Judge: Michelle Williams Court, Case: BC661702, Date: 2023-03-02 Tentative Ruling
Case Number: BC661702 Hearing Date: March 2, 2023 Dept: 1
BC661702 LAZBEN
INVESTMENT CO VS LAWRENCE M DEUTSCH
Defendants and Cross-Complainants, and Cross-Defendants
Lawrence Deutsch Lawrence Deutsch, Jacob Deutsch, Jonah Deutsch, Aleksander
Deutsch, and Ester Deutsch’s Motion for Order Fixing Amount of Appeal Bond
Pursuant to Code of Civil Procedure § 917.4
TENTATIVE RULING:
Motion for Order Fixing Amount of Appeal Bond Pursuant to Code of Civil
Procedure § 917.4 shall be GRANTED, in part.
The Court shall set the bond amount at $1,701,555.87 plus the rental
value of the property determined at the hearing.
Background
On May 18,
2017, Plaintiff Lazben Investment Co. filed a complaint against Lawrence M.
Deutsch.
On August
17, 2018, Intervenor Andrew M. Deutsch filed a complaint in intervention
against Lawrence M. Deutsch alleging eight causes of action: (1) expulsion from
partnership, (2) breach of contract, (3) breach of covenant of good faith and
faith dealing, (4) breach of fiduciary duty of care, (5) breach of fiduciary
duty of loyalty, (6) accounting, (7) unjust enrichment, and (8) declaratory
relief.
On October
31, 2018, Lawrence Deutsch filed a cross-complaint against Cross-Defendants
Lazben Investment Co., Naftali Deutsch, Benjamin A. Deutsch, Andrew M. Deutsch,
Zachary I. Deutsch, Bookkeepers Unlimited Inc., Casa Lago, LLC, and All Persons
Unknown, claiming any legal or equitable right, title, estate, lien, or
interest in the property described in the cross-complaint adverse to Lawrence
Deutsch’s Title, or any cloud on Lawrence Deutsch’s title thereto.
On July
19, 2019, Cross-Defendant and Cross-Complainant Zachary Deutsch filed a
cross-complaint against cross-defendants Lawrence M. Deutsch, Deborah Deutsch,
Jacob Deutsch, Aleksander Deutsch, Esther Deutsch, and Jane Roe for (1)
expulsion from partnership, (2) breach of written partnership agreement, (3)
breach of implied covenant of good faith and fair dealing, (4) breach of
fiduciary duty of care, (5) breach of fiduciary duty of loyalty, (6)
accounting, (7) slander of title, (8) slander of title, (9) unjust
enrichment, (10) ejectment, (11) declaratory relief, (12) conversion, (13)
constructive trust and (14) conversion.
On April
2, 2019, Plaintiff filed the Second Amended Complaint against Lawrence M.
Deutsch, Deborah Deutsch, Jacob Deutsch, Aleksander Deutsch, Esther Deutsch,
Benjamin A. Deutsch and Andrew M. Deutsch, as trustees of the E.S.D. - Lawrence
M. Deutsch Trust UAD 12/17/73; Benjamin A. Deutsch And Andrew M. Deutsch, as
trustees of the N.D - L.M. Deutsch Trust UAD 12/17/73; Lawrence M. Deutsch and
Andrew M. Deutsch as trustees of the E.S.D.-Benjamin A. Deutsch Trust UAD
12/17/73, and the N.D -B.A. Deutsch Trust UAD 12/17/73; and all persons
unknown, claiming any legal or equitable right, title, estate, lien, or
interest in the property. The SAC asserted causes of action for: (1) breach of
contract; (2) breach of covenant of good faith and fair dealing; (3) breach of
fiduciary duty; (4) expulsion from partnership; (5) conversion; (6) quiet title
to the 2565 Benedict Canyon property; (7) quiet title to parcel 2 property; (8)
ejectment; (9) declaratory relief as to ownership and possession of 2565
Benedict Canyon property; (10) declaratory relief as to ownership and
possession of parcel 2 property; (11) constructive trust; (12) unjust enrichment;
and (13) accounting.
On July 8, 2019, the Court issued a
preliminary injunction enjoining Lawrence M. Deutsch, Jacob Deutsch, and
Aleksander Deutsch, and all those acting in concert or participation with them,
from interfering with or preventing Lazben from having full and unimpeded
access to the 2565 Benedict Canyon property, and from obtaining Certificates of
Occupancy or using or occupying any building or structure that does not have a
Certificate of Occupancy. On November 22, 2019, the Court entered the parties’
stipulated order to dissolve the injunction upon certain conditions.
