Opinion
F081678
01-26-2023
In re the Marriage of HOLLY GROVER and SAMUEL HONNOLD. v. SAMUEL HONNOLD, Appellant. HOLLY GROVER, Respondent,
LaMontagne & Amador and Eric A. Amador; Gates Law Group and Glen E. Gates for Appellant. McCormick, Barstow, Sheppard, Wayte & Carruth and Todd W. Baxter for Respondent.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Fresno County. No. 18CEFL01246 Amy K. Guerra, Judge.
LaMontagne & Amador and Eric A. Amador; Gates Law Group and Glen E. Gates for Appellant.
McCormick, Barstow, Sheppard, Wayte & Carruth and Todd W. Baxter for Respondent.
OPINION
MEEHAN, ACTING P. J.
INTRODUCTION
During marital dissolution proceedings, appellant Samuel Honnold and respondent Holly Grover engaged in a dispute over their marital residence and its value. Both parties separately obtained expert real estate appraisals, which showed disparate valuations of $225,000 and $400,000. A jointly obtained appraisal in April 2019 valued the house at $242,000, and a cash offer of $265,000 was received in September 2019. Ultimately, the parties stipulated to value the house at $265,000 on September 24, 2019. About a week after this stipulation, Grover sought to refinance the loan on the house to make an equalization payment to Honnold, which triggered another appraisal that valued the house at $380,000. Grover did not disclose the new appraisal to Honnold before the refinance process was complete, and when Honnold obtained the appraisal, he sought to rescind the stipulation on grounds of breach of fiduciary duty, fraud and mistake of fact. During pendency of the motion, the trial court entered dissolution judgment, which incorporated the stipulation and an order thereon regarding the residence.
Postjudgment, the trial court heard the motion and, after an evidentiary hearing, ruled Honnold had not established mistake, fraud or a breach of fiduciary duty. Honnold claims on appeal the trial court should have found the October 2019 appraisal to be material information as a matter of law, concluded Grover breached her fiduciary duties by not timely disclosing it, and set aside the portion of the judgment incorporating the stipulation. Honnold also asserts the trial court erred in failing to set aside the judgment due to mistake of fact.
We find no error and affirm. Honnold cannot establish the October 2019 appraisal, which did not exist in September 2019 when the parties made their agreement, would have affected his decision to agree to the stipulation. The October 2019 appraisal was only one expert opinion among several as to the fair market value of the house, it was formulated from information readily available to both parties and inside the range of appraisals the parties already had obtained. The October 2019 appraisal did not conclusively establish the value of the home sufficient to show, as a matter of law, that Grover gained an advantage in the transaction to support a presumptive breach of fiduciary duties in a spousal transaction. Nor did the evidence compel a finding the $380,000 appraisal definitively established the value of the home such that the $265,000 stipulated value constituted a mistake of fact.
FACTUAL SUMMARY
The parties married on October 31, 2014, and separated on February 27, 2018. Grover filed a petition for divorce on February 28, 2018. At the time of their separation, they were co-owners of a residence they had purchased around the time they were married on which there was a mortgage. Grover continued to live in the residence while divorce proceedings were pending.
In September 2018, Honnold contracted with a certified real estate appraiser so he could make an offer to Grover to buy the house. The appraised value was $400,000, and a copy of the appraisal was sent to Grover's counsel. In January 2019, Grover obtained her own appraisal of the marital residence, valuing the home at $225,000. On March 19, 2019, Grover and Honnold attended a settlement conference where they agreed to a third appraisal of the marital residence. The third appraisal, obtained in April 2019, estimated the fair market value of the home to be $242,000.
Although the parties were able to settle other issues, their dispute over the residence continued. By that time, Honnold wished to sell the home, and Grover wished to keep it. On July 30, 2019, the parties were ordered to appear on September 24, 2019, for a contested hearing about the marital residence. The court's minute order setting the contested hearing on that date indicated the parties had waived final declarations and disclosures. About a week before the parties appeared for that hearing, Honnold received an unsolicited offer to purchase the residence "'as is'" for $275,000, but the offer was unsigned. Honnold also received a second cash offer to purchase the property for the sum of $265,000. On the day of the contested hearing, the parties entered into a stipulation regarding the home. Honnold accepted the $265,000 valuation with one-half of the equity to be paid to him, less his attorney's fees. The parties agreed Grover would have six months to seek refinancing on the loan in order to pay Honnold his equity share.
The parties placed their agreement regarding the marital residence on the record. The trial court adopted the agreement in full, and ordered Grover's counsel to prepare the order for the court. The court issued Grover's proposed order regarding the stipulation on November 12, 2019.
About a week after the parties' open-court stipulation, Grover sought refinancing for the mortgage. As part of the loan application process, the property was appraised at $380,000 in October 2019. Grover signed an application showing the appraisal amount on November 21, 2019, and signed a second document showing the appraisal amount in December 23, 2019. Grover did not inform Honnold of the new appraisal.
At some point, Honnold was contacted by a title company as part of refinancing and retitling the home. Honnold asked for copies of the refinance appraisal, which the company refused to give him because Grover and her attorney had specifically instructed the company not to share that information with Honnold. Grover denied giving such an instruction to the lender or escrow company. Honnold executed an interspousal transfer deed transferring the property to Grover, which was notarized on December 13, 2019, and recorded on December 30, 2019.
The deed indicates it was signed by Honnold on November 19, 2019, but his signature was notarized on December 13, 2019.
Honnold attempted to subpoena the appraisal, and a motion to quash was filed. Ultimately, the parties resolved the subpoena dispute, and Honnold obtained a copy of the $380,000 appraisal through Grover's attorney. In May 2020, Honnold filed a motion to rescind the September 2019 stipulation and order thereon. Honnold asserted Grover had breached her fiduciary duties under Family Code section 721 by not timely informing him of the October 2019 appraisal and, alternatively, asked for rescission of the stipulation on the basis of mistake in light of the October 2019 appraisal. He maintained that had he been aware the property was worth $380,000, he never would have entered into the stipulation.
All further statutory references are to the Family Code unless otherwise specified.
