Filed 7/2/20 Diggs v. Ocwen Loan Servicing, LLC CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

APRIL E. DIGGS,

Plaintiff and Appellant,

v.

OCWEN LOAN SERVICING, LLC, et al.,

Defendants and Respondents.

E072230

(Super.Ct.No. CIVDS1808275)

OPINION

APPEAL from the Superior Court of San Bernardino County. Brian F. Foster, Judge. Affirmed.

J. Wright Law Group and Jamie Wright for Plaintiff and Appellant.

Severson & Werson, Jan T. Chilton and Kerry W. Franich for Defendants and Respondents.

I. INTRODUCTION

Plaintiff and appellant, April E. Diggs, appeals from the judgment dismissing her first amended complaint (FAC) against defendants and respondents, Ocwen and U.S. Bank, following the trial court’s order sustaining defendants’ general demurrer to the FAC without leave to amend, on res judicata grounds.

We affirm the judgment of dismissal. Plaintiff claims the trial court abused its discretion in dismissing the FAC, with prejudice, because all of the claims alleged in the FAC are not barred by res judicata but constitute new claims. We conclude on de novo review that all of the claims that are or could be alleged in the FAC are barred by the claim preclusion aspect of res judicata. In a prior federal court action, which was dismissed with prejudice and adjudicated on its merits against plaintiff, plaintiff alleged claims based on the same primary right she alleges defendants violated in the FAC: her right to be free of defendants’ debt collection activities, because defendants are not authorized to collect any amounts due on her home mortgage loan, or to exercise the power of sale under the deed of trust securing the loan. Plaintiff has also not shown a reasonable possibility that she can amend her FAC to state a new cause of action.

II. BACKGROUND

A. The Allegations of the FAC

The FAC alleges that, in July 2006, plaintiff obtained a mortgage loan in the principal amount of $775,000, secured by a deed of trust against her Rancho Cucamonga home. “GreenPoint Mortgage Funding, Inc.” (GreenPoint) originated the loan. In September 2011, plaintiff stopped making payments on the loan and it went into default.

In February 2013, Ocwen advised plaintiff by letter that, effective February 16, 2013, the “servicing” of the loan was being transferred to Ocwen. At that time, the October 2011 payment was still due on the loan. In November 2013, U.S. Bank was assigned the beneficial interest under the deed of trust securing plaintiff’s mortgage loan. A notice of default was recorded in February 2016, and a notice of trustee’s sale was recorded in March 2018.

Plaintiff filed her original complaint in this action in April 2018. She filed her operative FAC in June 2018. The key allegation of the FAC is its conclusory allegation that defendants have no authority to collect any amounts due on plaintiff’s mortgage loan, because the deed of trust securing the loan was not properly transferred to “them.” The FAC does not explain why Ocwen is not authorized to service the loan or why the deed of trust was not properly transferred to U.S. Bank. Even so, the FAC alleges that defendants’ efforts to collect the loan and to exercise the power of sale violate various provisions of the California Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788, et. seq.) (the Rosenthal Act) (first cause of action) and the Unfair Competition Law (Bus. & Prof. Code, § 17200) (the UCL) (third cause of action).

The FAC also alleges a claim for intentional infliction of emotional distress (IIED) (second cause of action) based on defendants’ “extreme and outrageous” conduct in attempting to collect plaintiff’s mortgage loan. But the FAC does not allege what defendants did that was so extreme and outrageous. As support for the IIED claim, the FAC relies solely on its allegation that defendants have attempted to collect plaintiff’s loan without the authority to do so or to enforce the power of sale under the deed of trust.

Lastly, the FAC seeks injunctive relief under both the UCL and Code of Civil Procedure section 526 (fourth cause of action), restraining defendants from taking further efforts to collect plaintiff’s loan, including foreclosure proceedings. This claim for injunctive relief, like the Rosenthal Act, UCL, and IIED claims, is based solely on defendant’s unauthorized and unspecified attempts to collect plaintiff’s loan.

B. Defendants’ Demurrer and the Trial Court’s Ruling Sustaining the Demurrer

Defendants filed a general demurrer to the FAC (Code Civ. Proc., § 430.10, subd. (e)), on the ground its claims were barred by res judicata principles. The trial court agreed and granted the demurrer on this ground, without explaining what prior action precluded the FAC’s claims. Defendants also claimed the FAC failed to state facts sufficient to constitute any causes of action, but the trial court did not sustain the demurrer on this ground. The judgment of dismissal was entered on August 31, 2018. In September 2018, U.S. Bank purchased plaintiff’s property at a nonjudicial foreclosure sale.

III. DISCUSSION

A. Standard of Review

On appeal from a judgment of dismissal following an order sustaining a general demurrer to a complaint without leave to amend, we examine the complaint de novo to determine whether it states a cause of action under any possible legal theory. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415; Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) We assume the truth of the complaint’s well-pleaded factual allegations, and we may also consider judicially noticeable matters, but we do not assume the truth of any factual contentions or conclusions of fact or law. (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6.) If the complaint fails to state a cause of action and the plaintiff shows there is a reasonable possibility that it can be amended to state a cause of action, we reverse, but if the plaintiff does not meet this burden, we affirm the judgment of dismissal. (See Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

B. The Demurrer Was Properly Sustained on Res Judicata Grounds

Plaintiff claims the court abused its discretion in sustaining defendants’ demurrer, without leave to amend, and dismissing the FAC on the ground it was barred by res judicata principles. She argues that, because this is the first action in which she has asserted a claim against defendants for Rosenthal Act violations, the FAC is not barred by res judicata, but states new claims against defendants.

For their part, defendants argue that the federal district court’s decision in Diggs v. Ocwen Loan Servicing LLC (C.D. Cal. 2017) 2017 U.S. Dist. LEXIS 147672 (“Diggs” or “the prior federal court action”), dismissing plaintiff’s complaint in that action against defendants on res judicata grounds, shows that the FAC is also barred by res judicata. We agree. On our own motion, we take judicial notice of the federal district court’s decision in the prior federal court action. (Evid. Code, § 459, subd. (a).)

1. The Prior Federal Court Action

In the prior federal court action, plaintiff sued defendants, Ocwen and U.S. Bank, alleging, “(1) violations of the Fair Debt Collection Practices Act (“FDCPA”), see 15 U.S.C. § 1692 et. seq.; (2) other violations of the FDCPA, see 15 U.S.C § 1692f(6); (3) violations of state law regarding the assignment of a mortgage, or the beneficial interest under a deed of trust, see Cal. Civ. Code § 2934(a)(1)(A); (4) cancellation of instruments; and (5) violation of state unfair competition laws, see Cal. Bus & Prof. Code §17200 et. seq.” (Diggs, supra, 2017 U.S. Dist. LEXIS 147672 at pp. 1-2.) The court in the prior federal court action dismissed plaintiff’s complaint, without leave to amend, and entered judgment for defendants and against plaintiff on the complaint. (Id. at p. 8.)

The court concluded the complaint was barred by res judicata, based on a prior state court action that plaintiff filed against defendants in San Bernardino County, Diggs v. U.S. National Bank Association, case No. CIVRS1401333 (Cal.Super. Ct. 2014). (Diggs, supra, 2017 U.S. Dist. LEXIS 147672 at pp. 5-6.) The court found that all three elements of res judicata applied. Both actions involved the same parties, namely, plaintiff and defendants, and both actions “concern[ed] the same nucleus of operative facts and the same legal issues . . . essentially . . . that [d]efendants lack the right to foreclose on [plaintiff’s] home or collect various loan payments.” (Id. at pp. 5-6.) Additionally, the San Bernardino County action resulted in a final adjudication of the complaint in that action on its merits, against plaintiff and in favor of defendants. (Id. at p. 6.)

2. The FAC is Barred by Res Judicata

“ ‘ “The doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy.” ’ ” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.) The res judicata doctrine has two aspects: its primary aspect, claim preclusion, and its secondary aspect, issue preclusion or collateral estoppel. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 823-824.) Claim preclusion “acts to bar claims that were, or should have been, advanced in a previous suit involving the same parties.” (Id. at p. 824.) As we explain, the decision in the prior federal district court action, Diggs, shows that the FAC, and all of the claims that are or that could be alleged in it, are barred by the claim preclusion aspect of res judicata.

The claim preclusion aspect of res judicata precludes the relitigation of a cause of action “ ‘only if (1) the decision in the prior proceeding is final and on the merits; (2) the present action is on the same cause of action as the prior proceeding; and (3) the parties in the present action or parties in privity with them were parties to the prior proceeding’ [Citation.]” (Franceschi v. Franchise Tax Bd. (2016) 1 Cal.App.5th 247, 257 (Franceschi).) In this context, the phrase, “cause of action” has a particular meaning; it is based on the “primary right theory” of code pleading. (Id. at p. 257.)

Under the primary right theory, “ ‘a “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the defendant constituting a breach of that duty. [Citation.] . . . [¶] . . . [T]he primary right is simply the plaintiff’s right to be free from the particular injury suffered. [Citation.] It must therefore be distinguished from the legal theory on which liability for that injury is premised: “Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.” [Citation.] The primary right must also be distinguished from the remedy sought: “The violation of one primary right constitutes a single cause of action, though it may entitle the injured party to many forms of relief, and the relief is not to be confounded with the cause of action, one not being determinative of the other.” [Citation.]’ ” (Franceschi, supra, 1 Cal.App.5th at p. 258.)

“ ‘The primary right theory . . . is invoked . . . when a plaintiff attempts to divide a primary right and enforce it in two suits. . . . [I]f the first suit has terminated in a judgment on the merits adverse to the plaintiff, the defendant in the second suit may set up that judgment as a bar under the principles of res judicata.’ [Citation.] . . . [T]he significant factor guiding the application of the doctrine is whether the “cause of action” is for invasion of a single primary right; whether the same facts are involved in both suits is not conclusive. [Citation.]” (Franceschi, supra, 1 Cal.App.5th at p. 258.)

In the FAC, as in the prior federal district court action, all three elements of the claim preclusion aspect of res judicata have been met. First, the prior federal court action and the FAC involve the same parties: plaintiff and defendants, Ocwen and U.S. Bank. Second, the prior federal court action, in which plaintiff’s complaint was dismissed with prejudice, is final adjudication on the merits of that complaint against plaintiff. (See Owens v. Kaiser Found. Health Plan, Inc. (9th Cir. 2001) 244 F.3d 708, 714 [dismissal of complaint with prejudice based on failure to prosecute constitutes final adjudication of complaint on its merits for purpose of claim preclusion].) Third, the prior federal court action and the FAC are based on the same alleged injuries to the same primary right, namely, injuries plaintiff alleges she has suffered due to defendant’s efforts to collect her home mortgage loan, and to exercise the power of sale under the deed of trust, without authority to collect the loan or to exercise the power of sale.

Plaintiff does not dispute that the prior federal court action and the FAC involve the same parties, or that the complaint in the federal court has been finally adjudicated on its merits against plaintiff. As noted, plaintiff argues that, because this is the first action in which she has asserted that defendants’ collection efforts amounted to Rosenthal Act violations, the FAC is not based on the same cause of action or primary right as the prior federal court action and is not res judicata. We disagree.

As we have stressed, the FAC, like the prior federal court action, is based on the conclusory allegation that plaintiff has suffered injury due to defendants’ efforts to collect plaintiff’s mortgage loan and to exercise the power of sale under the deed of trust securing the loan, without the requisite authority to do so. In the federal court action, plaintiff alleged that defendants’ unauthorized efforts to collect her mortgage loan violated the FDCPA, not the Rosenthal Act. But these two statutory schemes merely provide different remedies for injuries to plaintiff’s primary right to be free of defendants’ debt collection activities, because defendants are not authorized to collect plaintiff’s loan or to exercise the power of sale under the deed of trust securing the loan.

Claim preclusion bars not only the relitigation of claims resolved in a prior action; it also precludes the litigation of claims that could have been but were not brought in the prior action. (Franceschi, supra, 1 Cal.App.5th at p. 258.) “ ‘The law abhors a multiplicity of actions . . . . [A] party cannot by negligence or design withhold issues and litigate them in successive actions; he may not split his demands or defenses; he may not submit his case in piecemeal fashion.’ [Citation.]” (Ibid.) This is what plaintiff is attempting by her FAC: assert purportedly new claims for Rosenthal Act violations, related UCL violations, an IIED claim, and injunctive relief, that could have been but were not brought in the prior federal court action. This is impermissible.

Res judicata “goes beyond the four corners of the operative pleading in the prior action: ‘ “If the matter was within the scope of the action, related to the subject-matter and relevant to the issues, so that it could have been raised, the judgment is conclusive on it despite the fact that it was not in fact expressly pleaded or otherwise urged. The reason for this is manifest. A party cannot by negligence or design withhold issues and litigate them in consecutive actions. Hence the rule is that the prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable.” ’ [Citation.]” (Franceschi, supra, 1 Cal.App.4th at p. 259.)

3. Plaintiff’s “Continuing Violation” Theory Lacks Merit

Plaintiff argues her Rosenthal Act claims and her other claims alleged in the FAC are not res judicata because they are subject to the continuing violation doctrine, and are therefore not barred by the one-year limitations period that otherwise applies to Rosenthal Act violations. (Civ. Code, § 1788.30, subd. (f).) The continuing violation doctrine permits recovery “ ‘for actions that take place outside the limitations period if these actions are sufficiently linked to unlawful conduct within the limitations period.’ ” (Komarova v. National Credit Acceptance, Inc. (2009) 175 Cal.App.4th 324, 343.) Plaintiff appears to argue that defendants have engaged in a continuous pattern of Rosenthal Act violations since defendants first attempted to collect plaintiff’s mortgage loan around 2013, and that these Rosenthal Act violations have continued into 2017 and 2018, after her federal district court action was dismissed on September 11, 2017. (See Diggs, supra, 2017 U.S. Dist. LEXIS 147672 at p. 8.)

This argument is not helpful to plaintiff’s position, and it blurs the distinction between whether the FAC’s claims are barred by res judicata with the unrelated question of what limitations period applies to the FAC’s alleged Rosenthal Act violations. Even if all of defendants’ alleged Rosenthal Act violations are subject to the continuing violation doctrine, the FAC’s alleged Rosenthal Act claims, and its wholly related UCL, IIED, and injunctive relief claims, are nonetheless barred by res judicata.

As we have explained, the key allegation and primary right injury underlying the entire FAC is that defendants have made ongoing, unauthorized attempts to collect plaintiff’s loan and to exercise the power of sale under the deed of trust. Because this allegation was adjudicated on its merits against plaintiff and in favor of defendants in the prior federal court action, and because the same allegation underlies the FAC’s alleged Rosenthal Act violations and its other alleged causes of action, all of the FAC’s claims are barred by res judicata, regardless of whether any part of defendant’s ongoing collection activities occurred within the Rosenthal Act’s one-year limitations period.

Lastly, plaintiff has not demonstrated a reasonable possibility that she can amend the FAC to state any cause of action. (See Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) She has not shown that defendants have injured her in any way other than through their ongoing attempts, since 2013, to collect her mortgage loan and to exercise the power of sale under the deed of trust, without having the authority to do so. Thus, we affirm the judgment dismissing the FAC, without leave to amend.

IV. DISPOSITION

The judgment dismissing the FAC, with prejudice, is affirmed. Defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278.)

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

FIELDS

J.

We concur:

McKINSTER

Acting P. J.

RAPHAEL

J.

Filed 7/2/20 Precise Aerospace Manufacturing, Inc. v. Cantu CA4/2

`

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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

PRECISE AEROSPACE MANUFACTURING, INC.,

Plaintiff and Appellant,

v.

BRIDGET CANTU,

Defendant and Respondent

E073696

(Super.Ct.No. RIC1902167)

OPINION

APPEAL from the Superior Court of Riverside County. Daniel A. Ottolia, Judge. Affirmed.

Law Office of Harry S. Carmack and Harry S. Carmack for Plaintiff and Appellant.

Pettis Law Firm and James C. Pettis for Defendant and Respondent.

Bridget Cantu worked first for MAG Aerospace Industries, LLC (MAG), and thereafter for Precise Aerospace Manufacturing, Inc. (Precise). Precise and MAG became embroiled in litigation in federal court. After Cantu left Precise, she gave MAG a declaration, which MAG filed in the federal action.

Precise then filed this action against Cantu. It asserted causes of action for breach of a confidentiality agreement, for misappropriation of trade secrets, and for intentional interference with contractual relations.

Cantu filed a special motion to strike (anti-SLAPP motion) under Code of Civil Procedure section 425.16 (section 425.16 or anti-SLAPP statute). She argued that all of Precise’s causes of action arose out of her declaration, which constituted protected activity, and that Precise could not show a probability of prevailing on any of them. The trial court agreed that all of the causes of action arose out of protected activity. It denied the motion as to the first cause of action, ruling that Precise had shown a probability of prevailing, but granted it as to the second and third causes of action.

Precise appeals. It contends that its causes of action did not arise out of protected activity. We will hold that they all arose out of Cantu’s declaration, which was classic protected activity. Hence, we will affirm.

