Judge William A. Crowfoot, Case Number: 22AHCV00344, Date: 2023-05-19 Tentative Ruling

Judge: William A. Crowfoot, Case: 22AHCV00344, Date: 2023-05-19 Tentative Ruling

On June 8, 2022, plaintiff Bradley Ranch Co-Owners LLC (“Plaintiff” or “LLC”) filed this action against defendants Christy Snyder Bradley (“Christy”), Ann Hyatt Logan (“Logan”), and Philip M. Symanski (“Symanski”). Plaintiff asserts causes of action against Christy for conversion, constructive fraud, breach of fiduciary duty, violation of Penal Code section 496, unjust enrichment, money had and received, constructive trust, accounting, and injunctive relief.

Plaintiff alleges that Christy was its sole manager from December 18, 2020, until on or about May 21, 2022. (Compl., ¶ 5.) Christy was authorized to sell its primary asset of 120 acres of farmland (the “Bradley Ranch”) for $3.15 million. (Compl., ¶ 1.) After the sale of the Bradley Ranch closed on September 29, 2021, the net sale proceeds were deposited into Plaintiff’s bank account (“Logix Account”). After the sale, on September 8, 2021, Christy allegedly transferred $560,000 from the Logix Account to her own account at Charles Schwab (“Schwab Account”). (Compl., ¶ 13.) On September 30, 2021, she transferred $1.85 million from Plaintiff’s Logix Account to her Schwab Account. (Compl., ¶ 14.) On October 6, 2021, Christy transferred $400,000 from the Logix Account to her Schwab Account. (Compl., ¶ 15.) On October 20, 2021, Christy transferred $300,000 from the Logix Account to Logan. (Compl., ¶ 16.) None of these alleged transfers were authorized by Plaintiff and were allegedly done in secret. (Compl., ¶¶ 13-16.) Plaintiff alleges that Christy embezzled a total amount of $3.11 million. (Ibid.)

Plaintiff alleges that Christy confessed to her misappropriation of funds on April 27, 2022, when she sent an e-mail to LLC members (the “April 27 Email”) stating the following:

I have not been honest with you about the proceeds we received from the sale of the ranch. And, I sincerely regret my actions. I am working diligently to totally correct the situation and hope to have it completely resolved by the end of May.

On May 16, 2023, Plaintiff filed this motion for summary judgment or, in the alternative, summary adjudication as to Christy on each cause of action.

On August 4, 2023, Christy filed an opposition brief which included a request for a continuance on the hearing of this motion. Christy also filed evidentiary objections.

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843). In analyzing such motions, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Hinesley¿v.¿Oakshade¿Town Center¿(2005) 135 Cal.App.4th 289, 294).¿ Thus, summary judgment or summary adjudication is granted when, after the Court’s consideration of the evidence set forth in the papers and all reasonable inferences accordingly, no triable issues of fact exist and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc. § 437c, subd. (c);¿Villa v.¿McFarren¿(1995) 35 Cal.App.4th 733, 741.)

A plaintiff has met their burden of showing that there is no defense to a cause of action if they have proved each element of the cause of action entitling the party to judgment on the cause of action. (Code Civ. Proc., § 437c, subd. (p)(1).) Once the plaintiff has met that burden, the burden shifts to the defendant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. (Ibid.) The defendant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto. (Ibid.)

“The party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.” (Aguilar, supra, 25 Cal.4th at p. 850.)

Christy objects to portions of the declaration submitted by John F. Bradley, Jr. (“Bradley”). Pursuant to Code of Civil Procedure section 437c(q), the Court rules on Plaintiff’s objections to evidence that is material to the disposition of the motion.

Objection Nos. 1 and 3 on the grounds of relevance: OVERRULED. Testimony relates to Bradley’s personal knowledge of matters and lays foundation for the remainder of his testimony.

Objection Nos. 2, 14, 17, 19, 21, 23, 25, 26, 30 on the grounds that Bradley lacks foundation or personal knowledge to testify as to other LLC members’ state of mind or actions: SUSTAINED insofar as Bradley is testifying as to other LLC members; OVERRULED as to Bradley’s testimony about himself as an LLC member although his state of mind is not dispositive.

