Opinion
G035981
5-30-2007
LISLE MILLER et al., Plaintiffs and Appellants, v. ROBERT CRISTIANO et al., Defendants and Respondents.
Wellman & Warren, Scott W. Wellman and Stuart Miller for Plaintiffs and Appellants. Shapero, Shapero & Hurst, Steven J. Shapero, Hackerbraly and Jeffrey A. Hacker for Defendants and Respondents.
NOT TO BE PUBLISHED
Plaintiffs Draper Partners and ISP/Newhall LLC (ISP/Newhall) contend the trial court erred by giving an instruction that removed one of their claims from the jurys consideration and prejudiced the jury against each of their other claims. We conclude the trial courts instruction accurately reflected the damages evidence plaintiffs presented, and did not prejudice the jury as to any of plaintiffs claims. Accordingly, we affirm.
I
FACTUAL AND PROCEDURAL BACKGROUND
In 1991, certain individual investors funded a $2.1 million loan to an entity named H & H, which executed a promissory note secured by a first trust deed on a 35-acre parcel of undeveloped real property in Santa Clarita (H & H parcel). When the loan originated, the H & H parcel was subject to an approved vesting tentative tract map. The entitlement, however, carried a condition requiring an extension to Golden Valley Road, a major thoroughfare, through land held by adjoining landowners. One of the landowners objected to the road extension and filed suit against the city, which resulted in the entitlements on the property being voided.
In an effort to raise money to reacquire entitlements, the investors transferred their shares of the promissory note into an entity known as ISP/Newhall, managed by Garfield Logan. Under a 1998 management agreement, an entity known as Zephyr Partners LLC took over management of the project. Zephyr Partners was managed by Robert Cristiano, one of the original investors in the promissory note. Zephyr Partners agreed to contribute up to $500,000 toward obtaining a new tentative tract map, in exchange for profit participation in the project.
Transferring the investors shares into a single entity allowed subordination of the promissory note to new secured loans needed to entitle the property, without having to obtain the signatures of each investor.
Cristiano decided it would be more efficient to purchase an adjacent parcel (Palmer parcel) and develop it jointly with the H & H parcel. A new entity, Zephyr Newhall, was formed to purchase the Palmer parcel. A tract map for 175 lots on the H & H and Palmer parcels was then submitted to the city. In March 1998, a developer, Western Pacific, offered to buy the lots on the tract map at $113,000 per approved lot, less the actual costs of improvement, which were then estimated at $ 64,000 per lot. In April 1999, the city determined the project required an environmental impact report (EIR). Up until that point, those involved had been assured the city would permit the project with a negative declaration, and therefore not require an EIR. An EIR would add approximately $100,000 to $ 200,000 in cost and delay the project by an additional nine months. As a result of the new EIR requirement, Western Pacific withdrew its offer.
In July 1999, Logan, on behalf of ISP/Newhall, and Cristiano, on behalf of Zephyr Newhall and Zephyr Partners, executed the amended Draper Partners Partnership Agreement. Under this agreement, Zephyr Newhall would invest the additional money needed to complete entitlements on the property in exchange for all sale proceeds exceeding the Western Pacific offer of $113,000 per lot. From 1999 to 2001, Cristiano worked to obtain entitlements for the two properties. Although 175 lots had been requested, the city approved only 150 lots. The city also conditioned approval on the completion of the Golden Valley Road extension. Recognizing it would be both unfair and infeasible to require the owners of the tract to construct the entire road project without compensation, the city agreed to issue $4,260,000 in bridge and thoroughfare credits (B & T credits). B & T credits are a type of scrip redeemable by developers as a credit against costs imposed by the city on other projects. The B & T credits could be sold to other developers with projects in the city.
In April 2001, the partners of Draper Partners executed a partnership resolution allocating 38 percent of the 150 lots to Zephyr Newhall, and 62 percent to Draper Partners. The partnership resolution again capped the return to Draper Partners at $113,000 per lot. Later that year, Draper Partners and Zephyr Newhall also executed an assignment of proceeds reflecting that Zephyr Newhall and Draper Partners would share the B & T credits on a 38 percent/62 percent basis, consistent with the entities proportionate share of the residential lots approved by the city.
In 2001, Cristiano negotiated the sale of 148 lots to DR Horton, a homebuilder. DR Horton also paid Cristiano $500,000 to work with the city to eliminate, modify, or reduce the conditions of approval. The city approved the final subdivision map in May 2003, and the sale to DR Horton closed in July 2003. Cristiano continued working to sell the B & T credits, but had converted them all to cash by the time of trial.
