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Kurtin v. Elieff

COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREE
Sep 23, 2019
No. G055211 (Cal. Ct. App. Sep. 23, 2019)

Opinion

G055211 G055415 G055612 G055892

09-23-2019

TODD KURTIN, Plaintiff, Respondent and Cross-Appellant, v. BRUCE ELIEFF, Defendant, Appellant and Cross-Respondent.

Miller Barondess, Louis R. Miller, Daniel S. Miller, Mira Hashmall and Kiva G. Schrager; Snell & Wilmer, Richard A. Derevan and Todd E. Lundell, for Defendant, Appellant and Cross-Respondent. Weintraub Tobin, Gary A. Waldron and Sherry S. Bragg; Dentons US and Charles A. Bird, for Plaintiff, Respondent and Cross-Appellant.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2007-00100307) OPINION Appeal from a judgment of the Superior Court of Orange County, Glenda Sanders, Judge. Affirmed, in part, reversed, in part, and remanded with directions. Miller Barondess, Louis R. Miller, Daniel S. Miller, Mira Hashmall and Kiva G. Schrager; Snell & Wilmer, Richard A. Derevan and Todd E. Lundell, for Defendant, Appellant and Cross-Respondent. Weintraub Tobin, Gary A. Waldron and Sherry S. Bragg; Dentons US and Charles A. Bird, for Plaintiff, Respondent and Cross-Appellant.

A jury awarded approximately $20.33 million in damages to respondent and cross-appellant Todd Kurtin in a retrial on the issue of damages caused by a breach of contract. The trial court then denied appellant and cross-respondent Bruce Elieff's motion for a new trial, exercised its discretion to award Kurtin roughly $8 million in prejudgment interest, and awarded Kurtin approximately $3.1 million in attorney fees and costs. Elieff appeals, urging us to find error in the jury's damage award, the trial court's determinations concerning the admissibility of certain evidence, and its decision to award prejudgment interest. He also contends we should reverse the attorney fees and costs awards if we find merit in any of his arguments. Kurtin's cross-appeal relates to the latter subject matter, and asserts the trial court erred by denying his request for mandatory prejudgment interest.

With the exception of one aspect of Elieff's challenge to the damage award, we find no merit to any of the parties' contentions. We agree there is no substantial evidence to support approximately $3.5 million of the award, meaning the judgment must be reduced accordingly. Because the calculation of prejudgment interest is tied to the damage award, the amount of interest must also be recalculated. Thus, we reverse the judgment and remand the matter to the trial court with directions to reduce the judgment by $3,546,862.07 and recalculate prejudgment interest. In all other respects, the judgment is affirmed, including the award of attorney fees and costs to Kurtin.

FACTUAL AND PROCEDURAL BACKGROUND

Though the history of this case spans more than a decade, and the parties' relationship over a decade more, we limit our focus on the facts and procedural background relevant to the issues raised in the consolidated appeals before us. Kurtin and Elieff are former business partners in the land development arena. They, through single purpose business entities, would acquire raw land and construct the necessary infrastructure to be able to sell finished lots to home builders.

Further details are set forth in two prior opinions issued by this court. (Kurtin v. Elieff (2013) 215 Cal.App.4th 455 (Kurtin I); Kurtin v. Elieff (Sept. 2, 2015, G049556) [nonpub. opn.].)

Following growing disputes between them, they found themselves embroiled in litigation. The litigation led to a mediation and eventually a settlement agreement (the Settlement Agreement) by which Elieff agreed to buy out Kurtin's interest in their venture with four installment payments totaling $48.8 million (the Settlement Payments). Elieff and a number of their single purpose business entities (the Joint Entities) were jointly and severally responsible for the first installment, and the Joint Entities were solely responsible for the remaining three.

After a portion of the third installment and the entirety of the fourth installment of the Settlement Payments were not paid, an unsuccessful attempt by Kurtin to enforce the Settlement Agreement against the Joint Entities, and an arbitration concerning other issues, Kurtin filed this action against Elieff and the Joint Entities. The complaint alleged, inter alia, breach of warranty, fraud, intentional and negligent misrepresentation, and breach of the Settlement Agreement. Concerning the latter, Kurtin claimed Elieff violated a "distribution" clause which provided: "Elieff shall not take any distribution from any of the Joint Entities if such distribution prevents satisfaction of payment of the Settlement Payments." This is the sole cause of action relevant to the present appeal.

