Filed 4/2/20 Copenbarger v. McNaughton CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

LLOYD COPENBARGER, as Trustee, etc.,

Plaintiff and Appellant.

v.

KENT A. McNAUGHTON,

Defendant and Appellant.

G057235

(Super. Ct. No. 30-2009-00310879)

O P I N I O N

Appeal and cross-appeal from a postjudgment order of the Superior Court of Orange County, Hugh Michael Brenner, Judge. (Retired judge of the Orange Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed. Request for judicial notice. Denied as moot.

Weiland Golden Goodrich and Michael R. Adele, for Defendant and Appellant.

Hall Griffin, George L. Hampton IV and Laura J. Petrie for Plaintiff and Appellant Lloyd Copenbarger, as Trustee, etc.

* * *

This case arises from rather unique circumstances. Defendant signed a personal guaranty on a $3 million loan. The borrower defaulted, and the lender obtained a multimillion dollar judgment against defendant as guarantor. Meanwhile, the borrower continued to make payments to the lender, but neither party specified whether those payments applied to the note underlying the judgment or to a different debt, thus creating confusion over the precise amount owed on the judgment.

The lender applied for a writ of execution on the judgment. Defendant opposed the application, asserting the borrower’s payments toward the note should reduce the amount owed on the judgment. Defendant also filed motions for postjudgment discovery and for acknowledgment of partial satisfaction of the judgment.

The trial court appointed an accountant as referee to calculate the amount owed on the judgment. Although the court denied defendant’s motion for postjudgment discovery, it authorized the referee to conduct any discovery necessary to perform his calculation.

The referee interviewed the parties and examined their financial records, some of which he reviewed in camera. He determined the borrower paid the lender about $1.4 million postverdict and recommended allocating nearly all of those payments toward the judgment. The trial court adopted the referee’s recommendation, and the parties filed cross-appeals.

Defendant contends he should have been permitted to conduct postjudgment discovery, the evidence was insufficient to support the trial court’s allocation order because there was “no evidence in the record that additional creditable payments were not made,” and the court miscalculated the interest owed on the judgment. The lender also appeals, arguing the evidence was insufficient to support the referee’s allocation of the borrower’s payments toward the judgment. We reject these contentions and affirm the court’s order in full.

I.

FACTS

A. The Loans and Guaranty

Nonparty Paul Copenbarger (Paul ) and defendant Kent McNaughton formed Newport Harbor Offices & Marina, LLC (NHOM) in 2003 to acquire an office building and marina in Newport Beach and sublease the real property where the building and marina are located. To fund the transaction, NHOM borrowed $3 million from the Hazel I. Maag Trust (the Maag Trust) and $1.15 million from Plaza Del Sol Real Estate Trust (Plaza Del Sol).

The Maag Trust’s $3 million loan to NHOM was evidenced by a promissory note and secured by a first priority deed of trust on the improvements and the sublease. NHOM’s managing members, Paul and McNaughton, also executed a personal guaranty on the loan. That guaranty is at the heart of this litigation.

Plaza Del Sol’s $1.15 million loan to NHOM was evidenced by a promissory note and secured by a second priority deed of trust on the improvements and the sublease. Plaza Del Sol later assigned its note to the Maag Trust as part of a settlement agreement in 2012. As a result, the Maag Trust eventually held two promissory notes under which NHOM was obligated to pay.

B. The Lawsuit and Judgment Against McNaughton

NHOM defaulted on the Maag note, and counsel for the Maag Trust delivered a notice of default and loan acceleration to NHOM in September 2009. Plaintiff Lloyd Copenbarger (Lloyd), acting as trustee for the Maag Trust, then sued McNaughton to enforce his personal guaranty on the Maag Trust’s loan to NHOM. Lloyd never sued NHOM (the borrower) or his brother Paul (the co-guarantor and the other managing member of NHOM).

Lloyd and McNaughton stipulated to try the case in two phases: first, a jury trial on McNaughton’s obligation on the guaranty, and second, a bench trial on McNaughton’s affirmative defenses. At the conclusion of the first phase in August 2012, the jury returned a verdict in favor of the Maag Trust and against McNaughton in the amount of $2,784,100, plus attorney fees. In the second phase, however, the trial court found Lloyd’s conduct exonerated McNaughton’s obligations under the guaranty, and it entered a defense judgment for McNaughton.

Lloyd appealed, and we concluded the “waivers contained in the guaranty clearly and unequivocally entitled Lloyd to proceed against the guarantor [McNaughton] without having to proceed against the borrower [NHOM].” (Copenbarger I, supra, at *13.) We therefore reversed the defense judgment and directed the trial court to enter judgment for Lloyd on the verdict. (Id. at *6.)

In December 2014, the trial court entered judgment in favor of the Maag Trust and against McNaughton. Two years later, the court entered an amended judgment in favor of the Maag Trust in the amount of $2,784,100, plus $355,396 in attorney fees, $18,480 in costs, $207,723 in postjudgment attorney fees, and $9,487 in postjudgment costs. During that period, McNaughton made no payments toward the judgment, aside from $33.17 Lloyd levied against McNaughton’s bank account.

