Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-01591/USCOURTS-casd-3_11-cv-01591-5/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 

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UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

JOHN T. HARDISTY, 

 Plaintiff, 

Case No. 11-cv-01591-BAS(BLM)

FINDINGS OF FACT AND 

CONCLUSIONS OF LAW

 v. 

HAROLD MAXINE MOORE, et al.,

 Defendants. 

AND RELATED COUNTERCLAIM 

BASHANT, Judge: 

I. INTRODUCTION 

Hardisty (“Hardisty” or “Plaintiff”) filed the operative Third Amended 

Complaint against Harold Maxine Moore (“Hal Moore”), his wife Elaine K. Moore 

(“Melanie Moore”), The 1998 Harold M. Moore Revocable Trust (the “Moore 

Trust”), Mark Peluso, and State Insulation LLC, an Arizona limited liability 

company, and State Insulation LLC, a Nevada limited liability company 

(collectively “State Insulation”), (collectively “Defendants”) on June 1, 2012. (ECF 

No. 34.) On October 9, 2012, the Court granted Hal Moore’s motion to dismiss the 

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first and tenth causes of action, and also granted a motion by Defendants to strike 

any RICO allegations. (ECF No. 39.) On November 14, 2012, Hal Moore filed a 

Counterclaim against Hardisty for fraud and negligent misrepresentation. (ECF No. 

40.) 

On March 18, 2014, the Court granted Defendants’ Motion for Summary 

Judgment with respect to the fifth cause of action alleging quiet title, the eighth 

cause of action alleging abuse of process, as well as partial summary judgment on 

the remaining causes of action. (ECF No. 80.) On September 9, 2014, Hal Moore 

filed a Notice of Acceptance of Offer of Judgment. (ECF No. 130.) Pursuant to 

Federal Rule of Civil Procedure 68, Counter-Plaintiff Hal Moore accepted CounterDefendant Hardisty’s offer to allow entry of judgment on the Counterclaim. (Id.) 

The following remained for trial: (1) the second cause of action for aiding and 

abetting intentional torts against Melanie Moore, State Insulation, the Moore Trust, 

and Mark Peluso; (2) the third cause of action for fraud against all defendants except 

Mark Peluso; (3) the fourth cause of action for constructive fraud against Hal Moore 

and Melanie Moore; (4) the sixth cause of action for securities fraud under 

California Business and Professions Code §25401 et seq. against Hal Moore; (5) the 

seventh cause of action for conversion against all defendants except Mark Peluso; 

and (6) the ninth cause of action for conspiracy against all defendants except Mark 

Peluso. Each of the remaining causes of action was limited to allegations arising 

from Hardisty’s transfer of his 27% ownership interest in Legacy Pointe Apartments, 

LLC to Hal Moore. In a supplemental ruling on Defendants’ Motion for Summary 

Judgment, the Court agreed to also consider allegations arising from Hardisty’s 

additional transfer of his 5% ownership interest as a 50% owner of MunsonHardisty, LLC, as well as an amount of $380,000 allegedly owed by Hal Moore to 

Hardisty upon completion of the Legacy Pointe Apartments project. 

 This matter was set for a bench trial. Trial took place on September 16-19, 

2014, December 9, 2014, and January 27-29, 2015. The Court heard and weighed 

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the testimony and evidence presented at trial. The Court observed the demeanor of 

the witnesses, evaluated their candor and credibility, reviewed transcripts and 

exhibits from the trial, and the Court’s trial notes. Having done so, the Court makes 

the following findings of fact and separate conclusions of law pursuant to Federal 

Rule of Civil Procedure 52(a). 

II. FINDINGS OF FACT1

 A. Liability 

 Hardisty and Hal Moore were long-time close business associates. Melanie 

Moore is, and was at all relevant times, Hal Moore’s wife, and in late 2008 and early 

2009, she was the Chief Executive Officer of State Insulation,2

 one of Hal Moore’s 

companies. From 2007 through 2009, Mark Peluso was the Controller of Great 

Western Drywall, another one of Hal Moore’s companies. 

 In August 2007, Hardisty, Munson-Hardisty, LLC (a general contractor of 

which Hardisty was a 50% owner), Craig Mason, and Legacy Pointe Apartments, 

LLC (“Legacy Pointe”) entered into an Amended and Restated Operating 

Agreement with respect to the construction of an apartment complex in Knoxville, 

Tennessee (hereinafter referred to as the “Project”). This was to be a construction 

project financed by the United States Department of Housing and Urban 

Development (“HUD”). 

 In August 2007, Hal Moore agreed to contribute $1.5 million from the Moore 

Trust to the Project. In exchange, Hardisty agreed to seek approval from HUD for 

the transfer of a 50% membership interest in Legacy Pointe to Hal Moore and signed 

a Promissory Note Secured by Deeds of Trust dated August 20, 2007 in the amount 

of $1.5 million. In the Promissory Note, Hardisty agreed to pay 13% interest per 

 1

 To the extent these Findings of Fact are also deemed to be Conclusions 

of Law, they are hereby incorporated into the Conclusions of Law that follow. 

2

 State Insulation is wholly owned by Hal Moore. Hal Moore admits he 

and State Insulation are one and the same. 

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year on the unpaid balance of the $1.5 million investment. 

 In September 2007, Hal Moore lent $750,000 to Munson-Hardisty, LLC to 

help the company obtain payment and performance bonds for the Project. The 

$750,000 was deposited into a certificate of deposit (“CD”) at 1st Pacific Bank of 

California on or around September 11, 2007. In exchange for the $750,000 loan, 

Hardisty and his wife signed a Promissory Note dated September 11, 2007 

promising 13% interest per year on the unpaid balance. The Promissory Note was 

secured by various deeds of trust on their personal and business properties, including 

their personal residence. 

 In the same time frame, as part of the requirement for obtaining a contractor’s 

license in the name of Munson-Hardisty, LLC in Tennessee, Hardisty was required 

to obtain a personal line of credit in the amount of $380,000. Hardisty drew upon 

this personal line of credit and contributed the funds to Legacy Pointe. 

 On September 13, 2007, Munson-Hardisty, LLC (as the general contractor) 

and Legacy Pointe (as the owner) entered into a construction contract for the 

construction of the Project. In the construction contract, Legacy Pointe agreed to 

pay Munson-Hardisty, LLC a cash payment in the amount of: (1) the actual cost of 

construction; and (2) a fee of the Builder’s and Sponsor’s Profit and Risk Allowance 

(“BSPRA”), not to exceed $18,047,049. The construction contract required 

Munson-Hardisty, LLC to furnish Legacy Pointe with payment and performance 

bonds in the amount of $18,047,049 issued by Great American Insurance Company 

(“GAIC”) to assure completion of the Project. The construction contract provided 

for completion of construction by January 13, 2009. 

 On September 13, 2007, Munson-Hardisty, LLC obtained payment and 

performance bonds with GAIC as the Surety in the amount of $18,047,049. 

 On November 7, 2007, when HUD approved the transfer of a 50% 

membership interest in Legacy Pointe to Hal Moore, ownership in Legacy Pointe 

was as follows: Hal Moore (50%), Munson-Hardisty, LLC (10%), Craig Mason 

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(9.9%), and Hardisty (30.1%). Hardisty’s interest was later decreased from 30.1% 

to 27%. 

