Judge: Mitchell L. Beckloff, Case: BC567865, Date: 2023-01-27 Tentative Ruling

Case Number: BC567865    Hearing Date: January 27, 2023    Dept: 86

KHORSHIDI v. JAVAHERI

Case Number: BC567865

Hearing Date: January 27, 2023

[Tentative]       ORDER DENYING MOTION FOR NEW TRIAL

Plaintiffs, Michael Khorshidi and Nejatolah Rabbanian (jointly, K&R) move for a court order granting a new trial and/or an order setting aside the court’s Judgment After Remand of November 21, 2022, pursuant to Code of Civil Procedure section 657. Defendants, Alexander Javaheri and David Javaheri (jointly, the Javaheris), oppose the motion.

The motion is denied.

K&R’s request for judicial notice of Exhibits A through H is granted.

RELEVANT PROCEDURAL HISTORY

The procedural history of this case extends almost a decade. This court has presided over the case nearly since its inception.[1] The court notes the Court of Appeal opinion in Khorshidi, et al. v. Javaheri, et al., Court of Appeal Case No. B285132 contains a fulsome recitation of the relevant history of the litigation, and this court need not repeat them. (Mot., RJN Ex. C.) The court is extremely familiar with the parties and the underlying disputes.

ANALYSIS

K&R argue the court’s Judgment must be set aside and a new trial be had based upon

(1) irregularity in the proceedings of the court and/or any order of the court and/or abuse of discretion by which K&R were prevented from having a fair trial; (2) surprise, which ordinary prudence could not have guarded against; (3) the Judgment being against law; and (4) error in law.

The “ ‘right to a new trial is purely statutory, and a motion for a new trial can be granted only on one of the grounds enumerated in the statute.’ ” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1193.)

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Irregularity:

K&R argue the court’s ruling based on the setoff of the Javaheris’ damages with prejudgment interest calculated and K&R’s damages without any prejudgment interest factored in constitutes a departure by the court from the due and orderly disposition of the case which has materially affected K&R.

A new trial may be granted where there is an “[i]rregularity in the proceedings” that deprived a party of a fair trial. (Code Civ. Proc., § 657, subd. 1.) “No accurate classification of such irregularities can be made, but it is said that an overt act of the trial court, jury, or adverse party, violative of the right to a fair and impartial trial, amounting to misconduct, may be regarded as an irregularity.” (Gray v. Robinson (1939) 33 Cal.App.2d 177, 182.) The statute's language “is sufficiently broad to include any departure by the court from the due and orderly method of disposition of an action by which the substantial rights of a party have been materially affected.” (Gay v. Torrance (1904) 145 Cal. 144, 149.)

K&R argue they are entitled to prejudgment interest on their damage award of $89,364.90. According to K&R, the prejudgment interest on this award amounts to $692,301.54 (principal plus interest). (Gizer Decl., ¶ 10, Ex. I.) 

The Court of Appeal “remanded for retrial on the limited issue of prejudgment interest asserted in the Javaheris’ motion for new trial filed in April 2018; in all other respects, the judgment is affirmed.” (Mot., RJN Ex. C, p. 76.) To be clear, the “issue of prejudgment interest asserted in the Javaheris’ motion for new trial” was as follows:

“Specifically, the court determined that the loan was repaid in February 2010, and that the principal balance at that time was $2,761.00. This was not the finding Plaintiff’s pled or requested. Accordingly, [the Javheris] were each entitled to receive $276,00.00 from the distributions due Plaintiffs as of that date. As Defendants could not collect the surcharge on March 1, 2010 they were entitled to interest at the legal rate of (10%) until the balance was paid. The court erred in awarding Plaintiff’s damages for surcharges collected in excess of the $276,100.00, without computing the interest due on that amount until the $276,100.00 was paid in full.” (Amended Notice of Intention to Move for New Trial, filed April 13, 2018.)

K&R position they are owed prejudgment interest by the Javaheris ignores the Javaheris’ injury—the failure of K&R to pay them $276,100—on March 1, 2010. K&R’s claimed damages were effectively payments made toward K&R’s obligation to the Javaheris. As of March 1, 2010, K&R owed each of the Javaheris $276,100. Moreover, K&R’s position today is specifically at odds with their position before the court on August 3, 2017 when K&R argued any prejudgment interest to which they were entitled did not begin to accrue until June 15, 2015 when the Javaheris’ diversions from the joint venture’s distributions exceeded $276,100 for each of the Javaheris. (See Plaintiffs/Majority Partners’ Memorandum of Points and Authorities in Support of Motion for New Trial filed August 3, 2017, p. 4.)[2]

K&R also take issue with this court’s purported “procedural missteps” with respect to entry of the Judgment. (Mot., 11:22-12:8.) As noted by the Javaheris, K&R must demonstrate they were materially and substantively affected by such procedural errors. The court agrees—based on this decision—K&R has identified no prejudice from the court’s purported procedural errors. While K&R complain about an alleged “miscarriage of justice,” the Judgment is accurate. Other than their disagreement with the court’s decision, K&R fail to identify how the Judgment fails to reflect the court’s orders after remand. (See Order on Remand filed November 7, 2022. [“Plaintiffs shall pay to Defendant Alexander Javaheri $44,735.33.” “Plaintiffs shall pay to Defendant David Javaheri $32,528,56.”])

