Opinion
H050324
08-14-2023
SEYHMUS GOKCE, Plaintiff and Respondent, v. ISMAIL UNLU, Defendant and Appellant.
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. 20CV365194
BAMATTRE-MANOUKIAN, ACTING P.J.
I. INTRODUCTION
Appellant Ismail Unlu and respondent Seyhmus Gokce each owned a 50 percent interest in Amed 21, Inc. (Amed 21), a corporation formed to operate a restaurant. Unlu owned the property where the restaurant was located, and he leased the property to Amed 21. Unlu eventually evicted Amed 21 for unpaid rent, and the restaurant closed. Thereafter, Gokce and Amed 21 filed a civil complaint against Unlu, alleging various causes of action including usurpation of corporate opportunity. Unlu responded with a cross-complaint alleging breach of fiduciary duty and other claims either individually or derivatively on behalf of Amed 21.
Ahmed 21 is not a party to this appeal.
After a bench trial, the trial court ordered, regarding the complaint, that Unlu pay $95,000 to Gokce for usurpation of corporate opportunity. Regarding the crosscomplaint, the court ordered Amed 21 to pay $90,575.34 to Unlu for unpaid rent. The court also ordered Gokce to return certain items to Unlu (six sculptures, a statue, and a painting) and to pay Unlu $2,400 for other items that were taken (four patio heaters).
On appeal, Unlu contends that the $95,000 award to Gokce for usurpation of corporate opportunity was not supported by substantial evidence. Second, Unlu argues that the trial court erred in failing to award damages for breach of fiduciary duty by Gokce based on his disposition of corporate assets - specifically, restaurant equipment, wine and liquor inventory, and a company car - when the business was evicted. Third, Unlu contends that the trial court erred in failing to award damages for breach of fiduciary duty based on Gokce's payment of advances to himself from corporate funds. Fourth, Unlu argues that the trial court erred in finding time-barred a breach of contract claim against Gokce for failing to transfer a liquor license to Amed 21. For reasons that we will explain, we will affirm the judgment.
Respondent Gokce has filed a motion for sanctions, contending that Unlu's appeal is frivolous and/or brought solely for delay. As we will explain, we determine that sanctions are not warranted, and we will deny the motion.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. The Pleadings
In March 2020, Gokce and Amed 21 filed a civil complaint against Unlu alleging the following causes of action: (1) usurpation of corporate opportunity, (2) conversion (two counts), (3) breach of written contract, (4) unfair competition, (5) unjust enrichment, (6) intentional interference with prospective economic advantage, (7) violation of the "California Comprehensive Computer Access and Fraud Act [(Pen. Code, § 502)]," (8) two causes of action for breach of fiduciary duty, and (9) injunctive relief.
The complaint is not contained in the record on appeal. Our recitation of the causes of action in the complaint is taken from the trial court's statement of decision.
In July 2020, Unlu filed a cross-complaint alleging the following: (1) two derivative causes of action on behalf of Amed 21 for conversion of money and conversion of property against Gokce, (2) a derivative cause of action for an accounting against Gokce, (3) conversion of property against Gokce, (4) a derivative cause of action for breach of fiduciary duty against Gokce, (5) breach of contract regarding unpaid rent against Amed 21, (6) a derivative cause of action for breach of contract regarding a liquor license against Gokce, (7) breach of contract regarding unpaid salary against Amed 21; (8) negligence against both Gokce and Amed 21; and (9) a derivative cause of action for violation of the "California Comprehensive Computer Access and Fraud Act [(Pen. Code, § 502)]."
B. The Trial
A bench trial was conducted in 2022. The trial court heard testimony from (1) Gokce, (2) his younger son, (3) Unlu, and (4) the CPA for Amed 21. Several exhibits were admitted into evidence.
At trial, Gokce was assisted by a Turkish language interpreter.
C. The Statement of Decision
1. Background Factual Findings
The trial court filed a statement of decision on May 31, 2022. In the statement of decision, the court recited the following background facts:
Gokce and Unlu each own a 50 percent interest in Amed 21, a corporation formed in 2012, to operate a restaurant called Bella Vita. Gokce had previously been operating the restaurant alone for a period of time. Unlu purchased a 50 percent interest in 2012 for $150,000. Gokce is the CEO and a director of Amed 21. Unlu was the CFO and a director until January 2019. The "understanding" amongst the parties was that Gokce would manage the kitchen and Unlu would manage the dining room.
Unlu owned the property where the restaurant, Bella Vita, was located, and he leased the property to Amed 21. The most recent lease addendum was signed by Gokce as CEO on behalf of Amed 21. The lease addendum provided that the lease would expire in 2018, with the option of a five-year extension subject to certain conditions.
The trial court found that the "way" Gokce and Unlu were paid for their work in Amed 21 "was murky, at best." Gokce was a "W-2 employee" while Unlu was "paid via 1099." According to the court, "[i]t appear[ed] that the plan was for Unlu to write himself checks meant to match the salary Gokce was taking as an employee. The system was not well managed, and both parties had equal part in the confusion."
The trial court found that "[t]he evidence show[ed] that Gokce began to regularly write checks to himself from corporate accounts for personal purposes. Gokce referred to these checks as 'advances', and suggested that they were later repaid, although there is no evidence in the record that such amounts were repaid. [Gokce] also wrote some checks to third parties from corporate funds for his personal use. Evidence was presented through Gokce's testimony[] that equal amounts of money were taken by Unlu. For instance, Gokce testified that a $100,000 loan was taken, from which both Gokce and Unlu took $30,000 with the balance going into the business. No records were presented during the trial to corroborate the loan or the payments to either party." (Fn. omitted.) The court noted that this was "indicative of much of the testimony of both Gokce and Unlu in this trial. Both testified to specific items, but neither presented evidence to definitively quantify the amounts at issue."