 When Hal Moore received 50% equity in Legacy Pointe, the $1.5 million loan 

was extinguished. Nonetheless, Hardisty continued to pay Hal Moore 13% interest 

on the $1.5 million investment. 

 By December 2008, it was clear to all the parties that the Project was, as 

described by Hal Moore at trial, “going to hell in a hand basket.” The Project was 

not going to be completed on time and was facing numerous cost overruns. 

 Hardisty explored selling his interest in the Project to a third party. Hardisty 

was particularly concerned because he faced personal indemnity on the payment and 

performance bonds Munson-Hardisty, LLC had obtained as general contractor on 

the Project, so he wanted to ensure that all subcontractors, vendors, and suppliers got 

paid.3

 He negotiated to sell his interest to a third party for $1,750,000. However, 

when Hal Moore and Melanie Moore got wind of this negotiation, they were very 

angry, and told Hardisty if he was going to sell his interest, he should sell it to them. 

 Thus, in January 2009, Hardisty and Hal Moore entered into several 

agreements. First, Hardisty and Hal Moore entered into a “Letter of Intent,” which 

they termed the “Incentive Agreement,” dated January 15, 2009 (Exhibit 68). The 

Incentive Agreement detailed that Hardisty potentially faced personal liability due to 

his personal indemnity on the payment and performance bonds. Thus, to avoid this 

liability, Hardisty agreed to immediately transfer his remaining 27% ownership 

 3

 On September 4, 2007, GAIC and Munson-Hardisty, LLC, Legacy 

Pointe, John Hardisty, Teresa Hardisty, Craig Mason, and Hardisty and his 

companies entered into an Indemnity Agreement related to the payment and 

performance bonds (“Indemnity Agreement”). The Court takes judicial notice of the 

court filings submitted by Plaintiff at Docket No. 155 (Exhibits 1-9) and Defendants 

at Docket No. 204 (Exhibits 1-9) pursuant to Federal Rule of Evidence 201. See Lee 

v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); Mullis v. U.S. Bank 

Ct., 828 F.2d 1385, 1388 n. 9 (9th Cir. 1987) (a court may properly take judicial 

notice of the contents of public records or court files). 

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interest in Legacy Pointe to Hal Moore. In exchange, Hal Moore agreed to fund a 

bridge loan up to $1.5 million to enable Hardisty to make scheduled completion 

dates. 

 Hal Moore, through State Insulation, further agreed to purchase and retain all 

potential claims against the payment and performance bonds by the subcontractors, 

suppliers, and vendors. Munson-Hardisty, LLC agreed to receive a written collateral 

assignment from these subcontractors, suppliers, and vendors so that State Insulation 

could be reimbursed for these payments through the HUD draw process. State 

Insulation would thus be reimbursed through Legacy Pointe for all money spent. In 

addition, all unpaid expenses and loans incurred by Hal Moore would be reimbursed 

by Legacy Pointe through escrow upon the sale of the property or rent proceeds. 

Finally, Hal Moore agreed to pay Hardisty $380,000, and both Hardisty and 

Munson-Hardisty, LLC agreed to forego any salary ($3500/week for Hardisty and 

$2500/week for Munson-Hardisty, LLC). 

 Melanie Moore emailed the final draft of the Incentive Agreement to Hardisty 

on January 15, 2009, asking him to “please review and sign and send back to me; 

you can fax with an original to follow in the mail.” (Exhibit 66.) Hardisty signed 

the Incentive Agreement on January 16, 2009 and faxed it back to Hal Moore on the 

same day (Exhibit 68), and sent the original by mail. Although this Incentive 

Agreement does not have Hal Moore’s signature on it, Hardisty understood Hal 

Moore signed the Incentive Agreement based on representations from Hal Moore 

and Melanie Moore, and all parties immediately began performing thereunder. 

 After the Incentive Agreement was entered into, the Moores informed 

Hardisty that the Incentive Agreement could not be submitted to HUD for approval 

of the transfer of Hardisty’s 27% membership interest. A separate agreement needed 

to be signed specifically for HUD to effectuate the transfer. Hardisty did not 

understand this to be a “new agreement” on new terms. 

 On January 22, 2009, Melanie Moore emailed Hardisty a first draft of a 

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Purchase and Sale Agreement to be presented to HUD. Several versions of the 

Purchase and Sale Agreement were exchanged between the parties. All versions 

were drafted by the Moores and/or their counsel. At the last minute, without the 

knowledge of Hardisty, the Moores added language to the Purchase and Sale 

Agreement (which was not in the Incentive Agreement or even the first draft of the 

Purchase and Sale Agreement) saying Hal Moore agreed not to pursue any claims 

against the payment and performance bonds until May 1, 2009, which was shortly 

before the new predicted completion date of the Project. 

 Hardisty was unaware this additional language had been added at the last 

minute to the Purchase and Sale Agreement. Melanie Moore had represented that 

the final version of the Purchase and Sale Agreement (Exhibit 21) was substantially 

the same as earlier drafts Hardisty had read, and he understood it was simply 

memorializing part of the agreement they had reached through the Incentive 

Agreement for the purpose of submitting the transfer to HUD. 

 Even if Hardisty had seen the additional language the Moores added at the last 

minute to the Purchase and Sale Agreement, he would not have been concerned 

since, as outlined in the Incentive Agreement, the understanding was that State 

Insulation would be reimbursed for payments to subcontractors, vendors, and 

suppliers through the HUD draw process, and anything not paid through the draw 

process would be reimbursed by Legacy Pointe (of which Hal Moore was now a 

majority equity owner). So Hardisty was comfortable that State Insulation would be 

reimbursed for its payments, and Hardisty would no longer be personally liable on 

the payment and performance bonds. 

 In fact, State Insulation ultimately paid the subcontractors, vendors, and 

suppliers $2,156,308 as a result of the collateral assignments, and when the Project 

closed in August 2009, Hal Moore, on behalf of Legacy Pointe, represented to HUD 

that all claims had been paid, or would shortly be paid through escrow within fortyfive days, and that no debts were outstanding to subcontractors, vendors, and 

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suppliers. 

 However, on October 23, 2009, at the direction of Melanie Moore, State 

Insulation filed a complaint against GAIC in the Chancery Court for Knox County, 

Tennessee making a claim in the amount of $2,120,537.85 plus costs, prejudgment 

interest, and attorneys’ fees against the payment bond (Exhibit 124).4

 

 Since Hardisty was an indemnitor on the payment bond, GAIC requested that 

Hardisty defend and indemnify the claim. Hardisty was suddenly faced with 

personal liability in the amount of $2,120,537.85 plus costs, prejudgment interest, 

and attorneys’ fees. The only reason he transferred his 27% interest in Legacy 

Pointe in the first place was to avoid this liability. 

 The Project was complete in August 2009. Hal Moore signed the Mortgagor’s 

Certificate of Actual Cost on August 10, 2009 and final permission to occupy the 

living units was granted on August 6, 2009. However, upon completion of the 

Project, Hal Moore refused to pay Hardisty $380,000 as agreed to in the Incentive 

Agreement. 

 In February 2009, the “Amendment to Operating Agreement” of Legacy 

Pointe provided that following HUD approval the membership interests in Legacy 

Pointe would be as follows: Munson-Hardisty, LLC (10%), Craig Mason (13%), and 

Hal Moore (77%). Hal Moore also replaced John Hardisty as Chief Manager of 

Legacy Pointe. 

