Opinion
NO. CIV.S-06-1376 LKK/GGH.
April 25, 2007
ORDER
Plaintiffs have sued defendant to recover money lost in various unsuccessful financial ventures, including a real estate purchase, art acquisitions, and the recovery of gold from the Phillippines. The claims at issue include breach of contract, breach of good faith and fair dealing, and unjust enrichment. Pending before the court are cross motions for summary judgment. The court resolves the matter upon the parties' papers and after oral argument. For the reasons set forth below, plaintiffs' motion for summary judgment is denied and defendant's motion for summary judgment is granted.
I. Facts
Undisputed unless otherwise noted.
The plaintiffs in this action, Ridgewood Associates, Inc. of Nevada, Ridgewood Associates, Inc. of California, and Richard Malott, Jr., have brought suit against defendant Michael Trumpower, who is a resident of Arizona. Plaintiff's Statement of Undisputed Fact ("PSUF") ¶¶ 1-5. The parties met in 1996 and became business associates thereafter. PSUF ¶ 7. Defendant was essentially a matchmaker who paired investors with investment opportunities. PSUF ¶ 10.
Three business ventures gave rise to the present suit. First, plaintiffs maintain that they provided defendant with a refundable fee of $150,000 in 1996 in order to find additional investors for an undivided interest real estate venture. PSUF ¶ 16. Pursuant to a written agreement, Trumpower was to use his best efforts to obtain $15 million dollars on an unrestricted basis within 90 days, and if he was not able to obtain this financing, he was to return the $150,000 to Ridgewood California. PSUF ¶ 19. Trumpower was not able to find any investors for the venture and did not return the $150,000 fee. PSUF ¶ 20.
Second, in 1996-97, plaintiffs spent a total of approximately $610,000 in connection with a venture to obtain gold located in caves in the Phillippines. PSUF ¶ 37. During one of the trips to the Phillippines financed by plaintiffs, defendant gave $340,000 in cash to his contacts, who were then to notify defendant when a ton of gold bars would be ready for pick-up. PSUF ¶ 34. Ultimately, though, no gold was ever delivered, and the parties decided not to continue with the venture. PSUF ¶ 36. Plaintiffs contend (and defendant disputes) that defendant orally agreed to reimburse the expenses incurred. PSUF ¶ 39.
Third, plaintiffs claim that $225,000 was spent in connection with a venture to obtain art that had been looted from the Emir of Kuwait during the Gulf War. PSUF ¶ 40. The parties made several trips to the Middle East to look at the various art and artifacts, including paintings, sculptures, and gold coins. PSUF ¶ 42. Defendant smuggled two or three paintings back with him to the U.S. but was unable to have them evaluated by auction houses in the U.S. PSUF ¶ 47-48. In order to document plaintiffs' financing of the art venture, defendant signed a promissory note for $175,000 in 1997. PSUF ¶ 44. Plaintiffs also maintain that an additional $50,000 was provided to "clean up" the conclusion of the art venture. PSUF ¶ 51.
On November 6, 2001, defendant signed a letter agreement — the lynchpin of the present litigation — that purportedly constituted an acknowledgment of the otherwise time-barred debts to plaintiffs. PSUF ¶ 52. The original version drafted by plaintiffs read: "In consideration of the cash sums advanced you agree to return by January 4, 2002, an amount equal to 200%, or $1,970,000." PSUF ¶ 54. Defendant did not sign the original agreement.
Instead, defendant revised the document to read: "In consideration of the cash sums advanced you agree to return as soon as MATCO has available, an amount equal to 200%, or $1,970,000." PSUF ¶ 55. The signature line was also changed from simply "Michael Trumpower" to "Michael Trumpower" above the words "MATCO, Inc." MATCO was a corporation, headed by defendant, that was fighting off an involuntary bankruptcy petition by early 2001. Def.'s Statement of Undisputed Fact ("DSUF") ¶ 24-25. In short, defendant maintains that the November 2001 agreement was signed in an agency capacity for MATCO, and that any obligation to pay would only be triggered upon MATCO's future success.
II. Standard
Summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see also Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970); Secor Ltd. v. Cetus Corp., 51 F.3d 848, 853 (9th Cir. 1995).
