Filed 9/27/19 Khanna v. Sonasoft Corp. 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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
VINCE KHANNA,
Plaintiff and Respondent,
v.
SONASOFT CORPORATION et al.,
Defendants and Appellants.
H044374
(Santa Clara County
Super. Ct. No. 106CV074362)
Plaintiff Vince Khanna (respondent) sued defendant Sonasoft Corporation (Sonasoft) and defendant Andy Khanna (Andy) (together appellants) based on Sonasoft’s failure to promptly and fully pay his wages. The trial court entered a money judgment against Sonasoft on December 9, 2010, pursuant to its order approving the parties’ oral settlement. The judgment showed that Sonasoft was required to pay $173,000 ($227,000 in damages less payments of $54,000) to respondent. The first amended judgment (filed June 27, 2013) showed no damages still owing but required Sonasoft to pay respondent a total of $193,188 in costs, attorney fees, and postjudgment interest. The second amended judgment (filed September 24, 2013) merely added Andy as an additional judgment debtor on an alter ego theory. On appeal, this court modified the second amended judgment (hereinafter judgment) by striking the language adding Andy as an additional judgment debtor and affirmed the judgment as modified.
The trial court made the following postjudgment and post-appeal orders: (1) an order denying Andy’s motion for an award of attorney fees incurred on appeal under Labor Code section 218.5; (2) an order granting respondent’s motion to add a surety, American Contractors Indemnity Company, as a judgment debtor; and (3) an order denying Sonasoft’s motion to amend the judgment to reduce by half the award of attorney fees and costs. These orders were appealable as orders made after a judgment. (See Code Civ. Proc., § 904.1, subd. (a)(2).)
Andy now claims that the trial court erred in denying his motion for attorney fees incurred on appeal because (1) Labor Code section 218.5’s bad faith limitation on recovery of attorney fees against an employee who brings an action for nonpayment of wages did not apply to him; (2) the evidence was adequate to determine that respondent’s action for nonpayment of wages was brought and maintained in bad faith against him; and (3) he was entitled to recover attorney fees incurred on appeal notwithstanding this court’s disposition in case No. H040007, which provided that “[t]he parties shall bear their own costs on appeal.” Appellants assert that the trial court erred in granting respondent’s motion to add American Contractor Indemnity Company as a judgment debtor because the requirements of section 996.440 were not satisfied. Sonasoft also argues that the trial court erred in denying its motion to amend the judgment and that the attorney fees and costs included in the judgment should be reduced by half on the theory that “equal efforts were directed to each defendant.”
We find no reversible error and affirm the challenged orders. In addition, we conclude that appellants filed a frivolous motion on appeal, and we award sanctions in the amount of $7,765 to respondent Vince Khanna, payable by appellants’ counsel—Stephen M. Defilippis, Picone & Defilippis. (See California Rules of Court, rule 8.276. )
I
Procedural History
By notice filed on November 1, 2016, Andy moved for a post-appeal, postjudgment order awarding attorney fees to him as a party prevailing in the prior appeal, case No. H040007. Andy argued in support of his motion that he was entitled to attorney fees under Labor Code section 218.5 because he prevailed on the alter ego issue. The hearing on the motion was set for December 8, 2016.
Andy’s attorney fee motion was supported by the declaration of his appellate counsel, Paul Kirsch. Attorney Kirsch stated in his declaration that in preparing the appeals, he “spent approximately 360 hours working on the briefs, reply brief, supplemental briefs, researching the issues, reviewing the record of the extensive trial court proceedings, and meeting with the clients.” He estimated that “approximately half of this time was spent on the alter ego judgment that was reversed.” He stated that his hourly rate was $550 per hour and that the value of his fees based on his work “in connection with litigating the alter ego issues” was $99,000.
Subsequently, respondent moved to add a surety, American Contractors Indemnity Company, as a judgment debtor to the judgment against Sonasoft pursuant to sections 917 et seq. and 966.440 et seq. The hearing on this motion was also set for December 8, 2016.
Later, Sonasoft moved for an order “modifying the Amended Judgment entered on June 27, 2013 and modified on September 24, 2013 awarding Plaintiff approximately $193,188.54 in attorneys fees and costs.” Sonasoft argued that the trial court had authority under section 662 or section 473, subdivision (d), to vacate or modify its statement of decision and judgment and that the court should reduce the amount of the judgment by half. It was asserted that half of respondent’s “extensive litigation and collection efforts” allegedly targeted Andy, who prevailed on a summary judgment motion and later on an appeal challenging his addition to the judgment on an alter ego theory. The hearing on this motion was set for January 17, 2017.
