Opinion
G053495
10-23-2017
In re Marriage of MONALISA BERBEY and LUCKY LEE GOLD. MONALISA BERBEY, Appellant, v. LUCKY LEE GOLD, Respondent.
Kull + Hall and Robert F. Kull for Appellant. Brown & Charbonneau, Gregory G. Brown and Mark M. Higuchi for Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 08D000206) OPINION Appeal from a postjudgment order of the Superior Court of Orange County, Daphne Sykes Scott, Judge. Reversed. Kull + Hall and Robert F. Kull for Appellant. Brown & Charbonneau, Gregory G. Brown and Mark M. Higuchi for Respondent.
* * *
The stipulated judgment dividing the marital estate of appellant Monalisa Berbey and respondent Lucky Lee Gold awarded Berbey their community property home as her sole and separate property. At the time, the home carried two mortgages in Gold's name only. The judgment required Berbey to use her best efforts to refinance those mortgages to remove Gold's name, and further required Berbey to make the mortgage payments, indemnify Gold against all claims relating to the home, and immediately list the home for sale if she was more than 30 days late on any mortgage payment. Gold had the right to make Berbey's missed payments and obtain reimbursement from her.
Berbey was unable to refinance the mortgages and ultimately fell behind on both the property taxes and mortgage payments. She listed the home for sale, but she received no offers at her desired price after several months on the market. When she continued to miss payments, the trial court granted Gold control over the sale, including the authority to set the sale price and decide whether to accept an offer. Gold promptly sold the home to his current wife, who resold it approximately two months later for a $150,000 profit.
Berbey filed a request for an order compelling Gold to reimburse her for one-half the difference between his sale price and what Berbey claimed was the home's fair market value. According to Berbey, Gold breached his fiduciary duty to her by selling the home for less than it was worth. Gold responded by requesting an order compelling Berbey to reimburse him for the mortgage, tax, and other payments he made regarding the home, plus his attorney fees. The trial court denied Berbey's request, finding Gold did not owe Berbey any fiduciary duties because the two had not been spouses for several years. The court granted Gold's request, and ordered Berbey to pay him $265,000.
We reverse. The Family Code imposes fiduciary duties on spouses relating to their control and management of community property, and those duties continue after separation until the court allocates the asset or liability in question and that asset or liability "has actually been distributed." (Fam. Code, § 2102, subd. (b); see id. at §§ 721, subd. (b), 1100, subd. (e); 2102, subd. (a).) As explained below, we conclude an asset or liability has not actually been distributed until the parties have completed all the steps necessary to satisfy the judgment. Here, the judgment required the sale of the home to complete the distribution. Because the home had not actually been distributed, Gold continued to owe Berbey a fiduciary duty in managing the sale. We remand for the trial court to conduct an evidentiary hearing to determine whether Gold breached his fiduciary duty to Berbey when he sold the couple's home, and then to decide both reimbursement requests based on that determination.
All statutory references are to the Family Code unless otherwise stated.
We also reject Gold's contention Berbey failed to appeal timely because she filed her notice of appeal more than a year after the trial court granted Gold control over the sale. Berbey does not dispute the judgment required the parties to sell the home, nor does she challenge the court's order granting Gold control over the sale. Rather, Berbey challenges the manner in which Gold conducted the sale. The court's order regarding the parties' reimbursement requests is the only order addressing the manner in which Gold conducted the sale, and Berbey timely appealed from that order.
I
FACTS AND PROCEDURAL HISTORY
Berbey and Gold were married for nearly six years when they separated and Berbey filed for divorce. In March 2009, the trial court entered a stipulated judgment dividing the couple's martial estate. The judgment awarded to Berbey as her sole and separate property the community property home in San Clemente, California, subject to any existing liens, claims, and encumbrances. At the time, the home was subject to a first and second mortgage totaling more than $1.6 million. Both mortgages were in Gold's name only, and the judgment required Berbey to use her "reasonable best efforts" to refinance both mortgages in her name "[a]t such time as it is feasible."
