Filed 2/25/14 HSBC Bank USA, Nat. Assn. v. Cappello CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

HSBC BANK USA, NATIONAL 

ASSOCIATION,

Plaintiff and Respondent,

v.

ALEXANDER L. CAPPELLO et al.,

Defendants and Appellants.

 B236346

 (Los Angeles County

 Super. Ct. No. BC428453)

ALEXANDER L. CAPPELLO et al.,

Cross-complainants and Appellants,

v.

HSBC BANK USA, NATIONAL 

ASSOCIATION et al.,

Cross-defendants and Respondents.

 B240491

 (Los Angeles County

 Super. Ct. No. BC428453)
2

APPEALS from judgments of the Superior Court of Los Angeles County. 

Terry A. Green, Judge. Affirmed.

Greenberg Glusker Fields Claman & Machtinger, Judy M. Lam and Lori L. 

Werderitch for Cross-complainants, Defendants and Appellants.

Katten Muchin Rosenman, Stuart Richter and Yonaton Rosenzweig for Crossdefendants, Plaintiff and Respondents.

______________________

These two consolidated appeals follow the sustaining of a demurrer without leave 

to amend a cross-complaint and a summary judgment in favor of the plaintiff, in this 

collection action. We discuss each set of pleadings and rulings separately. For the 

reasons set forth below, we affirm the judgments.

Briefly, by way of background, in March 2007, plaintiff HSBC Bank USA, 

National Association (the Bank) loaned to defendant Alexander Cappello (Cappello) the 

sum of $3 million, pursuant to the terms of a note. In January 2009, Cappello restated the 

note and executed a revolving demand note, pursuant to which the loan was due on 

April 1, 2009. The loan was guaranteed by the “Alexander L. and Linda Cappello 2001 

Family Trust” (Trust) and Euro American Financial Corp. doing business as Cappello 

Group (Euro American). After the Bank made demand on Cappello to pay all sums due 

and payable, including interest, no payment was made. On December 21, 2009, the Bank 

filed a verified complaint for breach of revolving demand note, breach of guaranties, 

claim and delivery, conversion, and money lent.
3

THE FIRST APPEAL—DEMURRER TO CROSS-COMPLAINT

In May 2011, a year and a half after the lawsuit was initiated, the trial court 

permitted Cappello and Cappello Group, Inc.1(the Cappello parties) to file a crosscomplaint against the Bank and its employee, James C. Colman (Colman). We conclude 

that the trial court properly sustained without leave to amend the Bank’s and Colman’s 

demurrer to the cross-complaint on the ground that no independent tort duty arose out of 

this ordinary commercial transaction.

Allegations of the Cross-Complaint

The cross-complaint alleged as follows: Cappello is an investment banker and 

principal of Cappello Group, Inc. During Cappello’s course of dealing with the Bank, he 

“resolved to sell to Dr. Steven Funk [Funk] an equity interest in Cappello Group or form 

with Dr. Funk a newly-formed entity holding many of Mr. Cappello’s assets for up to $10 

million.” Cappello and Funk had been “closely acquainted” for more than 20 years. 

Nevertheless, Funk “required as a pre-condition to the $10 million investment, a positive 

reference from a bank to support Mr. Cappello’s reputation in the local community and 

his capacity for growing Cappello Group.”

Cappello informed Colman, who was his relationship officer at the Bank, of the 

potential investment that would be used to pay off the Bank and several other creditors, 

and of the “critical” importance of a positive reference. Colman “unequivocally 

promised” that he would provide the necessary positive reference. Colman’s promise 

was made with the understanding that Funk was already aware that a loan was in default 

and that the default was the very reason Cappello was seeking investors. 

Colman and Funk spoke by phone. Despite Colman’s promises and 

representations, he “fumbled” the call. Colman told Funk that the Bank considered its 

relationship with Cappello to be of no substantive value; did not consider Cappello to be 

a good client; did not find any value in Cappello’s contacts, network or ability to develop 

and grow Cappello Group, Inc.; and that it had never benefitted from Cappello’s contacts 

1 Cappello denies that Cappello Group, Inc. is the same company as Euro American.
4

or network. Colman later represented to Funk that the phone call went “great,” and 

“fine,” when it had not.

