Opinion
G051908
05-11-2017
HAVASU LAKESHORE INVESTMENTS, LLC, Cross-Complainant and Respondent, v. TERRY L. FLEMING, SR., Cross-Defendant and Appellant.
Law Offices of Randall S. Waier and Randall S. Waier for Cross-defendant and Appellant. Teeple Hall, Grant G. Teeple, Gregory M. Garrison, Frederick M. Reich, and Julia M. Williams; and Donna Bader for Cross-complainant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2011-00487736) OPINION Appeal from a judgment of the Superior Court of Orange County, Deborah C. Servino, Judge. Appeal Dismissed. Law Offices of Randall S. Waier and Randall S. Waier for Cross-defendant and Appellant. Teeple Hall, Grant G. Teeple, Gregory M. Garrison, Frederick M. Reich, and Julia M. Williams; and Donna Bader for Cross-complainant and Respondent.
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Cross-defendant Terry L. Fleming, Sr. appeals from a $3.6 million judgment against him and in favor of cross-complainant Havasu Lakeshore Investments, LLC (HLI) for Fleming's constructive fraud in purchasing a loan on which HLI had defaulted and then foreclosing on the loan. Based on Fleming's postjudgment conduct, however, HLI has moved for the dismissal of Fleming's appeal under the disentitlement doctrine. That doctrine prohibits a judgment debtor from seeking "the benefits of an appeal while willfully disobeying the trial court's valid orders and thereby frustrating [the judgment creditor's] legitimate efforts to enforce the judgment." (Gwartz v. Weilert (2014) 231 Cal.App.4th 750, 761 (Gwartz).) The record reveals that Fleming has made repeated, deliberate, and obstructionist efforts to effectively stay execution of the judgment without complying with legal procedures. He has lied under penalty of perjury at his judgment debtor examination, refused to comply (for over one year) with the court's order requiring him to turn over certain bank account funds, and been held in contempt by the court for his noncompliance with its turnover order. Accordingly, we grant HLI's motion and dismiss Fleming's appeal.
For convenience and because Terry L. Fleming, Jr., is not a party to this appeal, we refer in this opinion to Terry L. Fleming, Sr., individually, as "Fleming," and to Terry L. Fleming, Jr. as "Fleming, Jr."
FACTS
We take some facts from the declarations of HLI's attorneys supporting HLI's January 20, 2017 motion to dismiss Fleming's appeal; from the exhibits to that motion; and from the exhibits to Fleming's February 3, 2017 opposition to HLI's motion to dismiss. We hereby grant HLI's motion for judicial notice filed on January 18, 2017.
HLI's motion for judicial notice filed May 20, 2016, is denied as not relevant to this appeal.
The operative cross-complaint of the Peloquin parties (including HLI) against the Fleming parties (including Fleming) was tried before a jury on a single cause of action for constructive fraud. By special verdict, the jury made findings in HLI's favor. On February 11, 2015, the court entered an approximately $3.6 million judgment in favor of HLI.
The Peloquin parties are HLI, Jean Victor Peloquin, Capital Source Partners, and J. Victor Construction, Inc. The Fleming parties are Fleming (individually and as trustee of the Terry Lee Fleming Family Trust), Fleming, Jr., and Havasu Landing, LLC.
On May 8, 2015, Fleming appealed from the judgment and from the court's denial of his motion for judgment notwithstanding the verdict. He contended the special verdict form was legally insufficient to support the judgment because the jury arguably made no finding on the causation element of constructive fraud. Temporary Stay, Failure to Bond, and Fraudulent Transfers
On March 23, 2015, Fleming moved for a temporary stay of enforcement of the judgment purportedly to save himself the cost of having to "'re-bond'" if the court awarded HLI attorney fees. The court granted Fleming's temporary stay application, but cautioned against fraudulent transfers. Despite the purported purpose for the stay, the record does not reflect that Fleming ever posted a bond.
HLI's motion to dismiss asserts "Fleming could not have obtained a bond at the time of his stay request because he had already transferred or concealed nearly every asset he owned."
