Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 02CC13724, Robert H. Gallivan, Judge.
Law Office of Daniel R. Shapiro, Daniel R. Shapiro; Gary Appel; Ronald Talmo; Greg Curfman in pro. per; and Dana Judd in pro. per., for Defendants, Cross-complainants and Appellants.
Carroll & Werner and Lee G. Werner for Plaintiff, Cross-defendant and Respondent Pama L. Bangeman.
Chad Pearson, in pro. per. for Plaintiff, Cross-defendant and Respondent.
OPINION
RYLAARSDAM, ACTING P. J.
Following a bench trial, the trial court entered a judgment for over $500,000 in favor of plaintiffs and cross-defendants Chad S. Pearson and his sister Pama L. Bangeman. Defendants and cross-complainants Greg Curfman and Dana Judd (defendants) appeal, arguing, among other things, the court erred in determining there was no enforceable agreement between the parties to sell a hardware store to defendants. We disagree and find no merit to defendants’ remaining contentions, except for the award of $875.00 relating to court reporter fees, which shall be stricken. In all other respects, the judgment is affirmed.
FACTS AND PROCEDURAL BACKGROUND
Cecil and Lucy Pearson owned Pearson’s Ace Hardware. With profits from the store, they purchased additional properties, including the commercial site for their business and single family homes, which they used as rentals. In January 1996, they formed a trust to hold the business and all their other assets and named their three children, Charles, Chad, and Pama, as joint successor trustees. Simultaneously, Lucy appointed Cecil as her attorney-in-fact in the event of her incapacitation. She designated Pama as an alternative should Cecil become unable to serve. A few months later, the Pearsons amended the trust to give Chad the assets and liabilities of the hardware store “including use of the real property at [the location where the store is located] as long as [he] operates and owns an ongoing business on the property.”
In July 2001, the Pearsons signed a second amendment to the trust, naming Chad as the first successor trustee, Charles as the second successor trustee, and Pama as the third successor trustee. Cecil signed a power of attorney, effective immediately, appointing Chad as his attorney-in-fact over all matters including real property and “[e]state, trust, and other beneficiary transactions.” The instrument appointed Charles as Cecil’s attorney-in-fact in the event Chad is unable to act, and Pama in the event Charles is unable to act At the end of 2001, Greg Curfman had several conversations with Chad about buying the business. Curfman’s wife, Dana Judd, told her friend, Steve Scott (not a party to this appeal), that Pearson’s Ace Hardware needed a manager and that the person who “had the business” may want to sell it.
Judd typed up a letter proposing terms for the sale of the business. The letter reads: “The undersigned parties are interested in negotiating an agreement for the purchase and sale as a going concern of all the business assets, including furniture, fixtures and equipment, stock in trade, parts and supplies, leasehold interest and goodwill, owned by you in connection with the retail business carried on as Pearson’s Ace Hardware . . . . [¶] Subject to formal contract, we are prepared to pay $425,000 for the business on the following terms: [¶] Good Faith payment to be paid in the amount of $5,000, upon acceptance of this offer. [¶] $20,000 to be paid in one lump sum on or before April 1, 2002. [¶] The balance of $400,000 to be secured by a note which will be written at 9% interest, fully amortized over ten years and made payable to Chad Pearson in monthly installments of $5067.04. [¶] Buyers will be responsible for all costs associated with running the business commencing from the date decided upon by all parties. [¶] All past due payments or debts, except as negotiated, will become the responsibility of Seller. [¶] Purchase must include a 5 year lease in the amount of $3,000 a month for the first year, with an increase of $1,000 a month the second year. [¶] Buyers would prefer to include an option to purchase real estate should it become available. [¶] If you are interested in selling at this price on these terms, please let us know and we will make you a formal offer.”
The letter, dated December 28, 2001, is signed at the bottom by Curfman and Scott. The phrase “I accept offer” is handwritten across the top of the letter, with Chad’s signature next to it. Chad did not negotiate or make a counterproposal and had in fact turned the keys to the store over to Curfman and Scott “right after Thanksgiving.”
