N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT FNB N RESC O N I, LLC

Pla i ntiff-Appe lla

nt,
v. C ITR US EL DOR

ADO, LLC , De fe nda n t,
and C R AFTSM EN HOM E S, LLC ; e t a l., De fe nda n ts-Appe lle e s. No. 16-55604 D.C . No. 8:13-c v-00474-DOC -R

NB
M EM O R ANDUM *

C ITR US EL DOR

ADO, LLC , Pla i ntiff-Appe lle e , v. STEAR NS B ANK, De fe nda n t-Appe l la

nt,
and FNB N RESC O N I LLC ; e t a l., No. 16-55625 D.C . No. 8:09-c v-01462-DOC -R

NB 

# FIL ED FEB 01 2018 M OLLY C. DW Y ER, CLERK U
. S. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.De fe nda n ts. Appe a ls from

the Unite d

Stat e s Distric t C ourt for the C e ntra l Distric t of C a lifornia Dav id O. C arte r, Distric t Judge , Pre siding Argue d an d Subm i tte d De c e m be r 7, 2017 Pa sa de n a , C a l ifornia B e fore : TASHIM A, W
. FLETC HER , a nd B E R ZON, C irc uit Judge s. In the se c om

pa nion a ppe a ls, Ste arns B ank LLC (“ Ste arns” ) and FNB N R e sc on I LLC (“ R e sc on” ) a ppe a l from

the distric t c o urt’ s orde rs de ny i ng the ir
re ne we d m otions for judgme nt a s a m atte r of la

w. W e have jurisdic t ion unde r 28 U.S.C . § 1291, a

nd we a ffirm
. I. C itrus El Dora d o LLC (“ C itrus” ) e nte re d into a C onstruc tion Loa

n Agre e m e nt with First Herita ge B ank. Unde r the Agre e m e nt, C itrus would re c e ive a $13,394,000 loa

n in orde r to fina

nc e the c onstruc t ion of a

re side ntia l de ve lopm e nt. The loa n wa s se c ure d by

a de e d of trust on the

prope rty . In a ddition, Sc ott Sha ddix (the m a na ging m e m

be r of C itrus), C ra ftsm e n Hom e s LLC , a nd Swe e twate r Holdings Inc . (“ the Gua

rantors” ) gua

rante e d C itrus’ s obliga

tions unde r the
a gre e m e nt.
2First He rita ge B a nk fa i le d a

nd wa s pla c e d into FDIC re c e i ve rship. The FDIC sold theAgre e m e nt through a se rie s of c onte m

pora ne ous tra nsa c tions. In one transa c tion, theFDIC c re ate d R e sc on, a nd a ssigne d its intere st in the Agre e m e nt to it. In a se pa ra te tra nsa c tion, “ Ste arns SPV I,” a subsidia ry of Ste arns, purc ha se d the FDIC ’ s sole m e m

b e rship inte re st in R e sc on for a pproxim ate ly $32 m illion. Ste arns
a lso a gre e d to se rvic e the loa n on R e sc on’ s be ha lf. Following c onte ste d

e ve nts, Ste arns de c line d

to a dva nc e loa n funds to C itrus
and C itrus de fa

ulte d. In C a se No. 16-55625 (the “ C itrus M atte r” ) C itrus brought
c ontra c t a nd tort c la im s a ga i nst R e sc on a nd Ste arns. The distric t c ourt e nte re d judgm e nt a ga inst Ste a

rns, a n d Ste arns a

ppe a l e d. In C

itrus El Dorado LLC

v . Ste a rns Bank

, 552 F. App’ x 625 (9th C ir. 2014), this c ourt re ve rse d tha t judgm e n t. On re m an d, the jury

trie d C i trus’ s sole re m a i ning bre a c h of c ontra c t c la i m a ga inst Ste a rns a nd re turne d a ve rdic t in C itrus’ s favor. In C a se No. 16-55604 (the “ R e sc on M atte r” ), R e sc on file d c la im s a ga inst the G ua rantors for fa i ling to pa

y the outsta

nding ba la

nc e on the loa

n. The Gua rantors ra ise d a

n unc le an ha

nds a ffirm ative de fe nse , a rguing tha

t R e sc on a c te d in ba d fa ith a

nd wa s the re fore pre c lude d from re c ove ring on thegua

ranty . The jury
re turne d a ve rdic t in theGua

ra ntors’ fav or.

