Opinion
E064600
08-24-2017
JON T. LE, Plaintiff and Respondent, v. ROBERT MAYHALL, Defendant and Appellant.
Steven W. Kerekes for Defendant and Appellant. Law Offices of Allan E. Perry and Allan E. Perry for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. CIVRS1103256) OPINION APPEAL from the Superior Court of San Bernardino County. Donald R. Alvarez, Judge. Affirmed in part; reversed in part. Steven W. Kerekes for Defendant and Appellant. Law Offices of Allan E. Perry and Allan E. Perry for Plaintiff and Respondent.
Plaintiff and respondent Jon T. Le sued defendant and appellant Robert Mayhall and RVM Capital, LLC (RVM) for breach of contract. Following a bench trial, the trial court found in favor of Le. The trial court found RVM was liable and Mayhall was personally liable. The trial court awarded Le $277,500 plus interest, for a total judgment of $475,475.47. Mayhall raises two issues on appeal. First, Mayhall contends the trial court erred by finding him to be personally liable. Second, Mayhall contends the trial court erred in calculating the damages. We reverse the judgment in part.
FACTUAL AND PROCEDURAL HISTORY
A. JOINT VENTURE AGREEMENT
In May 2007, Le and RVM entered into a joint venture agreement (the Agreement). The Agreement provided Le would give RVM $250,000, and RVM would invest the money in a high yield investment program. RVM promised to pay Le a monthly distribution of up to two percent. If the investment program failed, then Le would not receive a distribution, but the balance of his $250,000 investment would be returned to him.
The signature section of the Agreement reflects the following:
Date:
Signature: __________
Jon Le
Date:
Signature: __________
RVM Capital, LLC
Robert V. Mayhall
The dates are left blank in the Agreement. Le signed on the signature line above his name. Mayhall signed on the signature line above RVM's name.
B. PROMISSORY NOTE
In May 2007, in connection with the Agreement, Le and RVM executed a promissory note (the Note). The Note provided the $250,000 from Le was a loan, and that RVM promised to repay the loan to Le subject to the conditions in the Agreement. The Note reflected the interest rate on the loan was 10 percent. In the Note, RVM agreed to make interest payments of $2,500 per month for 12 months, beginning in June 2007.
Section eight of the Note provides, "If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety or endorser of this Note, is also obligated to keep all of the promises made in this Note. The Lender [(Le)] may enforce its rights under this Note against each person individually or against all Borrowers. The Lender may further enforce its rights under this Note against such individuals as in its sole discretion it deems appropriate, subject only to any limitations imposed upon it by appropriate statute."
The signature section of the Note reflects the following:
By: /s/_________
RVM Capital, LLC
Robert Mayhall
Mayhall signed on the signature line.
C. BREACH
RVM wired Le's money to Consultores Los Tres Americas (CLTA). In August, RVM went online to check its trading account. The website displayed an announcement reflecting the money in the account had been seized by the Department of Justice because CLTA was allegedly a Ponzi scheme. Le received a total of $3,287.50 from RVM. The money was given to Le in July via a check.
A Ponzi scheme is "an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors." (https://www.sec.gov/fast-answers/answersponzihtm.html, as of August 23, 2017.) --------
D. RULING
The trial court found RVM failed to make 11 of the 12 monthly payments and failed to return the $250,000. The court determined RVM and Mayhall owed Le $277,500 plus interest.
In the trial court's statement of decision, it wrote, "The Court has considered Defendant Mayhall's contention that he is not personally liable for breach of the subject agreements. Reference is made to the fact that while Mayhall signed both the Joint Venture agreement and Promissory Note, those documents were signed in his capacity as the managing member of the Limited Liability Company RVM Capital, LLC, and not individually. The problem here is that neither the Joint Venture Agreement nor Promissory Note reflects Mayhall's capacity as limited to that of managing member of the LLC. Neither agreement specifically limits his designation as signing on behalf of RVM as opposed to individually.
