Marriage of Zimmerman

Filed 2/28/07 Marriage of Zimmerman CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION EIGHT

APPEAL from an order of the Los Angeles County Superior Court. Gretchen Taylor, Commissioner. Affirmed and remanded with directions.

Rehm & Rogari and Joanna Rehm for Appellant.

Donna Bader for Respondent.

________________________

SUMMARY

When they separated in 1964, Murray Zimmerman agreed to pay the extraordinary medical expenses of his former wife Jeanne for the rest of her unmarried life. For 40 years, Murray and Jeanne operated under that agreement without incident. In 2004, however, a dispute arose between them concerning Murrays payment of Jeannes medical expenses. Jeanne required expensive back surgery for which she could not afford to pay. She asked the trial court to interpret the parties property settlement agreement, and determine the meaning of extraordinary medical expenses under the agreement. The trial court concluded that extraordinary medical expenses were any expenses not covered by Medicare, inclusive of prescription medications, and exclusive of cosmetic or elective surgeries. On appeal, Murray insists the court did not merely interpret the agreement, but rather rewrote it. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The 17-year marriage between Murray Zimmerman and Jeanne Zimmerman was dissolved in 1967. The parties stipulated to a property settlement agreement (Agreement) which was incorporated into the judgment of dissolution. This appeal involves a dispute over one provision of the Agreement.

The disputed provision states:

4. Extraordinary Medical Expenses. [Murray] does hereby agree to pay the extraordinary medical expenses of [Jeanne] during her lifetime or until she remarries, . . . excluding, . . . any charge for psychiatric treatment for . . . .

In May 2005, Jeanne sought an order to show cause (OSC) to enforce this provision.[1] She said she needed, but was unable to afford, back surgery to alleviate excruciating pain caused by sciatica. Based on Murrays past refusal to pay spousal support, cancellation of a supplemental health care policy maintained for her benefit, and alleged refusal to pay her taxes, Jeanne feared Murray would refuse to pay for the surgical expenses. Accordingly, Jeanne asked the court to review the Agreement and make a determination as to what constitutes extraordinary health costs  to enable her to obtain the required surgery. She requested an order requiring that Murray obtain a supplemental medical insurance policy for her benefit, establish a medical account containing $500,000, or provide sufficient funds to cover extraordinary medical expenses not covered by Medicare.

Murray opposed the OSC. He asserted evidentiary objections to Jeannes supporting declaration and exhibits. He insisted that the back surgery did not qualify as an extraordinary medical expense because it was merely incident to the declining health of any 85-year-old woman. He claimed Jeanne provided no competent evidence that the surgery was a necessary, let alone an extraordinary expense, was the best treatment for Jeannes condition or was not covered by Medicare. He contended that, even if surgery was covered by Medicare, any co-payment constituted a customary out-of-pocket cost, not an extraordinary expense contemplated by the Agreement. Finally, he asserted Jeanne was estopped from reviving an unsuccessful 2004 OSC seeking coverage for her prescription medications as extraordinary medical expenses.

At the hearing on the OSC, the court noted it was being asked to construe the language of the 40-year-old Agreement for the first time. It concluded that extraordinary medical expenses under the Agreement, were defined as: those expenses which are not covered by Medicare. Those expenses would include co-payments, unreimbursed expenses for prescription medications, and other expenses not paid by Medicare, excluding elective or cosmetic procedures. Murray was therefore ordered to reimburse Jeanne on a monthly basis for co-payments and out-of-pocket expenses for prescription medications. Murray, however, was permitted to decide whether to purchase an insurance policy for Jeannes benefit or pay her health care providers directly. From the orders, Murray appeals.

^DISCUSSION

Murray contends the trial court erred by rewriting, rather than interpreting, the Agreement and ordering him to cover all of Jeannes unreimbursed prescription expenses. Jeanne insists the trial court correctly interpreted the Agreement to preserve the parties original intentions.

1. Rules of contract interpretation.

Where no conflicting extrinsic evidence exists, the appellate court is not bound by the trial courts interpretation of a contract, and must decide the issue de novo. (City of Chino v. Jackson (2002) 97 Cal.App.4th 377, 386; Southern Pacific Land Co. v. Westlake Farms, Inc. (1987) 188 Cal.App.3d 807, 817.)

 Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. [Citation.] Such intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense unless used by the parties in a technical sense or a special meaning is given to them by usage [citation], controls judicial interpretation. [Citation.] Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning. [Citations.]  (Santisas v. Goodin (1998) 17 Cal.4th 599, 608; Civ. Code, 1636, 1644.) Only these basic principles are necessary when interpreting clear and unambiguous contract language. (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912.)

The rules for recognizing an ambiguity are equally straightforward. An ambiguity exists when a contractual provision is susceptible of two or more reasonable constructions. (Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d at p. 912.) Contract language interpretation involves considering the whole instrument and the circumstances of the case; ambiguity is not an abstract question. [Citation.] (Shell Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 737.) A contract may be interpreted by reference to the circumstances under which it was made, and the matter to which it relates. (La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 37.) In addition, to resolve an ambiguity, courts routinely look to the parties conduct after an agreement is executed but before a dispute arises concerning it in order to ascertain the parties intent. This rule of practical construction is predicated on the common sense concept that actions speak louder than words. (Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 754; Automobile Salesmens Union v. Eastbay Motor Car Dealers, Inc. (1970) 10 Cal.App.3d 419, 424 [practical construction, based on parties conduct for months before a dispute arose, supported an interpretation of what contract meant to them, and should prevail over the ordinary meaning of words used].) The rule also governs in a unilateral practical construction. The practical interpretation of the contract by one party, evidenced by his or her words or acts, can be used against that party on behalf of the other party, even though the other party had no knowledge of those words or acts when they occurred and did not concur in them. (1 Witkin, Summary of Calif. Law (10th ed. 2005), Contracts, 749, p. 840, citing Southern Cal. Edison Co. v. Superior Court (1995) 37 Cal.App.4th 839, 851.)

With these principles in mind, we turn to the Agreement to ascertain the parties mutual intent when Murray agreed to pay Jeannes extraordinary medical expense for the remainder of her unmarried life.

2. The Agreement is ambiguous and the trial courts interpretation of extraordinary medical expense is consistent with the parties practical construction.

The words of a contract are to be understood in their ordinary and popular sense, . . . unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed. (Civ. Code, 1644.) Something is commonly defined as extraordinary if it is exceptional to a very marked extent, remarkable, or beyond what is ordinary or usual. (Merriam-Websters Third New International Dictionary (2002) p. 807; American Heritage Dict. (2d college ed. 1982) p. 480.) The Agreement does not define which medical expenses the parties considered ordinary medical expenses, and does not describe Jeannes financial responsibility for them.[2] According to Murray, common sense dictates that ordinary expenses are incident to routine, unexceptional medical care or procedures, including annual check-ups, ongoing prescriptions, and co-payments for office visits. This definition is problematic because the meaning of the term necessarily evolves over time as ones health and physical condition change. Indeed, Murray, who insists extraordinary is not ambiguous, asserts that a once extraordinary expense can become ordinary if Jeanne experiences a condition common to the aging process. For example, while Jeanne may not ordinarily have incurred a medical expense related to back pain 40 years ago, the expense is a persistent, if not a common, occurrence to a person in her mid-80s.

The phrase extraordinary medical expense is not clear and explicit. The parties intent can only be determined in context or relation to the circumstances at a given time. The term extraordinary, which is susceptible to more than one possible meaning or interpretation depending on the context, is ambiguous.

The resolution of a contractual ambiguity is not an abstract exercise. Under rules of practical construction, we look at circumstances under which a contract was made and the matter to which it relates. (La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co., supra, 9 Cal.4th at p. 37.) When Murray and Jeanne divorced, the division of their marital assets was markedly unbalanced. Jeanne left the marriage with spousal support of $800 per month, full custody of their two children,[3]the couples silverware, and approximately $73,000 in cash and stocks. While Murray absorbed the communitys debt and tax obligations, he also retained the vast majority of its assets: an established medical practice, the family home and cars, additional stock, significant interests in numerous parcels of real estate located in Whittier, Sunnymead, Long Beach, and 560 acres of undeveloped land near Malibu and Oceanside. Under these circumstances, Murrays agreement to pay Jeannes extraordinary medical expenses for the remainder of her unmarried life possessed significant value to Jeanne, for whom the Agreement provided assurance that her medical bills would be paid if she became ill or was injured. (Cf. Mandanis v. Mandanis (1970) 8 Cal.App.3d 579, 586-587 [Valuable benefit negotiated in property settlement agreement by which husband agreed to pay for, among other things, the childs extraordinary medical and dental expenses and his college education justifies denial of ex-wifes otherwise reasonable request to increase child support from $75 per month].) Given its high value, Murray cannot argue Jeanne would have bargained for a provision affording her less protection as she aged and became less able to work, with the concomitant diminishment in her limited income and financial resources.[4]

