Opinion
D073088
12-20-2019
MERITAGE HOMES OF CALIFORNIA, INC., Plaintiff and Respondent, v. PEPPERTREE VILLAGE-VII, LLC et al., Defendants and Appellants.
Williams Iagmin and Jon R. Williams for Defendants and Appellants Peppertree Land Company and Walter Osgood. Higgs, Fletcher & Mack, John Morris and Rachel E. Moffitt for Defendants and Appellants Peppertree Village-VII, LLC, Peppertree Park Villages 9 & 10 LLC, Northern Capital, Inc. and Duane Urquhart. Huguenin Kahn, Edward R. Huguenin, James L. Bothwell and Robert J. Kahn for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2014-00040032-CU-BC-NC) APPEALS from a judgment of the Superior Court of San Diego County, Earl H. Maas III, Judge. Appeals dismissed without prejudice. Williams Iagmin and Jon R. Williams for Defendants and Appellants Peppertree Land Company and Walter Osgood. Higgs, Fletcher & Mack, John Morris and Rachel E. Moffitt for Defendants and Appellants Peppertree Village-VII, LLC, Peppertree Park Villages 9 & 10 LLC, Northern Capital, Inc. and Duane Urquhart. Huguenin Kahn, Edward R. Huguenin, James L. Bothwell and Robert J. Kahn for Plaintiff and Respondent.
After phase one of a bifurcated bench trial, the superior court entered "judgment" exceeding $6.1 million in favor of Meritage Homes of California, Inc. (Meritage) against certain defendants, while reserving for future litigation Meritage's alter ego claims against these same defendants and Walter Osgood. Defendants appealed from the judgment and Osgood also appealed from the denial of his motion to vacate judgment.
Now, some two years later, the bifurcated alter ego trial still has not occurred. We dismiss the appeals without prejudice because the judgment is not final. Osgood's appeal from the denial of his motion to vacate the interlocutory judgment is likewise premature.
FACTUAL AND PROCEDURAL BACKGROUND
A. The Parties and Land Purchase
Because most of the litigated facts are not germane to the dispositive appealability issues, only an abbreviated factual background is necessary to place the case in context.
In April 2013, Peppertree Village-VII, LLC (Peppertree 7) owned undeveloped land in San Diego County (County), units 7 and 8 of the Peppertree Park residential development.
Peppertree 7 is a limited liability company. Its members are Northern Capital, Inc. (NorCap); its managing member, and Peppertree Land Company (PLC), a general partnership; its investor member.
Duane Urquhart is NorCap's owner and president. Urquhart is also PLC's managing partner. Osgood is a PLC general partner.
The record is unclear whether Osgood is a partner in his individual capacity, or as trustee of a family trust. In its second amended complaint, Meritage named Osgood individually. However, Osgood answered the complaint "sued individually and as the Trustee of the Osgood Family Trust." In a recently filed third amended complaint, Meritage named Osgood only in his trustee capacity. References to Osgood in this opinion do not distinguish between his individual and trustee capacities.
In September 2013, Peppertree 7 and Meritage entered into an agreement (Agreement) in which Meritage paid $5.9 million for units 7 and 8. Meritage intended to build 48 homes on the lots. Escrow closed in October 2013.
Peppertree 7 was later dissolved and Peppertree Park Villages 9 & 10, LLC (Peppertree Villages) is its successor in interest, comprised of the same members. Peppertree Villages owns two undeveloped parcels (units 9 and 10), adjacent to Meritage's units 7 and 8.
B. Disputes
Meritage's units 7 and 8 and Peppertree Villages's units 9 and 10 are divided by open space containing sensitive habitat. The County would not issue Meritage a grading permit or final map until the parties dedicated an easement in this open space to the County.
Meritage controlled only half of the open space. Urquhart refused to dedicate Peppertree Villages's portion, nor would he consent to divide the open space to allow Meritage to move forward by dedicating only its portion.
Meritage asserted that as a result of this and other disputes, it was unable to develop the parcels, its tentative map expired, and it would take years to obtain a new tentative map for this project.
