Marriage of Abdou and Malak CA2/7

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Filed 5/14/21 Marriage of Abdou and Malak CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         SECOND APPELLATE DISTRICT

                                     DIVISION SEVEN


In re the Marriage of ATEF                                  B304087
ABDOU and MARIAM ABDEL
MALAK.                                                      (Los Angeles County
                                                            Super. Ct. No. BD559444)

ATEF ABDOU,

         Plaintiff and Appellant,

         v.

MARIAM ABDEL MALAK,

         Defendant and Respondent.


     APPEAL from a judgment of the Superior Court of Los
Angeles County, Shelley L. Kaufman, Judge. Affirmed.
     Koletsky, Mancini, Feldman & Morrow, Stephen C.
Mancini and Suzy S. Marjanian for Plaintiff and Appellant.
      Leslie L. Niven for Defendant and Respondent.

                              __________________________
       Atef Abdou appeals from a judgment awarding his former
spouse Mariam Abdel Malak damages and attorneys’ fees and
costs for his breach of fiduciary duty. Abdou contends the family
court erred in characterizing his 100 percent interest in a
business entity, United No. 1, LLC, and United’s real property
asset as community property. Further, Abdou argues he did not
breach his fiduciary duty to Malak by transferring his interest in
United to his mother because his mother owned the company and
its real property and he managed the business for her. He also
argues Malak was not harmed by the transfer because the
property was underwater. Finally, Abdou contends the family
court erred by not staying its decision until after resolution of
Malak’s quiet title action because adjudication of the quiet title
action could result in duplicative awards. We affirm.

      FACTUAL AND PROCEDURAL BACKGROUND1

A.     The Marital Dissolution and Property Dispute
       Abdou and Malak were married on January 8, 2004. In
February 2009 Malak filed a petition for dissolution of marriage.
Abdou and Malak reconciled, and Malak dismissed her petition.
The couple separated again on February 21, 2012. Abdou filed a
petition for dissolution on February 22, 2012, and Malak filed a
petition five days later. The family court consolidated the
proceedings and deemed Malak’s petition a response to Abdou’s




1     Our summary of the facts is based on the undisputed facts
in the family court’s July 30, 2019 statement of decision and trial
testimony.




                                 2
petition.2 The court entered a judgment dissolving the marriage
on November 7, 2013.
       On December 18, 2018 Malak filed a complaint to quiet
title against United relating to real property located at 1303 S.
Western Avenue in Los Angeles (1303 Western property).3 It is
undisputed that United owns the 1303 Western property, which
United purchased on September 7, 2004 for $1,438,372. The
property contains a gas station with a food center and a car wash.
Because Abdou held a 100 percent ownership interest in United
at the time of the purchase, Abdou reported the 1303 Western
property as an asset valued at the purchase price on his 2004 tax
return.4

2      Malak sought to join Abdou’s mother Sohei Youssef
Moussa, Abdou’s brother Adel Hanna, and various business
entities, including United. The family court granted Malak’s
request to join Moussa and Hanna, but not the entities. Moussa
brought two separate motions to quash service of the summons
and complaint, both of which the family court granted. Moussa
was never served, and she died in Egypt in 2016. Malak did not
request to join Moussa’s estate.
3     Malak did not file a notice of related cases until the trial
had commenced in the marital dissolution action. The superior
court related the two cases on March 4, 2019 and consolidated
the proceedings on June 24, 2019 (after the trial concluded but
before the family court issued its final statement of decision).
4      Malak’s forensic accountant, John Gustavson, testified that
because United as a limited liability company had a single owner,
it was “considered a disregarded entity for tax purposes,” and
therefore all activity with respect to the company was reported on
Abdou’s personal tax returns as the owner. Gustavson did not
clarify whether Abdou’s 2004 tax return was filed separately or
jointly with Malak.




                                 3
      Abdou admitted United was formed during his marriage to
Malak. United made the loan payments on the 1303 Western
property during the marriage. Beginning in 2005 Abdou and
Malak reported the rental income and depreciation from the
property on their joint tax returns. Gustavson, Malak’s forensic
accounting expert, testified Abdou and Malak’s joint tax returns
showed a rental cash flow of approximately $80,000 per year from
the property. Further, Malak testified she went with Abdou to
work at the gas station every day during her pregnancy.
      Abdou testified the purchase of the 1303 Western property
was “an investment that was done by” his mother Moussa.
Gustavson confirmed Moussa wrote a $250,000 check that was
deposited into escrow as a down payment for the purchase of the
property. Abdou testified he did not borrow money from Moussa
for the down payment, nor did Moussa gift him the money to
acquire the property.
      On January 12, 2010 Abdou signed a membership transfer
agreement to transfer 90 percent of his interest in United to
Moussa for $50,000. On January 3, 2011 Abdou transferred his
remaining 10 percent interest in United to Moussa for $5,000.
Gustavson testified Abdou and Malak’s 2010 and 2011 joint tax
returns reflected capital gains from the sale of United to Moussa.
As of January 2010 the cash flow from the 1303 Western property
to Abdou and Malak ceased.

