In re Marriage of Kamgar ( 2017 )

Filed 11/17/17; pub. order 12/8/17 (see end of opn.)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
In re Marriage of FRED and MOIRA
KAMGAR. G052024
___________________________________
(Super. Ct. No. 13D001145)
FRED KAMGAR,
Appellant, OPINION
v.
MOIRA KAMGAR
Appellant
Appeal from a judgment of the Superior Court of Orange County, Thomas
R. Murphy, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.
Law Offices of Marjorie G. Fuller and Marjorie G. Fuller for Appellant
Fred Kamgar.
Minyard Morris, Lonnie K. Seide, Fabio F. Foti; Snell & Wilmer, Richard
A. Derevan, Todd E. Lundell; and Garrett C. Dailey for Appellant Moira Kamgar.
* * *
Fred Kamgar appeals from a judgment ordering him to pay Moira Kamgar
$1,952,056.50 for breach of his spousal fiduciary duties in failing to disclose to her that
he risked in options trading an additional $8 million more than the $2.5 million in
community assets she agreed he could trade in their investment account. The trial court
determined Fred’s undisclosed and reckless trading resulted in a loss of almost
$4 million, in addition to losing the initial $2.5 million.1 Fred contends the evidence does
not support the conclusion he violated his fiduciary duties. Moira in her appeal contends
she was entitled to more than the $1.9 million award she received as her community
interest in the $4 million loss. But as we explain, the law and the evidence amply support
the court’s award, and we therefore affirm the judgment.
I
FACTS AND PROCEDURAL HISTORY
Fred and Moira were married in May 1990 and had four children together
before they separated in late January 2013. Highly educated, Moira began her studies at
Harvard University at 16, then transferred to Sarah Lawrence College, where she
received a bachelor’s degree in international relations and Russian language studies. She
also earned a joint juris doctorate and master’s degree in taxation. Moira had not worked
outside the home for over 20 years by the date of the couple’s separation, but previously
held positions at the Depository Trust Company and the law firm of Best, Best and
Krieger. Fred earned a bachelor’s degree from USC in Electrical Engineering and
Computer Science, as well as an MBA from UCLA. During their marriage he ran several
businesses, the sale of which enabled him to stop working over the last ten years of the
marriage.
1 We use the parties’ first names for clarity and ease of reference, and intend
no disrespect. (In re Marriage of Olsen (1994) 24 Cal. App. 4th 1702, 1704, fn. 1.)
2
Beginning in 1999, the parties had their liquid assets professionally
managed successively by JP Morgan, Merrill Lynch, and then Bessemer Trust. Tiffany
Barbara, who managed the Kamgars’ funds at JP Morgan and Bessemer Trust, explained
the Kamgars charged her to preserve their wealth, which aligned with the conservative
financial strategies she pursued on their behalf at JP Morgan and Bessemer Trust.
Moira did not have much to do with the couple’s finances from this point
on, and left Fred with the basic management and control of the finances. Moira had not
seen bank statements or financial documents since 2003, when Fred rented an office
away from home and she did not have time to review the parties’ tax returns each year.
Fred made the investment decisions for the family during the last five years of their
marriage, some of which were discussed with Moira. He occasionally would sign
Moira’s name to financial documents. Fred stated that he did not involve Moira with the
family’s finances because she was not interested.
In 2010, Fred began to research options trading, educating himself about
the topic by taking investment classes, reading publications, and meeting with other
investors. Fred had been investing community funds in Apple, Inc. stocks since 2002 or
2003, in part because he believed the company and its stock performance were
predictable. With Moira’s consent, Fred opened a self-directed trading account at
TD Ameritrade (Ameritrade) and did some practice trades during the last half of 2011.
Both Fred and Moira signed the Ameritrade account application and opened the account
in the name of Kamgar Trust. Both Fred and Moira’s consent was required for any
transfer or withdrawal requests.
Fred explained his reasons for using Ameritrade to Moira, which included
research showing it was the best platform for trading options and it charged a lower fee
for trades; Moira did not object to his proposal. She agreed he could deposit $2.5 million
in Apple stock into the account, which she believed represented a “sliver” of their net
3
worth. As Moira later explained in her deposition testimony, Fred was free to use the
$2.5 million to “try his hand at doing something that he would find interesting or
amusing.” red chose this amount, which represented 24 percent of the parties’ net worth,
because it would create a dramatic profit if it “worked out,” but losing the sum would not
affect their lifestyle.
