Opinion
B200335Considered with B200887B203737
10-30-2008
JANE MERRIAM CODY, Petitioner and Respondent, v. DAYNA HESTER, Objector and Appellant.
Charles W. Hokanson for Objector and Appellant. Law Offices of David S. Karton and David S. Karton for Petitioner and Respondent.
Not to be Published
A third party witness appeals from orders imposing discovery sanctions based on her refusal to comply with deposition and document production subpoenas. The party in whose favor the court ordered sanctions separately appeals from the courts denial of an additional award of sanctions. We affirm.
BACKGROUND
Bruce Patrick McNall and respondent Jane Merriam Cody married in 1983, and in 1994 Cody filed an action for dissolution of marriage. In the same year McNalls creditors filed a petition for an involuntary Chapter 11 bankruptcy against McNall. During the bankruptcy proceedings Cody and McNall reached an agreement regarding Codys claims for support arrearages, future family support and division of community property. The bankruptcy court entered judgment on the parties stipulation in 1996, directing McNall to pay Cody (1) $250,000 per year for family support until January 2001, (2) $238,539 in family support arrearages, (3) $35,000 to resolve a community property dispute, and (4) $ 3,865,000, plus accruing interest at the rate of ten percent per annum. The judgment expressly stated that these orders for payment were "not dischargeable in this bankruptcy case or any other bankruptcy case by or against Debtor, Bruce Patrick McNall."
In January 2000 the family law court issued a judgment on reserved issues which incorporated the bankruptcy courts judgment. This part of the family law judgment stated: "Pursuant to judgment entered on November 14, 1996, in the United States Bankruptcy Court (Case No. LA94-028439-LF), [McNall] has been ordered to pay to [Cody] $35,000 for her community interest in furniture and $3,865,000 and interest thereon at the legal rate."
Apparently, McNall later filed for Chapter 7 bankruptcy protection. From McNalls testimony at his debtors examination in March 2003 Cody learned that (1) McNall was then employed by Aureus Ventures, (2) he received a salary of $52,000 a year plus bonuses, and (3) Aureus Ventures provided McNall an automobile and an expense account to pay for automobile, entertainment and other expenses. Cody also learned that Aureus Ventures paid McNalls live-in girlfriend, objector Dayna Hester, $8,000 a month. McNall testified Aureus Ventures paid Hester this money to pay for his living expenses. Robert Geringer, the sole shareholder, officer and board member of Aureus Ventures, testified, in contrast, that the company paid Hester $8,000 a month as advances on a business venture in which Hester was to develop a court reporting consulting and marketing firm.
By 2003 McNall had made no payments to Cody under the judgment. In June 2003 Cody obtained a writ of execution, and in July 2003 Cody served a wage garnishment order on Aureus Ventures. Aureus Ventures refused to honor the wage garnishment order, claiming that McNalls wages were already subject to an order with a higher priority.
In November 2003 the family law court granted Codys motion to join Aureus Ventures in the dissolution proceeding to determine whether it held assets belonging to McNall. Her complaint in joinder alleged causes of action against Aureus Ventures and McNall for (1) conversion, (2) breach of statutory duty, (3) an accounting, (4) imposition of a constructive trust, and (5) fraudulent conveyances allegedly to Hester and others.
Cody learned that McNall and Hester were living in a residence Hester had purchased in her name alone in May 2004 for nearly $ 1,500,000. In May 2005 Cody served a third-party deposition subpoena on Hester seeking her testimony and production of documents showing the source of Hesters funds to acquire the house. Hester refused to appear voluntarily. She sought a protective order to preclude her deposition entirely, or in the alternative, to preclude questions concerning her personal finances and the request to produce documents.
Commissioner Gordon denied Hesters request for a protective order and Cody took Hesters deposition in September 2005. Hester testified that she was a certified court reporter but that she had not worked for two years because she was then a full time student at U.C.L.A. Hester refused to answer certain questions concerning her finances and refused to produce certain documents pertaining to her purchase of the residence. When asked questions regarding her loan application for her mortgage from American Home Equity Corporation, Hester refused to answer and invoked the Fifth Amendment.
Cody subpoenaed Hesters loan documents from American Home Equity Corporation and Hester filed objections. On December 6, 2005 Cody filed a motion to compel production of these documents, which Hester opposed. Commissioner Gordon referred the matter to a discovery referee to resolve.