I

PROCEDURAL BACKGROUND

According to Precise’s complaint, in 2015, it hired Cantu as its vice-president of sales. She signed a “Confidentiality Agreement.” In it, she agreed not to disclose confidential information of Precise during or after her employment.

Also according to the complaint, in May 2017, Cantu left Precise. She was “a disgruntled former employee.” Meanwhile, sometime in 2017, Precise sued MAG, Cantu’s former employer, in federal court. On or about December 1, 2017, Cantu disclosed to MAG confidential information of Precise, including trade secrets. According to the second cause of action, she made this disclosure by “execut[ing] a declaration under oath.” Similarly, according to the third cause of action she made it by “provid[ing] a written declaration to MAG.” Cantu intended to damage Precise by helping MAG in the federal action.

Precise also alleged, on information and belief, that Cantu was continuing to disclose its trade secrets and confidential information to MAG.

The complaint asserted three causes of action against Cantu: (1) breach of contract, (2) misappropriation of trade secrets, and (3) intentional interference with contractual relations.

Cantu filed an anti-SLAPP motion. The evidence in support of the motion confirmed that on December 1, 2017, Cantu had signed a declaration that was filed in the federal court action.

Cantu argued that the action arose out of protected activity — specifically, her declaration. She also argued that Precise could not show a probability of prevailing, because (1) her conduct was protected by the litigation privilege (Civ. Code, § 47, subd. (b)(2)), and (2) the information in her declaration was not confidential and did not constitute trade secrets.

In its opposition, Precise argued that the declaration was not the gravamen of its causes of action; it was only evidence of damages. It also argued that it could have asserted the same causes of action against Cantu without mentioning her declaration.

Precise did not introduce any evidence in opposition to the motion.

After hearing argument, the trial court granted the motion in part and denied it in part.

It ruled that all three causes of action arose out of protected activity.

It denied the motion as to the first (breach of contract) cause of action, because it found that Cantu’s declaration appeared to violate the confidentiality agreement, and the litigation privilege did not apply.

It granted the motion as to the second (misappropriation of trade secrets) cause of action; it found that the litigation privilege did not apply, but Precise had failed to prove several elements of the cause of action.

It granted the motion as to the third (intentional interference with contractual relations) cause of action, because it found that the litigation privilege did apply.

II

THE ANTI-SLAPP MOTION

A. General Anti-SLAPP Principles.

Section 425.16, “commonly known as the anti-SLAPP statute, allows defendants to request early judicial screening of legal claims targeting free speech or petitioning activities.” (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 880-881.)

It provides: “A cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).)

“A court evaluates an anti-SLAPP motion in two steps. ‘Initially, the moving defendant bears the burden of establishing that the challenged allegations or claims “aris[e] from” protected activity in which the defendant has engaged. [Citations.] If the defendant carries its burden, the plaintiff must then demonstrate its claims have at least “minimal merit.”’ [Citation.] If the plaintiff fails to meet that burden, the court will strike the claim.” (Wilson v. Cable News Network, Inc., supra, 7 Cal.5th at p. 884.)

For purposes of the first step, an “‘act in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue’ includes: (1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, [and] (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law . . . .” (§ 425.16, subd. (e).)

“‘“[T]he defendant’s act underlying the plaintiff’s cause of action must itself have been an act in furtherance of the right of petition or free speech.”’ [Citation.] In other words, a claim does not ‘arise from’ protected activity simply because it was filed after, or because of, protected activity, or when protected activity merely provides evidentiary support or context for the claim. [Citation.] Rather, the protected activity must ‘supply elements of the challenged claim.’ [Citation.]” (Rand Resources, LLC v. City of Carson (2019) 6 Cal.5th 610, 621.)

“As to the second step inquiry, a plaintiff seeking to demonstrate the merit of the claim ‘may not rely solely on its complaint, even if verified; instead, its proof must be made upon competent admissible evidence.’ [Citations.]” (Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 940.)

“‘We review de novo the grant or denial of an anti-SLAPP motion.’ [Citation.]” (Sweetwater Union High School Dist. v. Gilbane Building Co., supra, 6 Cal.5th at p. 940.)

B. The First Step: Arising from Protected Activity.

As already noted, protected activity includes “any written or oral statement or writing made before a . . . judicial proceeding . . . .” (§ 425.16, subd. (e)(1).) Thus, Cantu’s declaration is protected. (See Schaffer v. City and County of San Francisco (2008) 168 Cal.App.4th 992, 999.)

Precise argues that its causes of action were “triggered by,” rather than arising from, the declaration. Here, however, the action was not merely filed after Cantu’s declaration. Rather, the declaration supplies necessary elements of Precise’s causes of action. It constitutes the alleged misappropriation of trade secrets. It also constitutes the alleged interference with contractual relations.

Precise may be arguing that Cantu must have disclosed the contents of her declaration to MAG (or its attorneys) before the declaration was drafted. Even if so, that disclosure would also be protected, as a “written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body . . . .” (§ 425.16, subd. (e)(2); see Neville v. Chudacoff (2008) 160 Cal.App.4th 1255, 1266 [“a statement is ‘in connection with’ litigation under section 425.16, subdivision (e)(2) if it relates to the substantive issues in the litigation and is directed to persons having some interest in the litigation.”].)

Precise also argues that, while one cause of action specifically alleged that Cantu’s declaration was the actionable disclosure, the other two did not. More generally, it argues that it alleged that disclosures were continuing.

Both the second and third causes of action, however, specifically alleged that they were based on the declaration. The first cause of action is not in issue in this appeal; we note, however, that while it did not specifically mention the declaration, it did allege that the disclosure occurred on December 1, 2017 — the date of the declaration.

Admittedly, Precise alleged that Cantu was continuing to make tortious disclosures to MAG. However, given the context, it seems that Cantu is making continuing disclosures to MAG — if any — in connection with the federal action. Moreover, this appears to be a collateral allegation, made only on information and belief. “Assertions that are ‘merely incidental’ or ‘collateral’ are not subject to section 425.16. [Citations.] Allegations of protected activity that merely provide context, without supporting a claim for recovery, cannot be stricken under the anti-SLAPP statute.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 394.) In any event, “[w]hen relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage.” (Id. at p. 396.)

Precise relies on Renewable Resources Coalition, Inc. v. Pebble Mines Corp. (2013) 218 Cal.App.4th 384. There, a mining company and its attorneys (collectively the Pebble defendants) allegedly purchased confidential documents of an anti-mining nonprofit corporation (Coalition) from the Coalition’s disgruntled former fundraiser; they then used them to prosecute an election law complaint against the Coalition. (Id. at pp. 386, 388-390.) The Coalition sued the Pebble defendants for interference with contract and interference with prospective economic advantage. (Id. at p. 389.)

The appellate court held that the trial court erred by granting an anti-SLAPP motion. (Renewable Resources Coalition, Inc. v. Pebble Mines Corp., supra, 218 Cal.App.4th at pp. 395-398.) It explained: “[T]he trial court erroneously focused on the Coalition’s damages allegations, i.e., that the Coalition was forced to defend itself in the [election law] proceeding. Instead, the proper focus should have been on the ‘allegedly wrongful and injury-producing conduct’ [citation] which gave rise to the Coalition’s damages.” (Id. at p 396.)

“[T]he Coalition did not sue the Pebble defendants for having prosecuted the [election law] complaint. Rather, . . . , the pleadings establish the gravamen of the Coalition’s claim against the Pebble defendants is that they induced [the fundraiser] to sell them the Coalition’s confidential documents for $50,000.” (Renewable Resources Coalition, Inc. v. Pebble Mines Corp., supra, 218 Cal.App.4th at p. 397.)

Here, however, Precise did expressly sue Cantu for executing the declaration. Unlike in Renewable, the judicial proceeding was not relevant exclusively to damages. Rather, the allegedly tortious disclosure was made in the course of a judicial proceeding, and thus was inextricable from it.

Regarding the second (misappropriation of trade secrets ) cause of action, Precise argues that a trade secrets claim is categorically immune from an anti-SLAPP motion.

Civil Code section 3426.11, as relevant here, provides: “Notwithstanding [the litigation privilege], . . . the voluntary, intentional disclosure of trade secret information, unauthorized by its owner, to a competitor or potential competitor of the owner of the trade secret information or the agent or representative of such a competitor or potential competitor is not privileged . . . .” For this reason, the trial court ruled that the litigation privilege did not apply to the second cause of action.

Precise relies on Ruiz v. Harbor View Community Association (2005) 134 Cal.App.4th 1456. Ruiz said, “[S]ubdivision (e), clauses (1) and (2) of section 425.16 are parallel to and co-extensive with the definition of privileged communication under Civil Code section 47, subdivision (b). [Citation.] . . . Thus, . . . a communication protected by the litigation privilege necessarily would fall within section 425.16, subdivision (e)(1) or (2) . . . .” (Id. at p. 1474.) Precise concludes that, because a trade secrets cause of action is not protected by the litigation privilege, under Ruiz, it necessarily also is not protected activity for purposes of the anti-SLAPP statute.

The anti-SLAPP statute, however, contains no exception similar to Civil Code section 3426.11. It protects statements in connection with litigation across the board. Accordingly, while the disclosure of a trade secret generally is not protected by the litigation privilege, it can be protected activity for anti-SLAPP purposes.

The statement quoted from Ruiz is simply overbroad — not surprisingly, as there was no issue concerning trade secrets in that case. “It is axiomatic that cases are not authority for propositions that are not considered. [Citation.]” (California Building Industry Association v. State Water Resources Control Board (2018) 4 Cal.5th 1032, 1043.) It would be more accurate to say that “[t]he privilege informs interpretation of the ‘arising from’ prong of the anti-SLAPP statute [citation], but protections afforded by the statute and the privilege are not entirely coextensive [citations].” (Navellier v. Sletten (2003) 106 Cal.App.4th 763, 770, italics added.)

Finally, Precise argues (with some rue) that it could have drafted its complaint so as not to mention the declaration at all. But the anti-SLAPP statute cannot be defeated by “artful pleading.” (See Baral v. Schnitt, supra, 1 Cal.5th at p. 393.) In deciding whether a cause of action arises from protected activity, the trial court is not limited to the four corners of the complaint. Rather, “[i]n deciding whether the initial ‘arising from’ requirement is met, a court considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ (§ 425.16, subd. (b).)” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.)

Accordingly, Cantu was free to show that the complaint was actually based on her declaration — and she did. Precise did not rebut that showing. Therefore, the trial court correctly found that the entire action arose out of protected activity.

C. The Second Step: Minimal Merit.

1. First cause of action: Breach of contract.

The trial court ruled that Precise had shown that its first cause of action (breach of contract) had minimal merit. Cantu has not cross-appealed. Hence, we do not review this ruling.

2. Second cause of action: Misappropriation of trade secrets.

The trial court also ruled that Precise had failed to show that its second cause of action (misappropriation of trade secrets) had minimal merit.

Precise contends that this was error, because the litigation privilege does not apply to a trade secrets cause of action. (See part II.B, ante.) It claims, “Cantu’s anti-SLAPP motion rests entirely on the claim that her [declaration] . . . is a privileged publication pursuant to California Civil Code section 47 . . . .” Not so. Cantu also argued that Precise also could not prove its second cause of action because any information she disclosed was neither a trade secret nor confidential.

Moreover, the trial court specifically ruled for Cantu on this ground. It stated: “[Precise] fails to identify what information disclosed in the declaration constitutes a trade secret. [Cantu]’s disclosures involved mostly information concerning [Precise]’s contractual negotiations with MAG. It’s not clear how this information had value to competitors or the public. . . . [¶] . . . Furthermore, [Precise] has not produced any evidence that [Cantu] attained an unfair competitive advantage or that it was damaged by the disclosure.”

Precise introduced no evidence whatsoever. Looking at Cantu’s evidence alone, we can hardly say that the information she disclosed did consist of trade secrets. She showed that at least some of it was available on Precise’s own website. Precise wholly failed to meet its burden of proof.

3. Third cause of action: Intentional interference
with contractual relations.

Finally, the trial court ruled that the third (intentional interference with contractual relations) cause of action lacked merit because the litigation privilege applied.

In its opening brief, Precise does not argue that this was error. If only out of an excess of caution, we also note that it did not introduce any evidence to show that this cause of action had even minimal merit. Hence, the trial court did not err.

III

DISPOSITION

The order appealed from is affirmed. Cantu is awarded costs on appeal, including attorney fees (§ 425.16, subd. (c)(1)), against Precise.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RAMIREZ

P. J.

We concur:

McKINSTER

J.

MILLER

J.

Filed 7/2/20 Rosen v. Reicheneder CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(a). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115(a).

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

JONATHAN C. ROSEN, et al.,

Plaintiffs and Appellants,

v.

DALE REICHENEDER, et al.,

Defendants and Respondents. B293942

(Los Angeles County

Super. Ct. No. BC690062)

APPEAL from an order of the Superior Court of Los Angeles County, William D. Stewart, Judge. Affirmed.

WLA Legal Services, Steven Zelig, for Plaintiffs and Appellants.

Joyce Crucillo for Defendants and Respondents.

INTRODUCTION

Appellants Jonathan Rosen, JCR Law Group, Inc., and Law Offices of Jonathan C. Rosen (collectively, Rosen) sued Respondents Dale Reicheneder and the Reicheneder Law Group (collectively, Reicheneder), James Moorhead, and Arturo Aguilar for malicious prosecution of an underlying legal malpractice case against Rosen. In the underlying malpractice case, Aguilar, represented by Reicheneder, claimed his former lawyer, Rosen, breached the standard of care while defending Aguilar in a juvenile delinquency case. Rosen appeals from an order granting a special motion to strike the malicious prosecution complaint under Code of Civil Procedure section 425.16 (i.e., an anti-SLAPP motion). We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

We are acquainted with the underlying legal malpractice case, having recently issued an unpublished opinion in that case. (Rosen v. Aguilar (Mar. 13, 2020, B288207) [nonpub. opn.] (Rosen I).) We borrow much of our description of both the malpractice case and the juvenile delinquency case from our earlier opinion.

A. Initial Juvenile Delinquency Action

In a juvenile delinquency case entitled People of the State of California v. Aguilar, Case No. PJ49788, Aguilar was accused of committing multiple counts of forcible lewd conduct on a minor in violation of Penal Code sections 288a, 288b, and 286, subdivision (c)(2). (Rosen I, supra, B288207.) Aguilar was a minor at the time the crimes were committed, but an adult when arrested. The prosecution moved to have the case heard in the adult criminal courts. Aguilar retained Rosen, who negotiated a “plea agreement” that kept the case in juvenile court. (Ibid.) Based on Rosen’s advice, Aguilar entered into an agreement whereby he admitted to violating Penal Code section 288b, was detained for a year in County Jail, and ordered to complete a probationary term. After Aguilar completed his jail time and probation, the juvenile court sealed Aguilar’s records under Welfare and Institutions Code section 786. (Ibid.)

B. Underlying Malpractice Action

Aguilar, represented by Reicheneder, later filed a complaint against Rosen for malpractice. (Rosen I, supra, B288207.) Aguilar alleged Rosen “persuade[d] . . . Aguilar to accept what was described to [Aguilar] as a ‘plea’ as to a false charge, resulting in . . . Aguilar remaining in [custody] for another year.” (Ibid.) Aguilar further alleged his “family continued pursuing the matter, ultimately proving the charge was incorrect, resulting, as predicted, in the court terminating jurisdiction.” (Ibid.)

Rosen filed a demurrer to Aguilar’s complaint, arguing the case should be dismissed because “Aguilar is unable to plead his actual innocence and the overturning of his conviction as required in criminal malpractice matters.” (Rosen I, supra, B288207.)

The doctrine of “actual innocence” has two parts. First, when a former criminal defendant sues his or her attorney for legal malpractice resulting in conviction, the former defendant’s actual innocence of the underlying criminal charges is a necessary element of the cause of action. (Wiley v. County of San Diego, (1998) 19 Cal.4th 532, 545) (Wiley.)) Second, the “plaintiff must obtain postconviction relief in the form of a final disposition of the underlying criminal case — for example, by acquittal after retrial, reversal on appeal with directions to dismiss the charges, reversal followed by the People’s refusal to continue the prosecution, or a grant of habeas corpus relief — as a prerequisite to proving actual innocence in a malpractice action against former criminal defense counsel.” (Coscia v. McKenna & Cuneo (2001) 25 Cal.4th 1194, 1205, fn. omitted (Coscia).)

Rosen filed a demurrer, arguing the actual innocence doctrine applied to Aguilar’s malpractice case, but Aguilar could not plead actual innocence for two reasons. (Rosen I, supra, B288207.) First, per Rosen, Aguilar confessed to the crime and also entered a plea. Second, the court in Aguilar’s juvenile delinquency case did not dismiss the case because the charge was overturned or there was a post-conviction exoneration. Rather, the court sealed the case pursuant to Welfare and Institutions Code section 786 because Aguilar satisfactorily completed probation. (Ibid.)

