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Estate of Richard G. Olsen, Deceased. v. James P. Curry

December 21, 2010

ESTATE OF RICHARD G. OLSEN, DECEASED.
MARY BOARDMAN, PLAINTIFF AND APPELLANT,
v.
JAMES P. CURRY, ADMINISTRATOR OF THE ESTATE OF RICHARD G. OLSEN, DECEASED, DEFENDANT AND RESPONDENT.



(Santa Cruz County Super. Ct. Nos. CV161940 & PR044403)

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

Estate of Olsen

CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

This appeal is taken from an order of dismissal, entered after the trial court sustained defendant's demurrer without leave to amend. As grounds for the demurrer, defendant asserted res judicata and estoppel defenses, based on plaintiff's prior dissolution judgment. We conclude that the prior judgment has no preclusive effect. We therefore reverse the dismissal.

BACKGROUND

The parties to this action are plaintiff Mary Boardman and defendant James P. Curry, administrator of the estate of decedent Richard G. Olsen. Plaintiff and decedent were married in 1988 and divorced in 2005. Decedent died in 2007.

The complaint alleges that defendant improperly rejected plaintiff's creditor's claim, which seeks repayment of the balance owed by decedent on a $2 million separate property loan. Defendant demurred to plaintiff's complaint on res judicata and estoppel grounds, asserting that the 2005 dissolution judgment precludes plaintiff's claims.

Dissolution Proceedings

On May 5, 2005, plaintiff petitioned for dissolution of her marriage to decedent in San Francisco County Superior Court (case number FDI-05-758909). She used the standard form dissolution petition (form FL-100). Concerning marital status, plaintiff stated that the parties had married in March 1988 and separated in July 1996. Plaintiff requested dissolution of the marriage by checking the box in paragraph 6-a. Concerning property, plaintiff made no request for court action. Plaintiff did not mark paragraph 4 (entitled "separate property"); she thus did not seek court confirmation of separate property assets or debts. At paragraph 5, entitled "declaration regarding community and quasi-community assets and debts as currently known," plaintiff placed an X in box 5-a, which states: "There are no such assets or debts subject to disposition by the court in this proceeding." At paragraph 7, plaintiff marked only box 7-g, thereby requesting termination of the court's jurisdiction to award spousal support to decedent; she did not mark box 7-h, determination of property rights.

On May 9, 2005, decedent was served by mail with the petition. Along with the petition, decedent also was served with several financial disclosure documents: a declaration of disclosure (form FL-105), a schedule of assets and debts (form FL-142), and an income and expense declaration (form FL-150).

On May 14, 2005, decedent acknowledged receipt of the above documents (form FL-117). He did not respond to the petition.

On June 22, 2005, plaintiff requested entry of decedent's default (form FL-165). Plaintiff marked the boxes on the form indicating that a property declaration was not attached because there were no support issues, no request for "money, property, costs or attorney fees" and "no issues of division of community property." Plaintiff marked the box for waiving costs.

On August 9, 2005, the court entered a judgment of dissolution (form FL-180). In it, the court ordered the parties' marital status terminated as of November 15, 2005. The box for property division was not marked. The judgment contains this typewritten statement: "There are no assets or liabilities subject to disposition by the court in this proceeding. Spousal support for the Petitioner is terminated by declaration. Spousal support for the Respondent is terminated by default. The court's jurisdiction to award spousal support to either party is terminated."

Probate Proceedings

On December 2, 2007, decedent died intestate.

On February 5, 2008, defendant was appointed special administrator of decedent's estate in Santa Cruz County (case number PR44403). On May 27, 2008, the court entered an order for probate, authorizing independent estate administration with full authority. On June 13, 2008, letters of administration were issued, naming defendant as administrator of decedent's estate.

On April 11, 2008, plaintiff filed a creditor's claim with defendant. Plaintiff based her claim on a $2 million loan to decedent, made in May 2005 from her separate property funds. Decedent made periodic payments on the loan by paying for plaintiff's "various travel expenses, lodgings, and meals." After deducting for those payments, plaintiff claimed a balance due of $1,920,469.69.

By notice dated August 21, 2008, defendant rejected plaintiff's creditor's claim in its entirety.

Civil Proceedings Complaint

On November 14, 2008, plaintiff filed the complaint at issue here in Santa Cruz County Superior Court (case number CV161940). It asserts causes of action for common counts, breach of contract, constructive trust, and reimbursement pursuant to Family Code section 2640. The factual basis for all four causes of action is plaintiff's loan to decedent.

Concerning the loan, the complaint alleges that plaintiff "orally agreed to lend [decedent] $2,000,000 from her sole and separate property to invest in the growth of his business." The complaint alleges that "this was a loan, not a gift." The complaint further alleges that plaintiff made "no express written transmutation" that would change the character of her separate property. According to the complaint, the source of the funds was "the sale of [plaintiff's] ranch, . . . acquired by her prior to her marriage with" decedent. Attached to the complaint is a copy of a check from plaintiff to decedent in the amount of $2 million, dated May 16, 2005, along with a statement showing that decedent deposited the check. The memorandum line of the check reads "Ranch."

With regard to repayment of the loan, the complaint alleges that decedent "agreed to repay [plaintiff] over time, which he did, in part, by paying for her various travel expenses, lodgings and meals." Attached to the complaint is a copy of a spreadsheet prepared by plaintiff showing the expenses paid by decedent. According to the complaint, decedent "had repaid [plaintiff] on the original loan in the amount of approximately $79,530.31, leaving $1,920,469.69" still owed at the time of decedent's death.

