Amerisource Mortgage, Inc. v. McConville

Filed 9/27/07 Amerisource Mortgage, Inc. v. McConville CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 FOUR

APPEAL from a judgment of the Superior Court for Los Angeles County, Leon Kaplan, Judge. Reversed.

Law Offices of Henry N. Jannol, Henry N. Jannol and Andrea Breuer for Plaintiffs and Appellants.

Haight Brown & Bonesteel, Rita Gunasekaran, William O. Martin, Jr., J. Alan Warfield and R. Bryan Martin for Defendant and Respondent.

Plaintiffs Amerisource Mortgage, Inc. and Angelo Di Nallo sued defendant Sean J. McConville, Amerisources President, for conversion and other related claims based upon McConvilles withdrawal of over $111,000 from Amerisources bank account. McConville moved for summary judgment, asserting that he had accepted an offer by Amerisource that allowed him to keep the funds if he was willing to surrender his interest in the company and enter into a release of all claims between himself and the company. Although the parties were not able to agree on the terms of the release, McConville contended that the offer and acceptance constituted an agreement only to negotiate in good faith, and that the $111,000 was the consideration Amerisource paid him to enter into that agreement. Plaintiffs argued that the parties intended that there would not be an agreement until there was a signed release. The trial court granted McConvilles motion and entered judgment in his favor. We find that the language of the offer is ambiguous, and that McConville failed to meet his burden on summary judgment to present evidence to resolve the ambiguity. Accordingly, we reverse the judgment.

BACKGROUND

Amerisource is a business that finances mortgages in the sub-prime market. It was incorporated in 2004 by McConville and Roger Gertz. At the time of the events at issue in this lawsuit, McConville and Gertz were the only shareholders in the corporation, and they, along with Gertzs wife, were the only members of the corporations board of directors. Plaintiff Di Nallo is employed by Amerisource as its mortgage broker.

Disputes arose between McConville and Gertz in January 2005. In mid-January, McConville told Gertz he did not want to remain in business with Gertz, and discussed how they might part ways. Gertz told McConville that he did not want to sell his interest in Amerisource. After a heated discussion on January 17, Gertz told McConville to leave the premises and not to return. The next day, McConville withdrew $111,541.08 from Amerisources bank account.

Three days later, on January 21, Amerisources attorney, Henry N. Jannol, faxed a letter to Michael T. Wells, McConvilles attorney. In the letter, Jannol responded to what appear to be accusations made in materials McConville sent to Gertz that morning. Jannol then made the following proposal: It is suggested that Mr. McConville would do well to surrender all right, title and interest (in the event that he has any) in the Corporation and enter into a Release of all claims between him and the Corporation. If he is willing to do so, he can keep the funds converted. This offer shall remain open until 5:00 p.m. on Monday, January 24, 2005. It must be accepted in writing prior to that time and immediately communicated to me. In the unlikely event that he declines to accept this most generous offer, please advise him of the potential consequences he will face if all funds converted are not immediately returned to the Corporation.

Wells responded to Jannols letter that same day. In a letter he faxed to Jannol, Wells stated in relevant part: We have been authorized by our client to accept your clients offer. This letter is intended to serve as formal notification of the acceptance of your clients offer as set forth in your letter dated January 21, 2005. [] We shall undertake preparation of a Mutual and General Release to be signed by the respective parties. We will send it to your office for your review and comment and ask that you then proceed to obtain the necessary signatures. [] Concurrent with the execution of the Mutual and General Release, Mr. McConville will resign as an officer and director of Amerisource Mortgage, Inc. The Mutual and General Release will contain, inter alia, mutual releases of all claims that either party may have against the other. [] We will request that your client file the appropriate notification with the California Secretary of State, and remove Mr. McConville from any and all bank accounts of Amerisource Mortgage, Inc., further, we shall require that Mr. McConville be released as a guarantor of any and all lease obligations for all equipment leased by Amerisource Mortgage, Inc. All of these details will be more fully set forth in the Mutual and General Release.[1]

On January 24, Jannol wrote to Wells to complain about McConvilles conduct: While the excellent service you have provided to your client appeared to have resulted in resolution of the issues, your clients continued defamatory comments regarding Mr. Gertz, solicitation of Amerisource employees and failure to return documents including, but not limited to, independent contractor agreements may require that litigation be filed. Later that same day, Jannol telephoned Wells. The parties dispute what was said during that call. Wells asserts that Jannol acknowledged McConvilles acceptance of Amerisources offer, agreed that a mutual and general release was appropriate, thanked Wells for taking on the task of preparing the release, and said that he would obtain the necessary signatures on the release. Jannol asserts he told Wells that it appeared they were getting close to reaching a settlement but that there would be no settlement without a release. He acknowledged that Wells would prepare the initial draft of the release and he told Wells that he would review Wells draft release and make the appropriate recommendations to his client.