The court finds K&R have not met their burden of demonstrating any irregularity in the proceedings in the context of Code of Civil Procedure, § 657, subdivision 1. Accordingly, their request for a new trial on grounds of irregularity is denied.

Surprise:

K&R also argue they are entitled to a new trial based on surprise. Specifically, K&R asserts the court requested the parties brief the Javaheris’ entitlement to prejudgment interest. They complain, “Never were the parties asked to brief the Javaheris’ entitlement to prejudgment interest award on the award in favor of K&R, and the parties did not brief the issue.” (Mot., 8:23-27.) K&R report, “Nowhere did the Javaheris argue in their briefing on remand that an award of prejudgment interest in their favor would flip the Court’s prior judgment.” (Mot. 9:1-2.)

A “trial court may order a new trial based on surprise.” (McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 305, citing Code Civ. Proc., § 657, subd. 3.) “The surprise must have detrimentally impacted the party moving for a new trial, but the movant must not have been able to prevent or guard against it by ordinary prudence.” (McCoy v. Pacific Maritime Assn., supra, 216 Cal.App.4th at p. 305.)

K&R argue when the court awarded prejudgment interest to the Javaheris, the court—to K&R’s surprise—flipped the judgment[3] without any further briefing. Further, the court determined the Javaheris made improper distributions (to the detriment of K&R) but did not factor in any prejudgment interest for K&R, which was also a surprise to K&R.[4] That is, “K&R are moving for a new trial because the Court’s judgment went beyond the issues framed by the Court of Appeal and the Court’s order setting the limited trial on the Javaheris’ entitlement to prejudgment interest.” (Reply 8:4-6.) Finally, K&R suggests the court’s actions punished K&R’s misconduct but did not punish the Javaheris for their misconduct. (Mot. 10:1-4.)  

First, it is not the role of the court in this civil proceeding to punish any party. While K&R may feel they have been “punished,” the court endeavors to follow the law. That the Javaheris were entitled to and obtained prejudgment interest is consistent with the law without regard to the parties’ feelings.

Moreover, that the court found wrongdoing by the Javaheris based  on their self-help (redistributing K&R’s partnership distribution) is relevant only to the extent such acts inform on the amount of damages owed. It is the court’s obligation to calculate the damages and prejudgment interest to reach the final damage amount between the parties—which is exactly what the court did here. K&R cannot argument surprise based on the effect of finding the Javaheris are entitled to prejudgment interest.

K&R argues: “If no offset were allowed, K&R would still come out ahead as they are owed $365,464.90, plus prejudgment interest, compared to the $276,100 the Javaheris were owed, with prejudgment interest.” (Mot. 10:7-9.) As noted earlier, K&R’s position conflicts with their earlier asserted position—a position the court adopted at their urging.

Further, in opposition, the Javaheris argue the declaration filed in support of this motion is inadequate to demonstrate a factual basis for surprise.[5] Additionally, the Javaheris argue K&R have waived their right to a new trial based on surprise.

The court need not address the Javaheris position on lack of evidence or waiver because

the court finds K&R simply have not demonstrated surprise on the argument and evidence before the court. That is, they have not met their burden on this motion under Code of Civil Procedure, section 657, subd. 3.

“From a very early date – 1866 – it has been held that surprise, as a ground for a motion for a new trial, should be looked on with ‘suspicion’. . . [A] motion on this ground ‘is seldom successful’ because the moving party to be entitled to a granting of the motion must make a showing of injury, a showing of diligence, and a showing that he did not unduly delay seeking redress.” (Fletcher v. Pierceall (1956) 146 Cal.App.2d 859, 866.) In Kauffman v. De Mutiis (1948) 31 Cal.2d 429, the California Supreme Court specifically explained the meaning of diligence in the context of a motion for new trial is as follows: “[the moving party] must act at the earliest possible moment for the ‘right to a new trial on the ground of surprise is waived if, when the surprise is discovered, it is not made known to the court, and no motion is made for a mistrial or continuance of the cause.’” (Id. at 432.)

