Amar Plaza, Inc. v. Rampart Properties CA2/1 ( 2016 )

Filed 2/29/16 Amar Plaza, Inc. v. Rampart Properties CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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 ONE
AMAR PLAZA, INC., B254564
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC431030)
v.
RAMPART PROPERTIES, INC., et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los Angeles County. Michael
L. Stern, Judge. Appeal dismissed.
Law Offices of Martin N. Buchanan and Martin N. Buchanan for Defendants and
Appellants.
BASTA, Ross T. Kutash, Matthew L. Brinton; and Daniel J. Bramzon for Plaintiff
and Respondent.
_____________________________________________
Rampart Properties, Inc. (Rampart) and its owner, Frank Acevedo, appeal from a
judgment in favor of Amar Plaza, Inc. (Amar Plaza) for damages and declaratory relief.
Amar Plaza filed a motion in this court to dismiss the appeal claiming that “the parties
entered into a full and final settlement agreement resolving all of the claims at issue in
this appeal.” Rampart and Acevedo opposed the motion on the ground that the parties
never reached a final settlement agreement and, if they did, it was never approved by the
bankruptcy court in Acevedo’s bankruptcy case. We remanded the cause to the superior
court to make findings regarding the alleged agreement. After an evidentiary hearing,
the trial court determined that the appeal should proceed because Amar Plaza’s counsel
negotiated the settlement with Acevedo’s bankruptcy counsel without involving Rampart
and Acevedo’s appellate counsel—conduct the court determined violated rule 2-100 of
the California State Bar Rules of Professional Conduct (rule 2-100).1 We have reviewed
the court’s findings, the record, and the parties’ supplemental briefs. We disagree
with the court’s application of rule 2-100 and conclude that the parties had reached a
settlement disposing of this appeal. Accordingly, we grant the motion to dismiss.
I. Background
Amar Plaza is a nonprofit mutual benefit corporation that owns a 15-building,
96-unit apartment complex in La Puente. The residents of the apartment complex
are the owners, or “members,” of Amar Plaza. Amar Plaza is subsidized and regulated
by the United States Department of Housing and Urban Development (HUD). HUD
regulations require that HUD approve of the property manager and any encumbrances
against Amar Plaza’s property.
In September 2004, Amar Plaza and Rampart entered into a “Management
Agreement.” Under the agreement, Rampart, as Amar Plaza’s agent, was authorized to
lease apartments, collect rents and other receipts, evict members, contract for operational
services, and arrange for property maintenance and repairs. Rampart was entitled to a
1
Although Judge Michael Stern presided over the trial in this case, Judge Ernest
Hiroshige presided over the evidentiary hearing on remand.
2
management fee equal to 8 percent of the gross receipts, plus other specified fees and
reimbursements. HUD approved of the agreement and certified Rampart as the property
manager.
In June 2005, Amar Plaza and Rampart entered into a “Consulting Agreement”
under which Rampart would provide, in addition to management services, “corporate and
management consulting services” and “maintenance and repair services” through its
“Building Services” affiliate.
Amar Plaza maintained a cash account for general operations and, in addition,
two reserve funds that HUD required: An “operating reserve” fund to meet occasional
operating deficiencies; and a “reserve for replacement” fund to pay for the replacement
of structural elements and mechanical equipment. Withdrawals from the reserve for
replacement fund required HUD’s prior approval.
Around the time Rampart took over as the property manager, Amar Plaza had a
cash account balance of $199,466, an operating reserve balance of $95,958, and a reserve
for replacement balance of $352,493. Three years later, Amar Plaza’s operating cash
balance had fallen to zero, the operating reserve account was reduced to $15,558, and
the reserve for replacement account balance had fallen to $210,878.
HUD uses a real estate assessment, or “REAC score” to evaluate the physical
condition of a property. In 2004, Amar Plaza’s complex achieved a “very good”
REAC score of 89 out of a possible 100 points. Three years later, in 2007, HUD gave
the property a “failing” REAC score of 56 and designated the property as “high-risk or
troubled.”