B.    The Statement of Decision
      After a trial, supplemental briefing, and the filing of
objections, on July 30, 2019 the family court issued its final
statement of decision. The court rejected Abdou’s claim the
10 percent down payment United used to purchase the




                                 4
1303 Western property came from Moussa’s funds and was her
investment. The court explained, “[Abdou] relies on his
testimony . . . to support his claim that the money for United 1 to
purchase the real property at 1303 Western ‘came from’ [his]
mother. . . . The passages cited state solely that he did not
borrow money from his mother, she did not gift money to him for
the down payment, and he does not owe her any money. This
testimony lacks reliability and credibility as to the true owner of
United 1 and the source of the funds to purchase the real
property at 1303 Western. The facts remain . . . at the time of the
purchase of the real property by United 1, [Abdou] was the only
member. Six years after the purchase of real property by United
1, which [Abdou] claims was owned by his mother, he transfers
ownership to her. [Abdou’s] claim is not credible.”
      The family court reasoned, “[Abdou’s] conduct does not
comport with his claim that 1303 Western was owned by his
mother through the entity United 1. Why would he then execute
a transfer agreement in 2010 and 2011 for remuneration from his
mother if she was the actual owner? This transfer occurred
shortly after [Malak] left the family home in 2009 and filed for
dissolution. [Abdou] filed his response to the dissolution on
March 11, 2009 and indicated that he was seeking to confirm as
his separate property United 1, including all personal and real
property assets. . . . Even if [Abdou’s] mother provided money to
[Abdou] for the down payment, there is insufficient evidence as to
the characterization of this money, or that this establishes she
was the owner of United 1, and not [Abdou].”
      The family court found Abdou failed to rebut the
presumption in Evidence Code section 662 that “[t]he owner of
the legal title to property is presumed to be the owner of the full




                                5
beneficial title.” The court stated, “The Court does not find
sufficient credible evidence that United 1 belonged to [Abdou’s]
mother at the time of acquisition. [Abdou] has provided little to
no documentary evidence of this claim other than his testimony.”
       The family court also found Abdou failed to rebut the
presumption in Family Code section 760 that all real or personal
property acquired during marriage is community property. The
court explained, “The 1303 Western property was in fact acquired
during marriage by United 1, wherein [Abdou] was the only
member. In a reply argument, [Abdou] states if 1303 Western
was his property through United 1, the ownership was only
obtained from funds that were a gift from his mother, and thus
should be deemed his separate property . . . . While testimony
was provided that he received funds from his mother to be used
for the down payment, [Abdou] did not provide further testimony
as to how the loan payments were made or applied to the
purchase of 1303 Western. [Abdou] had the burden to do the
appropriate tracing if this was his claim; he did not. Further,
Abdou admitted to working at the location, and managing the
property. He used community efforts thus to maintain the
property.”
       The family court concluded Malak met her burden to prove
Abdou breached his fiduciary duty by selling his interest in
United for less than the purchase price of the property. The court
awarded Malak 50 percent of the equity in the 1303 Western
property, explaining, “The community held an asset from date of
marriage which had a value of more than one million dollars. By
2011, not for comparable value, the asset was sold. Pursuant to
Family Code section 1101(g), [Malak] is entitled to 50% of the
value of the transferred asset.”




                                6
      The family court determined that Abdou owed Malak
$637,000 for his breach of fiduciary duty. The court based its
award on the testimony of real estate appraiser James Willard
and Gustavson.5 Willard testified the property’s value was
$2,107,000 as of February 16, 2012 (the date of separation), and
$3,160,000 as of December 12, 2018 (the date of his appraisal).
Gustavson calculated the equity in the property as of December
12, 2018 was $1,274,000 by taking the current market value of
the property ($3,160,000) less the current encumbrances reflected
in the property records ($1,886,000). The court also awarded
Malak $106,196 in attorneys’ fees and costs pursuant to Family
Code section 1101, subdivision (g), based on Abdou’s breach of
fiduciary duty.

