Chung v. Bookspan
Filed 1/17/13 Chung v.
Bookspan CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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 ONE
MICHAEL CHUNG,
Plaintiff and Appellant,
v.
STEVEN
BOOKSPAN et al.,
Defendants and Respondents.
No. B236479
(Los
Angeles County
Super. Ct. No.
BC392047)
MICHAEL CHUNG,
Plaintiff and
Respondent,
v.
STEVEN BOOKSPAN,
Defendant and
Appellant.
No. B238058
(Los
Angeles County
Super. Ct. No.
BC392047)
APPEALS from a judgment and order of
the Superior Court of Los
Angeles County. Alan S.
Rosenfield, Judge. Affirmed.
Henry M. Lee Law Corporation, Henry M. Lee and Michelle P. Tran for
Plaintiff, Appellant and Respondent Michael Chung.
Law Offices of Lottie Cohen, Lottie Cohen and H. Michael Yuen for
Defendant, Respondent and Appellant Steven Bookspan and Defendant and
Respondent Hahn Kim.
__________________________________
Plaintiff Michael Chung appeals from a judgment entered after the
trial court granted defendants Steven Bookspan and Hahn Kim’s
Procedure section 631.8.
name="_ftnref1" title="">[1] Chung contends the trial
court abused its discretion in denying his motion to reopen his case after the
court granted defendants’ motion for judgment.
Chung also contends the judgment is not supported by substantial
evidence. We affirm the judgment.
Defendant Steven Bookspan appeals
from a postjudgment order denying his motion for attorney fees under section
2033.420. We affirm.
In June 2008, Chung filed this fraud
action regarding a $1 million investment he made in a company called Brainrush,
Inc. He sued three individuals who were
affiliated with Brainrush (Keith Kim, Douglas Park and Steven Bookspan) and
three Brainrush entities (Brainrush, Inc., Brainrush Ventures, LLC and
Brainrush Ventures Management, LLC). Out
of these six defendants Chung originally sued, the matter went to trial against
Bookspan only. Chung requested entry of
default against the other five defendants.
The matter also went to trial against Hahn Kim, who was substituted in
for a Doe defendant in February 2011, two months before trial was set to
commence.
The Pleadings
In the operative first amended
complaint, filed May 11, 2009, Chung alleged he made a $1 million investment in
Brainrush, Inc. (hereafter, Brainrush) in late 1999, after his friend, Keith
Kim,
title="">[2] the chief executive officer,
director and majority shareholder of Brainrush, told Chung about his success
with another business venture, introduced Chung to Brainrush management and
provided Chung with an “executive summary†for Brainrush. According to the allegations of the first
amended complaint, Brainrush “invested in several other companies to assist and
incubate those companies for operation and profit, sale of the company, and/or
public offering.â€
name="_ftnref3" title="">[3] In late 2000, Chung read an
article stating Brainrush was set to receive approximately $70 million from the
sale of one of the incubated companies called mySimon.com.
he would receive his share of the profits.
Keith Kim told Chung “all investors would have to wait a few months for
the company to prepare financial statements and records to document the
transaction and revenues.†Chung “made
several requests for the status of the financial records†and Keith Kim told
him “the accounting had not yet been completed and to wait.†In mid-2001, Keith Kim told Chung “there were
no profits from the $70 million transaction†because Brainrush “had suffered
significant losses and the funds were used to offset those losses, so there was
nothing from the transaction left to distribute as profits to the
investors.†When Chung asked to review
records documenting the losses and distribution of the $70 million, Keith Kim
told Chung Brainrush’s chief financial officer, defendant Steven Bookspan, “had
lost the financial records.†Chung
alleged Keith Kim “did provide piecemeal documents,†but those “documents were
simply a few pages of bank information, and prepared financial statement[s]
that had no supporting documents.â€
Chung asked Douglas Park about “the missing money.†According to the allegations of the first
amended complaint, Park was an officer, director and majority shareholder of
Brainrush. Park allegedly told Chung
that Keith Kim “had personally taken money†from Brainrush to pay Park on a
personal loan Keith Kim took from Park.
Keith Kim denied Park’s accusation.