On the subject of the creditor's claim, the complaint alleges that plaintiff presented it to defendant, who rejected it.

Consolidation

In December 2008, based on the parties' stipulation, the court ordered the civil action (case number CV161940) consolidated with the probate proceedings (case number PR44403).

Demurrer

Defendant demurred to the complaint, asserting plaintiff's failure to state facts sufficient to constitute a cause of action. The demurrer addresses each of the four causes of action in turn. The demurrer attacks the first cause of action, for common counts, on the ground that "it is a generalized form of pleading" that necessarily falls with the second cause of action, for breach of contract. The demurrer attacks each of the remaining causes of action on the ground that "it shows on its face and upon judicially noticeable matters that the action is barred by res judicata and estoppel principles."

Defendant supported the demurrer with a memorandum of points and authorities, in which he argued that plaintiff could have and should have raised the issue of the loan in the dissolution proceedings and that her failure to do so bars her later claim for repayment. In addition to his memorandum, defendant also submitted a request for judicial notice of six documents from the dissolution action: (1) the May 2005 dissolution petition, (2) proof of service of the summons, (3) decedent's acknowledgement of receipt, (4) plaintiff's June 2005 request for default, (5) the San Francisco County Family Law Judgment Checklist filed with the default request, and (6) the August 2005 dissolution judgment.

Plaintiff opposed the demurrer, supported by her own request for judicial notice and legal memorandum. The subject of plaintiff's request for judicial notice was the grant deed for property that plaintiff identifies as the ranch, located at One Thayer Road, Santa Cruz. The deed recites that plaintiff "acquired title as an unmarried woman" and it conveys title from plaintiff and decedent to plaintiff alone "as her sole and separate property . . . ." The deed is dated April 28, 2005; it was recorded May 13, 2005. In her legal memorandum, plaintiff argued that her claim for breach of the loan agreement was not precluded. She offered two reasons: first, "there was no breach before the dissolution," and second, "because neither party placed the issue of the character of the separate property before the Family Court, the claim could not have been litigated before such time."

Defendant replied to plaintiff's opposition, arguing that the alleged breach arose out of a marital liability arising prior to the dissolution judgment and from the same nucleus of facts as those adjudicated, that the family court did not lack jurisdiction to adjudicate the alleged separate property loan, and that the loan should have been disclosed but plaintiff failed to comply with the statutory disclosure obligations.

On April 7, 2009, the court conducted a hearing on the matter. The court began by announcing its tentative decision to sustain the demurrer without leave to amend. By way of explanation, the court cited two points: "the mandate" in dissolution proceedings that "all assets and liabilities" be disclosed by the parties and the statutory provision requiring the family court to "characterize and determine all assets and liabilities." (See Fam. Code, §§ 2100, 2623.) The court concluded that the dissolution judgment "is res judicata as to the alleged breach of the loan agreement in this case."

After announcing its tentative decision, the court entertained oral argument from both parties on both points. After hearing argument, the court stated that it would take the matter under submission and render its final decision at a hearing the following week. Plaintiff's counsel requested an opportunity to supplement the briefing, which the court granted. Both parties submitted supplemental briefing.

At the continued hearing on April 16, 2009, after stating that it had reviewed the supplemental briefing from both parties, the court posed further questions to counsel. After hearing their responses, the court explained its analytic process. The starting point of the court's analysis was "the legal proposition . . . that res judicata bars all claims not only that were actually litigated, but that could have been raised in the prior proceeding." The court then looked to statutory provisions providing for family court jurisdiction to characterize and confirm separate debts. (Fam. Code, § 2625.) The court also considered statutory provisions requiring disclosures in dissolution proceedings, noting that plaintiff was required to disclose "her assets, liabilities, and debts, and that she was also required to update that in the event there were any material changes." (Fam. Code, § 2100.) Finally, the court noted that decedent died "with no documentation or any sort of indication that the parties understood that there was a loan between them. Now the estate is left with an inability to adequately defend itself because we don't have [decedent] here to testify when this should have been resolved in the Family Law Court." At the conclusion of the hearing, the court sustained the demurrer without leave to amend.

Orders

On May 12, 2009, the court entered its formal order sustaining the demurrer without leave to amend. The court based its decision on grounds of res judicata and collateral estoppel, finding that the dissolution judgment bars the current complaint. The court cited plaintiff's failure to augment her preliminary declaration of disclosure in the dissolution action after making the loan to decedent. In the court's view, plaintiff's failure to do so had two consequences. First, it "resulted in a lack of fairness and due process" that prejudiced decedent and defendant as his "successor in interest." Second, it prevented the family court "from characterizing the 'liability' . . . and from confirming it" under the governing statutes. The court concluded: "Because these issues could have, and should have, been raised in the dissolution proceedings by Plaintiff, they were necessarily decided by the Judgment of Dissolution."

On August 14, 2009, the court entered an order dismissing plaintiff's complaint.

Appeal

This timely appeal by plaintiff ensued. On appeal, plaintiff argues: (1) res judicata does not bar her complaint, (2) she was not required to make a final disclosure in the dissolution proceeding, (3) the particular causes of action asserted in her complaint are all viable, and (4) the trial court abused its discretion in sustaining the demurrer without leave to amend. Additionally, plaintiff filed a request for judicial notice in this court. The subject of the request is an action filed against her in December 2009, by defendant ...


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