IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (El Dorado)
July 11, 2011
FURLONG ENTERPRISES, INC. ET AL., PLAINTIFFS AND RESPONDENTS,
DAVID VAN BEBBER ET AL., DEFENDANTS AND APPELLANTS.
(Super. Ct. No. PC20070696)
The opinion of the court was delivered by: Duarte , J.
Furlong Enterprises v. Van Bebber
NOT TO BE PUBLISHED
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
After family members commingled business and personal loans for several years, a divorce severed family ties, eventually leading to this lawsuit. The trial court ultimately entered judgment for plaintiffs based on breach of an oral contract. Before doing so, the trial court suggested a theory of equitable estoppel, which operated in this case to preclude defendants from successfully asserting the two-year statute of limitations against oral contract claims. (Code Civ. Proc., § 339, subd. 1.)
On appeal, defendants contend in part that the trial court erred in declining to sustain their statute of limitations defense because the complaint did not plead equitable estoppel, and no substantial evidence supports equitable estoppel. We agree and shall reverse.
FACTUAL AND PROCEDURAL BACKGROUND
The record on appeal is incomplete and references events not fully explained by the parties. Furlong Enterprises, Inc. (Furlong) and Julie Siebert (Julie)*fn1 were the plaintiffs. The parties generally treated Julie (the president of Furlong) as the sole plaintiff. There were three defendants. One was Julie's sister, Victoria Van Bebber (Victoria), who was at odds with the other two defendants. They were David Van Bebber (David), with whom Victoria was engaged in a protracted divorce proceeding, and Van Bebber, Inc. (Van Bebber), a closely-held family corporation.
On November 26, 2007, Julie sued David, Victoria, and Van Bebber, alleging breach of an oral contract and common counts.*fn2 The complaint alleged on or about January 1, 2003, Julie lent money to and paid bills on behalf of defendants, for a promise "to repay upon demand[.]" An account was stated in 2003, and Victoria "acknowledged the accuracy of the account stated at a time when she was married to and cohabiting with David . . . and was an officer of Van Bebber[.]" Repayment was demanded within the prior two years, but no repayment had been made. The complaint sought damages of $200,000 plus interest from January 1, 2004.
David and Van Bebber generally denied the allegations, and raised affirmative defenses, including the two-year statute of limitations for oral contracts. Victoria's pro per answer conceded the debt.
A court trial began on January 26, 2009. In their trial briefs, David and Van Bebber argued Victoria was in the middle of a lengthy marital dissolution proceeding with David, and acted on behalf of her sister, Julie. David and Van Bebber also argued the suit was barred by the two-year statute of limitations for oral contracts. Julie relied on the four-year statute of limitations applicable to common counts, under which the time runs "from the date of the last entry." (Code Civ. Proc., § 337, subd. 2.)
David, called as an adverse witness, testified Victoria filed for divorce in October 2004. Van Bebber was a logging company, and David and Victoria were its officers and shareholders. Victoria was very involved in the financial aspects of the company before July 2005. In 2000 and 2001, Victoria and Julie prepared the corporate tax returns. In 2003, Van Bebber and David owed money to various creditors, and in November 2003 David sold the "shop property" to Julie for fair market value toward satisfying these debts.
David testified that, pursuant to an order in the divorce case, he took control of Van Bebber in July 2005. A balance sheet prepared for the 2005 corporate taxes showed a loan payable to Julie of $134,662.26, and the loan appears on the corporate tax returns for 2005 and 2007. David testified that he never agreed with the amounts claimed by Julie; however, he admitted that he signed the 2005 and 2007 corporate tax returns (showing the loan amount) under penalty of perjury. The loan was listed in a 2006 corporate appraisal prepared in connection with the divorce. A corporate balance sheet as of December 31, 2001, reflects a loan from Furlong of $87,906.27. David used the Van Bebber bank account and post office box for personal and business purposes.
