Calif. court reverses ruling against Morris Cerullo World Evangelism regarding attorneys' fees

By Tomas Kassahun | Dec 4, 2018

SAN DIEGO (Legal Newsline) – The California Court of Appeal 4th Appellate District Division Three has reversed a trial court’s decision against Morris Cerullo World Evangelism Inc., saying there was a failure of proof of the amount of damages.

Judge Richard Fybel reversed the ruling of the Orange County Superior Court, which awarded the Maag Trust $118,000 for attorneys' fees.

The appeals court’s decision came after Lloyd Copenbarger, as trustee of the Hazel I. Maag Trust, sued Morris Cerullo World Evangelism Inc. seeking declaratory relief and over allegations of breach of a settlement agreement made to resolve various disputes.

According to the opinion, the Maag Trust alleged MCWE breached the settlement agreement by failing to dismiss with prejudice an unlawful detainer action and sought, as damages, attorney fees incurred in that action from the date of the settlement agreement to the date on which MCWE did dismiss the action.

“Following a bench trial, the trial court found MCWE had breached the settlement agreement by not timely dismissing with prejudice the unlawful detainer action,” the lawsuit said. “As damages, the court awarded the Maag Trust $118,000—representing the attorney fees it claimed to have incurred during the relevant time period.”

MCWE made two arguments, the court wrote: "The Maag Trust could not recover its attorney fees incurred in the unlawful detainer action as damages for breach of the settlement agreement because attorney fees are costs of suit and the Maag Trust failed to prove the amount of damages."

“At trial, the Maag Trust did not attempt to authenticate as business records its attorney invoices and admit them into evidence,” Fybel stated. “Nor did the Maag Trust present testimony from its attorneys, or anyone else, of billing rates and the work performed in the unlawful detainer action.”

According to the opinion, the Maag Trust only offered the testimony of Copenbarger, whose testimony about the invoices was hearsay and violated the secondary evidence rule.

Copenbarger testified he did not know what the Maag Trust’s attorneys did in the unlawful detainer action. 

“As the evidence was insufficient to support the judgment, we reverse with directions to enter judgment in favor of MCWE on the Maag Trust’s complaint,” Fybel stated.

MCWE is the lessee of a 50-year ground lease of real property in Newport Beach, California that was improved with an office building and marina, according to the opinion.

In 2004, MCWE subleased the property and sold all of the improvements to Newport Harbor Offices & Marina (NHOM), the court said.

To acquire the sublease and fund the purchase of the Improvements, NHOM obtained a $1.15 million loan from Plaza del Sol Real Estate Trust and a $3 million loan from the Maag Trust, according to the opinion.

“In June 2011, MCWE commenced an unlawful detainer action against NHOM ... based on allegations NHOM failed to maintain and undertake required repairs,” Fybel stated. “Six months later, the Maag Trust intervened in the UD Action as a party defendant under the theory that if NHOM were evicted and the sublease terminated, then the Maag Trust’s security interest created by the Maag Deed of Trust would be destroyed.”

The court said MCWE, Plaza del Sol and the Maag Trust entered into a settlement agreement in 2012, requiring the Maag Trust to pay $400,000 to MCWE and obligated Plaza del Sol to assign the Plaza del Sol Note and the Plaza del Sol Deed of Trust to the Maag Trust.

According to the agreement, cited by the court, the settlement agreement states that each party would bear its own costs and attorney fees, but that “in any dispute involving the enforcement of this [settlement] agreement, the prevailing party shall be entitled to recover . . . its reasonable attorneys’ fees and all other reasonable costs and expenses incurred therein.”

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