C. The Dispute Over the Amount Due on the Judgment

A dispute soon arose over the amount due on the judgment. As noted, the Maag Trust held two notes under which NHOM was obligated to pay: the Maag note and the Plaza Del Sol note. NHOM paid the Maag Trust nearly $1.5 million in the three-year period after the jury verdict, but it was unclear whether those payments applied toward the Maag note (and arguably the judgment), the Plaza Del Sol note, or some combination of the two. With the exception of one check labeled “Repayment of Plaza Del Sol Note for January, February, March and April 2017,” NHOM did not specify how it allocated these periodic payments, and Lloyd did not memorialize any allocation of the payments to one note or the other.

McNaughton served Lloyd with a formal demand for acknowledgement of partial satisfaction of judgment. In response, Lloyd served an acknowledgment of partial satisfaction crediting receipt of only $33.17. In other words, Lloyd gave no credit toward the judgment for whatever postverdict payments, if any, NHOM had made toward the Maag note.

Two months later, Lloyd, as trustee for the Maag Trust, applied for a writ of execution on the judgment. (See Code Civ. Proc., § 699.010, et seq.) He claimed “[t]he Judgment Debtor [McNaughton] has not made any direct payments on the Judgment other than . . . $33.17 collected by way of a levy on July 6, 2016 and the $377.96 collected by way of a levy on January 19, 2017.”

McNaughton opposed the application, asserting Lloyd had failed to credit NHOM’s payments on the underlying note and accusing Lloyd of “misleading” the trial court.

Lloyd’s counsel later explained Lloyd did not dispute NHOM’s payments should offset the judgment; instead, the dispute was over “whether that [offset] happened automatically, or whether there’s an obligation to get an order from the court showing the offset.” Lloyd also submitted a declaration explaining NHOM had made installment payments totaling over $1,460,000 to the Maag Trust in the three years since the jury verdict. In that declaration, he maintained the Maag Trust “was entitled to and did apply such payments to both the [Plaza Del Sol] Note and the Maag Note,” but he did not specify any particular allocation.

Meanwhile, while the writ application was pending, Paul (the coguarantor on the Maag note) paid the Maag Trust $1,587,210 toward the Maag note.

D. The Appointment of Accountant Kenneth Rugeti as Referee

To resolve the issues raised in Lloyd’s application for writ of execution, the trial court had to determine which of NHOM’s postverdict payments applied toward the Maag note as opposed to the Plaza Del Sol note, determine the amount Paul paid toward the Maag note, and calculate what amount was due on the judgment as a result. After discussing the matter with the parties, the court appointed certified public accountant Kenneth Rugeti of Rugeti & Associates to determine the amount due on the judgment and to resolve any discovery issues. (See Code Civ. Proc., § 639, subd. (a)(1) & (a)(5) [permitting trial court to appoint referee when issue of fact requires examination of long account or when referee is necessary to hear discovery disputes].) Neither party objected to Rugeti’s appointment.

On the issue of apportioning NHOM’s payments between the two notes, the trial court “tentatively” found “NHOM has never given [the] Maag Trust an indication of it’s [sic] intention or desire as to how these single monthly payments should be applied to these two separate obligations,” and further found nothing in the Maag note addressed the allocation issue. The court therefore tentatively determined NHOM’s payments to the Maag Trust should be divided between the notes “‘in equal proportion’” under Civil Code section 1479, subsection (2), and Rugeti should “determine exactly how this apportionment should be calculated.”

The trial court then clarified Rugeti’s appointment as follows: “Rugeti is appointed to determine the amount currently due on the Judgment against Judgment Debtor Naughton [sic], which primarily turns on the amount due on the note between the Maag Trust and [NHOM]. This also involves the amount due on the note due between [Plaza Del Sol] and [NHOM]. Mr. Rugeti’s appointment therefore involves determining the total amounts paid by [NHOM] to Judgment Creditor Paul [sic] Copenbarger on these two notes from the date of entry of judgment in this case, plus two months prior thereto. Finally, Mr. Rugeti is to determine how amounts paid to Judgment Creditor [Lloyd] Copenbarger were apportioned between these two notes if any apportionment took place.” The court further ordered: “Mr. Rugeti is authorized to conduct any discovery he believes is necessary to determine the above amounts. If any disputes arise concerning his requests for discovery from either Party, Mr. Rugeti is authorized to report any such disputes to the Court and make recommendations concerning these disputes.”

E. Rugeti’s Investigation

Lloyd and the Maag Trust reportedly provided Rugeti with a list of NHOM’s payments to the Maag Trust, a copy of Paul’s $1,587,210 check to the Maag Trust, and NHOM’s check register, bank statements, and checks to the Maag Trust.

