Schrage v. Schrage CA2/7

Filed 8/19/20 Schrage v. Schrage CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

LEONARD SCHRAGE, B288478

Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC579623)
v.

MICHAEL SCHRAGE et al.,

Defendants and Appellants.

APPEAL from an order of the Superior Court of Los
Angeles County, Joanne O’Donnell, Judge. Modified and
affirmed.
Randall S. Waier for Defendants and Appellants.
Manatt, Phelps & Phillips, Benjamin G. Shatz, and Kishan
H. Barot; Pearl Cohen Zedek Latzer Baratz and Steven M.
Goldberg for Plaintiff and Respondent.
 INTRODUCTION

Leonard Schrage filed this action against his two brothers,
Michael and Joseph Schrage, for involuntary dissolution of the
family business. After invoking their statutory right to buy
Leonard’s interests in the business pursuant to a court-ordered
appraisal, Michael and Joseph declined to complete the purchase.
The trial court granted Leonard’s motion to recover attorneys’
fees and other expenses he incurred in the ultimately fruitless
appraisal process and in obtaining injunctive relief during the
appraisal process to protect the business from misconduct by
Michael and Joseph.
Michael and Joseph argue the trial court erred in awarding
the attorneys’ fees Leonard incurred in obtaining the injunctive
relief because the relevant buyout statutes authorize the court to
award only those attorneys’ fees and expenses incurred in the
appraisal process. They also argue that Leonard did not submit
admissible evidence of his attorneys’ fees and expenses, that the
judge who granted Leonard’s motion lacked jurisdiction to rule on
it after the judge who first heard the motion became unavailable,
that the court erred in making the award against Michael and
Joseph’s surety, and that the dissolution order was improper. We
conclude Leonard was not entitled to recover his injunction-
related attorneys’ fees, strike that portion of the expense award,
reject Michael and Joseph’s other arguments, and affirm the
order as modified.

2
 FACTUAL AND PROCEDURAL BACKGROUND

A. Leonard Sues His Brothers To Dissolve the Family
Business
Leonard, Michael, and Joseph each owned a one-third
interest in the Sage Automotive Group, a family-owned car
dealership business founded by their father. In April 2015
Leonard filed this action against Michael, Joseph, and 14
corporate entities in the Sage Automotive Group to dissolve and
wind up those entities. Leonard alleged Michael and Joseph
engaged in a pattern of self-dealing and mismanaged the
business by, among other things, misappropriating company
assets to fund a separately held car dealership and pay for lavish
personal expenses, making business decisions without Leonard’s
consent, and denying Leonard access to corporate books and
records. Leonard sought to dissolve five corporations under
Corporations Code section 1800,1 eight limited liability
companies under section 17707.03, and one limited partnership
under section 15908.02. Leonard requested an order distributing
the assets of each entity equally among the brothers and an order
appointing a receiver to manage and preserve the assets of the
business during the pendency of the action. Leonard also sought
compensatory and punitive damages against Michael and Joseph
for breach of fiduciary duty.

1 Undesignated statutory references are to the Corporations
Code.

3
 B. The Trial Court Enjoins Michael and Joseph from
Misusing Business Assets
On August 18, 2015, shortly after filing a first amended
complaint, Leonard filed a motion asking the court to appoint a
receiver. On December 15, 2015 the trial court denied the
motion, but issued a preliminary injunction (1) prohibiting
Michael and Joseph from using any funds, assets, or employees of
any of the entity defendants for the benefit of Michael and
Joseph’s separate dealership and (2) requiring a court-appointed
independent examiner to approve any loan or expense
reimbursement any of the parties requested. The court found
injunctive relief was necessary in light of evidence Michael and
Joseph had “used Company money to live the ‘high life,’ and did
so partly at Leonard’s expense.”

C. Michael and Joseph Invoke Their Statutory Rights To
Purchase Leonard’s Interests in the Business
In June 2016 Michael and Joseph filed an ex parte
application under sections 2000, 15908.02, and 17707.03 to stay
the dissolution action and to determine the value of Leonard’s
interest in the entity defendants. Michael and Joseph argued
that, under the shareholder buyout provisions of section 2000,
the defendants in an involuntary dissolution action may elect to
purchase the plaintiff’s interests at a fair value determined by
appraisers and confirmed by the court and that during the
buyout process the court had to stay the dissolution. In their
supporting declarations Michael and Joseph affirmed that they
each held a one-third interest in the Sage Automotive Group and
that they had elected to purchase all of Leonard’s interests in the
entity defendants.

4
 After the court denied their ex parte application, Michael
and Joseph filed a noticed motion seeking the same relief. As
required by the statutory buyout provisions, Michael and Joseph
posted a $1 million bond underwritten by their surety. On
August 23, 2016 the trial court stayed Leonard’s three dissolution
causes of action (one for each legal form of business ownership) to
allow Michael and Joseph to proceed on their election to purchase
Leonard’s interests in the business. The court did not stay
Leonard’s breach of fiduciary cause of action or Michael and
Joseph’s causes of action in their cross-complaint for breach of
fiduciary duty, conversion, and recording confidential
communications in violation of Penal Code sections 630 and 632.2
The parties subsequently stipulated to having a retired judge
serve as the referee to oversee and adjudicate all aspects of the
appraisal process. The parties also entered into a stipulation and
order governing the appraisal process that provided, among other
things, the appraisal and buyout would cover the 14 entity
defendants named in the first amended complaint, plus five
additional limited liability companies (collectively, the buyout
entities).

2 We augment the record to include the court’s August 23,
2016 order. (See Cal. Rules of Court, rule 8.155(a)(1)(A).) The
court also ruled that discovery was not stayed “as to the other
causes of action, cross-claims, or other matters outside of the
winding up and dissolution claims and proceedings” and that the
appraisers could request any discovery they needed regarding the
dissolution causes of action.