At some point, the business was failing, and it fell behind on its rent. Gokce's son testified that he (the son) proposed that the corporation obtain a loan to pay the overdue rent but that Unlu did not want to obtain a loan. The trial court found that "[b]y this time, Unlu had withdrawn as CFO of Amed 21. While it was disputed whether he had informed Gokce of this, what is clear is that Unlu knew he had withdrawn from the corporation, and therefore did not have the authority to prevent Amed 21 from seeking a loan. Despite that, he told Gokce that he did not agree with the plan to obtain a loan, and Gokce believed that prevented Amed 21 from moving forward."
Although the nature of Gokce's son's relationship to the restaurant was not set forth in the statement of decision, the son testified at trial that he worked at and was involved in the operation of the restaurant and that he helped translate documents and conversations for his father in relation to the restaurant.
Amed 21 owed at least $71,250 in back rent. Amed 21 received a notice of eviction but "did nothing to defend the action." Amed 21 was evicted on July 9, 2019, pursuant to a sheriff's notice to vacate which was served on Gokce.
On or shortly before the eviction, Gokce, "with the assistance of [his son] and others under his direction, removed substantially all corporate assets from the [p]roperty. Gokce admit[ted] that during the weeks from the notice to the eviction, he did not contact anyone in an attempt to sell the equipment. He contacted only one second-hand vendor on the day of eviction and . . . he sold substantially all of the restaurant equipment worth at least $50,000 for $5000 because he was upset or angry with Unlu."
"Gokce also admit[ted] that he allowed his older son to take the entire wine and liquor inventory of Bella Vita without any documentation and without Gokce independently ascertaining the value of the inventory. Gokce claim[ed] his son paid $10,000 for the inventory but no documentation [was] provided to corroborate this or to reflect the disposition of the proceeds."
"Gokce admit[ted] that he allowed his older son's restaurant manager to take the company car. Gokce claimed that $10,000 was paid for the company car. Unlu testified that it was worth at least $30,000. Neither party provided anything beyond bare testimony to support their position. No documentation [was] provided of the transaction. Unlu provided no documentation that the automobile was worth anything more than $10,000."
2. Findings Regarding Gokce and Ahmed 21's Complaint
The trial court made the following findings regarding the causes of action in Gokce and Ahmed 21's complaint. The court determined on the first cause of action that Unlu had usurped a corporate opportunity. In reaching this conclusion, the court found that Amed 21 was behind on its rent, and that Unlu objected to the corporation seeking a loan. However, Unlu had no authority regarding whether a loan was sought because he had already removed himself from his position within the corporation as CFO or director. The court specifically found that Gokce did not know about Unlu's withdrawal from the corporation as evidenced by the fact that Gokce "acceded" to Unlu on the issue of the loan. The court observed that Gokce and his son "continued to trust . . . Unlu with the Company's bank accounts and financial decisions ...." The court determined that "[i]mmediately upon evicting Amed 21, . . . Unlu reopened virtually the identical restaurant under a new name. This action show[ed] . . . Unlu believed a restaurant like the one operated by Amed 21 would be viable in that spot. Additionally, there was evidence that . . . Unlu was making plans at this time to redevelop the property into condominiums. Being the sole owner of the restaurant, rather than a partner, would certainly have given . . . Unlu more flexibility to move forward if and when approval for the development was received."
The trial court determined that Amed 21 was harmed by "the complete loss of its business." Regarding the amount of the loss, the court explained as follows: "Unlu admits to a business value of $300,000 at the time he purchased his fifty-percent stake in Amed 21 for $150,000. While the evidence showed that the business was struggling in 2019, Unlu further admits to making a $95,000 offer to purchase . . . Gokce's fiftypercent stake in Amed 21....Unlu also acknowledged this was an 'opening offer' to which he expected a counteroffer from . . . Gokce. [¶] The combination of . . . Unlu's concealment of his resignation as a director and CFO, his demonstrated comfort with subjecting Amed 21 to debt for his personal benefit, and his refusal to allow Amed 21 to obtain a loan to pay the rent owed to . . . Unlu comprise the proximate cause of Amed 21 losing its business. [¶] The undisputed evidence at trial showed that . . . Unlu did, in fact, offer $95,000 to buy . . . Gokce's one-half portion of the business while this was going on. Given that . . . Unlu was willing to pay that amount immediately prior to his resignation as CFO, this is a reasonable way to judge the value of the business at that time.... Unlu's actions of preventing the corporation from seeking a loan to be able to pay the back rent, and then using the failure of the paying of rent and being behind on rent to force the eviction, and then reopening the restaurant under his exclusive ownership makes him liable to . . . Gokce in the amount of $95,000 for the usurpation of that corporate opportunity."
The trial court explained that its finding of usurpation of corporate opportunity by Unlu "subsumed" Gokce and Amed 21's other causes of action for breach of fiduciary, unfair competition, and intentional interference with prospective economic advantage. The court found that Gokce and Amed 21 failed to meet their burden regarding the causes of action for conversion, breach of contract, unjust enrichment, and injunctive relief. Gokce and Amed 21 dismissed the remaining cause of action for violation of Penal Code section 502 before the close of trial.
3. Findings Regarding Unlu's Cross-Complaint
Regarding Unlu's cross-complaint, the trial court found that Amed 21 owed Unlu $90,575.34 for unpaid rent and prejudgment interest.
Regarding Unlu's derivative claim for breach of fiduciary duty against Gokce, the trial court found that "[t]here was insufficient evidence to show that . . . Gokce breached his fiduciary duties as CEO. Though his actions were not entirely ideal, the evidence presented favors the view that he was loyal and acted with due care under very dire circumstances to liquidate the Company's assets in the best way he knew how so that Amed 21 could pay its employees and other debts. Furthermore, . . . Gokce provided free storage at his home for the unsold assets of the Company."
As for Unlu's derivative claim for conversion of money against Gokce, the trial court found as follows: "Regarding the claims of . . . Gokce taking unearned advances, the evidence is clear that the corporation did not keep appropriate records of each alleged advance. This left the court in a position of having to try to piece together the history based on non-descript bank records and vague and often contradictory testimony of the parties. [¶] Though there was evidence of . . . Gokce taking payments from the Company bank account, there was insufficient evidence to support a finding of conversion. It appeared from the evidence that . . . Gokce informed his partner of when he took an advance payment by posting a note on a shared bulletin board. While far from an appropriate way to document the finances of a corporation, this evidence does show that . . . Gokce did not appear to be hiding the fact that he was taking money from the corporation. [¶] It was clear that Amed 21 was managed in a very informal manner with relatively little documentation or formal agreement. Given . . . Unlu's acquiescence to . . . Gokce's payments when seeing them posted on the Company bulletin board suggests that he agreed to . . . Gokce taking these withdrawals, which does not constitute a conversion."