While the motion to rescind the September 2019 stipulation and the November order thereon was pending, a judgment of dissolution was entered on July 10, 2020, which incorporated the stipulation and order regarding the marital residence. On July 28, 2020, an evidentiary hearing was held on Honnold's motion, and Grover and Honnold testified. Honnold also called a loan officer, Tracy Root, to testify. Root testified that if a homeowner wants to refinance a mortgage and liquidate some of the equity, it is considered a cash-out loan, which, legally, may only be approved at 80 percent of the appraised value. To get an appraisal, the lender must go through an appraisal management company who randomly assigns an appraiser.
On July 29, 2020, the parties' counsel made additional arguments to the court, and then the court provided its ruling on the record. The court found there was insufficient evidence the market value of the house had changed from the time of the stipulation and the October 2019 appraisal; thus, there was insufficient evidence that Grover obtained an unfair advantage in the stipulation. There were multiple appraisals at the time the parties entered their stipulation that suggested the market value was lower and higher than what the parties ultimately agreed to, which they both understood at the time. The fourth refinance appraisal in October 2019, the court concluded, was not dispositive of the house's fair market value given the disparate appraisals of the property. The court also found that, even assuming Grover had gained an advantage in the stipulation, the presumption of undue influence had been rebutted. A minute order was issued reflecting the trial court's July 29, 2020, denial of Honnold's motion to rescind the stipulation and order thereon.
Honnold appeals the court's July 29, 2020, ruling as confirmed by minute order.
DISCUSSION
I. Appealability of Order Denying Motion to Rescind Stipulation
On May 12, 2020, Honnold filed a motion to set aside the parties' stipulation and order filed on November 12, 2019; Honnold's motion was pending when the court entered a judgment of dissolution on July 10, 2020, that incorporated the stipulated order. Honnold's notice of appeal challenges the court's postjudgment July 29, 2020, order on his motion to set aside rather than the July 10, 2020, dissolution judgment. Grover claims the court's postjudgment minute order on Honnold's motion is not an appealable order, and Honnold should have challenged the dissolution judgment.
It is not clear why the trial court issued this judgment before Honnold's motion was resolved.
The existence of an appealable judgment or order "is a jurisdictional prerequisite to an appeal." (Jennings v. Marralle (1994) 8 Cal.4th 121, 126.) Whether a trial court's order is appealable is determined by statute. (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 696.) Under Code of Civil Procedure section 904.1, an appeal in a civil case may be taken, in relevant part, from a final judgment (id., subd. (a)(1)), an order made after an appealable judgment (id., subd. (a)(2)), or an order made appealable by provisions of the Family Code (Code Civ. Proc., § 904.1, subd. (a)(10)).
An appealable postjudgment order must satisfy three requirements (1) the underlying judgment must be appealable under Code of Civil Procedure section 904.1, subdivision (a)(1); (2) the order must involve issues different from those addressed in the underlying judgment; and (3) the order must affect or relate to the underlying judgment by enforcing it or staying its execution. (Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 651-652.) "[P]ostjudgment orders making a final determination of rights or obligations of parties" are appealable even if they do not "add to or subtract from the judgment." (Id. at p. 653.) Postjudgment orders that are nonappealable generally tend to fall into two categories: (1) orders that are preliminary to a later judgment, at which time they can be challenged by appeal; and (2) orders that pertain to preparation of a record for use in a later appeal. (Id. at pp. 652-653; SCC Acquisitions, Inc. v. Superior Court (2015) 243 Cal.App.4th 741, 748.)
When the trial court issued the judgment of dissolution on July 10, 2020, it expressly incorporated the November 12, 2019, stipulated order regarding the marital residence. The November 12, 2019, order (arising from the parties' Sept. 24, 2019, stipulation in open court) was merged into the judgment, and the stipulated order ceased to have any independent legal significance. By the time Honnold's motion seeking relief from that stipulation and order was heard and decided, the parties' rights and obligations were governed by the judgment alone. (See In re Marriage of Lynn (2002) 101 Cal.App.4th 120, 130 [noting marital settlement agreement merged into judgment of dissolution ceases to have independent legal significance; parties' rights and obligations are governed by the judgment alone].)
There is no indication Honnold objected to the entry of judgment despite the pendency of his motion regarding the September stipulation and order thereon.
Since the trial court entertained Honnold's motion and an evidentiary hearing after the dissolution judgment was entered, Honnold's motion to set aside was necessarily considered as a motion to set aside that portion of the judgment incorporating the stipulation and order thereon. The trial court could not grant Honnold any relief without some procedural mechanism to set aside that aspect of the judgment, such as that provided by section 2122. Under section 2122, fraud, mistake of fact or law, either mutual or bilateral, and the failure to comply with the disclosure requirements of chapter 9 (commencing with § 2100) are all grounds to set aside a judgment or part thereof. (§ 2122, subds. (a), (e) &(f).) Given the procedural posture of the case at the time the motion was heard and decided, the trial court's July 29, 2020, ruling must necessarily be construed as a postjudgment order denying relief under section 2122.
Given the timing of the motion, it could have been pursued under Code of Civil Procedure section 473. The denial of a motion made under Code of Civil Procedure section 473 is also an appealable postjudgment order. (Code Civ. Proc., § 904.1, subd. (a)(2) [order denying motion under Code Civ. Proc. § 473 is appealable postjudgment order].)
An order denying a motion under section 2122 is an appealable postjudgment order. (See In re Marriage of Jones (1998) 60 Cal.App.4th 685, 689 [entertaining appeal from order denying motion to set aside dissolution judgment under § 2120 et seq.]; In re Marriage of Varner (1997) 55 Cal.App.4th 128, 136 [same] (Varner).)
II. Denial of the Motion to Set Aside for Fiduciary Breach and Mistake
The trial court refused to set aside the stipulation and judgment regarding the marital residence on grounds of fraud, breach of fiduciary duty in failing to timely disclose the October 2019 appraisal, or for mistake. (See § 2122, subds. (a), (e), (f).) Honnold contends the trial court erred by failing to find Grover breached her duty of disclosure and by failing to find there was a mistake of fact that warranted setting aside the judgment.
On appeal, Honnold abandoned any argument about fraud as a basis to set aside the judgment/stipulation regarding the marital residence.
