Filed 5/1/18 Verde Peninsula Fund II, LLC v. Fair CA1/4
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FIRST APPELLATE DISTRICT

DIVISION FOUR


VERDE PENINSULA FUND II, LLC,
Cross-complainant and Respondent,
v.
DARWYN P. FAIR,
Cross-defendant and Appellant.
A151531

(San Francisco County
Super. Ct. No. CGC-13-529086)



This appeal is from a judgment following a court trial, which holds Darwyn Fair (Mr. Fair) liable to Verde Peninsula Fund II, LLC (VPF) for damages in the amount of $184,000. Mr. Fair, a Michigan attorney who has represented himself throughout these proceedings, contends the judgment must be reversed because the trial court made several errors of fact and law. We affirm.
I. STATEMENT OF FACTS
A. Background
In February 2013, VPF filed the underlying action for damages resulting from a failed commercial loan transaction. The named defendants included Pacific Bay Financial Services (Pacific Bay), Pacific Bay brokers Manny Kagan and Dwight Daguman, Capital Network Funding (Capital), and Capital broker Robert Waldman.
VPF alleged the following facts in support of its causes of action for breach of fiduciary duty, breach of contract, and negligence: In 2010, VPF began to look for financing for three real estate development projects, working initially with Daguman and Pacific Bay and later also with Waldman and Capital. In May 2011, Pacific Bay and Capital (collectively Brokers) offered VPF a “funding opportunity” that would require VPF to pre-pay interest of 5 percent on a $20 million corporate recourse loan that would be payable in one year. Brokers convinced VPF the loan arrangement was legitimate and assisted VPF in applying for the loan. Then VPF and Pacific Bay signed an agency representation agreement, which provided that Pacific Bay would act as a broker for the loan and would share its commission with Capital. Thereafter, “[b]ecause the loan required a 5% pre-payment of interest, Brokers began to encourage [VPF] to gather and wire the $1 million to lender’s attorney’s escrow account to lock in the corporate loan, which was to fund within ten (10) banking days of receipt of the pre-paid interest.” To alleviate VPF’s concern about pre-paying $1 million and then having the loan not close, Brokers secured an investor for VPF named Jaimie Griffin. Griffin agreed that, for a fee of $250,000, he would reimburse the $1 million payment to VPF if the loan did not close within 28 days after VPF deposited the payment into the lender’s escrow account. Ultimately, the loan did not close, VPF lost its $1 million payment, and the $250,000 it paid to Griffin, and suffered other damages.
In July 2013, the Pacific Bay defendants filed a cross-complaint against the Capital defendants and others, including Denolpa International Trading, Ltd. (Denolpa), a Canadian company that allegedly agreed to fund a $20 million loan to VPF. The Pacific Bay defendants alleged causes of actions against the Capital defendants for implied and equitable indemnity and comparative fault. Pacific Bay denied liability to VPF, but also alleged that if they were liable, “said liability is only passive and secondary and is the result of the active and primary acts, omissions, and fault of the cross-defendants.” The cross-complaint also alleged separate causes of action against Denolpa for breaching an agreement to fund the loan, and against Jamie Griffin for breaching his agreement to reimburse VPF if the loan did not close.
In January 2015, VPF and the Pacific Bay defendants entered into a settlement agreement. The key terms of the settlement were: Pacific Bay would pay VPF $110,000; Pacific Bay’s insurer would pay VPF an additional $340,000; VPF would release all claims again Pacific Bay arising out of the failed loan transaction; and Pacific Bay would assign to VPF all rights Pacific Bay had “arising from or related to the facts alleged in and the subject matter of the Action including, specifically any subrogation rights in this Action.” In March 2015, the superior court granted Pacific Bay’s motion for a determination that this settlement was made in good faith.
In June 2015, Pacific Bay amended its cross-complaint to substitute VPF as the cross-complainant in place of the Pacific Bay defendants. In September 2015, VPF amended the cross-complaint to substitute Mr. Fair for the fictitious name Roe 5. In December 2015, Mr. Fair filed a motion to quash service of the summons and cross-complaint on him for lack of personal jurisdiction or, in the alternative, on the ground of forum non conveniens. That motion was denied in January 2016.
In January 2017, the Honorable Andrew Y.S. Cheng held a court trial on the cross-claim against Mr. Fair for equitable indemnity and contribution. Following the close of evidence, the parties filed proposed orders and the case was submitted on January 24. On January 27, 2017, the court filed a judgment and order against Mr. Fair and in favor of VPF in the amount of $184,000.
B. The Trial Court’s Findings of Fact
The court made extensive findings of fact that were incorporated into the judgment, which we summarize here.
