DIETER TRATTMANN, Plaintiff and Appellant, v. GARRISON KEY et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
This case involves competing claims to ownership of 11 real properties. Garrison Key and Dieter Trattmann were equal partners in a real estate acquisition and management joint venture when Key persuaded Trattmann to sign deeds transferring to Key the 11 properties previously held in Trattmann's name alone. Eighteen months later, Key recorded the deeds. Trattmann maintains that he was the legal and beneficial owner of all the properties, he did not intend to transfer title to Key when he signed the deeds, and Key recorded the deeds without Trattmann's knowledge or consent and in violation of a promise not to record unless Trattmann died. Trattmann filed this action seeking, among other things, to cancel the deeds, quiet title, damages for fraud and breach of fiduciary duty, and an accounting. In a cross-complaint for, among other things, quiet title, fraud and an accounting, Key maintained that he has always had beneficial interest in the properties, and that it was Trattmann who held the properties in trust for Key. Following a nonjury trial, Trattmann prevailed on his cancellation of deed, quiet title, fraud and breach of fiduciary duty causes of action and on the cross-complaint.1 Both parties appeal.
Key contends the trial court erred (1) in canceling the deeds; (2) applying the unclean hands doctrine to deny him any interest in two of the 11 properties; (3) not requiring Trattmann to account for certain joint venture assets; (4) awarding money damages to Trattmann; (5) awarding receiver's fees and costs against Key; and (6) denying Key the right to enforce a prejudgment cost order against Trattmann. In his cross-appeal, Trattmann contends the trial court erred in denying punitive damages.
We modify the judgment to strike the award of expert witness costs, reverse and remand for further trial on punitive damages, and otherwise affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Properties
The litigation concerns ownership of the following 11 properties, commonly known as:
1132 Cory Ave., Los Angeles (Cory);
8615 West Knoll Dr., Los Angeles (West Knoll);
1854 N. New Hampshire Ave., Los Angeles (New Hampshire);
7420 Franklin Ave., Los Angeles (Franklin);
921 Westmount Dr., Los Angeles (Westmount);
735 N. Crescent Heights Blvd., Los Angeles (Crescent Heights);
1744 Webster Ave., Los Angeles (Webster);
1217 Horn Ave., Los Angeles (Horn);
1145-1147 Hi Point St., Los Angeles (Hi Point);
1480 S. Wooster St., Los Angeles (Wooster); and
113 W. Yanonali St., Santa Barbara (Yanonali).
2. The Joint Venture
Viewed in accordance with the usual rules on appeal, the evidence established the following.2 When Trattmann and Key met in early 1989, Key was a real estate broker; Trattmann, a Swiss citizen, directed music videos. They developed a personal relationship. About a year later, Key told Trattmann that he had been diagnosed with a condition which he was concerned his employers and clients would discover. A year after that, Key started showing symptoms of his illness. Over the ensuing years, Trattmann noticed Key's behavior becoming more and more erratic, even violent. Trattmann attributed the change to Key's deteriorating health. But Trattmann loved Key, and did not want to abandon him, so he continued to care for him. In 1994, Trattmann and Key executed reciprocal trusts, wills and powers of attorney.
In December 1993, Trattmann and Key formed Garrison Key, Inc. (Key, Inc., or Key Properties) so that Key could continue working as a broker and Trattmann could cover for Key when Key was too ill to work. Trattmann and Key were equal partners in Key, Inc., and by 1999, Trattmann was running Key, Inc., full-time, at the expense of his career as a director. Trattmann used his personal credit card as a line of credit for the business, which occasionally reimbursed Trattmann upon request.3 Trattmann testified that, over the next several years, the 11 properties were purchased and title was taken in Trattmann's name, except for Cory, which Trattmann inherited from a relative in April 1996.
3. Signing and Recording of the Grant Deeds
Trattmann testified that he was planning to fly to Switzerland on a Swissair flight on September 13, 2000, when Key brought up a recent Swissair crash and expressed concern that the same thing might happen to Trattmann. If it did, Key said he was afraid of what would happen to him in light of his medical condition and a cap on his insurance. Trattmann testified that, to alleviate Key's concerns, Trattmann agreed to sign deeds on various properties “solely for the trip, if anything were to happen to me. [¶] If I were to return ․, [Key] would return the deeds to me, and they were never meant to be recorded. And they didn't get recorded for 17 months. [¶] But that was the arrangement. It was purely for that trip as some kind of insurance for him. He's the one that wanted to feel safe. He procured it. He was quite insistent about it. [¶] ․ I thought, ‘If this makes you feel safe, okay.’ But it seemed, you know, they were conditional for sure.” Key told Trattmann, “['B]y signing these deeds you are not conveying anything to me. It's just, I'm just going to hold them, and that's it.['] [¶] We've had-I was concerned, worried. We discussed it. And he was quite-he was getting impatient. I wasn't really understanding it. And I thought, well, this is really weird. I'm signing over a whole grant deed. [¶] And but, you know, again, 10 years into this, I didn't for one minute think I couldn't trust him.” In fact, Trattmann had twice before made similar arrangements with Key, and Key had never recorded those deeds.
In several conversations, Trattmann expressed his discomfort about the proposal, but each time Key reassured Trattmann that he was not actually conveying anything by signing the deeds. Key threatened to harm himself or Trattmann if Trattmann did not do as Key wanted, and Trattmann took these threats seriously because of the erratic behavior he had seen Key display. A few days before he signed the deeds, Trattmann was in mortgage broker Sharon Langlois's office when she placed a call to Key on a speaker phone; Key repeated his assurance that Trattmann was not conveying any interest in the properties by signing the deeds. Trattmann was reassured by the fact that Langlois heard Key's statement.
Langlois testified that when Trattmann came into her office on another matter in early September, he mentioned that Key wanted Trattmann to sign some deeds. Trattmann called Key from Langlois's speaker phone to discuss the matter; Langlois also participated in the call. Langlois recalled that Key wanted Trattmann to sign the deeds, but Trattmann was hesitant. Key explained that he would destroy the deeds once Trattmann came home. Key assured Trattmann that nothing was to be done with the deeds. Langlois thought it was an unusual plan, but she assumed everyone was aware of the “pitfalls” since they told her they had done it before.
Trattmann eventually signed grant deeds for all 11 properties. Trattmann received no consideration. All but one deed stated on its face: “This is a bonafide gift and the grantor receives nothing in return R & T11911.” Although one deed bore no such language, Trattmann testified that he received no consideration for that deed, either.
When Trattmann returned from Switzerland, he asked for the deeds back several times. At first, Key said he was looking for them. Sometime in mid-2001, Key told Trattmann the deeds were lost.
In early February 2002, Trattmann was planning a trip to the Berlin Film Festival. Concerned that bills would need to be paid during the week he would be away, Trattmann added Key as a signatory on the bank account Trattmann used for income and expenses of the various properties he owned; at the time, there was about $10,000 in the account.
When Trattmann returned from Berlin on February 15, 2002, a friend gave Trattmann a letter from Key, in which Key stated he now owned the properties, had changed the locks, and had directed the tenants to send all rent checks to him; Key warned Trattmann not to come near the properties and that if he did, Key would obtain a restraining order. Trattmann contacted the title company and confirmed that Key was now the record title holder on all the properties. One of the properties Key locked Trattmann out of was Franklin, in which Key and Trattmann had been living together since October 1998; Key, Inc., also had its offices there. Trattmann was thus denied access to all of his belongings located there, including business and personal files. In February 2002, Trattmann also discovered that Key had not paid any of Trattmann's bills and, moreover, had emptied Trattmann's account by writing checks to himself.
