THIRD PARTY JOINED TO DISSOLUTION ORDERD TO PAY ATTORNEY’S FEES

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In another important family law court determination that affects third party’s to marital dissolutions, California’s Second Appellate District has held that a trial court did not err by ordering a third party, who was joined by the dissolution, to pay attorney’s fees of petitioner Wife without first determining whether petitioner was likely to prevail in her action.  The facts involved in the remarkable case of In re Marriage of Bendetti are as follows:

During their dissolution proceedings, Husband and Wife executed a Marital Settlement Agreement (MSA) that resulted in dividing their community property, which included their 50% interest in two restaurants, and ordered Husband to pay spousal support to Wife.  The MSA also stated that the parties’ Partner in the restaurants was willing to buy out their interest for $400,000, by paying off their existing IRS liability and paying the remainder to Husband and Wife in equal shares.

Per the agreement, Partner was supposed to sign a promissory note to Wife for her interest and pay off her share in equal installments over ten (10) years at 10% interest.  Partner was to pay Husband’s share to him in full.

Over the years, Partner failed to sign a promissory note to Wife, but paid her $1,500 every once in a while “to help her out because she had not been treated well in her divorce.”  Meanwhile, Husband failed to make regular spousal support payments.

In 2006, Wife took legal action to recover Husband’s spousal support arrearages.  During that process, she found out that Husband and his second wife (W-2) were parties to litigation over a $750,000 investment they made in another restaurant.  During Husband’s deposition in that litigation, he claimed that he and another Investor agreed to be partners in all of Investor’s California restaurants, but W-2 had signed the operating agreement for the restaurant that was involved in the current suit.

Husband also stated that Partner had paid part of what he owed to Husband from a restaurant that was involved in the current suit.  Husband further stated that Partner had paid part of what he owed to Husband from a restaurant sale by contributing to Husband’s capital contribution to the partnership with Investor.

When Wife learned of all this, she filed a judgment lien in the litigation.  The litigation settled in June of 2007, and W-2 received a $7.25 million payment, “apparently without regard to the lien.”  Within months, Husband paid $271,000 of those funds to Wife for the accrued spousal support arrearages.  Wife then filed a motion, seeking $31,693 for attorney’s fees incurred in recovering unpaid spousal support.

In response, Husband pleaded poverty.  He claimed that his only income was $950 per month from Social Security and that he had no other assets.  In his supporting declaration, Husband claimed that W-2, not he, was the investor in Investor’s restaurants, that he received nothing from the litigation settlement, and that he received no money from Investor’s restaurants.

Wife replied that Husband was the investor in Investor’s restaurants and that Husband had fraudulently transferred his settlement proceeds to W-2.  W-2 filed declaratory relief in July of 2008 from the U.S. District Court, seeking judgment that settlement proceeds belonged to her, but, acting on Wife’s motion, District Court dismissed W-2’s action.

In 2008, Wife successfully moved to have W-2 joined in the dissolution proceedings.  She then filed a complaint in joinder, alleging actual and constructive fraudulent transfers and unjust enrichment, and seeking declaratory relief.  When W-2 filed her demurrer and motion to strike, Wife amended her complaint to delete the cause of action for unjust enrichment, but still sought declaratory relief for actual and fraudulent transfers under the Uniform Fraudulent Transfer Act.

In 2010, Wife filed a motion seeking $223,090 in pendente lite attorney’s fees from Husband and W-2 for fees incurred for spousal support enforcement, defense of W-2’s federal action, and for preparation of pleadings in the current action.  She asked for an additional $100,000 for “work to be performed.”

The family law trial court in Los Angeles noted that Husband and Wife-2 claimed Wife’s suit was a sham, but found no need to deny Wife’s attorney’s fee request simply because her suit might be meritless.  The trial court concluded that Wife needed the fee award to ensure that she could sufficiently fund her suit for the trial court to hear the merits.

Accordingly, the trial court ordered Husband and W-2 to pay Wife $30,000 for fees in opposing W-2’s demurrer and motion to strike, $30,000 for omitted asset motion, $45,750 for legal services involved in W-2’s federal suit, and $26,000 for joinder, meet and confer, and other discovery requests in connection with the current action, for a total of $131,750.  The trial court declined to order fees for work not yet performed.

W-2 appealed, claiming that the family law trial court had erred by awarding fees without requiring Wife to show a reasonable likelihood of success in her suit, and the 2nd Appellate Court of California has affirmed the trial court’s decision, having found that:

1)      California Family Code §2030(d) permits the trial court to order a third party, who has been joined in a legal action, to pay another party’s attorney’s fees;

2)      That the trial court may order a third party joined in an action to pay another party’s attorney’s fees without requiring that fee recipient show a reasonable likelihood of prevailing in her claims against a third party; and,

3)      There was sufficient evidence of the dissolution issues related to W-2 (Husband’s conflicting claims re his involvement and W-2’s receipt of settlement funds) to show that W-2 was connected to the subject of the litigation.

