Marriage of Catalano

Filed 3/26/08 Marriage of Catalano 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 a judgment of the Superior Court of Los Angeles County, Kenneth A. Black, Judge. Affirmed.

Gilligan Law Corporation and John J. Gilligan for Defendant and Appellant

Michael D. Kwasigroch for Plaintiff and Respondent.

* * * * * *

John Catalano appeals from a judgment of dissolution of his marriage with respondent Arlene Roepke Catalano incorporating the courts determinations after a bench trial regarding the ownership of Montessori Childrens World, a childrens school located in Las Vegas, Nevada (Sunset school), and another Montessori school located in Minden, Nevada (Minden school). John claimed those businesses were his sole and separate property under a premarital agreement with Arlene.^[1] Among other things, the court found that (1) the Sunset school was owned in an equal three-party partnership among John, Arlene, and Johns adult daughter, respondent Lori Bossy; and (2) the Minden School investment was the community property of John and Arlene. Numerous witnesses testified at trial, including John, Arlene, Lori, a seller of the Sunset school and a co-investor in the Minden school, and the evidence was in sharp conflict. The court expressly found that Johns testimony was completely not credible.

John contends the trial court erred by considering extrinsic evidence to explain the terms of the premarital agreement and the purchase agreements for the Sunset school. He further contends the court had no legal basis to award Lori a one-third interest in the Sunset school because she did not pay the capital necessary to fund her ownership interest. We find no error and affirm.

FACTS^[2]

1. The Marriage

John and Arlene lived together for a period of time and then married in October 1998.

2. The Premarital Agreement

Several days before their marriage, John and Arlene entered into a premarital agreement dated October 19, 1998. Both parties have stipulated this premarital agreement is valid and they are bound by its terms and conditions.

In the premarital agreement, the parties agreed that all property, including the property set forth in exhibits attached to the agreement, owned by each party prior to marriage, together with the rents, issues, profits, increases, appreciation and income thereon, are the separate property of the party owning such property. The parties also agreed that a change in form of such assets from a sale, exchange, hypothecation, or other disposition shall not constitute any change of property characterization, and such assets shall remain [the partys] separate property regardless of any change in form. The premarital agreement also provided that (1) earnings, income or benefits during marriage shall be the separate property of the party earning or acquiring it; (2) a spouse who invests his or her time, labor and skill in the others separate property during the marriage shall not be compensated or thereby acquire any ownership interest in such property, and such investment shall not constitute or create a community property interest; and (3) should a party use separate property to maintain, enhance, repair or service the debt of the others separate property, the payment or contribution shall be considered a gift.

Paragraph 15 of the premarital agreement, entitled Debt Obligations on Separate Property Interests, provided, All obligations . . . incurred due to or as a consequence of the purchase, encumbrance or hypothecation [of] the separate property of either party . . . shall be paid from such partys separate property income or from such partys separate property funds . . . , there being no community property by the terms of this Agreement. . . . (Italics added.) Paragraph 16, entitled Unsecured Debt Responsibility, similarly provided, All unsecured obligations of each party, no matter when incurred, shall remain the sole and separate obligations of each such party . . . . Each partys unsecured obligations shall be paid from each respective partys separate property income or separate property funds . . . , there being no community property by the terms of this Agreement. . . . (Italics added.)

In Paragraph 24, the parties declared that [t]his Agreement contains the entire understanding and agreement of the parties, and there have been no promises, representations, warranties, or undertakings by either party to the other, oral or written, of any character or nature, except as set forth herein.

Paragraph 25 of the premarital agreement further provided, This Agreement may be altered, amended, modified or revoked only by an instrument in writing expressly referring to this Agreement, executed, signed and acknowledged by the parties herein, and by no other means. Each of the parties waives the right to claim, contend, or assert in the future that this Agreement was modified, cancelled, superseded or changed by an oral agreement, course of conduct, or estoppel.

The parties attached exhibits to the premarital agreement, listing each spouses separate property. Although it was already in existence, a joint checking account at the Bank of America (joint bank account) was not included in either partys list. Both Arlene and John deposited money into, and used, the joint bank account.

