Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County, No. 30-2008-00113872 David R. Chaffee, Judge.
The Eclipse Group and Edward F. O’Connor for Defendants, Cross-complainants and Appellants.
Smith, Chapman & Campbell, Steven C. Smith, John S. Clifford and Mark T. Kearney for Plaintiffs, Cross-defendants and Respondents.
OPINION
RYLAARSDAM, ACTING P. J.
The court entered judgment in favor of plaintiffs and cross-defendants Akram Quadri and Fatma Boukhari, who are married to each other (individual plaintiffs), and NeoCell Corporation against defendants and cross-complainants Ahmad Alkayali (Alkayali) and Terri Alkayali, finding the individual plaintiffs owned all the shares in NeoCell and defendants owned none. The judgment also included a permanent injunction barring defendants from the NeoCell premises.
Defendants’ appeal raises several issues. They claim the court erred by denying them a jury trial on the declaratory relief causes of action as to stock ownership, the statement of decision was insufficient, the judgment is not supported by substantial evidence, the injunction should not have issued, and plaintiffs are barred from recovering by unclean hands. Finding none of these arguments meritorious, we affirm.
FACTS AND PROCEDURAL HISTORY
1. Introduction
As appellants, defendants were required to “[p]rovide a summary of the significant facts....” (Cal. Rules of Court, rule 8.204(a)(2)(C).) This means all of the facts necessary for us to properly decide the issues raised, whether or not unfavorable. (In re Marriage of Dekker (1993) 17 Cal.App.4th 842, 847, fn. 2.; see Lewis v. County of Sacramento (2001) 93 Cal.App.4th 107, 113 [“We are a busy court which ‘cannot be expected to search through a voluminous record’”].) In addition, defendants were obliged to “[s]upport any reference to a matter in the record by a citation to the volume and page number” of the transcript. (Cal. Rules of Court, rule 8.204(a)(1)(C).)
Defendants failed to follow the rules. The statement of facts is incomplete and unclear and at times statements are unsupported by record references. Not only that, defendants impermissibly intersperse argument within this section of the brief. As a result it is difficult to understand the events leading up to the filing of the action. It would have been helpful if plaintiffs had included a statement of facts in their brief, although we recognize they were not required to do so.
To the extent facts are set out in the statement of decision we rely on those. (See Chapala Management Corp. v. Stanton (2010) 186 Cal.App.4th 1532, 1535 [“‘“Where [a trial court’s] statement of decision sets forth the factual and legal basis for the decision, any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision”’”].) Further, since it is not our burden to comb through the multiple volumes of clerk’s and reporters’ transcripts we note only those facts readily available.
2. Facts
The primary dispute in this action is ownership of NeoCell. In September 1998, defendants and the individual plaintiffs entered into an agreement to form NeoCell, agreeing each would own one-quarter of the shares. By virtue of a document that bears a date of October 1998, the parties agreed that as of January 2002 defendants would transfer all of their shares to the individual plaintiffs, and defendant Ahmad Alkayali would act as a consultant to manage NeoCell for $9,000 per month (consulting agreement). (Neither party explains the apparent discrepancy in the dates.)
Defendants relied on a document dated July 2002 (2002 amendment) that they argue purported to amend the original agreement and provide that NeoCell would merge with Molecule 2000, Inc., a company in which Alkayali was the majority shareholder. After the merger the individual plaintiffs were each to own 12.5 percent of NeoCell’s shares and Alkayali was to own 66 percent. According to Alkayali’s testimony, at some point the minority shareholders “cash[ed in] their stock, ” bringing his share to 72 percent. Under the 2002 amendment Alkayali was to be paid a minimum of $9,000 per month up to $11,708 and the individual plaintiffs were to earn $2,000 per month each. Quadri testified he and Boukhari never entered into the 2002 amendment but that the terms of the consulting agreement remained in effect.
In 2008 plaintiffs filed this action seeking injunctive and declaratory relief and damages for fraud and trespass. They alleged they had terminated Alkayali’s employment for cause for forging stock certificates showing defendants owned shares in NeoCell. Alkayali refused to leave the premises, claiming he owned both the building and 72 percent of the shares. Two weeks later, despite an agreement he would not reenter the premises, Alkayali returned and took some documents and a computer. In the declaratory relief cause of action plaintiffs sought a declaration that, despite the forged stock certificates, defendants owned no shares of NeoCell.
