Opinion
A147227
08-31-2017
ROBERT LALANNE, Plaintiff and Appellant, v. MICHELE ARMANINO et al., Defendants and Respondents; CHRISTOPHER ANDREAS, Claimant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco City and County Super. Ct. No. CPF-13-513216)
A series of disputes among family members and related family entities resulted in two judgments, one in favor of Robert Lalanne against Lalanne LLC (a real property investment venture; hereafter LLC) and a second judgment against Lalanne in favor of Lalanne Ranch Partnership (the Ranch Partnership). Both judgments were assigned. Lalanne assigned the first judgment to his attorney, appellant Christopher Andreas, in partial satisfaction of an attorney fee lien arising from the litigation. The Ranch Partnership assigned the second judgment to LLC. LLC obtained an order from the superior court allowing offset of the second judgment against the first, thereby relieving it of any further liability under the first judgment. Andreas challenges the order granting the offset and we affirm.
I. BACKGROUND
We summarize the relevant background as detailed in our opinion in a prior related appeal (Lalanne v. Armanino (July 2, 2015, A140972) [nonpub. opn.] (Lalanne I)). Appellants' August 11, 2016 amended request for judicial notice is construed, with respect to documents 1 to 4, as a motion to incorporate the record of the prior appeal and is granted. (Cal. Rules of Court, rule 8.147(b)(1).) With respect to documents 7 to 18, which are court documents from other actions involving the same parties, the request is denied on the ground of relevance. (Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276.)
Lalanne's and Michele Armanino's parents formed several estate planning entities in which Lalanne, Armanino, and other immediate family members hold financial interests. The entities include LLC, the Lalanne 1997 Trust, and the Ranch Partnership. At some point, Lalanne became the managing member of LLC, trustee of the trust, and managing general partner of the partnership. In 2006 or early 2007, Armanino took over those positions.
Several disputes between Lalanne and Armanino were submitted to mediation before the Honorable Ellen S. James (retired) under the auspices of JAMS (formerly Judicial Arbitration and Mediation Services). In 2007, Lalanne and Armanino arrived at a partial settlement, which was memorialized in a signed agreement. In 2008, Lalanne and Armanino resolved their remaining disputes and signed a second settlement agreement (2008 Settlement). The 2008 Settlement provided that "[a]ny and all disputes concerning this Agreement . . . shall be mediated and, if unresolved, arbitrated at JAMS," before Judge James if available.
Lalanne later claimed that LLC breached section 3(b) of the 2008 Settlement, and the matter went to arbitration before Judge James in 2012. In an interim award, Judge James determined the amount of Lalanne's interest in LLC, permitted a temporary increase in LLC's reserves, and ordered LLC to make a distribution to Lalanne based on those facts but allowing it to offset a $125,000 advance previously made to Lalanne. In another interim award, James awarded Lalanne $155,000 in attorney fees and costs as the prevailing party (fee award). In communications about the final award's specific wording, the parties disagreed about whether LLC should be permitted to offset alleged debts owed by Lalanne from future distributions and the fee award, including the debts listed in section 3(e) of the 2008 Settlement. In her final award, Judge James expressly declined to make any ruling regarding section 3(e) obligations. The final award did not specify a dollar amount of the distribution, but only specified the manner in which the distribution should be calculated. The court slightly increased the fee award to $156,600.
Section 3(b) of the 2008 Settlement provided: "As LLC Manager, [Armanino] shall, by Monday, June 16, 2008, distribute $339,000 to the members in accordance with their interests. . . . In addition, [Armanino] shall . . . advance $125,000 to [Lalanne], which advance shall be credited against future distributions from the LLC, and shall accrue simple interest at 6% per annum. . . . [I]n the future, after the reserve is replenished to $625,000, all net income of the LLC . . . shall be distributed to the members, in accordance with their interests, on at least a quarterly basis."
Armanino and LLC were identified as the responding parties to this arbitration proceeding. For purposes of simplicity, we refer to both as LLC except where necessary to identify Armanino separately.