The trial court proposed, and the parties agreed to, a two-phase trial. "Phase 1 . . . consisted of a five-day trial 'concerning the accounting issues arising out' of Kurtin's claim that Elieff had breached the [S]ettlement [A]greement by, among other things, taking distributions from entities that prevented repayment of remaining payments." (Kurtin I, supra, 215 Cal.App.4th at p. 460.) Because Kurtin "was unable to determine through his own records and his own understanding what happened to certain funds that were under . . . Elieff's control[,]" the court used the parties' evidence to trace transfers of money coming out of the Joint Entities—totaling approximately $22 million—during the relevant time period.

At the conclusion of phase 1, the trial court orally presented what it characterized as its "observations and/or findings[.]" It noted it was able to "account[] for every penny of the funds that could be classified in any way as a distribution from a joint entity in the period following the . . . [S]ettlement [A]greement[,]" and indicated the use of all funds fell into one or more of five categories. It further stated Elieff, himself, did not "take[] any profits from the [J]oint [E]ntities" during the relevant time period.

The parties subsequently offered their positions concerning what, if anything, remained for trial on the breach of contract cause of action given the results of phase 1. Ultimately, in phase 2 the issues of Elieff's liability for breach of contract and damages were tried to a jury. Among the jury instructions given by the trial court was one which discussed the results of phase 1 and its impact on the jury's duties.

Jury instruction No. 10, titled "Findings from Phase One of Trial Regarding Distributions of Money[,]" began as follows:

"At an earlier trial, the Court found that after the Settlement Agreement between Mr. Elieff and Mr. Kurtin was signed, Mr. Elieff used distributions of money from various of the Joint Entities in the total amount of $22,384,632.22. The Court heard evidence on, and made findings concerning, the source, amount, timing and use of this money. The Court found that all of this money was used by Mr. Elieff in the following five categories: (1) management services; (2) repayment of expenses; (3) management costs; (4) loan repayments or return of capital; and (5) payments to Mr. Kurtin. The Court's findings are binding, and you must accept them as true.

"The Court did not decide whether the taking of these distributions of money did or did not violate Paragraph 14 of the Settlement Agreement. The Court found that Paragraph 14 does not preclude Mr. Elieff from taking distributions from the Joint Entities, so long as the distributions were used to enhance, and not prevent or jeopardize, the possibility of Mr. Kurtin being paid the Settlement Payments required under the Settlement Agreement."

Following these paragraphs was a chart which "summarize[d] the Court's findings at [the] earlier trial." The chart listed the date, source account, amount and court findings concerning 19 different distributions.

After the jury returned a verdict in favor of Kurtin, finding Elieff made improper distributions in violation of Paragraph 14 and awarding damages of roughly $24 million, Elieff moved for a new trial. The trial court granted the new trial motion as to damages only. It found the award was excessive and not supported by substantial evidence because it exceeded the total amount of distributions found by the court during phase 1.

After the trial court entered judgment, Kurtin and Elieff both appealed. We affirmed the new trial order, with one modification not relevant to this appeal. (Kurtin I, supra, 215 Cal.App.4th at p. 487.) In doing so, we rejected Elieff's argument that a retrial was not needed because the court found in phase 1 that he spent funds only for authorized purposes. (Id. at p. 478.) We clarified the scope of phase 1: "There was indeed much left after the phase 1 trial. The trial judge did not rule that Elieff took no 'distributions.' She ruled, rather, that money which was used by Elieff to maximize the 'good of the whole' would not be covered by the distribution clause." (Ibid.) And we explained the purpose of phase 2: "Only one of the five destinations of the outflows identified by the trial court, payments to Kurtin, is unequivocally not a 'distribution' taken by Elieff to 'prevent' repayment of the unpaid balance. (That distribution was the $1.8 million that was itself a payment to Kurtin.) A reasonable jury might readily conclude that outflows within the other four categories . . . both (a) did not benefit the Joint Entities as a whole and (b) prevented repayment of the unpaid balance. And the ultimate categorization of the various outflows was left to the jury." (Ibid.)

