Newstart Real Estate Investment v. Huang CA2/8 ( 2020 )

Filed 12/18/20 Newstart Real Estate Investment v. Huang CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
NEWSTART REAL ESTATE B289513
INVESTMENT LLC,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BC502938)
v.
JACK HUANG et al.,
Defendants and Respondents.
APPEAL from a judgment and orders of the Superior Court
of Los Angeles County, Marc Marmaro, Judge. Affirmed.
Gary Hollingsworth, Chiao & Wu, Ching K. Chiao and
Alexei Brenot for Plaintiff and Appellant.
Law Office of Kirk G. Downing, Kirk G. Downing; Law
Offices of Seth M. Goldberg and Seth M. Goldberg for Defendants
and Respondents 325 Flamingo LLC, Allen Yeh, Jennifer Yeh,
Tony Yeh and Bin Fen Cheng.
Robert Gentino for Defendants and Respondents Jack
Huang and Regal Rock, Inc.
_______________________
Defendant 325 Flamingo LLC sold a Ramada Inn in Las
Vegas to plaintiff Newstart Real Estate Investment LLC. Regal
Rock, Inc. and its principal, Jack Huang, also known as Ming
Shan Huang, brokered the transaction. Plaintiff sued Regal Rock
and Mr. Huang (the broker defendants) and 325 Flamingo and its
members, Allen Yeh, Jennifer Yeh and Bin Fen Cheng (the seller
defendants), alleging numerous causes of action related to
plaintiff’s purchase of the hotel. Plaintiff also sued Tony Yeh,
who was not a member of 325 Flamingo but acted on its behalf in
negotiating the sale of the hotel.
The jury awarded compensatory damages against
325 Flamingo, Mr. Huang and Regal Rock, and punitive damages
against Mr. Huang and Regal Rock. However, as explained
below, the court entered judgment against only 325 Flamingo and
Mr. Huang. In a bench trial, the court found 325 Flamingo and
its members were not alter egos and entered judgment in favor of
the individual seller defendants.
Plaintiff claims many errors by the trial court. We affirm.
BACKGROUND
1. Plaintiff’s Allegations
Plaintiff bought the Ramada Inn in Las Vegas in 2012. In
2013, plaintiff sued the broker, seller, the escrow company, and
each of these entities’ principals and members. Plaintiff alleged
breach of contract, fraud, conspiracy and other causes of action.
The escrow defendants obtained judgment in their favor and are
not parties to this appeal.
The complaint alleges plaintiff’s principal does not speak or
read English, and defendants conspired to take advantage of him
by selling the property at an inflated price. Mr. Huang and the
members of 325 Flamingo made numerous misrepresentations
2
about the contents of deal documents and misrepresented the
value of the property, saying it was worth $77 million, when it
was only worth $4.5 million. Mr. Huang was the broker for both
plaintiff and 325 Flamingo, and pressured plaintiff to make a full
price offer on the property for $12.6 million. Plaintiff paid
$11.3 million for the property.
The broker defendants failed to disclose the requirements
for transfer of the Ramada franchise license to plaintiff. Plaintiff
was unable to obtain a transfer of the franchise, which was the
primary consideration for the transaction. The broker
defendants did not disclose that the purchase agreement and
escrow instructions allowed plaintiff to cancel the sale for a full
refund if the franchise was not transferred to plaintiff.
The seller defendants did not provide documents and
disclosures required by the purchase agreement, such as profit
and loss statements and disclosures about the condition of the
property. Defendants later induced plaintiff’s principal to sign a
waiver of any right to these documents and disclosures, without
explaining the nature of the document he was signing.
The complaint included alter ego allegations against
325 Flamingo and its members and alleged each defendant was
acting as the agent of the other defendants.
2. Trial and Judgment
After considerable law and motion proceedings, trial was
held over three weeks in October and November 2017. The jury
returned a special verdict finding “Jack Huang and/or Regal
Rock” caused plaintiff to suffer $1.62 million in economic
damages.
3
Punitive damages were tried separately. The jury’s special
verdict imposed punitive damages of $280,000 against “Jack
Huang and/or Regal Rock.”
The jury also returned a special verdict against
325 Flamingo for over $1.2 million. The jury found no portion of
the damage award against 325 Flamingo was included in the
$1.62 million award against “Jack Huang and/or Regal Rock.”
The total damages awarded appear to represent the difference in
value between what plaintiff paid, and what its trial expert
testified the property was worth.
Plaintiff’s alter ego allegations against 325 Flamingo and
its members were tried to the court in a bifurcated proceeding.
