Coppola v. Superior Court

• Court: California Court of Appeals
• Writing for the Court: DANIELSON; KLEIN, P.J., and ARABIAN
• Citation: Coppola v. Superior Court, 211 Cal.App.3d 848, 259 Cal.Rptr. 811 (Cal. App. 1989)
• Decision Date: 22 June 1989
• Docket Number: Nos. B038583,B039704,s. B038583
• Parties: Francis Ford COPPOLA, et al., Petitioners, v. The SUPERIOR COURT of the State of California, for the County of Los Angeles, Respondent. Jack SINGER, et al., Real Parties In Interest.

Page 811

259 Cal.Rptr. 811

211 Cal.App.3d 848

Francis Ford COPPOLA, et al., Petitioners, v. The SUPERIOR COURT of the State of California, for the County of Los Angeles, Respondent Jack SINGER, et al., Real Parties In Interest.

Nos. B038583, B039704.

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

June 22, 1989.

Certified For Partial Publication. ^*

As Modified on Denial of Rehearing July 18, 1989.

Chrystie & Berle, Elihu M. Berle and William H. Jennings, Los Angeles, for petitioners.

Hetland & Hansen, John R. Hetland, Charles A. Hansen and Steven M. Morger, Berkeley, as amici curiae on behalf of petitioners.

No appearance for respondent.

Greenberg, Glusker, Fields, Claman & Machtinger, Robert S. Chapman and Roger L. Funk, Los Angeles, for real parties in interest.

DANIELSON, Associate Justice.

By their initial petition for a writ of mandate or other extraordinary relief (B038583), Francis Ford Coppola (Francis), Eleanor Coppola (Eleanor), Zoetrope Productions (Zoetrope), and Hollywood General Studios, Inc. (HGS; collectively, defendants) ^{1 1} seek to overturn respondent court's order dated November 21, 1988, granting summary adjudication of certain issues. By a second and a supplemental (or third) petition for such relief (B039704), defendants seek, inter alia, to overturn or modify the court's orders dated January 20 and 30, 1989, in which the court barred discovery sought by defendants by reason of the November 21 order.

We grant the initial petition as to Eleanor. The second and supplemental petitions are dismissed as to Eleanor on the ground of mootness. We deny all of the petitions as unmeritorious with respect to the remaining defendants. The alternative writs issued by this court in conjunction with those petitions are discharged.

In passing on the petition in B038583 this court resolves an issue of first impression under federal and California law: Do the "fair value" limitation provisions of sections 580a and 726 of the Code of Civil Procedure ² apply to a sale "free and clear of liens" under the Bankruptcy Code? We hold they do not. By statute, the "fair value" limitation provisions apply only to judicial foreclosure sales ( §§ 725a, 726) and nonjudicial foreclosure sales ( § 580a). A sale "free and clear of liens" under the Bankruptcy Code is neither a judicial nor a nonjudicial foreclosure sale under California law. Moreover, the application of the "fair value" limitation provisions to a sale "free and clear of liens" is not compelled by California's principles of equity. (Cf. Butner v. United States (1979) 440 U.S. 48, 55-56, 99 S.Ct. 914, 918, 59 L.Ed.2d 136.)

FACTUAL STATEMENT

Jack Singer (Singer) was the principal shareholder of Atlas Finance and Realty Corporation, Ltd. (Atlas). Pursuant to a "Memorandum of Understanding" dated March 6, 1981, and its Addendum (March 6 Agreement), Atlas agreed to loan Zoetrope a total of $8 million as interim financing for the production of a motion picture entitled "ONE FROM THE HEART" (picture), which loan was to be repaid only out of the gross proceeds from the exploitation of the picture. That loan was to be delivered "on the date of closing."

At certain intervals prior to the closing date, however, Atlas made four advances to Zoetrope in the sums of $1 million, $1 million, $500,000, and $500,000, respectively, for a total of $3 million. Each of these advances was evidenced by a separate promissory note executed by Zoetrope as the borrower and guaranteed by Esquire Holding Company (Esquire) and Francis. Esquire's guarantee was secured by a deed of trust on the subject real property (the Studio Property). At all relevant times prior to February 10, 1984, either HGS or Esquire owned the Studio Property. Darion Development Corporation (Darion), as agent for Atlas, was "the lender, payee and beneficiary, respectively," of the advances, notes, and deed of trust.

Pursuant to the March 6 Agreement the notes were to be cancelled upon closing under that agreement and the advanced $3 million would be considered part of the $8 million loan. If no closing occurred, then Atlas had no duty to loan Zoetrope the $8 million, and Zoetrope's obligation to repay the $3 million remained payable pursuant to the promissory notes.

"Closing" would occur "at a mutually agreeable place and time upon satisfaction of the Conditions of Closing ..., but in no event later than ['... the expiration of six (6) days after the day of the Fourth Advance.']" The "Fourth Advance" was made on March 26, 1981.