 In April 2009, Munson-Hardisty, LLC transferred its 10% interest in Legacy 

Pointe to Hal Moore. 

/// 

/// 

 4

 The complaint was removed to U.S. District Court for the Eastern 

District of Tennessee (Knoxville) on December 2, 2009 and thereafter styled as 

State Insulation, LLC v. Great Am. Ins. Co., Case No. 09-cv-00526-RLJ(CCS) (E.D. 

Tenn.) (“Bond Action”). 

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 B. Damages 

 At the time State Insulation and the Moores made a bond claim, GAIC held 

the $750,000 deposited in a CD on behalf of Munson-Hardisty, LLC and the balance 

of the fund control account (seeded in part by Hardisty’s $380,000 line of credit). 

 On September 30, 2011, GAIC filed a complaint for interpleader in the 

Chancery Court for Knox County, Tennessee pursuant to a settlement agreement 

reached by Legacy Pointe, State Insulation, and GAIC and sought to deposit the held 

funds with the Court.5

 State Insulation and Legacy Pointe filed a counterclaim 

against GAIC and a cross-claim against Munson-Hardisty, LLC and Hardisty, 

among others, in the Interpleader Action arguing State Insulation, as a claimant 

under the terms of the payment bond for approximately $2.1 million, is entitled to 

the entire amount of the deposited funds plus interest. State Insulation alleges that 

Hardisty, Munson-Hardisty, LLC, and the other co-defendants have no interest in or 

right to the funds deposited by GAIC. State Insulation also argues, in the 

alternative, that Munson-Hardisty, LLC owes State Insulation the sum of 

approximately $2.1 million based on breach of contract and money had and received 

theories. Hal and Melanie Moore later intervened in the Interpleader Action seeking 

$750,000 of the deposited funds plus interest on the basis of the September 2007 

loan to Munson-Hardisty, LLC. 

 On September 9, 2014, before trial in this action, Hal Moore accepted 

Hardisty’s offer of judgment pursuant to Federal Rule of Civil Procedure 68. 

Judgment was thereafter entered in this action in favor of Hal Moore in the sum of 

$750,000 to be paid from the payment bond issued by GAIC and currently on 

deposit in the Interpleader Action. As a condition of acceptance of Hardisty’s offer, 

the Interpleader Action, including cross-claims and counterclaims brought by any 

party, must be dismissed in its entirety with prejudice. Therefore, all liability with 

 5

 Great Am. Ins. Co. v. State Insulation, LLC, et al., No. 1814023 (Ch. 

Knox Cnty., Tenn. filed Sept. 30, 2011) (“Interpleader Action”). 

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respect to the subcontractors, vendors, and suppliers on the Project and all collateral 

assignments has now been resolved. 

 Hardisty was required to indemnify and defend the Bond Action in Tennessee. 

The Bond Action was voluntarily dismissed by the parties on June 6, 2012. Hardisty 

was forced to incur attorneys’ fees in the amount of $148,036.45 in defending both 

the Bond Action and the Interpleader Action. 

 In January 2009, the value of Legacy Pointe was $28,244,787.6

 Since Legacy 

Pointe had an outstanding mortgage of $21,434,100, this put the equity in Legacy 

Pointe at $6,810,687, and John Hardisty’s 27% interest at $1,838,885. 

III. CONCLUSIONS OF LAW7

A. Fraud Against All Defendants Except Mark Peluso (Third Cause of 

Action) 

 To prove fraud, a plaintiff must prove by a preponderance of evidence: (1) 

that a defendant made a misrepresentation (false representation, concealment, or 

nondisclosure); (2) knowing that the misrepresentation was false; (3) with the intent 

 6

 The Court determines that Hardisty’s expert witness Stephen Jones’ 

initial valuation of Legacy Pointe at $28,244,787 is the most persuasive. Hardisty 

urges the Court to adopt Mr. Jones’ higher calculation of $30,262,271. This amount 

was re-calculated by Mr. Jones by using a lower capitalization rate after he saw 

Craig Mason’s calculations. However, these calculations by Mr. Mason were made 

in an attempt to sell Mr. Mason’s share and thus could easily reflect an inflated 

value. In addition, Hardisty’s resulting 27% of this higher calculation would be 

$2,383,606, which seems high in light of the fact that before Hardisty agreed to 

transfer his 27% ownership interest to Hal Moore in January 2009, he had been 

negotiating to sell his share to a third party for $1,750,000. Similarly, Defendants 

urge the Court to use a lower calculation, claiming that Mr. Jones improperly 

increased the prospective rents and thus the net operating income used by Mr. Jones 

was too high. However, Defendants’ calculations of Hardisty’s 27% interest at 

$137,984 (based allegedly on the HUD firm commitment) to $960,737 (based on the 

HUD firm commitment with a limitation on rent increases of 4.5% per year) appear 

to be too low in light of all the facts in this case. 

7

 To the extent any Findings of Fact are contained in the Conclusions of 

Law, they are hereby incorporated into the preceding Findings of Fact. 

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to defraud; (4) the plaintiff justifiably relied on the misrepresentation; and (5) as a 

result of the misrepresentation, suffered damages. Small v. Fritz Companies, Inc., 

30 Cal. 4th 167, 173 (2003); Liodas v. Sahadi, 19 Cal. 3d 278, 286-93 (1977). 

Reliance is justifiable where “circumstances were such to make it reasonable for the 

plaintiff to accept the defendant’s statements without an independent inquiry or 

investigation.” OCM Principal Opportunities Fund v. CIBC World Markets Corp., 

157 Cal. App. 4th 835, 864 (2007) (citation omitted). “The reasonableness of the 

plaintiff’s reliance is judged by reference to the plaintiff’s knowledge and 

experience.” Id. (citing 5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts § 

808, at p. 1164). 

 Although extrinsic evidence may not be relied upon to alter or add to the 

terms of an integrated written agreement, extrinsic evidence is admissible to show 

fraud and may be admitted where the validity of the agreement is the fact in dispute. 

See Riverisland Cold Storage, Inc. v. Fresno-Madera Prod. Credit Ass’n, 55 Cal. 4th 

1169, 1174-75 (2013) (“Evidence to prove that the instrument is void or voidable for 

mistake, fraud, duress, undue influence, illegality, alteration, lack of consideration, 

or another invalidating cause is admissible”) (citation omitted); Cal. Civ. Proc. Code 

§ 1856(f) & (g). This rule applies “even though the contract recites that all 

conditions and representations are embodied therein.” Morris v. Harbor Boat Bldg. 

Co., 112 Cal. App. 2d 887, 888 (1952) (citation omitted). 

 The Moores made the following misrepresentations to Hardisty in connection 

with the entering into the Purchase and Sale Agreement:8

 

1) Melanie Moore represented that the Purchase and Sale Agreement 

was substantially the same agreement as the Incentive Agreement 

 8

 Hardisty failed to present any evidence of fraud in connection with the 

transfer of his share of Munson-Hardisty, LLC’s interest in Legacy Pointe to Hal 

Moore. Hardisty also failed to present any evidence of misrepresentations by the 

Moore Trust and State Insulation. 