On June 2, 2015, HLI sued Fleming and Katherine Doucette in Riverside County for violating the Uniform Fraudulent Transfer Act. (Civ. Code § 3439 et seq., now known as the Uniform Voidable Transactions Act.) This action concerned Fleming's March 6, 2015 transfer of a residential property in Indian Wells to Doucette for no consideration, although the property was worth around $500,000. During the punitive damages phase of trial, Fleming had failed to mention the Indian Wells property. HLI's action is still pending.
Around June 2015, HLI's counsel learned from records subpoenaed from JP Morgan Chase Bank (Chase) and Wells Fargo Bank that cashier's checks made out to Fleming on March 3, 2015, had totaled over $3 million. During the punitive damages phase of trial, Fleming had testified that he held around $3 million in cash accounts at those banks.
On July 10, 2015, the court issued an order charging Fleming's interest in Havasu Landing, LLC (Landing) and requiring that any distributions from Landing to Fleming be made directly to HLI. During the punitive damages phase of trial, Fleming had testified that Landing was worth over $5 million and that he was its sole owner.
On August 13, 2015, at Landing's judgment debtor examination, Fleming's son, Fleming, Jr., testified that Fleming had transferred Landing stock to Fleming, Jr. on February 1, 2015. Specifically, Fleming had transferred a $2.55 million interest in Landing to Fleming, Jr. in exchange for $150,000 plus $2.4 million worth of future management services to be rendered by Fleming, Jr. over the course of 12 years. Fleming, Jr. and his attorney, Randall Waier, indicated that Landing had no intention of making any profit distributions.
On August 21, 2015, HLI sued Landing, Fleming, and Fleming, Jr. in Orange County Superior Court. HLI sought to set aside Fleming's fraudulent transfer of (1) 55 percent of his interest in Landing, as well as the managing member position, to Fleming, Jr. for little to no consideration; and (2) $3.1 million from Chase and Wells Fargo bank accounts to currently unknown parties. HLI's action in Orange County remains pending.
Fleming's Failures to Appear for his Judgment Debtor Examination
On April 29, 2015, the court ordered Fleming to appear for a judgment debtor examination on June 11, 2015. On May 21, 2015, HLI personally served Fleming with the order to appear. On June 5, 2015, Fleming filed a motion to quash personal service.
On June 11, 2015, when Fleming failed to appear for his examination, the court continued it to July 16, 2015.
On July 14, 2015, the court denied Fleming's motion to quash personal service. The court found the "motion was not brought in good faith, and in fact, was brought for purposes of delay," and awarded HLI reasonable expenses of $3,675 to be paid by Fleming within 30 days. Fleming filed a notice of appeal of the court's ruling denying his motion to quash, but sought to dismiss that appeal three months later. Fleming has never paid the sanctions ordered by the court.
We take judicial notice of the record in case no. G052273.
On July 16, 2015, Fleming again failed to appear for his judgment debtor examination. The court denied HLI's request for a bench warrant and continued Fleming's examination to August 13, 2015.
On July 31, 2015, Fleming filed a motion for reconsideration of the court's denial of his motion to quash personal service. On August 5, 2015, the court granted Fleming's motion for reconsideration and scheduled a hearing for August 13, 2015. It continued Fleming's judgment debtor examination to August 27, 2015. On August 20, 2015, the court denied Fleming's motion for reconsideration and reset his judgment debtor examination to September 3, 2015.
On September 3, 2015, Fleming failed to appear for his examination. The court issued an order to show cause regarding contempt for Fleming's failure to appear and ordered him to be present on September 10, 2015.
On September 10, 2015, Fleming failed to appear for his examination. The court set an order to show cause regarding contempt for September 17, 2015 and continued Fleming's judgment debtor examination to the same date.
On September 17, 2015, Fleming failed to appear for his examination. Fleming's counsel represented to the court that Fleming had filed a writ petition with this court on that date. The trial court continued the order to show cause to October 8, 2015.
On October 8, 2015, Fleming failed to appear for his examination. The court issued and held a $250,000 bench warrant and ordered Fleming to appear within five days of any denial of his writ petition.
On the evening of October 8, 2015, this court summarily denied Fleming's writ petition.