Rugeti also asked the Maag Trust to provide either (1) an accounting or register of deposits into all Maag Trust bank accounts from June 2012 onward or (2) copies of bank statements and checks deposited into those accounts. In response, Lloyd reportedly produced a PDF of all Maag Trust bank account statements showing deposits of NHOM payments from 2012 onward, but redacted out all entries unrelated to those payments. Rugeti asserted the redactions prevented him from completing his analysis and explained he needed unredacted records “to determine whether the payments [the Maag Trust] has voluntarily identified are complete, or whether [the Maag Trust] received additional funds from NHOM, or related entities, that need to be addressed for exclusion or inclusion” in his calculation. In response, Lloyd’s counsel initially agreed to make unredacted statements available for in camera review, but he later refused to do so, asserting those records were “irrelevant” and their production would violate the financial privacy rights of numerous third parties.

McNaughton’s counsel urged Rugeti to ask the trial court to issue subpoenas to the Maag Trust’s banks. At a status hearing, he also asked the court to authorize the issuance of subpoenas and sought permission to view whatever documents the Maag Trust provided to Rugeti for in camera inspection. The court denied both requests, but reminded Lloyd that he and the Maag Trust bore the burden of proof on the amount due on the Maag note, adding that until Rugeti was able to provide the court with that amount, it would not issue a writ of execution.

Several months later, Lloyd reportedly provided additional Maag Trust and NHOM financial records for Rugeti’s in camera review. The record is not clear as to what those documents included.

F. McNaughton’s Motion for Postjudgment Discovery

Concerned the Maag Trust was concealing payments that should be credited toward the judgment, and frustrated with Rugeti’s investigation, McNaughton filed a formal motion for “post-trial discovery.” McNaughton based his motion on the trial court’s “inherent power to control the proceedings before it to assure due process and fundamental fairness,” and on Code of Civil Procedure section 2017.010, which permits discovery of nonprivileged matter “relevant to the subject matter involved in the pending action or to the determination of any motion made in that action.”

McNaughton’s motion did not specify precisely what discovery he wanted, although based on other portions of the record, we surmise he wanted to subpoena bank records from the Maag Trust, NHMO, Paul, and Plaza Del Sol. In his motion, McNaughton expressed concern Lloyd had directed NHOM to make payments on the Maag note directly to one of the Maag Trust’s creditors, Michael Tomamichel, and thus was hiding payments on the Maag note that should be credited against the judgment.

Lloyd opposed the motion, noting “there is absolutely no legal authority” permitting a judgment debtor to engage in postjudgment discovery. He also noted the trial court already had appointed Rugeti to determine the full amount due on the judgment.

After hearing oral argument, the trial court denied McNaughton’s discovery motion “without prejudice,” ordering “Judgment debtor will not be granted discovery powers post judgment.” The court added, however, it would “leave the discovery duties to Court appointed forensic accountant, Ken Rugeti,” and “[c]ounsel can contact Mr. Rugeti on any discovery issues.”

Because the record does not contain any communications between McNaughton and Rugeti about discovery after that order, it is unclear what transpired next in resolving McNaughton’s ongoing discovery requests. According to McNaughton, Rugeti did not permit him or his counsel to review the documents submitted for Rugeti’s in camera inspection, although it appears at least some of those documents were later attached as exhibits to Rugeti’s report.

G. McNaughton’s Motion for Acknowledgement of Partial Satisfaction

Concurrently with his discovery motion, McNaughton filed a motion for acknowledgement of full or partial satisfaction, asserting Lloyd had not provided an acknowledgement that “accurately” listed the amount partially satisfying the judgment. (See Code Civ. Proc., § 724.050, subd. (d).) McNaughton argued the trial court should find the judgment was partially satisfied in the amount of $3,019,623 based on NHOM’s postverdict payments of at least $1,432,002, Paul’s postverdict payment of $1,587,210, and McNaughton’s payments of $33.17 and $377.96.

McNaughton also served another demand for acknowledgement of partial satisfaction of judgment on Lloyd. Lloyd responded “at least $1.8 million” remained due and owing on the judgment, and he maintained an acknowledgement of partial satisfaction would be premature until the trial court entered an order applying NHOM’s and Paul’s payments to the judgment.

H. Rugeti’s Draft Report and Additional Investigation

A year after his appointment, Rugeti lodged a draft report finding NHOM paid Lloyd $1,422,002 in postverdict payments, the vast majority of which the parties failed to allocate toward one note or the other. Rugeti recommended apportioning all unspecified payments to the Maag note (and hence the judgment). He thus concluded the outstanding balance due on the judgment was $1,796,512, which included interest through August 24, 2018.

McNaughton objected to Rugeti’s draft report, noting, among other objections, it “only establishes that certain payments were made, but does not establish that no additional payments were made” by Paul or NHOM, and thus at best “establishes only the maximum owed, not the minimum amount owed.”

Lloyd likewise objected to the draft report’s recommendation that the trial court allocate all unspecified NHOM payments to the judgment, asserting that allocation would put the Plaza Del Sol note into default and thus cause harm to nonparty NHOM.