As alleged in the first amended
complaint, Chung told Keith Kim he was going to sue him if Keith Kim “continued
to withhold documents from him.†Keith
Kim “responded that he was currently being investigated by the SEC for insider
trading securities law violations and begged [Chung] not to sue him.†He represented he would return Chung’s $1
million investment. According to Chung,
Keith Kim “offered that if [Chung] agreed not to sue [him] at that time, [Keith
Kim] would give [Chung] a promissory note, personally agreeing to repay [Chung]
his entire investment in full within five years.†On November 1, 2002,
Chung and Keith Kim executed the promissory note requiring Keith Kim to pay
Chung $1 million by December 31, 2007. Chung attached the promissory note to his
first amended complaint.
According to the allegations of the
first amended complaint, Keith Kim contacted Chung in 2005 and told Chung he
wanted to invest in Chung’s real estate financing business. Keith Kim invested $750,000 in Chung’s
business. A few months later, Keith Kim
asked Chung to return the money. Chung
returned $500,000, and Keith Kim agreed Chung could keep the other $250,00 as a
partial payment of the obligation due under the promissory note. In December 2007, when Chung asked Keith Kim
to pay the $750,000 balance due under the promissory note, Keith Kim asked
Chung to “just forget the debt.†Chung
declined to forgive the debt. In the
first amended complaint, Chung asserted a first cause of action against Keith
Kim and the Doe defendants for breach of the promissory note.
Chung asserted a second cause of
action against all defendants for fraud/intentional misrepresentation. Chung alleged Keith Kim made
misrepresentations about (1) the status of the financial records documenting
the $70 million transaction, (2) Bookspan’s loss of the financial records,
(3) the lack of profits from the transaction because the funds were used to
offset Brainrush’s losses, and (4) his intention to return Chung’s investment
if Chung agreed to delay suing him, among other misrepresentations. Chung claimed Bookspan and Park also made
these same misrepresentations “through†Keith Kim, who was their agent, representative
and coconspirator. Chung alleged he
relied on defendants’ misrepresentation to his detriment and was damaged in the
amount of “$750,000, lost interest, and lost profits from the $70 million
transaction.†Chung also sought punitive
damages.
Chung asserted a third cause of
action against all defendants for fraud/failure to disclose material
facts. Chung alleged defendants “owed
[him] a fiduciary duty to disclose all material facts relating to [his] investment
and further duty to avoid acting in a manner which would personally benefit
themselves or their related entities at [his] expense.†Chung claimed: “Defendants failed to disclose that one of
the BRAINRUSH assets was going to be sold, failed to disclose the terms of the
sale, failed to disclose the monies received from sale, failed to disclose the
accounting for the sales [sic] proceeds, failed to disclose financial
information as to the sale transaction and as to the entire company, failed to
disclose that Defendants and each of them, had personally taken all or a
portion of the sales [sic] proceeds and/or proceeds from [Chung]’s investments,
failed to disclose that an officer was being investigated for securities fraud,
failed to disclose that an officer was being sued/pursued for engaging in
fraudulent transactions involving the sale of an unrelated business entity,
failed to disclose their true intent not to return [Chung]’s investment, failed
to disclose their true intent to delay [Chung] from filing his lawsuit in order
to hide, destroy, alter, destroy [sic] evidence of Defendants’ fraudulent
conduct as [Chung] was waiting for payment on his note.â€
Chung alleged he would not have
invested in Brainrush if he had known about Keith Kim’s “securities
violations.†He also alleged he would
not have executed the promissory note and delayed filing a civil action if he
had known Keith Kim, Bookspan and Park “intended to delay [Chung] with the
promissory [note] and had no true intent to repay [Chung].†Chung sought the same categories of damages
as those set forth in his second cause of action for fraud/intentional
misrepresentation.
Chung asserted a fourth cause of
action against Keith Kim and the Doe defendants for fraud/false promise based
on “the representations made to induce [Chung] to delay filing a civil lawsuit
by way of the promissory note.â€
Finally, Chung asserted a fifth
cause of action against all defendants for securities violations. Chung alleged that Keith Kim, Bookspan and
Park “had access to material information†about Brainrush, “which information
would have materially affected [Chung]’s decision to purchase and to retain the
securities at issue.†Chung also alleged
he would not have invested in Brainrush if he had known “Defendants and each of
them had personal obligations between them that would be satisfied from
BRAINRUSH assets, income, revenues, [and] profits.†Chung claimed he was entitled to rescission
of his purchase of securities and to restitution of his investment, based on
his reliance on defendants’ material misrepresentations and omissions of
material fact.