Judge John P. Doyle, to whom the malpractice case was then assigned, heard a motion to file documents from Aguilar’s juvenile file in support of Rosen’s demurrer. (Rosen I, supra, B288207.) The court denied the motion, however, because the documents had been ordered sealed by the juvenile delinquency court and Rosen (as of that time) had not secured an order unsealing them. The documents were returned to Rosen and the court overruled the demurrer, finding Aguilar sufficiently pled “actual innocence” by alleging his family “‘continued pursuing the matter, ultimately proving the charge was incorrect, resulting, as predicted, in the court terminating jurisdiction.’” (Ibid.)

Rosen answered the complaint, and filed a motion for judgment on the pleadings, again arguing Aguilar did not plead facts that he was actually innocent or had obtained post-conviction relief. (Rosen I, supra, B288207.) In support of his motion, Rosen filed a request for judicial notice attaching an order, signed by the juvenile delinquency judge, granting Rosen’s request for disclosure of Aguilar’s juvenile case file. (Ibid.)

On October 28, 2016, the court held a hearing on various motions, including the motion for judgment on the pleadings. Judge Ralph C. Hofer, to whom the case was then assigned, granted Aguilar’s motion to file a second amended complaint to add causes of action for fraud, negligent misrepresentation, conversion, and unjust enrichment, and continued Rosen’s motion for judgment on the pleadings. The court also stayed the matter (with the exception of permitting Rosen to file a demurrer to any second amended complaint filed) to allow Aguilar’s criminal counsel, Michael Cavalluzzi, to “address issues raised with respect to plaintiff’s ability to plead factual innocence[ ] or any other matters Mr. Cavalluzzi seeks to address in the juvenile court.”

Aguilar filed a second amended complaint and attached Cavalluzzi’s declaration. Cavalluzzi declared he had been retained by Aguilar to file a “Petition for a Finding of Factual Innocence” in the juvenile delinquency matter. He further stated he needed the complete juvenile court file to determine preliminary issues, including “[w]hether the court would entertain a finding of factual innocence after the court records have been sealed. Pursuant to Welfare and Institutions Code [s]ection 781, once the court has ordered the record of a juvenile delinquency case sealed, the proceedings in the case shall be deemed never to have occurred. This would appear to render a finding of factual innocence unnecessary.”

At a later hearing, Judge Hofer sustained Rosen’s demurrer to the second amended complaint without leave to amend, and dismissed the malpractice action. In support of the demurrer, Rosen again argued Aguilar did not plead facts that he was actually innocent or had obtained post-conviction relief. At the hearing, Judge Hofer noted that no one had presented the court with legal authority that the factual innocence doctrine does not apply to a juvenile who seeks to bring a malpractice action after a petition alleging criminal conduct had been sustained by the juvenile court. In response, Cavalluzi stated, “I believe that it does apply, Your Honor. I believe that the factual innocence doctrine still does apply, and there’s a mechanism by which you can find a minor or former minor factually innocent.” After this concession, Judge Hofer noted there had been no finding of actual innocence, and Aguilar’s counsel had not requested a further delay to petition the juvenile court for exoneration or a finding of actual innocence. In his written order, Judge Hofer held the actual innocence doctrine applied to the juvenile proceedings, and further held Aguilar’s juvenile records demonstrated the juvenile court terminated jurisdiction only because Aguilar had successfully completed all terms and conditions of probation, not because Aguilar actually was innocent. Based on his ruling sustaining the demurrer without leave to amend, Judge Hofer ultimately dismissed the underlying malpractice claim and entered judgment in favor of Rosen. Aguilar did not appeal the dismissal.

Rosen later filed a motion for attorneys’ fees under section 128.5, asserting Aguilar’s complaint was frivolous, and Aguilar and his counsel engaged in bad faith conduct throughout the litigation. (Rosen I, supra, B288207.) In particular, Rosen argued Aguilar’s claims were frivolous because the law “is very well established that in order for a plaintiff to plead any cause of action against an attorney arising out of a representation in a prior criminal matter, the [p]laintiff must plead and prove that” he or she was “factually innocent of the underlying crimes,” yet “[Aguilar] never had his conviction set aside.” (Ibid.) Rosen further contended Aguilar’s course of conduct was to unreasonably delay the resolution of the case by, among other things, repeatedly claiming that he was seeking to have his conviction set aside, and requesting continuances to brief whether the juvenile court’s order unsealing his juvenile file was invalid. Finally, Rosen argued Aguilar engaged in bad faith litigation tactics throughout the proceeding, pointing to Aguilar’s allegation in his second amended complaint that Rosen has been subject to discipline by the State Bar, which Rosen noted is unfounded, and Aguilar’s “consistent and protracted tactic of harassing [Rosen] through the discovery process.” (Ibid.)

Judge Hofer denied the sanctions motion, finding Aguilar’s action was not “totally and completely without merit” because whether the actual innocence requirement applied to a case alleging defense counsel in a juvenile delinquency proceeding committed malpractice was a matter of first impression. (Rosen I, supra, B288207.) Judge Hofer said, “Here, while the court has ultimately determined that the actual innocence and post-conviction exoneration elements apply to juvenile matters there was a colorable argument asserted by plaintiff, and also attempts evidently being considered with respect to obtaining post-conviction relief, with the court permitting a continuance to so pursue . . . . Moreover, the moving papers, and, indeed, the demurrer, did not cite to any clear legal case authority in which a court did in fact apply the factual innocence requirement in connection with a sealed juvenile proceeding, which would have rendered the continued pursuit of plaintiff’s position in this matter unsupported . . . .” (Ibid.) Judge Hofer also explained the “motion does not support . . . these various matters by explaining which of the fees sought here were incurred as a result of such conduct, and, as argued in the opposition, it appears that much of that conduct occurred during discovery efforts, and should have been addressed through the sanctions available for discovery abuses at the time they allegedly occurred.” (Ibid.)

We affirmed this ruling in our previous unpublished opinion, holding the trial court neither abused its discretion nor committed legal error. (Rosen I, supra, B288207.) We held “[t]he trial court was well within its discretion in finding Aguilar’s complaint presented an issue of first impression, i.e., whether the actual innocence doctrine applies to juvenile delinquency matters involving a sealed record. As explained in Cavalluzzi’s declaration, Welfare and Institutions Code section 781 states ‘[o]nce the court has ordered the person’s records sealed, the proceedings in the case shall be deemed never to have occurred . . . .’ (Welf. & Inst. Code, § 781, subd. (a)(1)(A).) Thus, Cavalluzzi opined that section 781 ‘would appear to render a finding of actual innocence unnecessary.’ The fact the court ultimately determined the actual innocence doctrine applies to juvenile proceedings, and sustained Rosen’s demurrer, does not render Aguilar’s complaint frivolous.” (Ibid., fns. omitted.)

C. Malicious Prosecution Action and the Anti-SLAPP

Motion

Following dismissal of the underlying malpractice case, but before we issued our opinion in Rosen I, Rosen filed a complaint alleging a single cause of action for malicious prosecution against Reicheneder, Moorhead, and Aguilar. Reicheneder filed an anti-SLAPP motion in response.

Judge William D. Stewart, to whom the case was assigned, issued a lengthy and well-reasoned tentative opinion granting the anti-SLAPP motion. After hearing argument, Judge Stewart adopted his tentative ruling as the order of the court. This appeal followed.

DISCUSSION

“We review de novo a trial court’s decision on an anti-SLAPP motion. (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 788.) The anti-SLAPP statute requires a two-step process: ‘At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. . . . If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached. There, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken.’ (Baral v. Schnitt (2016) 1 Cal.5th 376, 396.) In making these determinations the court considers ‘the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.’ (§ 425.16, subd. (b)(2).)” (Briganti v. Chow (2019) 42 Cal.App.5th 504, 508) (Briganti).)

A. The Malpractice Complaint Arose from Protected Activity
B.
“The anti-SLAPP statute defines protected activities as: ‘(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.’ (§ 425.16, subd. (e).)” (Briganti, supra, 42 Cal.App.5th at p. 508.)

Our Supreme Court has determined that malicious prosecution suits, which by their very nature allege the defendant committed a tort by petitioning for judicial relief, are not categorically exempt from the anti-SLAPP statute; they arise from protected activity (filing a lawsuit) and therefore satisfy the first step of the anti-SLAPP analysis. (Jarrow Formulas, Inc. v. La Marche (2003) 31 Cal.4th 728, 734-739.) Rosen concedes this point, saying he “does not contest that this case is subject to the anti-SLAPP statute.” Thus, the first step in the anti-SLAPP analysis is satisfied.

C. Rosen Did Not Carry His Burden to Show a Probability of Prevailing on His Malicious Prosecution Claim
D.
“At the second anti-SLAPP step, the plaintiff bears the burden of demonstrating a probability of prevailing on each claim arising from protected activity. [Citation.] A plaintiff must ‘demonstrate that the complaint is both legally sufficient and supported by a sufficient prima facie showing of facts to sustain a favorable judgment if the evidence submitted by the plaintiff is credited.’ [Citation.] Under the ‘“summary-judgment-like procedure”’ applicable at this step, the court ‘does not weigh evidence or resolve conflicting factual claims.’ [Citation.]” (Briganti, supra, 42 Cal.App.5th at p. 509.) In responding to an anti-SLAPP motion, “at least ‘minimal merit’” must be shown. (Park v. Board of Trustees of California State University, (2017) 2 Cal.5th 1057, 1061.)

To win this appeal, Rosen therefore must show his malicious prosecution claim had at least minimal merit. “To prevail on a malicious prosecution claim, the plaintiff must show that the prior action (1) was commenced by or at the direction of the defendant and was pursued to a legal termination favorable to the plaintiff; (2) was brought without probable cause; and (3) was initiated with malice. [Citation.]” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 292) (Soukup)). It is undisputed on appeal, as Judge Stewart determined, that Rosen satisfied the first element, because Judge Hofer sustained Rosen’s demurrer to the second amended complaint in the underlying malpractice action without leave to amend, and dismissed the case. Thus we turn to the probable cause and malice elements.

1. Rosen Has Not Demonstrated the Underlying Malpractice Suit Was Brought Without Probable Cause
2.
“The question of probable cause is ‘whether, as an objective matter, the prior action was legally tenable or not.’ [Citation.] ‘A litigant will lack probable cause for his action either if he relies upon facts which he has no reasonable cause to believe to be true, or if he seeks recovery upon a legal theory which is untenable under the facts known to him.’ [Citation.]” (Soukup, supra, 39 Cal.4th at p. 292.) To make a prima facie showing sufficient to defeat the anti-SLAPP motion, Rosen was required to demonstrate that Respondents either (1) lacked probable cause to initiate the prior suit, or (2) after initiating the prior suit with probable cause, thereafter continued to prosecute it after learning they lacked probable cause. (Paiva v. Nichols (2008) 168 Cal.App.4th 1007, 1037 (Paiva).)

“Unlike the malice element, which is a factual question, the issue of whether there was an absence of probable cause in bringing the prior case is a question of law to be determined by the court. [Citation.]” (Pavia, supra, 168 Cal.App.4th at p. 1018; Sheldon Appel Co. v. Albert & Oliker (1989) 47 Cal.3d 863, 874-875 (Sheldon Appel).) “The question whether, on a given set of facts, there was probable cause to institute an action requires a sensitive evaluation of legal principles and precedents . . . [to] appreciate the distinction between a merely unsuccessful and a legally untenable claim.” (Sheldon Appel, supra, 47 Cal.3d at p. 875.) The test, in a malicious prosecution case, for evaluating whether the underlying case was brought with probable cause, is “whether any reasonable attorney would have thought the claim tenable[.]” (Id. at p. 886.) This test appropriately “reflects the important public policy of avoiding the chilling of novel or debatable legal claims.” (Id. at p. 885) Thus, when applying the test “a court must properly take into account the evolutionary potential of legal principles. [Citation.]” (Id. at p. 886.) “An action is deemed to have been pursued without probable cause if it was not legally tenable when viewed in an objective manner as of the time the action was initiated or while it was being prosecuted.” (Sycamore Ridge Apartments LLC v. Naumann (2007) 157 Cal.App.4th 1385, 1402.)

Rosen contends the underlying malpractice case lacked probable cause because Aguilar was required to — but could not — prove that he was actually innocent of the crime and had obtained a post-conviction exoneration. While proof of those elements assuredly would be required if Aguilar had been prosecuted and convicted in an adult criminal court (see, e.g., Coscia, supra, 25 Cal.4th at pp. 1201-1202), Aguilar was a child at the time of the offense and was charged in the juvenile delinquency court. As Judges Hofer and Stewart observed, Rosen was unable to point the lower court to any legal authority standing for the proposition that the actual innocence doctrine applies to a malpractice action brought against a defense lawyer in a juvenile delinquency case. Nor has Rosen identified any such authority on appeal. As both judges also noted, the issue appears to be one of first impression.

We need not decide whether the actual innocence doctrine should apply to such claims. The issue likely will be decided at some point in the future by an appellate court, and to do so that court will be required to balance both policy and pragmatic considerations. In Wiley, a divided Supreme Court concluded, “[f]or reasons of policy and pragmatism,” that “[w]hen a former criminal defendant [in an adult court] sues for legal malpractice,” actual innocence is “a necessary element of the cause of action[.]” (Wiley, supra, 19 Cal.4th. at p. 534.) At the time, whether actual innocence was an element of such a claim was an open question in California, and the court noted that various states answered the question differently. (Id. at pp. 536-538.) When considering whether to extend the actual innocence requirement to other types of proceedings, California courts also have weighed application of the various policy and pragmatic factors underlying it. (See, e.g., Brooks v. Shemaria (2006) 144 Cal.App.4th 434, 442-443 (Brooks); Khodayari v. Mashburn (2011) 200 Cal.App.4th 1184, 1192-1196 (Khodayari)).

In Brooks, the court considered whether the actual innocence requirement applied to a claim for professional negligence arising from an attorney’s representation in proceedings for a return of seized property, which occurred after the defendant’s conviction and sentence. (Brooks, supra, 144 Cal.App.4th at p. 441.) The court reasoned, “the issue . . . should not be resolved in a formulaic manner . . . . Rather, we must look to the policy considerations underlying the actual innocence requirement to see whether they justify application of the requirement here.” (Id. at p. 442.) The Brooks court articulated five policy considerations. “First, we should not permit a guilty defendant to profit from his or her own wrong. [Citation.] Second, to allow guilty defendants to shift their punishment to their former attorneys would undermine the criminal justice system. [Citation.] Third, ‘a defendant’s own criminal act remains the ultimate source of his predicament irrespective of counsel’s subsequent negligence.’ [Citation.] Fourth, a guilty defendant who is convicted or given a longer sentence as a result of counsel’s incompetence can obtain postconviction relief on that basis; in contrast, ‘a civil matter lost through an attorney’s negligence is lost forever.’ [Citation.] Fifth, there are formidable practical problems with criminal malpractice litigation, including the difficulty of quantifying damages and the complexity of the standard of proof, which must combine the preponderance of the evidence standard with the reasonable doubt standard applicable in a criminal trial. [Citation.]” (Id. at pp. 442-443.) In Brooks, the court concluded that “[n]one of those considerations weigh in favor of applying the actual innocence requirement . . . .” (Id. at p. 443.)

In Khodayari, a different panel of this court applied the Brooks policy considerations to conclude a plaintiff who brought malpractice and other claims against his former criminal defense attorney for allegedly causing him to be found in violation of probation must demonstrate actual innocence of the probation violations, and also obtain post-violation exoneration of those violations. (Khodayari, supra, 200 Cal.App.4th at pp. 1192-1196.) It remains to be seen how a California appellate court might resolve whether the actual innocence doctrine applies to malpractice or other tort claims by a convicted juvenile defendant against his or her former counsel. California’s juvenile and adult criminal justice systems have some important differences. For example, while the adult criminal justice system focuses on punishment of offenders as well as rehabilitation, “[t]he primary goal of the juvenile justice system is to rehabilitate offenders rather than punish them. (Welf. & Inst. Code, § 202, subd. (b).) The rationale for this approach is the susceptibility of some juveniles to immature and irresponsible behavior and the greater likelihood they, as opposed to adults, will be reformed by proper guidance and treatment programs. [Citation.]” (In re R.C. (2019) 39 Cal.App.5th 302, 310.) And as noted above, the juvenile justice system provides for sealing of juvenile records, upon certain conditions, which gives certain juvenile offenders an opportunity for a clean start to their futures. Welfare & Institutions Code section 781, subdivision (a)(1)(A) provides in relevant part, “Once the court has ordered the person’s records sealed, the proceedings in the case shall be deemed never to have occurred, and the person may properly reply accordingly to any inquiry about the events[.]”