I. Rugeti’s Final Recommendation and the Trial Court’s Rulings

After considering the parties’ objections to his draft recommendation, Rugeti reviewed NHOM bank records from August 2017 to June 2018 in camera, met with Paul (as a representative of NHOM), and met with McNaughton and his accountant to discuss their concerns about his investigation. The following month, he lodged his final recommendation, in which he responded to the parties’ objections, expanded his discussion of his reasoning, and echoed his original findings and recommendations — namely, that NHOM paid Lloyd $1,422,002 in postverdict payments, the parties for the most part did not allocate those payments to one note or the other, all unspecified NHOM payments should be allocated to the Maag note, and the outstanding balance due on the judgment was $1,796,512, which included interest through August 24, 2018.

Rugeti rejected Lloyd’s argument that the allocation of all unspecified payments to the Maag note would put the Plaza Del Sol note into default. He noted there was no “reliable evidence of the balance of the [Plaza Del Sol] Note,” and the Plaza Del Sol note was already “in default when it was assigned to the Maag Trust [citation] and would have remained in default based on the timing of the payments in question.”

After hearing oral argument, taking the matter under submission, and discussing the matter further with Rugeti in camera, the trial court issued an order on November 16, 2018, adopting Rugeti’s recommendation and finding the amount due and owing on the judgment was $1,796,512. In accepting Rugeti’s recommended allocation of all unspecified NHOM payments toward the Maag note, the court reasoned Lloyd was the only party who could prove NHOM’s payments should be allocated to one note or the other, and there was a lack of substantial evidence showing any payments were allocated to the Plaza Del Sol note. The court then granted McNaughton’s motion for acknowledgement of partial satisfaction of judgment.

In the same order, the trial court denied McNaughton’s renewed request to engage in postjudgment discovery. It reasoned “[t]here is no authority for such discovery” and “the Parties were ordered to address any issues of discovery to Referee Rugeti.”

McNaughton appealed the trial court’s order, and Lloyd cross-appealed.

II.

DISCUSSION

McNaughton contends he should have been permitted to conduct postjudgment discovery, there was insufficient evidence NHOM did not make additional payments on the Maag note, and the trial court miscalculated the interest owed on the judgment. Lloyd challenges Rugeti’s recommended allocation of all unspecified NHOM payments toward the Maag note, asserting Rugeti failed to comply with the court’s order to allocate the payments between the two notes. We reject these contentions and affirm the order.

A. McNaughton’s Appeal

1. McNaughton’s Motion for Postjudgment Discovery

McNaughton first contends the trial court erred as a matter of law in denying his motion for postjudgment discovery and in concluding “there is no authority for such discovery.” Although we normally review discovery orders for abuse of discretion (Manela v. Superior Court (2009) 177 Cal.App.4th 1139, 1145), we independently review McNaughton’s statutory construction argument. (SCC Acquisitions, Inc. v. Superior Court (2015) 243 Cal.App.4th 741, 751.)

We begin by observing trial “courts are without power to expand the methods of civil discovery beyond those authorized by statute. . . . [I]n the area of civil discovery, the judiciary has no power to create or sanction types or methods of discovery not based on a reasonable interpretation of statutory provisions.” (Holm v. Superior Court (1986) 187 Cal.App.3d 1241, 1247 (Holm); see Cruz v. Superior Court (2004) 121 Cal.App.4th 646, 650 [“after the adoption of the 1957 statutes dealing with civil discovery, our courts lack the power to order discovery beyond that permitted by the statutes”]; Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1288 [“the Discovery Act as amended and interpreted has subsumed the entire field pertaining to the gathering of evidence in preparation for trial”].)

It was thus incumbent on McNaughton to identify a discovery statute supporting his request for postjudgment discovery concerning the amount due on the judgment. He did not do so.

McNaughton asserts discovery was permissible under Code of Civil Procedure sections 2017.010 and 2024.050. The former permits any party to “obtain discovery regarding any matter, not privileged, that is relevant to the subject matter involved in the pending action or to the determination of any motion made in that action, if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” The latter governs motions to reopen discovery “after a new trial date has been set.”

Neither provision applies in postjudgment enforcement proceedings. Both provisions are part of the Civil Discovery Act (Code Civ. Proc., §§ 2016.010-2036.050). That is significant because the Civil Discovery Act “applies to discovery in aid of enforcement of a money judgment only to the extent provided in Article 1” of the Enforcement of Judgments Law (EJL) — i.e., Code of Civil Procedure sections 708.010 to 708.030. (Code Civ. Proc., § 2016.070, italics added; see Shrewsbury Management, Inc. v. Superior Court (2019) 32 Cal.App.5th 1213, 1223 [“The Civil Discovery Act applies to discovery in postjudgment enforcement proceedings only to the extent provided in sections 708.010 through 708.030 of the [EJL]”]; Fox Johns Lazar Pekin & Wexler, APC v. Superior Court (2013) 219 Cal.App.4th 1210, 1219 [“the Civil Discovery Act explicitly limits its application to postjudgment enforcement proceedings”].) In other words, discovery in a postjudgment enforcement proceeding is not as broad as pretrial discovery permitted under the Civil Discovery Act, but rather is limited to the discovery methods described in Article 1 of the EJL.

