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Quiogue v. Hemerick

California Court of Appeals, Fourth District, First Division
Mar 19, 2008
No. D050130 (Cal. Ct. App. Mar. 19, 2008)

Opinion


NONIE QUIOGUE et al., Plaintiffs, Cross-Defendants and Respondents, v. RICK ALLEN HEMERICK, Defendant, Cross-Complainant and Appellant. D050130 California Court of Appeal, Fourth District, First Division March 19, 2008

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of San Diego County, Super. Ct. No. GIC826778 Kevin A. Enright, Judge.

IRION, J.

Rick Allen Hemerick appeals from a judgment entered against him and in favor of Nonie Quiogue and Gilda Quiogue (collectively, the Quiogues) in the parties' dispute over ownership of an apartment building. Hemerick argues (1) that the trial court erred in finding that the parties had not entered into an enforceable settlement agreement prior to the trial in this action; (2) that the trial court erred in finding, after a bench trial, that Hemerick has no ownership interest in the apartment building; and (3) that the trial court erred in refusing to adjudicate the issue of whether Hemerick is entitled to receive a specific portion of the apartment building's net rents collected by the Quiogues. As we will explain, we conclude that Hemerick's arguments are without merit, and accordingly we affirm.

I

FACTUAL AND PROCEDURAL BACKGROUND

A. The Parties' Dispute

The Quiogues, who are husband and wife, are the owners of record of a 64-unit apartment building on Dawson Avenue in San Diego, also known as the Colina Park North Apartments (the Dawson property). In 1996, the Quiogues purchased the Dawson property from the previous owner for $1.5 million. Hemerick acted as the real estate broker for the Quiogues in the transaction, although he was not a licensed broker at the time. As part of the purchase transaction, Hemerick contributed $180,000 to the down payment and the Quiogues contributed $70,000. The remainder of the purchase price was financed by the Quiogues through a mortgage loan from a bank and a second trust deed carried by the seller. Hemerick was not identified as an owner of record on the title. Instead, title to the Dawson property was recorded as belonging to the Quiogues as community property.

Hemerick ultimately paid only $175,000 toward the down payment, as he loaned $5,000 to the Quiogues at the time of the transaction, which they later repaid.

In 1999, the Quiogues transferred ownership of the Dawson property to the Quiogue Family Trust.

Between 1997 and the time of trial, the Quiogues paid $308,877 to Hemerick from the checking account set up by the Quiogues to manage the Dawson property. According to the Quiogues, these payments were made pursuant to an oral agreement between Nonie Quiogue and Hemerick that Hemerick was to receive 70 percent of the net rents from the Dawson property and that the property would not be sold for at least five years. Hemerick disagrees with the Quiogues' description of the parties' agreement. According to Hemerick, although the Quiogues are the owners of record of the Dawson property, he entered into an agreement to share ownership of the property, either directly or through an alleged partnership with Nonie Quiogue in which he claimed to hold a 70 percent interest. No writing exists memorializing the parties' agreement.

At trial, Hemerick claimed that a writing was created but was then lost. The trial court found that Hemerick's testimony on that subject lacked credibility and that no writing ever existed.

In 2004, a dispute arose between Hemerick and the Quiogues. Hemerick contended that the Quiogues were required to pay him 70 percent of the rents before deducting expenses for needed repairs and maintenance to the Dawson property. Hemerick also claimed he had the right to prevent the Quiogues from selling the Dawson property.

The Quiogues filed an unverified complaint for declaratory relief against Hemerick, seeking a declaration, among other things, (1) that they alone held legal title to the Dawson property; and (2) determining the validity of any agreement between the parties concerning the Dawson property. The complaint stated that Hemerick asked to become an "ownership partner" in the Dawson property and that the Quiogues "entered into an oral partnership agreement with Hemerick," but that the parties' agreement was invalid and unenforceable.

Hemerick filed a verified cross-complaint to obtain declaratory relief and an order quieting title. Hemerick contended that he held fee simple title to the Dawson property as a tenant in common with the Quiogues or, in the alternative, that the Quiogues held record title to the Dawson property in constructive trust for a partnership in which Hemerick claimed to have a 70 percent interest. Hemerick also recorded a lis pendens concerning the Dawson property.

The Quiogues filed an unverified first amended complaint, which asserted three causes of action — (1) declaratory relief; (2) partition by sale in the event of a ruling that Hemerick owns a fee interest in the Dawson property; and (3) unjust enrichment. The first amended complaint alleged that Hemerick and Nonie Quiogue orally agreed, among other things, "that Hemerick would not take title to the [Dawson property] and would not be an owner of the [Dawson property]"; and "that Hemerick would be entitled to share in the net rents derived from the [Dawson property] after deducting all operating expenses and management fees, whereby the Quiogues would receive 30% of the net rents and Hemerick would receive 70% of the net rents." According to the first amended complaint, Gilda Quiogue was not a party to any oral agreement between Hemerick and her husband concerning the ownership of the Dawson property. Based on that allegation, the Quiogues requested, along with other relief, that because Gilda Quiogue did not consent to the transfer of her community property interest in the Dawson property, the court should declare void any transfer of ownership or rents to Hemerick and award to the Quiogues under a theory of unjust enrichment all of the rents that they paid to Hemerick, less the amount he contributed to the purchase of the Dawson property.

