Opinion
A156486
04-24-2020
SHELLY GABLE, Plaintiff and Appellant, v. IVY HILL ASSOCIATES, L.P., et al., Defendants 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Contra Costa County Super. Ct. No. MSC-16-01013)
Shelly Gable (Plaintiff) appeals the trial court's order granting summary judgment to Ivy Hill Associates, L.P. (Ivy Hill LP) and other defendants (collectively, Defendants), after the trial court found Plaintiff's fraud claim barred by the applicable statute of limitations. We affirm.
BACKGROUND
Ivy Hill LP was formed to develop and sell an apartment complex. Ivy Hill LP had two classes of partners: Class A partners, whose investments were tied to market rate units in the apartment complex, and Class B partners, whose investments were tied to below market rate units in the complex. Gable initially invested approximately $100,000 as a Class A partner. She also served as Ivy Hill LP's controller.
Lee Newell was a Class A and Class B partner, as well as president of a managing member of Ivy Hill LP's general partner, Walnut Creek Housing Partners, LLC (Walnut Creek LLC). In 2009, Newell executed, personally and on behalf of Ivy Hill LP, an acknowledgement of debt (hereafter, the 2009 Debt Acknowledgement). The 2009 Debt Acknowledgement provided that Ivy Hill LP and Walnut Creek LLC owed Klein Financial Corporation (Klein Financial) approximately $450,000 in consulting fees and accrued interest. The 2009 Debt Acknowledgement further provided that the debt "will be paid to Klein Financial Corporation from escrow at close of escrow of the sale of" Ivy Hill LP's apartment complex.
Walnut Creek LLC, its two managing members, and the presidents of the two managing members (including Newell) are also defendants in this action.
In 2010, Gable increased her Class A partnership interest in Ivy Hill LP by $600,000. In June 2013, Ivy Hill LP sold the apartment complex. Klein Financial was paid nearly $1 million from the escrow account. When the net proceeds from the sale were distributed to Ivy Hill LP's partners, Plaintiff recovered her investment but did not receive any return on it.
The background facts relating to Plaintiff's increased investment are not relevant to this appeal.
In May 2016, Plaintiff filed the instant action. The operative complaint alleges that Defendants intentionally concealed the 2009 Debt Acknowledgment from Plaintiff; that she only discovered the 2009 Debt Acknowledgement in 2015; and that, had she known of the 2009 Debt Acknowledgement in 2010, she would not have invested an additional $600,000 in Ivy Hill LP. Defendants moved for summary judgment, arguing (among other grounds) that the claim was barred by the statute of limitations. The trial court agreed, granted Defendants' motion, and issued judgment for Defendants.
The trial court sustained Defendants' demurrer without leave to amend as to a second cause of action. Plaintiff does not challenge this ruling on appeal.
DISCUSSION
I. Standard of Review
"An order granting summary judgment is reviewed de novo. [Citation.] As a practical matter, ' "we assume the role of a trial court and apply the same rules and standards which govern a trial court's determination of a motion for summary judgment." ' [Citation.] A motion for summary judgment is properly granted 'if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' [Citations.] 'From commencement to conclusion, the moving party bears the burden of persuasion that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law.' [Citations.] [¶] A defendant moving for summary judgment must show that one or more elements of the plaintiff's cause of action cannot be established or show there is a complete defense to the plaintiff's cause of action. [Citations.] It is not until the defendant meets this burden that the burden of production shifts to the plaintiff to show that a triable issue of one or more material facts exists as to the defense. [Citations.] In conducting our review, we must identify the issues to be considered on the motion for summary judgment, which are defined by the pleadings. [Citation.] Significantly, as to each claim as framed by the complaint, ' " 'the motion must respond by establishing a complete defense or otherwise showing there is no factual basis for relief on any theory reasonably contemplated by the opponent's pleading.' " ' " (Doe v. Good Samaritan Hospital (2018) 23 Cal.App.5th 653, 661.)