Article 1 of the EJL permits a judgment creditor to propound interrogatories and requests for production on a judgment debtor “to aid in enforcement of the money judgment.” (Code Civ. Proc., §§ 708.020, 708.030.) But there is no parallel provision permitting a judgment debtor to propound discovery on a judgment creditor in a postjudgment enforcement proceeding, much less serve third party subpoenas. Moreover, we are not aware of any case or statute allowing a judgment debtor to propound discovery in postjudgment enforcement proceedings or on a motion for acknowledgement of satisfaction of judgment, and McNaughton cites none. In the absence of authority specifically permitting that discovery, the trial court did not err in denying McNaughton’s discovery motion.

McNaughton observes one court broadly construed Code of Civil Procedure section 2024.050 “as allowing a motion to reopen discovery after judgment in a marital dissolution proceeding.” (In re Marriage of Boblitt (2014) 223 Cal.App.4th 1004, 1024 (Boblitt).) However, we decline to adopt that same reading in a nonfamily law setting. Unlike in most civil litigation, “[a] ‘final’ judgment in a family law action does not necessarily mark the end of litigation between the parties. A good many orders are modifiable and, quite often, are modified long after the judgment’s finality.” (Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group) Chap. 17, Scope Note, p. 17-1.) Thus, not allowing a motion to reopen discovery “would leave the parties [to a family law case] without any access to discovery on postjudgment matters where it may be needed.” (Boblitt, supra, 223 Cal.App.4th at p. 1024.) The same rationale does not apply here. Moreover, one year after Boblitt was decided, the Legislature enacted Family Code section 218, which specifies “discovery shall automatically reopen as to the issues raised in the postjudgment pleadings” in family law proceedings “when a request for order or other motion is filed and served after entry of judgment.” The Legislature did not add any parallel provision in the Civil Discovery Act.

McNaughton insists the trial court had the “inherent power” to permit him to conduct postjudgment discovery. Again, we are not persuaded. While some older cases suggest “the courts of this state have ‘inherent’ authority to order discovery,” those decisions predate (or rely on decisions that predate) “the 1957 adoption of the Code of Civil Procedure provisions controlling discovery, and were rendered at a time when civil discovery . . . was a matter of common law. More recent cases have made it clear that the courts are without power to expand the methods of civil discovery beyond those authorized by statute.” (Holm, supra, 187 Cal.App.3d at p. 1247; see, e.g., San Diego Unified Port Dist. v. Douglas E. Barnhart, Inc. (2002) 95 Cal.App.4th 1400, 1405 [“court’s inherent power to exercise reasonable control over discovery matters did not authorize it to order” parties to pay for destructive testing or any other discovery they do not wish to pursue].) In other words, although courts have the inherent power to exercise reasonable control over discovery proceedings and manage their dockets, they lack authority to create a wholly new discovery method not authorized by statute.

Relying exclusively on criminal cases, McNaughton alternatively contends the denial of his discovery motion violated his due process right to discovery. He asserts he had no way to determine how many postverdict payments NHMO or Paul made toward the underlying note, and thus no way to refute the Maag Trust’s claims regarding the exact amount due on the judgment against him. Because documentation of NHMO’s and Paul’s payments to the Maag Trust was in the sole possession of those who made and received those payments, McNaughton complains he was forced to accept their representations about payment.

We reject this contention. McNaughton cites no authority supporting a fundamental right to conduct discovery in postjudgment enforcement proceedings. And even if there were such a right, any error was harmless. As Rugeti observed in his recommendation, McNaughton was not completely in the dark, but rather “had access to extensive discovery of NHOM banking records” both “through this action and through ongoing litigation with his partner in NHOM, Paul.” Moreover, if McNaughton truly believed Lloyd was concealing payments that should have been credited toward the judgment and needed to conduct new discovery to prove that, he presumably could have initiated his own action for fraud or declaratory relief, and by doing so would have enjoyed the right to conduct discovery under the Civil Discovery Act in that new proceeding. He did not do so, however, and thus was constrained by the more limited discovery statutes applicable to postjudgment enforcement proceedings. In this unique situation, we conclude the trial court did not err in denying his discovery motion.

2. Rugeti’s Determination of the Amount NHOM Paid to the Maag Trust

McNaughton next challenges Rugeti’s determination that NHOM paid $1,422,002 to the Maag Trust postverdict. As noted, Rugeti based this finding on his review of the financial records disclosed to all parties, his review of additional financial records disclosed in camera for his eyes only, and his interviews of Paul, Lloyd, and McNaughton. Although not binding on the court, a “‘referee’s recommendations are entitled to great weight.’” (In re Marriage of Petropoulos (2001) 91 Cal.App.4th 161, 176.) This makes sense: “‘a trained accountant is generally better able to efficiently and inexpensively examine a “long account” than a trial court judge is able to do through adversarial court proceedings.’” (Jones v. Wagner (2001) 90 Cal.App.4th 466, 475 (Jones).)

