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Steinman v. Malamed

June 28, 2010

MARK STEINMAN, AS TRUSTEE, ETC., PLAINTIFFS AND APPELLANTS,
v.
KENNETH D. MALAMED ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from orders of the Superior Court of Los Angeles County, Allan J. Goodman, Judge. Reversed. (Los Angeles County Super. Ct. No. SC082878).

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

CERTIFIED FOR PUBLICATION

Mark Steinman and the Steinman Family Trust (collectively, Steinman) settled their action against Kenneth D. Malamed and Financial Management Advisors, Inc. and LLC (collectively, FMA). The trial court dismissed the action pursuant to a stipulation by the parties, and retained jurisdiction to enforce the settlement agreement. After FMA paid Steinman the amount due under the settlement early in order to take advantage of a prepayment discount, FMA filed a motion to enforce the prepayment provision: FMA argued that it had overpaid, and sought to recover the overpayment amount. The trial court granted the motion and filed an order requiring Steinman to return the overpayment; later, the court awarded FMA attorney's fees and prejudgment interest. Steinman appeals the order requiring him to return the overpayment and the order awarding attorney's fees and prejudgment interest. We reverse the judgment and vacate the order awarding attorney's fees.

FACTS AND PROCEDURAL HISTORY

In 2004, Steinman sued FMA for breach of fiduciary duty and fraud, in connection with FMA's advice and investment services regarding a securities investment made by Steinman on behalf of the trust. The trial court conducted a bench trial and on May 22, 2007 issued a 106-page proposed statement of decision, finding FMA liable for breach of fiduciary duty and awarding Steinman the return of the $4 million investment, with 9 percent interest from the date of the investment, September 3, 1999.

Steinman and FMA then reached a settlement agreement on July 6, 2007, under which FMA agreed to pay Steinman $6.5 million. By July 16, 2007, FMA had paid Steinman $2 million in cash, leaving a balance of $4.5 million to be paid over six years pursuant to a payment schedule, and secured by a promissory note. On July 18, 2007, the trial court entered a stipulated dismissal referencing the settlement agreement, and retained jurisdiction over the parties to enforce the terms of the agreement.

The settlement agreement and the promissory note each contained a provision providing FMA with a discount to encourage early payment of the amounts due. The second and final early payment date was June 1, 2008.*fn1 Around that time, FMA was attempting to sell off its assets to another company, First Western, and as a condition for closing the transaction, Malamed had to personally indemnify First Western in the amount required to pay Steinman off. Malamed could only afford to do so at the discounted prepayment amount. Steinman and FMA, however, did not agree on the calculation of what would be due to pay off the note by June 1, 2008. On May 29, 2008, FMA wrote Steinman: "despite our belief that your calculation may be in error, we will be using it on a preliminary basis to close the deal and will send those funds to you under protest." On May 30, 2008, FMA wired $3,929,822.65 to Steinman.

FMA filed a "Complaint to Recover Overpayment of Promissory Note and For Fraud" against Steinman on July 23, 2008. FMA alleged that it had made the payment under protest, resulting in an overpayment of at least $297,716.72. The complaint requested the overpayment amount, interest, and punitive damages. FMA voluntarily dismissed the complaint in October 2008.

On November 10, 2008, FMA filed a motion to enforce the prepayment provision of the parties' settlement agreement and promissory note in the underlying case, in which the trial court had entered a stipulated dismissal and had retained jurisdiction to enforce the settlement agreement. The motion set the overpayment amount at $325,219.40, and requested prejudgment interest and attorney's fees. On November 21, 2008, Steinman filed a request that the trial court enter a stipulated judgment against FMA, arguing that FMA had breached the settlement agreement by filing its separate lawsuit and by asking the trial court to determine the overpayment amount.

On March 23, 2009, the trial court filed an order after hearing, concluding that FMA's May 30, 2008 payment was made involuntarily, and that FMA was thus entitled to the return of an overpayment of $332,534.56. On April 22, 2009, the court filed an order denying Steinman's motion for entry of stipulated judgment and granting FMA's motion to enforce the prepayment provision. Steinman filed a notice of appeal on May 19, 2009 (No. B216291).

On June 2, 2009, FMA filed a motion for attorney's fees and prejudgment interest, under the settlement agreement and the promissory note. After a hearing, the trial court found that FMA was the prevailing party, and in a July 27, 2009 minute order awarded FMA $47,250 in attorney's fees and $29,701.86 in prejudgment interest. Steinman filed a notice of appeal on August 21, 2009 (No. B218554).

We consider the two appeals together.

DISCUSSION

I. The orders are ...


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