Ryan et al v. Ciolino et al

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The following discussion constitutes the court’s	1
conclusions of law and, to the extent appropriate in this summary
judgment context, findings of fact. Fed. R. Bankr. P. 7052.
-1-
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
JOHN A. RYAN and DANIELLE T.
RYAN,
Debtors.
Case No. 05-32933
Chapter 11
JOHN A. RYAN and DANIELLE T.
RYAN,
Plaintiffs,
v.
NICKLOS CIOLINO et al.,
Defendants.
Adv. No. 05-3450
AND RELATED CROSS-ACTIONS
MEMORANDUM DECISION DENYING
CHAZEN’S MOTION FOR SUMMARY ADJUDICATION
AND GRANTING SUMMARY JUDGMENT TO CIOLINO PARTIES1
I. Background
This action was brought by former debtors-in-possession John
Signed and Filed: October 12, 2006
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
October 13, 2006
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 1 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-2-
Ryan and Danielle T. Ryan (“Debtors”) to determine the priority of
liens asserted by the various defendants against their real
property in Redwood City, California, title to which is currently
in the name of debtor John A. Ryan (the “Property”). This action
is now controlled by the Chapter 11 trustee, E. Lynn Schoenmann
(“Trustee”).
All of the defendants filed Answers. Some defendants
asserted Cross-Claims against defendants Nicklos Ciolino, Charles
Ciolino, Stephen Daniele, Robert Aguilar and Daniel Delorenzi
(collectively, the “Ciolino Parties”). The cross-claimants are:
-Lawrence Chazen, individually and as trustee of the Lawrence
J. Chazen Revocable Trust (collectively, “Chazen”);
-William F. Stewart (“Stewart”);
-Jean L. Ryan, Lawrence Cavallini, and Kathy Cavallini
(“Ryan/Cavallini”); and
-Craig Judy and Patricia Judy (“Judy”).
The cross-claimants challenge the validity and priority of
attachment liens obtained by the Ciolino Parties in their actions
against debtor John A. Ryan, Superior Court of California, County
of San Mateo, Case Nos. 422430 through 422435 (the “State Court
Actions”). All of the cross-claims state the same three
alternative grounds for relief: (a) that the Ciolino Parties’
attachment liens have expired pursuant to Cal. Code Civ. P.
§ 488.510(a), (b) that they are void pursuant to Cal. Code Civ. P.
§ 483.010(a) because they were obtained to secure contract claims
but the judgments eventually obtained allegedly were upon fraud
claims, and (c) that they were fraudulently obtained in that the
Ciolino Parties asserted contract claims while allegedly knowing
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 2 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-3-
that no such claims existed and that the claims were tort claims,
on which the Ciolino Parties could not have obtained attachment
liens.
The Ciolino Parties filed Answers to Chazen’s and Stewart’s
cross-claims but not to the other, identical cross-claims. No
cross-claimant has sought a default against the Ciolino Parties.
Chazen filed a motion for summary adjudication, asserting
each of the grounds set forth in his cross-claim against the
Ciolino Parties. Chazen’s motion came on regularly for hearing
before the undersigned judge on April 7, 2006, and at a continued
hearing on June 16, 2006. None of the other cross-claimants filed
a written joinder in Chazen’s motion but counsel for some of them
argued in favor of his motion at the hearings. Appearances at
these hearings are as noted in the record.
At the end of the hearings the court stated that it would
deny Chazen’s motion. The court also stated that it was inclined
to enter a judgment in favor of the Ciolino Parties because a
ruling against Chazen appeared to establish the Ciolino Parties’
entitlement to a judgment as a matter of law. Chazen’s counsel
agreed that there is authority for such procedure. See generally
Civ. L.R. 56-3 (incorporated by B.L.R. 1001-2(a)(53)). The court
directed the Ciolino Parties’ counsel to file a declaration
supporting his calculation of pre-judgment and post-judgment
interest, and directed the parties to meet and confer on a form of
order. The Ciolino Parties filed that declaration and submitted a
proposed order, to which Chazen objected.
This court issued an order (the “OSC”) for all of the cross-
claimants, Trustee, and Debtors to show cause why the court should
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 3 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-4-
not enter this Memorandum Decision and judgments in favor of the
Ciolino Parties. Attached to the OSC were drafts of this
Memorandum Decision and a proposed form of Judgment. Chazen and
Trustee filed timely responses to the OSC. The Ciolino Parties
did not file any reply. A status conference on the OSC responses
was held on September 25, 2006. Appearances at the status
conference are as noted in the record.
