Lait
Filed 4/2/13 Moore v. Bebe Au Lait CA6
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opinion has not been certified for publication or ordered published for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 CALIFORNIA
SIXTH
APPELLATE DISTRICT
ROBERT GREGG MOORE,
Plaintiff and
Appellant,
v.
BEBE AU LAIT, LLC et al.,
Defendants and
Respondents.
H037266
(Santa Clara
County
Super. Ct.
No. CV176639)
Appellant
Robert Gregg Moore appeals from a stipulated judgment entered after the
superior court granted a motion by defendants Bebe au Lait, LLC (Bebe) and
Claire and Ronnie Ekelund for summary
adjudication of Moore’s breach of contract cause of action against them and
granted their motion to strike references to a 12 percent interest rate in
Moore’s amended complaint on the ground that it was usurious. Moore
contends that the superior court’s orders were erroneous because there were
triable issues about the application of a release to the
his amended complaint established that transaction was not usurious. We reject his contentions and affirm the
judgment.
I. Undisputed Facts
Bebe is a
limited liability company (LLC) that was formed by Claire Ekelund and Aimee
Lagos in 2004. Lagos
and Claire Ekelund originally each owned 50 percent of Bebe. In 2006, Claire Ekelund bought out Lagos’s
share of Bebe for an upfront cash payment plus a royalty stream. Moore
financed the buyout with a $100,000 loan to the Ekelunds. The original handwritten documentation of
this loan reflected that the loan was due in two years and that it bore an
interest rate of 10 percent per year. Moore
made additional loans to the Ekelunds and Bebe in 2006 and 2007.
In 2007, Lagos,
who by then resided in Minnesota,
filed an action for unpaid royalties
against the Ekelunds and Bebe in Minnesota
state court. This action prompted Moore
to create “formal written documentation†for his loans to Bebe and the
Ekelunds. In November 2007, Moore and
the Ekelunds formally documented both the initial loan and a series of
subsequent loans. The formal promissory
note for the original March 2006 loan provided that the Ekelunds would pay Moore
$100,000 plus 12 percent interest “per annum until paid.†A series of amendments to that note
documented the additional loans Moore
had made to the Ekelunds and Bebe. The
first amendment, dated July 2006, provided that the note had been assigned by
the Ekelunds to Bebe, that Moore
had loaned Bebe an additional $50,000, and that the outstanding balance was
$128,549.36. The second amendment, dated
September 2006, reflected an additional loan of $75,000. The third amendment, dated October 2006,
reflected an additional loan of $75,000.
The fourth amendment, dated November 2006, reflected an additional loan
of $25,000. The fifth amendment, dated
December 2006, reflected an additional loan of $50,000. The sixth amendment, dated September 2007,
reflected an additional loan of $50,000.
The seventh amendment, dated October 2007, reflected an additional loan
of $50,000. The eighth amendment, dated
November 2007, reflected an additional loan of $100,000.
reflected an additional loan of $100,000.
The 10th amendment, dated February 2008, reflected an additional loan of
$100,000. The 10th amendment also provided
that Bebe was executing a security agreement granting Moore
priority over any collateral for repayment of the
Lagos’s
Minnesota action also prompted Moore
to file an action in Santa Clara County
against Bebe, the Ekelunds, and Lagos
in order to protect his right to repayment of his loans. The Minnesota
and Santa Clara County
actions settled in 2008. The 2008
settlement agreement contained a release signed by Moore,
Lagos, Bebe, and the Ekelunds. The release referenced Moore’s loans to Bebe
and stated that, “in early 2008 Moore demanded payment from the Ekelunds and/or
Bebe au Lait of all amounts due to him, but the Ekelunds and Bebe au Lait were
unable to pay such amount.†The release
stated that it would “resolve all disputes and claims between them but for Moore’s
claim for payment from the Ekelunds and/or Bebe au Lait related to the loans
made by Moore . . . .â€
It then stated: “Moore hereby
forever releases and discharges Lagos, the Ekelunds and Bebe au Lait from any
and all claims, demands, causes of action, damages, liabilities, expenses,
attorney fees, or costs, known or unknown, based on any event or circumstance
occurring up to the date of this Settlement Agreement, including but not
limited to any claim or demand arising from or related to any of the Agreements,
provided, however, that this release does not extend [to] Moore’s claim against
the Ekelunds and/or Bebe au Lait for repayment of the loans that were the
subject of the California Action [by Moore against the Ekelunds and Bebe].†The release further stated: “[I]t is the parties’ intention to hereby
fully and finally and forever settle and release any and all matters, disputes,
and differences, known or unknown, suspected or unsuspected, which do now exist,
may exist or heretofore have existed, subject to the specific exceptions [for
Moore’s claim for repayment of the note].â€
Moore
financed the settlement with a loan that was memorialized in an 11th amendment
to the original note. The 11th amendment
reflected an additional loan of $350,000 and stated that “[t]he term of the
Note shall be extended to July 1, 2008.â€
In 2009, Moore signed a personal guarantee for a $200,000 line of credit
that Bebe obtained from a bank. On July
1, 2010, Moore demanded immediate payment of the amount due, which he asserted
was $1,107,937.33.
