Source: http://fl.bna.com/fl/19981006/24756.htm
Timestamp: 2019-04-19 08:14:20+00:00

Document:
THOMAS REDDING DALE, et al.
APPEAL from an order of the Superior Court of San Diego County, Harrison R. Hollywood and James R. Milliken, Judges. Reversed.
Mazur & Mazur and Janice R. Mazur for Plaintiff and Appellant.
Sharron Voorhees, Alan L. Nobler, Gollub and Golsan, Lorraine C. Gollub, Susan Berke Fogel and Pamela A. Kelley as Amici Curiae on behalf of Plaintiff and Appellant.
Meisenheimer and Herron, Matthew V. Heron, Robert M. Steele and Robert S. Gerstein for Defendants and Respondents.
Stephen Temko and Kim Cheatum as Amici Curiae on behalf of Defendants and Respondents.
In this action, Joanne Sandra Dale ("Joanne") alleged that during the course of a marital dissolution proceeding her former husband, defendant Thomas Redding Dale ("Thomas"), and the bookkeeper for his medical practice, defendant Chun Wei Dale ("Chun Wei"), concealed from Joanne certain community assets related to the practice. Joanne claimed that as a result of the concealment, she was induced to forego spousal support and to stipulate that Thomas be awarded the practice without full knowledge of the assets contained therein. Joanne sought compensatory and punitive damages under a variety of tort theories. The trial court dismissed the action for lack of jurisdiction, concluding Joanne's exclusive remedy lay in seeking to set aside the judgment of dissolution in the family court. We hold that in the absence of a pending dissolution proceeding, a plaintiff who contends she suffered injury because her former spouse tortiously concealed community assets from her, thereby preventing her from fully presenting her case in the dissolution proceeding, is entitled to bring a subsequent tort action based on the alleged concealment. Accordingly, we reverse the order of dismissal.
Joanne and Thomas were married in 1970. In 1984 Joanne initiated a marital dissolution proceeding. A judgment of dissolution was entered in 1985; however, the court reserved jurisdiction over the disposal of certain community assets. In 1988 pursuant to stipulation, a supplemental judgment was entered disposing of those assets, including Thomas's medical practice, which was awarded to Thomas.
Five years later, in August 1993, while seeking to increase child support for her two children, Joanne obtained from a certified public accountant certain financial documents related to the medical practice. Upon review of those documents, Joanne discovered that financial documents Thomas produced to her in the course of the dissolution proceeding had been altered. According to Joanne, beginning in 1984, when Thomas was served with notice of the dissolution proceeding, Thomas and Chun Wei withheld from billing patients, withheld monies received as payments to the accounts receivable of the medical practice, and otherwise acted so as to artificially reduce the value of the practice. Chun Wei prepared false ledgers, financial statements, income tax returns and other business records to conceal the withheld billings and payments. Thomas actively concealed the existence of the withheld billings and payments and affirmatively misrepresented to Joanne that his practice was experiencing financial difficulties and was near insolvency. As a result of the concealment of the withheld billings and payments by Thomas and Chun Wei, Joanne was induced to forego spousal support and to stipulate that Thomas be awarded the practice as his separate property.
In December 1993 Joanne commenced this action against Thomas and Chun Wei based on their alleged concealment of Thomas's true income and financial condition. Following several demurrers, Joanne filed a third amended complaint which stated claims against Thomas and Chun Wei on a variety of legal theories, including breach of fiduciary duty, fraud, constructive fraud, intentional and negligent misrepresentation, conversion, conspiracy, fraudulent conveyance, constructive trust, and declaratory relief. Joanne sought both compensatory and punitive damages.
The trial court apparently overruled a demurrer to the third amended complaint based on the "litigation privilege" (Civ. Code, § 47, subd. (b)).See footnote 1 Defendants later filed a motion for summary judgment on the same ground, asserting that Joanne's claims were barred by the privilege because the claims were based on statements and communications by parties to a judicial proceeding. The trial court denied the summary judgment motion without prejudice due to a deficiency in defendants' evidence, and defendants later refiled the motion. The court issued a tentative ruling denying the motion and then took the matter under submission following oral argument.
While the motion for summary judgment was still under submission, the case was called for trial. At the outset, the trial court indicated that it would allow the jury to decide the issue of fraud, but it would not allow the jury to fix damages. The court indicated that if the jury found fraud, the court would send the case to the family court See footnote 2 for "further adjudication." After an extended discussion with counsel during which defense counsel argued the family court had "exclusive jurisdiction" over the matter, the court agreed to allow the parties to brief the issue of the court's jurisdiction. Defendants argued that because the family court had continuing jurisdiction to determine spousal support and to award community assets not previously adjudicated, Joanne's sole remedy lay in that court. Joanne argued that she was entitled to elect between pursuing a remedy in the family court and pursuing an independent civil action for damages and equitable relief.
