Opinion
H048252
05-03-2023
In re Marriage of MARK and MELANIE ZARNEGAR v. MELANIE ZARNEGAR, Respondent. MARK ZARNEGAR, Appellant,
NOT TO BE PUBLISHED
(Santa Clara County Super. Ct. No. 16FL174248)
Wilson, J.
In this dissolution of marriage action, appellant Mark Zarnegar appeals from a trial court decision characterizing, valuing, and dividing marital property and awarding spousal support. Mark contends insufficient evidence supports the trial court's characterization and valuation of various assets, including one of the parties' brokerage accounts, certain Kaiser shares acquired by respondent Melanie during the marriage and after the parties' separation, and the parties' community residence. In addition, Mark claims that there was no substantial evidence to support the trial court finding that he breached his fiduciary duties to Melanie by selling community assets postseparation. Finally, Mark argues the trial court abused its discretion by awarding him permanent spousal support in an amount substantially lower than the temporary spousal support he had previously received and for an unreasonably short period of time.
For consistency with the parties' briefing and brevity, we refer to the parties by their first names.
For the reasons explained below, we agree that the trial court erred in part and remand with directions.
I. Factual and Procedural Background
A. Procedural Background
Mark and Melanie married on September 21, 2002 and separated on March 15, 2016. They have two minor children, ages 11 and eight, and share joint legal and physical custody. Melanie filed a petition for dissolution of the marriage in March 2016.
Pursuant to stipulation, on November 22, 2019, December 5, 2019, and January 16, 2020, the parties appeared for trial on the issues of support and division of assets and obligations. On April 29, 2020, the trial court issued a statement of decision that characterized and valued the parties' assets and obligations and awarded permanent spousal support to Mark.
The parties additionally stipulated to have the trial heard by a judge pro tem.
On June 4, 2020, the trial court entered a judgment for dissolution, with an effective date of dissolution of May 5, 2020. The judgment incorporated the April 29, 2020 statement of decision.
Mark timely appealed.
B. Evidence Presented at Trial 1. Characterization of Charles Schwab Account and Kaiser Shares
At the November 22, 2019 proceeding, the trial court heard testimony from Mark's forensic accountant Reagan Wade and Melanie's forensic accountant James Butera. Both witnesses provided expert testimony on the characterization of the parties' various financial accounts.
a. Reagan Wade's testimony
Wade testified that during the parties' marriage, Mark received an inheritance from his mother's estate totaling $241,373. According to her analysis, a portion of these funds were reinvested into a Charles Schwab investment account. While both parties withdrew funds from this account after their separation, Wade determined that Mark still had separate property funds totaling $36,263 in the account as of the date of separation in March 2016.
In November 2009, the parties purchased 2.165 shares of stock from Kaiser, Melanie's employer, at a total purchase price of $43,290. Wade stated that this purchase was made from the parties' joint Chase account, which had both community property funds and Mark's separate property funds. Because the community funds in the account at the time were insufficient to purchase the Kaiser shares, Wade determined that a portion of Mark's separate property funds were used towards this purchase. Per Wade's report, Mark's separate property contribution amounted to approximately $23,528.31.
From 2010 onwards, Melanie was granted an additional number of Kaiser shares by her employer each January in the amount of 10.5 percent of the total number of shares. Wade testified that this grant appeared to be a dividend, as Melanie would receive these shares even if she only worked part-time or had a change in her salary. Wade concluded that any shares Melanie received after the parties' separation should be characterized as community property as they were returns on the parties' initial investment, not new purchases.
In analyzing Mark's separate property claims to the parties' investment accounts and assets, including the initial purchase of Kaiser stock, Wade used a method known as traditional tracing. She described this method as tracing on a pro rata basis, where each investment or transfer is analyzed and characterized as community or separate property based on the percentage of community and separate funds in the account in question. Wade stated that she employed this method in approximately 95 percent of cases. Wade also noted that the type of asset governed her tracing approach, indicating that her pro rata approach was typically used for evaluating investment, savings, or checking accounts, but not for purchases of real property, where she would try to exhaust available community funds first.
b. James Butera's testimony
Butera also testified, stating that unlike Wade's pro rata approach to tracing, he instead chose to give the community "first shot" at investments or transfers. This method of tracing assumes that community funds are being used to purchase an asset, provided sufficient community funds are available at the time. Butera indicated that his office typically uses this approach for most tracing analyses and only uses the traditional pro rata approach described by Wade for a traded brokerage account; however, he stated that per the case of In re Marriage of Ciprari (2019) 32 Cal.App.5th 83 (Ciprari), it was his understanding that he was now required to automatically prioritize community funds when tracing any purchase or account and not use a pro rata approach.
Butera testified that his methodology had a "ripple effect" on many of Mark's separate property claims, resulting in some of the amounts being lower or higher in Butera's report than in Wade's report. Butera confirmed that the Charles Schwab account was one of the assets affected by the different methodology, as he calculated Mark's separate property portion as of March 2016 as only $16,874, not $36,263 as indicated by Wade.
Butera also testified his methodology resulted in him finding that there were sufficient community funds in the Chase account to purchase the Kaiser shares in 2009. As a result, Mark did not have a separate property interest in the Kaiser shares. Butera testified that Melanie only received additional shares each year if she remained a Kaiser employee; she would not receive any dividends or realize any actual money from the shares until her employment with Kaiser terminated. Butera equated this type of share grant to an annual bonus or retention bonus, where Melanie would receive a block of shares each January for her services as a Kaiser employee the previous year. He concluded that all shares granted to Melanie postseparation were based on her services rendered during that time and therefore should be treated as her separate property.
