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Knox v. Knox

California Court of Appeals, First District, Third Division
Jul 18, 2011
No. A129467 (Cal. Ct. App. Jul. 18, 2011)

Opinion


KATHLEEN KNOX, Plaintiff and Respondent, v. ROBERT G. KNOX, Defendant and Appellant. A129467 California Court of Appeal, First District, Third Division July 18, 2011

NOT TO BE PUBLISHED

Alameda County Super. Ct. No. HG 08376798

Siggins, J.

Defendant Robert G. Knox (Robert) appeals from a judgment, which, among other things, granted plaintiff Kathleen Knox (Kati) the principal sum of $57,012.77, in a partition action in order “to equalize the amounts each tenant in common invested in the property.” We agree with Robert that the sum awarded to Kati should be reduced to $28,506.39 (one-half of $57,012.77) to equalize the cotenants’ investments. As so modified, we affirm the judgment.

Because the parties in this case share the same last name, we will refer to them by their first names as used at trial for clarity and ease of reference.

FACTS

I. Background

In 2003, siblings Kati and Robert entered into a “very informal” agreement to convert a single-family residence located at 1470 164th Avenue in San Leandro into a building suitable for licensure as a residential care facility (hereinafter referred to as Ohana). They purchased the property for $330,000, and each owned a half-interest. To fund the purchase, Kati acquired a loan in her name only for the sum of $264,000, which was secured by a first deed of trust on the property. Each party contributed $40,000 to the down payment. Title vested in Kati and Robert as tenants in common. To finance the project, each party agreed to contribute “an equal amount” to a joint bank account. Even though both parties contributed to the joint bank account, they also paid expenses with checks from other bank accounts.

Robert was to handle the project’s finances and oversee the conversion of the structure into a facility suitable for licensure as a residential care facility. Kati agreed to secure the license, market, and operate the facility. Robert was experienced in building renovation, while Kati had experience in opening and operating residential care facilities. Kati was employed by KMJ Associates, Inc. (KMJ) as “the administrator, CEO, ” overseeing all the operations of “Rose Gate, ” a residential care facility. The Ohana property was directly adjacent to Mori Manor, another residential care facility that Kati purchased in 1995 and operated through KMJ.

By the end of May 2006, about 95 percent of the construction was completed. One of Kati’s employees, who was the project’s manager, prepared a “punch list” of items that needed to be completed before the facility opened.

On July 20, 2006, Kati received an email from Robert, who stated: “As there seems to be a conflicting interpretation of my position on the Ohana project, I will make clear my position. [¶] [The] [b]usiness relationship that was brought together to develop the Ohana property is going to cease.... I asked my attorney to bring closure to this relationship ASAP [as soon as possible].... This will require completion and sign off of the building permit, fire clearance and listing and sale of the property. [¶] It would be in everybody’s best interest to work towards this end quickly and professionally. Any hindrance or efforts to do anything to the contrary will be handled with the appropriate legal action. I’ve enjoyed the business relationship and believe the financial rewards, while not fully achieved, will be reasonable and worth the effort put forth. ” After receiving Robert’s email, Kati agreed to end their business relationship; she and Robert agreed to sell the property and split the proceeds. Kati continued to pay the expenses of the project including completion of the items on the “punch list.” Except for one subcontractor’s payment of $2,310 on March 23, 2007, Robert stopped contributing any money towards the Ohana project after August 2006.

In August 2006, Kati arranged for the Ohana facility to be licensed under an extension of the Mori Manor license. Ohana was never listed for sale because the parties could not agree on a listing price. While the parties were discussing sale of the property, Kati leased the Ohana facility to KMJ, commencing December 1, 2007, without objection by Robert. KMJ paid a security deposit of $2,107, plus monthly rent of $2,107 until May or June of 2008. The lease was ultimately cancelled in February 2009. Kati used the rental payments to make the Ohana mortgage payments.