5
 D. The Trial Court Issues a Second Injunction After
Michael and Joseph Violate the First One, and Then a
Third Injunction After They Violate the Second
On August 9, 2016, shortly before the trial court stayed the
dissolution proceeding, Leonard filed an ex parte application for
additional injunctive relief, claiming Michael and Joseph violated
the original injunction and asking the court to bar them from
managing the business. On November 28, 2016, following a
three-day hearing and extensive briefing, the trial court issued a
second preliminary injunction that prohibited any transfer of
assets or funds from any of the entity defendants without
Leonard’s prior written consent. The court found Michael and
Joseph intentionally violated the December 2015 injunction by,
among other acts, transferring company assets to their separate
dealership and using intercompany loans to purchase another car
dealership without approval of the independent examiner. The
court further found that Michael and Joseph fabricated corporate
records to disguise transfers and fraudulently characterized loans
as investments and that their claimed ignorance of the
transactions was not credible. The court also rejected the
argument by Michael and Joseph that the injunction violated the
stay under the buyout statutes. The court ruled that “[s]imply
because the winding up and dissolution proceedings are stayed
does not mean that Leonard cannot move to protect his interests
by way of a preliminary injunction in the meantime.”
On March 30, 2017 Leonard filed an ex parte application
seeking to hold Michael and Joseph in contempt of the December
2015 and November 2016 injunctions. Leonard claimed Michael
and Joseph continued to violate the first and second preliminary
injunctions by misusing company funds to pay for their personal

6
expenses. On July 12, 2017, following a five-day hearing, the
trial court issued a third preliminary injunction against Michael
and Joseph. The court found that a receivership was warranted
because the continuing violations by Michael and Joseph of the
two prior injunctions were endangering Leonard’s interests in the
business. Instead of appointing a receiver, however, the court
enjoined Michael and Joseph from directly or indirectly
exercising any management authority over the entity defendants.
The court also ruled Michael and Joseph could move to terminate
the injunction if they acquired Leonard’s interests in the
businesses through the statutory buyout procedure.

E. Appraisers Value Leonard’s Interest in the Business at
$40 Million, Which Michael and Joseph Do Not Pay
On July 25, 2017, following a lengthy appraisal process, the
referee confirmed that the value of Leonard’s interests in the
buyout entities was $40,237,000 and stated that, if Michael and
Joseph did not pay Leonard that amount by September 11, 2017,
the entities would be wound up and dissolved. The referee stated
that, under the stipulation and order, the referee’s findings were
“‘final’ and ‘all parties [have] expressly waive[d] any right to
contest, challenge, or object to such rulings before’” the court.
The referee concluded, “Accordingly, the Court should enter this
order as a final order of the Court without further hearings.” On
July 28, 2017 the trial court approved the referee’s
recommendation and entered it as the court’s order.
Michael and Joseph did not pay Leonard by the deadline.
On September 27, 2017 the trial court appointed a receiver to
wind up and dissolve the buyout entities.

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 F. The Trial Court Awards Leonard His Attorneys’ Fees
and Expenses, Including Those Relating to the Second
and Third Preliminary Injunctions
On September 26, 2017 Leonard filed a motion under the
buyout statutes to recover his attorneys’ fees, his share of the
referee’s fees, and other expenses. Leonard sought to recover
from Michael, Joseph, and their surety $962,903.13 in expenses,
consisting of $22,500 in referee fees, $379,009.50 in appraisal-
related attorneys’ fees, and $561,393.63 in injunction-related
attorneys’ fees. Leonard argued that, under the statutory buyout
procedures, he was entitled to recover the full amount of his
expenses and fees because Michael and Joseph failed to purchase
his interests in the Sage Automotive Group by the court-ordered
deadline. Leonard also argued he could recover the attorneys’
fees he incurred in obtaining the additional preliminary
injunctive relief because he sought that relief to protect his
interests in the business pending the completion of the appraisal
process. Counsel for Leonard submitted an invoice and a
spreadsheet documenting the services his law firm rendered
during the buyout appraisal proceeding.
In opposition to the motion, Michael and Joseph argued
Leonard could not recover the attorneys’ fees he incurred in
seeking the additional preliminary injunctive relief because he
did not incur those expenses as part of the appraisal process.
Michael and Joseph also argued the amount of attorneys’ fees
Leonard requested was unreasonable because he was seeking to
recover all of the fees he incurred since June 2016, which was
before the appraisal process began. Michael and Joseph also
argued the referee, not the court, should determine the

8
reasonableness of any attorneys’ fees Leonard was entitled to
recover.
At the October 19, 2017 hearing on the motion, Judge
Yvette Palazuelos provided the parties with a tentative ruling
that awarded Leonard a portion of the expenses he requested, but
did not award Leonard the attorneys’ fees he incurred in
litigating the requests for additional preliminary injunctive relief.
Counsel for Michael and Joseph agreed with the court’s tentative
ruling that the fees Leonard incurred in seeking the second and
third preliminary injunctions were not recoverable. Counsel for
Leonard urged the court to include those fees in the expense
award because the additional “injunctions were necessary to
preserve the status quo during this very extended buyout
process.” Judge Palazuelos took the matter under submission,
but never issued a ruling.3
At some point, and no later than December 8, 2017, Judge
Joanne O’Donnell began ruling on motions in the case. For
example, on December 8, 2017 Judge O’Donnell granted an
ex parte request by the receiver to approve the sale of the assets,

3 The record on appeal does not disclose why Judge
Palazuelos did not issue a final ruling on the motion. Michael
and Joseph have filed a motion in this court to augment
the record with a copy of the minute order for the October 19,
2017 hearing and a copy of Judge Palazuelos’s tentative ruling.
We grant the motion as to these two documents. (Cal. Rules
of Court, rule 8.155(a)(1)(A).) Judge Palazuelos’s
tentative ruling, however, was not a final order, and Michael and
Joseph cannot use it to impeach the ultimate order on Leonard’s
motion for attorneys’ fees and expenses. (See FLIR Systems, Inc.
v. Parrish (2009) 174 Cal.App.4th 1270, 1284; Shaw v. County of
Santa Cruz (2008) 170 Cal.App.4th 229, 268.)

