Opinion
A148329
11-09-2018
WEEKS STREET, LLC, Plaintiff, v. NEXGEN BUILDERS, INC., et al., Defendants and Respondents; WILLIAM E. KENNEDY, Movant and Appellant.
WEEKS STREET, LLC Plaintiff, v. NEXGEN BUILDERS, INC. et. al., Defendants and Respondents, WILLIAM E. KENNEDY, Movant and Appellant. ORDER MODIFYING OPINION AND DENYING REHEARING [NO CHANGE IN JUDGMENT] THE COURT: It is ordered that the opinion filed herein on November 9, 2018, be modified as follows: 1. On page 6, line 26, after "creditor motion" add as footnote 6 the following footnote, which will require renumbering of all subsequent
6In his petition for rehearing Kennedy argues that the trial court abused its discretion by denying the creditor motion which was based on Puri/Patel's direct contract. We again conclude that the trial court properly exercised its discretion. 2. On page 7, line 7, after "Kennedy does not appeal the dismissal" add: "of the lawsuit. 3. On page 7, line 11, after "in denying" omit "Kennedy's" There is no change in judgment. Appellant's petition for rehearing is denied. Date: November 30, 2018
SIGGINS, P.J. P.J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Mateo County Super. Ct. No. CIV-500942)
William E. Kennedy (Kennedy) owned and managed Weeks Street, LLC (Weeks) which built single family homes in East Palo Alto (property). Weeks obtained a construction loan from First National Bank of Northern California, N.A. (Bank) which Kennedy guaranteed. Weeks entered into a construction contract with Nexgen Builders, Inc. (Nexgen) to develop the property. Weeks also obtained a loan from Suraj P. Puri and Pravin N. Patel (Puri/Patel) secured by a trust deed on the property, subordinate to Bank's lien; later Kennedy acquired a 30% interest in the Puri/Patel loan. After sustaining construction challenges, Weeks filed for Chapter 11 protection in the United States Bankruptcy Court. (11 U.S.C. § 1101 et seq.) Weeks sued Nexgen and Bank for alleged contract breaches and other claims (lawsuit). When the bankruptcy proceeding was converted to a Chapter 7 proceeding (11 U.S.C. § 701 et seq.), Fred Hjelmeset was appointed trustee (trustee) and acquired sole control of Weeks's assets, including the lawsuit, relieving Kennedy of all decision-making authority in the lawsuit. When trustee, Bank and Nexgen reached a settlement of the lawsuit, Kennedy filed motions for permissive or compulsory joinder pursuant to Code of Civil Procedure sections 378 and 389, subdivision (a) respectively. Kennedy's motions were predicated variously on his role as guarantor of Weeks's Bank loan (guarantor motion) and/or as a partial owner of the Puri/Patel claim against the Bank (creditor motion). The trial court denied the motions on all grounds. Kennedy appealed; we affirm the trial court's denial of his joinder efforts.
All references are to the Code of Civil Procedure, unless otherwise noted.
FACTUAL AND PROCEDURAL BACKGROUND
A. Trial Court and Bankruptcy Court Proceedings
In March 2006, Weeks obtained a construction loan in the amount of $6,959,375 from Bank to build 18 single family homes in East Palo Alto, secured by a deed of trust on the property. In October 2006, Puri/Patel loaned Weeks $1.2 million. Coincident with extending the loan, Puri and Patel executed an Investor Agreement and Waiver with Weeks authorizing Bank to act to protect its interest in the property and waiving rights otherwise available to Puri/Patel as lenders (waiver agreement). Nexgen was the general contractor for construction of the homes. After a construction dispute with Weeks, Nexgen walked off the project and recorded a mechanic's lien. Bank initiated a nonjudicial foreclosure; in response Weeks filed its Chapter 11 petition on December 13, 2007. The homes were constructed; when they were sold all proceeds were applied to pay off the Bank loan. Weeks filed a complaint against Nexgen and Bank on November 24, 2010. After multiple demurrers were sustained, only claims for breach of contract, fraud and declaratory relief remained against Bank and for breach of contract against Nexgen. On September 29, 2015, the Bankruptcy Court granted Bank's motion to convert the proceedings from Chapter 11 to 7; a trustee was appointed and acquired control of the remaining four vacant lots and the lawsuit. On October 2, 2015, trustee informed the trial court of his appointment and authority over the lawsuit. Kennedy acquired a 30% interest in the Puri/Patel loan in December 2015.
