Court Opinion

ID: 1036091
Source: CourtListenerOpinion
Date Created: 2013-08-01 00:03:39.519112+00
Date Added: 2024-06-11T15:38:17.710986
License: Public Domain

Filed 7/31/13 Behrmann v. Baker CA2/6

                 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115.

             IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                    SECOND APPELLATE DISTRICT

                                                   DIVISION SIX

JOHN R. BEHRMANN et al.,                                                  2d Civil No. B241830
                                                                        (Super. Ct. No. 1341686)
     Plaintiffs and Appellants,                                          (Santa Barbara County)

v.                                                   ORDER MODIFYING OPINION AND DENYING
                                                      REHEARING (NO CHANGE IN JUDGMENT)
JOEL R. BAKER et al.,

     Defendants and Respondents.

THE COURT:
                   IT IS ORDERED that the opinion filed herein on July 3, 2013, be
modified as follows:
                   1. On page 2, second line from the top of the page, after the sentence
ending with the citation to Nally, add the following sentence:
         We set forth only those facts relevant to the issues dispositive of this
         appeal.
                   2. On page 2, first full paragraph, modify the first sentence to read as
follows:
                   In the mid-1990s, Baker worked as a financial planner and created
         a proprietary investment "tool" he called the "Financial Independence
         Plan" (FIP).
              3. On page 2, first full paragraph, line 6, replace "private charity"
with: qualified community trust (charity)
              4. On page 2, first full paragraph, third line from the bottom, delete
the word "private."
              5. On page 2, second full paragraph, line 4, replace "they never met
Baker" with: they never met Baker in person
              6. On page 2, second full paragraph, line 5, replace "once years later"
with: a few times
              7. On page 2, second full paragraph, line 5, before the sentence
starting with "Baker provided the agents" insert the following sentence:
       The 117-page FIP the agents provided the Behrmanns was generic
       except for 20 pages illustrating the specific returns and tax savings the
       FIP would yield for various levels of investment; Baker's name was
       on eight of those pages, and the agents' names were on the remaining
       12.
              8. On page 2, second full paragraph, second line from the bottom,
replace "Baker provided the agents" with: Baker also provided the agents
              9. On page 2, third full paragraph that carries over to page 3, line 5,
delete the word "private."
              10. On page 3, carry-over paragraph from page 2, add to the end of
the paragraph the following sentence:
       Baker received no compensation from NHF during the life of the
       split-dollar policies.
              11. On page 3, first full paragraph, line 5, following the sentence
ending in "three insurance policies" add the following sentence:
       When the Behrmanns cashed out the policies in 2002, NHF assessed a
       $9,452 marketing service fee and placed $3,860 of that amount into a
       charity for Baker's benefit.

                                            2
                12. On page 4, third full paragraph, line 4, delete the phrase "Baker
responds that the trial court properly rejected this claim" and replace it with:
       Baker had urged the trial court, in his nonsuit motion, to reject this claim
                13. On page 4, third full paragraph, second line from the bottom, add
the following footnote after the word "losses":
                To be sure, Baker placed the causation argument under a
       subheading in his nonsuit motion dealing with the Behrmanns'
       negligence claim rather than their CLRA claim. However, Baker
       asserted in that argument that he did not cause any of the Behrmanns'
       damages. Thus, Baker adequately challenged the Behrmanns'
       evidence of causation in his nonsuit motion. (Carson v. Facilities
       Dev. Co. (1984) 36 Cal. 3d 830, 839.) Even if Baker had not, it is
       nevertheless "clear" that the Behrmanns' insufficient proof of
       causation "could not have been remedied had it been called to [their]
       attention by the motion" for two reasons: (1) the nonsuit motion was
       made after the Behrmanns had presented all of their evidence; and (2)
       the Behrmanns were unable to persuade the trial court that they had
       presented sufficient evidence of causation when the trial court raised
       the issue at the hearing on the nonsuit motion. (Lawless v. Calaway
       (1944) 24 Cal. 2d 81, 94.)
This change will require renumbering of footnotes.
                14. On page 4, third full paragraph, remove the last sentence and
replace it with the following:
       The trial court did not decide the first issue, and instead ruled that
       nonsuit was proper on the causation element alone. This was not
       error.
                15. On page 7, first full paragraph, lines 4 and 7, delete the word
"private."

                                             3
16. On page 7, third full paragraph, line 4, delete the word "private."
There is no change in the judgment.
Plaintiffs and Appellants' petition for rehearing is denied.

                              4
Filed 7/3/13 (unmodified version)

               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 or ordered published for purposes of rule 8.1115.

           IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                  SECOND APPELLATE DISTRICT

                                                DIVISION SIX

JOHN R. BEHRMANN et al.,                                                       2d Civil No. B241830
                                                                             (Super. Ct. No. 1341686)
     Plaintiffs and Appellants,                                               (Santa Barbara County)

v.

JOEL R. BAKER et al.,

     Defendants and Respondents.

                   Plaintiffs John and Nancy Behrmann (the Behrmanns) sued Joel
Baker and his related companies (collectively Baker) for damages allegedly caused
by a life insurance-based investment tool Baker invented and by breach of the
fiduciary duty Baker allegedly owed them. After the Behrmanns rested their case at
trial, the trial court granted a nonsuit. Because the nonsuit was properly granted, we
affirm.
                               FACTS AND PROCEDURAL HISTORY
A. Facts
                   Because we are reviewing the trial court's grant of a nonsuit, we
construe the evidence presented at trial in the light most favorable to the
Behrmanns, and resolve all presumptions, inferences and doubts in their favor.
(Castaneda v. Olsher (2007) 41 Cal. 4th 1205, 1214-1215; Nally v. Grace
Community Church (1988) 47 Cal. 3d 278, 291 (Nally).)
              In the mid-1990s, Baker created a proprietary investment "tool" he
called the "Financial Independence Plan" (FIP). Under the FIP, an investor would
buy a variable life insurance policy and place title to the policy in an irrevocable life
insurance trust. The policy would be a "split dollar policy." Ten percent of the
policy's premiums would be paid directly by the investor; the remaining 90 percent
would be paid by a private charity the investor created and funded specifically for
that purpose. The policy's death benefit was also split, with the charity and the
investor's designated beneficiaries receiving a share upon the investor's death.
Baker's plan advised investors up front that the Internal Revenue Service (IRS)
might, at some point, disallow split dollar policies. Baker's plan also suggested that
Hartford Life provide the life insurance policy; that the investor's private charity be
housed at the National Heritage Foundation (NHF); and that attorney Michael
Goldstein (Goldstein) be hired to draft the required legal documents.
              The Behrmanns met with their insurance agent around this time.
The agent had heard Baker discussing the FIP at a conference, and brought in a
second agent more familiar with the FIP to help him advise the Behrmanns. The
Behrmanns met only with the insurance agents; they never met Baker, and only
spoke with him over the phone once years later. Baker provided the agents
information about the FIP, and answered the agents' questions.
              After conducting "due diligence" on the FIP with their personal
attorney, the Behrmanns decided to use the FIP notwithstanding the possibility that
split dollar policies might be disallowed. The Behrmanns then took out three
insurance policies with Hartford Life (one for themselves and one for each of their
two adult children); created the Highbourne Foundation as a private charity housed
at NHF; and retained Goldstein to create the necessary legal documents. As the FIP
promised, the Behrmanns avoided capital gains taxes, and were able to declare as
charitable deductions the hundreds of thousands of dollars in stock they donated to

                                           2
the Highbourne Foundation to pay the life insurance premiums. Baker received 15
percent of the commissions on the life insurance policy (the two agents split the
other 85 percent); Baker was also listed as the Philanthropic Development Officer
(PDO) for the Highbourne Foundation, which according to NHF's manual obligated
him to answer questions and provide requested help regarding the foundation.
              In 1999, Congress outlawed split dollar policies. The Behrmanns
sought advice on what to do with their FIP-related policies from several advisors,
including Baker. The Behrmanns did not follow Baker's advice. Instead, they
repaid the Highbourne Foundation for the premiums they had funneled through it,
and then terminated and "cashed out" all three insurance policies. The Behrmanns
left the proceeds of these cash-outs in the Highbourne Foundation's account, had
their son manage the money in that account, and donated some of that money to
charity.
              By 2009, the Behrmanns still had $643,000 in the Highbourne
Foundation account. NHF declared bankruptcy, and the bankruptcy court
determined that the Behrmanns had donated this money to the Highbourne
Foundation (and hence NHF), so those funds could be used to satisfy NHF's debts.
B. Procedural History
              The Behrmanns sued Baker and his affiliated companies for violating
the Consumer Legal Remedies Act (CLRA), Civil Code section 1750 et seq.,1 for
breach of fiduciary duty, for negligence, and for negligent misrepresentation.2
Although they ultimately recovered $590,000 of the $643,000, the Behrmanns sued
Baker for the full account balance, for lost earnings on that amount, and for over
$450,000 in attorney's fees and costs incurred litigating the bankruptcy.

              1
                  Unless otherwise indicated, all statutory references are to the Civil
Code.
              2
               The Behrmanns also alleged civil conspiracy and breach of contract,
but they do not challenge on appeal the trial court's rulings on these claims.

