Community Cause v. Boatwright

• Decision Date: 16 October 1987
• Docket Number: No. A027075,A027075
• Citation: 195 Cal.App.3d 562,240 Cal.Rptr. 794
• Court: California Court of Appeals Court of Appeals
• Parties: COMMUNITY CAUSE, Plaintiff and Appellant, v. Daniel E. BOATWRIGHT, Defendant and Respondent,

Page 794

240 Cal.Rptr. 794

195 Cal.App.3d 562

COMMUNITY CAUSE, Plaintiff and Appellant, v. Daniel E. BOATWRIGHT, Defendant and Respondent,

No. A027075.

Court of Appeal, First District, Division 3, California.

Oct. 16, 1987.

Review Denied Dec. 22, 1987.

Stephen C. Williams, David N. Bortin, Walnut Creek, Stephen H. Cornet, Oakland, for plaintiff and appellant

Bryce C. Anderson, Concord, for defendant and respondent.

SCOTT, Associate Justice.

This is the second appeal in plaintiff's action against defendant Daniel Boatwright,

                which alleged numerous violations of the Political Reform Act of 1974 (Gov.Code, § 81000 et seq.; 1  hereafter the PRA), among other causes of action.  Plaintiff Community Cause is a nonprofit corporation located in Contra Costa County;  defendant, now a state senator, was a state assemblyman representing part of that county when plaintiff sued.  Defendant's demurrer was sustained without leave to amend and the action dismissed.  In a published opinion, this court affirmed in part but reversed as to several causes of action.  (Community Cause v. Boatwright (1981) 124 Cal.App.3d 888, 177 Cal.Rptr. 657.)   A court trial was held to determine whether defendant violated the PRA by intentionally or negligently failing to report (1) an interest in a partnership known as Countrywood Shopping Center Associates (Countrywood) in statements of economic interest filed under the PRA before December 1976;  and (2) certain [195 Cal.App.3d 566] alleged income in his December 1976 statement of economic interest.  Judgment was entered in favor of defendant, who was also awarded attorney fees and costs.  We conclude that the award of fees and costs must be reversed, but otherwise affirm
                

THE FACTS AND THE LAWSUIT

a. The facts

Viewed in the light most favorable to the judgment, the evidence was as follows. In October 1973, Anthony Ujdur acquired an option to purchase approximately 17 acres located near the intersection of Treat Boulevard and Bancroft Road in Contra Costa County. The property was zoned agricultural and designated as single family residential on the county's general plan, and previous applications for its commercial development had been denied.

Ujdur's acquisition of the option was financed by Ujdur himself and several others: Ygnacio Homes, Inc. (Ujdur's corporation), Anthony Menosse, Joseph Ancona, and Anthony or Ila Shelton. In a written agreement dated October 16, 1973, Ujdur assigned the option to the following, in the share amounts indicated: Ancona, 6/16; Ygnacio Homes, Inc., 1/16; Anthony and Zita Ujdur, 4/16; Forest Simoni, 3/16; Anthony Menosse, 1/16; and Ila Shelton, 1/16. In the fall of 1974, the property was rezoned to permit commercial development.

In December 1974, a written agreement was made between "Countrywood Shopping Center Associates, a partnership, as owners," and Hoffman Construction Company, in which Hoffman agreed to assist in obtaining financing for a shopping center on the Treat Boulevard property and to construct the center. The agreement was signed by Ancona, Anthony Ujdur, Menosse, Simoni, and Arthur Shelton for the partnership. Kenneth Hoffman, president of the construction company, was to receive one share of an owner's interest in Countrywood. Hoffman also agreed to loan the partnership nearly $700,000 to enable them to exercise the option and begin development. Ancona and Ujdur signed a promissory note in that amount on behalf of Countrywood. As security, Hoffman required a deed of trust on the property and a personal guarantee of repayment by each partner; guarantees were signed by Ujdur, Ancona, Simoni, Menosse, and Ila Shelton.

In January 1975, Ancona, Ujdur, Simoni, Menosse, Ila Shelton, and Ygnacio Homes, Inc., by Ujdur, signed a written partnership agreement. It stated that the partnership had been operating under an oral agreement since October 1973, and specified the partnership interest of each consistent with their written agreement of October 1973. The agreement provided that no partner should sell or assign his or her interest, except that Ujdur could dispose of one share and Ancona of two, within five years.

