Opinion
G053177
11-28-2017
MARISA BRUMMOND, as Trustee, etc., Plaintiff and Respondent, v. WILLIAM E. POULIS, Defendant and Appellant.
Law Office of John Derrick and John Derrick for Defendant and Appellant. Donna Bader for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2013-00646937 consol. w/ 30-2014-00704439) OPINION Appeal from a judgment of the Superior Court of Orange County, Jamoa A. Moberly, Judge. Reversed and remanded. Law Office of John Derrick and John Derrick for Defendant and Appellant. Donna Bader for Plaintiff and Respondent.
* * *
Plaintiff and respondent Marisa Brummond, as trustee of the Debra Pappas Revocable Trust (Trust), filed the underlying probate petition seeking instructions on how to divide the net proceeds from the sale of her grandparents' home. She contends the proceeds should be divided equally between the Trust and her uncle, defendant and appellant William E. Poulis, because record title to the home shows the Trust and William each held an undivided 50 percent interest when it was sold. William, however, claims he paid Brummond's mother, Debra Pappas, $225,000 to purchase from her 25 percent of her 50 percent interest in the home under a written agreement the two executed in 2004 before she transferred her remaining interest in the home to the Trust.
Several members of the Poulis family are involved in this matter and therefore we use the first names of all members of the Poulis family to avoid confusion. No disrespect is intended.
Following a nonjury trial, the trial court entered judgment in Brummond's favor and ordered the sale proceeds divided equally between the Trust and William based on the statutory presumption the recorded title to property reflects the beneficial title. In its statement of decision, the court found William paid Pappas $225,000 as described in the 2004 agreement, but also found the agreement was voidable because William, an attorney, did not advise his sister to seek independent counsel concerning the transaction. The court further found William and Pappas agreed she would repay William the $225,000 from the sale proceeds when they eventually sold the home. William objected the court's statement of decision was inconsistent and incomplete because it found William paid Pappas the $225,000, the agreement regarding the money was voidable, and William and Pappas intended she would repay William from the sale proceeds, but the court ordered the sale proceeds divided equally without ordering reimbursement of the $225,000. The trial court overruled William's objection.
We reverse and remand for a new trial. Upon timely request, a trial court has a mandatory duty to prepare a statement of decision explaining the factual and legal basis for its decision on each principal controverted issue at trial. William timely asked the trial court to prepare a statement of decision on numerous issues, including whether he purchased a 25 percent interest in the home from Pappas when he paid her the money under their 2004 agreement, and if not, whether the Trust must reimburse William for the $225,000 he paid to Pappas. The court did not decide these issues despite William's request and his objections regarding the court's failure to do so.
Ordinarily, we would remand the matter for the court to issue a new statement of decision deciding the omitted controverted issues. Here, however, the trial judge who presided over the trial is unavailable to prepare a new statement of decision because she retired while this appeal was pending. Clear authority therefore requires us to order a new trial because only the judge who presided over a trial may prepare a statement of decision.
We also reverse the trial court's attorney fee award to Brummond because the award may not stand based on our reversal of the judgment.
I
FACTS AND PROCEDURAL HISTORY
Athena and Ernest Poulis owned a single-family home in Santa Barbara, California and had four adult children—William, Pappas, Richard Poulis, and John Poulis. Athena died in 1978, leaving Ernest as the home's sole owner. When Ernest became ill in 1987, he executed a grant deed transferring the home to William. Ernest told William he did not have a will or trust, but he wanted William to hold and distribute the home for his siblings' benefit. He also told William not to put his siblings' names on the home because Pappas recently had gone through a difficult divorce and Richard and John had personal problems that made them unreliable with money.
Ernest gave instructions that Pappas would have use of the home during her lifetime, and when she died or decided to sell it, Pappas would receive a 50 percent share and Richard and John each would receive a 25 percent share. William did not receive an interest in the home other than holding title for his siblings' benefit because he was a successful attorney and real estate investor who did not need his father's financial help. Ernest died a few days after he deeded the home to William.
