Opinion
D068768
01-30-2017
HISTORIC BEAUMANOR APARTMENTS, LLC et al., Plaintiffs and Appellants, v. JOSEPH SPENCER, Defendant and Appellant. JOSEPH SPENCER, Plaintiff and Appellant, v. HISTORIC BEAUMANOR APARTMENTS, LLC et al., Defendants and Appellants.
Business Law Group, Lowell Robert Fuselier, Bart Blechschmidt and Joseph A. Lara for Plaintiffs and Appellants and for Defendants and Appellants. Miltner & Menck, William L. Miltner and Autumn S. Frye for Defendant and Appellant and for Plaintiff and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 37-2013-00078794-CU-NP-CTL) (Super. Ct. No. 37-2013-00079395-CU-BC-CTL) APPEALS from a judgment and orders on posttrial motions of the Superior Court of San Diego County, John S. Meyer, Judge. Order granting new trial reversed; judgment affirmed. Business Law Group, Lowell Robert Fuselier, Bart Blechschmidt and Joseph A. Lara for Plaintiffs and Appellants and for Defendants and Appellants. Miltner & Menck, William L. Miltner and Autumn S. Frye for Defendant and Appellant and for Plaintiff and Appellant.
Historic Beaumanor Apartments, LLC (Beaumanor) sued Joseph Spencer, primarily alleging Spencer obtained his interest in Beaumanor by fraud. Beaumanor sought $81,281 in damages, consisting of distributions it paid Spencer before discovering his alleged misconduct.
In a separate action, Spencer sued Beaumanor and its shareholders, alleging they wrongfully converted his interest in Beaumanor. Spencer did not seek money damages. He sought equitable relief—a judicial declaration that he had an ownership interest in Beaumanor. The two cases were consolidated.
When legal and equitable claims are asserted in a single lawsuit, the order of trial has great significance because the first fact finder may bind the second when determining factual issues common to the equitable and legal claims. (Hoopes v. Dolan (2008) 168 Cal.App.4th 146, 156 (Hoopes).) "Where legal claims are first tried by a jury and equitable claims later tried by a judge, the trial court must follow the jury's factual determinations on common issues of fact." (Id. at p. 158.)
During trial, neither the lawyers nor the trial court was aware of Hoopes, supra, 168 Cal.App.4th 146. Beaumanor's legal claims were tried first to a jury, with the court thinking it was free to disagree with the jury's "advisory" verdict in later deciding Spencer's declaratory relief cause of action.
The jury returned special verdicts finding Spencer committed fraud and breach of fiduciary duty. The jury rejected all of Spencer's claims, determining Beaumanor and its shareholders did not convert his interest in Beaumanor. In a separate "advisory" question, the jury found Spencer's interest in Beaumanor was not wrongfully taken. However, the jury awarded Beaumanor only $1 in damages.
Immediately after discharging the jury, the court stated, "[I]t's compelling. . . . The jury didn't like what Mr. Spencer did." But later, the court stated it disagreed with the verdict and intended to award Spencer a 13.4 percent interest in Beaumanor on his declaratory relief cause of action.
After the parties discovered and briefed Hoopes, supra, 168 Cal.App.4th 146, the court reversed course, refused to sign a proposed statement of decision awarding Spencer 13.4 percent interest in Beaumanor, instructed counsel to prepare a judgment mirroring the verdict, and invited Spencer's attorney to file a motion for new trial.
Spencer moved for a new trial, asserting (1) the judgment failed to resolve Spencer's equitable claims, constituting both an irregularity in the proceedings and an error in law; and (2) the evidence was insufficient to support the verdict. Spencer also moved for judgment notwithstanding the verdict (JNOV), asserting the judgment is not supported by substantial evidence.
Spencer's motion for new trial did not assert the $1 verdict was the result of jury misconduct; i.e., a compromise verdict. Beaumanor did not file a motion for new trial. Accordingly, whether a new trial should have been granted because the verdict was an improper compromise is not before us, and we express no opinion on that issue.
Beaumanor also moved for JNOV, asserting the undisputed evidence established its damages were $81,281.
The court granted Spencer's motion for new trial on the grounds of (1) "insufficient evidence to support the verdict"; and (2) "error in law" in having the legal claims tried first, before the court decided Spencer's equitable claim for declaratory relief. The court also stated the special verdict forms were improperly "cobbled together, confusing, and asked the jury to determine questions of law and equity." The court denied both JNOV motions.
Beaumanor appeals from the order granting a new trial, primarily asserting (1) the court's specification of reasons for granting a new trial on the ground of insufficiency of the evidence is legally inadequate, and (2) there was no error in law that Spencer objected to during trial. Beaumanor also contends the court erroneously denied its JNOV motion.
Spencer has filed a protective cross-appeal, asserting the court improperly denied his JNOV motion.
As explained, post, we conclude the order granting the new trial must be reversed because (1) the court's three-sentence specification of reasons for granting a new trial based on insufficiency of the evidence is legally inadequate; and (2) submitting the legal claims to the jury before the court decided Spencer's equitable claim is not an error in law and, in any event, Spencer never asked the court to decide the equitable claim first. We also determine the court correctly denied both JNOV motions. Accordingly, the judgment is reinstated.
FACTUAL AND PROCEDURAL BACKGROUND
The facts are recited in the light most favorable to the judgment, resolving conflicts in Beaumanor's favor and giving Beaumanor the benefit of all reasonable inferences supporting the jury's verdict, which is the standard of review applicable to Spencer's cross-appeal. (McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 299.) However, where the evidence conflicts on material points, it is noted to give context to the court's order granting a new trial on the grounds of insufficient evidence.
A. Celtic Arms, LLC
In April 2007 Catherine Herrick and her then-husband, Spencer, formed The Celtic Arms, LLC (Celtic), which was in the business of purchasing and managing real estate. At inception, Herrick funded Celtic by making a $746,000 capital contribution. Spencer did not contribute any capital, but initially was given a 50 percent interest in Celtic.
In contrast, Spencer testified Herrick did not contribute cash, but rather that an "unrelated entity" made loans. However, Celtic's accountant contradicted Spencer's testimony.
Herrick hired a lawyer to draft Celtic's operating agreement. At the time, she and Spencer had been separated for the first of what would be six marital separations over the course of their marriage. Herrick described their marriage as "tumultuous" and testified she wanted "to make sure" her children from a previous marriage were "protected." She testified her lawyer "put language in [the Celtic operating agreement] so I wouldn't be screwed over, if things went south in the marriage."
The court sustained a late objection to this testimony on relevancy grounds; however, there was no motion to strike. In any event, this evidence was relevant because it explained why the Celtic operating agreement reduced Spencer's initial 50 percent interest to zero, a key issue in the case.
Paragraph 1.27 of the Celtic operating agreement was one of those provisions. It provides that each member's interest would be adjusted annually "in accordance with the relative proportions of the Capital Accounts of the Members . . . ." Thus, to maintain an interest in Celtic, Spencer was required to contribute capital.
Spencer never made a capital contribution to Celtic. Schedule K-1 tax documents issued by Celtic from 2007 through 2010 show Herrick contributed 100 percent of the capital—and, conversely, during that same period Spencer contributed zero.
B. Beaumanor Is Formed; $900,000 Loan to and by Celtic
In 2010 Herrick's father, Leon Herrick (Leon), was in financial trouble, had filed bankruptcy, and was battling cancer. Leon had personally guaranteed a $1.3 million loan, now due and held by Western Funding, and he lacked sufficient assets to pay it.
Because Herrick and her father have the same surname, for clarity we refer to Leon Herrick as Leon.
Leon asked Herrick, his daughter, for help. Leon owned the Historic Beaumanor Apartments, a building in the Gaslamp area in San Diego containing 52 apartments and ground floor retail space, worth approximately $5.5 million.
To raise cash to pay Leon's $1.3 million debt, Herrick and Spencer formed a limited liability company, Beaumanor, to take title to that building. In exchange for a quitclaim deed, Beaumanor paid Leon $400,000 cash and assumed the outstanding $4.93 million first trust deed. The $400,000 comprised the initial capital contributions by Beaumeanor's members, which included not only Herrick and Spencer, but also Sammad Attisha, Daniel Stone, and later Vickie Stone.
Herrick contributed $100,000 of the $400,000. Spencer's claim to an interest in Beaumanor from that $100,000 was settled before trial.
This left a shortfall of $900,000 needed to pay Western Funding. The $900,000 was obtained in two steps.
First, Celtic borrowed $900,000 from a hard money lender, called Par Michel, LLC, at 14 percent interest, payable in one year (hereafter the Par Michel Note). The Par Michel Note was secured by a second deed of trust on Celtic's main asset, an apartment building called the Celtic Arms, plus personal guarantees by Herrick and Spencer.
Second, Celtic (along with SDHP IX, LLC, an entity wholly owned by Herrick), loaned $900,000 to Leon under a promissory note (hereafter the Leon Herrick Note) bearing payment terms nearly identical to the Par Michel note.
At trial, Spencer asserted this $900,000 loan from Celtic to Leon was part of the consideration for Leon's quitclaim deed of the Historic Beaumanor Apartments to Beaumanor; however, Herrick testified that loan was not consideration for the quitclaim deed.
Together with the $400,000 cash contributed by investors in Beaumanor, Leon now had $1.3 million, which he paid to Western Funding.
Outside the jury's presence, the court asked why Leon did not simply borrow the $900,000 himself. The court stated, "I don't understand note two, which seems to come from Leon sort of." Beaumanor's lawyer explained that Par Michel, LLC, would not loan to Leon, who was in bankruptcy, "so Celtic had to take the loan and then they turned around and would loan money to Leon." The court remarked, "I guess I get it." Days later, the court was still unclear about the relationship between the Par Michel Note and the Leon Herrick Note.
