This case was last updated from Los Angeles County Superior Courts on 01/29/2020 at 21:31:03 (UTC).

CATHAY BANK VS ACE HARDWARE CORPORATION

Case Summary

On 09/25/2017 CATHAY BANK filed a Personal Injury - Other Personal Injury lawsuit against ACE HARDWARE CORPORATION. This case was filed in Los Angeles County Superior Courts, Pomona Courthouse South located in Los Angeles, California. The Judges overseeing this case are DUKES, ROBERT A. and PETER A. HERNANDEZ. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ****9647

  • Filing Date:

    09/25/2017

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Personal Injury - Other Personal Injury

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Pomona Courthouse South

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

DUKES, ROBERT A.

PETER A. HERNANDEZ

 

Party Details

Plaintiffs

ROBB EVANS & ASSOCCIATES LLC

CATHAY BANK

ROBB EVANS & ASSOCIATES LLC.

ROBB EVANS & ASSOCCIATES LLC.

Defendants

JOHN MIKULSKI INC

JMI MANUFACTURES REPRESENTATIVES

ACE HARDWARE CORPORATION

CHIU COOPER K.

CRUZ ADRIANA

YANG HUEI-PIN

CHIU ARBO K.

CHIU COOPER

COOPER KUO PAO

CHIU KUO P.

YANG TIFFANY

YANG TIFFANY AKA TIFFANY WANG

JOHN MIKULSKI INC.

Attorney/Law Firm Details

Plaintiff Attorneys

MIRMAN ALAN M.

ROBINS THOMAS M III

Defendant Attorneys

LAURIN PAUL L. ESQ.

LAURIN PAUL JOSEPH

MANDELL JOSHUA R. LAW OFFICES OF

MANDELL JOSHUA ROBERT

 

Court Documents

Minute Order - MINUTE ORDER (HEARING ON DEFENDANT'S MOTION TO COMPEL FURTHER DISCOVERY RES...)

8/28/2019: Minute Order - MINUTE ORDER (HEARING ON DEFENDANT'S MOTION TO COMPEL FURTHER DISCOVERY RES...)

Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER;)

9/12/2019: Minute Order - MINUTE ORDER (RULING ON SUBMITTED MATTER;)

Minute Order - Minute order entered: 2018-02-21 00:00:00

2/21/2018: Minute Order - Minute order entered: 2018-02-21 00:00:00

Order - Order of tentative ruling

5/29/2018: Order - Order of tentative ruling

Minute Order - Minute order entered: 2018-05-29 00:00:00

5/29/2018: Minute Order - Minute order entered: 2018-05-29 00:00:00

Amended Complaint - Amended Amended Complaint

6/5/2018: Amended Complaint - Amended Amended Complaint

Complaint -

7/11/2018: Complaint -

Minute Order - (Defendant, Ace Hardware Corporation's Demurrer to Second Amen...)

10/10/2018: Minute Order - (Defendant, Ace Hardware Corporation's Demurrer to Second Amen...)

Amended Complaint - Amended Amended Complaint

10/19/2018: Amended Complaint - Amended Amended Complaint

Separate Statement

11/26/2019: Separate Statement

Declaration - DECLARATION DECLARATION OF PAUL J. LAURIN ISO MSJ/MSA

11/26/2019: Declaration - DECLARATION DECLARATION OF PAUL J. LAURIN ISO MSJ/MSA

Declaration - DECLARATION DECLARATION OF BRICK KANE IN SUPPORT OF MOTION OF PLAINTIFFS FOR ORDER PERMITTING DISCOVERY OF FINANCIAL INFORMATION OF DEFENDANTS ACE ANDJMI

12/11/2019: Declaration - DECLARATION DECLARATION OF BRICK KANE IN SUPPORT OF MOTION OF PLAINTIFFS FOR ORDER PERMITTING DISCOVERY OF FINANCIAL INFORMATION OF DEFENDANTS ACE ANDJMI

Opposition - OPPOSITION TO PLAINTIFF'S MOTION FOR ORDER PERMITTING DISCOVERY OF FINANCIAL INFORMATION

12/20/2019: Opposition - OPPOSITION TO PLAINTIFF'S MOTION FOR ORDER PERMITTING DISCOVERY OF FINANCIAL INFORMATION

Stipulation and Order - STIPULATION AND ORDER TO CONTINUE TRIAL DATE

1/3/2020: Stipulation and Order - STIPULATION AND ORDER TO CONTINUE TRIAL DATE

Legacy Document - LEGACY DOCUMENT TYPE: Notice

9/28/2017: Legacy Document - LEGACY DOCUMENT TYPE: Notice

Other - - Other - Specially Appearing Defendant, John Mikulski, Inc.'s Appendix of Out-of-State Authorities

2/1/2018: Other - - Other - Specially Appearing Defendant, John Mikulski, Inc.'s Appendix of Out-of-State Authorities

Declaration - Declaration of John Mikulski in Support of Specially Appearing Defendant John Mikulski, Inc. Motion to Quash or, in the Alternative Dismiss

5/14/2018: Declaration - Declaration of John Mikulski in Support of Specially Appearing Defendant John Mikulski, Inc. Motion to Quash or, in the Alternative Dismiss

Declaration - Declaration of Bruce Meredith in Support of the Application by Cathay Bank for Issuance of a Right to Attach Order Against Ace Hardware Corporation