Under summary judgment practice, the moving party
[A]lways bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact.Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the `pleadings, depositions, answers to interrogatories, and admissions on file.'" Id. Indeed, summary judgment should be entered, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. See id. at 322. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. In such a circumstance, summary judgment should be granted, "so long as whatever is before the district court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. at 323.
If the moving party meets its initial responsibility, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist.Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see also First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968); Secor Ltd., 51 F.3d at 853.
In attempting to establish the existence of this factual dispute, the opposing party may not rely upon the denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed.R.Civ.P. 56(e); Matsushita, 475 U.S. at 586 n. 11; see also First Nat'l Bank, 391 U.S. at 289; Rand v. Rowland, 154 F.3d 952, 954 (9th Cir. 1998). The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Owens v. Local No. 169, Ass'n of Western Pulp and Paper Workers, 971 F.2d 347, 355 (9th Cir. 1992) (quoting T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987)), and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party,Anderson, 477 U.S. 248-49; see also Cline v. Indus. Maint. Eng'g Contracting Co., 200 F.3d 1223, 1228 (9th Cir. 1999).
In the endeavor to establish the existence of a factual dispute, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial."First Nat'l Bank, 391 U.S. at 290; see also T.W. Elec. Serv., 809 F.2d at 631. Thus, the "purpose of summary judgment is to `pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita, 475 U.S. at 587 (quoting Fed.R.Civ.P. 56(e) advisory committee's note on 1963 amendments); see also Int'l Union of Bricklayers Allied Craftsman Local Union No. 20 v. Martin Jaska, Inc., 752 F.2d 1401, 1405 (9th Cir. 1985).
In resolving the summary judgment motion, the court examines the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. Rule 56(c); see also In re Citric Acid Litigation, 191 F.3d 1090, 1093 (9th Cir. 1999). The evidence of the opposing party is to be believed, see Anderson, 477 U.S. at 255, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party, see Matsushita, 475 U.S. at 587 (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam)); See also Headwaters Forest Def. v. County of Humboldt, 211 F.3d 1121, 1132 (9th Cir. 2000). Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. See Richards v. Nielsen Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985), aff'd, 810 F.2d 898, 902 (9th Cir. 1987).
Finally, to demonstrate a genuine issue, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'"Matsushita, 475 U.S. at 587 (citation omitted).
III. Analysis
A. Breach of Contract
First, the parties move for summary judgment on the breach of contract claim. Plaintiffs maintain that the November 6, 2001 letter operates as an acknowledgment of defendant's previous debt. Although they concede that the statute of limitations has run on any previous contracts between themselves and the defendant, they argue that the letter creates a new agreement and, in turn, the running of a new statute of limitations. Even if the letter constituted a sufficient acknowledgment of the debt, however, it contained a condition — that MATCO have sufficient funds available — that was never satisfied. As such, the plaintiffs' claim fails as a matter of law.
California Code of Civil Procedure section 360 provides that an acknowledgment of an existing debt signed by the party to be charged is sufficient to renew the statute of limitations. Cal. Code Civ. Pro. § 360. In interpreting this provision, California courts require that an acknowledgment contain "a distinct and unqualified admission . . . without intimation of an intent to refuse payment." Southern Pacific Co. v. Prosser, 122 Cal. 413, 416 (1898) (citations omitted). The standard, however, is not rigid, and courts have found that even informal language is sufficient, so long as it identifies the debt. See, e.g., Bronne Shirt Co. v. Matthess, 88 F. Supp. 698 (S.D. Cal. 1950); Buescher v. Lastar, 61 Cal. App. 3d 73 (1976); Hayes v. O'Marr, 81 Cal. App. 210 (1927). Importantly, "[t]he postponement of [payment] to a future time . . . does not make the acknowledgment uncertain. It merely imposes an additional condition and makes it incumbent on the plaintiff to allege and prove its existence before he can sue on the new promise and recover." Bronne Shirt Co., 88 F. Supp. at 700; see also Hayes, 81 Cal. App. at 212 (requiring "pleading and proof that the condition has come into being, on which the promise was made").
