Milano v. Edelson CA2/5 ( 2014 )

Filed 9/2/14 Milano v. Edelson CA2/5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
SCOTT MILANO, B251440
Plaintiff and Respondent, (Los Angeles County Super. Ct.
No. BC411392)
v.
STEVE EDELSON,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Los Angeles, Steven J. Kleifield,
Judge. Affirmed.
Von Behren & Hunter and Andrew R. Hunter for Defendant and Appellant.
Smith Law Firm and Craig R. Smith for Plaintiff and Respondent.
_______________________
Defendant Steve Edelson appeals from the trial court’s order granting the motion
of plaintiff Scott Milano for specific performance of the conditions of a contract for the
sale of stock in a restaurant. The order required Edelson to indemnify Milano in the
amount of $76,763.39 pursuant to the terms of the sale agreement, pay interest at a rate of
10 percent, and pay attorney fees related to the enforcement motion. Edelson contends
the order must be reversed for the following reasons: (1) the trial court lacked
jurisdiction to adjudicate an indemnity claim; (2) the prior judgment did not grant the
court jurisdiction to determine any issue beyond the transfer of stock and the delivery of
the lease; (3) the trial court erred by ruling based on the moving and opposition papers
without holding an evidentiary hearing; (4) Edelson had the right to a jury trial on
Milano’s legal claim for money; (5) if the trial court was enforcing a specific
performance judgment its award of damages was prohibited; and (6) the trial court
lacked jurisdiction because an appeal was pending on the specific performance judgment.
BACKGROUND
Edelson entered into a stock purchase agreement (the agreement) to sell a
restaurant, El Cid Los Angeles, Inc., to Milano. Milano filed an action for specific
performance after the sale did not close. On October 25, 2011, following a bench trial,
the court issued a judgment in favor of Milano granting specific performance of the
agreement effective January 2, 2012. The trial court retained “jurisdiction over the
parties following entry of judgment to ensure the orderly closing of escrow, to enforce
the terms of the Agreement and/or the Lease and to adjudicate any disputes between the
parties in connection with the Agreement.” Edelson filed a notice of appeal from the
judgment on December 16, 2011.1
1 We grant Edelson’s motion for judicial notice of the record and opinion filed in
the prior appeal in this action. (Milano v. Edelson (Apr. 13, 2013, B237971 [nonpub.
opn.].)
2
On July 2, 2012, counsel for Milano, in a letter to counsel for Edelson, made a
demand for indemnity under Section 16.1 of the agreement. According to the letter,
Edelson did not disclose any liabilities at the closing of the agreement on January 3,
2012, did not deliver financial records prior to the closing, and failed to file required tax
returns and pay outstanding taxes and other liabilities. Documentation was supplied to
support Milano’s assertions. Edelson’s counsel was advised that if the demand for
indemnification was not satisfied, “then Buyer will file a motion with the Superior Court
to enforce the Judgment and the Agreement pursuant to paragraph 1(e) of the Judgment.”
Edelson’s opening brief on appeal from the judgment for specific performance in case
No. B237971 was filed on September 5, 2012, raising various issues, but not contesting
the trial court’s retention of jurisdiction or the scope of the retained jurisdiction.
On October 12, 2012, Milano filed a motion to enforce the judgment for specific
performance, seeking (1) indemnification in the amount of $76,763.59 pursuant to
paragraph 16.1 of the agreement for all unpaid taxes and undisclosed liabilities that were
the responsibility of Edelson, and (2) interest on that amount at a rate of seven percent
per annum since July 2, 2012, and (3) attorney fees incurred in connection with the
motion. The motion was supported by declarations by Milano and his counsel, as well as
bills paid by Milano that he asserted were the responsibility of Edelson under the
agreement.
Edelson filed an opposition to the motion. He contended the trial court lacked
jurisdiction to act while the appeal of the judgment was pending, Milano was not seeking
to enforce the judgment but to “bootstrap new claims into the judgment,” Milano lacked
standing to enforce the judgment for the benefit of the El Cid Los Angeles, Inc., and
Edelson was not personally liable for the corporate obligations of El Cid Los Angeles,
Inc. Milano filed a reply to the opposition. In response to a request by the trial court,
both parties filed briefs on the meaning of Section 8 of the agreement (defining “Closing
Adjustments” and requiring a reconciliation of inventory and accounts payable for
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inventory) and whether the court was required to hold an evidentiary hearing on Milano’s
motion to enforce the judgment.
