Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. FL115404.
RUSHING, P.J.
Mary Fistolera appeals an order after judgment setting aside a settlement agreement reached between herself and her husband, Larry Fistolera, to divide their respective retirement plans pursuant to their dissolution of marriage. The temporary judge assigned to the case set aside the settlement agreement on the ground that a significant decrease in the stock market made the agreed-to division of assets inequitable.
Statement of the Facts and Case
Mary and Larry were married in 1986, and separated August 20, 2003. The parties agreed to use a private attorney, Richard P. Roggia, as their temporary judge. On October 30, 2007, the judge filed a stipulated judgment of dissolution of marriage. In the stipulated judgment, the parties agreed that Mary would receive her retirement plan in its entirety, and that the community balance in Larry’s plan would be divided equally, after subtracting one-half of the community balance in Mary’s plan. The temporary judge appointed another private attorney, Suzanne Hunsinger, to prepare the Qualified Domestic Relations Order (QDRO) in order to divide Larry’s plan.
On May 27, 2008, the parties met with the temporary judge for a judicially supervised settlement conference. During the meeting, the parties agreed that Mary would receive $405,000, which was one-half the community interest in Larry’s plan, minus one-half the community interest in her retirement plan.
Following the settlement conference, the judge filed a formal order that embodied the agreement. This order was filed on October 24, 2008, and contained the following: “[t]he joint and neutral expert, Suzanne E. Hunsinger, will prepare a Qualified Domestic Relations Order so as to roll over or transfer from [Larry]’s SSP Deferred Compensation Plan to a plan or account to be identified by [Mary] the following sum: The sum of $405,000 less one-half the community interest in [Mary]’s WRL Annuity. The community interest in said annuity is stipulated to be 52% of the total value.” The order also stated, “[t]his is a defined number and will not change due to market conditions nor accumulate interest through date of transfer unless further ordered.” (Emphasis added.)
Pursuant to the court’s order, Ms. Hunsinger prepared the QDRO, which both parties and their attorneys signed. The QDRO calculated Mary’s community property interest in Larry’s plan at $383,566.
On June 27, 2008, Larry’s employer, Lockeed Martin, notified Ms. Hunsinger that it would not implement the QDRO as the result of some technical defects.
The defects in the QDRO identified by Lockeed Martin included a discrepancy as to whether the amounts paid to Mary were from before-tax or after-tax contributions to the plan, and an inconsistency between the parties’ agreed valuation date of June 30, 2007, and the date Lockeed Martin was to withdraw and segregate Mary’s portion of the plan.
On November 21, 2008, Mary filed a notice of motion for issuance of an amended QDRO to embody the parties’ settlement agreement on May 27, 2008. On the same day, Larry filed a counter notice of motion to set aside the October 24, 2008 order that stated the terms of the May 27, 2008 settlement agreement. The basis for Larry’s motion was that the stipulated pension division in the agreement was no longer equitable due to the downturn in the stock market.
A hearing was held on December 9, 2008 on both of the parties’ respective motions. Larry testified that he lost approximately 50 percent of the value of his retirement plan due to the 2008 stock market crash. The account was previously valued at approximately $1.6 million as of June 20, 2007, and was worth approximately $880,000 as of December 5, 2008.
On April 1, 2009, the judge issued an order after hearing setting aside the original settlement agreement from May 27, 2008, and ordering a new QDRO be prepared taking into account the reduced value of Larry’s retirement plan. The judge stated that he “decided to exercise [his] discretion in this case because to do otherwise would result in a substantially unequal division....” In addition, the judge stated, “[r]efusing to exercise discretion in ordering that a new QDRO be prepared to take into account the current economic realities would be tantamount to awarding [Mary] a windfall in this case.... The Court cannot ignore the anticipated result in this case if it were simply to adopt the specified amount as originally contemplated without looking at the economic reality of what has transpired since that time.”
Mary filed a timely notice of appeal from the order.
Discussion
Mary asserts the temporary judge abused his discretion by setting aside the settlement agreement between herself and Larry based on a change in value of the retirement plan due to stock market fluctuations.
A trial court’s exercise of discretionary power is reviewed for abuse of that discretion. Under this standard of review, an appellate court will disturb a discretionary trial court ruling only upon a showing of a clear case of abuse and a miscarriage of justice. (Blank v. Kirwan (1985) 39 Cal.3d 311, 331.) Discretion is abused only when, in its exercise, the trial court “ ‘exceeds the bounds of reason, all of the circumstances before it being considered.’ ” (Denham v. Superior Court (1970) 2 Cal.3d 557, 566.)
Mary’s arguments on appeal are based on the principle that a settlement agreement should not be set aside because the property that is the subject of the agreement subsequently changes value. Family Code section 2123 provides that a judgment may not be set aside “simply because the court finds that it was inequitable when made, nor simply because subsequent circumstances caused the division of assets or liabilities to become inequitable, or the support to become inadequate.” (See also In re Marriage of Brewer & Federici (2001) 93 Cal.App.4th 1334, 1344.) Indeed, if the moving party presents nothing more than the fact that the judgment was inequitable when made, the court has no discretion to grant relief under the statute. (In re Marriage of Heggie (2002) 99 Cal.App.4th 28, 29-30, 34.)
