Michael M Stewart Trust vs Ian Alban Stewart, Sr et al

Case Number

22CV04219

Case Type

Hearing Date / Time

Mon, 11/20/2023 - 10:00

Nature of Proceedings

Right to Attach

Tentative Ruling

The Michael M. Stewart Trust v. Ian Alban Stewart, Sr., et al.

Case No. 22CV04219

           

Hearing Date: November 20, 2023                                                    

HEARING:              Application of Plaintiff for Right to Attach Order and for Issuance of Writ of Attachment

ATTORNEYS:        For Plaintiff Norman Colavincenzo, as trustee of the Michael M. Stewart Trust: Matthew Clarke, Kelley Clarke, PC

                                    For Defendants Ian Alban Stewart, Sr., and Ian Alban Stewart, Jr.: J. Paul Gignac, Rimon, P.C.  

                                   

TENTATIVE RULING:

For the reasons set forth herein, the application of plaintiff Norman Colavincenzo, as trustee of the Michael M. Stewart Trust, for a right to attach order and for issuance of a writ of attachment is denied.

Background:

On October 27, 2022, plaintiff Norman Colavincenzo, as trustee of the Michael M. Stewart Trust (MMS Trust), filed his original complaint in this action against defendants Ian Alban Stewart, Sr., (Stewart or Stewart Sr.) and Ian Alban Stewart, Jr. (Stewart Jr.).

On March 10, 2023, without any response having been filed by any defendant, Colavincenzo filed his first amended complaint (FAC). The FAC asserts five causes of action: (1) breach of fiduciary duty; (2) gross negligence; (3) breach of contract; (4) unjust enrichment; and (5) fraudulent transfers.

On May 3, 2023, Stewart and Stewart Jr. each filed his respective answer to the FAC, each generally denying the allegations of the FAC and asserting nine affirmative defenses.

This case is related to the Matter of the William Stewart Living Trust and Fred & Lillian Stewart Trust, case number 16CV00064, that remains pending in this Department.

On October 10, 2023, plaintiff filed this application for right to attach order and for issuance of a writ of attachment as to Stewart. Plaintiff seeks attachment in the amount of $446,031.36. (Application, ¶ 8.)

The application is opposed by Stewart.

(1)       Evidence of Plaintiff

In support of the application, plaintiff presents the declaration of plaintiff Norman Colavincenzo, the trustee of the MMS Trust. According to Colavincenzo:

Attachment is sought as to Stewart’s interest in the proceeds of a trust asset called Sea Cliff. (Colavincenzo decl., ¶¶ 2, 3.) Sea Cliff is now for sale with a sale price of $6 million with a closing date of November 7, 2023. (Id., ¶ 2.) The purchase and sale agreement allows for a sooner closing. (Ibid.) The proceeds of the sale will belong to the Trust, but Stewart is entitled to one-third of the trust assets. (Ibid.) (Note: There are at least three trusts related to this transaction, namely, the MMS Trust, the William Stewart Living Trust, and the Fred & Lillian Stewart Trust. Plaintiff does not explain in the moving papers the relationship among the trusts with respect to their particular interests in this litigation. It appears that the undefined term “Trust” refers nonspecifically to either or both of the William Stewart Living Trust or the Fred & Lillian Stewart Trust.)

If Stewart receives the cash distribution after the sale of Sea Cliff, the money will be gone, dissipated, spent, or hidden. (Colavincenzo decl., ¶ 3.) Stewart has filed multiple bankruptcy cases. (Id., ¶ 4.)

Stewart was the trustee of the Fred and Lillian Stewart Trust and the William Stewart Trust. (Colavincenzo decl., ¶ 5.) Plaintiff’s counsel prepared a petition to remove Stewart as trustee of these trusts, but shortly before trial of that petition, Stewart quit as trustee, naming his son, Stewart Jr., as successor trustee. (Id., ¶ 6.)

Stewart’s main responsibility as trustee was to remediate contaminated soil from Sea Cliff, a 3-acre piece of property in Santa Barbara. (Colavincenzo decl., ¶ 8.) After remediation, Stewart was to partition the parcel into three roughly equal lots. (Id., ¶ 8 & exhibit 1 [Settlement Agreement, ¶ 3.8].) The Sea Cliff property was the only significant trust asset under Stewart’s control. (Id., ¶ 9.)

