Opinion
C042513.
11-3-2003
E2 BROKERS, Plaintiff and Appellant, v. JACOB MICKALICH, Defendant and Respondent.
Plaintiff E2 Brokers (E2) appeals from an order modifying a preliminary injunction. We shall affirm.
This order is appealable pursuant to Code of Civil Procedure section 904.1, subd. (a)(6), which makes "an order granting . . . an injunction" appealable, and People v. Associated Oil Company (1931) 212 Cal. 76, at pages 77 through 78 (order granting preliminary injunction), because appellants contest the modified portions of the injunction. (See Chico Womens Health Center v. Scully (1989) 208 Cal.App.3d. 230, 251-252.)
FACTUAL AND PROCEDURAL BACKGROUND
This case stems from a bitter dispute between the officers and shareholders of E2, a Nevada corporation with its main office in California. Defendant Mickalich, a 50 percent shareholder in E2 who held himself out as the corporations CEO, accused E2 president Michael Kehoe, the other 50 percent shareholder, of misappropriating corporate funds. Kehoe denied the charges.
On April 28, 2001, Mickalich allegedly entered E2s office in El Dorado Hills, California, appropriated corporate property, money, and inventory, and threatened corporate employees. On May 2, 2001, E2 purported to terminate Mickalichs employment.
Mickalich denies that E2 or any of its officers has the authority to terminate him.
On May 3, 2001, E2 sued Mickalich for conversion, breach of fiduciary duty, and injunctive relief. E2 simultaneously applied for a temporary restraining order (TRO) and order to show cause (OSC) re preliminary injunction against Mickalich.
Mickalich eventually cross-complained against E2 for involuntary dissolution of the corporation and an accounting, and for breach of contract.
The trial court (Judge J. Richard Couzens presiding) issued a TRO on May 4, 2001, barring Mickalich from coming within 500 feet of E2s office or within 100 feet of any E2 employee, and ordering him not to threaten, harass, or intimidate E2 employees, to return all E2 property, and to refrain from contacting E2 customers and vendors, removing E2 money from any account, drawing from any E2 credit card or charge account, or selling E2 property or inventory. The court set a hearing on the OSC for May 25, 2001.
Also on May 4, 2001, the parties entered into a written stipulation and order which provides in part: "Plaintiff shall cooperate in an audit to be commenced by Defendant Mickalich as soon as possible, to be paid by Defendant, so long as the audit does not unreasonably interfere with Plaintiffs business. Defendant reserves the right to seek reimbursement of the costs of the audit."
After a hearing on May 29, 2001, the trial court (Judge Larry Gaddis presiding) issued an order dated June 15, 2001, establishing preliminary injunction against Mickalich on the terms stated in the orders of May 4 and May 11, 2001 (including the audit).
On July 9, 2002, E2 moved for an order modifying the preliminary injunction dated June 15, 2001, so as to delete the requirement that E2 cooperate in an audit. E2 alleged among other things that Mickalich had slept on his rights by failing to conduct the audit timely.
Mickalich opposed the motion, declaring he had been financially unable to retain an accountant until recently.
On July 31, 2002, Judge Gaddis denied E2s motion, ruling that E2 had not demonstrated a material change in circumstances warranting the modification. Judge Gaddis ordered the audit to commence no later than August 9, 2002.
On September 5, 2002, Mickalich applied ex parte for an OSC re contempt, alleging that E2 had failed to cooperate with the audit. According to Mickalich, E2 had refused to allow Mickalichs auditor sufficient time to complete the audit and had limited his access to documents, although the preliminary injunction did not authorize any such limits.
E2 opposed the motion for OSC re contempt. E2 asserted that the audit provision of the preliminary injunction was impermissibly vague, ambiguous, indefinite, and uncertain as to the nature and scope of the audit and the acts required of E2. Moreover, according to E2, if Mickalich had conducted the audit timely in May 2001, it would have been completed no later than the end of June 2001; therefore E2 had reasonably interpreted its scope to cover only documents through that date, and any other interpretation would improperly reward Mickalich for delaying the audit.
