NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FILED
FOR THE NINTH CIRCUIT
SEP 07 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
JOHN T. HARDISTY, Nos. 15-56797
16-55538
Plaintiff-counter-
defendant-Appellee, D.C. No. 3:11-cv-01591-BAS-BLM
v.
MEMORANDUM*
MELANIE MOORE, in her capacity as the
executrix and the party representative of
the estate of Hal Moore; ELAINE K.
MOORE; STATE INSULATION, INC.,
an Arizona limited liability company; THE
1998 HAROLD M. MOORE
REVOCABLE TRUST; MARK PELUSO;
STATE INSULATION, LLC, a Nevada
limited liability company; STATE
INSULATION, LLC, an Arizona limited
liability company,
Defendants-counter-
claimants-Appellants.
JOHN T. HARDISTY, No. 15-56806
Plaintiff-counter- D.C. No. 3:11-cv-01591-BAS-BLM
defendant-Appellant,
*
This disposition is not appropriate for publication and is not precedent except as
provided by Ninth Circuit Rule 36-3.
v.
MELANIE MOORE, in her capacity as the
executrix and the party representative of
the estate of Hal Moore; ELAINE K.
MOORE; THE 1998 HAROLD M.
MOORE REVOCABLE TRUST; MARK
PELUSO; STATE INSULATION, LLC, a
Nevada limited liability company; STATE
INSULATION, LLC, an Arizona limited
liability company,
Defendants-counter-
claimants-Appellees.
Appeal from the United States District Court
for the Southern District of California
Cynthia A. Bashant, District Judge, Presiding
Argued and Submitted June 5, 2018
Pasadena, California
Before: WARDLAW and PAEZ, Circuit Judges, and CHHABRIA,** District
Judge.
Elaine K. Moore and others (collectively “the Moores”) appeal the district
court’s judgment and denial of attorney’s fees following a bench trial in this state-
law fraud case. John T. Hardisty cross-appeals the judgment and denial of
attorney’s fees. For the following reasons, we affirm.
**
The Honorable Vince Chhabria, United States District Judge for the Northern
District of California, sitting by designation.
2
1. The district court did not err in basing its fraud finding on three
misrepresentations that contradicted the text of the Purchase and Sale Agreement.
The case on which the Moores rely to assert otherwise, Cobbs v. Cobbs, 53 Cal.
App. 2d 780, 785 (1943), has been overruled by the California Supreme Court.
Riverisland Cold Storage, Inc. v. Fresno-Madera Prod. Credit Ass’n, 55 Cal. 4th
1169, 1180–82 (2013). The other misrepresentation found by the district court was
not clearly erroneous even if, as the Moores assert, they always intended to submit
the costs to HUD for payment as a change order. The district court’s finding was
based on the Moores’ representation that costs not paid by HUD would be
reimbursed by Legacy Pointe rather than through a claim on the bond. The Moores
do not challenge that aspect of the district court’s finding on appeal.
2. The district court did not err in concluding that Hardisty justifiably relied
on the Moores’ representations for purposes of its fraud in the execution finding.
Hardisty’s failure to read the final draft of the contract, coupled with his reasonable
opportunity to do so, would ordinarily render his reliance unjustifiable. Rosenthal
v. Great W. Fin. Sec. Corp., 14 Cal. 4th 394, 423 (1996). But that rule does not
apply because the district court did not clearly err in finding that Hardisty read an
earlier draft of the contract and that the Moores concealed the fact that they had
edited it. Restatement (Second) of Contracts § 163 cmt. b, illus. 2. Nor is the
3
district court’s finding that Hardisty’s reliance was reasonable otherwise clearly
erroneous. For similar reasons, the district court did not err in awarding fraud
damages. Chapman v. Skype, Inc., 220 Cal. App. 4th 217, 233 n.6 (2013) (noting
that a lower standard of justifiable reliance applies to tort claims than to fraud in
the execution).
3. The district court did not err in finding that the Incentive Agreement was
valid. Although the Incentive Agreement is titled “Letter of Intent,” Hardisty
testified that he understood it to be a binding, standalone contract and his counsel
argued to the district court that it could be affirmed, at least in part, even if the
Purchase and Sale Agreement were declared void or rescinded. The district court’s
factual finding that the Moores intended to perform in accordance with the
Incentive Agreement when they signed it was not internally inconsistent or
otherwise clearly erroneous. See Miller v. Thane Int’l, 615 F.3d 1095, 1104 (9th
Cir. 2010) (“[W]e are extremely deferential to credibility determinations.”).
Hardisty waived any claim for rescission of the Incentive Agreement based on total
failure of consideration by not raising it below. Smith v. Marsh, 194 F.3d 1045,
1052 (9th Cir. 1999). That HUD’s approval of the transfer was premised on the
void Purchase and Sale Agreement may make the transfer voidable at HUD’s
option, but it does not make it automatically void. Hardisty waived his argument
4
that the Incentive Agreement was never a valid contract based on Hal Moore’s
failure to sign it, because he did not raise it either below or in his opening brief.
