Court Opinion

ID: 9395077
Source: CourtListenerOpinion
Date Created: 2023-05-17 00:02:31.001596+00
Date Added: 2024-06-11T17:19:05.244559
License: Public Domain

Filed 5/16/23 Mondloch v. Bell CA5

                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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.

           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                     FIFTH APPELLATE DISTRICT

    KATHLEEN MONDLOCH (BELL),
                                                                                             F084407
           Appellant,
                                                                                  (Super. Ct. No. F71486)
                    v.

    BETSY BELL,                                                                           OPINION
           Respondent.

                                                   THE COURT*
         APPEAL from an order of the Superior Court of Merced County. Shelly
Seymour, Judge.
         Cyril Lawrence, Inc. and Cyril L. Lawrence for Appellant.
         McCormick, Barstow, Sheppard, Wayte & Carruth and Christopher A. Kent for
Respondent.
                                                        -ooOoo-

*        Before Franson, Acting P. J., Meehan, J. and Snauffer, J.
       Appellant Kathleen Mondloch (Bell) challenges the trial court’s award of $57,833
to her daughter, Betsy Bell (daughter), representing a one-sixth interest in the family
home that was sold through a short sale in 2011. Our review of the record provided on
appeal, and the relevant legal standards governing the interpretation of the language used
in the agreement at issue here, leads us to conclude this matter must be remanded to the
trial court for further proceedings.
                    PROCEDURAL AND FACTUAL SUMMARY
       On February 7, 1984, an interlocutory judgment of dissolution of marriage was
entered, with an attached stipulation dividing the community and separate property assets
of Mondloch and Jimmie Bell (ex-husband) (hereinafter “1984 property agreement”).
Among the property addressed in the 1984 property agreement was the “family”
residence (the Mulberry property), which was declared to be Mondloch’s sole and
separate property as follows:

       “All interest of the parties in the house and lot at 5520 West Mulberry,
       Atwater, California, subject to the equitable interest of the minor children
       as more particularly set forth in this judgment.”
Later in the 1984 property agreement, this equitable interest designated for the two minor
children of the marriage was described this way:

       “One-third of the gross value of the residence at 5520 West Mulberry,
       Atwater, California, which is awarded to [Mondloch] under the terms of
       this judgment, with the interest granted herein to be held in trust for the
       benefit of the minor children under the provisions set forth in the Civil
       Code of California, with one-half of the principle and accrued income of
       the trust distributed to each child as she attains the age of twenty-five (25);
       the interest created herein shall be an equitable interest and shall accrue to
       the benefit of the minor children upon the sale of the residence, or the death
       of Petitioner, whichever first occurs; and, [Mondloch] and [ex-husband]
       shall act as co-trustees with the powers more specifically designated in
       Section 1120.2 of the Probate Code of California for the purposes of this
       paragraph, the gross value is defined as the gross sale proceeds of the
       residence less any costs of sale and real estate commissions.”

                                             2.
        On July 8, 2021, a request for order was filed to enforce the 1984 property
agreement with respect to daughter’s interest in the Mulberry property.1 Daughter is one
of the two minors referenced in the 1984 property agreement, and is the real party in
interest and respondent here. A hearing on the request for order was held on October 7,
2021.
        The first witness at the hearing was Tammy Fornier, an employee of the title
company who handled the escrow of a short sale involving the Mulberry property in
2011. Fornier testified that all physical documents involved in the escrow had been
shredded approximately seven years after the short sale. However, Fornier was able to
retrieve a closing statement for the escrow from a computer. This statement showed
Mondloch received nothing from the sale of the Mulberry property, and that the lender
took all the proceeds from the short sale. The statement also showed the sale price for the
Mulberry property was $177,000, and that the lender received $165,180.15 after
commission, taxes, and other closing costs were deducted.
        Mondloch testified she continued to live on the Mulberry property, even after
remarrying, until sometime in June 2011, when the property was sold in the short sale.
Between 1984 and June 2011, Mondloch explained she took out various loans on the
Mulberry property to pay for repairs and upkeep, and for other things related to her
daughters. Mondloch recalled taking out three separate loans on the Mulberry property
during that time. After the first loan, the subsequent loans refinanced whatever debt
remained on the property for the prior loan. At the time of the short sale, Mondloch
owed over $300,000 on the Mulberry property. In fact, Mondloch acknowledged that the
notice of default showed she owed $347,000 on the Mulberry property.2 According to

1       The actual request for order is not part of the appellate record.
2       Mondloch testified to this fact during the hearing. We were not provided as part
of the appellate record the notice of default listing this debt, which was introduced as an
exhibit during the hearing.

