Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
San Francisco County Super. Ct. No. CGC-04-432322
RIVERA, J.
Cleghorn Bar Enterprises, a partnership, and J. Kern Hamilton, individually and as trustee for the J. Kern and Betty Hamilton Revocable Trust (collectively plaintiffs) were limited partners in a partnership that owned a parcel of property in San Francisco. After the property was sold to Third & Folsom, LLC (Third & Folsom), plaintiffs brought this action against Third & Folsom and William F. Garlock, trustee for the William F. Garlock Family Trust (collectively defendants) seeking damages under an indemnity agreement defendants had executed at the time of the sale. The trial court found in favor of defendants. We affirm.
We shall refer to Garlock in his capacity as trustee for the William F. Garlock Family Trust as “the trustee” in order to maintain a distinction between Garlock as trustee in his representative capacity and Garlock in his individual capacity.
I. BACKGROUND
A. The Transaction
Plaintiffs had limited partnership interests in Museum Parc Partners, L.P. (Museum Parc), a partnership whose sole asset was a commercial/retail real estate parcel at 350 Third Street in San Francisco. American Partnership Services, Inc., (APS) was the general partner of Museum Parc. Garlock and James Brennan each held 50 percent of the shares in APS.
Disagreements arose between Garlock and Brennan, and in 1999 they settled various disputes. As part of the settlement, they agreed to have Museum Parc sell the property at 350 Third Street to Third & Folsom, which had as members Garlock and the trustee, for $4,300,000. This amount was later determined to be $700,000 less than the fair market value of the property, and according to Garlock was chosen because they “thought [it] was high enough to pay everybody off.” Although the partnership gained a profit of more than $900,000 on the sale, proceeds from the transaction were distributed to pay other obligations—that is, nonpartnership obligations—and the limited partners received nothing from it. The capital accounts of Garlock and Brennan, however, each received $280,145 from the sale, and APS was assigned an account receivable of $790,850.
According to the purchase and sale agreement, the proceeds of the sale would be used to pay certain creditors, and the balance, if any, from the sale would be deposited in a trust account to be distributed to reimburse the APS partnership, Brennan, and Garlock for certain legal fees and expenses. All other funds would be distributed “pursuant to the agreement of Messrs. Brennan and Garlock.”
B. The Arbitration
The Museum Parc partnership agreement provided that disputes relating to the partnership or investments would be settled by binding arbitration. Accordingly, plaintiffs initiated arbitration proceedings against Brennan, Garlock, APS, and Museum Parc, asserting causes of action for breach of contract, intentional misrepresentation, breach of fiduciary duty, accounting, and constructive trust, and seeking “their rightful share of the proceeds of the sale of the partnership property.” Third & Folsom and the trustee were not parties to the limited partnership agreement, and did not participate in the arbitration.
The arbitrator ruled in favor of plaintiffs in 2003, ordering Brennan, Museum Parc, and APS to pay $262,626 to Hamilton and $175,855 to Cleghorn Bar Enterprises, plus interest. He ordered Garlock to pay $33,332 to Hamilton and $23,040 to Cleghorn Bar Enterprises, plus interest. In the statement of decision, the arbitrator concluded that the property was sold for $700,000 less than the fair market value of $5 million, that a substantial amount of the distributions from the sale of the property was used to pay obligations of entities other than Museum Parc, and that as a result of these improper distributions there were no funds available to pay anything owed to plaintiffs. The arbitrator noted that Brennan had largely been responsible for putting in place “remarkable financing arrangements,” and stated: “[S]ince Brennan controlled the distributions (and, indeed, the underlying accountings) he is responsible for any tortious conduct effected by APS in connection with the partnership distributions. There is no doubt but that the distributions represented, at best, a breach of fiduciary duty to the limited partners, and, at worst, outright fraud. In fact, Brennan’s conduct towards the limited partners—misleading them, failing to provide information, and ultimately paying out their funds to satisfy non-[Museum Parc] obligations—represents classic fraudulent conduct.” The arbitrator also concluded: “With respect to the sale of the retail parcel to Garlock, there is little question but that the price was not based on the fair market value of the property, but rather on the smallest amount that Brennan felt he could take for the property to satisfy certain outstanding obligations,” and that APS did not fulfill its fiduciary obligation to the partnership and the limited partners.