The Quiogues also alleged that under the parties' oral agreement Nonie Quiogue was given the option to pay $10,000 to Hemerick to increase the Quiogues' ownership of the rents from 30 percent to 40 percent, but that when Nonie Quiogue attempted to exercise this option, Hemerick refused to honor the agreement.

Hemerick filed a first amended cross-complaint, which added a cause of action for fraud based on the allegation that Nonie Quiogue falsely represented to Hemerick that he had the consent and authorization of Gilda Quiogue to enter into the agreement concerning the Dawson property on her behalf.

B. The Settlement Conference

On the day set for trial, the parties stipulated to participate in a settlement conference before Judge Ronald Styn. When the parties were unable to reach a settlement by the end of the conference, Judge Styn assembled the parties and counsel to announce his settlement recommendation. Judge Styn instructed that each counsel was to separately contact the court the next day to indicate either an acceptance or rejection of the recommendation. The next day, counsel for both sides contacted the court with acceptances.

Judge Styn's minute order reflecting the acceptances stated, "All counsel contact Department 62 to approve the settlement. [¶] A settlement has been reached; trial date is vacated. Matter is placed on a 60 day dismissal calendar." Later, in a telephone conference with both counsel, Judge Styn stated that the mechanics and structure of the settlement were to be worked out by counsel. It is undisputed that the settlement was not placed on the record in open court and that the parties (rather than their counsel) did not personally communicate with Judge Styn to accept the recommendation.

Judge Styn's minute order did not reflect the terms of the recommended settlement, and the parties now disagree as to what those terms were. According to the Quiogues, Judge Styn recommended a settlement with the following elements, and no others: "(a) Hemerick would pay off the existing encumbrances [against the Dawson property] and [the Quiogues] would receive the sum of $1.6 million; (b) [the Quiogues] would pay to Hemerick the sum of $50,000 from the operating profit account; [and] (c) [t]he parties would give each other a general release." As we understand it, implicit in this proposal was an agreement that Hemerick would become the owner of the Dawson property, and the Quiogues would cease to hold any ownership interest. According to Hemerick, the recommended settlement also included the provisions that "Hemerick would use the [Dawson] property to finance the buy-out," and that "[t]he buyout was to be accomplished within forty-five (45) days."

Following Judge Styn's minute order, the trial court issued a notice stating that the case would be dismissed without prejudice in 60 days (on August 5, 2005) unless a judgment or dismissal was filed or the parties appeared ex parte to show good cause why the case should not be dismissed.

In the following weeks, counsel for Hemerick sent a proposed settlement agreement to counsel for the Quiogues. After consulting their tax advisor, the Quiogues stated that they would not enter into the settlement because of adverse tax consequences.

C. Hemerick's Attempt to Enforce the Settlement Agreement

On July 25, 2005, Hemerick filed an ex parte application requesting that the trial court either extend the time for the parties to finalize the settlement or allow Hemerick to file a motion for leave to amend his cross-complaint to include a cause of action for enforcement of the settlement agreement. After hearing the ex parte application, the trial court put the action back on the active case list, and accepted the parties' stipulation to allow Hemerick to file a second amended cross-complaint to pursue enforcement of the settlement agreement. The parties agreed to bifurcate the trial on the enforcement of the settlement agreement from the other issues in the case.

Hemerick filed his second amended cross-complaint, adding causes of action for (1) breach of contract, based on the nonperformance of the settlement agreement; and (2) specific performance of the settlement agreement.

Pursuant to the parties' agreement to bifurcate, the trial court held a bench trial on the causes of action in the second amended cross-complaint concerning the settlement agreement. The parties did not present any live testimony, relying instead on stipulated facts, documentary exhibits and declarations submitted by counsel.

Hemerick did not contend that the settlement met the standards for enforceability under Code of Civil Procedure section 664.6. Thus, the issue was whether a contract had been formed that was enforceable under generally applicable contract principles. Hemerick contended that an enforceable agreement had been formed. The Quiogues, in contrast, argued that the settlement was not enforceable because (1) it is indefinite and uncertain; (2) there was no mutual consent to its terms; (3) it is subject to the statute of frauds because it concerns an interest in real property; and (4) Hemerick had waived his right to enforce the settlement agreement because he earlier had brought an ex parte application regarding the settlement.

Code of Civil Procedure section 664.6 states: "If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. If requested by the parties, the court may retain jurisdiction over the parties to enforce the settlement until performance in full of the terms of the settlement." Here, the settlement was not in a writing signed by the parties, nor was it made orally on the record by the parties. (See Johnson v. Department of Corrections (1995) 38 Cal.App.4th 1700, 1708 [under Code of Civ. Proc., § 664.6, the parties — not their attorneys — must personally agree to the settlement on the record].)

