Jovanovic v. Abel
Filed 6/27/12 Jovanovic v. Abel CA1/4
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opinion has not been certified for publication or ordered published for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
FIRST
APPELLATE DISTRICT
DIVISION
FOUR
BRANISLAV JOVANOVIC et al.,
Plaintiffs
and Appellants,
v.
LARRY ABEL
et al.,
Defendants and Respondents.
A131578
(Alameda
County
Super. Ct.
No. RG08390054)
Branislav
Jovanovic and Marianne Steele (plaintiffs) brought the underlying action
against 21st Century Mortgage Company (21st Century) and its individual
investors
to enjoin the foreclosure of a multi-unit condominium project in Oakland
that defendants had funded by a so-called hard money
loan in excess of $3 million. The trial
court granted a temporary restraining
order and then a preliminary injunction against defendants that was
conditioned upon plaintiffs posting an undertaking of $90,000 to cover the
attorney’s fees and monthly interest payments due to the defendants. Ultimately, the trial court found in favor of
defendants, dissolved the preliminary injunction and granted the defendants’
motion to enforce plaintiffs’ liability on the bond pursuant to Code of Civil
Procedure section 996.440.
surety, American Contractor Indemnity Company (ACIC), from the order granting
the motion to enforce their liability on the bond. We affirm.
A. The Loan and Default
In
February 2007, 21st Century arranged a $3,060,000 loan to plaintiffs that was
funded by the Investors. The loan was
obtained to enable plaintiffs to pay off a prior 21st Century loan in excess of
$2 million and to complete a 26-unit low-income condominium project (the project)
on 57th Avenue in Oakland
(the property). Plaintiffs’ obligation
on the loan was secured by a deed of trust encumbering the property. Pursuant to the promissory note, plaintiffs
were obligated to make monthly interest payments of $35,700 on the loan.
In
the loan documents, plaintiffs promised to use the loan proceeds to finish the
project and to repay the loan by August
1, 2007. The loan
proceeds—following payment of the prior 21st Century loan ($2,483,159.14), loan
origination fee to 21st Century ($38,250), and five-month interest impound
($178,500)—provided plaintiffs with $326,083.99 in construction funds to
complete the project.
After
the loan was funded and the trust deed
was recorded, 21st Century assigned its rights to the Investors on a pro rata
basis according to the Investors’ contributions to the loan funding.
The
loan went into default in August 2007, and the monthly interest payments
accrued from that point forward; pursuant to the parties’ agreement, the
interest had been impounded until the time of the default. At about the same time, 21st Century, which
had been servicing the loan for the Investors, ceased operations.
Proceedings and Commencement of Underlying Action
Several
months after the loan went into default, the Investors commenced nonjudicial
foreclosure proceedings. On May 29 2008,
plaintiffs filed the underlying action against the Investors, seeking, inter
alia, to invalidate the loan and trust deed and to enjoin the foreclosure. The Investors served a notice of sale,
scheduling the foreclosure sale for July 2, 2008.
In
their complaint, plaintiffs alleged, among other things, that they had been
induced to accept the loan by false promises of when the funding would
occur. Plaintiffs alleged that “[t]he
failure to provide promised funds caused a four [to] six month delay in
completing construction of the condominium units. That delay resulted in plaintiffs being
unable to sell the units for what they would have sold for four [to] six months
earlier (financing dried-up, and with it demand, forcing plaintiffs to reduce
sales prices and being unable to sell timely).”
C. Injunctive Relief Granted Conditioned Upon Posting of Bond
On
June 24, 2008, plaintiffs applied ex parte for a temporary restraining order to
enjoin the foreclosure sale. In support
of that application, plaintiffs averred that the delay in funding the loan
“caused a four [to] six month delay in completing construction . . .
which was a calamity in a rapidly softening real estate market.” On June 25, 2008, the trial court granted the
temporary restraining order and enjoined the July 2, 2008 foreclosure
sale. The trial court also issued an
order to show cause setting a preliminary injunction hearing for July 14,
2008. By stipulation and order, that
hearing was continued to July 28, 2008.
