Marriage of Hipp

Filed 8/1/07 Marriage of Hipp CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from an order of the Superior Court of Orange County, Derek W. Hunt, Judge. Reversed and remanded with directions.

Law Offices of Marjorie G. Fuller, Marjorie G. Fuller, J.E.T. Rutter, and Shara Beral Witkin; John R. Schilling for Appellant.

Carl Fabian; Thomas F. Kamph & Associates and Thomas Ferber Kamph for Respondent.

Appellant Antoinette V. Hipp (Antoinette) appeals from an order appointing a receiver to sell seven real estate properties in order to divide community property between her and her ex-husband, respondent Alfred C. Hipp (Alfred).[1] The sale was unnecessary; the court could have allocated the properties between the parties. The parties agree the court abused its discretion by ordering the sale. We concur.

Alfred nevertheless defends the receivers appointment. He contends the receiver was needed to protect the properties against Antoinettes mismanagement. But the court did not find Antoinette had mismanaged the properties. It appointed the receiver solely to effectuate the sale. As no reason existed for the sale, none existed for a receiver. We reverse.

FACTS

The court entered a judgment of dissolution terminating Alfreds and Antoinettes marriage in 2002. It reserved jurisdiction over property issues, which it tried in 2005. The main issue was whether seven properties acquired during the marriage six rental properties managed by Antoinette and Antoinettes residence were community property or Antoinettes separate property.

In response to the courts tentative ruling the properties were community property, Alfred asked the court to allocate the properties between the parties. Alfred noted a sale might impose very serious tax consequences on both parties to their disadvantage. Antoinette conceded the court could achieve an equal division of community property through an allocation.

The court balked at valuing and allocating the properties. It indicated it would order the properties sold and the proceeds divided 50-50 unless the parties agreed in writing on a specific, property-by-property allocation. It stated, [M]y instinct is going to be unless these two can find sweet reason after 14 years, the chances are Im going to order [the properties] sold. And Ill probably bring [the receiver] back into the picture for the purpose of conducting the sale. And well just divide by two . . . .  [] Im not inclined to sit here and listen to appraiser after appraiser to tell me what the [properties are] worth on this block this week. I dont want to hear it. You guys want to come to some treaty back out there in the hall and say you got this property, you got this property, that is fine with me; but that is a settlement. That could have been affected years ago. It declared, Im not a settlement judge, Im a trial judge.

After trial, the court issued a written memorandum of intended decision finding the properties were community property and must be sold. The memorandum stated, In the courts opinion, the total value of the community property in controversy exceeds $50k and therefore in accordance with Fam[ily] C[ode] 2552(a), unless the parties are able to agree in writing to some other method, the court will order a sale of each of the subject properties to be conducted by a receiver . . . the proceeds to be divided equally between the parties as of the date of sale, after adjustments as ordered by the court . . . .

The court also issued a signed minute order appointing the receiver. The order stated, [T]he appointment of a receiver in the instant action is necessary . . . in that certain properties must be sold to achieve a fair and equitable division of their proceeds between the parties hereto. It empowered the receiver to manage the six rental properties and place all seven properties for sale. We stayed the sale pending this appeal.

DISCUSSION

We begin with the part of the order directing the sale of the seven properties.[2] The court has a duty to value community property and divide it equally. (Fam. Code,  2550; In re Marriage of Cream (1993) 13 Cal.App.4th 81, 89-90 (Cream).)[3] Its discretion in doing so is broad but not limitless. (Cream, at pp. 88-90 [court abused discretion by auctioning community property business between spouses instead of valuing it and awarding it to one of the parties].) The courts have never ascribed to judicial discretion a potential without restraint. (In re Marriage of LaMusga (2004) 32 Cal.4th 1072, 1105 (LaMusga).)

In ordering the sale, the court abused its discretion in three ways. First, it yielded to a nonexistent statutory mandate. (See LaMusga, supra, 32 Cal.4th at p. 1105 [a trial court abuses its discretion whenever it applies the wrong legal standard to the issue at hand].) The court felt compelled by 2552(a) to order the sale because the parties did not agree in writing to a specific property allocation and the value of the community estate exceeded $50,000.

No such Family Code section exists. Section 2552 addresses the time at which community assets and liabilities are valued. It is wholly inapplicable here. Section 2550 requires the court to divide community property equally unless the parties agree otherwise. It does not direct the court to use any one particular method for the division. (Cream, supra, 13 Cal.App.4th at p. 88.) Section 2554 allows the court to submit the division of community property to arbitration if the parties cannot agree to a division and the community estate does not exceed $50,000. The court apparently conflated these three statutes, manufacturing a requirement to sell community property when the parties cannot agree to a specific division and the community estate exceeds $50,000. A sale is one possible option for dividing community property; it is not a statutory imperative. It is certainly not imperative to sell the properties before entering a final judgment dividing the community property, as the court did here.