4. Key's Testimony
Key recounted a different version of events. He testified that during the early 1990's he was earning between $100,000 and $200,000 a year as a real estate agent; Trattmann was earning substantially less. After they began living together in 1992 or 1993, they opened a joint household bank account. Key recalled that Trattmann had his own back account, but also treated Key's bank accounts as his own. Key and Trattmann discussed opening an account at Charles Schwab to diversify their assets. In order to improve Trattmann's ability to get real estate loans, they decided to open the account in Trattmann's name only, although they both understood it to be a joint account.
Meanwhile, Key and Trattmann began discussing purchasing real estate together in the early 1990's. They talked about holding the properties in Trattmann's name for several reasons, including (1) to improve Trattmann's credit rating, (2) so that the property would not be available to Key's creditors if Key had substantial medical bills, (3) so that Trattmann could have the property in the event of Key's “likely” death from his disease, and (4) to help Trattmann obtain United States citizenship. Key testified that he held “real” title and Trattmann held legal title to each of the properties subsequently acquired and that Trattmann agreed that he was holding the properties in trust for Key. With some exceptions, Key maintained that the properties were acquired in the same manner: Trattmann appeared to be the buyer and Key's client; pretending to act as Trattmann's agent, Key negotiated the purchase; Key gave Trattmann the money for the down payment; Trattmann pretended the down payment money was his, and he obtained a loan and took title to the property in his name alone. Key explained that the purpose of this charade was to make the lenders think that Trattmann was purchasing the property; the sellers, however, knew that Key and Trattmann were partners in the purchase of the properties. Key did not know whether purchasing properties in this manner was legal, but believed that it was.
One property not purchased in this manner was Webster, which Key testified was purchased in cash with money he gave to Trattmann so that Trattmann would appear to be the buyer. Another exception was Cory, which Key testified Trattmann gifted to him in exchange for Key having “orchestrated” the improvements made to that property. Except for Franklin, all of the funds used to make down payments or outright purchase each property came from Key's personal funds; the down payment for Franklin came from the proceeds of refinancing Cory.
Key testified that the mortgages on the properties were paid out of Trattmann's account into which the rents were deposited each month; in addition to the rents, Key gave Trattmann a check each month in the amount of the difference between the monthly rents and the mortgage payments. In December 2002, Key began offsetting the security deposits Key was returning to tenants who were moving out against the amount he gave to Trattmann.
Key testified that, in 1998, he asked Trattmann to execute grant deeds transferring to Key the properties acquired in Trattmann's name prior to that date. Key did so after he discovered money missing from some of the bank accounts and doubted Trattmann's explanation. Key never recorded these grant deeds, although it was understood that he could do so at any time. In September 2000, a second set of grant deeds was prepared because more properties had been acquired by then. There were no conditions placed on the recording of the second set of grant deeds.
In 2001, Key and Trattmann discussed obtaining a home equity loan, secured by the Franklin property, to use for the acquisition of additional properties. Trattmann obtained the equity loan and, although they had agreed to access the money only if Key agreed, Trattmann took out $150,000 without Key's knowledge. When Key discovered this fact and confronted Trattmann about it, Trattmann announced that he was moving into his own place. Also in 2001, Key discovered that Trattmann had refinanced several of the properties, including taking some cash out. Although they were living separately by this time, they were still seeing one another and Key hoped that they would reunite.
In early 2002, about a week after Key discovered the refinancing, Trattmann left for Berlin. While Trattmann was there, Key recorded the second set of grant deeds. He did so after discovering some of his personal property, including the 1998 grant deeds which he kept in an unlocked credenza in his office, was missing. Also in the credenza Keys kept a document Trattmann had signed in the summer of 2000 which stated that Trattmann was holding the properties in trust for Key. Key later delivered a copy of this document to a friend living in London for safekeeping.
In May 2002, Key and Trattmann's relationship ended when Key refused Trattmann's request that he return the grant deeds to Trattmann. Key learned that Trattmann had filed the instant law suit in July 2002.
5. David Frankel, Expert Witness
Expert witness David Frankel, a certified public accountant, was retained by Trattmann to, among other things, trace the funds that were used to acquire the properties to their original source and to determine the amount of damages Trattmann suffered as a result of Key having recorded the deeds. Based on his review of the closing statements for each real estate purchase, various checking account and brokerage statements, and cancelled checks, Frankel testified to the purchase price for each property, the source of the funds used as a down payment and the amount of any loans. Based on his review of the documents, Frankel concluded that Trattmann purchased the properties. He acknowledged, however, that Key had deposited money into some of the accounts from which the down payment funds were paid and that Key Properties had purchased some cashier's checks that were used for a portion of some of the down payments. Frankel based his damage calculation on the difference between the rental income Trattmann received from the properties before Key took over management, and the income Trattmann received after Key took over but before the receiver took over management.
6. Phase I (Liability) Statement of Decision
A. The Joint Venture
The trial court found that Trattmann and Key formed two joint ventures: Key, Inc., and a real estate acquisition and management joint venture. The trial court found Trattmann and Key were equal partners in Key, Inc., which was incorporated in 1993 and that Key, Inc., was the alter ego of Trattmann and Key, doing business as Key Properties. Trattmann managed the day-to-day operations of Key, Inc., while Key continued working as a real estate broker, marketing and selling properties.
In 1996, Trattmann and Key agreed to pool their earnings to acquire properties in which they would each have a 50 percent interest, although title would be in Trattmann's name; it was further agreed that Trattmann would manage the properties and would receive no salary for doing so.
The trial court found that “in some cases services were rendered (e.g., Trattmann's managerial services and Key's brokerage services) without any understanding or agreement as to remuneration except insofar as the community estate was to be shared equally by each joint venturer.” (Italics added.)
B. Property Ownership
The trial court found that the joint venture purchased 9 of the 11 properties in question; Trattmann purchased the West Knoll property in 1994 with his own funds; and Trattman inherited the Cory property in 1996. Both Cory and West Knoll were his sole and separate property.
