CRE Venture 2011-2 v.
Centurion Property Management Group
Filed 1/14/13 CRE
Venture 2011-2 v. Centurion Property Management Group CA2/5
>
>
>
>
>
>NOT TO BE PUBLISHED IN THE
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 This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115>.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
CRE VENTURE
2011-2, LLC,
Plaintiff and Respondent,
v.
CENTURION
PROPERTY MANAGEMENT GROUP II, LLC, et al.,
Defendants and Appellants.
B237991
(Los Angeles County
Super. Ct. No.
BC427618)
APPEAL
from a judgment of the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County.
Ramona G. See, Judge. Affirmed.
Pircher,
Nichols & Meeks, James L. Goldman for Defendants and Appellants.
Polsinelli
Shughart, Wesley D. Hurst, Michael P. Cutler for Plaintiff and Respondent.
_______________
Defendants and appellants Centurion
Property Management Group II, LLC, Centurion Partners, LLC, and Francesco
Mileto appeal from the judgment entered in favor of respondent CRE Venture
2011-2 LLC. We affirm.
Facts
The
complaint in this action was filed in December of 2009. The plaintiff was the First Regional
Bank. As to appellant Centurion Property
Management Group, the complaint brought causes of action for breach of
contract, money lent, and money had and received, on factual allegations that
in November of 2008, First Regional Bank had extended a line of credit in the
amount of $8 million to Centurion Property Management Group, that the
promissory note (hereinafter, "the Centurion Note") required
Centurion Property Management Group to make monthly payments beginning in
December 2008, but that Centurion Property Management Group had not made those
payments.
There
was also a cause of action against appellant Centurion Partners for breach of
guaranty, on factual allegations that it had guaranteed payment of the
Centurion Note, and numerous causes of action against appellant Mileto for
breach of guaranty of the Centurion Note and breach of guarantees of loans to
related entities.
In
January 2010, the FDIC became the receiver of the First Regional Bank. In August 2012, on the FDIC's unopposed
motion, we ordered respondent CRE Ventures substituted in place of the FDIC.
Trial
was to the court. There were many
stipulated facts and exhibits, generally concerning the identities of the
parties, the terms of the notes and guarantees, respondent's demands for
payment, and the lack of payment. Over
appellants' hearsay objection, respondent also introduced loan histories and
loan payoff statements for each loan.
Respondent used this evidence to establish the exact sums due,
considering unpaid balances, and accrued interest at the rates applicable both
before and after default on the notes.
Apparently, most or all of the notes were secured by real estate, and
the sum due also had to reflect advances made to protect secured assets, such
as real estate taxes.
The
court found in favor of respondent and against all appellants, awarding
$6,998,137 against all appellants and an additional $8,236,216 against Mileto
only.
There
are three issues on appeal, whether the trial court erred in admitting into
evidence as business records the loan histories and loan payoff statements;
whether respondent proved an element of its breach of contract claim, that
respondent itself performed; and whether the verdict on the causes of action
for common counts concerning the Centurion Note must be reversed because there
was no breach of a contract.
Discussion
1. Admission of the loan histories and payoff
statements
The
records were admitted under Evidence Code section 1271, the business records
exception to the hearsay rule, which provides that "Evidence of a writing
made as a record of an act, condition, or event is not made inadmissible by the
hearsay rule when offered to prove the act, condition, or even if: name=I8D895590013011DF8BABED63804091CB>name=I8D88B952013011DF8BABED63804091CB>[¶]
(a) The writing was made in the regular course of a business;name=I8D89A3B0013011DF8BABED63804091CB>name=I8D88B953013011DF8BABED63804091CB> [¶]
(b) The writing was made at or near the time of the act, condition, or event; name=I8D89CAC0013011DF8BABED63804091CB>name=I8D88B954013011DF8BABED63804091CB>[¶]
(c) The custodian or other qualified witness testifies to its identity and the
mode of its preparation; and name=I8D88E060013011DF8BABED63804091CB>[¶]
(d) The sources of information and method and time of preparation were such as
to indicate its trustworthiness."
When
documents are offered under an exception to the hearsay rule, the trial court
has broad discretion in determining whether a sufficient foundation has been
laid. We reverse only if the court
clearly abused that discretion. (Jazayeri
v. Mao (2009) 174 Cal.App.4th 301, 319.)
We see no abuse of discretion here.
