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California Family Law Report

 

 

Case of the Month (from CFLR Monthly)

February 2016
[Archive]

No error in ordering husband’s response stricken as discovery sanction . . .

 

In affirmance, Fourth District holds that trial court did not err by issuing default disso judgment on reserved property issues where disso petition did not list properties in which parties’ rights were to be determined, but husband’s response and parties’ PDDs did

 

In re Marriage of Eustice

(December 10, 2015)

California Court of Appeal 4 Civil E061140 (Div 2) 242 Cal.App.4 th 1291, 195 Cal.Rptr.3d 876, 2015 FA 1718, per Codrington, J (Ramirez, PJ and King, J, concurring). Riverside County: Olson, Temp J, affirmed. For appellant: Richard Trugman, (310) 982-2733. For respondent: Richard Houghton, CFLS, (760) 779-1420. CFLP §§C.150.7, D.122.5.

 

Joseph and Annette Eustice were married in 1989 and separated in August 2009. On August 6, 2009, Annette filed a disso petition, seeking, among other things, a determination of property rights. She checked box B and indicated that she did not know the full extent of the parties’ assets and debts, but she would either sign a stipulation for judgment regarding those assets and debts, or would amend her petition. Joseph filed a response on August 28, and attached a list of community property assets and debts to which the parties’ property rights should be determined.

 

On September 1, Annette filed a motion for child and spousal support, attorney’s fees and costs, and an injunctive order, along with an I&E declaration. Joseph filed his preliminary declaration of disclosure (PDD) on September 9, which contained a completed schedule of assets and debts, an I&E declaration, a statement of facts regarding their community debts, and a complete written disclosure of investment, business, or other income-producing opportunities. After a hearing on October 7, the trial court ordered Joseph to pay child and spousal support and Annette’s attorney’s fees. The parties’ attorneys stipulated that neither party could withdraw funds from an Ameritrade account except to pay for the parties’ adult son’s expenses at UCLA and $500 for his high school placement expenses. In findings and orders issued on October 26, the trial court awarded Annette the exclusive use of the family home in Rancho Mirage, permitted Joseph to withdraw money from the Ameritrade account to pay Annette’s attorney’s fees, reiterated its order re the UCLA and high school placement expenses, and required Joseph to provide Annette with an accounting of any money withdrawn from the Ameritrade account for the UCLA expenses and any other money withdrawn from that account after September 1, 2009. On October 27, Annette served Joseph with her PDD, an itemized schedule of community assets and debts, and her I&E declaration.

 

In March 2011, Annette filed a motion for sanctions under CCP §177.5, claiming that Joseph had failed to provide her with the required accountings for the Ameritrade account, despite her repeated requests that he do so. She and Joseph subsequently stipulated to an order requiring him to provide the accounting and supporting documents on or before June 20, 2011. The trial court issued their status-only disso judgment in April 2012. In May 2012, Annette filed a motion for a spousal support modification, attorney’s fees and costs, and for sanctions, due to Joseph’s continued failure to provide her with more than one year’s statements for the Ameritrade account or any other supporting documents related to his withdrawals from the account. Annette asked the trial court to strike Joseph’s response and to enter a default judgment under CCP §2023.010(g) and §2023.030 [discovery sanctions], or alternatively, to award monetary sanctions under CCP §177.5 for violating the trial court’s orders. In a supporting declaration, Annette detailed the extent of the withdrawals from the Ameritrade account that Joseph was permitted to make under the trial court’s order and his failure to provide her with more than a limited accounting of them. She attached two Ameritrade statements showing a balance of $111,000 in the account as of September 2009, and a balance of $35,000 as of June 2011. After a hearing, the trial court issued findings and order after hearing that ordered Joseph’s response stricken under CCP §2023.010(g).

 

In mid-December 2012, Annette filed and served Joseph with a request to enter default and documents supporting a default judgment, along with her FDD, I&E declaration, and property declaration. The trial court apparently entered the default, but rejected Annette’s prove-up documents as internally inconsistent. She then requested a prove-up hearing, which was held on February 27, 2013. At that hearing, Annette asserted that she had submitted every declaration and specified every known asset. The trial court acknowledged that it had ordered Joseph’s response stricken; thus, Annette was not required to serve him with a prove-up packet. After taking some evidence regarding the family home and another residence owned by the parties in La Quinta, the trial court ordered its previous orders to remain in effect regarding the properties. Acting on the trial court’s request, Annette prepared proposed findings and orders after hearing, which included her property reconciliation sheet, asset analysis, and requested community and separate property allocations.

