Jhaveri v. Teitelbaum

• Decision Date: 12 August 2009
• Docket Number: No. B203923.,B203923.
• Citation: 98 Cal. Rptr. 3d 268,176 Cal.App.4th 740
• Court: California Court of Appeals Court of Appeals
• Parties: INDRA S. JHAVERI et al., Plaintiffs and Respondents, v. STEVEN TEITELBAUM et al., Defendants and Appellants.

176 Cal.App.4th 740

98 Cal. Rptr. 3d 268

INDRA S. JHAVERI et al., Plaintiffs and Respondents, v. STEVEN TEITELBAUM et al., Defendants and Appellants.

No. B203923.

Court of Appeals of California, Second District, Division Eight.

August 12, 2009.

Benedon & Serlin, Gerald M. Serlin and Kelly R. Horwitz for Defendants and Appellants.

Hornberger & Brewer, Nicholas W. Hornberger, Michael Brewer and Wesley W. Chang for Plaintiffs and Respondents.

OPINION

FLIER, J.

Steven Teitelbaum (Teitelbaum) and Los Angeles Coin Company LLC (L.A. Coin Company) appeal from an order of the trial court directing respondents Indra S. and Mary Jhaveri, doing business as Kant-Sar International (the Jhaveris), to execute and deliver to appellants a partial satisfaction of the judgment entered in this case.

The Jhaveris previously obtained a jury verdict against appellants and their codefendant, Brian Dubois (Dubois) in the total amount of $5.2 million, and the court entered a judgment for that sum together with prejudgment interest.¹ The judgment consisted of (1) compensatory damages of $1.2 million against all defendants, jointly and severally, for breach of contract and fraud; (2) punitive damages in the sums of $1 million against Dubois individually, $2 million against Teitelbaum individually and $1 million against L.A. Coin Company; and (3) prejudgment interest.

In a nonpublished opinion, Jhaveri v. Teitelbaum (Nov. 28, 2007, B182898) (Jhaveri I), we affirmed the judgment in part and reversed in part. We affirmed the jury's award of compensatory and punitive damages, but we reduced the amount of prejudgment interest awarded by the court.

The Jhaveris brought a separate enforcement action (Jhaveri II), alleging Teitelbaum and Dubois conspired with their wives (Cherie Teitelbaum and Connie Dubois), L.A. Coin Company and others to fraudulently convey property to avoid payment of the underlying judgment. As described more specifically, post, the Duboises entered into a global settlement of Jhaveri I and Jhaveri II with the Jhaveris for the sum of $1 million. The Duboises paid only a portion of the settlement sum, $245,000, to the Jhaveris before filing for bankruptcy. Appellants filed a motion in the court below to compel the Jhaveris to execute and deliver a partial satisfaction of judgment in the present action, in the amount of one-half the face amount of the settlement, or $500,000. The court below ordered the Jhaveris to execute and deliver a partial satisfaction of judgment in the amount of one-fourth of the sums actually received by the Jhaveris under the settlement agreement, about $61,000.

Appellants appeal from the court's order, asserting that no substantial evidence supports the order and that the trial court incorrectly applied statutory provisions in allocating the amount of credit against the judgment. We disagree and therefore affirm.

FACTS AND PROCEDURAL HISTORY

1. Underlying Judgment

The Jhaveris filed Jhaveri I against appellants and Dubois for breach of contract and fraud, obtaining a jury verdict in their favor for a total of $5.2 million, as noted above. Just prior to the verdict in Jhaveri I, the Jhaveris discovered Teitelbaum and Dubois had transferred community real property into the name of each wife, as her sole and separate property, and made other conveyances to avoid collection of any judgment the Jhaveris might obtain in this action.

2. Fraudulent Conveyance Action

In December 2004, the Jhaveris filed an action for fraudulent conveyances including as defendants Teitelbaum, Dubois, their spouses, L.A. Coin Company and others acting with them (Jhaveri II). In Jhaveri II, the Jhaveris alleged the defendants participated in fraudulent property transfers in violation of the Uniform Fraudulent Transfer Act (Civ. Code, §§ 3439-3439.12) (UFTA) as part of a larger conspiracy to avoid paying the judgment in Jhaveri I. In addition to equitable remedies, the complaint prayed for general, special and punitive damages against all defendants. The Jhaveris sought to recover at least $2 million, as well as compensatory and punitive damages, from Dubois and his wife, Connie.