On November 5, 2019, Lawrence Deutsch filed his
Second Amended Cross-Complaint asserting causes of action for: (1) quiet title,
(2) declaratory relief as to title, (3) constructive trust, (4) slander of
title, (5) judicial dissolution, (6) accounting, (7) breach of contract, (8)
breach of fiduciary duty, (9) intentional interference with contractual
relations, (10) intentional interference with prospective economic advantage,
(11) receivership, (12) fraud, (13) expulsion from partnership (Naftali
Deutsch), (14) expulsion from partnership (Benjamin Deutsch), (15) expulsion
from partnership (Andrew Deutsch), and (16) damages from ultra vires acts.
On
January 15, 2020, the parties to this action reached a Settlement Agreement,
Agreement to Arbitrate, and Release of Claims, which would disperse of
Plaintiff’s property.
On
October 7, 2021, the Court issued an order reinstating the July 8, 2019
preliminary injunction and ordered
Lawrence M. Deutsch “to turn over to Lazben Investment Co. (“Lazben”) all
documents relating to renting or otherwise using the 2565 Benedict Canyon
Property or any portion thereof and to turn over all proceeds received from
renting or otherwise using the 2565 Benedict Canyon Property or any portion
thereof, which were obtained in violation of the Court’s November 22, 2019
Order, within five (5) days.”
On
November 1, 2022, the Court granted Lazben’s Ex Parte Application for (1) a
Temporary Restraining Order and OSC re Preliminary Injunction; and (2) an Order
Specially Setting for Hearing Lazben's Motion (1) Expanding 10/7/2021 Order,
and (2) Authorizing Sale of Property. On December 1, 2022, the Court issued its ruling on
submitted matter granting Plaintiff’s request for injunctive relief and entered
a counsel prepared order on December 22, 2022. The Court’s order enjoined Defendants Lawrence, Jacob, Aleksander,
Jonah, and Esther, and each of them, and their respective agents, servants,
employees, or representatives, and all persons or entities acting under or in
participation or concert with them, . . . from:
a. renting, leasing, or licensing all
or any portion of the real property located at 2565 Benedict Canyon Drive, Los
Angeles, California (the “2565 Benedict Canyon Property”) to third parties for
any event or activity other than residential occupancy;
b. entering into any contracts or
agreements for the use of the 2565 Benedict Canyon Property for any event or
activity other than residential occupancy;
c. receiving or accepting any payment
or remuneration for the use of the 2565 Benedict Canyon Property for any event
or activity other than residential occupancy; and/or
d. permitting or allowing the use of
the 2565 Benedict Canyon Property for any event or activity other than
residential occupancy.
The
order also authorized Plaintiff to encumber or sell the property to “i. Satisfy
the outstanding balance on the mortgage loan from Preferred Bank to Lazben
secured by the 2565 Benedict Canyon Property in the amount of $2,187,173.71;
ii. Pay delinquent property taxes on the 2565 Benedict Canyon Property in an
amount in excess of $400,000; and iii. Pay for fire and liability insurance on
the 2565 Benedict Canyon Property.”
Defendants
and Cross-Complainants, and Cross-Defendants Lawrence Deutsch Lawrence Deutsch,
Jacob Deutsch, Jonah Deutsch, Aleksander Deutsch, and Ester Deutsch filed a
Notice of Appeal of this order.
On
February 24, 2023, the Court granted Plaintiff’s request for injunctive relief
and issued an order “enjoining Defendants and their respective agents,
servants, employees or representatives, and all persons or entities acting
under or in participation or concert with them, from obstructing or interfering
in any way with Lazben’s and its agents’ access to the real property located at
2565 Benedict Canyon Drive, Beverly Hills, California (the ‘2565 Benedict
Canyon Property’) for the purpose of touring, inspecting, photographing,
preparing and distributing marketing materials for, listing for sale, and
showing to prospective purchasers, the 2565 Benedict Canyon Property.”
Motion
On
February 6, 2023, Defendants and
Cross-Complainants, and Cross-Defendants Lawrence Deutsch Lawrence Deutsch,
Jacob Deutsch, Jonah Deutsch, Aleksander Deutsch, and Ester Deutsch
(hereinafter “Movants”) filed the instant motion pursuant to Code of Civil
Procedure section 917.4 requesting that the Court set the amount of their
appeal bond in the amount of $467,047.40.