We review a trial court’s decision to accept a referee’s recommendation for an abuse of discretion. (See Lopez v. Watchtower Bible & Tract Society of New York, Inc. (2016) 246 Cal.App.4th 566, 589 (Lopez).) “An abuse of discretion occurs when, in light of applicable law and considering all relevant circumstances, the court’s ruling exceeds the bounds of reason.” (Jhaveri v. Teitelbaum (2009) 176 Cal.App.4th 740, 749 (Jhaveri).)

Resting his argument on a double negative, McNaughton contends the trial court abused its discretion in adopting Rugeti’s finding of a sum certain because there was insufficient evidence no additional creditable payments were made toward the Maag note postverdict. According to McNaughton, Rugeti only determined the “maximum” amount due on the judgment, not the exact amount owed, because “there was literally no evidence in the record that additional creditable payments were not made.”

This contention fails. The logical extension of McNaughton’s argument would require the trial court to admit into evidence the financial records the Maag Trust produced for Rugeti’s in camera inspection. Not so. An accountant appointed as a referee under Code of Civil Procedure section 639, subdivision (a), need not disclose the documents he reviewed and relied on in creating the accounting if the reference did not contemplate hearings or the taking of evidence. (See Jones, supra, 90 Cal.App.4th at pp. 474-476 [rejecting argument trial court erred by not requiring accountant-referee “to disclose the evidence that he reviewed and relied on as the basis for the accounting”].) An accountant-referee should “be given access to all information he or she deems necessary to do the job, regardless of whether the specific information was previously introduced into evidence or not,” and he or she need not rely solely on documents admitted into evidence when creating the accounting. (Id. at p. 476.) Indeed, that “‘would defeat the purpose of the accounting,’” which is “to avoid introduction into evidence at trial of each invoice, check or document . . . needed to create the accounting.” (Ibid.)

Nor did McNaughton have an unfettered right to access and view all Maag Trust financial records, particularly where those records implicated the financial privacy rights of nonparties and only established a lack of additional evidence relevant to Rugeti’s calculation, rather than the existence of evidence relevant to his calculation. Those records were relevant not for what they said, but for what they did not say, and Rugeti personally confirmed they disclosed no additional payments creditable toward the judgment. Conducting an in camera inspection of those records allowed Rugeti to strike a balance between the need for a complete and accurate record and the financial privacy rights of the third parties whose names reportedly appear in those records. In these unique circumstances, we cannot say the trial court abused its discretion by permitting Rugeti’s in camera inspection. (See Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 658 [“trial court has available certain procedural devices” to “accommodate considerations of both disclosure and confidentiality,” including “the holding of in camera hearings”].)

McNaughton insists “there is no reason to believe that Lloyd voluntarily provided all relevant records to Mr. Rugeti,” given Lloyd’s history of “misleading” filings suggesting only $33.17 had been paid toward the judgment. McNaughton overstates Lloyd’s alleged deceit. As Lloyd’s counsel explained at an early status hearing on his petition for writ of execution, Lloyd did not oppose the notion that some of NHOM’s payments would offset the judgment; the parties’ dispute was instead over “whether that [offset] happened automatically, or whether there’s an obligation to get an order from the court showing the offset.” At the same hearing, when McNaughton’s counsel complained Lloyd was “not being candid with the court,” the court rejected that argument outright. Lloyd’s previous assertions that “[n]o amount has been paid on the judgment” and that “[t]he Judgment Debtor has not made any direct payments on the Judgment other than” the $411.13 collected by way of levy were at least colorably correct: McNaughton had not made any direct payments on the judgment, and NHOM’s payments to the Maag Trust were not contemporaneously allocated toward the Maag note.

Moreover, Rugeti took into consideration McNaughton’s apprehensions about the completeness of the financial records and took steps to address those concerns before finalizing his recommendation. Specifically, he reviewed NHOM bank records from August 2017 to June 2018 in camera, met with Paul (as a representative of NHOM), and met with McNaughton and his accountant. After doing that additional investigation, Rugeti was evidently confident Lloyd was not hiding payments that applied to the judgment, and we have no basis to second-guess that determination.

The trial court’s appointment required Rugeti to determine the amount due on the judgment, which necessarily required him to determine the exact amount owed. We have no basis to conclude he did not do so, and consequently find no abuse of discretion in the trial court’s adoption of Rugeti’s finding that NHOM paid $1,422,022 to the Maag Trust.

3. The Interest Calculation

McNaughton asserts several challenges to the trial court’s calculation of interest. First, he contends the court committed reversible error by failing to cut off interest on the judgment after Lloyd began submitting “false” declarations concerning McNaughton’s lack of payments on the judgment in August 2015. In support, he relies on Civil Code section 3287, subdivision (a), which provides: “A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented . . . by the act of the creditor from paying the debt.” (Italics added.) According to McNaughton, Lloyd’s filings misleadingly suggested the balance owed on the judgment was at least $750,000 more than it actually was, and this prevented McNaughton from paying the debt owed and thus cut off interest.

