Rodrigues v. Steele CA2/2

Filed 3/3/21 Rodrigues v. Steele CA2/2
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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 TWO
MARK RODRIGUES, B289995
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. SC120499)
v.
NICOLAS STEELE et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Nancy L. Newman, Judge. Affirmed.
Bensamochan Law Firm and Eric Bensamochan for
Defendants and Appellants.
Troy Gould and Amy N. Stalling for Plaintiff and
Respondent.
Defendants and appellants Nicolas Steele (Steele), Lilia
Stepanova Steele (Stepanova), and Steele Aviation, Inc. (Steele
Aviation)1 appeal from the default judgment entered against
them and in favor of plaintiff and respondent Mark Rodrigues
(plaintiff) after the trial court granted terminating sanctions
against defendants for discovery abuses and ordered their
answers stricken. We affirm the judgment.
BACKGROUND
The lawsuit
Plaintiff commenced this action in April 2013 for damages
arising out of his ownership interest in Steele Aviation and for
repayment of loans he made to Steele. The operative fourth
amended complaint added Steele’s wife, Stepanova, as a
defendant, and asserted fourteen causes of action, including
breach of contract and promissory estoppel.
Plaintiff alleged that he and Steele formed Steele Aviation
in 2003 as equal partners; that between 2003 and 2012, plaintiff
loaned more than $458,000 to Steele; that Steele repaid
approximately $139,000 of the loaned funds but owed the balance
of the unpaid loans, plus interest; and that Steele, in conspiracy
with Stepanova, concealed Steele Aviation’s income and refused
to provide plaintiff with corporate documents and records to
which he is entitled. Plaintiff requested return of the loaned
funds, plus interest, and general damages exceeding $10 million.
1 Steele, Stepanova, and Steele Aviation are referred to
collectively as defendants.
2
Motions to compel and prior discovery sanctions against
defendants
Steele and Steele Aviation
In October 2013, the trial court granted plaintiff’s motion to
compel the inspection of Steele Aviation’s corporate records and
imposed $1600 in monetary sanctions against Steele and Steele
Aviation.
In April 2014, the trial court granted plaintiff’s motions to
compel further responses to written discovery and imposed
$2,150 in monetary sanctions against Steele and Steele Aviation.
In February 2015, the trial court issued an order granting
four motions to compel by plaintiff and requiring Steele and
Steele Aviation to produce all responsive documents. The trial
court’s order contained a warning that terminating sanctions
could be imposed if there was no indication that the imposition of
lesser sanctions would compel compliance.
Stepanova
Plaintiff served Stepanova personally with a deposition
subpoena in March 2014. The day before Stepanova’s scheduled
deposition, defendants’ counsel advised that Stepanova would not
appear because of illness. Ten minutes before Stepanova’s
rescheduled deposition, defendants’ counsel advised that
Stepanova would not appear. Counsel offered to produce
Stepanova ten days later. The day before Stepanova’s
rescheduled deposition, defendants’ counsel again advised that
Stepanova would not appear. At her rescheduled July 7, 2014
deposition, Stepanova appeared, claimed to feel ill, and left
without testifying.
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In September 2014, Stepanova served plaintiff with a
temporary restraining order, claiming he was stalking her. In
October 2014, Stepanova’s request for a temporary restraining
order was denied. On October 20, 2014, plaintiff noticed
Stepanova’s deposition for November 3, 2014. On November 3,
2014, defendants’ counsel advised that Stepanova would not
appear. Defendants’ counsel initially promised to provide
alternative dates and then subsequently refused to do so on the
ground that Stepanova was not a party. Plaintiff’s counsel
explained that Stepanova was added as a party in January 2015.
In August 2015, plaintiff moved to compel Stepanova’s
deposition.
Discovery referee’s reports and recommendations
In September 2015, the trial court referred the parties to a
discovery referee.
In December 2015, the trial court adopted and signed a
report and recommendation by the discovery referee granting
plaintiff’s motions to compel further discovery responses and
compelling the deposition of Stepanova.
