Avery v. Tahmazian CA2/5 ( 2014 )

Filed 7/28/14 Avery v. Tahmazian CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
DAVID L. AVERY, B250837
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC463757)
v.
JILBERT TAHMAZIAN,
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County, William
F. Fahey, Judge. Affirmed.
Gutierrez, Preciado & House, Calvin House; Joseph P. Bregman for Defendant
and Appellant.
The Gilleon Law Firm, James C. Mitchell, Samuel A. Clemens for Plaintiff and
Respondent.
INTRODUCTION
Plaintiff and respondent David Avery (plaintiff) needed $16 million in financing
to complete an indoor water park. To obtain that financing, he entered a Management
Agreement Contract (MAC) with defendants Magnet Investment Group, LLC (Magnet)
and Dino Awadisian (aka Vahak Awadisian)1 (Awadisian), Magnet’s “Managing
Member,” pursuant to which plaintiff was to deposit $1 million in attorney defendant and
appellant Jilbert Tahmazian’s (defendant) client trust account, and Magnet was to
“reserve a Financial Instrument” with a minimum face value of $100 million. Plaintiff
deposited $1 million in defendant’s client trust account, defendant released $979,940 to
Magnet and retained $20,060 as a fee for his escrow services, and Magnet failed to
reserve the financial instrument required by the MAC. Only $100,000 of plaintiff’s $1
million was returned to him. Plaintiff brought an action against Magnet, Awadisian, and
defendant on various theories. In a court trial, the trial court ruled for plaintiff, awarding
him $1,170,000. On appeal, defendant contends that the judgment is not supported by
substantial evidence. We affirm.
BACKGROUND
I. Plaintiff’s First Amended Complaint
Plaintiff brought an action for breach of contract (Magnet and defendant in
separate causes of action), common count—money paid for benefit (defendant, Magnet,
and Awadisian), fraud—intentional misrepresentation (Magnet and Awadisian),
conversion (defendant, Magnet, and Awadisian), breach of fiduciary duty (defendant),
and aiding and abetting fraud (defendant). Plaintiff later dismissed his cause of action for
aiding and abetting fraud.
1 Default judgments were entered against Magnet and Awadisian. Magnet and
Awadisian are not parties to this appeal.
2
II. The Trial Court’s Findings of Fact
As to defendant, the trial concerned plaintiff’s causes of action for conversion,
breach of contract, and breach of fiduciary duty. 2 In its statement of decision, the trial
court made the following findings of fact3:
Defendant, an attorney, was admitted to practice law in California in 1989. He
specialized in criminal defense work. In June 2009, defendant met Awadisian who
leased offices near defendant’s office. Defendant came to know Awadisian quite well
and did a significant amount of legal work for Awadisian personally and for Awadisian’s
company, Magnet.
Plaintiff was a resident of Illinois. In 2006, after he sold his family’s quarry
business, plaintiff and a partner decided to build an indoor water park. In 2009, plaintiff
had to stop construction on the park after two of the three banks financing the project
pulled out. Plaintiff needed an additional $16 million in financing to complete the
project. Plaintiff heard about Awadisian and his investment company, Magnet, from a
third party. Although plaintiff had not met Awadisian in person, Awadisian and others
assured him that Magnet was reputable.
In January 2010, Awadisian, as Magnet’s “Managing Member,” emailed the MAC
to plaintiff. On January 25, 2010, plaintiff and Awadisian signed the MAC. The MAC
provided that plaintiff would wire $1 million to a bank account Awadisian designated.
The designated bank account was not a Magnet business account, but defendant’s client
trust account. Once plaintiff wired the funds, Awadisian would “‘reserve a Financial
Instrument issued by a top rated financial institution/top 50 bank with a minimum face
2 The record on appeal does not disclose what happened to plaintiff’s common
count cause of action against defendant. The trial also served as a default prove up
hearing against Magnet and Awadisian.
3 Because neither party challenges the trial court’s findings of fact in its statement
of decision, our recitation of facts relies primarily on the statement of decision and the
trial exhibits cited in that decision. When necessary to present a fuller picture of the
matters at issue, we set forth trial testimony that was not specifically referenced in the
statement of decision.
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value of $100,000,000.’” If Awadisian did not reserve such a financial instrument within
15 banking days, plaintiff’s $1 million would be returned to plaintiff plus a two percent
penalty. The trial court found that “all of these material representations were false.”
On January 27 and 29, 2010, plaintiff transmitted a total of $1 million to
defendant’s client trust account in three wire transfers. He believed that by sending his
funds to an attorney to hold, he would be “protected.” Fifteen days passed and plaintiff
did not hear from Awadisian. Plaintiff’s $1 million was not refunded, and he was not
paid a two percent penalty.
