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Lewis v. Lewis

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT
Feb 15, 2012
F061164 (Cal. Ct. App. Feb. 15, 2012)

Opinion

F061164 Super. Ct. No. 426665

02-15-2012

In re the Marriage of MICHELE and ROGER W. LEWIS. MICHELE LEWIS, Appellant, v. ROGER W. LEWIS, Respondent.

McCormick, Barstow, Sheppard, Wayte & Carruth, Todd W. Baxter, Scott M. Reddie, and Jerry D. Casheros for Appellant. Goss & Goss, Mark A. Goss and Michael A. Goss for Respondent.


NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

OPINION

APPEAL from a judgment of the Superior Court of Stanislaus County. Jack M. Jacobson, Judge.

McCormick, Barstow, Sheppard, Wayte & Carruth, Todd W. Baxter, Scott M. Reddie, and Jerry D. Casheros for Appellant.

Goss & Goss, Mark A. Goss and Michael A. Goss for Respondent.

Appellant Michele Lewis asked the family court to find a community property interest in respondent Roger W. Lewis's interest in the Ob-Gyn Associates of Turlock, a Medical Group, Inc. (hereafter Ob-Gyn Associates), pension plan. The family court concluded it was entirely separate property.

Michele contends here that the family court (1) erred in finding the agreement was ambiguous and then admitting extrinsic evidence to interpret it; (2) abused its discretion by excluding testimony from the attorney who represented her during the negotiation and drafting of the agreement; and (3) adopted an interpretation of the agreement that was not reasonable or supported by substantial evidence.

We will refer to the parties by their first names, not out of disrespect but to avoid any confusion to the reader.

We agree with the family court's finding that the premarital agreement was ambiguous and its admitting extrinsic evidence to interpret the agreement. We agree with Michele, however, that the family court abused its discretion in excluding the testimony of the attorney. We also conclude this error requires reversal of the order and a remand of the matter for a new hearing. Because of this conclusion, we need not consider Michele's remaining contentions.

FACTUAL AND PROCEDURAL SUMMARY

Roger and Michele were married on October 25, 1997, and separated on November 1, 2007. A status only dissolution judgment was entered on January 20, 2009. At the time of the hearing concerning the premarital agreement in 2009, Michele was 40 and had some health issues; Roger was 57 and in good health.

Roger obtained his medical degree in 1981. Roger and Michele met when Roger was her obstetrician/gynecologist. They resided together and had a child prior to their marriage. They had two more children while married and Roger had children from his first marriage.

Michele's work experience had been in minimum-wage jobs. She wanted to obtain a college degree and a teaching or nursing credential, but Roger discouraged her as he had a substantial income. He felt Michele should spend her time taking care of their home, his children from his first marriage, and Michele's and his three children.

Roger had a thriving obstetrics and gynecology practice and also served for several years as Chief of Staff for Emanuel Medical Center during their marriage. From 1996 to 2008, Roger earned an average of $467,712 per year from his medical practice. From 2004 to 2008, the average increased to $508,486 per year.

A premarital agreement was signed at 11:30 p.m. on October 24, 1997, the night before the parties' wedding. It was faxed to the office of Michele's attorney on October 24. The premarital agreement entered into by the parties was several pages long and included exhibits.

During the marriage two IRA's were established, with approximately $12,000 in each. Roger also contributed approximately $400,000 to his retirement plan through the medical practice while the parties were married.

At the hearing, there was a dispute regarding whether contributions to Roger's retirement plan made during marriage with earnings from the medical practice were community property.

Michele maintained that paragraph 5(b) of the premarital agreement was unambiguous because it provided: "It is specifically understood by the parties that any and all contributions made to retirement and pension plans from the money earned after the date of marriage shall be the community properties of the parties."

All further references to paragraphs 2, 3, 4, and 5 are to the paragraphs contained in the parties' premarital agreement.

Roger argued paragraph 5(b) was ambiguous. Roger noted that exhibit A to the premarital agreement set forth his separate property at the time of his marriage to Michele and included his interest in "pension plans through Ob-Gyn Associates of Turlock, A Medical Group, Inc." The premarital agreement further provided that Roger's medical practice was his separate property. Roger maintained that all of his salary and income from his medical practice earned after their marriage, the value of his medical practice, and his pension plans, including all contributions to the pension plans after marriage, were wholly his separate property.

