Opinion
A151549
06-27-2018
CHARLES LI, Plaintiff and Respondent, v. DEMAS YAN, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco County Super. Ct. No. CGC10497990)
Defendant Demas Yan appeals from a post-judgment order requiring production of documents in connection with plaintiff Charles Li's attempt to examine Yan as a judgment debtor, specifically tax returns. We affirm.
BACKGROUND
This is Yan's third appeal arising out of the lawsuit brought by Li. That lawsuit began in 2010 when Li, an elderly man, sued Yan, an attorney, for professional negligence, breach of fiduciary duty, unlawful business practices, breach of contract, and fraud, which lawsuit has generated a register of actions that is 45 pages long, with 442 entries! The case came on for a court trial in late 2012, with Yan representing himself, Li represented by counsel. Evidence was taken over five days, following which supplemental briefs and proposed statements of decisions were submitted by both sides. On March 11, 2013, the trial court filed its statement of decision ruling for Li, a statement that was comprehensive and detailed, setting forth the evidence and the law supporting the decision. A judgment entered May 7 awarded Li damages of $254,411.06. And the trial court subsequently entered amended judgments adding attorney fees, interest, and costs. On June 2, 2016, the court entered a fourth amended judgment, awarding Li damages of $254,411.06, prejudgment interest of $149,677.29, attorney fees of $505,470.00, costs of $26,384.91, and post-judgment interest of $150,067.86, for a total of $1,086,001.12. Meanwhile, in January 2014, Yan filed his first appeal, in which Yan challenged only the award of prejudgment interest (Li v. Yan (Jan. 28, 2016, A140798 [nonpub. opn.] (Yan I)). We easily rejected Yan's appeal, in an opinion that among other things criticized Yan's tactics and his briefing for us. Indeed, on our own motion we imposed sanctions against Yan, ordering him to pay Li $9,000 within 30 days after the opinion became final. That was in March 2016, and to our knowledge that sanction has never been paid.
Following our decision in Yan I, Li's counsel began efforts to enforce the judgment, including examining Yan as a judgment debtor. Those efforts were extensive—and expensive—but met with little success, as Yan did all he could to thwart those efforts. That led to the second appeal, which ended with our published opinion of May 2, 2016: Li v. Yan (2016) 247 Cal.App.4th 56 (Yan II). Yan II ruled against Yan all the way, among other things affirming the April 16, 2015 trial court order that Yan produce tax returns. In the course of our opinion, we discussed at some length a fraudulent conveyance action Li had filed against Yan apparently involving members of his family; we also discussed the purpose of the judgment debtor examination procedure—to " 'leave no stone unturned in the search for assets.' " (Id. at p. 66, quoting Troy v. Superior Court (1986) 186 Cal.App.3d 1006, 1014.) And we concluded Yan II with this lengthy observation:
"According to Li, in the fraudulent conveyance action filed against Yan, Yan contends 'that he conveyed real estate to his relatives, either in 2004 or 2007 or 2012 (the story keeps changing).' And also according to Li, under Yan's own theory of such transfer, Yan 'realized a substantial capital gain in the purported transaction . . . . [And has] never informed the lender that holds up to $1 million in mortgage on the same property, and he may still be taking the interest deductions thereto. The tax returns would shed light on whether such transfer actually happened . . . . [In one . . . fraudulent transfer case, a debtor's deduction of interest and other expenses relating [to] real property on her federal tax returns was viewed as evidence that the property still belonged to her, not to the relative to whom she had transferred title.] In re Roca ([Bankr. D.Ariz.] 2009) 404 B.R. 531, 539.'
"In sum, there is a strong public policy here, beyond only leaving no stone unturned. That policy is to prevent fraud against creditors. And against lenders. And perhaps against the court.
