Filed 11/3/14 (pub. order 11/18/14; see end of opn.)

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT

BRIAN L. GWARTZ et al., Plaintiffs and Respondents,

v. MICHAEL WEILERT et al., Defendants and Appellants. F066581 (Super. Ct. No. 09CECG01032)



### OPINION

APPEAL from a judgment of the Superi or Court of Fresno County. Kristi C. Kapetan, Judge. Wild, Carter & Tipton and Steven E. Paganetti for De fendants and Appellants. Law Offices of Daniel B. Spitzer, Daniel B. Spitzer; and Cheryl A. Skigin for Plaintiffs and Respondents.
-ooOoo-2. This appeal follows a highly publicized jury trial of a fraud claim arising from a $2.3 million sale of 15 acres of land that incl uded a residence, riding arena and associated buildings, located on South Kings Canyon Road , Parlier, California. The plaintiffs who purchased the property obtained a judgment fo r $1,553,800, which included $850,000 in punitive damages. Plaintiffs were unsuccessful in attempting to collect the judgment and moved for various postjudgment orders. The trial court granted these motions and the orders issued have been referred to as the freeze order, th e turnover order, the a ssignment order and the charging order. Among other things, the orde rs enjoined defendan ts and their agents from selling, spending, transferring or dissi pating any of their a ssets, which included money in any deposit account. When plaintiffs learned that defendants had violated the orders, they filed a motion to dismiss the appeal under the doctrine of disentitlement. Plaintiffs’ moving papers iden tified 47 different transfers of money that violated the trial
court’s orders. The motion to dismiss presents a threshol d question that must be decided before reaching the merits of the appeal. Based on our review of the motion and opposition papers, including a declaration from defendant Michael Weilert that did not deny any of the 47 transactions took place, and argument by counsel, we conclude the balance of the equitable considerations relevant to the dise ntitlement doctrine favor dismissal. It would be unjust to allow defendants to seek the benefits of an appe al while willfully disobeying the trial court’s valid orders and frustrating plaintiffs’ legitimate e fforts to enforce the judgment. We therefore grant plaintiffs ’ motion to dismiss the appeal.
FACTS AND PR OCEEDINGS
The Parties The plaintiffs in this laws uit are Brian L. Gwartz and his wife, Cheryl A. Skigin, cotrustees of the Pendragon Trust.3. Michael Weilert, M.D. (Weilert) and hi s wife, Genevieve Weilert, who also is known as Genevieve de Montremare (Genevieve), 1 are the defendants in this action. The following entities are owned or cont rolled by Weilert and Genevieve. Defendants’ Related Entities The M&G Weilert Family, L.P. (Weilert FLP) is a limited partnership owned 10 percent by Weilert, 40 percent by Genevieve, and 50 percent by the Madonna della Pieta Trust, which is a living trust established in February 2009 with Ge nevieve as its sole

trustee. 2 It appears that the Weilert FLP has be come the owner of many of the assets of Weilert and Genevieve including the next three entities discussed. In addition,
defendants transferred investment real estate located in Clovis and Arroyo Grande to the Weilert FLP after the judgment was entered, but before the motions for a new trial and judgment notwithstanding th e verdict were denied. Michael Weilert, M.D., Inc. (MD Inc.), is a California corporation that has been in the business of providing medical service since 1981. Weilert once was the sole shareholder of MD Inc. Now, Weilert FLP is the sole shar eholder of MD Inc. Weilert remains an employee of, and perfo rms all the services associat ed with, the corporation. Those services are provided to Pathology As sociates, the business under which Weilert conducts his medical practice as a pathologist. Pathology Associates is a California general partnership that provides pathology services to physicians and hospitals. Weilert FLP is one of the gene ral partners and holds

