Kim v. Sumitomo Bank

• Decision Date: 21 July 1993
• Docket Number: No. B060571,B060571
• Court: California Court of Appeals Court of Appeals
• Parties: Suk Yong KIM et al., Plaintiffs and Appellants, v. SUMITOMO BANK OF CALIFORNIA, Defendants and Appellants.

Page 834

21 Cal.Rptr.2d 834

17 Cal.App.4th 974

Suk Yong KIM et al., Plaintiffs and Appellants, v. SUMITOMO BANK OF CALIFORNIA, Defendants and Appellants.

No. B060571.

Court of Appeal, Second District, Division 7, California.

July 21, 1993.

Certified for Partial Publication ^*

Carl James Sohn, Stanton, for plaintiffs and appellants

Leland, Parachini, Steinberg, Flinn, Matzger & Melnick, Richard Fannan, and David J. Cowan, Los Angeles, for defendants and appellants.

FRED WOODS, Associate Justice.

Plaintiffs appeal from a summary judgment granted in favor of defendant, contending that defendant violated various duties it owed plaintiffs, who had taken out a construction loan from defendant. Defendant appeals from the order denying its motion for attorney's fees. We affirm the judgment and reverse the order.

FACTUAL AND PROCEDURAL SYNOPSIS

I. Factual background

In February 1985, plaintiffs Suk Yong Kim and Ok Sun Kim ("Kims") entered into a construction contract with Jonathan Pae to build an apartment building on property they owned in Los Angeles.

On August 6, 1985, the Kims obtained a construction loan from defendant Sumitomo Bank of California ("Bank"). In connection with the loan, the Kims signed a promissory note, executed a deed of trust in favor of the Bank, and entered into a construction loan agreement ("Loan Agreement") with the Bank.

About the same time, the Kims also entered into a joint control agreement ("Control Agreement") with Pae and defendant Builders Disbursements, Inc. ("BDI"), whereby BDI agreed to periodically disburse funds to the contractor upon the contractor's instruction. The funds to be disbursed were to come from the Bank loan.

The Bank was not a party to the Control Agreement. The Control Agreement provided that the Kims would leave the moneys with the lender to be provided to the disbursing agent upon the agent's instruction.

Under the Loan Agreement, the Bank would advance the loan proceeds in accordance with the Disbursement Plan attached to the Loan Agreement. The Disbursement Plan provided for "all funds to be disbursed through [BDI], according to the schedule specified in the [Control] agreement."

After the agreements were entered into and construction had commenced, problems developed with the construction. Disputes arose over whether BDI properly disbursed the funds, the Bank should have required a performance bond, the Bank should have exercised its option to take over the construction, the Bank over-disbursed moneys to BDI, and the Bank should indemnify the Kims for damages to a neighbor's property during construction.

When the disputes were not resolved, the Kims filed a complaint against several defendants. The Bank was named in causes of action for breach of fiduciary duty, negligence and for indemnity. The Kims sought attorney's fees on all causes of action.

II. Procedural background

The Kims appeal from the judgment entered in favor of Bank following the court's granting the Bank's third summary judgment motion. The court had summarily On the Bank's first motion, Judge John Zebrowski summarily adjudicated that the Bank did not have a duty to require a performance bond, to advise the Kims of the merits of their action in entering into a business deal, to supervise the project, to step in and correct damages to a neighbor's property, or to take over construction. The court also granted the issue that the Bank did not act with malice toward the Kims. The court denied the issue that the Bank did not have a fiduciary duty "because it is unclear what duty, if any, BDI had and what duty Sumitomo may therefore have had regarding BDI's disbursements."

adjudicated certain issues on three previous motions (two by the Bank and one by BDI).

Judge Zebrowski denied the Bank's second summary judgment motion as a triable issue of fact existed with regard to an agency relationship between Sumitomo and BDI.

Temporary Judge Robert W. Zakon granted BDI's issue that BDI was not the Bank's agent.

On January 22, 1991, Judge Valerie Baker granted the Bank's third summary judgment motion, as there were no triable issues of material fact remaining.

Judge Baker denied the Bank's motion for attorney's fees.

The parties filed timely notices of appeal from the judgment and from the motion denying the request for attorney's fees.

DISCUSSION

I. Standard of review

"Since a summary judgment motion raises only questions of law regarding the construction and effect of the supporting and opposing papers, we independently review them on appeal, applying the same three-step analysis required of the trial court." (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064, 225 Cal.Rptr. 203.) We must identify the issues framed by the pleadings, determine whether the moving party has negated the opponent's claims, and determine whether the opposition has demonstrated the existence of a triable, material factual issue. (Id., at pp. 1064-1065, 225 Cal.Rptr. 203.)