Defendants cross-complained, asserting several causes of action, including breach of fiduciary duty, fraud, breach of contract, unjust enrichment, assault, and battery. Defendants also sought declaratory relief to determine the respective ownership of NeoCell, alleging they owned 72 percent of the shares. In the breach of contract count defendants pleaded that pursuant to the 2002 amendment 66 percent of the shares were transferred to Alkayali and plaintiffs breached that agreement by claiming Alkayali owned no shares.
During trial Alkayali testified that a company named Biocell Technology obtained a judgment against him and conducted a judgment debtor examination of him in May 2004. In that examination Alkayali stated he did not have an ownership interest in NeoCell. At trial he testified he and Quadri had agreed not to issue shares until after the litigation to avoid the risk the creditor would seize the shares in NeoCell. He also said that a stock certificate showing he owed 660 shares was issued after he settled that lawsuit even though it showed an issue date of September 1998, claiming he and Quadri agreed the certificate should be dated as of when NeoCell was incorporated. Quadri testified that from when and after the consulting agreement was signed, only he and his wife owned shares.
Alkayali also testified that in another judgment debtor examination in June 2007 resulting from a different judgment he stated he did not own stock in NeoCell. During trial he verified this was an accurate statement.
In 2007, NeoCell was in a dispute with its carrier over amounts for worker’s compensation insurance premiums due after an audit. The carrier was requiring NeoCell to provide copies of stock certificates. Sarah Quadri, plaintiffs’ daughter, worked for NeoCell as the office manager. She reported to Alkayali about the carrier’s requirements. He told her to make four copies of a blank stock certificate and fill them in showing each defendant owned 360 shares and plaintiffs owned 140 shares each and to date them as of December 2002. She was instructed to send those to the carrier.
At the time Sarah prepared the certificates she knew plaintiffs owned 100 percent of the shares. Alkayali told her he wanted to send the certificates so NeoCell would not have to pay worker’s compensation insurance premiums for defendants. He said the certificates were not to be used for any other purpose. She signed plaintiffs’ names to the certificates. Alkayali did not tell her to do this. But she did not believe it was necessary to talk to plaintiffs about signing the certificates since she worked with Alkayali daily and did what he told her to do. She believed “he would be responsible.” She “just did it” so she could “be done with this.”
The court determined the individual plaintiffs owned 100 percent of NeoCell’s shares. Additional facts are set out in the discussion.
DISCUSSION
1. Jury Trial
Defendants made a motion to sever the declaratory relief causes of action dealing with stock ownership from the rest of the action and have them tried first. The court decided to try the case in two phases. It empanelled a jury, ruling it would sit in an advisory capacity on the declaratory relief claims to be tried first, even though “dec[laratory] relief [was] ultimately... [the court’s] call..., ” and then try whatever other issues were necessary depending on the determination of stock ownership.
After the declaratory relief issue was tried, the jury was presented with one question: based on the evidence, do plaintiffs or defendants win on their theory of ownership of NeoCell. The jury came back 9 to 3 in favor of defendants. The court declined to accept the verdict, ruling the declaratory relief action was one in equity and decided the individual plaintiffs owned the shares.
Defendants argue they were entitled to have a jury determine the issue because the gist of the action was breach of contract. In support they rely on State Farm Mut. Auto. Ins. Co. v. Superior Court (1956) 47 Cal.2d 428, 432, which states that “‘courts will not permit the declaratory action to be used as a device to circumvent the right to a jury trial in cases where such right would be guaranteed if the proceeding were coercive rather than declaratory in nature.’ [Citations.]”
Defendants maintain the gist of the action is for breach of contract, that is the 2002 amendment, and that stock ownership was based on this amendment and “incidental to [it].” In support they refer to evidence they claim proves the 2002 amendment and the 72-28 percent stock ownership. They assert that when plaintiffs breached the 2002 amendment, defendants were damaged.
This misses the point. As plaintiffs point out, that the evidence proving or disproving stock ownership was based on contract does not transform the declaratory relief action into a contract claim. Moreover, “questions relating to the formation of a contract, its validity, its construction and effect, excuses for nonperformance, and termination are proper subjects for declaratory relief. [Citation.]” (Fowler v. Ross (1983) 142 Cal.App.3d 472, 478.) Further, defendants had a separate breach of contract cause of action in their cross-complaint in which they sought damages. And, pursuant to defendants’ motion, the declaratory relief claims were heard first, separate from the rest of the action, so no damages claims were tried with it; trial was limited to the question of stock ownership.