A. Standard of Review
A court's ruling on a motion to set aside a stipulated property division or to set aside a judgment incorporating that stipulation is reviewed for an abuse of discretion. (See In re Marriage of Brewer &Federici (2001) 93 Cal.App.4th 1334, 1346 [ruling on motion to set aside judgment and motion to set aside marital settlement agreement reviewed for abuse of discretion] (Brewer); In re Marriage of Rosevear (1998) 65 Cal.App.4th 673, 682-683 [ruling on motion to set aside judgment reviewed for abuse of discretion] (Rosevear).) A trial court's exercise of discretion will not be disturbed on appeal in the absence of a clear showing of abuse, resulting in injury sufficiently grave as to amount to a manifest miscarriage of justice. (Rosevear, supra, at p. 682.) "'"The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court."' [Citations.] The burden is on the complaining party to establish abuse of discretion. [Citations.] The showing on appeal is insufficient if it presents a state of facts which simply affords an opportunity for a difference of opinion." (Ibid.)
"'The abuse of discretion standard is not a unified standard; the deference it calls for varies according to the aspect of a trial court's ruling under review. The trial court's findings of fact are reviewed for substantial evidence, its conclusions of law are reviewed de novo, and its application of the law to the facts is reversible only if arbitrary and capricious.' (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711-712.) '"When a trial court's factual determination is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination, and when two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court. If such substantial evidence be found, it is of no consequence that the trial court believing other evidence, or drawing other reasonable inferences, might have reached a contrary conclusion."' (In re Marriage of Goodwin-Mitchell &Mitchell (2019) 40 Cal.App.5th 232, 238-239)." (In re Marriage of DeSouza (2020) 54 Cal.App.5th 25, 33.)
The parties dispute the standard of review that applies to different aspects of the trial court's ruling, and we address those disputes in the context of the specific issues presented.
B. Applicable Law 1. Spousal Fiduciary Duties
There are several Family Code provisions that address the fiduciary obligations of disclosure that govern the relationship between spouses. Section 721, subdivision (b), provides that "in transactions between themselves, spouses are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other." This confidential relationship includes, but is not limited to, the following duties: (1) providing each spouse access at all times to books kept regarding a transaction for purposes of inspecting and copying; (2) rendering, upon request, true and full information of all things affecting any transaction that concerns the community property; and (3) accounting to the spouse any benefit or profit derived from any transaction by one of the spouses without the consent of the other spouse that concerns the community property. (Id., subd. (b)(1)-(3).)
Section 1100, subdivision (e), extends these provisions through the course of dissolution proceedings: "Each spouse shall act with respect to the other spouse in the management and control of the community assets and liabilities in accordance with the general rules governing fiduciary relationships which control the actions of persons having relationships of personal confidence as specified in Section 721, until such time as the assets and liabilities have been divided by the parties or by a court. This duty includes the obligation to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest and debts for which the community is or may be liable, and to provide equal access to all information, records, and books that pertain to the value and character of those assets and debts, upon request." (Italics added.)
To promote California's public policy to "marshal, preserve, and protect community and quasi-community assets and liabilities that exist at the date of separation so as to avoid dissipation of the community estate before distribution" (§ 2100, subd. (a)), "a full and accurate disclosure of all [the parties'] assets and liabilities ... must be made in the early stages of the proceeding for dissolution of marriage" (id., subd. (c); see § 2104, subd. (c)). Moreover, each spouse "has a continuing duty to immediately, fully, and accurately update and augment that [initial] disclosure to the extent there have been any material changes ...." (§ 2100, subd. (c); see § 2102, subd. (a)(1).)
When a spouse is in a superior position to obtain records or information from which an asset can be valued, and can reasonably do so, that spouse must disclose such information to the other. (Brewer, supra, 93 Cal.App.4th at p. 1348.) A final declaration of disclosure is required and must include "[a]ll material facts and information regarding the valuation of all assets that are contended to be community property ._" (§ 2105, subd. (b)(2).) Final disclosures may be waived by execution of a waiver under penalty of perjury entered in open court or by stipulation, which includes a representation, among others, that the parties have fully augmented their preliminary declarations of disclosure, including material facts and information regarding the valuation of all assets that are contended to be community property. (Id., subd. (d)(3).) The waiver must also include a representation the parties understand the waiver does not limit the legal disclosure obligations of the parties, but is a statement that those obligations have been fulfilled. (Id., subd. (d)(5).)
The scope and length of the fiduciary relationship is addressed in section 2102. "From the date of separation to the date of the distribution of the community or quasicommunity asset or liability in question, each party is subject to the standards provided in Section 721, as to all activities that affect the assets and lability of the other party," which includes the "accurate and complete disclosure of all assets and liabilities in which the party has or may have an interest or obligation and all current earnings, accumulations, and expenses, including an immediate, full, and accurate update or augmentation to the extent there have been material changes." (Id., subd. (a), (a)(1).) Moreover, "[f]rom the date that a valid, enforceable, and binding resolution of the disposition of the asset or liability in question is reached, until the asset or liability has actually been distributed, each party is subject to the standards provided in Section 721 as to all activities that affect the assets or liabilities of the other party...." (Id., subd. (b), italics added.)
2. Relevant Remedies Related to Spousal Fiduciary Breach
a) Setting Aside Interspousal Transactions
While spouses may enter any transaction with each other during marriage and in dissolution proceedings, they are subject to the rules governing fiduciary relationships as articulated in section 721. Due to their confidential relationship, the formation of an agreement between spouses "is not an ordinary business transaction, resulting from an arm's-length negotiation between adversaries. Rather it is the result of negotiations between fiduciaries required to openly share information." (Brewer, supra, 93 Cal.App.4th at p. 1344.) Thus, while spouses may agree to whatever distribution or allocation of assets they wish during marriage or dissolution proceedings, even an unequal one, that agreement must be based on a complete and accurate understanding of the value of community and separate assets that are material to the agreement. (Id. at p. 1349.)