The trial court heard oral argument on the issues on April 25, 20132 and June 6,
2013. The court orally granted Milano’s motion. On June 27, 2013, the court signed the
order enforcing the judgment and awarding attorney fees. Edelson timely appeals from
that order.
On April 13, 2013, this court issued its opinion on Edelson’s appeal of the specific
performance judgment in case No. B237971. We held the specific performance judgment
was supported by substantial evidence and the award of attorney fees was not an abuse of
discretion. An award of damages based on lost interest in favor of Milano was reversed
on the basis it was improper in an action for specific performance.
DISCUSSION
Jurisdiction to Make the Order Enforcing the Judgment
Edelson first argues the trial court lacked jurisdiction to make the order enforcing
the judgment because the underlying matter and resulting judgment were limited to
whether Edelson was required to complete the sale of the stock of the restaurant and
deliver the real property lease. Milano responds that Edelson has forfeited the right to
challenge that portion of the original judgment retaining jurisdiction because the issue
was not raised in his earlier appeal. Milano points out that Edelson was on notice as of
the July 2, 2012 letter to counsel, prior to the date Edelson filed his opening brief in the
earlier appeal, that Milano would move to enforce the judgment if Edelson failed to
indemnify him for the undisclosed liabilities. Because Edelson had been made aware of
2 This court notified the parties of an apparent gap in the appellate record, as there
is no reporter’s transcript of the hearing of April 25, 2013. In response, the parties
submitted an agreed statement setting forth the proceedings. The record is complete for
appellate review.
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Milano’s intent to file a motion to enforce the judgment pursuant to the trial court’s
retention of jurisdiction, and he failed to challenge that portion of the judgment, Milano
argues that Edelson may not do so in a subsequent appeal.
When an appeal is taken from a severable judgment, and that appeal challenges
only some aspects of the severable judgment, reconsideration of issues not challenged on
appeal is precluded on remand or in a second appeal. (People v. Rosas (2010) 191
Cal. App. 4th 107, 116-117, citing Eisenberg et al., Cal. Practice Guide: Civil Appeals and
Writs (The Rutter Group 2009) ¶ 2:312, p. 2–161 (Eisenberg Rutter Guide).) An appeal
is partial when the notice of appeal specifies the entire judgment but only a part of the
judgment is challenged on appeal. (Ibid.) This type of partial appeal can have a
preclusive effect on portions of the judgment that are not mentioned in the opening brief,
because the partial appeal abandons appellate review of the severable parts of a judgment
that were not appealed. (Ibid.)
It is undisputed that Edelson’s appeal in case No. B237971 raised no challenge to
the trial court’s retention of jurisdiction. The issues raised in the prior appeal—whether
specific performance was properly granted, attorney fees awarded were appropriate, and
damages were authorized—are clearly not “‘intimately connected’” to the issue of the
court’s retention of jurisdiction, and are therefore severable. (See Gonzales v. R. J.
Novick Constr. Co. (1978) 20 Cal. 3d 798, 805, citing Whalen v. Smith (1912) 163 Cal.
360, 362-363.) To the extent Edelson challenges the trial court’s retained jurisdiction,
that issue has been forfeited by the failure to raise the contention in the earlier appeal.
Interpretation of the Judgment
Assuming the trial court properly retained jurisdiction, Edelson argues the court in
the underlying action “simply ordered the transfer of the stock, delivery of the real
property lease and damages,” and any relief after entry of judgment is limited to those
issues. Edelson relies on the decision in Stump’s Market, Inc. v. Plaza De Santa Fe
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Limited, LLC (2013) 212 Cal. App. 4th 882 (Stump’s Market) to support his contention.
Milano argues Stump’s Market is distinguishable. We hold that Edelson’s interpretation
of the language of the judgment is too narrow and contrary to its plain meaning, and that
the reasoning in Stump’s Market has no application in this case.
“The general rules for interpreting writings apply to the interpretation of a trial
court’s judgment. (Southern Pacific Pipe Lines, Inc. v. State Bd. of Equalization (1993)
14 Cal. App. 4th 42, 49.)” (Smith v. Selma Community Hospital (2008) 164 Cal. App. 4th
1478, 1501 (Smith).) “Generally, the first issue that arises in interpreting a writing is
whether the writing is ambiguous—that is, whether it is reasonably susceptible to more
than one interpretation. [¶] Under the general rules for interpreting writings, whether an
instrument is ambiguous is a question of law. (E.g., United Services Automobile Assn. v.