In February 2008, HUD informed the Amar Plaza board of directors that Rampart
was “no longer satisfactory to HUD and [had to] be replaced.” HUD cited the failing
REAC score, negative management reviews, unspecified “financial statement flags
and/or violations,” and “numerous complaints and/or dissatisfactions from current and
former residents.” Rampart was eventually terminated as the property manager in
December 2008.
3
Rampart’s tenure as the property manager was also marked by conflict among
members over control of the board of directors. By early 2009, there were, according
to one HUD official, “two dueling groups that were claiming to be the board of directors
and trying to exert control at the property.” The conflict was resolved in July 2009 by
an election, arranged by HUD, to recall certain members of the board of directors and
replace them with others. Two of the recalled board members are defendants Amparro
Sierra and Samuel Lizzarraga.
On June 19, 2009, about two weeks before the recall election, Sierra and
Lizzarraga signed a promissory note purporting to obligate Amar Plaza to pay $100,000
to Rampart. The note was dated February 1, 2009. At trial, Sierra, Lizzarraga, and
Acevedo explained that the obligation was based upon payments and transfers that
Rampart made to or on behalf of Amar Plaza between December 2008 and March 2009.
According to its terms, principal and interest were due on July 1, 2009. It also included
an attorneys’ fees provision. The note was secured by a deed of trust against the property
signed by Sierra and Lizarraga on behalf of Amar Plaza. The deed of trust was recorded
on June 29, 2009. HUD never approved the encumbrance.
At trial, Kelly Boyer, a former HUD field office director, testified that HUD
personnel became concerned that a $100,000 advance to Amar Plaza from its reserve for
replacement fund had not been used as authorized for roof replacement. Boyer sent an
architect to Amar Plaza to “make a determination as to whether or not [the roofs] had
been replaced.” The architect reported back to Boyer that “the roofs had not been
replaced.”
In November 2009, Rampart recorded a notice of default on the $100,000 note,
and commenced nonjudicial foreclosure procedures under the deed of trust.
In February 2010, Amar Plaza filed a verified complaint against Rampart,
Acevedo, Sierra, Lizarraga, and a third former board member, Cuahtemoc Lopez.
Against Rampart and Acevedo, Amar Plaza alleged causes of action for fraud,
“Misappropriation of Membership Funds” and “Unjust Enrichment,” and unfair business
4
practices. The complaint included a cause of action for breach of fiduciary duty against
Sierra, Lizarraga, and Lopez. Although neither Rampart nor Acevedo were named in
that cause of action, the court, over Rampart and Acevedo’s objection, allowed the jury
to consider that count against Rampart and Acevedo as well. In addition to damages,
Amar Plaza sought an injunction to stop Rampart’s foreclosure, a judicial declaration that
the deed of trust is void or voidable, and restitution under the unfair competition law.
Rampart filed a cross-complaint for foreclosure and a deficiency under the
promissory note and deed of trust, damages for breach of contract based on the unpaid
promissory note, and a common count for money had and received.
In a special verdict, the jury found Rampart liable for fraud, breach of fiduciary
duty, and misappropriation. It further found that Rampart did not “loan money to
Amar Plaza.” The jury awarded Amar Plaza $295,714.62 in consequential damages
against Rampart and Acevedo and $75,000 in punitive damages against Acevedo. Based
on the jury’s finding that Rampart did not loan money to Amar Plaza, the trial court
granted Amar Plaza declaratory relief voiding the note and deed of trust. It thereafter
awarded Amar Plaza $541,416.71 in costs and attorneys’ fees.
Rampart and Acevedo filed a timely notice of appeal.
II. Amar Plaza’s Motion to Dismiss The Appeal
In July 2014, Amar Plaza moved to dismiss Rampart and Acevedo’s appeal on
the ground that “the parties entered into a full and final settlement agreement resolving
all of the claims at issue in this appeal.” Rampart and Acevedo opposed the motion.
We remanded the cause to the trial court to determine “whether the parties entered into a
valid settlement agreement and, if so, whether that agreement included an implied waiver
of the appeal.” A different judge held an evidentiary hearing on the matter and concluded
that Rampart and Acevedo had not waived their right to appeal.2 Now, after considering
2
Our order of remand stated that the cause was “remanded to Judge Michael Stern
of the Los Angeles County Superior Court” to determine the specified issues. Judge
Stern had presided over the trial in the case. Unbeknownst to us, after the notice of
5
the trial court’s findings, the parties’ supplemental briefs, and the record, we grant the
motion.