C. Complaint and Cross-complaint
Meritage's operative second amended complaint (complaint) named as defendants: Peppertree 7, Peppertree Villages, Urquhart, NorCap, PLC (collectively, the Peppertree defendants), and Osgood. Meritage alleged intentional and negligent misrepresentation against Urquhart individually and as agent for NorCap, Peppertree 7, and Peppertree Villages. Meritage alleged breach of contract and breach of the implied covenant of good faith and fair dealing (implied covenant) against Peppertree 7 and Peppertree Villages (as its successor in interest). Meritage also alleged intentional interference with contract and "promissory estoppel" against Urquhart and Peppertree Villages. Meritage sought rescission of the Agreement for mistake of fact and failure of consideration. The complaint also alleged alter ego liability:
"8. Meritage alleges that Osgood and Urquhart dominated and controlled Peppertree [7], Peppertree [Villages], Northern Capital, and/or PLC; that a unity of interest and ownership existed between Defendants; that Peppertree [7], Peppertree [Villages], Northern Capital, and PLC were conduits for Osgood's and Urquhart's affairs; that Peppertree [7], Peppertree [Villages], Northern Capital, and PLC were inadequately capitalized; that Peppertree [7], Peppertree [Villages], Northern Capital, and PLC failed to abide by the
formalities of corporate existence; and that recognizing the separate existence of Defendants would promote injustice."
Peppertree 7, Peppertree Villages, Urquhart and NorCap cross-complained against Meritage for express indemnity and other causes of action.
D. Stipulation to Bifurcate Alter Ego
The parties waived jury and stipulated to bifurcate the alter ego issues. The court instructed counsel to obtain a trial date for the alter ego phase after the court issued the phase one statement of decision.
E. Statement of Decision and Judgment
The court found in Meritage's favor for breach of contract, breach of the implied covenant, intentional interference with contract, and promissory estoppel. On each, the court awarded Meritage $4,610,911.49, plus prejudgment interest. The court found against cross-complainants on the cross-complaint. The statement of decision ends by stating, "Plaintiff shall prepare a judgment consistent with the findings herein."
On July 21, 2017, the court entered judgment against the Peppertree defendants, jointly and severally, for $4,610,911.40, plus $1,528,166.52 in prejudgment interest. Osgood is not named in the judgment. Regarding the alter ego phase, the judgment states:
"The parties previously stipulated to . . . bifurcate Meritage['s] alter ego claims against Defendants and Cross-Complainants subject to a subsequent bench trial on the sole and exclusive issue of alter ego liability.
"[¶] . . . [¶]
"Meritage may inform the [c]ourt by ex parte notice that it intends to proceed with its alter ego claims against Defendants and Cross-Complainants (it is anticipated a bench trial as to these claims will conclude in no more than two court days). The [c]lerk shall amend the Judgment to include the [c]ourt's findings regarding alter ego liability."
The alter ego trial has not occurred.
Meritage states it cannot litigate its alter ego claims because after judgment was entered, appellants filed bankruptcy and those cases are pending. Some of the defendants contend, however, that Meritage "dropped the issue completely" and has thereby waived or abandoned its alter ego claims. As explained post, that issue is not properly before us and we express no opinion on it.
F. Post-Phase One Motions
The Peppertree defendants moved for a new trial. Separately represented, Osgood moved to vacate the judgment against PLC on the grounds that as a member of a limited liability company, PLC is not liable for Peppertree 7's and Peppertree Villages's obligation.
G. Bankruptcy Petitions
Between August 13 and August 28, 2017, Urquhart, NorCap, PLC, and Peppertree Villages each filed a bankruptcy petition. On August 30, 2017, counsel notified the superior court of the resulting automatic stay.
"[T]he filing of a bankruptcy petition operates as an automatic stay of 'the commencement or continuation . . . of a judicial . . . proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy action] . . . .' " (Lewow v. Surfside III Condominium Owners Assn., Inc. (2012) 203 Cal.App.4th 128, 132.)
H. Osgood's Appeal
Although Osgood did not file bankruptcy, the superior court declined to rule on his motion to vacate. On October 20, 2017, Osgood appealed from "the [c]ourt's July 21, 2017 Judgment" and the denial of his "[m]otion for [j]udgment [n]otwithstanding the [v]erdict" (JNOV), which was denied by operation of law.