When Leon died in May 2011, he had repaid Celtic about $219,000 on the Leon Herrick Note, reducing the outstanding balance to approximately $681,000.
C. Celtic Is Dissolved and Allocates $179,081 to Spencer
The Par Michel Note was due in October 2011. Celtic did not have the cash to pay it. Celtic sold the Celtic Arms Apartments, wound up its business, and used the proceeds to pay off the Par Michel Note.
For tax year 2011, Celtic allocated $179,081 in profit to Spencer. Spencer testified this was a "taxable event." It was unclear, however, from his testimony whether he actually paid taxes on that paper distribution. Asked, "Did you pay tax on the 179,000?", Spencer testified, "I had to report it on my taxes, yes, sir."
Spencer's lawyer-drafted declaration, received in evidence, states, "I paid taxes on the $179,801 profit distribution from Celtic Arms."
D. Herrick Is Diagnosed With Cancer—Spencer Takes Over Beaumanor
When these events were happening in late 2010, Herrick was diagnosed with breast cancer, which required her to undergo a mastectomy. Physicians told her and Spencer she had a 55 percent chance of surviving six months to a year. With Herrick ill, Spencer managed Beaumanor, worked with the accountants, and communicated with the other investors.
E. Spencer Transfers the Leon Herrick Note to Beaumanor
After selling the Celtic Arms, Celtic still had the Leon Herrick Note as an asset. Leon had paid down that loan to $681,000, and Herrick expected Leon's estate to ultimately pay the loan in full.
Spencer instructed accountants to transfer the Leon Herrick Note from Celtic to Beaumanor, booking it as a $900,000 capital contribution in Beaumanor by Spencer and Herrick. Although "concerned" the note was only worth $681,000, the accountants nevertheless did as Spencer instructed. As a result, Spencer and Herrick each received a 32.1 percent interest in Beaumanor.
To transfer the Leon Herrick Note and obtain his interest in Beaumanor, Spencer executed a document entitled "Action By Manager." It states there is "addition of [c]apital and adjustment of [c]apital [a]ccounts" of "Joseph or Cathy Spencer JTWROS" in the amount of $900,000. Spencer testified "JTWROS" means joint tenancy with rights of survivorship. He admitted that he and Herrick held no other property in this manner. On a line entitled, "Joseph and Cathy Spencer JTWROS," Spencer signed "C. Spencer"— indicating Cathy Herrick-Spencer signed the document. But Spencer admitted Herrick did not sign—he did.
Spencer testified Herrick authorized him to conduct this transaction as a joint tenancy. But Herrick contradicted that evidence, testifying she knew nothing about this transaction at the time.
Later, when Herrick learned what Spencer did, she was outraged that, expecting her to die in a few months, Spencer tried to create a $900,000 joint tenancy interest in Beaumanor. Herrick testified she and Spencer did not hold any community property. In fact, she was never willing to have any of her investments with him held in joint tenancy. Herrick explained why: "This was a second marriage for me and a fifth for [Spencer] . . . so I need to protect my children from a prior marriage . . . ."
Without Spencer's attorney stating any grounds for objection, the court nevertheless granted his motion to strike this testimony and then, on its own, the court sanitized it, telling the jury, "My understanding is that the parties agreed that their property would be separate property and that's the end of that."
In October 2011 Spencer executed another joint tenancy document, this one called "Action By Unanimous Consent." There, Beaumanor's members, including Herrick, consented to the adjustment of Herrick's and Spencer's capital accounts based on a $900,000 capital contribution, the Leon Herrick Note. On a line stating, "Joseph and Cathy Spencer JTWROS," Spencer again signed as: "C. Spencer." At trial, Spencer again admitted this signature was his, not Herrick's. Herrick testified she knew nothing of this transaction when Spencer made it. However, the evidence on this issue was sharply conflicting.
Spencer testified he created these joint tenancy documents on instructions from attorney Robert Fuselier, who at that time was representing Beaumanor in probate litigation brought by Leon's widow, Herrick's stepmother. Spencer testified Fuselier directed him to create the joint tenancy documents in an effort to defeat Leon's widow's claim to Leon's interest in Beaumanor.
Outside the jury's presence, Fuselier vehemently denied Spencer's assertions, stated the court erred in allowing Spencer to waive Beaumanor's attorney-client privilege, and said he would have to testify to contradict Spencer's testimony. Ultimately, however, Fuselier chose to not testify.
In its brief, Beaumanor concedes that any error in allowing Spencer to waive Beaumanor's attorney-client privilege was harmless since, despite Spencer's testimony, the jury rejected Spencer's claims. Therefore, we do not address this issue and express no opinion on whether the court properly allowed Spencer to waive Beaumanor's attorney-client privilege.
F. Herrick Survives Cancer, but the Marriage Ends, and the Books Are Audited
In April 2013 Herrick learned that Spencer had been dating another woman for several months. An audit of Spencer's financial dealings with Beaumanor led to discovery of certain "irregularities," and Beaumanor removed Spencer as its manager.
Before trial, the parties settled claims regarding these alleged irregularities, and therefore the jury heard no details about them.
As part of the audit, accountants acknowledged the Leon Herrick Note was not worth $900,000 as Spencer had claimed—Leon had paid that note down to $681,237. Accordingly, based on a $681,237 instead of a $900,000 capital contribution, Spencer's interest in Beaumanor was reduced to 13.4 percent.
Later, accountants reviewed Celtic's operating agreement and, in particular, paragraph 1.27. Because Spencer had never made a capital contribution to Celtic, under paragraph 1.27 his capital account was zero from 2008 through 2011 when Celtic was dissolved.
Accordingly, the accountants concluded that in 2011 when Spencer caused the Leon Herrick Note to be transferred from Celtic to Beaumanor, Spencer actually had no interest in that note—because Spencer had zero interest in Celtic.
As a result of that analysis, Beaumanor completely voided Spencer's interest in Beaumanor. Before doing so, Beaumanor had distributed $81,281 in dividends to Spencer based on his claimed $900,000 capital contribution.
Celtic's accountant testified the amount was $81,281. However, he apparently misspoke, transposing the numbers, because the exhibit the account authenticated has the amount as $82,821. The parties do not discuss this discrepancy, and therefore we also ignore it.
The audit had one other important impact. In 2011, when Celtic was dissolved, accountants allocated $179,801 in profit to Spencer. But having now determined that under paragraph 1.27 of Celtic's operating agreement Spencer in fact had zero interest in Celtic at that time, that tax document was in error. Herrick explained:
"[Herrick:] When he countersued us and our lawyers and CPA's and another outside CPA that came in to advise on the operating agreement and the language in that that prohibited him from having any shares in the Celtic unless he could add funds, as I did, to the investment, to the capital account. When he couldn't do that, then he had a zero interest, so, therefore, he could not have any interest in a note, because he had no membership interest in Celtic. [¶] . . .
"[Spencer's lawyer]: Okay. And at that point in time, he received a taxable event as a result of that, didn't he?
"[Herrick:] Yes, erroneously, he did.
"[Spencer's lawyer:] $179,000.00 or so?
"[Herrick:] Correct [¶] . . .
"[Spencer's lawyer]: And you haven't done any amended returns or anything, have you, to reflect that you underreported your income for the 2011?
"[Herrick:] We are waiting for the outcome of this hearing and that is our intent."
The trial occurred in May 2015. Celtic's accountant testified an amended return could be timely filed as late as September 2015.
However, Spencer disputed all these assertions, testifying he and Herrick contributed $900,000 cash to Beaumanor in exchange for their respective interests, but kept that contribution "off the books." In deposition testimony read at trial, Spencer also asserted rights in Beaumanor based on his providing services, which he called "[b]lood, sweat, and tears." He testified his 50 percent interest in Celtic never changed.
G. Litigation Ensues
Spencer sued Beaumanor and its members (Herrick, Attisha, Daniel Stone, Jr., and Vickie Stone), generally alleging they unlawfully removed him as manager and improperly voided his 32.1 percent interest in Beaumanor. He alleged causes of action for: declaratory relief, breach of contract, breach of the implied covenant of good faith and fair dealing, accounting and constructive trust, conversion, breach of fiduciary duty, violation of Corporations Code, and for the appointment of a receiver.
Other parties, both plaintiff and defendant, were dismissed pursuant to a pretrial settlement in which Spencer was paid $185,000. During trial, Spencer's attorney dismissed the implied covenant cause of action.
In a separate action (later consolidated with Spencer's lawsuit), Beaumanor sued Spencer, alleging Spencer had no interest in Celtic and therefore held no interest in Beaumanor. Beaumanor also alleged Spencer misrepresented that he held a 50 percent interest in the Leon Herrick Note and that, as a result of that fraud, Beaumanor distributed $81,821 to Spencer. Beaumanor alleged causes of action for: breach of fiduciary duty, conversion, money had and received, intentional misrepresentation, and negligent misrepresentation. At the end of trial, the court granted Beaumanor's motion to add a cause of action for breach of contract.
Historic Barcelona Apartments, LLC, is also a named plaintiff; however, its claims were settled before trial.