Colman’s comments “killed the investment.” Funk took from the comments that 

Cappello’s relationship with the Bank was at an end. Funk called other officers of the 

Bank, one of whom essentially refused to talk to him, was extremely rude, and hung up. 

Two other officers never returned his calls. “As a direct result of the extremely negative 

reference Dr. Funk received from Mr. Colman, and the equally negative handling by the 

other HSBC officers, Dr. Funk cancelled his intended investment of $10 million.” 

Cappello had other favorable, professional and banking relationships. Based on 

Colman’s promise to provide a positive reference, Cappello did not seek additional 

references. Had Cappello believed there was any possibility that Colman would provide 

a negative reference, Cappello would never have arranged the phone call. Instead, 

Cappello would have secured references from the other banks with whom he had a 

business relationship. The Cappello parties have been “unable to secure another 

investor.” 

The cross-complaint alleges four causes of action for negligence, negligent 

misrepresentation, negligent interference with prospective economic advantage, and 

promissory estoppel, and seeks $10 million in damages.

The Ruling

The trial court sustained the Bank’s and Colman’s demurrer to the cross-complaint

without leave to amend, dismissing the cross-complaint in its entirety. This ruling had 

the effect of dismissing as parties from the lawsuit both Colman and Cappello Group, Inc. 

The Cappello parties filed a notice of appeal on September 30, 2011.

Standard of Review

We review de novo a trial court’s sustaining of a demurrer without leave to 

amend, exercising our independent judgment as to whether a cause of action has been 

stated as a matter of law. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 

294, 300; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125.) We 

assume the truth of properly pleaded allegations in the complaint and give the complaint 
5

a reasonable interpretation, reading it as a whole and with all its parts in their context. 

(Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 558; People 

ex rel. Lungren v. Superior Court, supra, at p. 300.) “‘However, we will not assume the 

truth of contentions, deductions, or conclusions of fact or law.’” (Total Call Internat., 

Inc. v. Peerless Ins. Co. (2010) 181 Cal.App.4th 161, 166.) We will also disregard 

allegations which are contrary to law or to judicially noticed facts. (Wolfe v. State Farm 

Fire & Casualty Ins. Co. (1996) 46 Cal.App.4th 554, 559–560.) Thus, admissions of a 

party in prior sworn statements or pleadings may be taken as true on demurrer. (Able v. 

Van Der Zee (1967) 256 Cal.App.2d 728, 734; C.R. v. Tenet Healthcare Corp. (2009) 

169 Cal.App.4th 1094, 1103 [on demurrer, “the truth of [sworn] statements may be 

accepted when made by a party”]; Valerio v. Andrew Youngquist Construction (2002) 

103 Cal.App.4th 1264, 1271 [a party’s admission in the pleadings is binding]; Rauber v. 

Herman (1991) 229 Cal.App.3d 942, 954 [taking judicial notice on demurrer of 

plaintiff’s declarations filed in support of preliminary injunction]; Del E. Webb Corp. v. 

Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [“the court passing upon the 

question of the demurrer may look to affidavits filed on behalf of plaintiff,” as well as the 

plaintiff’s answers to interrogatories, request for admissions, and the like].)

We apply the abuse of discretion standard in reviewing a trial court’s denial of 

leave to amend. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Hernandez v. City of 

Pomona (1996) 49 Cal.App.4th 1492, 1497–1498.) On appeal, the plaintiff bears the 

burden of proving there is a reasonable probability that an amendment may cure any 

defect. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) To meet this 

burden, the plaintiff must show (1) the manner in which he or she intended to amend the 

complaint and (2) how the proposed amendment will change the legal effect of the 

complaint. (Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43.) 

The plaintiff must clearly and specifically set forth the factual allegations that sufficiently 

state all required elements of the cause of action, and the “[a]llegations must be factual 

and specific, not vague or conclusionary.” (Id. at p. 44.) If the plaintiff fails to make the 

required showing, the judgment of dismissal must be sustained. (Goodman v. Kennedy
6

(1976) 18 Cal.3d 335, 349–350.) “A plaintiff may not avoid a demurrer by pleading facts 

or positions in an amended complaint that contradict the facts pleaded in the original 

complaint or by suppressing facts which prove the pleaded facts false.” (Cantu v. 

Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 877.)

The Trial Court Properly Sustained the Demurrer Without Leave to Amend

No Duty of Care

The cross-complaint asserts negligence causes of action based on a duty of care. 

But the allegations of the cross-complaint sound in contract. The cross-complaint 

repeatedly alleges that Colman, on behalf of the Bank, made an oral “promise” to 

Cappello to provide a positive reference to Funk and then broke this promise.

A party may not convert a broken promise into a tort by simply pleading breach of 

a duty of care. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 553 [courts must avoid 

“converting every contract breach into a tort”]; Stop Loss Ins. Brokers, Inc. v. Brown & 

Toland Medical Group (2006) 143 Cal.App.4th 1036, 1041 [“Despite the crosscomplaint’s use of negligence terminology, the alleged misconduct by [defendant] 

describes, at most, a breach of contract, not a breach of a legal duty of care”].) 

An exception to the general rule that contracting parties do not owe one another a 

duty in tort arises in the context of a “special relationship.” (Egan v. Mutual of Omaha 

Ins. Co. (1979) 24 Cal.3d 809, 820.) Such a relationship exists when “public policy 

considerations” support imposition of tort-based exemplary damages, as opposed to 

contract-based compensatory damages. (Ibid.) Thus, courts have held that the “superior 

bargaining position” of the insurer in an insurance contract gives rise to a special 

relationship, permitting the insured to bring tort-based claims against the insurer. (Ibid.)

In the pivotal case of Foley v. Interactive Data Corp. (1988) 47 Cal.3d 654 

(Foley), our Supreme Court declined to find a special relationship giving rise to a tort 

duty in the employer-employee context. (Id. at p. 692.) The Foley Court cautioned 

future courts to carefully consider “the fundamental polices underlying the development 

of tort and contract law in general” and the unique qualities of the insured/insurer 
7

relationship, where tort remedies are available, before extending tort remedies for broken 

promises in arms-length relationships. (Id. at pp. 689–690.)

In Mitsui Manufacturers Bank v. Superior Court (1989) 212 Cal.App.3d 726

(Mitsui), upon which the trial court here relied, the reviewing court declined to impose a 

tort duty when a lender reneged on an alleged oral promise to the borrowers. There, the 

borrowers had signed short-term promissory notes for approximately $2 million, and the 

bank had orally promised to renew the short-term credit indefinitely until long-term 

financing could be secured and to provide the long-term financing itself if needed. (Id. at 

pp. 728–729.) After several renewals, the bank demanded payment in full. The 

borrowers, like the Cappello parties here, cross-complained for tort damages arising from 

the bank’s alleged oral promise. (Id. at p. 729.) Relying on Foley, the Mitsui Court 

explained: “Foley, impliedly if not expressly, limits the ability to recover tort damages in 

breach of contract situations to those where the respective positions of the contracting 

parties have the fiduciary characteristics of that relationship between the insurer and 

insured.” (Id. at p. 730.) The Mitsui Court went on to find that “the ordinary arms-length 

commercial lender/borrower relationship was insufficient as a matter of law to generate 

tort damages for the breach of the covenant of good faith and fair dealing” (id. at p. 729), 

and that the lender’s alleged oral promise to grant renewals was not sufficiently unique to 

create a special relationship between the contracting parties (id. at p. 731).

As the Bank points out, following Mitsui our Supreme Court has twice reaffirmed 

that claims for tortious breach of a promise in an arms-length relationship are rare and 

require special circumstances well beyond a mere promise. (Freeman & Mills, Inc. v. 

Belcher Oil Co. (1995) 11 Cal.4th 85, 95 [“courts should limit tort recovery in contract 

breach situations to the insurance area, at least in the absence of violation of an 

independent duty arising from principles of tort law other than denial of the existence of, 

or liability under, the breached contract”]; Erlich v. Menezes, supra, 21 Cal.4th at p. 554 

[“Focusing on intentional conduct gives substance to the proposition that a breach of 

contract is tortious only when some independent duty arising from tort law is violated”].)
8

We find this case to be no different from Mitsui and its progeny. In Mitsui, the 

bank orally promised to extend the borrowers’ notes until they could secure long-term 

financing so that they would not default on their loans, and then reneged on its promise. 