"As indicated above, Yan's story includes some claimed transfer(s) to members of his family, who may be complicit in Yan's machinations. As we noted in Yan I, a bankruptcy panel rejected two appeals by relatives of Yan who had filed claims in his bankruptcy. The appeals were by Yan's father, sister, and brother-in-law. In a six-page decision that discussed the history of the claims, the bankruptcy panel ended its decision with this:
" 'C. Bankruptcy Aspects
" 'Besides a lack of proof, overriding bankruptcy principles would also support the bankruptcy court's decision to disallow of Appellant's [sic] claims under the circumstances of this case. In re Murgillo [(Bankr. 9th Cir. 1994)] 176 B.R. [524,] 533. The record supports the bankruptcy court's explicit concern regarding the timing of Appellants' claims, i.e., that they served no valid bankruptcy purpose, but, instead, were strategically filed so that debtor could avoid paying his postpetition Judgment Creditors who had attached the surplus of this estate.
" 'Further, debtor presented a myriad of changing stories in this case. Full disclosure in the bankruptcy schedules is essential to satisfy a significant purpose: That adequate information be available to the trustee without the need for investigation into whether the information is true. Debtor did not list Chiu's claim in his schedules, which were signed under penalty of perjury. Yet, debtor later declared under penalty of perjury that he owed the money when Chiu filed his tardy claim. Moreover, debtor listed his father's claim as $38,000, but he later admitted that he did not list the full amount of debt because he did not want to create the appearance of questionable large claims from relatives. Debtor's failure to fully and adequately disclose not only has serious consequences, but his change in position demonstrates an intent to play fast and loose with the court, thereby prejudicing the trustee's administration of his estate. Had debtor listed the claims of his relatives as required, the trustee would have, before the Final Account, liquidated other assets to assure distribution to all creditors. Instead, she was prepared to abandon the assets to debtor.
" 'This later point directly relates to debtor's role in this appeal. His representation of Chiu and Yan as their attorney is truly troubling to this Panel. Where a debtor is a creditor's attorney, the conflict of interest involved is obvious. How can the debtor, as lawyer, advise his clients fully and effectively when the lawyer himself is on the other side of the bargaining table? Allowing Appellants' claims in full would compel the trustee to liquidate more of the to-be-abandoned estate, an obvious negative result to debtor.' (Fn. & boldface omitted.)
"We cannot overlook such conduct.
"Beyond all that, Yan's answers at the examinations are less than forthcoming—and, frankly, hard to believe. A few examples should suffice:
"Yan testified he sold his membership in an LLC (limited liability company) to two persons for $650,000, but could not remember their names.
"Yan testified that his mother provided him checks, but could not remember whether the checks numbered more than a hundred; when the most recent check was received; or when his mother last worked or her last job.
"Yan testified that he was the sole support for his children, supported solely by his income, which for 2014 was 'less than [$]10,000.' The support included rent, which included $8,400 in 2014, but he refused to provide the identity of the person to whom the rent was paid. Yan was asked the source of the money to pay his children's rent, and he said it was from his 'income.' Asked if that was from legal fees, Yan said, 'I don't know.'
"Enough is enough.
"Weingarten [v. Superior Court (2002) 102 Cal.App.4th 268 (Weingarten)] held that any privilege for tax returns yielded to the policy behind the discovery allowed to support punitive damages. There, Weingarten did not produce the standard documents. Rather, as described by the Court of Appeal, '[I]nstead of producing these standard documents, Weingarten continued to refuse to produce any credible financial information and instead claimed she had already disclosed all information relevant to her current financial condition, relying on her admittedly outdated financial statement. By so acting, Weingarten intentionally interfered with plaintiffs' ability to obtain relevant information through legitimate means, and then sought to hide behind the tax return privilege to ensure no relevant information would be revealed to plaintiffs.' (Weingarten, supra, at p. 275.)
"Further, and perhaps apropos to Yan here—whose conduct at various sessions of examination has necessitated appearances before the courts—is this additional observation from Weingarten: 'Weingarten's refusal to produce relevant financial information was not an isolated incident. The independent calendar trial judge, who was intimately familiar with the case and Weingarten's conduct during discovery, was aware that Weingarten had engaged in the same type of evasive and bad faith activities regarding her financial matters . . . . The trial court was aware that Weingarten repeatedly disregarded these fundamental principles, and acted as if she were exempt from discovery rules.' (Weingarten, supra, 102 Cal.App.4th at pp. 275-276.)