Under principles of practical construction, the parties conduct after executing the contract and before any controversy arises as to its effect also affords reliable evidence of their intentions. (Kennecott Corp. v. Union Oil Co. (1987) 196 Cal.App.3d 1179; Crestview Cemetery Assn. v. Dieden, supra, 54 Cal.2d at p. 754.) While incomplete, the facts here are not in conflict. For almost 40 years following their separation, the parties conducted themselves under the Agreement so as to invite no judicial intervention. For most of that period, the record is silent about the arrangement regarding any medical expenses paid by Jeanne. However, in 1995 Murray purchased a health insurance policy for Jeanne affording her full coverage for Extraordinary Medical Expenses. Murray permitted that policy lapse in 2004. Since then, Jeannes only medical coverage has been provided through Medicare.

Thus, the limited evidence of the parties conduct following the execution of the Agreement and before a dispute arose demonstrates that, for at least nine years, Murray provided supplemental health insurance for Jeanne which paid her out-of-pocket medical expenses not covered by Medicare or any health insurance plan. Murrays conduct is consistent with the trial courts and our interpretation that extraordinary medical expenses are those not covered by Medicare, exclusive of elective or cosmetic surgery.

3. Jeannes unpaid prescriptions are also extraordinary medical expenses.

Murray contends the trial court erred by finding that extraordinary medical expenses included Jeannes unreimbursed expenses for prescription medication because that issue was resolved against Jeanne in an earlier OSC and is now res judicata. We disagree.

In December 2004, Jeanne filed an OSC to require Murray pay all past, present and future prescription costs that are unreimbursed by insurance or other benefit. The requested relief was denied because Jeanne failed to present evidence that the expenses fell within the extraordinary medical expenses of wife referred to in paragraph 4 of the judgment, or were actually incurred.

Res judicata prohibits the relitigation of claims and issues which have already been adjudicated in an earlier proceeding. (Kelly v. Vons Companies, Inc. (1998) 67 Cal.App.4th 1329, 1335.) The rule is based upon the sound public policy of limiting litigation by preventing a party who has had one fair trial on an issue from again drawing it into controversy. [Citation.] (Bernhard v. Bank of America (1942) 19 Cal.2d 807, 810-811.) Five requirements must be satisfied for issue preclusion: (1) the issue presented is identical to one decided in the former proceeding; (2) the issue was actually litigated in the prior proceeding; (3) the issue was necessarily decided in the prior proceeding; (4) the decision in the prior proceeding was final and on the merits; and ( 5) the person subject to preclusion was a party to the prior proceeding or in privity with a party. (Castillo v. City of Los Angeles(2001) 92 Cal.App.4th 479, 481.)

These requirements are not satisfied here. Before this action, neither party requested a judicial interpretation of the Agreement. Rather, to the extent the record provides a basis for the trial courts 2004 OSC ruling, the minute order reflects that Jeanne presented unsubstantiated prescriptions, and sought payment for those and any she incurred in the future. The OSC was denied because Jeanne failed to provide evidentiary support for her request. As a result, res judicata does not apply.

4. Attorney fees.

The Agreement states, in part: If either party . . . brings any proceedings to enforce any . . . provision hereof, and is successful in whole or in part, the other party agrees to pay reasonable attorneys fees and all costs of the party bringing any such action. Because Jeanne is the prevailing party, this matter is remanded to the trial court to determine her attorneys fees on appeal.

DISPOSITION

The order is affirmed. Jeanne is awarded her costs of appeal. The matter is remanded to determine the amount of attorneys fees due to Jeanne for defending this appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

BOLAND, J.

We concur:

COOPER, P. J.

RUBIN, J.

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[1] ^{Jeanne also sought to enforce another provision related to Murrays agreement to pay certain taxes. That matter is not at issue in this appeal.}

[2] ^{With the exception of psychiatric treatment, all of which Jeanne must pay for.}

[3]^{Murrayagreed to pay child support of $200 per month for each child until majority.}

[4] ^{Even before her stroke, Jeanne was able to work only part time. Her gross income in 2003 was approximately $15,650; in 2004, it was just under $5,500.}