The judgment also required Berbey to "assume, pay, indemnify and hold [Gold] harmless in connection with all liens, claims and encumbrances relating to the Family Residence" and to "continue to make all monthly mortgage payments on both the first and second deeds of trust in a timely manner and keep all accounts current." The judgment required Berbey immediately to list the home for sale and sell it if any mortgage payment was more than 30 days late.
The judgment further provided, "Should [Gold], in order to preserve [his] credit, elect to cure any default in connection with any encumbrance secured by the Family Residence, and thereafter makes payments pending sale of the Family Residence, [Berbey] shall reimburse [Gold] for all monies paid by [Gold] to keep the Family Residence current pending the sale of the property." Finally, the judgment included an attorney fee provision that provided, "The prevailing party in any action to enforce or modify any provision of this Judgment shall be awarded reasonable attorneys' fees and costs."
After the court entered the judgment, Gold recorded a grant deed transferring his interest in the home to Berbey. Berbey was unable to refinance the two mortgages because there was insufficient equity in the home, but she continued to make the mortgage payments. In April 2014, however, Gold received a letter from the mortgage servicer notifying him that the property taxes on the home for the 2012/2013 tax year were delinquent. Gold contacted Berbey and asked her to immediately list the home for sale.
In August 2014, Berbey listed the home for sale at $1.964 million. A few weeks later, Gold received another letter from the mortgage servicer advising him that Berbey also had fallen behind on the mortgage payments. Gold therefore filed an ex parte application seeking a court order requiring the immediate sale of the home and granting him complete control over the sale to prevent Berbey from damaging his credit. Although he acknowledged Berbey had listed the home for sale, Gold argued she had significantly overpriced it because he estimated its value at $1.654 million.
In opposition, Berbey acknowledged she was late on a couple mortgage payments and she was behind on the property taxes, but emphasized she recently reduced the sale price by $75,000. The trial court refused to grant Gold control over the sale, but granted him the option to make any mortgage payment that was more than two days late and then recover that amount plus 10 percent interest from Berbey.
Berbey made the mortgage payments for September, October, and November 2014, but the lender reversed the credits for each of those payments after Berbey's bank returned her checks for insufficient funds. Upon learning of this, Gold made these payments to protect his credit, and then filed a second ex parte application seeking an order requiring the immediate sale of the home and granting him complete control over the sale. The trial court denied the request for ex parte relief and set the matter for an evidentiary hearing.
In February 2015, the court heard testimony from both Berbey and Gold about the home and the efforts to sell it. Berbey acknowledged that she had missed several mortgage payments and that she had not paid the property taxes in three years, but she objected to the court granting Gold control over the sale. She explained that she was attempting to sell the home, but had not received any offers. She further explained the home's fair market value was sufficient to pay off the mortgages, reimburse Gold for the payments he made on her behalf, and for her to buy a new residence. Nonetheless, she feared he would sell the home for less than it was worth, leaving her without any money to buy a new home and potentially liable to Gold for any payment he made not covered by the sale proceeds.
The trial court granted Gold the requested relief and gave him "control over the sale of the real property, including but not limited to the selection of a real estate agent, listing price, and acceptance of an offer to purchase." The court further ordered Berbey to "fully cooperate with the sale of said property . . . including the execution of any and all documents associated with the sale of the Property." The court did not place any limits on Gold's authority to sell the home.
In April 2015, Gold accepted an all cash offer from his current wife, Lynette Gold, to purchase the home as her sole and separate property for $1.45 million. He accepted that offer and forwarded it to Berbey for her to sign so he could open escrow. When Berbey did not respond, Gold applied ex parte for a court order compelling Berbey to sign the documents or appointing someone to sign on her behalf. The court granted the application and appointed the court clerk to sign on Berbey's behalf.
Although the $1.45 million purchase price was sufficient to pay off the first and second mortgages on the home, it was not sufficient to pay the delinquent property taxes, homeowner association dues, real estate commissions, and other encumbrances on the property. Gold therefore deposited approximately $115,000 into escrow to pay these expenses and complete the sale. Shortly after purchasing the home, Gold's current wife sold it to another buyer for $1.6 million in July 2015.
