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Sullivan v. Finn

United States District Court, N.D. California

April 3, 2017

STEPHEN A. FINN, Defendant.




         In this case plaintiff JoAnna Sullivan alleges that defendant Stephen Finn has breached a Stock Purchase Agreement (“SPA”), signed in 2011, through which Finn purchased Sullivan's majority shares and partnership in the Sullivan family's winery. As outlined in the SPA, in exchange for ownership of the winery Finn agreed to pay Sullivan $9, 000 a month for the rest of her life (the “Annuity Obligation”) and to pay an amount not to exceed $500, 000 toward a life estate in a property of Sullivan's choice (the “Life Estate Obligation”), (collectively the “Payment Obligations”). Sullivan alleges that Finn has failed to comply with these obligations and brings four claims for relief: (1) breach of contract because Finn failed to pay Sullivan at least six of the monthly annuity payments required under the SPA; (2) declaratory and injunctive relief, seeking a declaration that Finn is required to pay Sullivan $9, 000 a month for the rest of her life and an injunction compelling him to make such payments; (3) breach of contract because Finn failed to meet his Life Estate Obligation; and (4) elder abuse because Finn deprived Sullivan of money and property that Finn knew would likely be harmful to Sullivan.

         The parties have filed cross-motions for summary judgment. Finn seeks summary judgment on all four of Sullivan's claims, arguing that he was not required to perform the Payment Obligations under the SPA because Sullivan made various misrepresentations about the condition of the winery that excused his performance. There is no legal support for his arguments, and his motion is DENIED.

         Sullivan moves for summary judgment on her first three claims, arguing that there are no material facts in dispute to show that Finn was obligated to perform the Payment Obligations and that he has failed to do so. Although Finn argues that his ex-wife, Kelleen, agreed to satisfy his obligation to Sullivan (her mother), there is no evidence that Sullivan accepted Kelleen's full performance, which would be necessary under California Civil Code section 1473 to extinguish his obligation because it was allegedly being performed by a third party. Sullivan's motion for partial summary judgment is GRANTED with regard to liability. She also moves for summary judgment with regard to damages resulting from breach of the Annuity Obligation and Life Estate Obligation.[1] Sullivan's motion for partial summary judgment is GRANTED with regard to damages owed for breach of the Life Estate Obligation, as there are no facts in dispute as to it, but DENIED with regard to damages owed for breach of the Annuity Obligation because of disputed facts.


         JoAnna Sullivan is Finn's former mother-in-law. Kelleen Decl. ¶2, (Dkt. No. 102). Finn married Sullivan's daughter, Kelleen Sullivan on June 18, 2011 and the couple divorced in October 2015. Prior to Finn and Kelleen's marriage Kelleen's family, the Sullivans, owned a family winery in Napa County, California that was organized into two entities, Sullivan Vineyards Corporation (“SVC”) and Sullivan Vineyards Partnership (“SVP”). JoAnn Decl. ¶2 (Dkt. No. 101). In 2011, JoAnna was the majority shareholder of SVC and majority partner of SVP. Id. ¶3.

         On August 12, 2011, Finn entered into the SPA with SVC, SVP, JoAnna, and the Sullivan Family Revocable Living Trust, according to which Finn became the majority shareholder of SVC and the majority partner of SVP. Finn Decl. Ex. A, (“SPA”) (Dkt. No. 94-1). In exchange, the SPA provided that Finn was required to pay JoAnna as follows:

1.2 Consideration for Interests. Subject to the terms and conditions of this Agreement and in consideration of the acquisition, sale, conveyance, assignment, transfer and delivery by Seller of the Interests to Buyer, and the execution and delivery of this Agreement by SVC, SVP and Seller to Buyer, Buyer shall deliver to Seller on the Closing Date the following aggregate purchase price (collectively, the “Purchase Price”):
(a) Buyer Obligation to Make Annuity Payments. Buyer shall pay to Seller JoAnna Sullivan $9, 000 within one week following the completion of her move from the house located at 1090 Galleron Road, St. Helena, CA 94754 (the “Galleron Property”), and $9, 000 per month thereafter on the monthly anniversary of the first $9, 000 payment for the remainder of her life (the “Annuity”) . . .
(b) Buyer Obligation with Respect to Residence; Establishment of Trust. On the third annual anniversary of JoAnna C. Sullivan completing her move from the Galleron Property, Buyer shall pay an amount not to exceed $500, 000 towards a life interest in a personal residence of JoAnna C. Sullivan's choice. Such life interest in such residence shall be evidenced by a Trust Agreement (the “Trust Agreement”). Buyer and JoAnna C. Sullivan hereby agree to enter into the Trust Agreement in connection with the purchase of such residence. Buyer and JoAnna C. Sullivan will pay all property taxes, insurance, maintenance, home owner association costs, and all other costs associated with such residence during her life time, and to the extent not paid, Buyer shall have the right to offset and deduct the amount of such payments from the Annuity payments.

SPA § 1.2.

         In Section 2 of the SPA, JoAnna made a number of representations and warranties about the financial and operating condition of the winery. SPA § 2. These representations were supplemented and clarified by Schedule 2, which was incorporated into the SPA at its execution. Finn Decl. Ex. B (Dkt. No. 94-1).