Judge Gaddis held a hearing on Mickalichs motion for OSC re contempt on September 17, 2002. Mickalichs counsel began his argument: "[W]ere more concerned about completing the audit as promptly as possible." When E2s counsel spoke to the contempt order Mickalich sought, Judge Gaddis replied: "Sure, but you know what I really heard is they want to finish the audit." Mickalichs counsel interjected: "Ill drop the contempt. I just want to get back in and do the audit." (Italics added.) Judge Gaddis heard out both counsel on the proper scope of the audit. He then took the matter under submission.
On September 20, 2002, in a minute order headed, "Ruling on Submitted Matter," Judge Gaddis ruled: "The OSC re: Contempt is denied. Defendant did not meet their [sic] burden of proof. The order of 5-4-01 by this Court, allowing an audit, is modified to allow the audit to include materials and books up [to]and through any current entries. Counsel for Defendant to prepare order and give to counsel for plaintiff for approval as to form." (Italics added.)
On October 8, 2002, Mickalich applied ex parte for the trial court to sign a proposed "Order Modify[ing] the Preliminary Injunction and Denying the OSC Re Contempt," which would modify the preliminary injunction to require the audit to occur Monday through Friday from 9:30 a.m. to 4:30 p.m. from day to day until completed, or alternatively for the court to grant an order shortening time within which to file, serve, and hear a motion so to modify the preliminary injunction. The trial court denied the ex parte application and directed Mickalich to file and serve a motion on October 9, 2002. Mickalich did so, requesting a hearing on October 22, 2002. E2 filed extensive written opposition.
E2 twice asserts erroneously that the trial court granted the order shortening time. In fact, the proposed order sought a hearing on October 8, 2002. The trial court crossed out that part of the proposed order and made an order requiring Mickalich to file a motion the following day, with subsequent briefing to follow.
On October 21, 2002, a "tentative ruling" was entered on the motion as follows:
"This order is issued by Judge Larry Gaddis. This is the final order of the court. No order after hearing is required. No further oral argument shall be permitted on this matter.
"Defendants Application for Order that Plaintiff be Held in Contempt for Failure to Allow Plaintiff to Complete the Audit is denied. Defendant did not meet his burden of proof, as the court finds the order regarding the audit was ambiguous, as the order did not include the dates of records for which the audit was to include [sic].
"Upon the courts own motion and to promote judicial economy, the 5/4/01 order by this Court allowing an audit is modified to allow the audit to include materials and books up to and including all current entries. The audit shall commence no later than October 28, 2002, and shall continue Monday through Friday, day-to-day until completed."
DISCUSSION
"In any action, the court may on notice modify or dissolve an injunction . . . upon a showing that there has been a material change in the facts upon which the injunction . . . was granted, that the law upon which the injunction . . . was granted has changed, or that the ends of justice would be served by the modification or dissolution of the injunction . . . ." (Code Civ. Proc., § 533; italics added.) E2 contends the trial court did not give the notice required by section 533 before entering its final order modifying the preliminary injunction. We disagree.
Undesignated statutory references are to the Code of Civil Procedure.
E2 divides its argument into two parts. It asserts first: "The Trial Court Committed Prejudicial Error By Issuing The October 21 Order Without Notice To E2 Or An Opportunity For E2 To Oppose The Preliminary Injunction Modifications." (Underscoring omitted.) It asserts next: "The Trial Court Committed Prejudicial Error By Refusing To Hear Oral Argument On The Modifications To The Preliminary Injunction." (Underscoring omitted.) Both parts of this argument lack merit.
Under its first argument heading, E2 fails to cite any relevant authority and misrepresents the record. E2 asserts without citing authority that section 533 requires a "noticed motion." Even if this were so, although the statute does not say so on its face, the record clearly shows that Mickalich made a written motion and E2 responded to it in writing.
Furthermore, E2 asserts that Judge Gaddiss order requires the audit to occur "Monday through Friday, 9:30 a.m.—4:30 p.m., from day to day until completed," then complains it was not given the chance to show that these conditions would unreasonably interfere with its business. (Italics added.) In fact, although Mickalich requested the "9:30 a.m. to 4:30 p.m." condition, Judge Gaddiss order does not include that condition. In any event, E2s opposition to Mickalichs motion clearly states: "Allowing the audit to take place at any time between 9:30 a.m. and 4:30 p.m., Monday through Friday, has the high potential of unreasonably interfering with [E2]s business," and supports that assertion with a declaration by E2s office manager. E2 had the chance to make its showing on this point and did so.
