Kensington Apartment Properties, LLC v. Loanvest IX, L.P.

Background

Kensington borrowed $484,000 from Loanvest in 2007. The loan was secured by a parking garage and other real estate, and Landmark West LLC was a co-obligor. Kensington and Landmark later filed separate Chapter 11 bankruptcy cases and confirmed separate plans. Landmark’s plan provided for a lower interest rate and a possible rate reduction, while Kensington’s plan did not contain the same provisions.

Landmark paid Loanvest $788,604.20 in 2016, which fully satisfied Loanvest’s claim against Landmark under Landmark’s plan. Kensington later paid Loanvest $7,500 and then $447,869.90 after Loanvest demanded $446,852.31 plus daily interest. Kensington made the larger payment while reserving its right to challenge the demand. After Kensington sued, Loanvest asserted a counterclaim alleging that Kensington still owed money under its bankruptcy plan.

Payment Credit and Counterclaim

The court had previously adopted a bankruptcy court ruling that Landmark’s $788,604.20 payment had to be credited against whatever Kensington owed. The defendants continued to challenge that ruling in their pretrial filings, which the court treated as a request for reconsideration. The court denied that request.

The court explained that Kensington and Landmark were jointly and severally liable for the loan: each could be required to pay the entire debt, but together they could not be required to pay more than the total debt. Therefore, payments by one co-obligor reduced the amount recoverable from the other. The court held that the separate bankruptcy plans did not change this limit and that a bankruptcy discharge did not permit Loanvest to recover the same debt twice.

The court also rejected the defendants’ arguments based on a 2010 release, judicial estoppel, confirmation of Kensington’s bankruptcy plan, and preclusion arising from the earlier Landmark bankruptcy litigation. It concluded that the arguments were forfeited, did not apply, or did not prevent Kensington from receiving credit for Landmark’s payments.

Kensington’s Claims

Kensington’s first cause of action alleged breach of contract, and its sixth cause of action sought recovery of money had and received. The defendants stipulated that if Kensington was legally entitled to credit for Landmark’s payments, Loanvest had to return what Kensington paid after Landmark’s final payment, plus interest required by law. The defendants also stipulated to Kensington’s alter-ego theory. Based on those stipulations and the court’s payment-credit ruling, the court granted Kensington’s motion to enter judgment on the first and sixth causes of action against Loanvest, South Bay Real Estate Commerce Group LLC, and George Cresson.

The court ordered the defendants to pay Kensington $455,369.90 plus interest. The opinion states that the parties separately stipulated to the prejudgment and postjudgment interest rates, but it does not provide those rates in the text quoted here.

Kensington abandoned its second cause of action, which sought recovery under California’s usury law. The court dismissed that claim with prejudice. Kensington’s third cause of action alleged that Loanvest willfully failed to provide timely and accurate payoff-demand statements under California Civil Code section 2943. Based on the parties’ stipulation, the court granted dismissal of that claim with prejudice, with each side bearing its own costs and fees for that claim.

The fourth and fifth causes of action alleged conversion and accounting in connection with Kensington’s final payment. The court had adopted the bankruptcy court’s summary-judgment ruling for the defendants on those claims, and judgment was entered for the defendants on both.

Disposition

The court denied the defendants’ request to reconsider the payment-credit ruling; granted Kensington’s motion for judgment on its first and sixth causes of action; dismissed the second and third causes of action with prejudice; and entered judgment for the defendants on the fourth and fifth causes of action.