Opinion
NOT TO BE PUBLISHED
Superior Court County of Santa Barbara, No. 1093841, Thomas P. Anderle, Judge.
Robert Lane in pro.per, Laura Dewey, for Appellant.
Griffith & Thornburgh, Bruce Glesby for Respondent.
COFFEE, J.
Robert M. Lane appeals from a judgment of dissolution in which the court awarded child support to Vikki Lane in the amount of $6,000 per month, ordered Robert to pay $50,000 annually to Vikki for five years under a prenuptial agreement, and ordered Robert to pay $ 175, 000 in attorneys fees for work performed on child custody, visitation and support.
Robert contends that the trial court erred when it attributed to him $75,000 gross monthly income based on his lifestyle and deliberately convoluted finances. Robert also contends that the court erred when it determined his net worth was greater than $1,250,000 for purposes of calculating the payment due under the prenuptial agreement. Finally, he contends that the court's award of attorney's fees for work on child custody and support issues violated a fee waiver provision in the prenuptial agreement, which should have been interpreted under the law of the state of Michigan, and that the fee award did not reflect the amount actually incurred. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Robert and Vikki were married in April 1997. In 2008, they separated permanently after several periods of temporary separation and reconciliation. There are two children of the marriage. Robert also has two children by a prior marriage.
Before their wedding, Robert and Vikki entered into a prenuptial agreement. They were each represented by counsel. The agreement stated that it would be "governed by, continued and enforced" under Michigan state law, where they were living and where it was executed. The parties stipulated at trial that the prenuptial agreement was valid, enforceable and binding.
The agreement recited that Robert and Vikki were each financially independent: Vikki was a physician and Robert was "a well-established business entrepreneur with significant interests in numerous business enterprises [who] has accumulated a large estate." Among his assets were 1644 shares in Chatham Capital Corporation (CCC), an entity that owned weight reduction surgical centers, of which he was president.
Under the terms of the prenuptial agreement, the parties waived support and any interest in each others' property in the event the marriage terminated by divorce, separation or annulment. In lieu of support upon termination, Robert agreed to pay Vikki $50,000 for each year of their marriage, or 20 percent of Robert's net worth, whichever was less. The payment would be made in annual payments, without interest, for a number of years equal to the number of years of marriage. The parties also waived "attorney fees... that might otherwise result from a divorce or separation or annulment." The prenuptial agreement was silent regarding support of any children who might be born of the marriage.
Net worth was to include projected tax liabilities: "net worth (after provision for projected income tax liabilities on unrecognized or unrealized gain or deferred income)."
During the marriage, Robert was involved in the creation of business and trust entities which paid for his living expenses and provided other benefits to him. For much of the marriage, he maintained two residences, one with his family in Santa Barbara and one in Wyoming where his family saw him on visits.
Riverbend Ranch Trust, SHSM and Penobscot
For the first year of marriage, the parties lived together in Michigan in a 2, 000 square foot condominium owned by Robert. About nine months after the marriage, Robert formed Riverbend Ranch Trust, into which he put his CCC shares. Robert was the sole lifetime income beneficiary of Riverbend, with a right to all income. His brother was the trustee, with power to distribute the principal to Robert. His best friend acted as grantor.
Robert's best friend transferred into the trust an option to purchase the 1, 664 CCC shares, and Riverbend exercised the option.
Robert left his job and started his own business consulting with hospitals that wished to set up weight loss reduction surgery programs. He was not paid directly by the hospitals with which he consulted. He created two separate entities: Specialty Health Services Management LLC (SHSM) and Penobscot. SHSM received the money, and it paid Penobscot about $30,000 each month for Robert's consulting services. Penobscot then paid Robert an annual salary of $126,000 (about $10,000 a month) and contributed about $110,000 a year to a defined benefit pension plan of which Robert was the sole beneficiary. Robert was Penobscot's sole employee and its vice president. Its president and owner was his best friend. Penobscot account records for 2006 through July 2008 showed that Robert used his check writing authority to draw about $55,000 in cash which he described at trial as advances on his Penobscot salary.