When Code of Civil Procedure section 664.6 is inapplicable, enforcement of a settlement may be sought through other procedures such as "a motion for summary judgment, a separate suit in equity, or an amendment to the pleadings in [the instant] action." (Levy v. Superior Court (1995) 10 Cal.4th 578, 586, fn. 5.) "[A] party can still seek to enforce a settlement agreement by, among other things, prosecuting an action for breach of contract." (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 306.)

The trial court found in favor of the Quiogues, concluding that the parties had not entered into an enforceable agreement. It ruled, "The Court finds that [Hemerick] has failed to meet his burden of proof that a contract was formed. There is no evidence before the Court that the Quiogues themselves, who would obviously be essential parties to the contract, ever agreed to enter into a settlement agreement, i.e., contract. Without more, [the Quiogues' attorney's] telephone call to Judge Styn's clerk does not bind the Quiogues to a contract to settle the case. Similarly, the correspondence between counsel for both parties thereafter, without more, does not form a settlement agreement., i.e., contract, between the parties themselves."

D. The Trial Court Conducts a Bench Trial Concerning Ownership of the Dawson Property

The trial court next conducted a bench trial on the remaining issues in the litigation, i.e., the parties' dispute over the ownership of the Dawson property.

The trial court found against Hemerick and in favor of the Quiogues on the issue of whether Hemerick has an ownership interest in the Dawson property, concluding that "the Quiogues are the legal and beneficial owners of the [Dawson] property, to the exclusion of Mr. Hemerick."

First, the trial court rejected Hemerick's claim that he individually held a fee interest in the Dawson property. The trial court found that the evidence did not support that claim, and that if any such agreement existed it was not in writing and was thus invalid under the statute of frauds.

Second, the trial court addressed Hemerick's claim that a partnership was formed between Hemerick and Nonie Quiogue to beneficially own the Dawson property, in which Hemerick claimed to hold a 70 percent partnership interest. The trial court found that no partnership was formed for the purpose of holding a fee interest in the Dawson property. Accepting Nonie Quiogue's testimony, the trial court concluded that the agreement formed was "(1) that Mr. Hemerick would deposit $175,000 into escrow representing 70% of the Quiogues' required down payment; and (2) that in exchange, Mr. Quiogue will pay Mr. Hemerick 70% of the income derived from the apartments after deducting expenses and repairs."

The trial court ruled, as well, that if the parties had entered into an oral partnership agreement for ownership of the Dawson property, that agreement would be invalid under the statute of frauds.

The trial court also found that Hemerick breached his broker's fiduciary duty to the Quiogues at the time of the purchase of the Dawson property because (1) he did not make a written disclosure of any interest he would have in the property, (2) he "made no oral disclosure to [Gilda] Quiogue regarding a fee interest or an interest in the income at any time prior to the close of escrow," and (3) Gilda Quiogue was "intentionally kept in the dark about Mr. Hemerick's involvement in depositing money into escrow or his alleged interest in the apartments." The trial court concluded, "[Gilda] Quiogue would not have consented to or entered into or completed the transaction had Mr. Hemerick fulfilled his fiduciary duties." According to the trial court, even assuming, arguendo, that an oral partnership was formed between Nonie Quiogue and Hemerick to purchase the Dawson property, Gilda Quiogue "paid value for the property without knowledge or notice of the alleged interest of Mr. Hemerick," and she did not "ratify the alleged oral partnership agreement with Mr. Hemerick to purchase the apartments."

On the Quiogues' cause of action for unjust enrichment, the trial court ruled that the Quiogues had failed to meet their burden of proof that Hemerick had been unjustly enriched. The trial court also rejected each of the causes of action in Hemerick's cross-complaint.

In his objection to the statement of decision proposed by the Quiogues, Hemerick requested that the court adjudicate that the Quiogues owed him a specific amount of rents received from the Dawson property after the parties' dispute arose. In its statement of decision, the trial court declined to make an accounting, explaining that Hemerick did not ask for such relief in his cross-complaint and the Quiogues opposed the relief.

The trial court entered judgment, and Hemerick appealed.

II

DISCUSSION

A. The Trial Court's Decision on the Enforceability of the Settlement Agreement

We first address Hemerick's challenge to the trial court's ruling that the parties did not reach an enforceable settlement agreement.

1. Standard of Review

In considering whether the parties entered into an enforceable settlement agreement, the trial court was ruling on a question of law based largely on undisputed facts. (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407 [" '[W]hether a certain or undisputed state of facts establishes a contract is one of law for the court' "]; Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208 (Bustamante) ["if the material facts are certain or undisputed, the existence of a contract is a question for the court to decide"].) We apply a de novo standard of review to the trial court's ruling on that question of law. (See Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 797 (Barella) [issue of law reviewed under de novo standard].) To the extent the trial court relied on factual findings for its decision, we review those findings under a substantial evidence standard of review. (Robinson & Wilson,at p. 407.)

