Court Opinion

ID: 8406202
Source: CourtListenerOpinion
Date Created: 2022-10-27 20:02:01.445122+00
Date Added: 2024-06-11T16:47:09.921341
License: Public Domain

Filed 10/27/22 Siry Investment v. Farkhondehpour CA2/2
Opinion on remand from Supreme Court
   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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

                         SECOND APPELLATE DISTRICT

                                        DIVISION TWO

SIRY INVESTMENT, L.P.,                                       B277750
                                                             (Consolidated with B279009
         Plaintiff and Respondent,                            and B285904)

         v.                                                  (Los Angeles County
                                                             Super. Ct. No. BC372362)
SAEED FARKHONDEHPOUR
et al.,                                                      OPINION ON REMAND

     Defendants and
Appellants.

      APPEAL from a postjudgment order of the Superior Court
of Los Angeles County, Stephanie Bowick and Edward B.
Moreton, Judges. Affirmed as modified.

         Richard L. Knickerbocker for Defendants and Appellants.
     G. Hagen Law Office and Gregory D. Hagen for Plaintiff
and Respondent.

                               ******
       The trial court entered a $7 million default judgment
against the defendants in this case. This court issued a
published opinion in 2020 in which we (1) affirmed the
terminating sanctions order giving rise to the default judgment,
(2) held that a defendant in default may challenge a default
judgment in a new trial motion on the ground that it contains
“error[s] in law,” and (3) struck the awards of treble damages and
attorney fees from the judgment because we held that Penal Code
section 4961 did not apply to entitle the plaintiff to those
remedies. (Siry Investment, L.P. v. Farkhondehpour (2020) 45
Cal.App.5th 1098.) The California Supreme Court granted
review on the second and third holdings. The Court affirmed that
a defendant in default may move for a new trial, but held that
section 496 does apply to the facts alleged by the plaintiff in its
operative complaint in this case. (Siry Investment, L.P. v.
Farkhondehpour (2022) 13 Cal.5th 333 (Siry (2022)).)
       On remand, we are tasked with considering our prior
opinion in light of the Supreme Court’s holding that section 496
applies. That means we must (1) reinstate the award of
$1,912,974 in treble damages authorized by that statute, and (2)
address the defendants’ three challenges to the award of
$4,010,008.97 in attorney fees, which our prior opinion
sidestepped in light of our finding that section 496 did not apply.
We conclude that (1) predefault notice of the amount of attorney

1    All further statutory references are to Penal Code section
496 unless otherwise indicated.

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fees sought is not required, (2) attorney fees are not limited to
only those incurred after a demand for fees is added to an
amended complaint, and (3) attorney fees waived in a settlement
agreement that resolved a prior lawsuit are not recoverable in the
current case. Thus, we affirm the trial court’s amended judgment
with modifications to strike $376,437 from the fee award
constituting the unrecoverable fees incurred in the prior lawsuit.
        FACTS AND PROCEDURAL BACKGROUND2
I.    The Dispute
      In 1998, Moe Siry, Saeed Farkhondehpour
(Farkhondehpour) and Morad Neman (Neman) formed a limited
partnership to renovate and lease space in a mixed-use building
in downtown Los Angeles. The partnership agreement named
one general partner (namely, 416 South Wall Street, Inc. (416
South Wall Street), of which Farkhondehpour was president),
and four limited partners (namely, Siry Investment, L.P. (Siry),
the 1993 Farkhondehpour Family Trust (of which
Farkhondehpour was trustee), the Neman Family Irrevocable
Trust (of which Neman was trustee) and the Yedidia Investment
Defined Benefit Plan Trust (of which Neman was also trustee)).
      In 2003, Farkhondehpour, Neman, and 416 South Wall
Street created another entity, required the building’s tenants to
pay their rent to that entity, and thereby “improperly divert[ed]
rental income away from the . . . [limited] partnership and into”
that separate entity. Farkhondehpour and Neman also charged
personal and other nonpartnership expenses to the partnership.
Siry was ultimately underpaid its distributions, but

2     We draw the facts and procedural background that are
pertinent to this appeal from our prior opinion and the record
from that prior appeal.

