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Larisa Khazan et al v. Felix Braynin et al

May 30, 2012

LARISA KHAZAN ET AL., PLAINTIFFS, RESPONDENTS, AND CROSS-APPELLANTS,
v.
FELIX BRAYNIN ET AL., DEFENDANTS, APPELLANTS, AND CROSS-RESPONDENTS.



Trial Court: Superior Court of San Francisco City and County Trial Judge: Honorable Ernest H. Goldsmith Super. Ct. No. CGC00310997

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

CERTIFIED FOR PARTIAL PUBLICATION*fn1

(City & County of San Francisco)

This case returns to us after we decided two prior appeals in the same matter. Larisa Khazan (Khazan) and Boris Khazan (collectively plaintiffs) brought this action against Felix Braynin (Braynin), Vera Braynin, Vladislav Chernoguz (Chernoguz), and Biana Chernoguz (collectively defendants). Plaintiffs sought judicial foreclosure of a deed of trust on a property in San Francisco, alleging that defendants had defaulted on a promissory note secured by the deed of trust. They also alleged that defendants had defaulted on a second promissory note, committed fraud, and violated the Racketeer Influenced and Corrupt Organizations Act, 18 United States Code section 1961 et seq. (RICO). Defendants cross-complained for slander of title and cancellation of cloud on title. Plaintiffs prevailed on their causes of action for judicial foreclosure, declaratory relief, and default on the second promissory note and on the cross-complaint, but were unsuccessful in their fraud-based and RICO causes of action. The trial court then awarded plaintiffs contractual attorney fees in the amount of $1,370,604.

In one of the earlier appeals, Khazan v. Braynin (March 30, 2009, A113035) [nonpub. opn.] (Khazan I), we affirmed the judgment on the merits. On the same date, we reversed the order determining the amount of attorney fees and directed the trial court to reconsider plaintiffs' fee request. (Khazan v. Braynin (March 30, 2009, A114369) [nonpub. opn.] (Khazan II). The trial court has now done so. Defendants appeal the resulting decision, and plaintiffs have filed a cross-appeal challenging the trial court's ruling on when interest on the award should begin to accrue.

In the unpublished portion of this opinion, we reject defendants' challenges to the amount of the attorney fee award. In the published portion of this opinion, we conclude the trial court correctly ruled that interest should run not from the date of the original judgment, but from the date of the fee award on remand.

I. BACKGROUND

For the background of this dispute, we quote from our opinion in Khazan I: *fn2

A. The Loan and Deed of Trust

Braynin and Chernoguz operated a real estate business known as Crown Real Estate and Investment (Crown), and together defendants owned a property on Hayes Street in San Francisco. Braynin asked plaintiffs for a loan to fund construction on the Hayes Street property. Plaintiffs agreed to loan them $300,000, with the loan secured by a deed of trust. In February 1995, Braynin gave plaintiffs a $300,000 promissory note and deed of trust, payable within one year. The parties dispute how much money plaintiffs gave in return. Plaintiffs took the position that they gave defendants checks totaling $140,000, and the remainder of the promissory note represented unpaid amounts defendants had previously borrowed from plaintiffs. According to defendants, all previous loans had been paid off, and Khazan gave Braynin checks totaling $119,000, promising him the balance of $181,000 within about two weeks.

B. Defendants' Version of Events

The parties gave dramatically different versions of the events that took place next. According to defendants, within a few days of lending the money, Khazan told defendants that plaintiffs no longer wanted to continue with the loan, and instead asked them to transfer the money to another company, A and A Financial Management (A&A).*fn3 Chernoguz told A&A's owner, Alexander Lushtak, to transfer the $119,000, plus interest, from Crown's account at A&A to the Khazans' account, and Khazan was aware of the transfer. Braynin asked Khazan to return the note and deed of trust. At first she told him she was too busy to look for them. Later she said she had torn them up and thrown them away.

Braynin had a deed of reconveyance prepared, which recited that the indebtedness secured by the deed of trust had been fully paid and satisfied. He explained to plaintiffs that he wanted the deed of reconveyance executed so he could record it in the event the deed of trust and promissory note turned up. Plaintiffs signed the deed of reconveyance.*fn4 However, although Braynin asked them to come to Crown's office to have it notarized, they did not do so. Braynin eventually forgot about the deed of reconveyance.

Plaintiffs made no demands on the note for at least two years, and defendants made no payments. In approximately April or May 1997, however, A&A collapsed,*fn5 and plaintiffs lost money they had invested with A&A. In late May 1997, Khazan recorded the $300,000 deed of trust.

