El Gohary v. Colyer Institute

Filed 2/7/08 El Gohary v. Colyer Institute CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, John S. Meyer, Judge. Affirmed.

I.

INTRODUCTION

Plaintiff Mohammed El Gohary appeals from a judgment entered after a jury trial. El Gohary and three other plaintiffs^[1]sued The Colyer Institute (Institute), David Fagan, Wendell Skinner, Jack Caldwell, and Blum and Clark Accountancy Group (Blum and Clark) after an international transaction, in which all of the parties were involved, fell through when an off-shore bank failed. The plaintiffs alleged causes of action for, among other things, breach of contract and fraud and deceit against all of the defendants.

A jury concluded that neither the individual defendants nor Blum and Clark were liable to the plaintiffs for breach of contract or intentional misrepresentation. However, the jury found the Institute liable for intentional misrepresentations. The jury awarded El Gohary $27,500 in damages.

On appeal, El Gohary contends that there is not substantial evidence to support a number of aspects of the jury's verdict. He first contends that there is no substantial evidence to support the jury's decision finding the individual defendants not liable for misrepresentation. Second, El Gohary asserts that the dollar amount of the damage award is insufficient and is not supported by substantial evidence. Finally, El Gohary contends that there is not substantial evidence to support the jury's verdict in favor of Blum and Clark.

We conclude that there is substantial evidence to support the jury's verdict, both with regard to the individual defendants, and as to Blum and Clark. We further conclude that El Gohary forfeited his right to challenge the adequacy of the damage award against Institute by failing to move for a new trial in the trial court. We therefore affirm the judgment of the trial court.

II.

FACTUAL AND PROCEDURAL BACKGROUND

A. Factual background^[2]

This matter arose out of a failed business transaction between El Gohary, the other plaintiffs, and the defendants.

The Institute is a nonprofit corporation located in San Diego County. The Institute was founded in 1981 by David Fagan, Dr. Curt Benirshcke, who was at the time of the relevant events in this case Director of Research at the San Diego Zoo, and Tom Ables, who was a public relations specialist who worked for the San Diego Wild Animal Park in the 1970s. The purpose of the Institute was to study disease and nutritional issues in exotic animals.

During the relevant time period, Fagan was president and chief executive officer of the Institute. The plaintiffs alleged that Skinner, a certified public accountant who participated on behalf of the Institute in putting together the transaction at issue in this case, was a partner at the accounting firm Blum and Clark ─ an allegation that was

disputed by both Skinner and by a representative of Blum and Clark. Caldwell is the person who introduced El Gohary to the Institute and to Fagan.

Although it is not clear from the record, at some point in time Fagan and others involved with the Institute began to plan for the construction of a large research complex. They intended to purchase approximately 75,000 to 80,000 acres of land on which the complex would be built. The Institute hired a professional fundraising executive and commissioned feasibility studies. However, local banks expressed no interest in loaning the Institute the funds necessary to build the research complex.

After local banks turned down the Institute's funding proposals, Fagan initiated discussions with persons who were involved with venture capital organizations. In 2000, the Institute had acquired a trust deed encumbering a gold mine located in Oregon. A friend of Fagan's, Paul Scheibe, owned the nonoperational mine. Scheibe agreed to allow the Institute to encumber the mine in the amount of $20,000,000 as collateral for a loan, in exchange for receiving $15,000,000 of the loan proceeds, which he planned to use to get the mine in operational condition. The mine had been approved as collateral for a $20,000,000 certificate of deposit (CD) with Swiss National Bank (SNB). However, the parties could not use the CD as collateral to obtain additional financing because the credit rating for the bank and the CD was too low.

In late 2001, Fagan was introduced to El Gohary. El Gohary represented to Fagan that he was a banker with "a lot of experience." El Gohary and Fagan discussed a plan to use the Oregon gold mine as collateral for additional financing.

El Gohary was aware that the Institute had previously attempted to obtain additional financing, but had failed. He proposed the idea of using an "insurance wrap" on the CD held by the Institute to obtain the necessary financing.^[3] Purchasing wrap insurance would, according to El Gohary, raise the credit rating of the CD. El Gohary, Fagan, and Skinner spoke with Edwardo Arroyo, a banker with SNB, and agreed to structure the deal as follows: They would purchase wrap insurance for approximately $150,000 to upgrade the rating of the SNB CD, thereby allowing the Institute to access the funds held in the CD and to obtain a line of credit from SNB. The Institute would then invest the money in a "high investment yield" opportunity. According to El Gohary, a "high-yield trading program" is "a large amount of money that they go [sic] into a trading program that yield[s] a very high return on their investment. But the individual [who] goes into that yield, into that trading program must have free and clear funds, cannot be borrowed funds."