On December 8, 2016, the trial court held a hearing on Andy’s attorney fee motion and respondent’s motion to add the surety as a judgment debtor to the judgment. At the end of the hearing, the matters were taken under submission.
In a written order filed December 22, 2016, the trial court denied the motion for an order awarding attorney fees pursuant to Labor Code section 218.5. The basis of its order was that the moving party had failed to “adequately demonstrate bad faith of plaintiff/employee” as required by the current version of that section. The court also relied in part on the disposition in this court’s prior decision, which provided that “the parties shall bear their own costs on appeal.” The court’s December 22, 2016 order also granted respondent’s motion to enter judgment against the surety, as an additional judgment debtor.
On December 29, 2016, a notice of appeal from the December 22, 2016 order was filed. The notice omitted the name of the appealing party, but the heading indicated that it was filed by the attorney for Sonasoft.
On January 11, 2017, the trial court filed an amended order correcting clerical errors in its December 22, 2016 order. The amended order made clear that Andy, not respondent, was the moving party on the motion for attorney fees. There was no change in the result.
On January 17, 2017, the trial court held a hearing on Sonasoft’s motion to modify the judgment. At the hearing, Sonasoft’s counsel argued that the trial court had inherent power to modify the judgment. The trial court orally denied the motion. A written order reflecting the court’s denial was filed on January 26, 2017.
On February 9, 2017, a document denominated an “Amended Notice of Appeal” was filed. The document was signed by attorneys for Sonasoft and Andy. It stated that Sonasoft “hereby submits the attached Amended Notice of Appeal to include an inadvertently excluded party, American Contractor’s [sic] Indemnity Company . . . .” (Italics added.) The February 9, 2017 document also noted that the trial court’s December 22, 2016 order was amended on January 11, 2017 to correct clerical errors; that the trial court orally denied Sonasoft’s request to modify the judgment on January 17, 2017, and that the trial court filed a formal written order to that effect on January 26, 2017. No separate form “Notice of Appeal” was attached to the “Amended Notice of Appeal” contained in appellants’ appendix.
Andy now challenges the December 22, 2016 order, as corrected for clerical error by order filed on January 11, 2017. Sonasoft challenges the trial court’s December 22, 2016 order insofar as it granted respondent’s motion to enter judgment against the surety and its January 2017 denial of Sonasoft’s motion to reduce the judgment. Respondent has not asserted that either notice of appeal is deficient. We liberally construe the notice of appeal filed on December 29, 2016 and the “Amended Notice of Appeal” filed on February 9, 2017 to protect the parties’ rights of appeal and address the appellate claims on their merits. (See Toal v. Tardif (2009) 178 Cal.App.4th 1208, 1216-1217; see Cal. Rules of Court, rule 8.100(a)(2).)
II
Discussion
A. Order Denying Andy’s Motion for Attorney Fees under Labor Code section 218.5
1. Governing Law
“California follows the ‘American rule,’ under which each party to a lawsuit ordinarily must pay his or her own attorney fees. [Citations.] Code of Civil Procedure section 1021 codifies the rule, providing that the measure and mode of attorney compensation are left to the agreement of the parties ‘[e]xcept as attorney’s fees are specifically provided for by statute.’ ” (Musaelian v. Adams (2009) 45 Cal.4th 512, 516 (Musaelian).) “As contemplated by the initial clause of Code of Civil Procedure section 1021, the Legislature has established a variety of exceptions to the American Rule by enacting numerous statutes that authorize or mandate an award of attorney fees in designated circumstances. [Citation.]” (Tract 19051 Homeowners Assn. v. Kemp (2015) 60 Cal.4th 1135, 1142.) Labor Code section 218.5 is one of the legislatively created exceptions to the general rule.
Since its 2013 amendment (Stats. 2013, ch. 142, § 1, p. 2032), Labor Code section 218.5, subdivision (a), has provided in pertinent part: “In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorney’s fees and costs to the prevailing party if any party to the action requests attorney’s fees and costs upon the initiation of the action. However, if the prevailing party in the court action is not an employee, attorney’s fees and costs shall be awarded pursuant to this section only if the court finds that the employee brought the court action in bad faith.” The italicized language was not in the previous version. (See Stats. 2010, ch. 697, § 42, p. 3875, operative July 1, 2012.) Prior to the 2013 amendment, the Supreme Court had construed former Labor Code section 218.5 as providing for an award of “fees to the prevailing party whether it is the employee or the employer” and characterizing it as “a two-way fee-shifting provision.” (Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1248 (Kirby).