Arlene testified she had substantial properties and businesses, including two Montessori schools in California, at the time of marriage. Both parties desired the premarital agreement to protect his or her separate property upon marriage. Arlene testified it was not her intention the couple would never have community property. She testified she understood the agreement only talk[ed] about our separate properties and what will happen to our separate properties and that those [properties] will be protected no matter what. She testified the premarital agreement concerned issues regarding what happens after we get married to our separate property and [n]ot about any future things we may buy together.

3. Sunset School Purchase

On June 9, 1999, about seven months after their marriage, John and Arlene signed an Agreement to Purchase Assets and Lease Real Estate (purchase agreement) with Manual and Arlene Gonzalez and their limited liability company (sellers) with respect to the Sunset school. All four parties signed the purchase agreement and each initialed a number of changes to the agreement.

The purchase agreement had two components: an assets purchase and a facility lease. Under the purchase agreement, the buyers agreed to purchase all tangible and intangible assets for $75,000, and they agreed to lease the facility pursuant to a tiered payment schedule. The buyers agreed to pay $11,000 upon completion of the agreement and possession of the property, $25,000 at the end of 18 months and the balance within 36 months with interest. The purchase agreement provided that John and/or Arlene Catalano and/or nominee will be the buyer. The purchase agreement bears the signatures of John and Arlene.

A down payment of $500 for the Sunset school was made from John and Arlenes joint bank account. At the end of the Purchase agreement, John noted in his handwriting, and the sellers specifically acknowledged, receipt of $500 to bind this Agreement.^[3]

On June 21, 1999, John signed an Agreement for Sale of Assets (sale agreement) to purchase the Sunset school from the sellers. The sale agreement recited that the agreement for sale of assets was being made between the sellers and John Catalano or Nominee, designated as the Buyer[s].

Arlene testified she was not present to sign the sale agreement and related documents because of her mothers illness and because she understood the investigative process for a license to operate in Las Vegas would take much longer if she were involved since she owned other schools. Arlene also had not filed tax returns for several years, and the application for the license required tax returns to be attached to the license application.

The seller, Mrs. Gonzalez, testified that John told her at the signing that Arlene was unable to attend due to the illness of her mother. At the closing, John presented Mr. and Mrs. Gonzalez with a set of documents that he had prepared, which reflected the Buyers as John Catalano or Nominee. When Mrs. Gonzalez inquired about why Arlenes name did not appear on the documents, John informed Mrs. Gonzalez he was using the term nominee so that he and his wife could determine at a later date in what entity they would set up their business. He pointed to paragraph 11 of the sale agreement, assuring Mrs. Gonzalez that it was not necessary for Arlene to sign those documents because everything that we had agreed to on June 9th among the four of us transcended these future [documents].^[4]

In the sale agreement, the Buyers agreed to purchase the Sunset school for a total of $75,000, of which $500 was paid as a deposit, $10,500 was to be paid upon completion of licensing requirements, $25,000 was to be paid in equal installments over 18 months, and the balance of $39,000 was to be paid within 36 months with interest at 7 percent. John signed the sale agreement on a signature line below which was typed John Catalano or nominee, on behalf of the Buyers. The sellers made out a bill of sale to John Catalano or nominee, and John signed a promissory note for $75,000 in the sellers favor on behalf of John Catalano or nominee. Except for John, a number of witnesses testified a corporation was to be formed to own and operate the school, but the corporation never in fact was formed.

John also signed a commercial lease in favor of the sellers as landlords for a period of five years with the right to renew for three extended terms of five years each, a total lease term of 20 years. The tenant on the commercial lease was listed as John Catalano or Nominee, and John signed on a line designated John Catalano/Nominee.

Subsequently, John registered a fictitious business name under Montessori Childrens World in the State of Nevada solely under his own name. John applied for and was granted a license to operate as a licensed child care provider in Clark County, Nevada under the name, Montessori Childrens World.]

