Filed 5/18/20 Marriage of Effner CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

In re the Marriage of WILLIAM H. EFFNER, JR. and CHRISTINE S. EFFNER.

WILLIAM H. EFFNER, JR.,

Plaintiff and Appellant,

v.

CHRISTINE S. EFFNER,

Defendant and Appellant,

STEVE YUN,

Claimant and Appellant.

D074478

(Super. Ct. No. ED95735)

APPEALS from a judgment of the Superior Court of San Diego County, David B. Oberholtzer, Judge. Affirmed in part; reversed in part with directions.

Fair Cadora and Kevin L. Cadora for Plaintiff and Appellant.

Jenkins, Erik C. Jenkins, and Tanya C. Sanscartier for Defendant and Appellant.

Contreras Law Firm, Dolores Contreras, Anna Encinias, and Andrew Stilwell for Claimant and Appellant.

Three parties appeal the judgment in this marital dissolution proceeding: husband William H. Effner, Jr. (William), wife Christine S. Effner (Christine), and third party Steve Yun (Yun), who is Christine’s brother. William and Yun challenge aspects of the trial court’s judgment purporting to divide the community property interests related to a bar jointly owned by the parties. Christine challenges the court’s award of reimbursement to William under Family Code section 2640, as well as attorney fee awards under sections 271 and 1101.

The judgment awarded William substantial damages against Yun based on breach of contract and breach of fiduciary duty. We conclude this portion of the judgment violated Yun’s due process right to actual notice of the claims against him. Prior to trial in this matter, no party requested such relief against Yun. The court appears to have crafted relief that, while arguably warranted by the evidence, was not within the reasonable contemplation of Yun during the proceedings. It must therefore be reversed. This reversal moots William’s appeal, which covers a related matter. Christine’s separate contentions are unpersuasive. We therefore reverse the judgment in part and remand with directions. We affirm the judgment in all other respects.

FACTUAL AND PROCEDURAL BACKGROUND

“Following established principles of appellate review, the facts are recited here in the light most favorable to the judgment.” (In re Marriage of Hokanson (1998) 68 Cal.App.4th 987, 990, fn. 1.) Additional facts will be discussed where relevant in the following section.

William and Christine married in 1997. They eventually had three children. Prior to their marriage, they entered into a prenuptial (or premarital) agreement. It stated, “The purpose of this agreement is to ensure that both parties[‘] wishes are carried out and that any property owned prior to marriage by either party shall no longer be considered the separate property of the party but marital property of the parties with both parties having 50% interest in such property.” At the time of marriage, William owned a house in El Cajon, California in his name only. In the agreement, William agreed “that all property that would be considered his sole separate property or mixed with a separate property interest shall be considered community property after the date of marriage and shall be divided equally with [Christine].”

During their marriage, William and Christine went into business with Yun. As relevant here, they formed a corporation, BSC Enterprises, Inc. (BSC), to own and operate a bar in Glendora, California. Yun owned 50% of the business, and William and Christine owned the remaining 50% together. To avoid liquor license complications, Yun was BSC’s sole shareholder and director.

William and Christine loaned BSC money to acquire the bar. William and Christine also loaned money to Yun personally. Yun made regular payments on these loans to William. Yun and William spoke regularly about the bar’s operations, and William received cash distributions.

In February 2013, as Christine was contemplating divorce from William, she directed Yun to stop communicating with William and to make all further payments on the loans to her. Yun agreed. He also began hoarding cash from the bar’s operations. Seven months later, Yun had amassed approximately $73,000. In an email to Christine, he wrote, ” ‘we do not have access to the above business money until we funnel it into my personal account which will take another 6 months to fully funnel it all slowly 1 week at a time.’ ” Around the same time, without informing William, Yun sold the bar. The buyer agreed to pay $21,500 at the time of purchase and around $3,600 monthly for 60 months.

In July 2014, Christine moved from New Jersey, where the family had been living, to El Cajon. At that time, the remaining balance on the business loan to BSC was approximately $41,000. The remaining balance on the personal loan to Yun was approximately $8,000. Several months later, William moved to El Cajon as well. He filed for divorce in April 2015. His petition generally requested that the court determine the parties’ rights to community property.

During the dissolution proceedings, Yun produced two agreements purporting to memorialize loans and other financial arrangements between him and Christine. In the first agreement, Yun agreed to settle the outstanding balance of the loan to BSC for approximately $40,000. Yun also agreed to loan Christine approximately $49,000. If Christine failed to repay the loan within 15 months, the balance would grow to $100,000 and Yun would be able to force the sale of the El Cajon house to secure repayment. Christine also gave up her interest in the bar or any proceeds from its sale. In the second agreement, Yun agreed to loan Christine approximately $14,000. Christine again pledged the El Cajon house as collateral. Christine did not repay the loans.

William filed a request to join Yun and BSC in the dissolution proceedings. In a declaration supporting the request, William wrote, “I respectfully request the Court join [Yun] an[d] [BSC] as parties to this action because, among other reasons, [Yun] claims to have an ownership interest in our two major marital assets subject to disposition in this case: a bar business operated by [BSC] and the marital residence.” William stated, “[Yun] has material information and documents that are essential to the presentation of my claims in this matter, as well as the Court’s ability to render a full and enforceable judgment in this matter.” William asserted, “Post-separation, [Yun] unilaterally sold the . . . bar for approximately $211,500 and has refused to provide me with any of the sales proceeds, but has given Christine a substantial amount of funds on a monthly basis, as well as paid other expenses on her behalf. I contend the community is owed approximately $175,000 from the sale of the bar.”

