Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County No. GIN034571, William S. Dato, Judge.
NARES, Acting P. J.
This action was initiated by Jacqueline B. Reedy (Reedy), in her capacity as the trustee of the Helen Chamness Bussell Family Trust (the trust) and in her individual capacity as a beneficiary of the trust, against, among others, Todd Bussell, a beneficiary of the trust. The action sought to quiet title to a 131-acre ranch (the ranch) owned by the trust and to partition the ranch by sale. The court entered an interlocutory judgment quieting title in the trust and ordering a partition by sale.
Bussell appealed the interlocutory judgment, asserting (1) the judgment violated the spendthrift provision of the trust and Probate Code sections 15300 and 15301; (2) the court erred by including an award of attorney fees and costs in the judgment; and (3) the court erred in awarding Reedy the costs of maintaining, preserving and marketing the property. We affirmed the interlocutory judgment in Reedy v. Bussell (Jan. 6, 2010, DO54569) [nonpub. opn.] (Reedy I).
Following remand, Reedy brought a motion for an order confirming the sale of the property to the City of San Marcos in the amount of $6.5 million. The motion asserted that the sale was upon terms and a price that were the best that could be obtained.
Bussell opposed the motion, asserting (1) the process which culminated in the sale was unfair in that the sale price is based on an appraisal that was prepared by an appraiser who was retained and paid by the proposed purchaser of the property; (2) the appraisal was 18 months old; (3) Reedy had not served the motion on all parties who appeared in the action; and (4) if the motion was granted, he requested that the proceeds be deposited with the court pending resolution of the proper distribution of the proceeds from the sale.
The court granted the order confirming the sale.
On appeal, Bussell asserts that (1) there is an ambiguity in the order confirming sale because it permits the escrow holder to disburse the net sale proceeds without a future court order concerning distribution of the sale proceeds; and (2) paragraph 4 of the order confirming the sale violates established case law and this court's holdings in Reedy I. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Action and First Appeal
In December 2003 Reedy filed this action, seeking to quiet title to the ranch. After a bench trial, the court ordered the ranch be partitioned for sale. The court also found there were existing judgments in which Reedy was the judgment creditor and Bussell was the judgment debtor in the amount of almost $2 million. The court found that these liens encumbered Bussell's interest in the ranch, that the liens would encumber Bussell's interest in the trust "only upon distribution, " and ordered that "the proceeds from the sale" of the ranch would be applied to those liens. The court also ordered that Reedy be paid "such attorney fees and other expenses which she has incurred in commencing and prosecuting this proceeding as allowed by law" from the proceeds of the sale.
Finally, the court ordered that proceeds from the sale of the ranch shall be applied to "compensate [Reedy] for such expenses which she has incurred to maintain, preserve, and market the Subject Property...."
The court entered an interlocutory judgment in conformance with its findings.
B. The Sale Order
As stated above, following remand after Reedy I, on June 23, 2010, the court confirmed the sale of the subject property to the City of San Marcos.
Of relevance to this appeal, paragraph 4 of the order states in part: "Lien claimants are also divested of any interest in the Property as of close of escrow of the sale of the Property and in turn each lien claimant's lien in the Property is substituted with a lien in that portion of the sale proceeds allocated to the debtor of each such lien claimant."
Also of relevance to this appeal, paragraph 6 of the order states:
"Disposition of Sale Proceeds: The Court reserves jurisdiction to order the specific application of sale proceeds as provided for in the Amended Interlocutory Judgment. It is understood that the parties on, before or after the close of escrow will make application to the Court by a noticed motion for the specific payment of sale proceeds for fees, costs and other purposes as provided for by the Amended Interlocutory Judgment or otherwise."
C. The Sale Agreement
Also of relevance to this appeal, the agreement for sale of the property provides as to disbursement of funds, after closing costs, and deduction of prorations, that the escrow holder shall: "Disburse the remaining balance of the funds to Seller, or in accordance with Seller's written instructions, promptly upon the close of Escrow."
DISCUSSION
A. Purported Ambiguity in Order Confirming Sale
Bussell asserts that paragraph 6 of the order confirming sale is ambiguous and creates a conflict with the provision of the sale agreement concerning distribution of sale proceeds. Specifically, Bussell asserts that the sale agreement allows disbursement of the net sale proceeds without a final court order that directs how those funds should be distributed. He asserts that paragraph 6 of the order confirming sale "implies" that another court order is required to permit to permit disbursement of the net proceeds. This contention is unavailing.