                                3
Farkhondehpour and Neman ensured that Siry remained
unaware of the underpayments by misrepresenting to Siry the
partnership’s profits and losses.
II.    Prior Lawsuit
       In 2003, Farkhondehpour and Neman sued Siry for breach
of a different agreement, and Siry cross-complained for
accounting, breach of contract, and breach of fiduciary duty based
on underpayment of cash distributions from the partnership.
Siry prayed generally for attorney fees, but did not identify a
statute under which it was entitled to attorney fees.
       In 2004, the parties stipulated to dismissal of their claims
against each other in exchange for an accounting being conducted
immediately. However, Farkhondehpour and Neman did not
comply with requests to turn over documents necessary to
conduct the accounting, so Siry filed an amended cross-complaint.
       In 2006, the parties resolved their dispute with a
settlement agreement that contained a clause requiring each
party to “bear their or its own attorneys’ fees and costs in
connection with this dispute.”
III. Current Lawsuit
       A.    Siry’s lawsuit, first trial, and reversal
       Then, in 2007, Siry sued Neman, Farkhondehpour, 416
South Wall Street, and the trusts over which they were trustees
(collectively, defendants) for underpaying Siry and improperly
diverting the partnership’s rental income.
       The case proceeded to a jury trial in 2009. At that time,
Siry’s operative second amended complaint did not make any
claim under section 496 and did not demand attorney fees, nor
did any of the prior iterations of Siry’s complaints. The jury

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found for Siry, and awarded it actual damages as well as punitive
damages.
       We reversed the jury’s verdict on the ground that the
verdict was ambiguous as to whether Farkhondehpour and
Neman were liable individually or as trustees. (Siry Investment,
L.P. v. Farkhondehpour (Dec. 12, 2012, B223100) [nonpub. opn.].)
       B.    Remand, terminating sanctions, default
judgment, and amended judgment
       On remand, Siry amended its complaint. In the third
amended complaint filed on September 4, 2013, Siry added a new
prayer for treble damages and attorney fees under section 496
based on the preexisting allegations in the complaint.
       On September 2, 2014, Siry filed a fourth amended
complaint adding a stand-alone cause of action under section 496,
as well as adding allegations that Code of Civil Procedure section
1029.8 also provided a basis for attorney fees.
       On April 22, 2015, expecting that its upcoming motion for
terminating sanctions would be granted, Siry filed the operative
fifth amended complaint to “provide . . . pre-default notice”
“regarding the amounts of damages being sought in this case.”
Siry prayed for “in excess of” $2 million in actual damages and $6
million in treble damages; it did not pray for a specified amount
of attorney fees.
       In July 2015, the trial court issued terminating sanctions
against defendants for their repeated discovery violations; the
court struck defendants’ answers and entered their default.
       In July 2016, the trial court entered default judgment
against defendants awarding Siry over $12 million, including
treble damages of $2,869,461 pursuant to section 496 and

                                5
attorney fees totaling $4,010,008.97, as well as compensatory
damages, punitive damages, and interest.
       Defendants moved for a new trial on several grounds. In
September 2016, the trial court granted the motion in part. The
court reduced the treble damages award, reduced the punitive
damages award, and required Siry to elect between treble
damages and punitive damages. Siry elected treble damages. In
October 2016, the trial court entered an amended judgment
against defendants awarding Siry over $7 million comprised of (1)
actual damages of $956,487, (2) treble damages of $1,912,974
pursuant to section 496, (3) attorney fees totaling $4,010,008.97,3
and (4) costs of $187,109.13.
IV. Prior Appeal
       Siry and defendants appealed. In a published opinion, we
(1) affirmed the issuance of terminating sanctions against
defendants; (2) held that defendants, though in default, could
move for a new trial challenging the default judgment for
suffering from “error[s] in law”; and (3) held that section 496 does
not apply in cases like this one “where the plaintiff merely alleges
and proves conduct involving fraud, misrepresentation,
conversion or some other type of theft does not involve ‘stolen’
property.”

3     The trial court based the award of attorney fees on both
section 496 and Code of Civil Procedure section 1029.8, and we
held that neither statute applied. The Supreme Court reached
only the issue of section 496, leaving undisturbed our holding
that plaintiff is not entitled to attorney fees under Code of Civil
Procedure section 1029.8.

