Safarian v. Govgassian

• Decision Date: 21 April 2020
• Docket Number: B291387
• Citation: 261 Cal.Rptr.3d 473,47 Cal.App.5th 1053
• Court: California Court of Appeals Court of Appeals
• Parties: Rose SAFARIAN, Plaintiff and Appellant, v. Harry GOVGASSIAN et al., Defendants and Respondents.

47 Cal.App.5th 1053

261 Cal.Rptr.3d 473

Rose SAFARIAN, Plaintiff and Appellant,

v.Harry GOVGASSIAN et al., Defendants and Respondents.

B291387

Court of Appeal, Second District, Division 5, California.

Filed April 21, 2020

Law Offices of Armen M. Tashjian and Armen M. Tashjian, Glendale, for Plaintiff and Appellant.

Stone & Stone, Steven H. Stone, Encino; Benedon & Serlin, Gerald M. Serlin, Wendy S. Albers, Woodland Hills, for Defendants and Respondents.

MOOR, J.

A married couple filed a fraud action against multiple defendants. While the fraud action was pending, husband filed for divorce. Husband and wife entered into a written marital property agreement that characterized any recovery in the fraud action as the separate property of each spouse. Judgment was entered against the defendants in the fraud action, but husband filed for bankruptcy prior to enforcement of the judgment. The fraud defendants, aware of the marital property agreement, entered into a settlement with the bankruptcy trustee. Next, they moved to stay collection proceedings brought by wife in the fraud action on the ground that the entire amount of the judgment was community property included in husband’s bankruptcy estate and settled by the bankruptcy trustee. Wife argued that under the marital property agreement, her interest in the fraud judgment was her separate property, which was not part of husband’s bankruptcy estate. Defendants argued the marital property agreement was ineffective because it did not meet the transmutation requirements of Family Code section 852,¹ which precludes extrinsic evidence to resolve ambiguities. The trial court interpreted the marital property agreement to have had no effect on the character of the judgment proceeds. The agreement specifically identified the fraud action, but it referred to the spouses’ separate claims in the action; in fact, all of the claims in the fraud action were brought jointly. The trial court found the agreement was impermissibly vague, so it failed to transmute the community property judgment proceeds to separate property interests. The trial court granted the protective order.

On appeal, wife contends the fraud defendants do not have standing to challenge the property agreement based on the transmutation requirements of section 852. We conclude a transmutation that does not meet the requirements of section 852 is voidable, rather than void. Since the defendants are not parties to the marital property agreement, they cannot rely on section 852 to invalidate the agreement. We reverse and remand for further proceedings to determine the effect of the marital property agreement under ordinary rules of contract interpretation.

FACTUAL AND PROCEDURAL BACKGROUND

Fraud Trial and Marital Property Agreement

On March 20, 2008, plaintiff and appellant Rose Safarian (Wife) and her husband Armen Sanamyan (Husband) filed an action against defendants and appellants Harry Govgassian and Alisa Agadjanian, as well as against Elsagav S. Shaham, M.D., Hippocratic Management Services, Inc., and Silka Enterprises Inc., doing business as Salud Family Medical Clinic, for fraud and other claims arising out of an investment in a medical clinic (the fraud action).

Two months later in May 2008, Husband filed a petition for dissolution of marriage. Wife and Husband executed a "marital settlement agreement" at the end of July 2008. The express purpose of the agreement was to make a final and complete settlement of all rights and obligations between them, including all property rights. Provision 1, subdivision j, of the agreement stated, "Except as otherwise expressly provided in this Agreement, each Party, hereby releases the other from all inter-spousal obligations whether incurred before or after the effective date, and all claims to the property of the other. This release extends to all claims based on the rights that have accrued before the marriage, including, but not limited to, property and support claims. Additionally, it is agreed that each Party, while engaged in joint prosecution, will be entitled to maintain his or her separate claims for damages pertaining to the alleged fraud actions pertaining to two litigation matters, in reference to Ummba Grill Restaurant and Silka Enterprises, Inc., (collectively referred to as ‘Govgassian Fraud Cases’). The proceeds recovered from these actions will be the separate property of each Party. The parties have considered such claims in this agreement."

In addition, provision 10 of the agreement stated, "The parties acknowledge that they have previously divided all of their community assets and liabilities as well as their separate property, between them to their satisfaction. Each party hereby confirms such division and transfers to the other as his or her separate property all such property in their personal possession or title, including but not limited to the items stated in 1(j) above."

