BAILEY v. JAMES BATCHELOR INC

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Court of Appeal, Fourth District, Division 3, California.

Jean Melbourn BAILEY, Plaintiff and Respondent, v. JAMES K. BATCHELOR, INC., Defendant and Appellant.

No. G003237.

Decided: January 12, 1989

Lewis, D'Amato, Brisbois & Bisgaard, David E. Reynolds Los Angeles, and Joel Gelff, Beverly Hills, for defendant and appellant. Baker & Camusi, Philip J. Brimble and Damon Guizot, Los Angeles, for plaintiff and respondent.

OPINION

James K. Batchelor, Inc. (Batchelor) appeals the jury verdict awarding $165,000 to Jean Bailey for Batchelor's legal malpractice during its handling of her dissolution of marriage.   Jean successfully claimed Batchelor and its employee, Matthew Flynn, negligently failed to discover, characterize and value various assets and failed to protect her against tax liabilities arising out of an IRS audit, resulting in an inequitable division of community assets and liabilities.   Batchelor contends the separate and community property characterization of the disputed assets should have been decided by the court rather than a jury and that the damage award is not supported by substantial evidence.   We find the court properly submitted the property characterization to the jury and the damage award is partially supported by substantial evidence.   Accordingly, we modify the judgment and affirm.

I

Jean married Del Bailey in December 1977.   She was a schoolteacher and owned a condominium on Elsinore Avenue in Buena Park;  Del was an attorney and owned a condominium in Marina Pacifica in Long Beach.   After the marriage, the couple moved into the Elsinore condominium and rented out the Marina Pacifica unit.   Because both wanted to work towards early retirement, they agreed to live on Del's salary and invest Jean's.   They also agreed to pool their assets “to make money ․ for retirement.”

In early 1978, Del invested $20,000 in Katella Commercial Complex, a limited partnership.   The investment funds came from a loan secured by the Marina Pacifica condominium;  Del applied for the loan five months before the marriage but it was funded afterwards.   In February 1979, Del executed a grant deed transferring the Marina Pacifica property to himself and Jean as joint tenants.

After the marriage, the parties borrowed $60,000 from Jean's father and bought a condominium in Long Beach (the 802 Unit).   Later they decided to refinance the Elsinore property to obtain investment funds.   In May 1979 Jean transferred the property to herself and Del as joint tenants and, using Del's veteran status, they obtained a Cal Vet loan.   The proceeds of that loan were used to buy a second Long Beach condominium (Unit 808).   Shortly thereafter, the parties sold the Marina Pacifica property and used the proceeds to buy a third Long Beach condominium (Unit 804).

In September 1980, Jean signed a quitclaim deed relinquishing her rights to the Katella investment because the general partner required “wives to sign off if [the investor was] a married man and an individual partner.”   The investment was sold in early 1981, yielding a profit of $100,000 which Del used to purchase a certificate of deposit at Lloyds Bank.

In February 1981 the parties separated, and Del filed a petition for dissolution on March 27.   During February, March and April of that year, without Jean's knowledge or consent, Del made a series of investments with two individuals (Nelson/Agajanian) using funds borrowed from Lloyds Bank.   On February 18, Del filled out a financial statement for Lloyds Bank listing the value of all their community property as $1,125,000.   He pledged “all the community property of the parties ․” as security for the loan, but requested the loan be a “separate credit accommodation.”

In early April, Jean retained Batchelor to represent her in the dissolution action.   Batchelor introduced her to his associate, Matt Flynn, who subsequently did most of the work on her case.

Later in April, Gerald Nelson absconded with the funds of numerous investors, including the Baileys.   Through a chance visit with Mrs. Nelson, Jean discovered that Del had invested and lost some funds, although Jean did not know how much.   She called Del, confronted him with her discovery and suggested, “You better get yourself home because it is going to take the both of us to get through this one.”

Del did return home and the parties agreed to drop the dissolution proceeding.   To “protect” Jean from the Nelson/Agajanian creditors, however, Flynn and Del negotiated a community property division memorialized in a post-nuptial agreement.   The parties signed that agreement and on July 23, 1981, filed it with the court along with a request to dismiss the dissolution action.