In May 2017, the trial court issued an order denying a
motion by plaintiff for terminating sanctions but imposing
monetary sanctions against defendants.
In October 2017, the discovery referee issued a report and
recommendation requiring defendants to review and supplement
their previous discovery responses and to provide verifications for
those responses.
4
Terminating sanctions
Plaintiff appeared ex parte before the trial court in January
2018 to request an expedited hearing on a motion for terminating
sanctions. When the trial court expressed concern about its
calendar availability to hear the motion, plaintiff’s counsel
suggested having the discovery referee hear the motion and issue
recommendations for the court to consider and rule upon. The
trial court agreed and continued the matter.
The discovery referee heard plaintiff’s request for
terminating sanctions on February 2, 2018. The parties
submitted written briefs before the hearing and attended the
hearing with their respective attorneys. After the hearing, the
discovery referee issued a written report finding defendants in
violation of discovery orders and recommending terminating
sanctions against them.
The trial court held a hearing on February 26, 2018 on the
discovery referee’s report and recommendation for terminating
sanctions. The parties submitted written briefs before the
hearing; attended the hearing; and through their attorneys,
argued their respective positions. The trial court adopted the
discovery referee’s report and recommendation for terminating
sanctions and ordered defendants’ answer stricken.
Trial on damages
A prove up hearing on plaintiff’s damages was held on
March 14, 2018. Defendants were precluded from participating
for lack of standing.
At the trial court’s request, plaintiff provided a declaration
setting forth the general nature of the relationship between the
parties and the events preceding the filing of the lawsuit.
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Plaintiff also testified, as did aviation expert Ryan Antoon, and
forensic economist Douglas McDaniel.
Plaintiff testified between 2002 and 2012, he extended
multiple loans to Steele, evidenced by cancelled checks, invoices,
bank statements, and credit card statements, and the unpaid
balance of the loans totaled $425,000 in 2012. Plaintiff further
testified that in August and September 2012, Steele promised to
sign a secured promissory note in the amount of $425,000, plus
10 percent interest, to induce plaintiff to forbear from collection
efforts. Steele did not sign the note and failed to fulfill any of his
obligations under the note.
Testimony, modeling and estimates provided by aviation
expert Antoon established that defendants earned profits of
$7,329,013 between 2005 and 2017.2 Forensic economist
McDaniel testified that the total equity value of the parties’ joint
venture could be established using two methods – the
capitalization of cash flow method and the guided merged and
acquired company method. He opined that a conservative
valuation of the parties’ joint venture was $5.8 million.
The trial court found that plaintiff and Steele, acting on
behalf of himself and Steele Aviation, entered into an agreement
to invest in the aviation industry, including the purchase and
charter of aircraft, and that Steele, acting on behalf of Steele
aviation and in conspiracy with Stepanova, breached the
agreement with plaintiff. The trial court further found that
defendants earned profits of $7,329,013 between 2005 and 2017,
and that plaintiff was entitled to recover against defendants,
2 A court reporter was unavailable at the time Antoon
testified, and his testimony is not part of the reporter’s transcript
of proceedings.
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jointly and severally, one-half of those profits, totaling
$3,664,509. The trial court accepted McDaniel’s valuation of the
joint venture at $5.8 million and found that plaintiff was entitled
to recover against defendants, jointly and severally, 50 percent of
that value, or $2.9 million. The court awarded plaintiff damages
on his breach of contract claim in the amount of $3,664,509 for
lost profits, plus $2.9 million for his 50 percent share of the joint
venture, for a total award of $6,564,509 against defendants,
jointly and severally.
As to plaintiff’s promissory estoppel claim, the trial court
found that Steele promised to sign a secured promissory note in
the amount of $425,000, plus 10 percent interest in order to
obtain plaintiff’s forbearance from collection efforts, that Steele
failed to fulfill the obligations of the note, and that plaintiff was
entitled to recover $658,691.78 in interest against Steele only.
