2016-00204441-CU-BT

Folsom Ready Mix-Anderson, LLC vs. Randy David Barnes

Nature of Proceeding: Motion for Preliminary Injunction

Filed By: Finnerty, Kathleen E.

Plaintiffs Folsom Ready-Mix Anderson LLC and Folsom Ready-Mix, Inc.’s Motion for Preliminary Injunction is GRANTED.

The hearing on the Motion for Preliminary Injunction was continued by the Court from the original date of Dec. 19, 2017, as the Opposition papers were not timely served and filed. The Court has now received and considered the Redacted Opposition (ROA

93) and the Plaintiffs’ Supplemental Reply and Finnerty Declaration (ROA 96, 97). Complaint

On Dec. 6, 2016, Plaintiffs Folsom Ready-Mix Anderson LLC and Folsom Ready-Mix, Inc. filed their verified complaint in this action. That complaint alleges 10 causes of

action against the defendants Randy Barnes, Jeri F. Barnes and Central Valley CDL Services, LLC: the 1st for conversion of assets from Folsom Ready Mix – Anderson, the 2nd for conversion of assets from Folsom Ready Mix, Inc., the 3rd for breach of fiduciary duty, the 4th for negligence, the 5th for constructive fraud, the 6th for conspiracy to defraud, the 7th for unjust enrichment, the 8th for imposition of constructive trust, the 9th for specific performance and the 10th for injunctive relief.

Temporary Restraining Order

On Nov. 3, 2017, this Court issued its ex parte TRO and Order to Show Cause re Preliminary Injunction. Counsel for all parties had notice and were present at the ex parte.

The Court’s TRO ordered that Defendants Randy David Barnes, Jeri F. Barnes and Central Valley CDL Services, LLC, their agents, servants, employees, attorneys, and all others in active concert or participation with Defendants are restrained and enjoined from engaging in, or performing, directly or indirectly, any and all of the following acts: from wasting, using (which does not include “turning over” the engines), selling, encumbering, hypothecating, concealing or otherwise disposing of eight specified vehicles:

1. The 1956 Chevrolet Bel Air 2 door had top sedan with a 572-horsepower big block engine, chromed engine parts and custom interior (“hot rod”), VIN VC560025559, CA License No. BARNS56;

2. The 1964 Chevrolet Impala Super Sport (SS) 2-door hard top sedan with Small Block Chevy 327 engine, bored out to 331 horsepower (“hot rod”), chromed engine parts and customized interior, VIN 41447S230496, California License No. 7DIY660;

3. The 1970 GM C10 Truck (“hot rod”) VIN CE140Z130157, CA License No. RANDY70;
4. The 1972 GM C20 Truck (“hot rod”), VIN TKE2425513268, CA License No. 2F16479;

5. The 2007 GMC 2500 Truck; VIN unknown CA License No. RAMNBUL;
6. The 2005 Freightliner Truck (commercial vehicle designated as CVI), VIN 1FVACXDC55HU28443, CA License No. 8Z52325;

7. The 1998 Freightliner Truck (commercial vehicle designated as CV2), VIN 1FUYSDYB1WP913210, CA License No. 9D00965; and
8. The 2002 Ford Bus Van (commercial vehicle designated as CV3), VIN 1FDXE45S82HA45592, CA License No. 07495D1. (Collectively “the vehicles”)

Material Facts

Moving parties present evidence that Mr. Barnes was a long time employee and officer, employed from September 24, 1999 until February 3, 2016, when his employment was terminated for embezzling funds from plaintiffs. During his employment, Barnes served as the Vice President with all department heads reporting to him. Mr. Barnes admits that the accounting department for both plaintiffs reported directly to him. Mr. Barnes was never authorized to spend company money on his personal hot rods, home, or truck driving school. Mr. Barnes misappropriated at least five hundred forty thousand dollars ($540,000.00) in total. Barnes used company credit cards, bank accounts, and other funds to pay for his family home, autos, travel, dining, and other expenses; including paying the Barnes’ personal Internal Revenue Service obligations; and purchasing equipment, computers, insurance, licensing and supplies

to operate a business known as Central Valley CDL. Both Barnes’ also used plaintiffs’ company assets, including facilities, equipment and employees, to acquire, improve, and maintain their personal vehicles and those belonging to CVCDL. (Verif. Compl., ¶ ¶ 17, 20, 25.) Those defalcations were not discovered until January 2016.

In his deposition, Mr. Barnes admits spending over three hundred thousand dollars

($300,000.00) of company funds on personal expenses, specifically on his classic cars and other vehicles. Plaintiffs have submitted evidence of $310,372.28 of plaintiffs’ funds directly traceable to the assets that are the subject of this Motion. (Silva Dec. Exhs. 2, 2.1 – 2.25 and 3.)

Mr. Barnes admits spending company funds on Mr. and Mrs. Barnes’ truck driving school business, CVCDL. Barnes admits that the plaintiffs were the source of funds for three commercial vehicles purchased for Barnes’ truck driving school.

The Barnes’ 2013-2016 year-end and mid-2017 banking records reflect that the balances are declining. additionally, defendants have been disposing of valuable assets such as, inter alia, two Harley Davidson motorcycles, a 2003 Chevrolet Malibu and a 2010 Chevrolet Corvette.