Likewise here, allegedly the Bank orally promised to provide a positive reference for 

Cappello so that he could raise funds to pay off his defaulted loan, and then reneged on 

its promise. Both situations involved an arms-length commercial transaction and a 

promise based on that transaction. Under Foley, these facts are insufficient to give rise to 

a special relationship imposing a duty of care.

The Cappello parties’ attempt to limit Mitsui to the specific cause of action at issue 

(tortious breach of the covenant of good faith and fair dealing) is unpersuasive. As noted 

above, Mitsui relied heavily on Foley, applying its concepts to the lender-borrower 

relationship. And Foley broadly disapproved of extending tort damages to contract cases 

in general.

The Cappello parties’ reliance on Nymark v. Heart Fed. Savings & Loan Assn.

(1991) 231 Cal.App.3d 1089 is misplaced. Nymark actually stands for the same 

proposition as Mitsui: “[A]s a general rule, a financial institution owes no duty of care to 

a borrower when the institution’s involvement in the loan transaction does not exceed the 

scope of its conventional role as a mere lender of money. [Citations.] . . . ‘Liability to a 

borrower for negligence arises only when the lender “actively participates” in the 

financed enterprise “beyond the domain of the usual money lender.”’” (Id. at p. 1096, 

fn. omitted.) Indeed, Nymark noted: “‘[A] strong public policy exists, if our financial 

institutions are to remain solvent, to prevent a conventional money lender from having to

insure [the success of every investment].’” (Id. at pp. 1099–1100.) 

The Cappello parties’ reliance on Holcomb v. Wells Fargo Bank, N.A. (2007) 155 

Cal.App.4th 490 is also misplaced, since that case is distinguishable. There, the 

reviewing court reversed the trial court’s sustaining of a demurrer to a negligent 

misrepresentation claim, where the complaint alleged that a bank’s branch manager told a 

depositor that a $10,000 check had cleared and he could write checks against the deposit, 

when the manager had been informed that the check had in fact been returned for 
9

insufficient funds. (Id. at p. 499.) By contrast here, the cross-complaint does not allege 

that Colman made a representation to Cappello about the status of Cappello’s bank 

account or loan; rather, the cross-complaint involves the very different scenario where

Colman made an alleged promise to Cappello and then reneged on that promise. 

No Cure by Amendment

The Cappello parties argue they should be given leave to amend their crosscomplaint to plead facts that take this case outside of the ordinary commercial 

lender/borrower relationship. Specifically, they argue that “an amendment can more 

fully demonstrate how HSBC’s voluntary assumption of duty was a separate agreement 

to take on the Funk Investment, to vouch for Appellants, and to make crystal clear how 

HSBC went beyond the scope of its role as a mere lender of money, voluntarily injecting 

itself into an independent business deal that was separate from HSBC’s collection 

efforts.” As a matter of law, these amendments cannot be made.

As noted above, a plaintiff cannot avoid a demurrer by amending a complaint to 

plead facts or positions that contradict or suppress facts or positions previously pled, even 

in another action. (Cantu v. Resolution Trust Corp., supra, 4 Cal.App.4th at p. 877; Able 

v. Van Der Zee, supra, 256 Cal.App.2d at p. 734 [“A general demurrer may properly be 

sustained without leave to amend where the broad allegations of the plaintiff's complaint 

are directly contradicted by an affidavit filed voluntarily in opposition to the defendant’s 

demurrer”].)

