Filed 8/26/26 Internet Connectivity Group v. Manchester Financial Group CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
INTERNET CONNECTIVITY
GROUP, INC.,
G064301
Plaintiff and Appellant,
(Super. Ct. No. 30-2016-
v. 00861757)
MANCHESTER FINANCIAL OPINION
GROUP, L.P. et al.,
Defendants and Respondents.
Appeal from a judgment of the Superior Court of Orange County,
Melissa R. McCormick, Peter J. Wilson, and Glenda Sanders, Judges.
Affirmed.
The Business Legal Group and Russell M. Frandsen for Plaintiff
and Appellant.
Mojdehi Galvin Rego, Ali M. M. Mojdehi and Andrew J. Galvin
for Defendants and Respondents.
Plaintiff Internet Connectivity Group, Inc. (ICG) appeals from a
judgment entered in favor of defendants Douglas Manchester (Manchester),
Manchester Financial Group, L.P. (MFG), and Cloverleaf Media, LLC (CM
and, together with Manchester and MFG, the Manchester Defendants) on
ICG’s seventh amended complaint. On appeal, ICG argues the trial court
erred in instructing the jury and by denying its motion for a directed verdict.
ICG also contends the court erred by granting summary adjudication on two
of its claims. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In 2004, Kurtis Van Horn Jr. and Kevin Howard founded ICG,
which eventually engaged in business activities related to digital signage. In
2011, Manchester, who is the founder and chairman of MFG, invested
$1,000,000 in ICG through his trust.
In December 2013, MFG and ICG entered into a loan agreement
and promissory note (the Loan Agreement) under which MFG loaned
$2,000,000 to ICG, with an interest rate of 10 percent and a due date of June
30, 2014. MFG was granted 100,000 stock warrants with an exercise price of
$0.01. The Loan Agreement provided certain security interests to MFG in
ICG’s assets. ICG did not repay the loan by the June 30, 2014 due date.
On October 20, 2014, ICG and MFG entered into a first
amendment to the loan agreement and promissory note (the First
Amendment), which extended the due date of the loan to October 28, 2014.
The First Amendment further provided the interest rate continued at 10
percent, but if ICG defaulted, the interest rate would increase to 15 percent.
The parties agreed ICG would issue another 200,000 stock warrants to MFG
with an exercise price of $0.01, and if the loan was not repaid by the new due
date, ICG would issue MFG an additional 200,000 stock warrants with the
2
same exercise price. The First Amendment also required ICG to pay MFG an
amendment fee of $100,000 on October 28, 2014. ICG failed to repay the loan
by the new October 28, 2014 due date.
On April 14, 2015, ICG and MFG entered into a waiver and
second amendment to the loan agreement and promissory note (the Second
Amendment). The due date of the loan was again extended, this time to
October 28, 2015. The Second Amendment provided the interest rate would
be 10 percent, but in the event of a default, the interest rate would become 15
percent. ICG issued 500,000 stock warrants to MFG with an exercise price of
$0.01.
A few months later, on July 22, 2015, ICG and MFG entered into
a Series A preferred stock purchase agreement (the Preferred Stock Purchase
Agreement) under which MFG purchased 2,800,000 shares of ICG Series A
preferred stock for $3,500,000. Also on July 22, 2015, ICG and MFG entered
into a third amendment to the loan agreement and promissory note (the
Third Amendment). It gave MFG an option to convert the outstanding
principal of the loan, as well as accrued and unpaid interest, into shares of
ICG under certain terms.
ICG did not pay the loan by October 28, 2015. On November 4,
2015, MFG issued a notice of default pursuant to the loan documents. On
November 11, 2015, MFG issued a notification of disposition of collateral at
public sale. Among other things, it stated, “the secured party will sell, either
as a unit or in parcels, at the discretion of the secured party, the personal
property of debtor, described below to the highest qualified bidder(s) (which
may include the secured party) in public auction.” (Boldface, italics, and
capitalization omitted.) It also stated the public auction would be at 10:00
a.m. on December 11, 2015, at the address for Cooley LLP in San Diego.
3
Notices of the sale were published twice in both the Wall Street Journal
(November 23 and 28, 2015) and the San Diego Union-Tribune (November 24,
and December 2, 2015).
On December 11, 2015, the public auction occurred at the offices
of Cooley LLP, and MFG purchased ICG’s assets with a $2,692,744.94 credit
bid. No other bidders appeared at the auction. MFG then assigned its rights
in the assets to CM.1 Ryan Kiesel, who was the chief financial officer of both
CM and MFG, testified that, after acquiring the ICG assets, CM operated as
an active business until around June 2017, but made no profit from its use of
the ICG assets; to the contrary, it lost more than $5 million.
In June 2016, the initial complaint was filed in this action.2
Following multiple amended complaints, ICG filed its operative pleading—
the seventh amended complaint—in July 2021. The seventh amended
complaint named as defendants Manchester, MFG, CM, Howard, and Van
Horn, and it asserted seven causes of action: (1) breach of fiduciary duty
(against all defendants); (2) violation of California Uniform Commercial Code
(against the Manchester Defendants)3; (3) unfair competition in violation of
Business and Professions Code section 17200 et seq. (against all defendants);
(4) usury and loan sharking (against Manchester and MFG); (5) conversion
1
Although an assignment agreement in the record names the
assignee as Cloverleaf LLC, both parties on appeal refer to CM as the
assignee.
2
The initial complaint was filed as a derivative action by Jean
Johns, Michael Sorci, Cathleen Beckett, and Jeff Nye.
3
All undesignated statutory references are to the California
Uniform Commercial Code (California UCC).
4
(against all defendants); (6) misappropriation of trade secrets (against all
defendants); and (7) constructive fraud and deceit (against all defendants).4
In August 2022, the Manchester Defendants filed a motion for
partial summary judgment or, in the alternative, summary adjudication. In
May 2023, the trial court (Judge Peter J. Wilson) granted the motion in part.
As relevant here, the court granted summary adjudication in favor of
Manchester on the breach of fiduciary duty cause of action and summary
adjudication in favor of Manchester and MFG on the usury and loan sharking
cause of action.
The case proceeded to a jury trial in April and May 2024 before
Judge Melissa R. McCormick. During trial, testimony was given by Van
Horn, Howard, Kiesel, Allison Rego (an attorney who previously worked at
Cooley LLP), and Gordon Davidson (who previously worked as the chief
technology officer of ICG and as what he described as the “outward facing
CEO” of CM). Each side also presented expert testimony from two expert
witnesses: Erik Laykin and Mark Higgins for ICG, and Gregory Urbanchuck
and David Nolte for the Manchester Defendants.
After the conclusion of testimony, the parties made multiple
motions. As pertinent here, the trial court denied ICG’s motion for a directed
verdict and motion to conform the pleadings to proof. The jury rendered a
verdict. On ICG’s claim for violation of the California UCC, the jury found
MFG had established it conducted the disposition of the ICG collateral in a
4
Howard and Van Horn apparently settled before trial and are
not parties to this appeal.
5
commercially reasonable manner.5 On ICG’s claim for conversion, the jury
found ICG had consented to MFG taking possession of the ICG assets. Based
on the jury’s findings and the court’s various rulings on ICG’s other claims,
the court entered judgment in favor of the Manchester Defendants on the
seventh amended complaint.6
DISCUSSION
I.
