Opinion
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Los Angeles County Nos. BP058898, BP058899 Mitchell L. Beckloff, Judge.
Akin Gump Strauss Hauer & Feld, Rex S. Heinke, Hyongsoon Kim and Scott J. Street; Krane & Smith, Samuel Krane and Marc Smith for Plaintiffs and Appellants.
Sonnenschein Nath & Rosenthal, Bernard J. Nussbaum and John E. Walker; Morrison & Foerster, Miriam A. Vogel and Benjamin J. Fox for Defendant and Respondent.
CROSKEY, J.
Appellants Izzet Uzyel, Dafna Uzyel, Joelle Uzyel, and the Uzyel Irrevocable Trust Nos. 1 and 2 (collectively, the Uzyels) successfully obtained a money judgment against Neil Kadisha. In order to stay the judgment pending his appeal, Neil Kadisha provided an undertaking of several personal sureties: Dora Kadisha; Dina Kadisha; Leora Kadisha; David and Shairly Pourbaba; Leon and Deborah Farahnik; and Union Communications Company, LP (collectively, the Sureties). The parties agreed to an order whereby the Sureties would provide updated financial statements every six months during the pendency of Neil Kadisha’s appeal, and that the Sureties would notify the Uzyels of the occurrence of certain events. The Uzyels believed that the Sureties breached the order, by providing unsupported and highly improbable financial statements, and by failing to inform them of the occurrence of events as agreed. The Uzyels therefore moved for stricter reporting requirements and the right to take discovery regarding the Sureties’ finances. The trial court denied the motion on the basis that the Uzyels had not established changed circumstances sufficient to justify a new order. We conclude that the trial court did not abuse its discretion, and therefore affirm. However, our conclusion does not bar the Uzyels from bringing a similar motion in the future, supported by specific information establishing changed circumstances.
FACTUAL AND PROCEDURAL BACKGROUND
At the time the Uzyels filed their notice of appeal, they also filed a petition for writ of mandate, which was denied. The record on appeal consists of the exhibits in support of the writ petition, supplemented by a respondent’s appendix filed by Neil Kadisha. Our recitation of the factual and procedural background is necessarily incomplete, due to certain omissions in the record.
1. The Initial Undertaking and Discovery Dispute
In December 2006, the Uzyels obtained a judgment against Neil Kadisha, for compensatory and punitive damages, in an amount exceeding $100,000,000. The perfecting of an appeal does not stay the enforcement of a money judgment, unless an undertaking is given. (Code Civ. Proc., § 917.1, subd. (a)(1).) Neil Kadisha sought to provide an undertaking given by personal sureties, rather than an admitted surety insurer. As such, the undertaking was required to be for double the amount of the judgment. (Code Civ. Proc., § 917.1, subd. (b).) Neil Kadisha submitted an undertaking of multiple sureties, including the Sureties at issue in this appeal. When a bond is for more than $10,000 and is executed by more than two sureties, it is required that the aggregate worth of all sureties executing the bond be twice the amount of the bond itself. (Code Civ. Proc., § 995.520, subd. (d).) Pursuant to statute, each surety submitted an affidavit of qualifications, describing the real and personal property owned by the surety and the surety’s best estimate of the fair market value of each item of property, in order to demonstrate that the sureties had the necessary aggregate worth. (Code Civ. Proc., § 995.520.)
The terms “undertaking” and “bond” are interchangeable. (Code Civ. Proc., § 995.210.)
Due to an apparent compilation error, the respondent’s appendix contains only the signature pages from the undertaking itself. The language of the undertaking itself, including its precise amount, is not part of the record on appeal.
In other words, the bond must be for twice the amount of the judgment, but the sureties’ worth must be twice the amount of the bond.
The Uzyels sought substantial discovery in order to determine if the sureties’ affidavits had any basis in fact. The sureties’ assets consisted largely of three categories of property: (1) Qualcomm stock (encumbered by margin loans); (2) real property; and (3) interests in limited partnerships and closely-held corporations. The Uzyels sought discovery from the sureties, as well as the limited partnerships and closely-held corporations. The parties disputed the amount of discovery to which the Uzyels were entitled. The issue would not be resolved for nearly a year.
