Polliart v. ZiaSun Technologies
Filed 5/17/06 Polliart v. ZiaSun Technologies CA4/1
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
FREDERIC POLLIART, Plaintiff and Appellant, v. ZIASUN TECHNOLOGIES, INC. et al., Defendants and Respondents. | D046038 (Super. Ct. No. GIC806560) |
APPEAL from a judgment of the Superior Court of San Diego County, Ronald S. Prager, Judge. Affirmed.
Frederic Polliart sued ZiaSun Technologies, Inc. and its successor corporation Investools, Inc. (collectively ZiaSun), and two of ZiaSun's former officers, D. Scott Elder and Allen Hardman, alleging these defendants (the ZiaSun defendants) caused him to lose money on his investments in ZiaSun and other companies. Polliart also named several other defendants, but he dismissed these defendants after he was unable to serve them. The ZiaSun defendants successfully moved for summary judgment. Polliart appeals. We affirm.
FACTUAL SUMMARY
Polliart's amended complaint alleges the following. In 1996, Polliart, a French citizen living in Taiwan, was contacted by employees of a Philippine company (referred to as " Oxford International" ), who sold him shares of stock in several public companies, including ZiaSun, a Nevada corporation. The Oxford International employees allegedly misstated or failed to disclose that (1) Polliart's investments would be used to finance the criminal activities of various corporate officers; (2) returns on Polliart's investment would come from new investors (this was a " pyramid" or " Ponzi" scheme); (3) there was little or no market for the stock; and (4) individuals at the corporations were participating in insider trading. Polliart's stock purchase totaled $182,000.
The Oxford International employees were allegedly acting " at the direction of" several individuals, including Bryant Cragun and respondents Hardman and Elder.
Cragun allegedly owned Oxford International, and was affiliated with ZiaSun as an investment advisor, fundraiser, shareholder, officer, and director. Hardman and Elder were officers and/or directors of ZiaSun. These parties allegedly engaged in a scheme to defraud Polliart by using " 'boiler rooms'" to raise funds from Polliart and to deceive him into buying stock based on misrepresentations and omissions of material fact.
Based on these allegations, Polliart sued: (1) Cragun; (2) Hardman, Elder, and ZiaSun (the ZiaSun defendants); and (3) Oxford International and several of its employees. Polliart later dismissed the complaint against Cragun and the Oxford International defendants after he was unable to serve them. After demurrers were granted on several claims, Polliart's remaining causes of action against the ZiaSun defendants were: (1) deceit (common law fraud); (2) securities fraud in violation of Corporations Code section 25401; (3) conversion; and (4) conspiracy.
The ZiaSun defendants moved for summary judgment. In support, they submitted their declarations stating they had no prior communications with Polliart; they never sold stock to Polliart; they had no involvement in Oxford International's sale of stock to Polliart; and they had no ownership interest in, or agency relationship with, Oxford International. The ZiaSun defendants also relied on deposition testimony and Polliart's discovery responses showing (1) Polliart had never met or communicated with Elder or Hardman; (2) Polliart purchased the ZiaSun stock based solely on representations by the Oxford International employees; (3) Polliart had no evidence that the ZiaSun defendants had any involvement in Oxford International's sale of the ZiaSun stock; and (4) Polliart never purchased stock directly from ZiaSun, nor did he purchase any stock in California. Defendants additionally relied on Polliart's discovery responses showing Polliart had no evidence he lost money by purchasing ZiaSun stock, and he did not know how much of the $182,000 was used to purchase the ZiaSun stock (as opposed to stock from the other companies).