ICG’S MOTION FOR A DIRECTED VERDICT
ICG argues the trial court erred by denying its motion for a
directed verdict on its claim for violation of the California UCC. According to
ICG, MFG failed to carry its burden of presenting sufficient evidence to
support a finding that MFG conducted the disposition of ICG’s collateral in a
commercially reasonable manner, and the claim therefore should have been
submitted to the jury to determine damages. We disagree.
A. Standard of Review
When deciding a motion for a directed verdict, “the trial court has
no power to weigh the evidence, and may not consider the credibility of
witnesses. It may not grant a directed verdict where there is any substantial
conflict in the evidence. [Citation.] A directed verdict may be granted only
when, disregarding conflicting evidence, giving the evidence of the party
against whom the motion is directed all the value to which it is legally
entitled, and indulging every legitimate inference from such evidence in favor
5
The trial court had previously granted a directed verdict in
favor of Manchester and CM on the claim for violation of the California UCC.
6
The judgment also addressed Manchester’s and MFG’s cross-
claims, which are not at issue on this appeal.
6
of that party, the court nonetheless determines there is no evidence of
sufficient substantiality to support the claim or defense of the party opposing
the motion, or a verdict in favor of that party.” (Howard v. Owens Corning
(1999) 72 Cal.App.4th 621, 629–630.) Given that the jury found in favor of the
Manchester Defendants, ICG’s assertion that the court erred by denying its
motion for directed verdict “is therefore functionally equivalent to contending
there was insufficient evidence to support the jury verdict against [ICG].
Only if there was no substantial evidence in support of the verdict could it
have been error for the trial court earlier to have denied [ICG’s] motion for
directed verdict.” (Id. at p. 630.)
B. Analysis
Under section 9610, subdivision (a), “[a]fter default, a secured
party may sell, lease, license, or otherwise dispose of any or all of the
collateral in its present condition or following any commercially reasonable
preparation or processing.” (Ibid.) “Every aspect of a disposition of collateral,
including the method, manner, time, place, and other terms, must be
commercially reasonable. If commercially reasonable, a secured party may
dispose of collateral by public or private proceedings, by one or more
contracts, as a unit or in parcels, and at any time and place and on any
terms.” (Id., subd. (b).) “A secured party may purchase collateral at either of
the following: [¶] (1) At a public disposition. [¶] (2) At a private disposition
only if the collateral is of a kind that is customarily sold on a recognized
market or the subject of widely distributed standard price quotations.” (Id.,
subd. (c).) The Manchester Defendants do not dispute that MFG, as the
secured party, had the burden of showing the sale of the collateral was
commercially reasonable. (See § 9626, subd. (a)(2).)
7
Whether a sale was commercially reasonable “is intensively
factual and ‘the answer depends on all of the circumstances existing at the
time of the sale.’” (Ford & Vlahos v. ITT Commercial Finance Corp. (1994)
8 Cal.4th 1220, 1235 (Ford).) The California UCC does not provide a
comprehensive, detailed definition of the phrase “commercially reasonable.”
Under section 9627, subdivision (a), “[t]he fact that a greater amount could
have been obtained by a collection, enforcement, disposition, or acceptance at
a different time or in a different method from that selected by the secured
party is not of itself sufficient to preclude the secured party from establishing
that the collection, enforcement, disposition, or acceptance was made in a
commercially reasonable manner.” (Ibid.)7 Although subdivision (b) of section
9627 lists three methods of disposition that are commercially reasonable,8 the
three methods are neither required nor exclusive. The comment to the model
Uniform Commercial Code section 9-627 states that “none of the specific
methods of disposition specified in subsection (b) is required or exclusive.”
7
When discussing a former version of the California UCC, the
court in Clark Equipment Co. v. Mastelotto, Inc. (1978) 87 Cal.App.3d 88,
identified some factors for determining whether a sale was done in a
commercially reasonable manner: “‘Reason dictates that sale of repossessed
collateral, to be of protection to a debtor, must ordinarily be done in public,
during business hours, upon adequate notice within a reasonable time of
repossession and under conditions reasonably calculated to bring the fair
market price if the code requirements are to be met.’” (Id. at pp. 96–97.)
8
Section 9627, subdivision (b)(1) to (3), provides: “A disposition of
collateral is made in a commercially reasonable manner if the disposition
satisfies any of the following conditions: [¶] (1) It is made in the usual
manner on any recognized market. [¶] (2) It is made at the price current in
any recognized market at the time of the disposition. [¶] (3) It is made
otherwise in conformity with reasonable commercial practices among dealers
in the type of property that was the subject of the disposition.” (Ibid.)
8
(Official Comments on U. Com. Code (2026) foll. § 9-627; see also Jack in the
Box, Inc. v. Mehta (N.D.Cal., May 19, 2014, No. 5:13-cv-04444) 2014 WL
2069530 at p. *2 [“‘the methods of commercially reasonable dispositions listed
under [section] 9627[, subdivision (b)] are not required or exclusive, and other
types of dispositions may’ satisfy the standard”].) On appeal, ICG has not
argued the comment to the model Uniform Commercial Code is inapplicable
or that it contradicts the text. (See Pacific Sunwear of California, Inc. v.
Olaes Enterprises, Inc. (2008) 167 Cal.App.4th 466, 474 [“While the statutory
text, of course, controls over any inconsistent commentary, courts regularly
look to the official commentary to determine the meaning of ambiguous
statutory provisions”].)
We conclude substantial evidence supports the jury’s finding that
MFG conducted the disposition of the collateral in a commercially reasonable
manner. There is no dispute ICG had notice of the sale and the sale took
place during regular business hours. MFG also advertised the sale twice in
the Wall Street Journal (November 23 and 28, 2015) and twice more, on
different days, in the San Diego Union-Tribune (November 24 and December
2, 2015). The sale took place as advertised, in the conference room of a law
firm, and Rego testified anyone who came to the office wishing to participate
in the sale would have been directed to the conference room.
Substantial evidence also supports that the price was reasonable.
ICG claims it “was a promising technology and media company developing
groundbreaking digital signage products and services for consumer-facing
businesses,” but its appellate briefing ignores the substantial evidence
introduced at trial that counters that assertion. There was substantial
evidence at trial that ICG was unprofitable and significantly in debt, and
that its technology was not valuable. For example, Davidson (ICG’s former
9
chief technology officer and CM’s “outward facing CEO”) described ICG’s
legacy technology as primarily digital displays for menu boards and large
format displays in stadiums, but he testified the technology was barely
functioning and unfixable in 2014. He also testified ICG had lost a number of
customers of its legacy technology. Davidson further testified ICG struggled
to pay its employees on time and was not paying payroll taxes on time.
Howard testified ICG owed the IRS and California approximately $1,600,000
to $2,000,000 around October 2015. There also was testimony about ICG’s
cloverleaf technology, which ICG had only begun developing in 2013 and
2014.9 Davidson testified that technology was not ready for customers to
manage on their own in December 2015 and there were scaling issues with it.
Additionally, Davidson testified ICG generally was not profitable in 2014 and
2015, and one of ICG’s own experts testified his analysis of the company’s
finances showed ICG was not profitable at any time prior to December 11,
2015. One of the Manchester Defendants’ experts also testified that the value
of the ICG assets sold at the public auction, not including cash, was worth
less than the credit bid.
