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Wayne Robert Schelb et al v. Betty Louise Stein

December 17, 2010

WAYNE ROBERT SCHELB ET AL., PLAINTIFFS, CROSS-DEFENDANTS AND APPELLANTS,
v.
BETTY LOUISE STEIN, DEFENDANT, CROSS-COMPLAINANT AND APPELLANT; INTERBAY FUNDING, LLC, CROSS-DEFENDANT AND RESPONDENT.



(Los Angeles County Super. Ct. No. PC039929) APPEAL from a judgment of the Superior Court of Los Angeles County, John P. Farrell, Judge. Affirmed.

The opinion of the court was delivered by: Epstein, P. J.

CERTIFIED FOR PARTIAL PUBLICATION*

In the published portion of this decision, we address the primary issue in this appeal--whether a trust deed securing a promissory note issued in connection with a family law judgment may expire under provisions of the Marketable Record Title Act (MRTA, Civ. Code, § 880.020 et seq.) despite Family Code section 291, which provides that a family law judgment is enforceable until paid in full. Appellant Betty Louise Stein argues the trial court erred in ruling that she could not enforce the trust deed under the MRTA after more than 10 years had elapsed since the note secured by the trust deed had matured. She contends that the purpose of the Family Code is thwarted by allowing the security for the family law judgment to expire under the MRTA.

We conclude that the trial court properly harmonized the Family Code provision and the MRTA by holding that the debt evidenced by the note and secured by the deed of trust is still owed even though the note had expired under the MRTA and the deed of trust was no longer enforceable. We also reject respondent Wayne Schelb's argument that the family law judgment should not be enforced under the terms of Family Code section 4, subdivision (h).

In the nonpublished portion of this opinion, we conclude that Mr. Schelb's argument that the trial court erred by failing to address his claim that a modification of the family law judgment constituted an accord and satisfaction is unsupported by the evidence and is contrary to the terms of the modification. The trial court did not abuse its discretion in determining there was no prevailing party to warrant an award of attorney fees.

FACTUAL AND PROCEDURAL SUMMARY

The parties entered into a factual stipulation for trial from which we take portions of this summary. Betty Stein*fn1 and Wayne Schelb, a married couple, were divorced in 1988. The family court judgment of dissolution gave Mr. Schelb the fee interest in two parcels of real property (the Maclay and Glenoaks properties). Ms. Stein relinquished her fee interest in these properties. To equalize the division of community property, Mr. Schelb was ordered to give Ms. Stein a note for $335,000, secured by deeds of trust on the Maclay and Glenoaks properties. Mr. Schelb was to make monthly payments of $5,000 from February 1, 1989 to February 1, 1994. At that point the balance was due with interest.

In 1991, Ms. Stein and Mr. Schelb modified the deeds of trust and recorded the modification. The trial court ruled that this modification did not change either the maturity date of the note or the interest rate. As part of the modification, Mr. Schelb paid a lump sum of $166,000 to Ms. Stein. In return, Ms. Stein released the deed of trust on the Glenoaks parcel and agreed to interest only payments of $667 a month on the remaining principal balance of $73,600.

Pursuant to the modification, Mr. Schelb made the required payments from 1991 to 1993. Between 1997 and 1999, he made only quarterly payments. The amount and purpose of those payments were disputed. He made no payments to Ms. Stein after 1999.

Mr. Schelb and his current wife, Janice Bartholomew Schelb, sued Ms. Stein in December 2006. A first amended complaint was filed in February 2007. They alleged that their trust (the Wayne Schelb and Janice Bartholomew Trust) owned the fee interest in the Maclay property; in 2006 they decided to refinance the Maclay property to satisfy various debts, some of which were secured by the Maclay property; negotiations with Ms. Stein about the family law judgment and the secured note to be paid by Mr. Schelb were unsuccessful; and the Schelbs were unable to close the refinance of the property because of Ms. Stein's second trust deed. They alleged causes of action for cancellation of instruments, quiet title, injunction, declaratory judgment, intentional and negligent misrepresentation, and slander of title. Ms. Stein responded with a cross-complaint against Mr. Schelb and the title company for foreclosure of the deed of trust on the Maclay property. The cross-complaint was amended to name Interbay Funding, the company through which the Schelbs were refinancing, as a cross-defendant.

Motions for summary judgment by the Schelbs and Interbay were denied. While the litigation was pending, Interbay funded the Schelbs' refinance of the Maclay property. Encumbrances on the property other than that held by Ms. Stein were paid off. Interbay was aware of the promissory note and deed of trust in favor of Ms. Stein when it made the loan to the Schelbs.

The trial court issued a statement of decision following a court trial. It concluded that the MRTA governs the deed and note, and that they had expired under its terms. But it also held that the family law judgment remains in full force and effect under Family Code section 291 (section 291). The Schelbs were given judgment against Ms. Stein on their first and second causes of action for cancellation of instrument and to quiet title. On their fourth cause of action for declaratory relief, the trial court declared that Ms. Stein had no enforceable rights under the deed or note on the Maclay property, but that Mr. Schelb remains liable for the unpaid amount of the family court judgment under section 291, plus simple interest of 10 percent per annum on the unpaid principal (reduced by $5,500 for quarterly payments made by Mr. Schelb prior to 1999). Judgment against Ms. Stein and in favor of Mr. Schelb and Interbay was entered on her cross-complaint. The court ruled that none of the parties was entitled to fees under a fee clause in the note. This timely appeal by Ms. Stein followed entry of the judgment. Mr. Schelb filed a cross-appeal from the judgment.

DISCUSSION

I

We first dispose of a preliminary issue. Mr. Schelb argues the trial court erred in not addressing his argument that the 1991 modification constituted an accord and satisfaction which replaced the original note. Ms. Stein argues the issue was not preserved for appeal. There is an argument in Mr. Schelb's trial brief that the marital judgment had been satisfied. We turn to the merits of the argument.

The modification expressly states that the original note "is hereby modified in the following particulars only." (Italics added.) The modification repeated the maturity date of February 1, 1994; stated that the rate of interest was 10 percent per annum (the trial court found that to be the rate under the original note); and that the note was to "be payable interest only, or more, monthly with first payment due July 1, 1991 and to continue monthly thereafter to maturity. Interest to accrue on the unpaid principal balance of note as of June 1, 1991." There is nothing in the modification to indicate that the original judgment ...


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