Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC 292359, Terry A. Green, Judge. Affirmed.
Law Office of James V. Mellein and James V. Mellein for Plaintiff and Appellant.
Baute & Tidus, Jeffrey A. Tidus and David P. Crochetiere for Defendants and Respondents.
* Retired Judge of the Los Angeles Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Virtual Media Group, Inc. appeals from the trial court’s judgment, following a 32-day court trial, finding against Virtual on its claims against Regency Outdoor Advertising, Inc. Virtual sued Regency for breach of contract, tortious interference, and fraud related to the leases for five outdoor advertising locations on building walls in downtown Los Angeles. Virtual’s central argument is that the record does not contain substantial evidence to support the trial court’s factual finding that Virtual was owned by Drake and Brian Kennedy, who also own Regency. Because substantial evidence supports the trial court’s findings, we affirm.
BACKGROUND
In February and May of 1999, the City of Los Angeles (“City”) issued citations under a city sign ordinance against two outdoor advertising displays (also known as billboards, wall murals, or wall signs) maintained by Regency, on the east and west walls of a downtown building on San Pedro Street pursuant to leases with the building’s owner. Drake and Brian Kennedy owned Regency. Regency, through its then attorney Paul Fisher, appealed the citations to the City’s Building and Safety Appeals Board, which determined that the west wall sign was legal but the east wall sign, which had no permit, was illegal and must be removed. The City then filed a criminal misdemeanor complaint against Regency and Drake Kennedy, who responded with a state court lawsuit against the City. When that lawsuit was unsuccessful, Fisher told Regency that the company “needed to get from state court to federal court,” to challenge the constitutionality of the City sign ordinance.
Regency agreed to challenge the ordinance in federal district court, and Fisher advised that to avoid abstention by the federal court, Regency would need to add another corporate plaintiff other than Regency and Drake Kennedy, whose interests could be resolved in the ongoing state court proceeding on the misdemeanor charge. Regency then transferred the leases for five wall sign locations to a second corporation, Virtual. Virtual had been incorporated in 1999 (with Fisher as incorporator) to pursue business opportunities with online companies. Regency had the property owners change the name of the lessees from Regency to Virtual. All the sign locations transferred to Virtual had received citations from the City.
A federal court “must abstain under Younger [v. Harris (1971) 401 U.S. 37 [91 S.Ct. 746]] if four requirements are met: (1) a state-initiated procedure is ongoing; (2) the proceeding implicates important state interests; (3) the federal plaintiff is not barred from litigating federal constitutional issues in the state proceeding; and (4) the federal court action would enjoin the proceeding, or have the practical effect of doing so.... Younger itself involved potential interference with a state criminal case....” (San Jose Silicon Valley v. City of San Jose (9th Cir. 2008) 546 F.3d 1087, 1092.)
Regency and Virtual as co-plaintiffs filed an action in federal district court challenging the validity of the City sign ordinance under the First Amendment. The lawsuit was a success. The district court eventually issued a permanent injunction in early 2003 prohibiting the City from citing any of the plaintiffs’ billboards. The state criminal action against Drake Kennedy was dismissed.
After the federal court action concluded, Regency attempted to regain ownership of the leases that were in Virtual’s name, and the trouble leading to this appeal began in earnest. In 2000, at the time that the leases were transferred to Virtual as part of the litigation strategy, J. Keith Stephens was a full-time Regency employee obtaining leases for billboard sites. Stephens resigned from Regency in April 2002, after the end of the federal lawsuit. Stephens had his own billboard company, Valley Outdoor, Inc., and shortly thereafter Valley and Stephens filed a lawsuit against Regency alleging that Valley owned some Regency signs in Riverside County and in Oceanside. The parties settled the lawsuit in July 2002, executing a written settlement agreement in which Stephens agreed to release and discharge any and all claims against Regency, including claims related to his employment or compensation.
Regency also filed a malpractice lawsuit against Fisher, who, as the company lawyer, had been entrusted with transferring the Regency leases to Virtual in preparation for the filing of the federal lawsuit. Fisher had claimed ownership of another Regency company and of a percentage of Regency in 2002.
