VistaCamarillo Owners Assn. v. Citizens Business Bank

Filed 9/30/08 Vista Camarillo Owners Assn. v. Citizens Business Bank 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

Appeal from judgments of the Superior Court of Orange County, W. Michael Hayes, Judge. Affirmed in part, reversed in part.

Michael T. Harper for Plaintiff and Appellant.

Friedemann Goldberg, John F. Friedemann and Kyle M. Fisher for Defendant and Respondent Citizens Business Bank.

The Gordon Law Firm and Chance E. Gordon for Defendants and Respondents Melissa A. MacDowall and Linda Batrin.

Law Offices OConnor & Martin and Thomas J. OConnor for Defendant and Respondent Jill Susan Minn.

* * *

Plaintiff Vista Camarillo Owners Association (Vista) settled a previous construction defect lawsuit for approximately $3 million and subsequently hired a construction firm to repair the problems at the condominium complex. After a dispute arose between Vista and the construction firm and its affiliates, Vista filed a lawsuit alleging that defendants Citizens Business Bank (Citizens), Melissa A. MacDowall, Linda Batrin, and Jill Susan Minn conspired to embezzle the funds Vista received from the construction defect settlement through false statements, including grossly inflated project cost estimates and payment demands. Citizens, MacDowall, Batrin, and Minn filed separate motions for summary judgment, which the trial court granted. Vista contends the trial court erred in failing to prepare a written order describing the supporting evidence for its conclusion Vista did not show a triable issue of fact, and in concluding the statute of limitations barred Vistas claims.

Although we agree with Vista the trial court was required to prepare appropriate orders when granting summary judgment, the trial courts failure to do so does not require reversal. We also agree with Vista that the trial court erred in finding the statute of limitations had run as to MacDowall and Batrin. Vista alleged in its complaint the conspirators sent Vista payment demands within three years of its filing the complaint. Because these two defendants failed to demonstrate the last overt act of the alleged conspiracy occurred over three years before Vista filed its complaint, they failed to meet their burden in seeking summary judgment.

Citizens and Minn, however, demonstrated they were entitled to summary judgment on other grounds, and Vista failed to address these issues in its briefing. Accordingly, we affirm the trial courts summary judgment for Citizens and Minn.

I

Factual and Procedural Background

Vista sought to remediate certain construction defects at the Vista Camarillo condominium project using settlement funds from a prior construction defect lawsuit. After evaluating a number of competing construction firms, Vista contracted with Reconstruction Specialists, Inc. (RSI) in April 2002, to serve as construction manager. Vista also hired Infinity Design Group, Inc. (Infinity) to act as the project designer. Vista made its first payment, $15,000, to RSI in April 2002. At a meeting inMay 2002, RSI presented Pacific Crest Development Group, Inc. (Pacific) to the Vista board of directors as its selection for general contractor to perform the work RSI had agreed to oversee. RSI introduced MacDowall as Pacifics principal.

Vistas attorney, Michael T. Harper, investigated RSI, Infinity, and Pacific. After reviewing letters, invoices, contracts, and information available from the contractors licensing board, Harper informed Vistas board of directors in a memorandum dated June 10, 2002, that a June 4, 2002, letter from RSIs president to the president of Vistas board evidences a clear case of fraud, breach of fiduciary duty, and breach of contract. The memorandum noted that RSIs president failed to disclose his connections with Pacific, and recommended Vista declare all contracts with RSI and its president, affiliates, and associates in material breach, and that Vista make no further payments to RSI or its affiliates until Vista determines the groups are legitimate and acting in Vistas best interest. Harper further recommended Vista obtain two or three bids from independent third party contractors.

Despite Harpers warnings, Vista contracted with Pacific in July 2002 to serve as general contractor on the reconstruction work. In January 2003, after substantial work had been performed, Vista ceased paying RSIs invoices. In April 2003, Pacific, who was being paid by RSI, filed an arbitration demand against Vista, seeking over $1 million.

