Estate of Eyler

Filed 3/28/07 Estate of Eyler CA2/6

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

The decedent, Charles Eyler, received the proceeds from a personal injury settlement while living apart from his wife, Katherine Eyler. After his death, Katherine claimed the funds were community property. Charles's mother and sister disagreed, arguing that the funds were Charles's separate property because he received them while separated from Katherine. The trial court ruled that the funds are community in character because Charles's physical injury occurred while he and Katherine were living together. We agree and affirm.

FACTS

Appellants Rose and Gary Ripel are Charles's sister and brother-in-law. Appellant Edna Eyler is Charles's mother. After his death, the family produced two trusts allegedly executed by Charles, one in 2001 and another in 2002. The trial court ruled that the 2001 trust was the controlling document. That ruling has not been appealed. The only proceeding before us is Katherine's petition to characterize the property in the 2001 Trust (trust).

Charles and Katherine^[1]were married on March 10, 1973. Following an industrial accident, Charles underwent surgery to his lower extremities which required him to use a wheelchair for an extended period. Due to inactivity, he became obese, weighing over 300 pounds. In 1997 he was prescribed the drug Phen-fen for weight loss. One of the potential side effects of the drug is pulmonary hypertension. Charles took the drug for three months. He began experiencing severe shortness of breath and, on June 16, 1998, began pulmonary testing.

On October 14, 1998 Charles was evaluated by a cardiologist who was unable to arrive at a diagnosis. On October 15, 1998 a pulmonary internist concluded that Charles's shortness of breath was "physiologic and not just related to obesity or psychogenic causes." The internist ordered a "Cardio Echo Study which showed pulmonary hypertension, the etiology of which remained unknown." In November 1998, Katherine left the family home. Charles continued to undergo testing and, on March 8, 1999, the pulmonary internist diagnosed him as suffering from primary pulmonary hypertension.

While Charles and Katherine were living apart, he received a personal injury settlement of $2.8 million from the Phen-fen class action litigation. Charles placed the proceeds in a savings account in his name and the name of his and Katherine's adult son, Christopher Eyler. Katherine alleged that Charles paid community debts from this account as well financing the remodel of the marital home.

On October 11, 2001, Charles and Katherine executed the 2001 trust. Midstate Bank was named as the Trustee, with Charles and Katherine as co-trustees. The trust was funded with the proceeds from the Phen-fen litigation, Charles's retirement funds from a former employer (Mobil Oil), the assets and vehicles of the family business (Eyler Electric), the marital residence and a boat and trailer.

On April 5, 2002, Katherine removed $250,000 from the trust to purchase a home in Illinois. Several weeks later, Charles filed a petition for dissolution of marriage, but took no further action. In January 2004, their son died and they decided to attempt a reconciliation. Katherine returned from Illinois and moved into the marital home in May.

On August 30, 2004, Charles and Katherine entered into a stipulation and order. The stipulation recited their litigation history; that Charles continued to allege the personal injury judgment to be his sole and separate property; and that Katherine believed the monies to be community property. At their request, the court issued orders 1) vacating prior court orders restraining them from removing funds from the trust; 2) giving Charles management and control of specific bank accounts; 3) ordering Charles to pay Katherine a monthly allowance of $2,529; and 4) dismissing the dissolution proceedings. Charles died on September 19, 2004.

Petition for Order to Characterize Trust Property

On March 28, 2005, Katherine filed a petition for an order characterizing the property held by the Charles and Katherine Eyler 2001 Trust. She asked the court to confirm as community property the personal injury award, trust assets, marital home, family business and a boat and trailer.

Katherine argued that, although she left the marital home in November 1998, she continued to act as Charles's wife. No papers for legal separation were filed. She accompanied him to social engagements and transported him to his medical appointments. She assisted him in his Worker's Compensation claim, Phen-fen class action litigation and continued to run the family business and maintain the family home. They filed joint tax returns.

Katherine alleged that Charles "repeatedly demonstrated his intent that the money be considered community property." He paid "family expenses," including her living expenses and purchased her gifts from these funds. Katherine claimed that Charles repeatedly asked her what should be done with the money and only referred to it as belonging to both of them.

The record does not contain a copy of the trust instrument and there is no indication whether there were any beneficiaries. However, appellants filed opposition to the petition identifying Rose Ripel (Charles's sister) as a "contingent beneficiary" under the trust. Appellants challenged most of Katherine's factual allegations, claiming she visited Charles periodically but had not lived with him since 1998. They requested that the court order Katherine to return $250,000 to the estate and the value of two automobiles.

The trial court took the matter under submission and issued a written ruling. It concluded that "For the purpose of Family Code 780 and 781, the court finds that the common law rule, as enunciated in Witkin, controls this situation. Despite Charles' ignorance of the cause of action, there was a wrongful act (the ingestion of Phen-fen and the resultant interaction with his system) and appreciable harm (certainly sufficient to seek medical attention) that occurred before Katherine left in November of 1998. The court characterizes the monies received in the Phen-fen settlement as community property. With respect to the other assets in the trust at issue the court finds their character to be community property as well."

