Lough v. Lough
Filed 7/30/12 Lough v. Lough CA2/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
ONE
RICHARD STEVEN LOUGH,
Defendant,
Cross-complainant and Appellant,
v.
RODGER LOUGH,
Defendant,
Cross-defendant and Respondent.
B229119
(Los Angeles
County
Super. Ct.
No. NC050332)
ORDER MODIFYING OPINION
AND
DENYING PETITION FOR
REHEARING
[CHANGE IN
JUDGMENT]
THE COURT:
It is
ordered that the opinion filed herein on June 28, 2012 be modified
as follows:
1. On page 18, at the conclusion of
C. The
Judgment Incorrectly Refers To “Net Proceeds” Rather Than “Net Profits
Richard argues
that the trial court erred in awarding Rodger a success fee based on “net
proceeds” rather than on “net profits.”
He notes that Rodger’s expert, Hugh Saddington, never stated “that the
value of Rodger’s work should be based on a percentage of net sales price or
total stipulated value,” but instead only opined that the value should be
determined as a percentage of net profits.
Richard further argues that compensating Rodger based on a percentage of
net proceeds would go beyond compensating Rodger for the net value created by
Rodger’s efforts. Richard argues that
determining the net value Richard and Rodger receive from a sale of the Malibu
Acres requires the deduction of the costs of acquisition, actual improvement
costs, and actual carrying costs.
Richard
extends his argument to the Flint
and Pacific View properties. The
judgment awarded Rodger a 20 percent fee on the $800,000 stipulated value of
the Pacific View property. The judgment
awarded Rodger a 10 percent fee on the $500,000 stipulated value for the 321 Flint
and 323 Flint lots. Richard’s argument, essentially, is that
awarding a success fee on the stipulated value fails to include the costs
associated with the properties.
Accordingly, it includes value that Rodger did not add through his
contributions. We agree with respect to
the Malibu Acreage because the value of that property, unlike the Pacific View
properties and Flint Lots, has yet to be determined.
“Net
proceeds” are defined as “The amount received in a transaction minus the costs
of the transaction (such as expenses and commissions).” (Black’s Law Dict. (8th ed. 2004) p. 1242,
col. 1.) “Net profit,” on the other
hand, is defined as “Total sales revenue less the cost of the goods sold and
all additional expenses.” (Black’s Law
Dict. (8th ed. 2004) p. 1247, col. 1.)
In other words, net profits will necessarily be less than net proceeds
in any given transaction because it includes the cost associated with goods
sold.
The record
supports a finding that the work Rodger did on the Malibu Acres, Pacific View,
and Flint lots was the type of
entitlement work justifying a developer’s receipt of a “success fee” portion of
the net profits realized from the development.
The referee relied on the analysis of Rodger’s experts, Hugh Saddington
and John Andreotti, as well as that of Richard’s expert, John Tollman, in
reaching his recommendation on success fees.
However, as Richard notes, Saddington only stated that the value of
Rodger’s work should be based on success fees determined as a percentage of net
profits. In calculating Rodger’s success
fee on the Malibu Acres, Saddington deducted costs in calculating the “20 percent
profit share.” Likewise, with the
Pacific View property, Saddington’s analysis “allocated 20 percent profit
share” to Rodger. Saddington did the
same analysis with the Flint lots,
allotting Rodger a “20 percent profit share” in these lots. Saddington’s use of profits is reflected in
his opinion summaries, which deduct purchase price and other costs in
calculating Rodger’s success fee.
None of the other
experts used net proceeds in calculating Rodger’s success fee either. Andreotti estimated that in such a project as
the Malibu Acres, he “would be looking for a number 30 percent plus of the
profit” for his percentage participation.
John Tolman agreed with Andreotti that a success fee “of 30 percent of
the profit upon sale” was not atypical.
Tolman additionally testified that Saddington’s accounting failed to
account for costs that should have been deducted from the cost of sale “in
order to determine what the real profit was.”
None of the experts based success fees on net proceeds. The purpose of using a success fee was to
award Rodger’s “sweat” contributions. A
net proceeds valuation would include the cost of acquiring, improving, and
holding the properties, meaning that Rodger would be compensated for value that
his “sweat” contributions did not create.
