John v. Fine CA2/6 ( 2024 )

Filed 5/14/24 John v. Fine CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 SIX
RUSSELL JOHN, 2d Civ. No. B327477
(Super. Ct. No. 56-2019-
Plaintiff and Respondent, 00525051-CU-FR-VTA)
(Ventura County)
v.
JUSTIN FINE,
Defendant and Appellant.
Appellant Justin Fine formed an LLC for the purpose of
investing in biotech stocks. Respondent Russell John offered to
invest in the LLC and eventually paid $500,000 for an 87 percent
membership interest. The business relationship soured when
respondent did not receive the long-term returns he expected.
Two years of litigation culminated in a bench trial. The trial
court found, among other things, that appellant breached his
fiduciary duty to respondent by loaning large sums of the LLC’s
capital to other entities owned by appellant. It awarded
respondent monetary damages, prejudgment interest, punitive
damages, and attorney’s fees totaling $2,387,311.42.
Appellant appeals the judgment and subsequent denial of
his motion for new trial. We reject the first of his six arguments
as forfeited. Appellant fails to provide a record adequate to
review his remaining arguments. We will affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Appellant is the sole shareholder of ENIF, Inc., a corporate
shell used for managing his various business entities. Biorap,
LLC is among these entities.
Respondent is a successful insurance executive who
invested in Biorap. He met appellant socially about 15 years ago.
The two would frequently meet for lunch. Appellant explained
that he intended to use Biorap to invest in biotech stocks using a
proprietary algorithm. Respondent expressed interest in the
company and eventually acquired an 87 percent membership
from appellant for $500,000. He received Biorap’s operating
agreement and a statement of risk emphasizing the speculative
nature of his investment.
Biorap’s long-term returns did not meet respondent’s
expectations. He demanded a refund in 2018. Appellant
responded that the operating agreement entitled him to receive
only the value of his capital account—an amount far less than his
investment in the entity. Respondent sued appellant and ENIF
in 2019. His complaint included causes of action for breach of
fiduciary duty, negligence, fraud, breach of contract, violation of
the Corporations Code, and derivative claims on behalf of himself
and other members of Biorap.
The trial court held a six-day bench trial. Appellant and
respondent testified. Wayne Lorch, CPA, testified as
2
respondent’s expert witness. The trial court issued a proposed
statement of decision, and, after considering the parties’
objections, issued a final statement of decision in December 2021.
The court found appellant breached his fiduciary duty to
respondent by loaning over $600,000 in Biorap’s cash to ENIF.
The funds were then used to pay ENIF’s outstanding loans to
entities managed by appellant and other expenses that did not
benefit respondent, such as paying off a car loan. The court cited
the same conduct as proving respondent’s causes of action for
negligence, fraud, Corporations Code violations, and his
derivative claim. It awarded respondent damages, prejudgment
interest, attorney’s fees, and punitive damages totaling
$1,358,638.79. It awarded him an additional $1,028,672.63 on
the derivative claim.
The trial court denied appellant’s motion for new trial.
Appellant but not ENIF appealed the judgment.
DISCUSSION
Appellant presents the same six arguments on appeal he
made in his new trial motion, to wit: (1) the trial court erred
under People v. Sanchez (2016) 63 Cal.4th 665 (Sanchez) by
allowing Lorch to base his expert opinion on case-specific
hearsay; (2) the court awarded respondent excessive and
improperly calculated damages; (3) the court’s finding that
appellant owed a fiduciary duty to Biorap, together with Lorch’s
referring to Biorap as “insolvent” rather than “illiquid,”
constituted “irregularities in the proceedings” under Code of Civil
Procedure section 657; (4) respondent’s testimony at trial about
his knowledge of ENIF’s interrelationship with Biorap
“constituted a prejudicial surprise”; (5) new evidence about
Biorap’s investments in Crystallex, a Canadian mining company,
3
warranted a new trial; and (6) the evidence was not sufficient to
support the court’s fraud finding.
