Vail Lake Rancho v. Sundance International

Vail Lake Rancho v. Sundance International




Filed 6/14/06 Vail Lake Rancho v. Sundance International CA4/2




NOT TO BE PUBLISHED IN OFFICIAL REPORTS


California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



FOURTH APPELLATE DISTRICT



DIVISION TWO










VAIL LAKE RANCHO CALIFORNIA, LLC et al.,


Plaintiffs, Cross-Defendants, and Respondents,


v.


SUNDANCE INTERNATIONAL, LP


et al.,


Defendants, Cross-Complainants, and Appellants.


E035624


(Super.Ct.No. RIC339527)


OPINION


APPEAL from the Superior Court of Riverside County. Gary B. Tranbarger, Judge. Affirmed in part, reversed in part, remanded with directions.


Spach, Capaldi & Waggaman, Madison S. Spach, Jr., Thomas E. Walling; Law Office of Kelly Abreu, Kelly Abreu, for Defendants, Cross-Complainants and Appellants Sundance International, L.P., Mercury Management Corporation, Gary Clawson, John Mulder, and Centurion Capital Group, Inc.


Phillips, Haskett & Ingwalson and Frederick C. Phillips, for Plaintiffs, Cross-Defendants, and Respondents Vail Lake Rancho California, LLC., Vail Lake USA, LLC, Angella Sabella and Dynamic Finance Corporation.


Sundance International, LP (“Sundance”), Mercury Management Corporation, Gary Clawson (“Clawson”), John Mulder (“Mulder”), and Centurion Capital Group, Inc. (collectively referred to as “Appellants”) appeal from the judgment finding them in breach of contract and ordering them to pay damages to Vail Lake Rancho California, LLC (“VLRC”).


PROCEDURAL BACKGROUND AND FACTS


Since 1980, Sundance has owned and operated the Sundance Meadows recreational campground, approximately 400 acres of Temecula wilderness (the “Site”). Sundance Meadows is a membership guest ranch. Sundance has sold lifetime memberships that entitle the purchasers to use the ranch facilities. Sundance has also charged each purchaser monthly dues to pay for maintenance of ranch facilities. The Site is located near, but not on, a privately owned lake named Vail Lake (the “Lake”). Until it was sold to VLRC, the extensive areas surrounding the Lake and its surface rights were owned by a succession of affiliates of the Kemper Insurance Company (“Kemper”).[1] Prior to 1994, ranch members had no rights to use the Lake.


By 1993, Kemper decided to divest its California real estate interests. Jeffrey David (“David”), vice-president in charge of real estate development/sales for Kemper, conceived of a model for structuring a sale to Sundance and contacted Clawson, one of Sundance’s principals, about purchasing the recreational rights to the surface of the Lake, as well as the facilities and land around the Lake. Beginning in March 1994, Sundance and Kemper entered into a series of agreements (the “1994 Agreements”) whereby Sundance obtained lake usage rights for its current members and the right to sell future memberships to Sundance Meadows that included lake usage rights. At this time, Sundance had 1810 pre-existing members entitled to use Sundance Meadows (pre-Kemper Memberships), many of whom were still making installment payments.


The 1994 Agreements contemplated the granting of a number of rights to Sundance in phases, including (1) the right for its members to use the Lake recreationally; (2) an easement for a recreational trail around the Lake; (3) an easement for access and use of marina facilities located on real property known as Parcel C; (4) the purchase by Sundance of land between Sundance Meadows and the Lake known as Parcels E and F; (5) the purchase by Sundance of Parcel C, or the marina facility; and (6) the ultimate acquisition by Sundance of an exclusive right to the recreational use of the Lake (with the exception of personal use by future landowners around the Lake).


With the exception of a specific purchase price for Parcels E and F, the remaining rights obtained by Sundance were to be paid from membership sales by Sundance involving the right to use the Lake. The parties adopted a number of formulas in the Payment and Performance Agreement (“PAPA”) under which Sundance would pay Kemper a portion of the proceeds derived from the sale of memberships sold after the date of the agreements. Those formulas included the following:


(1) Sundance was obligated to meet a minimum sales quota of 300 memberships the first year and 400 for each year thereafter. The sales quota was a cumulative number.


(2) Sundance was obligated not to sell memberships for below a minimum price of $7,500, although a discount of up to 15 percent could be given for a full cash sale.


(3) Sundance was obligated to require a downpayment of at least 10 percent of the purchase price.


(4) Sundance was obligated to require that any installment sales contract provide for payment in full in no less than 10 years. Moreover, installment payments were to be deposited with a trustee. (From 1997 on, the parties engaged Advanced Financial Management (AFM) to serve as a trustee/escrow/distributing agent for each party’s share of sales proceeds).


(5) Sundance was obligated to charge an interest rate of at least the government 10-year bond rate plus 1 percent per annum on installment contracts.


(6) The proceeds from new sales were to be distributed in a way that Sundance would receive the downpayment, provided it did not exceed 30 percent of the purchase price, and Sundance was ultimately to receive 65 percent of the entire sales proceeds, and Kemper was to receive 35 percent of such proceeds.


In connection with the membership sales, the agreements with third parties were required to provide that members would lose their right to use the Lake upon a default in payments. The membership contracts were not to count as a sale for purposes of minimum sales until they were “seasoned.” A seasoned contract was a contract in which the member had paid the equivalent of a 10 percent downpayment plus three monthly payments. Finally, a membership could only be sold to a member of the general public for the member’s personal and family use of the Lake and ranch facilities.


