Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County., No. BC338255 Joanne O’Donnell, Judge.
Karen J. Segel for Defendant and Appellant.
Paul N. Crane for Plaintiffs and Respondents.
WOODS, J.
INTRODUCTION
Appellant, Angela Alvarez Rodriguez, appeals from a judgment in favor of respondents, Samuel and Paulette Kardashian, on respondents’ complaint for cancellation of instruments and declaratory relief and on appellant’s cross-complaint for reformation of instrument, fiduciary elder abuse, and declaratory relief. On appeal, appellant asserts that the trial court committed reversible error in failing to follow statutory law to resolve the purported ambiguities in the contractual instruments between the parties. As hereafter explained, the judgment should be affirmed.
FACTUAL AND PROCEDURAL SYNOPSIS
On November 8, 1996, respondents and appellant, who was 79 at the time of the trial, entered into an agreement based on a first version of escrow instructions for the purchase of the real property inherited by appellant from her father located at 1921 Frank St., Santa Monica, CA. The sales price provided on the first escrow instructions was $450,000. This initial escrow instrument was initialed and signed by both parties The parties both agreed that a down payment of $90,000 was to be deposited in escrow with the remaining $360,000 principal to be paid at $5,000 per month at an eight percent interest rate from March 7, 1997, to February 7, 2007, (a ten year period) as listed on the escrow form. Betty Storm, the escrow agent who conducted the escrow transaction at respondents’ request, testified that she told both parties that if appellant wanted a ten year term then the payments should be approximately $3,500 to $3,700 per month and that $5,000 a month would pay the loan off in less then ten years. Appellant insisted on $5,000 per month. Respondent, Mr. Kardashin, replied by instructing Betty Storm to “do whatever it takes.” The first escrow instruction reflected the agreement of the parties by providing that $450,000 was the total consideration, with a $90,000 down payment required. The principal of $360,000 was to be paid at the rate of $5,000 a month for ten years.
However, appellant was informed by Betty Storm that she would be required to deposit additional money into the escrow account in order to complete the sale due to encumbrances on the property exceeding the amount already in escrow. Appellant subsequently attempted to cancel the escrow and back out of the transaction. Respondents filed suit for specific performance in November 1996. Letters were exchanged between respondents’ and appellant’s counsel, and a resolution was reached which required respondents to deposit into escrow the extra money required of appellant in exchange for adjusting the principal amount owed to appellant (from $360,000 to $344,000 per correspondence), resulting in abandonment of respondents’ suit for specific performance. A second version of the escrow documents was executed and signed by respondents on February 5, 1997, reflecting the changes.
Respondents made the agreed $5,000 payments to appellant from March 7, 1997, until October 7, 2004. Appellant received a payment for $313.08 in November 2004 from respondents. Appellant never cashed the check but in fact lost it. Appellant wrote a letter inquiring of respondents why the payments had stopped. The amortization chart utilized by respondents in making payments indicated that the principal amount, as adjusted from $360,000 to $344,000, had been paid and the $313.08 check represented the final payment to appellant on the Frank property.
Respondents then requested full reconveyance of the deed of trust, but as of the date of trial appellant had not reconveyed the deed. Testimony from Betty Storm corroborated respondents’ contention they were entitled to a full reconveyance. Additionally, Storm indicated she had sent a letter to appellant explaining that the principal amount had been paid and requested that appellant convey the deed of trust to respondents. Respondents then filed suit in the Los Angeles County Superior Court requesting cancellation of the instrument and for declaratory relief. Appellant cross-complained requesting reformation of the instruments, declaratory relief and for fiduciary elder abuse.
The trial court, sitting without a jury, entered judgment in favor of respondents on the complaint and found the promissory note to be paid in full and ordered the trust deed to be conveyed to respondents. The trial court entered judgment against appellant on her cross-complaint, finding that appellant was not entitled to reformation of the instruments or to declaratory relief in her favor. The trial court further found there was no evidence of elder abuse in the case, fiduciary or otherwise. The trial court found there was an ambiguity in the promissory note, but reconciled the ambiguity by finding that the sales price of the property was $450,000. The trial court further found that neither party had raised the parol evidence rule in regard to the testimony that the sales price of the property was purportedly to be $600,000. As a result, the court did not invoke the parol evidence rule in making its findings.
The trial court explained that it found $450,000 the more likely price. The trial court also found that appellant’s expectation of receiving $5,000 a year for ten years was unreasonable in light of the exchange of letters between counsel for respondents and counsel for appellant pertaining to the subject of the abandoned specific performance litigation. The court found that Mr. Kardashian permitted the ambiguity in the note not because he was willing to pay $600,000 for the property, but because he believed that if a court were to look at the ambiguity, it would resolve the ambiguity in his favor.