In a complaint filed on March 14, 2008, Kati sued Robert, seeking to legally end their relationship by “partition.” Kati alleged that since September 2006, she had been forced to assume sole financial and management responsibility for the property because Robert had stopped contributing his share of funds. Kati sought “partition by sale” because “the land cannot be divided equally. The major value of the [p]roperty is the residence which would be impracticable to physically divide.” She sought a judgment (1) adjudicating the parties’ ownership interests; (2) partitioning the property by sale; (3) directing that the sale proceeds be used to pay the encumbrances on the property, the costs and expenses of the sale, and this action; (4) granting her an “allowance for the payment of the mortgage loan, value of improvements, the payment of taxes, and payment for expenditures for the care and maintenance of the property since September 2006;” and (5) an award of reasonable attorney fees. Robert answered and admitted the parties’ cotenancy, that partition would be proper, and that there should be a partition by sale. He otherwise denied that Kati was entitled to any incidental relief including an allowance for expenditures for the care and maintenance of the property and attorney fees.

Robert also filed a separate second amended cross-complaint against Kati, KMJ, Bruce Goodman, and Keller Williams Realty. The second amended cross-complaint was dismissed as against Bruce Goodman and Keller Williams Realty. The judgment under review directed that Robert “shall take nothing from... Kathleen Knox or KMJ Associates, Inc.” on the second amended cross-complaint. On appeal, Robert does not challenge that portion of the judgment.

II. Trial Court Proceedings

By the time the bench trial began in April 2010, Kati had stopped paying the mortgage and the Ohana property had been lost to foreclosure. Consequently, Kati recognized that her claims for partition by sale and distribution of sale proceeds were moot. However, she still sought incidental relief of “contribution by a co-tenant” for expenditures for the maintenance of the property while the parties held it in cotenancy. Robert argued that because the property was sold in foreclosure, Kati’s partition cause of action was “basically” moot. Her claim for contribution was waived, Robert argued, “by her conduct and what she’s done with the payments, ” contending that Kati had been reimbursed for her expenditures from the lease payments made by KMJ.

After closing arguments, the parties confirmed that in light of the foreclosure, there was no reason for the court to issue an order “severing” the property. However, Kati asked for an “accounting” of the expenses incurred for the permanent improvements and maintenance of the property in order to determine an apportionment between the parties, if appropriate. The court directed each party to submit a document based on the evidence that showed the moneys each party had invested in the project. Kati submitted a posttrial brief, referencing specific exhibits that demonstrated sums invested by Kati and Robert, and arguing that, at minimum, Kati had invested $57,012.77 more than Robert and she should recover that sum, plus interest. In his posttrial brief, Robert argued his investment in the project was $156,616.38. Robert acknowledged Kati’s $40,000 down payment, but otherwise argued she had no other out-of-pocket expenses and had, in fact, profited from the Ohana project. He also argued Kati’s contribution claim was barred by her conduct as well as “equity problems.”

The trial court issued a proposed statement of decision, to which Robert filed objections and submitted a modified request for statement of decision asking the court to answer 73 questions. The trial court’s final statement of decision was essentially unchanged. In pertinent part, the trial court found Kati, or KMJ Associates, Inc. on her behalf, invested a total sum of $211,717.60, and Robert invested a total sum of $154,704.83. Thus, at the end of the project, Kati’s investment exceeded Robert’s by $57,012.77 because she made payments for care and maintenance of the property after Robert stopped contributing. The court also found: “The Ohana project was a joint venture, entered into by sophisticated partners that failed because of problems with finances and a downturn in the real estate market. To the extent that there was an agreement, each party agreed to share equally in the benefits of a successful project and now that the project has failed, each must share equally in the loss.”

In response to Robert’s objections, the trial court stated: “These objections did not specify the ‘principal controverted issues’ as required by CRC 3.1590(d). Defendant chose to submit seventy-three questions probing the evidentiary details underlying the Court[’]s decision. Defendant’s questions did not convey to the Court what Defendant considered were the principal controverted issues. The Court need not address each question listed in Defendant’s request. [Citations.] However, the Court reviewed the questions and finds that the statement of decision has explained the factual and legal basis for the Court’s decisions regarding the principal controverted issues at trial.”

