Court Opinion

ID: 4016288
Source: CourtListenerOpinion
Date Created: 2016-07-15 21:03:03.456316+00
Date Added: 2024-06-11T14:31:15.989364
License: Public Domain

Filed 7/15/16 Marriage of Esposito CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

In re Marriage of DEBORAH M. and
JERRY L. ESPOSITO.

DEBORAH M. ESPOSITO,
                                                                       G051704
     Appellant,
                                                                       (Super. Ct. No. 03D010235)
         v.
                                                                       OPINION
JERRY L. ESPOSITO,

     Respondent.

                   Appeal from a postjudgment order of the Superior Court of Orange County,
Claudia Silbar, Judge. Reversed and remanded.
                   Deborah M. Esposito, in pro. per., for Appellant.
                   Shuff Law Firm, Tamara Shuff Mortensen and Joseph A. Shuff, III, for
Respondent.
                                   I. INTRODUCTION
              A stipulated divorce judgment filed in October 2005 provided that Deborah
Esposito, who was represented by counsel, was to pay about $198,000 “forthwith” to her
ex-husband Jerry as a community property equalization payment. On the other hand, the
judgment also required Jerry to pay $2,379 a month in spousal support based on his
having imputed monthly income of $10,000. The $2,379 monthly payments would
continue until September 2007, when the support figure would step down to $1,400, and
then continue at that level until the death of either party. In December 2005, at the behest
of the parties’ daughter Leigh, Deborah and Jerry changed their agreement: Jerry would
completely buy out his spousal support obligation in exchange for forgiving Deborah her
$198,000 debt to him. Deborah took the deal based on her understanding that Jerry was
in fact unemployed at the time and would “never work again.” An amended judgment
was filed December 13, 2005, terminating all possibility of support. In point of fact,
while Jerry had been unemployed during most of the divorce, in September 2005 he
landed a job as director of sourcing for a large company.
              In March 2014, Deborah brought a motion to vacate the December
judgment, based on her contention Jerry had fraudulently misrepresented his employment
in December 2005. The trial court denied the motion based on, among other things,
substantial evidence that by 2008 Jerry was communicating with Deborah by email and
his emails clearly showed he was employed by the large company that had hired him in
September 2005, and therefore Deborah should have discovered Jerry’s fraud around
2008.
              We reverse the trial court’s decision to deny a set aside motion brought by
appellant Deborah Esposito. But we do so on a narrow ground. We hold only that the
trial court erred in concluding that Deborah “should have discovered” in 2008 a violation
of her erstwhile husband Jerry’s fiduciary duty in late 2005. Based on this erroneous

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conclusion, the trial court ruled Deborah’s set aside motion was untimely under Family
Code section 2122, subdivision (a).1 As we explain below, we return the case to the trial
court for further reexamination of Deborah’s set aside motion without expressing any
opinion concerning how it should turn out.
                                               II. FACTS
              Deborah and Jerry2 were married in August 1974, and separated in April
2004. By the time of separation they had two adult children, a son, Robert, and a
daughter, Leigh.
              On August 31, 2005, in open court, the parties reached a settlement of most
of the issues in their case. The settlement resulted in a formal judgment being filed on
October 18, 2005. Among the highlights of the October 18, 2005 judgment was an award
of net community property assets to Deborah, who was represented by counsel, of $1.148
million, including about $600,000 from the sale of certain property in Newport Beach
and the net equity, about $400,000, in the family’s Laguna Beach home. Deborah also
got a money market account worth about $100,000. By contrast, the net assets awarded
to Jerry were about $750,000, 80 percent of which consisted of Jerry’s $600,000 half of
the proceeds of the Newport Beach property. Accordingly, the October 2005 judgment
provided that Deborah was to pay Jerry an equalization payment of about $198,000,
“payable forthwith.”
              The October 2005 judgment, however, left a few ends still loose. In
particular, the parties were asserting various claims against each other for payments made
after separation on community debts paid from separate property. Such claims are often
called “Epstein” credits.3 This case comes to us after a full-scale, contested evidentiary

       1      All undesignated statutory references in this opinion are to the Family Code.
       2      We use the parties’ first names for ease of reference.
       3      See In re Marriage of Epstein (1976) 24 Cal.3d 76 (Epstein).