2. Value of Community Residence
At the December 5, 2019 proceeding, the trial court heard expert testimony from joint appraiser Mark Ivey and real estate expert Kiersten Ligeti, regarding the value of the parties' community residence.
Ivey testified that in 2016 he had been retained by both parties to conduct a fair market valuation of the parties' residence, located on Finley Place in Santa Clara. To prepare this initial valuation, Ivey spoke with Mark and pulled up public information on the residence as well as sales that were most similar and comparable to the residence which had sold recently. Ivey also inspected the residence in person, where he documented the amenities, overall condition and quality of the residence. He appraised the residence at a value of $1.175 million on October 9, 2016. Ivey testified that he prepared a second appraisal in September 2018. He re-appraised the residence at $1.48 million and noted that this change was attributable to median sale prices in the Bay Area appreciating by approximately 25 percent between the two appraisal dates. Ivey conducted a third appraisal in September 2019, where he performed another full walk through and concluded that the condition of the property had not changed since 2016. Ivey testified that he re-appraised the residence at $1.212 million and attributed the change in value to a drop in Bay Area real estate prices.
Ivey testified that given the unchanged condition of the property between appraisals, the change in value was based entirely on comparable sales. In determining which comparable sales to consider in his appraisal, Ivey used a number of factors, including lot size, timing of the sales, and amenities. He further noted that the state of the market at the time of his appraisal also affected the comparable sales used, particularly if the market was declining or appreciating.
Ligeti testified that she had been working as a real estate broker since 1999 and had previously listed property in the same area as the parties' residence. Ligeti indicated that if she were to list the parties' residence for sale, she would list it at a price of $1.368 million, which she described as "slightly below" market value. In her opinion, some of the comparable sales used by Ivey in his September 2019 appraisal were for less desirable properties than the parties' residence, given the age of the homes and location. Ligeti testified that while the market had softened, it had not experienced the 18 percent decrease reflected in the difference of values between Ivey's September 2018 and September 2019 appraisals. From her experience with the market, a $40,000 decrease would be more appropriate.
Prior to Ligeti's testimony, the trial court issued a ruling on Mark's motion in limine requesting to exclude Ligeti from testifying as she was not timely disclosed as an expert witness. The trial court partially granted the motion but declined to exclude her testimony entirely, instead ruling that she would be allowed to provide impeachment testimony. The trial court later clarified its ruling, stating that Ligeti was not permitted to testify as to the value of the residence but could provide impeachment testimony regarding any underlying facts in Ivey's appraisal, such as comparable related sales.
Both Mark and Melanie also provided brief testimony regarding their estimated value of the residence. Melanie testified that she believed the house was worth between $1.4 to $1.5 million, but noted that since she had moved out postseparation, the condition of the house had deteriorated significantly. Mark testified that he had no desire to sell the home as both he and the children continued to reside there. Mark indicated that he would not be willing to sell the home to Melanie at Ivey's appraised value of $1.212 million or even at a higher value of $1.3 million.
3. Breach of Fiduciary Duties
At the December 5, 2019, and the January 16, 2020 proceedings, the trial court heard testimony from Melanie and Mark on a number of issues, including Melanie's allegation that Mark had unilaterally withdrawn funds from the Charles Schwab brokerage account after separation without Melanie's knowledge or consent.
Melanie testified that as of the parties' separation in March 2016, the "vast majority" of the funds in the Charles Schwab account were community funds. She stated that the account was in Mark's name only, even though she had asked him to add her numerous times, and she had no ability to access the funds therein.
Melanie stated that she served Mark with her petition for dissolution on March 15, 2016, and indicated that both parties were subject to the automatic temporary restraining orders (ATROs) at that time, which prevented them from liquidating stocks or selling any property without mutual agreement or a court order. At the time of separation, Mark had access to a number of bank accounts, including the Charles Schwab account, that she did not have access to. As a result, she requested that she have equal access to these accounts and the community funds therein. In April 2016, the trial court issued an order for the parties to exchange login access information for various financial accounts, including the Charles Schwab account. The April 2016 order also limited the parties' login access for viewing purposes only and prevented them from moving, transferring, liquidating, selling, or taking any other action with respect to the accounts at issue.
These orders, which are required to be on the summons for a dissolution action, restrain both parties from "transferring, encumbering, hypothecating, concealing, or in any way disposing of, any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life, and requiring each party to notify the other party of proposed extraordinary expenditures at least five business days before incurring those expenditures and to account to the court for all extraordinary expenditures made after service of the summons on that party." (Fam. Code, § 2040, subd. (a)(2)(A); unspecified statutory designations are to the Family Code.)
Melanie testified that she did not actually obtain access to the Charles Schwab account until the trial court issued another order in August 2016 directing Mark to provide her with the login information immediately. She was therefore unaware of what Mark was doing with the account from March 2016 until August 2016. Additionally, the August 2016 order contained the same language as the April 2016 order, whereby the parties were still limited to using their login access for viewing purposes only and were prohibited from making any transfers, withdrawals, or taking actions of any kind without express written consent from the other party or a court order.
Between 2016 and 2019, Melanie stated that Mark did not ask her for permission to withdraw funds from the Charles Schwab account. Melanie only became aware that Mark had withdrawn funds from the Charles Schwab account after she obtained login access in August 2016. Melanie's attorney informed Mark's attorney that Mark was unilaterally withdrawing funds from the account in June 2016.