1 In responses to form interrogatori es, Genevieve stated her name was (1) Genevieve Marie Anna Sanders from birth in 1962 until she was married in February 1988, (2) Genevieve Marie A nna Hoffman from February 19 88 until 1991, when it was legally changed to Genevieve Marie de Mont remare. Genevieve verified the responses on May 7, 2010, using the name Genevieve Weilert. During a June 2010 independent medical examination conducted to determine if Genevieve was capable of being deposed, she stated she was Genevieve Sand ers, not Genevieve Weilert.
2 Weilert testified that the property held within the trust was Genevieve’s sole and separate property.4. a 10 percent ownership interest in Pathology Associates. Al so, Weilert is the managing partner of Pathology Associates and, comp ared to the other partners, receives an additional draw of $2,000 per month for acting in that capac ity. At one time, MD Inc. received partnership draws from the Pathology Associates. Sierra Pathology Building , LLC is a California limited liability company that owns the building occupied by Patholo gy Associates. Weilert FLP ow ns a one-ninth interest in Sierra Pathology Building, LLC. Free Market Medical Systems, LLC (Free Market) is a California limited liability company that was formed shortly before the tria l in this case. On April 5, 2013, Weilert testified (1) Weilert FLP had put $150,000 into the company; (2 ) its purpose was to develop software products for use in medical offices; (3) its other member was Patricia Tam Ellis, a person familiar with software; (4) no application had been made for a copyright, design patent or ot her form of intellectual prope rty; and (5) no written business plan existed. On May 3, 2013, Weilert tes tified he had made tran sfers of $100,000 and $75,000 into Free Market’s bank account in anticipation of futu re business expense because he expected “to start coding on projects” and would need to pay the programmer. At the time, Weilert was the sole signatory on Free Market’s bank account with Wells Fargo. Belle Reve, LLC is a California limited liability company owned by Weilert and
Genevieve. After the judgment was entered in this case in October 2012, Weilert and Genevieve, along with MD Inc. and Weilert FLP filed petitions in bankruptcy court. 3

3 On September 9, 2013, the bankruptcy case for MD Inc. was filed and assigned case No. 13-16062. On Septembe r 13, 2013, defendants filed In re Michael Weilert and Genevieve de Montremare (Bankr. E.D.Cal, Case No . 13-16155), a proceeding under Chapter 7 (liquidation) of the Bankruptcy Code as well as th e bankruptcy case for Weilert FLP, which was assigned case No. 13-16156. [Fn. cont.]5. Those bankruptcy proceedings are mentioned only briefly because (1) the transfers examined here occurred before the petitions we re filed and (2) any bankruptcy stay that might have barred this court from moving forwar d in this matter has been lifted. (See pt. I.B.3, post .) The Underlying Fraudulent Real Estate Sale In March 2008, plaintiffs agreed to pu rchase approximately 15 acres of land from Weilert for $2.3 million. The pr operty included a residence, a riding arena and associated buildings. The documents for the sale incl uded (1) a California residential purchase agreement and joint escrow instructions, (2) a re al estate transfer disc losure statement, (3) a buyer’s inspection advisory, and (4) a supplemental statutory and contractual
disclosures. All of these documents were prepared using preprint ed forms published by
the California Association of Rea ltors. In the real estate tr ansfer disclosure statement, Weilert represented that he was not aware of any room additions, stru ctural modification, or other alterations or repairs (1) made with out the necessary permit s (except for the pool house) or (2) not in compliance with building codes. Plaintiffs alleged Weilert made misr epresentations regarding the property, including that (1) the construction of the re sidence had cost clos e to $2 million, (2) marble lions imported from Genevieve’s family in France came with the house, (3) the property had a private beach, and (4) the property had been permitted for a boat dock. Plaintiffs also alleged the parties agreed th at Weilert would complete a covered riding arena, barn and irrigation system prior to the close of escrow.
The Lawsuit In March 2009, plaintiffs filed a co mplaint against Weilert and Genevieve, alleging fraud and other causes of action arising from the re al estate transaction.

