Smykla v. Mark

• Docket Number: A164211
• Decision Date: 20 October 2023
• Parties: JAMES SMYKLA, Plaintiff, v. JOHN MARK, Defendant and Respondent; BODHI MARK, Intervenor and Appellant.
• Court: California Court of Appeals Court of Appeals

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JAMES SMYKLA, Plaintiff, v. JOHN MARK, Defendant and Respondent;

BODHI MARK, Intervenor and Appellant.

A164211

California Court of Appeals, First District, Second Division

October 20, 2023

NOT TO BE PUBLISHED

(Mendocino County Super. Ct. No. SCUKCVPB201526465)

STEWART, P. J.

Four family members entered into a settlement agreement to resolve an intra-family dispute over a parcel of real property located in Mendocino County. After the litigation was dismissed, a dispute about the meaning of the settlement agreement arose, and two of the settling parties, respondent John Mark and his son appellant Bodhi Mark, filed dueling motions to enforce the settlement agreement pursuant to the court's retained jurisdiction under Code of Civil Procedure section 664.6. Principally at issue was the meaning of a provision in the settlement agreement addressing two encumbrances on the property, both of which secured sizeable outstanding loans that respondent John Mark had taken out in his own name.

Ruling on those cross post-judgment motions, the trial court interpreted the settlement agreement as relieving John Mark from making any further payments on the larger and more senior of the two loans, thereby placing the property in peril of foreclosure. Bodhi Mark now appeals, and we reverse. On de novo review of this issue, we conclude the court erred in its interpretation of the settlement agreement.

BACKGROUND

John Mark and his unmarried partner Narda Vicent jointly owned an undivided parcel of real property in Mendocino County, held in trust. When Narda died in 2001, her fifty percent interest in the property passed in trust to their two sons, Bodhi Mark (Bodhi) and Mabin Mark (Mabin), and to her oldest son and their half-brother, James Smykla (James).

In 2015, James initiated proceedings against John over their late mother's trust for breach of fiduciary duty and to compel an accounting. The central allegations were that rather than distributing their mother's one-half interest in the real property to her sons as her trust beneficiaries John had engaged in a series of acts of self-dealing by which he had deeded the entire property to himself, borrowed against the property, and then used the borrowed funds to engage in a construction venture in Southern California. The two other brothers, Mark and Mabin, subsequently joined in the case, and on March 30, 2017, all four parties reached a written settlement in the midst of trial.

The undisputed extrinsic evidence established that, at the time of the settlement, the property was encumbered by two deeds of trust securing approximately $750,000 of indebtedness: a $550,000 mortgage referred to by the parties in the settlement agreement as the "First Mortgage," and a $200,000 mortgage referred to as the "Second Mortgage." The former was the approximate balance of a $650,000 loan John had obtained in his own name from CitiMortgage in March 2007, and the latter was a $200,000 home equity line of credit he had secured in his own name from Redwood Credit Union in May 2007.

Under the settlement agreement, two of the children, James and Mabin, cashed out of the property, each for $110,000. James agreed to sell his entire interest in the property to Bodhi partially payable by a five-year $90,000 promissory note secured by a deed of trust against the property, subject to the two senior lienholders. Mabin agreed to sell his interest to John, partially payable by a $100,000 promissory note secured by a deed of trust against the property, junior to all of the other lienholders including James. The result was that Bodhi would own approximately an undivided 31.4 percent interest in the property and John would own approximately an undivided 68.6 percent interest.

The settlement agreement addressed many subjects concerning the property on a prospective basis. As relevant here, Bodhi and John agreed to negotiate and cooperate in good faith to accomplish a subdivision of the property into two parcels and the settlement agreement gave each the right to buy out part of the other's interest in the property in the event of a subdivision, with the goal of allowing Bodhi to solely own the northern parcel and John the southern parcel upon the subdivision's completion.

The settlement agreement gave Bodhi and John the exclusive rights of use and possession of the northern and southern parcels, respectively, in the meantime. The agreement reflects that Bodhi had been living in a "duplex" located on John's southern parcel, which Bodhi agreed to vacate in 90 days. It also reflects that located on Bodhi's northern parcel was a three-bedroom residence that presently had rental tenants, and the settling parties agreed the lease would not be renewed at its expiration.