The plaintiffs eventually agreed to loan the Institute $150,000 it needed to purchase the wrap insurance. El Gohary loaned the Institute $90,000, which he apparently borrowed from an individual named Toni Navone.^[4] Mervat Wafa, a distant cousin of El Gohary, agreed to loan the Institute $40,000. Harriet Hall loaned the Institute $20,000. Hall became involved in the transaction through Lloyd Uyehara, a friend of El Gohary, who was unwilling to lend his own money, but agreed to find someone who could come up with the $20,000 needed to reach the $150,000 mark. The plaintiffs expected to obtain a significant return on the monies they loaned. In addition, Uyehara expected to share in future profits because he found an investor who was willing to put up the remaining funds that were needed to purchase the wrap insurance.

The parties dispute whether and when the plaintiffs gave the defendants their approval to send the loaned funds to an overseas bank. Arroyo informed the parties that the money for the insurance had to be wired to Arroyo's bank account at Anglo-American Bank in Grenada so that Arroyo could purchase the insurance. It is clear that Wafa placed the $40,000 she loaned to the Institute in an account at Washington Mutual National Bank. The funds were to be released to the Institute upon Wafa's instruction. The $90,000 from El Gohary was originally deposited into an account held by the Institute at Wells Fargo Bank. The Institute eventually wired El Gohary's $90,000 and Hall's $20,000 to the Anglo-American Bank in Grenada.

When Arroyo attempted to present the $110,000 cash and a letter of credit from Washington Mutual for Wafa's $40,000 to his insurance broker, the broker could not approve the purchase of the insurance because he could not accept the letter of credit.

The Anglo-American Bank went into receivership during the time the Institute's borrowed money was supposed to be in an account there. However, it remains unclear whether Anglo-American Bank ever received the money, or rather, whether a bank in Lithuania that participated in the wire transfer retained the funds. In any event, the end result was that the $110,000 El Gohary and Hall had loaned to the Institute disappeared.

There is no evidence that the defendants retained any of the lost funds. However, Fagan and Skinner failed to immediately inform the plaintiffs about the problems with Anglo-American Bank upon first learning about them. According to Fagan, he and Skinner wanted to confirm that the money was in fact missing before they informed anyone about what they had learned.

During this time, Fagan and Skinner informed Wafa that even though Arroyo had been unable to purchase the necessary insurance, they still needed her $40,000 for other obligations. That $40,000 was subsequently provided to El Gohary to give to Navone because Navone was apparently threatening to sue El Gohary.

The plaintiffs became concerned that something had gone wrong with the transaction because they did not receive the money they had expected to recover within the time frame the parties had discussed. El Gohary eventually received a letter, possibly sent to him in error, in which Skinner asked Caldwell for assistance in securing an additional line of credit. El Gohary was concerned that the transaction was not going as planned and asked that his money be returned.

B. Procedural background

The plaintiffs filed a complaint against the defendants on August 19, 2004, alleging causes of action for breach of contract and fraud and deceit. The plaintiffs later amended the complaint to allege an additional fraud claim, a claim for breach of an oral contract, and a conspiracy claim. The court conducted a six-day jury trial at which El Gohary, Wafa, Uyehara, Hall, Arroyo, Fagan, Skinner, Caldwell, and Stephen Clark, a partner at Blum and Clark, all testified.

On February 21, 2006, the jury rendered a verdict. The jury found defendant Institute guilty of misrepresentation and awarded damages of $27,500 to El Gohary, $38,139 to Wafa, and $20,000 to Hall. The jury awarded no damages to Uyehara.

III.

DISCUSSION

A. There is substantial evidence to support the jury's verdict

El Gohary contends that the jury was "not legally authorized to find that individuals who made false representations which induced Appellant, and thereby others, to give money to the Colyer Group, which same individuals then wired to an offshore account where it disappeared, are not liable, although the corporation for which they worked is liable." El Gohary appears to argue, in essence, that the jury could not have found the Institute liable for misrepresentation without also finding the individual defendants liable. In making this argument, El Gohary points to a litany of evidence that could have supported a jury verdict in his favor on the issue of the individual defendants' liability. "But 'in examining the sufficiency of the evidence to support a questioned finding, an appellate court must accept as true all evidence tending to establish the correctness of the finding as made . . . .'" (David v. Hermann (2005) 129 Cal.App.4th 672, 687.) It thus does not matter that there might exist evidence that tends to support a conclusion different from the one the jury reached; the relevant question is whether there exists evidence to support the conclusion the jury did reach.