Spouses in dissolution proceedings will often enter into marital settlement agreements or other stipulations to resolve some or all disputes regarding property and other issues relevant to the dissolution. A breach of a spouse's fiduciary duties with respect to an interspousal transaction, including the duty to disclose, can be established by presumption. In view of the confidential relationship between spouses, when an interspousal transaction advantages one spouse, "'"[t]he law, from considerations of public policy, presumes such transactions to have been induced by undue influence."'" (In re Marriage of Kieturakis (2006) 138 Cal.App.4th 56, 84 (Kieturakis); see In re Marriage of Burkle (2006) 139 Cal.App.4th 712, 734 (Burkle).)
If an advantage is gained, the spouse advantaged by the transaction has the burden of dispelling the presumption of undue influence by establishing the disadvantaged spouse's action "'was freely and voluntarily made, with full knowledge of all the facts, and with a complete understanding of the effect of' the transaction." (Burkle, supra, 139 Cal.App.4th at pp. 738-739.) In other words, "[t]he advantaged spouse must show, by a preponderance of evidence, that his or her advantage was not gained in violation of the fiduciary relationship." (In re Marriage of Fossum (2011) 192 Cal.App.4th 336, 344.) If the presumption is not rebutted, the transaction will be set aside. (In re Marriage of Mathews (2005) 133 Cal.App.4th 624, 629 (Mathews).)
b) Setting Aside Judgments and Stipulated Judgments
When spouses cannot otherwise agree to a division of property upon dissolution, California has a strong public policy of ensuring the fair division of community property. (§ 2120, subd. (a).) "It occasionally happens that the division of property ..., whether made as a result of agreement or trial, is inequitable when made due to the nondisclosure or other misconduct of one of the parties." (Id., subd. (b).) In such cases, section 2122 sets out the grounds and time limits to set aside a marital dissolution judgment. Under section 2122, there are six grounds to set aside a judgment, or portion thereof, including actual fraud, perjury, duress, mental incapacity, mistake, and the failure to fully disclose the value of assets set out in chapter 9 of the Family Code, beginning with section 2100. (§ 2122, subds. (a)-(f).) Nevertheless, a judgment may not be set aside simply because the court finds that it was inequitable when made or because subsequent circumstances caused the division of assets or liabilities to become inequitable. (§ 2123.)
c) Monetary Remedies
As an alternative to the set-aside relief available under section 2122, section 1101 creates a right of action and specific remedies for the breach of a spouse's fiduciary duty "that results in impairment to the claimant spouse's present undivided one-half interest in the community estate .." (§ 1101, subd. (a); see In re Marriage of Georgiou &Leslie (2013) 218 Cal.App.4th 561, 573.) A section 1101 action may be brought separately from or in conjunction with a dissolution action. (Id., subd. (f).) Section 1101, subdivisions (g) and (h), provide remedies for a spouse's breach of fiduciary duty. (In re Marriage of Schleich (2017) 8 Cal.App.5th 267, 277.)
Under section 1101, subdivision (g), "[r]emedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney's fees and court costs...." When the breach constitutes fraud, oppression or malice, the remedy "shall include, but not be limited to, an award to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset undisclosed or transferred in breach of the fiduciary duty." (Id., subd. (h).)
C. Trial Court's Ruling
After evidence and argument was received, the trial court ruled it was "not convinced there was a mistake as to value. [I]t seems abundantly clear these parties had multiple appraisals. The ranges did-you know, the values of those appraisals did range. [¶] . It's not as though these parties didn't have an appraisal and they just picked some number. Ultimately that negotiation was made after . appraisals came back in various sort of ranges. Some were quite low; some were quite high. Outside of those appraisals, Mr. Honnold had received the cash offer. [¶] And ultimately, given all of that, the parties entered into an agreement. So I'm not convinced that, as to the first ground, that there is sufficient information to rescind the stipulation .."
After further argument, the court turned to the duty to disclose. As for the length of spousal fiduciary duties, the court concluded the duty to disclose extends until the asset-in this case, the house-has actually been distributed. Grover's fiduciary duties to Honnold did not end with respect to the house on the date of their stipulation; rather, those duties extended until the refinance process was completed, the property was deeded to Grover, and Honnold was paid his equity share.
Nevertheless, the trial court found there was insufficient evidence to conclude Grover breached her duty of disclosure; the court analyzed the issue of breach-i.e., the failure to disclose material information of valuation of the house-as to whether the October 2019 appraisal showed that Grover was advantaged by the transaction and whether the presumption of undue influence applied. The court explained as follows:
"[T]here's insufficient evidence that the market value of the marital asset has changed from the time of the stipulation; and, therefore, insufficient evidence ... Ms. Grover obtained an advantage, which is the necessary part of finding there's a breach. [¶] . . . [V]aluation is a question of fact for the Court to decide and the Court is not required to accept the opinion of any experts. The Court also believes that I'm not required to accept the value of any appraisal. The parties weren't stipulating to an appraisal value; they were stipulating to a market value. [¶] ... I understand a fourth appraisal came forward which suggested, for the purposes of the refinance, that the market value was higher. But ultimately there were . . . other appraisals that suggested the market value of the house was much lower. Both parties understood that at the time that the stipulation was reached. They'd both done their due diligence. There were disparate estimates as to the actual fair market value as to the house. And so, the Court doesn't find the fourth appraisal is conclusive as to fair market value, particularly given that history and the appraisals conducted on this property in question.
"Again, in my mind[,] these parties were fully aware of the circumstances of this property and the fact that . . . it could have been sold, could have been refinanced. That's something different from the three different appraisals they received. And I agree with Ms. [Grover]'s interpretation of, again, sort of the fluctuating nature of the market. And this is close in time to the time that the stipulation was reached. But again, over four different appraisals-the value fluctuated between those four. And for whatever reason, it doesn't appear the experts have a clear consensus on what it's worth.
"Even if the Court were to assume there were some advantage, which the Court doesn't believe there's some advantage-but even if that were so, I think Ms. Grover clearly rebutted the presumption of undue influence because she was relying on the agreement the parties made. And that agreement was, again, based on-the following of that agreement was based in good faith, and the parties fully litigated this issue, litigated this asset.
"And so, again, relying on the stipulation that they made, even if there had been an advantage or if an advantage had been established, the Court believes Ms. Grover rebutted the presumption of undue influence."
