Brewer v. Hall
Filed 1/10/13
Brewer v. Hall CA3
NOT TO BE
PUBLISHED
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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE COURT OF APPEAL OF THE STATE OF
THIRD APPELLATE DISTRICT
(El Dorado
----
LEMOIN BREWER
et al.,
Plaintiffs and
Respondents,
v.
LEE W. HALL et
al.,
Defendants;
J. F. SHEA
CONSTRUCTION, INC.,
Objector and
Appellant.
C069545
(Super. Ct. No.
PC20060324)
This
appeal challenges the trial court’s postjudgment order, which granted a
judgment creditor’s motion for damages against a third party for a violation of
its garnishee duties with regard to a writ
of execution and notice of levy. We
agree the trial court erred and shall reverse and remand.
Lemoin
Brewer and Michael Palmer, partners in Snows Quarry Products (collectively
Snows Quarry), obtained a judgment of nearly $1.5 million against L. W.
Hall Company, Inc., which formerly did business under the name of Cobalt
Crushing (hereafter Hall Inc.), for breach of a lease agreement. In enforcement of this judgment, Snows Quarry
served a writ of execution and notice of levy on J. F. Shea Construction,
Inc., in February 2010.
name="_ftnref1" title="">[1] Snows Quarry brought the
instant motion for damages against Shea for the latter’s violation of its
garnishee duties, contending Shea had issued three checks in excess of $100,000
to Hall Inc. without good cause after service of the writ of execution and
notice of levy. (Code Civ. Proc., §§ 701.010
& 701.020;
name="_ftnref2" title="">[2] see 2 Ahart, Cal. Practice Guide: Enforcing Judgments and Debts (The Rutter
Group 2012) ¶ 6:577, pp. 6D-62 to 6D-63 (rev. #1, 2012) [judgment creditor
may determine garnishee liability by means of motion in underlying action]; see
also Ilshin Investment Co.,
Inc. (2011) 195 Cal.App.4th 612, 628-630 [distinguishing right to
recover legal fees in claim in underlying action for breach of garnishee duties
(§ 701.020) from independent creditor’s suit (§ 708.210)].) After holding an evidentiary hearing, the
trial court granted the motion and entered a “judgment†in favor of Snows
Quarry.
title="">[3] Shea filed a timely notice
of appeal.
Shea
contends the trial court erroneously concluded that Shea must have been doing business with Hall Inc., rather than with its president, Lee W. Hall (hereafter Lee Hall), as an individual doing business
under the name of L. W. Hall/Cobalt Crushing (hereafter Hall/Cobalt), because
Lee Hall did not have the necessary contractor’s license for the work for which
Shea made payment. Shea also argues the
evidence does not support the judgment because it ignored Shea’s claim that
Hall Inc. had an outstanding debt to Shea that would have offset any debt for
the work performed. Finally, it argues
the finding of Shea’s lack of a good faith belief that it was making payment to
Lee Hall as an individual is not supported by substantial evidence. Snows Quarry has moved for sanctions and
requested attorney fees for a frivolous appeal.
We
agree that the legal premise of the trial court’s ruling with respect to Lee
Hall’s need for a contractor’s license to crush rock foreclosed the trial court
in its evaluation of the evidence from finding that Shea had
which case it did not violate any duty regarding garnisheed Hall Inc. funds in
its possession).
name="_ftnref4" title="">[4] While we would ordinarily
remand for the trial court to redecide the motion on the present evidence and
briefing free of this legal misconception, we find the evidence entitles Shea
as a matter of law to denial of the motion, and in the interest of justice we
will direct the trial court to do so.
Snows Quarry’s motion for sanctions and request for attorney fees is
consequently without merit and is therefore denied.
FACTUAL AND PROCEDURAL BACKGROUND
Ordinarily
we would limit our account of the facts to those favoring the trial court’s
ruling. Given the error of law in the
trial court’s ruling, we instead will provide an account of
in dispute, merely the legal significance one should draw from them.
In
the underlying action, the trial court determined that Snows Quarry should not
take anything on any cause of action against Lee Hall as an individual. It accordingly entered judgment in January
2010 in his favor.
With
the million-dollar judgment pending against Hall Inc., Lee Hall consulted with
counsel about starting over. In December
2009, he obtained a new taxpayer identification number (TIN) for the new
business, Hall/Cobalt. He did not
surrender the existing fictitious name that Hall Inc. held that would expire in
2011, and did not file a fictitious name certificate for his sole
proprietorship. (Bus. & Prof. Code,
§ 17900, subd. (b)(1) [individual including own name in business title not
within definition of fictitious business name].) He opened new bank accounts for the
business. Believing that he had a
secured interest in the Hall Inc. equipment in excess of its value, he effected
the defunct (but not dissolved) corporation’s surrender of the equipment to him
under a writ of execution, and began to seek work.
