Marriage of Dekker, In re

• Decision Date: 03 August 1993
• Docket Number: No. D012292,D012292
• Citation: 21 Cal.Rptr.2d 642,17 Cal.App.4th 842
• Court: California Court of Appeals Court of Appeals
• Parties: In re the Marriage of David and Barbara DEKKER. David DEKKER, Respondent, v. Barbara DEKKER, Appellant.

Page 642

21 Cal.Rptr.2d 642

17 Cal.App.4th 842

In re the Marriage of David and Barbara DEKKER David DEKKER, Respondent, v. Barbara DEKKER, Appellant.

No. D012292.

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

Aug. 3, 1993.

Rehearing Denied Aug. 31, 1993.

Review Denied Dec. 1, 1993.

Barbara Dekker in pro. per., Gray, Cary, Ames & Frye, Marcelle E. Mihaila, Kenneth S. Klein, Ashworth, Larson & Blanchet (formerly Shea & Ashworth), Frances L. Harrison, Kathryn F. Ashworth, Sullivan, Hill, Lewin & Markham and Paul E. McMeans, San Diego, for appellant.

Richard J. Annis and Bruce Beals, San Diego, for respondent.

NARES, Associate Justice.

In a dissolution, husband (David) claimed community interest in a corporation formed during the marriage, Gas Turbine Services Corporation (GTS), whose stock had been issued to wife (Barbara). In bifurcated proceedings the court found: (1) Barbara was the title holder to the GTS stock; ¹ (2) judicial estoppel did not bar David from asserting community interest in GTS; (3) the increased value of GTS was due to David's effort, expertise and contacts; (4) under the doctrine of equitable apportionment and Pereira v. Pereira (1909) 156 Cal. 1, 103 P. 488, Barbara's separate property investment in GTS was due a 10 percent annual return, and the balance of GTS profits were community property.

Barbara appeals, asserting (1) error in finding that judicial estoppel did not bar David's claim; and (2) error in applying the doctrine of equitable apportionment. We conclude substantial evidence supports the court's findings. Accordingly, we affirm.

FACTS AND PROCEDURE

Barbara and David lived together from December 1981. ² David worked in the aerospace field. Barbara was unemployed, but she had some $75,000 in separate property. ³ Barbara and David were married August 29, 1982.

David lost his San Diego job in September 1982. He commuted to a new job in Dallas, Texas for several months before quitting to join his experience with Barbara's capital, and go into business with Barbara.

In March 1983, they retained corporate counsel (Dwyer) who formed GTS, naming Barbara and David as the original incorporators. Until their separation, Barbara and David were the only members of the GTS board. David was named president of GTS and agent for service of process. Barbara helped with typing, scheduling and bookkeeping.

The GTS stock was issued solely in Barbara's name. According to David, Barbara wanted the stock in her name "[t]o protect the assets of the company from [his ex-wife]." Attorney Dwyer told both Barbara Barbara initially capitalized GTS with $1,000 from her separate property. In addition, she loaned GTS nearly $50,000 for start-up costs. In 1985 David received some $20,000 in settlement of a lawsuit. He loaned these funds to GTS to cover payroll. Barbara and David's loans were accounted for separately. ⁴ GTS repaid Barbara, but David testified his loans were never repaid.

                and David that the stock could later be transferred into both their names.  Dwyer testified at his deposition that Barbara and David referred to GTS as "our corporation" and said "we're going to build it together."   The GTS accountant asked the parties why the stock was solely in Barbara's name.  The accountant was told that Barbara and David were having "trouble" with David's former wife
                

GTS obtained further commercial loans to purchase equipment and machinery and to provide working capital. The loans were personally guaranteed by Barbara and David. ⁵

David's ex-wife discovered GTS in October 1983, and filed a motion to increase her spousal support. In opposition to the motion, David filed a declaration in propria persona denying (under penalty of perjury) any ownership interest in GTS. This motion forms the basis for Barbara's contention that David should be judicially estopped from claiming community interest in GTS. At trial there was extensive testimony regarding Barbara's involvement in the preparation of David's declaration. ⁶

GTS became quite profitable. After six years of marriage David filed for dissolution, claiming GTS as a community asset. Barbara called a meeting of GTS's board of directors, and fired David. The court placed GTS in receivership. At the request of the receiver, David was reinstated as chief executive, ⁷ and Barbara was enjoined from entry upon GTS premises.

In the first trial Barbara argued (1) GTS was her separate property, as its stock was issued in her name alone; and (2) David should be judicially estopped from claiming any interest in GTS. The commissioner found, under Evidence Code section 662, ⁸ Barbara was the sole owner of the stock. The commissioner also ruled David's community property claim was not barred by judicial estoppel due to the coordinated "interactions of the parties as it pertains to the prior disso[lution] case."