Robert was an officer of SHSM and Vikki was the incorporator and chairman. Vikki testified she had no real duties, but that Robert prepared things for her to sign. Robert used her as the incorporator because, he told her, he had a conflict of interest while he remained on the board of a competing company.
In June of 1998, the parties' son was born. He was born with medical problems and underwent major surgery in November 1998. Vikki accepted a position as a physician at a clinic in Santa Barbara, California. In December 1998, she and the baby moved to Santa Barbara, and Robert followed about two months later.
The family lived in a rented condominium for the first few months of 1999. In the spring, Robert and Vikki bought a 2, 000 square foot home in Goleta for about $450,000, where they lived for about a year.
In February of 2000, the parties separated temporarily. Vikki moved to an 1, 800 square foot rental condominium in Santa Barbara, and Robert moved to a 3, 500 square foot home Jackson Hole, Wyoming, with views of the Snake River and the Tetons, purchased for his use by Windriver LLC (Windriver). Penobscot paid Windriver $3,500 a month rent for the Wyoming home. Robert paid no rent, expenses or insurance for the residence. The parties stipulated at trial that the value of the Wyoming home was $2.2 million. Vikki paid about $2,500 per month to rent her condominium.
Vikki filed a petition for dissolution in 2000, but did not pursue it, and in May 2000 the parties reconciled. Nevertheless, Robert continued to live in the Wyoming home for the next five years. The family members visited each other frequently. The parties' daughter was born in Santa Barbara in August 2000. After her birth, Vikki took six months leave and then returned to work-part time at the Santa Barbara clinic. She continued to work there part-time through trial. The Goleta home sold.
Boulder Investment Trust and Windriver LLC
On May 21, 2000, Robert formed the Boulder Investment Trust (BIT), into which he put essentially all of his assets. Vikki acted as BIT's grantor, using $2,000,000 that Robert gave her for this purpose. According to Vikki, Robert told her that the trust was necessary to protect his assets from a lawsuit with a third party, and for family estate planning. At his direction, she also transferred her interest in SHSM into BIT, which became its sole owner. Robert was the sole lifetime beneficiary of BIT, with a right to all income. His best friend was the trustee, with power to distribute principal to Robert. Among BIT's assets was Windriver, the entity that owned the Wyoming house in which Robert was living. Robert's best friend was the manager of Windriver.
On May 29, 2002, the parties separated again. Vikki filed a second petition for dissolution on May 30, 2002, but she did not serve it. The parties eventually reconciled, and Robert testified that he did not learn that she had filed a petition until the summer of 2005.
Montecito Home
In June 2003, the parties looked for and selected a family home in Montecito, California. Windriver purchased it for $4.2 million in cash, and spent $5 to $6 million on renovations and about $900,000 in furnishings for it. The house has ocean views, a pool, spa and wine cellar. Penobscot paid Windriver rent in the amount of $48,000 per year for Robert's use of the house. The parties stipulated at trial that the home's current value was $11.2 million. Vikki testified that Robert negotiated the purchase in her presence. She testified that he carried Windriver checks with him, pre-signed by his best friend, which she saw him use to purchase art and to pay bills. She introduced at trial copies of monthly letters to his friend, requesting reimbursement from BIT for many living expenses, and bank records showing that the requests were granted.
It took several years to renovate the Montecito home, during which Vikki continued to live in the condominium and Robert continued to live in Wyoming. He maintained strong and loving relationships with the children.
In the spring or summer of 2005, the marriage broke down again. Robert testified that in June or July of 2005 he found out about the pending dissolution petition. He filed a response to the petition in July. In the November 2005 support proceedings, he stated that his income for 2004 was $196,000, consisting of a $126,000 salary from Penobscot plus a $70,000 bonus, and that his income for 2005 would be $33,205 because Penobscot had reduced his income to $63,205 "to reflect a significant reduction in its business" and because he had borrowed $30,000 against his 2005 income. Records at trial showed his 2005 Penobscot salary was $126,000 and that Penobscot began making $110,000 annual pension contributions after the support hearing. He also declared in 2005 that he had no self-employment or trust income.
