Opinion
G045361
10-05-2012
DAVID YESKIN et al., Defendants and Appellants, v. PACIFIC MERCANTILE BANK, Plaintiff and Respondent.
Law Offices of William B. Hanley and William B. Hanley for Defendants and Appellants. Winston & Strawn, David L. Aronoff, Steven D. Atlee, Saul S. Rostamian, and Drew A. Robertson for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 30-2008-00116202)
OPINION
Appeal from a judgment and postjudgment order of the Superior Court of Orange County, Kim Garlin Dunning, Judge. Affirmed in part; dismissed in part.
Law Offices of William B. Hanley and William B. Hanley for Defendants and Appellants.
Winston & Strawn, David L. Aronoff, Steven D. Atlee, Saul S. Rostamian, and Drew A. Robertson for Plaintiff and Respondent.
David Yeskin (David) was part of a large investment group that borrowed $2 million from Pacific Mercantile Bank (the Bank) for the purposes of building and reselling a luxury home in Hawaii. When the investment group defaulted on the loan, the Bank filed a breach of contract action. Shortly thereafter, David transferred two multi-million dollar properties to his wife, Brenda Yeskin (Brenda), prompting the Bank to add Brenda as a defendant in its lawsuit. It alleged fraudulent transfer claims against Brenda and David. David also filed a cross-complaint alleging he was the victim of fraud and the Bank breached its fiduciary duty.
Before trial, most of the investment group members had settled or otherwise exited the case (through default or bankruptcy). The Bank prevailed at trial on its claims against David. The court declared a mistrial on the Bank's fraudulent conveyance claim against Brenda due to the jury's failure to reach a verdict. The court granted the Bank's motion for nonsuit on David's cross-complaint. After the judgment was executed the court granted, but significantly reduced, the Bank's request for attorney fees.
On appeal, David does not challenge the breach of contract verdict, but he asserts the nonsuit on his cross-complaint was improperly granted, the jury should not have considered the fraudulent transfer claims, and the attorney fees award must be reversed. Brenda contends the court should have entered judgment in her favor rather than declaring a mistrial. We conclude these contentions lack merit, and we dismiss Brenda's appeal as arising from a nonappealable order. We affirm the final judgment and attorney fees award entered against David.
I
David and 14 other investors were members of a limited liability company called Kolea 7 (Kolea). David paid $400,000 for a 10 percent interest in Kolea. In September 2005, eleven members of Kolea entered into a business loan agreement with the Bank to borrow $2 million for a proposed real estate development. The eleven members agreed to be personally liable for the amount of the loan, and that liability was joint and several. They executed a promissory note payable to the Bank for the principal sum of $2 million.
Kolea had difficulty selling the house and eventually defaulted on its obligation to repay the loan. In December 2008, the Bank filed a breach of contract lawsuit against each of the individual borrowers and Kolea. In March 2009, David quitclaimed two residential properties (located in Newport Beach and Solvang) to Brenda. The Newport Beach property (valued in 2010-2011) had a net taxable value of $1,878,110 and was encumbered by a $399,900 loan. The Solvang property had a net taxable value of $2,612,920 and no encumbrances. David claimed the transfer was made because he had suffered a stroke one year earlier (April 2008), and he had ongoing health issues. Brenda's cousin, who was a notary, prepared and notarized the quitclaim deeds.
At the end of 2009, the Bank amended its complaint to add fraudulent conveyance and constructive fraudulent transfer claims against David and Brenda. David filed a cross-complaint (which he amended two times) against the Bank, alleging inter alia, breach of fiduciary duty and fraudulent concealment. In the cross-complaint, David admitted he signed the promissory note and the loan agreement, but that he was fraudulently induced to sign these documents due to the Bank's fraudulent concealment of material facts.
We note that shortly before trial, David presented a new defense, alleging the signatures on the promissory note and loan documents were forged.
In the cross-complaint, David asserted the Bank's employee, Joy Kelly, had taken on the responsibility of acting as his financial and investment advisor. He claimed Kelly had access to all his financial information, including his personal tax returns. David alleged Kelly introduced him to the Kolea group and other investment opportunities. She also induced him to provide her with personal loans. David maintained the Bank "knowing that [David] did not read the [l]oan [d]ocuments before signing [them], breached its fiduciary duties . . . by failing to adequately advise and concealing . . . all material facts . . . relating to the [l]oan documents" such as: (1) it was a personal loan not a secured construction loan; (2) it was a commercial loan not protected by the Truth in Lending Act or by the Real Estate Settlement Procedures Act; (3) the Bank received commissions for encouraging David to invest in Kolea and sign the documents; (4) the Bank had a conflict of interest in inducing David to be an investor in Kolea; (5) the Bank gave preferential treatment to favored investors and did not require all members of Kolea to sign the loan documents; (6) David waived his right to a jury trial; (7) David would have personal liability regarding Kolea; and (8) changes in terms of the agreement required signatures that were forgeries.
In his cross-complaint, David also recounted all the misinformation he received that fraudulently induced him to execute the loan documents. For example, he claimed the Bank represented all the investors in Kolea would execute the loan documents, the loan was a normal part of the construction loan process, David would not incur any personal exposure as a passive investor, and the loan would be used to complete construction of the home and would be secured by a deed of trust recorded against the property. David alleged Kelly received a referral fee for convincing David to invest in Kolea and other projects (however, Kelly was not named as a defendant in David's cross-complaint).
The parties filed motions in limine relating to Kelly, who exercised her Fifth Amendment right not to testify at trial. The Bank's motion sought to preclude any evidence relating to Kelly's exercise of her right not to testify. The Bank also filed a motion to prevent David from calling Kelly as a witness. David's motion requested evidentiary sanctions against the Bank due to Kelly's exercise of her right not to testify.
The court determined David could not call Kelly as a witness or inform the jury Kelly was "taking the [F]ifth." The court stated it would read CACI instruction No. 216 to the jury: "Witness Joy Kelly has exercised her legal right not to testify concerning certain matters. Do not draw any conclusions from the exercise of this right or let it affect any of your decisions in this case. A witness may exercise this right freely and without fear of penalty."
