SCC Acquisitions v. Central Pacific Bank
Filed 6/25/12 SCC Acquisitions v. Central Pacific Bank
CA4/3
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opinion has not been certified for publication or ordered published for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
FOURTH
APPELLATE DISTRICT
DIVISION THREE
SCC ACQUISTIONS INC., et al.,
Cross-complainants and Appellants,
v.
CENTRAL PACIFIC BANK,
Cross-defendant and Respondent.
G044955
(Super. Ct. No. 30-2008-00112660)
O P I N I O N
Appeal from a judgment
of the Superior Court
of
County, Charles Margines, Judge. Affirmed.
Jeffrey S. Benice for
Cross-complainants and Appellants.
Frandzel Robins Bloom
& Csato and Thomas M. Robins III for Cross-defendant and Respondent.
* * *
Appellants SCC
Acquisitions, Inc. and Bruce Elieff (collectively appellants), guarantors on a
loan by respondent Central Pacific Bank (the bank) to Fillmore Sun LCC
(Fillmore Sun), appeal from a judgment of the superior court denying them
relief and finding in favor of the bank on appellants’ cross-complaint. Appellants contend the trial court erred in
instructing the jury. Finding no error,
we affirm.
I
FACTS
In
August 2005, the bank lent Fillmore Sun over $7.3 million for costs involved in
purchasing certain property and for “paying the predevelopment costs related to
the development of the Property.†Under
the terms of the one-year loan, Fillmore Sun would pay only the interest on the
loan until the maturity date of the loan, August 24, 2006, at which time the
entire principal would be due. The loan
also contained a provision affecting the maturity date: If there were no uncured default outstanding
at the time of the maturity date, in the bank’s sole and absolute opinion and
judgment the maturity date would be extended to February 24, 2007.
The clause also provided “[t]he granting of such extension, however, is
not intended to imply any agreement for any other or further extension of the
Maturity Date.†Appellants guaranteed
payment of the loan.
The
loan maturity date was extended five times, the last of which occurred on November 28, 2007, extending the
maturity date from October 26, 2007
to April 26, 2008. It appears that after the last extension was
granted, the bank did its quarterly review of the risks posed by its various
loans and downgraded the Fillmore Sun loan from 4W (a standard loan) to a 6 (a
substandard loan), requiring the bank to set aside over $1 million as a reserve
to protect against a possible loss on the loan.
Although we have not been cited to supporting evidence in the record on
appeal, the parties appear to agree a late January 2008 internal bank
memorandum noted that if a decision was made to not renew the loan, the
borrower should be notified of the decision at that time.
On
March 14, 2008, the bank
sent a term sheet for the Fillmore loan.
The term sheet presented terms “for a possible restructure†of the loan
and noted the term sheet was “for discussion purposes only, is subject to Bank
approval and should not be construed as a commitment to lend.†The proposed terms included a one-year
interest only at a loan to value rate of 50 percent. It also proposed any such loan should “close
no later than [March 31, 2008].â€
On
April 16, 2008, the bank
decided to sell a number of its outstanding loans, including the Fillmore Sun
loan, in a loan pool sale. Prior to that
time, the bank did not anticipate selling the Fillmore loan. In July 2008, the bank sold the loan to Gray
1 CPB, LLC (Gray 1) in the loan pool sale.
Fillmore was in default on the loan at that time. Gray 1 then sued the guarantors. It filed suit against SCC in September 2008,
and subsequently filed suit against Elieff, as his guarantee was to pay if SCC
failed to perform.
Appellants
cross-complained against the bank. The
causes of action included rescission based on sham guaranties, breach of
contract and the implied covenant of good faith and fair dealing, promissory
estoppel, and intentional fraud based on suppression of facts. The parties agree phase one of the trial
resulted in a $9.1 million judgment against appellants and in favor of Gray
1. Appellants’ cause of action for
rescission based on sham guarantees was tried in this phase of the trial. Appellants have not appealed from that
judgment.
