Harmon v. Dirubio
| Decision Date | 29 July 2021 |
| Docket Number | G060137 |
| Parties | GARY HARMON et al., Plaintiffs and Appellants, v. MIKE DIRUBIO, Defendant and Respondent. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Santa Clara County Carrie A. Zepeda, Judge. Affirmed. Request for judicial notice. Denied.
Grellas Shah, Dhaivat H. Shah, David I. Siegel, William Howlett Bohannon; Cazzell & Associates and Maryann Cazzell for Plaintiffs and Appellants.
No appearance for Defendant and Respondent.
Gary Harmon, Mark Masoni, and ISE Entertainment Corporation (ISE) (collectively, appellants) appeal from a judgment in favor of Mike DiRubio. Appellants sued DiRubio for defamation and breach of fiduciary duty. Following a bench trial, the court found that appellants had failed to establish any of their claims.
We affirm for five reasons. First, the trial court's determinations regarding witness credibility were supported by the evidence at trial. Second, the trial court did not err in denying appellants' motion for leave to amend, made the day before the trial started, because the proposed amendment was unreasonably delayed and would have been prejudicial. Third, the court's finding that Harmon and Masoni failed to prove the falsity of any of the allegedly defamatory statements made by DiRubio is supported by substantial evidence. Fourth, the court did not err in concluding that ISE lacked standing to pursue its claim for breach of fiduciary duty against DiRubio because ISE was not qualified to conduct intrastate business in California and its claims arose from that intrastate business. Fifth and finally, even if ISE had standing, the court explained why ISE had failed to prove a breach of any fiduciary duty by DiRubio to ISE.
Harmon is experienced in the fields of media arts, film, music theater, and live concert production. ISE is a Nevada Corporation founded by Harmon that produces films, television shows, and concerts. Harmon also developed a program called Arts Related Technical Training for Entertainment Careers (ARTTEC), which provided high school students with hands-on training and experience in the entertainment industry. ISE owned the ARTTEC program.
Harmon and Masoni met when both were high school teachers in Morgan Hill, California, and Masoni began working with Harmon on ARTTEC. Harmon and Masoni also worked for Sobrato Arts Foundation for Education (SAFE), a nonprofit organization that also provided career training in the entertainment field to high school students. DiRubio began working with Harmon and Masoni at ISE and ARTTEC in October 2008, initially as a volunteer.
In 2013, DiRubio invested $300, 000 in ISE in exchange for 30, 000 shares of ISE stock. DiRubio claimed that Harmon stole that money for his own use. ISE's former president, Sean Rangel, testified DiRubio's investment was used “for different productions that ISE had been involved with.” Harmon testified that DiRubio's investment was also used to make a loan to SAFE, for ISE's business expenses, and to acquire and operate a business called Boulder Creek Guitars. However, ISE did not maintain financial statements, and all testimony was based on limited information taken from its bank statements.
During his involvement with ISE, DiRubio referred to himself as a “partner” of ISE, and used that title on his LinkedIn page. DiRubio was an authorized signer on two of ISE's bank accounts, although he was removed from those accounts without notice in December 2014. Harmon testified that DiRubio “had full authority and management ability with the corporation, ” including “[w]ho we would do business with, what kind of productions we would engage in, ... who would be the musicians that we would book for these productions or other artists, but his primary focus or interest was with music, how money would be spent, what contracts we would enter into with vendors, all of those things.”
Harmon testified that in August 2014, the day after ISE produced a concert for Keifer Sutherland and his band, DiRubio called ISE's vendors, including providers of staging, lighting, audio, and security services, and told them not to work with ISE because Harmon was a “thief” and was planning to rip everyone off. On Facebook and in text messages, DiRubio stated that Harmon stole $250, 000 from him, embezzled from ISE, and committed fraud. On May 7, 2015, DiRubio sent an e mail to Masoni's wife, Lisa Masoni, stating that Harmon and Masoni had conspired to ruin his life, stole $250, 000 from him, and that her husband was a “minion” and a “fraud.”
