Marriage of Harman

Filed 10/24/06 Marriage of Harman CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 977.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 EIGHT

APPEAL from a judgment of the Superior Court of Los Angeles County.Michael J. Convey, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Reversed and remanded.

David K. Jefferies and Solveig L. Evers for Appellant.

Law Offices of Barbara B. Haug and Barbara B. Haug for Respondent.

Appellant David Harman (Husband) appeals from a judgment on reserved issues in this dissolution action. Husband and respondent Teresa M. Harman (Wife) had been married for over ten years before their separation in March 2001. There were two minor children of the marriage. The parties’ marital status terminated on December 30, 2002, and a judgment of dissolution as to status only was filed January 3, 2003. The judgment from which Husband appeals was entered October 15, 2004.

PROCEDURAL HISTORY AND STATEMENT OF FACTS

Evidence at trial

Husband’s father started a business, Tug-a-Lug, with inventions that were “a creation of his mind.” The main product of Tug-a-Lug is a dolly for helicopters, an invention of Husband’s father in about 1976.[1] Husband would make modifications to the original invention and worked side by side with his father. There was conflicting evidence regarding whether anyone has a patent on the invention, with Husband and his father representing there was no patent.

According to Wife, she and Husband worked up to 10-12 hours a days for six or seven days a week at Tug-a-Lug. Husband and his father dispute the number of hours she worked, but not that Wife worked at the office and at home and sometimes took the children to the office with her or that she was never paid for her work.[2]

Husband received stock in Tug-a-Lug during the years of marriage and eventually owned 51 percent of the corporation. Wife thought Husband’s father was retiring and wanted to transfer the business to both Husband and Wife, who were running the business. She was very surprised when her former father-in-law stated at trial that the shares of stock were a gift to his son. But she could not point out any document that contradicted her former father-in-law’s testimony that he intended the shares as a gift to his son. On the other hand, Husband and his father could point to no documentation that the stock was a gift. Wife knew the stock was in Husband’s name, indeed recorded the transfers in the corporate minutes, and never asked for shares of stock in her own name. Both Husband and his father testified that the Tug-a-Lug shares Husband received from his father were not compensation, and he paid no taxes on receiving those shares.[3]

According to Husband, Tug-a-Lug was struggling and there were four to eight weeks before trial when Husband did not receive his $3,000 per month paycheck. He would not give an opinion as to the earnings of the business for the fiscal year July 1, 2002, through June 30, 2003, and had received an extension on the corporate tax return for that period. He also would not testify as to the corporate income for previous years.[4] Husband testified that there was no agreement he would receive additional belated or delayed compensation when his dissolution case is over.

The corporation also pays Husband’s medical insurance. During the year before the hearing Husband resided in a 4-room trailer, called a “fifth wheel,” on the premises at Tug-a-Lug.[5] Before that, he was living in a camper and also in his father’s house. Husband pays no rent; Tug-a-Lug pays for all utilities, automobile expenses, and his telephones.[6] He “sometimes” pays for his own gas and automobile repairs and listed $150 per month for those expenses out of his own pocket.

At the beginning of their marriage, the family residence belonged to Wife as her separate property. According to Husband, he paid some of the bills for the house and, after they married in December 1990, Wife put the house in both their names. Between December 1990 and the March 2001 date of separation, Husband put his money into making improvements in the house.

Judgment

In its judgment of October 15, 2004, from which this appeal arises, the court ordered no spousal support but reserved jurisdiction over Husband’s right to spousal support until April 1, 2006. Child custody issues have not been appealed, so we omit those findings and orders. We set forth only the rulings on child support and other issues necessary to address the contentions on appeal.

The trial court ordered Husband to pay $1,176 per month in child support. Each parent was to have one child as a dependency exemption for tax purposes. Husband’s income was based on wages of $3,000 per month and the court found he received “additional benefits from his employer, Tug-a-Lug, Inc., that are deemed to be income to him” of $1,450 per month for the purpose of child support. His “net spendable income” after support is $2,741 per month. Wife’s reasonable wages “are imputed to be” $1,800 per month.

