Marriage of Sparks CA1/2 ( 2023 )

Filed 8/15/23 Marriage of Sparks CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
In re the Marriage of KIYOMI
SPARKS and ADAM SPARKS.
KIYOMI SPARKS,
Respondent, A163637
v.
(Contra Costa County
ADAM SPARKS,
Super. Ct. No. D1506010)
Appellant.
Adam Sparks and Kiyomi Sparks agreed in their Marital Settlement
Agreement (MSA) that they would “equally share in any recovery in
connection with” third party actions against them pending at the time of the
dissolution of their marriage. Several months later, those actions settled for
$15.8 million, after which Kiyomi1 requested orders to enforce the MSA and
award her a share of the settlement proceeds, plus attorney fees. In a
comprehensive, 12-page statement of decision, the trial court granted
1 As is customary in family law cases, we refer to the parties by their
first names for purposes of clarity.
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Kiyomi’s requests, awarding her $2.05 million from the settlement proceeds
and attorney fees, and entered judgment. Adam appeals, contending the trial
court misinterpreted the settlement agreement in the third party actions.
We reject his contentions, and we affirm.
BACKGROUND
The Parties and their Properties
Adam and Kiyomi were married on October 10, 1986. They separated
on July 2, 2015. And on December 21 of that year, Kiyomi petitioned to
dissolve their marriage.
During their 29-year marriage, Adam and Kiyomi owned and operated
Pacific Bay Investments, Inc. (PBI), a corporation that provided services in
real property management and asset development. In January 2000, they
created the Adam Sparks Family Revocable Trust (“Sparks Family Trust”),
with themselves as co-trustees. Title to PBI was held by the trust.
Also during their marriage, Adam and Kiyomi acquired a large number
of real estate holdings. Some of these properties were owned by the parties
under various entities (limited liability companies, limited partnerships,
corporations, or trusts), while other properties were owned in partnership
with third party individuals or entities. PBI oversaw approximately 35 to 40
property interests at any given time.
In 2000, the Sparks Family Trust and Giampaolo Boschetti entered
into a partnership that primarily consisted of jointly purchasing real
property. Ownership of these properties was divided between the Sparks (or
their trust or entities), and Boschetti (or his entities), so that each owned a
share of the properties.
The Boschetti Actions
Disputes with Boschetti concerning certain properties arose, resulting
2
in Boschetti filing three lawsuits: first in 2009 in San Francisco Superior
Court; next in 2018 in San Francisco Superior Court; and after that, in 2019
in a Hawaii state court (collectively, the “Boschetti actions” or “Boschetti
litigation”). The record indicates Boschetti sued Adam individually, Adam
and Kiyomi as co-trustees of the Sparks Family Trust, the Sparks Family
Trust, PBI, and other entities owned by the parties; Kiyomi was not sued in
her individual capacity. It also appears Boschetti asserted a number of
claims related to the management of certain properties, including violation of
the Business and Professions Code and breach of the implied covenant of
good faith and fair dealing. He also sought declaratory relief, an injunction,
an accounting, and the production of business records.
Adam and Kiyomi agreed to be jointly represented in the Boschetti
actions by Jeffrey Makoff of Valle Makoff LLP.
At some point, Adam, individually and on behalf of the Sparks Family
Trust, and PBI filed a cross-complaint against Boschetti. The operative
fourth-amended cross-complaint alleges causes of action for fraud,
conversion, breach of implied covenant of good faith and fair dealing, breach
of fiduciary duty, breach of contract, accounting, seizure of corporate
opportunity, quantum meruit, dissolution of partnership, and declaratory
relief (collectively, “counterclaims”).
The MSA and the Judgment of Dissolution
In April 2019, while the Boschetti actions were pending, Adam and
Kiyomi entered into the MSA.
Under Article 4 of the MSA, the parties agreed to divide 39 properties
in which they both had an interest.2 Sixteen of the properties were identified
2 The MSA lists the properties with associated numbers 1 through 38.
Two related properties (Meadow Creek and Woodlake Village Shopping
3
as “fractionally” owned, meaning that the properties were owned in
partnership with at least one other third party. The MSA noted that the
market values of those properties were discounted by 20 percent due to them
being fractionally owned.3 Of those fractionally owned properties subject to
the 20 percent discount, 11 were involved in the Boschetti actions
(collectively, the “subject properties”). Applying the 20-percent discount to
the subject properties resulted in their net worth totaling $11.7 million.
Under paragraph (d) of Article 4, the parties agreed that Adam would
retain 34 of those properties as his sole and separate property, 11 of which
were the subject properties. The total net worth of the properties awarded to
Adam was over $28.9 million.
Under paragraph (e) of Article 4, Kiyomi retained the remaining five
properties, with a total net worth of over $32.7 million.
Article 6 provided that Kiyomi and Adam would own the business
interests associated with the properties with which they were awarded under
Article 4.
The valuations of the properties in the MSA were based on Adam’s own
Centers) are identified as numbers 36a and 36b, respectively. Throughout
the proceedings, these properties sometimes were referred to as a single
property, thus resulting in a total of 38 properties. Other times, they were
referred to as two separate properties, thus resulting in a total of 39
properties. In addition, Exhibit 1 to the MSA lists the properties as
numbered 1 through 37 because it mistakenly omits a reference number
between 31 and 32 for the College Park Shopping Center. But in the body of
the MSA this property is correctly labeled number 32, and the properties
listed afterwards are correctly numbered 33 through 38.
3 As would later be explained at trial, the reasoning behind the
discounted value is that property that is only partially owned is less
attractive to a purchaser and harder to sell because the purchaser would
essentially be agreeing to buy property, he or she would not be able to
unilaterally sell or alter.
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estimations; the parties did not obtain an independent appraisal.
As significant here, Article 15 provides: “The parties acknowledge and
agree they are both defendants in an active lawsuit filed by a Giampaolo
Boschetti in 2009 in San Francisco Superior Court . . . . The parties further
acknowledge and agree that since commencement of the action, the parties
have been represented by Jeffrey Makoff, Esq. and have jointly shared in the
defense of the action. The parties further agree to maintain the status quo by
continuing to jointly defend against the lawsuit equally dividing any costs.
The parties agree that each party is jointly and severally liable for any and
all liability found by the Court and equally share in any recovery in
connection with [the Boschetti actions].”
Article 41 states: “The parties hereby agree that in any subsequent
proceeding in this action for marital dissolution, extrinsic evidence shall not
be admissible to prove the parties’ intentions concerning ambiguous language
in this Agreement.”
Finally, Articles 37 and 39 provide that the prevailing party in any
action for breach of the MSA would be entitled to an award of attorney fees.
The MSA was incorporated into a stipulated judgment of dissolution,
which judgment was entered on June 25, 2019.
The Settlement of the Boschetti Actions
On January 15, 2020, Adam, Kiyomi, and Boschetti entered into the
“Settlement Agreement and Mutual General Release” (“BSA”). The BSA
identified January 15, 2020 as the date it took effect, as well “the execution
date.” The final paragraph of BSA states that “the parties have caused this
Agreement to be executed as of the date and year first written above” and
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follows with the parties’ signatures.4
Paragraph 2 of the BSA provides in pertinent part: “Release Except
for Rights and Obligations Hereunder. . . . for and in consideration of
purchase and sale of the interests in the Properties provided herein, and for
the payments set forth herein, and in exchange and consideration for the
covenants contained herein, and for other good and valuable
consideration . . . , each of the Parties . . . hereby release[] and forever
discharge[] each other Party . . . from any and all claims . . . and causes of
action . . . of every nature, character, and description . . . . including but not
limited to . . . all claims alleged in the Actions.” “Actions” referred to the
three Boschetti actions. And “Properties” was defined to include the subject
properties.
