Remington v. Wade

1

JON REMINGTON et al., Plaintiffs and Respondents, v. STEPHEN R. WADE, Defendant and Appellant.

H050667

California Court of Appeals, Sixth District

March 22, 2024

NOT TO BE PUBLISHED

Santa Clara County Super. Ct. No. 17CV310715

LIE J.

Plaintiffs^[1] sued Sierra Land Associates LLC seeking a declaratory judgment establishing their title to real property on the ground that Sierra failed to exercise its unassignable option to purchase the property. Stephen R Wade was Sierra's counsel, one of its two controlling members, and, as revealed on the eve of trial, Sierra's assignee as to the disputed option. On this revelation, the parties stipulated Wade was the real party in interest for the defense. Prevailing at trial, plaintiffs secured a judgment and fee award against Sierra. Wade appeals from the latter order adding him as a judgment debtor, contending the trial court exceeded its jurisdiction and abused its discretion under Code of Civil Procedure section 187.^[2] We affirm.

I. BACKGROUND

Sierra owned real property subject to a loan evidenced by a promissory note and secured by a deed of trust. Wade began representing Sierra by 2011, when Sierra filed for bankruptcy. In 2013, facing nonjudicial foreclosure on the property, Sierra claimed the loan was usurious. To resolve the dispute, Sierra entered a settlement agreement with Remington; Drew Winkler; Commercial Estate Management, LLC; Eric Brandenburg, Trustee of the Eric Brandenburg Separate Property Trust dated August 14, 2001; and Karen D. Brandenburg. As Sierra's counsel, Wade was privy to the settlement negotiations and was named in the settlement agreement as a person entitled to copies of certain notices.

Under the settlement agreement, Sierra executed in favor of Remington and the Brandenburgs a deed in lieu of foreclosure, which was recorded on August 5, 2013. In return, Remington and the Brandenburgs entered an option agreement with Sierra.

Under the option agreement, Sierra acquired the nonassignable right to purchase the property for $300,000 within three years. Failure to timely exercise the option, failure to pay the $300,000 by the close of a 60-day escrow, or assignment of the option before the close of escrow would constitute a default. Sierra provided Remington and the Brandenburgs a quitclaim deed, which they would be entitled to record if Sierra defaulted.

In early 2015, Wade learned that Sierra's two members lacked "the financial wherewithal to pursue development of the property." So Wade agreed to "fund [development] at least through the entitlement of the property," and one of the members then assigned his membership interest to Wade.

Later that year, after Wade balked at the amount he would need to invest in the property, Sierra's other member and its manager/former member orally agreed that Sierra would assign the option to him. The assignment required Wade to assume all of Sierra's obligations under the option agreement. Sierra did not then disclose any assignment to plaintiffs.

Neither did Wade, who as Sierra's counsel instead notified Remington and the Brandenburgs that Sierra was exercising the option.^[3] When no one paid the purchase price, Remington and the Brandenburgs instructed the title company to record the quitclaim deed. Wade objected. The deed went unrecorded.

In 2017, Remington, Lee Brandenburg as successor trustee of the Eric Brandenburg Separate Property Trust dated August 14, 2001, and Karen D. Brandenburg sued Sierra, asserting causes of action for breach of the option agreement and declaratory relief establishing their title to the property.^[4]

Sierra, represented only by Wade, answered the complaint in 2018, after an unsuccessful motion for change of venue. Sierra's answer made no reference to assignment of the option agreement. Rather, Sierra's central defenses in the case were that the settlement agreement was a disguised security device or an equitable mortgage and that plaintiffs' predecessors in interest improperly refused to extend the escrow period.

In 2019, Sierra, represented only by Wade, responded to plaintiffs' form interrogatories. The responses identified Wade, as Sierra's attorney, as an individual with personal knowledge of each of Sierra's affirmative defenses.

The day before the 2021 trial, plaintiffs' counsel informed Wade that Sierra had been suspended by the California Secretary of State and the California Franchise Tax Board. Counsel advised Wade that plaintiffs would move in limine for an order barring Sierra from presenting any defense at trial. At that, Wade disclosed the assignment.

