Filed 8/27/14 Buttacavoli v. Rojas CA4/3




                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     FOURTH APPELLATE DISTRICT

                                                 DIVISION THREE


JOSEPH BUTTACAVOLI et al.,

   Cross-complainants, Cross-defendants                                G048487
and Respondents,
                                                                       (Super. Ct. No. 30-2009-00330086)
         v.
                                                                       OPINION
STEVEN R. ROJAS,

   Cross-defendant, Cross-complainant
and Appellant.



                   Appeal from a judgment of the Superior Court of Orange County, Sheila
Fell, Judge. Affirmed.
                   Best Best & Krieger, Kira L. Klatchko and Irene S. Zurko for Cross-
defendant, Cross complainant and Appellant.
                   Lurie & Associates, Barak Lurie and Michael J. Conway for Cross-
complainants, Cross-defendants and Respondents.
                                             *               *               *
              Joseph Buttacavoli and Steven Rojas were 50/50 partners who, beginning
in 1993, owned and operated a car dealership, Fullerton Dodge. In 2002, Rojas stopped
managing Fullerton Dodge and left to operate a new dealership, leaving Buttacavoli in
charge. Shortly before Rojas left, Fullerton Dodge began struggling financially. From
2002 through 2006, Buttacavoli made various loans to the dealership to ensure it had
sufficient cash to operate.
              In December 2006, Rojas agreed to buy Buttacavoli’s share for $1.5
million. Not long after that payment was made, Chrysler Financial Services, who
financed Fullerton Dodge’s operations, put the dealership on a credit hold, effectively
shutting down the dealership.
              Chrysler Financial Services later sued Buttacavoli, his wife, and Rojas to
collect on personal guarantees they had executed for loans it made to Fullerton Dodge.
Buttacavoli and his wife cross-complained against Rojas, invoking an indemnity
provision in the sale agreement and ultimately seeking repayment for their settlement
with Chrysler Financial Services as well as the attorney fees they paid to defend the case.
In turn, Rojas cross-complained against Buttacavoli, asserting claims for breach of the
oral partnership agreement, breach of fiduciary duty, and fraud. The gravamen of Rojas’s
claim was that, from 2002 to 2006, Buttacavoli looted the company. After a bench trial,
the court found in favor of Buttacavoli on his indemnity claim and against Rojas on his
claims. Rojas appealed.
              Rojas’s principal claim on appeal is that the court improperly put the
burden of proof on Rojas to prove a breach of Buttacavoli’s fiduciary duties. Rojas also
contends the decision is not supported by substantial evidence. We conclude the
evidence supports the court’s finding that Buttacavoli loaned more to the dealership than
he took out, and thus the evidence refuted causation and damages regardless of who
carried the burden of proof.



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              Rojas also claims the evidence established that Buttacavoli breached the
warranty in the sale agreement that the financial records fairly represented Fullerton
Dodge’s finances. He further claims that Buttacavoli breached a fiduciary duty by
negotiating the sale of a cell tower after he was no longer an owner. We find no merit in
these contentions and affirm.


                                          FACTS


              Rojas met Buttacavoli in April 1991. Buttacavoli was the sales manager at
what would become Fullerton Dodge. Buttacavoli became a partner in Fullerton Dodge
in 1993, 18 months after its opening. Buttacavoli initially invested $111,000, resulting in
Rojas and Buttacavoli each owning 50 percent of the dealership. Buttacavoli continued
operating as the sales manager and Rojas saw to the interactions outside the dealership.
Rojas and Buttacavoli formed Stone Properties LLC to purchase and hold the real
property upon which the dealership was located.
              Chrysler Financial Services financed the operations of Fullerton Dodge,
and over the course of the parties’ ownership of Fullerton Dodge, Chrysler Financial
Services lent Fullerton Dodge approximately $12.8 million. Buttacavoli, his wife, and
Rojas signed personal guarantees of at least some of those loans.
              Beginning in late 2001 the dealership began facing a cash shortage.
Starting as early as 2002, Buttacavoli made a series of loans to Fullerton Dodge to help
fund the store. In 2002, Fullerton Dodge issued a demand note entitling Buttacavoli to
payments in the amount of $1,456,464.85. This reflected the amount Buttacavoli had
loaned Fullerton Dodge up to this point. Rojas signed the demand note.
              That same year Rojas stopped actively managing Fullerton Dodge to run a
new dealership, Redlands Ford, leaving the operation of Fullerton Dodge to Buttacavoli.



