State Board of Equalization v. Woo

Opinion

HANLON, P. J.

Doreen H. Y. Woo (appellant) appeals from an earnings withholding order for taxes. The underlying tax liability stems from delinquent sales taxes in the amount of $35,504.43 owed by James K. Ho, appellant’s husband, to respondent State Board of Equalization. Appellant contends that a marital agreement she entered into with Ho transmuting the couple’s community property to the separate property of each spouse precludes respondent from garnishing her wages. We affirm.

Factual Background

In 1992, respondent determined that Ho owed taxes, interest and penalties in the amount of $37,419.90 which represented the unpaid sales taxes of the Monsoon Restaurant. In September 1996, Ho filed a complaint seeking a

[483]

refund of certain payments blade towards that tax liability. The trial court sustained respondent’s demurrer to the complaint without leave to amend and entered judgment against Ho. This court affirmed that judgment in an unpublished opinion filed on December

2,

1997, in

Ho v. State Bd. of Equalization,

A077815.

In July 1995, respondent notified appellant that it would seek an earnings withholding order against her to pay Ho’s tax debt. On November 5, 1995, appellant and Ho entered into a marital agreement transmuting their future earnings to separate property. Appellant subsequently became employed by Wells Fargo Bank, earning approximately $500,000 per year.

On July 27, 1999, respondent filed an application for an earnings withholding order for taxes. In support of the order, respondent argued that the marital agreement between appellant and Ho did not bar garnishment of her wages because the agreement was fraudulent and unenforceable under Family Code section 851 and Civil Code section 3439.04. Appellant contended that the marital agreement did not constitute a fraudulent transfer because she was not employed by Wells Fargo Bank at the time the agreement was executed and that her future earnings were a mere expectancy that could not be transferred. Following a hearing, the trial court entered an earnings withholding order for taxes directing Wells Fargo Bank to withhold and pay to respondent the sum of $3,000 per month from appellant’s earnings.