McKINSTER, Acting P. J.
Ruth E. Haringa filed for legal separation from Rudy Haringa and, six years later, they entered into a stipulated judgment of dissolution that divided their community assets. Inter alia, the judgment allocated certain pieces of real property between Ruth and Rudy,
The family court concluded: (1) the dairies at issue were no longer community property at the time the judgment was entered and, therefore, were not omitted assets; and (2) Ruth and her attorney in the dissolution proceeding knew of the existence and noncommunity property nature of the dairies at the time the judgment was entered. Therefore, the family court denied Ruth's request. Because we conclude there were no omitted or unadjudicated assets, we affirm.
On February 11, 1997, after more than 25 years of marriage, Ruth filed a petition for legal separation in the San Bernardino County Superior Court. Ruth alleged the date of separation was September 1, 1996. In an attachment, Ruth listed various community property assets to be divided in the proceeding, including three dairies located in Chino, Ontario, and Denair, California.
In his income and expense declaration, Rudy listed his occupation as a self-employed dairy farmer and his place of business as 7322 Chino Avenue, in Ontario. Rudy declared income in the prior 12 months of $132,415 from three partnerships: Haringa Brothers Dairy, Green Acres Dairy, and Haringa Dairy. Ruth filed a responsive declaration, in which she stated, in relevant part: "Respondent and his brother are equal partners and owners of several dairies. It is my understanding that Respondent has since divided the cows and is in the process of ending the partnership. . . . I have not signed any documents to change our ownership interest or to sell property."
As the parties litigated the proceeding, it morphed from a legal separation to a dissolution proceeding. The parties conducted discovery about community assets, including the dairies. In his deposition, Rudy testified that he, his brother William, and their father Earl were at one point each one-third partners in the operation of a dairy farm. After renting a dairy in Artesia, California, in 1966, the partners purchased land and built a dairy in Chino at the corner of Merrill and Grove Avenues. At some point, Rudy and William bought out their father's interest in the partnership and Earl retired. In the mid-1970s, Rudy and William purchased an operating dairy in Ontario located on Chino Avenue. Over the ensuing years, Rudy and William bought additional properties but later sold them. Relevant here, in 1990 or 1991, Rudy and William purchased an operating heifer ranch in Denair and established a dairy there. Rudy testified that around 1998, he and William divided up the cows they owned, William taking the Denair cows and Rudy taking the Chino/Ontario cows, and they ceased their partnership in the operation of the three dairies. However, Rudy and William continued to jointly own the land. Rudy testified that he continued to operate the Chino and Ontario dairies with his sons and paid rent on the properties to the real estate partnership. Likewise, William continued to pay rent on the Denair property to the real estate partnership.
In 2003, Ruth and Rudy entered into a stipulated judgment of dissolution. With respect to the division of community assets, the judgment awarded to Ruth residences located in Lake Arrowhead and Chino Hills, and personal property and bank accounts in her possession. The judgment awarded Rudy the community estate's interests in various pieces of real property, including properties located in Chino, Ontario, Denair, and Merced. The judgment expressly awarded Rudy all community interests in Haringa Farms and Green Acres Dairy. Finally, Rudy agreed to pay Ruth $3,000,000 to equalize the division of property.
Eleven years later, Ruth filed a request under Family Code
Rudy opposed the request, arguing the four assets were either adjudicated by the judgment or were not omitted community assets. In his declaration, Rudy stated that 7954 Merrill Avenue, which the judgment awarded to him, and 14848 Grove Avenue, which Ruth claimed was omitted from the judgment, were common addresses for the same two parcels of land. Therefore, Rudy argued the property had already been adjudicated.
With respect to "Haringa Brothers Dairy," Rudy declared that was the name under which he, Earl, and his now-deceased brother William operated the dairy located on Grove Avenue/Merrill Avenue. After Rudy and William divided their dairy business, Rudy acquired all interests in the dairies located in Chino and Ontario, and William acquired all interests in the Denair dairy. After that split, Rudy began operating the dairy on Grove Avenue/Merrill Avenue under the name "Haringa Farms" and the dairy on Chino Avenue under the name "Green Acres Dairy." Because the judgment already adjudicated the community estate's interests in the Haringa Brothers Dairy and Green Acres Dairy, Rudy argued Haringa Farms (formerly Haringa Brothers Dairy) had already been adjudicated.
