ULRS v. Badax CA2/3 ( 2021 )

Filed 8/27/21 ULRS v. Badax CA2/3
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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
ULRS, Inc., B294566
Plaintiff and Respondent, Los Angeles County
Super. Ct. No. BC608439
v.
Badax, LLC,
Defendant and Appellant.
APPEAL from a judgment and orders of the Superior Court
of Los Angeles County, Mark A. Borenstein, Judge. Affirmed.
Gordinier Kang & Kim and Edward S. Kim for Defendant
and Appellant.
Lanak & Hanna, Craig P. Bronstein and Michael K.
Murray for Plaintiff and Respondent.
_______________________________________
INTRODUCTION
This case, though complex, is essentially a debt collection
action. In a prior case, Delta Aliraq, Inc. obtained a multi-million-
dollar judgment against its former chief executive officer, David
Weisman. Delta Aliraq assigned its interest in the judgment to
plaintiff and respondent ULRS, Inc. ULRS then initiated the
present action against Barbara Anne Klein, Weisman’s estranged
wife, and her limited liability company, Badax, LLC. ULRS
alleged that Weisman used money he had stolen from Delta
Aliraq to give Klein a series of monetary gifts and to purchase
and improve a residence to which Badax held title.
To reach assets held by Klein and Badax, ULRS asserted
two theories of liability: fraudulent transfer under the Uniform
Voidable Transactions Act (UVTA) (Civ. Code, § 3439 et seq.) and
a creditor’s claim under Code of Civil Procedure section 708.210.
Following a five-day bench trial, the court found largely in favor
of ULRS under both theories of liability. The court apportioned
the ownership of the residence, giving ULRS a 66 percent
interest and Badax the remaining 34 percent. In addition, the
court awarded ULRS $60,000 against Klein, representing three
checks written by Weisman to Klein and deposited in a checking
account bearing both their names.
On appeal, defendant and appellant Badax argues
principally that the fraudulent transfer claims should be reversed
because they are barred by the statute of limitations and, even if
the claims are not barred, they are not supported by substantial
2
evidence.1 We need not address these assertions, however,
because Badax fails to challenge adequately the alternative basis
for the judgment, i.e., the creditor’s claim. We conclude, therefore,
that Badax has failed to meet its burden to establish error on
appeal and, in any event, substantial evidence supports the
court’s judgment based on the creditor’s claim. Finally, we reject
Badax’s contention that irregularity in the proceedings required
the court to grant its motion for a new trial. Accordingly, we
affirm the judgment.
FACTS AND PROCEDURAL BACKGROUND2
1. Background
Weisman and Klein met in May 2009, became engaged in
June 2010, and were married in March 2011. The couple
separated in mid-2014 and they were attempting to finalize their
divorce at the time of trial in this matter. Klein formed her
limited liability company, Badax, in August 2010 and she was the
only member.
During all relevant times, Delta Aliraq performed
reconstruction projects in Iraq. In 2009, Weisman and two
limited liability companies he controlled, Delta Alpha X-ray, LLC
(DAX) and Davro, LLC (Davro) (collectively, the Weisman
1Although Klein also appealed, the appellate briefs were submitted
only on behalf of Badax. Accordingly, we do not address the arguments
that relate only to Klein.
2Pursuant to Evidence Code sections 452 and 459, we take judicial
notice of the judgment and statement of decision in the suit between
Delta Aliraq and Weisman. We rely on these documents solely to
provide factual background concerning the prior litigation.
3
entities) invested in Delta Aliraq and Weisman became the chief
executive officer of Delta Aliraq. By mid- to late-2011, however,
some board members of Delta Aliraq began to suspect that
Weisman was stealing money from Delta Aliraq. The board of
directors fired Weisman in early 2012.
2. The Prior Litigation
After Delta Aliraq fired Weisman, he sued Delta Aliraq and
Delta Aliraq filed a cross-complaint against Weisman, DAX, and
Davro. Delta Aliraq’s operative cross-complaint included the
following causes of action: fraud and conspiracy against
Weisman, fraud and deceit against Weisman and Davro, breach
of fiduciary duty against Weisman, interference with prospective
economic advantage against Weisman and Davro, and breach of
contract against Davro and DAX.
