Opinion
F082501
11-17-2022
In re the Marriage of ROSETTA and GREGORY OPINSKI. v. GREGORY OPINSKI, Respondent. ROSETTA OPINSKI, Appellant,
McCormick, Barstow, Sheppard, Wayte & Carruth, Scott M. Reddie and Jerry D. Casheros for Appellant. Wanger Jones Helsley, Amanda G. Hebesha and John P. Kinsey for Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Merced County. No. FLM60769 Melinda A. Johnson, Temporary Judge. [*]
McCormick, Barstow, Sheppard, Wayte & Carruth, Scott M. Reddie and Jerry D. Casheros for Appellant.
Wanger Jones Helsley, Amanda G. Hebesha and John P. Kinsey for Respondent.
OPINION
PEÑA, J.
Rosetta Opinski (Rose) appeals from the trial court's judgment of dissolution of her 29-year marriage to Gregory Opinski (Greg). Rose raises two contentions on appeal: (1) the trial court made an unequal community property distribution in Greg's favor when it awarded a certain business asset to her without a corresponding credit; and (2) the trial court abused its discretion when it awarded her a $1.7 million equalization payment, which is payable over nine years. Finding no merit to Rose's contentions, we affirm.
For convenience and clarity, we will refer to these individuals by their first names because they share a last name. No disrespect is intended.
FACTUAL AND PROCEDURAL BACKGROUND
The couple married in 1985 and separated in August 2014. Rose petitioned to dissolve the marriage the following month. The parties had four adult children. In February 2016, the parties stipulated that commencing in January 2016, each party would receive a draw of $20,000 per month from the parties' business entities, which superseded the trial court's prior order of spousal support payable by Greg to Rose.
Many of the issues in the dissolution proceeding ultimately were resolved through partial settlements. After a six-day trial on the unresolved issues, which took place in May 2019, the court issued a statement of intended decision in August 2019. The parties filed objections to the statement of intended decision, with each party responding to the other's objections.
The parties stipulated to retired Judge Melinda A. Johnson of JAMS serving as judge pro tem. "with the ability to make final and binding decisions on all issues through judgment."
Following consideration of the parties' briefs and oral argument, the trial court issued its statement of decision in February 2020. At the request of the attorneys for both sides, the parties were given an additional opportunity to raise further objections and make requests for clarification and reconsideration. The parties filed poststatement of decision briefs and a telephonic oral argument was held in April 2020. After argument, the trial court received additional declarations and briefs.
The Amended Statement of Decision
In July 2020, the trial court issued an amended statement of decision. As pertinent to this appeal, the trial court found the following:
The parties owned business entities, real property, bank accounts, and other assets. The parties were the sole owners of three business entities: (1) OP Development, Inc. (OP Development); (2) Greg Opinski Construction Inc. (Opinski Construction); and (3) Rosetta Creek LLC. The parties held title to the other assets either individually or through the businesses. The businesses bought, developed, and sold real property, and "flipped" homes, which resulted in an ever-changing inventory, with assets being bought and sold postseparation in the normal course of business.
"As a result, the parties stipulated that all real property owned by them December 31, 2017, and all assets and liabilities of the businesses on December 31, 2017, would be valued as of that date. No independent value would be placed on the business entities as such, but, rather, their individual assets and liabilities would be valued and awarded or assigned to one party or the other." While not part of the stipulation, it was understood "the business entities would be assigned to [Greg] at -0- additional value," which the trial court ordered.
The trial court originally set the valuation date as May 31, 2017, but the parties subsequently agreed to change the valuation date to December 31, 2017, "through meetings with the 730 expert, Darren Silva," and the parties updated the property schedule for the businesses based on the latter valuation date.
The trial court explained it analyzed and awarded each asset individually, and its findings were to be incorporated into a final balance sheet for purposes of calculating an equalizing payment and determining the method of paying it. The trial court's stated goal was to award each asset "based on the respective party's ability to utilize it, and in an attempt to minimize the equalization payment as much as realistically possible, taking into account the risks associated with various assets, and the necessity of equalizing, between the parties, the burden of the community's assets as well as their benefits."