A. Factual Background
Following entry of the judgment in December 2013, Amar Plaza began collection
efforts against Rampart and Acevedo. At that time, the amount of the judgment,
including interest, was approximately $1 million. The collection activities against
Acevedo stopped when he filed a bankruptcy petition in April 2014. Attorney Glenn
Calsada represented Acevedo in the bankruptcy case; he did not represent Acevedo or
Rampart in the appeal. Attorney Martin Buchanan represented Rampart and Acevedo in
the appeal.
During a meeting of creditors in Acevedo’s bankruptcy case, Amar Plaza’s
attorney, Paul Katrinak, invited Calsada to submit a settlement proposal. Calsada
testified that he and Acevedo “made clear he was not giving up his appeal right.”
Katrinak admitted that Calsada told him that Acevedo wanted to retain his right to appeal
as part of any settlement, but testified that he told Calsada, “unequivocally no way. We
would never agree to any type of resolution that would involve Mr. Acevedo preserving
his right to appeal.”
On June 13, 2014, Calsada emailed to Katrinak a proposal to “avoid further
litigation costs” and “to settle all claims” in exchange for Acevedo’s payment of
$180,000. It contained no mention of the appeal. Each side exchanged further proposals,
none of which mentioned the appeal, culminating in an email on June 22, 2014, from
Katrinak to Calsada with the following terms: The settlement amount was $850,000;
appeal was filed and prior to our order of remand, the superior court reassigned the case
to Judge Ernest Hiroshige for reasons unrelated to the appeal. Judge Hiroshige held the
evidentiary hearing and issued the pertinent findings and rulings.
Amar Plaza contends that it was error to have anyone other than Judge Stern
decide the questions we posed. We disagree. Our order referred to Judge Stern because
our records indicated that he was the judge assigned to the case. Because the case had
been reassigned to Judge Hiroshige, however, it was appropriate to have the matter heard
by him. There was no error.
6
a $50,000 “good faith” payment would be due in July; a second payment of $400,000
would be due in September (or earlier upon the sale of certain property); and the final
$400,000 would be paid “over three years in monthly payments.” There would be “a stay
on additional fees and interest, all of which shall be re-instated upon any default.” The
settlement amount would be discounted by 15 percent if paid within two years and
20 percent if paid within one year.
On June 23, 2014, Calsada informed Katrinak that the June 22 proposal
“is accepted,” and suggested that they dismiss Acevedo’s bankruptcy case when they
appear at a hearing previously scheduled for June 25. Doing so, Calsada explained,
would avoid the need to set another hearing to obtain bankruptcy court approval of the
agreement. Katrinak responded the same day, stating: “That’s fine. It makes sense to
dismiss the [b]ankruptcy.”
On the morning of June 25, 2014, Calsada, for Acevedo, and Ross Kutash, for
Amar Plaza, appeared in the bankruptcy court. Based on their stipulation, the court
granted the United States Trustee’s motion to dismiss the case.
That afternoon, Calsada sent an email to Katrinak attaching a copy of the June 22
email signed by Acevedo. Acevedo’s signature is dated June 24, 2014, and appears on
a line above two statements: “Frank Acevedo, an individual”; and “Frank Acevedo,
President Rampart Properties, Inc.” In his email, Calsada stated: “As you know, the
[bankruptcy] case was dismissed today, an order will be signed and entered later.
In any event, Frank [Acevedo] has now signed off on Amar Plaza’s counter-proposal
accepting your terms and conditions. . . . Can you counter-sign and return by fax or
email?” At some point thereafter, Maria Ochoa, as President of Amar Plaza, signed the
June 22 email (without dating her signature).
On June 27, 2014, the bankruptcy court filed its written order dismissing
Acevedo’s bankruptcy case.
On July 2, 2014, Katrinak telephoned Buchanan (Rampart and Acevedo’s
appellate counsel) and informed him that the case had settled. According to Buchanan,
7
this was the first time he had heard of a settlement or of any settlement negotiations.
