Harvey v. Robinson
Decision Date | 28 October 2010 |
Docket Number | No. SCV-244588,A126561,SCV-244588 |
Parties | BONNIE M. HARVEY and MICHAEL C. HOULIHAN,Plaintiffs and Respondents, v. GARY ROBINSON,Defendant and Appellant. |
Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
In this appeal defendant challenges an order that granted plaintiffs' application for a writ of attachment in the amount of $3 million. We conclude that the attachment order is not supported by any evidence of a contractual amount of damages that is fixed or readily ascertainable, as required by the governing statutes. We therefore reverse the attachment order.
On July 25, 2005, plaintiffs Bonnie Harvey and Michael Houlihan entered into an "Operating Agreement" (the Agreement) with defendant Gary Robinson to form the Foss Creek Villas LLC (the LLC), a partnership created for the purpose of purchasing, remodeling, and selling units in a condominium complex in Healdsburg, California. Plaintiffs each made a $1 million initial contribution to the partnership, and in return they each received a 25 percent ownership interest as "silent investors" in the LLC. Defendant was granted a 50 percent interest in the LLC, although he was not required to make any initial investment in the partnership. Instead, for his partnership interestdefendant incurred the sole responsibility to manage the project to completion. Defendant received a Class C membership interest in the partnership; plaintiffs became Class A members, with priority rights to distribution of net profits. Financing for the project was provided by loans in the total amount of $12,789, 750 obtained from First Community Bank, which were guaranteed by the three members of the partnership.
According to paragraph 3.2 of the Agreement, the LLC partners were not required to make any additional capital contributions to the project. If defendant as manager determined that additional capital contributions were necessary, the members were to be given the "opportunity, but not the obligation" to make additional contributions "if and to the extent they so desire" on a "pro rata basis in accordance with their Class Percentage Interests."
To respond to the need for additional financing, on September 24, 2007, the members executed an "Operating Agreement Amendment" (the Amendment) in which they all agreed to loan the partnership "personal funds to complete the project," in the "estimated" amount of "$100,000 for each Class of Member." The "purpose" of the Amendment was to "have each class of member contribute 50% of the total gross loan amount." A "more accurate accounting" was contemplated within 10 days to "determine the exact total loan amounts that each class of Member has loaned to the LLC to date," and to require any class member who "has paid less" to "loan additional funds to the LLC in the amount of the difference." The Amendment also specified that it is "for this day only, and will not be construed to influence any other agreements."
Pursuant to the Amendment, defendant loaned the LLC $100,000; plaintiffs each loaned the partnership $50,000. On October 6, 2007, acting under their authority as Class A members, plaintiffs removed defendant as the managing member of the partnership, and Houlihan assumed management responsibilities for the Foss Creek Villas project. Plaintiffs loaned the partnership an additional $3 million thereafter to complete the project, for a total contribution as of May 14, 2009, of $4,978, 573.58. Defendant declined to contribute any additional funds to the partnership.
Construction on the project was subsequently completed at an additional expense of $2.7 million. Some of the total of 40 condominium units were sold, while others remain on the market. Plaintiffs have estimated that even if all of the units in the condominium complex are sold promptly at optimistic sale prices, the project will lose at least an additional $2,389, 475, for a total loss of over $7 million.
Plaintiffs filed a complaint in February of 2009, followed by a first amended complaint on June 1, 2009, which alleged causes of action against defendant and others for breach of contract, fraud and deceit, breach of the covenant of good faith, breach of fiduciary duty, implied contractual indemnity, and declaratory relief.1 The next day, plaintiffs filed an ex parte application for a right to attach order and writ of attachment. The request for a right to attach order was denied, but a hearing was set on the application for a writ of attachment. Following a hearing, the court granted plaintiffs a writ of attachment in the amount of $3 million. This appeal followed.
Defendant argues that the trial court erred by granting plaintiffs' application for a writ of attachment. He presents several claims that plaintiffs failed to establish the statutory elements required to obtain a writ of attachment: the Amendment upon which the action is based is not "a valid and enforceable contract" due to the absence of the "material terms required of a legally binding loan commitment;" the amount of the contractual obligation stated in the amendment is uncertain; the claim did not "arise out of the conduct by the defendant" of his trade or business; and, plaintiffs do not have a "reasonable probability of prevailing on the merits." He also challenges plaintiffs' standing to bring an action as individuals for "breach of an obligation to the LLC." Without examining any of the other issues raised by defendant, we find that the amount of the obligation owed by defendant under the Amendment is not fixed or readily ascertainable, and therefore the attachment order cannot stand.
(Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1476, italics & fn. omitted (Kemp Bros.).)
For our purposes, plaintiffs' right to a writ of attachment is governed by Code of Civil Procedure sections 483.010 and 484.090.2 Section 483.010, subdivision (a), (CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App.4th 537, 539-540 (CIT Group); see also Korea Water Resources Corp. v. Lee (2004) 115 Cal.App.4th 389, 401.)3 Section 484.090 adds that upon examination of the evidence offered by the parties at a hearing, (Goldstein v. Barak Construction (2008) 164 Cal.App.4th 845, 852.)
In our review of the propriety of the attachment order, (Howard S. Wright Construction Co. v. Superior Court (2003) 106 Cal.App.4th 314, 320; see also Goldstein v. Barak Construction, supra, 164 Cal.App.4th 845, 853.) But where, as here, the material facts are not in conflict, the issue becomes one of law and we "independently review the effect and significance of the undisputed evidence" to draw our own legal conclusions. (Howard S. Wright, supra, at p. 320.)
Our focus is upon the requirement that (Kemp Bros., supra, 146 Cal.App.4th 1474, 1481, fn. 5; see also Hobbs v. Weiss (1999) 73 Cal.App.4th 76, 82.) "The Legislature has determined attachments may properly issue only to secure anticipated recoveries on contract claims in fixed or readily ascertainable amounts." (Baker v. Superior Court (1983) 150 Cal.App.3d 140, 146-147; see also Waffer Internal Corp. v. Khorsandi (1999) 69 Cal.App.4th 1261, 1277.)" ' "The fact that the damages are unliquidated is not determinative. [Citations.] But the contract sued on must furnish a standard by which the amount due may be clearly ascertained and there must exist a basis upon which the damages can be determined by proof." ' [Citations.]" (CIT Group, supra, 115 Cal.App.4th 537, 540.) While it is not necessary that the amount owed appear on the face of the contract, it must be measurable by reference to the contract sued upon, and the basis of the damages must be reasonable and certain. (Ibid.; Baker, supra, at pp. 146-147; Walker v. Phillips (1962) 205 Cal.App.2d 26, 31.)
Among the various uncertainties that afflict the Amendment, the most glaring is the failure of the agreement to identify with any specificity the ongoing financial obligations of the three partners. They agreed in the Amendment to lend the partnership "personal funds to complete the project."4 The figure specified for "today's...
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