The court concluded that Weisman induced Delta Aliraq to
hire him by misrepresenting his qualifications and abilities,
Weisman breached his fiduciary duty to Delta Aliraq by
systematically misappropriating large amounts of money from
the company, and that DAX and Davro breached their written
investment agreement with Delta Aliraq by taking money from
the company that was not authorized under the agreement. The
court awarded Delta Aliraq compensatory damages of $6,589,809
against Weisman and Davro, jointly and severally. The court also
found DAX and Davro were Weisman’s alter egos and that
Weisman, DAX, and Davro acted with malice, oppression and
fraud. The court awarded Delta Aliraq $1,000,000 in punitive
damages against Weisman, DAX, and Davro, jointly and
severally.
Delta Aliraq subsequently transferred its interest in the
judgment to ULRS.
4
3. The Present Action Against Klein and Badax
3.1. Complaint and Answer
ULRS filed the present action against numerous parties
including Klein and Badax. As to Klein and Badax, the complaint
asserted three causes of action. One cause of action for fraudulent
transfer under the UVTA named Badax and alleged that
Weisman, through DAX and/or Davro, transferred more than
$850,000 to an escrow account relating to the purchase of a
residence in Chatsworth (the residence) to which Badax held
title. Further, the complaint alleged, Weisman, though DAX, paid
more than $188,000 for improvements to the residence. Badax
provided nothing of value in exchange for title to the residence
and the transfers, and the decision to title the property in the
name of Badax was designed to hinder, delay, or defraud
Weisman’s creditors. A second cause of action for fraudulent
transfer, this one against Klein, alleged that in order to deceive
Weisman’s creditors, DAX transferred $116,000 to Klein between
December 2010 and January 2012. Finally, as to both Klein and
Badax, ULRS asserted a creditor’s claim (Code Civ. Proc.,
§ 708.210 et seq.) alleging that ULRS had a money judgment
against the Weisman entities in the amount of $7,589,809 which
it had been unable to satisfy and that Badax and Klein were in
possession or control of assets or property in which the Weisman
entities had an interest.
Klein and Badax denied the allegations of the complaint
and asserted numerous affirmative defenses.
3.2. Badax’s Motion for Summary Adjudication
Badax moved for summary adjudication on the fraudulent
transfer claim insofar as it related to the purchase of the
5
residence, arguing mainly that the claim was barred by the four-
year statute of limitations and/or the one-year delayed discovery
rule found in Civil Code section 3439.09, subdivision (a).
Specifically, Badax asserted that the purchase of the residence
closed on January 12, 2012 and ULRS did not file its complaint
until January 27, 2016—more than four years after the purchase.
The court denied the motion.
3.3. Bench Trial3
A bench trial took place over five days in April 2018, during
which Klein testified extensively concerning her engagement and
marriage to Weisman, the funds used to purchase the residence,
and money and other generous gifts she received from Weisman
both before and during the marriage. Klein also confirmed, and
attempted to explain, a Gordian knot of financial transactions
that took place from mid-2010 to late 2012 between herself and
Badax on one side and Weisman, DAX, and Davro on the other.
The court also heard testimony from two former board
members of Delta Aliraq about that company’s operations,
Weisman’s involvement with the company, their suspicions in
mid- to late-2011 that Weisman was stealing money from the
company, the board’s ultimate decision to terminate Weisman’s
employment, and the multi-million-dollar judgment obtained by
Delta Aliraq against Weisman, DAX, and Davro in the prior
litigation. In addition, a forensic accounting expert testified for
ULRS regarding financial transactions between Weisman,
through DAX and Davro, Klein, and Badax.
3We present a more detailed discussion of those facts relevant to our
decision post.
6
Neither side called Weisman to testify.
3.4. Judgment and Statement of Decision
The court issued a detailed statement of decision
containing its findings. As an initial matter, the court concluded
that some of Klein’s testimony was credible and, further, that she
had likely been unaware of Weisman’s scheme to hide money
from his creditors. But the court also found that Weisman’s
actions and the explanations he provided to Klein, as well as
some of Klein’s explanations during her testimony, were
“incredible,” “fantastic,” and “unbelievable.”