II. Procedural Background
In July
2010, Moore filed an action against Bebe and the Ekelunds. His original complaint contained four causes
of action. The first cause of action
sought judicial foreclosure on the promissory
note. The second cause of action was
a common count for money lent in the amount of $810,000 “plus interest.†The third cause of action was for breach of
contract. It alleged that defendants had
orally agreed to give Moore an ownership interest in Bebe in exchange for his
loans and business advice. The fourth
cause of action was a common count for “Work, Labor and Services.â€
Bebe and
the Ekelunds answered the complaint.
agreement to their answer and asserted that the release barred the third and
fourth causes of action. Moore filed an
amended complaint alleging the same four causes of action.
to the amended complaint and alleged an affirmative defense of usury.
The
Ekelunds and Bebe filed a motion for summary adjudication of the breach of
contract cause of action on the ground that it was barred by the release. They argued that Moore’s claim for equity in
Bebe arose before the 2008 release and had been thereby released. The Ekelunds and Bebe also brought a motion
to strike all references in the amended complaint to a 12 percent interest rate
on the ground that this rate was usurious.
Moore
opposed both motions. He admitted that
promises of an equity interest in Bebe occurred in 2006 and that the release
had been entered into in 2008. Moore
also conceded that he was “not contending fraud, duress o[r] undue influenceâ€
with respect to the release. The sole evidentiary
support for Moore’s opposition to the motions was his own declaration. Moore
asserted that the promised equity interest was intended to be half of what a
venture capitalist would demand in exchange for the loans. It would be determined by dividing the loan
amount by Bebe’s revenue at the time of the loan and dividing by two. He explained in his declaration that the
equity interest was not “formally document[ed]†because he was concerned “about
the ramifications of the equity arrangement on the Lagos litigation,†but he
believed that the equity interest would be documented “as soon as the Lagos
litigation was over.†Moore declared
that he “put my trust in the bonds of friendship as opposed to legal documentation,â€
as was his practice when doing business with friends. During the two years between the settlement
and Moore’s 2010 legal action, he negotiated with the Ekelunds about his equity
interest. It was only in 2010 that Moore
concluded that the Ekelunds were not going to grant him the promised equity
interest.
Moore
contended that the 12 percent interest rate was not usurious because it served
as “partial compensation for the business advice and work that I was
contributing to the company.†In his
declaration, he maintained that he and the Ekelunds behaved “as if†they “were
in business together.â€
The court
granted the summary adjudication motion.
It concluded that the Ekelunds and Bebe had met their initial burden
based on the release and that Moore had failed to raise a
triable issue as to equitable estoppel because Moore was aware of the
release. Laches was not applicable
because the third cause of action sought damages. The release was not reasonably susceptible of
the interpretation that Moore advocated.
Civil Code section 1542 was inapplicable because the release was
governed by Minnesota law, and, in any case, the release did not fail to comply
with the statute.