II. Statute of Limitations
A. Legal Principles
"[A] cause of action does not accrue, and the limitations period does not begin to run, 'until the plaintiff discovers or should have discovered the cause of action.' [Citation.] 'Under the discovery rule, suspicion of one or more of the elements of a cause of action, coupled with knowledge of any remaining elements, will generally trigger the statute of limitations period.' [Citation.] In ascertaining suspicion or knowledge of the elements of a cause of action, courts 'do not take a hypertechnical approach . . . . Rather than examining whether the plaintiffs suspect facts supporting each specific legal element of a particular cause of action, we look to whether the plaintiffs have reason to at least suspect that a type of wrongdoing has injured them.' " (Choi v. Sagemark Consulting (2017) 18 Cal.App.5th 308, 323 (Choi).)
"Generally, once plaintiffs 'have reason to at least suspect that a type of wrongdoing has injured them,' the cause of action begins to accrue. [Citation.] The plaintiffs at that point 'are required to conduct a reasonable investigation . . . , and are charged with knowledge of the information that would have been revealed by such an investigation.' [Citation.] . . . '[T]he limitations period begins once the plaintiff " ' "has notice or information of circumstances to put a reasonable person on inquiry . . . ." ' " [Citation.] A plaintiff need not be aware of the specific "facts" necessary to establish the claim; that is a process contemplated by pretrial discovery. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.' " (Choi, supra, 18 Cal.App.5th at p. 329.) Thus, "[a]n action for fraud . . . accrues when a plaintiff first learns that a fraud may have occurred, so long as he or she could have confirmed the fraud through further investigation." (Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 282.)
" 'The resolution of a statute of limitations defense is typically a factual question for the trier of fact. However, summary judgment is proper if the court can draw only one legitimate inference from uncontradicted evidence about the limitations issue.' " (Choi, supra, 18 Cal.App.5th at pp. 323-324.)
B. Analysis
The statute of limitations for fraud is three years. (Code Civ. Proc., § 338, subd. (d).) Accordingly, if the uncontradicted evidence establishes that Plaintiff had reason to suspect, before May 2013 (three years before the complaint was filed), a fraud may have occurred, summary judgment for the Defendants is proper.
The fraud alleged in the complaint is that Defendants concealed the 2009 Debt Acknowledgement and, had Plaintiff known of the 2009 Debt Acknowledgement in 2010, she would not have invested an additional $600,000 in Ivy Hill LP. Plaintiff focuses on two aspects of the 2009 Debt Acknowledgement: first, that Ivy Hill LP owed Klein Financial more than $450,000; and second, that Klein Financial would be paid "from escrow at close of escrow" when Ivy Hill LP's property sold. Thus, our inquiry notice analysis properly focuses on whether Plaintiff learned or suspected, prior to May 2013, that Ivy Hill LP owed Klein Financial more than $450,000 and that this debt would be paid from escrow at close of escrow.
Plaintiff argues that she lacked knowledge or reason to suspect various other facts, including that she would receive no return on her investment and that Ivy Hill LP's Class B partners would subsequently execute an amendment to the partnership agreement to which Plaintiff objected. Plaintiff fails to explain why knowledge or suspicion of these facts is necessary to create inquiry notice of her fraud claim.
Plaintiff argues her claim did not accrue until June 2013, when the Ivy Hill LP apartment complex was sold and Plaintiff received no return on her investment, or November 2015 when Plaintiff received a copy of the 2009 Debt Acknowledgement in discovery in a separate lawsuit.
Details about this lawsuit are not relevant to our resolution of this appeal.
