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Case of the Month Archive

July 2020

Fam C §§271 and 1101 are not intended to redress injury but to spur cooperation and full disclosure. . .


In affirmance, Second District holds that trial court did not err by determining that lender had not written off the balance of a line of credit, deducting the balance from the value of FH awarded to wife, sanctioning husband for failing to make required disclosures about another house, or by declining to order reimbursement of property taxes paid by husband.


In re Marriage of Gutierrez

(May 6, 2020)

California Court of Appeal 2 Civil B291507, (Div 8) 48 Cal.App.5th 877, 262 Cal.Rptr.3d 322, 2020 FA 1936, per Wiley, J (Bigelow, PJ and Grimes, J, concurring). Los Angeles County: Shaller, J, affirmed. For appellant: Ronald Funk, CALS, CFLS, (888) 249-7560. For respondent: C. Athena Roussos, CALS, (916) 670-7901. CFLP §J.80.3.5.


Mayela and Alberto Gutierrez were married in 2001 and later had two children. In 2006, they bought a house in Hacienda Heights, financing the purchase with a loan of $204,000 from Washington Mutual. Also during the marriage, the couple bought property in Havasupai, Arizona, for $135,000. They separated in 2008 and began disso proceedings, after which Mayela and the two kids remained in the family home in Hacienda Heights.


After their separation, Mayela was unable to keep up the payments on the family home, the value of which had dropped, and she stopped making payments on the mortgage and line of credit. When Chase Bank acquired Washington Mutual, it referred her delinquent loan to a collection agency, which pursued her for payment of $170,000. Mayela lacked the funds to pay but was able to negotiate with the bank to forestall foreclosure. She began making payments of $700 a month in 2011 and was able to bring both the mortgage and the line of credit loans current. Meanwhile, in 2008, the trial court ordered Alberto to sell the Arizona property and pay Mayela half of the proceeds to alleviate the financial distress she was under from his lack of financial support. Alberto sold the property in 2011 but did not tell Mayela and kept the sale proceeds of $38,000 for himself.


At the parties' 2015 disso trial, Alberto called two witnesses to testify in support of his claim that Chase Bank had written off the loans on the family home. Richardra Winder, a mortgage bank research officer, repeatedly claimed that the loans had been written off, but on cross examination, admitted being unclear as to when in 2009 the write-off occurred. Moreover, Winder could not explain why Mayela was still making payments on the loans in 2013 if they had been written off in 2009 and had no documentation regarding Mayela's agreement with the bank. Winder stated that the bank's policy was to refund payments made after a loan was charged off but did not know why Mayela hadn't received any such payments. Alberto's other witness, Richard Mease, a tax preparer and paralegal, testified that he concluded that the write-off had occurred from his interpretation of documents given him by Alberto. He too had no explanation for the bank's accepting Mayela's monthly payments if the loans had been written off.


As the trial progressed, the trial court found that Alberto had breached his fiduciary duty to Mayela by failing to disclose the existence of another house in Rosemead on his PDD and FDD. The trial court ordered sanctions for the breach per Fam C §§1101 and 271. Other evidence revealed that Alberto failed to share the proceeds from the sale of the Arizona property until the time of trial, some three years later. He claimed that he had used the funds to pay property taxes and balances on joint credit cards but provided no documentation of those payments. Nevertheless, he sought reimbursement of $3,578 for his tax payments. Alberto made other accusations concerning Mayela's sale of a jeep and an old all-terrain vehicle, her conversion of a watch belonging to him, and retention of $20,000 to $30,000 worth of tools he had left in the garage.


After the trial concluded, the trial court issued a lengthy and detailed statement of decision in which it determined that the loans on the family home had not been written off and deducted the remaining balance of $171,099 from the value of the house, which it awarded to Mayela. The trial court rejected the testimony of Alberto's witnesses, finding that it made no sense to accept that Mayela was simply making monthly payments as a volunteer and the bank was accepting them without question. The lower court repeated its sanctions order. The court declined to order reimbursement for the taxes Alberto paid on the Arizona property, because it would be unfair and unreasonable to do so given his failure to pay Mayela's share of the sale proceeds for three years, leaving her in dire financial straits and in fear of losing the family home. And, the trial court concluded that Alberto's other contentions regarding the vehicle sales, his watch, and his tools were not supported by the evidence.


Alberto appealed, but the Second District affirmed.


Unbelievable. . .
Alberto first contended that the lower court erred by reducing the value of the family home by subtracting the outstanding balance on the house loan. The justices didn't agree. They reasoned that the lower court was entitled to reject Winder's testimony regarding the write-off, since the loan officer had no documentation to support her contentions and her testimony was unclear. The panel described Winder as having been "trapped. . .in a simple contradiction" by maintaining that there had been a write-off, while admitting that Mayela was still making payments on the loans, which Chase was accepting. The justices thought that the lower court had it right when it said that it strained credulity to believe that she was making payments voluntarily. Summing up, the justices found that substantial evidence supported the trial court's determination and ruling re the loans and the house value.


A slight misunderstanding. . .
Alberto next argued that the trial court erred by ordering sanctions against him for breach of fiduciary duty. He claimed that the trial court was required to find that Mayela had no knowledge of the allegedly concealed asset, as is required in civil fraud cases. The justices pointed out that in In re Marriage of Feldman (2007) 153 Cal.App.4th 1470, 64 Cal.Rptr.3d 29, 2007 CFLR 10701, 2007 FA 1304, the appellate court had shot down a similar argument. Those justices explained that sanctions under §§1101 and 271 are imposed not to "redress civil injuries to a victim" but rather to create incentives for divorcing spouses to engage in good conduct and make full disclosures. Moreover, they act as a spur to improve the efficiency of discovery and lower the costs of disso proceedings. Noting that Alberto had neither attempted to distinguish Feldman nor cited any contrary case law, the panel concluded that Alberto's argument failed.


Really, Alberto?. . .
The justices then turned to Alberto's contention that the lower court should have ordered reimbursement for the taxes that he paid. He claimed he'd never been ordered to act immediately to disburse the sale proceeds from the Havasupai property. The panel reasoned that the lower court had ordered the sale of the property to help alleviate Mayela's financial distress. Taking prompt action was implicit in the order. The justices thought it was unreasonable of Alberto to believe that the order permitted him to sell the property in secret and keep the money for himself. The panel also noted that Alberto failed to provide documentation to support his claim that he'd used the sale proceeds to pay taxes and credit card debt, but the trial court had accepted the claim and made its ruling on equitable grounds. Summing up, the justices found no abuse of discretion in the lower court's rulings regarding this property sale. As for Alberto's other contentions, the panel concluded that substantial evidence supported the lower court's rulings with regard to them.





We frequently urge readers to choose their witnesses carefully and to prepare them fully to testify. This case is a prime example of why those preparations are so important. It also serves as a good reminder of the value of arguing equitable grounds on which the trial court may pin its rulings where, as here, the facts on your side may be a little iffy. Finally, the justices emphasize that the sanctions statutes cited by the lower court are not intended to be used for a redress of injury. However, they approve the lower court's equitable ruling that, in essence, may be seen as a redress of injury to Mayela and the kids for Alberto's actions in sitting on the sale proceeds while they wondered where their next dollar was coming from. More than one way to skin a cat, eh?


Library References
11 Witkin, Summary of Cal. Law (11th ed. 2020) Marriage, § 25

Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group) ¶ 14:235.1



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