Because the price of memberships might fluctuate, the parties agreed on percentages as opposed to a specific price for the Lake interests; thus, the sale was to be consummated when Sundance met certain sales quotas. This transaction was thus structured such that Sundance would be able to purchase the properties by generating an agreed-upon number of sales (3000 in Phase One) at an agreed-upon rate (300 initially, then 400 per year). After the sale of the first 300 memberships, Kemper would transfer title to Sundance of Parcels E and F (Kemper was required to subdivide Parcels E and F as soon as possible). When Sundance completed the sale of an additional 2,700 memberships, Kemper would be required to deliver fee title to Parcel C, the 80-acre Marina site, and other interests, and its Lake Rights would become exclusive. The parties also agreed that they might later elect to enter a Phase Two after completion of Phase One, which would involve additional sales of 2000 memberships and purchase of several other Kemper parcels.


In 1997, Kemper decided to sell its interest in the 1994 Agreements, along with its rights to and interest in the Lake and all of the property it owned surrounding the Lake. Kemper affiliate KI/FKLA Ardenwood, LLC (KI/FKLA), KRDC’s successor, specifically transferred its interest in the Marina Site to VLRC by means of a Grant Deed dated May 28, 1998, and recorded June 17, 1998 (the Grant Deed). The Grant Deed contains a restriction that prevents KRDC’s successor from selling its own memberships.


In 1998, the Kemper interests in the real estate surrounding the Lake and the Lake’s usage rights and contract rights with Sundance were purchased by Vail Lake USA, LLC (“VL USA”) and VLRC in two separate transactions. These limited liability companies were managed by William Johnson (“Johnson”). However, the entity that actually succeeded to Kemper’s contract rights with Sundance was VLRC.


On October 13, 1998, Johnson met with Mulder and Kelly Abreu[2] (“Abreu”) of Sundance to discuss some concerns regarding Sundance’s sale of memberships. Following this meeting, on November 10, 1998, Johnson sent a letter to Sundance notifying it of numerous defaults in connection with the various 1994 Agreements. On October 13, 1999, Johnson sent a second letter to Sundance wherein he again notified Sundance of its numerous defaults and VLRC’s election to terminate the 1994 Agreements. This litigation followed.


Following a court trial, a statement of decision was entered which concluded that Sundance had breached the 1994 Agreements in numerous ways, and that because of Sundance’s breach, VLRC was justified in terminating the contracts with Sundance. The court found the following breaches: (1) Sundance waived downpayments on installment contracts; (2) in December 1996, Sundance sold 200 memberships to a single individual named LePard as an investment which was not a valid membership sale; (3) Sundance failed to maintain the marina facilities in good condition; (4) Sundance sold in excess of 40 memberships in December 1998 to its employees or family members for which zero cash was paid by the recipients, no monthly payments were made by the recipients, and the amounts due under the contracts were either waived or paid to the collection agency by Sundance itself; (5) both the LePard sales and the December 1998 sales were “sham” sales and, in fact, “were paperwork manipulations designed to look like sales”; (6) Sundance improperly, and in violation of the 1994 Agreements, raised its monthly dues from $20 to $30; (7) Sundance failed to pay the property taxes on Parcel C; (8) Sundance failed to maintain the level of insurance required under the 1994 Agreements; and (9) Sundance continued to make sales after the termination of the 1994 Agreements by VLRC.


On March 12, 2004, the court entered judgment in favor of VLRC and against Appellants. The judgment provided that Sundance was indebted via a promissory note in the sum of $658,675 plus interest after September 30, 2003, secured by a Deed of Trust, and that the judgment of foreclosure would be entered on that note. The judgment also provided that VLRC be entitled to damages in the amount of $15,264,211.90. The court found that Sundance’s performance under the various agreements was secured by the Deeds of Trust and that the property would be sold pursuant to VLRC’s judicial foreclosure cause of action with VLRC entitled to a deficiency judgment against Sundance if the proceeds of said sale were insufficient to cover the judgment amount.


The court ordered an accounting of existing memberships for the purpose of determining defaulted members and for the further purpose of determining funds received by Sundance as a result of membership sales after October 13, 1999. The court ordered Sundance to pay license fees of $59,325 to VLRC for the right of its members to use the Lake for the first quarter of 2004. The court further made a number of orders pertaining to the management and usage of the Lake, the payment of quarterly license fees, the payment of maintenance costs, payments of receiver fees and the collection of dues, none of which are the subject of this appeal. Sundance was ordered to pay VLRC 35 percent of all amounts received from post October 1999 sales, which amount was to be not less than $547,373 for the period through June 30, 2003, plus additional amounts determined to be due for that period from the accounting, plus 35 percent of all amounts collected after June 30, 2003. Finally, the court ordered that Sundance pay $246,384.77 to VLRC, representing receiver’s fees and costs paid by VLRC through January 14, 2004.


ISSUES ON APPEAL


In this appeal, Sundance raises the following contentions:


(1) Did VLRC breach the 1994 Agreements in October 1999 by denying a cure period following its declaration of default and election to terminate Sundance’s rights to the Lake before foreclosure under the PAPA Trust Deed?


(2) Is there sufficient evidence to support the trial court’s conclusion that Sundance breached the 1994 Agreements?


(3) Is there sufficient evidence to support the trial court’s award of damages in the amount of $15,264,211.90?


(4) Did the trial court err in calculating the Lake Rights fees owed by Sundance?


(5) Should the damages from sales of pre-Kemper memberships be reversed on the ground that the evidence shows that Sundance was allowed to sell pre-Kemper memberships?


(6) Should the judgment dismissing the cross-complaint be reversed?


DID VLRC BREACH THE 1994 AGREEMENTS WITH SUNDANCE?


Sundance contends “the trial court should have found that VLRC materially breached the 1994 Agreements by its premature termination of Sundance’s Lake Rights and other rights under the 1994 Agreements.” In support of this contention, Sundance turns to the language in the various agreements. First, Sundance notes that under section 5.1 of the Lake Rights Assignment,[3] it could not be considered to be in default of the 1994 Agreements until it was notified in writing and was allowed a 30-day period to cure. Second, Sundance points out that, even after the establishment of a default, section 5.2 of the Lake Rights Assignment[4] prevented VLRC from terminating Sundance’s Lake Rights unless and until VLRC completed a foreclosure against Sundance under the PAPA Trust Deed. Third, given the above, Sundance maintains that it was entitled to keep selling memberships until a court entered judgment for foreclosure. Thus, according to Sundance, by terminating Sundance’s Lake Rights in October 1999, VLRC breached the terms of the 1994 Agreements and deprived Sundance of its ability to cure the claimed defaults.


