California Court of Appeal Jun 14, 2016 No. D069927Unpublished
Filed 6/14/16 Delgado v. Campbell CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
FRANCISCO DELGADO, D069927
Plaintiff and Appellant,
v. (Super. Ct. No. RIC1110768)
LAROY RANDALL CAMPBELL,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Riverside County, Craig G.
Riemer, Judge. Affirmed.
Law Office of Michael A. Younge and Michael A. Younge for Plaintiff and
Appellant.
Laroy Randall Campbell, in pro. per., for Defendant and Respondent.
INTRODUCTION
Francisco Delgado appeals from a judgment in favor of Laroy Randall Campbell
following a bench trial on Delgado's causes of action for intentional misrepresentation,
concealment, and money had and received stemming from a $150,000 investment
Delgado made in a corporation formed by Campbell and Campbell's wife to manufacture,
market, and distribute a specialized gardening tool. Referencing only the evidence
favorable to his position and failing to acknowledge an adverse credibility finding,
Delgado contends we must reverse the judgment because he presented evidence at trial
establishing each element of the above causes of action. After considering the evidence
in the light most favorable to the judgment, which we are obliged to do (In re I.J. (2013)
56 Cal.4th 766, 773), we conclude there is substantial evidence to support the court's
decision on the above causes of action. We, therefore, affirm the judgment.
BACKGROUND
In 1996, Campbell was convicted in federal court of transporting falsely made
securities interstate, uttering counterfeit securities, and bank fraud. In 2007, Campbell
and his wife formed a corporation to manufacture, market, and distribute a specialized
gardening tool. The Campbells obtained a design patent for the tool in 2009.
Business plan writers prepared two business plans for the corporation: one in
October 2007 (2007 business plan) and one in March 2010 (2010 business plan). The
stated purpose of the 2007 business plan was to establish the need for the tool and the
viability of the corporation to be a successful venture with sales in excess of 300,000
units and revenue of $8 million. The 2007 business plan also stated the Campbells each
owned 50 percent of the corporation, and they were seeking $1.2 million to launch their
company and provide two years of operating cash flow. The 2007 business plan's
financial model projected, with the sale of 150,000 retail units and 150,000 wholesale
2
units, the corporation would have gross profits of $3,684,225 and net earnings of
$2,273,868.1 Among its other pertinent representations, the 2007 business plan stated the
tool would be sold in retail locations such as Costco, Home Depot, Ace Hardware, and
Lowe's; and the corporation's exit strategy was to sell the corporation after its sales
exceeded $300,000 annually to a large, publicly traded company for 10 times the owners'
equity or four times the gross profit multiplier, whichever was greater.
The 2010 business plan was similar to, but varied in key respects from, the 2007
business plan. The stated purpose of the 2010 business plan was to establish the
corporation as a viable business venture and investment opportunity with potential sales
of 100,000 units and revenue of $3 million in the first two years of production. The 2010
business plan also stated the corporation owned the tool's patent and the Campbells each
owned 50 percent of the corporation; however, the Campbells' ownership interests in the
corporation would be diluted as ownership equity was sold to investors. In addition, the
2010 business plan stated the Campbells were seeking $150,000 in first round funding to
launch the company, with the possibility of a second-stage capital injection of up to
$300,000 if the company received a letter of intent to purchase from Costco and had the
ability to ship 25,000 tools. The 2010 business plan's 12-month profit and loss forecast
anticipated gross profits of $648,494 and net earnings of $98,837, and its five-year profit
and loss forecast anticipated gross profits of $8,334,862 and net earnings of $4,783,914.
Like the 2007 business plan, the 2010 business plan included an exit strategy, which was
1 The business plan also included 12-month and five-year profit and loss forecasts, but the record copies of the forecasts were illegible. 3
to sell the corporation after its annual sales exceeded $3 million to a large, publicly traded
company for 10 times the owners' equity or four times the gross profit multiplier,
whichever was greater.
The same month the 2010 business plan was prepared, the Campbells, Delgado,
and another investor signed a document stating Delgado and the other investor would pay
$300,000 for 25 percent of the corporation. Delgado and the other investor were to pay
$100,000 immediately and $200,000 within six months. Delgado then wrote a personal
check to the corporation for $50,000, and Campbell's wife signed a stock certificate
certifying Delgado and the other investor were "12.5% owner" of the corporation's
shares.2 Delgado testified he did not know about the 2010 business plan when he made
his investment decision. Instead, he received and based his investment decision on the
2007 business plan and a promotional video for the tool.