Real Property
With respect to the parties' real property holdings, the trial court explained it had previously ordered "the real properties be valued, as of December 31, 2017 at the 'marital value,' which was defined as 'the economic value of the real property to the spouse retaining it and who will continue to use it in the future.'" The trial court further explained its order listed numerous considerations that could be used to determine "marital value," including fair market value, investment value, cost-benefit analysis, yield rate, development approach, residential land value, and discounted cash value, and the appraiser was entitled to use any, some, or all these approaches.
The trial court divided 16 properties or categories of properties between the parties, assigning each a balance sheet value based on the evidence produced at trial. As pertinent here, one of the properties was a 47.64-acre undeveloped parcel of land dubbed the Lake Merced property, which OP Development had owned since 1990. Since then, Greg had been working toward developing the property, and while progress had been made, issues remained concerning annexation and sewer systems. The parties agreed the property's highest and best use was to continue working toward residential development, and while Rose expressed an interest in being awarded the property, she did not personally have the skills to develop it and did not have a practical plan to hire anyone else to do so.
James Cogdill, a real estate appraiser whom Rose retained, appraised the Lake Merced property, as well as 25 other properties the parties' owned. Cogdill determined the Lake Merced property was worth $52,411 per acre, which was slightly below the midrange of the comparable sales he analyzed, which would result in a market value of $2,496,860. Greg, who chose not to retain an appraiser and instead testified himself concerning the property's value, opined the property was worth $30,000 per acre based on comparable sales.
Ultimately, Cogdill appraised the property at $2.5 million, which was its expected net yield when fully developed and sold, while Greg valued the property at $1.4 million. The trial court found Cogdill's methodology for his yield analysis raised several questions, as it was "based on a predication of the future yield from the sale of not yet developed homes, considering ongoing costs to hold and develop the land, and the current value of the revenue ultimately received[,]" therefore, "any modification of any given variable could result in a significant difference in appraised value."
The trial court provided examples of the variables that made Cogdill's "appraisal relatively more subjective than objective," including: (1) Cogdill's belief 310 one-acre lots could be developed while Greg believed only 250 lots could be developed; (2) Cogdill assumed a five-to-seven-year development and three-year sales period, but also recognized the city had an oversupply of developable lots, it would take some time for the annexation to be approved, and a sewer bond would have to pass before the land could be developed; (3) while Cogdill opined it would cost $35,000 per lot to develop the land plus holding costs, Greg believed the cost would be much higher and Cogdill's estimate did not consider mitigation costs; and (4) Cogdill assumed a rate of inflation which may or may not prove accurate. Moreover, the trial court noted Cogdill did not consider Greg's age or health, which could affect the marital value to him if the development process stretched out longer.
The trial court dismissed Rose's reliance on Greg's deposition testimony that he would not sell the property for $5 million as evidence of marital value. The trial court found the testimony "may reflect the emotional connection created when a great deal of time and energy has been poured into a project which one expects, as [Greg] described it, to be his 'retirement,' rather than an objective opinion of value. I would not sell my 50 year old engagement ring for $100,000, but that doesn't change my factual understanding that it is only objectively worth $300."
The trial court recognized the difficulties in applying the "marital value analysis" to a piece of developable land that had been held for nearly three decades with no immediate or even midterm development in sight involved, as it involved "several highly subjective judgment calls." The trial court found it difficult to apply the marital value analysis because: (1) it related solely to the spouse who would retain and use the asset, but here the spouse's involvement would differ depending on which party was awarded the property-if awarded to Greg, the property would remain a major part of his remaining worklife, but if awarded to Rose, she would hire a third party to develop it if she did not choose to sell it first; and (2) its purpose "appears to be to capture some specific value to the in-spouse beyond what value the open market might assign to the property," but the property had the same interest and value to any potential developer purchaser as it did to Greg.
Nevertheless, the trial court understood that, given the likelihood of development of the Lake Merced property, some analysis involving yield, in addition to current fair market value, was appropriate. Looking at the range the identified variables allowed for, the trial court determined the value of the Lake Merced property was $1,481,000 and awarded the property to Greg.
The trial court awarded two pieces of property to the parties as tenants in common and ordered them to be sold. With respect to the Calaveras property, which was valued at $335,000, the trial court ordered Greg to pay half of his net proceeds from the sale to Rose to reduce the equalizing payment that would result from the division of community assets. With respect to the San Andreas property, which was valued at $1.44 million, the trial court ordered Greg to pay one-quarter of his net proceeds from the sale to Rose to reduce the equalizing payment.
