Stanton v. Marques

1

RYAN STANTON, Plaintiff and Appellant, v. FRANCES FONTANE MARQUES et al., Defendants and Appellants.

B305149

California Court of Appeals, Second District, Seventh Division

April 2, 2024

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Los Angeles County No. BC572198 Randolph M. Hammock, Judge. Reversed with directions.

Law Offices of Alain V. Bonavida and Alain V. Bonavida for Plaintiff and Appellant.

Klapach & Klapach and Joseph S. Klapach for Defendants and Appellants.

MARTINEZ, J.

INTRODUCTION

Ryan Stanton, a plastic surgeon, sued his business partner and former romantic partner, Frances Fontane Marques, and her daughter, Pablynie Jamison, for misappropriating money through improper distributions from the company managing Stanton's medical practice. The matter proceeded to a nine-day jury trial on Stanton's causes of action for fraud, conversion, breach of the operating agreement, breach of fiduciary duty, constructive fraud, negligent misrepresentation, negligence, obtaining property by false pretenses and larceny under Penal Code section 496, and fraudulent conveyance.

After Stanton presented his case-in-chief, the trial court granted Marques's and Jamison's motions for nonsuit on the causes of action for fraud, Penal Code section 496, breach of fiduciary duty as to Jamison, constructive fraud, negligent misrepresentation, and negligence. The jury ultimately entered a special verdict in Stanton's favor against Marques on the remaining causes of action for conversion breach of contract, breach of fiduciary duty, and fraudulent transfer, and against Jamison for conversion. It awarded Stanton compensatory damages of $1,652,128 against Marques and $50,000 against Jamison, and punitive damages of $1,000,000 against Marques and $40,000 against Jamison.

Stanton appeals the trial court's grant of nonsuit on his Penal Code section 496 cause of action, and purports to appeal the trial court's postjudgment order denying his Code of Civil Procedure section 2033.420 motion for costs and attorney fees relating to a request for admission.^[1]

Marques and Jamison cross-appeal the judgment against Jamison for conversion and the compensatory and punitive damages awards against both of them. They also contend the trial court committed prejudicial evidentiary error by allowing Stanton's counsel to question Jamison about her alleged past work as an escort.

We reverse and remand with directions. First, we reverse the order of nonsuit on Stanton's Penal Code section 496 cause of action. While this appeal was pending, the California Supreme Court decided Siry Investment, L.P. v. Farkhondehpour (2022) 13 Cal.5th 333, 361 (Siry), which holds that a plaintiff may recover damages under Penal Code section 496, "when property has been obtained in any manner constituting theft." On remand, the trial court shall require Stanton to elect his remedies to the extent he prevails on the Penal Code section 496 cause of action at trial. Next, we conclude we lack jurisdiction to review the trial court's postjudgment order denying Stanton's section 2033.420 motion because he did not appeal from that order. Third, we reverse the judgment and damages award against Marques and Jamison, and remand for a new trial on liability and damages due to inconsistencies in the jury's verdict as to Marques, and prejudicial evidentiary error and insufficient evidence supporting conversion and damages awarded as to Jamison.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Parties' Relationship, Business, and Lawsuit

Stanton and Marques began a romantic relationship and moved in together in 2002, as Stanton was launching his plastic surgery practice in Beverly Hills. In 2005 Stanton and Marques formed a limited liability company called Modern Medical Management LLC ("MMM") to manage Stanton's medical practice, with Stanton and Marques each holding a 50 percent membership interest. Under the MMM operating agreement, Marques was entitled to 50 percent of net profits and received a $4,500 per month salary. She testified, however, that she took few salary distributions between 2003 and 2006. Stanton and Marques ended their romantic relationship and cohabitation in 2009, but remained close friends and business partners, with Stanton "completely trust[ing]" Marques and her management of the business.

Marques served as the managing member of MMM from 2005 through 2014, handling business operations, bookkeeping, banking, and other administrative and financial management tasks for the medical practice while Stanton focused on patient care. Marques was not an owner of Stanton's medical practice, which was separately incorporated as Modern Institute of Plastic Surgery and Anti-Aging, Inc. ("MIPSA"), but had signatory authority on MIPSA's accounts and the ability to move funds out of MIPSA into MMM. In 2011 Marques and Stanton hired Marques's daughter Jamison to work for MMM as a bookkeeper and office manager. Stanton terminated Jamison in August 2014 due to her job performance and after hearing from staff that she claimed to own the business.