C.     Entry of Judgment and the Appeal
       On November 8, 2019 Abdou moved for a new trial, which
the family court denied. On March 4, 2020 the court entered a
judgment ordering Abdou to pay $637,000 to Malak for his breach
of fiduciary duty and awarding Malak $106,196 in attorneys’ fees
and costs. Abdou timely appealed.6

5     The family court found Abdou’s accounting expert, Jackie
Adams-Ings, “did not assign a value to the loss of this property,
asserting the property belonged to [Abdou’s] mother.”
6     Although Abdou filed his notice of appeal on February
6, 2020, before entry of judgment, we consider his premature
notice of appeal a valid “notice of appeal filed after judgment is
rendered but before it is entered.” (Cal. Rules of Court,
rule 8.104(d)(1).) We therefore treat the notice of appeal as filed
immediately after entry of judgment. (Ko v. Maxim Healthcare
Services, Inc. (2020) 

58 Cal. App. 5th 1144

, 1149; Valdez v.
Seidner-Miller, Inc. (2019) 

33 Cal. App. 5th 600

, 607.)




                                 7
                          DISCUSSION


A.      Characterization of Property in a Martial Dissolution
        Proceeding
        “In a marital dissolution proceeding, a court’s
characterization of the parties’ property—as community property
or separate property—determines the division of the property
between the spouses. [Citations.] Property that a spouse
acquired before the marriage is that spouse’s separate property.
(Fam. Code, § 770, subd. (a)(1).) Property that a spouse acquired
during the marriage is community property (id., § 760) unless it
is (1) traceable to a separate property source [citations],
(2) acquired by gift or bequest (Fam. Code, § 770, subd. (a)(2)), or
(3) earned or accumulated while the spouses are living separate
and apart (id., § 771, subd. (a)).” (In re Marriage of Valli (2014)

58 Cal. 4th 1396

, 1399-1400; accord, In re Brace (2020) 

9 Cal. 5th
903

, 914.)
        Under Family Code section 760,7 “‘there is a general
presumption that property acquired during marriage by either
spouse other than by gift or inheritance is community property
unless traceable to a separate property source. [Citation.] This
is a rebuttable presumption affecting the burden of proof; hence it
can be overcome by the party contesting community property



7     Further undesignated statutory references are to the
Family Code. Section 760 provides, “Except as otherwise
provided by statute, all property, real or personal, wherever
situated, acquired by a married person during the marriage while
domiciled in this state is community property.”




                                 8
status. [Citation.] Since this general community property
presumption is not a title presumption, virtually any credible
evidence may be used to overcome it, including tracing the asset
to a separate property source, showing an agreement or clear
understanding between the parties regarding ownership status
and presenting evidence the item was acquired as a gift.’” (In re
Marriage of Ciprari (2019) 

32 Cal. App. 5th 83

, 91; accord, Trenk
v. Soheili (2020) 

58 Cal. App. 5th 1033

, 1048 [Section 760 “does not
contain any requirement that the source of funds used to
purchase the property must be proved before the presumption
applies.”].) “A spouse’s claim that property acquired during a
marriage is separate property must be proven by a
preponderance of the evidence.” (In re Marriage of 

Valli, supra

,
58 Cal.4th at p. 1400; accord, Trenk, at p. 1045 [Section 760
“establishes a presumption affecting the burden of proof, which
may be rebutted by the preponderance of the evidence.”].)

B.     Standard of Review
       “The existence and scope of a fiduciary duty is a question of
law that we review de novo. [Citation.] However, ‘the factual
background against which we [answer that question] is a function
of a particular case’s procedural posture.’ [Citation.] 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.’” (In re
Marriage of Kamgar (2017) 

18 Cal. App. 5th 136

, 144; accord, In re
Marriage of Bonds (2000) 

24 Cal. 4th 1

, 31 [“‘“In reviewing the
evidence on . . . appeal all conflicts must be resolved in favor of




                                 9
the [prevailing party], and all legitimate and reasonable
inferences indulged in [order] to uphold the [finding] if
possible.”’”]; In re Marriage of Rossi (2001) 

90 Cal. App. 4th 34

, 40
[“We review factual findings of the family court for substantial
evidence, examining the evidence in the light most favorable to
the prevailing party.”].) “‘“Substantial evidence” is evidence of
ponderable legal significance, evidence that is reasonable,
credible and of solid value.’” (Estate of O’Connor (2017)