Additionally, substantial evidence supports that many people
involved with ICG were aware of the auction, but none of them submitted a
bid for the assets. Davidson testified that, when ICG received the notice of
default, it set off a frantic period in which ICG tried to raise funds and go
“back to investors looking at new avenues,” but ICG was not able to persuade
any of its shareholders to provide funds to pay off the loan. Howard testified
about meeting with certain ICG shareholders to discuss options, including
9
Testimony at trial described the cloverleaf technology as digital
screens on the edges of shelves in retail stores that could, for example,
display the price.
10
the prospect of the shareholders bidding up the assets at the public auction.
With respect to that idea, Van Horn testified “[w]e had people that had
funds” to bid up the assets, “but they weren’t necessarily willing to go and do
that.” Kiesel also testified he attended a shareholder teleconference a week
before the auction in which the upcoming auction was discussed, and he
confirmed “[t]he shareholders knew about the auction.”
On appeal, ICG raises various arguments that more should have
been done in connection with the sale of ICG’s assets. For example, ICG
attacks the advertisements in the newspaper that publicized the upcoming
public auction, complaining their font size was too small, they were published
too close to Thanksgiving, and they did not describe the assets in sufficient
detail. ICG also asserts “MFG made no effort to contact third parties that its
executives knew were interested in acquiring ownership of ICG and its shelf-
edge technology.” ICG asserts “all of the Manchester witnesses testified they
had never conducted such a sale before, and were unfamiliar with the type of
assets sold at the foreclosure sale.” Although these arguments might have
supported a contrary verdict, we cannot conclude there was insufficient
evidence to support the jury’s verdict given the standard of review on the
motion for a directed verdict.
Pointing to the advertisements that MFG ran in the Wall Street
Journal and San Diego Union-Tribune, ICG cites Ford and asserts the
California Supreme Court “has explicitly held that such advertising is legally
insufficient in a foreclosure sale.” Ford did not make such a broad holding. In
that case, the defendant loaned money to the plaintiff to purchase an aircraft,
and after the plaintiff defaulted, the defendant notified the plaintiff it would
repossess the aircraft and hold a public sale. (Ford, supra, 8 Cal.4th at
pp. 1223–1224.) The defendant advertised the sale in the Arizona Republic
11
and, because of an error in that advertisement, placed another advertisement
in the Phoenix (Arizona) Gazette. (Id. at p. 1224.) The defendant was the sole
bidder at the auction and bought the aircraft for $1,000,000, but after the
sale, the defendant’s agent advertised the aircraft in a different publication
and was able to sell it for approximately $1,500,000. (Ibid.) The trial court
found the sale was commercially unreasonable. (Ibid.) The court of appeal
reversed, reasoning “the Legislature had created a ‘safe harbor’ in California
Uniform Commercial Code [former] section 9504, subdivision (3) . . . whereby
satisfying the statute’s notice requirement precluded any challenge to the
sale’s commercial reasonableness on the basis of inadequate publicity.” (Id. at
p. 1225.)
The California Supreme Court accepted review in Ford and
addressed the “narrow question of law” of “whether the [former] California
version of Uniform Commercial Code section 9-504, subdivision (3),
definitively limits a secured party’s duty to advertise the sale of collateral
merely to placing a legal notice in a newspaper,” concluding it does not.
(Ford, supra, 8 Cal.4th at p. 1223.) It explained “notice on the one hand, and
publicity or advertising on the other, are separate but related concepts under
the California Uniform Commercial Code.” (Id. at p. 1227.) It concluded “the
minimum advertising required to make the publicity aspect of a sale of
foreclosed collateral commercially reasonable is the notice given by
publication. But if placing the required legal notice is not a commercially
reasonable method of informing potential buyers of the sale’s time and place,
the sale will fail to meet the requirements of subdivision (3) of [former]
section 9504.” (Id. at p. 1233.) It explained, “[i]n this case, substantial
evidence supported the trial court’s conclusion that the Phoenix newspapers,
with their limited circulation, did not provide a forum likely to bring bidders
12
and a fair price for the foreclosed aircraft, and the sale hence was
commercially unreasonable.” (Id. at p. 1235.) The California Supreme Court,
however, did not hold that advertisements in newspapers can never
constitute commercially reasonable advertising of a sale of collateral. To the
contrary, the Court stated, “in another case involving different collateral the
trier of fact may find that giving the required legal notice alerted the relevant
market to the sale and thereby satisfied the requirement of adequate
promotion.” (Ibid.)10
ICG also argues MFG could not prove it acted in a commercially
reasonable manner because it did not present expert testimony on
commercial reasonableness. According to ICG, “[w]here, as here, a party fails
to introduce expert opinion necessary to determine whether a standard of
care has been met, a motion for directed verdict is properly granted.” To be
sure, there are some circumstances in which expert testimony is required.
For example, in legal malpractice and medical malpractice actions, plaintiffs
generally must present expert testimony on whether the defendant’s conduct
fell below the relevant standard of care. (See, e.g., O’Shea v. Lindenberg
(2021) 64 Cal.App.5th 228, 236 [“The general rule is that expert evidence is
required to establish legal malpractice”]; San Antonia Regional Hospital v.
Superior Court (2024) 102 Cal.App.5th 346, 350 [noting the standard of care
10
The California Supreme Court noted “[a] dealer in the type of
property repossessed here—a valuable airplane—surely would advertise its
auction in the relevant market by, for example, informing brokers, placing
reasonably prominent announcements in recognized trade journals, or
contacting individuals or entities known to be seeking an airplane of the type
for sale.” (Ford, supra, 8 Cal.4th at p. 1229.) The circumstances here are
distinguishable. Notably, the airplane in Ford was valuable and subsequently
sold for nearly 150 percent of the sale price, whereas here, evidence supports
that ICG’s technology was not valuable and not a viable business.
13
element of a medical malpractice action “‘can only be proved by expert
testimony, unless the circumstances are such that the required conduct is
within the layperson’s common knowledge’”].) Our Supreme Court has
explained, “[i]f the matter in issue is one within the knowledge of experts
only and not within the common knowledge of laymen, it is necessary for the
plaintiff to introduce expert opinion evidence in order to establish a prima
facie case.” (Miller v. Los Angeles County Flood Control Dist. (1973) 8 Cal.3d
689, 702 (Miller).)
ICG asserts Miller is instructive. In that case, the plaintiffs’
home was destroyed by a flood during a rainstorm. (Miller, supra, 8 Cal.3d at
p. 693.) The plaintiffs’ theory of negligence against the builder of the home
was that it had failed “to take reasonable steps to guard against the
destruction of the home in case of flood,” but the trial court granted a motion
for nonsuit because the plaintiffs failed to present expert testimony on the
standard of care applicable to the builder. (Id. at pp. 699–701.) The California
Supreme Court agreed expert testimony was required on those facts,
explaining: “In the instant case, the issue as to whether or not the Miller
home had been negligently constructed involved a multitude of subsidiary
questions bearing not only upon the erection of the structure itself but also
upon the location of the house on the particular lot, the elevation of the lot,
the influence of the surrounding terrain, the possibility of run-offs and floods,
and the existence of the debris dam. These were not questions which the jury
could have resolved from their common experience and the trial judge
properly concluded that the issue of the allegedly negligent construction of
the Miller residence was one within the knowledge of experts only.” (Id. at
p. 703.)