“We independently review questions of statutory construction. [Citation.]” (Kirby, supra, 53 Cal.4th at p. 1250.) “The interpretation of [Labor Code section 218.5] and its application to the circumstances in this case are questions of law, subject to independent review on appeal. [Citations.]” (Californians for Population Stabilization v. Hewlett-Packard Co. (1997) 58 Cal.App.4th 273, 294, abrogated on another point in Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 175-178.)
“The fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law. [Citations.]” (Select Base Materials v. Board of Equalization (1959) 51 Cal.2d 640, 645.) “Whether a statute operates prospectively or retroactively is, at least in the first instance, a matter of legislative intent.” (People v. Brown (2012) 54 Cal.4th 314, 319.) “When the Legislature has not made its intent on the matter clear with respect to a particular statute” (ibid.), courts apply the general default rule of prospective application, which is codified in statute. (See ibid.)
2. Analysis
a. The Trial Court Applied the Proper Version of Labor Code Section 218.5
Andy contends that the trial court erred in finding that Labor Code section 218.5’s bad faith requirement applied to his motion because “[t]o apply the statute retroactively, when it was not in effect when the trial court amended the order placing liability upon [him] for post-judgment costs as judgment debtor would result in taking away a substantive right from [him].” He cites two code sections and two cases that reflect the general rule that statutes operate prospectively in the absence of contrary legislative intent. (See Civ. Code, § 3 [“No part of [the code] is retroactive, unless expressly so declared”]; § 3 [same]; Quarry v. Doe I (2012) 53 Cal.4th 945, 955 (Quarry); Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1207-1208 (Evangelatos).) He also points to Labor Code section 4, which states: “No action or proceeding commenced before this code takes effect, and no right accrued, is affected by the provisions of this code, but all procedure thereafter taken therein shall conform to the provisions of this code so far as possible.”
In USS-Posco Industries v. Case (2016) 244 Cal.App.4th 197 (USS-Posco), which respondent cites on appeal, an appellate court concluded that the trial court had incorrectly applied the former version of Labor Code section 218.5 to an employer’s fee motion. (USS-Posco, supra, at pp. 221-222.) In that case, after granting the employer’s motion for summary judgment, the trial court granted a fee motion under Labor Code section 218.5, applying the former version of the section that was in effect at the time of the summary judgment proceedings rather than “the version in effect at the time it awarded fees, which permits [an award of] fees to a prevailing employer only when the employee’s wage claims [were] brought in ‘bad faith.’ ” (USS-Posco, supra, at p. 201.)
The appellate court concluded that “[u]nder California Supreme Court precedent, statutory provisions that alter the recovery of attorney fees are deemed procedural in nature and apply to pending litigation.” (USS-Posco, supra, 244 Cal.App.4th at p. 201, italics added.) The court recognized that “California federal courts, applying federal law, have refused to apply the new version of section 218.5 at issue here to pending cases. [Citations.]” (Id. at p. 218.) It observed that in contrast, “the California Supreme Court and many, many Courts of Appeal have treated legislation affecting the recovery of costs, including attorney fees, as addressing a ‘procedural’ matter that is ‘prospective’ in character and thus not at odds with the general presumption against retroactivity.” (Id. at p. 221.) The court concluded that “the new version of section 218.5 provides the proper criteria for assessing fee entitlement in this case.” (Id. at p. 222.)
The California Supreme Court at one time explained: “[P]rocedural statutes may become operative only when and if the procedure or remedy is invoked, and if the trial postdates the enactment, the statute operates in the future regardless of the time of occurrence of the events giving rise to the cause of action. [Citation.] In such cases the statutory changes are said to apply not because they constitute an exception to the general rule of statutory construction, but because they are not in fact retrospective.” (Aetna Cas. & Surety Co. v. Industrial Acc. Commission (1947) 30 Cal.2d 388, 394.) But the court cautioned that the foregoing reasoning “assume[d] a clear-cut distinction between purely ‘procedural’ and purely ‘substantive’ legislation” (ibid.) and that “[i]n truth the distinction relates not so much to the form of the statute as to its effects.” (Ibid.)
The California Supreme Court later observed that “the distinction between procedural and substantive rules is not particularly helpful. [Citation.]” (Quarry, supra, 53 Cal.4th at p. 980.) “In deciding whether the application of a law is prospective or retroactive, we look to function, not form. [Citations.] We consider the effect of a law on a party’s rights and liabilities, not whether a procedural or substantive label best applies.” (Elsner v. Uveges (2004) 34 Cal.4th 915, 936-937; accord, Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 231 [proposition eliminating the standing of uninjured private persons to bring actions under the unfair competition law was applied prospectively to pending action].)
