Chazen v. Ciolino (In Re Ryan)

369 B.R. 536, 2007 U.S. Dist. LEXIS 35832, 2007 WL 1455915
CourtDistrict Court, N.D. California
DecidedMay 16, 2007
Docket06-cv-06606 MHP
StatusPublished
Cited by6 cases

This text of 369 B.R. 536 (Chazen v. Ciolino (In Re Ryan)) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chazen v. Ciolino (In Re Ryan), 369 B.R. 536, 2007 U.S. Dist. LEXIS 35832, 2007 WL 1455915 (N.D. Cal. 2007).

Opinion

*539 MEMORANDUM AND ORDER

Re: Bankruptcy Appeal

PATEL, Judge.

On October 24, 2006 Lawrence J. Chazen (“Chazen”) filed this appeal challenging the bankruptcy court’s October 12, 2006 order granting summary judgment to Nicklos and Charles Ciolino, Daniel Delo-renzi, Robert Aguilar, and Stephen Dan-iele (“the Ciolinos”) and denying summary adjudication to Chazen. The bankruptcy court ruled that, with respect to the estate of the bankrupt John Ryan (“Ryan”), some of the Ciolinos’ judgment liens related back and merged with their pre-judgment attachment liens, and that the Ciolinos’ liens therefore take priority over Chazen’s liens. Having considered the parties’ arguments and submissions, and for the reasons set forth below, the court enters the following memorandum and order. BACKGROUND 1

The underlying action was brought by the Ciolinos after they sustained losses from a fraudulent investment scheme undertaken by John Ryan. The Ciolinos entered into oral contracts with Ryan, who promised to make particular stock investments on their behalf. To secure the Cio-linos’ confidence Ryan made a number of false representations, including, among other things, that the investments 1) were virtually risk free, 2) were insured by the brokerage firm Bear Stearns, 3) were audited regularly by Bear Stearns, 4) would be repaid promptly, and 5) would, at worst, be repaid plus ten percent interest. Appellants’ App. at AA0467-69. Ryan concealed the facts that the investments were neither secure nor insured; that, at worst, the Ciolinos could lose the entirety of their investments; and that Ryan’s investment firm was not a sound, reputable corporation. Id. at AA0468-69. The Ciolinos lost both the corpus of their investments as well as their promised returns on those funds.

On April 30, 2002 the Ciolinos brought suit against Ryan in San Mateo County Superior Court, alleging fraud and contract claims, including concealment, negligent misrepresentation, negligence, breach of fiduciary duty, breach of oral contract and unfair business practices. Ryan’s primary asset is a $1.6 million house and parcel of land in Redwood City, California (“Ryan’s home”). On June 20, 2002 the Ciolinos obtained five pre-judgment writs of attachment on this property for five contract claims totaling $497,000. These writs were recorded on June 21, 2002.

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This original action went to trial on December 1, 2003. On December 31, 2003 a jury awarded the Ciolinos compensatory damages in the amount of $603,000, punitive damages in the amount of $225,000.

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The judge awarded the plaintiffs prejudgment interest and costs in the amounts of *540 $161,017.05 and $27,910.05 respectively, on the basis of both fraud and contract claims.

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The sum of the awards to the Ciolinos was thus $1,016,927.10. Following this original judgment, the Ciolinos secured abstracts of judgment on Ryan’s house. Ryan appealed the judgment against him and the California Court of Appeal affirmed.

On June 25, 2002, four days after the Ciolinos’ writs of attachment were recorded, Chazen recorded a deed of trust on Ryan’s home in the amount of $964,000. The Ciolinos characterize Chazen as Ryan’s friend and co-conspirator in the fraudulent investment scheme. On January 5, 2004 Ryan’s friends and family members, including Craig and Patricia Judy, Lawrence and Kathy Cavallini and Jean Ryan, recorded a second deed of trust on Ryan’s home in the amount of $750,000. On January 28, 2005 the Cioli-nos, believing the two deeds to be fraudulent transfers meant to drain Ryan’s home of equity, again filed suit in San Mateo County Superior Court seeking the annulment of the allegedly fraudulent deeds. 2

On September 7, 2005 Ryan and his wife Danielle filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Northern District of California. On October 20, 2005 the Ryans initiated an adversary proceeding against all creditors holding liens on the Redwood City property, including Chazen and the Ciolinos. In the adversary proceeding, the Ryans sought a determination of the priority of the various liens on the property. 3 Chazen answered and filed a cross-claim against the Ciolinos seeking a determination that his deed was senior to their liens and/or that the Ciolinos’ liens were void or expired. Chazen subsequently moved for summary adjudication on these issues.

In Chazen’s motion for summary adjudication, he argued that he was entitled to summary adjudication because the Ciolinos had obtained prejudgment attachment liens based on claims for breach of contract. Appellants’ App. at AA0153. While Chazen acknowledged that the Ciolinos sought and obtained judgments for tort claims involving fraud and misrepresentation as well as for contract claims involving breach of oral contract, Chazen nonetheless argued that the jury awarded the Ciolinos damages for their tort claims exclusively and awarded the Ciolinos no damages for their contract claims. Id. As a result, Chazen contended that the Cioli-nos’ judgments do not relate back to their attachment liens and that since the attachment liens were not renewed they have therefore expired. Id.

The bankruptcy court denied Chazen’s motion, and the parties agreed that this ruling amounted to a finding that the Cioli-nos’ liens were senior to Chazen’s deed. On October 12, 2006 the court granted summary judgment to the Ciolinos. The court ruled that “to the extent that the Ciolino parties’ judgments arise from their breach of contract claims, their judgment liens arise from the same claims as the attachment liens and therefore relate back *541 to and merge with those attachment liens.” The court determined that $563,000 of the Ciolinos’ $603,000 total compensatory damage award; no punitive damages; $77,794.52 in pre-judgment interest; and 10 percent per annum in simple interest arose from the Ciolinos’ contract claims and therefore related back to and merged with the attachment liens. A comparison of the prejudgment attachments liens secured by each plaintiff with the amount of compensatory damages found to relate back to the liens is presented below.

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The bankruptcy court determined the amount of prejudgment interest that relates back to the liens based on the original investment of each of the Ciolino parties. The break-down of the amount of prejudgment interest that would relate back is as follows:

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Therefore, court computed the total amount of the judgement liens that relate back to the attachment liens based on the sum of the relevant portion of the prejudgment interest and the compensatory damage award.

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As a result, the court found the Ciolinos’ liens, in the amount of $640,794.52, to be of higher priority than Chazen’s deed.

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Cite This Page — Counsel Stack

Bluebook (online)
369 B.R. 536, 2007 U.S. Dist. LEXIS 35832, 2007 WL 1455915, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chazen-v-ciolino-in-re-ryan-cand-2007.