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hearing, so we must assume the trial judge believed Jerry’s testimony and, on balance, he
would have come out about $30,000 ahead had the dueling credit battle come to hearing.
Deborah thus faced the possibility of paying Jerry another $15,000 on top of the
$198,000.
                  There is no question that Jerry had been unemployed for much of the period
of the dissolution proceedings. He had lost his employment with a large candy and pet
food conglomerate (Mars, Inc.) back in 2003.4 In May 2005, he filed a declaration
detailing his unsuccessful efforts to find employment in the sourcing-purchasing field at
over 40 large firms.
                  Nor is there any question that, as of August 31, 2005, when the parties
reached their stipulated judgment leaving only a few relatively minor issues remaining,
he was still unemployed. Jerry did not volunteer the fact that since late July he had been
in contact with Technicolor seeking a sourcing position, but as of August 31, he did not
know he would get the job.
                  An offer from Technicolor arrived via letter dated September 8, 2005.
Jerry accepted four days later, on September 12. At the time, marital status had yet to be
formally terminated. Marital status was not formally terminated until October 18, 2005,
the date the written stipulated judgment was filed. The spousal support provisions of that
judgment required Jerry to pay Deborah $2,379 a month, based on a finding of imputed
income of $10,000. The offer that Jerry accepted, though, was for a salary of $7,116 paid
fortnightly, which works out to about $15,400 a month, or $185,016 a year. Technicolor
also had a bonus program. If Jerry met certain targets, his total compensation would be
bumped up another 20 percent. That is, he would be making $222,015 year. That works
out to $18,500 a month.

         4        Deborah’s initial petition for dissolution alleged a date of separation in October of 2003, fitting a
common pattern of economic and marital difficulties going hand in hand. The October 18, 2005 judgment, however,
gives an April, 2004 separation date, but the discrepancy does not significantly affect the issues before us now.

                                                          4
                   Jerry did not disclose his new job in the period September 12, 2005 (the
date he accepted his new job) through October 18, 2005 (the date of the termination of
the status of marriage). In fact, his trial brief on those few untied remaining loose end
credit issues – likewise filed October 18, 2005 – flatly states he was “unemployed.”
Deborah’s mindset at the time coincided with that false statement. She would later testify
that Jerry had “represented . . . that he was not working and was not going to be able to
find a job.”
                   Sometime in early December 2005, the couple’s daughter Leigh called her
father on the telephone to “discuss the fact” her mother did not want to pay the almost
$200,000 equalization payment provided for by the October judgment. Leigh was in the
same room as her mother and maternal grandparents at the time; it was a family
celebration since she had recently graduated from Columbia Law School, had just passed
the California bar examination, and had been employed by a large law firm. Leigh asked,
on her mother’s behalf, whether her parents might be able to “work something else out.”
                   Essentially, Leigh functioned as a human relay in a conversation between
her parents about a possible buy-out of Jerry’s support obligation. She would later
describe what she passed on to her mother from Jerry this way: “He was concerned that
my mom was going to get screwed, umm, and that he was offering her a settlement,
because he was never going to work again, and, umm, this [the buy-out] would give her
something instead of nothing.”5
                   By December 13, the parties had entered into another stipulated judgment,
the purpose of which was to modify the earlier October 18 judgment and resolve “all

          5         There is a tension, if not direct conflict, in the evidence as to whether Deborah or Jerry initiated
the buy-out proposal. Jerry’s lawyer sought, on cross-examination, to have Deborah admit that she “initiated” the
possibility of a buy-out in return for a waiver of support. Deborah held fast that she didn’t. Daughter Leigh also
testified it was Jerry who initiated the call. Jerry testified, on the other hand, that Leigh initiated the call that led to
the proposal, with the strong implication she had been asked to do by her mother: “She wanted to discuss the fact
that her mother did not want to pay 200,000 in the equivalency charges, that could we work something else out?”
Given the procedural posture of the case, it is Jerry’s version we must accept.