6/26/2018: Declaration - Declaration of Bruce Meredith in Support of the Application by Cathay Bank for Issuance of a Right to Attach Order Against Ace Hardware Corporation

141 More Documents Available

 

Docket Entries

  • 09/08/2020
  • Hearing09/08/2020 at 08:30 AM in Department O at 400 Civic Center Plaza, Pomona, CA 91766; Jury Trial

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  • 08/31/2020
  • Hearing08/31/2020 at 08:30 AM in Department O at 400 Civic Center Plaza, Pomona, CA 91766; Final Status Conference

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  • 03/16/2020
  • Hearing03/16/2020 at 08:30 AM in Department O at 400 Civic Center Plaza, Pomona, CA 91766; Hearing on Motion - Other Discovery of Financial Information re Punitives

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  • 03/16/2020
  • Hearing03/16/2020 at 08:30 AM in Department O at 400 Civic Center Plaza, Pomona, CA 91766; Hearing on Motion for Summary Judgment

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  • 01/06/2020
  • Docketat 08:30 AM in Department O, Peter A. Hernandez, Presiding; Hearing on Motion - Other (Discovery of Financial Information re Punitives) - Not Held - Continued - Stipulation

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  • 01/03/2020
  • DocketStipulation and Order (STIPULATION TO CONTINUE PLAINTIFFS' MOTION FOR ORDER PERMITTING DISCOVERY OF FINANCIAL INFORMATION AS TO DEFENDANTS ACE HARDWARE CORPORATION AND JOHN MIKULSKI, INC. TO SUPPORT CLAIM FOR PUNITIVE DAMAGES [Civ. Code 3295(c)]; [PROPOSED] ORDER THEREON); Filed by CATHAY BANK (Plaintiff)

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  • 01/03/2020
  • DocketStipulation and Order (To Continue Trial Date); Filed by ACE HARDWARE CORPORATION (Defendant)

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  • 12/20/2019
  • DocketDeclaration (OF JOSHUA R. MANDELL IN SUPPORT OF DEFENDANT JMI, INC.'S OPPOSITION TO PLAINTIFF'S MOTION FOR ORDER PERMITTING DISCOVERY OF FINANCIAL INFORMATION); Filed by JOHN MIKULSKI, INC. (Defendant)

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  • 12/20/2019
  • DocketRequest for Judicial Notice; Filed by JOHN MIKULSKI, INC. (Defendant)

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  • 12/20/2019
  • DocketOpposition (TO PLAINTIFF'S MOTION FOR ORDER PERMITTING DISCOVERY OF FINANCIAL INFORMATION); Filed by JOHN MIKULSKI, INC. (Defendant)

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240 More Docket Entries
  • 09/28/2017
  • DocketNotice ( of errata re verified complaint ); Filed by Attorney for Plaintiff

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  • 09/28/2017
  • DocketNotice; Filed by CATHAY BANK (Plaintiff)

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  • 09/26/2017
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 09/26/2017
  • DocketNotice-Case Management Conference; Filed by Clerk

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  • 09/25/2017
  • DocketComplaint Filed

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  • 09/25/2017
  • DocketCivil Case Cover Sheet; Filed by CATHAY BANK (Plaintiff); ROBB EVANS & ASSOCIATES, LLC. (Plaintiff)

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  • 09/25/2017
  • DocketSummons (on Amended Complaint (3rd)); Filed by Clerk

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  • 09/25/2017
  • DocketNotice-Related Cases; Filed by Plaintiff

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  • 09/25/2017
  • DocketComplaint; Filed by CATHAY BANK (Plaintiff); ROBB EVANS & ASSOCCIATES LLC., (Plaintiff)

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  • 09/25/2017
  • DocketNotice of Related Case; Filed by Plaintiff

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Tentative Rulings

Case Number: KC069647    Hearing Date: November 06, 2020    Dept: O

Plaintiffs Cathay Bank and Robb Evans & Associates LLC’s motion for order permitting discovery of financial information as to Defendants Ace Hardware Corporation and John Mikulski, Inc. is DENIED.

Judicial notice is taken of Defendant JMI, Inc.’s (“Defendant JMI”) Exhibits 1-2. (Evid. Code § 452.)

Evidentiary Objections

Defendant Ace Hardware Corporation’s (“Defendant Ace”) evidentiary objections are OVERRULED as to Objections ## 2, 7-10, 13, 16-18, 22-23, 25-27, 29, 31, and 33 and SUSTAINED as to Objections ## 1, 3-6, 11-12, 14-15, 19-21, 24, 28, 30, 32, and 34.

Plaintiffs Cathay Bank and Robb Evans & Associates LLC (collectively, the “Plaintiffs”) move for leave to conduct discovery into the financial condition of Defendant Ace and Defendant JMI (collectively, the “Defendants”) pursuant to Civil Code section 3295(c):

No pretrial discovery by the plaintiff shall be permitted with respect to the evidence referred to in paragraphs (1) and (2) of subdivision (a) unless the court enters an order permitting such discovery pursuant to this subdivision. However, the plaintiff may subpoena documents or witnesses to be available at the trial for the purpose of establishing the profits or financial condition referred to in subdivision (a), and the defendant may be required to identify documents in the defendant’s possession which are relevant and admissible for that purpose and the witnesses employed by or related to the defendant who would be most competent to testify to those facts. Upon motion by the plaintiff supported by appropriate affidavits and after a hearing, if the court deems a hearing to be necessary, the court may at any time enter an order permitting the discovery otherwise prohibited by this subdivision if the court finds, on the basis of the supporting and opposing affidavits presented, that the plaintiff has established that there is a substantial probability that the plaintiff will prevail on the claim pursuant to Section 3294. Such order shall not be considered to be a determination on the merits of the claim or any defense thereto and shall not be given in evidence or referred to at the trial.