The court found that 325 Flamingo and its members were not
alter egos.
On January 3, 2018, the court entered judgment against
Mr. Huang and 325 Flamingo, and in favor of Regal Rock and
325 Flamingo’s individual members. We discuss below the
proceedings that led to the entry of judgment in favor of Regal
Rock despite the jury verdict against it. The judgment awarded
postverdict interest at a rate of 10 percent per year, accruing
from the date the jury verdict was rendered in November 2017,
but did not award prejudgment interest.
3. Posttrial Motions
Mr. Huang successfully moved for a new trial of punitive
damages. The court granted the motion “subject to denial if
Plaintiff accepts a reduction to $10,000.” Plaintiff did not accept
the court’s proposed reduction of punitive damages.
Plaintiff moved for $800,165 in attorney fees against
325 Flamingo, based on the attorney fees provision in the
purchase agreement. The individual seller defendants filed a
4
competing fee motion, seeking $596,598 in fees, pursuant to the
reciprocal fee provisions of Civil Code section 1717.
Regal Rock filed a memorandum of costs, seeking over
$23,000 in costs, as a prevailing party. Plaintiff moved to tax
costs, arguing there was a unity of interests between Mr. Huang
and Regal Rock, and the costs were necessarily incurred for
Mr. Huang’s benefit as well.
The trial court awarded plaintiff attorney fees of
$143,257.92 against 325 Flamingo and awarded the individual
seller defendants attorney fees of $105,000 against plaintiff. The
court granted the seller defendants’ motion to offset the fee
awards. The court granted plaintiff’s motion to tax Regal Rock’s
costs in part and awarded Regal Rock costs of $4,609.77.
DISCUSSION
1. Conspiracy Claim
Before trial, the court summarily adjudicated the
conspiracy claim in favor of the seller defendants, finding there is
no independent tort of conspiracy. The trial court also granted
the seller defendants’ motion in limine to bar any reference at
trial to a civil conspiracy, or any evidence or argument that the
seller defendants conspired with the other defendants to inflate
the price of the hotel. The court reasoned the purpose of
conspiracy allegations is to impose joint tortfeasor liability, but
no tort claim had been stated against the seller defendants. The
trial court acknowledged, however, that the complaint included
agency allegations that might support vicarious liability.
Plaintiff argues the trial court did not consider evidence in
granting summary adjudication, and should have given plaintiff
leave to amend its complaint. However, plaintiff does not argue
that it ever asked the trial court for leave to amend. More to the
5
point, plaintiff concedes (as it must) that conspiracy is not an
independent cause of action. (Faunce v. Cate (2013)
222 Cal.App.4th 166, 172–173.)
It appears plaintiff’s real complaint is the trial court
erroneously granted the motion in limine, preventing it from
presenting evidence of conspiracy to hold the seller defendants
liable for Mr. Huang’s fraud. Plaintiff argues that even without
the conspiracy cause of action, the complaint included conspiracy-
type allegations (e.g., agency allegations) against the defendants
that it should have been permitted to prove.
We review a ruling on a motion in limine for abuse of
discretion. (Ulloa v. McMillin Real Estate & Mortgage,
Inc. (2007) 149 Cal.App.4th 333, 338.) Under this deferential
standard of review, we find no error. The conspiracy allegations
had been resolved against plaintiff by summary adjudication.
The complaint did not state a fraud cause of action against the
seller defendants. The misrepresentation claims were alleged
only against the broker and escrow defendants. Plaintiff did not
allege the seller defendants were liable for misrepresentations of
the broker and escrow defendants as agents or otherwise.
Further, plaintiff cites nothing in the record showing the
trial court prevented plaintiff from offering agency evidence, and
the portions of the record we have reviewed demonstrate that the
court was amenable to arguments and evidence of agency.
Therefore, plaintiff has failed to demonstrate error. (Denham v.
Superior Court (1970) 2 Cal.3d 557, 564.)
2. Alter Ego Findings for 325 Flamingo and Its
Members
The court found 325 Flamingo was not the alter ego of the
individual seller defendants. Plaintiff complains the court’s
6
findings are not supported by substantial evidence, arguing that
325 Flamingo failed to follow corporate formalities, and sale
proceeds were not distributed in proportion to the interests of the
members in 325 Flamingo. (The members were a mother, son,
and daughter.)
Plaintiff has waived this contention by discussing only the
evidence favorable to its position. (County of Solano v. Vallejo
Redevelopment Agency (1999) 75 Cal.App.4th 1262, 1274 [an
appellant must discuss all significant facts, and the failure to
state all of the evidence fairly in its brief waives the alleged
error].)