The court ordered various personal property received as shares of community property and/or items that were confirmed as separate property. Regarding firearms, the court took judicial notice of Commissioner Siegel’s 2001 order regarding the AK-47 rifle and found the order was not appropriate “in a domestic violence case for that type of firearm.” Given the possibility of danger and keeping in mind the safety and welfare of the parties and the children, the court ordered Husband’s attorney to surrender the AK-47 rifle to the sheriff’s department and gave “no credit or reimbursement to either party for the value of that AK-47.” The court added “Simply stated, as a matter of policy and common sense, that rifle has no business being anywhere near the streets of the Antelope Valley, and this Court believes that that promotes the best interests of the children and promotes their health, safety, and welfare.”

Regarding the .45 Colt, a “legal, authorized type of firearm,” the court found it of some value to the community and observed it was “very disturbing that this firearm was not turned over in accordance with Commissioner Siegel’s domestic violence orders.” Therefore, Husband was ordered to retrieve the .45 handgun solely for the purpose of selling it to Husband’s attorney for fair market value.[7] If Husband’s counsel, who proposed the sale to him, should choose not to purchase the handgun, counsel was ordered to deliver it to the Sheriff’s Department.

In a further division of the property, the court awarded the 5,000 shares of Tug-a-Lug stock to Husband and the family residence to Wife. The court found that Wife had the burden of proof to show that the shares of stock were community property and “failed to show this was compensation to [Husband.]” The court noted the documents do not reflect specific intent to make a gift but “by the same token the minutes and the documents themselves do not adequately reflect as an evidentiary matter that this was compensation.” Therefore, the court found insufficient evidence to show stock was “anything other than a gift [to Husband from his father] pursuant to Family Code § 770.” The value of the community property portion of the house was determined to be $30,000, an evaluation Husband does not contest on appeal. Husband’s share was therefore $15,000.

In an issue contested on appeal, the court gave Wife a credit for the contribution of her labor to Tug-a-Lug during the marriage, which the court found was “in excess of the $15,000 she owes [Husband] for his interest in the [family residence].” The court found that the good will of the “family business“ increased significantly because of Wife’s efforts and allowed Husband “to increase his income and continue with a steady flow of income into the community throughout their marriage. It is not tangible. It is not defined clearly by [Wife], but it does have value, and in balancing the equities of division of the community assets and liabilities, [the court found] that [Wife’s] contribution in value did exceed $15,000 . . . .” Moreover, “in order to balance the equities in the division of property, assets, debts, and liabilities, the only remaining asset that [Husband] has from the community to give back to [Wife] to make that reimbursement, as fair and equitable as possible is his share of the community residence.”

Finally, the court awarded Wife $10,000 in attorney fees. The judgment included references to delay occasioned “primarily by [Husband]” on the custody issues and due to the recalcitrance of Husband’s father regarding producing the records of the business. As compensation to Wife “for the delay in the custody part of this case, which delayed all other aspects of this case being resolved,” the court made the cited award to Wife.

CONTENTIONS ON APPEAL

Husband contends: (1) The trial court erred in characterizing the value of rent-free trailer space and utilities as “nontaxable” earnings. (2) The trial court erred in offsetting Husband’s $15,000 community interest in the marital residence against the $15,000 the trial court found to be the value of Wife’s labor for Tug-a-Lug. (3) The trial court erred in awarding Wife $10,000 in attorney’s fees. (4) Court orders regarding both firearms were an abuse of discretion and were made by a court lacking jurisdiction to make such orders. (5) The court order to destroy the AK-47 rifle without compensation to either party was an unlawful taking of personal property without due process. (6) The trial court’s order that the .45 colt handgun be “sold” to respondent’s attorney was an abuse of discretion and made without requisite jurisdiction.