Neither Rosen nor Respondents have attempted to apply the relevant policy factors articulated in Brooks to our consideration of whether the claims asserted in the underlying case were tenable. And we need not apply them on our own, because we are not deciding whether the claims were meritorious. We need only decide whether they were arguably meritorious. (Sheldon Appel, supra, 47 Cal.3d at p. 885.) It therefore is sufficient to conclude, as we do, that because (1) we are unaware of any controlling authority, (2) resolution of the issue would require consideration of various policy and pragmatic concerns, which introduces uncertainty into any forecast of how an appellate court would resolve the question, (3) there is room for debate on the issue, and (4) we are required to take into account potential evolution of the law in this area, we cannot say no reasonable attorney would have thought Aguilar’s claims were tenable. (Paiva, supra, 168 Cal.App.4th at p. 1019.) That conclusion is consistent with our holding in Rosen I that Judge Hofer did not abuse his discretion, when denying Rosen’s sanctions motion, by finding the underlying suit was “colorable” and not frivolous. (See Rosen I, supra, B288207.) Thus, we hold that Rosen did not carry his burden of demonstrating the underlying malpractice suit was brought or maintained without probable cause.

We have considered Rosen’s argument that, even if applicability of the actual innocence doctrine to the underlying malpractice case was or is an issue of first impression, Aguilar cannot rely on an “‘un-pled hidden theory of liability.’” In other words, Rosen contends “[i]n Aguilar’s complaint, Reicheneder never claimed that factual innocence was not required because Aguilar was prosecuted in a juvenile proceeding. Rather, [he] simply relied on deception, i.e., that Aguilar was innocent and/or that post-conviction exoneration had been obtained.” This argument is circular, however, because unless factual innocence is an element of Aguilar’s claim, there was no reason to plead it.

3. We Need Not Reach the Malice Element
4.
Rosen argues at length that the underlying malpractice case lacked merit because it was initiated and prosecuted with malice. Respondents dispute this. Because we have resolved this appeal “by determining the legal question of probable cause, we need not address whether [Rosen] presented sufficient evidence to support a finding — ordinarily reserved for the trier of fact [citation] — that appellants acted with malice in prosecuting the prior suit. [Citation.]” (Paiva, supra, 168 Cal.App.4th at p. 1019, fn.6).

DISPOSITION

The order granting the anti-SLAPP motion is affirmed. Respondents are awarded their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

CURREY, J.

We concur:

MANELLA, P.J.

WILLHITE, J.

Filed 7/10/20 Pacific Sunshine Development v. Lillie CA6

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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT

PACIFIC SUNSHINE DEVELOPMENT, LLC,

Plaintiff and Respondent,

v.

BRIAN JAMES LILLIE et al.,

Defendants and Appellants.

H045653*

(Santa Cruz County

Super. Ct. No. 17CV01895)

Defendants Brian James Lillie and Richard Bain appeal from a January 2018 preliminary injunction preventing them from selling or transferring assets in a civil fraud/breach of contract case. The order directed plaintiff Pacific Sunshine Development, LLC to post a $100,000 bond to cover defendants’ costs and fees in the event they successfully procured a final decision dissolving the injunction. Shortly after the appeal was placed on this court’s conference list, a trial was held in the superior court and a permanent injunction and final judgment were entered in favor of plaintiff. Defendants have not responded to our invitation for supplemental briefing regarding whether the appeal is now moot. Plaintiff filed a motion to dismiss the appeal and for release of the $100,000 bond it posted in the superior court as a condition of the preliminary injunction.

Plaintiff’s motion to dismiss this appeal is granted. The appeal is moot. (Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 134 [“when a case becomes moot pending an appellate decision ‘the court will not proceed to a formal judgment, but will dismiss the appeal’ ”]; County of San Diego v. State of California (1997) 15 Cal.4th 68, 110 [preliminary injunction appeal mooted by entry of final judgment]; People v. Morse (1993) 21 Cal.App.4th 259, 264–265 [same].) Plaintiff is entitled to the release of the bond posted in connection with the preliminary injunction.

DISPOSITION

The appeal is dismissed. The superior court shall release to plaintiff Pacific Sunshine Development, LLC. the $100,000 bond posted in January 2018. The parties shall bear their own costs on appeal.

____________________________________

Grover, J.

WE CONCUR:

____________________________

Greenwood, P. J.

____________________________

Danner, J.

H045653 – Pacific Sunshine Development, LLC v. Lillie et al.

Filed 7/10/20 Shimmick Construction v. City of Long Beach CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

SHIMMICK CONSTRUCTION COMPANY, INC./, FCC CONSTRUCCION S.A./IMPREGILO S.P.A., a joint venture,

Plaintiff and Respondent,

v.

CITY OF LONG BEACH,

Defendant and Appellant. B298465

(Los Angeles County

Super. Ct. No. 18LBCP00029)

APPEAL from an order of the Superior Court of Los Angeles County, Michael P. Vicencia, Judge. Affirmed.

Theodora Oringher, Kevin A. Dorse, Erich R. Luschei, and Panteha Abdollahi; Office of the City Attorney, John C. Parkin and William R. Baerg for Defendant and Appellant.

Watt, Tieder, Hoffar & Fitzgerald, Brent N. Mackay, Lewis J. Baker and Richard G. Mann, Jr., for Plaintiff and Respondent.

__________________________

A municipality and a private construction firm enter into a $650 million public works contract. Understandably, they agree to an elaborate dispute resolution procedure – comprised of both mediation and arbitration components – to settle the inevitable disputes they will have over the course of the project. Perhaps unexpectedly, the parties cannot even agree on how the dispute resolution procedure itself works. Many disputes are left in abeyance. Litigation ensues – not to resolve a particular construction dispute, but over how those disputes are going to be resolved. The trial court issues an injunction against one of the parties to compel compliance with the dispute resolution process. That party appeals. On appeal, both parties raise additional complaints regarding the procedure used. We resolve the procedural imbroglio and affirm.

OVERVIEW

On July 23, 2012, the City of Long Beach (the Port) entered into a public works contract with a design-build contractor called Shimmick Construction Company, Inc./FCC Construcción S.A./Impregilo S.P.A. (Shimmick) for the design and construction of the Gerald Desmond Bridge, for the approximate price of $650 million.

Pursuant to the contract, disputes between the parties were to be resolved by a three-member Disputes Review Board (DRB) – with one member appointed by each party and the third member appointed by the first two. If the dispute involved $375,000 or less (which the trial court characterized as “limited” claims), the DRB would act as an arbitration panel; if the dispute was in excess of $375,000 (“unlimited”), the DRB would provide nonbinding recommendations akin to a mediation.

When the Port lost faith in the DRB, it fired the member it had appointed, which it had the unilateral right to do, but refused to appoint a new member to replace him. Instead, it waited nearly three years, and then sought the appointment of a new DRB, under a provision found in one of the exhibits to the contract. The Port asserted that under the exhibit each party had “the right to require appointment of a new disputes review board to resolve future [d]isputes, which right may be exercised at any time by delivery of notice to such effect to the other party and to the [b]oard [m]embers.” Believing that the Port’s interpretation of this language was contradicted and negated by other contract provisions, Shimmick took the position that the Port’s attempt to obtain a new board was without effect. The Port continued to refuse to appoint a new member to the then-existing DRB, leaving the DRB unable to function.

When the growing number of unresolved disputes between the Port and Shimmick necessitated a functioning DRB, the parties sought court intervention to resolve their stalemate. Unfortunately, the dual nature of the DRB as both arbitrators and mediators made for confusion as to the proper basis for jurisdiction – specifically, whether jurisdiction should be invoked under the California Arbitration Act (Code Civ. Proc., §§ 1280 et seq.) or more generally by a complaint for declaratory relief (§ 1060). Ultimately, the court resolved the matter under the Arbitration Act, and the parties initially agreed the court’s order extended to the DRB acting as mediators as well. The court concluded the clause on which the Port relied did not provide for the appointment of a new DRB. As such, it entered an order requiring the Port to replace its member on the existing board. The Port complied.

The Port appeals. In addition to the substantive issue of contract interpretation, the parties present a number of procedural issues: (1) whether the trial court had jurisdiction to enter its order under the Arbitration Act when there was no pending arbitration (limited) claim between the parties; (2) whether the trial court’s order properly extended to the DRB sitting as mediators as well as arbitrators; (3) whether the trial court’s order is non-appealable as an order preliminary to arbitration; and (4) whether the appeal is moot, or waived, by the Port’s eventual appointment of a replacement member to the DRB in compliance with the trial court’s order.

We reject all of the procedural challenges and conclude the trial court was correct in its ultimate interpretation of the contract; we therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Contract Terms
2.
Two contract documents governed the relationship between the parties, at least as concerns the DRB. We describe these documents only in sufficient detail for the analysis that follows. The key contractual documents are “Book 1 Design-Build Contract,” and a separate “Disputes Review Board Agreement,” which was to be in the form of Exhibit I to Book 1.

Book 1 of the contract contained section 18.2, which governed the dispute resolution process, and provided for the establishment and powers of the DRB. The parties agreed to a three-level informal dispute resolution process, followed by a fourth level before the DRB if the informal process was unsuccessful. The DRB resolved limited claims ($375,000 or less) in binding arbitration; it issued only nonbinding recommendations for unlimited claims (over $375,000).

We discuss several of the contractual provisions below. Part A of this section deals with the selection, termination and withdrawal of a member of the DRB as set forth in section 18.2 of Book 1. Part B discusses additional terms set forth in the separate DRB Agreement.

A. Provisions in Book 1 of the Contract
B.
There are two relevant provisions in section 18.2 of Book 1 – the first governing the initial makeup of the DRB and the second governing the termination and replacement of individual DRB members.

(1) The Initial Makeup of the DRB
(2)
Under section 18.2.4, “The DRB shall consist of one member selected by Port and approved by [Shimmick], one member selected by [Shimmick] and approved by Port, and a third member selected by the first two members and approved by both Port and [Shimmick].” When each party nominates its member, it is required to give the other party its nominee’s disclosure statement. Objections shall be for cause, but each party may “on a one-time basis” object to the other’s nominee without specifying a reason. As to the third member, there is a multi-level process designed to result in a neutral approved by both parties.

Upon the initial appointment of the DRB, its members “shall execute” a DRB Agreement “substantially in the form” of Exhibit I to Book 1 of the contract.

(3) Termination and Replacement of a DRB Member
(4)
Section 18.2.5 is entitled “Termination, Replacement of DRB Member.” Section 18.2.5.1 provides that a DRB member may be “terminated immediately, by either Party, for” cause. It also provides that, at any time, “upon not less than 15 [d]ays prior written notice to the DRB members and the other Party,” any side may unilaterally terminate its appointee, and the third member may be terminated on the recommendation of the two appointed members and the mutual written approval of the parties. When a member is replaced, the replacement member shall be appointed in the same manner as the member being replaced, within 30 days.

B. Provisions in the DRB Agreement
C.
In addition to the body of Book 1, the DRB Agreement also contains language on the dispute resolution process. The DRB Agreement is first found as an unexecuted document attached in Exhibit I to Book 1. It is “made and entered into” “among” the Port, Shimmick, and three selected DRB members. The form DRB Agreement in Exhibit I to Book 1 contains unsigned signature blocks for all five parties, and they did, in fact, all execute a standalone version of the DRB Agreement. The DRB Agreement the parties executed was nearly identical to the unsigned form in Exhibit I, except for one additional provision we discuss below.

The DRB Agreement contains three relevant provisions: one governing withdrawal and replacement of members; one suggesting a party could demand the appointment of a new DRB to resolve future disputes (the provision on which the Port relies); and a new provision, added at the request of the DRB members, governing their indemnification and compensation in the event their services were no longer required.

(1) Withdrawal/Replacement of a DRB Member
(2)
Section 2.4 of the DRB Agreement provides: “[b]oard [m]embers may withdraw from the [b]oard upon delivery of written notice of withdrawal to Port, [Shimmick] and the other [b]oard [m]embers, which notice shall specify a withdrawal date at least 30 days following the date of delivery of the notice. In addition, a member may be terminated by Port or [Shimmick] in accordance with [s]ection 18.2.5.1 of the [c]ontract [for cause]. Should the need arise to appoint a replacement [b]oard [m]ember, the replacement member shall be appointed in the same manner as provided by the [c]ontracts for appointment of the original member. The selection of a replacement [b]oard [m]ember shall begin promptly upon notification of the necessity for a replacement and shall be completed within 30 days thereafter. The change in [b]oard membership shall be evidenced by the new member’s signature on this Agreement.”

(3) Provision for New DRB to Resolve Future Disputes
(4)
Section 2.5 of the DRB Agreement is at the center of the parties’ disagreement. It provides: “The [b]oard [m]embers acknowledge[ ] that Port and [Shimmick] each have the right to require appointment of a new disputes review board to resolve future [d]isputes, which right may be exercised at any time by delivery of notice to such effect to the other party and to the [b]oard [m]embers. In such event a new agreement in the same form as this agreement will be executed establishing the new board, and except as otherwise mutually agreed by Port and [Shimmick], the work to be performed by the [b]oard established under this Agreement shall be limited to [d]isputes submitted to the [b]oard before delivery of the notice requiring appointment of a new [b]oard. Nothing shall prohibit Port or [Shimmick] from reappointing its current member.”

There is no extrinsic evidence that explains the inclusion of section 2.5 in Exhibit I to Book 1 of the contract, and, thereafter, in the executed DRB Agreement. According to the Port’s Program Director for the project, section 2.5 was important to the Port “in order to ensure the parties had a remedy if they lost confidence in the impartiality of an established DRB.”

There is extrinsic evidence as to the next relevant provision, section 2.8.

(5) Continued Indemnification/Pay Provision
(6)
Section 2.8 was not part of the original Exhibit I to Book 1 of the contract but was added to the executed DRB at the request of the DRB members and with the agreement of both parties. Section 2.8 provides: “In the event of termination, withdrawal or replacement of a [b]oard [m]ember in accordance with [s]ection 2.4, or appointment of a new disputes review board to resolve future [d]isputes in accordance with [s]ection 2.5: (a) the [p]arties’ obligations to [b]oard [m]embers stated in [s]ection 8.2 [indemnification] will survive such action; and (b) the [p]arties will pay any outgoing [b]oard [m]ember all fees earned and expenses incurred prior to the effective date of the termination, withdrawal or replacement of that [b]oard [m]ember.” Although section 2.8 was ostensibly a pay and indemnification provision protecting the DRB members, its reference to [s]ection 2.5 forms part of the Port’s contractual argument.

D. Conflict Provision
E.
The parties’ disagreement about the meaning of the contract boils down to whether section 2.5 of the DRB Agreement – with its reference to a new DRB to resolve future disputes –constitutes an additional agreement between Port and Shimmick; or whether Book 1, section 18.2.5.1 – “Termination, Replacement of DRB Member” – sets forth the exclusive means of removing and replacing a member of the DRB, and therefore takes precedence over any contrary suggestion in section 2.5.

The DRB Agreement contains a conflict provision that helps resolve the issue. Section 8.3 provides, “The parties intend for [s]ection 18 of the Contract and the other terms of this Agreement to be complementary. Except as otherwise specifically provided herein, in the event of any conflict between this Agreement and said [s]ection 18, [s]ection 18 shall control.”

3. The Parties’ Dispute
4.
All was apparently calm and copacetic in Long Beach during the first year after the contract was executed. The DRB was established. The Port nominated Ernest Holt and Shimmick nominated Daniel Meyer; neither party objected to the other’s nominee. Holt and Meyer together selected Robert Smith as the third member; again neither party objected. These three members of the DRB executed the DRB Agreement, which was also signed by the Port and Shimmick.

The DRB went into operation, and on July 17, 2014, it issued a report with recommendations on several unlimited claims. On September 26, 2014, the Port sent Shimmick a letter disagreeing with and rejecting the DRB recommendations on these claims. Not only did the Port believe the DRB was simply wrong in its proposed resolution of the disputes, it believed the DRB went beyond its contractual authority. In short, the Port no longer “trust[ed] this DRB to be impartial.”

A. The Port Terminates Its Member and Declines to Use the DRB
B.
On October 28, 2014, the Port gave Shimmick 15-days notice that it was terminating its member, Holt, from the DRB, under section 18.2.5.1 of the contract. In apparent disregard of section 18.2.5.2 that a replacement be named within 30 days, the Port stated that it “does not intend to nominate a replacement” for Holt. It further gave Shimmick notice that it “will not participate in the DRB process going forward.” Believing the DRB violated the terms of its contract, the Port indicated that it would “focus its efforts on working directly with [Shimmick] to resolve disputes between the parties.”

C. Shimmick Claims the Port Breached the Contract
D.
Shimmick responded, claiming that the Port lacked authority to do any of the three things it purported to do in its October 28 letter: terminate Holt, refuse to replace him, and abrogate the DRB process. Shimmick assigned this conduct as a breach and gave the Port notice and an opportunity to cure. Indeed, Shimmick elected to commence the parties’ informal dispute resolution process to resolve the very dispute over the DRB.

E. Positions Taken at the Parties’ Informal Resolution Meeting
F.
On November 10, 2014, the parties had their first level meeting in an attempt to resolve the DRB impasse. The minutes of that meeting reflect that the Port took the position that its “only unilateral recourse is to terminate its appointed member.” Shimmick now acknowledged that the Port did have the unilateral right to terminate Holt, but complained that the Port failed to document the need to do so (section 18.2.5.1) or nominate a replacement (section 18.2.5.2). On the issue of failure to nominate a replacement, the Port’s position was, “[a]bsent an agreement with [Shimmick] to replace the whole DRB, the only recourse the Port has is to remove its nominated member.” Shimmick would later use this statement to argue that Port did not then believe that section 2.5 of the DRB Agreement (on which the Port now relies) gave the Port the right to demand appointment of a new DRB to resolve future disputes. Shimmick would emphasize the Port’s language – “Absent an agreement with [Shimmick]” – as demonstrating that the Port knew there was no unilateral right to a new board.

