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In re Marriage of Ahearn

California Court of Appeals, Fourth District, First Division
Jul 31, 2008
No. D050894 (Cal. Ct. App. Jul. 31, 2008)

Opinion


In re the Marriage of KELLY P. AHEARN and RICHARD D. RUSSELL. KELLY P. AHEARN, Respondent, v. RICHARD D. RUSSELL, Appellant. D050894 California Court of Appeal, Fourth District, First Division July 31, 2008

NOT TO BE PUBLISHED

APPEAL from an order of the Superior Court of San Diego County No. DN81762, Harry L. Powazek, Judge.

McCONNELL, P. J.

Richard D. Russell appeals a March 19,, 2007 order requiring him to pay Kelly Ahearn $645,142.39 in a dissolution action under Family Code section 1101, subdivision (h), which pertains to the nondisclosure or transfer of a community asset in violation of a spouse's fiduciary duty. Russell's principal contention is that the evidence is insufficient to support the award. We affirm the order.

Richard Russell was Paul Maly's assumed name during the marriage. Because we used the Russell name in a prior opinion in this case we also use it here.

FACTUAL AND PROCEDURAL BACKGROUND

Ahearn requests that we take judicial notice of the documents contained in a prior appeal and Russell requests to augment the record. We do so to the extent necessary to decide this appeal.

The parties separated on March 3, 1994, and in March 1999 their marriage was dissolved by default judgment. The court retained jurisdiction to divide various loans and accounts, including an account with Jack White & Company (Jack White) that was owned by a corporation Russell controlled. On February 25, 1994, the account had a balance of $645,142.39; the following month Russell made substantial cash withdrawals, and by March 25, 1994, the account had a balance of $289,169.21.

Ahearn sought an award of $645,142.39, claiming Russell had diverted funds from the account to a Nevada corporation. Ahearn relied on Family Code section 1101, subdivision (h), which pertains to remedies for a spouse's breach of fiduciary duty, and Civil Code section 3294, which pertains to punitive damages. Russell argued he used the bulk of the funds to cover child support and community debts.

A trial was held in December 2001. On March 19, 2002, the court sent the parties a letter ruling on matters it had taken under submission. As to the Jack White account, the court noted the account history and that Russell had presented little, if any, accounting or substantiation of his argument. The letter stated that unless, within 90 days of the date of the letter, Russell provided an accurate accounting of how community funds were disbursed from the account, the court's tentative decision was to grant Ahearn's request.

The court directed Ahearn to prepare an order. The order, filed on May 28, 2002, stated as to the Jack White account that unless Russell, within 90 days of the date the order was enrolled, provided an accurate accounting of how community funds were disbursed, the court's "tentative decision is to grant [Ahearn's] request." In a cover letter, Ahearn reminded the court that Russell had obtained an ex parte order that extended the commencement date for the 90-day period to the date of the order's enrollment.

Russell did not submit any accounting. He appealed various aspects of the May 28, 2002 order, but he did not address the Jack White account. This court affirmed the judgment and issued the remittitur in September 2004. (In re Marriage of Russell (July 12, 2004, D040613) [nonpub. opn.].)

On February 3, 2005 Russell filed an order to show cause to present financial information "as requested by the court." The pleading stated "attachments to follow." In response, Ahearn requested that as to the Jack White account the court make the tentative ruling in its May 28, 2002 order a final ruling since Russell did not submit an accounting within the specified 90-day period.

The day before the April 5, 2005 hearing, Russell provided a purported accounting on the Jack White account. At the hearing, the court sustained Ahearn's objection to it on the ground of untimeliness, and rejected Russell's argument the 90-day period had not yet run because of the earlier appeal. The court explained that even if the appeal stayed the matter, more than 90 days had expired since this court issued the remittitur. Russell conceded, "I understand that we've gone past that 90-day limit."