Although Del returned home in April, his relations with Jean were stormy.   He moved out several times, and each party accused the other of violating the post-nuptial agreement.   Jean became dissatisfied with Flynn and asked James Batchelor to work on the post-nuptial agreement personally.   In December 1981, the parties separated permanently.

Batchelor filed a new petition for dissolution and worked out an interlocutory agreement with Del, which was signed and filed in February 1982.   In July 1982, Jean filed a motion to set aside the interlocutory judgment based on surprise, inadvertence or excusable neglect (Code Civ.Proc., § 473);  the motion was denied.   She then filed an action for legal malpractice against Batchelor (Flynn was later added by stipulation), alleging the community assets and liabilities were inequitably divided due to her attorneys' inadequate discovery during the dissolution proceeding.

 During the ensuing trial, Flynn was granted judgment on the pleadings based on the bar of the statute of limitations.1  The jury returned a special verdict finding Batchelor's negligence was the proximate cause of damage to Jean in the amount of $165,000.   Batchelor's motions for new trial and for judgment notwithstanding the verdict were denied.

II

Batchelor first argues both the factual and legal issues underlying the community versus separate property characterizations should have been decided by the court;  then the court should have instructed the jury how these characterizations would have been made had the original action been tried.   It points out litigants have no right to a jury in dissolution actions;  had the original matter been tried instead of settled, a court would have acted as the finder of fact.   Although this question has been discussed in other jurisdictions, it appears to be one of first impression in California.

To recover in a legal malpractice action, a plaintiff must prove not only that the attorney was negligent, but also that the negligence was a proximate cause of damage to the client.   To accomplish this, it is often necessary to litigate the underlying action to prove what should have happened in the absence of negligence.

Because a dissolution proceeding is an action in equity, questions of both fact and law are decided by the court.  (Porter v. Superior Court (1977) 73 Cal.App.3d 793, 141 Cal.Rptr. 59.)   Batchelor points out these questions are frequently complex and intertwined and argues it is inappropriate for a jury to attempt to understand and interpret the subtleties of California community property law.   His viewpoint is supported by Mallen and Levit in their treatise Legal Malpractice (2d ed. 1981) section 672, page 855:  “Often, the selection of the trier of fact [of the underlying action] is mandated by law or statute.   In such situations, a proceeding tried other than by a judge may mean that a jury may not be capable of replicating the result of the original arbiter unless guided by substantial expert evidence intended to duplicate both the experience and guidelines used by the trier of fact.   The complexity of the instructions necessary to guide a jury and the risk of the confusion by conflicting expert testimony militate against such proceedings being resolved by a jury of lay persons.”  (Ibid.)

The clear majority of cases dealing with this issue, however, have reached a contrary result.  (Compare Glamann v. St. Paul Fire and Marine Ins. Co. (1988) 144 Wis.2d 865, 424 N.W.2d 924.)   Rather than focusing on the type of fact finder required in the original action, courts have looked to whether the issues in the malpractice action are of law or fact.  Chocktoot v. Smith (1977) 280 Or. 567, 571 P.2d 1255 involved a malpractice action where defendants had unsuccessfully represented plaintiff in an heirship proceeding tried by a judge sitting in probate.   In the malpractice action, the plaintiff alleged defendants had negligently failed, inter alia, to discover and present material evidence.   The trial court ruled it had the responsibility to decide whether defendants' negligence would have changed the outcome of the heirship proceeding, because the required trier of fact had been a judge.   The Oregon Supreme Court reversed.  “We conclude, in short, that in determining the probable consequences of an attorney's earlier negligence in a later action for malpractice, the line dividing the responsibility of judge and jury runs between questions of law and questions of fact․  [T]he trial court ․ drew the line between those questions which would have been for a jury and those for the court in the original proceeding.   But that rule would withdraw from the jury in the malpractice trial the evaluation of the probable outcome of purely factual disputes in all nonjury cases, including all equity, probate, or administrative proceedings․  [T]here is no reason why the jury cannot replicate the judgment of another factfinding [sic] tribunal, whatever its composition.”  (Id., 571 P.2d at p. 1259.)