As for the real estate venture, Rudy declared it was merely an accounting entity for the pooling and passing through of rents from four properties jointly owned by Rudy and William, to wit, the Chino, Ontario, Denair, and Merced properties. The judgment already awarded Rudy the community estate's interests in those properties. Rudy also declared the real estate venture "had no employees, no capital, and made no profit." Therefore, Rudy argued the venture's funds had already been adjudicated.
Finally, Rudy declared that Haringa Dairy was the name under which William operated the Denair dairy, after he and Rudy had dissolved their partnership in the dairy businesses. Rudy stated Haringa Dairy was not included in the judgment because, as of December 1996, he no longer owned an interest in that dairy. Therefore, Rudy argued it was not an omitted asset.
Ruth subsequently withdrew her claim with regard to the Grove Avenue/Merrill Avenue property but, in her position brief, she continued to argue the remaining assets were omitted from the judgment.
In his brief for the hearing, Rudy argued: (1) Ruth was barred from seeking relief under section 2556 because she knew about the allegedly omitted or unadjudicated assets before the judgment was entered; (2) the stipulated judgment must be construed to effectuate the former spouses' intent to adjudicate all of the known community assets, including the allegedly omitted or unadjudicated assets; and (3) Ruth's claim was actually a time-barred action under section 1101 for breach of fiduciary duty. Rudy submitted a second declaration, in which he essentially restated what he had already declared about the transactions with William regarding the dairies, and a declaration from his son Edward, who stated he had been involved in the operation of the family dairies since 1991 and had personal knowledge of the division of the dairies between Rudy and William.
Rudy also submitted a declaration from an accountant who represented the partnership and was familiar with the division of the dairy operations and with the real estate venture. The accountant declared that she was the person primarily responsible for providing bookkeeping services to Rudy and William while they operated the dairies jointly, and to Rudy and William individually after they dissolved their partnership with respect to the operation of the dairies. The accountant was also involved in preparing schedules for the dissolution of the partnership, including valuation of the dairies, which became effective January 1, 1997. The dissolution of the partnership between Rudy and William and the division of the dairies "was effectuated by a trade of like-kind assets to the extent that the assets were equal, and a final sale of the differences between the assets." The accountant described the transaction by which Rudy acquired the Chino and Ontario dairies and William acquired the Denair dairy. Finally, the accountant declared that she had provided bookkeeping services to the real estate venture and echoed what Rudy had already declared about the entity's limited functions and lack of any independent assets or profits. The accountant declared that "the only revenue recorded by [the real estate venture] consist[ed] of rents, plus the gain reported on the disposition of real property," and that the rents were distributed to Rudy and William "and recorded on their individual tax returns."
During the hearing, Ruth's former attorney testified that the stipulated judgment included all community assets known to him at the time, and that the Denair dairy and the real estate venture were not included in the judgment. The disputed assets were further narrowed during the hearing because Ruth no longer argued the former Haringa Brothers Dairy in Chino was an omitted or unadjudicated asset. Ruth instead focused entirely on the Denair dairy and the real estate venture, and argued the dispositive issue was that those assets were not expressly divided in the judgment. Rudy's attorney argued that William had acquired all interests in the Denair dairy, so there were no longer any community estate interests in that dairy to be divided in the judgment. He also argued that the real estate venture was merely an accounting entity with no value and, therefore, it was not a community asset to begin with.
In its order denying Ruth's request, the family court made various findings regarding the Denair dairy: (1) Rudy and William owned and operated three dairies and jointly owned various properties in Ontario, Chino, and Denair; (2) the brothers subsequently agreed to divide the family dairies; (3) ownership of the Denair dairy was transferred to William before the petition for legal separation was filed and, therefore, it was no longer a community asset that needed to be adjudicated by the final judgment; and (4) Ruth and the attorney who represented her in the dissolution proceeding knew about the division of ownership of the dairies before the judgment was entered. From these findings, the court concluded: "There is sufficient evidence to find that Haringa Dairy in Denair, California, was not included in the Judgment because it was owned and operated by William Haringa." The clear inference to be drawn is that the family court concluded Ruth and Rudy intentionally excluded the Denair dairy from the judgment because they knew it was no longer a community asset.
With respect to the real estate venture, the court found: (1) the venture was merely an accounting mechanism for channeling rents and profits from properties owned by Rudy and William; (2) the venture owned no property, paid no taxes, had no employees, had no assets, and made no profits whatsoever; and (3) Ruth and her attorney during the dissolution proceedings knew about the existence of the venture before the judgment was entered. Although the family court drew no explicit conclusions from these findings, it is apparent the court concluded that Ruth and Rudy knowingly excluded the venture from the judgment because they understood it to have no value and, therefore, they agreed it did not constitute a community asset.