Assuming, arguendo, that the November 2001 letter constitutes an acknowledgment sufficient to renew the statute of limitations and, further, that Mr. Trumpower is personally liable for the debt, the promise to pay is based on the fulfillment of a condition. The letter expressly states that the money will be paid "as soon as Matco has [the funds] available." Pls.' Mot. for Summary Judgment, Ex. A. This language constitutes a condition that must be satisfied before plaintiffs can recover the alleged debt. In Bronne Shirt, for instance, the defendant promised to pay an old debt "as soon as [he could] build up a safe reserve," which the court found was a contractual condition (not merely hope as to time or manner of payment) whose existence plaintiff had to prove in order to sue on the new promise. 88 F. Supp. at 700 (describing satisfaction of condition as "contingency" for suit). Similarly, plaintiffs here must prove that "the condition has come into being." Hayes, 81 Cal. App. at 212.
This latter assumption is particularly questionable, given that defendant specifically revised to the letter agreement to read "Michael Trumpower MATCO, Inc.", rather than just "Michael Trumpower," and inserted the phrase "as soon as MATCO has available." While plaintiffs maintain that defendant's deposition testimony indicates that he intended to pay the debt out of profits from MATCO, that extrinsic evidence would only be relevant if the agreement were ambiguous, which is doubtful. Furthermore, if the debt was intended to be repaid from defendant's personal profits, there would be no need for defendant to reference his capacity as an agent for MATCO; if they were personal profits, defendant could do with them whatever he chose.
Fatally for plaintiffs, they are unable to prove the fulfillment of the relevant condition. Because Matco is bankrupt, it does not have the funds available to repay the debt. Therefore, the condition specified in the letter remains unfulfilled, and plaintiffs' claim fails as a matter of law. Accordingly, the court denies plaintiffs' motion for summary judgment and grants defendant's motion for summary judgment regarding the breach of contract claim.
B. Breach of the Covenant of Good Faith and Fair Dealing
The parties also seek summary judgment on the issue of whether defendant has breached the covenant of good faith and fair dealing. "In every contract there is an implied covenant of good faith and fair dealing that neither party will do anything which injures the right of the other to receive the benefits of the agreement." Brown v. Superior Court of Los Angeles County, 34 Cal. 2d 559, 564 (1949) (citations omitted). As noted above, the November 2001 letter agreement contains a condition that defendant will repay the debt when MATCO has the funds available. Plaintiffs do not allege nor present any evidence that the defendant took any action to thwart the fulfillment of that condition (e.g., deliberately impairing the financial health of MATCO), and accordingly, the claim fails as a matter of law.
C. Unjust Enrichment
Next, the parties move for summary judgment on the claim of unjust enrichment. This claim is subsumed and barred by the contracts covering the same subject matter. See California Medical Ass'n v. Aetna U.S. Healthcare of California, 94 Cal. App. 4th 151, 168 (2001) ("[A]s a matter of law, a quasi-contract action for unjust enrichment does not lie where, as here, express binding agreements exist and define the parties' rights."); Lance Camper Manufacturing Corp. v. Republic Indemnity Co., 44 Cal. App. 4th 194, 203 (1996) ("[A]n implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter.").
Here, a written agreement governed the real estate venture, just as a promissory note governed the art acquisition venture. The fact that the statute of limitations expired on enforcement of those contracts does not render them invalid. Furthermore, the November 2001 acknowledgement embraces all three of the ventures at issue. Accordingly, the courts grants defendant's motion for summary judgment on the unjust enrichment claim.
D. Failure to Join Necessary Parties
Defendant contends that the case should be dismissed for the failure to join necessary parties under Federal Rule of Civil Procedure 19, because he would otherwise be subject to multiple legal obligations. The basis for defendant's concern is that the November 2001 letter referenced seven entities, not all of whom are plaintiffs in the case. However, it appears that the entities lent money to plaintiff Malott (who then lent money to defendant); accordingly, money is owed to these individuals by plaintiff, not defendant, and these individuals are not necessary parties to this action.
IV. Conclusion
For the reasons set forth above, the court orders as follows:
1. Plaintiffs' motion for summary judgment is denied.
2. Defendant's motion for summary judgment is granted.
3. Defendant's motion to extend the time for discovery is denied as moot.
IT IS SO ORDERED.