Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. CV071914
Premo, J.
J. Lucena was one of many victims of an investment fraud scheme perpetrated by one Michael Joseph Schneider. This scheme, which Schneider maintained for over a decade and which resulted in over $43 million in total losses to his many victims, eventually collapsed and Schneider was criminally prosecuted. Lucena subsequently brought a civil action against Bank of the West (Bank), alleging that it was liable for at least some of his losses because it accepted a number of checks made out to “California Plan Escrow, ” even though the checks were then endorsed by, and deposited to the account of, “California Plan, Inc.”
On our own motion, we take judicial notice of this court’s nonpublished opinion from Schneider’s direct criminal appeal, People v. Schneider (May 28, 2009, H032628). (Cal. Rules of Court, rule 8.1115(b)(1).)
The trial court granted Bank’s motion for summary judgment on the grounds that the undisputed evidence established that Schneider was the owner and principal of both California Plan, Inc., and California Plan Escrow, registered as “C/P Escrow, Inc., ” and that it was Schneider who authorized the deposit of Lucena’s checks into the California Plan, Inc., account.
Lucena raises the following four arguments on appeal: (1) the trial court failed to consider the duty of care imposed on Bank by Commercial Code section 3404, subdivision (d); (2) Bank failed to meet its burden of proof in establishing the payees’ names were sufficiently similar to absolve it of liability; (3) the trial court failed to consider all of his causes of action and thus summary judgment was improper; (4) the trial court failed to consider the declarations offered in opposition to the motion for summary judgment.
Further unspecified statutory references are to the Commercial Code.
We disagree with all of these arguments and shall affirm.
I. Factual and Procedural Background
We take the facts from the record that was before the trial court when it ruled upon Bank’s summary judgment motion. (State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026, 1034-1035.)
A. Factual background
Schneider was the sole owner, director, chief executive officer and chief financial officer of an entity named California Plan, Inc. (Cal Plan), which he purchased in or around 1993. Cal Plan made loans secured by real estate, with the funding for those loans coming from private investors, such as Lucena. Cal Plan also handled the documentation and servicing of these loans for the investors.
At the same time that Schneider purchased Cal Plan, he purchased another company called C/P Escrow, Inc. (C/P Escrow). Schneider was also the sole owner, chief executive officer and chief financial officer of C/P Escrow, which was a registered California corporation with the same address as Cal Plan. According to Schneider, he referred to C/P Escrow as “California Plan Escrow” and viewed the name to be interchangeable with C/P Escrow. The California Secretary of State, however, has no records for a company named “California Plan Escrow.”
Over the years, Lucena and his wife invested in dozens of loans through Cal Plan and, at some point in time, Schneider became the principal person at Cal Plan with whom Lucena dealt. Lucena’s standard practice in investing in loans arranged by Cal Plan was to write checks, usually payable to “California Plan, ” but sometimes payable to “California Plan Escrow.” He would deliver the checks in one of three ways: (1) handing them directly to Schneider; (2) mailing them in envelopes addressed to Schneider’s attention at Cal Plan’s address; or (3) hand delivering the checks to Cal Plan’s offices in envelopes addressed to Schneider’s attention. Schneider endorsed the checks Lucena made out to “California Plan Escrow” with a stamped indorsement for Cal Plan and deposited the checks into Cal Plan’s account with Bank.
According to Schneider, Cal Plan did not specify how investors should make out their checks and checks came in many forms.
Eventually, Schneider began defrauding Cal Plan’s investors, including Lucena, by falsifying loan transactions. Cal Plan became a “Ponzi” scheme. According to Lucena, he and his family trust lost more than $2.7 million as a result of Schneider’s fraud.
Cal Plan had an account at Bank, and Schneider was an authorized signer on that account. Schneider had ultimate authority for making deposits, withdrawals and transfers of moneys on behalf of Cal Plan and primarily handled the disposition of funds deposited into Cal Plan’s account. Schneider had the same authority for deposits, withdrawals and transfers of funds for C/P Escrow, whether called by that name or California Plan Escrow, and had the authority to direct where deposits would be made for that entity. Bank had no accounts in the name of either “California Plan Escrow” or C/P Escrow.
