Opinion
G056402 G056485
10-09-2019
NAELA BAKOUR et al., Plaintiffs and Respondents, v. WATHIQ BILBEISI et al., Defendants and Appellants.
Law Offices of Majorie G. Fuller and Marjorie G. Fuller for Defendants and Appellants. Law Offices of David T. Moutoux and David T. Moutoux for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 30-2015-00814565) OPINION Appeal from a judgment of the Superior Court of Orange County, Frederick Paul Horn, Judge. (Retired judge of the Orange Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed as modified. Law Offices of Majorie G. Fuller and Marjorie G. Fuller for Defendants and Appellants. Law Offices of David T. Moutoux and David T. Moutoux for Plaintiffs and Respondents.
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Plaintiffs Naela and Luai Bakour (collectively, plaintiffs) filed the complaint underlying this case against defendants Wathiq and Sharon Bilbeisi (collectively, defendants), based upon a sale of foreign land belonging to Naela. Wathiq received the sale proceeds as an intermediary for Naela, but did not deliver them to Naela. The trial court found in favor of plaintiffs on their conversion claim and awarded both general and special damages. We find most of the special damages awarded were not supported by substantial evidence and affirm the judgment as modified.
Because, at all times relevant to this case, plaintiffs and defendants were husband and wife couples sharing common last names, we refer to the parties by their first names to avoid confusion.
I
FACTS AND PROCEDURAL HISTORY
A. Land Sale Proceeds Withheld
By June 2015, Naela and Wathiq agreed that Wathiq would assist Naela with handling the proceeds of her sale of land in the country of Jordan. Specifically, Wathiq and his business associate were to act as intermediaries and receive the proceeds of the sale for transfer to Naela. There was no written agreement specifying how the sale proceeds would be transferred to Naela. The proceeds were received by Wathiq but not delivered to Naela, despite numerous communications between the two.
Plaintiffs filed their complaint against defendants in October 2015 and amended it in February 2016. Plaintiffs alleged causes of action for conversion and quantum meruit. Among other things, their request for relief sought compensatory, emotional distress, and punitive damages. In May 2016, Wathiq filed a cross-complaint (no copy has been provided in the record before this court) and, three days later, he deposited the land sale proceeds with the court. Shortly thereafter, plaintiffs filed a motion to release the proceeds, which the court denied. The parties then proceeded to litigate this case for the next two years. B. Court Trial
According to the trial transcript, Sharon was named as a codefendant solely because Wathiq deposited the at issue proceeds in a joint marital account.
This case was tried during a two-day court trial in January 2018. Naela testified that the land sale proceeds were initially made payable through a check to Wathiq's business associate, with her agreement. However, without her specific agreement, Wathiq then transferred the proceeds to a bank account opened in his name. Naela testified that Wathiq thereafter proposed making specific amounts of money available to Naela upon terms she had not agreed to.
Wathiq did not dispute Naela was the rightful owner of the proceeds but testified he did not release the proceeds because Naela did not comply with his requests to either provide sufficient documentation of the underlying transactions or add herself as an owner of the account where the proceeds were being held. Wathiq testified the purpose of his requests was to prevent any potential tax liability for himself in the future.
As to plaintiffs' claimed injuries, Naela testified that, as a result of Wathiq's withholding of the land sale proceeds, she had to secure five loans from friends and family (collectively, the personal loans). Naela testified the personal loans included an interest rate of 6 percent based upon oral terms. Next, Naela's husband Luai testified that in February 2016, one month before he lost his employment of 20 years as an engineer and manager, he had to take out a $50,000 loan from his 401k retirement plan, which was shortly thereafter converted into income and resulted in a penalty and tax liability being incurred. Luai also testified that due to the lack of having the proceeds, he lost a business opportunity to purchase a FedEx shipping business.
The trial court found in favor of plaintiffs on all issues. Specifically, the court found that Wathiq had not been justified in withholding the sale proceeds and was therefore liable on plaintiffs' conversion claim for both general and special damages pursuant to Civil Code section 3336. In an amended judgment following defendants' motion for a new trial, the court awarded a total of $380,613.36. Specifically, the court ordered the payment of $213,862.36 as general damages directly caused by Wathiq's withholding of the proceeds. This category included the $196,815.00 Wathiq had deposited with the court, $16,347.36 in accrued interest, and an additional $700 for money being held by Wathiq.
All further undesignated statutory references are to the Civil Code.
Not at issue on appeal, the court also awarded plaintiffs costs but did not award emotional distress or punitive damages.
