Filed 10/22/14 Wizman v. Elyakim CA2/8
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
JACOB WIZMAN, B246897
Plaintiff, Cross-defendant and (Los Angeles County
Respondent, Super. Ct. No. BC405438)
v.
MOSHE ELYAKIM,
Defendant, Cross-complainant and
Appellant.
APPEAL from a judgment of the Superior Court of Los Angeles County.
Kevin Brazile, Judge. Affirmed.
The deRubertis Law Firm, David M. deRubertis and Helen U. Kim; The Rutten
Law Firm and Howard Rutten, for Defendant, Cross-complainant and Appellant.
Beitchman & Zekian, David P. Beitchman and Andre Boniadi for Plaintiff, Cross-
defendant and Respondent.
__________________________
Moshe Elyakim appeals from the trial court’s judgment that Jacob Wizman’s
refusal to pay his promissory note to Elyakim did not breach the note. We affirm.
FACTS AND PROCEEDINGS
Appellant Moshe Elyakim is a general contractor. Respondent Jacob Wizman and
appellant were acquainted with each other through construction work appellant had done
on respondent’s home. Respondent, who is the former president of worldwide sales for
Gucci and an original investor in Coffee Bean, has successfully invested in real estate.
According to respondent, he had a “good amount of experience, certainly more than the
everyday average person with regard to real estate transactions.”
In 2004, appellant approached respondent about their investing in two adjacent
parcels of undeveloped hillside land in Beverly Hills. Appellant believed he could
profitably build several homes on the parcels. Appellant and respondent entered into an
oral agreement, under which respondent bought the parcels, one of which was called
“Heather Court” and the other “Arrowwood.”1 Respondent paid $1,209,839 for Heather
Court and $410,500 for Arrowwood. Because respondent paid the entire purchase price
for the parcels, only his name was put on title to the properties, although the parties
agreed that they would equally share the project’s profits or losses.
After buying Heather Court and Arrowwood, respondent deposited $1.485 million
into appellant’s personal checking account from which appellant paid the project’s
construction costs. Construction began on Heather Court, which appellant oversaw as the
general contractor and for which respondent paid appellant $10,000 a month. The parties
intended to use their profit from the sale of Heather Court to pay for developing the rest
of the project.
1 The settlement agreement that produced the promissory note at the heart of these
proceedings refers to the property as “Arrowhead,” but the parties’ briefs name the
property “Arrowwood” (appellant) and “Arrowood” (respondent).
2
The configuration of the Heather Court and Arrowwood hillside lots created
ingress and egress challenges to the nearby city street that appellant and respondent had
to solve to make the properties fully marketable. A third parcel, called Cedarbrook, lay
between Heather Court and Arrowwood and connected them. To solve the access
problem, respondent negotiated a lot-line adjustment with Cedarbrook’s owner, L&B
Real Estate. After negotiating the agreement, L&B Real Estate sold the non-hillside
portion of Cedarbrook to Brad Jones. L&B Real Estate conditioned the sale to Jones on
his agreeing to honor the lot-line adjustment with respondent by signing a grant deed that
transferred the access-strip to respondent. But once L&B Real Estate sold the property to
Jones, he refused to honor the agreement to give respondent access.
Respondent assigned to appellant respondent’s claims against L&B Real Estate
and Jones for breach of the access agreement. In April 2006, appellant filed a complaint
against L&B Real Estate and Jones for breach of contract and specific performance.
Appellant also recorded a lis pendens on the Cedarbrook property.
In the meantime, appellant and respondent began to have “major differences” on
how to proceed with the Heather Court project. As a result, in 2007 appellant stopped
construction on Heather Court before it was complete. Appellant’s and respondent’s
relationship having deteriorated to the point that litigation loomed, respondent began
negotiating the possible sale of Heather Court and Arrowwood to Mohamed Hadid.
Respondent hoped that by selling the properties he would avoid incurring the cost and
burden of finishing the project. Respondent’s desired sales price to Hadid was $8
million.