The first day of trial, the parties stipulated that Wade, as Sierra's assignee, was "the Real Party in Interest to this action as Defendant." When plaintiffs later noted that their written motion in limine to disqualify Sierra remained pending, Wade moved to substitute himself for Sierra as the party defendant. Plaintiffs opposed the request on the ground that Sierra had no right to assign the option. Rather than rule on Wade's motion, the court left the issues presented by plaintiffs' motion in limine "hanging," citing ambiguity as to when Sierra was suspended, whether Sierra could reinstate itself, and ultimately whether "we . . . have to mess around with whether they're assignments, or non-assignments or otherwise." Plaintiffs withdrew their motion in limine the next day, after the close of evidence. The court never ruled on Wade's motion to substitute himself for Sierra as a party.

The trial court found for plaintiffs on their declaratory relief cause of action.^[5] The court determined that the settlement agreement was neither a disguised security interest nor an equitable mortgage but an absolute transfer of title. Further, the court found that Sierra forfeited its option by failing to properly exercise it. Alternatively, the court found that Sierra's assignment to Wade, if valid, was an "outright violation of the option agreement" that negated Sierra's exercise of the option.

The trial court entered a declaratory judgment for plaintiffs and against Sierra. The court declared that plaintiffs hold all legal and equitable title in the property and required Sierra to assist in executing and recording necessary documents. The judgment provided for plaintiffs to recover their legal costs according to proof. Never having been formally made a party, despite his stipulated status as Sierra's assignee and real party in interest, Wade was not named in the judgment.

After entry of the judgment, plaintiffs filed a memorandum of costs and a motion for attorney fees. Neither Sierra nor Wade opposed. The trial court awarded $144,946.50 in attorney fees, finding the fee award authorized by both the settlement agreement and the option agreement, and $5,673.28 in costs for plaintiffs and against Sierra.

Plaintiffs then moved to add Wade as a defendant bound by the judgment, including the award of attorney fees and costs. Further, plaintiffs requested an award of an additional $25,012.50 in attorney fees associated with this new motion against Wade. In an unreported hearing, the trial court granted both requests and entered an amended judgment by which Sierra and Wade are jointly liable for a total of $183,120.10 in attorney fees, costs, and postjudgment interest. The trial court based its ruling on both section 368.5 and section 187.

Wade timely appealed from the entry of the amended judgment.

II. DISCUSSION

Trial courts have well-established authority to amend a judgment to add a judgment debtor under section 187. The trial court's exercise of that authority here fell within its discretion under the statute.^[6]

A. The Trial Court's Exercise of its Discretionary Power under Section 187

1. Legal Principles and Standard of Review

As a general rule," 'a judgment may not be entered either for or against a person who is not a party to the proceeding.'" (Fazzi v. Peters (1968) 68 Cal.2d 590, 594 (Fazzi); see also Hassell v. Bird (2018) 5 Cal.5th 522, 549 (conc. opn. of Kruger, J.) (Hassell).) But a court is vested with "all the means necessary" to the exercise of its jurisdiction, including "any suitable process or mode of proceeding . . . conformable to the spirit" of the Code of Civil Procedure. (§ 187.) So" 'a court may amend its judgment at any time so that the judgment will properly designate the real defendants.'" (Dow Jones Co. v. Avenel (1984) 151 Cal.App.3d 144, 149 (Dow Jones).)

The authority to amend a judgment under section 187 encompasses "authority to . . . add a judgment debtor." (Carr v. Barnabey's Hotel Corp. (1994) 23 Cal.App.4th 14, 20 (Carr).) Amendment to add an alter ego of the original defendant, for example, is" '" '" 'an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant.'" '" '" (Favila v. Pasquarella (2021) 65 Cal.App.5th 934, 942 (Favila).)

Even without all "the formal elements" of alter ego liability,^[7] the addition of a judgment debtor may be proper "if the equities overwhelmingly favor the amendment and it is necessary to prevent an injustice." (Favila, supra, 65 Cal.App.5th at p. 949, citing Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP (2012) 212 Cal.App.4th 1181, 1189 (Carolina Casualty); see Carr, supra, 23 Cal.App.4th at pp. 21, 23; see also Dow Jones, supra, 151 Cal.App.3d at p. 148, fn. omitted [agreeing with party's contention that "trial court may add a postjudgment debtor, pursuant to Code of Civil Procedure section 187, subject only to due process considerations"].)

In Carr, the plaintiff sued a defunct business entity that had once operated a hotel, rather than the hotel's current operator. (Carr, supra, 23 Cal.App.4th at...