“[D]eciding when a statute operates ‘retroactively’ is not always a simple or mechanical task.” (Landgraf v. USI Film Products (1994) 511 U.S. 244, 268 (Landgraf).) “A statute does not operate ‘retrospectively’ merely because it is applied in a case arising from conduct antedating the statute’s enactment [citation] or upsets expectations based in prior law.” (Id. at p. 269, fn. omitted.) The United States Supreme Court has observed that where there is no indication of legislative intent, “the court must determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.” (Id. at p. 280.) “If the statute would operate retroactively, our traditional presumption teaches that it does not govern absent clear congressional intent favoring such a result.” (Ibid.)
“California courts apply the same ‘general prospectivity principle’ as the United States Supreme Court. [Citation.] Under this formulation, a statute’s retroactivity is, in the first instance, a policy determination for the Legislature and one to which courts defer absent ‘some constitutional objection’ to retroactivity. [Citation.] But ‘a statute that is ambiguous with respect to retroactive application is construed . . . to be unambiguously prospective.’ [Citations.]” (Myers v. Philip Morris Companies, Inc. (2002) 28 Cal.4th 828, 841.)
Andy argues that the trial court erred in “retroactively” applying the bad faith provision of Labor Code section 218.5, which went into effect on January 1, 2014. None of the reference points in the litigation suggested by Andy was the correct one for determining whether Labor Code section 218.5, as amended in 2013, was applied retrospectively or prospectively in this case.
Senate Bill No. 462 (2013-2014 Reg. Sess.), which amended Labor Code section 218.5, was introduced in February 2013, approved by the Governor and chaptered by the Secretary of State on August 26, 2013, and went into effect on January 1, 2014. (See Cal. Const., art. IV, § 8, subd. (c)(1); Gov. Code § 9600, subd. (a).) The judgment that added Andy as a judgment debtor was entered September 24, 2013, after Senate Bill No. 462 had been chaptered by the Secretary of State. Andy appealed. Paul Kirsch substituted in as appellate attorney of record for Andy and Sonasoft in late March 2014, after the effective date of the newly amended Labor Code section 218.5. The appellant’s opening brief in case No. H040007 was not filed until April 23, 2014.
Appellate attorney Kirsch claimed in his declaration that “the value of [his] fees for performing [the alter ego] aspect of the work [was] $99,000” based on his estimate of the hours of work he had done. But Kirsch’s declaration was not substantiated by any billing statements. More significantly, there was no showing that any of the work performed by Kirsch on the appeal was done before the “bad faith” provision limiting recovery of attorney fees against an employee in Labor Code section 218.5 went into effect on January 1, 2014. Before the effective date, the parties and their attorneys were constructively on notice that the law was changing, and they could no longer reasonably rely on former Labor Code section 218.5 with respect to attorney fees incurred after the amendment’s effective date.
The United States Supreme Court has stated: “The inquiry into whether a statute operates retroactively demands a commonsense, functional judgment about ‘whether the new provision attaches new legal consequences to events completed before its enactment.’ [Citation.] This judgment should be informed and guided by ‘familiar considerations of fair notice, reasonable reliance, and settled expectations.’ [Citation.]” (Martin v. Hadix (1999) 527 U.S. 343, 357-358 (Hadix).)
In Hadix, “[s]ection 803(d)(3) of the Prison Litigation Reform Act of 1995 [(PLRA)] . . . place[d] limits on the fees that [might] be awarded to attorneys who litigated prisoner lawsuits.” (Hadix, supra, 527 U.S. at p. 347.) The United States Supreme Court was asked to “decide how this section applie[d] to cases that were pending when the PLRA became effective on April 26, 1996.” (Ibid.) The court concluded that section “803(d)(3) limit[ed] attorney’s fees with respect to postjudgment monitoring services [to ensure the defendants’ compliance with a remedial or consent decree] performed after the PLRA’s effective date but it [did] not so limit fees for postjudgment monitoring performed before the effective date.” (Ibid.) The court reasoned that “[t]o impose the new standards now, for work performed before the PLRA became effective, would upset the reasonable expectations of the parties.” (Id. at p. 360.) It determined that “[w]ith respect to postjudgment monitoring performed after the effective date, by contrast, there is no retroactive effect, and the PLRA fees cap applies to such work.” (Id. at p. 362.)
Hadix’s reasoning supports the conclusion that Labor Code section 218.5 as amended in 2013 was applied prospectively in this case, regardless of the analysis in USS-Posco. Its application did not upset any settled expectations.