Five days later, Buchanan emailed Katrinak “to clarify an apparent misunderstanding
between the parties.” Buchanan explained that Acevedo’s “sole intent was to agree to
make payments on the judgment to prevent further collections by Amar Plaza, while
preserving his right to appeal the judgment. He has never agreed to dismiss his appeal
from the judgment, either on behalf of himself or Rampart.” Buchanan further stated that
Acevedo “is still willing to make payments on the existing judgment” on terms that
included those set forth in the June 22 email with the following additional provisions:
“Any payments made pursuant to this Agreement will be returned if the judgment is
reversed, and any excess payments will be returned if the judgment is reduced”; and
“[t]his Agreement shall not deprive Acevedo and/or Rampart of the right to appeal the
judgment.” Katrinak rejected the proposal.
After the evidentiary hearing, the trial court issued a minute order stating:
“The Court finds that as to the purported settlement agreement in this matter, there was
no implied waiver of the appeal in this matter. The appeal should continue.” (Boldface
omitted.) The court based its ruling primarily on the conclusion that Katrinak, by failing
to involve Buchanan in the settlement discussions, violated rule 2-100. As a result of this
violation, the court explained it could not make “any adverse implication regarding
[Rampart’s and Acevedo’s] appellate rights.” In light of this conclusion, the court did
“not believe it [was] necessary to make a finding that the purported settlement was a
valid agreement and indeed resulted in an implied waiver of the appeal in this matter.”
The court also, however, expressly adopted “the points and authorities and arguments”
found in the defendants’ closing brief. Defendants’ closing brief argued, inter alia, that
the parties had not entered into a binding settlement agreement because they had not
reached a meeting of the minds on material terms, including the resolution of the pending
appeal.
8
After the trial court transmitted its ruling to this court, the parties filed
supplemental briefs, which we have considered.3
B. The Settlement Agreement is Enforceable and Includes an Implied
Dismissal of this Appeal
Initially, we reject the trial court’s reliance on a perceived violation of rule 2-100
as a basis for its ruling. Even if Katrinak’s failure to involve Buchanan in the settlement
negotiations violated the rule—a question we need not decide—the violation
does not affect the validity of the agreement. Myerchin v. Family Benefits, Inc. (2008)
162 Cal. App. 4th 1526 (Myerchin), is instructive. In that case, Dimitri Gross, an attorney
for the defendant, had been negotiating the settlement of a dispute with the plaintiff,
Myerchin, at a time when Myerchin was not represented by counsel. Myerchin
eventually retained counsel to review a settlement proposal. His attorney then filed a
lawsuit on Myerchin’s behalf against the defendant. (Id. at p. 1531.) When Gross
learned that Myerchin retained counsel and filed the lawsuit, he called Myerchin and told
him, “I am trying to help you and your attorney doesn’t know what he is doing and is
just ripping you off and will just run up a big bill. We will countersue you and you
will end up owing us money. Your only chance to settle is to deal with me.” (Ibid.)
Soon afterward, Myerchin settled with the defendant without telling his attorney.
Myerchin subsequently argued that the settlement agreement was unenforceable based on
Gross’s violation of rule 2-100. (Id. at p. 1538.) The Myerchin court rejected this
argument, stating: “[W]hen an attorney violates the rule against communicating with a
represented party during the pendency of litigation, . . . the court must . . . focus on
identifying an appropriate remedy for whatever improper effect the attorney’s misconduct
may have had in the case before it.” (Ibid.) “Because there was no evidence that Gross’s
3
In addition to supplemental briefs, Rampart and Acevedo filed a request for
judicial notice of various documents filed in the trial court pertaining to the remand,
a copy of the reporter’s transcript of the evidentiary hearing, and the claims register for
Acevedo’s bankruptcy court proceeding. Amar Plaza did not oppose the request and we
grant it. (Evid. Code, §§ 452, subds. (d) & (h), 453, 459.)