                                  6
V.     Supreme Court Opinion and Remand
       The Supreme Court granted review of the second and third
issues. Our high court affirmed that a defendant in default may
move for a new trial because “the standing conclusion is
supported by the statutory scheme as construed by well-reasoned
prior appellate decisions and considerations of judicial economy.”
(Siry (2022), supra, 13 Cal.5th at pp. 339, 344-345.) Resolving a
split of authority, the high court held that treble damages and
attorney fees are available under section 496 where, as here,
deeming Siry’s allegations true, “property has been obtained in
any manner constituting theft.” (Id. at p. 361.)
       The Supreme Court remanded the matter for proceedings
consistent with its opinion—that is, for proceedings regarding the
trial court’s award of treble damages and attorney fees to Siry
pursuant to section 496. We solicited supplemental briefing from
the parties on the issue.4
                            DISCUSSION
        Subdivision (a) of section 496 makes it a crime to (1) “buy[]
or receive[] any property that has been stolen or that has been
obtained in any manner constituting theft or extortion, knowing
the property to be so stolen or obtained,” or (2) “conceal[], sell[],

4      In our notice inviting supplemental briefing, we noted that
Neman is no longer a party to this case because he settled with
Siry while the case was pending before the Supreme Court.
       Siry requested that we expand the scope of supplemental
briefing on remand to include whether defendants alleged a
proper ground for a new trial motion. Not only did we fully
resolve this issue in our prior opinion, but Siry’s request would
negate the Supreme Court’s conclusion that a new trial motion
was proper in this instance. For obvious reasons, then, we denied
Siry’s request to expand the supplemental briefing.

                                  7
[or] withhold[] any property from the owner, knowing the
property to be so stolen or obtained.” (§ 496, subd. (a).)
Subdivision (c) empowers “[a]ny person who has been injured by
a violation of subdivision (a)” to “bring an action for three times
the amount of actual damages [he has] . . . sustained” as well as
for “costs of suit[] and reasonable attorney fees.” (Id., subd. (c).)
       Here, defendants do not challenge the amount of treble
damages Siry was awarded under section 496.5 They also do not
dispute that Siry’s claim under section 496 and the associated
request for attorney fees under that statute in the third amended
complaint are based on the same general set of facts alleged in
the prior iterations of Siry’s complaint. Instead, defendants raise
three challenges regarding the amount of fees Siry was awarded.
I.     Predefault Notice of Amount of Attorney Fees
       Defendants argue that Siry is not entitled to attorney fees
at all because Siry did not allege in its operative complaint, prior
to default being entered against defendants, the specific amount
of attorney fees it was seeking. This argument lacks merit.
       A default judgment “cannot exceed” the maximum amount
of “relief” “demanded in the [operative] complaint” (Code Civ.
Proc., § 580, subd. (a)), even if the default follows the imposition
of terminating sanctions (Simke, Chodos, Silberfeld & Anteau,
Inc. v. Athans (2011) 195 Cal.App.4th 1275, 1278, 1286 (Simke).)
“A default judgment that awards relief beyond the type and
amount sought in the operative pleading is void.” (Sass v. Cohen

5      Although Siry suggested in the prior appeal that the trial
court’s calculation of treble damages was incorrect, we declined to
entertain that suggestion because Siry waited until its reply brief
to raise it. What is more, Siry does not challenge the trial court’s
requirement that it elect between treble and punitive damages.