We grant Kurtin's request for judicial notice of certain documents filed in connection with the prior appeal. (Evid. Code, §§ 452, subd. (d)(1), 459.)

On remand, the issue of damages due to Elieff's breach of the Settlement Agreement was once again tried to a jury. The parties' pretrial motions evidenced they disagreed whether, and to what extent, the trial court's phase 1 "findings" were binding and precluded evidence and argument as to certain matters. In that context, the trial court made the following two rulings, among others: (1) jury instruction No. 10 "constitutes the law of the case and is the backdrop against which the [breach of contract] cause of action must be evaluated"; and (2) Kurtin was not limited to arguing for a maximum of $7.8 million in damages even though his attorney had argued during the first jury trial that was the amount to which he was entitled.

At the conclusion of the retrial, the jury returned a special verdict awarding Kurtin approximately $20.33 million in damages. Elieff moved for a new trial, but the trial court denied the request. Thereafter, it denied Kurtin's request for mandatory prejudgment interest, but granted him roughly $8 million in discretionary prejudgment interest and approximately $3.1 million in attorney fees and costs. The trial court entered judgment accordingly. Elieff appealed from the judgment, which included the prejudgment interest, attorney fees, and costs awards. Kurtin appealed from the judgment to the extent he was denied mandatory prejudgment interest. We consolidated all of the appeals.

DISCUSSION

Elieff's arguments target three different aspects of the proceedings leading to final judgment. First, he contends the jury's damage award is excessive and lacks substantial supporting evidence. Second, he argues his new trial motion should have been granted because the trial court committed errors which are cumulatively prejudicial. Third, he claims the court abused its discretion in awarding prejudgment interest. Kurtin's cross-appeal also concerns prejudgment interest, but instead focuses on the trial court's denial of mandatory prejudgment interest. With the exception of $3.5 million of the jury's total damage award which we find is not supported by substantial evidence, we find no merit in any of the parties' arguments.

Jury's Damage Award

Elieff contends the jury's damage award is excessive and not supported by substantial evidence. He urges us to find it must be reduced by somewhere between approximately $3.5 million and $9.98 million. We agree $3.5 million of the jury's total damages verdict is not supported by substantial evidence, but reject Elieff's other contentions.

The principles which prescribe our limited scope of review of a damage award are well-settled. "'The amount of damages is a fact question, first committed to the discretion of the jury and next to the discretion of the trial judge on a motion for new trial. They see and hear the witnesses . . . ." (Izell v. Union Carbide Corp. (2014) 231 Cal.App.4th 962, 978-979 (Izell).) "A new trial shall not be granted upon the ground of insufficiency of the evidence to justify the verdict . . . , nor upon the ground of excessive . . . damages, unless after weighing the evidence the court is convinced from the entire record, including reasonable inferences therefrom, that the . . . jury clearly should have reached a different verdict or decision." (Code Civ. Proc., § 657.)

A trial court has broad discretion in ruling on a new trial motion, and on appeal all presumptions are in favor of its decision. (Izell, supra, 231 Cal.App.4th at p. 978.) "'An appellate court can interfere on the ground that the judgment is excessive only [if] the verdict is so large that, at first blush, it shocks the conscience and suggests passion, prejudice or corruption on the part of the jury.'" (Izell, at p. 979.) Similarly, "we can reverse the denial of a new trial motion based on insufficiency of the evidence . . . only if there is no substantial conflict in the evidence and the evidence compels the conclusion that the motion should have been granted." (Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 751-752 (Fassberg).)

The first aspect of the damage award challenged by Elieff concerns two Joint Entity distributions which the parties identify as relating to two different development projects—Moorpark and Pacific Point. Regarding Moorpark, the "[c]ourt [f]indings" column in jury instruction No. 10's chart lists $1 million as "used to repay a deposit from Pacer Communities, a third party." The same column identifies a roughly $8.9 million Pacific Pointe related disbursement as "[r]epayment of a bridge loan made by Elieff after California Bank and Trust ceased funding of the project . . . ." From these descriptions, Elieff argues both amounts were loan and deposit repayments and, thus, it was proper for them to be made prior to any settlement payments to Kurtin.

