Marriage of Shannahan CA4/1 ( 2014 )

Filed 6/30/14 Marriage of Shannahan CA4/1
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
In re the Marriage of SARACIA and D062062
WILLIAM P. SHANNAHAN.
SARACIA SHANNAHAN,
Petitioner,
v. (Super. Ct. No. D483710)
WILLIAM P. SHANNAHAN,
Respondent.
BROOKMEAD PARTNERS, L.P., (Super. Ct. No. 37-2009-00095945-
Plaintiff and Appellant, CU-MC-CTL)
v.
SARACIA SHANNAHAN,
Defendant and Respondent;
WILLIAM P. SHANNAHAN,
Defendant and Appellant.
APPEALS from a judgment of the Superior Court of San Diego County, Lorna
Alksne, Judge. Affirmed.
Smylie & Van Dusen and Scott A. Smylie for Plaintiff and Appellant Brookmead
Partners L.P.
Higgs, Fletcher & Mack, John Morris; RSR Law Group and James J. Reynolds for
Defendant and Appellant William P. Shannahan.
Law Office of Beatrice L. Snider, Win Heiskala; Stephen Temko; Janis Law
Group, Dean T. Janis and Deval R. Zaveri for Defendant and Respondent Saracia
Shannahan.
This case pertains to the disposition of homeowner insurance proceeds paid on the
destruction of Saracia Shannahan and William P. Shannahan's1 community property
residence in La Jolla. Brookmead Partners, LP (Brookmead Partners), an entity William
created, appeals a judgment denying its request for a judicial declaration that it is entitled
to the proceeds under a resulting trust theory even though it was not a named insured
under the policy, based on William's testimony that two premium payments he made
from his personal checking account were intended to be a loan to Brookmead Partners.
William joins in Brookmead Partners' briefing. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND2
Saracia and William married in 1983 and separated in 2004. William was a
practicing attorney at the time of the marriage and a tax law specialist.
1 We use the parties' first names as is customary in family law proceedings.
2 We have addressed the background facts of this dissolution action in several
previous appeals. (In re Marriage of Shannahan (Dec. 1, 2010, D053701, D055292)
[nonpub. opn.]; In re Marriage of Shannahan (July 18, 2011, D057453) [nonpub. opn.];
In re Marriage of Shannahan (Nov. 10, 2011, D058220) [nonpub. opn.].) Here, we recite
only the facts and procedure pertinent to the issue on appeal.
2
Between late 2006 and early 2007 the parties had a multiple day trial before retired
Judge Thomas Ashworth III at Judicial Arbitration and Mediation Services (JAMS),
culminating in August 2008 in a judgment on reserved issues. In relevant part, Judge
Ashworth ruled that the family residence (the Brookmead property) was community
property and William breached his fiduciary duty to Saracia, in violation of Family Code
sections 721 and 1100, by transferring it to other entities (including Brookmead Partners)
without her knowledge, consent, or adequate compensation to the community. The
judgment states "this community property interest overcomes the claim of title or other
title interests claimed by [William] to be in other entities, joined or otherwise." Judge
Ashworth determined that William "is the one common denominator and alter ego in all
of these other entities," but his "conduct in these various transfers is neither fraudulent
nor illegal." Based on the parties' stipulation that the land and residence were worth $4.1
million, and Judge Ashworth's finding the property carried no recognizable debt, he
awarded Saracia $2,050,000 for her one-half interest.3
In December 2007 after trial but before entry of judgment, the Brookmead
property was destroyed by fire. The structure and contents were insured under a policy
3 In a statement of decision preceding the judgment, Judge Ashworth noted: "This
is perhaps the most convoluted and contentious case the Court has encountered in 45
years of experience. Most of the assets acquired during marriage are currently owned by
trusts, partnerships or corporations and some of these entities have, or had, connections in
the Cayman Islands, Hong Kong or Nevada. . . . It is essentially [William's] position that
there is no community property. This is based on a combination of [William's] claims of
an oral transmutation, tracing from his separate property and the fact that most of the
assets are now owned all, or in part, by separate legal entities which have not been joined
to the action."