The following day, January 25, Wells wrote to Jannol to express his view of the volatile situation involving their clients. After noting his conclusion that Gertz had engaged in actionable conduct, Wells stated, Again, I strongly suggest that you urge your client to enter into a Mutual and General Release and that the respective parties move forward. I have advised our client to do so, and he is willing to put aside his legal claims and move on to a more productive set of circumstances. [] If, however, your client is unwilling to put this unfortunate matter to rest, and litigation commences, please be advised that we are fully prepared to represent our client and without wishing to resort to purple prose, we have the facts, witnesses and law to not only respond to any complaint but respond with a cross complaint [that] will be compelling and, unfortunately, may result in lessons being learned that are unfortunate for your client. . . . [] Until I hear from you, I have ceased preparation of a Mutual and General Release. We ask that you use your good offices to attempt to amicably resolve this matter. If the matter cannot be resolved shortly, we will pursue other legal alternatives.

Jannol and Wells continued to communicate that day, and the following day Wells wrote to Jannol: Since both parties wish to go their separate ways, it is, I believe, in our respective clients best interest that they release each other from liability, not go through the expensive and time consuming need for accountings and retribution and each get on with their business activities. [] We have prepared a Mutual and General Release that our client is prepared to sign. We are sending it to you for your review and for your clients signature. We ask that the Agreement be reviewed, and you indicate your clients acceptance by 5:00 p.m. Thursday, January 27, 2005. In the event your client does not wish to proceed in this manner, we shall commence legal proceedings to involuntarily dissolve Amerisource Mortgage, Inc., as provided for in the California General Corporation Law.

The draft release enclosed with Wells letter was entitled GENERAL RELEASE AND SETTLEMENT AGREEMENT. The parties to the release were Amerisource, McConville, and Gertz. The recitals of the agreement stated that a dispute had arisen among the three parties concerning the operations, ownership and control of SJM [apparently this is a mistake, since SJM is the short form reference for McConville] resulting in conflicting allegations by both [Gertz] and [McConville]. In addition to a mutual general release, the agreement includes a representation that [t]here have been no other agreements or understandings between the parties hereto, or any of them, relating to the disputes referred to in this Agreement, and an integration clause stating, This Agreement constitutes a single, integrated written contract expressing the entire agreement of the parties hereto relative to the subject matter hereof. No covenants, agreements, representations, or warranties of any kind whatsoever have been made by any party hereto, except as specifically set forth in this Agreement. All prior discussions and negotiations have been and are merged and integrated into, and are superseded by this Agreement.

Jannol wrote to Wells the day he received the draft agreement, telling Wells that the draft was not acceptable. That same day, McConville met with Gertz to discuss the terms that Gertz found unacceptable, relating to responsibility for loans made before McConville left Amerisource. Although McConville testified at his deposition that he was agreeable to Gertzs suggestion, the parties ultimately did not sign any release or agreement.

Amerisource and Di Nallo filed a complaint against McConville related to the funds McConville withdrew, alleging claims for conversion, breach of fiduciary duties, fraud, and negligent misrepresentation. McConville filed an answer and a cross complaint, alleging claims for breach of contract, breach of fiduciary duty, and declaratory relief. All of McConvilles cross-claims were based upon his allegations that Jannols offer letter of January 21, 2005 was accepted by McConville and constituted a settlement agreement regarding the $111,000 McConville withdrew from the Amerisource bank account.

McConville moved for summary judgment or, in the alternative, summary adjudication, on the ground that the parties had entered into a settlement agreement on January 21 that barred each of plaintiffs claims. He submitted in support of his motion the January 21 letters (the offer and acceptance letters), Jannols January 24 letter, Wells January 26 letter and the accompanying draft release and settlement agreement, and Wells declaration (which discussed the exchange of letters and the telephone conversation he had with Jannol on Jan. 24). McConville argued that Jannols January 21 letter constituted an offer that was accepted by Wells January 21 letter, that the resulting agreement allowed McConville to keep the $111,000 if he demonstrated his willingness to enter into a release and surrender his interest in Amerisource, and that Jannol acknowledged on January 24 that the parties had entered into such an agreement. He also contended that he demonstrated his willingness to enter into a release and surrender his interest in Amerisource by having his attorney draft a proposed release and settlement agreement.