9
property, and business of one of the dealerships. On
December 15, 2017 she heard an ex parte application by Leonard
to continue the trial. And on December 29, 2017 she granted a
motion by the receiver for authorization to establish the
procedure for resolving claims against the various business
entities.
On December 29, 2017 Judge O’Donnell also issued a
written ruling granting Leonard’s motion for expenses Judge
Palazuelos had heard in October and awarding Leonard all of the
expenses he sought, including the injunction-related attorneys’
fees. Judge O’Donnell rejected the arguments by Michael and
Joseph that Leonard’s request for fees was unreasonable and that
the referee should determine the amount of the award. Judge
O’Donnell also rejected the argument that the injunction-related
fees were not recoverable under the buyout statutes, ruling: “The
Court will not interpret the statute[s] in the narrow and
constrictive manner suggested by Defendants. The fees incurred
by Plaintiff were incurred during the appraisal process and were
incurred due to the actions and tactics employed by Defendants.
[Citation.] The Court has been required to intervene numerous
times due to Defendants’ actions, only to see Defendants fail
again to consummate the buyout despite their frequent
reassurances to the Court and Plaintiff that they would do so.
[¶] Accordingly, Plaintiff is entitled to his expenses under the
language of the Buyout Statutes against Defendants and their
Surety. Plaintiff is entitled to all expenses incurred as a result
of Defendants’ failed buyout election, including those expenses

10
incurred due to trial delays and the need for interim relief.”
4
Michael and Joseph appealed.

DISCUSSION

A. The Statutory Buyout Provisions
The statutory buyout provisions of the Corporations Code
provide a defendant in an involuntary dissolution action with a
mechanism for avoiding the dissolution by purchasing the
plaintiff’s shares or other interests. (Kennedy v. Kennedy (2015)
235 Cal.App.4th 1474, 1481, 1486-1487; see Panakosta, Partners,
LP v. Hammer Lane Management, LLC (2011) 199 Cal.App.4th
612, 628-629 [applying § 15908.02 governing limited
partnerships].) Section 2000, subdivision (a), which applies to
corporations, states that, “[i]n any suit for involuntary
dissolution, . . . the corporation or, if it does not elect to purchase,
the holders of 50 percent or more of the voting power of the
corporation (the ‘purchasing parties’) may avoid the dissolution of
the corporation and the appointment of any receiver by
purchasing for cash the shares owned by the plaintiffs or by the

4 Although the order is not appealable under Code of Civil
Procedure section 904.1, subdivision (a)(2), as a postjudgment
order awarding attorneys’ fees (see Pacific Corporate Group
Holdings, LLC v. Keck (2014) 232 Cal.App.4th 294, 305
[order denying attorneys’ fees was not appealable under Code of
Civil Procedure section 904.1 because it was not postjudgment]),
it is appealable under sections 2000, subdivision (c), 15908.02,
subdivision (d), and 17707.03, subdivision (c)(3), each of which
authorizes an appeal from an “action of the court” under the
statute.

11
shareholders so initiating the proceeding (the ‘moving parties’) at
their fair value.” If the parties are unable to agree on the fair
value of the shares, and the purchasing parties post a bond with
sufficient security to pay the moving parties’ estimated
reasonable expenses, “the court upon application of the
purchasing parties . . . shall stay the winding up and dissolution
proceeding and shall proceed to ascertain and fix the fair value of
the shares owned by the moving parties.” (§ 2000, subd. (b).)
Section 2000, subdivision (c), prescribes the procedure for
determining the fair value of the shares and the relief available
to the moving parties if the shares are not purchased. That
provision states in relevant part: “The court shall appoint three
disinterested appraisers to appraise the fair value of the shares
owned by the moving parties, and shall make an order referring
the matter to the appraisers so appointed for the purpose of
ascertaining the value. The order shall prescribe the time and
manner of producing evidence, if evidence is required. The award
of the appraisers or of a majority of them, when confirmed by the
court, shall be final and conclusive upon all parties. The court
shall enter a decree, which shall provide in the alternative for
winding up and dissolution of the corporation unless payment is
made for the shares within the time specified by the decree.”
Sections 17707.03 and 15908.02 contain substantively identical
buyout provisions for limited liability companies and limited
partnerships, respectively.
The buyout statutes provide that, to invoke the statutory
buyout procedure and obtain a stay of the dissolution proceeding,
the purchasing parties must “give bond with sufficient security to
pay the estimated reasonable expenses (including attorneys’ fees)
of the moving parties if those expenses are recoverable” under

