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Roodenburg v. Pavestone Company

February 18, 2009

FRANS ROODENBURG ET AL., PLAINTIFFS AND APPELLANTS,
v.
PAVESTONE COMPANY, L.P., DEFENDANT AND APPELLANT.



APPEAL from a judgment of the Superior Court of Sacramento County, Steven H. Rodda, Judge. Affirmed. (Super. Ct. No. 02AS06389).

The opinion of the court was delivered by: Hull, J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

Plaintiffs Hokanson Building Block Company, Inc. (Hokanson), Hokanson‟s president and sole owner Frans Roodenburg (Roodenburg), and defendant Pavestone Company, L.P. (Pavestone) formed a California limited liability company named Pavestone California LLC (Pavestone California). The operating agreement for Pavestone California appointed Roodenburg general manager and provided that, in the event Roodenburg was terminated or resigned for cause, Pavestone would purchase Hokanson‟s interest in the company for the value of Hokanson‟s capital account at the time plus a severance payment.

Nearly two years later, Roodenburg resigned as general manager of Pavestone California for cause. When the parties could not agree on the value of Hokanson‟s capital account, plaintiffs initiated this action alleging, among other things, breach of contract and breach of fiduciary duty. Following a jury trial, the court entered judgment for plaintiffs on the breach of contract claim in the amount of $543,040, which consisted of $143,040 for Hokanson‟s capital account and $400,000 for the severance payment. The jury found no breach of fiduciary duty. The court also awarded plaintiffs prejudgment interest in the amount of $489,550.56.

Pavestone appeals, contending the award of damages is inconsistent with the special verdict returned by the jury, which expressly found no breach of contract. Pavestone also challenges the award of prejudgment interest on several grounds.

Plaintiffs cross-appeal, claiming jury misconduct in connection with the verdict on the breach of fiduciary duty claim. Plaintiffs also contend the trial court erred in not awarding compound interest.

In the published portion of the opinion, we conclude plaintiffs are entitled to prejudgment interest on their breach of contract claim, notwithstanding that the amount of their claim was uncertain, because the contract between the parties provides for an award of prejudgment interest. We further conclude the prejudgment interest provision of the parties‟ contract is not a "forbearance" agreement within the meaning of the usury section of the California Constitution. Finally, we conclude plaintiffs failed to present any admissible evidence of jury misconduct in connection with their breach of fiduciary duty claim.

In the unpublished portion of the opinion, we conclude the trial court properly interpreted the jury‟s special verdict in awarding plaintiffs $543,040 on their breach of contract claim and properly declined to award plaintiffs‟ compound interest.

We reject each of the parties‟ contentions and affirm the judgment.

FACTS AND PROCEEDINGS

Prior to the formation of Pavestone California, Roodenburg was the sole owner of Hokanson, which operated a concrete block manufacturing facility in the Sacramento area. On January 1, 2000, Roodenburg, Hokanson and Pavestone entered into an operating agreement in order to establish the terms and conditions under which Pavestone California would operate (the Operating Agreement). Around this same time, they also entered into a "Contribution Agreement" providing for the transfer of Hokanson‟s assets to Pavestone California.

Under the terms of the Operating Agreement, Pavestone owned 75 percent of Pavestone California and Hokanson owned 25 percent, with each sharing in profits and losses in the same proportion. The Operating Agreement named Pavestone as the managing member of the new company and Roodenburg as the general manager of "all operations," with such duties and responsibilities as delegated by the managing member.

The Operating Agreement created capital accounts for each member, with such accounts credited with any capital contributions by the member, any liabilities assumed by the member, and a share of any profits earned. The capital accounts were also debited with money or property distributed to the member, any member liabilities assumed by the company, and a share of any operating losses sustained.

Article 8 of the Operating Agreement spells out the consequences of dissolution or bankruptcy of a member. It also contains sections 8.7 and 8.8, concerning the resignation or termination of Roodenburg as general manager. (Further references to sections 8.7 and 8.8 are to the Operating Agreement.) Section 8.7 reads: "In the event Roodenburg dies or resigns as General Manager of the Company, then in that event, Pavestone shall purchase the Membership Interest of Hokanson for an amount equal to the Capital Account balance of Hokanson. The purchase price for the Membership Interest of Hokanson will be payable in cash in immediately available funds at the closing which shall take place not later than thirty (30) days after the death or resignation of Roodenburg as General Manager of the Company, as the case may be. Any amounts not paid when due as set forth in this section, will bear interest at the rate of one and one-half percent (11/2 %) per month until paid."

