Tsao v. Knabb

Filed 4/29/08 Tsao v. Knabb CA6

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SIXTH APPELLATE DISTRICT

The original appellants in this appeal were Pegasus Wireless Corporation and Jasper Knabb. They appealed from the trial courts preliminary injunction directing Pegasus to turn over certain stock certificates located in its Florida offices in response to a sheriffs levy on the certificates in Alameda County under a right to attach order and writ of attachment issued in Chich-Hsing Alex Tsaos favor against Pegasus. They also appealed from the trial courts order decreasing the amount of the attachment bond from $1,000,000 to $25,000.

On appeal and below, Pegasus and Knabb were jointly represented. But before their opening brief was due, their counsel filed a motion to withdraw, which was later granted.[1] The order permitting counsels withdrawal notified Pegasus that as a corporation, it could not represent itself and that if it did not obtain legal counsel to represent it in this court within 30 days thereof, its appeal would be dismissed. Having failed to secure counsel within that period, Pegasuss appeal was later dismissed, leaving only Knabbs appeal for disposition.

After our review of the record, we conclude that Knabb lacks standing to appeal from the orders as he is not a party aggrieved thereby. The orders directed only Pegasus to turn over the share certificates and related to a right to attach order that affected only Pegasuss corporate property. Knabbs appeal is accordingly dismissed.[2]

BACKGROUND

I. Factual Background

In 2006, Tsao was the Chief Executive Officer and Chairman of the Board of Directors of Pegasus, which began publicly trading its stock on the NASDAQ Global Market in April of that year. As a result of a dispute concerning Tsaos pledge of company stock as collateral for a loan, in June 2006, he lost his position as an officer and director of the company. Later, in August 2006, Tsao and Pegasus entered into a written Non-Compete and Retirement Agreement under which Pegasus agreed to pay Tsao a total of $2,810,000 in installments, the first $2,000,000 of which was due to be paid by August 22, 2006 and the balance of $810,000 in monthly installments over a five-year period.

Pegasus did not pay the $2,000,000 installment when it was due and contended that between its execution of the agreement in early August and the date that the $2,000,000 payment was to be paid, it learned that Tsao had made material misrepresentations to the company in breach of his fiduciary obligations. Pegasus has not made any payments under the agreement.

II. Procedural Background

As a result of Pegasuss failure to pay Tsao sums due under the retirement agreement, on September 8, 2006, Tsao sued Pegasus and Jasper Knabb, its president. The pleadings are not included in the record but we gather that Tsaos claims against Pegasus included a cause of action for breach of written contract alleging breach of the retirement agreement. We further gather that Pegasus filed a cross-complaint that included a claim for rescission of the contract based on Tsaos alleged fraud and breach of fiduciary duty.

Based on the contract claim, on October 6, 2006, Tsao filed an application against Pegasus only for a right to attach order and for issuance of a writ of attachment as a prejudgment, provisional remedy in order to secure his otherwise unsecured claim against Pegasus. The application sought to attach all Pegasuss corporate property that was subject to attachment. On November 6, 2006, the court granted the application over Pegasuss opposition and issued the right to attach order and writ of attachment, setting the attachment bond at $1,000,000. After Tsao posted the bond, on November 17, 2006, the sheriff levied on the writ at Pegasuss Fremont facility. The writ sought to attach certificates of stock that Pegasus held in two of its privately held subsidiariesAMAX Engineering Corporation and AMAX Information Technologies, Inc.and $250,000 cash.

In response to the levy, on November 27, 2006, Pegasus issued a memorandum of garnishee, which stated that Pegasus did not have the AMAX stock certificates in its possession. Tsao then realized that he in fact had the stock certificates, which he sent to Pegasuss Fremont facility by Federal Express and they were delivered on January 3, 2007. Pegasus received the shares and immediately sent them to its corporate headquarters in Florida, where it contended it kept all corporate records and documents.

On January 5, 2007, the sheriff again levied on the writ of attachment at Pegasuss Fremont facility, specifically seeking possession of the AMAX shares. On January 19, 2007, Pegasus issued a memorandum of garnishee in response to this levy. It asserted again that Pegasus could not comply with the levy as to the AMAX stock certificates because they were not physically located in Fremont, the shares having been sent to Florida.

The writ of attachment having been returned unsatisfied with respect to the AMAX shares, Tsao filed an application for preliminary injunction requesting an order directing Pegasus to, in effect, turn over the AMAX stock certificates to the sheriff under the writ of attachment. The motion also sought to have the attachment bond reduced. It did not seek any relief against Knabb.

Pegasus opposed the motion but the court granted it, ultimately directing Pegasus in its written order to deliver to the Alameda County Sheriff . . . (a) stock certificates representing 2,004,622 shares of common stock AMAX Engineering Corporation, and (b) stock certificates representing 2,004,622 shares of common stock of AMAX Information Technologies, Inc. by no later than April 18, 2007. The order further reduced the attachment bond from $1,000,000 to $25,000.[3]

Pegasus and Knabb timely appealed from the orders.[4]

The opening brief was originally due to be filed in this court by August 9, 2007. On August 7, 2007, appellants Pegasus and Knabb, through their counsel, sought an extension of time within which to file the brief, which was granted such that the brief was due by September 10, 2007. On August 23, 2007, appellants counsel filed both a motion to withdraw as counsel and a second request for extension of time within which to file the opening brief. Tsao opposed the request for extension and this court denied it. The opening brief was then filed on September 25, 2007, while counsels motion to withdraw was still pending.

