Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. D453601, William J. Howatt, Jr., Judge.
McINTYRE, J.
Kathryn E. M. Brown appeals from the judgment in this dissolution action between her and her former husband, David S. Brown. She contends that the court erred in valuing certain of the community property business assets as of the date of the parties' separation rather than at the time of trial, which is the presumptive date of valuation under the Family Code. (All further statutory references are to the Family Code except as otherwise noted.) Specifically, she contends that (1) David did not give notice of his intent to seek valuation of those businesses as of the date of separation as required by the Family Code and the California Rules of Court; (2) the court applied an incorrect standard in determining the proper date of valuation; and (3) the evidence at trial did not support the court's decision to use the alternative date of valuation. David responds that (1) Kathryn was benefited rather than aggrieved by the court's decision to use the date of separation as the date of valuation and thus lacks standing to pursue an appeal, which he seeks to have dismissed; and (2) the court did not abuse its discretion in using the date of separation for the purpose of valuing some of the businesses and that decision was supported by substantial evidence. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Kathryn and David met while attending the University of Virginia and married in December 1980, after their graduations. The couple moved to Florida, where David ultimately took a job as the in-house counsel for Vistana, the largest existing single-site timeshare project in the world. While living in Florida, Kathryn and David had two daughters and a son; in 1988 the family moved to San Diego, where David began working as the general manager of operations for Shell Winners Circle Resorts (Shell), a timeshare business affiliated with Vistana. Shortly after moving to San Diego, Kathryn and David had another son.
In 1990, David and fellow Shell employee Tim Stripe took over the company and, in the ensuing 12 years, they created 19 timeshare resort related businesses together. The companies consisted of: (1) seven development companies, each of which constructed and operated a particular resort; (2) a marketing and sales company (Grand Pacific Resorts, Inc. (GPRI)), which managed the sales and marketing for timeshare interests in the resorts and which held a one percent partnership interest in each of the development companies; (3) seven service companies, some of which serviced and collected commercial notes received from purchasers of timeshare interests, another of which facilitated timeshare owners' resale of their interests and still others which managed timeshare resorts; and (4) three asset holding companies, two of which owned commercial real estate (GPRI's office property and a restaurant property adjacent to one of the resorts in Carlsbad) and the other of which held a portfolio of consumer notes.
In November 1998, after the establishment of 16 of the companies as operating businesses, Kathryn and David separated and in July 1999, David petitioned to dissolve their marriage. The parties were unable to reach agreement as to the custody of their children and a bifurcated trial was held on custody issues in June 2004, at a time when only the two sons were still minors. In August 2004, the court awarded David legal and physical custody of the boys. Kathryn unsuccessfully appealed the court's decision relating to the parties' youngest son (the older son having reached the age of majority).
In December 2004, the court presided over trial on the issues between the parties relating to the valuation and division of the parties' property. Kathryn requested that the court value all 19 of the companies as of the time of trial in accordance with section 2552, subdivision (a). David contended, however, that only five of the companies would be properly valued as of the date of trial; he argued that the court should characterize the three companies formed after the parties' separation and the one formed just prior to separation as his separate property and that it should value the remaining companies as of the date of separation.
Based on the evidence presented at trial, the court issued a 21-page written opinion regarding the property issues. It found in part that four of the companies (Grand Pacific Development, Inc., Grand Pacific Resorts RiverPointe, L.P., ResorTime.com and Carlsbad Ranch Restaurant Company) and 21.4 percent of the interest in Advanced Commercial Corporation were properly characterized as David's separate property. As to the remaining businesses that it characterized as community property, the court valued five of them (Coronado Beach Resort Partnership, Premier Advanced Financial Corporation, Advanced Financial Company, L.P., Grand Pacific Asset Management, Inc. and Grand Pacific Plaza, L.L.C.) as of the date of trial.
