Court Opinion

ID: 9412589
Source: CourtListenerOpinion
Date Created: 2023-07-31 20:04:49.236266+00
Date Added: 2024-06-11T16:41:39.421927
License: Public Domain

Filed 7/31/23 Cohen v. Smith CA4/1
                   NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for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.

                  COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                       DIVISION ONE

                                              STATE OF CALIFORNIA

 ANDREW COHEN et al.,                                                         D080298

            Plaintiffs and Respondents,

            v.                                                                (Super. Ct. No. 37-2015-00024876-
                                                                              CU-BC-NC)
 RICHARD CAMERON SMITH,

            Defendant and Appellant.

          APPEAL from an order of the Superior Court of San Diego County,
Cynthia A. Freeland, Judge. Reversed with directions.
          Richard Cameron Smith, in pro. per., for Defendant and Appellant.
          Bunt & Shaver and David N. Shaver for Plaintiffs and Respondents.

          Richard Cameron Smith, self-represented, appeals from a
postjudgment order awarding Andrew Cohen $116,468.84 in prejudgment
interest. His opening and reply briefs contain no citations to the record. Nor
do they cite to any legal authority. He states, “I know [briefs] usually quote
court cases as precedent. I’m not an attorney and can’t afford one so I won’t
attempt to do that.”
      We recognize the significant challenges self-represented litigants face,
as well as the high cost of legal services in a civil case. Nonlawyers who
represent themselves are usually at a considerable disadvantage, as would be
anyone attempting to perform a complex task without adequate training,
education, and experience. However, “[a] doctrine generally requiring or
permitting exceptional treatment of parties who represent themselves would
lead to a quagmire in the trial courts, and would be unfair to the other
parties to litigation.” (Rappleyea v. Campbell (1994) 8 Cal.4th 975, 985.)
Thus, a self-represented litigant “ ‘must expect and receive the same
treatment as if represented by an attorney—no different, no better, no
worse.’ ” (Nuño v. California State University, Bakersfield (2020) 47
Cal.App.5th 799, 811.)
      The most basic rule of appellate review is that the Court of Appeal
starts a case with the presumption that the trial court’s order is correct.
(Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) To prevail, an
appellant must demonstrate prejudicial error by making arguments
supported by authority (such as cases and statutes). Smith’s admitted failure
to engage in this process operates to forfeit each point he raises. (See Golden
Door Properties, LLC v. Superior Court (2020) 53 Cal.App.5th 733, 787.) His

candid recognition quoted above is an explanation but not an excuse.1
      But even when parties are represented by attorneys, and perhaps
especially when they are not, we have discretion to identify, request

1      The website for the Court of Appeal, Fourth Appellate District, Division
One contains a “Self Help Resource Center.”
( [as of July 31, 2023], archived at
.) Among many other excellent resources,
it links to “The California Court of Appeal - Step by Step,” which in plain
language explains the civil appellate process, including a chapter entitled,
“Briefing the Case.” There is even a sample brief provided in the appendix.
                                        2
supplemental briefing on, and correct legal error where the relevant facts are
undisputed and could not be altered by the presentation of additional
evidence in the trial court. (See Alki Partners, LP v. DB Fund Services, LLC
(2016) 4 Cal.App.5th 574, 599.) Here, citing Civil Code section 3289,

subdivision (b),2 the trial court awarded prejudgment interest at the rate of
10 percent per annum. But as a matter of law, that rate applies only “after a
breach” of contract. As we will explain, it has already been conclusively
determined in this case that there was no enforceable contract between the
parties. Smith’s underlying liability is for restitution following cancellation
of an instrument, not breach of contract. As Cohen now concedes, the
applicable rate of prejudgment interest is therefore seven, not 10 percent.
(Cal. Const., art. 15, § 1.) We reverse and remand with directions to
recompute the award.

