Lico v. Lico

• Decision Date: 04 May 2012
• Docket Number: A130765
• Parties: In re the Marriage of BETH ANN and STEVEN ARTHUR LICO. BETH ANN LICO, Appellant, v. STEVEN ARTHUR LICO, Appellant.
• Court: California Court of Appeals Court of Appeals

In re the Marriage of BETH ANN and STEVEN ARTHUR LICO.BETH ANN LICO, Appellant,

v.STEVEN ARTHUR LICO, Appellant.

A130765

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION ONE

Filed: May 4, 2012

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(San Mateo County

Super. Ct. No. FAM-091681)

This appeal has been taken by Beth Ann Lico (Beth) from a judgment that found invalid an agreement by which her husband Steven Arthur Lico (Steven) transmuted his separate property to community property. Beth argues that the transmutation agreement was enforceable, and the trial court also erred by denying her request for an award of attorney fees. We conclude that substantial evidence supports the findings that a presumption of undue influence arose from the transmutation agreement, and was not rebutted by the evidence. We also find that the trial court did not abuse its discretion by denying an award of attorney fees to Beth. Steven has filed a cross-appeal which we need not resolve in light of our finding that the transmutation agreement was invalid. We therefore affirm the judgment.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

The parties were married in February of 1990, and subsequently had two children. During the marriage Steven was employed as a licensed real estate agent and broker,working primarily in the field of commercial real estate. Beth "stopped working" and was "at home with the children" for most of the marriage after their first child was born in 1995. She obtained a real estate license and "became a mortgage broker" in 2005.

Steven's family owned numerous real estate holdings, partnerships, and other business interests in ranches, subdivisions, apartments, commercial and industrial complexes. Steven acquired shares in the Lico family business interests as his separate property by inheritance or gifts from his parents during the marriage. The value of Steven's separate property interests, while not quantified at trial, were acknowledged as quite extensive. Neither Steven nor Beth knew precisely the nature and extent of Steven's separate property interests in the Lico family partnerships and other limited liability business entities, although Steven regularly attended family partnership meetings during which his business interests were discussed. He also kept records of the family partnerships. Steven told Beth that neither one of them needed to work because "there was a lot of money" in the family business.

Beth owned considerably less separate property which she acquired prior to the marriage, and received more modest gifts of individual interests in the Lico family holdings from Steven's father. On one occasion Beth and Steven jointly purchased additional partnership shares in a Lico family property.

In December of 2001, Beth and Steven mutually decided to develop and execute an estate plan for themselves and their children. Steven contacted an estate planning attorney, Jennifer Cunneen, of the law firm of Hopkins and Carley, and arranged an appointment to formulate an estate plan. Prior to the meeting with Cunneen, Beth and Steven reviewed materials provided to them by the attorney, and completed questionnaires that concisely delineated their respective property interests.

Steven and Beth initially met with Cunneen on January 15, 2002, to provide her with their completed questionnaires and explain to her the primary "purpose" of their estate plan: to protect their children in the event "something happened" to them. Cunneen provided them with an overview of the nature and types of trusts available to married couples, as well as the tax and other "benefits of doing an estate plan."Information in a "Guide to Basic Estate Planning Techniques" given by Cunneen to Steven and Beth disclosed the concept that revocable trusts left them with "complete power to amend the terms of the trust," add to or withdraw property from it, or even revoke the trust entirely.

Cunneen testified that at the meeting she mentioned to Steven and Beth "the difference between separate property and community property," particularly as related to the "tax consequences upon death of separate versus community property" - that is, the advantageous "step up in basis" of community property upon the death of the first spouse. She did not refer to the legal impact of "transmutation issues," or inform them that the estate plan may change the character of their assets from separate to community property. Cunneen did not recall "having a specific discussion about divorce law" or "what would happen" to their separate and community property interests "if they got a divorce." Beth and Steven testified that Cunneen did not confer with them about "changing separately held assets to community property," although Beth gave Cunneen instructions to place her separate property "into the community estate, estate plan." Nor did Steven and Beth ever discuss among themselves the concept of changing Steven's separate property interests to community property. Beth testified that during the meeting she and Steven authorized Cunneen to create an estate plan, but did not direct her to change title to their assets.

In March of 2002, Beth and Steven received drafts of the estate plan documents from Cunneen and her paralegal Carol Thole. Steven subsequently reviewed the drafts and provided Cunneen with more information about the nature of his separate property assets as requested. After receiving the draft documents, Beth did not take any further action, review any of the estate planning documents, or contact Cunneen. Beth believed that any assets she and Steven transferred into the trust would become community property. By March of 2002, the parties also signed a conflict waiver and agreed to dual representation of both of them by the law firm of Hopkins and Carley.

In November of 2002, Steven returned the draft estate plan documents to Cunneen. He also identified for Cunneen his separate property interests in family partnerships andother assets that were listed in Schedule A of the Revocable Trust Agreement as targeted for transfer into the contemplated Lico Family Revocable Trust, although he did not definitively determine which interests were his separate property and which were community property. Cunneen testified that she had a single telephone conversation with Steven in which he asked her to explain the "differences between separate and community property," and she did so. Otherwise, they had no further contact or discussion with Cunneen about the content of the draft estate plan before a meeting to sign the documents on December 3, 2002. Cunneen testified that after the initial meeting she "talked generally" with Steven "about what was separate or what was community," and "what the differences were," but he did not ask her for any advice on the ramifications of the transmutation agreement.

After the nature and extent of the assets to be transferred to the trust were determined, Beth and Steven instructed Cunneen to prepare a document to change the character of their respective property interests from separate to community. Cunneen then drafted a "Community Property Agreement" that was presented at the meeting on December 3, 2002. In the Community Property Agreement Steven and Beth specified that "all property owned by them, regardless of the record state of title, and whether held as trustees or individually, is intended to be held by them as their community property in which each has a present equal and existing interest." The Community Property Agreement further provides: "This is intended to be a valid transmutation under Family Code [section] 852, of any of the parties' assets that are not already community property. Each of us understands that to the extent that assets can be traced to inherited or gifted assets, or to assets owned before the date of marriage, such assets are probably either partly or wholly the separate property of the party having the premarital assets, or who inherited assets, or to whom assets were gifted, and that the party holding a separate property interest is by this agreement giving away one-half (1/2) of such separate property interest." Both parties also explicitly waived "any right to reimbursement under Family Code [section] 2640, which would otherwise create a right, in a spouse whocontributes separate property to the community, to be reimbursed in the event of a marital dissolution, for the value of the property at the date of contribution."

At the meeting on December 3, 2002, Cunneen read and briefly reviewed the trust documents, including Schedule A, the Last Wills and Testaments, Durable Powers of Attorney, and the Community Property Agreement, with Steven and Beth. Cunneen also gave Steven and Beth the opportunity to ask questions about the content and effect of the documents. The parties offered conflicting testimony on Steven's understanding of the Community Property Agreement. Beth testified that not only was the document read to them by Cunneen, but Steven expressed his understanding that he was "gifting" his separate property to the community to "share 50/50" in the event of "a breakdown" of the marriage, "and giving away his rights to claim it back." Steven denied he understood that he was waiving his separate property rights or his right to reimbursement if he and Beth "got a divorce." Steven also insisted that Cunneen did not explain to him the Community Property Agreement or the waiver of his right to reimbursement for contributions of separate property to the community. Neither Beth nor Steven voiced any objections or made any inquiries about the substance of the trust documents during the meeting.

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