H. The Trial, Confusion About Court and Jury Role
At the outset, even before voir dire, the court expressed concern about how the parties intended to handle the equitable and legal claims with a jury:
"The Court: It looks like the gist of the action is that Spencer is suing Herrick for engineering his ouster, so to speak, from the LLC or at least his ouster of a $450,000.00 ownership interest . . . . [¶] . . . [¶] What this matter involves, it looks like, is whether or not Spencer has a $450,000.00 interest . . . in the Beaumanor, LLC, or whether he doesn't. And it looks like what it should be is it's almost an action for declaratory relief where Spencer is saying, wait a minute, I got a $450,000.00 interest and . . . Herrick is saying, no, you don't, the LLC voted not to do that. [¶] . . . [¶] . . . It looks almost like a declaration relief action."
The court asked Spencer's attorney, William Miltner, "What's the jury going to decide?" Miltner answered, "What his membership interest in the LLC is." The court replied, "That's not a jury . . . it would be essentially a declaratory relief action or something like it." Miltner stated, "We got conversion. We got breach of contract. . . . [¶] . . . [¶] . . . It's pretty simple and it's a big dollar issue because they completely took him from 34 [percent] to [zero]." (Italics added.)
Based on Miltner's statements, the court believed the case was essentially one for breach of contract, where Spencer sought $450,000 in damages:
The trial judge had no prior involvement with the case.
"The Court: So isn't it really when you look at the CACI jury instructions and the CACI verdict, just right out of the book? Breach of contract. . . . [¶] . . .
" . . . They're both suing each other for the same thing?
"Mr. Fuselier [Beaumanor's attorney]: No. We're trying to get the money he got as dividends of, basically, $81,000.00 and change.
"The Court: I thought that was settled.
"Mr. Fuselier: No, no. That's what he got when he had the $450,000.00 interest. He received those monies off the interest.
"The Court: Okay. It's part of the same thing. [¶] . . . [¶] He wants $450,000.00; you want—you—
"Mr. Fuselier: $81.
"The Court: You want the $450,000.00 back plus whatever benefits he got from it.
"Mr. Fuselier: Okay. All right.
"The Court: So you're both suing—
"Mr. Miltner: Right. It would almost make sense to almost bifurcate and have the issue of what his ownership interest is first, because if they come back somewhere between—
"The Court: Bifurcate and do what?
"Mr. Miltner: Determine damages after we determine the percentage, because then it's just math. They had had this—
"The Court: No. I think bifurcation is just going to make it more problematic I think."
The court then ruled on motions in limine, the parties conducted voir dire, and the court gave the jury preliminary instructions.
I. The Court Realizes Spencer Seeks Only Declaratory Relief
The parties did not have opening statements transcribed, so we do not know what the attorneys told the jury in opening statements. However, after Fuselier's opening statement, and outside the jury's presence, the court addressed Miltner, stating, "I was thinking about something over lunch. What are your damages?" He then asked, "[Y]ou want $450,000.00?" Miltner replied, "No. I just want my . . . client's membership interest restored." The following colloquy occurred next:
"The Court: You lost me.
"Mr. Miltner: Lost you? . . . He's not asking for money, he's asking for his position in the LLC to be restored . . . ." [¶] . . .
"The Court: [Y]our damages are not really damages, it's an interest in the LLC?
"Mr. Miltner: Correct. . . .
"The Court: But it's an equitable—you don't want damages. The jury is not going to be able to award you damages. What you want is equitable relief. [¶] . . .
"Mr. Miltner: I got a declaratory relief cause of action seeking to have—
"The Court: You do?
"Mr. Miltner: Yes.
"The Court: That's equitable.
"Mr. Miltner: Yes. You can decide that.
"The Court: Okay. [¶] . . . [¶] You better get together on the verdict form, because I don't know how it's going to work.
"Mr. Miltner: Okay.
"The Court: I mean, there's no motion to bifurcate, but what you want can't—the jury can't give you. (Italics added.) [¶] . . .
"What are you going to do? Then have the jury come back after a bench trial? I don't know that you thought this out, frankly.
"Mr. Miltner: Frankly, the declaratory relief cause of action has always been the linchpin of our case.
"The Court: What are we doing with the jury now? It should have been bifurcated.
"Mr. Miltner: He's the one that wants a jury. He's asking for monetary damages.
"The Court: Right. And you don't.
"Mr. Miltner: I'm asking for a declaratory relief judgment."
J. The Court Will Have an Advisory Jury
At the end of the first day of trial, and outside the jury's presence, the court addressed both counsel, stating, "I'm probably going to have an advisory jury, so think about that with the jury verdict form on the question of whether or not he's got an interest in the . . . LLC."
K. Spencer's Attorney Files a Motion to Dismiss the Jury
At the end of the second day of trial, Miltner stated, "Your Honor, has there been any more thought about the advisory—the jury for advisory purposes?" Miltner informed the court he just filed a motion to "[u]se the jury exclusively for advisory purposes . . . ."
That motion asserted the "gist" of the entire action was equitable, and therefore the entire consolidated case—including Beaumanor's fraud action seeking $81,281 in damages—should be tried only to the court. Spencer's motion did not ask the court to bifurcate the equitable from the legal claims and try the equitable action first. Rather, he asked the court to either dismiss the jury or use it exclusively as an advisory jury.
The next day, the court denied Spencer's motion as "untimely," stating:
"The Court: [B]oth of you have requested a jury. We're in the middle of a jury trial. I'm certainly not going to discharge the jury. I agree this is a mess, but you made the mess . . . . [¶] . . . [¶] [Y]ou are going to have to meet and confer on how to tee this up before the jury, and I have my reservations about that."
L. The Court Suggests an Advisory Question
After the last witness testified, but before the parties' rested and outside the jury's presence, the court stated, "I'm not going to have declaratory relief go to the jury." The court added, "[Y]ou might ask the jury whether or not the LLC improperly divested Mr. Spencer of his membership interest." The court instructed counsel to confer on the issue.
M. More on Advisory Jury
After the parties rested, Miltner again stated, "I don't have damages . . . . [¶] . . . [¶] I just have, was his membership interest taken wrongfully." He asked, "Is Your Honor going to be making that decision on the declaratory relief?" The court replied, "Sure. I'm going to use an advisory jury." The court suggested the jury be given a "special interrogatory or something."
N. The Court Denies Beaumanor's Nonsuit Motions
In light of Miltner's concession, "I don't have damages," Beaumanor moved for nonsuit on Spencer's cause of action for breach of contract. Opposing that motion, Miltner argued "our damages are they have wrongfully taken his membership interest . . . ." The court replied, "[T]hat's not a jury determination. It's equitable." The court suggested the attorneys give the jury "a special question [¶ . . . [¶] [b]ut don't tell them it's advisory."
Beaumanor also moved for nonsuit on Spencer's causes of action for conversion, breach of fiduciary duty, and breach of contract, asserting, "all of those causes of action require evidence of damages. It's an element. There's been no evidence of damages for all three of those causes of action . . . ."
The court ruled, "I'm reluctant to grant a nonsuit, but I'm not going to allow that to go to a jury, because there's no . . . evidence of monetary damages and all the jury can do is award monetary damages." Later, the court denied the motions for nonsuit, stating, "[i]t doesn't matter" because Spencer is "not going to get any money."
O. More Discussion on the Advisory Jury
The court and counsel continued to discuss the interplay between court and jury. Miltner addressed the court, stating, "So, you're going to make the decision on the membership interest of Joseph [Spencer]. They're going to give an advisory opinion. . . . [¶] . . . [¶] [I]f you come to one conclusion that's inconsistent with the conclusion of the jury, how does it work?" Miltner added, "So, there could be two inconsistent results[?]" The court replied that it would not be bound by the jury's verdict, stating, "It's an advisory jury. It's like . . . [¶] . . . [¶] I can ask Judge Styn what he thinks, you know."
P. Verdict
After deliberating a full day, in special verdicts the jury found by clear and convincing evidence that Spencer committed fraud and breached his fiduciary duty in obtaining his membership interest in Beaumanor. However, the jury awarded Beaumanor only $1 damages. The jury rejected Beaumanor's breach of contract claim, determining that all the conditions that were required for Spencer's performance did not occur.
The jury rejected all of Spencer's claims, finding Beaumanor was not liable for conversion or breach of contract. The jury also rejected Spencer's breach of fiduciary duty claim, finding neither Beaumanor nor Herrick breached fiduciary duties. The jury found Beaumanor was not liable for conversion, determining Beaumanor did not intentionally and substantially interfere with Spencer's interest in Beaumanor. Consistent with all these findings, in response to the advisory question, the jury found Spencer's membership interest in Beaumanor was not wrongfully taken from him.
In light of the $1 damages verdict, Beaumanor waived its right to seek punitive damages.
After receiving the verdict, the court stated it would not decide Spencer's declaratory relief cause of action at that time, but no further evidence would be received. Believing it was free to reject the verdict when deciding Spencer's declaratory relief cause of action, the court stated, "I either disagree with the jury or I don't, and I can see how the jury reached the verdict. . . . [¶] . . . [¶] . . . I can speculate with pretty good insight into how the jury got where they got . . . ." The court stated the verdicts were "compelling" and indicated "[t]he jury didn't like what Mr. Spencer did."
Yet, a few moments later, the court expressed concern that Spencer was "stuck with a tax liability" based on the 2011 K-1 tax document, showing a $179,000 distribution. The court stated, "I think that he should . . . at the least be reimbursed for his tax liability." The court suggested the equitable resolution would be to give Spencer credit for the tax liability, less the $81,281 Spencer received from Beaumanor "and call it a day." The court stated, "If I had to rule right now, I would say he has an interest in Beaumanor for whatever." Remarking, "[t]his screams for settlement," the court directed the parties to meet with a retired judge to try to settle the case.
