Summary
distinguishing public-works context
Summary of this case from Visa Inc. v. Sally Beauty Holdings, Inc.Opinion
E051433
09-29-2011
GLASS STRAND INCORPORATED, Plaintiff and Appellant, v. VINCULA INTERNATIONAL, LTD., INC., Defendant and Appellant; SUBHI A. KHIREIWISH et al., Defendants and Respondents. VINCULA INTERNATIONAL LIMITED. INC., Plaintiff and Appellant, v. GLASS STRAND INCORPORATED et al., Defendants and Appellants.
Law Office of Pope & Gentile and Daniel K. Gentile for Plaintiff, Defendant and Appellant. Arshak Bartoumian for Plaintiff, Defendants, Appellants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
(Super.Ct.No. VCVVS035643)
OPINION
APPEAL from the Superior Court of San Bernardino County. Donald R. Alvarez, Judge. Affirmed.
Law Office of Pope & Gentile and Daniel K. Gentile for Plaintiff, Defendant and Appellant.
Arshak Bartoumian for Plaintiff, Defendants, Appellants and Respondents.
I
INTRODUCTION
Glass Strand Incorporated (Glass Strand), plaintiff, appeals from a judgment in which none of the parties to the underlying litigation, were awarded any recovery.
Respondents are defendants Subhi A. Khireiwish, Vincula Industries, Inc., and Vincula International Trade, Inc. (collectively Vincula). Vincula's cross-appeal has been dismissed.
Glass Strand entered into a written contract to construct a turnkey fiberglass pultrusion plant in Saudi Arabia. A Saudi developer and investor, Abduallatif Al-Arfaj (Al-Arfaj), is the real party in interest who advanced the money for the project. Glass Strand entered into a subcontract with Vincula. Glass Strand claims that Vincula embezzled project funds. But Al-Arfaj did not sue Glass Strand or Vincula. The trial court ruled that Glass Strand could not recover against Vincula because it did not have standing to recover on behalf of Al-Arfaj. Based on the undisputed facts, we affirm the judgment.
The meaning of "pultrusion" is "A method for producing profiles (cross-sectional shapes) with continuous fibre reinforcement is pultrusion. As the name suggests, pultrusion resembles extrusion, except that the impregnated fibres are pulled through a die that defines the profile while being heated to form a dimensionally stable network." (Encyclopedia Britannica online. Encyclopedia Britannica Academic Edition, 2011. http://www.britannica.com/EBchecked/topic/483330/pultrusion [as of Sept. 15, 2011].)
II
FACTUAL AND PROCEDURAL BACKGROUND
Glass Strand filed a second amended complaint against Vincula for breach of contract, breach of fiduciary duty, accounting, fraud, conversion, constructive trust, and fraudulent conveyance. Glass Strand alleged that Vincula had embezzled $1,673,038.35 intended for the project in Saudi Arabia.
After a court trial, the trial court issued a statement of decision. The parties do not dispute the trial court's factual findings.
Vincula's "Pertinent Facts" contain no citations to the reporter's transcript or the appellant's appendix.
As described in the statement of decision, Vincula had a history of constructing turnkey manufacturing facilities for overseas clients. In 1995,Vincula and Al-Arfaj negotiated the construction of a fiberglass pultrusion plant in Saudi Arabia at the cost of about $3.5 million.
Financing for the project was provided through the Export-Import Bank of the United States (Ex-Im), the official export credit agency of the United States. Ex-Im insures foreign loans made by United States banks. The lender for the project was South Trust Bank (South Trust), an Ex-Im-approved lender.
"Ex-Im Bank's mission is to assist in financing the export of U.S. goods and services to international markets." (http://www.exim.gov/about/mission.cfm [as of Sept. 15, 2011].)
A purchase order was generated between Al-Arfaj and Glass Strand for $3,543,900, including two pultrusion machines for $575,000. In July 2001, Glass Strand and Vincula confirmed Glass Strand would build the two machines for $140,000 each and Vincula would complete the other parts of the project. The total amount received by Glass Strand from South Trust on behalf of Al-Arfaj was $3,058.895.
