Marriage of Shannahan CA4/1

• Court: California Court of Appeal
• Decided: June 30, 2014
• Docket: D062062
• Status: Unpublished

Opinion

Filed 6/30/14 Marriage of Shannahan CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

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

4 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

6 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.

10 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.