As a condition to closing, Zoetrope, HGS, and Esquire agreed to deliver to Atlas the consent of Chase Manhattan Bank (Chase) to the terms of the March 6 Agreement. Chase had loaned approximately $10.6 million as of that date for the production of the picture. Pursuant to the March 6 Agreement, Chase would agree, inter alia, that Atlas would be in first position, pari passu with Chase, with respect to the right to recoupment.

According to the March 6 agreement, in the event of a failure to meet a "Condition of Closing," the notes were payable "one month after the latest permissible closing date" or "one month after written demand by Atlas," whichever event occurred first. On their face, however, the four notes were payable "not later than two months after demand."

It is undisputed that Chase's consent to the terms of the March 6 Agreement was never obtained and that there was no "closing" under the March 6 Agreement. It is also undisputed that the remaining $5 million of the proposed loan was never delivered to Zoetrope and that none of the $3 million advanced to Zoetrope pursuant to the subject four notes has been repaid.

PROCEDURAL STATEMENT

In July, 1983, HGS, owner of the Studio Property, was the debtor in an involuntary Chapter 11 bankruptcy proceeding. Pursuant to an order dated December 22, 1983, ³ the bankruptcy court granted the request of HGS, as debtor-in-possession, to sell its assets free and clear of all liens and to set a minimum bid of $12,200,000 for the Studio Property.

At the February 10, 1984, auction of the assets of HGS Darion purchased the Studio Property for $12,300,000. By order of the same date the bankruptcy court confirmed the sale and ordered that title to the property was to vest "free and clear of all liens, encumbrances and claims of any and all persons and entities whomsoever."

On January 31, 1985, the bankruptcy proceeding against HGS was dismissed on HGS' motion. There has been no adjudication that any debt HGS owed to Darion has been discharged.

On February 1, 1985, Singer, Darion, and Atlas (collectively, plaintiffs) filed the underlying action for a money judgment based on the debt evidenced by the four promissory notes, not on the March 6 Agreement, and on February 19, 1985, filed a first amended complaint. On October 18, 1985, Francis, Eleanor, and Zoetrope filed a joint answer. Also on that date Zoetrope and HGS filed a cross-complaint against plaintiffs for breach of the covenant of good faith and fair dealing, fraud, negligent misrepresentation, and interference with prospective economic advantage.

By court order HGS was added as a Doe defendant in the second amended complaint filed January 27, 1986.

On February 21, 1986, defendants answered the second amended complaint by generally denying its material allegations and by asserting various affirmative defenses including breach of the covenant of good faith and fair dealing, fraud in the inducement and a defense referred to by defendants as "economic duress."

Following a hearing on November 21, 1988, the court granted plaintiffs' motion for summary adjudication of 16 issues as specified. ⁴

On December 1, 1988, defendants filed their first petition for a writ of mandate or other extraordinary relief (B038583), which challenged the November 21, 1988 order with respect to all the issues as to Eleanor but only issues 7, 9, 10, 11, and 15 as to the remaining defendants. We issued an alternative writ.

On January 20, 1989, the respondent court granted the motion of plaintiffs to stay discovery regarding the fraud and economic duress issues on the ground that those issues were disposed of by the November 21, 1988 order.

On January 31, 1989, defendants filed a supplemental petition for a writ of mandate or other extraordinary relief (B039704) in which they sought to have the January 30 order vacated or modified.

By order filed February 14, 1989, this court consolidated the petitions for extraordinary relief in B038583 and B039704 and issued a second alternative writ of mandate regarding the order dated January 20, 1989.

I. Initial petition (B038583)

In their first petition ⁵ defendants contend that the court's order dated November 21, 1988, was erroneous in all respects as to Eleanor and erroneous as to the remaining defendants only with respect to issues 7, 9, 10, 11, and 15.

A. DISCUSSION

1. Standard of Review

"In reviewing an order declaring an issue 'without substantial controversy' pursuant to Code of Civil Procedure section 437c, we are bound by the rules generally applicable to review of summary judgments." (Tauber-Arons Auctioneers Co. v. Superior Court (1980) 101 Cal.App.3d 268, 273, 161 Cal.Rptr. 789.)

Summary judgment is proper only if the evidence presented by the moving party is sufficient to sustain a judgment in his favor and his opponent does not by evidence show facts sufficient to present a triable issue. The evidence of the moving party is strictly construed and that of the responding party liberally construed, and doubts as to the propriety of granting the motion must be resolved in favor of the party opposing the motion. (Varco-Pruden, Inc. v. Hampshire Constr. Co. (1975) 50 Cal.App.3d 654, 659, 123 Cal.Rptr. 606.)

Mindful of the foregoing principles, we first address the propriety of granting summary adjudication of the 16 issues against Eleanor and then address the propriety of granting issues 7, 9, 10, 11, and 15 against the...