In support of the demurrer, the Bank requested the trial court to take judicial 

notice of the “Verified Second Amended Answer To Complaint,” verified by Cappello.2

As part of the affirmative defenses of “Failure to Mitigate,” “Set-Off or Offset,” and 

“Unclean Hands,” Cappello asserted that the Bank “promise[d] to provide a favorable 

recommendation as a part of the modification [of the terms of the demand note], which 

2

The parties do not point to any place in the record showing a specific ruling on this 

request by the trial court; however, we note that the written ruling on the demurrer states 

that the trial court “has considered the pleadings and papers submitted by counsel.” 
10

Mr. Cappello signed in partial reliance upon such promises.” Thus, any amended 

pleading that Colman’s promise of a positive reference was somehow a separate or 

independent transaction from the loan transaction would impermissibly contradict these 

prior verified assertions. Moreover, the cross-complaint itself alleges that Colman’s 

promise was made with the understanding that a loan was in default and that the default 

was the very reason Cappello was seeking investors.

As aptly stated by the Bank, these “sworn statements and pleadings have tied [the 

Bank’s] alleged promise for a favorable recommendation to the lending relationship,” and 

the Cappello parties “cannot now un-plead these facts.”3

THE SECOND APPEAL—MOTION FOR SUMMARY JUDGMENT

We conclude that the trial court properly granted the Bank’s second summary 

judgment motion, on the grounds that there are no triable issues of material fact as to 

appellants’ affirmative defenses, and that appellants’ remaining claims of procedural 

error have no merit.4

Procedural Background

The First Summary Judgment Motion

In their amended answer to the Bank’s verified complaint, appellants raised two 

affirmative defenses (Failure to Mitigate and Set-Off) based on Colman’s broken promise 

to provide a positive reference to Funk about Cappello, what the parties refer to as the 

“Funk Defense.” After receiving interrogatory responses that appeared to abandon the 

Funk Defense, the Bank filed its first motion for summary judgment on September 29, 

2010, on the grounds that the loan was valid, due and unpaid. 

3

In light of our conclusion, we need not address the parties’ remaining arguments 

regarding the correctness of the trial court’s ruling sustaining the demurrer without leave 

to amend.

4

For purposes of the appeal from the summary judgment, we will refer to 

defendants Cappello, Euro American and “Alexander L. Cappello and Linda N. Cappello 

as trustees of The Alexander L. and Linda Cappello 2001 Family Trust” collectively as 

“appellants.”
11

Appellants opposed the motion by reviving the Funk Defense and submitting 

Funk’s declaration. Funk declared that following his telephone call with Colman, he was 

left with an “extremely negative impression” of Cappello and that he understood 

Cappello’s relationship with the Bank was at an end. Funk also declared that his 

conversation with Colman “stuck a dagger in the very heart” of his $10 million loan or 

investment that he was considering making to Cappello’s company. In March 2010 (after 

the Bank filed this lawsuit), Funk contacted Bank officer, Fred Schimel, who essentially 

refused to talk to Funk, was extremely rude and hung up on him. Funk tried contacting 

Mr. Schimel’s supervisor, Richard Werner, who never returned his calls. Funk also tried 

contacting Mr. Werner’s supervisor, Gerald Nagle, who eventually left a voicemail 

stating that he would not speak to Funk without an attorney. Funk concluded: “As a 

direct result of the extremely negative reference I received from Mr. Colman, and the 

equally negative handling by the other HSBC officers, I abandoned my intended 

investment in the Cappello Group.” 

The trial court denied the first motion for summary judgment without prejudice, 

finding disputed issues of material fact regarding the Funk Defense. Because the Bank 

had been unable to obtain discovery regarding Funk, the trial court continued the trial, 

and ordered appellants to produce discovery regarding Funk.

The Second Summary Judgment Motion

After Funk appeared for his deposition, the Bank moved for summary judgment a 

second time in October 2011, relying on Funk’s deposition testimony. In his deposition, 

Funk admitted that he maintained significant interest in investing in Cappello’s company

well after his conversation with Colman, which took place in March 2009.

5

 The motion 

5

Funk testified as follows: 

“Q. Okay, but after your conversation with Mr. Colman you continued to do your 

due diligence and look toward doing an investment, though? [¶] A. Right. [¶] Q. So 

when you say ‘stuck a dagger,’ the possibility of investment wasn’t done. [¶] A. What 

date was that [declaration] signed? [¶] Q. This was signed in January 2011. [¶] A. A 

lot of retrospect there. [¶] Q. And what do you mean by that, a lot of retrospective? [¶]

A. If you look back at it this deal was never going anywhere and the next guy hung up 
12

attacked the Funk Defense and sought judgment on the collection claims. Among the 

grounds for the motion was that Funk’s conversation with Colman was not the legal 

cause of Funk’s decision not to invest. 