Q. The First Posttrial Hearing
About two weeks later, unable to reach a settlement, the parties returned to court. By this time, the parties had read and briefed Hoopes, supra, 168 Cal.App.4th 146. Beaumanor filed a request for judgment in its favor on Spencer's declaratory relief cause of action, asserting:
"In light of the analysis in Hoopes, the disposition of Mr. Spencer's cause of action for declaratory relief becomes clear. The jury made factual determinations in coming to a verdict that are common to Mr. Spencer's declaratory relief action. First, since the jury determined that Mr. Spencer obtained his membership interest in Beaumanor through fraud and breach of fiduciary duty, a judgment finding that he has an interest would be wholly inconsistent with the verdict and would necessarily have to be made with utter disregard for the jury's factual findings. . . . [¶] Therefore, the Court is bound by the factual determinations made by the jury and cannot enter judgment in favor of Mr. Spencer contrary to the jury's verdict."
Spencer also filed a request for judgment on the declaratory relief cause of action. He attempted to distinguish Hoopes, supra, 168 Cal.App.4th 146, and also argued the court remained free to reject the jury's findings in deciding declaratory relief.
The court, despite previously stating the verdict was "compelling," now stated the jury did not understand the case and its verdict "doesn't make much sense." The court stated it should have granted nonsuits on Spencer's causes of action for breach of contract and conversion "because there was no evidence of damages." The court also stated the trial should have been bifurcated with the equitable cause of action tried first.
Fuselier agreed in part, asserting that under Hoopes, supra, 168 Cal.App.4th 146, "[t]he equitable issue should have been decided first." However, Fuselier added, "since the legal issues were decided first, those findings are binding on this court." He stated, "[T]here's nothing wrong with the way it was done." The following colloquy occurred next:
"Mr. Fuselier: If I had been in Mr. Miltner's shoes, I would have certainly requested that the equitable matters be resolved first, but he didn't.
"The Court: He didn't.
"Mr. Fuselier: He didn't request that. And I didn't want that. I wanted my case.
"The Court. I know. Look, I understand exactly where you're coming from.
"Mr. Fuselier: I had a legal case, I had a case at law, and I wanted it resolved by the jury, and it was resolved."
The court stated, "I'm not going to follow the verdict." to which Fuselier replied, "How can you not?" The court replied, "I will make a determination that Mr. Spencer has an interest of 13.4 percent." The court further determined that Herrick is "estopped from suggesting otherwise."
Earlier in the case, when Miltner argued estoppel, the court rejected that theory, stating, "You didn't plead that. . . ." However, following the court's lead from this hearing, in his brief Spencer now asserts his "main defense" to Beaumanor's lawsuit "was his estoppel defense."
The court stated the basis for the estoppel is Spencer "pledged his interest in Celtic Arms to get Historic Beaumanor." In light of the accountant's testimony that Spencer had zero interest in Celtic after 2008, Fuselier remarked, "Wow . . . [¶] . . . [¶] . . . the evidence is nowhere near that."
The hearing ended with the court's stating, "I'm not going to follow the advisory verdict. And I'm going to make a determination that he's got an interest in the . . . [¶] . . . [¶] . . . Beaumanor LLC." The court directed Spencer's attorney to prepare a statement of decision and judgment.
R. Judgment
About a month later, the court conducted the fourth hearing in an attempt to reduce the verdict to judgment. The court stated there was "never a request to bifurcate, which there absolutely, positively should have been right from the beginning and it probably should have been done before the case even went out to trial." Stating the case was a "complete mess", the court reversed itself, ruling it would not award Spencer any interest in Beaumanor. Lamenting "'[n]o good deed goes unpunished,'" the court explained it was only bluffing when it stated it would award Spencer an interest in Beaumanor—"to get the parties to get this thing settled and resolved."
The court directed Beaumanor's attorney to prepare a judgment consistent with the special verdicts and "be done with it", and invited Spencer's attorney to bring a motion for new trial.
Subsequently, the court entered judgment as follows: "1. Judgment is entered in favor of Historic Beaumanor Apartments, LLC, and against Joseph Spencer in the amount of $1.00. [¶] 2. Judgment is entered in favor of Catherine Herrick, individually and as Trustee of the Catherine Herrick Family Trust, and against Joseph Spencer on Joseph Spencer's claims. [¶] 3. Judgment is entered in favor of Sammad Attisha, as Trustee of the Sammad Attisha Family Trust; Daniel C. Stone, Jr., individually, as Trustee of the Stone Family Trust, and as Beneficiary of the IRA with Equity Trust Co. dba Sterling Trust; and Vickie Stone, individually and as Beneficiary of an IRA with Equity Trust Co. dba Sterling Trust, and against Joseph Spencer on Joseph Spencer's claims. [¶] 4. Judgment is entered in favor of Joseph Spencer on Historic Beaumanor Apartments, LLC's Breach of Contract claim."
S. Spencer's Posttrial Motions
Spencer filed a notice of intention to move for new trial and, later, a motion for new trial. In his memorandum of points and authorities, Spencer asserted the court should grant a new trial on these grounds: (1) Irregularity in the proceedings because the judgment fails to address Spencer's declaratory relief cause of action, (2) insufficient evidence to support any of the verdicts against Spencer, and (3) error in law "for the [c]ourt not to rule on Spencer's equitable claims."
Spencer also filed a JNOV motion, asserting (1) the court erred in not addressing his equitable claims in the judgment, and (2) no substantial evidence supported any of the verdicts against Spencer.
Beaumanor filed opposition, but did not include it in the appellant's appendix.
T. Beaumanor's JNOV Motion
Beaumanor filed a JNOV motion, asserting the jury's $1 award "has no basis in the evidence" and "the only evidence of Beaumanor's damages that was introduced and was undisputed was that Beaumanor paid $81,281 in distributions to Spencer based on his fraudulently obtained membership interest."
Spencer filed opposition, but it too is not included in the record the parties have provided.
U. New Trial Motion Granted, JNOV Denied
The court granted Spencer's motion for new trial "on the grounds of insufficient evidence to support the verdict and error in law, occurring at the trial and excepted to by the party making the application."
Summarizing procedural history, the order states:
"Midway through the trial, Spencer made an oral motion to 'strike the jury' and bifurcate the declaratory relief cause of action. Beaumanor also moved for non-suit on all but the declaratory relief causes of action. The Court denied both motions."
With respect to an "error in law," the order states:
"The cause of action for declaratory relief should have been bifurcated at the beginning of the trial and tried by the Court sitting in equity. The motions for nonsuit should have been granted. [¶] Accordingly, it was error in law for the jury to have considered the forms of verdict, which were cobbled together, confusing, and asked the jury to determine questions of law and equity."
Regarding the sufficiency of the evidence, the order states:
"There was evidence that Spencer has an interest in the LLC (Celtic Arms) which was pledged for the Beaumanor loan and had tax consequences for Spencer when sold. Nevertheless, there was also evidence that this interest was somehow voided after the fact. [¶] Although the Court indicated that it would consider the jury's verdict as 'advisory,' with hindsight, this was error. The evidence presented relative to Spencer's interest in the LLC was woefully inadequate for the Court, let alone the jury, to render a fair and meaningful decision. [¶] Additonally, there is no basis for the jury award of
$1.00 in damages for fraud and breach of fiduciary duty. An award of nominal damages had no support in light of the evidence submitted at trial."
The court ended its order by stating, "Accordingly, the various procedural errors and failures of proof cry out to the parties to properly retry all issues in dispute, in the interest of fairness and justice." The court denied both JNOV motions, stating, "See ruling on Motion for New Trial."
DISCUSSION
I. THE COURT ERRED IN GRANTING SPENCER'S NEW TRIAL MOTION
A. Insufficiency of the Evidence
The trial court's authority to grant a new trial "is established and circumscribed by statute." (Oakland Raiders v. National Football League (2007) 41 Cal.4th 624, 633 (Raiders ).) Under Code of Civil Procedure section 657, the grounds for granting a new trial include "[i]nsufficiency of the evidence to justify the verdict." (§ 657, subd. (6).) A new trial may not be granted on this ground unless the trial court is convinced based on its review of the entire record that "the jury clearly should have reached a different verdict or decision." (§ 657, italics added.)
All statutory references are to the Code of Civil Procedure.
In granting a new trial, the court must identify each statutory ground upon which it relies and provide a written specification of the reasons for granting a new trial. (§ 657.) "[O]n appeal from an order granting a new trial upon the ground of the insufficiency of the evidence to justify the verdict . . . it shall be conclusively presumed that said order as to such ground was made only for the reasons specified in said order or said specification of reasons, and such order shall be reversed as to such ground only if there is no substantial basis in the record for any of such reasons." (Ibid.)
The legislative purpose for requiring the trial court to specify its reasons for granting a new trial on the ground of insufficiency of the evidence is twofold. Society has an interest in avoiding needless retrials because they cause hardship to litigants, delay justice, and result in economic waste. (Mercer v. Perez (1968) 68 Cal.2d 104, 113 (Mercer).) Accordingly, the first purpose is "to promote judicial deliberation before judicial action, and thereby 'discourage hasty or ill-considered orders for new trial.'" (Ibid.) The second is to make the right to appeal meaningful by focusing the appellant and appellate court on the specific deficiencies the trial court identified in the evidence. (Ibid.)