Stewart hired High Roads Consulting (High Roads), based in Portland, Oregon, as a general contractor to oversee the remediation of Sea Cliff. (Colavincenzo decl., ¶ 10.) Stewart made his choice based upon his friendship with the owner of High Roads and did not screen High Roads for competency, familiarity with local laws, or experience with similar projects. (Id.) High Road Consulting had no soil remediation experience, but constructed single family homes in Oregon. (Id., ¶ 11.) Stewart did not seek out or interview other general contractors or engage in a competitive bidding process for a project that would eventually cost $550,000 without any results. (Id., ¶ 12.) Stewart did not question the billing practices or excessive charges of High Roads. (Ibid.) In total, Stewart paid High Roads $446,031.36. (Id., ¶ 13.) No soil was ever remediated. (Ibid.)

When Stewart hired High Roads, Stewart knew of a cheaper, local person who could have managed the remediation project. (Colavincenzo decl., ¶ 14.) That person was not hired until after Stewart spent $446,031.36 on High Roads. (Ibid.)

On January 1, 2019, the Trust held $826,999 in cash under Stewart’s control. (Colavincenzo decl., ¶ 16.) In March 2020, the Trust had no funds to pay bills and Stewart could not pay contractors. (Ibid.)

Also in support of the application, plaintiff attaches the transcript of volume 2 of Stewart’s deposition. (Colavincenzo decl., ¶ 26 & exhibit 2.)

(2)       Evidence of Stewart

In opposition to the motion, Stewart provides his own declaration. According to Stewart:

Acting as trustee of behalf of the Trust, Stewart hired High Roads to perform certain services in connection with the remediation of the Sea Cliff property. (Stewart decl., ¶ 4.) While High Roads never got to the point of physically removing soil from the Sea Cliff property, High Roads performed a number of valuable services that will benefit the future property owner (if the sale of the Sea Cliff Property takes place) and that contributed to an increase in the value of the Sea Cliff Property for sale purposes. (Id., ¶ 5.) By way of example only, High Roads subcontracted with Campbell Geological to perform a soil evaluation and report at a cost of $119,541, Mac Designs to perform an engineering report at a cost of $29,543, and RDH Land Surveying to perform a survey of the Sea Cliff property at a cost of $13,287. (Id., ¶ 6.) All of these reports were submitted to the County and are necessary to obtain approval of the remediation plan and the lot split. (Ibid.)

Also in support of the application, Stewart attaches excerpts from the deposition of Crystal A. Knepler, CPA. (Gignac decl., ¶ 5 & exhibit A.)

Stewart has raised numerous objections to plaintiff’s evidence. In reaching the conclusions stated herein, the court has relied only upon admissible evidence presented by the parties. (See also Code Civ. Proc., § 482.040.)

Analysis:

A right to attach order and writ of attachment may only be issued after a hearing by the Court. (Code Civ. Proc., § 484.040.)

“At the hearing, the court shall consider the showing made by the parties appearing and shall issue a right to attach order, which shall state the amount to be secured by the attachment determined by the court in accordance with Section 483.015 or 483.020, if it finds all of the following:

            “(1)      The claim upon which the attachment is based is one upon which an attachment may be issued.

            “(2)      The plaintiff has established the probable validity of the claim upon which the attachment is based.

            “(3)      The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

            “(4)      The amount to be secured by the attachment is greater than zero.” (Code Civ. Proc., § 484.090, subd. (a).)

“Inasmuch as the attachment procedures are purely the creation of the Legislature, the statute is subject to strict construction.” (Nakasone v. Randall (1982) 129 Cal.App.3d 757, 761.)

(1)       Claim Upon Which An Attachment May Be Issued

The first requirement of section 484.090 is that the claim upon which the attachment is based is one upon which an attachment may be issued.

“Except as otherwise provided by statute, an attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of costs, interest, and attorney’s fees.” (Code Civ. Proc., § 483.010, subd. (a).)

“ ‘ ‘[T]he plaintiff has the burden of proving (1) that his claim is one upon which an attachment may be issued and (2) the probable validity of such claim.” ’ [Citation.]” (Kemp Bros. Construction, Inc. v. Titan Electric Corp. (2007) 146 Cal.App.4th 1474, 1481 (Kemp Bros.).)

Plaintiff argues that plaintiff’s claim is a claim for money based upon a contract as follows: “Stewart Sr.’s main responsibility as Trustee was to remediate contaminated soil from a 3-acre piece of property in Santa Barbara called Sea Cliff. After remediating the soil, he would partition the parcel into three roughly equal lots. This obligation stems from a written contract which provided: ‘The Sea Cliff property will be expediently remediated and partitioned, allowing a lot split into three parcels of approximately equal size.’ Exhibit 1 to the NC Decl. Plaintiff has sued Stewart Sr. for breach of this contact and Plaintiff seeks money damages flowing from Stewart Sr.’s breach of this agreement.” (Plaintiff’s Memorandum in Support, at p. 8.)