Plaintiff failed to summarize the substantial evidence in
support of the trial court’s findings. The managing member of
325 Flamingo testified, among other things, 325 Flamingo was
managed by a third party management company. 325 Flamingo
employed an accountant to prepare tax returns and keep
business records, and the accountant coordinated with the
management company to obtain the necessary records and
information. Each member made significant capital
contributions and loans to 325 Flamingo and never withdrew
money from it. Plaintiff is asking us to reweigh the evidence,
which we cannot do. (Howard v. Owens Corning (1999)
72 Cal.App.4th 621, 631.)
3. New Trial Motion
In the punitive damages phase of the trial, Mr. Huang
testified he owned no real estate, his income was $65,000 a year,
he had not earned a real estate commission since 2012, and the
equity in his automobile was only $5,000. Plaintiff did not
present any other evidence of Mr. Huang’s financial condition.
However, plaintiff argued that since Mr. Huang had earned a
7
$280,000 commission from the sale of the hotel, it would be fair
for him to pay that amount in punitive damages. The jury
awarded punitive damages of $280,000.
Mr. Huang moved for a new trial of the punitive damages
award, arguing it was excessive in light of his limited assets. The
trial court granted the motion, finding there was no evidence
Mr. Huang was able to pay such a large award. The court found
Mr. Huang’s past ability to earn a commission of $280,000 was
irrelevant to his current net worth and ability to pay the award.
On appeal, plaintiff argues the court erred in granting the
motion for a new trial. Plaintiff’s briefs do not discuss
Mr. Huang’s testimony, and again, plaintiff has failed to fairly
summarize the evidence and has waived the alleged error.
When a trial court grants a new trial on the issue of
excessive damages, the presumption of correctness normally
accorded to the jury’s verdict is replaced by a presumption in
favor of the order, and we review the trial court’s ruling for an
abuse of discretion. (Neal v. Farmers Ins. Exchange (1978)
21 Cal.3d 910, 932–933.) Plaintiff has not demonstrated error in
the trial court’s conclusion that Mr. Huang’s earnings in 2012 did
not prove his current ability to pay the punitive damages award,
especially since he testified he had not earned a real estate
commission since then. (Adams v. Murakami (1991) 54 Cal.3d
105, 112–113 [a punitive damages award is excessive if it exceeds
a defendant’s ability to pay].)
4. Exclusion of Expert Testimony
Plaintiff argues it was error for the trial court to exclude its
expert’s testimony about lost profits from 325 Flamingo’s failure
to transfer the franchise license, and the lost opportunity to
invest elsewhere the sums plaintiff paid for the hotel. Plaintiff
8
argues the court also erred by excluding another expert’s
testimony about discrepancies between the accounting provided
to plaintiff and 325 Flamingo’s tax returns, claiming the
discrepancies demonstrated fraud on the part of the seller
defendants.
A trial court has broad discretion to exclude evidence
pursuant to Evidence Code section 352. (Garfield v. Russell
(1967) 251 Cal.App.2d 275, 279.) We find no abuse of that
discretion here.
The court excluded the expert testimony about lost profits
and the discrepancies between its accounting to plaintiff and
325 Flamingo’s tax returns on the grounds that evidence was
irrelevant and risked prejudice due to jury confusion. Plaintiff’s
brief quotes at length case law about the admissibility of expert
testimony, most of which concerns an expert’s qualifications to
offer an opinion, which was not the basis for the court’s rulings.
Plaintiff does not provide a full and fair summary of the evidence
or the trial court’s ruling or reasoning. There is no application of
the cases cited to the facts in the record. Plaintiff says the
rulings left it without proof of fraud in misstating the hotel’s
income, but plaintiff did not allege fraud against 325 Flamingo,
as we discussed, ante.
Plaintiff also complains the court did not admit exhibits
relied upon by one of its experts regarding costs incurred by the
seller defendants and paid by plaintiff before the close of escrow.
Plaintiff acknowledges its expert was permitted to testify about
these costs, despite exclusion of the exhibits. Again, plaintiff
provides no citations to the record, no summary of the trial
court’s ruling or reasoning, and no explanation why plaintiff was
prejudiced by the exclusion of the exhibits. We see no prejudice,
9
since the expert testified to the amount plaintiff paid as reflected
in the exhibits.