On January 11, 2016, Kennedy filed the guarantor motion and the creditor motion—seeking to join the lawsuit as a plaintiff, pursuant to sections 378 and 389, subdivision (a)—which are the sole remaining issues on appeal. On January 19, 2016, trustee filed a motion in bankruptcy court to approve settlement of the lawsuit which, if approved, provided for the lawsuit's dismissal. Weeks (through trustee), Bank and Nexgen opposed the joinder motions. At the February 8, 2016, hearing the trial court denied the motions on all grounds. On March 2, 2016, trustee, Bank and Nexgen dismissed the lawsuit with prejudice.
B. Court of Appeal Proceedings
Kennedy appealed denial of the two orders and the dismissal, but later moved to dismiss the appeal as to the lawsuit's dismissal, and we granted the request.
On March 20, 2017—after filing his opening brief—Kennedy "filed a 'motion and memorandum to abandon part of appeal' seeking to dismiss the appeal as to the request for dismissal filed in the trial court on March 2, 2016." We "construed[d] [Kennedy's] motion as a request to dismiss the appeal in part pursuant to rule 8.244(c) of the California Rules of Court. So construed the request [was] granted. The appeal [was] dismissed as to the request for dismissal filed in the trial court on March 2, 2016 . . . . [t]he appeal remains operative as to the other orders identified in appellant's notice of appeal. [¶] In light of the partial dismissal, the argument addressing the request for dismissal in appellant's opening brief section X, pp. 47-66) is considered withdrawn, and the issue need not be addressed in respondent's briefs."
Bank moved to strike documents in Kennedy's appendix and the references to those documents in his brief. We granted the motion and disregard any arguments based on, or citations to, those stricken documents.
Trustee joined the arguments in Bank's brief but did not file his own brief.
We denied Kennedy's motion to take judicial notice of documents which were not presented to the trial court.
Kennedy moved to strike parts of Bank's response brief and certain appendix documents and corresponding parts in joinders by Nexgen and the bankruptcy trustee; in response, Bank asked us to take judicial notice of documents. We deferred ruling, but then denied Kennedy's motion to strike and granted Banks' request for judicial notice.
We take judicial notice of: (1) Notice of election to appear, filed in the trial court on March 2, 2016 ; and (2) United States District Court Order Affirming Orders of the Bankruptcy Court, filed February 13, 2017 (USDC Order). (Evid. Code, §§ 452, subd. (d), 459; Cal. Rules of Court, rule 8.252).
DISCUSSION
A. Appealability
Kennedy asserts without authority that the two orders are appealable. Bank assumes the challenged orders are appealable; Nexgen contends that they are not appealable but does not provide authority for the position. We issued an order requesting briefing on the issue and directing counsel to be prepared to address the issue at oral argument. Bank and Nexgen responded that the orders are not appealable because they are not among the 14 categories of appealable judgments and orders specifically enumerated in section 904.1, subdivision (a). Trustee joined Bank's letter brief. Kennedy argues that an appeal lies as to the challenged orders; he analogizes them to an order denying a motion to intervene, which is appealable. (Jun v. Meyers (2001) 88 Cal.App.4th 117, 122.) We agree with that position.
"The existence of an appealable judgment or order is a jurisdictional prerequisite to an appeal." (Jennings v. Maralle (1994) 8 Cal.4th 121, 126 (Jennings).) "A reviewing court has jurisdiction over a direct appeal only when there is (1) an appealable order or (2) an appealable judgment." (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 696 (Griset).) When, as here, an appeal is taken from an order and not a final judgment, the "trial court's order is appealable [only] when it is made so by statute." (Ibid.) "The right to appeal is wholly statutory. [Citation.] Code of Civil Procedure section 904.1 lists appealable judgments and orders. Chief among them is a 'judgment' that is not interlocutory, e.g., a final judgment. A judgment is the final determination of the rights of the parties (Code Civ. Proc., § 577.) ' " ' when it terminates the litigation between the parties on the merits of the case and leaves nothing to be done but to enforce by execution what has been determined.' " ' [Citations.] ' "It is not the form of the decree but the substance and effect of the adjudication which is determinative. As a general test, which must be adapted to the particular circumstances of the individual case, it may be said that where no issue is left for future consideration except the fact of compliance or noncompliance with the terms of the first decree, that decree is final, but where anything further in the nature of judicial action on the part of the court is essential to a final determination of the rights of the parties, the decree is interlocutory." ' " (Dana Point Safe Harbor Collective v. Superior Court (2010) 51 Cal.4th 1, 5, fn. omitted.)
