Cunningham v. Magidow

Filed 8/30/13 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

KATHLEEN CUNNINGHAM, B243474

Plaintiff and Appellant, (Los Angeles County Super. Ct. No. YC 060725) v.

NORMAN MAGIDOW,

Defendant and Respondent.

APPEAL from an order of the Superior Court of Los Angeles County. Dudley W. Gray II, Judge. Reversed with directions. Spierer, Woodward, Corbalis & Goldberg and Stephen B. Goldberg for Plaintiff and Appellant. Law Office of Shula Roth-Barash, Shula Roth-Barash; Greines, Martin, Stein & Richland LLP, Cynthia E. Tobisman, and Meehan Rasch for Defendant and Respondent. ______

Kathleen Cunningham brought this shareholder derivative action on behalf of Royal Airline Linen, Inc. (Royal) against Norman Magidow. The trial court found Magidow liable for breach of fiduciary duty, awarded compensatory and punitive damages, and entered judgment accordingly. Magidow then forgave $452,000 of a loan he had made to Royal and moved for an order compelling Cunningham to acknowledge that the judgment had been partially satisfied in the amount of $452,000. The trial court granted the motion. Cunningham appeals, and we reverse. BACKGROUND Cunningham owns half the stock of Royal. Magidow owns the other half and is also an officer and director. Cunningham filed this shareholder derivative action against Magidow and other defendants, alleging claims for breach of fiduciary duty, usurpation of corporate opportunity, and conversion. Cunningham alleged that Magidow arranged for Royal to purchase certain supplies at inflated prices from a separate business owned by Magidow and that he failed to disclose his conflict of interest. The breach of fiduciary duty claim against Magidow was tried to the court, which found in favor of Cunningham. The court found that Magidow “didn‟t disclose” his conflict of interest to Cunningham and “always substantially marked up the prices he charged [Royal].” The court also found that Magidow was not a credible witness and that his statements were “repeatedly impeached” and “proven to be false.” The court awarded $226,000 in compensatory damages and an additional $226,000 in punitive damages, for a total award (exclusive of interest and costs) of $452,000. The trial court entered judgment on November 30, 2011. Cunningham obtained a writ of execution and attempted to enforce the judgment. On June 28, 2012, Magidow served on Cunningham a demand for acknowledgement of partial satisfaction of judgment. In it, Magidow claimed that he had satisfied the $452,000 principal amount of the judgment by forgiving $452,000 of a loan he had previously made to Royal in the amount of $599,472. He demanded that Cunningham execute and deliver a partial satisfaction of judgment, and he cautioned her