Marriage of Cappello

Filed 10/23/06 Marriage of Cappello CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

Mary Ann Cappello (Wife) appeals from the order modifying the amount of monthly spousal support paid by her former husband, A. Barry Cappello (Husband), from $11,727 to zero, while reserving jurisdiction. She contends the trial court abused its discretion because Husband did not prove a material change of circumstances to justify the modification, because the order requires her to liquidate her entire estate including her primary residence, and because the trial court improperly considered loan applications she made to purchase or refinance investment properties. She further contends the trial court erred when it refused to increase spousal support and when it denied her request for an award of attorney fees.

Preliminarily, we observe that while appellant presents the contentions as errors of law, they involve questions of fact. They were resolved adversely to her by the trial court which expressly ruled that she lacked credibility. This does not auger well for her contentions. We affirm.

Facts

The parties were married in 1970 and separated in 1990. They have no minor children. Their marital settlement agreement provided that Husband would initially pay spousal support of $23,500 per month. The parties agreed the support obligation would be reduced when their principal residence sold and when Wife either sold undeveloped real estate known as the Mulholland property or held it for three years. In a 1997 unpublished opinion, we affirmed an order enforcing these provisions and reducing spousal support to $11,727 per month. (In re Marriage of Cappello (April 17, 1997, No. B095275).)

In September 2004, Husband filed an order to show cause to modify or terminate spousal support pursuant to Family Code section 4322.[1] Wife's opposing income and expense declaration listed spousal support as her only monthly income. Her accountant opined that her real estate investments had produced a negative cash flow each month for the last four years and that her net worth was about $966,000. Wife's declaration stated that she had been unable to sell the Mulholland property because the permits required to develop it had expired.[2] Husband's reply papers included appraisals of Wife's real estate and other assets. His expert witness opined that Wife's property had a net worth, after taxes and liquidation expenses, of $2,735,530. That amount, if invested for a 6 percent return would produce annual, after tax income of $140,000.

Wife's "sur-opposition" contended that her estate was not sufficient to provide for her needs of $23,500 per month. At most, it would produce income of about $11,000 per month. Husband filed a "further reply" in which he contended Wife's statements concerning her income, expenses and assets were not credible because they were contradicted by loan applications she filed in 2002 and 2004. Neither loan application mentioned spousal support as a source of income. The 2002 application claimed a monthly income from interest and dividends of $34,311. In 2004, Wife claimed monthly income from the same sources of $29,218.

In its statement of decision, the trial court found that the "fundamental problem" in deciding whether Wife's estate was reasonably managed and sufficient for her proper support, "has been [Wife's] total lack of credibility." Her loan applications claimed monthly income that is much higher than the income reported on her income and expense declaration. She claimed to be spending $5,000 per month developing the Mulholland property, but also claimed that property has no value. She asserted that she had to spend her capital to meet her monthly expenses, but the value of her liquid assets has doubled since the 1992 judgment and she reported only modest consumer debt.

The trial court found that Wife should invest her assets for income rather than for capital growth. It further found that the value of her estate "is sufficient, if properly managed, to provide for her reasonable support." It declined, however, to terminate spousal support entirely, finding that Wife needed time to "adjust her portfolio . . . consider her alternatives and decide how best to meet her personal needs." Thus, it retained jurisdiction over spousal support and ordered that monthly support payments be reduced from $11,727 to zero in four stages between April 1, 2005 and March 1, 2006.

Discussion

Wife contends the trial court erred in modifying spousal support downward because Husband failed to show changed circumstances. She further contends the trial court improperly considered her loan applications and failed to account for debts secured by her real property.

"The trial court has broad discretion to decide whether to modify a spousal support order based on a material change of circumstances." (In re Marriage of Terry (2000) 80 Cal.App.4th 921, 928.) " ' "So long as the court exercised its discretion along legal lines, its decision will not be reversed on appeal if there is substantial evidence to support it." ' " (In re Marriage of Biderman (1992) 5 Cal.App.4th 409, 412.) We will not reverse the order absent a clear showing of abuse. (In re Marriage of Schmir (2006) 134 Cal.App.4th 43, 47.) There has been none here.

"A motion for modification of spousal support may only be granted if there has been a material change of circumstances since the last order." (In re Marriage of Biderman, supra, 5 Cal.App.4th at p. 412.) Wife contends Husband failed to carry his burden to prove a material change of circumstances. We disagree. The material change of circumstances here are the increase in Wife's income and the value of her estate. The trial court noted that Wife's liquid assets have doubled since the original judgment, to $833,000. Her IRA has a balance of about $250,000. Wife has acquired additional real estate and reports only a modest amount of consumer debt. Her 2002 and 2004 loan applications reported monthly income from interest and dividends of more than $15,000. The trial court valued her real estate at about $4.5 million and found that, if she liquidated non-performing real estate and invested the proceeds for a conservative return on capital of 3 percent, she would generate $13,000 in income each month. This, taken together with her interest and dividend income of $15,000 per month, would exceed the original spousal support of $23,500 per month. These findings by the trial court are supported by substantial evidence, including the appraisals and other expert opinions submitted by Husband and Wife's loan applications.