On October 23, 2007, this court granted appellants counsels motion to withdraw. The order notified Pegasus that as a corporate entity, it may not appeal in this court without counsel of record and that the failure to secure substitute counsel within 30 days of the date of this order may result in dismissal of [Pegasuss] appeal. On November 28, 2007, Pegasus having failed to secure counsel to represent it on appeal, its appeal was dismissed. The order provided that Knabbs appeal would proceed in due course.

Tsao filed his respondents brief in this court on October 25, 2007, and the parties have waived oral argument.

DISCUSSION

Notwithstanding an appealable judgment or order, an appeal may be taken only by those who have standing to appeal. The standing requirement is jurisdictional and cannot be waived. (United Investors Life Ins. Co. v. Waddell & Reed, Inc. (2005) 125 Cal.App.4th 1300, 1304; Marsh v. Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289, 295.) It is embodied at Code of Civil Procedure section 902, which provides that a party who is aggrieved may appeal. A party is aggrieved in this sense if his rights or interests are injuriously affected by the judgment [or order]. (County of Alameda v. Carleson (1971) 5 Cal.3d 730, 737.) The rights or interests  injuriously affected  must be  immediate, pecuniary, and substantial and not nominal or a remote consequence of the judgment [or order]  (ibid.) and must be recognizable by law. (In re Pacific Std. Life Ins. Co. (1992) 9 Cal.App.4th 1197, 1201.)

 [A]s to the question who is the party aggrieved, the test . . . seems to be the most clear and simple that could be conceived. Would the party have had the thing, if the erroneous judgment had not been given? If the answer be yea, then the person is the party aggrieved. But his right to the thing must be immediate, and not the remote consequence of the judgment, had it been differently given.  (Crook v. Contreras (2002) 95 Cal.App.4th 1194, 1201.)

Although Code of Civil Procedure section 902 is considered a remedial statute, which should be liberally construed in favor of the right to appeal, the issues sought to be appealed must still injuriously affect the party appealing. Parties may not take an appeal based on error that injuriously affected only a nonappealing co-party or otherwise did not affect his or her own rights. (Estrada v. RPS, Inc. (2005) 125 Cal.App.4th 976, 985; Rebney v. Wells Fargo Bank (1990) 220 Cal.App.3d 1117, 1128.) For example, a person who is bound by res judicata has standing to appeal even if not a party of record. But standing to appeal in this situation exists only when the res judicata effect is immediate, pecuniary, and substantial. (In re Carissa G. (1999) 76 Cal.App.4th 731, 736; Marsh v. Mountain Zephyr, Inc., supra, 43 Cal.App.4th at pp. 295-297; Consumer Advocacy Group, Inc. v. Kintetsu Enterprises of America (2006) 141 Cal.App.4th 46, 58.)

Applying these standing principles here, it is clear that Knabb is not a party aggrieved by the orders under appeal. First of all, Tsao did not seek a writ of attachment against Knabb and the right to attach order and writ of attachment do not affect him or his property. Secondly, the preliminary injunction directing Pegasus to turn over shares of stock in other subsidiary corporations that it owns does not order Knabb, personally, to do anything. Third, the order lowering the amount of the attachment bond does not affect Knabb for the same reason that the underlying right to attach order and writ of attachment do not.

Under these circumstances, Knabb is not an aggrieved party because he is not injuriously or directly affected by the orders under appeal in any immediate, pecuniary, or substantial way. Knabb accordingly lacks standing to pursue an appeal from them.

DISPOSITION

Jasper Knabbs appeal from the trial courts orders of April 5, 2007, is dismissed.

Duffy, J.

WE CONCUR:

Mihara, Acting P.J.

McAdams, J.

Publication courtesy of California pro bono lawyer directory.

Analysis and review provided by Chula Vista Property line attorney.

San Diego Case Information provided by www.fearnotlaw.com

[1] The motion to withdraw was not granted before the opening brief was due. Accordingly, with their motion to withdraw pending, counsel for Pegasus and Knabb prepared and filed the opening brief. After counsel was relieved, Knabb did not file a reply brief or request oral argument.

[2] We requested Knabb to show cause by letter brief why his appeal should not be dismissed for lack of standing but he declined to do so.

[3] There are two written orders in the record granting the motion, both filed April 5, 2007. One appears to have been prepared by the court and it states that the motion for preliminary injunction is granted and the undertaking is reduced to $25,000, providing some legal justification for each statement and referring to both defendants Pegasus and Knabb. But that order does not direct any conduct to be undertaken by either defendant. The other order, prepared by Tsaos counsel, is consistent with the fact that the writ of attachment was issued only against Pegasus, not Knabb, and it provides the actual injunctive relief by directing Pegasus to perform a particular act by a date certain.

[4] The appeal is from both similar orders dated April 5, 2007.