In
order to lay a foundation for the introduction of the loan histories and loan
payoff statements, respondent calledhref="#_ftn1" name="_ftnref1" title="">[1] John Schulhof, a former
Senior Vice President and Chief Special Assetshref="#_ftn2" name="_ftnref2" title="">[2] Officer of First Regional
Bank, and Anson Lang, a Vice President at SitusServ, L.P., which serviced First
Regional's loans for the FDIC. Schulhof
testified about First Regional's records and record keeping in general and the
loan histories in particular, testifying, inter alia, that the records were
maintained in the regular course of business, that First Regional's policy was
that transactions be recorded as soon as possible, and that he was one of the
custodians of the records. Lang
testified about the payoff statements, which he prepared from records which
SitusServ received from the FDIC and from SitusServ's own records. He testified, inter alia, that the records
were maintained in the regular course of business, that SitusServ required
events to be recorded within 48 hours, and that he was one of the custodians of
the records.
In
its statement of decision, the trial court summarized the evidence: "Mr. John Schulhof and Mr. Anson Lang
testified that employees with personal knowledge of disbursements and payments
on the subject promissory notes promptly made records of these disbursements
and payments into a database as part of their regular job
responsibilities. This Court finds that
Mr. Schulhof is a qualified witness to lay foundation for the subject records .
. . because he is the Senior Vice President and Chief Special Assets Officer of
the Special Assets Department of First Regional Bank and is one of the
custodians of records for First Regional Bank pertaining to the subject
promissory notes and guaranties at issue in this action. Pursuant to his declaration in lieu of live
testimony, Mr. Schulhof testified: [¶] 'I personally worked with, and on, First
Regional Bank's Records and have personal knowledge that the Records were kept
in the usual and ordinary course of First Regional Bank's business and that the
entries therein were made at or about the time of the events recorded by
individuals employed by First Regional Bank who had personal knowledge thereof
and who had a continuing business duty to make those entries and record those
events at or about the time of the events recorded.' [¶] Mr. Schulhof went on
to describe in detail his knowledge of the bank's required procedures for the
manner in which originals of the subject documents and all related documents
were processed and stored and the subject accounts were monitored, how the
information contained in those documents was inputted into the computer system,
and how the bank's tracking system of the amounts paid, owed and interest accrued
on each of the subject promissory notes.
Thus, the Court finds Mr. Schulhof had the background, training,
experience and knowledge to lay proper foundation for the documents and did
so."
The
court further found, "In addition, Mr. Lang is a Vice President for . . .
loan servicer for the subject promissory notes . . . . Mr. Lang reviewed the
bank documents which were properly authenticated as business records by Mr.
Schulhof and compiled summaries of information from those bank records from a
computer system for which Mr. Schulhof also already provided proper
authentication. As a result, this Court
finds that these witnesses laid sufficient foundation for the bank record
exhibits and this Court finds that these exhibits qualify as business records,
an exception to the hearsay rule."
Appellants
argue that the records were not trustworthy and should not have been admitted
because neither Schulhof nor Lang personally prepared the underlying documents
or tested the accuracy of the computer systems, and because there was no
evidence concerning the "workings" of the hardware and software
systems. Appellants cite, for instance, Lang's testimony that he had no
personal knowledge about the making of the loans or their administration, but
prepared the loan payoff statements from the records, and Schulhof's testimony
that he did not begin work in Special Assets until April of 2009, after most of
the advances were made, and did not personally approve any of the
advances. Appellants contend that
"[n]either of [respondent's] witnesses has any personal knowledge about
the underlying transactions, or about how the data in the ledgers or other
underlying documents in which advances and payments . . . were recorded or how
they became a part of the loan histories."
However,
as the trial court noted, Schulhof testified in detail about the bank's
recordkeeping practices and the preparation of the loan histories. Similarly, while it is certainly true that
Lang prepared the loan payoff statements from documents prepared by others, at
another institution, that fact does not render the loan payoff statements
untrustworthy. Indeed, it is difficult
to imagine any other way in which loan payoff statements could be generated. The business records exception to the hearsay
rule does not mandate that a party call as witnesses the people who actually
input the data and opened the envelopes.
"[A]
person who generally understands the system's operation and possesses
sufficient knowledge and skill to properly use the system and explain the
resultant data, even if unable to perform every task from initial design and
programming to final printout, is a 'qualified witness' for purposes of
Evidence Code section 1271." (name="SR;13441">People v. Lugashi
(1988) 205 Cal.App.3d 632, 640; People v. Dorsey (1974) 43 Cal.App.3d
953, 960-961.)
>Remington Investments, Inc. v. Hamedani
(1997) 55 Cal.App.4th 1033 and the out-of-state cases cited by appellant
establish only that documentary evidence will be excluded when there is an
insufficient showing of trustworthiness.
That is not the case here.
2.