The discovery referee, Judge Arnold Gold, retired, filed a report with the court (1) rejecting Hesters numerous procedural challenges to Codys subpoena, (2) recommending the loan documents be released to Cody for inspection and copying, (3) suggesting that Cody pay the discovery referees charges, and (4) recommending Hester reimburse Cody the $7,000 in attorneys fees and $36.30 in costs that Cody had incurred prosecuting the motion to compel. In reviewing Hesters procedural maneuvers in opposing the subpoena, Judge Gold concluded that Hester had opposed Codys motion to compel "bothin bad faith andwithout substantial justification." (Original emphasis.)
Hester objected to the discovery referees report and on the scheduled hearing date moved ex parte to disqualify Commissioner Gordon. On the continued hearing date of April 28, 2006 Commissioner Gordon (1) denied Hesters disqualification motion, (2) ordered American Home Equity Corporation to deliver the subpoenaed documents to the court for review and copying by Cody and Hester, (3) directed Cody to pay the discovery referees charges of $3,400, and (4) directed Hester to reimburse Cody $7,036.30 in attorney fees and costs for opposing Codys motion to compel in bad faith and without substantial justification. The court expressly reserved jurisdiction to reconsider issues regarding (1) who should be ultimately responsible for the discovery referees fees and (2) the "ultimate amount and chargeability" of attorney fees to be awarded.
Hester filed a notice of appeal from the courts April 28, 2006 order directing her to pay Codys attorney fees and costs as sanctions (B200335). The court clerks office, however, misplaced the document and did not process it for approximately a year.
Cody served another subpoena for documents on Washington Mutual Bank which had since refinanced the American Home Equity Corporation loans on Hesters residence. Hester opposed Codys efforts to subpoena these financial documents and another discovery battle ensued. As with her American Home Equity Corporation loan application, Hester represented that during the past few years she had earned income of at least $27,500 per month, of which she earned at least $12,000 from court reporting.
In October 2006 Cody moved the court to revisit its earlier ruling and impose additional discovery sanctions of over $130,000 against Hester. Hester filed opposition and again objected to Commissioner Gordons authority to hear Codys motion for sanctions.
On May 14, 2007 the court issued its final order (1) denying Hesters challenge to its jurisdiction, (2) amending its earlier order awarding attorney fees as sanctions against Hester by requiring Hester to also reimburse Cody $3,400 for the discovery referees charges, and (3) denying Codys request for additional sanctions against Hester.
Hester appealed from the courts order directing her to reimburse Cody for the discovery referees charges (B200887). Cody separately filed a notice of appeal from the courts order denying her an additional award of sanctions against Hester (B203737).
DISCUSSION
Standard of Review
Issues concerning the courts subject matter jurisdiction are questions of law an appellate court reviews de novo. (Robbins v. Foothill Nissan (1994) 22 Cal.App.4th 1769, 1774; Lundahl v. Telford (2004) 116 Cal.App.4th 305, 312.) Orders imposing discovery sanctions are reviewed for abuse of discretion. (Britts v. Superior Court (2006) 145 Cal.App.4th 1112, 1123; Parker v. Wolters Kluwer U.S., Inc. (2007) 149 Cal.App.4th 285, 297.)
Interim Sanction Order of April 28, 2006—B200335
Hester contends the order requiring her to pay the discovery referees costs of $3,400 was invalid because the commissioners order of April 28, 2006 was a final order on the subject and not amenable to reconsideration absent timely motion. We disagree. The order by its express language was not final. Hester cites no authority prohibiting a court from making interim orders subject to change in the circumstances of this case and we know of none. Instead, Hester argues, that the court had no authority to amend the order because she had appealed the order and such appeal stayed the proceedings. The premise of her argument, that the order was final and appealable, however, is incorrect. To the extent the courts April 2006 order was ambiguous because it both directed the payment of $ 7,036.30 in attorney fees and costs, and expressly reserved jurisdiction to modify this sanction order, Hester has forfeited her right to claim the order was final and appealable by failing to alert the court to this potential ambiguity to permit it to clarify its order.
We thus treat Hesters appeal from the courts final order entered in May 2007 (B200887) as an appeal from the April 2006 order and consider her appeal on the merits.
California Rules of Court, rule 8.104(e)(2) provides that "[t]he reviewing court may treat a notice of appeal filed after the superior court has announced its intended ruling, but before it has rendered judgment, as filed immediately after entry of judgment."
