Opinion
B155493.
7-15-2003
STRATHVALE HOLDINGS, LTD., et al., Plaintiffs and Respondents, v. HUGH SILBERT et al., Defendants and Appellants.
Martin E. Jacobs, Inc., and Martin E. Jacobs for Defendants and Appellants. Law Office of Gary Kurtz and Gary Kurtz for Plaintiffs and Respondents.
Plaintiffs and respondents Strathvale Holdings, Ltd. (Strathvale) and Concord Investment Holdings Corporation (Concord) sought recovery for damages alleged to have arisen out of certain investments made by respondents in an allegedly fraudulent financial investment scheme. The case proceeded to a bench trial on respondents claims for unfair business practices under Business and Professions Code section 17200, constructive trust and conversion. The court entered judgment in favor of respondents and against defendants and appellants Hugh Silbert and his defunct companies Hu-Mann Co., Inc., Allied Provincial Investments, S.A., Bellingham Industries Ltd., and Zenith Acquisitions and Imperial Holdings, Ltd. We affirm.
Karifa Capital Corp., Ltd., alleged that it made investments as well. Pursuant to the judgment, Karifa recovered nothing, and does not appear to be a party on appeal. Additional plaintiffs consisted of individuals Wayne Kunimura, Ken Murishwar, Ken Hall, William Mullins and Brian Dempsey, whose claims were dismissed by the court during trial.
All statutory references are to the Business and Professions Code unless otherwise specified.
Respondents additional claims for declaratory relief and resulting trust were dismissed by the court.
We note that our task on appeal was made particularly difficult by the parties inadequate briefing and general lack of specific citation to the record. Indeed, because the trial exhibits were originally provided to us without being marked with the exhibit numbers assigned at trial, it was impossible to follow along with the exhibits while reviewing the trial testimony. Accordingly, we requested that the record be resubmitted with exhibit references, which necessitated a second review of the transcript.
FACTUAL AND PROCEDURAL BACKGROUND
Trial
The following evidence was presented at trial: In 1994, respondents invested an aggregate of $ 430,000 into an investment program initially offered by an entity called Manor Financial Services and its principal, Rob Nite. Specifically, respondent Strathvale invested $ 300,000, and respondent Concord invested $ 130,000. Ken Murishwar, managing director of Concord, was told by a third-party broker that in return for investing between $ 130,000 to $ 150,000 in the Nite program, he would receive $ 1 million a week for a 40-week period.
In their first amended complaint, respondents alleged that in 1996 they "obtained a judgment against Manor Financial Services in an amount in excess of $ 138,000,000.00."
Respondents witness, Steven Rambam, a private licensed investigator who was hired by appellant Hugh Silbert in 1994, testified that respondents investment amounts made their way to third party Nevis International Ltd. and its principals, Phil Thomas and David Sims, and from there to Silbert. Silbert referred to Thomas and Sims as his partners, and several agreements between them were admitted at trial. The invested money was eventually deposited into an escrow account in the name of attorney Charles Mehrman, now deceased (Mehrman escrow).
Respondents attached to their posttrial brief a United States Securities and Exchange Commission litigation release dated September 4, 1997, which stated that the SEC had filed suit against Nite, Thomas and Sims, alleging that "they conducted a multi-million dollar fraudulent investment scheme involving the fictional trading of securities purportedly issued by major international banks," the scheme is commonly referred to as a "prime bank scheme," and Nite was currently incarcerated, serving time for fraud. This document was not presented at trial.
Once the funds were in the Mehrman escrow, Silbert had access to the money, which he used to fund his prime bank advance fee program. Rambam testified that, in theory, the program was supposed to work as follows: The investment or advance fee made by an investor would be used to secure a bank instrument known as a funding commitment or "standby letter of credit" or "prime bank guarantee." Once the funding commitment was obtained, it would be used to purchase prime bank notes (midterm bank bonds or debentures) at a discount, which could then be sold at market, and the difference between the purchase price and sale price would constitute the investors profit.
