Court Opinion

ID: 2654587
Source: CourtListenerOpinion
Date Created: 2014-02-26 01:02:33.70838+00
Date Added: 2024-06-11T12:18:04.393194
License: Public Domain

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                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION TWO

HSBC BANK USA, NATIONAL                                              B236346
ASSOCIATION,
                                                                     (Los Angeles County
         Plaintiff and Respondent,                                   Super. Ct. No. BC428453)

         v.

ALEXANDER L. CAPPELLO et al.,

         Defendants and Appellants.

ALEXANDER L. CAPPELLO et al.,                                        B240491

         Cross-complainants and Appellants,                          (Los Angeles County
                                                                     Super. Ct. No. BC428453)
         v.

HSBC BANK USA, NATIONAL
ASSOCIATION et al.,

         Cross-defendants and Respondents.
      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 Cross-
defendants, 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.

                                            2
         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 cross-
complaint 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.

                                              3
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

                                             4
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

                                               5
(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 cross-
complaint’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

                                              6
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”].)

                                              7
       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

                                              8
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 cross-
complaint 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.”

                                              9
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.”

                                            10
       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

                                            11
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.

                                             12
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

                                                13
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

                                              14
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.

                                             15
                                    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.

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