Objection No. 13 on the grounds that Bradley lacks foundation and personal knowledge to testify whether the LLC’s bank account would contain money aside from capital from the Ranch, capital contributions from LLC members, income from LLC operations, sales, and lease, and sale of the Ranch: SUSTAINED. Bradley states his knowledge is on information and belief.

Objection Nos. 17, 19, 21, 23 on the grounds that Bradley lacks foundation to testify whether a transfer of money was made without notice or without a legitimate LLC business purpose: SUSTAINED. Bradley has not shown that he has firsthand knowledge of Christy’s lack of evidence.

Objection Nos. 4-12, 15-16, 18, 20, 22, 24-25, 27 on the grounds of “best evidence”: OVERRULED. Christy does not object to the emails themselves. The Secondary Evidence Rule requires exclusion of secondary evidence of writing if the court determines either of the following: (1) a genuine dispute exists concerning material terms of the writing and justice requires the exclusion; (2) admission of the secondary evidence would be unfair. (Evid. Code, § 1521, subd. (a).) The burden is on the opponent to raise issues of “genuine dispute” or unfairness. (See People v. Garcia (1988) 201 Cal.App.3d 324, 329-330.) Christy does not explain in her objections or her opposition brief how the Secondary Evidence Rule applies to Bradley’s Declaration.

Objection Nos. 15, 29 on the ground that Bradley’s testimony is argumentative: OVERRULED.

Objection Nos. 16, 18, 20, 22 on the ground that whether Christy violated the LLC Operating Agreement is argumentative: SUSTAINED. This is a legal argument that belongs in a brief.

Objection No. 25 on the grounds that Bradley’s testimony describing Christy’s email as “confessing to her misappropriation of LLC funds” is argumentative: SUSTAINED.

Objection No. 26 on the grounds that Bradley’s testimony regarding the veracity of Christy’s statements is argumentative: SUSTAINED.

Objection No. 28 on the grounds that whether Christy owes fiduciary duties is argumentative: SUSTAINED.

Objection No. 29 on the grounds that Bradley is not qualified as an expert to testify whether Christy knew or should have known that LLC funds were not to be “diverted” to herself or third parties and that Christy failed to act as a reasonably careful manager: OVERRULED, but Bradley’s testimony is not dispositive.

After considering Christy’s evidentiary objections, Plaintiff’s material facts are reduced to the following:

- Escrow closed on the Ranch on September 29, 2021. (Plaintiff’s Undisputed Material Fact (“UMF”) No. 3.)

- Plaintiff received $3,056,318.35 in deposits to its Logix Account and cites to Exhibits 7, 8, 16, and 17, as well as Bradley’s declaration at paragraphs 11-12 and 22. (UMF No. 4.)

- The funds in the Logix Account during September 2021 and October 2021 belonged to the LLC and were intended to be distributed to the LLC members. (UMF Nos. 5, 7.)

- Christy transferred $560,000 from the Logix Account to her account at Charles Schwab on September 8, 2021. (UMF No. 8.)

- Christy transferred $1.85 million from the Logix Account to her account at Charles Schwab on September 30, 2021. (UMF No. 10.)

- On October 6, 2021, Christy transferred $400,000 from the Logix Account to her account at Charles Schwab. (UMF No. 12.)

- On October 20, 2021, Christy transferred $300,000 from the Logix Account to Logan’s account at First Republic Bank. (UMF No. 14.)

- Plaintiff has demanded repayment of the LLC’s funds but no amount has been repaid. (UMF No. 16.)

Plaintiff argues that Christy is entitled to summary adjudication as to its claim for “conversion – embezzlement.” However, as an initial matter, there is no private cause of action for embezzlement; rather, it is a crime pursuant to the Penal Code. (See Ex parte Hedley (1866) 31 Cal. 108, 111 [“Embezzlement is a purely statutory offense”].) Instead, the crime of embezzlement finds its civil equivalent in the torts of conversion and fraud. (See Ferrick v. Santa Clara University (2014) 231 Cal.App.4th 1337, 1347 [“‘Embezzlement requires conversion of trusted funds [or property] coupled with the intent to defraud’”].)