The bulk of the court’s analysis regarding the convoluted
and often conflicting evidence focused on the UVTA claims—
specifically, whether Weisman intended to hinder, delay, or
defraud his creditors. Stated generally, the court found that
explanations for most of the transactions between the Weisman
entities and Klein and/or Badax were simply not credible, and, in
many instances, Klein’s testimony was internally inconsistent or
was contradicted by other evidence or basic common sense. The
court concluded that ULRS met its burden to demonstrate
fraudulent transfers under the UVTA, particularly as to the
residence but also as to three checks written from the Weisman
entities to Klein and deposited into a checking account in her
name and Weisman’s. The court also found that ULRS
established its creditor’s suit as to the residence as well as the
three checks at issue.
The court awarded ULRS a money judgment against Klein
in the amount of $60,000—the value of the three checks. After
noting that the precise remedy concerning the residence was
largely a matter of equity, the court apportioned the interest in
the residence between the Weisman entities and Badax
7
consistent with their relative financial contributions. Specifically,
the court concluded that the Weisman entities deposited all funds
into escrow for the purchase of the residence, paid all the interest
on the one-year mortgage loan, paid the principal on the
mortgage loan, and paid approximately $300,000 for
improvements to the residence. Badax, meanwhile, had repaid
DAX $717,952 of the money the Weisman entities placed into
escrow. The court awarded Badax a 34 percent interest in the
residence and concluded ULRS, in place of the Weisman entities,
was entitled to a 66 percent interest in the residence.
3.5. The Motion for New Trial
Klein and Badax filed a timely motion for new trial,
arguing that they had been deprived of a fair trial due to
misconduct by counsel for ULRS. Specifically, they contended
that counsel for ULRS repeatedly referred to facts not in
evidence, i.e., that Weisman had been seen with Klein in the
courthouse during the trial and that, not coincidentally, Klein
later offered documentary evidence (DAX’s 2009 tax return) not
disclosed during discovery. No evidence was admitted concerning
Weisman’s supposed visit to the courthouse to collaborate with
Klein, however. Nevertheless, counsel alluded to Weisman’s
supposed presence in the courthouse in ULRS’s closing brief and
in a subsequent brief regarding the form of judgment.
The court concluded that counsel for ULRS committed
misconduct but, as discussed in detail post, the misconduct was
not prejudicial. Accordingly, the court denied the motion.
8
4. Entry of Judgment and the Appeal
The court entered judgment in favor of ULRS on
October 16, 2018. The court denied the motion for new trial on
December 10, 2018. Badax timely appeals.
DISCUSSION
1. Badax fails to demonstrate error concerning the
creditor’s claim, one of the two alternative bases for
the judgment.
1.1. The Appellant’s Burden on Appeal
The most fundamental rule of appellate review is that the
judgment or order challenged on appeal is presumed to be correct,
and “it is the appellant’s burden to affirmatively demonstrate
error.” (People v. Sanghera (2006) 139 Cal.App.4th 1567, 1573.)
“ ‘All intendments and presumptions are indulged to support it on
matters as to which the record is silent, and error must be
affirmatively shown.’ ” (Denham v. Superior Court (1970) 2
Cal.3d 557, 564.)
In addition, parties must provide citations to the appellate
record directing the court to the supporting evidence for each
factual assertion contained in that party’s briefs. When an
opening brief fails to make appropriate references to the record in
connection with points urged on appeal, the appellate court may
treat those points as waived or forfeited. (See, e.g., Lonely Maiden
Productions, LLC v. GoldenTree Asset Management, LP (2011)
201 Cal.App.4th 368, 384; Dietz v. Meisenheimer & Herron (2009)
177 Cal.App.4th 771, 779–801 [several contentions on appeal
“forfeited” because appellant failed to provide a single record
citation demonstrating it raised those contentions at trial].)
Further, “an appellant must present argument and authorities on
9
each point to which error is asserted or else the issue is waived.”
(Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 867.)
Matters not properly raised or that lack adequate legal discussion
will be deemed forfeited. (Keyes v. Bowen (2010) 189 Cal.App.4th
647, 655–656.)