The court entered judgment in favor of plaintiff against
defendants in the amount of $6,564,509 on the breach of contract
claim, and against Steele in the amount of $658,691.78 on the
promissory estoppel claim. This appeal followed.3
DISCUSSION
Defendants contend the trial court denied them due process
by imposing terminating sanctions in the absence of a noticed
motion, that an evidence sanction was more appropriate, and
that terminating sanctions against Stepanova were not
3 Respondent’s Motion for Relief from Order Striking
Respondent’s Appendix, or in the alternative, Motion to Augment
the Record, is denied as the appendix contains nothing necessary
to evaluate the appeal.
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warranted. Defendants further contend there is insufficient
evidence to support the damages award.
I. Terminating sanctions
A. Standard of review
A trial court’s order for terminating sanctions is reviewed
for abuse of discretion. (Liberty Mutual Fire Ins. Co. v. LcL
Administrators, Inc. (2008) 163 Cal.App.4th 1093, 1102.) Under
this standard, the order may be reversed on appeal only if it is
arbitrary, capricious, and exceeds the bounds of reason. (Lang v.
Hochman (2000) 77 Cal.App.4th 1225, 1244; Vallbona v. Springer
(1996) 43 Cal.App.4th 1525, 1545.) The party challenging the
trial court court’s order has the burden of demonstrating an
abuse of discretion. (Laguna Auto Body v. Farmers Ins. Exchange
(1991) 231 Cal.App.3d 481, 487, disapproved on other grounds by
Garcia v. McCutchen (1997) 16 Cal.4th 469, 478, fn. 4.)
B. Due process
The trial court’s imposition of terminating sanctions absent
a noticed motion did not deny defendants their due process
rights. Although discovery sanctions cannot be ordered without
notice and an opportunity for hearing (Code Civ. Proc.,
§ 2023.030)4, defendants were not denied notice or the
opportunity to be heard. The record shows that defendants were
admonished by the trial court in 2015 that their continued
noncompliance with discovery orders could result in terminating
sanctions, yet defendants continued to violate those orders.
Defendants received notice of the February 2, 2018 hearing
4 All further statutory references are to the Code of Civil
Procedure.
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before the discovery referee on plaintiff’s request for terminating
sanctions. They also submitted a written letter brief to the
discovery referee and argued at the hearing.
After the discovery referee issued a report and
recommendation for terminating sanctions, defendants submitted
written briefs to the trial court objecting to the discovery referee’s
report and recommendations. Defendants also appeared before
the trial court and argued at the February 26, 2018 hearing at
which the trial court adopted the discovery referee’s report and
recommendation for terminating sanctions.
Defendants’ appearance at the February 26, 2018 hearing
also forfeited any appellate challenge to the sanctions imposed at
that hearing. (Alliance Bank v. Murray (1984) 161 Cal.App.3d 1,
6 (Alliance Bank).) The facts here are similar to those in Alliance
Bank, a case in which we find dispositive guidance. In Alliance
Bank, the trial court, in ordering the defendant to appear for
deposition, ruled that the plaintiff could seek terminating
sanctions upon an ex parte application if the defendant did not
comply with the order. (Alliance Bank, at pp. 3-4.) When the
defendant failed to appear for deposition, the plaintiff applied ex
parte for sanctions. The defendant appeared, through counsel, at
the hearing on the ex parte application and opposed it on the
merits. At the hearing, the trial court issued terminating
sanctions against the defendant by striking his answer and
entering a default. (Id. at pp. 4-5, 7-9.) The appellate court in
Alliance Bank held that the trial court’s initial order permitting
the plaintiff to seek sanctions on an ex parte basis was “invalid
for being in excess of the court’s jurisdiction” but nevertheless
affirmed the sanctions order. (Id. at p. 6.) The court concluded
that the defendant, by appearing at the ex parte hearing and
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opposing it on the merits, had forfeited any contention as to
defective notice and had impliedly consented to “any exercise of
jurisdiction in excess of the court’s authority.” (Id. at pp. 7-9.)