Brown v. Rawson-Neal Psychiatric Hosp., 840 F.3d 1146, 1148 (9th Cir. 2016);
Smith, 194 F.3d at 1052. We therefore affirm the district court’s refusal to rescind
the full transaction and its judgment for the Moores on the conversion and
securities fraud claims.1
4. The district court did not err in finding that there was no confidential
relationship at the relevant time and entering judgment for the Moores on the
constructive fraud claim. The district court properly interpreted Odorizzi v.
Bloomfield Sch. Dist., 246 Cal. App. 2d 123, 129 (1966), to stand for the
proposition that a negotiation “to bring about a termination of [the] relationship” is
generally strong evidence (but not dispositive evidence) that a confidential
relationship has ended. Any continued control over Hardisty’s finances by the
Moores is relevant only to the existence of a fiduciary relationship, not to the
existence of a confidential relationship.2 See Vai v. Bank of Am. Nat’l Tr. & Sav.
Ass’n, 56 Cal. 2d 329, 338 (1961); Hayutin v. Weintraub, 207 Cal. App. 2d 497,
1
We need not, and do not, decide whether the district court’s alternative holding that the
LLC interests were not securities was correct.
2
Hardisty waived any challenge to the district court’s finding that there was no fiduciary
relationship by not addressing it in his opening brief. Brown, 840 F.3d at 1148.
5
513-14 (1962); Sime v. Malouf, 95 Cal. App. 2d 82, 97 (1949). The district court’s
factual finding that any confidential relationship had deteriorated was not
otherwise clearly erroneous in light of the evidence in the record that the
negotiations over the Incentive Agreement and the Purchase and Sale Agreement
were acrimonious and based on threats rather than trust and confidence.
5. The Moores waived their challenge to the district court’s reopening of the
case to permit new evidence by failing to explain what prejudice they suffered
from the reopening—that is, what evidence introduced after reopening the district
court relied on to support its judgment. See Fed. R. App. P. 28(a)(8)(A); United
Nurses Ass’ns of Cal. v. Nat’l Labor Relations Bd., 871 F.3d 767, 780 (9th Cir.
2017). Even if we were to reach this issue, we would affirm. On two separate
occasions, the district court explained that it was reopening the case “solely
because . . . I feel like I short circuited both sides with the time crunch” and that its
“only reason for reopening was my concern that I had not given both sides
sufficient time.” The district court properly ensured that it did “not adhere so
6
rigidly to time limits as to sacrifice justice in the name of efficiency.” Navellier v.
Sletten, 262 F.3d 923, 941 (9th Cir. 2001). 3
6. We need not decide whether the district court properly admitted the
testimony of Hardisty’s expert witness because the Moores concede that the district
court did not rely on that testimony, so there could be no prejudice. See Estate of
Barabin v. AstenJohnson, Inc., 740 F.3d 457, 462 (9th Cir. 2014).
7. Hardisty’s claims were, in part, “on a contract” because they sought
rescission of the Purchase and Sale Agreement. Super 7 Motel Assocs. v. Wang, 16
Cal. App. 4th 541, 549 (1993); see also Cal. Civ. Code § 1717(a). But Hardisty
also sought consequential damages, which sound in tort rather than contract. Id. at
549–50. The district court should have focused solely on the contract portion of the
claims to determine the prevailing party under § 1717(a). We nevertheless affirm
because “under the correct legal standard it would have been an abuse of
discretion” to find either party to be the prevailing party. United States v. Davis,
3
In connection with its decision to reopen, the district court may have misstated the
burden of proof as to damages under California law. But these statements were merely in further
defense of the decision to reopen in response to objections by counsel. The district court twice
stated clearly that it made the decision to alleviate the harm caused by unduly strict time limits.
And even if the district court’s explanation of its rationale for the reopening could be considered
ambiguous, we would resolve that ambiguity in favor of the conclusion that the district court
properly exercised its discretion. In the criminal sentencing context, we have resolved
ambiguities about whether the district court exercised its discretion or instead based a decision
on an erroneous legal conclusion in favor of remand. See United States v. Brown, 985 F.2d 478,
480–81 (9th Cir. 1993). That context is very different from this one, which involves merely the
reopening of the evidence in a civil bench trial.
7
428 F.3d 802, 808 (9th Cir. 2005). The Moores are not the prevailing party on the
rescission claims because the Purchase and Sale Agreement was declared void
based on the fraud they committed against Hardisty. Hardisty is also not the
prevailing party because he sought rescission of the Purchase and Sale Agreement
solely for the purpose of getting his shares in Legacy Pointe back, which he failed
to do. See Hsu v. Abbara, 9 Cal. 4th 863, 877 (1995) (“[I]n determining litigation
success, courts should respect substance more than form.”). The district court’s
judgment thus was “good news and bad news to each of the parties.” Kytasty v.
Godwin, 102 Cal. App. 3d 762, 774 (1980).
8. The district court did not abuse its discretion in denying costs to Hardisty.
Considering “the overall action,” this case involved “a mixed judgment.” Amarel v.
Connell, 102 F.3d 1494, 1523 (9th Cir. 1996).
AFFIRMED. Each party shall bear its own costs on appeal in all three
cases.
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John Hardisty v. Melanie Moore
Combined Opinion