2. The Amended Judgment and the Undertakings at Issue
While the discovery dispute was pending, the judgment was amended on March 12, 2007, to reflect an award of approximately $64,000,000 in compensatory and punitive damages. With this decrease in the judgment, Neil Kadisha submitted a decreased undertaking, in an amount in excess of $128,000,000. As the bond amount had decreased, Neil Kadisha did not need all of the sureties who had initially submitted affidavits. He submitted new affidavits of only the Sureties at issue in this appeal, indicating the aggregate worth of the Sureties to be $300,000,000.
Each Surety agreed that its liability would be limited to a certain amount, and submitted an affidavit indicating a worth exceeding that amount. The total of the amounts to which the Sureties agreed to be liable was $300,000,000.
On August 6, 2007, the trial court ordered Neil Kadisha to pay the Uzyels over $13,000,000 in attorney fees. On October 23, 2007, Neil Kadisha was ordered to pay the Uzyels over $300,000 in costs. On November 7, 2007, some of the Sureties (Dora Kadisha, Dina Kadisha, Leora Kadisha and Union Communications) submitted a second undertaking, in an amount exceeding $27,000,000, in order to bond the orders awarding attorney fees and costs. Those Sureties submitted affidavits of qualification which simply reaffirmed their earlier affidavits, but modified them to note increases in the margin loans encumbering their Qualcomm stock; they did not add additional assets or claim an increase in their worth.
The costs award was later modified to delete nearly $85,000 in costs.
In Neil Kadisha’s brief on appeal, he argues that he was not required to post a bond to stay enforcement of the costs award. This is incorrect. While no bond is required “solely for costs awarded” (Code Civ. Proc., § 917.1, subd. (d)), “[c]osts awarded by the trial court... shall be included in the amount of the judgment or order for the purpose [of calculating the amount of the undertaking].” (Code Civ. Proc., § 917.1, subd. (d).)
At this point, the Sureties had together issued two undertakings in a sum exceeding $155,000,000, but had indicated aggregate net worth of $300,000,000 – an amount slightly less than double the undertaking. The Uzyels did not, and do not, challenge this. That is to say, they made no argument that the Sureties had to establish an additional $10 million in aggregate net worth in order to amount to twice the amount of both bonds.
3. Discovery and the Uzyels’ Acceptance of the Adequacy of the Undertakings
At this point, the discovery dispute had been resolved by the trial court. The Uzyels were permitted to examine three of the Sureties in open court. Prior to the testimony of the Sureties, they had submitted to the Uzyels financial statements supported by substantial documentation.
Counsel for the Uzyels indicated that he had received “mounds” of documents. Surety David Pourbaba alone submitted “at least four inches” of documents.
After hearing the testimony of the Sureties, and reviewing the submitted documentation, the Uzyels were permitted to make any objections they may have had to the Sureties. The Uzyels did not object to any of the Sureties.
The Uzyels objected to the adequacy of Dora Kadisha as a surety, on the basis that Neil Kadisha had transferred certain assets to his wife Dora Kadisha as her separate property so that she could be a surety for him. As the result of the Uzyels’ objection, Dora Kadisha transmuted her separate property interest in those assets back to community property. She modified her affidavit of qualification to delete those assets; however, as her claimed worth still exceeded the amount to which she had agreed to be liable, no additional sureties were submitted to make up the shortfall.
4. The Agreed-Upon Reporting Requirements
Although the Uzyels did not object to the Sureties, the Uzyels requested that the court impose certain reporting requirements on the Sureties “to ensure that the [S]ureties are adequate to secure the judgment pending appeal.” Under the Code of Civil Procedure, subsequent to the acceptance of a bond, a party may object that the bond has “become insufficient” (Code Civ. Proc., § 996.010, subd. (a)) on the basis of “changed circumstances” (Code Civ. Proc., § 995.930, subd. (c)). The Uzyels asserted that there is little public information available by which they could account for subsequent encumbrances to, or transfers of, the Sureties’ assets. They argued that, “[w]ithout adequate reporting requirements, [they] will be deprived, perhaps irreparably, of their due process rights to ascertain whether there ha[ve] been ‘changed circumstances.’ ” The Uzyels sought the imposition of five reporting requirements, including: (1) the twice yearly service of financial statements, certified under penalty of perjury; and (2) fourteen days advance written notice regarding any intention to sell or encumber any of the Sureties’ Qualcomm stock. The matter of reporting requirements was fully briefed. A hearing was held, although the transcript of that hearing is not part of the record on appeal.