The court’s June 18, 2010, judgment reads, in pertinent part: “1. Plaintiff and Defendant were each tenants in common in the property that was located at 1470 164th Avenue, San Leandro, California, and were each entitled to an undivided one-half of all rights, title, interest and obligations in the property. Each party agreed that partition is proper. [¶] 2. The property was lost to foreclosure therefore an order for partition by sale is moot. [¶] 3. There were no proceeds of the sale after foreclosure to divide between the parties. [¶] 4. Pursuant to Code of Civil Procedure [section] 87[4].040, the Court exercises its discretion to award Plaintiff, Kathleen Knox $57,012.77 plus interest, from and after the date of this judgment to equalize the amounts each tenant in common invested in the property. Defendant Robert Knox shall pay the costs. [¶] 5. Plaintiff is awarded attorney’s fees and costs pursuant to Code of Civil Procedure [section] 874.010 subject to a memorandum of costs.” Robert timely appeals from the judgment.

Code of Civil Procedure section 874.040 reads, in pertinent part: “[T]he court shall apportion the costs of partition among the parties in proportion to their interests or make such other apportionment as may be equitable.”

Code of Civil Procedure section 874.010 reads, in pertinent part: “The costs of partition include: [¶] (a) Reasonable attorney’s fees incurred or paid by a party for the common benefit.”

DISCUSSION

I. Kati’s Claim for Contribution

Robert contends the trial court erred in granting Kati her “costs of partition, ” pursuant to Code of Civil Procedure section 874.040 because by the time of the trial her request to partition the property by sale or in kind was moot. We disagree.

All further unspecified statutory references are to the Code of Civil Procedure.

“[A]lthough the action of partition is of statutory origin in this state, it is nonetheless an equitable proceeding [citation], and in its evolution has been conditioned and controlled by the broad principles governing equity jurisprudence. [Citation.] Whenever a party affirmatively seeks relief through the interposition of the remedy of partition, the courts have adhered, in adjusting the rights of cotenants and defining their interest in the common property, to the classic formulas encapsulated in the maxims that equity is equality and he who seeks equity must do equity, and have dispensed equitable relief only upon condition that the equitable rights of a cotenant are respected and safeguarded. [Citations.] We must therefore examine [Robert’s] claims in harmony not only with these established principles, but cognizant that equity, which penetrates beyond the form to the substance of a controversy, is nonetheless bound by the prescriptions and requirements of the law.” (Elbert, Ltd. v. Federated Income Properties (1953) 120 Cal.App.2d 194, 200.)

An action for partition is not rendered moot by the fact that the real property no longer needs to be divided by sale or in kind by the time of trial. “Every partition action includes a final accounting according to the principles of equity for both charges and credits upon each cotenant’s interest. Credits include expenditures in excess of the cotenant’s fractional share for necessary repairs, improvements that enhance the value of the property, taxes, payments of principal and interest on mortgages, and other liens, insurance for the common benefit, and protection and preservation of title.” (Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035-1036; see § 872.140 [“[t]he court may, in all [partition] cases, order allowance, accounting, contribution, or other compensatory adjustment among the parties according to the principles of equity.”]; § 874.010, subd. (e) [the costs of partition include “disbursements or expenses determined by the court to have been incurred or paid for the common benefit”]; Willmon v. Koyer (1914) 168 Cal. 369, 372-374 [upholding plaintiff’s claim for contribution where partition sought only to resolve that defendant was not a cotenant].) The trial court’s monetary award to Kati is also “in accord with the general rule that a court of equity, having once acquired jurisdiction, will adjust all the differences between the parties arising from the cause of action in order to do complete justice and prevent further litigation, whether or not the particular relief was requested. [Citations.] It has been held that under this rule the court could properly order an accounting although the complaint did not ask for such relief.” (Sears v. Rule (1945) 27 Cal.2d 131, 148-149 [rejecting appellant’s argument that money judgment was improper because certain sums were awarded based on issues not raised by the pleadings and court did not employ procedure appropriate for an accounting].)