At oral argument, E2 complained that it was not given an opportunity to object to the temporal scope of the audit order—permitting an audit of "current" entries. This argument is not well taken. The record shows that the parties argued over the proper temporal scope of the audit order before Judge Gaddis at the hearing of September 17, 2002, on Mickalichs motion for OSC re contempt, and E2 made its objections to any audit extending beyond June 2001 extremely clear—as it had already done in its written opposition to Mickalichs motion.
As we have noted, at the September 17 hearing Mickalichs counsel indicated that his client was less concerned about getting a contempt order than about getting a full audit done as quickly as possible. Judge Gaddis then said to E2s counsel: "The real issue to me boils down to your position or your clients position on, you know, allowing the audit to proceed through the current time." (Italics added.) E2s counsel replied: "We dont want the audit to go beyond— [¶] . . . [¶] June 30th." Judge Gaddis asked: "Of this year?" Counsel replied: "Of last year." Counsel then explained his position at length: "May 4[, 2001,] he was supposed to start the audit. [¶] . . . [¶] Were saying if it took him almost 55 days to do that audit, he would have been done by June 30th. And certainly the fact that he absolutely slept on his rights for over a year, and it wasnt until April that [Mickalichs counsel] finally awoke Mr. Mickalich from his slumber that there was a request made to do the audit.
"Now, what Mr. Mickalich would like to do and what his counsel would like to do is to benefit from doing nothing, and we have a maximum [sic] jurisprudence that says that people who sleep on their rights dont get to take advantage of that. This is a very fundamental principle. So what were saying to Mr. Mickalich and what we have said in correspondence is you may audit the books and records up to the point of June 30th, 2001, pursuant to the existing May 4 order. . . . [I]f they had acted even remotely reasonably in connection with an allegation that they had to have this stuff so immediately that there was a temporary restraining order issued, we wouldnt be here 18 months later and they wouldnt be in a position of saying, oh, now we want that audit that we got on May 4 to include everything up to the present date. We dont think that is fair or appropriate or just or equitable . . . ." E2 could not have made its objections to an audit order covering current entries any clearer. It may not now be heard to say it was denied the chance to state its position as to the proper temporal scope of the audit order before Judge Gaddis ruled on the matter in his minute order of September 20, 2002. The final order of October 21, 2002, from which E2 appeals, did not change that ruling in that respect.
Thus E2s real complaint appears to be that Judge Gaddis issued his final order without holding oral argument on it beforehand or permitting oral argument afterward, which E2 characterizes as the court "act[ing] on its own motion." In other words, E2 asserts that section 533 requires not only a noticed motion but a hearing with oral argument on the motion. E2 is wrong.
First, section 533 says no such thing on its face. Rather, it simply says that the court may act to dissolve or modify a preliminary injunction "on notice." By contrast, section 527, which sets out the procedure for obtaining a temporary injunction in the first place, expressly provides for a hearing at numerous points. (§ 527, subds. (d)(2), (d)(3), (d)(4), (d)(5), (e), (f)(2).) By expressly requiring a hearing on an original application for temporary injunction, but not doing so on an application to modify or dissolve such an injunction, the Legislature showed its intent to differentiate between the two. When the Legislature uses a term in one statute but omits the term in another statute on a related subject, it is a good indication that the Legislature did not intend that term to be read into the second statute. (Medical Board v. Superior Court (2001) 88 Cal.App.4th 1001, 1015.)
Section 527 provides in full: "(a) A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor. No preliminary injunction shall be granted without notice to the opposing party.
"(b) A temporary restraining order or a preliminary injunction, or both, may be granted in a class action, in which one or more of the parties sues or defends for the benefit of numerous parties upon the same grounds as in other actions, whether or not the class has been certified.
"(c) No temporary restraining order shall be granted without notice to the opposing party, unless both of the following requirements are satisfied:
"(1) It appears from facts shown by affidavit or by the verified complaint that great or irreparable injury will result to the applicant before the matter can be heard on notice.
"(2) The applicant or the applicants attorney certifies one of the following to the court under oath:
"(A) That within a reasonable time prior to the application the applicant informed the opposing party or the opposing partys attorney at what time and where the application would be made.
"(B) That the applicant in good faith attempted but was unable to inform the opposing party and the opposing partys attorney, specifying the efforts made to contact them.