On February 21, 2008, the court signed an order which was agreed to by the parties and the Sureties. According to the order, the parties agreed that the personal sureties were sufficient, and that the undertaking amounts were sufficient to secure both the judgment and the awards of attorney fees and costs. The parties and Sureties also agreed to certain reporting requirements. Specifically, the parties and Sureties agreed that the Sureties would provide the Uzyels with twice yearly copies “of their financial statement[s] in substantially the same format as the financial statements heretofore produced to [the Uzyels’] counsel.” Notably, the previously submitted financial statements were not submitted under penalty of perjury, and the stipulated order did not require that the future statements be so submitted. The stipulated order also did not require the Sureties to notify the Uzyels before the sale of any of their Qualcomm stock. Instead, it required the Sureties to notify the Uzyels within fourteen days “after each calendar month if the fair market value of the equity of the [S]urety’s Qualcomm stock at the end of the month was less than 90% of the equity fair market value stated in the [S]urety’s affidavit. ‘Equity’ is defined as follows: An amount equal to the number of shares owned by Surety times the closing price, minus the amount of any loans or other obligations secured by the Qualcomm Stock.” In short, some, but not all, of the reporting requirements originally sought by the Uzyels were imposed by stipulation.
The Uzyels’ brief on appeal implies that this order was the result of an exercise of judgment by the trial court. The order begins, “This matter having been heard... and the parties and sureties having agreed hereto.... ” It is signed not only by the trial court, but by counsel for the parties and Sureties, under the line, “AGREED AS TO FORM AND SUBSTANCE.”
Among other things, the financial statements were to include “[a]ny previously contingent federal or tax liabilities that have become due resulting from the sale of any assets.”
Several of the Sureties had filed two affidavits – the first supporting the undertaking on the judgment and the second supporting the undertaking on costs and attorney fees. The second affidavits each reflected a lower equity fair market value, as they noted an increase in the margin loan amounts, but no change in stock price or holdings. It is not clear which set of affidavits is referred to by this stipulation.
5. The Uzyels Believe the Sureties’ Financial Statements are Inadequate
Pursuant to the order, the Sureties served the Uzyels with their mid-year 2008 financial statements, followed by their year-end 2008 financial statements. The Uzyels believed these financial statements to be insufficient, and asked the Sureties for further information. Letters were exchanged. By early 2009, it appeared that the Sureties had obtained no appraisals for their real property since 2006 and 2007, when they had first submitted affidavits. Believing that the general drop in property values caused by the recession rendered the prior appraisals no longer useful, the Uzyels requested that the Sureties obtain new appraisals. The Sureties refused, arguing that the February 21, 2008 stipulated order did not require them to obtain appraisals of their property.
Shortly thereafter, the amended judgment was again amended, to correct certain clerical errors. The result was an increase in the judgment in excess of $240,000. The parties agreed that this increase in the judgment would “not require any increase in the undertaking on appeal or the liability of the personal sureties.”
This was also apparently true with respect to valuations of at least some of the limited partnerships and closely-held corporations.
6. The Uzyels’ Motion for Further Reporting Requirements and Discovery
In light of this stalemate, the Uzyels moved for an order: (1) requiring the Sureties to provide updated financial statements based on current third-party appraisals; (2) allowing 90 days of discovery regarding the basis for the values in the Sureties’ financial statements; and (3) modifying the stipulated order to require that all future financial statements to be submitted under penalty of perjury.
The Uzyels’ motion was captioned as a motion “objecting to adequacy of personal Sureties... as satisfactory undertakings... and to compel personal Sureties’ compliance with the court’s February 21, 2008 order.” This was something of a misnomer. The Uzyels did not object to the adequacy of the Sureties; they instead sought information which could possibly support a future objection. Moreover, they did not seek compliance with the February 21, 2008 order; they sought instead to modify the requirements of the order to require appraisals and the submission of financial statements under penalty of perjury.