Ruth timely appealed.
On appeal, Ruth contends that substantial evidence does not support the family court's findings that she and her attorney were aware of the division of the ownership of dairies between Rudy and William. To the contrary, Ruth contends the record demonstrates she did not consent to the division of the community estate's interest in the Denair dairy, which constitutes substantial evidence that she did not know of the division. In addition, Ruth contends a former spouse's prior knowledge of an omitted or unadjudicated asset is not the correct standard under section 2556. Instead, Ruth posits the correct standard is whether the asset was actually divided by the judgment. Because the parties agree the judgment makes no mention of the Denair dairy and the real estate venture, Ruth argues the family court erred as a matter of law.
In his brief, Rudy argues Ruth was not entitled to relief under section 2556 because: (1) Ruth knew about the division of ownership of the dairies before the judgment was entered; (2) the Denair dairy and the real estate venture were the subject of discovery during the divorce proceedings and, therefore, were actually litigated; (3) although the judgment does not specifically mention them, the Denair dairy and the venture could have been adjudicated in the judgment and, therefore, they are deemed to have been adjudicated; (4) Ruth is actually seeking time-barred remedies for breach of husband's fiduciary duty; and (5) Rudy transferred ownership of the Denair dairies to William before the judgment was entered, and the venture had no value whatsoever, so they were not community assets that needed to be adjudicated.
"The trial court is generally required to `divide the community estate of the parties equally.' (§ 2550.) In satisfying this mandate, `the court must distribute both the assets and the obligations of the community so that the residual assets awarded to each party after the deduction of the obligations are equal.' [Citation.]" (In re Marriage of Walrath (1998) 17 Cal.4th 907, 924.) The family court has continuing jurisdiction to entertain a postjudgment request to divide omitted or unadjudicated community assets or debts. "In a proceeding for dissolution of marriage, for nullity of marriage, or for legal separation of the parties, the court has continuing jurisdiction to award community estate assets or community estate liabilities to the parties that have not been previously adjudicated by a judgment in the proceeding. A party may file a postjudgment motion or order to show cause in the proceeding in order to obtain adjudication of any community estate asset or liability omitted or not adjudicated by the judgment. In these cases, the court shall equally divide the omitted or unadjudicated community estate asset or liability, unless the court finds upon good cause shown that the interests of justice require an unequal division of the asset or liability." (§ 2556.)
"[Family Code] Section 2556 was derived from the substantively identical provisions of former Civil Code section 4353. Prior to enactment of former Civil Code section 4353, a spouse who believed that community property had not been adjudicated in a prior dissolution proceeding was required to bring a separate civil action. (Henn v. Henn (1980) 26 Cal.3d 323, 330-332 . . . .) `There are no reported decisions that have held that a community property claim to an asset left unmentioned in a prior judicial division of community property may be adjudicated in a motion to modify the prior decree. The only reported decisions that address this issue correctly conclude that such claims may only be adjudicated in a separate action. [Citations.]' (Id. at p. 332.)" (In re Marriage of Hixson (2003) 111 Cal.App.4th 1116, 1121.) The Legislature adopted former Civil Code section 4353 to alleviate the need for a former spouse to file a separate civil action by providing the family court with continuing jurisdiction to divide omitted community assets or debts by way of an order to show cause. (In re Marriage of Hixson, at p. 1121; In re Marriage of Moore & Ferrie (1993) 14 Cal.App.4th 1472, 1483, fn. 9.)
By definition, section 2556 only applies to community property assets or debts. It does not apply to separate property assets or debts of the former spouses that were not adjudicated in the judgment. (In re Marriage of Klug (2005) 130 Cal.App.4th 1389, 1396; In re Marriage of Hixson, supra, 111 Cal.App.4th at p. 1123.) And section 2556 only applies to assets or debts that were not "previously adjudicated by a judgment." (Italics added.) It is not enough that the parties litigated or conducted discovery regarding a community asset or debt if the judgment itself did not finally divide or otherwise allocate the asset or debt. "`The mere mention of an asset in the judgment is not controlling. [Citation.] "[T]he crucial question is whether the [asset or debt was] actually litigated and divided in the previous proceeding."' [Citation.]" (In re Marriage of Georgiou & Leslie (2013) 218 Cal.App.4th 561, 575, italics added.)
