Peirona v. Nguyen
| Decision Date | 16 December 2010 |
| Docket Number | A126551,No. CIV 445795,CIV 445795 |
| Parties | LOUISE PEIRONA et al., Plaintiffs and Appellants, v. KIET NGUYEN et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Respondent Kiet Nguyen (Nguyen) was one of two members of TMT Associates, LLC (TMT), a real estate holding limited liability company. The other was Thomas Peirona. Thomas Peirona died suddenly in 2005, and his estate and his surviving spouse, Louise Peirona (collectively Plaintiffs), sued Nguyen over their entitlement to distributions from TMT's income. The trial court entered a preliminary injunction restricting use of the company's funds. Other trial court proceedings were stayed and Plaintiffs' claims were submitted to arbitration, with an agreement by the parties that the injunction would remain in effect until the arbitration was resolved.
While the arbitration was pending, the parties (including Nguyen's spouse, Kim Nguyen) repeatedly returned to court seeking further provisional relief. Late in the arbitration proceeding, Plaintiffs asked the court to lift the stay of the trial court litigation so that they could abandon the arbitration. The court denied the motion and sanctioned Plaintiffs for bringing it. The trial court subsequently confirmed the final arbitration award, which rejected many of Plantiffs' claims.
Plaintiffs challenge the order confirming the final arbitration award, the denial of their motion for relief from the stay of trial court proceedings, and the trial court order imposing sanctions. We affirm these orders. We also grant motions by Nguyen and TMT for sanctions against Plaintiffs for pursuing a frivolous appeal; we further impose sanctions on Plaintiffs payable directly to the clerk of this court both for a frivolous appeal and for repeated violations of appellate rules; and we grant Kim Nguyen's request for an award of attorney fees on appeal.
In September 1996, Nguyen and Thomas Peirona formed TMT for the purpose of acquiring leasehold interests and option rights in certain commercial property in San Mateo County (the Property).1 A company owned by Nguyen, KLN Precision Machining Company (KLN) (later renamed KLN Engineering Corporation), already held a lease on the Property, as well as an option to purchase the Property at a price of $4.1 million. At the time TMT was formed, the Property had a market value of $19.25 million. After TMT was formed, KLN assigned the lease and its purchase option to TMT. TMT then subleased space in the Property to KLN and another tenant, Inhale Therapeutic Systems, Inc., which later became Nektar Therapeutics (Nektar). Nektar held an option to purchase the Property from TMT at a price of slightly more than $25 million in 2005, escalating annually.
In April 1997, TMT exercised its purchase option and acquired the Property. In November 1997, it refinanced the Property with a $14 million loan secured by the Property (the Loan). The loan was originally held by Credit Suisse and was later transferred to Wachovia Securities (Lender). As of January 2005, TMT still owed $13 million on the Loan.
The TMT Operating Agreement (Operating Agreement) provided that Nguyen and Thomas Peirona held 51 percent and 49 percent ownership interests, respectively. (Section 1.3.) Upon Thomas Peirona's death, his estate and spouse became assignees of his interest in TMT, but not members, and Nguyen became the sole member and manager of TMT. (Sections 4.1, 5.2, 5.4.) Subject to certain restrictions, the Operating Agreement required that TMT's "cash available for distribution" (cash available after paying all ordinary and necessary expenses, maintaining reserves, and repaying loans) be distributed to the members according to their percentage interests. (Section 3.5(b)(3).) The Operating Agreement also required mediation and binding arbitration of "[a]ny controversy or claim arising out of or relating to this Agreement, the Company or the Members' rights and duties," with the prevailing party to recover his or her fees and costs. (Section 8.7.) The members' spouses, Kim Nguyen and Louise Peirona, signed "Consent of Spouse" declarations in which each agreed to be bound by the terms of the Operating Agreement.
Thomas Peirona died suddenly on February 11, 2005, and Louise Peirona (Peirona) acquired his community interest in TMT. Although Thomas Peirona had received monthly distributions of $40,000 to $60,000 from TMT before his death, Peirona received no distributions after his death and Nguyen failed to respond to numerous inquiries by her and her counsel. When a family friend finally contacted Nguyen, Nguyen gave Peirona a $20,000 distribution, without explanation of the amount. Moreover, a certified public accountant hired by Peirona opined that TMT's tax records for 2002 appeared to show far greater distributions to Nguyen than were justified by his 51 percent interest in the company.
