Opinion
B161162. B162240 consolidated with.
11-6-2003
In re the Marriage of MARCIA and SHELDON CLOOBECK. MARCIA CLOOBECK, Appellant, v. SHELDON CLOOBECK, Respondent.
Kolodny & Anteau, Stephen A. Kolodny and Lauren S. Petkin for Appellant. Lurvey & Shapiro, Judith Salkow Shapiro; and Honey Kessler Amado for Respondent.
In a bifurcated proceeding pursuant to Family Code section 2337, subdivision (a), the trial court entered a status only judgment of dissolution, terminating the marital status of appellant and petitioner Marcia Cloobeck and respondent Sheldon Cloobeck. The trial court reserved all other issues for trial.
On appeal, Marcia asserts the trial court abused its discretion by refusing to impose in the status only judgment, pursuant to section 2337, subdivision (c)(8), quoted below in the Discussion, certain proposed conditions upon Sheldon or his estate. Marcia asserts the conditions are necessary to protect her rights under the parties postnuptial agreements until final judgment on the reserved issues. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Prenuptial Agreement
In 1988, represented by separate counsel, Marcia and Sheldon executed a written prenuptial agreement, which provided that all of their past, present, and future property would be considered, and remain, the separate property of the person acquiring it. The prenuptial agreement also provided for monthly community property payments and certain forms of spousal support to Marcia in the events of Sheldons death or divorce. Approximately two weeks after executing the prenuptial agreement, the parties married.
B. Postnuptial Agreements
In June and November 1993, again represented by separate counsel, the parties entered into two additional written agreements: an "Addendum to Prenuptial Agreement" (hereafter Addendum), and an "Amendment to Addendum to Prenuptial Agreement" (hereafter Amendment).
On appeal, according to Marcia, these two postnuptial agreements provided financial benefits to Marcia while the parties remained married, regardless of whether they were separated at the time of Sheldons death. For example, the Addendum required Sheldon to maintain two $1 million life insurance policies, "for so long as the parties are married," one upon his life with Marcia as the sole irrevocable beneficiary, and another upon the life of Marcia with her children from a prior marriage as the beneficiaries.
In addition, pursuant to the Addendum, in the event of "Sheldons death, [if] he and Marcia [were] still married," Sheldons estate was required to pay to Marcia "[a]n amount equal to five percent (5%) of Sheldons entire net estate (including assets held in trust) for the first five years of the parties marriage, plus one percent (1%) of Sheldons entire net estate for each successive year of marriage, up to a maximum of 20 years for a total of twenty-five percent (25%) of Sheldons net estate . . . ." Moreover, under such circumstances, all the parties household furnishings were to be given to Marcia with limited exceptions.
The Amendment provided that in the event of "Sheldons death, [if] he and Marcia [were] still married," his estate would provide Marcia with title to her automobile free and clear of any encumbrances.
In addition, Marcia claims that, in comparison to the prenuptial agreement, the postnuptial agreements provided for "significantly enhanced financial and economic benefits." Marcia asserts the proposed conditions are necessary to protect these financial rights while the parties litigate the reserved issues.
C. Petition for Dissolution and Motion for Bifurcation
On March 19, 1999, Marcia filed a petition for dissolution of marriage. After an apparent reconciliation and continuance, on June 27, 2002, Sheldon renewed a prior motion to bifurcate, requesting the trial court to grant a dissolution of marriage as to status only. Sheldon consented to the trial court imposing the conditions set forth in section 2337, subdivision (c)(1-5, & 7).
In Marcias response, she agreed to the bifurcated status judgment but only upon the condition that the trial court impose 24 requested conditions in the judgment, applicable until final judgment on the reserved issues. Marcias conditions, nos. 1, 2, 4, 5, 6, and 8, are almost identical to those set forth in section 2337, subdivision (c)(1-5, & 7). (See fn. 3.)
Marcia contends, however, the judgment does not go far enough to protect her rights under the postnuptial agreements, because of the trial courts failure to include the 18 other proposed conditions. We briefly identify each proposed condition, which we number, for the parties ease of reference, according to the numbering in Marcias declaration filed below.