The California Supreme Court has declared "[n]o hard and fast rule can be laid down as to the content of such a specification [of reasons], and it will necessarily vary according to the facts and circumstances of each case." (Mercer, supra, 68 Cal.2d at p. 115; see Scala v. Jerry Witt & Sons, Inc. (1970) 3 Cal.3d 359, 363-370 (Scala).) But the Supreme Court also has emphasized that when the trial court relies on insufficiency of the evidence, "the judge must briefly recite the respects in which he finds the evidence to be legally inadequate; no other construction is consonant with the conclusive presumption on appeal that the order was made 'only for the reasons specified.' Phrasing the requirement in terms of the codification of the trial judge's power in [section 657], such an order must briefly identify the portion of the record which convinces the judge 'that the court or jury clearly should have reached a different verdict or decision.'" (Mercer, at p. 116, fn. omitted.)
"[T]o comply with section 657 'the trial judge is not necessarily required to cite page and line of the record, or discuss the testimony of particular witnesses,' nor need he undertake 'a discussion of the weight to be given, and the inferences to be drawn from each item of evidence supporting, or impeaching, the judgment.'" (Scala, supra, 3 Cal.3d at p. 370.) However, "the trial judge [is required] to briefly identify the deficiencies he finds in 'the evidence' or 'the record' or [citation] 'the proof'—rather than merely in 'the issues' or 'the ultimate facts.'" (Id. at p. 367.)
In the specification of reasons for granting a new trial on the ground of insufficiency of the evidence, the court must conduct an analytical discussion of the evidence. (See Jones v. Citrus Motors Ontario, Inc. (1973) 8 Cal.3d 706, 708, fn. 2 (Jones v. Citrus Motors).) "It is helpful if the court declares what witnesses it believed, what testimony was to be disregarded or the value of any impeachment." (Bigboy v. County of San Diego (1984) 154 Cal.App.3d 397, 404 (Bigboy).) "The court should briefly identify criticized evidence." (Ibid.) The trial court "must supply the reviewing court with information such as to enable it to review in a meaningful way the order granting the new trial." (Aronowicz v. Nalley's, Inc. (1972) 30 Cal.App.3d 27, 39, fn. 7.)
Reviewing cases that uphold, and others that disapprove of, particular specifications helps give a practical interpretation to these rules. For example, in Dizon v. Pope (1974) 44 Cal.App.3d 146 (Dizon), the appellate court reversed an order granting a new trial on excessive damages if the plaintiff did not accept a reduction in the judgment from $35,000 to $15,000. The trial court's specification stated:
Spencer's brief cites no cases to support his assertion the specification of reasons in this case is adequate. He simply declares that it is.
"'The motion for new trial will be granted on the grounds that the verdict is excessive. The plaintiff sustained special damages of $1536.00. The injury was to soft tissue and does not appear to be permanent.'" (Id. at pp. 147-148.)
The Dizon court concluded this was inadequate because "[t]he court in its order did not discuss the evidence[,] . . . did not set forth how it arrived at the total of special damages mentioned in the order or the significance of its statement regarding soft tissue[, and] . . . [¶] . . . did not specify the evidence which convinced the court that appellant's 'injury . . . does not appear to be permanent.'" (Dizon, supra, 44 Cal.App.3d at p. 149.)
In contrast, in Jones v. Citrus Motors, supra, 8 Cal.3d 706, the California Supreme Court determined the following specification of reasons was sufficient:
"'The impressive testimony of the eyewitnesses Dyer and Marquez and of the investigator Fairfield as well as the photographs of the scene and the condition of the left front tire of the Teagle vehicle established without question that the accident was a result of the left tie rod on the Teagle car coming loose at the inboard end. Likewise, the undamaged appearance of the taper pin at that location would lead to the only rational conclusion that the castellated nut worked loose and came off the said pin because a locking cotter key was missing.
"'The pivotal question is who if anyone is responsible for that condition. Any question of responsibility of the co-defendants not involved here can be disregarded for the reason that there was no evidence that they did anything to or with the tie rod assembly and the theory of the case against them was that they should have observed the missing key and had a duty to so inform Mr. Teagle.
"'There was testimony by Mr. Teagle that his son at one time had driven the car over a railroad grade crossing and damaged the oil pan and differential. However, there was no evidence that this would necessarily involve damage to the tie rod assembly and it was noted that the repair did not include repair to that portion of the car.
"'The only defendant shown to have had anything to do with the tie rod assembly was the defendant Citrus when they straightened the frame of the car. Although question was raised as to whether it was necessary to disassemble the tie rod assembly in order to straighten the frame, the testimony of the car's former owner Mr. Amrose as well as the experts called by the defendant Citrus leaves no reasonable inference other than that the assembly had been removed and reinstalled by Citrus.
"'The fact that the cotter key at the outboard portion of the left tie rod as well as the dust cap were missing would indicate that they were also left off when the steering apparatus was reassembled after the frame straightening by Citrus. There was no testimony or other evidence adduced by Citrus to show this did not or could not be the case.
"'The evidence was necessarily all circumstantial and the most significant obstacle to plaintiffs' case arose because of the lapse of time and the mileage put on the car between its sale by Citrus to Mr. Teagle and the date of the accident. However, the tapered shape and the construction of the joint as well as the testimony as to the use of a "pickle fork" is physical evidence of the difficulty in dislodging the tie rod even in the absence of a holding nut or cotter pin. More graphically illustrating this point was the moving picture films shown by the defendant. All of this evidence served to show that very probably the nut would stay in place and the taper pin would remain engaged through a great deal of driving and vibration.
"'On the other hand, no creditable evidence was produced by defendant to show any of the foregoing did not or could not happen.
This is not to say, of course, that they had the burden of proof but it would seem that they were in the best position to bring forward direct evidence that they were not responsible.
"'For the foregoing reasons it would appear that the jury was somehow misled into an area of speculation not supported by the evidence.'" (Id. at p. 708, fn. 2.)
A standard treatise for trial courts advises that when specifying reasons for granting a new trial on the ground of insufficiency of the evidence, a trial judge should "focus on the specific facts and evidence . . . . The judge should recite those facts, not generalities, and connect those facts to the evidence and the applicable law." (Cal. Judges Benchbook: Civil Proceedings After Trial (2d ed. CJER 2014) Motions Attacking Verdict or Judgment After Trial, § 2.84, p. 143 (CJER Benchbook).)
The statement of reasons in Dizon, supra, 44 Cal.App.3d 146 failed this standard whereas the one in Jones v. Citrus Motors, supra, 8 Cal.3d 706 does not. One significant difference between the two cases is the statement of reasons in Jones v. Citrus Motors identifies specific evidence, analyzes in what respects the court found such evidence lacking in probative value, and links that analysis to the relevant substantive law.
Providing a legally adequate specification of reasons is not onerous. For example, in Romero v. Riggs (1994) 24 Cal.App.4th 117 (Romero), a patient sued an optometrist for failing to diagnose and treat his glaucoma. The jury found the optometrist had been negligent, but also found such negligence was not a cause of the patient's injury. (Id. at p. 120.) The trial court granted the patient's motion for a new trial and filed the following statement of reasons, which was upheld on appeal:
"The jury found negligence on the part of the defendant doctor, with which this Court agrees. The jury found against the plaintiff on the issue of causation and returned a defense verdict. The medical evidence was overwhelming that the early onset and the severity of the effect upon the plaintiff and his early deterioration of eyesight was a direct and proximate result of the negligent failure of the defendant doctor to diagnose and treat the plaintiff's condition. The overwhelming evidence was that, had the defendant doctor not been negligent and had proper treatment [been] instituted when it could and should have been, the probabilities are that plaintiff's failure of eyesight would have been forestalled or delayed, if not prevented. The evidence was insufficient in these particulars to support the verdict and a new trial should be granted." (Id. at p. 121.)
This specification was adequate because it "'directs the appellate court's attention' to the aspects of the record which support the order; here, the 'overwhelming' medical evidence of six experts as to the existence of causation in this case." (Romero, supra, 24 Cal.App.4th at p. 124.)
Dixon v. St. Francis Hotel Corp. (1969) 271 Cal.App.2d 739 (Dixon) is another case involving an adequate specification. Dixon is particularly appropriate to study because in Scala, supra, 3 Cal.3d at page 370, footnote 6, the California Supreme Court cited Dixon as a good example to follow.
In Dixon, supra, 271 Cal.App.2d 739 a hotel guest sued for injuries sustained by tripping over wood in the lobby. The jury returned a plaintiff's verdict; however, the court granted a new trial on the grounds of insufficiency of the evidence, stating:
"'The evidence discloses that a 24-foot plank, 18 inches wide, 6 inches thick in the center and tapering to 3 inches on each end, was placed on the floor of the hotel lobby by employees of the defendant-painting contractor. Two similar planks were placed on top of it with the end of the lowest one projecting somewhat. In the immediate vicinity of the planks were also placed ladders, scaffolding, buckets, drop cloths, and other equipment commonly
used by the painters. All this equipment occupied a sizeable area in a corner of the lobby. This, in itself, violates no known rule of law nor does it give rise to any duty owed by the defendants to invitees unless it creates a dangerous condition. This Court feels that it did not.'
"'The basis of liability in this type of case is the superior knowledge of the invitor or landlord of a dangerous condition, thereby creating a duty to either correct or warn against.'
"'It is difficult for this Court to believe, after weighing all the evidence, that the defendants, by creating the condition described, thereby acquired a knowledge that would be superior to that of anyone else using that degree of care that the law requires to safeguard one's own safety.'
"'The Court is convinced after considering the law and the evidence, including all reasonable inferences therefrom, and after putting aside the sympathy which the Court has in full measure for the plaintiff, that neither defendant was negligent, but, on the other hand, plaintiff was negligent, and that her negligence was a proximate cause of her injuries.'" (Id. at p. 741, fn. 1.)