Plaintiff’s third cause of action is for breach of contract. (FAC, ¶¶ 43-46.) The contract at issue containing the above-quoted provision is more fully quoted as follows:

“Sea Cliff Property. The Sea Cliff Property is currently subject to secured debt (the ‘Sea Cliff Debt’) encumbering the Sea Cliff Property (see Exhibit C). The debt will be paid in full from the proceeds of the sale of Sandstone, and per Exhibit C, the Sea Cliff property will be expediently remediated and partitioned, allowing a lot split into three parcels of approximately equal size. Trustee will expediently have the three parcels appraised, and each beneficiary will receive a parcel equalizing with cash payment the other beneficiaries for any valuation difference in order to arrive at equal one-thirds of the aggregate distribution of Sea Cliff. In the event that the partition is not accomplished within three years, Sea Cliff will be distributed as described in Exhibit C, no later than three years of this Agreement. The Michael Trust will have first right of refusal to receive the portion of the Sea Cliff Property where the physical house is presently located. On or before the distribution of Sea Cliff, Ian as beneficiary will arrange payment to Arabella of $122,000.00 to fully satisfy between Ian and Arabella all loans and advances as reflected in the last Stewart Trust accounting dated May 31, 2018. Arabella agrees to be credited $122,000.00 on the division of the proceeds resulting from the sale of Sea Cliff property or if the Sea Cliff property is distributed to the beneficiaries, then as noted in Exhibit C, Section 3.3(g), Ian will be charged $122,000.00 and Arabella will be credited for $122,000.00.” (Settlement Agreement, § 3.8, at pp. 10-11, underscoring and bolding omitted.)

“ ‘ “[I]t is a well-recognized rule of law in this state that an attachment will lie upon a cause of action for damages for a breach of contract where the damages are readily ascertainable by reference to the contract and the basis of the computation of damages appears to be reasonable and definite. [Citations.] The fact that the damages are unliquidated is not determinative. [Citations.] But the contract sued on must furnish a standard by which the amount due may be clearly ascertained and there must exist a basis upon which the damages can be determined by proof.” ’ [Citation.]” (CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App.4th 537, 540 (CIT Group).)

“CIT Group presents a paradigm: The case involved an issue of deficiency after a tenant defaulted on a commercial equipment lease. In determining there was a clear basis for attachment, the court noted, ‘There is no profit or other calculation to be made to ascertain the monthly rent due; each of the lease schedules sets forth the rental period and the monthly rent due for each machine. The master lease and corresponding lease schedules provide a clear and definite formula for the computation of damages, to wit: the monthly rent multiplied by the unexpired term.’ [Citation.]” (Kemp Bros., supra, 146 Cal.App.4th at p. 1481, fn. 5.)

The FAC does not allege any specific amount of damages sought for breach of contract. (FAC, ¶ 45 & prayer, ¶ 1.) Moreover, there is nothing in the Settlement Agreement to furnish a standard by which the amount due may be clearly ascertained. The contract merely requires construction activity, i.e., remediation as described in exhibit C, to take place expediently. The exhibit C referenced in the Settlement Agreement is not included in the Settlement Agreement attached as exhibit 1 to the declaration of Norman Colavincenzo. The court is therefore unable to determine the terms by which “the Sea Cliff property will be expediently remediated and partitioned” from the entirety of the Settlement Agreement. From what is presented, namely, the text of section 3.8 of the Settlement Agreement without exhibit C, the nature of the contractual obligations asserted to be breached here is fundamentally different from the CIT Group paradigm by which the amount of damages may be readily ascertained. Instead, assuming for purposes of this part of the discussion that breach of contract has been affirmatively established, the breach is the failure to compete the construction expediently and the measure of damages subject to attachment must be determined on that basis.

“The proper measure of damages for breach of a contract to construct improvements on real property where the work is to be done on plaintiff’s property is ordinarily the reasonable cost to the plaintiff of completing the work and not the difference between the value of the property and its value had the improvements been constructed. [Citations.] A different rule applies, however, where improvements are to be made on property not owned by the injured party. ‘In that event the injured party is unable to complete the work himself and, subject to the restrictions of sections 3300 and 3359 of the Civil Code, the proper measure of damages is the difference in value of the property with and without the promised performance, since that is the contractual benefit of which the injured party is deprived.’ [Citations.]” (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 123–124.)

