Filed 8/28/18 Carthen v. Jory CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Nevada)

—-

LINDA CARTHEN,

Plaintiff and Respondent,

v.

WILLIAM J. JORY et al.,

Defendants and Appellants.

C084767

(Super. Ct. No. P1515749)

It was always Mildred Gorman’s intent to split the assets in her trust equally between her two children, with her son William Jory (defendant and appellant with his wife Jodene Jory, collectively the Jorys) receiving her house and her daughter Linda Carthen (plaintiff and respondent) receiving an equal value from the trust. Gorman did not know how to accomplish this goal and told her attorney the children “would have to figure it out after she was gone what to do about the house.” To that end, after Gorman’s death, her children signed two “SHARE & SHARE ALIKE STATEMENT[S]” agreeing Jory would receive the house and an investment account, while Carthen would receive Gorman’s personal property, the trust account, an oil investment, and a “Promissory Note.” One statement included values of the assets to be disbursed and the total each child would receive, while the other did not.

A year later, Carthen sued her brother, who was the trustee of their mother’s trust, for failing to provide an inventory and accounting of the trust despite repeated requests. Following trial, the court ruled the share and share alike statements constituted a valid agreement and the “Promissory Note” notation referred to the amount of money Jory owed his sister “to create an equal distribution rising to the level of $206,400” as “clearly denoted” in the agreement. The court determined the amount of the “Promissory Note” to be $138,340 and ordered Jory to pay that sum to Carthen plus interest. Jory disputes the trial court’s mathematical calculations and its imposition of interest on appeal. We agree the amount ordered was in error but disagree that interest should not have been imposed.

FACTUAL AND PROCEDURAL BACKGROUND

The Jorys raise a single issue having to do with the calculation of the amount the court ordered they pay Carthen to equalize their distributions under the trust. We relate only those facts relevant to that issue.

In January 2014, Jory and Carthen signed a share and share alike statement (January statement) dividing up the assets in Gorman’s trust. Gorman’s trust provided that upon her death the remaining balance of the trust would be distributed equally to her two children “in share and share alike.” The January statement provides that Jory was to receive Gorman’s home valued at $174,000 and an All Star Financial investment account valued at $32,400. The total distribution to Jory was $206,400. Carthen was to receive the remainder of Gorman’s estate, comprising of personal property valued at $2,180, a trust account valued at $15,880, and an oil investment valued at $0. The statement also provides that Carthen would receive a “Promissory Note” and that the distribution to Carthen would equal the value of the distribution to Jory at $206,400.

Jory and Carthen again signed a share and share alike statement in late May and early June 2014, respectively (June statement). They filed this statement with the county assessor’s office. The June statement related the same information as the first, except it did not include any valuations.

At trial, Jory’s wife Jodene, who assisted him in the administration of his mother’s trust, testified that the “Promissory Note” notation in the share and share alike statements referred to the amount the Jorys would owe Carthen once the parties figured out how much Carthen received as an advance of her inheritance. Only then could they calculate what they owed Carthen. Jodene also explained the reason for the absence of valuations in the June statement was that the county assessor’s office told her to submit a statement without valuations in response to her discomfort with the characterization of the assets in the January statement. Carthen testified she believed the promissory note was for the purpose of making up the difference between what was actually distributed to her and her share of $206,400. To do so, she believed Jory owed her $157,000 because he had only paid her $50,000 at the time of trial.

After a three-day court trial, the court rejected the Jorys claim that Carthen received part of her inheritance in advance of their mother’s death because Gorman never effectuated a writing saying so. Thus, any money Carthen received from her mother before her mother’s death was a gift, not to be deducted from Carthen’s share of the trust estate. The trial court also found the share and share alike statements constituted an enforceable agreement giving Carthen the personal property, the trust account, the oil investment, and a promissory note. The court then found the share and share alike agreement “clearly denoted” the promissory note was to create an equal distribution of $206,400 to each sibling.

The court then subtracted the value of the assets Carthen was given in the agreement from $206,400 to determine the value of the promissory note. Carthen received $2,180 in personal property, $15,880 from the trust account, and zero from the oil investment. Therefore, to make Carthen’s disbursement of equal value to Jory’s, the amount owed to Carthen with promissory note was valued at $188,340, $50,000 of which the Jorys already paid, leaving an outstanding amount of $138,340 plus interest from September 20, 2013, when Jory distributed $50,000 to Carthen. The court then found a motor home had been excluded from Gorman’s estate and divided the asset equally between Jory and Carthen, awarding them each $3,650. In the end, Jory was ordered to pay Carthen a total of $157,830, calculated by adding the value owed on the promissory note, the value of the trust account Jory had not yet distributed, and half the value of the motor home.

The Jorys appeal.

