Court Opinion

ID: 2641435
Source: CourtListenerOpinion
Date Created: 2013-11-07 01:02:39.795758+00
Date Added: 2024-06-11T09:55:56.897639
License: Public Domain

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                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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,                                         G047107

         v.                                                            (Super. Ct. No. 802823)

MARTIN PEMSTEIN,                                                       OPINION

     Defendant and Appellant.

                   Appeal from a postjudgment order of the 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. 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 Harold1 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.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.

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 with an abbreviated record on appeal, our
discussion of the procedural history is taken from our prior opinion, Pemstein v. Pemstein
(May 16, 2011, G043349) [nonpub. opn.], of which we take judicial notice.

                                              2
              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

                                               3
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

                                             4
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

                                              5
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

                                              6
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

                                                7
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 1032,3 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.

3            All further statutory references are to the Code of Civil Procedure, unless
otherwise indicated.

                                               8
                                              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.

                                              9
              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

                                             10
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

                                              11
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

                                             12
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.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

4               In awarding costs, Judge Rodriguez referred to our opinion in Pemstein v.
Pemstein, supra, G043349, as supporting the conclusion Harold was entitled to recover
costs relating back to the underlying litigation. Our opinion certainly referred to the
2005 judgment ordering dissolution of Pemma and HMS and we acknowledged it was
not the end of the litigation between 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 conclusion in 2005 that equity required the
parties share the costs relating to resolution of the underlying lawsuits. The 2010
judgment determined Harold was the prevailing party only on the accounting dispute.

                                             13
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

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