"Additionally, the Court finds it significant that Paragraph 8 of the Note generally provides that the lender ([Le]), may enforce its rights under the Note not only against any guarantor, surety or endorser of the Note, but against each person individually or against all borrowers. In addition to the foregoing, lender retains a separate and distinct contractual right to further enforce its rights under this Note against such individuals as in its sole discretion it deems appropriate subject to limitations, if any, imposed by statute.
"In the Court's view, the extreme breadth and scope of this language is sufficient to encompass personal liability as to Defendant Mayhall. This is more compelling given the express lack of a title designation on the agreements limiting Mayhall's capacity as a signatory to that of a managing member only and not as an individual." (Trial court added underlining to the language of the Note.)
DISCUSSION
A. PERSONAL LIABILITY
1. CONTENTION
Mayhall contends the trial court erred by finding he is personally liable for the breach of contract.
2. STANDARD OF REVIEW
"'The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the "mutual intention" of the parties. "Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. [Citation.] Such intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] The 'clear and explicit' meaning of these provisions, interpreted in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage' [citation], controls judicial interpretation.'" (E.M.M.I. Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470.) If a material term of the contract is ambiguous, then extrinsic evidence is admissible to aid in deciphering the parties' intent. (Wolf v. Walt Disney Pictures and Television (2008) 162 Cal.App.4th 1107, 1126.)
"We independently review the trial court's interpretation of a contract, including the resolution of any ambiguity, unless the interpretation depends on the trial court's resolution of factual questions concerning the credibility of extrinsic evidence." (Dowling v. Farmers Ins. Exchange (2012) 208 Cal.App.4th 685, 694; see also Civ. Code, § 1638.)
The trial court concluded Mayhall was personally liable because (1) Mayhall was an endorser of the Note; (2) the Note permitted Le to sue "such individuals"; and (3) the Agreement and Note did not specifically reflect Mayhall was acting in his capacity as the sole member of RVM. The trial court's findings are based upon its interpretation of the language in the Agreement and the Note—not upon extrinsic evidence.
Accordingly, we apply the de novo standard of review.
3. ENDORSER
We examine whether Mayhall was an endorser of the Note. Section eight of the Note provides, "If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a[n] endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a[n] endorser of this Note, is also obligated to keep all of the promises made in this Note. The Lender [(Le)] may enforce its rights under this Note against each person individually or against all Borrowers. The Lender may further enforce its rights under this Note against such individuals as in its sole discretion it deems appropriate, subject only to any limitations imposed upon it by appropriate statute."
An endorser is a type of surety. (Everts v. Matteson (1942) 21 Cal.2d 437, 446.) An endorser is liable upon an obligor's failure to pay because an endorser warrants the obligor is solvent or that the endorser will perform the obligor's obligations. (Lopez v. Puzina (1966) 239 Cal.App.2d 708, 714-715; Riggs v. Waldo (1852) 2 Cal. 485, 487-488.) An endorsement requires a signature on the back of the contract or, if there is not room, then on a page that is firmly affixed to the contract. (Com. Code, §§ 3204-3205; Lopez, at pp. 710-711.) To create a surety contract, the words of the contract must reflect an intention to create a suretyship. (Ingalls v. Bell (1941) 43 Cal.App.2d 356, 366.)
The Note does not contain language creating a surety relationship. The Note reflects RVM borrowed money from Le and RVM is to repay Le. The Note does not reflect Mayhall agreed to assume personal liability for RVM's unpaid debt. There is also not a second signature by Mayhall indicating he personally endorsed the Note. Rather, the Note has one signature by Mayhall creating the primary obligation for RVM under the Note. Because there is no language in the Note setting forth a suretyship, and there is not a second signature by Mayhall reflecting an endorsement, we conclude the trial court erred by finding Mayhall was personally liable as an endorser of the Note.
