Shalikar v. Shalikar CA4/2 ( 2014 )

Filed 11/13/14 Shalikar v. Shalikar CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
OLGA SHALIKAR et al.,
Plaintiffs and Appellants, E056412
v. (Super.Ct.No. RIC419394 &
RIC419424)
MOHAMMAD I. SHALIKAR et al.,
OPINION
Defendants and Respondents.
MOHAMMAD I. SHALIKAR et al.,
Plaintiffs and Respondents,
v.
TOURYALAI SHALIKAR et al.,
Defendants and Appellants.
APPEAL from the Superior Court of Riverside County. John W. Vineyard, Judge.
Affirmed.
1
The Law Office of John Derrick and John Derrick for Plaintiffs, Defendants, and
Appellants.
Law Offices of Lawrence R. Bynum and Lawrence R. Bynum for Plaintiffs,
Defendants, and Respondents.
I. INTRODUCTION
Plaintiff, defendant, and appellant Touryalai Shalikar and plaintiff, defendant, and
respondent Mohammad Shalikar are brothers.1 They jointly owned certain businesses
and real property, including four parcels of land in Hesperia. They have been litigating
disputes regarding these properties and other matters since at least 2004.
In 2006, Touryalai and Mohammad entered into a settlement agreement. The
agreement called for Touryalai to transfer his interest in the four Hesperia parcels to
Mohammad and for Mohammad to transfer other property to Touryalai. For the next
three years, neither side performed their obligations under the agreement or demanded
that the other do so. In the meantime, they sold three of the four Hesperia parcels to the
City of Hesperia (the City) in response to the City’s threat of condemnation proceedings.
The proceeds for the parcels were split evenly between Touryalai and Mohammad. The
parties continued to jointly hold one Hesperia parcel.
1 Because Touryalai and Mohammad share the same last name, we will refer to
them by their first names. Touryalai’s and Mohammad’s wives are also parties to the
underlying litigation and this appeal. In their briefs on appeal, both sides refer only to the
brothers’ names in the interests of brevity. Without meaning any disrespect for any party,
we will abide by that convention for the sake of brevity as well as avoiding confusion.
2
In 2009, as the trial between them began, Mohammad moved to have judgment
entered on the settlement agreement pursuant to section 664.6 of the Code of Civil
Procedure.2 Over Touryalai’s opposition, the court granted the motion. Soon afterward,
both sides filed motions to interpret and enforce the agreement. In ruling on these
motions, the court concluded that the four jointly held Hesperia parcels were not covered
by the agreement. Mohammad appealed to this court and, in an unpublished opinion, we
reversed. (Shalikar v. Shalikar (Mar. 10, 2011, E050447) [nonpub. opn.] (Shalikar I).)3
We concluded that the agreement and judgment called for Touryalai to transfer his
interest in the four Hesperia parcels to Mohammad. We modified the court’s order to
direct Touryalai to transfer his interest in the one Hesperia parcel that remained jointly
held to Mohammad. As for the proceeds Touryalai obtained from the sale of the three
parcels to the City, we directed the trial court to consider that issue upon remand.
Following remand, an evidentiary hearing was held to consider the remaining
issues. The trial court ordered Touryalai to pay to Mohammad the amount he received in
exchange for the three sold parcels, plus prejudgment interest. Touryalai appealed.
2 All further statutory references are to the Code of Civil Procedure unless
otherwise indicated. Section 664.6 provides: “If parties to pending litigation stipulate, in
a writing signed by the parties outside the presence of the court or orally before the court,
for settlement of the case, or part thereof, the court, upon motion, may enter judgment
pursuant to the terms of the settlement. If requested by the parties, the court may retain
jurisdiction over the parties to enforce the settlement until performance in full of the
terms of the settlement.”
3 We take judicial notice of our opinion in Shalikar I and of the record on appeal
in that case. (Evid. Code, §§ 452, subd. (d), 459, subd. (a).)
3
We affirm.
II. SUMMARY OF FACTS AND PROCEDURAL HISTORY
A. Background: The Litigation, the Settlement Agreement, and the Judgment
Touryalai sued Mohammad, among others, in 2004. In August 2005, Touryalai
filed a first amended complaint alleging disputes concerning certain business and real
property transactions involving the parties. Touryalai sought a variety of remedies,
including rescission, specific performance, damages, quiet title, partition and accounting,
and declaratory relief.4 Among the properties Touryalai sought to partition were various
parcels he owned jointly with Mohammad in Hemet, Victorville, and Hesperia.
In August 2006, the parties entered into a written settlement agreement. The
agreement consisted of five numbered paragraphs. Under the first paragraph,
Mohammad was to transfer certain property in Hemet and Sun City to Touryalai. Under
the second paragraph, Touryalai was to transfer to Mohammad his interest in a parcel of
land in Victorville and an unspecified “4 parcels of land” in Hesperia. The third
paragraph required Touryalai to pay $150,000 to another family member; paragraph four
addressed restrictions on the parties’ abilities to compete against each other; and
paragraph five provided for the removal of liens on Mohammad’s properties in Hesperia
and Homeland.
4 The register of actions for the case indicates that Mohammad commenced a
separate action against Touryalai, that the two actions were consolidated, and that
Mohammad subsequently filed a cross-complaint in the consolidated case. The pleadings
filed by Mohammad are not included in our record on appeal.
4
Despite the agreement, the litigation between the parties continued.5 Mohammad
did not transfer or tender the Hemet or Sun City properties to Touryalai, and Touryalai
did not transfer or tender the Hesperia or Victorville properties to Mohammad. In
February 2008, Touryalai filed a second amended complaint that included the claims
asserted in the first amended complaint and added additional claims. It did not mention
the settlement agreement.