16 Cal. App. 5th 159

, 163; accord, In re Marriage of Burwell (2013)

221 Cal. App. 4th 1

, 24-25, fn. 21.)
        However, a different standard of review applies where the
appellant had the burden of proof in the family court. “‘In the
case where the trier of fact has expressly or implicitly concluded
that the party with the burden of proof did not carry the burden
and that party appeals, it is misleading to characterize the
failure-of-proof issue as whether substantial evidence supports
the judgment.’ [Citation.] ‘[W]here the issue on appeal turns on
a failure of proof at trial, the question for a reviewing court
becomes whether the evidence compels a finding in favor of the
appellant as a matter of law.’” (Juen v. Alain Pinel Realtors, Inc.
(2019) 

32 Cal. App. 5th 972

, 978-979 (Juen); accord, Almanor
Lakeside Villas Owners Assn. v. Carson (2016) 

246 Cal. App. 4th
761

, 769; Dreyer’s Grand Ice Cream, Inc. v. County of Kern (2013)

218 Cal. App. 4th 828

, 838 (Dreyer’s Grand Ice Cream).)
       “‘Specifically, the question becomes whether the appellant’s
evidence was (1) “uncontradicted and unimpeached” and (2) “of
such a character and weight as to leave no room for a judicial
determination that it was insufficient to support a finding.”’”

(Juen, supra

, 32 Cal.App.5th at p. 979; accord, Glovis America,
Inc. v. County of Ventura (2018) 

28 Cal. App. 5th 62

, 71; Dreyer’s




                                10
Grand Ice 

Cream, supra

, 218 Cal.App.4th at p. 838.)
“‘[W]here . . . the judgment is against the party who has the
burden of proof, it is almost impossible for him to prevail on
appeal by arguing the evidence compels a judgment in his favor.’”
(Atkins v. City of Los Angeles (2017) 

8 Cal. App. 5th 696

, 734;
accord, Bookout v. State of California ex rel. Dept. of
Transportation (2010) 

186 Cal. App. 4th 1478

, 1486.) “That is
because unless the trial court makes specific findings of fact in
favor of the losing [party], we presume the trial court found the
[losing party’s] evidence lacks sufficient weight and credibility to
carry the burden of proof. [Citations.] We have no power on
appeal to judge the credibility of witnesses or to reweigh the
evidence.” (Bookout, at p. 1486; accord, Jennifer K. v. Shane K.
(2020) 

47 Cal. App. 5th 558

, 579.)

C.     The Evidence Presented by Abdou at Trial Does Not Compel
       the Conclusion United Was Not Community Property
       Abdou contends the family court erroneously characterized
United and the 1303 Western property as community property,
pointing to the testimony of his accounting expert, Jackie Adams-
Ings, that “minimal community funds were available in the first
year of the marriage.” Thus, he argues, it was not plausible eight
months into his marriage with Malak that he and Malak had
accumulated $250,000 for the down payment. Instead, as Abdou
testified, his mother wrote him a check for the down payment
that he used to purchase the property for Moussa. Further,
Gustavson confirmed that Moussa wrote a $250,000 check as a
down payment to acquire the property.
       These facts do not compel a conclusion the 1303 Western
property was not community property. The trial court found




                                 11
Abdou’s testimony “lack[ed] reliability and credibility as to the
true owner of United 1 and the source of the funds to purchase
the real property at 1303 Western,” noting Abdou was the only
member of United at the time of the purchase, and Abdou
transferred the property six years later to Moussa (shortly after
Malak moved out in 2009), showing Moussa was never the owner
of the property. As to the $250,000 down payment, Abdou
testified it was neither a gift nor a loan to him. Although there
was evidence Moussa made this payment, as the family court
found, Abdou did not testify as to how the loan payments were
made (for example, whether Moussa made any loan payments).
And it was United, not Moussa, that made the payments on the
loan. Abdou acknowledged he worked at the location and
managed the property during the marriage, and Malak testified
she worked at the gas station with Abdou every day during her
pregnancy. In addition, Abdou reported the purchase of the 1303
Western property on his 2004 personal tax return, and Abdou
and Malak reported the rental income and depreciation from the
property on their joint tax returns starting in 2005. Moreover,
when Abdou transferred his interest in United to Moussa in 2010
and 2011, Abdou and Malak reported the capital gains on their
joint tax returns.
       Further, it was undisputed that United was the record
owner of the 1303 Western property. Under Evidence Code
section 662, “the owner of the legal title to property is presumed
to be the owner of the full beneficial title,” and the “presumption
may only be rebutted by clear and convincing proof.” In addition,
Abdou admitted United purchased the property eight months
after he and Malak married, and thus the presumption under
section 760 that the property was community property also




                                12
applied. The family court found Abdou did not rebut either
presumption. Abdou failed to present evidence that compels the
conclusion he rebutted the presumptions the 1303 Western
property was owned by United and was community property.

