Opinion
G050612
04-10-2017
NEIL SHAPIRO, Plaintiff, Cross-defendant and Respondent, v. WILLIAM F. DOHR et al., Defendants, Cross-defendants and Appellants.
Thomas Vogele & Associates, Thomas A. Vogele, and Timothy M. Kowal, for Defendants, Cross-defendants, and Appellants. McQueen & Ashman, and James A. McQueen; Law Offices of Joel Franklin and Joel Franklin, for Plaintiff, Cross-defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2009-00118305) OPINION Appeal from a judgment of the Superior Court of Orange County, Nancy Wieben Stock (retired judge of the Orange Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) and Robert J. Moss, Judge. Judgment reversed and remanded with directions. Motions for additional findings and for taking new evidence on appeal and request for judicial notice denied. Thomas Vogele & Associates, Thomas A. Vogele, and Timothy M. Kowal, for Defendants, Cross-defendants, and Appellants. McQueen & Ashman, and James A. McQueen; Law Offices of Joel Franklin and Joel Franklin, for Plaintiff, Cross-defendant and Respondent.
* * *
This case is fraught with procedural complications, but it boils down to one fairly straightforward question: Did the trial court's statement of decision include adequate findings to support the judgment in favor of plaintiff Neil Shapiro, acting as special trustee of the Robert H. Lintz Living Trust, UDT February 26, 1988 (the Trust), for enforcement of a lost negotiable instrument under California Uniform Commercial Code section 3309, subdivision (a) (section 3309(a))? We conclude it did not.
Moreover, we agree with defendants William F. Dohr, Sterling Homes Corporation, and Amberhill Development, Ltd. (collectively Dohr) that the deficiencies in the trial court's statement of decision were properly brought to the court's attention before entry of judgment, and thus we are prohibited from inferring those missing findings in support of the judgment.
Both parties have filed motions asking us to make additional factual findings on appeal pursuant to Code of Civil Procedure section 909, and the Trust has asked us to take judicial notice of evidence in support of its motion. Dohr asks this court to make findings adverse to the Trust on the issues omitted from the statement of decision, and to enter judgment in his favor based on those findings. The Trust asks us to take additional evidence and find no third parties made a claim for payment on the missing negotiable instrument within the statute of limitations, and thus Dohr was not prejudiced by any deficiency in the trial court's findings. We deny both motions and the Trust's related request for judicial notice.
The usual remedy in cases like this is to remand to the trial court to make additional findings. In this case, however, that remedy is complicated by the fact the trial judge who presided over the case, Nancy Wieben Stock, retired after filing her statement of decision, and her successor, Robert J. Moss, concluded he would be unable to supplement or alter her original findings unless he were allowed to consult with her on the task. Dohr refused to stipulate to that proposed consultation.
Consequently, although our remand will direct the trial court to make additional findings on the elements of a claim under section 3309(a), we will also specify that if the trial court is unable to make those findings without assistance from retired Judge Stock, then the parties shall again be given the option of stipulating to Judge Stock's assistance in that endeavor. And if either party declines to stipulate, or if Judge Stock declines to participate, then the matter shall be retried in the interests of justice.
The new trial remedy also addresses Dohr's alternative contention on appeal. He contends the trial court abused its discretion by allowing the Trust to amend its complaint on the last day of trial—adding what proved to be the winning claim for enforcement of the lost negotiable instrument under section 3309(a)—because it denied him a meaningful opportunity to challenge the legal sufficiency of that claim and to marshal evidence to defend against it. We need not decide that issue. It is sufficient to note that if we did agree, the remedy we would order would be a new trial, given the other options available to the court at the time it granted the motion to amend.
FACTS
This case arises out of Dohr's alleged failure to make full payment on an amended and restated promissory note (the Note), dated January 1, 2002. The Note obligated Dohr to pay $15 million, plus interest—a total of almost $18.3 million—to the Trust, or to the holder of the Note, over a period of time ending on January 1, 2009.
As explained in the trial court's statement of decision, the Note was "preceded in time by a Loan Assumption Agreement, wherein Dohr . . . agreed to assume the obligations to Robert [Lintz], previously held by an entity Riviera Holdings. The note associated with that transaction, known as the 'Rivera Note,' was originally given as part of the sale by Robert of his interest in the real estate development company Sterling Homes. As a result of the assumption of that obligation by Dohr . . . , Dohr held a controlling interest in Sterling Homes and oversaw its operations."