On September 21, 2009, Bookspan filed his answer to Chung’s first amended complaint. He denied the allegations in the complaint
and asserted numerous affirmative defenses, including a fourth affirmative defense
alleging intervening and superseding causes of loss.
Trial was set for April 22, 2011. On February 17, 2011, Chung substituted Hahn Kim, Keith Kim’s brother, for Doe 1. The trial court continued the April 22, 2011 trial date. On April 27, 2011, Hahn Kim filed his answer to Chung’s first amended complaint. He denied the allegations in the complaint
and asserted numerous affirmative defenses, including a fourth affirmative
defense alleging intervening and superseding causes of loss. As an example of such a superseding cause,
Hahn Kim alleged in his answer, “Keith Kim had a novation of [Chung]’s
investment, which is a superseding event.â€
The Trial
The court trial began on May 5, 2011, with Bookspan and Hahn Kim as the only appearing defendants. Bookspan and Hahn Kim submitted a trial brief
on the first day of trial. In their
brief, they argued a novation of Chung’s $1 million investment in Brainrush
occurred in November 2002 when Chung and Keith Kim executed the promissory
note. They also argued they could not be
held liable for civil conspiracy based on actions of other defendants where
they had no continuing relationship with Chung after 2001. Bookspan and Hahn Kim maintained Chung failed
to state any valid cause of action against them. In their opening statement, Bookspan and Hahn
Kim stated these same theories of the case, including novation.
Chung called Bookspan as an adverse
party witness under Evidence Code section 776.
Defendants reserved their examination of Bookspan until their case. Chung also testified. Defendants reserved their cross-examination
of Chung.
Chung testified he made the $1
million investment in Brainrush primarily because he believed mySimon was an
asset of Brainrush. His friend, Keith
Kim, represented Brainrush owned mySimon and provided Chung with documents
indicating the same. Chung conceded—in
opposing the motion for judgment made at the close of his case—that neither
Bookspan nor Hahn Kim made any representations to induce Chung to invest in
Brainrush.
Chung’s
evidence regarding Bookspan
Chung’s theory of liability against
Bookspan was that, after mySimon was acquired by a company called CNET, Inc. in
January 2000, Bookspan (1) delayed in providing financial documentation to
Chung about the transaction after Chung requested the information, and (2)
eventually provided “confusing and misleading†documentation indicating CNET
shares were an asset of Brainrush when in fact they were not.
Evidence Chung presented at trial
demonstrated, at or around the end of 1999, Bookspan became the chief financial
officer (CFO) of Brainrush. He left his
employment with Brainrush on March 2, 2001.
He continued to communicate with Keith Kim about Brainrush business
until the summer of 2001. Bookspan moved
out of California on October 5, 2002.
California at any time prior to trial.
Bookspan testified Brainrush never
had any interest in mySimon. According
to Bookspan, Keith Kim personally owned mySimon stock. When CNET acquired mySimon, Keith Kim received
shares of CNET in exchange for his shares of mySimon. Bookspan testified, although Keith Kim did
not place the CNET shares in a Brainrush account, he “pledged to put every
dollar that he could from the CNET transaction into Brainrush as necessary.†Brainrush’s April 30, 2000 balance sheet,
which Bookspan reviewed and approved in his capacity as Brainrush’s CFO, listed
as an asset of Brainrush “marketable securities†valued at $21,451,395. These “marketable securities†were the CNET
shares Keith Kim received in exchange for his mySimon shares. According to Bookspan, Brainrush “had access
to†these CNET shares, which were held in an account in Keith Kim’s name.
During a face-to-face meeting in
early 2000, after CNET acquired mySimon, Chung asked Bookspan to provide him
with financial statements for Brainrush.
Bookspan gave Chung the April 30, 2000 balance sheet referenced above
and a Brainrush income statement for the period October 1, 1999 through April
30, 2000. Bookspan prepared the balance
sheet in response to Chung’s request for information. Bookspan testified he needed authorization
from Keith Kim before he could release Brainrush financial information to
anyone. Keith Kim authorized Bookspan to
release the April 30, 2000 financial statements to Chung. That was the only time Keith Kim authorized
Bookspan to release Brainrush financial records to Chung. Bookspan explained to Chung Keith Kim’s
policy that all requests for Brainrush financial information had to go through
Keith Kim. Bookspan did not recall Chung
ever expressing to Bookspan (1) that he was upset because he was unable to
obtain Brainrush financial information or (2) that he was thinking about suing
Bookspan.