On October 13, 2015, Fleming, ex parte, "walked in . . . with specially appearing counsel . . . Waier, on a stayed $250,000[] Bench Warrant for failing to appear for Judgment Debtor Examinations." The court ordered him to return to court on November 12, 2015 for his judgment debtor examination. Fleming's Judgment Debtor Examination
On November 12, 2015, nearly six months after being served by HLI, Fleming appeared for his judgment debtor examination and testified under oath as follows. He was currently the sole trustee of the Terry Lee Fleming Family Trust and was the only person who handled trust funds. He currently had around $2.6 million in a Chase bank account ending in 368 and held in the name of his family trust, and was the only person who could write checks on that account. He had taken funds out of his bank accounts in the form of cashier's checks totaling about $3 million, and did not deposit all of the funds back into his checking account until "the last couple of weeks" before his judgment debtor examination.
The Turnover Order
On November 12, 2015, immediately following Fleming's testimony at his judgment debtor examination, HLI's counsel requested the court to issue a turnover order for property Fleming had testified was in his custody or control. The court then issued an order for delivery of property after examination (the turnover order). The turnover order directed Fleming to "immediately deliver to the [Riverside County Sheriff] . . . all funds on deposit with Chase Bank in the name of [the] Terry L. Flemming [sic] Sr. Family Trust," along with a golf cart and four guns.
HLI's counsel asked the court (1) whether the court could hold Fleming in the courtroom for service (so HLI's counsel could "hand him a copy of the order"), or (2) whether the order was effective from the bench. The court replied, "From the bench is fine." Fleming and his attorney Waier were present in open court and had an opportunity to review the turnover order before the court signed it. Waier was shown the turnover order before the court signed it.
The next day, HLI's counsel e-mailed Waier to ask him to confirm Fleming's compliance with the turnover order, and "again" attaching a copy of the turnover order. Waier replied that he (Waier) was "unable to accept service of this order on behalf of" Fleming, and stated HLI's counsel had to "personally serve [Fleming] with that turnover order [in order for it] to be effective." HLI's counsel e-mailed Waier and cited Code of Civil Procedure section 708.205, which provides that, at the conclusion of a judgment debtor examination, "the court may order the judgment debtor's interest in the property in the possession or under the control of the judgment debtor . . . to be applied toward the satisfaction of the money judgment if the property is not exempt from enforcement of a money judgment. Such an order creates a lien on the property or debt."
HLI's Discovery that Fleming's Testimony Was Perjured
On September 15, 2016, HLI took the debtor's examination of Fleming's daughter, Patricia Wilson-Fleming. During the examination, HLI discovered numerous facts that showed Fleming had lied during his judgment debtor examination on November 12, 2015. Specifically, Fleming had falsely testified that he was the trustee of his family trust, that he alone controlled trust funds, and that he presently had around $2.6 million in the trust's Chase bank account ending in 368.
Fleming's daughter testified and provided documents showing that, on November 10, 2015, just two days before Fleming's judgment debtor examination, Fleming had made her the trustee of his family trust. According to bank records and Fleming's daughter's testimony, on November 10, 2015, she had opened a new account ending in 695 at Chase (the new account) in her name, as trustee of the trust. She had deposited $2,628,500 into the new account, which money had come from Fleming in the form of a cashier's check or checks. On November 12, 2015 — the day of her father's judgment debtor's examination and the court's turnover order — she had withdrawn $1,928,500 from the new account, leaving $700,000 in the new account. The next day, on November 13, 2015, she had withdrawn $699,500 from the new account and received 13 cashier's checks in various denominations made out to herself as trustee of the trust. She had endorsed the cashier's checks and given them to Fleming.
Fleming's Contempt Judgment
On February 9, 2016, the court issued an order to show cause as to why Fleming should not be held in contempt for willfully disobeying the turnover order. The court heard testimony, took evidence, and was fully briefed on the matter.