In 2007 or 2008, the City of Hesperia contacted Touryalai about the City’s interest
in acquiring, by eminent domain if necessary, an easement over one of the jointly held
Hesperia parcels for a drainage project. Touryalai referred the City to Mohammad
because Mohammad “has experience in real estate.” Mohammad thereafter conducted
most of the negotiations with the City.
Although the City sought an easement over one parcel only, Mohammad
negotiated to have the City purchase three of the Hesperia parcels. The initial form of
escrow instructions called for the purchase money to be disbursed to Touryalai and
Mohammad jointly. The escrow instructions were thereafter modified to provide for
separate checks to each party. According to Touryalai, this was done because
Mohammad “was very broke at the time and . . . wanted to split the checks” so that each
5 Mohammad explains that shortly after the settlement agreement was signed, two
nephews who had not signed the agreement intervened and joined in the action.
Touryalai subsequently added other parties to the case. Because the new parties to the
lawsuit were not parties to the settlement agreement, Mohammad was “prevented” from
moving to enforce the settlement. In July 2009, the additional parties were dismissed
from the lawsuit and, one week later, Mohammad moved to have judgment entered based
on the settlement agreement.
5
received one-half of the proceeds. Mohammad testified that while he agreed to separate
checks, he believed their agreement was in effect at that time and that the proceeds did
not affect the agreement. The transaction closed in October 2008. They each received
$633,517.66. According to Touryalai, once they received their checks, they “never
talked about it.”
In July 2009, as trial in the case commenced, Mohammad filed a motion to have
judgment entered pursuant to the terms of the settlement agreement. In opposing the
motion, Touryalai’s counsel argued that “there are issues of enforcement that will
immediately pop up, and the parties would be obliged to file motions to deal with those
questions of interpretation and modification, whatever those issues are.” He further
asserted that granting the motion would “spark a whole series of issues that we’ll have to
deal with which will result in post ruling motions.”
After the court indicated it would grant the motion, the court asked Touryalai’s
counsel whether he would object to the court’s continuing jurisdiction. The attorney
responded: “I really do not, Your Honor, because it’s pretty clear to me that the Court
may be called upon to make further orders to carry out the judgment, whatever the
judgment is.” None of the parties personally requested or expressly stipulated to the
court’s continuing jurisdiction.
The judgment attached and incorporated the settlement agreement. The judgment
further provides: “Pursuant to the parties’ stipulation, the Riverside Superior Court
retains jurisdiction to enforce the judgment.”
6
B. Postjudgment Motions and Shalikar I
Within three months after the judgment was entered, both sides filed motions
calling for the interpretation and enforcement of the judgment. Mohammad filed a
motion to enforce the judgment in October 2009. According to Mohammad, Touryalai
was required under paragraph 2 of the settlement agreement to transfer his interest in a
certain Victorville parcel and four specific parcels in Hesperia that they had held jointly
when the agreement was made, including the three parcels that were sold to the City in
2008. Mohammad requested an order directing Touryalai to execute deeds to the
remaining Hesperia parcel and the Victorville parcel and, as to the three sold parcels, a
writ of execution covering Touryalai’s proceeds from the sale.
Touryalai opposed the motion and asserted that the “4 parcels of land” referenced
in paragraph 2 of the settlement agreement are not the jointly held Hesperia parcels
identified by Mohammad, but rather four different parcels held in Mohammad’s name
alone.
In November 2009, Touryalai filed a motion for an injunction to prevent
Mohammad from competing against Touryalai in violation of the settlement agreement.
According to Touryalai, the motion was made “in aid of enforcement of the judgment”
and recited that, “[p]ursuant to the stipulation of the parties, the court retained jurisdiction
to enforce the judgment.”
Mohammad’s motion to enforce the judgment and Touryalai’s motion for an
injunction were heard together in January 2010. The court granted Mohammad’s motion
7
in part and issued orders directing the transfer of certain properties among the parties.
However, the trial court agreed with Touryalai’s interpretation of paragraph 2 and,
consequently, made no order concerning the remaining jointly held Hesperia parcel or the
proceeds from the sale of the other three parcels. The court also granted Touryalai’s
motion in part and ordered Mohammad to close a certain business he was operating in
violation of the noncompetition provision of the agreement.
In February 2010, pursuant to the court’s January 2010 orders, Mohammad
transferred to Touryalai the Sun City and Hemet properties and Touryalai transferred to
Mohammad the Victorville property. Touryalai also paid the $150,000 payment required
under paragraph 3 of the agreement.6
Mohammad appealed. In Shalikar I, we agreed with Mohammad and construed
the “4 parcels of land” referenced in paragraph 2 to mean the four Hesperia parcels
identified by Mohammad. With respect to the parcel that was still held jointly by the
parties, we modified the court’s order to require that Touryalai transfer his interest in that
parcel to Mohammad. As for Mohammad’s request that Touryalai be ordered to turn
over his share of the proceeds for the sale of the other three parcels, we stated: “[W]e
think the appropriate remedy is to direct the trial court to consider that request following
remand. . . . [T]he trial court never reached the question of [Mohammad’s] right to the
proceeds. If it has jurisdiction to consider the question, its resolution may involve
6 The agreement called for this payment to be made to Najiba Faizy. After Faizy
assigned her right to the payment to Mohammad, Touryalai made the payment to
Mohammad.
8
equitable considerations, factual determinations, and the exercise of judicial discretion
that are more properly within the province of the trial court. The trial court should be
given the opportunity to address such issues.” Specifically, we concluded: “Upon
motion by [Mohammad] following remand, the court shall consider [Mohammad’s]
request to modify the judgment by providing for an order that [Touryalai] pay
[Mohammad his] share of proceeds from the sale of three jointly held parcels to the City
of Hesperia.”
C. Postremand Motion to Enforce the Judgment
Following remand, Mohammad filed the motion permitted by Shalikar I. He
sought $633,517.33 in principal plus $140,332.50 in prejudgment interest. After the
submission of opposing and reply papers and oral argument, the court ordered an
evidentiary hearing and further briefing.
