Wertheim, LLC v. Currency Corp., B218547
| Decision Date | 22 May 2012 |
| Docket Number | B218547 |
| Parties | WERTHEIM, LLC, Plaintiff, Appellant and Respondent, v. CURRENCY CORPORATION et al., Defendants, Respondents and Appellants. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC328263)
APPEAL from a judgment of the Superior Court of Los Angeles County. Robert Hess, Judge. Affirmed.
Law Offices of Robert S. Besser, Robert S. Besser; Law Office of Anthony Kornarens and Anthony Kornarens for Plaintiff, Appellant and Respondent.
Law Offices of Alan S. Gutman, Alan S. Gutman; Benedon & Serlin, Douglas G. Benedon and Gerald M. Serlin for Defendants, Respondents and Appellants.
These are cross-appeals from a judgment and post-judgment award of attorney fees and costs. Defendant Currency Corporation, which is owned and operated by defendant Parviz Omidvar (collectively "Currency"), is a finance lender. Currency made numerous loans to Alfred Cleveland, the son of a successful songwriter, secured by assignments on royalty payments owed to Cleveland by third parties. When a dispute arose over the loans, Cleveland sued Currency and assigned his royalty rights and some of his claims against Currency to Wertheim, LLC, which joined the lawsuit. Cleveland then settled with Currency, and the matter proceeded to trial on Wertheim's claims. After several rounds of demurrer, a motion for judgment on the pleadings, and a bifurcated trial, the court entered judgment in favor of Wertheim and awarded it attorney fees.
Both Wertheim and Currency appeal from the judgment and award. Wertheim contends the trial court erred in sustaining in part Currency's demurrer, granting in part its motion for judgment on the pleadings, and limiting its recovery of attorney fees. Currency contends the trial court erred in denying in part its motion for judgment on the pleadings and in awarding Wertheim any attorney fees.
We affirm.
Cleveland's father was Alfred W. Cleveland (Cleveland Sr.), a successful songwriter on the Motown label who, as a result of his work, owned rights to royalty income of approximately $100,000 per year, payable primarily by the American Society of Composers, Authors and Publishers and The EMI Group (collectively ASCAP). From 1994 to 1996, Currency made loans to Cleveland Sr., secured by the royalty stream.
Cleveland inherited the royalty stream when Cleveland Sr. died in August 1996. On August 14, 1996 and December 11, 2001, Currency issued Cleveland lines of credit, each in the amount of $75,000. In both credit agreements, Currency agreed to advance funds to Cleveland on a revolving basis so long as it was satisfied "in its sole discretion of the value and liquidity of the" royalty stream. The credit agreements contained Cleveland's promise that the funds loaned would be used for commercial purposes only.
On September 25, 1998, Currency and Cleveland entered into a security agreement (the 1998 Security Agreement) pursuant to which Currency agreed to receive Cleveland's royalty payments directly from ASCAP, apply them to any outstanding loan balances, and redirect to Cleveland any amount that exceeded the balances.
Currency made almost 200 loans to Cleveland under the lines of credit, memorializing each with a separate promissory note denoted "Commercial Note." The promissory notes were materially identical. Cleveland promised to pay Currency principal sums ranging from $31 to $44,426, interest at a rate of 72 percent per year, plus a "processing fee" typically of 20 percent. The loans had terms of from 5 to 18 months. Each note set forth these terms of the loan and provided that "Any unpaid payments of . . . interest . . . shall bear interest from their respective maturities . . . ." The notes also provided, "In no event shall Borrower be obligated to pay interest at a rate in excess of the highest rate permitted by applicable law. . . ."
Disputes arose between Cleveland and Currency over the amount of interest charged, the fees assessed, and Currency's alleged practice of retaining more royalties than were necessary to cover loan balances. On February 3, 2005, Cleveland instituted this lawsuit, alleging causes of action for breach of contract, breach of fiduciary duty and violation of the Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq.).
In April and August, 2005, Cleveland assigned his music library and any claims against Currency to entities controlled by David Pullman, Wertheim's sole owner. The assignment agreements granted Pullman complete control of any litigation not only of the assigned claims but also of Cleveland's nonassigned claims. The Pullman entities then reassigned the claims to Wertheim, which joined the lawsuit and filed a second amended complaint.