Section 12 of the settlement agreement waived John's and Bodhi's rights of partition for four years, and provided that at the expiration of the four-year period each had a right of first refusal "of any offer made" by the other, and further specified that if "the parties do not agree on a price, an agent under limited power of attorney . . . chosen by agreement between [them] from the list attached here as Exhibit 'M' will cause the Property to be listed and sold to the highest and best bidder."

Section 5 addressed the existing mortgages. It stated in relevant part:

"A. Payment of First Mortgage. Commencing upon the Effective Date and continuing for a period of four (4) years (the 'Co-tenancy Period'), John agrees to assume all obligations under that certain encumbrance with a balance at present of approximately $550,000.00 payable to Select Portfolio Savings . . . (the 'First Mortgage'), which loan is secured in first position by the Property. John personally warrants and guarantees that all payments on the First Mortgage will be made in a timely manner and that [his payments] . . . will at no time be in arrears. John is solely responsible for this encumbrance.

"B. Payment of Second Mortgage. During the Co-tenancy Period, Bodhi agrees to pay fifty percent of the monthly payments due on that certain Redwood Credit Union loan . . . (the 'Second Mortgage'), or $700 a month, whichever is less. The Second Mortgage is secured by the Property in second position. Bodhi personally warrants and guarantees that all payments will be made in a timely manner, and that his payments will at no time be in arrears.

"Notwithstanding the foregoing, John agrees to reduce such amount of current principal on the Second Mortgage charged against it by John on or after March 8, 2017 within thirty (30) days of the Effective Date.

"In the event the Second Mortgage is not paid in full at the end of the Co-tenancy period, Bodhi agrees to continue to pay his portion until the mortgage is fully retired."

The settlement agreement provided that the action would be dismissed but that the court would retain jurisdiction to enforce it pursuant to Code of Civil Procedure section 664.6.

The court subsequently dismissed the case with prejudice (on April 3, 2017) but, as agreed by the settling parties, retained jurisdiction to enforce the settlement agreement.

On August 3, 2021, four years and three months after the parties entered into the settlement agreement, John filed a motion to enforce it. He contended that Bodhi had breached the settlement agreement by refusing to cooperate in listing the property for sale after the four-year co-tenancy period ended on March 30, 2021, and sought an order of specific performance directing Bodhi to cooperate in the viewing, showing, listing and sale of the property. He also contended that he and Bodhi disputed the meaning of section 5 of the settlement agreement, with John taking the position he was no longer required to pay the First Mortgage because the four-year cotenancy period had expired and Bodhi taking the position John remained solely responsible to pay that mortgage. John asserted that Bodhi was using that dispute as a basis to delay or prevent a sale of the property, and asked the court to sever the First Mortgage provision from the contract pursuant to a severability clause contained in section 16 of the settlement agreement. He asserted that once that clause was deleted, "the remaining balance of the First Mortgage must be paid in accordance with the parties' respective ownership interests," citing to a portion of section 12 of the settlement agreement.^[1]

Bodhi, who wanted either to buy his father's interest in the property or subdivide the property and own just a portion, opposed the motion and filed a dueling motion of his own to enforce the settlement.^[2] As relevant here, he sought an order confirming that he has no responsibility for the First Mortgage or, in the alternative, a finding that there was a lack of meeting of the minds and an order vacating the settlement agreement and setting case for trial.

The fundamental disagreement below was whether John was required to pay 100 percent of the remaining balance of the First Mortgage or whether Bodhi was required to pay a portion of the balance, based on his fractional ownership interest. And while the motions were pending, John allowed the property to go into default.

In a December 3, 2021 minute order, the court ruled in pertinent part that "[t]he four-year term set forth in the Agreement expired on March 30, 2021," "to date, [John] has stopped making any mortgage payments," and that "pursuant to the agreement either party may make an offer to purchase the property in its entirety, or the property is to be listed for sale" but that "[n]either party has made an offer to purchase so the property must be listed for sale." It also ruled that John "will no longer be responsible for the mortgage payments."

Bodhi then timely appealed the court's order....