Opinion
A117331
4-22-2008
NORBERT A. LEWANDOWSKI et al., Plaintiffs and Respondents, v. STEVEN MURDOCK, Defendant and Appellant.
Steven Murdock appeals contending the trial court erred when it denied his motion to vacate a judgment. We conclude the court did not abuse its discretion and will affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 1996, respondents Norbert and Shirley Lewandowski sold rental property that they owned. Hoping to defer taxes on their capital gains, they consulted their accountant, appellant Steven Murdock. Appellant said he had a great deal of experience in tax-deferred exchanges. He said he would help respondents select an appropriate property. After first recommending a house in another state, appellant recommended a house in Dublin. He told respondents it would take $80,000 to close the deal. Because respondents did not have that much money, appellant offered to assist respondents by entering into a partnership. Respondents would contribute $60,000 and appellant would contribute $20,000. Respondents agreed. Appellant then prepared a partnership agreement under which respondents would own a 75 percent interest in the property and appellant would own 25 percent.
Escrow on the Dublin property closed in December 1997. The closing costs were not $80,000 as appellant had represented, but only $67,781.34. Of that amount, respondents paid $62,781.34, and appellant paid $5,000.
The Dublin property was a rental and appellant, with respondents consent, moved in as a tenant. However, shortly thereafter, appellant began to manipulate the propertys financial records. Appellant began to charge the partnership for work he performed as a property manager and accountant even though the partnership agreement stated specifically that neither partner would be compensated for their work. In addition, appellant began to characterize his monthly rent checks as mortgage payments, apparently in an effort to increase his equity in the property.
In late 2003, the partners decided to refinance the property in order to take advantage of lower interest rates. Anticipating that appellant might purchase the property from the partnership ultimately, the partners placed the new mortgage and grant deed in appellants name.
Shortly after the refinance, appellant began to claim that he now owned 75 percent of the property while respondents owned 25 percent. Respondents wrote to appellant and asked for an explanation. Appellant failed to respond.
Respondents then filed the complaint that is at issue in this appeal. As is relevant, they alleged a cause of action for partition.
The case was tried to a judge who entered an interlocutory judgment stating that respondents owned 75 percent of the Dublin property and that appellant owned 25 percent. The court also ruled that partition was appropriate and ordered the property be sold. The judgment was supported by a 15-page statement of decision in which the court explained, in detail, the reasons for its ruling. As is relevant, the court stated as follows:
"The court finds by clear and convincing evidence that it was not enough for the defendant to obtain a 900% return on his $5000.00 investment and 25% interest in a property worth in excess of $650,000.00. The defendant selfishly wanted it all. To that end the defendant intentionally and consciously attempted to defraud and wrongfully deprive the plaintiffs out of their proper share in the partnership property by the use of deceit, double talk, the manipulation of records through his property management and accounting company, and by the superior bargaining position he held by his occupancy of the premises along with the grant deed and mortgage being in his name. . . . "
"The court finds by clear and convincing evidence that the defendant, to achieve his selfish goal engaged in conduct with malice, oppression and fraud. The defendant owed a fiduciary duty to his partners to take appropriate care of the property and not to use his position as financial advisor and resident in the partnership property to deprive his partners of their rightful share and interest in the property. Defendants breach of his fiduciary obligations to his partners was despicable and done with willful and knowing disregard of the rights of the plaintiffs. Defendant intentionally misrepresented the truth which was designed to deprive his partners of their rightful interests in the partnership property.
"The evidence clearly reflects that this was not a spur of the moment plan by defendant to deprive his partners of their rightful interests. This is reflected by the fact that early in the partnership the defendant started to manipulate and trying to document things in a fashion to minimize the interests of the plaintiffs."
The court also made clear that it found appellants testimony at trial to be not credible:
"This case did not come down to one partners word against another. The clear language of the partnership agreement — drafted by defendant — compels a holding for the plaintiffs. Furthermore, to get to the end result urged by the defendant requires a dramatic distortion of reality and mental gymnastics which are not supported by the evidence, reason, logic or even simple arithmetic.
"This reality might explain why defendants testimony on all matters in dispute reached a point in the trial that he was simply not credible. To begin with the defendants testimony was impeached by earlier statements that he made in writing or at his deposition. Then as his testimony proceeded during the trial, the defendant would contradict himself. At times one got the impression he was making it up as he went along. These contradictions were not on minor points. More telling was the fact that the defendant did not present any documentation — cancelled checks or receipts — to support his contentions that he paid substantial amounts of money on improvements and maintenance on [the Dublin house] resulting in his equity share in the property growing to 75% . . . ."