In August 2014, Stanton transferred his 50 percent interest in MMM to Marques.

After terminating Jamison, Stanton became suspicious when his practice suddenly became more profitable. He discovered irregularities in MMM's books, including a spreadsheet showing different member distributions from MMM. He confronted Marques about the discrepancies and locked her out of his medical practice in October 2014. On November 8, 2014 bookkeeper Michele Askori discovered the Quickbooks data for Stanton's practice had been deleted from the office computer Jamison was using before she was fired.

In 2015 Stanton filed the underlying action against Marques, Jamison, MMM, and Marques Management LLC (an entity solely owned by Marques), alleging Marques and Jamison misappropriated millions of dollars from Stanton's medical practice. Stanton's operative second amended complaint stated causes of action for fraud, conversion, breach of MMM's operating agreement, breach of fiduciary duty, constructive fraud, negligent misrepresentation, negligence, obtaining property by false pretense and larceny under Penal Code section 496, and fraudulent conveyance. Stanton sought compensatory damages, punitive damages, and rescission of contract.

In December 2019 and January 2020 the trial court conducted a nine-day jury trial. Marques's defense theory was that Marques was entitled to "pay herself" after investing her own money and sweat equity without compensation in the early years of the business. According to Marques and Jamison, Stanton knew Marques was paying personal expenses from company funds, and he also used MMM funds for his personal expenses. They also maintained the amounts paid to Jamison were solely salary related. Finally, according to Marques and Jamison, Stanton sued them because he wanted to "get back" at Marques and regretted going into business with her.

B. The Evidence at Trial

At trial, the jury heard testimony in Stanton's case-in-chief from forensic accounting and damages expert Leonard Lyons, Stanton's current bookkeeper Michele Askori, and Stanton. Stanton called Marques and Jamison as hostile witnesses. Stanton also introduced into evidence voluminous financial exhibits, including bank records, detailed accounting records, and forensic analysis.

Lyons testified Marques received $2,442,628 in total payments from MMM, while Stanton received $372,699. Lyons offered two alternative damages calculations at trial. The first calculated Stanton's damages as $1,034,965, and assumed the operating agreement was valid, entitling Marques and Stanton to a 50 percent interest in net profits. The second calculated Stanton's damages as either $1,952,128 or $2,442,628 (depending on whether Marques was entitled to a salary); for this calculation, Lyons assumed the operating agreement was not valid and that Marques had "no right to any of the profits."

Lyons also testified that what appeared to be Marques's personal expenses and personal travel were on MMM's books, including a $60,000 watch that was recorded as a medical supplies expense. He further testified Marques withdrew $112,024.24 from Stanton's surgical practice (MIPSA) even though she was not an owner of that entity and that she used $564,396.74 obtained from MMM to purchase a home in Santa Monica, which she transferred into a trust on the eve of litigation.

Marques and Jamison testified on their own behalf and called Stanton as a witness. They did not present any expert on damages. Marques testified she contributed $300,000 of her own funds to remodel the surgical center shortly after starting to work with Stanton. Jamison was paid a salary of $4,000 per month as an independent contractor, which was later raised to $4,500 per month, plus health insurance benefits, a cell phone, and car payments. Marques testified she authorized the payment of Jamison's health insurance, cell phone, and car payments. Jamison testified that Lyons had mistakenly identified a number of business expenses as personal expenses in his analysis, such as $1,000 charges for cleaning and $86 for pest control.

C. The Motions for Nonsuit by Marques and Jamison

At the close of Stanton's case-in-chief, the trial court granted the oral nonsuit motion of Marques and Jamison as to Stanton's causes of action for fraud, Penal Code section 496, breach of fiduciary duty as to Jamison, constructive fraud, negligent misrepresentation, and negligence.^[2] The remaining claims for the jury were breach of contract, conversion, breach of fiduciary duty, and fraudulent transfer against Marques, and conversion only against Jamison.

As to Stanton's Penal Code section 496 cause of action, the trial...