"In providing courts with continuing jurisdiction, section 2556 imposes no time limit on former spouses to seek to adjudicate omitted or unadjudicated community property after a dissolution judgment was entered." (In re Marriage of Huntley (2017) 10 Cal.App.5th 1053, 1060.) Although laches is technically not available as a defense, the court may consider prejudice to the nonmoving former spouse from delay in bringing a claim of omitted assets in determining whether to make an unequal division of those assets or debts. (§ 2556; Lakkees v. Superior Court (1990) 222 Cal.App.3d 531, 540, fn. 5 [dicta]; Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2017) ¶ 8:1516, p. 8-516.)
We agree with Ruth that the family court applied the wrong standard for determining whether the Denair dairy and the real estate venture were omitted assets. That Ruth allegedly knew about the division of the dairies during the divorce proceedings has no bearing on whether she can seek relief under section 2556 to have them adjudicated as omitted assets. "Section 2556 applies even when former spouses were aware of the community property at the time the dissolution judgment was entered. In Huddleson v. Huddleson (1986) 187 Cal.App.3d 1564 . . . (Huddleson), the appellate court rejected a contention that a community property pension was immune from postjudgment division because the moving party had known of the asset at the time of judgment. The Huddleson court explained, `Regardless of whether the parties know of, or discuss, the vested pension, if the "court was not called upon to award it, and did not award it, as community property, separate property, or any property at all" [citation], then the pension is a missed asset subject to a postdissolution claim.' (Huddleson, at p. 1569 . . . .)" (In re Marriage of Huntley, supra, 10 Cal.App.5th at p. 1060, italics added; see Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶ 8:1522, p. 8-520 ["Section 2556 relief is available even though the moving party might have known about the existence of the asset or debt at the time of the dissolution proceeding."].) Because Ruth's knowledge or lack of knowledge of the division of the dairies prior to the judgment did not preclude her from seeking relief under section 2556, we need not determine whether the family court's findings about Ruth's knowledge are supported by substantial evidence.
As noted, ante, the mere mention of an asset or debt in a judgment is not controlling, and the crucial question under section 2556 is whether the asset or debt was actually divided by the judgment. (In re Marriage of Georgiou & Leslie, supra, 218 Cal.App.4th at p. 575.) Rudy agrees the Denair dairy and the real estate venture were not mentioned in the judgment but, relying on a leading treatise on family law, he argues omitted assets may be deemed to have been divided by the judgment. Rudy quotes the following in his brief: "[Community property] assets may be deemed `adjudicated' by the judgment (not `omitted' for § 2556 purposes) even though not specifically identified in the judgment." (Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶ 8:1521.1, p. 8-517.) From this quotation, Rudy extrapolates that "the actual text of a judgment is not dispositive in determining whether Family Code section 2556 is applicable to a purportedly omitted asset" and, because the Denair dairy and the real estate venture were the subject of discovery and were before the family court, they should be deemed to have been adjudicated in the judgment.
Rudy wrests the language from the treatise out of its proper context and attempts to shoehorn it into a situation the authors never intended.
Next, contrary to suggestion in Rudy's brief, the fact the Denair dairy and the real estate venture could have been adjudicated in the judgment did not preclude Ruth from seeking relief under section 2556. "As explained in In re Marriage of Thorne & Raccina (2012) 203 Cal.App.4th 492 . . ., `once a marital dissolution judgment has become final, the court loses jurisdiction to modify or alter it. [Citations.] Under the doctrine of res judicata, "`[i]f a property settlement is incorporated in the divorce decree, the settlement is merged with the decree and becomes the final judicial determination of the property rights of the parties.'"' (Id. at p. 499.) However, there are exceptions, including the one covered by section 2556: the trial court may divide a community property asset or liability that has not been `"previously adjudicated by a judgment in the proceeding."' (In re Marriage of Thorne & Raccina, at pp. 500-501, quoting § 2556.)" (In re Marriage of Nassimi (2016) 3 Cal.App.5th 667, 691-692.) "The rule that division of a community asset or liability is not precluded by collateral estoppel or res judicata merely because it could have been disposed of in a prior judgment of dissolution predates the enactment of section 2556. [Citation.]" (Id. at p. 692, fn. 35.)
