Landes Const. Co., Inc. v. Royal Bank of Canada

Decision Date09 December 1987
Docket NumberNos. 86-5603,86-5611,s. 86-5603
Citation833 F.2d 1365
Parties24 Fed. R. Evid. Serv. 885 LANDES CONSTRUCTION CO., INC., Plaintiff-Appellee/Cross-Appellant, v. ROYAL BANK OF CANADA, Defendant-Appellant/Cross-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Isaac M. Pachulski (argued) and Anthony Castanares, Stutman, Treister & Glatt, Los Angeles, Cal., Thomas N. Bucknell, Shulkin, Hutton & Bucknell, Inc., P.S., Seattle, Wash., for plaintiff-appellee/cross-appellant.

Howard P. Miller, Buchalter, Nemer, Fields, Chrystie & Younger, Los Angeles, Cal., for defendant-appellant/cross-appellee.

Appeal from the United States District Court for the Central District of California.

Before FERGUSON, BOOCHEVER and WIGGINS, Circuit Judges.

BOOCHEVER, Circuit Judge:

A jury found that the Royal Bank of Canada orally agreed to lend Landes Construction Company $10 million to finance the purchase of commercial real estate in Los Angeles and that the bank breached this agreement. It awarded the construction company $18.5 million in damages. The bank appeals the judgment and the district court's denial of the bank's motion for judgment notwithstanding the verdict and for a new trial. It argues that the district court's grant of four peremptory challenges to both parties at voir dire was reversible error. The bank also argues that there was insufficient evidence to establish the existence of a contract. Alternatively, the bank contends that if there was a contract, it was one within California's statute of frauds and thus unenforceable. Assuming the existence of a valid

enforceable contract, the bank claims that the district court erred in failing to grant J.N.O.V. or a new trial as there was insufficient proof of damages. Finally, if the evidence was sufficient to prove the contract and damages from its breach, the bank contends it was error for the district court to refuse a motion for an equitable offset against the damages awarded by a jury. Landes Construction Company cross appeals the district court's denial of prejudgment interest. We affirm the jury's verdict and the district court's rulings on the post-trial motions.

FACTS

The claims of error made by the Royal Bank of Canada (RBOC or bank) involving the jury's verdict and the district court's rulings on the motions for a new trial and for judgment notwithstanding the verdict go to the weight of the evidence. In reviewing these alleged errors, we must view the evidence presented at trial from the perspective most favorable to Landes Construction Company (LCCO or construction company). See Robins v. Harum, 773 F.2d 1004, 1006 (9th Cir.1985); Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1013-14 (9th Cir.1985), cert. denied, 474 U.S. 1059, 106 S.Ct. 802, 88 L.Ed.2d 778 (1986); Walker v. KFC Corp., 728 F.2d 1215, 1223 (9th Cir.1984). Viewed in this manner, the facts are as follows.

Nat Landes was the sole shareholder of LCCO and Eliyahu Scheinberg was the sole shareholder of Elpat Holdings, Ltd. Together they had participated in several real estate ventures, notably the development of a golf course. William Neapole was a vice president of the bank. The bank provided some of the financing for development of the golf course; Neapole participated in the transaction.

In the spring of 1981, Landes learned of an opportunity to purchase eleven acres located at 5757 Wilshire Boulevard in Los Angeles. The sellers and LCCO reached a tentative purchase agreement requiring a $10 million down payment and a $40 million note and deed of trust in favor of the sellers. The sellers wanted assurances that LCCO could obtain the financing necessary to complete the sale. Landes had told them that neither he nor his company had sufficient resources to purchase the property and he would therefore join with Scheinberg, who would arrange financing. Scheinberg contacted RBOC through Neapole and another of its officers, David Maltby. The bank expressed interest in the project, and Neapole and Don Palethorpe, a real estate specialist with the bank, accompanied Scheinberg to California to meet with Landes and the sellers.

