Pemstein v. Pemstein

 

 

 

 

 

 

 

 

 

 

 

 

 

Filed 11/6/13  Pemstein v. Pemstein CA4/3

 

 

 

 

 

 

 

 

 

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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.

 

 

IN THE COURT OF
APPEAL OF THE STATE OF CALIFORNIA

 

FOURTH APPELLATE
DISTRICT

 

DIVISION THREE

 

 
>

HAROLD PEMSTEIN,         Plaintiff and Respondent,               v.   MARTIN PEMSTEIN,         Defendant and Appellant.

G047107            (Super. Ct. No. 802823)            O P I N I O N

 

                        Appeal from a postjudgment
order of the Superior Court
of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Orange
County, Luis A. Rodriguez, Judge.  Reversed and remanded.

                        Manahan, Flashman &
Brandon, Amanda E. Manahan and Jeffrey S. Flashman for Defendant and Appellant.

                        Harold Pemstein in pro.
per., for Plaintiff and Respondent.

 

 

                        In this appeal, Martin
Pemstein contends the trial court erred in failing to tax costs as outlined in
his unopposed motion.  He faults the
trial court for requesting additional briefing, considering argument from the
prevailing party Harold Pemstein, and awarding Haroldhref="#_ftn1" name="_ftnref1" title="">[1]
costs he was not entitled to receive.  We
conclude Martin’s arguments lack merit, but because the trial court
misinterpreted the scope of the costs award, the order must be reversed and
remanded. 

I

                        This is not the first
time we have considered an appeal arising from litigation between brothers
Harold and Martin.  Their contentious
business disputes have resulted in many lawsuits, two bankruptcies, and four
appeals before this court.  As aptly
described by the trial court in its ruling on Martin’s motion to tax costs, “The
continuing saga of this complex and bitter partnership dissolution . . . hopefully
concludes the final state of this 21st century ‘[B]leak [H]ouse.’” 

                        We will begin by briefly
summarizing the procedural and factual history leading up to Martin’s motion to
tax costs.href="#_ftn2" name="_ftnref2" title="">[2]  Harold, the minority shareholder of a small,
closely held family corporation (The Pemma Corporation, hereafter Pemma),
brought an action for its involuntary dissolution pursuant to Corporations Code
section 1800, subdivision (b)(4) and (5).  He filed a separate lawsuit to dissolve HMS
Holding Company (HMS), a partnership he owned with Martin.  Harold also filed a third lawsuit seeking to
hold Martin and others personally liable for various tort causes of action.  The defendants in each case filed
cross-complaints, and in the partnership dissolution action, Pemma filed a
complaint in intervention.

                        Confronted with this
tangled web of lawsuits sharing the common thread of family discord, the trial
court (before a different trial judge) consolidated all the cases for trial.  In 2001, that trial judge bifurcated the
potentially dispositive causes of action and engaged in a piecemeal
decision-making process that resulted in a bundle of obscure and confusing
rulings.  Both parties appealed, and this
court reversed the judgments.  (>Pemstein v. Pemstein (June 9, 2004, G030217) [nonpub. opn.];
Pemstein v. Pemstein (June 9, 2004, G029394) [nonpub. opn.];
Pemstein v. The Pemma Corporation (June 9, 2004, G031227) [nonpub.
opn.].)  The case was remanded for a new
trial and assigned to a different trial judge (Judge Peter John Polos).

                        In June 2005, after an
11-day trial, the trial court issued a 23-page statement of decision and
judgment.  It ruled HMS and Pemma must be
dissolved, and each party was to “bear their own fees and costs.”  Judge Polos stated he wished to appoint a
receiver, and he appointed an evaluator, Jaime Holmes, to determine the value
of HMS.  However, before the court could oversee
the liquidation and dissolution process, Pemma and HMS filed for bankruptcy.

                        After HMS’s bankruptcy case was
dismissed in 2007, the case was placed back on calendar to complete the accounting.
 Harold asserted Martin owed him $295,871
in rent payments, plus $400,347 interest.  In addition, Harold attempted to add a cause
of action and requested additional damages arising from Martin’s alleged breach
of fiduciary duty in filing for bankruptcy. 