Shea
was soliciting bids to crush rock in one of its quarries for Shea to use in the
manufacture of the asphalt aggregate it used in highway and other public work
projects. Shea had used Hall Inc.
frequently in the past because it was obligated to its union to contract with
union businesses if possible and Hall Inc. was one of two in the county. There had also been litigation initiated in
2007 under the corporate name of Hall Inc. against Shea, which resulted in a
settlement in November 2007
name="_ftnref5" title="">[5] under which Hall Inc. had an outstanding debt to Shea for
overpayments.
name="_ftnref6" title="">[6]
Lee
Hall spoke with Shea’s project manager on February 3, 2010, and made an
attractive bid that obligated Shea only to buy up to a certain quantity of
crushed rock, then buy only on an “as needed†basis. In the course of their conversation, Lee Hall
told Shea’s project manager about the change in Lee Hall’s form of business as
a result of the judgment against Hall Inc.
Lee
Hall sent an e-mailed letter later that day confirming the terms, and Shea’s
project manager prepared a purchase order on the same date. The project manager was not aware that the
sheriff had unsuccessfully attempted to serve the notice of levy on the
vice-president of “J. F. Shea Construction, Inc.†at Shea’s Redding offices
that afternoon on any funds due “LW Hall Company Inc dba Cobalt Crushing†(Shea
as a matter of policy refusing to accept process anywhere other than its Los
Angeles offices).
name="_ftnref7" title="">[7]
Shea’s
vice-president filed a garnishee memoranda (former § 701.030)
in response to this notice of levy and a subsequent one in June 2010,
which attested to his understanding that Shea did not owe money to judgment
debtor Hall Inc. (against which Shea had an offset under the 2007 settlement
for any debts Shea might owe it) but rather to Lee Hall as an individual. Shea’s vice-president reiterated this
position at trial as the basis for issuing the checks to Lee Hall even after he
received the notices of levy.
Lee
Hall told the foreman of Shea’s asphalt plant
ability to operate in light of the judgment.
Lee Hall sent the plant foreman the TIN for the new business in March
2010, who then forwarded it to Shea’s project manager. At some point, Lee Hall told Shea’s
vice-president as well about the need to make the change in his form of
business. The vice-president did not
request any documentation of the change, and was not aware of the form in which
Lee Hall intended to operate.
Lee
Hall sent invoices for payment on stationery using the Hall/Cobalt title. On its receipt, Shea’s office staff, which
did not have any direct knowledge of any of the details of Shea’s contracts
with vendors, would have done a search for a name that was reasonably close to
Hall/Cobalt in Shea’s records. This
would have generated the vendor number for Hall Inc., because there had not
been any notification to the office staff of the need for a new vendor number
(which can be generated only upon receipt of a new W-9 in the name of the
vendor with its TIN). The old vendor
number was written on the invoices, and appeared on the checks issued to “Cobalt
Crushing†next to the date, which Shea’s vice-president signed. The vice-president did not as a normal matter
pay any heed to the vendor numbers on invoices and checks submitted to him for
signature. He would simply look at the
payee and the amount, and question it only if it did not make sense. Lee Hall deposited these checks in the new
accounts opened for Hall/Cobalt.
Sometime
in June 2010, Shea’s plant manager learned that the sheriff was seizing the
Hall/Cobalt equipment at the quarry, and drove over there to make sure Shea
property was not taken as well. He was
familiar with the equipment Hall Inc. had used over the years, and Hall/Cobalt
appeared to have been using the same equipment.
In a subsequent proceeding in the underlying action, the court
determined that Lee Hall in fact had a secured interest in the property of Hall
Inc., but not greater than the value of the equipment. In its December 2010 order, the court
declined to add Lee Hall as an additional judgment debtor and awarded him about
$196,000 in first priority from the proceeds of the sale of the equipment.
of the equipment, Lee Hall was unable to respond to complaints Shea had about
the composition of the mix of crushed rocks, on the basis of which Shea
asserted that it had overpaid him about $51,000.
In
December 2010, Lee Hall went to Shea’s offices to remind them that he would
need a 1099 form reflecting his compensation (a form not issued to
corporations). This was the first that
the office staff had learned of his change in status. The office had him fill out a W-9 with the
new TIN and issued a new vendor number.
It also issued a 1099 form to Hall/Cobalt in the amount of the checks
issued to Cobalt Crushing.
