SIRY INVESTMENTS, L.P., Plaintiff and Appellant, v. SAEED FARKHONDEHPOUR et al., Defendants and Respondents.
No. B251250
Second Dist., Div. Two.
June 17, 2015
238 Cal. App. 4th 725
Wilson, Elser, Moskowitz, Edelman & Dicker and Robert Cooper for Plaintiff and Appellant.
Law Offices of Mohammad A. Fakhreddine and Mohammad A. Fakhreddine for Defendants and Respondents.
OPINION
HOFFSTADT, J.—After we issued an opinion in a prior appeal in this case, but before our remittitur issued, the Judicial Council amended
FACTUAL AND PROCEDURAL HISTORY
Plaintiff Siry Investments, L.P. (Siry), sued two of its former business partners, defendants Saeed Farkhondehpour (Farkhondehpour) and Morad Neman (Neman) (collectively, defendants), in their individual and trustee capacities, for breach of fiduciary duty. A jury awarded Siry compensatory and punitive damages. On appeal, we overturned the jury‘s special verdict as “fatally indefinite” and remanded for a new trial. We issued our opinion on December 12, 2012. Siry filed a petition for rehearing on December 27, 2012, which we denied on January 7, 2013. The California Supreme Court denied Siry‘s petition for review and we issued the remittitur on March 27, 2013.
To forestall execution of the judgment during the pendency of their (ultimately successful) appeal, defendants had arranged for a surety to post two bonds covering the amount of the judgment. (
Following our disposition of the appeal in defendants’ favor, defendants sought to recover, among other things, the net interest they incurred to borrow the $2,621,471.40 they used as collateral for the appeal bonds; this came to $377,157.72. Siry moved to tax this cost. The trial court denied Siry‘s motion, and awarded this cost to defendants.
Siry timely appeals.
DISCUSSION
Siry‘s challenge to the award of net interest expenses turns on two questions: (1) Did the trial court apply the correct version of
We have jurisdiction to entertain this appeal notwithstanding the pending retrial. (Krikorian Premiere Theatres, LLC v. Westminster Central, LLC (2011) 193 Cal.App.4th 1075, 1078–1085 [123 Cal.Rptr.3d 379].)
I. Proper version of California Rules of Court, rule 8.278
Prior to January 1, 2013, rule 8.278 authorized a court to award the prevailing party on appeal “[t]he cost to procure a surety bond . . . and the cost to obtain a letter of credit as collateral,” but the rule was silent as to whether the compensable “cost” included the fees and net interest expense incurred if the party borrowed the money to obtain the bond or letter of credit. The California Supreme Court interpreted this silence to preclude such an award. (Rossa, supra, 53 Cal.4th at p. 390.) The Judicial Council thereafter amended the rule to overturn Rossa. As amended, rule 8.278 reads, in pertinent part: “A party may recover only the following costs, if reasonable: [¶] . . . [¶] (F) The cost to procure a surety bond, including the premium, the cost to obtain a letter of credit as collateral, and the fees and net interest expenses incurred to borrow funds to provide security for the bond or to obtain a letter of credit . . . .” (
Siry argues that the trial court erred in relying on the amended version of rule 8.278 to award net interest expenses because doing so (1) amounts to an impermissible retroactive application of the rule, and (2) denied Siry due process by not giving sufficient “advance notice” of the new rule. Both arguments lack merit.