The Uzyels argued that, without current appraisals, the financial statements submitted by the Sureties were useless. They argued that the nationwide recession heavily impacted real estate values (particularly in areas in which the Sureties held property) and industries in which the limited partnerships and closely-held corporations in which the Sureties hold interests operate. In light of the economic downturn, the Uzyels found the Sureties’ unsupported financial statements – which often showed no decreases in the value of their assets – difficult to believe. The Uzyels did not obtain any “drive-by” appraisals of the Sureties’ real property, or support their motion with any comparative market analyses performed by real estate experts. Instead, they simply relied on general market data (for example, the “luxury home market” in Los Angeles) to establish a decline.
The Uzyels also argued that Qualcomm stock had been volatile over the intervening months, but noted that, at the time of their motion, the market price actually exceeded the price relied on in the Sureties’ affidavits.
The Uzyels also argued that the Sureties had breached the requirements of the February 21, 2008 stipulated order in certain respects. They noted that “at various times during November 2008, December 2008, and February 2009, the price of Qualcomm stock decreased to less than 90% of its original value of $37.00 as listed in the Sureties’ Affidavits of Qualifications, ” but the Sureties failed to give notice as purportedly required by the stipulated order. Finally, the Uzyels argued that one Surety, Union Communications, apparently sold approximately 10% of its shares of Qualcomm, but did not notify the Uzyels until several months after the sale.
We here note that the stipulated order did not require notification whenever the stock price dipped to less than 90% of its value, but only notification when, at the end of the month, the Surety’s equity in Qualcomm stock had decreased to less than 90% of the equity value claimed in the affidavits.
The Uzyels also argued that Union Communications never notified it about any federal or state tax liabilities incurred as the result of the sale. However, the Uzyels presented no evidence that Union Communications actually incurred such liabilities. The Uzyels could have presented, for example, an expert declaration to the effect that the sale of stock under these circumstances generally gives rise to previously contingent tax liabilities coming due, should that be the case.
Finally, the Uzyels noted that substantial postjudgment interest had been incurred. The Uzyels did not seek an increase in the amount of the undertaking in order to guarantee that they would be able to collect such interest if the underlying judgment against Neil Kadisha were to be affirmed on appeal. Instead, they simply argued that the increase in postjudgment interest further underlined the necessity for accurate valuation of the Sureties’ assets.
7. The Sureties and Neil Kadisha Oppose the Motion
The Sureties and Neil Kadisha opposed the motion, largely on the basis that the Uzyels’ motion set forth no facts indicating changed circumstances or that the undertaking had become insufficient. They argued that there was no requirement in the stipulated order that the Sureties obtain new appraisals. The Sureties conceded that Qualcomm’s stock closed below $37 in four months, but argued that their failure to notify the Uzyels of this fact was a technical breach at best, as the stock price was easily available to the Uzyels, and the stock price had increased by the time of the motion. Finally, they argued that, given the substantial increase in value of Qualcomm stock, and the increase in value of PWP Holdings, Inc., a corporation in which several of the Sureties held interests, the bonds continued to be well-supported by the Sureties’ assets.
8. Subsequent Financial Statements and the Uzyels’ Reply
By the time the oppositions were filed, the Sureties had completed their mid-year 2009 financial statements, and had served them on the Uzyels. In the Uzyels’ reply memorandum, they argued, based on these most recent financial statements, that the Sureties’ valuations of the closely-held corporations and limited partnerships may themselves be suspect, because the Sureties each showed a different percentage increase in value for their interests in PWP from 2006 to 2009. Specifically, Dora Kadisha and Union Communications showed a much greater increase in the value of their interests in PWP than the Farahniks showed with respect to their interest. Given this disparity, the Uzyels argued that there was reason to distrust the Sureties’ valuations of PWP.
