Opinion
NOT TO BE PUBLISHED
San Mateo County Super. Ct. No. CIV 477881
RIVERA, J.
I. INTRODUCTION
This appeal arises out of the third unsuccessful attempt by The Cadle Company II, Inc. (Cadle) to recover on a defaulted bank loan entered against Balew’s Fine Jewelers, Inc. (Balew’s), a defunct, family-run jewelry business. Cadle has filed five separate appeals, challenging the judgments entered in favor of the defendants and the orders awarding defendants cost of proof fees. In the instant appeal, Cadle appeals from the postjudgment order awarding cost of proof fees to Phillip Bell (Phillip) pursuant to Code of Civil Procedure section 2033.420, following Cadle’s unreasonable denial of the requests for admissions propounded during discovery. We affirm.
The underlying litigation involves Marilyn Bell (Marilyn), and her two sons, Phillip Bell (Phillip) and Harold Bell (Harold). We shall refer to the defendants by their first names to avoid confusion. (See In re Marriage of Witherspoon (2007) 155 Cal.App.4th 963, 967, fn. 2 [“We refer to the parties by their first names for clarity and ease of reference, and intend no disrespect.”].)
All further undesignated statutory references are to the Code of Civil Procedure.
II. BACKGROUND
This action arises from a defaulted bank loan. In April 2005, Cadle sued Balew’s and Marilyn Bell (Marilyn) (The Cadle Company II, Inc. v. Balew’s Fine Jewelers, Inc., et al. (Super. Ct. Santa Clara County, 2005, No. 105CV040095) [Balew’s I]), alleging breach of contract and breach of written guaranty of the loan. After dismissing that action on the eve of trial, Cadle filed an identical action against Balew’s and Marilyn in November 2006, which also named Phillip as a defendant (The Cadle Company II, Inc. v. Balew’s Fine Jewelers, Inc., et al. (Super. Ct. Santa Clara County, 2006, No. 106CV073476) [Balew’s II]). Just after the case was ordered to trial, Cadle dismissed its claims against Marilyn and Phillip. Thereafter, Cadle obtained a default judgment against Balew’s.
Cadle filed the first amended complaint in the instant action in April 2009, naming Balew’s, Marilyn, Phillip, and Harold as defendants (The Cadle Company II, Inc. v. Balew’s Fine Jewelers, Inc., et al. (Super. Ct. San Mateo County, 2009, No. CV 477881) [Balew’s III]). The complaint alleged, among other things, that the individual defendants, while acting as officers and directors of the corporation, improperly dissipated Balew’s assets for personal purposes at the expense of Balew’s creditors.
During discovery, Phillip submitted requests that Cadle admit that Phillip did not act with intent to defraud Balew’s creditors; that he did not engage in any fraudulent transfers of Balew’s assets; and that the transfers of Balew’s funds to Marilyn constituted reasonable compensation for services rendered. Cadle denied the requests for admissions.
At his deposition, Phillip unequivocally testified that between 2001 and 2004, he and Marilyn received “ ‘regular salaries’ ” as “ ‘compensation’ ” from Balew’s. Phillip further testified that Marilyn worked five days a week, every week.
At trial, Phillip testified, although he lived in Grass Valley, he worked five days a week, nine hours a day managing Balew’s, which was located in Redwood City. On average, Phillip received about $5,000 per month, which represented his base salary, plus his draws and bonuses. However, due to Balew’s outstanding debts, by December 2003, Phillip received his pay in piecemeal fashion.
Phillip also testified that he tried his best to pay off as many creditors as he could by engaging outside companies to assist in liquidation sales. He explained the procedures for these sales, including the way Balew’s processed its revenues from the sales.
The trial court found in favor of defendants, finding “absolutely nothing to support plaintiff’s allegations.” Relying primarily on Phillip’s testimony, the trial court found there was “nothing... to support... any misappropriation.” Furthermore, based on this testimony, the trial court concluded there was no evidence of “inadequate corporate formalities.”
Phillip moved to recover costs of proof for Cadle’s failure to admit the truth of the requests for admissions pursuant to section 2033.420. At the hearing on the motion, plaintiff’s counsel advised the trial court that Cadle would be seeking an appeal, which prompted the trial court to opine: “The fact that you are even considering appealing this decision shows to me that but for the fact that vexatious litigant is a legal term of art, The Cadle Company is a vexatious litigant in pursuing this litigation... I seriously hope the Court of Appeal in reviewing this realizes this entire appeal, including the appeal of the grant of summary judgment in favor of Marilyn [], is absolutely, completely specious and without any legal merit. That’s my opinion.”