In May, 2003, Vista filed a cross-complaint against Pacific in the arbitration alleging causes of action for fraud, negligence, and breach of contract, and sought damages in excess of $2.8 million. The arbitration concluded in December 2004, with the three arbitrator panel awarding Pacific nothing. The arbitration panel clarified it had made no determination regarding potential causes of action against RSI, noting, While the circumstantial evidence suggests there was massive fraud, RSIs fraud has not been proven to be attributable to PCD. The panel further observed that this case is not about breach of fiduciary duty by any or all of the Board members of [Vista]. To the extent [Vista] was damaged by the misconduct of its own Board members, it must look to them for recovery.

In June 2003, Vista sued RSI and Infinity in Ventura County Superior Court, alleging causes of action for breach of contract, fraud, and negligence. In April 2004, Vista dismissed the case.

In August 2005, Vista initiated the present action by suing, inter alia, Citizens and MacDowall, alleging causes of action for fraud and constructive trust. In September 2006, Vista filed the operative third amended complaint, adding as defendants Batrin and Minn, and alleged causes of action for fraud, negligence, and conversion. In essence, the third amended complaint alleges an individual, T. George Lazar, learned that Vista had obtained repair money from a previous lawsuit. Believing the funds totaled approximately $3 million, Lazar allegedly conspired with Batrin, MacDowall, and Amin Amirfar to embezzle the money by obligating Vista to pay $3 million or more for shoddy and substandard construction that would cost Lazar and his cohorts no more than $400,000 to complete, including profit, overhead, and related costs. To further the plan, LAZARS team intentionally and falsely represented to [Vista] that . . . BATRIN was experienced in project management, when in fact she was not; [and] MACDOWALL was a competent contractor, when in fact she was not . . . . The complaint alleges that despite MacDowalls representation to Vista that she was independent from Lazar and RSI, she was the mother of Lazars child. The complaint alleges the conspirators scope of work and projected costs inflated the actual project costs by $2.4 million.

The complaint also alleges that Lazar used Minn to launder embezzled funds by setting up bank accounts in the names of fake businesses with names similar to those hired in the construction contracts executed by Vista, which also had accounts at Citizens. Minn had acted as Lazars banker in the past and, at the time of her participation in the conspiracy, was a vice-president and branch manager at Citizens. Minn allegedly set up an account for Lazar under the name of Infinity Group Design, Inc., with T. Walter Bartoletti, an alias of Lazar, as signatory. She also set up an account under the name of Pacific Crest Group, Inc., also under the Bartoletti alias. At Lazars instruction, Minn ensured that checks received in connection with the project were misdirected first into Lazars fraudulent accounts, with a lesser amount later transferred to the correct accounts.

The trial court granted defendants separate summary judgment motions. Plaintiff now appeals.

II

Discussion

A. The Trial Court Did Not Err in Granting Summary Judgment for Citizens

In ruling on Citizens summary judgment motion, the trial court issued a tentative decision and, after hearing, adopted its tentative as the courts order. In the tentative, the trial court sustained objections to nearly all of Vistas evidence. In support of its ruling, the tentative cited Citizens evidence, noting: The declaration of Minn says there was no agreement express or implied [to] work in cooperation with RSI, [Pacific], PCG, or [Vista]. She further said she didnt know of any wrong doing by the [Citizens] customers with respect to the [Vista] project. The tentative concluded: Plaintiff has not sustained its burden to establish a triable issue of fact as to Minns lack of knowledge or participation in the conspiracy. Plaintiff has presented no evidence aside from conjecture and speculation. Citing a verification form Vista submitted, the court observed: The verification form was executed months after the alleged conspiracy was complete. Further, it was unrelated to the [Vista] project, unrelated to any damages claimed by Vista and unrelated to the alleged Fraud. The court continued: As to negligence claim [sic] fails b/c plaintiff cannot establish that [Citizens] owed a duty to plaintiff. Absent extraordinary and specific facts, a [b]ank does not owe a duty of care to a non-customer. Citing to Citizens separate statement, the trial court concluded Vista could not prove any of its allegations against the bank.

Vista contends we must reverse summary judgment in Citizens favor because the trial court did not draft an order citing evidence to support its conclusion there were no triable issues of fact. We disagree.