SAME-GENDER COHABITATION NOW ON PAR WITH THAT OF OPPOSITE-SEX

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Over the last half century, California law has evolved tremendously when it comes to same-gender cohabitation and spousal support.  It has gone from penalizing same-gender cohabitation by the termination of spousal support and the requirement of restitution from the date of cohabitation to extending the same rights, obligations, and privileges of marriage to same-gender cohabitating partners.

Same-gender couples should now be prepared to assume the benefits of cohabitation as well as the burdens that have always been placed on cohabitating couples of the opposite-sex.  They should recognize that the sharing of household expenses reduces the need for spousal support regardless of the genders involved.  The reality is that the presumption of decreased need for support upon cohabitation is a gender-neutral issue.

SPOUSAL SUPPORT PRESUMPTION DIFFERENT FOR ‘SAME-GENDER’ COHABITANTS

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It is interesting to note that in California when same-gender couples part their ways, Family Code § 4323(a)(1) imposes a presumption that affects the “burden of proof, of decreased need for spousal support if the supported party is cohabiting with a person of the opposite sex.”  What this means is that when a spouse who receives support cohabits with an opposite-sex partner in a relationship, a burden is placed upon that spouse to demonstrate a continued need for spousal support at the same level to which he or she was entitled before cohabiting.

A key understanding here is that section 4223(a)(1) addresses opposite gender spouses only.  There is no such presumption where a supported spouse is cohabiting with a same-sex partner.  The California legislature still seems to be lagging when it comes to addressing the financial realities of same-gender relationships.

WAIVER OF SPOUSAL SUPPORT IN FINAL JUDGMENT NON MODIFIABLE

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A very interesting unpublished opinion was recently handed down by California’s Court of Appeals regarding spousal support.  The case of Irmo Camerlingo basically stands for the proposition that when one party expressly waives spousal support in a final judgment of dissolution that party cannot later attempt to modify the agreement to provide for support.

It’s important to remember, however, that Camerlingo was not published, meaning it should not be cited or relied upon except as permitted under Rules 8.1115 (a) and (b) of the California Rules of Court.  It should strictly be used for case study to show how recurring family law disputes were resolved in trial and appellate courts.

Camerlingo involved a Husband and Wife who were married for 25 years before divorcing.  The terms of their Marriage Settlement Agreement expressly waived spousal support for either party.  Husband and Wife later fashioned a new stipulation whereby Husband agreed to provide support for Wife.  Wife later filed an OSC to modify the stipulated agreement.

In its wisdom, the California Court of Appeals ruled that collateral estoppel bars Wife from enforcing the stipulation as a support order.  The doctrine of collateral estoppel precludes re-litigation of issues previously adjudicated.

The appellate court concluded that spouses are permitted to waive support and the trial court’s jurisdiction terminates unless there has been an express reservation concerning spousal support.  The parties may not confer jurisdiction on a court.  The family court’s jurisdictional finding was final under these circumstances.

MUST SHOW CHANGED CIRCUMSTANCES (UNREALIZED EXPECTATIONS) TO EXTEND SPOUSAL SUPPORT

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An important case came down earlier this year regarding spousal support, holding that the supported party in what is referred to as a Richmond order must show changed circumstances such as “unrealized expectations” to warrant an extension of support.  In IRMO Khera & Sameer (CA 6 – Opinion filed June 19, 2012), the court also determined that a voluntary decision to pursue a doctoral degree rather than going to work full time is not a change of circumstances that warrants an extension of support.

The case centers around two parties that had reached a judgment that included spousal support.  Wife moved to set aside the judgment and then moved to modify spousal support by extending it beyond the scheduled termination date.  Husband opposed the relief request.

The appellate court ultimately denied Wife’s motion.  In its decision, it cited California Family Code § 4330 (a), which provides that support of a party may be ordered in an amount and for a period of time, that the court determines is just and reasonable based on the standard of living established during the marriage.  It also stated that several factors that are listed in Family Code § 4320 must be considered.

Also cited was Family Code § 3651(d), which states that a support order may be modified or terminated at any time unless the parties agree otherwise in writing or orally on the record in open court.  IRMO McCann (1996) 41 Cal.App.4th 978, 982, dictates that modification of spousal support, even if the prior amount is established by agreement, requires a material change of circumstances since the last order.

A material change of circumstances may be found in the unrealized expectations of the supported party.  However, under IRMO Farrell (1985) 171 Cal.App.3d 695, a change of circumstances may not be found by reconsidering a circumstance that has not changed since the previous order.  If changed circumstances are proved, a trial court presented with a request to modify a spousal support order must then reconsider the criteria set for in Family Code § 4320.

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