The Bank filed a motion in limine for an order stopping David from contradicting multiple judicial admissions by offering evidence the loan documents were forged. The Bank noted David's cross-complaint mentioned over 16 times that David signed the loan documents and later signed numerous changes in terms of agreement with the Bank. It argued David waited until the eve of trial to allege the documents were forged and, in any event, he should be estopped from denying the validity of the loan due to its subsequent ratification. The court ruled the cross-complaints were not verified and therefore do not qualify as judicial admissions. It stated the Bank could cross-examine David on why it took so long to determine his signature was forged.
Counsel for David and Brenda began the opening statement by discussing David's stroke and that the transfer of property was not fraudulent but rather related to David's declining health. Counsel also mentioned Kelly received "kickbacks." This last comment prompted the Bank to file a motion to exclude any mention of Kelly's kickbacks, finder's fees, or commissions. The court granted the Bank's motion, ruling there could not be any mention of kickbacks or finder's fees that did not go directly to the Bank. The court stated it would hold an Evidence Code section 402 hearing to consider whether the jury could hear testimony from David Schneider, another managing member of Kolea, who knew about Kelly's acceptance of finder's fees during her employment with the Bank. The court's evidentiary ruling caused David and Brenda's counsel to postpone completion of the opening statement until after the Evidence Code section 402 hearing.
The Bank gave its opening statement and as the first witness began to testify, David and Brenda made a motion for mistrial on the grounds they were prejudiced by not being able to make an opening statement at the beginning of trial regarding Kelly's illegal activities. The court denied the motion.
The first witness to testify was Raymond E. Dellerba, who founded the Bank in 1999, and he discussed the Bank's history and his personal relationship with David. He testified the Bank's first office was in Newport Beach and now the Bank had multiple offices in Orange County. Dellerba met David through the Bank's Business Development Officer, who at the time was Kelly. Dellerba stated David was one of the Bank's top customers, and they had become friends.
The next witnesses were Robert J. Sullivan, senior vice president of the Bank, and Robert W. Bartlett, the chief operating officer, who worked on resolving the Bank's credit problems. Bartlett explained this meant he dealt with the loans that were delinquent, including the Kolea loan. He noted the Bank was also involved in litigation with a different group of borrowers that included David.
On the second day of trial, the court held an Evidence Code section 402 hearing and considered Schneider's testimony. Schneider was a named defendant in the case, but because he had filed for bankruptcy, the claim against him was stayed at the time of trial. Schneider testified he and Carl Grewe were Kolea's managing members, and Schneider owned a 24 percent interest in the company. Schneider was once associated with the Bank as a mortgage broker and that is where he met Kelly. Schneider agreed to pay Kelly a finder's fee when she recruited investors for Schneider's various real estate ventures, including Kolea. Kelly created a company called Caliber Consulting for the purpose of hiding the finder's fees from the Bank.
Schneider stated Kelly wanted a finder's fee on every investment made by David. Kelly said she had control over David's financial portfolio. Kelly received referral fees ranging from $2,500 to $10,000. She also received finder's fees for bringing investors to Grewe.
After considering argument from the parties, the court excluded Schneider's testimony regarding Kelly's finder's fees. The court stated the evidence was irrelevant because David was claiming his signature on the promissory note and loan documents were forgeries. It concluded there was no longer an issue about representations from Kelly inducing David to sign those documents. In addition, the court ruled Schneider's testimony should be excluded on the additional grounds it was prejudicial and inadmissible hearsay. The court reasoned there was no admissible testimony Kelly actually received a fee or commission for the Kolea deal.
After the Bank indicated it had presented all its evidence, David and Brenda moved for nonsuit on the fraudulent transfer claims: The third and fifth causes of action alleged actual fraudulent transfer against David and Brenda respectively, and the fourth and sixth causes of action were for constructive fraudulent transfer. The Bank stated it would not oppose the nonsuit as to the constructive fraudulent transfer claims because there was no evidence showing David and Brenda were on the brink of insolvency. However, the Bank stated it wished to oppose the nonsuit motion as to the actual fraudulent transfer causes of action. It argued there was evidence Brenda and David knew there was an attachment hearing, knew the Bank had sued David for $2 million, and together they worked on documents to oppose the attachment proceedings. In support of the motion for nonsuit, counsel pointed out there was evidence showing David's net worth was approximately $13 million, well above the judgment that might be rendered in the Bank's breach of contract case.
The court granted the nonsuit and asked the Bank if it wanted to make a request to reopen. The Bank's counsel replied they would like to reopen its case as to only the actual fraudulent transfer causes of action (third and fifth causes of action). The Bank gave an offer of proof, stating it would re-call Bartlett to talk about the types of assets the Bank looks at when pursuing a debt, about the loan approval report, and the credit analysis. The court did not believe this testimony would be enough to get past a nonsuit, stating there needed to be direct evidence of intent. Counsel then offered to submit briefing on whether circumstantial evidence could establish intent. The court stated it would delay ruling on "whether you can brief it later." It advised the parties that the jury would be told the Bank had rested its case.
David and Brenda then presented an opening statement to the jury. Counsel argued David's signatures were forged and there existed a fiduciary relationship between David and Kelly, a Bank employee. Counsel did not discuss the fraudulent conveyance claims. The jury then heard Brenda and David testify. David stated the signatures on the documents were forgeries.
The jury also heard testimony from Moshina Kibriya. She worked at the insurance company David owned. She stated the insurance company's bank accounts changed banks whenever Kelly changed her employment at different banks. Kibriya also invested in Kolea.
On the next day of trial, the jury considered testimony from David's expert witness, James Black, who opined the signatures on the promissory note and various loan documents were all forgeries. The Bank had withdrawn its handwriting expert before trial. However, after Black testified, the Bank called Howard G. Rile to testify as a rebuttal expert witness pursuant to Code of Civil Procedure section 2034.310, subdivision (b). David made a motion to strike the testimony, arguing it was not proper impeachment evidence. The court denied the motion.