Regarding Unlu's derivative claim for conversion of property against Gokce, the trial court determined that "Gokce, as CEO of Amed 2 l, along with a number of other people who were engaged to help, removed property from the restaurant building during the eviction. There was no evidence to demonstrate that . . . Gokce improperly used or took any items for his personal benefit. There was insufficient evidence produced at trial to show a conversion of that property. However, with respect to certain items for which there was evidence that they belonged to . . . Unlu, they should be returned to him. These items include: six lion head sculptures (the 'Lion Head Sculptures'), a statue of a lady (the 'Statute') and a painting that . . . Unlu indicated in testimony was of personal value to him (the 'Painting'). Additionally, there were four patio heaters with testimonial evidence of their value being $600 each, that were removed from the property but not kept in storage....Unlu is entitled to possession of the Lion Head Sculptures, Statue and Painting, as well as damages in the amount of $2,400 as compensation for the four heaters."
Regarding Unlu's individual claim for conversion of property against Gokce, the trial court ruled that "Gokce's role was as CEO of Amed 21. He was not acting on his own behalf. All of the property taken from the building during eviction was taken by Amed 21 and it has been stored and accounted for. However, there were other persons involved in the removal of property from the building, and there was no evidence to show that . . . Gokce personally took anything. All of the items taken have been stored by . . . Gokce on behalf of Amed 2l, or have been sold to pay debts of the Company. There was not sufficient evidence to support a finding of conversion against . . . Gokce; and furthermore, there was no prayer for piercing the corporate veil. So, there is no basis for liability against . . . Gokce personally on this count."
The trial court also determined that Unlu failed to meet his burden of proving the derivative or individual causes of action for an accounting, breach of contract regarding unpaid salary, negligence, and violation of Penal Code section 502. The court further found that Unlu's derivative claim for breach of contract based on Gokce's failure to transfer the liquor license to Amed 21 was barred by the statute of limitations.
D. The Judgment
On July 13, 2022, a judgment was filed consistent with the statement of decision. Specifically, the court ordered (1) Unlu to pay $95,000 to Gokce for usurpation of corporate opportunity, (2) Amed 21 to pay $90,575.34 to Unlu for unpaid rent, (3) Gokce to return the sculptures, a statue, and a painting to Unlu, and (4) Gokce to pay $2,400 to Unlu for the four patio heaters that were taken from the property.
III. DISCUSSION
A. Timeliness of Appeal
As an initial matter, we address whether Unlu filed a timely notice of appeal. Gokce contends that the statement of decision, which was served by the court clerk on May 31, 2022, triggered the 60-day deadline by which Unlu had to file a notice of appeal. (See Cal. Rules of Court, rule 8.104(a)(1)(A).) Gokce argues that Unlu's August 22, 2022 notice of appeal was too late.
Unlu contends that his notice of appeal was timely based on the July 13, 2022 judgment. We agree that the appeal was timely.
The California Supreme Court has explained that "[t]he general rule is that a statement or memorandum of decision is not appealable. [Citations.] The rule's practical justification is that courts typically embody their final rulings not in statements of decision but in orders or judgments. Reviewing courts have discretion to treat statements of decision as appealable when they must, as when a statement of decision is signed and filed and does, in fact, constitute the court's final decision on the merits. [Citations.] But a statement of decision is not treated as appealable when a formal order or judgment does follow ....[Citations.] Certainly the desire to cut off a litigant's right to appeal cannot justify creating an exception to the general rule. Such an exception would directly contravene 'the well-established policy, based upon the remedial character of the right of appeal, of according that right in doubtful cases "when such can be accomplished without doing violence to applicable rules."' [Citations.]" (Alan v. American Honda Motor Co., Inc. (2007) 40 Cal.4th 894, 901 (Alan).)
In this case, Gokce contends that the statement of decision was an appealable final judgment because the statement of decision includes the following language, "Judgment is entered as follows ....[¶] . . . [¶] IT IS SO ORDERED."
However, although we "have discretion to treat" the statement of decision as appealable when it "constitute[s] the [trial] court's final decision on the merits," our Supreme Court has instructed that "a statement of decision is not treated as appealable when a formal order or judgment does follow, as in this case. [Citations.]" (Alan, supra, 40 Cal.4th at p. 901.) Further, "the desire to cut off a litigant's right to appeal cannot justify creating an exception to the general rule" that a statement of decision is not appealable, especially in view of "the remedial character of the right of appeal" and " 'of according that right in doubtful cases "when such can be accomplished without doing violence to applicable rules."' [Citations.]" (Ibid.; see In re Marriage of Campi (2013) 212 Cal.App.4th 1565, 1570-1572.)
Accordingly, as Unlu's August 22, 2022 notice of appeal was timely based on the July 13, 2022 judgment, we will consider the merits of his appeal.
B. Substantial Evidence to Support Gokce's $95,000 Award for Unlu's Usurpation of Corporate Opportunity
The trial court found Unlu liable on the cause of action for usurpation of corporate opportunity and awarded Gokce $95,000. On appeal, Unlu contends that the $95,000 award was not supported by substantial evidence. He argues that there was no evidence about the financial performance or value of the business in 2019. Unlu further contends that in calculating damages, the court should not have relied on a $95,000 offer that he made to buy out Gokce's share of the business.