(CC § 3295(c).)

“[B]efore a trial court may enter an order allowing discovery of financial condition information under Civil Code section 3295, subdivision (c), it must (1) weigh the evidence presented by both sides, and (2) make a finding that it is very likely the plaintiff will prevail on his claim for punitive damages.” (Jabro v. Superior Court (2002) 95 Cal. App. 4th 754, 755.)

The Third Amended Complaint (“TAC”) alleges that Defendant JMI facilitated a scheme to launder money owed to Plaintiffs by now-defunct company Sentron International, Inc. (“Sentron”). Defendant JMI contacted Defendant Ace to rename purchase orders made by Sentron to Smith Barnett, LLC (“Smith Barnett”). Plaintiffs allege that Defendant Ace knew of this conversion scheme and willfully complied with Defendant JMI’s request to rename the purchase orders.

Plaintiffs submit the following evidence:

Plaintiffs, through Cathay Bank (“Bank”), had a perfected security interest in Sentron’s Inventory, contract rights, accounts receivables, and proceeds enforceable against Sentron and third parties. (See Declaration of Gregory Badura ¶¶ 3-13.) When Sentron defaulted on the loans, Plaintiffs contend Sentron began hiding its assets by transferring its business to Smith Barnett. (See Declaration of Bruce Meredith Decl., ¶ 9.) One component of this alleged plan was to get Defendant Ace to change the name on the Sentron purchase order to Smith Barnett. Three days after the Bank filed suit sometime in early October 2015, Plaintiffs allege Sentron contacted JMI to request Defendant Ace to change their legal name and business to Smith Barnett. (Id. at ¶¶ 10-11.) At around that time, a receiver was appointed and Plaintiff Robb Evans & Associates, LLC (“Robb Evans”) notified Defendant Ace via telephone of its appointment on November 4, 2015. (See Declaration of Jackie Dadbin (“Dadbin Decl.”) ¶ 2-4.) Plaintiff Robb Evans then sent a letter to Defendant Ace on November 18, 2015 about the same issue. (Id. at ¶ 10.) This letter was forward a few times before reaching William Christou, who was a counsel in Defendant Ace’s legal department. (See Declaration of Thomas Robins ¶ 4, Ex. 71.) On November 24, 2015, Mr. Christou called Plaintiff Robb Evans through Jackie Dadbin and asked for a week to review the matter. (Dadbin Decl., ¶¶ 14-16.) In that time period, Defendant Ace paid Smith Barnett its invoices for the racking material. (See Declaration of Bruce Poltrock ¶ 6.) Mr. Christou spoke with Ms. Dadbin again on December 3, where he told her that Defendant Ace’s account had been changed to Smith Barnett but failed to mention that Defendant Ace was making payments to Smith Barnett. (Dadbin Decl., ¶¶ 17-20.)

In opposition, Defendant Ace offers the declaration of Paul Laurin, who attended the depositions of Mr. Christou, Mr. Meredith, Wayne Janovsky, Jason Sieben and Susan Kintz in connection with this litigation. In the declaration, Mr. Laurin provides deposition transcripts from these witnesses, who testified to facts showing they were unaware of the scheme. Mr. Christou testified that he did not receive the email sent from Brian Wojciechowski to Mr. Janovsky regarding the four invoices until after December 15, 2015. (See Declaration of Paul Laurin ¶ 2, Ex. A.) Furthermore, Mr. Christou testified that he investigated the delivery of Ms. Dadbin’s email to Defendant Ace regarding the receivership and found that Ms. Dadbin had sent her letter to the human resources manager at Defendant Ace’s retail support center in Sacramento, CA (i.e., Margo Miles) rather than to Defendant Ace’s legal department. (Ibid.) Mr. Meredith testified that he was not contacted by the receiver until the beginning of 2016 (Id. at ¶ 3, Ex. B), and Mr. Janovsky testified that he was mainly concerned with whether Defendant Ace was going to get the racks for its promotion and was merely thinking of things from the perspective of a merchant and not from a legal perspective. (Id. at ¶ 4, Ex. C.) Mr. Janovsky also testified that he was not aware that the request by Defendant JMI for the name change could have affected the receivership. (Ibid.)

Based on the conflicting evidence, the Court finds that Plaintiffs failed to carry their high burden of establishing “substantial probability” or “that it is very likely” that they will prevail on their claims for punitive damages against Defendant Ace. There is no evidence that Defendant Ace was a willful participant in the alleged scheme to defund Sentron. Plaintiffs ask the Court to speculate that Defendant Ace must have complied with Defendant JMI’s request for name change solely to convert assets. However, it is equally possible that there was a miscommunication between the various departments at Defendant Ace that caused Defendant Ace to not know what the other parties were planning, and thus caused Defendant Ace to delay the taking appropriate action after the receivership went into effect. At most, this shows an act of negligence on the part of Defendant Ace, but nothing so willful to entitle Plaintiffs to punitive damages discovery against Defendant Ace.