Shortly after the sale to Gold's current wife, Berbey filed a request for an order compelling Gold to reimburse her for one-half the difference between the $1.45 million sales price and the home's fair market value, which Berbey claimed was $1.725 million based on the recent sale of the same model home in the same development. Berbey argued the Family Code imposed fiduciary duties on Gold that required him to sell the home for its fair market value, and he breached those duties by selling it to his current wife at a substantial discount. Berbey claimed Gold's below market sales price not only allowed his current wife to make $150,000 by quickly flipping the home to another buyer, but also allowed him to recover from Berbey the tax and mortgage payments he advanced because the sale proceeds were insufficient to cover those payments. Gold responded by asking the trial court to compel Berbey to reimburse him for the mortgage payments, escrow deposits, and other payments he advanced to complete the sale of the property because the sale proceeds were insufficient to reimburse him. He also requested his attorney fees based on the attorney fee provision in the judgment.
In October 2015, the court heard both Berbey's and Gold's reimbursement requests. The court denied Berbey's request, finding Gold owed no fiduciary duty to Berbey because the couple had been divorced since 2009, and therefore the statutorily imposed fiduciary duties between spouses no longer applied. The court explained, "[Gold] dul[]y sold the property. He made a profit after that. I don't see anything that precluded that from happening." The court took Gold's reimbursement request under submission.
In November 2015, the court granted Gold's reimbursement request based on the terms of the judgment and the payments Gold advanced. The court ordered Gold's attorney to prepare a proposed order providing an itemization of each payment category for which Gold sought reimbursement. In December 2015, Gold served a proposed order awarding him $265,753.65, which comprised $192,148.63 for Gold's payment of mortgage payments, property taxes, broker commissions, homeowner association fees and dues, and escrow fees, $13,605.02 for interest on Gold's payments, and $60,000 for the attorney fees Gold incurred to enforce the judgment. Berbey filed objections to the proposed order, requesting the court add a provision allowing the parties to seek the court's assistance if they cannot agree upon the payment terms. Berbey did not object to any specific amount the proposed order required her to pay.
In March 2016, the trial court conducted a hearing on Berbey's objections, overruled the objections, and signed the order Gold proposed without modification.
II
DISCUSSION
A. Berbey's Appeal Is Timely
Gold contends Berbey's appeal is untimely because she filed it more than a year after the trial court entered its February 2015 order authorizing him to sell the home. We disagree. Berbey's appeal challenges the court's March 2016 order regarding reimbursement, not the February 2015 order authorizing Gold to sell the home.
"'Compliance with the time for filing a notice of appeal is mandatory and jurisdictional. [Citations.] If a notice of appeal is not timely, the appellate court must dismiss the appeal.' [Citations.] California Rules of Court, rule 8.104(a)(1), contains the applicable time period for filing a notice of appeal." (Ellis v. Ellis (2015) 235 Cal.App.4th 837, 842.) That rule provides a notice of appeal must be filed "on or before the earliest of" (1) 60 days after the court clerk or a party serves notice of entry of the appealed judgment or order, and (2) 180 days after entry of the judgment or order. (Cal. Rules of Court, rule 8.104(a).)
Berbey challenges what she contends is Gold's decision to sell the home at a discount to his current wife, who promptly resold the property for a $150,000 profit. According to Berbey, Gold had a fiduciary duty under the Family Code that required him to sell the home for as much as possible, or at least fair market value. Although the trial court's February 2015 order authorized Gold to set the sale price, nothing in that order excused Gold from his fiduciary duty, and therefore there was nothing in the order for Berbey to challenge. Indeed, it is undisputed the judgment required the home to be sold once Berbey failed timely to make a mortgage payment, and Berbey does not challenge the court's decision to grant Gold control over the sale.
Berbey contends no breach of duty or other actionable conduct occurred until Gold sold the home for less than Berbey believed it was worth. Only at that point did Berbey's breach of fiduciary duty claim arise. Berbey asserted her claim by promptly asking the court for an order requiring Gold to reimburse her for one-half of the difference between the sale price and the home's fair market value. Gold responded by filing his own request that Berbey reimburse him for the mortgage and other payments he made relating to the home and for which the sale proceeds were inadequate to reimburse Gold. Berbey opposed Gold's request, arguing the sale proceeds would have been sufficient to reimburse Berbey if he had sold the home for its fair market value.