In response, Yun and BSC agreed to be joined. The parties stipulated that Yun and BSC “are indispensable parties to the determination of various property and reimbursement issues in this matter and the enforcement of a judgment re the same.” Yun and BSC “waive[d] their respective rights to a hearing on whether they should be joined as parties to the proceeding.”

The court (Judge Epley) held a first phase trial limited to the validity of the premarital agreement. As relevant here, the court found the agreement valid. It noted, however, that “the agreement did not include an express waiver by [William] as to his right of reimbursement under Family Code section 2640, subdivision (b)” as to the El Cajon house.

In advance of trial on the remaining issues, the parties submitted trial briefs. Christine’s brief contended the community’s loans to Yun and BSC were fully repaid before the date of separation. To the extent they were repaid after separation, Christine used the funds to benefit the community. The community had no further interest in the bar or its proceeds, as a result of Christine’s loan agreements with Yun.

William’s trial brief agreed that the personal loan to Yun had been fully repaid with funds to Christine. He contended, however, that he was entitled to a credit from Christine for half the balance remaining on the loan at the date of separation. William believed Christine had also received approximately $24,000 for repayment of the BSC loan after the date of separation. He proposed that the loan receivable be assigned to Christine in full, with a credit of half the balance remaining on the loan at separation to William. William further believed Christine had received over $100,000 from the sale of the bar and other proceeds. He proposed that the community’s interest in these proceeds be assigned to Christine, with a credit of half to William. William argued that any future proceeds from the sale of the bar should be awarded to him as sanctions for Christine’s breaches of fiduciary duty related to the bar. William requested attorney fees from Christine and Yun.

Yun, in his trial brief, contended that BSC had been dissolved and there were no further proceeds from the bar to divide. He requested reimbursement of approximately $65,000 loaned to Christine.

In advance of trial, Yun filed a request for an order dismissing him as a joined party. He claimed that he no longer owned the bar, he had no communication with the buyer, and he had not received a payment in nine months. He argued that any dispute over the proceeds should be addressed in a civil case. He maintained that he had an interest in the El Cajon home based on his loan agreements with Christine, but he was not requesting enforcement of the agreements at this time. In Yun’s view, there was no basis to continue his joinder as a party because discovery had been completed and he was not in possession of any community property. In its ruling, the court noted that Yun’s arguments were “compelling” but there remained disputed issues of fact regarding Yun’s role. It therefore denied Yun’s motion “without prejudice.”

William testified at trial regarding the history of the bar and its operations. In early 2013, Yun stopped communicating with William about the business. The loan payments William had been receiving stopped. Yun also largely stopped making cash deposits into BSC’s bank account. William estimated that approximately $110,000 in cash had disappeared from the business. William also had not received any money from the sale of the bar. William acknowledged that Yun had made payments to Christine related to the bar and the outstanding loans, but he maintained the documentation of those payments was unreliable and the funds difficult to trace.

Yun testified that, in early 2013, Christine told him to stop making loan payments to William and make them to her instead. He believed he fully paid off his personal loan and at least partially paid off the BSC loan. He also claimed he gave Christine approximately $37,000 in proceeds from the bar’s operations. Yun testified that he was not currently holding any bar proceeds on Christine’s behalf.

Yun said he sold the bar in November 2014. He did not discuss the sale with William. Yun dissolved BSC in June 2016, approximately one week after his deposition in the dissolution proceedings. Even before BSC was dissolved, the buyer made payments directly to Yun personally. Yun estimated that the buyer had made approximately 18 to 20 monthly payments. Yun admitted that the community would be entitled to 50 percent of those payments under normal circumstances, but he contended his loan agreements with Christine altered the business relationship between himself and William and Christine.

Following his testimony, Yun renewed his request for dismissal. He attempted to distinguish the issue of whether he was holding community property (which could be pursued in the dissolution proceeding) from the issue of damages to William based on a breach of fiduciary duty as a business partner (which could not). The court agreed, “[T]he only two issues here before me are going to be property of the estate and attorney[‘]s fees. If there are damages to be recovered from Mr. Yun by Mr. Effner, you’re right; I’m not [going to] deal with that.” But the court believed that any outstanding balances owed to the community could result in a judgment against Yun. The court denied the request for dismissal.

In her testimony, Christine admitted telling Yun to pay her instead of William. She believed Yun had fully repaid both his personal loan and the BSC loan. Christine also received a payment of approximately $36,000, which was one-half of the bar checking account at the time. Christine said she used the payments to benefit the community.

Christine said she did not receive any proceeds from the sale of the bar. She believed she had given up her interest in the bar when she entered into the loan agreements with Yun. She first testified that she intended, by her agreements with Yun, to give up the community’s interest in the bar as well. But she later said she did not intend to bind the community or William.

At the close of evidence, Yun made a third request for dismissal. He argued that he had not been served with a complaint or other pleading requesting relief against him. The court again denied the request. The court agreed there was no pleading, but it found Yun had actual notice of the claims against him and had fully participated in the proceedings. It believed that Yun should have brought up any formal pleading deficiencies at the time of joinder.