14
The circumstances here are not analogous to those in Miller.
Miller involved a negligence theory related to the construction of a house and
“a multitude of subsidiary questions bearing not only upon the erection of the
structure itself but also upon the location of the house on the particular lot,
the elevation of the lot, the influence of the surrounding terrain, the
possibility of run-offs and floods, and the existence of the debris dam.”
(Miller, supra, 8 Cal.3d at p. 703.) Conversely, the issue here did not involve
a multitude of complex and technical construction issues necessary to address
a negligence theory. Instead, the issue of commercial reasonableness here is
not peculiarly or exclusively within the knowledge of experts, particularly
given the evidence of the failing aspects of ICG’s business, the flaws in its
technology, and the many people who received notice of the public auction—
including ICG shareholders who likely understood its business and
technology the best—but chose not to attend or bid on the assets. Depending
on the nature of the assets being auctioned and the nature of the businesses
in which assets might be used, there may be instances where expert
testimony regarding commercial reasonableness would be necessary. But we
do not find the assets and business involved here to be one of them. We
decline to adopt a per se rule that expert testimony is always necessary to
establish commercial reasonableness.
Notably, ICG cites no California case holding that expert
testimony is invariably required to establish that a secured party acted in a
commercially reasonable manner in selling collateral. In its reply brief on
appeal, ICG asserts Brasher’s Cascade Auto Auction v. Valley Auto Sales &
Leasing (2004) 119 Cal.App.4th 1038 (Brasher’s) “explicitly held that expert
testimony is required to determine reasonable commercial standards.” We
disagree that Brasher’s requires expert testimony here.
15
In Brasher’s, “[a] middleman who purchased vehicles from an
auction company-secured lender and resold the vehicles to a used car dealer
failed to apply the proceeds from the resale to pay off the auction company-
secured lender,” and the “appeal concern[ed] whether the loss caused by the
insolvent middleman should be borne by the auction company-secured lender
or by the used car dealer.” (Brasher’s, supra, 119 Cal.App.4th at p. 1041.) The
appellate court concluded “the former version of the California Uniform
Commercial Code requires a merchant buyer to adhere to reasonable
commercial standards to obtain the status of a buyer in the ordinary course.”
(Id. at p. 1042.) The appellate court considered whether it could decide the
reasonableness of the party’s conduct in the first instance. (Id. at p. 1059.) It
noted its “review of the testimony of the expert witnesses, and the inferences
that could be drawn from that testimony, shows a conflict over what are the
commercial standards for the delivery of certificates of title relative to the
time of payment.” (Id. at p. 1068.) It concluded, therefore, that it “cannot
resolve the conflict and determine as a matter of law whether [the defendant]
complied with commercial standards when it failed to demand title at or near
the time it paid,” and “the trial court must weigh the evidence and make a
finding of fact to resolve this issue.” (Ibid.) The appellate court therefore
remanded the matter to the trial court, noting that “commercial standards
relevant to the sale of vehicles from a wholesaler-merchant to a used car
dealer-merchant should be established by expert testimony.” (Id. at pp. 1068–
1069.) We do not interpret that statement as a holding that expert testimony
is always required to establish commercial reasonableness.11 Indeed, the
11
Brasher’s also did not address whether the disposition of
collateral was commercially reasonable under section 9610.
16
appellate court did not need to address whether expert testimony on the
commercial standards is always required, as the parties already had provided
conflicting expert testimony on the commercial standards. (Brasher’s, at
pp. 1068–1069.)
II.
ROBERT MOSIER
A. Additional Background
On February 14, 2022, the Manchester Defendants served a
demand for exchange of expert information under Code of Civil Procedure
section 2034.210 et seq., which stated the exchange shall occur on March 7,
2022. ICG did not serve its expert information on March 7, 2022.
On March 21, 2022, ICG filed a motion to continue the April 25,
2022 trial date. On April 4, 2022, the trial court (Judge Glenda Sanders) held
a hearing on ICG’s motion. The court’s tentative ruling noted, among other
things, discovery had closed on March 25, 2022, pursuant to Code of Civil
Procedure section 2024.020, subdivision (a); ICG “did not take any
depositions before the cutoff” and “opted not to designate any expert
witnesses in response to defendants’” demand; and ICG had “not shown good
cause to permit an ‘onslaught’ of sixteen depositions (including several expert
depositions) almost 6 years after this case was first filed.”12 The tentative
ruling also noted defendants were willing to continue the trial date, allow
four fact depositions and two expert depositions, and agree not to assert a
failure to bring the case to trial within five years. The court’s tentative ruling
“strongly encouraged [ICG] to accept Defendants’ conditional offer to continue
12
On the same day as the hearing on its motion to continue the
trial, ICG served an expert witness designation and declaration that listed
four expert witnesses: Higgins, Mosier, Laykin, and James Fotenos.
17
the trial to a date in July or August.” After hearing oral argument, the court
“grant[ed] the continuance of the trial, to a date to be determined, subject to a
stipulation and proposed order to be submitted by the parties, within 7 days,
consistent with the conditional stipulation to continue the trial date set forth
with the limited opposition.”
ICG and defendants thereafter entered into a written stipulation
on April 19, 2022, in which they agreed to continue the trial date to
September 12, 2022, and further agreed “limited discovery is re-opened in
this matter, and will be completed 30 days before trial.” The stipulation
stated ICG’s two experts would be Higgins and Laykin, ICG would take
depositions of four specified fact witnesses, and defendants would designate
two rebuttal experts. The trial court entered the stipulation as an order on
May 11, 2022.
On October 18, 2022—approximately six months after the
parties’ written stipulation—ICG filed an ex parte application seeking leave
to designate Mosier as an expert witness instead of Laykin. Judge Sanders
denied ICG’s application two days later. Among other things, the court noted
ICG “appears to overlook the fact that it never designated any experts
pursuant to the code,” and ICG “fails to explain why this motion could not
have been brought several weeks earlier when the need for a change in expert
strategy apparently manifested itself.” The court found ICG had not met its
“burden of showing irreparable harm, immediate danger, or any other
statutory basis for granting ex parte relief.” And it further found ICG “did not
engage in a timely exchange of expert witness information, and has not
provided any other basis upon which this court should amend or vacate its
May 11, 2022 [o]rder.”
18
B. Analysis
ICG argues the trial court erred by refusing to allow ICG to
substitute Mosier as one of its two expert witnesses so that he could have
testified at trial about commercial reasonableness. ICG’s argument is
unavailing.
As an initial matter, ICG forfeited this argument by failing to
provide developed argument in its opening brief on appeal. In its opening
brief, ICG states, “[o]n April 4, 2022, ICG initially designated four experts,”
including Mosier, “[b]ut the trial court limited ICG to just two expert
witnesses.” ICG’s opening brief, however, does not mention that ICG had
failed to exchange expert information under the Code of Civil Procedure prior
to the discovery cutoff. Although the opening brief states the court limited
ICG to two expert witnesses, it also fails to mention that the limitation
occurred after ICG had missed the discovery cutoff and sought to continue
the trial date. And ICG’s opening brief fails to mention that ICG had
stipulated in writing to limit its expert witnesses to Higgins and Laykin. By
failing to adequately address the procedural context and reasoning for the
court’s order in its opening brief, ICG forfeited this argument. (See County of
Los Angeles v. Niblett (2025) 116 Cal.App.5th 454, 475 [concluding the
appellant forfeited a claim of error “by failing to develop adequately that
contention in his opening brief” and “cannot salvage this claim of error by
offering new arguments supporting it in his reply”].)