9
direct communication with Myerchin . . . , even assuming it violated rule 2-100,
actually impaired [Myerchin’s] ability to make a reasoned decision about settlement, we
conclude the trial court properly rejected the assertion that the mere fact of that improper
communication would be sufficient to nullify the agreement.” (Id. at p. 1539.)
Here, Acevedo was represented by counsel during the settlement negotiations.
Although that counsel was not his counsel on this appeal, nothing in the record suggests
that Acevedo’s representation by his bankruptcy counsel, rather than his appellate
counsel, “impaired [his] ability to make a reasoned decision about settlement.”
(Myerchin, supra, 162 Cal.App.4th at p. 1540.) Therefore, even if we assume that
Katrinak violated rule 2-100, Acevedo and Rampart cannot thereby avoid the
consequences of settlement.
Settlement agreements are governed by the legal principles applicable to contracts
generally. (Weddington Productions, Inc. v. Flick (1998) 60 Cal. App. 4th 793, 810
(Weddington Productions).) An essential element of contract formation is mutual
consent communicated by each party to the other. (Civ. Code, §§ 1550, 1565.) The
existence of mutual consent is determined by an objective test: Whether the words used
and the “‘outward manifestations of consent would lead a reasonable person to believe’”
that the parties agreed upon the same thing in the same sense. (Weddington Productions,
supra, 60 Cal. App. 4th 793, 811.) “Accordingly, the primary focus in determining the
existence of mutual consent is upon the acts of the parties involved.” (Meyer v. Benko
(1976) 55 Cal. App. 3d 937, 943.) “‘Ordinarily, one who accepts or signs an instrument,
which on its face is a contract, is deemed to assent to all its terms . . . .’ [Citation.]”
(Ibid.) Terms that “are necessary to make a contract reasonable, or conformable to usage,
are implied” when “the contract manifests no contrary intention.” (Civ. Code, § 1655;
see generally 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 751, p. 842
[a reasonable term essential to a determination of the parties’ rights and duties can be
supplied by the court].)
10
We agree with Amar Plaza that the parties entered into a binding settlement
agreement under the terms set forth in the June 22 email. After receiving the email,
Calsada informed Katrinak that the proposal “is accepted,” and that he had informed the
United States Bankruptcy Trustee of the settlement. Acevedo then signed the document
for himself and Rampart following the words “ACCEPTED AND AGREED.” Finally,
the president of Amar Plaza signed the document. When, as here, it appears that the
parties “‘intend to make a contract, the court should not frustrate their intention if
it is possible to reach a fair and just result, even though this requires a choice among
conflicting meanings and the filling of some gaps that the parties have left.’” (Okun v.
Morton (1988) 203 Cal. App. 3d 805, 817, quoting 1 Corbin on Contracts (1963) § 95,
p. 400.)
A “gap” left in the June 22 email is the status of the appeal. According to Calsada
and Acevedo, the proposal’s silence regarding the appeal meant that the appeal was
unaffected by the agreement. Amar Plaza, on the other hand, points to the failure to
mention the appeal as evidence that Rampart and Acevedo did not preserve their right to
appeal. We agree with Amar Plaza.
A settlement agreement, by its nature, implies a settlement of, at least, known and
pending claims between the parties. Indeed, a settlement reached during the pendency
of an appeal “effectively extinguishes the judgment from which the appeal is taken, thus,
ending the prior dispute between the parties.” (Ebensteiner Co., Inc. v. Chadmar Group
(2006) 143 Cal. App. 4th 1174, 1180.) If Rampart and Acevedo desired the unusual
circumstance of a settlement that somehow preserved the claims between the parties,
it was incumbent upon them to express that intention and include it in the terms of the
agreement. Although Calsada initially informed Katrinak that Acevedo wanted to retain
his right to appeal, he introduced his first settlement proposal by stating that Acevedo
would like to settle “to avoid further litigation costs.” He then proposed “to settle all
claims” in exchange for a stated sum. The phrase “litigation costs” in this context
reasonably includes the costs of pursuing the appeal, and “all claims,” unless differently
11
defined, includes claims on appeal. This language is not only consistent with the general
understanding that a settlement agreement will settle pending claims, it indicates that
Acevedo had dropped his initial insistence that he retain the right to appeal as part of any
settlement. In subsequent proposals, the parties focused on the amount and terms of the
payment to be made, and Calsada made no mention of preserving the right to appeal.