The general rule, set forth in Code of Civil Procedure section 2034.300, is that an undesignated expert witness may not testify. An exception to that rule is provided in Code of Civil Procedure section 2034.310, which permits a party to call an undesignated expert witness to testify if the expert has already been designated by another party, or if "[t]hat expert is called as a witness to impeach the testimony of an expert witness offered by any other party at the trial. This impeachment may include testimony to the falsity or nonexistence of any fact used as the foundation for any opinion by any other party's expert witness, but may not include testimony that contradicts the opinion." (Code Civ. Proc., § 2034.310, subds. (a) & (b).) Trial courts strictly construe the foundational fact requirement in Code of Civil Procedure section 2034.310 "so as to 'prevent a party from offering a contrary opinion of his expert under the guise of impeachment.' [Citation.]" (Mizel v. City of Santa Monica (2001) 93 Cal.App.4th 1059, 1068.)
That same day, the Bank moved for nonsuit of David's cross-complaint (alleging breach of fiduciary duty, fraud by concealment, rescission for fraud, and declaratory relief). The court considered the parties' arguments and granted the motion on the following grounds: (1) no evidence was presented concerning the Bank's fiduciary duty to David, much less a breach of that duty; (2) there was no evidence as to fraud by concealment in part because David changed his theory as to the promissory note and was now claiming his signatures were forged; and (3) there was no evidence providing a basis for a decision as to rescission. When the court asked David if he wished to reopen, his counsel stated, "No."
The court also considered the Bank's written opposition (also filed that day) to nonsuit on the fraudulent conveyance claims. The Bank argued there was sufficient evidence to permit the trier of fact to infer David and Brenda had a fraudulent intent when they transferred two homes to Brenda as her sole and separate property. The court noted, "Before the noon recess off the record the court indicated it would grant the motion for nonsuit. Absolutely no evidence was presented concerning harm." The court asked counsel if the Bank was a putative creditor pending determination on the breach of contract action. The Bank replied it was and asked if the case could be reopened.
The Bank made the following offer of proof: (1) Bartlett would testify that in the credit approval process the Bank had considered David's two residences as assets that could satisfy his debt and the Bank would be harmed if it could not now pursue those assets; and (2) Thomas Pikor, a private investigator, would testify about the lack of assets in David's name to satisfy the judgment.
The court held an Evidence Code section 402 hearing to consider Pikor's testimony. Pikor testified he specialized in asset searches. He testified about the assessed values of the two transferred properties based on his examination of the assessor's tax records and doing real property searches. The court ruled there was sufficient evidence to establish harm and the Bank's claims for fraudulent transfer could be decided by the jury.
The jury was permitted to consider Pikor's testimony about David's assets. In addition to the assessed values of the two transferred properties, Pikor stated the only remaining real property held in David's name was located in San Clemente. It had a net taxable value of $701,912, but was encumbered with a $5.7 million dollar loan.
On April 18, 2011, the jury found David liable for breach of contract and awarded the Bank $2,111,764.28 in damages. It found David liable for actual fraudulent transfer. The special verdict form indicated the jury also found Brenda liable for fraudulent transfer, but polling of the jury revealed only a vote of 8-4 in favor of liability. After conferring with counsel off the record, the court polled the jury again. Again there were only 8 votes in favor of liability. The court asked counsel if there was "anything else" before the jury was discharged. They both responded "no." The court discharged the jury.
After a lengthy discussion about whether the Bank could apply for a writ of attachment, the court turned its attention to drafting the judgment. It stated, "It would be the court's intention to enter judgment in favor of [Brenda]" on the fifth cause of action (the fraudulent conveyance claim). The court asked the parties if a judgment could be prepared before the next hearing. The Bank's counsel offered to prepare a proposed judgment.
The following month, the court held a hearing to discuss the writ of attachment and the judgment. The court denied the Bank's application for a writ of attachment on the grounds the claim has been fully adjudicated and a jury verdict had been returned. In its minute order, the court acknowledged there was no signed judgment, but reasoned the writ ordinarily is used as a pretrial provisional remedy to protect the creditor until a final adjudication of the dispute. In addition, the order indicated the court had considered argument about the proposed judgment and the issues about offsets based on settlements with codefendants.
On the record, the Bank stated it prepared a judgment stating no verdict was entered against Brenda. Counsel stated, "I'm aware that at the end of trial, as we were packing up, the court stated that it was inclined to enter judgment in favor of [Brenda] on that cause of action. Contrary to the representations that [David and Brenda] have made, the Bank did not say that it agreed with that in any way. We simply agreed to prepare a proposed judgment." The trial court replied it remembered the day differently, and commented, "I think it's safe to say we were all surprised by the results of the polling" and the bottom line is it was the Bank's burden "to have nine jurors agree with [it]. . . . We discussed this in chambers and we all agreed that the trial was over. I specifically asked if you agreed that we could . . . the court could discharge the jurors, or if you felt there was anything else that we needed to do while we still had the jurors here. You both agreed that the jurors would be discharged."
The Bank's counsel responded, "Absolutely. We agree completely. We're willing to accept the chips where they lay, which is that we were one vote shy. Under [Code of Civil Procedure] section 616, that's a mistrial as to that cause of action." When the court pointed out the Bank did not move for a mistrial, counsel argued, "well, your honor, it's a pretty far stretch to go from an 8/4 in favor of the Bank to a 9/3 in favor of Brenda . . . . There would be no basis for that." David and Brenda's counsel stated the Bank had the option to send the jury back to deliberate further if that is what it wanted, but the Bank "expressed no objection on the record to the procedure that was being described." The court agreed, and stated its recollection is the court ruled to enter judgment in Brenda's favor. However, the court postponed signing the judgment.