When the letter was signed, both Curfman and Scott knew other documents needed to be prepared and signed, including a formal agreement for the sale of the business, a promissory note, a lease agreement, and a security agreement. Scott had someone he knew prepare the documents.
A formal agreement was prepared but not signed. According to Curfman, he and Scott “were changing things on the contract” and “correcting and rewriting things,” while Chad was “bouncing around in his head the ideas.” At the end of February 2002, Chad told them he had to consult with an attorney to rewrite a few things, to which they replied “no problem, go right ahead.” A few months later, Curfman raised the issue of finalizing the contract and Chad said he would get it done.
Similarly, the proposed security agreement contained blank spaces. Curfman never talked to anyone about filling in the blanks and did not consider what assets would constitute the security for the promissory note. Additionally, neither a bulk sales notice nor a statement of abandonment of fictitious business name was ever published, and no escrow was used.
After signing the letter, Chad remained a signatory on the business bank account. For that reason, and because his name was still on the Ace account, Chad was considered a partner by Curfman and Scott.
In January 2002, Chad began receiving monthly payments of $3,000 for rent and $5,000 for the purchase of the business. Although the February payment was short, he received payments through July. He deposited the rent payments in his father’s bank account, and the purchase payment in his own bank account. Curfman and Scott operated the business, each receiving a weekly salary of $700.
Chad’s father died in April. At that time, Chad’s mother was bedridden and suffering from severe dementia.
Meanwhile, Curfman became concerned about getting signed contracts from Chad because “we kept paying and we kept running and I didn’t want to start a business that I really cared about and run it and all of a sudden not be secure.” He asked Chad for them but never received them. Scott was also concerned the documents were not forthcoming.
In July, Curfman obtained a form lease agreement. He called Pama, who lives in Idaho, about his concern that he did not have a lease; Pama told him the Pearson Family Trust would not be leasing the property to him. According to Pama, Curfman became upset and said attorneys would be contacting her.
The next month, Chad and Curfman had an argument, following which Chad went to the business and changed the locks. Chad believed he was still the owner because of the business license, the conduct of Ace Hardware, and the fact portions of the alleged contract was “never followed up” on. Curfman and Scott changed the locks back.
Pama filed an unlawful detainer action to evict Curfman and Scott. Upon receiving a lease termination notice in mid-August, Curfman and Scott, along with Judd, looked for another location for the business but made no offer on any of the properties. They decided to liquidate the entire inventory, placing signs in the windows of the business advertising that the merchandise was 50 percent off. They collected “maybe 10 to 15 cents per dollar” of inventory.
Pama and Chad sued Curfman, Scott, and others for, among other things, declaratory relief, rescission and restitution, conversion, willful misconduct, fraud, and negligence. Chad further asserted a cause of action against Curfman for assault and battery. Curfman, Scott, and Judd cross-complained, alleging breach of oral contract, breach of written contract, interference with contract, intentional misrepresentation, trespass, conversion, fraud and conspiracy. Following a bench trial, the trial court ruled in Chad’s favor on his cause of action for assault and battery and in plaintiffs’ favor on their causes of action for declaratory relief, rescission and restitution for undue influence, conversion, and willful misconduct. Judgment was entered for Chad in the amount of $500 and for “plaintiffs Chad Pearson and Pama Bangeman, individually and as attorney-in-fact for Lucy Pearson, the sole surviving trustee of The Pearson Family Trust, and against defendants Greg Curfman, Steve Scott, and Dana Judd, jointly and severally, in the sum of $505,147.67.” Plaintiffs also prevailed on all causes of action in the cross-complaint.
Judd’s motion for new trial was denied. She and Curfman appeal.
DISCUSSION
1. Standing
Defendants argue that neither Chad nor Pama had personal standing to bring the action and that the trustee of the Pearson Family Trust should have been named instead as the proper plaintiff. They further assert it was prejudicial error to add Pama in her capacity as attorney-in-fact for Lucy Pearson. We disagree.