On
the issue of Lee Hall’s lack of a contractor’s license, the testimony at the
hearing was brief. Shea’s plant foreman
did not have any knowledge of whether Lee Hall had a contractor’s license. On the final page of testimony, Lee Hall
stated, “You don’t need a mining contractor’s license to do mining.†He explained he did not need a state license
to do mining work on federal forest land, mines were under federal
jurisdiction, and that under the state contractors’ law there was not even a
classification for a mining license.
He based his views on his 40 years of experience. The nature of the contractor’s license numbers
that appeared on the stationery of Hall Inc. (A&B402271) was not addressed
at any point in the trial court, though the prefixes “A†and “B†suggest
general engineering and general building licensure. (See Gibbs & Hunt, Cal. Construction
Law (16th ed. 2000) § 1.02, pp. 6-8) [license classifications].)
The
trial court concluded that Lee Hall had “attempted
to convert the operation of the rock crushing business into a sole
proprietorship,†run from the same location and using a similar fictitious name
as Hall Inc. (as well as using equipment that had belonged to Hall Inc.), but
did not register Hall/Cobalt as a fictitious name for the new business and had
not obtained a contractor’s license in his own name; “[b]ecause [Lee] Hall
California, the only logical conclusion
for the court to draw from the evidence is that [Lee] Hall continued to
operate under the contractor’s license of†Hall Inc. and, even though he had
obtained a new tax identification number for the new business, “that fact alone
does not change the nature of the business.
The business that [Lee] Hall was entering into required a contractor’s license to crush rock. [Lee] Hall never obtained the required license
and his continued operation could only
have been done under the . . . contractor’s license [of Hall
Inc.]†(Italics added.) Because of its conclusion that as a matter of
law Lee Hall could not operate as an
individual, the trial court did not address Shea’s claim that it
Inc. for the work because of the debt that the latter owed it.
On
the issue of whether Shea had a good faith belief that it was dealing with Lee
Hall as an individual, the trial court cited Shea’s failure to request any
substantiation of Lee Hall’s right to do business as a contractor (despite
Shea’s awareness of the legal difficulties of Hall Inc.) or to create a new
vendor number for the new business, and its awareness that Lee Hall was using the
same equipment as when he operated Hall Inc.
Thus, “[d]ue to the lack of diligence by [Shea], [it] could not in good
faith believe that Lee Hall was doing business†in any form other than as Hall
Inc., for which Shea had received the writ of execution naming Hall Inc. as a
judgment debtor. Its failure to hand
over the funds was thus without justification.
DISCUSSION
I.
Standing to Appeal: A Frivolous
Issue
In
its reply brief and in its July 2012 motion for sanctions and request for
attorney fees, Snows Quarry asserts the “judgment,†which it prepared, names J. F. Shea Company, Inc. (see fn. 1,
breach of garnishee duties.
that “an un-named corporation, Shea Construction, responded to the motion
brought against [the parent company] and seemingly
argued on its behalf,†though this “procedural irregularit[y]†was “never
brought to the trial court’s attention nor complained of by any party. Yet the trial
court was consistent, naming only [the parent company] in the
[‘]judgment[’] appealed from.†(Italics
added.) Continuing in this sangfroid
manner, Snows Quarry further asserts that the writs and notices, the garnishee
memoranda, and the section 701.020 motion named the parent company as the party
to this proceeding, and “Appellant is someone else.†Snows Quarry thus contends as a threshold
issue that Shea does not have standing to pursue this appeal, rendering it
frivolous. Snows Quarry is being too
clever by half (if not more).
Whether
from mistake or malfeasance, this argument is premised on a blatant
misrepresentation of the most significant part of the record. Both
of the writs and notices of levy, as we stated above, are directed to the
vice-president of Shea (the second
identifying him as “CEOâ€), and the first includes the proof of service on
memorandum identifies the responding garnishee as Shea in the text (though it
and the second garnishee memorandum include the name of the parent company in
the caption as “defendantâ€). The second memorandum refers to the
responding party only as “J. F. Shea.â€
Even
if the parties (including Shea) after this point took a casual approach to the
various permutations of Shea’s name in the body of their filings, Shea’s
filings consistently list it as the party of record, as does the
the section 701.020 motion and the clerk’s
notice of the filing of the notice of appeal.
More to the point, Snows Quarry does not explain how the trial court
could have acquired jurisdiction over (or issued an enforceable order against)
any party other than Shea.