Condition No. 3 would have extended some of Sheldons health care obligations to Marcia for three years subsequent to final judgment on the reserved issues.
Condition No. 7 would have required the trial court to interpret Sheldons contractual financial obligations in the Addendum and Amendment otherwise applicable in the event of "Sheldons death, [if] he and Marcia [were] still married" or "for so long as the parties [were] married," as applicable until final judgment on the reserved issues, instead of terminating at the time of dissolution of marriage by entry of the status only judgment.
Conditions Nos. 9, 10, 11, 18, 19, and 20 related to the possibility that Sheldon might remarry. Condition No. 9 would have barred Sheldon from seeking to modify his financial obligations to Marcia because of a new marriage. Condition No. 10 would have barred Sheldon from asserting evidentiary privileges, (Evid. Code, §§ 970, 971, & 980), because of the marriage. Condition No. 11 would have required Sheldon to provide Marcia, as a condition precedent to obtaining a marriage license, with a written waiver from any intended spouse of her rights under sections 970, 971 and 980, applicable from marriage to the time of trial on the reserved issues. Condition No. 18 would have barred Sheldon from raising any privacy concerns about his business affairs because of a remarriage. Conditions Nos. 19 and 20 would have required Sheldon to provide Marcia, as a condition precedent to obtaining a marriage license, a written waiver from any intended spouse of any privacy rights related to jointly filed income tax returns, and a written waiver of his intended spouses constitutional right to assert any privacy privilege "relative to her financial affairs or transactions," both waivers applicable from the time of marriage until the time of trial on the reserved issues.
Condition No. 12 would have obligated Sheldon to name Marcia as the sole irrevocable beneficiary on all of his life insurance policies.
Condition No. 13 would have obligated Sheldon to indemnify Marcia for any loss of rights, if any, under Probate Code sections 100, 101, 102, 103, 104, or 120, resulting from the status only judgment.
Condition No. 14 would have made Sheldon liable for Marcias attorney fees in the event he breached any of the proposed conditions.
Condition No. 15 would have continued Sheldons fiduciary duties to Marcia, as though they were still married, including duties of full disclosure, to provide equal access, and to manage and control the communitys assets.
Condition No. 16 would have given Marcia the right to damages for Sheldons breach of any of the conditions, "in addition to, and not in lieu of, any other remedies available to [Marcia] for enforcement of the . . . Judgment."
Condition No. 17 would have required Sheldon or his estate to indemnify Marcia, if, the termination of marital status "result[ed] in [Marcia] incurring any tax liabilities by reason of her inability to claim a `stepped up basis with respect to any real or personal property held by the parties at the time of the termination of their marital status . . . ."
Condition No. 21 would have obligated Sheldon to advise Marcia of all real property he intended to buy and provide all pertinent financial details prior to entering into escrow.
Condition No. 22 would have restrained the parties from encumbering, selling, or otherwise disposing of, any community, quasi-community or separate property.
Condition No. 23 would have made entry of the status only judgment dependent upon Sheldon posting a $1 million bond in favor of Marcia.
Condition No. 24 would have expressly reserved jurisdiction in the trial court on all other issues.
D. The Trial Courts Judgment
The trial court granted Sheldons motion for bifurcation. After additional briefing, one month later, the trial court entered a status only judgment, terminating the marital status of the parties as of September 19, 2002, and reserving all other issues for trial. In the judgment, the trial court imposed upon Sheldon or his estate the six mandatory conditions set forth in section 2337, subdivision (c)(1-5, & 7), "[u]ntil Judgment has been entered on all remaining issues and has become final . . . ." The judgment also required Sheldon to reimburse Marcia for any sums she would have been entitled to receive if it was later determined that Sheldon had a pension or retirement plan. Marcia filed a timely notice of appeal.
E. Post-appeal Trial Court Order
On our own motion, we take judicial notice that on March 4, 2003, the trial court entered an order in which it determined that the parties had waived the right to contest the validity or enforceability of the two postnuptial agreements for reasons such as duress, validity of signing, voluntary consent to and knowledge of terms, or being competently advised by counsel. The trial court found, however, that the parties had not waived the right to contest the interpretation of any provisions of the postnuptial agreements, or whether the agreements were unenforceable because of past performance, ambiguity, or as a violation of law or public policy. Neither party has raised any objections to this order, nor our judicial notice of this order.