Melanie noted that the only funds she received from this account between 2016 and 2019 was a $130,000 transfer, which was pursuant to a court order filed in 2018. Melanie testified that she did not withdraw any other funds from the account because it was her understanding that the previous court orders restrained her from doing so. In September 2016, her financial advisor advised her not to liquidate any of the funds in the account as the resulting taxes and capital gains would result in greater losses than gains, and she relayed this information to Mark. Melanie confirmed that she had to pay capital gains taxes on the account in 2017 and 2018 due to the withdrawals from the account, and therefore believed Mark's withdrawals resulted in a loss to the community.
In his testimony, Mark did not dispute that he had withdrawn funds from the Charles Schwab account between April 2016 and November 2019 in the following amounts: $49,000 in 2016, $72,000 in 2017, $55,000 in 2018, and $41,000 in 2019. Mark testified that he did not provide Melanie with notice or obtain her consent prior to making these withdrawals. He was aware of the restrictions in the ATROs on the transfer and disposal of property. Mark acknowledged that the court made orders in April 2016, August 2016, and December 2016 that restricted the parties' usage of login information to viewing access only and prevented them from transferring, withdrawing, or taking any other action with respect to the accounts without express written consent of the other party or a court order. However, Mark indicated that he had withdrawn the funds in question to pay for his living expenses and attorney fees between 2016 and 2019 since he was not consistently receiving his court-ordered support payments from Melanie. Per Mark's understanding of the ATROs and the subsequent court orders, he was not precluded from using the Charles Schwab account to pay for necessities of life. Furthermore, the viewing access restriction only applied to Melanie and did not prevent him from making any further withdrawals or transfers from the Charles Schwab account. Mark stated that he did not use a $650,000 inheritance that he received in May 2016 to pay for his attorney fees or other expenses.
Butera additionally provided expert testimony at the November 20, 2019 proceeding regarding the withdrawals in question. Butera testified that because the Charles Schwab account was a brokerage account primarily consisting of stock and securities, Mark would first sell stock or securities to put enough cash into the account for him to make a withdrawal. Butera testified the total dollar amount of stock sales made by Mark between 2016 and 2019 was $222,694. If the stocks and securities in question had not been sold and had remained in the account, Butera believed their values would have increased by $102,045 by November 2019, with a cumulative value of $324,739. Butera therefore concluded that Mark's withdrawals resulted in a net loss to the community.
4. Permanent Spousal Support
At the commencement of the trial, the parties jointly stipulated on the record that their marital standard of living was $10,625 per month after taxes. The trial court also heard testimony from Mark and Melanie about their respective educational backgrounds, occupations, and incomes for purposes of evaluating Mark's request for permanent spousal support.
Mark earned two bachelor's degrees and a Ph.D. prior to beginning as a post-doctoral research scientist at Stanford University in April 2011, which converted to a regular research scientist position in 2015. His starting salary at Stanford was $45,000 and increased to approximately $65,000 by the time he left his position in 2019. Mark stated his position at Stanford gave him considerable flexibility, which allowed him to adjust his schedule to provide childcare for the parties' children as needed. After the parties separated, this flexibility allowed him to attend court dates and provide childcare during his parenting time. In August 2018, Mark began searching for a new position with a heavier workload. In October 2019, he obtained a position as a scientist with Roche Labs with an annual salary of $115,000. Mark also received dividend income and occasional distributions from his separate property brokerage accounts.
Melanie testified that she began working for Kaiser as a physician in 2005 and reduced her hours to 70 percent time after the parties' daughter was born in 2011. However, she testified that the actual number of hours she worked were the equivalent of a full-time position. Her workdays often exceeded 10 hours or more even though she would only have eight hours of actual appointments with patients. Melanie indicated that she was working approximately 36 to 40 hours per week consistently, including occasional work on her days off. She also testified that if she were to work at 100 percent time, she would be working close to 60 hours a week.
Melanie testified that her monthly earnings were $19,340 and that she received an annual bonus every March. She acknowledged that Mark earned significantly less than her but stated that she had substantial debt, including a loan she obtained from her parents for attorney fees. Such debt made it very difficult for her to support both herself and Mark.
C. Trial Court's Statement of Decision
Following the parties' submission of written closing arguments, the trial court issued a tentative statement of decision, to which both parties filed objections. The trial court then issued a final statement of decision on April 29, 2020. The trial court ruled that the fair market value of the community residence was $1.35 million. While the trial court indicated that this value was based on the collective testimony of Mark Ivey, Kiersten Ligeti, and the parties, the court specifically pointed to Mark's testimony that he would not sell the home to Melanie for $1.3 million. The court stated that this testimony indicated that the home's value was higher than the $1.212 million number set forth in Ivey's last appraisal, and noted that the higher value was also supported by Melanie's and Ligeti's testimony. The court awarded the residence to Mark and ordered him to pay Melanie 50 percent of the net equity, which was adjusted to reflect a number of reimbursement claims submitted by both parties.
While the record on appeal only contained Mark's objections, the final statement of decision indicated that both parties filed objections.
With respect to permanent spousal support, the trial court ordered Melanie to pay $500 per month in permanent spousal support to Mark until December 31, 2024. In making this order, the court discussed the various factors under section 4320 that it considered in evaluating permanent spousal support. While the court declined to impute income to either party, it found that Mark was underemployed during the marriage, given his educational background and expertise, and attributed this in part to his substantial separate property inheritance of $800,000. The court also found that Melanie was working the equivalent of a full-time job even at 70 percent time such that she should not be imputed with income. The court also noted that neither party had sufficient income on their own to meet the marital standard of living of $10,625 per month after taxes. The court further noted that Melanie had substantial debts, including a $300,000 loan to her parents for attorney fees and minimal investments and assets, while Mark had minimal debt, substantial separate property assets, and multiple investments. The court additionally found that Mark was capable of increasing his earning capacity over time as the children matured without impairing his ability to take care of them during his custodial time. While the court recognized that the length of marriage was 13 years, it determined that Mark's education and experience were superior enough that he would be able to earn a salary substantially equal to Melanie's by January 2025. The court also acknowledged that Melanie had been paying Mark $2,137 in temporary spousal support since April 2016 but indicated that it was not relying upon this amount in setting permanent support, particularly since this amount was reflective of Mark's under-employment at the time. Finally, the court did not make any orders for additional support based on any bonus income earned by either party, indicating that all considerations of additional income had been taken into account in setting the amount of $500 per month.