DISCUSSION

Characterization of Phen-fen Settlement

Appellants challenge only the trial court's ruling that the Phen-fen proceeds are community property. They do not ask us to review the court's property characterization of the remaining assets.

"'The finding of a trial court that property is either separate or community in character is binding and conclusive on the appellate court if it is supported by sufficient evidence . . . .' [Citations.]" (Beam v. Bank of America (1971) 6 Cal.3d 12, 25.) We review the trial court's property characterization to determine whether any substantial evidence, contradicted or uncontradicted, supports the finding. (In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 849; Marriage of Ananeh-Firempong (1990) 219 Cal.App.3d 272, 279.)

All property acquired during marriage is community property. (Fam. Code,  760.)^[2] Monies received from a personal injury judgment or by way of settlement are community property if the cause of action for the damages arose during the marriage. ( 780, 2603, subd. (a).)If the cause of action arose while the parties were living apart, the money is the separate property of the injured spouse. ( 781.) Upon dissolution, the court will assign community property personal injury damages to the party who suffered the injury. If the interests of justice require, the court may apportion the funds between the parties. ( 2603, subd. (a)-(b).)^[3]

A cause of action generally arises when the injury was suffered. (Hogoboom and King, Cal. Practice Guide: Family Law (The Rutter Group 2006)  8:266; In re Marriage of Klug (2005) 130 Cal.App.4th 1389, 1398-1399.) "Once injury occurs, the injured party has a property interest which can be valued and characterized as separate or community property." (Klug, at p. 1398 [wife's recovery in legal malpractice action was her separate property].)^[4] The determination of the date of the injury is a question of fact. (Adams v. Paul(1995) 11 Cal.4th 583, 588 [legal malpractice]; Brown v. Bleiberg (1982) 32 Cal.3d 426, 436 [medical malpractice].)

Charles took the Phen-fen drug for three months in 1997 and experienced physical symptoms that caused him to seek medical treatment. He began pulmonary functioning testing in June 1998. In October, test results indicated that he was suffering from pulmonary hypertension. Katherine left in November and, in March 1999, Charles received a conclusive diagnosis of primary pulmonary hypertension. Substantial evidence supported the trial court's finding that the injury occurred while Charles and Katherine were living together, thus the Phen-fen settlement was properly characterized as community property.

Application of Family Code section 2603

Appellants argue that, if the cause of action arose before Katherine left the home and is therefore community property, the trial court should have assigned the proceeds to Charles pursuant to section 2603. Katherine contends that appellants have waived this argument by raising it for the first time on appeal.

Despite appellants' failure to raise the issue below, we address their contention on the merits. Section 2603 applies when a personal injury judgment is community property. Upon dissolution of marriage, the court shall award the entirety of that settlement to the injured spouse. If the interests of justice require a different result, the court may apportion the award the between the spouses, as long as the injured spouse receives at least one-half of the proceeds. Section 2603 contemplates the survival of both spouses and the injured party's need for continued support. It is inapplicable here, where the injured spouse is deceased and the only matter before the trial court is the division of estate assets.

On the final page of their brief, appellants assert that "the judgment should be modified to require Katherine to return the $250,000 that she obtained by forging Charles' signature." We are without authority to grant their request because this issue is not part of the ruling from which appellants appealed.

The judgment is affirmed. Costs on appeal are awarded to respondent.

NOT TO BE PUBLISHED.

COFFEE, J.

We concur:

GILBERT, P.J.

YEGAN, J.

Roger T. Picquet, Judge

Superior Court County of San Luis Obispo

______________________________

John F. Hodges, Glen R. Lewis and William Peter Terhune for Appellants Rose Ripel, Gary Ripel and Edna Eyler.

Tardiff Law Offices and Neil S. Tardiff for Respondent Katherine Eyler.

Publication courtesy of San Diego pro bono legal advice.

Analysis and review provided by Poway Property line attorney.

^[1]We refer to respondent by first name for purposes of clarity.

^[2]All further statutory references are to the Family Code unless otherwise stated.

^[3]Section 2603, subdivision (b) provides in part, "Community estate personal injury damages shall be assigned to the party who suffered the injuries unless the court, after taking into account the economic condition and needs of each party, the time that has elapsed since the recovery of the damages or the accrual of the cause of action, and all other facts of the case, determines that the interests of justice require another disposition. In such a case, the community estate personal injury damages shall be assigned to the respective parties in such proportions as the court determines to be just, except that at least one-half of the damages shall be assigned to the party who suffered the injuries."

^[4]Klug contains an extensive discussion concerning the difference between when a cause of action "arose," as that term is used in the Family Code, and when a cause of action "accrues," as the term is employed in the statutes of limitation. (In re Marriage of Klug, supra, 130 Cal.App. 4th at pp. 1399-1400.) This distinction is irrelevant to our analysis because we are concerned only with the characterization of the settlement proceeds. We are not called upon to determine that Charles would be barred from filing a lawsuit. "[T]he statute of limitations is irrelevant to the question of when the cause of action arose for purposes of [property] characterization and division." (Id. at p. 1401.) It should be noted that Charles did not bring an action against Phen-fen; he received his settlement proceeds via class action litigation.