Where the same persons are the trustees of a trust as well as its beneficiaries, they may maintain an action in their own names without mentioning the trust. (Hassoldt v. Patrick Media Group, Inc. (2000) 84 Cal.App.4th 153, 171.) Chad and Pama were both trustees and beneficiaries of the trust. The original trust named two co-trustees. When Cecil died, Chad took his place as the first successor trustee. Simultaneously, Pama became attorney-in-fact for Lucy, the sole remaining original trustee. She later also assumed Chad’s position as successor trustee when Chad resigned, while retaining her status as Lucy’s attorney-in-fact. Thus, it was proper for Chad and Pama to bring the action in their own names, as well as for Pama to be named in her capacity as Lucy’s attorney-in-fact.
Defendants are correct the trust contained a provision that if one of the original co-trustees became incapacitated, a successor trustee could be appointed in place of the incapacitated trustee. That provision states, “In the event that one or both of the original Co-Trustees is deemed, by the other Co-Trustee and/or a party or parties having a present or future beneficial interest of at least sixty percent (60%) of the Trust estate, to be mentally incapable of continuing in a fiduciary capacity, the discerning parties shall suggest that . . . original Co-Trustee[] resign and be replaced by the First Successor Trustee.” There is no evidence this was ever done.
Because Lucy was never removed as a trustee, defendants’ contention Cecil became the sole trustee upon her incapacitation lacks merit. Lucy remained a trustee, with Cecil acting as her attorney-in-fact until his death, after which the appointment passed to Pama.
Defendants maintain the court abused its discretion in granting plaintiffs’ request in their closing brief following trial to amend the complaint to add Pama in her representative capacity. Although they acknowledge “‘[a]mendment may be allowed during trial, without the formalities usually required for motions,’” they argue the court erred in not requiring “a formal motion [under Code of Civil Procedure section 473] supported by an affidavit.” The failure to proceed by way of noticed motion, however, “does not vitiate the court’s power to permit the amendment. [Citations.]” (Central Sur. & Ins. Corp. v. Foley (1962) 204 Cal.App.2d 738, 744.) An amendment is nevertheless properly allowed where it does “not allege new matter of substance and could thus have resulted in no real prejudice to [the opposing party]” and disallowance of amendment would not serve ends of justice. (Ibid; see also Stockton v. Newman (1957) 148 Cal.App.2d 558, 562-563.)
Defendants assert they were prejudiced because they have a “right to adequate notice” and “were entitled to proceed throughout this case under the theory that the action had not been brought in the name of the true real party in interest.” But they have not shown they would have acted any differently had Pama originally been named as Lucy’s attorney-in fact. Unlike the cases they cite, Pama was not a stranger to the action and her claims as Lucy’s attorney-in-fact were identical to her claims as trustee. (See Pasadena Hospital Assn., Ltd. v. Superior Court (1988) 204 Cal.App.3d 1031, 1037 [no abuse of discretion in allowing amendment adding corporation as a plaintiff where doctor’s and corporation’s claims are identical and arose from same conduct by hospital defendant, no possible prejudice to the defendant resulted, change was of form, not substance, and “in the interests of justice should be treated as such”]; see also Fifth & Broadway Partnership v. Kimny, Inc. (1980) 102 Cal.App.3d 195, 199 [no abuse of discretion in allowing amendment to add party, where that party did not claim, and record did not show, it was prejudiced by amendment].) Although defendants claim they would not have dismissed Lucy from their cross-complaint if the complaint had named her as a plaintiff, they have not explained how that prejudiced them, particularly in light of the judgment entered against them on the cross-complaint. Absent a showing of prejudice, the trial court did not abuse its discretion in allowing the amendment.
2. The December 2001 Letter
In entering judgment for plaintiffs, the trial court found “[t]he 12/28/01 letter ‘agreement’ was merely an invitation to enter into a formal agreement to sell the business known as Pearson’s Ace Hardware subject to the terms set forth and is otherwise not enforceable.” Defendants contend this issue was “not actually litigated in the trial” because plaintiffs’ trial briefs argued only that the unlawful detainer action was res judicata as to the validity of the contract. The briefs show otherwise.