C. Plaintiffs' Version of Events

Plaintiffs' version of the events relevant to this appeal is irreconcilable with defendants'. Khazan testified that she did not have an account with A&A, that she never intended to loan money to A&A,*fn6 and that the $300,000 note was fully funded by a combination of "new money" she gave defendants and "old money" rolled over from previous loans.*fn7 Khazan did not immediately record the deed of trust because Braynin asked her not to do so, so that he could borrow more money against the property. She never told Braynin plaintiffs wanted to withdraw from the loan, did not ask him to have her money transferred to A&A, and did not tell him she had torn up the note and deed of trust. Khazan had no memory of signing the deed of reconveyance, although she agreed that the signatures on the document looked like plaintiffs'. She received numerous interest payments on the loan before April 1997, often in the form of cash and checks from Crown or A&A, but it appears that she did not keep records of the payments. When the note came due, she asked Braynin and Chernoguz when it would be paid, and they told her they would pay very soon. She decided to record the note after Braynin told her, in around April 1997, that he had lost his money. After the note was recorded, Khazan again asked defendants when they would repay the amounts due on the $300,000 note. They said they would repay the loan, and Braynin indicated the payment would be made within a year.

D. The Litigation

Plaintiffs brought this action, seeking judicial foreclosure of the deed of trust and alleging fraud and other causes of action, and defendants cross-complained for slander of title and cancellation of cloud on title.[*fn8 ] A jury first heard the evidence and rendered its verdict. Responding to the special verdict form's questions regarding breach of the $300,000 note, the jury found that defendants had executed and delivered the note, that plaintiffs had fully funded the note with checks and the rolling over of an existing indebtedness, that plaintiffs had not instructed Braynin and Chernoguz to cancel the $300,000 promissory note and deed of trust and to transfer their money to A&A, and that the interest rate on the note was usurious.*fn9 On the cause of action for breach of the $57,000 note, the jury found that Braynin and Chernoguz had executed and delivered the note to Khazan, and that it was supported by $57,000 consideration. The jury found against plaintiffs on the other causes of action submitted to it. [In particular, the jury rejected plaintiffs' allegations that Braynin and Chernoguz committed fraud by telling them that it was unnecessary to record the $300,000 deed of trust because there was sufficient equity in the Hayes Street property and they would not endanger the value of the deed of trust; that Braynin and Chernoguz falsely promised to repay the notes for $300,000 and $57,000 without intending to do so; and that Braynin and Chernoguz committed two "predicate acts" under RICO [¶]].

The trial court later issued a statement of decision ruling in plaintiffs' favor on their first cause of action for judicial foreclosure of the deed of trust--finding that plaintiffs were entitled to the unpaid balance on the note, plus interest and attorney fees, and indicating its intent to issue a judgment of foreclosure directing the sale of the Hayes Street property--and the seventh cause of action for declaratory relief.*fn10 The court entered judgment in plaintiffs' favor on their causes of action for judicial foreclosure, declaratory relief, and default on the $57,000 note, as well as on the cross-complaint. [We end our quotation from our opinion in Khazan I.] In Khazan I, we affirmed that judgment.

E. Initial Attorney Fee Order

As we explained in Khazan II, "[t]he February 1995 note for $300,000 provided: 'Should suit be commenced to collect this note or any portion thereof, such sum as the Court may deem reasonable shall be added hereto as attorney's fees.' The promissory note for $57,000, dated June 1, 1997, contained nearly identical language.

"In ruling for plaintiffs on their causes of action for judicial foreclosure and declaratory relief, the trial court awarded plaintiffs their attorney fees in an amount to be determined. Plaintiffs brought a motion seeking a lodestar amount of $944,952 for the legal services of one of their attorneys, Arthur Brunwasser, and an additional $94,506 for the services of another attorney, Robert S. Rivkin, and asked to have the lodestar amount enhanced by a factor of 1.5.

"The trial court found that plaintiffs incurred lodestar attorney fees of $850,732 for Brunwasser's services, and applied a 1.5 multiplier for those services, for an award of $1,276,098. It also awarded $94,506 for Rivkin's services, for a total attorney fee award of $1,370,604. It used a rate of $400 per hour as the prevailing rate in the community for similar services for Brunwasser's work, and $285 per hour for Rivkin's work. The court awarded no fees for the time spent on the failed RICO claim, but declined to apportion the fees incurred for the contract and fraud causes of action, concluding they arose from a common nucleus of facts." (Fn. omitted.)

Thus, although the jury rejected the fraud causes of action, the trial court found that the facts relevant to each claim were closely related and could not be separated from each other. Based on this finding, the trial court did not apportion fees between contract causes of action, for which contractual attorney fees were available, and the fraud causes of action, for which they were unavailable. We considered the propriety of this action in Khazan II, and reversed the attorney fee award. In doing so, we concluded that while we did not dispute a finding that some, or even most, of the attorney fees plaintiff sought arose from issues common to the contract and fraud claims, it was clear to us that at least some of the fees were incurred in connection with claims that were not relevant to the contract causes of action. In particular, we pointed to evidence of defendant's dealings with various third parties in connection with the A&A transactions, evidence that arguably had relevance to the fraud-based causes of action, but had no relevance to the contractual causes of action. We also noted the authority for a trial court correcting attorney fee awards to account for a party's limited success. (See, e.g., Harman v. City and County of San Francisco (2007) 158 Cal.App.4th 407, 417-418 (Harman II); Sokolow v. ...


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