              FACTUAL AND PROCEDURAL BACKGROUND3

      Smith is a business consultant and R. Theodore Nussdorf, now
deceased, was his longtime friend and client. In 2008, they invested in real
estate together. Smith took title for perceived tax advantages, and he
established a business entity, Pacific West Capital LLC (Pacific West), of
which he was the sole member, to hold Nussdorf's money until they
purchased the property.

2     Undesignated statutory references are to the Civil Code.
3     An opening brief must “[p]rovide a summary of the significant facts
limited to matters in the record” and each must be supported “by a citation to
the volume and page number of the record where the matter appears.” (Cal.
Rules of Court, rules 8.204(a)(2)(C), 8.204(a)(1)(C).) Because Smith’s brief
violates these rules, the factual and procedural background is taken from our
unpublished opinion, Cohen v. Smith (Dec. 18, 2019, D073787) (Cohen I.)
                                        3
      They structured the transaction as a loan from Nussdorf to Pacific
West. In 2008, Nussdorf caused $200,000 to be transferred to Pacific West
under a promissory note that Smith drafted. He signed the note as “member”
of Pacific West, which promised to repay the principal amount plus interest
at a variable rate. (Cohen I, supra, D073787.)
      Smith used the entire $200,000 to purchase and renovate a single
family home in Oceanside. He and his wife took title in their own names.
During the economic recession of 2008, the property’s value plummeted.
Although in October 2014 Nussdorf demanded full restitution, Smith made
only a single $3,189.23 interest payment.
      Nussdorf filed a complaint against Pacific West and Smith (as its alter

ego), alleging a claim for rescission.4 After an appeal and cross-appeal, this
court determined the parties’ promissory note was an unenforceable contract
because it lacked an essential term—the time when payment of principal was
due. We held that restitution was appropriate and directed that judgment be
entered against Pacific West by default, and against Smith as its alter ego,
in the amount of $196,810.77 (the $200,000 loaned less one interest payment
Smith had made). We remanded to the trial court to establish a “fair and
equitable date for Smith to pay Cohen such restitution . . . .” (Cohen I, supra,
D073787.) In a footnote, we acknowledged that “[e]ntitlement, if any, to
prejudgment interest is not before us and we express no opinion on that
issue—except to note that ‘prejudgment interest at the statutory rate is
available only in the absence of an applicable contractual provision.’ ” (Ibid.)

4     Nussdorf died during the pendency of the action, and the action was
thereafter maintained by his successors in interest, including Andrew Cohen,
as trustee. (Cohen I, supra, D073787.)
                                       4
      On remand, Cohen moved for prejudgment interest running from the
date he first asserted a cause of action for rescission (July 27, 2015) to
June 25, 2021 (the date the court entered judgment). Citing section 3287,

subdivision (a),5 the trial court determined that Cohen was entitled to
10 percent prejudgment interest, stating:
         “Thus, ‘in order to recover prejudgment interest . . . the
         claimant must show: (1) an underlying monetary
         obligation, (2) damages which are certain or capable of
         being made certain by calculation, and (3) a right to
         recovery that vests on a particular day.’ [Citations.] ‘The
         test for recovery . . . is whether [the] defendant actually
         knows the amount owed or from reasonably available
         information could the defendant have computed that
         amount. . . . [A] dispute over liability or uncertainty
         concerning the damages measure does not render damages
         unascertainable. [Citations].’ ” [¶] . . . [¶]

         “Plaintiff included in his initial [c]omplaint and each
         subsequently amended complaint a cause of action for
         rescission and a request for the return of the $200,000 owed
         under the promissory note . . . . It is undisputed that
         [Smith] personally guaranteed repayment of the $200,000
         due under the promissory note, and that [Smith] made only
         one interest payment in the amount of $3,189.23. It is
         further undisputed that the Court of Appeal found in
         Plaintiff’s favor on his rescission cause of action and
         directed this court to enter a $196,810.77 judgment in
         Plaintiff’s favor.”

      Citing section 3289, subdivision (b), the court awarded Cohen
$116,468.84 in prejudgment interest.