Defendants’ opening trial brief specifically asserted “[t]he agreement of December 28, 2001 was more than a mere contemplation by the parties. Whether the agreement is a lease or merely an executory agreement depends on the intent of the parties, and the court should look to the construction of the document in light of the circumstances surrounding the negotiations and the subsequent conduct of the parties.” Plaintiffs responded by claiming, “the evidence clearly established that no viable contract to sell the business was ever executed by the parties.” The issue was thus litigated.
Defendants now repeat their argument the December 2001 letter constituted a binding contract because the document included the necessary terms and the parties performed under its terms. “‘[W]hether a certain or undisputed state of facts establishes a contract is [a question] of law for the court . . . [.] On the other hand, where the existence and not the validity or construction of a contract or the terms thereof is the point in issue, and the evidence is conflicting or admits of more than one inference, it is for the jury or other trier of the facts to determine whether the contract did in fact exist, . . .’ [Citation.]” (Robinson & Wilson, Inc. v. Stone (1973) 35 Cal.App.3d 396, 407.) Here, the parties presented conflicting evidence as to whether a valid and enforceable contract existed. We review the trial court’s factual finding on this issue for substantial evidence.
Under the substantial evidence standard of review, “[w]here findings of fact are challenged on a civil appeal, we are bound by the ‘elementary, but often overlooked principle of law, that . . . the power of an appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted,’ to support the findings below. [Citation.] We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor in accordance with the standard of review so long adhered to by this court. [Citations.]” (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.)
“‘Whether a writing constitutes a final agreement or merely an agreement to make an agreement depends primarily upon the intention of the parties. In the absence of ambiguity this must be determined by a construction of the instrument taken as a whole.’ [Citation.] ‘Preliminary negotiations or an agreement for future negotiations are not the functional equivalent of a valid, subsisting agreement. “A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.” [Citation.]’ [Citation.] Thus, where it is part of the understanding between the parties that the terms of their contract are to be reduced to writing and signed by the parties, the assent to its terms must be evidenced in the manner agreed upon or it does not become a binding or completed contract. [Citations.]” (Beck v. American Health Group Internat., Inc. (1989) 211 Cal.App.3d 1555, 1562.)
Substantial evidence supports the court’s determination that the December 2001 letter was not an enforceable contract. Although defendants are correct the letter identifies the parties, consent, a lawful object, and consideration, it also contemplates on its face further negotiation by the parties to reach a definitive written contract. It states, “The undersigned parties are interested in negotiating an agreement . . . . [¶] Subject to formal contract . . . . [¶] . . . [¶] If you are interested in selling at this price on these terms, please let us know and we will make you a formal offer.”
The parties’ subsequent conduct was consistent with the written expression of their intent to negotiate further toward a definitive contract. After the letter was signed, the parties “were changing things on the contract” and “correcting and rewriting things,” while Chad was “bouncing around in his head the ideas.” With Curfman’s and Scott’s acknowledgement and approval, Chad expressed a desire to consult an attorney to rewrite some terms.
Curfman and Scott admitted they knew when the letter was signed that other documents needed to be prepared and signed, including a formal agreement, a promissory note, a lease agreement, and a security agreement. Both were concerned when Chad did not sign and return these contractual documents to them. The implication is they recognized the letter they had signed was not a binding final agreement, but a nonbinding agreement to make an agreement.
Because substantial evidence supports the court’s determination there was no enforceable contract, we affirm the judgment on the declaratory relief cause of action. As a result, it is unnecessary to address defendants’ alternative arguments that (1) the unlawful detainer action has no res judicata effect; (2) Chad had legal authority to sell the business; (3) Curfman and Scott were bona-fide purchases who were not bound to inquire whether Chad had the power to act; (4) Curfman and Scott should have prevailed on their cross-complaint if Chad lacked authority; and (5) the Pearson Trust is liable for indemnification.
3. Individual Causes of Action
Defendants contend the evidence is insufficient to support the causes of action for rescission and restitution for undue influence, conversion, and willful misconduct. We review the judgment, not the trial court’s reasoning, and may affirm it on any proper basis presented by the record. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1268.) We have already determined substantial evidence supports the judgment under the declaratory relief cause of action. We conclude the same with respect to the conversion claim. It is thus unnecessary to address the remaining causes of action.