"The corporate opportunity doctrine 'prohibits one who occupies a fiduciary relationship to a corporation from acquiring, in opposition to the corporation, property in which the corporation has an interest or tangible expectancy or that is essential to its existence.' [Citation.]" (Center for Healthcare Education &Research, Inc. v. International Congress for Joint Reconstruction, Inc. (2020) 57 Cal.App.5th 1108, 1132 (Center for Healthcare Education).) To establish a claim for breach of fiduciary duty, the plaintiff must show damage proximately caused by the breach. (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101.) "A claimant pursuing a cause of action for breach of fiduciary duties 'ha[s] the right to elect the kind of relief they seek.' [Citation.] The available relief includes damages or any of a' "variety of equitable remedies"' .... [Citations.]" (Center for Healthcare Education, supra, at p. 1125.)
In this case, the trial court calculated the damages for usurpation of corporate opportunity by using Unlu's $95,000 offer to purchase Gokce's 50 percent interest in Amed 21. Unlu made this offer in January 2019, prior to his July 9, 2019 eviction of Amed 21 from the property. The court explained that Unlu "acknowledged [the $95,000] was an 'opening offer' to which he expected a counteroffer from . . . Gokce." The court reasoned as follows: "The undisputed evidence at trial showed that . . . Unlu did, in fact, offer $95,000 to buy . . . Gokce's one-half portion of the business while this was going on. Given that . . . Unlu was willing to pay that amount immediately prior to his resignation as CFO, this is a reasonable way to judge the value of the business at that time.... Unlu's actions of preventing the corporation from seeking a loan to be able to pay the back rent, and then using the failure of the paying of rent and being behind on rent to force the eviction, and then reopening the restaurant under his exclusive ownership makes him liable to . . . Gokce in the amount of $95,000 for the usurpation of that corporate opportunity."
We are not persuaded by Unlu's contention that there was not substantial evidence to support the award for $95,000. Unlu in his opening brief on appeal admits that in a January 2019 email, which was admitted into evidence at trial, he offered $95,000 to buy out Gokce's share of the business.
Unlu relies on Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739 (Greenwich) and Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747 (Sargon Enterprises), but these cases do not support his argument that there is insufficient evidence to support the damages awarded in the instant case. In Greenwich, the appellate court concluded that "lost profits were not properly awarded" for a claim for "breach of a real property sale agreement where the buyer intended to renovate and sell the property at a profit" because "the evidence showed the prospect of profits was uncertain, hypothetical and entirely speculative." (Greenwich, supra, at p. 743; see id. at p. 766, fn. omitted ["lost profits claim was based on the assumption that Greenwich S.F. would have constructed the residence according to the plans and specifications without changes and that the venture would have been profitable," but "[t]he proposed real estate development project here involved numerous variables that made any calculation of lost profits inherently uncertain"].) In Sargon Enterprises, the issue was whether the trial court abused its discretion in excluding as speculative the proffered expert testimony about lost profits. (Sargon Enterprises, supra, at p. 753.)
In the instant case, Unlu does not point to anything in the record indicating that Gokce sought lost profits or that some or all of the court's award of $95,000 was for lost profits. As a consequence, the discussion in the cited authorities concerning the sometimes speculative nature of lost profits does not advance Unlu's argument that the evidence in this case regarding damages lacked reasonable certainty or was otherwise insufficient. The statement of decision in this case reflects that the trial court used Unlu's $95,000 offer as "a reasonable way to judge the value of the business at that time." Given Unlu's concession that he made the $95,000 offer to buy out Gokce's share of the business, substantial evidence supports the calculation of damages by the court.
We are also not persuaded by the Unlu's argument that his $95,000 offer was not a proper measure of damages. Unlu argues that his offer was based on "the restaurant [being] a going business with all of its assets in place" but that upon the eviction of the business, Gokce "stripped the business of its assets, disposed of them and has never accounted for the proceeds."
First, however, the trial court did not find that Gokce "stripped the business of its assets, disposed of them and has never accounted for the proceeds." To the contrary, the trial court found that, other than the sculptures, a statue, and a painting that must be returned to Unlu and four patio heaters that he must be compensated for in the amount of $2,400, there was insufficient evidence that Gokce had improperly converted any money or property. The court found that "[a]ll of the property taken from the building during eviction was taken by Amed 21 and it has been stored and accounted for" or "sold to pay the debts of the Company." The court further found that "the evidence presented favors the view that [Gokce] was loyal and acted with due care under very dire circumstances to liquidate the Company's assets in the best way he knew how so that Amed 21 could pay its employees and other debts."
Second, Unlu also fails to provide legal authority establishing that the proper measure of damages is not the value of the business just prior to the usurpation of corporate opportunity, as calculated by the trial court, but rather the proper measure of damages in this case is the value of the business after the eviction and usurpation of corporate opportunity.
In sum, Unlu fails to establish that the trial court used the wrong measure of damages or that the $95,000 award was not supported by substantial evidence.
C. Failure to Award Damages for Breach of Fiduciary Duty Based on Gokce's Disposition of Corporate Assets
1. Unlu's Contentions
Unlu contends that the trial court erred in failing to award damages for breach of fiduciary duty by Gokce based on his disposition of certain corporate assets. Unlu argues that damages for breach of fiduciary duty should have been awarded based on the court's own findings that (1) Gokce sold $50,000 worth of the corporation's equipment for $5,000, (2) Gokce allowed his son to take the restaurant's wine and liquor inventory without documentation that his son paid $10,000, and (3) Gokce allowed his son's restaurant manager to take the company car without documentation that $10,000 was paid for the car. Regarding the latter item, the company car, Unlu further contends that Gokce's son admitted that at least $4,900 of the car proceeds were deposited in Gokce's personal bank account.
2. Unlu's Standing on Appeal to Bring Claims for Individual Relief
As an initial matter, Gokce argues that Unlu improperly seeks relief on appeal in favor of himself individually for causes of action that he brought derivatively on behalf of Amed 21 in the trial court, including the breach of fiduciary duty cause of action. Gokce argues that Unlu may not individually recover damages for the derivative claims and that because Amed 21 is not a party to this appeal, Unlu lacks standing to pursue the claims in this court.
In reply, Unlu argues that the procedural requirements of a derivative action do not apply to two-shareholder corporations based on Jara v. Suprema Meats, Inc. (2004) 121 Cal.App.4th 1238 (Jara). Alternatively, assuming the breach of fiduciary duty claim and other claims are derivative in nature, Unlu argues that he is "asserting the claims [in] this appeal on behalf of the corporation" and "asking for judgment in favor of the corporation."