The court valued the remaining ten companies as of the date of separation. As to the development companies in this group (Carlsbad Seapointe Resort, L.P., Red Wolf Lakeside Lodge, L.P., Carlsbad Seapointe Resort II, L.P., Grand Pacific Palisades, L.P. and Sierra Tahoe Partners, L.P.) and GPRI, the court found that David's post-separation efforts, dedication, business acumen and skill, particularly as they related to the marketing and sales of the timeshare interests, were "substantially responsible" for the increase in value of those business entities, each of which was in a phase of the process where marketing and sales were critical. Similarly, the court found that the success of the group's resort management service companies (Winners Circle Resort Management, Inc. and Grand Pacific Resorts Services, L.P.) did not depend on capital investments, but rather on David's energy and skill, including his consistent service on the homeowners association boards, regular attendance at association meetings and frequent contact with property managers. Finally, the court found that the remaining 28.6 percent interest in Advanced Commercial Corporation's timeshare resale and consumer note holding business were properly valued as of the date of separation.
Kathryn appeals the resulting judgment. She does not challenge the court's characterizations of various assets as David's separate property, its decisions to value other assets as of the date of trial or its additional findings as to the proper division of other non-business community assets. She does, however, challenge the court's decision to value the remaining ten companies as of the date of separation.
DISCUSSION
1. Kathryn's Standing
David first contends that Kathryn's appeal should be dismissed because the arguments in her opening brief relate only to GPRI, a company that his expert testified was more valuable on the date of separation than on the date of trial. However, Kathryn's arguments are not only directed to GPRI but also to its "related" entities. Although David also contends that Kathryn's brief is not sufficiently detailed as to each company to comply with applicable rules of court, he does not explain how this would preclude Kathryn from being an aggrieved party; in any event, any such deficiency would not provide a basis for dismissal of her appeal. (Cal. Rules of Court, rule 8.204(e).) For these reasons, we conclude that David has not established a basis for dismissing Kathryn's appeal based on her lack of standing. (Code Civ. Proc., § 902.)
2. Alternative Dates of Valuation
Section 2552 provides in relevant part:
"(a) For the purpose of division of the community estate upon dissolution of marriage or legal separation of the parties, except as provided in subdivision (b), the court shall value the assets and liabilities as near as practicable to the time of trial.
"(b) Upon 30 days' notice by the moving party to the other party, the court for good cause shown may value all or any portion of the assets and liabilities at a date after separation and before trial to accomplish an equal division of the community estate of the parties in an equitable manner."
A. Notice
Kathryn first contends, as she did below, that David could not seek a date of valuation other than the date of trial because he failed to comply with the notice requirements of section 2552, subdivision (b) and California Rules of Court, rule 5.126. (All rule references are to the California Rules of Court.) (Rule 5.126 specifies that a party seeking an alternative valuation date must use an "application for separate trial" on Judicial Council form FL-315 to give notice required under section 2552, subd. (b).) Specifically, she argues that due process required David to strictly comply with the applicable notice provisions and that the superior court's failure to enforce those provisions was error as a matter of law.
Kathryn's argument is unavailing. She cites no authority (nor have we found any) holding that principles of due process require the strict enforcement of notice provisions such as those set forth in section 2552, subdivision (b) and rule 5.126. (See, e.g., In re Marriage of Bergman (1985) 168 Cal.App.3d 742, 760 [acknowledging that the procedure specified in the rule 5.126 was preferable, but not statutorily required].)
In fact, in many contexts substantial compliance with applicable notice requirements is sufficient, so long as the other party has actual notice of the matter. (Ellard v. Conway (2001) 94 Cal.App.4th 540, 544 [holding that where the defendant has actual notice of an action, strict compliance with the statutes governing service of process is not required]; Los Angeles Chemical Co. v. Superior Court (1990) 226 Cal.App.3d 703, 712-713 [a prosecutor's failure to timely serve a motion to reinstate a criminal complaint was not fatal where the defendant knew of the motion]; Lum v. Mission Inn Foundation, Inc. (1986) 180 Cal.App.3d 967, 972 [plaintiffs' failure to serve the defendant with their request for trial de novo following mandatory arbitration did not invalidate the request where the defendant had actual notice of the request]; compare Parsons v. Superior Court (2007) 149 Cal.App.4th Supp. 1, 6 [strict compliance with notice requirements is required as a prerequisite to invoking the summary unlawful detainer procedures].)