Paragraph 5 provides: “Purchase of All Interests by Boschetti and
Sale Of All Interests To Him. Boschetti agrees to buy, and Sparks . . .
agree to sell, Sparks’[s] . . . . entire right, title and interest in the
Properties . . . to Boschetti so that Boschetti . . . . shall be 100% owner in fee
of each of the Properties . . . . , for the net prices to be paid set forth in the
attached Exhibit A. The total aggregate price for all of Selling Parties’
interests in the Properties is . . . $15,800,000.” Exhibit A to the BSA lists and
sets forth the prices of each property to be purchased.
Post-Judgment Requests for Orders
On June 19, 2020, Adam filed a request for orders (RFO) to enforce
Articles 4 and 15 the MSA, arguing that Kiyomi failed to transfer to him title
4 At trial, Kiyomi did not recall exactly when she signed the BSA,
though she believed she did so between January 15 and January 20. Adam
recalled signing the BSA around the same time that he sent her a letter on
January 14 demanding she sign a deed of trust regarding certain property.
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of the properties awarded to him under the MSA and refused to pay her share
of attorney Makoff’s fees incurred in the Boschetti actions (then over
$100,000). Adam also sought attorney fees for bringing the RFO.
Kiyomi filed her responsive declaration, in which she argued she was
entitled under Article 15 of the MSA to receive, but had not received, her
share of the “recovery” from the settlement proceeds in the Boschetti actions.
She also disputed Adam’s fee request on the grounds that their joint attorney
excluded her from communications regarding the settlement. Kiyomi stated,
“I am willing to pay Mr. Makoff’s fees and costs when I receive my entitled
share of the Boschetti Matter recovery.” Adam filed a reply.
On July 9, Kiyomi filed her own RFO seeking to enforce Article 15 of
the MSA, specifically arguing she was entitled to half of the $15.8 million
settlement sum in the Boschetti actions, or $7.9 million. Kiyomi additionally
sought attorney fees pursuant to Article 37 of the MSA.
Pre-Trial Proceedings
On July 23, the trial court held a hearing on the RFOs, during which
Adam’s attorney argued that Kiyomi “has come up with this new argument
trying to bring in extrinsic evidence of the fee agreement, and all we’re
seeking today is enforcement of the Article 15 of our MSA . . . . The execution
and enforcement of the civil case is not before the court. It’s not in the court’s
jurisdiction . . . .” Counsel argued there was no need for an evidentiary
hearing on the RFOs. The court consolidated the parties’ RFOs, ordered the
parties to attend mediation, and set the RFOs for trial on October 15 and 16
in the event the issues were not resolved at mediation.
Adam sought “reconsideration” of the order setting trial dates, again
arguing “[t]here is no need for an evidentiary hearing” with respect to
Kiyomi’s RFO. Adam cited Article 41 of the MSA prohibiting the use of
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extrinsic evidence to explain any ambiguity in the MSA. He also argued, “the
Boschetti agreement is not before the Court in this family law matter” and
“all that is at issue is the MSA itself.” Kiyomi opposed the request.
On September 21, Adam filed a “motion in limine to exclude extrinsic
evidence offered to prove the meaning of Article 15 of the MSA . . . .” Adam
based his motion mainly on Article 41 of the MSA.
Kiyomi opposed the motion, arguing “[t]here are clearly competing
interpretations of the MSA as it relates to ‘recovery’ in the Boschetti Matter,
as [she] has one interpretation such that she is entitled to half of the $15M
recovery, and . . . Adam is claiming that there should be no recovery. As the
language used is fairly susceptible to two interpretations, extrinsic evidence
and parol evidence must be used to aid the Court.” Kiyomi specified that
extrinsic evidence regarding the “substance and outcome” and “settlement of
the Boschetti Matter” should be considered.
In early December, the parties filed their trial briefs. Adam intended
to call one expert witness: an attorney who had been retained in the
Boschetti actions “to review and analyze documents to summarize the
voluminous pleadings filed in the [actions],” and who would “offer testimony
on the [BSA].”
Kiyomi’s witness list included herself, Adam, experts, and other
witnesses, including Marie Ebersbacher, C.P.A., the parties’ financial expert
in the Boschetti actions who would testify as to the value of the parties’
counterclaims.
Adam filed another motion in limine to exclude, primarily on relevance
grounds, the testimony of Kiyomi’s witnesses. Kiyomi opposed the motion,
and Adam replied.
On April 8, 2021, after holding a hearing, the court granted Adam’s
8
motion in limine to exclude extrinsic evidence to interpret the language of
Article 15 of the MSA. However, it permitted the parties to introduce
“evidence related to whether there was ‘any recovery’ in connection with the
settlement of the Boschetti civil cases.”
The Trial
The court held a bench trial over four days in May 2021.
During trial, Kiyomi asserted various theories as to her “recovery” from
the settlement of the Boschetti actions within the meaning of Article 15 of the
MSA. Her principal theory was that she was entitled to half of the entirety of
the $15.8 million settlement sum, or $7.9 million. Kiyomi also raised
alternative theories, one of which was that the “recovery” was the
“differential between the price of the properties in the MSA [$11.7 million]
and the price of the properties sold to Adam in the settlement agreement
[$15.8 million]”—or $4.1 million. Under this theory, she was entitled to one-
half of this amount, or $2.05 million.
In contrast, Adam’s theory was that the BSA provided for no “recovery”
because the properties that were sold to Boschetti under the BSA were his
sole and separate property and, as such, he had sole control and ownership of
it, as well as any proceeds derived from such ownership.
Witnesses who testified included Kiyomi, accountant Marie
Ebersbacher, and Adam. The court also received documentary evidence. The
evidence at trial showed the following.
After proceeding for 11 years, the Boschetti actions were set to go to
trial in January 2020. Two months before that, Adam and Boschetti began
settlement discussions.
On December 6, 2019, Adam emailed Makoff, copying Kiyomi,
discussing the parties’ counterclaims and a framework for a global
9
settlement. Adam wrote, “The strength of our counterclaim[s] would
determine our willingness to settle.” He stated that although he wished to
further discuss the “strength” of the counterclaims with Makoff, “[he]
th[ought] they’re reasonable and [they] should proceed with them.” Adam
then stated, “I would fold my claims into the property division. For example,
if my claim if [sic] for a total of $6MM, I would accept a property trade
whereby I get $3MM more in equity than what I had just proposed.”
When asked to explain this email, Adam testified that “it was
reasonable to proceed in that way as if [the counterclaims] were fair. It was a
negotiating posture.” Adam further testified that Makoff replied to his email,
stating, “ ‘We should signal that we’re confident of those claims.’ ” “In other
words,” Adam said, “regardless of how weak [the counterclaims] are, we
should pretend they are great. That is what [Makoff] was saying.”
Kiyomi and Adam each testified as to their understanding of the
strength of the counterclaims. Kiyomi was advised that they were “strong,”
while Adam maintained they were “very weak.”
Marie Ebersbacher, an accountant whom the parties had retained as an
economic expert in the Boschetti actions, testified she was asked to prepare a
summary of damages for the parties’ counterclaims for purposes of the
settlement conference. By her calculations, the damages for the
counterclaims amounted to $9.8 million, not inclusive of damages for the
parties’ additional claims related to option properties and special services.
A settlement conference took place “right before Christmas” of 2019.
Adam, Makoff, and Boschetti were present; Kiyomi was not. Adam testified
that he and Boschetti ultimately reached a settlement agreement whereby
Boschetti would purchase the subject properties for $15.8 million.
Adam was asked why there was a difference between the purchase
10
price of the properties ($15.8 million) and the values of the properties as
assigned in the MSA ($11.7 million). Adam testified that the $11.7 million
valuation in the MSA reflected the net value of the properties, discounted by
20 percent due to them being under “fractional” ownership at the time. By
virtue of the sale of the properties to Boschetti under the BSA, Adam
testified, Boschetti would become the sole owner of the properties, the
properties thus would no longer be “fractionally” owned, and consequently
the 20 percent discount due to fractional ownership would no longer be
applicable. Without the discount, Adam asserted, the value of the properties
was $16.7 million. Adam further testified that he agreed to give Boschetti a
$1 million discount on the $16.7 million, because Boschetti agreed to
purchase the subject properties at all once—hence, the total purchase price of
$15.8 million.