The following general legal principles apply to civil actions involving a corporation. "[A] corporation is a legal entity that is distinct from its shareholders. [Citation.] The authority to manage the business and affairs of a corporation is vested in its board of directors, not in its shareholders. [Citations.] This includes the authority to commence, defend, and control actions on behalf of the corporation. [Citations.]
"Because a corporation exists as a separate legal entity, the shareholders have no direct cause of action or right of recovery against those who have harmed it. The shareholders may, however, bring a derivative suit to enforce the corporation's rights and redress its injuries when the board of directors fails or refuses to do so. When a derivative suit is brought to litigate the rights of the corporation, the corporation is an indispensable party and must be joined as a nominal defendant. [Citations.]
"An action is deemed derivative' "if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock and property without any severance or distribution among individual holders, or it seeks to recover assets for the corporation or to prevent the dissipation of its assets."' [Citation.] When a derivative action is successful, the corporation is the only party that benefits from any recovery; the shareholders derive no benefit' "except the indirect benefit resulting from a realization upon the corporation's assets."' [Citation.]" (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1108, fn. omitted.)
"' "The stockholder's individual suit, on the other hand, is a suit to enforce a right against the corporation which the stockholder possesses as an individual."' [Citations.] For example,' "[i]f the injury is one to the plaintiff as a stockholder and to him individually, and not to the corporation, as where the action is based on a contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting him directly, it is an individual action."' [Citation.]" (Schrage v. Schrage (2021) 69 Cal.App.5th 126, 150 (Schrage).)
In this case, Unlu fails to persuasively articulate why he may bring certain claims, such as the breach of fiduciary duty claim against Gokce, on an individual basis. Although Unlu cites Jara, that case does not establish a bright line rule that the procedural requirements of a derivative action are inapplicable to a two-shareholder corporation. (See Nelson v. Anderson (1999) 72 Cal.App.4th 111, 127 [a derivative action may be required even "when there are only two shareholders, and one of them is the alleged wrongdoer"]; Schrage, supra, 69 Cal.App.5th at pp. 157-158 [derivative action rule may apply to a close corporation and other closely held entities].) Indeed, contrary to Unlu's suggestion, Jara involved a three-shareholder corporation with the lawsuit being brought by the minority shareholder. (Jara, supra, 121 Cal.App.4th at p. 1242.) In contrast, in the instant case, Unlu and Gokce each held a 50 percent interest in Amed 21. Further, in Jara, the appellate court concluded that the minority shareholder could bring an individual claim for breach of fiduciary duty where the minority shareholder sought "a share of disguised dividends paid to [the other two shareholders] in the form of excessive compensation." (Id. at pp. 1259-1260, fn. omitted; see id. at pp. 1242, 1245.) In this case, Unlu fails to articulate how any of the claims he now pursues on appeal fall within this category of an individual claim.
Ultimately, we need not decide whether Unlu is required to pursue derivatively on behalf of Amed 21 any of the claims that he raises in this court. As we shall explain, even assuming the claims may be brought on an individual basis, the claims fail on the merits.
3. Analysis
The substantial evidence standard of review requires that "we must consider all of the evidence in the light most favorable to the prevailing party, accept as true all the evidence and reasonable inferences therefrom that tend to establish the correctness of the trial court's findings and decision, and resolve every conflict in favor of the judgment." (Baxter Healthcare Corp. v. Denton (2004) 120 Cal.App.4th 333, 369.) The substantial evidence standard typically applies where a defendant on appeal contends that there was insufficient evidence at trial to support the judgment in the plaintiff's favor. (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 465 (Sonic Manufacturing).) In this case, however, the trial court in denying relief to Unlu found that "[t]here was insufficient evidence to show that . . . Gokce breached his fiduciary duties." In other words, the court concluded that Unlu did not meet his burden of proof.
When" 'the trier of fact has expressly or implicitly concluded that the party with the burden of proof did not carry the burden and that party appeals, it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment.'" (Sonic Manufacturing, supra, 196 Cal.App.4th at p. 465.) Instead, where" 'the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law. [Citations.] Specifically, the question becomes whether the appellant's evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding."' [Citation.]" (Id. at p. 466, italics added.) In this case, Unlu fails to meet this burden on appeal regarding the trial court's failure to award damages for breach of fiduciary duty by Gokce with respect to the disposition of the restaurant equipment, wine and liquor inventory, and company car.
a. Restaurant equipment
First, assuming Gokce breached his fiduciary duty by selling the restaurant equipment "for just $5000" out of anger as contended by Unlu, Unlu fails to point to evidence in the record that would compel an award of damages as a matter of law in the amount that he now seeks (see Sonic Manufacturing, supra, 196 Cal.App.4th at p. 466). Unlu observes that the trial court found that the restaurant equipment was worth at least $50,000. From this finding, Unlu contends that he should be awarded $50,000 "[a]t a minimum" for the equipment.
However, at the time Gokce sold the equipment, Amed 21 was being evicted from the property. The trial court found that because of the eviction, the company's assets needed to be removed from the property. The trial court further found that "the Company's assets" were being "liquidate[d]" "so that Amed 21 could pay its employees and other debts." Although the trial court found that Gokce did not contact anyone in an attempt to sell the restaurant equipment during the weeks after the notice of eviction and that he "contacted only one second-hand vendor on the day of eviction," Unlu fails to point to evidence in the record establishing that the equipment could have actually been sold for more than $5,000 had other vendors been contacted in the timeframe between the notice of eviction and the actual eviction date. There was testimony that Unlu himself offered $50,000 or $70,000 to Gokce, but the evidence indicated that Unlu's offer was for a "buy . . . out" of "everything," not just for the restaurant equipment. Indeed Gokce testified that with respect to the restaurant equipment, "[t]here was nobody else offering other than the secondhand. If somebody else had given higher price, I would have sold to that person." Gokce also explained that the value of the equipment he sold "would be $50,000 if they were brand new purchased....But since it was used product, you would go less than half the value if you want to sell them. So when the secondhand purchaser comes in, they pay a hundred on a thousand value." In sum, Unlu fails to persuasively establish that the record compels as a matter of law the $50,000 damages award he now seeks for the corporation's equipment after the company was evicted from its place of business. (See Sonic Manufacturing, supra, 196 Cal.App.4th at p. 466.)
b. Wine and liquor inventory
Second, Unlu contends that Gokce breached his fiduciary duty by "[t]ransferring" the wine and liquor inventory to his son without ascertaining the value of the inventory, without providing documentation of his son's payment, and without accounting for the proceeds.