Accounts
The trial court understood that all accounts in the business entities would be valued as of December 31, 2017, and personal accounts as of the date closest to trial or the date of separation. The trial court noted that "[s]ince separation, money has come in and gone out of the business accounts, and [Greg] has paid personal, business and community obligations from OP Development, and sometimes from Opinski Construction." No postseparation accounting was done, and the parties had "generally waived their claims against one another related to OP Development money."
The trial court explained: "As was the parties' practice during marriage, both personal and business money came into the business entities, and both personal and business expenses were paid from them. Since the order, early on in this litigation, distributing to each party an identical, and fixed amount for their personal use, the revenues coming into the entities, be it from payments on hard money loans, construction or development work or otherwise (which might have been separate, community, or mixed income) were, by de facto agreement, retained by [Greg]. No further effort to 'assign' [Greg] separate property revenue and calculate a spousal support order was made. No differentiation was made between business-related expenses paid, joint expenses paid, separate expenses of each party paid, or community expenses paid."
The trial court rejected Greg's posttrial request for a postseparation accounting as untimely and because it would involve a prodigious amount of time and expense, and a determination of what Greg might owe the community, or the community might owe him, could not reasonably "be done with anything resembling accuracy." Accordingly, the trial court found Greg's proposal to assign some business accounts to Rose to be unworkable. Because the amount reflected on the balance sheet may be more or less than was currently in a business account, the trial court assigned all business accounts to Greg at a set value, noting he was thereafter "free to use any of those monies to reduce any equalizer due [Rose]."
The trial court assigned some of the parties' bank accounts to Rose and divided several of them equally between Rose and Greg. The trial court assigned the cash and cash equivalents in three business entities to Greg with a total balance sheet value of nearly $2.4 million. With respect to the cash and cash equivalents in OP Development, the trial court charged them to Greg at their December 31, 2017, value, again noting he was "free to use any or all of them to equalize the division of community assets, thereby reducing interest payments on the equalizer and shortening the time assets awarded to him may be encumbered." The trial court assigned the accounts in the two other businesses to Greg and divided other accounts between the parties.
Other Business Assets-Hard Money Loans/Receivables
As part of the house flipping business, OP Development made hard money loans to the purchasers of the flipped homes. As of December 31, 2017, there were 16 hard money loans with a total outstanding balance of $1,239,389. In assigning these loans, the trial court noted they were made by the community businesses and valued, by stipulation, based on their outstanding balances as of December 31, 2017, like all other assets the businesses owned. The trial court understood "payments since that date have been made to OP Development, and used for all the purposes discussed above," and while Rose asked to be assigned only the loans she was certain would not have collection issues, the evidence showed all loans were collateralized and "some of the risk of the community assets must be borne by each party." Accordingly, the trial court awarded the 16 loans to Rose, ordered Greg to provide the documentation regarding them to Rose, and ordered that all payments received on the loans on and after March 1, 2020, be forwarded to Rose.
Equalization Payment
The trial court determined the calculated equalization payment would accrue simple interest at 3 percent, which it stated was a commercially reasonable figure at the time, on the unpaid balance commencing March 1, 2021. Interest payments were to commence in 2021 and were calculated based on the balance due as of December 31 of each year and due by February 28 of the next calendar year. Payments on the principal could be made at any time, without any prepayment penalty, and Greg was required to make annual principal payments of at least $150,000 on or before March 1 of each calendar year, commencing in 2021. The balance was required to be secured by a deed of trust on all real property owned by Greg or any entity he owned, which would be subordinate to any business-related encumbrances, such as credit lines, purchase money mortgages and development loans. The entire unpaid principal balance was due and payable on or before March 1, 2029, unless extended by the parties' stipulation or on a showing of good cause to the court.
Rose's Request for Order
Rose filed a request for order concerning an omitted asset, loss of appreciation, and sanctions in September 2020, which Greg opposed. The following month, Greg filed a request for order to require Rose to perform several tasks in support of the division of assets, which Rose opposed. After oral argument and the parties meeting and conferring on an issue, the trial court issued findings and orders on the requests in January 2021.
