Galaz v. Oshita

Filed 5/30/06  Galaz v. Oshita CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b).  This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

            APPEALS from a judgment and an order of the Superior Court of Los Angeles County.  Ricardo A. Torres, Judge.  Judgment affirmed.  Order affirmed in part and reversed in part with directions.

            Rogers & Harris and Michael Harris for Defendant and Appellant.

            Pick & Boydston and Brian D. Boydston for Plaintiff and Respondent.

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            In this dispute involving ownership of interests in two limited liability companies, defendant Marian Oshita appeals from a judgment rescinding the sale to her of a 37.5 percent interest in the companies and awarding to plaintiff Lisa Galaz damages of $18,750 and a postjudgment order awarding Galaz approximately $104,000 in attorney fees and costs under Corporations Code section 17106, subdivision (g).^[1]  We affirm the judgment, rejecting Oshita's claims of error and insufficiency of the evidence to support a rescission of the sale based on lack of consideration.  But we reverse the order of attorney fees because Galaz failed to establish which, if any, of the fees sought were attributable to efforts to seek Oshita's compliance with Corporations Code section 17106 and were not already included in the jury's award of damages.

BACKGROUND^[2]

            In 1998 and 1999, Raul Galaz, an attorney and then the husband of plaintiff Galaz, formed two limited liability companies, one in California and one in Texas, in order to prosecute and collect cable and satellite retransmission royalties on behalf of clients.  Raul was president of both companies, Worldwide Subsidy Group  – California (WSG-California) and Worldwide Subsidy Group  – Texas (WSG-Texas) (referred to collectively as WSG).  Raul had a 75  percent interest and Oshita a 25  percent interest in WSG.  Oshita worked out of her home in Los Angeles and Raul worked out of his home in Texas.  Up to February 2003, Raul maintained the books and records of WSG at his home in Texas.  Raul and Oshita were not paid salaries by WSG but received shares of the profits according to their ownership interests.

            In August 2001, Raul was being investigated by federal authorities for mail fraud, not involving WSG, but arising out of his theft in 1995 of over $300,000 in royalties by falsely claiming to own rights to a cartoon program.  Raul took $50,000 from one of WSG's accounts to pay his criminal defense attorneys in August 2001.  Raul believed that his criminal attorneys were also working on behalf of WSG.  In February 2002, Raul pleaded guilty to one count of mail fraud but did not begin serving his sentence until February 2003.  Before Raul went to prison in February 2003, he gave Galaz a power of attorney.  Raul continued to maintain the books and records of WSG until February 2003.  Raul was released from prison in May 2004.

            Meanwhile, in March 2002, Galaz began divorce proceedings.  Pursuant to a May  6, 2002 agreement incident to the divorce, which was incorporated into the Texas court's final divorce decree of May  7, 2002, Galaz received half of Raul's 75  percent interest, or a 37.5  percent interest, in WSG.  Galaz's receipt of a 37.5  percent interest in WSG pursuant to the divorce decree is not at issue on this appeal. 

            In May 2002, Galaz and Raul were living in the same house in Texas when Oshita came to stay with them for several days.  On May  14, 2002, Raul drafted, and he and Oshita signed, a Rights Purchase Agreement by which he sold his remaining 37.5  percent ownership interests in WSG to Oshita for $50,000 â€