CONTENTIONS
Marcia contends the trial court abused its discretion by not including the proposed conditions in the status only judgment, and thus failed to protect Marcias rights under the postnuptial agreements until final judgment on the reserved issues.
STANDARD OF REVIEW
Section 2337, subdivision (c), provides that a trial court "may" impose conditions in status only judgments. (In re Richard E. (1978) 21 Cal.3d 349, 354 ["The ordinary import of `may is a grant of discretion."].) We therefore review the trial courts judgment pursuant to the abuse of discretion standard of review.
"[I]t is generally accepted that the appropriate test of abuse of discretion is whether or not the trial court exceeded the bounds of reason, all of the circumstances before it being considered. [Citations.]" (In re Marriage of Connolly (1979) 23 Cal.3d 590, 598.) Stated another way, under the abuse of discretion standard of review, a trial courts decision will be overturned on appeal only if, considering the evidence in support of the order, no judge could reasonably have made such an order. (In re Marriage of Keech (1999) 75 Cal.App.4th 860, 866.)
DISCUSSION
Marcia claims that the trial court abused its discretion by not imposing the 18 proposed conditions in the status only judgment pursuant to section 2337, subdivision (c)(8), which permits a trial court to impose "[a]ny other condition the court determines is just and equitable."
Marcia asserts: (A) by denying proposed condition No. 7, the trial court impliedly and improperly summarily adjudicated the meaning of certain financial provisions in the postnuptial agreements; (B) Marcia has shown a compelling need for the conditions, which will not result in undue prejudice to Sheldon; (C) the conditions are tailored to the specific needs of the case; and (D) because Sheldon is contesting the validity and interpretation of the postnuptial agreements, the conditions are necessary to protect her rights under the agreements. We disagree with each contention.
A. Summary Adjudication
Marcia asserts the provisions in the Addendum and Amendment providing for financial benefits to Marcia in the event of "Sheldons death, [if] he and Marcia are still married," or "for so long as the parties are married," must be interpreted to be applicable until final judgment on the reserved issues, rather than until the date marital status ended as provided in the status only judgment. Marcia claims the trial court summarily adjudicated these contractual rights by denying inclusion of condition No. 7, which would have required the trial court to interpret the financial provisions applicable as long as the parties were married until final judgment on the reserved issues.
We reject this argument. Absent extrinsic evidence, the interpretation of a contract is a question of law, subject to our de novo review. (Wu v. Interstate Consolidated Industries (1991) 226 Cal.App.3d 1511, 1514-1515.) In this case, Marcia did not seek to introduce any extrinsic evidence supporting her interpretation of the postnuptial agreements, nor did she make an offer of proof regarding her interpretation of the postnuptial agreements.
The postnuptial agreements are ambiguous to the extent that they fail to define whether the financial provisions applicable while the parties remain "married" apply until entry of a status only judgment or until final judgment on the reserved issues.
If agreements are ambiguous, absent extrinsic evidence, it is our task to resolve this ambiguity by "applying the standard rules of interpretation in order to give effect to the mutual intention of the parties. [Citation.]" (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 798.) We therefore interpret these financial provisions in the Addendum and Amendment applicable while the parties remain married "in their ordinary and popular sense." (Civ. Code, § 1644.)
We conclude that the financial provisions applicable only for so long as the parties are married ceased upon entry of the status only judgment of dissolution. This interpretation gives the word "married" a reasonable, ordinary and common sense meaning in accord with the public policy of the State of California. (Civ. Code, §§ 1644 & 1646.)