5      Civil Code section 3287, subdivision (a) provides in part: “A person who
is entitled to recover damages certain, or capable of being made certain by
calculation, and the right to recover which is vested in the person upon a
particular day, is entitled also to recover interest thereon from that day . . . .”
                                        5
                                DISCUSSION

A.   In an Action for Rescission of an Unenforceable Contract, the Rate of
     Prejudgment Interest Is Seven Percent

      Section 3289, subdivision (b) provides for interest at the rate of 10
percent “after a breach” of contract. But here, the contract was determined to
be unenforceable. Cohen’s recovery, therefore, could not have been based on
breach of contract. Rather, he was awarded restitution following cancellation
of the purposed contract. Restitution is not intended to compensate for losses
resulting from a breach of contract obligation but is rather designed to place
the aggrieved party in the position he or she enjoyed before entering the
rescinded contract. (See Utemark v. Samuel (1953) 118 Cal.App.2d 313, 317.)
Section 3289, subdivision (b), which by its own terms applies only where
there has been a breach of contract, does not apply when there is no contract.
      For the same reason, we reject Smith’s contention that the court should
have applied the variable interest rate as provided in the promissory note.
In Cohen I, the promissory note was determined to be an unenforceable
contract. Therefore, the agreed-upon contract rate cannot apply.
      Section 1 of article XV of the California Constitution provides in part,
“The rate of interest upon the loan or forbearance of any money . . . shall be
7 percent per annum.” This is the applicable rate in this case. (See Lund v.
Cooper (1958) 159 Cal.App.2d 349, 351 [seven percent prejudgment interest

ran from notice of rescission of an unenforceable contract].)6

6     We requested supplemental briefs on this issue.
                                       6
B.   The Transaction Has Been Conclusively Determined to Have Been a
     Loan

      Smith asserts that the underlying transaction “although having a title
of a promissory note was a joint venture agreement . . . .” He insists that
“[i]f you look at the case as a promissory note that was thrown out by the
court then you are missing the whole substance of the case.” From that
premise, he contends that “[s]ince the investment hasn’t been sold there has
never been a sum certain” that would allow an award of prejudgment
interest.
      This argument fails, not only on forfeiture grounds, but also because
in the underlying trial the court determined it was a loan. In no small part,
that was probably because Smith drafted the promissory note himself and
signed it as a “member” of Pacific West. (Cohen I, supra, D073787.) In any
event, Smith did not challenge that finding in Cohen I as being erroneous as
a matter of law.
      The loan-versus-joint-venture issue was not relitigated on remand.
Nor could it have been. The disposition in Cohen I directed the trial court to
enter judgment against Smith for rescission and left the door open for an
award of prejudgment interest. The superior court lacked authority to do
anything else. (Hampton v. Superior Court of Los Angeles County (1952) 38
Cal.2d 652, 655 [the trial court is empowered to act only in accordance with
the direction of the reviewing court; “action which does not conform to those
directions is void”].) Thus, even if Smith had attempted to relitigate whether
the transaction was a loan or joint venture, the trial court would have lacked
subject matter jurisdiction to have done so.

                                       7
C.   Cohen I Did Not Preclude An Award of Prejudgment Interest on Remand

      Although Smith’s brief lacks argument headings, in several places he
asserts that Cohen I determined that no prejudgment interest should be
awarded. This reflects a misunderstanding of that earlier decision. We
stated that the issue of prejudgment interest was not before us and expressed

no opinion on that issue.7 That disposition left the door open for an award of
prejudgment interest on remand.

                                  DISPOSITION

      The order awarding prejudgment interest is reversed with directions to
recalculate the amount using a rate of seven percent per annum. Appellant
is entitled to costs on appeal.

                                                                     DATO, J.

WE CONCUR:

HUFFMAN, Acting P. J.

IRION, J.

7     We also noted that where an “applicable contractual provision” sets an
interest rate, the statutory rate does not apply. (Cohen I, supra, D073787.)
                                       8