Khorshidi v. Javaheri

Full title: MICHAEL KHORSHIDI et al., Plaintiffs, Cross-defendants and Appellants, v…

Court: California Court of Appeals, Second District, Fourth Division

Date published: Aug 5, 2021

No. B285132 (Cal. Ct. App. Aug. 5, 2021)

Opinion

B285132 B291095

08-05-2021

MICHAEL KHORSHIDI et al., Plaintiffs, Cross-defendants and Appellants, v. ALEXANDER JAVAHERI et al., Defendants, Cross-complainants and Respondents. PARVEZ ABDI, Cross-defendant, Cross-complainant and Respondent. MICHAEL KHORSHIDI et al., Plaintiffs and Appellants, v. ALEXANDER JAVAHERI et. al., Defendants and Appellants

Law Offices of Scott L. Zimmerman, Scott Zimmerman; Early Sullivan Wright Gizer & McRae, Scott E. Gizer for Plaintiffs, Cross-defendants and Appellants in B285132 and Plaintiffs and Appellants in B291095. Law Offices of Tabone and Derek L. Tabone for Defendants, Cross-complainants and Respondents in B285132 and Defendants and Appellants in B291095; Harrison Law and Mediation and Susan L. Harrison for Cross-defendant, Cross-complainant and Respondent in B285132.

COLLINS, J.

NOT TO BE PUBLISHED

APPEALS from judgments of the Superior Court of Los Angeles County Nos. BC408948, BC567865, Rex Heeseman and Mitchell L. Beckloff, Judges. The judgment in case no. BC408948 is affirmed. The judgment in case no. BC567865 is reversed, and the case is remanded with directions.

Law Offices of Scott L. Zimmerman, Scott Zimmerman; Early Sullivan Wright Gizer & McRae, Scott E. Gizer for Plaintiffs, Cross-defendants and Appellants in B285132 and Plaintiffs and Appellants in B291095.

Law Offices of Tabone and Derek L. Tabone for Defendants, Cross-complainants and Respondents in B285132 and Defendants and Appellants in B291095;

Harrison Law and Mediation and Susan L. Harrison for Cross-defendant, Cross-complainant and Respondent in B285132.

COLLINS, J.

Introduction

In 1987, five partners began a joint venture involving a downtown Los Angeles property. The relationship between the parties quickly deteriorated into what one partner characterized as “nothing short of a bloody family feud.” Early violent conflicts led to mutual restraining orders. Some of the parties stopped speaking to each other in 1989 or 1990, and thereafter communicated only through certified mail or their attorneys. Litigation began in 1993, and multiple lawsuits among the parties have resulted in numerous judgments over the decades.

This consolidated appeal arises from the most recent two judgments, which followed a trial conducted in multiple phases. In March 2009, Manoutchehr/Michael Khorshidi and Nejatolah Rabbanian (collectively, appellants) sued two of their partners in the joint venture agreement, brothers Eskander/Alexander Javaheri and Ardeshir/David Javaheri (collectively, the Javaheris), who are also Rabbanian's nephews. The fifth partner to the agreement, Parviz/Paul Abdi joined the lawsuit through a cross-complaint, and each of the three factions-appellants, the Javaheris, and Abdi-asserted claims against the other two. The parties sought to invoke the right under the joint venture agreement to buy out the other partners due to the “defaults” of the others, as defined in the joint venture agreement. The parties also asserted additional claims against each other, including breach of contract, breach of fiduciary duty, fraud, conspiracy, and equitable contribution.

In phase one of the bifurcated trial before Judge Rex Heeseman in October 2011, the parties tried the buyout claims to determine which parties, if any, had defaulted under the joint venture agreement, and which parties, if any, were entitled to invoke the forced buyout provision of the agreement. In January 2012, Judge Heeseman announced the court's decision in open court, holding that appellants had defaulted under the joint venture agreement, and the Javaheris and Abdi were entitled to exercise their buyout rights. No party requested a written statement of decision. The parties proceeded to have the joint venture appraised to determine a buyout value pursuant to the joint venture agreement.

The litigation dragged on for several years. Judge Heeseman was reassigned and then retired; Judge Mitchell L. Beckloff eventually took over the case. Appellants, represented by new counsel, moved for a mistrial under the “one judge rule, ” which holds that parties are entitled to have the judge who hears the facts of a case be the one who renders the decision on those facts. Judge Beckloff denied the motion, finding that the issues decided by Judge Heeseman were discrete and severable, so proceeding with the remainder of the trial would not violate the one judge rule.

While the case was pending, in December 2014 appellants filed a second complaint against the Javaheris. A 2008 arbitration award entitled the Javaheris to collect future damages arising from appellants' refinancing a joint venture loan in 1999. In their new lawsuit, appellants alleged that the Javaheris manipulated the loan payments to force appellants to pay more than they should have under the 2008 arbitration award. The second case, which we will refer to as the loan action, was deemed related to the first, which we will call the main action.

Abdi and the Javaheris eventually dismissed their claims against each other. In 2016, the case proceeded to a trial that included phase two of the main action and the loan action. In the main action, Judge Beckloff ruled against appellants on their claims against the Javaheris and Abdi, and ruled partially in favor of Abdi on his cross-complaint against appellants. Judge Beckloff incorporated Judge Heeseman's rulings from phase one regarding the defaults and buyout rights. In the loan action, Judge Beckloff held that appellants were entitled to a partial refund from the damages the Javaheris had collected.

Appellants appealed the judgment in the main action. They assert that Judge Heeseman erred in phase one of the trial by relying on a 1999 loan as a basis for finding that appellants had defaulted under the joint venture agreement. They also assert that the bifurcated trial violated the one judge rule, and that the final judgment that incorporated Judge Heeseman's oral ruling from phase one violated Code of Civil Procedure, section 635.¹ We find no error and affirm.

1 All further statutory references are to the Code of Civil Procedure unless otherwise indicated.

In the loan action, the trial court awarded appellants prejudgment interest on their damages. The Javaheris moved for a new trial, asserting that because the parties had competing claims for damages-the Javaheris' entitlement to damages arising from the 2008 arbitration award, and appellants' contention that the Javaheris had collected too much-the court should also have considered prejudgment interest owed to the Javaheris before appellants' debt was satisfied. The court agreed and granted the motion, but then realized that it had ruled too late, so the motion was denied as a matter of law. The Javaheris appealed, asserting that the motion for new trial should be granted; appellants cross-appealed, asserting that the Javaheris were not entitled to a consideration of prejudgment interest, and that the 2008 arbitration award was not a valid basis for any further recovery by the Javaheris. We find a new trial is warranted so the court can consider whether the Javaheris are entitled to any consideration of prejudgment interest. We therefore reverse the judgment and remand the loan action for a new trial on that limited issue.

Factual and procedural background

A. Background

1. The joint venture

Appellants state that the parties are “Iranian immigrants who came here following the fall of the Shah.” The Javaheris are Rabbanian's nephews, and Abdi was appellants' friend. On April 1, 1987, appellants, the Javaheris, and Abdi entered into a joint venture agreement regarding a property at the intersection of 5th Street and Los Angeles Street in downtown Los Angeles (5th & LA). The purpose of the joint venture was to acquire the property, demolish the existing structure, and build a new structure. The building would operate as an “indoor swap-meet style building.” The ground floor had booths leased to small retailers, and the second floor included offices, storage spaces, and rooftop parking. The building was substantially complete in 1989.

Under the joint venture agreement, appellants each held a 30 percent interest in the joint venture, Abdi held a 20 percent interest, and the Javaheris each held a 10 percent interest. The “exclusive management and control of the Venture and its business and affairs” was vested in appellants.

Section 9 of the joint venture agreement was titled “Default and Dissolution.” It stated that “any of the following events shall constitute an event of default.” The list of defaults included failures to make capital contributions, filing for bankruptcy, or “[d]efault in performance of or failure to comply with any other agreements, obligations or undertakings” required by the joint venture agreement. Section 9.3.1 of the joint venture agreement stated that “[u]pon the occurrence of an Event of Default by a Venturer, ” the non-defaulting venturers “shall have the right to acquire the Joint Venture interest of the Defaulter for cash... at a price determined pursuant to the appraisal procedure set forth in Paragraph 10” of the agreement. The agreement stated that the joint venture would terminate 30 years after the date of execution of the agreement.

2. The 1993-1994 arbitration

Conflict between the parties started shortly after the joint venture was established. A 1993 arbitration initiated by the Javaheris resulted in a judgment requiring appellants to pay the Javaheris monthly distributions “at the same time that distributions are made” to appellants, and barred appellants from withdrawing cash from the joint venture “without the express written consent of all of the joint venturers.” Although management of the joint venture originally was vested in appellants, the 1994 judgment required appellants to “consult and confer” with the Javaheris “regarding the management and business affairs of the Joint Venture, ” including “refinancing any loans encumbering the Joint Venture Property.” Nevertheless, the judgment stated that “the power of decision shall be exclusively with” appellants. The judgment also required appellants to pay from their personal funds $40,000 for a “reallocation of partnership income, ” as well as $35,000 for attorney fees and costs resulting from the arbitration.

3. The 2002-2005 litigation

In 1999, without consulting the Javaheris, appellants refinanced the joint venture property. The 1999 refinancing involved a 10-year, $8,000,000 loan from Community Bank. After securing the refinancing loan, appellants paid off the principal owed on the joint venture's existing loan (approximately $2,700,000), and distributed the remainder to the partners. Appellants then used their portion of the funds to purchase a competing property at the intersection of 6th Street and Los Angeles Street (6th & LA).

In 2002, the Javaheris sued appellants and the joint venture for breach of contract, breach of fiduciary duty, and other causes of action. In their complaint, the Javaheris alleged that appellants did not consult the Javaheris regarding the 1999 refinancing, failed to pay the Javaheris their portion of net cash flows, failed to provide yearly budgets or quarterly accounting statements, failed to report all income generated by the joint venture, and “inflated the expenses of the building by paying costs of other businesses not associated with 5th and LA with joint venture funds.” At a trial in 2005, a jury found that appellants breached their obligations under the joint venture agreement; breached their fiduciary duties; intentionally concealed information from the Javaheris; and acted with malice, fraud, or oppression. The jury awarded actual damages of $1,130,519.60, as well as punitive damages of $1.7 million against each of the appellants. This court affirmed the judgment on appeal in 2006. (See Javaheri v. Khorshidi (Nov. 13, 2006, B183177) [nonpub. opn.].) Appellants paid the judgment in full, and the Javaheris filed an acknowledgment of satisfaction of judgment in January 2007.

4. The 2005-2008 arbitration

The Javaheris asserted that during the 2005 trial, they learned for the first time that appellants used the money from the 1999 refinancing to purchase 6th & LA. (Appellants dispute when the Javaheris learned this fact.) The Javaheris filed two lawsuits on July 8, 2005. The first was filed against appellants and “Sixth and LA Wholesale Plaza, LLC, ” and according to the Javaheris, was intended to address “breach of fiduciary duty by usurpation of the Joint Venture business in using its assets to develop a competing venture.” The second was filed against appellants, Abdi, and the joint venture, and according to the Javaheris, was intended to “address ongoing defalcations of Appellants as managers of the joint venture.” The two cases were consolidated and ordered to arbitration.²

2 Abdi did not appear, and was not a party to the judgment.

Following arbitration in January 2008 and additional briefing, the arbitrator issued a 20-page written award in July 2008. The arbitrator noted the limited scope of the arbitration, stating that he had limited the evidence to “events ante-dating February 18, 2005, the date of the jury's award” in the 2002-2005 litigation. The arbitrator also stated that any “damages for the failure to obtain consent for the 1999 loan would be barred by the statute of limitations, ” and the issues that were the subject of the 2002-2005 litigation were “outside the scope of this arbitration.”

The arbitrator rejected the Javaheris' claim that appellants breached their fiduciary duties by opening a competing business. However, he found that appellants did commit a breach by “using the resources of 5th & LA to obtain financing of the purchase” of the 6th & LA property, and “using 5th & LA funds to pay off the loan obtained for that purpose.” The arbitrator found that appellants' payment of the 1999 loan with joint venture funds between February 2005 and April 2008 “resulted in $2,418,423.74 less being available for partnership distributions during the time applicable to the arbitration proceeding.” The arbitration award ordered appellants, jointly and severally, to pay the Javaheris each 10 percent of that figure, $241,842.37, reflecting their respective 10 percent ownership in the joint venture.

The arbitrator noted that the parties agreed that appellants had used joint venture funds to pay their attorney fees and costs in the 2002-2005 litigation and the current litigation. The arbitrator found that the joint venture paid attorney fees of $472,724.53 for appellants' defense in the 2002-2005 litigation, and adding interest, assessed damages to the joint venture of $578,245.60. Appellants, jointly and severally, were required to pay the Javaheris ten percent of that figure, $57,824.56 each. In addition, the arbitrator found that the joint venture paid $177,777.50 of appellants' attorney fees in the pending arbitration; the arbitrator awarded the Javaheris $17,777.75 each, plus interest.

The arbitrator further found that “general damages were warranted” because appellants “continu[ed] to use 5th & LA as a check book to pay expenses whenever they saw fit.” Thus, appellants were to pay the Javaheris $100,000.00 each in general damages. The arbitrator denied the Javaheris' request for punitive damages. The arbitrator also amended the joint venture agreement to vest management of 5th & LA in the Javaheris.