Lastly, the court found Mr. Kardashian to be a credible witness but found appellant to be lacking in credibility. The court found appellant acted arbitrarily, capriciously and even spitefully throughout the transaction, and in the now abandoned specific performance litigation, and in the current litigation.
Appellant filed a timely appeal from the judgment.
DISCUSSION
On appeal, appellant alleges that the trial court erroneously decided in respondents favor because it failed to use the proper Civil Code sections in resolving the purported ambiguity in the terms contained in the escrow instrument. Specifically, appellant maintains that the court should have applied Civil Code sections 1649 and 1654 in resolving the issues in the case. Appellant claims that if these statutes had been used and properly applied, the trial court should have found respondents at fault for allowing the ambiguity to exist in the escrow instrument. Appellant further maintains, the court should have found that respondents’ contentions pertaining to the ambiguous documents were irrelevant and that appellant’s interpretation as to what she understood about allowing the particular payment term to stay in the instrument should have been paramount. This court agrees with appellant that the Civil Code is applicable in this case. However, as more fully explained hereafter, application of the Civil Code should result in affirmance of the judgment in favor of respondents.
All statutory references are to the Civil Code.
I. Standard of Review
The parties urge different standards of review on appeal. The threshold determination by the trial court of whether an ambiguity exists is a question of law and is subject to an independent de novo review on appeal. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1166; WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1710.) De novo review is also applicable on appeal in looking to the trial court’s resolution of the ambiguity if no parol evidence is admitted or if the parol evidence admitted is not in conflict.
However, if the resolution of the ambiguity by the trial court is determined by parol evidence that is in conflict then this determination is a question of fact that must be supported by substantial evidence in order to be upheld. (WYDA Associates v. Merner, supra, 42 Cal.App.4th at p. 1710.) Also, if the parol evidence is in conflict and credibility issues arise, any reasonable construction will be upheld so long as there is substantial evidence to support it. (Winet v. Price, supra, 4 Cal.App.4th at p. 1710.) Evidence is substantial if it is of “ponderable legal significance, . . . reasonable in nature, credible and of solid value.” (Bowers v. Bernards (1983) 150 Cal.App.3d 870, 873; see also Estate of Teed (1952) 112 Cal.App.2d 638, 644.)
With these standards in mind, we consider whether an ambiguity existed and, if found, whether the ambiguity was resolved by the trial court without committing reversible error.
II. An Ambiguity Exists in the Promissory Note
There is clearly an ambiguity in the promissory note dated February 5, 1997, when all the evidence is considered. Further, there appears to be no serious dispute by either party that the ambiguity does exist. The $450,000 sales price is set forth in the “sale escrow instructions” dated November 8, 1996, but the associated note requires payment at $5,000 a month with 8 percent interest over a ten-year period, which is equivalent to an obligation with a principal balance of slightly more than $412,000. It is clear that $90,000 was to be deposited into escrow by respondents to pay existing encumbrances owed by appellant. It is undisputed that the encumbrances exceeded the amount deposited into escrow. Although appellant was responsible for the outstanding amount, through negotiations between counsel for respondents and counsel for appellant, respondents agreed to deposit more money into escrow in exchange for a reduction of the principal amount due. Appellant was not required to deposit any of her own money into escrow. However, what is not entirely clear from the face of the note is why the principal was reduced to $344,000 as respondents assert. The question then arises why the terms of $5,000 a month for 10 years were allowed to remain in the instrument. A monthly payment of $5,000 would clearly result in paying off the principal balance of $344,000 far before the 10-year term expired.
We note that the promissory note dated February 5, 1997, was signed by both parties with a face amount of $344,000, later adjusted in escrow by $815.83, leaving a balance due of $343,184.17.
Thus, upon independent review, a clear ambiguity exists in the escrow documents and the promissory note.
III. Resolution of the Ambiguity by the Trial Court
As stated above, appellant argues that in order to resolve the ambiguity issue, the trial court should have utilized sections 1649 and 1654 of the Civil Code. An analysis of both statutes reveals that both statutes do apply in this case. But their application is not in favor of appellant, as hereafter reasoned.
Section 1649 states “If the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it.” In her argument relying on section 1649, appellant urges this court to in effect recognize her as the promisor and declare that her understanding of entitlement to $5,000 a month for ten years is the proper way to resolve the ambiguity.
But appellant also alleges cryptically that the respondents are the promisors because the escrow documents and promissory note were drafted at respondents’ request by Betty Storm and respondents were the ones who promised to buy appellant’s property. This position appears to be at odds with appellant’s argument that she should in effect be viewed as the “promisor” under section 1649. Appellant further maintains, inconsistently, that in making appellant the promisee, it follows that the ambiguity should have been resolved with her understanding as the paramount consideration. This court finds appellant’s contention to be convoluted. Regardless of appellant’s inconsistency, this court takes issue with what appellant purportedly “understood” in reaching a resolution of the ambiguity as demonstrated by the record on appeal or reasonable inference therefrom.