At the time the postnuptial agreements were signed, California law and public policy clearly favored bifurcation and status only judgments. Prior to passage of section 2337, in Hull v. Superior Court (1960) 54 Cal.2d 139, the California Supreme Court endorsed the concept of a "divisible divorce," (id. at p. 147), explaining the public policy as follows: "Severance of a personal relationship which the law has found to be unworkable and, as a result, injurious to the public welfare is not dependent upon final settlement of property disputes. Society will be little concerned if the parties engage in property litigation of however long duration; it will be much concerned if two people are forced to remain legally bound to one another when this status can do nothing but engender additional bitterness and unhappiness. If the parties choose to enter into a property agreement, termination of their personal status should not be conditioned upon compliance with this agreement. If they enter into an integrated property settlement which provides for support payments as well as property allocation the entire agreement is considered a property agreement . . . and should be divisible in toto from the final dissolution of their personal status. Otherwise property disputes, real and specious, could continue for years, effectively preventing the legal establishment of any other relationship by either party. [Citation.]" (Id. at pp. 147-148, original italics.)
In Gionis v. Superior Court (1988) 202 Cal.App.3d 786, the court of appeal issued a writ to direct the trial court to enter a new order granting bifurcation and a status only judgment. The court explained: "Consistent with the legislative policy favoring no fault dissolution of marriage, only slight evidence is necessary to obtain bifurcation and resolution of marital status. On the other hand, a spouse opposing bifurcation must present compelling reasons for denial." (Id. at p. 790.)
In this case, the parties were represented by separate counsel in negotiating and executing the postnuptial agreements. The agreements expressly provided they were to be governed and construed in accordance with California law. At the time of execution, California law and public policy without question favored status only judgments terminating marriages.
In the postnuptial agreements, the parties negotiated for certain written financial obligations to cease when the legal status of marriage ceased. The marriage ceased upon entry of the status only judgment. The trial court, therefore, absent some compelling interest or other legal justification (which Marcia has not shown), did not abuse its discretion by impliedly terminating Sheldons contractual postnuptial financial obligations dependent upon the legal status of marriage at the time when the legal status of marriage ceased — upon entry of the status only judgment.
Marcia relies upon what she calls the "three-tiered approach" of the financial provisions found in the postnuptial agreements, coupled with her analysis of the legislative history of section 2337 and its remedial purpose, to support her contractual interpretation. The analysis is as follows. The financial provisions in the postnuptial agreements apply at three distinct times: (1) some provisions apply "[u]ntil such time as the parties may separate;" (2) other provisions apply when "Sheldon and Marcia separate and cease living together . . . and/or their marriage is dissolved;" and, finally, (3) the last set of provisions apply "for so long as the parties are married" or, if "[i]n the event that at the time of Sheldons death, he and Marcia are married."
Based upon this three-tiered contractual structure, Marcia claims that the third set of provisions, applicable while the parties are married, regardless of whether they are separated, must be interpreted to apply until final judgment on the reserved issues, instead of only until entry of the status only dissolution judgment. Marcia never really explains this structural analysis further. Instead, Marcia devotes substantial briefing to the legislative history of section 2337 and its alleged remedial purpose, which we address below.
We disagree with Marcias contractual interpretation based upon the "three-tiered" approach. For the most part, the first two sets of provisions came into play when the parties separated. The third set of provisions applied as long as the parties were legally married. We see no basis for concluding that the overall structure of these contractual provisions leads to the conclusion that the provisions applicable while the parties remain married must be interpreted to mean until final judgment on the reserved issues.
Marcia also contends that the legislative history shows that section 2337 was intended to protect the non-moving spouse from prejudice resulting from a status only judgment and to maintain the status quo pending final judgment on the reserved issues. Marcia therefore contends that those financial provisions applicable for so long as the parties remain married, must be maintained by the trial court in order to preserve the status quo pending final judgment on the reserved issues.
The legislative history of section 2337 and its alleged remedial purpose, however, do not alter our conclusion regarding the ordinary and popular meaning of the contractual provisions applicable for so long as the parties remain married. As we concluded above, as a matter of law, we interpret the provisions applicable for so long as the parties remain married to cease upon entry of the status only judgment of dissolution.
We therefore conclude that absent express definition in the written agreements, extrinsic evidence to the contrary, or some other compelling justification, the written contractual provisions in the postnuptial agreements which were applicable only for so long as the parties remained married, terminated upon entry of a status only judgment. The trial court therefore did not abuse its discretion by denying proposed condition No. 7.
