Tamen, In re, 92-56171

• Decision Date: 15 April 1994
• Docket Number: No. 92-56171,92-56171
• Citation: 22 F.3d 199
• Parties: In re E. Jerome TAMEN; Nelly Danielle Tamen, Debtors. E. Jerome TAMEN; Nelly Danielle Tamen, Plaintiffs-Appellees, v. ALHAMBRA WORLD INVESTMENT, INC.; Daniel Chu; Delta Partnership Pacific, Ltd., Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 199

22 F.3d 199

In re E. Jerome TAMEN; Nelly Danielle Tamen, Debtors E. Jerome TAMEN; Nelly Danielle Tamen, Plaintiffs-Appellees, v. ALHAMBRA WORLD INVESTMENT, INC.; Daniel Chu; Delta Partnership Pacific, Ltd., Defendants-Appellants.

No. 92-56171.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 1, 1994.

Decided April 15, 1994.

Arthur Leeds, McKenna & Fitting, Los Angeles, CA, for plaintiffs-appellees.

Aaron M. Peck, Rogers & Wells, Los Angeles, CA, for defendants-appellants.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel.

Before: SNEED, THOMPSON, and Pamela Ann RYMER, Circuit Judges.

Opinion by Judge SNEED.

OPINION

SNEED, Circuit Judge:

This case stems from agreements for the sale and subsequent development of real property. The seller claims that the buyer breached the agreements by reselling the property prior to development. The bankruptcy court found the buyer, and several related defendants, liable under various contract and tort theories. The Bankruptcy Appellate Panel (BAP) affirmed. We also affirm.

I. FACTS AND PROCEEDINGS BELOW

Plaintiff E. Jerome Tamen was the general partner in two California limited partnerships, University Estates, Ltd., and Yucaipa Estates, Ltd. Each limited partnership owned property in the Yucaipa Valley in San Bernardino County, California. In 1985, Tamen and his wife entered Chapter 11 reorganization proceedings.

Facing the prospect of foreclosure, Tamen discussed the possible development of the Yucaipa Valley properties with Daniel Chu, president and sole director of Alhambra World Investments, Inc. (Alhambra). On October 22, 1986, Tamen's two partnerships agreed to sell the properties to Alhambra for the amounts in default on the properties' debts. Alhambra agreed not to assign its interest in the sale agreements except under certain conditions.

Concurrently, Alhambra and Tamen entered into two management agreements, under which Tamen would manage the development of the properties while Alhambra would arrange financing. Although Alhambra was free to discharge Tamen "at any time," Tamen would receive one-half the profits from development and sale, even if he was discharged. The bankruptcy court with jurisdiction over the Tamen reorganization approved the sale and management agreements.

Tamen then began obtaining the necessary plans, studies, and permits for developing the subject properties. The project apparently was nearing the groundbreaking stage in July 1987. At that time, however, Tamen gradually ceased his duties as development manager because Chu refused to reimburse him for certain expenses. On November 17, 1987, Alhambra, controlled by Chu, agreed that either partner, Chu or Tamen, would have the right of first refusal to buy the other's position or to buy into a joint venture with a new investor.

In addition to being Alhambra's president, Chu also was the owner, president, and sole director of Delta Partnership Pacific, Ltd. (Delta). The lineup was now Chu, Alhambra, and Delta on one side and Tamen on the other. On February 25, 1988, after lengthy negotiations, Delta and CSCEC-US, a truly unrelated corporation, formed a joint venture to develop the Yucaipa Valley properties. Tamen was not a party. CSCEC-US agreed to purchase the properties from Alhambra for $1 million in what we will call "Transaction No. 1." After holding the properties for a brief "custodial period," CSCEC-US was to transfer them to the newly formed venture in what we will call "Transaction No. 2."

Chu informed Tamen of the sale to CSCEC-US on March 17, 1988, and gave Tamen twenty-four hours to exercise his right of first refusal made available to him by reason of the November 1987 modification to the Alhambra purchase agreement. Chu did not inform Tamen of the Delta-CSCEC-US joint venture. The first escrow on the CSCEC-US sale closed on March 25, 1988. Alhambra did not provide Tamen with any of the sale proceeds. Tamen, thus, had neither property nor money.