In accordance with these authorities, a court may properly apply the doctrine of substantial compliance to statutory requirements when the essential statutory purposes are satisfied and strict compliance is not necessary to serve the statutory intent. Such is the case here. The record establishes that, as of February 2001, Kathryn had actual notice of David's intent to seek an alternative valuation date for at least some of the companies and she subsequently retained her own expert to provide a separate analysis on valuation. At a court hearing in September 2003, Kathryn's counsel acknowledged that the alternative valuation dates remained in dispute.
Further, Kathryn deposed David's valuation expert prior to trial and thus knew which companies David was contending should be valued as of the date of separation. Kathryn's expert, who attended that deposition as well, had the opportunity to undertake and present an analysis of the businesses' valuations as of the date of separation and in fact did so, at least on a limited basis.
Under these circumstances, the purpose of the statutory and rule notice requirements was met and Kathryn was not unduly prejudiced as a result of the court's failure to require David's strict compliance therewith. We find no error in the court's decision to consider whether an alternative date of valuation was appropriate for the various companies despite David's failure to make a formal motion in accordance with rule 5.126.
B. Choice of Alternative Dates for Certain of the Businesses
i. Standards
When a spouse operates a community property business after separation, there is an inherent tension between the general rule that the business must be valued as of the date of trial (§ 2552, subd. (a)) and the rule that a spouse's earnings after separation are his or her separate property. (§ 771, subd. (a); see In re Marriage of Green (1989) 213 Cal.App.3d 14, 20.) For this reason, section 2552, subdivision (b) authorizes the superior court to exercise considerable discretion in determining the date of valuation of community property assets so as to remedy inequities that might otherwise result, such as where the efforts of one spouse after separation greatly increase the value of a community asset that must later be divided with the other spouse. (In re Marriage of Connolly (1979) 23 Cal.3d 590, 603; In re Marriage of Duncan (2001) 90 Cal.App.4th 617, 624-625; In re Marriage of Barnert (1978) 85 Cal.App.3d 413, 423.)
The discretion to choose a date of valuation different than the statutorily-presumptive date (the date of trial) is frequently exercised where one spouse has a professional practice or a personal service business that relies on that spouse's skill, efforts and reputation. (E.g., In re Marriage of Duncan, supra, 90 Cal.App.4th at p. 625 [community property investment company was properly valued as of the date of separation where the evidence showed the husband made investment decisions for 97 percent of the fund's assets, based on his own methodology and investment criteria]; In re Marriage of Kilbourne (1991) 232 Cal.App.3d 1518, 1524 [alternative valuation date for a spouse's law practice].) In such instances, the value of the business turns primarily on the spouse's skill, reputation and efforts rather than the business's capital assets and, in recognition of the rule that post-separation earnings and accumulations are to be regarded as the spouse's separate property, the community interest is appropriately valued as of the date of separation rather than the date of trial. (In re Marriage of Geraci (2006) 144 Cal.App.4th 1278, 1291 [valuation of real estate business]; In re Marriage of Stevenson (1993) 20 Cal.App.4th 250, 253-254 [general contracting business]; Sukoff v. Lemkin (1988) 202 Cal.App.3d 740, 746 [medical corporation].)
ii. The Standard Applied by the Court
The undisputed evidence at trial showed that there is a lengthy process involved in developing timeshare resorts, selling the fractional interests therein and collecting on the purchaser notes received therefor and that, as a result, a timeshare resort developer typically does not receive full payment on a project until approximately 10 years after the last timeshare interest is sold and 16 years after it started the project. Further, the evidence showed that prior to their separation both Kathryn and David were required to execute personal guaranties for loans obtained by the companies, but that after separation, David alone executed such guaranties. In his closing argument, David's counsel emphasized the risky nature of the timeshare business.
At the end of the trial, the court reflected on the nature of the timeshare business and noted that David had had to undertake substantial long-term personal risk that the companies would ultimately be profitable. It further expressed its belief that this was a relevant factor in determining the scope of David's post-separation efforts "to generate or to enhance the financial stability and value" of the companies for purposes of setting a fair date of valuation, a point with which Kathryn agreed at trial. On appeal, Kathryn argues that these comments show the court considered improper criteria in deciding to utilize alternative valuation dates for the businesses.