Following the completion of briefing, the trial court issued an order tentatively dismissing the case on the grounds that the court did not have jurisdiction "to hear matters previously determined and adjudicated by the Family Court" or "to hear damages testimony relating to community property assets including, but not limited to, spousal support and valuation of the medical practice . . . ." The court transferred the case to the presiding judge for a determination of whether the case should be dismissed or transferred to the family court. The presiding judge issued a minute order dismissing the case and later denied a motion for reconsideration. Joanne appeals the dismissal.
In ruling that it lacked jurisdiction in this case, the trial court cited several provisions of the Family Code which provide that the court in a dissolution proceeding has continuing jurisdiction to order the payment of spousal support and to award community assets which have not been previously adjudicated. (See Fam. Code, §§ 2552, 2556, 4330, 4336.) Because the damages sought here relate to spousal support and community assets Joanne claims she forfeited as a result of defendants' tortious conduct, the trial court apparently concluded that it had no "jurisdiction" to grant Joanne the relief she sought and that her only recourse was to seek to reopen the dissolution proceeding so she could pursue directly in that proceeding an award of spousal support and a division of the concealed assets. Accordingly, the question presented here is not one of the court's subject matter jurisdiction, but of the court's "jurisdiction" (or power) to grant relief in an action for damages stemming from the tortious concealment of community assets in a dissolution proceeding. For the reasons that follow, we conclude that the court does have the power to grant relief in such an action.
Joanne acknowledges the continuing jurisdiction of the family court in the dissolution proceeding to award spousal support and divide omitted community assets. She argues, however, that "continuing jurisdiction does not equate to exclusive jurisdiction" and that she has the right to elect her remedy and proceed with an action for damages. (Original italics.) In support of her argument, Joanne relies primarily on Worton v. Worton (1991) 234 Cal.App.3d 1638.
Joanne contends that Worton "is on all fours with the instant case in all pertinent respects." We disagree. It is true the court in Worton allowed the plaintiff to proceed with her action for damages against her former husband based on his fraudulent concealment of community assets during the dissolution proceeding. However, the court in Worton apparently was not presented with, and therefore did not address, the argument defendants make here: namely, that a plaintiff in such a case is not entitled to pursue an action for damages but is instead limited to seeking relief from the family court by moving to set aside the judgment of dissolution. (See d'Elia v. d'Elia (1997) 58 Cal.App.4th 415, 431 ["The Worton court never considered the legal propriety of a tort claim based on the concealment of a community asset, as distinct from a traditional set aside action based on extrinsic fraud."].) "[C]ases are not authority for propositions not considered." (McDowell & Craig v. City of Santa Fe Springs (1960) 54 Cal.2d 33, 38.) Accordingly, the decision in Worton is of little assistance in deciding the primary issue before us.
Although McNeill is of little direct assistance, it does illustrate the general rule that one spouse may sue the other for intentional or negligent torts. See footnote 8 (See Nagy v. Nagy (1989) 210 Cal.App.3d 1262, 1268.) The question posed by this case is whether that general rule does not or should not apply when the tortious conduct, which provides the basis for the action, consists of the concealment of community assets in a dissolution proceeding, and the damages the injured spouse claims relate to spousal support and community assets allegedly forfeited as a result of that conduct. We are aware of no authority imposing any such limitation and find no basis for doing so ourselves.
In framing arguments to justify the trial court's dismissal of this action, defendants for the most part fail to acknowledge that this case is an action for damages resulting from allegedly tortious conduct. Instead, defendants characterize this case as an attempt by Joanne to relitigate spousal support and community property issues already resolved in the dissolution proceeding. Defendants contend that "once the Family Court acquires jurisdiction over community property it retains exclusive jurisdiction over that property." Citing Williams v. Superior Court (1939) 14 Cal.2d 656 and its progeny, defendants suggest that Joanne's action for damages is barred because the family court already exercised jurisdiction over Thomas's medical practice in the dissolution proceeding, and therefore Joanne's sole remedy is to move to set aside the judgment in that proceeding.
Taken together, Williams, Schenck, and Askew stand for the proposition that when a dissolution proceeding is pending in the family court, another department of the superior court may not act so as to interfere with the family court's exercise of its powers in that proceeding. (See, e.g., Glade v. Glade (1995) 38 Cal.App.4th 1441, 1449-1455.) That proposition is inapposite here, however, because at the time Joanne commenced this action for damages, the dissolution proceeding had been finally disposed of by means of a final judgment. There is nothing in the record to indicate that during the pendency of this action, the family court was exercising its power over community assets or spousal support in the dissolution proceeding, or that any issue related to those matters remained to be disposed of by the family court. Accordingly, allowing Joanne to proceed with this action for damages would not interfere with the family court's exercise of its powers in that proceeding.
Finally, to the extent defendants suggest Joanne should be barred from pursuing her action for damages for reasons of public policy, we disagree. It is true that in some instances the courts have concluded that allowing a remedy in tort would be contrary to public policy. (See, e.g., Nagy v. Nagy, supra, 210 Cal.App.3d at pp. 1269-1270.) This is not such a case.