The trial court found that "Gokce . . . admit[ted] that he allowed his older son to take the entire wine and liquor inventory of Bella Vita without any documentation and without Gokce independently ascertaining the value of the inventory. Gokce claim[ed] his son paid $10,000 for the inventory but no documentation [was] provided to corroborate this or to reflect the disposition of the proceeds."
As to Unlu's derivative claim for breach of fiduciary duty against Gokce, the trial court found that "[t]here was insufficient evidence to show that . . . Gokce breached his fiduciary duties as CEO. Though his actions were not entirely ideal, the evidence presented favors the view that he was loyal and acted with due care under very dire circumstances to liquidate the Company's assets in the best way he knew how so that Amed 21 could pay its employees and other debts."
We observe that the trial court, in denying Unlu's cause of action for an accounting, explained that "if the amounts due can be determined without an accounting, there is no right to an accounting." The court further found that there was "[a]mple evidence," in the form of testimony, "that the wines were sold for $10,000" and that consequently there was no basis for an accounting concerning these items.
It thus appears that while the trial court recognized that there was no written documentation of Gokce's son's payment of $10,000 for the alcohol, the court accepted as true Gokce's testimony that his older son had paid that amount for the alcohol. Indeed, Gokce testified that with respect to the alcohol, company car, and restaurant equipment he "did not sell these items and put the money in [his] pocket." He testified that the proceeds were "the money of the company" and that he used the money to pay vendors and payroll. Consistent with this testimony, although the court found that there was "no documentation . . . to reflect the disposition of the proceeds," the court ultimately determined that "the evidence presented favors the view that [Gokce] was loyal and acted with due care under very dire circumstances to liquidate the Company's assets in the best way he knew how so that Amed 21 could pay its employees and other debts." In rejecting Unlu's two causes of action for conversion of property (derivative and individual), the court similarly found that all of the items taken from the building were either stored on behalf of Amed 21 or sold to pay the company's debts (except the sculptures, statue, painting, and patio heaters, which the court ordered to be returned or compensated for).
In view of the trial court's determination that there was a failure of proof on Unlu's breach of fiduciary duty claim against Gokce, Unlu's burden on appeal requires that he show" 'the evidence compels a finding in favor of [him] as a matter of law,'" which includes a showing that his evidence was"' "uncontradicted and unimpeached." '" (Sonic Manufacturing, supra, 196 Cal.App.4th at p. 466.) However, Gokce's testimony alone prevents Unlu from meeting this burden. (See In re Marriage of Fregoso &Hernandez (2016) 5 Cal.App.5th 698, 703 (Marriage of Fregoso &Hernandez) ["testimony of one witness, even that of a party, may constitute substantial evidence" in favor of the testifying party].) Based on (1) our standard of review, (2) Gokce's testimony that $10,000 was paid for the alcohol and that he used the money to pay vendors and payroll, and (3) the court's finding that "the evidence . . . favors the view that [Gokce] was loyal and acted with due care under very dire circumstances to liquidate the Company's assets in the best way he knew how so that Amed 21 could pay its employees and other debts," we conclude that Unlu fails to meet his burden on appeal to show error in the court's finding of no breach of fiduciary duty with respect to the sale of the alcohol inventory.
c. Company car
Third, Unlu contends that the trial court erred by failing to award damages for breach of fiduciary duty based on Gokce allowing his older son's restaurant manager to take the company car without documentation that $10,000 was paid for the car. Unlu further contends that Gokce's younger son admitted that at least $4,900 of the car proceeds were deposited in Gokce's personal bank account.
In its statement of decision, the trial court found that "Gokce admit[ted] that he allowed his older son's restaurant manager to take the company car. Gokce claimed that $10,000 was paid for the company car. Unlu testified that it was worth at least $30,000. Neither party provided anything beyond bare testimony to support their position. No documentation [was] provided of the transaction. Unlu provided no documentation that the automobile was worth anything more than $10,000."
We observe that the trial court, in denying Unlu's cause of action for an accounting, explained that "if the amounts due can be determined without an accounting, there is no right to an accounting." The court further found that there was "[a]mple evidence," in the form of testimony, that "the company car was sold for $10,000" and that consequently there was no basis for an accounting concerning the car.
Similar to the sale of the company's alcohol it appears that, while the trial court acknowledged that there was no written documentation of the $10,000 payment for the company car, the court accepted as true Gokce's testimony that the payment had in fact been made. Indeed, Gokce testified that he sold the car for $10,000, that it was the company's money, and that he "did not . . . put the money in [his] pocket." He further testified that the car was valued at $11,000 or $12,000 at the time, but that he "had to sell it in a hurry to pay the workers' wages." Consistent with this testimony, the court ultimately determined that "the evidence presented favors the view that [Gokce] was loyal and acted with due care under very dire circumstances to liquidate the Company's assets in the best way he knew how so that Amed 21 could pay its employees and other debts." In rejecting Unlu's two causes of action for conversion of property (derivative and individual), the court similarly found that all of the items taken from the building were either stored on behalf of Amed 21 or sold to pay the company's debts (except the sculptures, statue, painting, and patio heaters, which the court ordered to be returned or compensated for).