In response, VLRC points out that it is the PAPA, and not the Lake Rights Assignment, that governs the rights and obligations of the parties in connection with membership sales. Regarding a default period, VLRC points out that if there was an applicable default period, Sundance received it when VLRC sent a letter dated November 10, 1998 and a second letter dated October 13, 1999. Nonetheless, the PAPA did not require any particular form of notice to terminate the 1994 Agreements following a default. Moreover, it did not provide for a 30-day, or any other, cure period with respect to defaults. Instead, VLRC maintains that Sundance’s failure to sell the required memberships was not subject to a cure period. We agree. Sundance’s reliance on the Lake Rights Assignment is misplaced. The PAPA controls whether, and how, VLRC may (1) declare Sundance to be in default; and (2) elect to terminate the 1994 Agreements. The PAPA “sets forth in detail certain payment and performance obligations of Sundance in connection with the transactions contemplated by the Purchase Agreement.”


Notwithstanding the above, Sundance expands its argument in its reply brief by referencing section 12.2 of the PAPA and the PAPA Trust Deed. First, Sundance contends that VLRC’s sole reliance on section 12.1 of the PAPA misstates the rights and obligations of the parties in the event of a default. According to Sundance, section 12.2 (a)(iii) “addresses rights and obligations upon termination of the Lake Rights, recognizing that the Sundance Lake Rights may be terminated only by foreclosure under the PAPA Trust Deed.” We disagree.


To the extent that Sundance is arguing that the 1994 Agreements allow it to continue selling memberships[5] after being notified of its default and VLRC’s election to terminate, Sundance is wrong. While Sundance could not sell any new membership which would have access to the Lake following its default and VLRC’s election to terminate,[6] VLRC could not deny access to anyone who had purchased a membership with Lake Rights. The purpose of the Lake Rights Assignment Agreement was to prohibit VLRC, or another entity, from marketing any similar or competitive use of those portions of the Lake which VLRC owned and assigned to Sundance. Such prohibition ceased upon foreclosure.


Regarding the language in the PAPA Trust Deed, the 10-day cure period applied only if Sundance was in default on its payment of any indebtedness secured by the Trust Deed. There is no cure period for a default in the obligation to sell a minimum number of seasoned memberships under the PAPA.


DID SUNDANCE BREACH THE 1994 AGREEMENTS?


Sundance contends the evidence does not support the trial court’s finding that it breached the 1994 Agreements. Although the court listed several breaches of the agreements,[7] we need only find sufficient evidence of one breach to support the court’s conclusion that Sundance breached the 1994 Agreements.


Regarding the sale of 200 memberships to LePard, the trial court stated:


“In December of 1996, Sundance sold 200 memberships to a single individual named D. LePard. This transaction was characterized as an ‘investment’ by Mr. LePard. . . . The issue here is whether or not Kemper accepted this sale as being valid under the contract. The court finds that Kemper did not accept this sale. The best that can be said for Sundance on this issue is that Kemper was less than vigilant in enforcing its rights on this issue. Kemper informed Sundance that it questioned the validity of this sale and Kemper repeatedly asked Sundance for additional information regarding the sale and regarding the buyer so that Kemper could make a final decision regarding its position regarding this sale. This sought for information was never given to Kemper and Kemper never articulated a final position regarding the LePard transaction.


“The court finds that is not a situation where it can be said that Sundance detrimentally relied on Kemper’s inaction or indecision. Sundance knew that Kemper was questioning these sales. Sundance knew that it ran the risk of it not meeting the minimum sales quota if the LePard sales were disqualified. Sundance can point to no action it would have taken to generate more sales if only it had known that the LePard sales would not count. The LePard transaction took place in mid-December of 1996. The testimony is unanimous that sales to the general public were non-existent in the last two weeks of December. Sundance does not even assert that these 200 sales could have been made up by other means if only it knew that Kemper would reject them.


“An argument could be made that Kemper waived any failure to meet the 1996 sales quota by not terminating at any time during 1997. The problem with such an argument is that the sales quotas were cumulative. If Sundance met the 1997 cumulative total without the use of the LePard sales, then this argument would be a serious one. However, the facts make such an argument moot.


“. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


“As explained above, Kemper/[VLRC] had no guarantee of receiving a specific sum from Sundance for the sale of Lake Rights because Kemper/[VLRC’s] income was dependent on the number of memberships sold by Sundance, and the payment performance of the new members. If Sundance quit selling, Kemper/[VLRC] received no compensation for the sale of its principle asset. It is therefore obvious that the minimum sales quota was a material term of the agreements.


“[VLRC] asserted in trial that each and every membership sale that was not in strict compliance with the terms of the PAPA should not be counted in evaluating compliance with the minimum quota. For reasons stated above, the court finds that Kemper[/VLRC] waived any defect of noncompliance for many of the issues raised by [VLRC] in 1999. These would include: membership contract terms of over 10 years, lack of approved disclosure form, sales with less than 10% down payment; extension of the time in which a membership may become ‘seasoned,’ and cash sales of a price less than the minimum price set forth in the agreements.


“For reasons set forth above, the court finds no waiver on the issue of sales other than individual sales to individual members of the general public. Therefore, [VLRC] was free to assert that the D. Le[P]ard sales and the December 1998 sales should not be counted when assessing Sundance’s compliance with the minimum sales quota.