All statutory references are to the Family Code.
In In re Marriage of Hahn (1990) 224 Cal.App.3d 1236, the court considered the question of whether it should allow a party to reopen a case post settlement to introduce evidence of the change in value of the marital property subject to the agreement. The court concluded that reopening the case would be contrary to the policy encouraging settlement, stating: “[s]hould a family law court be required to take new evidence and to continually redistribute community assets until the moment a judgment is formally entered? The answer is obviously no. Such a policy would wreak havoc with the efficient operation of the courts and disrupt the settled expectations of the parties.... Where an asset has arguably increased in value under circumstances similar to those present here and has not been sold, the spouse retaining the asset is still at risk of further fluctuation one way or the other. The court is under no obligation to undertake a continuing responsibility to assume the role of an on-call broker or real estate appraiser when that is the case.” (Id. at p. 1241.)
Here, in setting aside the settlement agreement, the temporary judge was attempting to equalize the property distribution following the decline in the stock market. Indeed, he acknowledged this fact when he specifically stated that Mary would enjoy a windfall if the current financial realities are not taken into account in creating the new QDRO.
The court erred in considering the change in value of the retirement plans when it exercised its discretion to set aside the settlement agreement. Whether or not Mary received a “windfall” from the change in value of the retirement plans is immaterial in whether the agreement should be enforced. California law is clear that a judgment may not be set aside because subsequent circumstances caused the division of assets to become inequitable. Here, the judge abused his discretion in setting aside the settlement based on a change in value of the retirement plan.
Rather than dispute the fundamental principle of California law that a court may not exercise its discretion to set aside a settlement agreement based on the property’s change in value, Larry instead attempts to argue for the first time on appeal that the original settlement agreement was invalid, because it did not comply with the provisions of section 2550, and the QDRO is unenforceable because it contained illegal or mistaken terms. Larry’s arguments are without merit.
Initially, with regard to the enforceability of the agreement section 2550 provides: “[e]xcept upon the written agreement of the parties, or an oral stipulation of the parties in open court, or as otherwise provided in this division, in a proceeding for dissolution of marriage..., the court shall, either in its judgment of dissolution of the marriage... or at a later time if it expressly reserves jurisdiction to make such property division, divide the community estate of the parties equally.” Larry asserts that there was no written agreement between the parties, nor was there an oral stipulation in open court; therefore, the court was compelled under section 2550 to divide the assets equally in this case and order the preparation of a new QDRO.
In support of this argument that the original settlement agreement is unenforceable, Larry cites a number of cases, included In re Marriage of Dellaria (2009) 172 Cal.App.4th 196 (Dellaria), In re Marriage of Maricle (1990) 220 Cal.App.3d 55 (Maricle), and In re Marriage of Elkins (1972) 28 Cal.App.3d 899 (Elkins). In all of these cases, the courts determined that the oral settlement agreements between the parties were unenforceable, because they were made outside of court and therefore, did not comply with section 2550 and its predecessor. (Dellaria, supra, 172 Cal.App.4th at 201; Maricle, supra, 220 Cal.App.3d at p. 58; Elkins, supra, 28 Cal.App.3d at 903.) Therefore, in the absence of a valid settlement agreement between the parties, the courts were compelled to divide the marital property equally. (Dellaria, supra, 172 Cal.App.4th at 201; Maricle, supra, 220 Cal.App.3d at p. 58; Elkins, supra, 28 Cal.App.3d at 903 .)
An important distinction among the cases Larry cites, and the present case, is that here, the parties engaged in a judicially supervised settlement conference on May 27, 2008, the results of which were formalized in the order filed October 28, 2008. This case is not one in which the parties engaged in oral negotiations to divide property without the supervision and participation of the court, as the parties did in Dellaria, Maricle and Elkins. Indeed, at the hearing on the motion to set aside the agreement in this case, the judge stated “[w]hat we have is... a stipulated order which emanated from a settlement conference order..., ” notwithstanding respondent’s counsel’s claim at oral argument. The May 27, 2008 agreement was reached through a judicially supervised settlement conference, and was subject to a formal court order. Therefore, it is enforceable and satisfies the requirements of section 2550.
In addition to his argument that the original settlement agreement is unenforceable under section 2550, Larry argues the QDRO is invalid due to illegal or mistaken terms. Therefore, the temporary judge’s order setting aside the settlement was proper in this case.
While it is true that the QDRO created by Ms. Hunsinger contained technical errors leading to Lockeed Martin’s refusal to implement it, this fact does not invalidate the terms of the original settlement agreement between the parties. Indeed, a QDRO is not itself the parties’ settlement agreement; rather it serves the purpose of allowing retirement plan administrators to carry out a community property settlement of an Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1001 et seq.) benefit. (See, e.g., In re Marriage of Baker (1988) 204 Cal.App.3d 206, 217-218.)
See footnote 1, ante.
Here, both parties agree that a new QDRO must be written to correct the technical errors in the original. However, the court in the present case ordered the new QDRO based on the changes in value of the retirement accounts, not solely to correct the technical errors in the original. This basis for ordering a new QDRO was improper as discussed above.
Disposition
The order appealed from is reversed.
WE CONCUR: PREMO, J., ELIA, J.