Despite Adam’s testimony that the purchase price was based on the
properties’ market value, Adam confirmed that no independent appraisal of
the properties had been performed.
Also, it was not entirely clear as to how the $15.8 million settlement
amount originated. As mentioned above, Adam testified that he initially
proposed the $16.7 million price based on what he claimed was the market
value of the properties. Other times, however, he testified that “[t]he
numbers came out to 15.8 million because that is the buyout price Mr.
Boschetti offered me in the settlement agreement, and what I think [Adam’s
attorneys] did is they tried to allocate each property of value that would total
up to 15.8 million.” He said, “The numbers that were associated with each
property were essentially allocated to match up with the $15.8 million
number.”
Kiyomi testified that after the settlement conference, she was not
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included on some of the correspondence between Adam and Makoff regarding
the BSA. She stated she received “many different version[s]” of the BSA, but
that “many times was just a signature page” without the full document or the
exhibits referenced in the document. Kiyomi reminded Makoff to include her
in all correspondence.5
Kiyomi signed the BSA with the expectation that she had an “equal
recovery right” with respect to the settlement proceeds.
On January 16, 2020, the day after the parties executed the BSA,
Makoff circulated a copy of a proposed “Amendment to Marital Settlement
Agreement.” As pertinent here, Paragraph 3 of that document states:
“Neither Adam nor Kiyomi shall claim any adjustment, positive or negative,
to the property division in the MSA as a result of the [Boschetti] Settlement.
Any gain or loss on the sale of any property . . . in the performance of the
Settlement shall accrue to Adam (and not Kiyomi). Adam and Kiyomi agree
that there will be no net recovery or liability to divide between them as a
result of the terms of Settlement of the Boschetti Litigation.” In addition,
Paragraph 5 states, “This Amendment . . . expressly supersedes Article 15 of
the MSA.”
Adam testified he provided input on the language of the proposed
5 At this time Kiyomi also had a family law attorney, Andrew Ross.
According to Kiyomi, Ross was ill and hospitalized for approximately the
month of December 2019. Because of his illness, along with the fact he was
merely her personal family law attorney and not counsel of record in the
Boschetti actions, any involvement he may have had on her behalf in the
settlement of those actions was limited. Kiyomi further testified as to her
belief that Ross did not have a hand in drafting the BSA. Complaining that
Makoff was “supposed to be” her and Adam’s joint counsel in the Boschetti
actions, Kiyomi at some point filed a legal malpractice lawsuit against Makoff
and his firm.
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amendment and later approved the final draft. Kiyomi, on the other hand,
refused to sign it, understanding it would have the effect of divesting her of
her “equal share of recovery” from the BSA settlement proceeds. She
testified, “I think [Adam] believed I have a right; therefore, he wants me to
give up my right. . . . That doesn’t make sense why I would sign such
agreement.”
Following the presentation of the evidence, the parties submitted their
closing arguments in writing.
The Trial Court’s Decision
On July 21, 2021, the court issued a tentative statement of decision
awarding Kiyomi $2.05 million—one-half of $4.1 million, the difference
between the value of the subject properties as assigned under the MSA
($11.7 million) and the settlement sum under the BSA ($15.8 million)—and
attorney fees.
Adam objected to the tentative decision on various substantive
grounds. Kiyomi submitted her response to Adam’s objections, after which
the court issued its final statement of decision adopting the tentative
decision.
The court rejected Kiyomi’s theory that she was entitled to half of the
entirety of the $15.8 million settlement sum, finding that such a result would
run afoul of Article 4 of the MSA. Nonetheless, it determined Kiyomi was
“still . . . entitled to some share” of the settlement proceeds. The court
explained:
“While Adam is correct that the property that was subject to the
Boschetti sale was awarded to him under the terms of the MSA and, as his
separate property, should be his to dispose of as he wished, his argument to
retain all of the proceeds overlooks the fact that the evidence established that
13
the Boschetti Litigation settlement also resolved the claims the Sparks and
their entities pursed related to community property interests. These claims
alleged that the Sparks and their entities provided Boschetti with property
management services and that he owed the Sparks and their entities
management fees, commissions and ‘equity bonuses,’ all of which became due
from Boschetti during the marriage. . . . These community property claims
were also released as part of the Boschetti Litigation settlement.”
The court continued: “So the question becomes whether something of
value to the community was obtained from the settlement—i.e., whether the
community effectively received a ‘recovery’ of some kind from the settlement
agreement and mutual release of all claims.” The court answered yes,
concluding “the preponderance of the evidence supports a finding that the
amount received from Boschetti in the settlement over and above the
$11.7 million worth of property as valued approximately eight months earlier
is a ‘recovery’ of a community asset in the amount of $4.1 million for the
purposes of Article 15 and is to be equally shared between Adam and
Kiyomi.” (Fn. omitted.) The court stated several reasons for its conclusion,
including the following:
“First, and most significantly, Adam’s own statements to counsel and
Kiyomi discussing the ‘strength of our counterclaim’ and the framework for a
global settlement of the Boschetti Litigation, proposed the concept of
‘fold[ing] my claims into the property division’ to get a ‘property trade’
millions of dollars ‘more in equity.’ In other words, he acknowledged seeking
a settlement that would be more than just the value of the real property to
account for settling the counterclaims. He conceded that there is ‘added
value’ to the case over and above the value of the property to be sold to
Boschetti. . . . Kiyomi not so subtly intimates that Adam and Makoff may
14
have actually plotted to structure any resolution with Boschetti so as to avoid
any claim that a ‘recovery’ was obtained. The evidence does not support such
a nefarious scheme, although the proposed (and rejected) amendment to the
MSA discussed next lends support to this suspicion.
“Second, just prior to the execution of the Boschetti Litigation, Makoff
circulated a proposed amendment to the MSA that stated that Kiyomi gives
up any claim to any gain arising from the sale of the properties in the
Boschetti Agreement. . . . Kiyomi refused to sign.
“Third, there was no evidence presented to support an ‘independent’
basis for the properties to have increased in value by $4.1 million in the eight
months since execution of the MSA. Furthermore, there was no substantial
evidence of other facts besides the resolution of the counterclaims that
supported the difference between the recently-valued property and the
settlement sum. . . .
“Fourth, albeit a less persuasive basis for finding a $4.1 million
recovery, there was a ‘carve-out’ in the settlement agreement anticipating the
possibility of a ‘recovery.’ Section 2 of the Boschetti Litigation Settlement set
forth mutual releases of all claims by all parties and entities, known or
unknown, but specifically stated that ‘Nothing herein shall be construed to
release or compromise claims between or among’ Adam Sparks (in any
capacity), Kiyomi Sparks (in any capacity), or their Trusts, or business
interests in which Boschetti has no financial interest ‘nor shall this
Agreement affect the rights and obligations of Adam Sparks and Kiyomi
Sparks under the [MSA] (and judgment thereon) or any amendment thereof
and all claims thereunder are preserved.’ While Section 2 standing alone
would not be determinative of the issue here . . . , viewed in the context of the
other factors cited above, Section 2 is consistent with the concept of a
15
potential ‘recovery’ arising from the Boschetti Litigation.”
The court added, “Adam further claims that he ‘lost money’ in the
transaction because the subject properties were actually worth $16.7 million.
This is faulty reasoning. Adam placed the $11.7 million valuation on the real
property for the purpose of property division. He derived the benefit of that
property valuation in the division of the community property and cannot now
claim it was really worth more for the purposes of Article 15 analysis. Also,
Adam’s theory would mean he agreed to receive over a million dollars less
from Boschetti than what he claims as the fair market value of the properties
and agreed to give up all the ‘strong’ and substantial counterclaims against
Boschetti—an unlikely scenario for such a successful and savvy
entrepreneur.”
