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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 th e Superior Court of 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. pe r., for Plaintiff and Respondent.2 In this appeal, Martin Pemstein conte nds the trial court erred in failing to

tax costs as outlined in his u nopposed motion. He faults the trial court for requesting additional briefing, considerin g argument from the prevailing party Harold Pemstein, and awarding Harold 1 costs he was not entitled to receive. We conclude Martin’s arguments lack merit, but because the trial court misinterpreted th e 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 ba nkruptcies, and four appeals be fore 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 bitte r 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. 2 Harold, the minority shareholder of a small, closely held family corporation (The Pemma Corporation, hereafte r Pemma), brought an action for its involuntary dissolution pursuant to Corporations Code section 1800, subdivision (b)(4) and (5). He filed a separate lawsu it to dissolve HMS Holding Company (HMS), a partnership he owned with Ma rtin. Harold also filed a third lawsuit seeking to hold Martin and othe rs 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 complain t in intervention.

1 We hereafter refer to the parties by their first names for ease of reading and to avoid confusion, and not out of disrespect. ( In re Marriage of James & Christine C. (2008) 158 Cal.App.4th 1261, 1264, fn. 1.)

2 Because we have been provided w ith an abbreviated r ecord on appeal, our discussion of the procedural histor y is taken from our prior opinion, Pemstein v. Pemstein (May 16, 2011, G043349) [n onpub. opn.], of which we take judicial notice.3 Confronted with this tangled web of lawsuits sharing the common thread of family discord, the trial court (before a differe nt 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 tria l, the trial court issued a 23-page statement of decision and judgment. It ru led HMS and Pemma must be dissolved, and each party was to “bear their own fees and co sts.” Judge Polos stated he wished to appoint a receiver, and he appointed an eval uator, Jaime Holmes, to determine the value of HMS. However, before the court c ould oversee the liqui dation and dissolution process, Pemma and HMS filed for bankruptcy. After HMS’s bankruptcy case was di smissed in 2007, the case was placed back on calendar to complete the accounting. Harold asserted Martin owed him $295,871 in rent payments, pl us $400,347 interest. In add ition, Harold attempted to add a cause of action and requested additional da mages arising from Martin’s alleged breach of fiduciary duty in filing for bankruptcy. Judge Polos held a hearing over se veral days beginni ng 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 i ssue 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 evid ence presented. He determined Martin breached his duty of care to Ha rold in the collection of re nt on behalf of HMS, and4 awarded Harold the sum of damages request ed relating to the rent issue ($295,871 principal plus $400,347 interest). On January 5, 2010, Judge Polo s entered a written judgment on the equitable accounting claim. He ordered Mar tin 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 a llege a breach of fiduciary duty cause of action, and unfairly did not awar d 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 fo r 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). Haro ld 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 $26,7 18.80 for court reporter fees (item 12), and $43,593.90 for “other” charges relating to ar bitration, the bankruptcy trustee, and appellate court fees.

Martin filed a “motion to strike . . . memorandum of costs and/or to tax costs.” (Original capitalization omitted.) Ma rtin 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 20045 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 ot her 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 re quest for costs arising out of earlier litigation was untimely. Martin also provided specific argumen ts as to different items on the costs bill. As to item 2, jury fees, Martin note d the equitable accountin g 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 equita ble 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 a nd unreasonable to the instant action. On April 2, 2010, Harold opposed the motion to strike and/or motion to tax costs. Harold argued the mo tion to tax costs was untimely be cause it was filed more than 10 days after the memorandum of costs was se rved. Harold concluded the court lacked jurisdiction to grant Martin any relief. Haro ld did not address any of the substantive

issues raised in the motion to tax costs. A few weeks later, the court held a hear ing on the motion to tax costs. The