Defendant testified that he agreed to assist Awadisian with his transaction with
plaintiff. Defendant said that his assistance consisted of allowing his client trust account
to be used to receive plaintiff’s $1 million. He said that he received a copy of the MAC
in January 2010, and that he read and understood the MAC. Defendant testified both at
his deposition and at trial that the MAC was “the entire contract” which set forth his role
in Awadisian’s transaction with plaintiff. In his deposition, defendant characterized his
role in the transaction as providing “escrow services” for a two percent fee. At trial,
defendant attempted to “back away” from that deposition testimony. The trial court
found that by changing his testimony, and by his demeanor, defendant “severely
undermined his credibility.”
The trial court found that nothing in the MAC gave defendant the authority to
transmit plaintiff’s funds to Magnet. Nevertheless, defendant, in three transfers on
February 2, 2010, transferred $979,940 to Magnet. Defendant retained the balance of
plaintiff’s $1 million—$20,060. Plaintiff and defendant both testified that plaintiff did
not give defendant instructions about what to do with plaintiff’s money once it was
transferred to defendant’s trust account. According to defendant, Awadisian told
defendant that Awadisian would be entering into the transaction with plaintiff, that
Awadisian would provide defendant with the MAC, and that upon receipt of the money,
the money would be transferred to Awadisian’s account pursuant to the MAC. Plaintiff
did not learn of the transfers to Magnet until after he filed this action.
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When he did not timely hear from Awadisian, plaintiff “reach[ed] out” to
defendant and others about his investment. Defendant did not return plaintiff’s telephone
calls. In March 2010, “[defendant] and/or others caused to be delivered to [plaintiff]” a
memo from Awadisian that stated that Awadisian had been unable to meet his recent
business obligations due to his “serious battle with STOMACH Cancer.” The memo
described the actions Awadisian was taking that would enable him “very quickly to make
good on each and every contractual commitment [he] made before [his] illness.” The
trial court found that the memo could “best be described as a ‘lulling’ statement, designed
to engender sympathy and to ‘explain’ why Awadisian had not performed his obligations
to his ‘clients.’ Such documents are regularly issued by con artists who seek to mollify
their victims and to delay reporting to law enforcement.”
In the following months, plaintiff made efforts to have his money refunded. In
September or October 2010, defendant told plaintiff that Awadisian would refund
plaintiff $100,000 as a showing of good faith, and that the rest of the funds were expected
to be refunded within 30 days. In November 2010, defendant refunded $100,000 to
plaintiff through, apparently, defendant’s client trust account. The trial court found that
although defendant claimed that he received the $100,000 from Awadisian, nothing in the
wire transfer document from defendant to plaintiff or in an email from Awadisian to
defendant instructing him to refund the $100,000 supported that claim.
After receiving the $100,000 refund, plaintiff and his partner followed up with
many emails and telephone calls to Awadisian and defendant without success. No other
amounts were refunded. The trial court found that the promise that the balance of
plaintiff’s funds would be refunded within 30 days was “yet another lulling statement
designed to delay the initiation of legal action.”
III. The Trial Court’s Conclusions of Law
In finding Magnet and Awadisian liable on all of plaintiff’s causes of action, the
trial court stated, “The evidence in this case reveals the existence of a very sophisticated
and financially successful fraud perpetrated by the defendants in this case.” The trial
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court stated that it had reviewed Magnet’s bank records, which records showed that funds
were used at Las Vegas casinos and for other purposes, but not for the purchase or
reservation of a “‘financial instrument issued by a top rated financial institution/top 50
bank with a minimum face value of $100,000,000.’”
As for defendant, the trial court found him liable on plaintiff’s conversion cause of
action because nothing in the MAC permitted defendant to take any of plaintiff’s money
for escrow fees.4 It found defendant liable on plaintiff’s breach of contract and breach of
fiduciary duty causes of action based on “his agreement to act on behalf of his client
Awadisian, as both an escrow agent for the $1 million dollars and as a knowing
participant in the fraud perpetrated on [plaintiff].” The trial found incredible defendant’s
testimony that he simply received and reviewed the MAC and found it to be legitimate.
It found that the MAC contained “patent material falsehoods, dressed up in vague and
confusing ‘legalese’” that defendant and Awadisian designed to “lull unsophisticated
investors like [plaintiff] into parting with their funds.”
The trial court concluded that “[defendant], and his co-schemers, knew that an
investor like [plaintiff] would be more inclined to transfer funds if they were to be held
by an attorney, who is presumed to be ethical and act in accordance with the high
standards of the legal profession. The participation of [defendant] was thus highly
instrumental in persuading [plaintiff] to invest his money with [Magnet] and Awadisian.”
