The Trial Court Erred In Granting Plaintiff’s Motion For Summary Adjudication On Breach Of Contract Claim Because Defendants Had Established A Triable Issue Of Fact, And That Error Prejudiced The Subsequent Bench Trial On Other Claims.
In Groth v. Gilad, Case Nos. A151497 and A150493 (1st Dist., Div. 5 November 18, 2019) (unpublished), plaintiff and other individuals signed a Partnership Engagement Letter that provided each person signing would contribute capital equally for the purpose of engaging in a cigar club. Shortly thereafter, plaintiff agreed to fund the purchase of real property for the club – depositing $735,000 into a business account belonging to one of the defendants. That defendant then transferred the funds into an LLC account – with the LLC having been formed to own the real property. The cigar club (which has since failed) was operated under a California corporation incorporated about a month later.
Approximately four months after depositing the $735,000, plaintiff requested a written promissory note for $610,001 showing the corporation as the borrower. The promissory note was signed by the corporation’s Secretary and CFO – both of whom had signed the Partnership Engagement Letter with plaintiff – on behalf of the corporation.
After receiving only one payment from the LLC of $10,001, plaintiff received no additional payments. He sued the Secretary and CFO who had signed the promissory note, and one corporate entity, alleging breach of contract, negligence, and breach of fiduciary duty. His motion for summary adjudication on the breach of contract claim was granted and, after a bench trial on other issues, the trial court issued judgment against all defendants for $400,000 in contract damages and interest, plus costs and contractual attorney’s fees.
On appeal, defendants argued that the trial court erred in granting summary adjudication on the breach of contract claim because defendants had established triable issues of fact that brought into question whether the parties agreed that the partnership, as opposed to solely the corporation or the LLC, would be obligated under the note. They also argued that this erroneous ruling had prejudiced the subsequent bench trial on other claims. The 1/5 DCA agreed and reversed the judgment and post-judgment fees order – finding the promissory note to be ambiguous with competing reasonable inferences regarding liability. Because triable issues of material fact exist as to the breach of contract, summary adjudication was precluded. With that, plaintiff's damages, interest, costs and fees awards went POOF! (at least for now).
Comments