Accordingly, the court found Kiyomi was entitled to one-half of
$4.1 million, or $2.05 million, of the settlement proceeds under the BSA.
Based on this, the court found Kiyomi was the prevailing party with respect
to her claim to enforce Article 15 of the MSA and thus awarded her
$93,361.35 in fees and costs pursuant to Article 37.
The court separately granted Adam’s RFO to compel Kiyomi to pay her
share of Makoff’s fees and costs in the amount of $79,323.63.
On September 16, the “judgment on post-judgment enforcement issues”
was entered.
This appeal followed.
DISCUSSION
Introduction
This case involves the interplay between two separate contracts: the
MSA and the BSA. As Kiyomi frames it, “[t]he key question is whether the
BSA provides ‘any recovery in connection with’ the [Boschetti] Actions under
16
Article 15 of the MSA. . . .” This question, which presents an issue of contract
interpretation, was resolved by the trial court in favor of Kiyomi.
Adam argues the court “erroneously construed the BSA contrary to its
unambiguous language in holding that the $15.8 million purchase of [his]
real estate included an unstated $4.1 million ‘recovery’ on litigation
counterclaims”; “the parol evidence rule barr[ed] [the court from] using
extrinsic evidence to find a $4.1 million ‘recovery’ in the Boschetti
settlement”; and none of the reasons stated in the statement of decision
supports a finding of a $4.1 million “recovery.” Adam further contends that
because the award of $2.05 million requires reversal, we must also reverse
the attorney fee award.
We reject these contentions. As we shall explain, the BSA is
ambiguous, i.e., reasonably susceptible to the parties’ competing
interpretations, and extrinsic evidence was properly admitted to interpret the
ambiguity. We further conclude substantial evidence supports the trial
court’s determination that the parties intended the BSA to include a
“recovery” attributable to the parties’ counterclaims within the meaning of
Article 15 of the MSA. Because we affirm the court’s decision to grant
Kiyomi’s RFO, we also affirm the fee award.
We now set forth the applicable legal principles.
Principles of Contract Interpretation and Standards of Review
Settlement agreements, including marital settlement agreements
incorporated into a dissolution judgment, are construed under the same rules
that apply to any other contract. (In re Tobacco Cases I (2010)
186 Cal.App.4th 42, 47; In re Marriage of Iberti (1997) 55 Cal.App.4th 1434,
1439.) In interpreting a contract, the trial court must “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.) When parties
17
settle an agreement in writing, their intent “is to be ascertained from the
writing alone, if possible . . . .” (Id., § 1639.)
“The court generally may not consider extrinsic evidence of any prior
agreement or contemporaneous oral agreement to vary or contradict the clear
and unambiguous terms of a written, integrated contract. [Citations.]
Extrinsic evidence is admissible, however, to interpret an agreement when a
material term is ambiguous. [Citations.]” (Wolf v. Walt Disney Pictures &
Television (2008) 162 Cal.App.4th 1107, 1126, citing Pacific Gas & Electric
Co. v. G.W. Thomas Drayage & Rigging Co. (1968) 69 Cal.2d 33, 37 (Pacific
Gas).)
In such cases, the court engages in a two-step process: “First, the court
provisionally receives (without actually admitting) all credible evidence
concerning the parties’ intentions to determine ‘ambiguity,’ i.e., whether the
language is ‘reasonably susceptible’ to the interpretation urged by a party. If
in light of the extrinsic evidence the court decides the language is ‘reasonably
susceptible’ to the interpretation urged, the extrinsic evidence is then
admitted to aid in the second step—interpreting the contract. [Citation.]”
(Winet v. Price (1992) 4 Cal.App.4th 1159, 1165 (Winet).)
As for how such determinations are reviewed on appeal, whether an
ambiguity exists is a question of law, subject to independent review. (Winet,
supra, 4 Cal.App.4th at p. 1165.) The trial court’s resolution of an ambiguity
is also a question of law if no parol evidence is admitted or if the parol
evidence is not in conflict. (Ibid.) However, where the parol evidence is in
conflict, the trial court’s resolution of that conflict is a question of fact that
will be upheld so long as substantial evidence supports it. (Ibid.; see
Oakland-Alameda County Coliseum Authority v. Golden State Warriors, LLC
(2020) 53 Cal.App.5th 807, 819, quoting City of Hope National Medical
18
Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395 (City of Hope) [“
‘[W]hen . . . ascertaining the intent of the parties at the time the contract was
executed depends on the credibility of extrinsic evidence, that credibility
determination and the interpretation of the contract are questions of
fact . . .’ ”].)
Kiyomi Proved She Was Entitled To a Share of the Settlement
Proceeds From the Boschetti Actions
The MSA
We start with the overarching provision at issue in this case, Article 15
of the MSA, which states in relevant part: “The parties agree that each party
is jointly and severally liable for any and all liability found by the Court and
equally share in any recovery in connection with [the Boschetti litigation].”
(Italics added.)
At trial, the parties disputed the meaning of the phrase “any recovery.”
Kiyomi argued that “recovery” is not limited to situations where a court has
entered judgment for a party but includes settlements prior to a trial. Adam,
on the other hand, argued that “recovery” refers only to an award by a
judgment or decree. The trial court rejected Adam’s interpretation,
explaining there was no language in Article 15 that limited the word
“recovery” to only a judgment or award after trial. Rather, the court found,
“The only rational implication to be derived from the language in Article 15 is
that the parties would equally share any of the burdens as well as any of the
benefits of the Boschetti Litigation, whatever the source.”
The court further found that “recovery” as it related to the Boschetti
actions referred to the benefits, if any, that were realized from the parties’
counterclaims against Boschetti. The court characterized those
counterclaims as belonging to the community and concluded that “to the
extent the claims could become realized, they remained as community
19
property assets.” As a result, the court concluded that under Article 15, each
party was entitled to a one-half interest in the “community” share of the
proceeds, if any, from the settlement of the Boschetti actions.
On appeal, Adam does not address, much less dispute, the court’s
interpretation of Article 15 of the MSA. Because a trial court’s decision is
presumed to be correct, and Adam as the appellant has failed to demonstrate
any error, we will uphold the court’s interpretation of Article 15 of the MSA.
(Jameson v. Desta (2018) 5 Cal.5th 594, 608–609.)
We move on to “whether the community effectively received a ‘recovery’
of some kind from the settlement agreement and mutual release of all claims”
under the BSA.
The BSA
At trial, Kiyomi argued various theories as to what constituted a
“recovery” from the settlement of the Boschetti actions. At issue here is the
one adopted by the trial court: that Kiyomi was “entitled to half of the
difference of $4.1 million of profit realized by Adam above and beyond the
value of the property as assessed for purposes of the property division
recognized in the MSA,” or $2.05 million.6
6 Kiyomi’s initial and principal argument was that she was entitled to
half of the entirety of settlement proceeds of $15.8 million. The trial court
rejected that theory of recovery but found she was nonetheless entitled to a
portion of the proceeds. In her respondent’s brief, Kiyomi states that
although she could have filed a cross-appeal from the aspect of the court’s
decision declining to award her half of the $15.8 million settlement, she
elected not to do so, conceding that “[r]ecovery of half would arguably be
inconsistent with the implementation of the MSA by which Adam received
those properties which he alone valued at $11.7 million.” Because Kiyomi
has not filed a cross-appeal, any argument that she was entitled to half of the
$15.8 million settlement sum is not reviewable. (See Prakashpalan v.
Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1121 [“respondents
20
In challenging that determination, Adam raises three main arguments:
(1) the court construed the BSA contrary to its unambiguous language;
(2) the court improperly admitted extrinsic evidence; and (3) neither the
evidence nor any of the reasons stated in the statement of decision supports
the court’s interpretation of the BSA.
Adam Is Precluded from Challenging the Admission of
Extrinsic Evidence
At the threshold, Kiyomi argues that Adam forfeited his challenge to
the admission of extrinsic evidence because he did not object to its
introduction in the trial court. We agree.