The trial court properly considered Wife's loan applications in determining her income. In In re Marriage of Chakko (2004) 115 Cal.App.4th 104, a child support case, we affirmed an order declaring a father's income to be $40,000 per month based on a loan application he had submitted. (Id. at p. 106.) The order also precluded father from offering any evidence to the contrary, as a sanction for his failure to cooperate in discovery concerning his income. (Id. at p. 107.) Wife contends the trial court erred in considering her loan applications because she was never the subject of a discovery sanction. But Chakko is not so limited. It affirms the trial court's ability to make a factual finding of income based on the most credible evidence available to it.

We reached a similar conclusion in In re Marriage of Calcaterra and Badakhsh (2005) 132 Cal.App.4th 28. There, the evidence a father provided of his income contradicted itself. The trial court noted a "huge discrepancy between the tax return, the 2002 and 2003 loan applications, his income and expense declaration, and [his] testimony . . . ." (Id. at p. 35.) The figures on his income and expense declaration, his loan applications and his tax returns, all signed under penalty of perjury, just didn't "add up." (Id. at p. 38.) We held the trial court "was not required to accept the statement of income on the tax returns[,]" and could instead rely upon the most credible evidence before it "and the reasonable inferences which flow therefrom." (Id. at pp. 35, 38.)

Wife's conduct in this case is, admittedly, not as egregious as that of the parents in In re Marriage of Chakko, supra, 115 Cal.App.4th 104 and In re Marriage of Calcaterra and Badakhsh, supra, 132 Cal.App.4th 28. Nevertheless the trial court found that she demonstrated a "total lack of credibility[,]" because the documents she submitted concerning her finances just "didn't add up." Wife's loan applications, which were signed under penalty of perjury, contradicted her income and expense declaration, her deposition testimony and each other. In these circumstances, the trial court properly relied upon the evidence it considered most credible in determining whether Wife's present estate is sufficient to meet her needs.

Wife contends the trial court erred in valuing her assets because it did not reduce the value of her real estate by the encumbrances against it. As the trial court found, however, Wife did not introduce admissible evidence of any encumbrances against her real property. Having failed to provide credible evidence of her debts, Wife cannot complain they were underestimated by the trial court. (See e.g., In re Marriage of Heiner (2006) 136 Cal.App.4th 1514, 1525 [wife waives objection to trial court's refusal to allocate any portion of husband's lump sum personal injury recovery to income where wife presents no evidence of proper allocation]; In re Marriage of Hinman (1997) 55 Cal.App.4th 988, 1002 [non-custodial parent waives contention that deductions from income should have been made in determining child support where parent did not make those contentions in trial court].)

Wife contends the trial court erred when it considered the liquidation value of her assets in determining the income she could derive from reasonable investments. She contends that, while liquidation value may be relevant to the termination of spousal support, it is not relevant to the modification of support. Wife also contends the trial court erred when it considered the value of her primary residence because it is not an income-producing asset. Neither argument has merit.

In exercising its discretion to modify spousal support, the trial court considers the criteria set forth in section 4320, the same criteria it considers in making the initial order. (In re Marriage of Terry (2000) 80 Cal.App.4th 921, 928.) They include, "The extent to which the earning capacity of each party is sufficient to maintain the standard of living established during the marriage . . . [,]" and "The obligations and assets" of each party. (§ 4320, subd. (a), (e).) Earning capacity may include "income that could be derived from income-producing assets as well as from work . . . ." (In re Marriage of Dacumos (1999) 76 Cal.App.4th 150, 154; see also In re Marriage of

De Guigne (2002) 97 Cal.App.4th 1353, 1365 [earning capacity and income derived from inherited wealth properly considered in determining child and spousal support].) Here, Wife's investment properties generate income and she has built up substantial equity in her home. The trial court properly considered both in determining her "obligations and assets" pursuant to section 4320.

Wife contends the trial court's order erroneously requires her to liquidate her assets to generate the income necessary to support herself. She relies on the dissenting opinion in In re Marriage of Terry, supra, which noted that many California courts "have expressly refused to consider income derived from community property awarded to the supported spouse in the division of the marital property when deciding whether to deny, reduce, or terminate support; and numerous other cases have held that a supported spouse is not required to invest and manage his or her estate so as to maximize income, or to invade capital (especially where the capital asset was community property awarded to the supported spouse in the division of the marital property) to meet his or her current support needs." (In re Marriage of Terry, supra, 80 Cal.App.4th at pp. 943-944, dis. opn. of Sepulvdea, J.)