3Ste arns a nd R e sc o n, in the ir re spe c tive m atte rs, file d re ne we d m otions for judgm e nt a s a

m atte r of la

w tha t we re de n i e d by

the distric t c ourt. B oth pa rtie s now
a ppe a l. II. In the C itrus M atte r, Ste arns a rgue s tha t the jury ve rdic t wa s not supporte d by substa ntia l e vide nc e . W e re v ie w de novo thedistric t c ourt’ s de nia l of a re ne we d
m otion for judgme nt a s a

m atte r of la

w. J ose phs v . Pac . Be l l , 443 F.3d 1050, 1062 (9th C ir. 2006). Theve rdic t m ust be uphe ld “ if it is supporte d by substa ntia l
e vide nc e , whic h is e vide nc e a de quate to support the jury ’ s c onc lusion, e ve n if it is
a lso possible

to dra w a c ontra ry c onc lusion.” Pav ao v . Pagay , 307 F.3d 915, 918 (9th C ir. 2002). W e m

ust vie wthe e vide n c e in the light m ost fa vora ble to the
nonm o ving pa

rty

— he re , C itrus— and dra

w a ll re a sona

ble infe re nc e s in tha

t pa rty ’ s favor. Re e v e

s v . Sande r

son Plumbing Prods., Inc
. , 530 U.S. 133, 149–50 (2000). Ste arns first a

rgue s tha t t he re c o rd c onta ins no e vide nc e tha t it a ssum e d the le nde r’ s obliga

t ions unde r the C onstruc tion Loa n Agre e m e nt. Ste arns wa s not a pa rty to the origina l Agre e m e nt, but thedistric t c ourt instruc te d the jury tha t Ste a rns c ould be found to ha

ve im plie d ly a ssum e d the Agre e m e nt’ s obliga tions if it
wa s a ware of those obliga

tions a nd if it a c c e pte d a ll of the be ne fits of C itrus’ s pe rform a nc e . Se e C a l . C i v. C o d e § 1589. On a ppe a l , Ste arns a

rgue s tha t the re c ord
4doe s not indic ate tha t it a c c e pte d a

ny be n e fits. Our re vie w of the re c ord, vie we d in the l ight m ost fa

vora ble to C itrus, supports the jury ’ s c onc lusion. B e c a use R e sc on is owne d by Ste arns SPV I, a wholly -owne d

subsidia ry of Ste arns, the be ne fits of C itrus’ s pe rform an c e ultim ate ly ran to Ste arns. Ste arns a lso a

rgue s tha t the re c ord c onta i ns insuffic ie nt e vide nc e tha t C itrus pe rform e d c onditions tha

t we re pre c e de nt to its entitle m e n t to re c e ive loa n funds. The c onditions c ha lle nge d by Ste arns re q

uire d C i trus to (1) de m onstra t e tha t the re we re suffic ie n t

funds to c o m

ple te the proje c t a

nd pa y othe r sum s unde r the Agre e m e nt; (2) pa

y a ll outsta nding prope rty

taxe s a nd a sse ssm e nts; (3) ke e p the prope rty fre e of lie ns; a

nd (4) obta in titleinsura

n c e in orde r to m a inta in “ the
c ontinue d priority

of the [Le nde r’ s] lie n” from m e c ha n ic ’ s lie ns. Substa ntia l e v i de nc e supports the jury ’ s c onc lusion tha

t C itrus pe rform e d, or
wa s e xc use d from

pe rform ing, the re le va

nt c onditions. For the

first c ondition, the pa rtie s dispute d

whe the r or not the re we re suffic ie nt funds re m a ining to c om ple t e the p roje c t, a

nd pre se nte d c onflic ting e vide nc e on this que stion. This c ourt m ay not
se c o nd-gue ss the jury ’ s c re dibility findings or we ighing of the e vide nc e . Murray v . Labore rs Union Loc al N

o. 324 , 55 F.3d 1445, 1452 (9th C ir. 1995). W ith re spe c t to there m a ining c onditions, C itrus pre s e nte d e v ide nc e tha t Ste a rns’ s re fusa l to a dva

nc e loa n funds in a

tim e ly m anne r pre ve nte d C itrus from
5fulfilling the c onditions. Unde

r C a lifornia

la w, if one c ontra c ting pa

rty pre v e nts the othe r from

pe rform i ng a

c ondition pre c e d e nt, the pa rty tha t is subje c t to the
c ondition is exc u s e d from pe rform ing it. Se e P arsons v . Bristol De v . C o. , 62 C a l. 2d 861, 868–69 (1965); C ity of Hollister v . Monte re