Adam filed a motion in limine seeking to exclude any extrinsic evidence
to interpret the MSA, but did not raise any similar objections with respect to
the BSA. In fact, Adam took the position that “[a]ll that [wa]s at issue is the
MSA itself,” the BSA had “no impact on the MSA,” and the BSA’s execution
was not “in the court’s jurisdiction.” Adam also did not object to the court’s
tentative statement of decision, in which it relied on extrinsic evidence
presented at trial, on the grounds the evidence was improperly admitted.7
who fail to file a cross-appeal cannot claim error in connection with the
opposing party’s appeal”].)
7 In his reply brief, Adam contends he raised objections to extrinsic
evidence related to both the MSA and the BSA. However, the portions of the
record he cites disclose that his counsel raised only general assertions that
both documents “speak for themselves.” Counsel’s comments do not satisfy
the rule that an objection to the introduction of evidence must “make clear
the specific ground of the objection or motion.” (Evid. Code, § 353, subd. (a);
People v. Williams (1988) 44 Cal.3d 883, 906 [A trial objection must be
sufficiently specific to encompass the issue raised on appeal].) Further, it
appears counsel’s comments were made within the context of an objection to
the testimony of one of Kiyomi’s expert witnesses on the grounds that the
testimony exceeded the scope of testimony described in Kiyomi’s witness
designation.
21
Accordingly, Adam may not complain on appeal about the trial court’s
admission of the extrinsic evidence because he did not object to its
introduction at trial. (Tahoe National Bank v. Phillips (1971) 4 Cal.3d 11,
23–24.)
Adam is also precluded from challenging the admission of the evidence
under the invited error doctrine. In his trial brief, Adam designated an
expert to testify as to the various pleadings filed in the Boschetti actions.
Also, the parties’ joint trial brief, under “Respondent’s Position,” states that
“should the Court find that a ‘recovery may be within the Civil Settlement
Agreement, then a ‘recovery’ must be shown through submitting evidence of
[certain specified topics].” Furthermore, in his opening brief, Adam points
out that at trial he sought, unsuccessfully, to introduce evidence related to
the circumstances under which the proposed amendment to the MSA was
drafted. Having attempted to elicit the evidence himself, Adam is “hardly in
a position to object to its admission.” (Kim v. Toyota Motor Corp. (2018)
6 Cal.5th 21, 38–39; People v. Williams, supra, 44 Cal.3d at p. 912 [“It is
axiomatic that a party who himself offers inadmissible evidence is estopped
to assert error in regard thereto”].) Any error in the trial court in considering
extrinsic evidence was invited by Adam.
Thus, Adam may not challenge the admission of extrinsic evidence to
construe the BSA.8 In any event, for the reasons now explained, we conclude
the court did not err in admitting the extrinsic evidence.
The BSA Is Reasonably Susceptible To Kiyomi’s
Interpretation
“ ‘When a dispute arises over the meaning of contract language, the
8 Adam, however, may challenge, as he does, the sufficiency of the
evidence to support the judgment. (See Tahoe National Bank v. Phillips,
supra, 4 Cal.3d at pp. 23–24.) We address those challenges below.
22
first question to be decided is whether the language is “reasonably
susceptible” to the interpretation urged by [Kiyomi]. If it is not, the case is
over.’ ” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 393, quoting
Southern Cal. Edison Co. v. Superior Court (1995) 37 Cal.App.4th 839, 847
(Southern Cal. Edison).) “Whether the contract is reasonably susceptible to a
party’s interpretation can be determined from the language of the contract
itself [citation] or from extrinsic evidence of the parties’ intent [citation].”
(Southern Cal. Edison, supra, 37 Cal.App.4th at p. 848.)
The trial court did not expressly state whether the BSA was
ambiguous. However, it heard Kiyomi’s arguments that the BSA was
reasonably susceptible to more than one interpretation and that extrinsic
evidence was permissible to aid in interpreting the BSA. We may infer from
its receipt of extrinsic evidence that it agreed with Kiyomi and considered the
BSA ambiguous. And we review that implied finding independently.
(Winet, supra, 4 Cal.App.4th at p. 1165.)
The Contract Language
We begin with the language of the BSA. Paragraph 2 states in relevant
part: “for and in consideration of purchase and sale of the interests in the
Properties provided herein, and for the payments set forth herein, and in
exchange and consideration for the covenants contained herein, and for other
good and valuable consideration . . . , each of the Parties . . . hereby release
and forever discharge each other Party . . . from any and all claims . . . and
causes of action, of every nature, character, and description . . . . including
but not limited to . . . all claims alleged in the Actions.” Paragraph 2 also
states: “Additionally, Sparks, Pacific Bay and their directors, officers,
owners, agents . . . hereby release any and all claims for fees, management
fees, asset management fees, commissions or other compensation,” which are
23
the claims asserted in the parties’ cross-complaint.
Paragraph 5 provides: “Boschetti agrees to buy, and Sparks . . . agree
to sell, Sparks’ . . . . entire right, title and interest in the Properties . . . to
Boschetti so that Boschetti . . . . shall be 100% owner in fee of each of the
Properties . . . . , for the net prices to be paid set forth in the attached Exhibit
A. The total aggregate price for all of Selling Parties’ interests in the
Properties is . . . $15,800,000.” Exhibit A to the BSA lists and itemizes the
values of each property to be purchased.
According to Adam, “Nowhere in paragraph 2, or anywhere else in the
BSA, does Boschetti agree to pay Adam any amount of money for the release
of [the] counterclaims, much less $4.1 million.” He also points out that
Paragraph 2 does not “contain any reference to the $15.8 million figure or
suggest that the payment is related to the release of claims.” Adam goes on,
“To the contrary, paragraph 5 makes unmistakably clear that the
$15.8 million payment is for the purchase of Adam’s real estate, and that
alone.” Finally, Adam relies on Exhibit A’s itemization of prices for the
individual properties. As such, Adam concludes that the BSA “is only
reasonably susceptible of one meaning”: his proposed interpretation. We
disagree.
In our view, the BSA as a whole is susceptible to more than one
interpretation. Adam is correct that the release in Paragraph 2 does not
mention the settlement amount or the purchase price of the subject
properties, much less apportion the settlement sum. He is also correct that
Paragraph 5 and Exhibit A to the BSA provide that $15.8 million is the
purchase price of the properties and do not refer back to the release of claims.
However, we do not believe these omissions render untenable Kiyomi’s
interpretation that the $15.8 million settlement sum includes payment for
24
the release of claims.
Adam’s quotation to Paragraph 2 in his brief conveniently omits the
part where it states: “[F]or and in consideration of purchase and sale of the
interests in the Properties provided herein, and for the payments set forth
herein, and in exchange and consideration for the covenants contained
herein, and for other good and valuable consideration, receipt of which is
hereby acknowledged, each of the Parties . . . hereby releases and forever
discharges each other Party . . . . from any and all claims . . . .” (Italics
added.) This language undermines Adam’s assertion that the purchase of the
properties under the contract is not “related to the release of claims.” To the
contrary, Paragraph 2 provides that the two are related—it states that
Boschetti was to purchase the properties as consideration for the release of
disputed claims. And when Paragraph 2 is read together with Paragraph 5
(the provision setting forth the $15.8 million purchase price for the
properties), it is plausible to interpret that amount as encompassing payment
for the release of the parties’ counterclaims. Thus, we disagree with Adam
that the BSA unambiguously memorializes a standalone real estate
transaction, and nothing more.