The agreement stated it was valid and enforceable "upon signing by both parties regardless whether a judgment for dissolution is entered or not." The effective date of the agreement was the date of execution by both parties. Husband signed the agreement on July 21, 2008, and Wife signed the agreement on July 22, 2008.

Three years later, on August 20, 2012, judgment was entered after a jury trial in the fraud action in favor of Wife and Husband. Hippocratic’s default had been entered. The jury found the defendants conspired to defraud the plaintiffs, whose total damages were $460,000 as follows: $240,000 for loss of investment or loans, $20,000 for Wife’s unpaid wages, $100,000 for Wife’s noneconomic losses, and $100,000 for Husband’s noneconomic losses. The jury also found the defendants liable for punitive damages as follows: $250,000 as against Govgassian, $125,000 as against Agadjanian, $100,000 as against Shaham, and $25,000 as against Silka. The judgment ordered recovery of $460,000 to Wife and Husband from the defendants jointly and severably, an additional $250,000 from Govgassian, an additional $125,000 from Agadjanian, an additional $100,000 from Shaham, and an additional $25,000 from Silka.

Govgassian and Agadjanian filed a notice of appeal, as did Shaham. But on December 18, 2012, the appeal filed by Govgassian and Agadjanian was dismissed based on their default.

Bankruptcy Filing

On December 13, 2013, Husband filed a petition for bankruptcy under Chapter 7 of the Bankruptcy Code. He expressly stated that it was not a joint case and he was unmarried. He listed the dissolution proceeding as a pending action to which he was a party as well as other civil litigation not relevant here. Husband did not list the fraud action in his original bankruptcy petition. The record on appeal does not contain an amended petition, but Govgassian and Agadjanian have represented in pleadings in this matter that Husband filed an amended bankruptcy petition on February 11, 2014, listing the judgment in the fraud action. The bankruptcy court granted a discharge to Husband on April 7, 2014.

Four months later, this appellate court affirmed the judgment against Shaham in the fraud action in an unpublished opinion. ( Safarian v. Shaham (Oct. 9, 2014, B244709) 2014 WL 5038651.)

Govgassian and Agadjanian contacted bankruptcy trustee Howard Ehrenberg to discuss settlement of the judgment in the fraud action. In early 2016, Ehrenberg provided notice in the bankruptcy proceedings of a motion to approve a proposed settlement with the judgment debtors. In response, the attorney who represented Wife and Husband in the fraud action expressed concern that the proposed settlement might compromise Wife’s interest in the judgment. Ehrenberg did not believe he had settled Wife’s claim and assured the attorney that the judgment debtors did not include Wife’s interest in the settlement. The following week, Ehrenberg changed his assessment and stated he could not confirm that the settlement did not extend to Wife’s interest, because the judgment was a community asset included in the bankruptcy estate. Husband’s bankruptcy attorney provided Ehrenberg with a copy of the marital property agreement, and Ehrenberg withdrew his motion to approve the settlement. Ehrenberg concluded Wife had an interest in the fraud judgment that was separate from the bankruptcy estate, and he did not have any authority to compromise Wife’s interest. Separate mediations were held.

On August 19, 2016, Ehrenberg entered into an agreement with Govgassian and Agadjanian to accept payment in settlement of Husband’s rights and interest to collect on the judgment. The bankruptcy court approved the settlement of the judgment in November 2016, and Govgassian and Agadjanian completed payment of the judgment in May 2017. On July 26, 2017, the bankruptcy trustee executed a satisfaction of judgment that clearly stated it was in full satisfaction of Husband’s interest only.

Protective Order to Stay Collection Proceedings

On March 6, 2018, Govgassian and Agadjanian filed a motion in the fraud action for a protective order staying all collection proceedings. They argued that even if a marital settlement agreement existed, the causes of action and recovery in the fraud case were community property as a matter of law, because no judgment of dissolution or approval of the agreement dividing the property had been entered. Community property, including the non-debtor’s spouse’s share, became part of the bankruptcy estate by law. As a result, the satisfaction of judgment signed by the bankruptcy trustee satisfied the entire fraud judgment.

Govgassian and Agadjanian submitted Ehrenberg’s declaration in support of their motion. Ehrenberg stated that the fraud judgment was an asset of the bankruptcy estate, but the bankruptcy court had not ruled on whether the judgment was community or separate property. On August 19, 2019, Ehrenberg entered into a settlement agreement with Govgassian and Agadjanian to accept payment in full and final settlement of the bankruptcy...