The family court found the premarital agreement was "susceptible to the two interpretations offered by the parties." The family court concluded paragraph 5 was ambiguous and permitted extrinsic evidence to be introduced.

Michele then asked to present testimony from the attorney who represented her during the negotiation and preparation of the premarital agreement, Allen Mitterling. In her offer of proof, Michele represented that Mitterling would testify regarding conversations he had had with Roger's attorney during the time the premarital agreement was being drafted. The family court denied the request, ruling the testimony of the attorney was not relevant as the attorney would merely support his client's position.

Ultimately, the family court ruled that all funds in Roger's pension plan were his separate property and the community had no interest in the pension plan.

DISCUSSION

Michele challenges the family court's finding that paragraph 5(b) was ambiguous and the decision to receive extrinsic evidence to determine the parties' mutual intent. She also contends the family court abused its discretion when it excluded Mitterling from testifying. Finally, she argues the family court erred in concluding that the postmarriage contributions to the pension plan were Roger's separate property, and that the conclusion was not supported by substantial evidence.

I. Finding that Paragraph 5(b) Was Ambiguous

Standard of review

The threshold question of whether a contract is ambiguous is subject to de novo review by an appellate court. (Bill Signs Trucking, LLC v. Signs Family Limited Partnership (2007) 157 Cal.App.4th 1515, 1521.) A premarital agreement is interpreted according to the same rules applied to contracts. (In re Marriage of Bonds (2000) 24 Cal.4th 1, 13.) "Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.) The 'clear and explicit' meaning of these provisions, interpreted in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage' (id., § 1644), controls judicial interpretation. (Id., § 1638.) Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning. [Citations.]" (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-822.) The language of a contract must be interpreted as a whole, and courts will not strain to create ambiguity where none exists. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18-19.)

The fundamental goal of contract interpretation is to give effect to the parties' mutual intent. (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912.) The contract must be construed as a whole, with the various individual provisions interpreted together so as to give effect to all, if reasonably possible or practicable. (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473 (City of Atascadero).) Moreover, the contract must be interpreted to be "lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties." (Civ. Code, § 1643.)

Specific provisions of the premarital agreement

Paragraph 2 identifies the purpose of the document and states, "The parties enter into this agreement for the purpose of defining their respective property rights following their contemplated marriage. They intend that all property owned by either of them at the time of marriage shall remain thereafter separate property of the party who owns the property unless stated otherwise in the 'Community Property' clause herein."

Paragraph 3(a) recites that each party has provided a list of assets currently owned, with Roger's assets listed in exhibit A and Michele's assets listed in exhibit B. Paragraph 3(b) recites that the figures and amounts set forth in the exhibits for the value of assets are "approximately correct" and "reflect the values of the listed property on or about the date of this agreement."

Exhibit A lists as part of Roger's premarital assets an IRA account in the approximate amount of $10,000, his medical practice, and "All pension plans through Ob-Gyn Associates of Turlock, A Medical Group, Inc." Roger's premarital assets also included real property in Carmel worth $1.5 million, bank and savings accounts exclusive of the IRA worth over $10,000, and other personal property valued at over $60,000. Exhibit B lists Michele's premarital assets as consisting of personal property valued at approximately $14,000.

Paragraph 4(a) states that assets listed in exhibit A shall remain the separate property of Roger. Paragraph 4(b) provides that assets listed in exhibit B shall remain the separate property of Michele. Paragraph 4(c) provides that "All income, increases and other accumulations from the assets listed in Exhibits 'A' and 'B' shall be the separate property of the party who owns that property."

Under the caption "Community Property" paragraph 5(b) provides:

"The parties shall establish identical IRA accounts after the date of marriage, and any identical IRA established after the date of marriage shall be the community property of the parties. The parties shall have a community interest in the retirement and pension plan of the other, but it is
specifically understood by the parties that any and all contributions to retirement or pension plan made from the income earned before the marriage remain separate property of the party who earned that income. It is specifically understood by the parties that any and all contributions made to retirement and pension plans from the money earned after the date of marriage shall be the community properties of the parties."