Nor are we persuaded by Adam’s arguments that “[t]he BSA’s preamble
and structure show that the parties considered the property sale and the
disposition of the litigation as separate and distinct issues,” as well as
“support the conclusion that the $15.8 million is payment for property alone
and does not include damages for [the] counterclaims.” The preamble states
the purposes of the BSA, including the parties’ “desire to settle, resolve,
compromise all of their Disputes and Claims as provided herein, and as part
of this Agreement, to have Boschetti purchase the interests owned by the
parties in the . . . properties, to provide for the terms of such purchases and
25
sales . . . .” But nothing in the preamble, logically or syntactically, supports
Adam’s assertion that “the 15.8 million is payment for property alone.” Nor
does the “structure” of the BSA shed any light on whether, let alone support
that, the BSA should be read in the manner Adam proposes. Indeed,
Paragraph 2, as discussed above, belies his construction.
Accordingly, the language of the BSA is reasonably susceptible to
Kiyomi’s interpretation that the $15.8 million includes a payment for release
of the counterclaims.
Extrinsic Evidence
Our provisional consideration of the extrinsic evidence confirms what
we have just concluded: the BSA is ambiguous.
Before we discuss the evidence, we make one preliminary observation:
The fact that the BSA contains integration clauses9 does not preclude the
receipt of extrinsic evidence on the question of ambiguity, contrary to Adam’s
assertions otherwise. “[E]ven in an integrated contract, extrinsic evidence
can be admitted to explain the meaning of the contractual language at issue,
although it cannot be used to contradict it or offer an inconsistent meaning.
The language, in such a case, must be ‘ “reasonably susceptible” ’ to the
proposed meaning.” (Hot Rods, LLC v. Northrop Grumman Systems Corp.
(2015) 242 Cal.App.4th 1166, 1175–1176; accord, Epic Communications,
Inc. v. Richwave Technology, Inc. (2015) 237 Cal.App.4th 1342, 1354–1355.)
9 Adam cites Paragraph 22, which states: “Each party acknowledges
that this Agreement effects the full, final, and complete settlement of all
claims by all Parties against each other . . . .” He also cites Paragraph 28:
“This is the entire agreement between the Parties with respect to the subject
matter of this Agreement, and it supersedes any and all prior agreements,
negotiations, or undertaking among the Parties . . . .” Kiyomi appears to
concede the BSA is fully integrated.
26
If we determine the BSA is susceptible to Kiyomi’s interpretation, there is no
violation of its integration clauses because there is no alteration of its terms.
(See, e.g., Rosenfeld v. Abraham Joshua Heschel Day School, Inc. (2014) 226
Cal.App.4th 886, 897–898.)
We turn to the evidence, beginning with the circumstances surrounding
the making of the agreement. (See Civ. Code, § 1647 [“A contract may be
explained by reference to the circumstances under which it was made, and
the matter to which it relates”].) Relevant circumstances to consider include
“the object, nature and subject matter of the writing [citations], and the
preliminary negotiations between the parties,” so that the court “can place
itself in the same situation in which the parties found themselves at the time
of contracting.” (Universal Sales Corp. v. California Press Mfg. Co. (1942)
20 Cal.2d 751, 761 (Universal Sales); accord, Pacific Gas, supra, 69 Cal.2d at
p. 40; Winet, supra, 4 Cal.App.4th at p. 1168.)
Here, Kiyomi introduced testimony and documentary evidence of
Adam’s and attorney Makoff’s negotiation strategy going into the settlement
discussions with Boschetti. On December 6, 2019, weeks before the
settlement conference, Adam emailed Makoff discussing the “strength of our
counterclaim[s]” and a framework for a global settlement. Adam also
proposed the concept of “fold[ing]” the counterclaims “into the property
division” to get a “property trade” millions of dollars “more in equity.” When
asked about this email, Adam testified, “it was reasonable to proceed in that
way as if [the counterclaims] were fair. It was a negotiating posture.” Adam
also testified that Makoff apparently agreed with this negotiating strategy,
stating “ ‘We should signal that we’re confident of those claims.’ ”
And regarding the “strength” and value of the counterclaims, Kiyomi
introduced the testimony of accountant Ebersbacher, who calculated the
27
damages for the parties’ counterclaims to be a minimum of $9.8 million.
This evidence shows, as the court found, Adam “conceded there is
‘added value’ to the case over and above the value of the property to be sold to
Boschetti” and “acknowledged seeking a settlement that would be more than
just the value of the real property to account for settling the counterclaims.”
Kiyomi also presented evidence of conduct subsequent to the execution
of the BSA. (See Southern Cal. Edison, supra, 37 Cal.App.4th at p. 851 [court
may consider the parties’ acts subsequent to the execution of the contract and
before a controversy has arisen to determine the meaning of contract], citing
Universal Sales, supra, 20 Cal.2d at p. 761; see 1 Witkin, Summary of Cal.
Law (11th ed. 2023) Contracts, § 772 [“The conduct of the parties may be, in
effect, a practical construction thereof, for they are probably least likely to be
mistaken as to the intent”].)
Specifically, on January 16, 2020, the day after the parties entered into
the BSA, Makoff circulated a copy of a proposed amendment to the MSA.
That document stated the parties would agree, among other things, that “Any
gain or loss on the sale of any property . . . in the performance of the
Settlement shall accrue to Adam (and not Kiyomi)” and “there will be no net
recovery or liability to divide between them as a result of the terms of
Settlement of the Boschetti Litigation.” It also states, in Paragraph 5, “This
Amendment . . . expressly supersedes Article 15 of the MSA.” Adam testified
he provided input on the proposed amendment and eventually approved the
final draft; Kiyomi did not.
This evidence suggests Adam’s acknowledgment that any “gain” or
“recovery” from the Boschetti litigation settlement would be measured based
on the MSA’s valuation of the properties ($11.7 million). In other words, it
shows Adam’s understanding that any amount received under the BSA over
28
and above the $11.7 million valuation of the properties in the MSA would
constitute the “recovery” for purposes of Article 15 of the MSA. The evidence
further suggests that Adam may have in fact anticipated a recovery under
the BSA and that he attempted to obtain Kiyomi’s waiver of any claim to that
recovery. As Kiyomi posits, why would Adam ask her to waive a right to a
recovery under the BSA if he did not believe a recovery existed in the first
place?
Adam counters that his December 6, 2019 email to Makoff and Kiyomi
was irrelevant because it was not disclosed to Boschetti. He relies on the
general rule concerning the objective theory of contracts, which declares that
“ ‘[i]t is the objective intent, as evidenced by the words of the contract, rather
than the subjective intent of one of the parties, that controls interpretation’
[citation]” and thus “[t]he parties’ undisclosed intent or understanding is
irrelevant to contract interpretation.” (Founding Members of the Newport
Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109
Cal.App.4th 944, 956; see Winograd v. American Broadcasting Co. (1998)
68 Cal.App.4th 624, 632 [“The question is what the parties’ objective
manifestations of agreement or objective expressions of intent would lead a
reasonable person to believe”].) We are not persuaded.
Adam’s directive to his attorney to take a particular “negotiating
posture” in upcoming settlement discussions was an outward, rather than
subjective, manifestation of intent. Viewed objectively, the evidence would
lead a reasonable person to believe, as the court here observed, that Adam
acknowledged seeking a settlement that would be more than just the value of
the real property to account for settling the counterclaims. Further, that the
email was not disclosed to Boschetti did not preclude its consideration at
trial. (See Heston v. Farmers Ins. Group (1984) 160 Cal.App.3d 402, 414
29
[holding plaintiff allowed to introduce defendant’s brief filed in previous
action, undisclosed to plaintiff, to show defendant’s interpretation of a
disputed contract term coincided with the plaintiff's interpretation].)
Adam also challenges the court’s receipt of evidence of the proposed
amendment to the MSA, again on the grounds that the document was not
disclosed to Boschetti.10 However, the rule permitting the admission of
conduct subsequent to the execution of a contract, and before any controversy
has arisen as to its meaning, “is not limited to the joint conduct of the parties
in the course of performance of the contract.” (Southern Cal. Edison, supra,
37 Cal.App.4th at p. 851.) “ ‘The practical interpretation of the contract by
one party, evidenced by his words or acts, can be used against him on behalf
of the other party, even though that other party had no knowledge of those
words or acts when they occurred and did not concur in them. In the
litigation that has ensued, one who is maintaining the same interpretation
that is evidenced by the other party’s earlier words, and acts, can introduce
them to support his contention.’ ” (Ibid., citing 3 Corbin on Contracts (1960)
§ 558, p. 256; Heston v. Farmers Ins. Group, supra, 160 Cal.App.3d at
pp. 414−415.)