Brennan, Museum Parc, and APS were also ordered to pay $109,633 to Hamilton in his role as assignee of the HP fund, to which Brennan had apparently contributed part of his limited partnership interest in Museum Parc. Garlock was ordered to pay $43,600 to Hamilton as assignee of the HP fund. The HP fund does not concern us here.
As to Garlock’s liability, the arbitrator concluded that although Garlock had negotiated the price of the property at arm’s length, he was liable to plaintiffs for the difference in the sales price as allocable to their limited partnership interests, in part because the favorable price was due to a lis pendens that Garlock should have known had been improperly recorded against the property. The amounts Garlock was ordered to pay—$33,332 to Hamilton and $23,040 to Cleghorn Bar, plus prejudgment interest—represented their proportionate share of the difference in the sales price. The amounts Brennan, Museum Park, and APS were required to pay—$262,626 to Hamilton and $175,855 to Cleghorn Bar, plus prejudgment interest—represented both the difference in sales price and additional amounts that should have been distributed to the limited partners, including amounts that should have been allocated to their capital accounts and retained earnings.
To the extent the award represented Hamilton and Cleghorn Bar’s share in the difference in the sales price, Brennan, Museum Parc, and APS were jointly and severally liable with Garlock.
The San Francisco Superior Court confirmed the arbitration award.
Before the trial in the present action, plaintiffs reached a settlement with Garlock and filed an acknowledgement of satisfaction of judgment.
C. The Present Action
In 1999, at the time of the sale of the property at 350 Third Street, Third & Folsom, the William F. Garlock Family Trust (the trust), Museum Parc, APS, Brennan, and another entity entered into an indemnity agreement, under which Third & Folsom and the trust agreed to indemnify Museum Parc, APS, and Brennan from, among other things, “claims relating to the real estate purchase transaction referenced herein,” that is, the sale of 350 Third Street.
Before the arbitrator had issued his 2003 decision, plaintiffs settled with Brennan, APS, and Museum Parc. As part of the settlement, Brennan, APS, and Museum Park assigned to plaintiffs their rights under the indemnity agreement.
Plaintiffs then brought this action against the trustee and Third & Folsom, asserting the rights of Brennan, APS, and Museum Parc for indemnity under the indemnity agreement. Plaintiffs alleged that the arbitration had established the liability of Brennan, APS and Museum Parc for claims related to the transfer of the property at 350 Third Street, and sought the amounts for which Brennan, APS, and Museum Parc were liable.
The trial court ruled in favor of defendants. The court stated that plaintiffs had received from Garlock the damages from the sale of the property at less than fair market value, and that the issue before it was whether the indemnity agreement covered losses flowing from the misappropriation of the proceeds of the sale. On that issue, the court ruled that the indemnity agreement’s provision that it applied to “ ‘claims relating to the real estate purchase transaction’ ” was ambiguous. The court concluded that the indemnity agreement applied to claims relating to the purchase price, and not to claims arising from the distributions of the partnership’s funds. In any case, according to the court, if the agreement were interpreted to include indemnity for Brennan’s actions in misusing the sales proceeds, that part of the agreement would be void under Civil Code section 2773 (section 2773). Noting that there was no dispute that the proceeds of the sale had been used to pay nonpartnership obligations, the court stated “Brennan surely knew ‘at the time of doing it [the distribution was] . . . unlawful.” By extension, Museum Parc and APS, which were under Brennan’s control, were wrongdoers and could not have enforced the indemnity agreement. As the assignees of the wrongdoers, the court ruled, plaintiffs similarly could not enforce the agreement.
Section 2773 provides: “An agreement to indemnify a person against an act thereafter to be done, is void, if the act be known by such person at the time of doing it to be unlawful.”
This appeal ensued.
II. DISCUSSION
A. Applicability of Section 2773
Plaintiffs contend the trial court erred in concluding that their claims for improper distribution of the proceeds of the sale of Museum Parc’s real property to Third & Folsom were not “ ‘claims relating to the real estate purchase transaction’ ” for purposes of the indemnity agreement. According to plaintiffs, the contractual language was unambiguous, and was broad enough to cover claims relating to the misallocation of the proceeds of the transaction.