" 'A trial court has broad discretion in determining the applicability of a statutory privilege.' (Weingarten, supra, 102 Cal.App.4th at p. 274, citing National Football League Properties, Inc. v. Superior Court (1998) 65 Cal.App.4th 100, 106-107.) That discretion was not abused by Judge Crompton here." (Yan II, supra, 247 Cal.App.4th at pp. 67-70.)
Our remittur in Yan II issued on July 7, 2016. Yan flouted it, and did not produce tax returns, bringing about the events leading to this appeal. Specifically:
Li served a request for tax returns for the years 2010 through 2015. Yan did not respond. So, in September 2016, Li filed a motion to compel (1) compliance with the trial court's April 16, 2015 order, compelling production of tax returns that were the subject of Yan II; (2) answers without objections to post-judgment interrogatories served June 6, 2016; and (3) production without objection to post-judgment requests for production of documents served June 6, 2016. Yan did not file opposition, and by order of October 25, the trial court granted Li's motion in its entirety, giving Yan until October 31 to comply with the trial court's April 16, 2015 order and until November 9 to serve responses to post-judgment interrogatories and requests for production of documents. Still, Yan did not comply.
On November 23, Li obtained an order to show cause, ordering Yan to appear on January 4, 2017 to show cause why he should not be held in contempt for disobeying the trial court's October 25 order. This apparently got Yan's attention, and on December 23, Yan filed a declaration in support of his response to the order to show cause. There, Yan testified that he served responses that day to Li's post-judgment interrogatories and requests for production of documents. Yan further testified that before being personally served with the order to show cause, he had been unaware of the trial court's October 25 order to compel discovery. Yan had been distracted for the past seven months by the illness of his father who had recently passed away, and for whom Yan was responsible for providing "24/7" hospice care at home. In addition to being in mourning and depression since his father passed away, Yan was the victim of a "vicious assault" in April that gave him a head injury from which he had not yet fully recovered, and that he suffered from fatigue, pain, loss of concentration, worsened eye sight, and other maladies.
Li's December 30 reply argued among other things that Yan had not produced his tax returns in whatever he served in December.
At a January 4, 2017 hearing, the trial court gave Yan one last chance to meet and confer regarding the discovery in order to avoid contempt. Instead, in February—more than two years after he first received the request for the tax returns and after he had unsuccessfully appealed the issue to this court—Yan served an amended response which for the first time stated several objections, including this one: "Responding party had not filed tax return as a single filer for the requested period. Any jointly filed tax return is privileged absent waiver by both holders of the privilege. There is no waiver here by both holders of any jointly filed tax return. Coate v. Superior Court (Cal. Ct. App. Dist. 1, 1978) 81 Cal.App.3d 113 [in the absence of a waiver by each of the holders of the privilege, the court may not compel disclosure of joint federal or joint state income tax returns, or any information contained therein.]" This position, it must be repeated, had never been urged before, not in the trial court, not before us.
The order to show cause came on for hearing on February 15 before the Honorable Harold Kahn, a most experienced jurist. The subject of Yan II and its holding came up, and Judge Kahn asked Yan, "How can you get around the Court of Appeal's opinion?" Yan said that the opinion "only dealt with my raising the privacy privilege as to me." To which Judge Kahn replied, "you have waived any other objection." Judge Kahn requested Li's attorney to prepare an order and present it to him, and ordered Yan to produce the tax returns by March 6. Judge Kahn discharged the order to show cause regarding contempt "in favor of an order of compliance with the discovery at issue."
On February 16, Yan filed an opposition to Li's proposed order compelling further discovery responses. Yan's opposition asserted that he had served amended discovery responses on February 7 and, regarding the request for tax returns, he had raised an objection based on the third party joint filer's tax return privilege and the rule that waiver by one joint holder of the privilege does not bar assertion of the privilege by another joint holder.
Judge Kahn rejected this new objection, entered yet another order compelling production, and on March 2 signed an order that stated in pertinent part, "Order To Show Cause Re Contempt is discharged in favor of order for production compliance. Court orders Mr. Yan to produce tax returns by March 6, 2017 . . . ."