We also reject Rudy's argument that Ruth's request to adjudicate omitted assets is actually a time-barred claim for breach of fiduciary duty under section 1101. "Under sections 721 and 1100, spouses have fiduciary duties to each other as to the management and control of community property. (§§ 721, subd. (b), 1100, subd. (e).)" (In re Marriage of Fossum (2011) 192 Cal.App.4th 336, 347.) "Section 1101 creates a right of action and specific remedies for the breach of a spouse's fiduciary duty `that results in impairment to the claimant spouse's present undivided one-half interest in the community estate.' (§ 1101, subd. (a); [citation].) A section 1101 action may be brought separate from or in conjunction with a dissolution action. (§ 1101, subd. (f).) Section 1101, subdivisions (g) and (h) provide remedies for a spouse's breach of fiduciary duty. Under subdivision (g), `[r]emedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney's fees and court costs.' When the breach constitutes fraud, oppression or malice, the remedy `shall include, but not be limited to, an award to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset undisclosed or transferred in breach of the fiduciary duty.' (§ 1101, subd. (h).)" (In re Marriage of Schleich (2017) 8 Cal.App.5th 267, 277.)
As already noted, ante, section 2556 imposes no time limit on a spouse's ability to adjudicate omitted or unadjudicated community assets or debts. (In re Marriage of Huntley, supra, 10 Cal.App.5th at p. 1060.) Rudy nonetheless contends Ruth's request is untimely because the three-year statute of limitations for claims of breach of fiduciary duty expired before Ruth filed her postjudgment request. Section 1101, subdivision (d)(1), provides that "any action under subdivision (a) shall be commenced within three years of the date a petitioning spouse had actual knowledge that the transaction or event for which the remedy is being sought occurred." But, on its face, the three-year statute of limitations applies only to actions brought under section 1101, subdivision (a), for breach of a spouse's fiduciary duties. (Patrick v. Alacer Corp. (2011) 201 Cal.App.4th 1326, 1337-1338 [§ 1101, subd. (d)(1), does not apply to declaratory relief action seeking accounting under § 1101, subd. (b)].) Section 1101, subdivision (d)(1), does not govern a former spouse's "other available remedies" such as a postjudgment request to divide omitted or unadjudicated assets under section 2556. (Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶ 8:639, p. 8-243; see id., ¶ 8:691, p. 8-258.) Ruth did not bring an "action" under section 1011, subdivision (a), seeking remedies for breach of fiduciary duty. Therefore, we conclude Ruth's request under section 2556 was not time-barred.
Nonetheless, we agree with the family court that the Denair dairy was not an unadjudicated asset, though for different reasons.
If, on one hand, the division of the dairies between Rudy and William left both with dairies and assets of an equal value as they had before the split, then (1) the transaction was legally valid vis-à-vis the community estate even without Ruth's consent, (2) the community estate was not harmed, and (3) as a practical matter, the judgment's award of the Chino dairies to Rudy completely disposed of the community's interest in the Denair dairy. If, on the other hand, the division of the dairies was unequal in value, and Rudy was left with dairies and assets worth less than what he owned before the division, then (1) the transaction was invalid vis-à-vis the community estate, (2) the community estate was harmed, (3) the award of the Chino and Ontario dairies to Rudy would not have completely adjudicated the community estate's original interest in the dairies, and (4) Rudy would be obligated to pay an additional amount in equalization to Ruth.
The undisputed evidence in the record demonstrates the former is correct. In her declaration in support of Rudy's brief filed in the family court, the accountant for Rudy and William stated under oath that she personally prepared the schedules for the dissolution of the partnership that operated the three dairies, including schedules "setting forth the value of assets traded and sold as part of the dissolution and division." She further stated, "The dissolution and division of the dairies was effectuated by a trade of like-kind assets to the extent that the assets were equal, and a final sale of the differences between the assets." The family court admitted this declaration into evidence without objection (see, ante, fn. 4), and Ruth introduced no contrary evidence to demonstrate that the division of the dairies was unequal and harmed the community estate's interests. Because the record demonstrates that the division of the dairies between Rudy and William in no way diminished the value of the community estate's prior interests, we must conclude the award of the Chino and Ontario dairies to Rudy fully adjudicated those interests.
Finally, we agree with the family court that the real estate venture was not an omitted asset. The record contains substantial evidence to support the family court's finding that the venture owned no property or assets, it had no employees and filed no tax returns, and the venture was merely an accounting entity for the pooling and paying out of rents to Rudy and William from real estate they jointly owned. It is undisputed that the underlying realty was in fact awarded to Rudy by the judgment, and any and all rents earned from that property belongs to him alone and is not an omitted or unadjudicated community asset.
The postjudgment order denying Ruth Haringa's request to divide omitted or unadjudicated assets is affirmed. Rudy Haringa shall recover his costs on appeal.
