Opinion
D077596
07-15-2021
ANTHONY ASARO et al., Plaintiffs and Respondents, v. MATTEO GIACALONE et al., Defendants and Appellants.
S|Tratege Law and J. Scott Scheper for Defendants and Appellants Matteo Giacalone and Madelyn Giacalone. Higgs Fletcher & Mack, Roland H. Achtel and Scott J. Ingold for Plaintiff and Respondent Anthony Asaro. Van Dyke & Associates, Richard S. Van Dyke; Law Offices of James A. Bush and James A. Bush for Plaintiffs and Respondents Jon Maniscalco and Michael Maniscalco.
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County, No. 37-2015-00034908- PR-TR-CTL Julia C. Kelety, Judge. Affirmed.
S|Tratege Law and J. Scott Scheper for Defendants and Appellants Matteo Giacalone and Madelyn Giacalone.
Higgs Fletcher & Mack, Roland H. Achtel and Scott J. Ingold for Plaintiff and Respondent Anthony Asaro.
Van Dyke & Associates, Richard S. Van Dyke; Law Offices of James A. Bush and James A. Bush for Plaintiffs and Respondents Jon Maniscalco and Michael Maniscalco.
DATO, J.
This probate litigation involves competing claims to $965,335 that the court determined was originally held in a trust established by Nicola and Antoinette Giacalone, now both deceased. The outcome depends on whether the money derives from the couple's community property, or instead from Nicola's separate property. If the latter, beneficiaries of a Survivor's Trust (including defendants Matteo and Madelyn Giacalone (collectively, the Giacalones) take all. But if it was community property, then half should have been allocated to a Residual Trust, of which plaintiffs Michael Maniscalco, Jon Maniscalco (collectively, the Maniscalcos) and Anthony Asaro are beneficiaries.
Because several of the parties have the same surname, for clarity we use first names.
The Giacalones appeal from the probate court's order determining the $965,335 was community property and ordering them to transfer $482,677.50 (plus interest) to the Residual Trust. They contend the court erred by (1) deciding the issue without hearing live witness testimony, and (2) determining they bore the burden of establishing the money was separate property. We reject these contentions and affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Trust and Community Property Agreement
Nicola and Antoinette married in 1953. In 1985, they created the Giacalone Family Trust (Trust) and entered into a community property agreement. Except as to certain joint tenancy bank accounts and life insurance, they agreed that “all property acquired by either or both [h]usband and [w]ife[, ]... whether before or after the date of this Agreement... shall be the community property of husband and wife.” In 2005, Nicola and Antoinette assigned to themselves as cotrustees “all of their right, title, and interest in and to all of the assets owned by either of them that would otherwise be subject to a probate proceeding on the death of either [t]rustor.”
Nicola and Antoinette had no children. Under the Trust as amended, when the first of them died, the Trust was to be divided into a Survivor's Trust and a Residual Trust. The Survivor's Trust would consist of the surviving spouse's one-half share of the community property, plus all of that spouse's separate property. The Residual Trust would contain the balance-the deceased spouse's one-half interest in the community property, plus his or her separate property.
B. The $970,000 Loan to Jon
In April 2009, physicians diagnosed Antoinette with Alzheimer's Dementia and she was incapable of managing her financial affairs. That same month, Nicola appointed Antoinette's nephew Jon as his “attorney-in-fact” with broad powers over his assets. In September 2010, Jon transferred a $970,000 brokerage account held by the Trust to himself in exchange for an unsecured promissory note in the same amount payable to Nicola individually. A few months later, Nicola appointed Jon as a cotrustee of the Trust.
The note provides for 15 years of interest-only monthly payments (at four percent per annum interest), with the outstanding balance due at the end of that period.