"On appeal our review is limited to the facts shown in the documents presented to the trial judge in making our independent determination of their construction and effect as a matter of law." (Bonus-Built, Inc. v. United Grocers, Ltd. (1982) 136 Cal.App.3d 429, 442, 186 Cal.Rptr. 357.) Facts not contained in the separate statement do not exist. (United Community Church v. Garcin (1991) 231 Cal.App.3d 327, 337, 282 Cal.Rptr. 368.)

The bulk of the legal authority relied on by the Kims is the opinion of their counsel, an opinion often unsupported by citation to any recognized legal authority. At times, the relevance of the cited authority is not discussed or points are argued in conclusionary form. "This court is not required to discuss or consider points which are not argued or which are not supported by citation to authorities or the record." (MST Farms v. C. G. 1464 (1988) 204 Cal.App.3d 304, 306, 251 Cal.Rptr. 72.)

II. The Bank had no fiduciary duty to the Kims

In Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 476, 261 Cal.Rptr. 735, the court observed: "It has long been regarded as 'axiomatic that the relationship between a bank and its depositor arising out of a general deposit is that of a debtor and creditor.' [Citation.] 'A debt is not a trust and there is not a fiduciary relation between debtor and creditor as such.' [Citation.] The same principle should apply with even greater clarity to the relationship between a bank and its loan customers."

In Price, the court noted that the plaintiffs did not contend that their agreement with the bank satisfied the five-part test for a special relationship nor did they seek to prove special circumstances that might conceivably give a fiduciary character to a lender/borrower relation. (213 Cal.App.3d at p. 478, 261 Cal.Rptr. 735.) Although not precisely stated, the Kims argue that they had a special relationship California courts have determined that the relationship of a bank-commercial borrower does not constitute a special relationship for the purposes of the covenant of good faith and fair dealing. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1399, fn. 25, 272 Cal.Rptr. 387.)

with the Bank and that special circumstances created a fiduciary relationship with the Bank.

First, the Kims argue that a special relationship existed because under the Loan Agreement, the Bank was a control lender in that they were at the mercy of the Bank, which had stripped them of their right to control their project. Counsel does not discuss what a control lender is (other than claiming that the Bank is one). As authority, the Kims rely on a law review article and Taylor v. Standard Gas Co. (1939) 306 U.S. 307, 59 S.Ct. 543, 83 L.Ed. 669, a case in which they claim the United States Supreme Court stated that a lender that assumes a control position vis-a-vis a borrower may occupy a fiduciary position to the borrower. The lender in Taylor was a parent corporation which mismanaged the operations of the debtor/subsidiary corporation.

The law review article relied on by the Kims states that: "As a lender, the bank may become a control creditor by becoming so involved in the borrower's daily operations that the bank has, in effect, dominated the borrower to the extent that the borrower has lost its separate identity." (Note, The Fiduciary Controversy: Injection of Fiduciary Principles into The Bank-Depositor and Bank-Borrower Relationships (1987) 20 Loyola L.A.L.Rev. 795, 800.) The article also refers to a merger of identities where the bank can command the debtor to obey the bank's policy directives or the bank's being the alter ego of the debtor before fiduciary duties are imposed. (Id., at pp. 800-801.)

No such relationship exists here. There is no indication that the Bank had any say in the operation of the construction project. If anything, the Kims are complaining that the Bank did not become involved in the daily operation of the construction project. The Kims do not discuss how paragraphs 5, 7 and 8 of the Loan Agreement made the Bank a control lender. Those sections do not give the Bank any authority over the Kims' project. Moreover, although the Bank held the loan proceeds, the disbursement of the proceeds was ultimately authorized by the contractor, not the Bank.

Second, the Kims claim that the Bank had a fiduciary duty to them because it took from them their right to use and control the funds they borrowed from the Bank, the Bank used and disbursed the Kims' money as it saw fit, and they had no choice but to rely on and trust the Bank. The Kims' position is supported by the dicta in Price that a fiduciary relationship might arise in a bank/borrower relation and a statement in Barrett v. Bank of America (1986) 183 Cal.App.3d 1362, 1369, 229 Cal.Rptr. 16, that the relationship of a bank to depositor is at least quasi-fiduciary, giving rise to a duty to disclose facts which might place the bank or a third party at an...