Opposition
In
opposition, Plaintiff contends the Court’s December 22, 2022 order is not
appealable and the bond amount should include the equity held in the property,
the outstanding liens against the property, all outstanding property taxes, and
the reasonable rental value of the property. Plaintiff also contends Movants
failed to properly calculate insurance costs.
Reply
In
reply, Movants argue the appealability of the Court’s order is immaterial to
their motion, the bond amount should not include the claimed equity in the
property, Plaintiff miscalculated the state tax liens, and Plaintiff failed to
adequately evidence its asserted values for the insurance and rental value.
Movants
impermissibly cite an unpublished opinion in their reply. (Reply at 3:16-17.)
The Court disregards the citation. (Cal. R. Ct., 8.1115; Aguirre v. Amscan
Holdings, Inc. (2015) 234 Cal.App.4th 1290, 1299 n.5 (“Rule 8.1115 of the
California Rules of Court prohibits the citation of unpublished opinions of
California state courts, with certain limited exceptions. (Cal. Rules of Court,
rule 8.1115(a).)
Judicial Notice
Plaintiff
requests the Court take judicial notice of state tax liens, federal tax liens,
and mechanics liens recorded against the property as well as the Statement of
Information for JD Construction, Inc. on file with the Secretary of State.
These requests are GRANTED as to their existence and legal effect. (Evid. Code
§§ 452(c); 452(h).)
Plaintiff’s Evidentiary Objections
Plaintiff’s
objections to paragraph 6, 7, and Exhibit B are SUSTAINED. The remaining
objections are OVERRULED.
Movants’ Evidentiary Objections
Movants’
objection is SUSTAINED.
Motion
to Set Appellate Bond
Standard
Code of Civil Procedure
section 917.4 provides: “The perfecting of an appeal shall not stay enforcement
of the judgment or order in the trial court if the judgment or order appealed
from directs the sale, conveyance or delivery of possession of real property
which is in the possession or control of the appellant or the party ordered to
sell, convey or deliver possession of the property, unless an undertaking in a
sum fixed by the trial court is given that the appellant or party ordered to
sell, convey or deliver possession of the property will not commit or suffer to
be committed any waste thereon and that if the judgment or order appealed from
is affirmed, or the appeal is withdrawn or dismissed, the appellant shall pay
the damage suffered by the waste and the value of the use and occupancy of the
property, or the part of it as to which the judgment or order is affirmed, from
the time of the taking of the appeal until the delivery of the possession of
the property. If the judgment or order directs the sale of mortgaged real
property and the payment of any deficiency, the undertaking shall also provide
for the payment of any deficiency.”
Section 917.4 “requires an
undertaking to the effect that appellant will not commit waste, and, if the
judgment is affirmed, that he will pay the value of the use and occupation of
the property during the pendency of the appeal. While it is the function of the
trial judge to fix the size of the appeal bond, this discretion must be
exercised in a manner compatible with the potential injury which respondents
might suffer during the period of appeal.” (Vangel v. Vangel (1953) 116
Cal.App.2d 615, 632.) “Section 917.4, . . . requires an undertaking to insure
that ‘the Appellant or party ordered to sell, convey or deliver possession of
such property’ will not commit waste.” (Estate of Murphy (1971) 16
Cal.App.3d 564, 568.)
This
Court Does Not Determine the Appealability of the Order
In opposition, Plaintiff
contends the December 22, 2022 order is not an appealable order. (Opp. at
10:3-11:22.) However, the appealability of an order is a jurisdictional
question for the Court of Appeal, not this Court. (See generally Marsh v.
Mountain Zephyr, Inc. (1996) 43 Cal.App.4th 289, 297 (“The appealability of
the judgment or order is jurisdictional and an attempt to appeal from a nonappealable judgment or order will
ordinarily be dismissed.”); Chapman v. Tarentola (1960) 187 Cal.App.2d
22, 25 (“It is the duty of an Appellate Court on its own motion to dismiss an
appeal from an order which is not appealable.”); In re Anna S. (2010)
180 Cal.App.4th 1489, 1499 (“Generally the filing of a notice of appeal
deprives the trial court of jurisdiction of the cause and vests jurisdiction
with the appellate court until the reviewing court issues a remittitur.”).)