C. Antoinette Dies; Litigation Ensues
Antoinette died in November 2010. After a falling out between Nicola and Jon in May 2011, Nicola revoked Jon's power of attorney, removed him as cotrustee, and appointed his nephew Matteo in his place. Jon responded with petitions to remove Matteo as cotrustee and to have a conservator appointed for Nicola. These claims were settled in October 2011. As part of the settlement, Jon withdrew his objection to Matteo serving as cotrustee and agreed to repay the $970,000 loan by transferring a $966,000 Wells Fargo account titled in his name that was “formerly an asset of Nic[ola] or the Trust....” “Nic[ola] and/or the Co-Trustees” agreed to cancel Jon's promissory note, retaining any payments he had made in the interim.
Matteo and Madelyn are the son and daughter-in-law of Nicola's deceased brother.
Instead of transferring the Wells Fargo account as called for, Jon gave the cotrustees a $965,335 Wells Fargo cashier's check payable to “Giacalone Family Trust” and “[Matteo] Giacalone, co-trustee.” Matteo and Jon both signed a receipt, stating, “These funds represent the entire amount contained in the Wells Fargo investment account, formerly an asset of the Giacalone Family Trust, and referenced to [sic] in the [s]ettlement [a]greement....” The $965,355 was deposited in a separate property trust for Nicola.
D. Division of Trust Assets into Survivor's and Residual Trusts
In November 2011, Nicola divided the Trust assets into the Survivor's and Residual trusts, as required following Antoinette's death. Nicola represented that the community property Trust assets were valued at $5.7 million. He allocated $2,875,800 of those assets to each of the two trusts. But the $965,335 was not included as an asset of either.
Nicola died in 2016. In 2017, a “Revised Notification of Trust Division” was submitted to the beneficiaries of the Residual Trust showing the division of community property assets between the survivor's and residual trusts. Once again, the $965,355 is not listed; it was being treated as Nicola's separate property.
E. The Petitions Regarding Allocation of the $965,355
In July 2018, the Maniscalcos filed an amended petition “for return of property to residual trust.” They asserted that the $965,355 was improperly characterized as Nicola's separate property and that half ($482,667.50) should have been allocated to the Residual Trust as Antoinette's share of a community property asset. Asaro joined in that petition and later filed his own petition making the same claim. The parties submitted briefs, declarations, and documentary evidence relevant to the characterization issue. At a hearing on March 6, 2020, the court heard argument. It ultimately determined that the $965,355 was community property because in 1985 Nicola and Antoinette “drew a firm line in the sand” and provided that whatever they had then and going forward was community property. Additionally, there was “absolutely nothing that would show” the money was from “separate assets.” Having determined that the promissory note was a community asset, the court ruled that “when the promissory note was paid off, that returns as a community property asset.”
DISCUSSION
In asserting that the trial court erred in characterizing the $965,335 as community property, the Giacalones make two procedural arguments. They first contend the trial court was obligated to conduct an evidentiary hearing with live witness testimony before deciding the issue. They also maintain the court misallocated the burden of proof in order to reach its conclusion.
A. The Court Correctly Refused to Conduct a Hearing with Live Witnesses.
The Giacalones contend the probate court erred “when it summarily decided disputed issues” without “a full trial.” They claim that when “first given the opportunity to address the issue” at the March 6 hearing, counsel “made clear” he was not consenting to a ruling “without an evidentiary hearing.” Citing local probate court rules and Estate of Bennett (2008) 163 Cal.App.4th 1303 (Bennett) for the proposition that the court was required to hear live witnesses absent a stipulation to the contrary, they assert that the court “effectively ignored the entire Evidence Code.”
1. Additional Procedural Facts
The probate court ordered the parties to submit points and authorities on whether the $965,355 was community or separate property. In a 21-page filing on January 16, 2020, the Giacalones' lawyer, J. Scott Scheper, asserted that the “sworn [deposition] testimony” of Nicola's former attorney, Anthony Romano, “reveals six key factors” showing it was Nicola's separate property: (1) the promissory note was in Nicola's name only; (2) the settlement agreement ambiguously referred to the underlying investment account as “formerly an asset of Nic[ola] or the Trust”; (3) Jon controlled drafting the $965,355 check, so it being made payable to the Trust is “not dispositive, ” and in any event, transferring an asset to a trust does not determine or change its community or separate character; (4) Antoinette had already died when the money was repaid, “so there was no community”; (5) Nicola “specifically stated” the money was his separate property; and (6) Jon was acting under a power of attorney and as cotrustee, but has not produced any documents to show the source of the funds or contradict Nicola's separate property characterization.