1.2. Analysis
As noted ante, the court found in favor of ULRS and
awarded damages under two alternative legal theories—
fraudulent transfer under the UVTA and a creditor’s claim under
Code of Civil Procedure section 708.210 et. seq. We may, of
course, affirm the judgment on either of the alternative legal
grounds. (E.g., Rappleyea v. Campbell (1994) 8 Cal.4th 975, 981
[judgment will not be set aside on appeal even if court misapplied
the law so long as any other correct legal theory supports the
judgment].)
Badax’s opening brief focuses myopically on the fraudulent
transfer claims. Badax’s first legal argument—that the claims
made under the UVTA are barred by the statute of limitations—
does not mention the creditor’s claim. And because the applicable
statutes of limitations are different (compare Civ. Code,
§ 3439.09, subd. (a) with Code Civ. Proc., § 708.230), we will not
assume Badax intended to attack the creditor’s claim on that
basis.
Badax’s second argument—that the judgment is not
supported by substantial evidence—is explicitly limited to the
claims asserted under the UVTA. The heading of that section
states, “there is no substantial evidence to support judgment on
the second cause of action for fraudulent transfer” and the
analysis is so limited.
10
In fact, Badax devotes only three short paragraphs at the
end of its 66-page opening brief to the creditor’s claim. The first
sentence summarizes the argument: “Since there is no
substantial evidence that DAX or DAVRO transferred funds to
Badax with the actual intent to hinder, delay or defraud its
creditors, Plaintiff’s seventh cause of action for a creditor’s suit
also fails.” But a creditor’s claim is not identical to or derivative
of a claim under the UVTA. As we explain post, a creditor’s claim
does not require the creditor to prove fraudulent intent and
therefore the absence of evidence of Weisman’s intent vis a vis his
creditors is of no moment.
In its reply brief, Badax asserts additional arguments,
namely, that neither DAX nor Davro ever made a claim against
Badax concerning the residence or sought repayment of money
transferred to Klein. It also contends DAX and Davro could not
have asserted a claim of ownership in the residence because they
received no security interest in the residence and, therefore, the
court erred by awarding ULRS “greater rights and remedies”
than DAX and Davro could have obtained directly. By failing to
raise or develop these arguments in its opening brief, Badax has
forfeited them. (See People v. Duff (2014) 58 Cal.4th 527, 550,
fn. 9, [“the claim is omitted from the opening brief and thus
waived”]; Aptos Council v. County of Santa Cruz (2017) 10
Cal.App.5th 266, 296, fn. 7 [“Issues not raised in the appellant’s
opening brief are deemed waived or abandoned.”]; Heshejin v.
Rostami (2020) 54 Cal.App.5th 984, 995, fn. 11 [same].)
In any event, DAX and Davro could have brought an action
against Klein and Badax under an equitable theory such as
constructive trust. (See, e.g., Cabral v. Soares (2007) 157
Cal.App.4th 1234, 1242–1243 (Cabral).) And adhering to the rule
11
that an appellate court views the record in the light most
favorable to the prevailing party and draws all reasonable
inferences in favor of the judgment, we conclude the court did not
err in determining that Badax’s denial that DAX and Davro had
an interest in the residence or that it is indebted to those entities
was not credible. (See Evans v. Paye (1995) 32 Cal.App.4th 265,
270 [“Once the judgment creditor has presented prima facie
evidence of the existence of a debt by the third person to the
judgment debtor, the burden shifts to the third person to show by
a preponderance of the evidence that his or her denial of the debt
is made in good faith. The third person does not satisfy this
burden simply by offering an explanation which, on its face, is not
patently frivolous or an obvious sham.”].)
In sum, the judgment in favor of ULRS rests on two
alternative legal grounds and in essence Badax has only
challenged one. Its failure to demonstrate error relating to the
creditor’s claim theory of liability is, standing alone, fatal to its
appeal.
2. The judgment against Badax based on the creditor’s
claim is supported by substantial evidence.
Given Badax’s failure to make a viable challenge to the
judgment based on the creditor’s claim, we could decline to
consider whether the judgment is supported by substantial
evidence. But in the interest of completeness, we address the
issue.
2.1. Standard of Review
“On appeal from a judgment based on a statement of
decision after a bench trial, we review the trial court’s
conclusions of law de novo and its findings of fact for substantial
12
evidence. (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.)