Plaintiffs argued in opposition to the summary judgment motion that there was no final agreement between the parties regarding the funds McConville withdrew. In support of their opposition, plaintiffs submitted, among other things, a declaration from Jannol in which he described the discussions he had with Wells regarding the proposed settlement. Jannol stated that he intended that there would be no final settlement until both parties signed a release, and that he communicated that intent to Wells.

There were three hearings on McConvilles motion. At the first hearing, the trial court gave its tentative ruling, in which it stated that the January 21 offer and acceptance letters constituted an agreement to negotiate the terms of the final resolution of claims between Gertz and McConville. But the court described the agreement as follows: McConville agreed to give up all rights in Amerisource Mortgage, Inc. and claims against both Amerisource and Gertz in exchange for the stated sum. Gertz acquired the interest in Amerisource and also agreed to waive all claims against McConville. Any later disputes regarding the final terms of the settlement agreement does not prevent the formation of the contract to resolve the partnership claims. [] The settlement effectively negates all claims arising from McConvilles removal of the funds from Amerisource accounts and therefore establishes no remaining triable issues of material fact in the complaint. The court continued the hearing, however, and suggested that the parties try to reach a global settlement of their claims.

At the next hearing, the court once again described the agreement: The agreement is that [McConville] gets to keep the money, in exchange for that he surrenders all interest in the company. . . . [] Its a substantial amount. Its $110,000. In exchange for that, were never going to see your mug again. You relinquish every interest that you have in the company. That sounds to me prima facie very clear. So -- and the parties further agree that theyll draft a mutual and general release. The court disagreed with plaintiffs assertion that there was no enforceable agreement because there was no release, stating, I could impose the terms of the release based on the agreement to have a release and the context. The court took the matter under submission, and issued its ruling by minute order after the next hearing.

In its minute order, the court stated that the motion was granted for the reasons stated in the moving partys papers and articulated on the record of Jan. 27, 2006 [i.e., the first hearing]. The subsequent written order, submitted by McConville and signed by the trial court, is not entirely consistent with the courts January 27 discussion of the agreement. The order states in relevant part: The objective intent of the parties, as evidenced by the words of Amerisources and Gertzs January 21, 2005 offer letter to McConville, McConvilles January 21, 2005 acceptance letter of the offer, and Amerisources and Gertzs January 24, 2005 acknowledgement letter of McConvilles acceptance, establish that the parties entered into a binding and enforceable agreement as to the $111,541.08 that is the subject of Amerisources and DiNallos entire Complaint against McConville. . . . [] Amerisources and Gertzs January 21, 2005 offer letter to McConville constituted an offer to enter into a contract to negotiate the terms of a Mutual and General Release in good faith, whereby McConville would enter into such a Release and surrender all of his interests in Amerisource. The $111,541.08 constituted the consideration offered to McConville to enter into the contract to negotiate the Release in good faith. The court entered judgment in favor of McConville, from which plaintiffs appeal.[2]

DISCUSSION

[F]rom commencement to conclusion, the party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law. . . . A defendant [moving for summary judgment] bears the burden of persuasion that one or more elements of the cause of action in question cannot be established, or that there is a complete defense thereto. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850, italics and fns. omitted.) In ruling on the summary judgment motion, the court strictly construes the moving partys evidence, liberally construes the opposing partys evidence, and resolves all doubts as to whether a summary judgment should be granted in favor of the opposing party. The court seeks to find whether there are contradictions in the evidence, or inferences reasonably deducible from the evidence, that raise a triable issue of material fact. (Michael J. v. Los Angeles County Dept. of Adoptions (1988) 201 Cal.App.3d 859, 865-866.) On appeal from a summary judgment, we make an independent assessment of the correctness of the trial courts ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law. (Iverson v. Muroc Unified School Dist. (1995) 32 Cal.App.4th 218, 222.)

By his summary judgment motion, McConville essentially sought specific performance of the alleged January 21 agreement, which McConville contends provides a complete defense to plaintiffs claims. Thus, McConville bore the burden to show there is no triable issue regarding the existence of the alleged agreement and its terms, and that it provides a complete defense to plaintiffs claims.

