Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County Super. Ct. No. BC340170. Malcolm Mackey, Judge.
Law Offices of Kenneth Lance Haddix and Kenneth Lance Haddix for Plaintiff and Appellant.
Debra Fischl for Defendants and Respondents Oded Wolf and Steven Zale & Co., LLC.
No appearance on behalf of Defendant and Respondent Steven Zale.
ARMSTRONG, J.
Plaintiff and appellant Sumaria Gems, Inc. appeals the judgment entered following a bench trial in his lawsuit for fraudulent conveyance and conversion, as well as the orders awarding attorney fees and costs to the prevailing parties. We affirm the judgment but reverse the attorney fee awards.
FACTS AND PROCEDURAL BACKGROUND
Plaintiff is in the wholesale diamond business, selling loose diamonds and manufactured jewelry to various vendors. Between 1999 and 2001, plaintiff did business with one such vendor, KRS Crown, Inc., which was owned by defendant and respondent Steven Zale. During that time, plaintiff would consign to KRS Crown loose diamonds, documenting each transaction with a "Consignment Invoice." In November 2001, KRS Crown was robbed; plaintiffs' consigned diamonds, valued at approximately $143,000, were among the gems stolen.
KRS Crown submitted a claim to its insurer, resulting in its receipt of insurance proceeds of approximately $231,000. Plaintiff received none of the insurance proceeds. KRS Crown ceased doing business shortly after receiving the insurance proceeds. Soon thereafter, Zale, together with defendant and respondent Oded Wolf, formed a new California corporation, Steven Zale & Co., LLC, also in the wholesale jewelry business.
On or about April 15, 2004, plaintiff sued KRS Crown for breach of contract and obtained a default judgment in the amount of $166,941.24. Because KRS Crown went out of business, plaintiff was not able to execute on the judgment.
Believing that Zale had used the insurance proceeds paid to KRS Crown to capitalize the LLC, and transferred the remainder of KRS Crown's assets to the LLC, plaintiff filed this lawsuit against KRS Crown, Zale, Wolf and the LLC for fraudulent conveyance, conspiracy to commit fraudulent conveyance, and conversion, seeking to recover the money KRS Crown owed it on account of the robbery.
After a three-day bench trial, the trial court concluded that plaintiff had failed to establish that the insurance proceeds were converted by Zale for use by the LLC. Consequently, judgment was entered for the defendants.
Thereafter, Zale on the one hand, and Wolf and the LLC on the other hand, sought an award of attorney fees, based on the attorney fee provision in plaintiff's Consignment Invoices. The trial court awarded Zale, Wolf and the LLC their costs and fees.
The amount of the awards is not immediately apparent from the record. While Wolf and the LLC filed a notice of ruling setting forth the award to them in the aggregate amount of $16,565.07, the record on appeal contains no notice of ruling with respect to the fees awarded to Zale, and the parties' briefs reference no such document.
Plaintiff timely appealed both the judgment and the awards of fees and costs. The two appeals were consolidated for purposes of briefing, oral argument and decision.
DISCUSSION
1. Statement of Decision
Plaintiff maintains that it timely filed its Request for Statement of Decision on July 13, 2006, but that the trial court "completely ignored the request." Citing Code of Civil Procedure section 632 and rule 232 of the California Rules of Court, plaintiff contends that the trial court's failure to provide a statement of decision is reversible error. Plaintiff is mistaken.
First, plaintiff orally waived a written statement of decision prior to trial, on June 27, 2006, as follows:
"The Court: . . . The other thing is I will give an oral statement of decision at the end of the case, and the reporter will take it down, and you will have a record of it. Can we waive a written statement of decision? You have it orally, and you can ask me questions about any decision.
"Mr. Haddix [plaintiff's counsel]: As long as it is taken down by the court reporter.
". . .
"The Court: Mr. Haddix stipulated. Okay. That's fine."
Having waived its right to a written statement of decision, the trial court was not required to prepare such a statement.
Moreover, contrary to plaintiff's assertion, its request for a written statement of decision was not timely. As plaintiff acknowledges, Code of Civil Procedure section 632 specifies that a party must request a statement of decision "within 10 days after the court announces a tentative decision." The court announced its tentative decision on June 29, 2006: "You know, there is a lot of confusing facts tracing money. I tried to trace the money, but I have a problem getting it back to Mr. Zale. So I have to find for Zale individually. And I was not going to be able to get down to LLC and Wolf, because I didn't see any liability as to them. You showed some amounts, some strange transactions, but I didn't see the liability. So judgment for the defendants. . . . [¶] . . . That is my ruling."
Plaintiff's request for a written statement of decision, which was filed on either July 14, 2006 or July 17, 2006, was submitted more than 10 days after the court announced its tentative decision. Because plaintiff did not timely request a statement of decision, the trial court's failure to prepare one is not reversible error.