y Ins. C o . , 165 C a l. App. 4th 455, 490 (2008). Fina lly , C a lifornia

ha s a pplie d the doc trine of substa ntia l pe rform anc e to
c onditions pre c e de nt. Se e , e .g. , C line v . Yamaga , 97 C a l. App. 3d 239, 247 (1979). Ste a rns c ha lle nge s only

a sm a ll subse t of the c o nditions pre c e de nt outline d in the Agre e m e nt. Substa

ntia l e v ide nc e supports a

finding tha

t C itrus substa

ntia lly pe rform e d the c o n ditions, a nd tha t Ste arns wa s not disc ha

rge d from its obliga tion to a d va nc e loa n funds. III. In the R e sc on M atte r, R e sc on a rgue s tha t the distric t

c o urt e rre d in subm itting the Gua

ran t ors’ unc le an ha

nds de fe nse to the jury . Spe c ific a lly , R e sc on c onte nds tha

t (1) the Gua

rantors wa ive d the de fe nse ; (2) the Gua rantors a re ba rre d by issue pre c l usion from ra i sing thede fe nse ; a nd a lte rnative l y , (3) the de fe nse is not supporte d by

substa ntia l e vide n c e . W e a ddre ss the s e argum e nts in turn. R e sc on first a

rgue s tha t the gua ranty c ontra c ts inc lude a

wa ive r of the right to a s se rt a n unc le an ha

n ds de fe nse . A distric t c ourt’ s inte rpre tat ion of c ontra c t

6provisions is revie we d de novo. C onrad v . Ac e Prop. &C

as. Ins. C o . , 532 F.3d 1000, 1004 (9th C ir. 2008). Eve n a ssum ing, a rgue ndo, tha

t a wa ive r e xists, a

ny suc h wa ive r would be une nforc e a ble unde r C a lifornia

la w. Se e C al. Bank & Trust
v . De lPonti , 232 C a l. App. 4th 162, 166–68 (2014). Ac c ordingly , the distric t c ourt did not e rr in c onc luding tha t the Gua ran tors we re not c ontra c tua l ly ba rre d from
ra ising thede fe nse . R e sc on a lso a

rgue s tha t the first fina l judgm e nt in theC itrus M atte r pre c lude s the Gua

rantors from

ra ising thede fe n se . Spe c ific a lly , R e sc on a rgue s tha t the G ua rantors’ de fe nse is pre m ise d on R e sc on’ s a lle ge d m isc onduc t towa rds C itrus, tha

t C itrus litiga

te d a nd lost its bre a c h of c ontra c t c la im a ga inst R e sc on in the C itrus M atte r, a

nd tha t the bre a c h of c ontra c t c l a im wa s ba se d

on sim ila r fa c t ua l a lle g ations. W e re vie w the av a ila bility of issue pre c lusion denovo; if it is
ava ila ble , we re vie w the de c ision to a pply it for a b use of disc re tion. Diaz v . Elique , 436 F.3d 1125, 1128 (9th C ir. 2006). Unde r C a l ifornia la w, issue pre c lusion is
ava ila ble whe n six fa c tors a

re m e t . The se fa c tors a

re : (1) “ the issue sought to be pre c lude d m

ust be ide ntic a l to tha

t de c ide d in a form e r proc e e ding” ; (2) the issue

“ m ust ha ve be e n a c tua lly litiga te d in the form e r proc e e ding” ; (3) the issue “ m ust have be e n ne c e ssa rily de c ide d in the form e r proc e e d ing” ; (4) “ the de c i sion in the form e r proc e e d ing m

u s t be fina l a

nd on them e rits” ; (5) “ the pa rty a ga i nst whom
7pre c lusion is sought m u s t be the sa

m e a s, or in privity

with, thepa

rty to the form e r proc e e ding” ; and (6) the a p plic ation of issue

pre c lusion m

ust be c onsiste nt with public polic y . Luc ido v . Supe rior C ourt , 51 C a l. 3d 335, 341–43 (1990). The distric t c ourt c o nc l ude d tha t pre c l usion wa s not a

v a i la ble , be c a u se the Gua rantors we re ne ithe r partie s to theorigina l la wsuit, nor in privity with a pa rty . W e disa gre e . Unde r C a lifornia la w, privity re quire s a