VPF engaged Pacific Bay to source and broker a commercial loan. VPF worked with Pacific Bay broker Daguman, who contacted Waldman at Capital about a loan opportunity “that might be suitable to VPF.” Daguman and Waldman, who both would earn a commission if the loan closed, made representations to VPF that the loan transaction they proposed was legitimate.
The loan terms were contained in a June 2011 Joint Working Agreement presented to VPF by Daguman. “Under the terms of the transaction, VPF would be required to deposit $1 million dollars into the escrow account identified in the Joint Working Agreement and the lender, [Denolpa], through its bank, would then cause $20 million dollars to be transferred to VPF within ten banking days.”
The Joint Working Agreement identified Mr. Fair as the escrow agent, and Mr. Fair’s account as the escrow account for the proposed transaction. On June 8, 2011, VPF wire transferred $1 million into Mr. Fair’s Interests on Lawyers Trust Account (IOLTA) in accordance with the Joint Working Agreement. At trial, Mr. Fair first denied but then admitted that “he had the Joint Working Agreement in his possession when he received VPF’s $1 million dollars into his client trust account.”
On June 9, 2011, Daniel Shaheen from Denolpa sent an e-mail to VPF, with a copy to Mr. Fair. Shaheen told VPF that Mr. Fair “ ‘has your money,’ ” and that Denolpa had “ ‘procured the instrument as you know.’ ” Shaheen also said that Mr. Fair would contact VPF “regarding disbursing the $1 million to conclude the transaction.” Mr. Fair received Shaheen’s June 9 e-mail and did not inquire about any representation that was made in it or respond that there was any confusion about what it said. Nor did he “disclaim the representations in the email.”
On June 9, 2011, Mr. Fair contacted VPF, and, “consistent with Mr. Shaheen’s earlier email that day,” indicated that “he was prepared to disburse the wired funds and the loan proceeds.” Mr. Fair stated that Shaheen had directed him to disburse a portion of the $1 million as specified on a list of people, accounts and amounts, and he requested that VPF confirm that directive. Mr. Fair also inquired about a discrepancy between the account from which the $1 million deposit was paid and the account to which the loan proceeds were to be transferred, seeking clarification so that the proceeds would be deposited into the correct account.
VPF provided written responses to each of Mr. Fair’s inquiries. It gave Mr. Fair “written authorization to disburse ‘said funds as required by said documentation and directions received from Mr. Shaheen for the purpose of completing the financial transaction.’ (Exhibit 7).” And, VPF also let Mr. Fair “know that he was correct in seeing that there was a difference between the account from which the $1 million originated and the account to which the loan proceeds were to be disbursed. (Exhibit 8).”
At trial, Mr. Fair testified that he never received the $20 million in loan proceeds. But Mr. Fair did not tell anybody that he did not receive these proceeds or that he was going to make disbursements from the $1 million even though he did not have the loan proceeds. Mr. Fair “never, at any time, told VPF he was disbursing any or all of the $1 million without having confirmed the corresponding obligation that $20 million in loan proceeds was available to disburse to VPF.”
VPF understood that Mr. Fair would make the following disbursements from his client trust account “in order to facilitate transfer of the loan proceeds to VPF”: $150,000 to Gerald DeSadier; $180,000 to Joyce Miller; and $300,000 to Daniel Shaheen. “VPF authorized these disbursements based on the conversation and writings with Mr. Fair that the loan proceeds were available to be transferred and the authorizations were needed to complete the transaction. VPF would not have approved these disbursements had it understood that the loan proceeds were not ready to be or would never be transferred to it.”
Later on June 9, 2011, a client of Mr. Fair by the name of Aaron Ransom instructed Mr. Fair to disburse $300,000 to the Downtown Ransom Group. Ransom was not a party to the Joint Working Agreement, Mr. Fair never disclosed to VPF that he disbursed $300,000 of the $1 million to Ransom, and VPF never approved this disbursement.
On June 14, 2011, Shaheen instructed Mr. Fair to make disbursements from the $1 million in the client trust account to (1) Pamala Walker and (2) attorneys Protopapas and Spiegelberg, each in the amount of $35,000. Neither payee was a party to the Joint Working Agreement, Mr. Fair did not disclose to VPF that he was going to make these disbursements, and VPF did not approve these disbursements. Later that day, Shaheen authorized Mr. Fair to deduct $1,500 from the disbursement to the Protopapas firm to pay himself for his “ ‘escrow agent’ ” fees. Mr. Fair did not tell VPF that he paid himself out of the $1 million fund, or that he obtained authorization from Shaheen to do so. VPF did not approve the payment Mr. Fair made to himself.
