Opinion
A165253
06-07-2023
Estate of BERNARD JAMES TYSON, Deceased. v. BERNARD JAMES TYSON, JR., Objector and Appellant. VIRGIL DENISE BRADLEY-TYSON, Petitioner and Respondent,
NOT TO BE PUBLISHED
Alameda County Super. Ct. No. RP19-046215
TUCHER, P.J.
After Bernard James Tyson (Husband or Bernard) died without leaving a will, his wife Virgil Denise Bradley-Tyson (Wife or Denise) petitioned for confirmation that she had rescinded the couple's premarital agreement (the PMA or agreement). Husband's son by a previous marriage, Bernard James Tyson, Jr. (Son), opposed the petition. The trial court found that the PMA was rescinded and that Wife was entitled to her intestate share of Husband's estate. Son appeals, and we affirm.
FACTUAL AND PROCEDURAL HISTORY
I. The Premarital Agreement
Husband and Wife married in 2009, shortly after executing the PMA. At the time, Husband was an executive vice president at Kaiser Permanente (Kaiser). His divorce from his first wife had been contentious, and he asked Wife to enter into a PMA before their marriage.
Under the terms of the PMA, the parties agreed that their earnings and income based on personal services, skill, and efforts during the marriage would be the separate property of the earning spouse rather than becoming community property. The parties waived all rights they would otherwise have upon the death of the other, including the right to inherit property by intestate succession.
The PMA recited that Wife had significant earning capacity due to her education, training, and work experience, but that she was currently doing part-time consulting work. The parties agreed that upon their marriage, Wife would move to Husband's home in Pleasanton and assist with domestic duties, as well as continuing part-time consulting work. Wife agreed that her right to spousal support in the event of divorce would be limited to no more than $200,000 per year, for no more than one-half the duration of the marriage.
Under the PMA, Wife would receive $750,000 upon Husband's death if they were still married and living with each other, an obligation that "may be satisfied by proceeds payable under a life insurance policy on Bernard's life."
The PMA imposed certain obligations on the parties. Most important for purposes of this case, it required Husband, "[a]s soon as feasible following marriage, [to] transfer ownership of his residence [in Pleasanton] ('the Ruby Hill Home') to the parties jointly, as community property." It went on, "Bernard shall execute and record a deed to the parties jointly as community property; however, the transmutation of the Ruby Hill Home from Bernard's separate property to the parties' community property shall become effective following marriage even if for any reason such a deed is not executed or recorded."
The PMA also provided that, "[a]s soon as feasible after marriage, Denise shall open and Bernard shall fund an initial deposit of $3,000 to a spousal IRA for Denise. So long as the parties are married and not living separate and apart . . . Bernard shall make the maximum annual contribution to Denise's spousal IRA," the proceeds of which would be her separate property.
Among the other provisions of the PMA, Husband forgave a $60,000 loan to Wife.
The PMA provided that it could be amended or modified only by a written agreement executed by both parties, and not by the conduct of the parties.
Wife, who was 49 years old when she married Husband, testified that the provisions for the Ruby Hill house becoming community property and for a spousal individual retirement account (IRA) were important to ensure her own financial security if the marriage failed.
II. The Marriage and Husband's Death
Husband's career at Kaiser prospered (and his income and assets increased dramatically) during the couple's marriage, and he was appointed Kaiser's chief executive officer in 2013 and chairman of the board in 2014. Wife is highly educated and earned a good living when she worked full-time before her marriage, but she described her income from her part-time work during the marriage as "almost . . . zero." Husband did not want her to return to full-time work because he wanted her to be available to help him raise his children, travel with him, and assist him professionally. The couple agreed she would be the "trailing spouse."
Despite the requirements of the PMA, Husband did not execute or record a deed transferring any ownership of the Ruby Hill property to Wife. There is no dispute that he did not fund (and Wife did not open) an IRA. He and Wife did not discuss either the transfer of title or the spousal IRA after their marriage. Wife trusted Husband to fulfill his promises to her. Husband and Wife lived in the Ruby Hill house throughout their marriage.
The couple traveled to Italy together in the summer of 2019 to celebrate their 10-year wedding anniversary. On that trip, according to Wife, Husband tore up the PMA, telling her she had "passed the test," that he wanted to spend the rest of his life with her, and that he did not want the document standing between them. It was her impression that the PMA was no longer in effect.