As pertinent here, Rose asserted that since the statement of decision she discovered an additional hard money loan that had not been awarded to her, which she asked the court to find was an omitted asset. The trial court determined it was not an omitted asset, finding it was a single note that had been significantly reduced by the time of trial. In so finding, the trial court explained: "The parties stipulated, and the Court ordered, the hard money loans would be valued as of December 31, 2017, without adjustments of any kind. This was because [Greg] was maintaining the business, bills were being paid from whatever income was generated (including from the promissory notes) and [Rose] was receiving a $20,000 draw per month. A post-separation accounting would have been extremely expensive and, so, no credits or debits were to be applied to these funds."
Judgment of Dissolution
The judgment of dissolution was filed in February 2021. Attached to the judgment was a balance sheet that reflected the division of community assets and debts, and showed Greg owed Rose an equalizing payment of $1,720,996. The judgment set out the terms of payment as reflected in the amended statement of decision, with Greg required to make annual interest and minimum principal payments beginning in 2021, and the entire unpaid balance due eight years later, on March 1, 2029.
DISCUSSION
I. The Division of Community Property and Standard of Review
On dissolution of marriage, in the absence of the parties' written agreement or oral stipulation in open court, the trial court is required to divide the community property equally between the parties. (Fam. Code, § 2550.) The trial court may award a community asset to one party "on such conditions as the court deems proper to effect a substantially equal division of the community estate." (§ 2601.) Trial courts have considerable discretion to determine the value of community property and to formulate a practical way in which to divide property equally. (In re Marriage of Connolly (1979) 23 Cal.3d 590, 603.) They have broad statutory powers to accomplish a just and equal division of marital property "and possess 'broad discretion to determine the manner in which community property is awarded in order to accomplish an equal allocation.'" (In re Marriage of Greaux &Mermin (2014) 223 Cal.App.4th 1242, 1250.)
Undesignated statutory references are to the Family Code.
Where the community property cannot be readily divided equally in kind because of the nature of the assets, the court may order one party to make an equalizing payment to the other party. (In re Marriage of Bergman (1985) 168 Cal.App.3d 742, 746 (Bergman); In re Marriage of Tammen (1976) 63 Cal.App.3d 927, 939-930 (Tammen).) Generally, if the equalizing payment cannot be made in cash, the debtor spouse executes a promissory note, approved by the court, which specifies an appropriate interest rate and due date. (See, e.g., Bergman, supra, at pp. 761-762; In re Marriage of Slater (1979) 100 Cal.App.3d 241, 248; In re Marriage of Horowitz (1984) 159 Cal.App.3d 368, 371.) "Courts have discretion to use promissory notes for relatively short periods at reasonable interest rates." (Bergman, at p. 761.) The court need not require interest at the legal rate applicable to judgments. (In re Marriage of Escamilla (1982) 127 Cal.App.3d 963, 967.)
"Decisions which have considered issues of deferred enjoyment of community property award reflect individualized results tailored to specific circumstances." (In re Marriage of Teichmann (1984) 157 Cal.App.3d 302, 305-306.) Accordingly, in reviewing a family court decision, we cannot ignore "the overall equity of a result that allows a trial court do to what is fair under the unique factual circumstances of each case." (In re Marriage of Fogarty & Rasbeary (2000) 78 Cal.App.4th 1353, 1360.)
We review the trial court's orders concerning the valuation and apportionment of community property for abuse of discretion. (In re Marriage of Finby (2013) 222 Cal.App.4th 977, 984; Marriage of Greaux & Mermin, supra, 223 Cal.App.4th at p. 1250.) "Under that standard, we would reverse only if considering all the relevant circumstances, the court has '"'"exceeded the bounds of reason"'"' or '"'no judge would reasonably make the same order in the same circumstances.'"'" (In re Marriage of Honer (2015) 236 Cal.App.4th 687, 694.) We accept the trial court's factual determinations as true if supported by substantial evidence. (Ibid.; In re Marriage of Quay (1993) 18 Cal.App.4th 961, 966.) While the trial court's adopted method may vary with the facts in each case, the trial court does not have discretion to divide the community estate unequally. (In re Marriage of Cooper (2008) 160 Cal.App.4th 574, 580.)
With these principles in mind, we review Rose's claims of error.