Fred’s goal was to maximize the return on his trades. He wanted to make
enough money so the parties could live for the rest of their lives without needing to work.
Fred transferred 6,000 shares of Apple stock, which was worth about $2.43 million, into
the Ameritrade account in December 2011. Fred then applied to Ameritrade for a
“Portfolio Margin Upgrade Request” to allow enhanced margin trading, which
dramatically increased the potential return — and risk of loss — in his option trading by
using funds borrowed through the investment account to increase the value of the trades.
As a prerequisite for the upgrade, Ameritrade required Fred and Moira to
pass a test demonstrating their financial knowledge and awareness of trading risks. Fred
testified that because Moira was not interested, he took the test for her and signed her
name to the upgrade application. Moira claimed she never authorized Fred to sign her
name to the application. Fred falsely represented on the application that he and Moira
both had extensive options trading experience. Fred also stated the couple’s financial
goals were growth, income, and conservation of capital, but not speculation. In
February 2012, Fred changed the Ameritrade account so he no longer would need
Moira’s signature to make withdrawals or transfers to the account.
Over the next 13 months, Fred converted the Apple securities in the
account to cash and then, without telling Moira, deposited another $8,188,605 in
community funds into the account, for a total community investment of $10,618,605.
Moira did not know until just before their separation in January 2013 that Fred had
replaced their professional financial managers, moving virtually all of the community’s
4
liquid assets into the Ameritrade account. The trial court found Moira only authorized
Fred to invest up to $2.5 million in the Ameritrade account.
Between the additional deposits and increases in value through options
trades, often on margin, the Ameritrade account increased in value from the original
$2.43 million in converted Apple stock to $2,691,000 in December 2011, then to almost
$13 million at the end of February 2012. The account value declined in March and each
of the next four months to an initial low of $10,046,000 in June 2012. Then it jumped
slightly in value in July 2012, growing to about $10.5 million. The account value
exploded in August 2012, reaching a peak end-of-the month balance of $16,322,000. As
the court observed, Fred earlier withdrew more than $3 million, so the total account value
likely crested above $19 million. Factoring in the withdrawal and trading losses, the next
month saw the account balance decrease to $14,163,000 in September 2012. October
was catastrophic, with a $10 million loss dropping the account value to $4,144,000. In
November and December it dropped further, to $1,950,000 and $998,000, respectively,
before Fred ceased trading in January 2013, with $409,000 left in the account.
Fred had continued investing in Apple options after the August peak
because he believed the market would respond favorably to the pending release of new
Apple products in the fourth quarter of 2012. The trial court found that, “[b]y August 31,
2012, all of the investments held in the brokerage account . . . were entirely concentrated
in various call and put option positions held entirely in Apple stock (with about $502,000
of cash held).” Betting Apple stock would increase in value, Fred tilted his call option
position to almost $10 million more than his put options, while also shorting put options.
“But,” as the trial court described it, “between September 1, 2012 and
January 31, 2013, the price of Apple shares dropped from about $642.14 to $441.68, a
loss of 31.22%. [¶] By September 30, 2012, the account had borrowed $4.2 million of
cash margin. In the month of October 2012, when Apple’s stock price dropped from
5
about $630 per share to $557 per share, the TD Ameritrade account lost $9,718,900. For
the remainder of the periods, virtually all of the positions [Fred] held in the account
remained various and sundry Apple option positions. Between September 1, 2012
through January 31, 2013, another $780,000 of cash was also withdrawn from the
account.” Based on the initial deposit of almost $2.5 million in Apple stock, plus Fred’s
additional deposit of more than $8 million, the trial court observed that, “[i]n short,
$10,618,605 of community funds are at issue, of which $3,805,000 was withdrawn and
$6,404,113 was lost in trading activities.”
At trial, Moira’s financial expert testified that Fred’s option trading was so
highly speculative, particularly for lack of diversification, that it amounted to gambling.
He explained that trading can still be negligent despite “exhaustive” research, but
acknowledged there was no standard or definition in the financial industry for when ill-
conceived trading amounted to gambling. Fred’s financial expert observed that Fred’s
investment strategy had worked well in the first three quarters of 2012. He believed Fred
had carefully managed the account and explained that there is a direct correlation
between risk and making “serious money.” The expert concluded Fred had not been
negligent or grossly negligent in his investment strategy, noting that Fred had relied on
other analysts who predicted a fourth quarter rise in Apple’s stock value.
