United States Postal Service v. Jamke et al

Filing 70

MEMORANDUM DECISION and ORDER Denying Defendants 62 Motions for New Trial or in the Alternative, for Modification of Judgment and Instructions, signed by Chief Judge Lawrence J. O'Neill on 5/1/17. (Gonzalez, R)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 FOR THE EASTERN DISTRICT OF CALIFORNIA 6 7 UNITED STATES POSTAL SERVICE, Plaintiff, 8 9 v. JAMKE, a California general partnership, 10 STACEY CARLSON, in her personal capacity, as Trustee of the Ashlock Family 11 2013 Trust B, and as Trustee of the Ashlock Family Trust of 1993, GABRIEL 12 ASHLOCK, in his personal capacity and as court appointed administrator of the Estate 13 of Lonnie Ashlock, JOHN A MYRTAKIS, KEN DAVID ELVING, and INVESTWEST 14 PROPERTIES, a California general partnership, 15 16 17 CASE NO. 1:15-cv-01806-LJO-EPG MEMORANDUM DECISION AND ORDER DENYING DEFENDANTS MOTIONS FOR A NEW TRIAL, OR IN THE ALTERNATIVE, FOR MODIFICATION OF JUDGMENT AND INSTRUCTIONS ECF Nos. 60, 62. Defendants. AND RELATED CROSS ACTIONS 18 I. BACKGROUND 19 Plaintiff United States Postal Service (“USPS” or “Plaintiff”) brought suit against Defendants 20 JAMKE, a California general partnership, and JAMKE partners Ken David Elving and John A. Myrtakis 21 (collectively, “JAMKE”), Stacey Carlson, in her personal capacity and as Trustee of the of the Ashlock 22 Family 2013 Trust B and the Ashlock Family Trust of 1993 (“Carlson”), Gabriel Ashlock in his personal 23 24 25 1 1 capacity and as court appointed administrator of the Estate of Lonnie Ashlock (“Gabriel”1), and Invest 2 West Properties (“Invest West”), a California general partnership, to enforce the fixed price purchase 3 option provision contained in its long-term lease agreement for the Merced Post Office. The agreement 4 provided that at the termination of the long-term lease on November 30, 2015, USPS had the option to 5 purchase the Merced Post Office property for $300,000. On January 12, 2017, the Court granted summary judgment in favor of USPS. (ECF No. 52.) The 6 7 Court held that USPS had properly exercised its valid purchase option, and that Defendants had 8 breached by failing to convey title to USPS after the lease ended on November 30, 2015 in accordance 9 with the terms of the agreement. (Id.) The Court ordered USPS to submit a proposed final judgment detailing the terms for specific 10 11 performance, which USPS filed on January 20, 2017. (ECF No. 53.) Defendants filed objections to the 12 proposed order on January 31, 2017. (ECF Nos. 54, 55.) Specifically, Defendants objected to the Court’s 13 ordering specific performance, the proposed distribution of escrow funds, and asserted that they were 14 owed rent, prejudgment interest, taxes, insurance premiums, and other costs. (Id.) Defendant Gabriel 15 also asserted that he could not provide quiet title due to a pending state court action. (Id.) The Court 16 entered final judgment on February 3, 2017, ordering Defendants to transfer title of the Merced Post 17 Office within 30 days to USPS in accordance with the terms of lease agreement between the parties. 18 (ECF No. 58.) The Court thoroughly addressed Defendants’ objections in footnotes 1 through 4 of the 19 judgment. (Id.) On March 3, 2017, Gabriel filed a motion for a new trial, or, in the alternative, for modification 20 21 of judgment and instructions pursuant to Federal Rules of Civil Procedure 52(b) and 59. (ECF No. 60.) 22 On March 6, 2017, JAMKE filed a motion for a new trial and/or, in the alternative, a motion to alter 23 judgment. (ECF. No. 62.) In their motions, Defendants object to several aspects of the Court’s judgment, 24 25 1 Because there are multiple individuals and trusts with the name “Ashlock” involved in this dispute, the Court refers to Gabriel Ashlock by his first name. 2 1 including the Court’s determination that Defendants were not entitled to “holdover” rent, interest, taxes, 2 insurance premiums, repair costs, or other costs accrued by Defendants after November 30, 2015. (ECF 3 Nos. 60, 62.) Defendants also objected to being required to pay closing costs. (Id.) Defendant Gabriel 4 raised other issues with respect to its ability to provide quiet title to USPS. (ECF No. 60.) 