Mr. Fair was the only person who could disburse funds from his client trust account, and he “did not issue Form-1099s to any of the recipients of his disbursements.”
When VPF did not receive its loan, it asked Mr. Fair for an accounting of his client trust account regarding this transaction. Mr. Fair refused without providing any explanation. VPF filed a complaint about the matter with the Michigan Attorney Grievance Commission. In April 2013, Mr. Fair provided a written response to an inquiry from the commission, “at which point VPF was finally provided with an accounting as to who received what sums of the $1 million deposited to Mr. Fair’s client trust account and confirming he never received the $20 million of loan proceeds into his account.”
When the Pacific Bay defendants and their insurer executed a settlement with VPF, they were required to pay a total of $450,000. These parties would not “have had to pay anything in settlement if Mr. Fair had not disbursed the $1 million dollars from his trust account and instead either held the sum pending receipt of the loan proceeds or returned the funds to VPF upon learning that the loan proceeds were not available to be transferred per the Joint Working Agreement.”
C. The Trial Court’s Conclusions of Law
The trial court made the following conclusions of law, which were incorporated into the judgment:
“1. By accepting VPF’s $1 million dollars into his IOLTA client trust account, Mr. Fair was acting as the fiduciary of VPF.
“2. Attorneys often receive payments on behalf of their clients from third parties, which the attorney agrees to hold ‘in escrow’ or ‘in trust’ pending the client’s performance of a contract (e.g., payments received as a deposit on purchase of the client’s property, or stock certificates received in connection with a stock sale and/or transfer). ‘When an attorney receives money on behalf of a third party who is not his client, he nevertheless is a fiduciary as to such third party.’ (Johnstone v. State Bar (1966) 64 Cal.2d 153, 155–156—money received on behalf of non-client lienholder; Crooks v. State Bar (1970) 3 Ca1.3d 346, 355—lawyer serving as escrow holder for sale of business.)
“3. The elements of a cause of action for indemnity are (1) showing of fault on the part of the indemnitor and (2) resulting damage to the indemnitee for which the indemnitor is equitably responsible. (Bailey v. Safeway, Inc. (2011) 199 Cal.App.4th 206, 217.)
“4. Equitable indemnity includes the entire range of possible apportionments, from no right to any indemnity to a right of complete indemnity. Total indemnification is just one end of the spectrum of comparative equitable indemnification. (Far West Financial Corp. v. D&S Co., Inc. (1988) 46 Cal.3d 796, 808.)
“5. Mr. Fair was the escrow agent for the loan transaction described in the Joint Working Agreement. He was negligent in handling VPF’s $1 million deposit because he disbursed those funds without proper and complete disclosures and without verifying that loan proceeds were ready and available to be transferred to VPF to complete the financial transaction.
“6. Mr. Fair’s negligence in the handling of VPF’s funds was a substantial factor in causing VPF’s harm. Specifically, VPF lost the entire $1 million dollar deposit it made into Mr. Fair’s client trust account.
“7. But for Mr. Fair’s negligent handling of VPF’s funds, Cross-Complainants Pacific Bay, Kagan, Daguman, and their insurer Western World Insurance Company, would not have paid $450,000 to VPF to relieve themselves of liability for VPF’s loss of $1 million dollars. Pacific Bay, Kagan, Daguman, and Western World Insurance Company, should not have to pay for the fault of Mr. Fair in disbursing the funds since the handling of the funds and disbursement was out of their control. They would not have collectively paid $450,000 had Mr. Fair properly handled the escrowed funds.
“8. Once the $1 million was transferred to Mr. Fair’s account, only Mr. Fair had control over the account and only he could disburse the funds. At that point, none of Pacific Bay, Kagan, Daguman or any other defendant besides Mr. Fair had control over such funds. By handling and disbursing the funds as he did, without proper authorization and disclosure, and by failing to timely account for the funds, Mr. Fair exposed Pacific Bay, Kagan, Daguman (and their insurance carrier, Western World Insurance Company) to damages caused by the acts and omissions of Mr. Fair. There was no evidence that any of the distributees did anything for the monies that were disbursed to them and the testimony from Mr. Fair was that none of the distributees received a 1099 statement so they gained these funds without any corresponding consideration to VPF and without any reporting to tax authorities that they received these sums; yet Mr. Fair called none of these parties to testify or submit evidence in his defense.
“9. In computing the amount of restitution, the Court finds that $180,000 to $185,000 is the appropriate range either by assigning to Mr. Fair a 40% share of liability for the $450,000 amount or assessing 50% of the amounts for which Mr. Fair had no authorization—$370,000. Accordingly, the Court awards $182,500 plus the return of the $1,500 escrow fee for a total of $184,000 payable to VPF within 90 days of the Order.”
