GENESIS MERCHANT PARTNERS, LP, a Connecticut corporation v. NERY'S USA, INC., a Nevada corporation

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GENESIS MERCHANT PARTNERS, LP,
a Connecticut corporation,
Plaintiff - Appellant,
v.
NERY'S USA, INC., a Nevada corporation;
JOHN CATHCART, an individual;
COMMERCIAL TARGA, S.A. DE C.V., a
Mexican corporation,
Defendants - Appellees.
No. 13-56797
D.C. No. 3:11-cv-01589-JM-WVG
MEMORANDUM*
GENESIS MERCHANT PARTNERS, LP,
a Connecticut corporation,
Plaintiff - Appellant,
v.
NERY'S USA, INC., a Nevada corporation;
JOHN CATHCART, an individual;
COMMERCIAL TARGA, S.A. DE C.V., a
Mexican corporation,
Defendants - Appellees.
No. 13-57106
D.C. No. 3:11-cv-01589-JM-WVG
* This disposition is not appropriate for publication and is not precedent except
as provided by 9th Cir. R. 36-3.
FILED
JAN 15 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Appeal from the United States District Court
for the Southern District of California
Jeffrey T. Miller, Senior District Judge, Presiding
Argued and Submitted December 10, 2015
Pasadena, California
Before: PREGERSON, CALLAHAN, and HURWITZ, Circuit Judges.
Genesis Merchant Partners, LP, appeals the district court’s judgment, and award
of attorneys’ fees, in favor of Nery’s USA, Inc., Commercial Targa, and John
Cathcart. We have jurisdiction under 28 U.S.C. § 1291, vacate the judgment, and
remand for further proceedings.
1. The district court’s finding that Nascent breached the Stock Purchase
Agreement (the “Agreement”) by failing to indemnify Nery’s for certain obligations
of Targa is supported by substantial evidence. But, the court erred by entering a
judgment that allowed Nery’s to retain the Targa stock that was the subject of the
Agreement while excusing payment of the balance of the promissory note Nery’s
gave Nascent in return. Under California law, a party “injured by a breach of
contract” may either “disaffirm the contract, treating it as rescinded, and recover
damages resulting from the rescission,” or “affirm the contract . . . and recover
damages for breach of contract.” Wong v. Stoler, 188 Cal. Rptr. 3d 674, 680 (Ct.
App. 2015). The district court’s judgment does not comport with either of these
recognized remedies for breach of contract.

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2. Freedman v. Rector, Wardens & Vestrymen of St. Mathias Parish, 230
P.2d 629 (Cal. 1951), does not support the remedy ordered below. That case refuses
to enforce, as a penalty, a liquidated damages provision in a real estate contract,
instead holding that the vendee could recover restitution if his down payment
exceeded the vendor’s damages. Id. at 631, 633. That the vendee’s anticipatory
breach excused the vendor’s obligation to sell the property in that case, id. at 631,
does not suggest that Nascent’s breach both excused Nery’s from its obligations
under the note and simultaneously allowed it to retain the benefits of the Agreement.
3. Genesis does not dispute that any damages for Nascent’s breach of its
contractual duty to indemnify should be offset against the note. We therefore
remand for assessment of those damages.1
4. Fees may be granted to the “party who is determined to be the party
prevailing on the contract.” Cal. Civ. Code § 1717(a). Because we vacate the
judgment, we also vacate the fee award without prejudice to the district court
awarding fees after entry of a new judgment.
1 We leave to the district court the decision whether those damages should be
determined solely on the existing record. We also leave to the district court whether
Nery’s is entitled to a new election of remedies after contractual damages are
calculated, and if Nery’s is allowed to rescind the Stock Purchase Agreement,
whether Genesis has a claim for unjust enrichment arising out of Nery’s ownership
of Targa before the rescission.

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VACATED and REMANDED

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