John was able to secure insurance at a substantial reduction in premium for the Sunset school, based on Arlenes longtime relationship with the insurer as an established owner of a preschool and after John presented to the agent a letter stating Arlene would be a co-owner. Lori was named as an additional insured on the policy upon Johns representing to the insurer that she was an additional owner of the business. John also listed both Arlene and Lori as owners in applying for medical insurance for the business.

Mrs. Gonzalez testified it was her understanding from discussions prior to the sale that Arlene had several successful preschools and Montessori schools in California and Arlene would be the primary person running the school, together with Lori. Mrs. Gonzalez recalled that John worked at Home Depot and had no background in running any school or preschool. Mrs. Gonzalez considered the most important factor in the sale to be Arlenes experience. She testified she would never have sold her school had John been the sole purchaser. According to Mrs. Gonzalez, the inducement for selling the school was that she had found someone she could trust with the business that she had built and grown and who had the knowledge and experience necessary to continue the business. A prime consideration was that the buyer be successful in running the school, which would be a long-term source of income for the Gonzalezs. Mrs. Gonzalez understood Arlene would be the brains behind the business because of her experience and John would take only a background role. John told Mrs. Gonzalez that Lori, who had a masters degree in education and Montessori experience, also would be an owner and the onsite director of the school. Mrs. Gonzalez stated she understood John, Arlene and Lori would each have one-third share in the business.

After the purchase, John introduced himself, Arlene and Lori as the new owners of the Sunset school at a meeting of the school staff.

Arlene and Lori testified that John and Arlene entered into an oral agreement with Lori whereby the three would purchase the preschool as partners and convert the preschool into a Montessori school using Arlenes knowledge and experience, and Lori would be the school director and one-third owner. After the purchase, Lori and John signed a Director/Teacher Employment Agreement that provided for Lori to serve as the director of the Sunset school for two years and to receive a one-third ownership of the Sunset school.^[5] Lori testified she was to participate in profit once the sum of $25,000 was credited to her toward the initial investment of $75,000.

John asserted at trial that he and Arlene had ongoing discussions about sharing their assets. He testified that Arlenes becoming an owner in the Sunset school was contingent upon her agreeing to share with him the assets she had acquired and developed prior to the marriage.

4. Minden School Purchase

John and Arlene also invested in the Minden school as partners with another couple. It was intended that title would be taken under a corporate name and that Arlene would oversee the school. The proceeds to acquire the Minden venture came from the Sunset school. John and Arlenes co-investors became disenchanted with them before the close of escrow. The co-investors purchased John and Arlenes interest in the Minden school for $80,000, which sums were deposited in John and Arlenes joint bank account.

PROCEDURAL HISTORY

In March 2001, Arlene filed a petition for dissolution of marriage. An amended petition alleged she and John were separated in March 2001, after a marriage of almost two and a half years. The amended petition requested the court to determine, among other things, the couples the community and quasi-community assets and debts and their property rights. John responded but alleged the couple had separated in September 2000, after a marriage of almost two years. He also asserted no community property was acquired during the marriage pursuant to the premarital agreement.

Separate and apart from the dissolution of marriage proceeding, Arlene filed a civil action in April 2001 against John and others for breach of oral contract, accounting, fraud, conversion, breach of fiduciary duty, breach of covenant of good faith and fair dealing, injunctive relief and imposition of constructive trust. The civil lawsuit was subsequently amended by adding Lori as an additional plaintiff together with additional related causes of action. Subsequently, a second amended complaint was filed which eventually was consolidated with the marriage dissolution proceeding.

A bench trial commenced in February 2003, continued over the course of a year and concluded in March 2004.

After hearing the evidence, the trial court found the Sunset school was owned equally by John, Arlene and Lori. As between John and Arlene, the court determined the Sunset school was jointly acquired as a community asset and that John breached his fiduciary duties owed to Arlene under Family Code section 721.^[6] The court found on conflicting evidence that the $500 deposit came from John and Arlenes joint bank account opened before the marriage, into which both parties had deposited funds, and that the balance of the down payment, $10,500, was paid from the profit of the Sunset school. The court further found that Lori was a one-third partner of the Sunset school under oral and written agreements between the parties.