                                             3
              The case proceeded to trial. After the close of the Behrmanns' case,
Baker moved for a nonsuit. The trial court granted the motion. The court reasoned
that Baker had not violated the CLRA because the FIP gave the Behrmanns all of
the benefits Baker promised. The court found that the Behrmanns were, at bottom,
seeking to hold Baker responsible for not anticipating that NHF would declare
bankruptcy 13 years after the Behrmanns adopted the FIP. The court further
determined that Baker did not owe the Behrmanns a fiduciary duty because he
"basically sold his product" to the insurance agents, "who sold it to" the Behrmanns.
Alternatively, the court ruled that Baker had not breached any duty.
                                     DISCUSSION
              The Behrmanns assail the trial court's grant of a nonsuit. We
independently review the trial court's determination that the evidence presented by
the Behrmanns at trial was insufficient, as a matter of law, to permit a jury to find in
their favor. (Nally, supra, 47 Cal.3d at p. 291.)
                     I. The Consumer Legal Remedies Act Claim
              The CLRA empowers consumers to sue a defendant for enumerated
"unfair or deceptive acts or practices" during "transaction[s] intended to result or
which result[] in the sale or lease of goods or services . . . ." (§ 1770, subd. (a).)
The Behrmanns argue that the jury should have considered this claim. Baker
responds that the trial court properly rejected this claim as a matter of law because
(1) he never sold a "good" or provided a "service" within the meaning of the CLRA;
and (2) the Behrmanns did not prove the causal link between his conduct and their
losses. We need not decide the first issue because the nonsuit was proper on the
causation element alone.
              In addition to proving that the defendant engaged in proscribed acts or
practices in relation to a "good[]" or "service[]," a plaintiff must establish that the
defendant's acts or practices damaged her. (E.g., Bower v. AT & T Mobility, LLC
(2011) 196 Cal. App. 4th 1545, 1556.) Causation is a question of fact "[e]xcept in
the rare case[s] where the undisputed facts leave no room for a reasonable

                                            4
difference of opinion . . . ." (Blankenheim v. E.F. Hutton & Co. (1990) 217
Cal. App. 3d 1464, 1475 (Blankenheim).) This is one of those rare cases.
              The damages the Behrmanns seek all arise from the loss of the
funds sitting in the Highbourne Foundation account at NHF in 2009. Those
damages were not proximately caused by anything Baker did. Baker was
undoubtedly the "architect" of the FIP, but the FIP advised that the NHF account
was to be used as a conduit for paying insurance policy premiums. More to the
point, the FIP performed as promised: The Behrmanns were able to take full
advantage of all promised tax breaks and were never audited, even after Congress
disallowed split dollar policies.
              The losses the Behrmanns incurred in 2009 stemmed from the
cumulative effect of Congress' disallowance of split dollar policies; of the
Behrmanns' decision—upon the advice of others—to ignore Baker's advice and
instead cash out the life insurance policies and leave the proceeds in the Highbourne
Foundation account; and of NHF's subsequent bankruptcy. To be sure, the
Behrmanns would not have created an account at NHF absent the FIP. But the
Behrmanns' decision to use that account in a manner not recommended by Baker
and not contemplated by the FIP was theirs and theirs alone. (See Wilhelm v. Pray
(1986) 186 Cal. App. 3d 1324, 1333 [reliance on advice of others is a superseding
cause that severs causation]; Goehring v. Chapman Univ. (2004) 121 Cal. App. 4th
353, 365-366 [damages arising from independent causes sever chain of causation].)
Under these facts, the loss of the money in that account cannot be attributed to
Baker, and the Behrmanns' CLRA claim was properly dismissed.
                               II. Fiduciary Duty Claim
              A fiduciary duty arises when one party is "'". . . duty bound to act with
the utmost good faith for the benefit of the other party. . . ."'" (Wolf v. Super. Ct.
(2003) 107 Cal. App. 4th 25, 29, quoting Herbert v. Lankershim (1937) 9 Cal. 2d 409,
483.) The Behrmanns argue that Baker owed them a fiduciary duty by virtue of
(1) his role as their investment advisor; (2) his role as the PDO to the Highbourne