After David testified, the parties learned Victoria's pro per answer, which apparently could not be located, had conceded liability. The trial court continued the trial to allow Victoria to consult with counsel. The next day, Victoria's family law attorney specially appeared and sought leave on Victoria's behalf to amend the complaint to raise the statute of limitations defense. The trial court continued the trial.
On April 17, 2009, Victoria filed an amended pro per answer, admitting all defendants "owe money to plaintiff" but raising the statute of limitations defense.
Trial resumed on August 10, 2009.
Julie testified she was the president of Furlong, which "operates Ice House Resort." From 2000 to 2004, she and Furlong loaned about $234,600 to defendants. She did not distinguish between the defendants because they commingled their funds. At the end of 2003, she mailed a statement dated December 31, 2003, which was never returned or contested. It was addressed to David, Victoria and Van Bebber, and stated in part: "Balance of monies loaned to business and/or personal as of the 31st of December, 2003. [¶] $234,233.85[.] [¶] This total is monies only. The funds were from both Furlong Enterprises and Julie Wentworth Siebert."
Julie identified a ledger reflecting the individual loans. It was missing the first page, which had been given to the defendants' accountant, in the presence of the defendants. Some loans were payments made to or on behalf of Van Bebber, such as for equipment, and some were made to or on behalf of personal obligations of David and Victoria, such as for house payments and repairs. Julie conceded the penultimate item, a check dated November 6, 2003 for $2,600, had likely been repaid on November 12, 2003, by a check from Van Bebber in the amount of $2,700, and conceded she had failed to note that payment. The last item, dated September 2004, was for a house appraisal, which Julie testified was obtained at Victoria's request, in contemplation of Victoria's divorce from David. Sometimes Julie did not list items if they were repaid immediately, but, except for the one mistake regarding the November 12, 2003 entry, she credited all money received to the loan arrearages. The top of the first remaining page in the ledger contained a notation indicating insurance payments for one year, and the next line reads "plus that amount on financial," which Julie testified referred to the amount on the December 31, 2001, Van Bebber corporate balance sheet. She added the notation to the ledger in 2005, at the request of Victoria's family law lawyer.
Julie testified Victoria usually asked Julie to make payments, but David was sometimes present. She was present in 2003 when David and Victoria spoke with two different bankruptcy lawyers. These meetings followed a meeting with "Mike Peterson" which both David and Victoria asked her to attend, where they discussed resolving the couple's financial problems. In 2003, she considered herself to be a creditor of Van Bebber.
Julie testified that in 2006, Victoria told Julie she would be repaid out of the divorce settlement. Discussions continued into 2007, when Julie was shown a proposed settlement. It would have assigned Julie's debt to Victoria, who would receive some offset from David. Julie testified: "Well, I was led to believe that it would be settled then and it would be repaid. You know . . . because David was supposed to give [Victoria] some money and stuff. [¶] And I was led to believe that it was going to settle in 2006, early part of 2007. I wasn't led to believe. That's what was being talked about, you know. [¶] Q. Okay. And did you rely on those conversations? [¶] A. Yeah, I think -- I think everybody did." Julie was given a proposed settlement, but did not sign it. The terms of the proposed settlement are not in the record.
Julie testified Victoria "always" said she would be repaid. This testimony was given in the course of Julie's explanation of how the oral contract was formed, as follows:
"Q. And as I understand it, your claim is that you had an oral agreement that you would loan the defendants money and they were supposed to pay you back on your demand; is that accurate?
"A. Well, I had hoped -- yeah, Vicki always said: We'll pay you back. We'll pay you back.
"And I had hoped that they would succeed in business and get their finances turned around.
"I mean, it is my sister. I would like to see them be successful. . . ."
After plaintiffs rested, defendants moved for judgment, based on the statute of limitations.
The next day, before the ruling on the motion for judgment, Julie testified she accompanied David and Victoria to meetings with their bankruptcy counsel in 2003, to try to resolve their financial problems.