                        Judge
Polos held a hearing over several days beginning on September 14 and ending on November 16, 2009.  In his minute order, Judge Polos noted the
parties had not requested a statement of decision and he clarified the only
issue remaining in the case was the equitable accounting of Harold’s claim for
rent owed.  He stated the ruling was
based on the parties’ arguments and evidence presented.  He determined Martin breached his duty of
care to Harold in the collection of rent on behalf of HMS, and awarded Harold the
sum of damages requested relating to the rent issue ($295,871 principal plus
$400,347 interest).  

                        On
January 5, 2010, Judge Polos
entered a written judgment on the equitable accounting claim.  He ordered Martin to pay Harold a total of “$696,218.03
together with interest on this judgment
and fees and costs per postjudgment motions.” 
(Italics added.)

                        Harold
filed an appeal, complaining the trial court never formally ruled on his oral
request to amend the complaint to allege a breach of fiduciary duty cause of
action, and unfairly did not award separate damages for that claim as part of
the equitable accounting.  This court
affirmed the judgment, concluding the record reflected the court considered and
rejected the breach of fiduciary duty claim. 
(Pemstein v. Pemstein, supra, (G043349).)  In affirming the judgment, we concluded that
in the interests of justice both sides would bear their own costs on
appeal.  (Ibid.)

                        Meanwhile, while the appeal was
pending, Harold filed a memorandum of costs seeking a total of $168,287.82.  This sum included costs incurred at the
beginning of these proceedings, not just costs relating to the equitable
accounting.  Specifically, Harold sought
$22,375.77 for filing and motion fees (item 1 on the cost memorandum), which
included costs for motions dating back to 1999. 
He sought $1,950 for jury fees paid in 2000 (item 2).  Harold requested $24,682.29 related to
deposition costs (item 4), $7,492.73, for service of process charges (item 5),
and $38,327.40 for witness fees

(item 8).  Harold also requested $26,718.80 for court
reporter fees (item 12), and $43,593.90 for “other” charges relating to
arbitration, the bankruptcy trustee, and appellate court fees.

                        Martin
filed a “motion to strike . . . memorandum of costs and/or to tax costs.”  (Original capitalization omitted.)  Martin argued Harold was not entitled to
costs incurred before 2005 because the 2005 judgment expressly stated both
sides shall bear their own costs and fees. 
He added that costs also did not arise from the three 2004 appeals
because the opinions also stated each party shall bear their own costs and
fees.  Martin asserted Harold has
litigated 12 different cases in the superior court, and it appeared the fees
related to some of those other lawsuits. 
Martin alleged any request for costs arising from the 2005 lawsuit
should be shared by the other defendants of those actions.  And finally, Martin asserted the request for
costs arising out of earlier litigation was untimely. 

                        Martin
also provided specific arguments as to different items on the costs bill.  As to item 2, jury fees, Martin noted the equitable
accounting judgment was reached following a three-day court trial and no jury
was seated.  He stated there was only one
deposition cost (item 4) related to the equitable accounting action and he
should not have to pay for Dana Sherman’s deposition.  Martin argued item 5, the service of process
fees, and item 8, witness fees, were unnecessary and unreasonable to the
instant action. 

                        On April 2, 2010, Harold
opposed the motion to strike and/or motion to tax costs.  Harold argued the motion to tax costs was
untimely because it was filed more than 10 days after the memorandum of costs
was served.  Harold concluded the court
lacked jurisdiction to grant Martin any relief. 
Harold did not address any of the substantive issues raised in the
motion to tax costs.

                        A few weeks later, the
court held a hearing on the motion to tax costs.  The court indicated the motion to tax was
timely and was an unopposed motion. 
Harold attempted orally to make substantive arguments in opposition to
the motion to tax costs.  The court
granted Martin’s counsel’s objection to these arguments.  Harold’s counsel then argued that although
the motion was unopposed, the court still had an independent duty to determine
if the costs were unnecessary or unreasonable. 
The court asked the parties to brief whether the court had a duty to
independently consider whether the costs were necessary and reasonable.  Martin’s counsel clarified briefing would be
on this limited issue, and not the substantive issues Harold wanted to untimely
assert.  The court agreed.  It issued a minute order denying the motion
to strike “for failure to state a basis for striking the entire cost bill.”  It granted
the motion to tax “for lack of opposition on the merits” and stated it would “allow
[the] parties to submit points and authorities to adjudicate amounts to be
taxed.” 