In September 2000, Chung sent a
letter to Bookspan requesting updated financial statements for Brainrush. According to Chung’s trial testimony,
Bookspan stated “[i]t would take some time†for Bookspan to get the documents
to Chung because there were “many companies under Brainrush.†In early 2001, Chung made multiple requests
to Bookspan for Brainrush financial information, and Bookspan told him the
documents “were not ready.â€
Chung testified, at or around the
end of the first quarter of 2001, he informed Bookspan he was concerned about
the delay and excuses regarding the Brainrush financial information and he was
going to sue Bookspan, Brainrush and Brainrush management if he did not get the
documents. According to Chung, Bookspan
told him not to sue because Keith Kim would resolve the issue. Chung contacted Keith Kim who told him to be
patient because Brainrush was “short-staffed†and “behind†on its
paperwork. The next time Chung contacted
Brainrush in an effort to obtain financial information, he learned Bookspan had
left the company.
Throughout 2001, Chung continued to
ask Keith Kim to provide him with Brainrush financial information. Keith Kim assured Chung he would repay the $1
million Chung had invested in Brainrush.
Keith Kim represented Brainrush did not have any profit, but he would
sell Brainrush assets to get the money to pay Chung. Keith Kim also stated he did not have the
financial records because Bookspan had left the company and there was “some
missing documentation[].â€
As discussed above, on November 1,
2002, Chung and Keith Kim executed a promissory note requiring Keith Kim to pay
Chung $1 million by December 31, 2007.
At the time Chung filed this action, Keith Kim still owed $750,000 under
the promissory note.
Chung’s
evidence regarding Hahn Kim
Chung’s theory of liability against
Hahn Kim was that Hahn Kim was “an unauthorized beneficiary of the $1 million
transaction between Chung and Brainrush.â€
According to Bookspan, Hahn Kim was
not an employee of Brainrush, but he was a “50 percent shareholder†of
Brainrush. At trial, Bookspan testified
about a “$1 million pass-through investment . . . for the benefit of
Hahn Kim.†According to Bookspan, Hahn
Kim invested $1 million in a company called MindStack, one of the Brainrush
incubated companies. The funds were
deposited into a Brainrush account and then transferred to a MindStack
account. Hahn Kim made his investment
some time in 2000.
According to Bookspan, shortly before trial, Keith Kim and Hahn Kim
told Bookspan the source of the funds for Hahn Kim’s investment in MindStack
was Hahn Kim’s own money. Chung claimed
the funds for Hahn Kim’s investment in MindStack came from Chung’s $1 million
investment in Brainrush, and not from Hahn Kim’s own money.
Motion for Judgment and Motion to Reopen Case
On
May 9, 2011, at the close of Chung’s evidence as to Bookspan and Hahn,
oral motion for judgment under section 631.8.
After hearing oral argument by the parties, the trial court granted the
motion. The court concluded Chung did
not prove any cause of action against Bookspan or Hahn Kim. As an alternative ground for granting
judgment in favor of Bookspan and Hahn Kim, the court concluded the promissory
note between Chung and Keith Kim constituted a novation which released Bookspan
and Hahn Kim from any liability regarding Chung’s investment in Brainrush.
On May 20, 2011, Chung made a
written motion to reopen his case to introduce additional evidence. He claimed he was surprised at trial by
defendants’ assertion of a novation defense.
He sought to introduce evidence to rebut defendants’ claim of a
novation. Chung wanted to introduce his
own testimony (1) “that he never intended the promissory note to be a
novation,†(2) “that he never intended to waive any claims against Bookspan,â€
(3) “that Keith Kim told [him] that if the promissory note was breached,
[Chung] could still sue,†and (4) “that he never knew that Hahn J. Kim had
received any benefits from Defendants in this case until January 2011.†(Underlining omitted.) He also wanted to introduce Bookspan’s answer
and response to form interrogatories, “which all show that [Bookspan] never
disclosed his novation defense.†Chung
further asked the court to admit into evidence documents which were marked for
identification at trial “relating to Brainrush’s ownership of my[S]imon.†(Boldface omitted.) Finally, Chung asked the court to allow him
to “present evidence to impeach Bookspan’s testimony†that he disclosed certain
information to Chung. Chung argued he
“was unable to present evidence earlier for impeachment because Bookspan
testified at deposition that he did not provide ANY financials to
Plaintiff.†(Boldface omitted.) Bookspan and Hahn Kim opposed Chung’s motion
to reopen the case.