Appellant and respondent thereafter began negotiating a global settlement
agreement to resolve all of their differences. They met for the first time in September
2007 to discuss settlement. The initial proposal of their tentative settlement was to share
the profits from the hoped-for $8 million sale to Hadid. Based on the estimated costs for
completing the project, they calculated appellant’s half of profits from such a sale would
be $2.1 million. In addition, as part of their ongoing settlement negotiations, appellant
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authorized respondent to negotiate a resolution of the lawsuit against Jones over access to
Cedarbrook.
Over the next few months, appellant and respondent prepared several drafts of
their written settlement agreement as they continued to negotiate its terms. On January
16, 2008, Hadid submitted to respondent written offers to buy Heather Court and
Arrowwood for $8 million. His offers were contingent, however, on his obtaining an
access easement on the Cedarbrook property. He proposed closing escrow on January
30, 2008.
Two days after receiving Hadid’s offers, respondent settled the Jones’ lawsuit. In
return for respondent’s paying Jones $145,000, Jones agreed to grant an easement on
Cedarbrook. On January 18, 2008, respondent delivered a check for $145,000 to Jones.
Five days later on January 23, 2008, appellant and respondent signed a final
settlement agreement. Section 3.3 of the settlement agreement obligated respondent to
deliver a promissory note to appellant in the amount of $1.685 million. Section 3.3
stated: “[Respondent] shall make and deliver to [appellant] a promissory note in the sum
of $1,685,000 secured by a first deed of trust against the Property . . . due in no more than
two years, which shall be recorded . . . simultaneously with the recording of the
withdrawal of the Lis Pendens.” Appellant and respondent had set $1.685 million for the
amount of the note based on their updated calculation of appellant’s half of their
anticipated profit from an $8 million sale to Hadid; the profit had fallen since they began
negotiations in September because their costs had risen in the intervening months.
Concurrent with signing the final settlement agreement, respondent delivered his
promissory note to appellant. The note stated “On or before March 1, 2009 or upon
confirmation of recordation for sale of property . . . whichever occurs first . . . the
undersigned promises to pay” $1,685,000. Respondent testified that the note did not
provide for its immediate payment because the parties wanted to allow time to finish the
project’s construction. The parties calculated that a due date of about a year would give
them sufficient time.
4
As promised under the settlement agreement, appellant gave respondent in
conjunction with signing the settlement agreement appellant’s withdrawal of his lis
pendens on Jones’s Cedarbrook property. But a few days later, respondent told appellant
the sale to Hadid had collapsed because of the “access issue.”2 Asserting that payment of
the note was contingent on selling the properties to Hadid, respondent did not pay the
note on its stated due date of March 1, 2009.3
Based on respondent’s failure to pay the note, appellant sued respondent for
breach of the settlement agreement and promissory note. The court tried the case as a
bench trial.4 After appellant rested his case-in-chief, respondent moved for judgment
under Code of Civil Procedure section 631.8. The court granted respondent’s motion,
finding respondent had not breached the settlement agreement and promissory note. In
its statement of decision, the court found respondent more credible than appellant about
“the intent of the parties and purposes of the settlement agreement and note.” The court
noted that “the condition upon or event which the settlement agreement was predicated
upon, namely the sale of the property to Hadid, did not occur. Thus, the absence of the
sale of the property to Hadid does not give rise to any obligation of [respondent] Wizman
2 Respondent asserts he did not know access problems would kill the sale to Hadid,
but the court concluded otherwise. The court stated, “I can tell you that in terms of a
mistake [by respondent], there was no mistake here. He knew about the landlock
situation. He knew about the access problem. He thought there was a solution to it. So
there’s no mistake.”
3 Respondent eventually sold Heather Court for $2.425 million in April 2011 to a
buyer not involved in these proceedings. And in July 2011 respondent sold Arrowwood
and a vacant parcel remaining from Heather Court to Hadid for $1.6 million. Claiming
no profit from the sales, respondent never paid appellant any portion of the $1.685
million promissory note.
4 Appellant alleged his causes of action by way of a cross-complaint following
respondent’s earlier complaint against appellant that alleged multiple causes of action
against appellant arising from the parties’ dispute over the properties. On the eve of trial,
respondent dismissed his complaint and the trial proceeded on only appellant’s cross-
complaint.
