Richard B. Levine, Inc. v. Higashi

• Decision Date: 27 July 2005
• Docket Number: No. G032995.,G032995.
• Citation: 32 Cal.Rptr.3d 244,131 Cal.App.4th 566
• Court: California Court of Appeals Court of Appeals
• Parties: RICHARD B. LeVINE, INC., Plaintiff and Appellant, v. Gerald HIGASHI et al., Defendants and Respondents.

32 Cal.Rptr.3d 244

131 Cal.App.4th 566

RICHARD B. LeVINE, INC., Plaintiff and Appellant, v. Gerald HIGASHI et al., Defendants and Respondents.

No. G032995.

Court of Appeal, Fourth District, Division Three.

July 27, 2005.

Certified for Partial Publication.^*

Law Offices of Mary A. Lehman and Mary A. Lehman, Coronado, for Plaintiff and Appellant.

Garrett & Tully, Efren A. Compeán, Pasadena, and Christopher G. Piety for Defendants and Respondents.

OPINION

IKOLA, J.

Richard B. LeVine, Inc., (plaintiff) appeals from a summary judgment and also challenges the court's earlier rulings on demurrer. We conclude an arbitration award in favor of defendants' alleged coconspirators bars any claim grounded on an aiding and abetting or conspiracy theory, and plaintiff failed to establish any independent duty owed by defendants to plaintiff. Accordingly, in the published portion of this opinion, we affirm the summary judgment. In the unpublished portions of this opinion, we discuss an evidentiary ruling and also affirm the earlier rulings on demurrer.

FACTS

Plaintiff was a partner in a medical partnership named Orange County Heart Institute and Research Center (OCHI) formed in 1994. Cardiologist Richard B. LeVine was plaintiff's officer, employee, and sole shareholder.

Gerald Higashi and HMWC CPAs & Business Advisors (collectively Higashi) were retained to provide accounting services to OCHI, including the calculation of each partner's share of the partnership profits and the amount of each partner's capital account. Higashi's calculation of each partner's share of the 1994 profits was completed without controversy in accordance with the provisions of article 7 of the OCHI partnership agreement. Thereafter, Dr. LeVine died in June 1995, and his wife Roberta LeVine became plaintiff's sole shareholder and president.

After Dr. LeVine's death, OCHI's chief executive officer informed Higashi that the OCHI partners had agreed to change the method of allocating the partners' income and had decided to allocate $239,501 to plaintiff for 1995. Higashi followed these instructions and directed one of his firm's bookkeepers to prepare a worksheet reflecting the new allocation. Before Higashi prepared plaintiff's 1995 Schedule K-1, he wrote OCHI a letter confirming the latter's instructions regarding the calculation of profits. The confirming letter was countersigned by OCHI's chief executive officer on March 8, 1996. Accordingly, plaintiff's 1995 Schedule K-1, prepared by Higashi, reflected a profit allocation of $239,501. In February 1996, OCHI paid plaintiff $81,611 to buy out plaintiff's partnership interest. The payment was accepted under protest, and plaintiff's accountant wrote a letter claiming additional amounts were owed under the partnership agreement.

In October 1996, OCHI advised Higashi that plaintiff's partnership interest had been bought out and that plaintiff was no longer a partner, its voting powers and interest in the profits having terminated upon Dr. LeVine's death on June 15, 1995. Higashi received further instructions from OCHI in February 1997 to prepare the 1996 partnership tax return and the partners' K-1 statements to reflect the redemption of plaintiff's partnership interest with a resultant zero balance in its capital account.

Meanwhile, Mrs. LeVine had attempted to obtain financial information about the OCHI partnership, apparently without success. In October 1995, she sought the assistance of Stephen Bennett, a certified public accountant who had provided services for plaintiff since the 1980's, to obtain the partnership financial information. Beginning in February 1996, Bennett demanded further payments for plaintiff's partnership interest in OCHI, including the disputed 1995 profits.

Plaintiff also retained a law firm to pursue its claims, and, in 1998, initiated an arbitration proceeding against OCHI and its partners pursuant to an arbitration provision in the partnership agreement. In a two-phase arbitration proceeding, the arbitrator ruled in phase one that under the partnership agreement plaintiff was not entitled to partnership profits accruing after Dr. LeVine's death, and in phase two that plaintiff was not entitled to additional profits for 1995. The final arbitration award was made on September 7, 2000.