B. Procedural background
On January 26, 2007, Lucena filed a first amended complaint against Bank and Wells Fargo Bank, alleging causes of action for general negligence and breach of contract implied by law. In support of his negligence cause of action, Lucena alleged that Bank wrongfully “paid [Lucena]’s checks drawn on his accounts..., even though each of said checks was endorsed by persons other than the payees of said checks.”
Lucena voluntarily dismissed Wells Fargo Bank without prejudice on June 18, 2007.
In support of his breach of contract implied by law cause of action, Lucena alleged that “[Bank] agreed to pay only to the payees of [Lucena]’s checks the amounts thereof. [¶] Instead, each Defendant bank paid to persons other than those named as payees of [Lucena]’s checks the amounts thereof..., contrary to [Lucena]’s implied in law agreement with each Defendant bank.”
Bank moved for summary judgment under Campbell v. Bank of America (1987) 190 Cal.App.3d 1420 (Campbell), arguing that it was immune from liability since Lucena delivered the checks at issue to Schneider as the intended representative of “California Plan Escrow” and Schneider had full authority to direct that those checks be deposited to Cal Plan’s account.
In support of his opposition, Lucena submitted, among other documents, his personal declaration and two declarations from Schneider. In his declaration, Lucena states that he intended that his checks be deposited into an escrow account, and that he trusted Schneider to safeguard the funds he provided to him.
In the first of Schneider’s declarations, dated March 29, 2008 (hereafter Schneider’s March 29, 2008 declaration), he expresses his “genuine[]... remorse[]” for Lucena’s losses, but asserts that “[n]early none of his losses... would have happened if it were not for the negligence of [Bank].” Schneider’s declaration goes on to describe how he defrauded Lucena and the other investors who trusted him and how Bank allowed him to use the Cal Plan account as he pleased, even though Bank “was aware that this was an escrow account.” In his second declaration, dated January 14, 2008 (hereafter Schneider’s January 14, 2008 declaration), however, Schneider indicates that the Cal Plan account was not an escrow account, and that he failed to follow Lucena’s instructions to deposit the checks at issue into an escrow account, instead depositing them into the Cal Plan account.
Bank submitted written objections to the three declarations proffered by Lucena in opposition to its motion. The objections were directed at specified paragraphs within each of these declarations.
The trial court granted the summary judgment motion and entered judgment in favor of Bank. In its order, the court stated that the “undisputed evidence establishes that Michael Schneider, the owner and principal of California Plan, Inc. and California Plan Escrow (registered under the name ‘C/P Escrow, Inc.’), authorized the deposit of the checks into the California Plan, Inc. account.” After citing specific undisputed material facts and evidence submitted in support of Bank’s motion, the court concluded that, under Campbell, supra, 190 Cal.App.3d 1420, a “bank is not liable for accepting checks not endorsed by the named payee where the named payee authorized the deposit. [Citation.] [Lucena]’s checks did not specify that the funds were to be deposited into a specific escrow account that would restrict California Plan, Inc.’s or California Plan Escrow’s access to the funds. [Citation.]” However, the trial court did not rule on, or even mention, Bank’s evidentiary objections.
Lucena timely appealed.
II. Discussion
A. Lucena’s objections to Bank’s separate statement
In his reply brief, Lucena makes several objections to Bank’s separate statement of undisputed material facts, complaining that it does not comply with California Rules of Court, rule 3.1350(d) and also that certain material facts set forth therein are inadmissible. Lucena did not raise any of these objections to the trial court. In fact, many of the material facts that Lucena now contends should be considered inadmissible are facts that he conceded were undisputed in his opposition separate statement.
As a general rule, claims of procedural error are forfeited on appeal if they are not raised in the trial court. (In re S.B. (2004) 32 Cal.4th 1287, 1293.) “The purpose of this rule is to encourage parties to bring errors to the attention of the trial court, so that they may be corrected.” (Ibid.) As the California Supreme Court opined in Caminetti v. Pac. Mutual L. Ins. Co. (1943) 22 Cal.2d 386, 392, “ ‘It would seem... intolerable to permit a party to play fast and loose with the administration of justice by deliberately standing by without making an objection of which he is aware and thereby permitting the proceedings to go to a conclusion which he may acquiesce in, if favorable, and which he may avoid, if not.’ ” (Id. at p. 392, quoting Lindsay-Strathmore I. Dist. v. Superior Ct. (1920) 182 Cal. 315, 338 [conc. opn. of Olney, J.].) In other words, “[a] party should not be allowed to gamble on a favorable decision and then raise such an objection in the event he is disappointed in the result.” (Rohr v. Johnson (1944) 65 Cal.App.2d 208, 212.)