3
issued by Interinsurance Exchange of the Automobile Club (AAA) to Saracia and
William as the named insureds. In April 2008 AAA sent William a check for
$957,525.23, made payable to him and Saracia. He deposited the check into a new
account he opened, titled "William P. Shannahan, Brookmead Fire," but it did not clear.
Saracia applied ex parte for an order requiring that any replacement check from
AAA be deposited in a trust account with the law firm representing William, Higgs,
Fletcher & Mack (Higgs Fletcher). Judge Ashworth granted the order, and AAA issued a
replacement check to Higgs Fletcher. Judge Ashworth retained jurisdiction over
disposition of the proceeds.
In August 2009 Brookmead Partners filed a complaint for declaratory relief
against AAA, Saracia, William, and Higgs Fletcher. It was consolidated with the family
law case. The operative second amended complaint (SAC) sought a judicial declaration
that Brookmead Partners was the owner of the insurable interest in the Brookmead
property and "the rightful and equitable insured" under the AAA policy; it was entitled to
the $957,525.23 in insurance proceeds; William and Saracia were not the owners of the
insurable interest in the property and had no claim to the proceeds; and Saracia's
judgment for her one-half interest in the property terminated any interest she may have
had in the proceeds. William filed a disclaimer of any interest in the proceeds.
Judge Lorna Alksne handled the September 2011 trial. At its commencement,
Brookmead Partners advised the court "that we're not necessarily trying to prove that
William and Saracia are not owners of the insurable interest" in the Brookmead property.
The court found there were two principal controverted issues, whether Brookmead
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Partners had an insurable interest in the property, and if so, whether it was entitled to the
insurance proceeds.
The evidence showed the Brookmead property was purchased for $730,000 in
November 1987, and William unilaterally decided title would be held by Northwest
Financial, Inc. (Northwest Financial), a Nevada corporation he created "primarily for tax
reasons." In December 1987 William caused Northwest Financial to sell the property for
$750,000 to the Shannahan Marital Trust (Marital Trust) under an installment land
contract.
In January 2003 William created Brookmead Partners (initially, as a California
general partnership), between William P. Shannahan, APLC, and the Marital Trust. At
the same time, William signed a fourth amendment to the land contract, both as cotrustee
of the Marital Trust and as the president of Northwest Financial, increasing the sale price
of the Brookmead property to $1.2 million to reflect improvements made to the property.
William then undertook a series of transactions that culminated in June 2003 with
the extinguishment of the vendor's (Northwest Financial) and the vendee's (Marital Trust)
interests in the land contract and interests in the Brookmead property being transferred to
Brookmead Partners. William, however, kept title in Northwest Financial until May
2008, when, without notice to Saracia, he caused title to be conveyed to Brookmead
Partners (converted in 2007 to a Nevada limited partnership).
According to the limited partnership agreement, Brookmead Partners' general
partner was Virginia Way, L.P., a Nevada limited partnership (18.25 percent interest).
The limited partners were Saracia (12.25 percent interest); William P. Shannahan, APLC
5
(1.0 percent interest); Shannahan Investments, Inc., a Nevada corporation (23.5 percent
interest); Northwest Financial Limited, a Nevada limited partnership (21 percent
interest); and BLLJ, a Nevada limited partnership (24 percent interest). William signed
the limited partnership agreement on behalf of all partners, including Saracia, with the
notation, "(By Virginia Way L.P., General Partner, Power of Attorney under 10.1)." He
admitted he never discussed the agreement with her.
In the fall of 2003, AAA issued a homeowners policy on the Brookmead property
to Saracia and William as the named insureds. William signed the application, and the
policy was renewed annually until the fire. For the final policy period, William received
a bill from AAA with a minimum due of $865.46. In November 2008 William paid that
amount by a check titled "Shannahan Corp." In December 2008 William made a
payment of $871.77 to AAA on the same account. He testified, "Shannahan Corp. is just
a name that was put on an account . . . that I opened, I believe, back in early 2002." He
also testified Brookmead Partners had no money, and "I had to lend the money to
Brookmead [Partners] to pay the premium."
Further, William testified that in 2003, acting as cotrustee of the Marital Trust, he
assigned any benefits under the AAA policy to Brookmead Partners. William conceded
there was no written assignment. He also conceded he never applied for insurance in
Brookmead Partners' name, notified AAA he was applying for insurance on behalf of that
entity, or notified AAA the insurance proceeds belonged to Brookmead Partners. He
stated, "I have, in effect, assigned [the benefits] because of my responsibility as the
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manager of the general partner of Brookmead Partners . . . . I had a fiduciary
responsibility that those proceeds belonged to the partnership."