In addition, Andy’s motion for an order awarding attorney fees on appeal under Labor Code section 218.5 was filed on November 1, 2016. Thus, the motion was filed, heard, and decided many months after the 2013 amendment of Labor Code section 218.5 had gone into effect. Under California case law, a statutory motion for attorney fees under Labor Code section 218.5 is governed by the law currently in effect and is considered a prospective application of the statute. (See USS-Posco, supra, 244 Cal.App.4th at pp. 219-221; cf. Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 929-931 [newly enacted private attorney general fee statute (§ 1021.5) applied to attorney fee ruling pending on appeal on statute’s effective date, even though it was not in effect when the trial court denied the original request for attorney fees]; Stockton Theatres, Inc. v. Palermo (1956) 47 Cal.2d 469, 477 [“ ‘ “[C]osts are given only by statutory direction and their allowance depends on the terms of the statute in force at the time of the accrual of the right to have them taxed. This time, in regard to costs on appeal, is the time of the rendition of the judgment on appeal. It follows that the rule pertaining to the allowance of costs may be changed or modified by statute during the pendency of the proceeding” ’ ”].)
Andy has failed to demonstrate that the trial court’s application of the current version of Labor Code section 218.5 was “at odds with the general presumption against retroactivity.” (USS-Posco, supra, 244 Cal.App.4th at p. 221.)
b. No Abuse of its Discretion in Finding Insufficient Evidence of Bad Faith
Andy contends that if he was required to establish that respondent acted in bad faith in order to obtain an award of attorney fees under Labor Code section 218.5, the trial court abused its discretion by finding that Andy had failed to “adequately demonstrate [respondent’s] bad faith.” Andy suggests that bad faith can be inferred from respondent’s motion to add him to the judgment as the alter ego of Sonasoft despite the order granting summary judgment as to him (as an individual), and despite the parties’ oral settlement—upon which the trial court entered judgment, which required that he be ultimately dismissed from the lawsuit with prejudice. He maintains that there was adequate evidence to determine that respondent’s action for nonpayment of wages was brought and maintained against him in bad faith.
In this case, Andy had the burden of proving that he was the prevailing party within the meaning of Labor Code section 218.5 and that “the employee brought the court action in bad faith.” (Lab. Code, § 218.5, subd. (a); see Evid. Code, §§ 500, 550, subd. (a).) Where the trier of fact—in this case the trial court—concludes that “the party with the burden of proof did not carry the burden and that party appeals, it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment.” (In re I.W. (2009) 180 Cal.App.4th 1517, 1528 (I.W.).) “[W]here the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant’s evidence was (1) ‘uncontradicted and unimpeached’ and (2) ‘of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.’ [Citation.]” (Ibid.)
“ ‘Discretion [in applying the law to the facts] is abused whenever, in its exercise, the court exceeds the bounds of reason, all of the circumstances before it being considered. The burden is on the party complaining to establish an abuse of discretion, and unless a clear case of abuse is shown and unless there has been a miscarriage of justice a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power.’ [Citations.]” (Denham v. Superior Court (1970) 2 Cal.3d 557, 566 (Denham); see People v. Williams (1998) 17 Cal.4th 148, 162 [abuse of discretion standard is deferential and “asks in substance whether the ruling in question ‘falls outside the bounds of reason’ under the applicable law and the relevant facts”].)
We conclude that the trial court was not compelled to make a finding of bad faith because Andy’s evidence was not “ ‘of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.’ ” (I.W., supra, 180 Cal.App.4th at p. 1528.) Andy’s oversimplification of the procedural history of this case is misleading. Andy was Sonasoft’s chief executive officer (CEO) or president. In 2010, Andy signed the order approving the parties’ settlement on behalf of Sonasoft and himself. Sonasoft failed to execute a promissory note as required by the approved settlement and defaulted on its payment obligations under the settlement. Consequently, the unpaid balance of the $227,000 settlement became due and owing. In 2010, a money judgment was entered against Sonasoft, and apparently respondent incurred significant postjudgment attorney fees and costs attempting to enforce the judgment.
