Ciprari v. Ciprari (In re Ciprari)

32 Cal.App.5th 83

242 Cal.Rptr.3d 900

IN RE the MARRIAGE OF Dorothy and Joseph CIPRARI.

Dorothy Ciprari, Appellant,

v.Joseph Ciprari, Respondent.

B272039

B278187

Court of Appeal, Second District, Division 1, California.

Filed February 6, 2019

California Appellate Law Group, Sarah K. Hofstadter, Novato, Robert A. Roth, San Francisco, and Kelly Woodruff for Appellant.

Elkins Kalt Weintraub Reuben Gartside and Thomas P. Dunlap, Los Angeles, for respondent.

CURREY, J.^*

INTRODUCTION

Dorothy ("DeeDee") and Joseph ("Joe") Ciprari married on September 16, 1995.¹ The trial court fixed the date of separation as August 13, 2010, the date DeeDee commenced this marital dissolution proceeding. The marriage terminated pursuant to a judgment entered March 18, 2016, which attached the court’s final statement of decision.

On appeal from that judgment, DeeDee principally challenges the trial court’s characterization of a majority of the cash and securities held in commingled accounts as Joe’s separate property. As discussed more fully below, she attacks a detailed tracing analysis performed by Joe’s expert witness, upon which the trial court relied. We conclude the tracing is valid and constitutes substantial evidence in support of the judgment.

DeeDee also challenges the trial court’s findings that Joe did not breach fiduciary duties when he used community property funds to establish an irrevocable life insurance trust for the benefit of Marie and Molly, and to fund tax-advantaged Internal Revenue Code section 529 college savings accounts (529 accounts) for the two girls. We conclude these findings also are supported by substantial evidence.

In addition, DeeDee seeks to overturn the trial court’s temporary and permanent child and spousal support awards.² We affirm that part of the judgment awarding permanent child support, and the trial court’s temporary child and spousal support awards for two periods in 2015. But, we hold the trial court abused its discretion when it retrospectively modified 2014 pendente lite child and spousal support, because it based the modification on the parties’ 2013 tax returns, rather than their 2014 tax returns, which were then available. We reverse that part of the judgment, and remand for the limited purpose of recalculating the 2014 awards in light of the 2014 tax returns. We also reverse the permanent spousal support award and remand for recalculation of that amount as well.

Finally, in a second, consolidated appeal, DeeDee contends the trial court erred in denying her an award of additional attorneys’ fees. We reverse that postjudgment order.

DISCUSSION

I. Characterization of Assets.

The parties stipulated Joe entered the marriage with $2,053,573 of separate property. Of that amount, $873,953 was held in two Wells Fargo Bank accounts. The trial court found the money held in the bank accounts was "essentially ‘gifted’ to the community," a finding neither party contests. (See See v. See (1966) 64 Cal. 2d 778, 785, 51 Cal.Rptr. 888, 415 P.2d 776 [In the absence of an agreement to the contrary, the use of separate property to meet community living expenses is a gift to the community.].)

On the date of the parties’ marriage, Joe held the balance of his separate property ($1,179,620) in a brokerage account at PaineWebber. As is typical, the brokerage account had a cash component and an investment component. The account held $295,856 in cash and securities then valued at $883,764.³

In February 1996, Joe received a $244,696 bonus from his employer for work performed during the prior year. Because the parties had married during 1995, the bonus was partly separate property and partly community property. Nevertheless, Joe deposited the entire amount in his PaineWebber brokerage account. This was the first time that community and separate funds became commingled in the account. But it was far from the last. Throughout the marriage, Joe indiscriminately deposited portions of his salary (which was community property) into the PaineWebber account⁴ and other commingled investment accounts he later opened. By the end of 2014, the combined balances in these commingled investment accounts equaled $6,910,568.