The trial court concluded that Trattmann and Key each owned a one-half interest in each of the other nine properties. The trial court explained that, prior to October 1996, certain bank accounts were Trattmann's separate property while others were Key's separate property, and still others were in the name of Key, Inc., and therefore part of that joint venture. In October 1996, proceeds from the sale of the Primera property (not part of the 11 and which had been purchased with funds from Trattmann, Key and Key, Inc.) were deposited into a Charles Schwab account which had previously been Trattmann's sole and separate property. Key's commission earned from the sale of the Primera property was also deposited into that account. As a result of this comingling, from October 1996 forward the Charles Schwab account became the property of the joint venture. Subsequently, as new properties were purchased with funds from the Charles Schwab account, those properties became the property of the joint venture. As income from properties owned by the joint venture was deposited into accounts that had previously been the sole property of either Trattmann or Key, those accounts also became the property of the joint venture. And the joint venture owned all properties purchased with funds from the accounts in which funds were comingled. The trial court found “(a) all funds from whatever source were ultimately comingled in furtherance of the joint venture, (b) the parties agreed to equal access to such funds, and (c) did in fact avail themselves to access of such funds․”
The trial court found that Key induced Trattmann to sign the grant deeds by “feigning concern that if Trattman[n] were to die on [his planned trip to Switzerland], Key would have no financial resources to support himself or to continue paying uninsured medical expenses for the treatment of [a serious, chronic illness]․ [¶] ․ When Trattman[n] signed the grant deeds in September, 2000, the parties orally agreed that Key would record the deeds only upon Trattman[n]'s death․ [¶] ․ At the time Key procured Trattman[n]'s signature, Key concealed from Trattman[n] his intention to record the deeds in violation of the mutually agreed intention that the deeds should only be recorded in the event of Trattman[n]'s death․ [¶] ․ In February of 2002, Key caused the grant deeds on all properties to be recorded without notice to or consent of Trattman[n], and in violation of their express agreement that the deeds should not be recorded unless Trattman[n] died.” The trial court noted that its findings were based in part on its finding that Key's testimony was not credible while Trattmann's testimony was credible. Although the trial court found Key's conduct supported an award of punitive damages, the court denied punitive damages because Trattman had not introduced evidence of Key's financial condition.
7. Phase II (Damages) Statement of Decision
A. Pre-Appointment of the Receiver
The trial court found Key negligently managed all 11 properties from February 2002 until a receiver was appointed in February 2003. As a result of Key's mismanagement, the rental income from the properties declined. Trattmann was entitled to damages in the amount of one-half of the lost net rent on the properties in which the court found he had a one-half interest, and all of the lost net rent for Cory and West Knoll, which the court found were Trattmann's property. The court found Trattman had not established the net lost rent prior to the time a receiver was appointed.
B. Post-Appointment of the Receiver
Key's mismanagement of the properties and refusal to allow Trattmann to manage them necessitated appointment of a receiver. For this reason, Key was ordered to pay all costs and fees associated with the receiver, in an amount to be determined by the Receiver Court. The trial court found Trattmann was entitled to post-receiver damages in the amount of one-half of the lost net rent on the properties in which he had a one-half interest, but again no evidence was presented of lost rents. The trial court awarded Trattmann damages in the amount of $159,808.50, comprised of the following: $20,108 (100 percent of the net rent lost from Cory and West Knoll); $14,688 (50 percent of community funds spent to cover increased tax liability on Cory and West Knoll); $82,560 (50 percent of community funds spent to cover increased tax liability on the other 9 properties); $42,452.50 (50 percent of the costs of the sale of the Horn property, as the sale would not have been necessary but for Key's mismanagement).
8. The Final Judgment
The final judgment, entered on September 28, 2007, declared that each of the 11 deeds Key recorded in February 2002 “constitutes a fraudulent transfer and is therefore null and void․” It quiets title to Cory and West Knoll in Trattmann as his sole and separate property. It quiets title in the remaining nine properties as follows: “Dieter Trattmann, a single man, as to a 50.0% interest and Garrison Key, a single man, as to a 50.0% interest, as tenants in common.” Trattmann was awarded damages in the amount of $159,808.50. On February 22, 2008, the trial court awarded costs of $147,779.76 to Trattmann.
Key filed a timely notice of appeal from the judgment and the cost order. Trattmann filed a timely notice of cross-appeal.
1. Key's Appeal
A. The Trial Court Properly Cancelled the 11 Deeds
Key contends the trial court erred in cancelling the deeds. He makes two arguments: (1) under Civil Code section 1056, Trattmann's manual delivery of the deeds to Key establishes as a matter of law that Key has legal title to the properties; and (2) there was insufficient evidence that Key fraudulently induced Trattmann to sign the deeds. Neither argument is persuasive.4
(1) Civil Code Section 1056
“A grant takes effect, so as to vest the interest intended to be transferred, only upon its delivery by the grantor.” (Civ.Code, § 1054.) “A grant duly executed is presumed to have been delivered at its date.” (Civ.Code, § 1055.) “A grant cannot be delivered to the grantee conditionally. Delivery to him, or to his agent as such, is necessarily absolute, and the instrument takes effect thereupon, discharged of any condition on which the delivery was made.” (Civ.Code, § 1056.)
Section 1056 comes into play only where there has been a “delivery.” But it is settled that “[t]he physical handing over of the piece of paper upon which certain words and figures are written and printed in and of itself and with nothing more does not constitute a good and sufficient delivery.” (Danenberg v. O'Connor (1961) 195 Cal.App.2d 194, 200.) Whether there has been a “delivery” depends upon whether the grantor had the intention to pass title irrevocably. “The act of the delivery of the deed must be accompanied with the intent that it shall become presently operative as such and presently pass title. [Citations.] Whether or not the requisite intent exists is a question of fact for the trial court or jury. [Citation.]” (Kelly v. Bank of America (1952) 112 Cal.App.2d 388, 395-396 (Kelly ); see also 12 Witkin, Summary of Cal. Law (10th ed. 2005) Real Property, § 297, pp. 354-355.) It may be determined from the surrounding circumstances of the transaction. (Kelly, supra, at p. 396.) These circumstances include the grantor's acts and declaration both before and after transmission of the deed to the grantee. (Estate of Pieper (1964) 224 Cal.App.2d 670, 687.)
Witkin explains that the Civil Code section 1055 presumption of delivery is only as to the time of delivery; the fact of delivery must be independently proved; a grantee's possession of the deed creates a presumption of delivery; recordation is prima facie evidence of delivery and “[r]ecordation coupled with manual delivery raises a strong presumption, which can be overthrown only by very clear proof.” (12 Witkin, Summary of Cal. Law, supra, § 295, p. 352.)
Kelly is instructive. In anticipation of an operation that he might not survive, the grantor in Kelly executed a deed in favor of his son. He did so after his attorney advised him that to make a gift effective it would have to have no conditions and a request to not record the deed would not be binding. The grantor handed the executed deed to his son, stating, “Here is the deed to the home property which I am giving to you without any strings attached. The only request I want to make is that you do not record the deed until after my death.” (Kelly, supra, 112 Cal.App.2d at p. 391.) The grantor survived the operation. Several years later, the grantor asked to see the deed and the grantee brought it back. The grantor gave it to his attorney saying, “Here it is. You can destroy it.” (Id. at p. 392.) The grantor then executed a will under the terms of which the property was placed in a trust with the defendant bank as the trustee. After the grantor's death several months later, the grantee brought an action to quiet title. The trial court found the grantee had no right, title or interest in the property because the grantor did not deliver the deed with the intention of conveying title or any interest to him. (Id. at p. 393.) The appellate court affirmed, reasoning that the finding of nondelivery was supported by (a) the circumstance of the anticipated operation (inference of delivery on condition of survival); (b) the grantor's continued possession of the property and payment of expenses, and exercise of rights of ownership; and (c) the grantee's failure to seek possession and his return of the deed with no attempt to get it back. (Id. at pp. 397-398.)
Here, the trial court found by clear and convincing evidence that Trattmann did not intend to convey an interest in any of the 11 properties and did not intend to deliver the grant deeds to Key within the meaning of Civil Code section 1056. Substantial evidence supports the trial court's finding, including the circumstances of Trattmann's desire to alleviate Key's anxiety about the trip to Switzerland; Trattmann's continued possession of the property, payment of property taxes and expenses; and Key's failure to immediately record the grant deed.