Paragraph 5(c)(1) provides in part that "Roger shall have the absolute right to establish any financial accounts to put in his income from his medical practice or income from any other properties that are his separate properties. Such financial accounts shall remain his sole and separate property as long as such financial accounts are held in Roger's name alone."

Paragraph 5(e) provides that "Notwithstanding any clauses above, any income from his medical practice deposited in Roger's separate financial account, shall remain, regardless of what form it is held, the separate property of Roger."

The premarital agreement further provides that each party acknowledges they have been represented by independent counsel in the negotiation of the agreement; each party has read the agreement; and each party's legal counsel has explained to each of them the meaning and legal consequences of the agreement. The attorneys representing Roger and Michele each signed a certification stating that they had explained the legal effect of the premarital agreement to their client and that their client acknowledged "full and complete understanding of the agreement and its legal consequences." The certification included the phrase that the client had signed the agreement in the presence of his or her attorney; Michele's attorney struck this phrase from his certification.

The record does not contain any premarital agreement that bears a signature from Michele. The premarital agreement in the record bears only Roger's signature and that of the attorneys. In order to be enforceable, a premarital agreement must be in writing and signed by both parties. (Fam. Code, § 1611; In re Marriage of Shaban (2001) 88 Cal.App.4th 398, 405.) Michele, however, did not challenge the validity of the premarital agreement.
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Analysis

The premarital agreement must be construed as a whole, with the various individual provisions interpreted together so as to give effect to all, if reasonably possible or practicable. (City of Atascadero, supra, 68 Cal.App.4th at p. 473.) Construing the premarital agreement as a whole, we avoid construing the agreement so as to render another part of the agreement meaningless, surplusage, or nugatory. (Berg v. MTC Electronics Technologies Co. (1998) 61 Cal.App.4th 349, 361.) Applying this approach to paragraph 5(b) here leads us to conclude that it was ambiguous.

It is clear that the premarital agreement was very one-sided. Roger intended that everything he had and everything he earned would be his separate property, unless he unilaterally decided otherwise. Michele agreed with this, even though it meant she was giving up substantial community property rights. This intention is belied by the language set forth in paragraph 5(b). Each party contends a reasonable interpretation of the language leads to a different conclusion.

Michele argues the language of the last two sentences of paragraph 5(b) applies to all pension accounts, including the pension plan of the medical practice. This argument is supported by the words "pension plan," which appear three times in the last two sentences of the paragraph.

Roger maintains that paragraph 5(b) deals with the establishment of IRA's and any other separate retirement accounts he may establish.

The ambiguity is apparent.

Michele's interpretation would make the first sentence of paragraph 5(b) meaningless surplusage. If paragraph 5(b) were to apply to all retirement and pension plans, then there would be no need to identify IRA accounts. Also, such an interpretation would be contrary to the complete separate property nature of Roger's property and income as reflected in the remainder of the agreement.

Roger's interpretation would make the last two sentences meaningless surplusage. If the second and third sentences of paragraph 5(b) were intended to refer only to IRA accounts, logic dictates that the term "IRA accounts" would have been used, or there was no need for the two sentences at all. The use of the term "retirement and pension plans" in the second and third sentences of paragraph 5(b) rather than the term "IRA accounts" signals that the phrase "retirement and pension plans" was intended to have a broader meaning than a reference only to the IRA accounts. Whether applying a plain and ordinary meaning or a technical meaning to the terms "IRA accounts" and "pension plan," they are understood to be different. (Civ. Code, § 1645; Hambrecht & Quist Venture Partners v. American Medical Internal, Inc. (1995) 38 Cal.App.4th 1532, 1539-1540.)

We thus agree with the family court that the intentions of the parties concerning paragraph 5(b) were ambiguous, and it was correct in receiving evidence to aid it in reaching its decision.

