Court Opinion

ID: 9951141
Source: CourtListenerOpinion
Date Created: 2024-03-15 17:03:20.168077+00
Date Added: 2024-06-11T14:37:17.806677
License: Public Domain

Filed 3/15/24 Marriage of Ferris CA1/5

       NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on
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poses of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                         FIRST APPELLATE DISTRICT

                                    DIVISION FIVE

 In re the Marriage of MINH NGOC
 THI FERRIS and MICHAEL
 ANTHONY FERRIS

 MINH NGOC THI FERRIS,
           Respondent,                                            A165952

 v.
 MICHAEL ANTHONY FERRIS,
            Respondent;                                           (Alameda County
                                                                  Super. Ct. No. AF13686594)
 LORIE WILLIAMS,
           Appellant.

       By statute, a couple’s community property is liable for any
debts either spouse incurred before or during the marriage.
(Fam. Code, § 910.)1 Also by statute, contractual debts are
“ ‘incurred’ ” in this context “at the time the contract is made.”
(§ 903.) Taken together, these provisions compel the conclusion
that an award of contractual attorney fees is a community debt if
the debtor spouse entered the contract containing the fee

        1 Undesignated statutory references are to the Family

Code.
                                                1
provision before marriage, without regard to when the contract
was breached, the breach was litigated, or the fees were awarded.
Here, accordingly, respondent Michael Ferris’s obligation to pay
attorney fees arising from a contract he entered with appellant
Lorie Williams before his marriage to Minh Ngoc Thi Ferris is a
community debt, even though the fees were awarded after the
couple separated. We reverse.

                         BACKGROUND

                                 A.

      In 2005, Ferris and Williams entered into a contract
related to a real estate transaction. The contract provided that
“[s]hould litigation become necessary to enforce the terms of this
Agreement, the prevailing party therein shall be entitled to
recover all of his attorney’s fees and costs, including expert costs.”

       Their venture fell apart and, as happens, litigation ensued.
In October 2012, Williams sued Ferris; Ferris countersued. In
July 2013, the court dismissed the cross-complaint after Ferris
failed to amend following a successful demurrer. The court
entered judgment for Williams on the cross-complaint, deemed
her the prevailing party, and, in September 2013, awarded her
$29,975 in attorney fees. Williams dismissed her complaint
against Ferris in July 2013.

      Meanwhile, Ferris and Minh2 married in 2009, almost
three years before Williams sued Ferris. The couple legally
separated in June 2013, while the litigation was pending, and
Minh filed for divorce a month later.

      2 To avoid confusion, we refer to Ms. Ferris by her first

name.

                                  2
                                B.

       In 2021, Williams successfully moved to intervene in the
Ferris’s still-ongoing divorce action. Her complaint for joinder
sought a declaratory judgment that surplus funds remaining
after the couple’s former home had been sold at foreclosure were
community property, and were therefore available to satisfy
Ferris’s judgment debt.

       One of the disputed issues at trial – the only one presented
in this appeal – was whether Ferris’s debt to Williams was his
separate obligation or was owed by the community. Minh
asserted it was the former because (1) Ferris’s venture with
Williams occurred before the marriage and did not benefit the
community; and (2) the attorney fees were awarded after the
couple’s date of separation. The family court agreed, reasoning
the fee award was “not a contract debt” because, when the
contract was executed, any obligation to pay attorney fees was
contingent on future events. Since the obligation to pay fees
arose only after the date of separation, when the court in the
Williams-Ferris litigation issued the fee award, the debt was
Ferris’s separate obligation and could not be charged to the
community. The court further noted the debt “was not for the
common necessaries of life of either spouse or the children of the
marriage.”

                          DISCUSSION

      Who is liable on a debt for contractual attorney fees arising
from litigation on a contract entered by one spouse before the
marriage and awarded after the marriage’s demise? Addressing
this question of statutory interpretation de novo (see People v.
Tran (2015) 61 Cal.4th 1160, 1166; In re Marriage of Ruiz (2011)
194 Cal.App.4th 348, 356, fn. 3), we conclude the debt belongs to
the community.

                                 3
      We begin with the controlling statutory language. Under
section 910, subdivision (a), “[e]xcept as otherwise expressly
provided by statute, the community estate is liable for a debt
incurred by either spouse before or during marriage, regardless of
which spouse has the management and control of the property
and regardless of whether one or both spouses are parties to the
debt or to a judgment for the debt.” Section 903, in turn, states
that a contractual debt is incurred “at the time the contract is
made.” Accordingly, the community estate is liable for a spouse’s
breach of a contract he or she entered into before or during the
marriage. (§§ 903, 910; In re Marriage of Feldner (1995) 40
Cal.App.4th 618, 622 (Feldner) [“section 903 is oblivious to the
time of performance of a contract”]; In re Marriage of Nassimi
(2016) 3 Cal.App.5th 667, 685-686 (Nassimi).)

