Callahan v. Ami Adini & Assocs.

• Court: California Court of Appeals
• Writing for the Court: BENKE, Acting P. J.
• Decision Date: 25 November 2019
• Docket Number: D074007
• Citation: Callahan v. Ami Adini & Assocs., D074007 (Cal. App. Nov 25, 2019)
• Parties: R. SCOTT CALLAHAN, as Personal Representative, etc., Plaintiff, Cross-defendant, and Respondent, v. AMI ADINI & ASSOCIATES, INC., Defendant, Cross-complainant, and Appellant; AMIRAM ADINI et. al., Defendants and Appellants.

R. SCOTT CALLAHAN, as Personal Representative, etc.,Plaintiff, Cross-defendant, and Respondent, v. AMI ADINI & ASSOCIATES, INC.,Defendant, Cross-complainant, and Appellant;AMIRAM ADINI et. al., Defendants and Appellants.

D074007

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

November 25, 2019

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 37-2014-00038522-CU-BC-CTL)

APPEAL from a judgment of the Superior Court of San Diego County, Judith F. Hayes, Judge. Reversed and remanded for further proceedings.

Gordon & Rees, Brian Mark Ledger, Don Willenburg and Kara Persson for Defendants, Cross-complainant and Appellants.

Kessler & Seecof, Daniel J. Kessler, Benjamin R. Seecof and Albert W. Lee for Plaintiff, Cross-defendant and Respondent.

Richard Callahan¹ employed Ami Adini & Associates, Inc. (AAA) to remediate underground tank pollution on his property and obtain reimbursement for AAA's work from California's Underground Storage Tank Cleanup Fund (the Fund). The trial court concluded that AAA and its agents Amiram Adini and Elie Balas (collectively with AAA, defendants) defrauded Callahan and awarded him compensatory damages of $677,695.51, $640,000 in punitive damages and his costs. The trial court also enjoined Adini and Balas from stating professional degrees or qualifications unless they are true and not misleading.

Defendants appeal, contending: (1) the trial court erred by granting Callahan's motion for judgment on the pleadings on their cross-complaint; (2) the statement of decision contains errors of fact and law that require reversal and retrial; (3) the trial court made erroneous liability determinations; and (4) the damages awards were excessive and not supported by substantial evidence.

We conclude that the trial court erred in granting Callahan's motion for judgment on the pleadings on AAA's cross-complaint for breach of contract. We also conclude that substantial evidence does not support the following findings: (1) alter ego liability against Adini and Balas; (2) Balas's personal liability on any of the causes of action; and (3) Adini's personal liability for breach of contract, constructive fraud, and implied contractual indemnity. We otherwise reject defendants' arguments and remand the matter for further proceedings on defendants' cross-complaint.²

GENERAL BACKGROUND

The Legislature enacted the Barry Keene Underground Storage Tank (UST) Cleanup Trust Fund Act of 1989 (Health & Saf. Code, § 25299.10 et seq., the Act) "to help ensure an efficient petroleum [UST] cleanup program that adequately protects public health and safety and the environment and provides for the rapid distribution of cleanup funds . . . ." (Health & Saf. Code, § 25299.10(b)(1).) The Legislature found that "owners or operators of [UST's] have been unable to obtain affordable environmental impairment liability insurance coverage to pay for corrective action or the obtainable coverage has been outside their financial means." (Health & Saf. Code, § 25299.10, subd. (b)(4).) The Act created the Fund to pay for claims of reimbursement by UST owners who take " 'corrective action.' " (Caldo Oil Co. v. State Water Res. Control Bd. (1996) 44 Cal.App.4th 1821, 1825; Health & Saf. Code, § 25299.50, subd. (a).)

The San Diego County Environmental Health Department directed Callahan to remediate petroleum contamination from soil and groundwater under real property (the property) that he owned which previously had UST's. Callahan hired a company to remediate the contamination, which included a large amount of gasoline in the soil and groundwater beneath the property that spread beneath streets and adjacent properties. This company, however, stopped work because it could not handle the property or the reimbursement process. When this company stopped work, approximately $1.35 million remained available in Callahan's Fund account to cover future cleanup costs. Defendants' expert witness testified that he has worked on hundreds of leaking UST sites, but that Callahan's property had the largest "free product plume[]" he had ever come across "by an order of magnitude."³

Callahan contacted AAA after receiving several mailings from the company. One mailing advertised cleaning a site "in six months or less" and stated that their "newly employed remediation technology can achieve complete and final cleanup in as little as 90 days from the time we begin the actual remediation treatment." The mailing indicated "expert services" including "[a]nalysis of different remediation methods to determine the most suitable one, tailored for your site (based on contaminants, time, cost and future use of space)." (Italics deleted.)