Ahearn again asked the court to finalize its tentative decision on the Jack White account. The court refused to reopen the evidentiary period and ordered Russell to prepare an order. He did not comply, and presumably neither Ahearn nor the court followed up on the matter. The court's minutes from the April 5, 2005 hearing do not mention the Jack White account. The minutes do note that Russell was to prepare the order.

In June 2005 Ahearn filed an order to show cause, asserting that at the April 5, 2005 hearing the court affirmed its tentative ruling awarding Ahearn $645,142.39 on the Jack White account. She sought a ruling that the court made the award under Family Code section 1101, subdivision (h) and Civil Code section 3294, to prevent Russell from discharging the obligation in bankruptcy. After several continuances, a hearing was held in July 2006. On August 1, 2006, the court issued a letter ruling that stated it made the award under Family Code section 1101, subdivision (h) based on Russell's breach of fiduciary duty.

The court asked Ahearn to prepare an order, and it was entered on October 9, 2006. The order stated "there is no basis upon which to characterize the award to [Ahearn] of $645,142.39 as exemplary or punitive pursuant to . . . Civil Code § 3294 and [her] request for such is therefore denied." The order stated the court had determined that Russell breached his fiduciary duty to Ahearn, and it intended in its May 28, 2002 order to base the award on Family Code section 1101, subdivision (h).

Judge Dato signed the order rather than Commissioner Powazek, who heard the matter, during his absence.

Russell then moved to vacate the order and for a new trial on the grounds of newly discovered evidence, insufficiency of the evidence, and illegality and excessiveness of the award. The court took the matter under submission after a January 2007 hearing.

On March 19, 2007, the court issued its order. It found that Russell's motion was actually for reconsideration of the October 9, 2006 order, but reconsideration was unwarranted because Russell presented no new evidence or legal theory. The court explained that Ahearn's alleged agreement to review Russell's documentation on the Jack White account was dated November 4, 2005, and thus he could have produced it at the July 2006 hearing.

The court, however, exercised its inherent power to correct an inaccuracy in its October 9, 2006 order. The court explained the order "mistakenly indicates that the court did not intend to characterize the award as 'exemplary or punitive' within the meaning of Civil Code section 3294, but that the court did intend the award to be issued pursuant to Family Code § 1101(h). [¶] It is not possible to make an award under Family Code § 1101(h), without making a finding, based on clear and convincing evidence, that the breach of fiduciary duty falls within the ambit of Civil Code § 3294." The March 19 order clarified that Ahearn made the required showing under Family Code section 1101, subdivision (h), including the requisite showing under Civil Code section 3294.

DISCUSSION

I

Jurisdiction

Preliminarily, we dispose of Russell's contention that California courts lost jurisdiction over the case several years ago. He raises this issue for the first time in a one-page supplemental brief, which we permit him to file.

Russell relies on the portion of the May 28, 2002 order that granted Ahearn's motion for a change of venue to Oregon, based on the residency of the couple's two children there since 1994, the presence of the children's therapist and other "major contacts" there, and the recommendation of the children's counsel. He also cites the court's comments at an April 2005 hearing that "from my perspective, everything has been resolved in this state. The case has been transferred. If anything else comes before me and I make a finding that I don't have jurisdiction to deal with it, I will grant . . . sanctions because there's nothing left before me." Without citing any supporting legal authority, Russell states, "Therefore this court no longer has jurisdiction in the case and any findings and order made in California on this case subsequent to the date of the finalization of the order to change venue to Oregon are void."

On our own motion we take judicial notice of the superior court file, which reveals that Ahearn requested that only child-related issues be transferred to Oregon and stated her preference that the California courts continue to handle property issues. Notably, the change of venue order includes factual findings relating exclusively to the children.

