Mako Fund, Inc. v. San Remo Funding Group

Filed 10/28/08 Mako Fund, Inc. v. San Remo Funding Group CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 THREE

APPEAL from a judgment of the Superior Court of Los Angeles County, Patrick T. Madden, Judge. Affirmed.

Brian J. Jacobs for Defendants and Appellants.

Ropers, Majeski, Kohn, & Bentley, Richard L. Charnley and Terry Anastassiou for Plaintiffs and Respondents.

_________________________

San Remo Funding Group, a general partnership, and Frank Campagna, its general partner, appeal a judgment entered in favor of Mako Fund and Philip Markowitz. We affirm the judgment and award Mako Fund and Philip Markowitz costs on appeal.

FACTS AND PROCEDURAL BACKGROUND

1. Formation of the joint venture and acquisition of the real property.

Pursuant to a joint venture agreement dated December 10, 1997, Mako Fund, then owned by Vito Rotunno, entered into an agreement with Alex Saenz, an individual, and San Remo Funding Group, a general partnership, (San Remo) by which they formed Mako Fund-San Remo (the joint venture). Frank Campagna is the general partner of San Remo.

The joint venture agreement recited that Saenz held an option to purchase two notes in the principal amounts of $528,750 and $176,250 from the estate of Ann Patton by making a timely deposit of the purchase price before October 6, 1997. The notes were secured by deeds of trust on real property (the Patton property). Saenz and San Remo entered into an agreement with the Stone Foundation (Stone) to provide the consideration for the purchase of the notes. Stone agreed to provide $375,000 and deposited $175,000 of this amount but failed to fund the balance of $200,000, thereby resulting in default in the exercise of the option and forfeiture of the $175,000. In a settlement agreement, Stone transferred any right it had to the $175,000 previously deposited to Saenz and San Remo.

Saenz and San Remo thereafter jointly approached Mako Fund to invest funds sufficient to enable Saenz to renegotiate the option to acquire the notes, to foreclose on the trust deeds, which were in default, and to prepare the Patton property for sale. Saenz and San Remo agreed to assign to Mako Fund their interest in the Stone funds. The agreement further provided that, upon acquisition and transfer of the notes and trust deeds to the joint venture, Mako Fund would be credited with $375,000 to its capital account.

Mako Fund agreed to make available a sum not to exceed $275,000. The agreement provided that, after acquisition of the notes, the initial joint venture capital accounts would reflect that Mako Fund had paid-in capital of $575,000 and Saenz/San Remo had paid-in capital of $175,000.

Paragraph 4(a) of the agreement provides that in the event additional capital is necessary to liquidate the assets of the joint venture, Mako Fund and Saenz/San Remo will contribute equally and the amounts contributed will be considered loans to the joint venture.

Paragraph 8 addressed distribution of profits from sale of the property. It provided Mako Fund would be paid the amount of $1.04 million, which would include a return of its capital account; San Remo would receive the sum of $260,000, which would include a return of its capital account. Any excess proceeds would be paid 30 percent to Mako Fund and 70 percent to San Remo.

Paragraph 10 addressed the marketing of the real property. The parties agreed it was their intention to sell the property for not less than $1.1 million. Subparagraph (a) provides: In the event the Real Property or other Joint Venture assets are neither sold nor in escrow with a qualified buyer within twelve (12) months of acquisition of the Real Property, Mako Fund, at its option, will have the exclusive right to designate the method of liquidation of the Joint Venture assets. In such an event, Mako Fund will actively market the Real Property by employing qualified commercial real estate brokers to list the Real Property for sale at a purchase price which reflects the fair market value.

Saenz successfully renegotiated the option agreement and the joint venture acquired the Patton property. Saenz thereafter ceased involvement in the joint venture.

In addition to the Patton property, the joint venture acquired several parcels of real property that were contiguous to the Patton property. These lots are described as lots 30 and 31, lot 32 and lot 20.

2. The joint ventures use of the property and attempts to market it.

Frank Campagna, the general partner of San Remo, testified three railroad spurs were built on the property in 1996. These rail spurs connected the property, which was near the Port of Los Angeles, to the Alameda rail corridor.

When the joint venture was unable to market the property as quickly as anticipated, Campagna entered into an informal agreement with Tom Sharkey in 1999 pursuant to which Sharkey ran a truck parking operation on the property in exchange for half the rent Sharkey collected. Rotunno was not involved in the operation, which netted the joint venture approximately $7,000 per month. Sharkey was permitted to store property and equipment on the property at no charge. Sharkey also was permitted to operate a business on the property at no charge.

Over a period of several years, Campagna negotiated an agreement between the joint venture and AccuChem, referred to as the Wilmington Rail Transfer Facility (WRTF) agreement. Under the WRTF agreement, AccuChem agreed to purchase a 50 percent interest in the holdings of the joint venture for $1.1 million with an option to purchase the remaining 50 percent at market value within five years. AccuChem would then establish an ongoing rail spur operation and install a waxing facility, which they needed for their tankers. The agreement required AccuChem to pay the joint venture $215,000 on December 15, 2000, and $50,000 on February 15, 2001. Campagna testified that, had the AccuChem deal gone through, in five years the property with the rail spur and the associated trucking operation would have been worth far in excess of $5 million.