Yan did not do that and continued with purported "meet and confer" so as not to comply with the order. He did not produce even partial returns (or even a page) that redacted the alleged third party information. Instead, more than a week after his compliance deadline Yan sent over a draft protective order that would have given him the power to designate any discovery documents as confidential. Li insisted on his strict compliance with the court order, and at a March 28 debtor's examination—supervised by a judge of the San Francisco Superior Court—Yan refused to even identify the claimed third party filer. And on April 13, Yan filed a notice of appeal.
DISCUSSION
Introduction
We began both Yan I and Yan II with the statement that "Appellant Demas Yan is an attorney." We cannot begin this opinion that way, as Yan is now "disbarred," having been ordered disbarred by a Decision and Order of Involuntary Inactive Enrollment filed by the Hearings Department-San Francisco on September 27, 2017 In the Matter of Demas W. Yan, Case Nos. 13-O-17331-PEM; 14-O-05531 (16-O-10733; 16-O-13600); 15-O-13359 (16-O-15786); 16-J-17889 (Cons.)), of which we take judicial notice. (See Evid. Code, § 452; In re Visciotti (1996) 14 Cal.4th 325 [State Bar suspension proceedings]; Younger v. Soloman (1974) 38 Cal.App.3d 289 [finding of disciplinary board of State Bar]; see generally Mack v. State Bar (2001) 92 Cal.App.4th 957.)
The State Bar order discussed Yan's involvement with at least seven different persons, mostly clients he has represented. The order states that it involves four consolidated matters in which Yan was charged with 30 separate counts of misconduct in seven cases. And the order goes on to find, by clear and convincing evidence, that Yan is culpable of 27 counts of misconduct. After commenting on the attorney fees and costs Yan has caused others to incur, the order noted as follows:
"There is a point which zealous litigation must yield to the judicial process and the rule of law and duty to the court. Without such deference, respect for the process and rule of law is lost.
"Here, there is clear and convincing evidence that respondent's litigiousness caused significant harm to DIVP, Lei, Fu, Li, Garcia, and Eng; the administration of justice; and the public.
"Indifference Toward Rectification/Atonement (Std. 1.5(k).)
"Respondent demonstrated indifference toward rectification of or atonement for the consequences of his misconduct. 'The law does not require false penitence. [Citation.] But it does require that the respondent accept responsibility for his acts and come to grips with his culpability. [Citation.]' (In re Matter of Katz (Review Dept. 1991) 1 Cal. State Bar Ct. Rptr. 502, 511.)
"Respondent expressed no recognition of the serious consequences of his misbehavior. He was relentless in pursuit of his claims. Respondent had to know that his arguments in many of the appeals were not supported by the law. Yet, he was undeterred by the multiple sanctions imposed by the court. He soldiered on filing meritless appeal after appeal in the state and federal courts. He has no insight into his behavior. He is unapologetic toward the significant harm he has caused Lei, Fu, and others. He has failed to pay the judgment and many of the sanctions that were imposed against him, including the $552,412 judgment to Li, the $35,000 in sanctions to Lei or Tony Fu; or the $9,000, $1,200 and $1,275 in sanctions to Li."
Among the other things we learn from the disbarment order is that "Charles Li in the Li lawsuits incurred additional attorney fees to collect on his judgment against [Yan]. To date, [Yan] has only paid approximately $900 on the $1 million judgment."
That is the setting against which Yan comes before us here, in Yan III: having been ordered by the trial court in 2015, by us in early 2016, and again by the trial court in early 2017 to produce tax returns; he has not, flouting order upon order, belatedly coming up with a claim, never before made, of a joint filer, a joint filer, as discussed below, who Yan refuses to identify—indeed, may not even exist.
Yan's appeal has no merit. He has demonstrated no error.
The Tax Returns Must Be Produced
Yan, now represented by counsel, asserts fundamentally two arguments: that the law of the case does not apply, an argument he makes at great length, and that the trial court erred in finding waiver. As to the first argument, suffice to say that we do not understand its applicability here, as law of the case was not the basis of the trial court's ruling. But while Yan's brief discusses the law of the case, it does not discuss the standard of review, which is not even mentioned.