The superior
court granted the motion to strike as
to the 12 percent interest rate. It
found that the interest rate was plainly usurious and that the amended
complaint did not describe a joint venture relationship between Moore and the
Ekelunds. The parties thereafter entered
into a stipulated judgment that was expressly intended to facilitate an appeal
challenging the court’s rulings on the motions.
Moore timely filed a notice of appeal from the judgment.
III. Discussion
A. Summary Adjudication
“Appellate
review of a ruling on a summary judgment or summary adjudication motion is de
novo.†(Brassinga v. City of Mountain View (1998) 66 Cal.App.4th 195,
210.) “[T]he party moving for summary
judgment bears the burden of persuasion that there are no triable issues of
material fact and that [the moving party] is entitled to judgment as a matter
of law.†(Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (
burden of production to make a prima facie showing of the nonexistence of any
triable issue of material fact; if he carries his burden of production, he
causes a shift, and the opposing party is then subjected to a burden of
production of his own to make a prima facie showing of the existence of a
triable issue of material fact.†(
“A prima facie showing is one that is sufficient to support the position
of the party in question.†(
The
Ekelunds and Bebe, the moving parties, satisfied their burden of production by
producing evidence that Moore had signed the release. The release provided prima facie evidence
that Moore had no surviving claim for violation of the alleged 2006 agreement to
grant him equity in Bebe. Thus, the burden
shifted to Moore to make a prima facie showing of a triable issue.
Moore
contends that he made a prima facie showing that there were triable issues of
fact regarding the release defense because (1) he proffered evidence that,
after the parties signed the release, they acted in a manner inconsistent with
the application of the release to his contract claim; (2) the Ekelunds and Bebe
were equitably estopped from relying on the release because they misled Moore
into believing that the release did not apply to his claim; (3) laches barred
reliance on the release; (4) Civil Code section 1542 applied and barred the
Ekelunds and Bebe from relying on the release; and (5) the release was invalid
due to mutual mistake or fraud.
1. Interpretation of the Release
Moore
contends that he created a triable issue by presenting extrinsic evidence that
the release did not apply to unaccrued
claims such as his claim for equity in Bebe.
He claims that the release’s “list is reasonably susceptible to a
construction that excludes Moore’s on-going entitlement to equity under an
executory oral agreement from the scope of the matters released.†In his view, the 2006 oral agreement was
“executory†and created an “actionable claim†within the meaning of the release
only when, after the release, the Ekelunds and Bebe failed to perform.
“Under
statutory rules of contract
interpretation, the mutual intention of the parties at the time the
contract is formed governs interpretation.
(Civ. Code, § 1636.) Such intent
is to be inferred, if possible, solely from the written provisions of the
contract. (Id., § 1639.) The ‘clear and
explicit’ meaning of these provisions, interpreted in their ‘ordinary and
popular sense,’ unless ‘used by the parties in a technical sense or a special
meaning is given to them by usage’ (id.,
§ 1644), controls judicial interpretation.
(Id., § 1638.) Thus, if the meaning a lay person would
ascribe to contract language is not ambiguous, we apply that meaning.†(AIU
Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-822.) “The test of admissibility of
of a written instrument is not whether it appears to the court to be plain and
unambiguous on its face, but whether the offered evidence is relevant to prove
a meaning to which the language of the instrument is reasonably
susceptible.†(Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69
Cal.2d 33, 37.)
Thus, the
critical question is whether the language of the release is “reasonably
susceptible†of a meaning that applies its provisions only to accrued or
actionable claims. The language of the
release used a host of broad terms to describe what was being released. It stated that it applied to “all disputes
and claims,†“any and all claims, demands, causes of action, damages,
liabilities,†and “any and all matters, disputes, and differences, known or
unknown, suspected or unsuspected, which do now exist, may exist or heretofore
have existed†other than Moore’s claim for repayment of the note.
Moore
argues that his claim to equity in Bebe under the alleged 2006 oral agreement
did not “exist†in 2008 because the Ekelunds and Bebe had not yet breached that
agreement. He maintains that the release
was limited to actionable claims.