(Juen, supra

, 32 Cal.App.5th at pp. 978-979; Dreyer’s Grand Ice

Cream, supra

, 218 Cal.App.4th at p. 838.)

D.     Substantial Evidence Supports the Family Court’s Finding
       Abdou Breached his Fiduciary Duty
       Abdou contends even if United is community property, he
did not breach his fiduciary duty because under section 1100,
subdivision (d), he had primary management and control of
United, and thus he was authorized unilaterally to transfer
United and the 1303 Western property to Moussa. This
contention lacks merit.
       Section 1100, subdivision (d), provides, “Except as provided
in subdivisions (b) and (c), and in Section 1102, a spouse who is
operating or managing a business or an interest in a business
that is all or substantially all community personal property has
the primary management and control of the business or interest.
Primary management and control means that the managing
spouse may act alone in all transactions but shall give prior
written notice to the other spouse of any sale, lease, exchange,
encumbrance, or other disposition of all or substantially all of the
personal property used in the operation of the business (including
personal property used for agricultural purposes), whether or not
title to that property is held in the name of only one spouse. . . .”
       Abdou ignores section 1100, subdivision (b), which
provides, “A spouse may not make a gift of community personal
property, or dispose of community personal property for less than




                                 13
fair and reasonable value, without the written consent of the
other spouse. This subdivision does not apply to gifts mutually
given by both spouses to third parties and to gifts given by one
spouse to the other spouse.” There is no evidence Abdou gave
written notice to Malak, or that Malak provided written consent
to Abdou’s transfer of United and the 1303 Western property to
Moussa. Nor is there evidence Abdou and Malak mutually
transferred United to Moussa as a gift. Rather, as the family
court found, Abdou transferred his interest in United to Moussa
in 2010 and 2011 after Malak initiated the first marital
dissolution proceedings and moved out of the family home.
Further, the family court found credible Malak’s testimony she
did not know Abdou sold his interest in United and its asset to
Moussa.
      Notwithstanding Abdou’s failure to provide Malak notice of
the sale of United to Moussa, Abdou asserts the sale did not
impair Malak’s 50 percent interest in United and the 1303
Western property. Without any citation to the record, Abdou
claims “the property was upside down on its loan” at the time of
the sale to Moussa. But United purchased the property on
September 7, 2004 for $1,438,372. Abdou and Malak’s joint tax
returns reflected a rental cash flow of approximately $80,000 per
year from the property, which was sufficient for United to make
the loan payments. Then, in 2010 and 2011, Abdou sold United
to Moussa for $55,000, which was significantly less than the
purchase price of the 1303 Western property. Willard testified
the property value was $2,107,00 as of February 16, 2012, and
$3,160,000 as of December 12, 2018. Substantial evidence
therefore supports the family court’s finding Abdou breached his




                               14
fiduciary duty by selling United without Malak’s knowledge and
for less than its fair market value.

E.    The Family Court’s Award Was Proper
      Abdou contends the family court erred by not staying its
decision until Malak’s quiet title action against United was
resolved because a favorable result in the quiet title action could
result in Malak receiving more than her 50 percent share in the
property. This argument is not persuasive.
      On January 2, 2019, prior to trial in the marital dissolution
action, Malak’s attorney requested the family court “make a
ruling on whether it is proper go forward today in light of the
motion to consolidate and the complaint to quiet title.” Abdou
could have joined in the request for a continuance, but he did not.
The family court denied Malak’s request because the dissolution
action was filed in 2012 and the quiet title complaint was filed “a
couple of weeks before trial.” After trial in the marital
dissolution action, the superior court related the family law case
and the quiet title action and then consolidated them on June 24,
2019. Abdou’s assertion that Malak could obtain a judgment
awarding her another 50 percent interest in 1303 Western in the
quiet title action is speculative given that the quiet title action
will be heard as part of the consolidated proceeding.




                                15
                         DISPOSITION

     The judgment is affirmed. Malak is to recover her costs on
appeal.



                                    FEUER, J.
We concur:



             SEGAL, Acting P. J.



             MCCORMICK, J.*




*     Judge of the Orange Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California
Constitution.




                               16

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