"'When findings of fact are challenged in a civil appeal, we are bound by the familiar principle that "the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted," to support the findings below.' [Citation.] We must therefore view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor. [Citation.]" (Robertson v. Fleetwood Travel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 798.)

The jury clearly concluded that the individual defendants were not liable to the plaintiffs for any damages. Although the jury agreed that each of the individual defendants had knowingly made false representations^[5]to the plaintiffs, the jury also determined that the plaintiffs were not justified in relying on any of these misrepresentations.^[6] In contrast, the jury concluded that the plaintiffs had been justified in relying on some misrepresentation made by the Institute. It is entirely possible, based on this record, that the jury determined that the plaintiffs were not reasonably justified in relying on any single misrepresentation made by any one of the individual defendants, but that considered as a whole, the misrepresentations were such that the plaintiffs could have justifiably relied on them in the aggregate.

The evidence demonstrated that most of the alleged misrepresentations made by Skinner and Fagan were minor both in their scope and potential effect, when viewed as single instances of misrepresentation. For example, one of the possible instances of a misrepresentation was that Fagan represented to El Gohary that things were progressing as planned, despite the fact that Fagan and Skinner had been notified that there was a question about the location of $110,000 that was supposed to be on deposit with Anglo-American Bank. Because Arroyo and the Institute were unable to trace the money at that time, Skinner and Fagan began to try to obtain additional credit in order to move forward with the transaction and eventually pay the plaintiffs the returns they were expecting. The jury could have believed that because El Gohary presented himself as adept at putting together international deals, he had the ability to determine the true state of the transaction, and that he should have done so, regardless of what Fagan might have represented to him. There was a significant amount of evidence establishing that El Gohary was personally involved with all aspects of the deal, including being in communication with Arroyo on multiple occasions throughout the process. This evidence would support an inference that El Gohary was not justified on relying on any particular representation made by Fagan and/or Skinner. It was reasonable for the jury to conclude that the individual defendants should not be held personally liable for the result of a failed business transaction that all of the parties were hoping would succeed, particularly in light of the fact that El Gohary was directly involved in structuring the transaction and claimed to possess particularized knowledge in the area of international banking.

To the extent that El Gohary may be arguing that the jury incorrectly applied the law with regard to personal liability of officers of a corporation, he has forfeited any such argument. The court's instructions to the jury are not included in the appellate record, and the reporter's transcript reveals that the court orally instructed the jury off the record.^[7]

B. El Gohary has forfeited his challenge to the adequacy of the jury's damage award

El Gohary contends in a single paragraph in his opening brief that the jury's decision to award him $27,500, rather than the $90,000 he claims he loaned to the Institute, was speculative and is not supported by the evidence. We conclude that El Gohary has forfeited this argument, both by failing to move for a new trial in the trial court, and by failing to demonstrate why his failure to do so should not preclude him from raising this issue on appeal.

"[A] failure to move for a new trial ordinarily precludes a party from complaining on appeal that the damages awarded were either excessive or inadequate, whether the case was tried by a jury or a court without a jury. [Citations.]" (Glendale Federal Savings & Loan Assn. v. Marina View Heights Development Company, Inc. (1977) 66 Cal.App.3d 101, 122 (Glendale).) This is because generally "[t]he trial court is in a better position than a reviewing court to determine whether a jury verdict was influenced by passion or prejudice. Moreover, the power to weigh the evidence and resolve issues of

credibility is vested in the trial court, not the reviewing court. [Citation.]" (Ibid.) "Consequently, where the ascertainment of the amount of damage requires resolution of conflicts in the evidence or depends on the credibility of witnesses, the award may not be challenged for inadequacy or excessiveness for the first time on appeal. To permit a party to do so without a motion for new trial would unnecessarily burden reviewing courts with issues which can and should be resolved at the trial court level. [Citation.]" (Ibid.)

Although this rule may not apply in situations where there is no need to weigh the evidence or to resolve issues of credibility (see Glendale, supra, 66 Cal.App.3d at p. 122), there is no reason to believe that is the case here. El Gohary has not demonstrated that this exception should apply, despite the fact that the defendants raised the issue of forfeiture in their opposition briefing. Further, Blum and Clark offer a number of possible theories as to how the jury may have determined that El Gohary suffered damages of $27,500, yet El Gohary does not attempt to demonstrate why any of these theories is not supported by substantial evidence. For all of these reasons, we conclude that El Gohary has forfeited this issue for purposes of this appeal.