In
the second phase of the trial, the court impaneled a jury on a number of
appellants’ remaining causes of action, including fraud. Appellants’ theory of liability was that
while the original loan and the loan extensions all called for interest only
payments until the maturity date of the loan, at which point the entire
principal was due, the bank led Fillmore Sun and appellants to believe it would
extend the loan as a matter of course.
Appellants alleged that prior to the April 26, 2008 maturity date on the last extension, the
bank “wanted out of the California
residential real estate market†and decided to sell its existing loans —
including the loan to Fillmore Sun — to the highest bidder.
The jury rendered
special verdicts. It found the bank made
no false representations of an important fact to appellants and that the bank
made a promise to appellants, but the bank intended to perform the promise when
the promise was made. The jury also
found the bank intentionally failed to disclose an important fact to appellants
which could not have reasonably been discovered by appellants, but it was done
without an intent to deceive. The court
then found in favor of the bank and adjudged that appellants take nothing by
their cross-complaint.
II
DISCUSSION
Appellants
contend the trial court prejudicially erred when it instructed the jury
pursuant to two special instructions requested by the bank. “The propriety of jury instructions is a
question of law that we review de novo.
[Citation.]†(
(2009) 171 Cal.App.4th 72, 82.) If an
instruction is found to be erroneous, reversal is required only when “it
appears probable that the improper instruction misled the jury and affected its
verdict. [Citation.]†(Lundquist
v. Reusser (1994) 7 Cal.4th 1193, 1213.)
Before
addressing the jury instruction issues, we briefly address another matter. The bank asks that we dismiss the appeal for
appellants’ violation of California Rules of Court, rule 8.130(a)(2) (failure
to designate points to be raised on appeal when less than all reporter’s
transcripts are designated as the record on appeal) and to strike portions of
appellants’ opening brief for violation of California Rules of Court, rule
8.204(a)(1)(C) (failure to support factual allegations with citation to
record). This is not the first time
counsel for appellants has failed to cite to the record as required by court
rules. (Doppes v. Bentley Motors, Inc. (2009) 174 Cal.App.4th 967, 990.)
to strike portions of appellants’ opening brief because the bank did not file
separate motions seeking such relief.
(Cal. Rules of Court, rule 8.54(a).)
We have not, however, considered factual allegations contained in
appellants’ opening brief unsupported
by reference to the record on appeal or which, citing to the record, are not
supported by the record. (
148 Cal.App.4th 809, 812, fn. 2.)
The First Instruction
Pursuant
to the bank’s special instruction No. 3, the court gave the following
instruction: “You have heard evidence of
statements in Central Pacific Bank’s credit memoranda contemplating that if, by
the end of January 2008, a decision has not been made to extend the loan the
borrower should be notified of such decision by that time. You are instructed that such statements in
the credit memoranda by themselves do not create a legal duty on the part of
the Bank to do so.†Appellants claim the
instruction is contrary to law. We
disagree.
“‘[T]he elements of an action for
are: (1) the defendant must have
concealed or suppressed a material fact, (2) the defendant must have been under
a duty to disclose the fact to the plaintiff, (3) the defendant must have
intentionally concealed or suppressed the fact with the intent to defraud the
plaintiff, (4) the plaintiff must have been unaware of the fact and would not
have acted as he did if he had known of the concealed or suppressed fact, and
(5) as a result of the concealment or suppression of the fact, the plaintiff must
have sustained damage.’
[Citations.]†(
868.) “A duty to speak may arise in four
ways: it may be directly imposed by statute or other prescriptive law; it may
be voluntarily assumed by contractual undertaking; it may arise as an incident
of a relationship between the defendant and the plaintiff; and it may arise as
a result of other conduct by the defendant that makes it wrongful for him to
remain silent.†(Id. at p. 867.)