(2) There Was Substantial Evidence of Fraud
Key makes several arguments in support of his contention that there was insufficient evidence to support the trial court's finding that Key fraudulently induced Trattmann to sign the deeds. None is persuasive.
a) The Evidence Code Section 662 (Section 662) Presumption Was Not Applicable
Key challenges the trial court's finding that Key was “ ‘not the legal owner of title,’ as that phrase is used in Ev. C. § 662.” Key maintains that, under section 662, the trial court should have presumed that Key was the beneficial owner of the properties.5 But the presumption is inapplicable in a quiet title action when the plaintiff claims that the title is void. (Murray v. Murray (1994) 26 Cal.App.4th 1062, 1068.) A deed is voidable “where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations.” (Schiavon v. Arnaudo Brothers (2000) 84 Cal.App.4th 374, 378.)
Here, the gravamen of Trattmann's cancellation of deed and quiet title causes of action was that the deeds were void because they were obtained by fraud. Accordingly, the trial court correctly found the section 662 presumption did not apply.
Key's reliance on Tannehill v. Finch (1986) 188 Cal.App.3d 224, 227-228 and Toney v. Nolder (1985) 173 Cal.App.3d 791, 794-797 for a contrary result is misplaced because in neither case did the plaintiff claim the defendant's title was void as the result of fraud.
b) The Cancellation of Deed and Quiet Title Causes of Action Were Not Corporate Derivative Claims
As we understand Key's argument, it is that the cancellation of deed and quiet title causes of action belonged to Key, Inc., not to Trattmann individually. Key explains that “[t]he trial court's judgment returned the property to the corporate joint venture for division between its shareholders, not to Trattmann personally as requested in Trattmann's complaint.” (Italics added.) As such, Key complains that “[t]he trial court effectively switched plaintiffs and the legal theory of the case on Key after the trial was over, enforcing an unpleaded claim of the corporate joint venture Key Inc. to have the properties returned to Key Inc. for division between its shareholders, a claim which is different and independent from the claim for return of the properties to Trattmann personally alleged in Trattmann's complaint.” We find no error.
“ ‘A joint venture ․ is an undertaking by two or more persons jointly to carry out a single business enterprise for profit.’ [Citation.] ‘There are three basic elements of a joint venture: the members must have joint control over the venture (even though they may delegate it), they must share the profits of the undertaking, and the members must each have an ownership interest in the enterprise. [Citation.]’ [Citation.] ‘Whether a joint venture actually exists depends on the intention of the parties. [Citations.] [¶] ․ [¶] ․ Where evidence is in dispute the existence or nonexistence of a joint venture is a question of fact to be determined by the jury. [Citation.]’ [Citation.]” (Unruh-Haxton v. Regents of University of California (2008) 162 Cal.App.4th 343, 370.) The creation of a joint venture may be inferred from conduct of the parties and need not be expressed in a formal writing. (Iron etc. Co. v. American Milling etc. Co. (1931) 115 Cal.App. 238, 247.)
“ ‘[P]roperty purchased with the funds of the joint adventure or with profits derived therefrom belongs, unless otherwise agreed, to all the coadventurers in equal proportion․ Even though title is permitted to be taken in the name of one of the coadventurers, the right of the others is not impaired thereby, for under such circumstances the one holding title becomes a trustee for all.’ “ (Paganucci v. Kalpouzos (1947) 78 Cal.App.2d 714, 718 (Paganucci ), quoting 30 Am.Jur. (1958) Joint Adventures, § 38, pp. 965-966.)
Here, Trattmann's complaint and Key's cross-complaint alleged competing quiet title causes of action - each party alleging that he was the sole beneficial owner of each of the properties. But, the trial court found that nine of the properties were owned by a real estate acquisition joint venture which Trattmann and Key formed in 1996 and in which they were equal partners. The trial court explained that Westmount, acquired in March 1996, was the first property acquired by the joint venture because it was the first down payment paid with funds from accounts in which Trattmann and Key had comingled their personal funds. In April 1996, Primera was also purchased with funds from a comingled account. The trial court concluded that the evidence established “an enforceable express contract at the time of the Westmount property acquisition between Trattman[n] and Key to pool their earnings and financial resources for the continued acquisition of properties in which each would enjoy an equal interest not only in the properties to be acquired but also in the income from such properties and in the several bank accounts into which rental income (including equity loan and refinance proceeds) was deposited or comingled.” It found the properties acquired with comingled funds “were jointly acquired and owned by Trattman[n] and Key by virtue of their joint venture. Each has a 50% interest in those properties.” The trial court ordered the deeds filed in February 2002 expunged and, as to the properties purchased with joint venture funds, that new deeds be recorded in the names of Trattmann and Key as tenants in common.
It is clear to us that the trial court found Trattmann and Key entered into two separate joint venture agreements. The first was the 1993 agreement to operate Key, Inc., a real estate brokerage firm. The second was the 1996 agreement to jointly acquire and manage properties. The 1996 joint venture did not take a corporate form. The trial court's separate joint ventures finding is supported by its finding that, in February 2003, the receiver took over management and control of the properties while Key took over management and control of Key, Inc. It is also supported by the finding there was no understanding or agreement as to remuneration of Trattmann and Key for services they rendered “except insofar as the community estate was to be shared equally by each joint venturer.” (Italics added.) Moreover, throughout the statement of decision, the trial court refers to Key, Inc., and the properties separately, as: “the business of Key Inc. and the rental properties,” or “Key Inc. and the eleven properties.”
Indulging in all reasonable inferences to uphold the judgment (Chin v. Namvar, supra, 166 Cal.App.4th at p. 998, fn. 4), we conclude that the trial court's finding that all of the properties except West Knoll and Cory “were jointly acquired and owned by Trattman[n] and Key by virtue of their joint venture,” is a finding that the properties belonged to the 1996 real estate acquisition joint venture, not the Key, Inc., 1993 brokerage firm joint venture. (Italics added.) Accordingly, the trial court quieted title in these properties in Trattmann and Key as tenants in common, not in the corporation.
Return of the properties to the “corporate” joint venture is the lynchpin of Key's contention that the Trattmann's claims were derivative. But Key's contention fails to distinguish between these two joint ventures and incorrectly assumes that the trial court returned the properties to Key, Inc., not the real estate acquisition joint venture. In fact, it returned the properties to Trattmann and Key as tenants in common. Accordingly, Key's contention fails.
c) The Trial Court Did Not Fail to Restore Consideration
Key contends “the trial court erred in not enforcing the restoration-of-consideration requirement applicable to the fraud claims actually pled and presented by Trattmann at trial.” He argues that the fraud claims were for fraud in the inducement, not fraud in the execution. As such, the deeds were voidable, not void, and subject to the rule that the complainant must return to the defendant everything of value the complainant received in the transaction. Key complains that trial court “avoided the restoration-of-consideration requirement by improperly changing the plaintiff from Trattmann personally to Trattmann as representative of the corporate joint venture Key Inc. ․” We disagree.