As to special damages, the trial court awarded $166,751.00, for three categories of injuries presented at trial. First, the court awarded $951 in interest obligations incurred by Naela, based upon the personal loans. Second, the court awarded $15,800 for interest, penalty, and tax liabilities incurred as result of Luai's 401k loan. Third, the court awarded $150,000 in business venture damages, finding that "defendant's failure to timely deliver the funds to plaintiff resulted in the loss of [plaintiffs'] significant business opportunity." No statement of decision was requested by the parties and defendants timely appealed.
II
DISCUSSION
A. Standard of Review
On appeal, defendants do not dispute the trial court's ruling regarding liability issues but claim the court committed errors in its award of damages. First, defendants claim section 3336 authorized the court to award either general damages or special damages, but not both. Second, defendants claim plaintiffs were precluded from being awarded special damages based upon inadequate pleading. Third, defendants claim that, in any case, there was insufficient evidence to support all three categories of special damages awarded.
A plaintiff's challenge of the amount of damages awarded is reviewed for substantial evidence (Virtanen v. O'Connell (2006) 140 Cal.App.4th 688, 709-710), whereas entitlement to a particular measure of damages is reviewed de novo. (El Centro Mall, LLC v. Payless ShoeSource, Inc. (2009) 174 Cal.App.4th 58, 62.) Defendants, as the appellants, have the burden of demonstrating the trial court erred. (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 610.) We begin our discussion with our review for substantial evidence. B. Substantial Evidence Review of Special Damages
We find merit in the majority of defendants' arguments that substantial evidence did not support the special damages awarded. Under substantial evidence review, "the general rule [is] that an appellate court must affirm the decision of a trial court if, after resolving all evidentiary conflicts and indulging all reasonable inferences in support of the judgment, there is substantial evidence to support it." (County of Riverside v. City of Murrieta (1998) 65 Cal.App.4th 616, 620.)
At the same time, "[a] damage award must not be "'"'speculative, remote, imaginary, contingent, or merely possible.'"'" (Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 738.) Incompetent evidence which is received by a trial court without objection can support a judgment. (Id. at pp. 739-740.) However, even "[c]ompetent evidence is not necessarily substantial evidence." (Ibid.) Damages awarded must be proved to be reasonably certain. (Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 696-697 ["An expert's opinion must not be based upon speculative or conjectural data. If the expert's opinion is not based upon facts otherwise proved or assumes facts contrary to the only proof, it cannot rise to the dignity of substantial evidence"].) We review each of the three challenged categories of special damages in turn.
1. Personal loans
Defendants contend the trial court erroneously awarded $951 as damages for interest incurred on Naela's personal loans because it was not supported by substantial evidence. We disagree. At trial, Naela testified that she had received five loans from friends and family members, without any written notes prepared. Naela testified that the five loans totaled $8,950 and when asked by her counsel, "Over what period of time?" she responded, "September 2015 to March 2016." Naela testified that for each loan she had agreed to an interest rate of "about six percent." Naela identified the specific lender and loan amounts for three of the five loans and did not specify any dates of the loans. Defendants did not object to any portion of Naela's testimony on this subject and did not present any contradicting evidence of their own. Defendants did object to Naela's attempt to admit into evidence documents related to the loans, which was sustained by the trial court.
We indulge all reasonable inferences in support of the judgment and find substantial evidence supports the $951 awarded for Naela's personal loans. (County of Riverside v. City of Murrieta, supra, 65 Cal.App.4th at p. 620.) The admitted evidence of Naela's testimony supported a theoretical award of more than what was actually awarded. Assuming the smallest window of time allowed for accrued interest was March 31, 2016 to the date of the amended judgment, June 18, 2018, applying a simple interest rate of 6 percent to the total loan principal of $8,950 (both components testified to by Naela and uncontradicted by defendants) would have yielded accrued interest in the amount of $1,190.23. Since this amount was more than the $951 the trial court awarded, we find substantial evidence supports the award. (See Myers v. Stephens (1965) 233 Cal.App.2d 104, 118 (Myers) [affirming the trial court's damages award amount based upon appellate court's independent calculation of damages awardable based upon facts in record].)
