Opinion
NOT TO BE PUBLISHED
APPEALS from a judgment of the Superior Court of Los Angeles County No. BC361307, Conrad Aragon, Judge. Reversed and remanded for further proceedings.
Law Offices of Jonathan Stein and Jonathan A. Stein for Plaintiffs, Cross-complainant and Appellants.
Seltzer Caplan McMahonVitek, Gregory A. Vega, David M. Greeley and Jeffrey B. Harris for Defendant, Cross-defendant and Respondent.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
I. INTRODUCTION
Appellants The Crane Group, Inc. (“Crane”) St. Monica Development Company, LLC (“SMDC”) and Jonathan Stein (“Stein”) appeal from a summary judgment entered on March 5, 2009 in favor of Respondent Richard G. Polanco (“Polanco”).
On November 2, 2006 a complaint was filed by Gabrielino-Tongva Tribe, a California State Recognized Indian Tribe against SMDC, Stein and his law offices. Case No. BC 361307. On September 26, 2007, Stein and SMDC filed a cross-complaint for indemnity contribution and declaratory relief against Gabrielino/Tongva Nation FKA Gabrielino-Tongva Tribe, FKA Gabrielino Tribal Gaming authority, as well as against many individual defendants including Polanco.
On the same day, SMDC filed a complaint against Gabrielino-Tongva Tribe, a state recognized Indian tribe and other defendants including Polanco.
On January 31, 2007, Crane filed a complaint alleging causes of action against the same parties as SMDC. As to Polanco, Crane alleged breach of contract, intentional interference with contractual relations, negligent interference with contractual relations, fraudulent conveyance, negligence, account stated, and quantum meruit.
On May 7, 2007, SMDC filed a first amended complaint naming the same defendants as the original complaint alleging as to Polanco breaches of contracts, intentional interference with contractual relations, negligent interference with contractual relations, fraudulent conveyance, account stated, and quantum meruit. By February 2008 all three cases were related and consolidated for all purposes and pending before Judge Aragon.
On September 26, 2008, the trial court granted Polanco’s motion for summary judgment as to SMDC’s first amended complaint, Crane’s complaint, and SMDC and Stein’s cross-complaint for indemnity.
On October 21, 2008, Polanco filed a Memorandum of Costs. Plaintiffs filed a motion to tax costs. Polanco filed a motion for award of attorney’s fees. On January 22, 2009, the trial court granted Polanco’s motion for attorney’s fees. On March 5, 2009, the trial court executed the amended judgment, which included the award of fees and costs.
II. BACKGROUND
Polanco summarizes the facts of the case in the following terms. In March 2001, SMDC entered into a written contract with the Gabrielino-Tongva Tribal Nation. From February 2001 to September 2006, SMDC and the Tribe performed under the SMDC agreement until its termination not later than October 3, 2006. In 2004, Stein recruited Polanco to become a political consultant for the Tribe as the Tribe pursued gaming rights.
In 2004, the Tribal Council approved a Consulting Agreement with Polanco’s company, Tres Es, Inc. Polanco’s goals under the agreement were to: (1) lobby the Governor regarding a gaming compact for the Tribe; (2) lobby the legislature to pass a bill recognizing the Tribe as a sovereign nation; (3) lobby municipalities for location of a reservation; and (4) assist in locating investors.
In March 2005, the Tribe retained Crane as a federal lobbyist. In June 2006, the Tribe paid Crane $50,000. On January 4, 2007, Crane wrote to Polanco who was then CEO of the Tribe and terminated the Crane Agreement.
On October 2, 2005, the Tribe held elections for its Tribal Council. On May 20, 2006 Libra Securities (Libra) and the Tribe acting through the Tribal Council executed the Libra Funding Agreement for up to $21 million to be invested with the Tribe. In late May 2006, Libra caused the Tribe to receive $2,150,000 investment funds. The Libra Funding Agreement provided that funds paid to the Tribe pursuant to the Agreement shall be used only in furtherance of the development of the Proposed Project. The “Proposed Project” was defined as obtaining approval for one or more Las Vegas–style casinos in Los Angeles County in order to conduct certain gaming activities.