On appeal, Unlu observes that in comparison to Gokce's testimony that the proceeds from the sale of the company car went to pay employees, Gokce's younger son testified that at least $4,900 of the proceeds were deposited in Gokce's personal bank account. Unlu contends that the "remainder" from the sale of the car "still remains unaccounted for." He further argues that "[t]ransferring the company car to a family-related person without transparency or documentation is textbook self-dealing and breach of fiduciary duty. Moreover, the admission at trial that Gokce had quietly placed some corporate proceeds into his personal bank account is an egregious breach of fiduciary duty."
Our review in this case is limited to whether" 'the evidence compels a finding in favor of [Unlu] as a matter of law.'" (Sonic Manufacturing, supra, 196 Cal.App.4th at p. 466.) Based on (1) our standard of review; (2) Gokce's testimony that the company car had to be quickly sold for $10,000 to pay employees, that it was company money, and that he did not pocket the proceeds; and (3) the court's findings that "the evidence . . . favors the view that [Gokce] was loyal and acted with due care under very dire circumstances to liquidate the Company's assets in the best way he knew how so that Amed 21 could pay its employees and other debts," we conclude that Unlu fails to meet his burden on appeal to show error in the court's finding of no breach of fiduciary duty with respect to the sale of the company car.
D. Failure to Award Damages for Breach of Fiduciary Duty Based on Gokce's Disposition of Corporate Funds
Unlu contends that the trial court erred in failing to award damages for breach of fiduciary duty after the court determined that Gokce gave himself advances from corporate funds.
In the statement of decision, the trial court found that the "way" Gokce and Unlu were paid for their work in Amed 21 "was murky, at best." Gokce was a "W-2 employee" while Unlu was "paid via 1099." "It appear[ed] that the plan was for Unlu to write himself checks meant to match the salary Gokce was taking as an employee. The system was not well managed, and both parties had equal part in the confusion."
The trial court found that "[t]he evidence show[ed] that Gokce began to regularly write checks to himself from corporate accounts for personal purposes. Gokce referred to these checks as 'advances', and suggested that they were later repaid, although there is no evidence in the record that such amounts were repaid. [Gokce] also wrote some checks to third parties from corporate funds for his personal use. Evidence was presented through Gokce's testimony[] that equal amounts of money were taken by Unlu. For instance, Gokce testified that a $100,000 loan was taken, from which both Gokce and Unlu took $30,000 with the balance going into the business. No records were presented during the trial to corroborate the loan or the payments to either party." (Fn. omitted.) The court noted that this was "indicative of much of the testimony of both Gokce and Unlu in this trial. Both testified to specific items, but neither presented evidence to definitively quantify the amounts at issue."
As for Unlu's derivative claim for conversion of money against Gokce, the trial court found as follows: "Regarding the claims of . . . Gokce taking unearned advances, the evidence is clear that the corporation did not keep appropriate records of each alleged advance. This left the court in a position of having to try to piece together the history based on non-descript bank records and vague and often contradictory testimony of the parties. [¶] Though there was evidence of . . . Gokce taking payments from the Company bank account, there was insufficient evidence to support a finding of conversion. It appeared from the evidence that . . . Gokce informed his partner of when he took an advance payment by posting a note on a shared bulletin board. While far from an appropriate way to document the finances of a corporation, this evidence does show that . . . Gokce did not appear to be hiding the fact that he was taking money from the corporation. [¶] It was clear that Amed 21 was managed in a very informal manner with relatively little documentation or formal agreement. Given . . . Unlu's acquiescence to . . . Gokce's payments when seeing them posted on the Company bulletin board suggests that he agreed to . . . Gokce taking these withdrawals, which does not constitute a conversion."
On appeal, Unlu fails to demonstrate that" 'the evidence compels a finding in favor of [him] as a matter of law,'" that is, he fails to show that his" 'evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding."' [Citation.]" (Sonic Manufacturing, supra, 196 Cal.App.4th at p. 466.) To the contrary, the trial court found that neither Gokce nor Unlu "presented evidence to definitively quantify the amounts at issue." For example, the court found that the "way" the parties were paid for their work at Amed 21 was "was murky, at best." "It appear[ed] that the plan was for Unlu to write himself checks meant to match the salary Gokce was taking as an employee. The system was not well managed, and both parties had equal part in the confusion."
Further, the trial court found that with respect to the" 'advances'" that Gokce made by writing checks to himself from corporate accounts for personal purposes, Gokce's testimony "suggested" that the advances "were later repaid" and he also testified that "equal amounts of money were taken by Unlu."
The trial court found that in the absence of "appropriate records," the court was "left . . . in a position of having to try to piece together the history based on non-descript bank records and vague and often contradictory testimony of the parties." The trial court further found that Gokce informed Unlu about the advance payments by posting a note on a shared bulletin board, which indicated that Gokce did not appear to be hiding the advances and that Unlu appeared to agree to the advances. The court ultimately concluded that no conversion of money had been shown by Unlu.
It appears from the record that Unlu alleged that Gokce's advance payments from corporate funds amounted to conversion, which in turn amounted to a breach of fiduciary duty by Gokce. In view of the trial court's determination that the evidence was insufficient to establish conversion, we may imply that the court similarly concluded the evidence was insufficient to establish a breach of fiduciary duty. (See Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 58 ["doctrine of implied findings requires the appellate court to infer the trial court made all factual findings necessary to support the judgment"].)
Given the lack of"' "uncontradicted and unimpeached" '" evidence that" 'compels a finding in favor of [Unlu] as a matter of law'" with respect to the circumstances of Gokce's advances (Sonic Manufacturing, supra, 196 Cal.App.4th at p. 466), Unlu fails to demonstrate that he is entitled to a judgment in the amount of $56,780.76 as he contends on appeal.
Unlu contends that he sufficiently documented the funds that were "misappropriated" by Gokce through evidence of cancelled checks or a check register. However, the trial court found that Gokce's testimony "suggested" that the advances "were later repaid," and he also testified that "equal amounts of money were taken by Unlu." "The testimony of one witness, even that of a party, may constitute substantial evidence. [Citation.]" (See Marriage of Fregoso &Hernandez, supra, 5 Cal.App.5th at p. 703.)