In February 1975, a partnership statement was recorded as required by Corporations Code section 15010.5. Listed as "all the partners of Countrywood Shopping Center Associates" were Ancona, Ujdur, Simoni, Ila Shelton, and Ygnacio Homes, Inc. Each listed partner signed the statement and a declaration under penalty of perjury that the statement was true. The Relations among the partners, and in particular between Ancona and Ujdur, were strained almost from the beginning of their association. In July 1975, Ujdur was removed as managing partner. In December 1975, Ancona offered to sell two of his shares to defendant. Defendant refused the offer because he did not want to become partners with Ujdur. In mid-1976, he changed his mind. He purchased a two-year option on the shares, paying Ancona $24,000, which was to be applied to the purchase price if the option was exercised. The option agreement did not specify the purchase price, but according to Ancona, he promised to sell to defendant at his (Ancona's) cost, $12,000 per share, unless he had to spend additional money before defendant exercised the option.

partnership agreement was amended as of June 8, 1976, to add Hoffman as holder of a 1/17 share.

Defendant, a lawyer as well as a legislator, had long been a friend of Ancona. When the shopping center project was first discussed at meetings in 1973, Ancona asked defendant to attend with him, because he knew other attorneys would be present. Defendant also attended meetings of the investor group in 1974. Although defendant was not practicing law in 1974 and was only closing out his files, he did perform some services which benefited the partnership. He drafted the partnership agreement at the request of Ancona; Shelton, who was also an attorney, reviewed and finalized it. Defendant also participated in negotiations with the two principal tenants for the shopping center, Safeway and Longs Drug Store, and negotiated with Hoffman concerning his agreement with and loan to the partnership. Defendant did not bill Ancona or the partnership for any of these services; he felt obligated to Ancona because of a prior transaction with him in which defendant had realized substantially more profit than anticipated. There was no understanding that defendant would acquire a financial interest in Countrywood for any of his work.

In October 1976, Ujdur, Simoni and Menosse, who together had a majority interest in the partnership, joined forces and voted to give themselves as a management committee the authority to sell, lease, or dispose of the property. As a result, Ancona, Hoffman and Shelton filed an action seeking a dissolution of the partnership and other relief.

Despite the animosity among the partners, in November 1976 defendant decided to exercise his option, primarily because his family circumstances at the time made him feel a need to provide for his children. Ancona did not charge defendant any more than his cost for the exercise of the option because the partnership dissolution was pending at the time, and Hoffman was seeking money for cost overruns from the partners; Ancona believed those factors adversely affected the value of the shares.

b. The litigation

As we discussed in Community Cause v. Boatwright, supra, 124 Cal.App.3d at page 898, 177 Cal.Rptr. 657, the PRA requires specified public officials to make periodic disclosures of investments, interests in real property, and income. (§§ 87200-87210.) At the time of this action, section 82030, subdivision (a), of the PRA defined income as "income of any nature from any source, including ... any ... gift, [or] discount in the price of anything of value...." Section 82028 defined gift as "any payment to the extent that consideration of equal or greater value is not received." ²

In his December 1976 statement of economic interest, defendant reported acquisition on June 30, 1976, of an option to purchase a partnership interest in Countrywood, and valued the option as in excess of $100,000, the highest value listed on the disclosure schedule; he also reported the exercise of that option on November 15, 1976, and valued the partnership interest as in excess of $100,000.

Section 91004 of the PRA authorizes the Fair Political Practices Commission (the Commission) or a local resident to bring a civil action for damages against one who intentionally or negligently violates its provisions. ³ In 1978, after exhausting its administrative remedies under the PRA (see § 91007; Community Cause v. Boatwright, supra, 124 Cal.App.3d at [195 Cal.App.3d 569] pp. 903-904, 177 Cal.Rptr. 657), plaintiff filed the instant action. Among the causes of action which survived after plaintiff's first appeal, several alleged that defendant had actually acquired his partnership interest long before November 1976 and either negligently or intentionally failed to report that interest on his December 1975 and March 1976 statements. Other surviving causes of action alleged that there was a disparity between the $24,000 which defendant paid for the partnership interest and its value, and that defendant should have disclosed that disparity as income, because it was either a gift or a discount. (See Community Cause v. Boatwright, supra, 124 Cal.App.3d 888, 177 Cal.Rptr. 657.) Plaintiff sought damages as authorized by section 91004 but not injunctive relief pursuant to section 91003.

After a court trial, the court issued a lengthy statement of decision summarizing the evidence, setting forth its findings, and explaining its conclusion that defendant was entitled to judgment. The court's findings and analysis will be discussed in more detail in conjunction with our evaluation of plaintiff's contentions.

ACQUISITION OF THE COUNTRYWOOD INTEREST

As we have stated, plaintiff alleged that defendant acquired his interest...