In any event, the trial court did not abuse its discretion in
denying ICG’s ex parte application. (See People ex rel. Allstate Ins. Co. v. Suh
(2019) 37 Cal.App.5th 253, 257 [“We review a trial court’s ruling on an ex
parte application for abuse of discretion”].) As discussed, ICG failed to
designate Mosier as an expert prior to the discovery cutoff, and it was only
19
after ICG moved to continue the trial date that the court ordered limited
discovery based on the parties’ stipulation. At that time, ICG could have
designated Mosier as one of its two experts, but it chose not to. Instead, ICG
stipulated that its two experts would be Higgins and Laykin. It was not until
six months later that ICG filed its ex parte application to replace Laykin with
Mosier. We find no abuse of discretion under these circumstances.
ICG asserts “Mosier had rendered his opinion in January 2017,”13
“[t]he content of his opinion had been known to MFG for over five years,” and
the trial court’s preclusion of Mosier’s testimony “occurred 18 months before
the trial commenced.” According to ICG, “MFG would have been neither
surprised nor prejudiced by allowing . . . Mosier to testify as an expert
witness.” ICG’s arguments do not demonstrate the trial court abused its
discretion given the circumstances discussed above. Moreover, the court
found fault with the timing of ICG’s motion to substitute Mosier, noting ICG
“fails to explain why this motion could not have been brought several weeks
earlier when the need for a change in expert strategy apparently manifested
itself.” We presume the court rejected ICG’s argument that the Manchester
Defendants would not be prejudiced by ICG’s proposed switch in its experts,
and we conclude it was not an abuse of discretion for the court to determine
13
ICG asserts, “[i]n the early stages of this litigation, ICG
obtained the written declaration by Robert Mosier that the foreclosure sale
did not comply with the requirements of” section 9610, subdivision (b), citing
to a report that appears to have been filed in January 2017. Although ICG’s
opening brief on appeal does not provide further context for why that
declaration was filed, ICG’s reply brief suggests shareholders who had
initially filed the complaint as a derivative action submitted Mosier’s
declaration in opposition to Manchester’s bond motion. ICG does not contend
that early filing constitutes an adequate expert designation of Mosier under
section 2034.210 et seq. of the Code of Civil Procedure.
20
the Manchester Defendants were entitled to rely, in preparing their defense,
on ICG’s decision not to choose Mosier as one of its two expert witnesses.
In its reply brief on appeal, ICG argues the trial court was
required to grant leave under Code of Civil Procedure section 2034.720 and
excluding Mosier’s expert testimony was not justified under Code of Civil
Procedure section 2034.300. ICG waived these arguments by failing to raise
them in its opening brief. (See Dieckmeyer v. Redevelopment Agency of
Huntington Beach (2005) 127 Cal.App.4th 248, 260 [“An appellant’s failure to
raise an argument in its opening brief waives the issue on appeal”].)
Relying on Kline v. Zimmer, Inc. (2022) 79 Cal.App.5th 123, ICG
asserts “[t]he trial court’s categorical exclusion of ICG’s expert testimony on a
central issue, which was beyond the experience of laypeople, deprived ICG of
a fair trial and therefore constitutes structural error.”14 As discussed, ICG
failed to timely designate any experts pursuant to the Code of Civil
Procedure, and even after it was permitted to designate two experts as part of
a stipulation to continue the trial date and reopen limited discovery, it still
chose not to designate Mosier. ICG has not established it was denied a fair
trial and due process under these circumstances.
III.
JURY INSTRUCTIONS
A. Legal Principles
“‘“A party is entitled upon request to correct, nonargumentative
instructions on every theory of the case advanced by him which is supported
by substantial evidence.” [Citation.]’ [Citation.] ‘[T]he duty of the court is
14
As explained above, we reject the premise of this argument
that the commercial reasonableness of the disposition of ICG’s assets was
beyond the ken of lay jurors.
21
fully discharged if the instructions given by the court embrace all the points
of the law arising in the case. [Citations.] [¶] A party is not entitled to have
the jury instructed in any particular phraseology and may not complain on
the ground that his requested instructions are refused if the court correctly
gives the substance of the law applicable to the case. [Citation.]’ [Citations.]
We review the legal adequacy of jury instructions under the de novo standard
of review.” (Davis v. Honeywell Internat. Inc. (2016) 245 Cal.App.4th 477,
494–495.)
“‘“[T]here is no rule of automatic reversal or ‘inherent” prejudice
applicable to any category of civil instructional error, whether of commission
or omission. A judgment may not be reversed for instructional error in a civil
case “unless, after an examination of the entire cause, including the evidence,
the court shall be of the opinion that the error complained of has resulted in a
miscarriage of justice.’ [Citation.] . . . [¶] Instructional error in a civil case is
prejudicial ‘where it seems probable’ that the error ‘prejudicially affected the
verdict.’” [Citation.] “[A] ‘miscarriage of justice’ should be declared only when
the court, “after an examination of the entire cause, including the evidence,”
is of the “opinion” that it is reasonably probable that a result more favorable
to the appealing party would have been reached in the absence of the error.”’”
(Green v. Healthcare Services, Inc. (2021) 68 Cal.App.5th 407, 415.)
“‘Under the doctrine of invited error, when a party by its own
conduct induces the commission of error, it may not claim on appeal that the
judgment should be reversed because of that error.’” (Transport Ins. Co. v.
TIG Ins. Co. (2012) 202 Cal.App.4th 984, 1000.) “It has been said that the
invited error doctrine ‘applies “with particular force in the area of jury
instructions. . . .”’ [citation], and numerous cases have held that a party who
requests, or acquiesces in, a particular jury instruction cannot appeal the
22
giving of that instruction.” (Ibid.; see also Davis v. Harano (2022)
79 Cal.App.5th 688, 692 [noting “[c]ounsel for Davis and Harano jointly
submitted the instructions and the special verdict form” and “Davis cannot
now argue these instructions or this verdict form are cause for reversal”].)
The appellant “carries the burden of presenting a sufficient record to
establish that the claimed instructional errors were not invited or waived.”
(Green v. Healthcare Services, Inc., supra, 68 Cal.App.5th at p. 420.)
B. Jury Instruction Nos. 2, 5, 10, and 11
ICG argues the trial court erred by failing to give what ICG
refers to as jury instruction Nos. 2, 5, 10, and 11, which ICG claims it
requested. As support for its assertion that it requested instruction No. 2,
ICG cites the proposed jury instructions that it filed on February 21, 2024. As
support for its assertion that it requested instruction Nos. 5, 10, and 11, ICG
cites its proposed special jury instructions regarding the California UCC that
it filed on March 19, 2024.
In its opening brief on appeal, ICG does not include any record
citation showing where the trial court ruled on whether to provide those four
jury instructions, and it fails to mention that it later submitted amended
proposed jury instructions. In fact, the record shows the parties subsequently
filed several versions of joint proposed jury instructions, including joint
proposed amended jury instructions on April 29, 2024, and joint proposed
second amended jury instructions on April 30, 2024. ICG also separately filed
amended proposed jury instructions on April 29, 2024, which included its
proposed special jury instructions regarding the California UCC. The court
and parties discussed jury instructions extensively on April 30, 2024.