“The court finds that both the D. LePard sales and the December 1998 sales are in violation of the agreements and are therefore not valid sales for purposes of the minimum sales quota. [VLRC] asserts that these are ‘sham’ sales. The court agrees. While the evidence is in conflict, the court finds that the investor D. LePard, in fact, made no investment whatsoever. He merely consented to his name going on a contract that obligated him to pay millions of dollars secure in the knowledge that he would never be forced to pay a dime. The court reaches the same conclusion regarding the December 1998 sales. These were not sales at all. They were paperwork manipulations designed to look like sales.


“Sundance asserts that the December 1998 sales should be counted because [VLRC] has received his appropriate share of the money from these transactions. Even if the court agrees that, to date, [VLRC’s] income from these sales is in full compliance with the agreements, this does not make the sales valid. [VLRC] can look forward to income from these sales only as long as Sundance decides to front the money for the ‘sham’ buyers. At first, Sundance fronted the money only long enough to qualify the sales as ‘seasoned.’ After the seasoning threshold was met, the payments stopped. Under threat of pending litigation, the payments started again. Should this court find the sales valid, the court is confident the payments would stop. None of the December 1998 sales represented a real candidate to become one of the 3,000 non-default sales necessary to close out Phase One of the agreements. None of the December 1998 sales represented a true opportunity for [VLRC] to fully realize [its] share of a true sale. Kemper/[VLRC] agreed to bear the risk of an arms-length purchaser ultimately defaulting. They did not agree to bear the risk of letting Sundance manipulate sales figures by internal bookkeeping transfers.


“It is not a coincidence that all the ‘sham’ sales occurred in December of years that Sundance was behind in its sales quota. Sundance knew that without the ‘sham’ sales, it would not meet the quota. As the court finds that these sales are invalid, the court also finds that Sundance was in material breach of the agreements by failing to meet the cumulative sales quota for 1996, 1997, and 1998.”


In challenging the trial court’s decision, Sundance contends that the court “did not have the discretion to disregard the uncontradicted testimony of Kemper’s representative, [Dennis] Klimmek, or Sundance’s representatives, [Helen] Graboski and . . . Clawson.” Sundance argues that the 1994 Agreements provided that any sale that was “seasoned” would be counted towards Sundance’s sales quota. Regarding the LePard sales, Sundance highlights the testimonies of Dennis Klimmek (“Klimmek”), former vice-president and General Counsel of Kemper, Helen Graboski (“Graboski”), and Clawson, which support Sundance’s position that Kemper accepted the LePard sales as valid sales.[8]


In contrast, VLRC points to the PAPA, which requires that all amendments or additions be in writing. Regarding Klimmek’s testimony, VLRC argues that “the court indicated its general disbelief of . . . Klimmek’s testimony on another area of breach by asking the witness if Kemper was in the habit of permitting oral modifications to million dollar deals and by further asking if it was possible that there was no such agreement. . . . On cross-examination, . . . Klimmek testified that he never orally entered into a modification of the Sundance agreement and that it would not have been Kemper’s business practice to enter into oral modifications. . . .” Klimmek further testified that all decisions pertaining to the Lake had to come from Jeff Minkler or Dennis Chiniaeff and they had to be in writing. Klimmek also stated that Kemper had requested certain information from Sundance as a condition to accepting the LePard sales, and that he did not recall ever receiving such information.


Abreu testified that Diane LePard is a friend of hers. The LePards resided in Pincher Creek, Canada. The LePard accounts were delinquent by over $1,000,000. However, Sundance took no action to collect the accounts.


Generally, uncontradicted evidence cannot be arbitrarily rejected; however, the demeanor and credibility of witnesses is a determination inherently reserved to the trier of fact. (Felgenhauer v. Soni (2004) 121 Cal.App.4th 445, 449; Sprague v. Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1028; Bohn v. Gruver (1931) 111 Cal.App. 386, 393.) Clearly, given the discrepancy in the testimonies regarding the LePard sales, the trial court was entitled to disregard the testimonies that Kemper accepted such sales in favor of finding that the sales were a sham, thus constituting a material breach of the 1994 Agreements. Given the record before this court, we find substantial evidence in support of the trial court’s decision.


THE AWARD OF $15,264,211.90


The trial court found that Sundance is indebted to VLRC in the amount of $15,264,211.90. Following the foreclosure sale under the PAPA Trust Deed, any unpaid portion of this amount will become a deficiency enforceable against Sundance. The trial court has reserved jurisdiction for purposes of calculating the amount of the deficiency and entering judgment thereon once the foreclosure sale takes place.


According to Sundance, “the trial court erred as a matter of law in at least three respects when it issued the award of the PAPA Trust Deed Amount and declared the amount could be converted into a deficiency judgment.” Sundance argues that: (1) the remedy of foreclosure was not available because VLRC failed to allow a cure period and prematurely declared a termination of its agreements with Sundance, preventing Sundance from conducting sales for a period of four and one-half years (October 1999 through March 2004); (2) the PAPA Trust Deed Amount cannot be deemed a deficiency following foreclosure because the antideficiency provisions of Code of Civil Procedure section 580b prohibit any deficiency under the PAPA Trust Deed, because it is a purchase money trust deed; and (3) the trial court double counted at least 1400 Phase One memberships and erroneously included 2000 Phase Two memberships in calculating the PAPA Trust Deed Amount.


A. Foreclosure Remedy Unavailable Because of Failure to Allow a Cure Period.


Regarding Sundance’s claim that foreclosure was unavailable because VLRC failed to allow a cure period and prematurely declared a termination of its agreements with Sundance, preventing Sundance from conducting sales for a period of four and one-half years (October 1999 through March 2004), as we have previously found, VLRC was within its rights when it terminated its agreements with Sundance based on Sundance’s breach by failing to comply with the minimum sales quota. Furthermore, there was no requirement that VLRC give Sundance a period in which to cure such default.


B. Code of Civil Procedure Section 580b.


Regarding Sundance’s claim that the PAPA Trust Deed is a purchase money trust deed, we find such contention to be misplaced.