5. Plaintiff’s Attorney Fees Award
Plaintiff sought to recover $800,165 in attorney fees from
325 Flamingo, based on the attorney fees provision in the
purchase agreement. The motion was supported by billing
records from February 2013 through January 2018, when the fee
motion was filed. Counsel’s declaration in support of the motion
stated it was impossible to apportion the time spent litigating the
claims among 325 Flamingo and the individual seller defendants.
The court did not question the hourly rate or total number
of hours spent, but instead apportioned the fees among the
six groups of defendants (the escrow company and its agent,
Regal Rock and Mr. Huang, and 325 Flamingo and its members).
The trial court awarded $143,257.92 in attorney fees against
325 Flamingo, one-sixth of the total fees requested plus fees
incurred to bring the fee motion.
After reviewing the extensive billings records, the court
found plaintiff was seeking to recover nearly all its fees incurred
in the action from 325 Flamingo, and that it would be
unreasonable for 325 Flamingo to incur fees related to other
defendants with whom Flamingo did not share liability. Plaintiff
says all the defendants were acting in concert and all the fees
incurred were necessarily incurred to make its case against
325 Flamingo. But the trial court rejected that, and plaintiff does
not develop an argument with citation to authorities to
demonstrate the court abused its discretion.
It is well settled that “the trial court has broad authority to
determine the amount of a reasonable fee.” (PLCM Group, Inc. v.
Drexler (2020) 22 Cal.4th 1084, 1095.) Once a trial court
10
determines entitlement to an award of attorney
fees, apportionment of that award rests within the court’s
sound discretion. (Carver v. Chevron U.S.A., Inc. (2004)
119 Cal.App.4th 498, 505.) The court only abuses that discretion
when “it exceeds the bounds of reason, all of the circumstances
before it being considered. The burden is on the party
complaining to establish that discretion was clearly abused and a
miscarriage of justice resulted.” (Ibid.)
Plaintiff has not established the trial court abused its
discretion in apportioning attorney fees among the six groups of
defendants. The court could reasonably conclude it was unfair to
saddle 325 Flamingo with fees unrelated to the claims against it.
6. Attorney Fees Award for 325 Flamingo’s Members
The individual seller defendants also filed a motion for
attorney fees as prevailing parties on the claims against them.
They sought $596,598 in fees and supported their fee request
with a declaration by 325 Flamingo’s managing member and a
declaration of counsel, testifying to the total amount of fees
incurred in defending the action. The motion did not include
billing records, or any breakdown of the work performed by
counsel. Counsel apparently filed a supplemental declaration in
support of the fee request, detailing the hours spent on the
litigation. The supplemental declaration was not included in the
record on appeal.
The trial court observed defendants had provided little
evidence to demonstrate the reasonableness of their requested
fees, and they could not recover fees incurred by 325 Flamingo in
its defense. The court relied on its own experience, its knowledge
of the case, defendants’ supplemental declaration, and plaintiff’s
11
attorney fee request to determine that a fee award of $105,000
reasonably compensated the individual defendants for their fees.
Plaintiff contends the individual defendants were not
prevailing parties because they are the members of 325 Flamingo
against which plaintiff prevailed, their request for fees was not
supported by admissible evidence and was excessive, and if they
are entitled to fees, they are only entitled to fees incurred for the
half-day alter ego trial.
The record is inadequate to review the claimed error, as the
supplemental declaration detailing the number of hours
expended defending the individual seller defendants was omitted
from the appendices and was not included in the record on
appeal. (Denham v. Superior Court, supra, 2 Cal.3d at p. 564.)
Plaintiff has cited no authority for the proposition that the
individual seller defendants are not prevailing parties because
325 Flamingo did not prevail. Individual defendants tried as
alter egos may be awarded contractual attorney fees if they
prevail, even if their business entity does not. (Burkhalter
Kessler Clement & George LLP v. Hamilton (2018) 19 Cal.App.5th
38, 45–46; Pueblo Radiology Medical Group, Inc. v. Gerlach
(2008) 163 Cal.App.4th 826, 829.) All the fees incurred in
defending the action are recoverable; not just the fees related to
the alter ego trial. (Horsford v. Board of Trustees of California
State etc. (2005) 132 Cal.App.4th 359, 395.)
As discussed ante, the trial court has broad discretion in
fixing fees. Detailed billing records are not required to support a
fee motion, and the court may award fees without any evidence
other than the court’s own observation of the proceedings.
(Martino v. Denevi (1986) 182 Cal.App.3d 553, 559; see also Fed-
12
Mart Corp. v. Pell Enterprises, Inc. (1980) 111 Cal.App.3d 215,
227.)