Significantly, the jury instruction Nos. 2, 5, 10, and 11 that were
included in ICG’s initial proposed jury instructions filed before trial were not
23
included in the first or second amended proposed joint jury instructions or in
ICG’s separate proposed jury instructions on April 29. ICG cites nothing in
the record indicating the trial court rejected those four initial jury
instructions before ICG removed them from the amended joint proposed jury
instructions.15 ICG cannot claim on appeal the court erred by not giving
instructions that ICG initially requested but ultimately chose to withdraw
before the court settled the instructions.
C. Jury Instruction No. 6008
ICG argues the trial court erred by giving jury instruction No.
6008, which provided: “A disposition of collateral is conducted in a
commercially reasonable manner if it is made in conformity with reasonable
commercial practices among dealers in the type of property that was the
subject of the disposition. [¶] However, this method of disposition is neither
required nor exclusive.” ICG appears to be arguing that the last sentence is
misleading because it eliminates the requirement that a disposition be
conducted in a commercially reasonable manner.
ICG’s argument again fails to address important context
regarding this jury instruction. ICG’s April 29, 2024 proposed amended jury
instructions included an instruction with nearly the identical first sentence.16
At the hearing on April 30, 2024, the trial court and parties discussed this
jury instruction. The Manchester Defendants’ counsel argued the proposed
15
In their respondent’s brief, the Manchester Defendants
asserted “the record affirmatively establishes that these instructions were
not included in ICG’s proposed set of jury instructions filed with the court on
April 29, 2024—the day before the jury-instruction conference took place.”
ICG’s reply brief did not address those filings.
16
ICG’s proposed instruction used “subject of the foreclosure sale”
instead of “subject of the disposition” at the conclusion of the first sentence.
24
instruction could be confusing because it provided a method of proving
commercial reasonableness but it was not a required method. ICG’s counsel
argued the statutory subdivision reflected in this instruction is the only one
that could possibly be relevant here, but he also noted there is a “comment to
the Code that says this is not necessarily the only way to prove commercial
reasonableness.” The court then asked, if the proposed instruction is
included, “don’t we also need to include a sentence from the comment?” ICG’s
counsel stated he “would not be opposed to that,” and he thought “it is
important that the UCC’s definition of commercial reasonableness be given
with the addition of the comment.” There was then further discussion about
what the last sentence should say, which included the following discussion:
ICG’s counsel: “Well, if I may, your Honor, I mean the title of
9627 is Determination of Whether Conduct was Commercially Reasonable. To
me it’s clear that legislator [sic] was determining—was providing standards
for how to determine that. So I don’t have the comment in front of me in my
printout. [¶] Yes. So if we just included some version of that last sentence of
comment three, I think we would be—none of the specific methods of
disposition specified in Subsection B is required or exclusive.”
Trial court: “Well, I think you need to modify that. I think what
you need to say is you need to say that this—this instruction is proposed as
only discussing one. So you need to say something like, ‘This method of
disposition is neither required nor exclusive’; something to that effect.”
ICG’s counsel: “Yes. I think we could come up with that
sentence.”
Under these circumstances, if there was error in the instruction,
ICG invited it. At the hearing, ICG’s counsel agreed to add language that the
method described in jury instruction No. 6008 was neither required nor
25
exclusive to establish commercial reasonableness. Notably, although the
Manchester Defendants’ respondent’s brief argued ICG cannot establish any
error “[h]aving invited and agreed to the language it now challenges,” ICG’s
reply brief is silent on whether it invited any error.
In any event, the instruction was not misleading or erroneous, as
ICG now claims. The instruction identified one method of showing the
disposition of collateral was made in a commercially reasonable manner.
(§ 9627, subd. (b)(3).) It then correctly stated that method was neither
required nor exclusive. Indeed, in its reply brief, ICG agrees it “has never
claimed that [section 9627, subdivision (b)(3)] is exclusive.” To the extent ICG
is arguing the last sentence could be read as suggesting there is no
commercial reasonableness requirement, that is not a plausible reading of
the jury instruction.17
D. Jury Instruction No. 6009
ICG argues the trial court erred by giving jury instruction
No. 6009, which provided: “A secured party may purchase collateral at a
public disposition. [¶] A ‘public disposition’ is one at which the price is
determined after the public has had a meaningful opportunity for competitive
bidding. ‘Meaningful opportunity’ is meant to imply that some form of
advertisement or public notice must precede the sale (or other disposition)
and that the public must have access to the sale (disposition).”
We conclude the trial court did not err by providing this jury
instruction. This jury instruction accurately states that a secured party may
purchase collateral at a public disposition. (§ 9610, subd. (c)(1).) It then
17
A separate jury instruction stated, “[e]very aspect of a
disposition of collateral, including the method, manner, time, place, and other
terms, must be commercially reasonable.”
26
provides a definition for public disposition, which comes from an Assembly
Committee comment to section 9610. (Assem. Com. Com., 23C pt. 2 West’s
Ann. Cal. U. Com. Code (2026 ed.) foll. § 9610, com. 7, p. 86.) ICG appears to
argue this comment is erroneous because its use of the word “or” in the
phrase “advertisement or public notice” suggests that advertising and notice
are not both required for commercial reasonableness. ICG’s argument is
unavailing because the sentence discussing “or” defines a public disposition,
not commercial reasonableness. ICG also claims that “[i]ncluding this
comment out of context when no dispute about a private sale existed is
misleading and false.” Again, this instruction is not misleading or false; it
accurately states a secured party may purchase collateral at a public
disposition and defines what constitutes a public disposition.
IV.
SUMMARY ADJUDICATION
A. Legal Principles
A party may move for summary judgment or, alternatively,
summary adjudication. (Code Civ. Proc., § 437c, subds. (a) & (f).) “‘A
summary adjudication motion is subject to the same rules and procedures as
a summary judgment motion. Both are reviewed de novo.’” (Case v. State
Farm Mutual Automobile Ins. Co., Inc. (2018) 30 Cal.App.5th 397, 401.)
“‘[T]he party moving for summary judgment bears an initial burden of
production to make a prima facie showing of the nonexistence of any triable
issue of material fact.’ [Citation.] ‘A prima facie showing is one that is
sufficient to support the position of the party in question.’ [Citation.] A
defendant moving for summary judgment may satisfy the initial burden
either by producing evidence of a complete defense or by showing the
plaintiff’s inability to establish a required element of the case.” (Blaylock v.
27
DMP 250 Newport Center, LLC (2023) 92 Cal.App.5th 863, 869.) “If a moving
defendant makes the necessary initial showing, the burden of production
shifts to the plaintiff to make a prima facie showing of the existence of a
triable issue of material fact.” (Ibid.)
“In evaluating the summary judgment motion and opposition, the
trial court ‘must consider all of the evidence and all of the inferences drawn
therefrom.’ [Citation.] The moving party’s evidence is strictly construed,
while the opponent’s is liberally construed. [Citation.] All reasonable
inferences must be drawn in favor of the opposing party and ‘summary
judgment cannot be granted when the facts are susceptible of more than one
reasonable inference . . . .’” (Blaylock v. DMP 250 Newport Center, LLP,
supra, 92 Cal.App.5th at p. 870.) “In reassessing the merits of the motion, we
‘consider only the facts properly before the trial court at the time it ruled on
the motion.’” (Haney v. Aramark Uniform Services, Inc. (2004)
121 Cal.App.4th 623, 631.) “‘We are not limited by the trial court’s reasons;
even if summary judgment was granted on an incorrect basis, we must affirm
if it would have been proper on another ground.’” (Blaylock, at p. 870.)