The record makes clear that the trial court’s use of the term “net
proceeds” in the judgment to the Malibu Acreage was an inadvertence.
However, the
error impacts only the Malibu Acreage.
The judgment provides that with respect to the Pacific View property,
“[p]ursuant to the parties’ agreements as placed on the record on May 5, 2008
and the findings and recommendations of the Referee as heretofore adopted by
the Court, [Rodger] is entitled to receive monetary credit for his non-monetary
contributions to the Pacific View House equal to 20% of $800,000 (the parties’
stipulated value for the Pacific View House), and is entitled to credit as
against [Richard] for one-half that amount, or
$80,000 . . . .”
Similarly, the judgment provides with respect to the 321 and 323 Flint
Lots that “[p]ursuant to the parties’ agreements as placed on the record on
May 5, 2008 and the findings and recommendations of the Referee as
heretofore adopted by the Court, [Rodger] is entitled to receive monetary
credit for his non-monetary contributions to the 321 Flint and 323 Flint [lots]
equal to 10% of $500,000 (the parties’ stipulated value for the 321 Flint and
323 Flint [lots]), and is entitled to credit as against [Richard] for one-half
that amount or $25,000 . . . .” Although the parties agreed to split the
properties and sell them, pursuant to the judgment, the parties were not
ordered to sell the properties in order to realize “net profits.” As a result, because there is no sale to take
place with respect to either of these properties in order to divide “net
profits,” the referee used the stipulated values of the properties as a basis
for Rodger’s success fee.
Therefore, the
trial court must modify the judgment to use the term “net profits” instead of
“net proceeds” in delineating Rodger’s success fee on the Malibu Acreage.
2. On page 26, the third full paragraph
beginning “Pursuant to section 685.010” and on page 27, the first two full
paragraphs are deleted and the following is inserted in its place:
Code of Civil
Procedure section 685.010, subdivision (a) provides that “[i]nterest accrues at
the rate of 10 percent per annum on the principal amount of a money judgment
remaining unsatisfied.” (Code Civ.
Proc., § 685.010, subd. (a).) Thus,
in order for postjudgment interest to run on any judgment, that judgment must
be a money judgment. Code of Civil
Procedure section 685.020, subdivision (a) provides that “interest commences to
accrue on a money judgment on the date of entry of the judgment.” (Code Civ. Proc., § 685.020, subd. (a).) The trial court’s judgment was not a money
judgment because it was too uncertain to be enforced. Accordingly, section 685.020, subdivision (a)
does not apply until the judgment can be enforced—i.e., after the sale of the
Malibu Acres. Accordingly, the opinion
should be modified to affirm the trial court’s determination that postjudgment
interest should run from the date of the close of escrow on the Malibu Acres.
Code of Civil
Procedure section 680.270 defines a “money judgment” as “that part of a
judgment that requires the payment of money.”
(Code Civ. Proc., § 680.270.) The
amount of any judgment should be “computed and stated in dollars and cents,
rejecting fractions.” (Code Civ. Proc.,
§ 577.5.) Furthermore, “a judgment for
money must be stated with certainty and should specify the amount.” (Kittle
v. Lang (1951) 107 Cal.App.2d 604, 612; In
re Estate of Kampen (2011) 201 Cal.App.4th 971, 986.) The question is whether the trial court’s
judgment on the Malibu Acres may be considered a money judgment. If it is not a money judgment, then
postjudgment interest necessarily cannot accrue on the judgment, even if
judgment has been entered.
In
partnership whereby plaintiff would devote his “full time to the interest of
the business” in exchange for a one-half interest in the business and a $50 a
week salary. (Kittle v. Lang, supra,
107 Cal.App.2d at p. 607.) Defendant
refused to comply with the agreement and the partnership dissolved. (Ibid.) As part of its findings, the trial court
“found that defendant had collected ‘certain sums of money on behalf of
plaintiff, as more particularly appears from defendant’s testimony herein,’ and
that plaintiff is entitled to any and of said sums of money so collected by
defendant.” (Id. at p. 608.) The court
held that this “portion of the judgment [was] too indefinite and uncertain to
be enforced.” (Id. at p. 613.) In reaching
this holding, the court declared that the rule for “a judgment of money” is that
the judgment “must be stated with certainty and should specify the
amount.” (Id. at p. 612.)