During 2004 and 2005, about a million dollars had been spent on renovations for the Montecito home. Robert had also purchased art and coins through Windriver, and had traveled extensively. In the five years before trial he traveled to Japan, China, Australia, Spain, New Zealand and England. Some of these trips included business. In June of 2004, Windriver paid for a Renoir print for the Montecito house, which was insured for $500,000. In the spring of 2005, Windriver paid for a Glackens piece that was insured for $200,000 and a Manet piece that was insured for $120,000. Windriver also owns a Henry Monet piece that is insured for $500,000 and a Pissarro insured for $325,000.
For the rest of 2005, Vikki remained in the Santa Barbara condominium with the children, except for a brief period when she attempted to move them to San Diego and the court ordered her to return them to Santa Barbara. The court ordered Robert to pay child support in the amount of $1,323 per month based on his declared Penobscot annual salary of $126,500, without prejudice to adjustment at trial. Robert paid the support until the parties again reconciled.
The parties reconciled in January of 2006. In February 2006, they all moved into the renovated Montecito home where they lived together for almost two years, until the final separation in May of 2008. Robert also maintained his Wyoming residence throughout this period and spent much time away from California.
St. Catherine Entities
According to Robert's 2006 tax return, Robert received $618,172 in income that year as the income beneficiary of BIT. He and his accountant testified at trial that he did not actually receive that income; it was used by BIT to acquire two hospitals and their related entities (the St. Catherine entities). In May 2006, BIT acquired the St. Catherine entities. They were financially distressed. Robert did not expect them to be profitable in the short term; he planned that they would be a "turnaround" investment. In 2006, Robert continued to purchase art, for which Windriver reimbursed him, and coins, for which Windriver paid. He spent about $40,000 to purchase coins between 2006 and 2008. Also in 2006, Penobscot donated $10,000 to Robert's alma mater, University of Michigan. It made another gift in the same amount in 2007.
The four entities were St. Catherine Hospital of Pennsylvania LLC, St. Catherine Health Care of Pennsylvania LLC, St. Catherine Hospital of Indiana LLC, and St. Catherine Health Care LLC.
Jackson Hole Credit Line
In about March of 2007, Robert personally guaranteed a $15,000,000 credit line for BIT at the Bank of Jackson Hole. He testified that it was secured by all of BIT's assets, including Windriver and the St. Catherine entities. At the time of trial, $14.9 million was owed on this credit line. He testified that he had used $8 million to refinance BIT's purchase of the St. Catherine entities, and that he had loaned the rest to St. Catherine's as "working capital." St. Catherine's had been making the interest payments on the credit line.
Robert continued to purchase art and coins in 2007, for which Windriver paid. He also started collecting wine, which he testified he purchased to sell. By May of 2007, the parties' reconciliation efforts were failing, but Vikki remained in the Montecito house for another year.
In May of 2008, the parties finally separated, and Vikki moved into a rented three bedroom condominium in Santa Barbara, where she remained at the time of trial. Her pay stubs showed recent average gross monthly income of $7,856 and she testified that the average was about $6,250 gross. She testified that her mother was paying for her $2,500 monthly rent. Robert testified that his income was limited to the $126,000 salary from Penobscot. In 2008 he received an income tax refund of about $110,000 for the prior four years after amending his returns for those years. The parties' daughter had attended private school in 2006 and 2007 but she attended public school in 2008 when they were unable to reach agreement about payment of tuition.
Trial
In the fall of 2008, the trial court conducted a bench trial on the following issues: child custody, child support, payment under the prenuptial agreement, and attorney's fees. Vikki sought to maintain 70/30 custody and requested monthly child support from Robert of $14,943, plus certain shared expenses. She argued that Robert's monthly income was $124,079 or $81,458 and that her monthly income was $6,250. She requested five annual payments of $50,000 each under the prenuptial agreement and $313,260 for fees related solely to child custody and support. Robert sought 50/50 custody and monthly child support from Vikki of $444 which he offered to "waive." He argued that his monthly income was his Penobscot salary of $10,950 and attributed to Vikki a monthly salary of $13,333. He calculated Vikki's payment under the prenuptial agreement as $0 because, he argued, his net worth was negative. He argued that all fees were waived by the prenuptial agreement and he requested a refund of a prior fee award of $7,500 for fees incurred collecting child support.