After Ernest died, Pappas initially lived in the home, but she later moved out and rented the home to obtain more income. In 1994, Pappas told William she needed to borrow money against her interest in the home, but she could not do so because her name was not on the title. William agreed to add her name to the title reflecting the interest Ernest wanted her to have. In May 1994, William therefore recorded a grant deed transferring an undivided 50 percent interest in the home to Pappas and retaining the other 50 percent in his name. Over the years, Pappas took out several loans against her interest in the home.
In March 1997, Richard was shot and killed outside a bar in Santa Barbara. He was survived by two adult children, John Robert Poulis (Robert) and Matthew Richard Poulis. Brummond and William assumed Richard's 25 percent interest in the home passed to Robert and Matthew, but no one points to any will, trust, or other document to support that assumption and neither Robert nor Matthew were added to the home's title. In 2000, John died in a mental health facility without any children or heirs other than his siblings. Brummond and William contend John's 25 percent interest in the home passed to them by intestate succession.
In 2004, Pappas needed a place to live because she continued to rent the home as a source of income and her landlord gave away the room Pappas rented while she was in the hospital recovering from back surgery. Pappas purchased a mobile home with $225,000 William borrowed from a line of credit that had no connection to the home. William provided Pappas this money because she lacked the funds to purchase the mobile home on her own, and Pappas could not afford the increased monthly payments that would result if she borrowed more money against her interest in the home. Pappas took title to the mobile home in her name.
In November 2004, Pappas and William signed an agreement that William drafted regarding this transaction. The agreement stated William paid $225,000 to Pappas to purchase one-half of her 50 percent interest in the home, or a 25 percent ownership interest. The agreement explained the $225,000 price was 25 percent of the home's fair market value, and further provided for William to be reimbursed out of Pappas's remaining share of the home if the value decreased. The agreement included an attorney fee provision, but did not advise Pappas that she should seek the advice of independent counsel regarding the transaction. William and Pappas did not change title to the home to reflect the changes described in this agreement or to acknowledge their brothers' deaths.
In May 2007, Pappas formed the Trust to hold title to her property. In July 2011, Pappas and William executed a grant deed transferring her interest in the home to the Trust. Rather than acknowledge the 25 percent interest William allegedly purchased from Pappas, the deed continued to identify Pappas and William each as holding an undivided 50 percent interest in the home. In 2011, Pappas also transferred to the Trust the title to her mobile home.
Pappas died in February 2012, leaving three adult children—Brummond, Paula Pappas, and Gail Pappas. When Pappas died, Brummond and William succeeded her as co-trustees of the Trust, but William later resigned. The Trust provided that upon Pappas's death the trustee must distribute the Trust's assets equally among Pappas's three children. Brummond therefore sold Pappas's mobile home and distributed the approximately $185,000 in net proceeds among Pappas's children. In January 2013, Brummond and William also sold the home. After paying closing costs and the loans Pappas took against the home, the net sales proceeds were approximately $402,000. Brummond and William, however, could not agree on how to distribute those proceeds and they remain in escrow.
In May 2013, acting as the Trust's sole trustee, Brummond filed the underlying petition for instructions on how to distribute the home's sale proceeds. She alleged the Trust was entitled to 50 percent of the proceeds based on the 50 percent ownership interest reflected in the 2011 grant deed that Pappas and William recorded. Brummond disputed the validity of the 2004 agreement purporting to transfer half of Pappas's interest to William because (1) William, an attorney, prepared the agreement without advising Pappas to seek independent counsel; (2) Brummond was unaware of the agreement and no copy was found in Pappas's papers; and (3) Pappas and William executed the 2011 grant deed nearly seven years after the alleged agreement and the deed did not reflect the ownership change described in the agreement. The petition also named Robert and Matthew as parties based on any interest they received in the home from Richard.