Defendants rely primarily on two documents which we will refer to collectively as the Klein Settlement Agreements. The first is a January 2011 settlement agreement between Klein Financial and Ivy Hill LP, Walnut Creek LLC, Newell, and one of Walnut Creek LLC's managing entities. The settlement agreement provided that Ivy Hill LP pay Klein Financial over $500,000 at the "earlier of (a) close of escrow on the sale or refinancing of the project or (b) June 30, 2011." Ivy Hill LP was further obligated, within three days of opening escrow, to "deposit into the escrow an irrevocable instruction to pay the" amount owed to Klein Financial. The second document is a December 2011 amended settlement agreement between the same parties, which acknowledged that the original settlement agreement was in default. The amended settlement agreement provided the amount owed was now more than $650,000 and that Ivy Hill LP would begin making $5,000 monthly payments to Klein Financial in February 2012 (increasing to $10,000 in July 2012 and $20,000 in November 2012). The amended settlement agreement further provided that Ivy Hill LP would pay the balance owed at "close of escrow on the sale or refinancing of the Project" or upon default of the agreement, whichever came first, and that Klein Financial was "entitled to submit a demand in escrow and have all unpaid amounts due under [the Klein Settlement Agreements] paid from escrow at closing."
Plaintiff mentions a third settlement agreement between Klein Financial and a separate entity called 116 Ivy Investments LLC, in which Plaintiff asserts she had no interest. This document is not material to the issue before us.
It is undisputed that Plaintiff learned of the Klein Settlement Agreements in February 2012. At that time, Newell emailed Plaintiff as follows: "Ivy Hill must pay $5,000 per month to Klein Financial as interest on the consulting bill that has been outstanding for many years....I cannot hold off payment any longer. Hopefully, we will close escrow in April and pay it off in full." It is also undisputed that in 2012, in her capacity as Ivy Hill LP's controller, Plaintiff processed and paid at least some monthly payments to Klein Financial pursuant to the amended settlement agreement: Newell's February 2012 email asked Plaintiff to "[s]end the [monthly payment] check to Klein Financial," and in November 2012, Plaintiff received an email directly from Klein Financial attaching an invoice for the $20,000 monthly payment "per 1st Amend. to Settlement Agmt."
This undisputed evidence—Plaintiff's knowledge of the Klein Settlement Agreements and processing of monthly payments pursuant to the amended agreement—demonstrates that, in 2012, Plaintiff knew or, at the least, had reason to suspect both pieces of information contained in the allegedly concealed 2009 Debt Acknowledgement: that Ivy Hill LP owed Klein Financial more than $450,000, and that Klein Financial's debt would be paid from the escrow account at the sale of Ivy Hill LP's project.
The parties dispute whether additional documents—a 2010 Memorandum of Understanding regarding the Class A partners' distributions, a financial analysis of Ivy Hill LP performed in 2012, and a 2012 Agreement among certain Ivy Hill LP partners regarding a disagreement about distributions—support summary judgment. We need not, and do not, decide the issue, as we find other evidence sufficient to support the judgment.
Plaintiff's arguments to the contrary are unavailing. First, Plaintiff argues that, although she was aware of the debt to Klein Financial in 2012, she believed the debt was owed by the Class B partners—because the work performed by Klein Financial was primarily for the benefit of those partners—or by Newell personally. But Plaintiff was aware of the Klein Settlement Agreements, which unequivocally provided that "Ivy Hill [LP] shall pay" Klein Financial more than $450,000, and Plaintiff knew Ivy Hill LP was making monthly payments on the debt. Newell's February 2012 email stating "Ivy Hill" must make monthly payments further indicated the debt was owed by Ivy Hill LP. At the very least, Plaintiff had reason to suspect Ivy Hill LP was responsible for the debt, rather than the Class B partners or Newell personally.
Plaintiff also argues that the Klein Settlement Agreements did not put her on notice that the Klein Financial debt would be paid "first in line" from escrow, before the Class A partners' returns. The 2009 Debt Acknowledgement was silent on this matter as well, yet the basis of Plaintiff's claim is that, had she seen the 2009 Debt Acknowledgement, in particular its promise to pay Klein Financial from escrow, she would have known it. Because the 2009 Debt Acknowledgement said no more on this issue than the Klein Settlement Agreements did, Plaintiff's knowledge of the latter put her on notice of what was allegedly concealed from her when Defendants did not provide her with the former.
