was an adjudicated asset.

Following a November 21, 2016 hearing, the court took the matter under submission so it could further review the record. On November 23, 2016, the court filed an order denying Bauldry’s request to adjudicate an “Allegedly Omitted Asset.” The court found that the Daggett IRA was not an omitted asset under section 2556 because the court adjudicated this asset in section I, paragraph 6b and paragraph 6c of the SOD. The court also stated that what Bauldry was really asking was for the court to reconsider or set aside the judgment because Bauldry inadvertently failed to present evidence at trial regarding his alleged interest in the Daggett IRA. The court found that section 2556 did not afford Bauldry that remedy.

II. DISCUSSION

Bauldry contends that the trial court erred by concluding that the Daggett IRA is not an omitted asset within the meaning of section 2556. The parties agree that this question of statutory interpretation is subject to independent review on appeal. (Citing Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 724.)

A trial court has continuing jurisdiction under section 2556 “to award community estate assets . . . to the parties that have not been previously adjudicated by a judgment in the proceeding.” (§ 2556.) Here, the appellate record demonstrates that the Daggett IRA was adjudicated by the judgment resulting from the lengthy court trial conducted in 2015 and 2016. Therefore, Bauldry’s subsequent request for an order to divide this asset was properly denied. Bauldry’s arguments to the contrary are not well founded.

Bauldry argues that the Daggett IRA was not an adjudicated asset because the question about how to characterize this asset was not “properly raised by the pleadings, submitted for determination and actually litigated.” As support for this proposition, Bauldry cites Murphy v. Murphy (2008) 164 Cal.App.4th 376, 400–401. That case, which involved application of collateral estoppel principles to a substituted judgment, had nothing to do with section 2556. Furthermore, the rule discussed in Murphy states that “ ‘ “[w]hen an issue is properly raised, by the pleadings or otherwise, and is submitted for determination, and is determined, the issue is actually litigated . . . .” ’ [Citation.]” (Murphy, at p. 400.) Here, the record shows that a court trial was conducted for the purpose of dividing assets and debts, that the assets in question included the bank, investment and retirement accounts held in the name of either party, and that the trial court sitting as the trier of fact and law made explicit orders dividing those accounts among the parties.

Bauldry acknowledges that the SOD contains an order that all retirement accounts held in the name of a party were that party’s separate property, but he argues this fact is not determinative because “ ‘[t]he mere mention of an asset in the judgment is not controlling.’ ” (Quoting In re Marriage of Thorne and Raccina (2012) 203 Cal.App.4th 492, 501.) Instead, “ ‘[t]he crucial question is whether the [asset was] actually litigated and divided in the previous proceeding.’ [Citation.]” (Ibid.) As discussed, however, the trial court did not just mention retirement accounts in the SOD, it explicitly divided them among the parties.

Taking a different tack, Bauldry argues that the Daggett IRA was an omitted asset because it was not specifically mentioned in the SOD. We note, however, that multiple accounts that were confirmed as separate property were not specifically mentioned in the SOD. In any event, the Daggett IRA was mentioned by name in the SOD when the trial court declined to use that asset to offset damages resulting from Bauldry’s breach of fiduciary duty.

Bauldry contends the trial court’s reference to the Daggett IRA is not an adjudication of that asset within the meaning of section 2556 because there was no substantive evidence presented at trial to establish whether it was community or separate property or to establish its value. According to this argument, the trial court misconstrued section 2556 by concluding that it did not afford Bauldry relief for his trial counsel’s failure to present evidence about an asset at trial. Bauldry insists that this oversight by his counsel is precisely why the Daggett IRA is an omitted asset within the meaning of section 2556. As support for this novel argument, Bauldry mistakenly relies on In re Marriage of Huntley (2017) 10 Cal.App.5th 1053 (Huntley).

In Huntley, supra, 10 Cal.App.5th 1053, the appellant did not respond to her ex‑husband’s petition for dissolution of marriage, which led to the entry of a default judgment that “did not mention any community property.” (Id. at p. 1057.) Two years later, the appellant filed a section 2556 motion to adjudicate omitted community property, which the trial court denied on the ground that the appellant never moved to set aside the default. (Id. at pp. 1057–1058.) The Huntley court reversed, finding that the trial court had continuing jurisdiction under section 2556 to adjudicate the omitted property even though the appellant waited more than two years to bring her motion. (Huntley, at p. 1061.) In reaching this conclusion, the court recited several general rules, including that it does not matter whether the parties were aware of an asset when a prior judgment was entered because, “if the ‘court was not called upon to award it, and did not award it, as community property, separate property, or any property at all’ [citation], then the [asset] is a missed asset subject to a postdissolution claim. [Citation.]” (Id. at p. 1060.)

First, the Daggett IRA is not analogous to the community property assets in Huntley. Unlike the Huntley appellant, whose marriage was dissolved by a default judgment that did not mention any community property, Bauldry participated in a trial to divide the parties’ assets that took several months to complete and resulted in a 14-page SOD. That SOD contains express orders dividing the retirement accounts. Second, Huntley actually supports the trial court’s conclusion in this case that it does not matter whether Bauldry’s trial counsel was aware of the Daggett IRA during the presentation of evidence at trial. The determinative fact is that the trial court awarded the Daggett IRA as separate property, which compels the conclusion that this account was not an omitted asset under section 2556. (Huntley, supra, 10 Cal.App.5th at p. 1060.)

Finally, Bauldry contends that if the Daggett IRA was an adjudicated asset, the trial court abused its discretion by awarding it to Daggett. In pursuing this theory at oral argument, Bauldry’s appellate counsel appeared to suggest that the trial court had an affirmative duty to articulate an evidentiary basis for each ruling in the SOD, or at least for the allocation of the Daggett IRA in light of Bauldry’s specific objection to the tentative SOD. We will not address the merits of this claim because Bauldry has not appealed from the trial court’s SOD or the judgment resulting therefrom. Rather, his notice of appeal clearly states that he appealed only the November 23, 2016 order denying his section 2556 request to divide an asset that was allegedly omitted from the judgment. We hold that the trial court did not err by denying Bauldry’s request because the Daggett IRA was adjudicated by the judgment.

III. DISPOSITION

The November 23, 2016 order denying Bauldry’s request to divide an allegedly omitted asset is affirmed. Daggett is awarded her costs on appeal.

_________________________

SMITH, J.^*

We concur:

_________________________

STREETER, Acting P. J.

_________________________

REARDON, J.

^* Judge of the Superior Court of California, County of Alameda, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

A150426, In re the Marriage of Daggett and Bauldry