Baggett (1989) 209 Cal. App. 3d 1387, 1391 [insurance policy].) As a question of law, it
is subject to our independent review. (See Winet v. Price (1992) 4 Cal. App. 4th 1159,
1165 [‘the threshold determination of ambiguity is subject to independent review’].)”
(Smith, supra, at pp. 1501-1502.)
The language of the judgment retaining jurisdiction is clear and unambiguous, and
Edelson’s contention that the court enforcement powers are limited to transfer of the
stock and delivery of lease does not withstand scrutiny. The court retained jurisdiction to
(1) “ensure the orderly closing of escrow,” (2) “enforce the terms of the Agreement
and/or the Lease,” and (3) “adjudicate any disputes between the parties in connection
with the Agreement.”
The agreement provided in paragraph 8 (“Closing Adjustments”) that Edelson
agrees “that all cash, cash equivalents, deposit accounts and pending credit card
transactions, as well as all food and beverages (including alcohol) are excluded from this
transaction and at all times will remain the property of Seller. Regarding inventory,
Seller and Buyer agree to reconcile inventory on hand with pending accounts payable for
inventory . . . . Seller shall credit Buyer for excess of accounts payable over inventory;
alternatively, Buyer shall credit Seller excess of inventory over accounts payable.”
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Paragraph 16.1 (“Seller’s Indemnity”) provides: “For a period of one year following the
Closing Date, Seller shall indemnify and hold harmless Buyer from and against any and
all claims, liabilities, obligations, losses, costs, expenses (including without limitation,
interest, penalties, and attorneys’ fees, of any kind or nature . . . arising out of or resulting
from any breach of, or any inaccuracy or misrepresentation in, any of the representations
or warranties made by Seller.”
Milano’s declaration in support of his motion to enforce the judgment asserts that
Edelson did not disclose any liabilities at closing or provide any financial records, and he
failed to pay taxes to various governmental entities. Milano stated he was forced to pay
$35,980.60 in taxes, penalties, and fees, plus an additional $40,782.99 to cover unpaid
liabilities incurred prior to closing. Milano’s motion to enforce the provisions of the
agreement requiring Edelson to assume responsibility for these liabilities falls squarely
within the retention of jurisdiction language in the judgment.
Edelson’s reliance on Stump’s Market, supra, 212 Cal. App. 4th 882, is misplaced
for procedural and substantive reasons. First, the issue of the scope of retained
jurisdiction in Stump’s Market was raised on direct appeal from the judgment. Edelson
did not raise the issue of the scope of retained jurisdiction in his earlier appeal, and as set
forth above, any challenge to that aspect of the judgment has been forfeited. Second, the
impermissible retention of jurisdiction in Stump’s Market bears no relationship to what
happened in this case. In Stump’s Market, the trial court retained jurisdiction over a
landlord and tenant who were parties to a lease that potentially spanned an additional 17
years; the court also retained jurisdiction to determine rights and responsibilities of the
parties in the future. (Id. at pp. 892-893.) Here, the trial court’s retained jurisdiction is
limited to enforcement of the agreement, and the indemnity provision in paragraph 16.1
expressly applies only “[f]or a period of one year following the Closing Date.” As a
result, the concern of the Stump’s Market court that jurisdiction was retained over an
impermissibly lengthy period of time is not a factor in this case. Moreover, the trial court
limited its retained jurisdiction to adjudication of disputes only in connection with the
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agreement; it did not retain jurisdiction to resolve any other disputes that might occur
beyond the agreement, which was the other concern of the court in Stump’s Market.
Finally, we point out that Stump’s Market recognizes the traditional rule that a
court acting in equity may retain jurisdiction to enforce its judgment, although doing so
was not appropriate under the unusual circumstances in that case. (Stump’s Market,
supra, 212 Cal.App.4th at pp. 890-892.) The general rule is that “‘[t]he jurisdiction of a
court of equity to enforce its decrees is coextensive with its jurisdiction to determine the
rights of the parties, and it has power to enforce its decrees as a necessary incident to its
jurisdiction. Except where the decree is self-executing, jurisdiction of the cause
continues for this purpose, or leave may be expressly reserved to reinstate the cause for
the purpose of enforcing the decree, or to make such further orders as may be necessary.
