2012-00118919-CU-NP

Supervalu Inc vs. Construction Services Inc

Nature of Proceeding:     Motion for Summary Judgment and/or Adjudication

Filed By:   Reeves, Brandon L.

The motion of Defendant Construction Services, Inc. (“CSI”) and Ronald Batch
(“Batch”) (collectively “Defendants”) for summary judgment/summary adjudication of
issues is GRANTED in part and DENIED in part.

Background Facts/Procedure

This case presents a commercial dispute involving a large payment purportedly made
in error.  Plaintiff Supervalu, Inc. (“Supervalu”) is a wholesaler, retailer and distributor
in the grocery and pharmacy industries.  Among other things, Supervalu operates
Albertson stores.  CSI is a construction company.  Batch’s family owns and operates
CSI.

In its complaint, Supervalu alleges that it retained CSI in 2009 to perform a repair on
the floor of one of its Albertson stores.  Supervalu further alleges that it paid the
agreed-upon price of $3,975.  However, Supervalu contends that in 2011, it mistakenly
issued a check to CSI in the amount of $255,456.  Supervalu maintains that the check
was intended for a vendor with a name similar to CSI’s.  CSI deposited the check and
returned only $113,616.  In Defendants’ view, Supervalu owed principal and interest
for services rendered, and CSI thus retained approximately $140,000 of the funds
Supervalu issued by check in 2011.  According to Supervalu, CSI’s retention of funds
is based on a fabricated work order and work CSI never performed.

Supervalu’s complaint contains four causes of action against Defendants for
conversion, money had and received, constructive trust and unjust enrichment.  By the
instant motion, Defendants move for summary judgment on grounds of accord and
satisfaction, i.e., that CSI extinguished Supervalu’s legal claims when the former
repaid $113,616 as “reimbursement paid in full” and Supervalu cashed the repayment
check without protest.  In the alternative, Batch moves for summary adjudication of
each cause of action against him on grounds that CSI–not Batch– contracted with
Supervalu as well as received, deposited and made partial repayment of the funds at
issue.

Discussion

Preliminarily, the court notes the parties’ dispute whether the motion was set to be
heard timely, i.e., no later than 30 days before trial.  (See CCP § (437c(a).)  Trial is set
for July 28, 2014.  Thirty days before trial falls on June 28, 2014, a Saturday.  Under
CCP § 12a, Defendants were entitled to set the hearing on the next business day, or
June 30, 2014.  Accordingly the motion is before the court.

Also at the outset, the court DENIES Supervalu’s request for a continuance to
complete discovery.  (See Opp. at 11.)  Although Supervalu argues that critical
discovery may exist, it has not produced the requisite evidence to support its  argument.  (See CCP § 473c(h) [continuance contingent on showing by “affidavits” that
discovery needed to oppose motion may exist].)

Summary Judgment Based on Accord and Satisfaction

Summary judgment is DENIED.

Defendants seek summary judgment on grounds that, when CSI issued its repayment
check, the memo line contained the phrase “Reimbursement paid in full,” and
Supervalu cashed the check.  (UMF 15-16.)  Defendants further note that, when
Supervalu cashed the check, it did so without striking or deleting the memo line, and it
never returned the repayment as insufficient.  (UMF 17, 19.)  Defendants argue that,
pursuant to the accord-and-satisfaction provisions in CC § 1526 and Commercial Code
§ 3311, CSI extinguished Supervalu’s claim of mistaken payment.

CC § 1526 reads, in pertinent part:

(a) Where a claim is disputed or unliquidated and a check or draft is
tendered by the debtor in settlement thereof in full discharge of the claim,
and the words “payment in full” or other words of similar meaning are
notated on the check or draft, the acceptance of the check or draft does
not constitute an accord and satisfaction if the creditor protests against
accepting the tender in full payment by striking out or otherwise deleting
that notation or if the acceptance of the check or draft was inadvertent or
without knowledge of the notation.

In turn, Commercial Code § 3311 provides:

(a) If a person against whom a claim is asserted proves that (1) that
person in good faith tendered an instrument to the claimant as full
satisfaction of the claim, (2) the amount of the claim was unliquidated
or subject to a bona fide dispute, and (3) the claimant obtained
payment of the instrument, the following subdivisions apply.

(b) Unless subdivision (c) applies, the claim is discharged if the person
against whom the claim is asserted proves that the instrument or an
accompanying written communication contained a conspicuous
statement to the effect that the instrument was tendered as full
satisfaction of the claim.  (Emphasis added.)

When both CC § 1526 and Commercial Code § 3311 apply, the latter trumps
because it was enacted later.  (See Woolridge v. J.F.L. Electric., Inc. (2002) 96
th
Cal.App.4   Supp. 52, 59-60.)  Both statutes apply to the instant case because
CSI tendered a check as full payment of a disputed claim (CC § 1526) and the
payment was made with a negotiable instrument, namely a check (Com. Code §
3311.)  Thus, the court applies Section 3311 to the current dispute.