In April 2010 Delgado gave the corporation two cashier's checks for $50,000 each.
The same month, the Campbells, Delgado and the other investor signed a document
stating "that the 300,000 dollar[s] that was paid to [the corporation] will be given back at
the rate of 6 per cent after 12 months if [the corporation] does show a profit of at lease
300,000.00." (Grammar and spelling errors in original; some capitalization omitted.)
Delgado testified he did not know why Campbell wanted to pay him interest as he
understood his investment in the corporation to mean he and Campbell were business
partners. Regardless, he never received any interest payments.
2 The other investor was neither a party to nor a witness in this case. 4
Campbell testified that at the time Delgado invested in the corporation, the tool
was just an idea and only a prototype of it existed. He denied ever telling Delgado the
tool was already in production and being sold in stores. Campbell planned to use
Delgado's investment to build molds to make the tool and market it to different retailers,
specifically Ace Hardware, Lowe's, Home Depot, and Costco. Delgado admitted he
knew the tool was not in production when he invested in the corporation. He also did not
believe the tool was being sold by any of the above retailers when he invested in the
corporation.
Campbell further testified he disclosed his federal convictions to Delgado before
Delgado invested any money in the corporation because he was concerned Delgado
wanted to use the investment to launder money. Delgado denied receiving any such
disclosure and testified he would not have invested in the corporation had he known
about Campbell's criminal history. He testified he was unemployed when he made the
investment and had obtained the money for the investment by refinancing his home.
Within a week after Delgado gave the corporation the last check for $50,000, the
California Secretary of State suspended the corporation for not paying taxes. Campbell
never notified Delgado of the corporation's suspension.
In August 2010 Campbell sent Delgado an e-mail stating a meeting with Ace
Hardware had gone well and Ace Hardware was setting up the corporation as a vendor.
At trial, Campbell introduced photographs showing the tools being offered for sale at Ace
Hardware stores and testified the corporation began receiving sales revenue in 2010.
5
Nonetheless, the corporation has never been profitable, and Delgado never received any
return on his investment.
Delgado sued Campbell and others, alleging causes of action for: violation of
Corporations Code section 25503, violation of Corporations Code section 25401,
intentional misrepresentation, concealment, negligent misrepresentation, and money had
and received.3 Delgado dismissed the first and second causes of action before trial.4 At
trial, Delgado focused exclusively on the fraud-related causes of action.
As to these causes of action, the complaint alleged Campbell made the following
misrepresentations: (1) the corporation was organized in California and was in good
standing with all governmental authorities; (2) the corporation was qualified to sell
securities under California law; (3) the corporation was a viable entity in the business of
manufacturing, marketing, and distributing a specialized garden tool; (4) the corporation
had existing relationships for the sale of its product with Costco, Home Depot, Ace
Hardware, and Lowe's; (5) the corporation would have gross revenues totaling
$17,720,031 in the first five years of operation; (6) the corporation would have gross
profit totaling $9,634,661 in the first five years of operation; (7) the corporation would
have net earnings before interest, taxes, depreciation and amortization totaling
3 The other defendants defaulted. The bench trial in this case served both as the trial on the merits for Campbell and a prove-up hearing for the defaulted defendants.
4 In December 2010, the California Department of Corrections issued a desist and refrain letter against the Campbells, the corporation, and others for violating Corporations Code sections 25110 and 25401 by selling unqualified, nonexempt securities by means of misrepresentations and/or omissions of material fact. Six months later, the Campbells and the corporation stipulated to a final desist and refrain order. 6
$6,026,180 in the first five years of operation; (8) the corporation owned the rights to the
gardening tool's patent; (9) the corporation had the financial ability to return 36 percent
profit from its business activities; and (10) Delgado would receive a share certificate
evidencing a 12.5 percent interest in the corporation.
A day after the bench trial concluded, the court issued a tentative decision in
Campbell's favor. As to Delgado's intentional and negligent misrepresentation causes of
action, the court found Delgado had failed to prove Campbell had made any false
representations of material fact. As to these causes of action and the concealment cause
of action, the court further found Delgado had failed to prove reasonable reliance. The
court noted Delgado testified on his own behalf in support of each of his claims;
however, the court found his testimony incredible because, among other reasons, he
repeatedly contradicted himself, he failed to offer available corroborating evidence, and
his testimony was often facially unbelievable.
As to the money had and received cause of action, the court found the undisputed
evidence showed Delgado paid $150,000 to purchase an interest in the corporation. The
money was not a loan.