At the next hearing on May 25, 2011, the court started the proceedings by telling the parties, "In [Code of Civil Procedure] section 616, you're correct . . . the court can't enter judgment in favor of Brenda . . . . [Pursuant to Code of Civil Procedure] section[s] 616 and 618, I think [David's and Brenda's counsel was] in error, which means the court was in error, when we discharged the jury; we shouldn't have done that. We should have sent the jury back in to deliberate. So we get a new jury trial as to Brenda . . . because that's what those [Code of Civil Procedure] sections provide. So we can go ahead and set that date today. . . . [¶] So, I am prepared to sign the judgment for . . . $1,431,764.28" in favor of the Bank.
Later in the hearing, the court clarified it was a mistake to discharge the jury, "so there's no point in compounding an error. Let's fix it. So [Brenda] is not entitled to judgment. And under the clear wording of [Code of Civil Procedure section] 616, she gets a new trial on that cause of action. We can set it in pretty short order." When counsel pointed out there was no new trial motion pending, the court explained it could set a new trial on "its own because I should not have discharged the jury. It was wrong. The court erred[.] The court's going to fix that error." A trial was set for September 2011. David and Brenda filed a notice of appeal from the judgment executed May 25, 2011.
In July 2011, the Bank moved for leave to amend the fifth cause of action in its complaint. The Bank asserted the cause of action was scheduled to be retried in September, which meant there was no final judgment as to Brenda. The Bank reasoned it could amend the complaint because the trial court retained jurisdiction despite Brenda's erroneous appeal of the mistrial ruling (a nonappealable order).
The court dismissed the fifth cause of action from the complaint and ruled the motion for leave to amend was moot. In August 2011, the Bank filed a new complaint against Brenda, and the case has been stayed pending the outcome of this appeal.
This appeal also concerns the Bank's postjudgment motion for attorney fees. The Bank requested $1,397,379, although it claimed to have incurred more than $2 million in attorney fees. The Bank did not seek fees relating to Schneider (who declared bankruptcy) or seven other defendants who settled prior to trial. In support of its motion, the court submitted four attorney declarations. The trial court ordered the Bank to identify the attorney fees related to the contract action. It also requested supplemental declarations and more detailed billing statements. It eliminated attorney fees relating to the fraudulent transfer claims and reduced fees it considered excessive. The court awarded the Bank $575,000, and held David, Grewe, and Kolea were jointly and severally liable. It ruled David alone was liable for an additional sum of $187,000 in fees incurred by the Bank due to David's own legal maneuverings. The court issued an 11-page order regarding its reasoning for the attorney fees award.
II
The Nonsuit Motions
David and Brenda argue the trial court should have granted their nonsuit motion regarding the Bank's fraudulent conveyance claims. They also challenge the court's decision to grant nonsuit on David's cross-claims. We conclude the trial court got it right.
"A defendant [or cross-defendant] is entitled to nonsuit if the trial court determines the evidence presented by the plaintiff is insufficient as a matter of law to permit a jury to find in [his or] her favor. The court may not weigh the evidence or consider the credibility of witnesses. Instead, it must accept the evidence most favorable to the plaintiff as true and disregard conflicting evidence. The plaintiff's evidence must be given all the value to which it is legally entitled, including every legitimate inference that may be drawn in the plaintiff's favor. A mere 'scintilla of evidence' is not enough, however. There must be substantial evidence creating a conflict for the jury to resolve. In reviewing a grant of nonsuit, we follow the same rules requiring the evidence to be evaluated in the light most favorable to the plaintiff and least favorable to the defendant. All presumptions, inferences, and doubts are resolved against the defendant. We may not affirm, unless judgment for the defendant is required as a matter of law. (Nally v. Grace Community Church (1988) 47 Cal.3d 278, 291.)" (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1065.)
"Ordinarily when the defendant moves for nonsuit it is an abuse of discretion to deny the plaintiff's request to reopen and present additional evidence to cure the defects in its case." (Consolidated World Investments, Inc. v. Lido Preferred Ltd. (1992) 9 Cal.App.4th 373, 382.) If an offer of proof is made, the denial of the motion to reopen "will not be overturned when the additional evidence sought to be produced by the plaintiff is either irrelevant to the issues involved in the action (no error) or would not be sufficient to render defendants liable as a matter of law (no prejudice)." (S.C. Anderson, Inc. v. Bank of America (1994) 24 Cal.App.4th 529, 539.)
A. Brenda and David's Motion for Nonsuit
Brenda and David assert they timely moved for nonsuit on the fraudulent conveyance claims after the Bank presented its evidence. They contend the court's ruling granting the nonsuit negatively affected their counsel's opening statement because it caused him to omit the fraudulent conveyance claims. They assert the Bank's first offer of proof was properly rejected and the court had no authority to grant a second and untimely request to reopen the following day after their opening statement. Not so.
We have carefully reviewed the record and conclude the trial court clearly left the door open for the Bank to make a future offer of proof on the fraudulent conveyance claims. The Bank stated it would not oppose the nonsuit as to the constructive fraudulent conveyance, but that it wished to reopen with evidence regarding actual fraudulent conveyance. The court considered the Bank's first offer of proof and then indicated it might consider briefing on whether circumstantial evidence could be used to prove fraudulent intent. The issue was by no means finished when David and Brenda's counsel delivered the opening statement.
David and Brenda suggest the court should not have allowed the Bank to reopen because it prejudiced their opening statement. We find no authority to support this theory. And we find no prejudice. David and Brenda discussed the fraudulent conveyance claims in their initial mini-opening statement at the start of the trial. Moreover, they could have requested another opportunity to make an opening statement after the court permitted the Bank to reopen its case. David and Brenda's reliance on Onick v. Long (1957) 154 Cal.App.2d 38 (Onick),is misplaced.
In Onick, one day after the grant of the nonsuit, defense counsel moved to reopen the case to present an additional witness. No affidavit was filed in support of the request and no other showing was made by counsel to explain the delay in producing the witness. The court recognized that had the witness been produced "and his evidence offered after the motion for nonsuit was argued and before the court acted on it the denial of such offer might well have been error. [Citation.] But where a party has rested, and after a nonsuit has been granted on a subsequent day seeks to reopen his case, in the absence of a showing of reasonable grounds for the delay in offering the witness we are satisfied that the trial court commits no abuse of discretion in refusing to permit the reopening of the case to allow such testimony to be introduced out of order. [Citations.]" (Id. at p. 388.)