However, existing case law makes clear that the nature of the business to be valued (i.e., whether it is of the type that its success depends more on one spouse's skill, efforts and reputation or one that is primarily dependent on its capital assets) is relevant in determining whether that business should be valued as of the date of trial. (See, e.g., In re Marriage of Duncan, supra, 90 Cal.App.4th at pp. 625-626 [recognizing that the exception to trial date valuation applies to businesses whose value, "including goodwill, is primarily a reflection of the practitioner's services (accounts receivable and work in progress)" rather than its capital assets].) Further, we perceive of no reason why such efforts and industry would exclude the spouse's willingness to undertake risks inherent in the business, risks that were necessary for the business to proceed, but that the community was not required to bear. (See § 910, subd. (b).) Further, a review of the court's written decision after trial substantiates that the court did not consider this factor in a vacuum but as one aspect of the nature of the businesses it was seeking to value. The court's comments at the close of trial do not establish that the court relied on improper matters in choosing to value certain of the companies as of the date of separation.
iii. Sufficiency of the Evidence to Support the Court's Decision
Although Kathryn challenges the sufficiency of the evidence to support the trial court's decision to value the 10 companies as of the date of separation rather than the date of trial, she does not undertake a separate analysis of the court's findings as to each company and the evidence presented in support thereof. Instead, she attempts to distinguish the facts of this case from those involved in In re Marriage of Duncan, supra, 90 Cal.App.4th at pp. 626-627, a case on which the trial court relied as a basis for its decisions.
In that case, Mr. Duncan was a nationally-recognized professional investment advisor who managed pension plan investments for various companies and after marrying he and his wife formed Duncan-Hurst Capital Management, Inc., through which he initially managed $84 million in pension funds of large corporations and institutions. (In re Marriage of Duncan, supra, 90 Cal.App.4th at pp. 622-623.) Approximately four years later when the Duncans separated, the company was managing $1.086 billion in assets; within another two years, it had $2.628 billion in invested funds. (Id. at p. 623.) In the action to dissolve the Duncans' marriage, the trial court selected their date of separation as the proper date for valuing the company in dividing up the community assets. (In re Marriage of Duncan, supra, 90 Cal.App.4th at p. 623.) Mrs. Duncan appealed, contending that the trial court had abused its discretion in using an alternative (non-trial) valuation date. (Id. at p. 624.)
This court affirmed the trial court's judgment. (In re Marriage of Duncan, supra, 90 Cal.App.4th at pp. 622, 636.) In doing so, it rejected Mrs. Duncan's argument that the increased value had to have resulted solely from her husband's efforts rather than a "confluence of factors," including a flourishing stock market and the marketing efforts of Mr. Duncan's partner. (Id. at pp. 627-628.) The court concluded that, despite these factors, the existence of "overwhelming evidence" that Mr. Duncan's national reputation and investment decision making capabilities were largely the reason for Duncan-Hurst's success was sufficient to support the trial court's decision to use an alternative date of valuation. (Id. at pp. 627-629.)
We conclude that Kathryn's reliance on In re Marriage of Duncan as a basis for arguing that the trial court abused its substantial discretion to determine the appropriate valuation dates for the companies is misplaced. The law strives to remedy inequities that may result when the post- separation effort and energy of one spouse, but not the other, greatly increases the value of the community's estate. (In re Marriage of Reuling (1994) 23 Cal.App.4th 1428, 1435; In re Marriage of Barnert, supra, 85 Cal.App.3d at p. 423.) Here, the uncontroverted evidence before the trial court showed that the success of each of the timeshare companies turned in substantial part on the success of the marketing and sales efforts, which were time-intensive activities for which David was primarily responsible.
Although the facts here are not "on all fours" with the facts presented in In re Marriage of Duncan, the trial court could have reasonably concluded that, without David's continuing efforts and expertise in the development, marketing and other support of the timeshare businesses after the parties' separation, the value of those businesses would not have experienced the increase in value that they did. Accordingly, the trial court acted well within its discretion in determining that the equities supported attributing those gains to David in the division of the community property
DISPOSITION
The judgment is affirmed. David is awarded his costs on appeal.
WE CONCUR: BENKE, Acting P.J., IRION, J.