“Foreclosure by sale, long available as a remedy for vendee’s breach of a land sale contract [citations], was legislatively recognized in 1935 in the following provision of Code of Civil Procedure section 580b: ‘No deficiency judgment shall lie in any event after any sale of real property for failure of the purchaser to complete his contract of sale, or under a deed of trust, or mortgage, given to the vendor to secure payment of the balance of the purchase price of real property . . . .’ The provision applies to land sale contracts used as a security device, as distinct from marketing contracts. [Citations.] It not only prohibits deficiency judgments but also bars the seller from suing for the remaining balance without first going against the security. [Citation.]” (Petersen v. Hartell (1985) 40 Cal.3d 102, 115, fn. 5.) “If the security is insufficient, [the seller’s] right to a judgment against the debtor for the deficiency may be limited or barred by section[ ] . . . 580b . . . of the Code of Civil Procedure.’ [Citation.]” (Walker v. Community Bank (1974) 10 Cal.3d 729, 733.)


“Courts have determined that [Code of Civil Procedure ]section 580b applies to sold-out junior lienors holding a purchase money mortgage or deed of trust. However, the statute automatically applies only to the standard purchase money mortgage transaction in which the vendor of real property retains an interest in the land sold to secure payment of the purchase price. If the transaction in question is a variation on the standard purchase money mortgage or deed of trust transaction, section 580b applies only if the factual circumstances of the transaction come within the purposes of the statute. [Citations.]” (Boyle v. Sweeney (1989) 207 Cal.App.3d 998, 1001.)


Relying on the antideficiency statute, Sundance contends that “the PAPA and the PAPA Trust Deed, together with the other 1994 Agreements, operate as an installment sales contract where Sundance, by meeting its sales quotas, acquires rights to, and eventually owns, the . . . parcels [E, F and C] described in the separate 1994 Agreements.” We reject this claim.


As VLRC points out, the obligation on the part of Sundance to meet membership quotas was not part of the purchase price for Parcels E and F. Instead, it was a contractual performance obligation contained in a series of agreements between the parties. The price for the purchase of parcels E and F is set forth in the Purchase Agreement. Section 1.45 states that the purchase price shall be $450,000. The Purchase Agreement provided that parcels E and F would be transferred to Sundance sometime after close of escrow in exchange for a note on those parcels secured by a trust deed. However, the trust deeds on which the trial court awarded the deficiency judgment are other trust deeds, namely, one on Parcel E only, and the other on Sundance’s Access Easement.


The promissory note for the purchase of Parcels E and F is for the entire purchase price of $450,000. The note provides for the accrual of interest “at 5 percent per annum for a period of five years, with payments to commence thereafter at an interest rate of 2% over Wells Fargo Bank prime on an amortized basis over a 15 year period.” The deed of trust which secures the $450,000 note is a standard purchase money deed of trust.


Given the above, we agree with VLRC’s argument that the membership sales obligations contained in the PAPA are separate from the purchase money obligations for the purchase of Parcels E and F. Sundance’s performance obligations were secured by trust deeds on various easements granted to Sundance around the Lake, as well as any future improvements made on the property by Sundance. The trust deed securing such performance obligations was recorded on January 19, 1995.


Moreover, as the Agreements provide, Sundance could not purchase Parcels E and F until after it had sold the initial 300 memberships. The membership sales themselves were not consideration for the purchase of Parcels E and F. Instead, the sale of 300 memberships triggered the date upon which Sundance could purchase Parcels E and F. The record suggests that such purchase occurred on or about February 7, 1996.[9] In connection with that sale, and again pursuant to the Agreements, the parties executed a second deed of trust on Parcel E only, which secured the same membership sales obligations of the PAPA as were secured by Exhibit 90. This deed of trust was recorded on February 7, 1996, after the recordation of the $450,000 deed of trust. Thus, we agree with VLRC that Code of Civil Procedure section 580b does not apply.


Alternatively, VLRC argues that “even to the extent that the Parcel E deed of trust could[,] by some stretch[,] be characterized as a purchase money obligation, under no circumstances could it be viewed as a standard transaction.” We agree. As VLRC points out, “what the parties contemplated was a venture on the part of Sundance whereby it would sell large numbers of memberships, engage in heavy use of Kemper’s[/VLRC’s] adjoining property, and thereby create a valuable enterprise which would bring large profits to both parties.” Prohibiting a deficiency judgment in this case will not advance the purposes of Code of Civil Procedure section 580b, i.e., “(1) discouraging speculative land sales and the overvaluation of properties, and (2) preventing the aggravation of economic downturns and declining property values that would result if purchasers who had lost their properties were also liable for the full purchase price.” (Conley v. Matthes (1997) 56 Cal.App.4th 1453, 1461.)


C. Calculation of Phase One and Phase Two Memberships.


In assessing the damages figure of $15,264,211.90, the trial court accepted VLRC’s view and looked to the PAPA Trust Deed, which provided the formula for calculating the amounts owed based on sold memberships. Thus, damages were composed of three parts: (1) 35 percent of the nondistributed revenue for the Phase One memberships actually sold; (2) 35 percent of the revenue which would have been realized from the unsold Phase One memberships; and (3) 35 percent of the revenue which would have been realized from the unsold Phase Two memberships. On appeal, Sundance contends the number of sold Phase One memberships was miscalculated, and that the unsold Phase Two memberships should not have been included.


In calculating the amount of nondistributed revenue resulting from the sold Phase One memberships, VLRC and the trial court looked at AFM’s October 2003 report of accounts receivable, which showed an amount of $10,323,695.67. The court multiplied that number by 35 percent, to arrive at the sum of $3,613,293.48. Sundance claims that this method of calculation is flawed because (1) there is no evidence to support how the total figure for the accounts receivable was generated; and (2) it “fails to comply with the calculation method of the PAPA Trust Deed.” However, Sundance does not offer any argument in its opening brief as to why the total accounts receivable reflected in Exhibit 723 should not be used. Its reply brief likewise asserts that there is no evidence to support the figure in Exhibit 723 without any reference to the evidence offered at trial, reference to this point being argued at the trial level, or any analysis of how the figure was, or should have been, derived. A “‘. . . reviewing court is not required to make an independent, unassisted study of the record in search of error . . . .’ [Citations.]” (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1115.) Instead, we may treat an issue as waived “when an appellant makes a general assertion, unsupported by specific argument, . . .” (People v. Stanley (1995) 10 Cal.4th 764, 793; Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 [When an appellant asserts a point but fails to support it with reasoned argument and citations to authority, the appellate court may treat the issue as waived.].)