Weilert FLP had filed its first bankruptc y petition (case No. 13- 14036) on June 7, 2013. On July 18, 2 013, the bankruptcy trustee filed a motion to dismiss the case, which the bankruptcy court granted in an order dated August 13, 2013.6. The trial began in September 2012. Th e first phase was a bench trial for the purpose of determining whether the purchase agreement was an in tegrated document. Defendants hoped to show the purchase agreem ent was integrated and its “as-is” clause barred plaintiffs’ claims they made misrep resentations. The trial court rejected defendants’ position, ruling the purchase agreement was not integrated and parol evidence could be presen ted to the jury. During the second phase of the trial, a jury was presented with plaintiffs’ causes of action for breach of contract, fraud by in tentional misrepresentation, fraud by concealment, negligent misrepresentation, and a common count for work, labor and materials provided by plaintiffs to defendants. The jury decided these causes of action in favor of plaintiffs and also awarded plain tiffs $850,000 in pun itive damages. The Judgment and Appeal On October 30, 2012, the trial court file d a judgment on jury ve rdict that awarded plaintiffs $1,553,800, plus attorney fees a nd costs in an amount to be determined. Defendants subsequently filed a motion fo r a new trial and a motion for judgment notwithstanding the verdict. The tr ial court denied these motions. On December 28, 2012, defe ndants filed a notice of a ppeal from the judgment and the trial court’s order denying their moti on for new trial and motion for judgment notwithstanding the verdict. Defendants did not post a bond to stay the enforcement of the judgment as provided in Code of Civil Procedure section 917.1. The Postjudgment Orders On April 5, 2013, Weilert testified dur ing a judgment debtor examination at the superior court that Weilert FLP had a ba nk account with We lls Fargo Bank with approximately $225,000. Plaintiffs requested the trial court for an order directing the
turnover of the funds. The c ourt directed that the matter be put on calendar and a written ex parte application be filed. The court th en stated, “I again re peat my cautionary7. comment. I think it behooves th e judgment debtors not to change the status quo for the next, whatever, two business days it may take to have the matter heard on the merits.” Despite this admonition, sometime betw een April 5, 2013, and the continued judgment debtor examination on May 3, 2013 , Weilert made transfers of $75,000 and $100,000 to the bank acco unt of Free Market. On May 3, 2013, a hearing was held on the written application for a turnover order. The trial court continued the hearing on the turnover applic ation and issued an order prohibiting the transfer or concealment of assets. The written form of the May 3, 2013, order 4 was filed on May 6, 2013, and provided that “(a) the judgment debtors, Weilert and Genevieve, individually or as agents, employees, officers or other representative capacity for (b) the Weilert FLP, (c) Free Market, (d) Belle Reve, (e) MD Inc., and (f) the [Madonna della Pieta] Trust, and thei r respective agents, representatives, employees and attorneys, and all others acting in concert with them, are hereby restrained and enjoined from selling, withdrawing, spending, transferring, encumbering, dissipating, or assigning any assets (including without limitation money on depos it in any deposit account) of the judgment debtors, Weilert FLP, Free Market, Belle Reve, MD Inc. and the [Madonna della Pieta] Trust.”
The order conti nued the hearing on application for a turnover order until May 16, 2013, and stated the freeze order would remain in effect until that hearing. On May 16, 2013, the trial court reinstated the freeze order. The court also granted plaintiffs’ motion for a turnover orde r and their motion for an assignment order. The court took plaintiffs’ motion for a ch arging order under s ubmission and filed a written charging order on May 28, 2013.