In closing arguments, William agreed Yun had repaid the personal loan by making payments to Christine. He therefore requested that the community’s interest in the loan receivable be awarded to Christine, with a credit to William of half the outstanding loan balance at separation (or approximately $4,000). Regarding the business loan to BSC, William maintained that Christine had received between $3,000 and $24,000 after separation, depending on the validity of the loan agreements between her and Yun. William proposed that Christine be awarded the community’s interest in that loan as well, with a credit to him of half the outstanding loan balance at separation. William believed Christine had received $55,000 in cash diverted from the bar. He proposed to award Christine the community’s interest in any bar cash, with a credit to him of $27,500. Similarly, William believed Christine had received $36,000 from a bar checking account, and he requested half that amount, presumably as a credit as well.

William believed the community’s interest in proceeds from the sale of the bar was approximately $45,000. William requested the entire amount be awarded to him as a sanction for Christine’s breach of fiduciary duty in attempting to cut William out of the bar business. The court asked where this award would come from. William’s counsel responded, “Well—and again, he—husband believes that there are funds that Mr. Yun has for wife somewhere; [it] could come out of her share of the retirement accounts.” After William’s counsel addressed a separate sanction for breach of fiduciary duty, the court said, “Okay. So you’re saying you want that to come out of the wife’s interest?” William’s counsel responded, “Yes.”

William requested an order that he was entitled to “at least half” of any future payments for the purchase of the bar, i.e., the community’s entire interest, “because of the intentional concealment of this issue.” He also asserted that Yun had diverted funds from a stock account. He wanted a “judgment” for half the amount diverted, or approximately $43,000. The court said, “Against Mr. Yun?” William’s counsel responded, “If the court believes that Mr. Yun has that money, yes. If the court believes wife has received it, then from her.” William concluded by requesting approximately $50,000 in attorney fees and costs from Yun under section 2030.

Christine, in her closing argument, agreed with William’s proposed disposition of the personal loan receivable from Yun. As to the bar, Christine’s counsel argued, “at best it was confusing in terms of what money was actually paid out from Mr. Yun to my client from November of 2013 to when the money from the bar ran out.” She acknowledged, however, that both Christine and Yun testified she received at least approximately $34,000 in bar money. She claimed Christine used the funds to benefit the community. But to the extent the court disbelieved Christine, William would be entitled to a credit of half that amount from Christine.

Before Yun’s closing, the court remarked, “So far neither party has asked me to award anything from your client.” In response, Yun’s counsel mentioned William’s attorney fee request, but stated, “[E]ven in this particular scenario, neither party is now requesting—which maybe that’s why no complaint or pleading was filed in the first place.” William’s counsel interjected that he had requested an order regarding future sales proceeds, and “then the sales proceeds that have already been received and the stock account, I think we had said to the court if the court wants to offset with the retirements, that’s an option. If the court thinks that wife hasn’t received the moneys, then we’d be asking for that from Mr. Yun. It’s sort of up to the [c]ourt’s assessment of the loan agreements, essentially.”

In his argument, Yun maintained that he had fully paid Christine for all amounts for which he was personally liable and for any bar cash on hand. He contended he was not personally liable for any amounts owed by BSC on its business loan. Any claim against Yun for breach of his duties as a business partner, or for alter ego liability, would have to be pursued in a civil action. Yun argued that the parties had not requested any relief directly against him, instead proposing various credits and offsets as between each other. The court asked whether it was bound by the parties’ requests. Yun’s counsel responded, “I believe so. I think it goes back to what the parties’ requests are, Your Honor. I mean, it’s basically parties are making certain requests and I think that it would be above and beyond to charge my client when, one, it was never—I mean, it was never pled; and, two, it’s not even being sought.” The court replied, “Okay. That has a certain appeal to it.”

In a brief rebuttal, William contended he was not foreclosing a judgment against Yun. His counsel stated, “What I’d asked the court for was if the court wants to offset [Christine’s] share of the retirements and provide [William] the relief that the law says he should have that way and if that’s sufficient to cover the damages, then that’s an option so we don’t have to go chase down the money. [¶] But we’re not saying we’re not asking for anything from Mr. Yun. It’s up to the [c]ourt to determine what to do with these issues, particularly in light of whether the [c]ourt believes the loan agreements or not. Because if the [c]ourt believes the loan agreements, then the community has received nothing from the sales proceeds from BSC.”

In an oral ruling from the bench, the court said it found William and Christine generally credible. It found Yun not credible. He “sounded like he was making it up as he went. . . . He simply did not try to tell me the truth.” The court found that the two loan agreements “are all a transparent sham designed by [Yun] to deprive [William] of his share of the profits and proceeds from the bar as well as an effort on his own part to relieve him of any obligation to repay his personal loan to the [community].”

As to the personal loan, the court believed that Yun and Christine conspired to violate William’s rights. It found that the community was owed approximately $8,000 at the time of separation, and it awarded judgment in favor of William and against Yun for half that amount. Similarly, the court found that Yun paid approximately $36,000 to Christine from the bar monies he had ” ‘funneled’ ” into his personal accounts. It found, “This is both a breach of fiduciary duty to the corporation and a violation of Mr. Yun’s obligations to his partner.” It awarded judgment in favor of William and against Yun for half the amount paid to Christine, or approximately $18,000. It also awarded judgment in favor of William and against BSC for half the balance of the BSC loan at the time of separation, or approximately $20,000. (The court expressly left unresolved the question of whether BSC was the alter ego of Yun to a separate proceeding. It also found no evidence of a separate BSC stock account.) The court awarded William one-fourth of the payments to date for the sale of the bar, or approximately $23,000, to be collected from Yun. The court declined to make any orders regarding future payments because they were unlikely. It also ordered Yun to pay William $10,000 in attorney fees under section 2030, subdivision (d). On the issue of reimbursement under section 2640, the court found that William had not waived his right to receive reimbursement for his separate interest in the El Cajon house.