On June 3, 2011, the trial court
heard oral argument on Chung’s motion to reopen his case and denied the
motion. The court noted the novation
defense was asserted in Hahn Kim’s answer and also was raised in Bookspan and
Hahn Kim’s trial brief which was submitted the first day of trial. Even if there was not a novation, the court stated
Chung did not prove any cause of action against Bookspan or Hahn Kim. Finally, the court commented it did not
believe the motion to reopen the trial was timely.
On June 30, 2011, the trial court
issued its statement of decision.
Bookspan and Hahn Kim.
I. Chung’s
Appeal, Case No. B236479
Chung contends the trial court erred in denying his motion to reopen
his case. “Trial courts have broad discretion
in deciding whether to reopen the evidence. [Citation.] We review a court’s denial of a motion to
reopen evidence for an abuse of discretion.
[Citation.] The appropriate test
for abuse of discretion is whether the trial court’s decision exceeded the
bounds of reason.†(Horning v. Shilberg (2005) 130 Cal.App.4th 197, 208-209.) “A trial court does not abuse its discretion
when it refuses to reopen a case for new evidence that will not produce a
different result. [Citations.] A motion to reopen is also subject to a
diligence requirement.†(
Cal.App.4th 1212, 1222.)
Chung asserts the trial court should have granted his motion to
reopen his case because he was surprised by the novation defense asserted by
Bookspan and Hahn Kim at trial. Chung
attached the promissory note—the agreement which defendants argued was a
novation—to his first amended complaint.
Hahn Kim alleged there was a novation in his answer to the first amended
complaint filed shortly before trial on April 27, 2011.
the promissory note constituted a novation in their trial brief submitted on
May 5, 2011, the first day of trial. In
her opening statement at trial, the attorney who represented Bookspan and Hahn
Kim stated the promissory note was a novation.
Chung did not object to defendants raising the novation issue at
trial. When the trial court granted the
the close of Chung’s case, Chung did not ask the court to allow him to present
additional evidence.
name="_ftnref9" title="">[9] He waited 11 days, until May
20, 2011, before making his motion to
reopen his case. The court did not abuse
its discretion in finding surprise was not a valid ground for Chung’s motion to
reopen his case.
In any event, Chung’s evidence regarding novation would not lead to
a different result. The trial court
concluded, regardless of whether there was a novation, Chung did not prove any
cause of action against Bookspan or Hahn Kim.
As discussed below, substantial evidence supports this conclusion.
Chung also argues the trial court should have granted his motion to
reopen his case and allowed him to present evidence to impeach Bookspan’s
testimony that Bookspan disclosed certain information to Chung. Chung claims he “did not have a chance to
present this evidence earlier for impeachment because Respondent Bookspan
testified at deposition that he did not provide ANY financials to Chung.†(Boldface omitted.) Chung did not reveal in his motion, and he
does not reveal on appeal, what evidence he would like to present to impeach
Bookspan’s testimony and why he could not gather this information in time to
present it at trial.
name="_ftnref10" title="">[10] Moreover, he has not
explained why he rested his case without informing the court there was
additional evidence he wanted to present, and why he failed to mention this
additional evidence at the time the court granted the motion for judgment. The trial court did not abuse its discretion
in declining to reopen Chung’s case based on Chung’s assertion he wanted to
impeach Bookspan with unspecified evidence.
In his motion to reopen his case, Chung further asked the trial
court to admit into evidence documents which were marked for identification at
trial “relating to Brainrush’s ownership of my[S]imon.†(Boldface omitted.) Chung does not explain why he failed to move
these documents into evidence before he rested his case and why he did not
bring this issue to the court’s attention at the time the court granted the
motion for judgment. Chung has not
demonstrated he was diligent in seeking to have this evidence admitted.
