Marriage of Fonstein, In re

• Decision Date: 19 August 1976
• Citation: 131 Cal.Rptr. 873,17 Cal.3d 738,552 P.2d 1169
• Court: California Supreme Court
• Parties: , 552 P.2d 1169 In re the MARRIAGE OF Sarane and Harold FONSTEIN. Sarane FONSTEIN, Appellant, v. Harold FONSTEIN, Appellant. L.A. 30580.

Page 873

131 Cal.Rptr. 873

17 Cal.3d 738, 552 P.2d 1169

In re the MARRIAGE OF Sarane and Harold FONSTEIN.

Sarane FONSTEIN, Appellant, v. Harold FONSTEIN, Appellant.

L.A. 30580.

Supreme Court of California.

Aug. 19, 1976.

Milton R. Gunter and Amil Roth, Beverly Hills, for appellant wife.

Loeb & Loeb and Jerome L. Goldberg, Los Angeles, for appellant husband.

SULLIVAN, Justice.

In this action for dissolution of marriage, appellant Sarane Fonstein (Sarane) appeals from that portion of an interlocutory judgment of dissolution of marriage dividing the community property. ¹ Specifically, she challenges the trial court's valuation, as an item of community property, of cross-appellant Harold Fonstein's (Harold) interest in his law partnership. The crucial question which we face is whether in valuing the above item of community property which was awarded to the husband and not divided in kind, the trial court erred in taking into account the tax consequences which might result to the husband in the event he subsequently decided to convert the item into cash, and in reducing the current value of the item accordingly. As will appear, we conclude that it did and reverse that portion of the judgment appealed from.

Harold and Sarane were married on January 30, 1954, and separated on September 15, 1972. There are three children born of the marriage. In February 5, 1973, Sarane commenced the instant proceeding. After a six-day trial, dealing primarily with the issues of spousal support and the valuation of the assets of the community, the trial court made findings of fact and conclusions of law and in accordance therewith entered an interlocutory judgment declaring that the parties were entitled to have their marriage dissolved, dividing the community property of the marriage, ordering payment of community debts and awarding child and spousal support.

The court awarded Sarane certain of the community property with a total value of $73,997, including the family recidence, household furniture and furnishings, 400 shares of stock and an automobile. Harold was awarded community property determined to have a value of $123,848. The court ordered him to pay out of his share of the community property outstanding community debts including fees to Sarane's attorney for his services in the dissolution proceeding. Harold was ordered then to pay to Sarane one-half of the difference between the remaining value of community property warded to him and the value of the community property awarded to Sarane.

One of the items of community property awarded to Harold was his interest in his law partnership. He became a partner in the firm in 1964, during the marriage. The parties do not dispute that his interest in the partnership, if it has any value, is community property. The partnership operates pursuant to a written agreement dated May 25, 1972. Pertinent to this case are the portions of the agreement providing for payments to partners by the firm in the event of their death, disability, retirement, or voluntary withdrawal. For the purpose of determining the total amount of these payments, each partner is assigned an equity percentage figure. ² Harold's figure is 8 percent.

In the event of a partner's voluntary withdrawal from the firm, he will receive a total payment approximately equal to one-half of three times the average annual earnings of the firm over the preceding three years multiplied by the partner's equity percentage. The partner will also receive his capital account which consists primarily of his unwithdrawn earnings. This total amount is to be paid in installments without interest over a period of five or nine years, depending upon whether more than one partner is being paid at any one time. These payments are not funded in any way and are to be paid from current partnership income.

The trial court found that the value of Harold's partnership interest was $49,977. As revealed in its memorandum of intended decision, the court valued his interest in the partnership by determining the present value of his contractual right to valuntarily withdraw under the firm's partnership agreement. Briefly stated, this method first required a determination of the total amount of payments based on Harold's equity percentage plus his capital account which he would receive in the event of his withdrawal. It was then concluded that Harold would receive these payments over a nine-year period in view of the recent death or another partner. Accordingly, this stream of payments wad discounted at a 7 percent rate to a persent value of $110,417. This amount was then further discounted in accordance with an estimate of the potential state and federal income tax consequences of Harold's receipt of withdrawal payments, resulting in the final figure of $49,977. Sarane disputes the validity of this final step.