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and failed to point out that she and Hal Moore had added language 

agreeing not to pursue any claims against the payment and 

performance bond until May 1, 2009 (the new predicted completion 

date of the Project); 

2) Both of the Moores represented that they would pursue 

reimbursement of State Insulation for payments to subcontractors, 

vendors, and suppliers through the HUD draw process, and anything 

not paid through the draw process would be reimbursed by Legacy 

Pointe; 

3) Both of the Moores represented that in exchange for the transfer of 

Hardisty’s 27% interest, Hardisty’s liability to subcontractors, 

vendors, and suppliers would be extinguished; and 

4) Both of the Moores represented they would pay Hardisty $380,000 

when construction of the Project was finished. 

 At the time they made these representations, the Moores knew the 

representations were false. They made the representations to deceive Hardisty as to 

the true nature of the Purchase and Sale Agreement and to induce Hardisty to 

execute the Purchase and Sale Agreement. Hardisty relied on these representations 

by executing the Purchase and Sale Agreement, by submitting documents to HUD 

seeking approval of the transfer of his 27% membership interest in Legacy Pointe to 

Hal Moore, and by continuing to work to complete the Project. Given all the 

circumstances, his reliance was justifiable. 

 As a result, Hardisty was damaged when the Moores caused State Insulation 

to file the Bond Action, which Hardisty was required to indemnify and defend. 

While the Bond Action was ultimately dismissed, and the Interpleader Action will 

soon be dismissed, Hardisty incurred attorneys’ fees in defending the Bond Action 

and Interpleader Action. Furthermore, Hal Moore used the Purchase and Sale 

Agreement to justify his refusal to pay Hardisty the $380,000 he had promised to 

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pay him, which led to Hardisty being unable to pay the interest on his personal line 

of credit and the bank defaulting him. 

 Accordingly, the Court finds for Plaintiff on his third cause of action for fraud 

and against defendants Hal Moore and Melanie Moore. 

B. Constructive Fraud Against Hal Moore and Melanie Moore 

(Fourth Cause of Action) 

 “Constructive fraud arises on a breach of duty by one in a confidential or 

fiduciary relationship to another which induces justifiable reliance by the latter to his 

prejudice.” Odorizzi v. Bloomfield Sch. Dist., 246 Cal. App. 2d 123, 129 (1966). 

To prove constructive fraud, a plaintiff must prove by a preponderance of evidence 

the following elements: “(1) a fiduciary or confidential relationship; (2) an act, 

omission or concealment involving a breach of that duty; (3) reliance; and (4) 

resulting damage.” Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1142 

(C.D. Cal. 2003) (citing Assilzadeh v. Cal. Fed. Bank, 82 Cal. App. 4th 399, 414 

(2000)); Younan v. Equifax Inc., 111 Cal. App. 3d 498, 516-17 (1980); Tyler v. 

Children’s Home Soc’y, 29 Cal. App. 4th 511, 548-49 (1994); Cal. Civ. Code § 

1573. 

 The essence of a “constructive fraud” claim is the existence of a confidential 

or fiduciary relationship which induces justifiable reliance by one in the relationship 

to his prejudice. Odorizzi, 246 Cal.App.2d at 129. “Such a confidential relationship 

may exist whenever a person with justification places trust and confidence in the 

integrity and fidelity of another.” Id. 

 Hardisty and Hal Moore were long-time close business associates. Whether 

or not this relationship could be characterized as a “friendship,” it was never a 

fiduciary relationship. Although he might have had a confidential relationship with 

Hal Moore at some point in time, by the time Hardisty was negotiating the transfer 

of his 27% membership interest in Legacy Pointe to Hal Moore, whatever existed of 

that confidential relationship had completely eroded. Id. (“The absence of a 

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confidential relationship . . . is especially apparent where, as here, the parties were 

negotiating to bring about a termination of their relationship. In such a situation, 

each party is expected to look after his own interests.”) Hardisty never had a 

fiduciary or confidential relationship with Melanie Moore. 

 Since Hardisty has failed to prove either a confidential or a fiduciary 

relationship with the Moores, he has failed to meet his burden on this cause of 

action. The Court therefore finds for defendants Hal Moore and Melanie Moore on 

Plaintiff’s fourth cause of action for constructive fraud. 

 C. Securities Fraud Against Hal Moore (Sixth Cause of Action) 

 To prove securities fraud under California Corporations Code section 25401, a 

plaintiff must prove by a preponderance of evidence that there was a purchase or 

sale of a security in California, and that defendant engaged in “fraud or deceit” or 

made “an untrue statement of material fact” or “omit[ted] to state a material fact 

necessary to make the statements made, in light of the circumstances under which 

they were made, not misleading.” MTC Elec. Tech. Co., Ltd. v. Leung, 876 F. Supp. 

1143, 1147 (C.D. Cal. 1995); Cal. Corp. Code § 25401. 

 A membership interest in a limited liability company is a security under the 

California Corporations Code unless Defendants “can prove that all of the members 

are actively engaged in the management” of the company.” Cal. Corp. Code § 

25019. Evidence that members vote or have a right to vote, have the right to 

information concerning the business and affairs of the limited liability company, or 

the right to participate in management, without more, is insufficient to establish the 

exception. Id. In general, where profits come substantially from the efforts of 

others, a security will be present, but where profits come from the joint efforts of 

partners, a security will not be present. Consol. Mgmt. Grp., LLC v. Dep’t of Corps., 

162 Cal. App. 4th 598, 610 (2008); People v. Syde, 37 Cal. 2d 765, 768 (1951). 

 Under California Corporations Code section 25506(b), an action under section 

25401 must be brought within two years after discovery of the false statement of 

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fact. Cal. Corp. Code §§ 25506(b), 25501. In this case, Hardisty did not know the 

Moores had made the false misrepresentations until October 2009 when State 

Insulation initiated the Bond Action. The Complaint in this case was filed on July 

19, 2011, within two years after discovery of the false statements. Therefore, this 

cause of action is not barred by the statute of limitations. 

 However, Hardisty’s “security” sale was that of a membership interest in 

Legacy Pointe. Legacy Pointe was a limited liability company in which all of the 

members were actively involved in managing the company. Hardisty as the Chief 

Manager of Legacy Pointe, Munson-Hardisty, LLC as the general contractor, and 

Hal Moore as an active investor who initially visited, monitored, and, at times, 

controlled the Project and later became the Chief Manager, were active members. 

Mr. Mason was also an active member. The evidence reflects that Mr. Mason made 

labor contributions to the Project, including tying up the land for the Project, paying 

for the plans, engineering, and the HUD package. Mr. Mason was further involved 

in and assigned tasks in meetings and conference calls relating to the Project. 

Therefore, the purchase or sale at issue was not one of a security, and Plaintiff’s 

claim on this cause of action must fail.9

 

 Accordingly, the Court therefore finds for defendant Hal Moore on Plaintiff’s 

sixth cause of action for securities fraud. 

 D. Conversion Against All Defendants Except Mark Peluso (Seventh 

 Cause of Action) 

 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.” 

Oakes v. Suelynn Corp., 24 Cal. App. 3d 271, 278 (1972). To prove conversion, a 

 9

 Alternatively, the Court finds that Hardisty’s 27% membership interest 

in Legacy Pointe was not acquired by fraud or by means of a false statement of 

material fact or an omission of a material fact. Hardisty transferred his 27% 

membership interest in Legacy Pointe pursuant to the Incentive Agreement, which, 

as discussed herein, is a valid contract. 