II. DISCUSSION
A. Standard of Review
Mr. Fair erroneously contends that he is entitled to de novo review. Our standards of review are grounded in the fundamental principle that the judgment is presumed correct and that error must be affirmatively shown by the appellant. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) If an appellant challenges a finding of fact, it is his burden to establish the record lacks substantial evidence to support it. (Piedra v. Dugan (2004) 123 Cal.App.4th 1483, 1489 [“ ‘The substantial evidence standard of review is applicable to appeals from both jury and nonjury trials.’ ”].) When, as here, the “statement of decision sets forth the factual and legal basis for the decision, any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision. [Citations.]” (In re Marriage of Hoffmeister (1987) 191 Cal.App.3d 351, 358.) By contrast, when the appellant alleges a pure error of law, that does not involve the resolution of disputed facts, our standard of review is de novo. (Topanga and Victory Partners v. Toghia (2002) 103 Cal.App.4th 775, 779–780.)
B. Deficiencies in the Appellate Record Warrant Summary Affirmance
When Mr. Fair filed this appeal, he elected to proceed without a record of the oral proceedings in the superior court. He also elected to file an appendix instead of using a clerk’s transcript. But Mr. Fair did not file a proper appendix. With each of his appellate briefs, he filed a bare-bones “Index” with no pagination, which contains a copy of the judgment and a few documents labeled as “Exhibits.” Mr. Fair’s briefs contain many assertions that are not supported by a citation to his index, as well as references to documents that are not in that index.
The combined effect of these shortcomings is that Mr. Fair cannot overcome the presumption that the judgment is correct. Indeed, Mr. Fair’s failure to comply with these basic procedural requirements would justify a summary affirmance of the judgment or, alternatively, a dismissal of this appeal. (Foust v. San Jose Construction Co., Inc. (2011) 198 Cal.App.4th 181,185–188; In re Marriage of Wilcox (2004) 124 Cal.App.4th 492, 498.) However, VPF filed a Respondent’s Appendix along with an appellate brief in support of the judgment, which allows us to discuss why Mr. Fair’s claims lack merit.
Our review is framed by the settled rule that an appellant cannot challenge the sufficiency of the evidence to support a judgment when he has failed to provide the court with a transcript of the oral proceedings at trial. (Estate of Fain (1999) 75 Cal.App.4th 973, 992; see generally, Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2017) ¶ 4:3, p. 4-2.) Because Mr. Fair cannot dispute the sufficiency of the evidence to support the trial court’s findings of fact, we accept those findings as true. (Rael v. Davis (2008) 166 Cal.App.4th 1608, 1617.)
C. Mr. Fair’s Claims Lack Merit
Mr. Fair contends that the indemnity claim Pacific Bay assigned to VPF fails as a matter of law. He reasons that the Pacific Bay defendants could not have held him jointly liable for damages they caused to VPF because Mr. Fair had no contractual relationship with Pacific Bay.
“In general, indemnity refers to ‘the obligation resting on one party to make good a loss or damage another party has incurred.’ [Citation.]” (Prince v. Pacific Gas & Electric Co. (2009) 45 Cal.4th 1151, 1157.) California law recognizes two types of indemnity, (1) express indemnity, which is expressly provided for by contract; and (2) equitable indemnity, which arises from the equities of particular circumstances. (Ibid.) “Unlike express indemnity, traditional equitable indemnity requires no contractual relationship between an indemnitor and an indemnitee. Such indemnity ‘is premised on a joint legal obligation to another for damages,’ but it ‘does not invariably follow fault.’ [Citation.] Although traditional equitable indemnity once operated to shift the entire loss upon the one bound to indemnify, the doctrine is now subject to allocation of fault principles and comparative equitable apportionment of loss. [Citations.]” (Id. at p. 1158, fn. omitted.)
Thus, contrary to Mr. Fair’s arguments here, VPF did not have to establish that Mr. Fair had a contract with Pacific Bay to hold Mr. Fair liable for a portion of VPF’s damages. Rather, “[e]quitable indemnity allows a defendant to ‘seek apportionment of loss between the wrongdoers in proportion to their relative culpability.’ ” (Starbucks Corp. v. Amcor Packaging Distrib. (E.D. Cal. Nov. 4, 2014) 2014 U.S. Dist. Lexis 156720, at pp. *8–*10, quoting Gem Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419, 426.)
In a separate argument, Mr. Fair challenges the trial court’s finding that he was negligent for mishandling VPF’s $1 million payment. Mr. Fair appears to believe that he did not owe VPF a duty of care with respect to these funds because (1) his relationship with VPF was subject to an “Escrow Trust Agreement,” (2) the Escrow Trust Agreement was part of the Joint Working Agreement, and (3) Denolpa (his client) did not breach the Joint Working Agreement.
