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Webb v. Webb

Court of Appeals of Louisiana, Fifth Circuit

January 24, 2018




          COUNSEL FOR DEFENDANT/APPELLANT, DANIEL ANDREW WEBB Amy C. Cowley Frank P. Tranchina, Jr. Mark J. Mansfield Jennifer C. deBlanc

          Panel composed of Judges Susan M. Chehardy, Fredericka Homberg Wicker, and Robert A. Chaisson


         Appellant, Daniel Andrew Webb, seeks review of the trial court's January 13, 2016 community property partition judgment. On appeal, Mr. Webb assigns as error the trial court's classification of certain debts as his separate obligations and, relatedly, the denial of his reimbursement claims associated with payments made toward those debts after termination of the community. Mr. Webb further assigns as error the trial court's denial of his reimbursement claims for community use of his separate income generated from a Trust, as well as the denial of his rental reimbursement claim arising out of Mrs. Webb's exclusive use of the community home. For the following reasons, we reverse the trial court's judgment in part and affirm in part.

         In her answer to the appeal, Elizabeth Webb alleges that the trial court erred in granting Mr. Webb's motion for new trial in part, finding that Mr. Webb is entitled to reimbursement from the community for one-half of the expenses related to their daughter's wedding. For the reasons discussed herein, we find that Mr. Webb is not entitled to reimbursement for those expenses and we reverse the trial court's granting of a new trial as to that issue.

         Procedural History and Factual Background

         Daniel Webb and Elizabeth Webb were married on December 29, 1972. During their marriage, the parties had three children: Craig, Preston and Pierce, all of whom have reached the age of majority. On March 6, 2012, after she discovered that Mr. Webb had fraudulently forged her signature on a home equity mortgage, resulting in a $250, 000.00 loan encumbering the family home, Mrs. Webb filed a petition for divorce, requesting interim and final spousal support in addition to exclusive use of the family home and a partition of community property.

         On May 31 2012, Mr. and Mrs. Webb stipulated to the Recommendations of the Hearing Officer that granted Mrs. Webb interim use and occupancy of the family home at 322 Hector Avenue in Metairie, and deferred to trial the issue of whether Mr. Webb would be entitled to rental reimbursement.

         The community property partition trial was held on June 15, 2015, and July 27, 2015. At the center of the partition trial, and pertinent to this appeal, were the following issues: (1) whether a $250, 000.00 First National Bank of Commerce (FNBC) loan-fraudulently executed without the approval of Mrs. Webb-should be classified as a separate or community obligation; (2) whether a $46, 037.94 Capital One line of credit should be classified as a separate or community obligation; (3) whether Mr. Webb is entitled to reimbursement for: (a) payments Mr. Webb made after termination of the community toward the FNBC loan and the Capital One line of credit; (b) community use of his separate funds generated from a family trust; (c) the rental value for Mrs. Webb's exclusive use of the family home prior to partition; and (d) expenses paid from the FNBC loan funds related to Mr. and Mrs. Webb's daughter's wedding. Additional issues were determined at trial, such as the valuation of Mr. Webb's law firm, Sutterfield and Webb, as a community asset, as well as the calculation of tax liabilities, which are not at issue in this appeal.

         During the two day trial, the following witnesses testified: Daniel Webb, Elizabeth Webb, Mark DeRouen, Albert Pappalardo, and Dale Fleishmann.[1]

         The evidence presented at trial reflects that, during the course of their marriage, Mr. Webb took on a series of debts with multiple banks without notifying Mrs. Webb. Despite his contention that Mrs. Webb was aware of the debt incurred throughout their marriage, the record reflects that Mr. Webb took steps to hide his debt from his wife.[2] In his testimony, Mr. Webb acknowledged that he concealed from his wife a lawsuit filed against Mr. and Mrs. Webb after he defaulted on a $75, 000.00 Capital One loan.[3] He testified that he requested that service of process on Mrs. Webb be waived, because he "didn't want her to know about the lawsuit."[4] Further, as discussed in more detail below, Mr. Webb additionally testified that he concealed from his wife a $250, 000.00 FNBC loan, providing his office address on the FNBC documentation because he "probably" did not want his wife to know about the debt, and knew that Mrs. Webb absolutely would not have agreed to execute a home equity mortgage.