10 Although Adam argues the trial court erred in admitting this
evidence, Adam acknowledges that he himself sought to introduce evidence
regarding the drafting of the proposed amendment. Not only that, he claims
on appeal that the court erred in excluding his evidence. As mentioned, “a
party who himself offers inadmissible evidence is estopped to assert error in
regard thereto.” (People v. Williams, supra, 44 Cal.3d at p. 912.) In any
event, we reject the assertion. For one, although Adam claims he should
have been permitted to introduce his own evidence on the matter, he offers no
legal basis to support this claim. In addition, evidentiary rulings are
reviewed for abuse of discretion (Pannu v. Land Rover North America, Inc.
(2011) 191 Cal.App.4th 1298, 1317), and Adam has failed to raise any
argument, much less establish, the court here so abused its discretion.
30
In sum, the language of the BSA, as well as Kiyomi’s extrinsic evidence,
demonstrates that the BSA is reasonably susceptible to her interpretation.
Thus, the parol evidence was admissible to prove what the parties intended.
(Pacific Gas, supra, 69 Cal.2d at pp. 38–40; Oakland-Alameda County
Coliseum Authority v. Golden State Warriors, LLC, supra, 53 Cal.App.5th at
p. 818.)
The Evidence Supports the Court’s Interpretation of the
BSA
Having concluded that the BSA is reasonably susceptible to Kiyomi’s
interpretation, we move to the “second step in the analysis—the ultimate
construction to be placed on the ambiguous language.” (Southern Cal.
Edison, supra, 37 Cal.App.4th at p. 851.) This step “may call for differing
standards of review, depending upon the parol evidence used to construe the
contract.” (Winet, supra, 4 Cal.App.4th at pp. 1155–1156.)
The parties disagree on the standard of review that applies to the
court’s interpretation of the BSA. Adam argues that de novo review applies,
because only the inferences to be drawn from the evidence, and not the
evidence itself, are in conflict. (See Hewlett-Packard Co. v. Oracle Corp.
(2021) 65 Cal.App.5th 506, 538 [“Because the extrinsic evidence relevant to
our analysis is largely uncontradicted, we apply independent review, even
when conflicting inferences may be drawn from the evidence”].) Kiyomi
agrees that some of the evidence is not in conflict, but contends that other
evidence is, and thus those aspects of the evidence raise questions of fact.
In our view, the court’s interpretation of the contract addressed a
question of fact, because it depended on it deciding between “divergent
testimony about what the parties understood [the BSA] to mean” and thus
resolving credibility issues. (See City of Hope, supra, 43 Cal.4th at pp. 394–
395; Winet, supra, 4 Cal.App.4th at p. 1166.) By way of example, the
31
statement of decision reflects the court resolved credibility issues raised by
evidence concerning the strength of the counterclaims against Boschetti, the
extent of Kiyomi’s involvement in the settlement discussions in the Boschetti
actions, and the extent of each party’s involvement in preparing the proposed
amendment to the MSA. Indeed, the discussion of some of this evidence in
the parties’ briefs discloses the existence of conflicts in the evidence.
As a result, the substantial evidence standard of review applies to the
court’s construction of the BSA. (Winet, supra, 4 Cal.App.4th at p. 1165.)
And we hold there is such evidence to support the court’s construction.11
We have already described why the text of the BSA is amenable to, and
perhaps even more supportive of, Kiyomi’s interpretation that the
$15.8 million settlement sum includes an amount attributable to the release
of the parties’ counterclaims against Boschetti. This interpretation, as the
court found, is supported by the extrinsic evidence, including the evidence
discussed above: Adam’s email to attorney Makoff and Kiyomi proposing the
concept of “fold[ing] [the] [counter]claims into the property division”; Makoff’s
agreement to proceed with that negotiating strategy; the high valuation of
damages for the counterclaims; and the proposed amendment to the MSA.
Adam nonetheless contends the evidence does not support the court’s
interpretation. He disputes the court’s reliance on his email prior to the
settlement conference in the Boschetti actions, arguing “the proposition that
counterclaim damages were ‘folded’ into Boschetti’s $15.8 million payment
directly contradicts the terms of the BSA.” We have already rejected the
premise of his argument, concluding that the text of the BSA is reasonably
susceptible to Kiyomi’s interpretation. Thus, the admission of the evidence
11 We would uphold the court’s interpretation of the BSA even if de
novo review applies.
32
pertaining to the email did not “add to, detract from, or vary the terms” of the
BSA. (Pacific Gas, supra, 69 Cal.2d at p. 39.)
With respect to the proposed amendment to the MSA, Kiyomi properly
observes that Adam “attempts to distance him[self] from [it], and cites
evidence suggesting that he played no role in its formulation.” The court,
however, found otherwise, suggesting that Adam and Makoff not only
proposed the amendment, but did so as part of a “nefarious scheme” in which
they “may have actually plotted to structure any resolution with Boschetti so
as to avoid any claim that a ‘recovery’ was obtained.”12 To the extent Adam
claims he was not involved in proposing the amendment, he essentially asks
us to reweigh the evidence. We decline to do so. (Hasson v. Ford Motor Co.
(1982) 32 Cal.3d 388, 398 [when reviewing for substantial evidence court does
not reweigh the evidence on appeal]; Picerne Construction Corp. v. Castellino
Villas (2016) 244 Cal.App.4th 1201, 1209 [“If substantial evidence exists, it is
of no consequence that the trial court believing other evidence or drawing
other reasonable inferences might have reached a contrary conclusion”].)
Accordingly, we defer to the court’s resolution of credibility determinations
and uphold its finding that Adam, along with Makoff, proposed the
amendment.
12 In addition to that of the parties, the court heard testimony from
Kiyomi’s expert witness regarding the custom and practice in the creation
and interpretation of settlement agreements. In discussing the BSA, the
expert testified, “I think there’s enough indication and really the lack of any
explanation as to what consideration was paid that benefited directly Kiyomi
Sparks for trading her 50 percent of all of the claims in the cross-complaint in
exchange for, you know, being part of the whole agreement. [¶] She’s the
only one that didn’t get consideration for what she gave up. And, to me, it
doesn’t pass the smell test is the best way to say it without sounding
offensive. . . . [¶] But there’s a big elephant in the corner on this issue, I
think . . . .”
33
Adam also argues the proposed amendment to the MSA “in no way
supports the court’s conclusion that the BSA includes payment for something
other than real estate gain or loss.” Adam does not meaningfully explain this
assertion, and, in any event, we disagree with it. As explained above, based
on the language of the proposed amendment, as well as Adam’s contribution
to and approval of it, the court could reasonably infer that Adam understood
the MSA values for the properties would serve as the yardstick by which to
measure any “recovery” realized under the BSA. The court could further
infer from this evidence that Adam anticipated that the BSA would in fact
provide for such a recovery and, with this understanding, attempted to get
Kiyomi to waive her ability to claim that recovery. There would be no need
for Adam to obtain Kiyomi’s waiver of her claim to a recovery under the BSA
if he did not believe a recovery was forthcoming. Thus, Adam’s conduct
subsequent to the execution of the BSA supports the court’s finding in favor
of Kiyomi’s interpretation. (See Universal Sales, supra, 20 Cal.2d at p. 761
[“a construction given to [a contract] by the acts and conduct of the parties
with knowledge of its terms, before any controversy has arisen as to its
meaning, is entitled to great weight”]; see Crestview Cemetery Ass’n. v.
Dieden (1960) 54 Cal.2d 744, 754 [“This rule of practical construction is
predicated on the common sense concept that ‘actions speak louder than
words’ . . .”].)