The trial court also found that Mark breached his fiduciary duties to Melanie under section 1101, subdivision (a) by withdrawing funds from the Charles Schwab account after the parties' separation without Melanie's knowledge or consent. In making its finding, the trial court specifically addressed Mark's claim that he made these withdrawals to pay for his fees and necessities of life after Melanie stopped paying him support. The court noted that it would have been inclined to look more favorably on this argument if not for the fact that Mark received $650,000 from his inheritance in May 2016, which he could have used to support himself. The trial court also indicated that Mark made many of these withdrawals after numerous warnings and admonitions not to do so, including the August 2016 and December 2016 court orders limiting the parties' login access to viewing only, communications from Melanie's attorney informing Mark that his withdrawals were unilateral and not proper, and communications from Melanie that she did not think it was prudent to sell the stock. The trial court ordered Mark to repay Melanie $158,563, or 100 percent of the funds withdrawn between December 6, 2016 and April 30, 2019, pursuant to section 1101, subdivision (h), and $32,065.35, or 50 percent of the funds withdrawn between April 13, 2016 and April 16, 2016, pursuant to section 1101, subdivision (g). The court also ordered that Mark pay $102,046 in damages for denying the community the opportunity to sell the stock at a higher value.
Section 1101, subdivision (h) provides in relevant part that remedies for a breach of fiduciary duties by one spouse, when the breach reflects oppression, fraud, or malice, shall include 100 percent of the assets transferred as part of the breach.
Section 1101, subdivision (g) provides in relevant part that remedies for a breach of fiduciary duties by one spouse shall include 50 percent of the assets transferred as part of the breach.
Regarding Mark's separate property claims, the trial court indicated that it was adopting the traditional tracing analysis for most of the parties' accounts with the exception of the Kaiser stock. The court stated that its decision to use different tracing methods was supported by the holding from Ciprari, which granted courts the flexibility to consider any credible evidence and to evaluate alternative tracing methods. (See Ciprari, supra, 32 Cal.App.5th at pp. 96-97.) The court accepted a number of findings from both experts' reports that were undisputed. Notably, the court adopted Wade's findings regarding Mark's separate property claim to the parties' Morgan Stanley account. The court also ruled that the Charles Schwab account was entirely community property as of the date of separation.
With respect to the Kaiser stock, the trial court adopted Butera's tracing by finding that there were sufficient community funds to purchase the initial shares and that Melanie's intention was for the purchase to be a wholly community investment. The trial court also ruled that any additional shares granted to Melanie after the parties' separation were not dividends on the initial purchase, but inducements for her to remain employed at Kaiser and therefore constituted her separate property.
II. Discussion
A. Characterization and Valuation of Assets
Mark contends there was no substantial evidence to support the trial court's (1) finding the Charles Schwab account was wholly community property as of the date of separation (2) findings that the initial Kaiser stock purchase was made with community funds only, and any shares acquired postseparation were Melanie's separate property and (3) valuation of the parties' marital residence at $1.35 million.
For the reasons explained below, we find that the trial court erred in ruling that the Charles Schwab account was solely community property at the time of separation, but affirm the orders related to the Kaiser shares and valuation of the marital residence.
1. Applicable Law and Standard of Review
The characterization of property involves" 'the process of classifying property as separate, community, or quasi-community.'" (Ciprari, supra, 32 Cal.App.5th at p. 91.) As a general rule, all property acquired by the parties during the marriage is presumptively community property. (§ 760.) Conversely, any property acquired prior to the parties' marriage or after separation, or at any time by gift, bequest, devise, or descent, is separate property. (§§ 770, subd. (a), 771.) The party contesting the property's community status bears the burden of establishing its separate character. (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 290.) This rebuttal of the presumption may be accomplished by "any credible evidence," such as "tracing the asset to a separate property source, showing an agreement or clear understanding between parties regarding ownership status[, or] presenting evidence the item was acquired as a gift." (Ibid.)
In addition, the commingling of separate and community property funds "does not alter the status of the respective property interests, provided that the components of the commingled mass can be adequately traced to their separate property and community property sources. [Citation.] But if the separate property and community property interests have been commingled in such a manner that the respective contributions cannot be traced and identified, the entire commingled fund will be deemed community property pursuant to the general community property presumption of section 760." (In re Marriage of Braud (1996) 45 Cal.App.4th 797, 822-823.)
"The trial court's findings on the characterization and valuation of assets in a dissolution proceeding are factual determinations which are reviewed for substantial evidence." (In re Marriage of Campi (2013) 212 Cal.App.4th 1565, 1572.)" 'In this regard, the court has broad discretion to determine the manner in which community property is divided and the responsibility to fix the value of assets and liabilities in order to accomplish an equal division. [Citations.] The trial court's determination of the value of a particular asset is a factual one and as long as that determination is within the range of the evidence presented, we will uphold it on appeal.'" (Ibid.)
