Judge: Douglas W. Stern, Case: BC721119, Date: 2023-06-30 Tentative Ruling

Case Number: BC721119    Hearing Date: November 8, 2023    Dept: 68

Content Checked Holdings, Inc. vs. RBSM, LLP, BC721119

Motion for Judgment Notwithstanding the Verdict

Motion for New Trial

Motion for Prejudgment Interest

Moving Party: Plaintiff Content Checked Holdings, Inc

Motions

            These motions are moot in light of the fact that the Court ruled on October 30, 2023, that Defendant RBSM’s motion for nonsuit was granted on the basis that RBSM has proven that Plaintiff Content Checked Holding (CCH) has unclean hands and is in pari delicto. Because CCH had unclean hands, the Court ruled that CCH shall take nothing on its complaint pursuant to Peregrine Funding, Inc. v. Sheppard Mullin, Richter & Hampton LLP (2005) 133 Cal.App.4th 658. Though the motions are moot, the Court will briefly address them on their merits.

I.                   Motion for Judgment Notwithstanding the Verdict.

CCH argues that the jury should not have awarded its verdict based on CCH’s settlement with Hillair Capital Management because CCH argues that its settlement reflected the reduced amount it was able to negotiate rather than the total amount that CCH actually owed Hillair.  This, claims CCH was a collateral source and the jury should have awarded it the full amount of what it originally owed Hillair, not the amount is negotiated.

The collateral-source rule only applies when a third-party source compensates an injured party for his or her loss. (See Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d 725, 729.) CCH settled with Hillair because it lacked funds and other assets to satisfy its debt to Hillair.  Its funds had been squandered and stolen by Finstad. Per the settlement, CCH only had to pay $985,877, meaning that CCH was only damaged in that amount. This is not a collateral source because CCH was not receiving compensation for its injuries or payment for a loss. (Miller v. Ellis (2002) 103 Cal.App.4th 373, 378-79.)

CCH’s motion for judgment notwithstanding the verdict is denied.

II.                Motion for New Trial

CCH moves for a new trial on three issues: the collateral source rule argument, the value of the shares of stock that Finstad took, and a summary judgment order granted in favor of RBSM in 2020.

A.    Collateral Source Rule

The Court denies CCH’s motion for new trial on the basis of the collateral source rule for the same reasons given above under CCH’s motion for JNOV.

B.     Stock Shares

CCH argues that when Finstad issued himself shares in September 2015, they were worth $0.96 a share, so he received shares worth over a million dollars. When he gave back the shares, they were worth nothing. However, there was no economic consequence to the company. Only pieces of paper existed.  Stock given.  Stock given back.  No money ever moved in any direction.  No action was taken by anyone as a result of the stock being given to Finstad.

Further, CCH is wrong is claiming that the only evidence of the value of the stock when given to Finstad was provided by the testimony of its expert.  On the contrary, the jury learned that the market lacked correct information about the fact that Finstad had already stolen all the cash (and had provided a forged bank account statement to its auditors), there were no assets, and the company was essentially a bankrupt empty shell run by a crook.  A rational jury could have found that the true value of the stock when given to Finstad was zero.  The Jury did not have to accept the expert’s testimony as to value when the expert purposefully omitted from his analysis the facts related to the condition of the company.  The jury correctly concluded that nothing of value was given and no loss was ever experienced.

The jury was correct in determining that CCH did not lose any money when Finstad took the stocks. The Court denies CCH’s motion for new trial on the stock shares issue.

C.    Summary Judgment Issue

            CCH argues that because Judge Mooney granted a summary judgment motion in RBSM’s favor on a breach of contract claim back in 2020, then the jury’s verdict finding RBSM was negligent conflicts with that decision. CCH wants the Court to either vacate the summary judgment decision or grant a new trial.

First, all the possible deadlines to vacate or reconsider the summary judgment motion under CCP §§ 663, 473, and 1008 have long since passed. From a procedural standpoint, the Court will not reconsider the summary judgment motion.

Further, the award for the services rendered by RBSM is not going to be eliminated by virtue of the fact that CCH defrauded the accountant by providing a forged bank statement. RBSM did the work, but it did not catch that CCH was lying to it and providing it false information. Though the jury found that RBSM was negligent, CCH is not relieved of its liability because RBSM did not catch that CCH was lying to it. CCH cannot take advantage of its wrong, particularly in light of the fact that this Court found that CCH had unclean hands.

The Court does not vacate the summary judgment order. CCH’s motion for new trial on this issue is denied.

III.             Motion for Prejudgment Interest

            Given that Court ruled that CCH shall take nothing on its complaint, there is nothing upon which to base the interest. However, the Court denies the motion for prejudgment interest based on the following.

Under Civ. Code § 3287, where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate. (Duale v. Mercedes-Benz USA, LLC (2007) 148 Cal.App.4th 718.) Further, “interest cannot be awarded prior to judgment when the amount of damages cannot be ascertained except on conflicting evidence. The rationale of such rule is that where the amount of damages is in dispute, i.e., cannot be resolved except by verdict or judgment, an award of prejudgment interest is not appropriate.” (Iverson v. Spang Industries, Inc., (1975) 45 Cal.App.3d 303, 312; Conderback, Inc. v. Standard Oil Co. (1966) 239 Cal.App.2d 664, 689-690.) Damages are deemed certain or capable of being made certain within the provisions of subdivision (a) of § 3287 where there is essentially no dispute between the parties concerning the basis of computation of damages if any are recoverable. (Wisper Corp. v. California Commerce Bank (1996) 49 Cal.App.4th 948, 958.)

This case was not one where pre-judgment interest could be awarded.  The issue of the negligence of defendant was not the only issue that had to be resolved in order to get to the damages.  CCH’s case was dependent upon a determination of a causation chain that was subject to dispute.  While defendant failed to catch Finstad’s forgery and his theft of virtually all of the CCH funds, that which was to follow in the way of damages, and whether it was to be determined to be the consequence of the negligence of defendant or other causes involved a chain of events that makes this case inappropriate for an award of pre-judgment interest.

In this case, the amount of damages was only determinable until the parties obtained the verdict of the jury. Therefore, prejudgment interest is not appropriate.  The Motion for interest is denied.

IV.             Order

The Court denies CCH’s motions for JNOV, new trial, and prejudgment interest.