By letter of November 13, 2014, the Port confirmed its position, stating that it would not replace Holt “with the remaining members of this DRB still in place.” The Port repeated its understanding that mutuality was required for a new board: “Absent [Shimmick]’s agreement to dismiss all members of the DRB, the Port’s sole recourse is to remove Mr. Holt for his part in the entire DRB’s failure.”

G. The Parties Try to Work Around the Impasse
H.
The parties did not elevate the dispute to the second level of informal resolution. While the Port and Shimmick had other disputes which normally would have gone to the DRB, the Port refused to return to the existing DRB. In August 2016, the parties agreed (with a reservation of rights) to engage a single person to act as a project neutral to help resolve disputes. This did not last for long.

I. Shimmick Demands the Reinstatement of the DRB
J.
By June 2017, nearly three years after the Port terminated DRB member Holt, it was apparent that the neutral was not a viable solution. The parties had over 100 unresolved issues, 91 of which had been outstanding for more than two years. Shimmick identified five of these disputes which it wanted to refer to the DRB, and requested the Port to immediately appoint a new member to replace Holt.

K. The Port Requests a New DRB Under Section 2.5 of the DRB Agreement
L.
By letter of June 28, 2017, the Port responded, indicating that it was “prepared to work with [Shimmick] to re-establish a DRB.” For the first time in the parties’ three-year DRB limbo, the Port invoked section 2.5 of the DRB Agreement. The Port wrote that “the dispute resolution process should be continued by appointment of a new DRB in accordance with paragraph 2.5 of the Disputes Review Board Agreement. The Port is currently in the process of reviewing candidates for the Port’s appointed member and requests that [Shimmick] advise the Port as to its nominee.”

Even though the record reflects the June 28, 2017 letter was the first time the Port had raised section 2.5, the Port took the position that it had always been relying on this provision. The Port’s gloss on its earlier position was that, as it had lost faith in the DRB, it had used “its only available remedy to address this deficiency; namely, terminating the Port’s DRB member and requesting that [Shimmick] appoint a new member to establish a properly constituted, neutral DRB.”

M. Shimmick Disagreed and Continued to Demand a Replacement for Holt
N.
On July 12, 2017, Shimmick responded, expressing relief that the Port wanted to return to the DRB process, but maintaining its position that it would not replace its appointed member. Shimmick argued there was no legal basis for the Port’s position, claiming it was “an improper attempt by the Port to hold the DRB process hostage until and unless [Shimmick] terminates its appointed member.” Shimmick again demanded the Port replace Holt on the original DRB.

O. The Port’s Reiteration
P.
By letter of August 4, 2017, the Port wrote Shimmick, reaffirming its willingness to proceed with a new DRB. It also set forth its argument that Shimmick was misreading the contract. Specifically, the Port drew a distinction between the right to terminate an individual member and the right to require formulation of a new DRB. The Port also explained that a new DRB was necessary in order for it to have confidence in the DRB, which was critical to the DRB effectively resolving anything in mediation.

Q. The Port Formally Invokes Section 2.5 of the DRB Agreement
R.
On October 20, 2017, the Port sent notice to Meyer and Smith – the two remaining DRB members – and Shimmick, purportedly under section 2.5 of the DRB Agreement that it “is exercising its right to require appointment of a new Disputes Review Board. Accordingly, the services of M[e]ssrs. Smith and Meyer are no longer required on this project.”

S. Shimmick’s Rejects the Invocation of Section 2.5
T.
On November 2, 2017, Shimmick wrote back, saying that section 18.2.5 of Book 1 of the contract governs termination of DRB members, and that section 2.5 of the DRB Agreement did not give the Port the unilateral right to terminate Smith and Meyer. Shimmick asked Smith and Meyer to disregard the Port’s letter as baseless and of no effect.

After an exchange of more letters and running the dispute through the informal dispute resolution process, the parties remained at standstill. Shimmick attempted to submit the dispute to Smith and Meyer, as the two remaining members of the DRB. On August 30, 2018, Smith sent a letter to the parties, stating that he had discussed the purported referral with Meyer, and they agreed that they “do not have jurisdiction over the purported referral and lack the authority to accept it.”

The dispute regarding the composition of the DRB was destined for court resolution. Unremarkably, the parties could not agree on the proper procedure by which to invoke court jurisdiction.

5. Pleadings in the Trial Court
6.
Shimmick brought suit. By the time it was all over, (1) Shimmick had filed a petition to compel arbitration and compliance with the contractual dispute resolution procedures; (2) the Port had filed a petition to compel appointment of a new arbitration panel and a complaint for declaratory relief; and (3) Shimmick had filed a cross-complaint for declaratory relief.

A. The Main Procedural Dispute
B.
The reason for the diverse set of pleadings was that the Port believed there was a distinction in the relief that could be sought depending on whether one was considering the DRB as an arbitration panel or a mediation panel. The Port believed remedies under the Arbitration Act could apply only when DRB was presiding over an arbitration (“limited cases”). In order to obtain relief regarding the DRB as mediators, the Port believed declaratory relief was necessary.

Shimmick disagreed, specifically arguing that its petition to compel arbitration was broad enough to obtain relief governing the composition of the DRB even when it acted in its mediation capacity. Shimmick argued that the unlimited-claim mediation services, “are part and parcel of the standing arbitration panel and inform the panel members to enable swifter and more consistent arbitration decisions and DRB procedures. Not enforcing the entire agreement with the arbitrators would be a disservice to both the arbitration and DRB procedures, as well as to both the arbitrators/DRB members and [Shimmick].” Nonetheless, once the Port raised the distinction, Shimmick filed a cross-complaint for declaratory relief to cover its bases.

C. The Main Substantive Dispute
D.
The dueling petitions under the Arbitration Act afforded each party with at least three opportunities to make its arguments in writing. The dispute at bottom was straightforward. Shimmick wanted the court to order the Port to replace Holt and participate in the DRB process before a DRB consisting of Smith, Meyer, and Holt’s replacement. The Port wanted the court to give effect to the Port’s invocation of section 2.5 of the DRB Agreement, and order appointment of a whole new DRB.

At this juncture, we repeat verbatim section 2.5 as it informs much of the events we describe next. Section 2.5 provides, “[t]he [b]oard [m]embers acknowledge that Port and [Shimmick] each have the right to require appointment of a new disputes review board to resolve future [d]isputes, which right may be exercised at any time by delivery of notice to such effect to the other party and to the [b]oard [m]embers. In such event a new agreement in the same form as this agreement will be executed establishing the new board, and except as otherwise mutually agreed by Port and [Shimmick], the work to be performed by the [b]oard established under this Agreement shall be limited to [d]isputes submitted to the [b]oard before delivery of the notice requiring appointment of a new [b]oard. Nothing shall prohibit Port or [Shimmick] from reappointing its current member.”

The Port argued that section 2.5 of the DRB Agreement allowed the Port to dismiss the current board and require the appointment of a new board to resolve future disputes – regardless of the specific, detailed provisions governing board member termination in section 18.2 of Book 1. The Port argued the two provisions should be harmonized, and that, since section 18.2 of Book 1 was silent as to termination of the entire board (and spoke only of termination of individual members), there was no conflict.

Shimmick proffered this explanation of section 2.5: The provision “referenced only an ‘acknowledgement’ by the DRB members of a right that did not exist [citation].” Shimmick argued that, at best, the provision was ambiguous and had been reasonably understood by both parties in the earliest stage of the dispute as not granting a unilateral termination right. That “mutual interpretation should be treated as a mutual mistake before applying a contrary interpretation.”

7. Hearing on the Cross-Petitions
8.
The trial court held a hearing on the cross-petitions under the Arbitration Act.

A. The Court’s Jurisdictional Ruling
B.
At the hearing, the court initially raised doubts about its jurisdiction. Shimmick had brought a petition to compel arbitration, yet the parties had not even suggested there was a limited dispute ripe for arbitration. The court was concerned that it was improperly being asked to render an advisory opinion, explaining, “There is no identifiable dispute for me to order to arbitration.”

Although the trial court was factually correct, the parties both argued that there was jurisdiction for the court to resolve the matter under the Arbitration Act. But each relied on a different part of the Act to support its argument. The Port argued section 1281.6 gave the court jurisdiction to establish the composition of the arbitration panel. For its part, Shimmick turned to section 1281.8, which allows a trial court to enter a preliminary injunction prior to an arbitration, “upon the ground that the [arbitration] award to which the applicant may be entitled may be rendered ineffectual without provisional relief.” The absence of an arbitrable dispute notwithstanding, the court ultimately was persuaded that it had jurisdiction under section 1281.8, and asked the Port whether it agreed. The Port’s counsel replied, “Probably,” and then acknowledged that there was jurisdiction under the Arbitration Act generally.

The court next addressed whether its jurisdiction, now invoked, extended to mediations, the DRB’s main function. Shimmick argued that the DRB’s arbitration and mediation functions overlapped and could not be separated. The Port replied, “Your order, from our perspective, is going to establish the composition of that panel. We agree that the order you enter establishing the composition of that panel establishes the composition of the panel for all purposes under the contract.” Although the Port argued that Shimmick was improperly seeking an order compelling mediation, the Port expressly agreed that the court had jurisdiction to determine the panel. The court was unbowed and stated that it would rule on “how the panel must be constituted,” but its “order would only apply to the limited jurisdiction [matters] because that is the only thing that has a binding arbitration.” If the parties wanted a ruling on the composition of the panel for mediation matters, the court advised the parties would have to pursue their claims “in contract.”

C. The Court’s Substantive Ruling
D.
The court then turned to the merits of the dispute. The court offered an interpretation of section 2.5 of the DRB Agreement that was somewhat different than what was offered by either party. The court stated it found that section 2.5 could be harmonized with the other clauses in the contract. The court began with the premise that whenever even one member of the DRB is changed, the result is a “new” board. Section 2.5 simply provided that, in the event a “new” board comes into being due to the replacement of one or more members under section 18.2.5.1 of Book 1 of the contract, the “old” board would continue to resolve old disputes and receive compensation for its work. The court was particularly persuaded by the use of the word “acknowledge” in section 2.5 (“The [b]oard [m]embers acknowledge that Port and [Shimmick] each have the right to require appointment of a new disputes review board . . . .”) The court believed that “acknowledge” does not suggest the creation of a new right, but simply the acknowledgement of a right that exists elsewhere. In this case, the court found that right to be the termination right in section 18.2.5.1.

The court went on to explain that it was attempting to harmonize section 2.5 of the DRB Agreement with section 18 of Book 1. It stated that section “18 is clearly intended to be the end-all and be-all of how you appoint, how you terminate, how you reappoint. That is – clearly, that is where you meant to put it. And then out of the blue, you have a new right in this other agreement that is for the board members to sign? [¶] That doesn’t seem to make a lot of sense. What seems to make far more sense is that you can read this in a way that only 18 contains those rights. That is the way I have read it, in harmony with what 18 has.”

The parties were directed to meet and confer regarding language for the court’s order. They also agreed to discuss whether there was anything left to be resolved with respect to the cross-complaints for declaratory relief.

E. The Withdrawal of the Cross-Complaints
F.
The parties disputed the terms to be included in the court’s order. Now that Shimmick was prevailing on the merits, the Port took the position that the court’s order regarding composition of the DRB must be limited to the composition of the panel for arbitration purposes only. The dispute was resolved at a case management conference.

After the trial court expressed disappointment that the Port was taking a position contrary to the representations it had made at the prior hearing, the Port backpedaled and agreed that the court’s ruling resolved the issues in its declaratory relief complaint and that no further proceedings were necessary.

The parties filed a joint stipulation dismissing their declaratory relief complaints without prejudice.

G. The Court’s Written Order
H.
On April 24, 2019, the trial court issued its order granting in part Shimmick’s petition to compel and denying the Port’s. The court concluded its jurisdiction was under section 1281.8, and construed the parties’ petitions as applications for provisional relief under that section.

As to contract interpretation, the court concluded that section 18 governed termination of panel members and did not allow for unilateral termination of the entire panel. Section 2.5 of the DRB Agreement was interpreted in harmony with those provisions as a simple acknowledgement of the rights the parties granted in section 18. Section 2.5 “does not create any new rights between the [p]arties.” The Port’s letter purporting to terminate the entire board was therefore void and without legal effect.

The court’s order prohibited the Port from: (1) refusing to maintain the contractual DRB Panel; (2) terminating its member without replacement; and (3) refusing to nominate a replacement for Holt to complete the standing panel within 30 days of entry of the order.

E. Proceedings Following Entry of Order

On May 17, 2019 – within 30 days of the court’s order – the Port nominated a replacement for Holt. Shimmick approved the nominee.

On June 6, 2019, the Port served notice of entry and on June 7, 2019, it filed its notice of appeal.

Shimmick filed a motion to dismiss the appeal on the grounds that it was taken from a nonappealable order. We denied the motion, without prejudice to the parties arguing the issue in their briefs.

Shimmick’s previously-appointed DRB member (Meyer) declined further service on the DRB and on August 9, 2019, Shimmick submitted a replacement nominee.

On December 5, 2019, the Port signed a new DRB Agreement, which had already been executed by Shimmick, and the three board members (Smith from the prior board, and the parties’ new appointees). The new agreement did not differ materially from the original version. In its respondent’s brief, Shimmick argued that Port’s execution of the new DRB Agreement rendered its appeal moot.

DISCUSSION

Before we reach the issue of contract interpretation, we must address Shimmick’s contentions that the appeal must be dismissed as either taken from a nonappealable order or because it is moot. Working backward further, before we can address whether the appeal was taken from a nonappealable order, we first must determine the legal basis of the trial court’s order.

Thus, we approach the legal issues in this order: (1) whether the trial court’s order was lawfully entered under the Arbitration Act; (2) whether the trial court’s order extended to the DRB acting in its mediation capacity; (3) whether the trial court’s order is nonappealable as an order preliminary to arbitration; (4) whether the appeal is mooted by the Port’s execution of a new DRB Agreement; and, finally, (5) the substantive issue of contract interpretation.

Working backward even further, before we address these issues, we provide a brief description on the limited case law that has considered the DRB process.

1. Case Law Descriptions of Disputes Review Boards
2.
There have been a few published cases in California addressing DRBs. None of the cases we have reviewed involved a hybrid DRB – one acting as both mediation panel and arbitration panel. Instead, they have involved DRBs acting only in their non-binding capacity. Judicial descriptions of the general DRB process follow.

“At the planning stage of a large construction project, the [owner] and contractor sometimes agree to organize a three-member Disputes Resolution Board (DRB) to offer recommendations for the resolution of the disputes that will inevitably arise during construction. Typically, the owner and contractor each designate one member of the DRB and those two members, in turn, select the third.” (Los Angeles County Metropolitan Transportation Authority v. Shea-Kiewit-Kenny (1997) 59 Cal.App.4th 676, 678.)

“The DRB process constitutes a form of alternative dispute resolution (ADR) most commonly employed in tunneling and other large, complex, heavy construction projects. First utilized in the mid-1970’s, it has proven particularly advantageous in contracts performance of which will take a long period of time, and in which disputes are inevitable and multiple installment payments are contractually required on completion of performance milestones or components of the work. Generally, the DRB serves as a safety net to resolve problems or matters about which reasonable people could differ before they harm the business relationship between the parties and result in acrimonious litigation. It is composed of three experts, selected by the parties at the beginning of the project, who become familiar with it, monitor its progress and are available to provide advisory decisions on short notice concerning disputes the parties are unable to resolve themselves. The availability of the DRB and its familiarity with the project enable prompt resolution of disputes, which furthers the goal of preserving cooperative relationships between the contracting parties. The DRB process resembles the arbitration process with several significant differences. First, the DRB is a standing tribunal contractually required to be formed and in place within a few months after the owner gives the contractor notice to proceed. Second, the process envisions an introductory/orientation meeting for the DRB members to become acquainted with the owner, the contractor, and their key personnel; a brief history of the project, including significant potential technical, environmental, political or social issues that might arise from it; and the scope and anticipated schedule of construction. Third, the DRB meets regularly throughout construction of the project. The frequency of meetings is dictated by the project’s size, complexity, schedule and number of claims or problems. Fourth, unlike standing arbitrators who make immediately binding decisions, the DRB issues advisory opinions or nonbinding recommendations. [Citations.]” (Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc. (2003) 111 Cal.App.4th 1328, 1338–1339.)

3. Basis of Trial Court Jurisdiction
4.
The trial court stated that it was exercising its jurisdiction under section 1281.8 to enter a preliminary injunction to provide provisional relief necessary to prevent a subsequent arbitration award from being ineffectual; Shimmick agreed. The Port instead argued that the court had jurisdiction under section 1281.6, to establish the composition of the arbitration panel.