In an accompanying filing entitled “Summary of Evidence, ” Scheper proposed 44 factual findings that he supported with 238 pages of attached exhibits including deeds, Trust documents, the community property agreement, e-mails, attorney letters, the $970,000 promissory note, excerpts of depositions, bank statements, and the settlement agreement.
The same day, the Maniscalcos' attorney, Richard S. Van Dyke, filed points and authorities asserting the $965,355 was community property. Invoking the presumption of community property under Probate Code section 5305, he argued that “in the absence of any evidence showing a contrary source of the funds..., the repayment proceeds must be characterized as a community property Trust asset.” Like Scheper, Van Dyke also submitted documentary evidence including Trust documents, bank statements, and deposition excerpts. Asaro, separately represented by Amanda McCarty, also filed points and authorities with accompanying exhibits.
Probate Code section 5305, subdivision (a) provides in part: “if parties to an account are married to each other, whether or not they are so described in the deposit agreement, their net contribution to the account is presumed to be and remain their community property.”
Meanwhile, in addition to the dispute about the $965,355, at the same time the parties were also litigating a demurrer to Asaro's amended petition, which in part involved whether some or all of Asaro's claims were time-barred. At a hearing on January 22, 2020 pertaining to the demurrer, the court scheduled a two-hour evidentiary hearing for March 6 “to nail down the factual elements that would suggest the statute [of limitations] has been met or not.”
After the court asked counsel, “Anything else that we can accomplish today?” Scheper asked the court to address “what step we take next” regarding the $965,335, which was now fully briefed. The court replied:
“[I]n addition to the statute of limitations, why don't we continue on to argue the separate and community property points and authorities on that same date, March 6th?”
Scheper responded that resolving that issue “may very well require... some witness presentations” and involve “a more contested hearing and possibly with witnesses to testify.” (Italics added.) The court left that question open until it had more fully considered the points and authorities, stating, “If it turns out that, having read the briefs, we're going to need to do something more th[e]n we will....”
McCarty confirmed, “So we are not submitting additional evidence or briefing. The evidence we presented and filed per the court's deadline rests and the hearing will just be continued till the 6th.” The court replied, “Right.”
About two weeks before the scheduled March 6 hearing, at the parties' request, the court continued the evidentiary hearing on the statute of limitations issue. Thus, the hearing would be limited to the community/separate property characterization of the $965,335, to be followed with “general case management.”
At the very start of the March 6 hearing, the court asked the lawyers to confirm they would argue the matter:
“The Court: And the parties agreed that we're going to hear argument on that today? Is that where we are?”
“Mr. Van Dyke: “We're prepared to do that.
“Ms. McCarty: Yes, Your Honor.
“Mr. Scheper: Sure, Your Honor.”
After noting that Scheper filed a supplemental brief that morning, the court stated, “So why don't we proceed in this way? I will tell you my tentative ruling on that and then we can go from there.” None of the lawyers objected.
The court stated, “So my tentative ruling is that the $965,000 payment was community property of the trustors.” It was only then that Scheper claimed live witnesses would be necessary. He asserted, “I don't think that this is an issue that can be just decided on briefing. I think witnesses are required relative to a lot of things here. We need to understand the foundation of the documents and some testimony about those things.” At this point, the reporter's transcript reflects silence-neither the court nor any of the lawyers responded to Scheper's comment. Instead, the record shows that Schaper spoke next: “But coming back, I guess, I will start with the supplemental brief that I submitted.”