The trial court set the two requests for hearing at the same time, and after hearing the evidence, the court denied Berbey's request and took Gold's request under submission. The court later issued its ruling granting Gold's request and directing him to prepare a proposed order itemizing each item for which he sought reimbursement. After receiving the proposed order and Berbey's objections, the court conducted another hearing at which it overruled Berbey's objections and then entered the March 2016 order. That order is the first and only order that completely disposes of Berbey's breach of fiduciary duty claim by requiring her to pay Gold for the deficiencies he allegedly created when he sold the home for less than its fair market value in violation of his alleged fiduciary duties.
Berbey filed her notice of appeal within 60 days of that order even though no notice of entry of that order was served. Berbey's appeal therefore is timely. B. Gold Owed Berbey Fiduciary Duties in Selling the Home
Berbey contends the trial erred in finding Gold owed no fiduciary duty to her in selling the home because they were no longer married. We agree.
The Family Code provides that "spouses are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code." (§ 721, subd. (b); see In re Marriage of Leni (2006) 144 Cal.App.4th 1087, 1091-1092.) These duties apply to each spouse's management and control of community property assets and liabilities. (§ 1100, subd. (e).)
Although section 721 uses the term spouses, the duties it imposes do not necessarily end when a couple separates and later divorces. Other Family Code provisions incorporate the duties described in section 721 and extend those duties to activities that affect the assets and liabilities of the other party (1) from the date of separation to the date of distribution of the community asset or liability in question (§ 2102, subd. (a); see § 1100, subd. (e)), and (2) from the date of disposition of an asset or liability until the asset or liability is actually distributed (§ 2102, subd. (b)).
In pertinent part, section 2102, subdivision (a), provides as follows: "From the date of separation to the date of the distribution of the community or quasi-community asset or liability in question, each party is subject to the standards provided in Section 721, as to all activities that affect the assets and liabilities of the other party . . . ." --------
In its entirety, section 2102, subdivision (b), provides as follows: "From the date that a valid, enforceable, and binding resolution of the disposition of the asset or liability in question is reached, until the asset or liability has actually been distributed, each party is subject to the standards provided in Section 721 as to all activities that affect the assets or liabilities of the other party. Once a particular asset or liability has been distributed, the duties and standards set forth in Section 721 shall end as to that asset or liability." (Italics added.)
Here, the critical question is when has an asset or liability "actually been distributed?" Unfortunately, the parties have not cited, and our independent research failed to uncover, any reported cases addressing this statutory language. We therefore must examine the language and its context to determine the Legislature's intent.
"When interpreting a statute, 'we seek to "'ascertain the Legislature's intent so as to effectuate the purpose of the law.'"' [Citation.] '"'We begin with the plain language of the statute, affording the words of the provision their ordinary and usual meaning and viewing them in their statutory context, because the language employed in the Legislature's enactment generally is the most reliable indicator of legislative intent.' [Citations.] The plain meaning controls if there is no ambiguity in the statutory language. [Citation.] If, however, 'the statutory language may reasonably be given more than one interpretation, "'"courts may consider various extrinsic aids, including the purpose of the statute, the evils to be remedied, the legislative history, public policy, and the statutory scheme encompassing the statute."'"'"'" (Carloss v. County of Alameda (2015) 242 Cal.App.4th 116, 127.)
The verb "distribute" means "to divide or separate especially into kinds" (Merriam-Webster's Online Dictionary (2017) <https://www.merriam-webster.com/dictionary/distribute> [as of Oct. 18, 2017]), and the adverb "actually" means "in act or in fact" (Merriam-Webster's Online Dictionary (2017) <https://www.merriam-webster.com/dictionary/actually > [as of Oct. 18, 2017]). An asset or liability therefore has been distributed when it in fact has been divided or separated from one spouse and his or her interests. It is not sufficient that a judgment has ordered the distribution of an asset or liability, or that steps have been taken to distribute the asset or liability. The parties must complete the distribution of the asset or liability before the asset or liability will be considered "distributed" under section 2102, subdivision (b).