4. "SUCH INDIVIDUALS"
In the trial court's statement of decision, it quoted and underlined the following portions of section eight of the Note, "In addition to the foregoing, lender retains a separate and distinct contractual right to further enforce its rights under this Note against such individuals as in its sole discretion it deems appropriate subject to limitations, if any, imposed by statute."
We interpret the trial court's underlining of the foregoing words in section eight as meaning the trial court concluded Mayhall was liable in his personal capacity because Mayhall fell into the category of "such individuals." "Such individuals" is reference back to guarantors, sureties, and endorsers of the Note. As explained ante, Mayhall is not an endorser of the Note. Therefore, the "such individuals" language does not apply to Mayhall.
5. CAPACITY
We examine whether Mayhall was personally liable under the Agreement and Note (collectively, the Contract) because the Contract did not reflect Mayhall was acting in his official capacity as the sole member of RVM.
"Directors and officers are not personally liable on contracts signed by them for and on behalf of the corporation unless they purport to bind themselves individually." (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 595.) Where a contract is entered into on behalf of a corporation by its agent, the corporation is liable and the agent is not liable. (Barrett v. Hammer Builders, Inc. (1961) 195 Cal.App.2d 305, 317.) For example, where the signature block reads, "'Prodigal Builders, Inc. by Samuel Oschin,'" "[i]t is clear that Sam Oschin was contracting on behalf of Prodigal and not for himself." (Ibid.)
The Agreement provides, "This Joint Venture Agreement is made on May 23, 2007 between RVM Capital LLC (hereinafter 'RVM') and Jon Le (hereinafter 'Jon Le')." The Agreement further provides, "RVM Capital, LLC agrees to pay 'Jon Le' an annual return on the Capital Contribution," and "In the event the Program fails . . . RVM will return the balance of the Capital Contribution." The language of the Agreement does not purport to bind Mayhall. The promises in the Agreement are between RVM and Le.
The signature block for RVM lists the name of RVM and then Mayhall's name. The omission of the word "by" in the signature block, e.g., RVM by Mayhall, does not create an ambiguity when the language of the promises is clear—only RVM promised to repay Le. Therefore, the signature block can be understood without ambiguity as Mayhall signing on behalf of RVM, in his official capacity as the sole member of RVM because the promises in the Agreement are only between RVM and Le.
The Note provides, "This Promissory Note is made on May 23, 2007, by RVM Capital LLC, 8598 Utica Avenue, Suite 100, Rancho Cucamonga, California (the 'Borrower'), in favor of 'Jon Le.'" Further, the Note provides, "[T]he Borrower [(RVM)] promises to pay U.S. $250,000 . . . to the order of 'Jon Le,'" and "Borrower will pay interest at a yearly rate of 10%." As in the Agreement, Mayhall did not make any personal promises. The promises in the Note are between RVM and Le. Therefore, the language of the Note unambiguously reflects the parties to the Note are RVM and Le.
The signature block for RVM lists RVM's name and then Mayhall's name. The signature block does not create confusion because it is not reasonable to read the Note as creating a personal promise on behalf of Mayhall when all the promises in the Note are made by RVM and Le. Therefore, the signature block can be understood without ambiguity—Mayhall signed the Note as an agent of RVM.
In sum, we conclude the trial court erred by construing that Mayhall signed the Contract in his personal capacity because there is nothing in the Contract purporting to bind him personally. Mayhall's failure to include his official title in the signature block does not create an ambiguity when the language of the Contract is unambiguously binding only RVM and Le.
6. ALTER EGO
a) Due Process
1) Procedural History
In Le's third amended complaint, he did not make an alter ego allegation. In Le's opening statement, he did not present an alter ego theory. In Le's closing brief, he argued Mayhall should be found liable under an alter ego theory. In Mayhall's closing brief, he asserted he should not be found liable pursuant to an alter ego theory because an alter ego allegation was not raised prior to trial.
The trial court did not address the alter ego argument in its tentative statement of decision. In Le's objections to the tentative statement of decision, he did not request the trial court address the alter ego argument. The trial court made its tentative statement of decision its final statement of decision, and did not address the alter ego argument.