         Concerning the FNBC loan, Mr. Webb testified that, on December 12, 2011, he executed a $250, 000.00 loan with First NBC and that the funds were deposited into a newly created FNBC bank account in Mr. Webb's name only, opened on October 21, 2011. To secure this loan, Mr. Webb executed a home equity mortgage on the family home, securing indebtedness up to one million dollars in favor of FNBC. The record reflects, and Mr. Webb admits, that he fraudulently affixed Mrs. Webb's signature on the FNBC mortgage documents and intentionally concealed from Mrs. Webb the existence of the mortgage.

         Mr. Webb testified that a portion of the $250, 000.00 FNBC loan paid in full a previously executed, unsecured $120, 000.00 loan balance, also with FNBC, which he incurred to satisfy past due federal tax obligations.[5] Additionally, Mr. Webb testified that a portion of the $250, 000.00 FNBC loan funds were used to settle the Capital One lawsuit filed after he defaulted on the $75, 000.00 loan, to pay Louisiana state taxes, and to pay the remaining portion of the expenses related to his daughter's wedding.[6]

         Concerning his claim for reimbursement for his separate funds used to satisfy community obligations, Mr. Webb testified that he received separate income from The Harold A. Webb Trust created by his father, Harold Webb, before his death. The Trust was created for the benefit of Harold Webb's children and grandchildren.[7] Pursuant to the terms of the Trust, according to Mr. Webb, the Trust was divided into equal shares to Mr. Webb, his siblings, his children, and his nieces and nephews.

         Under the terms of Trust, Mr. Webb received a 1/8 interest and each of his three children received a 1/8 interest.[8] Mr. Webb testified that the Trust was established to pay for the tuitions of Harold Webb's grandchildren, and was used to pay for the children's summer camps as well as for the children's portion of the expenses for a family trip to Europe in 2000 to celebrate Mrs. Webb's fiftieth birthday.

         Mr. Webb received income from the Trust from 1988 to 2000. In 1993, Mr. Webb filed a "Reservation of Income From Separate Property" to keep the Trust income as his separate property, which he "probably" did not disclose to his wife. Mr. Webb testified that the largest distributions he received from the Harold A. Webb Trust were in the years 1993 and 1994. The Webb's federal tax returns from 1993and 1994 show that Mr. Webb earned $31, 997.00 in 1993 and $20, 322.00 in 1994in dividend distributions from the Trust. Although Mr. Webb filed a Reservation of Income from Separate Property in 1993, he testified on the first day of trial that the income distributions from his father's Trust were not deposited into a separate bank account, and the money was used to enhance the community.

         However, on the second day of trial, Mr. Webb changed his story and testified that he deposited the Trust income into a separate Smith Barney account that contained no community funds. In support of this assertion, Mr. Webb provided documents prepared by his expert, Mr. DeRouen, reflecting various deposits into the Smith Barney account, only for the years 1998-2001, totaling $221, 070.88. Mr. Webb testified that the deposits into the Smith Barney account are his separate funds distributed from the Trust.

         In her testimony, Mrs. Webb portrayed herself as a frugal woman who lives on a budget. Mrs. Webb testified that her father opened a separate bank account for her when she was in seventh grade, in which he regularly deposited funds, and she maintained that account as separate throughout her marriage. Following her father's advice, Mrs. Webb testified she never deposited any community funds into her separate bank account during her marriage.