We treat Kennedy's motions as his attempts to intervene. (Jun v. Myers, supra, 88 Cal.App.4th at pp. 122-123 [action by a party that is " 'in essence an attempt to intervene and to become a party to the proceeding . . . treated as if it were a motion to intervene and is appealable' "].) The trial court's denial of Kennedy's joinder motions was a final determination of his role in the lawsuit. The lawsuit was dismissed with prejudice and Kennedy has abandoned his appeal of that order. We find that the two challenged orders are appealable.
B. Standard of Review
To succeed under section 389, a party must show that his absence " 'may result in substantial prejudice to that person or to parties already before the court.' " (Morrical v. Rogers (2013) 220 Cal.App.4th 438, 461.) " 'Whether a party is necessary and/or indispensable is a matter of trial court discretion in which the court weighs "factors of practical realities and other considerations." [Citations.]' [Citation.] We review a trial court's determination under Code of Civil Procedure section 389 for abuse of discretion." (Ibid.) We review the denial of the motion to intervene for abuse of discretion (§ 378; Sutter Health Uninsured Pricing Cases (2009) 171 Cal.App.4th 495, 512) and apply the same standard to review denial of the indispensable party motion. (§ 389; County of Imperial v. Superior Court (2007) 152 Cal.App.4th 13, 25; Deltakeeper v. Oakdale Irrigation Dist. (2001) 94 Cal.App.4th 1092, 1106.)
C. Permissive and Compulsory Joinder
Joinder of a party is compulsory where: "(1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk or incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest." (§ 389, subd. (a).)
Joinder as a plaintiff is permissive if a person (1) "assert[s] any right to relief . . . in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all these persons will arise in the action;" or (2) has "a claim, right, or interest adverse to the defendant in the property or controversy which is the subject of the action." (§ 378, subd. (a)(1-2).)
Kennedy sought to join the lawsuit as plaintiff as a "creditor" of Weeks based on his 30% interest in the Puri/Patel loan (creditor motion) and/or as the guarantor of Week's Bank loan (guarantor motion). Kennedy seeks to assert a claim derived from his acquisition of his interest in Puri/Patel's loan and the attendant waiver agreement. Having acquired his interest from Puri/Patel, his rights are commensurate with those of Puri/Patel. Puri/Patel sought to intervene in the lawsuit in December 2013, but the trial court denied the motion, concluding: they were not third party beneficiaries of any contract between Weeks and either bank or Nexgen; they had no interest in the property or the transaction; and any claims were time-barred. Puri/Patel did not appeal the trial court's order. Kennedy's claims can fare no better than those of Puri/Patel, his predecessors-in-interest. The trial court did not abuse its discretion in denying the creditor motion.
Nor does his role as guarantor of Weeks's Bank loan require Kennedy's compulsory or permissive joinder. All the entities necessary to accord "complete relief"—Weeks, Nexgen and Bank—were parties in the lawsuit. We have taken judicial notice of the USDC Order which describes in excruciating detail the underlying transaction and events which lead to the bankruptcy court proceedings and the lawsuit. The bankruptcy court judge, with jurisdiction over Weeks, carefully reviewed and approved the lawsuit's settlement and the United States District Court Judge affirmed the bankruptcy court decision. Weeks, Bank and Nexgen advised the trial court of the imminent settlement of the lawsuit, subject to Bankruptcy Court approval. As a result of the settlement the lawsuit was dismissed; Kennedy does not appeal the dismissal. Kennedy did not show that his absence "[m]ay result in substantial prejudice" to him (Morrical v. Rogers, supra, 220 Cal.App.4th at p. 461) nor to any other parties to the lawsuit, all of whom opposed his joinder.
In the interest of judicial economy, we do not discuss individually each of Kennedy's arguments, none of which would support a claim that Kennedy's motions should have been granted or that the trial court abused its discretion.
The trial court did not abuse its discretion in denying Kennedy's the guarantor motion.
DISPOSITION
The trial court orders are affirmed. Respondents shall be entitled to recover their costs on appeal.
/s/_________
Ross, J. We concur: /s/_________
Siggins, P.J. /s/_________
Jenkins, J.
Judge of the San Francisco Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.