Accordingly, we conclude that issues pertaining to the Jack White account were not transferred to Oregon. Indeed, Russell understood the California courts retained jurisdiction over property matters, as he sought relief in the family court here regarding the Jack White account long after the change of venue order. Russell stated at the April 5, 2005 hearing, "As far as I know the case isn't transferred. There's no case in Oregon." Further, the court's statements at that hearing merely reflected that the remaining property issues had been resolved, and thus no further proceedings in California should be necessary. We conclude Russell's supplemental brief lacks merit.

II

The $645,142.39 Award

A

Finality of Order

In his opening brief Russell contends the family court never made a final order requiring him to pay Ahearn $645,142.39, as the May 28, 2002 order was merely tentative as to the Jack White account. Ahearn responds that the May 28 order became final after 90 days of its enrollment after Russell did not provide any accounting.

It appears that the court did intend to make the May 28 order final if Russell did not make an accurate accounting within the 90-day period. Nonetheless, it was drafted as a tentative order. It provides that "the court will consider granting [Ahearn's] request that a judgment be rendered against [Russell] in the amount of $645,142.39 unless he provides an accurate accounting of how said community funds were disbursed and utilized within ninety . . . days of the date this Order is enrolled. Should said itemization not be completed and supported by appropriate documentation, the court's tentative decision is to grant [Ahearn's] request." (Italics added.)

Ahearn conceded the May 28, 2002 order was tentative when she requested in 2005 that the court enter a final order. Because of the tentative nature of the order, we disagree with Ahearn's assertion that Russell was required to raise issues pertaining to the Jack White account in his appeal of the May 28, 2002 order.

Further, after the April 5, 2005 hearing on Russell's request to furnish financial information on the Jack White account, he did not comply with the court's direction to submit an order on the matter, and Ahearn did not follow up. The order should also have granted Ahearn's request for a final determination on the Jack White account. The court's minutes merely note that Russell was to provide an order.

"An order is a direction of a court or judge that is made or entered in writing and is not included in a judgment. [Citation.] Orders not constituting judgment [citations] or dismissals [citations] are normally entered in the minutes. [Citations.] [¶] . . . The court may, however, elect to make a formal order, or direct that such an order be prepared, and entry then consists of filing the signed order with the clerk." (7 Witkin, Cal. Procedure (4th ed. 1997) Judgment, § 55, p. 584.) "When the trial court's minute order expressly indicates that a written order will be filed, only the written order is the effective order." (In re Marriage of Drake (1997) 53 Cal.App.4th 1139, 1170.)

We are satisfied, however, that the court's March 19, 2007 order, which is under review here, finalized the matter. In that order the court explained it intended to award Ahearn $645,142.39, the full amount once held in the Jack White account, under Family Code section 1101, subdivision (h) for his breach of fiduciary duty. The court also explained that Ahearn had met her burden of showing the account was under Russell's exclusive management and control and he "simply absconded with the money."

Contrary to Russell's contention, there was no need for any further evidentiary hearing or the appointment of a special master since the 90 days the court gave Russell to provide an accounting had expired. It is unfortunate that the award to Ahearn was not finalized earlier, but the March 19, 2007 order suffices as a final order. In his reply brief, Russell agrees that the March 19 order "for the first time, did indeed amount to an actual appealable final award . . . for $645,145.39 . . . and gave [him] proper standing to pursue appropriate [appellate] remedies." We agree that Russell may challenge the award in this appeal.

We reject Russell's contention that the March 19, 2007 order is an impermissible modification of the October 9, 2006 order. Both orders specified the $645,142.39 award was under Family Code section 1101, subdivision (h). The March order merely specified that the breach of fiduciary duty fell within the ambit of Civil Code section 3294.

B

Substantial Evidence

Russell challenges the sufficiency of the evidence to support the court's finding he absconded with funds from the Jack White account, or that the elements of Family Code section 1101, subdivision (h) and Civil Code section 3294 were satisfied.