                                  8
(2019) 32 Cal.App.5th 1032, 1041 (Sass (2019)), affd. Sass v.
Cohen (2020) 10 Cal.5th 861 (Sass (2020).) The court in Simke
concluded that attorney fees are not “relief” for purposes of
calculating the ceiling on recovery set by the operative compliant
(Simke, at pp. 1287-1288), and nearly every other court, including
our own, has adopted that conclusion (Sass (2019), at p. 1040;
accord Chan v. Curran (2015) 237 Cal.App.4th 601, 624 [“sharp
demarcation in the law” distinguishing damages from attorney
fees]; Folsom v. Butte County Assn. of Governments (1982) 32
Cal.3d 668, 677 [right to costs is statutory]; Code Civ. Proc., §
1033.5 [attorney fees authorized by statute are “costs”]; Sass
(2020), at p. 873 [“‘a prayer for damages according to proof passes
muster under section 580 only if a specific amount of damages is
alleged in the body of the complaint”’], italics added.) Indeed, a
court may award statutory attorney fees even if they are not
alleged. (Shames v. Utility Consumers’ Action Network (2017) 13
Cal.App.5th 29, 39; Faton v. Ahmedo (2015) 236 Cal.App.4th
1160, 1169; Washburn v. City of Berkeley (1987) 195 Cal.App.3d
578, 583.)
       Defendants assert that this established line of authority is
wrong because it is inconsistent with several other cases.
       First, they argue that this line of authority is inconsistent
with the Supreme Court’s decision in Becker v. S.P.V.
Construction Co. (1980) 27 Cal.3d 489 (Becker). But Becker
merely ruled that the operative complaint must include a prayer
for attorney fees before a plaintiff may be awarded fees in a
default judgment. (Id. at p. 495.) Indeed, Simke’s holding that
attorney fees are not “relief” for purposes of Code of Civil
Procedure section 580—and our reaffirmation of that holding
here—is consistent with Becker because Becker requires that a

                                 9
default judgment be limited to the “largest amount” of “damages”
“specifically requested in the complaint” (id. at p. 493) and treats
damages differently from attorney fees (id. at p. 494 [refers only
to “damages”]; see also Simke, supra, 195 Cal.App.4th at pp.
1290, 1292 [Becker “use[s] the term ‘damages’ in discussing the
purpose and application of the statute”].)
       Second, defendants argue that this line of authority is
inconsistent with Janssen v. Luu (1997) 57 Cal.App.4th 272
(Janssen). But Janssen vacated the award of attorney fees in
that case because it slashed the damages in the default judgment
to a fraction of what was awarded (id. at p. 279) and therefore
treated the disposition like “a complete and unqualified reversal
of liability” (Simke, supra, 195 Cal.App.4th at p. 1291).
       Third, defendants argue that this line of authority is
inconsistent with Hartke v. Abbott (1931) 119 Cal.App. 439
(Hartke). While Hartke ruled that an award of attorney fees in
excess of the specific amount of fees demanded in a complaint
was erroneous, we reject Hartke’s unexplained treatment of
attorney fees as “relief” and instead agree with the fulsome
analysis in Simke that attorney fees are not relief for purposes of
quantifying the cap on recovery set in a complaint.
       In their supplemental brief, defendants argue that Simke’s
holding that a specific amount of attorney fees need not be pled
rests on the impossibility of alleging a specific amount of attorney
fees that have yet to be incurred. Because it is not impossible to
plead the known amount of attorney fees a plaintiff has already
incurred, defendants continue, a plaintiff must allege the up-to-
date and specific amount of attorney fees incurred thus far in
each iteration of the complaint. Defendants cite no precedent
supporting their unique reading of Simke. And their reading

                                10
leads to what we consider to be absurd results. Defendants’
proffered rule would all but obligate plaintiffs to amend their
complaints every billing cycle to keep the running tab of incurred
attorney fees as high as possible, as that amount would function
as the “cap” on recoverable fees. And for what? So that
defendants could have the most up-to-date sense of the cost of
engaging in obstreperous discovery misconduct? We decline to
read the law in this manner.
II.    Attorney Fees Incurred Prior to Demand in
Amended Complaint
       Defendants next argue that Siry’s award of attorney fees
must be reduced to eliminate the fees Siry incurred prior to filing
the third amended complaint in September 2013 when Siry
alleged, for the first time, a demand for attorney fees under
section 496. We reject this argument for two reasons.
       First, there is no precedent supporting the idea that fees
must be allocated over time based on whether the fees were
incurred before or after a demand for fees was alleged in the
complaint. Indeed, analogous precedent is to the contrary. If a
plaintiff may amend his complaint to conform to proof at trial to
add a new theory arising out of the same general set of facts and
recover all relief associated with that new theory (Code Civ.
Proc., § 469 et seq.; Garcia v. Roberts (2009) 173 Cal.App.4th 900,
909-910), then a plaintiff may also amend his complaint prior to
default to add a demand for attorney fees and recover the full
amount incurred. Defendants’ argument that only those fees
incurred after a demand for fees is alleged in an amended
complaint would mean that a plaintiff who adds a new cause of
action arising out of the same facts may only be awarded
damages suffered from the time the claim was alleged forward,