However, AccuChem failed to make the required deposits and, on March 6, 2001, the joint venture notified AccuChem, in writing, of its default.

At some previous time, the joint venture lost title to lot 20 in a quiet title action.

3. Markowitz purchases Mako Fund from Rotunno; subsequent developments.

At a meeting on May 31, 2001, Vito Rotunno, the owner of Mako Fund, informed Campagna that Markowitz had purchased Mako Fund. Markowitz learned of the Sharkey truck parking operation at the meeting and arranged to meet Sharkey at the property the next day. Markowitz testified the property looked like a junkyard to me, and there [were] at least six motor homes or trailers and campers with people that appeared to be residing in them and power cords running to them. There were car parts strewn about the entire lot and Sharkey was running a truck dismantling business on the property without a business license or liability insurance. Markowitz informed Sharkey that a 50 percent split of the profits was excessive for a truck parking operation and asked Sharkey for copies of the rent receipts and a copy of the rent roll. Sharkey said he would provide Markowitz with the records if Campagna approved. Sharkey later refused to provide Markowitz with any receipts or the rent roll.

Markowitz spoke to tenants on the property and, in every instance, the tenant indicated they paid more rent than Sharkey reported. Only one tenant paid by check. When Markowitz told Campagna that Sharkey was not reporting all the income the property was generating, Campagna was lackadaisical about it, like he didnt care one way or the other, and that [Sharkey] is an honest guy and he pays . . . 50 percent, and thats all there is to it.

On June 6, 2001, Campagna made Markowitz a signatory on the joint venture bank account. The next day, Markowitz withdrew all the money in the account, $37,324.36, thereby closing it.

Markowitz refused to make the interest only payments on a note secured by a deed of trust on the Patton property in the amount of $200,000, which the joint venture executed in October of 1998. Campagna claimed San Remo co-executed the loan documents as an accommodation to Mako Fund and the proceeds of the loan were paid to Mako Fund. Campagna testified Rotunno told him the Mako Fund sale agreement provided Markowitz would honor the debts of Mako Fund. Rotunno also told Campagna, in Markowitzs presence, that Markowitz would continue to make the loan payments.

Markowitz denied he was aware of the $200,000 loan before he purchased Mako Fund and denied the loan was ever mentioned in Rotunnos presence. Markowitz offered to pay half of the funds needed to prevent the $200,000 loan from going into default. However, Campagna refused to pay the other half claiming the loan was an obligation of Mako Fund.

On August 7, 2001, Markowitz posted a notice on each vehicle on the property to vacate the premises within 48 hours. There was a confrontation on the property the following day between Sharkey and Markowitz. Thereafter, Markowitz succeeded in clearing the property and preparing it for sale.

Campagna disagreed with Markowitzs decision to terminate the Sharkey operation. Campagna tried to convince Markowitz to continue the operation so the joint venture would have an income stream while it tried to decide what to do with the property. Campagna tried to appeal to Markowitzs common sense not to destroy a cash cow. Campagna claimed the truck parking operation netted the joint venture $7,000 per month without any effort on the part of the joint venturers.

4. Campagna blocks Markowitzs sale of the property.

Markowitz retained a real estate broker and entered into an agreement to sell the joint ventures real property for $1.1 million. Markowitz told Campagna that if he had a buyer who would pay more than Markowitzs buyer, Campagna should produce the buyer. Markowitz offered Campagna $50,000 to sign off his interest in the joint venture but Campagna refused. Campagna said that if Markowitz did not sell the property for more than $1.1 million, he would block the sale and Markowitz would get nothing.

After Markowitz entered into a sales agreement, Campagna filed a lawsuit and a lis pendens and succeeded in blocking the sale. At that point, Markowitz told Campagna that if Campagna did not pay off the $200,000 loan, it would go into default and Markowitz would purchase the Patton property at foreclosure sale. Campagna knew that making the payments on the $200,000 loan would not resolve the problem of the balloon payment that was due in November. However, the joint venture needed some time to resolve other issues.

The Patton property thereafter went into foreclosure. Markowitz admitted that one Douglas Kramer, an associate of Markowitzs, purchased the Patton property at the foreclosure sale on November 13, 2001, with funds borrowed from one of Markowitzs companies. Markowitz thereafter transferred lots 30, 31 and 32 to Rail Properties, LLC. Markowitz owned a 90 percent interest in Rail Properties.

Campagna testified that, immediately prior to Markowitzs involvement in the joint venture, the value of the Patton property was $3.5 million dollars. If lots 30, 31 and 32 were included, the property was worth $4 million. Campagna claimed these lots added significant value to the rail spur. Campagna testified the joint venture desired to sell the property for no less than $3 million.