Saracia testified that she first learned of William's business dealings during the
dissolution proceedings. Until then, she was unaware of the installment land contract
between National Financial and the Marital Trust, the existence of Brookmead Partners,
and the series of transactions that resulted in title to the Brookmead property being
conveyed to Brookmead Partners. She had not seen the 2007 limited partnership
agreement of Brookmead Partners, and William never discussed it with her. Further,
William did not have the authority to sign the agreement for her. During the marriage he
once asked for her power of attorney, and she refused. She also testified she did not
assign her right to insurance proceeds to any entity or give William the authority to do so.
Saracia argued that if the insurance proceeds went to Brookmead Partners,
William would get them as the alter ego of the entity. William denied having any
personal interest in the proceeds. Rather, he testified that the parties' two adult children
would benefit if they went to Brookmead Partners because irrevocable trusts he created
for them held interests in various entities that are partners of Brookmead Partners. As the
court noted, however, the copy of the children's trust that he produced did not include
Schedule A, the list of trust assets.
The court took the matter under submission, and in March 2012 it issued a
statement of decision denying Brookmead Partners any declaratory relief. The court
expressly found William's testimony was self-serving and not credible, and Saracia's
testimony was credible.
7
The court determined Brookmead Partners had no insurable interest in the
Brookmead property based on legal title, because it was not conveyed until after the fire,
but it had an "insurable equitable interest" that existed at the time of the fire. The court,
however, found Brookmead Partners lacked standing to contest Saracia and William's
insurable interest in the property, because in California only an insurer may raise the
issue of insurable interest, and AAA waived the issue by paying the policy proceeds to
Saracia and William. The lack of standing effectively precluded Brookmead Partners
from obtaining the requested declaratory relief.
Alternatively, the court determined that even if Brookmead Partners had standing,
it was not entitled to the insurance proceeds because it was not insured under the AAA
policy. The court explained: "There is no documentary evidence to support [Brookmead
Partners'] contention that William and Saracia purchased the insurance in their capacities
as co-trustees of the Marital Trust. There is no persuasive evidence to support
[Brookmead Partners'] factual or legal contention that William and Saracia were the
named insureds on the policy as a matter of convenience or as resulting trustees for
Northwest Financial . . . or Brookmead [Partners]. There is no persuasive evidence . . . to
prove that the 2007 insurance policy was acquired in the name of the partnership or that it
was purchased with partnership funds paid on behalf of Brookmead [Partners]. To the
contrary, William testified that he never applied for insurance in the name of either the
Marital Trust or Brookmead [Partners] nor is there any document formally assigning the
insurance proceeds to any entity." (Italics added.)
8
The court specifically rejected William's testimony that his payment of policy
premiums from his personal account was intended to be a loan to Brookmead Partners.
The court also noted there was no corroborating evidence.
Further, the court found that Saracia and William had an insurable interest in the
Brookmead property, based on law of the case classifying it as community property. The
court determined Saracia was not entitled to the insurance proceeds because she was
awarded a money judgment against William for one-half its stipulated value. Although
William disavowed any interest, the court awarded him the proceeds, explaining that
"[t]o not award the money to someone would be an illogical and absurd ending to this
heavily litigated, time-consuming and expensive three year old issue."
Judgment was entered on April 27, 2012. It specified that the insurance proceeds
were to remain in the client trust fund "pending disbursement pursuant to court order or
judgment."
DISCUSSION
I
Lack of Standing to Raise Issue of Insurable Interest
Brookmead Partners challenges the court's rejection of its argument that it was an
insured under the AAA policy under a resulting trust theory.4 Brookmead Partners,
4 William's appeal is a joinder in Brookmead Partners' position. Given our holding
as to Brookmead Partners, we decline to address Saracia's contention that William lacks
standing to appeal because he is not aggrieved by a judgment that awards him the
insurance proceeds.
9
however, ignores the court's first ground for denying declaratory relief, that it lacked
standing to "raise the question of insurable interest or lack thereof."