Prior
to the hearing on the preliminary injunction, plaintiffs, in their reply
papers, suggested either no bond or a “bond of $100,000 (six months’ of interest)[.]”
following: “ ‘If the security is declining in value, an Undertaking represented
by monthly deposits of the interest owed on the remaining indebtedness is one
alternative . . . .’ ”
At the July 28, 2008 hearing, the trial court granted the preliminary
injunction subject to further hearing, then set the hearing for November 3,
2008. In granting the preliminary
injunction, the trial court adopted the methodology suggested by plaintiffs,
stating: “The injunction is CONDITIONED on plaintiffs providing a bond of
$90,000, to cover interest payments and reasonable attorney’s fees incurred by
defendants during the injunctive period.”
On
August 8, 2008, plaintiffs procured a $90,000 bond through surety insurer,
ACIC. During the injunctive period, the
interest on the loan continued to accrue at $35,700 per month, while the value
of the property plummeted.
Dissolved
Prior
to the continued hearing on the preliminary injunction held on December 5,
2008, plaintiffs filed an “Update” with the court, stating as follows: “In today’s market it is impossible to sell
the units to individual homeowners. No
one is qualifying for financing.”
Plaintiffs also admitted that they were “unable to fund a further bond
and unable to fund continued sprucing-up of the units.” The trial court denied further extension of
the preliminary injunction for several reasons, including plaintiffs’ inability
to obtain a further undertaking to protect the interests of the Investors.
Following
the lifting of the injunction, the Investors resumed the foreclosure
proceedings. To facilitate the
foreclosure proceedings, the Investors formed a limited liability company,
BR473 Condos, LLC (BR473). BR473 was
owned by the Investors in the same percentage as their respective interests in
the loan. Its sole purpose was to
represent the Investors and to streamline the proceedings, by, among other
things, obviating the need to get 65 signatures for each document.
On
December 12, 2008, the Investors recorded an assignment of their respective
rights in the deed of trust to BR473. At
the foreclosure sale on December 15, 2008, there were no outside bids. Thus, the Investors, acting through BR473,
submitted a credit bid of $2.2 million, which represented the waste and
deterioration of the property, together with its decline in market value. In April 2010, the Investors sold the
property for $1,020,000.
After
successfully moving for summary judgment of the underlying action, the
Investors filed a motion to enforce liability on the bond pursuant to
section 996.440. In opposition,
plaintiffs argued that the Investors did not have standing to enforce liability
on the bond due to the assignment of “all of their rights in the deed of trust
and promissory note” to BR473.
Plaintiffs submitted no evidence in support of their opposition. Rather, the only supporting documentation was
a declaration from their counsel, James L. Hand, in which he averred that he
too, along with plaintiffs, was “ ‘on the hook’ ” as an indemnitor for the
injunction bond. Hand further declared
that he had “reviewed documents” at the
County Recorder’s Office that “show[ed] that the remaining Investors
. . . all assigned their interests in the note and deed of trust to
BR473 . . . sometime in early 2009.”
In an accompanying request for judicial notice, plaintiffs submitted an
assignment of deed of trust recorded on December 12, 2008, which they claimed
established that “most” of the Investors had “transferred their interests in
the deed of trust and the promissory note to BR473.” They also requested judicial notice of a
grant deed recorded on April 10, 2010, which reflected BR473’s transfer of
ownership of the property to Fanfu Investment Company.
The
trial court granted the motion to enforce plaintiffs’ liability on the bond,
ruling as follows: “It is clear from the
express language in [the] July 28, 2008 Order that [the court] conditioned
granting of the preliminary injunction on [plaintiffs]. . .
‘providing a bond of $90,000 to cover interest payments and reasonable
attorney’s fees incurred by defendants during the injunctive period.’ []
Investor Defendants proffer sufficient evidence to support that they are
entitled to recover on this bond based on their loss of at least $107,100 in
interest payments ($35,700 per month for at least 3 months) while the preliminary
injunction was pending. []” In so ruling, the trial court expressly
determined that “[p]laintiffs fail[ed] to raise a triable issue of fact in
opposition.” The court also rejected the
argument that the Investors, in dismissing their cross-complaint, had “waived
their right to recover on this bond, given that the undertaking was in
connection with the preliminary injunction and therefore appears unrelated” to
the cross-complaint. Finally, the court
was not persuaded by plaintiffs’ argument that the Investors “should be barred
because of their creation of a limited liability company which assigned the
members’ individual interests to their proportional collective interest
. . . .” In rejecting
this argument, the court explained as follows:
“A limited liability company is a hybrid business entity consisting of
members and which allows one entity to act collectively on behalf of all
members. (See [Corp. Code, §] 17001(t),
(x), (z).) No evidence has been
presented that the entity did not adequately or fairly represent the respective
shares of the members or that plaintiffs were in any way prejudiced by [the
Investors’] use of this mechanism for efficiency purposes.”
