FIRST MOTOR GROUP OF ENCINO ET AL VS ENCINO MOTORCARS INC.

Tentative Rulings

Case Number: LC106723    Hearing Date: August 25, 2020    Dept: W

FIRST MOTOR GROUP OF ENCINO, LLP V. ENCINO MOTORCARS, LLC.

MOTION TO REQUIRE PLAINTIFFS TO POST AN UNDERTAKING PENDING APPEAL

Date of Hearing: August 25, 2020 Trial Date: N/A

Department: W Case No.: LC106723

Moving Party: Defendants Encino Motorcars LLC; David Peterson; Stephen Zubieta

Responding Party: Plaintiffs First Motor Group of Encino; Trophy Automotive Dealer Group

BACKGROUND

On January 12, 2018, TADG and FMGE filed a Complaint against Encino Motorcars, Peterson and Zubieta, alleging:

1. Breach of Contract

2. Negligent Misrepresentation

3. Concealment

4. Intentional Misrepresentation

On April 20, 2018, Encino Motorcars, Peterson, Zubieta and DLP filed a Cross-Complaint against FMGE, TADG, TADG Real Estate Group, and TADG Real Estate Group II. Cross-Complainants filed an Amended Cross-Complaint (“ACC”) on September 14, 2018. On April 4, 2019, this court granted summary adjudication in defendants’ favor as to plaintiff’s claims based on fraud.

On November 20, 2019, judgment was entered in favor of Defendants. Now Defendants move the court for an order requiring Plaintiffs to post an undertaking to secure the full amount of the Amended Judgment.

[TENTATIVE] RULING:

Defendants’ Motion to Require Plaintiffs to Post an Undertaking Pending Appeal is GRANTED.

REQUEST FOR JUDICIAL NOTICE

Defendants request this court take judicial notice of the following: (1) Defendants' Memorandum of Points and Authorities in Support of Motion for Attorney's Fees filed 12/11/19 (Exh. 1); (2) 2/3/20 order granting Defendants' Motion for Summary Adjudication of Plaintiffs' Second through Fourth Causes of Action (Exh. 2); (3) 5/28/19 order denying Plaintiffs/Cross-Defendants' Motion for Attorneys' Fees (Exh. 3); (4) 4/8/20 order on Defendants' Motion for Attorney's Fees (Exh. 4); (5) Defendants' Response to Supplemental Declaration of Franjo M. Dolenac in Opposition to Defendants' Motion for Attorney's Fees (Exh. 5); (6) California State Assembly Committee on Judiciary Analysis of Assembly Bill No. 58 (May 19, 1993) (Exh. 6); and (7) Plaintiffs' Notice of Filing Undertaking dated 4/28/20 (Exh. 7).

The court grants Defendants’ request for judicial notice. (Evid. Code §452(d).)

In opposition, Plaintiffs request the court take judicial notice of the following: (1) January 22, 2020 Minute Order (Exh. 1); (2) Defendants’ Encino Motorcars, LLC’s Notice of Motion and Motion for Entry of Case Management Order Governing Production of Documents; Memorandum of Points and Authorities; [Proposed] Order filed by Defendants on August 2, 2019 (Exh. 2); (3) August 28, 2019 Minute Order (Exh. 3); (4) The Special Verdict Form entered in this action on November 5, 2019 (Exh. 4); and (5) November 20, 2018 Minute Order (Exh. 5).

The court grants Plaintiffs’ request for judicial notice. (Evid. Code §452(d).)

DISCUSSION

Defendants move the court for an order requiring Plaintiffs to post an undertaking to secure the full amount of the Amended Judgment. Defendants motion is made pursuant to Code of Civil Procedure section 917.9(a)(3), which grants the court discretion to require an undertaking to stay enforcement of a judgment or order, and section 917.9(b), which requires the court to fix the sum of the undertaking in an amount sufficient to cover all damages which the respondent may sustain by reason of the stay in the enforcement of the judgment or order. Defendants request the undertaking be fixed in the sum of $3,532,769.49, which represents the unbonded portion of the judgment and two years of interest.