Based on Johns testimony, the court concluded the business had a value of $1 million, and it calculated that Johns one-third interest in the business amounted to $333,333. The court charged John with taking funds from the Sunset school in the amount of $382,758, an amount in excess of what John was entitled to by $49,425. The court therefore determined that John owed Arlene and Lori $49,425 and that John effectively had been bought out of his interest by virtue of his unauthorized withdrawals. John was ordered to pay Arlene approximately $64,700 and to pay Lori approximately $12,200.

The trial court also found that John had taken funds from the Sunset school to purchase the Minden school and that John and Arlene were equal owners of the Minden school. The court determined John had taken $80,000 in proceeds from the Minden school and that he was obligated to pay Arlene one-half of this amount, or $40,000.

The court issued a statement of decision including such findings in September 2005. Thereafter, on September 21, 2005, the court entered a judgment of dissolution of marriage incorporating its determinations regarding the joined action after trial. John timely appealed from the courts judgment.

DISCUSSION

1. The Court Properly Considered Extrinsic Evidence

John contends the trial court erred when it allowed parol evidence to interpret the fully integrated contracts, specifically: (1) the premarital agreement and (2) the agreements for the purchase of the Sunset school.

A contract must be interpreted so as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful. (Civ. Code, 1636; see also Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264; Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 38, fn. 5.) The intention of the parties is to be ascertained from the writing alone, if possible, and the words of the contract must be understood in their ordinary and popular sense. (Civ. Code, 1639, 1644; In re Marriage of Simundza (2004) 121 Cal.App.4th 1513, 1518.) Under the parol evidence rule, where the parties to a contract have set forth the terms of their agreement in a writing which they intend as the final and complete expression of their understanding, it is deemed integrated and may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement. (Banco Do Brasil, S.A. v. Latian, Inc. (1991) 234 Cal.App.3d 973, 1000, italics added; see also Civ. Code, 1625; Code Civ. Proc., 1856, subd. (a).)  The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.  (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391, quoting Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co., supra, 69 Cal.2d at p. 37.)

The threshold issue of whether the contract is reasonably susceptible to the interpretation urged, and thus whether the extrinsic evidence is admissible, is a question of law subject to de novo review. (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955; Winet v. Price (1992) 4 Cal.App.4th 1159, 1165-1166.) However, [w]hen the competent extrinsic evidence is in conflict, and thus requires resolution of credibility issues, any reasonable construction will be upheld if it is supported by substantial evidence. (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., supra, at p. 956; see also Winet v. Price, supra, at p. 1166.)

John contends the premarital agreement is an integrated document that expressly provided that no community property may be acquired by either party during the marriage. He also contends the only way this agreement could be modified is through a writing specifically referring to the premarital agreement signed by both parties. John further argues that there was no way for the parties to acquire community property during the marriage and, even if the parties changed the form of title, it would not result in a change in the property characterization. Therefore, he argues, when he entered into the purchase agreement for the Sunset school by himself, he acquired the business as his sole and separate property since it was impossible for the parties to own community property without a subsequent written document referencing a modification of the premarital agreement. We disagree.

The premarital agreement does not address property acquired after marriage but only addresses property owned by the parties at the time of marriage. In that respect, parol evidence is not necessary to ascertain the parties intent in their agreement.

John asserts, however, that under paragraph 15 there can be no community property acquired . . . . True, that paragraph has language incorporating the phrase: . . . there being no community property by the terms of this Agreement. But that sentence fragment must be read in context. Paragraph 15 is entitled Debt Obligations on Separate Property Interests and provides that All obligations . . . incurred due to or as a consequence [of] the purchase, encumbrance, hypothecation of the separate property of either party . . . shall be paid from such partys separate property income or from such partys separate property funds . . . , their being no community property by the terms of this Agreement. (Italics added.) Read in context, such provision relates to payment of separate property debt from the partys own separate property. The provision does not purport to prevent any future community ownership of property. The premarital agreement thus is reasonably susceptible to the meaning ascribed by Arlene.