The trial court also found, "[d]uring the early period of the Note, Dohr made timely payments in full. [But t]here came a time when his enterprise Sterling Homes struggled financially as the real estate recession of 2008 began to take full effect." Consequently, Dohr was unable to keep up with the payments called for under the Note. "However, in the period prior to the January 1, 2009 due date Dohr [also] caused various payments to be made to Robert or for the benefit of Robert's family and other holdings."
In February 2009, Robert and Lois Lynne Lintz (Lynne), acting as co-trustees of the Lintz Family Revocable Trust, initiated this action against Dohr, alleging a breach of contract based on Dohr's failure to repay the loan obligation underlying the Note. The Note itself was not mentioned in the complaint.
We refer to both Lintz's by their first names, for the sake of clarity. No disrespect is intended.
The trial court explicitly concluded the distinction between the Trust and the Lintz Family Revocable Trust was not a meaningful one: "The pleadings reference the Robert Lintz Living Trust as both the Robert Lintz Living Trust UDT February 26, 1988 and as the Lintz Family Revocable Trust, dated June 4, 2008. No distinction between the two has been made in the trial evidence or legal arguments of the [p]arties and so, the Court references the 'Trust' as including both forms." That finding is undisputed and we adopt it.
After extended litigation, during which Dohr suggested the Note existed but failed to produce a copy of it, the case went to trial on the Trust's claim for enforcement of the underlying contractual loan obligation. By that time, neither Robert nor Lynne remained as trustees of the Trust—he had been suffering from dementia and later died, and she had been removed as trustee based on findings she had breached her fiduciary duty in her disposition of trust assets, and had engaged in elder abuse of Robert. Thus, the case was being prosecuted on behalf of the Trust by Shapiro, who had been appointed by the court to act as special trustee.
Trial commended in October, 2013. On the fifth day of what was projected to be a five-day trial, Dohr announced he had found a signed copy of the Note in the files of his former attorney, and he sought to introduce it into evidence to defeat the Trust's cause of action for enforcement of the underlying loan obligation. This last minute introduction of a copy of the note would have been devastating to the Trust's contract cause of action because the existence of the Note, a negotiable instrument, would suspend any right to enforce the contractual obligation underlying that instrument. (Cal. U. Comm. Code, § 3310, subd. (b)(2) ["suspension of the obligation continues until dishonor of the note or until it is paid"].) And the Note itself could not be directly enforced because the original Note had not been located.
The Trust objected to admission of the copy of the Note, given the timing of its revelation, and stated that if it were introduced, the Trust would want to call Lynne as a witness and seek leave to amend its complaint to conform to proof, incorporating a cause of action for enforcement of the Note.
The court mused, "[i]f . . . everybody joins in the view that the 2002 Note existed, that may change people's legal theories. It also changes the facts potentially as well. . . . It may be sort of a sea change in terms of theory and evaluation of the case." The court asked if the Trust would agree its complaint "doesn't capture what your theory might be" if the Note existed. The Trust agreed.
The court then noted, "[s]ometimes it's appropriate for the court to entertain a motion to amend to conform to proof. I'm not saying this is that time, but that's not uncommon at trial. [¶] In this particular case, we have sort of resisted any major shifts in things because of the length of the case and the expense incurred by the parties to pursue their theories. [¶] So I'll just leave that thought out there. I'm not sure the plaintiff would be allowed to amend to conform to proof, but I'd have to hear argument in light of the fact that the reason for that is a very key exhibit that might be offered by the other side on the fifth day of a five-day trial." The court also suggested that if the copy of the Note were introduced, the Trust might be entitled to a continuance for purposes of calling additional witnesses.
Immediately following this colloquy, the parties agreed to try to settle the case, relying on the trial court to act as settlement officer. The trial was then adjourned to pursue settlement.
At that point the Trust moved to amend its sixth amended complaint to allege a cause of action for enforcement of the Note pursuant to section 3309(a), and attached the signed copy of the Note to the proposed amended complaint.
Section 3309(a) specifies the conditions under which a negotiable instrument can be enforced, even if the original instrument cannot be located. It requires proof that "(1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (2) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process." (Ibid.)