Landes met Scheinberg and Neapole in San Francisco on June 14, 1981. Neapole questioned Landes about the property, the plan for its development, the terms of the agreement with the sellers, and Landes' experience with previous development projects. At dinner, Neapole told Landes, "We are going to lend you $10 million for this project." The next day, Landes, Scheinberg, Neapole, and Palethorpe met with the representative of the owners of the property. The owners' representative informed them that he was authorized to enter into a purchase agreement if he was convinced that LCCO had "the capacity to carry this out." Neapole assured him that the bank would provide the financing. The parties then signed a purchase agreement that called for an initial payment of $1 million, another payment of $2 million in thirty days, and the remaining $7 million of the $10 million down payment in another fifty days. If LCCO did not make the final payment of $7 million, the $3 million would be treated as consideration for an option on the property and would be forfeited to the owners.

On June 19, 1981, Scheinberg met with Neapole to negotiate the terms of the $10 million loan from the bank to the construction company. LCCO would pay interest at the rate of "prime plus two," a fee of $3 million after the sale closed, and Landes and Scheinberg would personally guarantee the loan. The construction company paid the first two installments on the down payment as they became due in June and July. The bank transferred these funds to LCCO at Scheinberg's direction. The total In early August, the architectural firm retained by Landes presented the development plans for the property to representatives of the bank, the Los Angeles planning commission, and others. A similar presentation was made to officers of RBOC in Calgary. Neapole prepared an application for a loan of $22.5 million: $7 million would go to complete the down payment; the remainder was earmarked for development and payment of interest and fees. The bank rejected the application on September 4, 1981, five days before the $7 million installment was due. The construction company was unable to arrange other financing and the $3 million was forfeited to the sellers under the terms of the purchase agreement.

of $3 million was advanced against Elpat's line of credit. The bank had financed another project of Landes and Scheinberg, a golf course, in the same manner: the bank advanced funds against Elpat's established credit line until the paperwork for the project's own credit was completed. Then Elpat was repaid and the debt transferred to the project's credit line.

At trial, LCCO asserted that RBOC had made an oral promise to lend it $10 million to finance the down payment. The construction company presented evidence to support two alternative measures of its damages. Its expert witness testified that the project, if developed, would have generated profits with a present value of $79.6 million in 1985. Other evidence indicated that the property could have been immediately resold in September 1981 for $29-40 million more than the price agreed to in the purchase agreement. The jury found for LCCO and returned a general verdict against RBOC for $18.5 million.

The bank made motions for a new trial or judgment notwithstanding the verdict alleging that there was insufficient evidence on the questions of the existence of an oral contract and damages for its breach to permit the case to go to the jury. It also argued that even if there were sufficient evidence to create a jury question on the making of an oral agreement, such an agreement is barred by California's statute of frauds. Finally, it made a motion for an equitable offset of $3 million against the jury's verdict for the monies it had advanced for the down payment. The construction company made a motion for prejudgment interest on the verdict. The trial judge denied all the post trial motions. On appeal, the parties claim the district court erred in ruling on their respective motions. RBOC also asserts that the court committed reversible error by granting a fourth peremptory challenge at voir dire.

ANALYSIS
Peremptory Challenge

The trial court informed the parties that jury selection would follow the local procedure which holds that each acceptance of a jury panel by a party waives one of the peremptory challenges allowed it under 28 U.S.C. Sec. 1870 (1982). Counsel for LCCO, Castanares, accepted the first panel called. Berle, counsel for RBOC, excused juror No. 3 and the court called a replacement. Castanares accepted the panel again. Berle excused juror No. 4 and Castanares excused the replacement juror. Berle then challenged juror No. 1 and the court called as a replacement, a loan officer at a Los Angeles bank. Castanares challenged her for cause. The court expressed its reluctance to excuse her for cause. Castanares then asked that the court allow each side an additional challenge. Judge Rymer granted this motion over Berle's objection.

In United States v. Turner, 558 F.2d 535 (9th Cir.1977), the court held that "acceptance of a panel cannot be deemed a waiver of a peremptory challenge in respect of [sic] a person who was not a member of the panel at the time the jury was accepted." Id. at 538. Castanares' acceptances of the panel did not waive his right to an otherwise unexhausted peremptory challenge against the loan officer, who was not a member of the panel when he did accept it. Id.; see also United States v. Pimentel, 654 F.2d 538, 541 (9th Cir.1981).

Statute of Frauds

LCCO contends that the bank is precluded from raising a statute of frauds An oral agreement to lend money with which to purchase real property clearly falls outside California's statute of frauds. Cal.Civ.Code Sec. 1624 (West 1985 & Supp.1986...

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