As detailed, ante, the interlocutory judgment provided for payment of attorney fees and other expenses to Reedy. The obvious intent of paragraph 6 was to ensure the court retained jurisdiction to award Reedy attorney fees and other expenses she incurred until the sale is final. It specifically states that Reedy would have the right to bring a motion before the court to obtain such fees and expenses: "It is understood that the parties on, before or after the close of escrow will make application to the Court by a noticed motion for the specific payment of sale proceeds for fees, costs and other purposes as provided for by the Amended Interlocutory Judgment or otherwise." (Italics added.)
Nowhere does it state or "imply" that Reedy must return to court to obtain an order concerning payment of the liens Reedy has against Bussell. Such amounts are liquidated and payment has been ordered by the court in the interlocutory judgment.
Bussell asserts that he would be "deprived of due process" if Reedy is not required to go back to court to obtain an order regarding payment of liens because there is an outstanding issue, among others, as to "whether the judgment lien holders are able to obtain satisfaction of those liens prior to actual delivery to [Bussell] of his share of the sale proceeds." (Fn. omitted.) However, as will be discussed in more detail in the following section, we resolved this issue against Bussell in Reedy I, and this contention is also unsupported by the law.
Bussell makes several other claims of error related to paragraph 6 of the order confirming sale. In footnote 4 of his opening brief he asserts that "[a]ny order concerning the distribution of escrow funds should be made pursuant to a final judgment of partition, not an order confirming sale." However, Bussell provides no authority for this contention. In fact, the interlocutory judgment provides for the distribution of funds and the partition by sale.
Bussell asserts that the court must address "whether Reedy violated a standing court order by entering into an agreement that provides for the distribution of escrow funds prior to obtaining a final court order concerning distribution...." (Fn. omitted.) In footnote 7, Bussell refers to an October 2003 order entered by the Superior Court of Orange County that directed that there could be no distributions from the trusts "without a court order." Again, the interlocutory judgment and order confirming sale are "court orders" providing for distribution of the sale proceeds.
B. Paragraph 4 of Sale Agreement
Bussell asserts that paragraph 4 of the order confirming sale violates both case law and this court's holding in Reedy I. We reject this contention.
The portion of paragraph 4 of the order confirming sale to which Bussell objects, and which is quoted above, provides that upon close of escrow: "Lien claimants are also divested of any interest in the Property as of the close of escrow of the sale of the Property and in turn each lien claimant's lien in the Property is substituted with a lien in that portion of the sale proceeds allocated to the debtor of each such lien claimant."
Bussell asserts that this provision violates case law and our decision in Reedy I because his interest in the sale proceeds should be delivered to him first, not to those having liens against his interest.
However, paragraph 4 is merely a provision that clears title to the property. A property subject to a security interest remains subject to that security interest upon transfer of the property. (Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 596.) Thus, without paragraph 4, the property would remain encumbered by the liens that attach to Bussell's interest in the property. Without paragraph 4, title would be clouded, preventing the close of escrow.
Moreover, our decision in Reedy I did not provide thatthe judgment liens could not attach to his interest in the sale proceeds before his share is actually delivered to him. Indeed, in Reedy I Bussell made just this assertion, which we rejected. Bussell argued that the interlocutory judgment was in error because there was a spendthrift provision in the gift trust which, under Probate Code section 15300, could not be subjected to any liens until the trust proceeds are "paid to the beneficiary." (Reedy I, at p. 4.) We rejected that argument because the gift trust terminated upon the grantor's (Helen Bussell's) death, and the spendthrift provision terminated at that time as well. (Id. at p. 5.) Thus, we held the judgment liens attached to his interest in the sale proceeds before actual distribution of the sale proceeds to Bussell.
Bussell also asserts paragraph 4 is contrary to Frazier v. Wasserman (1968) 263 Cal.App.3d 120. However, as we noted in Reedy I, that case actually is contrary to Bussell's position. (Reedy I, at p. 5.) As the Court of Appeal stated in that case, "the donor of a spendthrift trust can only protect his gift from the claims of the beneficiary's creditors during the life of the trust. Therefore, once the corpus of a spendthrift trust vests in the beneficiary and is placed in his hands, or under his direct control, it may not only be dissipated by the beneficiary contrary to what the donor may have wanted, but it may also be reached by the beneficiary's creditors through attachment or execution to satisfy his debts...." (Frazier, supra, at p. 127, italics added.)
Thus, Frazier acknowledges that the interest of a beneficiary in a terminated trust may be attached or executed upon. Once the trustor passed away, the judgment liens attached to Bussell's interest in the property. (Di Maria v. Bank of California Nat'l Asso. (1965) 237 Cal.App.2d 254, 257.)
DISPOSITION
The order confirming sale is affirmed. Respondent shall recover her costs on appeal.
WE CONCUR: McINTYRE, J., AARON, J.