         Following the execution of the SPA, Finn began making the $9, 000 monthly annuity payments to JoAnna. JoAnna Decl. ¶7. In the summer of 2014, JoAnna, her children, and Finn attempted to find a property that would suit JoAnna to satisfy the Life Estate Obligation. Eventually, JoAnna selected a property located at the Del Mesa Community in Carmel, with a purchase price of $558, 000. Id. Because the purchase price exceeded $500, 000, Finn, Kelleen, and JoAnna entered into an agreement, memorialized by a letter, regarding how the funds would be contributed to purchase the property. Warden Decl., Ex. C at 4 (Dkt. No. 118-3). The letter states that “Kelleen Finn agrees to add $10, 000 cash to the purchase amount, making $510, 000 of the $557, 000 purchase price, paid in full by Stephen and Kelleen Finn per the [SPA].” Id. It also states that JoAnna would contribute $16, 710 in cash and the remaining $31, 290 “by allowing Stephen Finn to deduct $1, 000 a month from [her] monthly annuity towards the remainder of the balance until paid in full.” Id. Starting in November, 2014, Finn reduced his monthly annuity payments to JoAnna by $1, 000, paying her $8, 000 a month. JoAnna Decl. ¶23.

         On October 22, 2014, Finn wrote Kelleen a check for $500, 000. Kelleen Decl. Ex. C. In the memo line on the check Finn wrote “Prenup Agreement.” Id. Under the marriage agreement between Finn and Kelleen, Finn was obligated to pay Kelleen $500, 000 a year for the first ten years of their marriage. Kelleen Decl. Ex. A. Finn told Kelleen to purchase the Del Mesa property with these funds. Kelleen Decl. ¶16. Kelleen used these funds to purchase the Del Mesa property at the end of October, 2014 as her sole and separate property. Warden Decl., Ex. G. In connection with the purchase of the Del Mesa property, the title insurance company suggested that Kelleen use the following language to indicate that the property was being purchased to establish a life estate for her mother:

An agreement exists between Kelleen Sullivan Finn, and JoAnna C. Sullivan, in which a Life Estate is to be established for JoAnna Sullivan. This letter confirms that at this time, Kelleen has entered into a purchase contract on the property, 157 Del Mesa, Carmel, CA 93921, which is being purchased to establish this life estate.

         Warden Decl. Ex. J at 4. Kelleen executed a letter containing this language prior to closing. Warden Decl. Ex. K at 4.

         Because she was not on the title to the property and received no life estate deed, following closing, JoAnna was concerned that she had not received a life estate in the Del Mesa property. JoAnna Decl. ¶12. To help address this issue, on April 10, 2015 Kelleen created a revocable trust that included the following language:

As soon as practicable after my death, even if my husband survives me, if my mother, JoAnna Sullivan, survives me and is living at the time property becomes distributable under this Section and is then occupying the Carmel Property (defined below) as her primary residence, my Trustee shall set aside (i) any interest held or received by my trust at my death in the Carmel Property, including any improvements thereon, all insurance policies thereon and related claims under such policies, and free of all liens and encumbrances thereon, and (ii) the sum of fifty thousand dollars ($50, 000) to be held in trust for the benefit of JoAnna Sullivan as described below. For all purposes of this agreement, references to the ‘Carmel Property' means the residence located at 157 Del Mesa, Carmel, California 93921. Such trust shall be referred to as the Carmel Property Trust . . . If my mother predeceases me, this gift shall lapse and the Carmel Property shall be administered as part of my remaining trust property as provided in Article Seven.

Warden Decl. Ex. S.

         In October 7, 2015, a Colorado court entered a divorce decree, ending Finn and Kelleen's marriage. Kelleen Decl. ¶24. Because the marriage agreement between Kelleen and Finn provided that Kelleen would acquire any interest in the Sullivan winery upon the dissolution of the couple's marriage, the Colorado court ordered that Finn's interests in the Sullivan winery be transferred to Kelleen. Id. Following the dissolution of marriage Finn stopped making annuity payments to JoAnna. JoAnna Decl. ¶16.

         Because of her ongoing concern that she did not have a life estate in the Del Mesa property, and because Finn had stopped making annuity payments, in late 2015 JoAnna Sullivan hired an attorney to help her obtain a life estate deed memorializing a life estate in the Del Mesa property and enforce the Annuity Obligation. Warden Decl. Ex. F at 132:3-17. JoAnna filed a lawsuit against Finn in Monterey County Superior Court on December 2, 2015, to enforce the Payment Obligations under the SPA. Warden Decl. Ex. H. She voluntarily dismissed the case without prejudice on December 31, 2015. Id.

         JoAnna never took possession of the Del Mesa property and Kelleen ultimately rented it out to another tenant. Warden Decl. Ex. F at 150:9-152:20. Kelleen sold the Del Mesa Property in October of 2016 for approximately $640, 000. Warden Decl. Ex. I at 34:18-23. Following the sale, Kelleen paid JoAnna $19, 500, which included the $17, 000 JoAnna had paid for the property with her own cash, plus $2, 500 in rental proceeds. Warden Decl. Ex. I at 122:22-123:16.


         Summary judgment on a claim or defense is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the non-moving party's claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to identify “specific facts showing there is a genuine issue for trial.” Id. The party opposing summary judgment must then present affirmative evidence from which a jury could return a verdict in that party's favor. Anderson v. Liberty Lobby, 477 U.S. 242, 257 (1986).

         On summary judgment, the Court draws all reasonable factual inferences in favor of the non-movant. Id. at 255. In deciding a motion for summary judgment, “[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.” Id. However, conclusory and speculative testimony does not raise genuine issues of fact and is ...

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