Code of Civil Procedure section 917.9(a)(3) provides, in pertinent part, “[t]he perfecting of an appeal shall not stay enforcement of the judgment or order in cases not provided for in Sections 917.1 to 917.8, inclusive, if the trial court, in its discretion, requires an undertaking and the undertaking is not given, in any of the following cases: . . . (3) The judgment against appellant is solely for costs awarded to the respondent by the trial court pursuant to Chapter 6 (commencing with Section 1021) of Title 14.”

Defendants contend the authority for the court’s April 8, 2020 order awarding Defendants’ their attorney fees was based on Code of Civil Procedure section 1033.5. Defendants contend this is exactly the type of case the Legislature contemplated when it amended the Code of Civil Procedure to add section 917.9(a)(3) and cite to Quiles v. Parent (2017) 10 Cal.App.5th 130 to support their contention. In Quiles, the court held a judge also has the discretion to require an undertaking under Code of Civil Procedure section 917.9(a)(3). (Quiles v. Parent (2017) 10 Cal.App.5th 130, 144.) The court held a judge might exercise this discretion when the award of costs is substantial or “the danger of asset dissipation is acute.” (Id.)

Defendants argue that similarly to Quiles, Defendants were awarded costs of over $3,000,000 - an order of magnitude greater than the awards that motivated the Legislature to enact section 917.9(a)(3). Defendants further contend the injustice of a one-sided bonding requirement is particularly acute in this case, where Plaintiffs have refused to release Defendants' $2 million letter of credit, resulting in the prevailing parties providing security for the losing parties in direct contravention of the purposes of section 917.9(a)(3). In addition, unlike the defendant in Quiles, Defendant argues Plaintiffs here have not paid a dime of the judgment and have no intention of doing so.

In opposition, Plaintiffs first argue Defendants failed to comply with the jurisdictional requirements of Section 1008(b) to renew their previously failed motion, so this court cannot even consider this motion. Plaintiffs contend Defendants undeniably seek the same relief here as they did in their initial motion for an undertaking.

On November 15, 2019, Defendants filed a motion for an order requiring Plaintiffs to file an undertaking to secure award of costs and attorney fees. The motion was based on Code of Civil Procedure section 1030, which provides that in an action or special proceeding brought by a non-resident plaintiff, the defendant may at any time move for an order requiring the plaintiff to post security. In order to meet the requirements of Section 1030, the defendant must demonstrate that the plaintiff resides out of the state or is a foreign corporation and that there is a reasonable possibility that the moving defendant will obtain judgment in the action or special proceeding. (CCP §1030(a).) The court denied the motion as Defendants had already prevailed and therefore, could not demonstrate a “reasonable possibility” of prevailing.

The court finds that the instant motion is not a motion to renew a previously denied motion. The instant motion seeks different relief than the relief sought in the November 15, 2019 motion. Defendants now seek an undertaking based on the appeal that has been taken by Plaintiffs. As noted above, the first motion was based on the basis Plaintiffs in the instant matter were non-residents. (See Reedy v. Bussell (2007) 148 Cal.App.4th 1272, 1291.) Thus, there was no requirement to comply with the jurisdictional requirements of Section 1008(b).

Next, Plaintiffs argue the financial factors in light of the circumstances of this case warrant denial, because the judgment is not “large” relative to the amount in dispute, and Defendants’ own bad faith warrants denial of the instant motion. Plaintiffs further argue if the court does require an undertaking, it should be limited to $291,480.75, or 10% per annum that could be earned while the $2,914,807.49 judgment balance is detained pending appeal.

The court disagrees. Regardless of the bad faith allegations (by either party), it is within the court’s discretion to condition a stay of an award of costs upon the filing of a sufficient bond or undertaking. Defendants have shown they recovered a substantial attorney fee award. The court notes Plaintiffs also argue their wealth has grown during trial, arguably, to demonstrate there is no danger of asset dissipation is this case. However, Defendants do not need to demonstrate both. Rather, the over $3 million in costs is a relevant financial factor that is sufficient to warrant an undertaking pursuant to Code of Civil Procedure section 917.9.

Although the court exercises its discretion as allowed by Section 917.9, the court finds the $3,532,769.49 not necessary as security. Rather, the court finds the appropriate amount for an undertaking to be $582,960, or two times the amount of interest defendants would be entitled to on a judgment of $291,480.75, as the appeal typically takes two years.

As such, the court exercises that discretion and orders that defendants post an undertaking in the amount of $582,960 within 30 days of the date of this order.