2) Analysis
Mayhall contends he cannot be held personally liable on an alter ego theory because an alter ego theory was not argued at the trial court and evidence was not presented on the theory. Le asserts evidence regarding the alter ego theory was elicited during trial, and the applicability of the alter ego theory was argued in the parties' closing briefs.
Appellate courts make findings of fact only in exceptional circumstances. (Bombardier Recreational Products, Inc. v. Dow Chemical Canada ULC (2013) 216 Cal.App.4th 591, 605.) "Whether [a] corporation is an alter ego of an individual is ordinarily a question of fact." (Babcock v. Houston (1973) 33 Cal.App.3d 858, 864.) An alter ego determination requires the trial court to consider a lengthy list of factors, none of which are singularly determinative. For example, some of the factors the court must consider are: whether Mayhall treated RVM's assets as his own; whether Mayhall held himself out as personally liable for the debts of RVM; whether Mayhall had the same office as RVM; and whether RVM was adequately capitalized. (See Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 512-513 [setting forth a non-exhaustive list of 14 factors].)
On appeal, Mayhall disputes Le's claim that RVM was undercapitalized. This court will not decide this evidentiary dispute for the first time on appeal. Accordingly, because the alter ego theory was not raised in the pleadings, was not mentioned in the tentative statement of decision, was not mentioned in Le's objections to the tentative statement of decision, and was not addressed in the trial court's final statement of decision, we conclude the theory of alter ego liability has been forfeited. (City of Coachella v. Riverside County Airport Land Use Com. (1989) 210 Cal.App.3d 1277, 1292.)
B. DAMAGES
Mayhall contends the trial court erred in calculating the amount of damages. The trial court determined Le was owed $277,500. Mayhall asserts the amount should be $241,712.50.
Damages for breach of contract must be "clearly ascertainable in both their nature and origin." (Civ. Code, § 3301.) "However, where the fact of damage has been established, the precise amount of the damage need not be calculated with absolute certainty. 'As long as there is available a satisfactory method for obtaining a reasonably proximate estimation of the damages, the defendant whose wrongful act gave rise to the injury will not be heard to complain that the amount thereof cannot be determined with mathematical precision.'" (DuBarry Internat., Inc. v. Southwest Forest Industries, Inc. (1991) 231 Cal.App.3d 552, 562.) We apply the substantial evidence standard of review. (Id. at p. 563.)
In the Note, RVM promised to pay Le $250,000 plus interest payments of $2,500 per month for 12 months, beginning in June 2007. $2,500 multiplied by 12 is $30,000. Thus, under the Note, RVM owed Le $280,000. In the Agreement, RVM promised to give Le a monthly distribution of "up to two percent (2%) beginning June 1, 2007." Two-percent of $250,000 is $5,000.
Le testified that he received a check from RVM for $3,287.50 in July. The memo line of the check reads, "June 2007 Distribution." The trial court could find from this evidence that $2,500 of the $3,287.50 was the interest payment owed under the Note, and the remaining $787.50 was the June distribution owed under the Agreement. Because RVM made one $2,500 interest payment, it still owed $277,500 to Le ($280,000 - $2,500 = $277,500). Therefore, substantial evidence supports the trial court's finding that RVM owed Le $277,500.
C. BREACH OF FIDUCIARY DUTY
Le contends the trial court erred by finding his breach of fiduciary duty cause of action was barred by the statute of limitations. Le did not file a notice of cross-appeal. Accordingly, we cannot address this issue. (Preserve Poway v. City of Poway (2016) 245 Cal.App.4th 560, 585 [to obtain affirmative relief, a respondent must file a notice of cross-appeal].)
DISPOSITION
The portion of the trial court's ruling reflecting defendant and appellant Robert Mayhall is personally liable is reversed. In all other respects the judgment is affirmed. Appellant is awarded his costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
MILLER
J. We concur: McKINSTER
Acting P. J. CODRINGTON
J.