As set forth above, the courts tentative ruling cited the evidence upon which it ruled, and the court expressly incorporated its tentative ruling into its order. Any procedural irregularity in the trial courts order, however, does not require reversal. (Soto v. State of California (1997) 56 Cal.App.4th 196, 199.) [T]he trial courts role in deciding a motion for summary judgment involves no findings of fact. The courts role is limited to determining whether there is a triable issue of fact. [Citation.] Such a determination is one of law that we review de novo. [Citation.] We are not bound by the trial courts stated reasons. [Citation.] [] Because we review the grant of summary judgment de novo, a statement of reasons is much less important for review than a statement of decision upon a trial of a question of fact. The lack of a statement of reasons presents no harm where, as here, our independent review establishes the validity of the judgment. (Id. at p. 199.)

Vista does not challenge any of the reasons the trial court presented in its tentative ruling for granting Citizens motion. Having failed to demonstrate error, we affirm the trial courts summary judgment grant for Citizens.

B. The Trial Court Erred in Granting Summary Judgment for MacDowall

MacDowall presented three arguments to support her summary judgment motion: (1) the statute of limitations barred the action; (2) Vista could not demonstrate justifiable reliance; and (3) the res judicata doctrine barred Vistas claims. In its minute order, the trial court cited only the statute of limitations as the basis for its ruling. In granting summary judgment, the trial court incorporated by reference its tentative ruling. Unfortunately, none of the parties included this particular tentative ruling in the record.

Code of Civil Procedure section 338 provides a three-year statute of limitations for fraud that does not commence to run until the discovery, by the aggrieved party, of the facts constituting the fraud . . . . (Code Civ. Proc., 338.) The rule is that the statute commences to run only after one has knowledge of facts sufficient to make a reasonably prudent person suspicious of fraud, thus putting him on inquiry. [Citation.] The means of knowledge are equivalent to knowledge only where there is a duty to inquire, as where plaintiff is aware of facts which would make a reasonably prudent person suspicious. (Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, 298.) Put another way, the plaintiff discovers the cause of action when he at least suspects a factual basis, as opposed to a legal theory, for its elements, even if he lacks knowledge thereof when, simply put, he at least suspects . . . that someone has done something wrong to him [citation], wrong being used, not in any technical sense, but rather in accordance with its lay understanding (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397-398.)

In asserting Vistas fraud claims are barred, MacDowall principally relies on the Harper memo and a declaration showing MacDowall disclosed at the May 2002 Board meeting that her only construction experience had been two small jobs. MacDowall asserts the Harper memo unmistakably gave Vista reason to suspect that someone has done something wrong to it, thus triggering the three year limitations period in Code of Civil Procedure section 338. But Vistas complaint alleged defendants acted as conspirators in a larger scheme. [W]hen a civil conspiracy is properly alleged and proved, the statute of limitations does not begin to run on any part of a plaintiffs claims until the last overt act pursuant to the conspiracy has been completed. (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 786 (Wyatt).)

In Wyatt, supra, a mortgage broker falsely represented the terms of a mortgage loan to the plaintiffs and, at various times, used the threat of foreclosure to induce the plaintiffs to keep refinancing the loan. Because the plaintiffs had alleged a conspiracy between the mortgage broker and its affiliated entities, the court held the statute of limitations did not commence to run until the conspirators performed the last overt act in furtherance of the conspiracy. As the Supreme Court observed: The situation of the [plaintiffs], on the other hand, demonstrates the equities served by the last overt act doctrine in cases where the fraud is of a continuing nature. There was substantial evidence that [the defendants] were involved in perfecting a scheme whose purpose was to trap respondents on a financial treadmill from which they could not escape. Once trapped by the unexpectedly large balloon payment due at the end of the first loan, the [plaintiffs] found themselves forced to refinance the loan, much as [the defendants] planned. (Efforts to obtain financing from other sources failed.) This permitted the repetitive collection of brokerage fees and late charges from respondents, depleting their resources and moving foreclosure ever closer. (Id. at p. 788.) The court explained: When, as here, the underlying fraud is a continuing wrong, a convincing rationale exists for delaying the running of the statute of limitations. Just as the statute of limitations does not run against an action based on fraud so long as the fraud remains concealed, so ought the statute to be tolled even after the fraud is discovered, for so long as the sheer economic duress or undue influenceembedded in the fraud continues to hold the victim in place. (Ibid., original italics)

Relying on Wyatt, MacDowall contends that tolling under the last overt act doctrine applies only if the plaintiff has been kept under economic duress. Because Vista knew or had reason to know of the conspiracy to defraud before it signed the Pacific contract, MacDowall asserts Vista was not under economic duress at the time it executed the contract. We disagree.

