David Ferguson vs. Joshua Bryant

The Court cannot consider an unpleaded issue in ruling on a motion for summary judgment or summary adjudication. (Roth v. Rhodes (1994) 25 Cal.App.4th 530, 541.) The papers filed in response to a defendant's motion for summary judgment or summary adjudication may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings. (Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342.) Indeed, it has often been noted that '[i]t would be patently unfair to allow plaintiffs to defeat UCI's summary judgment motion by allowing them to present a “moving target” unbounded by the pleadings.” (Melican v.

Regents of University of California, (2007) 151 Cal. App. 4th 168, 176-177.)

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Next, the Court must determine whether the moving party has met its burden. A defendant moving for summary judgment or summary adjudication bears the burden of persuasion that one or more elements of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826, 850, quoting C.C.P § 437c(p)(2).) A defendant is not required to conclusively negate one or more elements of the plaintiff’s cause of action. (Saelzer v Advanced Group 400 (2001) 25 Cal.4th 763, 780-781).

Rather, to meet its burden, the defendant is required to show only that the plaintiff cannot prove an element of its cause of action, i.e., that the plaintiff does not possess and cannot reasonably obtain evidence necessary to show this element. (Aguilar, 25 Cal.4th at 853-855.) Further, the initial burden requires a showing that the plaintiff “could not prevail on any theory raised by the pleadings.” (Hawkins v. Wilton (2006) 144 Cal. App. 4th 936, 939-940.)

At the same time, a defendant cannot shift the burden to the plaintiff simply by suggesting the possibility that the plaintiff cannot prove its case; a moving defendant must still make 'an affirmative showing' in support of its motion. (Aguilar, 25 Cal.4th at 854-855 n.23; Addy v Bliss & Glennon (1996) 44 Cal.App.4th 205, 214.)

Once the moving party has met its burden, the burden shifts to the opposing party to show that a material factual issue exists as to the cause of action alleged or a defense to it. (CCP § 437c(p).) In ruling on the motion, the Court must consider the evidence and inferences reasonably drawn from the evidence in the light most favorable to the party opposing the motion. (Aguilar, supra, 25 Cal.4th at 843.)

Summary adjudication requires disposition of an entire cause of action or claim for damages. (CCP § 437c(f)(1); Hindin v. Rust (2004) 118 Cal.App.4th 1247, 1256.)

Defendant’s separate statement includes the following facts which it asserts are undisputed. On March 13, 2010, Defendant Joshua Bryant emailed Plaintiff a written offer of employment to work for Element 26 at a Senior Estimator/Project Manager for a base salary of $145,000 per year and 30% ownership in Element 26. (UMF 1) Plaintiff was to receive stock representing 30% ownership in Element 26 when he began working for Element 26 in July 2010. (UMF 2) During Plaintiff’s first year of employment with Element 26, Plaintiff asked about receiving stock and asked to see Element 26’s shareholder agreement but was never given a copy. (UMF 3, 4) In May 2011, Plaintiff prepared a draft of a written loan agreement which included a term that he was a 30% stakeholder in Element 26.

Element 26 did not sign the draft. (UMF 5) By 2014 Plaintiff was frustrated with not having been issued stock and decided to stop giving his full time to Element 26. (UMF 6) Plaintiff never attended an Element 26 shareholder meeting and also never received a Schedule K-1 from Element 26 while he was employed. (UMF 7) Plaintiff was never issued stock in Element 26. (UMF 8)

On June 3, 2011, Plaintiff loaned Element 26 $100,00 pursuant to a written loan agreement. The loan’s maturity date was June 3, 2012. (UMF 9, 10) Starting on June 3, 2012, Plaintiff began

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asking to be repaid. (UMF 11) By 2014 Plaintiff was frustrated that he had not been repaid and decided to stop giving his full time to Element 26. (UMF 12) From June 3, 2011 through 2019, Plaintiff never received any payments on the loan. (UMF 13) The complaint in this action was filed on November 19, 2021. (UMF 14)

The Court will address the arguments in the order presented in Defendants’ moving papers.

First Cause of Action (Breach of Contract-Statute of Limitations)

In his first cause of action, Plaintiff alleges that Defendants breached an employment contract by failing to provide him 30% ownership in Element 26. Plaintiff also alleges that Defendants breached the loan agreement by failing to pay.

The statute of limitations for a breach of written contract is four years. (CCP § 337(a).) Defendants argue that with respect to the employment contract, the claim accrued in July 2010 once Plaintiff began working fulltime at Element 26 and as to the loan agreement, the claim accrued on June 3, 2012 when the loan matured. Thus, because the complaint was filed on November 19, 2021, Defendants argue that the breach of contract cause of action is barred by the statute of limitations.

Resolution of the statute of limitations is normally a question of fact and thus in order to meet their burden on this motion, Defendants were required to present evidence that “the uncontradicted facts established through discovery are susceptible to only one legitimate inference, summary judgment is proper.” (Jolly v. Eli Lilly & Co. (1998) 44 Cal.3d 1103, 1112.)