Robert and Matthew responded to the petition, but they are not parties to this appeal and their response to the petition is not part of the record.
William filed an objection to the petition, alleging the Trust was not entitled to any of the sale proceeds because "'[Pappas'] used all of her interest in the 'Property.'" According to William, Pappas sold one-half of her interest, or 25 percent of the home, to William for $225,000 as described in the 2004 agreement. Moreover, William alleged Pappas and the Trust already received more than they were entitled because nearly $248,000 of the proceeds from the sale were used to pay off the loans Pappas took on the home, but her remaining 25 percent interest was only worth approximately $163,000 based on the sales price.
William, Robert, and Matthew also filed a separate lawsuit against Brummond individually and as the Trust's trustee. Their complaint alleged two claims for breach of oral agreements and an accounting claim relating to the rental income for the home following Pappas's death. The trial court sustained Brummond's demurrer to the breach of contract claims and then consolidated the remaining accounting claim with Brummond's petition for instructions. The court's decision on the accounting claim is not at issue on this appeal.
William filed a request for a statement of decision near the end of a bench trial in this matter. The issues William asked the court to decide included (1) what interests the Trust, William, Matthew, and Robert held in the home; (2) whether Pappas sold William a 25 percent interest in the home for $225,000; (3) whether Pappas used that money to purchase a mobile home to which she took title in her name; (4) whether the court should order the Trust to return the $225,000 to William if the court found the 2004 agreement unenforceable; (5) whether that reimbursement should come solely from Pappas's interest in the home, as opposed to the sale proceeds in general; and (6) who is responsible for the loans Pappas took against the home.
In its tentative decision, the court found Ernest executed a grant deed transferring the home to William, but instructed William to hold title for his siblings' benefit and then distribute 50 percent to Pappas, 25 percent to Richard, and 25 percent to John upon the home's sale or Pappas's death. In that capacity, the court found William was acting as a fiduciary for his siblings. Nonetheless, the court found the Trust and William each held a 50 percent interest in the home based on the deed Pappas and William recorded in 2011, and William failed to present clear and convincing evidence to overcome the Evidence Code section 662 presumption that the holder of legal title to property is the owner of the beneficial title. The court therefore concluded the Trust was entitled to 50 percent of the remaining sales proceeds and William was entitled to the other 50 percent. The court did not specify whether William held the 50 percent for his own benefit, Matthew's and Robert's benefit, or some combination thereof.
The court also found the 2004 agreement conveying one-half of Pappas's interest in the home to William was voidable because "there is no evidence she was advised to seek independent counsel, did seek advice of counsel or that she understood the document. Civil Code 1654." Finally, the court found "[t]here is no promissory note from [Pappas] to William secured by the [home] as to the purchase of the mobile home by [Pappas]. However it was the intent of the parties at the time that [Pappas] purchased the mobile home that the $225,000 loan which William took out to enable [Pappas] to purchase the mobile home would be paid back to William from the sale of the [home]. However it was not intended that the proceeds come only from [Pappas's] share. Equitably it should come from the entire proceeds."
The court's tentative decision included several other findings that are not relevant to the issues on appeal, including (1) Brummond's witnesses had more credibility and William's testimony was self-serving at times; (2) Pappas primarily used the proceeds from the loans she took for the home's maintenance and repair, and (2) Brummond properly accounted for the home's rental income following Pappas's death.
William objected to the trial court's tentative decision and the virtually identical proposed statement of decision on several grounds. First, he objected the decision was inconsistent because it voided the 2004 agreement for William to purchase a portion of Pappas's interest in the home and allowed the Trust to retain the $225,000 William indisputably paid Pappas to acquire a portion of her interest. According to William, basic law on rescission required the court to order the Trust to repay the $225,000 if the court decided to void the agreement. Second, William objected the tentative decision was incomplete and ambiguous because it erroneously found equity required repayment to William of the $225,000 from the entire sales proceeds, not just Pappas's share of those proceeds. According to William, the tentative decision failed to identify the equitable principle or facts that supported the court's conclusion when it was undisputed Pappas used the $225,000 to buy a mobile home solely for her own benefit.