"(C) That for reasons specified the applicant should not be required to so inform the opposing party or the opposing partys attorney.
"(d) In case a temporary restraining order is granted without notice in the contingency specified in subdivision (c):
"(1) The matter shall be made returnable on an order requiring cause to be shown why a preliminary injunction should not be granted, on the earliest day that the business of the court will admit of, but not later than 15 days or, if good cause appears to the court, 22 days from the date the temporary restraining order is issued.
"(2) The party who obtained the temporary restraining order shall, within five days from the date the temporary restraining order is issued or two days prior to the hearing, whichever is earlier, serve on the opposing party a copy of the complaint if not previously served, the order to show cause stating the date, time, and place of the hearing, any affidavits to be used in the application, and a copy of the points and authorities in support of the application. The court may for good cause, on motion of the applicant or on its own motion, shorten the time required by this paragraph for service on the opposing party.
"(3) When the matter first comes up for hearing, if the party who obtained the temporary restraining order is not ready to proceed, or if the party has failed to effect service as required by paragraph (2), the court shall dissolve the temporary restraining order.
"(4) The opposing party is entitled to one continuance for a reasonable period of not less than 15 days or any shorter period requested by the opposing party, to enable the opposing party to meet the application for a preliminary injunction. If the opposing party obtains a continuance under this paragraph, the temporary restraining order shall remain in effect until the date of the continued hearing.
"(5) Upon the filing of an affidavit by the applicant that the opposing party could not be served within the time required by paragraph (2), the court may reissue any temporary restraining order previously issued. The reissued order shall be made returnable as provided by paragraph (1), with the time for hearing measured from the date of reissuance. No fee shall be charged for reissuing the order.
"(e) The opposing party may, in response to an order to show cause, present affidavits relating to the granting of the preliminary injunction, and if the affidavits are served on the applicant at least two days prior to the hearing, the applicant shall not be entitled to any continuance on account thereof. On the day the order is made returnable, the hearing shall take precedence over all other matters on the calendar of the day, except older matters of the same character, and matters to which special precedence may be given by law. When the cause is at issue it shall be set for trial at the earliest possible date and shall take precedence over all other cases, except older matters of the same character, and matters to which special precedence may be given by law.
"(f) Notwithstanding failure to satisfy the time requirements of this section, the court may nonetheless hear the order to show cause why a preliminary injunction should not be granted if the moving and supporting papers are served within the time required by Section 1005 and one of the following conditions is satisfied:
"(1) The order to show cause is issued without a temporary restraining order.
"(2) The order to show cause is issued with a temporary restraining order, but is either not set for hearing within the time required by paragraph (1) of subdivision (d), or the party who obtained the temporary restraining order fails to effect service within the time required by paragraph (2) of subdivision (d).
"(g) This section does not apply to an order issued under the Family Code.
"(h) As used in this section:
"(1) `Complaint means a complaint or a cross-complaint.
"(2) `Court means the court in which the action is pending." (Italics added.)
E2 bases much of its argument on section 527 and related rules of court, but ignores the rule of statutory construction we have cited.
Second, although E2 cites many cases recognizing the right to oral argument in other contexts, it cites none recognizing that right in this context. It asserts that the situation here involved a "critical pre-trial matter[]" of the kind where oral argument is available by right, but the case law it cites is inapposite.
In Titmas v. Superior Court (2001) 87 Cal.App.4th 738, a judge substituting in law and motion telephonically denied, without a hearing, a motion to quash a subpoena based on a claim of attorney-client privilege. (Id. at p. 741.) The appellate court, in reversing, pointed out that this raised a "critical pretrial matter of considerable significance to the parties" (id. at p. 744) because, once lost, the privilege cannot be regained, and the harm from improper disclosure of privileged material cannot be undone. (Ibid.) The court also noted that, though the statute on motions to quash does not expressly call for a hearing, the statutory scheme to which it belongs is replete with such requirements. (Id. at pp. 742-743.)
In TJX Companies, Inc. v. Superior Court (2001) 87 Cal.App.4th 747, the panel that decided Titmas v. Superior Court, supra, held that a temporarily sitting judge had erred by denying oral argument on a demurrer to a class action. (Id . at pp. 749-750, 755.) However, the rules of court on demurrer expressly require that a matter be "heard"; although the use of terms such as "heard" and "hearing" does not necessarily mean that an oral argument is required, the courts must construe the statutes to see if a contrary intention is indicated. (Id. at pp. 751-752; see also Medix Ambulance Service v. Superior Court (2002) 97 Cal.App.4th 109, 113-114 [demurrer].)