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              Fullerton Dodge’s financial decline continued. In August 2004,
Buttacavoli wrote a check to Fullerton Dodge in the amount of $2,750,000 to help fund
operations. Two million of this was memorialized in a promissory note in October 2004.
In September 2004, Buttacavoli wrote Rojas a letter stating, “Fullerton Dodge has
essentially run out of money,” and asked Rojas not to take further draws until the cash
situation could be rectified. In early 2005, Buttacavoli stopped taking a salary.
Buttacavoli loaned the dealership a further $974,797 in March 2005, which was also
memorialized by a promissory note. In addition, Buttacavoli would at various times
deposit money in an interest-bearing “CMA” account at the dealership.
              Over the course of their ownership of Fullerton Dodge, both Rojas and
Buttacavoli would take draws from the partnership against current or future profits.
Buttacavoli would also, at times, take money out as repayment for loans or other
investments he had made in the dealership.
              In 2006, Buttacavoli was attempting to sell his interest in the dealership and
had found a third party buyer. Rojas had a right of first refusal, however, and exercised
it. In December 2006, the parties reached an oral agreement for the sale of Buttacavoli’s
interest. Buttacavoli was to receive $1.5 million, a free loaner car, and health insurance
for his family.
              At that point in time Buttacavoli stopped managing the dealership, and
Rojas brought in his own general manager, Louis Rivas, and his own secretary/treasurer,
Tracey Hooper. Hooper examined the financial books and accounts and testified she
immediately noticed improprieties such as aged accounts receivables and “outrageous”
employee receivables attributable to Buttacavoli. Rivas likewise testified he saw
financial irregularities such as the value of the parts inventory being overstated and
delinquent accounts payable and receivable. He testified that Tony B Suzuki, a Suzuki
dealership Buttacavoli was running on the side using some of Fullerton Dodge’s
resources, had run up a receivable of $200,000. Hooper and Rivas brought these issues to

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Rojas’s attention in December 2006. However, there are no contemporaneous documents
to substantiate Rojas’s team’s alleged concerns about the books and records.
               Chrysler Financial Services had to approve the sale of Buttacavoli’s interest
to Rojas, and it imposed several conditions before granting approval. Most significantly,
the dealership needed approximately $2.5 million in working capital. This was to be
accomplished by Chrysler Financial Services loaning Fullerton Dodge $1.9 million,
which Buttacavoli personally guaranteed, and from which Fullerton Dodge would pay the
$1.5 million purchase price. Also, Rojas was supposed to invest a further $300,000 of his
own money (which he never did). And Rojas’s new business partner, Rivas, was to
invest $200,000. For his part, Buttacavoli had $3 million of his money invested in the
dealership. Chrysler Financial Services required him to credit approximately $1 million
of that to paying off a draw account, to invest $1 million in a subordinated note, and to
forgive the final million.
               In April 2007, despite the alleged irregularities in the books and records,
Rojas and Buttacavoli executed a written agreement for the sale (the “buy/sell
agreement”).
               In May 2007, Chrysler Financial Services performed an audit of Fullerton
Dodge. While the audit resulted in some adjustments to the financial accountings, the
auditors concluded, “The condition of the books and records are fair.” It also noted the
dealership’s bank accounts “are properly reconciled each month and neither had any
significant reconciliation items.”
               In January 2008, Rojas authorized the payment to Buttacavoli of the $1.5
million purchase price.
               Shortly thereafter, Chrysler Financial Services placed Fullerton Dodge on a
credit hold, which effectively shut the dealership down. The record is unclear as to the
reason. Rivas testified that Chrysler Financial Services told him the payment to