2. Business venture damages
Defendants also contend the trial court's award of $150,000 based upon Luai's claim of business venture damages was not supported by substantial evidence. We agree. Generally, the basis of opinion testimony regarding the extent of damages must be ascertainable to qualify as substantial evidence. (See Toscano v. Greene Music , supra, 124 Cal.App.4th at pp. 695-697 [although record supported an establishment of fact of damage, plaintiff's expert's conclusions as to the extent of lost employment damages was "wholly conjectural" and appellate court could not "ascertain with any certainty" how the plaintiff's expert reached an assumption underlying her opinion].) Furthermore, "[t]he plaintiff has the burden to produce the best evidence available in the circumstances to attempt to establish a claim for loss of profits." (S. C. Anderson, Inc. v. Bank of America (1994) 24 Cal.App.4th 529, 536.)
Defendants cite to case law to argue the evidence was insufficient because it was too speculative. In response, plaintiffs cite to their own case law, asserting that evidence can be found insufficient only if no reasonable interpretation of the record supports the amount awarded. Plaintiffs then cite to Luai's testimony regarding his opinion that the FedEx business he had been pursuing would have yielded him a net annual income of $150,000. Luai prefaced his opinion by stating the then current owner of the business had opined the amount was higher, at $160,000 to $180,000. Regarding the basis for his opinion, Luai testified that in performing his analysis of the business's value, he spent about three months going through the business's books with his agent. In support of Luai's testimony, plaintiffs proffered to the trial court 12 pages of documents related to Luai's analysis of the business. The documents included purported financial records of the business and a purported e-mail from an individual Luai identified as the owner of the business. Defendants did not object to Luai's oral testimony but did object to the admissibility of the documents as hearsay. After plaintiffs' counsel attempted to develop foundation for the documents, the court partially overruled the objection and admitted the documents as evidence only for the purpose of demonstrating plaintiffs' effort to buy the business, but not for the truth of the information contained in them.
Lewis Jorge Contstruction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 975-976, and Parlour Enterprises, Inc. v. The Kirin Group, Inc. (2007) 152 Cal.App.4th 281, 287-288.
San Diego Metropolitan Transit Development Bd. v. Cushman (1997) 53 Cal.App.4th 918, 931, and Toscano v. Greene Music, supra, 124 Cal.App.4th at page 691.
In her cross-examination testimony, Naela testified she believed her and Luai's joint offer to purchase the business had been "90 percent" accepted but plaintiffs had been unable to proceed with a necessary loan. Naela testified that she believed there was documentation of an acceptance of the offer but she had never looked for it.
Similarly, Luai testified that there was written documentation of his and Naela's offer to purchase the business but he had not brought it with him to court.
Even crediting plaintiffs' oral testimony about lost business profits—which almost exclusively consisted of Luai's lay opinion about what he would have earned—we do not find the evidence admitted by the trial court sufficed as substantial evidence supporting the court's award. The absence of foundational information, such as whether the business was an established or new business (see Parlour Enterprises, Inc. v. Kirin Group, Inc. (2007) 152 Cal.App.4th 281, 288 [discussing differing frameworks for analyzing lost profit damages between established and new businesses]), and how the proffered amount was calculated, rendered the evidence speculative as a matter of law.
In Toscano v. Greene Music, supra, 124 Cal.App.4th at pages 695-697—one of the two cases cited to by plaintiffs—the court reviewed an employee's damages award and concluded the expert opinion supporting it was too speculative to constitute substantial evidence. Specifically, the plaintiff in Toscano had alleged a defendant was liable under a theory of promissory estoppel for promising him employment as a sales manager, which caused the plaintiff to resign from his then current job. (Id. at pp. 689-690.) Following a bench trial, the trial court's total award of $536,833 included "lost wages based on what Toscano[, i.e., the plaintiff] would have earned from his former employer to the time of his retirement" based upon his accountant-expert's opinion testimony. (Id. at p. 689.)
On review, the Toscano appellate court held that, "even giving deference to the trial court's ruling and drawing all inferences in Toscano's favor," the future lost earnings awarded in that case had been too speculative. (Toscano v. Greene Music, supra, 124 Cal.App.4th at pp. 695-696.) In its analysis, the court analogized to case law regarding lost profit awards (id. at p. 696), and found that the evidence failed to prove lost future earnings with reasonable certainty because there was no demonstration of what the former employer's expectations were regarding Toscano's employment situation. (Id. at p. 695.) Specifically, the court stated "[w]e cannot ascertain with any certainty how [Toscano's expert] reached her assumption as to Toscano's continued employment." (Toscano v. Greene Music, supra, 124 Cal.App.4th at pp. 696-697.)