In the argument that followed, Scheper ultimately conceded there was no evidence that the $965,355 originated as Nicola's separate property:
“The Court: And I guess you're saying you just don't know where that money came from.
“Mr. Scheper: This has been the challenge all along. [¶]... [¶] We don't know when any assets got to Jon. We don't know the source of them. [¶] All we know in terms of evidence that could be in front of Your Honor is simply the promissory note is made out to just [Nicola] at a time when he was married but could have had separate property assets.” (Italics added.)
The fact that the promissory note was payable to Nicola alone could not affect the community versus separate property characterization. As the court explained:
“Nic[ola]'s handling of it is not a way to change a community asset [to] a separate asset. If it were, my husband would be greatly unhappy to hear that I just announced to everyone that everything we have is my separate property. It doesn't work that way.”
The court asked counsel to “focus on 2010, ” when the loan was made:
“The Court: So that's why I want to focus on 2010. And I guess you're saying you just don't know where that money came from.
“Mr. Scheper: This has been the challenge all along.”
The court then took a different tack. It inquired of Scheper, “So you say it could have come-could have come from separate property assets. [¶] So what separate property did [Nicola] have in 2010 that he could have used to fund a $900,000 loan?” Again, counsel conceded he had no evidence, stating “We don't know.” He ended by stating, “absent an evidentiary hearing... I just don't think that you can make a determination....” The court replied there was no point in having live witness testimony when counsel had repeatedly conceded he had no additional relevant evidence to offer:
“I don't think there's any need for an evidentiary hearing.... [Y]our whole point is we don't have evidence, so I'm not sure that an evidentiary hearing would help.” [¶]... [¶]
“Well, I think the relevant point is that you're telling me you're not going to be able to trace the assets to a separate property source. So I don't know how having a hearing on that and taking testimony about that-I accept that representation.”
2. The Giacalones Waived the Issue
Although the Giacalones claim in various ways they were denied an evidentiary hearing, the court did conduct a hearing at which it considered a considerable amount of evidence. Before the March 6 court appearance, the Giacalones submitted over 230 pages of evidentiary exhibits, including deposition testimony to support 44 separately stated proposed findings. The other parties also understood the matter would be decided on documentary evidence. The Maniscalcos submitted some 50 pages of additional documentary evidence-including bank statements and deposition excerpts. And Asaro's lawyer filed another 30 pages, including deposition excerpts. The record shows that the court considered this evidence because it sustained Giacalones' objections to portions of Jon's deposition testimony and one of the Trust documents. Thus, the real issue is not whether the court should have held an evidentiary hearing, but whether it was required to conduct one with live witnesses. In other words, the Giacalones claim their request that the court hear from live witnesses was improperly denied.
Evidence Code section 354, subdivision (a) provides that a “judgment or decision” shall not be reversed based on erroneous exclusion of evidence-in this case, unspecified live witness testimony-unless “it appears of record that: (a) The substance, purpose, and relevance of the excluded evidence was made known to the court by the questions asked, an offer of proof, or by any other means....” Thus, to preserve their claim on appeal that the trial court erred in excluding evidence, the Giacalones were required to first make an offer of proof. “An offer of proof should give the trial court an opportunity to change or clarify its ruling and in the event of appeal would provide the reviewing court with the means of determining error and assessing prejudice. [Citation.] To accomplish these purposes an offer of proof must be specific. It must set forth the actual evidence to be produced and not merely the facts or issues to be addressed and argued.” (People v. Schmies (1996) 44 Cal.App.4th 38, 53, italics added.)
Here, to the extent there is anything in the record resembling an offer of proof, it is Scheper's claim that “witnesses are required relative to a lot of things here” and the court needed “some testimony” about “the foundation of the documents.” This is inadequate because counsel did not identify any witness by name, nor indicate what testimony he expected to elicit. Accordingly, any error in deciding the matter without live testimony was waived.