“In obtaining rescission or cancellation, the rule is that the complainant is required to do equity, as a condition to his obtaining relief, by restoring to the defendant everything of value which the plaintiff has received in the transaction. [Citations.] The rule applies although the plaintiff was induced to enter into the contract by the fraudulent representations of the defendant. [Citations.]” (Fleming v. Kagan (1961) 189 Cal.App.2d 791, 796-797 (Fleming ); see also Civ.Code, § 1691, subd. (b).)
Here, citing Fleming, the complaint alleges that there was no consideration to restore to Key upon cancellation of the deeds because Key gave no consideration for the deeds. Key denied this allegation on information and belief. At the conclusion of the Phase I trial, the trial court found each of the deeds Key recorded in February 2002 constituted a fraudulent transfer and ordered them expunged and vacated from the county records. As to the nine properties which it found were purchased with comingled funds, the trial court quieted title in Trattmann's and Key's names as tenants in common.
Thus, the trial court did not, as Key asserts, avoid the restoration of consideration requirement by changing the plaintiff from Trattmann to the corporate joint venture. On the contrary, it concluded that, because the nine properties were purchased in part with funds belonging to Key and/or the joint venture, Key retained a one-half interest in the properties. Since Key retained an ownership interest in the properties, he was not entitled to restoration of any other funds, such as the down payments.
d) There Was Substantial Evidence of Reasonable Reliance and Fraudulent Intent
Key contends there was insufficient evidence that Trattmann reasonably relied on Key's promise not to record the deeds except in the event of Trattmann's death and insufficient evidence that Key had the requisite fraudulent intent. In support of these contentions, Key sets forth evidence that supports the inferences that Trattmann should have known signing the deeds resulted in a transfer and that Key was legitimately concerned that Trattmann might die on the trip to Switzerland. But Key's argument ignores the standard of review: we must resolve all conflicts in favor of the prevailing party if there is any substantial evidence, contradicted or uncontradicted, that will support the finding of the trier of fact. (Chin v. Namvar, supra, 166 Cal.App.4th at p. 998, fn. 4.)
Here, the finding that Trattmann reasonably relied on Key's assurances that Trattmann was not conveying any interest in the property by signing of the deeds is supported by Trattmann's testimony that he did, in fact, rely on these statements. That there was other evidence from which other inferences could reasonably be drawn does not compel a contrary result. Likewise, that there was some evidence from which it could be inferred that Key was concerned about his own well-being if Trattmann did not survive does not compel a finding that Key's concern was legitimate. This is particularly true in light of the trial court's express finding that Key's testimony was “not creditworthy, while Trattman[n]'s testimony [was] credible on these, and most other, points.”
(3) There Was Substantial Evidence That Key Had No Interest in West Knoll and Cory
Key makes two arguments in support of his contention that the trial court erred in finding that Key had no interest in West Knoll and Cory: (1) since Trattmann acquired both properties after the original Key, Inc., joint venture began, both properties necessarily belong to the joint venture; and (2) Key's unclean hands should not have precluded him from recovering any interest in those properties because “Trattmann's hands were no cleaner than Key's.” We find no error.
a) West Knoll Was Acquired Before the Real Estate Acquisition
Joint Venture Began
In the Phase I statement of decision, the trial court chronicled the acquisition of each of the properties, including identifying the source of funds for the down payments for each. It concluded that West Knoll, which Trattmann purchased with his own, not comingled, funds in 1994 before the real estate acquisition joint venture was entered into in 1996, and Cory, which Trattmann inherited, were Trattmann's sole and separate property.
Key does not dispute that West Knoll was acquired in 1994. Thus, the premise of his contention, that West Knoll was acquired after the joint venture began, is incorrect because it fails to distinguish between the two joint ventures.
b) Nothing Precluded the Parties From Also Owning Their Own
A partner in a joint venture with an interest in real property prior to the formation of a joint venture may contribute his property to the joint venture without violating the statute of frauds. (Gross v. Raeburn (1963) 219 Cal.App.2d 792, 798-799.) Where joint venturers “have agreed to buy a specific parcel of real property, and one partner or joint venturer, in breach of a fiduciary duty, wrongfully acquires it in his own name, the other partner or joint venturer may bring an action to impose a constructive trust and require the wrongdoing partner or joint venturer to convey the appropriate share of the legal title. [Citations.]” (BGJ Associates v. Superior Court (1999) 75 Cal.App.4th 952, 970; see also Leff v. Gunter (1983) 33 Cal.3d 508, 514 [a joint venturer who acquires property intended for the joint venture is subject to a constructive trust on the property in favor of the venture]; Paganucci, supra, 78 Cal.App.2d at p. 718 [where title to joint venture property is taken in the name of one party to the joint venture, that party becomes a trustee for all]; Koyer v. Willmon (1907) 150 Cal. 785, 787-788.)
Implicit in the trial court's finding that Key had no interest in West Knoll or Cory is a finding that Trattmann did not intend to contribute West Knoll to the real estate acquisition joint venture when it was formed in 1996, two years after he acquired West Knoll. (Gross v. Raeburn, supra, 219 Cal.App.2d at pp. 798-799 [party may contribute his or her property to a joint venture].) And, although the joint venture was in existence when Trattmann inherited Cory, there was no evidence that the joint venture included an agreement that property not acquired with joint venture assets must be contributed to the joint venture; nor was there any evidence of an agreement not to maintain separate property during the course of the joint venture. Thus, there was no evidence that Key had any interest in West Knoll or Cory.
c) Substantial Evidence Supports the Trial Court's Unclean Hands Finding as to Key
The trial court found that “[w]hile the co[m]ingling of funds from the time of the Westmount purchase might otherwise have given Key an equitable 50% interest [in West Knoll and Cory], the doctrine of unclean hands bars that result.” It also found that “Key's unclean hands in fraudulently recording grant deeds to all properties, including West Knoll and Cory, prevents a recovery of such an interest in the West Knoll and Cory properties under theories of implied contract or resulting trust.” Key challenges these findings, arguing that “Trattmann's hands were no cleaner than Key's.”
Because Key cites no legal authority for his argument, we consider it waived. The failure to cite authority or develop an argument with reference to any specific alleged deficiencies in the record constitutes a waiver of the issue on appeal. (Magic Kitchen LLC v. Good Things Internat., Ltd. (2007) 153 Cal.App.4th 1144, 1161-1162.) “When an issue is unsupported by pertinent or cognizable legal argument it may be deemed abandoned and discussion by the reviewing court is unnecessary.” (Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700.)
Key contends the trial court erred in denying his request for an accounting. He argues that by denying Key an accounting, the trial court excused Trattmann of his fiduciary duty to account for joint venture property. We find no error.
“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting. [Citations.] [¶] An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation. [Citation.]” (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179; see also 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 819, p. 236; but see Civic Western Corp. v. Zila Industries, Inc. (1977) 66 Cal.App.3d 1, 14 [accounting remedy is available when the accounts are so complicated as to render a legal action impracticable].)
Here, the cross-complaint's fourth cause of action for an accounting alleged that Key and Trattmann agreed that: Trattmann would open various bank, stock brokerage, and credit card accounts, as well as a Home Equity Line of Credit secured by the Franklin property, all in Trattmann's own name, but for Key's benefit; the funds in the brokerage account would be jointly owned; the funds in the equity loan would be used to renovate properties owned by Key or for Key to purchase additional properties. It further alleged that in violation of the agreement, Trattmann used equity loan funds for his own purposes. Key alleged that the amount owed was in excess of $350,000 and could not be ascertained without an “accounting of the receipts and disbursements of the aforementioned bank, brokerage and credit card accounts.” The trial court found against Key on all of the causes of action in the cross-complaint, including the fourth cause of action for accounting.