Under section 631.8, subdivision (a), “After a party has completed
his presentation of evidence in a trial by the court, the other party, without
waiving his right to offer evidence in support of his defense or in rebuttal in
the event the motion is not granted, may move for a judgment. The court as trier of the facts shall weigh
the evidence and may render a judgment in favor of the moving party, in which
case the court shall make a statement of decision as provided in Sections 632
and 634, or may decline to render any judgment until the close of all the
evidence. The court may consider all evidence received, provided, however, that
the party against whom the motion for judgment has been made shall have had an
opportunity to present additional evidence to rebut evidence received during
the presentation of evidence deemed by the presenting party to have been
adverse to him, and to rehabilitate the testimony of a witness whose
credibility has been attacked by the moving party. . . .†(Italics added.)
As a threshold matter, Chung argues the trial court improperly
granted the motion for judgment under section 631.8 because the court did not
“give Chung the opportunity to present additional evidence to rebut any
evidence that is adverse to him.†He
references the italicized language above from subdivision (a) of section 631.8
regarding the opposing party’s opportunity to present additional evidence. As discussed previously, at the time
defendants made their motion for judgment and the trial court granted it, Chung
did not ask the court to present additional evidence. Thus, he cannot show the trial court failed
to comply with section 631.8.
Chung contends the judgment is not supported by substantial
evidence. “The findings of a trial court
made after granting a motion for judgment pursuant to . . . section
631.8 are entitled to the same respect on appeal as are any other findings of a
trial court, and are not erroneous if supported by substantial evidence. [Citations.]
Where two or more inferences reasonably can be drawn from the facts, an
appellate court is without power to substitute its deductions for those of the
trial court. [Citations.] The rules applying to appellate review of a
nonsuit granted in a jury trial are not applicable. [Citation.]
We treat the court’s findings made pursuant to granting a motion under
. . . section 631.8 as though made after a trial in which evidence
was produced by both sides; thus the evidence is viewed in the light most
favorable to respondents.
[Citation.]†(
California Mart (1969) 2 Cal.App.3d 846, 853.)
Chung contends the trial court erred in granting the motion for
judgment as to Bookspan because he proved causes of action for fraud,
misrepresentation and breach of fiduciary duty.
Chung argues the evidence he presented at trial shows (1) Bookspan
delayed in providing him with Brainrush financial documents and (2) Bookspan
provided him with a balance sheet which was “confusing and misleading†in that
it indicated CNET shares were an asset of Brainrush when in fact they were
not. Based on this evidence, Chung
asserts Bookspan “intentionally defrauded Chung into believing Brainrush had
marketable securities by misrepresenting the assets of Brainrush in furtherance
of that fraud.†Chung also asserts
Bookspan “perpetuated Keith Kim’s misrepresentation and fraudâ€â€”that Brainrush
owned mySimon prior to the sale to CNET—“by failing to produce financial
records for the company and delegating his duties as Chief Financial Officerâ€
in deferring Chung’s requests for financial records to Keith Kim. Chung maintains the evidence shows “collusion
amongst [defendants] to hide information from Chung.â€
Substantial evidence supports the judgment in favor of
Bookspan. Chung conceded Bookspan did
not make any representation to induce Chung to invest in Brainrush. Chung did not present evidence demonstrating
Bookspan was aware of Keith Kim’s representation to Chung that Brainrush owned
mySimon at the time Chung invested in Brainrush.
Chung has not stated what financial records he believes Bookspan was
obligated to provide, but did not provide, to him. There is no evidence Chung ever asked
Bookspan for an explanation regarding the “marketable securities†item listed
on the Brainrush balance sheet Bookspan prepared. Chung has not established Bookspan improperly
listed the marketable securities on Brainrush’s balance sheet. Bookspan testified the CNET shares in Keith
Kim’s account were available for Brainrush’s use if necessary. In ruling on the motion for judgment, the
trial court stated: “It depends upon
your accounting interpretation of that.
If the shares are pledged, it can be an asset.†The propriety of information listed on the
balance sheet is not “common knowledge,†as Chung asserts. As the trial court noted in its statement of
decision, Chung “presented no forensic expert as to Steven Bookspan’s standard
of care as Brainrush’s CFO, or to interpret the financial statements prepared
by Steven Bookspan for internal corporate use.â€
Assuming Bookspan breached his fiduciary
duty or committed fraud in failing to provide unspecified financial
documentation and in preparing the balance sheet, Chung has not shown how this
caused him any damage. As set forth
above, Chung has conceded Bookspan did not do anything to induce Chung to
invest in Brainrush. Chung first asked
Bookspan for Brainrush financial records in early 2000 and Bookspan left
Brainrush in March 2001. It is not clear
what would have been different if, sometime between early 2000 and March 2001,
Bookspan had told Chung Brainrush never owned mySimon and had given Chung
additional Brainrush financial records.