Section 3(e) of the 2008 Settlement provides: "[Lalanne] agrees that the following amounts shall be considered advances to him, which advances shall be deducted from his distribution(s) of the proceeds from the sale of the ranch: $12,000 for the ranch truck, which shall be credited to the Entity that paid for the truck; $116,694.91 for the items reflected in Exhibit B, which advances shall be credited to the 1997 Trusts [sic]; $12,633.19 for accounting fees and a pet hospital bill, which shall be credited to the LLC; and $200,000, for all other potential claims, which shall be credited to the 1997 Trust."
Shortly after the final award was issued, Armanino informed Lalanne and other family members that she planned to make distributions from LLC and the Lalanne 1997 Trust (as well as another trust) and detailed for each family member the planned distributions, deductions, and net payments. For Lalanne, the distribution amounts totaled $692,306.64, including the fee award, but Armanino then deducted amounts alleged to be owed by Lalanne to LLC, the trusts, and the Ranch Partnership, including amounts claimed under section 3(e) of the 2008 Settlement. The net distribution after these deductions was $53,232.54. On September 16, 2013, Armanino made another distribution of LLC and Lalanne 1997 Trust assets, with Lalanne receiving $41,457.51 as an LLC distribution.
Lalanne's net distribution was paid to Center Street Development Company, an entity which held a judgment lien against Lalanne's recovery in the arbitration.
In response to Lalanne's objections to the distribution deductions, Judge James ruled, "[T]here were never any circumstances in this arbitration where I considered anything other than [section 3(b) of the 2008 Settlement]." Judge James issued a corrected final award with immaterial changes and left the remedial language of the award unchanged.
On October 7, 2013, the court (Hon. Peter J. Busch) confirmed the corrected final award by Judge James "in all respects as made" and entered judgment "in conformity []with" the award (the James Judgment). Lalanne assigned the James Judgment to his counsel, Andreas, in partial satisfaction of an existing contractual attorney fee lien. The following day, LLC served Andreas with a demand for acknowledgement of satisfaction of the James Judgment. Andreas objected, and LLC filed a motion to compel acknowledgement of satisfaction of the James Judgment.
On October 15, 2013, the Honorable Richard A. Hodge (retired) issued a final award in a separate arbitration between the Ranch Partnership and Lalanne. Judge Hodge found Lalanne had violated a partnership restriction on sales of ranch property and awarded the Ranch Partnership $1.1 million in damages as well as attorney fees and costs. On December 23, 2013, the court (Hon. Marla Miller) confirmed the award and entered a $1,556,332 judgment against Lalanne and in favor of the Ranch Partnership (the Hodge Judgment). The Ranch Partnership assigned the Hodge Judgment to LLC.
While LLC's motion to compel was still being briefed, Andreas obtained a writ of execution on "the only stated number in the [James Judgment]," the $156,600 fee award. LLC obtained a stay of enforcement of the writ pending a ruling on the motion to compel. On January 29, 2014, the court (Hon. Ernest H. Goldsmith) denied the motion to compel. The court found it premature to determine whether LLC had distributed the proper amount and satisfied the judgment until disputes regarding amounts owed under section 3(e) of the 2008 Settlement were resolved. The court denied the motion without prejudice, subject to renewal "once the offset dispute is adjudicated." LLC appealed from the January 29, 2014 order.
Lalanne I
In Lalanne I, we affirmed the January 29, 2014 order denying LLC's motion to compel. We first explained that " '[a] motion to compel acknowledgment of satisfaction or partial satisfaction of judgment . . . is an entirely acceptable procedure for seeking an offset against a judgment.' (Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 753.) '[A] court of equity will compel a set-off when mutual demands are held under such circumstances that one of them should be applied against the other and only the balance recovered. The insolvency of the party against whom the relief is sought affords sufficient ground for invoking this equitable principle. [Citations.] . . . The fact that the demand of the plaintiff has not been reduced to judgment is no obstacle to its allowance as set-off against a judgment.' (Harrison v. Adams (1942) 20 Cal.2d 646, 648-649; see also Erlich v. Superior Court (1965) 63 Cal.2d 551, 555.)' " (Lalanne I, supra, A140972, fn. omitted.) We held that "the only possible offsets to the James Judgment are claims for which Lalanne is liable to LLC. To establish an equitable offset, 'mutuality is essential.' ([Harrison,] at p. 649.) The only claimed offsets in the April 13, 2013 distribution that satisfied this mutuality requirement were the alleged 'Debt to LLC' and possibly the 'LLC Capital [Deficit].' The sum of both of these offsets ($137,633.19 + $172,746.00 = $310,379.19) plus the amount paid to Lalanne (i.e., actually paid to Center Street Development Company as creditor of Lalanne) in April 2013 ($53,232.54 + $310,379.19 = $363,611.73) was insufficient to fully satisfy the amounts due under the James Judgment (the $263,743.58 April 2013 LLC distribution + $156,600 fee award = $420,343.58), assuming LLC's calculation of the underlying distribution was correct. Therefore, the trial court properly denied LLC's motion to compel acknowledgement of full satisfaction of judgment." (Lalanne I, supra, A140972.)