4 The order was labeled “ORDER FOR TEMPORARY RESTRAINING ORDER, FOR CONTINUED HEARING ON EX PA RTE APPLICATION FOR TURNOVER ORDER AND FOR CONTINUED JUDGME NT DEBTOR EXAMINATION OF MICHAEL WEILERT.” For purposes of this opinion, it is referred to as the “freeze order.”8. The turnover order directed defendants an d their affiliated entities to deliver to the levying officer (1) vehicles and their documents of title; (2 ) horses and their documents of title; (3) documents of title fo r real estate in Fresno and San Luis Obispo Counties; and (4) all certificated and uncertificated securitie s representing interests in MD Inc., Belle Reve, LLC, Weilert FLP, Si erra Pathology Building, LL C, and Free Market. The assignment order stated that all payments due the defendants or the entities they owned or controlled (to the extent necessa ry to satisfy the judgment in full) were assigned to the plaintiffs. The order specifi cally mentioned (1) rental income from three parcels of real property; (2) payments, distri butions or partnership draws due to MD Inc. from Pathology Associates; (3) payments due Belle Reve, LLC from any source; and (4) payments due to Weilert or his affiliated entit ies from Sierra Patholog y Building, LLC. The charging order stated th at the interests of the defe ndants in the Weilert FLP; Pathology Associates; Belle Re ve, LLC; Sierra Pathology Bu ilding, LLC; and MD Inc. were charged with the unpaid balance due under the Oct ober 30, 2012, judgment.
The Motion to Dismiss On December 23, 2013, plaintiffs filed th eir motion to dismiss this appeal. The motion listed 47 transactions by defendants a nd their affiliated entities that violated the trial court’s May 6, 2013, order prohibiting transfers of funds in a deposit account. Eventually, after a specific order from this court, defendants filed an opposition to
the motion to dismiss that addressed wh ether dismissal was appropriate under the
doctrine of disentitlement.
DISCUSSION
Plaintiffs’ motion to dism iss the appeal pursuant to California’s doctrine of disentitlement presents this court with a thre shold question that, if decided in plaintiffs’ favor, would mean the merits of defendants’ appeal from the judgment are not reached. Because the motion to dismiss will be grante d, this opinion sets forth our reasons for9. dismissing the appeal and does not reach the meri ts of the appeal. (See Cal. Const., art. VI, § 14 [written appellate decisions].)
I. DISENTITLEMENT DOCTRINE A. Legal Principles An appellate court has the inherent powe r to dismiss an appeal by a party that refuses to comply with a lower court order. ( Stoltenberg v. Ampton Investments Inc. (2013) 215 Cal.App. 4th 1225, 1229 ( Stoltenberg ).) This doctrine of disentitlement is not jurisdictional, but is a discretionary tool that may be used to dismiss an appeal when the balance of the equitable concerns makes dismissal an appropriate sanction. ( Id . at p. 1230.) The rationale underlying the doctrine is that a party to an action cannot seek the aid and assistance of an appellate court while standing in an attitude of contempt to the legal orders and processes of the courts of this state. 5 ( Ibid .) No formal judgment of contempt is required under the doctrine of disentitlement. ( Ibid .) An appellate court may dismiss an appeal where the appellant has willf ully disobeyed the lower court’s orders or engaged in obstructive tactics. ( Ibid .) The disentitlement doctrine has been app lied to a wide range of cases, including cases in which an appellant is a judgment debtor who has frustrated or obstructed legitimate efforts to enfo rce a judgment. (E.g., Stoltenberg , supra , 215 Cal.App.4th 1225 [defendants repeatedly, and in contempt of si ster-state orders, frust rated the enforcement of the California judgment that was the subject of their appeal]; TMS, Inc. v. Aihara (1999) 71 Cal.App.4th 377 [appeal dismis sed where, despite trial court’s order, defendants willfully refused to resp ond to postjudgment interrogatories]; Stone v. Bach (1978) 80 Cal.App.3d 442 [appellant disobeye d a prejudgment order directing the deposit

5 This rationale appears to be derived from the fundamental pr inciple of equity jurisprudence that one who seek s equity must do equity. ( Dool v. First National Bank (1929) 207 Cal. 347, 351.) A similar rationale underlies the equitable defense of unclean hands. ( Polanski v. Superior Court (2009) 180 Cal.App.4th 507, 532.)10. of partnership funds collected by him into a trustee account and, after the judgment, was found in contempt for failing to appear at a judgment debtor examination].) B. Application of Doct rine to These Facts 1. Transfers Identified in Motion to Dismiss All 47 transactions identified in plainti ffs’ motion are not discussed here because it will suffice to examine a portion of the tr ansfers involving Weilert himself. These transfers adequately demonstrate that Weilert violated the trial c ourt’s freeze order. Specifically, we will consider 13 transfer s totaling $285,000 that were made from Weilert’s bank account to (1) MD Inc., (2) Belle Reve, (3) Free Market, and (4) American Express between June 3, 2013, and September 13, 2013. The five transfers made by Weilert to MD Inc. totaled $135,000 6 and were made in the following amounts and on the following dates:
Amount Date $15,000 June 17, 2013 $ 5,000 July 19, 2013 $10,000 August 2, 2013 $50,000 August 6, 2013 $55,000 August 8, 2013
Weilert also made four transf ers totaling $3,000 to Belle Reve:
Amount Date $ 600 July 1, 2013 $ 600 July 22, 2013 $ 800 August 6, 2013