12
subdivision (c). (§ 2000, subd. (b); see §§ 15908.02, subd. (c),
17707.03, subd. (c)(2).) In the event the purchasing parties fail to
purchase the moving parties’ shares or interests at the appraised
fair value, the buyout statutes authorize the moving parties to
recover the reasonable expenses and attorneys’ fees they
incurred. For example, in the case of corporations, the relevant
sentence of section 2000, subdivision (c), states: “If the
purchasing parties do not make payment for the shares within
the time specified, judgment shall be entered against them and
the surety or sureties on the bond for the amount of the expenses
(including attorneys’ fees) of the moving parties.”
The statutory buyout procedure is “a special proceeding”
that, “once initiated, ‘supplants’ a cause of action for involuntary
dissolution.” (Ontiveros v. Constable (2018) 27 Cal.App.5th 259,
264; see Goles v. Sawhney (2016) 5 Cal.App.5th 1014, 1018.) “In
such a proceeding, [the] purchasing parties aspire to buy out the
moving party, with minimal expenditure of time and money that
would otherwise be spent in litigation, in order to preserve the
corporation. If they . . . cannot pay the purchase price, or decide
not to do so, then both sides must walk away, receiving pro rata
the proceeds resulting from dissolution of the corporation. On the
other hand, if the purchasing parties tender the amount
determined by the court, the moving party cannot reject the
share price as being too low.” (Go v. Pacific Health Services, Inc.
(2009) 179 Cal.App.4th 522, 531 (Go).) The buyout procedure
“does not determine whether the corporation should be dissolved,
but instead, provides the plaintiff and defendant with a statutory
remedy without [a] trial” on the merits. (Ontiveros, at p. 277.)

13
 B. The Trial Court Erred in Awarding Leonard His
Attorneys’ Fees Incurred in Litigating the Second and
Third Preliminary Injunctions
Michael and Joseph argue the trial court erred in awarding
over half a million dollars in attorneys’ fees Leonard incurred
“‘outside’ of the appraisal process” to obtain the second and third
preliminary injunctions. They assert that, under the buyout
statutes, the court can only award fees and expenses incurred as
part of the appraisal process and that, because Leonard’s
injunction-related attorneys’ fees arose outside the appraisal
process, he was not entitled to recover those fees as part of his
expense award.

1. Applicable Law and Standard of Review
“‘“When we interpret a statute, ‘[o]ur fundamental task . . .
is to determine the Legislature’s intent so as to effectuate the
law’s purpose. We first examine the statutory language, giving
it a plain and commonsense meaning. We do not examine that
language in isolation, but in the context of the statutory
framework as a whole in order to determine its scope and
purpose and to harmonize the various parts of the enactment.
If the language is clear, courts must generally follow its plain
meaning unless a literal interpretation would result in absurd
consequences the Legislature did not intend. If the statutory
language permits more than one reasonable interpretation,
courts may consider other aids, such as the statute’s purpose,
legislative history, and public policy.’ [Citation.] ‘Furthermore,
we consider portions of a statute in the context of the entire
statute and the statutory scheme of which it is a part, giving
significance to every word, phrase, sentence, and part of an act

14
in pursuance of the legislative purpose.’”’” (Hassell v. Bird (2018)
5 Cal.5th 522, 540; see In re A.N. (2020) 9 Cal.5th 343, 351-352;
City of San Jose v. Superior Court (2017) 2 Cal.5th 608, 616-617.)
We generally review an award of attorneys’ fees for
abuse of discretion. (Laffitte v. Robert Half Internat. Inc. (2016)
1 Cal.5th 480, 488.) “‘Fees approved by the trial court are
presumed to be reasonable, and the objectors must show error in
the award.’” (Ibid.) “‘“However, de novo review of such a trial
court order is warranted where the determination of whether the
criteria for an award of attorney fees and costs in this context
have been satisfied amounts to statutory construction and a
question of law.”’” (Conservatorship of Whitley (2010) 50 Cal.4th
1206, 1213.) “In other words, ‘it is a discretionary trial court
decision on the propriety or amount of statutory attorney fees to
be awarded, but a determination of the legal basis for an attorney
fee award is a question of law to be reviewed de novo.’”
(Mountain Air Enterprises, LLC v. Sundowner Towers, LLC
(2017) 3 Cal.5th 744, 751.)

2. The Buyout Statutes Limit the Recovery of
Expenses and Fees to Those Incurred in the
Appraisal Process
The buyout statutes do not define the nature of the
attorneys’ fees and other expenses the moving parties may
recover if the purchasing parties do not buy out the moving
parties at the appraised value. The statutes simply provide that,
if the purchasing parties do not make a timely payment, the
moving parties are entitled to recover their reasonable expenses,
including attorneys’ fees. (§§ 2000, subd. (c), 15908.02, subd. (d),
17707.03, subd. (c)(3); see Cotton v. Expo Power Systems, Inc.

15
(2009) 170 Cal.App.4th 1371, 1376 [“If the purchasing parties do
not pay for the shares within the specified time, they are charged
with the expenses of the moving parties, including attorneys’
fees.”].) But the framework of the statutory buyout provisions
and the relevant legislative history show that the Legislature
intended the moving parties to recover only those fees and
expenses incurred in the appraisal process.
The provision governing the recovery of expenses in each of
the buyout statutes appears in the paragraph describing the
appraisal process. (§§ 2000, subd. (c), 15908.02, subd. (d),
17707.03, subd. (c)(3).) In addition to prescribing the procedure
for appointing the appraisers, confirming the appraisal award,
and entering the alternative decree, the paragraph authorizes the
moving parties to recover their attorneys’ fees and other expenses
if, at the end of the appraisal process, the purchasing parties
elect not to buy the moving parties’ interests at the price fixed by
the court after the appraisal. The placement of the expense
provision in the subsection of the statute governing the appraisal
process suggests the Legislature intended to limit the recoverable
expenses to those incurred in the appraisal process. (See The
Internat. Brotherhood of Boilermakers, etc. v. NASSCO Holdings
Inc. (2017) 17 Cal.App.5th 1105, 1119-1120 [“we do not consider
the statutory words in isolation; we must read the language as it
is placed in the code section, and in the context of the entire
statutory scheme”]; Conrad v. Medical Bd. of California (1996) 48
Cal.App.4th 1038, 1046 [in interpreting statutory language,
courts consider “its placement within an overall statutory
scheme”]; see, e.g., City and County of San Francisco v. Ballard
(2006) 136 Cal.App.4th 381, 401 [where an attorneys’ fees
provision was placed in a subdivision of a code section relating to