Several friends of Husband's likewise testified that he told them either that he planned to tear up the PMA or that he had done so. Around the time of the couple's tenth anniversary, Husband told a friend he was going to put Wife's name on the house in Pleasanton" 'because she deserves it.' "
Husband died intestate on November 10, 2019. After his death, Wife received $700,000 from an insurance policy of which she had been designated a 70 percent beneficiary in January 2018.
III. Events After Husband's Death
Shortly after Husband's death, Son told Wife he was not getting along with his mother, and he asked Wife if he could move into the Ruby Hill house. She allowed him to do so temporarily, knowing he was grieving the loss of his father. Before Husband's death, Son had asked to move into the house, but Husband wanted his children to make their own way in the world and he refused.
In January 2020, Wife told Son that she and Husband had had a PMA but that it had been destroyed, and she provided him with a copy of the document. Son's behavior toward her changed and he became disrespectful to her. She wanted him to move out, but he told her he did not have to do so because" '[t]his is my father's house.'" She began to feel vulnerable and fearful while living with Son. He broke things, he swiped family photographs, he installed surveillance equipment in the house without her permission or knowledge, he took the mail, he installed a lock on his bedroom door, and he was rude to her guests. On one occasion, workers were replacing a door leading from her bedroom to the patio. Son came to her bedroom door waiving the PMA and saying," 'What do you want? You have no rights.'" She told him she did not want to talk with him and she closed the door; he went around the side of the house and stood in the doorway where the glass door had been removed, shouting and "ranting and raving" as she trembled. She was afraid of Son, and she asked her brother to fly out and stay with her. When her brother arrived, Son was disrespectful, telling him he had no right to be there.
Wife consulted an attorney and tried to have Son evicted from the home, but she was unable to do so because her name was not on the house's title.
Because she no longer felt safe living in the same house as Son, Wife moved out of the house at the end of January or beginning of February, leaving her belongings behind. She had no other home available, so she stayed with family and friends. Son moved out approximately two months later, evidently pursuant to a court-ordered move-out stipulation. The locks on the house were changed, and Wife no longer had free access to the house. She could go there periodically, accompanied by a special administrator, but could not be inside the house on her own.
IV. Procedural History
Wife filed a petition to be named administrator of Husband's estate on December 10, 2019. At the time, she testified, she believed Husband had revoked the PMA when he tore it up.
Son filed a competing petition to be named administrator of the estate on January 17, 2020, and he objected to Wife's petition. The court appointed Herb Thomas special administrator on February 26, 2020. A special master was appointed to submit recommendations regarding the competing petitions.
Wife filed a spousal property petition on June 22, 2020. She alleged she was entitled to rescind the PMA due to Husband's material breach of the agreement during his lifetime. She also alleged that the PMA was unenforceable; that she relied on Husband's representation on the occasion he tore up the PMA that no further steps needed to be taken to revoke it; and that Husband orally promised to leave his estate to her with the understanding she would continue to provide financial assistance to his family. To the extent the court found the oral promise unenforceable and the PMA to be invalid, she sought all of the parties' community property and one-third of Husband's separate property under intestate succession. (Prob. Code, § 6401.) Son was the only one of Husband's three children to oppose Wife's petition.
The matter was heard by the special master. The special master rejected Wife's claim that Husband made an enforceable promise to leave her his estate. She also rejected the claim that, due to the contributions Wife had made to Husband's career, his earnings were community property under the PMA. The special master concluded, however, that Husband had breached the PMA by failing to transfer ownership of the Ruby Hill house and record a deed and by failing to fund and contribute to a spousal IRA. She characterized these breaches as material, because Wife gave up "substantially all of her marital rights" when she entered into the PMA, and a transfer of title of the house and an IRA were "the two most significant benefits for which she had bargained" to protect herself. Also according to the special master, Wife had fulfilled all requirements of a notice of rescission, and she was entitled to elect that remedy rather than accepting Son's offer to cure the breach by paying her an amount equivalent to a fully-funded IRA. The special master rejected Son's argument that the $700,000 life insurance payment was a partial satisfaction of the $750,000 to which Wife was entitled upon Husband's death and concluded she did not owe it to the estate.