 

In July 2013, Joseph filed a request to set aside the default entered in February, based on Annette’s alleged failure to list all the community property in her disso petition that the trial court subsequently disposed of in the default judgment. Annette countered that Joseph lacked standing to bring his motion because his default had been entered more than six months before he filed his motion. After a hearing, the trial court noted that Joseph had filed a response that listed the property he wanted adjudicated and the parties had exchanged PDDs. The lower court advised Joseph that at that stage in the proceedings, his remedy was to file an appeal from the judgment, not to seek a set aside of the default. It ordered Annette to file a proposed judgment based on the allegations in the disso petition and the declarations served on Joseph. On February 26, 2014, the trial court entered judgment on the reserved issues which divided the parties’ property as listed on Annette’s PDD.

 

Joseph appealed, but the Fourth District affirmed.

 

Getting picky with it . . .
Joseph contended that the default judgment was improper and void under CCP §580(a) [relief granted cannot exceed what was requested in the complaint] because Annette’s disso petition failed to identify the specific assets and debts subject to the trial court’s division. He relied on Stein v. York (2010) 181 Cal.App.4 th 320, 105 Cal.Rptr.3d 1, 2010 CFLR 11431, 2010 FA 1425, a legal malpractice action in which the court found that a default judgment was void under CCP §580 because it exceeded the amount demanded in the complaint and failed to give the defendant proper notice of the maximum judgment to which he could be liable. The justices, however, found that Stein was factually distinguishable because it did not involve a disso proceeding and the defendant had refused to file a response to the complaint. Here, Joseph filed a response, along with a PDD listing the property that was subject to division by the trial court, as did Annette. The PDDs filed by both parties, along with the declarations that Annette served on Joseph before his response was stricken, the panel found, satisfied Joseph’s due process right to notice of the relief requested and the property subject to disposition by the trial court. Moreover, the justices could find no authority to support Joseph’s contention that Annette was required to put values on the properties listed in her PDD and declaration. In fact, they noted, in In re Marriage of Andresen (1994) 28 Cal.App.4 th 873, 34 Cal.Rptr.2d 147, 1994 CFLR 6440, 1994 FA 670, the court found that a petitioner who checks the proper boxes on the disso petition and lists information that corresponds to the relief requested has satisfied due process and given sufficient notice to the respondent. Here, Annette had not listed the specific property on her petition, but she had filed a PDD containing a listing of it. Moreover, she had checked the box re property division and determination of property rights. Thus, she had met the requirements approved in Andresen .

 

He knew . . .
The panel also reasoned that Joseph’s response to the petition and his PDD showed that he “was on notice” of the property to be divided by the trial court. If he wanted to discuss the valuation and division of that property, the justices said, “he should have avoided having his Response stricken by complying with the court’s orders to produce necessary discovery documents.” They concluded that Joseph should not be allowed to benefit from his refusal to produce those documents by having the default judgment set aside on the grounds of lack of notice of the relief requested, since he received notice through other disso documents and requested the same relief in his response.

 

Bad enough . . .
Joseph also argued that the lower court erred by striking his response as a discovery sanction without first deciding a motion to compel or making a finding that there had been a violation of a prior court order. The justices didn’t agree. They noted that under CCP §2023.010(g), disobeying a court order to provide discovery qualifies as misuse of the discovery process, and under CCP §2023.030, a trial court may impose a terminating sanction for misuse of the discovery process by either ordering part or all of a party’s pleadings stricken or entering a default judgment against that party. The panel explained that a trial court has broad discretion to impose discovery sanctions, but should always be reluctant to impose terminating sanctions, except when faced with a willful violation of a discovery order, or a history of abuse of the discovery process. Joseph’s action, the justices determined, constituted a willful violation of the trial court’s discovery order, since he had refused to comply with that order to produce documents and an accounting for more than two years. Those actions, the panel reasoned, not only impeded the trial court’s ability to divide the parties’ property, but also “subjected the Ameritrade funds to covert, unrestrained, improper expenditure by Joseph.” Given all that, they concluded, the trial court had not abused its discretion by ordering Joseph’s response stricken. Summing up, the panel held that the default judgment was not void for exceeding the amount specifically demanded in the disso petition.

 

 

Comment

  

It used to be fairly common for attorneys to decline to list the parties’ property on disso petitions and to simply include a statement that the nature and extent of the property was currently unknown but the petition would be amended when it was known. Annette’s petition contains similar wording. The advent of the PDDs forced attorneys to be more specific about the property earlier in the case. However, it did not completely do away with the trial tactic of using the delaying statement, as we see here. In fact, the justices here, perhaps inadvertently, give a boost to that practice; at least they don’t shoot it down completely. The crux of the matter is that a party is entitled to proper notice of the liability that he or she faces and when that notice is not given before a default judgment is issued, the judgment is voidable. On facts like these, it is clear that Joseph received notice of what property was at issue; he listed it himself in his response and PDD. Besides, we have a sneaking suspicion that the courts might have been more receptive to Joseph’s argument if they hadn’t felt that he was trying to “benefit from his recalcitrance” in producing the documents by seeking to set aside the default judgment on notice grounds. Meanwhile, this is an issue of first impression, so put this case in your files for future reference.

 

 

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