In its statement of decision, the court cited 2 Witkin, Summary of California Law
(10th ed. 2005) Insurance, section 75, page 119, which states: "The insurer is the only
party that can raise the question of lack of insurable interest. [Citation.] If the insurer
waives the question of insurable interest and pays the money to the named beneficiary or
into court, other interested parties cannot claim the proceeds on that ground." (Ibid.,
citing In re Marriage of Bratton (1994) 28 Cal. App. 4th 791, 794 [husband lacked
standing to question whether ex-wife had insurable interest justifying her retention of
policy on his life] & Jenkins v. Hill (1939) 35 Cal. App. 2d 521, 524.) The court reasoned
that AAA's payment of insurance proceeds to Saracia and William constituted its waiver
of the insurable interest question, and since Brookmead Partners lacked standing to
pursue the issue it could not collect on the policy.
"On appeal, a judgment of the trial court is presumed to be correct. [Citation.]
Accordingly, if a judgment is correct on any theory, the appellate court will affirm it
regardless of the trial court's reasoning." (Cahill v. San Diego Gas & Electric Co. (2011)
194 Cal. App. 4th 939, 956.) " 'Appellate briefs must provide argument and legal authority
for the positions taken. "When an appellant fails to raise a point, or asserts it but fails to
support it with reasoned argument and citations to authority, we treat the point as
waived." ' [Citation.] 'We are not bound to develop appellants' argument for them.' "
(Ibid., italics added.) We deem the standing issue waived or forfeited, and affirm the
judgment on that ground.
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II
Resulting Trust Theory
Moreover, even without waiver, we affirm the judgment because Brookmead
Partners has not shown the court erred by rejecting its resulting trust theory. " 'A
resulting trust arises by operation of law from a transfer of property under circumstances
showing that the transferee was not intended to take the beneficial interest. [Citations.]
Such a resulting trust carries out and enforces the inferred intent of the parties.
[Citations.]' [Citation.] 'It has been termed an "intention-enforcing" trust, to distinguish
it from the other type of implied trust, the constructive or "fraud-rectifying" trust. The
resulting trust carries out the inferred intent of the parties; the constructive trust defeats or
prevents the wrongful act of one of them.' " (Fidelity National Title Insurance Co. v.
Schroeder (2009) 179 Cal. App. 4th 834, 847-848.) "[T]he relationship between resulting
trustee and beneficiary arises where one, in good faith, acquires title to property
belonging to another." (In re Estate of Yool (2007) 151 Cal. App. 4th 867, 874.)
"Clear and convincing proof is required to support a declaration that a resulting
trust exists." (Johnson v. Johnson (1987) 192 Cal. App. 3d 551, 556.) " ' "It is
fundamental that where a judgment is attacked on the ground that it is not supported, the
power of the appellate court ends when it shall once have determined that there is
substantial evidence which will support the conclusions of the trial court." [Citations.]
And that rule is applicable where the action is one to enforce a resulting trust. Whether
the evidence to prove the existence of the trust is clear, satisfactory and convincing "is
primarily a question for the trial court to determine, and if there is substantial evidence to
11
support its conclusion, the determination is not open to review on appeal." ' " (Islas v.
Islas (1963) 213 Cal. App. 2d 412, 416.)5
Brookmead Partners relies on language from the AAA policy that "[w]e will pay
you unless another payee is named in the policy or is legally entitled to receive payment."
(Italics added.) Brookmead Partners asserts that although it was not a named insured, it
is legally entitled to the insurance proceeds under a resulting trust theory because
William's payment of two policy premiums from his personal account was a loan.6 The
only evidence on the supposed loan, however, was William's testimony, and the
statement of decision explains, "The court does not find William's testimony at trial that
he made the payments as a loan to Brookmead [Partners] credible."
Brookmead Partners gives short shrift to the court's credibility finding,
erroneously calling it "gratuitous." In determining whether a resulting trust exists, " ' "the
credibility and weight of the evidence are exclusively for the trial court." ' " (Islas v.
Islas, supra, 213 Cal.App.2d at p. 416.) Because the court had the opportunity to observe
5 Brookmead Partners incorrectly asserts the resulting trust issue is a legal issue
subject to de novo review based on undisputed evidence. Given the court's rejection of
William's testimony, it is a factual matter subject to a substantial evidence standard of
review. (Los Defensores, Inc. v. Gomez (2014) 223 Cal. App. 4th 377, 391.)