In addition, it was only after the court announced a tentative ruling adverse to the Giacalones that counsel asserted “witnesses are required.” This is too late. Otherwise, the initial ruling will be nothing but a gamble, with a request that the court consider additional live witness testimony (and its attendant risks) only after an adverse decision appears imminent on the evidence already submitted.
3. Even if Not Waived, There Was No Error
In any event, even if the Giacalones had adequately preserved the point in the probate court, we would conclude that the court appropriately decided the matter on the documentary evidence alone. The analysis begins with the familiar rule that declarations ordinarily may not be used as a substitute for oral testimony in contested probate proceedings. (Bennett, supra, 163 Cal.App.4th at p. 1309.) But the right to a hearing with live witness testimony is not absolute. For example, parties can agree to submit a matter based on documentary evidence alone. (Estate of Fraysher (1956) 47 Cal.2d 131, 135.) Moreover, it goes without saying the court need not conduct a hearing with live witnesses when the parties offer no witness having relevant testimony to give. Both of these circumstances exist here.
Consistent with this case law, San Diego County probate court rules provide that if all parties agree in writing or on the record in open court, the court may decide the matter based on the pleadings and “evidentiary materials filed prior to the conclusion of the hearing.” (Super. Ct. San Diego County, Local Rules, rule 4.22.5(B).)
Until the court announced its tentative ruling, the record demonstrates that the lawyers had agreed to conduct the hearing based on the documentary evidence submitted. The January hearing is noteworthy in this respect, because whether to have live witness testimony was a main topic of discussion-but only with respect to the statute of limitations issue. Van Dyke told the court that Asaro would be the main (or only) live witness, and he would testify about when he discovered (or should have discovered) “that he needed to assert his rights.”
After “plan[ning] on a two-hour evidentiary hearing on the issue of the statute of limitations” for March 6, the court turned to the dispute involving the $965,355 and said, “Why don't we do this? Why don't we-in addition to the statute of limitations, why don't we continue on to argue the separate and community property points and authorities on that same date, March 6th?” (Italics added.)
If the Giacalones wanted to present live witnesses on the $965,355 issue, this would have been the opportune time to say so. But counsel equivocated, stating that live testimony “may very well” be required “relative to whether or not some of the stuff... that's been submitted will be admissible and how to deal with that. [¶] So I... think it's going to turn into a more contested hearing and possibly with witnesses to testify.” (Italics added.)
Saying that a hearing already packed with some 300 pages of documentary evidence and deposition excerpts “may very well” and might “possibly” require live witness testimony about “some of the stuff” falls substantially short of a request for live witness testimony. By the end of the January 2020 hearing, the court made clear that the parties would “not [be] submitting additional evidence” and the evidence already submitted would “just be continued [to] March 6th.” Counsel for the Giacalones did not object. No one else did either.
Moreover, when the March 6 hearing began, the court asked the lawyers, “And the parties agreed that we're going to hear argument on that [the $965,355] today? Is that where we are?” (Italics added.) Each lawyer, including Scheper, answered with an unqualified yes. A matter is argued only after the evidence is in. The only reasonable conclusion is that counsel agreed to conduct the hearing on the then-existing record of documentary evidence and deposition excerpts. If Scheper thought live witness testimony was necessary, this was his last opportunity to say so.
Furthermore, the Giacalones simply had no relevant additional evidence to offer. Scheper conceded that he had no evidence to show the source of the $970,000 loan. Courts are busy enough without having to hold hearings at which witnesses attempt to testify about evidence they do not have. That was the situation here, and having so concluded the court did not err in deciding the matter based on the parties evidentiary submissions, points and authorities, and oral argument.
In related arguments, the Giacalones also contend that the probate court “never even looked at the testamentary documents, ” and did not consider their affirmative defenses. (Underscore omitted.) But these arguments are not supported by any citation to the record and are, therefore, forfeited. (WFG National Title Ins. Co. v. Wells Fargo Bank, N.A. (2020) 51 Cal.App.5th 881, 894.)