The trial court denied the motion for judgment, tentatively finding Victoria had induced Julie not to press for repayment, as defendants "were scrambling around trying to work out some way, including bankruptcy or something else which would resolve their indebtedness," which included the debts that were the subject of the lawsuit. The trial court directed the parties to brief whether this tolled the statute of limitations. When David and Van Bebber objected that tolling had not been pled, Julie moved to amend the complaint to conform to proof. The trial court initially granted Julie's motion, observing "the testimony came in without objection as to the promise." After defense objection, the trial court directed the parties to brief the issue.
The parties, except Victoria, filed extensive posttrial briefs and objections, discussing both equitable tolling and equitable estoppel, and the trial court ultimately issued a statement of decision on April 30, 2010.
The trial court found from 2001 until 2003, Julie loaned defendants money for both corporate and family purposes, pursuant to an oral contract. The last payment made was on November 12, 2003, which the trial court found was the date of breach. The trial court found the two-year statute of limitations applicable to oral contracts applied but was equitably tolled "from November 2003 to the early part of 2007, when a settlement proposed through the [Van Bebber divorce case] was rejected by plaintiffs" and also found defendants were equitably estopped "to assert the statute of limitations as against plaintiffs until a promised settlement and payment in early 2007 fell apart[.]" According to the trial court, plaintiffs' reliance on settlement discussions and Victoria's statements Julie would be repaid was reasonable, in part because Victoria was Julie's sister and was an officer of Van Bebber. Victoria was an agent for David and Van Bebber regarding the loans, and the corporation ratified her acts by not disaffirming the loans. The trial court disbelieved David's testimony to the effect he did not know about the loans.
The trial court found defendants owed $227,307.74, but granted defendants credit for $7,300, for three items. The trial court found defendants jointly and severally liable in the amount of $220,007.74 plus interest.
David and Van Bebber timely filed this appeal on behalf of themselves, and purportedly on behalf of Victoria. (See Code Civ. Proc., § 371 [when spouses sued together, either may defend for both, if one "neglects to defend"].)
The original statement of decision, drafted by plaintiffs, in part found liability on the common counts theories. The trial court set aside the original statement of decision, finding it was issued prematurely. The parties have not provided transcripts of the hearings regarding the statement of decision, although court reporters were present. The final statement of decision, prepared by plaintiffs, does not mention common counts theories; and plaintiffs do not raise them in defense of the judgment. Accordingly, they have been abandoned. (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 701, p. 769 [waiver of points not urged]; 5 Cal.Jur.3d (2007) Appellate Review, § 610, p. 1158 ["failure to advance reasons in support of an order other than those stated in the order authorizes the court to assume that no other valid reasons exist"].)
The trial court found defendants were estopped*fn3 from relying on the statute of limitations for oral contracts due to settlement negotiations. We conclude that this finding was not supported by substantial evidence.
A. Substantial Evidence of Equitable Estoppel
The trial court found "plaintiffs held off suing because they were assured, prior to and during the [divorce discussions] that they would be repaid." Emphasizing testimony Victoria "always" said the debt would be repaid, the trial court found plaintiffs reasonably relied on defendants' conduct "given the repeated assurances by defendants that plaintiffs would be repaid and the close relationship between individual defendants and plaintiffs, particularly between" Julie and Victoria, who was Julie's sister and who handled Van Bebber's finances.
Whether equitable estoppel applies is a question of fact, unless the facts are undisputed. (See Sofranek v. County of Merced (2007) 146 Cal.App.4th 1238, 1251 (Sofranek).)
"[I]n examining the sufficiency of the evidence to support a questioned finding, an appellate court must accept as true all evidence tending to establish the correctness of the finding as made, taking into account, as well, all inferences which might reasonably have been thought by the trial court to lead to the same conclusion. Every substantial conflict in the testimony is, under the rule which has always prevailed in this court, to be resolved in favor of the finding." (Bancroft-Whitney Co. v. McHugh (1913) 166 Cal. 140, 142.)