At oral argument, citing Civil Code section 1691, Son's counsel suggested that Wife's rescission was ineffective as a matter of law because she did not offer to restore the $700,000 to the estate, and that she should be ordered to do so if the PMA is set aside. (Civ. Code, § 1691.) In his opening brief, however, Son does not raise a separate argument that the rescission was ineffective on this ground, nor that the trial court erred in not ordering restoration of the $700,000. Indeed, the brief acknowledges that he conceded in the trial court that the notice of rescission was adequate. We do not consider arguments that are not clearly set out under a separate heading and supported by reasoned argument or that are made for the first time in a reply brief or at oral argument. (Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289, 1294; People v. Dixon (2007) 153 Cal.App.4th 985, 996.)
The special master therefore recommended that the trial court grant Wife's spousal property petition and order that (1) the PMA was rescinded and (2) Wife was entitled to her intestate share of the estate, after deducting the $60,000 loan that Husband forgave in the PMA. The trial court adopted the special master's recommendation on March 24, 2022. The same day, the court entered a spousal property order. This timely appeal ensued.
DISCUSSION
I. Rescission for Material Breach
Son contends Husband's breaches of the PMA were not material and did not justify Wife rescinding the agreement.
A. General Legal Principles
A material breach of a contract, or a failure of consideration, is a ground for rescission at the option of the injured party. (Pennel v. Pond Union School Dist. (1973) 29 Cal.App.3d 832, 838, citing Civ. Code, § 1689, subd. (b)(2); see Civ. Code, § 1691; Whitney Inv. Co. v. Westview Dev. Co. (1969) 273 Cal.App.2d 594, 602; Boston LLC v. Juarez (2016) 245 Cal.App.4th 75, 82; Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1051.) To effect a rescission, the party must, "promptly upon discovering the facts which entitle [her] to rescind if [she]. . . is aware of [her] right to rescind," give notice of the rescission and restore or offer to restore everything of value received under the contract. (Civ. Code, § 1691.)
" 'A material breach of one aspect of a contract generally constitutes a material breach of the whole contract.'" (Brown v. Grimes (2011) 192 Cal.App.4th 265, 278.) Whether a breach is material enough to provide cause for termination is ordinarily a question of fact, although it may be resolved as a matter of law" 'if reasonable minds cannot differ on the issue of materiality.'" (Id. at pp. 277-278.) Factors that may be taken into account in determining whether a breach is material are "(1) 'the extent to which the injured party will be deprived of the benefit which [she] reasonably expected'; (2) 'the extent to which the injured party can be adequately compensated for the part of that benefit of which [she] will be deprived'; (3) 'the extent to which the party failing to perform or to offer to perform will suffer forfeiture'; (4) 'the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances'; and (5) 'the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.'" (Magic Carpet Ride LLC v. Rugger Investment Group, L.L.C. (2019) 41 Cal.App.5th 357, 365 (Magic Carpet), quoting Rest.2d Contracts, § 241.)
B. Application to Premarital Agreements
The first question we face is whether this rule applies to premarital agreements. Son argues that it does not, pointing to section 1615 of the Family Code. That statute provides that a premarital agreement is not enforceable if the party against whom enforcement is sought proves either that the party did not execute the agreement voluntarily or that the agreement was unconscionable when executed and certain other conditions applied. (Fam. Code, § 1615, subd. (a).) According to Son, this limits the grounds on which a PMA may be set aside, and a material breach is not among those grounds.
We are unpersuaded. Family Code section 1615 governs the enforceability of a PMA based on events at the time the parties entered into the agreement. But the question here is not whether the PMA was enforceable when made; it is the effect of one party's later material breach of the agreement, a matter on which the statute is silent.
Although case law on the matter is scant, at least two cases indicate a PMA may be rescinded for a material breach. (In re Estate of Warner (1907) 6 Cal.App. 361, 365-366; In re Marriage of Garrity & Bishton (1986) 181 Cal.App.3d 675, 684-685 (Garrity &Bishton) [distinguishing Warner on ground breach there was of material provision clearly expressed in premarital agreement].) As was held more than a century ago, "where a woman in an antenuptial contract releases all her rights in the property of her intended husband as his heir, in consideration of his doing certain things, if he fails to perform material covenants on his part she may show this and still claim her rights as heir." (Warner, at pp. 365-366.)