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plaintiff must prove by a preponderance of evidence: (1) that the plaintiff owned or 

had the right to possess personal property; (2) the defendant disposed of the property 

in a manner inconsistent with the plaintiff’s property rights and (3) as a result, the 

plaintiff suffered damages. Fremont Indem. Co. v. Fremont Gen. Corp., 148 Cal. 

App. 4th 97, 119 (2007); Liodas, 19 Cal. 3d at 286-93. A membership interest in 

an LLC constitutes personal property of the member. See Cal. Corp. Code, § 

17705.01; In re Kuiken, 484 B.R. 766, 769 (9th Cir. B.A.P. 2013). 

 Money can be the subject of a conversion action if a specific, identifiable sum 

is involved. Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 452 (1997). 

“Neither legal title nor absolute ownership of the property is necessary[,] . . . 

[h]owever, a mere contractual right of payment, without more, will not suffice.” Id.; 

see also Kim v. Westmoore Partners, Inc., 201 Cal. App. 4th 267, 284 (2011) 

(“California cases permitting an action for conversion of money typically involve 

those who have misappropriated, commingled, or misapplied specific funds held for 

the benefit of others.”); Florey Inst. of Neuroscience & Mental Health v. Kleiner 

Perkins Caufield & Byers, 31 F. Supp. 3d 1034, 1041 (N.D. Cal. 2014) (“[C]ourts 

have recognized a sufficient ownership interest when the plaintiff has a lien on the 

funds in question.”); Farmers Ins. Exch., 53 Cal. App. 4th at 455 (“[A] mere 

promise to pay from a specific fund may suffice to create an equitable lien if 

considerations of detrimental reliance or unjust enrichment are implicated.”). 

 In the Incentive Agreement, Hardisty agreed to immediately transfer his 

remaining 27% membership interest in Legacy Pointe to Hal Moore. As discussed 

herein, the Incentive Agreement is a valid contract. Therefore, Hardisty has failed to 

prove that he has a right to possess the 27% membership interest and that defendants 

Hal Moore, Melanie Moore, State Insulation, and the Moore Trust are wrongfully 

exerting control over his 27% membership interest in Legacy Pointe. 

 In the Incentive Agreement, Hal Moore agreed to pay Hardisty $380,000 in 

installments with the final installment due on completion of the Project. Hal Moore 

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has not paid this amount. However, the amount Hardisty was entitled to be paid on 

completion of the Project, was not the money he withdrew from his personal line of 

credit. In the Incentive Agreement, he “agree[d] that he [wa]s giving up his 

$380,000 seed money and transfer[red] any right thereto to Hal Moore.” The 

amount Hardisty was entitled to be paid was therefore not designated to come from 

any particular fund or source. Hardisty’s right to the $380,000 was a mere 

contractual right of payment. This cannot be the basis for a conversion claim. 

 Accordingly, the Court finds in favor of defendants Hal Moore, Melanie 

Moore, State Insulation, and the Moore Trust on Plaintiff’s seventh cause of action 

for conversion. 

 E. Conspiracy Against All Defendants Except Mark Peluso (Ninth 

 Cause of Action) 

 Although listed as the ninth cause of action, civil “[c]onspiracy is not a cause 

of action, but a legal doctrine that imposes liability on persons who, although not 

actually committing a tort themselves, share with the immediate tortfeasors a 

common plan or design in its perpetration.” Applied Equip. Corp. v. Litton Saudi 

Arabia Ltd., 7 Cal. 4th 503, 510-11 (1994) (citation omitted). “By participation in a 

civil conspiracy, a coconspirator effectively adopts as his or her own the torts of 

other coconspirators within the ambit of the conspiracy.” Id. at 511. 

 “The elements of an action for civil conspiracy are the formation and 

operation of the conspiracy and damage resulting to plaintiff from an act or acts 

done in furtherance of the common design.” Id. “[I]t is the acts done and not the 

conspiracy to do them which should be regarded as the essence of the civil action.” 

Id. While conspiracy extends liability beyond the principals who actually committed 

the tort, the coconspirator must be “legally capable of committing the tort, i.e., that 

he or she owes a duty to plaintiff recognized by law and is potentially subject to 

liability for breach of that duty.” Id. 

 Typically, agents and employees of a corporation cannot conspire with their 

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corporate principal or employer where they act in their official capacities on behalf 

of the corporation and not as individuals for their individual advantage. Doctors’ 

Co. v. Super. Ct., 49 Cal. 3d 39, 45 (1989); Black v. Bank of Am., 30 Cal. App. 4th 

1, 4 (1994) (“When a corporate employee acts in the course of his or her 

employment, on behalf of the corporation, there is no entity apart from the employee 

with whom the employee can conspire.”); Neilson v. Union Bank of Cal., N.A., 290 

F. Supp. 2d 1101, 1123 (C.D. Cal. 2003). The principles underlying the agent’s 

immunity rule apply to limited liability companies. See People v. Pac. Landmark, 

129 Cal App. 4th 1203, 1212-1213 (2005). 

An exception to the agent’s immunity rule that allows corporate employees to 

be held liable for conspiracy with their principal exists when they act for their own 

individual advantage and not solely on behalf of the corporation, or act beyond the 

scope of their authority. See Doctors’ Co., 49 Cal.3d at 47. Agents and employees 

may also be liable where they owe a duty to the plaintiff independent of the 

corporation’s duty. Black, 30 Cal. App. 4th at 4. “[E]veryone owes a duty not to 

commit an intentional tort against anyone.” Fuller v. First Franklin Fin. Corp., 216 

Cal. App. 4th 955, 967 (2013) (citing Qwest Commc’ns Corp. v. Weisz, 278 F. Supp. 

2d 1188, 1193, n. 4 (S.D. Cal. 2003)). “Thus, there can be liability for conspiring to 

commit an intentional tort even absent any duty.” Id.; see also Applied Equip. 

Corp., 7 Cal. 4th at 512-13. 

 “Because civil conspiracy is so easy to allege, plaintiffs have a weighty 

burden to prove it.” Choate v. Cnty. of Orange, 86 Cal. App. 4th 312, 333 (2000) 

(citation omitted). There must be proof of “a mutual understanding to accomplish a 

common and unlawful plan.” Id. “It is not enough that [the defendants] knew of an 

intended wrongful act, they must agree—expressly or tacitly—to achieve it.” Id. 

 The Moores committed fraud, an intentional tort, against Hardisty. The 

Moores and State Insulation all shared a common plan or design to take Hardisty’s 

27% membership interest in Legacy Pointe and his $380,000 by misrepresentations 

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that the claims by the subcontractors, vendors, and suppliers against the payment and 

performance bond would be extinguished, and each engaged in acts in furtherance of 

this common plan. While Hal Moore owned State Insulation and Melanie Moore 

was an employee, the Court finds that they acted for their own financial gain and not 

on behalf of the company. The 27% membership interest was being transferred to 

Hal Moore, and the Purchase and Sale Agreement was drafted by the Moores and 

signed by Hal Moore as an individual. State Insulation was simply a conduit and 

willing participant. 