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to pay [appellant] Elyakim the value of the note.” The court found telling the silence of
section 3.7 of the settlement agreement, which did not mention payment of the note if the
sale did not occur. The court’s statement of decision declared:
The “only provision of the contract that addresses what should occur in the event
the property is not sold to Hadid is section 3.7, which provides in full: ‘If the
property is not sold to the purchaser referred to in paragraph 3.5 [Hadid], then
Wizman and Elyakim shall diligently attempt to sell the property. Any additional
expenses incurred as of March 1, 2009 shall be deducted from both parties.’ [¶]
Provision 3.7 makes no reference or mention of the $1,685,000 unsecured note
being paid or owed in the event the sale of the property is not made to Hadid.
Therefore, once the sale of the property to Hadid was cancelled there could be no
breach of the settlement agreement with regard to payment of the unsecured note,
because the agreement did not contemplate or intend for payment of the unsecured
note in the event the sale to Hadid was cancelled. If the unsecured note was to be
paid after the cancellation of the sale to Hadid, the agreement should have
expressly stated such or mentioned payment of the unsecured note after
cancellation of the sale to Hadid.”
The court entered judgment for respondent. This appeal followed.
DISCUSSION
Appellant relies on the seemingly plain language of the promissory note and
settlement agreement to contend the court erred in finding respondent did not breach the
promissory note when respondent did not pay it. Appellant contends the promissory
note’s explicit due date – “On or before March 1, 2009 or upon confirmation of
recordation for sale of property . . . whichever occurs first” [emphasis added] – means
the note was due no later than March 1, 2009, regardless of whether the sale to Hadid
took place. And appellant notes that respondent testified that the settlement agreement –
which created respondent’s obligation to give appellant a promissory note due within no
more than two years of their settlement (§ 3.3) – was the parties’ complete and final
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agreement. Respondent testified, “Q. The final version of the agreement was the final
expression of your settlement in all respects with [appellant]? A. Correct. Q. The
moment you said in your mind I have a complete and final deal with [appellant] was on
January 23 when you guys both signed? A. Correct. Q. All the terms you wanted as part
of the deal with [appellant] were in [the settlement agreement]? A. Correct.” Slightly
later in the trial, respondent reaffirmed his testimony: “Q. You thought it was the
complete and entire agreement and expressed everything you meant to express in your
final resolution with [appellant]? A. Correct.”
Furthermore, appellant notes, respondent conceded under cross-examination that
the language of section 3.3 of the settlement agreement requiring a promissory note with
a due date of no more than two years after the signing of the settlement agreement – with
which the promissory note’s due date of March 1, 2009, complied – did not comport with
respondent’s interpretation that the note was unenforceable if the sale to Hadid did not
take place. Respondent testified: “Q. [Section] 3.3 really should have said Wizman
shall make and deliver a promissory note to Elyakim of $1.685 million only if the
property sells and only if there’s a profit? A. Only. Q. That’s what the agreement
should have said according to how you interpret it? A. That’s how I interpreted the
whole agreement. Q. You agree your interpretation is not what’s – it’s actually contrary
to the language of the agreement, because the agreement says it’s due in two years?
A. If the house is sold.” Respondent conceded his interpretation contradicted the note:
“Q. I’m just asking just based on the language of the document. I want to know if you
agree that the language of the note means even if the house is not sold, on March 1, the
money would become due? A. Correct. Q. Your interpretation contradicts what the
language says? A. Correct.”5
5 See Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal.App.4th
1050, 1061 [“Parol evidence cannot be used to ‘to flatly contradict the express terms of
the agreement. Thus if the contract calls for the plaintiff to deliver to defendant 100
pencils by July 21, 1992, parol evidence is not admissible to show that when the parties
said ‘pencils’ they really meant ‘car batteries’ or that when they said ‘July 21, 1992’ they
really meant May 13, 2001.”]
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The promissory note and settlement agreement must be read together because the
parties envisioned them as two parts of one overarching transaction. (Civ. Code, § 1642;
Restatement Second, Contracts § 202, subd. (2); DVD Copy Control Assn., Inc. v.