“Although we independently assess the grant of summary
judgment, our review is governed by a fundamental principle of appellate
procedure, namely, that ‘“[a] judgment or order of the lower court is
presumed correct,”’ and thus, ‘“error must be affirmatively shown.”’
[Citations.] Under this principle, [the appellant] bears the burden of
establishing error on appeal, even though [the respondent] had the burden of
proving its right to summary judgment before the trial court. [Citation.] For
this reason, our review is limited to contentions adequately raised in [the
appellant’s] briefs.” (Case v. State Farm Mutual Automobile Ins. Co., Inc.,
supra, 30 Cal.App.5th at pp. 401–402.)
28
Additionally, “[t]he pleadings play a key role in a summary
judgment motion and ‘“‘set the boundaries of the issues to be resolved at
summary judgment.’”’ [Citation.] ‘[T]he scope of the issues to be properly
addressed in [a] summary judgment motion’ is generally ‘limited to the
claims framed by the pleadings. [Citation.] A moving party seeking summary
judgment or adjudication is not required to go beyond the allegations of the
pleading, with respect to new theories that could have been pled, but for
which no motion to amend or supplement the pleading was brought, prior to
the hearing on the dispositive motion.’” (Jacobs v. Coldwell Banker
Residential Brokerage Co. (2017) 14 Cal.App.5th 438, 444.)
B. Cause of Action for Usury and Loan Sharking
“Article XV, section 1, of the California Constitution sets forth
California’s prohibition of usury.” (Stoneridge Parkway Partners, LLC v. MW
Housing Partners III, L.P. (2007) 153 Cal.App.4th 1373, 1379.)18 The
maximum rate that a lender can charge on a non-personal loan or
forbearance is the higher of 10 percent or 5 percent plus the rate established
by the Federal Reserve Bank of San Francisco on certain dates. (Cal. Const.,
art. XV, § 1; see also Stoneridge Parkway Partners, LLC, at p. 1379.)19 “The
essential elements of usury are: (1) The transaction must be a loan or
forbearance; (2) the interest to be paid must exceed the statutory maximum;
18
“California’s usury proscription is also set forth in a statute, an
initiative measure that has not been codified. [Citation.] This statute remains
in full force to the extent it does not conflict with the Constitution.” (Ghirardo
v. Antonioli (1994) 8 Cal.4th 791, 798, fn. 2.)
19
No party argues the maximum rate of 5 percent plus the rate
established by the Federal Reserve Bank of San Francisco is relevant here.
29
(3) the loan and interest must be absolutely repayable by the borrower; and
(4) the lender must have a willful intent to enter into a usurious transaction.”
(Ghirardo v. Antonioli, supra, 8 Cal.4th at p. 798.)20
Here, Judge Wilson found the Manchester Defendants met their
initial burden on summary adjudication because the Loan Agreement, First
Amendment, Second Amendment, and Third Amendment provide for an
interest rate of 10 percent per annum. The court further found the stock
warrants should not be factored into the analysis because the “Manchester
Defendants present[ed] evidence that there was no consistent and reliable
market for sales of [ICG’s] unlisted stock since it was not publicly traded, the
future sale of the stock was speculative and the value was not reasonably
certain.” The court stated ICG’s opposition, “does not dispute that the Loan
and amendments provide for an interest rate of 10% per annum. Nor does
[ICG] dispute that the warrants should not be included in the calculation of
interest.” Instead, the court noted ICG argued the true interest rate was
higher than 10 percent because the First Amendment included an increase in
the interest rate to 15 percent upon default and an amendment fee of
$100,000. The court, however, rejected that argument because those
allegations were not made in the seventh amended complaint and “unpled
claims or theories are insufficient to overcome summary adjudication.” The
court also rejected ICG’s attempt to create a triable issue of material fact by
arguing that ICG projected the cloverleaf technology to generate revenue of
more than $200 million for three years because “that is mere speculation and
20
ICG does not argue on appeal that loan sharking differs from
usury.
30
does not demonstrate that there was a marketplace for its stock or that its
stock could be sold and its value was reasonably ascertainable.”
On appeal, ICG does not dispute that a 10 percent interest rate is
not usurious. ICG, however, argues “[t]he trial court erroneously adopted a
per se rule that warrants to purchase stock may not be considered in
determining whether a loan is usurious.” The argument is unpersuasive for
several reasons. As an initial matter, the court did not adopt a per se rule as
ICG claims. Instead, the court addressed the evidence concerning the specific
stock warrants at issue here, concluding they should not be factored into the
analysis of the interest rate for the reasons it articulated. Notably, the court
found ICG did not “dispute that the warrants should not be included in the
calculation of interest.”
Moreover, ICG has not demonstrated the trial court erred by not
factoring the warrants into calculating the interest rate. ICG has failed to
cite sufficient evidence for its assertion that the warrants had value. (See
Sandell, Inc. v. Bailey (1963) 212 Cal.App.2d 920, 931–934 [concluding trial
court properly found stock options had no value at the time they were given
and were not considered in assessing a usury claim].) ICG argues that “[a]t
trial, ICG’s expert Mark Higgins gave his opinion that the common shares
were worth $0.238 per share. [Citation.] Thus, the warrants had an
immediate value of $0.236 per warrant.” ICG’s argument is unavailing
because it relies on testimony presented at trial, not evidence that it provided
in its opposition to summary judgment. (See Lewis v. City of Benicia (2014)
224 Cal.App.4th 1519, 1524, fn. 4 [stating, in review of summary judgment
rulings, the court considers “only the evidence submitted to the trial court
with the parties’ summary judgment papers” and not “evidence presented at
the subsequent trial or in connection with other proceedings in the case”].)
31
ICG also contends it “cited evidence that ICG had great value; in 2015 ICG
projected revenue over three years exceeding $200,000,000.” We agree with
the trial court that a purported projection by ICG is speculative and
insufficient to create a triable issue of material fact as to the value of the
warrants. (See Eng v. Opperman (2025) 117 Cal.App.5th 354, 376
[“opposition cannot be based on ‘speculation, imagination, guesswork, or mere
possibilities’”].)
ICG also argues the trial court erred by finding ICG’s reliance on
the amendment fee and default interest rate were unpled theories. We agree
with the court’s rejection of these arguments. Although the seventh amended
complaint includes general allegations about the loan and amendments being
usurious, a fair reading of the pleading does not suggest the usury claim was
based on the amendment fee and default interest rate; instead, the seventh
amended complaint alleged the interest rate was usurious because of the 10
percent per annum rate plus the warrants. (See Jacobs v. Coldwell Banker
Residential Brokerage Co., supra, 14 Cal.App.5th at p. 444 [“a fair reading of
the complaint’s allegations does not suggest a negligence claim based on the
condition of the empty pool as opposed to the condition of the diving board”].)
For example, the seventh amended complaint alleges: “MFG renewed the
loan on October 28, 2014, at a usurious interest rate of 10% per annum and
the grant by ICG of an additional 400,000 warrants to purchase common
stock of MFG for $0.01 per share. The 10% per annum interest and the
warrants constituted consideration for the loan in excess of 10% per annum.