Campagna claimed the AccuChem deal remained viable despite the loss of lot 20 because there were alternatives that would permit full use of the facility. These alternatives included moving one set of tracks and either obtaining an easement over lot 20 or purchasing the lot, which Campagna believed could be done for $40,000. Campagna testified he notified AccuChem in writing of their default only to put pressure on AccuChem to move forward with the WRTF deal.

Campagna told Markowitz that AccuChems loan application had been approved and AccuChem needed additional time to negotiate the interest rate. Campagna believed the AccuChem deal was a wonderful opportunity. However, Markowitz was not interested in discussing the deal. Campagna claimed Markowitz refused to meet with the people from AccuChem.

Markowitz denied he ever refused to speak with anyone at AccuChem and claimed he discussed the WRTF deal with Craig Robitaille, who represented himself as a partner in AccuChem. Markowitz told Campagna the problem with the AccuChem deal was the loss of lot 20. Markowitz claimed lot 20 was integral to the success of a rail operation because two of the three rail spurs passed over lot 20. Also, AccuChem did not have any money. Even if AccuChem had the required funds, it would not have risked its capital without lot 20.

5. Miscellaneous issues.

a. Campagnas use of checks payable to the joint venture or Mako Fund.

After Markowitz closed the joint ventures bank account, Campagna received one check in the amount of $7,500 and two checks from Sharkey for the rent for March and April of 2001 payable to Mako Fund in the total amount of $11,900. Campagna gave these checks to Attorney William Salica who negotiated them.

Markowitz claimed Campagna converted these funds to his own use. Campagna claimed he had no other way of utilizing the funds because Markowitz had closed the joint venture bank account and he refused to cooperate in opening a new account. Campagna testified the joint venture was obligated to Salica for legal services rendered in connection with the litigation over lot 20 and this use of the checks served to reduce the joint ventures obligations.

b. The alleged $15,000 loan.

Based on a joint venture check dated May 18, 2001, in the amount of $15,000 payable to Mako Fund, San Remo asserted the joint venture had made a loan to Mako Fund that had not been repaid. Campagna testified Rotunno received the check for $15,000 from the joint venture and it was characterized as a one-month loan.

6. Litigation ensues.

Sharkey sued Markowitz for slander and assault based on the confrontation at the property on August 8, 2001.

Mako Fund and San Remo sued each other for breach of the joint venture agreement, breach of fiduciary duty, conversion and for an accounting.

7. The trial courts ruling.

After a bench trial, the trial court found Markowitz had good cause to terminate Sharkeys truck parking business. The trial court agreed that 50 percent of the net profits was a very high percentage for Sharkey to receive. Further, the truck parking operation was an all cash business which lent itself to underreporting of income by Sharkey.

With respect to Mako Funds complaint, the trial court found San Remo breached the joint venture agreement in several respects. The trial court found the joint venture was obligated to repay the $200,000 loan. The trial court indicated, At trial, no document was produced that showed that Mako was obligated to repay the loan. . . . Markowitz proposed that [Markowitz and Campagna] each pay 50 [percent] of the amount needed to cure the default and reinstate the loan. Campagna refused. He insisted that it was the obligation of Mako (and Markowitz) to reinstate the loan and to repay it. This conduct by San Remo was a breach of Paragraph 4(a) of the [joint venture] Agreement, which required Mako and San Remo each to contribute 50 [percent] of the amount to cure the default and reinstate the loan. Campagnas contention that San Remo was not obligated to contribute any of the funds needed to cure the default is without merit. His assertion was not corroborated by any writing. In addition that is not what the JV Agreement states.

The statement of decision continued: Campagna also contended that it would be futile to cure the default, since the balloon payment on the unpaid principal was due shortly. That contention is also without merit. . . . Markowitz testified and the Court finds, the Property could have been sold before the foreclosure sale.

With respect to the deal with AccuChem, the trial court found it was never established that it would occur. It was speculation; for years Campagna had attempted to put together such a business, but it never took place and the Court finds that such an agreement was not reasonably likely to occur.

Regarding Markowitzs attempt to sell the property for $1.1 million, the trial court found: Instead of permitting the sale of the Property, as mandated by the JV Agreement, Campagna filed suit and filed a lis pendens on the Property, and according to his own testimony, he stopped the sale of the Property. Paragraph 10(a) of the JV Agreement provides that if the real property acquired by the JV is not sold [or] in escrow within twelve months of the acquisition of the property, then Mako had the exclusive right to designate the method of liquidation of the asset. In addition, Mako was to actively market the sale of the property by employing a qualified commercial real estate broker. Mako exercised its rights, but San Remo prevented the sale and thereby breached its obligation under the JV Agreement. The trial court found Mako Fund suffered damages in the amount it would have received from the proceeds of the sale or $840,000.