Here, as in Alliance Bank, defendants appeared through
their counsel at the hearing on plaintiff’s ex parte application for
terminating sanctions and had the opportunity to oppose the
sanctions motion on the merits. By doing so, they waived any
argument on appeal that they had insufficient notice of the
motion. (Alliance Bank, supra, 161 Cal.App.3d at pp. 7-8.)
C. Propriety of terminating sanctions
“A trial court may impose sanctions, including terminating
sanctions, for a party’s misuse of the discovery process, which
includes disobedience of a court order. [Citation.]” (Sole Energy
Co. v. Hodges (2005) 128 Cal.App.4th 199, 207; §§ 2023.010,
subds. (d), (g); 2023.030, subd. (d)(1), (4).) Failing to respond to
an authorized method of discovery, evading discovery, and
disobeying a court order to provide discovery are both misuses of
the discovery process. (§ 2023.010, subds. (d), (g).) Terminating
sanctions are justified when the discovery violation “‘is willful,
preceded by a history of abuse, and the evidence shows that less
severe sanctions would not produce compliance with the
discovery rules.’” (Parker v. Wolters Kluwer United States, Inc.
(2007) 149 Cal.App.4th 285, 297, fn. omitted.)
Defendants concede that “[i]t is hard to defend Steele’s
discovery conduct in this case.” They nevertheless argue that a
terminating sanction was excessive, and that a lesser sanction
should have been imposed. There is substantial evidence that
defendants willfully failed to comply with the trial court’s
discovery orders and that Stepanova willfully evaded her
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deposition. The record discloses no abuse of discretion in the trial
court’s imposition of terminating sanctions.
II. Damages
A judgment by default “confesses” or expressly admits the
material facts alleged by the plaintiff. (Steven M. Garber &
Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 823.)
Because the default admits properly pleaded facts, the plaintiff
has no responsibility to provide the court with sufficient evidence
to prove them—they are treated as true for purposes of obtaining
a default judgment. (Ostling v. Loring (1994) 27 Cal.App.4th
1731, 1746.)
To recover damages on a default judgment, the plaintiff
need only make a prima facie showing of entitlement to damages.
(Johnson v. Stanhiser (1999) 72 Cal.App.4th 357, 361.) Our
review of the evidence to support damages on a default judgment
is limited to whether damages are excessive. (Uva v. Evans
(1978) 83 Cal.App.3d 356, 363.) We may only set aside damages
that are grossly disproportionate to the evidence and appear to be
the result of passion, prejudice, or corruption. (Ibid.)
Plaintiff presented evidence sufficient to make a prima
facie showing of entitlement to damages. Plaintiff testified at
trial that he and Steele formed Steele Aviation in 2003. The
allegations of the fourth amended complaint, taken as true,
establish that Steele and plaintiff each owned 50 percent of
Steele Aviation. Plaintiff testified that he made an initial capital
contribution of $50,000, that he never received any distributions
from Steele Aviation, and that defendants concealed Steele
Aviation’s income from him. Plaintiff further testified that
extended multiple loans to Steele between 2003 and 2012, that
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the unpaid balance of those loans was $425,000. When plaintiff
threatened to undertake collection efforts, Steele agreed to sign a
secured promissory note in the amount of $425,000. Steele
subsequently refused to sign the note or to make any further
payments.
Defendants fail to establish that the damages award was
excessive. The award is less than the amount sought in the
fourth amended complaint and is supported by plaintiff’s
declaration and trial testimony; the testimony of two expert
witnesses; and documentary evidence, including the promissory
note agreed to by the parties, email exchanges between the
parties, discovery responses identifying Steele Aviation’s gross
revenues, plaintiff’s bank statements and cancelled checks, Steele
Aviation credit card statements, Steele Aviation’s hanger lease
agreement, list of aircraft, and quotes for charter flights.
Defendants fail to meet their burden of showing that the
trial court’s imposition of terminating sanctions was an abuse of
discretion or that the damages awarded were excessive.
DISPOSITION
The judgment is affirmed. Plaintiff shall recover his costs
on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
____________________________, J.
CHAVEZ
We concur:
________________________, P. J. __________________________, J.
LUI ASHMANN-GERST
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