Elieff's argument misses the mark. Whether the Moorpark and Pacific Pointe disbursements should be characterized as repayments is neither here nor there in the context of the jury's charge. After phase 1 and the liability finding during the initial phase 2, the jury was responsible for determining which of the disputed distributions (a) did not benefit the Joint Entities as a whole, and (b) prevented or jeopardized the possibility of Kurtin being paid. Loan and deposit repayments or not, it was an open question the jury could have answered affirmatively depending on the parties' evidence regarding the Moorpark and Pacific Pointe distributions.

And our review of the record reveals substantial evidence supports the jury's determination that both were disbursements made in contravention of the Settlement Agreement, even assuming arguendo the trial court's characterizations were binding on the jury. As for Moorpark, there was evidence the business entity which owned the Moorpark property received a $1 million purchase deposit from a third party company wishing to purchase the land. The evidence further showed: (1) five months prior to the date of the disbursement in question, the property-owning entity repaid the deposit to the third party due to a failure to satisfy pre-purchase conditions; (2) the source of the disbursement in question was not the entity to which the deposit was paid; (3) there was no evidence of a debt between the source of the disbursement and the property-owning entity or the third party depositor; and (4) the disbursement was made to a company solely owned by Elieff that, in turn, passed the funds to Elieff and recorded it as a distribution to him.

This evidence, in combination with the fact the $1 million disbursement was made at a time when the Joint Entities were already in default to Kurtin in the amount of $9.6 million, is substantial and supports the jury's verdict.

The same is true for the Pacific Pointe disbursement. Even assuming, as Elieff contends, the disbursement was made to Elieff to repay himself for a personal loan he made to one of the Joint Entities, there was key evidence concerning timing. Despite there being no promissory note or other document outlining the terms of the purported loan, a fact which Elieff admitted, the alleged payback was made just five months before the Joint Entities defaulted on the Settlement Payments due to Kurtin. The jury could reasonably conclude (1) a payback to Elieff, in his personal capacity, did not benefit the Joint Entities as a whole, and (2) the close timing of the repayment to the default date meant the payback prevented or jeopardized the possibility of Kurtin being paid. This is particularly true given there was no indication the entity making the disbursement would have needed the money for other purposes before the next payment to Kurtin was due. In other words, there was evidence Kurtin would have gotten paid had the disbursement to Elieff not been made.

As we concluded in Kurtin I, "the whole tenor of the [S]ettlement [A]greement was that Kurtin would be paid off the top from any money available after outflows from any of the Joint Entities, even if it meant that Elieff might go out of pocket." (Kurtin I, supra, 215 Cal.App.4th at p. 479, italics added.) The jury's verdict is entirely consistent with this conclusion. (See Ibid. ["Even capital that was 'returned' to Elieff might, if not otherwise linked to the 'good of the whole,' and if that return had the effect of preventing repayment, constitute an improper 'distribution' under the distribution clause"].)

Next, Elieff contends Kurtin should have been limited to a maximum of $7.8 million in damages based upon his counsel's statements in the initial phase 2 trial and a subsequent letter to Elieff's counsel. He claims the statements and letter are judicial admissions which bind Kurtin, particularly in light of jury instruction No. 10. We are not persuaded.

"A judicial admission is a party's unequivocal concession of the truth of a matter, and removes the matter as an issue in the case." (Gelfo v. Lockheed Martin Corp. (2006) 140 Cal.App.4th 34, 48.) Under limited circumstances, a prior statement of a party's counsel in the same action may be a binding judicial admission. (Gordon v. Nissan Motor Co., Ltd. (2009) 170 Cal.App.4th 1103, 1112 (Gordon).) To be so treated, the statement must be "'intended to be such or reasonably construed by the court or the other party as such'" (ibid.), and it must involve facts, not legal conclusions or theories (Stroud v. Tunzi (2008) 160 Cal.App.4th 377, 384). More specifically, it must "have the formality of an admission or a stipulation" (People v. Kiney (2007) 151 Cal.App.4th 807, 815), be "clear and unambiguous" (Gordon, at p. 1112), and "not [have been] made improvidently or unguardedly" (Fassberg, supra, 152 Cal.App.4th at p. 752).