In the present case, Silbert, who admitted he had no professional licenses, directed funds from the Mehrman escrow to purchase fraudulent instruments purportedly issued by two offshore banks, Kansai Bank and Bumi Daya Bank, and the nonexistent Eurobanco. Restitution was made to Silbert on the Eurobanco transaction to the equivalent of approximately $ 500,000 by individuals named Jimmy Bernard Sanchez and Charles Goodwin. However, neither Strathvale nor Concord received a return on their investments or recovered their investments. Silbert admitted that he pocketed some of respondents investment monies. Rambam testified that Silbert admitted he had never seen a funding commitment that was real, and that none of his funding programs had ever produced any money for investors. Rambam also testified that he had numerous conversations with Silbert about these fraudulent transactions in 1994.
At the end of trial, the court made clear that the tentative decision was to find the transaction "to be totally a scam" and stated "there is no doubt in my mind that this entire transaction and everybody participating in this transaction, everybody offering these — whatever they supposedly are — are engaging in unfair business practice, and it was done in an unlawful — besides being, I dont believe a real deal, it also was done in an unlawful manner because it was done by an unlicensed broker."
Statement of Decision
Following trial, the parties submitted briefs on several issues, including whether Silbert was required to have a brokers license. Appellants also submitted "proposals" as to the content of a statement of decision and respondents submitted two proposed statements of decision. The trial court ultimately issued a statement of decision that did not address the issue of whether Silbert needed a license. In the statement of decision, the court found that: Silberts prime bank advance fee programs "were scams and fraud schemes"; appellants Silbert and Hu-Mann Co., Inc., Allied Provincial Investments, S.A. and Bellingham Industries Ltd. "engaged in unfair business practices as defined by Business and Professions Code section 17200"; respondents Strathvale and Concord were entitled to a judgment against appellants jointly and severally in the amount of their investments; and a constructive trust would be imposed over certain identified instruments to the extent necessary to satisfy the judgment. The court also found that "Silbert and his testimony lacked credibility and were not to be believed."
Judgment
On June 29, 2001, the court entered judgment against appellants Silbert, Hu-Mann Co., Inc., Allied Provincial Investments, S.A., Bellingham Industries Ltd., as well as Zenith Acquisitions and Imperial Holdings, Ltd., in favor of Strathvale in the amount of $ 300,000 plus interest, and in favor of Concord in the amount of $ 130,000 plus interest. The judgment awarded plaintiff Karifa Capital Corp. Ltd. nothing on its complaint. A constructive trust was also imposed over all interests of respondents in "any money held by Jimmy Bernard Sanchez and all security for those funds" consisting of a security agreement and U.C.C. 1 statement, secured by a Rolls Royce and personal property located in Texas, and a real estate lien notice and deed of trust, secured by a deed of trust on certain real property in Texas.
Appellants filed their notice of appeal on December 24, 2001.
DISCUSSION
A. Untimely Appeal
As an initial matter, respondents assert that appellants notice of appeal was untimely since it was filed nearly six months after the judgment was entered.
California Rules of Court, rule 2(a), provides that a notice of appeal must be filed on or before the earliest of (1) 60 days after the superior court clerk mails appellant a document entitled "Notice of Entry" of judgment or a file-stamped copy of the judgment, showing the date either was mailed, (2) 60 days after appellant serves or is served with a document entitled "Notice of Entry" of judgment or a file-stamped copy of the judgment, accompanied by a proof of service, or (3) 180 days after entry of judgment.
The parties counsel have submitted conflicting declarations on this issue. Appellants counsel states that he was served by respondents counsel in court with a copy of the signed judgment that "was not file stamped." He attached this copy of the judgment to his declaration. We note that in addition to the lack of a file-stamp, this copy of the signed judgment also contains blank spaces for the amounts of interest awarded, which amounts appear on a copy of the judgment found elsewhere in the record.
These declarations were included as part of the parties augmented record.