For our purposes, the difference between the statutory provisions as a basis for jurisdiction is not significant. When a court orders the appropriate method for selection of an arbitrator, the court would appear to be acting under the express authority of section 1281.6 to “compel compliance with a method for selecting an arbitrator.” (Maggio v. Windward Capital Management Co. (2000) 80 Cal.App.4th 1210, 1213.) Or, it could also be a proper exercise of the court’s authority under section 1281.8 to enter a provisional remedy to prevent a future award from being “rendered ineffectual” under section 1281.8, subdivision (b).

We need not choose statutory sides. What is clear is that both parties petitioned for provisional relief under the Arbitration Act, both parties agreed that the court had jurisdiction to enter relief under that act, and the court, in fact, exercised its jurisdiction to enter provisional relief under the act.

5. The Court’s Jurisdiction was Not Limited to Arbitration Matters
6.
The Port next argues that the court’s order was overbroad, in that it purported to affect the composition of the DRB as a mediation panel, when the court’s jurisdiction (under the Arbitration Act) was limited to determining the composition of the DRB as an arbitration panel.

This argument might be persuasive were it not for the fact that the Port and Shimmick both agreed that the DRB was a single entity and that the court’s ruling as to the composition of the DRB as arbitrators would also apply to the composition of the DRB as mediators. We have set forth the procedural history of this case at length above. Shimmick, for its part, always believed that the court’s resolution under the Arbitration Act of the DRB membership would apply in both circumstances, and only filed its cross-complaint for declaratory relief after the Port raised the possibility that a ruling under the Arbitration Act may not be sufficient. The Port’s position on the issue was shifting. However, at the final case management conference, when the court asked if there were any factual or legal questions left for resolution and whether it should set a trial date on declaratory relief, the Port agreed that there were no issues left to resolve. The Port expressly conceded that the court’s ruling “disposes of the issues in our declaratory relief complaint.” The Port cannot now be heard to complain that the court did not, in fact, resolve those issues.

7. The Order is Appealable
8.
Shimmick argues that, because the court’s order under the Arbitration Act was simply preliminary to arbitration, it is not an appealable order.

Appealability of orders under the Arbitration Act is governed by section 1294; however, we look to section 904.1, governing appealability generally, for guidance in interpreting section 1294. (Fleur du Lac Estates Assn. v. Mansouri (2012) 205 Cal.App.4th 249, 255.)

Section 1294 does not discuss the appealability of preliminary or injunctive orders under the Act. Section 904.1, subdivision (a)(6) however, provides that orders granting injunctions, or refusing to grant injunctions, are appealable. Courts have resolved appeals granting injunctions under section 1281.8. (E.g., Jay Bharat Developers, Inc. v. Minidis (2008) 167 Cal.App.4th 437.)

Shimmick’s argument against appealability is that the court’s order was preliminary to arbitration, and is therefore non-appealable on the same basis that an order compelling arbitration is not appealable. (Melchor Investment Co. v. Rolm Systems (1992) 3 Cal.App.4th 587, 591.) The flaw in Shimmick’s position is that the court’s order was not preliminary to any particular arbitration. Shimmick failed to identify any limited dispute with the Port which was ripe for arbitration – only a dispute which might reach the point of DRB arbitration if the multi-level informal dispute resolution process failed. Indeed, the trial court declined to accept Shimmick’s construction of its petition as a petition to compel arbitration, on the basis that, were it to do so, it would risk rendering an improper advisory opinion.

The parties argued at length before the court on whether any legal or factual issues remained to be decided. At one point the court offered to set a trial date. The parties went back and forth at the hearing but in the end agreed there was nothing left for the court to decide. The final concession strikes us this way: Although the order may have been “provisional” under the Arbitration Act, the court’s order included a permanent injunction resolving all issues before it. No particular arbitration could be presented to the court in the case before it. As such, the order was final and appealable under section 904.1.

9. The Appeal is Not Moot
10.
Shimmick argues that the Port’s appeal is mooted by the Port’s execution of the new DRB Agreement while the appeal was pending.

“ ‘A party who voluntarily complies with the terms of a judgment, or who satisfies it by voluntary payment or otherwise, impliedly waives the right to appeal from it.’ [Citations.] The underlying rationale for this rule that an appeal is dismissed where the judgment is satisfied is because the satisfaction moots the issues on appeal. [Citation.] However, compliance or satisfaction that is compelled does not constitute a waiver of the right to appeal. Such a waiver is implied only where the satisfaction or compliance is the product of compromise or is coupled with an agreement not to appeal. [Citations.]” (Ryan v. California Interscholastic Federation (2001) 94 Cal.App.4th 1033, 1040.)

The Port argues that it did not voluntarily comply with the court’s order; it felt it was required to do so or risk contempt. Whether the Port was correct in its implied understanding that the court’s order was not stayed by its appeal is beside the point; in this case, it is clear that the Port did not sign the new DRB Agreement as the product of compromise or accompanied by an agreement not to appeal.

Moreover, the dispute is not moot in any practical sense. “ ‘Generally, courts decide only “actual controversies” which will result in a judgment that offers relief to the parties.’ [Citation.] ‘Thus, appellate courts as a rule will not render opinions on moot questions . . . .’ [Citation.] ‘A case becomes moot when a court ruling can have no practical impact or cannot provide the parties with effective relief.’ [Citation.] An appeal from an order denying an injunction may be dismissed as moot if the act sought to be enjoined is performed while the appeal is pending. [Citation.] But, where a court can afford the party at least some relief, even if not all the relief originally requested, the court should not dismiss a case as moot. [Citations.]” (City of Cerritos v. State of California (2015) 239 Cal.App.4th 1020, 1031.)

Here, relief could be afforded the Port. The Port wanted to proceed with a DRB which contained three new members; it now has a DRB with two new members and Smith, the original third member. The project is still ongoing and there is certainly no evidence that the DRB has finished its work; thus, there is still time to give the Port the relief it seeks: a new DRB with all new members. The new DRB Agreement signed by the parties pending appeal contains the same section 2.5; thus, the issue of the language’s interpretation may arise again, with the new DRB. (Cucamongans United for Reasonable Expansion v. City of Rancho Cucamonga (2000) 82 Cal.App.4th 473, 479–480 [court may retain jurisdiction over moot appeal if controversy is likely to recur between the parties].)

6. The Court Did Not Err in Resolving the Contractual Dispute in Favor of Shimmick
7.
We now turn to the merits of the appeal. The issue presented is whether section 2.5 of the DRB Agreement provides a party with the unilateral right to cause the creation of a new DRB.

A. Interpretation of Contracts
B.
“As the Supreme Court said, ‘The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the “mutual intention” of the parties. “Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id. § 1639.) The ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ (id. § 1644), controls judicial interpretation. (Id. § 1638.)” [Citations.]’ [Citation.]” (U.S. Bank National Assn. v. Yashouafar (2014) 232 Cal.App.4th 639, 646.)

“When faced with a dispute over the meaning of a contractual provision, the court must first determine whether the provision is ambiguous, i.e., whether, on its face, the language of the provision is capable of different, yet reasonable interpretations. [Citations.] If an ambiguity is found, the court must determine which of the plausible meanings the parties actually intended. [Citations.] When the parties offer no extrinsic evidence concerning the meaning of the contractual language, or when the extrinsic evidence offered is not in conflict, ascertaining the intended meaning is solely the duty of the court. [Citations.]” (Falkowski v. Imation Corp. (2005) 132 Cal.App.4th 499, 505–506.) “ ‘Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists.’ [Citation.]” (Bay Cities Paving & Grading v. Lawyers’ Mutual Insurance Co. (1993) 5 Cal.4th 854, 867.) Language must be construed in the context of the instrument as a whole, under the circumstances of the case, and cannot be found to be ambiguous in the abstract. (Ibid.)

“ ‘Generally the parties to an instrument intend every clause to have some effect and in some measure to evidence their agreement, and this purpose should not be thwarted except in the plainest case of necessary repugnance. Even where different parts of the instrument appear to be contradictory and inconsistent with each other, the court will, if possible, harmonize the parts and construe the instrument in such way that all parts may stand and will not strike down any portion unless there is an irreconcilable conflict wherein one part of the instrument destroys in effect another part.’ [Citations.]” (Southern Pacific Land Co. v. Westlake Farms, Inc. (1987) 188 Cal.App.3d 807, 822.)

In this case, there was some extrinsic evidence introduced; specifically each party relied on what it believed to be course-of-performance evidence. Shimmick relied on the Port’s letters in 2014 which reflected a belief that it could not “dismiss all members of the DRB” without Shimmick’s agreement. The Port, for its part, relied on Shimmick’s consent to adding section 2.8 to the DRB agreement, which characterized section 2.5 as providing for the “appointment of a new disputes review board to resolve future [d]isputes.” While the parties dispute the effect to be given to this extrinsic evidence, neither one disputes the truth of the evidence offered by the other. As such, there is no factual conflict, and we approach interpretation of the contract de novo.

C. The Port’s Interpretation of Section 2.5 of the DRB Agreement is Not Supportable
D.
Our first order of business would typically be to determine whether section 2.5 of the DRB Agreement is ambiguous – that is, whether, on its face, the language of the provision is capable of different, yet reasonable interpretations. We conclude this task is largely unnecessary. Assuming, without deciding, that the language of the provision, standing alone, is reasonably amenable to the Port’s interpretation, that interpretation fails in the context of the contract in its entirety.

Section 2.5 provides: “The [b]oard [m]embers acknowledge that Port and [Shimmick] each have the right to require appointment of a new disputes review board to resolve future [d]isputes, which right may be exercised at any time by delivery of notice to such effect to the other party and to the [b]oard [m]embers. In such event a new agreement in the same form as this agreement will be executed establishing the new board, and except as otherwise mutually agreed by Port and [Shimmick], the work to be performed by the [b]oard established under this Agreement shall be limited to [d]isputes submitted to the [b]oard before delivery of the notice requiring appointment of a new [b]oard. Nothing shall prohibit Port or [Shimmick] from reappointing its current member.”

The Port interprets the language as meaning the parties each have the right, on notice, to require the appointment of a new DRB, which will resolve new disputes, while the existing DRB will continue to resolve disputes already submitted to it. On its face the language does not create such a right; at most it purports to acknowledge the existence of a right assumed to have been created elsewhere. But there is no “there” elsewhere: Nowhere do the contractual documents create a unilateral right to compel appointment of a new board.

We find it significant that the Port did not express – and therefore presumably did not believe – until June 2017 that it had a unilateral right to compel the appointment of a new board. That was five years into the contract and nearly three years after the Port dismissed Holt and refused to appoint a replacement. Until June 2017, the Port’s position had been that – in accordance with the language of section 18.2 of Book 1 of the contract – the Port could unilaterally terminate only Holt, and could not force any other changes in DRB membership unless Shimmick agreed. While the Port and Shimmick disagreed as to how to resolve their disputes in the meantime, they agreed – until the Port’s delayed invocation of section 2.5 – that they were, in fact, at a stalemate, because the Port refused to appoint a replacement for Holt and Shimmick refused to agree to terminate the rest of the board. The fact that the parties allowed their dispute to simmer for years before the Port suggested section 2.5 gave it the right to demand a new board is indicative that, at the time the contract was executed, neither party believed section 2.5 created such a right.

We acknowledge there is nothing inherently unreasonable for an agreement to provide a unilateral right to a new board. In one of the earlier California cases involving a DRB, there was expert testimony explaining that both parties must have confidence in the DRB as a whole, and its members, if the DRB’s recommendations will actually be effective. (Los Angeles County Metropolitan Transportation Authority v. Shea-Kiewit, supra, 59 Cal.App.4th at pp. 683–684.) Parties could reasonably give themselves a right to a new Board whenever they had lost confidence in the old Board. Here, they did not.

We also understand the Port’s concern that mediation in particular is only viable when the parties have confidence in the mediation panel. The time to ensure confidence was in the negotiation process that culminated in section 18, and in the disclosure, vetting, and objection process for appointing DRB members. Confidence has to exist hand in hand with an efficient DRB operation. The value of a DRB is, at least in part, as an ongoing entity which exists for the duration of the project. (See Sehulster Tunnels/Pre-Con v. Traylor Brothers, Inc., supra, 111 Cal.App.4th at pp. 1328, 1338–1339 [“the DRB is a standing tribunal”].) If the parties could demand a new board to resolve new disputes at any time, essentially there would be no DRB at all – the contract would provide instead for a series of unrelated mediations, where the parties would decide before submission of each new dispute whether to retain or replace the existing mediators.

E. Even if the Port’s Interpretation were Correct, the Construction would Create a Conflict with Section 18; under the DRB the latter prevails
F.
Even if we were to conclude that section 2.5 allows either party, at any time, to require the appointment of a new board, that interpretation would not assist the Port. Such a construction would directly conflict with the provisions for the creation and operation of the board set out in section 18.2.5.1. Under section 8.3 of the DRB agreement, if there is a conflict between section 2.5 of the DRB Agreement and section 18 of Book 1, the latter prevails. Section 18.2.5.1 provides, in great detail: (1) a party may terminate any member for cause; (2) a party may unilaterally terminate the member it appointed for any reason; and (3) the third member may be terminated on the joint recommendation of the party-appointed members and the agreement of the parties. None of this would matter if a party could unilaterally insist on the appointment of a new board. Two examples suffice: If either party could demand unilaterally the appointment of a new board, the requirement that the other party’s member be terminated for cause would never come into play. There would be no need for a party to ever terminate a board member for cause if the party could demand a new board without cause under section 2.5. The provision for termination of the third member on the mutual agreement of the party-appointed members and the parties would likewise be rendered unnecessary if a single party could effectuate the removal of the third member by the simple expedient of unilaterally requesting a new board.

The Port posits that its reading of section 2.5 of the DRB Agreement is not in conflict and can be harmonized with section 18.2 of Book 1. It suggests that section 18.2 governs only termination and replacement of individual members while section 2.5 governs the appointment of an entirely new board. This is a distinction that makes no difference. A board is comprised of three members; a clause allowing replacement of all three members at will contradicts a clause specifically limiting the circumstances in which two of those individual members may be replaced.

We conclude that the Port’s interpretation undermines the carefully crafted dispute resolution process to which the parties agreed in great detail in section 18.2 of Book 1.

DISPOSITION

The order is affirmed. Shimmick is to recover its costs on appeal.

RUBIN, P. J.

WE CONCUR:

BAKER, J.

KIM, J.

Filed 7/10/20 Vazquez v. Warren Distributing CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

DIANA VAZQUEZ et al.,

Plaintiffs and Appellants,

v.

WARREN DISTRIBUTING, INC. et al.,

Defendants and Respondents.

B292573

(Los Angeles County
Super. Ct. No. BC595046)

HUGO GALLEGOS et al.,

Plaintiffs and Appellants,

v.

STREET CITY LOGISTICS et al.,

Defendants and Respondents.

B292575

(Los Angeles County
Super. Ct. No. BC549552)

APPEALS from an order of the Superior Court of Los Angeles County, Lisa Hart Cole, Judge. Affirmed in part, reversed in part, and remanded.

Strauss & Strauss, Michael A. Strauss; Mostafavi Law Group, Amir Mostafavi for Plaintiffs and Appellants.

Lewitt, Hackman, Shapiro, Marshall & Harlan, Sue M. Bendavid and Nicholas Kanter for Defendant and Respondent Warren Distributing, Inc.

Kaufman McAndrew, Stephen F. McAndrew; Miller Law Partners, Lee A. Miller for Defendant and Respondent Street City Logistics, Inc. and Street City Transportation, Inc. ________________________________________

Plaintiffs and appellants in these consolidated wage and hour actions worked as delivery drivers. Using their personal vehicles, they transported automobile parts throughout the Los Angeles area for defendant and respondent Warren Distributing, Inc. (Warren). Warren contracted for plaintiffs’ services with defendants and respondents Street City Logistics, Inc. (SCL), Street City Transportation, Inc. (SCT), and Millennium Transportation, Inc. (Millennium), which either employed or independently contracted with plaintiffs.

Plaintiffs allege that defendants failed to adequately reimburse their driving-related expenses, which resulted in their pay effectively falling beneath the minimum wage. Plaintiffs further allege that defendants lacked or failed to communicate policies governing meal and rest periods, failed to timely provide plaintiffs with their meal breaks, and willfully failed to timely pay plaintiffs their final wages. Plaintiffs moved to certify two classes, one of employees and one of allegedly misclassified independent contractors, and sought civil penalties under the Private Attorney General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.). They supported their motion with declarations from the named plaintiffs and putative class members. The trial court struck most of their declarations, denied class certification, and dismissed plaintiffs’ PAGA claim as unmanageable on a class-wide basis.

Plaintiffs contend each of these rulings was in error. First, they contend the court violated their due process rights and held them to an improper evidentiary standard when it struck all but two of their declarations for failing to comply with the translation rules set forth in California Rules of Court, rule 3.1110. We disagree. Plaintiffs had ample notice and opportunity to obtain certified translations of their declarations, and the court did not err in striking the nonconforming submissions.