We then provided "guidance to the trial court in the event LLC's motions are renewed following this appeal" and considered "whether any of the amounts claimed by LLC under the 2008 Settlement could properly be taken as equitable offsets, thus potentially entitling LLC to acknowledgement of partial satisfaction of judgment." (Lalanne I, supra, A140972.) We explained that the trial court could grant a motion to compel acknowledgement of satisfaction of judgment "only if it finds the judgment has been satisfied in fact" and that the moving party bears the burden of proving that fact. (Ibid.) We further explained that, in the context of a motion to compel, the trial court could take evidence and determine the validity of claimed offsets even if the offsets' validity had not previously been determined in a court action or arbitration. The trial court could also exercise its discretion not to determine the validity of claimed offsets if it determined it would be inequitable to do so and the issue would be better decided in a different forum. (Ibid.)
Proceedings on Remand
On remand, LLC filed a new motion to compel acknowledgment of satisfaction of judgment or in the alternative to offset judgments, and a motion to recall and quash the writ of execution. LLC argued the offsets claimed in the April 13, 2013 distribution were valid so that the "net distribution" satisfied the James Judgment. In the alternative, LLC argued any unsatisfied amount of the James Judgment should be offset by the Hodge Judgment, which had been assigned to LLC.
In his opposition, Andreas asserted that offset was improper because there was a lack of "mutuality" between judgments, awards or debts owed by or to the Ranch Partnership and judgments, awards or debts owed by or to LLC. He insisted that "The 1st DCA has concurred with the above . . . end of story." In reply, LLC argued it was "entitled as a matter of right to offset the judgment it obtained by assignment" against the James Judgment " 'absent the existence of facts establishing competing equities or an equitable defense precluding the offset.' " LLC argued Andreas had presented no evidence an offset would be inequitable and disputed Andreas's contention that this court had resolved the issue in Lalanne I.
In December 2015, the trial court granted LLC's motions. The court wrote: "The $1.5 million [Hodge Judgment] was assigned to [LLC] and under any calculation, that judgment exceeds what [Andreas] is owed in the instant matter. Accordingly, the court finds that there is an offset. The Court of Appeal did not directly resolve the offset issue and [Andreas] fails to distinguish [LLC's] authorities. [¶] . . . [¶] The court need not resolve the precise amount of the [Hodge Judgment] that is outstanding after the offset. Whether the court relies on the [2008 Settlement] or the Lalanne Ranch Partnership Agreement—which [LLC] would be subject to based upon the assignment—the remainder of the [Hodge Judgment] should be arbitrated." Andreas appeals.
The court also denied a pending motion by Andreas to rescind the prior order staying enforcement of the writ of execution.
II. DISCUSSION
A. Effect of Lalanne I
Andreas first argues this court "resolved" the issue of whether the Hodge Judgment was a proper offset against the James Judgment in its opinion in the prior appeal "by not including the [Hodge Judgment] as one of the enumerated potentially legitimate and timely offsets that [LLC] could have arguably applied back in early April of 2013 before their Final Award 1st LLC Distribution deadline expired." He misreads our prior opinion.