Substantial evidence is evidence of "ponderable legal significance . . . reasonable in nature, credible, and of solid value" (Estate of Teed (1952) 112 Cal.App.2d 638, 644 (Teed), quoted with approval by People v. Johnson (1980) 26 Cal.3d 557, 576) and evidence that "'"reasonably inspires confidence"'" (People v. Raley (1992) 2 Cal.4th 870, 891 (Raley)) in a finding. An inference "'"may not be based on suspicion alone, or on imagination, speculation, supposition, surmise, conjecture, or guess work. [¶] . . . A finding of fact must be an inference drawn from evidence rather than . . . a mere speculation as to probabilities without evidence."'" (Raley, supra, 2 Cal.4th at p. 891.)
"'"Equitable estoppel . . . comes into play only after the limitations period has run and addresses . . . the circumstances in which a party will be estopped from asserting the statute of limitations as a defense to an admittedly untimely action because his conduct has induced another into forbearing suit within the applicable limitations period. [Equitable estoppel] is wholly independent of the limitations period itself and takes its life . . . from the equitable principle that no man [may] profit from his own wrongdoing in a court of justice."'" (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 383 (Lantzy).)
1. Nature of Misrepresentation
To show an estoppel generally, "'(1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.'" (Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 655 (Mills).)
But, as plaintiffs acknowledge, in the case of estoppel to interpose a statute of limitations, "'"'it is enough if the party has been induced to refrain from using such means or taking such action as lay in his power, by which he might have retrieved his position and saved himself from loss.' . . . '. . . Where the delay in commencing action is induced by the conduct of the defendant it cannot be availed of by him as a defense.'"'" (Lantzy, supra, 31 Cal.4th at p. 384.)
At the end of the passage just quoted, the California Supreme Court added the following footnote: "The defendant's statement or conduct must amount to a misrepresentation bearing on the necessity of bringing a timely suit; the defendant's mere denial of legal liability does not set up an estoppel." (Lantzy, supra, 31 Cal.4th at p. 384, fn. 18.)
It has long been the rule that equitable estoppel must be based on conduct inducing the plaintiff to refrain from suit. (See Carruth v. Fritch (1950) 36 Cal.2d 426, 433 [estoppel where defendant "induced the plaintiff to believe that a settlement of the claim could be had without the necessity of suit"]; Battuello v. Battuello (1998) 64 Cal.App.4th 842, 845, 848 [promise made during settlement negotiations induced plaintiff not to file suit or objection to probate petition]; Union Oil Co. of California v. Greka Energy Corp. (2008) 165 Cal.App.4th 129, 138 [defendant "urged the bonding company and Unocal to suspend legal actions" with a "promise to amend the contracts"]; Shaffer v. Debbas (1993) 17 Cal.App.4th 33, 43-44 [suit delayed by representations of repair]; cf. Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 686 [no facts alleged showing defendants "'actually and reasonably induced' the investors to forbear filing suit"].)
Plaintiffs contend defendants represented they would pay the debt and plaintiffs relied on those representations to forbear filing suit. We see no evidence in the record showing defendants implied there was no need for plaintiffs to file a lawsuit to preserve their rights, and no evidence plaintiffs withheld suit based on anything defendants did.
Plaintiffs were aware of the debts, as they had sought repayment by the invoice dated December 31, 2003. (See Javor v. Taggart (2002) 98 Cal.App.4th 795, 804 [no equitable estoppel, "Javor was not ignorant of the 'true' facts. Quite the opposite. From the very beginning, he was keenly aware of the wrong done to him"].) Although Julie testified she attended some meetings with defendants' bankruptcy counsel and later meetings with divorce counsel, she never testified any defendant told her not to sue to preserve her rights, or discouraged her from seeking legal counsel, nor can such facts reasonably be inferred from the scant testimony Julie gave about those discussions. While plaintiffs hoped the debts would be repaid without litigation, that hope did not make their forbearance reasonable. Plaintiffs knew defendants were in a financial plight, therefore prudence dictated suing promptly, to preserve the claim, rather than waiting. There was no testimony filing suit would have impaired the bankruptcy or divorce negotiations, therefore plaintiffs had no practical reason to delay suit, and doing so was dangerous absent an explicit agreement by defendants to waive the statute of limitations.