16
receivership proceedings, and “not placed as its own subdivision
in [the] section,” prevailing party attorneys’ fees were limited to
receivership proceedings].)
This interpretation is consistent with the statutes’ purpose
of reimbursing the moving parties’ expenses incurred in an
appraisal process that did not end in a buyout. When the
purchasing parties invoke a statutory buyout provision, the
parties take a break from litigating the merits of the dissolution
action, which is stayed, and turn their attention and resources to
calculating by appraisal the fair value of the moving parties’
interests. If the purchasing parties complete the purchase at the
appraised fair value, the cost of the appraisal is money well
spent. But if the purchasing parties dispute the appraised fair
value, cannot afford to pay it, or otherwise choose dissolution
over acquisition, the moving parties have spent time and money
in the appraisal for naught. Section 2000, subdivision (c), like
the similar provisions for limited liability companies and
partnerships, imposes the costs of the appraisal process on those
who initiated the failed buyout procedure, i.e., the purchasing
parties. As the court in Go explained: “The objective of the
statutory appraisal process is to find a fair value for the shares of
the parties seeking dissolution and to award the [moving parties]
seeking dissolution the liquidation value they would have
received had their dissolution action been allowed to proceed to a
successful conclusion. If the purchasing parties believe the price
fixed by the court is too high, they can refuse to purchase the
shares at that price and permit the winding up and dissolution of
the corporation to proceed. Their only liability would be to pay
the expenses (including attorney fees) incurred by the moving
parties in the appraisal process.” (Go, supra, 179 Cal.App.4th at

17
p. 531; accord, Trahan v. Trahan (2002) 99 Cal.App.4th 62, 75
(Trahan);5 see Friedman et al., Cal. Practice Guide: Corporations
(The Rutter Group 2019) ¶ 8:887 [under section 2000, purchasing
parties may “back out of the purchase if they feel the price fixed
by the court is too high,” but “they will have to pay all reasonable
expenses (including attorney fees) incurred by the other parties”];
Marsh et al., Cal. Corporation Law (2020 supp.) Dissolution,
§ 21.07 [if the purchasing party “is not willing to pay the amount
determined in the appraisal process” and elects to proceed with
dissolution, “he is required to pay all of the expenses of the
moving parties in the appraisal proceeding, including their
attorneys’ fees”]; ibid. [“unless the payment is made for the
shares and the purchase consummated, the parties initiating the
dissolution proceeding have a right to collect the entire amount of
their expenses in the appraisal proceeding from the shareholders
making the election and the surety or sureties on the bond
furnished by such shareholders”].)6

5 The court in Go held section 2000 requires the court to
enter an alternative decree once the court has confirmed the fair
value of the corporation’s shares. (Go, supra, 179 Cal.App.4th at
pp. 529-530.) The court in Trahan held the trial court did not err
“in confirming the award of the appraiser where the appraiser
did not take into account the profits, if any, from contracts which
had not been completed by the valuation date.” (Trahan, supra,
99 Cal.App.4th at p. 70.)
6 Law professor Harold Marsh, Jr. was a member of the
State Bar Corporations Committee and the “principal draftsman”
of the 1975 revisions to the Corporations Code that included
section 2000. (Comr. Willie R. Barnes, Dept. of Corporations,
letter to Assemblymember John Miller, Chair Assem. Judiciary

18
 The legislative history of the buyout statutes supports
limiting the recovery of fees and expenses to those incurred in the
appraisal process. The predecessor to section 2000 did not
authorize the moving party to recover any fees or expenses in the
event of a failed buyout. Instead, it required the purchasing
party to give a “bond with sufficient security to protect the
interests and rights of the plaintiffs and to assure to the plaintiffs
the payment of the value of their shares.” (Former § 4658,
enacted by Stats. 1947, ch. 1038, § 4658, p. 2389, repealed and
added by Stats. 1975, ch. 682, § 7, p. 1516, eff. Jan. 1, 1977.) It
also required the court to “enter a decree for the amount of the
award against the shareholders electing to purchase and the
surety or sureties on the bond” and permitted the decree to
provide in the alternative “for winding up and dissolution of the
corporation” if the purchasing parties did not make a timely
payment. (Former § 4659, enacted by Stats. 1947, ch. 1038,
§ 4659, p. 2389, repealed and added by Stats. 1975, ch. 682, § 7,
p. 1516, eff. Jan. 1, 1977.)
In repealing the old statutes and enacting section 2000, the
Legislature made the entry of an alternative decree mandatory
rather than permissive, reduced the amount of the bond required
to the estimated reasonable expenses of the moving parties, and
added a remedy for the moving parties to recover those expenses
if the purchasing parties did not timely purchase their shares.

Com., Apr. 28, 1975, p. 2.) In a March 7, 1975 memorandum to
Assemblymember John T. Knox, Chair of the Assembly Select
Committee on Revision of the Corporations Code, Marsh wrote
the legislation “constitutes a complete revision and
modernization of the General Corporations Law, which has not
been thoroughly revised since its enactment in 1931 . . . .”