The amount due as damages under the traditional rules for damages for breach of a contract of improvements on real property is not readily ascertainable from the contract and there is, in any event, insufficient evidence as to that measure of damages being readily ascertainable under the circumstances here. Moreover, amounts paid by the Trust to High Roads are not shown to be a measure of readily ascertainable damages for this asserted breach of contract by Stewart as claimed by this plaintiff. The court concludes that the plaintiff has not met his burden to show that the claim upon which the attachment is based is one upon which an attachment may be issued.

(2)       Probable Validity of Contract Claim

Alternatively and additionally, plaintiff must also show the probable validity of the claim upon which the attachment is to be based. (Code Civ. Proc., § 484.090, subd. (a)(2).) “A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (Code Civ. Proc., § 481.190.) “In determining the probable validity of a claim where the defendant makes an appearance, the court must consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.” (Loeb & Loeb v. Beverly Glen Music, Inc. (1985) 166 Cal.App.3d 1110, 1120.)

In order to determine if the plaintiff is more likely than not to obtain a judgment on the breach of contract claim, the court must consider the evidence presented with respect to the elements of a cause of action for breach of contract. “A cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.)

There is evidence presented of the contract sued upon, namely, the Settlement Agreement. The Settlement Agreement is a lengthy document with multiple obligations among the parties. There is no evidence presented that plaintiff has performed its obligations under the Settlement Agreement (or explained what they may be) or was excused from performing those obligations. There is also a lack of evidence regarding breach and damages for breach specific to Stewart.

It appears from the evidence presented that Stewart’s contractual obligations to remediate the Sea Cliff property was as a trustee of a trust. (Colavincenzo decl., ¶ 8; Settlement Agreement, § 3.8.) “Unless otherwise provided in the contract or in this chapter, a trustee is not personally liable on a contract properly entered into in the trustee’s fiduciary capacity in the course of administration of the trust unless the trustee fails to reveal the trustee’s representative capacity or identify the trust in the contract.” (Prob. Code, § 18000, subd. (a).) Stewart executed the Settlement Agreement in all of his capacities, including as trustee. Insofar as the contractual obligation to remediate the Sea Cliff property is a contractual obligation of Stewart as a trustee, plaintiff has failed to provide argument or evidence as to why Stewart would be personally liable (and hence have his personal assets subject to attachment) on the basis of this contractual claim. (Note: Because attachment is tied to a contractual liability, the court considers only the contractual liability in determining whether there is probable validity of plaintiff’s claims. Nothing herein should be construed as addressing potential non-contractual personal liability of Stewart under the Trust Law or otherwise.)

Even assuming that Stewart had personal contract liability under the Settlement Agreement for the remediation, the evidence is insufficient to show that Stewart breached the Settlement Agreement. The contractual obligation at issue is that “the Sea Cliff property will be expediently remediated and partitioned, allowing a lot split into three parcels of approximately equal size.” Again, exhibit C is missing from the evidence presented, so it is not possible to determine whether exhibit C provides any further information as to what “expediently” means, but the only evidence presented relating to performance is that money was paid to High Roads and no soil was remediated through the time that Stewart quit as trustee in September 2023. (Colavincenzo decl., ¶¶ 6, 13, 14.) The terms of the Settlement Agreement in section 3.8 contemplate that the lot split may not be accomplished within three years (i.e., through September 2021) and so there is a substantial question as to what the Settlement Agreement contemplates with respect to “expediently.” In opposition to the motion, Stewart presents evidence that although High Roads did not remove soil from the Sea Cliff property, soil evaluation reports, engineering reports, and a survey that are necessary to obtain approval of the remediation plan and lot split. (Stewart decl., ¶ 6.) The evidence does not address timing issues, i.e., what was or was not done “expediently,” which are at the heart of the contractual obligation.

Instead, most of the evidence presented by plaintiff with respect to the remediation issue involves assertions that Stewart paid too much or otherwise wasted or squandered money. The contractual obligation asserted to support the claim of attachment does not contain any express obligations relating to the amount to be paid for remediation. The financial terms involve credits among beneficiaries arising from the distribution of the Sea Cliff property. There is an important distinction between claims that Stewart breached trust duties in how he performed as trustee, i.e., by paying too much or by contracting imprudently, and claims that Stewart breached section 3.8 of the Settlement Agreement by not remediating the Sea Cliff expediently. Plaintiff’s claim for damages is based entirely upon the assertions that Stewart paid money inappropriately relative to his duties as a trustee rather than upon contract damages for failing to remediate the Sea Cliff property expediently.

The court concludes that, on the evidence presented, plaintiff has failed to meet his burden to establish the probable validity of the claim upon which the attachment is based.

For all of these reasons, the court concludes that plaintiff has not met his burden in seeking a right to attach order and for issuance of a writ of attachment. The application will therefore be denied.