We find no error in the trial court's conclusion. Key sought a sum that could be made certain by “calculation of the receipts and disbursements” of the various accounts. Since the sum could be made certain by calculation, Key was not entitled to the equitable accounting remedy.
C. Trattmann Was Entitled to Some, But Not All, the Costs Awarded
Key contends the trial court erred in awarding Trattmann the following costs: (1) $109,389.93 fees paid to an expert witness; and (2) the costs of the receiver.6 We agree that the trial court erred in awarding Trattmann expert witness fees as costs, but find no error in the award of costs for the receiver.
(1) Expert Witness Fees Are Not Recoverable Costs
Key contends expert witness fees are not recoverable as costs in this case. Trattmann counters that, under Seever v. Copely Press, Inc. (2006) 141 Cal.App.4th 1550 (Seever ), the trial court had discretion to award expert witness fees associated with CPA David Frankel because it found Frankel's testimony so helpful. The trial court erred.
No party can recover costs in the absence of a statute authorizing an award of costs. (Davis v. KGO-T.V., Inc. (1998) 17 Cal.4th 436, 439 (Davis ).) Code of Civil Procedure section 1032, subdivision (b) (section 1032(b)), authorizes recovery of costs by the prevailing party. The items allowable as costs under section 1032(b) are listed in Code of Civil Procedure section 1033.5 (§ 1033.5). Subdivision (b)(1) of section 1033.5 states: “The following items are not allowable as costs, except when expressly authorized by law: [¶] (1) Fees of experts not ordered by the court.” (Italics added.) Subdivision (c)(4) states: “Items not mentioned in this section and items assessed upon application may be allowed or denied in the court's discretion.” (Italics added.)
In Olson v. Automobile Club of Southern California (2008) 42 Cal.4th 1142, 1148-1149, our Supreme Court explained: “Section 1033.5 describes three types of costs: (1) subdivision (a) describes items allowable as costs to a prevailing party under section 1032; (2) subdivision (b) describes items ‘not allowable as costs, except when expressly authorized by law’; and (3) subdivision (c)(4) describes items that ‘may be allowed or denied in the court's discretion’ if not enumerated in subdivisions (a) and (b)․ Pursuant to subdivision (b)(1), fees of expert witnesses not ordered by the court (see § 1033.5, subd. (a)(8)) are not allowable as costs unless ‘expressly authorized by law.’ (§ 1033.5, subd. (b)(1).)” Section 1033.5 simply codified the existing law that “fees of experts not ordered by the court were not an item of allowable costs.” (Davis, supra, 17 Cal.4th at p. 442.)
In Seever, which concerned an award of costs for unused trial exhibits, not expert witness fees, the court held that a cost item that is not mentioned in section 1033.5, subdivision (a) and not expressly disallowed in section 1033.5, subdivision (b) may be awarded in the trial court's discretion. (Seever, supra, 141 Cal.App.4th at p. 1558; see also Science Applications Internat. Corp. v. Superior Court (1995) 39 Cal.App.4th 1095, 1103 [“if an expense is neither expressly allowable under [section 1033.5,] subdivision (a) nor expressly prohibited under subdivision (b), it may nevertheless be recovered if, in the court's discretion, it is ‘reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation.’ [Citations.]”].) In contrast, here there is a statute that expressly prohibits a cost award of expert fees except in circumstances not present here.
Trattmann's Memorandum of Costs, which sought total costs of $151,604.76, included a line item of $109,389.99 for CPA David Frankel, an expert witness. In his Motion to Tax Costs, Key argued that the costs associated with Frankel were nonrecoverable expert witness fees. In his opposition, Trattmann argued that the costs associated with Frankel were recoverable under Seever, supra, 141 Cal.App.4th at page 1558, if they are reasonably necessary to the conduct of the litigation; and that Frankel's testimony was reasonably necessary was demonstrated by the trial court's comment at the conclusion of the Phase I trial that it relied heavily on Frankel's testimony.
According to its written tentative ruling on Key's motion to tax costs, the trial court believed that, notwithstanding section 1033.5, subdivision (b)(1), under Seever, “[section] 1033.5[, subdivision] (c)(4) gives the court discretion in awarding costs, both as to those specifically listed therein as allowable and those not so mentioned․ Thus, if a specific cost item is not identified in the cost statute or is precluded, it may nonetheless be awarded in the trial court's discretion, upon application, providing that it was reasonably necessary to the conduct of the litigation. [Citation.] [¶] The court here concludes that the costs incurred for Mr. Frankel['s] expert fees, while ordinarily an item not allowable as costs (since he was not an expert ordered by the court), could be awarded based on the fact that Mr. Frankel's testimony was significantly helpful to the court in assessing issues of tracing and related financial issues.” The trial court adopted its tentative decision as the judgment.7
The trial court erred. Expert witness fees are expressly not recoverable as costs under sections 1032 and 1033.5 and Seever does not hold otherwise. Since expert witness fees as an item of cost are expressly disallowed under section 1033.5, subdivision (b), the trial court had no discretion to award them.
(2) The Trial Court Properly Awarded Trattmann Costs and Fees of the Receiver
Key contends the trial court erred in awarding Trattmann 100 percent of the costs of the receiver. As we understand Key's arguments, they are that: (1) inasmuch as the receivership estate has been paying the costs of the receiver, and Key has a one-half interest in the estate, Key should be credited for half the payments already made; (2) the receiver costs improperly includes $42,452.50 that was awarded to Trattmann as damages for costs of sale of the Horn property; and (3) Key should not have to pay the receiver's costs to remodel Cory and West Knoll, which the trial court found were Trattmann's sole property. We find no error.
An award of costs in an equitable action is within the discretion of the trial court. (Neider v. Dardi (1957) 152 Cal.App.2d 156, 165 (Neider ); Baldwin v. Baldwin (1947) 82 Cal.App.2d 851, 856; see also 6 Witkin, Cal. Procedure (5th ed.2008) Provisional Remedies, § 459, p. 389 [amount of compensation allowed to a receiver is within trial court's discretion].) Generally, the costs of a receivership are charged to the receivership estate, but the trial court has discretion to impose direct liability on a party. (Andrade v. Andrade (1932) 216 Cal. 108, 110.) For example, in Neider, the appellate court affirmed an assessment of all of the costs of a court-appointed receiver against the appellant, Dardi, reasoning that the trial court “was justified in finding that Dardi was guilty of reprehensible conduct and that the costs should be assessed against him. [Citation.]” (Neider, supra, at p. 165.)