3. Settlement by Duboises

In July 2005, the Jhaveris and the Duboises submitted to a court-ordered mediation in Jhaveri II. Appellants chose not to participate in the mediation. As a result of the mediation, the Jhaveris agreed to settle their claims against the Duboises globally for the sum of $1 million. As part of the settlement agreement, the Duboises agreed to assist the Jhaveris in collecting the Jhaveri I judgment and in prosecuting Jhaveri II.

The Jhaveris served notice of this settlement on appellants in September 2005.²

The Duboises paid the Jhaveris $245,000 under the settlement agreement before filing for bankruptcy in November 2006.

4. Motion for Good Faith Settlement in Fraudulent Conveyance Action

In September 2005, appellants brought a motion in Jhaveri II for a determination of the good faith of the settlement between the Jhaveris and the Duboises under Code of Civil Procedure section 877.6, subdivision (a).³ The court deferred ruling on the motion ordering further briefing regarding the allocation of the settlement and the financial condition of the Duboises. However, before the court could hear and issue a ruling on the continued motion, the Duboises filed a notice informing the court of their bankruptcy filing automatically staying any proceedings against them.

5. Motion for Execution of Partial Satisfaction of Judgment

Appellants returned to the court below in August 2007. They moved for an order requiring the Jhaveris to file an acknowledgment of partial satisfaction of judgment in the amount of $500,000, to be credited against the $1 million compensatory damages award entered jointly and severally against appellants and Dubois in the present action. (§ 724.110, subd. (b).)

The parties stipulated that the Jhaveris' settlement with the Duboises contemplated they would jointly pay the Jhaveris $1 million. The parties further stipulated that the settlement agreement was silent on how the $1 million should be allocated as between the Duboises in Jhaveri II and as between compensatory and punitive damages in Jhaveri I and agreed that no other court had adjudicated the issue of allocation.

Appellants argued the face amount of the settlement, i.e., $1 million, should be allocated equally between the joint and several liability for compensatory damages and Dubois's separate liability for punitive damages in Jhaveri I, so that $500,000 of the settlement should be allocated to economic damages and $500,000 to Dubois's separate liability for punitive damages. Thus, they argued $500,000 should be credited to the economic damages awarded in Jhaveri I. The Jhaveris, on the other hand, argued that because Connie Dubois also was a party to the settlement and benefited from the dismissal with prejudice of the claims asserted against her in Jhaveri II, half the settlement funds should be attributed to extinguishing her obligations, half attributed to Dubois's liability in Jhaveri I, with half of that remaining half, i.e., one-fourth of the amount paid or $61,000, should be credited to Dubois's joint and several liability for the economic damages in Jhaveri I.⁴

The court indicated the issue before the court was not what rights appellants would have in a suit for contribution against Dubois "or vice versa," nor was the court being asked to make an after-the-fact determination whether the "not yet adjudicated" settlement by Dubois was a good faith settlement for purposes of extinguishing any claims for contribution.

The court reasoned that the first issue presented was whether the judgment debtors are entitled to credit for the amounts actually paid under the settlement agreement, rather than the amounts agreed to be paid but in fact were not paid. Appellants argued they were entitled to the benefit of section 877, which provides when fewer than all joint tortfeasors settle with a claimant, the claims against the nonsettling tortfeasors are reduced by "the amount of the consideration paid." (Italics added.) Appellants contended the reference in the statute to "consideration" paid should be construed as meaning the face amount of the contract, rather than cash received. The court ruled under general principles of equity and economics the judgment debtors should receive credit only for amounts actually paid under the settlement agreement, the same method used for purposes of cutting off accrual of interest on a judgment.

The trial court indicated the second issue presented was whether the amount of credit should be reduced by one-half to reflect Connie Dubois's "buying her peace" and whether some or all of that amount should be viewed as having to do only with judgment debtor Dubois "buying his p[ea]ce." The court concluded that, in the absence of clarity between the parties, an equal apportionment between Dubois and his wife would be equitable, given that the next suit was pending and Connie Dubois was at risk as the person in nominal possession of the assets. The court found that Connie Dubois was "independently at risk and had a personal, financial interest to be protected by obtaining the settlement in Jhaveri [II]." Thus, it determined one-half the settlement funds received should be attributed to extinguishing Dubois's liability in Jhaveri I and one-half to extinguishing Connie Dubois's obligations in Jhaveri II.

6. Order for Partial Satisfaction of Judgment and Appeal

Noting that the jury in Jhaveri I had awarded punitive damages against Dubois in an equal ratio to the amount of compensatory damages awarded, the court attributed one-fourth of the settlement payments received to Dubois's joint and several liability for compensatory damages and one-fourth of such payments to his separate punitive damages liability in Jhaveri I.⁵ The parties did not dispute that only one-half of the amount attributed to Dubois's...