The Wisconsin Supreme Court followed Chocktoot in Helmbrecht v. St. Paul Ins. Co. (1985) 122 Wis.2d 94, 362 N.W.2d 118 which, like the case before us, was a malpractice action arising out of negligent representation during a divorce proceeding.   The plaintiff alleged her attorney, who negotiated a settlement on the eve of trial, failed to investigate and value the marital assets properly and to assert her right to a higher maintenance award.  “We recognize that the instant case differs slightly from Chocktoot because in Chocktoot the issue in the initial action was strictly one of fact, whereas in this case, the issues before [the trial judge] were mixed questions of law and fact.   In a divorce action, the trial judge will make conclusions of law based upon his findings of fact․  In determining what a reasonable judge would have awarded [plaintiff] in 1977, the jury is presented with the same questions of law and fact.   The court in Chocktoot suggests that when the initial action involves both legal and factual elements, the trial court in a malpractice action should separate these issues and instruct the jury on the legal aspects of the case.  [Citation.]”  (Id., 362 N.W.2d at p. 135.)

Reversing because the trial court failed to give the jury guidelines normally used by a divorce judge to make findings of fact, the court expressed its confidence in the jury system:  “If a jury would be properly instructed on the law in this matter, we are confident that it could reasonably apply the law to the particular facts involved and resolve the issue of what a reasonable judge would have awarded in the initial divorce action.   The question of what a reasonable judge would have awarded as property division and maintenance is no more complicated than other issues decided by juries every day all across this nation.”  (Id., 362 N.W.2d at pp. 136–137.)

Two other jurisdictions that have confronted this issue have come down squarely on the side of the jury's ability to perform its fact finding duties.   In Phillips v. Clancy (App.1986) 152 Ariz. 415, 733 P.2d 300 the alleged negligence occurred when the attorney failed to seek administrative review of a Social Security Administration examiner's ruling denying plaintiff disability benefits.   Holding the malpractice jury should make the factual findings that would have been made by the administrative law judge, the Arizona Court of Appeals stated, “[I]n the ‘case within the case,’ the jury should be instructed on the applicable Social Security law and regulations and be asked if, based on the facts presented, but for the alleged negligence, [plaintiff] would have been entitled to disability benefits.   In short, legal issues are to be decided by the judge;  factual issues are to be decided by the jury.   [Citation.]”  (Id., 733 P.2d at p. 307.)   And the Maryland Court of Appeals, when faced with facts virtually identical with those before us, rejected the malpractice defendant's argument that a jury was unable to duplicate the result of a court sitting in equity.  “It is hard to conceive of issues more complex than determining the damages resulting from infliction of emotional distress or sorting out multiparty, multicount contract suits, yet juries are constantly given those responsibilities.”  (Pickett v. Haislip (1987) 73 Md.App. 89, 533 A.2d 287, 298, fn. 13.)

We find the reasoning of these other jurisdictions persuasive.   While a litigant has no right to a jury in the trial of a dissolution action, he or she does have such a right in a malpractice action.   (Cal. Const., art. 1, § 16;  Smith v. Lewis (1975) 13 Cal.3d 349, 118 Cal.Rptr. 621, 530 P.2d 589.)   Consequently, we hold that in a jury trial of a malpractice action, where the underlying proceeding was a dissolution of marriage, the court must instruct the jury on the applicable legal aspects of the dissolution issues and allow the jury to apply that law to the facts as it finds them.   Here, the jury instructions are not challenged and we therefore must assume the jury was properly instructed on community property law.   We also assume it correctly applied that law after it heard expert testimony and resolved the conflicting versions of the parties' oral agreements and of their intent in executing documents of title, clearly questions of fact.

III

Batchelor complains it is impossible to tell how the jury arrived at the damage award of $165,000 without explanatory findings of fact in the verdict.   It argues the court committed reversible error by refusing to give the jury the special verdict form it requested, instead giving its own special verdict form.