Unfortunately, the parties' settlement efforts were not successful, and the trial resumed in December 2013. The court allowed testimony from three witnesses which included references to the Note's execution and delivery. However, following that testimony, the Trust moved to exclude the copy of the Note from evidence, arguing Dohr had not produced it in discovery. The court granted the motion and excluded the copy of the Note as a discovery sanction. The court then ruled the Trust's "motion to amend the sixth amended complaint would be deemed off calendar as moot."
However, the Trust later renewed its motion for leave to amend the sixth amended complaint, and the court vacated its mootness ruling. The Trust pointed out that while the court had excluded the copy of the Note from evidence, it had not excluded the testimony regarding its existence: "[I]f there is still uncertainty as to how the court will ultimately rule on whether the underlying obligation is the one that's important here, or the amended and restated promissory note, the motion to leave seeks to put that latter document in play as an alternative theory of recovery, for the exact same damages as the underlying obligations."
The court suggested, as an alternative to amending the complaint, the oral testimony regarding the Note could be excluded as well, but the Trust contended allowing it to amend the complaint would offer the most flexibility in asserting its claim. "I would rather have this safety net of having the alternative cause of action be in place. And I think we have a sufficient record for me to renew that motion and have the court make its best determination on it."
Dohr objected, arguing the testimony which prompted the renewed motion to amend was in evidence before the copy of the Note was discovered (and excluded) and thus did not justify the belated effort to amend the complaint. He also asserted he would be prejudiced by the late amendment because he had no opportunity to challenge the sufficiency of the facts alleged in the new cause of action, and he had no opportunity to conduct discovery to ascertain what had become of the original note.
Despite those objections, the court granted the renewed motion to amend. As the court later explained in its statement of decision, "[Robert] made it clear that he wished to enforce the terms of the Note he sought to have precluded. Now both sides apparently wish to have the court consider it." The evidentiary portion of the trial concluded the same day as the amendment.
In January 2014, the court filed a notice of intended decision in favor of the Trust on the cause of action for enforcement of the Note pursuant to section 3309(a). The court also intended to find in favor of Dohr on his various claims of set-off against whatever liability he otherwise had to the Trust, and to find that no party had prevailed for purposes of awarding attorney fees. The court invited the parties to file objections or requests for clarification or modification. On February 5, the parties did so.
Dohr requested a formal statement of decision with specific findings addressing each of the elements of a claim for enforcement of a lost note under section 3309(a), including "[w]hether the . . . Trust satisfied its burden of proof under . . . section 3309(a)(1) that it 'was in possession of the instrument and entitled to enforce it when the loss of possession occurred?" and "[w]hether the . . . Trust satisfied its burden of proof under . . . section 3309(a)(2) that 'the loss of possession was not the result of a transfer by the person or a lawful seizure.'"
The court issued a formal ruling and statement of decision on February 10. The court found against the Trust on the first cause of action for breach of contract, and stated "this case comes down to enforcement of a note." The court found in favor of the Trust on the second cause of action for enforcement of the Note under section 3309(a).
However, the court did not make any of the specific findings requested by Dohr on the elements of a claim under section 3309(a). The court did reject Dohr's contention the special trustee had not diligently searched for the original note. The court explained the special trustee "produced ample and persuasive evidence that his trust's financial assets (including presumably the negotiable instrument) were left in the hands of [Lynne] who acted as original trustee . . . . In the Court's opinion, [the special trustee] has made a reasonable case for the futility of engaging in any more efforts to locate the original note than already undertaken."
The court also stated, "for purposes of enforcing a financial obligation, the reality is that when Robert died, the Trust was mistreated by the one individual that had a fiduciary obligation to preserve its assets, including the ability to enforce outstanding receivables. [Before being removed as trustee, Lynne] had been in control for over two years. [The special trustee], as court appointed successor Trustee had nowhere near the immediate access to [Robert's] papers that . . . wife did."
Dohr filed timely objections to the statement of decision, noting among other things it was "incomplete" and failed to adequately address the proposed findings set forth in his request for statement of decision—which he attached and incorporated by reference—"concerning the basic elements of the . . . Trust's claims."