The evidentiary hearing was held on February 24, 2012. In addition to testimony
from Touryalai and Mohammad, the court heard testimony from a representative of the
City who was involved in the negotiations for the sale of the three Hesperia parcels, the
escrow agent involved in the sale, and a nephew of the parties.
On May 22, 2012, the court issued an order and written findings. The court stated
that “[p]ursuant to the parties’ settlement, [Mohammad was] the equitable owner[] of the
three Hesperia parcels on the date of the sale. (Rogers v. Davis (1994) 28 Cal. App. 4th
1215 [[Fourth Dist., Div. Two] (Rogers)].) Any other result would constitute a windfall
to [Touryalai] and would frustrate the intent of the parties as reflected in their settlement
9
agreement, now judgment. As a result, [Mohammad is] entitled to recover the proceeds
of that sale, less an offset of $59,403.60, along with prejudgment interest . . . plus 10%
post judgment interest . . . .” The offset was based on Touryalai’s payment of mortgage
payments and other expenses relating to the sold Hesperia parcels.
With respect to the issue of whether Mohammad waived his right to the proceeds
of the sale, the court found that Touryalai “did not meet [his] burden of proving that
[Mohammad] acted, voluntarily, in any manner so inconsistent with [his] rights as to
induce a reasonable belief that such rights had been relinquished.”
Touryalai appealed.
III. DISCUSSION
A. Jurisdiction
Touryalai contends that the trial court did not retain jurisdiction after the judgment
was entered. In particular, he asserts that the court’s purported retention of jurisdiction
was ineffective because section 664.6 authorizes the retention of jurisdiction only when
the parties (and not merely their counsel) request it, and the parties did not do so in this
case. As we explain below, we reject this argument because, regardless of whether the
parties must personally request the court to retain jurisdiction under section 664.6, the
court has the inherent power to retain jurisdiction to enforce and interpret the judgment
and to resolve remaining issues to avoid further litigation.
Ordinarily, a trial court’s “‘jurisdiction over the parties and the subject matter . . .
continues until a final judgment is entered . . . .’ [Citation.]” (Diamond Heights Village
10
Assn., Inc. v. Financial Freedom Senior Funding Corp. (2011) 196 Cal. App. 4th 290,
305.) However, a court retains jurisdiction to “compel obedience to its judgments,
orders, and process . . . .” (§ 128, subd. (a)(4).) In cases involving equitable claims and
relief, such jurisdiction has been expressed in broad terms: “‘The jurisdiction of a court
of equity to enforce its decrees is coextensive with its jurisdiction to determine the rights
of the parties, and it has power to enforce its decrees as a necessary incident to its
jurisdiction. Except where the decree is self-executing, jurisdiction of the cause
continues for this purpose, or leave may be expressly reserved to reinstate the cause for
the purpose of enforcing the decree, or to make such further orders as may be necessary.
[Citations.] A court of equity can mold its decrees to suit the exigencies of the case.
[Citation.] Where equity has acquired jurisdiction for one purpose, it will retain that
jurisdiction to the final adjustment of all differences between the parties arising from the
causes of action alleged. [Citations.] Where a court has taken jurisdiction of a suit in
equity it may determine all legal as well as equitable issues in order to completely
dispose of the matters in controversy. [Citations.]’” (Day v. Sharp (1975) 50 Cal. App. 3d
904, 912-913, quoting Klinker v. Klinker (1955) 132 Cal. App. 2d 687, 694; accord,
Balboa Island Village Inn, Inc. v. Lemen (2007) 40 Cal. 4th 1141, 1161.)
The power to retain and exercise postjudgment jurisdiction by a court in equity in
order to interpret the judgment and determine unresolved issues and future problems is
well settled. (See, e.g., Dawson v. East Side Union High School Dist. (1994) 28
Cal. App. 4th 998, 1044-1045; Day v. Sharp, supra, 50 Cal.App.3d at pp. 911-913;
11
Rynsburger v. Dairymen’s Fertilizer Coop., Inc. (1968) 266 Cal. App. 2d 269, 278-279
[Fourth Dist., Div. Two]; Ecker Bros. v. Jones (1960) 186 Cal. App. 2d 775, 787; see also
Roden v. AmerisourceBergen Corp. (2005) 130 Cal. App. 4th 211, 217 [“court showed
exquisite foresight” in retaining jurisdiction “to entertain and resolve [future
employment] benefits issues”]; see generally 2 Witkin, Cal. Procedure (5th ed. 2008)
Jurisdiction, § 420, pp. 1070-1071.) Indeed, even in the absence of an express
reservation of jurisdiction, “[a]n equity court has inherent power to make its decree
effective by additional orders affecting the details of performance . . . .” (Barnes v.
Chamberlain (1983) 147 Cal. App. 3d 762, 767; accord, Palmco Corp. v. Superior Court
(1993) 16 Cal. App. 4th 221, 225.)
The postjudgment exercise of jurisdiction in equity cases is supported by policies
favoring judicial economy and finality; by resolving issues that remain after judgment is
entered, the court is able “to do full and final justice between [the parties] without the
necessity of filing a new action.” (Day v. Sharp, supra, 50 Cal.App.3d at p. 912; see also
Pailhe v. Pailhe (1952) 113 Cal. App. 2d 53, 64 [in exercising its equitable powers, the
court can, “‘in one action, grant all the relief to which the parties are entitled, although at
law such a result might strictly require several actions.’”].)