II. The Court’s Findings on Kati’s Claim for Contribution Are Supported by Substantial Evidence

In her posttrial brief, Kati explained, with references to exhibits that were admitted into evidence, the sums that each party invested in the property, and her calculations were accepted by the trial court. Relying on isolated portions of exhibits and testimony, Robert challenges the trial court’s findings based on purported inconsistencies or concessions in Kati’s testimony, conflicts in the evidence, and certain perceived deficiencies in some exhibits. However, it was for the trial court, as the trier of fact, “to resolve the conflicts in the evidence and to pass upon the weight to be given the evidence. [Citations.] It is well settled that the trier of fact may accept part of the testimony of a witness and reject another part even though the latter contradicts the part accepted. [Citations.] As [the court] said in Nevarov v. Caldwell (1958) 161 Cal.App.2d 762, 777 [327 P.2d 111], ‘the [trier of fact] properly may reject part of the testimony of a witness, though not directly contradicted, and combine the accepted portions with bits of testimony or interferences from the testimony of other witnesses thus weaving a cloth of truth out of selected available material.’ ” (Stevens v. Parke, Davis & Co. (1973) 9 Cal.3d 51, 67-68; see Evje v. City Title Ins. Co. (1953) 120 Cal.App.2d 488, 493 [judgment affirmed on testimony of a single witness rejecting argument that testimony was false in light of witness’s own documents and admissions].) These rules “will obtain even though to some triers of fact the evidence in the instant case would have seemed so improbable, impossible and unbelievable that a judgment contrary to that now on appeal would have inevitably followed.” (Romero v. Eustace (1950) 101 Cal.App.2d 253, 254.)

In particular, Robert’s related challenge to Plaintiff’s Exhibit 12 is not persuasive. Without objection, Kati testified that Plaintiff’s Exhibit 12 represented an accounting of the expenses she incurred for the benefit of Ohana from April 21, 2005 to July 30, 2008. She testified that her counsel prepared the accounting at her direction based on “all of the documents”, “the records”, and “information” supplied by Kati. Consequently, the trial court properly admitted the exhibit after overruling Robert’s objection “on foundation”, and finding “[t]here is an adequate foundation.”

Robert now argues that admission of the exhibit was improper because Kati did not physically prepare Plaintiff’s Exhibit 12, or produce all of the original documents reflected in the exhibit. However, those arguments are forfeited for his failure to raise them in the trial court, and concern the weight to be given the exhibit, not its admissibility. (See Cal. Law Revision Com. com. (1998 Addition), 29B West’s Ann. Evid. Code (2011 Supp.) foll. § 1521, p. 177 [“nature of [secondary] evidence offered affects its weight, not its admissibility”]; Evid. Code, § 1523, subd. (d) [“Oral testimony of the content of a writing is not made inadmissible... if the writing consists of numerous accounts or other writings that cannot be examined in court without great loss of time, and the evidence sought from them is only the general result of the whole.”]; see also Heaps v. Heaps (2004) 124 Cal.App.4th 286, 293-294 [court upheld admission of witness’s schedule of assets even though partially based on information not in the record].) Because Robert did not ask the trial court to exclude Plaintiff’s Exhibit 12 on the grounds there was a genuine dispute as to its contents and justice required its exclusion, such arguments are forfeited for review and we see no reason to address them.

At trial, Robert did not seek production of the original documents reflected in Plaintiff’s Exhibit 12, and there is no indication in the record that Kati could not have produced them had the trial court excluded the exhibit.

Finally, we reject Robert’s argument that the trial court should not have credited Kati for the expenses paid with checks drawn on a KMJ bank account. Kati testified that she paid some of the expenses for the Ohana project with KMJ checks. The trial court was free to accept and rely upon her testimony. While Robert says Kati did not address whether she was required to reimburse KMJ, once she testified she made the payments Kati had no obligation to produce such additional evidence. “The burden of producing evidence as to a particular fact is on the party against whom a finding on that fact would be required in the absence of further evidence.” (Cal. Evid. Code, § 550, subd. (a).) On this record, it was Robert’s burden to demonstrate Kati did not actually make the payments she claimed. Once the court determined that Kati had “paid a debt or obligation for the benefit of the joint property, ” the court was within its discretion to direct Robert to contribute his proportionate share of those expenses as a cotenant. (Conley v. Sharpe (1943)58 Cal.App.2d 145, 155; see also Jamison v. Cotton (1933) 136 Cal.App. 127, 131 [regardless of “what gave rise” to payment of expenses, the defaulting cotenant received the benefit and plaintiff cotenant had the “corresponding right to recovery”].)