Klinger v. Henderson (1969) 276 Cal.App.2d 774 is another case the California Supreme Court cited as illustrating a legally sufficient specification. There, in a medical malpractice action, the jury returned a defense verdict; however, the trial court granted the patient a new trial on the ground of insufficiency of the evidence. The appellate court affirmed the order granting a new trial, determining this specification of reasons was adequate:
See Scala, supra, 3 Cal.3d at page 370, footnote 6.
"'The defendant testified that he damaged the plaintiff's left ureter while performing the hysterectomy, but he did not actually know how the injury occurred. During the operation he encountered marked bleeding which obscured his operative field. He could not see the bleeding vessel, since it may have retracted somewhat, and
so, using a clamp, he "blindly grasped" where he thought the vessel was. In his opinion the damage to the ureter was done when he clamped the bleeder, possibly because the clamp was placed on the ureter.'
"'Dr. Boyers, a defense witness, testified on direct examination that when confronted with a bleeding artery the surgeon has "many guides" to the location of the bleeder. He listed touch, seeing the pulsation of the artery, or seeing the origin of the bleeding. He contraindicated "blind clamping."'
"'Dr. Jones, another defense witness, testified on direct examination even more explicitly: that when confronted with a bleeder the surgeon stops the bleeder with his finger and "then clamps." On cross-examination he reiterated that the surgeon should feel for the loose end of the artery but should not "go blind with a clamp."'
"'The defendant excused his blind clamping by the "extenuating circumstances," i.e., the necessity of stopping the flow of blood. But it appears from the uncontradicted testimony of his own witnesses that he violated the ordinary techniques of the profession by clamping blindly. The court concludes, therefore, that the verdict, which imports finding that the defendant proceeded with due care, is not supported by the evidence.'" (Id. at pp. 776-777.)
Here, the trial court's specification of reasons for granting Spencer a new trial on the grounds of insufficiency of the evidence states:
"There was evidence that Spencer has an interest in the LLC (Celtic Arms) which was pledged for the Beaumanor loan and had tax consequences for Spencer when sold. Nevertheless, there was also evidence that this interest was somehow voided after the fact. [¶] . . . The evidence presented relative to Spencer's interest in the LLC was woefully inadequate for the Court, let alone the jury, to render a fair and meaningful decision."
We agree with Beaumanor that these reasons are legally insufficient to support granting a new trial on the grounds of insufficiency of the evidence. The court's order simply states there was conflicting evidence on the disputed issue of whether Spencer had an interest in Celtic after 2008. The court says there was evidence "that Spencer has an interest . . . ." and there was other evidence "that this interest was somehow voided . . . ." The order fails to identify which aspects of the evidence on this point convince the court the jury clearly should have reached a different result. The order merely states there were two sides of the story.
The chief defect in the court's specification of reasons is it fails to state what the evidence was, and why the court finds such evidence legally inadequate. (Candido v. Huitt (1984) 151 Cal.App.3d 918, 923.) The order does not recite the respects in which the court finds the evidence to be legally inadequate, as required by the California Supreme Court in Miller v. Los Angeles County Flood Control Dist. (1973) 8 Cal.3d 689, 696-697 (Miller) and in Scala, supra, 3 Cal.3d at pages 363-364. The order lacks any analytical discussion of the evidence. (Jones v. Citrus Motors, supra, 8 Cal.3d at p. 708, fn. 2.) Contrary to the practical advice given by this court in Bigboy, supra, 154 Cal.App.3d at page 404, the order fails to indicate what witnesses the court believed, what testimony it deemed to disregard, and the value of any impeachment. Moreover, the order contravenes the CJER Benchbook because it does not "focus on the specific facts and evidence [and fails to] connect those facts to the evidence and the applicable law." (CJER Benchbook, supra, at § 2.84, p. 143, italics omitted.)
We are thus left to speculate why the court ignored evidence that Spencer forged Herrick's signature on documents to create a joint tenancy interest. We can only guess why the court rejected Herrick's testimony that Spencer, believing her to have only a few months to live, and in a failed or failing marriage, fraudulently created a joint tenancy interest in Beaumanor so he could take all of Herrick's interest in Beaumanor when she died. We can only speculate why the court ignored evidence that under paragraph 1.27 of Celtic's operating agreement, only members making capital contributions obtained an interest in Celtic—and the undisputed evidence Spencer made no such contributions. We do not know why the court rejected evidence that Herrick made a $746,000 capital contribution to Celtic and Spencer made none. There is no indication why the court rejected the probative value of Celtic K-1 tax forms from 2009 through 2011—prepared before any dispute arose in this case—showing Spencer had zero interest in Celtic.
Did the trial court not believe Herrick's testimony about why her attorney drafted paragraph 1.27 of the Celtic operating agreement? Did the court believe that the attorney, Fuselier, orchestrated the entire scheme, and that he, Spencer, and Herrick jointly agreed to back date documents and forge Herrick's signature—so Herrick could defeat her stepmother in the probate litigation fight over Leon's estate's interest in Beaumanor? Why did the court conclude Spencer paid taxes on the 2011 Celtic distribution of $179,000 when, asked whether he paid tax on that amount, Spencer carefully parsed his words, answering, "I had to report it on my taxes, yes, sir."
Given (1) Spencer's guarded, if not evasive, answer that he had to "report" the income, (2) the accountant's testimony there was still time to amend the return, and (3) Herrick's testimony she intended to amend the tax document depending on the outcome of this litigation—it is uncertain whether Spencer will pay taxes attributable to that distribution and, if so, how much. (See Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 952 ["recognizing that inquiring into tax consequences is' necessarily complex and speculative'"].)
Moreover, Spencer advanced three mutually inconsistent theories for claiming rights in Beaumanor: (1) a 50 percent interest in the Leon Herrick Note; (2) a secret off-the-books $900,000 cash contribution; and (3) a promotional interest, or as he put it, "[b]lood, sweat and tears." Under such circumstances, why did the court find the jury should have credited Spencer's testimony?
The "fundamental purpose[]" behind section 657's requirement that the trial court provide a specification of reasons is "to put an end to this kind of speculation." (Mercer, supra, 68 Cal.2d at p. 117; Raiders, supra, 41 Cal.4th at p. 638 [legislative intent behind requiring specification of reasons is "'to preclude just this type of guesswork'"]; Miller, supra, 8 Cal.3d at p. 698, fn. 8 [same].) We are not permitted to infer the trial court's reasons where we have not been told what they are. (Scala, supra, 3 Cal.3d at p. 365.)
The trial court's statement at the end—"The evidence presented relative to Spencer's interest in the LLC was woefully inadequate for the Court, let alone the jury, to render a fair and meaningful decision"—adds nothing of substance. The court here merely states the evidence is insufficient because it is insufficient. (Scala, supra, 3 Cal.3d at p. 367 ["[I]t borders on the tautological to 'specify' that a new trial is granted on the ground of the insufficiency of the evidence to justify the verdict finding the defendant negligent because that evidence fails to show the defendant was negligent. Such a 'reason' simply reiterates the ground of the ruling itself." (Italics omitted.)].)
In another part of the order, the court states, "[T]here is no basis for the jury award of $1.00 in damages for fraud and breach of fiduciary duty. An award of nominal damages had no support in light of the evidence submitted at trial." However, this statement, although true, cannot salvage the otherwise inadequate specification. Not surprisingly, being on the losing end of only a $1 verdict, Spencer did not argue a new trial should be granted because of inadequate damages. The inadequacy of a $1 damage award to Beaumanor was Beaumanor's argument to make, and Beaumanor did not make a motion for new trial, choosing instead to move for JNOV in an attempt to increase the damage award as a matter of law without the necessity of a retrial.
The trial court's failure to adequately specify the reasons for granting a new trial on the ground of insufficiency of the evidence requires reversal of the order on that ground. "Since 'it shall be conclusively presumed that said [new trial] order as to such ground was made only for the reasons specified' ([] § 657), and the ground of insufficiency of the evidence is unsupported by a proper specification of reasons, we conclude that the order granting a new trial must be reversed." (Miller, supra, 8 Cal.3d at p. 699; see also La Manna v. Stewart (1975) 13 Cal.3d 413, 425 ["the order cannot be sustained on this ground and must therefore be reversed"]; Bigboy, supra, 154 Cal.App.3d at p. 408 ["[t]he statement of reasons . . . are insufficient . . . [and] therefore the jury verdict must be reinstated . . . ."].)
In its opening brief, Beaumanor asserted the consequence of failing to adequately state reasons was a shift in the standard of review, from abuse of discretion to de novo. We asked the parties to submit supplemental briefs on whether such a failure requires the new trial order to be reversed. We have received and considered those briefs.
In Raiders, supra, 41 Cal.4th at pp. 635-636, the California Supreme Court addressed whether, in the context of a motion for new trial on the ground of jury misconduct, the consequence of an inadequate specification of reasons was to shift the standard of review from abuse of discretion to de novo. At our request, the parties submitted supplemental briefs on whether Raiders is distinguishable because that holding was expressly limited to a new trial motion granted on the ground of juror misconduct. (Ibid. ["we address a single, narrow issue: the standard of review—whether abuse of discretion or independent review—when, as here, a trial court grants a new trial on the ground of jury misconduct and properly specifies the ground for granting the motion but does not provide a statement of the reasons for granting the new trial on that ground" (italics omitted)].) We conclude the instant case falls within the category of orders not covered by the Raiders holding, and instead is governed by California Supreme Court cases cited in the text above, which hold that as to orders granting a new trial on the grounds of insufficiency of the evidence, the trial court's failure to adequately state its reasons requires reversal. We also agree with Beaumanor that any statements to the contrary in Montoya v. Barragan (2013) 220 Cal.App.4th 1215 are dicta—in Montoya, the court determined the specification of reasons was sufficient. (Id. at p. 1229.)