court indicated the motion to tax was timel y and was an unoppose d motion. Harold attempted orally to make subs tantive arguments in opposition to the motion to tax costs. The court granted Martin’s counsel’s objecti on to these arguments. Harold’s counsel then argued that although the motion was u nopposed, the court s till had an independent duty to determine if the costs were unnece ssary or unreasonable. The court asked the parties to brief whether the court had a duty to independently consid er whether the costs were necessary and reasonable. Martin’s c ounsel clarified briefing would be on this limited issue, and not the substa ntive issues Harold wanted to untimely assert. The court agreed. It issued a minute order denying the mo tion to strike “for failure to state a basis6 for striking the entir e 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, Haro ld 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 n ecessity of costs claime d.” Harold argued Martin did not meet his burden. In addition, Harold objected to Sherman’s declaration supporting the motion to tax costs on the gr ounds he was previously disqualified to represent Martin in the lawsu it and ordered not to participat e in the case. He filed a separate motion objecting to Sher man’s supporting declaration. Although the documents are not containe d in our record, Martin contends in his opening brief and Harold do es not dispute, the proceedings were delayed for two years because Martin filed for protection unde r the bankruptcy code and other “irrelevant procedural maneuvering[s].” On January 26, 2012, Haro ld 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 cap italization omitted.) Harold explained he was making the application because he had “obtained relief from th e 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 attorn ey 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 assigne d 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 Novemb er 2010. In additi on, Martin told the court he filed for bankruptcy before he c ould file supplemental briefing about costs as7 requested by the court. Harold moved to vaca te dismissal of the case to permit the court to again consider the issue of costs. Th e court agreed and told the parties it would “incorporate the prior paperwork and a llow both parties to submit supplemental briefings.” The parties submitted the matte r 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 to tal sum of “$107,292.56 as cost[s] to the prevailing party . . . Harold . . . and agains t . . . 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 judgm ent 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 ra ised in the motion to tax costs, Judge Rodriguez determined tr ial costs would include costs incurred before 2005. He rejected Martin’s argument co sts prior to 2005 should be disregarded, explaining, “[Martin] clings to Judge Polo s’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 incl usion of Judge Polos’s minute order. It is unclear why Judge Rodri guez did not simply refer directly to the8 superior court file. In any event, as desc ribed above, Judge Polos’ s minute order clarified his task was to resolve the one remaining issu e in the case and he noted the other issues

had been resolved in “‘prior partial rulings after the fi rst trial to this judge and the subsequent bankruptcy[.]’” Judge Rodriguez interpreted the mi nute order as undermining Martin’s argument “that Judge Polos’s cost share orde r excludes all costs in curred prior to 2010 since discovery was not reopened and the parties were excused [from] presenting evidence already adduced in the 20 05 trial. First no legal or factual basis is cited to this

court that this trial ended in 2005. On th e contrary[,] both the trial and appellate record conclusively demonstrate as cited above that th e 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 a ny tax is to be imposed on [Harold’s] cost[s] bill.” Citing Code of Civil Procedure section 1032, 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 co sts “after allocating the burdens of each party in this long and drawn ou t 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 aw arded $10,026.34. The court stated it taxed the appellate filings and fees as well as atto rney fees relating to Ronald Bye and Richard Duncan. The court did not tax any of the othe r itemized costs, awardi ng: (1) $1,950 for jury fees; (2) $24,682.29 for deposition co sts; (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.

3 All further statutory references are to the Code of Civil Procedure, unless otherwise indicated.9 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 moti on to tax was based en tirely 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 theo ry the court lacked authority to independently re view the costs or reject the objections raised in his unopposed motion to tax. We conclude Mar tin misconstrues the record and the court’s level of discretion and authority in considering costs and mo tions to tax. However, we agree the matter must be reversed and remand ed because the court ignored Judge Polos’s

2005 costs share order and misconstrued th e 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 ap peal utterly failed to provide this court with an adequate account of what occu rred 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. Judg e Polos also advised Harold’s counsel he

could not raise substantive issu es 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 err oneously allowed supplemental briefing

on the substantive issues is al so 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 unoppos ed. Consequently, up to this point in the proceedings, we find no evidence the court abused its discretion.10 What transpired next in the case was a procedural nightmare. First, Harold essentially ignored the trial court’s order and filed a supplemental br ief that looked very much like a typical substantive opposition to a motion to tax co sts. Martin did not file briefing and instead declared bankruptcy, de laying the proceedings for two years during which the underlying action was dismissed. Harold’s 2012 ex parte application requesting costs as the prevaili ng party did not adequately disc lose the status of Martin’s motion to tax costs. And after Judge R odriguez 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 suggesti ng 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 inte nded to reopen argumen t on the substantive issues. To the contrary, it appears the pa rties 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 cost s 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, wher e a party, by his conduct, induces the commission of an error, he is estopped fro m 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 t hose judgments. The procedural history of this case is somewhat complex but must be understood to appreciate the nature and si gnificance of the 2005 judgment and the11 2010 judgment. As noted above, in the late 1990s, after Harold’s three lawsuits were consolidated, the trial judge d ecided that rather than holdin g one massive trial, it would be more efficient to bifurcate and try the issu es separately. The case was partially tried by a jury, and partially tried by the court, an d from these judgments th e 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 equi valent of a Gordian knot. The piecemeal decision-making process resulted in an in extricably related bundle of obscure and confusing rulings, which leave this court unable to conclude with an y 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 procee dings “culminating in an equitable final