III. The Judgment Must Be Modified To Equalize Cotenants’ Investments

In its proposed statement of decision, final statement of decision, and judgment, the court expressly intended to award Kati a sum of money “to equalize the amounts each tenant in common invested in the property.” However, the sum of $57,012.77 awarded to Kati did not equalize the parties’ investments. Instead, it represents 100 percent of the expenses incurred by Kati that exceeded those incurred by Robert. The award does not take into consideration that Kati “would only be entitled to a refund from her cotenant of the latter’s proportionate share, ” or one-half of $57,012.77, which is $28,506.39. (Conley v. Sharpe, supra, 58 Cal.App.2d at p. 155; see Willmon v. Koyer, supra, 168 Cal. at p. 374 [“in proportion to their interests all tenants in common” are required to pay taxes and “expenditures other than taxes made for the common benefit”].)

Robert asks that we modify the judgment by reducing the principal sum awarded to Kati to $28,506.39, so the award reflects the court’s intent “to equalize” the parties’ investments. Kati responds that Robert has forfeited this issue because he did not raise it in a motion for a new trial. We need not address this forfeiture issue. Even if Robert should have moved for a new trial, we deem it appropriate to grant him the requested relief.

In her closing argument and posttrial brief, Kati specifically asked that Robert, as a cotenant, pay his proportionate share or one-half of her excessive expenses. However, in her posttrial brief Kati requested a minimum award in the principal sum of $57,012.77, which represented the difference between the cotenants’ investments rather than Robert’s proportionate share. Kati’s request apparently led the trial court to confuse the principal sum to be awarded if the court agreed with her calculations. In response to Robert’s appellate request for modification, Kati does not argue the principal sum of $57,012.77 equalizes the parties’ investments. She argues only that we may sustain the trial court’s ruling as an exercise of its discretion. We decline to do so.

“While we recognize that the applicable statutes allow the trial court to apportion fees and costs in an equitable manner, there is nothing in the record before us to support an apportionment in any manner other than according to the respective interest of the parties in the property.” (Stutz v. Davis (1981) 122 Cal.App.3d 1, 5.) Given the trial court’s explicit intention, “to equalize the amounts each tenant in common invested in the property, ” we are reasonably confident it did not intend Robert to pay more than his proportionate share or one-half of the excessive expenses incurred by Kati. We modify the judgment accordingly.

DISPOSITION

The judgment entered on June 18, 2010, is modified by deleting the following paragraph 4: “Pursuant to Code of Civil Procedure 870.040, the Court exercises its discretion to award Plaintiff, Kathleen Knox $57,012, 77 plus interest, from and after the date of this judgment to equalize the amounts each tenant in common invested in the property. Defendant Robert Knox shall pay the costs.” Instead, the trial court is directed to substitute the following paragraph 4: “Pursuant to Code of Civil Procedure section 874.040, the Court exercises its discretion to award Plaintiff, Kathleen Knox $28,506.39 plus interest, from and after the date of this judgment to equalize the amounts each tenant in common invested in the property. Defendant Robert Knox shall pay the costs.” As modified, the judgment is affirmed. Defendant Robert Knox is awarded costs on appeal.

We concur: Jenkins, J., McGuiness, P.J.


Summaries of

Knox v. Knox

California Court of Appeals, First District, Third Division
Jul 18, 2011
No. A129467 (Cal. Ct. App. Jul. 18, 2011)
Case details for

Knox v. Knox

Case Details

Full title:KATHLEEN KNOX, Plaintiff and Respondent, v. ROBERT G. KNOX, Defendant and…

Court:California Court of Appeals, First District, Third Division

Date published: Jul 18, 2011

Citations

No. A129467 (Cal. Ct. App. Jul. 18, 2011)