Copenbarger v. McNaughton
| Decision Date | 02 April 2020 |
| Docket Number | G057235 |
| Court | California Court of Appeals Court of Appeals |
| Parties | LLOYD COPENBARGER, as Trustee, etc., Plaintiff and Appellant. v. KENT A. McNAUGHTON, Defendant and Appellant. |
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINIONAppeal and cross-appeal from a postjudgment order of the Superior Court of Orange County, Hugh Michael Brenner, Judge. ) Affirmed. Request for judicial notice. Denied as moot.
Weiland Golden Goodrich and Michael R. Adele, for Defendant and Appellant.
Hall Griffin, George L. Hampton IV and Laura J. Petrie for Plaintiff and Appellant Lloyd Copenbarger, as Trustee, etc.
* * * This case arises from rather unique circumstances. Defendant signed a personal guaranty on a $3 million loan. The borrower defaulted, and the lender obtained a multimillion dollar judgment against defendant as guarantor. Meanwhile, the borrower continued to make payments to the lender, but neither party specified whether those payments applied to the note underlying the judgment or to a different debt, thus creating confusion over the precise amount owed on the judgment.
The lender applied for a writ of execution on the judgment. Defendant opposed the application, asserting the borrower's payments toward the note should reduce the amount owed on the judgment. Defendant also filed motions for postjudgment discovery and for acknowledgment of partial satisfaction of the judgment.
The trial court appointed an accountant as referee to calculate the amount owed on the judgment. Although the court denied defendant's motion for postjudgment discovery, it authorized the referee to conduct any discovery necessary to perform his calculation.
The referee interviewed the parties and examined their financial records, some of which he reviewed in camera. He determined the borrower paid the lender about $1.4 million postverdict and recommended allocating nearly all of those payments toward the judgment. The trial court adopted the referee's recommendation, and the parties filed cross-appeals.
Defendant contends he should have been permitted to conduct postjudgment discovery, the evidence was insufficient to support the trial court's allocation order because there was "no evidence in the record that additional creditable payments were not made," and the court miscalculated the interest owed on the judgment. The lender also appeals, arguing the evidence was insufficient to support the referee's allocation of the borrower's payments toward the judgment. We reject these contentions and affirm the court's order in full.
Nonparty Paul Copenbarger (Paul1) and defendant Kent McNaughton formed Newport Harbor Offices & Marina, LLC (NHOM) in 2003 to acquire an office building and marina in Newport Beach and sublease the real property where the building and marina are located. To fund the transaction, NHOM borrowed $3 million from the Hazel I. Maag Trust (the Maag Trust) and $1.15 million from Plaza Del Sol Real Estate Trust (Plaza Del Sol).
The Maag Trust's $3 million loan to NHOM was evidenced by a promissory note and secured by a first priority deed of trust on the improvements and the sublease. NHOM's managing members, Paul and McNaughton, also executed a personal guaranty on the loan. That guaranty is at the heart of this litigation.
Plaza Del Sol's $1.15 million loan to NHOM was evidenced by a promissory note and secured by a second priority deed of trust on the improvements and the sublease. Plaza Del Sol later assigned its note to the Maag Trust as part of a settlement agreement in 2012. As a result, the Maag Trust eventually held two promissory notes under which NHOM was obligated to pay.
NHOM defaulted on the Maag note, and counsel for the Maag Trust delivered a notice of default and loan acceleration to NHOM in September 2009. Plaintiff Lloyd Copenbarger (Lloyd), acting as trustee for the Maag Trust, then sued McNaughton to enforce his personal guaranty on the Maag Trust's loan to NHOM.Lloyd never sued NHOM (the borrower) or his brother Paul (the co-guarantor and the other managing member of NHOM).2
Lloyd and McNaughton stipulated to try the case in two phases: first, a jury trial on McNaughton's obligation on the guaranty, and second, a bench trial on McNaughton's affirmative defenses. At the conclusion of the first phase in August 2012, the jury returned a verdict in favor of the Maag Trust and against McNaughton in the amount of $2,784,100, plus attorney fees. In the second phase, however, the trial court found Lloyd's conduct exonerated McNaughton's obligations under the guaranty, and it entered a defense judgment for McNaughton.