The trial court further found Campagna breached the fiduciary duty owed the joint venture by giving Attorney Salica one check in the amount of $7,500 and two checks in the total amount of $11,900. The trial court found Campagna gave these checks to Salica, who cashed them and provided [the] funds to Campagna. Markowitz never consented to this transaction and, in fact, never knew of these checks until this lawsuit was filed. The trial court found Mako Fund was damaged in the amount of one half of the value of the checks or $9,700.

The trial court also found Campagna committed conversion of the two checks in the total amount of $11,900 and that this conduct by Campagna was fraudulent within the meaning of Civil Code section 3294. Based thereon, the trial court awarded Mako Fund punitive damages in the amount of $20,000.

On San Remos cross-complaint, the trial court found Markowitz breached the joint venture agreement by withdrawing $37,324.36 from the joint ventures bank account. The trial court found these funds were misappropriated and awarded San Remo 50 percent of the funds or $18,662.18.

With respect to San Remos request for an accounting, the trial court found an accounting was not appropriate given the trial courts other findings.

CONTENTIONS

San Remo contends: (1) the trial court erroneously refused to relieve San Remo of a jury waiver based on its failure to post jury fees timely; (2) the trial court ignored evidence indicating the $200,000 loan was the obligation of Mako Fund; (3) paragraph 10(a) of the joint venture agreement did not apply because the joint venture had a contract with AccuChem for the sale of the property; (4) Campagna did not commit conversion of joint venture funds and only the joint venture may sue for conversion of the funds in any event; (5) the filing of the lis pendens was privileged; (6) the punitive damage award must be set aside; (7) the $15,000 was an obligation of Mako Fund; and, (8) and an accounting is appropriate because the purchaser of the Patton property at the foreclosure sale was Markowitzs straw man and Markowitz transferred the three remaining parcels of real property belonging to the joint venture to an entity he controlled.

To the extent any of these arguments does not satisfy the standard required for reversal, San Remo urges they support a new trial.

DISCUSSION

1. The trial court committed no abuse of discretion in denying San Remos request for relief from its jury waiver.

a. Background.

Mako Fund initially demanded a jury trial on the allegations of its complaint by posting fees on June 20, 2003. (Code Civ. Proc., 631.)[1] However, on December 14, 2003, the first day of trial, Mako Fund waived jury and the matter proceeded as a court trial. San Remo, which had not posted jury fees, was deemed to have waived the right to jury trial. That trial ended in a mistrial on December 17, 2004. The trial court set the case for a trial de novo on May 2, 2005, as a court trial.

On March 18, 2005, San Remo posted jury fees and filed a notice of posting fees and demand for jury trial. On April 29, 2005, San Remo filed an ex parte application and notice of motion for modification of the order denying a jury trial. The matter was heard on May 3, 2005.

On May 19, 2005, the trial court issued a minute order denying the application. The trial court noted that after the initial finding of waiver, San Remo took no action to obtain relief from the waiver until the final status conference on April 29, 2005, which was only three days before the date the case initially was set for trial de novo. The trial court concluded the request was untimely and declined to exercise its discretion under Code of Civil Procedure section 631, subdivision (e).

In that regard, the trial court found there will be prejudice to the court and its calendar if this case were to proceed as a jury trial. There are numerous legal and factual issues in this case which, if tried to a jury, would cause the trial to be substantially longer than if the case is tried to the court. In addition, as a non-jury trial, the court will be able to deal with issues that result in delay of trial as those issues arise. At the trial that commenced on 12/14/04, documents were presented to a witness that had not previously been produced, despite pre-trial discovery that requested the documents. The court granted a delay in the testimony to permit all parties to obtain copies of the documents and the court permitted the deposition of the party who produced the documents during the trial. This procedure may not be possible in a jury trial. The court is also mindful that the most recent continuance of the trial date (from 05/02/05 to 06/06/05) was solely to accommodate one of the attorneys in this case who is accompanying his spouse on out of state treatment for a significant medical problem. If trial of this case were to be before a jury and any medical problem arises during the trial, then another mistrial would likely occur. A mistrial would not be necessary if the matter proceeds as a court trial the court would simply continue the trial to a new date far in the future if needed to accommodate the witnesses and attorneys should [the] need for a delay again arise for whatever reason during the trial.

San Remo sought review of the trial courts ruling by filing a petition for writ of mandate/prohibition, which this court denied on June 7, 2005. The matter proceeded to court trial the following day.[2]

b. San Remos arguments.

San Remo contends that where as here, a party has timely sought writ relief, a trial court abuses its discretion in denying relief from an inadvertent jury waiver where no prejudice has been occasioned to the other party or to the trial court as a result of the waiver. (Winston v. Superior Court (1987) 196 Cal.App.3d 600, 602.) This standard of review applies on appeal following a court trial if the party denied a jury seeks relief by writ of mandate prior to trial, as was done here. (McIntosh v. Bowman (1984) 151 Cal.App.3d 357, 363-364.)