Virtual then filed this lawsuit against Regency, Drake and Brian Kennedy, and other entities, claiming that Regency had usurped its rights to the five billboard sites following the conclusion of the federal litigation. The fourth amended complaint, filed in May 2004, named Stephens as the president and chief executive officer of Virtual, and alleged that Regency, the Kennedys, and related companies and individuals had committed fraud, negligent misrepresentation, interference with contract, breach of contract, and violations of the federal Racketeer Influenced and Corrupt Organizations Act, 18 United States Code section 1961 et seq. (RICO) in connection with the five billboard sites and other practices.
The trial court sustained a number of demurrers, and the case went to trial on three causes of action: breach of an oral contract between Virtual and Regency to give Virtual the five sign locations in exchange for Virtual’s participation in the federal lawsuit; tortious interference with contractual relations when Regency blocked Virtual’s ability to sign leases with the landlords for the five locations; and fraud, in that the Kennedys promised to assign the leases to Virtual while intending all along to regain the leases after the federal lawsuit was over.
The trial court conducted a bench trial over 32 days and ruled against Virtual on each claim. In a special verdict and in findings of fact and conclusions of law issued as a tentative ruling on February 14, 2007, the trial court determined that as an initial matter, Virtual was owned by the Kennedys, not by Stephens, and that there was no contract between Stephens and any of the defendants to transfer any wall mural locations. The trial court adopted the findings and special verdict as its statement of decision and entered judgment for Regency on May 7, 2007. This appeal followed, with Virtual stating “the entirety of that judgment was undermined by a central erroneous conclusion: that the Plaintiff, [Virtual], was owned by the Defendants, Drake and Brian Kennedy. That finding... mandates a reversal of the entirety of the judgment.”
The trial began as a jury trial. On January 23, 2006, the parties waived jury trial and the remainder of the trial was conducted by the court. The court answered the questions submitted by the parties on a special verdict form, and also issued findings of fact and conclusions of law.
DISCUSSION
I. Virtual has waived its claim that Stephens was an indispensable party.
Virtual argues that the trial court did not have jurisdiction to determine that the Kennedys, rather than Stephens, owned Virtual because Stephens was not a party to the lawsuit. We reject this claim, both because Virtual did not raise it until after trial and because Virtual made the tactical decision to follow a procedure that did not require Stephens to be a party.
“‘Failure to join an “indispensable party” is not “a jurisdictional defect” in the fundamental sense; even in the absence of an “indispensable” party, the court still has the power to render a decision as to the parties before it which will stand. It is for reasons of equity and convenience, and not because it is without power to proceed, that the court should not proceed with a case where it determines that an “indispensable” party is absent and cannot be joined.’” (Sustainability of Parks, Recycling & Wildlife Legal Defense Fund v. County of Solano Dept. of Resource Management (2008) 167 Cal.App.4th 1350, 1358.) Virtual, however, did not raise the issue that Stephens was an indispensable party at trial, and it therefore has waived this argument on appeal. (Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1126.)
Virtual agreed to a special interrogatory in the verdict form that asked “Who owns Virtual Media Group, Inc. (‘Virtual’)?” and gave as possible answers: “Drake Kennedy and Brian Kennedy” and “Jon Keith Stephens.” Virtual had earlier proposed this exact interrogatory, in opposition to Regency’s proposal to file a cross-complaint to adjudicate the parties’ respective ownership rights in Virtual. Virtual argued that a cross-complaint was unnecessary because the issue could “be readily solved by adding to the... special interrogatories the following question: ‘Who owns Virtual Media Group, Inc.?’” “‘Under the doctrine of “invited error” a party cannot successfully take advantage of error committed by the court at his request.... In the present case, therefore, defendant cannot attack a verdict resulting from an erroneous instruction which it prompted.’” (Perlin v. Fountain View Management, Inc. (2008) 163 Cal.App.4th 657, 667.) Virtual not only invited the error it complains of on appeal, it paved the way by providing the trial court with the exact language to use. Virtual cannot assert error where, for tactical reasons, it persuaded the court to determine the ownership issue without Stephens as a party. (See In re R.C. (2008) 169 Cal.App.4th 486, 493.)
