Unreported / Non-Citable
Background
These consolidated appeals arose from two lawsuits concerning the development of the historic California Theater Building property in downtown San Diego. The first action, filed in 2006 by Windmill Investment Advisors, Inc. against Pasquale Buono, sought to enforce a loan guaranty and resulted in a default judgment entered on December 11, 2008. The second action, filed in 2021 by Buono as trustee of the CTIG Windmill Trust against Faramarz Yousefzadeh and six affiliated entities, alleged usury, fraud, RICO violations, and breach of contract stemming from a purported 2007 oral agreement regarding the property's development and sale.
In the Guaranty Enforcement Case, the superior court denied Buono's motion for relief from the renewed default judgment, which Windmill Investment had obtained in 2019 after the original 2008 judgment. In the Usury and Fraud Case, the superior court sustained a demurrer to the second amended complaint without leave to amend as to the usury and RICO theories, leaving fraud as the only remaining theory. The superior court then granted Respondents' summary judgment motion on the fraud claim, concluding that Buono lacked standing because the CTIG Windmill Trust had not been validly formed. Buono appealed both rulings, challenging the denial of relief from the default judgment and the judgment against him in the second lawsuit.
The Court’s Holding
The Court of Appeal affirmed both judgments. Regarding the Usury and Fraud Case, the court held that the CTIG Windmill Trust was invalid because its purported property—rights to payment under an alleged oral agreement—was too uncertain to be identified with reasonable certainty. Buono's descriptions of the agreement's terms shifted materially over time, varying the liquidity event, the parties entitled to payment, the investment amounts, and the profit-sharing formula. The court explained that the discrepancies rendered the purported trust property so uncertain that even if Buono proved an oral agreement existed, the court could not articulate with reasonable certainty what rights had been assigned to the trust. Because the trust property could not be clearly and definitely pointed out, the trust was invalid, and Buono lacked standing to maintain suit as its trustee.
Regarding the Guaranty Enforcement Case, the court rejected Buono's five arguments for relief from the renewed default judgment. The court found no fraud on the court despite inaccuracies in a 2008 declaration, no invalidity from Windmill Investment's assignment of the note to Sloan before entry of judgment under Code of Civil Procedure section 368.5, and no bar to renewal by a dissolved corporation under Corporations Code section 2010. The court also upheld the nunc pro tunc renewal of the judgment despite administrative delays and found no prejudice from any alleged bankruptcy stay violation.
Key Takeaways
- A trust is invalid if its property cannot be identified with reasonable certainty, and shifting descriptions of the underlying contractual rights can render the purported trust property too uncertain to support a valid trust.
- A dissolved corporation continues to exist for the purpose of prosecuting actions and collecting judgments, and may seek renewal of a judgment under Corporations Code section 2010.
- Code of Civil Procedure section 368.5 permits an action to continue in the name of the original party even after that party has assigned away its interest in the lawsuit.
- Administrative delays in processing a renewal application do not invalidate the renewal where the applicant filed within the statutory period and the court directed the renewal to be dated nunc pro tunc.
- A party seeking relief from a default judgment based on fraud on the court must show both fraudulent intent and prejudice, and mere inaccuracies in a declaration do not suffice where the party consented to entry of the judgment.
Why It Matters
This decision reinforces the strict requirement that trust property be ascertainable with reasonable certainty, particularly when the purported property consists of contractual rights. Litigants cannot create valid trusts by assigning rights under oral agreements whose material terms are disputed or inconsistently described.
The ruling also clarifies that dissolved corporations retain authority to enforce judgments and that procedural mechanisms such as nunc pro tunc renewal can address administrative backlogs without prejudicing judgment debtors.