“The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.) Regarding the first element, defendants argue plaintiffs failed to “provide substantial evidence they had any right to the particular items of inventory sold either at the liquidation sale or purchased from Ace Hardware. They did not distinguish between the inventory left in the business at the time of the sale at the end of December 2001 and the new inventory purchased by Curfman and Scott . . . .” This contention assumes the existence of a valid contract to sell the business. Because it has already been determined that no valid contract arose, defendants’ argument lacks merit. Moreover, defendants’ offer to return the business to plaintiffs did not exclude any of the “new inventory.” By including both new and old inventory in their offer, defendants implicitly recognized plaintiffs’ right to possession of all of the inventory.
Defendants’ only challenge to the second element is that there was no evidence Judd took any property or committed a wrongful act. On the contrary, Judd participated in the decision to liquidate the entire inventory in the store without regard to plaintiffs’ right to possession. That is sufficient.
As to damages, defendants argue that only tangible property, such as inventory, can be converted and not the value of the business. Therefore, according to them, the conversion damages may include only $84,467 for the outstanding balance owed to Ace Hardware Corporation and “not . . . the . . . $425,000 for the value of the business.” We disagree. Defendants confuse the items that may be the subject of a conversion claim and the damages awardable for a wrongful conversion. Generally, the appropriate measure of damages for conversion is the value of the converted property plus interest from the date of conversion. (Lueter v. State of California (2002) 94 Cal.App.4th 1285, 1301-1302; Lint v. Chisholm (1981) 121 Cal.App.3d 615, 624.) Here, plaintiffs’ expert testified value of the inventory of the Pearson’s Ace Hardware business as of December 28, 2001 was approximately $425,000. The court determined that was the reasonable value of the business. Defendants have not persuaded us this was error.
4. Damages
The court’s award of damages included: “the reasonable value of the business” in the amount $425,000; “additional money damages resulting from defendant’s [sic] conduct in the sum of $84,467.67 paid by plaintiffs to Ace Hardware Corp.”; “reimbursement of the $20,580 paid as insurance benefits to defendants”; and “$30,100 for the draws of $1,400 per week paid to defendants after their unlawful retaking of the premises in August of 2002.” Defendants make several challenges to the damages awarded, none of which have merit.
a. Mitigation
Defendants contend plaintiffs failed to mitigate their damages by not immediately reopening the hardware store or accepting their offer to return the business. Under the mitigation of damages doctrine, “‘A plaintiff cannot be compensated for damages which he could have avoided by reasonable effort or expenditure. [Citations.] . . . [¶] [However,] [t]he doctrine does not require the injured party to take measures which are unreasonable or impractical or which would involve expenditures disproportionate to the loss sought to be avoided or which may be beyond his financial means. [Citations.] . . . The standard by which the reasonableness of the injured party’s efforts is to be measured is not as high as the standard required in other areas of law. [Citations.] It is sufficient if he acts reasonably and with due diligence, in good faith. [Citations.]’” (Royal Thrift and Loan Co. v. County Escrow, Inc. (2004) 123 Cal.App.4th 24, 33.) The defendants bear the burden of pleading and proving failure to mitigate. (State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026, 1044.) Defendants did not carry their burden.
First, defendants have not convinced us it would be reasonable to require plaintiffs to immediately restock and reopen the store after defendants had converted its inventory. Nor have they shown plaintiffs had the means to make the necessary expenditures.
Second, although returning converted property to their rightful owner may mitigate damages (see Krusi v. Bear, Stearns & Co. (1983) 144 Cal.App.3d 664, 673), the plaintiffs are not obligated to accept the defendants’ offer to return the property and may instead seek “the value of the property at the time of conversion.” (Everfresh, Inc. v. Goodman (1955) 131 Cal.App.2d 818, 820.) That is what plaintiffs did. They did not fail to mitigate by doing so.
b. Health Insurance Premiums
Defendants contest the portion of the judgment awarding plaintiffs $20,580 for the health insurance premiums paid by the business. They claim “plaintiffs admitted that Chad Pearson was covered under the business’s health insurance policy,” the admission is binding, and therefore plaintiffs did not meet their burden of showing how much of the premiums was allotted to Chad and how much to Curfman and Scott.