In April 2014, Dohr filed a motion seeking "correction" of the statement of decision and dismissal of the case. He set forth the specific elements required to be proved under section 3309(a), and again pointed out "[t]he court made no findings supporting judgment for plaintiff on its cause of action under [section 3309(a)]." (Boldface omitted.) Dohr also claimed there was insufficient evidence to support such findings in any case. In light of these perceived deficiencies, Dohr asserted the court must not have actually intended to find in favor of the Trust based on section 3309(a), and suggested any language in the statement of decision implying otherwise must have been the mistaken remnants of an earlier draft.
However, Judge Stock, who presided over the trial, had retired immediately after she filed the statement of decision, and Judge Moss, who was newly assigned to the case, concluded he could neither resolve the alleged ambiguities in the statement of decision nor supplement Judge Stock's findings without consulting her—an option Dohr refused to stipulate to. Judge Moss then denied Dohr's motionfor correction explaining "the statement of decision appears to be full and complete and covered all basic issues of the case; that is all that is required of a statement of decision . . . . [¶] . . . Section [3309(a)] was one of the major issues litigated at the trial and [Judge Stock] discussed it at length in her statement of decision."
In June 2014, Judge Moss entered a judgment in excess of $5 million in the trustee's favor, without making any additional section 3309(a) findings. However, Judge Moss declined to award either party attorney fees or costs, ruling "no party was more successful than the other."
Dohr then moved for a new trial, arguing the evidence was insufficient to support the judgment under section 3309(a), the decision was contrary to law, and the award of damages was excessive. Judge Moss denied that motion too.
DISCUSSION
1. Sufficiency of Findings to Support Liability Under Section 3309(a)
Dohr's primary contention is the findings in the court's statement of decision are insufficient to support the judgment in the Trust's favor, and because he brought that insufficiency to the court's attention prior to entry of judgment, we cannot infer those findings in support of the judgment. He is correct.
The statement of decision states the ruling was based on the Trust's claim for enforcement of the Note under section 3309(a), not the claim seeking enforcement of the underlying contractual obligation. It also includes a finding the original Note was never produced by the Trust, and acknowledges it could only be enforced in accordance with section 3309(a), which specifies: "A person not in possession of an instrument is entitled to enforce the instrument if (1) the person was in possession of the instrument and entitled to enforce it when loss of possession occurred, (2) the loss of possession was not the result of a transfer by the person or a lawful seizure, and (3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process."
However, the statement of decision did not make specific findings on each of the factual elements required to be proved under section 3309(a), even though Dohr's timely request for a statement of decision sought them. Instead, the court merely noted it presumed the original Note had been in the possession of Lynne, and concluded the Trust had demonstrated it would be futile for the special trustee to "engage[e] in any more efforts to locate the original Note than already undertaken." While those findings reflect a determination the special trustee did not currently possess the Note and could not locate it—which might satisfy the third element of section 3309(a)—they do not address either the first or second elements—when or under what circumstances the Trust might have lost possession of it. Those are both key issues in a section 3309(a) claim.
The Trust asserts the court's findings are also sufficient to satisfy the first element of section 3309(a). Specifically, it argues the court's recognition the Trust (which in this case is the "person" seeking to enforce the Note) was the original obligee on the Note, coupled with its finding Lynne had possession of the Trust's financial assets, demonstrates the Trust would have been entitled to enforce the Note when it lost possession. Moreover, the Trust claims the court's finding the special trustee did not have possession of the Note, and could not locate it after reasonable effort, demonstrated the Note had been "lost."
We cannot agree. Simply because the Trust originally had the right to enforce the Note, and Lynne had possession of it for some period (and the trial court merely presumed she possessed it in her capacity as trustee, without making an explicit finding on the point) does not establish the Trust had the right to enforce the Note when possession was lost. Those findings say nothing about the specific circumstances surrounding the Trust's loss of possession. And the fact the special trustee did not have possession of the Note at the time of trial, and could not locate it after a diligent search, does not establish the Note was "lost." It merely establishes the special trustee, who came into this case fairly late, does not know what happened to the Note.
Moreover, Code of Civil Procedure section 634 (CCP section 634) provides: "When a statement of decision does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court either prior to entry of judgment or in conjunction with a motion under Section 657 or 663, it shall not be inferred on appeal . . . that the trial court decided in favor of the prevailing party as to those facts or on that issue."