However, the release explicitly stated that it applied to more than just
accrued “causes of action.†It stated
that it applied to “any and all matters . . . , known or
unknown, suspected or unsuspected, which . . . may
exist . . . .†The
release’s inclusion of “any and all matters†in addition to “causes of action,†“liabilities,†“claims,â€
“disputes,†and “differences†precluded the language of the release from being
reasonably susceptible of an interpretation that limited its scope to only
accrued claims or causes of action.
name="_ftnref5" title="">[5] “The way we define words should not produce
redundancy, but instead should give each word significance.†(Shell
Oil Co. v. Winterthur Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 753.) Moore’s proffered construction would render
the word “matters†redundant, so it must be rejected.
Since the
language of the release is not reasonably susceptible of Moore’s proffered
interpretation, extrinsic evidence was not admissible to determine the scope of
the release.
Moore
relies on Butler v. Vons Companies, Inc.
(2006) 140 Cal.App.4th 943 (Butler). Butler was a Vons employee who claimed he was
harassed and discriminated against by Vons.
He was suspended after an unrelated altercation with his manager. His union filed a grievance regarding the
suspension. Butler subsequently
complained about the harassment and discrimination. Vons investigated and disciplined one of his
harassers. (Butler, at p. 945.) The
grievance was resolved by an agreement that gave Butler back pay and allowed
him to return to work. (
the grievance did not pertain to the harassment and discrimination
complaints. (Butler, at p. 946.) The
agreement stated that it released claims under the collective bargaining
agreement. (Butler, at p. 947.) Butler
later filed a civil action against Vons for
at p. 946.) Vons contended that the
agreement released the harassment and discrimination claims. The trial court granted summary judgment on
that ground, but the Court of Appeal reversed.
It found that the agreement was ambiguous with respect to whether it
applied to the harassment and discrimination claims. (Butler,
at pp. 947-948.) Since the grievance was
initiated by the union, and the language of the agreement was consistent with
an intent to resolve only the subject matter of the grievance, the agreement
was reasonably susceptible of a construction that did not extend to Butler’s
“personal claims†against Vons. (
susceptible of a construction that it was limited to a settlement of Lagos’s
claims and did not extend to Moore’s claims against the Ekelunds and Bebe. Indeed, the release explicitly excluded just
a single claim from its purview, and that claim was a claim by Moore against
the Ekelunds and Bebe. The fact that
Moore’s claim for repayment of the note was expressly excluded from the release
confirms that the release was intended to be broad and to extend to all
“matters†involving Moore, the Ekelunds, and Bebe. Since Moore’s claim to equity in Bebe was
based on the same consideration as his claim for repayment of the note, but was
not excluded from the scope of the release, it was subject to the release.
Since
Moore’s proffered extrinsic evidence was inadmissible, the release could only
be construed as barring his claim for equity in Bebe.
2. Equitable Estoppel
Moore
claims that the Ekelunds and Bebe were equitably estopped from relying on the
release as a defense. “The doctrine of
equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the
existence of a state of facts if he intentionally led another to believe a
particular circumstance to be true and to rely upon such belief to his
detriment. The elements of the doctrine
are that (1) the party to be estopped must be apprised of the facts; (2) he
must intend that his conduct shall be acted upon, or must so act that the party
asserting the estoppel has a right to believe it was so intended; (3) the other
party must be ignorant of the true state of facts; and (4) he must rely upon
the conduct to his injury.†(
Cal.3d 720, 725.)
Moore’s
contention fails because he submitted no evidence that he was “ignorant of the
true state of facts†while the Ekelunds and Bebe were “apprised of [those]
facts.†Moore did not claim that he was
unaware of the provisions of the release that he signed, and he submitted no
evidence that the Ekelunds and Bebe had any greater knowledge than he did
regarding the provisions of the release.
The provisions of the release are not reasonably susceptible of a
construction that excludes the alleged 2006 oral agreement from the scope of
the release. While Moore claims that he
did not believe that the release applied to the 2006 oral agreement, his
mistaken belief was not one of fact but one of law. Since he did not contend that the Ekelunds
and Bebe were aware of facts regarding the release of which he was not aware,
they could not be equitably estopped from relying on the release.