Here, there is no dispute during closing argument in the initial phase 2 trial, Kurtin's counsel argued to the jury that Kurtin was entitled to $7.8 million in damages. He even presented a slide which showed his work: from the approximately $22.38 million in total disbursements identified in phase 1, subtract the disbursements related to Moorpark and Pacific Point (about $10.5 million), $1.8 million undisputedly paid to Kurtin by the Joint Entities, and a roughly $2.2 million also paid to Kurtin. Additionally, after the initial jury returned its verdict, Kurtin's counsel wrote to Elieff's counsel acknowledging the excessiveness of the damages award and suggesting the parties stipulate to the $7.8 million amount—something which never occurred.

But content and context is everything. The statements by Kurtin's counsel to the jury were argument, and they concerned ultimate conclusions, not facts. Further, aside from the last of the described amounts, each disbursement subtracted by Kurtin's counsel was attributed to a specific characterization in the "findings" made by the trial court during phase 1. We clarified in the subsequent appeal that those characterizations did not preclude the jury from concluding that any or all of the disbursements were made in contravention of the Settlement Agreement. (Kurtin I, supra, 215 Cal.App.4th at p. 478.)

Thus, at most, the prior statements reflect a strategic decision by Kurtin's counsel during the initial phase 2 trial to not pursue certain disbursements in light of his beliefs about phase 1's impact. It was not a clear and unambiguous concession that Elieff was not liable for those additional amounts. Kurtin, therefore, was not bound by, and the jury was not limited to awarding, the $7.8 million figure on retrial. (See, e.g., Gordon, supra, 170 Cal.App.4th at pp. 1112-1113 [tactical choice not to pursue certain claim in first trial not binding on retrial].)

Fassberg, relied on by Elieff, does not alter our conclusion. There, in dispute was the amount a construction company owed to a city housing authority due to breach of a contract. (Fassberg, supra, 152 Cal.App.4th at pp. 730-731.) Testimony solicited by the housing authority's counsel from its own witness indicated the housing authority owed the company roughly $400,000, and an admitted housing authority exhibit confirmed it. (Id. at p. 751.) "There [was] no substantial conflict in the evidence in this regard." (Id. at p. 752.) Additionally, the housing authority's counsel made a "clear and deliberate" concession during closing argument that its client was indebted to the company in that amount. (Ibid.) After the jury failed to account for the $400,000 credit in the damages awarded to the housing authority, an appellate court held the housing authority was bound by its prior judicial admission. (Id. at pp. 752-753.) The damage award, thus, was ordered reduced accordingly. (Id. at p. 768.)

Unlike in Fassberg, the record before us does not reveal evidence offered by Kurtin himself which concedes that all disbursements in excess of the $7.8 million were consistent with the Settlement Agreement's terms. Nor do we have a clear and deliberate concession from him or his counsel to that effect.

That said, we do have concerns about another amount contested by Elieff: approximately $3.5 million. Elieff argues Kurtin received a check for that amount, Kurtin admitted in the initial phase 2 at least $2,237,000 of it came from the Joint Entities, and evidence in the retrial showed it came entirely from the Joint Entities.

Kurtin admits receiving the check and concedes the amount "is credited against the Joint Entities' debt[.]" He nevertheless states that during the retrial neither side's witnesses were able to identify to which of the phase 1 identified distributions the $3.5 million could be traced. From this, he contends an equally available conclusion was the money he received did not come from the Joint Entities.

Resolution of this issue lies in the parties' respective burdens and evidence. The undisputed evidence showed Kurtin received a $3.5 million check from one of the Joint Entities. Because in phase 1 the trial court identified all the possible disbursements made from the Joint Entities during the time period in question, the sole inference to draw was that the $3.5 million was a product of (i.e., could be traced back to) some of those disbursements. As a matter of law, Kurtin could not be damaged by Joint Entity money that flowed to him.

Given Kurtin's burden to prove damages, it was therefore incumbent upon him to bring forth evidence demonstrating the $3.5 million did not result from any of the Joint Entity outflows identified in jury instruction No. 10. But he offered none. The only evidence presented was a statement by Kurtin's expert that he had not seen anything indicating the $3.5 million traced back to funds identified in the jury instruction. Thus Kurtin failed to meet his burden, and there is insufficient evidence to support $3.5 million of the jury's total damage award.