Here, the Court concludes that Defendants’ failed to meet their initial burden to demonstrate that they are entitled to judgment as a matter of law on the basis that the first cause of action is barred by the statute of limitations. “Generally speaking, a cause of action accrues at ‘the time when the cause of action is complete with all of its elements.’” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal. 4th 797, 806 [citations omitted].) To that end, Defendants’ separate statement contains no evidence that establishes it is undisputed when Plaintiff was supposed to be issued the 30% interest in Element 26 pursuant to the employment contract.

Defendants cite to oral testimony from Plaintiff that he was “supposed to be actually made and become an owner of 30 percent of Element 26 . . . no later than when [Plaintiff] started working full-time at Element 26,” which was “approximately July of 2010.” (Ferguson Transcript at 86:3-13.) In contrast, however, the actual written offer of employment cited by Defendant simply states that Element 26 agreed to issue Plaintiff stock equal to 30% ownership. (Defs’ Exh. 1 at p. 58.) The document does not specify that the parties agreed to any particular date or deadline by when Plaintiff was to be issued the stock.

Thus, the asserted undisputed facts in support of the motion do not show as matter of law that Plaintiff’s cause of action for breach of contract, as it relates to the employment agreement, necessarily accrued in July 2010 when Plaintiff began working at Element 26. That would only be the case if there was undisputed evidence showing that

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Defendants, in fact, specifically agreed to issue the stock in July 2010 when Plaintiff began working at Element 26. While Plaintiff asserted during deposition that such was his belief, the actual documentation of Defendants’ offer does not support this assertion. As a result, Defendants failed to meet their initial burden to demonstrate that they were entitled to judgment as a matter of law on the basis that the statute of limitations on the breach of contract cause of action with respect to the employment agreement expired in July 2014.

Given the above conclusion, the motion directed to the first cause of action must be denied, even if Defendant were correct on its arguments regarding the statute of limitations as it applies to the loan agreement. This is true because the first cause of action for breach of contract is a single cause of action containing allegations regarding a breach of the employment agreement and the loan agreement. Any arguments regarding the loan agreement would not completely dispose of any cause of action, affirmative defense, claim for damages, or an issue of legal duty as required by CCP § 437c(f)(1).

Nor have Defendants obtained a stipulation from Plaintiff which has been approved by the Court allowing a motion for adjudication of certain legal issues or damages not covered by subdivision (f)(1). (CCP § 437c(t).) Further, Defendants did not request summary adjudication of any separate act based on Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848. The notice does not mention Lilienthal at all. Rather, the notice requests summary adjudication of the first cause of action in its entirety on the basis that it is barred by the statute of limitations.

Having concluded that Defendants failed to meet their initial burden, the burden never shifted to Plaintiff to demonstrate the existence of a triable issue of material fact.

The motion for summary adjudication as to the first cause of action on the basis that it is barred by the four year statute of limitations is denied.

Second Through Fifth Causes of Action (Fraud Based Causes of Action-Statute of Limitations)

In these fraud based causes of action Plaintiff alleges that Defendants made false representations regarding issuing him stock and repaying the loan agreement.

The statute of limitations for fraud is three years. (CCP § 338(d).) Defendants argue that all elements of Plaintiff’s fraud claims as to issuance of stock accrued in July 2010 when he began working for Element 26 and all the elements as to the fraud claims related to the loan agreement, the claim accrued on June 3, 2012 when the loan matured. Defendants contend that the statute began to run no later than 2014 when Plaintiff had a suspicion of wrongdoing. Thus, because the complaint was filed on November 19, 2021, Defendants argue that the fraud based causes of action are barred by the statute of limitations.

“Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something

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wrong to her the limitations period begins once the plaintiff ‘has notice or information of circumstances to put a reasonable person on inquiry A plaintiff need not be aware of the specific ‘facts’ necessary to establish the claim; that is a process contemplated by pretrial discovery. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.” (Jolly v.

Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110-1111 [citations omitted] [emphasis in original].) “[T]he plaintiff discovers the cause of action when he at least suspects a factual basis, as opposed to a legal theory, for its elements, even if he lacks knowledge thereof-when, simply put, he at least ‘suspects that someone has done something wrong’ to him [citation], ‘wrong’ being used, not in any technical sense, but rather in accordance with its ‘lay understanding’.” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397-398.)

As stated above, resolution of the statute of limitations is normally a question of fact, and summary judgment is only proper “where the uncontradicted facts established through discovery are susceptible of only one legitimate inference ” (Jolly, supra, 44 Cal.3d 1103, 1112.)

Once again, the Court concludes that Defendants have not met their initial burden of proof to show that they are entitled to judgment as a matter of law. Indeed, Defendants’ own evidence again fails to establish that it is in fact undisputed as to the date or deadline by which Defendants were required to issue Plaintiff the Element 26 stock. Further, while the evidence shows that Plaintiff made requests to view the shareholder agreement, included a term regarding the stock in a draft loan agreement, and was apparently frustrated in 2014 that he had not received such stock, the Court cannot conclude as a matter of law that Plaintiff suspected that Defendants had wronged him.