                        On April 23, 2010,
Harold filed a supplemental brief stating the court requested additional
briefing on whether Martin’s motion to tax costs “sustains its burden of proof
to challenge the reasonableness and necessity of costs claimed.”  Harold argued Martin did not meet his
burden.  In addition, Harold objected to
Sherman’s declaration supporting the motion to tax costs on the grounds he was
previously disqualified to represent Martin in the lawsuit and ordered not to
participate in the case.  He filed a
separate motion objecting to Sherman’s supporting declaration.  

                        Although the documents
are not contained in our record, Martin contends in his opening brief and
Harold does not dispute, the proceedings were delayed for two years because
Martin filed for protection under the bankruptcy code and other “irrelevant
procedural maneuvering[s].”

                        On January 26, 2012, Harold
filed an “ex parte application for [an] order awarding costs to [the]
prevailing [party] or alternatively for an order setting [a] hearing on [the]
motion to tax costs.  (Original capitalization
omitted.)  Harold explained he was making
the application because he had “obtained relief from the bankruptcy stay for
the purpose of obtaining an award of costs on [his] $750,000 judgment in this
action.”  Harold noted the judgment was “in
excess of $750,000” based on Judge Polos’s ruling on the equitable accounting
claim.  His attorney declared Judge Polos
ruled he would “entertain further briefing on the question of how much of
individual items the court should tax.”  The
matter was assigned to Judge Luis A. Rodriguez. 


                        The following day, Judge
Rodriguez held a hearing on the ex parte application.  Martin’s counsel stated the court was without
jurisdiction to rule on the matter because the case was dismissed in November
2010.  In addition, Martin told the court
he filed for bankruptcy before he could file supplemental briefing about costs as
requested by the court.  Harold moved to
vacate dismissal of the case to permit the court to again consider the issue of
costs.  The court agreed and told the
parties it would “incorporate the prior paperwork and allow both parties to
submit supplemental briefings.”  The
parties submitted the matter on the briefing and agreed with Judge Rodriguez
that a hearing was unnecessary.

                        On May 4, 2012, the
trial court ruled the motion to tax costs was granted in part and denied in
part.  It awarded a total sum of “$107,292.56
as cost[s] to the prevailing party . . . Harold . . . and against . . . Martin
. . . .”  (Italics omitted>.) 
The court overruled the objection to Sherman’s declaration.

                        The trial court reasoned
Martin’s motion to tax was timely, stating, “Contrary to the stance taken by
[Harold] even a cursory review of the record discloses that the costs that are
claimed in its [m]emorandum of [c]osts . . . are as characterized by [Martin]
are post trial cost[s] not post judgment cost[s].”  Citing California Rules of Court, rule
3.1700, the trial court concluded Martin had 15 days after service of the costs
bill, which was extended five days because the service was by mail.  Due to a court holiday on February 15, the
court calculated the motion to tax costs filed on February 16 was timely.

                        Turning to the
substantive issues raised in the motion to tax costs,

Judge
Rodriguez determined trial costs would include costs incurred before 2005.  He rejected Martin’s argument costs prior to
2005 should be disregarded, explaining, “[Martin] clings to Judge Polos’s
ruling in 2005 [that] ‘[e]ach [p]arty to bear their own cost.’  [Martin’s] point would be correct if the
litigation as Judge Polos had anticipated would have stopped there but it didn’t.” 

                        To support this
conclusion, Judge Rodriguez stated our prior appellate opinion affirming Judge
Polos’s January 5, 2010 judgment was “instructive.”  However, Judge Rodriguez did not cite to our
analysis but rather to our inclusion of Judge Polos’s minute order.  It is unclear why Judge Rodriguez did not
simply refer directly to the superior court file.  In any event, as described above, Judge Polos’s
minute order clarified his task was to resolve the one remaining issue in the
case and he noted the other issues had been resolved in “‘prior partial rulings
after the first trial to this judge and the subsequent bankruptcy[.]’” 