Caira v. Offner (2005) 126 Cal.App.4th 12 is instructive. It was a complex case consolidating three actions, in which some of the claims were for declaratory relief regarding ownership of common and preferred stock. After the jury rendered advisory verdicts on ownership of the shares, the trial court agreed with the finding regarding the preferred shares but disregarded the finding as to the common stock. The appellant claimed he had a right to a jury on ownership of the common shares. The appellate court disagreed, stating that there is no right to a jury trial in an equitable matter (id. at p. 23) including a “true” declaratory relief action (id. at pp. 23-24), that is, one seeking “to identify rights” as opposed to coercing action (ibid.). To make this distinction the court looks at the gist of the claim. (Ibid.) In Caira, determination of the stock ownership interests was equitable. (Id. at p. 26.) The same is true here. Thus the court did not err when it ruled there was no right to a jury trial on the declaratory relief claims.
2. Statement of Decision
Code of Civil Procedure section 632 declares that, upon request, “[t]he court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial....” The section “does not require that a finding be made as to every minute matter on which evidence is received at the trial....” (Coleman Engineering Co. v. North American Aviation, Inc. (1966) 65 Cal.2d 396, 410.) Rather, “a statement of decision is adequate if it fairly discloses the determinations as to the ultimate facts and material issues in the case. [Citation.] When this rule is applied, the term ‘ultimate fact’ generally refers to a core fact, such as an essential element of a claim” as “distinguished from evidentiary facts and from legal conclusions. [Citations.]” (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513.)
While acknowledging this principle, defendants contend the court may not merely set out evidence in support of the judgment, and go on to recite a litany of facts or issues they maintain the court failed to address, despite their “detailed set of questions, ” for which they fail to provide a record reference. This argument has no merit.
The statement of decision concluded the consulting agreement as the one by which plaintiffs obtained all of the NeoCell shares. Although the statement actually specifies Quadri received the shares, it is clear from the context and the actual consulting agreement that both plaintiffs owned them. “If the statement of decision is ambiguous or omits material factual findings, we will infer any factual findings necessary to support the judgment. [Citation.]” (Chapala Management Corp. v. Stanton, supra, 186 Cal.App.4th at p. 1535, fn. omitted.)
The court further found the 2002 amendment was void because “improperly obtained.” Alkayali was “intelligent and sophisticated” whereas Quadri who was 81 was less sophisticated and completely trusted Alkayali, so much so that he would sign anything Alkayali requested. The court did not find credible Alkayali’s explanation for why Quadri signed the 2002 amendment, setting out the evidence it did not believe and why.
The court also determined the stock certificates prepared at the time of the dispute with workers’ compensation carrier had “no legal effect.” Relying on the testimony of Alkayali and Sarah, it found they were prepared at Alkayali’s direction, solely to defraud the carrier, and not signed by plaintiffs. The court also concluded Alkayali was estopped from claiming any interest in the shares based on his testimony in the two judgment debtor exams, and that he had committed a fraud on the court, either in those proceedings or in the instant trial. Finally, Alkayali had unclean hands due to his untruthfulness in all the proceedings, which eliminated any right to equitable relief. These findings set out facts necessary to support the determination the individual plaintiffs owned all the stock in NeoCell.
Defendants’ argument is also unpersuasive because many of the facts they claim the court omitted from the statement of decision were actually included or were immaterial to it. For example, defendants assert there was no evidence in the statement of decision to support the finding the individual plaintiffs owned all of the shares. But the statement explicitly pointed to the consulting agreement as the basis for their ownership. Defendants also maintain the statement of decision makes no mention of any fraudulent acts by Terri Alkayali. True, but that was not necessary to support the decision as to ownership. The findings that 100 percent of the shares were transferred to plaintiffs by virtue of the consulting agreement and that nothing that occurred thereafter was effective to transfer shares to defendants are sufficient. Likewise, it is irrelevant whether or not Boukhari was unduly influenced. The court is not required to explain how it resolved subsidiary matters even if they are material to the ultimate issues. (Kuffel v. Seaside Oil Co. (1977) 69 Cal.App.3d 555, 565.)