Appellants do not contend disclosure of the
decision to not renew the loan was required by statute. Neither do they contend an obligation to
disclose was assumed by contract or that there existed a fiduciary duty on the
part of the bank to disclose. Rather,
appellants appear to argue a duty to disclose arose based on representations by
the bank — presumably issuance of the March 14, 2008 term sheet — and the
failure to disclose the decision to not renew the loan materially qualified the
terms and conditions set forth in the term sheet. The instruction did not misstate the
law. Contrary to appellants’ assertion,
the instruction did not inform the jury the bank had no duty to disclose a
decision not to renew the loan. It
merely informed the jury that the statement in the memorandum did “not createâ€
a duty to disclose. That the bank
thought it appropriate to notify the borrower of a decision not to renew the
loan did not, under any theory, “create†a duty to notify the borrower. Such a duty, if one ever existed, would have
arisen based on “other conduct by the defendant that makes it wrongful for him
to remain silent†(Blackman Turkus, LP v.
MF Downtown Sunnyvale, LCC, supra,
162 Cal.App.4th at p. 867), not on an internal policy decision to give notice
the bank was not otherwise required to give.
Accordingly, we find the trial court did not err in instructing the jury
pursuant to the bank’s special instruction No. 3.
The
court also instructed the jury in accordance with the bank’s special
instruction No. 4: “The Term Sheet dated
March 14, 2008 sent by the Bank to Fillmore Sun . . . does not, by itself, (1)
constitute a binding commitment to extend the loan on the terms stated therein
or (2) constitute a representation or promise to extend the loan on the terms
stated therein on which a claim or fraud or false promise can be based.†Appellants do not attempt to demonstrate the
instruction is a misstatement of law, other than merely pointing out a
misrepresentation may be established by conduct. (Thrifty-Tel,
Inc. v. Bezenek (1996) 46 Cal.App.4th 1559, 1567.) Appellants’ reliance on our opinion in
misplaced. There, the children of the
Bezeneks used another individual’s access code to gain access to Thrifty-Tel’s
long distance network. (
had been no misrepresentation, we held the use of another’s access code
constitutes an implied representation that the caller is authorized to make the
telephone call. (Id. at pp. 1567-1568.)
Here,
the face of the term sheet plainly states it was not a commitment,
representation, or promise to renew the loan on the terms set forth
therein: “Please be advised that this
for discussion purposes only, is subject
to Bank approval and should not be
construed as a commitment to lend.â€
(Italics added.) It could not
have been clearer. Additionally, the
term sheet provided the loan must close no later than March 31, 2008, 16 days
before the maturity date on the last extension, and it was conditioned on
previously unagreed to a 50 percent loan to value, which could have required a
substantial payment of principal on the then existing loan. Appellants cite to no evidence in the record
indicating the parties agreed to the terms in the term sheet by the suggested
closing date. What is more, appellants
disputed the value of the property subject to the loan and, therefore by
implication, the amount of principal that would have to be paid to make the
loan amount 50 percent of the property’s value.
The
instruction did not misstate the law. As
the face of the term sheet indicated in the most clear language, it was not a
promise to extend the loan. The term
sheet itself could not be deemed a misrepresentation that the loan would be
extended. Thus, it could not, as the
instruction stated, form the basis of a claim of misrepresentation “by
itself.†That, of course, does not mean
the term sheet could not be considered in conjunction with other evidence to
support a cause of action for misrepresentation. Therefore, the court did not err in
instructing the jury pursuant to the bank’s special instruction No. 4.
III
DISPOSITION
The judgment is
affirmed. The bank shall be entitled to
recover its costs.
MOORE,
J.
WE
CONCUR:
RYLAARSDAM,
ACTING P. J.
BEDSWORTH,
J.
At oral argument, counsel said he was trial counsel, not appellate counsel, in
on the briefs. That is of no
moment. (See Cole v. Meyer & Associates (Jun. 8, 2012, B227712, B230271)
Cal.App.4th ,
[2012 Cal.App.Lexis 671, at pp. *1-2] [“attorneys who appear on all of the
pleadings and papers filed for the plaintiffs in the underlying case cannot
avoid liability for malicious prosecution merely by showing that they took a
passive role in that caseâ€].)