Robert was represented by counsel at trial and represents himself on appeal.
Robert and Vikki both testified. Robert presented expert accounting testimony and Vikki did not. The trustees of Riverbend and BIT did not testify. Robert testified that his best friend had just resigned as trustee of BIT, resigned as president of Penobscot, and had sold Penobscot to Robert's sister. His sister was acting as manager of Windriver. He had moved out of the Montecito house and was staying in a hotel because work needed to be done on the house. It was not for sale. He did use it during the day. His son by his prior marriage testified that his dad (Robert) told him he would not be staying there just while he was going through the divorce.
According to Robert and his accountant, Robert had a negative net worth at the time of trial because his personal liabilities (including the $14.9 million credit line and a $2,000,000 judgment in other litigation) exceeded his personal assets (in which he did not include either home, the St. Catherine hospitals, the Windriver and BIT accounts, or the art wine and other collectibles). They testified that, even if assets of all of the entities were included, Robert's net worth would still be negative because liquidation of the assets would result in losses, the St. Catherine entities had a negative $12 million value using a liquidation analysis, and Robert had a projected tax liability of about $4.6 million resulting from a form K-1 that CCC had issued. Robert also testified that, under the terms of the credit line, the Jackson Bank would be entitled to seize all of BIT's assets anytime, "if the bank wakes up, " because the debt on the line exceeded $10 million.
On cross-examination, Robert's accounting expert acknowledged that the St. Catherine hospitals were fully operating, were not being liquidated and, had positive values of about $2.8 million each as going concerns (as compared to his negative $12 million liquidation value). The judgment against Robert had been satisfied by his co-defendant, who had not demanded indemnity as of the time of trial. Robert had taken the position before the IRS that he did not owe any taxes resulting from the K-1 issued by CCC. Two and a half years later, he had not received any deficiency notification from the IRS concerning the matter. The Jackson Hole bank had not taken any action to seize assets.
In November 2008, the court issued a tentative decision. Vikki requested a statement of decision which the court issued in January 2009, after considering proposals. Robert filed objections to the statement of decision in which he asked the court, among other things, to reanalyze child support, his net worth for purposes of the payment under the prenuptial agreement, and attorneys' fees. The court conducted a hearing on Robert's objections and then entered judgment on March 10, 2009.
In its final judgment, the court ordered joint legal and physical custody of the children and ordered Robert to pay to Vikki $6,000 per month in child support, based on findings that Robert's monthly income was $75,000 and Vikki's was $14,000. The court attributed to Robert an income of $75,000 per month based on his lavish lifestyle and adjusted the amount upward on its finding that special circumstances rendered application of the guidelines unjust in view of Robert's deliberately convoluted finances and the best interests of the children.
The court ordered Robert to make five annual payments under the prenuptial agreement to Vikki in the amount of $50,000 starting December 2008 and ending December 2012, based on its findings that the marriage lasted about five years and that Robert's net worth was greater than $1,250,000.
The court ordered Robert to pay attorney's fees to Vikki in the amount of $175,000 for work performed only on the issues of child custody, child support and visitation. The court found that the prenuptial agreement did not bar a fee award for work performed on those issues. It reduced the fees from the $313,000 requested because the itemized bills did not distinguish between work performed by a senior and junior attorney and, in some cases, did not specify the work performed.
DISCUSSION
Child Support
Robert contends that his child support obligation is excessive because no evidence supports the trial court's decision to attribute $75,000 monthly income to him. He argues that there was no evidence that he actually received any more than $131,500 income in the twelve months prior to trial, that the court should not have considered any evidence from previous years, that the court should not have attributed a higher income to him based on his lifestyle, the court should not have considered Penobscot's mandatory contributions to his pension, and the court should not have included BIT trust income that was reported on his income tax return but which Robert did not actually receive, particularly because both the Riverbend and BIT trusts were valued at zero by his expert at trial. He also contends the court should have attributed more than $14,000 monthly income to Vikki for work as a fulltime physician and that the special circumstance finding, pursuant to which the court increased guideline support of $5,610 to $6,000, was erroneous.