The same can also be said of Defendant JMI. While the Court is troubled by the November 21, 2015 email from Defendant JMI to Defendant Ace, it finds that Plaintiffs have not met their burden with respect to Defendant JMI. The October 12, 2015 email that discusses Defendant JMI’s request to Defendant Ace to change the billing name from Sentron to Smith Barnett may indicate some intent to deceive Plaintiff Robb Evans, but it is far from establishing “substantial probability” given the factual dispute raised by Defendant JMI that there was indication the name change was under review by Sentron and Defendant Ace prior to the filing of the Bank’s lawsuit. Moreover, the November 21, 2015 email could also be construed as reminding Defendant Ace not to disclose Smith Barnett’s private information from disclosure. If Sentron never had possessory interest in the goods based on nature of the sale, which is in dispute in this lawsuit, then any new purchase orders by Smith Barnett to Jiangmen Victory, the manufacture in China, would presumably be private information they would want to maintain private. Again, at this point, this does not show a willful act by Defendant JMI to entitle Plaintiffs to punitive damages discovery against it.

Accordingly, the motion is DENIED.

Case Number: KC069647    Hearing Date: August 31, 2020    Dept: O

  1. INTRODUCTION

Plaintiffs Cathay Bank and Robb Evans & Associates (collectively, as the “Plaintiffs”) have sued, inter alia, Defendant ACE Hardware Corporation (“Defendant”) in their attempts to collect a judgment issued in May of 2017 for over $10,000,000.00. Plaintiffs allege seven causes of action against Defendant in the Third Amended Complaint (“TAC”). On November 26, 2019, Defendant filed a Motion for Summary Judgment or, in the alternative, Summary Adjudication (“Motion”). Plaintiffs filed their opposition on February 10, 2020 (“Opposition”), and Defendant filed its reply on March 11, 2020. As shown below, the Court will ___________________.

II. FACTUAL SUMMARY

In 2013, Defendant began purchasing metal racking from Sentron International, Inc. (“Sentron”). (See Plaintiffs’ Separate Statement (“PSS”) 3.) In August 2015, Sentron ordered materials from Jiangmen Victory Ltd. (“JVL”) and MJB Wood Group LLC (“MJB”) to complete a racking order for Defendant’s January 2016 promotional sale. (PSS 8-9.) By September 2015, JVL and MJB began shipping materials to Sentron despite Sentron being insolvent. (PSS 11, 19.) On October 12, 2015, an employee of Defendant John Mikulski, Inc. emailed individuals at Sentron and Defendant requesting that Sentron update their legal and business name in Defendant’s financial system to Smith Barnett. (PSS 18.) On November 9, 2015, the same Defendant John Mikulski, Inc. employee informed individuals at Sentron and Defendant that Defendant’s account was now being serviced by Smith Barnett and not Sentron. (PSS 21.) Ultimately, Defendant paid the invoices issued by Smith Barnett for the January 2016 promotional sale. (PSS 22.)

On November 18, 2015, Defendant received a letter from Plaintiff Robb Evans & Associates requesting Defendant pay Plaintiff Robb Evans the outstanding balance to Sentron of $93,726.57. (PSS 23.) On November 21, 2015, the same employee from Defendant John Mikulski, Inc. sent Defendant the following email:

As of November 1, 2015, [Defendant] no longer purchased from Sentron, and we ask that any payables beyond [beyond the amount totaling $93,726.57] not be disclosed to the [Plaintiff Robb Evans]. There is an ongoing legal matter between these two companies, none of which should have affected [Defendant].

(PSS __.)

Two days later, on November 23, 2015, the same employee sent Defendant another email:

If possible, we also ask that no Smith Barnett invoices be shared with the [Plaintiff Robb Evans]. I believe that if [Defendant] releases the aforementioned $13K to the [Plaintiff Robb Evans] and notes that [Defendant] no longer purchases from Sentron, all of this will go away.

(PSS __.)

In December 2015, Plaintiff Robb Evans sent Defendant a copy of the report that included the outstanding balance, Defendant investigated the matter, determined that only $13,814.48 was owed to Sentron and paid Plaintiff Robb Evans $13,814.48 and later the remaining portion of the $93,726.57 amount in August 2016. (PSS 27-29.) Plaintiff Robb Evans never expressly informed Defendant to stop doing business with Smith Barnett or to stop making payments to Smith. (PSS 31.)

In the TAC, Plaintiffs’ allege the following causes of action against Defendant: (1) Violation of California Commercial Code section 9607; (2) Conversion; (3) Breach of Implied in Law Contract (Unjust Enrichment); (4) Breach of Fiduciary (as to Plaintiff Cathay Bank); (5) Breach of Fiduciary Duty (as to Plaintiff Robb Evans & Associates); (6) Violation of the Receivership Order; and (6) Common Count.

Defendant’s motion asserts that Plaintiffs cannot establish that there are triable issues on any of the causes of action because Plaintiffs did not have an interest in the goods purchased by Defendant. (See Motion at 1-2.) Even if it did have an interest, Defendant claims that Sentron was insolvent and a second company, Smith Barnett, provided the goods to Defendant. (Id.) Alternatively, Defendant argues that the claims brought by Plaintiff Robb Evans & Associates should be dismissed for lack of jurisdiction. (Id.)