19
(§ 2000, subds. (b), (c).) These revisions reveal that the purpose
of the expense provision was to compensate the moving parties
for the attorneys’ fees and expenses incurred in the appraisal
process where, at the conclusion of the process, the purchasing
parties are either unable or unwilling to consummate the buyout.
(See Assem. Select Com., Rep. on Revision of the Corporations
Code (Dec. 1, 1975) pp. 17-18 [“The requirement for the filing of a
bond for the entire (at that point unknown) purchase price at the
outset of the appraisal process by the purchasing parties is
eliminated; instead, a bond is only required to cover the expenses
of the moving party if the purchase is not consummated.”].)
Leonard argues that “any injunctive relief issued to
preserve [the] enterprise is very much part of the buyout process.”
But that is not true of the injunctive relief here. The court issued
the second and third preliminary injunctions to protect Leonard’s
interests in the entity defendants from further misconduct by
Michael and Joseph. Because Michael and Joseph engaged in
that misconduct throughout the litigation, Leonard would have
incurred attorneys’ fees seeking additional injunctive relief
regardless whether Michael and Joseph invoked the statutory
buyout process. Moreover, Leonard already had a way for
protecting his interests from Michael and Joseph’s misconduct:
his cause of action for breach of fiduciary duty, on which he
ultimately prevailed.7 If, as the trial court predicted, Michael

7 We take judicial notice of the March 12, 2019 judgment on
Leonard’s breach of fiduciary duty cause of action awarding him
$20,912,061 in compensatory damages against Michael and
Joseph, jointly and severally, $5,000,000 in punitive damages
against Michael, and $5,000,000 in punitive damages against
Joseph. Michael and Joseph have appealed from the judgment.

20
and Joseph left “Leonard stuck with the value of the Entity
Defendants at dissolution” by failing to consummate the buyout
after continually looting the business, Leonard could (and did)
recover damages for the devaluation of his interests during the
appraisal process through his breach of fiduciary duty cause of
action.
Leonard also asserts the “trial court expressly found that
the fees incurred to obtain the injunctions were ‘incurred during
the appraisal process.’” That assertion is technically true, and in
the strictly temporal sense of “during,” the trial court’s finding
was correct: The fees and expenses Leonard incurred in
obtaining the additional injunctive relief against Michael and
Joseph “were incurred during the appraisal process,” which was
occurring at the same time the parties were litigating Leonard’s
requests for additional injunctive relief. But that does not mean
Leonard incurred his injunction-related fees in (or as part of) the
appraisal process, only that he was incurring the two categories
of fees simultaneously. Leonard could have been incurring
attorneys’ fees on all kinds of things that occurred while the
appraisers and the referee were doing their work, such as
negotiating a settlement, gearing up for the dissolution of the
various entities in the event the buyout procedure failed, and
preparing for trial on his breach of fiduciary duty cause of action.
But Leonard could not have recovered those fees under section
2000 and the other buyout statutes, even if he incurred them
concurrently with the appraisal process. Therefore, the trial
court erred in awarding Leonard his attorneys’ fees incurred in
obtaining injunctive relief.

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 C. Admissible Evidence Supported Leonard’s Motion for
Fees and Expenses
Michael and Joseph also contend the trial court erred in
granting Leonard’s motion for fees and expenses because Leonard
did not submit admissible evidence in support of his motion.
Specifically, they argue that counsel for Leonard’s supporting
declaration and attached billing records were inadmissible
because she failed to sign her declaration “under penalty of
perjury.” Although counsel for Leonard submitted a
supplemental declaration that corrected the defect, Michael and
Joseph argue the court should have excluded it because it was
filed with Leonard’s reply brief and, thus, Michael and Joseph did
not have an opportunity to respond to it. This argument lacks
merit.
A declaration is inadmissible unless it meets certain
requirements, including that it is certified “to be true under
penalty of perjury.” (Code Civ. Proc., § 2015.5; see Kulshrestha v.
First Union Commercial Corp. (2004) 33 Cal.4th 601, 610.) The
initial declaration counsel for Leonard submitted in support of
the motion for expenses did not have the required certification.
In their opposition to the motion, Michael and Joseph pointed out
this defect, stating in a footnote that “Leonard’s claimed fees are
also unsubstantiated” because his attorney’s declaration was “not
signed under penalty of perjury as required by . . . Code of Civil
Procedure section 2015.5.” In his reply papers, counsel for
Leonard submitted a supplemental declaration that added the
following certification: “I declare under penalty of perjury under
the laws of the State of California that the foregoing is true and
correct.”

22
 A party may cure defects in a supporting declaration where
doing so does not prejudice the other side. For example, in Wall
Street Network, Ltd. v. New York Times Co. (2008) 164
Cal.App.4th 1171 the attorney for a party moving for summary
judgment submitted a declaration that omitted a statement that
the attorney was competent to testify to the matters stated in the
declaration. The party opposing the motion objected, and the
attorney submitted a corrected declaration with the reply papers.
(Id. at pp. 1182-1183.) The court in Wall Street Network held the
trial court properly admitted the amended declaration because
the “original declaration identified the substantive evidence upon
which respondents sought summary judgment” and the objecting
party “never identified any prejudice from its admission.” (Id. at
p. 1183; see Finkbeiner v. Gavid (2006) 136 Cal.App.4th 1417,
1422 [trial court erred in not allowing party to amend a petition
where the verification’s failure to state it was under penalty of
perjury “appear[ed] to be a clerical error”].)
Here, Michael and Joseph have not shown that admitting a
supplemental declaration that contained a proper certification,
but which was otherwise nearly identical to the original
declaration, caused them any prejudice. Therefore, the trial court
did not abuse its discretion in admitting the supplemental
declaration. (See Jacobs v. Coldwell Banker Residential
Brokerage Co. (2017) 14 Cal.App.5th 438, 449 [trial court did not
abuse its discretion in considering evidence submitted on reply
where the opposing party “had notice of the additional material
when they received [the] reply papers and ample opportunity to
ask the trial court for permission to submit responsive evidence
or to file a sur-reply”]; Gafcon, Inc. v. Ponsor & Associates (2002)
98 Cal.App.4th 1388, 1426 [“[a]bsent any objection to the

23
inclusion of new evidence in [the moving party’s] reply brief, the
court was entitled to consider the evidence as within the record
before it”].) In addition, Michael and Joseph did not file
objections in the trial court to the supplemental declaration or
ask the court for leave to submit additional briefing or evidence
in response to it, thus forfeiting this argument. (See Evid. Code,
§ 353; Mission Beverage Co. v. Pabst Brewing Co., LLC (2017) 15
Cal.App.5th 686, 711.)