Andreas relies on our statements discussing the trial court's order denying LLC's 2013 motion to compel. That motion was based solely on the offsets that had been claimed in the April 13, 2013 distribution, not the Hodge Judgment. Accordingly, we discussed only the April 13, 2013 offsets when considering whether the trial court properly denied the motion. We also discussed only the April 13, 2013 offsets while providing guidance to the trial court on remand with respect to this motion: "For guidance to the trial court in the event LLC's motions are renewed following this appeal, we consider whether any of the amounts claimed by LLC under the 2008 Settlement could properly be taken as equitable offsets . . . ." (Lalanne I, supra, A140972, italics added.) Andreas correctly notes that we also described the Hodge arbitration in the background section of the opinion and we noted that LLC based a 2014 motion to recall and quash the writ of execution in part on a claimed offset of the Hodge Judgment.
In affirming the trial court's order denying the motion to recall and quash the writ of execution, we held in part: "[W]e have already concluded that LLC has not yet established its right to the claimed offsets. Thus, on the existing record, the trial court did not err in denying the motion on this ground." (Lalanne I, supra, A140972.) In fact, our conclusion was that LLC had not established its right to offsets only with respect to the amounts claimed in the April 13, 2013 distribution. We simply did not directly address the claimed offset of the Hodge Judgment, and our opinion cannot be read as holding that we considered and rejected LLC's claim of a right to offset the Hodge Judgment against the James Judgment. At best, our holding could be read to conclude that LLC had not yet established a right to any offsets, including an offset of the Hodge Judgment. This reading is consistent with our disposition, which anticipated that the parties would file "appropriate new motions in the trial court." (Ibid.) B. Equitable Offset
Andreas argues the trial court erred "as a matter of law" in ruling that the Hodge Judgment was a legitimate offset, based on "a fundamental misunderstanding of California's statutory and decisional law concerning offsets." Liberally construed, his opening brief also argues that the court abused its discretion in weighing the equities in this case and ruling that they favored the offset. Because Andreas has not met his burden of establishing trial court error on appeal, we reject these arguments.
At oral argument, Andreas appeared to acknowledge that the question before us is the application of equitable offset. --------
" 'A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown.' " (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) " '[E]very brief should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration.' " (People v. Stanley (1995) 10 Cal.4th 764, 793.)
Andreas discusses only two cases on the law of equitable offsets—Salaman v. Bolt (1977) 74 Cal.App.3d 907 (Salaman) and Brienza v. Tepper (1995) 35 Cal.App.4th 1839 (Brienza), cases cited in the trial court—and he fails to demonstrate that the trial court violated the principles articulated in those cases. Salaman states: "[E]quitable offset is a means by which a debtor may satisfy in whole or in part a judgment or claim held against him out of a judgment or claim which he has subsequently acquired against his judgment creditor. The right exists independently of statute and rests upon the inherent power of the court to do justice to the parties before it. [Citations.] As was stated by our Supreme Court in Harrison v. Adams, supra[, 20 Cal.2d at pp. 648-649]: '(I)t is well settled that a court of equity will compel a set-off when mutual demands are held under such circumstances that one of them should be applied against the other and only the balance recovered. The insolvency of the party against whom the relief is sought affords sufficient ground for invoking this equitable principle. [Citations.] And a judgment debtor who has, by assignment or otherwise, become the owner of a judgment or claim against his judgment creditor, may go into the court in which the judgment against him was rendered and have his judgment offset against the first judgment.' " (Salaman, at p. 918.) Brienza similarly states: "[A] judgment debtor who has acquired a judgment or claim against his judgment creditor may ask the court in which the judgment against him was rendered to have his judgment or claim offset against the first judgment. The offset of judgment against judgment is a matter of right absent the existence of facts establishing competing equities or an equitable defense precluding the offset." (Brienza, at pp. 1847-1848.)