Section 8.8 reads: "In the event Roodenburg is terminated as General Manager of the Company, or in the event Roodenburg objects to or disagrees with a decision of the Members which would affect the strategic direction, capital structure, fundamental operations, or relationships with vendors or customers of the Company, . . . Roodenburg may, on behalf of Hokanson, deliver written notice of such objection or disagreement to Pavestone and within thirty (30) days after receipt of such notice, Pavestone shall purchase the Membership Interest of Hokanson for an amount equal to the sum of (a) the Capital Account balance of Hokanson and (b) the then applicable Severance Payment . . . . The purchase of the Membership Interest of Hokanson, pursuant to this section[,] will be payable in cash in immediately available funds at the closing which shall take place not less than thirty (30) days after the occurrence of the event triggering the purchase pursuant to this section. Any amounts not paid when due as set forth in this section will bear interest at the rate of one and one-half percent (11/2 %) per month until paid."

Based on an inventory conducted on the property contributed by Hokanson to Pavestone California, the value of Hokanson‟s capital account was initially set at $1,118,875.

On November 30, 2001, Roodenburg sent Pavestone a letter explaining his disagreement with certain matters that had occurred with respect to the governance of Pavestone California. Roodenburg indicated he believed he had been constructively terminated as general manager of the company inasmuch as his authority over its operations had been severely limited. Roodenburg stated he accepted such termination. However, he further stated: "If you disagree with this conclusion, I hereby resign from my employment with Pavestone California on the grounds that I object and disagree with your decisions affecting the strategic direction, capital structure, fundamental operations and relationships with vendors or customers . . . . On December 3, Pavestone accepted Roodenburg‟s resignation.

On July 3, 2002, Pavestone provided plaintiffs an accounting of the amounts it determined were owed to them upon Roodenburg‟s resignation. Pavestone computed the value of Hokanson‟s capital account to be -$27,944. Adding in a severance payment of $400,000 and interest of $25,056.33, and subtracting certain offsets, Pavestone arrived at a figure of $263,688.05. Pavestone included with the accounting statement a check in this amount. Plaintiffs disagreed with Pavestone‟s calculations and returned the check.

Plaintiffs initiated this action against Pavestone, alleging five causes of action, including breach of contract, breach of fiduciary duty, and accounting. The case went to trial on the breach of contract and breach of fiduciary duty claims alone. The jury returned a special verdict finding that, at the time of Roodenburg‟s resignation, the value of Hokanson‟s capital account was $143,040 and Roodenburg was entitled to severance of $400,000. The jury also found there had been no breach of fiduciary duty.

As noted above, the trial court entered judgment for plaintiffs in the amount of $543,040 plus interest of $489,550.56.

Both parties appeal.

D ISCUSSION

I. Breach of Contract

Pavestone contends the trial court erred in entering judgment for plaintiffs on the breach of contract claim, inasmuch as the jury returned a special verdict finding there had been no breach of contract. Pavestone cites question Nos. 5 and 6 of the special verdict. Question No. 5 asked: "Did defendant Pavestone Co. breach the agreements by failing to pay or offering to pay an amount equal to or greater than the balance of the Hokanson capital account?" The jury answered in the negative. Question No. 6 asked: "Did defendant Pavestone Co. breach the agreements by failing to pay or offering to pay the severance payment, if any, after the resignation of plaintiff Frans Roodenburg?" Again, the jury answered no.

Pavestone argues that, in light of these findings, it is entitled to a defense verdict on the breach of contract cause of action.

Plaintiffs counter that the jury also found, on question Nos. 7 and 8, that the balance in the capital account and the amount of the severance on November 30, 2001, were $143,040 and $400,000 respectively. Plaintiffs argue that, assuming there was any confusion between the special verdicts on question Nos. 5 and 6, on the one hand, and question Nos. 7 and 8, on the other, such confusion was caused by Pavestone and, hence, Pavestone cannot be heard to complain. Plaintiffs point out that, after the jury returned its verdict, they attempted to obtain clarification from the jury but Pavestone objected and Pavestone thereafter agreed to entry of judgment in the amount of $543,040. Plaintiffs further argue, in any event, the trial court properly interpreted the special verdict to reach the jury‟s intent.

Pavestone replies it reserved the right to challenge the verdict on the breach of contract claim. According to Pavestone, there is no ambiguity in the special verdict, inasmuch as the jury clearly found no breach of contract, and hence there was no reason to seek further clarification. Pavestone further argues it immediately challenged the verdict after it was entered.

Because we agree with plaintiffs that the trial court properly interpreted the jury‟s verdict, we need not ...


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