Here, Dohr not only specifically requested the court include findings on the elements of section 3309(a) in its statement of decision, but he continued to bring the issue to the court's attention after the court issued its statement of decision. Initially Dohr filed formal objections to the statement of decision, in which he pointed out it was incomplete, and he incorporated his initial request for specific findings on the elements of a claim for enforcement of a negotiable instrument under section 3309(a). Later Dohr filed a motion to correct the statement of decision, pointing out again the trial court had failed to make the findings set forth in section 3309(a) and suggesting the lack of findings might imply the court did not intend to base its judgment on section 3309(a).
Although CCP section 634 does not require any particular form to bring defects in a statement of decision to the court's attention, it does require "[t]he alleged omission or ambiguity must be identified with sufficient particularity to allow the trial court to correct the defect. [Citation.] 'By filing specific objections to the court's statement of decision a party pinpoints alleged deficiencies in the statement and allows the court to focus on the facts or issues the party contends were not resolved or whose resolution is ambiguous.'" (Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 498.)
Dohr fulfilled that requirement. He pointed out to the court, before the judgment was entered, the statement of decision did not include findings on the required elements of liability under section 3309(a). And because those required elements are set forth with such specificity in the statute, simply pointing out their omission was sufficient to focus the court on the deficiencies in its statement of decision.
The Trust relies on McAdams v. McElroy (1976) 62 Cal.App.3d 985, 993-994 (McAdams), to support its assertion Dohr's efforts were insufficient to prevent implied findings because he failed to "propose the findings [he] believes should be made." However, McAdams is distinguishable. In that case, the appellants "requested the court to make findings with respect to fourteen subjects without indicating what ultimate fact they considered the evidence established in connection with those matters. They now seek review of six of those requests. That practice unfairly burdens the trial judge in that he must not only speculate which questions embrace ultimate as distinguished from evidentiary facts, but also search his recollection of the record without the assistance of a suggestion from counsel." (Id. at p. 993.)
Here, by contrast to McAdams, Dohr pointed out the court's statement of decision omitted any explicit findings on the three elements required to establish liability under section 3309(a). Those elements are ultimate facts, not evidentiary ones. (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513 ["the term 'ultimate fact' generally refers to a core fact, such as an essential element of a claim"].) This was not a confusing request, nor one which required the court to speculate on the significance of the omitted findings. Rather, it appeared to be an effort to focus the court's evidentiary analysis on the statutory elements omitted from its statement of decision—exactly what CCP section 634 requires. Under these circumstances, we cannot infer the court made those findings in support of the judgment.
Consequently, we conclude the statement of decision is insufficient to support the judgment in favor of the Trust. 2. Motions for Additional Findings and Additional Evidence on Appeal
Both Dohr and the Trust have filed Code of Civil Procedure section 909 motions, asking us to make additional factual findings on appeal. We decline to do so.
The statute provides: "In all cases . . . where trial by jury has been waived, the reviewing court may make factual determinations contrary to or in addition to those made by the trial court. The factual determinations may be based on the evidence adduced before the trial court either with or without the taking of evidence by the reviewing court. The reviewing court may for the purpose of making the factual determinations or for any other purpose in the interests of justice, take additional evidence of or concerning facts occurring at any time prior to the decision of the appeal, and may give or direct the entry of any judgment or order and may make any further or other order as the case may require. This section shall be liberally construed to the end among others that, where feasible, causes may be finally disposed of by a single appeal and without further proceedings in the trial court except where in the interests of justice a new trial is required on some or all of the issues." (Code Civ. Proc., § 909.)
"'Although appellate courts are authorized to make findings of fact on appeal by Code of Civil Procedure section 909 and rule [8.252(b)] of the California Rules of Court, the authority should be exercised sparingly. [Citation.] Absent exceptional circumstances, no such findings should be made.'" (In re Zeth S. (2003) 31 Cal.4th 396, 405.) "The power created by the statute is discretionary and should be invoked sparingly, and only to affirm the case." (Golden West Baseball Co. v. City of Anaheim (1994) 25 Cal.App.4th 11, 42.) "The power to take evidence in the Court of Appeal is never used where there is conflicting evidence in the record and substantial evidence supports the trial court's findings." (Philippine Export & Foreign Loan Gurantee Corp. v. Chuidian (1990) 218 Cal.App.3d 1058, 1090.)