Second, plaintiffs contend the court abused its discretion by denying their motion for class certification. With respect to their expense reimbursement claim, as well as the minimum and final wage claims predicated on that claim, plaintiffs argue that the trial court misapplied the holding of Gattuso v. Harte-Hanks Shoppers, Inc. (2007) 42 Cal.4th 554 (Gattuso) and erroneously concluded that common issues of law and fact do not predominate. We disagree. The trial court did not abuse its discretion by concluding that the individualized inquiries necessary to litigate these claims rendered them unmanageable and inappropriate for class certification.

With respect to their meal and rest period claims, plaintiffs assert that the trial court improperly relied on their deposition testimony attesting to receipt of the breaks rather than analyzing their theories of liability. We reject this contention as to the meal period claim. The court did not abuse its discretion by looking to the depositions to conclude that the named plaintiffs’ claims were not typical of the class. We agree with plaintiffs that the trial court erred with regard to their rest period claim, however. The court did not address either plaintiffs’ theory of liability or the evidence. We therefore remand to allow the court to exercise its discretion in considering certification on the rest period claim.

Finally, we agree with plaintiffs that the trial court erred in dismissing their PAGA claim as unmanageable on a class-wide basis. Plaintiffs are not required to satisfy class action requirements to pursue civil penalties for Labor Code violations in a representative PAGA action. We accordingly reverse the order with respect to the PAGA claim and the rest period claim, and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Parties

Defendant Warren is an auto parts distributor. It is headquartered in Santa Fe Springs and has eight additional satellite warehouses throughout Southern California. Warren uses delivery drivers to transport auto parts among its warehouses and to its customers. Warren “outsources” some of its delivery driving duties to other entities. Warren pays the entities, and the entities in turn pay the drivers. Those entities have included, at various points in time, defendants Millennium , SCL, and SCT.

Plaintiffs were (and, in some cases, are) Warren’s “outsourced” drivers. They delivered auto parts for Warren but worked for and were paid by defendants Millennium, SCL, and/or SCT.

II. The Gallegos Complaint

On June 23, 2014, named plaintiffs Hugo Gallegos and Miguel Chulde, individually and on behalf of others similarly situated (collectively “the Gallegos plaintiffs”) filed a complaint against SCL, SCT, and 20 Doe defendants. The Gallegos plaintiffs alleged they were employed by SCL and its alter ego SCT as delivery drivers for Warren beginning on or about March 10, 2013. Gallegos was terminated from his employment in November 2013, but Chulde remained employed at the time the complaint was filed.

The Gallegos plaintiffs alleged SCL hired them as nonexempt employees and paid them an hourly wage. A portion of the hourly wage was earmarked to reimburse them for expenses they incurred while using their personal vehicles on the job. The Gallegos plaintiffs alleged this amount was not adequate to cover their actual driving expenses. They further alleged that SCL and SCT did not pay them the full amount of unpaid wages they were due in their final paychecks, did not pay them for unused vacation time, and did not provide them with legally mandated meal or rest breaks. The Gallegos plaintiffs asserted five causes of action based on this alleged conduct: conversion, failure to timely pay earned wages during employment and upon separation therefrom (§§ 201, 202, 203, 204, 218.5, 218.6, 227.3, 2698-2699.5), failure to reimburse expenses (§ 2802), failure to pay wages on regularly established paydays (§§ 204, 210, 2698-2699.5), and unfair business practices (Bus. & Prof. Code, § 17200 et seq.). The Gallegos plaintiffs sought to represent a class of similarly situated individuals, and to recover civil penalties under PAGA.

III. The Vazquez Complaint

On September 18, 2015, named plaintiffs Diana Vazquez, Jennyfer Herrera, Marcelino Solorzano Ascencio, and Regalado Villanueva de Guzman, individually and on behalf of others similarly situated (collectively “the Vazquez plaintiffs”), filed a complaint against SCL, SCT, Warren, and 20 Doe defendants. The Vazquez plaintiffs’ allegations and claims were substantially similar to those asserted by the Gallegos plaintiffs. The Vazquez plaintiffs added allegations that they were misclassified as independent contractors and should have been paid overtime wages. They asserted causes of action for misclassification, failure to provide accurate wage statements (§§ 226, 2698-2699.5), failure to pay overtime compensation (§§ 510, 1194, 2698-2699.5), failure to pay wages on regularly established paydays (§§ 204, 210, 2698-2699.5), failure to reimburse expenses (§ 2802), conversion, and unfair business practices (Bus. & Prof. Code, § 17200 et seq.). The Vazquez plaintiffs sought class action treatment and civil penalties under PAGA.

IV. Consolidation and Subsequent Complaints

The Vazquez plaintiffs filed a first amended complaint on November 3, 2015. They added Millennium as a defendant, alleging that it provided delivery drivers to Warren until approximately March 2013. On December 15, 2015, the trial court consolidated the Gallegos and Vazquez actions for certain purposes.

The Gallegos plaintiffs appear to have served, but not filed, a first amended complaint on March 9, 2016. Their first amended complaint added named plaintiffs and current drivers Humberto Rodriguez and Jose Munoz and additional defendants Warren and Millennium.

Both the Gallegos and Vazquez plaintiffs served but apparently did not file second amended complaints. The only material difference between the two second amended complaints is that the second amended Vazquez complaint included a cause of action alleging that the Vazquez plaintiffs were misclassified as independent contractors, and the second amended Gallegos complaint did not. Both second amended complaints asserted the following twelve causes of action against all defendants, whom both sets of plaintiffs alleged were joint employers: failure to pay minimum wage (§§ 204, 1182.12, 1194, 1194.2, 1197, 2698-2699.5), failure to timely pay earned wages at separation of employment (§§ 201, 202, 203, 204, 218.5, 218.6, 227.3, 2698-2699.5), failure to pay vested vacation upon termination

(§§ 227.3, 2698-2699.5), failure to provide meal and rest periods (§§ 226.7, 512, 2698-2699.5), failure to reimburse expenses

(§§ 2802, 2698-2699.5), failure to pay wages on regularly established paydays (§§ 204, 210, 2698-2699.5), failure to pay overtime compensation (§§ 510, 1194, 2698-2699.5), liquidated damages for failure to pay minimum wage (§§ 1194, 1194.2, 2698-2699.5), unfair business practices (Bus. & Prof. Code, § 17200 et seq.), conversion and theft of labor (Civ. Code, §§ 3294, 3336), PAGA civil penalties (§§ 2698-2699.5), and failure to maintain records (§ 1174.5, Wage Order No. 4, § 7).

As noted above, all named defendants answered both second amended complaints.

V. Motion for Class Certification

On November 18, 2016, plaintiffs filed a motion to certify two classes: an “Employee Driver Class” consisting of “All California-based drivers performing services for Warren Distributing, Inc. in California and paid as employees by Street City Logistics, Inc., Street City Transportation, Inc., and/or Millennium Transportation, Inc. during the time period of June 23, 2010 through the present,” and a “Contractor Driver Class” consisting of “All California-based drivers performing services for Warren Distributing, Inc. in California and paid as independent contractors by Street City Logistics, Inc., Street City Transportation, Inc., and/or Millennium Transportation, Inc. during the time period of June 23, 2010 through the present.” They sought to certify all of the named plaintiffs in the Gallegos and Vazquez actions “as representatives of the class.”

A. Theories of Liability

Plaintiffs asserted numerous theories of liability in their certification motion; we include only the most relevant here. With respect to their expense reimbursement claim (section 2802 claim), plaintiffs argued that the reimbursement they received was legally insufficient because it was less than the amount they would have received if defendants had used the per-mile reimbursement rate set by the federal Internal Revenue Service (IRS). Plaintiffs explained, “in 2014, the IRS mileage rate was $0.56 per mile. In 2014, the minimum wage was $9.00 per hour. So, if a driver for SCL drove 120 miles in an eight-hour day in 2014, SCL paid him $28 for his automobile expenses (at the rate of $3.50 per hour). Under the IRS reimbursement method, SCL would have been obligated to pay the driver $67.20 for his auto expenses. A shortfall of nearly $40 per day shows that the amount was unreasonable under California law.”

Plaintiffs’ theories of liability on their claims for failure to pay minimum wage and failure to timely pay all wages at termination were derivative of their section 2802 theory. They asserted that “Defendants’ woefully inadequate auto expense reimbursement policy – and the failure to cover self-employment and other such taxes – also resulted in a failure to pay minimum wage under California law,” and that “all minimum wages that Defendants failed to pay were due and owing at the termination/resignation of each former driver, and Defendants therefore failed to comply with sections 201 and 202.”

Plaintiffs asserted multiple theories of liability for their meal and rest break claims. Their first theory of liability “for their meal periods claim is that the drivers, because they had to be in the field making deliveries and could only take their meal periods between deliveries, often had to take their meal periods after five hours.” Their second theory of liability on the meal period claim was that defendants “never meaningfully communicated their meal period policies to the drivers, and thereby did not ‘provide’ them as required by California law.” Plaintiffs advanced a similar theory on their rest period claims: defendants’ “policies – or lack thereof – are in violation of California law. . . . until SCL created formal rest period policies in 2015, the drivers were not authorized and permitted to take rest periods.” Plaintiffs asserted that putative class members’ timecards would support their meal period claims, and their “declarations reflect the reality that drivers did not receive lawful rest periods.”

With respect to their PAGA claim, plaintiffs stated only, “An employee need not satisfy class action requirements to bring a representative action against an employer under the Private Attorneys General Act of 2004, Labor Code section 2698, et seq.”

B. Certification Criteria

Plaintiffs argued they met all of the criteria for class certification. As relevant here, they contended that common issues of law or fact predominated because all the drivers had the same duties, pay structure, equipment, and terms and conditions of employment. Plaintiffs further contended that the named plaintiffs’ claims were typical of the class, and their interests were “identical to the other class members since Defendants’ policies and procedures applied to all of the drivers.” Plaintiffs added that the named plaintiffs “supplied declarations outlining the terms and conditions of their employment, and their experiences were very similar to [ or]identical to those of their coworkers who have also supplied declarations in support of this motion.”

Plaintiffs assured the court that trial of their claims could be “easily managed.” “If, indeed, Defendants are joint employers pursuant to California law . . ., Defendants’ liability on each of the claims will be simple to prove. Each claim is susceptible to common proof based largely on the binding admissions of Defendants’ PMKs [persons most knowledgeable] and a simple analysis of payroll records. On the minimum wage claims, simple analysis of payroll records will determine whether Defendant [sic] paid the Putative Class members according to California minimum wage laws. Similarly, for the business expense reimbursement issue, it is simple to show that Defendants’ uniformly applied reimbursement scheme was vastly insufficient, compared to the IRS reimbursement method, to cover costs incurred by Putative Class Members in the discharge of their duties for Defendants. The remaining claims are derivative of these primary claims, and will rise or fall therewith.” Plaintiffs represented that they would further demonstrate manageability in their trial plan, “which will be submitted separately herewith.”

C. Accompanying Evidence

Plaintiffs did not submit a trial plan concurrently with their class certification motion. They did, however, file twelve declarations from the named plaintiffs and putative class members. Two of the declarations, those of named plaintiffs Vazquez and Herrera, were written exclusively in English. The ten remaining declarations were written in Spanish with accompanying English translations.

All of the declarants stated that they were required to take their meal breaks at the Warren warehouse and “oftentimes” were unable to take their meal breaks within five hours of their start time. They also uniformly stated that they were “never allowed to take a rest break.” Named plaintiffs Vazquez, Rodriguez, and Solorzano Ascencio, and putative class members Garcia and Ochoa stated that their automobile expenses exceeded the reimbursement they received “at all times.” Named plaintiff Herrera and putative class member Garcia stated that SCL “never paid me enough to cover my automobile” expenses.” The other declarants did not make statements about the adequacy of the reimbursement they received.

Plaintiffs also filed excerpts from depositions of defendants’ PMKs. Millennium’s corporate officer, Robert Brown, testified that Millennium provided drivers for Warren from June 23, 2010 to “either late 2012 or early 2013.” During that time, Millennium’s meal break policy was, “if you’re working an eight-hour day, you need to take your lunch. If you don’t take a lunch, you need to let us know.” Brown further testified that drivers took their meal breaks “when it was appropriate for the client’s business to facilitate it. So usually it could be anywhere from after three hours to no more than after five and a half, six hours.” Brown also stated that Millennium never provided its meal break policy to the drivers in writing, and did not have any policy governing rest breaks. Brown stated that the drivers’ wages ranged from “say, 11.75 to 14” dollars per hour, comprised of minimum wage plus a fixed hourly amount for automobile expense reimbursement.

SCL’s PMK, Paola Leggs Covarrubias, testified that SCL began providing drivers for Warren in October 2012. Some were employees and others were independent contractors. All drivers were paid minimum wage “plus a certain amount per hour for mileage reimbursement”; Covarrubias did not believe that SCL ever provided expense reimbursement on a per-mile basis. She stated that she personally and individually determined each driver’s per-hour expense reimbursement amount, “[b]ased on the type of vehicle, the type of route location and gas prices.” Covarrubias further testified that “[e]veryone’s wages . . . they’re different. Nobody gets the same – – no one gets the same reimbursement.” Covarrubias testified that SCL provided workers with two paid 10-minute rest breaks per eight hour shift, and one unpaid meal period.

VI. Oppositions

A. Warren

Defendants each opposed class certification. In its opposition brief, Warren argued that common facts did not predominate the expense reimbursement, meal period, and rest period claims. Warren contended that “detailed, individualized inquiries” were necessary on the section 2802 claims because the drivers “used vastly different cars, drove different routes, different amounts of miles per day/week, incurred different expenses and were reimbursed different amounts. Some drove for others, while driving for SCL and [Millennium], and made varying personal uses of their cars. Most made errors and overstated their reported miles.” It further argued that plaintiffs’ theory of liability on the section 2802 claims “deprive[d] Defendants of their right to select other methods and show drivers were reimbursed for actual/necessary expenses.” Warren provided the report of an expert who generally opined that data such as time cards, GPS records, and average automobile expenses demonstrated a need for individualized examination of plaintiffs’ claims.

Warren asserted that plaintiffs’ declaration statements regarding the lack and untimeliness of their meal and rest periods were contradicted by their deposition testimony and GPS data. It argued that the deposition testimony “shows drivers knew they were entitled to take breaks and took them,” while the GPS data showed that drivers “had many break opportunities,” and therefore that common facts did not predominate. Warren further relied on plaintiffs’ deposition testimony to argue that “there is no evidence of company-wide policies to deprive drivers of breaks, or a lack of policy resulting in drivers being deprived of breaks. Rather, a formal policy existed and drivers knew it.” Warren also argued that plaintiffs’ meal and rest period claims could not be resolved by common proof.

Warren attached deposition testimony from ten named plaintiffs and putative class members; they all testified, contrary to their declarations, that they had never been on a delivery run that kept them away from the Warren warehouse for more than five hours. Many of them also testified that they were aware of SCL’s meal and rest period policies and acknowledged receiving meal and rest breaks. Warren also attached declarations from nine other drivers who stated that SCL had meal and rest period policies of which they were aware, and that they took their required breaks without issue.

B. SCL and SCT

SCL and SCT also contended in their joint opposition brief that plaintiffs failed to demonstrate that common questions predominated. Like Warren, SCL and SCT argued that plaintiffs’ section 2802 claim and derivative wage claims would require individualized inquiries to establish both liability and defenses, and further argued that the evidence needed to perform these inquiries was not available. SCL and SCT also contended that plaintiffs’ theory of liability on the expense reimbursement claim was legally incorrect, because it essentially obligated defendants to use the IRS mileage method and Gattuso, supra, 42 Cal.4th 554 held that other methods were permissible.

SCL and SCT challenged the veracity of plaintiffs’ allegations and declarations regarding meal and rest periods. They asserted that they maintained policies on both types of breaks and, like Warren, contended that “every driver deposed admitted they received meal periods and there is no evidence to support the allegation that meal periods were not timely.” SCL and SCT further argued that plaintiffs could not establish commonality on these claims, because “such claims will necessarily involve mini-trials regarding whether individuals received meal periods,” and could not establish typicality because they “submitted false form declarations refuted by their deposition testimony, admitted they destroyed or discarded important evidence, testified they have no understanding of their responsibilities as class representatives, submitted a motion lacking in evidentiary support, and asserted incorrect theories of recovery.”

Like Warren, SCL and SCT appended deposition excerpts to their opposition. They highlighted passages pertinent to drivers’ lack of knowledge of their actual expenses and how those compared to the reimbursement they received, and drivers’ admissions they received meal breaks and rest periods. SCT and SCL also highlighted drivers’ deposition testimony that each of their days varied in terms of routes and mileage.

C. Millennium

Millennium argued that class certification “will not provide substantial benefits both to the Courts and the litigants,” because the court “is going to be bogged down at trial sussing out . . the time period(s) during which s/he was an employee versus an independent contractor and for whom.” It further suggested that plaintiffs’ claims against Millennium were not timely under the applicable statute of limitations, and that Millennium was not the corporate entity that paid drivers in any event.