DISCUSSION

1. The trial court erred in characterizing the value of rent-free trailer space and utilities as “nontaxable” earnings.

Appellant Husband contends the trial court erred in finding his rent-free trailer space and utilities were employment-related income or earnings rather than a gift from his father; in finding that the value of the trailer space and utilities was $1,050 per month when there was no evidence before the court on the issue; and in characterizing as “nontaxable income” the value of appellant’s rent-free housing for purposes of the DissoMaster support calculation.[8]

The trial court did not err in finding the value of the trailer space and utilities received by Husband amounted to compensation from Tug-a-Lug and not a gift from Husband’s father. This was a factual question; unlike the shares of stock, which Husband and his father testified were gifts from the father, these perquisites were apparently from Tug-a-Lug and the trial court could find them to be compensation. (See Marriage of Schulze, supra, 60 Cal.App.4th 519, 528-529 [Even though Husband’s parents may make gifts to him, where his “parents are also his employers, . . . the imputation of the free rent may be upheld as compensation from those employers”].)

We do, however, agree with Husband that, as in Schulze, supra, 60 Cal.App.4th 519, 529, the characterization of such imputed income as nontaxable “runs counter to the inclusion of the items as “income” within [Family Code] section 4058 in the first place.” That is, if such perquisites were income from his employer, they were most likely not “nontaxable” earnings and, unless demonstrated to the contrary, would be considered “taxable” income for the purpose of the DissoMaster calculations.

If the rent-free space and utilities are counted as compensation, Husband objects to lack of evidence of the $1,050 amount attached to the perquisites, except for the $400 medical insurance, by the trial court. Given the new significance to appellant of that figure, we shall remand for a determination of the dollar amount to be assigned to Husband’s compensatory perquisites as well as a legal determination of their taxable or nontaxable status.

2. The trial court erred in offsetting Husband’s $15,000 community interest in the marital residence against the $15,000 the trial court found to be the value of Wife’s labor for Tug-a-Lug.

As Husband argues, even if Wife’s contribution in labor for Tug-a-Lug was worth $15,000, his community half of that would be $7,500, not $15,000. However, the trial court found the value to “exceed” the $15,000 Wife owes Husband for his interest in the family residence. In our view, the amount of $15,000 is indeed low for her part-time work from 1990 to 1994, and at least 30 hours per week from 1994 through 1998, and perhaps as much as 10 to 12 hours per day for six or seven days a week.

Husband argues that the critical question is whether Wife’s unpaid labor was a contribution to the community or to Tug-a-Lug, a corporate (although very closely held corporate) employer and, if to Tug-a-Lug, Husband contends she is not entitled to any credit for that work.[9] If Husband is correct, Wife’s assets decrease and his increase, which will impact the child support calculation.

In addition, regarding compensation to Wife, the trial court imputed $1,800 reasonable wages to Wife at the time of trial, effectively lowering Husband’s support obligations. Wife does not work outside the home and that $1,800 imputation might have been in part an effort to equalize the division in attributing $15,000 for Wife’s prior unpaid earnings. To the extent Wife does not get credit for her earlier years of unpaid work, the trial court might reevaluate whether Husband gets the advantage of imputed income that Wife does not now receive. Thus, upon remand, the trial court should revisit both aspects of Wife’s employment and compensation, imputed or not.

3. The trial court did not abuse its discretion in awarding Wife $10,000 in attorney’s fees.

“An award of attorney fees under Family Code section 2030 is reviewed for abuse of discretion, and we therefore must affirm unless no judge reasonably could make the order. [Citation.]” (In re Marriage of Rosen (2002) 105 Cal.App.4th 808, 829; see also In re Marriage of Aylesworth (1980) 106 Cal.App.3d 869, 880.)

The trial court stated it was ordering Husband to pay Wife’s attorney’s fees, in the amount of $10,000, based on Family Code sections 2030 and 271. At the time of the hearing, Wife had been billed over $38,000 by her attorney. Wife, who has not worked outside the home since her separation in March 2001, testified that she has personally paid counsel $500 and that Wife’s mother loaned her the rest, with the expectation of repayment. There was another existing bill of over $4,000, not including the hearings of January 2004. Wife’s attorney represented there were fees of $38.089.94 plus an additional $6,000 to $6,500, plus $500 paid by Wife directly to counsel, for a total of about $45,089.34. Wife described the many proceedings, including custody issues, conciliation court appearances, multiple settlement negotiations, and many court appearances. She asked the court to award what is fair.