II. Exclusion of Attorney Testimony

When the family court decided to accept parol evidence to interpret paragraph 5(b), Michele sought to call as a witness the attorney who represented her at the time the agreement was negotiated, Mitterling. Michele wanted Mitterling to testify regarding discussions between Mitterling and Roger's counsel regarding the pension plan language in paragraph 5(b). Roger objected and the family court denied the request on the basis that testimony from the drafting attorneys was not relevant.

Standard of review

We review a ruling by the family court on the admissibility of evidence using the abuse of discretion standard. (People v. Guerra (2006) 37 Cal.4th 1067, 1140.) The family court has broad discretion in determining the relevance of evidence, but lacks discretion to admit irrelevant evidence or to reject relevant evidence for arbitrary or capricious reasons. Evidence is relevant if it has "any tendency in reason to prove or disprove any disputed fact that is of consequence to the determination of the action." (Evid. Code, § 210.)

Analysis

Once the family court has determined that parol evidence is needed to interpret the provisions of a contract, "evidence of the circumstances and negotiations of the parties in making the contract is both relevant and admissible." (Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 437.) Relevant evidence includes the testimony of the attorney or attorneys who drafted the agreement. (Id. at pp. 435-436.) The testimony of the parties to the agreement, prior drafts of the agreement, and testimony of the drafting attorneys are all relevant and admissible once a family court decides to accept parol evidence. (O'Connor Bros. Abalone Co. v. Brando (1974) 40 Cal.App.3d 90, 96.)

The family court's refusal to allow Mitterling's testimony was based on its determination that the testimony would just support his client's version of the events. Also, surely, the opposing attorney then would testify stating just the opposite. The family court did not think any of this evidence would be helpful in reaching a decision. This was error. We can think of no more relevant evidence to the determination of the intention of the parties than the testimony of those who participated in the negotiation and preparation of the final agreement.

Moreover, Mitterling's testimony would have been relevant to prove Michele's understanding of the effect of paragraph 5(b) at the time she entered into the agreement and whether that understanding was clearly communicated to Roger's counsel. Michele testified that she discussed with Roger that she would have a community property interest in contributions made to the Ob-Gyn Associates pension plan during their marriage. This was important to her as she had no earning capacity and no property.

If Michele had no intention of waiving her community property interest in postmarriage contributions to the Ob-Gyn Associates pension plan at the time she entered into the agreement, if she did not believe paragraph 5(b) effected such a waiver, and if that understanding was communicated by Mitterling to Roger's counsel, Michele potentially has grounds to rescind the agreement. A mistake in understanding a contract can constitute a basis for rescission of a contract, particularly when that mistaken understanding has been communicated to the other party and the other party fails to correct it. (Donovan v. RRL Corp. (2001) 26 Cal.4th 261, 278-279; Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1422.)

We conclude that the evidence was so relevant that the error requires reversal. On remand, the family court should hold a new hearing on the issue, which should include receiving all relevant evidence before deciding its interpretation of the agreement.

III. Other Issues

As we have determined that a new hearing on the interpretation of paragraph 5(b) is required, we do not decide whether substantial evidence supported the family court's ultimate conclusions, or whether those conclusions were correct.

CONCLUSION

We conclude that paragraph 5(b) was ambiguous. The matter will be referred to the family court for a new hearing to determine the mutual intent of the parties. At the hearing, the family court shall consider all relevant evidence, including the testimony of Michele's attorney if it is offered.

DISPOSITION

The family court's order that the Ob-Gyn Associates of Turlock, a Medical Group, Inc., pension plan is the sole and separate property of Roger W. Lewis is reversed. The matter is remanded to the family court for a new hearing to determine the community property interest in the pension plan, if any. Costs on appeal, including attorney fees, are awarded to Michele Lewis.

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CORNELL, J.

WE CONCUR:

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WISEMAN, Acting P.J.

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DETJEN, J.


Summaries of

Lewis v. Lewis

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT
Feb 15, 2012
F061164 (Cal. Ct. App. Feb. 15, 2012)
Case details for

Lewis v. Lewis

Case Details

Full title:In re the Marriage of MICHELE and ROGER W. LEWIS. MICHELE LEWIS…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FIFTH APPELLATE DISTRICT

Date published: Feb 15, 2012

Citations

F061164 (Cal. Ct. App. Feb. 15, 2012)