                                                              5
matters” between the parties. As they had discussed earlier, there was an absolute waiver
of spousal support in return for forgiveness of the equalization payment. There was also
a statement the amount forgiven would not be “includible” in Deborah’s taxable income
or “deductible” from Jerry’s.6
                  Eight years later, in March 2014, Deborah filed the instant proceeding to
vacate the December 13, 2005 judgment. She said she had only learned from the
couple’s daughter in October 2013, that Jerry had fraudulently misrepresented his
employment status back in December 2005. Her declaration in support of her motion
specifically repeated Jerry’s statements to her and their daughter that “he was, and had
been for several years, unemployed, and that he had no real hope of finding gainful
employment at anytime in the future due to his age.” The motion ultimately resulted in a
full-scale evidentiary hearing in late 2014.
                  Leigh admitted in her declaration that she had learned in 2007 her father
was employed at Technicolor by performing a search using the website Google.
However, Leigh also averred that Deborah had been manifesting delusional ideation since
as early as 2004. For example, during the divorce proceedings, Deborah believed Jerry
was in the Mafia and was having her followed.7 Leigh unilaterally kept the information
about her father’s employment from her mother until October 2013.8
                  Leigh’s declaration said that in 2008, she was appointed by a court to be
Deborah’s “medical Conservator,” but that (limited) conservatorship was terminated in

          6        Spousal support is usually deductible to the payor spouse, and includable to the payee spouse.
(See Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2015) ¶ 10:15, p. 10-7 [“Unless
otherwise designated, spousal support (referred to by the Code as ‘alimony’) is taxable to the recipient and
deductible by the payor.”].) Whether Jerry’s forgiveness of Deborah’s equalization payment would have otherwise
been deductible as spousal support has not been briefed by the parties and we decline to expound on the tax
ramifications of that clause in the judgment.
          7        The couple’s son Robert likewise signed a declaration to that effect.
          8        Leigh’s exact words: “Given my mother’s fragile mental health, I did not feel that she was able to
handle my discovery that my father had lied about his employment status during the divorce. Indeed, I feared that
her illness would be further exacerbated by this knowledge and, for that reason, decided not to tell her what I had
found.”

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late May 2009. As Leigh described it, “[b]etween 2009 and 2013, my mother became
more and more stable and recently achieved a state of relatively strong mental health.”9
                 For his part, Jerry testified that he did not actually say he was unemployed
back in December 2005, when the buy-out was being discussed. Rather, his version of
the discussions was that Deborah and his daughter both had “a very low expectation that
[he] was employable.” And while Jerry didn’t go out of his way to disabuse Deborah and
his daughter of that low expectation at the time, he did claim he never actually said he
was “unemployed.” As to employment qua employment: “It was never asked and it was
never offered.” Rather, he told Leigh (and indirectly Deborah) something literally true
but misleading. His exact words were: “I can’t believe that just because of my age and
my last salary, the position, that people won’t hire me.”
                 The core of Jerry’s evidence consisted of a series of emails from him to
Deborah in the period August 2008 through February 2010.10 The body of the emails
covered such innocuous topics as Syracuse’s football team and their son’s trip to France.
The main reason for the introduction into evidence of the emails was the prominent
address block right under the content, which made it plain that Jerry was employed and
sending the email from his work. Three of the emails had address blocks that included
these words:
                 “Jerry L. Esposito, C.P.M.
                 “General Manager, Sourcing
                 “Sourcing Mission: Passionate People Creating Value to Fuel Growth
                 “Technicolor [logo omitted]

         9        Attachments promised in Leigh’s declaration that might have thrown more light on the nature of
Deborah’s purported mental problems, such as the minute order lifting the conservatorship and a letter from the
doctor who diagnosed Deborah as suffering from “Delusional Disorder,” are not in the clerk’s transcript where one
would expect to find them, so we do not know if they were forthcoming.
         10       The evidence included several more emails, but those were not directly to Deborah; instead they
were to Leigh.

                                                        7
                  “by Thompson
                  “[address on] Mission Oaks Blvd.
                  “Camarillo, CA [zip omitted]
                  “W: [phone number omitted]
                  “C: [phone number omitted]”
                  Jerry also had a work associate, Lisa Hunt-Weaver, testify. It turned out
that Hunt-Weaver met Deborah at a birthday party for daughter Leigh in December 2009,
and during that conversation Hunt-Weaver mentioned Jerry’s employment to Deborah.
Hunt-Weaver described what she told Deborah this way: “I had mentioned that, you
know, the reason we knew Jerry was through work and that we worked with him at
Technicolor.”
                  After oral argument in December 2014, the trial court issued a minute order
denying Deborah’s motion. The trial court ruled the one-year statute of limitations under
section 2122 had run, and specifically cited Fox v. Ethicon Endo-Surgery, Inc. (2005) 35
Cal.4th 797 (Fox) as being “on point.”11 The trial court’s statements in its minute order
were later reiterated in a formal “Findings and Order After Hearing” filed January 30,
2015, denying Deborah’s set aside motion. Deborah, has timely appealed from the order
denying the motion.