III. JUDICIAL NOTICE & EVIDENTIARY OBJECTIONS

Judicial notice is taken of Plaintiffs’ Exhibits 28, 48-52, 66-67, 81, 83, and 89 - 94. (Evid. Code § 452.)

Plaintiffs’ evidentiary objections to the Declaration of Minbo Zhong, William Christou, Vince Fergen are overruled.

Plaintiffs’ evidentiary objections to Bruce Meredith’s Deposition and Deposition Exhibits, Deposition of Richard Smith, and Deposition of Brian Wojciechowski are overruled.

IV. LEGAL STANDARD

A defendant moving for summary judgment/adjudication has met its burden of showing a cause of action has no merit if the defendant can show one or more elements of the plaintiff’s cause of action cannot be established. (CCP § 437c(p)(2).) “A defendant can satisfy its burden by presenting evidence that negates an element of the cause of action or evidence that the plaintiff does not possess and cannot reasonably expect to obtain evidence needed to support an element of the cause of action.” (Superior Dispatch, Inc. v. Insurance Corp. of New York (2010) 181 Cal.App.4th 175, 186.) Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to the cause of action. (CCP § 437c(p)(2).) The court must liberally construe evidence in support of the party opposing summary judgment and resolve all doubts concerning the evidence in favor of that party. (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

  1. Enforcement of Rights to Account (1st Cause of Action)

This cause of action is not cognizable: there is no recognized legal authority that California Commercial Code section 9607 gives rise to an independent right of relief or cause of action. (DSS 34.) Furthermore, Plaintiffs do not address this cause of action in their Opposition, and only object to this statement of fact in their Separate Statement insofar as it is a statement of law. To the extent Plaintiffs seek to establish Defendant’s liability for breach of an obligation for an account stated, it is undisputed that no relationship between Plaintiffs and Defendant existed and there was never any express or implied promise by Defendant to pay the amount owed by Sentron to Plaintiffs.

Motion for summary adjudication on this issue is GRANTED.

  1. Conversion/Unjust Enrichment (2nd and 3rd Causes of Action)

The elements for conversion are: (1) Plaintiff's ownership or right to possession of personal property; (2) defendant's disposition of the property inconsistent with plaintiff's rights; and (3) resulting damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) Money cannot be the subject of a cause of action for conversion unless there is an identifiable sum. (PCO, Inc. v. Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP (2007) 150 Cal.App.4th 384, 395.) The tort of conversion is an act of dominion wrongfully exerted over another’s personal property in denial of or inconsistent with his rights therein. (Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787, 812.) Generally, conversion is a strict liability tort, and there is no general exception for bona fide purchasers. (Regent Alliance Ltd. v. Rabizadeh (2014) 231 Cal.App.4th 1177, 1181.) A cause of action for implied-in-law contract based on conversion of personal property invokes consideration of equitable principles and unjust enrichment. (Welborne v. Ryman-Carroll Found. (2018) 22 Cal.App.5th 719, 725; Fed. Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333, 346.)

Defendant attempts to meet its burden by showing that Plaintiffs have no legal interest in the racking (i.e., the metal shelving) assembled, paid for, and delivered to Defendant by Smith Barnett, LLC. Furthermore, Defendant contends its conduct was not a substantial factor in causing Plaintiffs’ alleged harm. Defendant shows facts that Sentron, the company Defendant initially invoiced for the racking, was unable to provide Defendant with the product. (DSS 3, 77.) Defendant was unaware of the loan enforcement actions of Cathay Bank against Sentron at the time. (DSS 30.) At the instruction of Defendant JMI, Defendant issued purchase orders to Smith Barnett for the racking instead and paid Smith Barnett for the products. (DSS 80-82.) Sentron also repudiated its interest in the raw materials for the assembly of the racking. Sentron was unable to pay Jiangmen and MJB, the two raw material manufacturers for the steel and wood used in the assembly of racking products, because Sentron was “terminal” as a result of “problems with [Cathay Bank].” (DSS 90.) Sentron then informed Jiangmen and MJB that Smith Barnett would have to purchase the materials and manufacture the racking for Defendant instead of Sentron. (DSS 92-94.) The rejection by Sentron occurred before the appointment of a receiver. (DSS 15, 17, 23.) From these facts, Defendant contends that title for the raw materials never passed to Sentron because Sentron never paid for the materials, and therefore Sentron never obtained an interest in the racking itself.

Defendant also shows facts that its conduct was not a substantial factor in causing Plaintiffs’ harm. Sentron already had no ability to assemble and supply the finished racking to Defendant due to Plaintiffs’ efforts to enforce the CSA and liquidate Sentron’s assets. (DSS 104.) Thus, Defendant mitigated its potential damages when it had Smith Barnett take over the assembly of the racking. However, Defendant’s conduct did not affect Plaintiffs’ rights to Sentron assets: Defendant’s actions merely mitigated any potential losses it could have suffered from Sentron’s inability to assemble the racking. Furthermore, the Court notes that Defendant has also paid the remaining portion of $93,726.57 to the Receiver on or about August 30, 2016. (DSS 32.) Therefore, Defendant has not been unjustly enriched for making a payment to Smith Barnett for the racking products, and for paying on the remaining amount to the Receiver.