We conclude appellant forfeited the first argument
(Sanchez error). The record on appeal is not adequate to review
the remaining arguments. (Roberson v. City of Rialto (2014) 226
Cal.App.4th 1499, 1507.)
Sanchez Error
Appellant contends the trial court committed Sanchez error
when it allowed Lorch to base his expert opinion on deposition
testimony given by ENIF’s accountant, John Pagano. Appellant
argues Lorch mischaracterized Pagano as stating ENIF was
“insolvent” instead of “illiquid” when it borrowed money from
Biorap. The trial court, in turn, relied on Lorch’s testimony when
it found appellant breached his fiduciary duty to respondent by in
essence loaning Biorap’s capital to himself.
Appellant does not demonstrate that he asserted Sanchez
error or any other hearsay-based objection before or during
Lorch’s examination at trial. The record contains no motion in
limine, brief, or oral objection addressing the issue. He appears
to have raised it for the first time in his new trial motion, though
the court’s one-sentence ruling does not state whether it denied
the motion on that ground. Failing to make a timely and specific
objection forfeits a claim on appeal. (Evid. Code, § 353, subd. (a);
David v. Hernandez (2017) 13 Cal.App.5th 692, 704.)
Remaining Issues on Appeal
We presume a judgment is correct and the record contains
evidence sufficient to support it. (Denham v. Superior Court
(1970) 2 Cal.3d 557, 564.) Appellant has the burden of
“overcoming this presumption by presenting a record that
4
demonstrates error.” (People v. Seneca Ins. Co. (2004) 116
Cal.App.4th 75, 80.) He does not meet this burden.
Appellant elected to proceed without a record of the oral
proceedings or an agreed statement. (Cal. Rules of Court, rule
8.134.) While excerpts of the reporter’s transcript are contained
in the clerk’s transcript, these include the complete testimony of
just one witness (Lorch) and fragments of testimony from
appellant, respondent, and appellant’s accountant. The absence
of a complete reporter’s transcript precludes appellant from
arguing sufficiency of the evidence on appeal. (See Estate of Fain
(1999) 75 Cal.App.4th 973, 992 [“it is presumed that the
unreported trial testimony would demonstrate the absence of
error”].) We conclude his second, third, fourth, and sixth
arguments fail on this ground alone.1
The written record is deficient as well. Appellant’s
designation of record identifies only two documents for the clerk’s
transcript beyond those pre-populated in the Judicial Council
form (APP-03). The operating agreements for Biorap and ENIF
are omitted, as are the promissory notes and other documents
memorializing Biorap’s loans to ENIF. Also missing are the
parties’ pleadings, most minute orders, the orders and exhibits
appellant cites related to Crystallex, and the parties’ post-trial
filings on respondent’s requests for attorney’s fees and punitive
damages. These gaps in the written record preclude our review of
the factual findings at issue in his second, third, fifth, and sixth
arguments. More significantly, we cannot discern whether
1 Appellant does not articulate any standard of review in
his opening brief. We agree with respondent that appellant’s
first and fifth arguments are reviewed for abuse of discretion,
and the second, third, fourth, and sixth for substantial evidence.
5
appellant timely raised all his concerns below because the record
does not include his objections to the trial court’s proposed
statement of decision. (Code Civ. Proc., § 632; Cal. Rules of
Court, rule 3.1590(g).)
DISPOSITION
Judgment is affirmed. Respondent shall recover his costs
on appeal.
NOT TO BE PUBLISHED.
CODY, J.
We concur:
GILBERT, P. J.
YEGAN, J.
6
Henry J. Walsh, Judge
Superior Court County of Ventura
______________________________
Justin C. Fine, in pro. per., for Defendant and Appellant.
Silver and Arsht, Samuel J. Arsht, Marsha C. Brilliant,
and Jeffrey A. Meinhardt, for Plaintiff and Respondent.
7