Kaleidescape, Inc. (2009) 176 Cal.App.4th 697, 713-714.) We conclude that, when
viewed together as a whole, the settlement agreement and promissory note establish that
payment of the promissory note was, as the trial court found, contingent upon a
successful sale to Hadid. Accordingly, the trial court correctly found no breach in
respondent’s failure to pay the promissory note following the collapse of the sale to
Hadid. In reaching this conclusion, we rely on several provisions of the settlement
agreement, which create ambiguity as to what the parties intended if the sale to Hadid did
not take place. We review as a question of law a finding of ambiguity. (Winet v. Price
(1992) 4 Cal.App.4th 1159, 1165.) In the face of ambiguity, a court may admit parol
evidence to interpret the contract. (Adams v. MHC Colony Park (2014) 224 Cal.App.4th
601, 620.) If the parol evidence involves disputed facts, the trier of fact – here the trial
court – resolves those disputes. We review the court’s resolution of those factual
disputes for substantial evidence. (Winet, at p. 1166.) We now consider those various
contractual provisions, which, taken as whole, establish ambiguity.
First, section 2.4 of the settlement agreement recited that the settlement
agreement’s purpose was to facilitate the sale of the property to Hadid, and that appellant
and respondent would divide the sale proceeds. Section 2.4 stated: “Elyakim and
Wizman desire to settle the Lawsuit, to acquire access across the Joneses’ Property, to
sell the Property, and divide the proceeds of the sale on the terms hereof.” The provision
thus anticipated a sale to Hadid, or else there would be no proceeds to divide.
Second, section 3.6 of the settlement agreement presupposed the source of funds
that would be used to pay appellant was from the sale to Hadid: “From the proceeds of
the sale, Elyakim shall receive the sum of $1,685,000.”
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Third, section 3.7(a)6 discussed the parties’ duties if the sale to Hadid did not
occur. It obligated the parties to “diligently” work to sell the property to a new buyer.
But instead of stating respondent’s obligation to pay the note remained, section 3.7 did
not mention the note, a silence emphasized by the trial court’s statement of decision in
which it observed section 3.7 was the only provision of the settlement agreement that
discussed what happened if the sale to Hadid did not take place.
Fourth, section 3.7(b) indicated Hadid would provide a deed of trust to replace the
deed of trust which respondent had given to appellant on respondent’s home when
respondent delivered his promissory note to appellant. Hadid’s offering of his deed of
trust in substitution for respondent’s deed of trust presupposed a successful sale to Hadid.
Because of the foregoing ambiguities in the settlement agreement as to what the
parties intended if the sale to Hadid fell through, the court admitted parol evidence of the
parties’ settlement negotiations between their initial meeting in September 2007 to the
signing of the agreement in January 2008. The trial court found that throughout the
negotiations, the parties contemplated each would receive a 50 percent share of the
profits or losses realized from the sale of the properties. According to respondent, and
apparently accepted by the trial court, respondent’s promissory note was merely an
“accommodation” to reassure appellant that appellant’s equitable claim to the properties
and their attendant sale proceeds remained protected until Hadid delivered to appellant a
deed of trust to secure Hadid’s payment of the entire sales price, which he was going to
pay in stages. Section 3.5 of the settlement agreement described the sequence of Hadid’s
payments and issuance of a deed of trust for his purchase of the properties. Hadid was to
put up $2.6 million in cash and then, within six months of opening escrow, deliver two
promissory notes, one of which was a note to appellant for $1.685 million that Hadid
would pay. Once Hadid issued his deed of trust, appellant was to reconvey to respondent
the deed of trust on respondent’s home. According to respondent, appellant required the
6 So numbered by the parties because the settlement agreement had two sections
3.7; therefore, they adopted the convention, which we follow, of referring to the first
section 3.7 as “3.7(a)” and the second as “3.7(b).”
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reassurance of the “accommodation” because appellant was not named on the title to the
properties.