                                            5
Foundation account; and (3) the statutory duty under Business and Professions
Code section 17510.8. The existence of a fiduciary duty is a question of law we
review de novo. (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal. App. 4th 1582,
1599.) We reject each of the Behrmanns' proffered rationales.
              First, the evidence establishes as a matter of law that Baker did not
owe the Behrmanns any fiduciary duties as their investment advisor. Investment
advisors owe fiduciary duties to their clients. (See Twomey v. Mitchum Jones &
Templeton, Inc. (1968) 262 Cal. App. 2d 690, 709 [investment counselor and stock
broker owes client fiduciary duty]; Blankenheim, supra, 217 Cal.App.3d at p. 1475
[same, as to stock broker].) But Baker was not the Behrmanns' investment advisor.
He was never retained for that purpose; he made no contracts with them; and he
never met them. What Baker did was invent the FIP. Yet it was the Behrmanns'
insurance agents who presented the FIP and the Behrmanns' own lawyer and other
advisors who encouraged them to adopt it.
              Second, the evidence establishes as a matter of law that the role of a
PDO is not fiduciary in nature. The NHF's manual defines the PDO as the person to
whom questions can be directed. Consistent with this purpose, the Behrmanns
called Baker with questions, but when it came to renegotiating NHF fees, they
called their insurance agent—not Baker. The Behrmanns point out that they
thought they were Baker's clients, and that NHF's founder thought of them as
Baker's "clients." However, subjective belief is not enough to create a fiduciary
relationship. (Zenith Ins. Co. v. O'Connor (2007) 148 Cal. App. 4th 998, 1010.) The
Behrmanns also point to their expert's opinion that Baker's status as their PDO
rendered him a "watchdog" owing them a fiduciary duty. The trial court rejected
that opinion as grounded in unsupported reasoning and hence not entitled to any
weight. (Sargon Enterprises, Inc. v. University of Southern California (2012) 55
Cal. 4th 747, 771-772.) The court did not abuse its discretion in rejecting the
expert's opinion while resolving the nonsuit motion. (City of San Diego v. Sobke
(1998) 65 Cal. App. 4th 379, 396 [trial court's gatekeeping rulings evaluated for

                                          6
abuse of discretion]; People ex rel. Dept. of Transportation v. Dry Canyon
Enterprises, LLC (2012) 211 Cal. App. 4th 486, 493 [trial court should not consider
rejected expert testimony in evaluating nonsuit motion].)
              Lastly, Business and Professions Code section 17510.8 does not apply
here. That section creates a fiduciary duty between those who solicit on behalf of a
charity, and the persons donating to the charity. (Ibid.) However, the Behrmanns
were donating their own money to their own private charity at NHF, and then
distributing that money to other charities. Baker was not involved in these
transactions. Baker initially suggested that the Behrmanns use NHF to house their
private charity, but this does not constitute a "solicitation" of funds for NHF
because the Behrmanns retained control over their donations and further directed
them as they saw fit.
                               III. Remaining Claims
              The Behrmanns' negligent performance of financial services and
negligent misrepresentation claims were properly dismissed for the same reasons as
their claim under the CLRA: Baker did not proximately cause the Behrmanns'
damages. (E.g., Conroy v. Regents of Univ. of Calif. (2009) 45 Cal. 4th 1244, 1256
[causation is element of negligent misrepresentation claim].)
                               IV. Evidentiary Errors
              The Behrmanns contend that the trial court erred in excluding
evidence that (1) Goldstein (the attorney Baker recommended) sought to obtain a
conflict of interest waiver from an unrelated client in 1998; and (2) NHF later
amended its application form for private charities to spell out that donors would
lose "control" of their donations as well as "ownership" and "custody." Because
these two exhibits do not affect our analysis, their exclusion is harmless.3 (Cf.

              3
               For the same reasons, the Behrmanns' post-briefing motion to strike
portions of Baker's brief and their request for judicial notice are denied as moot.

                                           7
Hirano v. Hirano (2007) 158 Cal. App. 4th 1, 8 [reversal mandated if wrongly
excluded evidence "could have enabled appellant to overcome the nonsuit"].)
                                  DISPOSITION
             The judgment is affirmed. Costs on appeal are awarded to Baker.
             NOT TO BE PUBLISHED.

                                        HOFFSTADT, J.*

We concur:

             GILBERT, P. J.

             YEGAN, J.

             *
               (Judge of the Superior Court of Los Angeles County, assigned by the
Chief Justice pursuant to art. 6, § 6 of the Cal. Const.)

                                        8
                            Denise de Bellefeuille, Judge

                       Superior Court County of Santa Barbara
                        ______________________________

             Nye, Peabody, Stirling, Hale & Miller, LLP, Karen K. Peabody,
Schendzielos & Associates, LLC, Daniel J. Schendzielos (pro hac vice) for Plaintiffs
and Appellants.
             Gordon & Rees LLP, Theresa A. Kristovich and David L. Jones for
Defendants and Respondents.