Under the deferential substantial evidence standard of review,
we ‘liberally construe[ ]’ findings of fact ‘to support the judgment
and we consider the evidence in the light most favorable to the
prevailing party, drawing all reasonable inferences in support of
the findings.’ (Ibid.) ‘We may not reweigh the evidence and are
bound by the trial court’s credibility determinations.’ (Estate of
Young (2008) 160 Cal.App.4th 62, 76.) Testimony believed by the
trial court ‘may be rejected only when it is inherently improbable
or incredible, i.e., “ ‘unbelievable per se,’ ” physically impossible or
“ ‘wholly unacceptable to reasonable minds.’ ” ’ (Oldham v. Kizer
(1991) 235 Cal.App.3d 1046, 1065.) ‘ “The ultimate determination
is whether a reasonable trier of fact could have found for the
respondent based on the whole record.” ’ (Estate of Young, at
p. 76.)” (McPherson v. EF Intercultural Foundation, Inc. (2020) 47
Cal.App.5th 243, 257 (McPherson).)
2.2. Creditor’s Claim
A creditor’s claim is one of several avenues available to a
creditor attempting to enforce a judgment. Code of Civil
Procedure section 708.210 provides: “If a third person has
possession or control of property in which the judgment debtor
has an interest or is indebted to the judgment debtor, the
judgment creditor may bring an action against the third person
to have the interest or debt applied to the satisfaction of the
money judgment.” One comment of the Law Revision Commission
observes that “[i]t is anticipated ... that less expensive and less
cumbersome enforcement procedures will be used in the normal
case.” (Cal. Law Revision Com. com preceding § 708.210.) But a
creditor’s suit may be necessary if, as here, there is a dispute
concerning ownership of the property held by the third party or
13
“where for some other reason the judgment creditor believes that
the third person will not cooperate.” (Ibid.)
For example, in Cabral, supra, the plaintiff was owed
substantial child and spousal support arrears from her ex-
husband, James. The plaintiff alleged that James’s mother, in
cahoots with James’s sister, changed the mother’s will shortly
before her death to redirect James’s inheritance to his sister, who
would in turn secretly give the funds to James. The court noted
that, in that circumstance, James could bring an action to impose
a constructive trust on the funds received by his sister as to
which he held a beneficial interest. Therefore, the court held, the
plaintiff, standing in James’s shoes, could properly bring a
creditor’s suit against James’s sister to recover those funds to
which James was entitled. The court noted that the sister, who
was (or soon would be) in possession of funds destined for James,
was unlikely to cooperate with the plaintiff’s collection efforts and
therefore a creditor’s suit was an appropriate, if little used, legal
vehicle for the plaintiff to enforce her family law judgment
against her ex-husband. (Cabral, supra, 157 Cal.App.4th at
pp. 1242–1243.)
2.3. Substantial evidence supports the court’s
apportionment of the beneficial interest in the
residence.
The court found by clear and convincing evidence (see Evid.
Code, § 662) that although Badax held record title to the
residence, the record title did not reflect true beneficial title. The
court apportioned the beneficial interest in the residence based
on the relative financial contributions made by DAX, Davro, and
Badax, finding that Badax’s interest in the house was only 34
percent because Badax contributed $717,952 and the Weisman
14
entities contributed the remainder of the $2,111,695.83 paid for
the residence and improvements. Specifically, the court found the
Weisman entities deposited all funds into escrow for the purchase
of the residence, paid all the interest on the mortgage loan, paid
the principal on the mortgage loan, and paid for substantial
improvements to the residence. Although Klein testified that
most, if not all, of the payments made by DAX and Davro were
repayments of loans made by Klein and/or Badax to DAX and
Davro or were in lieu of rent relating to the space Weisman used
in the residence as an office, the court largely rejected her
explanations as not credible. As we now explain, the court’s
findings are supported by substantial evidence.
2.3.1. The Weisman entities provided the funds to
purchase the residence. Badax took title.