2. The Parties' Agreement Is Unenforceable Under the Statute of Frauds

As they did in the trial court, on appeal the Quiogues set forth several arguments as to why the parties' purported settlement agreement is not enforceable. As we will explain, we find one of those arguments to be dispositive of the issue: no enforceable contract was formed because the settlement agreement concerns the transfer of an interest in real estate, and the agreement was not in writing and thus was invalid under the statute of frauds.

Because we affirm the trial court on the ground that the parties' agreement was unenforceable under the statute of frauds, we need not, and do not, comment on the other issues raised by the Quiogues on appeal or in the trial court, including whether the purported settlement agreement is unenforceable because it was uncertain and indefinite, whether Hemerick waived his right to seek enforcement of the purported settlement, and whether there was mutual assent to the agreement.

There is no doubt that the settlement agreement concerned a transfer of an interest in real estate. Both the Quiogues and Hemerick agree that the basic settlement proposal was for Hemerick to pay a certain amount of money to the Quiogues, Hemerick would become the owner of the Dawson property, and the Quiogues would surrender their ownership interest.

An agreement for the transfer of an interest of real property is invalid unless it is in writing. (Civ. Code, §§ 1091, 1624, subd. (a)(3); Code Civ. Proc., § 1971 [all concerning the requirement of a writing for the transfer of interest in real property].) This requirement applies even when the agreement for the transfer of real property is contained in a settlement agreement (Nicholson v. Barab (1991) 233 Cal.App.3d 1671, 1683), with the exception that a settlement made on the record under the procedures set forth in Code of Civil Procedure section 664.6 is not subject to the statute of frauds and need not be in writing to be enforceable. (Kohn v. Jaymar-Ruby, Inc. (1994) 23 Cal.App.4th 1530, 1535; Timney v. Lin (2003) 106 Cal.App.4th 1121, 1128 ["[Code of Civil Procedure] section 664.6, which permits the enforcement of an oral agreement recited in open court, constitutes a specific exception to the statute of frauds"].)

Here, as we have explained, the settlement agreement was not reached under the procedures set forth in Code of Civil Procedure section 664.6, and the parties do not contend otherwise. Accordingly, the statute of frauds makes the settlement agreement unenforceable unless it is in writing. The settlement agreement was not in writing. The trial court thus properly ruled that the settlement agreement could not be enforced.

3. Hemerick's Res Judicata Argument Lacks Merit

Hemerick argues, for the first time on appeal, that because of the operation of principles of res judicata, the trial court erred in ruling that there was no enforceable settlement agreement between the parties. Hemerick contends that Judge Styn's order was "a final disposition of the case" and that "[b]ecause [it] disposed of the entire action and left no judicial action on the part of the court other than to carry the judgment into effect such as by enforcement, it constituted a final judgment having res judicata effect." He argues, "Judge Enright's refusal to abide by and effectuate Judge Styn's final adjudication was prejudicial error at law and must be reversed . . . ."

We reject this argument. " 'Res judicata' describes the preclusive effect of a final judgment on the merits." (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) Here, Judge Styn's minute order stating that "[a] settlement has been reached" was not a final judgment on the merits. Instead, it was an order indicating that counsel for both parties had called to accept the settlement recommendation and that the case should be put on the dismissal calendar. The action remained pending. Thus, res judicata does not apply.

We also reject Hemerick's argument that the trial court's "refusal to enforce Judge Styn's finding that a settlement had been made makes a mockery of judicially supervised settlement conferences and eviscerates the public policy encouraging settlement." Judge Styn did not make a finding on the issue before the trial court, namely, whether the parties had entered into an enforceable contract. That issue was decided in the first instance by the trial court.

B. The Trial Court's Decision on the Merits of the Parties' Dispute

We next address Hemerick's challenge to the trial court's finding against him and in favor of the Quiogues on his claims seeking declaratory relief and an order quieting title with respect to his alleged ownership of the Dawson property.

1. Standard of Review

We apply a substantial evidence standard of review to the trial court's factual findings. (See Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053.) Substantial evidence is defined as evidence of " ' " ' " 'ponder able legal significance . . . reasonable in nature, credible, and of solid value[, and]' " ' . . . ' "relevant evidence that a reasonable mind might accept as adequate to support a conclusion" ' . . . ." ' " (Young v. Gannon (2002) 97 Cal.App.4th 209, 225.) To the extent that we are called upon to decide any issues of law, we apply a de novo standard of review. (Barella, supra, 84 Cal.App.4th at p. 797.)