Citing Byers v. Board of Supervisors (1968) 262 Cal.App.2d 148, 153, Spencer contends that where a new trial is granted on both the grounds of insufficiency of the evidence and that an error in law occurred, the order can be affirmed on the latter ground, even if the court's specification of reasons is legally inadequate on the former. We agree, and therefore consider whether the new trial order can be affirmed on the ground that an "error in law" occurred, "excepted to by the party making the application" as provided in section 657.
B. Error in Law
1. Bifurcation and using an advisory jury
The court also granted a new trial on the ground of "error in law, occurring at the trial and excepted to by the party making the application [for new trial]." The court identified the following errors in law:
"Midway through the trial, Spencer made an oral motion to 'strike the jury' and bifurcate the declaratory relief cause of action. Beaumanor also moved for non-suit on all but the declaratory relief causes of action. The Court denied both motions. [¶] . . . [¶] The cause of action for declaratory relief should have been bifurcated at
the beginning of the trial and tried by the Court sitting in equity. The motions for non-suit should have been granted. [¶] Accordingly, it was error in law for the jury to have considered the forms of verdict, which were cobbled together, confusing, and asked the jury to determine questions of law and equity. [¶] . . . [¶] Although the Court indicated it would consider the jury's verdict as 'advisory,' with hindsight, this was error."
A trial court may grant a new trial if it made an "[e]rror in law, occurring at the trial and excepted to by the party making the application." (§ 657.) "Where a new trial is granted on the basis of legal error, [the Court of Appeal] must first determine whether the ruling the trial court claims was made in error is as a matter of law truly error." (Donlen v. Ford Motor Co. (2013) 217 Cal.App.4th 138, 147 (Donlen).) "A trial court has no discretion to grant a new trial on the basis of error in law unless its original ruling was erroneous as a matter of law." (Ibid.) Moreover, even if there was legal error, "[t]o be entitled to a new trial, the moving party must also show the error was prejudicial—that it affected a substantial right and prevented . . . a fair trial." (Ibid.)
Here, although the preferred procedure would have been for the declaratory relief action to have been bifurcated and tried first, it was not an "error in law" for the jury to decide the legal claims first. Hoopes, supra, 168 Cal.App.4th 146 is instructive. In Hoopes, an action with both legal and equitable claims, the court conducted a jury trial on the plaintiff's legal claims, with the equitable claims to be decided second, after the verdict. ( Id. at p. 150.) The jury found in plaintiff's favor, but the judge, in ruling on the reserved equitable claims, entered judgment for the defendant, rejecting the jury's factual findings and making his own independent evaluation of the evidence. (Ibid.)
The court in Hoopes, supra, 168 Cal.App.4th at page 157 states the "better practice" in such cases is for the trial court to determine the equitable claims first, before submitting the legal claims to the jury. This is because the first fact finder will bind the second when determining factual issues common to the equitable and legal claims. (Id. at p. 156.) Thus, by deciding the equitable claims first, that decision "'may result in factual and legal findings that effectively dispose of the legal claims.'" (Id, at p. 157.) However, "'[w]here the legal issues are tried first, the judge cannot ignore the jury's verdict and grant equitable relief inconsistent with the jury's findings.'" (Id. at p. 159.)
Although the better practice is for equitable claims to be decided first, that does not mean a court makes an error in law by conducting a trial where the jury decides the legal claims first, or even answers an "advisory" question. As Hoopes, supra, 168 Cal.App.4th at page 157 notes, there are several reported California cases where legal claims were tried before equitable ones. Having legal claims decided first is not an error in law, it simply means the jury's determination of such may curtail or foreclose the court's consideration of equitable claims later. (Ibid.)
In its order granting a new trial, the court also stated it committed an error of law in believing the verdict was merely "advisory" as to the equitable claim. We agree; it was error, but the error was harmless in this case.
The jury's prior factual findings on legal causes of action bound the trial court when granting equitable remedies based on the same facts. (Hoopes, supra, 168 Cal.App.4th at p. 159.) Here, the court erred when, during trial and immediately afterwards, it believed it was free to contradict the jury's findings when deciding Spencer's declaratory relief cause of action. However, before entering judgment, the court changed course, and decided to not award Spencer anything under his declaratory relief cause of action The judgment states: "Judgment is entered in favor of Historic Beaumanor Apartments LLC, and against Joseph Spencer in the amount of $1.00." The judgment also states, "Judgment is entered in favor of Catherine Herrick . . . and against Joseph Spencer on Joseph Spencer's claims." And, the judgment states it is entered in favor of Attisha, Daniel C. Stone, and Vickie Stone "and against Joseph Spencer on Joseph Spencer's claims."
Thus, because the judgment is consistent with the special verdicts, any error in the court's earlier misapprehension that the verdict was only advisory as to Spencer's declaratory relief cause of action is harmless, and therefore cannot be a basis for granting a new trial. (Donlen, supra, 217 Cal.App.4th at p. 147 ["To be entitled to a new trial, the moving party must also show the error was prejudicial—that it affected a substantial right and prevented him from obtaining a fair trial."].)
Moreover, even assuming without deciding that it was error to not bifurcate the equitable claim to be tried first, the new trial order would still have to be reversed because Spencer's attorney never objected to having the jury decide legal claims first. He made no motion to bifurcate the equitable from legal claims.
The closest Spencer's attorney came to making such a request was on the first day of trial, when counsel stated, "It would almost make sense to almost bifurcate and have the issue of what his ownership interest is first . . . ."
However, counsel's statement was not a request to bifurcate. It was a request to "almost" bifurcate on the grounds that it "would almost make sense" to do so. Counsel filed no papers to support this request, and cited no authority, thus depriving Beaumanor's attorney of any meaningful opportunity to respond, and depriving the court of the factual and legal background necessary to make an informed ruling on the point. Moreover, the record shows the trial court did not understand this request as being a motion to bifurcate. Later the same day, the court stated, "[T]here's no motion to bifurcate . . . ." Spencer's counsel did not assert otherwise.
As Beaumanor notes, section 598 requires a motion to bifurcate to be made no later than the close of the pretrial conference in cases where such pretrial conference is held, or in other cases, no later than 30 days before the trial date. This requirement is no mere technicality, but rather is designed to ensure such motions are based on thoughtful research and analysis, by both the lawyers and the trial court. If Spencer had followed section 598, presumably Hoopes, supra, 168 Cal.App.4th 146 would have been discovered before the case was tried.
Further, when Spencer's attorney made his request to "almost bifurcate," the court was laboring under the misapprehension that Spencer was seeking $450,000 in money damages—not because of any fault by the trial court, but because that is how Spencer's attorney described the case at that early point.
Before making his request to "almost bifurcate," Spencer's counsel told the court he had a "big dollar issue." When the court identified that issue by saying "[Spencer] wants $450,000.00"—counsel said nothing about declaratory relief. The record shows that at the time, the court refused to bifurcate because it understood each side wanted money damages.
It was not until much later in the same day, after voir dire and plaintiff's opening statement, when counsel clarified that Spencer was not seeking money damages, but only declaratory relief. Once that happened, the court stated, "[T]here's no motion to bifurcate, but what you want can't—the jury can't give you." (Italics added.) If Spencer wanted to have the declaratory relief claims determined first, that was the time to speak up, but his attorney made no request to bifurcate, as the court expressly noted.
The next trial day, Miltner filed a motion—but it was not a motion to bifurcate to have the equitable claim decided first. It was a motion to dismiss the jury entirely, and have every issue, including Beaumanor's fraud claim for damages, tried only to the court.
Beaumanor's brief incorrectly states this was a motion to bifurcate the declaratory relief cause of action, whereas Spencer's brief correctly states it was a motion for the entire case to be heard by the court.
In granting a new trial on the ground an error in law occurred, the court's order states, "Midway through the trial, Spencer made an oral motion to 'strike the jury' and bifurcate the declaratory relief cause of action." As demonstrated above, this statement is not correct. To the contrary, Spencer's lawyer never sought to bifurcate the equitable claim to be tried first. The court said so itself at least three times—first, as quoted above, after Fuselier's opening statement, second, when the parties each requested judgment on the declaratory relief cause of action, and third, when directing Beaumanor's counsel to prepare a judgment, stating, "[T]here's never a request to bifurcate" in this case. Not once did Spencer's counsel disagree or contradict any such assertions when made.
In sum, the court erred in granting a new trial on the ground of error in law because not only was there no legal error, but even if there was, it was not "excepted to by the party making the application" as required by section 657.
2. Error in law in not granting nonsuit motions
As noted, ante, Beaumanor moved for nonsuit on Spencer's causes of action for conversion, breach of fiduciary duty, and breach of contract on the grounds there was no evidence of damages. The court also granted a new trial for "error in law" on the grounds Beaumanor's "motions for non-suit should have been granted."
The order granting a new trial cannot be sustained on this ground, however, because the jury returned verdicts in favor of Beaumanor and against Spencer on each of these causes of action. Accordingly, any error in denying Beaumanor's nonsuit motions was not prejudicial. (Donlen, supra, 217 Cal.App.4th at p. 147.)
3. Verdict forms
The court also found an error in law occurred because the forms of verdict "were cobbled together, confusing, and asked the jury to determine questions of law and equity." We disagree.