Mr. Fair’s poorly reasoned theory as to why Denolpa did not breach the Joint Working Agreement is irrelevant because Mr. Fair’s liability for equitable indemnity does not arise from a contract. Rather, the trial court’s findings show that Mr. Fair was VPF’s fiduciary because he acted as an escrow agent for both Denolpa and VPF. Specifically, Mr. Fair (1) accepted VPF’s $1 million payment on behalf of his client Denolpa, and he also (2) held the $1 million payment in his trust account on behalf of VPF pending Denolpa’s performance of its obligation to fund the $20 million loan. Mr. Fair breached his fiduciary duty to VPF because he negligently handled VPF’s $1 million deposit by disbursing those funds “without proper and complete disclosures and without verifying that loan proceeds were ready and available to be transferred to VPF to complete the financial transaction.”
Mr. Fair next argues that the trial court erred by rejecting his multiple defenses to the claim for equitable indemnity. According to Mr. Fair, undisputed evidence that VPF authorized Mr. Fair to make disbursements from the $1 million deposited into Mr. Fair’s trust account proves that VPF: (1) “waived [its] rights to the $1,000,000.00 and how the money was to be distributed”; (2) consented to “actions” by Mr. Fair that allegedly “caused its damages”; (3) assumed the risk that it would suffer injury; (4) executed a “release,” which allowed Mr. Fair to make the challenged disbursements; (5) made a “bilateral mistake” by instructing Mr. Fair to make the disbursements, in that “both parties were mistaken about whether the $20,000,000.00 loan was available or in place”; and (6) is estopped from denying that it authorized the disbursements that allegedly caused it damage.
On this record, we cannot determine whether these defenses were even presented at trial. If they were, the trial court implicitly rejected them by making the factual findings we have summarized above. As we have already explained, Mr. Fair’s failure to present an adequate appellate record precludes him from challenging these findings.
In his reply brief, Mr. Fair contends that trial Exhibit 7 constitutes uncontroverted evidence that on June 9, 2011, VPF consented in writing to “disburse the funds.” Exhibit 7, which is included in Mr. Fair’s indices, consists of a few cryptic e-mail messages, and a June 9, 2011 letter VPF sent to Mr. Fair. The letter, signed by VPF’s managing member Daniel Rottinghaus, stated that it was VPF’s understanding that Mr. Fair had “been provided a copy of the loan agreement,” and that Mr. Fair had “confirmed receipt of the deposit of funds.” The letter authorized Mr. Fair to “disburse said funds as required by said documentation and directions received from [the lender] for the purpose of completing the financial transaction.”
Exhibit 7 does not prove any of the defenses Mr. Fair purportedly asserted at trial. This exhibit is consistent with the trial court’s express findings as outlined above, including that “VPF authorized these disbursements based on the conversation and writings with Mr. Fair that the loan proceeds were available to be transferred and the authorizations were needed to complete the transaction.” Furthermore, as our factual summary reflects, the disbursements that were allegedly necessary to complete the loan transaction were not the only disbursements that Mr. Fair made from VPF’s $1 million payment. The trial court found that Mr. Fair also made unapproved transfers from his client trust account to the Ransom group, the Protopapas firm, Walker, and Mr. Fair himself. Indeed, it was these additional disbursements, which totaled $370,000, that the court used to calculate Mr. Fair’s share of the damages.
Finally, Mr. Fair claims that he established the defense of unclean hands based on laches. Without record support, Mr. Fair argues that VPF behaved improperly by waiting four years to pursue its claim against Mr. Fair, which prejudiced his ability to adequately prepare a defense. However, VPF did not wait four years to pursue this claim; it was assigned to VPF as part of the 2015 settlement. Furthermore, Mr. Fair delayed the resolution of this case by refusing to provide VPF with an accounting until he was compelled to do so by the Attorney Grievance Commission. He also postponed answering the cross-complaint by erroneously claiming that the court lacked jurisdiction over him. Finally, and in any event, Mr. Fair fails to articulate how he was prejudiced in his ability to prepare a defense.
III. DISPOSITION
The judgment is affirmed. Respondent is awarded costs of appeal.








_________________________
SMITH, J.*



We concur:


_________________________
STREETER, Acting P. J.


_________________________
REARDON, J.




















* Judge of the Superior Court of California, County of Alameda, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.