Tamen, not surprisingly, brought an action in bankruptcy court against Chu, Alhambra, Delta, CSCEC-US, and the Delta-CSCEC-US joint venture, alleging fraud, tortious interference with economic advantage, and various breaches of contractual and fiduciary duties. The bankruptcy court held that CSCEC-US was not liable under any theory but found the remaining defendants jointly and severally liable for: (1) breach of the sale and management agreements, (2) breach of the implied covenant of good faith and fair dealing, (3) breach of the agreement to provide right of first refusal, (4) tortious interference with the Tamen-Alhambra contracts, (5) fraud, and (6) breach of fiduciary duties. The court assessed damages consisting of Tamen's share of the profits from the purchase by CSCEC-US plus his share of lost profits from Alhambra's failure to develop the properties before sale.

The BAP affirmed the bankruptcy court's judgment against Chu, Alhambra, and Delta. All three appeal.

II. JURISDICTION AND STANDARD OF REVIEW

This court has jurisdiction over decisions of the BAP under 28 U.S.C. Sec. 158(d). We apply the same standard of review as the BAP did; namely, we review the bankruptcy court's factual findings for clear error while reviewing its legal conclusions de novo. In re Carroll, 903 F.2d 1266, 1269 (9th Cir.1990).

III. DISCUSSION

The issues on appeal fall under three general headings: (A) whether, in a proper legal sense, Tamen was "wronged," (B) whether, if wronged, the damage award was excessive, and (C) which defendants are liable for such damages as are appropriate.

A. Was Tamen Wronged?

Although the bankruptcy court and BAP found several defendants liable under multiple theories, this case essentially derives from two allegedly wrongful acts: Alhambra's failure to give Tamen his share of the CSCEC-US sale profits (Transaction No. 1), and its sale of the subject properties prior to development, resulting in lost profits for Tamen (Transaction No. 2). Defendants concede their liability on Transaction No. 1. The key to Transaction No. 2 is whether the Alhambra agreements permitted Alhambra to sell the properties before development without Tamen's consent. If so, that sale was not "wrongful" under any theory.

1. The Contractual Limitation on Pre-Development Resale

The bankruptcy court found, based on extrinsic evidence of the Alhambra-Tamen contract negotiations, that the sale and management agreements prevented Alhambra from reselling the Yucaipa Valley properties prior to development. The court then found that Alhambra breached the agreements by reselling before development. Defendants challenge the court's decision to admit Tamen's extrinsic evidence as well as its ultimate conclusion as to the meaning of the sale and management agreements.

Where the interpretation of a contract involves review of extrinsic evidence, this court reviews findings of fact for clear error while reviewing de novo the principles of law applied to those facts. Stephens v. City of Vista, 994 F.2d 650, 655 (9th Cir.1993). Under California law, extrinsic evidence is admissible if relevant to prove a meaning to which the contractual language is reasonably susceptible. Id. at 656. Even if a contract appears unambiguous on its face, a court must engage in a preliminary consideration of extrinsic facts in order to determine whether those facts create an ambiguity. Id. at 656-57.

Defendants first contend that the bankruptcy court should not have considered Tamen's extrinsic evidence because it did not first determine whether the agreements were reasonably susceptible to Tamen's interpretation. This contention lacks merit. The bankruptcy court agreed with Tamen's interpretation, thus implicitly finding that the agreements were reasonably susceptible to that interpretation.

The bankruptcy court's construction of the agreements was not clearly erroneous. Plainly, the parties agreed to jointly develop the properties. The sale prices were nominal. Both sale agreements were subject to the terms of the management agreements; indeed, this was a crucial factor in securing the bankruptcy court's approval. The management agreements appointed Tamen as manager for the care and development of the properties, laying out each party's respective role in detail. At trial, Chu himself admitted that he and Tamen agreed to develop the properties.

The contractual restrictions on resale, while less explicit, support Tamen's view. The management agreements do not expressly mention such a restriction, and also state that they contain the entire agreement between the parties. The sale agreements however, state that Alhambra could not assign its interest in those agreements without Tamen's written consent, except to an entity in which Alhambra had at least a fifty percent interest, and only if the assignee assumed all of Alhambra's obligations.

Defendants assert that this no-assignment clause refers only to Alhambra's obligations under the sale agreements, namely to pay the purchase price and take delivery. This ignores the fact that the sale agreements specifically incorporate the management agreements, which provide for joint development. At trial, Tamen explained that he and his wife told Chu they would not enter into any agreement unless they could participate in the profits from development of the properties, and that Chu assured them that the properties "would be developed with single family residences prior to sale." After receiving lengthy declarations and testimony from both parties, the bankruptcy court agreed with Tamen. Its findings are not clearly erroneous.

Defendants offer three extrinsic facts to contest that interpretation. First, they argue that Tamen actively sought resale before development and thus could not have believed the contract precluded resale. To support this first assertion, however, they point only to the fact that Tamen met with a broker without obtaining a commitment or offer and to...