The
trial court entered judgment in favor of the Investors, enforcing liability on
the bond, and the instant appeal followed.
A. Standard of Review and Burden of Proof
Preliminarily,
the parties disagree about our standard of review on appeal. Plaintiffs contend that we must view the
evidence in the same manner that we would on a motion for summary judgment,
conducting a de novo review of the trial court’s decision and resolving all
doubts in favor of the party opposing the motion to enforce liability on the
bond. The Investors agree that we must
conduct a de novo review of the trial court’s decision in a manner akin to the
summary judgment procedure, but they maintain that, unlike in summary judgment,
in summary bond enforcement proceedings the initial burden of proof is
“squarely” upon plaintiffs.
On the
question of the appropriate standard of review, we are guided by the applicable
statutes on bond enforcement. When an
injunction is granted, the applicant for the injunction must provide an
undertaking that he or she will pay any damages—up to a specified amount—that
the enjoined party may sustain as a result of the injunction. (§ 529,
subd. (a); ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1,
10.) Liability on this bond may be
enforced on a motion as part of the original action. (§ 996.440, subd. (a); Grade-Way Construction
Co. v. Golden Eagle Ins. Co. (1993) 13 Cal.App.4th 826, 829–833 (Grade-Way).) If sought, judgment must be entered
against the bond’s principal (and surety) unless an affidavit in
opposition to the motion to enforce the bond is filed, showing facts “as may be
deemed by the judge hearing the motion” to be sufficient to present a triable
issue of fact. (§ 996.440, subd.
(d).) If such a showing is made, a trial
on those issues is conducted after discovery.
(Ibid.)
The summary bond enforcement procedures
established by section 996.440 differ significantly from the procedures for a
motion for summary judgment under section 437c. Section 996.440 requires the
trial court to enter judgment against the principal and surety—the opponents
of the motion—unless they serve and file affidavits in opposition to the
motion showing triable issues of fact. (Grade-Way,
supra, 13 Cal.App.4th at p. 837; see § 996.440, subd. (d).) In a summary judgment proceeding, the moving
party must show that there are no triable issues of fact. (§ 437c, subd. (c).) Thus, the Legislature places the
summary judgment and bond enforcement proceedings. While summary judgment is disfavored as a drastic
remedy, summary bond enforcement is favored in the law. (See, e.g., Eriksson v. Nunnink (2011)
191 Cal.App.4th 826, 849; see also § 996.440.)
To apply the summary judgment procedures that plaintiffs implicitly urge
us to apply—i.e., construing the Investors’ affidavits strictly and construing
their own liberally—in a summary bond enforcement proceeding would be
inconsistent with their (and their surety’s) burden of proof as specified in
the bond enforcement statute. (See §
996.440, subd. (d).)
Nevertheless,
as both parties concede, albeit for different reasons, we review the judgment
on a section 996.440 motion de novo, to determine whether the statute has been
correctly applied and whether a triable issue of fact was raised. (See Simmons v.
California Coastal Com. (1981) 124 Cal.App.3d 790, 796 [concerning review
under section 1058a, the predecessor to section 996.440]; see also
Cir. 1994) 16 F.3d 1032, 1036 [applying de novo review of decision to execute
bond under Federal Rule of Civil Procedure, Rule 65(c)].)