We need not reach this issue, however, because whatever the scope of the indemnity, we conclude the trial court properly found that an agreement to provide indemnification for the misappropriation of the partnership’s funds would not be enforceable. In so finding, the trial court stated: “If Brennan expected the Garlock Family Trust and Third & Folsom, LLC to indemnify him from his own defalcations, such falls squarely under Civil Code section 2773, which provides ‘An agreement to indemnify a person against an act thereafter to [be] done, is void, if the act be known by such person at the time of doing it to be unlawful.’ The parties to this action agree that the proceeds in the attorney’s trust account were used to pay non-partnership obligations (or at least there is no dispute as to this issue), and that Brennan was at least partly responsible for this. Brennan surely knew ‘at the time of doing it [the distribution was] . . . unlawful.’ ”
Plaintiffs argue that there is insufficient evidence outside the arbitrator’s award to support the trial court’s conclusion Brennan knew his conduct was unlawful, and that as nonparties to the arbitration, defendants cannot reap the benefit of the arbitrator’s findings. Plaintiffs rely on Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 834, which holds that a private arbitration award has no collateral estoppel effect in favor of third parties unless the arbitral parties have so agreed.
Plaintiffs’ argument misses the point. Plaintiffs seek to establish their rights to indemnity by showing that the arbitrator awarded damages for Brennan’s use of the proceeds of the sale, while asking the court to ignore the fact that the basis for Brennan’s liability was his fraudulent misuse of those same proceeds. One of the causes of action in the arbitration was intentional misrepresentation. In that cause of action, plaintiffs alleged that Brennan, on behalf of himself, Garlock, APS, and Museum Parc, represented to plaintiffs that the Museum Parc venture was safe and profitable, that he would make good faith efforts to ensure they would receive a reasonable return, and after the property was sold that they would receive their promised share of distributions. According to the demand, Brennan and the other respondents knew these statements were untrue when they were made, and they made them with deliberate intent to induce plaintiffs to invest their funds for the exclusive benefit of the respondents and to refrain from taking any action to recover the amounts owed them. In ruling for plaintiffs, the arbitrator found that Brennan’s actions represented “classic fraudulent conduct.” Knowledge of the falsity of a representation is one of the elements of a cause of action for fraud or intentional misrepresentation. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 173; R & B Auto Center, Inc. v. Farmers Group, Inc. (2006) 140 Cal.App.4th 327, 377 (conc. opn. of Rylaarsdam, J.).) Having sought and received an award based on the theory that Brennan acted fraudulently, plaintiffs cannot now disavow that conclusion, or argue that its elements were not satisfied. The trial court was right to conclude that Brennan could not recover for his own misdeeds under the indemnity agreement, and that neither can plaintiffs, who stand in his shoes.
The arbitrator’s award was one of plaintiffs’ exhibits at trial. “An appellant cannot complain of evidence which he introduced himself.” (People v. Medina (1972) 26 Cal.App.3d 809, 820, citing Gjurich v. Fieg (1913) 164 Cal. 429, 433.) We are not considering the arbitrator’s award here as evidence of the underlying facts, but as evidence of the arbitrator’s adjudication and the basis for its ruling. Indeed, it would not be possible to decide this case without looking to the basis for the award, since the central question is whether or not the indemnity agreement covered the conduct for which Brennan, Museum Parc, and APS were found liable in the arbitration. Plaintiffs acknowledged as much to the court below when their counsel argued that “the factual heart of this case is to look at the arbitrator’s decision as to what was awarded and why and to determine whether or not that’s covered by the indemnity agreement.”
Among the arbitrator’s conclusions was the statement that “[t]here is no doubt but that the distributions represented, at best, a breach of fiduciary duty to the limited partners, and, at worst, outright fraud. In fact, Brennan’s conduct towards the limited partners—misleading them, failing to provide information, and ultimately paying out their funds to satisfy non-[Museum Parc] obligations—represents classic fraudulent conduct.” The arbitrator assigned liability for the misuse of partnership funds not to Garlock but solely to Brennan and the entities he controlled, stating, “Given Brennan’s intentional misappropriation of funds, without a full accounting (which may not be even possible), it would not be proper to assess liability against Garlock through the assignment of any purported ‘indemnity’ rights that Brennan might have or have had against Garlock.” (Italics added.)