In the second trial Barbara argued (1) judicial estoppel should bar David's claim, notwithstanding her pending appeal of the first judgment; ⁹ (2) the doctrine of equitable apportionment should not be applied, because David had increased the value of her separate property (GTS), not his; ¹⁰ and (3) David had been adequately compensated for his services, and thus apportionment was not required.

Following a lengthy trial, the judge rejected Barbara's arguments and applied the apportionment formula of Pereira v. Pereira, supra, 156 Cal. 1, 103 P. 488. Based on expert testimony, the court valued GTS at $927,000. The court apportioned Barbara's original $1,000 plus a 10 percent annual return, totaling $1,934, to her separate property. The balance of $925,066 was apportioned to community property. The court also made specific findings that David had been paid market value for his services, and that David was the reason for the great success of GTS. Barbara appealed from the second judgment, raising identical contentions.

DISCUSSION

Barbara argues this is not an apportionment case, and she asserts the question whether to apply equitable apportionment is one of law which should be reviewed de novo. Barbara cites no valid authority for this proposition. ¹¹

Appellate review of a trial court's finding that a particular item is separate or community property is limited to a determination of whether any substantial evidence supports the finding. (Marriage of Ananeh-Firempong (1990) 219 Cal.App.3d 272, 279, 268 Cal.Rptr. 83; McLellan v. McLellan (1972) 23 Cal.App.3d 343, 356, 100 Cal.Rptr. 258.) We apply the substantial evidence test to the judicial estoppel issue and to the issue whether equitable apportionment should be applied to this case. We apply the abuse of discretion test to the court's application of Pereira. (Beam v. Bank of America (1971) 6 Cal.3d 12, 18, 98 Cal.Rptr. 137, 490 P.2d 257.)

I. JUDICIAL ESTOPPEL

Barbara argued, because of David's declaration in opposition to his ex-wife's motion for increased spousal support, that he should be judicially estopped from claiming an interest in GTS. Judicial estoppel is an equitable doctrine aimed at preventing fraud on the courts. It is applied to keep litigants from playing "fast and loose with the court." (Schulze v. Schulze (1953) 121 Cal.App.2d 75, 83, 262 P.2d 646.)

David testified before the commissioner that Barbara drafted the declaration and presented it for his signature. At her deposition, Barbara denied any involvement in preparing the declaration. However, at trial, David produced a handwritten declaration prepared by Barbara. She then admitted to assisting David with his declaration and taking an active role in defeating his ex-wife's motion.

The commissioner found "judicial estoppel clearly does not apply in this particular case" because of the "interactions of the parties" in opposition to the spousal support motion filed by David's ex-wife.

A trial court's determination on the issue of estoppel is a factual finding which will be upheld if supported by substantial evidence. (County of Sonoma v. Rex (1991) 231 Cal.App.3d 1289, 1296, 282 Cal.Rptr. 796.)

The purpose of judicial estoppel is to prevent injury to an innocent litigant. Barbara admits in her brief, that she "did help draft the earlier declaration." We conclude the commissioner's finding is supported by substantial evidence.

II. EQUITABLE APPORTIONMENT

Barbara contends that since the community had received market value compensation for David's services to GTS, the trial court should not have reached the issue of apportionment. Barbara's assertion begs the question of what triggers a court's application of the doctrine of equitable apportionment.

We begin by noting that in California, property acquired prior to marriage is separate, while property acquired during the marriage is presumed community property. (Civ.Code, §§ 5107, 5108, 5110.) Income from separate property is separate Indeed, the basic concept of community property is that marriage is a partnership where spouses devote their particular talents, energies, and resources to their common good. (Knutson, California Community Property Laws: A Plea for Legislative Study and Reform ) (1966) 39 So.Cal.L.Rev. 240.) Acquisitions and gains which are directly or indirectly attributable to community expenditures of labor and resources are shared equally by the community. (Ibid.)

the intrinsic increase of separate property is separate, but the fruits of the community's expenditures of time, talent, and labor are community property. (Civ.Code, §§ 5107, 5108; Perkins, Appreciation of the Separately Owned, Closely Held Business (1987) 14 Comm.Prop.J. 62, 64.)

Where community efforts increase the value of a separate property business, it becomes necessary to quantify the contributions of the separate capital and community effort to the increase. (Perkins, Appreciation of the Separately Owned, Closely Held Business, supra, 14 Comm.Prop.J. at p. 64.) It is well settled in California that income produced by an asset takes on the character of the asset...