showing tha

t the Gua ra ntors ha d “ an ide ntity or c om m unity of inte re st with, a

nd a de quate re pre se ntation by ” C itrus in the

first a c tion. C

unningham v . Gate

s , 312 F.3d 1148, 1156 (9th C ir. 2002) (quoting C

le m me r v . Hartford Ins. C o. , 22 C a l. 3d 865, 875 (1978)). The inte re s ts of the Gua

ra ntors a nd C itrus (the princ ipa l de btor) we re c l ose ly a ligne d, give n tha t the Gua rantors’ lia

bility wa s de pe n de nt on a

finding tha

t C itrus de fa ulte d . Furthe r, a s note d by the distric t c ourt, whilethe re we re thre e gua rantors, Sc ott Sha ddix signe d the unde rly ing C onstruc tion Loa n Agre e m e nt a s a

princ ipa l of C itrus, a

nd signe d a ll thre e gua

ran ty a gre e m e nts on be ha lf of him se lf, C ra ftsm e n Hom e s, a nd Swe e twate r Holdings. In the first tria l in theC itrus M atte r, during
c losing a rgum e nt, C itrus e ve n a ske d the jury to a ward C itrus suffic ie nt funds to pa y off the Gua

rantors’ outsta

nding obliga

tions. B e c a

use the Gua

ra ntors a nd C itrus
we re in privity , the distric t c ourt e rre d in c onc l uding tha t the Gua rantors, a s nonpa rtie s, c ould not bebound by the fina l judgm e nt in theC itrus M atte r.
8Howe v e r “ [w] e m ay a ffirm the distric t c ourt on a

ny ground supporte d by

the
re c o rd, e ve n if the ground is not re lie d on by the distric t c o urt.” C harle y ’s Tax i Radio Dispatch C

orp. v . SIDA of Haw ., Inc
. , 810 F.2d 869, 874 (9th C ir. 1987). For pre c lusion to a

pply , the issue in the prior a c tion m ust be ide ntic a l to theissue for whic h pre c l usion is sought. Luc ido , 51 C a l. 3d a t 341. W e c onc lude tha

t the two re le va

nt issue s—

whe t he r R e sc on bre a c h e d its a g re e m e nt with C itrus, a nd whe the r R e sc on a c te d “ unfa irly , unc onsc iona bly , or ine quita

bly ” in its de a l ings with C itrus— are not ide ntic a l . While the re is som e ove rla p in the e vide nc e pre s e nte d at tria l, the ove ra ll fa c tua l a l le gat ions a re not the sa

m e . Our re vie w of the re c ord in thefirst C itrus tria l stre ngthe n s this c onc lusion. During thefirst tria l in theC itrus M atte r, e vide nc e wa s pre se n te d tha t R e sc on e xc lusive ly

inte ra c te d with C itrus through Ste arns, a nd tha t Ste arns re pre s e nte d itse lf a s the le nde r, disre ga rding c orporate form a l itie s. The jury re turne d a

spe c ia l
ve rdic t, in whic h it found tha t both Ste arns a

nd R e sc o n we re pa

rtie s to thec ontra c t,
and tha t e ithe r Ste arns or R e sc on bre a c h e d the c ontra c t. The jury

the n awarde d dam a ge s a

nd a lloc at e d re sponsibility to Ste arns. The s e findings le ave it a m biguous whe the r the jury re t

urne d a ve rdic t in R e sc on’ s fav or. B ut e v e n a ssum ing tha t it did, give n the c lose c onne c tions a m ong the pa

rtie s, a finding tha

t Ste arns, rathe r tha n R e sc on, bre a c he d the c ontra c t doe s not pre c lude a finding tha

t R e sc on a c te d
9unfa irly
. W e the re fore hold tha t the Gua rantors we re not pre c lude d from ra ising a n unc le an ha

nds de fe nse . R e sc on’ s fina l c o n te ntion is tha t the Gua ra ntors’ de fe nse is not supporte d by substa ntia l e vide nc e . B e c a

use the re c ord supports a

finding tha

t R e sc on c onc e a le d its ide ntity from C itrus a

nd the Gua

rantors, we c onc l ude tha

t the de fe nse is supporte d by substa

ntia l e vide nc e . R e sc on’ s a rgum e nt tha

t C itrus did not sa

tisfy a ll of the c ontra c tua l c o nditions pre c e de nt is duplic ative of Ste arns’ s a rgum e nts in the C itrus M atte r, and fa i ls for the sa m e re a s ons. AFFIRM E D.

10