                        Judge Rodriguez
interpreted the minute order as undermining Martin’s argument “that Judge Polos’s
cost share order excludes all costs incurred prior to 2010 since discovery was
not reopened and the parties were excused [from] presenting evidence already
adduced in the 2005 trial.  First no
legal or factual basis is cited to this court that this trial ended in
2005.  On the contrary[,] both the trial
and appellate record conclusively demonstrate as cited above that the 2010
judgment of Judge Polos finding [Harold] the prevailing party, who is entitled
to award of fees and cost[s] is the final ruling from which any tax is to be
imposed on [Harold’s] cost[s] bill.”

                        Citing Code of Civil
Procedure section 1032,href="#_ftn3"
name="_ftnref3" title="">[3]
and two cases Ladas v. California State
Auto Assoc. (1993) 19 Cal.App.4th 761 and Nelson v. Anderson (1999) 72 Cal.App.4th 111, the trial court
awarded  costs “after allocating the
burdens of each party in this long and drawn out litigation showing that they
were or were not ‘reasonable and necessary’” 


                        Specifically, as to item
1, Harold sought $22,375.77 for filing and motion fees and the court reduced
this amount and awarded $10,026.34.  The
court stated it taxed the appellate filings and fees as well as attorney fees
relating to Ronald Bye and Richard Duncan.  The court did not tax any of the other
itemized costs, awarding:  (1) $1,950 for
jury fees; (2) $24,682.29 for deposition costs; (3) $7,492.73 for service of
process charges; (4) $38,327.40 for witness fees; (5) $26,718.80 for court
reporter fees; and

(6)
$43,593.90 for “other” charges.

 

II

                        Martin’s first
contention on appeal is that “the trial court should have treated the motion
[to tax costs] as unopposed.”  (Original
capitalization omitted.)   He argues because
Harold’s opposition to the motion to tax was based entirely on procedural
timing defects, the court abused its discretion in (1) allowing further briefing,
and (2) not taxing costs requested in the unopposed motion.  It is Martin’s theory the court lacked
authority to independently review the costs or reject the objections raised in
his unopposed motion to tax.  We conclude
Martin misconstrues the record and the court’s level of discretion and
authority in considering costs and motions to tax.  However, we agree the matter must be reversed
and remanded because the court ignored Judge Polos’s 2005 costs share order and
misconstrued the final judgment by awarding costs beyond those reasonable and
necessary for Harold as the prevailing party in only the 2009-2010 equitable
accounting action. 

                        We begin by noting the
briefing on appeal utterly failed to provide this court with an adequate
account of what occurred below, and we have done our best to piece together the
events based on the limited record before us. 
Based on our independent review, we can say with certainty that contrary
to Martin’s contention,

Judge
Polos treated the motion to tax costs as unopposed.  He stated several times at the hearing that the
motion was unopposed.  Judge Polos also advised
Harold’s counsel he could not raise substantive issues for the first time at
the hearing.  The minute order granted
the motion to tax costs “for lack of opposition on the merits.”

                        Martin’s assertion Judge
Polos erroneously allowed supplemental briefing on the substantive issues is also
simply untrue.  The record reflects Judge
Polos requested briefing on the limited issue of whether a trial court must “separately”
adjudicate the amounts that are requested to be taxed “under the criteria of
unreasonable or unnecessary” when the motion to tax is unopposed.  Consequently, up to this point in the
proceedings, we find no evidence the court abused its discretion.

                        What transpired next in
the case was a procedural nightmare. 
First, Harold essentially ignored the trial court’s order and filed a
supplemental brief that looked very much like a typical substantive opposition
to a motion to tax costs.  Martin did not
file briefing and instead declared bankruptcy, delaying the proceedings for two
years during which the underlying action was dismissed.  Harold’s 2012 ex parte application requesting
costs as the prevailing party did not adequately disclose the status of Martin’s
motion to tax costs.  And after Judge
Rodriguez was assigned to the case, Harold represented to the court that the motion
to tax costs required supplemental briefing. 
Surprisingly, Martin apparently agreed with this plan and submitted the
issue to the court without the benefit of a hearing. 