There is no evidence indicating Chung would have been able to get his
money back at that point.
Substantial evidence supports the judgment in favor of Bookspan
based on the trial court’s conclusion Chung did not prove any cause of action
against Bookspan.
Chung contends the trial court erred in granting the motion for
judgment as to Hahn Kim because he “presented overwhelming evidence to show
that [Hahn] Kim was a beneficiary of misappropriated funds from the $1 million
dollar transaction.†(Boldface and
initial capitals omitted.) Chung asserts
the $1 million Chung invested in Brainrush was transferred to MindStack for the
benefit of Hahn Kim. Chung’s assertion
is based on speculation. He did not
present evidence showing the $1 million pass-through investment for Hahn Kim
had any connection with Chung’s investment in Brainrush.
Chung does not articulate any other basis for liability on the part
of Hahn Kim.
II. Bookspan’s
Appeal, Case No. B238058
After the trial court entered
judgment in his favor, Bookspan brought a motion for attorney fees against
Chung. Bookspan appeals from the order
denying his motion for attorney fees.
Proceedings
below
Bookspan brought his motion pursuant
to section 2033.420, based on Chung’s denial of 21 requests for admissions
Bookspan propounded to Chung. In all,
Bookspan propounded 33 requests for admission to Chung.
By his motion, Bookspan sought to recover attorney fees for Chung’s
failure to admit: (1) that Bookspan did
not breach any agreement with Chung, (2) that Bookspan did not breach any duty
to Chung, (3) that Bookspan is not liable for any losses suffered by Chung, (4)
that Bookspan did not conspire with the other defendants to defraud Chung, (5)
that Bookspan did not make any misrepresentations to Chung, (6) that Bookspan
was not negligent in the ways alleged by Chung, (7) that Bookspan is not
personally liable for any debts, liabilities and losses of Brainrush, (8) that
Bookspan is not personally liable to Chung, (9) that Bookspan did not lose
corporate documents, (10) that Bookspan did not approve the acts of the
other defendants, (11) that Chung invested in Brainrush in reliance on
representations made by Keith Kim only, (12) that all of Chung’s dealings were
directly with Keith Kim, (13) that Chung never dealt directly with Bookspan,
(14) that Bookspan never represented to Chung that Bookspan lost corporate
documents, (15) that Bookspan never fabricated any stories to Chung as Chung
alleged, (16) that Bookspan did not benefit from such fabricated stories as
Chung alleged, (17) that Bookspan was not a majority shareholder of
Brainrush, (18) that Bookspan did not control Brainrush, (19) that Bookspan was
not the alter ego of Brainrush, (20) that the agreement between Chung and Keith
Kim was a novation of any preexisting debt, and (21) that Bookspan never made
any direct misrepresentation to Chung.
The majority of these requests for admissions asked Chung to admit legal
conclusions, not facts.
Bookspan sought all attorney fees he incurred from the inception of
the case through judgment, which amounted to $86,782.20. Bookspan attached to his motion an 11-page
chart listing the task performed by the attorney, the amount of time spent, the
attorney’s billable rate, and the fees incurred, for each of the five attorneys
in the office who performed legal services on his behalf in this action.
Section 2033.420 provides:
“(a)
If a party fails to admit the genuineness of any document or the truth
of any matter when requested to do so under this chapter, and if the party
requesting that admission thereafter proves the genuineness of that document or
the truth of that matter, the party requesting the admission may move the court
for an order requiring the party to whom the request was directed to pay the
reasonable expenses incurred in making that proof, including reasonable
attorney’s fees.
“(b)
The court shall make this order unless it finds any of the following:
“(1)
An objection to the request was sustained or a response to it was waived
under Section 2033.290.
“(2)
The admission sought was of no substantial importance.
“(3)
The party failing to make the admission had reasonable ground to believe
that that party would prevail on the matter.