Moira testified Fred told her the account was performing “fine.”
Ameritrade sent the account statements to Fred’s office in Corona Del Mar. Fred
testified that by the time he received the statements in the mail they were outdated
because he had online access to information. He acknowledged the couple’s
communication channels were “not that great.”
The couple had been in marriage counseling from May 31, 2012, through
early January 2013. The therapist noted that Moira had stated more than once during the
sessions that “[s]he had no idea re[garding] the parties’ finances.” The therapist advised
6
them it was important to exchange information. The therapist did not recall whether she
had urged the exchange “as early as summer 2012” or later, “on November 6, 2012,” but
was sure “only that both were advised re[garding] the importance of sharing financial
information.”
Fred never told Moira of any of the 2012 increases or decreases in the
account value. In mid-January 2013, after the couple had been living in separate
residences since October 2012, he texted Moira that there were financial “challenges” he
needed to discuss with her. He wanted to meet in person, but she did not feel it would be
“productive yet” for them to do so, requesting instead, “Just explain simply and
generally.” Fred declined, instead pressing in text exchanges over the next 10 days for an
in-person meeting, while also urging Moira to sign the necessary paperwork to sell their
Emerald Bay property. When Fred offered no explanation, Moira asked him who their
current financial advisor was so she could get the information that way, but Fred
eventually disclosed that he exclusively made the family’s investment decisions.
After fruitless text exchanges in the ensuing days, Fred wrote: “Moira, I’ve
been trying to talk to you for quite a while but you refuse. So here’s the gist of our
financial issues via t[e]xt. Unfortunately we are running out of money and really need to
close the [Emerald Bay] sale. Between large investment losses, very high expenses, [a]
Viva Terra [investment], construction, your 2nd house, carrying costs for 3 properties,
. . . we will run out of cash in the next 2 mo[nths] which will create a financial disaster[.]
So please sign the doc and let the sale close asap. We have major changes we need to
make here soon for all our futures[’] sake so please also start talking to me so we can
work on them together[.]” Moira responded: “This is not a financial challenge,” but
rather a “disaster,” remarking, “You have given no indication of this at all, either in your
communication nor in your behavior.” She also noted, “As for your options trading, you
told me you were being prudent.”
7
After trial, the court in a detailed statement of decision determined that Fred
had breached his fiduciary duty to Moira by failing to disclose the “series of investment
transactions made by him within the Ameritrade account between December 2011 and
January 2013.” Alternately, the court also ruled that Fred breached his fiduciary duty to
Moira by grossly negligent mismanagement of the parties’ assets in the trading account,
and awarded Moira $1,952,056.50 as her share of community funds lost in Fred’s
undisclosed and reckless trading.
II
DISCUSSION
A. The Trial Court Did Not Err in Finding Fred Breached His Fiduciary Duty to Moira
Fred contends the trial court erred in concluding he owed Moira a fiduciary
duty of disclosure though the parties agreed he would manage and control their
Ameritrade account. He characterizes the court’s finding he breached his duty of
disclosure as tantamount to holding he was required to continuously update Moira on the
daily performance of their investments and on each transaction in their investment
account, at or near the time it occurred. He argues the purported duty of continuously
updating a spouse on changes in investment values, or requiring his or her express
permission for each and every transaction, is (1) impractical in today’s fast-moving
electronic market, (2) contrary to statutory provisions allowing each spouse to manage
community assets, and (3) contrary to the everyday reality of marriage, which includes
“an ongoing conglomeration of hundreds, if not thousands of overlapping financial
decisions made by one or the other of the spouses.”
Fred also challenges the alternative basis on which the trial court concluded
he breached his fiduciary duty to Moira, namely, that Fred’s “management of the parties’
investment portfolio was reckless and grossly negligent.”
8
The existence and scope of a fiduciary duty is a question of law that we
review de novo. (Castaneda v. Olsher (2007) 41 Cal. 4th 1205, 1213.) However, “the
factual background against which we [answer that question] is a function of a particular
case’s procedural posture.” (Id. at p. 1214.) Thus, to the extent the court’s decision
below “turned on the resolution of conflicts in the evidence or on factual inferences to be
drawn from the evidence, we consider the evidence in the light most favorable to the trial
court’s ruling and review the trial court’s factual determinations under the substantial
evidence standard. [Citation.]” (Baker v. Osborne Development Corp. (2008)
159 Cal. App. 4th 884, 892 (Baker).) Where there is a fiduciary duty, breach of the duty is
a question of fact. (In re Marriage of Duffy (2001) 91 Cal. App. 4th 923, 929-930.) We
review the trier of fact’s finding a breach occurred for substantial evidence, resolving all
conflicts and drawing all reasonable inferences in favor of the decision. (Ibid.)