DISCUSSION

I

The Trial Court’s Finding That The Parties Agreed To Receive $206,400 As Their Equal Division Of The Trust Estate Is Not Supported By Substantial Evidence

The Jorys contend the trial court committed a mathematical error when calculating the amount of the promissory note referenced in the share and share alike agreement. Specifically, the Jorys argue $206,400 was not the value of half the trust estate, thus the court’s calculation of the promissory note assuming so was in error. The problem with the Jorys’ contention is that the trial court did not determine the $206,400 figure from its own mathematical calculations, but from language in the January statement it found constituted the parties’ written contract together with the June statement. Thus, the Jorys are actually challenging the court’s interpretation of the parties’ contract as Carthen points out. Despite the Jorys’ characterization of the issue as a mathematical error, the parties have sufficiently addressed whether substantial evidence supports the court’s finding that they agreed to an equal distribution of the trust valued at $206,400 each. Accordingly, we will consider it. We agree with the Jorys; the court erred in finding Carthen was entitled to a total of $206,400 under the share and share alike agreement.

Generally speaking, the interpretation of a written instrument presents a question of law unless the interpretation turns on the competence or credibility of extrinsic evidence or a conflict therein and then it is reviewed for substantial evidence. (Wells Fargo Bank v. Marshall (1993) 20 Cal.App.4th 447, 452-453; De Mille v. Ramsey (1989) 207 Cal.App.3d 116, 125.) The fundamental goal of contract interpretation is “to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” (Civ. Code, § 1636.) “For the purpose of ascertaining the intention of the parties to a contract, if otherwise doubtful, the rules given in [Civil Code sections 1635 through 1663] are to be applied.” (Civ. Code, § 1637.)

Pertinent rules from the Civil Code provide as follows: “The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Civ. Code, § 1638.) “When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; subject, however, to the other provisions of this title.” (Civ. Code, § 1639.) “The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.” (Civ. Code, § 1644.) “A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates.” (Civ. Code, § 1647.) “If the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it.” (Civ. Code, § 1649.) “Words in a contract which are wholly inconsistent with its nature, or with the main intention of the parties, are to be rejected.” (Civ. Code, § 1653.)

The trial court found the parties entered into a valid agreement to distribute their mother’s trust and interpreted the terms of that agreement by looking at the two share and share alike statements and hearing testimony from the parties to the contract. The court noted in its order that it based its finding that the parties agreed on an equal distribution of $206,400 each on the “clearly denoted” amount in “both ‘Share and Share Alike’ agreements.” This finding, however, is not supported by substantial evidence.

As we indicated, the January statement does not appear in the record. Assuming as the court stated that the January statement provides for each beneficiary to receive $206,400 from the estate, this figure only appears in the January statement and not in the June statement. The June statement merely shows the division of assets without valuations, plus a promissory note to Carthen so the parties can reach a share and share alike apportionment. As the court noted, the agreement was intended to distribute the trust and effectuate the intent of Gorman, which was to equally divide her trust assets among her two children. Jory and Carthen also intended their agreement to constitute an equal division of the trust as evidenced by the title “SHARE & SHARE ALIKE STATEMENT” appearing at the top of the June statement and its reference to their mother’s trust. Further, Jodene testified that the promissory note represented what she and Jory owed Carthen once they figured out how much of the estate Carthen took in advance of her mother’s death. Carthen testified the promissory note was intended to give her an equal share of the trust estate, which she thought was $206,400. All of the evidence supports the trial court’s finding that the beneficiaries contracted to divide their mother’s trust estate into equal distributions.

To that end, it would be absurd and contrary to the intent of the parties for a term of the contract to be that each beneficiary would receive $206,400 under the trust because the total of the two distributions equates to more than the value of the trust assets distributed in the contract. The January statement assumed each beneficiary received an equal monetary value from the trust — so when Jory took $206,400 in assets from the trust, Carthen received a promissory note to also give her $206,400. But Carthen is not owed an equal value to what Jory took; she is only owed that which is due to her under the share and share a like agreement — half interest in her mother’s trust.

As the trial court found, the parties agreed by contract to obtain their half interest of their mother’s trust in a specific way with Jory receiving the house and the All Star Financial investment, and Carthen receiving the personal property, the trust account, the oil investment, and a promissory note to make her distribution of trust assets equal. To do so, the value of the disbursements to Carthen must equal the value of her half interest in the trust assets to be divided, not equal to the value of assets her brother took from the trust. To the extent the agreement entitled Carthen to more than her half share of her mother’s trust, those terms should be rejected. (Civ. Code, § 1653.)

Here, the court found the assets distributed under the contract equaled $224,460, calculated as follows: $174,000 (house) plus $32,400 (All Star Financial investment) plus $2,180 (personal property) plus $0 (oil investment) plus $15,880 (trust account), giving each beneficiary a half interest of $112,230. Jory took $206,400 in assets under the terms of the contract, leaving Carthen with $18,060 in assets. To make her share equal to the half share of the trust assets she contracted for in the share and share alike agreement, Carthen is owed $94,170 ($112,230 minus $18,060). The Jorys already paid Carthen $50,000, leaving an outstanding balance under the promissory note of $44,170 ($94,170 minus $50,000). This amount added to the assets the Jorys have not yet distributed to Carthen — trust account valued at $15,880 and motor home interest valued at $3,650 — leaves a total sum due to Carthen in the amount of $63,700.