Moreover, to the extent the provisions of paragraph 15 raise any ambiguity in the premarital agreement over the nature of the funds accumulated and to be accumulated by the parties in the future, the trial court properly admitted extrinsic evidence to explain the parties intent. Having heard such evidence, the court found that the circumstances in which the Sunset school was purchased was not expressly defined in the premarital agreement as characterizing the school as separate property. The court could properly believe Arlenes testimony that paragraph 25, relating to modification or revocation of the premarital agreement would apply only [i]f we were going to change an asset that is listed on the documents . . . (italics added), i.e., the exhibits to the premarital agreement. As Arlene explained, if I was going to sell my house and give the money to John or buy something or give it to him to buy something, then by the terms, we should put that in writing . . . , if it was going to change a separate property in[to] community. The court found Arlene credible and Johns testimony not credible in this regard, and we will not disturb the courts findings.

John further disputes the courts finding that he and Arlene acquired the Sunset school as community property, asserting the sale agreement, lease, bill of sale, license, fictitious business name statement and promissory note are all in his own name. The trial court properly admitted extrinsic evidence as to the true purchaser of the Sunset school business.

The purchase documents raised an ambiguity regarding the identity of the purchasers of the Sunset school business. The initial purchase agreement explicitly listed Arlene as one of the buyers of the Sunset school, referring to the buyers as John Catalano and/or Arlene Catalano and/or nominee. Arlene signed the purchase agreement as a buyer, together with John, and she initialed numerous changes made to that document. The subsequent sale agreement listed the buyers as John Catalano or Nominee, and John signed for the buyers on the line under which was designated John Catalano or nominee. The bill of sale, promissory note and lease agreement also designated the buyer as John Catalano or nominee. The reference to nominee may be reasonably interpreted as including a purchaser or purchasers in addition to John, such as the corporate entity that Arlene and Lori testified was to have been formed to own and operate the Sunset school. Moreover, the sale agreement specifically incorporated the provisions of the purchase agreement, which named Arlene as a buyer. The trial court therefore did not err in admitting extrinsic evidence regarding the identity of the purchasers. Nor did the court err in hearing testimony regarding the formation of those agreements and the circumstances of their execution. (See Code Civ. Proc., 1856, subd. (g) [circumstances under which agreement made], 1860 [circumstances of instrument, including parties thereto].)

As noted in the statement of facts, there was overwhelming evidence that Arlene was an intended purchaser of the Sunset school business, that the down payment for the business came from the parties joint bank account and that both parties deposited money, which included wedding gifts, into that account during the marriage. Whether property is characterized as separate or community is determined at the time of its acquisition. (See v. See (1966) 64 Cal.2d 778, 783.) There is no dispute that the Sunset school was acquired after John and Arlenes marriage. There is a general presumption property acquired during marriage by either spouse, other than by gift or inheritance, is community property unless it is traceable to a separate property source. (Fam. Code,  760; In re Marriage of Haines (1995) 33 Cal.App.4th 277, 289-290.) The court therefore properly applied the presumption that the Sunset school was acquired by the couple as community property.

The presumption that property acquired during marriage is community may be overcome by the party contesting the community property source. (In re Marriage of Mix (1975) 14 Cal.3d 604, 611-612.) In this case, the undisputed evidence showed the down payment for the Sunset school came from the joint bank account of John and Arlene. The court disbelieved Johns testimony regarding the source of the funds in the joint bank account, noting Johns claim that Arlene never deposited money into the account was rebutted by evidence of checks, wedding gifts, and even a cash deposit which was testified to by [Arlene] to have been her cash. John failed to overcome the presumption that the Sunset school was acquired as community property.