We first address Fred’s claim the trial court erred by adopting an overly
rigorous duty of disclosure, which led the court to erroneously conclude Fred breached
this duty.
Family Code section 1100 specifies that each spouse is mutually entrusted
with full individual authority to manage and control community property, including
disposing of or otherwise alienating it (id., subd. (a)), but each spouse also mutually owes
the other a fiduciary duty with respect to the property (id., subd. (e)).2 Specifically,
subdivision (a), provides in pertinent part that “either spouse has the management and
control of the community personal property, whether acquired prior to or on or after
January 1, 1975, with like absolute power of disposition, other than testamentary, as the
spouse has of the separate estate of the spouse.” (§ 1100, subd. (a).)
In turn, section 1100, subdivision (e), sets out in general terms that spouses
owe each other a fiduciary duty in the management and control of their assets. That
2 All further statutory references are to the Family Code, unless noted.
9
subdivision provides: “Each spouse shall act with respect to the other spouse in the
management and control of the community assets and liabilities in accordance with the
general rules governing fiduciary relationships which control the actions of persons
having relationships of personal confidence as specified in Section 721, until such time as
the assets and liabilities have been divided by the parties or by a court. This duty
includes the obligation to make full disclosure to the other spouse of all material facts
and information regarding the existence, characterization, and valuation of all assets in
which the community has or may have an interest and debts for which the community is
or may be liable, and to provide equal access to all information, records, and books that
pertain to the value and character of those assets and debts, upon request.” (Italics
added.)
With exceptions not pertinent here, section 721 states that “in transactions
between themselves, spouses are subject to the general rules governing fiduciary
relationships that control the actions of persons occupying confidential relations with
each other. This confidential relationship imposes a duty of the highest good faith and
fair dealing on each spouse, and neither shall take any unfair advantage of the other. This
confidential relationship is a fiduciary relationship subject to the same rights and duties
of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the
Corporations Code, including, but not limited to, the following . . . .”
Section 721 then specifies certain enumerated but nonexclusive fiduciary
duties, including: “(1) Providing each spouse access at all times to any books kept
regarding a transaction for the purposes of inspection and copying. [¶] (2) Rendering
upon request, true and full information of all things affecting any transaction that
concerns the community property. Nothing in this section is intended to impose a duty
for either spouse to keep detailed books and records of community property transactions.
[¶] (3) Accounting to the spouse, and holding as a trustee, any benefit or profit derived
10
from any transaction by one spouse without the consent of the other spouse that concerns
the community property.” (§ 721.)
Of the Corporations Code sections referenced in section 721, section 16403
sets out the disclosures required between partners. As pertinent here, it establishes in
subdivision (c) the following rule: “Each partner . . . shall furnish to a partner, and to the
legal representative of a deceased partner or partner under legal disability, . . . the
following . . . : [¶] (1) Without demand, any information concerning the partnership’s
business and affairs reasonably required for the proper exercise of the partners’ rights and
duties under the partnership agreement or this chapter . . . .”3 (Corp. Code, § 16403,
subd. (c)(1), italics added [hereafter, section 16403(c)(1)].)
Quoting a respected practice guide, the trial court observed: “‘The
phrase in Corporations Code § 16403(c)(1) “reasonably required for the proper exercise
of the partners’ rights and duties” probably means, in the family law context, “reasonably
required for the proper exercise [of the spouse’s rights and duties in the management and
control of community property].” Since each spouse has equal management and control
rights, it appears they must provide the other ‘without demand, any information
concerning’ the management and control of the community property. The failure to do so
would be a breach of his or her fiduciary duty.’” (Citing California Family Law Prac. &
Proc. (Matthew Bender & Co., 2d. ed. 2014) § 24.11, original brackets.)
Similarly, another treatise restates the statutory duty as follows: “Duty
despite no request: Fam. C. § 1100(e) specifically adopts the scope of spousal fiduciary
duties set forth in Fam. C. § 721(b) . . . . As amended effective 1/1/03, § 721(b)
incorporates provisions of the Corporations Code . . . that impose fiduciary duties of
3 The partners also must disclose to each other: “On demand, any other
information concerning the partnership’s business and affairs, except to the extent the
demand or the information demanded is unreasonable or otherwise improper under the
circumstances.” (Corp. Code, § 16403, subd. (c)(2), italics added.)
