Opinion
D072078
06-01-2018
MUNISH K. BATRA, Plaintiff and Appellant, v. HOYT HART, Defendant and Respondent.
Gregg A. Johnson for Plaintiff and Appellant. Law Office of William R. Fuhrman and William R. Fuhrman for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 37-2015-00003423-CU-BC-NC) APPEAL from a judgment of the Superior Court of San Diego County, William S. Dato, Judge. Affirmed. Gregg A. Johnson for Plaintiff and Appellant. Law Office of William R. Fuhrman and William R. Fuhrman for Defendant and Respondent.
I
INTRODUCTION
Dr. Munish K. Batra appeals from a judgment in favor of Hoyt Hart on Batra's complaint for breach of three 2014 promissory notes and Hart's affirmative defense of setoff for usurious interest Hart paid on a 2010 promissory note. Batra contends we must reverse the judgment because the court failed to determine the amount due under the 2014 promissory notes and the determination was a necessary predicate to determining whether the interest Hart paid on the 2010 promissory note was usurious. Batra also contends we must reverse the judgment because the court's statement of decision was legally deficient in multiple respects.
We conclude the issue of Batra's damages for Hart's breach of the 2014 promissory notes was not before the court at trial because the parties stipulated the trial would proceed only as to equitable issues. We further conclude there were no deficiencies in the court's statement of decision requiring reversal of the judgment.
II
BACKGROUND
Batra is a plastic surgeon and Hart's wife was Batra's long-time patient. In 2010 Batra and Hart entered into a promissory note under which Batra loaned Hart $100,000. In exchange for the loan and to satisfy the unspecified balance due on Hart's wife's account with Batra, Hart agreed to pay Batra $120,000 in two installments of $60,000 each over the succeeding two months. Hart ultimately took over two years to repay the loan, which he did in multiple installments totaling $133,228.34.
The promissory note, which was dated October 12, 2010, specifically stated, "For value, defined as $100,000 cash loan and the currently due account of [Hart's wife], the receipt of which is hereby acknowledged, [Hart] hereby promises to pay [Batra] $120,000 in two installments of $60,000 each. The first installment shall be due and payable on or before November 30, 2010. The second installment shall be due and payable on or before December 31, 2010."
In his recitation of facts and arguments on appeal, Batra repeatedly characterizes the loan as indisputably being in the principal amount of $120,000. The language of the loan does not support this characterization and, instead, is vague as to the principal amount of the loan over and above $100,000. Consequently, we do not address any of Batra's arguments which assume the truth of this characterization.
In 2014 Batra and Hart entered into three additional promissory notes. Under the first note Batra loaned Hart $30,000, which Hart agreed to repay within six months plus interest of $5,000. Hart also agreed to pay $5,000 for services rendered to Hart's wife. Under the second note, Batra loaned Hart $20,000, which Hart agreed to repay in six months with interest of $3,333.33. Under the third note, Batra loaned Hart $25,000, which Hart agreed to repay in six months with interest of $4,166.66.
When Hart did not repay the 2014 promissory notes as agreed, Batra sued Hart for breach of the notes. As an affirmative defense, Hart alleged entitlement to a setoff under Code of Civil Procedure section 431.70 for usurious interest charged on the 2010 promissory note.
Hart initially sought a setoff of $24,701.68. By the time of trial, he had reduced the amount sought to $23,039.74.
On the day of trial, Hart paid Batra $65,680.92, representing the amount due on the three 2014 promissory notes with 10 percent annual interest less Hart's claimed setoff. The parties then stipulated to the matter proceeding as a bench trial solely on the remaining equitable issues (i.e., Hart's setoff defense and Batra's equitable estoppel cross-defense).
Only Hart's setoff defense is at issue in this appeal. --------
During the trial, Batra testified that $20,000 of the amount repaid under the 2010 promissory note was for the balance due on Hoyt's wife account with Batra. If this were true, the effective amount of the loan was $120,000 and Hart did not pay any excessive interest to satisfy the loan. Although Hart was willing to accept there was an outstanding balance on his wife's account at the time he signed the 2010 promissory note, Hart thought, based on remarks by Batra, the amount due was approximately $4,500. At the conclusion of the trial, the court tentatively found in Batra's favor on this point and continued the matter for the parties to meet and confer on the calculations to resolve any outstanding issues.