Moreover, to allow plaintiffs to disavow the theory on which they prevailed in the arbitration—the theory that is the basis of the liability upon which they now seek to recover—would undermine the integrity of the judicial process. California law recognizes the doctrine of judicial estoppel to prevent such a result. This doctrine applies when “(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.” (Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 183; see also Law Offices of Ian Herzog v. Law Offices of Joseph M. Frederics (1998) 61 Cal.App.4th 672, 678-679 [applying judicial estoppel where party stipulated to and participated in arbitration]; Lydon v. Boston Sand & Gravel Co. (1st Cir. 1999) 175 F.3d 6, 12-13 [party who had successfully argued in arbitration that state law was plaintiff’s exclusive remedy could not argue in later state court action that federal law was exclusive remedy].) The goals of the doctrine are “to maintain the integrity of the judicial system and to protect parties from opponents’ unfair strategies.” (People ex rel. Sneddon v. Torch Energy Services, Inc. (2002) 102 Cal.App.4th 181, 189.) Plaintiffs’ allegations in the arbitration proceedings regarding the respondents’ knowledge of the falsity of their statements are completely inconsistent with a position that Brennan and the other defendants did not know their actions were wrongful. As we have discussed, the arbitrator accepted plaintiffs’ position, and the superior court confirmed the award. Having prevailed on their earlier allegations, plaintiffs may not now be heard to argue that defendants acted without knowledge of the wrongfulness of their conduct.
We are not persuaded otherwise by the cases cited by plaintiffs, which discuss section 2773’s requirement that the indemnitee know that the act is unlawful. In Lemat Corp. v. American Basketball Assn. (1975) 51 Cal.App.3d 267, 277-280, the Court of Appeal concluded there was no evidence that the indemnitees knew it would be unlawful to sign a basketball player, where there was uncontradicted testimony that they sought legal advice and acted in the good faith belief that the player was free to sign with their franchise. The court in State Farm Fire & Casualty Co. v. Eddy (1990) 218 Cal.App.3d 958, 968, concluded an agreement to indemnify an insured who had infected a woman with a sexually transmitted disease would not be void under section 2773 if the insured were found to have had a good faith belief that he did not have the disease. The question here is not whether Brennan was required to have knowledge of the unlawfulness of his actions for the bar of section 2773 to apply, but whether the trial court could properly conclude that he did have such knowledge. As we have discussed, the trial court could reasonably so conclude here.
In a footnote, plaintiffs argue that even if section 2773 bars their claims based on Brennan’s liability, his knowledge should not be imputed to Museum Parc and APS. They do not address the trial court’s findings that Museum Parc and APS were also wrongdoers because they were under Brennan’s control and that their actions resulted in the defalcations. Points unsupported by reasoned argument and citations to authority are deemed waived. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.)
B. Damages for Sale at Less than Fair Market Value
As we have noted, after the arbitrator had made his award, plaintiffs settled their dispute with Garlock and filed an acknowledgement of satisfaction of judgment, indicating they had accepted payment or performance other than that specified in the judgment in full satisfaction of the judgment, and releasing Garlock. It appears that Garlock settled for $130,000, and that at the time of the judgment, March 1, 2004, the value of the judgment against Garlock, including accrued interest, was $144,068. Plaintiffs contend that even if the trial court properly denied them recovery for the misappropriation of the proceeds of the sale, they should have been awarded the difference between the value of the judgment against Garlock—which reflected not the misuse of the proceeds of the sale of the property at 350 Third Street, but the fact that the property was sold for less than its fair market value, and was an amount for which Brennan, Museum Parc, APS, and Garlock were jointly and severally liable—and the amount Garlock actually paid, plus accrued interest.