D. No Error in Finding No Breach of Fiduciary Duty
Honnold analyzes the materiality of the disclosure-i.e., the purported breach of the fiduciary duty-without reference to the presumption of undue influence. Honnold claims Grover's failure to timely disclose the October 2019 appraisal was a breach of her fiduciary duty to fully disclose all material facts regarding the value of the marital residence, and the trial court erred in failing to set aside the parties' marital-residence stipulation and the judgment thereon. Honnold argues the $380,000 appraisal, obtained in October 2019 as part of Grover's application to refinance, was material as a matter of law; it was not disclosed by Grover until Honnold demanded it; and had Honnold known about this appraisal, he never would have agreed to value the marital residence at $265,000 for purposes of their stipulation. Further, Honnold asserts, the relevant facts are all undisputed and, thus, the trial court's decision is subject to de novo review on appeal.
Grover maintains that to establish a breach of a fiduciary duty, Honnold had to present evidence Grover secured an unfair advantage in the stipulation regarding the residence, and there was no evidence to establish such a claim. According to Grover, both parties understood there were disparate estimates as to the actual fair market value of the house, and the October 2019 appraisal did not conclusively establish the value of the house or show any actual appreciation since the stipulation. Grover contends whether she was advantaged by the transaction is a factual issue, the trial court resolved the factual issue against Honnold, which indicates Honnold did not carry his burden of proof, and the trial court's finding in this regard can be reversed only if undisputed evidence compels a finding in Honnold's favor.
1. Materiality of the October 2019 Appraisal
A fiduciary duty breach claim requires showing (1) a fiduciary relationship; (2) a breach of the fiduciary duty; and (3) damages proximately caused by the breach. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.) To establish a spouse's breach of the duty to disclose information, the matter or information to be disclosed must be material. (§§ 2102, subd. (a)(1), 1101, subd. (e) [spouse is "to make full disclosure to the other spouse of all material facts and information regarding ... valuation of all assets in which the community has or may have an interest"].) The materiality of the information or matter to be disclosed is a question of fact. (See In re Marriage of Kamgar (2017) 18 Cal.App.5th 136, 144 [where fiduciary duty exists, breach of that duty is a question of fact] (Kamgar).) Materiality is evaluated under an objective standard: whether a reasonable person would have acted differently had he or she known the undisclosed facts. (Roberts v. Lomanto (2003) 112 Cal.App.4th 1553, 1567 [evaluating real estate agent's fiduciary duty to disclose information to client].)
A failure to disclose material information might result in an unfair advantage to one spouse in the context of an interspousal transaction, and when such an advantage is shown, a breach of fiduciary duty-including the duty to disclose-is presumed under the presumption of undue influence. (In re Marriage of Bonds (2000) 24 Cal.4th 1, 27 (Bonds).) As already explained, because spouses occupy confidential relations with each other, when an interspousal transaction advantages one spouse over the other, a presumption of undue influence arises. (In re Marriage of Haines (1995) 33 Cal.App.4th 277, 287 (Haines), disapproved on another ground in In re Marriage of Valli (2014) 58 Cal.4th 1396, 1404.) Thus, when there is an asserted breach of fiduciary duty based on a failure to disclose that causes or otherwise exposes an unfair advantage in a spousal transaction, the breach may be established by presumption or by showing a failure to disclose material information. (See Kieturakis, supra, 138 Cal.App.4th at p. 87 [observing general breach of disclosure duty by virtue of fiduciary relationship would constitute undue influence]).
The trial court did not expressly evaluate the materiality of the October 2019 appraisal, but framed the question of breach around the presumption of undue influence. Nevertheless, the trial court implicitly and necessarily found the October 2019 appraisal was not material in concluding Grover did not breach her fiduciary duty to disclose. As noted, whether undisclosed information is material is typically an issue of fact assessed under a reasonable-person standard. (See Roberts v. Lomanto, supra, 112 Cal.App.4th at p. 1567; see also Kamgar, supra, 18 Cal.App.5th at p. 144 [where fiduciary duty exists, breach of that duty is a question of fact].) Honnold contends that because the facts are undisputed, the trial court's implicit finding the October 2019 appraisal was not material is reviewed de novo.
We agree the relevant facts as to materiality of the October 2019 appraisal were undisputed: The October 2019 appraisal did not occur until after the parties entered into their stipulation in September 2019; Grover obtained knowledge of the October 2019 appraisal at some point in October 2019, yet she did not share that information with Honnold until sometime after the interspousal transfer deed to the home was signed and notarized in December 2019. The dates and amounts of the other appraisals and cash offers were also undisputed, and the parties both knew these facts at the time of the stipulation.
Whether the October 2019 appraisal represented the actual market value of the home was a disputed issue, but its resolution is not relevant to materiality. It is the existence of the opinion as to value that is relevant to materiality no matter how definitive it is of market value.
Materiality is determined by whether a reasonable person would have acted differently if he or she had known the undisclosed information, and this rule of law must be applied to the undisputed facts. This presents a mixed question of law and fact. (See Haworth v. Superior Court (2010) 50 Cal.4th 372, 384-385 [whether arbitrator failed to disclose circumstances creating appearance of partiality was mixed question of law and fact].) In cases, as here, where the law to be applied is an objective test focused on a reasonable person's perceptions, the trial court will be in no better position than the appellate court to resolve the question on undisputed facts. (See id. at pp. 385-386; see also Mt. Holyoke Homes, L.P. v. Jeffer Mangels Butler &Mitchell, LLP (2013) 219 Cal.App.4th 1299, 1312 [de novo review of reasonable-person disclosure rule applied to undisputed facts as mixed question of law and fact].) Under these circumstances, de novo review is appropriate. (See Haworth, supra, at pp. 384-385; see also Crocker National Bank v. City and County of San Francisco (1989) 49 Cal.3d 881, 888 [setting out general principles governing the selection of standard of appellate review].)