“(4)
There was other good reason for the failure to admit.â€
Chung opposed Bookspan’s motion for
attorney fees. Chung argued Bookspan was
not entitled to attorney fees under section 2033.420 because Bookspan did not
prove the truth of any of the matters at issue in the requests for
admissions. Chung pointed out Bookspan
did not present his case at trial.
According to Chung, the trial court entered judgment in favor of Bookspan
because Chung did not present sufficient evidence to prove his case and the
court concluded a novation released Bookspan from any liability regarding
Chung’s investment in Brainrush. Chung
also argued he had reasonable grounds for maintaining the promissory note did
not constitute a novation, for denying the other requests for admissions, and
for believing he would prevail on these matters at trial.
In his opposition, Chung further
challenged the amount of attorney fees Bookspan requested. Chung argued, to the extent Bookspan was
entitled to any fees under section 2033.420, he was not entitled to fees
incurred before January 27, 2010, the date Chung served his response to
Bookspan’s requests for admission, or fees incurred after May 9, 2011, the date
the trial concluded and the court granted the motion for judgment. The fees incurred before January 27, 2010
amounted to $27,395.70, and the fees incurred after May 9, 2011 amounted to
$13,396.50, leaving $45,990 incurred between those two dates. Chung also argued Bookspan failed to demonstrate
the requested fees were reasonable and necessary in that Bookspan “fail[ed] to
describe or explain what work was done and how the time spent was related to
proving [Chung]’s denials.†Chung urged
the trial court to deny Bookspan’s motion for attorney fees in its entirety
based on Bookspan’s “attempt[] to recover all of his fees incurred in this
case, rather than only those fees permitted under C.C.P. section 2033.420.â€
After hearing oral argument, the
trial court denied Bookspan’s motion for attorney fees. The court found Bookspan’s request “is
inflated and puts things in that are nonrecoverable,†and that is a basis to
deny the motion in its entirety. The
court also indicated Chung had reasonable grounds for denying the promissory
note constituted a novation. The court
commented: “Of course, the term novation
probably is in the mind of the beholder, I suppose, at the point in time when
you’re looking at it.†The court also
noted Chung failed to prove his case at trial and Bookspan was not required to
put on a defense. The court concluded
its ruling with the following comments:
“On the state of this entire record and the court’s discretion being
exercised here, I don’t feel that attorneys fees are warranted. The motion is basically to try to get
attorneys fees for everything, and it’s not warranted. It’s excessive. So the motion is denied.â€
As
set forth above, under section 2033.420, “a party that denies a request for
admission may be ordered to pay the costs and fees incurred by the requesting
party in proving that matter. The court
‘shall’ order the payment of such fees and costs unless it finds: (1) that an objection to the request was
sustained or a response to the request was waived; (2) the admission sought was
of no substantial importance; (3) the party failing to make the admission had
reasonable ground to believe that the party would prevail on the matter; or (4)
there was other good reason for the failure to admit the request.†(Laabs
v. City of Victorville (2008) 163 Cal.App.4th 1242, 1276.) “We review the court’s ruling for an abuse of
discretion.†(Id. at pp. 1275-1276.)
In denying Bookspan’s motion for
attorney fees in its entirety, the trial court did not abuse its
discretion. Bookspan improperly tried to
use section 2033.420 as a means of recovering all attorney fees he incurred
from the inception of the case through judgment. He made no attempt to show how the fees he
sought were incurred in proving the truth of the matters covered by the 21
requests for admission at issue. He
provided the trial court with no means of fashioning a reasonable fee award in
the event the court determined Chung improperly denied a particular request for
admission. (See Serrano v. Unruh (1982) 32 Cal.3d 621, 635 [“A fee request that
appears unreasonably inflated is a special circumstance permitting the trial
court to reduce the award or deny one altogether.â€].) Moreover, Bookspan cannot demonstrate Chung
improperly denied the legal conclusions Bookspan asked Chung to admit more than
a year before trial (e.g., that Bookspan did not breach any duty to Chung, that
Bookspan was not negligent, that the promissory note constituted a novation,
etc.)
title="">[11]
The
judgment and order are affirmed. Hahn
Kim is entitled to recover costs on appeal.
Michael Chung and Steven Bookspan are to bear their own
NOT TO BE PUBLISHED.
CHANEY,
J.
We concur:
ROTHSCHILD,
Acting P. J.
JOHNSON,
J.
otherwise indicated.