Throughout the summer of 2006, disputes arose between Stein, the Tribal Council and the Tribe’s general counsel, Elizabeth Aronson. On September 9, 2006, at a meeting in Stein’s law offices, Stein demanded that the Tribal Council fire Aronson and that he be provided exclusive control over the remaining Investment Funds. The Tribal Council refused Stein’s demands. In response, Stein hand-delivered a letter of resignation. Stein then insisted that the Tribal Council leave his law offices, where at Stein’s invitation the Tribal Council had been meeting since 2001. Between September 9 and October 3, 2006, the dispute escalated. On September 29, 2006, the Tribal Council wrote to Stein, stating “immediately suspend all your activities, and those of St. Monica Development Company, on behalf of the Tribe and the Tribal Gaming Authority.” On October 3, 2006, at a Tribal Council meeting at Libra’s office, the Tribe’s outside attorney from Sheppard Mullin, James McShane, told Stein and confirmed in a letter that the Tribe had accepted Stein’s letter of resignation, or alternatively, that the Tribe was terminating him.
Polanco attended the October 3 meeting at Libra’s office because the Tribe had requested that Polanco provide a legislative update. At that meeting, the Tribal Council offered Polanco the position of CEO of the Tribe. Polanco accepted. Polanco’s compensation was to be $50,000 per month in addition to reimbursement of business expenses and a share of future gaming revenues in the event the Tribe is successful in operating a casino.
After resigning or being terminated, Stein unsuccessfully sought to mount a recall election. Stein then recruited members of a purported “Financial Oversight Committee” (the Santa Monica Group) to start their own competing tribal group. On December 17, 2006, the Santa Monica Group registered as an unincorporated association named the “Gabrielino-Tongva Tribe.”
On May 22, 2006, the Tribe received the Investment Funds from Libra. The Investment Funds were deposited into a Wells Fargo Brokerage Account. On behalf of the Tribe, Aronson opened up two checking accounts; one in the name of the Tribe –Tribe Union Bank Account, and one in the name of Gabrielino Tribal Gaming Authority –GTGA Union Bank Account. As of October 1, 2006, the Tribe had $727,650.51 in the Wells Fargo Brokerage Account, $64,892.81 in the Tribe Union Bank Account, and $168,045.16 in the GTGA Union Bank Account.
On November 3, 2006, the Tribe transferred all the funds in the Wells Fargo brokerage account to Sheppard Mullin. Sheppard Mullin retained $301,650.51 for payment of attorney’s fees, transferred $100,000 to Velie & Velie (a law firm hired by the Tribe to revise its Constitution), and on November 8, 2006 transferred $326,000 to the Tribe Union Bank Account.
From October 1, 2006 forward, the Tribe Union Bank Account had total funds available of $482,538.90. Polanco was paid $79,000 from these funds. He was paid $75,000 as CEO and $4,000 for previous services performed as the Tribe’s lobbyist/consultant. Olivia Polanco was paid $10,000 for reimbursement of initial office supplies and equipment. From the GTGA Union Bank Account, Polanco was paid $25,000 in CEO salary.
The Appellants summarize the facts of the case in the following terms. In October 2006 Polanco became CEO of the Gabrielino-Tongva Tribe, a California unincorporated association with approximately 1, 810 members who claimed to be descendents of the historical Gabrielino Indian Tribe. On October 3, Polanco was appointed CEO and received a $25,000 check. On October 11, the Tribal Council adopted Resolution 109 making Polanco’s appointment.