                                              3.
Mondloch, the bulk of the funds borrowed were used for remodeling and upkeep,
explaining that there were three buildings on the one and one-half acre Mulberry
property. The funds were used to pay for roofs for each building, painting, and windows.
The pool on the property also had to be replastered twice, and a new well was also built.
Mondloch admitted that not all these expenses were incurred while her daughters were
still living in the home.
       Daughter was the next to testify. She acknowledged receiving a $5,000 check
from her mother in 2017. Daughter stated that although her mother testified this amount
was given to offset the debt owed to daughter under the 1984 property agreement,
daughter testified no such statement was made to her at the time the check was provided.
Daughter only recalled a discussion that these funds may have been part of a “wedding
fund” that had been saved on her behalf by Mondloch, but was now given to her because
of her current needs.
       Ex-husband testified and explained that although the 1984 property agreement
showed there was approximately $111,000 worth of liens against the Mulberry property
in 1984, he eventually paid off all this debt near the time of the divorce so Mondloch
would receive the home free and clear. It was ex-husband’s expectation Mondloch would
only be obligated to pay insurance and taxes going forward. Ex-husband further testified
he expected his daughters would receive their interest in the Mulberry property once they
turned 25 years of age. Ex-husband explained that he did not pursue this matter earlier
because of bad advice from a lawyer, but mostly because his daughters objected to that
approach.
       After obtaining additional briefing on the issue of laches, the trial court entered an
order on March 3, 2022. The order stated the 1984 property agreement created an
equitable interest for daughter in the Mulberry property, and that she was entitled to
one-sixth of any “sale proceeds.” After finding no grounds to apply the defense of
laches, the court determined:

                                             4.
          “[T]he gross sale proceeds from the property [are] equal to what
          [Mondloch] received over the years by encumbering this property or
          $347,000, funds she and she alone received because of the equity in this
          property and used at her discretion to the exclusion of [daughter].”
The court then awarded daughter $57,833, representing one-sixth of the “gross sale
proceeds,” but declined to award daughter prejudgment interest. In the order, the court
did not offset against this award an amount representing the $5,000 check provided to
daughter in 2017. A notice of entry of this order was served on March 16, 2022. This
appeal followed.
                                         DISCUSSION
          In her appeal, Mondloch challenges the trial court’s award of $57,833 to daughter,
arguing it is based on an incorrect interpretation of the phrase “gross sale proceeds” in the
1984 property agreement. Mondloch further argues the court improperly denied her
defense of laches to the action brought on behalf of daughter to recover her
one-sixth interest in the Mulberry property.
I.        The Trial Court’s Interpretation of the Phrase “Gross Sale Proceeds”
          The trial court in its ruling found daughter was entitled to one-sixth of the sale
proceeds for the Mulberry property. The court further found “the gross sale proceeds
from the property to be equal to what [Mondloch] received over the years by
encumbering this property or $347,000,” which meant daughter was owed $57,833. Our
resolution of this issue will require us to consider the meaning of language used in the
1984 property agreement.
          The standard of review when construing contract language is de novo, “including
where conflicting inferences may be drawn from undisputed extrinsic evidence, ‘unless
the interpretation turns upon the credibility of extrinsic evidence.’ ” (Hewlett-Packard
Co. v. Oracle Corp. (2021) 65 Cal.App.5th 506, 531.) When “ ‘ “competent extrinsic
evidence is not in conflict, the appellate court independently construes the contract.” ’ ”
(Ibid.)

                                                5.
       “ ‘Marital property settlement agreements are favored under California law
[citation], and [are] governed by general contract principles [citation].’ ” (Welch v.
Welch (2022) 79 Cal.App.5th 283, 296.) “A contract must be so interpreted as to give
effect to the mutual intention of the parties as it existed at the time of contracting, so far
as the same is ascertainable and lawful.” (Civ. Code,3 § 1636.) “The language of a
contract is to govern its interpretation, if the language is clear and explicit, and does not
involve an absurdity.” (§ 1638.) “When a contract is reduced to writing, the intention of
the parties is to be ascertained from the writing alone, if possible.” (§ 1639.) “The words
of a contract are to be understood in their ordinary and popular sense, rather than
according to their strict legal meaning; unless used by the parties in a technical sense, or
unless a special meaning is given to them by usage, in which case the latter must be
followed.” (§ 1644.)
       Again, the 1984 property agreement stated daughters (as the minor children) were
entitled to receive one-third of the gross value of the Mulberry property, to be held in
trust for their benefit. The gross value was further “defined as the gross sale proceeds …
less any costs of sale and real estate commissions.” Mondloch and ex-husband were
designated as co-trustees of this equitable interest.
       In his testimony, ex-husband stated it was always his intent that each daughter
receives one-third of any sale proceeds for the Mulberry property. He also believed the
agreement required the property be sold by the time his daughters reached the age of 25.
We do not find this characterization of the relevant language in the 1984 property
agreement to constitute a credible or logical interpretation of the terms used. The
language only mentions a one-third interest for “the children,” not for each. There is also
no requirement stated that the Mulberry property be sold before either daughter turned
25. We will therefore independently construe the language of the 1984 property