Osgood filed a motion to vacate judgment, not a JNOV motion. However, we liberally construe his notice of appeal to include the motion to vacate because it is reasonably clear what he was trying to appeal from and Meritage has not been misled. (Critzer v. Enos (2010) 187 Cal.App.4th 1242, 1249.)
I. Relief From Stay and Appeals
In November 2017, the bankruptcy court modified the stay to allow the parties in those proceedings to take "any and all actions necessary or appropriate" to obtain a ruling on their motion for new trial and to appeal from the judgment.
On January 8, 2018, the superior court denied the motion for new trial. On February 2, 2018 (25 days later, but more than 180 days after entry of judgment), the Peppertree defendants appealed from the judgment.
J. Motions to Dismiss Appeals
Meritage filed motions to dismiss the Peppertree defendants' appeals with prejudice on the grounds that their notice of appeal was filed too late. Meritage also moved to dismiss Osgood's appeal for lack of standing and mootness. After defendants filed opposition, we deferred consideration of the motions to dismiss to the appeal.
K. Superior Court Proceedings
Despite the pendency of these appeals, litigation has continued in the superior court. In March 2019, the superior court granted Meritage leave to file a third amended complaint alleging a new cause of action against Osgood—that as a general partner, he is liable for Meritage's judgment against PLC. Osgood's appellate attorney advises that the superior court stayed proceedings on this third amended complaint pending disposition of this appeal.
We grant Osgood's request for judicial notice, filed April 29, 2019, which includes this third amended complaint. (Evid. Code, §§ 452, subd. (d), 459.)
Additionally, in December 2018, the superior court denied Meritage's motion to amend the judgment to include PLC's partners as judgment debtors. In February 2019, Meritage appealed from this order.
L. Supplemental Briefing on Appealability Issues
We requested letter briefs addressing whether the Peppertree defendants' appeals, filed more than 180 days after judgment, were untimely. Having reviewed those briefs, which raised complex bankruptcy law issues, we instructed the parties to address these issues in their appellate briefs. Later, after the parties filed merits briefs, we requested and received additional letter briefs on other appealability issues, including whether the judgment entered July 21, 2017, is a final appealable judgment.
Meritage filed a motion to augment the record in conjunction with its letter brief filed September 3, 2019. The motion to augment contains (1) bankruptcy petitions; (2) notices of stay; and (3) a bankruptcy court order granting relief from stay to allow Meritage to seek to amend the state court judgment to include PLC's general partners. The motion to augment is denied because (a) with the exception of the bankruptcy court order, these documents are already in the record; and (b) the bankruptcy court order is not directly relevant to the issues.
DISCUSSION
I. THE APPEALS ARE FROM A NONAPPEALABLE INTERLOCUTORY JUDGMENT
A. Legal Principles
" 'The existence of an appealable judgment is a jurisdictional prerequisite to an appeal. Thus, this court is obligated to review the question of appealability. [Citations.] [¶] California is governed by the "one final judgment" rule which provides "interlocutory or interim orders are not appealable, but are only 'reviewable on appeal' from the final judgment." [Citation.] The rule was designed to prevent piecemeal dispositions and costly multiple appeals which burden the courts and impede the judicial process. [Citations.] 'It is the substance and effect of the adjudication, and not the form, which determines if the order is interlocutory and nonappealable, or final and appealable. [Citation.] If no issues in the action remain for further consideration, the decree is final and appealable. But if further judicial action is required for a final determination of the rights of the parties, the decree is interlocutory.' " (Wilson v. County of San Joaquin (2019) 38 Cal.App.5th 1, 7.)
Baker v. Castaldi (2015) 235 Cal.App.4th 218 aptly illustrates these rules. There, after phase one of a bifurcated trial, the court entered a "judgment" awarding compensatory damages and reserving the amount of punitive damages for assessment "at a separate trial." The court of appeal dismissed appeals from this judgment because it was not a final, appealable judgment. (Id. at pp. 221, 227.)