II. Rulings
Upon consideration of the papers filed by the parties and the
arguments and evidence presented at the hearings, and for the
reasons stated on the record,
(A) Chazen’s motion. Chazen’s motion for summary
adjudication will be DENIED by a separate order and judgment
issued concurrently with this Memorandum Decision.
(B) Relation back, generally. 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 to and merge with those attachment
liens, such that they are prior in time and of higher priority
than the liens asserted by Chazen and all of the other cross-
claimants.
(C) Compensatory damages. Compensatory damages, as listed in
the General Verdict Form filed in the State Court Actions on
December 31, 2003, arise from the Ciolino Parties’ contract
claims, and therefore relate back. There is an exception for
Nicklos Ciolino. Chazen’s response to the OSC objects that
Nicklos Ciolino’s fifth cause of action, for contract damages,
only alleges an investment of $100,000.00 with a return of 20% for
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 4 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
The clerk’s file stamp shows a date of January 9, 2003,	2
but that is clearly a typographical error because that would be
before the trial, and the jury foreperson wrote the date as
January 9, 2004. See Request for Judicial Notice Supporting
Motion by Cross-Complainant Lawrence J. Chazen for Summary
Judgment, Exhibit G.
-5-
a total of $120,000.00. Trustee’s response to the OSC objects
that Nicklos Ciolino’s pre-judgment attachment was not based on an
additional $65,000.00 investment alleged in paragraphs 12-13 and
24 of Nicklos Ciolino’s Complaint. See Verified Complaint for
Damages filed in San Mateo Superior Court on April 30, 2002 (No.
Civ. 422430). Nicklos Ciolino did not respond to these objections
and his counsel conceded these points at the status conference on
September 25, 2006.
(D) Punitive damages. Punitive damages, as listed in the
Special Verdict Form; Punitive Damages Phase filed in the State
Court Actions on January 9, 2004, do not arise from the Ciolino	2
Parties’ contract claims, and therefore do not relate back.
(E) Pre-judgment interest. The awards of pre-judgment
interest to the Ciolino Parties arise in part from their contract
claims and in part from their tort claims. The court believes
that no trial is necessary to determine which portion of the award
arises from the Ciolino Parties’ contract claims because the
nature of the interest award is established by the Plaintiffs’
Memorandum of Points and Authorities in Support of Award of
Prejudgment Compounded Interest, filed in the State Court Actions
on January 20, 2004, and by the order awarding the requested
interest, filed on March 1, 2004.
(1) No compound interest. The Ciolino Parties
calculated interest based on annual compounding. Their sole
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 5 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Together with their proposed form of order the Ciolino	3
Parties provided the court with a copy of a facsimile from
Chazen’s counsel objecting to that form of order. In that
facsimile Chazen objects to the calculation of interest “from the
date of investment” but then states that contract interest “is
calculated from the date of the breach” (citing Cal. Civ. Code
§§ 3289(b), 1916.12-1, 1916.12-2), which is more generous than
what the Ciolino Parties sought in the State Court Actions.
Nevertheless, the court believes that it is impossible for the
portion of the Ciolino Parties’ judgments that arise from their
contract claims to include more interest than they asked for based
on those claims.
-6-
basis for doing so was that their awards were based in part
on tort claims. Therefore, the portion of their judgments
attributable to such compounding does not relate back to
their attachment liens.
(2) 10% simple interest. The Ciolino Parties
acknowledged that the rate of interest was within the
discretion of the state court. They asked for a rate of 10%
per annum on both contract and tort claims, and the state
court exercised that discretion to award them that rate.
Therefore, pre-judgment interest arises from their contract
claims to the extent of simple interest at 10% per annum.
(3) Interest from April 30, 2002. The Ciolino Parties
were awarded interest from the dates of their investments,
based on their tort claims, rather than the date that their
state court actions were filed, which is the earliest
permissible date under the authority they cited for their
contract claims. See Cal. Civ. Code § 3287(b)(interest in
court’s discretion “from a date prior to the entry of
judgment” but “in no event earlier than the date the action
was filed”). Therefore the pre-judgment interest awarded to	3
them arises from their contract claims only from April 30,
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 6 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-7-
2002, when their State Court Actions were filed. The court
calculates the period from April 30, 2002, through January
21, 2004, as one year and 266 days.
(4) Interest on original investment only. The Ciolino
Parties sought pre-judgment interest based on the original
dollar amount invested by each of them, rather than on the
their total compensatory damages. The court therefore
believes that interest must be limited to no more than their
original investment alleged in their Complaints.