Here, there is no dispute that the parties’ claims and the remedies employed to
resolve them are predominately equitable in nature: Touryalai claims included rescission,
12
specific performance, quiet title, partition and accounting, and declaratory relief;7 the
judgment establishes the parties’ rights to real and personal property, requires transfers of
property to reflect those rights, and sets restrictions on the parties’ abilities to compete
against each other. Under the authorities cited above, the court had continuing
jurisdiction to make the “‘final adjustment of all differences between the parties’” and
“‘determine all legal as well as equitable issues in order to completely dispose of the
matters in controversy.’” (Day v. Sharp, supra, 50 Cal.App.3d at pp. 912-913.)
The court’s retention of jurisdiction was particularly appropriate in light of the
recognition by the parties and the court that the entry of judgment would not end the
matter. For example, at the hearing on Mohammad’s motion to have judgment entered,
Touryalai’s counsel argued that “there are issues of enforcement that will immediately
pop up, and the parties would be obliged to file motions to deal with those questions of
interpretation and modification . . . .” The remaining issues include the “interpretation of
the obviously ambiguous language of the document” and “the effect of one or more
parties disabling themselves from performing” under the agreement. When the court
inquired whether Touryalai’s counsel would object to the court’s continuing jurisdiction,
counsel said he would not “because it’s pretty clear . . . that the Court may be called upon
to make further orders to carry out the judgment . . . .”
7 Our record does not include Mohammad’s pleadings. However, in his October
2009 motion to enforce the judgment, Mohammad refers to his “Complaint for Partition
of Real Property and Acctg.”
13
Indeed, soon after the judgment was entered both sides took advantage of the
court’s retained jurisdiction by filing motions calling for the court to interpret and enforce
different provisions of the settlement agreement: Mohammad filed his motion to enforce
the judgment, the ruling on which was the focus of Shalikar I, and Touryalai filed his
motion to enjoin Mohammad from certain competitive practices “in aid of enforcement of
the judgment . . . .” In support of his motion, Touryalai expressly relied on the parties’
stipulation to have the court retain jurisdiction.8
In light of the equitable nature of the claims and the remedies, the near-certainty of
postjudgment disputes, and the interest in avoiding new and multiple lawsuits, the court’s
express retention and exercise of jurisdiction was appropriate and amply supported by the
authorities cited above.
The primary focus of Touryalai’s argument is that the retention of jurisdiction
under section 664.6 is effective only if it was “requested by the parties.” (§ 664.6.)
Touryalai relies on the second sentence of section 664.6, which provides: “If requested
by the parties, the court may retain jurisdiction over the parties to enforce the settlement
until performance in full of the terms of the settlement.” This language was construed in
8 Touryalai’s reliance on the court’s retained jurisdiction to support his
postjudgment motion for injunctive relief arguably supports an argument that he is
judicially estopped from asserting that the court did not have jurisdiction to hear
Mohammad’s motion. (See, e.g., Aguilar v. Lerner (2004) 32 Cal. 4th 974, 986
[“‘“Judicial estoppel precludes a party from gaining an advantage by taking one position,
and then seeking a second advantage by taking an incompatible position.”’”].) Because
Mohammad does not explicitly rely on this theory and it is unnecessary to reach our
decision, we do not decide this issue.
14
Wackeen v. Malis (2002) 97 Cal. App. 4th 429, as requiring that the request to retain
jurisdiction “must be made by the parties, not by their attorneys, spouses or other such
agents.” (Id. at p. 433.) It does not, however, apply here.
The second sentence of section 664 was added to solve “the problem presented in
[one case], where the trial court lost jurisdiction of a case, and hence the ability to enforce
a settlement agreement, because the terms of the stipulated settlement required or
contemplated that the case would be dismissed.” (Wackeen v. Malis, supra, 97
Cal.App.4th at p. 439.) With the addition of the second sentence to section 664.6, even
after a settled case is dismissed, “the court may nevertheless retain jurisdiction to enforce
the terms of the settlement, until such time as all of its terms have been performed by the
parties, if the parties have requested this specific retention of jurisdiction.” (Ibid.; see
also Hines v. Lukes (2008) 167 Cal. App. 4th 1174, 1182 [“The court retains jurisdiction to
enforce a settlement under the statute even after a dismissal, but only if the parties
requested such a retention of jurisdiction before the dismissal.”].)
Here, the court was never presented with the problem that the second sentence of
section 664.6 was intended to resolve. The settlement agreement did not call for the
dismissal of the case and the parties never dismissed the case. Nothing in section 664.6
or the authorities cited by Touryalai abrogates the principles regarding the retention of
jurisdiction discussed above. Thus, if the trial court could retain jurisdiction based on its
inherent powers to enforce the judgment, there was no need to resort to the jurisdiction
retention provision of section 664.6 or to require the personal request or stipulation of the
15
parties. As discussed above, there is ample authority for the court’s retention of
jurisdiction in this case, and it could do so without regard to whether the parties
personally requested it. We therefore reject Touryalai’s argument.
Under separate headings, Touryalai contends that even if the court had jurisdiction
to enforce the judgment, the court’s order to turn over the sale proceeds went beyond
mere enforcement and “changed the terms of the judgment.” There is, he asserts, “a big
difference between a judgment of specific performance and an order to pay money.”9
We conclude that the court’s order was within its jurisdiction. The settlement
agreement and judgment required Touryalai to transfer his interest in the four Hesperia
properties to Mohammad—an equitable remedy within the scope of the claims between
the parties. Because three of the four parcels had been sold, Touryalai could not comply
with the judgment or any order that he transfer his interest in those parcels. Yet
Mohammad had complied with his obligations to transfer the Sun City and Hemet
properties to Touryalai. Thus, if, as Touryalai argues, the court could do nothing further,
Mohammad would be deprived of a key benefit of the settlement agreement (the three
Hesperia parcels) and Touryalai would receive an undeserved windfall (the proceeds
9 We anticipated this issue in Shalikar I when we noted: “[I]t is not clear to us
that the trial court’s retained jurisdiction to enforce the judgment includes the power to
order [Touryalai] to pay money to [Mohammad]. The jurisdiction to enforce a judgment
is ‘reserved to modify[ing] procedural provisions, not to materially change the
adjudication of substantial issues.’ (7 Witkin, Cal. Procedure [(5th ed. 2008)] Judgment,
§ 80, p. 616.) Arguably, an order for the payment of money would be a substantive
change to the judgment beyond a mere procedural modification.” (Shalikar I, supra, at
pp. 19-20.) Because the issue had not been briefed, we declined to express any view
concerning the merits of such an argument. (Id. at pp. 20-21.)