In 2005, Crane, a registered lobbyist based in Washington D.C. was hired by the Tribe. The “Crane Agreement” was adopted by the Tribe in March 2005 by Resolution 71. It provided for fees to accrue at a rate of $12,500 per month. Crane was owed $225,000 on December 31, 2006. On October 3, 2006, Crane was owed approximately $187,500. Crane’s demand letter states the debt, plus interest due, as $262,467.00 on January 31, 2007.
In 2001, the Tribe hired SMDC to help the Tribe obtain investment monies and eventually an Indian Casino in Los Angeles or Orange County. The “SMDC Agreement” was approved, adopted, ratified, amended or acknowledged by the Tribe a total of four times in six years. The SMDC Agreement provided for fees to accrue at the rate of $25,000 per month. SMDC’s demand letter dated November 2, 2006 stated the debt, plus interest, as $2,503,276.
The Tribe was a California unincorporated association formed in 2001, when descendants of the Gabrielino Indian Tribe “joined by mutual consent for a common lawful purpose.” Some of the common purposes were raising investment monies and using them to gain the legal right to open and operate an Indian casino in Los Angeles or Orange County. The Tribe’s governing board was referred to as the “Tribal Council.”
The Tribe’s accountants, Talley & Company, conducted a financial review in October 2006. The Talley report indicated that on or about October 3, 2006 the Tribe’s asset was “$898,100” held in three bank and brokerage accounts. The debts of the Tribe were in excess of $4.9 million.
After the termination of SMDC and the appointment of Polanco as CEO on October 3, 2006, a struggle for control over the Tribe ensued. Polanco and other Management Defendants set up offices, with new employees at 761 Terminal Street in downtown Los Angeles. New leaders who called themselves the “Financial Oversight Committee” continued to operate out of the Santa Monica offices. Each competing group held a meeting and formalized their split. The “Financial Oversight Committee” held a meeting of the Tribe’s members on November 18, 2006 in Elysian Park near Dodger Stadium. Five Financial Oversight Committee members eventually assumed positions as Tribal Council persons. Their elevation to the Tribal Council was ratified by general election of 1, 510 members held in May 2007.
Polanco and other Management Defendants held a meeting of their followers on November 19, 2006 at the Cal State “Pyramid” in Long Beach. Eventually 300 members of the 1, 810 member Tribe left to join the New GT Nation. Polanco as CEO of the New GT Nation established offices at 761 Terminal Street in downtown Los Angeles. He hired two part-time office works, Citali Arvizu and Desiree Martinez, and a P.R. firm, Sigala & Associates. Lisa Sigala became Tribal Administrator. Office supplies and equipment were purchased by Polanco’s wife. Washington D.C. attorneys, Velie & Velie drafted a new constitution which declared that, “The legal name of the Nation shall hereafter be known as The Gabrielino/Tongva Nation.” On February 17, 2007, the Constitution was ratified and the six Council person defendants were sworn in as members of New GT Nation’s governing board, the “Peo’tskome.”
On October 15, 2006, Polanco was appointed to a four person committee to develop and prepare a proposed budget for review by the council. The budget was dated November 5, 2006. Polanco was made sole signatory on the Wells Fargo account that contained $724,491.00. He instructed Wells Fargo to transfer that money to Sheppard Mullin’s attorney-client trust account. He directed Sheppard Mullin to keep $300,000 for legal fees and forward $436,800 to the Tribe’s Union Bank account. Then on November 8, Polanco directed Aronson to issue eight handwritten cashier’s checks in the amounts of $147,032.00, $58,032.00, $51,032, $47,032, $22,008, $10,032, $10,032, and $9,532.
The purpose of these cashier’s checks was to avoid a freeze on the accounts placed by banking institutions after complaints by SMDC that the defendants intended to abscond with the Tribe’s funds. The cashier checks were used to pay 12 challenged transfers that prepaid expenses of the New GT Nation for up to one year.