Bankruptcy Court Jurisdiction
Hester contends the only order requiring McNall to pay Cody was made by the bankruptcy court and the family law court thus had no jurisdiction to enforce that order, including imposing sanctions on a witness whose records and testimony are sought in support of enforcement of that order. She acknowledges that the family court judgment referred to the bankruptcy order but argues that it merely acknowledged the bankruptcy court order, but because it did not make any independent order on the subject, no order subject to enforcement in the family court existed. We disagree.
Title 28 of the United States Code section 1334(b) specifically provides that the bankruptcy court does not have exclusive jurisdiction to enforce such orders. "[A] creditor with a debt listed as nondischargeable under section 523(a)(1), (3), (5) [domestic support order], (7), (8) or (9) may bring suit on its claim in any appropriate nonbankruptcy forum, even after the close of the prior bankruptcy proceeding." (In re Marriage of Henderson (1990) 225 Cal.App.3d 531, 534.)
In any case, even if we view the judgment for $3,900,000 not to be a "domestic support order," Hesters contention that the bankruptcy court had exclusive jurisdiction is still incorrect. 28 United States Code, section 1334(b) provides that "(t)he district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11." (Italics added.) The court in In re McCowan (Bankr. 9th Cir. 2003) 296 B.R. 1 acknowledged that bankruptcy courts do not have exclusive jurisdiction to enforce bankruptcy judgments although they do retain jurisdiction to enforce them. (Id. at p. 5; see also, In re Bass (5th Cir. 1999) 171 F.3d 1016, 1025.)
Nor has Hester established that Codys action is strictly one to enforce either the family law or bankruptcy judgment. The record reflects Codys current action, as it pertains to Hester, is one to set aside fraudulent conveyances—a state law remedy available to creditors, even in the absence of a judgment, over which the state court necessarily has jurisdiction. (See Civ. Code, § 3439.07, subd. (a)(1) [authorizing a creditor to seek "avoidance" of a "transfer"]; Weisenburg v. Cragholm (1971) 5 Cal.3d 892, 896 ["the right to have a conveyance set aside is included under certain conditions, and it is no longer necessary that a creditor reduce his claim to judgment before seeking the benefit of the remedy"]; see also, Brenelli Amedeo, S.P.A. v. Bakara Furniture, Inc. (1994) 29 Cal.App.4th 1828, 1842-1845 [judgment creditor could in state court set aside fraudulent conveyances of assets abandoned by the bankruptcy trustee].) In this case, Cody filed her complaint in joinder against Aureus Ventures, alleging it had fraudulently conveyed to Hester assets McNall had accrued post-bankruptcy from Aureus Ventures. These allegations made this a state law action which the state court had jurisdiction to determine.
Hester contends Cody was not entitled to a deposition subpoena directing American Home Equity Corporation to produce records because deposition subpoenas are not available to a creditor seeking to enforce a judgment. (Citing Code Civ. Proc., § 2016.070 [civil discovery act when enforcing a judgment applies only to the extent specified in the enforcement of judgments law §§ 708.010 et seq.]; § 708.120 [person believed to hold property in which the debtor has an interest may be ordered to appear for examination, but this section does not authorize a deposition subpoena for the third partys business records].) The premise underlying Hesters argument is flawed. It is based on the assumption that Codys action is a post-judgment proceeding to enforce the judgment against McNall brought under the enforcement of judgments law. As the record reflects, Codys action is instead a separate civil action to avoid fraudulent transfers of McNalls assets Aureus Ventures, as McNalls employer, allegedly made to Hester. As such, it is a regular civil action to which the regular civil discovery act applies. (Code Civ. Proc., § 2016.010 et seq.)
Commissioner Gordons Authority to Rule on Codys Sanction Motions
Cody contends her withdrawal of the stipulation to Commission Gordon before he commenced the hearing in Codys motion for sanctions, caused him to lose jurisdiction to act on the motion.