The trial court awarded Phillip $5,500.00 for the fees incurred in preparing the cost of proof motion. This appeal followed.
III. DISCUSSION
A. Standard of Review
On appeal, we review the court’s ruling under section 2033.420 for an abuse of discretion. (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1275-1276 (Laabs); Brooks v. American Broadcasting Co. (1986) 179 Cal.App.3d 500, 508 (Brooks); Wimberly v. Derby Cycle Corp. (1997) 56 Cal.App.4th 618, 636-637; Barnett v. Penske Truck Leasing Co. (2001) 90 Cal.App.4th 494, 497.) Abuse of discretion occurs “only where it is shown that the trial court exceeded the bounds of reason. [Citation.] It is a deferential standard of review that requires us to uphold the trial court’s determination, even if we disagree with it, so long as it is reasonable.” (Stull v. Sparrow (2001) 92 Cal.App.4th 860, 864.) As we shall discuss, there was no abuse of discretion here.
B. No Abuse of Discretion
The trial court awarded attorney fees and costs to Phillip pursuant to section 2033.420. “Under... section 2033.420, a party that denies a request for admission may be ordered to pay the costs and fees incurred by the requesting party in proving that matter. The court ‘shall’ order the payment of such fees and costs unless it finds: (1) that an objection to the request was sustained or a response to the request was waived; (2) the admission sought was of no substantial importance; (3) the party failing to make the admission had reasonable ground to believe that the party would prevail on the matter; or (4) there was other good reason for the failure to admit the request.” (Laabs, supra, 163 Cal.App.4th at p. 1276.)
Section 2033.420 provides, in pertinent part:“(a) If a party fails to admit... the truth of any matter when requested to do so under this chapter, and if the party requesting that admission thereafter proves... the truth of that matter, the party requesting the admission may move the court for an order requiring the party to whom the request was directed to pay the reasonable expenses incurred in making that proof, including reasonable attorney’s fees. [¶] (b) The court shall make this order unless it finds any of the following: [¶] (1) An objection to the request was sustained or a response to it was waived.... [¶] (2) The admission sought was of no substantial importance. [¶] (3) The party failing to make the admission had reasonable ground to believe that that party would prevail on the matter.[¶] (4) There was other good reason for the failure to admit.”
In this case, there was no objection to the requests for admission, nor was a response waived. The requests for admission had substantial importance. Phillip asked Cadle to admit that Phillip did not act with intent to defraud Balew’s creditors; that he did not engage in any fraudulent transfers of Balew’s assets; and that the transfers of Balew’s funds to Marilyn constituted reasonable compensation for services rendered. These matters are “ ‘central to disposition of the case.’ ” (Laabs, supra, 163 Cal.App.4th at p. 1276; Brooks, supra, 179 Cal.App.3d at p. 509.)
The only remaining question in the analysis is the reasonableness of Cadle’s denials. “In evaluating whether a ‘good reason’ exists for denying a request to admit, ‘a court may properly consider whether at the time the denial was made the party making the denial held a reasonably entertained good faith belief that the party would prevail on the issue at trial.’ ” (Laabs, supra, 163 Cal.App.4th at p. 1276; Brooks, supra, 179 Cal.App.3d at p. 511.) “A party responding to requests for admissions has a duty to make a reasonable investigation to ascertain the facts even though the party has no personal knowledge of the matter when the party has available sources of information as to the matters involved in such requests for admissions. [Citations.] Thus, if a party denies a request for admission (of substantial importance) in circumstances where the party lacked personal knowledge but had available sources of information and failed to make a reasonable investigation to ascertain the facts, such failure will justify an award of expenses under [current section 2033.420].” (Brooks, supra, 179 Cal.App.3d at p. 510.)
At the time the requests for admissions were denied, the instant case had been pending for eleven months. Moreover, this case is the third lawsuit filed by Cadle within a five-year period in which it seeks to recover on the defaulted bank loan. In the prior cases, Cadle deposed Marilyn, Phillip, and a corporate accountant, as well as propounded extensive written discovery, all of which pertained to Balew’s inventory, banking records, and other financial matters. None of this discovery garnered any factual support for the prior cases and the cases were dismissed.