Batchelor's proposed special verdict form asked the jury whether the attorneys' representation fell below the community standard of care, whether Jean would have achieved a more favorable result in the absence of the attorneys' negligence, and whether Jean received less than one-half the community assets or more than one-half the community liabilities as a result of that negligence.   On the issue of damages, the form asked, “What is the amount of damages suffered by Jean Bailey as a result of the malpractice of James K. Batchelor and/or Matthew J. Flynn?”   The court's special verdict form asked the jury whether the defendant was negligent, whether that negligence was a proximate cause of the plaintiff's damage, and, on the issue of damages, “what is the total amount of damages suffered by the plaintiff, a proximate cause of which was the incident in question.”

 We agree that the absence of the jury's findings of fact makes appellate review of this verdict difficult.   But the special verdict form supplied by Batchelor would not have solved the problem.   Neither Batchelor's form nor the court's required the jury to make specific findings of fact to support the assessment of damages.   The record does not reveal any objection or argument by Batchelor's counsel that the special verdict form should include such findings.   Accordingly, we are precluded from considering the issue on appeal.  (Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184, fn. 1, 151 Cal.Rptr. 837, 588 P.2d 1261;  9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 311, pp. 321–322.)

IV

Batchelor next urges that even if the factual questions were properly submitted to the jury, the damage award of $165,000 is not supported by the evidence.   To reach that figure, it claims, the jury must have found (1) the Elsinore condominium was Jean's separate property rather than community property;  (2) the funds invested with Nelson/Agajanian were misappropriated community funds and thus one-half belonged to Jean;  (3) a valuable community interest existed in Del's law practice, one-half of which belonged to Jean;  (4) Jean should have been protected by an indemnity agreement from Del for her half of the income tax liability.   Batchelor asserts none of these assumed findings is supported by substantial evidence.

We note at the outset our strict standard of review:  “In resolving the issue of the sufficiency of the evidence, we are bound by the established rules of appellate review that all factual matters will be viewed most favorably to the prevailing party [citations] and in support of the judgment [citation].   All issues of credibility are likewise within the province of the trier of fact.  [Citation.]  ‘In brief, the appellate court ordinarily looks only at the evidence supporting the successful party, and disregards the contrary showing.’  [Citation.]  All conflicts, therefore, must be resolved in favor of the respondent.  [Citation.]”  (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 925–926, 101 Cal.Rptr. 568, 496 P.2d 480.)

The Elsinore Condominium

 Batchelor argues and we agree, the Elsinore condominium was community property as a matter of law.   Jean executed a deed transferring it to herself and Del as joint tenants.   The form of title is presumed to be as stated on the deed unless this presumption is overcome by evidence of an agreement to the contrary.  (In re Marriage of Lucas (1980) 27 Cal.3d 808, 166 Cal.Rptr. 853, 614 P.2d 285.)  “The act of taking title in a joint and equal ownership form is inconsistent with an intention to preserve a separate property interest.   Accordingly, the expectations of parties who take title jointly are best protected by presuming that the specified ownership interest is intended in the absence of an agreement or understanding to the contrary.”   (Id., at p. 815, 166 Cal.Rptr. 853, 614 P.2d 285.)2

Jean fails to cite to any evidence that she and Del agreed the property would remain hers.   She relies on evidence which would be sufficient to support an inference of an agreement 3 but this is not enough.   In order to rebut the Lucas presumption there must be evidence of the agreement itself.   The record reflects only that Jean and Del agreed to pool their assets.   The jury, as a matter of law, should have been instructed the Elsinore property was community property.

Agajanian/Nelson Funds

Batchelor contends the $194,500 Del lost when he invested with Agajanian/Nelson should not be brought back into the community for two reasons:  First, it claims the invested funds were Del's separate property;  Second, even if they were community property, they were invested in good faith and lost rather than misappropriated.

Batchelor attempts to support the first proposition by tracing the source of $100,000 of the collateral for the Nelson/Agajanian funds from the $20,000 loan against the Marina Pacifica condominium to the Katella Commercial Complex investment to the $100,000 certificate of deposit purchased with the profits.   It argues that because the Marina Pacifica condominium was Del's separate property when the loan was made, so was the $100,000 certificate of deposit.   (See v. See (1966) 64 Cal.2d 778, 51 Cal.Rptr. 888, 415 P.2d 776;  In re Marriage of Mix (1975) 14 Cal.3d 604, 122 Cal.Rptr. 79, 536 P.2d 479;  In re Marriage of Aufmuth (1979) 89 Cal.App.3d 446, 152 Cal.Rptr. 668.)   Batchelor then elaborately details other sources of the remaining $94,500 in collateral which it claims were either monies belonging to clients or Del's separate property.