Turning to the merits, the October 2019 appraisal was not material to Honnold's decision to enter the September 2019 stipulation because of the nature of the information it provided and its timing. First, this appraisal did not provide any information that differed from what the parties already knew about the home's value at the time of the stipulation. The October 2019 appraisal was within the range of appraisals already known to the parties at the time of their stipulation-in that regard, it presented no truly new or unknown information that would have caused a reasonable person to act differently. There is no evidence Grover possessed any undisclosed information at the time of the stipulation that could have been useful to forecast or predict the October 2019 appraisal would exceed the parties' agreed-upon value. At the time of their agreement, both parties knew the existing appraisals were disparate in their valuations, ranging from $225,000 to $400,000, and the subsequent $380,000 appraisal in October 2019 fit within that known range. They each had equal access to the underlying information necessary to value the house-indeed they had both commissioned separate appraisals in the past and could have done so again before the stipulation. Both parties also knew Grover would attempt to refinance the mortgage on the house after the stipulation as they negotiated over, and agreed to, a time frame for her to do so.
Notably, the parties did not make their stipulation as to value contingent on either the result of that refinancing or any appraisal stemming from it, and this may have been for good reason. Had the refinance appraisal come back lower than the parties' agreed value, a not-unlikely prospect given that the two most recent appraisals valued the house at less than $265,000, Honnold's equity share might have been less.
Additionally, the value the parties ultimately agreed to did not correlate to any of the appraisals; it matched the cash offer Honnold had received around the time of the stipulation. An appraisal is an estimate of fair market value, not necessarily what a willing buyer will actually pay. In the face of the cash offer amount, it is speculative to conclude a reasonable person would have acted differently with respect to the valuation if another appraisal within the existing and disparate range had existed.
Second, aside from the nature of the information it contained, the timing of the October 2019 appraisal also rendered it immaterial. The reason is straightforward: a fact or event that does not yet exist, or has not yet occurred, when a person acts (and, thus, cannot be known and disclosed) cannot have any material effect on a decision or action. A reasonable person would not act differently based on a nonexistent appraisal, and future facts cannot be applied retroactively as though they existed in the past. Here, it is undisputed, and axiomatic, that the October 2019 appraisal did not exist at the time the parties entered their stipulation in September 2019 and, thus, it could not have materially affected Honnold's decision to stipulate to a value of $265,000.
This is not to say that postagreement information could never be material to a past transaction. However, absent evidence of fraud, mistake or some other breach of fiduciary duty-which would provide separate bases for set-aside relief-information that does not exist and could not be disclosed at the time of an agreement cannot be retrospectively material just because it might have been helpful. To conclude otherwise would undermine the valid and binding nature of settlements and stipulations by subjecting them to continual revision based on any subsequent postagreement information that offers nothing more than hindsight. (See Adams v. Adams (1947) 29 Cal.2d 621, 624 [property settlements occupy a favored position in the law; courts are generally reluctant to disturb them except for equitable considerations].)
Indeed, the October 2019 appraisal's lack of materiality for purposes of a disclosure breach does not preclude Honnold's claim it evidenced a mistake of fact at the time of the stipulation, which is analyzed ante.
The trial court's implied finding the subsequent October 2019 appraisal was immaterial to the parties' September 2019 stipulation is correct. Given the facts here, Honnold cannot establish a reasonable person would have acted differently-i.e., not agreed to the September 2019 stipulation valuing the house at $265,000, with prescient knowledge of a future appraisal that was inside the range of appraisals already known to the parties.
2. Unfair Advantage
A breach of a spouse's fiduciary duties generally-not necessarily the duty to disclose specifically-is presumed in interspousal transactions where the spouse seeking the benefit of the presumption makes a foundational showing that the other spouse was advantaged by the transaction. (See Bonds, supra, 24 Cal.4th at p. 27 [spouses owe duty of full disclosure, and a presumption arises that a person who owes a fiduciary duty, and who secures a benefit through an agreement, has done so through undue influence].) If an advantage to one spouse is shown, this gives rise to a presumption the transaction was a product of undue influence, which can be rebutted by the advantaged spouse showing, by a preponderance of the evidence, that the transaction was entered into freely and voluntarily, with a full knowledge of all of the facts and a complete understanding of the effect of the transaction. (Mathews, supra, 133 Cal.App.4th at pp. 630-631.)
Grover argues whether she gained an advantage was a factual matter for which the trial court concluded Honnold had failed to carry his burden to prove, and thus the trial court's finding on this issue must be reviewed under the compelled-as-a-matter-of-law formulation of the substantial evidence standard. Honnold contends the trial court's findings must be reviewed de novo because the relevant facts were undisputed. He maintains the October 2019 appraisal definitively established the value of the home, and this fact clearly demonstrates the stipulation advantaged Grover to the tune of $115,000 in additional equity she did not have to share with him.
a) Burden of Proof and Standard of Review
Whether an advantage is shown and whether the presumption has been rebutted are both factual questions. (Mathews, supra, 133 Cal.App.4th at p. 632; Burkle, supra, 139 Cal.App.4th at p. 734 &fn. 11.) Here, while the relevant facts are undisputed, there are conflicting inferences that can be drawn as to whether those facts show Grover was advantaged by the stipulation. In such cases, the substantial evidence test applies to review the trial court's factual findings. (See Davis v. Shiekh Shoes, LLC (2022) 84 Cal.App.5th 956, 962-963 [conflicting inferences regarding waiver could be drawn from undisputed facts requiring application of substantial evidence standard of review].)
As noted, Honnold bore the initial burden of establishing Grover was advantaged by the stipulation. The trial court concluded there was insufficient evidence to show Grover gained an advantage in the stipulation. When the appellant bears the burden of proof on an issue of fact below, and the trial court implicitly or explicitly finds that burden of proof was not satisfied, the substantial evidence standard takes on a unique formulation. (Dreyer's Grand Ice Cream, Inc. v. County of Kern (2013) 218 Cal.App.4th 828, 838 (Dreyer's).) Under this circumstance, we review the record to determine whether Honnold has shown that the evidence compels a finding in his favor on this issue as a matter of law. (Ibid.) "'Specifically, the question becomes whether the appellant's evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding." [Citation.]'" (Ibid.)
b) Analysis
"Generally, a spouse obtains an advantage if that spouse's position is improved, he or she obtains a favorable opportunity, or otherwise gains, benefits, or profits." (Mathews, supra, 133 Cal.App.4th at p. 629.) Although parties may agree in writing to an unequal division of marital property (In re Marriage of Cream (1993) 13 Cal.App.4th 81, 91), the advantaged spouse cannot gain that advantage unfairly (Burkle, supra, 139 Cal.App.4th at p. 734).