Further, in reviewing a judgment based upon a statement of decision following a bench trial," 'any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision. [Citations.]' [Citation.] In a substantial evidence challenge to a judgment, the appellate court will 'consider all of the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference, and resolving conflicts in support of the [findings]. [Citations.]' [Citation.] We may not reweigh the evidence and are bound by the trial court's credibility determinations. [Citations.] Moreover, findings of fact are liberally construed to support the judgment." (Estate of Young (2008) 160 Cal.App.4th 62, 76.)
2. Characterization of Charles Schwab Account
Mark argues that there was no substantial evidence to support the trial court's finding that the Charles Schwab account was entirely community property at the time of separation. Mark contends that though they differed on the exact amounts, both experts concluded that Mark had some separate property funds in the account as of the date of separation. Melanie responds that the trial court's ruling reflected its implicit finding that the Charles Schwab account was "hopelessly commingled" such that Mark's separate property interest could not be properly identified. In reviewing the statement of decision and evidence presented at trial regarding this account, we agree with Mark that the trial court's decision does not appear to be supported by substantial evidence.
Although Mark initially contends that the trial court's ruling reflected an abuse of discretion, he later argues substantial evidence did not support the trial court's characterization of the Charles Schwab account. As reflected in our standard of review discussion, ante, we review factual determinations by the trial court for substantial evidence.
Both experts were able to trace Mark's separate property interest in the account and confirmed that he had separate property funds therein as of the date of separation. Wade determined that Mark had separate property funds in the account totaling $36,263 as of March 2016. Butera calculated Mark's separate property funds in the account to be $16,874 as of March 2016.
While we acknowledge that this account was also the account associated with Mark's alleged breach of fiduciary duties, neither party or expert provided any evidence nor did the trial court make any findings that the breach of fiduciary duties impacted Mark's separate property interest in the account as of the date of separation. Further, the Charles Schwab account is the only account where the trial court's ruling as to characterization and value did not correspond to the values and findings in Wade's or Butera's reports and testimony. Although we consider all evidence in the light most favorable to the prevailing party, the trial court did not explain its ultimate conclusion which ran counter to the evidence presented by both experts that Mark's separate property could be traced in this account. We therefore find that the trial court's ruling that the Charles Schwab account was solely community property as of the date of separation was not supported by substantial evidence.
3. Characterization of Initial Kaiser Stock Purchase
Mark next contends that there was no substantial evidence to support the trial court's characterization of the initial Kaiser stock purchase as a community purchase only. Mark also asserts that the trial court abused its discretion in adopting Butera's Ciprari method solely for the purchase of Kaiser stock while alternatively utilizing the traditional tracing method in determining Mark's separate property interest in the remaining accounts.
In Ciprari, the Second District rejected wife's argument that there were only two permissible methods of tracing funds in a commingled account: the exhaustion method, which traces purchases from a commingled account by first determining if all community funds therein have been exhausted, and the direct tracing method, where a party must provide documentary proof that there were sufficient separate property funds in question at the time of a purchase as well as proof that the party intended to use separate, not community funds, for the purchase. (Ciprari, supra, 32 Cal.App.5th at pp. 95-97.) The court ruled that trial courts had the flexibility to "consider any credible evidence and to evaluate alternative tracing methods to determine whether the proponent of the tracing carries his or her burden of proof. The tracing method may vary depending on the facts. Thus, trial courts are free to consider and credit reasonable, well-supported, and nonspeculative expert testimony, when determining whether the proponent has successfully traced commingled assets to a separate property source." (Id. at p. 97.) The court accordingly found that the method used by husband's accountant, which was based on a presumption that all investments were purchased with community funds unless there were insufficient community funds in an account, was an appropriate method of tracing. (Id. at p. 98.)
Ciprari does not discuss whether a trial court can utilize different methods of tracing when characterizing and valuing different assets in a single case. However, we see no reason why this would be impermissible. Mark provides no legal authority, nor do we know of any, requiring the trial court to explain why it chose to adopt different approaches for different assets. Indeed, Ciprari suggests otherwise by granting trial courts the freedom to "consider and credit any reasonable, well-supported, and nonspeculative expert testimony" in evaluating the tracing methods used. (See Ciprari, supra, 32 Cal.App.5th at p. 97.) While Mark disagrees with the method used by Butera, he fails to demonstrate that Butera's testimony was speculative or based on unreasonable assumptions or facts. Accordingly, we find no abuse of discretion in the trial court's decision to adopt Wade's traditional tracing for some accounts and Butera's Ciprari tracing for the initial Kaiser stock purchase.
Utilizing the Ciprari tracing method and witness testimony, the trial court did not err in finding that the initial Kaiser stock purchase was solely a community purchase. Melanie testified that after she completed her probationary period in Kaiser, she was required to buy Kaiser Class A and Class B shares in order to remain a Kaiser employee. She informed Mark of her intention to purchase these shares using her paycheck money, which she regularly deposited in the parties' joint Chase account, and that to her knowledge, there were sufficient community funds in the account to fund the initial purchase. Melanie further testified that she explicitly told Mark, who regularly moved funds between the parties' various accounts, to not take any of her paycheck money out of the Chase account so that she could purchase the shares. This aligns with Butera's testimony regarding a $44,000 transfer to the Chase account shortly before Melanie purchased the Kaiser stock, which, in his opinion, was clearly transferred with the purpose of funding the Kaiser purchase. Butera further confirmed that using the Ciprari tracing method, which gave the community "first shot" at any purchases, there were sufficient community funds in the parties' Chase account in 2009 to cover the entire stock purchase. We therefore conclude that there was substantial evidence to support the trial court's characterization of the initial Kaiser stock as a community purchase.
4. Characterization of Kaiser Shares Granted Postseparation
Mark contends that the trial court erred in finding that any shares granted to Melanie after the parties' separation were inducements for her to remain employed at Kaiser and therefore her sole and separate property. Mark argues that since the additional share grants remain the same every year and are not performance-based, they are necessarily predicated on the original investment and therefore should be considered a return on this investment.