Determination of the amount of child support rests in the sound discretion of the trial court and we will not disturb its determination in the absence of abuse. (McGinley v. Herman (1996) 50 Cal.App.4th 936, 940.) As long as the court "exercised its discretion along legal lines, " we will not reverse its decision if there is substantial evidence to support it. (In re Marriage of Smith (1990) 225 Cal.App.3d 469, 480.) Here, the trial court exercised its discretion along legal lines and substantial evidence supports its determination that $900,000 per year was both a reasonable estimate of Robert's earning ability and a reasonable reflection of his standard of living through 2008. As the court observed, "His testimony about his current financial situation [was] irreconcilable with the way he lives."
The court was not limited to consideration of income actually received. "A parent's first and principal obligation is to support his or her minor children according to the parent's circumstances and station in life." (Fam. Code, § 4053, subd. (a).) For purposes of calculating child support, "[t]he annual gross income of each parent means income from whatever source derived." (Fam. Code, § 4058, subd. (a).) It includes "(1)... salaries, ... dividends, pensions, ... trust income, ... [¶] (2) [i]ncome from the proprietorship of a business, ... [and] [¶] (3) [i]n the discretion of the court, employee benefits or self-employment benefits, taking into consideration the benefits to the employee, any corresponding reduction in living expenses, and other relevant facts." (Id., subd. (a)(1)-(3).) When a parent voluntarily chooses not to maximize his income, the court retains discretion to impute income. (In re Marriage of Berger (2009) 170 Cal.App.4th 1070, 1083.)
A parent may not divest himself of his earning ability at the expense of his children. (In re Marriage of Berger, supra, 170 Cal.App.4th 1070, 1082.) In Berger, the trial court erred when it reduced a father's support obligation after he, in good faith, elected to defer part of his contractual salary in order to help his company through difficult financial times. The appellate court explained that "while divorced parents have the same right to pursue happiness as all other citizens, they cannot do so by abrogating their obligation to support their families. And they certainly cannot do so by voluntarily deferring salary, living extravagantly off their sizeable assets, and pleading poverty at the support hearing." (Id. at p 1073.) This principle derives from the legislative directive that "[c]hildren should share in the standard of living of both parents." (Fam. Code, § 4053, subd. (f).) The trial court was not required to ignore the substantial disparity between Robert's reported income and his extravagant lifestyle.
In determining a party's income for purposes of child support, the court may consider circumstances that reduce living expenses. (County of Kern v. Castle (1999) 75 Cal.App.4th 1442, 1445 [abuse of discretion not to consider inheritance that reduced father's living expenses]; Stewart v. Gomez (1996) 47 Cal.App.4th 1748 [proper to consider value of rent free tribal housing as part of gross income].) Substantial evidence at trial demonstrated that Robert's extraordinary living expenses were paid by Penobscot (including rent, collectibles, medical expenses, and personal items) and Windriver (including the costs of maintaining and furnishing two lavish homes and the art and wine collections they housed.)
The trial court was not limited to evidence of Robert's finances in the preceding twelve months; it was permitted to consider any fairly representative time sample. In Marriage of Riddle (2005) 125 Cal.App.4th 1075, upon which Robert relies, the trial court erred because it considered an unrepresentative time period of only two months when calculating a husband's income. The Court of Appeal held that, where income fluctuates, the court should consider a fair and representative time sample. It held that a representative sample "on this record" would have been twelve, rather than two, months. (Id. at p. 1077.) Here, the period considered was fair and representative. The time period over which income is calculated is discretionary and "must be long enough to be representative, as distinct from extraordinary." (Id. at p. 1082.) The trial court did not abuse its discretion by considering a period greater than twelve months.
The court properly considered Penobscot's pension contributions as income because substantial evidence supported the inference that Robert arranged to divert much of his consulting income into the pension plan in order to avoid liabilities. A parent "cannot unilaterally, and voluntarily, arrange his business affairs in such a way as to effectively preclude his children from sharing in the benefits of his current standard of living." (In re Marriage of Berger, supra, 170 Cal.App.4th at p. 1082.) There was evidence at trial that SHSM paid $30,000 each month for Robert's consulting work, but that he declared only a fraction of that as income because he used Penobscot as his employer and diverted much of the money into the pension plan and expenses. Even if Robert's business arrangements were made in good faith, the court properly considered this deferred income.