While respondent’s motion to add Andy to the judgment as the alter ego of Sonasoft may have fallen short of the stringent legal standard for doing so, that circumstance did not in and of itself demonstrate that respondent brought the action for nonpayment of wages against Andy in bad faith. Even now, Sonasoft and Andy, who are represented by the same counsel, often do not differentiate between their interests in their briefs and motions and fail to accurately identify which of them is the actual aggrieved party on a claim. Significantly, respondent prevailed on his nonpayment of wages claim as reflected in the judgment in his favor, which was consistent with the approved settlement requiring Sonasoft to pay him a total of $227,000. Section 218.5 does not ask whether an employee acted in bad faith in seeking to add an alleged alter ego judgment debtor to a favorable judgment in a successful action for nonpayment of wages. In any event, Andy presented no evidence that respondent acted with subjective bad faith, i.e., an improper purpose, in seeking to add Andy as a judgment debtor. (Cf. Corbett v. Hayward Dodge, Inc. (2004) 119 Cal.App.4th 915, 924 [Civil Code section 1780 requires finding of subjective bad faith to award attorney fees to a prevailing defendant]; Levy v. Blum (2001) 92 Cal.App.4th 625, 635 [To impose sanctions against a party pursuant to section 128.5, there must “be a showing of an improper purpose, i.e., subjective bad faith on the part of the attorney or party to be sanctioned”].)
The trial court acted within its sound discretion in determining that Andy had not established that respondent had brought the action for nonpayment of wages against him in bad faith within the meaning of Labor Code section 218.5. In light of our conclusion, we do not reach respondent’s contention that the section must be construed as not entitling a defendant who is merely the CEO or a fellow employee—not a prevailing employer—to attorney fees.
B. Order Adding Surety to the Judgment
In granting respondent’s motion to add the surety to the judgment, the court stated: “The requirements of Code of [Civil] Procedure section 996.440 have been satisfied in order to add American Contractor Indemnity Company as a judgment debtor. The judgment is final. If a demand for payment by the principal is a condition imposed before resort to the surety, that defense belongs to the surety. American Contractor does not oppose this motion.” On appeal, Sonasoft now asserts that the court erred because (1) Sonasoft’s opposition was for the benefit of the surety, (2) the requirements of section 996.440 were not met, and (3) respondent never made any effort to collect the judgment against Sonasoft. Sonasoft cites section 996.440 and Civil Code section 2845 in support of its position.
Section 996.440, subdivision (a), states: “If a bond is given in an action or proceeding, the liability on the bond may be enforced on motion made in the court without the necessity of an independent action.” Such motion cannot “be made until after entry of the final judgment in the action or proceeding in which the bond is given and the time for appeal has expired or, if an appeal is taken, until the appeal is finally determined.” (§ 996.440, subd. (b), italics added.) Subdivision (d) of section 996.440 states: “Judgment shall be entered against the principal and sureties in accordance with the motion unless the principal or sureties serve and file affidavits in opposition to the motion showing such facts as may be deemed by the judge hearing the motion sufficient to present a triable issue of fact. If such a showing is made, the issues to be tried shall be specified by the court. Trial shall be by the court and shall be set for the earliest date convenient to the court, allowing sufficient time for such discovery proceedings as may be requested.” (Italics added.)
Civil Code section 2845 provides: “A surety may require the creditor, subject to Section 996.440 of the Code of Civil Procedure, to proceed against the principal, or to pursue any other remedy in the creditor’s power which the surety cannot pursue, and which would lighten the surety’s burden; and if the creditor neglects to do so, the surety is exonerated to the extent to which the surety is thereby prejudiced.” (Italics added.)
Nothing in Civil Code section 2845 or section 996.440 indicates that Civil Code section 2845 limits a moving party’s right to obtain entry of judgment against a surety pursuant to section 996.440 after an appeal is finally determined. Section 996.460, subdivision (a), expressly provides: “Notwithstanding Section 2845 of the Civil Code, a judgment of liability on a bond shall be in favor of the beneficiary and against the principal and sureties and shall obligate each of them jointly and severally.” (Italics added.) Subdivision (d) of section 996.460 states that “[t]he judgment may be enforced by the beneficiary directly against the sureties.” We do not read section 996.440 as requiring respondent to establish that he made sufficient efforts to collect the judgment against Sonasoft before moving to enter judgment against the surety.
Sonasoft does not appear to be arguing that affidavits filed in support of its opposition to the motion for entry of judgment against American Contractor Indemnity Company showed “facts . . . sufficient to present a triable issue of fact” (§ 996.440, subd. (d)). Neither has Sonasoft on appeal identified any facts that needed to be tried before entering judgment against the surety. The burden was on the principal or sureties to make the requisite showing. (See ibid.; see also Evid. Code, §§ 500, 550.) Any appellate contention that such a triable issue of fact existed was forfeited. (See People v. Stanley (1995) 10 Cal.4th 764, 793; Cal. Rules of Court, rule 8.204(a)(1)(B) & (C).)