       Here, the fee award in the Williams-Ferris litigation
unquestionably arose from the attorney fee provision in their
2005 contract. Nonetheless, the family court concluded it was
“not a contract debt” because “[a]t the time the contract was
formed, any obligation to pay attorney fees was speculative and
contingent on future events. The obligation to pay did not arise
until the Santa Clara County court ordered [Ferris] to pay them,
and the issuance of [that] order is the event that triggered the
debt.”

       Feldner, supra, 40 Cal.App.4th at pages 620-622, explains
why this was error. During his marriage, contractor William
Feldner entered an agreement with the Allens to build their
home. After he and his wife separated, Feldner breached the
agreement by failing to complete the project as agreed. (Id. at p.
621.) His wife contended the potential liability from the Allens’
ensuing lawsuit was William’s separate debt because he
“ ‘incurred’ ” it after their separation by discontinuing his work
on the project. (Id. at p. 622.)

                                 4
       The court rejected her contention. “As written, section 903
is oblivious to the time of performance of a contract. The statute
does not say that a contract debt is incurred when a contract is
broken, or incurred when it is to be substantially performed, or
anything like that. It says that a contract debt is ‘incurred’ when
the contract is ‘made.’ When read together with section 910,
subdivision (a) [‘Except as otherwise expressly provided by
statute, the community estate is liable for a debt incurred by
either spouse before or during marriage. . . .’] the effect of section
903 is to characterize contract debts as community when the
contract is ‘made’ (as distinct from performed) during the
marriage.” (Feldner, supra, 40 Cal.App.4th at p. 622.)

       It is immaterial in this context that the potential liability
on a contract made before or during a marriage may be
conjectural or uncertain at the time the contract was made.
Nassimi is illustrative. The contract in question there, for the
sale of the couple’s business, was executed during the marriage;
the complaint against the contracting spouse was filed after they
separated; and the parties settled 18 months later. (Nassimi,
supra, 3 Cal.App.5th at pp. 672-673, 675-677.) Following
Feldner, the court held the community estate was liable for the
settlement amount, attorney fees, and costs. As in Feldner, and
as here, when the contract was executed any obligation for its
potential breach was contingent on a breach occurring, followed
by litigation and an adverse judgment. But none of that
mattered. Pursuant to sections 910 and 903, the fact that the
contract was made during the marriage mandated that the debt
belonged to the community estate. (Nassimi, at pp. 685-686; e.g.,
In re Marriage of Brown (1976) 15 Cal.3d 838, 846, fn. 8 [“the fact
that a contractual right is contingent upon future events does not
degrade that right to an expectancy”]; In re Marriage of Fonstein
(1976) 17 Cal.3d 738, 746 [“contractual rights . . . are community
property though contingent upon future events”].)

                                  5
      Minh attempts to distinguish Feldner and Nassimi because
the contracts in those cases were executed during, rather than
before, the marriage. The distinction is meaningless: under
section 910, the community estate is equally liable for debts
incurred during and before the marriage.

       It is also irrelevant that, as Minh asserts, the marital
community did not benefit from the Williams-Ferris contract.
“[T]he liability of community property is not limited to debts
incurred for the benefit of the community, but extends to debts
incurred by one spouse alone exclusively for his or her own
personal benefit. [Citations.] Although a spouse may be required
to reimburse the community for the misuse of community assets
[citations], the community estate remains liable to third party
creditors for any debt incurred as a result of such misuse of
assets.” (Lezine v. Security Pacific Fin. Services, Inc. (1996) 14
Cal.4th 56, 64.) To the extent Minh further suggests the fee
award was invalid when issued, she provides no authority for
collaterally attacking it in this appeal and at this late date.

       Finally, the family court’s finding that the fee award was
not a debt for the “common necessaries of life” of either spouse or
their children is neither here nor there. Under section 2623,
debts incurred for the common necessaries of life after the date of
separation and prior to dissolution or legal separation are
community obligations, while other debts incurred during that
interval are charged to the spouse who incurred them. Ferris
incurred his debt to Williams before the marriage, so sections 903
and 910, not section 2623, provide the controlling law.

      We do not address Williams’s argument that she is entitled
to additional interest, costs, and attorney fees, nor Minh’s
argument that Williams forfeited the issue in the family court.
The parties may take up these issues with the trial court on
remand.

                                 6
                               DISPOSITION

       The judgment is reversed to the extent it characterizes the
judgment debt as Ferris’s separate obligation rather than a
community debt. The matter is remanded to the family court for
further proceedings consistent with this determination. Williams
is entitled to costs on appeal. (Cal. Rules of Court, rule 8.278(a).)

                                                         BURNS, J.
WE CONCUR:

JACKSON, P.J.
SIMONS, J.

Williams v. Ferris (A165952)

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