Cumulative Trial Court Error

Elieff asserts his motion for a new trial should have been granted due to prejudicial cumulative error committed by the court. He claims the court unwarrantedly (1) allowed Kurtin to present evidence and argument which contradicted the court's binding phase 1 findings, (2) let Kurtin's counsel argue to the jury that it could ignore the phase 1 findings, and (3) permitted Kurtin's expert to render opinions at trial which were expressly not disclosed during the expert's pretrial deposition. We find no error in the court's decisions on these individual matters and, consequently, no cumulative error.

In ruling on the parties' motions in limine prior to the damages retrial, the trial court made clear its position concerning the impact of phase 1. It found jury instruction No. 10 "constitute[d] the law of the case and [was] the backdrop against which the [breach of contract] cause of action must be evaluated." Accordingly, and pursuant to a joint submission by the parties, it was among the instructions given to the jury. All parties agree this was proper.

Where Elieff's argument goes awry is the manner in which he interprets the jury instruction statement the trial court's phase 1 findings are "binding." As we conveyed in Kurtin I, supra, 215 Cal.App.4th at pages 478-479, the court's phase 1 findings did not provide binding characterizations for the jury's phase 2 responsibility of determining which transactions breached the Settlement Agreement. The court performed the phase 1 tracing because Kurtin's own records and own understanding was insufficient to determine what happened to certain funds under Elieff's control. Consequently, the description of each disbursement in jury instruction No. 10 simply reflects the court's determination, based solely on evidence produced during phase 1, of how each was accounted for by the Elieff-controlled Joint Entities. Whether the funds were actually used in those ways, and to what extent there was a breach of the Settlement Agreement, were matters left to the jury's phase 2 fact-finding. (Id. at pp. 461, 478-479.)

Thus, it was proper for the trial court to allow the evidence and argument about which Elieff complains. The evidence did not contradict the court's binding phase 1 findings; rather, it went to the heart of the jury's charge in the damages retrial. And Kurtin's counsel did not urge the jury to ignore any of the binding findings. Instead, he explained why the jury should ultimately conclude that reality was different than what the Joint Entities' records would lead one to believe about the disbursements.

Equally without merit is Elieff's claim the trial court impermissibly allowed certain opinion testimony from Kurtin's expert, Mr. Holmes. The testimony in question concerned whether Elieff "double dipped" from the Joint Entities by, for example, reimbursing himself twice for management costs and fees. Elieff objected, arguing Holmes offered a new opinion not disclosed during his pretrial deposition. In overruling the objection, the trial court noted Holmes was impeaching, and rebutting the testimony of, Elieff's percipient accounting witness, Mr. Rollins. We agree with this ruling, as we will explain.

We begin with Holmes' deposition. When deposed by Elieff's counsel, he stated he did not remember whether he had ever seen Rollins' written analysis prepared for the initial phase 2 trial. Similarly, Holmes did not recall reviewing an updated written analysis Rollins prepared in anticipation of the damages retrial. Consistent with those statements, he said Rollins' analyses "did not inform [his] opinions in any way[.]"

During trial, however, Holmes listened to Rollins' testimony. On direct, Kurtin's counsel asked Holmes whether such testimony changed or altered his opinion. Holmes affirmed he evaluated Rollins' testimony and factored it into the opinions to which he was testifying.

Holmes explained: "So when I was here for Mr. Rollins' testimony, I thought that he had said that the costs in exhibit 832 were in the cash flow summaries. That's what I recollected . . . hearing. And so I thought about that. . . . [S]o if those costs they were referring to are in the cash flow summaries, then they've been paid for within each project. They've already been paid for. And the cash distributed from those projects, it's after they've been paid. And if the cash distributions to Mr. Elieff were then used to pay them again, I believe that's double-dipping and that they've been duplicated."

Holmes then recognized he could have misunderstood Rollins' testimony and provided a further opinion assuming he had: "Conversely, if I misunderstood Mr. Rollins and he thought that they were not included, then they wouldn't have been in the cash flow summaries. The cash distribution was to Mr. Elieff. And I've seen nothing to indicate that the payments should have been -- should have gone to Mr. Elieff's entity rather than to Todd Kurtin."