9. The Uzyels’ Motion is Denied
A hearing was held on the Uzyels’ motion. The trial court denied the motion on the basis that the Uzyels had provided no specific information that the Sureties’ financial statements were incorrect. The trial court conceded that the Uzyels could not independently obtain information regarding the value of the closely-held corporations, but noted that the Uzyels could have obtained their own valuations of the real properties held by the Sureties. As the Uzyels were the moving party, the trial court found that the Uzyels had the burden of establishing changed circumstances, and concluded that they had failed to establish that the Sureties’ property valuations were erroneous. As to the assertion of the disparity in the Sureties’ valuations of the increase in value of PWP, counsel for the Farahniks represented that the Farahniks’ percentage interest in PWP had decreased, which accounted for the disparity in the Farahniks’ valuation of their interest. The trial court impliedly accepted this explanation. As to Union Communications’ failure to inform the Uzyels of its sale of Qualcomm stock, the trial court agreed that this was a breach of the February 21, 2008 stipulated order, but believed that the breach did not justify the relief sought by the Uzyels. In conclusion, in the absence of any specific evidence that the Sureties’ financial statements inadequately valued their assets, the trial court found no basis to add to the February 21, 2008 order the additional safeguards sought by the Uzyels. The motion was therefore denied.
At one point, the trial court suggested the Uzyels could have gone to the website, zillow.com, to contradict the Sureties’ estimated values. Zillow.com provides what it calls a “Zestimate, ” which is a home’s “estimated market value, computed using a proprietary formula. It is not an appraisal. It is a starting point in determining a home’s value.” (http://www.zillow.com/wikipages/What-is-a-Zestimate/) Moreover, a homeowner is permitted to change Zillow’s facts about the property, thus changing the Zestimate. We, therefore, see no basis for recognizing Zillow’s “Zestimates” as a sufficient basis on which to obtain a legitimate valuation of the properties at issue.
The Uzyels challenged the order by petition for writ of mandate and timely notice of appeal. The petition for writ of mandate was denied.
The Uzyels named the Sureties as real parties in interest in their petition for writ of mandate, but failed to serve them with their notice of appeal or claim they were parties to the appeal in their case information statement. We sought additional briefing from the parties as to whether this appeal can proceed in the absence of the sureties, and what procedures must be taken to satisfy due process. As we are affirming the trial court’s ruling and not imposing any further obligations on the Sureties, we conclude due process does not require their involvement in this appeal. Nothing in our opinion should be read as precluding the Sureties from raising any appropriate objections to any future trial court proceedings.
CONTENTIONS ON APPEAL
On appeal, the Uzyels contend the trial court erred in three ways: (1) by stating that the Sureties’ aggregate worth must be only twice the judgment, rather than four times the judgment; (2) by concluding that the Uzyels had to present specific evidence of changed circumstances; and (3) by failing to provide the remedies they sought for the Sureties’ undisputed violations of the February 21, 2008 stipulated order.
DISCUSSION
1. Statutory Framework and Standard of Review
The perfecting of an appeal does not stay the enforcement of a money judgment unless an undertaking is given. (Code Civ. Proc., § 917.1, subd. (a)(1).) The undertaking shall be for double the amount of the judgment or order, unless it is given by an admitted surety insurer, in which case it need only be for one and one-half times the amount of the judgment or order. (Code Civ. Proc., § 917.1, subd. (b).) A bond shall be executed by either one sufficient admitted surety insurer or two or more sufficient personal sureties. (Code Civ. Proc., § 995.310.)
A bond shall be in writing signed by the sureties under oath. (Code Civ. Proc., § 995.320, subd. (a).) A personal surety on a bond is sufficient if, among other things, the “surety is worth the amount of the bond in real or personal property, or both, situated in this state, over and above all debts and liabilities, exclusive of property exempt from enforcement of a money judgment.” (Code Civ. Proc., § 995.510, subd. (a)(3).) “If the amount of a bond exceeds ten thousand dollars ($10,000) and is executed by more than two personal sureties, the worth of a personal surety may be less than the amount of the bond, so long as the aggregate worth of all sureties executing the bond is twice the amount of the bond.” (Code Civ. Proc., § 995.510, subd. (b).)
The surety must be a person other than the principal. (Code Civ. Proc., § 995.510, subd. (a).) As an alternative to obtaining a bond, the principal may make a deposit in lieu of a bond. (Code Civ. Proc., § 995.710.)
“The beneficiary may object to a bond on any of the following grounds: (a) The sureties are insufficient. (b) The amount of the bond is insufficient. (c) The bond, from any other cause, is insufficient.” (Code Civ. Proc., § 995.920.) “If a ground for the objection is that the amount of the bond is insufficient, the notice of motion shall state the reason for the insufficiency and shall include an estimate of the amount that would be sufficient.” (Code Civ. Proc., § 995.930, subd. (a).) A timetable is provided for objections. If no objection is made within ten days of service of the bond on the beneficiary, the beneficiary is deemed to have waived all objections except on a showing of good cause or “of changed circumstances.” (Code Civ. Proc., § 995.930, subd. (c).)