Son suggests, however, that the law governing marriage in California will be upended if we apply ordinary contract rules to premarital contracts, encouraging spouses to remain silent about breaches that could easily be cured then declaring a PMA rescinded. Again, we disagree. Where a person demands that a prospective spouse waive all her statutory rights to community property and inheritance, we see no mischief in a rule that allows the spouse her ordinary contractual remedies if that person fails to fulfill the contractual promises made in return for the waiver. That certainly does not mean, as Son suggests, that rescission will be available for minor breaches. And, as we have explained, in determining materiality courts consider the extent to which the injured party can be adequately compensated, the extent to which the nonperforming party will suffer forfeiture, the likelihood that the breaching party will cure the failure, and the extent to which the breaching party's behavior comported with standards of good faith and fair dealing. (Magic Carpet, supra, 41 Cal.App.5th at p. 365.) Son has not persuaded us that parties to PMA's are not subject to ordinary contractual remedies in the event of a material breach.
C. Effect of PMA's Provisions Regarding Modification and Waiver
Son contends that two provisions of the PMA bar Wife from rescinding it after a breach. This claim presents a question of contract interpretation, which we review de novo where, as here, there is no conflicting extrinsic evidence. (See In re Martinez (2012) 210 Cal.App.4th 800, 815; Garrity & Bishton, supra, 181 Cal.App.3d at p. 683 [PMA is contract subject to general rules of contract interpretation].) We interpret a contract so as to give effect to the intention of the parties, construing the instrument as a whole, and seeking an interpretation that is fair and reasonable and does not lead to absurd or inequitable results. (Citizens for Goleta Valley v. HT Santa Barbara (2004) 117 Cal.App.4th 1073, 1076-1077.)
Son first points to a provision of the PMA in paragraph 17, headed "Modification, Amendment and Waiver," in the subparagraph "Written Amendment." This provision recites that the agreement may be amended or modified only by written amendment, and that "[e]ach party waives and releases the future right to claim, contend or assert that this Agreement was modified, canceled, superseded, or changed by an oral agreement, course of conduct, or estoppel." Son suggests Husband's failure to comply with his obligations was a "course of conduct" that would not support Wife's claim that the agreement was "canceled." But Wife's contention is not that Husband canceled the PMA through his behavior; rather, it is that she has the right to rescind the agreement for Husband's material breach. Son has not shown she waived her contractual remedies in the event of a breach.
Second, paragraph 18 of the PMA, headed "Waiver of Breach," provides that "[t]he failure of either party, at any time, to require the other to perform any of his or her obligations under this Agreement will not affect that party's right to enforce those obligations thereafter. Nor will the waiver by either party of any breach of this Agreement by the other party be deemed a waiver of any subsequent breach, a waiver of the particular provision breached, or a waiver of any other provision of this agreement." Son tells us the first sentence of the paragraph is a" 'cure provision'" that allows the estate to cure the breach and does not authorize Wife to rescind the agreement. We fail to see how the provision, which preserves the parties' ongoing rights in the event of a breach, means Wife has given up any right she might have to rescind the contract after a material breach.
D. Substantial Evidence of Material Breach
Son acknowledges that Husband breached the PMA by failing to fund an IRA for Wife and by failing to execute a deed on the Ruby Hill house, but he contends that in context, these breaches did not constitute a material failure of consideration. The PMA recited that the consideration included the marriage between the parties and the mutual promises in the agreement itself. The marriage, of course, took place and Husband forgave Wife's $60,000 loan. Wife received $700,000 in life insurance proceeds, which Son characterizes as partial satisfaction of the promised $750,000 upon Husband's death. In this context, Son argues, the breaches are not material.