                        We found nothing in the
record before us suggesting either party informed the court the motion to tax
costs was granted as unopposed, or that Judge Polos’s order permitting
supplemental briefing was not intended to reopen argument on the substantive
issues.  To the contrary, it appears the
parties agreed to submit the issue based on additional briefing and without the
benefit of a further hearing.  To the
extent

Judge
Rodriguez should not have considered supplemental briefing or should have
treated the motion to tax costs as unopposed, any error was waived by the
parties’ conduct.  (See >Mesecher v. County of San Diego (1992) 9
Cal.App.4th 1677, 1685-1686.)  “‘Under
the doctrine of invited error, where a party, by his conduct, induces the
commission of an error, he is estopped from asserting it as grounds for
reversal.  [Citations.]”  (Ibid.)

                        However, this conclusion
is a hollow victory for Harold.  We
conclude Judge Rodriguez misconstrued the nature of the two judgments filed in
this case by

Judge
Polos and the holding of our prior opinion in Pemstein v. Pemstein, supra, (G043349), discussing those judgments. 

                        The procedural history
of this case is somewhat complex but must be understood to appreciate the
nature and significance of the 2005 judgment and the

2010
judgment.  As noted above, in the late
1990s, after Harold’s three lawsuits were consolidated, the trial judge decided
that rather than holding one massive trial, it would be more efficient to
bifurcate and try the issues separately.  The case was partially tried by a jury, and
partially tried by the court, and from these judgments the parties filed three
separate notices of appeal. 

                        As described in >Pemstein v. The Pemma Corporation supra, G031227,
the trial court’s strategy “resulted in the equivalent of a Gordian knot.  The piecemeal decision-making process
resulted in an inextricably related bundle of obscure and confusing rulings,
which leave this court unable to conclude with any confidence that the parties
all received a full and fair hearing on the issues.”  (Ibid.)  We directed the trial court to conduct a more
conventional proceedings “culminating in an equitable final order as to all
causes of action in all the consolidated cases.”

                        Judge Polos (the fourth
trial judge to have presided over the matter) skillfully undertook the monumental
task of trying all the causes of action raised in the three lawsuits.  After an 11-day court trial, Judge Polos
prepared a 23-page statement of decision and judgment on June 30, 2005, stating
he had visited Pemma’s facility in

Santa
Ana, considered the trial briefs, and evaluated the oral and documentary
evidence.  The court began its statement
of decision by clarifying, “Pursuant to [a]ppellate [c]ourt direction, this [s]tatement
of [d]ecision is a final equitable order
as to all the proceedings and all causes of action in these consolidated
proceedings.”  (Italics added.)

                        Judge Polos recounted
the long and complex procedural history and underlying facts of the case.  He found Harold and Martin were credible witnesses,
and their uncle Sherman, “to be the driving force behind this prolonged
litigation.” 

Judge
Polos rendered a decision as to all three lawsuits, ordering the dissolution of
Pemma and HMS.  In his concluding
remarks, Judge Polos recognized “the drastic nature in ordering the corporate
dissolution, especially after the [c]ourt’s visit to the Santa Ana premises . .
. .  The [c]ourt further understands the
needs of Pemma to continue to lease its current space from HMS . . . in order
to efficiently operate.  [¶]  For this reason, this [c]ourt >strongly advises an agreement be reached
between the parties before the appointment of a receiver is made to liquidate [Pemma]
and sell the HMS properties.”

                        Judge Polos scheduled a
hearing date for the appointment of a receiver, and he requested a copy of the
report prepared by the appointed expert as to the value of HMS.  He stated this information would be helpful
in any potential buy-out, resolution, or dissolution.  The final section of the statement of
decision contains the “judgment.”  It
orders the corporation and partnership be dissolved and “[e]ach party to bear
their own fees and costs” (hereafter referred to as the 2005 judgment).