Because there is no civil action for a claim of “embezzlement” and Plaintiff’s brief does not discuss the elements necessary for a conversion claim, the motion for summary adjudication of the first cause of action is DENIED.

“Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship” which comprises “any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another even though the conduct is not otherwise fraudulent.” (Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 415.) “Constructive fraud ‘arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice.’” (Tyler v. Children’s Home Society (1994) 29 Cal.App.4th 511, 548.) “Actual reliance and causation of injury must be shown.” (Id.)

Plaintiff argues that it is entitled to summary adjudication of its second cause of action because Christy owed it a fiduciary duty, acted on behalf of the LLC in selling the Ranch and handling the funds, transferred the funds to her personal account and Logan without permission, lied to and misled the LLC members about the disposition of the funds, and has not repaid any of the funds. (Motion, pp. 11-12.)

Summary adjudication here is not appropriate because Plaintiff failed to show how it can satisfy the element of justifiable reliance. None of the submitted documents or Bradley’s pared-down declaration supports an inference that the LLC justifiably relied on any of Christy’s actions or omissions.

“The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach.” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1405, 45 Cal.Rptr.3d 525.) Although subject to exceptions, the determination whether a breach of fiduciary duty occurs under a particular set of facts is “ ‘mainly for the trier of facts.’ ” (Mueller v. MacBan (1976) 62 Cal.App.3d 258, 276; see Marzec v. Public Employees’ Retirement System (2015) 236 Cal.App.4th 889, 915[“ ‘Whether a fiduciary duty exists is generally a question of law. [Citation.] Whether the defendant breached that duty towards the plaintiff is a question of fact. [Citation.]’ ”]; Harvey v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 822, 76 Cal.Rptr.3d 41 [“Breach of duty is usually a fact issue for the jury. [Citation.] Breach may be resolved as a matter of law, however, if the circumstances do not permit a reasonable doubt as to whether the defendant's conduct violates the degree of care exacted of him or her.”].) Expert testimony demonstrating a breach is not required, but is admissible in circumstances where the conduct supporting the alleged breach is beyond common knowledge. (See Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1087, 41 Cal.Rptr.2d 768.)

Plaintiff fails to establish that Christy breached a fiduciary duty as a matter of law. In a manager-managed limited liability company, the manager owes fiduciary duties of loyalty and care. (Corp. Code, § 17704.09, subd. (f).) In fact, Plaintiff does not specify or analyze which of these duties Christy has breached. Plaintiff has not produced admissible evidence showing that Christy transferred LLC funds without authorization. Instead, the evidence shows that Christy was the sole manager of the LLC and the operating agreement does not prohibit or require notice or permission for any transfer of funds. Further, the “confession emails” on which Plaintiff relies only shows that Christy invested the funds in a business venture with the expectation of a 5% return within one or two months; in fact, after “confessing” that the project she invested in was delayed, she reported that due to those delays, she was able to secure a 6% return. As sole manager, whether the decision to do so was a breach of fiduciary duty is an issue of fact.

Additionally, Plaintiff characterizes Christy as having repeatedly lied because she told Bradley that she had loaned money to a former client for a construction project, but then claimed in her cross-complaint that she was the victim of a romance scam. However, whether Christy invested the proceeds with an expectation of a quick return and whether Christy was the victim of a romance scam are not mutually exclusive possibilities.

Accordingly, the motion for summary adjudication of the third cause of action is DENIED.

A violation of Penal Code §496 occurs when a person receives stolen property, or obtains property by theft, or conceals or withholds property from an owner knowing the property to be stolen.

As with Plaintiff’s conversion and breach of fiduciary duty claims, Plaintiff fails to show that Christy violated Penal Code section 496 because Plaintiff has no evidence that the funds were stolen or transferred without authorization.