11
disclosure even if there is no demand therefor.” (Hogoboom & King, Cal. Practice
Guide: Family Law (The Rutter Group 2014) ¶ 8.605.1, pp. 8-220 to 8-221, original bold
and italics).
Fred repeatedly argues throughout his brief that the trial court’s judgment
amounts to imposing an unwarranted, expanded disclosure duty on the spouse managing
a couple’s financial affairs to “continuously update the other spouse as to changes in
value of all assets under management.” Phrased differently, he suggests the court’s
ruling requires “continuous updating of value during marriage on pain of sanction,”
makes a managing spouse who fails to provide continuous updates a “guarantor” of
community assets invested in the stock market, and effectively held him “liable for
failing to continuously disclose Apple’s changing value to Moira,” though the nature of
contemporary investments is that their value changes “second by second in today’s
electronic market.”
Fred emphasizes the utility and efficiency in having one spouse manage
certain financial decisions and notes section 1100, subdivision (a), confers on the
investing spouse “equal management and control of the community property, subject to
certain restrictions.” Indeed, that section grants the managing spouse authority to dispose
of community assets. (Ibid.) Fred acknowledges as an overriding restriction the married
couple’s “governing fiduciary relationship[],” but contends, “Surely the appropriate
interpretation is not that if the spouse who contemplates making a financial investment
fails to have it continuously approved by the other spouse, he or she is guilty of a breach
of fiduciary duty, subject to sanction if the investment loses money. If this were the case,
no spouse would take on management of any asset of the community.”
Fred creates a straw man by his repeated references to an asserted duty of
continuous updating. The trial court in its detailed statement of decision never mentioned
or imposed any such duty. Fred infers the court found a duty of continuous updating
12
because the court “did not identify at what point this breach of fiduciary duty occurred.”
Absent a specified date or dates on which the breach occurred, Fred apparently supposes
the trial court believed the breach occurred every day — indeed every moment — he did
not affirmatively disclose to Moira the Ameritrade account’s performance in 2012.
But the trial court found Fred beached his fiduciary duty of disclosure when
he unilaterally decided to put at risk and lose in options trading a sum beyond the amount
Moira agreed to risk. The evidence at trial showed Moira knew and agreed to depositing
up to $2.5 million in the Ameritrade account and that Fred was free to, in her words, “try
his hand at doing something that he would find interesting or amusing.” That expressly
included options trading, as reflected in a later text message with Fred in which she
referred to “your options trading.” Accordingly, the trial court did not hold Fred liable
for the eventual loss of the initial $2.5 million the couple mutually agreed to put into the
account because she agreed to risk that amount.
But unbeknownst to Moira, in addition to the nearly $2.5 million initial
sum, Fred unilaterally deposited an additional $8,188,605 of community funds into the
investment account, and then saw those twin deposits (the initial $2.5 million and
additional $8 million) both skyrocket and fall in recurring periods of gains and losses in
options trading. Over the course of these fluctuations, Fred withdrew $3,805,000 of the
$8 million amount, and then eventually lost all but $409,492 of the total community
funds deposited in the account. The net result was that of the additional, undisclosed
$8,188,605 Fred risked in options trading, he lost more than half, for a net loss to the
community of $3,904,113. That loss did not include the loss of the initial $2.5 million
because as the trial court specified in its calculation of damages, that $2.5 figure was the
“Amt/invstmts agreed [to] by Moira.”
The law and the evidence amply support the trial court’s $1,952,056.50
award in Moira’s favor against Fred for breach of his fiduciary duty of disclosure, as half
13
of the $3,904,113 loss incurred following his undisclosed decision to risk an additional
$8,188,605 in community funds. Both parties overlook a key provision in the governing
disclosure rules. Simply and quite obviously, the parties’ disclosure obligations in a
partnership, and in a marriage partnership under the Family Code’s incorporation of
Corporations Code section 16403, depends on their partnership agreement.