The total consideration exceeded the maximum legal interest rate of 10% per
annum under California law. Under the note and the loan agreement, both
the principal and the interest, including the warrants, were absolutely
repayable.” That allegation plainly relies on the interest rate purportedly
32
being usurious because of the 10 percent per annum interest rate plus the
warrants. It does not allege the amendment fee and default interest rate
made the loan usurious. Indeed, ICG concedes “the $100,000 extension fee
and the default interest rate of 15% were not mentioned in the complaint.”21
ICG also argues “[t]he trial court erred in refusing to grant ICG
leave to amend the complaint to allege additional facts to support the fourth
cause of action for usury.” ICG, however, does not argue it asked the court for
leave to amend the complaint either before or at the summary adjudication
hearing. ICG appears to be arguing Judge McCormick erred by not granting
its motion to conform the pleadings to add the usury claim after testimony
had concluded at trial. ICG forfeited that argument, however, by failing to
assert developed argument with applicable authority in its opening brief on
appeal. ICG’s opening brief does not address the court’s reasoning that ICG’s
request was an untimely motion to reconsider the summary adjudication
order and ICG did not demonstrate why allegedly new facts could not have
been presented earlier. Instead, ICG’s opening brief relies only on inapposite
cases discussing whether leave to amend should be granted in the context of
a demurrer. In any event, the court did not abuse its discretion in denying
the motion to conform the pleadings to add the usury claim that ICG made
21
ICG argues its complaint only needed to allege ultimate facts.
(See C.A. v. William S. Hart Union High School (2012) 53 Cal.4th 861, 872
[“To survive a demurrer, the complaint need only allege facts sufficient to
state a cause of action; each evidentiary fact that might eventually form part
of the plaintiff’s proof need not be alleged”]; Prue v. Brady Co./San Diego,
Inc. (2015) 242 Cal.App.4th 1367, 1376 [“a complaint ‘is adequate so long as it
apprises the defendant of the factual basis for the claim’”].) But as discussed,
a fair reading of the seventh amended complaint does not suggest the usury
claim was based on the amendment fee and default interest rate.
33
after the close of testimony, particularly given the prejudice to the
Manchester Defendants.
C. Cause of Action Against Manchester for Breach of Fiduciary Duty
“‘The elements of a cause of action for breach of fiduciary duty
are: (1) existence of a fiduciary duty; (2) breach of the fiduciary duty; and
(3) damage proximately caused by the breach.’” (Kaushansky v. Stonecroft
Attorneys, APC (2025) 109 Cal.App.5th 788, 805.)
Here, Judge Wilson found the “Manchester Defendants presented
sufficient evidence to satisfy their initial burden of showing Manchester did
not owe any fiduciary [duty] and that he did not breach any fiduciary duty to
[ICG].” The court explained, among other things, that “Manchester was not a
majority or controlling shareholder”; he “was a Board member of [ICG] from
July 22, 2015 to November 10, 2015 but was never an officer”; and “contrary
to [ICG’s] allegations, Manchester did not owe any fiduciary duties to [ICG]
at the time the Loan, the First Amendment, the Second Amendment or the
Third Amendment were negotiated, or when the Preferred Stock agreement
was negotiated.” The court also noted “Manchester represents that he
recused himself and did not participate in any Board deliberations regarding
the $2 million loan between MFG and [ICG], preferred stock, MFG,
restructuring [ICG’s] debt, whether to seek outside financing, or whether to
file for bankruptcy.”
On appeal, ICG contends the trial court erred because
“Manchester was, in fact, a director at the time the Third Amendment to the
Loan Agreement and the Preferred Stock Purchase Agreement were executed
as required directly by the Preferred Stock Purchase Agreement.” To the
extent ICG is attempting to now argue Manchester became a board member
prior to the closing of the Preferred Stock Purchase Agreement and Third
34
Amendment, ICG does not cite any evidence it submitted to the trial court as
part of its opposition to the summary judgment motion supporting that
assertion.22 Indeed, ICG did not dispute in the trial court that “Manchester
was appointed to the board on July 22, 2015, at the time of MFG’s purchase
of 2,800,000 shares of preferred.” ICG provides no developed argument with
citation to applicable authority showing how Manchester could have breached
a fiduciary duty in connection with the Loan Agreement and amendments if
he did not become a board member until the closing of the Preferred Stock
Purchase Agreement.
In its reply brief on appeal, ICG cites Corporations Code section
310 and argues Manchester failed to demonstrate the Preferred Stock
Purchase Agreement and Third Amendment met the requirements of that
statute. ICG forfeited this argument by raising it for the first time in its reply
brief.
ICG asserts its seventh amended complaint “alleges that
Manchester in October 2015, while still a director of ICG, breached his duty
to ICG by promising he would ‘work out’ the debt owed by ICG to MFG,
including an extension of time, although at the time he was planning to use
his position to seize control of the assets of ICG.” ICG’s only record citation
22
In its opening brief on appeal, ICG cites the Preferred Stock
Purchase Agreement, which states “[t]he obligations of Purchaser to purchase
Shares at the Initial Closing or any subsequent Closing are subject to the
fulfillment, on or before such Closing, of” certain enumerated conditions,
including: “As of the Initial Closing, the authorized size of the Board of
Directors shall be four (4), and the Board of Directors shall be comprised of
Kevin B. Howard, Kurtis Van Horn, Jr., Gordon Davidson and Douglas F.
Manchester.” That does not establish Manchester was a board member prior
to the closing of the Preferred Stock Purchase Agreement and Third
Amendment.
35
for this assertion is to its seventh amended complaint, which is insufficient.
(See Gabrielle A. v. County of Orange (2017) 10 Cal.App.5th 1268, 1282 [“To
meet the burden of a prima facie case, the litigant may not rely on mere
‘allegations or denials of [the] pleadings’”].) Similarly, ICG argues that
“Manchester continued as a director of ICG until November 10, 2015, and
that his fiduciary duty continued subsequent to his resignation for as long as
the consequences of his actions prior to resigning continued to adversely
affect or have an impact on ICG.” Again, however, ICG cites only its seventh
amended complaint for this assertion. Moreover, ICG provides no developed
argument with citations to applicable authority and the record demonstrating
how Manchester breached a fiduciary duty after he resigned from the board.23
ICG argues in its reply brief that “Manchester breached his duty
of good faith and to act in the best interests of ICG by using the insider
information he gained as a director to plan for and carry out the foreclosure
sale.” Again, ICG forfeited this argument by not making it in its opening
brief. In any event, the argument fails because ICG refers to allegations in its
complaint but does not include record citations to the evidence it submitted in
opposition to summary adjudication on this point.
23
ICG asserts the trial court erred by stating ICG “gave an
expansive general release in favor of MFG and its shareholders of any and all
claims that may arise in any way out of or are connected to actions or
omissions with respect to the Loan and Note, among other things.” ICG
appears to contend that a release cannot apply to its breach of fiduciary duty
claim under Civil Code section 1668. We need not resolve that issue because
we are not relying on the release.
36
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs
on appeal.
GOODING, J.
WE CONCUR:
DELANEY, ACTING P. J.
SCHWARM, J.*
*Judge of the Orange County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
37