We reject this contention. As stated in McCall v. Four Star Music Co. (1996) 51 Cal.App.4th 1394, 1398-1399 (McCall): “In California it has long been the rule, ‘There can be only one satisfaction for any injury; hence satisfaction of the judgment by execution sale, or payment by one or more of the joint or current tortfeasors, extinguishes the obligation and discharges the liability of all the others . . . .’ [Citation.] A ‘plaintiff is only entitled to a single recovery of full compensatory damages for a single injury.’ [Citation.] Thus, the rule is ‘. . . full payment of a judgment by one tortfeasor discharges all others who may be liable for the same injury.’ ” Here, plaintiffs checked the boxes on the Judicial Council form, “Acknowledgement of Satisfaction of Judgment” that indicated full satisfaction and that they had accepted payment or performance other than that specified in the judgment “in full satisfaction of the judgment.”
Plaintiffs argue, however, that they fall within the rule, stated in McCall, that “where fewer than all of the joint tortfeasors satisfy less than the entire judgment, such satisfaction will not relieve the remaining tortfeasors of their obligation under the judgment.” (McCall, supra, 51 Cal.App.4th at p. 1399.) The facts in McCall were different from those here. There, a judgment creditor, James McCall, entered into a settlement agreement with a judgment creditor; the agreement stated that it constituted “ ‘full settlement and satisfaction of all claims [McCall had arising out of the judgment] against all parties except [another judgment debtor, Joe E. Johnson],’ ” and that it “ ‘preserv[ed] in favor of [McCall] all of his rights in the said action and in the judgment heretofore rendered therein as against [Johnson].’ ” (Id. at pp. 1397, 1400.) McCall filed an acknowledgement of satisfaction of judgment, checking off the box indicating that he had accepted payment or performance other than that specified in the judgment in full satisfaction of the judgment, and naming the other judgment debtors as the parties being released. A week later, McCall filed an application for renewal of the judgment against Johnson. (Id. at p. 1400-1401.) On these facts, the Court of Appeal concluded that Johnson was still liable to McCall for his portion of the judgment. (Id. at pp. 1396-1397.) In doing so the court noted that the intent of the parties as expressed in the release was controlling, and concluded the settlement agreement did not constitute full satisfaction of the judgment. As the court stated, the agreement “expressed the patent intent of the signatories to release only the settling defendants while preserving McCall’s rights as against Johnson.” (Id. at pp. 1400-1401.) McCall’s intention that the agreement was not a full settlement of his rights under the judgment was also shown by the facts that he omitted Johnson’s name from the acknowledgement and filed a renewal of judgment against Johnson within a week of filing the acknowledgement of satisfaction. (Ibid.) The court reviewed earlier cases applying this principal; in each of the cases the court discussed, the parties had stated explicitly that the other judgment debtors were not released. (Id. at p. 1400, discussing Barnum v. Cochrane (1903) 139 Cal. 494, 495, and Bank of America v. Duer (1941) 47 Cal.App.2d 100, 101-102.) The court also recognized that McCall had not indicated in the acknowledgement of satisfaction of judgment that the satisfaction was only of the other defendants’ pro rata liability, noting that when such a document is filed for one of several joint debtors, “ ‘[s]o long as the intent is clearly indicated [citation], the judgment remains in effect against the remaining joint debtors (with a credit for the amount received). [Citations.]’ (Ahart, Cal. Practice Guide: Enforcing Judgments & Debts (The Rutter Group 1996) [¶] 6:1880, p. 6k-2, italics added.) Thus, ‘[i]f satisfaction has been made by one of several joint debtors [citation], the words “in full satisfaction of judgment debtor’s pro rata liability on the judgment” should be added’ to the acknowledgement. (Id. at [¶] 6:1895, p. 6k-4.)” (McCall, supra, 51 Cal.App.4th at p. 1401.) Although McCall had not made such a notation, the court treated the omission as a clerical error in light of the other indications of his intent at the time of the settlement. (Id. at p. 1402.)
Here, on the other hand, plaintiffs have drawn our attention to no evidence that they intended to preserve their rights against Brennan, Museum Parc, and APS as to the portion of the judgment for which they were jointly and severally liable with Garlock. They have not provided the settlement agreement, and the acknowledgement of satisfaction of judgment does not indicate that they were reserving their rights as to the other judgment debtors. Under the circumstances, we conclude the trial court did not err in refusing to award additional damages for the purchase price of the property.
III. DISPOSITION
The judgment is affirmed.
We concur: REARDON, Acting P. J., SEPULVEDA, J.