Moreover, the statement of decision, coupled with VLRC’s Trial Brief Re: Amounts Due on Judicial Foreclosure, reflect that the trial court was aware the language in the PAPA Trust Deed, and applied it accordingly. Sundance, having failed to demonstrate that the trial court was incorrect in its application, has not met its burden of proof on appeal, and thus has not shown that this claim has merit.


Regarding the number of sold Phase One memberships, Sundance acknowledges that the “trial court adopted a number based on Mr. Mack’s lowest total of what he deemed to be ‘qualified’ sold memberships.”[10] Nonetheless, Sundance points to other evidence in the record that would have supported a higher number of qualifying sold memberships, such as AFM’s calculation of 1990. However, our task on appeal is not to reweigh the evidence. Rather, we merely determine whether the record contains substantial evidence, contradicted or uncontradicted, to support the judgment. (McMahon v. Albany Unified School Dist. (2002) 104 Cal.App.4th 1275, 1282.) It is well established that “the trier of fact is the exclusive judge of credibility and may reject expert testimony in favor of nonexpert testimony or other evidence” that contradicts or rebuts the expert’s testimony. (Lauderdale Associates v. Department of Health Services (1998) 67 Cal.App.4th 117, 127.) Thus, the trial court could reasonably reject AFM’s calculation and accept that of Mr. Mack.


Finally, regarding the inclusion of the 2000 unsold Phase Two memberships, Sundance contends that the evidence shows that “Kemper and Sundance agreed, well before VLRC was assigned Kemper’s rights, that Phase [Two] would be abandoned.” Furthermore, Sundance maintains that its “rights to sell [Phase Two memberships] were prematurely terminated.”


Regarding the abandonment claim, Sundance references a letter from Kemper to Clawson which includes the following: “This letter shall serve as formal notice, under provisions of Section 5.1(c) [sic] of the [PAPA], that [Kemper] is not going to offer the Butterfield RV Park to Sundance under the various options in the [PAPA] but instead is going to sell the property to one or more third parties. Such sale will contain the appropriate prohibitions against competition with Sundance as are required in the agreements.” Sundance argues that this language supports a finding that Phase Two was abandoned. We disagree.


Section 5.1 of the PAPA provides that “[a]t its sole discretion at any time on or before the Phase One End Date, [Kemper] may elect: . . . (C) to use the Butterfield RV Park Site for any purpose other than for the sale of memberships similar to or competitive with the Memberships sold hereunder.” The PAPA further provides that if Kemper elects to use the Butterfield RV Park for other purposes, then “[t]he Phase Two End Date shall be the earlier to occur of: (A) the earliest date at which there are Two Thousand (2,000) Seasoned Phase Two Memberships, none of which are in default, or (B) four (4) years from the Phase One End Date.” Accordingly, the fact that Kemper chose to use the Butterfield RV Park Site for other purposes did not mean that Phase Two was being abandoned. Instead, it merely meant that “the Butterfield RV Park Site shall not become part of the Covered Property.”


Regarding Sundance’s claim that VLRC prematurely terminated Sundance’s right to sell memberships, as we stated above, it was Sundance that breached the 1994 Agreements, not VLRC.


LAKE RIGHTS FEES


The judgment ordered Sundance to pay quarterly Lake Rights license fees to VLRC commencing January 1, 2004, in the amount of $59,325. Sundance challenges this award to VLRC by claiming that: (1) Mr. Mack “erroneously totaled the number of memberships for purposes of” calculating the Lake Rights fees owed by Sundance; and (2) the obligation to pay such fees to use the Lake does not arise until after judicial foreclosure when VLRC offers the Lake Rights Use License to Sundance.


Regarding Mr. Mack’s calculation of the fees owed, Sundance argues that Mr. Mack erroneously included the LePard and “insider sales” in his calculation. However, Mr. Mack used Sundance’s representations regarding the number of members who had an ongoing right to use the Lake (and who were not in default) in calculating this figure. It was Sundance’s responsibility to maintain an accurate count of the number of viable memberships. Nonetheless, we note that the Judgment includes the requirement that an accounting be done. This accounting will be of “all existing memberships to determine if they shall be declared in default and terminated . . . .” To the extent that the number of total viable memberships determined by the accounting differs from the number used by Mr. Mack, the amount of fees owed for the Lake Rights Use License will change. Because we are remanding the matter to determine whether there is a viable Lake Rights Use License Agreement, the calculation of the fees owed can be addressed at the same time. However, as for Sundance’s challenge to Mr. Mack’s calculation of $15.30 per quarter for each membership, we find support for this figure in the Sundance Lake Rights License Agreement attached to PAPA as exhibit 6.


The judgment entered by the trial court was for judicial foreclosure. As VLRC points out, the trial was heard and all matters were submitted to the court as of January 16, 2003. Although VLRC requested an award of Lake Rights fees for a period from the time of default through January 1, 2004, the trial court denied such request. While refusing to award any license fees prior to January 1, 2004, the trial court did provide for postforeclosure relief. Nonetheless, Sundance further claims that the obligation to pay these license fees cannot arise until VLRC tenders a perpetual license to Sundance pursuant to PAPA, section 12.2(a)(iii). Looking at the Judgment, it appears that the trial court assumed that a perpetual license had been granted and thus it awarded license fees to VLRC. While the record contains the original Lake Rights License Agreement that was entered into in 1994, it is unclear whether this agreement remains viable given the lawsuit. Accordingly, we will reverse the award of fees and remand the matter to the trial court for further proceedings. If a viable Lake Rights License Agreement exists between VLRC and Sundance, then the trial court may reinstate the award of fees. If there is no agreement, then the award is contingent upon the execution of a viable Lake Rights License Agreement.