The arbitrator also noted that appellants' “breach of fiduciary duty, along with the additional breaches of paying costs of defense of [the 2002-2005 litigation] and costs of defense of the current litigation out of 5th & LA funds, constituted a default in performance of the obligations of [appellants] as managers of 5th & LA.” The arbitrator stated, “In that this is at least the third round of litigation between the minority venturers and the majority venturers, it does appear that it is not reasonably practical to carry on the business.” The arbitrator stated that he could not oust appellants from the joint venture, however, because the Javaheris did not initially request such a remedy; instead, “[o]nly during subsequent briefing have the [Javaheris] sought to have [appellants] expelled from the partnership under Corporations Code § 16601(5)(C).” The arbitrator did note, however, “The findings of this arbitration award constitute a judicial finding that [appellants], and each of them, have committed numerous defaults as defined in §9.1.1 L of the Joint Venture Agreement.... This finding presents [the Javaheris] with the option of an Election under §9.3 et. seq. of that Agreement.”

The arbitration award was confirmed as a judgment on November 19, 2008. Appellants paid the judgment, and the Javaheris filed an acknowledgment of satisfaction of judgment on December 2, 2008.

B. This action

1. The parties' complaints and cross-complaints

On January 20, 2009, appellants sent a letter to the Javaheris stating, “This letter constitutes notice that you are both in default of the Joint Venture Agreement.” Appellants stated that the Javaheris “have disregarded the advice of the property management company and caused substantial loss of income to the Venture by failing to lease out the Venture's property at appropriate market rents, by wrongfully asserting and demanding inappropriate payments from Messrs. Khorshidi and Rabbanian, and other wrongful acts.” Appellants referred to themselves as “Non-Defaulter Venturers” and sought to invoke the procedures in the joint venture agreement to force a sale of the Javaheris' shares of the joint venture.

On January 27, 2009, the Javaheris responded to appellants' letter, stating that their “assertion that the Javaheris are in default of the joint venture agreement is misplaced.” The Javaheris asserted that appellants had defaulted under the joint venture agreement, noting “three separate judgments finding that [appellants] wilfully [sic] breached their fiduciary duty, ” and referenced additional alleged breaches. The Javaheris sought to invoke the joint venture agreement's procedures to force a sale of appellants' shares.

Appellants filed the complaint that initiated this litigation on March 4, 2009. Appellants named the Javaheris as defendants, and alleged that after the Javaheris became managers of the joint venture pursuant to the 2008 arbitration award, they took certain actions “without the consent of the majority in interest” of the joint venture, which violated the joint venture agreement. Appellants also alleged that the Javaheris failed to pay full distributions to appellants and “recklessly and incompetently mismanaged the negotiation of rentals from tenant leases at 5th and LA.” Appellants invoked sections 9 and 10 of the joint venture agreement, characterizing the Javaheris' actions as defaults and alleging that the Javaheris' invocation of sections 9 and 10 of the agreement was itself a default. Appellants alleged causes of action for specific performance, declaratory relief, preliminary and permanent injunction, breach of contract, and breach of fiduciary duty.

All of the partners then cross-complained against each other in three factions: appellants, the Javaheris, and Abdi. The Javaheris cross-complained against appellants and Abdi for specific performance, breach of contract, breach of fiduciary duty, and preliminary and permanent injunction; their first amended cross-complaint is the operative pleading. The Javaheris alleged that despite being removed as managers of the joint venture, appellants “have renegotiated lease terms and extensions with tenants, have disparaged the facility to other tenants, and solicited tenants of 5th and LA to breach their lease and more [sic] to Sixth and LA by offering lower rent and more space.” They alleged that based on these actions and their previous wrongdoing, appellants had defaulted under the joint venture agreement. The Javaheris sought to invoke the procedures to acquire appellants' shares under sections 9 and 10 of the joint venture agreement.

The Javaheris included Abdi as a cross-defendant. They asserted that Abdi was “a non-defaulting venturer” who had “a right to participate in the purchase of the interest[s] of” appellants. The Javaheris requested that Abdi “elect[ ] whether to participate in the purchase.”

Abdi cross-complained against appellants and the Javaheris; his second amended cross-complaint is the operative pleading. Abdi alleged 14 causes of action, including breach of fiduciary duty, breach of contract, fraud, and conspiracy. He alleged that the Javaheris as managers of the joint venture were supposed to garnish appellants' distributions to make the joint venture whole, but “the Javaheris have failed to pay any such portion of the garnished distributions to Abdi.” Abdi alleged that appellants and the Javaheris had committed “serious breaches and defaults” under the joint venture agreement. Abdi further contended that he was a necessary party to the previous litigations, but he was either not included or not properly served in those litigations.

Appellants then cross-complained against Abdi; their first amended cross-complaint is the operative pleading. Appellants alleged that Abdi had been a co-manager of 5th & LA from 1993 to 2005, but he “never fully and accurately accounted for the cash proceeds and other proceeds he received” on behalf of 5th & LA. Appellants alleged they had no knowledge of Abdi's wrongdoing until July 2009. They also alleged that Abdi operated competing shopping centers, used “distributions of cash flow and refinancing proceeds from the Venture to construct, acquire and operate shopping centers in direct competition with” 5th & LA, and “wrongfully diverted tenants away from the Venture's Property and to his own competing properties.” Appellants further alleged that Abdi “was at least equally responsible” for the judgments against appellants arising from the earlier litigations. They alleged causes of action for breach of contract, breach of fiduciary duty, and various theories of indemnity and contribution.

2. Phase one trial in the main action

On February 10, 2010, the parties and court, with Judge Rex Heeseman presiding, agreed to bifurcate the trial into two phases: equitable issues to be tried in a bench trial in October 2010 (phase one), and a jury trial on the remaining issues in February 2011 (phase two). The parties and court ultimately agreed that phase one would determine the parties' rights to buy out the other joint venturers under the terms of the joint venture agreement.

After several delays, phase one was tried over seven days in October 2011. Most facts presented at the trial are not disputed. The evidence showed that from the time the building began operating until 2005, appellants managed the joint venture and acted as property managers at 5th & LA. Abdi managed the parking at 5th & LA from 1995 to 2005, and at least twice per day he collected money from the parking attendant and brought it to the management offices. Abdi also assisted with other managerial and bookkeeping tasks periodically prior to 2005; the extent to which Abdi participated in general management duties was disputed.

In approximately March 2005, appellants hired a management company, The Real Estate Group (TREG) to manage 5th & LA. Joe Yarman was the active manager with TREG. Also in 2005, appellants leased the building parking to a company called Paragon Parking.

In July 2008, following the 2008 arbitration award, the Javaheris became managers of the joint venture and Alexander Javaheri took an active role in managing 5th & LA. Revenues for the joint venture began dropping in 2007, and continued to drop through 2008 and into 2009. There was no dispute that the economic recession at the time impacted the revenues, but the parties disagreed whether other factors, such as management decisions or competing properties, also affected revenues.

Sometime after July 2008, Paragon's parking lease was terminated and AAA Parking began to lease the parking. TREG left 5th & LA, and a new management company, Central Business Management (CBM) took over as property manager. Alexander Javaheri had significant work done at 5th & LA, including repairs to the heating, air conditioning, and electrical systems. Several 5th & LA tenants testified about the building management and the conditions at the property.

The parties argued their positions in closing briefs. In appellants' briefs, they “concede[d] that the 2008 [arbitration] Award expressly permitted the Javaheris to exercise rights under Subparagraph 9.3.1 of the JV Agreement, ” and stated that they are “bound by the 2008 Arbitration Award as it applies to their dispute with the Javaheris.” However, appellants contended that “because [appellants] exercised first” by sending the Javaheris the letter seeking to force a buyout, “the rights of the Javaheris as well as the rights of Abdi to separately exercise such rights was [sic] extinguished.” Appellants also argued that “the Javaheris were deliberately engaging in a pattern of conduct to drive down the value” of 5th & LA, so the unclean hands doctrine barred them from any recovery. Appellants further contended that both Abdi and the Javaheris waited too long to exercise their buyout rights, and were now barred from doing so by the statute of limitations and the doctrine of laches.

The Javaheris asserted in their closing briefs that “they alone have the right to specifically enforce paragraph 9.3 of the JV Agreement” due to appellants' “repeated defaults of the JV Agreement as documented by the previous judgments.” They asserted that the 2008 arbitration award had res judicata and collateral estoppel effect against appellants, and none of appellants' defenses was sufficient to overcome this hurdle. The Javaheris also asserted that “Abdi has lost his right to specifically enforce the JV Agreement due to his involvement in the wrongdoing” by appellants, and asked the court to allow them to amend their pleadings against Abdi to conform to proof. They further argued that the evidence did not support any finding that the Javaheris defaulted under the joint venture agreement.

In his closing briefs, Abdi asserted that appellants were in default under the joint venture agreement, and therefore were not entitled to exercise the buyout option. The court previously ruled that Abdi could not rely on the prior judgments against appellants as collateral estoppel, because he was not a party to any of the earlier actions. Thus, Abdi asserted anew that each of the actions supporting the earlier judgments against appellants constituted defaults under the joint venture agreement. Regarding the Javaheris, Abdi noted in passing that he alleged “Breach of Fiduciary Duty and Breach of Contract claims against the Javaheris for conduct engaged in since they took control of the Venture which, if decided in his favor, would necessarily mean that the Javaheris also are in default under the Agreement and subject to buy-out by Abdi.” However, he did not assert that the evidence supported a finding against the Javaheris. Abdi also noted that the Javaheris stated in their pleadings that Abdi was a non-defaulting venturer, and therefore they had no claims against Abdi.

3. Phase one ruling

The court set a “hearing on oral statement of decision.” At the hearing on January 10, 2012, the court announced its ruling on phase one from the bench. The court noted that “the main issue” was “the event of default discussed in section 9 of the [joint venture agreement, ] the arguments being who did it and what would be the effect.” The court also noted that any default would need to be “material” to be actionable.

The court discussed the 1993 arbitration, the 2005 judgment, and the 2008 arbitration award. The court noted that the 2008 arbitration award found “three events of defaults” by appellants, and “the arbitrator's decision is res judicata for my purpose in connection with the [appellants] in event of default. But I'm going to only apply that to the situation involving the refinancing matter and the 2008 fees and costs.” The court continued, “So for purposes of this lawsuit, I'm going to say the [appellants] committed an event of default in connection with the refinancing... as set forth in paragraph 63 of the 2008 arbitration decision.” This aspect of the ruling is discussed more fully below.

The court rejected appellants' argument that the other parties' claims of default were too late, stating, “[T]here is no limit in the joint venture agreement as to when somebody has to invoke section 9. Instead, 9.3.1 says ‘at any time following an event of default of its election to institute the appraisals procedure.'” The court stated that “any time” was “very, very, very general, ” but “the joint venture agreement made the decision not to impose a time limitation.”

The court rejected appellants' contentions that the Javaheris defaulted based on their management of 5th & LA after 2008. The court noted the declines in revenue for the joint venture, but did not attribute them to the Javaheris. The court therefore rejected appellants' claims that the Javaheris defaulted, and concluded that the Javaheris “can proceed with their section 9 rights” under the joint venture agreement.

Turning to claims regarding Abdi, the court noted that appellants and the Javaheris “went after... Mr. Abdi” in “a variety of arguments.” The court stated, “I reject all of those arguments... against Mr. Abdi.” The court held, “Mr. Abdi can exercise his section 9 rights.”³

3 The court noted that the parties were “making arguments” about laches “and similar theories about limiting recoveries and all that.” The court stated that it would limit Abdi's monetary recovery to “the last three or four years.” Given that the court was not determining any causes of action including damages at the time, this ruling appeared to be prospective for issues in the phase two trial.

The court said it would retain jurisdiction over the case, but the “bottom line is this continuing saga has to stop.” The court and parties discussed how to proceed with the appraisal process required by the joint venture agreement to determine a net fair market value of the joint venture for buyout purposes. The court set a hearing three weeks away, on January 31, 2012, to discuss the selection of appraisers and next steps. The court's minute order for the hearing stated, “The court issues its ruling as fully reflected in the notes of the Official Court Reporter.”

4. Post-phase one proceedings with Judge Heeseman

At the hearing on January 31, 2012, appellants' counsel asked the court “if the court reporter could find a way to finish our transcript of your statement of decision hearing, ” which “would be helpful to all of us.” The court stated, “As far as I'm concerned, the transcript of my oral ruling is what controls, okay? I did spend some time organizing that oral ruling to avoid controversy later on.” Notably, none of the parties requested that the court enter a written statement of decision.

According to the record on appeal, there were many additional hearings, conference calls, or status conferences with Judge Heeseman between January 2012 and March 2013. Not all of the information from those meetings is summarized here.

In April 2012, Judge Heeseman informed the parties that due to a reorganization of the superior court, he would no longer be running a court department. Judge Heeseman told the parties that the case would be assigned to a different judge, and “[i]f there is another trial in this case, I will not be the trial court judge.” No party objected. On April 19, 2012, Judge Heeseman informed the parties that he would be one of two mandatory settlement conference judges for the case. He also told the parties that his calendar courtroom would be closing on May 1, 2012. Again, no party objected.