D. Judge O’Donnell Did Not Err in Ruling on Leonard’s
Motion Without Having a Second Hearing
Michael and Joseph argue Judge O’Donnell “lacked the
requisite jurisdiction to make the award, without a hearing,
under California Code of Civil Procedure [section] 635.” They
appear to assert that, because Judge Palazuelos was unavailable,
Judge O’Donnell was acting pursuant to Code of Civil Procedure
section 635 when she granted Leonard’s motion for fees and
expenses and that Judge O’Donnell should have held a second
hearing on the motion. Code of Civil Procedure section 635,
however, does not apply, and Michael and Joseph forfeited any
argument Judge O’Donnell erred in ruling on the motion without
having another hearing.
“As a general rule, . . . the final judgment in any case tried
without a jury ‘must be rendered by the judge who tried the case;
it would be a denial of due process for a new judge to render a
decision without having heard all of the evidence.’” (In re
Marriage of Colombo (1987) 197 Cal.App.3d 572, 581; see
Blumenthal v. Superior Court (2006) 137 Cal.App.4th 672, 682;
7 Witkin, Cal. Procedure (2020 supp.) Judgment, § 45.) Code of
Civil Procedure section 635 provides an exception to the general

24
rule: “In all cases where the decision of the court has been
entered in its minutes, and when the judge who heard or tried
the case is unavailable, the formal judgment or order conforming
to the minutes may be signed by the presiding judge of the court
or by a judge designated by the presiding judge.” The statute
“authorizes the signing of a formal judgment by the presiding
judge” where “the judge who has heard the evidence has already
provided the parties with a statement of decision,” but not
“whenever the judge who has heard the evidence has orally
entered a tentative decision, or tentative findings . . . in the
minutes.” (Armstrong v. Picquelle (1984) 157 Cal.App.3d 122,
127; see Heenan v. Sobati (2002) 96 Cal.App.4th 995, 1004
[“[u]nder Code of Civil Procedure section 635, presiding judges or
their designee may sign a judgment ‘[i]n all cases where the
decision of the court has been entered in its minutes, and when
the judge who heard or tried the case is unavailable’”].)
Code of Civil Procedure section 635 did not apply here, and
therefore did not deprive Judge O’Donnell of jurisdiction to rule
on Leonard’s motion for expenses. Judge Palazuelos did not
enter a decision in the minutes before she became unavailable.
She provided a tentative decision at the hearing on the motion,
but never issued a final decision after taking the matter under
submission. Judge O’Donnell did not sign Judge Palazuelos’s
tentative ruling; Judge O’Donnell wrote her own ruling based on
argument and evidence in motion papers she read and
considered. Which explains why there is no indication in the
record that the presiding judge designated Judge O’Donnell to
perform any act under the statute or sign an order conforming to
Judge Palazuelos’s tentative ruling that Judge O’Donnell was
purporting to act under the authority of Code of Civil Procedure

25
section 635 when she ruled on the motion. The record reflects
that, when Judge Palazuelos became unavailable, Judge
O’Donnell took over pending matters in the case, including
Leonard’s motion for expenses.
Michael and Joseph also contend Judge O’Donnell denied
them due process by ruling on the motion without giving them an
opportunity for a hearing before her. Michael and Joseph,
however, forfeited their contention by failing to ask for another
hearing. Prior to ruling on Leonard’s motion for expenses, Judge
O’Donnell heard at least two other matters in the case. She
granted a request by the receiver to approve the sale of one of the
car dealerships and she heard a request by Leonard to continue
the trial date. Yet despite knowing that Judge Palazuelos was
unavailable and that Judge O’Donnell was ruling on matters in
the case, Michael and Joseph did not ask Judge O’Donnell to hold
a second hearing on the motion for expenses before she issued a
decision on that motion. And after Judge O’Donnell ruled on the
motion, Michael and Joseph neither objected they were deprived
of a second hearing nor ever asked for such a hearing. (See In re
S.B. (2004) 32 Cal.4th 1287, 1293 [“a reviewing court ordinarily
will not consider a challenge to a ruling if an objection could have
been but was not made in the trial court,” a rule designed “to
encourage parties to bring errors to the attention of the trial
court, so that they may be corrected” (fn. omitted)]; Doers v.
Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 184, fn. 1
[“‘An appellate court will ordinarily not consider procedural
defects or erroneous rulings . . . where an objection could have
been but was not presented to the lower court by some
appropriate method” because “it is unfair to the trial judge and to
the adverse party to take advantage of an error on appeal when it

26
could easily have been corrected at the trial.’” (Italics omitted.)].)
Michael and Joseph easily could have asked Judge O’Donnell for
another hearing on Leonard’s motion for fees and expenses,
either before or after she issued her ruling. They did not.
In any event, Michael and Joseph were not entitled to a
hearing on Leonard’s motion for fees and expenses, even though
Judge Palazuelos had given them one. Because special
proceedings are “wholly statutory” (People v. Barrett (2012) 54
Cal.4th 1081, 1101), they provide the parties only those rights
statutorily specified. (In re Rose (2000) 22 Cal.4th 430, 453;
Thornton v. California Unemployment Ins. Appeals Bd. (2012)
204 Cal.App.4th 1403, 1414; Kim v. Yi (2006) 139 Cal.App.4th
543, 550; Low v. Golden Eagle Ins. Co. (2002) 101 Cal.App.4th
1354, 1367.) The moving party’s right to recover fees and
expenses under section 2000, subdivision (c),8 is part of the
special proceeding for a statutory buyout. The buyout statutes do
not provide for or mention a hearing before the trial court. (See
Abrams v. Abrams-Rubaloff & Associates, Inc. (1980) 114
Cal.App.3d 240, 247-248 [“[s]ection 2000 does not provide for a
full evidentiary hearing,” but “contemplates a summary
proceeding”].) Rather, on the issue of recovering fees and
expenses, the buyout statutes state only that the court “shall”
enter a judgment against the purchasing parties for the amount
of fees and expenses if they fail to buy the moving party’s shares.