                        Due to bankruptcies and
legal maneuvering, Judge Polos did not see the case again until four years
later in 2009.  Many of the issues
relating to the dissolution and liquidation were resolved in the bankruptcy
court.  Judge Polos held a three-day
court trial to complete the last accounting issue.  Indeed, he issued a minute order clarifying, “The
only issue remaining as to all of the consolidated cases the equitable
satisfaction” of Harold’s claim for rents owed by HMS.  Judge Polos issued a judgment on January 5,
2010, awarding rents owed plus interest “on this judgment and fees and costs
per postjudgment motions” (hereafter referred to as the 2010 judgment).

                        We conclude the 2005
judgment was final as to all the causes of action raised in the consolidated
action.  By ordering each party to bear
their own costs, we can infer the court determined there was no prevailing
party and equity did not require a costs award relating to the litigation of >those claims. 

                        We recognize this was an
interlocutory judgment that was not immediately appealable.  (Kinoshita
v. Horio (1986) 186 Cal.App.3d 959, 966 [orders dissolving partnerships are
not appealable final judgments].)  Further
judicial action was required.  Indeed,
Judge Polos appointed a receiver, ordered an accounting of Pemma’s and HMS’s
assets, and requested a copy of the expert’s report on the value of HMS.  (See 7 Witkin, Cal. Procedure (5th ed. 2008)
Judgment, § 15, pp. 558-560 [judgment’s reference to a master or referee makes
judgment interlocutory].)  The court’s orders
clearly contemplated further action in the trial court before a final judgment
would be prepared.  Although not stated
in the 2005 interlocutory judgment, the court retained jurisdiction to confirm
any sale of assets by the receiver and approve the receiver’s final
accounting.  (§ 565; 6 Witkin, Cal.
Procedure (5th ed. 2008) Provisional Remedies, §§ 438, 455, 458, pp. 370-371, 386,
387-389.)  

                        Although the 2005
judgment was interlocutory, the court’s order designating each side must bear
their own costs cannot be ignored or forgotten. 
In 2004, this court ordered Judge Polos to render a final >equitable order as to all
proceedings.  As a matter of equity, the trial
court made its ruling, determining there was no prevailing party as to those
decided issues.  The court’s subsequent
final judgment resolving the remaining accounting issues must be viewed in this
unique context.  Harold was certainly the
prevailing party with respect to the accounting dispute, and should be awarded
costs relating to the accounting litigation. 
However, he was never deemed the prevailing party as to the underlying
litigation, and he was not entitled to those costs.href="#_ftn4" name="_ftnref4" title="">[4]

                        For this reason we must
reverse the court’s order awarding costs. 
The award includes costs (such as jury fees) dating back to the original
piecemeal litigation that resulted in several judgments all reversed by this
court in 2004.  The award also includes
costs relating to the 11-day court trial before Judge Polos resulting in the

2005
interlocutory judgment dissolving the brothers’ corporation and partnership,
and ruling both sides shall bear their own costs. 

                        We remand the matter to
allow the trial court to reconsider Martin’s unopposed motion to tax costs.  Contrary to Martin’s contention on appeal,
the trial court is not required to blindly accept the arguments raised in the motion
to tax costs.  Section 1033.5 sets
forth the possible items that are and are not allowable costs.  And it is well settled, “‘The trial court’s
exercise of discretion in granting or denying a motion to tax costs will not be
disturbed if substantial evidence supports its decision.’  [Citation.] 
To the extent the statute grants the court discretion in allowing or
denying costs or in determining amounts, we reverse only if there has been a ‘“clear
abuse of discretion” and a “miscarriage of justice.”’  [Citations.]” 
(Chaaban v. Wet Seal, Inc.
(2012) 203 Cal.App.4th 49, 52 [court has discretion to deny motion to tax
costs].)  Pursuant to Judge Polos’s 2010 judgment,
Harold is only entitled to recover as the prevailing party costs reasonably
related and necessary for the equitable accounting action. 

III

                        The postjudgment order is
reversed and remanded.  In the interests
of justice, each side shall bear their own costs in this appeal.

 

 

                                                                                   

                                                                                    O’LEARY,
P. J.

 

WE CONCUR:

 

 

 

RYLAARSDAM,
J.

 

 

 

BEDSWORTH, J.

c