Thus, Defendant has met its burden, and the burden shifts to Plaintiffs to show a dispute of fact under CCP § 437c.

Plaintiffs attempt to meet their burden by showing a dispute of fact as to the ownership of the raw materials at the relevant time of the dispute. Plaintiff contends that title passed from the two manufacturers of raw materials to Sentron when it was delivered Freight On Board and the raw materials arrived at Sentron’s facility. (PSS 42, 51, 55.) This fact also demonstrates that Sentron never repudiated the raw materials. It wasn’t until November 10, 2015 when Smith Barnett submitted a credit application to one of the raw material manufacturers (MJB Wood Group) that Sentron’s invoices transferred to Smith Barnett, and the invoices were credited for the deliveries. (PSS 56.) Thus, Plaintiffs arguably meet their burden as to the issue of ownership.

However, the Court is uncertain as to Plaintiffs’ arguments regarding proximate causation. While Plaintiffs point to the fact that the Receiver would have readily completed the remaining “packout for the promotion,” this does not address what damages Plaintiffs sustained at the hand of Defendant’s conduct. Plaintiffs do not dispute that Defendant made such a payment to the Receiver for Smith Barnett’s credit memo to Defendant, only the conclusion that such payment was supposedly to resolve any and all claims the Receiver may have had. (Disputed DSS 32.) In doing so, it cites to paragraph 29 of _____ Christou’s Declaration. However, the Christou’s Declaration makes no claim regarding this matter, only that it was in the outstanding amount of $79,912.09 on the invoices of “Sentron’s Aging Report that Ace paid to Smith Barnett.” (Christou Decl., ¶ 29.) Plaintiffs provide no basis to show that this payment was unconnected with the January 2016 racking promotion, and demonstrate no facts that Defendant has been unjustly enriched to the detriment of Plaintiffs. Thus, Plaintiffs failed to meet their burden under CCP § 437c that there is a dispute of fact as to causation. The Court will hear further argument concerning CAUSATION.

Motion for summary adjudication of the 2nd and 3rd causes of action are GRANTED.

  1. Fiduciary Duty (4th and 5th Causes of Action)

To plead a cause of action for breach of fiduciary duty, a plaintiff must allege facts showing the existence of a fiduciary duty owed to that plaintiff, a breach of that duty and resulting damage. (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 524.) A fiduciary duty is founded upon a special relationship imposed by law or under circumstances in which “confidence is reposed by persons in the integrity of others” who voluntarily accept the confidence. (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1150; see CACI 4100, et seq.) In a cause of action for aiding and abetting the breach of fiduciary duties, the defendant must know the other’s conduct constitutes a breach of duty, and the defendant must give substantial assistance or encouragement to the other to so act. (Casey v. U.S. Bank Nat. Assn. (2005) 127 Cal.App.4th 1138, 1144.) Some cases also hold that plaintiff must allege facts showing the alleged aider and abettor also had the specific intent to facilitate the wrongful conduct. (See Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 95.)

Defendant attempts to meet its burden as to these causes of action by showing that there are no facts to establish it had actual knowledge of the breach of fiduciary duties by Sentron and its agents by engaging in self-dealing, nor did it give substantial assistance or encouragement to Sentron and its agent to breach their fiduciary duties. Defendant was informed and believed at the time it issued the purchase orders that it was engaging in ordinary commercial transactions to purchase racking from Smith and Barnett. (DSS 217, 272.) Furthermore, the Receiver did nothing to dispel or change Defendant’s understanding of its business relationship with Smith Barnett. (DSS 227-229, 282-284.) Defendant simply issued purchase orders for racking to Smith Barnett and then paid Smith Barnett for them. (DSS 235, 238, 290, 293.) There is also nothing in the facts to suggest that Defendant had the specific intent to facilitate the wrongful conduct. Thus, Defendant has met its burden, and the burden shifts to Plaintiffs to show a dispute of fact under CCP § 437c.

Plaintiffs attempt to meet their burden by showing a dispute of fact as to Defendant’s knowledge about Sentron’s breach of fiduciary duty at the relevant time of this case. However, Plaintiffs only make their case in a conclusory manner by stating that Defendant does not deny that the officers of Sentron breached fiduciary duties owed to Sentron itself and duties owed to creditors of an insolvent corporation. While the Court agrees with this, and arguably so does Defendant, Plaintiff has not demonstrated that Defendant knew about Sentron’s breach during the relevant time of this case (i.e., when Defendant changed over its Sentron account to Smith Barnett). The best fact it presents is that some of the defendants knew and appreciated that Sentron was self-dealing by November 23, 2015. But this timeframe was well after Defendant had already been an unwilling to participate in Sentron’s scheme of self-dealing. Furthermore, Plaintiffs contend that Defendant deceived the Receiver, but does not point to material facts to support its contention of deception. Plaintiffs strongest argument is that Defendant’s agent, Wayne Janovsky, received and read an email from Brian Wojciechowski, a JMI employee who handled Sentron’s sales. Plaintiffs claim that this email from Mr. Wojciechowski asked Defendant not to make any disclosure to the Receiver regarding the fact that Defendant was paying and had been invoiced by Smith Barnett for the January 2016 promotion. However, a closer inspection of the facts shows a different story. The email Mr. Wojciechowski sent to Mr. Janovsky stated:

As of November 1, 2015, [Defendant] Ace no longer purchased from Sentron and we ask that any payables beyond the above 4 are not to be disclosed to the receivership. There is an ongoing legal matter between these two companies, none of which should have affected Ace […]. Rest assured, all Ace business is secure and moving forward. There are January promotional goods that have been and continue to ship to Ace.