MacDowall fails to account for the contract Vista had signed with RSI in April 2002, two months before Harper had drafted his memo. According to the complaint, the RSI contract was a key part of the alleged conspiracy, obligating Vista to expend up to $2.95 million of Vistas money to remediate the project. Viewing the allegations of the complaint in a light most favorable to Vista, we conclude the RSI contract placed Vista in continuing economic duress, allowed the conspiracy to continue, and therefore tolled the statute of limitations.

MacDowall fails to cite any evidence demonstrating that Vista knew or suspected fraud at the time the parties executed the RSI contract, or that Vista could have simply walked away from the RSI contract when Harper expressed his concerns. Thus, assuming an economic duress requirement applies to tolling under a conspiracy theory, the last overt act doctrine fully applies to this case.

Vistas complaint alleges the conspirators made three applications for payment in January and February 2003. These applications constituted acts in furtherance of the conspiracy, and tolled the statute of limitations at least until the conspirators received the last payment. Vista filed the present suit in August 2005, less than three years from the 2003 payment applications. Consequently, Vistas fraud claims are not time-barred on their face.

True, a plaintiff bears the burden of proof at trial to demonstrate the applicable statute of limitations has been tolled, but the party moving for summary judgment bears the burden of demonstrating the absence of a triable issue of fact upon which the plaintiff has the burden of proof. (Segura v. Brundage (1979) 91 Cal.App.3d 19, 28-29.) Accordingly, the burden fell upon MacDowall to negate tolling in its summary judgment motion. Because MacDowall failed to do so, the trial courts ruling cannot be upheld on statute of limitations grounds. MacDowall does not raise in her brief any other grounds upon which the trial courts order may be affirmed. Accordingly, we reverse summary judgment in MacDowalls favor.

C. The Trial Court Erred in Granting Summary Judgment for Batrin

Batrin based her summary judgment motion on the statute of limitations and lack of justifiable reliance. Batrins arguments regarding statute of limitations are identical to MacDowalls, and our analysis on the subject applies to Batrin as well. Because Batrin does not address the lack of justifiable reliance issue in her brief, we do not consider the matter further. Accordingly, we reverse the trial courts grant of summary judgment for Batrin.

D. The Trial Court Did Not Err in Granting Summary Judgment for Minn

Minn based her summary judgment on three issues: (a) statute of limitations; (b) lack of justifiable reliance; and (c) lack of any evidence of Minns knowing participation in a conspiracy. Because Minns statute of limitations argument is similar to those of MacDowall and Batrin, we conclude this basis does not support the trial courts ruling.

Minn does address justifiable reliance in her brief. In support of summary judgment, Minn cited the Harper memo, arguing disclosure of the potential fraud in the memo prevented Vista from justifiably relying on any misrepresentations made to it. Minn fails to acknowledge, however, that her own separate statement demonstrates that Vista had made payments to RSI in April and June, 2002, under the existing contract before Harper distributed his memo. Accordingly, lack of justifiable reliance cannot support summary judgment for Minn.

As to lack of knowing participation in a conspiracy, Minn presented evidence demonstrating she had no knowledge of any fraudulent or wrongful behavior by the reconstruction team on the project, and never agreed to participate in any conspiracy to defraud Vista. Vista fails to address this ground in its opening brief, and did not file a reply brief. Although the trial court did not rule expressly on this ground in its order, it supports summary judgment for Minn.

III

Disposition

The judgments in favor of Citizens and Minn are affirmed, and the judgments in favor of MacDowall and Batrin are reversed. In the interests of justice, each party is to bear its own costs of this appeal.

ARONSON, J.

WE CONCUR:

SILLS, P. J.

RYLAARSDAM, J.

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