Lucena has forfeited these objections. His attempt to raise these objections for the first time on appeal--in his reply brief no less--provides a clear example of the sort of gamesmanship which our case law has long discouraged.
Even if these objections had not been forfeited, points raised for the first time in a reply brief will not be considered, absent a showing of good cause. (REO Broadcasting Consultants v. Martin (1999) 69 Cal.App.4th 489, 500.) There has been no such showing in this case.
At oral argument, Bank’s counsel mentioned that Lucena’s reply brief contained a quotation that is purportedly found in a footnote in National Union Fire Ins. Co. v. Allfirst Bank (D.Md. 2003) 282 F.Supp.2d 339, but that Bank’s counsel could not locate that language anywhere in that case. In a subsequent letter to the court, Lucena’s counsel apologized for the error and explained that the quoted language actually appears in the (unpublished) decision from the Fourth Circuit Court of Appeals in the National Union Fire Ins. Co. case, a copy of which was attached to the letter from counsel. The quoted language does appear on the last page of that case, albeit in a concurring opinion.
B. Standard and scope of review regarding summary judgment motions
A defendant moving for summary judgment must show either (1) that one or more elements of the plaintiff’s cause of action cannot be established, or (2) “that there is a complete defense to that cause of action.” (Code Civ. Proc., § 437c, subd. (p)(2).) “A court may grant summary judgment only when the evidence in support of the moving party establishes that there is no issue of fact to be tried.” (Neighbarger v. Irwin Industries, Inc. (1994) 8 Cal.4th 532, 547.) In other words, summary judgment should be granted only when a moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).)
Because a motion for summary judgment raises only questions of law, we independently review the parties’ supporting and opposing papers and apply the same standard as the trial court to determine whether a triable issue of material fact exists. (City of San Diego v. U.S. Gypsum Co. (1994) 30 Cal.App.4th 575, 582.) We review all evidence except that to which objections were made and sustained. (Reid v. Google (2010) 50 Cal.4th 512, 534.) Furthermore, we liberally construe the evidence in support of the party opposing summary judgment (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142), and assess whether the evidence would, if credited, permit the trier of fact to find in favor of the party opposing summary judgment under the applicable legal standards. (Cf. Aguilar v. Atlantic Richfield Co., supra, at p. 850.) We do not weigh the evidence and inferences, but merely determine whether a reasonable trier of fact could find in favor of the party opposing the motion, and must deny the motion when there is some evidence that, if believed, would support judgment in favor of the nonmoving party. (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 139.) Finally, we resolve any doubt as to the granting of the motion in favor of the opposing party. (Renna v. County of Fresno (2000) 78 Cal.App.4th 1, 5.)
C. Evidentiary objections
At oral argument, Bank’s counsel requested that this court rule on some of the evidentiary objections it made below, specifically objection Nos. 1, 3 and 4 to Schneider’s March 29, 2008 declaration and objection Nos. 4, 5, 6, 11, 12, 17, 19, 21 and 22 to Schneider’s January 14, 2008 declaration. As we noted above, the trial court failed to rule on Bank’s written objections, which appear to have been properly made. Consequently, the objections are presumed overruled and preserved for appeal. (Reid v. Google, Inc., supra, 50 Cal.4th at p. 534.)
As it turns out, however, Lucena did not rely on or cite to either of Schneider’s declarations in opposing the material facts set forth by the Bank in its separate statement. Instead, both of these declarations were cited exclusively in support of four of the six “additional material disputed facts” which Lucena presented in his opposition separate statement. The pertinent “additional material disputed facts” are set forth below:
Lucena’s citations to supporting evidence are omitted.
“3. Whether [Bank] used ordinary care in the handling of Plaintiff’s checks, when it allowed them to be deposited to the account of a person other than the named payee.