John disputes the award to Arlene of one-half of the proceeds from the Minden school only insofar as he claims he is sole owner of the Sunset school, which was the source of the funds for the investment in the Minden school. At trial, Johns counsel conceded that if the Sunset school were found to be community property and the money that went into the Minden school came from the Sunset school, I dont think theres any way that I can argue in good conscience to the court that [Arlene] has no interest in the Minden school. Because we determine the court properly found John and Arlenes interest in the Sunset school was community property, the court also appropriately found the proceeds from the Minden school to be community property.^[7]

2. Substantial Evidence Supports the Judgment for Lori

John contends there is no legal basis for the trial courts award to Lori of a one-third interest in the Sunset school. John argues that Loris ownership interest is based upon the two-year Director/Teacher Employment Agreement that required Lori to pay $25,000 of her share of the profits for her partnership share. He asserts the evidence showed Lori did not pay the necessary capital to fund her share and cites the absence of any Internal Revenue Service 1099 or W-2 form evidencing Loris receipt of $25,000 from the Sunset school to be invested back into the school. He further points to her alleged failure to declare such a sum on her personal income tax return. Finally, he argues that Lori received four cash gifts of $10,000 in lieu of her receipt of a one-third partnership share.

These arguments essentially are claims that the trial courts findings are not supported by substantial evidence.  When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact. [Citation.] (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) A reviewing court starts with the presumption that the record contains evidence to uphold every finding of fact, and it is the appellants burden to demonstrate there is no substantial evidence to support the findings under attack. (Ibid.)

Although respondents fail to assist the court whatsoever in this determination (see footnote 2, ante), we are satisfied from our own review that substantial evidence exists to support the courts findings.

There was substantial evidence presented that Lori satisfied the contractual requirement to pay $25,000 from Sunset school profit for her one-third share of the business. John himself testified several times that Lori had been credited with her $25,000 profit participation. There was also substantial evidence of oral and written agreements to make Lori a one-third partner in the Sunset school. Such evidence included documentary and oral evidence including the testimony of Lori, Arlene, Mrs. Gonzalez and other witnesses. Lori also testified her father told her funds from the Sunset school were being used to purchase the Minden school and that she would be an investor. Lori, however, claimed no ownership interest in the Minden school at trial, and the court properly left to Lori and Arlene, who were represented by the same attorney, the matter of reconciling the amounts due between them with respect to the Minden school investment.

DISPOSITION

The judgment is affirmed. Respondents are to recover costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

FLIER, J.

We concur:

COOPER, P. J.

EGERTON, J.^*

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^[1] Following the customary practice in marital dissolution cases, we use the parties first names for the sake of clarity, meaning no disrespect. (In re Marriage of Smith (2007) 148 Cal.App.4th 1115, 1118, fn. 1.)

^[2] Respondents brief is in gross violation of California Rules of Court, rule 8.204(a)(1)(C), which requires a party to [s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears. (Italics added.) Ignoring this rule, respondents only make a blanket reference to admitted facts in the appellants opening brief, appellants appendix pages and the trial courts statement of decision, claiming their facts are taken primarily from admitted facts purportedly contained in such documents. We may disregard such statements of fact not supported by appropriate reference to the record. (McOwen v. Grossman (2007) 153 Cal.App.4th 937, 947; Yeboah v. Progeny Ventures, Inc. (2005) 128 Cal.App.4th 443, 451; Cal. Rules of Court, rule 8.204(a)(1)(C).) Respondents violation of such rules has placed an inordinate burden on this court. Nonetheless, we have conducted our own review of the record.

^[3] Under the evidence at trial, this $500 was the sole amount paid out of pocket by the buyers. All remaining payments to the sellers were funded from proceeds of the Sunset school.

^[4] Paragraph 11 of the sale agreement states, All warranties and representations set forth in this agreement and the agreement letter [of] June 9, 1999 shall survive the execution of this agreement, the execution and delivery of the Bill of sale of the assets herein transferred and the delivery of said assets to Buyers.

^[5] The agreement was purportedly between Lori and Montessori School Development/Consulting Inc. It was not disputed that Montessori School Development/Consulting Inc. was never formed.

^[6] Family Code section 721, subdivision (b) provides that, with certain exceptions, in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. Such confidential relationship further imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. (Fam. Code, 721, subd. (b).)

^[7] We discuss Loris interest, if any, in the Minden school, ante.

^* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.