Thursday, February 7, 2019
Page 1
Court of Appeal:
Losing Respondent to Pay $1.4 Million Cost of Appeal Bond
Rubin Says Appellant’s Ability to Put Up $50 Million in Cash Does Not Render Unreasonable The Incurring of Expense in Securing a Surety Bond Backed by a Letter of Credit
By a MetNews Staff Writer
The Court of Appeal for this district yesterday affirmed a judgment for costs in connection with an appeal decided in 2016 in favor of the appellant, holding that an expense of about $1.4 million in obtaining a $50 million appeal bond, secured by a letter of credit, was necessary and reasonable despite the woman’s ability to obtain a cash-secured bond.
Div. Eight’s opinion was authored by Laurence D. Rubin (on assignment to the division where he sat as an associate justice until his confirmation as presiding justice of Div. Five on Dec. 21).
Obtaining the costs was Angela Chen Sabella, who was sued for breach of contract by Rostack Investments, Inc., a company controlled by her sister and rival, Vivien Chen Wai-Wai. On Nov. 12, 2014, Los Angeles Superior Court awarded judgment in favor of Rostack in the amount of $51,906,128 in damages, plus attorney fees and costs.
Div. Eight reversed that judgment in a Nov. 13, 2016, unpublished opinion by Rubin, which found that there was sufficient evidence that the women’s father, Hong Kong multi-billionaire Din-Hwa Chen, had, prior to his death, forgiven the underlying loan he had made to Sabella, thus creating a triable issue of fact.
Rostack was ordered to pay Sabella’s costs on appeal; Los Angeles Superior Court Judge Michael Johnson denied the plaintiff’s motion to tax the costs; Rostack brought the instant appeal from the judgment for costs.
More Expensive Option
Rubin noted that the ultimate cost to Sabella for the two contested items was 0.3 percent of the bond’s total and 0.6 percent of the letter of credit’s amount. A cash-secured bond would have required her to tie up $77 million in cash but would have netted her 0.25 percent interest on the collateral.
Rostack contended the defendant should have obtained the cash-secured bond, as it was ultimately cheaper than the credit-secured instrument. Citing California Rules of Court, rule 8.278(d)(1), which sets forth the costs recoverable on appeal, if reasonable, Rubin responded:
“As bond premiums and interest expenses incurred to obtain a letter of credit are specifically itemized by the rule, the issue raised by this appeal is whether substantial evidence supports the trial court’s conclusion that those items, as incurred by Sabella in this case, were reasonable and necessary….
“[T]he mere fact that an alternative procedure, which would have been less expensive, was available does not mandate that the option chosen was unreasonable or unnecessary.”
Sound Decision
The jurist noted that Sabella had considered both options, but had determined that the cash-secured bond would require liquidation of her assets. He credited her statement in a declaration that “it was not feasible or economically sound for me to post the $77,859,192.93 bond in cash.”
He also rejected the plaintiff’s argument that the 0.25 interest rate Sabella would earn on her cash collateral changed the metric, explaining:
“Indeed, unspoken in Sabella’s declaration was the premise that, given the choice between a net gain of 0.25 percent on a deposit of $77 million, and a net loss of 0.9 percent in bond/letter of credit premiums, the loss of 0.9 percent was the preferable choice—given what she could otherwise do with her $77 million.”
Costs Judgment Appealable
Rubin declared “meritless” the plaintiff’s assertion that the judgment for costs was an unappealable interlocutory judgment.
“Indeed, it was rejected as early as 1931,” he said, pointing to the California Supreme Court’s decision in First National Bank v. Stansbury.
The opinion proclaims:
“Rostack is to pay Sabella’s costs on appeal.”
The case is Rostack Investments v. Sabella, 2019 S.O.S. 661.
Rival Heiresses
Both Sabella and Wai-Wai are accomplished businesswomen involved in running Chen’s various enterprises in Hong Kong and the United States. The women’s mother, Foo-Oi Yang, divorced Chen in 2011, a year before his death and when he was at the peak of his net worth, which at that time was estimated at $3.8 billion.
(Chen built his business empire from his family’s already-successful textile business, becoming known in his home city as the “King of Cotton Yarn.”)
A lawsuit in Hong Kong between Yang and Wai-Wai over an inheritance arrangement providing for a third of Chen’s wealth to be distributed to each of Sabella, Wai-Wai and Yang resulted in a judgment against Wai-Wai for a third of the late magnate’s assets.
In March 2013, Hong Kong High Court Justice Bebe P. Chu declared in an appellate opinion that Sabella could use documents in Wai-Wai’s possession in the Los Angeles Superior Court case brought by Rostack. Chu’s opinion also ordered Wai-Wai to pay half of Sabella’s cost in making the request in the Hong Kong case.
Sabella, who paid cash to a company owned by President Donald J. Trump for a $15.8 million Park Avenue penthouse in New York City, also runs a company called Global Alliance Associates, which connects U.S. businesses with the mainland Chinese elite.
Copyright 2019, Metropolitan News Company