5 After filing their motions, Defendants conveyed title of the Merced Post Office property to USPS 6 pursuant to this Court’s February 3, 2017 judgment. (Declaration of M. Anderson Berry (“Berry Decl.”) 7 ¶ 2, Ex. 1, ECF No. 67-1.) The deeds were recorded on March 13, 2017. (Id.) USPS paid all closing 8 costs, in the amount of $4,592. (Id. ¶ 6, Ex. 2.) USPS also paid Defendants $5,000 for “roof repairs.” 9 (Id. ¶ 5, Ex. 2.) 10 USPS opposed the motions on April 18, 2017, noting that several of the issues raised by 11 Defendants had been resolved and therefore mooted in the course of the conveyance. (ECF No. 67.) 12 Defendants submitted a joint reply on April 25, 2017, in which they conceded that the issues raised in 13 their motions had been resolved, with the exception of their request for holdover rent or escrow interest, 14 property taxes, and reimbursement for insurance payments. (ECF No. 68.) This matter is suitable for 15 disposition without oral argument and is ripe for review. See Local Rule 230(g). II. STANDARD OF DECISION 16 17 A. Rule 59(a) 18 A new trial is warranted under Rule 59(a) when the judgment is “contrary to the clear weight of 19 the evidence, or [] based upon evidence which is false, or to prevent, in the sound discretion of the trial 20 court, a miscarriage of justice.” Silver Sage Partners, Ltd. v. City of Desert Hot Springs, 251 F.3d 814, 21 819 (9th Cir. 2001) (internal citations and quotation marks omitted). 22 B. Rule 59(e) 23 A district court may reconsider its grant of summary judgment under Federal Rule of Civil 24 Procedure 59(e). A motion to alter judgment under Rule 59(e) is appropriate where the court “(1) is 25 presented with newly discovered evidence, (2) committed clear error or the initial decision was 3 1 manifestly unjust, or (3) if there is an intervening change in controlling law.” Sch. Dist. No. 1J, 2 Multnomah Cty., Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). 3 C. Rule 52(b) 4 Federal Rule of Civil Procedure 52(b) permits a court to amend findings made after a bench 5 trial. Rule 52(b) provides: “On a party’s motion filed no later than 28 days after the entry of judgment, 6 the court may amend its findings—or make additional findings—and may amend the judgment 7 accordingly.” Fed. R. Civ. P. 52(b). Motions under Rule 52(b) are primarily designed to correct findings 8 of fact which are central to the ultimate decision; the Rule is not intended to serve as a vehicle for a 9 rehearing. Davis v. Mathews, 450 F. Supp. 308, 318 (E.D. Cal. 1978). 10 11 III. ANALYSIS Several of the issues raised by Defendants in their motions have been mooted by the subsequent 12 conveyance of the Merced Post Office property, and USPS’s payment of closing costs and roof repairs. 13 The remaining issues are whether Defendants are entitled to payment of rent or escrow interest, or 14 reimbursement for property taxes or insurance premiums for the period from December 1, 2015 through 15 the close of escrow. 16 As an initial matter, the Court notes that Defendants’ arguments are not properly made as 17 motions under Rule 59(a) or Rule 52. Rule 59(a) applies to motions brought for a new trial following a 18 either a jury trial or a bench trial. Rule 52 applies to motions brought regarding factual findings or 19 conclusions made by the Court. This case was resolved on undisputed facts on summary judgment. 20 Therefore, to the extent that these motions are brought under these rules, they are inappropriate. 21 To the extent that Defendants argue that the Court should reconsider its judgment under Rule 22 59(e), Defendants do not argue that any newly discovered evidence or intervening case law affects the 23 Court’s initial judgment. Therefore, the Court will consider only whether it “committed clear error or the 24 initial decision was manifestly unjust.” ACandS, Inc., 5 F.3d at 1263. 