“4. If not, whether [Bank]’s lack of ordinary care was the proximate cause or a contributing cause of Plaintiff’s losses.
“5. Whether the manner in which Schneider handled his accounts at [Bank] was sufficient to put it on notice that fraud was being perpetrated on Plaintiff.
“6. The extent to which [Bank] facilitated, aided and abetted Schneider’s perpetration of fraud upon Plaintiff.”
None of these purported “material facts, ” however, is actually a fact; rather, they pronounce issues to be resolved. Rather than posing the question whether Bank used “ordinary care” in handling his checks, as he did in “additional material disputed fact” No. 3, Lucena should have listed specific facts establishing not only what constitutes “ordinary care” for Bank, but how the actions of Bank’s employees constituted a failure to exercise such “ordinary care.”
Because the “additional material undisputed facts” are not facts at all, all the evidence cited in support thereof is irrelevant. Bank’s objections to that evidence are therefore unnecessary, and we need not rule on them.
D. Section 3404
1. Duty of care
On appeal (as in the trial court) Lucena focuses on a statutory provision that is not expressly pleaded in the operative complaint, namely section 3404. He contends that the trial court failed to properly consider the duty of care, imposed on Bank by this statute, to not deposit checks into an account when the name on the account does not match the name of the payee written on those checks. Lucena contends that section 3404 applies because “California Plan Escrow, ” the named payee on the checks at issue, is a “fictitious” entity.
Section 3404, subdivisions (b)(ii) and (d) provide, in effect, that the drawer of a check may recover from a depositary bank on a comparative negligence basis if, inter alia, the depositary bank failed to use ordinary care in permitting a customer to deposit a check when the person identified as the payee on the check is a “fictitious person.” However, there is no liability under the statute if it is shown that the indorsement is “made in a name substantially similar to that of the payee or... the instrument, whether or not indorsed, is deposited in a depositary bank to an account in a name substantially similar to that of the payee.” (Id. subd. (c).)
Accordingly, we must determine if Lucena’s opposition presented evidence which showed that there is a triable issue of fact on the question of whether or not “California Plan Escrow” is a “fictitious person” under section 3404, subdivision (b)(ii). Lucena relies on the undisputed fact that the California Secretary of State has no records for a company with that name. However, the mere fact that the California Secretary of State has no record of a company, does not make that company “fictitious.” It is also undisputed that “California Plan Escrow” was the name that Schneider used to refer to the second company he purchased along with Cal Plan, i.e., C/P Escrow, and that Schneider viewed the names to be interchangeable. Lucena has offered no evidence to the contrary. Accordingly, there was no triable issue of fact regarding the existence of “California Plan Escrow.” The undisputed evidence established that it was not an imaginary entity, but simply the name which Schneider used to refer to C/P Escrow. As a result, section 3404 is not applicable to this case.
The statute does not separately define the term “fictitious.” Merriam-Webster’s Collegiate Dictionary (10th ed. 1999) at page 432 defines “fictitious” as “of, relating to, or characteristic of fiction, ” and further defines “fiction” as “something invented by the imagination or feigned.”
It is also undisputed that C/P Escrow was registered as a California corporation with the California Secretary of State, with the same address as Cal Plan and with Schneider serving as its CEO and CFO.
2. Affirmative defense of “substantially similar” names
In a related argument, Lucena contends that Bank’s motion should have been denied because it failed to establish the affirmative defense afforded by section 3404, subdivision (c) where there is a substantial similarity between the name of the payee and the name of the indorser or between the name of the payee and the name on the account into which the checks are deposited.
However, as demonstrated above, section 3404 does not apply to this case, thus there was no need for Bank to establish that there was a substantial similarity between the name “California Plan Escrow” and Cal Plan. The affirmative defense is not relevant to this case, and cannot provide a basis for reversing the judgment in favor of Bank.
E. Negligence cause of action
Lucena contends that the superior court’s order failed to separately address his first cause of action for negligence, and thus should not have granted summary judgment in favor of Bank.