In order to obtain accord and satisfaction under Commercial Code § 3311, the
defendant must prove that tender of payment was made in good faith.  (See
th
Lucky United Prop. Investment, Inc. v. Lee (2010) 185 Cal.App.4   125, 148.)  In
order to assess the sufficiency of Defendants’ evidence of good faith in the
instant case, it is important to understand their overall version of the facts.   According to Defendants:

Supervalu contacted CSI in 2009 to perform substantial repairs to the floor in its
Blythe, California store.  CSI drafted Proposal No. 6565, which called for
payment in the amount of $88,650.  Supervalu rejected the proposal and
requested more limited repairs.  In response, CSI produced Proposal No. 6566
reflecting a cost of $3,975.  CSI caused a third party to perform the limited
repairs.  The use of Quikrete to make the repairs, however, produced an odor
that Supervalu asked CSI to remedy.  When Supervalu asked CSI to remedy
the odor, it also asked CSI to make the more substantial repairs outlined in
Proposal No. 6565.  CSI caused a third party to make those extensive repairs,
but Supervalu never paid.  (See UMF 1-3, 12-13.)

Based on this version of the facts, Defendants assert that the decision to tender
$113,616 as full reimbursement of funds owed to Supervalu was made in good
faith.  The only witness who testifies about CSI’s good faith belief is Batch.  In
explaining the basis for his good faith belief, he asserts that he had “some
knowledge” of the work that was performed at Supervalu’s Blythe store in 2009.
(Batch Decl., ¶ 18.)  Elsewhere, however, his knowledge of CSI’s dealings with
Supervalu appears to be limited.  (See id. ¶¶ 11-12.)  Batch further asserts that
he believes the contractor who testified that he made the substantial repairs to
the Blythe Store.  (See id. ¶ 16 [“I do not have any reason to doubt that Robert
Ross repaired the tiles and drains per Proposal Number 6565 as he says he
did.[..] I believe he is an honest person”).  And Batch asserts that he agreed
with his father’s assessment that Supervalu was indebted for that work.  (Id. ¶
18.)

However, Defendants have not produced any evidence that CSI attempted to
obtain payment from Supervalu at any point between 2009, when the extensive
repairs were purportedly made, and November 2011, when Supervalu issued its
$255,456 check in error.  Defendants have not submitted any post-repair
invoices or other communications with Supervalu evidencing attempts to collect.

The court concludes that Defendants’ equivocal and sparse evidence is
insufficiently probative to demonstrate the nonexistence of any triable issue
whether CSI acted in good faith when it issued its $113,616 check as full
reimbursement.  (See Aguilar v. Atlantic Richfield Co. (2001) 25 Cal. 4th 826,
851 [results of summary judgment motion depends on moving party’s burden at
trial].)  As a result, summary judgment based upon the defense of accord and
satisfaction is denied.

Summary Judgment/Adjudication of Causes of Action Against Batch on
Grounds That CSI–Not Batch–Received and Retained The Disputed
Funds

The First Cause of Action for Conversion

Summary adjudication is DENIED.

Batch argues that CSI is a corporate entity and that CSI is the one that received
and retained the funds.  (UMF 20, 27, 29-30, 34.)  Based on these facts, Batch
argues that he cannot be held liable for funds that only CSI has possessed.
Batch is not entitled to summary adjudication because he has failed to confront
Supervalu’s aiding and abetting allegations.  (See Compl., ¶¶ 6, 13-17.)  Aiding and
abetting applies to claims of conversion.  (See Stueve Bros. Farms, LLC v. Berger
Kahn (2013) 222 Cal.App.4th 303, 324.)  Having failed to demonstrate that there is no
triable issue of material fact whether he aided and abetted CSI’s alleged conversion of
funds, Batch has failed to meet his initial burden of production, and summary
adjudication must be denied.

The Second, Third and Fourth Causes of Action for Money Had and
Received, Constructive Trust and Unjust Enrichment

Summary adjudication is GRANTED.

Each of the subject causes of action requires evidence that Batch received
some or all of the disputed funds.  Batch has produced sufficient evidence that
CSI is the one that received and maintained the funds, and he therefore has
shifted the burden of production to Supervalu.

Supervalu has not produced evidence that Batch received any of the funds.
Instead, it argues that summary adjudication should be denied on a theory that
Batch is CSI’s alter ego.  The complaint, however, does not raise alter ego as a
basis upon which to hold Batch liable.  Because the complaint frames the
issues for summary adjudication, (see Frittelli, Inc. v. 350 North Canon Drive,
LP (2011) 202 Cal.App.4th 35, 41), and because Supervalu failed to raise alter
ego as an issue for decision, its current reliance on alter ego is misplaced.

Evidentiary Objections

Supervalu’s Objections are OVERRULED.

Judicial Notice

Defendants’ request for judicial notice of the complaint is GRANTED.

Conclusion

The motion for summary judgment is DENIED.

Batch’s alternative request for summary adjudication of the second through
fourth causes of action is GRANTED.  His further request for summary
adjudication of the first cause of action is DENIED.

Pursuant to CRC 3.1312, Batch is directed to submit a revised formal order for
the court’s signature.