II. The Hard Money Loans
Rose contends the trial court did not equally divide the community property because it allocated the hard money loans to her without a corresponding credit for payments made on the loans after December 31, 2017. It is undisputed that from December 31, 2017 to July 31, 2019, payments were made on the hard money loans totaling $636,247.57, which reduced the balance of the loans from the December 31, 2017, balance of $1,239,389 to a balance of $603,141.43, as of July 31, 2019. These payments were deposited into OP Development's business checking account, which the trial court awarded to Greg at its December 31, 2017, value.
Rose argues the trial court's allocation of the hard money loans to her at their December 31, 2017, balance resulted in a windfall to Greg of $636,247, which caused an unequal distribution of the community estate in violation of section 2550. Rose asserts the trial court had two options to equalize the estate: (1) award the hard money loans to Greg at their December 31, 2017, balance and add $1,239,389 to the equalization payment or award her other assets; or (2) award the hard money loans to her based on the July 31, 2019, balance of $603,141.13 and increase the equalization payment by $636,247 for payments Greg received after December 31, 2017. Rose argues that because the trial court did neither, the result was an unexplained, unequal distribution of the community estate.
Rose's argument, however, ignores the parties' agreement to value their business assets, including the hard money loans, as of December 31, 2017. As Rose acknowledged in her opening brief, the parties stipulated that all business assets and liabilities would be valued as of December 31, 2017, and awarded or assigned to one party or the other, which meant the party assigned a business asset or liability would keep any profit or bear any loss that occurred after December 31, 2017. The trial court honored this agreement when it assigned the hard money loans to Rose, stating those loans "were valued, by stipulation, based on their outstanding balances as of December 31, 2017, like all other assets owned by the business."
As Greg points out, since the valuation of the hard money loans was based on the parties' agreement, the trial court cannot be accused of impermissibly dividing the community estate unequally. (§ 2550 ["Except upon the written agreement of the parties, or on oral stipulation of the parties in open court, ... the court shall ... divide the community estate of the parties equally"].) Under the stipulation, each party was required to bear the burden of any post-December 31, 2017, decrease, or reap the benefit of any post-December 31, 2017, increase, in the value of the business assets and liabilities assigned to them.
Rose nevertheless contends she was entitled to a corresponding adjustment for the payments made on the hard money loans after December 31, 2017, since they were deposited into the OP Development business account controlled by Greg and awarded to him. The trial court, however, explained why it did not make a such an adjustment-the parties had a de facto agreement that Greg would retain any revenues coming into the business entities, "be it from hard money loans, construction or development work" (italics added), with personal and business expenses being paid from the business entities' accounts, including identical fixed payments to each party for their personal use as ordered early in the litigation, without any effort to assign Greg separate property revenue and calculate spousal support, and without differentiating whether payments were business-related expenses, joint expenses, separate expenses of each party, or community expenses. The trial court, therefore, followed the parties' stipulation when awarding the hard money loans to Rose at their December 31, 2017, balances without adjustment, noting specifically that Greg was maintaining the business, bills were being paid from whatever income was generated including the promissory notes, Rose was receiving a monthly draw of $20,000, and a postseparation accounting would have been extremely expensive.
Given the parties' stipulation, the trial court did not abuse its discretion in declining to make an adjustment for the post-December 31, 2017, payments. Rose points out that the trial court, when assigning the hard money loans to her in the statement of intended decision, stated it understood "payments since [December 31, 2017] have been made to [Rose]." The trial court later corrected this, stating in the amended statement of decision that it understood the post-December 31, 2017, payments were made to OP Development. Rose claims that because the trial court initially believed it was giving her $1,239,389, and that amount was part of its equal distribution calculus, it was required to make an adjustment for the post-December 31, 2017, payments when it later recognized they were made to OP Development.
The trial court, however, was not bound by its intended decision. As shown by its amended statement of decision and its January 2021 order, by the time it issued its final decision it was aware the post-December 31, 2017, payments on the hard money loans were deposited into an account controlled by Greg, and it decided not to order an adjustment based on the parties' stipulation because no postseparation accounting was done to categorize the expenses being paid from that account, which included community expenses such as Rose's $20,000 monthly draw.
Rose contends that because the trial court awarded the other fluctuating business assets to Greg, such as the OP Development accounts, the trial court should have awarded the hard money loans to Greg at their December 31, 2017, balances, with an appropriate adjustment to the equalization payment or award of other assets to her. She claims that for the parties' "stipulation to properly work as intended, all of the business assets with fluctuating values-bank accounts, receivables, payables, hard money loans, etc.- should have been awarded to Greg."