A. Impermissible retroactivity
There is no impermissible retroactivity in this case because the amended version of rule 8.278 is not being applied retroactively at all. Applying a procedural law in effect at the time of a pending proceeding is not a retroactive application of that law, even if that law has changed during the pendency of the proceeding. (Bank of Idaho v. Pine Avenue Associates (1982) 137 Cal.App.3d 5, 12 [186 Cal.Rptr. 695] [“A lawsuit is governed by a change in procedural rules made during its pendency . . . .“].) This rule applies to amendments to the rules governing the award of litigation costs. (See Stockton Theatres, Inc. v. Palermo (1956) 47 Cal.2d 469, 477 [304 P.2d
The pertinent proceeding in this case is defendants’ prior appeal, and that appeal was still pending when the amended version of rule 8.278 took effect on January 1, 2013. (Cf. Andreini, supra, 219 Cal.App.4th at pp. 1398–1399, 1405–1406 [amended rule 8.278 could not be retroactively applied to appeal that became final in 2011].) It is well settled that an appeal is not final until the court has issued its decision and issued the remittitur, at least when the decision is “on the merits.”1 (See
Siry nevertheless contends that defendants’ prior appeal became final when we issued our opinion, and for support cites Stockton Theatres, supra, 47 Cal.2d at page 477, and Southern Service Co. v. County of Los Angeles (1940) 15 Cal.2d 1 [97 P.2d 963] (Southern Service). Stockton Theatres held that a new cost statute could be applied to an appeal was filed and the bond posted, because the “decision [was] rendered” after the statute‘s effective date. (Stockton Theatres, at p. 477.) Rubenstein v. Rubenstein (2000) 81 Cal.App.4th 1131 [97 Cal.Rptr.2d 707] also looked to the date an appellate opinion was filed, but not in the context of general retroactivity principles; instead, Rubenstein held that, within the meaning of a statutory exception excepting certain judgments from ordinary rules of res judicata, a “judgment[] [was] entered” on the date the appellate court issued its opinion rather than the date
B. Insufficient “advance notice”
In certain circumstances, due process may require advance notice before certain property rights may be extinguished. (See Atkins v. Parker (1985) 472 U.S. 115, 130 [86 L.Ed.2d 81, 105 S.Ct. 2520] (Atkins), superseded on other grounds by
Assuming that Siry has a right to advance notice of a change in the rules governing costs on appeal, that notice was adequate in this case for two reasons. First, the amendment to rule 8.278 was the product of the Judicial Council‘s well-settled rulemaking process. (See generally
Second, the advance notice here was more than sufficient in any event. Atkins upheld 90 days of “lead time” and Texaco upheld two years of “lead time.” (See Atkins, supra, 472 U.S. at p. 117; Texaco, supra, 454 U.S. at pp. 531–532.) Here, Siry had 64 days of “lead time” after the Judicial Council‘s adoption of the amended rule 8.278 and 127 days after its recirculation in what became its final form. Siry does not explain why such notice was insufficient.
II. Application of amended rule 8.278
Siry alternatively argues that the trial court erred in determining that the $377,157.72 defendants sought to recover were “fees and net interest expenses incurred to borrow funds to provide security for the bond” under the amended rule 8.278. In particular, Siry asserts that (1) there is insufficient evidence that defendants borrowed funds, and (2) there is no evidence that the money, even if borrowed, was borrowed specifically for the purpose of securing a security bond. We reject these arguments.
Although not overwhelming, there was sufficient evidence that the $2.6 million that defendants used as collateral for their surety bonds came from the proceeds of an earlier loan having a then current balance of $16.5 million. Defendants provided ample evidence that they had taken this prior loan at 5.71 percent interest, secured by a certain parcel of real property. Siry argues that the loan was not taken out in their names, but the evidence shows defendants were personally liable for that loan. Farkhondehpour stated that the money was “relate[d] to” this loan, and Neman stated that “these [were] borrowed funds.” This is sufficient evidence that defendants were financing the collateral for their surety bonds with the liquid proceeds of a portion of a preexisting loan made to them.
There is also no need for defendants to prove that they borrowed these funds specifically to obtain funding for their surety bond in this case. Siry points to the amended rule 8.278‘s requirement that “the fees and net interest expenses [be] incurred to borrow funds to provide security for the bond.” (
Siry urges us to engraft a specific purpose requirement onto the rule. Siry contends this is necessary to prevent prevailing parties on appeal from financing bonds with their own never-borrowed money and thereafter seeking to collect interest on the theory that they could have used their own money to pay off one of their outstanding loans, and are thus entitled to receive interest at that loan‘s interest rate to compensate them for this lost opportunity cost. This may well be a valid concern (see Sequoia Vacuum Systems v. Stransky (1964) 229 Cal.App.2d 281, 289 [40 Cal.Rptr. 203] [disallowing cost award to “a party who was not required to borrow but could deposit his own money [to obtain a bond], to claim as costs the interest which he might otherwise be acquiring through investment elsewhere“]), but it is not one implicated in this case. That is because, as we noted above, the trial court found in this case that defendants did borrow the funds they put up as collateral. Siry alternatively argues that defendants still should have been required to pay off their prior loan and to take out a new loan to finance the surety bonds, even if from the same lender. But Siry‘s proffered requirement makes no sense: Not only does it require the prevailing party to take additional steps not mandated by the text of the rule, but it also results in the accrual of additional loan origination, financing and escrow fees—all of which are ostensibly collectible as “fees” under rule 8.278 and thus drive up the potential cost-shifting exposure to the nonprevailing party.
DISPOSITION
The judgment is affirmed. Defendants are entitled to their costs on appeal.
Boren, P. J., and Chavez, J., concurred.
A petition for a rehearing was denied July 9, 2015, and the opinion was modified to read as printed above. Appellant‘s petition for review by the Supreme Court was denied October 21, 2015, S228631.