Husband’s attorney represented that his fees had been $27,372.50 prior to trial and that he would probably bill another $5,000 to $6,500 for trial. Counsel proposed an offer of proof that Husband would testify he paid counsel $16,923.25 of that amount by borrowing the money from his father. Husband testified that his income and expense declarations show he paid $3,200 and then $14,673.25 of his attorney’s fees from earnings. He also borrowed about $5,000 from his father.

Appellant Husband contends the fee award was a disguised and improper discovery sanction, imposed without notice. (See, e.g., Fam. Code, § 271 [allowing costs and attorney’s fees “in the nature of a sanction” for frustrating the policy to promote settlement of litigation, after notice but “only after notice to the party against whom the sanction is proposed to be imposed and opportunity for that party to be heard”].) To the extent the award was imposed pursuant to Family Code section 271, Husband was told in open court that that was a basis of the ruling and did not ask either for further notice, for a separate hearing on the “sanction” issue, or for reconsideration or for a new trial on the fee issue. The declarations of Wife’s counsel left no doubt that the delays in the proceedings and the conduct of Husband and his attorney expanded a $3,000 - $5,000 case into one where the two parties have incurred fees over ten times that amount. Husband’s argument at trial was that all of the hearings were necessary not that, if they were not necessary and were compelled by Husband’s conduct, that fees would be improper. Husband was on notice. Like the wife in In re Marriage of Petropoulos (2001) 91 Cal.App.4th 161, 179, Husband has waived any objection he may have had on that ground.

Moreover, “Family Code section 2030 permits the trial court to order payment of attorney fees and costs as between the parties based upon their ‘ability to pay’ and their ‘respective incomes and needs’ in order to ‘ensure that each party has access to legal representation to preserve all of the party’s rights.’ (Fam. Code, § 2030, subd. (a).) ‘The purpose of such an award is to provide one of the parties, if necessary, with an amount adequate to properly litigate the controversy.’ (In re Marriage of Duncan [(2001)] 90 Cal.App.4th 617, 629.) The trial court may award attorney fees under section 2030 ‘where the making of the award, and the amount of the award, are just and reasonable under relative circumstances of the respective parties.’ (Fam. Code, § 2032, subd. (a).)” (In re Marriage of Rosen, supra, 105 Cal.App.4th 808, 829.)

“ ‘In determining what is just and reasonable under the relative circumstances, the court shall take into consideration the need for the award to enable each party, to the extent practical, to have sufficient financial resources to present the party’s case adequately, taking into consideration, to the extent relevant, the circumstances of the respective parties described in [Family Code] Section 4320.’ (Fam. Code, § 2032, subd. (b).) The parties’ circumstances described in section 4320 ‘ “include assets, debts and earning ability of both parties, ability to pay, duration of the marriage, and the age and health of the parties.” ‘ [Citation.] In assessing one party’s need and the other’s ability to pay, the court may consider evidence of the parties’ current incomes, assets, and earning abilities. [Citation.]” (In re Marriage of Rosen, supra, 105 Cal.App.4th 808, 829.)

In our view, the trial court did not abuse its discretion in awarding Wife $10,000 in attorney’s fees. A relatively simple case involving a family residence that had been Wife’s separate property at marriage, stock shares, and an array of fiercely fought over personal property, as well as child custody, escalated into multi-year litigation. Husband, who both was one of two people then employed by Tug-a-Lug and owned 51 percent of its stock, with his father owning the other 49 percent, purported to know nothing about the corporation’s recent earnings when questioned at trial. Tug-a-Lug need not have been joined in order to prompt that information from Husband. Despite a 2001 order, Husband had stored the .45 firearm and had not turned it over to his counsel as ordered.[10] These examples are emblematic of the roadblocks thrown in Wife’s way that extended the litigation and forced her to incur attorney’s fees that should not have been necessary in this particular set of circumstances.

Appellant has failed to demonstrate reversible error in the award of attorney’s fees to Wife. If the reassessment of the parties’ assets and income upon remand compels a new hearing on attorney’s fees based on the revised figures, the trial court may do so.

4. The court orders re the firearms were not an abuse of discretion and were made by a court with jurisdiction to make such orders.