Li's respondent's brief states that we review an order concerning discovery for abuse of discretion. Moreover, and as we recognized in Yan II, citing Weingarten, supra, 102 Cal.App.4th at p. 274, " 'A trial court has broad discretion in determining the applicability of a statutory privilege.' " (Yan II, supra, 247 Cal.App.4th at p. 70.) Yan's reply brief acknowledges this standard, going on to attempt to argue that the trial court used the "wrong legal standard." We disagree, and affirm Judge Kahn's order.
As indicated, Yan II involved the issue of tax returns, documents sought via a request for production. Yan raised no claim of any so-called joint holder or third-party privilege right. Nothing.
The rule is that if a person served with a document request fails to make a timely objection, the objection is deemed to be waived. (Stadish v. Superior Court (1999) 71 Cal.App.4th 1130, 1141.) When Li re-served the request for Yan's tax returns in June 2016, Yan did not file any response whatsoever. Thus, all objections were waived. (Code Civ. Proc., § 2031.300, subd. (a).)
Beyond that, as Yan admits, these requests have always called for his " 'personal or marital tax returns.' " Therefore, any issue relating to joint filers was prominently flagged. Yan took Li—not to mention this court—through two years of an expensive appeal without raising such an objection. Then, after losing that appeal, Yan sprung the issue at the very last moment, on February 16, 2017, after briefing was completed and the court had continued its first hearing on contempt.
Yan apparently argues that the mere invocation of a third party overturns all normal rules. This argument fails. First, he is the one asserting the objection today, not the third party. The same public policy reasons that require litigants to make timely and comprehensive objections on their own behalf also militate against allowing them to add objections years later on purported behalf of other parties. As Li aptly puts it, "[Yan's] position, if condoned, would permit litigants to stagger objections and drag out discovery disputes without constraint so long as they can allege some third party or public interest."
No third party has come forward to assert his or her own privacy interest. When legitimate third-party interests are invoked, a discovery respondent may be required to notify the third party so that the third party can protect his or her own interests. (Valley Bank of Nevada v. Superior Ct. (1975) 15 Cal.3d 652, 658.) Yan, having waived his own right to object, either did not notify the alleged third party or the alleged third party was not interested enough to appear in court. But perhaps this is not surprising, as it may be that Yan's claim of joint filer is not even true.
As indicated above, Yan's belated claim of joint filer was in his February 16 objection. That was it. There was no page, redacted or otherwise, of any return showing any joint filer. There was no declaration from Yan, or anyone else, testifying under oath that there was any joint return. Not only that, according to a recitation in Li's brief—a recitation with which Yan does not take issue—Yan was interrogated about this at length, and refused to answer. As Li's brief describes it: "[Yan] was obliged to prove to the court that his objection was justified on substantive grounds. [¶] He did not even try to do this. Indeed, there is no evidence—not even a sworn declaration—that any third party joint filer exists."
As noted, Yan's reply does not deny of this, or take issue with any of it. Essentially acknowledging that all Li asserts was true, Yan says this: "The reason that there is a dearth of information about the third-party filer is that the trial court was not interested in substantiating that person's identity. Neither did respondent raising [sic] any doubt during the hearing about whether the third-party existed. [¶] The trial court did not rest its ruling on doubts about the existence of the third-party joint filer. Without seeking to substantiate the identity of the third-party filer, the trial court ruled that appellant and the joint filer waived the issue and that the law of the case prevented the court from addressing the merits of appellant's claim."
It was Yan's duty to support his claim. And in any event, an order correct on any theory will be affirmed, even if it was not the basis of the trial court's decision. (Howard v. Thrifty Drug & Discount Stores (1995) 10 Cal.4th 424, 443; Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 252, fn. 1.)
DISPOSITION
The order is affirmed. Li shall recover his costs on appeal.
/s/_________
Richman, J. We concur: /s/_________
Kline, P.J. /s/_________
Stewart, J.