Robert argues that the court should have considered that his cash flow has been cut short because the St. Catherine entities have been a financial failure. Substantial evidence supported an inference that Robert made a deliberate choice to invest the 2006 BIT income, to which he was entitled upon demand, into the financially distressed hospitals. He was free to do so, but not at the expense of his children's support. In Marriage of Padilla (1995) 38 Cal.App.4th 1212, the court properly imputed a father's historic earnings to him after he voluntarily, in good faith, left a well paying job for self employment in a struggling business. The court held that a parent does not have the right to divest himself of his earning ability at the expense of his minor children. (Id. at p. 1218.) A parent who wishes to change professions or start a business may do so, but only when they satisfy their primary responsibility to provide for their children. (Id. at p. 1220.)
Robert argues that his pension was not "compensation, " and cites in support Pomona Police Officers Association v. City of Pomona (1997) 58 Cal.App.4th 578 and Oden v. Board of Administration (1994) 23 Cal.App.4th 194. Those cases are inapposite because they involved the determination of "compensation, " as the term is defined by statute for purposes of calculating retirement benefits under California's Public Employees' Retirement System. Here the court properly followed the provisions of the Family Code when it determined Robert's income for purposes of calculating child support.
Robert contends that the court should not have considered the $618,172 he reported as income in 2006 as the beneficiary of the BIT, because he did not actually receive that money. But "income" for purposes of calculating support includes "phantom" income that is imputed by the tax laws. (Riddle v. Riddle, supra, 125 Cal.App.4th at p. 1080.) Robert testified that the BIT 2006 income was actually used to acquire the St. Catherine entities, which were operating at a loss. Substantial evidence supported an inference that he was the driving force behind that purchase and knew that they were financially distressed entities. He was not entitled to voluntarily defer income to which he was entitled under the terms of the Boulder trust at the expense of his children. (Marriage of Padilla, supra, 38 Cal.App.4th 1212.)
Substantial evidence supported the court's decision to attribute $14,000 per month ($168,000 per year) to Vikki for fulltime employment as a physician. The CEO of the clinic where she works testified that if she worked full time her income would be between $160,000 and $170,000 per year.
Robert represents that he was terminated by Penobscot in August 2009, but our review is limited to matters that were before the trial court. We will consider only those matters that were a part of the record when judgment was rendered. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 444, fn. 3.)
The court did not abuse its discretion when it adjusted upward from the guideline support amount by $390. The guideline support calculation is presumptively correct (Fam. Code, §§ 4055, 4057, subd. (a)), but it may be rebutted where application of the formula would be unjust or inappropriate. (§ 4057, subd. (b)) For example, in In re Marriage of de Guigne (2002) 97 Cal.App.4th 1353, guideline support was properly tripled to shield the children from a lifestyle reduction where a lavish lifestyle during the marriage had been made possible by the husband's inherited wealth. Here, the court found that guideline support was $5,610 but that special circumstances warranted an adjustment to $6,000. Substantial evidence of Robert's lavish lifestyle during the marriage supported the court's upward adjustment.
Payment to Vikki Under The Pre-Nuptial Agreement
Appellant contends that Vikki should have been awarded zero dollars under the special provision because his net worth was zero and she was entitled only to 20 percent of his net worth. Appellant also contends that the special provision payments were erroneously ordered over three years and eight and a half months instead of five years. Finally he contends that the court erred because it did not expressly incorporate the prenuptial agreement into the judgment. We reject each contention.
Under the special provision, Vikki was entitled to $50,000 for each year of the marriage, measured from the date of the complaint for divorce, "or 20 percent of Robert's net worth (after provision for projected income tax liabilities on unrecognized or unrealized gain or deferred income), whichever is less." There is no dispute that the marriage was of five years. Thus, she was entitled to five $50,000 payments unless Robert's net worth was less than $1.25 million.