San Remo argues it posted jury fees and served notice of its demand for jury trial on March 18, 2005, which was 45 days before the date set for trial de novo, May 2, 2005. San Remo notes the trial court did not issue its minute order denying relief until 16 days after the hearing on the motion. Also, the court trial went on for seven months until December 16, 2005. These facts establish that San Remos application for relief from jury waiver did not prejudice either the other side or the trial court.

San Remo argues considerations of convenience cannot justify deprivation of the right to jury trial. San Remo asserts the trial courts reasoning would preclude a jury trial in every case as a matter of convenience. San Remo concludes the denial of its application must be set aside.

c. Resolution.

Initially, we note it is not clear that San Remos jury waiver was inadvertent as San Remo claims. San Remo did not post jury fees 25 days before the first day set for trial as required by the current version of Code of Civil Procedure section 631, subdivision (b). Further, San Remo did not post jury fees within five days of Mako Funds decision to abandon its request for jury fees as was required under the previous version of section 631.[3] Although San Remo was aware on December 14, 2004, that Mako Fund had waived trial by jury when the first trial of this action commenced, San Remo did not post jury fees until March 18, 2005. Nothing in the record suggests this was inadvertent conduct.

However, even assuming San Remos waiver was inadvertent, the trial courts statement of reasons was sufficient to warrant denial of the relief requested. As the trial courts statement reflects, this case already had proved difficult to bring to trial due to numerous unforeseen developments that had caused delay, continuances and one previous mistrial. Indeed, as the trial court predicted, the trial was likely to be continued due to unforeseen developments in the middle of trial and the matter was tried over a seven-month period. The trial court committed no abuse of discretion in considering the disruption to the administration of justice that would have resulted had San Remo been granted relief from the jury waiver. (Gann v. Williams Brothers Realty, Inc. (1991) 231 Cal.App.3d 1698, 1704-1705; Still v. Plaza Marina Commercial Corp. (1971) 21 Cal.App.3d 378, 387-388.)

2. Breach of contract.

San Remo contends the trial court erred in finding the $200,000 loan was an obligation of the joint venture. San Remo asserts it had no obligation to pay or service the loan under paragraph 4(a) because the loan payments cannot be deemed additional capital is necessary to achieve the liquidation of the Joint Ventures assets . . . . (Italics added.)[4] San Remo asserts this court must review the interpretation of a contract de novo. (Davies Machinery Co. v. Pine Mountain Club, Inc. (1974) 39 Cal.App.3d 18, 23.) San Remo argues the usual meaning of the words suggests that funds required to avoid foreclosure are not necessary to achieve a liquidation because a foreclosure is a liquidation. San Remo argues that, because the $200,000 was not disbursed to the joint venture but was wired directly to Mako Fund at its Utah account in October of 1998, the loan cannot fall within the ambit of paragraph 4(a).

San Remo further claims that, even if the $200,000 loan was a joint venture obligation, Mako Fund would have been in violation of the same provision for failing to contribute funds sufficient to bring the loan current. Additionally, the joint venture agreement specified the remedy for failure to contribute to joint venture expenses would be a first priority lien on the defaulting partys otherwise applicable distribution or reimbursement. Thus, under the express terms of the joint venture agreement, San Remos failure to contribute to bring the loan current, assuming it is a breach of the joint venture agreement, does not entitle Mako Fund to an award of damages.

San Remo concludes that Mako Funds receipt of the entire loan proceeds in October of 1998, combined with Rotunnos subsequent payment of interest charges for 31 months until June of 2001, established that the parties understood the loan was the obligation of Mako Fund, not the joint venture. (Fisher v. Allis-Chalmers Corp. Product Liability Trust (2002) 95 Cal.App.4th 1182, 1192 [the actions of the parties after the execution of the contract but before any controversy arose as to its effect may be looked to in determining the meaning of the contract].)

San Remos attack on the sufficiency of the evidence with respect to the trial courts finding the $200,000 loan was an obligation of the joint venture must be rejected because San Remo fails to provide an adequate record on appeal.

A judgment or order of a lower court is presumed to be correct on appeal, and all intendments and presumptions are indulged in favor of its correctness. (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) On appeal, the appellant has the burden of overcoming this presumption of correctness by affirmatively showing error on an adequate record. (Ballard v. Uribe (1986) 41 Cal.3d 564, 574.) Where no reporters transcript has been provided and no error is apparent on the face of the existing appellate record, the judgment must be conclusively presumed correct as to all evidentiary matters. (Estate of Fain (1999) 75 Cal.App.4th 973, 992.) Indeed, it is presumed that the unreported trial testimony would demonstrate the absence of error. [Citation.] (Ibid; Bennett v. McCall (1993) 19 Cal.App.4th 122, 127.) The presumption of correctness of the judgment is not simply a general principle of appellate practice but  an ingredient of the constitutional doctrine of reversible error. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)

Here, the trial courts minute orders reflect there were 23 days on which testimony or argument occurred. However, the entire record on appeal designated by San Remo consists of only eight days of reporters transcripts. San Remo failed to designate the testimony of Rotunno who was the owner of Mako Fund at the time the $200,000 loan was made, and omitted substantial portions of the testimony of Markowitz and Campagna.