II. It is immaterial whether the Kennedys had the burden of proof to show ownership of Virtual.
The trial court stated in its special verdict that “plaintiff bears the burden of proof to show that Stephens owns Virtual,” but added: “the evidence in this case is so overwhelming that Stephens does not own Virtual, that it makes no difference in the court’s mind who carries the burden of proof on this issue.” Virtual argues that the trial court erred in determining that it had the burden of proof to show that Stephens owned Virtual. We disagree. Regardless, as the trial court noted, the evidence was more than sufficient to satisfy the burden if it had been the Kennedys’.
“Except as otherwise provided by the law, a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting.” (Evid. Code, § 500.) The fourth amended complaint alleges that Stephens is the president and chief executive officer of Virtual, and that the defendants’ acts impaired his ability to manage and operate the corporation. It also alleged that the defendants conspired to sue “Stephens and/or Stephen’s business entities, for the sole purpose of harassing them and injuring [Virtual] directly and indirectly by victimizing its CEO, Stephens.” Regency and the other defendants had defrauded Virtual by misrepresenting that Virtual could operate the five wall mural leases it received for participating in the federal lawsuit, without which Virtual would not have participated; Regency had interfered with Virtual’s contractual right to operate the locations by claiming that Regency, not Virtual, owned the rights to the five sites; and, in general, Regency had breached its contract with Virtual to allow Virtual to operate the leases at the sites and post its own advertising copy, in exchange for which Virtual agreed to participate in the federal lawsuit. Underlying the repeated allegations of multiple injuries by Regency to Virtual’s “business and property” was the assertion that Virtual was a separate company whose interests were separable from those of Regency and the Kennedys, and the “existence or nonexistence” of Virtual as a separate company was “essential to the claim[s] of relief... [Virtual] is asserting.”
Nevertheless, Virtual argues that because the complaint does not actually state that Stephens owned Virtual, Regency and the Kennedys had the burden of proof to prove who owned Virtual. As the trial court pointed out, that reasoning would allow anyone to file a lawsuit in a corporate name and automatically shift to the defendant the burden of proof of the ownership of the corporation. But the burden of proof was not a factor, because as we discuss below in evaluating the sufficiency of the evidence, we agree with the trial court that the evidence in support of Regency’s ownership of Virtual was persuasive, and the evidence of Virtual’s ownership was not. Further, both Stephens and the Kennedys testified at trial, and regardless of which party had the burden of proof, the trial court’s finding that the Kennedys owned Virtual rested in large part on the court’s conclusion that Stephens was not credible and the Kennedys were worthy of belief. The burden of proof, as the trial court stated, is thus immaterial.
At trial counsel argued that because Stephens was not a party, he did not have the burden to prove that he owned Virtual. As we have concluded above, it was a tactical decision not to name Stephens as a party.
III. The Kennedys are not estopped from asserting their ownership of Virtual by their filing of the federal lawsuit.
Virtual argues that by adding Virtual to the federal lawsuit to avoid abstention, the Kennedys represented that they did not own Virtual and therefore are estopped from now claiming that they do own Virtual. Virtual’s argument ignores the trial court’s express finding that neither Regency nor its counsel Fisher ever represented to the federal court that the Kennedys did not own Virtual.
“‘“Judicial estoppel precludes a party from gaining an advantage by taking one position, and then seeking a second advantage by taking an incompatible position.”’” (Aguilar v. Lerner (2004) 32 Cal.4th 974, 986.) “The doctrine of judicial estoppel, however, only bars a party from taking two totally inconsistent positions in the course of judicial proceedings.” (Gordon v. Nissan Motor Co., Ltd. (2009) 170 Cal.App.4th 1103, 1113.) The trial court expressly found “[a]t no time during the federal court lawsuit did Fisher or Regency represent to the District Court that the Kennedys did not own Virtual.” Virtual does not argue that this factual finding was not supported by substantial evidence or point to any actual representation by Regency or its counsel about Virtual’s ownership. The Kennedys did not take any “position” with respect to the corporation’s ownership in the federal litigation. (See ibid.) Judicial estoppel therefore does not apply.