3. Laches
Moore also
claims that the Ekelunds and Bebe were barred by laches from relying on the
release. Laches is an
available in a legal action. (
534, 539.) Moore’s action was for breach
of contract, which is a legal action, not an equitable one. He acknowledges as much, but he contends that
he could properly raise laches “as an equitable defense to the defendants’
affirmative defense of a release.†He
claims that the defense of release was an equitable defense against which he
could assert laches. Whatever the
validity of this proposition, Moore failed to show that there was a triable
issue regarding laches.
“ ‘Laches is an equitable defense based on
the principle that those who neglect their rights may be barred from obtaining
relief in equity. [Citation.] “ ‘The
defense of laches requires unreasonable delay plus either acquiescence in the
act about which plaintiff complains or prejudice to the defendant resulting
from the delay.’ †[Citation.]
[¶] Laches is a question of fact
for the trial court, but may be decided as a
relevant facts are undisputed.
[Citation.]’ †(Feduniak
v. California Coastal Com. (2007) 148 Cal.App.4th 1346, 1381.)
Moore’s
claim is that laches bars reliance on the release due to the “silence†of the
Ekelunds and Bebe regarding the effect of the release on Moore’s claim to
equity in Bebe during the two years between the execution of the release and
the initiation of Moore’s 2010 lawsuit.
However, Moore produced no evidence that the Ekelunds and Bebe had any
opportunity to legally pursue any “right†under the release prior to Moore’s
initiation of his lawsuit. As Moore
described it, during this two-year period, although the Ekelunds engaged in
“negotiati[ons]†with him “on all issues, including repayment, equity and
compensation,†the Ekelunds “declined to take action on my equity
position . . . .â€
His contention is premised on his assumption that the Ekelunds were
obligated to inform him that the release barred any claim based on the alleged
2006 oral agreement. The doctrine of
laches does not so require. Laches
simply does not apply where the party against whom it would be raised had no
earlier opportunity to seek a remedy. Moore adduced no evidence that the Ekelunds
had an earlier opportunity to seek a remedy based on the release. The trial court did not err in concluding
that there were no triable issues regarding laches.
4. Civil Code Section 1542
Moore
contends that, even if the release covered his claim to equity in Bebe, Civil
Code section 1542 precluded the release from covering this claim because he
“had no knowledge that he had such a claim.â€
“A general
release does not extend to claims which the creditor does not know or suspect
to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with
the debtor.†(Civ. Code, § 1542.)
Moore’s
contention lacks merit. The settlement
agreement containing the release provided that it “shall be governed by the
laws of the State of Minnesota.†Moore
claims that this choice of law provision should not be enforced. A choice of law provision will be enforced if
(1) “the chosen state has a substantial relationship to the parties or their
transaction,†and (2) there is no “fundamental conflict†between the laws of
the chosen state and those of California.
(Nedlloyd Lines B.V. v. Superior
Court (1992) 3 Cal.4th 459, 466.)
Since the
settlement agreement containing the release resolved a Minnesota action brought
by a Minnesota resident, Minnesota, the “chosen state†clearly had the requisite
“substantial relationship†to the settlement agreement. As to the “fundamental conflict†issue, Moore
makes no attempt to demonstrate that there are any Minnesota laws pertaining to
this subject that “fundamental[ly] conflict†with Civil Code section 1542. Instead, his argument is limited to his
unsupported assertion that “Civil Code Section 1542 reflects the fundamental
policy of California.â€
Since Moore
fails to assert any “fundamental conflictâ€
between Minnesota and California law on this subject, we need not consider it
further. “ ‘[R]eview is limited to issues which have been adequately
raised and briefed.’ †(Claudio
v. Regents of University of California (2005) 134 Cal.App.4th 224,
230.) Moore has failed to show that
California law should be applied despite the choice of law provision selecting
Minnesota law.
Furthermore,
Moore’s claim that Civil Code section 1542 bars reliance on the release because
he did not know of his claim to
equity in Bebe at the time of the settlement agreement is not supported by any
evidence. Moore asserted that he was
promised equity in Bebe in 2006, and the equity was never forthcoming. While, at the time of the 2008 settlement
agreement, he may have retained hope that he would yet receive the allegedly
promised equity, he plainly was not unaware
of his alleged entitlement to it.