On February 27, 2013, there was a hearing before Judge Heeseman with the three appraisers who had been selected through the appraisal process set out in the joint venture agreement. The attorneys gave short presentations to the three appraisers, urging them to focus on certain issues relevant to the valuation of the building. After the presentations, the appraisers asked questions. The appraisers' reports were expected to be completed and sent to the court and parties by March 8, 2013, and their “reason statements” backing up their findings were expected by March 19, 2013. After the appraisers left, the court and counsel discussed an expected report of an independent CPA valuing the partnership shares for a buyout, which was also required under the joint venture agreement.

The appraisers submitted their reports, and the independent CPA submitted his report in March 2013. The CPA assessed the fair market value of appellants' shares in the joint venture at $1,568,483.00 each. A two-day mandatory settlement conference was conducted, but the parties failed to settle their remaining claims.

5. Transfer of case

The case was transferred to Judge Abraham Khan in April 2013. In July 2013, appellants moved to set aside the valuation based on the appraisals, characterizing it as an arbitration award. The court denied the motion. Appellants appealed the court's ruling, but after briefing was completed and the case was set for oral argument, appellants requested dismissal of the appeal, stating that it was based on a nonappealable order. The appeal was dismissed in August 2014.⁴

4 On our own motion, we take judicial notice of the record in appellants' appeal from this ruling, case no. B252026, as well as the record in the Javaheris' petition for writ of mandate, case no. B254258.

At some point, the parties or Judge Khan raised concerns about whether Judge Heeseman's ruling could be incorporated into a final judgment in the absence of a written statement of decision. The parties informally asked Judge Heeseman for a written statement of decision. In an email exchange with all counsel, Judge Heeseman initially agreed to review a written statement of decision prepared by the parties, but reminded the parties that he made clear that his oral statements on the record “would in effect be a Statement of Decision.” Appellants' counsel responded to the email, stating that there were “numerous issues... to be resolved” before he would stipulate to a statement of decision, and that a formal hearing would likely be required. Judge Heeseman responded to that email, stating that under section 632, a party must request a written statement of decision within 10 days after conclusion of a bench trial, but no party requested one. Judge Heeseman concluded that “the time for a written ‘Statement of Decision' has long ago passed and I will be guided accordingly.”

In October 2013, the Javaheris filed a motion in Department 1 of the superior court seeking to have the case reassigned to Judge Heeseman so he could issue a written statement of decision. Abdi joined the Javaheris' motion. The Javaheris' counsel stated in a declaration that Judge Khan refused to schedule a phase two trial without a written statement of decision from phase one, which placed the case in “limbo” and opened up the “very real possibility of having to retry the case from the beginning.”

Appellants opposed the motion, arguing that the Javaheris and Abdi had waived any claim to a written statement of decision by failing to timely request one. Appellants also asserted that Judge Heeseman's involvement in the mandatory settlement conference disqualified him from continuing to act as the judge in the case. Appellants' counsel stated in a declaration that appellants “never would have consented” to having Judge Heeseman be involved in the mandatory settlement conference “if they understood that Judge Heeseman would be making any further determinations in the trial of this case.”

The superior court, with Judge Daniel J. Buckley presiding in Department 1, denied the Javaheris' motion on December 31, 2013. The transcript from the hearing is not included in the record on appeal. In a minute order, the court stated, “[T]his Court cannot sit as a court of appeal over Judge Heeseman and Judge Khan. This Court recognizes the distinct chance that the parties face a re-trial of some or all issues heard by Judge Heeseman but only an appellate court can reverse his decision about the statement of decision. This Court does not have the authority to compel Judge Heeseman to issue a formal statement.” The Javaheris filed a petition for writ of mandate in this court. This court denied the petition on April 30, 2014.

The case was returned to Judge Khan, who set a trial for July 29, 2014. On February 6, 2014, the case was reassigned to Judge Mitchell L. Beckloff.

The July 29 trial date was vacated after appellants' trial counsel became “totally disabled.” New counsel for appellants substituted into the case in August 2014. In a status conference statement filed on September 29, 2014, appellants' new counsel asserted that “Phase I must be declared a mistrial and the issues therein retried.” At a status conference hearing before Judge Beckloff on October 2, 2014, the parties discussed the issue. The Javaheris and Abdi felt the case could proceed to phase two without a written ruling from phase one. Appellants' counsel disagreed, asserting that an oral ruling does not constitute a statement of decision, and “even if he signed a statement of decision, it would still be a mistrial.” Appellants stated that they planned to file a formal motion for mistrial, and the court set a briefing schedule for the motion.

6. Appellants' motion for mistrial

Appellants filed their motion for mistrial on October 8, 2014, asking “for an order declaring a mistrial of this action and ordering that the case be reset for trial de novo.” In the 30-page motion, appellants asserted that Judge Heeseman “presided over, but did not complete, Phase I” of the trial, and had since retired from the bench. They argued that the one judge rule required all evidence in the case to be heard by a single judge, and that without a statement of decision there could be no final judgment. Appellants also asserted that Judge Heeseman substantively erred by relying on the 2008 arbitration award, because the award had been “superseded and extinguished” by the judgment confirming the award, so it “no longer had any legal effect.” They further contended that the court erred by relying on the 1999 refinancing as an event of default, and by granting summary adjudication in favor of Abdi “without complying with CCP §437c.”

The Javaheris and Abdi separately opposed appellants' motion. The Javaheris asserted that appellants were trying to avoid an unfavorable ruling and delay inevitable losses. The Javaheris and Abdi noted that Judge Heeseman made clear that the focus of phase one was specific performance of the forced buyout provisions of the joint venture agreement, and his decision on that issue was complete and final. They also asserted that appellants had waived any contention that the same judge needed to hear both parts of the case. In addition, the Javaheris and Abdi asserted that a mistrial or motion for new trial was not an appropriate remedy for the errors alleged, which included a partial ruling in a bifurcated trial, or a lack of compliance with the summary judgment statute. Appellants filed a reply disputing the other parties' positions and reasserting their contentions. Abdi filed a sur-reply.

At the hearing on the motion on December 23, 2014, the parties argued their positions and the court took the matter under submission. One week later, the court denied the motion in a written ruling. The court stated that appellants' “due process concerns (the same judge rule), can and will be addressed through the remaining issues to be tried.” The court observed that Judge Heeseman ruled on the parties' defaults and buyout rights under the joint venture agreement, and that “Judge Heeseman's decision on those issues is complete and does not require further action by the court.” To the extent Judge Heeseman had not fully determined issues “other than rights and obligations arising under the joint venture agreement, ” those issues would need to be fully re-tried. “Thus, evidence presented to Judge Heeseman may have to be repeated in connection with this court's adjudication of those issues. Due process requires that this court hear and determine the evidence on all issues no[t] conclusively determined by Judge Heeseman.”

Appellants filed a petition for writ of mandate challenging the trial court's denial of their motion. On March 26, 2015, this court denied the petition.

7. The loan action

Meanwhile, on December 24, 2014, appellants filed a separate complaint against the Javaheris, initiating the loan action. The case was deemed related to the main action and transferred to Judge Beckloff. The operative pleading at the time of trial was the first amended complaint, filed May 28, 2015, which alleged four causes of action against the Javaheris: breach of fiduciary duty, breach of contract, declaratory relief, and accounting.

The 2008 arbitration award found that the 1999 refinancing constituted a breach of fiduciary duty, and awarded the Javaheris future damages reflecting the extent to which loan payments on the 1999 loan diminished joint venture profits that would otherwise be distributed to the partners. Thus, the arbitration award stated that the Javaheris were entitled to “an additional distribution to themselves of an amount calculated as 10% each of the amount(s) paid by 5th & LA during any given month to discharge” the 1999 refinancing loan, to be deducted from appellants' monthly partnership distributions.

In the loan action, appellants alleged that the 1999 loan came due in 2010, but the Javaheris improperly extended the loan in order to collect additional damages from appellants. Appellants alleged that rather than paying off the loan in 2010, the Javaheris “entered into a ‘Change in Terms Agreement' with Community Bank”-the same bank that had issued the 1999 loan-“with the intent and for the purpose of perpetuating the appearance of the same ‘existing obligation'” from the 1999 loan. By doing so, appellants alleged, the Javaheris perpetuated their “claim to continued receipt of the 10% Distribution Award” arising from the 2008 arbitration award. Appellants also contended that although each joint venture partner paid his share of the loan payoff amount in February 2015, the Javaheris nonetheless continued to withhold appellants' joint venture distributions until later in 2015 under the guise of those funds being “applied to the ‘loan payoff.'” Appellants alleged that their damages exceeded $360,000.00.

Appellants also alleged that after the Javaheris took over management of 5th & LA in 2008, and while the main action was pending, the Javaheris “intentionally acted to suppress the revenues of 5th and LA for purposes of artificially depressing its valuation.” Appellants alleged that the Javaheris offered unsolicited rent reductions to tenants, failed to rent available spaces, denied tenant requests to rent more valuable spaces, and declined to actively market the property. Appellants further alleged that the Javaheris “undertook unnecessary or excessive capital improvements to the Property.” Appellants also alleged that the Javaheris “interfered with the appraisals and the court's supervision thereof.”

The trial in the main action was continued several times, and the court granted appellants' motion to consolidate the main action and the loan action for purposes of trial. Trial was eventually set for August 29, 2016.

8. Phase two trial and the loan action trial

The issues to be tried in phase two were narrowed as the case proceeded. The phase one ruling addressing the parties' buyout rights had determined appellants' first cause of action for specific performance, second cause of action for declaratory relief, and third cause of action for preliminary and permanent injunction; the Javaheris' first cause of action for specific performance; and Abdi's seventh cause of action for specific performance. Before the trial of phase two, Abdi dismissed his claims against the Javaheris. The Javaheris abandoned the remaining causes of action in their cross-complaint.

The following issues therefore were tried in phase two and the loan action trial: appellants' causes of action in the main action against the Javaheris for breach of contract and breach of fiduciary duty; appellants' causes of action against Abdi for breach of contract, breach of fiduciary duty, and equitable indemnity; Abdi's causes of action against appellants for breach of fiduciary duty, breach of contract, reformation, fraud, unjust enrichment, and civil conspiracy; and appellants' causes of action in the loan action against the Javaheris for breach of fiduciary duty, breach of contract, declaratory relief, and accounting.

The bench trial on phase two and the loan action began on August 29, 2016 before Judge Beckloff. The facts and evidence are generally not disputed for purposes of this appeal. The evidence presented in phase two of the main action is briefly summarized here; the facts relevant to the loan action are summarized in a separate section below.

Alexander Javaheri, Rabbanian, Khorshidi, Abdi, and multiple other witnesses testified over the 18-day trial. Appellants presented evidence in support of their main action claims against the Javaheris, including evidence about the management of 5th & LA after Alexander Javaheri took control as managing partner in 2008, such as the change in on-site management companies, tenant rent reductions, the parking lease, and maintenance work done on the premises. Appellants presented a forensic accounting expert to testify about the rents at 5th & LA, and to compare “general economic trends” relating to swap meets and flea markets. Abdi presented evidence in his case against appellants, including testimony about the ongoing conflicts between the parties, the history of the joint venture, past litigations, and management of 5th & LA. Both Khorshidi and Rabbanian testified that the joint venture paid the legal fees for the 2002-2005 litigation and the 2005-2008 arbitration. Abdi also testified that he had no knowledge of appellants' earlier wrongdoing, in support of his delayed discovery claims.

After several additional hearings to settle disagreements about the admission of exhibits, the parties submitted written closing briefs in January 2017. In their closing brief, appellants asserted that any claims relating to the 1999 refinancing were barred by the statute of limitations, or res judicata/collateral estoppel, and, “Amid the chaos of Phase I and the parties' arguments with each other and Judge Heeseman as to what ‘equitable' issues were being presented in Phase I, these legal defenses were never adjudicated.” Appellants further contended that Abdi's testimony did not support a finding of delayed discovery. In addition, they renewed their objections under the one judge rule. Ultimately, appellants did not assert any arguments supporting the causes of action in their complaint against the Javaheris for breach of contract or breach of fiduciary duty.⁵ However, appellants asserted that they were entitled to recover against the Javaheris in the loan action.

5 The parties disagreed about whether the court could order specific performance of a buyout for a specific dollar amount based on the valuations that had been completed after phase one. The court ultimately held that issues addressing the valuation were not encompassed within the parties' pleadings, and “the buy-out provision in the [joint venture agreement] is a self-executing provision, ” so there was nothing more for the court to do. This issue is not relevant to the appeal.

The Javaheris' cause of action for specific performance against appellants had been adjudicated in phase one, and they dismissed their remaining causes of action. In their short closing brief, the Javaheris argued that appellants' res judicata affirmative defense was meritless. They also asserted that appellants were not entitled to recover in the loan action.

In his closing brief, Abdi asserted that appellants' misconduct entitled him to damages on his cross-claims, as well as punitive damages. He also asserted that the delayed discovery rule entitled him to damages beyond the statute of limitations. In addition, Abdi argued that appellants could not recover on their cross-claims against him.

The parties reiterated their positions in oral closing arguments before the court on February 6, 2017. Notably, appellants admitted in their closing argument, “We don't want anything from Abdi.... There's not enough evidence to seek money from Abdi.” After the parties had presented their positions, the court deemed the matter submitted.