In March 2005, Peirona sued Nguyen and TMT. Peirona asserted claims against Nguyen for conversion, breach of fiduciary duty, breach of contract, breach of the covenant of good faith and fair dealing, fraud and deceit, and negligent misrepresentation. She alleged that Nguyen was not distributing TMT's receipts inaccordance with the Operating Agreement and that he had taken capital distributions from TMT that were three times greater than those taken by Thomas Peirona and may have used the distributions for his personal benefit. She sought an accounting, declaratory relief, imposition of a constructive trust against both Nguyen and TMT, and injunctive relief against Nguyen.
On March 30, 2005, Peirona applied for an ex parte order prohibiting Nguyen from disbursing any assets of TMT except for certain specified monthly expenses. Nguyen agreed to the terms of a temporary restraining order in March and again in April, and the parties participated in mediation as required by the Operating Agreement. When the mediation proved unsuccessful, the trial court (Judge Quentin L. Kopp) incorporated the terms of the restraining order into a preliminary injunction on November 15, and thereafter entered a stipulated amended preliminary injunction that was filed January 6, 2006 (January 6, 2006 Preliminary Injunction).
The January 6, 2006 Preliminary Injunction enjoined Nguyen from using any of TMT's assets except to pay four specified monthly TMT obligations and "other expenses pertaining to the subject property to which [Peirona] may consent in writing, and which consent shall not be unreasonably] withheld." The injunction ordered TMT's net receipts distributed on a monthly basis to Nguyen and Peirona according to their respective 51 percent and 49 percent interests in the company.
On November 23, 2005, Nguyen moved to compel arbitration. Peirona initially filed a notice of nonopposition that stated, "This non-opposition is based upon an understanding between counsel for the parties that the preliminary injunction ordered by this court on November 15, 2005 shall remain in place...." On December 20, 2005, however, Peirona opposed the motion to compel arbitration after discovering that Nguyen had encumbered the Property in 2003 with a $1.6 million deed of trust, apparently for his personal benefit, but had only recorded the encumbrance in October 2005. She alsodiscovered that Nguyen had used some of the proceeds of TMT's November 1997 refinancing of the Property to purchase his residence in Atherton, California.
The matter of the newly-discovered deed of trust was resolved by February 2006, and the encumbrance on the Property was removed.2 Nguyen's alleged use of TMT funds to purchase his Atherton home, however, was not resolved. In a March 2006 second amended complaint, Peirona sued not only in her personal capacity (as in her original complaint) but also as administrator of the Estate of Thomas Peirona (Estate)3 and on behalf of TMT. Plaintiffs added claims that Nguyen misused TMT funds to purchase his marital residence in Atherton and added as defendants Kim Nguyen and other entities related to the financing of the Atherton home.4 They brought quiet title, constructive trust, and resulting trust causes of action with respect to the Atherton property in addition to their original causes of action. They also requested appointment of a receiver for TMT.
In May 2006, Nguyen renewed his motion to compel arbitration and also moved to expunge a lis pendens Peirona had recorded on the Atherton property. Plaintiffs filed a "Partial Opposition" to the motion to compel arbitration, explaining that they were (Italics added.) That is, Plaintiffs asked that the scope of arbitration be augmented to include issues related to the lis pendens. They insisted thatthey were not trying to avoid arbitration and the initial nonopposition to arbitration had been withdrawn only because they had discovered an allegedly improper encumbrance on the Property and needed to preserve access to the trial court to secure relief from the encumbrance.
On June 6, 2006, the court (Judge Marie S. Weiner) signed a stipulated order (the June 6, 2006 Stipulation) that ordered Plaintiffs' claims to arbitration. The parties agreed that Plaintiffs would remove the lis pendens from the Atherton property and Nguyen would deposit the net proceeds from a sale of the property into a blocked account to be held in trust. The parties also agreed to arbitrate "the disputes and...
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