Here, the Javaheris note their papers calculating the prejudgment interest to which they were entitled was served on August 19, 2022—five days before the schedule Phase Two trial date. During trial, K&R did not object based on the ground of surprise; instead, they argued that Javaheris should be awarded prejudgment interest in the amount of $0, or alternatively, $2,037.36 at most. (K&R’s Trial Brief, filed August 19, 2022 at 14:8, 16:14-17.) K&R had a full and fair opportunity to argue the matter on August 26, 2022—during the trial. The Javaheris are correct—there is no surprise where the Javaheris raised and provided their interest calculation prior to trial where the court adopts the calculation after the issue was litigated at trial.

The court equally agrees K&R’s assertion that the matter of the prevailing party—following the court’s prejudgment interest calculation—would be reserved for separate briefing after Phase Two of trial is not well-taken. As argued by the Javaheris, the court (with the agreement of the parties) bifurcated the remand trial into two phases. Phase One would address the legal issue of whether the Javaheris were entitled to prejudgment interest. Phase Two would determine the proper calculation of interest assuming the Javaheris were successful in Phase One of trial. There was no lack of clarity about the court’s plan for trial. No party ever discussed a third phase of trial and the issues that might be addressed therein.

Finally, K&R suggests they were surprised the court’s Judgment seems to conclude K&R did not prevail on any claims despite finding they prevailed on the for breach of fiduciary duty, breach of contract and declaratory relief regarding improper redistributions. K&R necessarily acknowledge they obtained no monetary award from any success on their claims of breach—that is, they did not demonstrate they suffered any damages from the breaches.

That K&R obtained a declaration the Javaheris breached the joint venture agreement or their fiduciary duties does not make K&R the prevailing parties in this matter. A prevailing party in the context of costs recovery includes “the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant.” (Code Civ. Proc. § 1032, subd. (a)(4).) The Javaheris are the parties “with a net monetary recovery.”

Against the Law:

K&R argues the court’s 2017 Statement of Decision and the Amended Judgment is inconsistent because it found that no offset was appropriate here; ultimately, however, the court relied on a offset to in adopting the Javaheris’ interest calculation.

“[A] decision is ‘against the law’ where the evidence is insufficient in law and without conflict on any material point.” (In re Marriage of Beilock (1978) 81 Cal.App.3d 713, 728.) “[A] a decision is against law when there is a failure to find on a material issue, or when the findings are irreconcilable or where the evidence is insufficient in law and without conflict on any material point.” (Schmeltzer v. Gregory (1968) 266 Cal.App.2d 420, 422-423; see also Renfer v. Skaggs (1950) 96 Cal.App.2d 380. [“Where the findings are so inconsistent, ambiguous, and uncertain that they are incapable of being reconciled and it is impossible to tell how a material issue is determined, the decision is ‘against law.’”])

The court’s decision to adopt the Javaheris’ prejudgment calculations does not result in any contradiction because the calculations are not about “offsetting claims.” In the court’s ruling (Mot., RJN Ex. E, p. 2), the court’s discussion of “offsetting claims” meant the offsetting of the parties’ respective damages against each other in their entireties as discussed in Burnett & Doty Development Co. v. Phillips (1978) 84 Cal.App.3d 384 (Burnett). There is no contradiction; the court’s finding that Burnett does not apply here and the court’s decision on the Javaheris’ prejudgment interest claim refer to two different concepts. The offsetting claims in Burnett arose from cross-demands on the same contract; that is not the case here. Instead, the offsetting that occurred with the prejudgment interest merely crediting K&R’s payments, in the form of the redistributions from the joint venture collected from K&R, to the Javaheris’s already-existing debt.

K&R have not met their burden of demonstrating the order was inconsistent, and therefore, against the law. Accordingly, K&R are not entitled to a new trial on grounds the court’s order was against the law.

Error in Law:

Finally, K&R argue the court erred by failing to apply prejudgment interest to K&R’s improper distribution damages on the specific dates set forth. (Mot., Gizer Decl., ¶¶6, 9, Exs. E, H.) That is, “it was an error in law for this Court to apply prejudgment interest to the Javaheris’ damages after adopting their interest calculations while simultaneously refusing to apply prejudgment interest to K&R’s damages.” (Mot., 13:14-16.)

Their argument is duplicative of those made earlier.[6] As the court explained, there is no prejudgment interest accruing on K&R’s damages because, at any one time, K&R owed more on the Javaheris’s debt than the Javaheris owed on the improper loan distributions. Moreover, as twice noted earlier, K&R took a different position on their claim of prejudgment interest in 2018. (See Plaintiffs/Majority Partners’ Memorandum of Points and Authorities in Support of Motion for New Trial filed August 3, 2017, p. 4; Amended Judgment Following New Trial filed March 26, 2018.)

CONCLUSION

For the foregoing reasons, the court will deny the motion

IT IS SO ORDERED.

January 27, 2023                                                                  ________________________________

                                                                                                                   Hon. Mitchell Beckloff

                                                                                                                   Judge of the Superior Court