9. Phase two and loan action rulings and judgments

In its June 2, 2017 statement of decision regarding the main action, the court stated that in phase one, “Judge Heeseman ruled on the parties' rights relative to one another under the joint venture agreement. Judge Heeseman's decision on those issues is complete and does not require further action by the court.” The court noted that Judge Heeseman found that appellants had defaulted under the joint venture agreement, the other parties had not defaulted, and the Javaheris and Abdi were entitled to exercise their buyout rights under section 9 of the joint venture agreement. Thus, Judge Heeseman found against appellants on their causes of action for specific performance, declaratory relief, and injunction. The court also noted that appellants abandoned the remaining causes of action in their complaint against the Javaheris-breach of contract and breach of fiduciary duty-thus ruling against appellants and in favor of the Javaheris on appellants' complaint.

The court noted that appellants admitted in closing arguments that they did not have sufficient evidence to prevail on their cross-claims against Abdi. The court therefore ruled against appellants and in favor of Abdi on appellants' cross-complaint against him.

Regarding the Javaheris' cross-complaint against appellants, the court noted that Judge Heeseman had found in favor of the Javaheris on their first cause of action for specific performance. The court noted that the Javaheris had withdrawn their second cause of action for breach of contract, third cause of action for breach of fiduciary duty, and fourth cause of action for injunction. The court rejected appellants' res judicata affirmative defense, stating that the issue decided by Judge Heeseman-whether the Javaheris were entitled to exercise their buyout rights-had not been litigated in any prior action. The court also rejected appellants' argument that they had been barred from presenting this affirmative defense in phase one, noting that appellants' actions in moving forward with the appraisals contradicted their claim that any affirmative defense relating to buyout rights remained to be tried. The court therefore ruled in favor of the Javaheris on their cross-complaint against appellants.

Turning to Abdi's cross-complaint against appellants, the court noted that Judge Heeseman's ruling in phase one supported a finding in Abdi's favor on his seventh cause of action for specific performance.⁶ The court rejected Abdi's contention that he was entitled to damages relating to the 1999 refinancing, because any such claim was untimely and Abdi could not recover under a continuing wrong theory. However, the court found that Abdi “has established entitlement from [appellants] to 20 percent of the defense fees and costs expended by the Joint Venture from July 17, 2005, ” four years before Abdi's cross-complaint was filed. The court rejected Abdi's request for damages beyond the statute of limitations, finding that Abdi's “testimony to support his delayed discovery claim is simply not credible.” The court therefore found that on Abdi's cross-complaint against appellants, Abdi was entitled to $64,945.00 in damages arising from the legal fees paid from joint venture funds, plus prejudgment interest in the amount of $79,152.86, for a total of $144,097.86. The court denied Abdi's request for punitive damages. The court therefore entered judgment in favor of Abdi against appellants for specific performance as determined in phase one, and for damages as determined in phase two.

6 The court also stated that Abdi was entitled to judgment on his sixth cause of action for declaratory relief against the Javaheris. However, that cause of action had been eliminated through a demurrer earlier in the action, and Abdi had dismissed all claims against the Javaheris.

The details of the court's ruling and statement of decision in the loan action are discussed more fully below. But in sum, in its June 1, 2017 statement of decision, the court agreed with appellants that the Javaheris had deducted more from appellants' partnership distributions than they were entitled to under the 2008 arbitration award. The court rejected appellants' claims that the Javaheris depressed the value of the property or interfered with the appraisal. The court ordered judgment against the Javaheris and in favor of each appellant for $89,364.90.

Judgment was entered in the loan action on July 7, 2017, and in the main action on July 17, 2017. We consolidated the appeals for all purposes.

10. Post-judgment motions

In the main action, appellants filed a motion to vacate the judgment or for a new trial. They asserted that their affirmative defenses of res judicata/claim splitting and statute of limitations were “never addressed by Judge Heeseman, ” and that Judge Beckloff “did not address the merits of the defenses; in legal effect, this court has determined that [appellants] abandoned or waived the defenses during Phase I.” They asserted that they were “unfairly denied the benefit of a judicial determination on this issue.” The Javaheris and Abdi opposed the motion.

The court denied appellants' motion, stating, “A fair reading of [the phase one ruling] reveals Judge Heeseman addressed [appellants'] argument concerning the timeliness of the claim of default” and rejected it. The court also rejected appellants' res judicata/claim splitting argument, stating that the Javaheris' primary rights litigated in the prior cases, which involved breaches of various duties under the joint venture agreement, were not the same primary right to a forced buyout litigated in phase one of the current litigation.

In the loan action, appellants and the Javaheris each filed motions for new trials, which involved the payment of prejudgment interest on the damages awarded to appellants. We discuss their respective motions in detail below.

Appellants timely appealed the judgment in the main action. The Javaheris timely appealed the judgment in the loan action, and appellants filed a cross-appeal.

Discussion

Appellants assert three primary contentions on appeal in the main action. First, they contend that in phase one the trial court erred in finding that the 1999 refinancing was an event of default, and by relying on the 2008 arbitration award in reaching that conclusion. Second, appellants contend that the proceedings violated the one judge rule. Third, they assert that under section 635, a judgment may not incorporate holdings from an oral statement of decision. We find no error on these points, and affirm the judgment in the main action.

In the Javaheris' appeal from the loan action, they assert that the trial court erred in including an award of prejudgment interest on the damages awarded to appellants without also considering whether the Javaheris were entitled to prejudgment interest on the amounts appellants owed the Javaheris. In appellants' cross-appeal, they contend that the Javaheris' collection of damages based on the 2008 arbitration award was unfounded. We reject appellants' contentions, and find that a retrial on the issue in the Javaheris' motion for new trial is warranted. We therefore remand the loan action for retrial on the limited issue of whether the Javaheris are entitled to have the court consider prejudgment interest on the amount owed to the Javaheris.

Appeal in the Main Action

A. The 1999 refinancing as a default in phase one

Appellants assert the trial court erred in phase one by finding that the 1999 refinancing constituted a default under the joint venture agreement. Appellants contend the court improperly based its decision on the arbitrator's finding of a default on that basis in the 2008 arbitration award. However, appellants have not challenged the court's other basis for finding a default-that appellants improperly used joint venture funds to pay their own litigation expenses, which both Khorshidi and Rabbanian have admitted. Because appellants have not challenged this independent finding of default, they have not demonstrated prejudicial error with respect to the phase one ruling.

1. Background

Paragraph 63 of the 2008 arbitration award stated in part that appellants breached their fiduciary duties to the Javaheris by “using the resources of 5th & LA to obtain financing of the purchase” of 6th & LA, a competing business, “without notifying or obtaining the consent of the other venturers. Further, the breach consisted of using 5th & LA funds to pay off the loan obtained for that purpose.” Paragraph 64 of the arbitration award stated, “That breach of fiduciary duty, along with the additional breaches of paying costs of defense of BC277665 [the 2002-2005 litigation] and costs of defense of the current litigation out of 5th & LA funds, constituted a default in performance of the obligations of [appellants] as managers of 5th & LA.”

In the phase one ruling, the trial court referred to these two paragraphs in finding that appellants had defaulted under the joint venture agreement. Judge Heeseman stated that in the 2008 arbitration award, the arbitrator “found three events of defaults” by appellants: first, using joint venture resources to fund a competing business through the 1999 refinancing, as stated in paragraph 63 of the arbitration award; second, using joint venture funds to pay litigation costs in the 2002-2005 litigation as stated in paragraph 64; and third, using joint venture funds to pay litigation costs in the in the 2005-2008 arbitration as stated in paragraph 64. The court stated, “So for purposes of this lawsuit, I'm going to say the [appellants] committed an event of default in connection with the refinancing which I outlined and as set forth in paragraph 63 of the 2008 arbitration decision. [¶] And as to the '08 fees and costs as set forth in paragraph 64, I reserve the right to re-visit the issue of the fees and costs if appropriate in the future.” The court did not mention the 2002-2005 litigation fees at this point. After addressing some of appellants' defenses, the court stated, “So now I conclude that the [appellants] have, as I said earlier, based upon the 2008 arbitration agreement [sic], have committed an event of default in connection with those two issues I said earlier. So the [appellants] are a defaulting venturer [sic].” Later, when discussing Abdi's contentions against appellants, the court stated again, “I believe the arbitrator got it right in connection with two of the events of default, the refi that I talked about earlier and the 2008 fees and costs that I talked about earlier.”

2. Analysis

Appellants assert that the “Phase I Ruling was legal error, because it depends on the 1999 Refinance as an ‘event of default' by Appellants.” They contend that res judicata bars the Javaheris' claims regarding the 1999 refinancing, because the 2002-2005 litigation focused on that issue, and that “was the Javaheris' one shot at obtaining remedies relative to that subject.” Appellants further assert that the Javaheris had a single “primary right” with respect to the 1999 refinancing, and any successive litigation on the same subject amounted to improper claim splitting. They also contend that that statute of limitations bars the Javaheris' and Abdi's claims relating to the 1999 refinance because the actual refinancing occurred a decade before this action was filed, and “[t]here was no ‘continuing wrong' as to the 1999 Loan.”⁷

7 Appellants filed motions in limine prior to phase two to bar admission of evidence relating to the 1999 refinancing and the 2008 arbitration award. The court granted the motion regarding the 1999 refinancing, and reserved ruling regarding the 2008 arbitration.

As Abdi correctly points out, however, appellants do not address the other default found by the arbitrator and the court-the improper payment of appellants' legal fees from joint venture funds. Khorshidi and Rabbanian testified in phase one that the legal fees for the appeal of the 2005 jury verdict and for the 2005-2008 arbitration were paid from joint venture funds. Appellants' counsel also admitted to the court that they did so, asserting, “We believe [the payments were] proper when made.” The documentary evidence received by the court showed that joint venture funds were used to pay appellants' litigation expenses into January and February 2007. Indeed, in phase two the court awarded Abdi damages for appellants' payment of personal litigation expenses from September 2005 to February 2007. Appellants do not acknowledge this issue in their opening brief, nor do they contend the court erred in finding a default on this basis.

It is a critical omission. “[T]he burden is on an appellant to demonstrate... that the trial court committed an error that justifies reversal of the judgment.” (Jameson v. Desta (2018) 5 Cal.5th 594, 609.) Even if we agreed with appellants that the court erred by relying on the 1999 refinancing as an event of default, appellants have not challenged the other, wholly independent finding of default. Thus, any error regarding the 1999 refinancing as a default would be harmless, and could not support reversal of the judgment. (See Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 570 [an error is harmless if “it is not reasonably probable [an appellant] would have obtained a more favorable result in its absence”]; see also F.P. v. Monier (2017) 3 Cal.5th 1099, 1108 [the California Constitution and generally applicable law prohibits a reviewing court from setting aside a judgment in the absence of prejudicial error].)

Appellants' arguments do not suggest error in the court's finding of a default relating to the use of joint venture fees to pay appellants' litigation costs. For example, appellants argue that the Javaheris' and Abdi's claims regarding the 1999 refinancing were time-barred. They acknowledge that the joint venture agreement is silent as to a time limit for exercising buyout rights, but assert that a “reasonable time is inferred, ” and the longest limitations period would have been four years under section 337. They assert that Abdi's and the Javaheris' “seeking a buyout based on the 1999 Refinance was about a decade late, ” and there was no “continuing wrong” that could extend the statute of limitations. However, appellants assert no argument that the parties' assertion of default based on the payment of attorney fees-which occurred as late as February 2007, about two years before this action was filed-was too late.

Similarly, appellants' contentions regarding claim splitting and res judicata are not supported for the default involving the payment of litigation expenses. Appellants argue that the 2002-2005 jury trial was based on the Javaheris' “grievances concerning the 1999 Refinance, ” and “[w]hat the Javaheris managed to achieve in the 2008 Arbitration was blatant claim-splitting, ” because that award was also based on the 1999 refinancing.⁸ Appellants argue that the Javaheris' contentions in this action “would be the third splitting of their claim based on the 1999 Refinance. Res judicata prevents exactly such piecemeal litigation.” (See, e.g., Crowley v. Katleman (1994) 8 Cal.4th 666, 681 [“A pleading that states the violation of one primary right in two causes of action contravenes the rule against ‘splitting' a cause of action”].)

8 The Javaheris dispute appellants' characterization of the issues in the past litigations.

Again, these contentions do not address appellants' use of joint venture funds to pay litigation expenses well into the 2005-2008 arbitration, which both the arbitrator and trial court found constituted a default. Moreover, these arguments do not address Abdi's claims of default. “Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) Abdi was not a party to any of the earlier judgments, and he never asserted any claims that appellants had defaulted under the joint venture agreement. Thus, even if we were to agree with appellants' contentions about res judicata or claim splitting with respect to the Javaheris, there is no basis for such a finding with respect to Abdi.

Appellants address attorney fees for the prior litigations for the first time in their reply brief, asserting that “[t]he issue of attorneys' fees charged to the JV is irrelevant as to the Javaheris and cannot support the judgment in favor of Abdi.” In a meandering argument that touches on most of the themes of appellants' appeal, appellants assert that “even if one accepts that Judge Heeseman conclusively and correctly declared the defense costs as an issue of default - it still cannot be said that Judge Heeseman determined to evict Appellants for just that issue.” They argue that it is “speculation” to assume that Judge Heeseman “would have determined to evict Appellants on just the [attorney fees] issue if viewed in isolation.”