Respondent's performance under the contract
Appellants
next contend that respondent failed to prove an element of the breach of
contract cause of action against Centurion Property Management Group, that
respondent itself performed its obligations under the Centurion Note. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990)
222 Cal.App.3d 1371, 1388.) Appellants'
contention is that respondent did not prove that it made the advances in a
timely manner.href="#_ftn3"
name="_ftnref3" title="">[3]
As
the trial court observed, the Centurion Note itself does not include a
requirement that advances be made in any particular time frame. Appellants point to another trial exhibit, an
Addendum to the Note, which provides that the borrower may make twice-monthly
applications for advances, on a specified form, "supported by such
evidence as Lender shall reasonably require," for "work actually
completed," and "material and equipment actually incorporated into
the project." The Addendum then
provides that "Advances will be funded by Lender within seven (7) business
days of submission to the Lender of a complete application payment."
Appellants
contend that respondent did not prove that advances were funded within seven
business days, and contends that exhibits at trial establish that it did not do
so.
On
this issue, the trial court found, "[Appellants] argue that [respondent]
cannot maintain any of its claims on any of the subject promissory notes,
modification agreements and guaranties because [respondent] failed to timely
provide such amounts to [appellants].
The only competent admissible evidence presented to this Court, however,
demonstrated that [respondent] performed all of its obligations under each of the
subject notes, modification agreements and guaranties and [appellant] breached
the terms of each of those agreements by failing to pay [respondent] the
amounts due and owing." We see no
reason to disturb that finding.
First,
as respondents argue, appellants' ability to raise this issue is limited. During discovery in this case, respondent
requested, inter alia, appellants' evidentiary basis for their claim that
respondent failed to timely respond to and fulfill draw requests under the
Centurion Note. Appellants did not
respond to this and other discovery, and as a result, entered into a
stipulation which barred them from raising their affirmative defenses, which
included failure of consideration. The
trial court found that the stipulation did not absolve respondent from proving
the elements of its case.
Under
these circumstances, we agree with respondent that it sufficiently proved the
elements of its case when it proved that it lent the money. The advances were recorded in the loan
histories and other documents which respondent entered into evidence, and that
is enough. We do not see that, as part
of its case in chief, respondent was required to submit evidence concerning
each of Centurion's requests for funds, the accompanying documentation, and the
timing of the advance.
Moreover,
even evidence of a delay in funding would not necessarily constitute a failure
of consideration which would excuse the lack of repayment. (Brown v. Grimes (2011) 192 Cal.App.4th 265, 277.) In their brief, appellants inform us that
they claimed that the lack of timely advances made it impossible to pay the
loans, because they could not complete construction, remove liens, or obtain
tenants. That is the stuff of an
affirmative defense, not a case in chief. (Bliss
v. California Cooperative Producers (1947) 30 Cal.2d 240, 248name="SR;2392">; Boswell v. Reid
(1962) 199 Cal.App.2d 705, 713.)
Nor
do we agree with appellants that the record establishes that the advances were
not timely. Appellants cite the loan
history, which shows advances in December 2008, January 2009, and May of 2009,
and conclude that "this history is inconsistent with the provisions of the
Addendum." The loan history shows
an uneven stream of advances, but given that under the Addendum, an advance
depended on a proper request, we cannot find a failure of consideration merely
from the uneven stream of advances.
Appellants
also point to Schulhof's testimony concerning May advances. When asked, "Isn't it a fact that those
advances . . . were advances pursuant to requests that had been made in prior
months?" Schulhof testified that the requests were incomplete. Appellants argue that he had no personal
knowledge of those matters, so that the testimony proves nothing. We do not agree. Schulhof testified that he was present at
loan committee meetings which discussed the requests.
3. The judgment on the causes of action for
common counts
Appellants
argue that "it is not permissible to allege a common count where there is
a contract governing the relationship between the parties," citing in
support Durell v.
Sharp Healthcare (2010) 183 Cal.App.4th 1350, which affirmed a dismissal after a demurrer was sustained, and
which held that "As a matter of law, an unjust enrichment claim does not
lie where the parties have an enforceable express contract." (Id.
at p. 1370.)
We
do not see that Durell, supra, compels
a reversal of the judgment here, especially where appellants do not seem to
have demurred to the common counts on the grounds now cited, and especially
where appellants make no argument that reversal of the judgment on common
counts would make any difference to them.
(County of Los Angeles v. Nobel
Ins. Co. (2000) 84 Cal.App.4th 939, 944–945.)
Disposition
The
judgment is affirmed. Respondent to
recover costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
ARMSTRONG,
J.
We concur:
TURNER, P. J.
KRIEGLER, J.
id=ftn1>
href="#_ftnref1" name="_ftn1" title="">[1] After those witnesses
testified, the trial was halted for several weeks for additional briefing on an
issue. When trial resumed, the parties
agreed to proceed through declarations.
id=ftn2>
href="#_ftnref2" name="_ftn2" title="">[2] In this context,
"special" means "nonperforming."