B. The Court Did Not Err in Characterizing the $965,355 as Community Property.
Family Code section 760 states that except as otherwise provided by statute, all property acquired by a married person during the marriage while domiciled in California is community property. This presumption that property acquired during the marriage belongs to the community is “ ‘perhaps the most fundamental principle of California's community property law.' ” (In re Brace (2020) 9 Cal.5th 903, 914.) The presumption may be rebutted by evidence “tracing the source of funds used to acquire the property to separate property.” (Ibid.) The party asserting that property acquired during the marriage is separate property “has the burden of overcoming this presumption by a preponderance of the evidence.” (In re Marriage of Sivyer-Foley & Foley (2010) 189 Cal.App.4th 521, 526.)
In this case, substantial evidence supports the probate court's finding that the $965,355 is presumed to be community property. Nicola and Antionette created the Trust in 1985. They contemporaneously agreed that except for commercial checking accounts held in joint tenancy and life insurance, all of their property, whenever acquired, was community property. In amending the Trust in 2005, they again declared, “All property transferred to the trust shall remain community property after its transfer.” Jon acquired the $970,000 in exchange for his promissory note in 2010-while both Nicola and Antoinette were alive. When Jon repaid the loan with the $965,355 cashier's check, Matteo acknowledged that the funds “represent the entire amount contained in the Wells Fargo investment account, formerly an asset of the Giacalone Family Trust....”
Thus, the evidence supports the court's implied findings that (1) the money originated from the Trust; (2) the settlors (Nicola and Antoinette) declared that Trust property was community; and (3) the Giacalones presented no evidence that Nicola had sufficient separate property assets to have funded a $970,000 loan. Accordingly, the probate court correctly placed the burden on the Giacalones to establish the $965,355 could be traced to Nicola's separate property. Given the absence of any such evidence, the court properly characterized it as community property.
In the probate court and again here, the Giacalones contend that the court misallocated the burden of proof. Citing In re Estate of Duncan (1937) 9 Cal.2d 207 (Duncan), they assert that the “burden of proof related to the characterization of certain trust property rests with the party contesting” the characterization”-here, the Maniscalcos and Asaro. But this argument is untenable. Controlling Supreme Court authority squarely holds that the party contesting the property's community status bears the burden of establishing its separate character. (In re Marriage of Valli (2014) 58 Cal.4th 1396, 1400 [“a spouse asserting that property acquired... during a marriage is separate property must prove that the property is not community”].)
Moreover, Duncan actually cuts against the Giacalones' argument. In that case, a widow claimed her deceased husband's entire estate as community property. The man's mother claimed half, contending it was all his separate property. (Duncan, supra, 9 Cal.2d at p. 209.) The Supreme Court stated, “The burden of producing clear and satisfactory proof that the property was the separate property of decedent was upon the contestant [mother] as the respondent [wife] was entitled to rely upon the presumption that it was community property.” (Id. at p. 217.)
Interestingly, in the reply brief the Giacalones concede that “[t]he Duncan case is inapposite and unilluminating....”
C. The Request for Stay is Denied
Without citation to authority, the Giacalones request this court issue “a stay of further proceedings in the underlying matter” pending resolution of this appeal. This issue is forfeited. (See, e.g., In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 830 [absence of cogent legal argument or citation to authority forfeits the contention; “[w]e are not bound to develop appellants' arguments for them”].) In any event, parties are required to ask the trial court for a stay (and be denied one) before asking the appellate court for the same relief. (See Archibald v. Cinerame Hotels et al. (1976) 15 Cal.3d 853, 862 [a request for a stay is a matter that “must first be addressed to the discretion of the trial court.”].) The Giacalones cite nothing in the record showing a request for stay was made in, and denied by, the probate court. Accordingly, their request is premature.
DISPOSITION
The order is affirmed. The request for stay is denied without prejudice. Respondents are entitled to costs on appeal.
WE CONCUR: HUFFMAN, Acting P. J.O'ROURKE, J.