Similarly, if, after a hearing on the beneficiary’s objection, the court makes an order determining the sufficiency of the bond, “no future objection to the bond may be made except upon a showing of changed circumstances.” (Code Civ. Proc., § 995.960, subd. (c).) As the Uzyels, after discovery, objected only to Dora Kadisha’s sufficiency, and Dora Kadisha subsequently amended her affidavit of qualifications to remove the basis for the objection, we conclude the governing statute is Code of Civil Procedure section 995.930, subdivision (c), applying after a failure to object, rather than Code of Civil Procedure section 995.960, subd. (c), applying after a trial court’s determination of sufficiency. In any event, the distinction is academic, as it is clear that further objection may only be made upon a showing of changed circumstances.
Code of Civil Procedure section 996.010, subdivision (a) provides that, “[i]f a bond is given in an action or proceeding, the court may determine that the bond is or has from any cause become insufficient because the sureties are insufficient or because the amount of the bond is insufficient.” The court may make this determination on its own motion, or “upon motion supported by affidavit.” (Code Civ. Proc., § 996.010, subd. (b).) “The motion shall be deemed to be an objection to the bond. The motion shall be heard and notice of motion shall be given in the same manner as an objection to the bond.” (Code Civ. Proc., § 996.010, subd. (b).) As the motion is deemed an objection, it is governed by the provision that an initial failure to timely object bars an objection except on a showing of changed circumstances (Code Civ. Proc., § 995.930, subd. (c)). If the court determines that the bond is insufficient, the court shall order a sufficient new, additional, or supplemental bond be given. (Code Civ. Proc., § 996.010, subd. (c).)
“The purpose behind [Code of Civil Procedure] section 996.010 is to guard against a bond or undertaking failing to serve its original purpose.” (Grant v. Superior Court (1990) 225 Cal.App.3d 929, 938.) When a party challenges an undertaking given to secure a money judgment, the movant “must demonstrate a real, substantial possibility, not just speculation, that the current bond ‘is or has from any cause become insufficient because the sureties were insufficient or because the amount of the bond is insufficient.’ ([Code Civ. Proc., ] § 996.010.)” (Ibid.) The determination, on such a motion, of the amount necessary to render the bond sufficient, is entrusted to the trial court’s discretion. (Id. at pp. 932, 939.)
Grant v. Superior Court, supra, 225 Cal.App.3d at p. 938, held that the trial court may consider, in a motion under Code of Civil Procedure section 996.010, that the accrual of postjudgment interest has rendered the initial undertaking insufficient. The court stated, “In finding the court had the right to consider the accumulation of postjudgment interest under the motion pursuant to section 996.010, we are not saying respondent is entitled to have a new undertaking which is in its aggregate one and one half times (or two times) the amount of the judgment, and accumulated appellate costs and postjudgment interest. Rather, we find only that the amounts of such interest and costs are proper factors for the trial court to consider in ruling on a motion pursuant to section 996.010.” (Ibid.)
2. The Proper Amount of the Bond Is Not Before This Court
It is undisputed that, under the circumstances of this case, the undertaking must be for twice the amount of the judgment (Code Civ. Proc., § 917.1, subd. (b)) and the aggregate worth of the Sureties must be twice the amount of the bond (Code Civ. Proc., § 995.510, subd. (a)).
During the hearing on the Uzyels’ motion, there was some discussion by the trial court as to whether the Uzyels sought an increase in the amount of the bond, and if the Uzyels argued that the amount of the bond should be four times the amount of the judgment, rather than twice the amount of the judgment. Based on this discussion, the Uzyels argue that the trial court erred in holding that the aggregate worth of the Sureties must be twice the amount of the judgment.