At a subsequent hearing, the court awarded William $100 for Christine’s breaches of fiduciary duty related to the bar. It also ordered Christine to pay William $25,000 in attorney fees under section 1101, subdivision (g) based on her breaches of fiduciary duty. In doing so, it stated its belief that section 1101 did not require it to consider Christine’s ability to pay in making the award. The court also ordered Christine to pay William $15,000 in attorney fees under section 271 based on her efforts to frustrate settlement. In making the latter award, the court expressly considered Christine’s ability to pay.

At Yun’s request, the court prepared a statement of decision on issues related to Yun’s liability. The statement of decision described the factual and legal basis for the court’s rulings. At the outset, it noted that the community made loans to BSC and Yun personally, with balances as of the date of separation of approximately $41,000 and $8,000 respectively. It also noted that Yun had sold the bar and received approximately $92,000 in proceeds by the time of trial. On this basis, the court found that “as of the date of separation, Yun personally was holding a substantial part of the Effner[s’] community property.”

The court also found that Christine told Yun in early 2013 to make all further loan payments and bar distributions to her. It wrote, “Yun then set up a subterfuge of transferring money to Christine, claiming it offset the money he and BSC owed to the Effners jointly. The court found by doing so, Yun had breached both his contractual obligations to William and his duties to William as a partner in the [bar], depriving William of his share of the money owed to the community. The court therefore entered judgment against Yun in favor of William for 25% of the total.”

The court explained why it had denied Yun’s requests for dismissal. It found a formal summons unnecessary since Yun had voluntarily participated in the proceedings. While the court believed Yun’s objection that “he had no notice of the specific claims against him is a closer question,” it found that Yun had actual notice of the claims: “His written motion to dismiss reflected detailed knowledge of the causes and facts alleged by William, and the court found he was not prejudiced by the lack of pleadings.” The court excluded the award of attorney fees from this conclusion, however, because “[t]he statutory authority for awarding fees against Yun is buried in the Family Code, and his knowledge of the issues and participation in the litigation would not have given him fair warning he could be liable for them.” The court therefore vacated its award of attorney fees against Yun.

The court found that the parties were partners in the bar business. It explained, “As partners, Yun, Christine and William each assumed a fiduciary duty of due care and loyalty ‘to the partnership and to each other.’ [Citation.] Yun could not take advantage of his position to profit personally to the detriment of William.” Given the partnership relationship, the court believed it was unnecessary to decide whether BSC was Yun’s alter ego.

The court found that, in her dealings with Yun, Christine’s plan “was to manufacture evidence and divert community property to herself.” By email, Yun discussed “setting up separate accounts for Christine into which he would deposit the payments from his personal loan and the bar purchase loan from the Effners[.]” Yun also agreed to divert the bar’s cash on hand to his personal accounts. The court wrote, “Essentially, Yun was trying to launder the money and keep it out of William’s reach.”

The court expressed extreme skepticism of the loan agreements and records produced by Yun. It found that a spreadsheet prepared by Yun “was designed to show Yun had satisfied his obligations to the Effners from the bar with his payments to Christine and her acknowledgements in the Financial Agreement and Loan Agreement, and that Yun had a $114,016 interest in the Effner’s home, which would offset any other obligations. The spreadsheet had some glaring discrepancies, however, and Yun was compelled to disavow it in his testimony, stating he had prepared it in a hurry. Moreover . . . Christine testified none of it diminished what William was owed by Yun and the bar. The court agrees.”

The court found, “The money Yun has wrongfully withheld from William is subject to restitution through a constructive trust.” It awarded judgment in favor of William and against Yun as described in its oral ruling, with the exception that the award based on the BSC loan was made against Yun personally. Yun objected to that portion of the judgment, but the court confirmed it was making the award against Yun personally notwithstanding its oral ruling that the judgment should be against BSC.

The court’s formal judgment incorporated its awards against Yun and in favor of William. The court awarded Christine child support but no spousal support. The court divided the community’s interest in various accounts, property, and obligations, which are not relevant here. As to the El Cajon home, the court found that William was entitled to approximately $172,000 in reimbursements under section 2640. Yun, Christine, and William all appeal the judgment.

I
Yun’s Appeal: Due Process

Yun contends the judgment is void on its face, it violates his right to procedural due process, and its specific relief was an abuse of discretion. We conclude the judgment violates Yun’s due process rights. We therefore need not consider Yun’s other contentions.

We independently consider whether the proceedings below complied with the constitutional guarantee of procedural due process. (Conservatorship of Christopher A. (2006) 139 Cal.App.4th 604, 609-610.) “It is a fundamental concept of due process that a judgment against a defendant cannot be entered unless he was given proper notice and an opportunity to defend.” (In re Marriage of Lippel (1990) 51 Cal.3d 1160, 1166.) ” ‘In a contested proceeding, no court may render judgment without conforming to the constitutional guarantees which afford due process of law. [Citation.] Due process requires that all parties be notified of the facts and issues in dispute, that each party be afforded a fair opportunity to present evidence in open court, and that judgment be rendered based on an evaluation of the evidence on each side, findings of fact and conclusions of law.’ ” (Carr v. Kamins (2007) 151 Cal.App.4th 929, 936.)