In some cases, the transaction may clearly advantage one spouse and there will be little question the presumption applies; once the foundational facts are shown, the burden is on the advantaged spouse to rebut the presumption. (Haines, supra, 33 Cal.App.4th at p. 296 [wife's quitclaim of marital residence to husband for his cosignature on a car loan was "clearly [an] inadequate consideration for execution of the quitclaim deed," and husband bore burden of rebutting presumption of influence]; Burkle, supra, 139 Cal.App.4th at pp. 731-732 [noting cases involving property transfers without consideration necessarily raise the presumption].)
In other cases, like here, where a spousal transaction confers different advantages on both spouses, the foundational showing to raise the presumption of undue influence requires more than simply asserting a spouse gained an advantage in a certain aspect. (See Burkle, supra, 139 Cal.App.4th at p. 734 [to raise presumption that contract was induced by undue influence, one spouse must obtain an unfair advantage over the other].) Burkle involved a complicated postmarital agreement that divided and allocated a host of assets to both spouses' mutual advantage in the event of a divorce. (Id. at pp. 719-720.) The appellate court affirmed the trial court's finding the postmarital agreement gave both parties mutually agreeable advantage and concluded the presumption of undue influence cannot be applied where neither party has gained an unfair advantage as a result of the transaction. (Id. at pp. 735-736.)
The trial court concluded the October 2019 appraisal did not establish Grover had obtained an advantage in stipulating the house's fair market value was $265,000. The trial court pointed out the appraisal was not dispositive as to the actual fair market value, it was just another estimate inside the range of estimates/appraisals the parties already had at the time they negotiated their agreement. In reaching this conclusion, the court pointed out the appraisal itself did not establish the house had actually appreciated in value since the stipulation. This was particularly so because there were numerous and wide-ranging appraisals of the property of which the parties were aware at the time of the stipulation, and the October 2019 appraisal fit within that range. Substantial evidence supports the trial court's factual finding in this regard.
While Honnold argues the trial court ignored the magnitude of the change in value from the January and April 2019 appraisals to the October 2019 appraisal, the court was well aware of the disparity in the appraisals and expressly noted it. Moreover, the mere fact that the October 2019 appraisal was used by a lender to approve a mortgage on the property does not make that appraisal more reliable or accurate than the prior appraisals. Given the $400,000 appraisal in September 2018, there was evidence the difference between the January and April 2019 appraisals ($225,000 and $242,000, respectively), and the October 2019 appraisal ($380,000) represented a disagreement among the experts as to value, not an actual fluctuation in value. The October 2019 appraisal is not conclusive as to the value of the home in view of the other appraisals, and the evidence did not compel the trial court to find Grover was advantaged by the stipulation as a matter of law. (Dreyer's, supra, 218 Cal.App.4th at p. 838.)
3. Substantial Evidence the Presumption Was Rebutted
The trial court also found that even if Grover had secured an advantage under the stipulation, Grover had rebutted the presumption of undue influence. Whether the presumption is overcome is a question of fact the advantaged spouse generally bears the burden of proving, and the trial court's decision will be upheld on review so long as it is supported by substantial evidence. (Burkle, supra, 139 Cal.App.4th at p. 737.) The presumption may be rebutted by proof that the aggrieved spouse freely and voluntarily entered the transaction, with full knowledge of all of the facts and a complete understanding of the effect of the transaction. (Id. at pp. 738-739; In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1519-1520.)
There is substantial evidence to support the trial court's factual finding. Although knowing the home had appraised between $225,000 and $400,000 in the previous year, Honnold nonetheless stipulated to $265,000 as the home's fair market value. Honnold was aware of the various appraisals and the disparity among them, and he knew the stipulation's agreed-upon value did not perfectly align with any of the appraisals. Honnold also had the same ability as Grover to obtain a new or different appraisal-all of the underlying information necessary for valuation was available to them both; for example, he had unilaterally obtained an appraisal in September 2018. Moreover, Honnold was aware that Grover was going to seek to refinance the home after their agreement to make the equalization payment and could have made his agreement to value contingent on any refinance appraisal. The parties both had the assistance of counsel when they negotiated their stipulation, and as the trial court pointed out, the parties fully litigated the value of the house. There was ample evidence Honnold entered the stipulation freely, voluntarily and with full knowledge of all of the facts and a complete understanding of the effect of the transaction.
E. No Error in Finding No Mistake of Fact
Honnold argues the trial court erred in failing to set aside the stipulation and judgment based on mistake of fact. Subdivision (e) of section 2122 states that "[a]s to stipulated or uncontested judgments or that part of a judgment stipulated to by the parties," a set-aside motion may be based on "mistake, either mutual or unilateral, whether mistake of law or mistake of fact." In addition to establishing mistake, the party seeking relief must also establish that "the facts alleged as the grounds for relief materially affected the original outcome and that the moving party would materially benefit from the granting of the relief." (§ 2121, subd. (b).)
The trial court refused to set aside the stipulation based on mistake, explaining the October 2019 appraisal did not establish a mistake as to the value of the marital residence. The court explained that at the time the parties stipulated to the value of the marital residence, it was "abundantly clear these parties had multiple appraisals" (one higher and two lower) and a cash offer. Additionally, after continuing the hearing to review authority regarding the duration of the spousal fiduciary duties, the court found the October 2019 appraisal was not conclusive as to the fair market value, it was simply another appraisal within the valuation range both parties were aware of at the time they entered the September 2019 stipulation. The trial court concluded the appraisal alone, especially given the variation in the appraisals, was insufficient evidence to show the actual market value of the home and that it had appreciated in value since the parties' stipulation.