Preliminary Injunction

Trial courts should evaluate two interrelated factors when deciding whether or not to issue a preliminary injunction. The first is the likelihood that the plaintiff will prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued. Cohen v. Board of Supervisors (1985) 40 Cal. 3d 277, 286.

Plaintiffs seek the imposition of a constructive trust on defendants’ assets acquired by breach of trust, fraud and embezzlement. Constructive trust is an equitable remedy imposed where the defendant holds title to some interest in certain property which it is inequitable for him to enjoy as against the plaintiff. Section 2224 of the Civil Code provides that: One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he has some other and better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who otherwise would have had it.

Mr. Barnes’ spent plaintiffs’ funds of at least $310,372.28, which have been traced by plaintiffs to Defendants’ classic cars, hot rods, trucks and truck driving school assets. Therefore plaintiffs assert that they are entitled to a constructive trust in those assets. Plaintiffs are entitled to a preliminary injunction to preserve the assets subject to a constructive trust and to preserve the status quo.

In opposition, defendants assert that based on the relatively small value of the repairs to the 1972 Chevy pick-up truck and the 2007 GMAC pick-up truck versus the total value of the two pick-up trucks, the court ought to deny Plaintiffs’ motion for imposition of a preliminary injunction and constructive trust on 1972 Chevy pick-up truck and the 2007 GMAC pick-up truck.

Likelihood That the Plaintiff Will Prevail On the Merits at Trial

The Court finds that Plaintiffs are likely to prove conversion and breach of fiduciary duty against Mr. Barnes.

To show a breach of the fiduciary duty of undivided loyalty, Plaintiffs must prove: (1) Mr. Barnes knowingly acted against Plaintiffs’ interests while he was a trusted employee, (2) without Plaintiffs’ informed consent, and (3) Mr. Barnes’ conduct was a substantial factor in causing Plaintiffs’ harm. (See CACI 4102.)

Plaintiffs further assert that they can prove conspiracy against Mrs. Barnes. A co-conspirator shares tort liability co-equal with the immediate tortfeasors. (Applied Equipment Corp v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 511.) The co-conspirator’s liability attaches, regardless of whether she was a direct actor and regardless of the degree of her activity in the conspiracy. Conspiracies are typically proved by circumstantial evidence. Mrs. Barnes is co-owner of the bank accounts, hot rods, classic cars, and CVCDL truck driving school. Mrs. Barnes’ financial interest was furthered by Mr. Barnes’ unauthorized expenditure of plaintiffs’ funds for the Barnes’ personal expenses, which she impliedly approved.

Without expressly addressing whether plaintiffs are likely to prevail at trial, in opposition, defendants assert the doctrine of “unclean hands” as a defense to an equitable action for constructive trust [although not pleaded as an affirmative defense in the answer]. The doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim. (Kendall-Jackson Winery, Ltd. v. Superior Court (1999) 76 Cal.App.4th 970, 978.)

Here, the defendant asserts that plaintiffs’ unclean hands rest on Scott Silva’s two promises to Barnes. The first promise was that Barnes could purchase 25% of Folsom Ready Mix-Anderson, LLC for $283,750.00 to be paid by Barnes’ 25% of profits from the operation of Folsom Ready Mix-Anderson, LLC. Barnes asserts that he relied in Silva’s promise. Barnes received K-1 forms from Silva’s accountants indicating that Barnes had paid for a substantial portion of his 25% of Folsom Ready Mix-Anderson, LLC. Now, Silva denies any such payments.

Silva’s second promise was to pay Barnes a “Management Bonus” equal to 4% of the profits generated by both plaintiffs. Silva denies that such 4% Management Bonus” exists.

In reply, moving parties assert that there was no false promise, which requires an intent not to perform at the time the promise was made. (CACI 1902.) Barnes received a bonus payment in 2006, and the 4% Management Bonus agreement terminated as to all employees in 2009, due to the severe depression in the construction industry at that time.

Similarly, the Barnes assertion that his deposit of $30,000 in credit card payments from CVCDL customers into plaintiffs’ account should result in a credit, is contradicted by his own testimony that those deposits were reimbursement to plaintiffs for CVCDL truck driving school’s use of plaintiffs’ employees.

The Interim Harm

The defendants’ dissipation of assets will create irreparable harm to plaintiffs.

Defendants have sold at least seven vehicles which would otherwise be subject to a constructive trust: a 2000 Harley Davidson Fat Boy, a 2002 Volkswagen Beetle, a 2003 Chevrolet Malibu, a 2007 Toy Hauler, a 2007 Harley Davidson Street Glide, a 2007 GM Yukon, and a 2010 Corvette, each of which was purchased or improved using Plaintiffs’ funds. Their bank accounts have been rapidly declining.

An injunction against disposing of property is proper if disposal would render the final judgment ineffectual. (Heckmann v. Ahmanson (1985) 168 Cal.App.3d 119, 136.)

By contrast defendants will suffer minimal hardship if a preliminary injunction is imposed. The vehicles at issue are not the defendants’ primary means of transportation.

Undertaking

The preliminary injunction is conditioned upon the posting of an undertaking in the amount of $15,000.00. C.C.P. section 529.

The preliminary injunction is granted.