Son urges us to treat this as a question of law subject to de novo review because he presented no evidence and the facts are therefore undisputed. He relies on cases holding that appellate courts review de novo the application of law to undisputed facts. (See In re Marriage of Carlton (2001) 91 Cal.App.4th 1213, 1217 [child support guidelines]; In re Marriage of Cloney (2001) 91 Cal.App.4th 429, 436 [legal effect of escrow officer's knowledge of identity of seller of property]; In re Marriage of von der Nuell (1994) 23 Cal.App.4th 730, 736 [legal effect of parties' continuing economic, emotional, sexual, and social ties and attempts at reconciliation on date of separation].) However, the special master had to make factual determinations, for instance as to the benefits Wife reasonably expected when she entered into the agreement and the significance of those benefits to her, and the extent to which she could adequately be compensated for Husband's breaches (see Magic Carpet, supra, 41 Cal.App.5th at p. 365), matters that would reasonably require an assessment of Wife's credibility. This is not a case in which" 'reasonable minds cannot differ on the issue of materiality,'" and we accordingly apply the usual rule that the determination is one of fact to be reviewed for substantial evidence. (Brown v. Grimes, supra, 192 Cal.App.4th at pp. 277278.)
We turn first to ownership of the Ruby Hill house. Husband promised to "transfer ownership" of the house to community property as soon as feasible after the marriage and to "execute and record a deed" reflecting that transfer. He also agreed that the transmutation to community property would become effective upon marriage even if a deed was not recorded. As a result, Son argues, the property was transferred to Wife upon the marriage, resulting in an immediate financial benefit to her, and this constituted substantial performance of Husband's promise. The breach, he argues, lay only in Husband's failure ensure title was in her name as well, by executing and recording a deed reflecting the transmutation, and this breach was not material. And, he goes on, any harm Wife suffered in the form of being forced from her home was the result not of the fact that her name was not on the property's title but of her own action in allowing Son to live with her.
This argument fails. The parties argue about whether the transmutation that occurred upon the parties' marriage under the PMA functioned as a transfer of ownership so as to fulfill part of Husband's obligations. (See In re Marriage of Lund (2009) 174 Cal.App.4th 40, 53-54 [agreement transmuting separate property to community property did not" 'transfer' title of the real property"].) But regardless of the result of this dispute, the trial court could reasonably find that Husband's failure to record title as community property was a material breach of his obligations.
Even at the time of the marriage, Husband's assets and income were significantly higher than Wife's. Not only did Wife agree to assist with domestic duties in Husband's home and work only part-time, but she gave up significant marital property rights in agreeing to the PMA, including the right to a community property interest in Husband's earnings during his lifetime and the right to intestate succession after his death. In return she bargained for only a few things, including title to the house being placed in community property. Husband failed to follow through on this promise. The materiality of this breach is starkly illustrated by the events that followed his death: Because she was not on title, she was unable to evict Son; she was forced to leave her home soon after the death of her husband; having no other home available, she had to live with friends and relatives; and for more than a year she could not return to the house unaccompanied. None of these harms can now be cured. The trial court could reasonably conclude Husband's breach of the obligation to transfer title caused a significant deprivation of a benefit Wife expected. (See Magic Carpet, supra, 41 Cal.App.5th at p. 365.)
We dismiss as risible Son's claim-based on tort rather than contract principles-that these events were Wife's own fault because she was imprudent enough to allow him to move into the house. It is true, of course, that Wife would not have been forced out of her home absent her act of kindness toward Son. But there is also evidence that the reason she could not evict Son and remain in her home was that her name was not on title, in breach of Husband's obligation to her.
The finding that the breaches were material also rested on Husband's failure to fund an IRA, a failure that Son acknowledges. Substantial evidence supports this finding of breach. The special master recognized that Wife did not open the IRA as contemplated by the agreement, but explained, "[Wife's] opening of the account was not a condition precedent to his obligation, but a separate and distinct obligation.... [¶] [T]his interpretation makes sense as it recognizes [Wife] needed funds to open a spousal IRA.... [¶] Mr. Tyson was required to 'fund an initial deposit of $3,000' which could have been done without making a direct deposit into a shell account." The special master credited Wife's testimony that the financial security of a spousal IRA, as well as having her name on title to the house, was important to her.