This principle—the one final judgment rule—is " 'a basic principle of appellate practice.' [Citation.] This principle prevents piecemeal dispositions and multiple appeals in a single action which would be oppressive and costly." (Walton v. Magno (1994) 25 Cal.App.4th 1237, 1240 (Walton).) " ' "Interlocutory appeals burden the courts and impede the judicial process in a number of ways: (1) They tend to clog the appellate courts with a multiplicity of appeals[;] (2) Early resort to the appellate courts tends to produce uncertainty and delay in the trial court[;] (3) Until a final judgment is rendered the trial court may completely obviate an appeal by altering the rulings from which an appeal would otherwise have been taken[;] [Citations.] (4) Later actions by the trial court may provide a more complete record which dispels the appearance of error or establishes that it was harmless[;] [and] (5) Having the benefit of a complete adjudication . . . will assist the reviewing court to remedy error (if any) by giving specific directions rather than remanding for another round of open-ended proceedings." ' " (Dana Point Safe Harbor Collective v. Superior Court (2010) 51 Cal.4th 1, 5-6.)
B. Analysis
The jurisdiction problem in this appeal arises from the last sentence of the statement of decision: "Plaintiff shall prepare a judgment consistent with the findings herein." "[A]fter the first stage of a bifurcated proceeding, the trial court should enter a minute order but not a judgment, then proceed with the trial of the remaining issues, with entry of final judgment awaiting terminating of the action." (Valentine v. Baxter Healthcare Corp. (1999) 68 Cal.App.4th 1467, 1477.)
The judgment entered on July 21, 2017 is not an appealable final judgment because it expressly contemplates future litigation between Meritage and "Defendants and Cross-Complainants" on the "issue of alter ego liability." Determining whether some or all of the defendants are alter egos is " 'judicial action on the part of the court' " that is " 'essential to a final determination of the rights of the parties . . . .' " (Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 698.) As a result, the July 21, 2017 judgment is interlocutory. No appeal lies from such an interlocutory judgment. "[W]hen a trial is bifurcated . . . no appeal is allowed until both . . . phases of the trial have been completed. [Citations.] Portions of a trial are only subject to appeal after one final judgment has been entered." (Walton, supra, 25 Cal.App.4th at p. 1240.) Therefore, the appeals filed by the Peppertree defendants are premature and should be dismissed without prejudice. (Guy F. Atkinson Co. v. State of California (1971) 17 Cal.App.3d 1065, 1067-1068 [premature appeal dismissed without prejudice].)
To the extent that Osgood has appealed from the judgment against PLC, his appeal should also be dismissed without prejudice for the same reason. To the extent Osgood appeals from a judgment against himself, that too is premature because Osgood is not currently a judgment debtor and a third amended complaint containing an unlitigated claim against him is pending.
C. Meritage's Arguments Unavailing
Disagreeing with this analysis, Meritage contends that "judicial economy weigh[s] in favor of allowing the appeals to proceed as filed" because its "alter ego claims will more or less be rendered moot" if this court affirms the judgment. However, an appeal requires a final judgment, not a "more or less" final judgment. Moreover, Meritage's judicial economy claim is dubious. Because the parties have prosecuted these appeals from a nonfinal judgment, this court has already expended substantial resources on procedural issues that do nothing to help resolve the case. Indeed, there are now two sets of appeals—one by defendants and another by Meritage. Additionally, as a result of the appeals, the case is mired in even more delay in the superior court. Thus, rather than promoting judicial economy as Meritage claims, the premature appeals have caused delay, wasted appellate resources, and resulted in multiple appeals—the very evils the one-final-judgment rule is intended to prevent.
We reject the Peppertree defendants' judicial economy argument for the same reasons. We also reject Osgood's assertion that we should decide the appeal to stop Meritage's collection on the judgment. A party's economic interest in a disposition on the merits does not determine appellate jurisdiction.
Alternatively, Meritage contends that the judgment is final as to Peppertree 7 and Peppertree Villages because those appellants do not challenge liability, but only damages. As a result, Meritage contends its alter ego claims against these parties "are no longer at issue . . . ."