Klein and Weisman decided to buy the residence in August
2011. Weisman signed the offer, and the purchaser was listed as
“David Weisman and/or assigns.” The purchase price for the
residence was approximately $1.7 million plus taxes, fees,
commissions, and other charges. The purchase was funded with
$857,172.91 in cash and a mortgage loan in the amount of
$895,000. Klein acknowledged that the Weisman entities
transferred all the necessary cash into the escrow account used
for the purchase of the residence.
Shortly before escrow closed, Weisman assigned the right
to purchase the residence to Badax. Badax took title to the
residence.
15
2.3.2. Badax repaid a portion of the funds deposited
into escrow.
Klein testified that she repaid the Weisman entities all the
money they put into escrow to fund the purchase of the residence.
The court found this testimony credible, in part.
According to Klein, in honor of the couple’s engagement,
Weisman gave her an Oscar statuette that had been awarded to
Orson Welles in connection with his 1941 film, Citizen Kane. The
gift was purportedly memorialized by a gift certificate Weisman
made for Klein. Klein said she later transferred the statuette to
Badax so that Badax could purchase the residence. In November
2011, Klein decided to sell the statuette and use the funds for the
purchase. With Weisman’s assistance, the statuette was sold in
December 2011.
The “hammer price” for the statuette was $717,952 and the
net amount ($714,952) was sent via wire transfer to an account in
the name of DAX. Klein explained that the Weisman entities had
deposited money into the escrow account to fund the purchase of
the residence, but she had always intended to repay the Weisman
entities with the money received from the sale of the Oscar.
Although Klein said the loan from the Weisman entities had been
fully repaid, she could not explain the discrepancy
(approximately $142,000) between the amount placed into escrow
by the Weisman entities ($857,172.91) and the lesser amount
($714,952) DAX later received.
Notwithstanding a great deal of evidence to the contrary,
the court believed Klein’s testimony that Weisman had given her
the Oscar and found that Klein and Badax contributed the
statuette’s “hammer price” of $717,952 toward the purchase of
the residence. And as noted, we defer to the court’s credibility
16
determinations. (E.g., McPherson, supra, 47 Cal.App.5th at p.
257.)
2.3.3. DAX paid for substantial improvements to the
residence.
The residence was not complete when Klein and Weisman
purchased it. Over the course of several months in early 2012, the
couple made improvements to the residence and Klein estimated
that they spent at least $300,000 doing so. She also
acknowledged that the Weisman entities paid for all, or nearly
all, of the improvements.
Klein represented that she had also paid for “tens of
thousands of dollars” for improvements to the residence, but no
supporting evidence was ever introduced and the evidence
admitted did not support her testimony.
Klein also claimed that DAX made the payments to vendors
and other third parties in part to “build out” Weisman’s office
space, as he would have done in a commercial building. And she
suggested that some of the improvements were in lieu of rent
owed to Badax from Weisman, who intended to use a portion of
the home as his office space. Although no written lease existed,
Klein said that she and Weisman had agreed that he and his
companies would fund some of the larger improvements to the
residence.
The court rejected Klein’s explanations because it found her
testimony was “not believable and does not make sense.”
Specifically, the court noted that payments Klein urged were
made in lieu of rent did not correspond to the period Weisman
maintained his office in the residence. The court’s credibility
assessment and evaluation of the weight of the evidence are fully
supported by the record.
17
2.3.4. DAX paid all the interest on Badax’s mortgage
loan.
In late December 2011, Klein, as the managing member of
Badax, signed a mortgage loan agreement and promissory note
with Lone Oak Fund, LLC (Lone Oak). Badax borrowed $895,000
at an interest rate of 7.9 percent and the loan was to be repaid in
one year, on or before December 31, 2012.
Interest on the loan was payable monthly, beginning in
February 2012. DAX made all the interest payments (a total of
$66,776.91) and paid Lone Oak directly by automatic electronic
funds transfers. Klein explained that these monthly payments
were made by DAX in lieu of rent; Weisman intended to use a
portion of the house as an office for his business endeavors.
Again, and as explained in the prior section, the court rejected
Klein’s explanations because it found her testimony was “not
believable and does not make sense.” Specifically, the court noted
that the payments Klein urged were made in lieu of rent did not
correspond to the period Weisman maintained his office in the
residence. The court’s credibility assessment and evaluation of
the weight of the evidence are fully supported by the record.