(PSS 82.)

This email merely shows that Defendant JMI requested that Defendant not disclose that it had made purchases through Smith Barnett, and Defendant complied. First, the facts show that Defendant JMI initiated the request to Defendant: Defendant did not independently come up with the idea to not disclose the Smith Barnett purchases to the Receiver. Second, Plaintiffs show no facts that Defendant complied with the request willfully knowing that not disclosing the Smith Barnett purchases was “deceptive.” Finally, there is a clearly reasonable rationale that Defendant complied to not get involved in what Defendant JMI described as “an ongoing legal matter between the two companies.” At best, this fact shows that a middleman requested that Defendant stay out of the legal matter between two companies and Defendant complied with that request.

Thus, Plaintiffs have not met their burden under section 437c, and summary adjudication of these issues are GRANTED.

  1. Tort in Essence/Violation of Injunction (7th Cause of Action)

A tort in essence is the breach of a nonconsensual duty owed another. (Laczko v. Jules Meyers, Inc. (1969) 276 Cal.App.2d 293, 295.)

Defendant contends that it was not in violation of any nonconsensual duty because its issuance of purchase orders for racking to Smith Barnett and then paying Smith Barnett for the assembled racking did not violate the Receivership Order. (DSS 319-321.)

Plaintiffs contend that an injunction certainly imposes “nonconsensual” duties. Furthermore, a party injured by another’s violation of an injunction may bring an action for damages caused thereby. However, as discussed above, Plaintiffs fail to establish facts showing that there was a violation of an injunction by Defendant and if so how this injunction was violated.

Thus, summary adjudication of this issue is GRANTED.

  1. Common Count (8th Cause of Action)

A common count is not a specific cause of action, however; rather, it is a simplified form of pleading normally used to aver the existence of various forms of monetary indebtedness, including that arising from an alleged duty to make restitution under an assumpsit theory. (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394.)

Because common count is not a specific cause of action, it must stand or fall with Plaintiffs’ second cause of action for conversion. The Court will hear further on the conversion cause of action at the hearing.

Case Number: KC069647    Hearing Date: May 11, 2020    Dept: O

Plaintiffs Cathay Bank and Robb Evans & Associates LLC’s motion for order permitting discovery of financial information as to Defendants Ace Hardware Corporation and John Mikulski, Inc. is DENIED.

Judicial notice is taken of Defendant JMI, Inc.’s (“Defendant JMI”) Exhibits 1-2. (Evid. Code § 452.)

Evidentiary Objections

Defendant Ace Hardware Corporation’s (“Defendant Ace”) evidentiary objections are OVERRULED as to Objections ## 2, 7-10, 13, 16-18, 22-23, 25-27, 29, 31, and 33 and SUSTAINED as to Objections ## 1, 3-6, 11-12, 14-15, 19-21, 24, 28, 30, 32, and 34.

Plaintiffs Cathay Bank and Robb Evans & Associates LLC (collectively, the “Plaintiffs”) move for leave to conduct discovery into the financial condition of Defendant Ace and Defendant JMI (collectively, the “Defendants”) pursuant to Civil Code section 3295(c):

No pretrial discovery by the plaintiff shall be permitted with respect to the evidence referred to in paragraphs (1) and (2) of subdivision (a) unless the court enters an order permitting such discovery pursuant to this subdivision. However, the plaintiff may subpoena documents or witnesses to be available at the trial for the purpose of establishing the profits or financial condition referred to in subdivision (a), and the defendant may be required to identify documents in the defendant’s possession which are relevant and admissible for that purpose and the witnesses employed by or related to the defendant who would be most competent to testify to those facts. Upon motion by the plaintiff supported by appropriate affidavits and after a hearing, if the court deems a hearing to be necessary, the court may at any time enter an order permitting the discovery otherwise prohibited by this subdivision if the court finds, on the basis of the supporting and opposing affidavits presented, that the plaintiff has established that there is a substantial probability that the plaintiff will prevail on the claim pursuant to Section 3294. Such order shall not be considered to be a determination on the merits of the claim or any defense thereto and shall not be given in evidence or referred to at the trial.

(CC § 3295(c).)

“[B]efore a trial court may enter an order allowing discovery of financial condition information under Civil Code section 3295, subdivision (c), it must (1) weigh the evidence presented by both sides, and (2) make a finding that it is very likely the plaintiff will prevail on his claim for punitive damages.” (Jabro v. Superior Court (2002) 95 Cal. App. 4th 754, 755.)

The Third Amended Complaint (“TAC”) alleges that Defendant JMI facilitated a scheme to launder money owed to Plaintiffs by now-defunct company Sentron International, Inc. (“Sentron”). Defendant JMI contacted Defendant Ace to rename purchase orders made by Sentron to Smith Barnett, LLC (“Smith Barnett”). Plaintiffs allege that Defendant Ace knew of this conversion scheme and willfully complied with Defendant JMI’s request to rename the purchase orders.