B. Compelling Need and Prejudice
Marcia claims that without the proposed conditions she will suffer extreme prejudice because certain of her rights, applicable while the parties remained married, terminated upon entry of the status only judgment of dissolution. Marcia asserts this extreme prejudice is a compelling need under Gionis v. Superior Court, supra, 202 Cal.App.3d at page 790 to either grant her requested conditions or to vacate the bifurcation order and the status only judgment.
Above, we concluded that the provisions in the postnuptial agreements, applicable while the parties remained married, terminated upon entry of the status only judgment. Marcia therefore has failed to establish a compelling need for condition No. 7, which would have maintained those rights until final judgment on the reserved issues.
As to Marcias other proposed conditions, we also conclude that Marcia has failed to establish either a compelling need or that the conditions are well-tailored to this case.
Condition No. 3 would have extended Sheldons health care obligations for three years past the final judgment. This would have given Marcia rights she was not entitled to under either the parties written contracts or pursuant to section 2337, subdivision (c)(2). Moreover, on August, 28, 2002, before entry of the status only judgment, the trial court ordered Sheldon to "maintain health insurance for the benefit of [Marcia]."
Marcia has made no showing of a compelling need for condition No. 9, which would have barred the trial court from seeking to modify his financial obligations to Marcia because of a new marriage. Marcias arguments opposing any such motion should be made if and when Sheldon seeks to modify any obligations. We will not place a prophylactic restriction on Sheldons rights to file motions in the trial court.
As to conditions nos. 10, 11 and 18, requiring Sheldon and any future intended spouses to waive spousal evidentiary and constitutional privacy privileges, Marcia has made no showing of any attempt by Sheldon to marry a witness to make her or any otherwise relevant information inaccessible.
As to conditions nos. 19 and 20, requiring written waivers from an intended spouse of any privacy rights to any jointly filed tax returns and her financial affairs or transactions, section 3552 allows discovery of joint tax returns and section 4323 provides that "[t]he income of a supporting spouses subsequent spouse . . . shall not be considered when determining . . . spousal support."
Condition No. 12 would have required Sheldon to name Marcia as sole irrevocable beneficiary on all his life insurance policies. The record does not indicate how much insurance would have been at stake pursuant to condition No. 12. To the extent condition No. 12 would have provided more life insurance protection to Marcia than the $1 million policy provided for in the Addendum, Marcia has made no showing of a compelling need for the additional insurance.
As to condition No. 13, Marcia does not explain what rights are at issue pursuant to Probate Code sections 100, 101, 102, 103, 104, or 120, and therefore has made no showing of a compelling need to protect whatever these alleged rights are in the status only judgment of dissolution.
Condition Nos. 14 and 16 would have allowed Marcia to obtain attorneys fees and damages if Sheldon breached any of the adopted conditions. Marcia has provided no authority for the imposition of these conditions. Nor has she otherwise provided a compelling explanation for providing her with these additional remedies.
Condition No. 15 would have unnecessarily imposed fiduciary duties upon Sheldon as though the parties were still married. Marcia has made no showing that her rights are not adequately protected by section 2102, which imposes fiduciary duties "[f]rom the date of separation to the date of the distribution of the community or quasi-community asset or liability in question . . . ." (See also, section 721, entitled "Contracts with each other and third parties; fiduciary relationship.")
As to condition No. 17 regarding tax liabilities from a failure to receive a "stepped-up" basis as to any of the parties real property, Marcia has made no showing that this issue cannot be resolved at the time of trial on the reserved issues.
Marcia has made no showing of a compelling need for condition No. 21, which would have required Sheldon to disclose all financial details of all real estate deals prior to escrow.
Marcia asserts that condition No. 22, which would have restrained either party from encumbering or disposing of any real property, would not have prejudiced Sheldon. Lack of prejudice is not the equivalent of a showing of a compelling need.
As to condition No. 23, Marcia made no showing to justify imposing a $1 million bond to secure Sheldons performance under the agreements. In addition, Marcia did not offer to the pay the premium and has shown no reason to impose such a cost on Sheldon.
Condition No. 24 was unnecessary because the trial court expressly retained jurisdiction for trial of the reserved issues in the status only judgment of dissolution.