6 We recognize that the 47 transactions listed in the motion to dismiss include 14 transfers from MD Inc. to We ilert totaling $43,100. If these transfers are offset against those made by Weilert to MD Inc., the net amou nt transferred from Weilert to MD Inc. is $91,900.11. $ 1,000 August 12, 2013 On June 20, 2013, Weilert transf erred $120,000 to Free Market. From September 9 through 12, 2013, Weilert made thre e payments to American Express totaling $27,000.
Plaintiffs learned of these transacti ons when defendants filed schedules and
statements of financial affair s in the bankruptcy cases involvi ng themselves, MD Inc. and
Weilert FLP. 2. Defendants’ Oppositions On January 7, 2014, defendants filed an opposition to plaintiffs’ motion to dismiss the appeal that did not address the disentitleme nt doctrine, but argued a motion to dismiss based on a failure to file an appellate brief was premature. On February 6, 2014, defendants file d a supplemental oppositio n to the motion to dismiss and requested sanctions against plai ntiffs on the ground that the motion was frivolous. Again, defendants asserted a motion to dismiss for failure to file an appellant’s opening brief was premature under Califor nia Rules of Court, rule 8.220(a). On March 7, 2014, this court filed an or der stating that defendants had failed to respond to the merits of the motion to dismiss and granted them 10 days leave to file such
a response. Defendants then filed an opposition that addressed the merits and was supported by a declaration of Weilert and a motion for judicial notice of various documents. Defendants’ opposition asserted (1) the moti on to dismiss was subject to a bankruptcy stay and (2) the facts did not support equita ble relief under the disentitlement doctrine. 3. Bankruptcy Stay and Its Effect on the Appeal A few days after receiving this oppositio n from defendants, this court issued an order directing plaintiffs to respond to defendants’ claim th at a bankruptcy stay was in effect. Plaintiffs’ reply stated the bankru ptcy court had entered an order lifting the automatic stay as to this appeal in its entirety. Defendants filed a supplemental12. opposition stating this appeal may proceed by virtue of the bankruptcy court’s order lifting the stay, but that order did not allow plai ntiffs to pursue their motion to dismiss. The bankruptcy court order referenced by the parties was si gned by United States Bankruptcy Judge W. Richard Lee on October 10, 2013. The order states in relevant part: “1. The Stay is lifted to permit the parties to proceed to a final determination of claims from the Cour t of Appeals but not to enforce any judgment against the debtor or bankrup tcy estate. Any affirmation of the judgment obtained shall be brought back to this Court for the proper treatment of claims under the Bankruptcy Code.” We interpret this order to mean that this court is not barred from addressing any issues necessary to resolve the appeal, including those i ssues presented by plaintiffs’
motion to dismiss under the disentitlement doctr ine. Therefore, we explicitly reject defendants’ interpretation that the bankruptcy stay was not lifted as to the motion to
dismiss.
4. Weilert’s Violations of the Freeze Order Weilert’s declaration in opposition to the motion to dismiss does not deny that any
of the 47 transactions listed in the motion took place. Indeed, Weilert effectively admits
the transfers occurred in the following statement: “[Plaintiffs] are substantially and mate rially wrong in the monetary amount they allege at page 8 of their mo tion seeking to dismiss my appeal. [Plaintiffs] reference an amount of $812,690.00. However, the actual amount is less than 1/3 of this amount . Without getting into the details of the various transfers, [plaintiffs] in effect re-calculated money twice or three times when the amount is the sa me money being transferred from one account to another.” In addition, Weilert’s declaration included the following assertion: “The actions I
took at all times relevant were done in good faith.” He o ffers no explanation for how he could have been acting in good faith when transferring money in violation of the trial
court’s freeze order.13. Based on our review of the evidence pr esented to support the motion to dismiss and the opposition papers (inc luding the Weilert declaration ), we conclude that Weilert willfully violated the trial court’s freeze orde r on many occasions by transferring money. Initially, we note defendants di d not address the violations raised in the motion to
dismiss in their first two sets of opposition papers. They a ddressed the violations and the application of the disentitlement doctrine only after this court issued an order directing
them to do so.
When defendants addressed merits of the motion to dismiss, they did not deny the
transfers listed in the motion occurred and did not explain ho w those transfers might have been permissible under the trial court’s orders . Instead, defendants argued the amount of money that had been moved was only one-third of the total identified in the motion to dismiss. This approach, for all practical purposes, admits money was transferred in
violation of the freeze order. Furthermore, Weilert’s assertion that his actions were done in good faith is unconvincing because defendants have offered no expl anation for (1) how the transfers could have been made without violating the tria l court’s orders or (2) how he acted with a pure heart and a head so empty that he di d not realize he was violating the orders. 7 In addition, Weilert fails to ex plain his inaction—namely, his failure to comply with the turnover order and the assignment order. Fo r example, Weilert’s declaration does not