[Citations.]’ (Klinker v. Klinker (1955) 132 Cal. App. 2d 687.)” (Balboa Island Village
Inn, Inc. v. Lemen (2007) 40 Cal. 4th 1141, 1161.) The trial court here retained
jurisdiction in accordance with the general rule in equitable actions, and did so in a
manner well within its discretion.
Right to an Evidentiary Hearing on the Motion
The trial court decided the motion to enforce the judgment based upon its
consideration of the moving and opposing papers, as well as oral argument. Edelson
argues on appeal, as he did below, that the trial court was required to hold an evidentiary
hearing on the motion. We disagree.
Under Code of Civil Procedure section 20093, facts are ordinarily proven at a
hearing on a motion by affidavit or declaration and documentary evidence, “with oral
3 Code of Civil Procedure section 2009 provides as follows: “An affidavit may be
used to verify a pleading or a paper in a special proceeding, to prove the service of a
summons, notice, or other paper in an action or special proceeding, to obtain a
provisional remedy, the examination of a witness, or a stay of proceedings, and in
uncontested proceedings to establish a record of birth, or upon a motion, and in any other
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testimony taken only in the court’s discretion.” (Rosenthal v. Great Western Fin.
Securities Corp. (1996) 14 Cal. 4th 394, 413-414 (Rosenthal); see In re Estate of Bennett
(2008) 163 Cal. App. 4th 1303, 1309.) Milano’s motion to enforce the judgment was a
law and motion proceeding under California law. “‘Law and motion’ includes any
proceedings: [¶] (2) On application for an order regarding the enforcement of a
judgment . . . .” (Cal. Rules of Court, rule 3.1103(2).) Although Edelson argues to the
contrary, our Supreme Court has held that the existence of conflicting evidence in
declarations does not establish “that a trial court abuses its discretion, in a motion
proceeding, by resolving evidentiary conflicts without hearing live testimony.”
(Rosenthal, supra, at p. 414.)
The trial court had before it persuasive evidence that Milano paid liabilities that
should have been the responsibility of Edelson under the agreement, and which Edelson
had failed to disclose as required. Milano presented proof of a timely demand for
indemnification to resolve the issue. Once Edelson failed to respond to that demand,
Milano invoked the retained jurisdiction of the trial court to enforce the judgment.
Milano was not required to file a new action, as the trial court had expressly reserved
jurisdiction to enforce its judgment and compliance with the terms of the agreement.
Edelson was given ample opportunity to set forth his position in an opposition and
supplemental opposition to Milano’s motion. The court considered extensive argument
before ruling. In these circumstances, and in accord with settled California law, an
evidentiary hearing was not required.
case expressly permitted by statute.” All statutory references are to the Code of Civil
Procedure, unless otherwise noted.
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Right to a Jury Trial on Milano’s Claim for Money
Edelson argues he was entitled to a jury trial, “[b]ecause the claims asserted by
Milano were nothing less than legal claims for the payment of money . . . .” Edelson
contends that had Milano asserted his claims in a civil action, Edelson would have been
entitled to a jury trial. Again citing Stump’s Market, supra, 212 Cal. App. 4th 882,
Edelson contends an award of money damages does not flow from the trial court’s power
to enforce its equitable judgment.
There is no right to a jury trial under the California Constitution in matters in
equity. (C & K Engineering Contractors v. Amber Steel Co. (1978) 23 Cal. 3d 1, 8-9.)
An action for specific performance is equitable and does not implicate the right to a jury
trial. (Walton v. Walton (1995) 31 Cal. App. 4th 277, 287-288.)
Edelson’s characterization of Milano’s motion as a legal claim for money
requiring a jury trial is incorrect. Under the agreement, Edelson was required to disclose
outstanding liabilities and pay appropriate taxes due at the time of closing. Edelson was
obligated in Paragraph 16.1 to indemnify Milano for any loss resulting from Edelson’s
breach of his obligations. The underlying judgment, in equity, ordered specific
performance of that agreement. The loss to Milano flowed directly from Edelson’s
failure to perform as ordered, and the trial court had the power, in equity, to enforce the
agreement by requiring Edelson to indemnify Milano.