5. Mutual Mistake or Fraud
Moore
argues that the release was invalid on the grounds of mutual mistake or
fraud. He concedes that he “did not
raise these issues before the trial court per
se.†Moore understates the
matter. In the trial court, Moore
explicitly conceded that he was “not contending fraud, duress o[r] undue
influence†with respect to the release.
As he disclaimed any attack on the release based on fraud, the Ekelunds
and Bebe were deprived of any opportunity to produce evidence establishing the
absence thereof. He cannot rely on
mutual mistake as he produced no evidence that the Ekelunds believed that the
release did not apply to the alleged 2006 oral agreement.
B. Motion to Strike
Moore
contends that the transactions involving the 12 percent interest rate were not
usurious and fell within an exception to the usury prohibition.
The
exception upon which he relies applies “ ‘[w]here
the relationship between the parties is a bona fide joint venture or
partnership.’ †(Junkin
v. Golden West Foreclosure Service, Inc. (2010) 180 Cal.App.4th 1150, 1155
(Junkin).) If there is a joint venture, “ ‘the advance by the partners or
joint venturers is an investment and not a loan, and the profit or return
earned by the investor is not subject to the statutory maximum limitations of
the Usury Law.’ †(Ibid.) The relevant factors in determining whether a
transaction is a joint venture are: (1)
“whether there is an absolute obligation of repaymentâ€; (2) “whether the
investor may suffer a risk of lossâ€; and (3) “whether the investor has any
right to participate in management.†(
the proper characterization of a transaction presents a question of law that
this court reviews de novo on appeal.†(
Here, Bebe
was absolutely obligated to repay the loans, and Moore had no
Bebe.
to repay his loans, this was no different than the situation faced by any
lender. Moore contends that his status
as a joint venturer was established by the alleged 2006 oral agreement to give
him an equity interest in Bebe as additional consideration for his loans. Although the alleged 2006 promise of equity
in Bebe was made prior to the interest rate being raised to 12 percent in 2007,
Moore was never actually given an equity interest in Bebe. Consequently, he lacked an actual equity
interest in Bebe at the time of the loans and therefore cannot rely on his
expectation that he would subsequently acquire such an interest to support his
claim that this equity interest excused the usurious rate of interest on the
loans.
Moore
maintains that, even if the joint venture exception does not apply, the
transaction was not usurious because 2 percent of the 12 percent interest rate
was “not for the forbearance of money†but “to compensate Moore partially†for
his “additional†investment of “time and business knowledge†after the initial
loan in 2006. “In determining whether a
transaction constitutes a loan or forbearance, we look to the substance rather
than the form of the transaction. ‘In
all such cases the issue is whether or not the bargain of the parties, assessed
in light of all the circumstances and with a view to substance rather than
form, has as its true object the hire of money at an excessive rate of
interest.’ †(Southwest
Concrete Products v. Gosh Construction Corp. (1990) 51 Cal.3d 701, 705 (
Nowhere in Southwest did the
California Supreme Court intimate that a transaction in which the debtor agreed
to pay the lender a usurious interest rate would be rendered nonusurious if the
premium portion of the interest rate that rendered the rate usurious could be
characterized as being compensation for something other than the “hire of
money.†Moore cites no authority for his
theory that a usurious interest rate can be partitioned in such a manner. In the absence of any authority for this
proposition, we reject it.
IV. Disposition
The
judgment is affirmed.
_______________________________
Mihara,
J.
WE CONCUR:
_____________________________
Bamattre-Manoukian,
Acting P. J.
_____________________________
Duffy, J.
name="_ftn1" title="">[1]
Despite the dates on the note
and the first seven amendments, it was undisputed that none of them were
executed until November 2007.
name="_ftn2" title="">[2]
The Ekelunds and Bebe also filed
a cross-complaint against Moore for breach of fiduciary duty, fraud, “Bad
Faith,†professional malpractice, rescission, and unfair competition. They alleged that Moore had been acting as
their attorney and had taken unfair advantage of them. The cross-complaint was dismissed as part of
the stipulated judgment that resolved the entire action.