Here, the trial court did not order Wife to liquidate any specific assets or otherwise change her investment strategy. It factually found that, given the income she reported on loan applications, her current assets were sufficient to provide for her reasonable support. On the basis of that finding, it reduced her spousal support to zero. This order is consistent with the majority opinion in In re Marriage of Terry. There, the majority held that, "it is not up to the trial court to direct [the supported spouse] to do anything in particular. The trial court's job is to ascertain whether the estate reasonably could generate sufficient income for proper support, not to second-guess how the spouse will manage that estate to ensure sufficient income. Thus a decision that an estate is adequate or sufficient is not a decision that any particular investment strategy must change, although that may happen." (Id. at p. 932.)

Wife is in a position similar to that of the supported spouse in Terry. The trial court factually found that her estate reasonably could generate sufficient income for her support. It did not require her to pursue any specific investment strategy or to liquidate any particular asset. There was no error.

In re Marriage of McNaughton (1983) 145 Cal.App.3d 845, 852-853, does not mandate a different result. In that case, the trial court awarded spousal support based on its factual finding that the wife's estate was not sufficient to meet her needs. Here, the trial court made the opposite finding and it entered an order consistent with that finding.

In re Marriage of Henry (2005) 126 Cal.App.4th 111, relied on by Wife, is also distinguishable. There, a mother became temporarily disabled and sought a reduction in her monthly child support payment. Although all of the evidence showed that Wife's income had declined as a result of her disability, the trial court declined to modify her child support obligation because it considered the equity in her home to be income. The Court of Appeal reversed, holding that, although income is broadly defined for purposes of calculating child support, it does not include "merely the appreciation in value of [the supporting parent's] assets." (Id. at pp. 118-119.) Of course, ours is not a child support case. Moreover, the trial court here did not calculate Wife's income solely on the equity in her primary residence. It based its income finding on all of her assets and on the income figures she reported, under penalty of perjury, on the loan applications.

Wife contends the matter should be remanded because the trial court's statement of decision does not include findings on the marital standard of living, the changed circumstances that justify the modification, or the parties' "failed expectation" concerning the value of the Mulholland property. We are not persuaded. First, the trial court did not err by failing to make a finding on the marital standard of living. It noted that the judgment entered in July 1992 awarded spousal support of $23,500 per month, a figure that reflected the marital standard of living. The trial court had discretion to give little weight to this factor in determining Wife's present need for support given the length of time since the entry of judgment. (§ 4320; In re Marriage of Lynn (2002) 101 Cal.App.4th 120, 132; In re Marriage of Rising (1999) 76 Cal.App.4th 472, 479, fn. 9.) Second, as we noted above, the trial court identified the increase in Wife's income and in the value of her estate as changed circumstances justifying modification. Additional express findings in the statement of decision were not required. Finally, as Husband points out in his respondent's brief, additional express findings on the Mulholland property were not necessary because that was the subject of our opinion on the prior appeal in this case.

Wife contends the trial court erred when it denied her request for an award of attorneys fees. Again, we disagree. "A motion for attorney fees in a marital dissolution action is left to the sound discretion of the trial court and will not be overturned absent an abuse of that discretion." (In re Marriage of Huntington (1992) 10 Cal.App.4th 1513, 1524.) "We may overturn the trial court's award only if ' "no judge could reasonably" ' have made it." (In re Marriage of O'Connor (1997) 59 Cal.App.4th 877, 884, quoting In re Marriage of Sullivan (1984) 37 Cal.3d 762, 768-769.) The trial court may rationally deny a request for attorney's fees where, as here, both spouses have substantial wealth, even though one spouse is wealthier than the other. (In re Marriage of O'Connor, supra, 59 Cal.App.4th at p. 884.)

Having concluded that the trial court properly modified spousal support downward, we need not consider Wife's contention that it erred in failing to increase support.

The order is affirmed. Costs to Husband.

NOT TO BE PUBLISHED.

YEGAN, J.

We concur:

GILBERT, P.J.

COFFEE, J.

James W. Brown, Judge

Superior Court County of Santa Barbara

______________________________

Bergman Law Group, Daniel A. Bergman, for Appellant.

Taylor, McCord, Praver & Cherry, a Law Corporation, Richard L. Taylor and Patrick G. Cherry, for Respondent.

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

[2] Wife requests that we take judicial notice of a California Coastal Commission "notice of violation" pertaining to the Mulholland property. We deny the request for judicial notice. (See 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 800, p. 832.)