The augmented record on appeal provided by Wife’s counsel reveals that paragraph 8 of the December 2001 order entered by Commissioner Siegel, ordered: “[Wife] shall deliver the AK47 firearm to [Husband’s attorney], together with any documentation regarding [its] purchase, ownership and registration, forthwith. Said firearm shall not be return[ed] to [Husband] under any circumstances.” Paragraph 9 of the 2001 order provided: “As to all firearms, other than said AK47, each of the parties shall deliver all other firearms to [Husband’s attorney] for temporary safekeeping. These firearms shall be returned to the parties either by written agreement or further order of the court.”

At the outset of the proceedings, Husband had three handguns and one AK-47. Wife gave the police the .22 caliber and .32 caliber handguns and, following the 2001 order, Husband’s counsel was given the AK-47. Husband agreed he still had the .45 caliber revolver at the time of the hearing on reserved issues and that it was never taken from him or turned over to his attorney for safekeeping. Rather, according to Husband, although he knew he was not supposed to have a gun, the .45 was locked in the safe at Tug-a-Lug and had been there since the beginning of this lawsuit. He conceded the other handguns were probably in the custody of the police.

Counsel added there was a “stipulation“ that the AK-47 was turned over to Husband’s counsel, and a value had been placed on it.^[11] Husband estimated the value of the .45 at $800. Wife asked that pursuant to the previous stipulation, the .45 gun be turned over to the sheriff or husband’s counsel, provided Wife is entitled to a credit of half the $800, with a similar order regarding the AK-47.^[12]

During his argument to the court, Husband’s attorney stated that if the court wished to prevent the return of the firearms to either of the parties and decided to set a value on them, counsel would buy them from the estate “with the understanding that they will not be returned to either of these parties under any circumstances. I think that’s the best satisfactory resolution.” Following trial, Husband’s counsel filed a declaration stating he had been ordered to transport the AK-47 that had been delivered to him pursuant to the 2001 order and that on January 16, 2004, he delivered the firearm to the Palmdale Sheriff’s station. In February 2004, Husband delivered the .45 pistol to his attorney pursuant to the 2001 order.

a. The AK-47

Paragraph 8 of the December 2001 order entered by Commissioner Siegel, provided: “[Wife] shall deliver the AK47 firearm to [Husband’s attorney], together with any documentation regarding [its] purchase, ownership and registration, forthwith. Said firearm shall not be return[ed] to [Husband] under any circumstances.” Husband’s trial brief asked for him to be awarded the other guns, but did not mention the AK-47. Wife’s trial brief characterized all the guns as community property, and at trial her attorney stated the guns in Husband’s counsel’s possession had “an agreed value of $800.”[13]

The order regarding the AK-47 was in accordance with Commissioner Siegel’s order in December 2001. The trial court inferentially assumed that AK-47 was community property in ordering “there shall be no credit or reimbursement to either party for the value of that AK-47.” Husband did not demonstrate that possession of the AK-47 was legal or that he had sought review of the 2001 order that that firearm should not be returned to him “under any circumstances.” Given the parties’ failure to contest the earlier order, the trial court was justified in a determination that the AK-47 should not be returned to the parties.

b. The .45 Colt handgun

The 2001 order stated regarding the firearms other than the AK-47 that “each of the parties shall deliver all other firearms to [Husband’s attorney] for temporary safekeeping. These firearms shall be returned to the parties either by written agreement or further order of the court.”

The trial court recognized a monetary value in the .45 handgun as part of the community. The court could have awarded the handgun to Wife as part of the division of property, but did not. Instead, Husband was to be given credit for the value of the .45 handgun, in the amount paid by his counsel. That agreement was proposed by Husband’s counsel.

We need not decide if Husband would be deprived of his property, assuming the handgun was destroyed as a consequence of counsel’s not purchasing the handgun, without any credit to Husband for his part of a community asset, as the alternative part of the court’s order permitted. The record on appeal demonstrates that Husband’s counsel received the .45 Colt from Husband; there is no indication if counsel purchased it or if it was conveyed to law enforcement.^[14] Thus, there is no evidence of prejudice to Husband. In view of this record, we need not decide if the trial court had the authority to destroy a firearm in a case where there is a history of some domestic violence and both parents share custody of their minor children.