Appellant contends the his net worth should have been negative because the court should have included his projected income tax liabilities, should not have included assets owned by the trusts, and if it did include trust assets it should also have included trust liabilities which would have resulted in a negative net worth.
The court rejected the testimony of Robert and his accounting expert concerning net worth and attributed to Robert trust assets which were at his disposal. We will not reassess the court's credibility determinations on appeal, and the court properly interpreted the "net worth" provision to include those assets over which Robert had control. For purposes of calculating support, the court may consider trust and corporate assets over which a spouse has control and it may disregard any trust and corporate entities that were designed to shield him from liability. (In re Marriage of Dick (1993) 15 Cal.App.4th 144, 159, 161.) Robert offered no Michigan state law to the contrary and the prenuptial agreement does not provide otherwise. We accept the trial court's interpretation of the instrument if it is reasonable or if it is equally tenable with our own interpretation of the instrument. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) It is both.
The court had before it evidence that, at the time of trial, Robert had control over assets far greater than $1.25 million. There was substantial evidence that, like the trust and corporate entities in Marriage of Dick, the entities here were created by Robert and his friends and family with his assets and under his direction in order to avoid tax and creditor liabilities. At the time of trial, BIT (and its subsidiary Windriver) held, among other assets, a securities account worth $11.9 million, two fully operating hospitals which were together worth more than $5.5 million as going concerns, and two residences together worth $13.4 million in which Robert had been living, neither of which was for sale. There was $1.6 million in artwork, $836,000 in gold bullion, and $110,000 in silver bullion, among other assets. Robert held two IRAs in his own name worth $618,457, and his defined benefit pension plan had a value of $820,420.
At trial, Robert's expert testified that the net value for all the assets was negative $8 million, but in deposition just two months earlier he had testified that the same assets had a positive net value of $2,040,249. One account had dropped in value $4.65 million, but he also acknowledged that he made downward adjustments for trial after consulting with Robert after his deposition. He also made many concessions on cross-examination that seriously undermined the negative net worth opinion. He assigned SHMS a zero value although it had been appraised at $500,000 one year earlier. He assigned the CCC shares zero value but acknowledged that a distribution was pending. CCC had previously distributed millions in dividends.
He adjusted his valuation of the hospitals downward for trial by $3,500,000 after Robert and Robert's business partner told him accounts receivable upon liquidation should be discounted 85 percent rather than 20 percent. The 20 percent figure had been based on information from the hospital's CFO.
The court found "decisively not persuasive" Robert's testimony that he had a negative net worth and "not persuasive" the negative value his experts attributed to the hospitals. Substantial evidence supported the court's assessment. Robert's negative $8 million net worth figure was based on discounted liquidation values for two hospitals that were fully operating. It relied on speculation that the Jackson Bank would call his personal guarantee of BIT's $15 million credit line even though the borrower had missed no payments. It also depended on a $2 million judgment which had already been satisfied and for which no demand for indemnification was in evidence. It also depended on a speculative $4.6 million projected tax liability which Robert had previously asserted he did not owe. The prenuptial agreement required the court to consider Robert's projected tax liabilities on unrecognized or unrealized gain or deferred income, whether or not there had been a notice of deficiency, but it did not require the court to credit untrustworthy testimony about a projected liability that Robert had previously represented was not valid.
The trial court reasonably concluded that the evidence lead "to only one conclusion and that is Robert has deliberately made the balance sheet and asset configuration so convoluted and complicated that the conclusions he presents through his testimony are categorically rejected. Based upon the testimony and the Court's observation of the witnesses and in particular my observation of Robert, it is readily apparent he approached the payment of any sum to Vikki for child support or from the terms of the prenuptial agreement as a challenge to obfuscate and mislead any fact finder so as to eliminate any financial obligation."
In its November 2008 tentative decision, the court ordered payments over a period of five years beginning December 2008 and ending December 2012. The duration of payments was consistent with the terms of the prenuptial agreement.
The court did not improperly neglect to incorporate the agreement by reference. With respect to incorporation of the prenuptial agreement into the judgment, the parties agreed to be bound by the agreement "whether or not incorporated in any such judgment."