16
from the sale of the parcels). Clearly, “full and final justice” would not be achieved—at
least not without another lawsuit and further litigation. (See Day v. Sharp, supra, 50
Cal.App.3d at p. 912.)
Fortunately, the law does not require such inefficiency. As discussed above,
when, as here, “‘a court has taken jurisdiction of a suit in equity[,] it may determine all
legal as well as equitable issues in order to completely dispose of the matters in
controversy. [Citations.]’” (Day v. Sharp, supra, 50 Cal.App.3d at p. 913.) In Shalikar
I, we specifically directed the trial court to consider whether Touryalai should be ordered
to pay to Mohammad the proceeds Touryalai received from the sale of the three parcels.
That question is thus indisputably an issue that remains in this case, the resolution of
which is necessary for the complete disposition of the matter. The trial court, therefore,
had jurisdiction to determine that issue.
B. The Merits
Touryalai next contends that the court’s decision on the merits was erroneous.
More specifically, he asserts the court erred in applying the doctrine of equitable
conversion and in finding that Mohammad had not waived his right to the sale proceeds.
In addition, Touryalai contends that Mohammad is barred by the doctrine of judicial
estoppel from receiving the relief he sought. We reject these arguments.
1. The Standard of Review
Initially, we reject Touryalai’s argument that we should apply a de novo standard
of review with respect to the trial court’s conclusions. As Touryalai acknowledges, a trial
17
court’s exercise of its equitable powers is generally reviewed for abuse of discretion.
(See Ho v. Hsieh (2010) 181 Cal. App. 4th 337, 345; De Anza Enterprises v. Johnson
(2002) 104 Cal. App. 4th 1307, 1315.) However, Touryalai argues that the court’s order in
this case is analogous to a summary judgment based on equitable defenses, which is
reviewed under the de novo standard. (See, e.g., Johnson v. City of Loma Linda (2000)
24 Cal. 4th 61, 67-68.) We disagree. Rulings on summary judgment motions are
reviewed under the de novo standard because the “‘motions raise only questions of law
regarding the construction and effect of the moving and opposing papers . . . .’
[Citations.]” (Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal. App. 4th 497, 502-503.)
Here, by contrast, the proceeding involved live testimony where the court could observe
the demeanor of the witnesses and assess their credibility. The hearing on the motion
was more akin to a trial than a summary judgment motion. Accordingly, we reject the
contention that we should depart from the deferential standard of review generally
applicable to equitable determinations.10
In reviewing the court’s ruling under the abuse of discretion standard, we observe
that “‘“[t]he discretion of a trial judge is not a whimsical, uncontrolled power, but a legal
discretion, which is subject to the limitations of legal principles governing the subject of
its action, and to reversal on appeal where no reasonable basis for the action is shown.
10 A deferential standard of review is also implicit in Shalikar I, where we
directed the parties to raise these issues in the trial court on remand because their
resolution “may involve equitable considerations, factual determinations, and the exercise
of judicial discretion that are more properly within the province of the trial court.”
(Shalikar I, supra, at p. 21.)
18
[Citation.]”’ [Citations.] The scope of discretion always resides in the particular law
being applied, i.e., in the ‘legal principles governing the subject of [the] action . . . .’
Action that transgresses the confines of the applicable principles of law is outside the
scope of discretion and we call such action an ‘abuse’ of discretion.” (City of
Sacramento v. Drew (1989) 207 Cal. App. 3d 1287, 1297.)
2. Equitable Conversion
Mohammad’s claim to Touryalai’s sale proceeds and the court’s ruling were based
upon the doctrine of equitable conversion. Under this doctrine, “[w]hen a binding
executory contract for the sale of real property is entered into, an equitable conversion of
the property . . . occurs under which the purchaser is deemed to be the equitable owner of
the property and the seller the owner of the purchase money, with an equitable lien on the
property for the balance of the unpaid purchase price. The vendor is regarded as holding
the legal title in trust for the purchaser; the purchaser, in turn, is considered the trustee of
the purchase money for the benefit of the vendor.” (Mamula v. McCulloch (1969) 275
Cal. App. 2d 184, 193-194; see generally Estate of Reid (1938) 26 Cal. App. 2d 362, 367-
370.)
The equitable conversion doctrine “‘is a mere fiction resting upon the principle
that equity regards things which are directed to be done as having actually been
performed where nothing has intervened which ought to prevent such a performance.’
[Citation.]” (Parr-Richmond Industrial Corp. v. Boyd (1954) 43 Cal. 2d 157, 165-166.)
The doctrine will not apply “where the contracting parties demonstrate an intention to the
19
contrary” (id. at p. 166), or “when ‘it would compel an inequitable result . . . .’
[Citation].” (Ocean Avenue LLC v. County of Los Angeles (2014) 227 Cal. App. 4th 344,
352.)