The purpose of imposing a fiduciary duty is to ensure that one spouse does not take unfair advantage of the other during the distribution of the asset or liability. We therefore conclude section 2102, subdivision (b), extends section 721's fiduciary duties until the distribution process is complete. This occurs when the asset or liability has been transferred to the spouse to whom the trial court awarded it, all ties to the other spouse regarding the asset or liability have been severed, all payments required to complete the distribution have been made, and the parties have performed any other steps the court required as part of the distribution process.
Here, the judgment awarded Berbey the home as her separate property and required Gold to provide a grant deed transferring his ownership interests in the home to Berbey. The judgment, however, also acknowledged that the two loans on the home were in Gold's name alone. To complete the distribution process, the judgment therefore ordered Berbey to "use her reasonable best efforts to refinance both loans" in her name "[a]t such time as it is feasible" to do so. This feasibility qualification recognized that market and other considerations could prevent Berbey from refinancing the home for an unknown period of time.
To protect Gold's credit, the judgment required Berbey to make the loan payments, to keep all accounts current, and to indemnify Gold against any liens, claims, and encumbrances relating to the home. In the event Berbey was more than 30 days late on any mortgage payment, the judgment required Berbey immediately to list the home for sale and sell it. Finally, the judgment gave Gold the right to make any missed loan payments and obtain reimbursement from Berbey.
These terms make clear that the home is not actually distributed until title is transferred to Berbey's name and Berbey either refinanced the loans to remove Gold's name or sold the home and reimbursed Gold for any payments he made. Until that time, the distribution process contemplated by the judgment is not complete. Accordingly, we concluded the trial court erred in finding Gold did not owe Berbey a fiduciary duty in selling the residence because the home had not actually been distributed.
Gold contends the home was actually distributed and his fiduciary duties ended when he recorded the grant deed transferring his ownership interest in the home to Berbey. This contention, however, ignores the terms of the judgment that required Berbey to refinance the home, or sell it and reimburse Gold for any payments he made, to complete the distribution of the home. Gold's argument would be correct if the judgment only required Gold to transfer the title to Berbey as her sole and separate property. No one disputes the judgment required more than this to carry out the distribution of the residence to Berbey.
Moreover, to say Gold owed no fiduciary duties and was free to sell the home at any price he chose is patently inconsistent with the purpose behind section 2102, subdivision (b), and sanctions the precise type of misconduct that Berbey alleges occurred here. Indeed, even secured creditors who are not in a fiduciary relationship with their debtors owe a duty to use commercially reasonable efforts when selling their security and to ensure the terms of any sale are commercially reasonable. (Com. Code, § 9610.)
In concluding the trial court erred in finding Gold did not owe Berbey a fiduciary duty in selling the home, we express no opinion on whether Gold's sale to his current wife breached his fiduciary duty. Berbey contends the sale price was well below the fair market value, but Gold contends he sold the home for its fair market value and also suggests he should not be required to continue to advance payments on the home until a buyer pays the alleged fair market value. These and potentially other factors are relevant to the determination whether Gold breached his fiduciary duties. The trial court, however, never determined whether a breach occurred because it concluded there was no duty to breach.
We remand for the court to conduct an evidentiary hearing and determine whether Gold breached the fiduciary duties he owed to Berbey. That determination is relevant to both Berbey's and Gold's reimbursement requests. Gold's alleged breach of fiduciary duty is the basis for Berbey's request and she asserts the same breach as a defense to Gold's request. Accordingly, after deciding whether a breach occurred, the court should revisit both requests and decide who is entitled to reimbursement, and in what amount.
In her supplement brief, Berbey requests a number of remedies that go well beyond the relief she sought in her reimbursement request, and therefore her entitlement to those remedies is not properly before us. We express no opinion on the proper measure of damages if the trial court determines Gold breached his fiduciary duties.
III
DISPOSITION
We reverse the postjudgment order denying Berbey's request for reimbursement and granting Gold's request for reimbursement. We remand for the trial court to conduct an evidentiary hearing to determine whether Gold breached his fiduciary duty in selling the home. Based on that determination, the court should revisit both requests to decide who is entitled to reimbursement and in what amount. Berbey shall recover her costs on appeal.
ARONSON, ACTING P. J. WE CONCUR: FYBEL, J. IKOLA, J.