6 Brookmead Partners asserts it raises two issues on appeal, whether the trial court
erred by finding it was not entitled to the insurance proceeds because it was not a named
insured under the AAA policy, and whether the court erred by rejecting its resulting trust
theory. The issues, however, are intertwined because Brookmead Partners' only claim to
the proceeds is the resulting trust theory.
12
William's demeanor when he testified, we give "great weight" to its credibility finding.
(In re Price (2011) 51 Cal. 4th 547, 559.)
Brookmead Partners cites Evidence Code section 411 for the proposition that "the
direct evidence of a single witness is sufficient to prove any fact." Evidence Code
section 411 actually states "the direct evidence of one witness who is entitled to full credit
is sufficient for proof of any fact." (Italics added.) "The testimony of one witness, if
believed, is sufficient to prove any fact." (People v. Vega (1995) 33 Cal. App. 4th 706,
711, italics added.) Additionally, Brookmead Partners cites La Jolla Casa de Manana v.
Hopkins (1950) 98 Cal. App. 2d 339, 345, which explains "that uncontradicted and
unimpeached testimony of a witness which is not inherently improbable, cannot be
arbitrarily disregarded and should be accepted as true by the trier of facts where it is not
found that the testimony was false." (Italics added.)
The court obviously found William's testimony inherently improbable. As the
statement of decision explains, the "premium checks themselves do not show any
indication that the premiums were paid on behalf of Brookmead [Partners] or that the
money was a loan from William to Brookmead [Partners]. . . . Nor could William's
personal payment of the premiums be reasonably inferred to be on behalf of Brookmead
[Partners] since he testified that he only had an indirect 3-4% interest in Brookmead
[Partners]. . . . [Brookmead Partners'] apparent failure to fulfill [its] own contractual
obligation to maintain fire insurance creates a counterintuitive conclusion to [its] right to
the insurance proceeds." (Italics added.) Additionally, when AAA sent William the
insurance check made payable to him and Saracia, he did not notify AAA that
13
Brookmead Partners was the insured. Rather, he attempted to cash it by depositing it into
his personal account.
Additionally, the statement of decision explains: "Brookmead [Partners], a legal
entity with no money, and its predecessor entities, were all created primarily for tax
purposes related to the property. . . . The court can think of no legal or logical reason
why Brookmead [Partners], or any of its predecessor entities, would carry a policy for the
loss of personal property."
Further, in assessing William's credibility the court was not required to ignore that
he and Saracia have been embroiled in contentious litigation for years, and he has a
history of breaching his fiduciary duty to her. Indeed, on appeal he candidly asserts he is
"aggrieved" because by awarding the insurance proceeds to him, "the trial court made the
funds susceptible to collection efforts" by Saracia. It was undisputed at trial that William
had not paid Saracia for her one-half interest in the Brookmead property.7
We conclude substantial evidence supports the court's credibility finding, and thus
William's testimony has " ' "no more effect than if it had not been given. It disappears
from the case . . . ." ' " (Wise v. DLA Piper LLP (US) (2013) 220 Cal. App. 4th 1180,
1192.) As his testimony was the only evidence pertaining to the supposed loan to
7 Saracia's attorney advised the court "she has not been paid. She has no prospect of
ever being paid by [William] because he has spent a lifetime making himself judgment-
proof." Brookmead Partners claims the Brookmead property "was transferred in the
manner it was, and ultimately ended up in the name of Brookmead Partners . . . as part of
a sophisticated tax and estate plan agreed to by William and Saracia during their
marriage." The claim is rather astounding given Saracia's testimony she was unaware of
Brookmead Property's existence until the dissolution proceedings began, and the court's
finding that her testimony was credible.
14
Brookmead Partners, we also conclude substantial evidence supports the court's rejection
of the resulting trust theory. We agree Brookmead Partners was not entitled to
declaratory relief.
DISPOSITION
The judgment is affirmed. Saracia is entitled to costs on appeal.
O'ROURKE, J.
WE CONCUR:
BENKE, Acting P. J.
McDONALD, J.
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