The fact that enforcement of the judgment results in an award on money does not
mean that Milano’s motion was an action at law requiring a jury trial. Equitable orders
may be converted to an award of money in appropriate circumstances. (Day v. Sharp
(1975) 50 Cal. App. 3d 904, 912-913.) Where the trial court engages in a valid retention
of jurisdiction to enforce an equitable judgment, it may enter an award of a sum of money
“without the necessity of filing a new action. [Citation.]” (Id. at p. 912.) Where, as here,
the action is only for specific performance and the court awards a sum of money based
upon the defendant’s failure to perform, “the authorities are practically uniform that
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damages are granted not in the exercise of a legal jurisdiction, but in the exercise of the
equity jurisdiction of the court. This principle illustrates one phase of the general rule
that equity having taken jurisdiction over a portion of a particular controversy it will
proceed to decide the whole issue and to award complete relief.” (Crouser v.
Boice (1942) 51 Cal. App. 2d 198, 203.)
Jurisdiction to Proceed While the Appeal was Pending
Edelson argues that the trial court lacked jurisdiction to grant the motion to
enforce the judgment as a result of Code of Civil Procedure section 916, subdivision (a),
because at the time of the motions and ruling, the case was on appeal from the judgment.
Edelson’s argument is based, in part, on his perception that “the trial court was not
enforcing the judgment. It was acting on claimed authority to adjudicate new disputes
based upon jurisdiction reserved to it by the very judgment pending on appeal.”
In general, a civil judgment is stayed on appeal under section 916,4 subject to
various exceptions. Several exceptions to section 916 are applicable in this case.
Section 917.2 provides in pertinent part as follows: “The perfecting of an appeal
shall not stay enforcement of the judgment or order of the trial court if the judgment or
order appealed from directs the assignment or delivery of personal property, including
documents, whether by the appellant or another party to the action . . . .” The judgment
in the underlying action directed Edelson to deliver to escrow “any and all documents, in
4 Section 916 provides as follows: “(a) Except as provided in Sections 917.1 to
917.9, inclusive, and in Section 116.810, the perfecting of an appeal stays proceedings in
the trial court upon the judgment or order appealed from or upon the matters embraced
therein or affected thereby, including enforcement of the judgment or order, but the trial
court may proceed upon any other matter embraced in the action and not affected by the
judgment or order. (b) When there is a stay of proceedings other than the enforcement of
the judgment, the trial court shall have jurisdiction of proceedings related to the
enforcement of the judgment as well as any other matter embraced in the action and not
affected by the judgment or order appealed from.”
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proper executed form, as required pursuant to the Agreement to close escrow, and to
transfer 100% of the outstanding stock of El Cid Los Angeles, Inc., . . . to plaintiff.” The
underlying judgment was not stayed pursuant to the exception to section 916 set forth in
section 917.2.
Section 917.3 provides as follows: “The perfecting of an appeal shall not stay
enforcement of the judgment or order in the trial court if the judgment or order appealed
from directs the execution of one or more instruments unless the instrument or
instruments are executed and deposited in the office of the clerk of the court where the
original judgment or order is entered to abide the order of the reviewing court.” As noted
above, the specific performance judgment directed the execution of documents, and in the
absence of proof that the executed documents were deposited with the clerk of the court,
section 917.3 precludes application of a stay under section 916.
Section 917.4 provides as follows: “The perfecting of an appeal shall not stay
enforcement of the judgment or order in the trial court if the judgment or order appealed
from directs the sale, conveyance or delivery of possession of real property which is in
the possession or control of the appellant or the party ordered to sell, convey or deliver
possession of the property, unless an undertaking in a sum fixed by the trial court is given
. . . .” The judgment provided for Edelson to deliver the restaurant property and lease by
January 2, 2012. Edelson does not contend he posted an undertaking in a sum fixed by
the court to stay the judgment on appeal.
Moreover, the trial court’s equitable judgment for specific performance permitted
it to proceed even if it doing so “alter[ed] the procedural details in order to carry out the
decree.” (Barnes v. Chamberlain (1983) 147 Cal. App. 3d 762, 768 [trial court had power
to alter specific performance decree after appeal was filed even in the absence of an
express reservation of jurisdiction].) The trial court had jurisdiction to enforce the
judgment while the appeal was pending in case No. B237971.
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DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent Scott
Milano.
KRIEGLER, J.
We concur:
MOSK, Acting P. J.
MINK. J. *
* Retired judge of the Los Angeles County Superior Court assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.
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