In opposition, appellants argued that the motion was an improper second attempt 

at summary judgment. They also argued that inconsistencies between Funk’s declaration 

and deposition testimony created triable issues of fact.

The trial court sustained the Bank’s objections to those portions of Funk’s 

declaration testimony that were inconsistent with his deposition testimony. The trial 

court found there were no disputed issues of material fact as to the Funk Defense, and 

entered judgment on the Bank’s collection claims. Appellants filed a notice of appeal 

from the summary judgment on April 11, 2012.

Standard of Review

We review a grant of summary judgment de novo, considering “‘all of the 

evidence set forth in the [supporting and opposition] papers, except that to which 

objections have been made and sustained by the court, and all [uncontradicted] inferences 

reasonably deducible from the evidence.’” (Artiglio v. Corning Inc. (1998) 18 Cal.4th 

604, 612.) “There is a triable issue of material fact if, and only if, the evidence would 

allow a reasonable trier of fact to find the underlying fact in favor of the party opposing 

the motion in accordance with the applicable standard of proof.” (Aguilar v. Atlantic 

Richfield Co. (2001) 25 Cal.4th 826, 850.) “On review of a summary judgment, the 

appellant has the burden of showing error, even if he did not bear the burden in the trial 

court.” (Claudio v. Regents of University of California (2005) 134 Cal.App.4th 224, 

230.) “‘[D]e novo review does not obligate us to cull the record for the benefit of the 

 

on me. [¶] Q. I see. So you are looking back it retrospectively but at that time you were 

still willing to pursue an investment? [¶] A. Correct.” Funk testified that “as late as 

April of 2010 I was still prepared to consider an investment in this business.” Funk 

testified that what Colman told him was not consistent with his personal beliefs about 

Colman, and that he thought Colman was “young” and “inexperienced.” Funk also 

testified that his inability to communicate with the Bank’s other officers was “critical” to 

his decision not to invest in Cappello’s company, and that he was not willing to invest 

while the loan was in recovery or litigation. 
13

appellant in order to attempt to uncover the requisite triable issues. As with an appeal 

from any judgment, it is the appellant’s responsibility to affirmatively demonstrate error 

and, therefore, to point out the triable issues . . .’” (Ibid.) “If the trial court’s decision is 

correct on any legal theory, the judgment will be affirmed.” (Marshak v. Ballesteros

(1999) 72 Cal.App.4th 1514, 1517.)

The Trial Court Properly Granted Summary Judgment

No Triable Issues of Material Fact

Appellants argue that summary judgment should not have been granted because 

triable issues of material fact existed as to their affirmative defenses. To prove their 

point, appellants basically just cite cases for the proposition that their affirmative 

defenses are factual questions that should be left for trial. But appellants overlook that 

issues within their defenses can be questions of law—such as causation. “A question of 

fact can become one of law, however, when only one reasonable conclusion can be drawn 

from the undisputed foundational facts.” (Weber v. Langholz (1995) 39 Cal.App.4th 

1578, 1583.)

Appellants’ attempt to create triable issues of fact regarding the Funk Defense fail. 

They argue that any inconsistencies between Funk’s declaration and his deposition 

testimony should have been resolved in their favor and left for trial. But appellants 

ignore the fact that the trial court sustained the Bank’s evidentiary objections to those 

portions of Funk’s declaration testimony that were inconsistent with his deposition 

testimony. Appellants do not challenge this ruling on appeal. Accordingly, only Funk’s 

deposition testimony was in evidence. 

Funk’s deposition testimony makes clear that his March 2009 conversation with 

Colman was not the proximate cause of his decision not to invest with Cappello. “Unless 

the act complained of was the proximate cause of the injury, there is no liability.” 