Plaintiffs submit the following evidence:

Plaintiffs, through Cathay Bank (“Bank”), had a perfected security interest in Sentron’s Inventory, contract rights, accounts receivables, and proceeds enforceable against Sentron and third parties. (See Declaration of Gregory Badura ¶¶ 3-13.) When Sentron defaulted on the loans, it began hiding its assets by transferring its business to Smith Barnett. (See Declaration of Bruce Meredith Decl., ¶ 9.) One component of this alleged plan was to get Defendant Ace to change the name on the Sentron purchase order to Smith Barnett. Three days after the Bank filed suit sometime in early October 2015, Sentron contacted JMI to request Defendant Ace to change their legal name and business to Smith Barnett. (Id. at ¶¶ 10-11.) At around that time, a receiver was appointed and Plaintiff Robb Evans & Associates, LLC (“Robb Evans”) notified Defendant Ace via telephone of its appointment on November 4, 2015. (See Declaration of Jackie Dadbin (“Dadbin Decl.”) ¶ 2-4.) Plaintiff Robb Evans then sent a letter to Defendant Ace on November 18, 2015 about the same issue. (Id. at ¶ 10.) This letter was forward a few times before reaching William Christou, who was a counsel in Defendant Ace’s legal department. (See Declaration of Thomas Robins ¶ 4, Ex. 71.) On November 24, 2015, Mr. Christou called Plaintiff Robb Evans through Jackie Dadbin and asked for a week to review the matter. (Dadbin Decl., ¶¶ 14-16.) In that time period, Defendant Ace paid Smith Barnett its invoices for the racking material in an amount over $585,000.00. (See Declaration of Bruce Poltrock ¶ 6.) Mr. Christou spoke with Ms. Dadbin again on December 3, where he told her that Defendant Ace’s account had been changed to Smith Barnett but failed to mention that Defendant Ace was making payments to Smith Barnett. (Dadbin Decl., ¶¶ 17-20.)

In opposition, Defendant Ace offers the declaration of Paul Laurin, who attended the depositions of Mr. Christou, Mr. Meredith, Wayne Janovsky, Jason Sieben and Susan Kintz in connection with this litigation. In the declaration, Mr. Laurin provides deposition transcripts from these witnesses, who testified to facts showing they were unaware of the scheme. Mr. Christou testified that he did not receive the email sent from Brian Wojciechowski to Mr. Janovsky regarding the four invoices until after December 15, 2015. (See Declaration of Paul Laurin ¶ 2, Ex. A.) Furthermore, Mr. Christou testified that he investigated the delivery of Ms. Dadbin’s email to Defendant Ace regarding the receivership and found that Ms. Dadbin had sent her letter to the human resources manager at Defendant Ace’s retail support center in Sacramento, CA (i.e., Margo Miles) rather than to Defendant Ace’s legal department. (Ibid.) Mr. Meredith testified that he was not contacted by the receiver until the beginning of 2016 (Id. at ¶ 3, Ex. B), and Mr. Janovsky testified that he was mainly concerned with whether Defendant Ace was going to get the racks for its promotion and was merely thinking of things from the perspective of a merchant and not from a legal perspective. (Id. at ¶ 4, Ex. C.) Mr. Janovsky also testified that he was not aware that the request by Defendant JMI for the name change could have affected the receivership. (Ibid.)

Based on the conflicting evidence, the Court finds that Plaintiffs failed to carry their high burden of establishing “substantial probability” or “that it is very likely” that they will prevail on their claims for punitive damages against Defendant Ace. There is no evidence that Defendant Ace was a willful participant in the alleged scheme to defund Sentron. Plaintiffs ask the Court to speculate that Defendant Ace must have complied with Defendant JMI’s request for name change solely to convert assets. However, it is equally possible that there was a miscommunication between the various departments at Defendant Ace that caused Defendant Ace to not know what the other parties were planning, and thus caused Defendant Ace to delay the taking appropriate action after the receivership went into effect. At most, this shows an act of negligence on the part of Defendant Ace, but nothing so willful to entitle Plaintiffs to punitive damages discovery against Defendant Ace.

The same can also be said of Defendant JMI. While the Court is troubled by the November 21, 2015 email from Defendant JMI to Defendant Ace, it finds that Plaintiffs have not met their burden with respect to Defendant JMI. The October 12, 2015 email that discusses Defendant JMI’s request to Defendant Ace to change the billing name from Sentron to Smith Barnett may indicate some intent to deceive Plaintiff Robb Evans, but it is far from establishing “substantial probability” given the factual dispute raised by Defendant JMI that there was indication the name change was under review by Sentron and Defendant Ace prior to the filing of the Bank’s lawsuit. Moreover, the November 21, 2015 email could also be construed as reminding Defendant Ace not to disclose Smith Barnett’s private information from disclosure. If Sentron never had possessory interest in the goods based on nature of the sale, which is in dispute in this lawsuit, then any new purchase orders by Smith Barnett to Jiangmen Victory, the manufacture in China, would presumably be private information they would want to maintain private. Again, at this point, this does not show a willful act by Defendant JMI to entitle Plaintiffs to punitive damages discovery against it.

Accordingly, the motion is DENIED.

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