Trial Court Did Not Err in Entering Its Award on the Bond
“It is well settled the damage
recoverable under an injunction bond, such as the bond at bench, is for all
loss proximately resulting from the injunction; the factors to be considered in
determining the loss depend upon the circumstances of the case; the measure of
damage will vary with those circumstances; arbitrary rules do not govern;
equitable principles are applied; and the allowance, although often difficult
to measure accurately, should furnish just and reasonable compensation for the
loss sustained. [Citations.]” (Surety Sav. & Loan Assn. v. National
Automobile & Cas. Ins. Co. (1970) 8 Cal.App.3d 752, 757 (
Plaintiffs contend, first, that the
judgment should be reversed because the items of damage upon which it is
predicated, viz., the lost interest, either are the product of an erroneous
measure of damage or are not supported by the evidence. Plaintiffs claim that the Investors were not
entitled to the interest on the loan that accrued during the injunctive period
because the Investors failed to establish that their loss was proximately
caused by the injunction. Second,
plaintiffs insist that the award of interest violates California antideficiency
judgment statutes, as well as the one-action rule. To understand this second claim, we briefly
review certain background principles regarding mortgages, deeds of trust, and
the foreclosure process.
1. Background Principles of Nonjudicial
Foreclosure
“A real property loan generally
involves two documents, a promissory note and a security instrument. The security instrument secures the
promissory note. This instrument ‘entitles
the lender to reach some asset of the debtor if the note is not paid. In California, the security instrument is
most commonly a deed of trust (with the debtor and creditor known as trustor
and beneficiary and a neutral third party known as trustee). The security instrument may also be a
mortgage (with mortgagor and mortgagee, as participants). In either case, the creditor is said to have
a lien on the property given as security, which is also referred to as
collateral.’ [Citation.]” (Alliance
Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1235, fn. omitted (
“California has an elaborate and
interrelated set of foreclosure and antideficiency statutes relating to the
enforcement of obligations secured by interests in real property. Most of these
statutes were enacted as the result of ‘the Great Depression and the
corresponding legislative abhorrence of the all too common foreclosures and
forfeitures [which occurred] during that era for reasons beyond the control of
the debtors.’ [Citation].
“Pursuant to this statutory scheme,
there is only ‘one form of action’ for the recovery of any debt or the
enforcement of any right secured by a mortgage or deed of trust. That action is foreclosure, which may be
either judicial or nonjudicial.
(. . . §§ 725a, 726, subd. (a).) In a judicial foreclosure, if the property is
sold for less than the amount of the outstanding indebtedness, the creditor may
seek a deficiency judgment, or the difference between the amount of the indebtedness
and the fair market value of the property, as determined by a court, at the
time of the sale. [Citation.] However, the debtor has a statutory right of
redemption, or an opportunity to regain ownership of the property by paying the
foreclosure sale price, for a period of time after foreclosure. [Citation.]
“In a nonjudicial foreclosure, also
known as a ‘trustee’s sale,’ the trustee exercises the power of sale given by
the deed of trust. [Citations.] Nonjudicial foreclosure is less expensive and
more quickly concluded than judicial foreclosure, since there is no oversight
by a court, ‘[n]either appraisal nor judicial determination of fair value is
required,’ and the debtor has no postsale right of redemption. [Citation.]
However, the creditor may not seek a deficiency
judgment. [Citation.] Thus, the antideficiency statutes in part
‘serve to prevent creditors in private sales from buying in at deflated prices
and realizing double recoveries by holding debtors for large
deficiencies.’ [Citation.]” (Alliance
Mortgage, supra, 10 Cal.4th at p. 1236.)
2. Analysis
The parties dispute the
applicability of the antideficiency statutes and the one action rule in the
instant case. According to plaintiffs,
the Investors had “no legal right, having chosen nonjudicial foreclosure, to
pursue . . . unpaid interest.”
Plaintiffs contend that the trial court could not have used unpaid
interest as the measure of damages in the motion to enforce liability on the
bond because the antideficiency statutes preclude recovery of interest. The Investors maintain this argument is a
“complete red herring,” which “flatly contradicts the position [plaintiffs]
took in the trial court,” where they urged that “interest accruing during the
injunctive period was an appropriate basis for setting the bond.”
We first consider whether the trial
court’s use of unpaid interest as the measure of damages, if error, was invited
error. As we have recited, plaintiffs
themselves suggested that a bond of $100,000, representing “six months’
of interest” at $15,000 per month (instead of the $35,700 per month proposed by
the Investors) would be appropriate.