The parties' stipulation, however, did not require the trial court to assign all business assets to Greg. As Greg points out, Rose benefitted from the hard money loan payments because, as the trial court found, the OP Development account was used to pay community expenses, as well as business, joint and separate expenses, including the $20,000 monthly draw Rose received in 2018 and 2019, which totaled $480,000. While Rose asserts the trial court did not make any findings about the post-December 31, 2017, payment of community obligations, that is belied by the trial court's finding that community obligations were paid postseparation from the OP Development account. The trial court declined to apply credits and debits for post-December 31, 2017, income into, and payments from, the business accounts, including giving credits for payments made on the hard money loans, because a postseparation accounting would have been extremely expensive and the parties' stipulated those assets would be valued as of December 31, 2017. To single out one business asset-the hard money loans-for an adjustment would have led to an unequal distribution of property, as the remaining business assets would all be valued as of December 31, 2017, without adjustment.
In sum, given the parties' stipulation, it was reasonable for the trial court to assign the hard money loans to Rose at their December 31, 2017, balances without adjustment for payments made on them after that date. There was no abuse of discretion.
III. The Equalization Payment
Rose's remaining contention is that the trial court abused its discretion in structuring the equalization payment as it did. Rose contends the trial court should have reduced the amount and timing of the equalizing payment by making a different property division. She argues the trial court made two errors that significantly increased the equalizing payment when it: (1) awarded the Lake Merced property to Greg at a value of $1.48 million instead of at the $2.5 million value Cogdill placed on the property; and (2) gave Greg discretion about when to pay off the equalizing payment despite awarding him about $2.4 million in cash and cash equivalents.
Rose contends that given the size of the marital estate, a $1.7 million equalization payment was unnecessary, and she is being forced to wait nine years to fully enjoy the community assets awarded to her. She claims the trial court should have structured a division of the community estate that would have: (1) maximized the marital estate's value, such as by awarding the Lake Merced property to her at a $2.5 million value; and (2) minimized the equalization payment by awarding her some of the cash and cash equivalents that were awarded to Greg.
We first address the trial court's valuation of the Lake Merced property. Rose asserts her contention is not that there is insufficient evidence to support the trial court's valuation; rather, she is arguing to minimize the equalizing payment, the trial court should have adopted the higher value at which Cogdill appraised the property and given the property to her. She asserts the trial court failed to consider the impact its valuation would have on the equalization payment, and because she "was willing to take the Lake Merced property at a value of $2.5 million," awarding the property to Greg at a value of $1.481 million is "contrary to the general policy to 'maximize assets of the community,'" citing In re Marriage of Cream (1993) 13 Cal.App.4th 81, 84, 88-89 (Cream).
In essence, Rose is arguing the Lake Merced property should be allocated to the spouse who proposes to pay the highest amount for it. This approach, however, was rejected in Cream. There, the trial court ordered a "nonbinding private auction between the parties" to dispose of the property at issue over the wife's objection because ignoring the husband's "offer to pay more than fair market value" for the property "'would not be a just result,' since it would not maximize the value of community property." (Cream, supra, 13 Cal.App.4th at pp. 84-85.) The appellate court determined this approach was not authorized by the pertinent statutes and rules of court as the trial court "possesses no authority to divide the community estate between the parties other than equally, and cannot delegate its responsibility to fix the fair market value of the community estate where assets are not divided in kind." (Id. at p. 88.) The court explained: "Without a stipulation of the parties, the trial court cannot abdicate its statutory responsibility to value and divide the community estate," therefore, it did not have "authority to order an interspousal auction of a community asset, over the objection of a party, as a substitute for the court valuing and making its award of that asset." (Id. at p. 89.) Accordingly, the court reversed and remanded the case to the trial court to fix the property's fair market value. (Id. at p. 93.)
Thus, the trial court here was required to fix the fair market value of the Lake Merced property based on the evidence before it. (Cream, supra, 13 Cal.App.4th at p. 88 ["as long as its determination is within the range of evidence presented, the court possesses broad discretion to determine the value of community assets"].) It could not simply adopt Rose's valuation of the property, thereby inflating the value of the community estate beyond the fair market value of its assets, so it could minimize the equalizing payment. Since Rose does not challenge the sufficiency of the evidence to support the trial court's valuation of the Lake Merced property, she cannot complain that the trial court adopted that value.