MEMBERSHIP SALES AFTER OCTOBER 19, 1999


Following VLRC’s termination of the 1994 Agreements with Sundance, Sundance continued to sell memberships, calling them “recycled” sales of memberships (pre-Kemper Memberships) that existed prior to the date of the 1994 Agreements. In its Statement of Decision, the trial court found the following:


“After receiving the formal notice of termination, Sundance continued selling memberships that included the right to use Vail Lake. Because the court finds that [VLRC] was entitled to terminate the contracts due to Sundance’s material breach, these post-October 12, 1999, sales were unauthorized.


“Sundance maintains that the post-October 1999 sales were appropriate sales made outside the authority of the [1994 Agreements]. Sundance asserts that Kemper gave Sundance the unbridled discretion to bestow Lake Rights to its pre-1994 members. Sundance also asserts that the post-October 1999 sales were not really new sales at all. Sundance asserts that they were transfers of pre-1994 memberships that had gone into default.


“The court finds that the [1994 Agreements] do not directly address the subject of Sundance’s ability to recycle (with Lake Rights) pre-1994 memberships (that were originally sold without Lake Rights) that have gone into default. Parol evidence has been submitted to the effect that Kemper understood such activity could and would take place. The court finds such testimony to be admissible as the [1994] [A]greements are not clear on this subject. The court also finds such testimony to be unworthy of belief. The entire deal was structured in such a way that only one of two things would occur: Either Sundance meets all of its obligations and therefore ultimately obtains clear title to the Lake Rights; or Sundance would not meet its obligations, go into default, and lose the right to sell Lake Rights. If either of those two scenarios occurred, Sundance’s ability to recycle defaulted pre-1994 memberships would be moot. This subject was not included in the contracts because neither side envisioned a situation where the subject would become relevant. Lake Rights belonged to Kemper. Sundance acquired no interest in Lake Rights other than what is articulated in the [1994] [A]greements. Since the agreements do not give Sundance the authority to add Lake Rights to recycled defaulted pre-1994 memberships, Sundance did not have authority to do so.


“. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


“The original parties negotiated a 35/65 split of membership sale proceeds. Because [VLRC] has affirmed its obligation to permit these authorized members to use the Lake, the court finds that this 35/65 split should be applied to these sales.”


On appeal, Sundance challenges the findings and order of the court. According to Sundance, “the trial court erred in arbitrarily rejecting the uncontradicted parole [sic] evidence by both contracting parties that Sundance was not prohibited from selling [p]re-Kemper Memberships.” Having found that the 1994 Agreements failed to address the issue of “Sundance’s ability to recycle (with Lake Rights) pre-1994 memberships (that were originally sold without Lake Rights) that have gone into default,” the trial court allowed parol evidence via the testimony of David, Kemper’s vice-president in 1994, who was responsible for negotiating the contracts. According to David, Kemper considered the issue of whether Sundance would be allowed to continue to sell Pre-Kemper Memberships in addition to Kemper Memberships and eventually decided that Sundance would be allowed to do so.


David testified: “[T]his was a point of concern and discussion amongst the Kemper company officials and myself. And again, we think we ended up with a transaction that was structured in such a way that . . . it provides these hurdles for Sundance to make certain membership sales in order to secure further rights. And while . . . we recognized [Sundance] needed a base of money to manage not only his existing facilities, which are important, the lake rights themselves . . . would not generate in our opinion after research enough cash flow to continue doing that, but the synergy of both these things, the existing campground, horses, and everything that Sundance had would create a synergism that would create a cash flow we could piggyback onto.


“[Sundance] had to maintain [the] existing facilities. . . . And we also knew that [Sundance] had to make hurdles, [it] had to make [its] sales quotas or [it] would never secure permanent rights to the lake property. And we figured [Sundance] would . . . know how to manage what was . . . what.


“We wanted the cash flow. [Sundance] knew [it] had to get through the hurdle rates to secure the property and we left it to [Sundance].


“. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


“We discussed it at length . . . . And we had to analyze the structure of the agreement. And it added one of the more complicated aspects of the transaction, which was Kemper reserved the right to go into competition with Sundance. And we felt like that . . . in conjunction with the hurdle rates and the incentive for him to turn as many memberships into the Kemper cash flow as possible, and the threat of having once establishing a valid business model capable of creating cash flow that we could come in and under new proof of the business model, maybe the Butterfield RV Park was, in fact, economically capable of being put into play and sell memberships on the lake, which would have completely diminished the value of [Sundance’s] efforts and would have given us an opportunity to . . . copy his model.


“So we thought that the combination of the incentive for [Sundance] to acquire more land and eventually secure the lake completely for [itself] and the threat of competition once [it has] invested all this time and effort and proven the business model, we figured that those two things would make him give the lion’s share of the memberships to make his quotas and only resell what he had to to maintain his cash flow necessary for his employees, maintenance of the property, et cetera.”


Based on David’s testimony, Kemper decided not to prohibit Sundance from selling pre-Kemper Memberships because it recognized that Sundance needed a “base of money” to manage its existing facility. Thus, even after consummation of the 1994 Agreements, Sundance was free to sell pre-Kemper Memberships without remitting any proceeds to Kemper because Kemper had thought that the 1994 Agreements had sufficient incentives built in to make sure adequate sales of Kemper Memberships were made before Sundance sold pre-Kemper Memberships. While Kemper wanted “cash flow” from this deal, it was mindful that Sundance needed its base of 1810 members to fund its operations. Thus, the sales of pre-Kemper Memberships were described as “backfilling” the 1810 memberships, or, as Sundance described it, “transferring” the 1810 memberships.