Moreover, “it is settled that: ‘A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown. This is not only a general principle of appellate practice but an ingredient of the constitutional doctrine of reversible error.’ [Citations.]” (Denham, supra, 2 Cal.3d at p. 564; see Cal. Const., art. VI, § 13.) Sonasoft has not affirmatively demonstrated that the trial court erred by granting respondent’s motion and entering judgment against the surety.
C. Order Denying Motion to Amend Judgment
In case No. H040007, we rejected the appellate challenges to the judgment’s inclusion of postjudgment costs, attorney fees, and interest. The argument subsequently made in appellants’ postjudgment motion to amend the judgment was not raised on appeal. On appeal, we concluded that respondent was entitled to postjudgment costs and attorney fees pursuant to statute (§ 685.040; Lab. Code, § 218.5) and to postjudgment interest as provided by law (§§ 685.010, subd. (a), 685.020). As indicated, we modified the judgment “by striking the language adding Andy Khanna as an additional judgment debtor” and affirmed it as modified. After the Supreme Court denied Sonasoft’s petition for review (S236464), the clerk of this court issued the remittitur.
Sonasoft argues, as it did below, that the amount of the judgment must be reduced by half. However, it now acknowledges that “[t]he post-judgment interest award in the amount of $26,794.54 is not contested and was inadvertently included in arguing the entire modified judgment should have been reduced by half.” Sonasoft insists that the trial court had jurisdiction to modify the judgment and cites various statutes. Sonasoft completely overlooks the effect of our unqualified affirmance of the judgment. It in effect seeks to relitigate issues that can no longer be raised.
“The appellate court clerk’s issuance of the remittitur effects the transfer of jurisdiction to the lower court. [Citation.] . . . [T]he terms of the remittitur define the trial court’s jurisdiction to act.” (Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754, 774, fn. 5.) “An unqualified affirmance ‘ordinarily sustains the judgment and ends the litigation.’ [Citation.]” (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 701 (Griset); see Parker v. Bernal (1885) 68 Cal. 122, 122-123.)
“The order of the reviewing court is contained in its remittitur, which defines the scope of the jurisdiction of the court to which the matter is returned.” (Griset, supra, 25 Cal.4th at p. 701.) “When there has been a decision upon appeal, the trial court is reinvested with jurisdiction of the cause, but only such jurisdiction as is defined by the terms of the remittitur. The trial court is empowered to act only in accordance with the direction of the reviewing court; action which does not conform to those directions is void. [Citations.]” (Hampton v. Superior Court (1952) 38 Cal.2d 652, 655; see Griset, supra, at p. 701.) Thus, once a reviewing court’s affirmance of a judgment becomes final, the superior court does not “have jurisdiction to reopen or retry the case . . . .” (Griset, supra, at p. 701; see Bixby v. Hotchkis (1945) 72 Cal.App.2d 375, 382.)
Sonasoft has not identified any authority that empowered the trial court to amend the judgment after this court affirmed it without qualification or direction for further proceedings. Although there are several exceptions to the general principle that an unqualified affirmance ends the litigation (see Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2018) § 11:50, p. 11-17), Sonasoft has not shown that its motion to amend the judgment came within any of them.
On appeal, Sonasoft cites subdivision (d) of section 473, which allows for correction of clerical error. (See ante, fn. 4.) “Apart from statutory authority, all courts are said to have an inherent power to correct their records so as to make them speak the truth, and under this inherent power courts have frequently corrected their final judgments when, because of clerical errors or omissions, the judgments actually rendered were not the judgments intended to be rendered. [Citations.]” (Olivera v. Grace (1942) 19 Cal.2d 570, 574.) Sonasoft has not argued or demonstrated that its motion to amend sought to correct mere clerical error.
D. Imposition of Sanctions
This court denied appellants’ “Motion to Release the Surety Bond,” which they filed in this court on February 27, 2019. By motion filed on March 13, 2019, respondent moved for sanctions against appellants for filing a frivolous motion. This court notified the parties in writing that on its own motion and on respondent’s motion, it was considering imposing monetary sanctions in an amount not to exceed $10,500 against appellants and their counsel for the filing of a frivolous motion. (Rule 8.276(a)(3) & (c).) Oral argument on the issue of sanctions was combined with oral argument on the merits of the appeal. (Rule 8.276(e).) We now conclude that sanctions are warranted for the filing of a frivolous motion. (See rule 8.276(a)(3).)