Section 16403(c)(1) states this principle expressly by limiting a partner’s
sua sponte duty of disclosure to “any information concerning the partnership’s business
and affairs reasonably required for the proper exercise of the partners’ rights and duties
under the partnership agreement . . . .” (Italics added.) The trial court reasonably could
conclude Moira and Fred’s agreement concerning options trading was limited to
investing $2.5 million in community funds. We must view the evidence in the light most
favorable to the court’s judgment. (Baker, supra, 159 Cal.App.4th at p. 892.) Indeed,
the evidence plainly showed the couple had discussed the trading account and Moira only
agreed to that amount for Fred to “try his hand” at trading, including options trading, but
no more.
Consequently, the court also reasonably could conclude that in unilaterally
deciding to risk the additional $8,188,605 in community funds, which was virtually all of
the couple’s liquid net worth, Fred interfered with Moira’s equal right of management
and control over those funds (§ 1100, subd. (a)). In other words, having secured Moira’s
agreement to risk $2.5 million in options trading, Fred breached his fiduciary duty of
disclosure to his spouse by failing to disclose his intention to put another $8 million into
such trades. Absent disclosure, he thwarted Moira’s “proper exercise of [her] rights and
duties” as a partner concerning those assets (§ 16403(c)(1)).
Because the trial court properly found Fred breached his fiduciary duty of
disclosure, we need not consider his challenge to the sufficiency of the evidence to
14
support the court’s conclusion he also breached his fiduciary duty in managing
community assets by engaging in grossly negligent and reckless behavior.
B. Moira’s Appeal
In her appeal, Moira argues the trial court erred in failing to credit her in the
couple’s property distribution a one-half share of the initial $2.5 million Fred deposited in
the Ameritrade account and one-half of the $16 million figure the account grew to in
August 2012. As we explain, the evidence supports the court’s damage award.
Moira argues that while she knew of the $2.5 million transfer to the
Ameritrade account and that Fred would engage in options trading in the account, she
“had no idea of the volume of trades and risk Fred would undertake.” Moira is correct
that although “[s]pouses are not subject to the Prudent Investor Rule (which applies to
trustees with regard to trust property) in managing and investing community property
. . . , a spouse’s improvident C[ommunity] P[roperty] investments can amount to a
breach of fiduciary duty if they rise to the level of ‘grossly negligent or reckless conduct,
intentional misconduct, or a knowing violation of law’ (Corps. C. § 16404(c)).”
(Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2017)
¶ 8:606.2, italics in original.)
Here, however, the trial court as the trier of fact reasonably could conclude
that under the parties’ mutual agreement concerning the $2.5 million in the account,
Moira had ceded management and control of those funds entirely to Fred. In other
words, Fred held no sua sponte duty of disclosure for her to exercise her equal duty of
control over those community funds because she had agreed to his use of those funds for
options trading in his sole discretion. The court as the trier of fact also could infer from
Moira’s description of the funds as a “sliver” of their assets with which Fred could “try
his hand at doing something . . . interesting or amusing” that if he lost the funds, it did not
15
matter to her how it occurred. (§§ 721, subd. (b); Corp. Code, 16403(c)(1) [marital
fiduciary duties defined by partnership agreement].)
Supporting this conclusion, Fred testified he selected $2.5 million as the
deposit amount with Moira’s agreement because losing it all would not require any
change in the family’s standard of living. Accordingly, the court could infer from these
comments that both partners recognized options losses could eradicate the $2.5 million
and that in regarding the sum as but a “sliver” or trifling amount, Moira did not hold Fred
to a fiduciary duty of care for those funds. To the contrary, she viewed the account total
as a disposable amount set aside for Fred’s “amus[ement].” Because we must view the
evidence in the light most favorable to the trier of fact’s conclusions, the deferential
standard of review furnishes no basis to overturn the trial court’s judgment. (Baker,
supra, 159 Cal.App.4th at p. 892.)
Moira also argues she was entitled to half of the $16 million peak value of
the Ameritrade account. She relies on the statutory remedy codified in section 1101,
subdivision (g), which provides: “Remedies for breach of the fiduciary duty by one
spouse, including those set out in Sections 721 and 1100, shall include, but not be limited
to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any
asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and
court costs.” The “transferred in breach” language supports the trial court’s award of
$1,952,056.50 because that is half of the nearly $4 million Fred lost of additional sums he
transferred into the options account in breach of his mutual agreement with Moira. He
transferred an additional $8 million beyond the $2.5 million to which Moira agreed, but
of the $8 million, he managed to pull out or salvage around $4 million, resulting in a
$4 million net loss, of which the court ordered Fred to reimburse Moira her half share.