After two rounds of demurrer, plaintiffs asserted in a fourth amended complaint causes of action for violation of the UCL, fraud, conversion, breach of fiduciary duty, money had and received, and breach of contract, alleging Currency breached the promissory agreements by charging illegal fees and interest rates and deceived Cleveland by failing to disclose that its rates were usurious and that royalties exceeded loanbalances. In the eighth cause of action, plaintiffs alleged Currency breached 187 separate promissory notes entered into between August 16, 1996 and April 12, 2004. In the ninth through ninety-fourth causes of action plaintiffs itemized the breaches, alleging breach of 86 separate promissory notes entered into between August 16, 1996 and November 11, 2003. Plaintiffs sought restitution, damages, punitive damages, declaratory relief, and an accounting. Specifically under their UCL cause of action, plaintiffs sought "restitution of all principal, interest, charges or other recompense collected by Defendants as a result of the purported loans."
On May 11, 2006, Currency demurred to the fourth amended complaint. It argued any claim based on a transaction occurring more than four years before the complaint was filed (that is, before February 3, 2001), was time barred, the loans were not usurious, and even if they were, Currency had no duty to explain the legal effect of the loans to Cleveland.
In June 2006, Cleveland settled his claims against Currency for $18,000. In a recitation in the settlement agreement, Cleveland admitted the lawsuit against Currency had no factual basis, as he and Currency shared no fiduciary relationship, the loans were for commercial purposes only, and he understood the terms of each loan. He admitted Currency had never misrepresented the terms of any loan or retained more royalties than were due to it, and in the end had provided a full and satisfactory accounting.
On July 7, 2006, the trial court sustained Currency's demurrer in part without leave to amend. It found that any claim based on a transaction occurring before February 3, 2001 was time barred, and plaintiffs' fraud and conversion allegations failed to state a cause of action. (Wertheim expressly abandons any appeal regarding its cause of action for conversion.) The court overruled Currency's demurrer to the causes of action for breach of fiduciary duty. It also overruled Currency's demurrer to the causes of action for breach of contract and unfair practices insofar as they were predicated on transactions occurring after February 3, 2001.
On August 4, 2006, Cleveland dismissed his claims against Currency.
On August 23, 2006, Currency moved for judgment on the pleadings on the UCL and breach of fiduciary duty causes of action, arguing Cleveland's exit from the lawsuit left Wertheim without standing to proceed on them. Wertheim opposed the motion. The trial court granted the motion without leave to amend, explaining in a minute order that Cleveland's causes of action for unfair business practices and breach of fiduciary duty were nonassignable.
Before trial, the court held a hearing pursuant to Evidence Code section 402 on whether Currency's loans to Cleveland were commercial or consumer loans, and if commercial loans whether they were exempt from interest and fee limitations set forth in the California Finance Lenders' Law, Financial Code section 22000 et seq. Omidvar was the only witness called. He testified Currency made exclusively commercial loans, and citing the 1996 and 2001 credit agreements with Cleveland, testified Cleveland had warranted that the loans made to him were for commercial purposes. Although not all promissory notes referenced the credit agreements, all loans made to Cleveland were drawn against the lines of credit. Omidvar relied on Cleveland's representation regarding the commercial use of the funds and did not attempt to verify whether the representation was true.
The court found that all loans made to Cleveland were commercial loans, and those over $5,000 were exempt from interest and fee limitations set forth in the Financial Code while those under $5,000 were not exempt.
The matter proceeded to jury trial on Wertheim's breach of contract claims.1 Currency conceded that it had charged illegal interest rates and administrative fees on approximately 44 notes in amounts under $5,000, disputing only the computation of damages. Wertheim's expert testified the damages were $102,007. Currency's expert testified Wertheim's damages were $38,554.48. The jury accepted Currency's evidenceand rejected Wertheim's, finding by special verdict that Wertheim's damages were $38,554.48. Judgment was entered accordingly.
After trial, Wertheim and Currency both moved for an award of attorney fees as the prevailing party, Wertheim seeking $316,335. Wertheim argued it was the prevailing party because it received a...
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