Onick is inapt. In our case, it was the court that gave the Bank's counsel reason to believe there would be time the following day to revisit the issue. By postponing any ruling on the Bank's offer to submit further briefing, there was no guarantee the matter was finally decided. Under these circumstances, we find no reason why the court would be precluded from considering the Bank's written opposition to the nonsuit or why it would be unfair to hear the Bank's second offer of proof simply because David and Brenda made an opening statement in the interim.
Alternatively, Brenda and David argue that if the second request to reopen was timely, the evidence was insufficient to permit the fraudulent conveyance claims to go to the jury. They assert the Bank asked Brenda but not David questions about why he transferred the property. They claim information about the properties and when the transfer occurred did not prove the necessary elements of intent or harm. In addition, they assert Pikor's testimony "added nothing" and the Bank's evidence was speculative. This is the sum total of their argument. We are left to guess why they believe the Bank's evidence was speculative and why Pikor's testimony was insufficient to support the fraudulent conveyance claim. They apparently forget it is not the appellate court's task to reweigh the evidence, or consider the evidence most favorable to their position. Rather we consider, accepting the evidence most favorable to the Bank, if there is substantial evidence creating a conflict for the jury to resolve.
To succeed on its claim of actual fraudulent transfer, the Bank had to establish the transfer was made with the "'actual intent to hinder, delay, or defraud any creditor of the debtor.' ([Civ. Code,] § 3439.04, subd. (a)(1).)" (Filip v. Bucurenciu (2005) 129 Cal.App.4th 825, 834 (Filip).)"Whether a conveyance was made with fraudulent intent is a question of fact, and proof often consists of inferences from the circumstances surrounding the transfer. [Citation.]" (Ibid.)Fraud must be proved by a preponderance of the evidence. (Liodas v. Sahadi (1977) 19 Cal.3d 278, 292-293.)
All further statutory references are to the Civil Code, unless otherwise indicated.
"Over the years, courts have considered a number of factors, the 'badges of fraud' [citation] described in a Legislative Committee comment to section 3439.04, in determining actual intent. [Citation.] Effective January 1, 2005, those factors are now codified at section 3439.04, subdivision (b) and include considerations such as whether the transfer was made to an insider (§ 3439.04, subd. (b)(1)), whether the transferee retained possession or control after the property was transferred (§ 3439.04, subd. (b)(2)), whether the transfer was disclosed (§ 3439.04, subd. (b)(3)), whether the debtor had been sued or threatened with suit before the transfer was made (§ 3439.04, subd. (b)(4)), whether the value received by the debtor was reasonably equivalent to the value of the transferred asset (§ 3439.04, subd. (b)(8)), and similar concerns. According to section 3439.04, subdivision (c), this amendment 'does not constitute a change in, but is declaratory of, existing law.'" (Filip, supra, 129 Cal.App.4th at p. 834.) The presence of one or more of the "badges of fraud" does not create a presumption of fraud, but instead provides evidence from which "'an inference of fraudulent intent'" may, but need not, be drawn. (Wyzard v. Goller (1994) 23 Cal.App.4th 1183, 1191.)
Substantial evidence of many of the above "badges of fraud" were present in this case. The transfer was made to a spouse (as her sole and separate property) for no consideration and without legal consultation. David and Brenda knew the Bank had filed a $2 million lawsuit and the assets were listed on the Bank's credit approval. David retained possession and control after the transfer. The transfer was not disclosed and a relative prepared the deeds and served as the notary. David did not have any other unencumbered real property assets. In light of the above, we conclude there was substantial evidence creating a conflict for the jury to resolve. And as it turned out, a jury concluded from these facts that David was liable for actual fraudulent conveyance and 8 jurors concluded Brenda was also liable. We find no error.
David and Brenda also assert there was no evidence the Bank was injured as a result of the transfer. "'A well-established principle of the law of fraudulent transfers is, "A transfer in fraud of creditors may be attacked only by one who is injured thereby. Mere intent to delay or defraud is not sufficient; injury to the creditor must be shown affirmatively. In other words, prejudice to the plaintiff is essential. It cannot be said that a creditor has been injured unless the transfer puts beyond [his or her] reach property [he or she] otherwise would be able to subject to the payment of [the] debt." [Citations.]' [Citation.]" (Fidelity National Title Ins. Co. v. Schroeder (2009) 179 Cal.App.4th 834, 841.)
The Bank established it could have used the two properties to satisfy David's debt if they had not been transferred to Brenda. Pikor testified the properties were valued at over $4 million and had sufficient equity to satisfy any judgment. David did not have any other unencumbered real property. The above is sufficient evidence of injury to submit the issue to the jury.
B. The Bank's Nonsuit Motion on the Cross-Complaint
The court granted the Bank's motion for nonsuit on all the remaining causes of action in David's cross-complaint (breach of fiduciary duty, fraud by concealment, rescission for fraud, and declaratory relief). On appeal, David asserts, "The trial court excluded all testimony relating to [the Bank's] employee . . . Kelly, which resulted in a nonsuit on David's . . . cross-complaint." David explains Kelly's activities were relevant to his claims for breach of fiduciary duty and fraud. He discusses the general legal requirements for those two claims, as well as the doctrine of respondent superior. He explains Kelly's activities (which were also described by Schneider in the Evidence Code section 402 hearing), satisfied the elements required to prevail on his cross-claims.
However, David completely fails to address the fundamental question that must be addressed in any appeal. A trial court's ruling is presumed to be correct and the burden of demonstrating error rests squarely on the appellant. (See Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 631-632, and cases cited therein.) Indeed, noticeably missing from David's discussion on appeal is any mention of why the court excluded Kelly as a witness and evidence of her activities. Even if we assume, for the sake of argument, the evidence was relevant, it was still David's burden to show its exclusion was reversible error.