It is apparent Holmes' opinions were based on a fact testified to by Elieff's witness, one to which Holmes was not privy prior to it being brought forth at trial since Holmes had not analyzed Rollins' written analysis. His statements based on that fact were the functional equivalent of an expert response to a hypothetical scenario. (See Rosenberg v. Goldstein (1966) 247 Cal.App.2d 25, 30 ["[A]n expert . . . [is] entitled to give his opinion although he did not personally observe the facts, basing his opinion upon the facts testified to by other witnesses and included in hypothetical question put to him'"].) And the opinions Holmes offered fell within the general scope of his expert designation. Any credibility determination or decision concerning the weight to accord Holmes' testimony was strictly for the jury. (San Bernardino County Flood Control Dist. v. Sweet (1967) 255 Cal.App.2d 889, 906.)

Elieff argues Rollins' testimony was not "new" evidence because he offered the same testimony during the initial phase 2 trial. But Holmes was not part of the initial trial. Further, even if factually accurate, a point on which we express no opinion, it is of no import. The proceeding was a retrial on the issue of damages, meaning it was as if the first damages trial never occurred. (Guzman v. Superior Court (1993) 19 Cal.App.4th 705, 707-708.) Kurtin was not obligated to anticipate whether, and to what extent, Elieff might choose to elicit the same testimony as in the initial trial.

Because we find no instance of trial court error among the matters raised by Elieff, we reject his assertion of cumulative prejudicial error as well.

Prejudgment Interest

The trial court's determination concerning prejudgment interest is the subject of both Elieff's appeal and Kurtin's cross-appeal. The latter claims the court erred in denying his request for mandatory prejudgment interest under Civil Code section 3287, subdivision (a). The former claims the court erred in granting discretionary prejudgment interest under subdivision (b) of the same statute. Neither claim has merit.

"Section 3287, subdivision (a) allows a person to recover prejudgment interest on 'damages certain, or capable of being made certain by calculation' . . . . '[T]he court has no discretion, but must award prejudgment interest upon request, from the first day there exists both a breach and a liquidated claim.' [Citation.]" (Warren v. Kia Motors America, Inc. (2018) 30 Cal.App.5th 24, 43 (Warren).) "'On appeal, we independently determine whether damages were ascertainable for purposes of the statute, absent a factual dispute as to what information was known or available to the defendant at the time.' [Citation.]" (Watson Bowman Acme Corp. v. RGW Construction, Inc. (2016) 2 Cal.App.5th 279, 296.)

Civil Code section 3287, subdivision (a) provides, in full: "A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt. This section is applicable to recovery of damages and interest from any debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state."

Contrary to Kurtin's assertion, the damages in this case were not certain or readily capable of being made certain by calculation, within the meaning of the statute, before the jury rendered its damages verdict in the retrial. As stated by our Supreme Court: "[T]he certainty required of Civil Code section 3287, subdivision (a), is absent when the amounts due turn on disputed facts, but not when the dispute is confined to the rules governing liability. [Citations.]" (Olson v. Cory (1983) 35 Cal.3d 390, 402 (Olson).) The reason the questions of liability and damages were sent to the jury in this case is because there were factual issues it needed to resolve. And as the trial court correctly noted, certain of those factual issues remained even after the jury found Elieff liable at the end of the initial phase 2 trial. (Kurtin, supra, 215 Cal.App.4th at pp. 478-479.)

Simply put, this is not a situation where the basis of calculating damages was known and the primary dispute centered on Elieff's liability for those damages. (See Olson, supra, 35 Cal.3d at p. 402 [uncertainty concerning questions of law does not render damages uncertain when there is no factual uncertainty or dispute].) Thus, the trial court correctly ruled Kurtin was not entitled to mandatory prejudgment interest under Civil Code section 3287, subdivision (a). (Ibid.)

Discretionary prejudgment interest under Civil Code section 3287, subdivision (b) is a different matter. The trial court awarded interest at 10 percent, running from the date on which this court issued an opinion affirming the jury's liability verdict in the initial phase 2 trial, resulting in approximately $8 million. Elieff recognizes a trial court has broad discretion in deciding whether to award interest under the subdivision, but contends the trial court erred by failing to consider all relevant factors in making its determination.