II

The Trial Court Properly Awarded Prejudgment Interest

As part of the court’s finding that Jory and Carthen entered into a contract to divide their mother’s trust estate, the court also imposed prejudgment interest on the amount due to Carthen under the promissory note from September 20, 2013 — the day the Jorys paid Carthen $50,000. Because the court ordered prejudgment interest from before Carthen filed her suit, the court impliedly imposed prejudment interest under Civil Code section 3287, subdivision (a) and not subdivision (b), which allows for prejudgment interest from no earlier than the date the action was filed. The Jorys contend the imposition of prejudgment interest was error because the amount of the promissory note represented the residue of Gorman’s estate, which was in dispute and subject to the instant litigation. The law does not support their position.

“Civil Code section 3287 provides for the recovery of prejudgment interest on damages. ‘The purpose of prejudgment interest is to compensate plaintiff for loss of use of his or her property.’ ” (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 828, fn. omitted.) Civil Code section 3287, subdivision (a), provides that “A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day . . . .” “[T]he court has no discretion, but must award prejudgment interest upon request, from the first day there exists both a breach and a liquidated claim.” (North Oakland Medical Clinic v. Rogers, supra, 65 Cal.App.4th at p. 828.)

“Courts generally apply a liberal construction in determining whether a claim is certain, or liquidated. [Citation.] The test for determining certainty under [Civil Code] section 3287[, subdivision ](a) is whether the defendant knew the amount of damages owed to the claimant or could have computed that amount from reasonably available information. [Citation.] Uncertainty as to liability is irrelevant. ‘A dispute concerning liability does not preclude prejudgment interest in a civil action.’ [Citation.] The certainty required by [Civil Code] section 3287[, subdivision ](a) is not lost when the existence of liability turns on disputed facts but only when the amount of damages turns on disputed facts. [Citation.] Moreover, only the claimant’s damages themselves must be certain. Damages are not made uncertain by the existence of unliquidated counterclaims or offsets interposed by defendant.” (Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 535-536.) We review a trial court’s statutory authority to award prejudgment interest de novo, but review any award itself for an abuse of discretion. (Union Pacific Railroad Co. v. Santa Fe Pacific Pipelines, Inc. (2014) 231 Cal.App.4th 134, 198.)

Contrary to the Jory’s argument on appeal, the amount of damages they owed Carthen under the contract was not in dispute nor resolved by the instant litigation. The court found a contract existed between the parties to divide the five assets listed in the share and share alike agreement. The agreement also provided for a promissory note to make Carthen’s distribution equal to Jory’s under the trust. Some assets contained in the contract were valued and as trustee Jory was responsible for valuing the others. Thus, the Jorys could reasonably calculate the value of the trust estate subject to the contract and the amount Carthen was owed to make her distribution equal. The fact that the Jorys also claimed Carthen had already received part of her inheritance in advance is irrelevant to the amount certain under the contract. The Jorys’ contention is nothing more than a counterclaim designed to offset Carthen’s recovery under the contract. Such claims do not make the damages under the contract uncertain. (Howard v. American National Fire Insurance Co., supra, 187 Cal.App.4th at pp. 535-536.)

The Jorys reliance on Estate of Kampen (2011) 201 Cal.App.4th 971, is misplaced. In that case, the court held an order requiring a trustee to distribute undistributed assets to a beneficiary does not constitute “damages” under Civil Code section 3287, subdivision (a). (Id. at pp. 989-990.) Here, to the extent the court ordered Jory to distribute to Carthen undistributed assets, it did not order prejudgment interest. The court only ordered prejudgment interest on the promissory note, which was not an undistributed asset of the trust and was created by contract.

The trial court, however, did abuse its discretion when imposing prejudgment interest from the date the Jorys paid Carthen $50,000 in September 2013 forward. Jory and Carthen did not enter into the share and share alike agreement until January 27, 2014 and again agreed in June 2014. It is unclear when Jory was to perform under the contract and thus when he breached it, but it was not in September 2013, before the parties ever entered into the share and share alike agreement. (See North Oakland Medical Clinic v. Rogers, supra, 65 Cal.App.4th at p. 828 [prejudgment interest to be awarded from the first day there is both a breach and a liquidated claim].) We will remand for the trial court to determine the proper date prejudgment interest began to accrue.

DISPOSITION

The judgment is reversed. Upon remand, the trial court shall modify the judgment consistent with this opinion. The Jorys are awarded costs on appeal. (Cal. Rule of Court, rule 8.278(a)(5).)

/s/

Robie, J.

We concur:

/s/

Hull, Acting P. J.

/s/

Hoch, J.