The cited testimony, however, is not of either plaintiff but that of Scott and Curfman. Moreover, although defense counsel stipulated to the total paid, he admitted he was “not sure” whether Chad was “covered by that premium amount.” Thus, even if Chad was covered under the store’s health insurance, defendants have not shown the stipulated sum included any premiums paid on Chad’s behalf. Absent such evidence, the court did not err in awarding the entire amount to plaintiffs.
Defendants cite no authority for their assertion plaintiffs had the burden of proving allocation of the premiums. The contention is waived. (Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979.)
c. Trust’s Position
For the same reason, we deem waived defendant’s claim the entire damage award should be vacated because the trust is in a better position after retaking the premises because it currently receives a higher rental payment than before the dispute. We need not discuss points that are not supported by citation to authorities. (Kim v. Sumitomo Bank, supra, 17 Cal.App.4th at p. 979.)
d. Draws
Defendants argue it was improper to charge Judd with the weekly draws received by Curfman and Scott totaling $30,100, and that “Curfman could be found liable for $700 a week, and Scott could be found liable for $700 a week, but all three defendants are not liable for the entire amount.” Pama responds that Judd, Curfman, and Scott were partners and “[a]ll partners are jointly and severally liable for all partnership obligations unless otherwise agreed by the claimant or provided by law.” We agree.
A partnership is formed by “the association of two or more persons to carry on as coowners a business for profit . . . whether or not the persons intend to form a partnership.” (Corp. Code, § 16202, subd. (a).) Its existence does not depend on a written agreement and may be inferred from the parties’ conduct and surrounding circumstances. (Cochran v. Board of Supervisors (1978) 85 Cal.App.3d 75, 81.) Subject to two inapplicable exceptions, “all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.” (Corp. Code, § 16306, subd. (a).)
Here, Judd testified she was a “silent partner” in the purchase of the for profit store. There was also evidence she, Curfman, and Scott had an oral agreement that each would have a one-third interest in the business. This is sufficient to show Judd, Curfman, and Scott had formed a partnership, as they associated together to carry on, as co-owners, a business for profit. Weighing the evidence and drawing all inferences in the light most favorable to the judgment (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133), the draws paid to Curfman and Scott were for their work on behalf of the partnership, making the return of the draws an obligation of the partnership. Because Judd was a member of the partnership, all three were jointly and severally liable for the draws.
e. Miscellaneous
Because no lost profits were awarded to plaintiffs, we reject defendants’ contention that Chad and the trust were not entitled to recover them. As for defendants’ claim that any damage award above the $84,467 for inventory constitutes a double recovery, we have already concluded plaintiffs were entitled to the value of the inventory in the amount of $425,000 as damages for conversion. (Lueter v. State of California, supra, 94 Cal.App.4th at pp. 1301-1302.) The other components of the damages award were within the court’s discretion.
Trial courts have broad discretion in awarding damages (Zalk v. General Exploration Co. (1980) 105 Cal.App.3d 786, 794) and may properly resort to equitable principles in doing so, such as attempting to place the parties in the status quo ante. (Paularena v. Superior Court (1965) 231 Cal.App.2d 906, 912.) Where, as here, a court has determined a contract to be unenforceable, the court may restore the parties to the status quo by awarding an amount that would put plaintiffs in as good a position as they would have been before the parties’ negotiations. (Dunkin v. Boskey (2000) 82 Cal.App.4th 171, 198; see Little v. CFS Service Corp. (1987) 188 Cal.App.3d 1354, 1361.) The court in this case did just that. No abuse of discretion has been shown.
5. Motion to Tax Costs
Defendants argue the court erred in denying their motion to tax $460.46 for service of process on a Scott Bunte because it is not “‘reasonable’” to charge them “with costs associated with service of process on some other defendant.” The contention lacks merit. Plaintiffs showed those costs were necessary and reasonable. (Code Civ. Proc., § 1033.5, subd. (c)(3).)
