2008-00027602-CU-BC

Westamerica Bank vs. Sacramento Yacht Charters LLC

Nature of Proceeding: Application for Entry of Judgment Pursuant to Stipulation

Filed By: Polland, Jonathan

***If any party requests oral argument, then at the time the request is made, the
requesting party must inform the court and opposing counsel of the specific
issue(s) on which oral argument is sought.***

The motion of Defendants and Cross-Complainants David O. Stroud and Frank
Andrews, Jr. (“Andrews”) (collectively “Cross-Complainants”) for entry of judgment is

GRANTED.

Background Facts/Procedure

In November 2008, Plaintiff Westamerica Bank commenced this action for default on
commercial loans and guarantees. Among the named defendants are Cross-
Complainants herein as well as Roy D. King and John Gueola (collectively “Cross-
Defendants”). Cross-Complainants filed a cross-complaint against Cross-Defendants
for indemnity and contribution, and Cross-Defendants filed their own, similar cross-
complaints against Cross-Complainants.

In May 2010, the above-named parties entered into a global settlement agreement
(“Settlement Agreement”) requiring Cross-Complainants to pay Westamerica the
principal sum of $991,500. (See Exh. A to Andrews Decl. filed 08/08/13.) The
Settlement Agreement provides for Cross-Complainants’ and Cross-Defendants’
execution of a stipulated judgment (“Stipulated Judgment”), whereby Cross-
Defendants would make monthly payments to Cross-Complainants on the principal
sum of $495,750, which is half the sum that Cross-Complainants owed Westamerica.
Cross-Defendants’ payments to Cross-Complainants would then be forwarded to
Westamerica, and such payments would reduce the principal balance that Cross-
Complainants owed to Westamerica.

The Settlement Agreement required Cross-Defendants to execute powers of attorney
authorizing Cross-Complainants to sell the collateral, i.e., certain water vessels. Cross
-Defendants were also required to cooperate with Cross-Complainants in the latters’
efforts to sell the collateral. Net proceeds from the sale of collateral would be
forwarded to Westamerica and would reduce the amount that Cross-Complainants
owed Westamerica as well as the amount that Cross-Defendants owed to Cross-
Complainants. Both the Settlement Agreement and the Stipulated Judgment provide
that, upon Cross-Defendants’ default, the stipulated judgment entered in Cross-
Complainants’ favor would be limited to the amount of $495,750, less any reductions in
principal from the sale of collateral. The Settlement Agreement and Stipulated
Judgment confer upon Cross-Complainants, in their sole discretion, the power to
initiate a public sale or private sale of the collateral in order to maximize proceeds
therefrom.

In June 2010, Cross-Complainants and Cross-Defendants entered into the Stipulated
Judgment. (See Polland Decl., Exh. B.)

In August 2013, Cross-Complainants applied ex parte for an order entering the
Stipulated Judgment against Cross-Defendants. The court set the matter for hearing
and, in November 2013, entered an order denying the motion without prejudice. (See
Polland Decl., Exh. A.) The court’s order contained findings that Cross-Defendants
defaulted on the payments owed to Cross-Complainants and that Cross-Complainants
were entitled to move for entry of judgment. The court also rejected Cross-
Defendants’ argument that Cross-Complainants were not entitled to entry of the
Stipulated Judgment because they had not used their best efforts to sell the collateral.
In this regard, the court concluded that the Stipulated Judgment contains Cross-
Defendants’ waiver of any claim based on poor efforts to sell the collateral.

However, the court denied entry of judgment, albeit without prejudice, due to
discrepancies in the amount of the judgment. The first discrepancy arose from credits

to Cross-Defendants based on sale of collateral. A second discrepancy arose as to
any principal payments Cross-Defendants had made to Cross-Complainants before
the former defaulted. The court’s November 2013 order makes reference to the
appointment of an accountant pursuant to CCP § 639 to resolve these discrepancies.

The parties ultimately stipulated to the appointment of Vanessa Hill, CPA (“Hill”)
pursuant to CCP § 638. Hill issued a report dated March 4, 2014. (See Polland Decl.,
Exh. D.) Hill concluded that Cross-Defendants are entitled to a $10,089 credit based
on payments derived form the sale of collateral. (See id., Exh. D at 8.) Hill further
concluded that Cross-Defendants were not entitled to any credits for principal
payments made to Cross-Complainants. Thus, Hill recommended entry of a judgment
in the amount of $485,661. Cross-Complainants now move the court to adopt Hill’s
recommendation and enter a judgment in that amount.

Discussion

Cross-Defendants oppose Hill’s recommendation on three grounds. First, they argue
that judgment is unwarranted because Cross-Complainants have failed to dispose of
additional collateral that could yield additional payments to Westamerica and,
therefore, additional credits in favor of Cross-Defendants. (According to Cross-
Defendants, the vessel in question “has a lease option but has never been sold.” (See
Opp. at 4:24-27.) This argument is based on Cross-Defendants’ position that the
Settlement Agreement requires Cross-Complainants to sell all collateral. The court
previously rejected this position in its November 2013 order because of Cross-
Defendants’ contractual waivers. (See Reply at 4:9-17.) The court abides by its
previous rejection.

Moreover, Cross-Defendants’ position does not square with the language of the
Stipulated Judgment. Paragraph 6 of the Stipulated Judgment empowers Cross-
Complainants to sell the collateral “in their sole and absolute discretion,” but it does not
require them to do so. The court does not read the Settlement Agreement to obligate
Cross-Complainants to sell all the collateral either. This finding is particularly apt given
Cross-Complainants’ uncontested assertions that (1) third-party liens exceed the value
of the remaining collateral and, therefore, sale of the collateral will not yield any net
proceeds, and (2) Cross-Complainants have offered to give the collateral to Cross-
Defendants to sell, but Cross-Defendants have refused this offer.

Next, Cross-Defendants argue that Hill failed to consider evidence that certain
insurance proceeds result in credits in favor of Cross-Defendants. The court finds that
the insurance proceeds went to a third party, not to Cross-Complainants or
Westamerica. Thus the court rejects Cross-Defendants’ position.

Finally, Cross-Defendants argue that Hill’s recommendation fails properly to account
for $36,000 that a third party provided as a down payment on an option to lease
collateral. Cross-Defendants argue that the prospective judgment against them should
be reduced by $18,000 in light of this down payment.

The court accepts Cross-Complainants’ uncontested representation that the $36,000
payment was given to a third party to make repairs to the collateral and therefore
should not be credited against Cross-Defendants’ payment obligations to Cross-
Complainants. (See Andrews Decl. of 04/18/14 at ¶ 4.) Thus, even if Hill should have
considered the $36,000 down payment differently than she did, it would not affect the

court’s current determination.

Conclusion

The court ADOPTS Hill’s recommendation and report dated 04/04/14.

Cross-Complainants are entitled to a judgment against Cross-Defendants in the
amount of $485,661.

The minute order is effective immediately. No further notice is required.

The court will sign the judgment submitted.