Relying on a practice guide, plaintiffs argued that “ ‘an
Undertaking represented by monthly deposits of the interest owed on the
remaining indebtedness is one alternative. . . .’ ” The trial court ultimately set the bond for
“$90,000, to cover interest payments and reasonable attorney’s fees incurred by
defendants during the injunctive period.”
Thereafter, in opposing the motion to enforce liability on the bond,
plaintiffs did not argue that lost interest was an improper measure of damages.
was error, it was invited. A party who
affirmatively proposes a legal principle and/or who fails to oppose a ruling
based on that principle by the trial court cannot complain about such ruling
for the first time on appeal, under either the doctrine of estoppel, waiver, or
invited error. (See
383, 403; [invited error]; Hepner v. Franchise Tax Bd. (1997) 52
Cal.App.4th 1475, 1486, [waiver]; Hasson
v. Ford Motor Co. (1982) 32 Cal.3d 388, 420-421 [estoppel].)
Plaintiffs assert that the
Investors induced the error by making the original request to require an undertaking
sufficient to cover interest accruing under the loan. Plaintiffs maintain that they merely made
“ ‘the best of a bad situation’ ” by proposing either no bond or
$100,000 for six months of (lower) interest.
This contention, however, in no way explains plaintiffs’ complete
failure to oppose defendants’ proposed theory
of damage (loss of interest), nor does it explain plaintiffs’ own proposed
basis for issuance of a bond (loss of interest, at a lower rate).
in the court’s use of lost interest in establishing the amount of the bond and
in setting damages under the bond. They,
therefore, cannot complain on appeal that this was error.
We
turn, next, to plaintiffs’ contention that the antideficiency statutes and the
one judgment rule preclude an award of damages under the bond. Plaintiffs argue
that “the strong policy behind California’s antideficiency statutes
. . . .” preclude the Investors from recovering the lost
interest amount. The antideficiency
statutes and the one action rule, however, are immaterial to the issue at
hand. By seeking the interest accrued
during the injunctive period, the Investors were not attempting to obtain the
difference between the amount of the indebtedness and the fair market value of
the property following a foreclosure.
(See Alliance Mortgage, supra, 10
Cal.4th at p. 1236.) Rather, the
Investors were pursuing damages for the wrongful delay in the foreclosure sale.
Plaintiffs argue, nonetheless, that
Cal.App.2d 40 (Union Bank), casts
doubt on the award of interest in the instant case. Not so.
Union Bank does not involve a
bond or otherwise discuss the measure of damages in summary bond enforcement
proceedings. Rather,
cannot recover from a guarantor the unpaid balance on a note following a
nonjudicial foreclosure. (
statutes are simply not at issue in the instant case.
Plaintiffs assert that the $90,000
award was inflated and “particularly inappropriate” here due to the facts that
the Investors made a $2.2 million credit bid in December 2008, and they
eventually sold the property in April 2010 for $1 million. According to plaintiffs, the Investors could
not have claimed a loss of investment value of the full $3 million loan,
because when they ultimately foreclosed the property, the Investors’ credit bid
was only $2.2 million and 16 months later the property was worth only $1
million. The problem with this argument,
however, is that plaintiffs did not present any evidence that the property was
worth only $2.2 million (or $1 million) in July
2008 when plaintiffs sought to enjoin the sale. Indeed, it was plaintiffs’ opinion that in June 2008, the units could be sold,
generating gross sale proceeds of $4.9 million.
Thus, plaintiffs’ own estimation of the property’s value belies their
claim on appeal that the $90,000 was inflated and “particularly inappropriate”
in the instant case.
We next address plaintiffs’ claim
that the injunction did not proximately cause the Investors any harm because
they “never collected interest for the twelve months prior to the injunction or
for the fourteen months after the injunction up to dismissal of their
cross-complaint that sought unpaid interest.”
According to plaintiffs, “[t]his clearly shows the injunction did not
hamper the Investors in collecting interest for August, September and October
2008.” This specious argument fails to
recognize that the injunction delayed the sale of the property from July 2008
to December 2008, and thus prevented the Investors from receiving the proceeds
of the sale in payment of the loan. It
was the inability to sell the property during this five-month period that caused
the Investor’s damages, not the Investors’ purported failure to seek the
collection of interest payments from plaintiffs either before or after the
injunctive period.