The trial court overruled William's objections and adopted the tentative decision as its final statement of decision with only minor changes. The court then entered judgment in Brummond's favor and ordered the remaining sales proceeds divided equally between the Trust and William. The court also granted Brummond's attorney fee motion based on the attorney fee provision in the 2004 agreement. It awarded Brummond approximately $89,000 in attorney fees and $10,000 in costs. This appeal followed.
II
DISCUSSION
A. The Trial Court's Statement of Decision is Inconsistent and Failed to Decide All Principal Controverted Issues
William contends the trial court's statement of decision is deficient and does not support the judgment because the court made inconsistent findings and failed to decide all principal controverted issues identified in Williams's request. We agree.
Upon any party's request in a nonjury trial, the trial court must "issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial." (Code Civ. Proc., § 632; see Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1124-1125 (Muzquiz).) The principal controverted issues are those that are "'relevant and essential to the judgment and closely and directly related to the trial court's determination of the ultimate issues in the case.'" (R. E. Folcka Construction, Inc. v. Medallion Home Loan Co. (1987) 191 Cal.App.3d 50, 53; see Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2017) ¶ 16:170, pp. 16-39 - 16-40.)
"A statement of decision . . . provides a complete record of the court's reasoning. . . . 'The purpose of the statement is to provide an explanation of the factual and legal basis for the court's decision.' [Citation.] A statement of decision gives the trial court 'an opportunity to place upon [the] record, in definite written form, its view of the facts and the law of the case, and to make the case easily reviewable on appeal by exhibiting the exact grounds upon which judgment rests.' [Citation.] 'If a statement of decision is given, it provides us with the trial court's reasoning on disputed issues and "is our touchstone to determine whether or not the trial court's decision is supported by the facts and the law."'" (A.G. v. C.S. (2016) 246 Cal.App.4th 1269, 1282, italics omitted.) "A statement of decision is as much, or more, for the benefit of the Court of Appeal as for the parties." (In re Marriage of Sellers (2003) 110 Cal.App.4th 1007, 1010.)
"A statement of decision need not address all the legal and factual issues raised by the parties. Instead, it need do no more than state the grounds upon which the judgment rests, without necessarily specifying the particular evidence considered by the trial court in reaching its decision. [Citations.] '[A] trial court rendering a statement of decision under . . . [Code of Civil Procedure] section 632 is required to state only ultimate rather than evidentiary facts because findings of ultimate facts necessarily include findings on all intermediate evidentiary facts necessary to sustain them.'" (Muzquiz, supra, 79 Cal.App.4th at pp. 1124-1125.)
"'"The court's statement of decision is sufficient if it fairly discloses the court's determination as to the ultimate facts and material issues in the case."'" (Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 500.) "'[O]nly when it fails to make findings on a material issue which would fairly disclose the trial court's determination would reversible error result.'" (In re Marriage of Balcof (2006) 141 Cal.App.4th 1509, 1531; see In re Marriage of Hardin (1995) 38 Cal.App.4th 448, 453 [trial court's statement of decision inadequate as matter of law when it fails to decide all principal controverted issues parties identify].)
"'Where [a] statement of decision sets forth the factual and legal basis for the decision, any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision.' [Citations.] '[F]indings of fact are liberally construed to support the judgment.' [Citation.] If the statement of decision 'does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court . . . , it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue.'" (Altavion, Inc. v. Konica Minolta Systems Laboratory Inc. (2014) 226 Cal.App.4th 26, 45-46.)
Here, a principal controverted issue William asked the trial court to decide was whether he acquired a 25 percent interest in the home when he provided Pappas $225,000 to purchase a mobile home as described in the 2004 agreement. William also asked the court to decide whether the Trust should be required to return the $225,000 if the court determined the 2004 agreement was unenforceable.
