Filed 12/4/18 Fontaine v. Hoult CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Hugh Michael Brenner, Judge. (Retired Judge of the Orange Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed in part and dismissed in part.

York│Tabucchi and Celinda Tabucchi for Plaintiff and Appellant.

Sheppard, Mullin, Richter & Hampton, Kelley A. Bolar and Daniel P. Bane for Defendant and Respondent Jennifer A. Hoult.

Pohls & Associates and Robert R. Pohls for Defendant and Respondent State Farm Life Insurance Company.

Plaintiff appeals from a judgment after a bench trial in which the court denied plaintiff’s request to impose an equitable lien on certain life insurance proceeds. Plaintiff also appeals from a fee award in favor of State Farm Life Insurance Company under the interpleader statute. We conclude the court did not abuse its discretion in denying equitable relief. We dismiss the appeal as to State Farm because plaintiff did not separately appeal from the postjudgment order, and thus we do not have jurisdiction to review it.

FACTS[1]

Plaintiff Jason Fontaine married Elizabeth Hoult in 2002 and they subsequently had two children. During their marriage, Jason and Elizabeth each purchased term life insurance policies on their own lives, naming the other as beneficiary, using community funds. Jason’s policy was originally with MetLife Insurance Company, but in May 2007, he replaced his MetLife policy with equivalent coverage with Genworth Life Insurance Company. Elizabeth’s policy was with MetLife. Each policy had a death benefit of $2 million.

In January 2008, their first child, then two years old, reported that Jason had sexually abused her. Some two weeks later, Elizabeth removed Jason as the beneficiary on her MetLife insurance policy without his consent. In December 2008, the two separated and Elizabeth petitioned for dissolution of their marriage. The following month, Jason removed Elizabeth as the beneficiary on his Genworth policy.

Around Easter in 2009, Elizabeth asked her cousin, Jennifer Hoult, to be her children’s godmother and legal guardian. Hoult agreed to serve in that capacity on the condition that Elizabeth leave enough money to care for the children. Elizabeth then purchased a new life insurance policy (the subject of this action) from defendant State Farm Life Insurance Company (State Farm), naming her mother and Hoult as primary and contingent beneficiaries. Elizabeth paid for the new policy with separate property funds. At about the same time, Elizabeth stopped paying for the old life insurance policy (which, by this point, no longer named Jason as a beneficiary), and it lapsed.

In July 2009, Jason signed his final declaration of disclosure in the dissolution action and did not identify any interest in a life insurance policy among his assets. Jason was represented in the dissolution action by an experienced family law practitioner.

In December 2009, a tragedy struck, the likes of which has rarely been seen in the Orange County Superior Court. The court resolved a custody battle in favor of Jason. In response, Elizabeth’s mother shot and killed the children, Elizabeth, and herself.

Elizabeth’s death triggered the State Farm life insurance policy on her life, of which Hoult was the beneficiary.[2] In May 2010, Jason filed the present lawsuit seeking the proceeds of the State Farm policy for himself.[3] After a removal to federal court, a remand back to the superior court, a demurrer, and a motion for summary judgment, the only surviving cause of action was for enforcement of an equitable lien against the policy proceeds. After a bench trial, the court found Jason had no interest in the State Farm policy and that equitable principles compelled the conclusion that Hoult was entitled to the proceeds of the State Farm policy. Jason appealed from the judgment.

DISCUSSION

The sole issue before the trial court was whether to impose an equitable lien on the proceeds of the State Farm policy. “An equitable lien is a right to subject property not in the possession of the lienor to the payment of a debt as a charge against that property. [Citation.] It may arise from a contract which reveals an intent to charge particular property with a debt or ‘out of general considerations of right and justice as applied to the relations of the parties and the circumstances of their dealings.’ [Citation.] ‘The basis of equitable liens is variously placed on the doctrines of estoppel, or unjust enrichment, or on the principle that a person having obtained an estate of another ought not in conscience to keep it as between them; and frequently it is based on the equitable maxim that equity will deem as done that which ought to be done, or that he who seeks the aid of equity must himself do equity.’” (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 453.) We review a ruling refusing to impose an equitable lien for abuse of discretion. (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 770-771 [“‘From the very nature of equity, a wide play is left to the conscience of the chancellor in formulating his decrees’”].)