Finally, the court found the liability of the defaulted defendants depended upon
Campbell's liability. Since Delgado had failed to prove Campbell's liability, he failed to
prove the liability of the defaulted defendants.
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DISCUSSION
I
Delgado's appeal essentially presents a challenge to the sufficiency of the evidence
to support the court's decisions as to his intentional misrepresentation, concealment, and
money had and received causes of action. However, Delgado has forfeited this challenge
because his briefs do not summarize all of the material evidence. His briefs summarize
only the evidence favorable to his position and entirely ignore the court's adverse
credibility determination. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881;
Sterling v. Sterling (2015) 242 Cal.App.4th 185, 195.)
II
Even if Delgado had not forfeited this challenge, he has not established its merits.
In reviewing a challenge to the sufficiency of the evidence, "the power of the appellate
court is limited to the determination of whether there is any evidence, contradicted or
uncontradicted, which will support the judgment rendered, and all reasonable inferences
must be indulged to uphold it, if possible." (Memorial Hospital Asso. v. Pacific Grape
Products Co. (1955) 45 Cal.2d 634, 635.) We do not reweigh evidence and we defer to
the court's credibility determinations. (Tribeca Companies, LLC v. First American Title
Ins. Co. (2015) 239 Cal.App.4th 1088, 1102; Donahue Schriber Realty Group, Inc. v. Nu
To prevail on his intentional misrepresentation and concealment causes of action,
Delgado had to prove: " '(1) misrepresentation (false representation, concealment or non-
8
disclosure); (2) knowledge of falsity (or "scienter"); (3) intent to defraud, i.e., to induce
reliance; (4) justifiable reliance; and (5) resulting damage.' " (Hackethal v. Nat'l Casualty
Co. (1987) 189 Cal.App.3d 1102, 1111; Daniels v. Select Portfolio Servicing, Inc. (2016)
246 Cal.App.4th 1150, 1166; Boschma v. Home Loan Center, Inc. (2011) 198
Cal.App.4th 230, 248.) Much of the evidence related to these elements was conflicting.
Nonetheless, as summarized above, there was evidence showing the alleged
misrepresentations underlying these cause of actions either never occurred or occurred
after Delgado made his investment decision, or they were not knowingly false, or they
were unactionable statements of opinion or predictions of future events, not actionable
statements of existing fact. (Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th
761, 769 [an actionable misrepresentation must be of an existing fact, not an opinion or
prediction of future events].)
Moreover, as to whether Delgado justifiably relied on any of the alleged
misrepresentations, the court expressly found Delgado's testimony on this point was
neither generally nor specifically credible. Delgado's appellate briefs do not identify any
legal or factual basis for us to disregard this adverse credibility finding and there is
substantial evidence in the record to support each of the court's reasons for the finding.
Accordingly, we conclude Delgado has failed to establish there was insufficient evidence
to support the court's decision on the intentional misrepresentation and concealment
causes of action.
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B
To prevail on his money had and received cause of action, Delgado had to prove
Campbell was indebted to Delgado for money Campbell received for Delgado's use and
benefit. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 230.)
However, Delgado's trial testimony established the money Delgado gave Campbell was
an investment in the corporation, not a debt between Delgado and Campbell. Delgado's
counsel implicitly acknowledged this failure of proof by focusing his examinations and
closing arguments exclusively on Delgado's fraud-related causes of action. Thus, we
conclude Delgado has failed to establish there was insufficient evidence to support the
court's decision on the money had and received cause of action.
DISPOSITION
The judgment is affirmed. Respondent is awarded his costs on appeal.
McCONNELL, P. J.
WE CONCUR:
HUFFMAN, J.
O'ROURKE, J.
10
AI Brief
AI-generated · verify before citing
Holding. The court affirmed the judgment in favor of the defendant, holding that the plaintiff failed to prove the elements of intentional misrepresentation, concealment, and money had and received, and further noting that the plaintiff forfeited his sufficiency of the evidence challenge by failing to summarize all material evidence.
Issues
Whether there was sufficient evidence to support the trial court's judgment on the causes of action for intentional misrepresentation, concealment, and money had and received.
Whether the appellant forfeited his challenge to the sufficiency of the evidence by failing to summarize all material evidence and ignoring adverse credibility findings.
Disposition. Affirmed
Quotations verified verbatim against the opinion
“Delgado's appellate briefs do not identify any legal or factual basis for us to disregard this adverse credibility finding and there is substantial evidence in the record to support each of the court's reasons for the finding.”
“Delgado's trial testimony established the money Delgado gave Campbell was an investment in the corporation, not a debt between Delgado and Campbell.”