Civil Code section 3287, subdivision (b), concerns prejudgment interest in the context of a contract based cause of action which is unliquidated. The damaged party "may . . . recover interest . . . from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed." (Civ. Code, § 3287, subd. (b).) "'By allowing an award of prejudgment interest, but only for a limited time period and only if the trial court finds it reasonable in light of the factual circumstances of a particular case, Civil Code section 3287, subdivision (b), seeks to balance the concern for fairness to the debtor against the concern for full compensation to the wronged party. [Citations.]' [Citation.]" (Faigin v. Signature Group Holdings, Inc. (2012) 211 Cal.App.4th 726, 751-752.) We review a court's discretionary award of prejudgment interest for an abuse of discretion.

Here, the trial court based its decision to award interest on the protracted amount of time it took for the case to reach judgment. It correctly recognized that awarding interest under such circumstances does not penalize a defendant for litigating a bona fide dispute, but rather simply recognizes additional damage incurred due to a breach of contract. (A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473.) However, it also explained the delay was extended due to Elieff's choice to try to force the case to arbitration after the first appeal and before the damages retrial. The court concluded: "While [Elieff] had the right to move to arbitrate and then appeal the trial court's decision, [Kurtin] should not be deprived of the interest that otherwise equitably would have begun to accrue earlier." This rationale does not exceed the bounds of reason.

Elieff identifies four additional factors which he faults the trial court for not considering. But there is no rigid test a court must apply, or a particular set of factors a court must consider, when exercising its discretion under Civil Code section 3287, subdivision (b). The court acts in equity. (See Espejo v. The Copley Press, Inc. (2017) 13 Cal.App.5th 329, 376.) Further, in absence of evidence indicating otherwise, we presume the court considered the totality of the circumstances and the parties' respective arguments. (Amaral v. Cintas Corp. No. 2 (2008) 163 Cal.App.4th 1157, 1214.) Elieff's arguments below included a discussion of the factors which he now claims the court failed to consider. And aside from the presumption they were considered, there are affirmative statements in the record which show the trial court, in fact, evaluated more than just the time elapsed between the filing of the case and judgment.

Focusing more on one particular factor, Elieff asserts the 10 percent interest rate used by the trial court gave Kurtin a windfall because it well exceeded the average interest rate on one-year United States Treasury securities in the time since Kurtin filed his complaint. But, in a breach of contract case where the contract does not stipulate a legal rate of interest, "Civil Code section 3289 specifies that the applicable interest rate for prejudgment interest . . . is 10 percent. This rate, set by the Legislature . . . replaces the default rate in the California Constitution for instances in which the Legislature has not acted to set another rate." (Teachers' Retirement Bd. v. Genest (2007) 154 Cal.App.4th 1012, 1045.)

Civil Code section 3289, subdivision (b) states, in relevant part: "If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach."

For all these reasons, Elieff has not shown an abuse of discretion.

Attorney Fees and Costs

Elieff summarily asserts that "[i]f the judgment is modified or vacated, the award[] of . . . attorneys' fees should be vacated as well . . . since [it is] based on the existing judgment." But he provides no legal authority or reasoned argument to support this assertion, so the issue is waived. (People v. Stanley (1995) 10 Cal.4th 764, 793.)

DISPOSITION

The judgment is reversed. On remand, the trial court shall enter an amended judgment, including a damage award to Kurtin reduced by $3,546,862.07, plus prejudgment interest calculated based on the reduced damage award. In all other respects, the judgment is affirmed, including the attorney fees and costs awards. Kurtin is entitled to his costs on appeal.

THOMPSON, J. WE CONCUR: ARONSON, ACTING P. J. FYBEL, J.


Summaries of

Kurtin v. Elieff

COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREE
Sep 23, 2019
No. G055211 (Cal. Ct. App. Sep. 23, 2019)
Case details for

Kurtin v. Elieff

Case Details

Full title:TODD KURTIN, Plaintiff, Respondent and Cross-Appellant, v. BRUCE ELIEFF…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREE

Date published: Sep 23, 2019

Citations

No. G055211 (Cal. Ct. App. Sep. 23, 2019)