In sum, the trial court did not err
in entering its award on the bond.
Plaintiffs
argued below, and argue here, that the Investors forfeited their
their interest to BR473, a limited liability company. This contention is without merit.
“[A] limited liability company is a
hybrid business entity formed under the Corporations Code consisting of at
least two members who own membership interests. The company has a legal
existence separate from its members.
While members actively participate in the management and control of the
company, they have limited liability for the company’s debts and obligations to
the same extent enjoyed by corporate shareholders. [Citations.]”
(Kwok v. Transnation Title Ins. Co. (2009) 170 Cal.App.4th 1562,
1571 (Kwok).) Under Corporations
Code section 17300, a member of a limited liability company “has no interest in
specific limited liability company property.” (Accord, Kwok, supra, 170 Cal.App.4th at pp.
1570–1571.) Furthermore, while a limited
liability company is usually regarded as an entity separate and distinct from
its members, under the alter ego doctrine, when necessary to avoid inequitable
results, a court may disregard the corporate entity and treat it and its
members as one and the same. (See Corp.
Code, § 17101, subd. (b); see also Katenkamp
v. Superior Court (1940) 16 Cal.2d 696, 700; People v. Pacific Landmark
LLC (2005) 129 Cal.App.4th 1203, 1212; Brooklyn
Navy Yard Cogeneration Partners v. Superior Court (1997) 60 Cal.App.4th 248, 257-258.)
“The alter
ego doctrine traditionally is applied to pierce the corporate veil so that a
shareholder may be held liable for the debts or conduct of the
corporation. Some courts recognize the
corporate veil may be pierced in reverse so that a corporation may be held
liable for the debts or conduct of a shareholder. (See Annot., Acceptance and Application of
Reverse Veil–Piercing—Third–Party Claimant (2005) 2 A.L.R.6th 195, § 2.) ‘The typical “reverse pierce” case involves a
corporate insider, or someone claiming through such individual, attempting to
pierce the corporate veil from within so that the corporate entity and the
individual will be considered one and the same.’ (1 Fletcher Cyclopedia of the
Law of Corporations (2006 rev. vol.) § 41.70, p. 258.) This is sometimes called ‘[i]nside reverse
piercing.’ (In re Phillips
(Colo.2006) 139 P.3d 639, 644–645.)” (Postal
Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1518.)
Plaintiffs argue that the Investors were not entitled
to recover on the bond because they assigned their respective interests to
BR473. According to plaintiffs, “reverse
piercing” of the corporate veil is not needed to avoid any inequitable results. We disagree.
“ ‘The conditions under which the
corporate entity may be disregarded, or the corporation be regarded as the alter ego of the stockholders,
necessarily vary according to the circumstances in each case inasmuch as the
doctrine is essentially an equitable one and for that reason is particularly
within the province of the trial court.’ ”
(Talbot v. Fresno-Pacific Corp. (1960) 181 Cal.App.2d 425,
431-432 (Talbot), italics omitted.)
From a recitation of the facts and
the application of the rules in the cases above-cited we conclude there was
sufficient evidence to support the findings of the court and judgment
entered. Capon v. Monopoly Game LLC (2011) 193 Cal.App.4th 344 (
not compel a contrary conclusion.
In
193 Cal.App.4th 344, which was decided by a different panel of this court, a
limited liability company was the purchaser of property in foreclosure but an
individual who was the principal of the entity claimed he would reside in the
home and that the entity was his “alter ego.”
(Id. at pp. 348, 351, 352-353.) The trial court had held that this intention
satisfied the exemption from Home Equity Sales Contract Act (Civ. Code, §§ 1695
et seq. [HESCA]) for a purchaser who intended to use the property as a
residence. (Capon, supra, 193 Cal.App.4th.
at p. 351.) The appellate court
reversed, holding that in order for the exemption to apply, the person who
takes title must be the same person
who resides on the property, and refusing to allow the equitable doctrine of
alter ego to be used to perpetrate an evasion of the statute by enabling legal
entities to structure transactions, have employees live in the property for a
brief period of time, and then re-sell the property for use by others. (Id.
at pp. 355-357.) The court further
observed that typically the alter ego doctrine is used to disregard a corporate
entity where it is being used by an individual to
other wrongful purpose. (
upon the doctrine to shield the defendants from liability under
HESCA. (Capon, supra, 193
Cal.App.4th at p. 357.) In refusing
to apply the doctrine, the court reasoned that the defendants failed to
identify inequitable results that would follow from the defendants’ attempt to
disregard the legal separateness of the limited liability company. (Ibid.)