On the other hand, Sheldon has shown substantial justification for the status only judgment. Marcia downplays the importance of these substantial and compelling interests. By declaration before the trial court, Sheldon indicated he wanted the status only termination because: (1) "[i]t [was] detrimental to [him] psychologically to stay married to [Marcia];" (2) "the continued maintenance of [the] marital relationship serve[d] no useful purpose;" (3) Sheldon was 69 years old and wanted to be free to marry; and (4) Sheldon wanted "to sever [his] personal ties with [Marcia] so that [he could] move on with [his] personal life." These are precisely the types of concerns which compelled the California Supreme Court 40 years ago in Hull v. Superior Court, supra, 54 Cal.2d 139, to endorse the concept of a "divisible divorce."
After a thorough review of the record, we conclude that Marcia has not shown a compelling need for imposition of the proposed conditions. Nor are the proposed conditions narrowly tailored to the facts of this case.
C. Validity and Interpretation of the Postnuptial Agreements
Marcia contends the conditions should be imposed because Sheldon is contesting the validity and interpretation of the postnuptial agreements, and if he succeeds, her rights will be governed by the prenuptial agreement or statute.
As to the validity of the postnuptial agreements, the trial court entered an extensive post-appeal order, of which we have taken judicial notice, indicating the parties had waived the issue of the validity of the postnuptial agreements. This moots the argument that Marcia needs the conditions to protect her rights while the parties litigate the validity of the postnuptial agreements.
Marcia also argues that the conditions should be imposed because Sheldon is contesting the interpretation of the two postnuptial agreements. We reject this argument. All of the proposed conditions, except No. 7, have nothing to do with issues involving the interpretation of the postnuptial agreements. Moreover, the trial court properly denied condition No. 7, as explained above.
DISPOSITION
The trial courts judgment is affirmed. Respondent is awarded costs on appeal.
We concur: KLEIN, P. J. and CROSKEY, J. --------------- Notes: All statutory references are to the Family Code, unless otherwise indicated. Section 2337, subdivision (a), provides: "In a proceeding for dissolution of marriage, the court, upon noticed motion, may sever and grant an early and separate trial on the issue of the dissolution of the status of the marriage apart from other issues." 2. For ease of reference and to avoid confusion, the parties shall be referred to as Marcia and Sheldon throughout the remainder of this opinion. 3. Quoting in part and paraphrasing in part, the pertinent portions of section 2337, subdivision (c) provide: "The court may impose upon a party any of the following conditions on granting a severance of the issue of the dissolution of the status of the marriage . . . ." (1) Indemnification for any taxes, reassessments, interest, or penalties which would not have been payable but for entry of the status only judgment prior to trial on the reserved issues. (2) Maintenance of all existing health and medical insurance coverage for the other party and the minor children as named dependents until final judgment on the reserved issues. (3) Indemnification for adverse consequences if the bifurcation results in a termination of the non-moving partys right to a probate homestead in the residence until final judgment on the reserved issues. (4) Indemnification for any adverse consequences if the bifurcation results in the loss of the non-moving partys rights to a probate family allowance as the surviving spouse of the party until final judgment on the reserved issues. (5) Indemnification for any adverse consequences if the bifurcation results in the loss of the non-moving partys rights to pension benefits, elections, or survivors benefits under the partys pension or retirement plan until final judgment on the reserved issues. (7) Indemnification for any adverse consequences if the bifurcation results in the loss of rights to social security benefits or elections to the extent the other party would have been entitled to those benefits or elections as the surviving spouse of the party. 4. Marcia claims the 18 proposed conditions were intended to: (1) preserve the status quo of the parties; (2) preserve Marcias interests should Sheldon die before entry of final judgment on the reserved issues; (3) prevent a remarriage from thwarting crucial discovery; and (4) protect Marcia from "the haste with which the bifurcation was sought, in light of the fact that discovery [had] not been completed and major issues, such as those pertaining to the validity and interpretation of the parties three agreements, remain unresolved." 5. In her opening brief, Marcia writes: "[Sheldon] offered the trial court little reason for this `rush to status only judgment."