In the instant case, Cadle conducted discovery that also confirmed that Phillip had not engaged in any fraudulent conveyances. Indeed, discovery revealed that the so-called illegal transfers to Marilyn were salary draws to compensate Marilyn for her services. Cadle, nevertheless, purported to rely on Phillip’s deposition testimony as a basis for its denials, asserting that Phillip admitted that the sums paid to Marilyn were not for work performed. That deposition testimony, however, supports no such inference. Indeed, Phillip testified that: “My dad was taking out a draw of somewhere around $5,500 or $6,000 for both of them while he was alive. And basically, then she assumed—after he passed away, she assumed his salary.” Cadle could not reasonably rely on the cited deposition testimony as a basis for denying the requests for admissions, especially given Phillip’s testimony from the same deposition in which he averred that Marilyn worked five days a week, every week, and received compensation based on her contribution. Accordingly, the trial court did not abuse its discretion by finding that Cadle had no plausible basis for its denials.
Cadle also contends, with respect to the denial of the request to admit that Cadle had no facts to support his claim against Phillip for officer’s and director’s liability, that the fact that Phillip was an officer and director in the relevant years “is sufficient for [Cadle] to have the good faith belief, under the authority cited in its trial brief, that [Phillip] was liable for failure to keep or furnish in discovery or at trial a proper accounting of the dissipation of corporate assets. [¶] That the Court did not find [Cadle’s] cases... to be controlling is a strictly legal issue, and has no bearing on any attorney time spent in ‘proof[.’] ” This contention is not only unsupported by any legal authority or by any citation to the record, it is also illogical. It is self-evident that a “good faith” belief that a party will prevail on a matter must be grounded not only in facts but also in legal authority that arguably supports that claim. Further, a denial, on whatever grounds, requires the other party to prove the matter; to say that “a strictly legal issue” has “no bearing on any... time spent in ‘proof’ ” is nonsensical.
Cadle did not include its trial brief in the record on appeal.
Cadle’s primary argument, however, is that it had reasonable grounds to believe it would prevail on the matters pertaining to its denials, “based on the voluminous evidence [Cadle] possessed at the time that a well financed business, (1) had all of its assets disappear in a little over a year, (2) had a large volume of sales receipts which also disappeared, (3) the person who operated that business with no corporate formalities, [Phillip], wrote many checks to himself over and above his wages, to his mother, and to cash, all without any explanation as to the corporation owing such payments in the documents furnished by [Phillip] pursuant to prior discovery, (4) a debt to [Cadle’s] predecessor-in-interest was left unpaid, and (5) no corporate minutes or resolutions existed authorizing [Phillip] to put [Balew’s] out of business leaving such a debt unpaid, while making the above payments to himself, to cash, and his mother.” This contention is based upon no citations whatsoever to the record, and as many of the assertions are of dubious provenance, we reject it on that basis. (Miller v. Superior Court (2002) 101 Cal.App.4th 728, 743 [failure to cite to the record waives the claim of error]; Cal. Rules of Court, rule 8.204(a)(1)(C).)
Cadle further complains that Phillip failed to connect the request responses to any services rendered that justified an award of costs. In particular, Cadle faults the declaration of Phillip’s counsel for failing to disclose “any proof” that Cadle “knew or should have known of when it made its denials.” (Underscoring omitted.) This argument is disingenuous.
First, section 2033.420, subdivision (a) provides, in pertinent part: “(a) If a party fails to admit... the truth of any matter when requested to do so under this chapter, and if the party requesting that admission thereafter proves... the truth of that matter, the party requesting the admission may move the court for an order requiring the party to whom the request was directed to pay the reasonable expenses incurred in making that proof, including reasonable attorney’s fees.” (Italics added.)
Contrary to Cadle’s suggestion, nothing in subdivision (a) of section 2033.420 requires a party seeking cost of proof sanctions to establish what his or her opponent knew or should have known at the time of the denials. Rather, the plain language of the statute provides for reimbursement of the costs associated with proving the matter at issue, i.e., Phillip had not participated in or directed any fraudulent conveyances and had not otherwise failed to follow corporate formalities.
Second, Phillip’s counsel provided a detailed declaration describing his efforts to establish that no misappropriation of Balew’s assets had occurred, “the absence of which [he] had essentially requested [Cadle] to admit in the requests [for admission]....” Counsel estimated that he provided “at least” 27½ hours “in legal services to Phillip... in making proof of those matters contained in the requests for admission that [Cadle] denied.” The award was well within the trial court’s discretion.
IV. DISPOSITION
The postjudgment order awarding cost of proof fees to Phillip is affirmed. Phillip is entitled to recover his costs on appeal.
We concur: RUVOLO, P.J. REARDON, J.