Second, the court's reliance in Cedars-Sinai on the adequacy of "nontort remedies that seek to punish and deter the intentional spoliation of evidence" is not compelling here because of the different circumstances involved. (Cedars-Sinai Medical Center v. Superior Court, supra, 18 Cal.4th at p. 11.) Most of the remedies discussed by the court in Cedars-Sinai -- the adverse evidentiary inference, discovery sanctions, and State Bar disciplinary sanctions -- do not apply here, either because the alleged wrongful conduct was not discovered during the course of the dissolution proceeding or because there is no allegation that Thomas's counsel in the dissolution proceeding participated in the alleged concealment of community assets.
Furthermore, there is no evidence before us that any such inundation will occur. Indeed, San Diego County Certified Family Law Specialists (the association), a county-wide association of specialists in this area, contends otherwise. In its amicus brief, the association contends the "fraudulent fabrication of documents and perjured testimony" is "the exception rather than the rule" in family law cases. The association further notes that "[c]ontingency attorney fee arrangements will screen the specious claims, if any, from the meritorious." Finally, the association contends "a decision that permits tort litigation when fraud is present will ultimately limit fraudulent conduct and the number of subsequent lawsuits."
We agree that public policy supports permitting rather than prohibiting tort actions in circumstances such as those alleged to be present here. Allowing a spouse who intentionally concealed the existence of community assets during the course of a dissolution proceeding to avoid liability for punitive damages likely would encourage such tortious behavior. A spouse would be able to practice concealment with little, if any, risk. (Cf. Resnik v. Superior Court (1986) 185 Cal.App.3d 634, 637.) Traditional tort remedies, including the risk of an award of punitive damages, should have a greater deterrent effect than the remedies available in family court.
In summary, we find no policy reason to prohibit a spouse like Joanne from pursuing a tort action for damages against her former spouse based on the alleged concealment of community assets. In the absence of a pending dissolution proceeding in which the parties' property and support rights have yet to be finally determined,See footnote 11 a plaintiff who contends she suffered injury because her former spouse tortiously concealed community assets from her, thereby preventing her from fully presenting her case in the dissolution proceeding, is entitled to bring a subsequent tort action based on the alleged concealment.
The order of dismissal is reversed. Appellant to recover costs on appeal.
Footnote: 1 The record on appeal does not contain any of the moving or opposing papers related to the demurrer to the third amended complaint.
Footnote: 2 As the California Supreme Court explained in In re Chantal S. (1996) 13 Cal.4th 196, 201: ". . . 'family court' refers to the activities of one or more superior court judicial officers who handle litigation arising under the Family Code. It is not a separate court with special jurisdiction, but is instead the superior court performing one of its general duties."
Footnote: 3 According to Joanne, she was injured by defendants' conduct because she "was induced to forego spousal support, was deprived of her rightful community interest in [Thomas's medical practice], and was further precluded from fully and fairly litigating the division of [the] concealed assets in the previous dissolution action . . . ."
Footnote: 4 Here, Joanne alleged the amount of her claim was "unknown at this time, but believed to be in an amount of at least $1,000,000.00."
Footnote: 5 Under case law, after the expiration of the six-month period for seeking relief pursuant to Code of Civil Procedure section 473 on grounds of mistake, inadvertance, surprise or excusable neglect, an otherwise valid and final judgment adjudicating support or division of community property could be set aside only if it was obtained through extrinsic fraud. (See In re Marriage of Stevenot (1984) 154 Cal.App.3d 1051, 1068.) For judgments entered on or after January 1, 1993, Family Code section 2120 et seq. provides a comprehensive statutory scheme for setting aside such judgments on grounds of actual fraud, perjury, duress, mental incapacity, or mistake. (See In re Marriage of Varner (1997) 55 Cal.App.4th 128, 136-137.) Because the judgment at issue here was entered in 1988, we have no occasion to address the effect of Family Code section 2120 et seq. on the viability of a tort action for concealment of community assets.
Footnote: 6 Wife also sued her former attorney for legal malpractice for negligently failing to discover the existence of the excess assets. The Court of Appeal affirmed a summary judgment in favor of the attorney on the ground that wife's claim was barred by the statute of limitations.
Footnote: 7 For similar reasons, the decision in McDaniel v. McDaniel (1969) 275 Cal.App.2d 927, cited by amicus curiae San Diego County Certified Family Law Specialists, is of little assistance in our inquiry. In McDaniel, husband appealed from a judgment in favor of wife in an action for misrepresentations husband made to wife in connection with a property settlement agreement in an action for divorce. (Id. at p. 929.) Husband contended that the evidence did not support the trial court's findings and that the damages were excessive. (Ibid.) He apparently did not contend that wife could not maintain a tort action against him.
Footnote: 10 We do note, however, that the trial court tentatively denied defendants' motion for summary judgment based on the litigation privilege on the ground that there were triable issues of fact as to the application of the privilege.
Footnote: 11 We express no opinion as to whether a tort action may be maintained when the dissolution proceeding has not yet resulted in a judgment finally adjudicating the parties' property and support rights.

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