25 4 1 2 A. Rent Defendants argue that the Court did not properly address their counterclaim for “holdover” rent 3 allegedly owed by USPS for the period from December 1, 2015 through the close of escrow. In its 4 summary judgment decision, the Court held that USPS properly exercised its valid option to purchase 5 the Merced Post Office property at the agreed price of $300,000. Therefore, on December 1, 2015, 6 USPS was the rightful and equitable owner of the property and Defendants were in breach. In granting 7 summary judgment against Defendants, the Court necessarily concluded that Defendants’ counterclaim 8 for holdover rent failed as a matter of law. USPS could not be both the rightful owner as of December 1, 9 2015 and a holdover tenant. This point bears emphasis: at no point was USPS a holdover tenant. Since 10 Plaintiff was the equitable owner as of December 1, 2015, and both parties agree that USPS made all the 11 required rent payments under the contract prior to December 1, 2015 (ECF No. 52 at 4; ECF No. 58 at 3 12 n.4), USPS does not owe Defendant any rent. See United States Postal Serv. v. Ester, 836 F.3d 1189, 13 1194, 1198 (9th Cir. 2016) (affirming district court’s order granting specific performance and denying 14 counterclaim for holdover rent); United States v. Turley, No. 15-CV-78-JHP, 2016 WL 8671924, at *11 15 (E.D. Okla. Nov. 18, 2016) (where USPS was granted summary judgment on similar facts, the court 16 noted that defendant was “not entitled to holdover rent . . . based on the Court’s finding that Plaintiff is 17 entitled to specific performance of the purchase option”); United States v. Americo Fisco Revocable 18 Trust, No. 1:14CV2579, 2016 WL 4565470, at *6 (N.D. Ohio Aug. 31, 2016) (“[O]nce a lessee 19 exercises an option to purchase . . ., the former lessee cannot be held liable for holdover rents”) 20 (citations omitted). 21 In support of their position that USPS owes holdover rent, Defendants cite Ellis v. Mihelis, 60 22 Cal. 2d 206, 219-20 (1963). In Ellis, the court reversed the lower court’s grant of specific performance 23 for the plaintiff on the grounds that the statute of frauds precluded enforcement of the contract for sale 24 between plaintiff and defendant. Id. at 219. In discussing the damages awarded by the lower court, the 25 court observed that, “[a] party to a contract for the purchase or exchange of land who is entitled to a 5 1 decree of specific performance is also ordinarily entitled to a judgment for the rents and profits from the 2 time he was entitled to a conveyance.” Id. 3 Defendants seem to interpret this case to mean that they are entitled to rent because the Court 4 ordered specific performance. The court’s analysis supports the opposite proposition. Plaintiff was 5 awarded specific performance in this case. Therefore, had Defendants been renting the property to a 6 third-party after USPS was entitled to the conveyance, then USPS, not Defendants, would have been 7 entitled to those rents and profits. The case does not stand for the proposition that Defendants are 8 entitled to rents and profits for the period of time after they should have conveyed the property to USPS. 9 Defendants contend that Ellis “stands for the notion that the parties [must] be put back into the 10 position they would have been if escrow closed timely.” (ECF No. 68 at 4.) Applying Ellis to this case, 11 if USPS had been timely conveyed the property, it would not have had to pay any rent to Defendants 12 from that point forward. Instead, USPS would have been the rightful owners. Therefore, under Ellis, 13 Plaintiff does not owe Defendants rent. 14 As to Defendants’ alternative argument that they are entitled to the interest on the escrow 15 account in lieu of holdover rent, Defendants do not allege that there was a waiver of sovereign immunity 16 for them to be entitled to interest from the federal government. “Interest cannot be recovered in a suit 17 against the Government in the absence of an express waiver of sovereign immunity from an award of 18 interest.” Library of Congress v. Shaw, 478 U.S. 310, 311 (1986), superseded by statute on other 19 grounds; see also Fabricius v. United States, No. CV-F-02-5597 REC/DLB, 2002 WL 31662301, at *1 20 (E.D. Cal. Oct. 18, 2002) (“Any waiver by the United States of its sovereign immunity cannot be 21 implied but must be unequivocally expressed, and such waivers must be strictly construed in favor of the 22 sovereign”). There is no indication USPS waived its sovereign immunity here. Defendants are not 23 entitled to rent or escrow interest after November 30, 2015. 