                                              5
Buttacavoli was supposed to “stay in the store in order for [Fullerton Dodge] to be
            1
capitalized.”
                In December 2009, Chrysler Financial Services sued Rojas, Buttacavoli,
and his wife for breach of their guarantees of loans made to Fullerton Dodge. The matter
apparently settled with Buttacavoli and his wife paying $325,000 to Chrysler Financial
Services. They incurred $111,000 in attorney fees.
                In February 2010, Buttacavoli and his wife filed a verified cross-complaint
against Rojas for, among other things, indemnification. In March 2010, Rojas answered,
admitting the truth of various loans Buttacavoli made to Fullerton Dodge. Also in March
2010, Rojas cross-complained against Buttacavoli for, among other things, breach of
contract and breach of fiduciary duty.
                The parties waived a jury trial and the matter was tried to the court. With
respect to the issues relevant to this appeal, the court rendered a judgment in
Buttacavoli’s favor. It found Rojas was liable to indemnify Buttacavoli and his wife
based on an indemnification provision in the buy/sell agreement. With respect to Rojas’s
claims for breach of fiduciary duty and breach of contract, it found both failed because
Buttacavoli had contributed at least $7,734,959.24, which is greater than the $6,981,785
Rojas claimed Buttacavoli had taken out of the dealership. The court stated, “Based on
the evidence submitted, cross-complainant Steven Rojas failed to carry his burden of
establishing any breach of contract and/or breach of fiduciary duty by cross-defendant
Joseph Buttacavoli that resulted in any causally related damage to cross-complainant
                                         2
Steven Rojas.” Rojas timely appealed.

1
              This explanation leaves much to be desired, however, since Chrysler
Financial Services, having approved of the sale, must have known Buttacavoli was to be
paid $1.5 million.
2
            Buttacavoli also secured a judgment for $1 million against Fullerton
Dodge. Fullerton Dodge did not appeal, however, and thus we do not address issues

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                                       DISCUSSION


              Rojas’s first argument on appeal is that the court incorrectly allocated to
him the burden of proving Buttacavoli’s breach of a fiduciary duty. We disagree.
              In proving a claim for breach of fiduciary duty, “The beneficiary of the
trust has the initial burden of proving the existence of a fiduciary duty and the trustee’s
failure to perform it; the burden then shifts to the trustee to justify its actions.” (LaMonte
v. Sanwa Bank California (1996) 45 Cal.App.4th 509, 517.) Once the burden has shifted,
“the trustee must prove it acted with the utmost good faith toward the beneficiary and
made full disclosure of all facts related to the transactions at issue.” (Van de Kamp v.
Bank of America (1988) 204 Cal.App.3d 819, 854.) We have found no case, nor has
Rojas cited one, holding that the burden of proof shifts on the issue of causation and
damages.
              We need not address that issue, however, because this is not a case that
turns on the burden of proof. In concluding Rojas had failed to prove causally related
damages, the court cited specific evidence that Buttacavoli had loaned more money to the
company than he had withdrawn. Thus, even if the burden of proof had shifted on the
issue of causation and damages, Buttacavoli offered evidence to support his position,
which the court credited. The real issue in this appeal is whether substantial evidence
supports the court’s finding. We turn to that next.
              The court found Buttacavoli had made loans of at least $7,734,959.24 as
compared to the $6,981,785 he had allegedly withdrawn. In support of the amount
loaned, the court cited Buttacavoli’s verified cross-complaint, Rojas’s verified answer,
and Exhibit 1009, which is a collection of business records from Fullerton Dodge
showing receipts for money Buttacavoli had loaned. Buttacavoli’s verified cross-


pertaining to that aspect of the judgment.

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complaint claims to have made three different loans totaling $4,431,261.85 (plus
                                                                     3
additional unspecified loans). Rojas’s answer admitted these loans. Further, each of
these three loans were corroborated by promissory notes entered into evidence. Exhibit
1009, the admissibility of which was stipulated, contains receipts showing Buttacavoli
                                           4                                      5
deposited a further sum of $3,499,697.86. These amounts total $7,930,959.71. Rojas
claimed at trial that Buttacavoli withdrew $6,981,785. Thus, whatever the propriety of
Buttacavoli’s withdrawals, this evidence shows he deposited nearly $1,000,000 more
                    6
than he took out.
              Rojas never addresses any of this evidence in his briefs and thus offers no
argument concerning why it is not substantial evidence to rebut causation and damages.
The best he offers is the comment that “Buttacavoli has not pointed to a cash infusion
into the business corresponding with each of his ‘loans,’ and in fact the financials
demonstrate that some of the ‘loans’ were not supported by cash.” This appears to be a
reference to the testimony of his expert. The court found the expert’s testimony not
credible, however, and that finding is supported by the record.

