CB Richard Ellis, Inc. v. Terra Nostra Consultants
178 Cal. Rptr. 3d 640
Cal. Ct. App.2014Background
- CB Richard Ellis (CBRE) had an exclusive listing agreement with Jefferson 38, LLC for a commission on sale of 38 acres in Murrieta; escrow closed July 11, 2005 for $11.8 million but CBRE received no commission.
- Jefferson deposited sale proceeds and quickly distributed nearly all funds to its members; Jefferson later filed a certificate of cancellation.
- CBRE arbitrated against Jefferson and obtained a confirmed arbitral award and judgment against Jefferson, but Jefferson lacked assets to satisfy it.
- CBRE sued Jefferson’s individual members under the dissolved-LLC enforcement statute (former Corp. Code §17355(a)(1)(B)), alleging distributions were made ‘‘upon dissolution’’ and members should be liable up to the amounts they received.
- A jury found Jefferson had dissolved, members received distributions upon dissolution, and awarded CBRE $354,000; the trial court denied CBRE’s posttrial motions for attorney fees and prejudgment interest.
- On appeal the court affirmed the judgment and denial of prejudgment interest, reversed the denial of attorney fees, and remanded to determine amount of fees.
Issues
| Issue | CBRE’s Argument | Defendants’ Argument | Held |
|---|---|---|---|
| Whether jury could find "de facto" dissolution so distributions counted as made "upon dissolution" | De facto dissolution is available; jury may consider whether company ceased ordinary business with intent not to resume | Dissolution should be limited to statutory events (articles/operating agreement term, member vote, or judicial decree); distributions before a statutory event are not "upon dissolution" | Court approved instruction allowing de facto dissolution; former §17355 applies when company effectively wound up and distributed assets (jury properly instructed) |
| Admissibility of confirmed arbitration award at trial | The arbitral award is relevant background; admissible in context to explain why case exists | Admission improperly exposed jury to arbitrator’s factual findings and legal reasoning (collateral estoppel not available) | Trial court erred in admitting the full award, but defendants forfeited prejudice argument; even on review no reasonable probability of a different outcome found |
| Juror misconduct (posttrial declarations alleging juror said extraneous knowledge) | Defendants claimed a juror repeatedly indicated outside knowledge implying defendants’ liability | CBRE produced a detailed denial from the accused juror; trial court found the accusation not credible | Trial court’s credibility finding supported by substantial evidence; denial of new trial affirmed |
| Entitlement to attorney fees and prejudgment interest | Fees: CBRE argued it could recover attorneys’ fees under the listing agreement enforced against members via former §17355; Interest: damages were certain (commission) from close of escrow, so prejudgment interest mandated | Fees: defendants argued fees not recoverable because listing agreement signed by Jefferson, not members; Interest: defendants argued damages uncertain (split commission issues, offsets) | Fees: Court reversed denial — CBRE may recover reasonable fees as prevailing party under contract enforced against members under §17355, but may not recover fees incurred in arbitration against Jefferson. Interest: Court affirmed denial — damages were unliquidated/uncertain so prejudgment interest not required |
Key Cases Cited
- Central Coast Baptist Assn. v. First Baptist Church of Las Lomas, 171 Cal.App.4th 822 (de facto dissolution concept may apply when entity effectively ceases ordinary business)
- Vandenberg v. Superior Court, 21 Cal.4th 815 (confirmed arbitration awards cannot be used to collateral estop issues against nonparties)
- Gottlieb v. Kest, 141 Cal.App.4th 110 (§17355 prevents unjust enrichment by enabling recovery from members who received distributions)
- Reynolds Metals Co. v. Alperson, 25 Cal.3d 124 (nonsignatories sued on a contract may be subject to the contract’s attorney-fee provision under principles of reciprocity)
- Cassim v. Allstate Ins. Co., 33 Cal.4th 780 (civil trial errors require prejudice showing; no reversal absent miscarriage of justice)
- Pannu v. Land Rover N. Am., Inc., 191 Cal.App.4th 1298 (trial court’s evidentiary rulings reviewed for abuse of discretion)
- ABF Capital Corp. v. Berglass, 130 Cal.App.4th 825 (denial of new trial for juror misconduct reviewed for abuse of discretion)
- Ovando v. County of Los Angeles, 159 Cal.App.4th 42 (credibility and juror disclosure issues are factual determinations for the trial court)
- Howard v. American Nat. Fire Ins. Co., 187 Cal.App.4th 498 (prejudgment interest under Civ. Code §3287 requires damages be certain or capable of mathematical calculation)
- Kilroy v. State of California, 119 Cal.App.4th 140 (prior judicial or arbitral factual findings are not proper subjects of judicial notice or admissible as findings absent res judicata/collateral estoppel)