It is well established that issues not addressed as error in a party's opening brief are forfeited. (See, e.g., Raceway Ford Cases (2016) 2 Cal.5th 161, 178 [“We generally do not consider arguments raised for the first time in a reply brief”].) Even if appellants had not forfeited this issue, we cannot assume that Judge Heeseman's ruling would have been different under different circumstances. “It is a fundamental rule of appellate review that the judgment appealed from is presumed correct and ‘“‘all intendments and presumptions are indulged in favor of its correctness.'”'” (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852.) Moreover, nothing in the record suggests that a single default on the part of appellants-rather than the multiple defaults that existed here-would be an insufficient basis for other partners to exercise their buyout rights under the joint venture agreement.

Appellants also take issue with the arbitration award itself. They contend the 2008 arbitration award was “a gross error that cannot be extended to provide additional remedies in this action, ” and the “arbitrator's error [should] be considered, and the award disregarded, in this action.” They argue that the arbitration award was “clearly contrary to law” regarding the 1999 refinancing, but they could not challenge it pursuant to Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 6, which holds that “an arbitrator's decision is not generally reviewable for errors of fact or law.” They argue that the policies supporting the finality of arbitration awards articulated in Moncharsh do not allow “an erroneous arbitration award [to] be dragged back into the court system as a basis for new rights and remedies based on alleged wrongs otherwise barred by res judicata and the statute of limitations.”

It is worth noting that appellants' position on appeal directly contradicts their statements to the trial court in phase one. In their pretrial brief filed before phase one, appellants stated, “As part of the arbitration award issued in July 2008, the Arbitrator found that [appellants] were in default of the joint venture agreement of the 5th and LA Joint Venture and that the Javaheris could exercise buyout rights against them under Section 9.3 of the Joint Venture Agreement.” When discussing the issues prior to the phase one trial, the court asked appellants' counsel whether the court was bound by the arbitrator's ruling as to both the Javaheris and Abdi. Appellants' counsel stated, “If you are speaking about whether my clients can escape the rulings of the arbitrator as to [the Javaheris'] very limited claims, we would not assert that. We would not assert that.” In their closing trial briefs filed after phase one, appellants “concede[d] that the 2008 [arbitration] Award expressly permitted the Javaheris to exercise rights under Subparagraph 9.3.1 of the JV Agreement, ” and acknowledged that appellants were “bound by the 2008 Arbitration Award as it applies to their dispute with the Javaheris.” In ruling from the bench, Judge Heeseman noted that appellants “acknowledge the res judicata claim” against them. Appellants' contradictory contention now-that the 2008 arbitration award was erroneous, it is not binding, and the court erred by relying on it-is not well taken.⁹ In addition, as we discuss further in the section below addressing the appeal from the loan action, appellants offer no valid legal basis for their attempt to collaterally attack the legal effect of the arbitration award long after the judgment on that award has become final.

9 Neither Abdi nor the Javaheris argue that appellants have forfeited their contentions or are judicially estopped from making these arguments on appeal based on their position in the phase one trial.

Moreover, appellants' argument suggests that the court relied on the arbitration award to the exclusion of other evidence in reaching its conclusions. The record does not support this contention. Phase one constituted a full trial held over seven court days to address which parties defaulted and which parties were entitled to exercise buyout rights under the joint venture agreement. In denying Abdi's motions for summary adjudication before the phase one trial, the court held that Abdi could not rely on the prior judgments or the arbitration award as collateral estoppel against appellants. Abdi therefore presented evidence in phase one that significantly overlapped with the issues in the arbitration award, including, as relevant to this appeal, documentary evidence that appellants used joint venture funds to pay their litigation expenses into early 2007.¹⁰ Khorshidi and Rabbanian both testified in phase one that joint venture funds were used to pay litigation expenses, and their counsel represented the same to the court. In stating his ruling, Judge Heeseman stated, “I spent a lot of time with the bench trial and afterwards going over the arbitrator's decision. I heard everybody's arguments. And after considering all that, listening to the testimony and all that, I believe the arbitrator got it right....” Thus, it is clear that the court did not reach its decision by relying on the arbitration award alone, and to the extent appellants' arguments rest on such a contention, we reject it.

10 The court later reversed its collateral estoppel ruling as to Abdi, holding that Abdi could also rely on the findings in the 2008 arbitration award, but only after this evidence had been presented to the court.

Because appellants did not demonstrate error with respect to the court's finding of default from their use of joint venture funds to pay their litigation expenses, and none of appellants' contentions undermine that holding, we find no error in the court's phase one ruling that appellants defaulted under the joint venture agreement.

B. One judge rule

Appellants argue that the bifurcated proceedings in the main action violated the one judge rule. More than a century ago, the Supreme Court articulated the one judge rule as follows: “A party litigant is entitled to a decision upon the facts of his case from the judge who hears the evidence, where the matter is tried without a jury, and from the jury that hears the evidence, where it is tried with a jury. He cannot be compelled to accept a decision upon the facts from another judge or another jury.” (In re Sullivan (1904) 143 Cal. 462, 467.)

The parties fundamentally disagree about the requirements of the one judge rule. Appellants contend that “[w]here any issues are decided by the court, all of the evidence must be heard by the same judge, and upon that judge's unavailability, a mistrial must be declared and the matter retried, ” unless the parties expressly waive this requirement. The Javaheris and Abdi assert that the one judge rule is more nuanced, requiring only that the factfinder must personally hear and receive the evidence upon which a decision is based, so that discrete, severable issues in a single case may be heard by different factfinders. “[T]he standard of review from a mistrial order is abuse of discretion.” (Petrosyan v. Prince Corp. (2013) 223 Cal.App.4th 587, 593.)

We find that the one judge rule was not violated here. The issues decided in phase one were sufficiently severable, and Judge Beckloff ensured that his decision was based solely on evidence presented to him.

1. Background

The parties and court agreed that phase one would determine the parties' rights to a forced buyout under the terms of the joint venture agreement. Judge Heeseman decided that issue, then oversaw the parties' efforts to have the joint venture appraised for buyout purposes. From January 2012 to April 2013, the parties worked with Judge Heeseman on issues relating to the appraisal. On April 12, 2012, Judge Heeseman informed the parties that soon the case would be assigned to a different judge, and “[i]f there is another trial in this case, I will not be the trial court judge.” On April 19, 2012, Judge Heeseman informed the parties that he would be one of two mandatory settlement conference judges for the case. No party objected.

The case was transferred to Judge Khan in April 2013. In May 2013, Abdi filed a motion for leave to amend his cross-complaint. In opposing Abdi's motion, appellants argued in part that they would be prejudiced by an amendment “because it will necessitate a new trial of the first phase of the trial, which has already been completed and a statement of decision issued.”

In October 2013, after concerns arose about the lack of a written statement of decision, appellants opposed the Javaheris' motion to transfer the case back to Judge Heeseman. In a declaration accompanying that opposition, appellants' counsel stated, “All counsel fully understood that the settlement conference would be the final act of Judge Heeseman in the instant case and had reason to believe that no further decisions would be made by Judge Heeseman on issues concerning the case.” Appellants' counsel stated that at the settlement conference, the parties submitted confidential settlement offers to Judge Heeseman and the other settlement judge, and appellants “never would have consented to this procedure if they understood that Judge Heeseman would be making any further determinations in the trial of this case.” Appellants asserted in their motion that they “believe that Judge Heeseman would in fact recuse and disqualify himself if the case were referred to him for issuance of a Statement of Decision.” As discussed above, the Javaheris' motion to transfer the case to Judge Heeseman was denied.

The case was transferred to Judge Beckloff in February 2014. New counsel for appellants substituted into the case in August 2014. In September 2014, appellants asserted that they would be filing a motion for mistrial, based in part on the one judge rule. In their motion for mistrial, appellants argued in part that the proceedings violated the one judge rule because Judge Heeseman “presided over, but did not complete, Phase I” of the trial.

As stated above, the court denied appellants' motion for mistrial, stating that appellants' “due process concerns (the same judge rule), can and will be addressed through the remaining issues to be tried.” The court noted that appellants, in their closing brief from phase one, stated that the issue addressed there was “which of the three groups of joint venturers... may exercise rights under Subparagraph 9.3.1 of the Joint Venture Agreement.” The court stated, “There is no question from the oral transcript of the proceedings conducted before Judge Heeseman on January 10, 2012, that Judge Heeseman ruled on the parties' rights relative to one another under the joint venture agreement. Judge Heeseman's decision on those issues is complete and does not require further action by the court.” The court noted that the trial was not complete at that point, because appellants' “causes of action for breach of contract and breach of fiduciary duty were not conclusively resolved and adjudicated. Judge Heeseman left for trial on another day the issue of damages.” Thus, “Judge Heeseman was essentially mid-trial” on issues “other than rights and obligations arising under the joint venture agreement.” The court therefore concluded, “[T]he motion for a mistrial is denied. The court finds that Judge Heeseman conclusively resolved and adjudicated the parties' rights under the joint venture agreement based on his findings of default. As Judge Heeseman did not, however, conclusively determine and adjudicate all other issues between the parties, those issues are subject to determination by this court. Thus, evidence presented to Judge Heeseman may have to be repeated in connection with this court's adjudication of those issues. Due process requires that this court hear and determine the evidence on all issues no[t] conclusively determined by Judge Heeseman.”

The court consistently adhered to this ruling throughout the remainder of the case, and took steps to ensure that all evidence necessary to the phase two decision was presented in phase two. For example, the one judge rule arose after appellants filed a motion in limine on the fifth day of the phase two trial seeking to limit the evidence presented by Abdi, asserting that in phase one Judge Heeseman had barred Abdi's conspiracy cause of action and limited the time frame allowed for Abdi's damages. Discussing the motion in court the following day, the court said to appellants' counsel, “I guess I just don't understand, Mr. Zimmerman, what the issue is. I mean, we are trying [Abdi's] cross-complaint. The only thing I determine[d] that Judge [Heeseman] determined was the relationship between the partners and whether there was a default and whether they were bound by the provisions of the joint venture agreement concerning the buyout.” The court denied appellants' motion, stating, “we are trying all the cases [sic] that currently exist between these parties.”

Near the end of trial, as the court and parties were discussing whether the transcript of Judge Heeseman's ruling should be admitted as an exhibit, appellants asked the court to judicially notice it rather than deem it an exhibit, because “I don't think that this court can say, ‘Judge Heeseman made this factual finding, and therefore I'm-'” The court interrupted counsel and said, “I agree with that. That's your one judge rule.”

Similarly, at the end of the phase two trial, appellants objected that documents admitted as evidence in phase one should not automatically be deemed admitted as evidence for phase two. Referencing one exhibit, for example, appellants' counsel asserted, “[T]o receive a document based on the assertion by Abdi that an expert testified about it in phase one is basically to admit testimony of a person, the expert who testified in a different phase but didn't testify in this phase, and the court has not heard his testimony. That's a clear violation of the one judge rule.” Appellants' objection took the court and parties by surprise, because they had been under the impression that the parties had all stipulated that phase one exhibits would be deemed admitted in phase two. Nevertheless, over the course of the six post-trial hearings addressing exhibits, the court narrowed which documents appellants objected to, and stated, “To the extent that something was admitted in phase 1 and there's an objection to it here and [it] is otherwise not admissible, then I'm going to reopen to allow the proponents of those documents to put on testimony.” The court reopened the proceedings, and the parties called four additional witnesses to lay the foundation for exhibits. Nothing in Judge Beckloff's statement of decision purported to rule on any issue that was tried only in phase one.

2. Analysis

Appellants argue that the one judge rule was violated by the bifurcated proceedings below. They rely heavily on European Beverage, Inc. v. Superior Court (1996) 43 Cal.App.4th 1211 (European Beverage). In that case, the plaintiff alleged that he owned “a one-half interest in European Beverage, Inc., and that various defendants (petitioners) committed intentional torts by diluting his interest in European Beverage and diluting its assets.” (Id. at p. 1213.) The trial court, with Judge Thomas Schneider presiding, “bifurcated the issues, ordering that the equitable issues of accounting and constructive trust be tried first in a court trial. At the conclusion of this first phase of trial, Judge Schneider determined that [the plaintiff] is the owner of 50 percent of the shares of the corporation, and directed a special master to conduct an accounting of the net worth of the corporation and inquire into any diversion of assets to petitioners.” (Id. at pp. 1213-1214.) The special master issued a report, but before the second phase of trial began, Judge Schneider became unavailable. The petitioners “filed an ex parte application for an order to prevent transfer of the case to a new trial judge, or alternatively, for a mistrial.” (Id. at p. 1214.) The court denied the motion and transferred the case to a new judge. The petitioners filed a petition for writ of mandate in the Court of Appeal, “seeking an order directing the trial court either to quash the transfer or declare a mistrial.” (Ibid.)

This court directed the superior court to vacate its order transferring the case to a new trial judge or declare a mistrial. (European Beverage, supra, 43 Cal.App.4th at p. 1216.) The court reasoned, “The law has long been settled that in a civil action ‘[a] party litigant is entitled to a decision upon the facts of his case from the judge who hears the evidence, where the matter is tried without a jury, and from the jury that hears the evidence, where it is tried with a jury. He cannot be compelled to accept a decision upon the facts from another judge or another jury.' [Citations.] Where there has been an interlocutory judgment rendered by one judge, and that judge then becomes unavailable to decide the remainder of the case, a successor judge is obliged to hear the evidence and make his or her own decision on all issues, including those that had been tried before the first judge, unless the parties stipulate otherwise. [Citation.] This is because an interlocutory judgment is subject to modification at any time prior to entry of a final judgment. [Citation.] It is considered a denial of due process for a new judge to render a final judgment without having heard all of the evidence.” (Id. at p. 1214.)