2. Objections to Proposed Judgment
Plaintiff complains that, after respondents filed a Proposed Judgment on July 3, 2006, "the trial court did not wait for the 15-day period [including the five days added pursuant to Code Civ. Proc., § 1013 for service by mail] provided for under Rule 232 to expire before it signed the proposed judgment. On or about July 10, 2006, the trial court, without giving Sumaria an opportunity to file its objection to the proposed judgment, had signed the proposed judgment." Plaintiff concludes: "Clearly the trial court erred and had abused its discretion in choosing to hastily sign the proposed judgment prior to the expiration of Sumaria's right to file an objection to the proposed judgment."
Plaintiff cites no case, and we know of none, which authorizes this court to reverse a judgment because the trial court entered judgment before the expiration of rule 232's objection period. If plaintiff's objections to the proposed judgment are well-taken, we will reverse it on the merits, not because the judgment was entered a few days early.
3. Substantial Evidence Supports the Judgment
Plaintiff next argues that the trial court erred when it ruled in favor of respondents because plaintiff "has shown by preponderance of evidence that Respondents . . . were liable for fraudulent conveyance against Sumaria." Plaintiff misunderstands its burden on appeal.
"Where the evidence is in conflict, the appellate court will not disturb the verdict of the jury or the findings of the trial court. The presumption being in favor of the judgment, the court must consider the evidence in the light most favorable to the prevailing party, giving him the benefit of every reasonable inference, and resolving conflicts in support of the judgment." (9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 359, p. 408, emphasis in original.) "It is an elementary, but often overlooked principle of law, that when a verdict is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the [factfinder]. When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court." (Crawford v. Southern Pac. Co. (1935) 3 Cal.2d 427, 429.)
As a consequence of this "conflicting evidence rule," an appellate court may not weigh the evidence or reverse the judgment in accordance with the preponderance of the evidence. "A judgment against the weight of the evidence will be affirmed, provided the record is free from prejudicial error, if there is substantial evidence to support it." (9 Witkin, supra, Appeal, § 363, p. 413.) Zales's testimony that he exhausted the insurance proceeds in payment of KRS Crown's legal debts and that the company had no assets when it ceased doing business is substantial evidence that the defendants did not convert the insurance proceeds to their own use or fraudulently convey KRS Crown's assets to the LLC. (See Menning v. Sourisseau (1933) 128 Cal.App. 635, 639 ["Defendant's demeanor on the stand, his appearance and his manner of giving testimony may have been sufficient to convince the trial judge of the defendant's honesty, integrity and the truthfulness of his testimony."]) Because substantial evidence supports the judgment, plaintiff's contention that the judgment should be reversed due to the trial court's faulty factual findings is without merit.
4. Attorney Fees Award
After judgment was entered in their favor, respondents moved for an order awarding attorney fees. Although plaintiff had sued on the tort claims of fraudulent conveyance and conversion, respondents argued that the causes of action were "based on 'written agreements' which consisted of 'Consignment Invoices.'" The trial court agreed, and awarded respondents their attorney fees and costs.
Plaintiff maintains that, because its lawsuit was not based on a contract with an attorney fees provision, the trial court erred in awarding respondents their attorney fees and costs. Plaintiff's argument is well-taken.
Attorney fees are not recoverable as costs unless expressly authorized by statute or contract. (Code Civ. Proc., § 1021; Reynolds Metal Co. v. Alperson (1979) 25 Cal.3d 124, 127.) "As a general rule, attorney fees are awarded only when the action involves a claim covered by a contractual attorney fee provision and the lawsuit is between signatories to the contract." (Real Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 380.) While the reciprocity principles of Civil Code section 1717 have been invoked "in actions involving signatory and nonsignatory parties" (ibid.), for instance, when a non-signator sues on a third-party beneficiary theory, they have not been applied, as they were in the trial court, to claims not based on contract.
Respondents base their entitlement to fees on Civil Code section 1717, which provides: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs."
No evidence was presented at trial to the effect that the parties to this lawsuit entered into any contract whatsoever, much less one which contained an attorney fees clause. Indeed, plaintiff sued the party with which it had contracted, KRS Crown, in an earlier proceeding for breach of contract. Had KRS Crown prevailed in that proceeding, it would have been entitled to its attorney fees.
In the instant lawsuit, plaintiff sued the individuals, Zale and Wolf, and their company, Steven Zale and Company, LLC, for their tortious conduct, not for breach of contract. The fact that, in the course of putting on its proof plaintiff introduced into evidence "Consignment Invoices" which contained attorney fee provisions does not transform this matter into a contract claim entitling the prevailing party to its attorney fees. Indeed, the reciprocity provisions of Civil Code section 1717 cannot come into play here, since plaintiff clearly would not be have been entitled to his attorney fees had he prevailed on his causes of action for fraudulent conveyance and conversion.
DISPOSITION
The judgment is affirmed. The award of attorney fees is reversed. The parties are to bear their own costs on appeal.
We concur: TURNER, P. J. KRIEGLER, J.