Rodger further
cites Khazan v. Braynin (2012) 206
Cal.App.4th 796 for the proposition that interest should not start to run until
the dollar amount of the payment obligation can be calculated and
determined. The issue in
on attorney fees included in the judgment should run on the date of the
original judgment, which was reversed on appeal, or on the date of the award on
remand. (Id. at p. 800.) The court
affirmed the trial court’s determination that interest should run from the date
of the award on remand. (
In reaching its decision, the court noted that “The California rate” of
legal interest “bears no relation to the amount any investor may reasonably
expect to receive from investments during the period between entry of judgment
and a ruling on an application for attorney fees.” (Id.
at p. 812.) The court then applied
the reasoning of Civil Code section 3287, which applies to prejudgment
interest, to postjudgment interest. (
“equitable principal in California that ‘a person who does not know what sum is
owed cannot be in default for failure to pay.’”
(Ibid.)
The judgment here
fails in these two respects: it is not
stated in “dollars and cents, rejecting fractions,” and it is does not specify
an amount. In other words, it cannot qualify
as a money judgment subject to postjudgment interest until it meets the
certainty requirement in Code of Civil Procedure section 577.5 and
This is because Rodger’s obligation to pay Richard can only be
determined upon the sale of the Malibu Acres whereby Rodger’s and Richard’s
total credits can be computed and compared.
Rodger’s total credits include “20 percent of the net proceeds of the
sale of the Malibu Acres,” meaning that Rodger’s total credits cannot be
computed with certainty until the Malibu Acres are sold.
Here, the
judgment contains a formula which could theoretically be applied to determine
the total money judgment. That formula
compares Richard’s and Rodger’s total credits after the sale of the Malibu
Acres. If there is no discrepancy
between the two, neither owes the other anything. However, if Richard’s total credits are
greater than Rodger’s, then Rodger owes the discrepancy to Richard. The problem is that the sales price of the
Malibu Acres cannot be easily ascertained even though the judgment allows only
a narrow band of sales prices because the Malibu Acres have not yet been
sold. In other words, because the sales
price has yet to be determined, the judgment thereby cannot be definitely
ascertainable. (See In re Marriage of Sandy (1980) 113 Cal.App.3d 724, 728, fn.
3.) Accordingly, as the judgment is not
definitely ascertainable, it is not a money judgment and postjudgment interest
cannot accrue until it becomes definitely ascertainable. In other words, Rodger should not be forced
to pay interest on a judgment amount that he does not know and cannot readily
ascertain.
Moreover, even if
the judgment were considered a money judgment, postjudgment interest only runs
on the portion of a money judgment that is “unsatisfied.” (Code Civ. Proc., § 685.010.) Until the Malibu Acres are sold and Rodger’s
and Richard’s total credits calculated, postjudgment interest cannot accrue, as
no portion of the money judgment is “unsatisfied.”
Finally, we
disagree with Rodger that the court erred in ordering that postjudgment
interest be deducted from the proceeds of sale of the Malibu Acreage. Nothing in the statutory scheme prohibits the
trial court from specifying the source of interest, and thus the trial court
was within its equitable powers given the nature of the proceedings before it
to declare that any interest accured would be payable from the proceeds of the
Malibu Acreage.
3. On page 29, the first full paragraph
beginning “The judgment of the superior court” is deleted and the following
paragraph is inserted in its place:
The
judgment is affirmed as modified to provide that Rodger Lough’s success fee
commission is to be applied to the “net profits” obtained on the sale of the
Malibu Acreage. Respondent is to recover
costs on appeal.
This
modification constitutes a change in the judgment.
The
petition for rehearing is denied.
_______________________________________________________________________
ROTHSCHILD, Acting P. J. CHANEY,
J. JOHNSON, J.