In April 2002, Glass Strand built the pultrusion machines and shipped them to Saudi Arabia. But Vincula and Al-Arfaj both failed to complete their project obligations. Al-Arfaj defaulted on the South Trust loan. South Trust filed a claim with Ex-Im and Ex-Im paid the loan balance to South Trust and assigned Global Recovery, LLC (Global) to pursue subrogation claims of $3 million against Al-Arfaj. Al-Arfaj obtained alternative financing to complete the project.
The trial court summed up the dispositive issue as follows: "If the court distills all the voluminous and conflicting evidence to the crux of this case, the fundamental problem with [Glass Strand's] breach of contract claim, which also infects most of the other claims advanced, is the fact that it is not the real party in interest for virtually all the damages it seeks. It was Al-Arfaj who suffered damage as a result of the pultrusion plant not being completed as agreed." Al-Arfaj still owes $3 million to Global.
Glass Strand was fully compensated for its work on the project. Glass Strand was not sued for damages arising out of the project. Nevertheless, Glass Strand sought to recover damages for the unfinished pultrusion plant when the claim really resides with Al-Arfaj. "In essence, it appears that [Glass Strand] is really acting in large measure as a strawman for Al-Arfaj who was never a party to this action. In fact, the evidence indicates that Al-Arfaj made a side arrangement with [Glass Strand] to prosecute this case . . .." for payment of $35,000 from any recovery against defendants. In the absence of any damages to Glass Strand, its claims must fail.
The court also analyzed the claims by Vincula against Glass Strand and rejected them. However, Vincula's cross-appeal has been dismissed.
III
DISCUSSION
The trial court concluded that, because Glass Strand was paid in full and because it was not sued by Al-Arfaj or South Trust, Glass Strand was not damaged and did not have standing to assert a viable claim against Vincula. We conduct an independent review of "the trial court's decision on the dispositive issue of standing." (Reycraft v. Lee (2009) 177 Cal.App.4th 1211, 1217 [Fourth Dist., Div. Two].) "As the parties here have acknowledged, where the facts are not in dispute and a pure question of law is before the court on appeal, the standard of review is independent or de novo review of the legal issues. '"Questions of law are reviewed under the non-deferential, de novo standard. [Citations.]"' (People v. Louis (1986) 42 Cal.3d 969, 985.)" (Edgemont Community Services Dist. v. City of Moreno Valley (1995) 36 Cal.App.4th 1157, 1166 [Fourth Dist., Div. Two].)
Glass Strand bases its argument almost entirely on its discussion of Green Wood Industrial Co. v. Forceman Internat. Development Group, Inc. (2007) 156 Cal.App.4th 766 (Green Wood). Vincula's respondent's brief consists mostly of photocopied pages from its trial briefs and it does not respond directly to Glass Strand's appellant's brief.
"The appellate practitioner who takes trial level points and authorities and, without reconsideration or additional research, merely shovels them in to an appellate brief, is producing a substandard product." (In re Marriage of Shaban (2001) 88 Cal.App.4th 398, 410.)
--------
In Green Wood, supra, 156 Cal.App.4th at page 770, plaintiff Green Wood was a Chinese company in the business of buying scrap metal from sellers in the United States for resale to buyers in China. It ordered scrap metal from an American-based scrap metal exporter, Richshine Metals, and agreed to resell the scrap metal to a buyer in China. Chinese law required that imported goods be inspected and certified. Defendant Forceman was in the business of obtaining and delivering the certificates. However, the scrap metal ordered by Green Wood from Richshine Metals did not exist, and the certificates obtained by Forceman and provided to Green Wood as proof of shipment were false. (Ibid.) Green Wood sued Forceman and Richshine Metals for fraud, conspiracy to commit fraud, and negligence. It prevailed and was awarded compensatory and punitive damages. The compensatory damages included an obligation Green Wood owed its Chinese buyer for nondelivery of the goods, in the amount of $274,868. (Id. at p. 771.)
On appeal, the court affirmed the verdict and the damages, but overturned the award of $274,868 for the amount Green Wood owed its Chinese buyer for the nondelivery. (Green Wood, supra, 156 Cal.App.4th at p. 778.) The court noted that, under California law, a plaintiff, whether in a tort or contract action, generally cannot recover damages alleged to arise from a third-party claim against the plaintiff even when caused by the defendant's misconduct: "A plaintiff may not recover damages for an unpaid liability to a third party, unless the plaintiff proves to a reasonable certainty that the liability could and would be enforced by the third party against the plaintiff or that the plaintiff otherwise could and would satisfy the obligation. [Fn omitted.] [¶] Under California law, a plaintiff—whether the plaintiff's claim sounds in contract or tort— generally cannot recover damages alleged to arise from a third party claim against the plaintiff when caused by the defendant's misconduct." (Id. at p. 776.)