The declaration of respondents counsel, on the other hand, states that he served appellants counsel with "a file stamped" copy of the judgment. However, there is no proof of service of such a document, as is required by California Rules of Court, rule 2. Moreover, there is no mention by either counsel of service of a document entitled "Notice of Entry" of judgment, nor does the record contain one.
Accordingly, in the absence of a proof of service showing service of either a file-stamped copy of the judgment or a document entitled "Notice of Entry," we conclude that the notice of appeal, filed within 180 days after entry of judgment, was timely.
B. Substantial Evidence
Appellants argue that "Silbert and his entities did not commit any acts in violation of California Business & Professions Code section 17,200 [sic]." Appellants do not assert that they did not violate section 17200 as a matter of law. What appellants appear to be arguing, in essence, is that there is no substantial evidence to support a finding that appellants engaged in unfair competition.
We note that on an appeal challenging the sufficiency of the evidence, an appellants opening brief must set forth all the material evidence on point, and not merely the facts favorable to appellant. (Bresnahan v. Chrysler Corp. (1998) 65 Cal.App.4th 1149, 1153, fn. 5.) Where an appellant fails to abide by this rule, we have discretion to treat the substantial evidence issue as waived and may presume the record contains evidence to sustain every finding of fact. (Toigo v. Town of Ross (1998) 70 Cal.App.4th 309, 317.) We are sorely tempted to do so here in light of appellants incomplete and one-sided rendering of the material facts in their opening brief, but we will nevertheless address the issue on the merits in the interests of justice.
Standard of Review
Although appellants fail to do so, we will set forth the applicable standard of review. "When a trial courts factual determination is attacked on the ground that there is no substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which will support the determination, and when two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court. If such substantial evidence be found, it is of no consequence that the trial court believing other evidence, or drawing other reasonable inferences, might have reached a contrary conclusion." (Bowers v. Bernards (1984) 150 Cal. App. 3d 870, 873-874, 197 Cal. Rptr. 925.) The substantial evidence rule recognizes that appellate courts should defer to a trier of facts resolution of factual issues because the judge or jury has the benefit of observing the demeanor of witnesses and, therefore, is in a better position to assess credibility. (Johnson v. Pratt & Whitney Canada, Inc. (1994) 28 Cal.App.4th 613, 622-623; Maslow v. Maslow (1953) 117 Cal. App. 2d 237, 243, 255 P.2d 65.) "We do not reweigh the evidence on appeal, but rather determine whether, after resolving all conflicts favorably to the prevailing party [citations], and according prevailing parties the benefit of all reasonable inferences [citation], there is substantial evidence to support the judgment." (Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 544, 138 Cal. Rptr. 705, 564 P.2d 857.) As long as there is substantial evidence to support it, the judgment must be affirmed. (Rupf v. Yan (2000) 85 Cal.App.4th 411, 429-430, fn. 5.)
Section 17200Before we can determine whether there is substantial evidence to support the courts finding of a violation of section 17200, we must first review that section. Section 17200 provides that "unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." "Section 17200 is not confined to anticompetitive business practices, but is also directed toward the publics right to protection from fraud, deceit, and unlawful conduct. [Citation.] Thus, California courts have consistently interpreted the language of section 17200 broadly." (South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72 Cal.App.4th 861, 877 quoting Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 519.) "`"The statute imposes strict liability. It is not necessary to show that the defendant intended to injure anyone."" (Ibid .) "`Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition — acts or practices which are unlawful, or unfair, or fraudulent. "In other words, a practice is prohibited as `unfair or `deceptive even if not `unlawful and vice versa."" (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180, 973 P.2d 527.)