8 And section 17707.03 for limited liability companies and
section 15908.2 for limited partnerships.

27
 E. Michael and Joseph Do Not Have Standing To Assert
the Rights of Their Surety
Michael and Joseph argue the expense award is
“jurisdictionally deficient” because it included their surety as a
judgment debtor. They argue that, because Leonard did not
serve a copy of his motion for expenses on the surety, the surety
did not have an opportunity to respond to the motion, which
violated its due process rights. Michael and Joseph, however, do
not have standing to assert the rights of their surety. (See
Brenner v. Universal Health Services of Rancho Springs, Inc.
(2017) 12 Cal.App.5th 589, 605 [“As a general rule, a third party
does not have standing to bring a claim asserting a violation of
someone else’s rights.”].)

F. This Court Does Not Have Jurisdiction To Hear the
Challenge by Michael and Joseph to the Order
Dissolving the Businesses
Michael and Joseph challenge, as part of this appeal, the
trial court’s jurisdiction to issue the July 28, 2017 alternative
decree to wind up and dissolve the buyout entities if, as occurred,
Michael and Joseph did not purchase Leonard’s interests in the
businesses. They contend the court “was not empowered to
enforce the July 28, 2017 alternative decree because of a lack of
subject matter jurisdiction, which rendered the decree void.
Because the decree was void, ab initio, Judge O’Donnell was
jurisdictionally inept to enforce it by her award of attorney fees
and other expenses to Leonard.” In particular, Michael and
Joseph argue the court lacked subject matter jurisdiction over the
five limited liability companies that were included in the
stipulation and order governing the appraisal process but that

28
were not named in Leonard’s complaint. Michael and Joseph,
however, cannot challenge the July 28, 2017 order in this appeal.
The July 28, 2017 alternative decree was an appealable
order. (§ 2000, subd. (c); see Cotton v. Expo Power Systems, Inc.,
supra, 170 Cal.App.4th at p. 1376 [under section 2000, “[a]ny
shareholder aggrieved by the alternative decree may appeal”];
Dickson v. Rehmke (2008) 164 Cal.App.4th 469, 476 [under the
predecessor statute to section 17707.03, “an appeal lies from the
alternative decree”].) On September 11, 2017 Michael and
Joseph filed a notice of appeal from the July 28, 2017 order, but
in May 2018 they each filed a request to dismiss the appeal, and
on May 31, 2018 this court dismissed it. Because neither the
requests for dismissal nor this court’s May 31, 2018 order stated
the dismissal was without prejudice, Michael and Joseph cannot
use this appeal from the December 29, 2017 order awarding
Leonard his fees and expenses under the buyout statutes to
attack the July 28, 2017 order, which is now final. (See Code
Civ. Proc., § 913 [“The dismissal of an appeal shall be with
prejudice to the right to file another appeal within the time
permitted, unless the dismissal is expressly made without
prejudice to another appeal.”]; Estate of Sapp (2019)
36 Cal.App.5th 86, 100 [“order dismissing [the appellant’s] first
appeal did not expressly say it was without prejudice, so by
operation of law it was with prejudice”]; Patchett v. Bergamot
Station, Ltd. (2006) 143 Cal.App.4th 1390, 1396 [Code of Civil
Procedure section 913 precluded a second appeal where the
appellant failed to delineate the basis for a stipulated dismissal
of the first appeal]; Property Owners of Whispering Palms, Inc. v.
Newport Pacific, Inc. (2005) 132 Cal.App.4th 666, 677 [“[b]ecause
this court’s dismissal of the first appeal did not expressly provide

29
that it was without prejudice to a subsequent appeal, the trial
court’s judgment . . . became final and binding”]; see also In re
C.C. (2009) 172 Cal.App.4th 1481, 1489 [“dismissal of the appeal
operates as an affirmance of the underlying judgment or order”].)
Michael and Joseph assert that, because the alternative
decree is facially void for lack of jurisdiction, they can attack it at
any time. A defendant can attack an order or judgment that is
void on its face at any time, either directly, “by a motion under
Code of Civil Procedure section 473, subdivision (d), or by
a collateral action.” (Falahati v. Kondo (2005) 127 Cal.App.4th
823, 830; see People v. American Contractors Indemnity Co.
(2004) 33 Cal.4th 653, 660). But there is no evidence in this
record that Michael and Joseph directly attacked the July 28,
2017 alternative decree for dissolution by filing a motion to
vacate it under Code of Civil Procedure section 473,
subdivision (d), and they dismissed their direct appeal from that
order. Nor is there any indication Michael and Joseph have filed
a collateral action challenging the order; and if they have, this
action is not it.

30
 DISPOSITION

The order granting Leonard’s motion for expenses is
modified to strike $561,393.63 in injunction-related attorneys’
fees. As modified, the order is affirmed. The parties are to bear
their costs on appeal.

SEGAL, J.

We concur:

PERLUSS, P. J.

FEUER, J.

31