"[W]here a trial court's factual finding is challenged on the ground there is no substantial evidence to sustain it, the power of the reviewing court begins and ends with the determination as to whether, on the whole record, there is substantial evidence, contradicted or uncontradicted, that will support the trial court's determination. [Citation.] [¶] The appellate court views the evidence in the light most favorable to the respondents [citation], resolving all evidentiary conflicts in favor of the prevailing party and indulging all reasonable inferences possible to uphold the trial court's findings [citation]." (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.)

The "confidential relationship [of spouses] imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other." (Fam. Code, § 721, subd. (b).) "The spouse who controls community property assets occupies a position of trust which is not terminated as to assets remaining in his or her hands after separation. 'It is part of his fiduciary duties to account to the wife for the community property when the spouses are negotiating a property settlement agreement.' " (In re Marriage of Koppelman (1984) 159 Cal.App.3d 627, 634, overruled on another ground in In re Marriage of Fabian (1986) 41 Cal.3d 440, 451, fn. 13.)

Remedies for the breach of this duty by one spouse, "when the breach falls within the ambit of Section 3294 of the Civil Code shall include, but not be limited to, an award to the other spouse of 100 percent . . . of any asset undisclosed or transferred in breach of the fiduciary duty." (Fam. Code, § 1101, subd. (h).) "The strong language of section 1101, subdivision (h) serves an important purpose: full disclosure of marital assets is absolutely essential to the trial court in determining the proper dissolution of property and resolving support issues. The statutory scheme for dissolution depends on the parties' full disclosure of all assets so they may be taken into account by the trial court. A failure to make such disclosure is properly subject to the severe sanction of section 1101, subdivision (h)." (In re Marriage of Rossi (2001) 90 Cal.App.4th 34, 42.)

Civil Code section 3294, subdivision (a) allows an award of punitive damages in a noncontract case when clear and convincing evidence shows "the defendant has been guilty of oppression, fraud, or malice." "Malice" is defined as "conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others." (Civ. Code, § 3294, subd. (c)(1).) "Oppression" is defined as "despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights." (Civ. Code, § 3294, subd. (c)(2).) "Fraud" means an "intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention . . . of thereby depriving a person of property or legal rights or otherwise causing injury." (Civ. Code, § 3294, subd. (c)(3).)

Russell asserts that statements from the Jack White account that Ahearn submitted "clearly indicated a los[s] of equity value due to market forces." The February 1994 statement listed assets of $645,142.34; the March 1994 statement listed assets of $289,169.21 and cash withdrawals of $227,467; and the June 1994 statement listed assets in the previous period of $114,117.72, in the current period of $78,669.05, and cash withdrawals of $50,000.

The statements, however, do not cover the entire period between February and June 1994, and thus it is impossible to determine to what extent the decline in account value was caused by market forces rather than cash withdrawals. Further, the statements establish that a significant amount of the account's decline was caused by cash withdrawals, and the statements, of course, do not explain where the cash went. Russell had the opportunity to present an accounting within the 90-day period, but he did not do so. Contrary to Russell's position, the court was not required to hold the evidentiary period open indefinitely for his convenience.

In Ahearn's declaration and her December 2001 testimony, she stated her belief that Russell used funds from the Jack White account to fund a newly formed Nevada corporation. She provided a corporate information sheet showing he had formed a new corporation about the time of their separation in March 1994, and the account statements show he withdrew substantial funds from the account the same month. She raised a reasonable inference to support her argument.

Russell claims there is evidence to rebut the inference. He relies on a February 23, 2006 letter from Ahearn's counsel that analyzes various accounts, and includes a chart showing a deposit of $172,000 into a "Kennedy Cabot" account. The letter, however, was prepared long after the 90-day period within which the court required Russell to provide an accurate accounting on the Jack White account. Moreover, since there is no evidence as to the source of the deposit into the Kennedy Cabot account, it does not refute Ahearn's claim regarding the Nevada corporation, or establish that Russell did not otherwise abscond with the money. Further, the amount of that deposit was considerably less than his cash withdrawals from the Jack White account. Further, Russell withdrew funds from the Jack White account several weeks before the deposit into the Kennedy Cabot account was made.