Lloyd appealed, and we concluded the "waivers contained in the guaranty clearly and unequivocally entitled Lloyd to proceed against the guarantor [McNaughton] without having to proceed against the borrower [NHOM]." (Copenbarger I, supra, at *13.) We therefore reversed the defense judgment and directed the trial court to enter judgment for Lloyd on the verdict. (Id. at *6.)
In December 2014, the trial court entered judgment in favor of the Maag Trust and against McNaughton. Two years later, the court entered an amended judgment in favor of the Maag Trust in the amount of $2,784,100, plus $355,396 in attorney fees, $18,480 in costs, $207,723 in postjudgment attorney fees, and $9,487 in postjudgment costs. During that period, McNaughton made no payments toward the judgment, aside from $33.17 Lloyd levied against McNaughton's bank account.
A dispute soon arose over the amount due on the judgment. As noted, the Maag Trust held two notes under which NHOM was obligated to pay: the Maag note andthe Plaza Del Sol note. NHOM paid the Maag Trust nearly $1.5 million in the three-year period after the jury verdict, but it was unclear whether those payments applied toward the Maag note (and arguably the judgment), the Plaza Del Sol note, or some combination of the two. With the exception of one check labeled "Repayment of Plaza Del Sol Note for January, February, March and April 2017," NHOM did not specify how it allocated these periodic payments, and Lloyd did not memorialize any allocation of the payments to one note or the other.
McNaughton served Lloyd with a formal demand for acknowledgement of partial satisfaction of judgment. In response, Lloyd served an acknowledgment of partial satisfaction crediting receipt of only $33.17. In other words, Lloyd gave no credit toward the judgment for whatever postverdict payments, if any, NHOM had made toward the Maag note.
Two months later, Lloyd, as trustee for the Maag Trust, applied for a writ of execution on the judgment. (See Code Civ. Proc., § 699.010, et seq.) He claimed "[t]he Judgment Debtor [McNaughton] has not made any direct payments on the Judgment other than . . . $33.17 collected by way of a levy on July 6, 2016 and the $377.96 collected by way of a levy on January 19, 2017."
McNaughton opposed the application, asserting Lloyd had failed to credit NHOM's payments on the underlying note and accusing Lloyd of "misleading" the trial court.
Lloyd's counsel later explained Lloyd did not dispute NHOM's payments should offset the judgment; instead, the dispute was over "whether that [offset] happened automatically, or whether there's an obligation to get an order from the court showing the offset." Lloyd also submitted a declaration explaining NHOM had made installment payments totaling over $1,460,000 to the Maag Trust in the three years since the jury verdict. In that declaration, he maintained the Maag Trust "was entitled to and did applysuch payments to both the [Plaza Del Sol] Note and the Maag Note," but he did not specify any particular allocation.3
Meanwhile, while the writ application was pending, Paul (the coguarantor on the Maag note) paid the Maag Trust $1,587,210 toward the Maag note.
To resolve the issues raised in Lloyd's application for writ of execution, the trial court had to determine which of NHOM's postverdict payments applied toward the Maag note as opposed to the Plaza Del Sol note, determine the amount Paul paid toward the Maag note, and calculate what amount was due on the judgment as a result. After discussing the matter with the parties, the court appointed certified public accountant Kenneth Rugeti of Rugeti & Associates to determine the amount due on the judgment and to resolve any discovery issues. (See Code Civ. Proc., § 639, subd. (a)(1) & (a)(5) [].) Neither party objected to Rugeti's appointment.
On the issue of apportioning NHOM's payments between the two notes, the trial court "tentatively" found "NHOM has never given [the] Maag Trust an indication of it's [sic] intention or desire as to how these single monthly payments should be applied to these two separate obligations," and further found nothing in the Maag note addressed the allocation issue. The court therefore tentatively determined NHOM's payments to the Maag Trust should be divided between the notes "'in equal proportion'" under Civil Code section 1479, subsection (2), and Rugeti should "determine exactly how this apportionment should be calculated."
The trial court then clarified Rugeti's appointment as follows: ...
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