Second, the court abused its discretion by rejecting the method of community property division that both parties wanted. [T]he court must accept stipulations of the parties with regard to the disposition of their property. (Cream, supra, 13 Cal.App.4th at p. 91.) The court clearly must accept the parties agreement to the ultimate, item-by-item community property division this is the agreement the court wanted the parties to reach here. But the court must also accept the parties lesser agreement to the method for determining the final division. In Cream, each spouse wanted the community property business, but they agreed the court should award it to one spouse or the other. The court abused its discretion by rejecting this agreement, ordering an interspousal auction, and, if the party winning the auction was unable to complete the sale, selling the property to a third party at a public auction or through a listing process. (Id. at pp. 84-85, 88-90.)

Here, neither Alfred nor Antoinette requested the court to sell the seven properties. Alfred suggested the court allocate the properties between them and warned against a sale; Antoinette agreed an allocation was possible.[4] The court ordered a sale nonetheless. If the court had any doubt about the parties preference before it issued its order, the parties soon made their desire clear. Antoinette sought an allocation in her opposition to the receivers petition for instructions, a motion for reconsideration, and two writ petitions. Alfred, for his part, applied for an order directing an allocation. The court refused to relent because the parties would not agree in writing to the allocation. This was error. The court should have respected the parties wishes as much as possible by valuing and allocating the properties to effect an equal division.

The court could not shirk its responsibility simply because it was not inclined to value the properties. The Cream court rebuffed a similar dodge, where the trial court threatened to sell the community property business if neither party purchased the business as a result of the interspousal auction. (Cream, supra, 13 Cal.App.4th at p. 89, fn. 5, 90.) The court stated, [I]t would be an abuse of discretion to sell the business out from under both parties, simply because they could not agree upon its value or the one to whom it should be awarded. Those decisions are the courts responsibility. . . .  No matter how difficult the decision, the trial judge must bite the bullet, value the business and award it to one of the parties. No one ever said judging was easy. (Cream, supra, 13 Cal.App.4th at p. 90.)

Third, the court abused its discretion by choosing an especially onerous method for dividing the community property. Alfred warned the court that selling the properties would needlessly trigger tax liability. The court brushed off Alfreds warning. Even the receiver would later ask the court to sell only one property and allocate the other six properties. It noted an allocation has the distinct advantages of (1) eliminating most of the costs of sale to preserve more equity for [Alfred] and [Antoinette], (2) avoiding most tax consequences to the parties, and /or complications of a [Internal Revenue Code section] 1031 exchange, and (3) bringing the estate to a quick close. The courts choice of a sale that would diminish the community estate instead of an allocation that would preserve the community estate was arbitrary and capricious, an abuse of discretion.

This leads us to the part of the order appointing the receiver. Alfred contends the court, having questioned Antoinettes recordkeeping and credibility, could have appointed a receiver to protect the properties against Antoinettes mismanagement. Perhaps. But it did not. It found a receiver was necessary only insofar as certain properties must be sold to divide the community property. It stated no other reason for the appointment. And it did not find Antoinette had mismanaged the rental properties. In fact, it ordered a hearing to determine how much the community owed Antoinette for managing the rental properties.

[R]eceivers are often legal luxuries, frequently representing an extravagant cost to a losing litigant. When it appears that no reasonably certain benefit will result to one litigant, and a distinct disadvantage will result to another, courts should weigh carefully the propriety of appointing a receiver. (City and County of San Francisco v. Daley (1993) 16 Cal.App.4th 734, 744.) With no sale to conduct, appointing a receiver to wrest the rental properties from Antoinettes apparently adequate management would result in no reasonably certain benefit to Alfred and a distinct disadvantage to Antoinette. (Ibid.) Indeed, appointing the receiver disadvantaged both parties because the community was liable for his fees and expenses. The court abused its discretion in appointing the receiver. (Ibid. [standard of review].)

DISPOSITION

The order appointing the receiver and directing the sale of the real properties is reversed. The matter is remanded to the court with directions to: (1) vacate the order directing the sale; (2) order the receiver to present his final account and report and request for discharge pursuant to California Rules of Court, rule 3.1184, within 15 days of the remittitur; (3) hold a hearing on the receivers request for discharge on the earliest law and motion calendar following the statutory notice period under Code of Civil Procedure section 1005, subdivision (b); and (4) value and divide the community estate, allocating the real properties between the parties to the greatest possible extent. The stay of the sale, having served its purpose, is lifted.

Antoinette shall recover her costs on appeal.

IKOLA, J.

WE CONCUR:

SILLS, P. J.

OLEARY, J.

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[1] We refer to the parties by their first names for ease of reference and to avoid confusion. No disrespect is intended.

[2] An order appointing a receiver is appealable. (Code Civ. Proc.,  904.1, subd. (a)(7).)

[3] All further statutory references are to the Family Code unless otherwise stated.

[4] The parties call the allocation an in kind division. But in an in kind division, each spouse gets half of an easily divisible asset each gets half of the Snickers and half of the Milky Way. (Cream, supra, 13 Cal.App.4th at pp. 88, 94, appen.) In an asset distribution division, however, each party gets different assets of equal value one spouse gets the Snickers, the other gets the Milky Way. (Id. at p. 88.)