The plain language of these cases confirms the equitable authority of the trial court to offset the Hodge Judgment, which was assigned to LLC, against the James Judgment against LLC. Andreas argues there was a lack of mutuality in the offset because the Hodge Judgment was entered in favor of the Ranch Partnership and the James Judgment was against LLC. (See Harrison v. Adams, supra, 20 Cal.2d at pp. 649-650 ["mutuality is essential, that is, the judgments must be between the same parties"]). However, Salaman and Brienza both clearly state that a judgment acquired by assignment may be a proper setoff. (Salaman, supra, 74 Cal.App.4th at p. 918; Brienza, supra, 35 Cal.App.4th at pp. 1847-1848.) Andreas also argues there was a "temporal disconnect" between the December 2013 Hodge Judgment and the October 2013 James Judgment, and even more so between the December 2013 Hodge Judgment and the April 2013 award by Judge James that ordered LLC to make a proper distribution within one week of the award. However, Andreas cites no authority for the proposition that an offset must exist at the time the countervailing judgment was entered. In Brienza, the appellate court held that a judgment against Brienza that was acquired by Tepper after entry of judgment for Brienza and against Tepper was a proper offset to the latter judgment (but lower in priority to a competing attorney fee lien). (Brienza, at pp. 1841-1842, 1847-1848.) Andreas cites no other authority on application of equitable offsets, and has forfeited any argument that the court may have erred in other respects. (See Guthrie v. State of California (1998) 63 Cal.App.4th 1108, 1115-1116.)
We nevertheless liberally construe Andreas's attempts to factually distinguish Salaman and Brienza as an argument that the trial court abused its discretion in granting the offset motion in this case. "Whether a setoff is appropriate in equity is a question within the trial court's discretion. We review the court's decision under the abuse of discretion standard. [Citation.] An abuse of discretion occurs if, in light of the applicable law and considering all of the relevant circumstances, the court's decision exceeds the bounds of reason and results in a miscarriage of justice." (Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 762-763.)
Andreas argues that, in contrast to Salaman, the equities in this case required the trial court to deny the offset. However, Andreas fails to acknowledge and discuss all of the relevant evidence. He claims LLC engaged in inequitable conduct when it took offsets in the April 2013 without judicial or arbitral authorization, but he fails to discuss findings of inequitable conduct by Lalanne in the Hodge arbitration, as cited and discussed in the respondents' brief in this appeal. Consequently, Andreas has forfeited the argument. (See County of Solano v. Vallejo Redevelopment Agency (1999) 75 Cal.App.4th 1262, 1274 ["[a]n appellant's failure to state all of the evidence fairly in its brief waives the alleged error"].) Andreas also contests LLC's assertion that Lalanne is insolvent or nearly insolvent (i.e., in an "extremely dire" or "desperate" financial condition). (See Brienza, supra, 35 Cal.App.4th at p. 1844 [insolvency is a proper equitable consideration in an equitable offset case].) However, he cites no evidence that the assertion is untrue and fails to address evidence cited by LLC. Finally, Andreas argues it was error for the trial court to rely on the fact that the amount of the Hodge Judgment exceeded the amount of the James Judgment. We do not read the court's order as treating the relative values of the judgments a factor in balancing the equities of the case; instead, we read the order as simply observing that no amount is due and collectable on the James Judgment after the offset, so it was appropriate to recall and quash the writ of execution. In sum, Andreas has not shown the court abused its discretion in weighing the equities in this case. C. Priority of Liens
Andreas argues the trial court erred as a matter of law "in failing to account for Andreas'[s] contractual fee lien and grant it priority." This argument is meritless on its face as Andreas had an assignment of the James Judgment, not a lien on the judgment, which competed for priority with LLC's claimed offset. Andreas cites cases addressing determination of priority among competing liens and/or offset claims, but fails to explain how those cases apply to a claimed offset against an assigned judgment.
Even if we assumed that an assignment of a judgment to compensate an attorney for his services was the equivalent of a lien on a judgment for the same purpose, the authorities cited by Andreas would not demonstrate that the trial court erred. These cases indicate that the relative priority of a claimed offset and a contractual attorney fee lien is an equitable issue committed to the trial court's discretion. (See Crasnick v. Marquez (2016) 248 Cal.App.4th Supp. 1, 6-7; cf. Cetenko v. United California Bank (1982) 30 Cal.3d 528, 531 [priority between statutory lien and contractual fee lien determined by statute, which grants earlier lien priority].) As we have already concluded, Andreas has not shown on appeal that the trial court abused its discretion in weighing the equities and granting the offset.
III. DISPOSITION
The December 2015 order granting respondents' motions to offset judgments and recall and quash the writ of execution and denying Andreas's motion to rescind the stay of enforcement is affirmed. Andreas shall bear respondents' costs on appeal.
/s/_________
BRUINIERS, J. WE CONCUR: /s/_________
JONES, P. J. /s/_________
SIMONS, J.