Strictly speaking, there is no “cause of action” for unjust enrichment. (Rutherford Holdings LLC v. Plaza Del Rey¿(2014) 223 Cal.App.4th 221, 231;¿Levine v. Blue Shield of California¿(2010) 189 Cal.App.4th 1117, 1138.) Courts have construed unjust enrichment claims as quasi-contract claims seeking restitution. (Rutherford Holdings, supra, 223 Cal.App.4th at p. 231;¿Levine, supra, 189 Cal.App.4th at p. 1138; see¿Civic Partners Stockton, LLC v.¿Youssefi¿(2013) 218 Cal.App.4th 1005, 1013 [elected remedy under conversion cause].) “Whether termed unjust enrichment, quasi-contract, or quantum meruit, the equitable remedy of restitution when unjust enrichment has occurred ‘is an obligation (not a true contract) created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to his or her former position by return of the thing or its equivalent in money.’ ” (Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 346, citations omitted.)

Plaintiff fails to show that a quasi-contract claim exists or that restitution is appropriate in this action that sounds mainly in tort. Summary adjudication of the fifth cause of action is DENIED.

A claim for money had and received is viable “wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter. [Citations.]” (Avidor v. Sutter’s Place, Inc.¿(2013) 212 Cal.App.4th 1439, 1454.) To prevail, a plaintiff must prove that the defendant received money that was intended to be used for the benefit of the plaintiff, that the money was not used for the benefit of the plaintiff, and that the defendant has not returned the money to the plaintiff. (CACI No. 370.)

As discussed in connection with Plaintiff’s Third Cause of Action, Plaintiff has not shown that Christy did not intend to use the money for the LLC’s benefit. The motion for summary adjudication of the sixth cause of action is DENIED.

A constructive trust is imposed where a person obtains property by fraud, accident, mistake, undue influence, violation of trust, or other wrongful act. The wrongful actor is deemed an involuntary trustee of the property for the benefit of the rightful owner. (See Civ. Code §§ 2223 - 2224.) A cause of action for constructive trust consists of the obtaining of property through fraud, breach of duty, or other act making the defendant a constructive trustee with the duty to transfer the property to the plaintiff. (See Michaelian v. State Comp. Ins. Fund (1996) 50 Cal.App.4th 1093, 1114.)

Plaintiff failed to show any of the predicate conditions for imposing a constructive trust. Namely, as stated above, Plaintiff has not established the elements of fraud, breach of duty, or other wrongful act. The motion for summary adjudication of the seventh cause of action is DENIED.

For an accounting claim to be available, a litigant must prove two elements: (1) a relationship that requires accounting exists between the plaintiff and the defendant, and (2) that some balance is owed to the plaintiff, which can only be ascertained with an accounting. (Teselle v. McLoughlin (2009) 173 Cal.App.4th 156, 179.) “An accounting is an equitable proceeding which is proper where there is an unliquidated and unascertained amount owing that cannot be determined without an examination of the debits and credits on the books to determine what is due and owing.” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1136-1137.)

Plaintiff fails to show that it is entitled to an accounting. First, Plaintiff has not shown that Christy owes a balance. Also, the balance does not require an accounting because Plaintiff already contends that Christy transferred $3.11 million dollars out of the Logix Account.

“An injunction is a writ or order requiring a person to refrain from a particular act.” (Code Civ. Proc., § 525.) Plaintiff does not substantiate the basis or form of its requested injunctive relief. Plaintiff does not identify any action that must be restrained or continued, or whether such restraint or continuance should be “for a limited period or perpetually.” (Id.; Code Civ. Proc., § 526, subd. (a).) There is also no showing that “pecuniary compensation would not afford adequate relief” or that it would be “extremely difficult to ascertain the amount of compensation which would afford adequate relief.” (Code Civ. Proc., § 526, subds. (a)(4)-(5).)

Accordingly, the motion for summary adjudication of the ninth cause of action is DENIED.

As the Court finds that Plaintiff has not met its moving burden, the Court need not consider Christy’s opposition brief or request for continuance.

William A. Crowfoot

Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the Court at ALHDEPT3@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org. Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter. Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue. If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.