From our careful review of the evidence, we also find there was substantial evidence to support the trial court's finding that the additional shares were inducements for Melanie to remain employed at Kaiser. Melanie testified that she was required to make the initial purchase of shares in 2009 as a condition of her continued employment with Kaiser. Melanie also testified that she only received the additional shares if she remained employed at 60 percent time or higher for the entirety of the previous year. Butera similarly testified that his understanding of the additional grants was that they were granted each January only upon completion of a full year of employment with Kaiser. Based on this evidence, we find it reasonable for the trial court to have concluded that all additional shares were granted based on Melanie's continued employment with Kaiser such that any shares earned postseparation were her separate property.
Mark further argues that if Melanie's additional shares are viewed as retention bonuses, they should be subject to a Smith/Ostler bonus order for income earned above her base salary. We disagree. While Butera characterized the shares as a retention "bonus," he testified that Melanie would not receive any dividends or realize any actual money from the shares until her employment with Kaiser terminated. Accordingly, it would not have been proper for the trial court to apply a Smith/Ostler order to shares of unrealized value when such an order applies to bonus income" 'actually received.'" (See In re Marriage of Minkin, supra, 11 Cal.App.5th at p. 949, italics added.)
A Smith/Ostler payment is an additional support award calculated as a percentage of discretionary bonus income actually received. (See In re Marriage of Minkin (2017) 11 Cal.App.5th 939, 949; In re Marriage of Ostler & Smith (1990) 223 Cal.App.3d 33.)
Mark additionally argues that the trial court abused its discretion by failing to apply a time rule to apportion the dividends earned postseparation. We find no merit to this contention. The trial court has broad discretion to apportion interests in any property that contains both separate and community interest. (In re Marriage of Steinberger (2001) 91 Cal.App.4th 1449, 1459.) Further, there is no mandate that a trial court apportion interests pursuant to the time rule when stock options include both separate and community property interests. Indeed, case law demonstrates the opposite. (See Ibid. [noting that no single rule or formula should be applied to every case involving stock options, and courts have broad discretion to fashion approaches that lead to the most equitable results based on the facts of each case]; In re Marriage of Hug, supra, 154 Cal.App.3d at p. 793 [indicating that equity could result in a determination that stock options granted after the date of separation are solely the separate property of an employee spouse].) The trial court therefore was within its discretion to not apply a time rule in its apportionment of the community and separate property interests. We find no error in the trial court's ruling that all shares granted to Melanie postseparation were her separate property.
A time rule for stock options generally provides that "the number of options determined to be community property is a product of a fraction in which the numerator is the period in months between the commencement of the spouse's employment by the employer and the date of separation of the parties, and the denominator is the period in months between commencement of employment and the date when each option is first exercisable, multiplied by the number of shares which can be purchased on the date the option is first exercisable." (See In re Marriage of Hug (1984) 154 Cal.App.3d 780, 782.)
5. Valuation of Community Residence
Mark next argues that there was no substantial evidence to support the trial court's valuation of the community residence at $1.35 million. Mark contends that the trial court abused its discretion in allowing Ligeti to testify about listing price, which directly contradicted Ivey's opinion as to value and exceeded the permissible scope of her impeachment testimony. Mark also claims that the trial court improperly interpreted his testimony that he would not sell Melanie the residence for $1.3 million as his opinion on the home's value, which he was not qualified to make.
We find that the trial court did not err in setting the value of the residence at $1.35 million. As stated above, a trial court's determination of the value of a particular asset is entirely factual and will be upheld on appeal as long as that determination is within the range of the evidence presented. (In re Marriage of Campi, supra, 212 Cal.App.4th at p. 1572.) In the instant case, viewing the evidence in the light most favorable to the prevailing party, we find that the court's determination of the residence's value was supported by substantial evidence. Melanie testified that she estimated the residence to be valued at approximately $1.4 to $1.5 million, despite the numerous repairs needed. In addition, Ligeti provided proper impeachment testimony in her discussion of why Ivey's assessment of the market in 2019 was an inaccurate reflection of current market conditions and why the comparable properties used in his appraisal were less desirable than the parties' residence. Further, although Mark's testimony that he would not sell the home to Melanie for $1.3 million certainly may not have amounted to his opinion on the value of the home, it remained within the trial court's discretion to consider this statement along with the remaining evidence presented in making its determination of the home's value. Accordingly, we find there was substantial evidence to support the trial court's valuation of the residence at $1.35 million.
While we agree with Mark that Ligeti's testimony about listing price exceeded the permissible scope of her impeachment testimony, we find there was substantial evidence apart from this testimony to support the trial court's valuation of the residence.
B. Breach of Fiduciary Duties 1. Applicable Law and Standard of Review
Section 721 recognizes the fiduciary relationship in transactions between spouses. This relationship includes "a duty of the highest good faith and fair dealing on each spouse," and mandates that "neither [spouse] shall take any unfair advantage of the other." (§ 721, subd. (b).) This relationship applies to management and control of community assets and liabilities during marriage. (§ 1100, subd. (e).) This duty includes the obligation to fully disclose to the other spouse "all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest and debts for which the community is or may be liable, and to provide equal access to all information, records, and books that pertain to the value and character of those assets and debts, upon request." (Ibid.) To enforce these fiduciary duties, a petition for dissolution includes a restraining order prohibiting both parties from the transfer or disposition of any property without consent or order of the family court, except those made in the usual course of business or for the necessities of life. (§ 2040, subd. (a)(2).) Violating the restraining order may result in statutory sanctions. (In re Marriage of McTiernan &Dubrow (2005) 133 Cal.App.4th 1090, 1102-1103 (McTiernan).)