In its statement of decision, the trial court found William borrowed $225,000 on a line of credit and provided that money to Pappas for her to purchase the mobile home, but William did not acquire a 25 percent interest in the home when he provided those funds to Pappas. According to the court, the grant deed William and Pappas recorded in 2011 showed they each continued to hold the same undivided 50 percent interest in the home after they executed the 2004 agreement as they held before they executed the agreement. The court found the grant deed established the present ownership interests in the home because William failed to present clear and convincing evidence sufficient to overcome the statutory presumption that recorded title accurately reflects who holds beneficial title to property. The court further found the 2004 agreement for the sale of a 25 percent interest in the home was voidable because William failed to advise Pappas to consult independent counsel regarding the transaction. William does not dispute that substantial evidence and the law support these findings.
The trial court, however, went astray when it ordered the remaining proceeds from the home's sale divided equally between the Trust and William to reflect how they held title, but made no order relating to the $225,000 the court found William provided to Pappas for her to purchase the mobile home. Based on its statement of decision, it is not clear whether the court viewed the transaction between William and Pappas as an unenforceable agreement to purchase an interest in the home or a loan. The court admitted into evidence the 2004 agreement for William to purchase an interest in the home from Pappas, but found the agreement voidable as described above. The court also found Pappas and William intended that William would be repaid the $225,000 when the home was sold. These two versions of the transaction are irreconcilable because Pappas would not repay William if she sold him an ownership interest in the home, and William would not receive an ownership interest if he simply loaned Pappas the money.
Nonetheless, both versions required the court to order the $225,000 returned to William. If the transaction was an unenforceable purchase agreement, then the fundamental legal principles regarding rescission of an unenforceable contract required the court to order the Trust to return the money William paid to Pappas under the agreement. (See, e.g., Civ. Code, § 1691 [party seeking rescission must "[r]estore to the other party everything of value which he has received from him under the contract"]; Reed v. Gallagher (2016) 248 Cal.App.4th 841, 860 ["'"The consequence of rescission is . . . the restoration of the parties to their former positions by requiring each to return whatever consideration has been received"'"].) Similarly, if the transaction was a loan, then "the intent of the parties" as found by the court required Pappas to repay William from the proceeds of the home's sale. Under either version, the court's statement of decision and judgment impermissibly allows the Trust to keep both Pappas's entire ownership interest in the home and the $225,000 William paid to Pappas, while William receives neither the interest in the home he sought to purchase nor the money he paid to Pappas.
As stated above, William asked the trial court to decide whether he acquired a 25 percent interest in the home from Pappas under the 2004 agreement, and if not, whether the Trust was required to return the $225,000 William paid to Pappas. William objected that both the trial court's tentative decision and proposed statement of decision were inconsistent and failed to decide these issues, but the court overruled William's objection and carried these deficiencies into its final statement of decision. We conclude the trial court erred in doing so.
Brummond contends William's "argument that he is entitled to an additional $225,000 is flawed." According to Brummond, other than the 25 percent William claimed he purchased from Pappas, William never argued he owned the 12.5 percent he allegedly inherited when John died without any heirs other than Pappas and William. Accordingly, Brummond contends, the court necessarily reimbursed William for the $225,000 when it awarded him 50 percent of the remaining sale proceeds. Not so. Rather than undermine William's challenges to the statement of decision, this contention by Brummond only acts to underscore additional deficiencies in the statement of decision.