2. Hemerick's Challenge to the Trial Court's Findings Regarding Ownership of the Dawson Property

As we have explained, Hemerick advanced two different theories of ownership at trial. First, he claimed that he owned a direct 70 percent fee simple interest in the Dawson property. As we have explained, the trial court rejected this claim on the ground that no such agreement was made, and if it had been, it would be unenforceable under the statute of frauds because it was not in writing. (See Civ. Code, §§ 1091, 1624, subd. (a)(3); Code Civ. Proc., § 1971.) Second, Hemerick claimed that he entered into a partnership with Nonie Quiogue and that the Quiogues took title to the Dawson property in constructive trust for the partnership. The trial court also rejected this claim, finding that the parties did not enter into a partnership agreement.

On appeal, Hemerick has abandoned his claim for direct ownership and relies only upon the claim that a partnership is the beneficial owner of the Dawson property. Hemerick states that "the only judgment possible based upon the record is a judgment upholding Hemerick's claim that the [Dawson property] is beneficially owned by the partnership and that [the Quiogues] hold bare legal title as constructive trustees on behalf of the partnership." Thus, the question that we must resolve is whether substantial evidence supports the trial court's finding that Hemerick is not a partner in any partnership that holds a beneficial interest in the Dawson property.

For Hemerick's argument on appeal, the distinction between ownership of the property directly by Hemerick versus ownership through a partnership is crucial. Although Hemerick appears to concede that under the statute of frauds a writing must exist for a transfer of ownership to him directly, he maintains that a writing is not required when one partner obtains real property in constructive trust for a partnership. The Quiogues disagree with the latter position, as did the trial court. As we will explain, we conclude that substantial evidence supports the trial court's finding that the parties did not form a partnership for ownership of the Dawson property. Therefore, we need not, and do not, address the applicability of the statute of frauds in the context of an oral partnership to own real property.

The trial court cited several items in support of its finding that no partnership was formed between the Quiogues and Hemerick for ownership of the Dawson property. The trial court noted: (1) the grant deed does not indicate that the partnership took title to or had any interest in the property, or that the Quiogues took title as a trustee for the benefit of another owner; (2) although Hemerick is a self-described real estate expert, in his own testimony he described the purported written agreement entered into by the parties as stating that he was to have a 70 percent "undivided" ownership interest, which is not commonly how a partnership interest is described; (3) although Gilda Quiogue is a record owner of the Dawson property, she was not included in any agreement made between her husband and Hemerick with respect to the ownership of the property through the vehicle of a partnership; (4) neither the Quiogues nor Hemerick filed tax returns or provided a Schedule K-1 on behalf of the alleged partnership; and (5) partnership funds were not used to purchase the Dawson property because, among other things, the "loan secured by the first deed of trust is the legal responsibility solely of the Quiogues, not Mr. Hemerick."

The lack of any mention of the partnership on the grant deed was significant because, as the trial court pointed out, Corporations Code section 16204, subdivision (a) states that "[p]roperty is partnership property if acquired in the name of either of the following: [¶] (1) The partnership. [¶] (2) One or more partners with an indication in the instrument transferring title to the property of the person's capacity as a partner or of the existence of a partnership but without an indication of the name of the partnership." Further, Corporations Code section 16204, subdivision (d) states that "[p]roperty acquired in the name of one or more of the partners, without an indication in the instrument transferring title to the property of the person's capacity as a partner or of the existence of a partnership and without use of partnership assets, is presumed to be separate property, even if used for partnership purposes." The trial court could reasonably infer that if the parties had intended the partnership to own the property, they would have, as specified by Corporations Code section 16204, subdivision (a), identified that partnership interest on the grant deed.

Together, the items cited by the trial court provide reasonable, credible, and solid evidence pointing to the lack of a partnership agreement. Thus, we conclude that these items provide substantial evidence in support of the trial court's finding that the parties did not enter into a partnership agreement for ownership of the Dawson property.

Despite the substantial evidence relied on by the trial court in support of its finding, Hemerick argues that the Quiogues purportedly admitted on several occasions that they entered into a partnership with Hemerick for ownership of the Dawson property. Hemerick argues that the Quiogues "made admissions on at least five separate occasions prior to trial that even though title of record stands in the name of [the Quiogues], the beneficial ownership is in the partnership." According to Hemerick, those admissions negate the value of the evidence cited by the trial court and require us to conclude that substantial evidence does not support the trial court's finding as to the nonexistence of the partnership. We now proceed to consider each of the five alleged admissions.

a. Form Filed with the Employment Development Department

In approximately 1998, the Quiogues hired a resident manager for the Dawson property. As new employers, the Quiogues filed a registration form with the State of California Employment Development Department (EDD form). Nonie Quiogue filled out the EDD form, indicating "Colina Park North Apartments" for the business name and listing himself and Hemerick as "partner[s]" in the business. Nonie Quiogue testified that he listed himself and Hemerick as partners on the EDD form because the money that would be paid to the resident manager would be taken from the rents and therefore, due to Hemerick's interest in 70 percent of the rents, Hemerick would be paying 70 percent of the resident manager's salary.

