Hilliard v. Harbour
A146330
| Cal. Ct. App. | Jun 16, 2017Background
- Plaintiff James C. Hilliard (age 78) owned controlling interests in the James Crystal Companies, which borrowed from Wells Fargo under a secured loan that went into default.
- Wells Fargo negotiated settlement proposals in 2010 and 2012; Hilliard sold real property and later agreed to a February 6, 2012 email from Wells Fargo representative Kevin Harbour offering to deem the loan paid in full if $2 million cash was received by March 31, 2012.
- Hilliard alleges he relied on Harbour’s representation, sold a radio station at a discount to meet the demand, but could not obtain governmental approvals to produce cash by March 31.
- Without notice to Hilliard, Wells Fargo sold the loan to Atalaya on April 9, 2012; Atalaya later obtained a New York judgment against the Companies and acquired their assets in bankruptcy.
- Hilliard sued Wells Fargo and Harbour under California’s Elder Abuse and Dependent Adult Civil Protection Act (financial abuse provision, Welf. & Inst. Code §15610.30), claiming Wells Fargo took his property for a wrongful use with intent to defraud.
- Trial court sustained demurrer without leave to amend on grounds Hilliard lacked individual standing (claim was derivative of the Companies) and failed to state a cause of action; Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing — Can Hilliard sue individually under the Elder Abuse Act for harms tied to the Companies? | Hilliard contends Harbour’s fraud was directed at him personally and he may pursue individual remedies as an elder harmed by wrongful taking. | Wells Fargo argues the injury is derivative of the Companies (an LLC) and only the entity (not Hilliard individually) may sue for corporate losses. | Held: Claim is derivative. Hilliard lacks individual standing because the harm arises from his status as owner of the Companies. |
| Whether the Act confers broader individual standing on elders to sue third parties for business-related takings | Hilliard asserts the Act’s heightened protections permit individual suits by elders for financial abuse even when injuries overlap corporate loss. | Wells Fargo contends the Act does not displace established derivative/individual action doctrine; lenders may enforce contractual rights and transfer loans without creating elder-specific duties. | Held: Act does not expand standing here; plaintiff cannot avoid LLC protections and limitations by invoking elder status. |
Key Cases Cited
- Sutter v. General Petroleum Corp., 28 Cal.2d 525 (Cal. 1946) (fraud directed at individual that induced formation/investment in corporation can support individual causes of action)
- Nelson v. Anderson, 72 Cal.App.4th 111 (Cal. Ct. App. 1999) (individual recovery limited where injury is derivative of corporation; relief allowed only when duty arises independent of shareholder status)
- Bounds v. Superior Court, 229 Cal.App.4th 468 (Cal. Ct. App. 2014) (definition and scope of financial abuse under the Elder Abuse Act)
- Stebley v. Litton Loan Servicing, LLP, 202 Cal.App.4th 522 (Cal. Ct. App. 2011) (commercial lenders may exercise contractual rights; foreclosure/lender conduct not per se tortious)
- Jones v. H. F. Ahmanson & Co., 1 Cal.3d 93 (Cal. 1969) (distinguishing individual vs. derivative claims; injury incidental to corporate injury yields derivative claim)