Dohr's motion asks us to exercise our authority under Code of Civil Procedure section 909 to make findings adverse to the Trust on each of the elements required for liability under section 3309(a), and to reverse the judgment with directions to enter judgment in his favor based on those findings. Dohr argues the Trust "judicially admitted" it never received the Note, it is bound by that judicial admission and, as a result, the Trust is precluded from obtaining a judgment which predicated on the existence of a signed and delivered note. We are not persuaded.
A "judicial admission" is established only when a party judicially "admits" a fact the opposing party also agrees is true. (Barsegian v. Kessler & Kessler (2013) 215 Cal.App.4th 446, 452 ["a judicial admission is ordinarily a factual allegation by one party that is admitted by the opposing party. The factual allegation is removed from the issues in the litigation because the parties agree to its truth"].)
None of the cases cited by Dohr suggests otherwise. (See People v. Hayes (1999) 21 Cal.4th 1211, 1293 [dissent characterizes prosecution's "concession" of juror misconduct—the position taken by the defendant—as a judicial admission on the point]); Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 752 [describing counsel's "unambiguous concession of a matter then at issue" as a judicial admission]; Smith v. Walter E. Heller & Co. (1978) [the plaintiffs conceded their litigation was funded by a person previously enjoined from pursuing litigation against the defendants].) In each of those cases, the judicial admission occurred when a party admitted a fact that was also relied upon by the opposing side. "Thus, if a factual allegation is treated as a judicial admission, then neither party may attempt to contradict it—the admitted fact is effectively conceded by both sides." (Barsegian v. Kessler & Kessler, supra, 215 Cal.App.4th at p. 452.)
Here, the admission Dohr seeks to enforce against the Trust—that it never had possession of the Note, or that the Note was never delivered to it—was one he disputed at all times. And because he disputed that issue, it was not "removed from the . . . litigation" by the Trust's contrary contention. (Barsegian v. Kessler & Kessler, supra, 215 Cal.App.4th at p. 452). Instead, the court found an enforceable note did exist, just as Dohr had long asserted. Consequently, the Trust's contention cannot be enforced against it as a judicial admission.
Dohr also argues we should make findings in his favor on the elements of section 3309(a) because there is insufficient evidence to support the required findings in favor of the Trust. However, this argument also incorporates Dohr's judicial admission claim, which we have concluded is unpersuasive. And Dohr's other challenges to the evidence are cursory, technical and confused.
In any event, Dohr's motion for additional factual findings on appeal is unjustified. Dohr argues this case presents exceptional circumstances that justify factual findings on appeal because Judge Stock, who prepared the statement of decision, has retired and thus cannot be called upon to supply the missing findings on remand. But that assertion is disingenuous. It was Dohr himself who refused to stipulate to a process that would have allowed Judge Stock to help supplement those findings in the wake of her retirement. On remand, Dohr will have that opportunity again. If he again declines to stipulate to her participation (or she declines to participate after such a lengthy delay), he cannot be heard to complain of the consequences of his choice.
The Trust asks us to take additional evidence and find no third party ever presented the missing Note for payment, and the time to do so has now expired. The Trust contends this evidence would (1) establish there was no prejudice from the court's failure to make specific findings in support of the judgment under section 3309(a) because Dohr never faced any third party claim; and (2) support the Trust's assertion the Note was merely lost, rather than having been transferred for consideration or lawfully seized by a third party. Those contentions do not warrant the relief sought by the Trust.
When a court fails to make adequate findings to support a judgment, and we are precluded by CCP section 634 from inferring those findings, reversal is mandated without regard to prejudice. The Trust cites no cases suggesting prejudice is relevant. In fact, until the trial court issues a complete statement of decision, addressing and resolving all the ultimate facts presented in the case, it's impossible for us to tell which side might have been prejudiced by its failure to do so in the first instance.