          11       After citing Fox, the court’s minute order went on to say: “The court finds the petitioner knew or
should have known in 2008 that the respondent [Jerry] was employed. That is six years ago. The court finds the
one-year statute of limitations ran from that date also. [¶] The facts demonstrate that the respondent was on regular
basis communicating with the petitioner by way of email throughout 2008. In 2008 respondent was employed and
when he was communicating by email with the petitioner, he was utilizing his employment email on a regular and
consistent basis. [¶] The petitioner admits she received these emails and that she received the majority of the
emails. Petitioner denies having read the portion of the email which states respondent’s name, position, address,
telephone number and company. . . . [¶] The court finds that a moving party on a statute of limitations issues, as it
relates to, knew or should have known, has to exercise some reasonable diligence. [¶] The court finds it is not
reasonable for a person to wait six years and then come to court and allege she did not know he was employed. A
party has an obligation to exercise some due diligence. [¶] On the other hand, further investigation was not
required in 2008, as it is clear, pursuant to respondent’s emails, that he was employed.” (Italics added.)
                   The italicized words show that the trial court stopped its analysis in 2008, thus the sole basis of its
rejection of the motion was the statute of limitations as found in section 2122.

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                                     III. DISCUSSION
A. Preliminaries
              We first must disabuse Jerry of the idea that he was not obligated to
disclose his new employment in the period prior to the formal termination of the status of
marriage on October 18, 2005. Jerry argues his fiduciary duties of disclosure ended on
August 31, 2005, the date of the settlement. For that proposition Jerry cites section 2102,
subdivision (c) for an early end date of his fiduciary duty. The statute provides: “From
the date of separation to the date of a valid, enforceable, and binding resolution of all
issues relating to child or spousal support and professional fees, each party is subject to
the standards provided in Section 721 as to all issues relating to the support and fees,
including immediate, full, and accurate disclosure of all material facts and information
regarding the income or expenses of the party.”
              There are at least two reasons Jerry’s assertion is incorrect. First—and
most obvious—Jerry had an application in at Technicolor by the end of July 2005, but
didn’t disclose it, and that was prior to the August 31, 2005 settlement. Second, section
721 imposes fiduciary duties on “spouses,” and in this case marital status was not
terminated until October 18, 2005, not August 31, 2005. Jerry was still Deborah’s
“spouse” up to October 18.
              We must further note, preliminarily, that Deborah makes no argument on
appeal that her own (possible) mental incapacity in the period 2005 through 2009 (if we
credit Leigh’s lay diagnosis of her mother’s mental health) requires setting aside the
December 2005 judgment, under section 2122, subdivision (d). It would not be in her
interest to do so: Under that statute, a family law litigant has only two years from the
“entry of judgment” to bring a motion to set aside a judgment.

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B. Section 2122
                  Deborah’s appeal, rather, centers on subdivision (a) of section 2122, which
expressly requires a motion to set aside a family law judgment within one year of the date
the complaining party discovered or “should have discovered” the fraud.12
                  The “should have discovered” standard is often shorthanded to the phrase
“inquiry notice.” (See Alfaro v. Community Housing Improvement System & Planning
Assn., Inc. (2009) 171 Cal.App.4th 1356, 1391 [“The doctrine of inquiry notice is usually
invoked when the issue is whether a statute of limitations has expired before a plaintiff
should have discovered a cause of action.”].) The key Supreme Court decision on the
rules governing inquiry notice in the context of statutes of limitations using “should have
discovered” language is Fox, supra, 35 Cal.4th 797. Indeed, the Fox court equated
“should have discovered” language in various statutes of limitations with the principle of
“inquiry notice.” (See Id. at p. 807.) Fox also appears to be our Supreme Court’s own
“go-to” case for explication of the inquiry notice rule in ordinary civil contexts. (See
Quarry v. Doe I (2012) 53 Cal.4th 945, 960 [quoting Fox]; Grisham v. Philip Morris
U.S.A., Inc. (2007) 40 Cal.4th 623, 634 [quoting Fox]; Pooshs v. Philip Morris USA, Inc.
(2011) 51 Cal.4th 788, 801 [quoting Fox].)
                  The key passages from Fox stress two basic principles – first, a suspicion
principle, and second an opportunity principle. Specifically:

          12        The language of the section 2122, subdivision (a) is: “The grounds and time limits for a motion to
set aside a judgment, or any part or parts thereof, are governed by this section and shall be one of the following: [¶]
(a) Actual fraud where the defrauded party was kept in ignorance or in some other manner was fraudulently
prevented from fully participating in the proceeding. An action or motion based on fraud shall be brought within
one year after the date on which the complaining party either did discover, or should have discovered, the fraud.”
(Italics added.)
                    On appeal Deborah also mentions subdivision (f) of section 2122, which also has a one-year
statute of limitations for failure to comply with the disclosure requirements set out in section 2100 et seq. Though
the argument was waived at trial level, we may observe that the same dynamics which govern subdivision (a) also
govern subdivision (f). Obviously cases of actual fraud will often involve failure to comply with disclosure
requirements. It thus makes no difference that Deborah did not also rely on subdivision (f) at trial because if the
one-year statute didn’t run as to one, it didn’t run as to the other.

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                  (1) The suspicion principle. A litigant should have discovered a claim
when he or she “‘has reason at least to suspect a factual basis for’” the elements of that
claim. (Fox, supra, 35 Cal.4th at p. 807, quoting Norgart v. Upjohn Co. (1999) 21
Cal.4th 383, 398 (Norgart).) The Fox court defined “elements” to simply mean
wrongdoing, causation, and harm. (Fox, supra, 35 Cal.4th at p. 807, explaining Norgart,
supra, 21 Cal.4th at p. 397.) The Fox court further elaborated: “[W]e look to whether
the plaintiffs have reason to at least suspect that a type of wrongdoing has injured them.”
(Fox, supra, 35 Cal.4th at p. 807, italics added.)
                  (2) The opportunity principle. Once a litigant becomes aware of an injury,
he or she is required to “conduct a reasonable investigation” and is charged with the
knowledge such an investigation would have revealed. (Fox, supra, 35 Cal.4th at p. 808.)
Put another way, if a complaint on its face shows a claim would be time-barred, the
claimant must show both the time and manner of the discovery of the claim and “‘the
inability to have made earlier discovery despite reasonable diligence.’” (Id. at p. 808,
quoting McKelvey v. Boeing North American, Inc. (1999) 74 Cal.App.4th 151, 160
(McKelvey).) The idea that a claimant must in fact show he or she could not have
reasonably discovered facts supporting their claim has in fact been reiterated by the court.
(Fox, supra, 35 Cal.4th at p. 809.)13
                  Applying Fox, we are forced to conclude there was insufficient evidence
that Deborah should have known, in 2008, that Jerry had, back in 2005, committed fraud.
The evidence of the emails only shows Jerry had a job by 2008, not that he had hidden

           13      Fox itself came to the Supreme Court on demurrer sustained without leave to amend, so the high
court made a point of noting that the plaintiff’s allegations had to be taken as true. (See Fox, supra, 35 Cal.4th at p.
811.) The case arose out of a perforation in the small intestine allegedly caused by a defective surgical stapler. (See
id. at p. 804.) The manufacturer of the stapler contended the applicable one-year statute of limitations had run.
However, accepting as true the plaintiff’s allegation that the plaintiff had no reason to know of the cause of the
perforated intestine until the deposition of a particular physician, the Fox court held that the plaintiff should have
been allowed to amend her complaint to allege the time of the deposition as the time of the discovery of the injury,
which amendment, if allowed, would have made her claim timely. (Id. at p. 811.)

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the fact of an existing job in 2005. The element of knowledge of wrongdoing was
missing. (See Fox, supra, 35 Cal.4th at p. 807.) The same goes for the birthday party
evidence from December 2009. Nothing in the record indicates Hunt-Weaver told
Deborah that Jerry had been working at Technicolor back in 2005. We thus conclude the
trial court erred in deciding the statute of limitations issue against Deborah.
C. Remand Required
              Our conclusion on section 2122 does not, however, necessarily mean that
the court should have granted Deborah’s motion. It only means that the court must now
evaluate Deborah’s motion on the merits because it is not time-barred under section 2122.
There are issues that are yet to be decided, but they are issues we cannot address in the
first instance. All we can decide is the one dispositive issue of whether the trial court
correctly applied section 2122 to these facts. Since it didn’t, we reverse the order
denying Deborah’s set aside motion and remand for reconsideration of her set aside
motion consistent with this opinion. Deborah will also recover her costs on appeal.

                                                  BEDSWORTH, ACTING P. J.
WE CONCUR:

ARONSON, J.

FYBEL, J.

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