On January 10, 2017, the court issued its decision finding Fleming guilty of contempt. Specifically, the trial court found: "Instead of delivering the funds on deposit at JPMorgan Chase Bank to the judgment creditor or the Riverside County Sheriff, on November 13, 2015, Patricia Wilson-Fleming, as trustee of the Terry Lee Fleming Family Trust, withdrew $699,500[] from the account and purchased 13 cashier's checks in her own name, which she then endorsed and gave to Mr. Fleming, who cashed them all. Again, instead of delivering the cash to the judgment creditor or the Riverside County Sheriff, Mr. Fleming negotiated each of the 13 cashier's checks between December 1, 2015 and September 12, 2016. [¶] On September 26, 2016, Mr. Fleming arranged for the golf cart, the guns, and a check for [$25] to be delivered to the Riverside County Sheriff. However, at no time has he delivered the funds that were in the JPMorgan Chase Bank account in the name of his trust at the time the order of November 12, 2015 was entered."
The court found Fleming "willfully disregarded" the turnover order by failing to deliver the funds on deposit at Chase "in the name of his trust at the time the order was entered." The court further found Fleming and his attorney were aware of the turnover order "because they were present in open court on November 12, 2015 when it was signed by the Court and they had an opportunity to review the order prior to the Court's signing it."
The court imposed a fine of $1,000 and ordered Fleming to pay reasonable attorney fees and costs.
Disentitlement Briefing
On December 9, 2015, HLI moved this court for dismissal of Fleming's appeal under the disentitlement doctrine. On January 7, 2016, we denied HLI's motion "without prejudice to renew the motion if the superior court finds [Fleming] in contempt for his failure to comply with the turnover order issued by the superior court on November 12, 2015."
Over a year later, on January 20, 2017, HLI renewed its motion for dismissal of Fleming's appeal under the disentitlement doctrine, advising us that the superior court had held Fleming in contempt on January 10, 2017. HLI further argued that, "not only has Fleming[] failed to comply with the court below's turnover order and continued his efforts to avoid collection of the Judgment over the past eleven months, substantial evidence has come to light that Fleming[] perjured himself to do so."
On February 3, 2017, Fleming filed an opposition to HLI's renewed motion. Fleming stated that the superior court was reconsidering its contempt order. He declared that, on January 17, 2017 — i.e., after the court held him in contempt — he tried to give duty-sheriff "Cynthia" at the Palm Desert substation a cashier's check for $699,500. Fleming further declared that on September 26, 2016, he personally delivered $24 "to the Sheriff's Palm Desert substation to Sgt. Koser, who testified he refused the delivery." Exhibits to Fleming's opposition show he declared (1) that he "was not served" on November 12, 2015 "with any signed order by" the court; (2) that, on November 12, 2015, "the only account at Chase Bank, where [he] was both the trustee and sole signatory" contained about $24; and (3) that the "Chase account . . . containing the $699,500[], at the time the turnover order was read in court, was in the name of Patricia Wilson-Fleming, as the sole trustee of [Fleming's] revocable trust, under her social security number, and she was further the sole signatory on that account."
HLI's February 16, 2017 reply to Fleming's opposition attached as an exhibit the superior court's February 3, 2017 minute order denying Fleming's application to reopen the constructive contempt proceedings.
On March 16, 2017, we summarily denied Fleming's petition for writ of mandate or other appropriate relief concerning the trial court's contempt holding and turnover order.
We take judicial notice of the record in case no. G054622.
DISCUSSION
The disentitlement doctrine empowers a reviewing court to dismiss an appeal by a party who refuses to comply with trial court orders. (Stoltenberg v. Ampton Investments, Inc. (2013) 215 Cal.App.4th 1225, 1229 (Stoltenberg).) "No formal judgment of contempt is required; an appellate court 'may dismiss an appeal where there has been willful disobedience or obstructive tactics.'" (Id. at p. 1230.) An appeal may be dismissed even if the noncompliant appellant believes that the trial court's judgment or order is invalid: "A trial court's judgment and orders, all of them, are presumptively valid and must be obeyed and enforced. [Citation.] They are not to be frustrated by litigants except by legally provided methods." (Stone v. Bach (1978) 80 Cal.App.3d 442, 448 (Stone).) Thus, the merits of an appeal are irrelevant to an appellate court's determination whether to dismiss the appeal. (Ironridge Global IV, Ltd. v. ScripsAmerica, Inc. (2015) 238 Cal.App.4th 259, 266.) The disentitlement "doctrine 'is based upon fundamental equity and is not to be frustrated by technicalities.'" (Stoltenberg, at p. 1230.) "'[I]t would be a flagrant abuse of the principles of equity and of the due administration of justice to consider the demands of a party who becomes a voluntary actor before a court and seeks its aid while he stands in contempt of its legal orders and processes.'" (Stone, at p. 444.)