"Significantly, plaintiff does not allege that it was encouraged to forestall filing suit on this claim. Mere allegations that plaintiff believed that 'the check was in the mail' do not establish either ignorance of the true state of facts, or reasonable reliance by plaintiff to his detriment." (Lundeen Coatings Corp. v. Department of Water & Power (1991) 232 Cal.App.3d 816, 829 (Lundeen).)
Plaintiffs correctly point out "there is authority for the proposition that 'where the defendant makes representations to the effect that he will perform his contractual obligation, and the plaintiff, in reliance thereon, forbears to sue in time' an estoppel may arise." (Lundeen, supra, 232 Cal.App.3d at p. 830, fn. 7; see Langdon v. Langdon (1941) 47 Cal.App.2d 28, 30-31 [defendant induced plaintiff to continue working by promising a bonus, representing inability to pay until business improved].) But "[t]hese cases are distinguishable on the ground that the party claiming the estoppel could reasonably rely on the promises to pay or settle because such promises were the only information available to plaintiff." (Lundeen, supra, 232 Cal.App.3d at p. 830, fn. 7.) Here, plaintiffs knew of the unpaid debt and of defendants' financial condition, therefore in the absence of any evidence filing suit would have harmed a possible settlement, it was not reasonable to delay filing suit.
Nor does the timing of the various discussions support the trial court's finding of equitable estoppel.
Julie accompanied David and Victoria to meetings with bankruptcy lawyers in 2003, and the trial court found the date of breach was November 12, 2003. Even had Julie refrained from filing suit during discussions with the bankruptcy lawyers, four years separated the end of those discussions and the filing of the suit. "[A] plaintiff cannot rely on an estoppel if there is still ample time to take action within the statutory period after the circumstances inducing delay have ceased to operate." (Santee v. Santa Clara County Office of Education (1990) 220 Cal.App.3d 702, 716.) Where the "inducement ends prior to the expiration of the limitation period . . . with ample time remaining for the initiation of litigation, the elements for estoppel are no longer satisfied." (2 Corman, Limitation of Actions (1991) Tolling Affected by Defendant's Actions or Status, § 9.1, p. 30; see Snyder v. Boy Scouts of America, Inc. (1988) 205 Cal.App.3d 1318, 1324 ["any influence" defendant had on plaintiff terminated long before suit filed]; Lobrovich v. Georgison (1956) 144 Cal.App.2d 567, 573-574 (Lobrovich).)
Julie also accompanied Victoria and David to discussions with their divorce lawyers, who apparently proposed some type of settlement. Plaintiffs repeatedly state Julie "relied" on those discussions. But the record, although sparse on this settlement proposal, shows discussions began in the fall of 2006. By this time, oral contract claims were already time-barred. Therefore, those discussions did not induce plaintiffs to ignore the statute of limitations. Conduct supporting estoppel must occur before the statute runs. (See Aguilera v. Heiman (2009) 174 Cal.App.4th 590, 602-603; McGee Street Productions v. Workers' Comp. Appeals Bd. (2003) 108 Cal.App.4th 717, 726.)