1. Standard of Review
Contrary to Honnold's assertion, the evidence as to the home's actual fair market value was not undisputed. Although the dates and amounts of the various appraisals were not disputed, contrary inferences could be drawn from these expert opinions of value. Whether the differences in appraisals between September 2018 and October 2019 accurately reflected the value of the home was strangely fluctuating down $175,000 and then up $115,000 all in the course of a year, or whether the differences in the appraisals reflected a dispute among the experts were questions of fact necessary to determine the existence of any mistake of fact in the parties' stipulation. Honnold's challenge is directed to these factual findings, as he asserts the October 2019 appraisal definitively established the value of the home and showed the parties had incomplete and inaccurate valuation information at the time of the stipulated judgment. Given the disputed inferences arising from the evidence, de novo review is not appropriate. (See Rosevear, supra, 65 Cal.App.4th at p. 686 [de novo review not warranted where there is substantial conflicting evidence on central issue of mistake].)
Here, the trial court's factual findings as to what the various appraisals established as to the value of the home is reviewed for substantial evidence, while the trial court's ultimate decision not to set aside the stipulation for mistake of fact is reviewed for abuse of discretion. (Haraguchi v. Superior Court (2008) 43 Cal.4th 706, 711-712 [abuse of discretion is not a unified standard, and the deference it calls for varies according to the aspect of a trial court's ruling under review; findings of fact are reviewed for substantial evidence while application of law to fact is reversible only if arbitrary and capricious].)
As Honnold had the burden to prove the October 2019 appraisal, rather than the stipulated value of $265,000, was the correct market value of the home, and the court concluded he had not carried that burden (Kieturakis, supra, 138 Cal.App.4th at pp. 8990 [moving party under § 2122 bears burden of proof]; see Evid. Code, § 500 [party has burden of proof as to each fact essential to claim for relief]), reversal of the trial court's factual finding is warranted only if a finding in Honnold's favor is compelled as a matter of law (Dreyer's, supra, 218 Cal.App.4th at p. 838). The trial court's ultimate denial of the motion based on mistake is reviewed for abuse of discretion. (Brewer, supra, 93 Cal.App.4th at p. 1346.)
2. Analysis
Honnold asserts the October 2019 appraisal supports only one possible conclusion: that there was a mistake as to the value of the house when the parties entered their stipulation. This contention, however, hinges on the disputable proposition the $380,000 appraisal in October 2019 represents the definitive fair market value of the home, as opposed to the $265,000 to which the parties agreed. For all of the reasons discussed above with respect to whether Grover gained an advantage, the trial court was not compelled to conclude the October 2019 appraisal decisively established the fair market value of the house.
Of the appraisals, the October 2019 appraisal was the closest in temporal proximity to the parties' stipulation, but this did not necessarily render it the most accurate appraisal or reflect an appreciation in actual value since the stipulation or the last appraisal in April 2019. The appraisals over the prior year had been widely disparate, starting with an appraisal of $400,000 in September 2018, then down to $225,000 and $242,000 in appraisals in January and April 2019, and then back up to $380,000 in October 2019. Without any other evidence of what was happening in this particular housing market, the variation in appraisals can be interpreted as more suggestive of a disagreement among experts rather than reflective of a highly volatile and oddly fluctuating housing market.
The details of the appraisals before the September 2019 stipulation are not in the record.
Nor is there evidence that compels a conclusion as a matter of law that the appraisals for $400,000 and $380,000 were more accurate than the appraisals for $225,000 and $242,000. In sum, the evidence does not compel a finding as a matter of law the October 2019 appraisal provided the definitive value of the home or an appreciation since the stipulation, and the trial court did not err in reaching a contrary conclusion.
Given the trial court's factual conclusion the October 2019 appraisal did not represent the definitive market value of the house, the trial court did not abuse its discretion in concluding the $265,000 stipulation of value was not shown to be a mistake that materially affected the original outcome. Although Honnold cites Brewer and Varner as analogous mistakes of fact that warranted setting aside spousal agreements and judgments, those cases are clearly distinguishable. In Brewer, at the time the spouses reached their settlement agreement, the wife had failed to accurately disclose all of her pension assets, despite that the value of both pensions was readily ascertainable and could have been accurately calculated at that time. (Brewer, supra, 93 Cal.App.4th at pp. 1339-1340.) After the settlement, the husband discovered the actual value of the wife's two pensions was significantly greater than she had disclosed. (Id. at p. 1340.) The appellate court held the evidence supported the trial court's determination there was a unilateral mistake by the husband because he did not have accurate and complete valuations of the wife's pension plans, and that information was essential to his agreement to resolve all financial issues. (Id. at pp. 1346-1349.)
In Varner, the trial court refused to set aside a stipulated judgment based on the wife's assertion the husband had failed to provide accurate valuation of his business interests, among other things, when the parties entered their stipulation. (Varner, supra, 55 Cal.App.4th at pp. 130-135.) The appellate court reversed based in part on evidence that, while the husband had indicated the value of his business interests "equaled about zero," subsequent appraisals submitted by the wife (and even by the husband's experts) showed the businesses had value in the millions of dollars. (Id. at pp. 132, 134.) The court concluded the husband had failed to disclose complete and accurate information and this constituted a basis for setting aside the judgment on the ground of mistake. (Id. at pp. 142-144.)
In both Brewer and Varner, unlike here, the disclosed asset information was decidedly incorrect and provided by a spouse who had superior access to the information. (Brewer, supra, 93 Cal.App.4th at p. 1348 [wife "in a superior position to gain access to the information from which valuations for these [pension] assets could be determined"]; Varner, supra, 55 Cal.App.4th at p. 143 [information necessary to value property was in the hands of the husband and not made available to the wife].) Here, the trial court found the October 2019 appraisal was insufficient to establish the definitive market value of the home, and the information underlying the October 2019 appraisal was equally available to Honnold at the time of the stipulation. Honnold had already sought a separate appraisal a year earlier and could have done so again before he entered the stipulation.
As the trial court permissibly found the October 2019 appraisal was insufficient to establish the actual value of the home given the disparate appraisals, Honnold could not show the stipulated value was a mistake that materially affected the original outcome. The trial court's refusal to set aside the stipulation and judgment based on mistake was supported by permissible factual findings and application of the correct legal standard. The trial court's denial of Honnold's motion on this ground was not an abuse of discretion.
DISPOSITION
The trial court's judgment is affirmed. Respondent is entitled to her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)
WE CONCUR: SNAUFFER, J., DeSANTOS, J.