Dale v. Dale

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 moneys 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)).^[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^[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.

Discussion

Subject Matter Jurisdiction

The parties suggest the issue presented here is whether the trial court had subject matter jurisdiction over this action. We disagree. In this case, Joanne seeks an award of compensatory and punitive damages for pecuniary injury she allegedly sustained as a result of defendants’ tortious conduct.^[3] The superior court has subject matter jurisdiction over a tort action where the

amount in controversy exceeds $25,000.^[4] (See Ash v. Hertz Corp. (1997) 53 Cal.App.4th 1107 , 1109-1110 [ 62 Cal.Rptr.2d 192 ]; Code Civ. Proc., § 86.) Likewise, to the extent Joanne seeks declaratory relief as to her interest in the community assets defendants allegedly concealed from her, the superior court has subject matter jurisdiction. (See Code Civ. Proc., § 1060.)

We believe that in dismissing this case for lack of “jurisdiction,” the trial court used that term in its broader sense, as articulated by the California Supreme Court in Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280 [ 109 P.2d 942 , 132 A.L.R. 715 ]. In Abelleira, the court explained: “Lack of jurisdiction in its most fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject matter or the parties. . . . [¶] But in its ordinary usage the phrase ‘lack of jurisdiction’ is not limited to these fundamental situations. For the purpose of determining the right to . . . dismissal of an action, a much broader meaning is recognized. Here it may be applied to a case where, though the court has jurisdiction over the subject matter and the parties in the fundamental sense, it has no ‘jurisdiction’ (or power) to act except in a particular manner, or to give certain kinds of relief . . . .” (Id. at p. 288.)

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.

Viability of Tort Action for Concealment of Community Assets

In defense of the trial court’s ruling, defendants argue that “the Family Court is the only court that can decide issues of community property

and spousal support.” According to defendants, Joanne is not entitled to maintain a tort action against them based on their allegedly tortious concealment of community assets. They contend Joanne’s sole remedy is to move to set aside the supplemental judgment in the dissolution proceeding on grounds of extrinsic fraud.^[5]

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 [ 286 Cal.Rptr. 410 ],

In Worton, a wife sued her former husband for damages for fraud and conversion, alleging that during the course of their marital dissolution proceeding he concealed the existence of certain excess assets in a pension plan.^[6] (Worton v. Worton, supra, 234 Cal.App.3d at pp. 1643-1644.) The husband obtained summary judgment on the ground that the action against him was barred by the doctrine of res judicata. (Id. at pp. 1644-1646.) The Court of Appeal reversed, holding that res judicata did not apply because the husband’s “failure to reveal the existence of the excess assets to plaintiff . . . deprived her of an opportunity fully to present her case in the dissolution proceeding.” (Id. at p. 1649.)

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 [ 68 Cal.Rptr.2d 324 ] [“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 [ 4 Cal.Rptr. 176 , 351 P.2d 344 ].) Accordingly, the decision in Worton is of little assistance in deciding the primary issue before us.

Joanne also relies on In re Marriage of McNeill (1984) 160 Cal.App.3d 548 [ 206 Cal.Rptr. 641 ], disapproved on other grounds in In re Marriage of Fabian (1986) 41 Cal.3d 440 [ 224 Cal.Rptr. 333 , 715 P.2d 253 ]. In McNeill, the trial court consolidated a husband’s action against his wife for damages based on fraud with the couple’s dissolution proceeding. In that case, however, the wife did not argue that her husband could not pursue his action for damages. Rather, she simply argued that the court erred in consolidating the two proceedings. (Id. at pp. 556-558.) Consequently, like Worton, Mc-Neill provides little direct assistance in deciding whether Joanne may maintain an action for damages for concealment of community assets.^[7]

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.^[8] (See Nagy v. Nagy (1989) 210 Cal.App.3d 1262 , 1268 [ 258 Cal.Rptr. 787 ].) 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.

Defendants contend the decision in d’Elia v. d’Elia, supra, 58 Cal.App.4th 415 “disposes of [Joanne’s] claim to an independent tort action for damages resulting from the allegedly fraudulent inducement of her property settlement with her former husband . . . .” Defendants are mistaken. In d’Elia, the wife claimed that in the course of a dissolution proceeding her former husband made misrepresentations to her in connection with the disposition of certain community stock. (Id. at p. 420.) The wife brought an action for damages against the husband, alleging statutory claims for violation of state securities laws, as well as common law claims for intentional and negligent misrepresentation and breach of fiduciary duty. (Id. at pp. 422-423.) On appeal from a judgment in favor of the wife, the appellate court reversed the judgment on the statutory claims, holding that California’s securities laws do not apply to allocations of community stock pursuant to marital settlement agreements. (Id. at pp. 423, 432-433.) The court did not hold that the wife was barred from recovering on her common law claims against the husband. Indeed, the court expressly noted that because the husband did not challenge the wife’s “right to a recovery per se under the [common law] causes of action, . . . we do not address [the wife’s] right to a recovery under those causes of action . . . .” (Id. at p. 423, italics omitted.) Accordingly, like Worton, d’Elia does not resolve the issue before us.^[9]

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 [ 96 P.2d 334 ] 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.

The cases on which defendants rely do not support their argument. In Williams v. Superior Court, supra, 14 Cal.2d 656 , the California Supreme Court held “that where a proceeding has been duly assigned for hearing and determination to one department of the superior court by the presiding judge of said court in conformity with the rules thereof, and the proceeding so assigned has not been finally disposed of therein or legally

(b).) According to defendants, Joanne’s claims are barred by the privilege because they are “based entirely on statements, communications and publications by parties and their counsel to a judicial proceeding.” We conclude, however, that the litigation privilege issue is not properly before us. As noted above, at the time the trial court dismissed the action for lack of jurisdiction, defendants’ motion for summary judgment based on the litigation privilege was still under submission. The trial court must be allowed to rule on that motion in the first instance. Accordingly, we do not reach the issue of whether the litigation privilege applies to this case.^[10]

V

Public Policy

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.

Defendants suggest that because “Civil Court judges are not trained to render decisions in this field of expertise, the Family Court is the only court that can decide issues of community property and spousal support.” That the damages Joanne seeks are related to forfeited spousal support and community assets—matters with which family court judges are undoubtedly more familiar—does not alone justify limiting Joanne to those remedies that may be available in the dissolution proceeding. We see no reason why a properly instructed jury cannot be trusted to determine the value of the pecuniary injury suffered by a plaintiff who alleges her former spouse tortiously concealed community assets from her in the dissolution proceeding. (See d’Elia v. d’Elia, supra, 58 Cal.App.4th at pp. 423, 433 [affirming an award of $3.9 million on common law claims against former spouse for misrepresenting value of community stock].)

Defendants also contend “public policy requires that a party be secure from an endless stream of litigation.” Recently, the California Supreme Court discussed similar policy concerns in a case involving intentional spoliation of evidence. (Cedars-Sinai Medical Center v. Superior Court (1998) 18 Cal.4th 1 [ 74 Cal.Rptr.2d 248 , 954 P.2d 511 ].) In Cedars-Sinai, the court held “. . . there is no tort remedy for the intentional

otherwise. In its amicus curiae 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 “[cjontingency 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 [ 230 Cal.Rptr. 1 ].) 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,^[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.

Disposition

The order of dismissal is reversed. Appellant to recover costs on appeal.

Benke, Acting P. J., and Haller, J., concurred.

A petition for a rehearing was denied October 20, 1998, and respondents’ petition for review by the Supreme Court was denied January 13, 1999. Mosk, J., and Kennard, J., were of the opinion that the petition should be granted.