 Such detail is unnecessary.   Substantial evidence supports the conclusion the monies invested were either from loans collateralized with community property or from community accounts.   In Del's financial statement and loan application for Lloyd's Bank, he represented all his and Jean's community property was being utilized.   This is sufficient to permit the loan proceeds to be characterized as community funds.  (In re Marriage of Stephenson (1984) 162 Cal.App.3d 1057, 1084–1085, 209 Cal.Rptr. 383.)

 There is also evidence from which the jury could have concluded the funds were deliberately misappropriated so as to entitle Jean to reimbursement of her one-half.   The community was damaged because the loans were paid off through the sale of community properties.   The jury was instructed on the provisions of Civil Code section 4800, subdivision (b)(2) as follows:  “As an additional award or offset against existing property, the court may award, from a party's share, any sum it determines to have been deliberately misappropriated by such party to the exclusion of the community property ․ interest of the other party.”  “The term ‘deliberate misappropriation’ has reference to calculated thievery by a spouse, not the mishandling of assets.”   (In re Marriage of Schultz (1980) 105 Cal.App.3d 846, 855, 164 Cal.Rptr. 653.)

The evidence here suggests more than mere mishandling of assets.   The parties were already separated and Jean was not informed or consulted about the series of investments or the loan at Lloyd's Bank.   Without Jean's knowledge, Del pledged all their community assets as collateral, but requested the loan be denoted a “separate credit accommodation.”   This is more than sufficient evidence to support the jury's apparent conclusion Del intended to reap the benefit of the investment to the exclusion of Jean and therefore deliberately misappropriated the funds.  “Even if in theory both spouses have an equal right to management and control, if one spouse acts in his or her self-interest to the detriment of the community interest, the community should be entitled to restitution.”  (In re Marriage of Frick (1986) 181 Cal.App.3d 997, 1020, 226 Cal.Rptr. 766.)4

Del's Law Practice

Batchelor argues insufficient evidence supports the finding of a valuable community interest in Del's law practice, asserting Jean's expert testimony did not follow the mandated guidelines for valuing a law practice.  (See In re Marriage of Lopez (1974) 38 Cal.App.3d 93, 113 Cal.Rptr. 58.)

Jean's expert, Rodney Clarida, testified that during the marriage the law practice had increased in value by $42,064.   His opinion was based on an IRS audit statement of Del's gross receipts from his practice for 1977 and 1978, the parties' personal tax returns for 1979, and a cash receipts and disbursement journal showing the cash received in both the law practice and the real estate business for 1980 and 1981.   Clarida explained he used the “gross receipts method”;  he did not have information about net profits, goodwill or hard assets.   He testified he considered the Lopez case in formulating his opinion.

Lopez involved the dissolution of a 15–year marriage.   Husband was an attorney who had practiced law for over four years before the marriage.   His practice grew and prospered up to the time of trial.   Apparently based on husband's testimony that he withdrew “every penny of [his] income from the practice and used it for the benefit of the community,” the trial court found the law practice was the husband's separate property.   The appellate court reversed, stating, “ ‘[T]he value of the practice at the time of dissolution of the community is community property.’ ”  (Id., 38 Cal.App.3d at p. 105, 113 Cal.Rptr. 58, quoting from Todd v. Todd (1969) 272 Cal.App.2d 786, 791, 78 Cal.Rptr. 131.)   This value, the court went on, should be determined by examining the “existence and value of the following:  (a) fixed assets, which we deem to include cash, furniture, equipment, supplies and law library;  (b) other assets, including properly aged accounts receivable, costs advanced with due regard for their collectability;  work in progress partially completed but not billed as a receivable, and work completed but not billed;  (c) goodwill of the practitioner in his law business as a going concern;  and (d) liabilities of the practitioner related to his business.”  (Id., 38 Cal.App.3d at p. 110, 113 Cal.Rptr. 58.)