24 B. Property Taxes 25 Defendants further contend that they are entitled to be reimbursed for property taxes paid from 6 1 December 1, 2015 through the close of escrow. USPS counters that if Defendants had not breached the 2 contract, USPS would not have incurred any property taxes after being conveyed legal title because it is 3 exempt from state taxes as a federal government entity. It is undisputed that USPS paid Defendants’ 4 property taxes in accordance with the terms of the lease agreement while the agreement was in effect. 5 (ECF No. 52 at 4; ECF No. 58 at 3 n.4) 6 As Defendants acknowledge, the purpose of specific performance and other equitable remedies 7 is to put the parties back in the position that they would have been in had the breach not occurred. (ECF 8 No. 4); see also Postal Instant Press, Inc. v. Sealy, 43 Cal. App. 4th 1704, 1708-09 (1996) (“Under 9 general contract principles, when one party breaches a contract the other party ordinarily is entitled to 10 damages sufficient to make that party ‘whole,’ that is, enough to place the non-breaching party in the 11 same position as if the breach had not occurred.”). Here, the non-breaching party, USPS, would not have 12 incurred any property taxes from December 1, 2015 through the close of escrow had the property been 13 conveyed to them by the breaching party on November 30, 2015. See M’Cullouch v. Maryland, 17 U.S. 14 316, at *1 (1819) (“The state governments have no right to tax any of the constitutional means employed 15 by the government of the Union to execute its constitutional powers.”). Correspondingly, had 16 Defendants not breached, they would not have incurred property taxes after that date. Putting the parties 17 into the position they would have been in had the breach not occurred, Plaintiff does not owe Defendants 18 reimbursement for property taxes. 19 C. Insurance Premiums 20 Defendants also contend that USPS should reimburse them for insurance premiums paid after 21 November 30, 2015 because “any funds expended for the benefit of the Subject Property after that date 22 were, in essence, expended for the benefit of USPS.” (ECF No. 62 at 9.) Defendants cite Ellis for the 23 proposition that USPS should pay for the insurance premiums as part of an accounting following the 24 Court’s order of specific performance. 60 Cal. 2d at 220. The Court disagrees. Defendants made those 25 insurance payments to protect themselves as legal owners of the property, even if they were not 7 1 equitable owners at the time. In other words, Defendants paid that insurance for their own benefit. 2 Indeed, USPS was not even responsible for insurance payments while the contract was in effect, because 3 the benefit of paying for that insurance accrued to Defendants. 4 Moreover, had the property been timely conveyed in accordance with the terms of the contract, 5 USPS would have had the option to make its own decisions regarding how to insure the property. They 6 were denied that option by Defendants’ breach, and Defendants cannot now foist their costs, which they 7 would have not have incurred if they had not breached, on to USPS. Defendants are not entitled to 8 reimbursement for insurance premiums. 9 In deciding not to order Plaintiff to pay rent, property taxes, or insurance to Defendants, the 10 Court did not commit clear error in its initial judgment, nor was its initial decision manifestly unjust. 11 Therefore, Defendants’ motions under Rule 59(e) are DENIED. IV. CONCLUSION AND ORDER 12 13 For the reasons set forth above, Defendants’ motions for a new trial, or, in the alternative for 14 altered judgment are DENIED. 15 16 IT IS SO ORDERED. 17 Dated: /s/ Lawrence J. O’Neill _____ May 1, 2017 UNITED STATES CHIEF DISTRICT JUDGE 18 19 20 21 22 23 24 25 8

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