“A marital dissolution court cannot grant relief not demanded in the complaint against a defaulting party. [Citations.] Similarly, a dissolution court cannot grant unrequested relief against a party who appears without affording that party notice and an opportunity to respond.” (In re Marriage of O’Connell (1992) 8 Cal.App.4th 565, 574, fn. omitted (O’Connell).)

For example, in In re Marriage of Siegel (2015) 239 Cal.App.4th 944, 948 (Siegel), one spouse (wife) filed a form request for order with the following statement of relief requested: ” ‘Husband was ordered to establish an insurance trust for the benefit of the wife in the amount of at least $250,000. Husband has not ever and will not provide proof that this policy is or ever was in existance [sic]. Wife has asked repeatedly for this proof and now prays that the court will insist on that proof.’ ” (Italics omitted.) The husband filed a response consenting to an order ” ‘that petitioner disclose information about his existing life insurance for respondent.’ ” (Id. at pp. 948-949.) The husband attached documentation showing a $123,000 life insurance policy, which he contended was all he could obtain given his advanced age. (Id. at p. 949.) At the subsequent hearing, the husband did not appear. (Id. at p. 950.) The trial court and the wife engaged in a discussion on the record about the husband’s life insurance obligations. (Id. at pp. 950-952.) In a subsequent order, the court stated that it construed the wife’s form request for order as a request to enforce the parties’ marital settlement agreement. (Id. at p. 952.) It ordered the husband to, among other things, establish a separate trust of approximately $127,000 for the wife’s benefit to make up for the life insurance shortfall. (Id. at p. 953.)

The reviewing court reversed the order because it violated the husband’s right to procedural due process. (Siegel, supra, 239 Cal.App.4th at p. 958.) It wrote, “[Wife’s] request for orders did not give him notice that the family court would ‘construe’ it to seek relief broader than that prayed for, in essence a motion to enforce compliance with the settlement agreement.” (Id. at p. 955.) “[Wife’s] request for an order to disclose insurance information as ‘proof’ that a life insurance policy existed could not be treated, consistent with due process, as notice that the family court would take the matter under submission and issue an order requiring [husband] to establish and fund a $126,916 trust.” (Id. at p. 958.)

Similarly here, William’s requests for relief in advance of trial cannot reasonably be construed as requests for a judgment against Yun personally. In his petition, William generally requested that the court determine rights to community property. In his declaration in support of joinder, William stated that “[Yun] claims to have an ownership interest in our two major marital assets subject to disposition in this case: a bar business operated by [BSC] and the marital residence.” He noted that Yun had sold the bar for approximately $211,500 and paid Christine a substantial amount of funds. He contended that the community was owed approximately $175,000 from the sale of the bar, but the import of that contention was unclear.

In his trial brief, William continued to frame his requests in terms of division of property. He identified various community assets and requested that they be assigned to Christine with a credit to himself. In William’s framing, the community assets were the right to repayment of the personal and BSC loans, the right to payment of funds from the bar operations, and the right to payment from the proceeds of the sale of the bar. His only deviation from this framework related to future bar proceeds. He requested that these proceeds be awarded to him as a sanction against Christine for her breaches of fiduciary duty. William did not seek relief against Yun personally.

At the end of trial, William continued to request the division of community assets, rather than pursue a judgment against Yun. William proposed that the right to repayment of both loans be assigned to Christine, with a credit to himself of half the balance remaining at separation. He believed that Christine had received approximately $55,000 in funds from the bar’s operations, so he proposed to assign the right to receive such funds to Christine with a credit of half that amount to William. With respect to the bar sale proceeds, William proposed that he be awarded the community’s entire interest, again based on Christine’s breaches of fiduciary duty. When the court inquired about the source of these funds, William’s counsel appeared to give the court the option of ordering Yun to provide funds to the extent “there are funds that Mr. Yun has for wife somewhere,” but otherwise from Christine’s share of other community assets.

It was only after the court remarked to Yun’s counsel, “So far neither party has asked me to award anything from your client,” that William raised an unconditional judgment against Yun for certain bar proceeds (but not the loans). William’s counsel proposed the possibility of a judgment against Yun, but only for William’s share of the bar proceeds and only to the extent Christine had not already received the money.

The court’s disposition of these issues in its judgment goes far beyond William’s requests. Rather than divide the community’s assets (i.e., the right to payment) between William and Christine with appropriate offsets, the court treated the proceedings as including claims for relief against Yun personally. It entered judgment against Yun for half the balance of the personal loan at separation, even though all parties agreed that Yun had repaid it (and William requested only an offset from Christine). It also entered judgment against Yun for half the amount of the BSC business loan, even though the loan was not made to him personally (and again William requested only an offset from Christine). It entered judgment against Yun for one-quarter of the amount allegedly diverted from the bar business, even though William argued that Christine had already received the community’s share of these funds and William requested only an offset of half the amount she had received. And the court entered judgment against Yun for one-quarter of the amount allegedly received for the sale of the bar, even though William requested only an offset from Christine or, alternatively in his closing argument, a judgment against Yun if “there are funds that Mr. Yun has for wife somewhere.”

