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Pollard v. Schiff

Court of Appeal of Louisiana, Fourth Circuit

February 4, 2015

LIDIA POLLARD
v.
ROBERT ANDREW SCHIFF AND N.O.W. PROPERTIES, LLC

Page 49

APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH. NO. 2010-03264, DIVISION " G-11" . Honorable Robin M. Giarrusso, Judge.

W. Patrick Klotz, KLOTZ & EARLY, New Orleans, LA; Mark P. Glago, GLAGO LAW FIRM, L.L.C., New Orleans, LA, COUNSEL FOR PLAINTIFF/APPELLEE, LIDIA POLLARD.

James M. Garner, Joshua S. Force, Paul R. Trapani, III, SHER GARNER CAHILL RICHTER KLEIN & HILBERT, L.L.C., New Orleans, LA; Galen M. Hair, Lauren E. Checki, VARADI, HAIR & CHECKI, LLC, New Orleans, LA, COUNSEL FOR DEFENDANTS/APPELLANTS, ROBERT ANDREW SCHIFF AND N.O.W. PROPERTIES, LLC.

Court composed of Judge Max N. Tobias, Jr., Judge Edwin A. Lombard, Judge Joy Cossich Lobrano.

OPINION

Max N. Tobias, Jr., Judge

Page 50

[2013-1682 La.App. 4 Cir. 1] The defendants/appellants, Robert Andrew Schiff and N.O.W. Properties, LLC,[1] appeal from a judgment arising out of a failed business venture between Schiff and the plaintiff/appellee, Lidia Pollard (" Ms. Pollard" ). After reviewing the record and applicable law, we amend the judgment and affirm as amended.

This matter involved a partnership between Mr. Schiff and Ms. Pollard that resulted in the creation of N.O.W. Properties, LLC, a limited liability company. Mr. Schiff is a commercial litigator with a degree in finance, who lives in Santa Monica, California. At some point, Mr. Schiff ceased the practice of law and began collecting money from a trust fund set up by his deceased father.

Prior to the spring of 2007, Ms. Pollard had worked her entire life as a merchant engineer aboard ocean-going vessels. Ms. Pollard was then 60 years old and, having been born and raised in Argentina, English was not her first language.

[2013-1682 La.App. 4 Cir. 2] During a trip to visit a property he purchased in the Lakeview section of New Orleans in February 2007, Mr. Schiff noticed some post-Katrina renovation work done by Ms. Pollard. Mr. Schiff approached Ms. Pollard and, being impressed with the work she was performing, suggested they discuss doing business together. Mr. Schiff was from California and wanted to invest in the city's rebuilding efforts after Hurricane Katrina. Ms. Pollard was very excited about the idea. Mr. Schiff came to Ms. Pollard's home and handwrote a contract on a paper from a spiral notebook. At some point, this contract

Page 51

became known as the " napkin agreement." [2]

At the house with Ms. Pollard and Mr. Schiff was Renee Parks, who had known Ms. Pollard for most of their lives, and was living with Ms. Pollard. Ms. Parks testified at trial and corroborated all material aspects of Ms. Pollard's testimony.[3]

Pursuant to the agreement, Schiff would put up the money (initially $200,000) to purchase and renovate properties that would then be " flipped" (resold), preferably within " two months of its purchase date." Ms. Pollard was to locate suitable homes (with the aid of Ms. Parks) and supervise the renovations. Once renovations were complete, the properties were to be sold with Schiff, on the one hand, and Ms. Pollard, on the other hand, splitting equally all net profits.