Although 50 percent of the title to the home was in William's name, he has consistently conceded that he is not the beneficial owner of that entire 50 percent. Indeed, it is undisputed he originally held this 50 percent interest for the benefit of his brothers, Richard and John. It is further undisputed that Richard was killed in 1997, and his adult children, Robert and Matthew, survived him. Finally, it is undisputed John died in 2000 without a surviving spouse, child, or parent. Based on these undisputed facts, the controverted issues William asked the trial court to decide included the precise ownership interest he held in the home for Robert, Matthew, Pappas, and himself. The trial court did not decide these issues, but the undisputed evidence and William's concessions defeat Brummond's contention that the trial court necessarily reimbursed William for the $225,000 by awarding him 50 percent of the remaining sale proceeds. B. We Must Remand for a New Trial Because the Trial Judge Is not Available to Issue a New Statement of Decision Resolving All Principal Controverted Issues
Based on the deficiencies in the trial court's statement of decision, William contends we should reverse the judgment and remand for the trial court to enter a new judgment ordering Brummond to repay him the $225,000 solely from Pappas's share of the remaining sale proceeds. Alternatively, William contends the new judgment should order the escrow holder to repay William the $225,000 before dividing the remaining sale proceeds according to the court's 50-50 distribution. We decline to choose between these or any other possible options because only the trial judge who presided over the trial may correct a deficient statement of decision.
A trial court has a mandatory duty to provide a statement of decision and commits reversible error by failing to provide a statement upon a timely and proper request. (Espinoza v. Calva (2008) 169 Cal.App.4th 1393, 1397; Karlsen v. Superior Court (2006) 139 Cal.App.4th 1526, 1530 (Karlsen).) When a trial court fails to provide a statement of decision, appellate courts generally decline to reach the merits of the appellant's challenge and remand the matter for the trial court to complete the process and issue a statement of decision. (Karlsen, at p. 1531; Gordon v. Wolfe (1986) 179 Cal.App.3d 162, 165.) The same rule applies when a trial court issues a statement of decision, but fails to decide a principal controverted issue. (In re Marriage of Hargrave (1985) 163 Cal.App.3d 346, 353-354; Mitidiere v. Saito (1966) 246 Cal.App.2d 535, 539.)
The trial judge who presided over the trial and heard the evidence is the only one who may provide a new statement of decision when either a request for a statement of decision is erroneously denied or a statement fails to decide all principal controverted issues. (Karlsen, supra, 139 Cal.App.4th at p. 1531, Raville v. Singh (1994) 25 Cal.App.4th 1127, 1132-1133 (Raville).) When the trial judge is unavailable due to incapacity, death, disqualification, or retirement, the matter must be retired because no other judge can complete the statement of decision process. (Karlsen, at p. 1531; see Wallis v. PHL Associates, Inc. (2013) 220 Cal.App.4th 814, 827 [disqualification]; Raville, at p. 1129 [death]; Armstrong v. Picquelle (1984) 157 Cal.App.3d 122, 127-128 [retirement].)
Here, the trial judge who heard this matter and issued the statement of decision retired while this appeal was pending. That judge therefore is unavailable to provide a new statement of decision (Karlsen, supra, 139 Cal.App.4th at p. 1531; People v. Dunn (1986) 176 Cal.App.3d 572, 575), and therefore we must order a new trial (Karlsen, at p. 1531). C. Because We Reverse the Judgment, We Also Must Reverse the Attorney Fee Award
William also contends the trial court erred in awarding Brummond attorney fees under the attorney fee provision in the 2004 agreement. Based on our decision to reverse and remand for a new trial, we also must reverse the fee award because there no longer is a prevailing party who may claim attorney fees under the 2004 agreement. (Gillan v. City of San Marino (2007) 147 Cal.App.4th 1033, 1053 ["Our reversal of the judgment necessarily compels the reversal of the award of fees as costs to the prevailing party based on the judgment"]; Law Offices of Dixon R. Howell v. Valley (2005) 129 Cal.App.4th 1076, 1105 ["[order awarding attorney fees falls with a reversal of judgment on which it was based"].) Of course, the prevailing party may seek a fee award following the new trial.
III
DISPOSITION
We reverse the judgment and the attorney fee award, and remand for a new trial. Poulis shall recover his costs on appeal.
ARONSON, J. WE CONCUR: MOORE, ACTING P. J. IKOLA, J.