The European Beverage decision acknowledged that California Rules of Court, former rule 232.5 (now rule 3.1591) “recognizes that different judges may hear different phases of a trial, an alternative that always has been available upon the stipulation of the parties. But it does not undermine the right of a party to have the same judge hear all the evidence and decide the facts of the case.” (European Beverage, supra, 43 Cal.App.4th at p. 1215.) The court therefore concluded that the “[p]etitioners are entitled to have the second phase of this trial heard by Judge Schneider, or if Judge Schneider is unavailable, to have a mistrial declared so that the entire action can be heard by a different judge.” (Id. at p. 1216.)

The Javaheris and Abdi disagree that European Beverage controls here, and assert that this case is more similar to Valentine v. Baxter Healthcare Corp. (1999) 68 Cal.App.4th 1467 (Valentine), which found that severable issues may be heard and decided by different factfinders. The Valentine court described the proceedings in the trial court as follows: “This product liability case against the manufacturer of silicone gel breast implants has been twice tried. The first jury returned special verdicts for the defense on strict liability and fraud, but hung on the causation element of the negligence count. (Valentine I.) The second jury returned a special verdict for the defense on negligent design and manufacturing, but deadlocked on negligent failure to warn and hung on the causation element of the negligent testing and inspection count. (Valentine II.)” (Id. at pp. 1470-1471.) One of the questions addressed by the Court of Appeal was, “Can a trial court declare a partial mistrial and reserve judgment on some, but not all, causes of action pending a second trial?.... The answer is: ‘Yes, it can.'” (Id. at p. 1475.)

The Court of Appeal discussed “the myriad procedural devices that vest trial courts with authority to partially resolve issues in cases before them, ” including summary adjudication, partial nonsuit, and partial directed verdicts. (Valentine, supra, 68 Cal.App.4th at p. 1475.) In the superior court, one jury “had determined all conclusions of fact pertaining to the strict liability and fraud causes of action. The court then accepted and entered those verdicts. Nothing remained but for it to draw the legal conclusion of nonliability as to Baxter on those counts.” (Id. at p. 1478.) The Court of Appeal then examined “whether the causes of action subject to the special verdicts were, as the [trial] court ruled, severable such that the negligence cause could be separately retried.” (Ibid.) The court found that they were: “negligence was separate and severable from the independent causes of action for strict liability and fraud. It was separately pled, separately covered on the verdict form, and subject to separate instructions.” (Id. at pp. 1478-1479.)

The Valentine court stated that “[t]here is no constitutional impediment to a retrial of a limited issue, so long as that issue is sufficiently distinct and severable from the others that a limited retrial would not result in an injustice.” (Valentine, supra, 68 Cal.App.4th at 1478.) It distinguished European Beverage, which “relied on the concept that where there has been an interlocutory judgment subject to modification prior to entry of final judgment, it is a denial of due process for a new judge to render final judgment without having heard all the evidence.” (Valentine, supra, 68 Cal.App.4th at pp. 1479-1480.) By contrast, with the jury verdicts in Valentine, the trial court correctly “determined as a matter of law from the special verdicts on fraud and strict liability that those causes of action had been conclusively resolved and adjudicated in Baxter's favor, and reserved entry of judgment pending further consideration of the negligence count, all in accordance with sections 624 and 628. The decision on those causes of action was not subject to further modification and thus there was no denial of due process in having the remaining cause of action tried by another jury.” (Id. at p. 1480.)

We agree that Valentine's analysis is relevant here. Other cases addressing the one judge rule focus on ensuring that the judge or jury in the decision-making role actually hears the evidence relevant to that decision-making. For example, in In re Sullivan, supra, 143 Cal. 462, a daughter sought to establish a guardianship over her mother, whom the daughter alleged was mentally incompetent. In the superior court, “[t]he evidence was all taken and the examination of the alleged incompetent had before one judge, who has never given any decision in the matter. The matter was subsequently argued and submitted for decision to another judge, who never heard any of the witnesses testify, ” but decided “that letters of guardianship should issue. The only order or judgment ever entered was signed by still another judge, who had never heard either evidence or argument.” (Id. at p. 467.) The court held that the judgment must be reversed, because “[a] party litigant is entitled to a decision upon the facts of his case from the judge who hears the evidence, ” unless that right has been waived. (Id. at pp. 467-468.)

Similarly, in Linsk v. Linsk (1969) 70 Cal.2d 272, a divorce proceeding “ended in a mistrial due to the disability of the trial judge who heard the evidence.” (Id. at p. 275.) The wife's attorney “stipulated over his client's express objection that the case could be decided by a different judge entirely on the basis of the record previously made.” (Ibid.) The trial court held in favor of the husband, and the Supreme Court held that the judgment must be reversed. “It seems incontrovertible that the right of a party to have the trier of fact observe his demeanor, and that of his adversary and other witnesses, during examination and cross-examination is so crucial to a party's cause of action that an attorney cannot be permitted to waive by stipulation such right as to all the testimony in a trial when the stipulation is contrary to the express wishes of his client.” (Id. at pp. 278-279.)

The one judge rule was also discussed in Rose v. Boydston (1981) 122 Cal.App.3d 92, in which the cross-complainants sought “dissolution of an alleged joint venture and for an accounting and payment of whatever was due” to them. (Id. at p. 94.) After a two-day trial before Judge Edwin Beach, the court entered “[f]indings and an interlocutory judgment in favor of cross-complainants... on the existence and terms of a joint venture.” (Ibid.) The interlocutory judgment stated, “This decree is interlocutory and the Court will retain jurisdiction for such additional period of time as may be necessary for the purpose of rendering and settling an account herein.” (Ibid.) Judge Beach was elevated to the Court of Appeal, and the case was assigned to Judge Robert Willard. It later “became apparent that opposing counsel had different views as to the effect of the interlocutory judgment.” (Id. at pp. 94-95.) Judge Willard “expressed his view that a mistrial must be declared and the entire case be retried de novo unless Justice Beach returned to complete the trial or the parties stipulated to be bound by the interlocutory decision.” (Id. at p. 95.) The case was continued several times before it was dismissed for lack of prosecution, and cross-complainants appealed that order. (Id. at p. 96.)

The Court of Appeal noted that the interlocutory judgment did not provide a final determination of the issues between the parties: “It is clear from this record that substantial issues remained undecided. The findings do not determine whether the parties had performed their respective duties, nor do they determine what assets existed and which party had control of them. The mention of damages in the conclusions of law indicates that the court had not determined whether, and to what extent, any of the parties had been guilty of a breach of duties owed to the others.” (Rose v. Boydston, supra, 122 Cal.App.3d at p. 96.) The court noted that a litigant is entitled to receive a decision from the judge who hears the evidence, and concluded, “It follows that in this case, any judge other than Justice Beach would be obliged to hear the evidence and make his own decision on all issues, including those which had been tried before Justice Beach, unless the parties stipulated otherwise.” (Boydston, supra, at p.97.)

Each of these cases emphasizes that a party is entitled to have the judge or jury tasked with decision-making or fact-finding be the same judge or jury that receives the evidence. These cases do not hold that a party is entitled to have a single judge hear a case from start to finish. Thus, appellants were not entitled to a new trial on phase one simply because Judge Heeseman became unavailable, unless the phase one and phase two issues were so intertwined that they could not be severed. That was not the case here.

In phase one, Judge Heeseman decided the parties' rights regarding default and buyout under the joint venture agreement. Appellants assert that “Judge Heeseman did not purport to render a final verdict or partial judgment on any claim, ” so that the “‘severable' nature of the claims so critical to the holding in Valentine was also absent here.” We disagree. After Judge Heeseman's phase one ruling, the parties initially accepted that ruling and had the joint venture appraised in order to complete the forced buyout. There were no additional issues to be determined regarding who defaulted under the joint venture agreement or who was entitled to exercise buyout rights. This issue was appropriately severed from the remainder of the parties' claims for damages.¹¹

11 Appellants request that we take judicial notice of a complaint the Javaheris filed in December 2018, which, in part, seeks specific performance of the joint venture agreement's buyout provisions based on the allegation that appellants refuse to sell their shares of the joint venture and the parties cannot agree on the percentages of the joint venture the Javaheris and Abdi are entitled to purchase. Appellants assert that the new lawsuit demonstrates that phase one did not decide all issues relating to the buyout. The request for judicial notice is denied; the parties' new lawsuit is not relevant to whether the phase one ruling was complete based on the issues before the court at the time. (See Evid. Code § 459; People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422 [“any matter to be judicially noticed must be relevant to a material issue”].)

Judge Heeseman did comment on some other issues in his oral statement of decision. For example, he discussed the extent to which the statute of limitations affected Abdi's claims for damages. However, Judge Beckloff was careful to avoid relying on any such comments by Judge Heeseman, holding that those issues must be fully retried in phase two to ensure that he would be presented with all evidence relevant to those claims. For example, when appellants filed their motion in limine in phase two seeking to restrict Abdi's claims and measure of damages based on Judge Heeseman's statements in his phase one statement of decision, Judge Beckloff denied the motion, stating that all undecided issues were being fully tried.

Appellants further argue that they were unable to “raise the defenses of res judicata and statute of limitations in Phase II, ” because Judge Beckloff “looked back at the Phase I record and concluded that Appellants ‘conceded' the absence of those defenses” earlier in the case. But these contentions are not supported by the record. Judge Heeseman addressed appellants' arguments about the timeliness of the Javaheris' and Abdi's claims as they related to the buyout. Also, Judge Beckloff granted appellants' motion in limine to bar evidence of damages arising from the 1999 refinancing, limited Abdi's damages to those arising only within the statute of limitations, and rejected Abdi's contentions regarding the delayed discovery rule.

Appellants argue that Judge Beckloff heard some of the same evidence as Judge Heeseman, such as evidence relating to Abdi's knowledge of appellants' use of joint venture funds to pay litigation expenses. Appellants argue that “there was no room for Judge Beckloff to revisit that ‘event of default.' Had the same evidence been presented, instead, to Judge Heeseman in Phase II, then Appellants would have had the opportunity to argue to Judge Heeseman for a change in his interlocutory Phase I Ruling.” We are not persuaded. “Issues adjudicated in earlier phases of a bifurcated trial are binding in later phases of that trial and need not be relitigated.” (Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464, 487.) Nothing about the one judge rule undermines this general rule. And to the extent that certain evidence in phase one was also presented in phase two, Judge Beckloff allowed duplicative evidence with the express purpose of avoiding any violation of the one judge rule, so he would not be making any decisions based on evidence that was not before him. In short, we find that the one judge rule was not violated here.¹² The trial court did not abuse its discretion in denying appellants' requests for a mistrial.

12 Abdi also argues that appellants waived any reliance on the one judge rule when they agreed to have another judge proceed with phase two, then objected to having Judge Heeseman handle any additional proceedings. Appellants assert that their counsel's actions could not waive that right for them. Ultimately we do not address waiver, because we find the one judge rule was not violated.

C. Code of Civil Procedure section 635

Appellants contend that the judgment violates section 635, which places limitations on when a different judge may enter a judgment after the trial judge has become unavailable. Appellants assert that Judge Heeseman's oral phase one ruling does not meet the requirements of the statute, because an oral statement is necessarily tentative and cannot serve as the basis for a judgment. The Javaheris and Abdi disagree, asserting that the court's ruling complied with section 635 in that Judge Heeseman's oral statement of decision was final rather than tentative, and no party requested a written statement of decision under section 632. We find no error.

1. Background

Judge Heeseman announced his phase one ruling in open court. The minute order from that hearing stated, “The court issues its ruling as fully reflected in the notes of the Official Court Reporter.” No party requested a written statement of decision until more than two years later, when confusion arose about whether a written statement of decision might be required. Following phase two, Judge Beckloff noted in his statement of decision, “All of the requirements of Code of Civil Procedure section 635 are satisfied here.” He stated that Judge Heeseman's decision was entered in the minutes, Judge Heeseman had retired, and Judge Beckloff had been “designated to sign the judgment by the presiding judge.”

Section 632 addresses statements of decision, and provides in part, “The court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial upon the request of any party appearing at the trial. The request must be made within 10 days after the court announces a tentative decision.... [¶] The statement of decision shall be in writing, unless the parties appearing at trial agree otherwise.” California Rules of Court, rule 3.1590 provides the procedures for preparing a written statement of decision, and states in part, “On the trial of a question of fact by the court, the court must announce its tentative decision by an oral statement, entered in the minutes, or by a written statement filed with the clerk.” (Cal. Rules of Court, rule 3.1590(a).) This “tentative decision does not constitute a judgment and is not binding on the court.” (Id., rule 3.1590(b).) “Within 10 days after announcement or service of the tentative decision, whichever is later, any party that appeared at trial may request a statement of decision.” (Id., rule 3.1590(d).) “If no party requests or is ordered to prepare a statement of decision and a written judgment is required, ” the court then takes steps necessary to prepare the judgment. (Id., rule 3.1590(h).)