Appellant maintains that her understanding was to the effect that she expected to receive $600,000 for the property, with principal and interest payments of $5,000 per month for 10 years. This contention appears implausible. First, although a monthly payment of $5,000 for a 10-year period results in a total payment of $600,000, when that payment includes an 8 percent interest component, the principal repaid would be something less than $415,000 – a far cry from the $600,000 sales price appellant posits. Second appellant’s position fails to account for the reduction of the sales price due to the amounts deposited into escrow by respondents. Assuming, contrary to all testimony, that no interest was to be paid, $5,000 per month would pay the balance in less than 10 years; applying the interest rate of 8 percent to which all parties testified, those payments would be insufficient to retire the balance in the time allotted. Thus, no scenario supports appellant’s claim that the purchase price was $600,000.
Appellant further argues that this court should look only to the terms indicating that $5,000 a month was to be paid for the ten-year period. To the contrary, this court is required to look at the entire agreement. In determining how appellant understood the transaction as a whole, we defer to the substantial evidence considered by the trial court pertaining to appellant’s understanding in the face of conflicting parol evidence. The evidence shows that the principal payment terms still do not add up to what appellant claims she “understood.” It is not reasonable for appellant to maintain she was going to get $600,000 in payments when there is substantial evidence to the contrary in the first escrow instructions, which appellant signed and initialed, indicating clearly that the purchase price was to be $450,000, as well as permitting her lawyer, Joseph E. Deering Jr., to negotiate a proposal which also stated the purchase price was to be $450,000.
Appellant has argued that the terms were not properly explained to her. However, substantial evidence adduced at trial shows numerous parties, including respondents, Betty Storm, and counsel for both parties at the time of the specific performance litigation, all understood the sales price to be $450,000. Both Mr. Kardashian and Ms. Storm were purported to have explained to appellant what her understanding should be as to what she would receive. Appellant’s actions in refraining from filing suit against her counsel Joseph E. Deering Jr. and allowing the sale of her property to commence, indicated acceptance of the terms negotiated between counsel. If appellant did not understand something, she was obligated to ask someone to explain any terms clearly before agreeing to such terms.
Appellant attempts to portray herself an unsophisticated and elderly seller, however, the evidence is otherwise. Appellant had a job as a bail bond agent for 25 years. That position reasonably requires a high level of business knowledge and money management skills. Additionally, appellant retained counsel for her negotiations and the record does not reveal she made any claims against her counsel, Joseph E. Deering Jr., for inadequate representation. Substantial evidence supports the trial court’s decision appellant understood the sales price to be $450,000 and not $600,000 and makes it improbable that a woman with money management skills would believe that she would get $5,000 a month for ten years on a purchase price of $450,000.
Section 1654 states that, “In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist.” Appellant maintains that respondents are responsible for allowing the ambiguity into the contractual instrument, and thus it should be interpreted strongly against respondents. However, this court concludes the ambiguity was the fault of both parties. We therefore look to determine if substantial evidence supports the trial court’s decision.
It is true that Betty Storm had previously worked many times with respondents. It was Storm who drafted the contractual instruments. Continual use of an escrow agent does not necessarily point towards partiality. Storm testified to remaining impartial during the process and trying to facilitate the desires of both parties. It is undisputed that both respondents and Storm were aware of the ambiguity when drawing up the contractual instruments. Appellant, however, argues she was not aware of the ambiguity and because respondents admit to being aware of the ambiguity, the interpretation of the contractual instrument should be strongly against respondents’ assertions. Substantial evidence, however, points to the fact that appellant was also aware of the ambiguity at the time the first escrow document was drafted and in fact insisted on the ambiguity remaining in the contractual instruments.
Negotiations occurred when respondents and appellant were at Betty Storm’s office as well as when the specific performance litigation arose. Both parties were aware of the ambiguity in that appellant insisted on the terms of $5,000 a month for ten years, and Mr. Kardashian agreed to allow those terms to be incorporated into the first escrow document even though he knew those terms to be incorrect. Thus, on balance, the evidence cannot be weighed strongly for or against any one party. This court finds application of the statute to be of marginal assistance in this case.
As stated above, there is substantial evidence in the record that the sales price was in fact $450,000 and that the terms of $5,000 a month for ten years were not the true understanding of the parties.
DISPOSITION
The judgment is affirmed. Each party to bear their own costs of appeal.
We concur: PERLUSS, P.J. ZELON, J.