In a footnote, Plaintiff cursorily asserts "there is no evidence in the record that [Plaintiff] ever read" the Klein Settlement Agreements. Plaintiff's complaint alleges beliefs she held "[b]ased on the terms of the Klein[] Settlement Agreement[s]"—beliefs she could only have formed after reading said terms. Moreover, in responding to Defendants' separate statement of undisputed facts asserting Plaintiff's knowledge, as of February 2012, of certain terms of the Klein Settlement Agreements, Plaintiff disputed only the characterization of the term. Plaintiff did not dispute the fact on the ground that she had not read the Klein Settlement Agreements and was therefore unaware of their terms. (Cal. Rules of Court, rule 3.1350(f)(2) ["An opposing party who contends that a fact is disputed must state . . . the nature of the dispute . . . ."].) Even if Plaintiff had not read the Klein Settlement Agreements, her awareness that they memorialized a substantial debt owed by Ivy Hill LP to Klein Financial and required Ivy Hill LP to make monthly installment payments would have obligated her to investigate by reading the documents. (MGA Entertainment, Inc. v. Mattel, Inc. (2019) 41 Cal.App.5th 554, 564 (MGA Entertainment) ["the question is not when [the plaintiff] actually discovered [the] misappropriations; it is when [the plaintiff] by the exercise of reasonable diligence should have discovered [the defendants] engaged in misappropriation"].)
Plaintiff points to a July 2012 letter from Newell to Klein Financial referencing the Klein Settlement Agreements and "confirm[ing] that, at closing of the [sale of certain interests, including the Ivy Hill LP property], KFC [Klein Financial] will be paid from the closing escrow" more than $650,000 pursuant to the Klein Settlement Agreements (as well as other unrelated money due). Plaintiff asserts this letter was "on Newell's personal stationary" and Plaintiff was "confused" by it and "assumed that it reflected a debt that was personal to Newell." Any such assumption was not reasonable: the letter clearly references the Klein Settlement Agreements—which provide that Ivy Hill LP is liable for the debt—and was executed on behalf of Ivy Hill LP and other entities. Any confusion on Plaintiff's part only obligated her to investigate.
Plaintiff also points to a 2010 email in which she asked Newell, "Are you planning on paying the Klein bill inside the partnership or out? Is any of this part of this [sic] allocable to the BMR [below market rate] units?" Plaintiff argues this demonstrates she did not know "who was responsible for paying" the Klein Financial debt, and asserts there is no record evidence that Newell ever responded to her inquiry. To the contrary, the only reasonable inference we see from this inquiry—assuming, as Plaintiff does, that the "Klein bill" refers to the Klein Financial debt at issue here—is that Plaintiff in fact did suspect the partnership as a whole could be liable for the Klein Financial debt. If Newell failed to respond to her inquiry, her suspicion should have been heightened.
Finally, Plaintiff argues the statute of limitations should have been tolled under the doctrine of fraudulent concealment. "[I]t is firmly established ' "that the defendant's fraud in concealing a cause of action against him tolls the applicable statute of limitations, but only for that period during which the claim is undiscovered by plaintiff or until such time as plaintiff, by the exercise of reasonable diligence, should have discovered it." ' [Citation.] . . . [T]he doctrine of fraudulent concealment for tolling the statute of limitation ' "does not come into play, whatever the lengths to which a defendant has gone to conceal the wrongs, if a plaintiff is on notice of a potential claim." ' " (MGA Entertainment, supra, 41 Cal.App.5th at p. 561.) As the uncontradicted evidence demonstrates Plaintiff was on notice of the potential claim as of 2012, the doctrine of fraudulent concealment does not assist her.
In sum, we conclude that the only reasonable inference from the uncontradicted evidence demonstrates that, before May 2013, Plaintiff had reason to suspect a wrong had been done to her. Her claim is therefore barred by the statute of limitations.
Because of this conclusion, we need not decide whether, as Defendants contend, they were entitled to summary judgment on other grounds. --------
DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.
/s/_________
SIMONS, J. We concur. /s/_________
JONES, P.J. /s/_________
NEEDHAM, J.