         The record reflects that, throughout the parties' thirty-nine year marriage, Mrs. Webb paid for various community expenses from her separate account. Mrs. Webb testified that she used her separate funds to pay for a portion of Mr. Webb's law school tuition, his credit card bills, a $15, 000.00 loan[9] executed by Mr. Webb and her medical bills after a miscarriage. Mrs. Webb testified that, at the time of trial, her separate bank account was almost completely depleted due to various expenses including: long-term health care, [10] property taxes, tax liabilities, and attorneys' fees.

         During the marriage, Mrs. Webb was in charge of the household checking account and handled all household expenses for the Webb family. According to Mrs. Webb's testimony, she and Mr. Webb-to her knowledge-maintained two community bank accounts. One account was a money market account, where community funds were deposited to earn interest. The second was a joint checking account. Mrs. Webb testified that Mr. Webb would transfer money twice a month from the money market account into the joint checking account for Mrs. Webb to pay household bills. When business was doing well at Mr. Webb's law firm, he would make two monthly deposits, each approximately $8, 500.00, into the joint checking account, which would be used exclusively for community expenses.

         At trial, Mrs. Webb testified to her understanding that the Webbs' family home on Hector Avenue was free and clear of any mortgage or encumbrance, after she had made a final $13, 000.00 payment in March of 2010. Mrs. Webb testified that she was completely unaware of the FNBC loan and the Capital One line of credit at issue in this appeal, and that she would have remained unaware of the FNBC home equity mortgage and loan had FNBC not inadvertently sent a copy of the loan document to the Webb family home. Mrs. Webb testified that in January of 2012-a week before her daughter's wedding-documentation from FNBC arrived by mail to the family home address. When she read the documents, Mrs. Webb noticed that the home address had been crossed out on the return address line on the mortgage application and had been replaced, in Mr. Webb's handwriting, with 650 Poydras Street-Mr. Webb's law firm's address. Sent with the mortgage was a card asking whether the Webbs needed a bankruptcy attorney-this correspondence also notified Mrs. Webb, for the first time, of the pending lawsuit Capital One filed against the Webbs for a separate loan in default. Mrs. Webb testified she read through the mortgage and noticed that her signature had been forged to the document. Mrs. Webb reluctantly decided to wait until after her daughter's wedding to ask Mr. Webb about the undisclosed mortgage, and other debts he may have incurred without her approval.

         Approximately two days after her daughter's wedding, Mrs. Webb testified that she confronted Mr. Webb about the forged mortgage documents. At that time, Mr. Webb admitted to forging Mrs. Webb's signature on the FNBC documents and further informed Mrs. Webb of an additional $120, 000.00 unsecured loan that Mr. Webb obtained without her knowledge, as well as undisclosed $50, 000.00 and $75, 000.00 lines of credit.[11] Mr. Webb told his wife that the $75, 000.00 line of credit and the forged mortgage were "taken care of." Mr. Webb explained to her that he executed the $250, 000.00 FNBC loan in order to settle the pending Capital One lawsuit and to pay off other debts. After discovering the multiple lines of credit and loans that Mr. Webb executed without her knowledge or approval, Mrs. Webb filed for divorce on March 6, 2012.[12]

         On May 30, 2012, Mrs. Webb filed an ethical conduct complaint with the Louisiana Office of Disciplinary Counsel ("ODC"), contending that Mr. Webb, a licensed Louisiana attorney, violated the Rules of Professional Conduct by forging her signature to both the FNBC mortgage documents as well as a 2010 IRS tax form. At trial, the record from the disciplinary proceeding was introduced into evidence.[13]

         In the disciplinary record, Mr. Webb acknowledged his responsibility for forging Mrs. Webb's signature onto the FNBC mortgage application and also acknowledged he forged her signature to a later electronic request to the IRS for an extension to file federal income taxes. [14] In the ODC record, in an early correspondence between Mr. Webb's attorney and the ODC, Mr. Webb acknowledged the forgery, and stated that he would take steps to "make it right" by working with the lender to cancel the mortgage or, at the least, to remove Mrs. Webb from personal exposure for the loan.[15]

         At trial, Mr. Webb vehemently denied that his statements to the Supreme Court and the ODC constitute judicial confessions sufficient to prove that he intended for the FNBC loan to be classified as his separate obligation. Mr. Webb testified that his statement promising to "make it right" related to his attempt to remove Mrs. Webb's name from the mortgage to avoid Mrs. Webb's personal exposure to the creditor, FNBC. Mr. Webb, however, testified that he stated clearly in his pleadings to the ODC that the $250, 000.00 loan was, in fact, a community debt.