After the court entered the interlocutory judgment, appellant filed a motion for new trial. He presented evidence that showed he had been complaining of memory problems since 2003, and that he had been diagnosed with Alzheimers disease shortly before the trial. Appellant asked the court to reevaluate its decision in light of that fact.
The trial court denied appellants motion as follows:
"There is no basis for the Court to find that Defendants rights were materially affected by accident or surprise, or that there is newly discovered evidence that Defendant could not, with reasonable diligence, have discovered or produced at trial. The records submitted by Defendant show on their face that he was aware of his medical condition at the time of trial. Those records also show that Defendants condition did not prevent him from disclosing the true facts to his attorneys.
"The evidence was clearly sufficient to justify the verdict. The Courts determination with regard to the underlying facts surrounding the ownership interests in the partnership are not dependant upon the fact that Defendants affirmative testimony was not credible. The documentary evidence introduced into evidence was sufficient in itself to establish Plaintiffs ownership interest in the partnership. There is nothing before the Court to suggest that if a new trial is granted, Defendant will be able to offer some credible explanation for his conduct that will change the substantive ruling.
"The evidence presented by Defendant is not sufficient to cast doubt upon the finding of intentional conduct. During all relevant time periods, including November 2003, Defendants medical condition was not severe, to the point of being undetectable by medical testing."
Almost three months after the court denied appellants motion for new trial, appellant, now represented by different counsel, filed a motion to vacate the judgment. New counsel argued that "former defense counsels failure to advise the Court of Defendants medical condition constituted extrinsic mistake depriving Defendant of a fair adversary hearing . . . ." Respondents opposed the motion arguing appellant was simply rearguing the points he had advanced in his prior unsuccessful motion for new trial. In reply, appellant submitted a declaration from Bruce R. Reed, a psychologist and specialist in Alzheimers disease. Dr. Reeds attached report stated as follows:
"[I]n July of 2006 [when the case was tried] Mr. Murdock was mildly demented and . . . his memory impairments were sufficiently severe as to significantly limit his ability to assist in his own legal defense. Exactly what errors and lapses he would have exhibited are difficult to predict and some degree of variability is expectable. However, based on the degree of memory impairment that I think was present, I would expect that his ability to accurately recall recent events, including conversations, and the actions of himself and others, would be severely diminished and highly unreliable. His inability to recall these events might have been manifested in frank statements of forgetting. However, [it] is important to consider that his own awareness of his memory loss is, and was likely to be, shallow and inconsistent. Thus, it was unlikely that he would consistently say to others, in effect `I have a serious memory problem and I simply cannot recall what you are asking. More likely he might have presented answers that seemed to him reasonable or plausible but which were not based in any true recall of the events or circumstances. This is not `lying (although it might have appeared as such), but rather it is a common response of patients with pathological memory failure. It is often referred to as `covering, which is a useful descriptive term, but unfortunately implies a degree of intentionality which is in fact not there. These kinds of false but superficially plausible statements are instead fundamentally based in the amnestic patients inability to distinguish what is true in a particular situation from what is familiar and in some sense possible. Other manifestations of his illness might have been failure to follow through on requests from his attorney, [and] failures or inability to locate or supply documents. While memory was severely impaired, most other aspects of mental function were intact or nearly so meaning that his social skills, his personality, his ability to express himself, as well as his physical function and appearance of health were all retained. This is a peculiar disjunction (although it is absolutely characteristic of early AD) and can mask symptoms and make their interpretation confusing. I think it likely that his reasoning and judgment were subtly impaired, although this is more difficult to objectively demonstrate. The key point here is that at that time his episodic memory—his ability to learn, retain, and recall specific new material and the ongoing events of his work and life—was severely impaired, and to the extent that he needed memory to assist himself in those legal proceedings he would not have been able to do so. Because of his impairments, his diminished appreciation of them, his `covering responses, and his outward appearance of health, instead of being able to assist in his defense it was instead the case that Mr. Murdock would repeatedly act in a manner so as [to] impede his interests and interfere with his defense."
The trial court conducted a hearing on appellants motion to vacate and denied it, explaining as follows: "The evidence presented does not support a finding of extrinsic mistake. Defendant does not show that he was denied a fair trial. Defendant does not show that the result would have been different if the Court had known of his medical condition."
This appeal followed.
II. DISCUSSION
Appellant contends the trial court erred when it denied his motion to vacate the judgment.