McConville contended in his motion, and contends on appeal, that the offer set forth in Jannols January 21 letter required only that he be willing to enter into a release and surrender his interest in Amerisource in exchange for the $111,000 at issue. He argues that he was entitled to judgment as a matter of law because (1) the language of the offer is unambiguous and (2) it is undisputed that he accepted the offer and demonstrated his willingness to enter into a release and surrender his interest. Plaintiffs contend that McConville was not entitled to summary judgment because there were triable issues regarding whether there was mutual consent, whether the parties intended to enter into a written release before the agreement would be final, and whether the alleged agreement was too uncertain to be enforced. We agree that McConville was not entitled to summary judgment.

We begin by quoting the language of the offer: It is suggested that Mr. McConville would do well to surrender all right, title and interest (in the event that he has any) in the Corporation and enter into a Release of all claims between him and the Corporation. If he is willing to do so, he can keep the funds converted. The question in this case is, what does it mean to be willing to surrender all right, title and interest in the company and enter into a Release of all claims? Three possible interpretations of this language, and the effect of McConvilles acceptance of the offer, were offered.

McConville interpreted the language to mean that by accepting the offer, he agreed to negotiate a mutual and general release, and he was entitled to keep the money regardless of whether the parties ultimately agreed to the terms of the release.

The trial court in its tentative ruling interpreted the language to mean that McConville could keep the money in exchange for releasing any claims and surrendering his interest. By accepting the offer, McConville released all claims against the company and surrendered his interest in the company.

Plaintiffs interpreted the language to mean that McConville could keep the money in exchange for entering into a negotiated release. By accepting the offer, McConville agreed to negotiate the release, but he was not entitled to keep the money until the parties actually entered into the release.

The language of the offer and McConvilles acceptance conceivably could support any of these interpretations. Because the language is ambiguous, McConville was required to produce evidence to resolve the ambiguity in order to meet his burden to show he was entitled to judgment as a matter of law. (See, e.g., White Point Co. v. Herrington (1968) 268 Cal.App.2d 458, 467-468 [Where, however, the written contract of the parties is ambiguous, and parol evidence of the transaction between the parties fails to remove the ambiguity as to a material term of the agreement, specific performance must be refused].) He failed to meet that burden.

Both sides point to the parties post-acceptance conduct to support their interpretation of the alleged agreement. McConville argues that Jannols January 24 letter, in which Jannol stated that Wells efforts appeared to have resulted in resolution of the issues, and Jannols telephone call to Wells in which Jannol acknowledged McConvilles acceptance of the offer show that Jannol believed an agreement had been reached regarding the $111,000. Plaintiffs, on the other hand, point to the continuing negotiations and efforts to agree on the terms of the release as evidence that a final agreement had not been reached.

None of this evidence resolves the ambiguity of the language of the offer, however, because all of the conduct is consistent with either partys interpretation.[3] If, as plaintiffs contend, the parties agreed that McConville could keep the money if he entered into a release, Jannols comments can be construed as nothing more than acknowledgement of this agreement. Similarly, McConvilles negotiations regarding the terms of the release after accepting the offer can be construed as his performance under his interpretation of the agreement, i.e., it demonstrates his willingness to enter into a release.

Because the evidence before the trial court on the summary judgment motion failed to resolve the ambiguity in the alleged agreement, McConville did not meet his burden to show that he was entitled to judgment as a matter of law. Therefore, the trial court erred by granting summary judgment in McConvilles favor.

DISPOSITION

The judgment is reversed. Plaintiffs shall recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

WILLHITE, J.

We concur:

EPSTEIN, P. J.

SUZUKAWA, J.

Publication courtesy of San Diego free legal advice.

Analysis and review provided by Santee Property line attorney.

[1] Wells faxed and sent a nearly identical letter to Jannol on January 24. The only difference between the two letters was that in the later letter, Wells added that McConville would permit the cancellation of his shares in Amerisource concurrent with the execution of the Mutual and General Release.

[2] There is an indication in the Case Summary included in the record on appeal that the cross-complaint was dismissed before judgment was entered, although there is no actual dismissal in the record. McConville acknowledges in his respondents brief that the cross-complaint was dismissed.

[3] The conduct does, however, seem to be inconsistent with the trial courts interpretation in its tentative ruling. Under that interpretation, McConville released all claims and surrendered his interest in the company simply by accepting the offer. Yet Wells in his January 21 letter accepting the offer on McConvilles behalf stated that McConville would resign as an officer and director of the company [c]oncurrent with the execution of the Mutual and General Release, and in his January 24 acceptance letter he added that McConville would permit the cancellation of his shares in the company at that time as well. Jannol did not protest this statement. Thus, by their conduct, it appears that neither party intended that the offer and acceptance be interpreted as the trial court suggested.