By contrast, in our case the only point at issue was the precise scheduling of an audit which had already been ordered. As noted, E2 had and used the opportunity to state its objections to Mickalichs specific requests. Unlike the judges temporarily filling in who made the orders in Titmas v. Superior Court, supra, 87 Cal.App.4th 738, and TJX Companies, Inc. v. Superior Court, supra, 87 Cal.App.4th 747, Judge Gaddis was thoroughly familiar with the issue and the parties positions, having considered written motions and heard oral argument more than once before on this very subject. And the controlling statute, section 533, does not refer in any way to oral argument or even generally to a "hearing."
E2 asserts the modification of the preliminary injunction sought by Mickalich involved "critical pre-trial matters of considerable significance to the parties" because "the October 21 Order changed the rights of the parties by substantially lengthening the period the audit was to cover to include the years 2001 and 2002 financial statements [sic] and their requirement that the audit occur Monday through Friday, 9:30 a.m. to 4:30 p.m. from day-to-day until completed." But the modification as to "the years 2001 and 2002" had already been made by the minute order of September 20, 2002. And as we have pointed out, the October 21 order did not require the audit to occur "9:30 a.m. to 4:30 p.m." In any event, E2 does not explain how any of these conditions "changed the rights of the parties." Finally, the fact that E2 opposed Mickalichs requests does not elevate this dispute to the level of a "critical pre-trial matter[] of considerable significance to the parties" requiring oral argument, because such a standard would mandate oral argument on every disputed question in law and motion.
Lastly, E2 asserts that Judge Gaddis failed to comply with rule 324(a) of the California Rules of Court, which sets out the procedure for trial court judges to issue tentative rulings in civil law and motion matters. (All further rules references are to the California Rules of Court.) E2 is wrong.
Rule 324(a) states:
"A trial court that offers a tentative ruling procedure in civil law and motion matters shall follow one of the following procedures:
"(1) [] The court shall make its tentative ruling available by telephone and also, at the option of the court, by any other method designated by the court, by no later than 3:00 p.m. the court day before the scheduled hearing. If the court desires oral argument, the tentative ruling shall so direct. The tentative ruling may also note any issues on which the court wishes the parties to provide further argument.If the court has not directed argument, oral argument shall be permitted only if a party notifies all other parties and the court by 4:00 p.m. on the court day prior to the hearing of the partys intention to appear . A party shall notify all other parties by telephone or in person. The court shall accept notice by telephone and, at its discretion, may also designate alternative methods by which a party may notify the court of the partys intention to appear. The tentative ruling shall become the ruling of the court if the court has not directed oral argument by its tentative ruling and notice of intent to appear has not been given.
"(2) [] The court shall make its tentative ruling available by telephone, and also, at the option of the court, by any other method designated by the court, by a specified time prior to the hearing. The tentative ruling may note any issues on which the court wishes the parties to provide further argument at the hearing. This procedure shall not require the parties to give notice of intent to appear, and the tentative ruling shall not automatically become the ruling of the court if such notice is not given. The tentative ruling, or such other ruling as the court may render, shall not become the final ruling of the court until the hearing." (Italics added.)
E2 asserts that Judge Gaddis chose the procedure specified in rule 324(a)(1), but violated that procedure because it allows for parties to give notice of intent to appear, thus requiring oral argument, even where the tentative order does not direct oral argument. However, nothing in rule 324(a)(1) requires a trial court to hear oral argument. On the contrary, the rule expressly leaves it up to the trial courts discretion whether to "direct" or "permit[]" argument. Moreover, where the court does not "desire [] argument," nothing in rule 324(a)(1) precludes it from ordering, as Judge Gaddis did, that argument will not be permitted.
In summary, E2 has not demonstrated any error in Judge Gaddiss issuance of the order appealed from. Thus we need not consider E2s claim of prejudice.
DISPOSITION
The judgment (order modifying preliminary injunction) is affirmed. Mickalich shall receive his costs on appeal.
We concur: MORRISON, J. HULL, J.