Further, that there was evidence contradicting the facts on which the court relied is irrelevant. “In general, in reviewing a judgment based upon a statement of decision..., ‘any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision. [Citations.]’ [Citation.]” (Estate of Young (2008) 160 Cal.App.4th 62, 75-76.) We also find nothing to support defendants’ claim the court “ignore[d]” all contrary evidence merely to punish him for his misconduct.
3. Sufficiency of the Evidence
Defendants argue the evidence “overwhelmingly” (bold and capitalization omitted) demonstrated they should prevail, claiming plaintiffs did not put on “one scintilla of evidence.” That is just not correct. A mere review of the index to the reporters’ transcripts disproves that claim, showing hundreds of pages of testimony on plaintiffs’ behalf in addition to the numerous exhibits admitted. And the court referred to plaintiffs’ evidence, including testimony by Quadri that he trusted Alkayali and signed documents in complete reliance on him and Sarah’s testimony that her parents did not know about or sign the stock certificates prepared at Alkayali’s direction to defraud the insurance carrier.
More importantly, though, defendants did not preserve their right to challenge the sufficiency of the evidence. To do so, a party must set out in the brief all material evidence, even that which is unfavorable (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881) or we may treat the claim as forfeited (Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 749 & fn. 1). Defendants must also “‘show how and why [the evidence presented] is insufficient. [Citation.]’ [Citation.]” (Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 738, italics omitted.) They did not meet their burden to do so here.
Defendants direct us only to evidence favorable to their position and completely ignore the evidence plaintiffs presented and on which the court relied to make its findings. At best the evidence on which defendants rely merely conflicts with plaintiffs’. We do not reweigh evidence or redetermine credibility. (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 766.)
4. Injunction
As part of the judgment the court issued a permanent injunction barring defendants from trespassing on or coming within 500 yards of NeoCell’s property, contacting any of NeoCell’s employees or customers absent its consent, and removing or otherwise interfering with NeoCell’s books and records. This was an extension of the preliminary injunction issued at the beginning of the action. After trial defendants filed a motion to amend the preliminary injunction, which the court denied on the grounds defendants did not provide authority for the court to amend a preliminary injunction after a permanent injunction had been ordered or explain why they did not raise the grounds in their initial opposition to the preliminary injunction.
Defendants here raise the same arguments they did in the trial court: that the NeoCell business address set out in the injunction is also home to a company called HealthWise Nutraceuticals, Inc., of which defendants are purportedly 72 percent owners; and that the injunction is an improper prior restraint on speech. These arguments have no merit.
First, once the permanent injunction issued, the preliminary injunction was superseded and had no effect. (County of San Diego v. State of California (1997) 15 Cal.4th 68, 110.) Therefore, it cannot be challenged now. In the reply brief defendants adopt that position.
Second, the substantive arguments should have been raised at trial. As the court noted in its ruling, defendants failed to explain why they were not or to provide any authority that the defenses could be raised posttrial.
5. Equity
Relying on the maxim that a party who seeks equitable relief must have clean hands, defendants set out five instances of alleged misconduct they argue bar plaintiffs from prevailing.
This argument suffers from the same defects that infect the others –defendants’ failure to set out all of the material facts, some of which defeat their argument. For example, they point to loan documents the individual plaintiffs allegedly signed showing they owned 28 percent of the stock, presumably exhibits 116A and 116B although not identified here. But they fail to include evidence on which the court relied that Quadri would “sign any paper put in front of him [by Alkayali]” because he had “placed all of his faith and confidence in [him]....” Other documents on which defendants rely, purportedly submitted to the workers’ compensation carrier, which seem to be contained in exhibit 104, cannot be considered because that exhibit was not submitted to us.
Moreover Sarah’s conduct in signing the stock certificates Alkayali created for the purpose of defrauding the insurance carrier, however it is characterized, cannot be imputed to plaintiffs. Defendants reiterate throughout their brief that the court found Sarah was a “real party in interest.” In actuality the court stated she was “effectively a party” based on “inheritance rights.” But in any event, Sarah clearly testified her parents did not sign the certificates and knew nothing of them. If there are any unclean hands in that transaction they did not belong to plaintiffs.
DISPOSITION
The judgment is affirmed. Respondents are entitled to costs on appeal.
WE CONCUR: BEDSWORTH, J., O’LEARY, J.