Plaintiff argues “pursuant
to Code of Civil Procedure § 916(a), ‘perfecting an appeal’ is a condition
precedent to a stay pending appeal. Here, Defendants have purported to appeal a
non-appealable order. As such, Defendants have not ‘perfected an appeal’ and
are not entitled to a stay of the December 22, 2022 Order notwithstanding their
willingness to post bond in an amount set by the trial court.” (Opp. at
11:18-22.) Plaintiff’s argument is contrary to California law. “[A]n appeal is
perfected when the notice of appeal is filed.” (Kroger Co. v. Workers' Comp. Appeals Bd. (2012) 210 Cal.App.4th
952, 959.) Movants filed a Notice of Appeal and therefore have perfected their
appeal within the meaning of the relevant statutes. Movants are therefore
entitled to request that this Court set the appropriate bond amount. (Code Civ.
Proc. § 917.4.)
Bond
Amount
In their initial motion,
Movants contend the appropriate bond amount is $467,047.40. (Mot. at 4:18,
9:22, 10:11.) As argued by Plaintiffs in opposition, Movants “do not explain
the underlying calculations supporting this number.” (Opp. at 17:24.) In reply,
Movants contend they “included [the following] in their Calculation of an
appeal bond:
-
Monthly
mortgage payments for 18 months = $312,522.84;
-
Monthly
cost for landscaping & gardening for 18 months = $90,945.00;
-
Monthly
cost for water and power for 18 months = $15,639.12; and
-
Monthly
cost for housekeeping for 18 months = $42,570.00.”
(Reply at 4:10-16.) These numbers total
$461,676.96. In opposition, Plaintiff requests the Court set the bond at
$42,354,478.20 consisting of the following:
-
$40
million of equity in the Property at risk;
-
$558,140.23
for unpaid property taxes for the Property;
-
$785,661.02
for Lawrence’s outstanding personal liens;
-
$1,010,676.96
for 18 months of Carrying Expenses; and
-
$900,000
for 18 months of the reasonable rental value of the Property.
(Opp. at 19:9-18.)
After reviewing Plaintiff’s opposition,
Movants contend “the highest amount [they] should be required to post an appeal
bond should be in the amount of $1,866,908.67” consisting of:
-
$485,506.92
for 18 months of Carrying Expenses;
-
$558,140.23
for outstanding property taxes on the Property;
-
$681,738.68
for outstanding personal liens; and
-
$141,522.84
for 18 months of the reasonable rental value of the Property.
(Reply at 6:23-7:3.)
As to the bond amount, Movants and
Plaintiff disagree regarding the value of the insurance premiums as part of the
Carrying Expenses, (Reply at 4:17-5:5), the total liens on the property, (Id.
at 5:7-9), the potential monthly rental income for the property, (Id. at
5:17-6:3), and whether the $40 million in equity should be considered. (Id. at
6:5-22.) Movants suggested, and Plaintiff did not dispute, an 18-month duration
of the appeal to serve as the basis for the bond calculation. The Court finds
this reasonable.
Movants contend the annual insurance
premiums on the property are $15,886.65. (Deutsch Decl. ¶ 6 (“Preferred Bank,
the Property’s insurance provider, has informed me that the annual premiums for
homeowner’s insurance coverage on the Property are $15,886.65.”).) The Court
sustained Plaintiff’s objection to this statement on hearsay grounds. Plaintiff
contends Preferred Bank is the lender, not an insurance provider, and it
purchased forced added insurance solely to cover its principal. (Bolstad Decl.
¶¶ 21-23, Ex. J.) Accordingly, “the bank, at the expense of Lazben, insures its
potential loss, but does not insure Lazben or its general partners.” (Id. ¶
23.) Plaintiff’s calculation includes insurance of $366,000.00. (Opp. at
14:3-8.) However, Plaintiff’s calculation is supported by the admitted
“guesswork” of an insurance broker without evidence or support. (Goodman Decl.
Ex. A.) As neither party has provided any admissible evidence regarding the
claimed insurance and accuse each other of being responsible for, but not
paying the insurance, the Court shall not include any value for insurance in
the calculation.