In support of her position she claims that she was a "party litigant," and if not a "party litigant," then a "real party in interest," whose express consent to the temporary judge was required to invest him with jurisdiction pursuant to Article VI, section 21 of the California Constitution. We disagree, however, that she was either a "party litigant" or a "real party in interest." Indeed, Hester has cited no decision, and we know of none, which holds a third party witness is either a "party litigant" or a "real party in interest" whose consent is necessary to invest jurisdiction in a temporary judge. Thus, courts have held that third parties may not challenge a temporary judge under Code of Civil Procedure section 170.6 because such challenges are limited to "parties." (See Code Civ. Proc., § 170.6, subd. (a)(2); Avelar v. Superior Court (1992) 7 Cal.App.4th 1270, 1277 ["It is apparent that a nonparty witness under subpena has no right to exercise a peremptory challenge under section 170.6," italics added]; Sears, Roebuck and Co. v. National Union Fire Ins. Co. (2005) 131 Cal.App.4th 1342, 1350, fn. 4 ["We have no problem with preventing nonparties and their lawyers from peremptorily challenging bench officers presiding over ongoing litigation when those nonparties are brought in as witnesses or seek relief from discovery procedures aimed at them. Nor do we believe that a nonparty witness could challenge a judge or discovery referee simply because a party sought monetary sanctions against that witness for discovery abuse"].)
Article VI, section 21 of the California Constitution provides that "[o]n stipulation of the parties litigant the court may order a cause to be tried by a temporary judge who is a member of the State Bar, sworn and empowered to act until final determination of the cause." (See Sarracino v. Superior Court (1974) 13 Cal.3d 1, 6 [under this constitutional provision "a commissioner cannot act as a temporary judge except `on stipulation of the parties litigant"].)
In support of her contention that she was a "party litigant" whose stipulation was necessary Hester relies on the decision in In re Plotkin (1976) 54 Cal.App.3d 1014. The Plotkin decision is inapposite because the person cited for contempt is necessarily a party to the contempt proceeding. (Id. at pp. 1016-1017.) Hesters other cited authority also does not apply. In re Kents Estate (1936) 6 Cal.2d 154 concerned named parties to a probate action who had a direct financial interest in the probate estate. The Supreme Court narrowed the definition of "party litigant," and held that although all the estates creditors, heirs and devisees were named in the accounts and had a personal interest in the estate, only those creditors, heirs and devisees who had actually appeared in the action could be considered "parties litigant" with the right to challenge a temporary judge. (Id. at p. 162 ["`parties litigant means the parties who are taking part in the litigation,—those who have appeared therein"].) Toby v. Superior Court (1935) 8 Cal.App.2d 32 similarly involved beneficiaries in a probate matter and held that because the distributees under the will were the real parties in interest in the probate action the orders settling the account and making the final distribution were void because the beneficiaries had not consented to the appointment of the temporary judge. (Id. at pp. 34-35.) These decisions do not assist Hester because she is neither a named party to Codys civil action to void fraudulent conveyances, nor does she have a direct interest in the outcome of the case as did the beneficiaries and creditors in the probate cases she cites.
Notice to Consumer
Hester contends the court erred in granting Codys motion to compel the production of loan documents from American Home Equity Corporation because Cody failed to comply with the statutory requirements for providing "notice to the consumer" that the subpoena sought Hesters personal records. We disagree.
Code of Civil Procedure section 2020.410 provides in relevant part, that a deposition subpoena for business records may be served on a third party witness provided the deposition subpoena is executed in compliance with Code of Civil Procedure section 1985.3 for providing notice to a consumer when the subpoena seeks personal records. (Code Civ. Proc., § 2020.410, subd. (d).)
Code of Civil Procedure section 1985.3 defines "personal records" as including "documents" "pertaining to a consumer" held by a financial institution "authorized by this state to make or arrange loans that are secured by real property". (Code Civ. Proc., § 1985.3, subd. (a)(1).) Notice of the subpoena duces tecum for the production of personal records and other documents, must be served on "the consumer personally" if the person is not a party to the action. (Code Civ. Proc., § 1985.3, subd. (b)(1).) A nonparty witness whose records are sought may file "a written objection that cites the specific grounds on which production of the personal records should be prohibited." (Code Civ. Proc., § 1985.3, subd. (g).) Failure to comply with the requirements of Code of Civil Procedure section 1985.3 provides a sufficient basis for the witness to refuse to produce the records sought by the subpoena. (Code Civ. Proc., § 1985.3, subd. (k).)
Cody did not strictly comply with the statutory requirements in seeking Hesters personal records from American Home Equity Corporation. She served both McNall and Aureus Ventures with (1) the notice of deposition, (2) a "notice to consumer" under Code of Civil Procedure section 1985.3, (3) a copy of a deposition subpoena for production of business records, and (4) a certificate of compliance with Code of Civil Procedure section 1985.3. Cody served the same group of documents on Hesters counsel, but not on Hester personally.