After obtaining numerous lengthy continuances, Polliart filed an opposition asserting that triable issues of fact existed as to the ZiaSun defendants' involvement in the alleged misrepresentations/failures to disclose. Polliart's supporting evidence included the following: Cragun lived " part of the time" in Solana Beach. Cragun gave Hardman a business card in May 1997 stating that Cragun was president of Oxford International. In June 1997, Cragun hired Hardman to be vice president of BestWay, which was the predecessor of ZiaSun. Although Cragun was never an employee, officer, or director of ZiaSun, he owned stock in the company and worked as an independent consultant for ZiaSun to find potential acquisition candidates. ZiaSun paid ZiaSun stock to Cragun for his consulting services. Cragun was the main source of the venture capital for ZiaSun. Hardman did not know where Cragun was getting this capital. Hardman was paid an annual salary of $120,000 by BestWay, and was paid an annual salary of $150,000 by ZiaSun. Cragun's daughter worked for ZiaSun as an administrative assistant, and assisted in the incorporation of a predecessor entity. Polliart's last purchase of ZiaSun stock was in March 1999, and Hardman signed a ZiaSun stock certificate in June 2000 showing that Polliart owned 10,000 shares of ZiaSun stock. ZiaSun shared some of the legal costs with Cragun in a prior slander suit in which ZiaSun and Cragun were co-plaintiffs.
Polliart also submitted evidence to which the court sustained defendants' evidentiary objections. This evidence included: (1) ZiaSun's former auditor and attorney had " regulatory problems" at unspecified times, and ZiaSun did not disclose this information to Polliart; and (2) Cragun had been investigated and accused of various improprieties, and ZiaSun did not " look into" these allegations or disclose them to Polliart.
After a hearing, the superior court granted summary judgment in the ZiaSun defendants' favor. On the fraud claim, the court found it was " undisputed that Plaintiff never met or communicated with Elder or Hardman. . . . Furthermore, plaintiff . . . failed to provide relevant evidence linking Oxford to either [ZiaSun] or Investools. In addition, plaintiff does not know how much money he invested in [ZiaSun]." With respect to the securities fraud claim, the court found the undisputed evidence showed defendants did not offer or sell a security to Polliart in California, and rejected Polliart's argument that the ZiaSun defendants had a duty to conduct investigations of ZiaSun's advisors, and to disclose that information to the public. On the conversion claim, the court stated Polliart did not identify " the specific sum he alleges was converted." On the conspiracy claim, the court stated Polliart failed to " establish the existence of an actionable tort" and therefore could not recover on a conspiracy theory.
Polliart appeals.
DISCUSSION
I. Standard of Review
A " party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A defendant meets this burden if it shows the plaintiff does not possess, and cannot reasonably obtain, the evidence to support its claims. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460; Gaggero v. County of San Diego (2004) 124 Cal.App.4th 609, 614.) If this burden is met, the burden of production shifts to the opposing party to make a prima facie showing of a triable issue of material fact. (1231 Euclid Homeowners Assn. v. State Farm Fire & Casualty Co. (2006) 135 Cal.App.4th 1008, 1017.)
On appeal from a summary judgment, we review the record de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) We view the evidence in the light most favorable to the opposing party, liberally construing the opposing party's evidentiary showing while strictly scrutinizing the moving party's showing. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.) Because summary judgment is a drastic procedure, we resolve all doubts as to the propriety of granting the motion in favor of the opposing party. (Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037.) However, we must presume the judgment is correct and the appellant bears the burden of demonstrating error. (Howard v. Thrifty Drug & Discount Stores (1995) 10 Cal.4th 424, 443.)
II. Fraud/Deceit Claim
To prove a fraud claim, a plaintiff must show the defendant made a material misrepresentation to the plaintiff or failed to disclose material facts that the defendant had a duty to disclose, and the plaintiff justifiably relied on the misrepresentation or omission. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.)
Polliart's fraud theory against the ZiaSun defendants was based solely on his allegations that Oxford International employees misrepresented material facts in connection with a stock sale and these Oxford International employees were acting " at the direction of" the ZiaSun defendants. In moving for summary judgment, the ZiaSun defendants met their burden to show Polliart had no evidence to support these allegations. The ZiaSun defendants relied on their own declarations and Polliart's discovery responses to show there was no evidence of a relationship between the ZiaSun defendants and Oxford International supporting a finding that the ZiaSun defendants could be held liable for Oxford International's alleged wrongful acts.