How much, if any, of that sum was Joe’s separate property, and how much was community property, is known as a "characterization" issue, and is the central issue in this case. "Characterization ... refers to the process of classifying property as separate, community, or quasi-community." ( In re Marriage of Haines (1995) 33 Cal.App.4th 277, 291, 39 Cal.Rptr.2d 673 ( Haines ), disapproved on another point in In re Marriage of Valli (2014) 58 Cal.4th 1396, 171 Cal.Rptr.3d 454, 324 P.3d 274.) It "is an integral part of the division of property on marital dissolution." ( Ibid . )

Family Code section 760⁵ states the basic presumption that, except as otherwise provided by statute, all property acquired by a married person during marriage, while domiciled in California, is community property. Each spouse has a "present, existing and equal" interest in the community property. (§ 751.) On the other hand, property acquired before marriage, or after separation, or at any time by gift, bequest, devise, or descent, is separate property. (§§ 770, subd. (a), 771). And the "rents, issues, and profits" of separate property also are separate property, whether earned before, during, or after marriage. (§ 770, subd. (a)(3).) "Except as otherwise provided by statute, neither spouse has any interest in the separate property of the other." (§ 752.)

"Thus, there is a general presumption that property acquired during marriage by either spouse other than by gift or inheritance is community property unless traceable to a separate property source. [Citation.] This is a rebuttable presumption affecting the burden of proof; hence it can be overcome by the party contesting community property status. [Citation.] Since this general community property presumption is not a title presumption,⁶ virtually any credible evidence may be used to overcome it, including tracing the asset to a separate property source, showing an agreement or clear understanding between the parties regarding ownership status and presenting evidence the item was acquired as a gift." ( Haines , supra , 33 Cal.App.4th at pp. 289–290, 39 Cal.Rptr.2d 673, (fn. omitted); In re Marriage of Bonvino (2015) 241 Cal.App.4th 1411, 1423, 194 Cal.Rptr.3d 754 ( Bonvino ); see also See v. See , supra , 64 Cal.2d 778, 783, 51 Cal.Rptr. 888, 415 P.2d 776 ; Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2018) ¶¶ 8:361 8:363, pp. 8-137–8-139 (Hogoboom & King).)

"Of course, mere commingling of separate property 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. 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 funds 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, 53 Cal.Rptr.2d 179 ( Braud ); see also In re Marriage of Cochran (2001) 87 Cal.App.4th 1050, 1057, 104 Cal.Rptr.2d 920 ( Cochran ); Bonvino , supra , 241 Cal.App.4th at p. 1423, 194 Cal.Rptr.3d 754.)

A. Joe’s Tracing

At trial, Joe’s forensic accountant testified he had conducted a detailed and comprehensive tracing of all the accounts, analyzing every transaction, including all deposits, purchases, payments of interest or dividends, transfers, and withdrawals. Although the tracing was lengthy and detailed—listing approximately 17,000 account entries in 23 accounts over almost 20 years, and consisting (along with various schedules) of 547 pages—it employed straightforward and readily understandable methods.

Joe’s accountant first gathered and reviewed all brokerage statements for each account, so he could list and analyze all transactions. For each account, he determined whether each deposit or transfer into the account was separate property or community property (or some combination). If unknown, he treated the funds deposited as community property. Consistent with section 760 ’s presumption that assets acquired during marriage are community property, Joe’s accountant characterized all purchases of securities as community property, to the extent community property funds were available in the cash portion of the account to make the purchase. (See In re Marriage of Frick (1986) 181 Cal.App.3d 997, 1010, 226 Cal.Rptr. 766 ["Where funds are paid from a commingled account, the presumption is that the funds are community funds."].) Only when the community funds in the cash portion of the account were exhausted did he characterize an investment as separate property. If some community property cash remained in an account, but was insufficient to purchase the entirety of the securities acquired, he characterized the investment as part community and part separate property, in proportion to the amount of each used to purchase the investment. If he characterized the investment as, for example, 65 percent community property and 35 percent separate property, he allocated any interest or dividends from that investment using the same ratio. When and if the asset was sold, he divided the proceeds in the same ratio. If the proceeds were used for subsequent investments, Joe’s accountant traced them in the same manner. He used the same process to trace and characterize all assets in all accounts.

The bottom line is the community was credited with any securities purchased in an account to the extent that community funds were available in that account for their purchase. To the extent community funds were not available in the account at the time an asset was purchased, the asset was characterized as separate property....