In Alhambra Redevelopment Agency v. Transamerica Financial Services (1989)
212 Cal. App. 3d 1370 (Alhambra Redevelopment), this doctrine was applied to uphold an
award of condemnation proceeds to a purchaser of condemned property who had not yet
obtained title to the property. As the Court of Appeal explained: “[A] purchaser of real
property under a land sales contract is considered an equitable owner of the property and
is vested with the right to any condemnation award. ‘An executory contract to convey
has the effect of vesting the equitable estate in the vendee, leaving in the vendor the
naked legal title. As the equitable owner of the land, the vendee is entitled to any award
which may be made on condemnation of the property.’ [Citations.] [¶] In contrast, the
seller’s rights in the property are extremely limited. . . . [T]he seller only possesses legal
title to the property. [Citation.] The seller is considered to be nothing more than a
trustee, ‘holding the land in trust for the purchaser as security for the payment of the
purchase price until a conveyance of the legal title to the vendee is finally made.’
[Citations.]” (Id. at pp. 1375-1376.)
In the case cited by the trial court in the present case—Rogers, supra, 28
Cal. App. 4th 1215—the doctrine was applied to uphold the right of the
purchaser/equitable owner to receive the excess proceeds from a foreclosure sale of the
subject property. (Id. at p. 1223.) The court explained that, “as the equitable owners of
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the property at the time of the foreclosure sale, plaintiffs would be entitled, in equity, to
the sales proceeds under the doctrine of equitable conversion.” (Ibid., fn. omitted.) By
awarding the sale proceeds to the purchaser, the trial court “properly and fairly fashioned
equitable relief ‘to create substantially the same legal effects that the promised
performance would have created’ [citation], i.e., a judgment which gave [the purchaser]
the benefit of the equity in the property, i.e., the sales proceeds . . . .” (Id. at p. 1224.)
The equitable conversion doctrine can, as a general matter, be applied in the
present case in a straightforward manner. Under the settlement agreement, Touryalai was
contractually obligated to deed his interest in the Hesperia properties to Mohammad.
Mohammad was thus in the position of a purchaser of Touryalai’s interests in the
Hesperia properties and, consequently, the equitable owner of those interests. Although
Touryalai continued to hold his legal interests in the parcels, he held such interests in
trust for Mohammad as security for the purchase price—i.e., the performance of
Mohammad’s obligations under the agreement.
If the Hesperia parcels were condemned or foreclosed upon prior to Touryalai’s
transfer of his interest in the parcels, we could see no reason to distinguish this situation
from that in the Alhambra Redevelopment or Rogers cases and would be compelled to
conclude that Mohammad was entitled to the condemnation or excess foreclosure sale
proceeds, subject to Mohammad’s performance of his obligations. Indeed, it does not
appear that Touryalai would disagree with this.
21
The problem, according to Touryalai, is that the sale of the three parcels did not
come about by condemnation or foreclosure, but by Mohammad’s choice to sell the
parcels. Rogers, Touryalai asserts, is factually distinguishable and inapposite because the
purchaser in Rogers “did not bring about the situation where performance of the contract
became impossible. Here, by contrast, it was uncontroverted that Mohammad chose to
sell the three properties to the City (with Touryalai receiving half the proceeds).” By
doing so, Touryalai contends, Mohammad “intervened” and prevented Touryalai’s
performance of the contract. As such, Mohammad is precluded from invoking the
equitable conversion doctrine. (See Parr-Richmond Industrial Corp. v. Boyd, supra, 43
Cal.2d at pp. 165-166 [equitable conversion applies “‘where nothing has intervened
which ought to prevent such a performance.’”].)
We see no reason why Mohammad’s efforts to sell the Hesperia parcels should
render the equitable conversion doctrine inapplicable and necessarily preclude him from
obtaining the proceeds from that sale when both he and Touryalai agreed to the sale to the
City. Under the equitable conversion doctrine, the equitable conversion occurs upon the
entry into an agreement for the purchase of property. (See Estate of Dwyer (1911) 159
Cal. 664, 675; Estate of Reid, supra, 26 Cal.App.2d at p. 368.) Although its effect may
not become apparent until a subsequent event, such as condemnation in Alhambra
Redevelopment or the foreclosure sale in Rogers, the purchaser nevertheless acquires
equitable title at the time the agreement is made. The seller, so long as he or she retains
legal title, holds such title in trust for the purchaser as security for the purchase price.
22
(Alhambra Development, supra, 212 Cal.App.3d at p. 1376; Orange Cove Water Co. v.
Sampson (1926) 78 Cal. App. 334, 342.) If, prior to the transfer of legal title, the
purchaser/equitable owner desires to sell the purchased parcels and negotiates a price
with a third party, and the seller/legal titleholder agrees to that sale, the proceeds from the
sale would, in substance, take the place of the parcels. In that case, the parties should
have the same status as to the proceeds that they had to the parcels prior to the third party
sale. The equitable owner of the parcels would become the equitable owner of the sale
proceeds; and the holder of the legal title to the parcels would hold the proceeds in trust
for the benefit of the equitable owner. Thus, Touryalai, who held legal title to the parcels
in trust for Mohammad as security for the performance of Mohammad’s obligations
under the agreement, would now hold the sale proceeds in trust for Mohammad for the
same purpose; and Mohammad would have the equitable interest in the cash proceeds
and be entitled to receive them outright upon the performance of his obligations.
Essential to this analysis is Touryalai’s consent to the sale negotiated by
Mohammad. If Touryalai, as one holding legal title as security for Mohammad’s
performance under the agreement, was concerned that the cash proceeds would provide
inadequate security for Mohammad’s performance, he could have refused to sell or
insisted upon additional security as a condition of his approval. Mohammad’s
“intervention” in negotiating a sale did not, as Touryalai contends, prevent Touryalai’s
performance; Touryalai’s performance became impossible only by his consent to the sale
23
to the City. Under these circumstances, Mohammad’s efforts to sell the parcels did not
prevent the application of the equitable conversion doctrine.