We conclude that as the trier of fact the trial court was entitled to make a credibility determination in favor of Nonie Quiogue and thus believe his testimony that he described Hemerick as a "partner" on the EDD form because Hemerick shared in the rents on the Dawson property. Thus, the trial court could reasonably have concluded that the EDD form did not constitute an admission by Quiogue that the parties entered into a partnership to own the Dawson property.

b. Hemerick's 1998 Letter

A dispute arose between the parties in 1998 when Nonie Quiogue informed Hemerick that he wanted to purchase 10 percent of Hemerick's 70 percent interest in the Dawson property for $10,000, according to an option agreement that Nonie Quiogue claimed the parties had entered into. Hemerick wrote a letter to the Quiogues in April 1998, stating that he would not agree to the transaction. In the letter, Hemerick made statements characterizing his interest in the Dawson property as "ownership." Among other things, he stated: ". . . I will not allow you to coerce or extort this money from me. Nor will you purchase 10% from my existing 70% ownership of [the Dawson property] at a price well below fair market value. . .," and "[y]our attempt to purchase 10% of my 70% ownership of [the Dawson property] at the ridiculously low price of $10,000 is unacceptable." In the letter, Hemerick also demanded that the Quiogues send him both his 70 percent share of the cash flow for the last three months and 16 months of operating statements. Hemerick made no mention of a partnership in his letter.

Nonie Quiogue testified that he interpreted the claim of ownership in Hemerick's letter to refer to ownership of the net rents. The only response that Nonie Quiogue made to Hemerick's letter was to send $7,000 to Hemerick, with a note that stated the money was "[p]er your request to get your share for the apartment."

Hemerick argues that "Mr. Quiogue's failure to object to the unequivocal statements of ownership, and actual acquiescence to demands based upon ownership, is at the minimum an adoptive admission." We disagree. Nonie Quiogue testified that he did not understand Hemerick to be referring to 70 percent ownership interest in the Dawson property, but that instead he understood Hemerick to be referring to their agreement to share the net rents. Indeed, Nonie Quiogue's response of sending Hemerick his share of the rents is consistent with that understanding. The trial court, as the trier of fact, was entitled to credit Nonie Quiogue's testimony and thus reject any notion that Nonie Quiogue had acquiesced in a claim of ownership by Hemerick.

Moreover, the issue before us is whether the evidence supports a finding regarding a claim to partnership ownership of the Dawson property. Because Hemerick's letter did not refer to any to ownership of the property through a partnership, Quiogue's failure to object to the letter could not, in any event, serve as an admission that the parties entered into a partnership to hold the Dawson property.

c. Nonie Quiogue's Deposition

In 2002, before the present dispute arose among the parties, Nonie Quiogue gave a third party deposition in another lawsuit involving Hemerick. During the deposition, Nonie Quiogue was asked about the Dawson property.

"Q. . . . When you bought the property, did you have an understanding that Mr. Hemerick had some interest in the property?

"A. Yes.

"Q. Okay. And you had some oral agreement with him regarding Dawson?

"A. Yes.

"Q. Okay. What was that agreement?

"A. 30 percent for me, 70 percent for him."

"Q. . . . What was the arrangement under which you and Mr. Hemerick would acquire Dawson together?

"A. 30 percent for me, 70 percent for him."

"Q. Does Mr. Hemerick still own an interest in that property?

"A. Yes."

The trial court, acting as the finder of fact, was not required to construe this testimony as an admission that Hemerick and Nonie Quiogue formed a partnership to own the Dawson property. Nonie Quiogue testified that when he was referring to "30 percent for me, 70 percent for him" and responding to the question about Hemerick's "interest in the property," he was not referring to Hemerick's ownership of the property, but instead to an agreement that gave Hemerick an interest in the net rents generated by the property, and that during the deposition it was not clear to him that he was being asked about ownership of the property rather than ownership of the net rents.

The trial court was entitled to credit this testimony as a reasonable explanation for what Nonie Quiogue meant when he stated "30 percent for me, 70 percent for him." Further, we note that nowhere in the deposition testimony does Nonie Quiogue refer to the formation of partnership to own the Dawson property, which is the issue before us.

d. Corrections to the Transcript of the Deposition Testimony

As an additional purported admission, Hemerick points to Nonie Quiogue's corrections to the deposition transcript discussed above. In handwritten corrections, Nonie Quiogue added the following statement to his deposition testimony: "Mr. Hemerick [and] I have a disagreement on how I'm going to pay the 10% that I'm suppose ably [sic] to have in order for me to have 40% share of the Dawson property [and] 60% for him." At trial Nonie Quiogue testified that he was referring to the agreement to share the net rents when he made this statement.