 Hardisty has not demonstrated that the Moore Trust was involved in the 

common plan. Accordingly, the Court finds Hal Moore, Melanie Moore, and State 

Insulation engaged in a conspiracy to commit fraud. 

 F. Aiding and Abetting Against Melanie Moore, State Insulation, the 

 Moore Trust and Mark Peluso (Second Cause of Action) 

 To prove aiding and abetting, a plaintiff must prove by a preponderance of 

evidence: (1) that the defendants knew that another person’s conduct was a breach of 

a duty owed to another and (2) that the defendants gave substantial assistance and 

encouragement of that breach. See Schultz v. Neovi Data Corp., 152 Cal. App. 4th 

86, 93 (2007). “Mere knowledge that a tort is being committed and the failure to 

prevent it does not constitute aiding and abetting.” Austin B. v. Escondido Union 

Sch. Dist., 149 Cal. App. 4th 860, 879 (2007) (citation omitted). 

 There is no evidence that Mark Peluso knew the Moores were breaching any 

duty to Hardisty or that the Moores were committing any fraud against him. 

Therefore, with respect to Mark Peluso, Hardisty has failed to meet his burden of 

proof on this cause of action. In addition, there is no evidence the Moore Trust gave 

substantial assistance in encouragement of the breach. 

 With respect to the remaining defendants, Hardisty has proved that they each 

knew the Moores were making fraudulent misrepresentations to him, and they each 

substantially assisted and encouraged that fraud. The Court therefore finds in favor 

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of Plaintiff on his second cause of action for aiding and abetting against defendants 

Melanie Moore and State Insulation. 

 G. Fraud Damages 

 Once a plaintiff has proven he was actually damaged by a defendant’s 

conduct, the trial court must attempt to ascertain the amount of damages even if the 

task is a difficult one. See Meister v. Mensinger, 230 Cal. App. 4th 381, 396 (2014) 

(“While the damages suffered by the [plaintiffs] as a consequence of respondents’ 

wrongdoing may not have been readily ascertained, it does not follow that the 

[plaintiffs] failed to establish the fact they were harmed by respondents’ actions.”). 

“Where the fact of damages is certain, the amount of damages need not be calculated 

with absolute certainty.” GHK Assocs. v. Mayer Grp., Inc., 224 Cal. App. 3d 856, 

873 (1990). “The law requires only that some reasonable basis of computation of 

damages be used, and the damages may be computed even if the result reached is an 

approximation.” Id. Trial courts must do the best they can and use all available 

facts to approximate the fair and reasonable damages under all of the circumstances. 

Meister, 230 Cal. App. 4th at 397. 

 1. Incentive Agreement 

 The Court finds that the parties entered into the Incentive Agreement. The 

Moores made an offer, which was accepted by Hardisty. Cal. Civ. Code §§ 1582, 

1583. While Hal Moore may or may not have signed the Incentive Agreement, the 

parties, including Hal Moore, began to immediately perform thereunder. See Cal. 

Civ. Code § 1584. 

 California law “distinguishes between fraud in the execution or inception of a 

contract, and fraud in the inducement of a contract.” Village Northridge 

Homeowners Ass’n v. State Farm Fire & Cas. Co., 50 Cal. 4th 913, 921 (2010). 

Fraud in the inducement “occurs when the promisor knows what he is signing but 

his consent is induced by fraud.” Rosenthal v. Great W. Fin. Sec. Corp., 14 Cal. 4th 

394, 415 (1996) (internal quotations omitted). Fraud in the execution or inception, 

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on the other hand, occurs when “the promisor is deceived as to the nature of his act, 

and actually does not know what he is signing, or does not intend to enter into a 

contract at all.” Id. 

 To succeed on a claim of fraud in the inception, a plaintiff must show that his 

apparent assent to the contract—his signature on the agreement—is “negated by 

fraud so fundamental” that he was “deceived as to the basic character of the 

document” he signed and “had no reasonable opportunity to learn the truth.” Id. at 

425. A misrepresentation of the contract’s contents alone does not render a 

contract’s contents void “where the defrauded party had a reasonable opportunity to 

discover the real terms of the contract.” Id. at 419-20. 

 Hardisty has failed to prove any fraud in the execution or inducement of the 

Incentive Agreement. While Hardisty was under economic duress at the time, the 

Moores did not engage in any sufficiently wrongful coercive acts at the time the 

parties entered into the Incentive Agreement to invalidate the agreement. See Rich 

& Whillock, Inc. v. Ashton Dev., Inc., 157 Cal. App. 3d 1154, 1158-59 (1984) 

(“[T]he [economic duress] doctrine . . . [which can serve as a basis for invalidating a 

contract] come[s] into play upon the doing of a wrongful act which is sufficiently 

coercive to cause a reasonably prudent person faced with no reasonable alternative 

to succumb to the perpetrator’s pressure.”) 

 Plaintiff argues that Hal Moore’s representation in the Incentive Agreement 

that he would provide a “bridge loan” was promissory fraud because of the 

subsequently filed Bond Action. To establish promissory fraud, a plaintiff must 

prove “(1) the defendant made a representation of intent to perform some future 

action, i.e., the defendant made a promise, and (2) the defendant did not really have 

that intent at the time that the promise was made, i.e., the promise was false.” 

Beckwith v. Dahl, 205 Cal. App. 4th 1039, 1060 (2012) (citing Lazar v. Super. Ct., 

12 Cal. 4th 631, 639 (1996)). However, Plaintiff has failed to prove that the Moores 

or State Insulation intended to pursue a claim on the bonds at the time the Incentive 

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Agreement was entered into, or to seek reimbursement by any method other than 

“through the draw process,” thereby misrepresenting the nature of the “bridge loan.” 

Plaintiff testified that when he signed the Incentive Agreement he understood Hal 

Moore, through State Insulation and Legacy Pointe, was going to reimburse himself 

for the “bridge loan.” Hal Moore similarly testified that the purpose of the collateral 

assignments was to ensure he was reimbursed. He further testified that he was not 

planning on filing a bond claim at the time he entered the Incentive Agreement, and 

was not setting one up. Plaintiff has presented no evidence to the contrary. 

 2. Purchase and Sale Agreement 

 Hardisty was deceived as to the basic character of the Purchase and Sale 

Agreement and had no reasonable opportunity to learn the truth. Thus, the Court 

finds there was fraud in the inception of the Purchase and Sale Agreement. 

 A party’s “rescission obligations depend on the type of fraud alleged.” 

Village Northridge Homeowners Ass’n, 50 Cal. 4th at 921. “If the fraud goes to the 

execution or inception of a contract, so that the promisors do not know what they are 

signing, the contract lacks mutual assent and is void.” Id. Therefore, the contract 

“may be disregarded without the necessity of rescission.” Id. (citation omitted). 

 The Court thus finds that the Purchase and Sale Agreement is void and shall 

be disregarded without the necessity for rescission. As the Purchase and Sale 

Agreement is void, it is not a novation, and the Incentive Agreement remains in 

effect. See Airs Intern., Inc. v. Perfect Scents Distributions, Ltd., 902 F. Supp. 1141, 

1148-49 (N.D. Cal. 1995) (“[A]n essential element of a novation is the validity of [a] 

new contract[; therefore] ... [i]f the new contract is invalid, there is no novation and 

the parties’ previous obligations are not extinguished.”) (citations omitted); Cal. Civ. 