The only fair reading of the MAC, the trial court concluded, was that it provided
that defendant was to serve as an escrow agent for the deal between plaintiff and Magnet.
Defendant admitted he was to serve as an escrow agent in his deposition “before he
thought better of it and unpersuasively tried to change his testimony at trial.” The trial
court ruled that by agreeing to act as an escrow officer, defendant obligated himself to
safeguard plaintiff’s funds until Awadisian performed. Defendant did not safeguard
4 Although plaintiff’s first amended complaint requested $900,000 on plaintiff’s
conversion cause of action, based on the evidence adduced at trial, plaintiff limited his
request at the conclusion of the trial to the $20,000 of plaintiff’s $1 million that defendant
retained.
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plaintiff’s funds, and instead breached the MAC by immediately delivering plaintiff’s
funds to his “co-schemer” Awadisian. Thus, the trial court ruled, defendant was liable on
plaintiff’s breach of contract cause of action.
Defendant was liable on plaintiff’s breach of fiduciary duty cause of action, the
trial court ruled, because 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. Thus the funds
in his possession are impressed with a trust, and his conversion of such funds is a breach
of the trust.’ Johnstone v. State Bar, 64 Cal. 2d 153, 155-56 (1966). Indeed, such
conduct is an act of moral turpitude and dishonesty. Id. at 156.” In a footnote, the trial
court noted that “[s]uch conduct might also be criminal in nature. Given the magnitude
of the fraud in this case, and the likelihood of other victims, this case should be referred
to the FBI/United States Attorney and/or the Glendale Police Department/District
Attorney.”
DISCUSSION
Defendant contends that substantial evidence does not support the trial court’s
rulings that he was liable on plaintiff’s conversion, breach of contract, and breach of
fiduciary duty causes of action. Substantial evidence supports the trial court’s ruling that
defendant was liable on plaintiff’s breach of fiduciary duty cause of action.5
I. Standard of Review
“‘In general, in reviewing a judgment based upon a statement of decision
following a bench trial, “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
5 The damages awarded for plaintiff’s breach of contract and breach of fiduciary
duty causes of action were the same and included the damages awarded for plaintiff’s
conversion cause of action. Because we hold that substantial evidence supports the trial
court’s ruling that defendant was liable on plaintiff’s breach of fiduciary duty cause of
action, we need not address whether substantial evidence supports the trial court’s ruling
on plaintiff’s breach of contract and conversion causes of action.
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decision. [Citations.]” [Citation.] In a substantial evidence challenge to a judgment, the
appellate court will “consider all of the evidence in the light most favorable to the
prevailing party, giving it the benefit of every reasonable inference, and resolving
conflicts in support of the [findings]. [Citations.]” [Citation.] We may not reweigh the
evidence and are bound by the trial court’s credibility determinations. [Citations.]
Moreover, findings of fact are liberally construed to support the judgment. [Citation.]’”
(Cuiellette v. City of Los Angeles (2011) 194 Cal. App. 4th 757, 765, quoting Estate of
Young (2008) 160 Cal. App. 4th 62, 75-76.)
II. Application of Relevant Principles
“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. Thus the funds in his possession are
impressed with a trust . . . .” (Johnstone v. State Bar (1966) 64 Cal. 2d 153, 155; Guzzetta
v. State Bar (1987) 43 Cal. 3d 962, 978-979 [in a marital dissolution proceeding, an
attorney who deposited community property funds into his trust account was a fiduciary
who held the funds in trust both for his client and his client’s wife].) An attorney who
acts as an escrow holder owes a fiduciary duty to a non-client who deposits property into
the escrow. (Virtanen v. O’Connell (2006) 140 Cal. App. 4th 688, 702-703; Wasmann v.
Seidenberg (1988) 202 Cal. App. 3d 752, 756-757 [an attorney acting as an escrow holder
does not owe a professional duty to a third-party who deposits property into the escrow,
but owes that party a fiduciary duty].)