This contention fails. Assuming arguendo Civil Code section 3287 applies to calculating postjudgment interest (an issue we need not decide), Lloyd did nothing to “prevent” McNaughton from making payments toward the judgment. The record includes no evidence McNaughton was ready, willing, and able to pay the debt; to the contrary, his levied payments toward the multi-million dollar judgment totaled only $411.13. True, Paul’s and NHOM’s payments toward the Maag note created some confusion about the amount McNaughton owed on the judgment. But McNaughton bore the sole responsibility for paying the award of attorney fees and costs in the judgment, and he made no efforts to pay even those amounts.

McNaughton also contends NHOM’s payments should have been credited first to principal, not interest. Again, we disagree. Rugeti considered and rejected that argument in his final recommendation, noting McNaughton cited no authority for applying payments first to principal, and adding that would be “inconsistent with the economic principles behind applying payments first to interest.” Rugeti explained: “Under simple (non-compounding) post-judgment interest, applying payments to outstanding interest before principal avoids the possibility of a debtor claiming that a partial payment could pay off principal in full, thereby stopping the accrual of further interest and avoiding compensation to the creditor for inexcusable delays in paying off any outstanding portion of a judgment that remains.”

Ignoring these principles, McNaughton asserts “[t]here is no indication from Rugeti’s Report that he ever received or reviewed the Maag Trust’s tax returns to determine whether the Maag Trust treated all payments as repayment of principal,” and further speculates that if those tax returns “neither acknowledged nor paid taxes on post-judgment creditable payments made to the Maag Trust, then by implication all such creditable payments must have been allocated to principal (not interest).”

We are not persuaded. These arguments are highly speculative and based on unsupported assumptions (e.g., that the Maag Trust did not pay taxes on NHOM’s payments and therefore intended to allocate NHOM’s payments to principal). McNaughton also fails to explain why Rugeti’s accounting methodology was improper under applicable accounting standards, and we have no cause to question that methodology. (See De Guere v. Universal City Studios, Inc. (1997) 56 Cal.App.4th 482, 503 [“referee may properly make a determination of which accounting standards to apply, even if there is a conflict in the evidence as to the proper standard”].)

Finally, in his reply brief, McNaughton contends for the first time the trial court erred in calculating interest from the date of the verdict (August 2012) rather than from the date of judgment (December 2014). We treat this issue as waived. The court’s December 2014 judgment awarded “interest thereon accruing from the date of the jury verdict on August 17, 2012.” McNaughton did not appeal that judgment and cannot belatedly claim error in this appeal. Moreover, we have “the discretion to deem an alleged error to have been waived if asserted only in the reply brief and not the opening brief.” (Stoll v. Shuff (1994) 22 Cal.App.4th 22, 25, fn. 1.) We therefore deem the issue waived.

4. Attorney Fees

In his reply brief, McNaughton seeks attorney fees under Civil Code section 1717, which awards attorney fees to the prevailing party in certain “action[s] on a contract.” We deny this request. McNaughton is not the prevailing party in his appeal, and he failed to request attorney fees in his opening brief, thereby waiving the argument.

B. Lloyd’s Cross-Appeal

In his cross-appeal, Lloyd challenges Rugeti’s determination the balance due on the judgment was $1,796,512.26 as of August 24, 2018. As noted in Section II.A.2, supra, a referee’s recommendations are entitled to great weight. We review a trial court’s decision to accept a referee’s recommendation and its decision to apply a credit in partial satisfaction of the judgment for an abuse of discretion. (See Lopez, supra, 246 Cal.App.4th at p. 589; Jhaveri, supra, 176 Cal.App.4th at p. 749.)

According to Rugeti’s report, NHOM’s payments to the Maag Trust totaled $1,422,002, NHOM and the Maag Trust failed to apportion the vast majority of those payments to either the Maag note or the Plaza Del Sol note, and all of NHOM’s unspecified payments should be allocated toward the judgment. Lloyd contends this finding was not supported by substantial evidence because Rugeti failed to comply with the trial court’s order to allocate NHOM’s payments “‘in equal proportion’” between the two notes.

As a preliminary matter, we must address whether Lloyd waived this argument below. In its November 2018 order, the trial court deemed the argument waived, ruling: “At oral argument on this matter . . . , [Lloyd] Copenbarger’s attorney stated on the record that [Lloyd] Copenbarger would accept Rugeti’s finding that the amount due on the Magg [sic] Trust note, and therefore on the judgment against McNaughton’s [sic], was $1,796,512.” Not so. The reporter’s transcript from the hearing in question reflects Lloyd’s counsel was willing to accept the $1,796,512 figure as the “minimum” amount owed on the judgment, but objected to Rugeti’s alleged failure to apportion payment between the two notes. We therefore reach the merits of Lloyd’s cross-appeal.