Finally, the trial court emphasized that Victoria "always" told Julie she would be repaid. No specific dates were elicited regarding this broad assertion. First, as quoted earlier, that testimony, in context, referred to how the oral contract and series of loans came to be made. It did not, despite plaintiffs claims, address settling the debt. Second, a debtor's promise to pay does not of itself warrant an estoppel. (Lundeen, supra, 232 Cal.App.3d at p. 829.) Generally, "a mere promise by a defendant to pay, without more, even though relied upon the by plaintiffs," will not suffice, except "where the promise to pay has been made on condition that the plaintiff not sue." (See Annot., Estoppel--Statute of Limitations (1972) 44 A.L.R.3d 482, 488; Annot., Statute of Limitations--Negotiations (1971) 39 A.L.R.3d 127, 131 ["the mere conduct of settlement negotiations or discussions by a defendant with a plaintiff does not alone provide a basis for estopping the defendant"]; United States Casualty Co. v. Industrial Acci. Com. (1954) 122 Cal.App.2d 427, 433 ["a mere request for delay, in the absence of a promise or agreement not to plead" statute of limitations does not suffice]; Lobrovich, supra, 144 Cal.App.2d at p. 573 ["no more than an advice to explore the possibility of a settlement"].)
All we can reasonably infer from the evidence is plaintiffs--and, apparently, defendants--hoped the matter would be resolved amicably. But we cannot reasonably infer defendants' conduct induced plaintiffs not to file suit for over four years. Julie's testimony that Victoria "always" said she would be repaid is not evidence of "ponderable legal significance . . . reasonable in nature, credible, and of solid value" (Teed, supra, 112 Cal.App.2d at p. 644) showing conduct by defendants sufficient to induce plaintiffs to forbear from suit, such that they have lost the ability to interpose the statute of limitations defense.*fn4
Finally, we note plaintiffs assert an estoppel can be based on silence when there is a duty to speak, and they cite supporting authority. (See, e.g., Skulnick v. Roberts Express, Inc. (1992) 2 Cal.App.4th 884, 891; Elliano v. Assurance Co. of America (1970) 3 Cal.App.3d 446, 451; Dettamanti v. Lompoc Union School Dist. (1956) 143 Cal.App.2d 715, 721.) But plaintiffs do not explain what duty to speak was owed in this case, or by whom. We decline to make the argument for plaintiffs. (See Paterno v. State of California (1999) 74 Cal.App.4th 68, 106 (Paterno) ["An appellate court is not required to examine undeveloped claims, nor to make arguments for parties"].)
B. Amended Complaint
The parties disagree as to whether equitable estoppel must be pled in the complaint and whether defendants were required to object to evidence tending to show an estoppel. (See Sloan v. Hiatt (1966) 245 Cal.App.2d 926, 936 [where pleadings did not raise estoppel, "any objection was waived by the failure to
object" to admission of evidence of estoppel at trial].) Plaintiffs contend the trial court did not abuse its discretion in allowing them to amend the complaint. But it appears no amended complaint was ever filed.
If a complaint on its face shows an action would be barred by a statute of limitations, it must plead facts showing equitable estoppel. (Sofranek, supra, 146 Cal.App.4th at p. 1250; Service Employees Internat. Union v. Sacramento City Unified School Dist. (1984) 151 Cal.App.3d 705, 712; cf. Ateeq v. Najor (1993) 15 Cal.App.4th 1351, 1358 [otherwise, facts need not be pleaded]; Sloan, supra, 245 Cal.App.2d at pp. 933-935.)
The complaint, in pertinent part, alleged breach of an oral contract made on January 1, 2003. An oral contract is subject to a two-year statute of limitations. (Code Civ. Proc., § 339, subd. 1.) The complaint alleges demand for repayment was made within the past two years. Although the trial court found the date of breach was the date of the last payment, November 12, 2003, a cause of action for a loan payable on demand normally accrues when the loan is made, not when repayment is demanded. (See Miguel v. Miguel (1920) 184 Cal. 311; 314; Carrasco v. Greco Canning Co. (1943) 58 Cal.App.2d 673, 675-676.) Accordingly, the complaint, filed November 26, 2007, on its face shows the oral contract theory is barred by the two-year statute of limitations. Therefore equitable estoppel was required to be alleged and was never alleged, as the complaint was never amended. Thus there was no duty to object.*fn5
The judgment is reversed. Plaintiffs shall pay defendants' costs on appeal. (See Cal. Rules of Court, rule 8.278(a)(2).)
We concur: RAYE , P. J. BLEASE , J.