Hart subsequently moved to reopen his case-in-chief to introduce evidence of his wife's "Patient Financial History," which she obtained from Batra's office. Hart argued the evidence contradicted Batra's testimony and showed Hart's wife never had any outstanding amounts due to Batra for Batra's services. The court granted the motion over Batra's objection.
Batra subsequently testified he had instructed his staff to adjust Hart's wife's account and remove approximately $20,000 after Hart signed the 2010 promissory note. However, earlier versions of the Patient Financial History showed Batra made this adjustment approximately 10 months before Hart signed the promissory note. Batra also admitted charging Hart's wife's account for a $3,500 service without her approval. In addition, Hart's wife testified her account balance with Batra had never approached $20,000, in part because she received discounts on services in exchange for promoting his practice.
After receiving and considering the additional evidence and arguments from both parties, the court found the Patient Financial History raised numerous questions Batra was unable to answer. Consequently, the court stated it was "unable to rely on the accuracy or integrity of [Batra's] records, which are critical to his claim" and entered judgment in favor of Hart.
Batra requested a statement of decision. The court directed Hart to prepare and submit a proposed statement of decision, which Hart did. Batra objected to the proposed statement of decision. The court subsequently issued its own statement of decision.
In its statement, the court determined that the only disputed issue was whether the approximately $33,000 Hart paid over and above $100,000 to satisfy the 2010 promissory note was substantially principal (for unpaid services rendered to Hart's wife) or substantially interest. If the former, then the loan was not usurious. If the latter, then the loan was usurious. The court further determined that, while Hart had the burden of proving the promissory note was usurious, Batra had the burden of establishing the amount due on Hart's account. Since Batra failed to meet his burden, the court determined Hart was entitled to a judgment in his favor on Batra's breach of promissory note claims.
III
DISCUSSION
"In reviewing a judgment based upon a statement of decision following a bench trial, we review questions of law de novo. [Citation.] We apply a substantial evidence standard of review to the trial court's findings of fact. [Citation.] Under this deferential standard of review, findings of fact are liberally construed to support the judgment and we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings." (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.)
Batra properly acknowledges he may not challenge the sufficiency of the evidence to support the judgment because the record on appeal does not include a reporter's transcript of the trial court proceedings. "Where no reporter's transcript has been provided and no error is apparent on the face of the existing appellate record, the judgment must be conclusively presumed correct as to all evidentiary matters. To put it another way, it is presumed that the unreported trial testimony would demonstrate the absence of error. [Citation.] The effect of this rule is that an appellant who attacks a judgment but supplies no reporter's transcript will be precluded from raising an argument as to the sufficiency of the evidence." (Estate of Fain (1999) 75 Cal.App.4th 973, 992.) Instead, Batra contends we must reverse the judgment because the court's statement of decision omits or avoids explaining the factual and legal basis for the court's decision on numerous controverted issues.
A
First, Batra contends the statement of decision is deficient because the court failed to determine the amount of damages owed to Batra for breach of the 2014 promissory notes before determining whether the 2010 promissory note was usurious. However, after Hart presented Batra with a check for $65,680.92 and Batra accepted it, the parties stipulated the trial would proceed solely on equitable issues. Because damages is a legal issue (see Collier v. Merced Irrigation Dist. (1931) 213 Cal. 554, 562), the parties' stipulation effectively removed the damages issue from the court's consideration.
Even if the parties had not removed the damages issue from the court's consideration, the court did not need to decide the damages issue before deciding the setoff issue because the setoff issue was presented to the court in an all-or-nothing manner. Either Hart was entitled to a setoff in the amount he claimed, in which case his check for $65,680.92 satisfied the 2014 promissory notes, or he was not entitled to any setoff, in which case he owed Batra the $23,039.74 he claimed as a setoff and withheld from his repayment of the 2014 promissory notes. In other words, the amount of Batra's damages were impliedly conceded to be either $65,680.92, the amount Hart paid Batra before trial, or $88,720.66, the amount Hart paid Batra before trial plus the amount Hart claimed as a setoff.