                                11
not the full panoply of damages, even though the claim is timely
and relates back to the filing of the complaint. (Quiroz v. Seventh
Ave. Center (2006) 140 Cal.App.4th 1256, 1278 [relation-back
doctrine].) This is nonsensical.
       Second, awarding Siry the attorney fees during the entire
span of the litigation does not implicate due process concerns.
(Sass (2019), supra, 32 Cal.App.5th at p. 1041 [“[i]f and only if a
defendant receives advance notice of the type and amount of
relief sought can he make a ‘fair and informed’ decision whether
to fight the pending case . . . .”]; Sass (2020), supra, 10 Cal.5th at
p. 864 [purpose of default judgment statute is “‘to guarantee
defaulting parties adequate notice of the maximum judgment
that may be assessed against them’”].) That is because at the
time the trial court issued terminating sanctions against
defendants and entered their defaults, defendants had been on
notice of Siry’s demand for attorney fees for nearly two years.
Yet, defendants did not change their contemptuous discovery
abuse despite the possibility of a substantial judgment against
them looming.
III. Attorney Fees Waived in Settlement of First Lawsuit
       Lastly, defendants argue that Siry’s award of attorney fees
must be reduced to eliminate the $376,437 in fees Siry incurred
in connection with the first lawsuit.6 While the usual standard of
review for an award of attorney fees is abuse of discretion,
whether the trial court had the authority to award attorney fees

6      In light of the hundreds of pages of billing invoices from
four law firms that Siry submitted as part of its default judgment
prove-up package in the trial court, we adopt as conclusive the
parties’ agreed-upon calculation in their briefs in the prior
appeal.

                                 12
is a legal issue we review de novo. (Connerly v. State Personnel
Bd. (2006) 37 Cal.4th 1169, 1175.)
       By agreeing in the 2006 agreement that settled the first
lawsuit to “bear [its] own attorneys’ fees,” Siry waived its right to
those attorney fees. (Bluhm v. Bluhm (1954) 129 Cal.App.2d 546,
548-550 [if litigant waives right to attorney fees in settlement
agreement, trial court may not later award litigant waived fees].)
       Siry responds that it is not bound by its prior waiver
because, at the time the parties signed the 2006 settlement,
former Corporations Code section 15634, subdivision (h),
provided that a waiver of attorney fees incurred in connection
with an “action under this section” was unenforceable. (Former
Corp. Code, § 15634, subds. (g) & (h); Berti v. Santa Barbara
Beach Properties (2006) 145 Cal.App.4th 70, 76.) This section
does not help Siry because neither the prior lawsuit nor the
current lawsuit between the parties was brought “under” former
Corporations Code section 15634. That statute required general
partners to provide limited partners with access to certain
partnership records; if a limited partner was forced to bring an
“action under” the statute to obtain access and the trial court
found that “the failure of the partnership to comply” with the
statute was “without justification,” the court could then “award
an amount sufficient to reimburse” the limited partner “for the
reasonable expenses incurred . . ., including attorneys’ fees.”
(Former Corp. Code, § 15634, subds. (a), (b), (g).) The prior
lawsuit concerned the parties’ competing claims regarding the
consummation of a corporate transaction and unpaid partnership
distributions. And while defendants had failed to provide certain
partnership records in a court-ordered accounting during the first
lawsuit, that did not somehow transform that lawsuit into one

                                 13
concerning the requirements of former Corporations Code section
15634. Indeed, that statute was never alleged in the parties’
complaints in the first lawsuit. Likewise, as stated in the
modification of our prior opinion in response to Siry’s petition for
rehearing, former Corporations Code section 15634 was also not
at issue in the current lawsuit.
       Because Siry’s waiver of attorney fees in the settlement of
the first lawsuit was valid, Siry’s further argument that it may
recover those fees in this lawsuit because the two disputes are
related is moot.
                          DISPOSITION
       The amended judgment is affirmed as modified. We order
that the amended judgment be modified to strike $376,437 from
Siry’s award of attorney fees. The parties are to bear their own
costs on appeal.
    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

                                      ______________________, J.
                                      HOFFSTADT

We concur:

_________________________, P. J.
LUI

_________________________, J.
CHAVEZ

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