The 12 challenged transfers are: (i) Alameda Produce Market, $12,000. This transfer prepaid 12 months of rent for offices at 761 Terminal Street, from October 2006 to October 2007; (ii) U.S. Postmaster, $20,000. This transfer prepaid postage and postage meter; (iii) AT&T, $2,000 and $7,000. These transfers prepaid cell phone bills for Council person defendants; (iv) Cingular $2,000 and $1,100. These transfers prepaid cell phone bills for Council person defendants; (v) MGB Strategies, $40,000; Carmona Entertainment, $30,000; and Fenton Productions, $13,000. These transfers prepaid public relations and event planning in connection with the February 17 City Hall event; (vi) Velie &Velie, $100,000. Payment to the law firm that drafted the constitution for the New GT Nation; (vii) Baca Sigala (Lisa Sigala), $22,000. Payment to Ms. Sigala who worked as Tribal Administrator at 761Terminal Street; (viii) Desiree Martinez, $11,250 and Citali Arvizee $11,500. Payment to office workers at 761 Terminal Street; (ix) Richard Polanco (Tres Es, Inc.) $100,000. A first check of $25,000 was paid October 3 and then a second amount of $75,000 was paid on November 8; (x) Olivia Polanco, $10,000. This payment was for reimbursement for purchases of stationary and office equipment at the 761 Terminal Street address; (xi) General Counsel Elizabeth Aronson, $24,000. Aronson was paid for six months of work beginning with December 2006; and (xii) Council persons Carmelo, Dunlap, Loya, Perez, Alcala and Machado, $72,000. The Council persons and later Peo’tskome members were prepaid for four month of work through March, 2007.
III. DISCUSSION
“Summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law. [Citation.] The function of the trial court in ruling on a motion for summary judgment is merely to determine whether such issues of fact exist, not to decide the merits of the issues themselves. [Citation.] Whether the papers raise a triable issue of material fact is reviewed de novo by the appellate court, unbound by the trial court’s decision. [Citation.]” (Furla v. Jon Douglas Co. (1998) 65 Cal.App.4th 1069, 1076-1077). Applying the foregoing standards, we conclude that the summary judgment was improperly granted.
In the minute order dated September 26, 2008 ruling on Polanco’s motion for summary judgment the trial court writes: “The parties have done nothing to clarify the status or identity of the Gabrielino party or parties who may be liable under the SMDC and CRANE contracts, notwithstanding the declarations submitted by plaintiffs with their improper legal conclusion and opinion that all the successive ‘tribal’ entities are one and the same. Thus, rather than adopt the parties’ confusing labels, the court will refer to the entity (or entities) who entered into, or were successively bound by, the subject contracts, if any, as ‘the association.’”
In another part of the minute order dated September 26, 2008, the trial court writes: “Plaintiffs assert that since the defendants formed the new entity, The Nation, for whose benefit the money was spent, the defendants ‘absconded’ with the money. If the Nation has no ‘successor’ ties to its predecessor, this argument might have some merit. But, as noted above, the status of the successive associations is still unresolved. The court has noted that the Nation appears to have succeeded to the obligations of its successors under the February 21, 2001 agreement. A corollary to this proposition is that the Nation may well be the successor association although that issue remains to be resolved, succeeding to all the assets, including the monies invested, and liabilities of any or all of its successors. If this is so, and it is not negated by the evidence, the transfer of funds from the predecessor to the successor would not constitute a fraudulent transfer.”
From our de novo review of the record, we find that there is a triable issue of material fact as to the question of separate identity as to the associations described as the Tribe and the New Gabrielino Tribe Nation. Given our finding that there is at least one triable issue of material fact, we need not address the other issues raised by the appellants as to the granting of the motion for summary judgment.
Based on our findings, the issue of the award of attorneys fees is moot.
IV. DISPOSITION
The judgment is reversed and remanded for further proceedings. Appellants, The Crane Group, Inc., St. Monica Development Company, LLC, and Jonathan Stein are to recover their costs on appeal from Respondent, Richard G. Polanco.
We concur: ARMSTRONG, ACTING P.J., KRIEGLER, J.