Section 1101 creates a right of action for a spouse's breach of fiduciary duty if it "results in impairment to the claimant spouse's present undivided one-half interest in the community estate." (§ 1101, subd. (a); In re Marriage of Prentis-Margulis &Margulis (2011) 198 Cal.App.4th 1252, 1270.) Subdivisions (b), (c), (g), and (h) of section 1101 provide remedies for a spouse's breach of fiduciary duty. Subdivision (g), applied by the trial court here, states: "Remedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney's fees and court costs." When the breach constitutes fraud, oppression, or malice, the remedy "shall include, but not be limited to, an award to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset undisclosed or transferred in breach of the fiduciary duty." (§ 1101, subd. (h).)
We review the trial court's finding that a breach occurred for substantial evidence, "resolving all conflicts and drawing all reasonable inferences in favor of the decision." (In re Marriage of Kamgar (2017) 18 Cal.App.5th 136, 144.) "We review for abuse of discretion the trial court's decision concerning the appropriate remedy for breach of fiduciary duty." (Id. at p. 150.)
2. Substantial Evidence Supports The Trial Court's Finding that Mark Breached His Fiduciary Duties
Mark argues that there was no substantial evidence to support the trial court's finding that his postseparation withdrawal of funds from the parties' Charles Schwab account constituted a breach of his fiduciary duties to Melanie. We disagree.
The evidence was undisputed that Mark unilaterally sold securities from the Charles Schwab account and withdrew over $200,000 in cash proceeds between April 2016 and November 2019 without providing Melanie prior notice or asking for her permission to do so. This action alone, on its face, constitutes a violation of the ATROs, which prohibited both parties from disposing of any assets without the written consent of the other party or further order of the court except to pay for the necessities of life. (See § 2040, subd. (a)(2)(A).) It was also undisputed that the trial court made additional orders in April 2016, August 2016, and December 2016 indicating that the parties were to exchange login access for certain accounts, including the Charles Schwab account, for viewing purposes only and could not withdraw, transfer, liquidate, or take actions of any kind without the other party's written consent or court order. Accordingly, the trial court properly found that Mark's continued withdrawal of funds from the account after being explicitly ordered not to do so constituted a breach of his fiduciary duties.
Mark argues his withdrawals fell within the exception to the ATROs to pay for necessities of life and attorney fees, particularly in light of Melanie's non-payment of support. However, the trial court did not find this argument persuasive in light of the fact that Mark received $650,000 from his inheritance in May 2016, which he could have used to support himself. Accordingly, we find that the trial court properly utilized its discretion to reject Mark's claim that his withdrawals were permissible to pay for necessities of life. Further, while Mark argues that Melanie had "unclean hands" due to her non-payment of support, which resulted in Mark withdrawing funds from the account to pay his expenses, he himself acknowledges that courts have not found this to be a valid defense for a breach of fiduciary duties. (See In re Marriage of Rossi (2001) 90 Cal.App.4th 34, 42-43.) Mark has not persuaded us that the trial court abused its discretion in rejecting Mark's contention.
Mark also contends that Melanie failed to establish that his withdrawals impaired her undivided one-half interest in the community estate because the amount of shares he sold were less than Melanie's actual one-half share of the community shares across the parties' multiple brokerage accounts. In making this argument, Mark primarily relies on In re Schleich (2017) 8 Cal.App.5th 267. In that case, the appellate court reversed the trial court's finding that husband had breached his fiduciary duties to wife by failing to disclose $164,614 in side business income he received and spent during the year before the parties' separation. (Id. at pp. 281-282.) The court stated that because the income had already been dissipated prior to the parties' separation, it was no longer part of the community estate at the time husband failed to disclose its existence in his postseparation financial disclosures and therefore did not result in any impairment to the community estate. (Ibid.) We find that this case lends little support to Mark's argument given that he only began making the subject withdrawals after the parties' separation.
Further, in making the above argument, Mark claims that the value of the community estate should be determined based on the actual number of community shares owned by each party, not their potential cash value at the time of Mark's withdrawals. Yet Mark cites no legal authority, and we are aware of none that supports such an approach in determining the value of the community estate for purposes of evaluating whether one spouse's interest in the estate was impaired by the other spouse's actions. Considering the evidence in the light most favorable to the prevailing party, there was substantial evidence to support the trial court's finding that Mark breached his fiduciary duties to Melanie.
3. The Trial Court Did Not Abuse Its Discretion in Awarding Damages for Breach of Fiduciary Duties
As stated above, remedies for a breach of fiduciary duties shall include an award to the other spouse of 50 percent, or an amount equal to 50 percent, of the asset transferred in breach of the fiduciary duty. (§ 1101, subd. (g).) When the breach constitutes fraud, oppression, or malice, the remedy shall include an award to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset transferred in breach of the fiduciary duty. (§ 1101, subd. (h).) "The value of the asset [in question] shall be determined to be its highest value at the date of the breach of the fiduciary duty, the date of the sale or disposition of the asset, or the date of the award by the court." (§ 1101, subd. (g).)