California Rules of Court, rule 3.1591 addresses bifurcated trials, and states in part, “When a factual issue raised by the pleadings is tried by the court separately and before the trial of other issues, the judge conducting the separate trial must announce the tentative decision on the issue so tried and must, when requested under Code of Civil Procedure section 632, issue a statement of decision as prescribed in rule 3.1590.” (Cal. Rules of Court, rule 3.1591(a).) It continues, “If the other issues are tried by a different judge or judges, each judge must perform all acts required by rule 3.1590 as to the issues tried by that judge and the judge trying the final issue must prepare the proposed judgment.” (Id., rule 3.1591(b).) Section 635 states in full, “In all cases where the decision of the court has been entered in its minutes, and when the judge who heard or tried the case is unavailable, the formal judgment or order conforming to the minutes may be signed by the presiding judge of the court or by a judge designated by the presiding judge.”

2. Analysis

Appellants argue that Judge Heeseman's oral decision in phase one did not meet the requirements of section 635, because “[n]o such ‘decision' from Phase I exists in the record of this case.” They note that Judge Heeseman's phase one ruling was oral, there is no indication that Judge Heeseman ever reviewed the court reporter's transcript for accuracy, and the court minutes reference the court reporter's notes “without any substantive specification of the ruling itself or indication that the reporter's notes were yet created or accurate.” They assert that “absent some clear, final ‘decision' within the meaning of § 635, no successor judge can sign a final judgment encompassing the prior judge's tentative rulings.”

Appellants rely on cases in which parties requested a written statement of decision, but the trial judge failed to enter one before a different judge entered a judgment. In Armstrong v. Picquelle (1984) 157 Cal.App.3d 122 (Armstrong), for example, the court held a bench trial after which the judge announced tentative findings. One party requested that the court issue written findings of fact and conclusions of law, but the court did not act on that request before the judge retired. (Id. at p. 126.) The presiding judge “signed settled findings of fact and conclusions of law, presumably conformable to [the retired judge's] statement of tentative findings.” (Ibid.) On appeal, the Court of Appeal noted that section 635 had recently been amended to a version that is nearly identical to the current version. The court stated, “The legislative intent in amending section 635 is clear. The amended section authorizes the signing of a formal judgment by the presiding judge only where (1) no statement of decision has been requested or (2) the judge who has heard the evidence has already provided the parties with a statement of decision upon their request for it.” (Id. at p. 127, emphasis in original.) The court observed, “To interpret section 635 to allow a presiding judge to enter judgment on the basis of a tentative decision entered in the minutes would strip the parties of their section 632 right to a statement of decision after the trial judge's tentative ruling. The legislature could not have intended to take away with one hand what it gave with the other.” (Ibid.) The court stated that “[n]o legal judgment could be entered by the presiding judge on the basis of the trial judge's tentative ruling, ” and held that a new trial was required. (Id. at p. 128.)

Appellants also cite Raville v. Singh (1994) 25 Cal.App.4th 1127 (Raville), in which the court held a bench trial, and the judge announced his tentative ruling in court. (Id. at p. 1129.) The appellant requested a written statement of decision and the other parties filed objections to the proposed statement, but the trial judge died before ruling on the objections or entering the statement of decision. (Id. at p. 1130.) The supervising judge signed the respondent's proposed statement of decision and judgment. (Ibid.) The Court of Appeal held that a judgment could not rest on a trial judge's tentative ruling after the parties requested a written statement of decision. The court stated, “When the trial judge becomes unavailable before the entire process contemplated in section 632, and California Rules of Court, [former] rule 232 [now rule 3.1590] has been completed, the parties have been deprived of a full and fair trial.” (Id. at p. 1132.)

Appellants also cite Whittington v. McKinney (1991) 234 Cal.App.3d 123 (Whittington). In that case, the parties asked the court for a written statement of decision following a bench trial, but the “trial court advised the parties that ‘if you would like to have a written document like that entitled statement of decision, then what you do is order a copy of the reporter's transcript, all three or four or five of those sessions, it will be entitled statement of decision....'” (Id. at p. 127.) The Court of Appeal rejected the trial court's approach, stating, “When a party requests a statement of decision, it must be prepared, and the failure to do so is reversible error.” (Ibid.) Whittington does not mention section 635.

Appellants assert that a similar error is present here, because Judge Heeseman's ruling was oral and the reporter's transcript cannot be deemed a statement of decision. But unlike Armstrong, Raville, and Whittington, no party requested a written statement of decision until years after Judge Heeseman gave his oral statement of decision from the bench. As the court stated in Armstrong, section 635 authorizes another judge to sign a judgment when “no statement of decision has been requested” from the first judge. (Armstrong, supra, 157 Cal.App.3d at p. 127.) None of appellants' authorities suggest that more was required here.

Appellants shift their focus in their reply brief, asserting for the first time that “in a bifurcated trial before different judges, [California Rules of Court, rule] 3.1591(b) mandated a statement of decision for each phase.” Because appellants did not include this contention in their opening brief, it has been forfeited. (See, e.g., Raceway Ford Cases, supra, 2 Cal.5th at p. 178.) Moreover, appellants have not demonstrated error. As noted above, California Rules of Court, rule 3.1591(b) states that in a bifurcated trial before different judges, “each judge must perform all acts required by rule 3.1590 as to the issues tried by that judge and the judge trying the final issue must prepare the proposed judgment.” California Rules of Court, rule 3.1590(h) states that when “no party requests or is ordered to prepare a statement of decision and a written judgment is required, ” the court may prepare the judgment. That is what occurred here, because no party timely requested a written statement of decision from Judge Heeseman. Judge Beckloff, authorized by the presiding judge to do so, prepared the written judgment after trying the final issues between the parties. We find no violation of section 635.

Appeal in the loan action

A. Stipulated facts and trial

In the loan action, appellants alleged that the Javaheris took more than they were entitled to receive under the 2008 arbitration award.¹³ Prior to trial, the parties stipulated to the following facts. The 1999 refinancing involved a 10-year, $8,000,000 loan from Community Bank. After securing the loan, appellants paid off the principal owed on the joint venture's existing loan (approximately $2,700,000), and distributed the remainder to the partners. The 1999 loan had a maturity date of December 9, 2009, which was later extended to February 28, 2010.

13 Appellants also contended that the Javaheris “intentionally acted to suppress the revenues of 5th and LA for purposes of artificially depressing its valuation” and by mismanaging 5th & LA. The court ultimately rejected this claim, and appellants do not challenge that finding on appeal.

The 2008 arbitration award held that appellants' act of securing the loan constituted a breach of fiduciary duty, which increased the debt to the joint venture and reduced the profit distributions that would otherwise be owed to the Javaheris. Among other damages, paragraph 116 of the arbitration award ordered that beginning in May 2008, the Javaheris were entitled to “an additional distribution to themselves of an amount calculated as 10% each of the amount(s) paid by 5th & LA during any given month to discharge the obligation of the existing encumbrance against 5th & LA. Those additional amounts shall be deducted from the amounts (at 30% of profit distributions each) otherwise distributable to [appellants].” In other words, each month an amount equal to ten percent of the loan payment would be deducted from partnership distributions to each of the appellants, and added to the partnership distributions to the Javaheris. We will refer to these payments as 10 percent redistributions.

As of February 28, 2010, the principal on the 1999 loan was $2,761,554.31. On February 28, 2010, the joint venture, managed by Alexander Javaheri, entered into what the parties call a “Change in Terms Agreement” with Community Bank-a loan with a new termination date of March 1, 2015. Community Bank charged a total of $20,468 in related fees, which were paid by the joint venture. Between February 2010 and February 2015, the Javaheris continued to collect 10 percent redistributions from each appellant in “an amount equal to ten percent (10%) of the amounts paid by 5th & LA to Community Bank.”

When the 2010 loan came due in March 2015, each of the five partners paid off the debt in full by contributing a share of the outstanding debt equal to his respective share in the joint venture-Khorshidi and Rabbanian each paid 30 percent of the debt, Abdi paid 20 percent, and the Javaheris each paid 10 percent. These payments were made from the partners' personal funds, not from the joint venture. After the Community Bank loan was paid off, the Javaheris directed the entirety of appellants' monthly joint venture distributions to themselves for several months. Appellants received no distributions from April through September 2015, and a partial distribution in October 2015. The Javaheris explained that according to their interpretation of the arbitration award, they were entitled to “continue adjusting [appellants'] distributions until they had deducted from each of [appellants'] distributions an amount equal to 10% of the total... 2015 loan payoff to Community Bank.”

At trial, the parties' evidence largely supported the stipulated facts. The parties and witnesses testified about the 1999 loan coming due in 2010, and Alexander Javaheri's efforts to secure a new loan (or new terms) from Community Bank. The partners testified about paying off the 2010 loan balance in 2015 with their personal funds. The parties also testified about the 10 percent redistributions from appellants under the 2008 arbitration award.

In their closing briefs after trial, appellants' argument was twofold. First, appellants asserted that the 2008 arbitration award did not entitle the Javaheris to collect 10 percent redistributions relating to the 2010 loan. They argued that the Javaheris could have made a capital call to pay off the loan in 2010 rather than undertake a new obligation, and that the 2010 loan was not an extension or modification of the 1999 loan. Second, they asserted that the 2015 final loan payoff was paid by the individual partners, not the joint venture, and therefore the Javaheris were not entitled to 10 percent redistributions on that amount. Appellants stated, “Accordingly, this court should find that the remedy provided by ¶ 116 of the 2008 Award terminated in February 2010 and award [appellants] judgment against the Javaheris for the amounts raked from their distributions during the 4 years preceding the filing of the BC567865 action.... That amount totals $347,552.14 (or $173,776.07 each).”

The Javaheris asserted in their closing brief that “[t]he language in the arbitration award... indicates that the [10 percent redistributions] continues until the ‘obligation of the existing encumbrance against 5th & LA' is discharged. That obligation was not discharged until the loan was paid off in 2015.” They also contended that appellants' contentions about the extension of the loan and timing of the payments were irrelevant, because the Javaheris were entitled to 10 percent redistributions until the loan was paid off under any repayment schedule.

B. Court ruling

In a written statement of decision, the trial court found partially in favor of appellants. The court stated that the 10 percent redistributions set out in paragraph 116 of the 2008 arbitration award “was tied to the Joint Venture's payment of the then existing ‘obligation' or loan, ” but the 2010 Change in Terms Agreement “constituted a new loan that extinguished the 1999 Community Bank obligation.” Thus, the 2008 arbitration award did not entitle the Javaheris to continue taking 10 percent redistributions in relation to the 2010-2015 loan payments.

However, the court held that appellants were not entitled to a full refund of the redistributions collected by the Javaheris. The court noted that that at the time the 1999 loan came due in 2010, there was still an outstanding balance of $2,761,000. In a finding that did not match either side's position, the court held that “[t]he Javaheris were entitled under the 2008 arbitration award and judgment to 10 percent from [appellants] of the amounts paid by the Joint Venture to discharge the obligation” of the remaining $2,761,000. Thus, “the Javaheris were entitled to ‘adjust partnership distributions' to reflect $276,100 owed to them by each of the [appellants]. Over the life of the new loan, [appellants] each only paid the Javaheris $207,863.70 of that obligation leaving a balance due to the Javaheris from each of the [appellants] of $68,236.30.”

The court further held that the Javaheris were not entitled to collect ten percent of the 2015 payoff amount. The money used to pay off the 2010 loan came from each of the individual partners, and therefore it did not diminish the profits of the joint venture. By diverting appellants' partnership distributions from April to October 2015 to recoup that amount, the Javaheris improperly reduced the distributions appellants were entitled to by $157,601.20.

The court therefore concluded that the Javaheris had been entitled to receive $276,100 from each of the appellants based on the 2010 payoff amount, but they actually received a total of $365,464.90 from each of the appellants through October 2015. Appellants were entitled to be refunded the difference. Thus, the court held that appellants “are each entitled to judgment against the Javaheris jointly and severally in the amount of $89,364.90.” On July 7, 2017, the court entered judgment in favor of appellants on their complaint against the Javaheris for breach of contract and breach of fiduciary duty, in the amount of $89,364.90 each.

C. Post-judgment motions for new trial

Appellants filed a motion for new trial on the basis of inadequate damages (§ 657, subd. 5), “on the narrow and limited issue of prejudgment interest.” Appellants contended that under Civil Code section 3287, subdivision (a), they were entitled to prejudgment interest on the damages awarded in the judgment.¹⁴ The Javaheris opposed the motion, asserting that if appellants were entitled to prejudgment interest on overpayments they made to the Javaheris, then the court must also consider prejudgment interest due to the Javaheris. They asserted that because the court held that the Javaheris were entitled to $276,100 as of February 28, 2010 when the 1999 loan came due, the Javaheris were entitled to collect prejudgment interest on that amount until it was paid off.¹⁵

14 Civil Code section 3287, subdivision (a) states in part, “A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day....”

15 The Javaheris also asserted this contention in their own notice of intention to move for new trial, but it was not timely filed and the trial court did not consider it.

The court granted appellants' motion and held a short hearing to receive additional evidence on the issue. In a written ruling, the court held that each appellant was entitled to $21,984.19 in interest. The court also stated that the Javaheris were not entitled to interest based on the 2010 payoff amount, because they had not pled an affirmative defense of setoff in their answer. On March 26, 2018, the court entered an amended judgment that included the interest awarded to appellants. The same day, the court mailed notice of entry of judgment to appellants' counsel. On April 4, 2018, appellants' counsel served notice of entry of amended judgment on the Javaheris' counsel.