We begin by observing Rugeti’s allocation of all unspecified payments toward the Maag note was consistent with Civil Code section 1479, which governs the allocation of a debtor’s payments between multiple obligations. Subsection (1) of “section 1479 provides that a debtor may specify how his or her ‘performance’ should be credited by communicating his or her intention to the creditor at the time of performance. In the absence of such a specification, the creditor may choose [under subsection (2)] to apply a payment to any obligation then due. Only if ‘neither party makes such application within the time prescribed herein’ do [subsection (3)’s] default rules apply.” (Kerley v. Weber (2018) 27 Cal.App.5th 1187, 1199-1200.) The party claiming the debtor or creditor applied a payment toward one debt or another bears the burden of proving that particular application was made. (Madera Sugar Pine Co. v. Adams (1924) 68 Cal.App. 111, 115.)

The trial court asked Rugeti to “determine how amounts paid by NHOM to Judgment Creditor [Lloyd] Copenbarger were apportioned [by the parties], if at all,” and Rugeti determined those amounts “WERE NOT APPORTIONED.” Substantial evidence supports his finding. NHOM’s checks to the Maag Trust (with the exception of the April 2017 check) expressed no allocation, and as Lloyd confirmed at deposition in a different case, “NHOM never specified how those payments would be allocated.” Nor did Lloyd express any intent on allocation. According to his deposition testimony in another case, Lloyd mentally credited the payments in a certain manner, but he “didn’t do anything” physically “to actually credit the amount received” to one debt or the other, and “[t]here was no actual physical creation of any documents to memorialize” any application. Consistent with that admission, at a hearing when the court noted Lloyd “never did apportion” the payments, Lloyd’s counsel confirmed: “No. Specific amounts were not apportioned to that obligation.” Substantial evidence thus supports Rugeti’s finding that neither Lloyd nor NHOM allocated the payments toward either note.

Based on that finding, Civil Code section 1479, subsection (1), is inapplicable because NHOM did not “manifest” to Lloyd any “intention or desire” at the time of performance as to how the payments should be credited. Subsection (2) likewise does not apply because the Maag Trust did not expressly apply the payments toward the extinction of either obligation within a “reasonable time” after each payment. (Cf. Goodwin v. Alston (1952) 114 Cal.App.2d 713, 717-718 [where creditor sent “statement in writing” to debtor allocating some payments to principal, trial court had no authority to allocate those payments to interest].) Subsection (3)’s default rules therefore apply. (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 650 (Jessup) [section 1479, subs. (3) applies if “several obligations are owed and neither the debtor nor the creditor makes express application of a payment to a particular obligation within the time prescribed”].)

Subsection (3) dictates the payments “be applied to the extinction of obligations in the following order; and, if there be more than one obligation of a particular class, to the extinction of all in that class, ratably: [¶] 1. Of interest due at the time of the performance. [¶] 2. Of principal due at that time. [¶] 3. Of the obligation earliest in date of maturity. . . .” (Italics added.) Categories 1 and 2 do not apply if the two competing obligations embody “both principal plus accrued interest” and if “there is no question regarding the application of payments as between principal and interest”; in that instance, the question becomes which obligation matures first. (Jessup, supra, 33 Cal.3d at p. 651.) “It is settled that an obligation ‘matures’ when the holder of the note has a legal right to bring an action to force payment.” (Id. at p. 656.)

NHOM defaulted on the Maag note sometime before August 2009, and the Maag Trust delivered a notice of default and acceleration of loan to NHOM in September 2009. The Maag Trust did not acquire the Plaza Del Sol note until several years later in August 2012. Because the Maag Trust had a legal right to bring an action to force payment on the Maag note before it acquired a right to force payment on the Plaza Del Sol note, the Maag note matured first for priority of allocation under section 1479, subsection (3), category 3. Accordingly, the trial court did not abuse its discretion in adopting Rugeti’s recommendation to allocate all unspecified NHOM payments toward the Maag note, and hence the judgment.

Lloyd contends subsection (3) cannot apply because the trial court previously found subsection (2) controlled. We disagree. That ruling was only “tentative” and was made a year before Rugeti issued his report. It was also wrong. Again, for subsection (2) to apply, the creditor must expressly apply the payment to a particular obligation “within a reasonable time after such performance.” (Civ. Code, § 1479, subs. (2).) The Maag Trust did not carry its burden of showing it did so.

Accordingly, subsection (3) controls and therefore the trial court was required to allocate all unspecified NHOM payments toward the Maag note. True, neither Rugeti nor the trial court expressly cited subsection (3), but we may affirm the court’s ruling if correct for any reason. (Orange Catholic Foundation v. Arvizu (2018) 28 Cal.App.5th 283, 297.) Consequently, we find no error in the court’s adoption of Rugeti’s recommended allocation of all unspecified NHOM payments toward the Maag note.

III.

DISPOSITION

The trial court’s November 16, 2018 order is affirmed. Lloyd shall recover his costs with respect to McNaughton’s appeal, and McNaughton shall recover his costs with respect to Lloyd’s cross-appeal. (Cal. Rules of Court, rule 8.278, subd. (2).)

ARONSON, J.

WE CONCUR:

O’LEARY, P. J.

BEDSWORTH, J.