Hester objected in writing to the record request without mentioning the specific ground, namely, that Cody had not provided her personal notice. Thereafter, the parties counsel exchanged several letters. Cody requested the specific grounds of Hesters objections. In response, Hesters counsel directed Cody to review the "applicable statutes," but did not mention Code of Civil Procedure section 1985.3 nor complain about the lack of personal notice. The court adopted the discovery referees finding that, although notice to Hester did not satisfy the statutory requirements, Hester had forfeited her right to claim such error as grounds to reverse the sanction order where she similarly did not comply with Code of Civil Procedure section 1985.3, subdivision (g) by notifying Cody of the "specific grounds" of her objection in a timely fashion to enable Cody to rectify the notice error. We find no abuse of discretion.
Hester does not challenge the merits of the courts orders imposing attorney fees and costs against her as sanctions.
Codys Appeal of the May 14, 2007 Order Denying Additional Sanctions—B203737
Cody contends the trial court erred in failing to award her additional attorney fees as sanctions for Hesters continued discovery abuses. The court denied Cody additional attorney fees, in part, because Cody had failed to provide Hester adequate notice that her motion sought additional discovery sanctions. Cody contends she cited the applicable statutes within the body of her memorandum of points and authorities in support of her motion for sanctions, and that this was sufficient notice. We disagree.
Codys notice of motion for attorneys fees did not specify the statutory authority for imposing discovery sanctions against third-party witness Hester. Her notice of motion did not cite Code of Civil Procedure section 1987.2, governing awards of attorney fees and costs against a third party when the court finds a motion for discovery was either made or opposed in bad faith or without substantial justification. Nor did Codys notice of motion cite to specific statutes describing the discovery methods which Hester allegedly abused. Indeed, and contrary to Codys argument, she did not invoke any statutory authority within the body of her memorandum of points and authorities at all to justify her request for additional sanctions against Hester. It was not until the conclusion of her memorandum that Cody cited to Code of Civil Procedure section 2023.010 (describing types of discovery abuses), and made a general reference to Code of Civil Procedure section 2023.030 (to request monetary sanctions). General citations to these discovery statutes in the conclusion of her memorandum in support of her motion for sanctions was insufficient notice to justify her request for sanctions. (Compare Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1289 [defendants had ample notice plaintiff sought a terminating sanction against them from the plaintiffs notices before and during trial]; Mattco Forge, Inc. v. Arthur Young & Co. (1990) 223 Cal.App.3d 1429, 1435 [specific references to the applicable statutes in both the title of the document and in the body of the notice of motion constituted adequate notice the plaintiffs motion sought sanctions for discovery abuses].)
Code of Civil Procedure section 2023.030 specifies sanctions for discovery abuses are only permissible "to the extent authorized by the chapter governing any particular discovery method or any other provision of this title, . . ., after notice, to any affected party, person, or attorney, and after the opportunity for hearing, . . . " The notice must specify the particular discovery method abused which in turn controls the particular sanctions available for abuse of that discovery method. (See Code Civ. Proc., § 2023.040 [the notice of motion must specify the sanction sought]; London v. Dri-Honing Corp. (2004) 117 Cal.App.4th 999, 1006 [explaining the interplay of the statutes governing discovery and available sanctions for discovery abuses].) A general citation in only the conclusion of the memorandum, and not in the notice of motion, did not satisfy the statutory requirements of providing notice which discovery methods Hester allegedly abused to warrant sanctions. In these circumstances, it was within the courts discretion to find that, absent proper notice, sanctions could not be imposed.
Further, Cody did not seek the courts assistance to compel Hester to answer questions at deposition, or to produce the requested documents at her deposition or from Washington Mutual Bank. Because Cody chose not to invoke the courts authority to secure the discovery she sought, the court could reasonably question whether Hesters conduct during the discovery proceedings, of which it had no direct knowledge, was as egregious and sanctionable as Cody represented.
These are sufficient bases supporting the courts exercise of discretion to deny Cody additional attorney fees as sanctions. (Reedy v. Bussell, supra, 148 Cal.App.4th 1272, 1293 [to justify reversal the courts order must constitute a manifest abuse of discretion and exceed the bounds of reason].)
DISPOSITION
The orders are affirmed. Each side to bear its own costs on appeal.
We concur:
MALLANO, P.J.
WEISBERG, J.