         As to the Harold A. Webb Trust, Mrs. Webb testified that she knew of the Trust and knew that her husband and children were receiving distributions from the Trust regularly. However, she stated that Mr. Webb never allowed her access to the Trust and that she was unaware of the amount of income the Trust provided to Mr. Webb and their children. Mrs. Webb testified that she at some point asked for an account statement for her children's interest in the Trust, which Mr. Webb refused to provide.[16]

         In support of his claim that all of the loans he received during the community were community obligations, Mr. Webb retained Marc DeRouen, a certified public accountant ("CPA") and certified valuation analyst ("CVA"). Mr. DeRouen, accepted as an expert in divorce accountancy, testified that he evaluated the parties' assets and liabilities and created both a joint descriptive list as well as other documents reflecting the activity related to Capital One joint checking accounts as well as the $250, 000.00 FNBC loan.[17]

         Concerning the FNBC loan, Mr. DeRouen testified that the $250, 000.00 loan was distributed by FNBC by direct payment of $120, 000.00 to satisfy a prior, unsecured FNBC loan and a direct payment of $78, 652.90 to Capital One to satisfy a separate unsecured loan. The remaining approximately $50, 000.00 was deposited into an FNBC checking account in Mr. Webb's name.[18]

         With regard to the $50, 000 deposited into Mr. Webb's FNBC account, Mr. DeRouen traced the withdrawals from the FNBC bank account to community expenses. Of the $50, 000.00 deposited into Mr. Webb's FNBC account, Mr. DeRouen testified that certain community expenses were paid, including a $29, 655.95 check made payable to the New Orleans Country Club as a final payment for his daughter's wedding.

         Concerning the $46, 037.94 Capitol One line of credit at issue in this appeal, Mr. DeRouen testified briefly that Mr. Webb made payments toward satisfying that debt after termination of the community, and that Mr. Webb's one-half paid to be reimbursed by Mrs. Webb totaled $4, 203.32. The parties stipulated to that amount at trial, but did not agree that the debt was a community obligation subject to reimbursement by Mrs. Webb. No bank statements or other documentation related to the $46, 037.94 Capital One line of credit were introduced into evidence at trial.

         Mr. DeRouen also testified concerning Mr. Webb's other reimbursement claims. Mr. DeRouen prepared a second document tracking the summary of activity from the Smith Barney bank account, the account in which Mr. Webb alleged he deposited the Trust income. The document tracked deposits and disbursements from the account, only from 1998 to the Trust's dissolution in 2001. Mr. DeRouen calculated the income Mr. Webb made from the Trust through tax returns and determined that $221, 070.88 was deposited into the Smith Barney account which he testified was similar to the amount identified on Mr. Webb's tax returns as attributable to the Trust income.

         According to Mr. DeRouen, the community expenses from 1998 to 2001 paid from the Smith Barney account totaled $206, 881.48. However, in arriving at that figure of withdrawals from the Smith Barney account, Mr. DeRouen could only determine the amount of the withdrawals and to whom the payment was made. He could not testify with certainty whether the withdrawals were for community expenses, but stated that it "certainly [gave] the appearance generally of being community expenditures." Mr. DeRouen did not receive any cancelled checks or other documentation to prove that the money deposited into the Smith Barney account came from the Trust or, conversely, that the money withdrawn from the Smith Barney account was used to benefit the community. Mr. Webb sought a reimbursement of half of his expenditures of his separate assets from the Smith Barney account used to satisfy community obligations-in his joint descriptive list, Mr. Webb sought a total of $84, 720.00 in reimbursement.