Although it is not readily obvious from appellants opening brief, it appears that appellants are arguing that there is no substantial evidence to support a finding of liability on the "fraud" prong of section 17200. "The `"fraud" contemplated by section 17200s third prong bears little resemblance to common law fraud or deception. The test is whether the public is likely to be deceived." (South Bay Chevrolet v. General Motors Acceptance Corp., supra, 72 Cal.App.4th at p. 888 quoting State Farm Fire & Casualty Co. v. Superior Court (1996) 45 Cal.App.4th 1093, 1105.) Thus, "fraudulent" as used in the statute, "`does not refer to the common law tort of fraud," but only requires a showing that "`members of the public "`are likely to be deceived."" (Ibid .; Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 839; Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267, 833 P.2d 545.) "`This means that a section 17200 violation, unlike common law fraud, can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage." (South Bay Chevrolet, at p. 888 quoting State Farm Fire & Casualty Co., at p. 1105.)
In their reply brief, appellants state: "In the statement of decision, Judge Elias set forth the courts reasoning with respect to the judgment, clearly placing the judgment on the fraud ground of California Business and Professions Code section 17200 rather than the illegality branch."
Violation of Section 17200
To support their position that there is no substantial evidence to sustain the courts finding of a violation of section 17200, appellants essentially summarize various "beliefs" held by Silbert and representations made to him by third parties, as revealed by his testimony at trial. But the trial court made the express finding in its statement of decision that "Mr. Silbert and his testimony lacked credibility and were not to be believed." We defer to the trial courts assessment of witness credibility. (See, e.g., Johnson v. Pratt & Whitney Canada, Inc. (1994) 28 Cal.App.4th 613, 622-623; Maslow v. Maslow, supra, 117 Cal. App. 2d at p. 243.)
Moreover, appellants argument reflects a fundamental misunderstanding of our role on appeal. We are not at liberty to reweigh the evidence since that function lies exclusively within the province of the trier of fact. (Hasson v. Ford Motor Co., supra, (1977) 19 Cal.3d at p. 544; Johnson v. Pratt & Whitney Canada, Inc., supra, 28 Cal.App.4th at pp. 622-623.) Nor does it matter that conflicting evidence exists which is contrary to the courts findings since any conflicts in the evidence must be resolved in respondents favor. (Hasson, at p. 544.) So long as there is substantial evidence to support the judgment, we must affirm it even if we would have reached a different result if presiding over the proceedings below. (Rupf v. Yan, supra, 85 Cal.App.4th at pp. 429-430, fn. 5.)
To determine whether there is such substantial evidence in this case, we must review the entire record. (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633; DiMartino v. City of Orinda (2000) 80 Cal.App.4th 329, 336.) In this regard, we note that respondents brief offers us little assistance. Rather than pointing to the evidence to support their judgment, respondents simply assert mere conclusions.
Respondents state: "The trial courts conclusion is well supported by the facts at trial. All of the specific transactions in which Silbert placed Respondents money were fraudulent: (a) the Mitchell/Barsky transaction was a fraud where Silbert lost approximately $ 750,000; (b) the Sanchez/Goodwin funding commitment, which cost $ 500,000, was drawn from a bank that did not exist; and so on." (Italics added.) This last phrase is especially meaningless.
From our own review of the record, the evidence shows that Silbert, through his companies, primarily Hu-Mann Company, Inc. and Allied Provincial Investments, S.A., was doing business with his "partners," Phil Thomas and Dave Sims, in 1994 and 1995. There can be no dispute as to their involvement with each other as several agreements between them were admitted at trial. Rambam testified that Silbert told him that money invested with Rob Nite was passed on to Thomas and Sims, which was then placed in the Mehrman escrow under Silberts control. Rambam testified that he and Silbert met with some of these investors, including Ken Murishwar of Concord. Brian Dempsey of Strathvale testified that he attended a meeting in New York in the fall of 1994 in which a man he believed was Silbert was present. Silbert used money from the Mehrman escrow to buy funding commitments that were fraudulent. Although Silbert obtained restitution in connection with one of these transactions (the Eurobanco transaction), neither Concord nor Strathvale recovered their investments. Rambam testified that Silbert told him that Silbert spent in excess of $ 150,000 of the invested funds on expenses for his business and what appeared to be an extravagant lifestyle. At the end of the day, it would appear that Silbert still had control over half a million dollars of the invested money. Because we defer to the trial courts finding that Silberts testimony was not credible, there is no explanation for why this money was not returned to investors. Nor is there evidence to suggest that Silbert does not still have control of the money.