Any possible confusion on the part of the trial court is immaterial as the trial court denied the Uzyels’ motion on grounds having nothing to do with the proper amount of the bond. Indeed, the Uzyels repeatedly disclaimed any attempt to seek an increase in the amount of the bond due to, for example, the accrual of postjudgment interest. As the Uzyels did not seek an increase in the amount of the bond or an increase in the aggregate Sureties’ worth necessary to support the bond, the proper calculation of these amounts is not before this court on appeal. Lest there be any confusion, the statutory requirements are clear: the bond is to be for twice the judgment; and the aggregate net worth of the sureties must be twice the amount of the bond.
In their reply brief on appeal, the Uzyels argue that “given that nearly $20 million in post-judgment interest had accrued to the [$78 million] Amended Judgment [inclusive of costs and attorney fees] at that time, the trial court should have considered whether the Sureties could demonstrate an aggregate net worth of at least $392 million ($98 million x 4 = $392 million.)” We disagree. The bond is to be twice the amount of the judgment; the aggregate worth is to be twice the amount of the bond. The Uzyels cannot avoid their express waiver of an argument that the bond amount should be increased to incorporate postjudgment interest by arguing that the amount of the bond should stay the same but the aggregate worth must be increased. The Uzyels agreed that the bond amounts of $155 million were appropriate; that the net worth of the sureties was required to be no more than $310 million follows.
3. The Trial Court Did Not Abuse Its Discretion in Finding No Evidence of Changed Circumstances
As stated above, when a party subsequently challenges the sufficiency of an undertaking, the movant must demonstrate a real, substantial possibility, not just speculation, that the current bond is or has from any cause become insufficient because the sureties are insufficient or because the amount of the bond is insufficient. In this case, the trial court concluded that the Uzyels failed to meet this burden. This did not constitute an abuse of discretion.
Specifically, the trial court was concerned that, with respect to the Sureties’ real properties, the Uzyels’ evidence consisted only of general data relating to the relevant real estate markets. The Uzyels’ provided no “drive-by” appraisals or comparative market analyses. There were no expert declarations from real estate agents with familiarity with the relevant neighborhoods. In short, the Uzyels relied only on their own opinion that the values given by the Sureties were unworthy of belief due to the economic recession. The court concluded that the Uzyels failed to demonstrate a real, substantial possibility that the properties had, in fact, decreased in value. This was not error.
On appeal, the Uzyels point to a disparity in the changes in valuations given by the Sureties to their interests in PWP between their March 2007 affidavits and their year end 2008 financial statements, which purportedly gives rise to an inference that the financial statements are unworthy of belief. But the Uzyels did not make this argument before the trial court. In their motion, their only argument with respect to the values of the limited partnership and closely-held corporation interests was that the Sureties showed these values increasing or holding firm, which was hard to believe in a recession. We cannot hold that the trial court erred by rejecting an argument that was not before it. Moreover, the trial court did not abuse its discretion in concluding that the argument the Uzyels did make – that steady or increasing values were improbable in light of the general economic decline – was nothing more than speculation.
They point to a similar disparity between the year-end 2008 and mid-year 2009 statements.
In their reply brief in support of their motion, the Uzyels pointed to a disparity with respect to the valuations given PWP between 2006 and the Sureties’ recently disclosed mid-year 2009 statements, but this disparity was explained by the Farahniks’ counsel at the hearing, and the Uzyels do not pursue it.
The Uzyels argue that, with respect to all of the Sureties’ assets except the publicly-traded Qualcomm stock, they could not have presented any additional evidence of value, and that the trial court should have granted them discovery to obtain such evidence. We are not unsympathetic to the Uzyels’ position; the great bulk of the information which would support a claim of changed circumstances is held only by the Sureties. Nonetheless, we conclude that, even with their limited access to information, the Uzyels could have made a substantially greater showing than they did. As the trial court noted, and the Uzyels conceded at the hearing, they could have obtained expert opinions regarding the value of the Sureties’ real estate holdings. As to the Sureties’ interests in limited partnerships and closely-held corporations, the Uzyels have made arguments in their briefs, which were not made before the trial court, that demonstrate possible irregularities in the Sureties’ valuations of these interests. Moreover, the Sureties have provided some financial statements from one of those corporations, PWP. The Uzyels could have obtained an expert opinion of whether the Sureties’ valuations of their interests in PWP are justified by the financial statements disclosed, and whether there are any questionable entries in the financial statements themselves. As to the Sureties’ Qualcomm stock holdings, in their reply brief on appeal, the Uzyels performed the necessary calculations and have argued that there were several months for which, at the end of the month, the equity of three of the Sureties in Qualcomm stock dropped below 90% of the amount in their affidavits. Indeed, the Uzyels’ calculations show that, at the end of one month, the equity of Union Communications in Qualcomm stock dropped below 50% of the amount in its affidavit. This argument cannot be made for the first time in a reply brief on appeal (see Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764), but does illustrate that the Uzyels had before them sufficient data to make a much greater showing than they did before the trial court. As such, we cannot hold that the trial court abused its discretion in holding that the Uzyels’ showing of a general economic decline constituted an insufficient showing of changed circumstances, even taking into account the limited information possessed by the Uzyels.