Indeed,
in Snows Quarry’s closing posthearing brief, it asserted “thereafter
provisions for a writ of execution]†to pay over to the sheriff any sums due
Hall Inc., which “renders J. F. Shea
Construction Inc. liable upon the issuance of [the] three checks,†and as a
result “[j]udgment creditors are entitled to judgment against
[Shea]†and refers only to Shea in its text, thus proving false Snows Quarry’s
assertion that the trial court (at least in documents in which Snows Quarry did
not have a hand) “was consistent [in] naming only [the parent company].â€
This
argument is therefore entirely frivolous.
It does not merit any further response.
II.
Statement of Decision: A
Frivolous Issue
Snows
Quarry’s other threshold issue raised in its brief and motion for sanctions
asserts we must apply the doctrine of implied findings (In re Marriage of Arceneaux (1990) 51 Cal.3d 1130) in this
appeal because Shea never objected to the trial court’s “statement of
decision.†We do not need to spell out
the effect this doctrine has on appellate review because it is manifestly
inapposite.
“A
statement of decision is not required in ruling on a motion.†(7 Witkin, Cal. Procedure (5th ed. 2008)
Trial, § 392, p. 460.) Shea
accordingly did not have any obligation to object to the trial court’s
Moreover, even if the procedure in section 632 for statements of
decision was somehow applicable to this proceeding, the trial court omitted the
preliminary step of first announcing a tentative
decision to which the parties could raise any objections. (7 Witkin, supra, § 394, p. 463.)
As this failed to provide Shea with any opportunity to raise objections
(and none of its arguments on appeal involve claims of omissions or ambiguities
in the ruling), the doctrine of implied findings cannot apply. Finally, even if we entertained Snows
Quarry’s dubious proposition, the legal error that is the crux of Shea’s appeal
appears on the face of the “statement of decision,†which absolves Shea of any
duty to object in the trial court. (
(2007) 150 Cal.App.4th 42, 59.)
Consequently, we find this issue to be entirely frivolous and do not
address it any further.
III.
Licensure
A
“contractor†subject to the Contractors’ State License Law (Bus. & Prof.
Code, § 7000 et seq.) is “synonymous with†the term
“ ‘builder’ †(id.,
§ 7026), and thus is “one who undertakes to . . . ‘construct,
alter, repair, add to, subtract from, improve, move, wreck or demolish, any
building.’ †(Howard v. State (1948) 85 Cal.App.2d 361, 364.) On its face, then, one who crushes rock in a
quarry is not subject to the licensing law.
Moreover, as Shea points out, a supplier of materials (or finished
goods) who does not in the process perform more than incidental work that would
come within the definition of a contractor is not subject to licensure. (Bus. & Prof. Code, § 7045;
97 Cal.App.3d 842, 848; cf. King v.
Hinderstein (1981) 122 Cal.App.3d 430, 442 [analogizing to licensing
law; “substantial installation†comes
within its purview]; see Banis Restaurant
Design, Inc. v. Serrano (2005) 134 Cal.App.4th 1035, 1046 [even if the
plaintiff had not filed lien (which applies to fixtures subject to licensing
law), services performed in course of supplying materials more than incidental
and thus subject to licensing]; Gibbs & Hunt, supra, Cal. Construction Law, § 1.06, p. 23.)
The
trial court, as we noted at the outset, did not provide any basis for ruling
unexpectedly that Hall/Cobalt was subject to the licensing law in crushing rock
to supply to Shea, and Snows Quarry does not make any attempt to defend the
ruling beyond misstating the record yet again (claiming that the issue of
Hall/Cobalt’s work is based on “disputed facts,†but citing only the second
garnishee memorandum in which Shea discussed Lee Hall’s providing (undescribed)
services, but not indicating that these services were anything more than the
provision of crushed rock). Rather,
Snows Quarry blithely waves away this issue and asserts we should uphold the
trial court’s result despite the
analytic flaw in its reasoning. This we
cannot do.
By
virtue of its conclusion that it was legally impossible for Shea to have
contracted with Hall/Cobalt because the company lacked a contractor’s license,
the trial court never considered the necessary premise to liability under
section 701.010: If the contract
did not have any duty under the writ of execution in the first place to remit
would thus need to find the evidence as a
matter of law establishes that Shea contracted with Hall Inc. before
assessing whether substantial evidence supports a finding that Shea did not in
good faith think it was contracting with Hall/Cobalt.
To
the contrary, the evidence at trial demonstrated Lee Hall did all he needed to
do to establish Hall/Cobalt as a business:
acquiring the TIN, opening new business accounts, changing his
stationery, and acquiring equipment under a claim of right from Hall Inc.