The failure to designate a complete record precludes any argument the trial courts findings are unsupported by substantial evidence. Consequently, San Remo cannot complain on appeal of insufficient evidence to support the trial courts finding. (Hughes v. DeMund (1936) 7 Cal.2d 504, 505-506; Gee v. American Realty & Construction, Inc. (2002) 99 Cal.App.4th 1412, 1416.)

San Remos request for de novo review of the joint venture agreement does not alter this result. The incomplete record before this court supports the trial courts finding the loan was a joint venture obligation. The loan documents indicate the loan was made to the joint venture and was secured by joint venture property. Although the conduct of the parties is admissible to resolve ambiguities in the contracts language (City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 393), the loan is not reasonably susceptible to the interpretation urged by San Remo (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 392-393). San Remo did not prove that, despite the express contractual terms, the loan was the obligation of Mako Fund.

With respect to San Remos argument Mako Fund breached the joint venture agreement by failing to bring the loan current, the trial court found Mako Fund offered to pay half the money required to reinstate the loan but San Remo refused to pay the other half.

Additionally, the trial court found the Markowitz sale would have been completed prior to the foreclosure sale. Thus, had Campagna permitted the Markowitz sale of the property to proceed, there would have been no need for Markowitz or Mako Fund to cure the loan default.

Regarding San Remos assertion Markowitz could have reinstated the loan and taken a priority lien under paragraph 4(a), the joint venture agreement does not state that a priority lien is the only remedy in the event the other party breaches.

In sum, San Remos attack on the sufficiency of the evidence to support the trial courts findings with respect to the $200,000 loan fails.

3. Applicability of paragraph 10(a) of the joint venture agreement.

Paragraph 10(a) of the joint venture agreement provides that in the event the real property is neither sold nor in escrow within 12 months of acquisition, Mako Fund at its option, had the exclusive right to designate the manner of liquidation of the joint ventures assets.

San Remo contends paragraph 10(a) of the joint venture agreement did not apply because there was a fully executed agreement between the joint venture and AccuChem for the sale of the joint ventures property. San Remo asserts Campagnas testimony confirmed the authenticity of the WRTF deal, pursuant to which the joint venture sold a one half interest in the property and agreed to sell the remaining half at market value in five years. San Remo notes an escrow had been opened to consummate the WRTF deal and the joint venture had placed in escrow grant deeds transferring a one-half interest in the joint ventures real property to WRTF. San Remo reasons that, because there was a sale of the joint ventures property before Markowitz acquired Mako Fund, the provision of paragraph 10(a) affording Markowitz the ability to make unilateral decisions concerning the joint ventures assets was not in effect. San Remo concludes that because there is no dispute the parties entered into the WRTF agreement, the finding in the statement of decision that it was not reasonably likely to occur was not supported by substantial evidence.

Initially, we note that once again San Remo has failed to provide an adequate record for appellate review of a sufficiency of the evidence claim.

However, even if this omission is overlooked, substantial evidence in the form of Markowitzs testimony supports the trial courts finding the WRTF venture would not have come to fruition. Markowitz testified AccuChem lacked the funds required to proceed with the WRTF venture and, even if AccuChem had the necessary funds, it would not have risked them without the inclusion of lot 20 in the deal. Additionally, prior to Markowitzs involvement in the joint venture, Rotunno and Campagna had advised AccuChem, in writing, that AccuChem was in default of the WRTF agreement. This evidence abundantly supports the trial courts finding the WRTF venture was not likely to occur.

San Remo also argues the trial court improperly excluded the WRTF Venture Agreement from evidence on the ground it was hearsay. San Remo asserts this was error because the WRTF agreement was offered as an operative fact.

However, it is unclear whether the record citation offered by San Remo for the improper exclusion of evidence refers to the WRTF agreement. Assuming for the sake of discussion the record shows the trial court excluded the written WRTF agreement from evidence, the trial court permitted Campagna to testify at length with respect to the agreement with AccuChem. Thus, the trial court had before it substantial testimony related to the viability of the WRTF deal even without the written agreement itself.

In sum, substantial evidence supports the trial courts finding Markowitz had the right under paragraph 10(a) to liquidate the joint ventures assets because the property had neither been sold nor was it in escrow pending sale.

4. The recording of the lis pendens.

The trial court found Campagna improperly blocked Mako Funds sale of the property by filing a lawsuit and a lis pendens and that this conduct constituted a breach of the joint venture agreement which entitled Mako Fund to damages.

San Remo contends the filing of a lis pendens is absolutely privileged. (Civ. Code, 47, subd. (b)(4); Jacob B. v. County of Shasta (2007) 40 Cal.4th 948, 958.) Because this act was privileged, no liability can arise from it.

The principal purpose of the litigation privilege is to afford litigants and witnesses the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions. (Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1241; Navellierv. Sletten (2003) 106 Cal.App.4th 763, 773-774.)