IV. There was substantial evidence that the Kennedys owned Virtual.
Virtual argues that the evidence that the Kennedys owned Virtual was “virtually nonexistent.” The record does show a marked failure to adhere to corporate formalities when Virtual was formed in 1999 and thereafter. However flawed the formation of Virtual may have been, the issue before the trial court was not whether the corporation was the alter ego of the Kennedys, but who had the superior claim to ownership. We conclude that substantial evidence supported the conclusion that the Kennedys, rather than Stephens, owned the corporation.
On review, we presume the judgment is valid and resolve all conflicts in the evidence in favor of the prevailing party. “‘“[T]he 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 [trier of fact]. 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.”’” (Estate of Teel (1944) 25 Cal.2d 520, 526.)
The trial court found that the Kennedys formed Virtual in 1999 “for the purpose of pursuing business opportunities with dot.com companies,” that Fisher formed Virtual for the Kennedys while continuing to represent Regency on a wide range of matters, and that “the Kennedys, through their company Regency, contributed $75,000 in capital to Virtual to fund the start-up of that company” (which Virtual used for stationery, business cards, and business travel). The court also found that the Kennedys continued to make financial contributions to Virtual, paying its legal bills in the federal court challenge to the City sign ordinance, and paying David Seyde, an independent contractor who worked for Regency, to obtain the leases for wall sign locations in Virtual’s name. By contrast, “Stephens contributed no start-up capital to Virtual. Stephens paid no expenses incurred by Virtual either in connection with the failed dot.com concept or in obtaining the leases which are the subject of this dispute.”
These factual findings are supported by the record. Drake Kennedy testified that after deciding to create Virtual in 1999, he asked Fisher, Regency’s lawyer, to form the company for Regency. Brian Kennedy testified that he supported the new venture when Fisher told him about it, that “Virtual Media was Brian and Drake Kennedy’s Virtual Media,” and that he pet up the $75,000 start-up money. The $75,000 check from Regency to Virtual was in evidence, and Regency paid the attorney fees for Virtual and Regency in the federal case, as well as paying for Seyde’s work in obtaining the leases for Virtual. Seyde testified that Stephens never offered to pay him to negotiate the Virtual leases, that Stephens had no involvement in obtaining the leases, and that he had a deal on commissions with the Kennedys, not Stephens. Also in evidence were invoices from one location for rent due on a Virtual lease and other correspondence regarding Virtual sent to Regency’s offices, and two leases signed by Drake Kennedy as Virtual’s president.
The trial court found that the Kennedys and Seyde were credible witnesses. By contrast, the trial court concluded that Stephens’ testimony lacked credibility, and also concluded it did not believe Fisher. “As a reviewing court, we do not reweigh evidence or reassess the credibility of witnesses.” (Peak-Las Positas Partners v. Bollag (2009) 172 Cal.App.4th 101, 108.)
“The court finds the testimony of Stephens lacks credibility. Stephens was contradicted by his prior sworn deposition testimony and exhibits prepared by him or third parties on numerous occasions. His inability to consistently articulate what sign sites were supposedly given to him is an instance of a lack of credibility in claiming an oral contract. Stephens’ testimony by whiting-out (or not whiting-out) Drake Kennedy’s name on a critical lease likewise impeached his credibility.” One of the trial exhibits was a Virtual lease on which Drake Kennedy’s signature was whited out, and Stephens’ signature appeared over the white-out.
DISPOSITION
The judgment is affirmed. Appellant shall bear costs of the appeal.
We concur: MALLANO, P. J., ROTHSCHILD, J.