Moreover, the trial court did not abuse its discretion in awarding the Lake Merced property to Greg. As the trial court noted, the parties' agreed the highest and best use of the property was to continue working toward residential development. While Rose was interested in having the property assigned to her, she did not have the skills to develop it or a practical plan for hiring someone else to do so, and if the property were awarded to her, she would need to hire a third party to develop it if she did not sell it first. In contrast, if the property were awarded to Greg, it would "remain a major part of his remaining worklife." Considering Greg's occupation and experience, the trial court reasonably awarded the property to him, as doing so was in line with the trial court's stated goal of awarding each asset based on a party's "ability to utilize it."
With respect to the term of the equalizing payment, the trial court was required to structure the payment so Rose would receive its full market value rather than a note that is worth less than its face value. (Tammen, supra, 63 Cal.App.3d at p. 930 [whether promissory note maintained equal division of property turned on whether the note was worth substantially less than its face value].) Community property is not divided equally where a promissory note's terms make the note's market value substantially less than its face value. (Id. at p. 931.)
In Tammen, to equalize the division of community property, the trial court ordered the wife to give the husband a promissory note bearing simple interest at 7 percent, which was secured by a second deed of trust on the family residence that was awarded to the wife. (Tammen, supra, 63 Cal.App.3d at p. 929.) Principal and interest on the promissory note were payable in 10 years at the latest, but were payable sooner if the wife remarried, the property was sold, the property was refinanced, the wife ceased using or occupying the property as the family residence, or on the wife's death. (Ibid.)
In addressing the husband's argument that the promissory note's value was less than the offsetting community property awarded to the wife, the appellate court observed that "[r]ealization of the money was long deferred," and there were considerations that affected the security's value, including probable inflation and the husband's need to be alert and able to protect against foreclosure of the senior deed of trust. (Tammen, supra, 63 Cal.App.3d at p. 931.) The appellate court concluded the promissory note did not comply with the equal division requirement because the note's market value was substantially less than its face value, as its face value would "be discounted by the inferiority of its security, the long and uncertain deferment of its enjoyment, the probable effect of inflation upon it, and the concerns of its ownership." (Ibid.; see In re Marriage of Hopkins (1977) 74 Cal.App.3d 591, 597-598 [promissory note secured by first deed of trust on the family home did not equalize community property division because the 7 percent interest rate was below the prevailing rate, and the note did not become due and payable on events such as the borrower's death or the sale or refinancing of the home, which meant the wife "would be lending her money to strangers for just about the rest of her life expectancy"].)
In contrast, in In re Marriage of Slater, the trial court did not abuse its discretion in structuring a promissory note the husband was required to execute in the wife's favor that included the following terms: (1) the principal accrued interest at the rate of 10 percent per annum, which was payable annually, with the entire amount of the note plus interest due in five years at the latest; (2) the note was secured by a pledge of the husband's one-half interest in the partnership investments in his group medical practice; (3) the husband's accrued income from the partnership investments would apply to pay the interest and principal; and (4) if any of the husband's partnership interest sold, the net proceeds would apply to the note until paid in full. (In re Marriage of Slater, supra, 100 Cal.App.3d at pp. 241, 244, 248.) The appellate court found the promissory note was not worth substantially less than its face value, as the five-year period was "not a long and uncertain deferment of the wife's enjoyment of the award," the trial court ensured the note would be paid in full as soon as possible, and "the 10 percent interest rate and short payment period adequately compensated for inflation possibilities." (Id. at p. 248.)
Similarly, in Bergman, the appellate court concluded the award of an equalizing promissory note to the husband did not impose a long and uncertain deferment of his enjoyment of the award where: (1) the note bore 10 percent interest compounded annually; (2) it was secured by substantial equity in the family residence; (3) it would be paid in full within the three years, with the entire amount due sooner if the wife sold the house; and (4) the trial court specifically found the term and interest rate were reasonable in light of current economic conditions and the facts of the case. (Bergman, supra, 168 Cal.App.3d at pp. 761-762.) The appellate court further noted the interest rate and short payment period adequately compensated for inflation's potential effects. (Id. at p. 762.)