(Augustine v. Trucco (1954) 124 Cal.App.2d 229, 246.) Funk admitted that as late as 

April 2010, more than a year after the conversation, he was still prepared to consider 

investing with Cappello. Based on this undisputed evidence, the trial court correctly 
14

found that “Colman’s negative reference to Funk was not the legal cause for Funk 

deciding not to invest in the Cappello Parties.”

To the extent appellants rely on Funk’s testimony that he abandoned his 

investment based on his postlitigation conversations with the Bank’s officers, these facts 

were not pled as part of appellants’ affirmative defenses in either the amended or verified 

second amended answers. The trial court acted within its discretion to refuse to consider 

an unpled theory. (See Valerio v. Andrew Youngquist Construction (2002) 103 

Cal.App.4th 1264, 1271–1272.)

Appellants’ Remaining Claims of Procedural Error Fail

Appellants raise three additional contentions as to why the trial court erred in 

granting the Bank’s second summary judgment motion, none of which have merit.

First, appellants argue that the trial court should not have entertained the second 

motion because it was merely a repackaging of the first summary judgment motion. 

Code of Civil Procedure 437c, subdivision (f)(2) provides that “a party may not move for 

summary judgment based on issues asserted in a prior motion for summary adjudication 

and denied by the court, unless that party establishes to the satisfaction of the court, 

newly discovered facts or circumstances or a change of law supporting the issues 

reasserted in the summary judgment motion.” Here, newly discovered facts were present. 

After the first summary judgment motion was denied, the Bank compelled discovery, 

including Funk’s deposition. Funk’s deposition testimony made clear that, contrary to his 

earlier declaration testimony, he remained interested in investing with Cappello for at 

least a year after receiving Colman’s negative reference of Cappello, and decided not to 

invest because the Bank was enforcing its collection rights. The trial court was properly 

satisfied that the second motion was “a wholly new motion built on wholly new evidence 

that was discovered after the last one.” 

Appellants next argue that the trial court erred in granting summary judgment 

because the notice of the second motion sought adjudication of only three affirmative 

defenses (failure to mitigate, offset and unclean hands) leaving three other defenses 

(waiver, estoppel and excuse) for trial. This argument is disingenuous. The notice for 
15

the second summary judgment motion states: “[B]ecause the Court was previously 

prepared to grant summary judgment on HSBC’s claim but for the Funk Defense, if the 

Court grants summary adjudication as to the Cappello Parties’ three remaining 

Affirmative Defenses [failure to mitigate, offset and unclean hands], then HSBC will and 

hereby does move for summary judgment as to its First, Second, and Third causes of 

action. If granted, then HSBC will withdraw its remaining claims and respectfully 

requests final judgment against the Cappello Parties and each of them.” The trial court 

granted summary adjudication as to the three noticed affirmative defenses and as to the 

first three causes of action. Because each cause of action was decided in favor of the 

Bank, there were no remaining defenses. (See Aguilar v. Atlantic Richfield Co., supra, 

25 Cal.4th at p. 853 [when a plaintiff moves for summary judgment, each defense is put 

at issue and the plaintiff is not required to disprove every defense].) 

Finally, appellants argue that the trial court lacked jurisdiction to hear the second 

summary judgment motion while the notice of appeal from the judgment dismissing the 

cross-complaint following the sustaining of the Bank’s and Colman’s demurrer was 

pending in this court. Code of Civil Procedure section 916, subdivision (a) provides that 

“the perfecting of an appeal stays proceedings in the trial court upon the judgment or 

order appealed from or upon the matters embraced therein or affected thereby, including 

enforcement of the judgment or order, but the trial court may proceed upon any other 

matter embraced in the action and not affected by the judgment or order.” Here, the first 

notice of appeal on file was from a judgment following a demurrer to a cross-complaint; 

it had nothing to do with summary judgment on the complaint. Thus, the trial court ruled 

on a separate matter not affected or embraced by the appealed ruling on the demurrer.
16

DISPOSITION

The judgments are affirmed. The Bank is entitled to recover its costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

______________________________, J.

ASHMANN-GERST

We concur:

_______________________________, P. J.

BOREN

_______________________________, J.*

FERNS

*

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to 

article VI, section 6 of the California Constitution.