To begin with, the parties agreed on the form of the verdicts. Moreover, the verdict forms are not confusing. The special verdict findings for fraud, which was Beaumanor's principal theory of recovery tracks verbatim the standard form civil verdict, CACI No. VF-1900, entitled, "Intentional Misrepresentation." Similarly, the verdict on conversion—where the jury determined Beaumanor did not convert Spencer's interest—is verbatim of CACI No. VF-2100, entitled "Conversion." (Id. at p. 1165.)
On appeal, Spencer asserts the verdicts were confusing, as evidenced by what he characterizes as inconsistent findings: the jury found in his favor on Beaumanor's cause of action for breach of contract, but against him on fraud and breach of fiduciary duty. Spencer's argument is unpersuasive because there is no inconsistency. Although the jury found Spencer did not breach a contract with Beaumanor, that determination was not based on a finding that Spencer duly performed, but rather that conditions precedent to Spencer's obligations never arose. Because the jury found conditions precedent did not arise, the jury never even answered the question whether Spencer "fail[ed] to do something the contract required him to do."
4. The economic loss doctrine does not apply
Spencer also contends an error in law occurred because "[b]oth the verdicts for breach of fiduciary duty and fraud against [Spencer] are illegal pursuant to the economic loss doctrine."
This economic loss argument is untenable. The economic loss rule, which in some circumstances "bars a tort action in the absence of personal injury or physical damage to other property" (Robinson Helicopter Co. Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 984) does not apply to claims for fraud in the inducement. (Id. at pp. 989-990.) Here, the gravamen of Beaumanor's case is Spencer fraudulently induced Beaumanor to grant him an ownership interest, and pay dividends and distributions, by misrepresenting the amount, and in fact the very existence, of his interest in the Leon Herrick Note. As Beaumanor's attorney explained to the court in successfully defeating Spencer's motion for a nonsuit on fraud:
"My clients were lied to about what was contributed to the LLC and they put up good money for that. They give up their interest for that based on his representation. It's not a true representation. [¶] . . . [¶] Their damages were the interest he took, and . . . [¶] [w]hile he had it, he got this money right here, $81,281, as a result of this fraud."
Accordingly, the economic loss rule does not apply.
For the same reasons, we reject the economic loss rule argument Spencer asserts in his cross-appeal from the order denying his JNOV motion.
II. THE COURT CORRECTLY DENIED BEAUMANOR'S JNOV MOTION
After the jury returned its $1 verdict, but before the court had decided how it would decide Spencer's equitable claim, the subject of Beaumanor's $81,000 in damages was raised. The court remarked, "[T]here was no dispute as to that. So once a determination is made that [Spencer] had no interest, then [Beaumanor] get[s] [$]81,000 and some dollars without a second thought." Beaumanor's attorney agreed, stating, "[T]hat would be a basis for a motion for new trial on the inadequacy of damages." (Italics added.)
However, Beaumanor did not file a motion for new trial on the grounds of inadequate damages (or any other grounds). Instead, Beaumanor choose to file a JNOV motion, asserting the jury's award of $1.00 "has no basis in the evidence" and "the only evidence of Beaumanor's damages that was introduced and was undisputed was that Beaumanor paid $81,281 in distributions to Spencer based on his fraudulently obtained membership interest."
The court correctly denied Beaumanor's JNOV motion because a court "cannot grant judgment notwithstanding the verdict merely upon the ground that damages were excessive or inadequate. That issue must be raised by a motion for new trial . . . ." (Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, 919.)
Although Spencer failed to raise this issue in his respondent's brief, by order dated November 22, 2016, we afforded the parties an opportunity to address this issue in their supplemental briefs.
Where damages are inadequate "the proper procedure is to set the verdict aside on motion for new trial." (Crowe v. Sacks (1955) 44 Cal.2d 590, 599.) A motion for new trial—not a motion for JNOV—is the proper procedure because such verdicts may be the result of jurors compromising the issue of liability. (Id. at p. 598; see also Clifford v. Ruocco (1952) 39 Cal.2d 327, 329.) Because affording substantial justice to the defendant in such circumstances requires a new trial of both liability and damages, it would be inappropriate in such cases to increase the amount of damages by a JNOV motion, while leaving the potentially compromised liability findings intact.
A compromise verdict occurs when a juror who has the conscientious conviction there is no liability changes his or her vote in favor of liability, in exchange for other jurors, who believe that damages are of a certain amount, to change their vote on damages for a substantially lesser amount. (See Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1346.) Because a jury's fair assessment of liability is fundamental to justice, its verdict on liability must be based on conviction, and not a function of compromise. (See generally Lauren H. v. Kannappan (2002) 96 Cal.App.4th 834, 840-841). As noted, ante, in this case neither party raised the issue of compromise verdict as a ground for new trial, in either the trial court or on appeal, and therefore we do not address it.
SPENCER'S CROSS-APPEAL
In his cross-appeal Spencer is entitled to file the last brief, limited to a reply to Beaumanor's cross-respondent's brief. However, Spencer's last brief is entitled "Respondent's Reply Brief & Cross-Appellant's Reply Brief." The "Respondent's Reply Brief," about 30 pages long, is an unauthorized sur-reply on Beaumanor's appeal and therefore we disregard it. The actual cross-appellant's part of this brief, entitled "Legal Discussion As to Cross-Respondent's Brief" is only three pages. --------
III. THE COURT CORRECLTY DENIED SPENCER'S JNOV MOTION
Spencer cross-appeals the court's order denying his JNOV motion, asserting no substantial evidence supports the verdict.
"'"The scope of appellate review of a trial court's denial of a motion for judgment notwithstanding the verdict is to determine whether there is any substantial evidence, contradicted or uncontradicted, supporting the jury's conclusion and where so found, to uphold the trial court's denial of the motion."'" (Shapiro v. Prudential Property & Casualty Co. (1997) 52 Cal.App.4th 722, 730.) We review the correctness of the trial court's ruling and are not limited by the trial court's reasons supporting it. (See California Service Station etc. Assn. v. American Home Assurance Co. (1998) 62 Cal.App.4th 1166, 1171.)
Under the substantial evidence standard, "[t]he issue is not whether there is evidence in the record to support a different finding, but whether there is some evidence that, if believed, would support the findings of the trier of fact." (Fariba v. Dealer Services Corp. (2009) 178 Cal.App.4th 156, 170.) The testimony of one witness, even that of a party, may constitute substantial evidence. (In re Marriage of Mix (1975) 14 Cal.3d 604, 614.)
Contrary to Spencer's assertion, substantial evidence supports the judgment. Herrick testified Spencer carried out a plan to ensure Herrick's separate property interest in Beaumanor would pass to him (rather than to her children) as a joint tenant when she died, which Spencer expected to occur within months. Spencer misrepresented the value of the Leon Herrick Note, and at trial he admitted forging Herrick's signature on key documents that purported to give him a joint tenancy interest in what Spencer represented to be a $900,000 asset. Spencer admitted he and Herrick held no other property in this manner. Herrick explained why she would not have authorized any such transaction, given their long history of marital problems and her concern for her children's economic well-being.
Although Herrick's testimony alone is enough to support the judgment, her version of events was corroborated by other witnesses, including Daniel Stone. He refuted Spencer's theory that Herrick was a scorned woman, bent on retaliating against her ex-husband by orchestrating his removal from Beaumanor. Stone testified he was the one who discovered Spencer's "irregularities in his fiduciary responsibilities," and he was the one who said Spencer "had to go."
In evaluating Spencer's substantial evidence argument, we presume the jury credited Stone's testimony and disbelieved Spencer's contrary evidence. Indeed, the jury heard that Stone and Spencer were formerly close friends and "had a lot of things in common." Stone testified it was difficult, after discovering Spencer's wrongdoing, to discharge him from Beaumanor because "he was a very, very close personal friend."
Additionally, there was a substantial basis for the jury to have viewed Spencer's testimony with suspicion. Spencer's case was a moving target. He took inconsistent positions, on the one hand he claimed he had a $900,000 interest in Beaumanor based on his rights in the Leon Herrick Note, yet he was impeached by his deposition testimony where he testified that note had "zero value." At trial, Spencer stated his rights in Beaumanor were instead based on a secret $900,000 cash contribution that he and Herrick agreed to keep "off the books." Herrick categorically denied any such $900,000 contribution. Finally, as a third theory, in deposition Spencer testified to $900,000 of interest in exchange for his promotional efforts, which he called his "[b]lood, sweat, and tears."
Spencer also contends the court should have granted his JNOV motion because the court failed to rule on his equitable claim for declaratory relief. However, once the jury returned special verdicts finding (1) Spencer defrauded Beaumanor and breached his fiduciary duties; and (2) Beaumanor did not convert Spencer's interest in the company, the ruling on Spencer's declaratory relief cause of action was a fait accompli. (Hoopes, supra, 168 Cal.App.4th at p. 159.) The court was required to, and ultimately did, consider itself bound by the jury's prior factual findings. As such, the court recognized it could not sign a proposed statement of decision awarding Spencer any interest in Beaumanor, and the court properly refused to do so. The court ultimately entered a judgment stating that "Judgment is entered . . . against Joseph Spencer on Joseph Spencer's claims." There was no error. That judgment is properly interpreted to include a judgment against Spencer on his cause of action for declaratory relief, which was compelled as a matter of law based on the jury's binding findings in the special verdicts. (Hoopes, at p. 159.)
DISPOSITION
The order granting a new trial is reversed. The judgment is reinstated. The orders denying motions for judgment notwithstanding the verdict are affirmed. Historic Beaumanor Apartments, LLC is entitled to costs on appeal.
NARES, J. WE CONCUR: BENKE, Acting P. J. IRION, J.