In response to this evidence, Polliart directed the court's attention to various connections between Cragun and the ZiaSun defendants. Polliart argued this evidence was relevant because Cragun was the president of Oxford International and therefore Cragun's actions should be considered the acts of Oxford International. However, the court sustained the ZiaSun defendants' objections to evidence showing that Cragun was Oxford International's president, and Polliart does not challenge this ruling on appeal. Contrary to Polliart's assertion in his reply brief, the fact that he appealed the judgment does not necessarily show he raised the evidentiary issues on appeal. To challenge a court's evidentiary ruling, an appellant must identify the ruling, and explain why the court's ruling was error, citing to relevant factual and legal authority. (See 108 Holdings, LTD. v. City of Rohnert Park (2006) 136 Cal.App.4th 186, 193, fn. 3.) Polliart did not assert any legal or factual argument as to why the court's evidentiary rulings were erroneous. He therefore waived the claim. (Ibid.)
In any event, Polliart produced no facts showing that Cragun's actions (on his own behalf or as president of Oxford International) could be attributed to the ZiaSun defendants. The fact that Cragun was the main source of venture capital for ZiaSun or that he worked as a consultant to ZiaSun does not show he was ZiaSun's agent. Similarly, the fact that Cragun's daughter worked for ZiaSun as an administrative assistant is insufficient to show a link between Oxford International and the ZiaSun defendants making defendants legally responsible for Oxford International's conduct. There were no facts showing Cragun, Oxford International, or Oxford International employees were the actual or ostensible agents of the ZiaSun defendants. (See Civ. Code, §§ 2316, 2317.)
On appeal, Polliart asserts: " The defendants are cunning business people who have built a network of inter-related companies by working together, each on behalf of the rest. Polliart's rights against these respondents cannot be defeated simply because the front man, Cragun, is unavailable to be served . . . ." However, by failing to support these assertions with any evidence (or a citation to the factual record), Polliart's argument is insufficient to show the trial court erred in granting summary judgment on the fraud claim. (See Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 699-700; Michelson v. Hamada (1994)29 Cal.App.4th 1566, 1589.)
Polliart alternatively contends he created a triable issue of fact on his fraud claim by showing the ZiaSun defendants did not disclose certain material information to Polliart. However, Polliart did not allege this factual theory as a basis for his fraud claim. Polliart alleged only that the ZiaSun defendants were liable because the Oxford International employees were " acting at [their] direction." A " 'plaintiff cannot bring up new, unpleaded issues in his or her opposing papers.' . . . A summary judgment . . . motion that is otherwise sufficient 'cannot be successfully resisted by counterdeclarations which create immaterial factual conflicts outside the scope of the pleadings . . . .'" (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648.)
Additionally, even assuming Polliart properly pled this theory, Polliart's factual submissions failed to create a triable issue of fact. Polliart argues the ZiaSun defendants should have revealed information about Cragun, and various regulatory investigations of ZiaSun's attorney and accountant. However, the trial court ruled Polliart's evidence on these matters was inadmissible, and Polliart has not challenged this ruling on appeal. Moreover, Polliart does not cite to any legal authority holding that a corporation owes a common law duty to purchasers of its stock to publicly disclose regulatory " investigations" of its independent consultants, legal professionals, or accounting professionals. Additionally, there was no evidence that any of the information about these individuals was material and affected the price of ZiaSun's stock.
Finally, we find unavailing Polliart's reliance on the June 2000 stock certification signed by Hardman. Even assuming we could construe this document as a " communication" between Hardman and Polliart, the document does not create a basis for imposing fraud liability because there was no evidence the stock certificate contained any false or misleading information.
