Judge Melvin D. Sandvig, Case Number: 23CHCV00276, Date: 2024-11-07 Tentative Ruling

Judge: Melvin D. Sandvig, Case: 23CHCV00276, Date: 2024-11-07 Tentative Ruling

Case Number: 23CHCV00276 Hearing Date: November 7, 2024 Dept: F47

Dept. F47

Date: 11/7/24 TRIAL DATE: 12/9/24

Case #23CHCV00276

SUMMARY JUDGMENT/SUMMARY ADJUDICATION

Motion filed on 8/21/24.

MOVING PARTY: Defendants Fortune Energy, Inc.; Fortune Energy Distribution, Inc.; Fortune Energy Distribution Corp.; and F.E. Distribution Inc.

RESPONDING PARTY: Plaintiff Southwest Marine and General Insurance Company

NOTICE: ok

RELIEF REQUESTED: An order granting summary judgment in favor of Defendants and against Plaintiff on Plaintiff’s First Amended Complaint.

RULING: The motion is denied in its entirety.

SUMMARY OF FACTS & PROCEDURAL HISTORY

This action arises out of payments made by Plaintiff Southwest Marine and General Insurance Company (Plaintiff) as surety on a Customs Bond issued by Plaintiff on behalf of Defendant Fortune Energy, Inc.

Plaintiff alleges that on or about 11/7/13, a written Custom’s Bond Agreement & Indemnity (Agreement) was made between Plaintiff’s authorized Agent and non-Party, Avalon Risk Management Insurance Agency, LLC (Avalon) and Fortune Energy, Inc. (collectively, Principal or Defendant). (See Zaragoza Decl., Ex.1; Separate Statement (SS) 16). Avalon acted as an agent for Plaintiff, an admitted carrier of its parent company, and non-party Coaction Specialty Insurance Company (Coaction), and pursuant to Agreement, Avalon requested that Plaintiff issue a Customs Bond and to act as Surety on the bond, and Plaintiff did issue a Customs Bond on behalf of Plaintiff to Defendants, Bond #17C003X0M (Bond), and named themselves as Surety on the bond. (Zaragoza Decl., Ex.2; SS 17). The Bond was issued in favor of U.S. Customs Border and Protection for continuous one year terms until such time as terminated. (Leslie Decl.; Zaragoza Decl.; SS 18). The Bond had limits of liability in the amount of $50,000.00.

From approximately 12/30/21 through 2/1/22, multiple demands for payment under the Bond were made upon Plaintiff by U.S. Customs Border and Patrol for two payments which totaled $41,542.96 for duties Defendants deprived the United States Government from collecting alleging violations of Title 19, Unites States Code, Section, 1592 by which Defendants declared the material used in construction of the imported equipment was of a different alloy than the material that Defendant reported was used, and therefore the duty was higher. (Leslie Decl.; Zaragoza Decl., Ex.3-6; SS 19-22). The U.S. Customs and Border Patrol indicated in their notice of violation that the standard violated by Defendants was fraud, and did not believe that the standard violated was negligence or gross negligence. Defendant failed to respond to the notices issued to Defendant. Defendant failed to present a defense, or to even respond to the notices issued to Plaintiff which were forwarded to Defendant. (Zaragoza Decl., Ex.3-6; SS 27).

On or about 3/3/22, by a letter sent to Defendant, Avalon Risk Management demanded that Defendant pay the duties demanded by the U.S. Customs and Border Enforcement, and warned Defendant that any payment required to be made on their behalf by Plaintiff would require reimbursement by Defendant. (Zaragoza Decl., Ex.7; SS 24).

On or about 3/9/22, Plaintiff, paid two claims made against the Bond by U.S. Customs Border and Protection on behalf of Plaintiff’s bond Principal, the Defendant, by and through Coaction’s non-admitted carrier and non-party New York Marine and General Insurance Company, for $15,218.26 and $26,324.70, totaling $41,542.96. (Leslie Decl.; Zaragoza Decl., Ex.8; SS 25).

Plaintiff contends that on or about 3/9/22, Defendants breached the Agreement by failing to repay the amount expended by Plaintiff. As a result, Plaintiff claims to have suffered damages in the amount of $41,542.96. (Zaragoza Decl.; SS 25).

On 2/1/23, Plaintiff filed this action against Defendant Fortune Energy, Inc. and Defendants Fortune Energy Distribution, Inc.; Fortune Energy Distribution Corp.; and F.E. Distribution Inc., as the alter egos of Fortune Energy, Inc. (collectively, Defendants), for breach of contract and indemnity. In response to a demurrer to the original complaint, on 6/5/23, Plaintiff filed a First Amended Complaint which alleges the same two causes of action.

On 12/12/23, this Court overruled Defendants’ demurrer to the First Amended Complaint and ordered Defendants to answer within 30 days. (See 12/12/23 Minute Order). On 1/11/24, Defendants answered the complaint.

On 8/21/24, Defendants filed and served the instant motion seeking an order granting summary judgment in favor of Defendants and against Plaintiff on Plaintiff’s First Amended Complaint. The motion is titled as being a motion for summary judgment, or, in the alternative, summary adjudication. (See Notice of Motion, p.i:14-17). The introduction to the Memorandum of Points and Authorities filed in support of the motion also indicates that the motion is one for summary judgment or alternatively summary adjudication. (See Motion, p.1:3-4, p.1:26-28). However, the body of the notice of motion indicates that Defendants are only seeking summary judgment in their favor on Plaintiff’s First Amended Complaint. (See Notice of Motion, p.ii:1-14). Additionally, no alternative issues are set forth in the notice of motion or in the separate statement filed in support of the motion as required to obtain such relief. See CRC 3.1350(b), (h); CCP 437c(f). As such, the Court cannot determine what alternative issues Defendants’ seek to have adjudicated.