Nonetheless, the court discredited David’s testimony. Instead, it reasoned that because the 1994 Agreements did not give Sundance the authority to add Lake Rights to the recycled, defaulted pre-Kemper Memberships, the court found that “Sundance did not have authority to do so.” Sundance argues that this finding is a result of the trial court misinterpreting the Agreements. Sundance maintains that “Lake Rights were conferred on [p]re-Kemper Memberships; therefore, when they were transferred by sale to a new owner (‘recycled,’ as the court noted), they already had Lake Rights.”


In response, VLRC argues that (1) its termination of the Agreements in October 1999 resulted in a termination of Sundance’s right to continue to engage in membership sales of any kind; and (2) regardless of its termination of the Agreements, VLRC was entitled to 35 percent of the proceeds from all membership sales pursuant to the 1994 Agreements. We agree with Sundance.


The PAPA defines pre-Kemper Memberships as “those Memberships that are sold, and not in default, as of the Effective Date of the Purchase Agreement; provided, however, that any such Membership for which, as of the Effective Date, (a) less than ten percent (10%) of the Membership Price has been paid, and/or (b) fewer than three (3) monthly payments on the related installment sale note have been made, shall not be counted as an Existing Membership unless and until the conditions in both clauses (a) and (b) are satisfied.” In order to keep track of the valid pre-Kemper Memberships which were available for transfer, the PAPA provides that within 10 days following the effective date of the agreement, Sundance was required to “deliver to [Kemper] a roster of Existing Memberships indicating the name and address of each Member and indicating which existing Memberships, if any, are in default as of the Effective Date. [Kemper] shall have ninety (90) days from the Effective Date to verify the information on such roster through an audit of Sundance’s books and records.”


Regarding the transfer of a pre-Kemper Membership, the PAPA provides that “[n]othing in this PAPA shall prohibit Sundance at any time from facilitating the transfer of previously sold, non-terminated Memberships to new owners as a service to the transferor Member for a fee not to exceed ten percent (10%) of the transfer price. However, no such transfer shall be counted as the sale of a new Membership for any purpose, including without limitation, the satisfaction of minimum sales requirements pursuant to Section 6.2 or the determination of either the Phase One End Date or Phase Two End Date.” Thus, as David testified, the incentive for not “backfilling” or “transferring” a pre-Kemper Membership was the fact that it would not be counted toward the minimum sales requirements in either Phase One or Phase Two. Moreover, Klimmek, another former vice-president and general counsel of Kemper, testified that Kemper’s Letter of Intent regarding the 1994 Agreements “does seem to contemplate the existing members would not be resold.” However, such requirement was never added to the 1994 Agreements.


Because the record supports a finding that the issue of “backfilling” was initially forbidden in the letter of intent, and then dropped from the subsequent contracts, we, contrary to the trial court’s ruling, find that Kemper chose to exempt such sales from any obligation to share proceeds with Kemper. Accordingly, we reverse the trial court’s ruling awarding damages for any sale or transfer of any pre-Kemper Membership. However, we note that the number of pre-Kemper memberships that could be transferred (or “backfilled”) is limited, i.e., only those pre-Kemper memberships (no more than 1810) that fit the description of being an Existing Membership pursuant to the PAPA. Thus, we must remand this issue to the trial court for further proceedings after the accounting has been conducted as ordered in the judgment. If it is discovered that Sundance transferred more pre-Kemper memberships than it was entitled to pursuant to the 1994 Agreements (Exh. 82, § 1.8), then the trial court may order damages based on the number of memberships sold after October 19, 1999, which were not valid transferred (or “backfilled”) pre-Kemper memberships.


DISMISSAL OF CROSS-COMPLAINT


Sundance concedes that the “court’s findings and orders with respect to the complaint dispose of the issue of the cross-complaint.” However, in the event this court reverses the judgment on the complaint, Sundance contends reversal of the judgment on the cross-complaint necessarily follows. Because we have only reversed the judgment in part, and there is no argument as to the viability of the cross-complaint in the event of a partial reversal, we deem any issue regarding the judgment on the cross-complaint to be waived.


DISPOSITION


We reverse the award of Lake Rights License Fees and remand the matter to the trial court for a determination of whether a viable Lake Rights License Agreement exists between VLRC and Sundance. Should such agreement exist, the trial court may reinstate the award of fees. If there is no agreement, then the award is contingent upon the execution of a viable Lake Rights License Agreement. We reverse the award of damages resulting from Sundance’s sale or transfer of any Pre-Kemper memberships which were not counted toward the minimum sales requirements in either Phase One or Phase Two and we remand the matter for further proceedings as discussed in this opinion. In all other respects, we affirm the judgment. Each party shall bear its own costs.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS



HOLLENHORST


J.


We concur:


RAMIREZ


P.J.


MCKINSTER


J.


Publication courtesy of San Diego pro bono legal advice.


Analysis and review provided by Poway Apartment Manager Lawyers.


[1] Although there have been a series of entities associated with Kemper Insurance, including KRDC, Inc. (“KRDC”), to simplify matters, we will use “Kemper” to refer to any of those entities.


[2] Clawson’s daughter.


[3]Default. Each of the terms, provisions, conditions and covenants of Sundance under this Assignment is a material consideration for this Assignment. If Sundance shall be in breach of any of its obligations under this Assignment and fail to cure such breach by the earlier of (a) thirty (30) days after written notice from [Kemper] specifying the nature of such breach, or (b) a foreclosure under the PAPA Trust Deed, then Sundance shall be in default hereunder. No termination or expiration of this Agreement shall relieve Sundance of its obligations to perform those acts required to be performed either prior to or after its termination.”


[4]Foreclosure under PAPA Trust Deed. If a default by Sundance under any of the Secured Agreements, including this Assignment, is followed by [Kemper] foreclosing on the PAPA Trust Deed, then the rights and obligations of

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