Further, the Trust's "prejudice" argument misses the mark. Essentially, the Trust is arguing that as long as no other party has sought to enforce the Note, Dohr is not prejudiced by a judgment which allows the Trust to do so—after all, if Dohr hasn't fully performed his payment obligation set forth in the Note, he owes the money to someone. But Dohr has no obligation to pay the money in the abstract. His only obligation was to pay the money to the person who possesses the original Note, or who can prove a right to enforce it pursuant to section 3309(a). He has no obligation to pay it to anyone else. And if for some reason a rightful claimant never came forward to enforce payment under the Note, Dohr could not be compelled to pay the money to any other party, including the Trust. Thus, Dohr would be prejudiced by a judgment requiring he pay the money to the Trust, without it having made the showing required by section 3309(a).
Ultimately, the Trust's motion fails because the mere fact no one else sought to enforce the Note does not automatically establish the Trust was the party entitled to do so. We cannot conclusively presume a third party—to whom the original note might have been intentionally transferred—has not simply lost track of it. After all, the judgment we are reviewing reflects that is what happened with the Trust. It had possession of the Note at some point, and later its successor trustee could not account for what happened to it. Apparently, these things happen.
And even assuming the Trust's proposed evidence would "support" a finding the Note had been lost, rather than transferred or seized (as the Trust argues), we would not make that factual finding on appeal. The Trust had the burden of proof on this issue, and it is the province of the trial court, not the Court of Appeal, to determine whether the evidence is persuasive as to each of the elements of the Trust's claim. Thus, the trial court should make those findings in the first instance. We consequently deny the Trust's motion to take additional evidence and make additional findings on appeal. 3. Order Granting Leave to Amend Complaint During Trial
Dohr also argues the court abused its discretion by allowing the Trust to amend its complaint on the last day of trial, to include the cause of action for enforcement of the Note under section 3309(a). Dohr contends the proper remedy that error is to preclude the Trust from any recovery based on the theory set forth in its last-minute amendment. That would result in a judgment in Dohr's favor, because he prevailed on the only other claim set forth in the Trust's complaint.
Dohr relies on Garcia v. Roberts (2009) 173 Cal.App.4th 900 (Garcia). In Garcia, the plaintiff had been steadfast in his assertion of an oral contract between himself and the defendants, and he explicitly denied under oath the existence of any written contract. So even though the defendants were aware of a written contract, they "reasonably limited the focus of [their] discovery efforts and the manner in which defendants prepared for trial." (Garcia, supra, 173 Cal.App.4th at p. 913.)
However, after the Garcia plaintiff's death, his wife substituted in as his representative and authorized her counsel to seek leave to amend during trial, to add a claim for breach of the written contract. The trial court allowed the amendment, and later rendered a judgment which awarded damages to the plaintiff on several theories, including on the breach of written contract claim.
But the appellate court vacated the written contract portion of the judgment, concluding the trial court had abused its discretion by allowing the plaintiff to add the new claim during trial. As the appellate court explained, "'[t]he cases on amending pleadings during trial suggest trial courts should be guided by two general principles: (1) whether facts or legal theories are being changed and (2) whether the opposing party will be prejudiced by the proposed amendment.'" (Garcia, supra, 173 Cal.App.4th at p. 910.)
The Garcia court recognized the claim for breach of written contract was based on different facts, and the plaintiff's denial of it, coupled with his subsequent death meant he could never be questioned about it. "[S]ince plaintiff denied knowledge of the lease-option agreement, the pursuit of discovery from plaintiff on that subject could reasonably go no further. . . . [¶] In view of these circumstances and the crucial fact that at the time of trial plaintiff was deceased and so could not be questioned further on any issues relevant to the lease-option agreement, we conclude that defendants were unfairly prejudiced when the trial court permitted the amendment during trial and thereby allowed plaintiff (through his wife as successor in interest) to materially reverse his position by asserting a cause of action for breach of the lease-option agreement. Plaintiff, whom it turns out knew about the lease-option agreement but refused to allow his attorney to raise it, cannot be permitted through his successor in interest to '"blow hot and cold in this manner'" to defendants' prejudice." (Garcia, supra, 173 Cal.App.4th at p. 913, second italics added.) Thus, the Garcia court precluded any recovery based on the written contract.