Here, to equalize the division of community property, the trial court ordered Greg to make a $1,720,996 equalizing payment to Rose, which would be fully paid at the latest eight years from entry of judgment. The unpaid balance accrues simple interest of 3 percent, which the trial court found was a commercially reasonable figure at the time, with the interest payment due annually based on the unpaid balance as of December 31 of each year. While payments on the principal could be made at any time without penalty, minimum annual payments of $150,000 were required, commencing in 2021, and the entire balance was due by March 1, 2029. The equalization payment was to be secured by a deed of trust on all real property owned by Greg, or by any entity in which he had an ownership interest, subordinate to any legitimate business-related encumbrances. To reduce the amount owed, the trial court ordered two properties sold and a portion of Greg's proceeds from the sales applied toward the unpaid balance.
Under these terms, there is nothing to suggest the market value of the promissory note is less than its face value. While the entire balance is not due until eight years after the first payment in 2021, the trial court ensured substantial annual principal payments, as well as annual interest payments, were made to reduce the balance, and Greg is required to pledge all his real property, which included at least the 17 properties he was awarded in this proceeding, as collateral to ensure payment in full. Given the annual payments, the interest rate that the trial court found was commercially reasonable, the requirement to apply proceeds from the sale of two properties toward the balance owed,and the ample security provided, we cannot conclude Rose will receive less than the $1.7 million she is owed.
In response to the trial court's statement of intended decision and statement of decision, both of which did not set a date by which the equalizing payment must be paid off, Rose proposed the balance should be due at the end of five to seven years. Given this, the eight-year payment period is not unreasonable.
Rose asserts the proceeds of the sale of these properties will not minimize the equalizing payment or reduce the nine-year repayment period because she stood to receive from Greg at most $83,750, minus costs of sale, from the sale of the Calaveras property, and less than $150,000 from the sale of the San Andreas property.
Rose asserts there were reasonable alternatives that would have substantially minimized or eliminated the need for a nine-year waiting period. It can be an abuse of discretion to require a party to accept a promissory note to equalize the division of community property when the other party can make a cash payment to equalize the division, such as by using liquid assets or borrowing money. (In re Marriage of Hopkins, supra, 74 Cal.App.3d at p. 598.) Rose argues the trial court should have required Greg to use the liquid assets he was awarded to pay down the amount owed, rather than leaving it to Greg to decide if he wants to pay off the equalization payment in less than nine years.
Greg was awarded OP Development's regular and Suncrest Bank checking accounts, and its money market account, with December 31, 2017, values totaling $786,715, which the trial court advised he was free to use to equalize the division of community assets, as well as cash and cash equivalents of $742,929 in Opinski Construction, and $422,088 in Rosetta Creek. Rose argues some of this cash could have been used to reduce the amount of the equalization payment and the trial court abused its discretion in allowing Greg to decide whether to use these assets to reduce the amount of the equalizing payment rather than ordering him to do so.
In addition to these accounts, however, Greg also was assigned outstanding business liabilities, including a $127,413 line of credit through OP Development, a $541,031 line of credit in Opinski Construction, and $696,006 in accounts payable in Opinski Construction. Thus, the bank account total of $1,951,732 is offset by liabilities totaling $1,364,450, leaving $587,282 in available cash as of December 31, 2017. Given this, the trial court reasonably could conclude the businesses' liquid capital was necessary for their continued operation and Greg should be given discretion on whether to use any or all the funds in these accounts to reduce the equalization payment, especially since the current balances were not known to the trial court due to the parties' stipulation to value the properties as of December 31, 2017.
In sum, Greg did not have the cash to immediately fund the entire $1.7 million equalizing payment, and while he may have had some cash available to pay down the amount due, given the parties' stipulation to value the business accounts as of December 31, 2017, the trial court reasonably could give Greg discretion on whether to use the money in the accounts to reduce some of the equalization payment. The trial court ultimately required Greg to make $150,000 annual payments to Rose, along with annual interest payments, and reduced the amount due from his proceeds from the immediate sale of two properties. The remaining amounts owed are secured by all of Greg's real property, and the unpaid amounts are accruing interest at what was then a "commercially reasonable" rate. Under the circumstances, the trial court did not abuse its discretion by allowing Greg until 2029 to pay any amounts remaining on the debt.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to Greg.
WE CONCUR: HILL, P. J., DETJEN, J.
[*] Pursuant to California Constitution, article VI, section 21.