The uncontradicted facts do not allow for only one inference. Indeed, Plaintiff alleges that Defendants made representations regarding its intent to repay the loan and issue stock throughout his employment with Element 26, and that the representations continued through 2020. (Second Amended Complaint ¶¶ 5, 46.) Thus, the allegations indicate that there were representations over the course of Plaintiff’s employment, which did not end until March 2020. (Id. ¶ 6.) Further, Plaintiff alleged that Defendants made a payment on the loan in March 2020. (Id. ¶ 3.)

Defendants do not address these allegations which are issues presented by Plaintiff’s complaint and thereby relevant to the question of statute of limitations. Plaintiff also alleged that in response to his demand for repayment of the loan, he was terminated and “told that he has no ownership stake.” (Id. ¶ 6.) A reasonable trier of fact could find that given the representations regarding the loan and the stock, which allegedly continued through Plaintiff’s employment which did not end until 2020, that Plaintiff did not have a factual basis to suspect wrongdoing until he was terminated in 2020 and told he had no ownership stake.

As a result, Defendants failed to meet their initial burden to demonstrate that they were entitled to judgment as a matter of law on the basis that the statute of limitations on the fraud causes of action began to run no later than 2014.

The Court is aware that Defendants argue in reply that it was unreasonable as a matter of law for Plaintiff to rely upon any representation after 2014 when he admitted he was frustrated.

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However, as set forth above, Plaintiff alleged that as late as March 2020, Defendants actually made a payment on the loan. Whether or not Plaintiff could rely upon any representation as to either repayment of the loan, or receiving stock, after 2014 are questions of fact which cannot be resolved on this motion.

Having concluded that Defendants failed to meet their initial burden, the burden never shifted to Plaintiff to demonstrate the existence of a triable issue of material fact.

The motion for summary adjudication as to the second through fifth fraud based causes of action on the basis that they are barred by the four year statute of limitations is denied.

Sixth Cause of Action (Accounting)

As noted by Defendants in the moving papers, the statute of limitations regarding an accounting cause of action is based on the statute of limitations for the underlying wrong. (Estate of Peebles (1972) 27 Cal.App.3d 163, 166.) Defendants argue that given that the underlying causes of action are barred by the statute of limitations the instant cause of action is as well. However, as seen above, Defendants’ motions for summary adjudication based on the statute of limitations were denied. As a result, the instant motion directed to the sixth cause of action must be denied for the reasons discussed above.

First Cause of Action (Defendants Joshua and Miranda Bryant only)

The individual defendants move for summary adjudication as to the first cause of action on the alternate basis that they were not parties to any contract and thus cannot be liable for breach of contract. This cause of action requires a contractual relationship between Plaintiff and the individual defendants. “To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract ” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

The individual defendants’ evidence shows that they were not parties to either the employment agreement or the loan agreement and instead that the contracts were between Plaintiff and Element 26. (UMF 1, 15) Specifically, the employment agreement was on Element 26’s letterhead and was signed by Joshua Bryant as “Vice President” and the loan agreement reflected a loan to Element 26 only. (Id.)

“Under California law it is settled that a personal judgment for damages for breach of contract may not be obtained against a known agent of a disclosed principal.” (Sackett v. Wyatt 1973) 32 Cal. App. 3d 592, 597.)

The evidence is sufficient to demonstrate that the individual defendants are entitled to judgment as a matter of law on the first cause of action for breach of contract given that they were not parties to the subject contracts and at most executed the contracts as agents for Element 26.

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In opposition, Plaintiff does not argue that there are any disputed issues of material fact and instead devotes a number of pages to arguing that agents may be liable for their own tortious conduct. This is a correct statement of law, but has no application to a breach of contract. Plaintiff cites no law which would demonstrate that an agent is liable for breach of contract regarding a contract made on behalf of a principal. Rather, the opposite is true. “While Civil Code section 2343 and Bayuk indicate that the agent will be held liable for his torts despite the facts that he acts for a principal, nothing in Bayuk suggests that the agent should be held liable under contractual theories.

Bayuk merely states that the contract does not immunize the agent from tort liability. (Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903, 929 [emphasis added].) Notably, the individual defendants did not move for summary adjudication as to any of the fraud based causes of action on the basis that they were only acting on behalf of Element 26.

Plaintiff has failed to demonstrate either that the individual defendants did not meet their initial burden or that there is a triable issue of material fact as to whether the individual defendants can be liable for breach of contract.

As a result, the individual defendants’ motion for summary adjudication as to the first cause of action is granted on the basis that they were not parties to any contract with Plaintiff.

In conclusion, Defendants’ motions for summary adjudication as to the first through sixth causes of action on the basis that they are barred by the statute of limitations is denied. Defendants Joshua and Miranda Bryant’s motion for summary adjudication as to the first cause of action on the basis that they were not parties to any contract with Plaintiff is granted.

Having failed to obtain summary adjudication as to all causes of action asserted against them in the complaint, Defendants’ motion for summary judgment is denied.

Defendants shall submit an order for the Court’s signature pursuant to CCP § 437c and CRC 3.1312.