7. Verdict in Favor of Regal Rock
The jury awarded $1.62 million in economic damages
against “Jack Huang and/or Regal Rock, Inc.” The special verdict
form sometimes referred to only Jack Huang’s conduct, and
sometimes to the conduct of “Jack Huang and/or Regal Rock, Inc.”
Four of the special verdict questions referred to both Jack Huang
and/or Regal Rock, while 17 questions referred only to
Mr. Huang.
For example, the verdict form asked whether plaintiff “and
Jack Huang and/or Regal Rock, Inc., enter[ed] into a contract?”
The verdict also asked whether “Jack Huang and/or Regal Rock,
Inc.” failed to perform under the contract, and whether plaintiff
hired “Jack Huang or Regal Rock, Inc.” as its real estate agent.
Other questions asked if plaintiff was “harmed by Jack
Huang’s breach of contract,” whether “Jack Huang was
negligent,” and whether “Jack Huang ma[de] false
representation[s],” without mention of Regal Rock.
On December 1, 2017, the court held a hearing on an order
to show cause regarding the judgment. The proceedings were not
reported. The court ordered the parties to meet and confer
regarding the judgment. Plaintiff filed a brief regarding the
judgment, arguing the use of the phrase “and/or” in the special
verdict form did not render it ambiguous, and any error was
invited because Jack Huang and Regal Rock agreed to the
language in the special verdict.
Another hearing was held on January 3, 2018. Those
proceedings were not reported either. Judgment was entered
that same day. The judgment omitted Regal Rock as a joint
13
tortfeasor, and judgment was entered against only Mr. Huang for
the broker parties. The judgment found Regal Rock was a
prevailing party.
According to plaintiff’s appellate briefs, the court omitted
Regal Rock from the judgment because Mr. Huang complained
the special verdict form was ambiguous. Plaintiff has failed to
point us to any portion of the record establishing that Mr. Huang
complained the verdict was ambiguous. We assume the verdict
and judgment were discussed at the unreported hearings where
the parties conferred about the judgment. However, plaintiff has
failed to provide a settled or agreed statement to establish what
happened at those hearings. (Cal. Rules of Court, rules 8.134,
8.137.)
Accordingly, we cannot review this claim of error on appeal.
(Amato v. Mercury Casualty Co. (1993) 18 Cal.App.4th 1784, 1794
[appellant bears the burden of providing an adequate record on
appeal].)
8. Regal Rock’s Cost Award
Regal Rock filed a memorandum of costs, seeking over
$23,000 as a prevailing party. Plaintiff moved to tax costs,
arguing there was a unity of interests between Mr. Huang and
Regal Rock, and the costs were necessarily incurred for
Mr. Huang’s benefit as well. The court granted plaintiff’s motion
in part, and awarded Regal Rock costs of $4,609.77.
Plaintiff contends all costs, except Regal Rock’s first
appearance fee, should be allocated to Mr. Huang, as they were
necessarily incurred in his defense. However, it is within the
discretion of the court to allocate costs “ ‘in those instances in
which several defendants are united in interest and/or join in
making the same defenses in the same answer.’ ” (Slavin v. Fink
14
(1994) 25 Cal.App.4th 722, 726.) Here, the trial court greatly
reduced the requested costs, and plaintiff has not demonstrated
any abuse of discretion.
9. Prejudgment Interest
Plaintiff requested prejudgment interest in its posttrial
brief. On appeal, plaintiff argues the trial court erroneously
concluded that plaintiff was only entitled to interest accruing
from the date the verdict was rendered, and interest should be
awarded from the date escrow closed. However, plaintiff’s
citations to the reporter’s transcript in support of this argument
contain no discussion of plaintiff’s entitlement to prejudgment
interest. We have no idea what arguments the parties may have
made in support of or against the imposition of pretrial interest.
The court’s minutes for a December 15, 2017 unreported
hearing, held after plaintiff’s posttrial brief was filed, reflect that
all counsel stipulated that prejudgment interest would be
awarded from the date of the jury’s verdict, November 11, 2017,
which is consistent with the judgment entered by the court.
Plaintiff’s briefs did not disclose that counsel had stipulated to
that aspect of the judgment. As has been the custom with this
appeal, plaintiff has not fairly represented the proceedings below,
and has waived the alleged error.
DISPOSITION
The judgment and orders are affirmed. Respondents are
awarded their costs on appeal.
GRIMES, J.
WE CONCUR:
BIGELOW, P. J. WILEY, J.
15