As to the liens against the property,
Plaintiff’s opposition contends the State of California record[ed] multiple tax
liens against the Property amounting to $329,847.40, before the accrual of
interest and penalties” due to Lawrence Deutsch’s failure to pay personal
income taxes. (Opp. at 14:27-15:4.) In reply, Movants contend the state tax
liens total $225,925.06, but does not contest the amount of the other liens
identified by Plaintiff. (Reply at 5:7-9.) Plaintiff’s counsel states “True and
correct copies of state tax liens recorded against the Property are attached
hereto as Exhibit M.” (Bolstad Decl. ¶ 25.) Exhibit M contains four Notices of
State Tax Lien in the amounts of $50,344.05, $103,261.18, $22,068.97, and $50,250.86.
(Id. Ex. M.) The sum of these four liens is $225,925.06 as stated by Movants.
Accordingly, the Court shall use $225,925.06 as the state tax lien amount.
Movants contend the bond should include
rental income of “$7,862.38 per month, i.e., is the difference of the monthly
mortgage payments [$17,362.38] and the monthly rental income [$9,500.00].” (Mo.
at 9:10-16.) The $9,500.00 monthly rental income is solely for the “lower
house” on the property. (Deutsch Decl. Ex. E.) The Court finds no basis for this
calculation to serve as the “value of the use and occupancy of the property”
under Section 917.4. The Court agrees with Plaintiff that the use and occupancy
value of the property can be established by its reasonable market rental rate,
which is not approximated by subtracting the mortgage payments from the amount
obtained by the rental of only the “lower house.”
In opposition, Plaintiff provides a
printout purportedly from the website Zillow to contend the rental value should
be no less than $50,000.00 per month. (Opp. at 18:15-20; Bolstad Decl. Ex. Q.)
The Court sustained Movants’ objection to this document, which is also an
incomplete copy of the website it purports to represent and indicates the
property is 2,338 square feet. Plaintiff’s memorandum of points and authorities
indicates that the lower house is “approximately 4,000 square feet,” (Opp. at
18:15), and the main building is a “25,000 square foot house.” (Opp. at 17:26.)
However, neither party has provided evidence of the square footage of either
building. (Cole v. Town of Los Gatos
(2012) 205 Cal.App.4th 749, 767 n.8 (“It goes without saying that statements in
a memorandum of points and authorities are not evidence.”).)
At the hearing, the parties must be
prepared to demonstrate the square footage of the “lower house” and the main
house. The Court shall calculate the monthly rental value for the property by:
(1) calculating a price per square foot rental value based upon the $9,500.00
obtained for the “lower house,” (2) multiplying the price per square foot by
the square footage of the main house, and (3) adding $9,500.00 to the
calculated rental value of the main house. The Court will then multiply this
monthly rental value by the applicable 18-month period and add this amount to
the other amounts determined herein.
Finally, Plaintiff contends the bond
amount should include $40 million in equity. (Opp. at 5:17, 11:23-12:25,
17:10-17.) Plaintiff cites no authority in support of this request and does not
adequately evidence that the entire equity of the property is reasonably at
risk during the pendency of the appeal. Plaintiff’s primary concern regarding
the claimed equity appears to be a foreclosure sale. (Opp. at 5:17-18 (“the
potential loss of the $40 million in equity in the Property resulting from a
non-judicial foreclosure of the outstanding mortgage loan”); Opp. at 12:13-14
(“the potential injury to Lazben and its general partners is catastrophic—the
foreclosure of the Property and the loss of equity in a $40 million
property.”): Opp. at 16:5-8 (“there is a substantial risk that Lawrence will
not pay off the balance of the loan as he agreed to do in the Settlement
Agreement and Term Sheet, resulting in the foreclosure and loss of the
Property. Such a loss will be catastrophic to Lazben, as Lazben will lose at
least $40 million worth of equity.”).) However, it is not reasonable to
conclude a foreclosure sale would result in the total loss of all equity on the
property. Moreover, Plaintiff’s claimed equity does not appear to fall within
the bond contemplated by Code of Civil Procedure section 917.4. Accordingly,
the Court shall not include the claimed equity in the calculation.
Based upon the foregoing, the Court
shall set the bond amount based upon $ $461,676.96 for 18 months of carrying
expenses, $558,140.23 in outstanding property taxes on the Property,
$681,738.68 for outstanding personal liens, and the reasonable monthly rental
value of the property for the 18-month period based upon the rental price per
square foot to be determined at the hearing.
Accordingly, the Court shall set the
bond amount at $1,701,555.87 plus the rental value of the property determined
at the hearing.