2.3.5. Davro gave Badax the funds used to pay off the
mortgage loan.
On December 18, 2012, shortly before the deadline to pay
the mortgage principal, a representative of Lone Oak advised
Klein and Weisman via email that the loan payoff amount,
including interest and fees, was $898,796.65. Less than 30
minutes after that email was sent, Badax received a wire transfer
in the amount of $895,000 from an account belonging to Davro.
The next day, a withdrawal was made from Badax’s account in
18
the amount of $898,806.65. The loan principal was paid to Lone
Oak on December 19, 2012.
Klein testified that the $895,000 transfer from Davro to
Badax in December 2012 was a repayment of two loans Badax
purportedly made to DAX in May and June of 2011. Badax’s bank
records, however, showed no evidence of the loans. A $750,000
transfer was made to DAX in May 2011, however, from an
account bearing both Klein’s and Weisman’s name.4 Klein
produced a promissory note evidencing the loan and handwritten
notations suggesting the loan had been repaid. But the $750,000
transfer occurred just 11 days after Weisman deposited $900,000
into the same account. Klein claimed the $900,000 deposit was a
wedding gift and she recounted an elaborate and romantic
gesture by Weisman. Further, Klein stated, Weisman asked to
borrow $750,000 from her shortly thereafter and she agreed.
Klein said she loaned Weisman another $100,000 a few weeks
later.
The court rejected Klein’s explanation as not credible and
found it more likely that Weisman deposited $900,000
(presumably looted from Delta Aliraq) into the checking account
and later withdrew $850,000 for some other purpose and that
Weisman and Klein fabricated the promissory note and the other
evidence of the wedding gift from Weisman. We will not disturb
the court’s credibility assessment. (McPherson, supra, 47
Cal.App.5th at p. 257.)
4Klein testified that, by agreement, the checking account was hers and
was not a joint account with Weisman.
19
3. The court properly denied the motion for new trial.
Finally, Badax contends the court erred in denying its
motion for new trial due to irregularity in the proceedings,
namely, misconduct by counsel for ULRS.5 We disagree.
A new trial may be granted where there is an
“[i]rregularity in the proceedings.” (Code Civ. Proc., § 657,
subd. (1).) “An ‘irregularity in the proceedings’ is a catchall
phrase referring to any act that (1) violates the right of a party to
a fair trial and (2) which a party ‘cannot fully present by
exceptions taken during the progress of the trial, and which must
therefore appear by affidavits.’ (Gay v. Torrance (1904) 145 Cal.
144, 149; accord, Gibbons v. Los Angeles Biltmore Hotel (1963)
217 Cal.App.2d 782, 791.)” (Montoya v. Barragan (2013) 220
Cal.App.4th 1215, 1229–1230.) Our Supreme Court has
concluded attorney misconduct qualifies as such an irregularity
and, thus, may be grounds for a new trial. (City of Los Angeles v.
Decker (1977) 18 Cal.3d 860, 870 (Decker).)
Badax contends counsel for ULRS committed misconduct
by repeatedly referring to facts not in evidence, i.e., that
Weisman had been seen with Klein in the courthouse during the
trial and that, not coincidentally, Klein later offered documentary
evidence (DAX’s 2009 tax return) not disclosed during discovery.
The tax return reflected a $989,000 capital gain from sale of land
and was offered to support Klein’s testimony that Weisman
5 An order denying a motion for new trial is not appealable. (Rodriguez
v. Barnett (1959) 52 Cal.2d 154, 156.) Such an order, however, may be
reviewed on appeal from the underlying judgment. (Walker v. Los
Angeles County Metropolitan Transportation Authority (2005) 35
Cal.4th 15, 18.)
20
promised to, and did, give Klein $1 million as a wedding gift and
she later used those funds to pay the $865,000 mortgage
principal. No evidence was admitted concerning Weisman’s
supposed visit to the courthouse to collaborate with Klein,
however. Nevertheless, counsel alluded to Weisman’s supposed
presence in the courthouse in ULRS’s closing brief and in a
subsequent brief regarding the form of judgment.