B
Batra next contends the statement of decision was deficient because the court failed to determine Hart had established the essential elements of his usury claim. A " 'statement of decision is sufficient if it fairly discloses the court's determination as to the ultimate facts and material issues in the case.' [Citations.] 'When this rule is applied, the term "ultimate fact" generally refers to a core fact, such as an essential element of a claim.' [Citation.] 'Ultimate facts are distinguished from evidentiary facts and from legal conclusions.' [Citation.] Thus, a court is not expected to make findings with regard to 'detailed evidentiary facts or to make minute findings as to individual items of evidence.' " (Thompson v. Asimos, supra, 6 Cal.App.5th at p. 983.) The court's statement of decision on Hart's usury claim satisfies these requirements.
"The essential elements of usury are: (1) [t]he transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction." (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 798 (Ghirardo).) As to the first and third elements, the court found the transactions between the parties were loans and Hart obliged himself to repay the loans, subject to a claimed offset for usurious interest. Although Batra attempts to dispute the factual bases for the court's findings, he is precluded from doing so because of the absence of a reporter's transcript in the record. (Estate of Fain, supra, 75 Cal.App.4th at p. 992.)
As to the fourth element, the court found Batra had knowingly received approximately $33,000 in excess of the $100,000 he loaned Hart in 2010. Contrary to Batra's assertion, " 'the intent sufficient to support the judgment [of usury] does not require a conscious attempt, with knowledge of the law, to evade it. The conscious and voluntary taking of more than the legal rate of interest constitutes usury and the only intent necessary on the part of the lender is to take the amount of interest which he receives; if that amount is more than the law allows, the offense is complete.' " (Ghirardo, supra, 8 Cal.4th at p. 798.)
This leads to the second element and the crux of the parties' dispute: whether the amount Hart paid Batra under the 2010 promissory note included interest exceeding the statutory maximum. As to this element, the court found the question turned on whether the amount Hart paid over $100,000 was substantially interest or whether it included approximately $20,000 in principal for services provided by Batra to Hart's wife. If the former, then the loan was usurious. If the latter, then the loan was not usurious.
As Batra points out, "[a] transaction is rebuttably presumed not to be usurious" and "[t]he borrower bears the burden of proving the essential elements of a usurious transaction." (Ghirardo, supra, 8 Cal.4th at pp. 798-799.) To meet his burden as to the second element, Hart had to rebut Batra's initial testimony that the amount Hart paid to satisfy the 2010 promissory note included payment for approximately $20,000 of services to Hart's wife. (Evid. Code, § 550, subd. (b).) Hart met this burden by providing the Patient Financial History information obtained from Batra's office showing Hart's wife did not have a $20,000 account balance at the time the parties entered into the 2010 promissory note. The burden then shifted to Batra to refute Hart's evidence. (Id., § 550, subd. (a); see Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1668 [once a party with the burden of proof makes a prima facie case, the burden of going forward shifts to the opposing party, who must produce evidence refuting the prima facie case]; Sanchez v. Unemployment Ins. Appeals Bd. (1977) 20 Cal.3d 55, 71 [" 'Where the evidence necessary to establish a fact essential to a claim lies peculiarly within the knowledge and competence of one of the parties, that party has the burden of going forward with the evidence on the issue although it is not the party asserting the claim.' "].) Although Batra provided countervailing account histories and testimony, the court found Batra's evidence was not credible. Consequently, the court correctly determined Batra had not met his burden of establishing there was a substantial amount due on Hart's wife's account at the time of the 2010 promissory note.
Even if the court had misallocated the burden of proof, "[m]isallocation of the burden of proof in a bench trial is not reversible error per se but must be prejudicial to warrant reversal. [Citation.] Prejudice means ' "a reasonable probability that in the absence of the error, a result more favorable to [the appellant] would have been reached." ' [Citation.] A probability does not mean 'more likely than not' but 'a reasonable chance, more than an abstract possibility.' " (Navigators Specialty Ins. Co. v. Moorefield Construction, Inc. (2016) 6 Cal.App.5th 1258, 1287, italics omitted.) Here, the court's finding that Batra's testimony and account histories were unreliable precludes a reasonable probability of an outcome more favorable to Batra in the absence of the alleged misallocation. Given this conclusion and our other conclusions, we need not decide whether Batra forfeited any of his challenges to the statement of decision by failing to preserve them below.
IV
DISPOSITION
The judgment is affirmed. Respondent is awarded his appeal costs.
McCONNELL, P. J. WE CONCUR: HUFFMAN, J. GUERRERO, J.