DISPOSITION

The judgment is reversed and the cause is remanded for a further hearing in accordance with this decision. Wife is awarded costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

COOPER, P.J.

We concur:

RUBIN, J.

FLIER, J.

Publication Courtesy of California attorney directory.

Analysis and review provided by Oceanside Property line Lawyers.

[1] According to Husband’s father, the business once employed eight people and by the time of trial was down to Husband and his father.

[2] Wife worked at Tug-a-Lug part-time from 1990, also working in her former position in title insurance. From about 1994 through 1998, she worked about 30 hours a week at Tug-a-Lug and nowhere else and did the books, helped put dollies together, helped cut steel, made wiring harnesses, and painted. Husband testified they agreed that the pay would go to him and she never actually got a paycheck.

[3] Husband’s father testified that he transferred shares to Husband each year from 1994 to 1999, in an effort to transfer the business to his son because the father was going to retire, and that the father now owns 49 percent and Husband owns the other 51 percent. His testimony was not included in Husband’s designation of record on appeal, forcing Wife to file a motion to augment the record to include it and other relevant testimony from December 2003. Husband’s minimal clerk’s transcript likewise forced Wife’s counsel to file a motion to augment the clerk’s transcript. To neglect inclusion of parts of the trial record that may be unfavorable is not good appellate advocacy. The exclusion of relevant testimony and documentation is not at all helpful to this court.

[4] Husband’s father testified at trial. He did not bring the minute book and stock transfer records to court although he was subpoenaed to do so and then said he did not know where they were in the corporate offices. At one point, there was also a body attachment warrant out for his arrest.

[5] Husband testified his brother owned the fifth-wheel trailer.

[6] Tug-a-Lug also pays Husband’s Blue Cross coverage of $400 per month, which includes the children. Husband had not given Wife a copy of the current insurance cards.

[7] The court suggested but did not order that the firearm “may be used as a credit or offset owed by [Husband] to his attorney. [Wife] shall receive no credit or offset regarding the .45 Colt handgun.”

[8] “The DissoMaster is one of two privately developed computer programs used to calculate guideline child support as required by [Family Code] section 4055, which involves, literally, an algebraic formula. The complexity of California’s child support scheme has been the subject of considerable judicial criticism. [Citations.]” (In re Marriage of Schulze (1997) 60 Cal.App.4th 519, 523-524, fn. 2.)

[9] Even if Wife’s work was for her employer Tug-a-Lug, Husband eventually owned 51% of the corporation through the gift of stock from his father. Husband and his father certainly benefited from Wife’s unpaid employment.

[10] Husband’s father’s recalcitrance in producing business records was also cited by the court as an example of conduct causing delay. If not prompted or joined in by Husband, the obstinacy of Husband’s father cannot be held against Husband. We note, however, that evidentiary sanctions favorable to Wife may have been available in that the combined conduct of Husband and his father effectively deprived her of information she needed to prove Husband’s earnings and assets, relevant to the issue of the support of the parties’ two minor children.

[11] The court remembered nearly falling off its chair when it heard there was an AK-47 involved and noncompliance with domestic violence restraining orders. Husband’s counsel stated that Commissioner Siegal signed an order regarding the AK-47. Judicial notice was taken of the 2001 order. Husband testified he understood he had to turn the .45 over to the police to be destroyed unless the court made another order.

[12] Husband’s counsel told the court he had “no desire to keep” the AK-47 and suggested the parties bid on “this ridiculous contraption”. Wife’s attorney replied that she did not want either party to have a gun, which was pursuant to the previous order. Husband’s attorney maintained “Unfortunately it doesn’t follow the property laws of the State of California.” The court responded “That happened a long time ago. All you need to do is you need to tell me what you think I should do, and I’ll make the decision.” Wife asked that the guns be turned over to the sheriff’s department for destruction, with no credit to either Husband or Wife. Husband’s counsel argued he was “a little confused about the authority being relied on to order the destruction of the firearms.”

[13] At the proceedings on December 9, 2003, Wife’s counsel appeared to be stating that in the division of property, Husband would receive the guns.

[14] In contrast, the record contains documentation that Husband’s counsel conveyed the AK-47 to the Sheriff’s Palmdale Station.