Attorney's Fees
Robert contends that the fee award was barred by the waiver of attorney's fees in the prenuptial agreement. We disagree because the prenuptial agreement was silent with respect to children of the marriage and because any provision purporting to waive fees necessary to litigate their custody or support would have been unenforceable.
The prenuptial agreement concerned division of property and spousal support upon divorce. It contained a waiver of "attorney fees... or any other form of payment that might otherwise result from a divorce or separation or annulment." The trial court enforced the fee waiver with respect to division of property and spousal support. As the parties stipulated, the agreement was enforceable with respect to those matters. (Marriage of Pendleton and Fireman (2000) 24 Cal.4th 39 [a premarital waiver of spousal support is enforceable].)
But the agreement did not address child custody or support. Even if the fee waiver was intended to apply to fees incurred in connection with child custody and support it was unenforceable. Parties to a premarital agreement may contract regarding "matter[s], including their personal rights and obligations, not in violation of public policy" (Fam. Code § 1612, subd. (a)(7)), but "[t]he right of a child to support may not be adversely affected by a premarital agreement" (id., subd. (b)).
California has a strong public policy interest in the welfare and support of resident children. Their welfare and support is inextricably intertwined with the fees necessary to secure it. Thus, California courts will not enforce contractual fee waivers that would prevent an award of fees incurred to obtain child custody or support. (In re Marriage of Joseph (1990) 217 Cal.App.3d 1277, 1282 [fees incurred to modify child support post-judgment could not be waived by a provision in a marital settlement agreement waiving fees "arising out of the instant matter"].) Further, "parties to divorce cannot abridge the court's ability to act on behalf of the children... by attempts to deny attorney's fees where needed to institute or defend against actions for modification of child support or support orders." (Id. at pp.1284-1285.) Similarly, fees incurred to obtain child support cannot be waived by a fee waiver provision in a marital property settlement. (Newhall v. Newhall (1958) 157 Cal.App.2d 786, 796.)
Robert argues that the public policy exception for fees incurred for child custody and support is inapplicable because the agreement was governed by Michigan Law and Michigan is not a signatory to the Uniform Prenuptial Agreement Act. But he cites no Michigan authority that would permit contractual waiver of child custody, support, or related fees. The Michigan authorities on which he relies provide only that prenuptial agreements are enforceable to waive alimony and property rights, notwithstanding a public policy favoring the sanctity of marriage. (Reed v. Reed (2005) 265 Mich.App. 131; Rinvelt v. Rinvelt (1991) 190 Mich.App. 372; Mich. Comp. Laws, § 557.28.) Therefore, the trial court correctly found that those authorities did not control. The trial court properly construed the fee waiver to apply only to litigation of property division and spousal support.
Robert invokes Michigan state law only on the issue of attorney's fees.
The trial court did not refuse to follow Michigan state law. It wrote that the authorities cited by Robert were not "persuasive." We understand this to be an observation that they were not on point.
We also reject Robert's contention that the amount of the fee award was erroneous because it did not reflect actual fees incurred for child custody and support issues and because his ability to challenge the amount was prejudiced by late disclosure of the billing records. The trial court has broad discretion in awarding attorney fees in dissolution proceedings and we will not disturb its determination on appeal absent a clear showing of an abuse of discretion. (Marriage of Ward (1992) 3 Cal.App.4th 618, 628.) The fee award here was supported by exhaustive itemized billing records which the trial court reviewed in detail. The court heard the testimony of Vikki's counsel and reduced the claimed fees to account for lack of specificity in some of the entries, duplicate work, and failure to distinguish between work performed by the junior and senior attorneys. Although Vikki was not wholly successful on custody and support issues, the record supports a finding that extraordinary efforts were required for counsel to establish Robert's income and lifestyle for purposes of obtaining child support. The trial court was in the best position to assess the reasonableness of the fees and did not clearly abuse its discretion.
DISPOSITION
The judgment is affirmed. Robert is ordered to pay costs on appeal to Vikki.
We concur: YEGAN, Acting P.J., PERREN, J.