Additionally, Russell asserts Ahearn conceded she received at least $87,700 from him. He cites her December 2001 declaration, in which she denied Russell's claim that he gave her approximately $105,000 after their separation. Rather, he gave her $8,000 as an advance on an equalization payment required by the parties' marital settlement agreement. The declaration stated that other money Russell gave her was for child support. The evidence does not constitute any type of concession that Russell gave Ahearn funds from the Jack White account. Further, Ahearn signed a statement showing she received the $8,000 from Russell in installments on June 23 and July 19, 1994, dates that do not correspond with his withdrawal of funds from the Jack White account.

Similarly unhelpful is a document Russell submitted which ostensibly showed he had paid Ahearn a total of approximately $105,000 "under duress" since March 1994. Most of the money was supposedly paid between 1995 and 1997, well after he withdrew funds from the Jack White account, and the total payments are substantially less than the withdrawals. Again, Ahearn's declaration shows the payments were for child support, with the exception of the $8,000 equalizing payment. We need not discuss other evidence Russell cites, as it is likewise unavailing.

We have reviewed the entire record, and conclude substantial evidence supports the court's finding by clear and convincing evidence that the elements of Civil Code section 3294 are present, and Ahearn is entitled to the 100 percent penalty under Family Code section 1101, subdivision (h) for Russell's breach of fiduciary duty. (See In re Marriage of Rossi, supra, 90 Cal.App.4th at p. 40.) To justify a punitive award, "defendant must act ' " 'with the intent to vex, injure, or annoy, or with a conscious disregard of the plaintiff's rights. [Citations.]' " ' [Citations.] These elements may be proven directly or by implication." (Colonial Life & Accident Ins. Co. v. Superior Court (1982) 31 Cal.3d 785, 792, italics omitted.) It is undisputed that Russell alone controlled the Jack White account, he withdrew large sums of cash from the account, and he failed to provide an accurate accounting or documentation showing what he did with the money. The evidence amply supports an inference that Russell intentionally concealed material facts to deprive Ahearn of her share of a community asset, and his conduct was intended to injure her or was in conscious disregard of her rights. (Civ. Code, § 3294, subds. (c)(1) & (3).)

III

Ahearn's Contentions

Ahearn contends cursorily in the conclusion section of her brief that we should declare Russell a vexatious litigant under Code of Civil Procedure section 391. She presents no argument beyond citing the vexatious litigant statute and complaining, without citations to the record, about his relitigating issues relating to the original default judgment and his failure to account. She also claims we should impose monetary sanctions against Russell under Family Code section 271 and Code of Civil Procedure section 128.5 [erroneously designated section 128.7], and order him to contribute to her attorney fees and costs under Family Code section 2030. Again, she develops no argument and cites no authority beyond the statutes.

" 'This court is not required to discuss or consider points which are not argued or which are not supported by citation to authorities or to the record.' " (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979.) " '[E]very brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration.' " (McComber v. Wells (1999) 72 Cal.App.4th 512, 522-523.) We deem Ahearn's points as waived.

DISPOSITION

The order is affirmed. Respondent is awarded costs on appeal.

WE CONCUR: BENKE, J., McINTYRE, J.


Summaries of

In re Marriage of Ahearn

California Court of Appeals, Fourth District, First Division
Jul 31, 2008
No. D050894 (Cal. Ct. App. Jul. 31, 2008)
Case details for

In re Marriage of Ahearn

Case Details

Full title:In re the Marriage of KELLY P. AHEARN and RICHARD D. RUSSELL. KELLY P…

Court:California Court of Appeals, Fourth District, First Division

Date published: Jul 31, 2008

Citations

No. D050894 (Cal. Ct. App. Jul. 31, 2008)