Here, Dohr argues the Trust's last-minute amendment also reflected a significant change in its legal theory, based on different facts. He claims he was prejudiced because he had had previously made arrangements to have Lynne testify, in anticipation the Trust might assert a claim under section 3309(a). And after the Trust "affirmed [its] sole case theory was on the 'underlying obligation'" Dohr excused Lynne from having to appear and testify. When the Trust subsequently did an about-face on the last day of trial, and asserted the section 3309(a) claim, he had been hamstrung in his ability to defend it. Dohr suggests, consistent with the remedy in Garcia, we should now preclude the Trust from any recovery on the theory stated in its last-minute amendment, and otherwise affirm the judgment.
But even if we assume the court abused its discretion by allowing the amendment—and we make no such finding—the proper remedy is not to excise the amended theory from the judgment, while affirming the remaining portion that declares Dohr the victor on the Trust's original cause of action.
Instead, while it is true the Trust's last-minute assertion of a claim for liability under section 3309(a) had a profound impact on the course of the trial, it was made in response to Dohr's dramatic last-minute revelation he had located a copy of the Note which, until then, the Trust did not believe existed. Hence, it was Dohr's revelation, rather than the Trust's attempt to blow hot and cold, which threw the trial into disarray.
At that point the court noted there had been a "sea change in terms of theory and evaluation of the case." The court considered all options for dealing with that change. In addition to considering the proposed amendment, the court suggested it could (1) declare a mistrial, or (2) entertain a motion to exclude all evidence pertaining to the existence of the Note, which would effectively restrict both parties to litigating the Trust's original claim for enforcement of the underlying obligation. Neither of those alternatives would have handed a victory to Dohr.
Declaring a mistrial would have required the case be retried. And excluding all evidence of the Note would have required the court to decide the case as though the Note had never existed—removing the most significant impediment to a judgment in favor of the Trust on its original cause of action. We consequently reject Dohr's contention the court's alleged abuse of discretion in allowing the Trust to amend its complaint automatically justifies a judgment in his favor. 4. Interest Calculation
Dohr suggests, in conclusory terms, the court erred by failing to exercise its discretion in calculating the award of interest to the Trust. However, because Dohr simply inserted this abbreviated claim at the end of his analysis of the court's alleged error in allowing the Trust to amend its complaint—in which he also alleged the court failed to exercise its discretion—we cannot discern whether he is actually seeking relief on the point or merely citing it as an example of the court's myriad alleged failures.
Because Dohr failed to set out the interest contention under a distinct heading, accompanied by a fully developed argument, we decline to address it. "Although we address the issues raised in the headings, we do not consider all of the loose and disparate arguments that are not clearly set out in a heading and supported by reasoned legal argument." (Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289, 1294; accord, Dinslage v. City and County of San Francisco (2016) 5 Cal.App.5th 368, 377, fn.3.) 5. Remedy on Remand
When the trial court's findings are insufficient to support the judgment, the usual remedy is to reverse the judgment and remand the case for further findings. (Canal-Randolph Anaheim, Inc. v. Wilkoski (1978) 78 Cal.App.3d 477, 494.) We recognize the usual remedy presents unusual complications in this case, given the retirement of Judge Stock. Nevertheless, it is the most appropriate remedy, and it must be attempted. Consequently, if the trial court is unable to make the required findings on each of the elements of section 3309(a) without assistance from retired Judge Stock, then the parties shall again be given the option to stipulate to Judge Stock's assistance. And if either party declines to stipulate, or if Judge Stock declines to participate, then the matter must be retried.
We acknowledge additional time and expense will be incurred by both sides if the matter has to be retried. However, if the trial court is unable to supplement the statement of decision in a satisfactory manner, the judgment based thereon cannot stand. Moreover, a new trial will allow both sides an ample—and equal—opportunity to prepare their cases with an understanding of all the pertinent facts and legal theories.
DISPOSITION
The judgment is reversed with directions to make findings on each of the elements of a claim for enforcement of a lost negotiable instrument under section 3309(a), in accordance with Code of Civil Procedure section 632 and this opinion. If the trial court is unable to make those findings without assistance from Judge Stock, the retired judge who presided at trial, then the parties shall again be given the option to stipulate to Judge Stock's assistance. If the parties decline to stipulate, or if Judge Stock declines to participate, the matter shall be retried in the interests of justice. The parties are to bear their own costs on appeal.
THOMPSON, J. WE CONCUR: BEDSWORTH, ACTING P. J. MOORE, J.