[2013-1682 La.App. 4 Cir. 3] The first property was purchased in March 2007, and a total of 12 properties, four of which were duplexes or doubles, were purchased and renovated through August of 2009. These properties were all purchased in Mr. Schiff's name.[4] This is because of a conversation Mr. Schiff had with an individual (referred to by Ms. Pollard as the " no-doc loan guy" ), who explained that mortgages could be placed on the properties if they were purchased in Mr. Schiff's name alone and not in the name of N.O.W. Properties, LLC. Although the contract called for the properties to be " flipped" within two months, at some point early in the venture, Mr. Schiff unilaterally decided to rent the completed houses rather than sell them. Ms. Pollard did not want to do this, but went along with the plan because Schiff provided the money; she considered herself to be " stuck" with the arrangement.

Schiff expected Ms. Pollard to manage the rental properties by securing tenants, collecting rent, and making repairs to the properties as requested by the tenants. Mr. Schiff also claimed Ms. Pollard was " in charge" of the partnership's books and records, despite Mr. Schiff having a finance degree and possession of all the receipts and bank records. According to Mr. Schiff, Ms. Pollard was expected to do this without any monetary remuneration; her only consideration was being permitted to live in one of the properties for six months (paying $2,000 per month in rent) and $40,000 in deferred compensation (which she allegedly never received). Ms. Pollard testified that she often used her own resources (or resources [2013-1682 La.App. 4 Cir. 4] borrowed from others) to purchase materials and supplies for the partnership. She was not, however, promptly or fully, reimbursed; often, she was not reimbursed at all.

Mr. Schiff admitted at trial that, from the very inception of the business relationship, he never intended Ms. Pollard to be a partner:

Q. Tell me what your intent was about how to organize and run your business venture that you started with Lidia Pollard in 2007.

Page 52

A. I intended to be a sole proprietorship and that she was going to be a supervisor on the properties.

Further, Mr. Schiff stated that, although he introduced Ms. Pollard to third parties and financiers as his " partner," he had never informed her that the business was a " sole proprietorship" and that she was merely a " supervisor." Conversely, Ms. Pollard testified that she and Mr. Schiff were partners; she was never told otherwise.[5]

Ms. Pollard and Ms. Parks testified that all the receipts and bank records were first sent to Mr. Schiff by telefax. However, later a problem occurred with that method so Mr. Schiff would pick them up whenever he came to town or they were sent to him in California by Federal Express. Ms. Parks herself put some of them into manila envelopes. She believed that Mr. Schiff took them with him because she did not see them again. Mr. Schiff, however, testified that Ms. Pollard kept all the receipts.

[2013-1682 La.App. 4 Cir. 5] Ms. Parks confirmed Ms. Pollard's testimony regarding reimbursements. Ms. Pollard often needed to use her own money to purchase materials and supplies and then seek reimbursement from Schiff. However, she was not always repaid immediately. Sometimes she was partially reimbursed or sometimes not at all. Ms. Pollard testified that she had to borrow large sums of money from her father, who eventually filed for bankruptcy.

Ms. Parks stated that the " napkin agreement" called for a house to be purchased, renovated, and sold, at which time another house would be bought. However, she could not recall any sales except for the house on Filmore Avenue in New Orleans that was sold after the end of the business venture.

Ms. Parks testified that Ms. Pollard grew increasingly dissatisfied with the arrangement she had with Schiff. She was worried about the absence of reimbursements from Schiff. She was also worried that the properties were not being sold and she would not be making the money she believed she would receive pursuant to the original agreement.

As Ms. Pollard's displeasure grew, Ms. Parks became concerned about the handwritten contract between the parties. Ms. Parks asked Mr. Schiff to give Ms. Pollard something more formal, despite Mr. Schiff's assurances that the " napkin agreement" was valid and enforceable in the court of law. Ms. Parks asked Mr. Schiff to prepare a typewritten version of the " napkin agreement." She was no longer living with Ms. Pollard but was under the impression that the two agreements would be the same. Ms. Parks told Ms. Pollard that Mr. Schiff was typing up something more formal and that she should sign it. However, Ms. Parks did not see it before it was sent to Ms. Pollard. Ms. Pollard signed the typewritten agreement on 15 July 2009, more than two years after the business venture began.