Based on its statement of decision, the court appears to have believed that the balances of the personal and BSC loans, as well as the bar operations and sales proceeds, were community property. Its theory appears to be that Yun obtained (or failed to pay) those amounts in violation of his contractual and fiduciary duties, and imposition of a constructive trust on Yun for those amounts was appropriate. (See Civ. Code, §§ 2223, 2224.) Setting aside the validity of that theory, it was never raised in the proceedings prior to the court’s decision. The court therefore erred by relying on it. (See Moore v. Cal. Minerals Products Corp. (1953) 115 Cal.App.2d 834, 837.) With the very limited exceptions noted above, none of the parties sought relief against Yun personally, and based on our review of the record, none of the parties mentioned a constructive trust or similar concepts during the proceedings.

Yun could not reasonably have understood that he would be exposed to this relief before the court began articulating its views at the end of trial during Yun’s closing argument. Before that point, neither William nor Christine requested relief against Yun personally. Although William alleged that Yun had engaged in various wrongful acts, he did not advance a theory of liability directly against Yun. To the extent the wrongful acts formed the basis of William’s contentions, they supported his claims of breach of fiduciary duty against Christine. William did not pursue any cause of action for breach of contract or breach of fiduciary duty against Yun. Yun had no reasonable opportunity to defend against claims of breach of contract, breach of fiduciary duty, or imposition of a constructive trust to recover unpaid loan proceeds or partnership assets.

Under these circumstances, the court’s judgment violated Yun’s due process rights. (See O’Connell, supra, 8 Cal.App.4th at p. 574 [“[A] dissolution court cannot grant unrequested relief against a party who appears without affording that party notice and an opportunity to respond.”]; see also In re Marriage of Gruen (2011) 191 Cal.App.4th 627, 640 [modification order exceeded court’s jurisdiction because it was not based on a pending motion or request].) Yun was entitled to reasonable notice that he would be exposed to liability in the manner reflected in the court’s judgment. Because he was not, the court’s judgment must be reversed. (See Estate of Buchman (1954) 123 Cal.App.2d 546, 559-560.)

Resisting this conclusion, William relies on the stipulation joining Yun and BSC in the dissolution proceedings. In the stipulation, the parties agreed that Yun and BSC “are indispensable parties to the determination of various property and reimbursement issues in this matter and the enforcement of a judgment re the same.” The phrase, “various property and reimbursement issues,” is insufficient to put Yun on notice of the liability eventually imposed by the court. In general, the property issues to be litigated in a marital dissolution action are the assessment and division of community assets and debts. (See In re Marriage of Eustice (2015) 242 Cal.App.4th 1291, 1307.) The reimbursement issues are payments or offsets between the spouses based on various statutory and other rights to reimbursement. (See, e.g., §§ 900 et seq., 2626, 2640, 2641; see generally Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2019) ¶ 8:795.) The phrase, “various property and reimbursement issues,” did not provide Yun with reasonable notice that he could be held personally liable to William based on claims for breach of contract or breach of fiduciary duty. (See Falahati v. Kondo (2005) 127 Cal.App.4th 823, 830 [“The complaint contained no factual allegations with respect to [defendant]; therefore it failed to apprise him of the nature of plaintiffs’ demand against him.”]; see also In re Marriage of Kahn (2013) 215 Cal.App.4th 1113, 1119 [reference to “other” relief insufficient].) William’s declaration in support of joinder and his trial briefs likewise did not provide actual notice to Yun that he would be held personally liable, as discussed above.

William also raises various procedural objections, but they are inapplicable to Yun’s procedural due process argument. Yun could not have filed a motion to dismiss or made an objection to relief that was not asserted against him. (See Simmons v. Ware (2013) 213 Cal.App.4th 1035, 1049-1050.) To the extent Yun raised the issue, the parties confirmed the scope of the proceedings was limited to the division of community assets and debts, not causes of action against Yun personally. By the time the court articulated its reasoning at the end of trial, it was too late.

Based on the foregoing, the judgment as to Yun personally must be reversed. We must likewise reverse any affected portions of the judgment, which here include the remaining bar issues (e.g., future proceeds and liabilities) and the personal and BSC loans. This disposition moots William’s appeal, which involves the division of future proceeds of the sale of the bar.

On remand, the court shall reconsider the division of community assets and debts related to the bar and the personal and BSC loans. It may also consider whether to address any properly pled claims against Yun. We express no opinion on the merits of such claims or whether they may be properly asserted in this dissolution proceeding.

II
Christine’s Appeal: Reimbursements and Attorney Fees

A. Reimbursement Pursuant to Section 2640

Christine contends the court erred by finding that William was entitled to reimbursements under section 2640, subdivision (b) for his separate property contributions to the acquisition of the El Cajon house. That statute provides, in relevant part, “In the division of the community estate under this division, unless a party has made a written waiver of the right to reimbursement or has signed a writing that has the effect of a waiver, the party shall be reimbursed for the party’s contributions to the acquisition of property of the community property estate to the extent the party traces the contributions to a separate property source.” (§ 2640, subd. (b).)

“The effect of section 2640 was ‘to overturn a long line of cases which had held that absent an agreement to the contrary, separate property contributions to the community were deemed to be gifts to the community.’ ” (In re Marriage of Walrath (1998) 17 Cal.4th 907, 918.) “[S]ection 2640 protects the general expectations of most people in marriage, i.e., that spouses will be reimbursed for significant monetary contributions to the community should the community dissolve.” (Id. at p. 919.)

Christine argues that the parties’ premarital agreement, which transmuted the El Cajon house from William’s separate property to community property, was sufficient to waive his right to reimbursement under section 2640, subdivision (b). We disagree. To prevail on her claim that William is not entitled to reimbursements for his separate property contributions to the community, Christine must establish that there was (1) a written waiver of the right to reimbursement or (2) a signed writing that has the effect of a waiver. (§ 2640, subd. (b).)