With respect to plaintiff’s $1 million, the MAC provided:
“WHEREBY, [plaintiff] will send via bank wire the sum of $1,000,000.00 (ONE
MILLION UNITED STATES DOLLARS) to bank account designated by [Magnet]
(‘Wire’) (See Exhibit A attached) [Account name: ‘Law Offices of Jilbert Tahmazian
Attorney Client Trust’]; and within Fifteen (15) Banking Days upon receipt and
confirmation of wire, [Magnet] will reserve a Financial Instrument issued by a top rated
financial institution/top 50 bank with a minimum face value of $100,000,000.00 (ONE
HUNDRED MILLION UNITED STATED DOLLARS) for a duration of one (1) year
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excluding coupons and interest, with a third-party provider (‘Financial Instrument’) with
the understanding that [Magnet] shall arrange for the reservation of and procurement of
the issuance of the Financial Instrument and that [Magnet] shall arrange for the
monetization of such Financial Instrument. The Financial Instrument can be extended,
upon mutual agreement between [plaintiff] and [Magnet], for an additional four (4)
periods of one (1) year each at an additional cost at which time cost will be borne by
[plaintiff]. [Plaintiff] is fully aware, that from receipt of the Wire sent to [Magnet], it
shall take no more than approximately Fifteen (15) Banking Days or less, excluding
national and banking holidays, for issuance of Financial Instrument and the monetization
of the Financial Instrument to be completed. Monetization shall equal no less than 65.0%
(Sixty-Five Percent) loan-to-value to a high range of 85.0% (Eighty-Five Percent) loan-
to-value of the Financial Instrument less any bank and administrative fees (‘Funds’).
[Magnet] and [plaintiff] agree that any assignment and monetization of the Financial
Instrument would be irrevocable and be incorporated within this agreement and be bound
by its terms.
“WHEREBY, should [Magnet] not perform in quoted term of Fifteen (15)
Banking days or less, excluding national and banking holidays for issuance of Financial
Instrument and the monetization of the Financial Instrument completed, [Magnet] agrees
to return [plaintiff]’s funds plus Two (2%) Percent Penalty on the Sixteenth (16th)
Banking Day of receipt, clearing and posting of [plaintiff]’s wire transferred funds; and
should [plaintiff] place this request into written format—without hesitation or delay and
immediately.”
Defendant contends that plaintiff should not have been “surprised” that he
transferred plaintiff’s funds to Magnet because, among other things, the MAC required
Magnet to return the funds to plaintiff if Magnet failed to obtain the promised financial
instrument within 15 days of receipt of plaintiff’s funds. That is, because the MAC
provided that Magnet, and not defendant, was to return plaintiff’s funds on Magnet’s
non-performance, defendant properly transferred the funds to Magnet. In the absence of
an instruction in the MAC that defendant was to transfer plaintiff’s funds to Magnet, the
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provision in the MAC that Magnet was to return plaintiff’s funds on Magnet’s non-
performance should be read to mean that Magnet was to cause to be returned to plaintiff,
through defendant, and release any interest in, plaintiff’s funds that continued to be held
in defendant’s client trust account.
Defendant contends that his status as an attorney did not require him to assume
any responsibilities beyond those stated in the MAC. Although he acknowledges that an
attorney who accepts funds into his client trust account must not distribute those funds
improperly, he contends that the attorney’s obligation does not extend beyond the
instructions he was given for the disposition of those funds. That is, defendant contends
that “[w]here the documentation that created the fiduciary relationship does not create a
duty to act as the plaintiff contends, his claim lacks merit.” (Citing R & B Auto Center,
Inc. v. Farmers Group, Inc. (2006) 140 Cal. App. 4th 327, 362-367.) Defendant argues
that he did not violate his fiduciary duty to plaintiff because the MAC did not instruct
him to hold plaintiff’s funds until Awadisian obtained the promised financial instrument,
and plaintiff did not give him instructions on how he was to dispose of the funds when
plaintiff wired the funds to his client trust account.
Plaintiff did not instruct defendant about what defendant was to do with plaintiff’s
$1 million once it was in defendant’s client trust account. Defendant testified that the
MAC was “the entire contract” which set forth his role in Awadisian’s transaction with
plaintiff. The MAC did not instruct defendant to transfer plaintiff’s funds to Awadisian
and to retain a fee for himself after plaintiff transferred his funds to defendant’s client
trust account. Defendant transferred the funds to Awadisian because Awadisian, his
client, told him to the transfer the funds. Defendant’s transfer and retention of plaintiff’s
funds without plaintiff’s instruction or permission violated the fiduciary duty created
when defendant accepted in his client trust account the deposit of plaintiff’s $1 million.
(See Johnstone v. State Bar, supra, 64 Cal.2d at p. 155; Guzzetta v. State Bar, supra, 43
Cal.3d at pp. 978-979 ; Virtanen v. O’Connell, supra, 140 Cal.App.4th at pp. 702-703;
Wasmann v. Seidenberg, supra, 202 Cal.App.3d at pp. 756-757.) Accordingly, sufficient
evidence supports plaintiff’s breach of fiduciary duty cause of action.
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DISPOSITION
The judgment awarding plaintiff $1,170,000 on his breach of fiduciary duty cause
of action is affirmed. Plaintiff is awarded his costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
MOSK, J.
We concur:
TURNER, P. J.
KRIEGLER, J.
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