Similarly in this case, there is no way of ascertaining with reasonable certainty how Luai reached his assumptions underlying his lost profit opinion. It is apparent plaintiffs' strategy at trial was to support the opinion with the 12-page document exhibit proffered. But because that exhibit was admitted only on a limited basis, it offered no foundational support for the lay opinion that Luai would have earned a net income of $150,000 if he had been able to purchase the FedEx shipping business. Not only is the record devoid of how Luai's opinion was reached, it provides no meaningful basis showing what amounts it was based upon. For example, the record does not establish what costs and revenues were reviewed in arriving at the Luai's opinion. While it is true Luai testified that the then current owner believed $160,000 to $180,000 would have been earned, that purported opinion (not challenged by defendants), suffered from the same foundational issue in that it was simply a conclusion without a demonstrated basis. Accordingly, even under the deferential standard of substantial evidence review, there is a lack of reasonable certainty in the assumptions of Luai's opinion, rendering the business venture damages speculative. (Toscano v. Greene Music, supra, 124 Cal.App.4th at pp. 696-697.)
Moreover, given that it appears better evidence could have been presented—such as documentation of the business's financial performance history—we find plaintiffs did not meet their "burden to produce the best evidence available in the circumstances to attempt to establish a claim for loss of profits." (S. C. Anderson, Inc. v. Bank of America, supra, 24 Cal.App.4th at p. 536.) In sum, the trial court's award of $150,000 for business venture damages was not supported by substantial evidence.
3. Damages arising from 401k loan
Defendants also contend the trial court's award of $15,800 based upon Luai's loan from his 401k retirement fund was not supported by substantial evidence because the admitted evidence on that subject was also speculative. We partially agree. Based upon the testimony of Luai, the amount of the award was comprised of three components: interest, penalty, and taxes. According to plaintiffs' counsel's trial argument and briefing, the component amounts were $1,800 for two months of interest at 4.5 percent, a $4,000 penalty for Luai's early withdrawal of the 401k money, and $10,000 in tax liability for the loan being converted into income.
The actual evidence did not align with the argument. The two sources of evidence at trial regarding Luai's 401k loan related damages were his own testimony and a single page document which appears to be a screenshot of some basic information regarding his loan. Luai testified he had not yet paid the claimed penalty or tax—even after approximately 19 months had elapsed since he had failed to repay the loan. Notwithstanding, Luai testified he would pay 20 percent of the $50,000 as a tax liability and that he was going to incur a penalty of 25 percent for taking money out of his 401k account early. Luai testified he did not pay any interest related to his 401k account and no other evidence was admitted regarding it. Defendants did not object to or present any contradicting evidence disputing Luai's testimony on these points.
In contrast to the business venture damages discussed above, the foundational assumptions needed to support Luai's claims regarding his 401k related damages was logically simpler than proving lost profits. This made the claims inherently less susceptible to being found speculative and more appropriate subjects of appellate deference to the trier of fact under substantial evidence review. That being said, there was still a material difference in foundational basis between Luai's claimed penalty and his estimated tax liability. Specifically, Luai testified that his opinion he was going to incur a 25 percent penalty was based upon a communication from his previous employer's "401k plan person." In contrast, with respect to his claimed tax liability, Luai expressly stated he was estimating the applicable tax rate and he did not identify any third party or objective source regarding that information. "Speculation or conjecture alone is not substantial evidence." (Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 651.)
We credit Luai's testimony and draw all reasonable inferences in favor of affirming the judgment (County of Riverside v. City of Murrieta, supra, 65 Cal.App.4th at p. 620), but reject speculation. (Atkins v. City of Los Angeles, supra, 8 Cal.App.5th at p. 738.) Accordingly, we find there was substantial evidence to support a damages award in an amount equal to the claimed 25 percent penalty on the $50,000, but not for interest nor the claimed tax liability. The evidence supported an award of $12,500 for damages related to Luai's 401k loan. C. Statutory Interpretation of Damages Awardable Under Section 3336
With respect to our de novo review of this appeal, we reject defendants' contention that the trial court committed legal error by awarding both general and special damages. Section 3336 provides: "The detriment caused by the wrongful conversion of personal property is presumed to be: [¶] First—The value of the property at the time of the conversion, with the interest from that time, or, an amount sufficient to indemnify the party injured for the loss which is the natural, reasonable and proximate result of the wrongful act complained of and which a proper degree of prudence on his part would not have averted; and [¶] Second—A fair compensation for the time and money properly expended in pursuit of the property."
