Tinajero v. Aguirre (In re Tinajero)

• Decision Date: 11 October 2018
• Docket Number: BAP No. CC-18-1012-SFL,Adv. No. 2:17-ap-01355-BR,BAP No. CC-18-1031-SFL
• Parties: In re: FRANCISCO TINAJERO, JR. and JACQUELINE SANCHEZ, Debtors. FRANCISCO TINAJERO, JR., Appellant, v. BLANCA AGUIRRE; JOSE M. ZAVALA, Appellees. GLENN WARD CALSADA, Appellant.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

In re: FRANCISCO TINAJERO, JR. and JACQUELINE SANCHEZ, Debtors.

FRANCISCO TINAJERO, JR., Appellant, v. BLANCA AGUIRRE; JOSE M. ZAVALA, Appellees.

GLENN WARD CALSADA, Appellant.

BAP No. CC-18-1012-SFL

BAP No. CC-18-1031-SFL

Adv. No. 2:17-ap-01355-BR

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

Argued and Submitted: September 27, 2018

October 11, 2018

NOT FOR PUBLICATION

(Related)

Bk. No. 2:17-bk-15755-BR

MEMORANDUM^*

Argued and Submitted on September 27, 2018 at Los Angeles, CaliforniaAppeals from the United States Bankruptcy Court for the Central District of California

Honorable Barry Russell, Bankruptcy Judge, Presiding

Appearances: Glenn Ward Calsada argued pro se and for appellant Francisco Tinajero, Jr.; Steve Lopez argued for appellees Blanca Aguirre and Jose M. Zavala.

Before: SPRAKER, FARIS, and LAFFERTY, Bankruptcy Judges.

INTRODUCTION

Creditors Blanca Aguirre and Jose M. Zavala obtained a judgment against debtor Francisco Tinajero, Jr., in California state court for specific performance of a real estate purchase and sale agreement. Aguirre and Zavala also obtained a judgment for their attorney's fees and costs. After Tinajero and his spouse Jacqueline Sanchez commenced their joint chapter 7¹ bankruptcy case, Aguirre and Zavala sued Tinajero to except the judgment debt from discharge under § 523(a)(2)(A) based on allegations of fraud. The bankruptcy court ultimately granted the creditors' summaryjudgment motion, determining that there was no genuine issue of material fact because of the preclusive effect of the state court judgments.

The bankruptcy court noted that the state court had made numerous findings of fraudulent conduct by Tinajero. But the state court granted the creditors specific performance and awarded them their fees based on Tinajero's breach of the purchase and sale agreement. Nothing in the record indicates that any relief was granted based on the state court's fraud findings. Because the fraud findings were not essential to the state court judgments, those findings are not entitled to preclusive effect. Furthermore, there is nothing in the state court record tying the debt Tinajero incurred - the award of attorney's fees and costs - to Tinajero's fraud rather than breach of contract. Accordingly, we REVERSE the bankruptcy court's grant of summary judgment in favor of Aguirre and Zavala, and we REMAND for further proceedings in the creditors' nondischargeability action.

Tinajero's attorney Glenn Ward Calsada separately appeals from an order sanctioning him $300 for not complying with the bankruptcy court's pretrial procedures as specified in its Local Rules. Nothing Calsada has said in his appeal brief persuades us that the bankruptcy court committed reversible error in sanctioning Calsada. Therefore, we AFFIRM the sanctions order.

FACTS

In April 2013, Aguirre and Zavala entered into an agreement withTinajero for their purchase of his residence located in Whittier, California. Tinajero refused to close the sale. In June 2013, Aguirre and Zavala commenced a lawsuit against Tinajero in the Los Angeles County Superior Court. Their complaint sought specific performance of the agreement.² In the alternative, the complaint requested damages for breach of contract and for breach of the implied covenant of good faith and fair dealing. The final cause of action in the complaint was for a declaration of the parties' respective rights under the agreement. Thus, on its face, each cause of action sought relief for breach of contract.