Code of Civil Procedure section 473, subdivision (b) states in part: "The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect." Our review of a trial courts ruling on a section 473 motion is highly deferential. We "extend all legitimate and reasonable inferences to uphold the judgment. The disposition of such a motion rests largely in the discretion of the trial court, and its decision will not be disturbed on appeal unless there has been a clear abuse of discretion. Although precise definition is difficult, it is generally accepted that the appropriate test of abuse of discretion is whether or not the trial court exceeded the bounds of reason, all of the circumstances before it being considered. [Citations.] We have said that when two or more inferences can reasonably be deduced from the facts, a reviewing court lacks power to substitute its deductions for those of the trial court. [Citations.]" (In re Marriage of Connolly (1979) 23 Cal.3d 590, 597-598.)
Here, appellant contends the trial court abused its discretion when it denied his motion to vacate. First, he argues that if his mental condition had been known at the time of trial, the "court could have and should have excluded his testimony because he did not have the requisite personal knowledge."
It is not clear whether appellant would have been permitted to testify if the court had known of his condition at the time of trial. Our Supreme Court has stated that a witness with mental deficiencies may testify so long as he has the capacity to perceive and recollect. (People v. Lewis (2001) 26 Cal.4th 334, 356-359.) However, the court here was denied the opportunity to make that determination. Even though the records appellant submitted in support of his motion to vacate show appellant had been complaining of memory problems since 2003, and that he had been diagnosed with Alzheimers disease shortly before trial, appellant did not tell anyone that fact. Thus neither the court nor counsel had any reason to suspect that appellant was operating under some disability.
A party who fails to object in the court below waives the right to challenge a witnesss competency on appeal. (People v. Lewis, supra, 26 Cal. 4th at p. 357, see also People v. Augustin (2003) 112 Cal.App.4th 444, 447.) We conclude appellant has waived the right to argue that the court could and should have excluded his testimony at trial.
Next, appellant argues the court "failed to `exercise its discriminating judgment " when it denied his motion to vacate. Some courts have used that term to describe the abuse of discretion standard. (See e.g. Hernandez v. Superior Court (2004) 115 Cal.App.4th 1242, 1246.) Therefore, appellant argues, in essence, that the court abused its discretion when it denied his motion. We find no such abuse. It is true that the declaration and documentation appellant submitted from psychologist Reed indicated appellant was suffering from Alzheimers disease at the time of trial. However, Reed did not state that appellants disease would somehow have caused him to defraud others. As the court explained when denying appellants motion for new trial, appellant started defrauding respondents and manipulating the partnerships books shortly after the partnership was formed in 1997. That was years before appellant started to complain of any sort of memory problems. Furthermore, the court stated expressly that its determination of the partners ownership interests was not based on appellants testimony at trial, but on the partnership documentation. The trial court could, and impliedly did, conclude the judgment was valid because it was based on factors that were unrelated to the memory problems appellant was experiencing.
Appellant also contends that once the court knew of his impaired mental state "as a matter of public policy", the court had an obligation "to protect him from others who would take advantage of his impaired state." Assuming without deciding that the court had such an obligation, the record does not indicate the court failed to carry it out. The judgment was supported by the evidence that was presented. The mental problems appellant was experiencing did not necessarily contribute to that verdict. Appellant was represented throughout these proceedings by vigorous counsel. We see no reason to conclude the court failed to protect appellant from others.
Next, appellant argues that he was entitled to vacate the judgment on the grounds of mistake. The precise mistake appellant identifies is his counsels failure to know that he had been diagnosed with Alzheimers disease before trial. We find no place where appellant raised this argument in his opening brief so the issue is waived. (Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy (1992) 4 Cal.App.4th 963, 976.) The argument also is not meritorious. The record does indicate that trial counsel did not know that appellant had been diagnosed with Alzheimers disease shortly before the trial. However, the reason for this is apparent: Appellant failed to tell him. When a party by his or her conduct induces the commission of error, he or she is estopped from asserting it as a ground for reversal. (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 403.)
Finally, appellant argues at several points in his briefs that the court should have granted his motion to vacate because psychologist Reeds declaration and evaluation were unrebutted. While that is true, appellant filed Reeds declaration and supporting evaluation after respondents filed their opposition to appellants motion. Respondents cannot be faulted for failing to respond to documents that were filed as part of appellants reply.
We conclude the trial court did not abuse its discretion when it denied appellants motion to vacate.
III. DISPOSITION
The order denying appellants motion to vacate the judgment is affirmed.
We concur:
Needham, J.
Stevens, J. --------------- Notes: Retired Associate Justice of the Court of Appeal, First Appellate District, Division Five, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.