III. Securities Fraud Claim
In his complaint, Polliart alleged the ZiaSun defendants violated Corporations Code section 25401. To prevail on a cause of action under this code section, a plaintiff must establish the defendant sold stock in California by fraudulent untrue statements or by omitting material facts that would make a statement misleading. (Corp. Code, §§ 25401, 25501; see California Amplifier, Inc. v. RLI Ins. Co. (2001) 94 Cal.App.4th 102, 108-109.)
The undisputed facts showed Polliart could not succeed on this claim. There was no evidence the securities were bought or sold in California, as is required to establish a violation of the statute. Challenging this finding on appeal, Polliart argues " Oxford appears to have been a boiler room used by Cragun, Hardman, Elder, [and] ZiaSun . . . to pump out worthless stock to an unsuspecting public. A triable issue of fact exists, therefore, whether respondents were offering or selling securities in California." However, Polliart does not cite to any evidence supporting that this " boiler room" was in California or that any of the challenged stock sales were made from this location or that the ZiaSun defendants were involved in these sales. Our independent review of the factual record confirmed the absence of any such evidence.
Further, as discussed above, there was no evidence defendants sold the securities to Polliart. The courts have recognized that Corporations Code section 25401 imposes a duty only upon persons engaged in the market activity. A defendant must be " selling" or offering" the stock while making an allegedly false statement for the purpose of inducing the purchase of the stock. (See StorMedia Inc. v. Superior Court (1999) 20 Cal.4th 449, 461-462; Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1104; Employers Ins. v. Musick, Peeler & Garrett (S.D. Cal. 1994) 871 F.Supp. 381, 387, opn. amended on other grounds (S.D. Cal. 1995) 948 F.Supp. 942); see also 1 Marsh & Volk, Practice Under the Cal. Securities Laws (2005) Civil Liabilities, § 14.03[4][a][b], pp. 14-22 to 14-23.)
IV. Conversion Claim
" 'Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion are the plaintiff's ownership or right to possession of the property at the time of the conversion; the defendant's conversion by a wrongful act or disposition of property rights; and damages. . . .' Money can be the subject of an action for conversion if a specific sum capable of identification is involved." (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451-452.)
To meet their summary judgment burden on this claim, the ZiaSun defendants relied on their own declarations showing they had no involvement in Polliart's purchase of ZiaSun's stock and Polliart's discovery responses to show he had no evidence to support his claim that the ZiaSun defendants engaged in wrongful acts interfering with Polliart's property. Defendants also relied on evidence showing Polliart was unable to identify any specific sum of money that was the subject of the conversion claim. This showing satisfied defendants' summary judgment burden. Polliart did not produce any responsive evidence raising a triable issue of fact on these issues.
On appeal, Polliart argues that summary judgment was improper because he " has identified the specific sum of $182,000, which has been converted by Respondents through their intricate conspiracy of fraud." However, it is undisputed the $182,000 was a collective amount to purchase a bundle of stock, only a portion of which was ZiaSun stock. Moreover, even assuming the subject of the conversion claim had been properly identified, Polliart does not cite to any facts showing the ZiaSun defendants affirmatively engaged in any wrongful conduct that improperly deprived Polliart of his money. Thus, the court properly granted summary judgment on the conversion claim.
V. Conspiracy Claim
" Liability for civil conspiracy generally requires three elements: (1) formation of the conspiracy (an agreement to commit wrongful acts); (2) operation of the conspiracy (commission of the wrongful acts); and (3) damage resulting from operation of the conspiracy." (People ex rel. Kennedy v. Beaumont Investment, Ltd. (2003) 111 Cal.App.4th 102, 137; see Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1062.) The undisputed record shows Polliart cannot prove these elements. There were no facts showing an agreement or common plan to commit a tortious act. There was no evidence the ZiaSun defendants actively took part in a plan to commit a wrongful act, aided or encouraged any wrongdoer, or ratified or adopted any acts of any other defendants. The court thus properly granted summary judgment on the conspiracy claim.
DISPOSITION
Judgment affirmed. Appellant to pay respondents' costs on appeal.
HALLER, Acting P.J.
WE CONCUR:
O'ROURKE, J.
IRION, J.
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