We thus conclude that the circumstances surrounding the making of
the BSA and the parties’ conduct subsequent to the execution of the BSA
supplies substantial evidence supporting the court’s interpretation of the
BSA. And we do not reweigh the evidence or parse other testimony or
exhibits to see if the trial court might have reached a contrary conclusion.
(Hasson v. Ford Motor Co., supra, 32 Cal.3d at p. 398; Picerne Construction
34
Corp. v. Castellino Villas, supra, 244 Cal.App.4th at p. 1209.) But we briefly
highlight why the extrinsic evidence supporting Adam’s interpretation of the
BSA is comparatively weaker.
Adam points to portions of his testimony to argue that, contrary to the
court’s finding, there was no “increase” in value of the properties between the
time of the MSA and the time of the BSA, and therefore he did not receive an
amount “over and above” the MSA’s valuations of the properties to be sold to
Boschetti. When asked why there was a difference between the purchase
price ($15.8 million) and the values of the properties assigned in the MSA
($11.7 million), Adam testified that the $11.7 million valuation in the MSA
reflected the net value of the properties, discounted by 20 percent due to
them being under “fractional” ownership at the time. By virtue of the sale of
the properties to Boschetti pursuant to the BSA, Adam testified, Boschetti
would become the sole owner of the properties, the properties thus would no
longer be “fractionally” owned, and consequently the 20-percent discount due
to fractional ownership would no longer be applicable. Without that discount,
Adam asserted, the value of the properties was $16.7 million. Adam further
testified that he and Boschetti negotiated a discount of a $1 million, because
Boschetti agreed to purchase the subject properties at all once. The
$15.8 million purchase price thus equaled the $16.7 million, less the
$1 million discount. Adam’s theory, then, was that there was no “variance
between the Boschetti settlement amount and the MSA values . . . and there
simply [was] no ‘recovery’ above the real estate value.”
Despite his testimony that the $15.8 million settlement sum was based
on the market value of the subject properties, Adam confirmed that no
independent appraisal of the properties had been performed. Given the
absence of an appraisal or other objective source to justify the difference
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between the $11.7 million figure under the MSA and the $15.8 million sum
under the BSA, the court was not required to accept Adam’s self-serving
testimony as to what he claimed the properties were actually worth. (See
Guerra v. Balestrieri (1954) 127 Cal.App.2d 511, 515 [“[T]he trier of the facts
is not required to believe everything that a witness says even if
uncontradicted”], citing Blank v. Coffin (1942) 20 Cal.2d 457, 461 [trier of fact
“is free to disbelieve [witnesses] though they are uncontradicted if there is
any rational ground for doing so”].) Thus, the court was entitled to find
“there was no evidence presented to support an ‘independent’ basis for the
properties to have increased in value by $4.1 million in the eight months
since execution of the MSA.”
This finding receives additional support from what appears to be
internally inconsistent testimony from Adam regarding the origin of the
$15.8 million settlement amount. At times Adam testified that he initially
proposed the $16.7 million price based on what he claimed was the market
value of the properties. Other times, however, he testified that Boschetti
offered to pay $15.8 million, and that his (Adam’s) attorney then assigned
values to each property to be sold, such that those values would “match up” to
the $15.8 million offered by Boschetti. The latter testimony seems to suggest
that the $15.8 million was arrived at somewhat arbitrarily—that it was
Boschetti who came forward with the $15.8 million price, and that Adam
worked backwards from that amount and assigned values to each property so
that those values would sum up to the $15.8 million offer. In light of this
ambiguity, if not inconsistency, in Adam’s testimony regarding how the
$15.8 million figure originated, the court was not required to believe his
explanation.
In short, the record supports the court’s conclusion “that the amount
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received from Boschetti in the settlement over and above the $11.7 million
worth of property as valued approximately eight months earlier is a ‘recovery’
of a community asset in the amount of $4.1 million for the purposes of
Article 15 and is to be equally shared between Adam and Kiyomi.
In addition to the extrinsic evidence, other general principles of
contract support the court’s determination. Of particular importance in this
case is the rule that “ ‘If a contract is capable of two constructions courts are
bound to give such an interpretation as will make it lawful, operative,
definite, reasonable, and capable of being carried into effect.’ ” (Edwards v.
Arthur Andersen LLP (2008) 44 Cal.4th 937, 953−954; accord, Cohn v. Cohn
(1942) 20 Cal.2d 65, 70; Civ. Code, § 1643; see also West Pueblo Partners,
LLC v. Stone Brewing Co., LLC (2023) 90 Cal.App.5th 1179, 1185 [“the court
‘should avoid an interpretation which will make the contract unusual,
extraordinary, harsh, unjust or inequitable . . . , or which would result in an
absurdity’ ”].)
Applying these principles, we conclude Kiyomi’s interpretation of the
BSA is the more reasonable one. The facts of this case demonstrate the
inequity that would result from adopting the interpretation put forth by
Adam. For example, as discussed, the court found there was evidence to
suggest Adam and Makoff may have engaged in a ”nefarious scheme” in
which they had “plotted to structure any resolution with Boschetti so as to
avoid any claim that a ‘recovery’ was obtained.” When viewed against this
finding, adopting Adam’s interpretation of the BSA would have rendered the
BSA unfair, unlawful, and/or unreasonable. The court properly declined to
adopt an interpretation that would produce such a result.
In addition, the court observed that “[t]he only rational implication to
be derived from” Article 15 of the MSA is that “the parties would equally
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share any of the burdens as well as any of the benefits from the Boschetti
Litigation, whatever the source.” It is undisputed that Kiyomi and Adam
equally shared in the “burdens” imposed by the Boschetti actions—they
jointly defended Boschetti’s claims and paid Makoff’s legal fees and costs in
the actions. Indeed, the court in this case granted Adam’s RFO to compel
Kiyomi to pay her half of the outstanding fees owed to attorney Makoff. Yet,
Adam maintains that Kiyomi was not entitled to any benefits received from
the Boschetti actions. As Kiyomi asserts, “Adam should not be allowed at the
same time to enforce Article 15’s burdens against Kiyomi by seeking fees, and
deny Article 15’s benefits to Kiyomi by keeping the Boschetti settlement
proceeds for himself.” Despite Adam’s description of the counterclaims as
“his” counterclaims throughout his briefs, he does not contest the court’s
finding that the counterclaims belonged to the community. (See Vick v.
DaCorsi (2003) 110 Cal.App.4th 206, 212, fn. 35 [a cause of action to recovery
money damages is a form of personal property, and personal property
acquired during the marriage is community property].) As such, Kiyomi had
just as much of an interest in those claims as Adam did. It follows that
Kiyomi had just as much of a right to recover for relinquishing such claims as
Adam did. It would be inequitable for the court to have required Kiyomi to
share in the costs of obtaining a recovery, but not in that actual recovery.
Finally, if application of the canons of contract construction were not
enough, the court’s conclusion is supported by this additional principle:
“Family law cases ‘are equitable proceedings in which the court must have
the ability to exercise discretion to achieve fairness and equity.’ ” (In re
Marriage of Egedi (2001) 88 Cal.App.4th 17, 22–23.) For the reasons stated
above, the court properly fashioned an award that ensured equity between
the parties.
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The Court Properly Awarded Kiyomi Attorney Fees
Because we affirm the trial court’s decision to grant Kiyomi’s RFO to
enforce Article 15 of the MSA, we also affirm its finding that Kiyomi was the
prevailing party on her RFO and therefore entitled to attorney fees under
Articles 37 and 39 of the MSA.
DISPOSITION
The judgment entered on September 16, 2021 is affirmed. Kiyomi shall
recover her costs on appeal.
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_________________________
Richman, J.
We concur:
_________________________
Stewart, P.J.
_________________________
Markman, J. *
In re Marriage of Sparks (A163637)
*Superior Court of Alameda County, Judge Michael Markman, sitting as assigned
by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
40