The Javaheris then moved for a new trial on the grounds of excessive damages, and accident or surprise. (§ 657, subds. 3, 5) The Javaheris asserted that because the court held that each of the appellants owed the Javaheris $276,100 in February 2010, the interest appellants owed on that amount must be factored into any damages and interest award. In their motion and accompanying declaration by the Javaheris' counsel, the Javaheris asserted that the court's holding-that appellants owed the Javaheris ten percent of the loan payoff amount in February 2010-did not reflect the parties' positions throughout the litigation. The Javaheris asserted that “[t]he ‘surprise' was that the court held that the loan payoff occurred in February 2010, when the loan was extended, and not 2015, when it was finally paid off.” The Javaheris' counsel stated in his declaration, “Because the relief granted by this court was not consistent with either [appellants'] pleadings or trial posture, the Javaheris did not contend that interest (at the legal rate) was due on the principal balance of the loan when it was extended in February 2010.” If appellants had asserted such a claim, “the Javaheris would have contended, both in their pleadings and at trial, ” that they were entitled to “collect, or at the very least, offset, interest on the $276,100 due (each) at the legal rate until they were able to recoup the amount” appellants owed. Counsel further stated that taking interest into account, appellants “would still owe each Javaheri $23,905.28, instead of the Javaheris owing each [appellant] the sum of $89,364.90 as held by the court.”

Appellants opposed the Javaheris' motion. They argued that the court had already rejected the Javaheris' contentions, which mirrored the arguments they made in opposing appellants' motion for a new trial. They also asserted that the Javaheris, in their pleadings or at trial, “had never claimed or sought any of the relief they are now seeking.” Appellants further noted that the Javaheris' argument constituted “surprise” arising from the court's findings of damages in the original judgment, not the amended judgment.

A minute order dated April 16, 2018 stated that “[a]fter a telephonic discussion” with the Javaheris' counsel, a hearing on the motion was set for June 14, 2018. At the hearing that day, the parties argued their respective positions. The court asked the Javaheris' counsel, “When does the 60 days run on [the] motion for new trial?” The Javaheris' counsel clarified, “For you to decide?” The court answered, “Yes.” The Javaheris' counsel stated, “The notice of intention [to file a motion for new trial] was filed April 18. So, you have until June 17th, I think.” The court noted that June 17 was a Sunday, and therefore it had until Monday, June 18.

On June 18, 2018, the court issued a written ruling granting the Javaheris' motion. The court stated that it had “not previously considered the merits of the Javaheris' claim of excessive damages and surprise, ” and that the Javaheris' motion for new trial following the entry of the amended judgment was acceptable procedurally. The court stated, “A new trial is granted on the limited issue of interest due, if any, to the Javaheris on the $276,100 due to them from [appellants] on March 1, 2010.”

On June 25, 2018, the court issued a written order setting aside the June 18 order. The court noted the court and counsel's belief that the deadline to rule on the motion was June 18. However, the court stated, “As the court was preparing its specification of reasons for granting [the Javaheris'] new trial motion, the court discovered an error with regard to the jurisdictional deadline.” Under section 660, the “power of the court to rule on a motion for a new trial shall expire 60 days from and after the mailing of notice of entry of judgment by the clerk of the court pursuant to Section 664.5 or 60 days from and after service on the moving party by any party of written notice of the entry of the judgment, whichever is earlier, or if such notice has not theretofore been given, then 60 days after filing of the first notice of intention to move for a new trial. If such motion is not determined within said period of 60 days, or within said period as thus extended, the effect shall be a denial of the motion without further order of the court.” (Former § 660.¹⁶) The court stated that notice of entry of the amended judgment had been served on the Javaheris on April 4, 2018, and therefore the court's deadline to rule on the motion was June 4, 2018. Because the court did not rule on the motion before that date, the motion had been denied as a matter of law.

16 Effective January 1, 2019, this jurisdictional restriction has been extended to 75 days. (See § 660, subd. (c).)

The court also included a “specification of reasons for granting [the Javaheris'] new trial motion.” The court acknowledged that “neither [appellants] nor [the Javaheris] raised the issue of each [appellant's] obligation to [the Javaheris] of $276,100 arising from the 2010 payoff in the pleadings or during trial.” Because the issue was not raised before the entry of judgment, the Javaheris “did not have notice of the issue and did not know they should argue their entitlement to interest on the obligation. As the issue was not raised by the pleadings or argued by counsel, [the Javaheris'] counsel had no warning of the manner in which the court would address the claims and could not have guarded against the court's failure to provide [the Javaheris] with interest on the $276,100 obligation. The court's failure to include the interest prejudiced [the Javaheris] as the interest due could be used as an offset against [appellants'] claim for damages. In fact, [the Javaheris] argue crediting them with interest due will result in [the Javaheris] becoming the prevailing parties.”

D. Analysis

On appeal, the Javaheris assert that the trial court's final intent to grant a new trial on damages was correct, in that the court was required to factor in interest owed to the Javaheris when calculating the parties' damages. In their cross-appeal, appellants assert that the “erroneous” 2008 arbitration award cannot be the basis for “any affirmative relief, or defense, in favor of the Javaheris, ” and that the Javaheris were not entitled to a setoff for prejudgment interest.¹⁷ “Generally, the trial court's ruling on a new trial motion is reviewed for an abuse of discretion.” (Sandoval v. Los Angeles County Dept. of Public Social Services (2008) 169 Cal.App.4th 1167, 1176, fn. 6.) “‘[T]he merits of a motion for a new trial denied by the operation of law [that is, by expiration of the 60-day time period] may be reviewed upon appeal in the same manner as if expressly denied by the court.'” (In re Marriage of Liu (1987) 197 Cal.App.3d 143, 152 [brackets in original].) We find that a new trial is warranted to allow the court to consider the Javaheris' entitlement to prejudgment interest, if any, in the calculation of damages.

17 In the appeal from the loan action, the Javaheris filed an opening brief, and appellants filed a respondents' brief/cross-appeal opening brief. No other briefs were filed.

A new trial may be granted where the proceedings have been affected by “[a]ccident or surprise, which ordinary prudence could not have guarded against.” (§ 657, subd. 3.) “‘Surprise' as a ground for a new trial denotes some condition or a situation in which a party to an action is unexpectedly placed to his detriment.” (Wade v. De Bernardi (1970) 4 Cal.App.3d 967, 971.) We agree that a new trial was warranted on the basis of surprise for the reasons stated in the trial court's June 25 order. The facts of this case were largely uncontested. The parties understood the scope of the 2008 arbitration award, the amounts of the 10 percent redistributions, and the details of the 1999 and 2010 loans. The parties' positions at trial were based on their understanding of those factors. They did not expect, however, that the trial court would reach a decision that did not quite match what either party advocated-a finding that appellants owed the Javaheris a lump sum of $276,100 in February 2010-and that such a decision would affect any claims of prejudgment interest. Because the parties did not anticipate such a ruling, they did not tailor their arguments to address the issues regarding prejudgment interest that arose from it. The court's unexpected ruling constitutes a surprise under section 657, subdivision 3.¹⁸

18 Appellants assert that the Javaheris' arguments have been forfeited because the opening brief does not specifically argue the issue of surprise. The opening brief asserts that the Javaheris' motion for new trial should have been granted and that the error was prejudicial. We find the issue has been adequately presented for appellate review.

The Javaheris assert that their “right to recover interest on the sums owed by [appellants] is absolute, ” and suggest that we make any factual findings “necessary to support entry of a new judgment factoring in the interest due the Javaheris.” Appellants, on the other hand, assert that the Javaheris are not entitled to any consideration of prejudgment interest. However, we do not find the Javaheris' entitlement or lack of entitlement to prejudgment interest as straightforward as the parties contend. These issues would more appropriately be determined by the trial court.

For example, the Javaheris assert that the “sole question” relevant to their prejudgment interest claim is “whether the conditions of [Civil Code] section 3287(a) were met.” The issues here are more complicated than this, especially in light of the court's holding, which the Javaheris contend was a surprise. “[W]here the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate.” (Wisper Corp. v. California Commerce Bank (1996) 49 Cal.App.4th 948, 960; see also Cassinos v. Union Oil Co. (1993) 14 Cal.App.4th 1770, 1789 [“The test for recovery of prejudgment interest under [Civil Code] section 3287, subdivision (a) is whether ‘defendant [here, appellants] actually know[s] the amount owed or from reasonably available information could the defendant have computed that amount'”].) And as appellants correctly point out, under certain circumstances involving competing claims that offset one another, only the balance awarded may bear prejudgment interest. (See, e.g., Burnett & Doty Development Co. v. Phillips (1978) 84 Cal.App.3d 384, 391 [“When a plaintiff sues for a liquidated sum and the defendant establishes an offsetting claim based upon defective performance of the same contract by the plaintiff, the amount of the plaintiff's liquidated sum must be offset against the defendant's unliquidated sum as of the due date of the original debt and only the balance bears interest”].) Given the complex nature of the parties' claims here, including liability based on the 2008 arbitration award and the piecemeal manner by which the competing debts were collected through monthly partnership distributions, the trial court is in the best position to determine whether prejudgment interest is warranted here.

We reject appellants' contention that the 2008 arbitration award cannot be the basis for any relief to the Javaheris. Incorporating arguments from their brief in the main action, appellants argue that the 2008 arbitration award “was legally defective, ” and ask that this court “determine that the 2008 Arbitration Award was defective and violative of the law, and as such, and as a matter of public policy and equity, cannot be the basis for additional remedies or benefits in favor of the Javaheris in any further action beyond the 2008 Arbitration.” They assert that such a determination “would resolve the Javaheris' appeal herein against them, and would further support [appellants'] cross-appeal, with the result that the judgment herein should either be affirmed or reversed in favor of [appellants], such that the judgment is revised only to eliminate the setoff granted by the Trial Court.”

As in the main action, appellants offer no valid legal basis for their attempt to collaterally attack the validity of the arbitration award. They argue, for example, that the arbitrator misunderstood the evidence and erred in finding that the 1999 refinancing constituted a continuing wrong. But appellants' disagreement with the arbitrator's findings in a separate proceeding cannot undermine the validity or legal effect of the arbitration award. “‘“[I]t is well settled that a party may not sit idle through an arbitration proceeding and then collaterally attack that procedure on grounds not raised before the arbitrators when the result turns out to be adverse.”'” (Mossman v. City of Oakdale (2009) 170 Cal.App.4th 83, 93.) Moreover, the arbitration award has been reduced to a judgment, and “a judgment that is valid on the face of the record is generally not subject to collateral attack.” (OC Interior Services, LLC v. Nationstar Mortgage, LLC (2017) 7 Cal.App.5th 1318, 1328.) We therefore decline appellants' invitation to question the validity of the 2008 arbitration award or second-guess the Javaheris' right to recover the damages included in that award.

Appellants also assert, apparently for the first time on cross-appeal, that the Javaheris were not entitled to collect any portion of the 2010 payoff amount, approximately $2,761,000, because the balance of the existing mortgage on the joint venture at the time of the 1999 refinancing loan was a similar amount, around $2.7 million. They argue that the trial court erred “in interpreting the 2008 Arbitration Award to permit the continued allocation of [appellants'] profit distributions after the 1999 Community Bank Loan had been paid down to the refinanced balance of the prior 1996 Sumitomo Loan, and thereby bestowing an unjustified windfall to the Javaheris.” In support of this argument, appellants cite only the stipulated facts noting the balances of the respective loans.

In essence, this is another attack on the validity of the Javaheris' claim to the future damages included in the 2008 arbitration award. To agree with appellants' position, we would have to assume that the balance of the 1996 loan was not considered in the 2008 arbitration award. However, the 2008 arbitration award discussed the loan payments that would have been made on the existing loan, had it not been refinanced, and deducted that amount from the award to the Javaheris. Appellants have not pointed to any evidence in the record to support their argument other than the loan balances themselves. Even assuming this contention had not been forfeited by failing to assert it below, appellants have not shown that the trial court erred in failing to account for the balance of the 1996 loan in 1999.

We also reject appellants' contentions that the Javaheris are not entitled to a consideration of prejudgment interest as a matter of law. Appellants assert, for example, that the Javaheris are not entitled to prejudgment interest because they failed to assert a claim for a “setoff, ” which “must be affirmatively pleaded.” (See Title Ins. Co. v. State Bd. of Equalization (1992) 4 Cal.4th 715, 731.) However, “[i]n order to assert a set-off, cross-demands for money must exist between the parties, ” (Birman v. Loeb (1998) 64 Cal.App.4th 502, 518), which was not the case here, in that the Javaheris were already entitled to certain payments under the 2008 arbitration award and therefore had no need to cross-complain. Moreover, “neither [Civil Code] section 3287, nor any other rule, specifies when prejudgment interest must be sought” (Steiny & Co., Inc. v. California Electric Supply Co. (2000) 79 Cal.App.4th 285, 294), but “at the latest, a request for prejudgment interest under [Civil Code] section 3287 may be sought as part of a motion for new trial.” (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 830.) The trial court is in the best position to determine whether any consideration of prejudgment interest is warranted under the unique circumstances of this case.

We therefore reverse the judgment and remand the matter for further proceedings limited only to the issue asserted in the Javaheris' motion for new trial regarding prejudgment interest.

Disposition

The judgment in case no. BC408948 is affirmed. The judgment in case no. BC567865 is reversed, and the case is remanded for retrial on the limited issue of prejudgment interest asserted in the Javaheris' motion for new trial filed in April 2018; in all other respects, the judgment is affirmed. The Javaheris and Abdi are entitled to recover their costs on appeal.

We concur: MANELLA, P. J., WILLHITE, J.