Background
Jason McConnell and Suzanne Jahnke married in 2005 and separated in 2020. The couple were vintners who owned over 200 acres of land near Ukiah in Mendocino County. After contentious dissolution proceedings, they reached a settlement during a trial recess in March 2024, memorializing their agreement in a written memorandum of understanding (MOU).
Under the MOU, Jahnke received virtually all the community property — including the marital home and “all debts thereon,” two business entities, and their associated debts and liabilities. McConnell received a $3.8 million equalization payment and certain personal property. The parties never finalized a comprehensive marital settlement agreement because they could not agree on one issue: whether the MOU required Jahnke to remove McConnell’s name from the jointly held mortgage on the home.
When Jahnke moved for entry of judgment consistent with the MOU, McConnell filed a competing request asking the trial court to order Jahnke to remove him as a borrower on the mortgage. The trial court ruled in Jahnke’s favor, finding the MOU unambiguously did not require her to remove McConnell from the loan. It entered judgment without admitting any parol evidence. McConnell appealed.
The Court’s Holding
The First District affirmed. The court held that the MOU provision “awarding” Jahnke the home “and all debts thereon” unambiguously made her solely responsible for paying the mortgage as between the spouses, but it did not include an implied term requiring her to remove McConnell from the underlying loan with the lender.
The court applied the well-established principle that “[i]mplied terms are not favored in the law, and should be read into contracts only upon grounds of obvious necessity.” McConnell could not demonstrate that removing his name from the mortgage — which might require refinancing or paying off the loan entirely — was the only way to ensure Jahnke’s performance. The court pointed to Family Code section 916, subdivision (b), which provides a right of reimbursement when a debt assigned to one spouse in a dissolution goes unpaid: the award of a previously joint debt to one spouse does not require the underlying contractual obligations with the lender to be reconfigured. The MOU’s structure reinforced this conclusion — while it specified that McConnell must execute a grant deed within 10 days, it contained no comparable requirement for Jahnke to take any action to restructure the mortgage.
The court also rejected McConnell’s alternative argument that the MOU was ambiguous and parol evidence should have been admitted. Because the provision was not “reasonably susceptible” to McConnell’s interpretation, extrinsic evidence was properly excluded. Finally, the court declined to disturb the trial court’s refusal to attach oral stipulations from the settlement hearing to the judgment, finding McConnell had not shown prejudice.
Key Takeaways
- A divorcing party who agrees to assume a joint mortgage in a property settlement cannot be forced to remove the other spouse from the mortgage absent an explicit term in the agreement requiring it. “Awarding” a home “and all debts thereon” allocates payment responsibility between the spouses, but it does not obligate the recipient to refinance or restructure the loan with the lender.
- Family Code section 916, subdivision (b) provides a statutory safety net: if the spouse who assumed the debt fails to pay, the other spouse retains a right of reimbursement — even though the lender may still hold both names on the loan.
- When drafting marital settlement agreements involving jointly held mortgages, practitioners should include explicit provisions addressing whether the receiving spouse must refinance, obtain a loan assumption, or otherwise remove the other spouse from the mortgage — and specify deadlines and consequences for failure to do so.
Why It Matters
This opinion addresses a recurring pain point in California divorces: what happens when one spouse gets the house and the mortgage but never removes the other spouse from the loan. The non-recipient spouse remains exposed to credit risk and contingent liability despite no longer having any interest in the property. Until now, many family law practitioners assumed that “awarding” the home and its debts to one spouse implicitly required removing the other from the mortgage. The First District has now squarely held otherwise.
The practical impact is significant. California family law attorneys should treat mortgage removal as a term that must be explicitly negotiated and drafted — not assumed. Settlement agreements and marital settlement agreements should specify whether and when the receiving spouse must refinance, the consequences of failing to do so (such as a forced sale), and interim protections for the non-recipient spouse’s credit. Without these provisions, the non-recipient may be stuck on the mortgage indefinitely, with only the statutory reimbursement remedy under Family Code section 916 as a backstop.