On November 7, 2001, plaintiff filed the instant action against Higashi. The demurrer war began. Ultimately, plaintiff's third amended complaint alleged constructive and actual fraud, negligence, and conspiracy. The court sustained Higashi's demurrer to the constructive and actual fraud causes of action. Later, the court granted Higashi's summary judgment motion as to the remaining causes of action. On this appeal, plaintiff challenges the court's rulings on both the demurrer and the summary judgment motion.

DISCUSSION

I^**

II The Court Correctly Adjudicated the Conspiracy and Aiding and Abetting Claim

After a seemingly endless round of demurrers, the only matters at issue at the time of defendants' summary judgment motion were two causes of action contained in plaintiff's fourth amended complaint labeled "Civil Conspiracy (Aiding and Abetting)" and "Professional Negligence." We conclude the court correctly granted Higashi's motion as to each cause of action.

The standard for deciding a summary judgment motion is well-established, as is the standard of review on appeal. "[T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law. . . . There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850, 107 Cal.Rptr.2d 841, 24 P.3d 493, fns. omitted.) "We review the trial court's decision de novo, considering all of the evidence the parties offered in connection with the motion (except that which the court properly excluded) and the uncontradicted inferences the evidence reasonably supports." (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476, 110 Cal.Rptr.2d 370, 28 P.3d 116.)

A. The Arbitration Adjudicated the Same Cause of Action Raised in the Conspiracy and Aiding and Abetting Claim

The stated basis for the court's ruling granting the motion with respect to the civil conspiracy claim was threefold: (1) Plaintiff's evidence was "not only inconclusive," it was "actually unintelligible"; (2) the conspiracy claim was barred by the statutes of limitation applicable to the underlying torts of breach of fiduciary duty and conversion; and (3) the awards in the arbitration proceeding between plaintiff, OCHI, and its partners collaterally estopped plaintiff from proceeding on the conspiracy claim. We conclude the third reason, which the court called collateral estoppel, but we will call res judicata or claim preclusion, conclusively established Higashi's complete defense to the claim for civil conspiracy.⁴

"`Res judicata' describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. Collateral estoppel, or issue preclusion, `precludes relitigation of issues argued and decided in prior proceedings.' [Citation.] Under the doctrine of res judicata, if a plaintiff prevails in an action, the cause is merged into the judgment and may not be asserted in a subsequent lawsuit; a judgment for the defendant serves as a bar to further litigation of the same cause of action." (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897, 123 Cal.Rptr.2d 432, 51 P.3d 297, fn. omitted.) Although the trial court invoked the narrower prong of the doctrine, collateral estoppel, under the circumstances of this case we think it is more accurate to invoke the strict res judicata, or claim preclusion, aspect of the doctrine. Whatever name one attaches to the legal principle, the result is the same. Regardless of what term we use, the question we address is whether, under the facts of this case, plaintiff is precluded from pursuing this particular claim against Higashi.

It is unclear from plaintiff's operative fourth amended complaint whether it was relying on a conspiracy theory or an aiding and abetting theory. But it doesn't matter. Under either legal avenue, summary judgment was properly granted because Higashi's liability is dependent upon the commission of an underlying tort by OCHI and its partners, a claim decided adversely to plaintiff in the prior arbitration.

We begin by recognizing the well-worn principle applicable to the civil conspiracy theory: "[T]here is no separate tort of civil conspiracy, and there is no civil action for conspiracy to commit a recognized tort unless the wrongful act itself is committed and damage results therefrom." (5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 44, p. 107; Unruh v. Truck Insurance Exchange (1972) 7 Cal.3d 616, 631, 102 Cal.Rptr. 815, 498 P.2d 1063 ["A civil conspiracy however atrocious, does not per se give rise to a cause of action unless a civil wrong has been committed resulting in damage"].) "[T]he only significance of the conspiracy charge is that each member may be held responsible as a joint tortfeasor, regardless of whether or not he directly participated in the act." (5 Witkin, supra, Torts, § 44, p. 107.) Thus, under the civil conspiracy claim, we will consider whether Higashi can be held liable for the acts of the alleged coconspirators, the OCHI partners. Whether Higashi can be liable for his direct acts will be considered on our review of the professional negligence claim.

Closely related to plaintiff's conspiracy theory is its aiding and abetting theory. "`Liability may . . . be imposed on one who aids and abets the...