3      Unless otherwise indicated, all further statutory references are to the Civil Code.

                                               6.
agreement on the issue of any obligation owed to daughter related to the Mulberry
property. (See Hewlett-Packard Co. v. Oracle Corp., supra, 65 Cal.App.5th at pp. 530–
531.) This will require us to consider the meaning of “gross sale proceeds” as it is used
in the 1984 property agreement.
       The specific language of the 1984 property agreement states, “gross value is
defined as the gross sale proceeds of the residence less any costs of sale and real estate
commissions.” (Italics added.) There is no mention in this language that any debts
encumbering the property should be factored into the amount before the gross value is
identified. Yet, the trial court determined “the gross sale proceeds from the property”
were equal to what Mondloch “received over the years by encumbering this property or
$347,000,” resulting in an award for daughter of $57,833. When viewing the plain
language of the 1984 property agreement, we cannot conclude that the meaning of “gross
sale proceeds” could be interpreted to mean the total value of loans received on the
property.4
       This matter must be remanded to the trial court for a redetermination of what is
owed to daughter under the 1984 property agreement, based on a new interpretation of
the phrase “gross sale proceeds.”5

4      The Merriam Webster online dictionary states “proceeds” is generally understood
to mean proceeds before costs and expenses are deducted to determine the net proceeds
from a sale that will be provided to a seller. (Merriam-Webster Dict. Online (2023)
 [as of April 20, 2023].)
For federal income tax purposes, “[g]ross proceeds include cash and notes payable to [the
transferor or seller], notes assumed by the transferee (buyer), and any notes paid off at
settlement.” (I.R.S. form 1099-S, rev. 2022, p.4, emphasis added.) Both of these more
common uses of the phrase “gross” or “gross proceeds” identify a starting point, or the
total amount paid by the buyer before expenses, costs, or notes are deducted from that
amount.
5     We do not address any additional claims that may be available to daughter to
address potential harm done to her equitable interest in the Mulberry property.

                                             7.
II.    The Availability of a Laches Defense to Mondloch
       “ ‘Laches is an equitable defense to the enforcement of stale claims. It may be
applied where the complaining party has unreasonably delayed in the enforcement of a
right, and where that party has either acquiesced in the adverse party’s conduct or where
the adverse party has suffered prejudice .… [Citations.]’ ” (Straley v. Gamble (2013)
217 Cal.App.4th 533, 538.) “We review the trial court’s finding [on the availability of a
laches defense] for an abuse of discretion.” (Id. at p. 537.)
       The 1984 property agreement cited Probate Code section 1120.2 as providing
guidance for Mondloch and ex-husband in their roles as co-trustees of the equitable
interest provided to their daughters. While that specific provision of the Probate Code
was repealed, the language contained in that provision was reenacted into Probate Code
sections 16200 et. seq. Therefore, Mondloch continued to owe her daughters a fiduciary
duty to protect the equitable interest they were provided at the time their parents
divorced. (Prob. Code, § 16202.)
       A valid trust interest can “be created by any words or acts of the trustor which
indicate with ‘reasonable certainty’ an intention” to create a trust interest, the subject, its
purpose, and to designate any beneficiaries of the trust interest. (Estate of Berges (1977)
76 Cal.App.3d 106, 109.) To that end,

       “An instrument that incorporates the powers provided in former [Probate
       Code] [s]ection 1120.2 (repealed by [Ch.] 820 of the [Stats.] of 1986) shall
       be deemed to refer to the powers provided in Article 2 (commencing with
       [Prob. Code,] [§] 16220). For this purpose, the trustee’s powers under
       former [Probate Code] [s]ection 1120.2 are not diminished and the trustee
       is not required to obtain court approval for exercise of a power for which
       court approval was not required by former law.” (Prob. Code, § 16203.)
While the “grant of a power to a trustee, whether by the trust instrument, by statute, or by
the court, does not in itself require or permit the exercise of the power,” any exercise of
that power “by a trustee is subject to the trustee’s fiduciary duties.” (Prob. Code,

                                               8.
§ 16202.) A trustee also has an ongoing obligation to beneficiaries of trust property.
(See Blackmon v. Hale (1970) 1 Cal.3d 548, 560.)
       Mondloch had an ongoing responsibility to her daughters to take care of the
equitable interest owed to them through the 1984 property agreement. Even if other
elements of the test for laches could be established, Mondloch failed to establish how she
would be prejudiced by allowing such a claim to go forward, given the high duty she
owed as a fiduciary to her daughters. We find no abuse of discretion in the trial court’s
denial of Mondloch’s claim of laches.
                                     DISPOSITION
       This matter is remanded to reconsider the findings made in paragraphs six and
seven of the “RULING ON MOTION OF REAL PARTY IN INTEREST, BETSY
BELL, TO ENFORCE JUDGMENT,” involving the interpretation of the phrase “gross
sale proceeds” in the 1984 property agreement. In all other respects, the order is
affirmed. Costs are not awarded in this appeal.

                                            9.