Ampro Sys. v. Xian Li
| Docket Number | H048523 |
| Decision Date | 10 October 2023 |
| Parties | AMPRO SYSTEMS, INC. et al., Plaintiffs and Appellants, v. XIAN LI et al., Defendants and Respondents |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
(Santa Clara County Super. Ct. No. 17CV311868)
Over a period of approximately eight years, Xian Li, also known as James Li (James), and Charlene Qian, conspired with members of their families, including Ruo (Laura) Li,[1] and other associates to embezzle money from their former employers appellants Ampro Systems, Inc. (Ampro) and Consolitech Electronics, Inc. (Consolitech) (collectively appellants). Appellants sued James, Qian, Laura, and various other parties, including a sham corporation LXRZ, Inc. (LXRZ) which was set up to facilitate the scheme, for conversion concealment, fraud, breach of fiduciary duty, and violation of Penal Code section 496 (section 496).[2] A jury found in appellants' favor on every cause of action and, among other damages, awarded appellants treble damages and attorney fees pursuant to section 496. Several of the respondents, including Laura, moved for judgment notwithstanding the verdict (JNOV) on appellants' section 496 cause of action, arguing insufficient evidence had been presented to establish that the claim was not barred by the applicable statute of limitations. On its own motion, the trial court, relying on a then-recent opinion from the Second District Court of Appeal,[3] granted partial JNOV in favor of all respondents on the section 496 cause of action, thereby eliminating the award of treble damages and attorney fees to appellants under that statute. In addition, the court granted JNOV in favor of Laura on the section 496 claim on the ground that there was not substantial evidence to support the jury's finding that Laura engaged in specific acts of concealment within the relevant statute of limitations period.
On appeal, appellants argue that the trial court erred in entering partial JNOV on its section 496 cause of action based on Siry I, supra, 45 Cal.App.5th 1098, which has since been reversed by the California Supreme Court.[4] Appellants next argue that the trial court erred by granting JNOV in Laura's favor because substantial evidence supports the jury's finding that Laura committed specific acts of concealment within the requisite time period.
For the reasons explained below, we will reverse the judgment and, on remand, the trial court shall reinstate the original judgment in favor of appellants.
Appellants filed the operative fourth amended complaint in November 2018, alleging that, beginning sometime in 2008, the defendants, led by Qian and James,[5]conspired to embezzle money from appellants through a variety of fraudulent schemes and transactions. According to the fourth amended complaint, the defendants embezzled nearly $4 million from appellants over a 10-year period. In addition to paying themselves additional salaries and bonuses, Qian and James put family members, including Laura, on appellants' payrolls or employed them as independent contractors, yet those family members provided no compensable goods or services to appellants.
The fourth amended complaint stated nine causes of action, as follows: (1) conversion; (2) breach of fiduciary duty; (3) fraud by intentional misrepresentation; (4) fraud by concealment; (5) negligent misrepresentation; (6) violation of section 496; (7) money had and received; (8) negligence; and (9) breach of contract.
At trial, Ampro's president, Elliot Wang, testified that he first learned that money was being embezzled from appellants in early February 2016. He traveled to the United States from Taiwan within 24 hours of that discovery and fired James a few days later. Wang hired consultants to audit appellants' accounting records to discover who was receiving unauthorized payments from the companies. In the course of the investigation, Wang determined there were people listed on the payroll reports who he did not know, including members of both James's and Qian's families.