The trial court found that counsel committed misconduct by
referencing Weisman’s purported presence in the courthouse
without any supporting evidence. We agree. An attorney has wide
latitude to discuss the case during closing argument and may
argue all reasonable inferences from the evidence. (See, e.g.,
Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 795–796
(Cassim).) But it is well settled that an attorney who exceeds this
wide latitude commits misconduct. For example, our Supreme
Court has noted that “ ‘[w]hile a counsel in summing up may
indulge in all fair arguments in favor of his client’s case, he may
not assume facts not in evidence or invite the jury to speculate as
to unsupported inferences.’ (Malkasian v. Irwin (1964) 61 Cal.2d
738, 747.)” (Id. at p. 796.)
But as the trial court noted, it is not enough for a party
seeking a new trial to show attorney misconduct. The party must
also demonstrate that the misconduct was prejudicial. (Cassim,
supra, 33 Cal.4th at p. 800.) As to this issue, we make “an
independent determination as to whether the error was
prejudicial.” (Decker, supra, 18 Cal.3d at p. 872.) Prejudice exists
if it is reasonably probable that the trier of fact would have
arrived at a verdict more favorable to the moving party in the
absence of the irregularity or error. (Cassim, at p. 800.)
21
The prejudice analysis in a jury trial necessarily focuses on
the state of the evidence and any conduct by the jury from which
it might be inferred that the misconduct at issue did or did not
affect the verdict. But here, the case was tried before a judge, not
a jury, and we have the benefit of the court’s analysis on the issue
of prejudice.
The court directly addressed the issue at the hearing on the
motion for new trial. Referencing Weisman’s purported presence
at the courthouse, the court explicitly stated it did not and would
not consider that evidence, emphasizing the “overwhelming
evidence” supporting the court’s factual findings. After allowing
counsel to argue, the court announced “that it was misconduct to
refer to the evidence not admitted during the trial both in the
closing brief and in the form of the brief and hearing.” Then, the
court noted that the evidence developed at trial amply supported
the inference that Weisman and Klein colluded in order to
deceive Weisman’s creditors. In other words, the suggestion that
Weisman colluded with Klein was not new and was supported by
other admitted evidence. And, in any event, the court rejected
that suggestion because it concluded “Klein acted without actual
fraudulent intent, she did not wrongfully collude with Weisman
and did not actively participate in his fraudulent schemes.”
Moreover, the court explicitly rejected the possibility that
counsel’s misconduct affected the outcome of the case, stating:
“So I do think that pressing that point both at the
statement of decision point of our proceedings and in the
judgment proceedings was not appropriate. But, so what. Where
is the evidence that the result would have been different absent
the misconduct[…] that Ms. Klein and Badax [were] prejudiced
by the statements? In my view, there is none. … I would not have
22
changed one iota of my decision, which I can say[.] A jury might
not be able to say, but I can say, based if nothing [sic] was said
about Mr. Weisman being in the hallway or Mr. Weisman
providing the 2009 tax return. This was not a jury trial where we
may not know what the jury considered. Here the decision and
judgment I can absolutely, confidently, say was not influenced by
misconduct of counsel in the least. The decision would have been
exactly the same in the absence of misconduct. I just do not find
any prejudice or any likelihood that the result would be
different.”
The court’s clear statements notwithstanding, Badax seems
to contend that counsel’s misconduct was prejudicial. But its
discussion on this point is simply a regurgitation of the evidence
favorable to Badax and Klein that was presented at trial—
evidence which the court rejected mainly on the basis of
credibility. We will not disturb the court’s ruling in this regard.
(See, e.g., Warren v. Merrill (2006) 143 Cal.App.4th 96, 109
[“ ‘ “[T]he power of the appellate court begins and ends with a
determination as to whether there is any substantial evidence,
contradicted or uncontradicted, which will support the conclusion
reached by the [trier of fact].” (Crawford v. Southern Pacific Co.
(1935) 3 Cal.2d 427, 429.)’ ”].)
In sum, we take the court at its word and conclude
counsel’s misconduct was not prejudicial.
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DISPOSITION
The judgment is affirmed. ULRS, Inc. shall recover its costs
on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
LAVIN, Acting P. J.
WE CONCUR:
EGERTON, J.
HILL, J.*
* Judge of the Santa Barbara Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
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