But in support of her claim the court instead should have awarded her
$8 million as half the account’s peak $16 million value, Moira relies on further language
16
in section 1101, subdivision (g), pegging the undisclosed or wrongfully transferred asset
at “its highest value.” Specifically, the statute provides: “The value of the asset shall be
determined to be its highest value at the date of the breach of the fiduciary duty, the date
of the sale or disposition of the asset, or the date of the award by the court.” (Ibid., italics
added (hereafter § 1101(g)).) We review for abuse of discretion the trial court’s decision
concerning the appropriate remedy for breach of fiduciary duty. (In re Marriage of
Schleich (2017) 8 Cal.App.5th 267, 284.)
The trial court reasonably could conclude the date of the breach was the
date Fred unilaterally decided to transfer an additional $8 million into the account beyond
the agreed-upon $2.5 million, and of that $8 million, Fred lost half. Apart from the
breach of fiduciary duty on the transfer date, the other two dates in section 1101(g) do not
support Moira’s argument for an award based on peak value of the account. In particular,
an award of half the asset value at its disposition date would not support Moira’s claim
because it was precisely in “disposing” of — i.e., fulfilling — the options contracts that
their negative value was realized. Similarly, Moira does not identify the value of the lost
assets on the date of the court’s award, but presumably there was no additional value to
be realized because the option contract dates already had passed.
Citing the trial court’s conclusion that Fred’s risky options trading strategy
constituted a breach of his fiduciary duty because it was so reckless, Moira argues that
“the date of the breach” under section 1101(g)’s first prong is better viewed as a
continuing period rather than a fixed date because Fred engaged in his risky strategy over
a continuous period of time instead of in a single trade. She then argues that because the
Legislature decreed the “value of the asset shall be determined to be its highest value at
the date of the breach” (ibid.), the court was required to use the $16 million figure as the
basis for Moira’s award because that was the option account’s highwater value over the
period in which the court found Fred engaged in reckless trading.
17
Although Moira’s interpretation is plausible, it does not comport with the
Legislature’s intent, as revealed by section 1101(g)’s legislative history. We interpret
statutes de novo. (Martin v. PacifiCare of California (2011) 198 Cal. App. 4th 1390,
1399.) “The primary purpose of statutory construction is to ascertain the Legislature’s
intent. . . . ‘If the language of the statute is not ambiguous, the plain meaning controls
and resort to extrinsic sources to determine the Legislature’s intent is unnecessary.’
[Citation.]” (California School Employees Assn. v. Governing Bd. of South Orange
County Community College Dist. (2004) 124 Cal. App. 4th 574, 583.) But if the statutory
language “‘leaves doubt about meaning, we may consult other evidence of the
Legislature’s intent, such as the history and background of the measure.’” (Ibid.)
Section 1101(g)’s use of “the date” of the breach, rather than “dates,” and
its use of the disjunctive “or” between three specified dates — the date of the breach of
fiduciary duty, the asset’s disposition date, or the date of the court’s award — do not tend
to support Moira’s argument that the Legislature intended section’s 1101(g)’s remedy for
breach of a fiduciary duty to be calculated over a continuing period. But the word
“highest” introduces some doubt because it could operate to tether the court’s award to a
particular date — the date of the asset’s highest value — within a period of a continuing
breach.
Section 1101’s legislative history, however, reveals the Legislature
expressly contemplated and rejected Moira’s interpretation. Section 1101(g)’s current
language was adopted in 2002. (Stats. 2001, ch. 703 (Assem. Bill 583), § 1.) Before the
Legislature settled on that language, an earlier version of the bill used language consistent
with Moira’s notion of valuing a fluctuating asset at its highest point over the course of a
continuing breach. The bill’s draft language provided that “the value of the asset that is
the subject of the breach shall be determined to be ‘its highest value from the time of
nondisclosure to the time of the award.’” (Sen Com. on Judiciary, Analysis of Assem.
18
Bill No. 583 (2001-2002 Reg. Sess.) July 17, 2001, p. 3, italics added (hereafter Sen.
Judiciary Com. Analysis).)