Here, in its Phase I statement of decision, the trial court found that, until February 2002, Trattmann competently managed the 11 properties. In February 2002, Key ousted Trattmann from the management and control of the properties. From February 2002 until appointment of a receiver in February 2003, Key managed the properties. In its Phase II statement of decision, the trial court found that Key so “ineptly” managed the properties “that some were in imminent danger of default or foreclosure by the time the Receiver was appointed.” Key “made it impossible for Trattman[n] to keep the properties in good repair and to service the ongoing property obligations. [¶] ․ [¶] ․ The only way to stop Key from wreaking further damage to the properties was to have their management vested in a third party Receiver.” “At the time of the Receiver's appointment, and solely because of Key's mismanagement, the properties were in disrepair and on the verge of financial collapse.” “[A]ppointment of the Receiver was necessary to wrest wrongful control of the eleven properties from Key to prevent further money losses and physical destruction of the properties, and ․ but for Key's negligence the appointment would not have been necessary. For this reason, Key shall pay all costs of the Receiver, including costs and fees of the Receiver's employees and agents. [Citation.] [¶] The reasonableness and necessity of the amounts of such fees and costs have been, or are to be determined, by the Receivership Court. Thus, this court determines that Key shall pay only such fees and costs that are regularly approved by the Receivership Court. These costs will include all receivership fees and costs incurred up to and including the final accounting and order terminating of the receivership.”
The final judgment states: “Key is solely liable for all Receiver costs and fees, including the Receiver's employees' costs and fees as have been, or are yet to be, determined to be reasonable and necessary by the Receivership Court expended by the Receiver from the date of the appointment of the Receiver until the Receiver's discharge by the Receivership Court; however, the Receiver shall be paid such costs and fees out of the assets of the Receivership estate, and Key shall therefore pay Trattmann, as damages, 100% of all such Receiver fees and costs already paid or to be paid out of the Receivership estate as approved by the Receivership Court. To secure payment of these damages to Trattmann, all such costs and fees shall constitute a lien in Trattmann's favor against all properties herein described in which Key holds a 50.0% interest as a tenant in common.”
Key argues, in essence, that he owned the properties and could manage them any way he wanted, but this argument ignores the trial court's finding to the contrary. Nor does Key challenge the sufficiency of the evidence to support the trial court's finding that he managed them so ineptly appointment of a receiver was necessary to protect the properties from additional loss and damage. These findings justified the trial court's assessment of all receiver costs against Key. (Neider, supra, 152 Cal.App.2d 156.)
To the extent Key argues that specific amounts should not be included in the final cost award, the argument is premature. The trial court ordered the amount to be determined by the Receivership Court. Until that court renders a judgment, there is nothing to appeal.
D. The Prejudgment Cost Award
In its Phase II statement of decision, the trial court found: “The court awarded costs of $7,525 in Key's favor, but the minute order to that effect provides no payment due date. Trattmann is not liable [to] Key for failing to pay that sum as damages, the obligation not yet having fallen due.” Key contends the trial court erred in denying Key the right to enforce the $7,525 cost award, which was made in connection with Key's successful motion to expunge a lis pendens recorded by Trattmann against a property owned by Key in San Diego. We find no error.
“ ‘Judgment’ means a judgment, order, or decree entered in a court of this state.” (Code Civ. Proc., § 680.230.) “ ‘Money judgment’ means that part of a judgment that requires the payment of money.” (Code Civ. Proc., § 680.270.) “[A]fter entry of a money judgment, a writ of execution shall be issued by the clerk of the court upon application of the judgment creditor and shall be directed to the levying officer in the county where the levy is to be made and to any registered process server.” (Code Civ. Proc., § 699.510, subd. (a).) Sanctions orders have the force and effect of a money judgment, and are immediately enforceable through execution, except to the extent the trial court may order a stay of the sanction. (Newland v. Superior Court (1995) 40 Cal.App.4th 608, 615.)
Here, Key did not seek to enforce his cost award through the execution of judgment laws and the trial court did not deny Key the right to do so. It did not “nullify” the order. Rather, Key sought to include the award as a measure of damages and the trial court declined to do so.8
2. Trattmann's Cross-Appeal
Trattmann contends the trial court erred in excluding evidence relevant to punitive damages. He argues that the trial court's stated reason for doing so, Trattmann's failure to introduce evidence of Key's net worth during the Phase I trial, is contrary to Civil Code section 3295, which required such evidence to be presented in the second phase of the bifurcated trial. Key counters that no court order prevented Trattmann from presenting evidence of Key's net worth in the Phase I trial. We agree with Trattmann that he should have been allowed to introduce evidence of Key's finances in the Phase II trial.
The defendant's financial condition is an element of punitive damages, upon which the plaintiff bears the burden of producing evidence. (Adams v. Murakami (1991) 54 Cal.3d 105, 119-123.) “[A] court may order a defendant to produce evidence of his or her financial condition following a determination of liability for punitive damages even if the plaintiff has not attempted to obtain that information prior to trial.” (StreetScenes v. ITC Entertainment Group, Inc. (2002) 103 Cal.App.4th 233, 243.) But, “[t]he court shall, on application of any defendant, preclude the admission of evidence of that defendant's profits or financial condition until after the trier of fact returns a verdict for plaintiff awarding actual damages and finds that a defendant is guilty of malice, oppression, or fraud in accordance with [Civil Code s]ection 3294. Evidence of profit and financial condition shall be admissible only as to the defendant or defendants found to be liable to the plaintiff and to be guilty of malice, oppression, or fraud.” (Civ.Code, § 3295, subd. (d), italics added.)
“While [Civil Code section 3295, subdivision (d) ] refers only to evidence of the defendant's financial condition, in practice bifurcation under this section means that all evidence relating to the amount of punitive damages is to be offered in the second phase, while the determination whether the plaintiff is entitled to punitive damages (i.e., whether the defendant is guilty of malice, fraud or oppression) is decided in the first phase along with compensatory damages. [Citations.]” (Holdgrafer v. Unocal Corp. (2008) 160 Cal.App.4th 907, 919.)
Here, Key filed two motions in limine prior to the initial May 12, 2003 trial date. The first sought to bifurcate the issue of liability from that of damages pursuant to Code of Civil Procedure section 598 and Evidence Code section 352. The second sought to bifurcate compensatory damages from punitive damages pursuant to Code of Civil Procedure section 598 and Civil Code section 3295, subdivision (d). The record does not appear to include a copy of the bifurcation order but the trial, which began in August 2006, was in fact bifurcated.9 In its Phase I statement of decision, the trial court explained that the “just completed first phase was a trial of the competing claims of the parties to ownership of the subject real properties, bank accounts, and [Key, Inc.] The first phase also adjudicates the claims of wrong-doing asserted by Trattman[n] against Key, and by Key against Trattman[n], but only up to February of 2002, when Key took control of Key Inc. and the properties. [¶] The second phase shall adjudicate apportionment of losses and gains on the property allocable to each party in accordance to their respective ownership interests and their relative fault in causing loss or damage to both the properties and Key Inc. as measured by the conduct of the parties from February 2002 until February of 2003, when the Receiver was appointed and took over management, of the subject properties.”