[2013-1682 La.App. 4 Cir. 6] Despite assurances that no substantial changes existed between the two agreements, the typewritten agreement specifically contained terms allowing the properties to be rented. These terms were neither addressed in the " napkin agreement" nor contemplated by the parties in March 2007.

The typewritten agreement also stated:

This Partnership Agreement is between Lidia Pollard (" Lidia" ) and Robert

Page 53

Schiff (" Robert" ), both being referred to herein as " partners" . This formally written agreement is to replace an agreement written on a napkin when the partners first met and any other prior written or oral agreements between them. [Emphasis supplied.]

By the time she had renovated the twelfth property in September 2009, Ms. Pollard had had enough, especially since Schiff had completely stopped funding the operation. By this point, Ms. Pollard was paying for all of the renovations herself, and Schiff had stopped reimbursing her. The parties agreed to end their business arrangement effective 1 September 2009.

In an effort to amicably end their relationship, Mr. Schiff proposed that Ms. Pollard obtain a comparative market analysis (" CMA" ) for each of the 12 properties. Ms. Pollard obtained CMAs from a real estate broker, Janie Armato, who prepared recommended prices for the properties totaling $2.9 million, and sent them to Mr. Schiff. In a letter dated 29 September 2009, Mr. Schiff proposed a settlement to Ms. Pollard. When valuing the assets, Mr. Schiff also used a total value of approximately $2.9 million, which was similar to the total value of the CMAs. Later, in 2013 (after suit was filed and trial dates continued at Schiff's request), Mr. Schiff retained the services of a certified real estate appraiser, who appraised the market value of the properties in 2009 at approximately $2.3 million.

[2013-1682 La.App. 4 Cir. 7] The parties were unable to reconcile their differences. Ms. Pollard finished the last property in April of 2010 (541 Filmore Avenue), staged the property for sale, and found a buyer. Once they were ready to go to Act of Sale, Schiff refused to give Ms. Pollard her fifty percent share of the profit from that property. Mr. Schiff proceeded to sell the property in April and pocketed all the profits. At trial, he justified this by totaling his expenses on all the properties before determining the profits instead of using the Filmore property alone.[6]

Once the parties were unable to reach an amicable settlement, Ms. Pollard filed suit against Schiff in 2010, seeking, inter alia, half of the profits from the sale of the Filmore property and an accounting of the partnership.[7] The matter was tried without a jury on 16-18 April 2013. Schiff filed post-trial motions, including a motion to admit approximately 100 documents that he forgot to admit at trial, as well as motions to admit newly discovered evidence and for new trial. On 28 June 2013, Mr. Schiff was cross examined on the newly admitted documents. The other motions were denied.

The trial court rendered judgment on 2 August 2013, finding in favor of Ms. Pollard. The court found that the parties had entered into a contract and that Schiff had breached the " referenced contract," without specifying the contract to which is referred. The trial court also held " that it was Mr. Schiff's intention to breach this contract from the inception," and that Mr. Schiff was " in bad faith and liable for damages under LA [sic] C.C. Art. 1997, as well." [8]

[2013-1682 La.App. 4 Cir. 8] Ms. Pollard was awarded a total of $685,176.52, plus interest on the total

Page 54

amount from 1 September 2009, consisting of the following elements of damages:

1. 50% of profits

$373,312.80

2. Reimbursable expenses

$188,367.72

3. Truck expenses

$897.00

4. Property management

$50,000.00

5. Utilities

$5,000.00

6. Accounting

$11,800.00

7. Personal funds

$55,799.00

Schiff appealed the judgment assigning seven alleged errors committed by the trial court:

o The trial court erred in finding that Schiff, in bad faith, breached an agreement that was replaced and superseded by a subsequent agreement.
o The trial court relied on the CMAs and not the appraisals.
o The CMAs were incorrect; the trial court erred in ...

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