The judiciary committee’s analysis aptly observed: “A difficulty with the
bill’s proposed valuation method, however, is that it appears to assume that the breaching
spouse’s failure to sell an asset that may fluctuate markedly in value (such as stock) at a
fleeting high point in that value represents a legitimate loss to the claimant spouse that
must be recompensed, [but] the likelihood that the claimant spouse would actually have
taken advantage of that limited opportunity may be speculative at best. For example, if
the breaching spouse negligently managed, or fraudulently concealed, stock purchased at
$50 a share, the stock climbed rapidly to $200 a share and immediately began to fall,
reaching $5 a share at the time of the award, this bill’s proposed valuation assumes the
claimant spouse has the right to the stock at a value of $200 a share, even though, for
most private citizens who own stock, the failure to convert shares at the highest point of
value is a tale of woe much more common than a successful conversion at the highest
price.” (Sen. Judiciary Com. Analysis, supra., pp. 9-10.)
The committee proposed alternative language to preclude this outcome, as
follows: “A possible alternative definition might be to value the asset at its highest worth
on one of three alternative dates: the date the breach occurred; the date of sale of the
asset, if a sale occurred; and the date of the award. In the above example, a breaching
spouse who sold the stock for any amount above its $50 purchase price would be liable
for the value at sale, whereas one who did not sell the asset would be liable at the $50
share price, even though the price had fallen to $5 at the time of the award. Such a
definition would protect the claimant spouse from some market fluctuations, while at the
same time avoiding an unduly speculative valuation.” (Sen. Judiciary Com. Analysis,
supra, p. 10.)
19
Because the Legislature not only reviewed the committee’s proposed
language, but adopted it verbatim, we infer the Legislature intended to reject the
interpretation of section 1101(g) that Moira now advances. (See People v. Wahidi (2013)
222 Cal. App. 4th 802, 808 [“‘“[C]ommittee materials are properly consulted to
understand legislative intent, since it is reasonable to infer the legislators considered
explanatory materials and shared the understanding expressed in the materials when
voting to enact a statute”’”].) As noted, the language the Legislature adopted at the
committee’s suggestion is not free from ambiguity. But in the context of the legislative
history, it reflects a clear intent to reject the notion that the proper remedy under
section 1101(g) for a breach of fiduciary duty is simply to select a fluctuating asset’s
highest value in the applicable period. Notably, the committee expressly proposed that
the amended language would “appl[y] to all the duties subject to Section 1101 penalties,
not just the duty to disclose assets.” (Sen. Judiciary Com. Analysis, supra, p. 10.)
Consequently, there is no merit to Moira’s claim that the breach of fiduciary duty the trial
court found in Fred’s reckless trading of the couple’s assets should result in a different
award than for his breach by transferring additional funds into the account without
disclosure.
Moira’s reliance on In re Marriage of Hokanson (1998) 68 Cal. App. 4th
987 (Hokanson) for the propriety of dividing marital assets based on unrealized gains is
misplaced. There, the wife ignored the divorce court’s order for the expeditious sale of
the couple’s home, which in the 18-month interim declined $30,000 in value by the time
it sold. The higher potential price from a prompt sale under the court’s order formed a
proper basis for an award to the husband of half the value lost due to the wife’s delay.
(Id. at pp. 994-995.) But unlike in Hokanson, there was no court order here for the sale
of assets. More to the point, the committee analysis noted above expressly considered
Hokanson, viewed it as authority for an award when the “managing spouse’s conduct [is]
20
first considered to be in breach,” rather than for the highest asset value over a continuing
period, and we presume the Legislature in adopting the committee’s exact proposed
language similarly adopted this view. (Sen. Judiciary Com. Analysis, supra, p. 9, italics
added.)
III
DISPOSITION
The judgment is affirmed. Moira is entitled to her costs on appeal. Moira’s
motion to strike two references in Fred’s reply brief to investment publications is denied
as moot.
ARONSON, J.
WE CONCUR:
MOORE, ACTING P. J.
FYBEL, J.
21
Filed 12/8/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
In re Marriage of FRED and MOIRA
KAMGAR. G052024
___________________________________
(Super. Ct. No. 13D001145)
FRED KAMGAR,
ORDER GRANTING REQUEST
Appellant,
FOR PUBLICATION
v.
MOIRA KAMGAR
Appellant
The Association of Certified Family Law Specialists has requested that our
opinion, filed on November 17, 2017, be certified for publication. It appears that our
opinion meets the standards set forth in California Rules of Court, rule 8.1105(c). The
request is GRANTED.
22
The opinion is ordered published in the Official Reports. (Cal. Rules of
Court, rule 8.1105(b).)
ARONSON, J.
WE CONCUR:
MOORE, ACTING P. J.
FYBEL, J.
23