Son argues in response that if the spousal IRA was significant to wife, she had an obligation to raise his failure to fund it during Husband's lifetime, when Husband still could have cured the breach. (Citing Estate of Warner (1914) 168 Cal. 771, 775.) On the facts of this case, that argument finds no purchase. Husband made clear, when he ripped up the PMA and told his wife and friends it had no further effect, that he had no interest in curing his breaches so as to enforce the agreement. Whether or not this act had the legal effect he ascribed to it, the dramatic gesture was evidence he was perfectly happy to forfeit his rights under the agreement after the couple's tenth anniversary. Viewing Husband's breach of his obligation to fund a spousal IRA in tandem with his failure to change title to the house, and bearing in mind the financial sacrifices Wife made when she agreed to the PMA, we conclude substantial evidence supports the finding that Husband's breaches were material.
In reaching this conclusion, we express no view on what the result would be if the only consequences of Husband's breaches were monetary ones causing no harm that could not be remedied through allocation of the estate's assets. But that is not the case here. Rather, Wife was deprived of the security and stability that title to the Ruby Hill house would have given her, and was instead driven from her own home while mourning her husband's death. In these, we trust unusual, circumstances, substantial evidence supports the finding that the breaches were material.
Son points repeatedly to the vast size of Husband's estate and argues the losses caused by Husband's breaches pale in comparison to that amount and therefore were not material. But it appears to us that the appropriate point of reference is not the size to which Husband's estate had grown during the marriage, but the benefits Wife reasonably expected under the PMA. Viewed in that light-and even bearing in mind that Wife's loan was forgiven, that she received a community property interest in the Ruby Hill home at the time of the marriage, and that no one disputed her right to $750,000 upon Husband's death-substantial evidence supports a finding the failure of consideration was material.
Relying on out-of-state law, Son argues that rescission for a breach is appropriate only when the failure of consideration is total. In the case of partial failure of consideration, he contends, the proper remedy is damages. But he provides no California authority for this proposition, relying solely on a case from North Dakota. (Check Control, Inc. v. Shepherd (N.D. 1990) 462 N.W.2d 644 (Check Control).) Check Control stated that a total failure of consideration occurs when "a party has failed to perform a substantial part of its obligation, so as to defeat the very object of the agreement," and the remedy is to excuse the non-breaching party from performing its obligations under the contract. (Id. at p. 647.) A partial failure on the other hand, according to Check Control, "occurs when there has been an insubstantial breach that leaves sufficient consideration for sustaining the contract," in which case the appropriate remedy is damages. (Ibid.) Under these standards, Son argues, the failure of consideration was only partial: part of the consideration for the PMA was the marriage itself, which took place, and Wife gained a community property interest in the Ruby Hill house.
Even under Check Control, we are not persuaded by Son's reasoning. Through the protections granted by the PMA, Wife sought to protect her own interests in financial stability and the benefits of home ownership. Husband's obligation to transfer title and fund a spousal IRA can reasonably be characterized as "a substantial part of [his] obligation," the breach of which "defeat[ed] the very object of the agreement." (Check Control, supra, 462 N.W.2d at p. 647.) In any case, to the extent the standard of Check Control is different from that of the California authorities we have cited, we follow California law.
Son urges, however, that Wife should not be permitted to rescind the PMA because the estate stands ready to pay Wife any amounts due to her under the agreement. That argument fails. As discussed above, a large part of the harm Wife suffered from Husband's breach was being forced out of her own home and not allowed to return, as a result of Son's action in harassing her and refusing to leave in spite of his knowledge of the terms of the PMA, which stated that the house was community property after the marriage. He is in no position now to claim that the harm to her is easily remedied through allocation of the amounts due to her under the PMA, or that she is not entitled to her contractual rights after a material breach.
II. Community Property Nature of House
In his opening brief, Son challenges the trial court's confirmation of the Ruby Hill house as community property. He points out that the house was Husband's separate property before the marriage and asserts that, if the PMA is invalid and Husband's earnings during marriage were community property, Wife is entitled only to the portion of the house's value attributable to payments made on the mortgage with community property money. In his reply brief, Son withdraws this argument, and we do not consider it.
As an aside, Son tells us that the house was worth $3,000,000 on the date of marriage and had a relatively small mortgage of $420,000. In fact, the portion of the record he cites for this proposition, a list of Husband's assets and liabilities at the time of marriage, indicates the property was additionally subject to another mortgage of $2,200,000.
DISPOSITION
The March 24, 2022 orders are affirmed. Respondent shall recover her costs on appeal.
WE CONCUR: PETROU, J., RODRÍGUEZ, J.