As noted above, the equitable conversion doctrine will not apply “when ‘it would
compel an inequitable result . . . .’ [Citation].” (Ocean Avenue LLC v. County of Los
Angeles, supra, 227 Cal.App.4th at p. 352.) The court’s ruling did not produce an
inequitable result; indeed, a contrary result would appear to be inequitable. The essence
of the settlement agreement was that Mohammad would turn over his interest in
properties located in Sun City and Hemet to Touryalai, Touryalai would turn over his
interest in properties located in Hesperia and Victorville to Mohammad, and neither
would compete against the other. Although the agreement appears to have been ignored
in the three years after it was made, Mohammad has since delivered the Sun City and
Hemet properties to Touryalai and has complied with the noncompetition provision; he
has, in short, performed his part of the deal. Touryalai has delivered the Victorville
property and one of the Hesperia properties to Mohammad, but never delivered his
interest in the remaining Hesperia parcels; his performance remains deficient. Although
the sale of the Hesperia parcels to the City has made his full performance to that extent
impossible, fairness and equity compel the conclusion that the proceeds he received from
that sale should be delivered to Mohammad. As the trial court recognized, “[a]ny other
result would constitute a windfall to [Touryalai] and would frustrate the intent of the
parties as reflected in their settlement agreement, now judgment.”
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3. Waiver
Touryalai next contends that Mohammad waived his right to Touryalai’s proceeds
from the sale. The trial court explicitly rejected this argument.
“‘Waiver is the intentional relinquishment of a known right after knowledge of the
facts.’ [Citations.] The burden is on the party claiming waiver ‘to prove it by clear and
convincing evidence that does not leave the matter to speculation, and “doubtful cases
will be decided against a waiver.”’ [Citations.] Waiver may occur by intentional
relinquishment or by conduct so inconsistent with an intent to enforce the right as to
induce a reasonable belief that such right has been relinquished.” (Harper v. Kaiser
Cement Corp. (1983) 144 Cal. App. 3d 616, 619.)
Touryalai points to evidence that Mohammad arranged for the proceeds from the
sale to the City to be paid in separate checks to Touryalai and himself rather than a single
check payable to the parties jointly. We do not believe that this arrangement necessarily
reflects Mohammad’s waiver of his right to the proceeds. Mohammad was indisputably
entitled to one-half of the proceeds from the sale to the City; his and Touryalai’s rights to
the other half was uncertain. Mohammad’s desire for separate checks could have been
motivated by a desire for an immediate payout of his undisputed one-half of the proceeds
without having to wait until the rights to the remainder were determined. This possibility
is suggested by Touryalai’s testimony that he (Touryalai) wanted the proceeds “to go to
the trust account, to be deposited in court or whatever.” However, Mohammad “was very
broke at the time” and told Touryalai that “he did need money” and “wanted to split the
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checks.” This indicates that Touryalai believed that disbursement of the proceeds should
await a judicial determination, thus tying up the entire sum until the rights were
adjudicated, while Mohammad desired immediate disbursement of the proceeds even if
he would only receive one-half the total at that time. That Mohammad desired immediate
and separate disbursement does not necessarily mean that he was relinquishing any claim
he had to the amounts disbursed to Touryalai.
Mohammad also testified that while he agreed to provide for separate checks, he
thought the “settlement agreement was still in effect.” He believed that the payment did
not affect the settlement agreement because he “could have made a different lawsuit and
stop it, but [he] already had the lawsuit and [he] didn’t want to go through another hell.”
Finally, on cross-examination he agreed with Touryalai’s counsel that he allowed
separate checks to be issued even though he understood that Touryalai “would gain
possession of money that would otherwise come to [him] jointly” “because [he] didn’t
want any more headaches with this.” These statements are equivocal and subject to
different interpretations. They could support an inference, as Touryalai suggests, that
Mohammad was relinquishing any claim to half the proceeds to avoid “any more
headaches.” But they could also support the view that Mohammad continued to believe
that the agreement would control the rights to the proceeds and that he agreed to separate
checks only because he was broke and needed some money immediately without the
“headaches” of litigation.
26
Touryalai next asserts that Mohammad’s act of moving to have judgment entered
on the settlement agreement after the three Hesperia parcels had been sold evidences
waiver. This argument assumes the conclusion that Mohammad had no right to the
proceeds from the sale to the City under the settlement agreement. If he did not,
Touryalai would be correct: Having judgment entered on an agreement that did not
entitle Mohammad to the sale proceeds would be strong, if not conclusive, evidence of
waiver. However, as established in the preceding part, Mohammad was entitled to the
proceeds under the agreement (or, at least, the trial court could reasonably conclude he
had that right) with the aid of the equitable conversion doctrine. Because Mohammad
was entitled to the proceeds under the settlement agreement, his effort to have that
agreement enforced as a judgment cannot constitute a waiver of his claim to the proceeds.
Touryalai also points to the following colloquy between his counsel and the trial
court at the hearing to have judgment entered on the settlement agreement:
“[Counsel for Touryalai:] . . . I’m also concerned that when the Court is speaking
of this at this time, it[’]s speaking of a transaction that was done in August, 2006, and
whatever the events are after that, that might affect the rights and liabilities of the parties
are issues that are not before the Court, quite frankly.
“[Court]: That’s right, and I’m not a referee, and you might be interested in my
thoughts on what you ought to do, but those and 50 cents might not even buy you a cup
of coffee anymore.”
27
Touryalai asserts that the court’s comment “amounted to an advisement that by
asking for judgment to be entered, Mohammad was locking into the state of affairs as of
August 2006, without factoring in the sale that had happened subsequently.” Touryalai
adds that Mohammad’s counsel did not respond to this colloquy indicating that
Mohammad “was content to have the 2006 settlement converted to a judgment as it stood
– with no ‘ifs’ or ‘buts.’”
We see nothing in the cited colloquy between the court and Touryalai’s counsel or
in Mohammad’s counsel’s apparent lack of interest in that colloquy that suggests that
Mohammad was waiving his right to assert his claim to the sale proceeds.