Under these circumstances, the actions of the parties would have been reasonably
understood by the other as expressions of intent to settle all claims between them in
exchange for the payments specified in the agreement. Because such claims include
this appeal, we construe the agreement as requiring Acevedo and Rampart to dismiss
the appeal.
Acevedo contends that the settlement agreement is “without legal effect” because
it was never approved by the bankruptcy court. We reject this argument. The record
reveals that Calsada “accepted” the terms set forth in Katrinak’s June 22 email on
June 23. At that time, a hearing was scheduled to take place in Acevedo’s bankruptcy
case on June 25. In order to avoid the need to set an additional hearing to obtain
bankruptcy court approval for the settlement, Calsada suggested to Katrinak that “we
dismiss” the bankruptcy case at the June 25 hearing. Katrinak agreed. On the morning of
June 25, 2014, Calsada (for Acevedo) and Ross Kutash (for Amar Plaza) appeared before
the bankruptcy court and announced their stipulation to dismiss Acevedo’s case. Based
on the stipulation, the court ordered the case dismissed. That afternoon, Calsada sent an
email to Katrinak attaching a copy of the June 22 email that included Acevedo’s
signature, and stated: “As you know, the [bankruptcy] case was dismissed today, an
order will be signed and entered later. In any event, Frank [Acevedo] has now signed off
on Amar Plaza’s counter-proposal accepting your terms and conditions. . . . Can you
counter-sign and return by fax or email?” Maria Ochoa subsequently signed the
agreement on behalf of Amar Plaza. On June 27, 2014, the court filed its written order
dismissing the bankruptcy case.
12
Even if Calsada’s June 23 acceptance of the terms in the June 22 email could not
have been enforced at that time because of Acevedo’s pending bankruptcy, the exchange
of executed copies of the email after the court dismissed the bankruptcy case formed a
contract that did not require bankruptcy court approval. Although Acevedo points out
that the bankruptcy court’s written order dismissing the case was not filed until June 27—
two days after Calsada sent Acevedo’s signed copy to Katrinak—the order dismissing the
bankruptcy case was effective against Acevedo when it was made in court on June 25;
Calsada was present when the court ordered the case dismissed and, later that day,
expressly represented to Katrinak that the “case was dismissed.” (See Noli v. C.I.R.
(9th Cir. 1988) 860 F.2d 1521, 1525 [bankruptcy court’s oral order was binding on
petitioner who was present in court when order was made and understood and accepted
the order as final].) Moreover, even if the agreement was made prior to the order
dismissing the bankruptcy case, the dismissal had the effect of validating the earlier
agreement. (See Valencia v. Rodriguez (2001) 87 Cal. App. 4th 1222, 1227-1228
[dismissal of bankruptcy petition validated settlement agreement made during pendency
of bankruptcy case].) We therefore reject Acevedo’s argument that the absence of
bankruptcy court approval makes the agreement unenforceable.
For the foregoing reasons, we grant Amar Plaza’s motion to dismiss the appeal.
If we did not grant the motion to dismiss, we would still affirm the judgment.
Contrary to Rampart and Acevedo’s arguments, there was sufficient evidence to support
the judgment. Boyer’s testimony regarding the $100,000 advance for roofs that were
never replaced supports an inference that Rampart misappropriated such funds. Although
Rampart and Acevedo argue that Boyer’s testimony was based on hearsay, they neither
objected to the testimony nor presented any contrary evidence. The jury could also
reasonably infer that Rampart misappropriated other funds based on Rampart’s
withdrawal from Amar Plaza’s accounts of approximately $243,000 for maintenance
and repairs at the same time that the physical condition of the property deteriorated
13
substantially. We also reject Rampart and Acevedo’s claims that procedural and
instructional errors require reversal of the judgment.
DISPOSITION
The appeal is dismissed. Respondent shall recover its costs on appeal.
NOT TO BE PUBLISHED.
ROTHSCHILD, P. J.
We concur:
JOHNSON, J.
LUI, J.
14