3
              We note that in a subsequent answer to an amended complaint, Rojas
denied the validity of the same loans. Although the prior pleadings had been superseded
as pleadings, they were, nonetheless, admissible evidence. (Minish v. Hanuman
Fellowship (2013) 214 Cal.App.4th 437, 457 [“‘superseded pleadings may be used at trial
as admissions against interest; however, the party who made the pleadings must be
allowed to explain the changes’”].)
4
             We have not counted a deposit of $344,000, which appears to already be
accounted for in the loans mentioned in the verified cross-complaint.
5
             Our calculation is approximately $200,000 higher than the trial court’s. We
are unsure how the trial court reached its total, but the discrepancy makes no difference to
the outcome of the appeal since any surplus in favor of Buttacavoli would undermine
Rojas’s damages claim.
6
             It is worth noting there is no evidence in the record that Rojas invested any
money in the dealership at all, and Rojas does not claim he did.

                                               8
              Rojas’s expert was on the stand for only a short time and produced a report
that is nothing more than a series of spreadsheets. Despite his short time on the stand,
however, he was amply impeached. To take a particularly relevant example, Rojas’s
expert testified he could not find support in the dealership’s books and records for the
approximate $1.5 million loan reflected in the demand note executed in March 2002.
However, he later admitted he was not provided the dealership’s financial records for
January through April 2002, which would be the most likely place to find such support.
The expert further admitted that if the financial records had supported the $1.5 million
loan, even by his own calculations there would be a surplus in favor of Buttacavoli. The
substantial evidence supporting the $1.5 million loan is that the demand note is signed by
Rojas. The expert further acknowledged that he had not figured in a $250,000 loan
Buttacavoli made that was supported by a cancelled check, and that he had been unaware
of Buttacavoli’s initial $111,000 investment, which was also not reflected in his
calculations. The expert also admitted he had not reviewed any financial records prior to
2002, and thus did not know what investments or draws Buttacavoli may have made from
the time he became a partner in 1993. In short, the court had ample bases to reject the
expert’s testimony.
              Beyond the comment noted above, Rojas never directly addresses the
damages issue at all, and thus offers no explanation for how he could be damaged when,
at the end of the day, Buttacavoli left nearly $1 million in the dealership. Instead, he
spends nearly his entire brief arguing that the distributions Buttacavoli took were unfair
for one reason or another. That is all beside the point, however, since the court’s finding
of no causally related damages is supported by the record. (LaMonte v. Sanwa Bank
California, supra, 45 Cal.App.4th at p. 517 [“In order to plead a cause of action for
breach of fiduciary duty against a trustee, the plaintiff must show the existence of a




                                              9
fiduciary relationship, its breach, and damage proximately caused by that breach; the
                                                                           7
absence of any one of these elements is fatal to the cause of action”].)
              Next Rojas claims Buttacavoli breached his fiduciary duty by selling a cell
tower on behalf of Stone Properties LLC (the company holding title to the real estate on
which the dealership was located) after he had divested himself of any interest in that
company. This argument borders on frivolous. Rojas acknowledges that the court
credited Buttacavoli’s testimony on this issue. Buttacavoli testified that he negotiated the
sale of the cell tower because Rojas specifically asked him to do it, and that he
transmitted all of the proceeds to Fullerton Dodge for Rojas’s benefit. Rojas contends
this was a breach of fiduciary duty because the sale proceeds were initially wired to
Buttacavoli’s personal account, and only then did he pass along the proceeds to Fullerton
Dodge (which Buttacavoli no longer owned) for Rojas’s benefit. There is no contention,
however, that he failed to pass along the full amount of the proceeds. We do not see an
issue.
              Rojas’s final argument is that the trial court erred by not finding
Buttacavoli had breached the warranty in the buy/sell agreement that the financial records
accurately portrayed Fullerton Dodge’s finances. Rojas’s single page of briefing on this
issue fails to point us to any particular material misrepresentations in the financial
records. The single sentence in Rojas’s opening brief devoted to this issue states,
“Because, as explained above at length, Buttacavoli did not provide accurate financials in
accord with either Section 3.7 or 3.9 of the Buy/Sell Agreement,” he breached it. It is not
our duty, however, to sift through the previous 41 pages of briefing to determine what
might have been a material misrepresentation in the books and records. We also note that



7
               We note that even if we were to credit Rojas the full $309,305 of
operational losses allegedly passed from Tony B Suzuiki to Fullerton Dodge, there would
still be a comfortable surplus in favor of Buttacavoli.

                                             10
the Chrysler Financial Services audit specifically found “[t]he condition of the books and
records are fair.” We find no error.


                                       DISPOSITION


              The judgment is affirmed. Respondents shall recover their costs incurred
on appeal.




                                                 IKOLA, J.

WE CONCUR:



BEDSWORTH, ACTING P. J.



THOMPSON, J.




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