The trial court’s order specifically cites the “general negligence” attachment to Lucena’s form complaint in recounting the allegations that form the basis of that complaint, i.e., that Bank “paid checks drawn on [Lucena]’s account even though the checks were ‘endorsed by persons other than the payees.’ ” The trial court also explained that the basis for its decision was that Schneider, the “owner and principal of [Cal Plan] and California Plan Escrow (registered under the name ‘C/P Escrow, Inc.’), authorized the deposit of the checks into the [Cal Plan] account.” The order then states: “In general, a bank is not liable for accepting checks not endorsed by the named payee where the named payee authorized the deposit.” (Campbell, supra, 190 Cal.App.3d at p. 1425.)
In Campbell, the plaintiff, Campbell, was an investor in an entity known as Mid Valley Time Loan (MVTL). (Campbell, supra, 190 Cal.App.3d at p. 1423.) William Probasco, the founder, CEO, manager and majority shareholder of MVTL, was also the founder, CEO, manager and majority shareholder of another entity known as Mid Valley Time Loan North (MVTL-North). (Ibid.) Campbell drew each of his investment checks payable to MVTL, but never noticed that, with one exception, all of the checks were stamped indorsed “MVTL-North” and deposited into MVTL-North’s account. (Id. at pp. 1423-1424.) Probasco authorized the deposits and “regularly authorized the movement of funds between the two corporations.” (Id. at p. 1424.) When Campbell learned that MVTL was filing for bankruptcy, he discovered that the checks he had written to MVTL had been indorsed by, and paid to the account of, MVTL-North. (Ibid.) After the bank refused to reimburse him, Campbell filed suit and, following a trial, obtained a judgment against the bank based on, among other causes of action, the bank’s negligence in accepting “improperly indorsed checks” in a name other than that of the named payee. (Id. at pp. 1424-1425.)
The Court of Appeal reversed, finding that the bank could not be held liable “under any theory supported by the evidence since indorsement of the checks by MVTL-North and deposit into the account of MVTL-North was authorized by the named payee, MVTL.” (Campbell, supra, 190 Cal.App.3d at p. 1425.) Because Probasco was the CEO and manager of both MVTL and MVTL-North, and had full authority over the financial operations of those entities, including the authority to make deposits, withdrawals and transfers of funds between them, Campbell could not maintain a negligence cause of action against the bank for accepting the checks indorsed by MVTL-North. (Id. at p. 1428.)
Here, too, the undisputed evidence establishes that Schneider had full authority over both Cal Plan and C/P Escrow, and thus Bank cannot, as a matter of law, be negligent for accepting the checks made out to “California Plan Escrow” and depositing the funds into Cal Plan’s account.
F. Opposition declarations
Finally, Lucena argues that the superior court’s order failed to mention the declarations that he submitted in opposition to Bank’s summary judgment motion even though those declarations raised triable issues of fact.
Code of Civil Procedure section 437c, subdivision (g) provides that “[u]pon the grant of a motion for summary judgment, on the ground that there is no triable issue of material fact, the court shall, by written or oral order, specify the reasons for its determination. The order shall specifically refer to the evidence proffered in support of, and if applicable in opposition to, the motion which indicates that no triable issue exists.” (Italics added.) The statute quite plainly provides that the order granting summary judgment need not, in all cases, refer to the evidence offered in opposition to the motion, rather such evidence must be referenced only “if applicable.”
The trial court’s decision was based on the “undisputed evidence” establishing that Schneider had unfettered authority regarding deposits, withdrawals and transfers for both Cal Plan and C/P Escrow and that C/P Escrow and “California Plan Escrow” were interchangeable terms for the same entity. Lucena does not specify how the declarations he submitted in opposition to Bank’s motion apply to these undisputed facts. Our review of those declarations does not reveal any evidence which would raise a triable issue of fact with respect to Schneider’s authority over those entities and the bank accounts he established for them. Consequently, the trial court’s failure to reference those declarations in its order was entirely appropriate.
Furthermore, as discussed in Section II.C., above, the two Schneider declarations were cited solely in support of Lucena’s improper “additional material disputed facts.”
III. Disposition
The judgment is affirmed.
WE CONCUR: Rushing, P.J., Elia, J.
The California Rules of Court do not prohibit the citation of unpublished federal appellate decisions. However, we remind counsel those rules do require that a copy of any such unpublished opinion be attached to the document in which it is cited. (Cal. Rules of Court, rule 8.1115(c).)