However, "the finality of a judgment for purposes of appeal should be determined as of the date that a notice of appeal was filed [citation], except where the judgment is subsequently modified or vacated such as on a new trial motion." (Faigin v. Signature Group Holdings, Inc. (2012) 211 Cal.App.4th 726, 735, fn. 3.) As explained ante, the judgment was not final when defendants filed notices of appeal. Meritage cites no authority supporting its assertion that by limiting issues on appeal, an appellant retroactively transforms an interlocutory judgment into a final one.
Meritage also asserts that it is "willing to stipulate" that the appeals proceed "with the understanding" that it shall be permitted to litigate alter ego claims if the judgment is reversed. However, even if appellants were to accept that offer, there remains no appellate jurisdiction. " '[T]he parties cannot by any form of consent make a nonappealable [judgment] appealable.' " (Horton v. Jones (1972) 26 Cal.App.3d 952, 956 (Horton).)
D. The Arguments by Peppertree 7, Peppertree Villages, NorCap, and Urquhart are Unavailing
In their brief, Peppertree 7, Peppertree Villages, and NorCap contend that the judgment "is definitely final" as to them "since the only alter ego allegations asserted by Meritage in its operative [s]econd [a]mended [c]omplaint were against Urquhart." To support this assertion, they cite 15 allegations, scattered across the complaint, all of which are to the effect that "Urquhart, in his individual capacity and/or as agent and alter ego of Defendants" did or failed to do certain actionable things.
For the first time at oral argument, appellate counsel for Peppertree 7, Peppertree Villages, NorCap, and Urquhart stated, "I concede . . . that the court cannot get to the merits . . . because we don't have a final judgment. . . . I believe now that the appropriate resolution . . . is to dismiss the appeal remand the case to the superior court for further proceedings." Commenting on that concession, appellate counsel for Osgood and PLC stated, "I'm in agreement with respect to the status of the appeal. . . ."
We read the complaint differently. Although in places the complaint alleges that Urquhart acted as the defendants' alter ego, other alter ego allegations encompass all the defendants as alter egos. For example, paragraph 8, incorporated by reference into each cause of action, alleges that "a unity of interest and ownership existed between Defendants;" and Peppertree [7], Peppertree Park Villages, Northern Capital, and PLC "failed to abide by the formalities of corporate existence" and "recognizing the separate existence of Defendants would promote injustice." (Italics added.)
Consistent with these allegations, in its trial brief Meritage asserted, "Defendants are alter egos of one another, such that Meritage requests that damages be imposed jointly and severally against all Defendants." Likewise, the judgment states that the bifurcated alter ego claims would be tried "against Defendants and Cross-Complainants . . . ." Peppertree 7, Peppertree Villages, and NorCap are defendants and cross-complainants. Accordingly, the judgment includes these defendants as parties against whom Meritage asserts alter ego claims.
Peppertree 7, Peppertree Villages, NorCap, and Urquhart also contend that Meritage has waived or abandoned its alter ego claims because (1) in closing argument, Meritage's lawyer said that a finding against NorCap would "likely obviate the need to rely upon alter ego or successor remedies;" (2) Meritage then "permitted judgment to be entered;" (3) did not file post-trial motions "to preserve the issue;" (4) did not raise "this in its response to Urquhart's appeal; and (5) "has done nothing for more than two years since that judgment was entered to reopen proceedings against Urquhart."
Evaluating this argument requires legal analysis on at least two issues: (1) does the asserted conduct constitute waiver or abandonment of an unadjudicated bifurcated claim? and (2) may such a finding be made on this record, for the first time on appeal?
Peppertree 7, Peppertree Villages, NorCap, and Urquhart cite no authority and provide no reasoned analysis on these points. Accordingly, the arguments are forfeited. (Berger v. Godden (1985) 163 Cal.App.3d 1113, 1119 (Berger) [contentions not supported by citation of authority are deemed to be without foundation, and to have been abandoned].)
Urquhart concedes that "if the [c]ourt does not agree that Meritage has either waived or abandoned its alter ego theory," then Urquhart's appeal should be dismissed as being premature.
E. Osgood's Arguments as to the Judgment are Unavailing
Osgood concedes that the judgment is not final as to himself. In his brief, however, he contends the judgment is final against PLC because Meritage has attempted to enforce that judgment against Osgood's assets. However, Osgood cites no authority that a nonfinal judgment becomes final when the plaintiff treats it so. The argument is, therefore, forfeited. (Berger, supra, 163 Cal.App.3d at p. 1119.)