“Most judgments and orders are stayed on appeal only if appellant posts security ([Code Civ. Proc.,] §§ 917.1-922). The security usually takes the form of a bond or undertaking from a personal or corporate surety, but may alternatively consist of a deposit of cash or negotiable securities . . . .” (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2018) ¶7.95, p. 7-34.) “[T]he purpose of an undertaking is to protect the judgment while the appeal is pending. (Grant v. Superior Court (1990) 225 Cal.App.3d 929, 934; Lewin v. Anselmo (1997) 56 Cal.App.4th 694, 700.)” (City of Lodi v. Randtron (2004) 118 Cal.App.4th 337, 363.)
In their motion, appellants asserted that they had “now twice posted a bond for $289,782.00.” They stated that the “first undertaking occurred on August 20, 2014,” using property as collateral, and that they “undertook a bond in the same amount” on February 10, 2017. The California Rules of Court require an appellate motion based on matters outside the record on appeal to “be accompanied . . . by declarations or other supporting evidence.” (Rule 8.54(a)(2).) The motion to release the surety bonds was not accompanied by any supporting evidence.
Appellants also failed to inform this court that they had brought a substantially similar “Motion to Release the Surety Bond” in the trial court, which asked the trial court to release the February 10, 2017 bond and the collateral for an August 20, 2014 bond. That motion was denied by written order filed on August 17, 2018. Appellants brought a subsequent motion for reconsideration, which was denied by written order filed on February 6, 2019. At oral argument, appellants’ counsel agreed that in making the appellate motion for release of the surety bonds, he should have disclosed his prior unsuccessful motion in the trial court. Counsel claimed that he had no intent to mislead this court and suggested that he should have filed a petition for a writ of mandate instead of a motion to release the bonds.
Citing section 917.1, subdivision (d), (hereinafter 917.1(d)), appellants argued in their motion that they were “entitled to an automatic stay of enforcement without an undertaking” because they “had satisfied the damages portion of the judgment.” They asked this court to “order the bond[s] and all collateral [to] be immediately released with the stay of enforcement remaining until the appeal ha[d] reached finality.” Section 917.1(d) states in part that “no undertaking shall be required pursuant to this section solely for costs awarded under Chapter 6 (commencing with Section 1021) of Title 14.” (See § 995.190 [“undertaking” defined]; see also § 995.210, subd. (b) [bond in lieu of undertaking].)
Appellants failed to establish in support of their motion that this court had original jurisdiction or any authority to release a surety bond in the present circumstances. (See Lewin, supra, 56 Cal.App.4th at p. 700 [“a surety on a bond given in an action or proceeding may be released from liability on that bond only by order of the court, following a properly noticed hearing. (§ 996.110.)”]; § 995.150 [“ ‘Court’ means, if a bond is given in an action or proceeding, the court in which the action or proceeding is pending”]; see also §§ 996.120-996.150.) Moreover, the first and second amended judgments against Sonasoft were not “solely for costs awarded under Chapter 6 (commencing with Section 1021) of Title 14.” (§ 917.1(d), italics added.) Postjudgment costs incurred to enforce a money judgment are authorized by an entirely different title. (See § 680.010 et seq. [Enforcement of Judgments Law]; see also §§ 685.040 [“[J]udgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment”], 685.090 [“Costs are added to and become a part of the judgment”.) Also, appellants acknowledge that they have not paid $26,794 in postjudgment interest that was awarded to respondent in the first amended judgment (and in the second amended judgment).
We conclude that appellants’ motion to release the surety bonds was frivolous because it was indisputably without merit. Consequently, on our own motion, we award sanctions in the amount of $7,765 to respondent Vince Khanna, payable by appellants’ counsel—Stephen M. Defilippis, Picone & Defilippis. (See rule 8.276.) This award of sanctions is in addition to, and does not affect, any right of respondent to recover postjudgment costs, attorney fees, and interest. The clerk of this court and appellants’ counsel of record shall notify the California State Bar that judicial sanctions were imposed. (See Bus. & Prof. Code, §§ 6086.7, subd. (a)(3), 6068, subd. (o)(3).)
DISPOSITION
The orders appealed from are affirmed. Appellants shall bear all costs on appeal. (Rule 8.278.)
We award sanctions in the amount of $7,765 to respondent Vince Khanna, payable by appellants’ counsel of record—Stephen M. Defilippis, Picone & Deillippis. (See rule 8.276.) Appellants’ counsel of record and the clerk of this court shall forward a copy of this opinion to the California State Bar upon issuance of the remittitur. (See Bus. & Prof. Code, §§ 6086.7, subd. (a)(3), 6068, subd. (o)(3).) All sanctions shall be paid no later than 30 days after the date the remittitur is issued
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ELIA, ACTING P. J.
WE CONCUR:
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MIHARA, J.
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GROVER, J.
Khanna v. Sonasoft Corporation et al.
H044374