The present action is based on breach of contract. San Remo essentially agreed in the joint venture agreement to allow Mako Fund to market the joint venture assets if they were not in escrow within one year after the property was acquired. As the trial court found, Instead of permitting the sale of the Property, as mandated by the JV Agreement, Campagna filed suit and filed a lis pendens on the Property, and according to his own testimony, he stopped the sale of the Property.

The trial courts finding Campagna interfered with the sale of the joint venture property was based not only on the filing of the lis pendens, but also on the filing of the lawsuit seeking to block the sale of which the lis pendens gave notice. In these circumstances, the filing of the lawsuit for breach of the joint venture agreement was not privileged. (Wentland v. Wass (2005) 126 Cal.App.4th 1484, 1494-1495.) The lis pendens merely gave notice of that suit. Consequently, Civil Code section 47, subdivision (b)(4), does not prevent a finding that San Remo and Campagna breached the joint venture agreement by filing a lawsuit to block Mako Funds sale of the joint venture property.

5. Breach of fiduciary duty with respect to the checks given to Salica.

The trial court found Campagna breached a fiduciary duty by giving one check in the amount of $7,500 to Attorney Salica on March 30, 2001, and then providing Salica two checks from Sharkey payable to Mako Fund in the aggregate amount of $11,900. San Remo contends no admissible evidence supports the claim Campagna received any proceeds of the checks given to Salica.

San Remo notes Salica was the joint ventures attorney and he represented the joint venture in the litigation concerning lot 20 before Markowitz became involved in Mako Fund. (Pacifica Land Co., Inc. v. Mako Fund-San Remo (May 6, 2003, B155015) [nonpub. opn.].) San Remo notes the joint ventures check stubs reflect payments by the joint venture of other expenses on the lot 20 case, such as check No. 1054 to Salica in the amount of $1,500 and check No. 1051 in the amount of $50 for a mediation fee.

San Remo asserts that, at the time the checks were deposited with Salica on June 15, 2001, Markowitz already had closed the bank account. Thus, providing the funds to a creditor of the joint venture was an appropriate use of the funds. San Remo claims Campagna cannot have breached a fiduciary duty to the joint venture by paying the joint ventures attorney. San Remo also argues the evidence showed Salica retained the funds. Thus, they were not paid to Campagna as the trial court found.

The record on appeal does not include the testimony of Salica. Therefore, San Remo has failed in its obligation to designate an adequate record that would allow this court to review the trial courts finding San Remo diverted joint venture funds by giving the checks at issue to Salica. (Estate of Fain, supra, 75 Cal.App.4th at p. 992.) In any event, Campagna admitted at trial he gave Salica the check in the amount of $7,500 and two checks payable to Mako Fund in the total amount of $11,900. Consequently, the trial courts findings are supported by the record before us.

6. Conversion of the checks in the amount of $11,900.

The trial court found San Remo and Campagna liable for conversion of the two checks payable to Mako Fund in the total amount of $11,900. San Remo contends this finding must be set aside. San Remo notes a plaintiff in conversion must prove ownership of the converted property. Here, Sharkey operated the truck parking business based on a contract with the joint venture. Thus, the joint venture owned the checks at issue. However, the joint venture was not a party to the lawsuit. Thus, according to San Remo, the claim of conversion must fail. Further, the two checks properly were delivered to Salica on joint venture business so that no improper dominion was exercised over these checks by Campagna.

Putting aside the omission of Salicas testimony from the record on appeal, the record reveals the two checks in the total amount of $11,900 were payable to Mako Fund, not the joint venture. Thus, the trial courts finding of conversion is supported by the record.

7. Punitive damages.

The trial court awarded Markowitz $20,000 in punitive damages based on Campagnas bad faith conversion of the two checks in the total amount of $11,900. San Remo claims the payment of joint venture funds to a creditor of the joint venture cannot, as a matter of law, be deemed fraudulent under Civil Code section 3294.

However, as set forth above, the trial court properly could conclude otherwise based on the evidence presented.

San Remo further claims the award of punitive damages must be set aside because the trial court was obliged to conduct a hearing on the defendants financial ability to pay before punitive damages may be imposed. (Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928, fn. 13.)

It is settled that the amount of punitive damages must bear a relation to a defendants financial condition. Thus, an award of punitive damages is not permitted without evidence of the defendants financial condition. (Adams v. Murukami (1991) 54 Cal.3d 105, 118.) However, this claim fails because San Remo failed to provide a complete record of the trial. Because the necessary evidence of Campagnas financial condition may have been produced during a portion of the trial that has been omitted from the record on appeal, we refuse to disturb the award of punitive damages. (Estate of Fain, supra, 75 Cal.App.4th at p. 992.)

8. The alleged loan of $15,000.

San Remos fourth cause of action in its cross-complaint includes a claim that Mako Fund borrowed $15,000 from the joint venture, the money was deposited into Mako Funds Utah account and Mako Fund thereafter refused to repay the loan. The trial court found no evidence was presented to support this claim.