C. There is substantial evidence to support the jury's verdict in favor of

defendant Blum and Clark

Although his contentions related to this issue are somewhat unclear, El Gohary appears to be rearguing the state of the evidence, in an attempt to encourage this court to review the evidence and conclude that the jury reached an incorrect result when it failed to hold Blum and Clark liable on any cause of action. According to El Gohary, Blum and Clark should be held liable for defendant Skinner's actions on the theory that Skinner was an employee of Blum and Clark and was acting on behalf of Blum and Clark during the course of this ill-fated transaction. El Gohary recites evidence that the Blum and Clark website "listed Defendant Skinner as a partner of Blum and Clark" and "included a picture of him, and detailed his background . . . ." El Gohary also points to evidence that Skinner "had a mailing address" at Blum and Clark's primary address and that Skinner's name was posted outside the door of Blum and Clark's office. El Gohary points to other evidence, as well, to support his claim that Blum and Clark should be held liable for Skinner's actions because Skinner was an employee of Blum and Clark, not an independent contractor.

Even if Blum and Clark could have been held vicariously liable for Skinner's actions, there is no basis for holding Blum and Clark liable, because the jury did not find Skinner liable. There is sufficient evidence to support the jury's verdict in favor of Skinner. (See part III.A., ante.) Having found Skinner not liable, the jury did not have to consider the question whether Blum and Clark could be vicariously liable for Skinner's actions. Contrary to El Gohary's assertions, there is substantial evidence to support the verdict in favor of Blum and Clark.

IV.

DISPOSITION

The judgment of the trial court is affirmed.

AARON, J.

WE CONCUR:

McDONALD, Acting P. J.

IRION, J.

Publication courtesy of California free legal advice.

Analysis and review provided by Carlsbad Property line attorney.

^[1] The other plaintiffs, who are not parties to this appeal, are Lloyd Uyehara, Harriet Hall and Mervat Wafa.

^[2] None of the parties to this appeal presented a thorough and organized version of the factual history of this case, nor did they sufficiently describe the nature of the complex transaction that forms the basis of this litigation. The factual background as set forth in the body of the opinion represents our best attempt to provide an accurate depiction of the events that led to this litigation. We were impeded in our effort to provide a cogent recitation of the relevant facts by the failure of the parties to present a coherent background, and by confusing, conflicting, and sometimes incomplete testimony of the witnesses at trial.

^[3] At trial, El Gohary explained what an "insurance wrap," or "wrap insurance" is: "Instead of focusing on the bank, to do the endorsement [of the CD issued by a small, unknown bank], you can get an insurance ─ [a] financial insurance company to do that, they are as strong and as acceptable as a [major] bank. So ─ but the bank, they do [an] endorsement. Insurance, they do [a] wrap. But basically [those things are] the same."

^[4] Navone was not a party to the action and did not appear at trial.

^[5] The jury was not asked to identify the statements that it found constituted false representations. Rather, the jury was asked whether each defendant had made a false representation to the plaintiffs.

^[6] Although El Gohary did not include the verdict forms in the clerk's transcript on appeal, the reporter's transcript from the trial reveals the jury's determinations as to the special verdict form. As an example, with regard to defendant Fagan, the jury responded as follows:

"[I]ntentional misrepresentation as to David Fagan. We, the jury in the above-entitled action, find the following special verdict on the following questions submitted to us:

"Question number one: Did the defendant, David Fagan, make a representation as to a past or existing important fact or promise of future action? As to Gohary, yes; as to Wafa, yes; as to Uyehara, yes; as to Hall, yes.

"Question number two: Was the representation false? Gohary, yes; Wafa, yes; Uyehara[,] yes; Hall, yes.

"Question number 3a: Did the defendant, David Fagan, know that the representation was false when he made it? Gohary, yes; Wafa, yes; Uyehara, yes; Hall, yes.

"Question number 3b: Did the defendant, David Fagan, make the representation recklessly without knowing whether it was true or false: Gohary, no; Wafa, no; Uyehara, no; Hall, no.

"Question number four: Did the defendant, David Fagan, make a representation with an intent to defraud the plaintiff? Gohary, yes; Wafa, yes; Uyehara[,] yes; Hall, yes.

"Question number five: Was the plaintiff aware of a falsity of the representation? Gohary, no; Wafa, no; Uyehara, no; Hall, no.

"Question number six: Did the plaintiff act in reliance upon the truth of the representation? Gohary, yes; Wafa, yes; Uyehara[,] yes; Hall, yes.

"Question number seven: Was the plaintiff justified in relying upon the representation? Gohary, no; Wafa, no; Uyehara, no; Hall, no."

The jury responded in the same way as to each of the individual defendants. Only with regard to the corporate defendant did the jury respond that the plaintiffs had justifiably relied on a false representation.

^[7] There is no indication that any of the parties objected to the jury being instructed off the record.