Most of the evidence was excluded before trial after the court considered several in limine motions in light of Kelly's decision to exercise her Fifth Amendment right not to testify. The court ruled Kelly could be called as a witness and counsel could not discuss that Kelly had exercised her legal right. David fails to discuss the standard of review for such evidentiary rulings or the reasons the court gave for excluding the evidence. He simply notes a nonsuit may be reversed if the court erroneously excluded evidence that would support a verdict. The argument begs the question, "Why was the evidence erroneously excluded?" His analysis of why the evidence was purportedly relevant and how it relates to his claims does not answer this question. Not all relevant evidence is automatically admissible (e.g. Evid. Code, § 913, subd. (a) [judges and counsel cannot comment regarding a witness's exercise of a privilege]; Evid. Code, § 352 [exclude relevant evidence if its probative value is substantially outweighed by undue prejudice, confusing the issues, misleading the jury].)
When an appellant raises an issue "but fails to support it with reasoned argument and citations to authority, we treat the point as waived. [Citations.]" (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.) An appellant may not simply make the assertion the trial court's ruling is erroneous and leave it to the appellate court to figure out why. Even when our standard of review is de novo, the scope of review is limited to issues that have been adequately raised and are supported by analysis. (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6.)
Similarly, in his opening brief David does not discuss the reasons why the court precluded counsel from mentioning Kelly's finder's fees and prohibited Schneider from testifying about Kelly's scheme to collect finder's fees (after holding an Evidence Code section 402 hearing). David simply mentions "an offer of proof was made through testimony of . . . Schneider." Not until the reply brief does he discuss some of the reasons the court gave for excluding Schneider's testimony (prejudice and hearsay). In the reply brief, David argues for the first time (1) Kelly's statements and conduct are admissible hearsay as a party admission, (2) the statements and conduct are "original evidence" and the "operative facts of fraud" and not hearsay, and (3) the evidence was not prejudicial to the Bank because it would not evoke an "emotional response" with the jury.
We refuse to consider the new issues raised in the reply brief. "'Points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.' [Citation.] 'Obvious reasons of fairness militate against consideration of an issue raised initially in the reply brief of an appellant.' [Citation.] 'Obvious considerations of fairness in argument demand that the appellant present all of his points in the opening brief. To withhold a point until the closing brief would deprive the respondent of his opportunity to answer it or require the effort and delay of an additional brief by permission. Hence the rule is that points raised in the reply brief for the first time will not be considered, unless good reason is shown for failure to present them before.' [Citation.]" (Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764.) David offers no good cause for failing to include these arguments in the opening brief.
III
The Mistrial—A Nonappealable Order
Special verdict question No. 12 related to the Bank's fifth cause of action alleged against Brenda for actual fraudulent conveyance. Question No. 12 asked the jury: "Did Brenda . . . receive the property with the intent to hinder, delay or defraud one or more of [David's] creditors?" The jury form indicated the jury answered, "Yes." However, when the jury was polled, only 8 jurors voted, "Yes." One juror had changed his (or her) mind. The trial judge and the parties held a discussion in chambers and off the record. When they returned, the court polled the jury again about question No. 12 and received the same vote of 8 to 4 in favor of liability. The court asked both counsel, "Is there anything else" for the jurors before they were discharged. Both counsel replied, "No, your honor." The jury was discharged.
The juror's gender cannot be determined from this record.
On appeal, Brenda states the Bank "forfeited any claim of irregularity" when it failed to request the jury be sent back for further deliberations, and permitted the jury to be discharged without objection after the court announced its intention to enter judgment in favor of Brenda. She misstates the record. The court did not bring up the possibility of entering judgment until after the jury had been discharged. And because the court's discussions with counsel after the polling were held off the record, we cannot assume the Bank forfeited any particular claim by its silence. After the jury was polled a second time, neither party requested further action by the court and they both agreed to discharge the jury. To the extent the Bank's failure to act forfeited any right to have a jury verdict rendered in its favor, so too did Brenda forfeit her rights by failing to ask that the jury further deliberate. In short, any error was invited by both parties.
Second, the record reflects the court's contemplation of entering a judgment in Brenda's favor was not properly based on a review of the legal sufficiency of the evidence. It is well established that when a jury is unable to reach a verdict, the court has the power to order judgment within 30 days after the jury is discharged in cases where a motion for directed verdict should have been granted. (Code Civ. Proc., § 630, subd. (f) [authorizing court to enter a directed verdict].)
That section provides, "When the jury for any reason has been discharged without having rendered a verdict, the court on its own motion or upon motion of a party, notice of which was given within 10 days after discharge of the jury, may order judgment to be entered in favor of a party whenever a motion for directed verdict for that party should have been granted had a previous motion been made . . . ." (Code Civ. Proc., § 630, subd. (f).)
We have carefully reviewed the record and it is apparent the trial court in this case was initially surprised by the polling and was unsure how to proceed. After discharging the jury, the court considered entering judgment in Brenda's favor on the ground the Bank failed its burden to convince nine jurors of liability. When the parties began drafting a proposed judgment the court reviewed the relevant statutes and realized its mistake in failing to declare a mistrial when the jury was unable to reach a verdict. (Code Civ. Proc., § 616.)
In the end, the court correctly applied Code of Civil Procedure section 616 and declared a partial mistrial. "In all cases where the jury are discharged without having rendered a verdict, or are prevented from giving a verdict, by reason of accident or other cause, during the progress of the trial, or after the cause is submitted to them, except as provided in [Code of Civil Procedure] section 630 [authorizing court to enter a directed verdict], the action may be again tried immediately, or at a future time, as the court may direct." (Code Civ. Proc., § 616.) "A partial mistrial may be granted when the jury returns a verdict (or a special verdict) on one or more claims, but deadlocks on a different, severable cause of action." (Wegner et al., Cal. Practice Guide: Civil Trials & Evidence (The Rutter Group 2011) ¶ 12:20.11, p. 12-8, citing Valentine v. Baxter Healthcare Corp. (1999) 68 Cal.App.4th 1467, 1475 (Valentine).)