The trial court found that Mark's withdrawals between April 13 and April 16, 2016, were in violation of the ATROs but did not reflect a willful or malicious intent. Accordingly, the trial court properly awarded Melanie 50 percent of the value of the stock sales made during this period in time pursuant to section 1101, subdivision (g). However, the trial court found that Mark's withdrawals between December 2016 and November 2019 did reflect a willful and malicious intent and therefore awarded 100 percent of the value of the stock sales during this period in time pursuant to section 1101, subdivision (h). Further, these values were taken directly from Butera's testimony and supporting statements reflecting the actual values of the stock sale proceeds Mark withdrew from the account. Mark also objects to the trial court's award of additional damages in the amount of $102,046 for the loss incurred to the community. Melanie contends that these damages were permissible under the holding in McTiernan, supra, 133 Cal.App.4th at pages 1102 through 1103. We agree. In McTiernan, after husband sold certain community stock postseparation without notice or consent from wife, the value of the stock increased significantly. (Id. at p. 1102.) In finding that husband's unilateral sale of stock violated the ATROs, the trial court ordered him to pay damages in the amount of lost appreciation in the stock. (Id. at p. 1103.) The appellate court upheld the award, finding that it constituted restitution for the loss caused to wife by husband's violation. (Ibid.) Given the substantial similarity between the facts in McTiernan and the instant matter, we agree with the holding therein. Based upon our review of the record, we find no abuse of discretion in the trial court's award of remedies to Melanie pursuant to section 1101, subdivisions (g) and (h) or its award of additional damages for the loss incurred to the community.
We note that the damages awarded were based on the court's finding that the Charles Schwab account was wholly community as of the date of separation, which, as explained above, we found to be in error. Accordingly, if the account is recharacterized on remand as partially separate property, the trial court should recalculate the amount of damages owed for Mark's breaches.
C. Permanent Spousal Support 1. Applicable Law and Standard of Review
" 'An award of spousal support is a determination to be made by the trial court in each case before it, based upon the facts and equities of that case, after weighing each of the circumstances and applicable statutory guidelines. [Citation.] In making its spousal support order, the trial court possesses broad discretion so as to fairly exercise the weighing process contemplated by section 4320, with the goal of accomplishing substantial justice for the parties in the case before it. "The issue of spousal support, including its purpose, is one which is truly personal to the parties." [Citation.] In awarding spousal support, the court must consider the mandatory guidelines of section 4320. Once the court does so, the ultimate decision as to amount and duration of spousal support rests within its broad discretion and will not be reversed on appeal absent an abuse of that discretion. [Citation.] "Because trial courts have such broad discretion, appellate courts must act with cautious judicial restraint in reviewing these orders." '" (In re Marriage of McLain (2017) 7 Cal.App.5th 262, 269.) An abuse of discretion occurs" 'when it can be said that no judge reasonably could have made the same order.'" (In re Marriage of Meegan (1992) 11 Cal.App.4th 156, 161.)
2. The Trial Court's Award of Permanent Spousal Support Was Not An Abuse of Discretion
Mark argues that the trial court abused its discretion in ordering Melanie to pay him $500 per month in permanent spousal support through December 31, 2024.
Mark also argues that the trial court's rulings, particularly with respect to spousal support, reflected an overall bias against him. However, as Mark does not allege bias as a basis for reversal, we will not address the merits of this claim.
In its statement of decision, the trial court listed each factor under section 4320 and provided substantial discussion regarding its finding as to each one. Our review of the trial court's order reflects that each of its findings was supported by substantial evidence in the record, particularly with regard to the factors to which it gave substantial weight in making its ruling.
The evidence was undisputed that Mark had superior academic credentials, including two bachelor's degrees, a Ph.D., and post-doctorate research experience. In addition, Mark testified that his final annual salary at Stanford was $65,000, which increased substantially to $115,000 once he joined Roche Labs only a few months later. Based on these facts, it was reasonable for the trial court to conclude that Mark had the potential to earn a higher income at an earlier time yet chose not to do so.
Mark claims that there was no evidence to support the trial court's statement that his decision not to seek higher-paying work was based in large part on him receiving a substantial separate property inheritance in 2016. While we acknowledge the lack of any testimony to this effect, we find that this was a reasonable inference for the trial court to make based on the facts presented. Multiple parties, including Mark, Melanie, and Wade, testified that Mark inherited substantial funds from his late mother's estate in May 2016 after the parties had separated. Further, while Mark claims that the only reason he remained at Stanford was to take advantage of its flexible schedule, which allowed him to attend court dates and take care of the children, the trial court was under no obligation to accept this statement at face value. (See In re Marriage of Meegan, supra, 11 Cal.App.4th at p. 162 ["Credibility is a matter within the trial court's discretion."].)
The trial court correctly stated that while it could consider the temporary support amount of $2,100 per month as a factor under section 4320, it could not fix support by merely relying on this number. (See In re Marriage of Schulze (1997) 60 Cal.App.4th 519, 525-526 [indicating that reliance on a temporary spousal support number would be improper when determining permanent spousal support, given the different legal purposes between each type of support order].) The $500 per month spousal support order reflects the trial court's findings regarding the parties' respective incomes and the parties' obligations. The trial court acknowledged that Melanie's salary was substantially higher than Mark's salary but it also noted that Mark had other sources of income not available to Melanie. The trial court also concluded that Mark's work experience and skills would allow him to, with the appropriate due diligence, increase his earnings within five years. These findings were clearly supported by the record and testimony of the parties. We find no abuse of discretion in the trial court's award of permanent spousal support.
III. Disposition
We reverse the judgment and remand to the trial court to vacate its finding that the Charles Schwab account was wholly community property as of the date of separation.
The trial court is directed to issue a new order characterizing Mark's separate property in the Charles Schwab account on the date of separation. The trial court is also ordered to recalculate the amount of damages owed by Mark for his breaches of fiduciary duties based on the new order characterizing the Charles Schwab account as of the date of separation. In all other respects the judgment is affirmed.
WE CONCUR: Bamattre-Manoukian, Acting P.J. Danner, J.