Unlu further argues that Gokce admitted at trial that he did not know the exact amount that Unlu had taken, which contradicted Gokce's suggestion that Unlu took equal withdrawals. This testimony by Gokce, however, simply reinforces the trial court's statement that it was "left . . . in a position of having to try to piece together the history based on non-descript bank records and vague and often contradictory testimony of the parties." On this record, Unlu fails to demonstrate that the evidence and circumstances surrounding Gokce's advances was"' "uncontradicted and unimpeached" '" such that the evidence" 'compel[ed] a finding in favor of [Unlu] as a matter of law'" that the advances amount to conversion or a breach of fiduciary duty. (Sonic Manufacturing, supra, 196 Cal.App.4th at p. 466.)
Unlu also contends that the trial court improperly relied on Gokce's testimony that he put notes on the bulletin board after taking advances. Unlu argues that "[t]here was no evidence in the record that [he] gave prior approval or was consulted prior about these unearned advances" and that "secrecy is not an element of conversion."
A conversion claim requires a showing of" '" 'the wrongful exercise of dominion over the property of another.'" '" (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) "[T]he law is well settled that there can be no conversion where an owner either expressly or impliedly assents to or ratifies the taking, use or disposition of his property. [Citation.]" (Farrington v. A. Teichert &Son, Inc. (1943) 59 Cal.App.2d 468, 474; accord, Chen v. PayPal, Inc. (2021) 61 Cal.App.5th 559, 576.) Here, the trial court found the method of note-posting on the shared bulletin board to be reflective of the manner in which Amed 21 was managed - "a very informal manner with relatively little documentation or formal agreement." The court found that, "[g]iven . . . Unlu's acquiescence to . . . Gokce's payments when seeing them posted on the Company bulletin board," the evidence "suggest[ed] that [Unlu] agreed to . . . Gokce taking these withdrawals." Unlu fails to demonstrate error in the court's finding of consent or ratification of Gokce's advances based on the practice of notes being posted on the shared bulletin board.
E. Statute of Limitations Regarding Breach of Contract for Liquor License
Unlu contends that the trial court erred in finding time-barred the breach of contract claim against Gokce regarding the liquor license. The trial court in its statement of decision found that Gokce orally agreed to transfer the liquor license to Amed 21 in December 2013. Gokce's civil complaint and Unlu's cross-complaint were both filed in 2020. The court determined that "[t]he two-year statute of limitations for oral contracts has long since run, rendering this cause of action time-barred from any recovery."
On appeal, Unlu contends that a cause of action does not accrue until damages have been sustained and that nominal damages are insufficient to create a cause of action. Unlu argues that in this case, while the business was in operation, the liquor license was used for the business even though Gokce never transferred the license into the business's name. According to Unlu, no damages were sustained until July 9, 2019, when "the business ceased operation and [he] was deprived of the benefit of the liquor license." Unlu argues that he is entitled to a judgment of $33,000, representing the amount of money that Gokce sold the liquor license for in January 2022.
In response, Unlu contends that Amed 21 was damaged "the very moment that [its] balance sheet was deprived of the liquor license as an asset," regardless of "[w]hether the asset is in the form of a liquor license or its value in the form of cash."
We determine that the trial court correctly found that the breach of contract claim regarding the liquor license was time-barred. The statute of limitation for a contract claim based on an oral contract is two years. (Code Civ. Proc., § 339, subd. (1); Whorton v. Dillingham (1988) 202 Cal.App.3d 447, 456 (Whorton).) "Generally speaking, a cause of action for breach of contract accrues at the time of the breach. [Citations.]" (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 831 (Reichert); accord, Whorton, supra, at p. 456; McCaskey v. California State Automobile Assn. (2010) 189 Cal.App.4th 947, 958 (McCaskey).) The "cause of action for breach of contract ordinarily accrues at the time of breach regardless of whether any substantial damage is apparent or ascertainable. [Citation.]" (Menefee v. Ostawari (1991) 228 Cal.App.3d 239, 246; accord, Reichert, supra, at p. 832.)
In this case, the trial court found that Gokce orally agreed to transfer the liquor license to Amed 21 in December 2013. In view of the fact that the pleadings in this case were not filed until 2020, as the trial court observed, "[t]he two-year statute of limitations for oral contracts has long since run."
We are not persuaded by Unlu's contention that no damages arose prior July 9, 2019, when the business ceased operating due to the eviction. The 2013 oral agreement provided for the transfer of the liquor license by Gokce to Amed 21. As Gokce observes, the breach occurred when he failed to transfer the license, and Amed 21 was damaged when it was deprived of the license as an asset. This damage occurred notwithstanding the fact that Gokce continued to allow Amed 21 to use the license while the restaurant was operating. Indeed, the evidence that Gokce later sold the license for $33,000 indicates that the asset had more than nominal value and that Amed 21 suffered damages earlier by Gokce's failure to transfer it pursuant to the oral agreement, notwithstanding Amed 21's ability to use the license during the time the restaurant was operating.
F. Respondent Gokce's Motion for Sanctions
Gokce has filed a motion for sanctions on the grounds that Unlu's appeal is frivolous and/or brought solely for delay. Gokce contends that sanctions are warranted for two reasons: (1) the appeal is untimely based on the filing date of the statement of decision, and (2) Unlu in this court improperly seeks to recover individually on several causes of action that were brought derivatively on behalf of Amed 21 in the trial court.
We deny Gokce's motion for sanctions. As we have already explained, Unlu's appeal is timely based on the filing of the judgment. Second, without deciding whether Unlu was required to assert certain claims derivatively on behalf of Amed 21 in this court (as he did in the trial court), Gokce acknowledges that at least a portion of Unlu's appeal was not required to be brought derivatively on behalf of Amed 21. For example, Unlu may properly challenge the judgment against him individually in the amount of $95,000 for usurpation of corporate opportunity. Further, we do not find Unlu's arguments on the merits so frivolous as to warrant sanctions. In sum, we conclude that sanctions are not warranted regarding Unlu's appeal.
IV. DISPOSITION
The judgment is affirmed. Respondent Seyhmus Gokce's motion for sanctions is denied.
WE CONCUR: DANNER, J., BROMBERG, J.