Hemerick's reliance on Nonie Quiogues' correction to his deposition testimony is unpersuasive for the reasons that we have cited as to the deposition testimony itself: (1) the trial court was entitled to credit Nonie Quiogue's explanation that he was referring to a share in the net rents; and (2) there is, in any event, no reference in Nonie Quiogue's statement to a partnership owning the Dawson property.

e. Allegations in the Quiogues' Original Complaint

Hemerick claims that the Quiogues admitted in the original complaint filed in this action "that there was an oral partnership agreement with Hemerick for ownership of the [Dawson property]." Specifically, the complaint contained the following allegation: "In reliance on Hemerick's representations, [the Quiogues] purchased the [Dawson property] and obtained a purchase money loan secured by [the Dawson property]; and further, [the Quiogues] entered into an oral partnership agreement with Hemerick where under after the close of escrow on the sale of [the Dawson property] to [the Quiogues], that [the Quiogues] transfer an ownership interest in [the Dawson property] to Hemerick; however, Hemerick requested that he not be made an owner of record and that [the Quiogues] orally acknowledge his ownership interest."

As we have explained, the first amended complaint is much more specific about the Quiogues' view of the parties' relationship, alleging that Nonie Quiogue and Hemerick entered into an oral agreement to share the net rents from the Dawson property.

This allegation in the Quiogues' original complaint does not support Hemerick's position. The allegation is not an admission that a partnership became the owner of the Dawson property. Instead, although the allegation is somewhat unclear, it appears to describe an oral agreement under which the Quiogues would transfer an ownership interest to Hemerick as an individual after the close of escrow, but that Hemerick did not want his interest to be reflected on the title. Further, the nature of the "ownership" interest is not specified. The trial court was entitled to rely on Nonie Quiogue's testimony throughout trial that the parties agreed that Hemerick would have an "ownership" interest in the property only insofar as he was entitled to receive a share of the rents.

Having examined all five of the items that Hemerick asserts are admissions by the Quiogues, we conclude that the trial court was not required to find in favor of Hemerick based on those items.

Further, as we have explained, the trial court set forth an extensive list of evidence in support of its conclusion that the parties did not enter into a partnership for ownership of the Dawson property. Based on the evidence identified by the trial court, we conclude that the record contains substantial evidence supporting the trial court's finding in favor of the Quiogues and against Hemerick on the issue of whether the parties entered into a partnership to own the Dawson property. Accordingly, we affirm the judgment in favor of the Quiogues concerning their ownership of the Dawson property.

3. Hemerick's Challenge to the Trial Court's Denial of Declaratory Relief as to the Rents Owing to Him by the Quiogues

As we have explained, the trial court found that there was an oral agreement between Nonie Quiogue and Hemerick to share in the income from the Dawson property, with Hemerick entitled to receive 70 percent of the income. The evidence at trial established, and the parties do not dispute, that the Quiogues did not make income payments to Hemerick after the present dispute arose. According to Hemerick's appellate briefing, by the time of trial $460,000 in net rents had accumulated from which he did not receive his share.

We note that the trial court did not expressly rule on whether that agreement is enforceable despite Gilda Quiogue's lack of knowledge of it, but the trial court did deny the Quiogues' claim of unjust enrichment, under which they sought to recover the amounts already paid to Hemerick.

Hemerick's entitlement to his share of rents that the Quiogues collected after the parties' dispute arose was not an issue specifically addressed by Hemerick at trial. The issue appears to have been raised by Hemerick for the first time in his objections to a proposed statement of decision prepared by the Quiogues. Hemerick argued that the trial court should order "[d]eclaratory relief determining Hemerick's entitlement to his 70% of said net rents, including an accounting and distribution to Hemerick of his share . . . ." Hemerick set forth a list of the relief he was requesting from the trial court, which included the following proposed findings:

"1. That the net rents from the [Dawson property] collected by the Quiogues during the pendency of this action were not less than $300,000 . . .;

"2. That no portion of said net rents has been disbursed to Hemerick[;]"

"5. That [Gilda] Quiogue did not communicate to Hemerick any rescission of or objection to the agreement to share 70% of the net rents with Hemerick at any time prior to the filing of [the Quiogue's original complaint];

"6. That no later than April 1998, [Gilda] Quiogue ratified and/or accepted the agreement for paying Hemerick 70% of the net rents of the subject property[;]

"7. That the right to rescind, cancel or avoid [sic] said agreement, if any, is barred by the statute of limitations[; and]

"8. That Hemerick is entitled to payment by Quiogue of his 70% share of the net rents above described, said share being the amount of $210,000."

The parties and the trial court discussed the issue at length in connection with Hemerick's objections to the proposed statement of decision. The Quiogues contended that Hemerick was not entitled to declaratory relief concerning his entitlement to a specific amount of the rents collected by the Quiogues because (1) Hemerick did not request such relief in his pleadings or at trial; and (2) Hemerick's filing of a lis pendens on the Dawson property should have some bearing on whether he is entitled to continue to receive a share of the rents.

In its final statement of decision, the trial court rejected Hemerick's request for declaratory relief as to whether the Quiogues owed him certain rents collected on the property. Referring to the relief sought by Hemerick as an "accounting" of the rents owed to him, the trial court stated that it was declining to "make an accounting" for two reasons. "First, neither the First Amended Complaint nor the Second Amended Cross-Complaint adequately pleads an accounting. Second, [the Quiogues] object[]. Without an accounting being property pled, the Court is not in a position to make findings on an accounting."