In conclusion, although there is evidence in the record from which inferences can
be drawn to support a waiver argument, we cannot conclude that the trial court erred in
finding that Touryalai failed to satisfy his burden of proving waiver.
4. Judicial Estoppel
Touryalai next contends that Mohammad is judicially estopped from asserting his
claim for the sale proceeds. Although the trial court did not expressly address this
argument, it was raised below and implicitly rejected. Because we find no abuse of
discretion in rejecting the argument, there was no error.
“‘“‘Judicial estoppel precludes a party from gaining an advantage by taking one
position, and then seeking a second advantage by taking an incompatible position.
[Citations.] The doctrine’s dual goals are to maintain the integrity of the judicial system
and to protect parties from opponents’ unfair strategies. [Citation.] . . .’” [Citation.]
28
The doctrine applies when “(1) the same party has taken two positions; (2) the positions
were taken in judicial or quasi-judicial administrative proceedings; (3) the party was
successful in asserting the first position (i.e., the tribunal adopted the position or accepted
it as true); (4) the two positions are totally inconsistent; and (5) the first position was not
taken as a result of ignorance, fraud, or mistake.” [Citations.]’ [Citations.]” (People v.
Castillo (2010) 49 Cal. 4th 145, 155.) “[J]udicial estoppel is an equitable doctrine, and its
application, even where all necessary elements are present, is discretionary.” (MW
Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc. (2005) 36 Cal. 4th
412, 422.)
Touryalai argues that Mohammad’s two positions are: (1) that the settlement
agreement represents a full, final, and complete agreement between the parties; and (2) he
is asking for a form of relief not contained in the settlement agreement or judgment, i.e., a
cash payment. Touryalai contends these two positions are inconsistent because the “final
and complete” settlement agreement “provides for one thing,” but Mohammad later
argued that he is “actually entitled to something different.”
The two positions are not necessarily inconsistent. Mohammad’s assertion that the
settlement agreement is a full, final, and complete agreement was made in the context of
the motion to enforce the settlement and have judgment entered thereon. He insists that
he has never asserted otherwise. According to Mohammad, by seeking the proceeds
Touryalai received from the sale, “he is simply seeking to enforce the full and final
settlement . . . .” There is logic to Mohammad’s position: The full, final, and complete
29
agreement calls for Touryalai to transfer his interest in the Hesperia parcels to
Mohammad; if Touryalai never sold his interest in the Hesperia parcels, a motion to
enforce the agreement by compelling Touryalai to deliver title to the Hesperia properties
would have been consistent with the assertion that the agreement is a full, final, and
complete agreement; however, Touryalai sold three of the Hesperia parcels for cash;
under the doctrine of equitable conversion, Mohammad has the same right to that cash
that he did to the parcels; it follows that a motion to compel Touryalai to deliver that cash
is just as consistent with the assertion of a full, final, and complete settlement agreement
as a motion to compel Touryalai to deliver title to the Hesperia properties would have
been.
Because the trial court could reasonably conclude that the assertion of the
agreement as full, final, and complete was not inconsistent with Mohammad’s effort to
enforce the agreement by seeking to recover Touryalai’s proceeds, the court did not abuse
its discretion in rejecting the judicial estoppel argument.
C. Effect of Purchase and Sale Agreement
The purchase and sale agreement with the City regarding the three Hesperia
parcels includes this “merger” provision: “This Agreement and other documents
incorporated herein by reference contain the entire understanding between the parties
relating to the transaction contemplated hereby and all prior to [sic] contemporaneous
agreements, understandings, representations and statements, oral or written, are merged
herein and shall be of no further force or effect.” Touryalai quoted this provision, among
30
numerous other provisions of the purchase agreement, in the statement of facts in his
opposition to the motion to enforce the judgment. He did not, however, make any
argument based on the provision.
On appeal, Touryalai contends that the merger provision constitutes an express
acknowledgment by Mohammad “that the 2006 agreement would be of ‘no further force
or effect,’” and that it “amounted to a voluntary, contractual – as opposed to equitable –
abandonment of whatever rights regarding the three properties Mohammad would
otherwise have had.” We decline to consider this argument because it was not asserted
below. (See Perez v. Grajales (2008) 169 Cal. App. 4th 580, 591-592 [arguments raised
for the first time on appeal are generally deemed forfeited].) Although we may consider
new arguments that present pure questions of law (In re Spencer S. (2009) 176
Cal. App. 4th 1315, 1323), Touryalai’s argument raises factual issues as to whether the
parties’ intended the provision to cancel the 2006 settlement agreement. Because neither
Mohammad nor the trial court had the opportunity to address this argument and the
factual issues it raises, it would be unfair to both to decide the appeal on that basis. (See
Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal. 3d 180, 184-185, fn. 1;
Zimmerman, Rosenfeld, Gersh & Leeds LLP v. Larson (2005) 131 Cal. App. 4th 1466,
1488.)
Even if the argument has not been forfeited, it is not persuasive. The merger
clause does not, as Tourylai asserts, expressly acknowledge that the 2006 settlement
agreement will have no further force or effect; indeed, it makes no mention whatsoever of
31
that agreement. Instead, it refers only vaguely to the understanding of the parties
“relating to the transaction contemplated hereby.” The contemplated transaction is the
sale of the three Hesperia parcels to the City, not the exchange of properties between
Touryalai and Mohammad called for in the 2006 agreement. Moreover, if Touryalai and
Mohammad intended to cancel or novate their 2006 agreement, it is unlikely they would
have used what appears to be a boilerplate merger clause within the
“MISCELLANEOUS” provisions of the City’s purchase and sale contract without
making any specific reference to the prior agreement. Reading the merger provision in
light of the entire purchase and sale contract, we do not believe the parties intended that it
render the 2006 agreement ineffective and unenforceable.
IV. DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
KING
J.
We concur:
RAMIREZ
P. J.
MILLER
J.
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