Jason offers various theories as to why Elizabeth’s removal of Jason from the Met Life policy should result in an equitable lien on the State Farm policy: (1) It violated Family Code provisions regarding gifts of community property (Fam. Code, § 1100, subd. (b));[4] (2) it violated automatic restraining orders (ATROs) concerning the disposition of assets (§§ 233, 2040); and (3) it violated marital fiduciary duties (§ 1100, subd. (e)).

Regarding section 2040, that statute imposes four automatic temporary restraining orders upon the filing of a dissolution proceeding. As potentially relevant here, the parties are restrained from: “transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal, whether community, quasi-community, or separate, without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life” (id., subd. (a)(2)); “cashing, borrowing against, canceling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability, held for the benefit of the parties and their child or children for whom support may be ordered” (id., subd. (a)(3)); “creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer, without the written consent of the other party or an order of the court” (id., subd. (a)(4)).

First, we note that Elizabeth’s act of removing Jason as the beneficiary of her MetLife policy did not violate any ATRO because she took this action nearly a year before the ATRO issued. And assuming Jason is correct that the change of beneficiary on Elizabeth’s MetLife policy violated the cited provisions of section 1100, Jason never satisfactorily addresses why this should not have been adjudicated during the pendency of the dissolution proceeding, or in an action against Elizabeth’s estate, or why equity should intervene now to impose an equitable lien on Hoult’s interest in the State Farm policy? After all, the case that went to trial was not an action against Elizabeth’s estate. It solely concerned whether an equitable lien should attach to the proceeds of the State Farm policy payable to Hoult under the explicit terms of the policy.

Jason’s strongest argument in this action is that Elizabeth’s act of allowing the MetLife policy to lapse violated section 2040, subdivision (a)(3), the ATRO which restrains both parties from cancelling insurance coverage held for the benefit of the parties and their children for whom support may be ordered, and that the acquisition of the State Farm policy violated section 2040, subdivision (a)(4), the ATRO which restrains “both parties from creating a nonprobate transfer or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer, without the written consent of the other party or an order of the court.” (Id., subd. (a)(4), italics added.) Jason argues that the lapse of the MetLife policy and Elizabeth’s procurement of the State Farm policy, and the designation of persons other than Jason as beneficiaries, violated these ATROs.

But assuming (without deciding) that Elizabeth’s conduct violated the ATROs, it is evident that both parties affirmatively demonstrated they had absolutely no interest in maintaining their respective life insurance policies for the benefit of the other. Nor did either party demonstrate any recognition or concern that changes they each made to their respective life insurance policies would potentially violate section 2040, subdivisions (a)(3) and/or (a)(4). Almost immediately after the daughter’s charge of sexual abuse arose, and nearly a year before the ATROs issued, Elizabeth removed Jason as the beneficiary of her MetLife policy and named her mother Bonnie as the primary beneficiary and her two daughters as contingent beneficiaries. For Jason’s part, within one month of Elizabeth’s filing of her petition for dissolution, he removed Elizabeth as the beneficiary of his Genworth policy, replacing her with his mother as primary beneficiary and his sister as a contingent beneficiary. And a week after changing the beneficiary on his Genworth policy, Jason also named his mother and father as the primary and contingent beneficiaries on his John Hancock retirement plan. Jason also reduced the death benefit on his Genworth policy to $1 million. There is no evidence that Jason consulted Elizabeth or sought her consent for any of these changes.