Defendants also challenge the court reporter fees in the amount of $875.00 as not being “‘ordered’” by the court and thus not recoverable. We agree. Code of Civil Procedure section 1033.5, subdivision (b)(5) specifically disallows recovery of costs for “Transcripts of court proceedings not ordered by the court.”
Pama maintains that Government Code section 68086, subdivision (a)(5) “permits the recovery of court reporter costs to the prevailing party.” She is mistaken. Subdivision (a)(5) of that statute requires the Judicial Council to adopt certain rules. It has nothing to do with recovering court reporter costs. Subdivision (a)(4) of section 68086, which we presume plaintiffs meant to cite to, applies only to recovering “costs for the services of the official court reporter,” which is different from costs for transcripts of court proceedings.
6. Sanctions
a. The Motion for Sanctions
Pama moved for monetary sanctions against defendants and their lawyers, Gary Appel and Daniel R. Shapiro. The motion was based on the following contentions: (1) the appeal lacks merit and was filed solely for delay; (2) defendants’ bankruptcy filing and 10 applications for extensions of time to file their opening brief caused substantial delay; (3) defendants and their lawyers communicated with and unduly influenced Chad, one of their adversaries; (4) defendants and their lawyers have manipulated Chad in this appeal and in the trial court, causing him to file sham pleadings.
b. The Hearing Before The Honorable Frederick P. Horn
This court remanded the matter to the Orange County Superior Court to conduct hearings and make findings with respect to a series of specific questions. Hearings were conducted by the Honorable Frederick P. Horn, Judge of the Superior Court. This court’s questions and Judge Horn’s findings with respect thereto may be summarized as follows:
1. Did defendants, attorney Appel, or attorney Shapiro, or any of their agents or employees, have personal contact with Chad while he was jointly represented by counsel for Pama? The trial court found that Judd had personal contact with Chad on November 1, 2005 while he was still represented by counsel and that Appel and Shapiro had contact with Chad, while he was still represented, through their agents Judd and Vicquar Ahmed.
2. What was the nature and extent of these contacts? The November 1 meeting between defendants, Chad, Mary Tibbs, and Joyce Nelson took place four days after Chad returned from Idaho and within a week, Chad had executed a declaration charging his lawyers with fraud in obtaining a judgment in his favor. Chad also executed a substitution of attorney forms and signed a letter terminating his lawyers’ services. At the same time Shapiro submitted Chad’s declaration in connection with another request for an extension of time to investigate Chad’s fraud claims against his lawyers. The court found that Chad was not capable of personally drafting the documents executed by him.
3. Was Ahmed employed by either Appel or Shapiro in any capacity between September 2004 and the present? The court concluded that Ahmed was employed by Appel as either a paralegal, law clerk or both prior to and subsequent to November 21, 2005.
4. Did Ahmed ghostwrite any appellate briefs and/or motions on appeal on behalf of Chad or defendants in connection with this appeal? And 5., if Ahmed did so, what was the nature and extent of the writing? The court could not “find conclusively that . . . Ahmed ghost[]wrote appellate briefs and/or motions on behalf of Chad or the [defendants] in connection with this appeal,” but concluded that Ahmed likely did so, probably with Judd’s assistance. The court found that Ahmed probably ghostwrote Chad’s declarations and letters.
6. If Ahmed ghostwrote any documents on appeal on behalf of Chad or defendants, were they written while Ahmed was employed as a paralegal or in any other capacity by either Appel or Shapiro? The trial court answered this question in the affirmative.
c. Sanctions Based on Judge Horn’s Findings
Judge Horn’s most explicit findings concern communications between defendants and Chad. Rule 2-100(A) of the Rules of Professional Conduct provides, “While representing a client, a member shall not communicate directly or indirectly about the subject of the representation with a party the member knows to be represented by another lawyer in the matter, unless the member has the consent of the other lawyer.” But the rule does not prohibit communications between the opposing parties, as long as such communication is not initiated by the parties’ lawyers. (See Discussion, para. 2, 23 pt. 5 West’s Ann. Court Rules (2008 ed.) foll. Rule 2-100, p. 760 [“Rule 2-100 is not intended to prevent the parties themselves from communicating with respect to the subject matter of the representation, and nothing in the rule prevents a member from advising the client that such communication can be made”].) Thus, the fact that defendants communicated with Chad is not sanctionable.