Appellant offers, however, a different interpretation of the effect of Hadid’s note
and deed of trust under respondent’s accommodation theory. According to appellant,
section 3.5 obligated Hadid upon escrow’s close to tender a note by which he assumed
respondent’s obligation to pay appellant $1.685 million. That the payment obligation
transferred from respondent to Hadid when, and if, Hadid bought the properties did not
mean that respondent’s duty to pay under respondent’s note disappeared if the sale to
Hadid did not happen. Be that as it may, appellant’s interpretation of what the parties
intended created a question of fact that the trial court resolved against appellant and in
favor of respondent’s accommodation theory. The court’s statement of decision declared
that “as a good faith measure to ensure that Elyakim would be entitled to his 50 [percent]
share of the estimated profits from the anticipated sale to Hadid, Wizman offered to give
a copy of a note and deed of trust on his own personal residence until escrow was open,
at which time escrow instructions would require a replacement note in the exact same
value to be issued pursuant to section 3.5.”
Appellant contends that even if the court properly admitted parol evidence, the
evidence showed that appellant did not want profit-sharing as found by the court, but
wanted instead the promissory note’s guarantee of payment. Appellant testified he
wanted to protect himself from increasing construction costs eating into appellant’s gains
from the Heather Court and Arrowood properties. He testified his stated aim throughout
the settlement negotiations was thus to get a fixed-payment not dependent on the sale to
Hadid taking place.
Supporting appellant’s contention, wording which could be construed as profit-
sharing language was deleted from the final settlement agreement. Before its deletion,
the relevant proposed language stated: “If the Property is not sold to the purchaser
referred to in paragraph 3.5 [Hadid], then Wizman shall diligently attempt to sell the
Property. If the eventual sale is for more than $8,000,000, then Elyakim’s total share
shall be $1,925,000 plus one half of the amount by which the sales price exceeds
10
$8,000,000. If the eventual sale is for less than $8,000,000, then Elyakim’s total share
shall be $1,925,000 minus one half of the amount by which the price is less than
$8,000,000. The proceeds shall be divided as set forth in section 3.5, except that the
amount of $1,925,000 in section 3.4.4 shall be replaced by Elyakim’s share of the
proceeds as adjusted by this section 3.6.” But in the final agreement, the relevant
provision stated: “If the Property is not sold to the purchaser referred to in paragraph 3.5
[Hadid], then Wizman and Elyakim shall diligently attempt to sell the Property. Any
additional expenses incurred as of March 1 shall be deducted from both parties.”7 And in
fact, respondent admitted under cross examination that because appellant no longer
trusted respondent, appellant repeatedly asked during their settlement negotiations for a
fixed payment not tied to respondent’s expenses in finishing and maintaining the
properties. Be that as it may, the settlement agreement’s language was, when viewed as a
whole, ambiguous as to what the parties intended if the sale to Hadid did not take place,
making parol evidence admissible. And because substantial evidence supported the trial
court’s factual findings that respondent gave the promissory note to appellant as an
accommodation that presupposed an $8 million sale of the properties to Hadid, the court
reasonably found no breach from respondent’s failure to pay the note when the sale to
Hadid did not take place.
7 For the reader’s reference, we quote the pre-deleted language to which we have
applied conventional proofreading marks to highlight the change in the wording: “If the
Property is not sold to the purchaser referred to in paragraph 3.5 [Hadid], then Wizman
and Elyakim shall diligently attempt to sell the Property. If the eventual sale is for more
than $8,000,000, then Elyakim's total share shall be $1,925,000 plus one half of the
amount by which the sales price exceeds $8,000,000. If the eventual sale is for less than
$8,000,000, then Elyakim's total share shall be $1,925,000 minus one half of the amount
by which the price is less than $8,000,000. The proceeds shall be divided as set forth in
section 3.5, except that the amount of $1,925,000 in section 3.4.4 shall be replaced by
Elyakim's share of the proceeds as adjusted by this section 3.6.” Any additional expenses
incurred as of March 1 shall be deducted from both parties.”
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DISPOSITION
The judgment is affirmed. Each side to bear its own costs on appeal.
RUBIN, J.
WE CONCUR:
BIGELOW, P. J.
FLIER, .J
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