Code § 1531.10

 10 To the extent Defendants argue the Purchase and Sale Agreement was 

subsequently ratified by Hardisty when he signed documents addressed or submitted 

to HUD in February 2009, the Court disagrees. “[O]ne who, after discovery of an 

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 “Restitution of the benefits conferred under a contract may be awarded if the 

contract is rescinded or determined to be unenforceable.” Chapman v. Skype Inc., 

220 Cal. App. 4th 217, 233-34 (2013) (citing Durell v. Sharp Healthcare, 183 Cal. 

App. 4th 1350, 1370 (2010)). “Alternatively, restitution may be awarded where the 

defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or 

similar conduct.” Durell, 183 Cal. App. 4th at 1370 (citation omitted). However, 

“[t]he person receiving the benefit is required to make restitution only if the 

circumstances are such that, as between the two individuals, it is unjust for the 

person to retain it.” Id. (citation omitted). 

 The Court finds that no restitution of any benefits conferred by the Purchase 

and Sale Agreement is required to prevent unjust enrichment. The Bond Action has 

been settled and dismissed. The Interpleader Action, including all cross-claims and 

counterclaims in their entirety brought by any party, must be dismissed with 

prejudice. (See ECF No. 130.) In addition, by virtue of the terms of the Incentive 

Agreement, which, as discussed herein, is valid, Hardisty and Munson-Hardisty, 

LLC have no obligation to State Insulation or the Moores for any unpaid 

subcontractor, supplier, or vendor invoices. The collateral assignments were to be 

reimbursed “by HUD through the draw process;” and to the extent that did not 

 

alleged fraud, ratifies the original contract by entering into a new agreement 

granting him substantial benefits with respect to the same subject matter, is deemed 

to have waived his right to claim damages for fraudulent inducement.” See Oakland 

Raiders v. Oakland-Alameda Cnty. Coliseum, Inc., 144 Cal. App. 4th 1175, 1186 

(2006). As discussed herein, Hardisty did not learn of the fraud until the filing of 

the Bond Claim in October 2009. Therefore, the Court finds Defendants have failed 

to establish that Hardisty ratified the Purchase and Sale Agreement and waived his 

rights to claim damages for fraud. See DRG/Beverly Hills, Ltd. v. Chopstix Dim 

Sum Cafe & Takeout III, Ltd., 30 Cal. App. 4th 54, 60 (1994) (“Waiver is the 

intentional relinquishment of a known right after knowledge of the facts. ... The 

burden, moreover, is on the party claiming a waiver of a right to prove it by clear 

and convincing evidence that does not leave the matter to speculation, and doubtful 

cases will be decided against a waiver.”) (emphasis added) (citations and internal 

quotations omitted). 

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occur, the Incentive Agreement provides that “all unpaid expenses and loans 

incurred by Moore are to be paid back through escrow upon sale of the property or 

rent proceeds.” 

 California Civil Code section 3343 provides the measure of damages when 

one is “defrauded in the purchase, sale or exchange of property.” Cal. Civ. Code § 

3343(a). California Civil Code section 3333, alternatively, provides the measure of 

damages for “[f]or the breach of an obligation not arising from contract.” Cal. Civ. 

Code § 3333. California Civil Code section 1709 further provides the measure of 

damages when a person “willfully deceives another with intent to induce him to alter 

his position to his injury or risk.” Cal. Civ. Code § 1709. Given that the fraud at 

issue occurred during the execution of the Purchase and Sale Agreement, which is 

void, and not during the transfer of Hardisty’s 27% membership interest in Legacy 

Pointe, which was transferred by means of the Incentive Agreement, the Court finds 

that Sections 1709 and 3333 provide the more appropriate measure of damages in 

this case. 

 Under Section 3333, the measure of tort damages “is the amount which will 

compensate for all detriment proximately caused thereby, whether it could have been 

anticipated or not.” Cal. Civ. Code § 3333. “There is no fixed rule for the measure 

of tort damages under Civil Code section 3333.” Santa Barbara Pistachio Ranch v. 

Chowchilla Water Dist., 88 Cal. App. 4th 439, 446 (2001). The damages awarded 

should place the plaintiff in the position he would have occupied had the 

misrepresentations not occurred. Eckert Cold Storage, Inc. v. Behl, 943 F. Supp. 

1230, 1234 (E.D. Cal. 1996) (citing Gray v. Don Miller & Assocs., Inc., 35 Cal. 3d 

498, 504 (1984); Kenly v. Ukegawa, 16 Cal. App. 4th 49, 54-55 (1993)). 

 Section 1709 similarly provides that a defendant engaging in deceit “is liable 

for any damage which [the plaintiff] thereby suffers.” Cal. Civ. Code § 1709. A 

plaintiff is required to prove the amount of damages he suffered with “reasonable 

certainty.” City Solutions, Inc. v. Clear Channel Commc’ns, 365 F.3d 835, 839 (9th 

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Cir. 2004) (citing Stott v. Johnston, 36 Cal. 2d 864, 875 (1951)). 

 Hardisty has demonstrated with reasonable certainty that as a result of the 

fraud committed by defendants Hal Moore and Melanie Moore, he was unable to 

repay his personal line of credit at the bank in the amount of $380,000 plus interest 

which led to a default, and he was forced to incur $148,036.45 in attorneys’ fees 

associated with defending the Bond Action and Interpleader Action in Tennessee.11 

 At the beginning of the Project, Hardisty drew upon a $380,000 personal line 

of credit and contributed the funds to the Project. These funds were held by GAIC 

for the duration of the Project, and were later deposited with the court in the 

Interpleader Action. When Hardisty entered into the Incentive Agreement, receiving 

funds to be able to maintain and pay off his $380,000 line of credit was a key 

component of the agreement. Hardisty therefore agreed to waive his right to the 

funds held by GAIC on the promise that he would receive the $380,000 sooner from 

Hal Moore through installment payments, with the final installment to be paid on 

completion of the Project. Therefore, through this agreement, Hardisty anticipated 

being able to maintain and pay off his line of credit. Hal Moore further continuously 

promised to pay Hardisty the $380,000 while the Project was being completed, 

stringing him along for months. 

 In reliance on these promises, Hardisty continued to work on the Project. At 

the end of the Project, Hal Moore informed Hardisty that he would not pay him 

 11 Hardisty failed to demonstrate that he was deprived of additional 

“salary” by virtue of the fraud committed by defendants Hal Moore, Melanie Moore, 

and State Insulation. The Incentive Agreement provides that Hardisty was to 

receive $380,000 pursuant to a payment schedule but during the course of the 

payment schedule both he and Munson-Hardisty, LLC would forego any salary. 

Furthermore, Hardisty now abandons his claim that his companies, Hardisty 

Construction Inc., Hardisty Construction Management, Inc., and Melhorn 

Construction, Inc. were damaged as a result of defendants’ actions. Therefore, 

Defendants’ motion in limine (ECF No. 106) which is still pending has been 

rendered moot. 