Plaintiffs filed suit, asserting eight different causes of action, based on four separate claims of wrongdoing: First, defendants calculated Draper Partners share of sales proceeds at $113,000 per lot, less capped costs per lot of $109,175, times 92 lots (the number of Draper Partners lots actually sold), for a total of $351,900. Plaintiffs alleged defendants had previously committed to purchase 100 lots from Draper Partners at $113,000 per lot, less estimated costs per lot of $64,000, which would have generated sales proceeds of $4.9 million. Second, in the DR Horton sale, Zephyr Newhall had failed to include portions of the Palmer parcel consisting of a commercial lot and a "remainder" lot. Plaintiffs contended these parcels, allegedly worth $3 million, should have been sold and the proceeds divided between Zephyr Newhall and Draper Partner. Third, defendants removed dirt from partnership property, and placed it on property in which Cristiano had a minority interest. Plaintiffs contended this amounted to the conversion of approximately $2 million worth of dirt. Fourth, plaintiffs contended the $500,000 fee DR Horton paid Cristiano for his entitlement work violated his fiduciary duties to the partnership.
The jury ruled in favor of defendants on all counts, and plaintiffs now appeal.
II
Discussion
Plaintiffs contend that in addition to the four claims of wrongdoing noted above, they also sought a distribution of the B & T credits due ISP/Newhall from Draper Partners (both sides agreed Draper Partners was entitled to $2.64 million in B & T credits). Plaintiffs assert the trial court barred the jury from deciding this issue when it gave the following jury instruction: "The B & T credits due to ISP/Newhall are not in dispute and should not be considered by you. The court will ensure that the B & T credits will be properly distributed. Therefore, your calculation of any damages should not involve B & T credits one way or another." Although the title of this instruction read "Special Instruction by Stipulation," plaintiffs assert they stipulated only to the precise wording of the instruction, not the courts underlying decision to remove the issue from the jurys consideration. Plaintiffs contend the instruction not only precluded an award of B & T credits, but also negated their other claims, endorsed defendants evidence, and compelled a finding that plaintiffs suffered no damage. We disagree.
As plaintiffs acknowledge, defendants did not propose the challenged instruction until after plaintiffs completed their initial closing argument. At this point, however, plaintiffs had not requested the jury to award them any portion of the B & T credits as part of their damages. Indeed, in their rebuttal closing argument, plaintiffs counsel noted the challenged instruction did not affect their claimed damages, as they had purposefully excluded B & T credits from their damage calculations: "The B & Ts, youre going to get an instruction from his honor that they are not to be included in your damages. Either way. They are in addition to what we get. We have worked out a situation with his honor where he is going to administer the B & Ts. [¶] But if you remember the calculation damages I put up yesterday, those numbers did not include the B & T credits. I specifically excluded them from those." (Italics added.) Because plaintiffs never asked the jury to award ISP/Newhall B & T credits as part of its damages, the courts instruction not to consider the issue was proper.
Moreover, we do not perceive how the challenged instruction could have negatively impacted plaintiffs other claims. Well before the challenged instruction surfaced, plaintiffs financial expert, David Hanson, testified plaintiffs damage calculations did not include B & T credits, and that any B & T credits due would be in addition to the damage amounts he had calculated, as follows: "Q[:] Now, in any of these calculations, are the B & T credits that the ISP Newhall investors would be entitled to included? [¶] A[:] They are not included in these particular calculations themselves. [¶] Q[:] Why is that? [¶] A[:] These calculations are calculations of the proceeds associated with the sale of the parcel itself. [¶] Q[:] So if the B & T credits came in, or cash from the B & T credits came into Draper [Partners], under your analysis, investors would be entitled to their percentage of that also? [¶] A[:] Yes. Under the provisions of the partnership agreement, it would be distributed out to the partners pursuant to the agreement itself." Hanson explained he did not consider the B & T credits in his calculations because they had not, to his knowledge, "come into fruition yet."
Despite the courts instruction that it would determine the proper amount of B & T credits due ISP/Newhall, the court later refused to do so, inviting the parties to resolve the issue in a separate lawsuit. The court recognized, however, that many of the B & T credits had not been liquidated at that point, and that partnership debts may affect the final distribution. The court noted: "[S]omebodys going to have to file another action to dissolve the partnership and ensure the partnership funds, and what[] its further entitled to will be distributed properly." Accordingly, two additional actions have been filed relating to Draper Partners, one by its creditors to collect money Draper Partners allegedly owes them (Zachary D., LLC et al. v. Draper Partners (Super. Ct. Orange County, 2005, No. 05CC08663)), and another by Zephyr Newhall and Zephyr Partners seeking dissolution of Draper Partners and an accounting (Zephyr Newhall Limited Partnership et al. v. Draper Partners (Super Ct. Orange County, 2005, No. 05CC13245).) We see no reason why these actions provide an inadequate forum for ISP/Newhall to assert its rights to a final distribution of all money due from Draper Partners, including that attributable to liquidated B & T credits.
We grant defendants request for judicial notice of these two pending actions. We also grant plaintiffs request to augment the record with the October 11, 2005 hearing transcript.
III
DISPOSITION
The judgment is affirmed. Defendants are entitled to their costs of this appeal.
We concur:
OLEARY, Acting P. J.
IKOLA, J.