We note, however, that nothing in the trial court’s ruling precludes the Uzyels from bringing a similar motion in the future. The motion was based on the Sureties’ year-end 2008 financial statements. Since that time, there have been at least two further sets of financial statements given to the Uzyels. Should they believe these financial statements are similarly questionable, they may bring a motion based on these later statements. Should the trial court find that the Uzyels have made a sufficient showing given the limited information available to them, it is within the court’s discretion to order: (1) discovery from the Sureties; (2) an increase in the amount of the bond; and/or (3) an increase in the net worth of the Sureties necessary to support the bond.
At the hearing on the motion, counsel for the Uzyels suggested that if the court denied their motion without prejudice, counsel could obtain the real estate appraisals sought by the trial court. The court denied the motion, but not without prejudice. This ruling simply prevented the Uzyels from refiling the same motion with additional evidence; it does not prevent them from bringing a subsequent motion based on subsequently disclosed financial statements.
4. The Trial Court Did Not Err in Denying the Uzyels Discovery and Increased Reporting Requirements for the Sureties’ Breaches of the Reporting Order
The trial court expressly found that Union Communications breached the reporting order by not disclosing its sale of Qualcomm stock which reduced its equity in Qualcomm below the 90% reporting threshold. The Uzyels argue that the trial court erred in not granting it the discovery and increased reporting requirements it sought as a remedy for this breach. (Cf. Civ. Code, § 3523 [“For every wrong there is a remedy.”])
The Uzyels also argue that all of the Sureties who held Qualcomm stock breached the February 21, 2008 order as they did not disclose similar drops in their own equity in Qualcomm stock. In their motion, the Uzyels argued only that the Sureties had failed to give notice whenever “the price of Qualcomm stock decreased to less than 90% of its original value of $37.00, ” but this was not the requirement of the order, which related to equity value and only required reporting if the drop existed at the end of a month.
The trial court concluded that Union Communications’s breach did not justify the imposition of increased reporting requirements on all of the Sureties. This is clearly not error. The Uzyels did not seek any remedy properly related to Union Communications’s breach. For example, the Uzyels did not seek sanctions against Union Communications for its breach of the court order, or ask that the court set an order to show cause why Union Communications should not be held in contempt. The Uzyels did not argue that Union Communications’s breach of the order gave rise to a conclusion that Union Communications was no longer a reliable surety, and did not ask that Union Communications be replaced with another personal surety or an admitted surety insurer. The Uzyels did not even argue that the decrease in Union Communications’s Qualcomm holdings required Union Communications to identify additional assets to support its undertaking. Instead, the Uzyels sought to impose additional future reporting requirements on all of the Sureties, including those which held no Qualcomm stock. The trial court concluded that Union Communications’s prior breach of the order regarding disclosures of decreases in value of its equity in Qualcomm stock did not justify the imposition of discovery and additional reporting requirements (including the obtaining of third-party appraisals) on all Sureties, especially in light of the subsequent increase in market price of Qualcomm stock. This was not an abuse of discretion.
Indeed, the Uzyels made no attempt to exempt the Pourbabas from their motion, even though the Uzyels concede that the Pourbabas’ financial statements showed decreases in the values of their real properties, and the Uzyels have never identified any specific alleged breaches of the February 21, 2008 order by the Pourbabas. It is difficult to see on what basis the Pourbabas could be subject to discovery and additional reporting requirements based on another Surety’s alleged breach.
DISPOSITION
The order is affirmed. The parties shall bear their own costs on appeal.
We Concur: KLEIN, P. J.KITCHING, J.