$850,000 awarded in liquidated damage clause case

By Angela Underwood | May 18, 2017

A family feud has ended in a $850,000 settlement between two siblings.

SAN JOSE – A family feud has ended in a $850,000 settlement between two siblings.

In an opinion delivered by Chief Justices Conrad L. Rushing, Henry J. Walsh and Associate Justice Eugene M. Premo, the California Sixth District Court of Appeal recently ended a costly battle between Aisha A. Krechuniak and her brother Zia Jamal Noorzoy over a memorandum agreement regarding a Pebble Beach property.

The panel of judges affirmed that, according to Krechuniak v. Noorzoy, if an agreement “provision is an illegal penalty or an enforceable liquidated damage clause,” as seen with the brother’s end of the deal, then as the defendant, he has to pay the sister for alleged losses.  

In 2005, Krechuniak entered into an agreement with her brother, a licensed real estate broker, to develop and sell her property at on Sand Dunes Road. Under the written contract, the siblings agreed that the brother would develop his sister's property with investor funds and their own. 

Ultimately, the parties would divide all profits made on the sell of property once the sister retained her 2005 equity of  $1.5 million, minus $30,000 for her brother’s management fee.

In 2008, “the sister agreed to relinquish ownership of another Pebble Beach property at 2889 17 Mile Drive... co-owned with [the] brother and another relative, so that [the] brother could obtain a loan of $400,000.00 secured by that property,” according to the opinion.

Ultimately, the brother reneged on money owed and defaulted on the mortgage, a fact his sister was not made aware of and cost her $400,000. The brother was then sued by both his sister and the investors for their loss on the second property's foreclosure. 

Taking the matter personally, the sister’s cross-complaint sought $1.7 million in excessive punitive damages for “breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, conversion, negligent and intentional misrepresentation and intentional infliction of emotional distress,” according to the opinion.

The panel of judges deemed that under current statute, the burden of proof was on the brother during the trial court case to show “the judgment provision in the settlement memo 'was unreasonable under the circumstances existing at the time the contract was made,'" according to the opinion. 

The brother appealed, attacking the stipulated judgment provision and filing for bankruptcy in 2011. 

“What occurred at the bankruptcy hearing was important to the arguments in the trial court but is irrelevant to the issues on appeal, and [the] sister was awarded a stipulated judgment of $850,000.00,” according to the opinion.

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