Plaintiff has opposed the motion and Defendants have filed a reply to the opposition.

ANALYSIS

Request for Judicial Notice

Defendants’ Request for Judicial Notice (RJN) is denied. Defendants’ request that the Court take judicial notice of Plaintiff’s First Amended Complaint, Plaintiff’s Original Complaint, Defendants’ Demurrer to the Original Complaint, Defendants’ Demurer to the First Amended Complaint, Plaintiff’s Opposition to the Demurrer to the First Amended Complaint, Defendants’ Reply to the Opposition to the Demurrer to the First Amended Complaint; the Court’s Minute Order Re the Ruling on the Demurrer to the First Amended Complaint, and Defendants’ Answer to the First Amended Complaint. Since all of the foregoing documents are part of the Court file, the Court finds it unnecessary to take judicial notice of same.

Evidentiary Objections

Plaintiff’s objections (numbers 1-7) to the Schoen declaration are overruled.

* * *

A party may move for summary judgment if it is contended that the action has no merit or there is no defense to the action. See CCP 437c(a)(1). A motion for summary judgment must be granted if all of the papers show that there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. CCP 437c(c).

A defendant moving for summary judgment has met its “burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” CCP 437c(p)(2). A cause of action has no merit if one or more elements of the cause of action cannot be separately established or a defendant establishes an affirmative defense to the cause of action. CCP 437c(o). If the moving party on a motion for summary judgment fails to meet its initial burden, the burden never shifts to the responding party and the motion must be denied. See Swanson (2014) 232 CA4th 954, 963.

Since Defendants have failed to properly request or support the alternative request for summary adjudication, as noted above, it must be denied. As such, if one triable issue of material fact exists, the motion must be denied.

The gravamen of Defendants’ argument is that Plaintiff cannot establish that a contract exists between the parties which is an essential element of Plaintiff’s causes of action for breach of contract and express indemnity. (See Defendants’ Memorandum of Points and Authorities, generally). However, Defendants have failed to support this argument, both procedurally and substantively.

The separate statement filed in support of the motion does not include material facts which support a finding that Plaintiff cannot establish the contract element of its claims. Material facts are defined as “facts that relate to the cause of action, claim for damages, issue of duty, or affirmative defense that is the subject of the motion and that could make a difference in the disposition of the motion.” See CRC 3.1350(a)(2). The first seven facts in the separate statement set forth the underlying material facts which led to the filing of this action. (See Separate Statement 1-7). The next six facts set forth the procedural history of the case as set forth above. (See Separate Statement 8-13). The last two facts in the separate statement merely set forth the date Defendants propounded Requests for Admissions on Plaintiff and the date Plaintiff served responses to same. (See Separate Statement 14-15). Defendants do not point to any specific Request for Admission or response thereto which supports their position that they are entitled to summary judgment in their favor on Plaintiff’s First Amended Complaint. (SS 14-15). As such, Defendants have failed to establish how these facts could make a difference in the disposition of the motion.

An examination of the Requests for Admissions and responses thereto, reveals that Plaintiff has denied all of the Requests for Admissions. (See Defendants’ Ex.13-14). The denials of the requests for admissions are not admissible because Plaintiff’s litigation conduct is not directly at issue. See Gonsalves (2015) 232 CA4th 1406, 1417. Further, Defendants have not shown that the facts denied by Plaintiff are in fact true.

The evidence before the Court establishes that a triable issue of material fact exists regarding the existence of a contract (the Customs Bond) which was renewed annually as long as Defendant paid the bond premium. (See FAC ¶17; Zaragoza Decl., Ex.2; SS 17, 30, 31). The evidence indicates that the Customs Bond was issued by Plaintiff at Defendant’s special insistence and request, pursuant to the “Customs Bond Application and Indemnity.” (Zaragoza Decl., Ex.1-2; SS 16-18). Plaintiff is listed as the Surety in the bond which is the agreement which required Plaintiff to pay Customs and Border Enforcement for the duties that Defendant failed to pay. The evidence indicates that Plaintiff acted as a Surety for the import duties, and paid the customs duty when it was demanded by U.S. Customs after Defendant failed and refused to pay as agreed. (Zaragoza Decl., Ex.7, 8; SS 25-26, 31, 38-41).

Minimally, based on the contract and California law, a triable issue of material fact exists as to whether Defendants must reimburse Plaintiff for the sums paid by Plaintiff on Defendant’s behalf. Civil Code 2847 provides:

“If a surety satisfies the principal obligation, or any part thereof, whether with or without legal proceedings, the principal is bound to reimburse what he has disbursed, including necessary costs and expenses; but the surety has no claim for reimbursement against other persons, though they may have been benefited by his act, except as prescribed by the next section.”

Defendants have not presented any evidence to refute Plaintiff’s allegation that Fortune Energy Distribution, Inc., Fortune Energy Distribution Corp., and F.E. Distribution Inc., are alter egos of Defendant Fortune Energy, Inc. As such, a triable issue of material fact also exists as to the liability of these defendants.

CONCLUSION

The motion is denied in its entirety.

The Court notes that Plaintiff has failed to electronically bookmark the exhibits attached to the declaration of Rosa Zaragoza filed in support of the opposition in violation of CRC 3.1110(f)(4). Counsel for the parties are warned that failure to comply with this rule in the future may result in matters being continued so that papers can be refiled in compliance with the rule, papers not being considered and/or the imposition of sanctions.