Callahan contacted AAA and spoke to both Balas and Adini. They represented that AAA could clean the property "fast" from 90 days to six months. In December 2006, Callahan signed a proposal (the 2006 contract) guaranteeing that at least 90 percent of their cleanup charges would be reimbursed and that he would be personally responsible for paying a maximum of 10 percent of the cleanup costs, or $150,000. When he entered into the contract defendants told him they could fully perform their obligations under the contract within the $1.5 million reimbursement limits. Callahan designated AAA as his agent for preparing and seeking reimbursement from the Fund.

Balas admitted that AAA performed no evaluation to determine the amount of money required to clean the property before contracting with Callahan. Adini admitted that before contracting with Callahan, AAA did not review any environmental reports concerning the property, or discuss the extent of the contamination with Callahan. Additionally, AAA had cleaned only one site in six months or less.

AAA submitted "task orders" to Callahan outlining the work and providing a cost estimate. Callahan signed the task orders and returned them to AAA. AAA then sought reimbursement from the Fund as Callahan's agent. When Callahan received payment from the Fund, he would pay defendants' invoices. Callahan reviewed the invoices and saw that Adini billed himself as the "principal engineer." Callahan believed that to be true. Callahan also believed that Balas was licensed as an engineer and a geologist as reported on the AAA invoices.

From 2006 to 2011, Callahan believed that defendants were working on his property and they assured him that "everything's just fine." In January 2011, Callahan received a letter from Adini informing him that he had almost exhausted the $1.5 million in his Fund and it would cost him an additional $500,000 to $620,000 to remediate the property. In July 2011, defendants proposed that if Callahan personally paid them $250,000 above his remaining Fund money, they would "unconditionally guarantee" case closure. Because he did not have $250,000 in cash and believing that he had no other option, Callahan agreed and signed defendants' proposed "Promissory Note Secured by Deed of Trust and Agreement on Financing the Cost of Environmental Closure" (the 2011 note), returned the signed promissory note with an executed trust deed to the Property.

For the next three years, Callahan believed that defendants were still working on the property. Defendants, however, had stopped work on the property in July 2011. Balas admitted that he never informed Callahan that AAA had stopped working on the property. In October 2012, California seized most of AAA's business records.

On July 17, 2014, Callahan received a notice from the County of San Diego that a required corrective action plan for cleanup of the property was past due.

On July 21, 2014, Adini sent Callahan an e-mail that included copies of the 2006 proposal and the 2011 promissory note, which Adini referred to as "our agreements." The e-mail stated: "Due to extreme financial difficulties AAA does not anymore possess the means or personnel critically needed to carry on with the project."

In 2014, Callahan was served as a Doe defendant in a qui tam lawsuit against defendants.⁴ That action was consolidated with another lawsuit filed by the State of California. According to the State, in 2008, defendants overbilled the Fund $50,270 for Callahan's project. Defendants refused to defend Callahan, who ultimately settled the consolidated qui tam action for $5,000 after incurring $32,695.51 in legal fees. Eventually, defendants stipulated to judgment in the qui tam action on the State's cause of action for professional negligence. Callahan filed this action in November 2014.

DISCUSSION

I. MOTION FOR JUDGMENT ON THE PLEADINGS

A. Additional Background

AAA filed a cross-complaint against Callahan for breaching the 2006 contract based on Callahan's alleged failure to pay all invoices submitted by AAA to him within the time specified by the 2006 contract. AAA incorporated into the cross-complaint a bill of particulars⁵ stating that AAA sought to recover from Callahan for the reimbursement requests that AAA had submitted for Callahan to the Fund in the amount of $153,351, plus interest, costs, and attorney fees.

Callahan moved for judgment on the pleadings, arguing that the stipulated judgment entered in the consolidated qui tam action (the stipulated judgment) provided that defendants would no longer have any right to any money or benefit from its work on Fund sites. Callahan argued that the stipulated judgment barred AAA from any further payment based upon any reimbursement request submitted to the Fund and that collateral estoppel (more accurately referred to as "issue preclusion")⁶ prevented AAA from pursuing its cross-claim for breach of the 2006 contract against him.

AAA opposed the motion, arguing that the stipulated judgment...