The parties also demonstrated no interest in contributing to the other’s premium payments on their respective life insurance policies. At the end of December 2008, just two weeks after the petition for dissolution was filed, Jason wrote to Elizabeth about their respective responsibilities for charges made against their joint checking account at Bank of America. In summing up what each of them owed to the joint account, Jason said: “I did not include your life insurance or your cell phone bills. I am fine with splitting those but obviously you need to make arrangements to remove those from the account.” Elizabeth and Jason also argued about Jason paying for his insurance out of the joint bank account. On Sept. 2, 2009, Elizabeth wrote to Jason “[W]ould you please transfer your life insurance payment and switch that to debit from your own account.” Five days later, on September 7, 2009, Elizabeth again wrote, “Just a reminder to transfer your life insurance payment and redirect that to your own account.” On September 18, 2009, Elizabeth became more insistent, writing, “I cannot continue to pay for 1/2 of everything you want, including your own life insurance and other payments.” In response, Jason did not assert the premium payment was a proper community expense. Instead, he wrote, “You have not been paying half of my life insurance.” (Italics added.)

Further evidence of the parties’ disinterest in their respective life insurance policies is found in Jason’s declaration of disclosure in the dissolution action, which makes no mention whatsoever of any interest in either his or Elizabeth’s insurance policies. And, finally, in October 2009. Jason responded to Elizabeth’s proposed settlement agreement, indicating provisions he was not comfortable with and proposing alternate visitation schedules. The document makes no mention of the need to dispose of rights in any insurance policies.

The circumstances here are both tragic and unique. It is apparent that Elizabeth and Jason each commendably intended to provide funds for the support of their minor children in the event of their deaths. Elizabeth chose her mother to receive the funds, or if her mother predeceased Elizabeth, her cousin Jennifer Hoult was selected to receive the funds. Likewise, Jason chose his mother and then his sister to receive the funds from his policy. But none of this came to pass because the children perished with their mother – sadly, support for the children was no longer necessary.

We also note that if either party wished the other to maintain a policy for his or her benefit, they could have sought one in the dissolution proceeding under section 4360, which provides that, as an element of spousal support, the court “may include an amount sufficient to . . . maintain insurance for the benefit of the supported spouse on the life of the spouse required to make the payment of support.” Or even apart from spousal support, they could have sought an order requiring the other party to maintain a policy on his or her life at their own expense. (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2018) ¶ 6:898.5, p. 6-475.) So far as our record reveals, however, neither party made a peep about life insurance during the dissolution proceeding. Apparently neither had any interest in a life insurance policy on the other’s life while still alive. It was only upon Elizabeth’s unexpected death that Jason belatedly wanted a policy on her life.

Equity intervenes to redress real harms. Thus, where a party violates a restraining order against selling community property, an available remedy is to impute a half interest in that property to the other spouse. (In re Marriage of McTiernan & Dubrow (2005) 133 Cal.App.4th 1090, 1102-1103 [sale of stocks that subsequently appreciated].) But in that case, the purpose of the remedy is “restitution of the loss caused wife by husband’s violation.” (Id. at p. 1103.) Or where a party is specifically ordered to maintain life insurance for the benefit of a divorced spouse, but instead names his own estate on his life insurance policies, a constructive trust on the proceeds in the estate is appropriate. (Cramer v. Biddison (1968) 257 Cal.App.2d 720, 723-724.) Similarly, where a husband was specifically ordered to maintain life insurance on his own life for the benefit of his spouse and children, his suicide, which severely limited the payout under the policy, justified a constructive trust on other assets in his estate. (Tintocalis v. Tintocalis (1993) 20 Cal.App.4th 1590, 1592-1593.)

Here, Elizabeth purchased the State Farm life insurance policy with her own separate property funds. That acquisition of that policy did not harm Jason at all. And the subsequent events meant he did not need the funds to support his children. The result he seeks—conversion of the State Farm life insurance policy into community property—would be a windfall.