(albeit one that the trial court subsequently found was not as extensive as Lee
Hall had believed). Dissolving Hall Inc.
or surrendering its fictitious name of Cobalt Crushing were not essential to
Lee Hall’s commencing business as an individual under the name of L. W.
Hall/Cobalt Crushing (which was not itself a fictitious name within the
statutory definition). All the witnesses
who were directly involved with Lee Hall expressed their intent to contract
with Hall/Cobalt, not Hall Inc., and Lee Hall provided the new TIN to Shea for
Hall/Cobalt to confirm its independent status.
If a TIN is good enough for the tax authorities, Snows Quarry does not
give any persuasive reason why Shea needed to confirm every other aspect of
Hall/Cobalt’s start-up. Were it not for
the failure to notify the Shea accounting department (which does not have any
direct role in Shea’s line operations) about the new form of business in which
Lee Hall was operating, the old vendor number would not even have been
employed,
title="">[12] and Shea in any event ultimately filed tax information reporting
payments to Hall/Cobalt.
This
evidence not only fails to entitle Snows Quarry as a matter of law to a finding
that Shea did not actually contract with Hall/Cobalt, we believe it entitles
Shea to the contrary finding as a matter of law. Absent the erroneous legal ruling that Hall/Cobalt
was not a viable business, the only way in which a trier of fact could conclude
that there was in fact an intent to contract with Hall Inc. would be the
uncontradicted percipient witnesses and documentary evidence, which a trier of
fact is not permitted to do. (
(1958) 158 Cal.App.2d 169, 173.)
It would be arbitrary in the present case because we find any contrary
Hall Inc. irrational as a matter of
law. (California
Shoppers, Inc. v. Royal Globe
Ins. Co. (1985) 175 Cal.App.3d 1, 44-45.) Even if Shea had a strong motive to
continue to work with Lee Hall
because of their past relationship and his union business, this would not
explain a desire to enter into a contract to pay Hall Inc. (which has an outstanding debt to Shea) rather than just pay Hall/Cobalt directly. Thus, disbelief of the evidence of an intent
to contract with Hall/Cobalt does not provide any basis for the opposite
inference. “A
legal inference cannot flow from the nonexistence of a fact; it can be drawn
only from a fact actually established.â€
(Eramdjian v. Interstate Bakery Corp. (1957) 153 Cal.App.2d
590, 602; accord, People v. Herrera
(2006) 136 Cal.App.4th 1191, 1205; People v. Stein (1979)
94 Cal.App.3d 235, 239; People v.
Samarjian (1966) 240 Cal.App.2d 13, 18 [must prevail on own evidence,
“not on a vacuum created by rejection of a defenseâ€].) No such fact exists in this record.
In
light of this evidence, Snows Quarry’s professed belief in the existence of a
contract with Hall Inc. rings hollow, and these proceedings have every
indication of an intent to circumvent the liability-limiting effect of the
corporate form of Hall Inc. in order to recoup its judgment from Lee Hall as an
individual. It is time to bring this
litigation to a close in the interests of justice. Because the trial court as the trier of fact
could not reasonably find that Shea did not
contract with and make payment to Hall/Cobalt, on remand we will direct it to
enter an order finding that Shea is not liable for any breach of its garnishee
duties because it contracted with and paid funds to Hall/Cobalt. (See People
v. Barragan (2004) 32 Cal.4th 236, 249-250 [reviewing court has power
to direct entry of judgment for appellant where, upon full consideration of
record, court finds respondent cannot establish case on remand under any theory
grounded in reason].)
IV.
Sanctions: A Frivolous Request
Given
the frivolous nature of issues that Snows Quarry raised in its brief and its
misrepresentations of the record, this puts it in the position of the
proverbial pot pointing at the kettle.
In any event, our reversal of the trial court’s order necessitates
denial of the motion for sanctions and request for attorney fees.
DISPOSITION
The
order imposing liability for a breach of third party garnishee duties under
section 701.010 is reversed. The matter
is remanded with directions to enter a new order denying the motion for
damages. Snows Quarry’s motion for
sanctions and request for attorney fees is denied. Objector and appellant J. F. Shea
Construction, Inc., shall recover its costs
on appeal. (Cal. Rules of Court,
rule 8.278(a)(1), (2).)
BUTZ , J.
We concur:
ROBIE , Acting P. J.
MURRAY , J.
Snows Quarry challenges the identity of the entity that is actually liable for
breach of garnishee duties, contending that J. F. Shea Company, Inc., a Nevada
corporation, is the appropriate entity and not
J. F. Shea Construction, Inc., a California corporation (hereafter
Shea). We address this contention in
part I of the Discussion (pp. 8-10, post).
references are to the Code of Civil Procedure.