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$380,000, relying on the fraudulently executed Purchase and Sale Agreement which 

states that “[i]n entering this Agreement, [Hardisty] does not rely on any 

representations by [Hal Moore] or his agents concerning any subject matter 

whatsoever.” As the harm to Hardisty, namely his inability to make payments and 

the subsequent defaulting on his personal line of credit, arose from and was 

perpetuated and exacerbated by the fraud of defendants Hal Moore and Melanie 

Moore, the Court finds tort damages in the amount of $380,000 to be the appropriate 

and equitable remedy. 

 In addition, “[a]lthough as a general rule attorneys’ fees incurred by a plaintiff 

in an action for damages for fraud are nonrecoverable, an exception is recognized 

where a plaintiff, as a proximate result of defendant’s fraud, is required to prosecute 

or defend an action against a third party for the protection of his interest.” Glendale 

Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co., Inc., 66 Cal. App. 3d 101, 

149 (1977) (internal citations omitted). “In such cases reasonable attorneys’ fees 

incurred in connection with the third party lawsuit are recoverable as damages 

caused by defendant’s tortious act.” Id. (citations omitted); Oasis West Realty, LLC 

v. Goldman, 51 Cal. 4th 811, 826 (2011) (quoting Jordache Entrs., Inc. v. Brobeck, 

Phleger and Harrison, 18 Cal. 4th 739, 751 (1998)) (“It is ‘the established rule that 

attorney fees incurred as a direct result of another’s tort are recoverable damages.’”). 

By virtue of Defendants’ fraud, Hardisty was forced to incur $148,036.45 in 

attorneys’ fees associated with defending the Bond Action and Interpleader Action 

in Tennessee, and the Court finds he is entitled to recover this amount.12

/// 

 12 Although Defendants attempt to distinguish between the Bond Action 

and Interpleader Action, in fact, Hardisty was forced to continue litigation in the 

Interpleader Action because both his original investment of $380,000, as well as the 

$750,000 he borrowed from the Moores at 13% interest had been interpleaded in 

that court. Thus, the Interpleader Action was a continuation of the Bond Action, 

which Hardisty would not have been forced to defend, had there been no fraud. 

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 3. Prejudgment Interest 

 Prejudgment interest may be awarded in the discretion of the fact-finder “[i]n 

an action for the breach of an obligation not arising from contract, and in every case 

of . . . fraud.” Cal. Civ. Code § 3288; Michaelson v. Hamada, 29 Cal. App. 4th 

1566, 1586 (1994). The award of pre-judgment interest should be based on all of the 

circumstances of the case. West v. Stainback, 108 Cal.App.2d 806, 819 (1952). 

Damages that are “ascertainable” are entitled to prejudgment interest. See Cal. Civ. 

Code § 3287(a); Bullock v. Philip Morris USA, Inc., 198 Cal. App. 4th 543, 573-74 

(2011). Damages are calculated from the date the amount was both due and owing 

and ascertainable. Bullock, 198 Cal.App.4th at 573. Prejudgment interest is 

calculated at a rate of 7% per year. Id. (citing Michaelson, 29 Cal.App.4th at 1585). 

Generally, compound interest, as opposed to simple interest, is awarded only if the 

defendants owed a fiduciary duty to the plaintiff. Michaelson, 29 Cal.App.4th at 

1586. Therefore, the Court finds that Hardisty is entitled to simple prejudgment 

interest at the rate of 7% per year on the $380,000 from August 10, 2009 to the date 

of this Order.13 Interest is therefore $147,065.21. 

 4. Punitive Damages 

 Under California Civil Code section 3294, punitive damages may be awarded 

in the court’s discretion in a tort action “where it is proven by clear and convincing 

evidence that the defendant has been guilty of oppression, fraud, or malice.” Cal. 

Civ. Code § 3294(a); Chavez v. Keat, 34 Cal. App. 4th 1406, 1415 (1995). The 

Court declines to award punitive damages. 

/// 

/// 

 13 As noted above, the Project was complete in August 2009. Hal Moore 

signed the Mortgagor’s Certificate of Actual Cost on August 10, 2009 and final 

permission to occupy the living units was granted on August 6, 2009. For purposes 

of calculating prejudgment interest, the Court will use August 10, 2009, the latest 

date provided by the parties. 

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III. CONCLUSION 

 For the above stated reasons, IT IS HEREBY ORDERED that: 

 1. Judgment be entered in favor of Plaintiff in the amount of $675,101.66 

and (1) against Melanie Moore and State Insulation LLC, an Arizona limited 

liability company, and State Insulation LLC, a Nevada limited liability company, on 

Plaintiff’s second cause of action for aiding and abetting intentional torts; and (2) 

against defendants Harold M. Moore and Elaine K. Moore a/k/a Melanie K. Moore 

on Plaintiff’s third cause of action for fraud. Harold M. Moore, Elaine K. Moore 

a/k/a Melanie K. Moore, and State Insulation LLC, an Arizona limited liability 

company, and State Insulation LLC, a Nevada limited liability company, are jointly 

liable for this amount. 

 2. Judgment be entered against Plaintiff and in favor of defendants State 

Insulation LLC, an Arizona limited liability company, and State Insulation LLC, a 

Nevada limited liability company, on Plaintiff’s third cause of action for fraud. 

 3. Judgment be entered against Plaintiff and in favor of defendants Harold 

M. Moore and Elaine K. Moore a/k/a Melanie K. Moore on Plaintiff’s fourth cause 

of action for constructive fraud. 

 4. Judgment be entered against Plaintiff and in favor of defendant Harold 

M. Moore on Plaintiff’s sixth cause of action for securities fraud. 

 5. Judgment be entered against Plaintiff and in favor of defendants Harold 

M. Moore, Elaine K. Moore a/k/a Melanie K. Moore, State Insulation LLC, an 

Arizona limited liability company, and State Insulation LLC, a Nevada limited 

liability company, and The 1998 Harold M. Moore Revocable Trust, on Plaintiff’s 

seventh cause of action for conversion and Plaintiff’s ninth cause of action for 

conspiracy. 

 6. Judgment be entered against Plaintiff and in favor of defendant The 

1998 Harold M. Moore Revocable Trust on Plaintiff’s second cause of action for 

aiding and abetting intentional torts, Plaintiff’s third cause of action for fraud, and 

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Plaintiff’s ninth cause of action for conspiracy. 

 7. Judgment be entered against Plaintiff and in favor of Mark Peluso on 

Plaintiff’s second cause of action for aiding and abetting intentional torts. 

 8. Pursuant to Rule 68, judgment is entered in favor Counter-Claimant 

Harold M. Moore and against Counter-Defendant John Hardisty in the sum of 

$750,000.00. This sum is to be paid from the payment bond issued by Great 

American Insurance Company, which is currently being held in the registry of the 

Chancery Court for Knox County, Tennessee, and the subject of a certain 

interpleader action pending in that court (Great Am. Ins. Co. v. State Insulation, 

LLC, Case No. 181402-3 (Interpleader Action)). This shall be the total amount to be 

paid on account of any liability claimed by Counter-Claimant in this action, 

including without limitation any and all claims for compensatory damages, statutory 

damages, attorneys’ fees, litigation expenses and costs of suit otherwise recoverable 

in this action by Counter-Claimant. 

 The Court instructs the Clerk to issue an Amended Judgment accordingly, 

which vacates and supersedes the Clerk’s Judgment previously issued in this case on 

September 19, 2014 (ECF No. 145). 

 IT IS SO ORDERED.

DATED: February 20, 2015 

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