In In re Marriage of Garrity and Bishton (1986) 181 Cal.App.3d 675, 226 Cal.Rptr. 485, the court, following Lopez, reversed the trial court's finding that wife's law practice had no value when using the excess earnings method.  “We fail to see how a proper determination of the practice's value can be established without a [sic] assessment of [the Lopez] factors.”  (Id., at p. 689, 226 Cal.Rptr. 485.)

In both Lopez and Garrity and Bishton, however, the enumerated factors were used to avoid a finding of zero value to the community.   They are not the exclusive method of professional practice valuation.   In In re Marriage of Barnert (1978) 85 Cal.App.3d 413, 149 Cal.Rptr. 616, for example, the court upheld expert testimony valuing the husband's medical practice at $23,000 using a formula based on gross billings, while the Lopez method resulted in a value of $12,000.

 Here, Batchelor's cross-examination of Clarida attempted to establish weaknesses in his method of valuation and in his background and experience.   The jury was free to make a credibility determination and give as much weight to Clarida's testimony as it saw fit.   In any event, his testimony constitutes substantial evidence to support a finding that the practice was worth $42,064 to the community.

Tax Liability

 When the parties' federal tax returns for 1977, 1978, 1979 and 1980 were audited, the IRS initially claimed a deficiency in excess of $400,000.   Substantial evidence supports a finding that Batchelor was negligent in dealing with Jean's portion of this potential liability.   She testified she told both Flynn and Batchelor about the problem and neither of them addressed it.   The record, however, does not show Jean suffered any damage from Batchelor's negligence;  thus, the jury's damage award cannot include any amount for the breach.

Russell Briesacker, a tax attorney who originally represented both parties in the IRS audit, testified their joint liability was settled for $31,518.   This amount reflects an adjustment for the premarital portion of 1977;  it also reflects a factual determination that Jean was an “innocent spouse” as to certain income, which resulted in a proportional reduction in the joint liability.

The “innocent spouse” rule (§§ 6013(e), 6653(b) of the Int.Rev.Code) relieves a spouse from tax liability if “there is a substantial understatement of tax attributable to grossly erroneous items” of the other spouse;  the innocent spouse establishes “he or she did not know and had no reason to know” of the substantial understatement;  and the facts and circumstances indicate it would be unfair to hold the innocent spouse liable.   Under this rule, Jean has already received protection against any unfair allocation of tax liability.   She introduced no evidence at trial to require her liability be further reduced.   Since the only tax liability she is left with is one-half of a legitimate joint obligation, she cannot now argue Batchelor should have achieved a better result.

V

 Thus far, the damage award is supported in the amount of $118,282:  $21,032 for one-half the community interest in Del's law practice and $97,250 for reimbursement for one-half the misappropriated funds.   Under well established appellate procedure, we are required to uphold a general finding by a jury if it can be supported by substantial evidence on any theory.   (Nestle v. City of Santa Monica, supra, 6 Cal.3d 920, 101 Cal.Rptr. 568, 496 P.2d 480.)   But Jean points us to no other substantial evidence on which the jury could have based its award.

While admitting no one knows how the jury reached the total figure of $165,000, Jean speculates several ways it could have been calculated.   The only possibility which merits discussion is her theory the jury may have awarded some amount based on a loan credit report.

 Jean introduced into evidence a Branch Loan Credit Report apparently prepared by Lloyd's Bank in connection with Del's loan application in February 1981.   The report covered Del's business account history with the bank and showed average savings balances for the preceding six months as “C.D. $150,000” and “SAV. $1,100.”   Jean claims the jury could have found these figures represented hidden community assets that should have been investigated by Batchelor.

There was no evidence, however, that this money was unaccounted for in the property division worked out by Batchelor;  neither was there any explanation of the source of the funds or how much was present on the date of separation.   To establish an item of damage, Jean had to show that absent Batchelor's negligent failure to investigate the community assets, she would have received a higher amount.   The evidence proffered here is not substantial enough to support awarding her additional monies.

The judgment is modified from $165,000 to $118,282 and, as modified, is affirmed.   Respondent is entitled to costs on appeal.