” ‘Waiver [of section 2640 reimbursement rights] requires a voluntary act, knowingly done, with sufficient awareness of the relevant circumstances and likely consequences. [Citation.] There must be actual or constructive knowledge of the existence of the right to which the person is entitled. [Citation.]’ [Citation.] There must be ‘ . . . an actual intention to relinquish it or conduct so inconsistent with the intent to enforce that right in question as to induce a reasonable belief that it has been relinquished.’ ” (In re Marriage of Perkal (1988) 203 Cal.App.3d 1198, 1203 (Perkal).) The parties’ premarital agreement does not satisfy these requirements. There is no language in the agreement referring to the statutory right of reimbursement or the consequences of relinquishing this right. Neither party testified that they were aware of a right to reimbursement, or that they voluntarily relinquished it through the premarital agreement. To the contrary, William testified that, when he entered into the premarital agreement, he was not aware of his right to be reimbursed for separate property contributions to the community, and he did not intend to waive his separate property reimbursement claims.

Christine’s claim that the premarital agreement—which constitutes a transmutation—is enough to establish a waiver was considered and rejected in In re Marriage of Carpenter (2002) 100 Cal.App.4th 424 (Carpenter). In Carpenter, the parties executed a premarital agreement providing that the house the husband was in the process of purchasing would be ” ‘deemed to be their community property.’ ” (Id. at p. 426.) The husband closed escrow on the house on the parties’ wedding day, and a few days later the husband “executed a quitclaim deed transferring title to husband and wife as community property.” (Id. at pp. 426-427.) “The trial court concluded that the writing requirement of section 2640 was not satisfied because the premarital agreement was silent on husband’s right of reimbursement.” (Id. at p. 428.) The reviewing court agreed. Although the premarital agreement and quitclaim deed effected a valid transmutation, “[t]hese documents did not affect husband’s right of reimbursement after the house became community property.” (Id. at p. 427.)

Similarly, here, the premarital agreement is silent on William’s right to reimbursement. (Carpenter, supra, 100 Cal.App.4th at p. 428 [when a premarital agreement is “silent” on the issue of reimbursement, “it cannot have the effect of a waiver”].) The agreement identifies the El Cajon residence as William’s separate property, then provides that William “agrees and understands that all property that would be considered his sole separate property or mixed with a separate property interest shall be considered community property after the date of marriage and shall be divided equally with Christine S. Yun.” This language merely reflects an intent to transmute separate property into community property, consistent with sections 850 and 852. But ” ‘[t]he right of reimbursement is not inconsistent with the characterization of property as community.’ ” (Carpenter, at p. 428.) Several decisions confirm this principle. (See, e.g., In re Marriage of Weaver (2005) 127 Cal.App.4th 858, 866 [“Generally, a spouse who converts his or her own separate property to community property is entitled to reimbursement for the separate property contribution in the event of marital dissolution, unless the right is waived in writing.”]; In re Marriage of Holtemann (2008) 166 Cal.App.4th 1166, 1175 [documents prepared as part of estate planning constituted a valid transmutation, but the transmutation did not affect husband’s right to seek reimbursement for his separate property contributions to community property under section 2640, subdivision (b)]; Perkal, supra, 203 Cal.App.3d at pp. 1202-1203 [husband’s adding the phrase ” ‘For A Gift’ ” on a signed grant deed transferring separate property to community did not have the ” ‘effect of a waiver’ ” and therefore did not relinquish his section 2640 reimbursement rights].) We therefore conclude William’s agreement to transmute the El Cajon house to community property was insufficient to waive his right to reimbursement under section 2640, subdivision (b).

Christine points to a different subdivision of the statute, which governs “separate property contributions to the acquisition of property of the other spouse’s separate property estate during the marriage.” (§ 2640, subd. (c).) Like subdivision (b) at issue here, subdivision (c) provides for a right to reimbursement unless the contributing party has made a “written waiver of the right to reimbursement.” (Ibid.) Subdivision (c) contains an additional exception for “a transmutation in writing.” (Ibid.) Christine claims that the transmutation exception should apply to subdivision (b) as well, but the Legislature did not include this additional exception in subdivision (b). We may not interpret the statute to include an exception the Legislature did not intend. (See Blankenship v. Allstate Ins. Co. (2010) 186 Cal.App.4th 87, 94-95; Jurcoane v. Superior Court (2001) 93 Cal.App.4th 886, 894, 897.) Because there is no mention of a transmutation agreement altering the right to reimbursement under section 2640, subdivision (b) as there is in section 2640, subdivision (c), we reject Christine’s argument.

In sum, Christine has not shown the court erred by finding that William was entitled to reimbursements for his separate property contributions to the community under section 2640.

B. Section 271 Sanctions

Christine contends the court erred in connection with its award of $15,000 in attorney fees under section 271. That statute provides for an award of attorney fees and costs, as a sanction, when the conduct of a party or attorney frustrates the policy of the law to promote settlement. (§ 271, subd. (a).) “A court awarding attorney fees and costs as a sanction under section 271 must consider ‘all evidence concerning the parties’ incomes, assets, and liabilities’ and must not impose an unreasonable financial burden on the sanctioned party.” (In re Marriage of Fong (2011) 193 Cal.App.4th 278, 291 (Fong).)