Osgood also contends that we should review the judgment against PLC because he has a "tangible pecuniary interest in its validity." However, this argument erroneously conflates standing (i.e., whether Osgood is a party aggrieved) with finality.
F. Osgood's Appeal from the Denial of His Motion to Vacate
Osgood's appeal from the denial of his motion to vacate the judgment against PLC must also be dismissed. Ordinarily, an order denying a motion to vacate judgment is a separately appealable order. (Ryan v. Rosenfeld (2017) 3 Cal.5th 124, 127, 134-135.) However, here Osgood filed a motion to vacate a nonfinal judgment. The issue is whether the denial of that motion, although ordinarily appealable, is not appealable when the underlying judgment itself is not appealable.
We asked the parties to address this issue by letter brief.
Citing In re Marriage of Eben-King & King (2000) 80 Cal.App.4th 92 (King) and Blaser v. State Teachers' Retirement System (2019) 37 Cal.App.5th 349 (Blaser), Meritage contends that Osgood's appeal from the denial of his motion to vacate should proceed. However, neither case is helpful. The issue in King was whether a Family Code provision for setting aside a dissolution judgment on the grounds of mistake, fraud or duress affects the time for filing a notice of appeal from the dissolution judgment. (King, at pp. 96-97.) King does not involve a motion to vacate directed at a nonfinal judgment. Blaser is also off point. The primary issue there was whether the continuous accrual theory applied with respect to certain claims involving pension benefit payments. (Blaser, at pp. 354-355.) Blaser does not involve an appeal from an order denying a motion to vacate a nonfinal judgment.
Osgood also contends we have jurisdiction. However, apart from citing Ryan, supra, 3 Cal.5th 124 for the proposition that an order denying a motion to vacate judgment is ordinarily appealable, he cites no authority for applying that rule where the underlying judgment is nonfinal.
Although our independent research has not found any published California case exactly on point, Horton, supra, 26 Cal.App.3d 952 is legally indistinguishable. There, after the jury returned a plaintiff's verdict on the liability phase of a bifurcated trial, the clerk entered judgment. (Id. at pp. 953-954.) The defendant brought a JNOV motion, which the trial court denied, and then appealed from the order denying the JNOV motion. (Id. at p. 954.) Normally, an order denying a JNOV motion is an appealable order. (Ibid.) However, the appellate court dismissed that appeal because there was no final judgment in the bifurcated trial. (Id. at p. 955.) By the same reasoning, we lack jurisdiction over Osgood's appeal from the denial of his motion to vacate because the judgment that the motion assailed is not final.
Nothing in this opinion precludes Osgood or any other defendant from bringing a motion to vacate the final judgment.
II. MERITAGE'S MOTIONS TO DISMISS APPEALS
Meritage has moved to dismiss the Peppertree defendants' appeals with prejudice on the grounds that their joint notice of appeal from the judgment, filed February 2, 2018 was filed too late—more than 180 days after entry of judgment. Because there is no final judgment, the time to appeal has not even started. Therefore, Meritage's motions to dismiss these appeals are denied.
Although Meritage concedes that Osgood's appeal, filed October 20, 2017, is timely, Meritage moves to dismiss Osgood's appeal on numerous grounds.
Because we have determined that defendants' appeals should be dismissed as being premature, Meritage's motion to dismiss, predicated on the erroneous assumption that the judgment entered July 21, 2017 is appealable, must be denied.
DISPOSITION
The appeals filed by Peppertree Village-VII, LLC; Peppertree Park Villages 9 & 10, LLC, Northern Capital, Inc., Duane Urquhart, and Peppertree Land Company on February 2, 2018, are dismissed without prejudice.
The appeal filed by Walter Osgood, individually and as trustee of the Osgood Family Trust on October 20, 2017, is dismissed without prejudice.
The motions to dismiss appeals filed by Meritage Homes of California, Inc. on January 23, 2019, are denied.
In the interests of justice, the parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
McCONNELL, P. J. WE CONCUR: BENKE, J. DATO, J.