"There is no constitutional impediment to a retrial of a limited issue, so long as that issue is sufficiently distinct and severable from the others that a limited retrial would not result in an injustice. [Citations.] And, where special verdicts on one matter do not depend on inconclusive special verdicts on another matter, the remaining matter can properly be determined on retrial. (See Phelps v. Superior Court [(1982)] 136 Cal.App.3d [802,] 814-815 [comparative negligence special verdicts were not dependent upon determination of special verdicts on punitive damages, which were inconclusive; thus issues concerning punitive damages could be separately submitted for retrial].)" (Valentine, supra, 68 Cal.App.4th at pp. 1478 & 1479 [negligence separate and severable from independent causes of action for strict liability and fraud because "it was separately pled, separately covered on the verdict form, and subject to separate instructions. Negligence and strict liability form independent bases of liability"].)
Here, the actual fraudulent conveyance claim against Brenda was separate and severable from the causes of action against David. The claim was separately pled and separately covered on the special verdict form. The factual question of whether Brenda received the property with the intent to hinder, delay, or defraud one or more of David's creditors was unresolved. The court had authority to grant a mistrial and schedule a retrial on the fifth cause of action.
Our record shows the trial court made a postjudgment order to dismiss the fifth cause of action and permitted the Bank to file a new complaint against Brenda to set aside the fraudulent transfer. The retrial was converted to a new trial. However, we cannot comment on these rulings because it is beyond the scope of the notice of appeal from the May 25, 2011, judgment.
Consequently, there is no final judgment regarding the Bank's fifth cause of action against Brenda. The mistrial order is an interlocutory ruling and is nonappealable but reviewable on appeal from the judgment following the retrial. (See Sullivan v. Delta Air Lines, Inc. (1997) 15 Cal.4th 288, 307, fn. 11.) Brenda's appeal must be dismissed as it is premature.
This finding does not mean we cannot consider David's appeal. "In multiparty actions, a 'piecemeal' judgment or order that leaves no issue remaining to be determined as to one of the parties is considered final as to that party and thus appealable. [Citations.]" (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2011) ¶ 2:91, p. 2-57.) The judgment is final as to David, and thus we can consider his appeal.
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In the reply brief, Brenda clarifies she is not appealing the mistrial order. She states her position is the Bank consented to discharging the jury and judgment being entered in her favor. As noted above, this argument is not factually supported by the record. The Bank never consented to a directed verdict being entered in favor of Brenda. The court did not discuss on the record what should happen with respect to the fifth cause of action until after the jury was discharged.
Alternatively, Brenda argues she is actually appealing the judgment entered on May 25, 2011, because it does not provide for the court's "announced intention" to enter a judgment in her favor. She concludes, "It is the failure to include in the judgment the announced intention, after discharging the jury, after no objection to that decision by the Bank that is being appealed."
Brenda cites to Henrioulle v. Marin Ventures, Inc. (1978) 20 Cal.3d 512, 517, a case in which the trial court granted defendant a new trial because the same nine jurors had not assented to each question on the special verdict form. When the case was decided, it was unclear whether such a verdict (lacking the votes of the same nine jurors on each special verdict question) was valid. The court concluded the granting of a new trial was erroneous, but did not resolve the underlying substantive issue, because it reasoned that even if the verdict was invalid on the stated ground, any challenge to the verdict had been forfeited. It explained, "Failure to object to a verdict before the discharge of a jury and to request clarification or further deliberation precludes a party from later questioning the validity of that verdict if the alleged defect was apparent at the time the verdict was rendered and could have been corrected." (Id. at p. 521.) Therefore, because the alleged defect of not having the same nine jurors voting was apparent at the time the jury was polled and could have been cured by further deliberation, defendant's failure to object forfeited the claim and precluded the trial court from granting a new trial on that basis. (Id. at p. 522; see also People v. Lessard (1962) 58 Cal.2d 447 [defendant waived alleged defect that the jury was incompletely polled]; Silverhart v. Mount Zion Hospital (1971) 20 Cal.App.3d 1022 [defendant waived defect in polling procedure].)
The case is inapt. There is no apparent defect with the verdict or the polling in this case. Rather, there were simply not enough jurors who agreed on an answer to special verdict question No. 12. The forfeiture rule applies only when there is a defect or error that can be waived. And the jury's inability to reach an agreement on a particular factual question in the special verdicts is not something that can be resolved or waived by the parties.
IV
Attorney Fees
Thankfully, the Bank prepared a respondent's appendix containing the trial court's 11-page attorney fees award. In the order, the trial court detailed the background of the case and its reasons for the amount awarded, which is a tremendous assistance for purposes of our review of the order. The trial court's order described the contents of the Bank's motion, and surmised that of the over $2 million in attorney fees incurred in the case, the Bank was only requesting $1,397,379, which it claimed represented a fair and reasonable share of the fees attributable to litigation against David, Grewe, and Kolea on the breach of contract claim. The court noted the Bank did not seek to recover attorney fees attributable to the co-defendants who filed for bankruptcy or settled.
In its order, the trial court described some of the events occurring after the Bank filed its motion for attorney fees. The court mentioned the Bank had submitted severely redacted bills and the court directed the Bank to supply billing statements that described the legal services provided. It denied David's motion to appoint an independent fees expert and denied his motion to deny the fee award outright. Moreover, while the attorney fees motion was pending, the Bank sought an additional $104,906.50 in fees it incurred to respond to David's efforts to remove post-trial lis pendens from the two properties transferred to Brenda. At the court's request, the Bank also segregated $168,769 in attorney fees relating to the fraudulent conveyance claims. The court told the Bank it would not award fees for pursuing these claims.