In July 2014, Sanchez filed a complaint in intervention, asserting that the residence was community property. According to Aguirre and Zavala, Sanchez's complaint provided their first notice that Sanchez was Tinajero's spouse and that she claimed an interest in the residence. In response to the complaint in intervention, in August 2014, Aguirre and Zavala filed a cross complaint in intervention against Tinajero and Sanchez seeking damages for fraud, negligent misrepresentation and negligent infliction of emotional distress, all largely based on Tinajero's failure to disclose his marriage to Sanchez and her alleged interest in the residence. Aguirre and Zavalaalleged that, through his real estate agent, Tinajero represented that he was unmarried, that he was the sole owner of the residence, and/or that he was authorized to sell the residence. They further alleged that Tinajero concealed the fact that he was married and that, when the sales agreement was signed, a temporary restraining order prohibited him from selling the residence. As Aguirre and Zavala put it, Tinajero misrepresented and concealed the true state of affairs regarding the residence in order to induce them to enter into the agreement. According to Aguirre and Zavala, as a result of Tinajero's fraudulent conduct, they were entitled to recover consequential and punitive damages.³

In July 2015, after a bench trial, the state court entered a judgment for specific performance in favor of Aguirre and Zavala and against Tinajero. The judgment made clear that the grant of specific performance was based on Tinajero's failure and refusal to convey the residence to Aguirre and Zavala as required by the agreement. For instance, the judgment references the parties' agreement, Aguirre's and Zavala's performance of all conditions precedent under the agreement, and their tender of the consideration ($300,000) under the agreement. Significantly, the specificperformance judgment did not mention at all the cross-complaint in intervention or Tinajero's fraud.

The state court also issued a statement of decision contemporaneously with the judgment. Unlike the judgment for specific performance, the statement of decision repeatedly referenced Tinajero's fraudulent conduct regarding ownership of the property and his marital status. The statement of decision also determined that Tinajero knowingly misled Aguirre and Zavala in order to induce them to enter into the agreement and that they justifiably relied on Tinajero's fraudulent conduct in entering into the agreement. However, nowhere in the judgment or the statement of decision was there any finding that Tinajero's fraud resulted in damages to Aguirre and Zavala. Although the statement of decision determined that Tinajero "is liable" for his fraudulent conduct, no damages were awarded for fraud. Rather, Aguirre and Zavala, acting through their attorney, "waived tort damages in favor of a judgment for specific performance." Discussing Aguirre's and Zavala's election to recover specific performance, the court explained:

The concept of election of remedies in breach of contract actions is embodied in the Civil Code, section 3300, which provides: "For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate the party aggrieved for all thedetriment proximately caused thereby, or which in the ordinary course of things, would be likely to result therefrom."

However, an aggrieved buyer may elect for a court order that directs the breaching party to perform his/her obligations under the contract. As embodied in Civil Code section 3387, "[i]t is to be presumed that the breach of an agreement to transfer real property cannot be adequately relieved by pecuniary compensation."

Statement of Decision (July 28, 2015) at 16:16-24 (parenthetical information omitted).

Accordingly, the state court awarded specific performance "based on the enforceable contract that is sufficiently certain in its terms . . . ; adequate consideration, and a just and reasonable contract as testified to by Plaintiffs and Defendant; Plaintiffs' full performance by opening escrow; and Defendant Tinajero's clear breach of contract." Moreover, the statement of decision never mentioned Tinajero's fraud as a basis for specific performance. To the contrary, the statement of decision specified that the remedy of specific performance was being granted based on "Tinajero's clear breach of contract."⁴

Finally, the statement of decision concluded that Aguirre and Zavala were entitled to recover their attorney's fees and costs. But neither the specific performance judgment nor the statement of decision determined the amount of fees and costs to be awarded. Instead, they left the amount of fees and costs for later determination. In addition, neither the statement of decision nor the specific performance judgment explained the legal basis for awarding Aguirre and Zavala their attorney's fees.

Shortly thereafter, in August 2015, a different state court judge entered an order granting Aguirre's and Zavala's motion for attorney's fees and costs, citing Cal. Civil Code § 1717 and Cal. Civil Procedure Code§ 1032. The judge wrestled with the fact that neither the statement of decision nor the specific performance judgment specified the legal basis for the fee award, and also was troubled that the agreement on which the fee award presumably was based required mediation as a prerequisite to any entitlement to fees. No mediation took place. Notwithstanding its expression of some doubt regarding their entitlement to fees in light of the failure to satisfy the mediation prerequisite, the second judge concluded that it had no power to disturb the prior judge's conclusion in the statement of decision and in the specific performance judgment that Aguirre and Zavala were entitled to recover their fees and costs. As a result, in November 2015, the state court entered a judgment awarding Aguirre and Zavala their attorney's fees and costs in the aggregate amount of $52,477.20.

Tinajero apparently did not appeal either the specific performance judgment or the judgment for fees and costs. Tinajero and Sanchez filed their chapter 7 petition in May 2017.⁵ Aguirre and Zavala then commenced their nondischargeability action against Tinajero in July 2017, seeking to have the judgment debt for fees and costs declared nondischargeable under § 523(a...