I concur in all parts of the majority opinion but write separately regarding the Agajanian/Nelson funds.

I agree there is sufficient evidence to permit the funds invested to be characterized as community property.1  And I join with the majority in concluding Del could have been charged with those funds.   However, I cannot, as a matter of law, agree Del deliberately misappropriated those funds.   (Civ.Code, § 4800, subd. (b)(2).) 2

As the majority observes, “The term ‘deliberate misappropriation’ has reference to calculated thievery by a spouse, not the mishandling of assets.”   (In re Marriage of Schultz, supra, 105 Cal.App.3d 846, 855, 164 Cal.Rptr. 653.)   Here, Del made a bad investment, but Jean “has failed to prove that [Del] made a gift of the [funds] or disposed of them without valuable consideration.”  (In re Marriage of Moore (1980) 28 Cal.3d 366, 375, 168 Cal.Rptr. 662, 618 P.2d 208.)

Nevertheless, “[Del] should have been required to account to the community for this sum․”  (In re Marriage of Cohen (1980) 105 Cal.App.3d 836, 844, 164 Cal.Rptr. 672.)   A “spouse may [not] unilaterally expend community funds, after separation, upon other than the necessities of life without being accountable to the other spouse.”  (Id., at p. 845, 164 Cal.Rptr. 672.)

FOOTNOTES

1.   Batchelor contends it cannot be held liable for Flynn's negligence because Flynn was “removed from this action.”   Citing Bradley v. Rosenthal (1908) 154 Cal. 420, 97 P. 875, Batchelor asserts, “[A] judgment exonerating the agent necessarily exonerates the principal, since the principal's responsibility flows through the agent's wrongs.”   While this is a correct statement of the law, it does not apply here.   Flynn's ability to assert the statute of limitations successfully was personal to him.  (3 Witkin, Cal.Procedure (3d ed., 1985) Actions, § 314, p. 345.)   It did not automatically render the claim against Batchelor time-barred nor did it operate as an adjudication on the merits of Flynn's negligence.

2.   The jury was instructed that property held jointly between spouses is presumed to be community property unless there is evidence of an oral agreement to the contrary.

3.   Both Jean and Del testified they agreed to use her condo as collateral to obtain funds to make community property investments.   And Del testified his veteran status was necessary to obtain the favorable Cal Vet loan.   Thus one could infer the property was transferred to joint tenancy solely to create eligibility for that loan.   However, as discussed above, without evidence of an agreement, the inference is meaningless.

4.   The situation here is to be distinguished from that where a spouse unilaterally transfers community property without valuable consideration, thus entitling the other spouse to reimbursement under Civil Code section 5125, subdivision (b).  (See, e.g., In re Marriage of Moore (1980) 28 Cal.3d 366, 374–375, 168 Cal.Rptr. 662, 618 P.2d 208.)   The case before us is more akin to those where a spouse has been ordered to reimburse the community for the use of community property to discharge a separate property obligation or to defray a separate property loss.  (See, e.g., In re Marriage of Lister (1984) 152 Cal.App.3d 411, 418–419, 199 Cal.Rptr. 321;  In re Marriage of Cohen (1980) 105 Cal.App.3d 836, 844–845, 164 Cal.Rptr. 672;  In re Marriage of Walter (1976) 57 Cal.App.3d 802, 806–807, 129 Cal.Rptr. 351.The misappropriation cases defy rigid analysis or classification, as the determination in each is “made on a case-by-case basis․”  (Cal. Practice Guide:  Family Law (TRG 1988) § 8:220, p. 8–177.)   Our holding here is only that the jury's finding of misappropriation is supported by substantial evidence;  put another way, we cannot say, as a matter of law, that the jury could not have found misappropriation based on these facts.

1.   The funds invested and lost included:$100,000—Certificate of Deposit$ 27,500—Cash Del claimed actually belonged to a friend$ 27,500—Cash from Del's law practice$ 40,000—Del concedes was community property

2.   I realize this is an unimportant distinction without a difference.

WALLIN, Associate Justice.

SONENSHINE, Acting P.J., and CROSBY, J., concur.

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