We agree with the trial court that Hemerick's pleadings do not encompass the relief he sought in his objections to the proposed statement of decision, i.e., a declaration establishing that he was owed money under an oral agreement to share rents. Hemerick's second amended cross-complaint did not request such relief. Instead, it asserted only two theories of the parties' contractual relationship, namely, (1) that Hemerick held a direct ownership interest in the Dawson property; and (2) that Hemerick held an interest in a partnership that allegedly owned the Dawson property. Although the Quiogues alleged in the first amended complaint that Hemerick and Nonie Quiogue agreed that Hemerick would receive a 70 percent share of the net rents, Hemerick's second amended cross-complaint did not acknowledge the possibility that the trial court could find the Quiogues' allegation to be true. Thus, the second amended cross-complaint did not ask the trial court to determine, in the alternative, the amount that the Quiogues owe to Hemerick under an agreement to share the net rents.

Further, the Quiogues' first amended complaint did not put at issue the amount that they owed to Hemerick under their theory of the parties' agreement. For instance, the Quiogues did not ask for an accounting as to the amounts that they may owe to Hemerick.

Although the second amended cross-complaint contains a request for an "accounting" of the "profits" from the Dawson property, it plainly does not base this request on an allegation that the parties entered into an agreement to share the net rents obtained from the Dawson property. In the declaratory relief cause of action, the second amended cross-complaint describes Hemerick's position that he "is entitled to a full accounting from [the Quiogues] and distribution of profits in accordance with said accounting." Further, the cross-complaint's prayer for relief requests a "judicial determination and order thereon determining the legal rights and duties of the parties hereto, including, but not limited to, the validity of the partnership agreement and ownership sharing agreement between Hemerick and [the Quiogues], and an accounting by Quiogue to Hemerick of profits and proceeds from the [Dawson property]." These requests refer to Hemerick's claim that he is entitled to an accounting and a share of the profits due to his alleged status as an owner or partner in the property; they do not refer to any allegation that Hemerick entered into an oral agreement for a portion of the rental income. Accordingly, the pleadings do not encompass a request for a declaration that Hemerick was owed a certain amount of net rents from the Quiogues under an oral agreement to share net rents obtained from the Dawson property.

Under the applicable legal standards, because Hemerick's pleadings do not request relief regarding his share of the rents, the trial court properly declined to adjudicate Hemerick's entitlement to such relief. " 'A judgment must be confined to matters which have been placed in issue by the parties and those which are necessarily involved.' " (Tokio Marine & Fire Ins. Corp. v. Western Pacific Roofing Corp. (1999) 75 Cal.App.4th 110, 123.) Further, "[w]here a party alleges facts amounting to a certain cause of action and the evidence sets forth an entirely separate set of facts constituting an entirely different cause of action from the one pled, the result is . . . a failure of proof." (Fineberg v. Niekerk (1985) 175 Cal.App.3d 935, 939.) When a failure of proof exists, the trial court need not allow an amendment of the pleadings to conform to the proof. (See Code Civ. Proc., § 471.) "Notwithstanding prevailing liberality in the amendment of pleadings to conform to proof, an amendment will not be permitted where there is a complete failure of proof, that is, where 'the allegation of the claim or defense to which the proof is directed, is unproved, not in some particular or particulars only, but in its general scope and meaning . . . .' " (Johnston v. County of Yolo (1969) 274 Cal.App.2d 46, 51, quoting Code Civ. Proc., § 471.) "Although the courts are liberal in permitting amendments to conform to proof, one limitation remains. That is that the amendment to conform to proof must not introduce a new cause of action or introduce a new issue, or substantially change the claim or defense." (Earp v. Nobmann (1981) 122 Cal.App.3d 270, 286.)

Here, because Hemerick's pleadings did not request that the court provide declaratory relief with respect to the amounts owing by the Quiogues under an oral agreement to share the net rents from the Dawson property, the trial court would have had to order an amendment to the pleadings to afford that relief. Because such an amendment would have substantially changed the relief pursued by Hemerick, the trial court properly declined to adjudicate the issues raised by Hemerick in his objections to the proposed statement of decision.

DISPOSITION

The judgment is affirmed.

WE CONCUR:NARES, Acting P. J., AARON, J.


Summaries of

Quiogue v. Hemerick

California Court of Appeals, Fourth District, First Division
Mar 19, 2008
No. D050130 (Cal. Ct. App. Mar. 19, 2008)
Case details for

Quiogue v. Hemerick

Case Details

Full title:NONIE QUIOGUE et al., Plaintiffs, Cross-Defendants and Respondents, v…

Court:California Court of Appeals, Fourth District, First Division

Date published: Mar 19, 2008

Citations

No. D050130 (Cal. Ct. App. Mar. 19, 2008)