San Remo argues Defendants exhibit No. 11 includes check No. 1061, dated May 18, 2001, payable to Rotunno in the amount of $15,000, with a notation loan to 6/15/01. San Remo argues this check establishes that Mako Fund borrowed $15,000. San Remo concludes the trial courts ruling was not based on substantial evidence.

Initially, we note the record on appeal does not include the testimony of Rotunno. Consequently, this court is unable to assess San Remos claim on appeal. However, putting that impediment aside, evidence indicating the joint venture wrote a $15,000 check payable to Rotunno does not establish that Mako Fund converted the funds to its own use, refused to repay the loan or breached the joint venture agreement. Even if the evidence showed Rotunno borrowed $15,000 from the joint venture, a joint venture loan to an individual is not a conversion of joint venture property.

Consequently, we have no occasion to reverse the trial courts ruling on San Remos allegation that Mako Fund acted improperly with respect to the alleged loan.

9. Breach of fiduciary duty with respect to the truck parking concession.

The trial court found Markowitz had the right to terminate the Sharkey operation unilaterally based on paragraph 10(a) of the joint venture agreement.

San Remo argues that, for reasons previously stated, paragraph 10a was not in effect. Therefore, paragraph 12 of the joint venture agreement, which prohibited any expense in excess of $250 by one joint venturer without the others approval is the applicable provision. Campagna testified the operation of the parking lot was a cash cow that provided in excess of $7,000 per month without any effort on the part of the joint venturers. Under these circumstances, Markowitzs action in unilaterally depriving the joint venture of the income derived from the operation, at the same time it put the property into foreclosure by failing to pay the loan and depriving the joint venture of its bank account, qualifies as a breach of fiduciary duty.

This claim fails because the purpose of the joint venture was to market the property, not to operate a truck parking business on it.

10. Accounting.

San Remos sixth cause of action sought an accounting, which the trial court found was not warranted based on the facts of this case and the findings it had made.

San Remo argues this finding was error because Markowitz admitted the joint ventures property was acquired in foreclosure by one Kramer and that Kramer obtained the funds to acquire the property from Markowitz. Markowitz also admitted he transferred lots 30, 31 and 32 to a corporation that was 90 percent owned by Markowitz, Rail Properties, LLC. San Remo concludes this evidence showed Markowitz acquired an interest in joint venture assets such that an accounting was appropriate.

San Remo failed to demonstrate the foreclosure sale of the Patton property to Kramer, or the transfer of lots 30, 31 and 32 to Rail Properties, LLC, constituted a breach of the joint venture agreement. Because Markowitzs only breach of the joint venture agreement related to his retention of the joint venture funds in the bank account, and the trial court awarded San Remo one half of that amount, there was no need for an accounting in this case.

11. Motion for new trial, irregularity in the proceedings, insufficiency of the evidence and errors of law.

In a perfunctory argument, San Remo seeks review of the trial courts ruling on its motion for new trial. This claim cannot be reached because San Remo failed to designate a reporters transcript of the hearing on the motion. (Ballard v. Uribe, supra, 41 Cal.3d at p. 574.) In any event, based on our review of the record submitted, no error in the denial of the request for a new trial appears.

DISPOSITION

The judgment is affirmed. Mako Fund and Markowitz are entitled to costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KLEIN, P. J.

We concur:

CROSKEY, J.

ALDRICH, J.

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[1] As relevant here, Code of Civil Procedure section 631 provides: (b) Each party demanding a jury trial shall deposit advance jury fees with the clerk or judge. . . . The deposit shall be made at least 25 calendar days before the date initially set for trial . . . . [] . . . []
(d) A party waives trial by jury in any of the following ways: . . . [] . . . [] (4)  By failing to announce that a jury is required, at the time the cause is first set for trial, if it is set upon notice or stipulation, or within five days after notice of setting if it is set without notice or stipulation. . . . [] (5) By failing to deposit with the clerk, or judge, advance jury fees as provided in subdivision (b). . . . [] . . . [] (e) The court may, in its discretion upon just terms, allow a trial by jury although there may have been a waiver of a trial by jury.

[2] We hereby grant San Remos request for judicial notice of the petition for writ of mandate/prohibition filed in case No. B183452. (Evid. Code, 452, subd. (b).)

[3] Former Code of Civil Procedure section 631, subdivision (b) provided: In a superior court action, . . . if a jury is demanded by either party in the memorandum to set the cause for trial and the party, prior to trial, by announcement or by operation of law waives a trial by jury, then all adverse parties shall have five days following the receipt of notice of the waiver to file and serve a demand for a trial by jury and to deposit any advance jury fees that are then due.

[4] Paragraph 4a provides: In the event additional capital is necessary to achieve a liquidation of the Joint Ventures assets, Mako Fund and Saenz/San Remo will contribute equally, which amounts will be considered loans to the Joint Venture. . . .