order as to all causes of action in all the consolidated cases.” Judge Polos (the fourth trial judg e to have presided over the matter) skillfully undertook the monumenta l task of trying all the caus es of action raised in the

three lawsuits. After an 11-d ay court trial, Judge Polos pr epared a 23-page statement of decision and judgment on June 30, 2005, stati ng he had visited Pemm a’s facility in Santa Ana, considered the trial briefs, and ev aluated 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 consolid ated proceedings.” (Italics added.) Judge Polos recounted the long an d complex procedur al 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 prol onged litigation.” Judge Polos rendered a decision as to all th ree 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 lease12 its current space from HMS . . . in order to effici ently operate. [¶] For this reason, this [c]ourt strongly advises an agreement be reached be tween the parties before the appointment of a receiver is made to liqui date [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 inform ation would be helpful in any potential buy-out, resolution,

or dissolution. The final section of the statem ent of decision contains the “judgment.” It orders the corporation and part nership be dissolved and “[e] ach party to bear their own fees and costs” (hereafter refe rred to as the 2005 judgment). Due to bankruptcies and legal mane uvering, Judge Polos did not see the case again until four years later in 2009. Ma ny of the issues rela ting 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 cons olidated cases the equ itable satisfaction” of Harold’s claim for rents owed by HMS. J udge Polos issued a j udgment 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 fi nal as to all the causes of action

raised in the consolidated acti on. By ordering each party to bear their own costs, we can infer the court determined there was no preva iling party and equity di d not require a costs award relating to the litigation of those claims

. We recognize this was an interlocut ory judgment that was not immediately appealable. ( Kinoshita v. Horio (1986) 186 Cal.App.3d 9 59, 966 [orders dissolving partnerships are not appealable final judgments ].) Further judicial action was required. Indeed, Judge Polos appointed a receiver, or dered 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 a13 master or referee makes judgment interl ocutory].) 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, th e court retained jurisdiction to confirm any sale of assets by the receiver a nd approve the receiver’s final accounting. (§ 565; 6 Witkin, Cal. Proced ure (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 cour t’s subsequent final judgment resolving the remaining accounting issues must be viewed in this unique cont ext. Harold was certainly the prevailing party with respect to the accoun ting dispute, and should be awarded costs relating to the accounting litigation. However, he was never deemed the prevailing party as to the underlying litigation, a nd he was not entitled to those costs. 4 For this reason we must reverse the court’s order awarding costs. The award includes costs (such as jury fees) dating back to th e original piecemeal litigation that resulted in several judgments all revers ed by this court in 20 04. The award also includes costs relating to the 11-day court trial before Judge Polos resulting in the

4 In awarding costs, Judge Rodr iguez referred to our opinion in Pemstein v. Pemstein, supra, G043349, as supporting the conclusi on Harold was entitled to recover costs relating back to the underlying litigation. Our opinion certainly referred to the 2005 judgment ordering dissolution of Pe mma and HMS and we acknowledged it was not the end of the litigation betw een these parties. However, our opinion simply affirmed Judge Polos’s final judgment resolving the last remaining accounting issue. Nothing in our opinion suggested this judgment rendered Harold the prevailing party in the entire litigation entitled to costs incurred before the 2005 judgment. As noted above, such a holding would be contrary to Judge Polos’s c onclusion in 2005 that equity required the parties share the costs relati ng to resolution of the underlying lawsuits. The 2010 judgment determined Harold was the prevailing party only on the accounting dispute.14 2005 interlocutory judgment dissolving the brothers’ corporation and partnership, and ruling both sides shall b ear 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 argumen ts 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 di scretion 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 an d remanded. In the interests of justice, each side shall bear th eir own costs in this appeal.

O’LEARY, P. J.

WE CONCUR:

RYLAARSDAM, J.

BEDSWORTH, J.

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