(5) Calculation of pre-judgment interest. Based on the
foregoing, the court calculates the portions of pre-judgment
interest that arise from the Ciolino Parties’ contract claims
as follows:
Ciolino Party Original investment Pre-Judgment Interest
(10%/yr from 4/30/02)*
Nicklos Ciolino $ 100,000.00 $ 17,287.67
Charles Ciolino $ 100,000.00 $ 17,287.67
Stephen Daniele $ 100,000.00 $ 17,287.67
Robert Aguilar $ 50,000.00 $ 8,643.84
Daniel Delorenzi $ 100,000.00 $ 17,287.67
* Taking Nicklos Ciolino as an example, $100,000.00 x 10%/yr x 1
yr = $10,000, plus $10,000 x 266/365 days = $7,287.67, for a total
of $17,287.67.
(F) Post-judgment interest. The First Amended Judgment on
Jury Verdict issued in each of the State Court Actions awarded
post-judgment interest on the entire award at the rate of ten
percent (10%) per year from January 23, 2004, until paid. That
interest award only relates back to the attachment liens to the
extent that the judgment is based on contract claims. As noted
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 7 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-8-
above, the contract-based damages claimed by Nicklos Ciolino are
$120,000.00 plus pre-judgment interest. For all other Ciolino
Parties the contract-based damages are equal to the total
compensatory award plus pre-judgment interest thereon (i.e., not
the punitive award or interest thereon).
(G) Final calculations. The court calculates the dollar
amounts of the Ciolino Plaintiffs’ judgment liens that relate back
to their attachment liens as follows:
Ciolino Party Damages that relate
back to attachment
(12/31/03 Gen.
Verdict, or
$120,000 for Niklos
Ciolino)
Pre-Judgment
Interest (from
above table)
Total as of
1/23/04*
Nicklos Ciolino $ 120,000.00 $ 17,287.67 $ 137,287.67
Charles Ciolino $ 138,000.00 $ 17,287.67 $ 155,287.67
Stephen Daniele $ 130,000.00 $ 17,287.67 $ 147,287.67
Robert Aguilar $ 55,000.00 $ 8,643.84 $ 63,643.84
Daniel Delorenzi $ 120,000.00 $ 17,287.67 $ 137,287.67
$ 563,000.00 $ 77,794.52 $ 640,794.52
* Plus post-judgment interest at 10% per annum.
(H) Judgment. To the extent of the above dollar amounts,
plus post-judgment interest at 10% per annum, the Ciolino Parties’
judgment liens against the Property in the State Court Actions
arise from their breach of contract claims, relate back to their
attachment liens, and therefore are prior in time and have
priority over all of the cross-claimants’ asserted liens as a
matter of law. A separate order and judgment will be entered
denying Chazen’s motion and in favor of the Ciolino Parties
concurrent with this Memorandum Decision.
* END OF MEMORANDUM DECISION *
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 8 of 9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-9-
COURT SERVICE LIST
Thomas F. Koegel, Esq. for Trustee
Folger Levin & Kahn LLP
275 Battery St., 23rd Fl.
San Francisco, CA 94111
T. Michael Turner, Esq. for Debtors
236 West Portal Ave., #53
San Francisco, CA 94127
Michael D. Liberty, Esq. for Ciolino Parties
Law Office of Michael D. Liberty
1290 Howard Ave., Ste. 303
Burlingame, CA 94010
Iain A. Macdonald, Esq. for Chazen
Macdonald & Associates
Two Embarcadero Center, Ste. 1670
San Francisco, CA 94111
Michele L. McGill, Esq. for Chazen
Law Offices of Michele L. McGill
220 Sansome St., 6th Fl.
San Francisco, CA 94104
Laurie J. Helper, Esq. for Chazen
Carroll, Burdick & McDonough, LLP
44 Montgomery St., Suite 400
San Francisco, CA 94104
Desmond B. Tuck, Esq. for Stewart
Law Offices of Desmond B. Tuck
177 Bovet Rd., Ste. 600
San Mateo, CA 94402
Patrick M. Macias, Esq. for Ryan/Cavallini
Ragghianti Freitas LLP
874 4th St., Ste. D
San Rafael, CA 94901
Michael Mazzocone, Esq. for Judy
Law Offices of Michael A. Mazzocone
400 Montgomery St., Ste. 200
San Francisco, CA 94104
James F. Beiden, Esq.
840 Hinckley Rd., Ste. 245
Burlingame, CA 94010
Herbert Rowland, Esq.
Ragghianti Freitas LLP
874 Fourth St., Ste. D
San Rafael, CA 94901
Case: 05-03450 Doc# 40 Filed: 10/12/06 Entered: 10/13/06 09:39:49 Page 9 of 9