         Concerning Mr. Webb's request for rental reimbursement for Mrs. Webb's exclusive use of the family home, both Mr. and Mrs. Webb had experts present testimony regarding the overall value of the home and the expected rental value.

         Mr. Albert Pappalardo testified as an expert real estate appraiser on behalf of Mrs. Webb.[19] Mr. Pappalardo conducted an appraisal of the Webb family home and determined the market value to be $825, 000. To arrive at that valuation, Mr. Pappalardo compared the Webb family home to six properties-including one used by Mr. Webb's appraiser-that were similar in size, condition and location. It was Mr. Pappalardo's opinion that 322 Hector would have a rental value of $4, 000.00 per month from 2012 to 2015.

         Mr. Webb retained Dale Fleishmann, an expert real estate appraiser, to appraise the value of the Webb family home.[20] Ms. Fleishmann's 2014 appraisal valued the Webb family home at $950, 000.00. In Ms. Fleishmann's opinion, the difference in value between Mr. Pappalardo's appraisal and his appraisal value was due to Ms. Fleishmann's choice of comparable houses closer in proximity to the Webb home, and his use of price per square foot comparable to the average in the area. Further, Ms. Fleishmann opined that the monthly rental value of the Webb home was $4, 100.00 in 2014.

         On January 13, 2016, the trial court issued a community property partition judgment, denying all of Mr. Webb's reimbursement claims and finding that the $250, 000.00 FNBC loan and the Capital One line of credit are Mr. Webb's separate obligations.[21] In the court's Reasons for Judgment issued the same day, the court found that Mr. Webb "shall assume full responsibility" for the fraudulent FNBC loan and mortgage-finding that the statements made through his counsel to the Supreme Court during his disciplinary proceedings constituted a judicial confession, acknowledging the FNBC loan, as Mr. Webb's separate property. Additionally, the trial court found that Mr. Webb failed to meet the burden of proof to establish that the $46, 037.00 Capitol One line of credit is a community obligation, and denied his reimbursement claim for payments made to satisfy that debt after the termination of the community. Further, the court denied Mr. Webb's reimbursement claim for the community's alleged use of his separate Trust income-finding that Mr. Webb failed to present evidence with sufficient particularity to be entitled to show that his separate income was used to satisfy community obligations. Finally, the court denied Mr. Webb's rental reimbursement claim, finding that an order requiring retroactive rental reimbursement would be extremely prejudicial to Mrs. Webb.

         Mr. Webb filed a motion for new trial on January 26, 2016, which the court granted in part on May 24, 2016. The court amended its January 13, 2016 judgment, and found that Mr. Webb was entitled to reimbursement of one-half of the $29, 655.95 in expenses from his daughter's wedding- a reimbursement totaling $14, 827.98. In the judgment, the court again denied Mr. Webb's rental reimbursement claim for Mrs. Webb's use of the family home, denied his reimbursement claims for payments made on the FNBC loan and Capitol One line of credit, and his reimbursement claim for the community's alleged use of Mr. Webb's separate Trust income.

         Mr. Webb timely appealed the trial court judgments. Mrs. Webb filed an Answer to Appeal on October 11, 2016, alleging only that the trial court erred in granting Mr. Webb's motion for new trial in part as to his reimbursement claim for the expenses related to their daughter's wedding.

         Law and Analysis

         Classification of Obligations

         On appeal, Mr. Webb first challenges the trial court's classification of two loans-the FNBC loan with a balance of $244, 356.92 and the Capital One line of credit, with a balance of $46, 037.00-as his separate obligations. Mr. Webb contends that both the FNBC loan and the Capital One line of credit are debts incurred during the community regime and, ...

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