Defendants contend the trial court committed error by misreading the "or" in the section as an "and" in awarding both types of damages. Although the precedents they cite to stand for other well established aspects of awarding "indemnity" damages under section 3336, defendants' discussion does not persuade us that the "or" in section 3336 must be read as a mutually exclusive disjunctive. For example, Myers v. Stephens, supra, 233 Cal.App.2d 104, 116, is primarily known for the proposition that a trial court's award of "indemnity" (special) damages under section 3336 should only be resorted to if awarding the presumptive "value of the property" (general) damages would be "manifestly unjust." Myers also stands for a well-established proposition that "indemnity" damages should be awarded only where special circumstances are pleaded and proven that "'it was reasonably forseeable [sic] to a prudent person, having regard for the accompanying circumstances, that injury or damage would likely result from his wrongful act.'" (Krueger v. Bank of America, supra, 145 Cal.App.3d at p. 215, quoting Myers, at pp. 119-120; Lueter v. State of California, supra, 94 Cal.App.4th at p. 1301.)
Defendants cite to Lueter v. State of California (2002) 94 Cal.App.4th 1285, Krueger v. Bank of America (1983) 145 Cal.App.3d 204, Myers, supra, 233 Cal.App.2d 104, and Betzer v. Olney (1936) 14 Cal.App.2d 53.
While section 3336's use of the word "or" is susceptible to defendants' proffered conclusion, it does not compel it. Indeed, rejecting defendants' restrictive interpretation, and instead applying a more flexible interpretation that would allow for case-by-case basis discretion, is more consistent with this state's general policy interest of making plaintiffs whole through tort damages. (Erlich v. Menezes (1999) 21 Cal.4th 543, 550.) We are not persuaded by defendants that special damages could not be awarded in addition to the value of the property as a matter of statutory interpretation. D. Challenge to Plaintiffs' Pleadings
Nor are we persuaded that the "or" in section 3336 would have to be read as an "and" in order for the trial court to award damages as it did.
The point can be illustrated by a hypothetical situation where a plaintiff's money in the sum of $1,000 is converted for only one day, but on a day when he had planned to use that money to purchase shares of a successful company. The following day, the company's shares increase in value by 20 percent, which means the plaintiff missed an opportunity to realize a capital gain of $200. If he successfully sues the party who converted his $1,000, under defendants' reading of section 3336, the plaintiff's choice of damages would be restricted to either $1,000 (plus a negligible amount of one day's interest) or $200, but under no circumstances both. In contrast, not reading the "or" in section 3336 as requiring mutual exclusivity would allow a trial court the discretion to award an equitable amount of $1,200 under the hypothetical circumstances, based upon a finding that the amount indemnified a "loss [that was] the natural, reasonable and proximate result of the wrongful act complained of and which a proper degree of prudence on his part would not have averted." (§ 3336.)
Next, defendants contend plaintiffs should have been precluded as a matter of law from being awarded special damages because plaintiffs failed to plead the basis for special damages pursuant to Myers, supra, 233 Cal.App.2d at pages 120-121, 123. Plaintiffs counterargue that at no time relevant to the case did defendants claim surprise or prejudice due to plaintiffs' claims for the special damages at issue in this appeal. Plaintiffs also counterargue that defendants waived argument on this issue by not raising it at the trial court level when they moved for a new trial. Particularly given that defendants do not respond to these counterarguments in their reply, we find the issue forfeited for failure to object at trial (see Little v. Amber Hotel Co. (2011) 202 Cal.App.4th 280, 303, fn. 13), which comports with the principle that theories not raised in the trial court cannot be asserted for the first time on appeal, as a matter of general fairness. (Nellie Gail Ranch Owners Assn. v. McMullin (2016) 4 Cal.App.5th 982, 997.) E. Conclusion
Finally, we reject defendants contention that based upon the insufficiency of the evidence in this case, this court should direct the trial court to enter judgment for defendants. Insofar as defendants are arguing that any portion of the judgment that is reversed for lack of substantial evidence must be reversed without remanding the case back to the trial court for relitigation, we agree. Plaintiffs "had [a] full and fair opportunity to present the case, and the evidence is insufficient as a matter of law to support" the specific damages discussed above. (Frank v. County of Los Angeles (2007) 149 Cal.App.4th 805, 833.) The judgment is to be modified to vacate only those portions of the damages award that were not supported by substantial evidence, as discussed above.
III
DISPOSITION
The judgment is modified to award $ 227,313.36 to plaintiffs. In all other respects, the judgment is affirmed. Defendants are entitled to costs in this appeal.
MOORE, ACTING P. J. WE CONCUR: THOMPSON, J. GOETHALS, J.