In her testimony, Laura said that all of the Ampro payroll checks she received from 2010 to 2016 were deposited into a joint account that was opened in her and her parents' names.[6] Laura could access that joint account online and view the bank statements, but she denied having an ATM card for the account or checks that she could write against it. Although Laura endorsed the first paychecks (which she received directly from James) she would immediately turn those checks over to her mother to deposit. At some point, Laura gave her mother authority to endorse the checks for her, and she did not even see the checks from that point on. Laura denied ever receiving or spending any money from that joint account. She testified that her parents exclusively handled all the money in that account. Laura also specifically denied ever being paid by LXRZ or receiving any money upon its dissolution even though she was a shareholder.[7]
Following a two-week trial, the jury returned verdicts against all of the defendants.[8] Specifically, as relevant here, the jury found Laura liable on appellants' conversion and concealment causes of action and found that Laura was directly responsible for damages totaling $149,348.54. The jury also found that Laura engaged in specific affirmative acts after September 6, 2016 to conceal money stolen from appellants. After the punitive damages phase of the trial, the jury awarded appellants $7,500 in punitive damages payable by Laura.
On February 24, 2020, the trial court entered judgment in favor of appellants, reserving jurisdiction over posttrial motions for costs and attorney fees. Specifically, as to Laura, judgment was entered against her in the total amount of $489,863.21, consisting of $149,348.54 in general damages, $41,817.59 in prejudgment interest, and $298,697.08 under section 496.
On March 6, 2020, respondents moved for a partial JNOV and for a new trial on the section 496 cause of action arguing it was time barred because there was no substantial evidence to support the jury's finding that respondents engaged in any specific affirmative acts to conceal stolen money from appellants after September 6, 2016.
Appellants' opposition listed the trial evidence which supported the jury's finding that each of the respondents engaged in specific acts of concealment after September 6, 2016. Appellants pointed to trial testimony where: (1) James's wife described how money paid by appellants was funneled through bank accounts she co-owned with James and Laura and then used to pay her mortgage; (2) Laura testified that she retained Qian in 2016 and 2017 to prepare her tax returns for income earned in 2015 and 2016; (3) Laura testified that she received bi-weekly checks from 2010 to 2016 though she did not work for appellants; (4) Laura testified that when LXRZ was dissolved in 2018, its assets were distributed to its shareholders, including herself; and (5) Laura testified she first began receiving checks from Ampro in 2010 based on an "arrangement with [Ampro's president] Mr. Wang."
On April 13, 2020, the trial court requested supplemental briefing from the parties in light of Siry I, supra, 45 Cal.App.5th at page 1134, which held that" 'treble damages are not available under . . . section 496 in cases where the plaintiff merely alleges and proves conduct involving fraud, misrepresentation, conversion, or some other type of theft that does not involve "stolen property."' "
On April 30, 2020, the trial court informed the parties that it intended to grant partial JNOV in favor of respondents on its own motion pursuant to Code of Civil Procedure section 629, subdivision (a) as to appellants' section 496 cause of action.
On June 12, 2020, the trial court granted partial JNOV in favor of respondents as to the section 496 cause of action, based on Siry's analysis of that statute. The court also granted JNOV as to Laura solely on the ground that there was no substantial evidence to support the jury's verdict that she engaged in acts of concealment after September 6, 2016. In its order, the court acknowledged, but found insufficient, the following evidence presented at trial: (1) before September 6, 2016, Laura received and deposited checks from Ampro; (2) Laura was a shareholder in the LXRZ but "there was no evidence that she exercised control over that business or its accounts"; and (3) Laura asked Qian to prepare her tax returns for the 2016 tax year but "[r]eporting income to a tax authority and paying taxes is not 'concealing or withholding stolen property from the rightful owner.'" The trial court stated "There was no evidence that [Laura] exercised control over that bank account [into which her payroll checks were deposited], withdrew any portion of those funds for her own benefit, or controlled how the money was spent" and "there was no evidence or finding that [Laura] (as opposed to other Moving Defendants) had actual control over or possession of the stolen funds after September 6, 2016."
As a consequence of the trial court's order, appellants were no longer entitled to treble damages, interest, or attorney fees under section 496. The amended judgment was entered on August 13, 2020.
Appellants argue that the trial court erred in granting JNOV in favor of Laura on the ground that no substantial evidence was presented to the jury to support its verdict that Laura engaged in acts of concealment after September 6, 2016. For the reasons discussed below, we agree that the trial court erred in granting JNOV in favor of Laura.
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