In its oral ruling, the court stated, “With respect to . . . Family Code [s]ection 271 and the efforts to settle it under 271, I am [going to] take into account the ability to pay and the effect it would have on the—on the children.” The court found that Christine impaired the parties’ attempts to settle the matter, and “taking into account the ability to pay, the 271 sanctions [against Christine] are going to be $15,000.”

Christine argues the court did not sufficiently articulate whether it took into consideration the financial burden of the award on Christine. She fails to cite any authority for the proposition that the court was required to expressly state its reasoning on the record. She appears to rely on In re Marriage of Fossum (2011) 192 Cal.App.4th 336 (Fossum), but that opinion does not discuss the issue. Christine cites various authorities for the proposition that a court must consider a party’s ability to pay, and not impose an unreasonable financial burden. (See Fong, supra, 193 Cal.App.4th at p. 291; In re Marriage of Falcone & Fyke (2008) 164 Cal.App.4th 814, 828 (Falcone & Fyke); In re Marriage of Norton (1988) 206 Cal.App.3d 53, 60.) But none of these authorities supports her argument that the court erred by not detailing its reasoning. Indeed, the rule is the opposite: “In assessing [the] contention that the trial court failed to consider the financial burden of its sanction award, we indulge all reasonable inferences to uphold the trial court’s order.” (In re Marriage of Petropoulos (2001) 91 Cal.App.4th 161, 177-178; see Taylor v. Nabors Drilling USA, LP (2014) 222 Cal.App.4th 1228, 1249-1250.) ” ‘[W]e will overturn such an order only if, considering all of the evidence viewed most favorably in its support and indulging all reasonable inferences in its favor, no judge could reasonably make the order.’ ” (Fong, at p. 291.) Christine has not shown the court erred.

C. Attorney Fees Under Section 1101

Christine also contends the court erred in connection with its award of $25,000 in attorney fees under section 1101, subdivision (g). That statute provides, in relevant part, “Remedies for breach of the fiduciary duty by one spouse . . . 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.” (§ 1101, subd. (g).)

The court sanctioned Christine based on her efforts, in concert with Yun, to conceal the truth about the bar proceeds and the loans to Yun. In making the award, the court stated, “I don’t see anything in [section] 1101 that asks me to mitigate the attorney[‘]s fees based on ability to pay.”

Christine argues the court erred by failing to consider her ability to pay the fee award under section 1011, subdivision (g). We agree. The Family Code mandates an ability to pay determination for any fee or cost award under the Code: “If a court orders a party to pay attorney’s fees or costs under this code, the court shall first determine that the party has or is reasonably likely to have the ability to pay.” (§ 270; see Fossum, supra, 192 Cal.App.4th at p. 350, fn. 2 (conc. & dis. opn. of Rothschild, J.).) We recognize that the award of attorney fees is mandatory under section 1101, subdivision (g)—in the sense that the court has no discretion to simply waive the amount or deny a request outright for reasons unrelated to the sanctioned party’s financial circumstances—but there is nonetheless an obligation to consider ability to pay in determining whether it is necessary to adjust the amount of fees to impose as a sanction. (See Hogoboom & King, Cal. Practice Guide: Family Law, supra, ¶ 8:617.5 [section 1101, subdivision (g)’s remedies “are cast in mandatory terms,” such that “the court has no discretion to deny the aggrieved spouse’s request for attorney fees in this situation”; “[b]ut, under the Family Code, even a ‘mandatory’ fees award is subject to an ability to pay determination.”].)

However, “error alone does not warrant reversal. ‘It is a fundamental principle of appellate jurisprudence in this state that a judgment will not be reversed unless it can be shown that a trial court error in the case affected the result.’ [Citation.] ‘ “The burden is on the appellant, not alone to show error, but to show injury from the error.” ‘ [Citation.] ‘Injury is not presumed from error, but injury must appear affirmatively upon the court’s examination of the entire record.’ [Citation.] ‘Only when an error has resulted in a miscarriage of justice will it be deemed to be prejudicial so as to require reversal.’ [Citation.] A miscarriage of justice is not found ‘unless it appears reasonably probable that, absent the error, the appellant would have obtained a more favorable result.’ ” (Falcone & Fyke, supra, 164 Cal.App.4th at pp. 822-823.)

Christine does not address whether the court’s error was prejudicial. She does not discuss her financial situation or make any effort to show she did not have the ability to pay (or that the amount imposed was not otherwise appropriate under section 1101). Indeed, the court’s determination that Christine had the ability to pay attorney fees under section 271 after it made the challenged award under section 1101 strongly suggests the court would have found Christine had the ability to pay the former award if it had considered the issue. (See In re Marriage of Schleich (2017) 8 Cal.App.5th 267, 292, fn. 9 [“By determining that Husband had the ability to pay a portion of Wife’s attorney’s fees under section 2030 after it had awarded Wife attorney’s fees under sections 1101 and 2107, the court necessarily determined that Husband had, or was reasonably likely to have, the ability to pay the sanctions award.”].) Christine has not shown the court’s failure to consider her ability to pay was prejudicial.

DISPOSITION

The judgment is reversed to the extent it grants relief against Yun and adjudicates the community’s interests related to the bar and the personal and BSC loans. The matter is remanded to the trial court for further proceedings consistent with this opinion. On remand, the court may reconsider the imposition and amount of any sanctions or fee awards in light of these proceedings. In all other respects, the judgment is affirmed. The parties shall bear their own costs on appeal.

GUERRERO, J.

WE CONCUR:

HUFFMAN, Acting P. J.

O’ROURKE, J.