In the order, the court stated it had "thoroughly reviewed the voluminous billing statements, charts, graphs, declarations and other exhibits that support the requested" attorney fees. It determined the average billing rate of $500 per hour was reasonable and the fee request represented approximately 2,756 billable hours of work. The additional $104,906 for post-trial work represented 202.85 hours of work by two partners, three associates, and a paralegal. The court concluded, "Even with [the Bank's] voluntary reduction in hours and billing, the time spent litigating this matter and the requested attorneys' fees . . . are excessive." The court stated the Bank's case was "overly prepared, analyzed, strategized, and reviewed." In addition, the court concluded the Bank's defense case was "exaggerated" and "[t]he number of attorneys and paralegals working on the litigation case[] was excessive and resulted in duplicative and unnecessary billing." Finally, the court noted "unexplained discrepancies in some of the submitted billings and supporting documents have adversely affected the credibility of all entries." It devoted several paragraphs in the order to describing the above problems it saw with the billing and it gave several specific examples.
The court ruled, "The reasonable number of hours for legal services for which defendants/cross-complainants [David], Grewe, and Kolea . . . should be jointly and severally liable is 1,150. Based on this reasonable number of hours at the reasonable rate of $500 per hour, defendants . . . are jointly and severally responsible for attorney's fees in the sum of $575,000. An additional sum is assessed as to [David] alone, in the amount of $187,500, representing an additional 375 hours of legal services attributable to preparations for the jury trial, the belated forgery defense, and the jury trial itself."
David contends the attorney fees order must be reversed because the court should have granted his motion to appoint an independent expert to review the Bank's attorney fees motion. He explains the declarations submitted to support the attorney fees motion do not explain why the fees incurred were allowable, reasonable in amount, or reasonably necessary to the conduct of the litigation. For example, David questions whether it was necessary to have 18 billing professionals actively working on the case and three lawyers for every single day of trial. He also criticizes the declarations for not stating the hourly rates and total fees sought were reasonably necessary. David cites to legal authority holding fees are not recoverable for work unrelated to the action on the contract (such as fees incurred defending the cross-complaint or in litigating Brenda's claims). David concludes that for all of the above reasons, an independent expert should have been appointed to review the fee request. We find no reversible error.
A trial court's attorney fees award under a contract is reviewed for abuse of discretion. "As our high court has repeatedly stated, '"'[t]he "experienced trial judge is the best judge of the value of professional services rendered in his [or her] court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong"—meaning that it abused its discretion.'"' [Citations.]" (Children's Hospital and Medical Center v. Bonta (2002) 97 Cal.App.4th 740, 777.) It is David's burden on appeal to prove that the court abused its discretion in awarding fees.
It is unclear why David believes an independent expert would have done a better job than the trial judge (who was very familiar with the case and the complexity of the issues presented). He does not specifically allege the court failed to properly apportion fees to those relating to the contract. Nor does he challenge any specific ruling made in the court's lengthy attorney fees ruling (indeed, it was not included in the record he prepared for the appellants' appendix).
It appears David is suggesting that we hold an independent expert must automatically be retained in any large complex civil case and that the trial court favored expediency and efficiency over justice. We find his reliance on Donahue v. Donahue (2010) 182 Cal.App.4th 259, to support this theory is misplaced. That case involved "some $5 million" in attorney fees charged against a trust on behalf of a former trustee in defending against the beneficiary's allegations of self-dealing and conflict of interest. (Id. at p. 262.) The court considered the trustee's fiduciary duties to act for the benefit of the trust, and determined that the court below had not undertaken sufficient "close scrutiny on questions of reasonableness, proportionality and trust benefit" in making its award of attorney fees. (Id. at p. 273.) The trustee had retained two major law firms to represent him concurrently and maintained a "spare-no-expense" strategy resulting in the extremely large award. A different panel of this court expressed a sense that the trial court was "overly deferential" in its approach and essentially gave a "rubberstamp" to the request for attorney fees, effectively thwarting meaningful appellate review. (Id. at p. 271.)
In the matter before us, there is no concern the trial court exhibited an overly deferential attitude because it is plainly evident from the record the trial court spent a great deal of time and effort sorting through the billing records, and it prepared a detailed opinion outlining the basis for reducing the hours from 2,756 to 1,150 (a 1,606 cut) for services before and during trial. The record shows the court considered and addressed all the complaints raised on appeal, the hourly rate, the number of lawyers, the excessive preparation, the fees unrelated to the contract, and the credibility of the billing.
David offers no sound or legal reason why an independent expert would have done a better job assessing and analyzing the attorney fees request. In Donahue, the court applied a heightened standard of review because it was a probate proceeding and determined "a judge's litigation experience may not extend to many critical aspects of fee awards pertaining to prudent trust administration, including management of complex litigation, legal auditing, and legal cost control. . . . [¶] In this area, the testimony or declaration of fee experts may assist the trial court, on remand, in determining the appropriate amount of reimbursement to Patrick for his efforts, as a former trustee, to benefit the trust. [Citation.] On remand, we leave it to the sound discretion of the trial court to fashion appropriate discovery regarding proper and reasonable levels of legal services for the benefit of the trust." (Donahue, supra, 182 Cal.App.4th at pp. 276-277, italics added.)
The trial court in this case was not asked to determine fees pertinent to prudent trust administration. There is no evidence to suggest the trial court was unfamiliar with the reasonable levels of legal services and hourly rates for the litigation of a breach of contract action. It is well established that an experienced judge is in the best position to assess the value of legal services rendered in his or her court. As aptly stated by the Donahue court, "It is true that judges themselves are deemed to be experts on the value of legal services, and may rely on their own experience about reasonable and proper fees, without resort to expert testimony. '"In many cases the trial court will be aware of the nature and extent of the attorney's services from its observation of the trial proceedings and the pretrial and discovery proceedings reflected in the file."' [Citation.]" (Donahue, supra, 182 Cal.App.4th at p. 276.) It cannot be said the experienced trial judge in this case abused her discretion by failing to bring in an independent expert to judge the value of the professional services rendered in her court.
V
Disposition
The judgment and postjudgment attorney fees order entered against David Yeskin is affirmed. Brenda Yeskin's portion of the appeal is dismissed as moot. Respondent shall recover its costs on appeal.
O'LEARY, P. J. WE CONCUR: MOORE, J. THOMPSON, J.