7 We note that in some contexts, a claim of subjective good faith is referred to as the “pure heart, empty head” defense. (Jones, “Stop, Think & In vestigate”: Should California Adopt Federal Rule 11 (1993) 22 Sw.U. L.Rev. 337 [1983 amendment the federal rule regarding sanctions eliminated the pure heart, empty head defense]; Maute, Sporting Theory of Justice: Taming Adversari al Zeal with Logica l Sanctions Doctrine (1987) 20 Conn. L.Rev. 7, 18; see United States National B ank of Oregon v. Boge (1990) 311 Or. 550, 565 [814 P.2d 1082 , 1090] [all that subjective good faith requires is a pure heart and empty head]; Thornton v. Wahl (7th Cir. 1986) 787 F.2d 1151, 1154 [Judge Easterbrook discusses sanctions under Fed. Rules Civ. Proc., rule 11, 28 U.S.C.A., for counsel’s wildly untru e representations about state law].)14. dispute the facts set forth in the declaration of Daniel Spitzer regarding the service of the orders upon him.
The record shows th at defendants are seeking the benefits of an appeal while willfully disobeying the tria l court’s valid orders and th ereby frustrating defendants’ legitimate efforts to enforce the judgment. Therefor e, we conclude the equitable
considerations relevant to the disentitlement doctrine favor dismissa l of this appeal.
II. APPEAL IN CASE NO. F067958 Weilert and Genevieve also filed an ap peal from the freeze, turnover, assignment and charging orders entered by the trial court after the judgment. That appeal has been assigned case No. F067958. On May 13, 2014, plaintiffs filed a mo tion to dismiss the second appeal on the same grounds asserted in their moti on to dismiss the first appeal. We will grant that motion to dismiss in a separate order based on the rationale set forth in this opinion.
DISPOSITION
The motion to dismiss the de fendants’ appeal is granted. Plaintiffs shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).) Defendants’ request for sanctions file d on February 6, 2014, is denied.

_ ____________ ___________ Franson, J.

WE CONCUR:

__________ ___________ Kane, Acting P.J.

__________ __________ Peña, J.Filed 11/18/14

IN THE 

## Court of Appeal of the State of California

IN AND FOR THE 

## Fifth Appellate District

BRIAN L. GWARTZ et al., Plaintiffs and Respondents,

v. MICHAEL WEILERT et al., Defendants and Appellants. F066581
(Super. Ct. No. 09CECG01032)
ORDER GRANTING REQUEST FOR PUBLICATION

As the nonpublished opin ion filed on November 3, 2014, in the above entitled matter hereby meets the standards for publica tion specified in the California Rules of Court, rule 8.1105(c), it is ordered that th e opinion be certified for publication in the Official Reports.

_______________________ Franson, J.

WE CONCUR:

_____________ __________ Kane, Acting P.J.

_____________ __________ Peña, J.2.