“‘Equity or chancery law has its origin in the necessity for exceptions to the application of rules of law in those cases where the law, by reason of its universality, would create injustice in the affairs of men.’ [Citation.] The object of equity is to do right and justice. It ‘does not wait upon precedent which exactly squares with the facts in controversy, but will assert itself in those situations where right and justice would be defeated but for its intervention. “It has always been the pride of courts of equity that they will so mold and adjust their decrees as to award substantial justice according to the requirements of the varying complications that may be presented to them for adjudication.” [Citation.]’ [Citation.] ‘The powers of a court of equity, dealing with the subject-matters within its jurisdiction, are not cribbed or confined by the rigid rules of law. From the very nature of equity, a wide play is left to the conscience of the chancellor in formulating his decrees . . . . It is of the very essence of equity that its powers should be so broad as to be capable of dealing with novel conditions. [Citation.]’ [Citaion.] Equity acts ‘“'in order to meet the requirements of every case, and to satisfy the needs of a progressive social condition, in which new primary rights and duties are constantly arising, and new kinds of wrongs are constantly committed.” [Citation.]’ [Citation.].” (Hirshfield v. Schwartz, supra, 91 Cal.App.4th 749, 770.) “[A] trial court does not abuse its discretion unless its decision is so irrational or arbitrary that no reasonable person could agree with it.” (People v. Carmony (2004) 33 Cal.4th 367, 377.) Under the present circumstances, we cannot say the court abused its discretion in denying an equitable lien, thereby allowing the policy proceeds of Elizabeth’s policy, acquired with her separate property funds, to be delivered to Hoult, her intended beneficiary.

Jason’s remaining argument is that the court erred in awarding State Farm attorney fees of $212,270 under Code of Civil Procedure section 386.6 (fee provision for interpleader actions). However, we do not have jurisdiction to consider this argument because Jason failed to separately appeal the fee award, and thus we will grant State Farm’s motion to dismiss the appeal.

The judgement was entered on August 31, 2016, in favor of Hoult and discharging State Farm from liability. The judgment recited, “Because State Farm has requested that the Court make an allowance pursuant to Code of Civil Procedure section 386.6(a), which directs that its costs and/or attorney fees incurred in this action may be awarded from the funds it deposited with the Court, State Farm . . . hereby is ordered to file and serve a post-trial motion for such an allowance.” State Farm filed its motion for attorney fees to be heard on October 17, 2016. Jason filed his notice of appeal on September 28, 2016, from the judgment after a court trial. The court entered an order awarding fees on October 27, 2016. Jason did not separately appeal from that order. “A postjudgment order awarding attorney fees is separately appealable. [Citations.] The failure to appeal an appealable order ordinarily deprives the appellate court of jurisdiction to review the order. [Citation.] However, when the judgment awards attorney fees but does not determine the amount, the judgment is deemed to subsume the postjudgment order determining the amount awarded, and an appeal from the judgment encompasses the postjudgment order.” (R.P. Richards, Inc. v. Chartered Construction Corp. (2000) 83 Cal.App.4th 146, 158.)

Here, the judgment did not determine State Farm’s entitlement to fees. It simply cited Code of Civil Procedure section 386.6 for the proposition that the court may award fees, and it directed State Farm to file a motion. Indeed, subdivision (a) of that section states, “the court may, in its discretion, award such party his costs and reasonable attorney fees from the amount in dispute which has been deposited with the court.” State Farm’s entitlement to fees, therefore, had not been determined at the time of the judgment. Accordingly, it was a separately appealable postjudgment order, which Jason was required to separately appeal. Having failed to do so, we lack jurisdiction to review the order.

DISPOSITION

The appeal is dismissed as to respondent State Farm. The judgment is affirmed as to respondent Hoult. Respondents shall recover their costs incurred on appeal.

IKOLA, J.

WE CONCUR:

O’LEARY, P. J.

THOMPSON, J.