The rule to be derived from
applied to avoid inequitable results not to eliminate the consequences of
corporate operations. (
356-357.) Here, the Investors did not
form BR473 to shield them from any liability.
Indeed, quite the contrary is evident from the record. The Investors assigned their pro rata
interest in the promissory note and deed of trust in order to handle the
foreclosure proceedings in an efficient manner; rather than proceeding with 65
individual notices and related recordings, the matter was effectively
consolidated into one unitary proceeding.
Plaintiffs have not established either below or on appeal any
inequitable results that would follow from disregarding the legal separateness
of BR473. Indeed, inequitable results
would follow from failing to
disregard the corporate form in the instant case. Here, plaintiffs, the defaulting borrowers who
wrongfully enjoined a foreclosure sale, are trying to shield themselves from
their own liability on the bond by using BR473’s corporate status to defeat the
rights of the Investors. Equity will not
countenance such a result. (See
431-432 [“A wrongdoer may not urge separate entity as a shield. [Citation.]”].)
In short, the trial court did not
err in concluding that the Investors’ assignment of their proportional collective
interest did not bar their rights to enforce the undertaking and recover
therefrom.
Fees on Appeal
“Where attorney’s fees are authorized by statute they are
authorized on appeal as well as in the trial court.” (People ex rel. Cooper v. Mitchell
Brothers’ Santa Ana Theater (1985) 165 Cal.App.3d 378, 387; see Morcos
v. Board of Retirement (1990) 51 Cal.3d 924, 927.) Section 996.480, subdivision (a)(2),
provides: “If the beneficiary makes a claim for payment on a bond given in an
action or proceeding after the liability of the principal is . . .
established and the surety fails to make payment, the surety is liable for
costs incurred in obtaining a judgment against the surety, including a
reasonable attorney’s fee, and interest on the judgment from the date of the
claim, notwithstanding Section 996.470[, which otherwise limits the liability
of sureties].” (§ 996.480, subd. (a)(2).)
Based on this section, the Investors
ask in their respondents’ brief that they be awarded attorney fees on appeal if
we affirm the judgment, which we do. We may entertain a request for fees by
motion in a brief, instead of by separate motion, if the brief offers “argument
or analysis on the subject.” (Banning
v. Newdow (2004) 119 Cal.App.4th 438, 459 [denying award when these
criteria not met]; Akins v. Enterprise Rent–A–Car Co. (2000) 79
Cal.App.4th 1127, 1130, 1134–1135 [awarding fees sought in brief].) Plaintiffs make no response to this request
in their reply brief.
The language of section 996.480,
subdivision (a)(2), mandates an award of fees against a nonpaying surety. Accordingly, the Investors are entitled to
recover reasonable attorney fees in successfully defending the judgment against
the surety on appeal. (See
Grade-Way, supra, 13 Cal.App.4th at pp. 837–838 [awarding fees and costs
on appeal based on section 996.480].)
The amount of fees shall be determined by the trial court pursuant to a
properly noticed motion. (See § 1033.5,
subd. (c)(5); Cal. Rules of Court, rule 3.1702(c).)
The judgment is affirmed. The Investors are entitled to costs on
appeal, and also to reasonable attorney fees on appeal to be determined by the
trial court.
_________________________
RIVERA,
J.
We concur:
_________________________
RUVOLO, P. J.
_________________________
REARDON, J.
Respondents are 65 individual
investors. For ease of reference, we
shall refer to respondents as either the “Investors ” or “defendants.”
“Hard money loans” carry much
higher interest rates than conventional loans.
(Arnold, Mortgages: Hard Money (2011)
44 No. 2 Mortgages & Real Estate Executives Report 7.) “The lenders are not commercial banks or
traditional lenders; instead they are often private investors familiar with
their local economy.” (
Hard money lenders rely on the value of the collateral rather than a
borrower’s income and credit score. (