Stoltenberg involved "a judgment debtor who act[ed] to frustrate or obstruct legitimate efforts in a trial court to enforce a judgment." (Stoltenberg, supra, 215 Cal.App.4th at p. 1230.) The Stoltenberg defendants failed to post a bond to stay enforcement of a California judgment, unsuccessfully applied for a writ to stay enforcement of judgment, did not comply with the plaintiffs' subpoena served in New York for the corporate defendant's financial information nor with a New York trial court's order compelling the defendants to respond, and were held in contempt by the New York trial court. (Id. at pp. 1227-1228.) The defendants paid a $500 contempt fine, but still did not provide the subpoenaed financial information. (Id. at p. 1229.) Stoltenberg dismissed the defendants' appeal, holding "that the disentitlement doctrine applies to noncompliance with and contempt of New York trial court orders, which noncompliance and contempt directly affect and frustrate the enforcement of a California judgment." (Id. at p. 1227.)
In Gwartz, supra, 231 Cal.App.4th 750, the defendants did not post a bond to stay enforcement of judgment. (Id. at p. 755.) The trial court issued various orders, including a freeze order, to help the plaintiffs collect their judgment from the defendants. (Id. at p. 752.) The defendants violated the freeze order by transferring money from a bank account. (Id. at p. 758.) Gwartz "conclude[d] the equitable considerations relevant to the disentitlement doctrine favor dismissal of this appeal." (Id. at p. 761.)
In Stone, supra, 80 Cal.App.3d 442, the trial court twice held the appellant defendant in contempt, once for failing "to deposit into specified accounts all partnership receipts in his possession" (id. at p. 443) and subsequently "for refusing to be sworn for examination as a judgment debtor" (id. at p. 444). Stone concluded the appellant's conduct was intolerable and dismissed his appeal. (Id. at p. 448.)
In the case before us, Fleming has systematically abused the legal system to hinder HLI's collection of its judgment against him. He failed to post a bond to stay enforcement of the judgment, despite the court's granting him a temporary stay of enforcement to allow him to do so. He made several transfers of his assets for little or no consideration. He postponed his judgment debtor examination for months by, inter alia, (1) moving to quash service of process (for which motion the court sanctioned him, finding he had brought the motion for purposes of delay), (2) filing and dismissing an appeal, and (3) petitioning for a writ (which petition we summarily denied). He failed to pay sanctions ordered by the court for the delay. He finally appeared in court, but only after the court issued and held a bench warrant for his appearance. At his judgment debtor examination, he falsely testified under oath that he had over $2.6 million in trust funds in a Chase bank account. The court ordered him to turn over his trust's funds, showed the order to Fleming's counsel Waier, and issued the order from the bench. Nonetheless, Waier and Fleming asserted the turnover order was not properly served. They also took the position the order required Fleming to turn over a mere $24. After over a year of Fleming's blatant noncompliance, the court held him in contempt for willfully disobeying the turnover order.
This chronology lays bare Fleming's intolerable conduct. Fleming's behavior is even more reprehensible than that of the defendants in Stoltenberg, Gwartz, and Stone. Not only did Fleming transfer his assets for little or no consideration, fail to provide honest financial information, and disobey a court order (leading to the court's holding him in contempt), but he lied under penalty of perjury. His willful disobedience, obstructionist tactics, and "utter[] dishonest[y]" (Blumberg v. Minthorne (2015) 233 Cal.App.4th 1384, 1392) disqualify him from seeking our aid on appeal.
DISPOSITION
The appeal is dismissed. HLI is entitled to costs on appeal.
IKOLA, J. WE CONCUR: BEDSWORTH, ACTING P. J. FYBEL, J.