At the outset, however, we dispose of two subordinate issues. Harold has moved to dismiss Sarane's appeal on the ground that she has accepted the benefits of the judgment and thereby has waived her right of appeal. Harold has also cross-appealed asserting that his interest in the law partnership is a mere expectancy with no present value subject to division upon dissolution of this marriage. ³

The settled rule that the voluntary acceptance of the benefits of a judgment will bar appeal therefrom (Gudelj v. Gudelj (1953) 41 Cal.2d 202, 214, 259 P.2d 656; Schubert v. Reich (1950) 36 Cal.2d 298, 299, 223 P.2d 242) is subject to qualifications applicable to this case. First, the appellant must demonstrate a clear and unmistakable acquiescence in, or, to put it another way, an "unconditional, voluntary and absolute" acceptance of, the fruits of the judgment. (Gudelj, supra, 41 Cal.2d at p. 214, 259 P.2d 656; Hansen v. Hansen, supra, 233 Cal.App.2d 575, 580, 43 Cal.Rptr. 729.) Furthermore, where the benefits accepted are those to which the appellant would be entitled even in the event of reversal, acceptance thereof does not bar prosecution of the appeal. (Gudelj, supra, 41 Cal.2d at p. 214, 259 P.2d 656; Schubert v. Reich, supra, 36 Cal.2d at p. 299, 223 P.2d 242; Harrold v. Harrold (1950) 100 Cal.App.2d 601, 605, 224 P.2d 66.) Thus, '(i)f the appeal is only from a portion of a judgment in which the issues are severable, the portions from which no appeal is taken may become final and beyond the scope of review of the appellate court (citations); and so where the judgment clearly establishes the appellant's right to recover but the amount is less than he demands, he may accept it and nevertheless appeal, claiming the larger recovery. (Citations.)' (Hansen v. Hansen, supra, 233 Cal.App.2d at p. 580, 43 Cal.Rptr. at p. 732.)

Sarane's occupancy of the family residence does not reflect a clear and unmistakable acceptance of the portion of the award of community property. (See Gudelj v. Gudelj, supra, 41 Cal.2d 202, 215, 259 P.2d 656.) She merely continues her use of the premises as a home for herself and the children of the parties. There is no indication that that use is adverse to any claim by Harold of an interest in the property. While Harold, of course, does not use the property, there is no indication that he desires to do so. Most importantly, Sarane has not received a deed to the premises and record title remains joint.

As to Sarane's receipt of spousal and child support and as to the payment of fees to her attorney, it has often been recognized that these items are severable from the portion of the judgment in a dissolution proceeding dividing the community property and that an appeal therefrom is not barred by acceptance of these items. (Browning v. Browning (1929) 208 Cal. 518, 524--526, 282 P. 503; Hansen v. Hansen, supra, 233 Cal.App.2d 575, 581--582, 43 Cal.Rptr. 729; Di Grandi v. Di Grandi (1951)102 Cal.App.2d 442, 444--445, 227 P.2d 841.) Finally, Sarane's receipt of 400 shares of stock, while constituting acceptance of a portion of her award of community property, does not bar her appeal. Without detailing the precise figures, it appears that even if we were to conclude that Harold's partnership interest was not subject to division, Sarane would be entitled to community property having a value greater than the value of the stock which she has received. She is therefore not precluded from seeking a larger recovery and if our conclusions herein require the trial court to readjust the division of property, it can take into account her receipt of the stock. (Hansen v. Hansen, supra, 233 Cal.App.2d at pp. 580, 582, 43 Cal.Rptr. 729.) Harold's motion to dismiss Sarane's appeal is therefore denied.

Harold's cross-appeal is also without merit. He contends that his contractual right to withdraw from his partnership is a mere expectancy with no present value subject to division because it is contingent upon his decision to withdraw and because his withdrawal rights are always subject to modification by agreement of the partners. This argument misconstrues the facts. The asset being divided in this proceeding is Harold's interest in his partnership, not his contractual withdrawal rights. The value of the withdrawal rights was considered by the trial court merely as a basis for valuing the partnership interest. The interest in the partnership is an interest in a 'going business,' as it were; there is nothing in the record indicating that such 'business' lacks assets or value. Moreover, Harold's argument that his contractual right to withdraw from his firm is a mere expectancy with no present value is erroneous under established authorities. His withdrawal rights are analogous to the pension rights which have been held to be community property when subject only to conditions within the control of the employee. (Waite v. Waite (1972) 6 Cal.3d 461, 472, 99 Cal.Rptr. 325, 492 P.2d 13; In re Marriage of Peterson (1974) 41 Cal.App.3d 642, 650--651, 115 Cal.Rptr. 184.) Furthermore, in view of our decision in In re Marriage of Brown ...