We conclude that there is substantial evidence to support the trial courts finding of a fraudulent business practice under section 17200.
Respondents argue that a separate, independent basis for a finding of a section 17200 violation under the "unlawful" prong of the statute is that Silbert was engaged in transactions which required professional licenses, which he did not have. Appellants address this issue in their reply brief. But we note that while the parties briefed the court on this issue in posttrial briefs and respondents included it in their proposed statement of decision, the trial court did not include this finding in the statement of decision it issued, which contains no finding on the issue of professional licenses. We conclude it is not necessary to address this issue on appeal.
Appellants, however, assert that there can be no finding of a fraudulent business transaction because there was no reasonable reliance. To support their position, appellants rely on the following comments by the court during trial: "I dont understand how anybody invested in these transactions. I dont understand how this is reasonable reliance. I have a real problem with that. I dont understand how people with MBAs . . . I dont understand how people would do this. You are supposed to invest five hundred thousand and get a million back a month. There is an old adage: If it looks too good, it is too good." But respondents counsel clarified that respondents were not suing for common law fraud, but a fraudulent business practice under section 17200. As stated above, unlike common law fraud, a finding of a fraudulent business transaction under section 17200 can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. (South Bay Chevrolet v. General Motors Acceptance Corp., supra, 72 Cal.App.4th at p. 888; State Farm Fire & Casualty Co. v. Superior Court, supra, 45 Cal.App.4th at p. 1105.) The statute authorizes "courts to order restitution without individualized proof of deception, reliance, and injury if necessary to prevent the use or employment of an unfair practice." (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1267.) The test is only whether members of the public are likely to be deceived. (South Bay Chevrolet, at p. 888.) Here, members of the public were likely to be deceived where their money was solicited for investment into a program through which their money would be used to purchase legitimate bank documents that would enable them to earn a profit, when, in fact, no such legitimate documents were ever purchased and no profit was ever earned.
C. Real Parties in Interest
Appellants argue that respondents Strathvale and Concord are not the real parties in interest because the monies invested through these companies into the Rob Nite program were obtained from individuals and were not the companies own funds. Appellants argument is without merit. Brian Dempsey, the chairman and owner of Strathvale, testified that the money invested by Strathvale belonged to the corporation. Documents admitted into evidence show that the money was invested "on behalf of" Strathvale. Additionally, Ken Murishwar, managing director of Concord, testified that the money was invested through Concord. Documents admitted into evidence show that the transaction was made "on behalf of" Concord. Thus, we conclude that substantial evidence supports the finding that the corporate entities were the real parties in interest.
D. Waived Issues
Appellants summarily raise three additional issues under separate headings, spending only a few sentences on each in their opening brief. Appellants assert that: (1) respondents failed to show that the money invested with Rob Nite made its way to appellants; (2) "it is obvious" that a constructive trust on the Sanchez assets is improper where the assets resulted from a loan and not from any monies from the Mehrman trust; and (3) "there was no basis in the statement of decision for a judgment against [Zenith Acquisitions & Imperial Holdings, Ltd.] and no evidence in the record to support any judgment against it."
But appellants do not cite to a single legal authority or include any reasoned argument to support their conclusions. We will not make appellants arguments for them. "When an appellant fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived." (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785; see also People v. Stanley (1995) 10 Cal.4th 764, 793, 897 P.2d 481; Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 216, fn. 4, 188 Cal. Rptr. 115, 655 P.2d 317; Muega v. Menocal (1996) 50 Cal.App.4th 868, 877; San Mateo County Coastal Landowners Assn. v. County of San Mateo (1995) 38 Cal.App.4th 523, 559; Kim v. Sumitomo Bank (1993) 17 Cal.App.4th 974, 979.)
DISPOSITION
The judgment is affirmed. Respondents to recover their costs on appeal.
We concur: BOREN, P.J., and ASHMANN-GERST, J.