Accordingly, the Green Wood court held: "the existence of a mere liability is not necessarily the equivalent of actual damage. This is because the fact of damage is inherently uncertain in such circumstances. The facts that a third party has demanded payment by the plaintiff of a particular liability and the plaintiff has admitted such liability are not, by themselves, sufficient to support an award of damages for that liability, because that third party may never attempt to force the plaintiff to satisfy the alleged obligation, and the plaintiff may never pay the obligation." (Green Wood, supra, 156 Cal.App.4th at p. 776.) Thus, in order to recover against a defendant based on an obligation owed to a third party, the plaintiff must either pay the obligation or demonstrate with reasonable certainty that it will suffer the damage. (Id. at p. 778.) The court found that, while Green Wood did demonstrate an agreement to pay its buyer, it had not yet paid the obligation and did not present any evidence showing that the liability could and would be enforced by the buyer, or that the claim would otherwise be paid. (Ibid.)
Similarly, in the present case, in order for Glass Strand to recover against Vincula based on an obligation owed to Al-Arfaj, Glass Strand had either to pay the obligation or demonstrate with reasonable certainty it would suffer damage. The trial court expressly found that "[Glass Strand] was not sued by any person or entity arising out of [Vincula's] lack of performance of the Pultrusion plant which would negate a damages claim by [Glass Strand] for liability to a third party. [Green Wood, supra, 156 Cal.App.4th at p. 776.] [¶] As noted by the court, while the evidence suggests that Al-Arfaj may have a claim against [Glass Strand] for [Vincula's] failure to perform on the Projects Pultrusion plant, neither Al-Arfaj, [Ex-Im] Bank, Global, or South Trust Bank have ever sued [Glass Strand] for damages arising out of this Project. In fact, the evidence shows that Al-Arfaj is aiding and supporting [Glass Strand] as a strawman, in pursuit of a recovery against Defendants." The court concluded there was no evidence of a threat of a lawsuit against Glass Strand and even a threat might be legally insufficient to trigger a damages claim by Glass Strand against Vincula. In view of the court's undisputed factual finding of no liability between Glass Strand and Al-Arfaj, there existed no basis for recovery by Glass Strand against Vincula.
As an alternative argument, Glass Strand attempts to rely on a pretrial agreement allowing Glass Strand to litigate Al-Arfaj's claims against Vincula. The trial court expressly found "this is not a legally enforceable arrangement evidenced by an assignment of claims from Al-Arfaj."
Furthermore, the case cited by Glass Strand, Howard Contracting, Inc. v. G.A. MacDonald Construction Co. (1998) 71 Cal.App.4th 38, is distinguishable. Howard is a case involving a public agency contract which is not entirely coextensive with rights under private contracts. Howard held a pretrial agreement between a general contractor and a subcontractor provided a legal basis for the contractor to present the subcontractor's claim to the owner/city on a pass-through basis. (Id. at p. 60.) The appellate court said the public agency's breach of a construction contract with a contractor may cause damage to a subcontractor, and "[i]n such a situation, the subcontractor may not have legal standing to assert a claim directly against the public agency due to a lack of privity of contract, but may assert a claim against the general contractor. In such a case, a general contractor is permitted to present a pass-through claim on behalf of the subcontractor against the public agency." (Ibid.)
The present case does not involve the same necessity for a pass-through claim by Glass Strand on behalf of Al-Arfaj against Vincula. Al-Arfaj, as the project developer, could have sued Vincula directly in tort or as a third-party beneficiary. (Civ. Code, § 1559; Kaiser Engineers, Inc. v. Grinnell Fire Protection Systems Co. (1985) 173 Cal.App.3d 1050, 1055, citing Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, 69-70.) Howard does not apply in this case.
IV
DISPOSITION
Based on our independent review of the trial court's undisputed factual findings, we agree Glass Strand lacked standing to sue Vincula for recovery of damages to third parties. We affirm the judgment. The parties shall bear their own costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Codrington
J.
We concur:
Ramirez
P.J.
McKinster
J.