The trial court's tentative Phase I statement of decision did not mention punitive damages. Neither party's written objections to the tentative statement of decision addressed punitive damages. The final Phase I statement of decision, filed February 15, 2007, also did not mention punitive damages. The first reference to punitive damages appears to come in a proposed Phase II trial order filed by Key on February 16, 2007 (which is also stamped “received” by the trial court on February 20, 2007), in which Key requests an opportunity to present evidence of Trattmann's liability and punitive damages in Phase II. A trial setting conference took place two days later. Because the conference was unreported, we do not know whether the issue of punitive damages in Phase II was discussed then, but in a Supplemental Ruling On Objections To Decision And Amendments Nunc Pro Tunc, filed February 27, 2007, the trial court stated: “III. No Punitive Damages. While the court could (and did) find conduct under [Civil Code section] 3294 sufficient to support an award of punitive damages in Trattman[n]'s favor, Trattman[n] offered no evidence of Key's net worth. Thus, even if the court had determined, in the first instance, that some amount of money should have been awarded to Trattman[n] for punitive purposes, the court was without the critical evidence to determine the appropriate amount. (See, generally, 6 Witkin (10th ed. 2005) Torts § 1619.)” And in a Tentative Phase II Trial Order, filed the next day, the trial court stated that the Phase II trial would address economic damages only: “There is no issue of non-economic damages remaining to be adjudicated; and no issue of punitive damages. The only damage issue yet to be adjudicated is whether there have been losses sustained or realized by the properties and Key Inc. attributable to the parties based upon fault.”
On March 5, 2007, Trattmann filed a Request For Hearing And Oral Argument On Tentative Phase II Trial Order in which he objected to being denied the opportunity to present evidence of punitive damages during Phase II. Trattmann argued that “[b]ifurcation of punitive damages was requested in this matter and ordered by the court, thus precluding [Trattmann] from putting on evidence of [Key's] finances until after liability was determined.” Trattmann explained that, after Key stonewalled discovery of his finances, Trattmann propounded notices to appear at trial and produce financial documents on Key but Trattmann “understood that the requested financial information would not be produced nor permitted until the conclusion of Phase I, depending on whether [Trattmann] proved by clear and convincing evidence that Key committed fraud.” Pursuant to Civil Code section 3295, Trattmann maintained, the evidence of Key's finances should be introduced in the Phase II trial. In his response, Key challenges Trattmann's claim that Key did not respond to discovery of his financial condition. Key states: “Finally, the exhibit binders of both parties include hundreds of bank statements and other financial records of Key and Garrison Key, Inc. Many of these were included in the documents admitted into evidence. [¶] In short, the Court received ample evidence concerning Key's financial condition․”
At the hearing on March 16, 2007, apparently the first hearing after the Phase I trial ended on October 17, 2006, the trial court observed that the parties' comments on its clarification order had not persuaded the court to alter its decision. According to the minute order filed that day: “Objections having been read and settled, the Court's order on Phase II is final.” The trial court's ruling precluded Trattmann from introducing evidence on punitive damages in the Phase II trial, which began on May 24, 2007.
Trattmann should have been allowed to introduce evidence of Key's finances -and any other admissible evidence related to punitive damages - in the Phase II trial. Key's motion in limine to bifurcate punitive damages constituted an application to preclude admission of evidence of his financial condition unless and until the trier of fact returned a verdict for Trattmann awarding actual damages and found that Key was guilty of malice, oppression, or fraud in accordance with Civil Code section 3294. Pursuant to Civil Code section 3295, subdivision (d), the trial court had no discretion to deny the application. Accordingly, Trattmann reasonably understood that he could not introduce the evidence until the Phase II trial. The trial court erred in precluding him from doing so.
The judgment is modified by striking the $109,389.99 in expert witness fees awarded to Trattmann. The judgment is reversed in part and the matter is remanded for the limited purpose of a trial on the issue of the amount, if any, of punitive damages. In all other respects, the judgment is affirmed. Trattmann shall recover his costs on appeal.
FN1. The trial court entered judgment in favor of Key on the complaint's remaining causes of action, including the accounting claim, finding Trattmann had failed to meet his burden of proof.. FN1. The trial court entered judgment in favor of Key on the complaint's remaining causes of action, including the accounting claim, finding Trattmann had failed to meet his burden of proof.
FN2. “ ‘In reviewing the evidence on appeal, we resolve all conflicts in favor of the prevailing party, and we indulge in all legitimate and reasonable inferences to uphold the finding if possible. Our power begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, that will support the finding. When two or more inferences can be reasonably deduced from the facts, we cannot substitute our own deductions for those of the trial court. [Citation.]’ [Citation.]” (Chin v. Namvar (2008) 166 Cal.App.4th 994, 998, fn. 4.). FN2. “ ‘In reviewing the evidence on appeal, we resolve all conflicts in favor of the prevailing party, and we indulge in all legitimate and reasonable inferences to uphold the finding if possible. Our power begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, that will support the finding. When two or more inferences can be reasonably deduced from the facts, we cannot substitute our own deductions for those of the trial court. [Citation.]’ [Citation.]” (Chin v. Namvar (2008) 166 Cal.App.4th 994, 998, fn. 4.)
FN3. Key testified that Trattmann's credit card was used for company expenses but that Key paid off the credit card every month; Key could not recall whether he had his own credit card.. FN3. Key testified that Trattmann's credit card was used for company expenses but that Key paid off the credit card every month; Key could not recall whether he had his own credit card.
FN4. To the extent Key's other contentions are premised on the contention that the trial court erred in canceling the deeds, those other contentions necessarily fail and we do not repeat our analysis.. FN4. To the extent Key's other contentions are premised on the contention that the trial court erred in canceling the deeds, those other contentions necessarily fail and we do not repeat our analysis.
FN5. Section 662 provides: “The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”. FN5. Section 662 provides: “The owner of the legal title to property is presumed to be the owner of the full beneficial title. This presumption may be rebutted only by clear and convincing proof.”
FN6. Key contends the entire cost award should be reversed because it was based on the erroneous finding that Key was not the beneficial owner of the properties. Inasmuch as we have upheld the finding that Key was not the beneficial owner of the properties, that contention necessarily fails.. FN6. Key contends the entire cost award should be reversed because it was based on the erroneous finding that Key was not the beneficial owner of the properties. Inasmuch as we have upheld the finding that Key was not the beneficial owner of the properties, that contention necessarily fails.
FN7. The judgment taxed Trattmann's claimed costs by $3,825. In its tentative ruling, the trial court explained that it was disallowing this amount because it was attributable to the cost of deposing an expert witness not ordered by the court.. FN7. The judgment taxed Trattmann's claimed costs by $3,825. In its tentative ruling, the trial court explained that it was disallowing this amount because it was attributable to the cost of deposing an expert witness not ordered by the court.
FN8. In this regard, we reject Trattmann's assertion that the trial court found the prior cost award was unenforceable because it did not include a date certain for payment. Trattmann has shown no reason why Key could not enforce the cost order through the execution of judgment laws. We express no opinion on the amount of the net judgment in this case and what execution procedures are available to the parties.. FN8. In this regard, we reject Trattmann's assertion that the trial court found the prior cost award was unenforceable because it did not include a date certain for payment. Trattmann has shown no reason why Key could not enforce the cost order through the execution of judgment laws. We express no opinion on the amount of the net judgment in this case and what execution procedures are available to the parties.
FN9. Key maintains that the trial court did not grant his motions to bifurcate, but he cites nothing in the record to support this assertion. That the trial was bifurcated suggests that the motions were granted.. FN9. Key maintains that the trial court did not grant his motions to bifurcate, but he cites nothing in the record to support this assertion. That the trial was bifurcated suggests that the motions were granted.
FOOTNOTE. FN*. Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
BIGELOW, P. J.