In re Marriage of Nassimi
B259704M
| Cal. Ct. App. | Oct 14, 2016Background
- Shary (husband/appellant) owned IEI (a sole proprietorship treated as community property); he sold IEI to Chamberlain in 2007 for ~$14M with $1M held in escrow for claim adjustments and potential earn-out payments tied to future sales.
- The parties entered a stipulated marital dissolution judgment in June 2009 allocating assets and addressing (a) claims to the $1M escrow (paragraph 7(g)) and (b) earn-out claims assigned to Shary with indemnity language for counterclaims/cross-claims (paragraph 7(h)).
- Chamberlain sued Shary in federal court (filed July 2009) asserting many IEI products violated FCC rules and seeking rescission or damages; Shary counterclaimed, including an earn-out claim. Summary adjudication favored Chamberlain on some warranty/knowledge issues; damages range estimates were large.
- Shary settled with Chamberlain in January 2011, paying $1M of his funds and releasing the escrow $1M; because he lacked cash, he secured a promissory note against the former marital home (later paid from its sale).
- Postjudgment (family) proceedings: Shary sought contribution/50% share from Esther (wife/respondent) for the cost of defending/settling Chamberlain’s rescission-related claims as an omitted community obligation under Family Code §2556; the family court initially found the rescission claims were an omitted community obligation but later denied reimbursement because Shary failed to segregate attorney fees tied to his earn-out counterclaim and because the settlement/release did not include Esther. The court awarded attorney fees to Esther as prevailing party; Shary appealed.
Issues
| Issue | Plaintiff's Argument (Shary) | Defendant's Argument (Esther) | Held |
|---|---|---|---|
| Whether Chamberlain’s rescission/damages claims (filed after dissolution) are community obligations omitted from the 2009 judgment under Fam. Code §2556 | The contract and related liabilities arose during the marriage and were not addressed by the judgment’s provisions, so the litigation and settlement are omitted community liabilities subject to equal division | Paragraphs 7(g)/7(h) and other judgment provisions allocate liabilities: 7(h) assigns litigation costs to Shary (except escrow), releases in ¶34 and various allocation paragraphs make Esther not liable | Held: Liability from Chamberlain’s rescission/related claims was an omitted community obligation under §2556 and not covered by ¶7(h) or other judgment provisions; therefore Esther must bear half the settlement cost (reversed as to denial of reimbursement) |
| Whether Esther must reimburse half of the $2M settlement Shary paid Chamberlain | Settlement paid by Shary satisfied community liability; because liability was an omitted community obligation, Esther owes half of the settlement | Settlement did not include Esther/the community and Shary acted without her—she is not bound by that private settlement | Held: Reversed — Esther must reimburse one-half of the settlement Shary paid (court erred in refusing reimbursement) |
| Whether Shary proved entitlement to one-half of attorney fees and costs incurred defending Chamberlain’s claims | Fees defending Chamberlain’s affirmative rescission/damage claims are community and recoverable; Shary presented billing and testimony supporting significant allocable fees | Many billing entries were block-billed, included work adverse to Esther (e.g., attempting to join her), and Shary failed to present credible allocation evidence; ¶7(h) may limit recoverable fees | Held: Affirmed — Shary failed to meet his burden to segregate fees; trial court properly denied reimbursement of attorney fees and costs for lack of reliable allocation evidence |
| Whether prevailing-party attorney fee award to Esther in the family proceeding should stand | Shary argued the judgment’s prevailing-party clause controlled but he prevailed in part (recovery of half the settlement), so the fee award must be revisited | Esther prevailed below on several claims and was awarded fees under the judgment’s prevailing-party clause | Held: Reversed the fee award to Esther and remanded for the family court to reconsider identity of prevailing party in light of partial reversal |
Key Cases Cited
- Lezine v. Security Pacific Fin. Services, Inc., 14 Cal.4th 56 (explains that community estate is liable for debts incurred by either spouse during marriage)
- In re Marriage of Feldner, 40 Cal.App.4th 617 (character of liability is determined by when contract was made; debts arising from contracts made during marriage are community)
- In re Marriage of Hirsch, 211 Cal.App.3d 104 (innocent spouse shares community liability where community benefitted from spouse’s conduct; settlement obligations can be community debt)
- In re Marriage of Dekker, 17 Cal.App.4th 842 (community property principles concerning income and assets)
- In re Marriage of Guilardi, 200 Cal.App.4th 770 (contractual prevailing-party clause can replace need-based fee claims under Fam. Code §2030)
- Hsu v. Abbara, 9 Cal.4th 863 (prevailing party under a contract fee clause is determined by comparing relief awarded with parties’ demands and objectives)
- Scott Co. v. Blount, Inc., 20 Cal.4th 1103 (trial court discretion in determining prevailing party when neither side completely prevails)