The trial court did not find that there were any direct communications between Appel and Shapiro on the one hand and Chad on the other. The court concluded that there was such contact indirectly however in the communications between Judd and Ahmed with Chad; in reaching this conclusion, the court characterized Judd and Ahmed as agents for Appel and Shapiro. If Judd or Ahmed were acting in this capacity, the communications would qualify as prohibited indirect communications between Appel and Shapiro and Chad.
We searched the record of the hearing before Judge Horn and, although the circumstances were suspicious and Judge Horn noted that 7 of the 17 witnesses he examined were not credible or were simply lying, the fact that a witness may be disbelieved does not, by itself furnish evidence of the truth of the opposing facts. (See Viner v. Sweet (2004) 117 Cal.App.4th 1218, 1229 [disbelief of witness’s testimony is not affirmative evidence of contrary proposition].) We were unable to find support in the record for the proposition that defendants or Ahmed were acting under the instructions or even with the knowledge of Appel or Shapiro. Sanctions are therefore not awardable on this basis.
d. Sanctions Based on Delay in Processing and Alleged Frivolity of Appeal
Pama also moved for sanctions based on the alleged frivolity of the appeal and defendants’ delays in filing their opening brief. “When it appears to the reviewing court that the appeal was frivolous or taken solely for delay, it may add to the costs on appeal such damages as may be just.” (Code Civ. Proc., § 907.) California Rules of Court, rule 8.276(a)(1) and (3) also authorizes sanctions for a frivolous appeal and filing frivolous motions. “[A]n appeal should be held to be frivolous only when it is prosecuted for an improper motive—to harass the respondent or delay the effect of an adverse judgment—or when it indisputably has no merit—when any reasonable attorney would agree that the appeal is totally and completely without merit.” (In re Marriage of Flaherty (1982) 31 Cal.3d 637, 650.)
Pama argues the opening brief was essentially finished before defendants started to request their time extensions. But we cannot determine this in the absence of a copy of the brief as originally prepared by defendants’ former lawyer. In addition, although we affirm the judgment of the trial court, we cannot conclude that the appeal is so devoid of merit as to reach the standard for sanctionability of In re Marriage of Flaherty, supra, 31 Cal.3d at p. 650.
e. Referral to California State Bar
Although the record does not support our issuing a sanction order, we must refer this matter to the California State Bar. Judge Horn expressed doubt about the veracity of Appel and Shapiro. He stated that Appel “ha[d] a very selective memory,” that “Appel’s testimony that he never employed Mr. Ahmed as a paralegal or law clerk is not credible,” and that he “has little faith in the testimony of Attorney Shapiro.” Rule 5-200 of the Rules of Professional Conduct demands that a member of the California State Bar be candid when presenting a matter to a tribunal.
In addition, with respect to rule 2-100 of the Rules of Professional Conduct, Judge Horn’s order finds: “This court also finds that attorneys Appel and Shapiro had personal contact with Chad Pearson prior to 11-21-05 through their agents, Dana Judd and Vicquar Ahmend. Through these agents, attorneys Appel and Shapiro solicited and prepared Mr. Pearson’s 11-7-05 declaration, Mr. Pearson’s 11-18-05 declaration (which was identical to the 11-7-05 declaration with the exception of date and place of execution), substitution of attorney forms and the letters to Attorney Werner dated 11-5-05 and 11-14-05 (EX 18).”
We therefore order the clerk to forward a copy of this opinion, together with a copy of Judge Horn’s order to the California State Bar for such action as it may deem to be appropriate.
DISPOSITION
The award of $875.00 in costs for court reporter fees is stricken. In all other respects, the judgment is affirmed. The motion for sanctions is denied. Plaintiffs shall recover their costs on appeal. The clerk of this court is directed to forward a copy of this opinion and the superior court’s October 18, 2007 order to the State Bar of California.
WE CONCUR: MOORE, J., FYBEL, J.