DiRubio confirmed that he had told a number of people that Harmon was a criminal and had stolen money from him. DiRubio testified he was aware that Harmon had been dismissed from SAFE due to financial improprieties. DiRubio also testified he had heard Harmon lost his job teaching at Ann Sobrato High School because he was caught stealing equipment from the school and had been arrested.
In October 2016, Harmon was charged in a felony complaint with multiple charges of grand theft and making untrue statements with the intent to take personal property in violation of Corporations Code sections 25401 to 25540, subdivision (b), and was ultimately convicted on several counts. One of the felony counts for violation of the Corporations Code involved the sale of ISE stock to DiRubio.
On July 9, 2015, Harmon, Masoni, and ISE filed a complaint for libel, slander, fraud, breach of contract, breach of fiduciary duty, rescission, and cancellation of instrument against DiRubio. At the start of trial in November 2017, appellants moved to amend the complaint to add claims for interference with contract, interference with prospective economic advantage, and unfair competition. The court denied the motion as untimely and prejudicial to the defendant. The only claims that went to trial were ISE's claim for breach of fiduciary duty and the defamation claims by Harmon and Masoni.
After a bench trial, the trial court issued a detailed statement of decision. The court found that Harmon and Masoni had failed to establish the element of falsity on the defamation causes of action. The court also found that ISE had no standing to maintain its cause of action against DiRubio for breach of fiduciary duty because, as a foreign corporation, ISE had not registered to conduct intrastate business in California, and the breach of fiduciary duty claim arose out of its intrastate business. The court nevertheless addressed the merits of the claim and found that DiRubio did not owe ISE or its shareholders a fiduciary duty.
DiRubio and ISE stipulated that ISE would pay DiRubio $248, 000 and in exchange DiRubio would surrender his share certificate for 30, 000 shares of ISE stock. Judgment was entered, and Harmon, Masoni, and ISE filed a notice of appeal.
As the trier of fact at a bench trial, the court was “the ultimate judge of the weight and credibility of witness testimony.” (Navigators Specialty Ins. Co. v Moorefield Construction, Inc. (2016) 6 Cal.App.5th 1258, 1276.) The trial court found “Mr. DiRubio was credible and Mr. Harmon, Mr. Masoni and Mr. Altamirano[1] were not credible.” The court found that Harmon and Masoni had “a history of fabricating evidence in and outside of court proceedings in an attempt to gain an advantage.” Specifically regarding the defamation claims, the court “found Mr. DiRubio to be more credible than Mr. Harmon and Mr. Masoni in establishing each of these facts.” In conclusion, “[t]he court did not find Mr. Harmon, Mr. Masoni or their witnesses to be credible or knowledgeable about any material facts and [appellants] did not produce other credible documents or other evidence to support their claims.”
The court's findings as to the credibility of the witnesses were fully supported by the evidence at trial. In May 2013, Harmon was fired as executive director of SAFE for being “negligent in [his] responsibilities of maintaining accurate financial records, ” and for using the SAFE name for his own personal gain. In July 2013, SAFE publicly announced that Harmon, DiRubio, Masoni, and Altamirano were “no longer employed by, or have any affiliation with” SAFE.
Later, Harmon, Masoni, DiRubio, and Altamirano sued SAFE for unpaid wages. DiRubio admitted during the trial of the present action that they created and signed false employment contracts before filing the lawsuit against SAFE in order to bolster their position in the litigation. Although Harmon and Masoni testified that the employment contracts were signed at the time the various employees were hired, Harmon admitted signing an employment contract for DiRubio's wife, who never ended up working at SAFE but was named as a plaintiff in the employment lawsuit against SAFE.
The court's findings regarding credibility were also supported by evidence regarding a commercial lease entered into on behalf of ISE. Two copies of the lease agreement were admitted in evidence at trial. One had been signed by DiRubio, Harmon, and the lessor. The other was purportedly signed by Masoni, Harmon, and the lessor. Masoni testified that the lessor needed an original signed copy for purposes of a property refinancing, and could not find the original of the lease signed by DiRubio, so he needed a new copy backdated to the original signing date.
The lessor, however, testified his signature was not on the second lease, he could not recall having requested that Masoni sign a second lease, he did not refinance the property, and he never requested that Masoni backdate his signature on a lease. The trial court found the lessor ...
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