With respect to the expense reimbursement claim, Millennium contended that drivers leased their vehicles to Millennium during the workday and therefore did not incur any automobile expenses. It also echoed SCL and SCT’s arguments that plaintiffs’ theory of liability was not legally correct under Gattuso, supra, 42 Cal.4th 554, and that plaintiffs lacked evidence of their actual expenses. Millennium additionally argued that common issues of law and fact did not predominate, trial of plaintiffs’ claims would be unmanageable, and the named plaintiffs were not “typical” or adequate representatives because none of them had worked for Millennium.

VII. Trial Plan and Oppositions

Plaintiffs filed a trial plan on April 19, 2018, after defendants filed their oppositions to the class certification motion. Plaintiffs proposed presenting their case “through a combination of stipulations (assuming Defendants will enter into stipulations), direct evidence (Defendants’ own payroll records and written company policies), representative testimony by some of the putative class members, expert testimony, and Evidence Code section 776 testimony of Defendants’ persons most knowledgeable.”

Plaintiffs stated that they planned to prove their section 2802 claim without presenting any evidence of the expenses they actually incurred on the job. They asserted “actual vehicle expenses have no relevance in determining liability or aggregate damages in this action,” because their theory was that defendants were liable for reimbursing them less than the amount they would have received under the IRS mileage reimbursement method. Plaintiffs further asserted that “there is no need for any form of individualized inquiry,” because they could prove their damages using a class-wide calculation. Plaintiffs argued that defendants “will have the opportunity to present defenses regarding the factors relevant to calculating the reimbursement owed under the mileage reimbursement method, i.e., what rate per mile is reasonable and should apply and the number of miles driven, and comparing the results to the lump sum Defendants actually paid.” They further argued that defendants’ argument otherwise—that individualized inquiry into actual expenses was required—“flies in the face of Gattuso.”

Plaintiffs reiterated that their primary theory of liability on their meal period claim was that “the drivers, because they had to be in the field making deliveries and could only take their meal periods between deliveries, often had to take their meals after five hours.” Plaintiffs planned to prove this theory using “a simple review of the drivers’ time cards,” as well as “representative testimony of some drivers” and testimony of defendants’ representatives. To prove their alternative theory, that defendants “never meaningfully communicated their meal period policies to the drivers, and thereby did not ‘provide’ them as required by California law,” plaintiffs planned to rely on “representative testimony of some drivers to establish that Defendants never complied with California law by providing meal periods.” Plaintiffs also planned to use testimony from defendants’ representatives to prove that defendants did not inform plaintiffs of their meal policies. Plaintiffs planned to prove their identical rest period theory the same way.

With respect to their PAGA claim, plaintiffs stated the following: “The Court decides the amount of PAGA penalties to apply if violation [sic] is found. [Citation.] The amount awarded is on a per pay period basis. [Citation.] If a stipulation is not reached as to the total pay periods during the PAGA liability period, Plaintiff [sic] will present testimony through its experts as to the total Class Member pay periods during the PAGA liability period.”

Defendants opposed plaintiffs’ trial plan. Warren argued that plaintiffs’ plan deprived defendants of their right to establish that plaintiffs were fully reimbursed for expenses they actually and necessarily incurred. Both Warren and SCL/SCT also argued that plaintiffs misapplied Gattuso, supra, 42 Cal.4th 554. Millennium argued that the section 2802 claim would be unmanageable because it would require “a mini-trial for each putative class member.” Warren and Millennium both argued that plaintiffs failed to show how their meal and rest break claims could be managed, since each would require an individualized analysis. SCL/SCT argued that plaintiffs’ plan to try the meal and rest break claims was “based upon a misrepresentation of the facts,” and pointed again to the deposition testimony in which the named plaintiffs and other putative class members admitted receiving the breaks to which they were entitled.

Warren acknowledged that plaintiffs’ PAGA claim “need not satisfy class action requirements,” but argued that “same consideration for manageability of individualized issues must be made for PAGA,” because “no action can go forward if the trial plan would prevent defendants from presenting affirmative defenses or abridge substantive due process rights.” “To recover PAGA penalties, Plaintiffs must prove violations for each driver. Plaintiffs have not shown how a trial as to each driver can be managed in light of the individual issues that predominate Plaintiffs’ claims.”

VIII. Hearing and Ruling

The court heard the class certification, trial plan, and related motions on July 26, 2018. At the outset of the hearing, the court indicated that it was inclined to grant Warren’s motion to strike the declarations that were not translated by a certified, qualified interpreter. The court noted that the effect of doing so “would be that there are no plaintiffs from Millennium, because that only leaves Herrera and Vazquez” (both named plaintiffs in the Vazquez action). Plaintiffs’ counsel requested leave to provide “translated declarations”; the court responded, “you provided translated declarations. They just did not satisfy the rules of court. . . . ” The court added that the problem was “unusual,” since plaintiffs’ motion for class certification had been pending for nearly two years, and the motion to strike the declarations had been pending for nearly six months with no corrective action by plaintiffs. The court ultimately told plaintiffs’ counsel that it would give the entire case “a second look” after the hearing, and accordingly would allow plaintiffs to submit certified interpretations of the declarations “within seven days.” The court cautioned plaintiffs’ counsel, “I’m very iffy on whether this is going to meet class certification,” so “you may not wish to undergo the expense, if there is a substantial expense.”

The court further indicated that its initial tentative was to grant certification on the section 2802 claim and derivative wage claims, because the court believed “it is possible to lump those claims together for class cert by using the defendants’ own records.” The court also indicated an inclination to certify a class regarding defendants’ status as joint employers. It stated that it was not inclined to certify classes on the meal and rest period claims, because the two declarations without translation issues were “totally inconsistent” with the deposition testimony from other putative class members, giving rise to “no typicality at all.” The parties spent the remainder of the hearing presenting argument on the section 2802 claim. The court took the matter under submission.

Four days later, on July 30, 2018, the court issued a written ruling. As relevant here, it first rejected plaintiffs’ contention that evidence submitted at the class certification stage—namely, their improperly translated declarations—need not be admissible. The court found the federal case law plaintiffs cited unpersuasive and distinguishable, and further noted that nothing precluded plaintiffs from obtaining proper translations or correcting the defects once alerted to them. The court noted that it had granted plaintiffs leave to correct the translations, but “given the court’s reversal of its tentative ruling, the issue is moot.”

The court next declined to certify plaintiffs’ expense reimbursement and derivative minimum wage claims. The court gave two reasons for this ruling. First, it concluded the trial plan was inadequate because it foreclosed Warren’s ability to assert its affirmative defense that the reimbursement was sufficient to cover necessary expenses the drivers incurred. The court noted that plaintiffs’ trial plan instead “proposes to deem any reimbursement inadequate if it was less than the applicable IRS mileage rate, without regard for the actual expenses the drivers incurred.” As a second reason for denying certification, the court concluded that plaintiffs failed to demonstrate the predominance of common questions of law and fact. It explained, “the drivers drove a wide variety of vehicles. [Plaintiffs have] not analyzed the actual costs these drivers incurred, and compared those costs to the applicable IRS mileage rates. [Plaintiffs have] therefore not presented any evidence on how many drivers received less than their incurred costs in reimbursement. The court cannot determine if common questions of law and fact predominate, such that certification is appropriate.”

The court also denied class certification on the meal and rest break claims on the ground that plaintiffs “failed to demonstrate that class treatment of these claims is appropriate.” The court reasoned that the deposition testimony from numerous class members on these issues was inconsistent with plaintiffs’ two admissible declarations, those of named plaintiffs Vazquez and Herrera. Vazquez and Herrera stated in their declarations that they were required to take their meal breaks at Warren’s warehouse, they did not receive meal breaks in timely fashion if they could not return to the warehouse within five hours, they recorded meal breaks on their timesheets even if they did not take them, and they were never permitted to take rest breaks. The court found that the Vazquez and Herrera declarations were inconsistent with other putative class members’ depositions. The court specifically pointed to the deposition testimony of named plaintiffs Hugo Gallegos, Miguel Chulde, Humberto Rodriguez, Jose Armando Munoz Romero, Marcelino Solorzano Ascencio, and Regalado Villanueva de Guzman, all of whom testified that they took 30-minute meal breaks every day. Gallegos, Rodriguez, and Villanueva de Guzman also testified that they knew they were entitled to these breaks within five hours of starting their shifts. The court also pointed to similar testimony in the depositions of six putative class members. The court concluded from these depositions that plaintiffs failed to meet their burden of demonstrating that common questions of law or fact predominated: “the evidence before the court suggests that Va[z]quez and Herrera had atypical experiences if they were unable to take meal breaks.” It did not further address rest breaks.

The court also concluded that plaintiffs failed to meet their burden of demonstrating that trial of their representative PAGA claims was manageable. The court recognized that the PAGA claims “are representative claims, which do not require certification,” but added “as in a class action, in a PAGA action, the burden is on the plaintiff to establish any violations of the Labor Code. . . .” The court continued, “[f]or that reason, a representative plaintiff in [a PAGA action] must seek to render trial of the action manageable.” The court found that plaintiffs failed to carry the burden of demonstrating manageability “on a class-wide basis.”

Plaintiffs timely appealed the court’s rulings in both the Vazquez and Gallegos actions under the death knell doctrine. (See In re Baycol Cases I & II (2011) 51 Cal.4th 751, 757.) The parties filed all of their substantive materials in the Vazquez matter; the filings in the Gallegos matter incorporate the Vazquez filings by reference. We ordered the matters consolidated for argument and resolution.

DISCUSSION

I. Striking the Declarations

Plaintiffs contend the court erred in striking most of the declarations they submitted in support of their motion for class certification. They first argue that the plain language of California Rules of Court, rule 3.1110(g) “did not apply to the English versions” of the declarations, because the rule refers only to exhibits “written in a foreign language.” Considering the court’s interpretation of the rule de novo, we disagree. (See Roth v. Plikaytis (2017) 15 Cal.App.5th 283, 291 & fn. 7; Ponce v. Wells Fargo Bank (2018) 21 Cal.App.5th 253, 261.)

Rule 3.1110(g), entitled “Translation of exhibits,” provides that “Exhibits written in a foreign language must be accompanied by an English translation, certified under oath by a qualified interpreter.” All but two of the declarations included as exhibits to plaintiffs’ class certification motion were written in Spanish with English translations. Some of declarations were single documents that contained statements written in both Spanish and English, while others came in pairs—a declaration fully written in Spanish accompanied by a separate, complete English translation. Plaintiffs contend Rule 3.1110(g) does not apply to the English halves of the English-Spanish declaration pairs, because they are not “written in a foreign language,” and there is “no indication that the declarants were unable to read or understand English or that the English versions were translations of the Spanish version.” This argument is not persuasive. If the English versions were not translations of the accompanying Spanish versions, there would have been no reason for plaintiffs to prepare or include the Spanish versions. When it is apparent from the circumstances that an exhibit written in English is a translation of an accompanying exhibit written in a foreign language, it would be absurd to read Rule 3.1110(g) as plaintiffs suggest.

Plaintiffs next contend the court erred in striking the declarations on admissibility grounds at the class certification stage. Relying on Sali v. Corona Regional Medical Center (9th Cir. 2018) 909 F.3d 996, 1004 (Sali), plaintiffs argue that “applying a formal stricture of a translator’s certification had the result of making the certification hearing an evidentiary shooting match.” We are not persuaded. Although “California courts may look to federal rules on procedural matters” in class actions (Gonzales v. San Gabriel Transit, Inc. (2019) 40 Cal.App.5th 1131, 1151), we are not bound to do so.

Sali is distinguishable in any event, as it reasoned that “the evidence needed to prove a class’s case often lies in a defendant’s possession and may be obtained only through discovery. Limiting class-certification-stage proof to admissible evidence risks terminating actions before a putative class may gather crucial admissible evidence. And transforming a preliminary stage into an evidentiary shooting match inhibits an early determination of the best manner to conduct the action.” (Sali, supra, 909 F.3d at p. 1004.) These concerns are not present here, as the declarations and translations were entirely within plaintiffs’ control. Moreover, the Sali court “found an abuse of discretion where a ‘district court limited its analysis of whether’ class plaintiffs satisfied a Rule 23 requirement ‘to a determination of whether Plaintiffs’ evidence on that point was admissible.’” (Ibid.) The trial court here did not restrict its analysis in this way. Sali accordingly is inapposite.

Plaintiffs finally contend that the “trial court’s about-face on its decision to allow Appellants an opportunity to cure the deficiencies in the declarations was erroneous,” because the trial court changed its interim order without providing plaintiffs with an opportunity to litigate the question. They further argue that the error was prejudicial, because the trial court “went on to find that Appellants failed to meet their burden of showing the predominance of common questions of law and fact.” We disagree. Here, as the court observed, nearly six months elapsed between the filing and adjudication of Warren’s motion to strike. Plaintiffs could have obtained certified translations of some or all of the Spanish declarations during that time. They failed to do so, and were unable to provide the trial court with a satisfactory explanation after litigating the issue at the hearing. The court was not required to grant plaintiffs additional time to comply with a standard court rule.

Even if the court erred in failing to give plaintiffs the promised seven days to submit certified translations before it ruled on the motion, we find that plaintiffs have failed to demonstrate that they were prejudiced. The court did not rely on the dearth of declarations to make its ruling. Instead, it contrasted the remaining declarations with the ample deposition testimony directly contradicting them and concluded that the meal break experiences Vazquez and Herrera described in their declarations were “atypical.” Plaintiffs have not demonstrated how the stricken declarations, which contained, nearly verbatim, the same assertions as the Vazquez and Herrera declarations, would have aligned with the depositions or otherwise demonstrated typicality. We accordingly find that plaintiffs were not prejudiced.

II. Denial of Class Certification

A. Legal Principles

A class action is a procedural device used to aggregate claims when “the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court.” (Code Civ. Proc., § 382.) “The party advocating class treatment must demonstrate the existence of an ascertainable and sufficiently numerous class, a well-defined community of interest, and substantial benefits from certification that render proceeding as a class superior to the alternatives.” (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021 (Brinker).) “‘In turn, the “community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.”’ [Citation.]” (Ibid.) As the party seeking certification, plaintiffs bear the burden of demonstrating all three community of interest factors. (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104 (Lockheed).) Only the first two, predominance and typicality, are at issue here.

To establish predominance, plaintiffs must “place substantial evidence in the record that common issues predominate.” (Lockheed, supra, 29 Cal.4th at p. 1108.) “‘[T]his means “each member must not be required to individually litigate numerous and substantial questions to determine his [or her] right to recover following class judgment; and the issues which may be jointly tried, when compared with those requiring separate adjudication, must be sufficiently numerous and substantial to make the class action advantageous to the judicial process and to the litigants.”’ [Citation.]” (Ibid.) Whether common questions predominate “will often depend upon resolution of issues closely tied to the merits” of the claims, even though the certification of a class is a procedural question that generally does not turn on whether an action is legally or factually meritorious. (Brinker, supra, 53 Cal.4th at pp. 1023-1024.) “To assess predominance, a court ‘must examine the issues framed by the pleadings and the law applicable to the causes of action alleged.’ [Citation.] It must determine whether the elements necessary to establish liability are susceptible of common proof or, if not, whether there are ways to manage effectively proof of any elements that may require individualized evidence. [Citation.] In turn, whether an element may be established collectively or only individually, plaintiff by plaintiff, can turn on the precise nature of the element and require resolution of disputed factual or legal issues affecting the merits.” (Id. at p. 1024.) At bottom, predominance is a factual question for the trial court. (Id. at p. 1022.)

The second community of interest requirement, typicality, refers to the nature of the class representative’s claim, not the specific facts from which it arose or the specific relief sought. (Martinez v. Joe’s Crab Shack Holdings (2014) 231 Cal.App.4th 362, 375.) The purpose of the typicality requirement is to ensure that the class representative’s interests align with those of the broader class. (Ibid.) The test of typicality is whether the action is based on conduct not unique to the named plaintiffs, whether the other class members experienced and have been injured by the same course of conduct as the named plaintiffs, and whether the other class members suffered the same or similar injury as the named plaintiffs. (Ibid.)

“On review of a class certification order, an appellate court’s inquiry is narrowly circumscribed. ‘The decision to certify a class rests squarely within the discretion of the trial court, and we afford that decision great deference on appeal, reversing only for manifest abuse of discretion: “Because trial courts are ideally suited to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification.” [Citation.] A certification order generally will not be disturbed unless (1) it is unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions. [Citations.]’” (Brinker, supra, 53 Cal.4th at p. 1022.) However, in conducting our review, we examine the trial court’s “actual reasons for granting or denying certification; if they are erroneous, we must reverse, whether or not other reasons not relied upon might have supported the ruling.” (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 530.)

B. Expense Reimbursement (Section 2802) Claim

Plaintiffs argue that the trial court erred in denying certification of their section 2802 expense reimbursement claim and, by extension, their derivative minimum and final wage claims. They contend that both of the trial court’s reasons for denying certification on these claims, improper foreclosure of Warren’s affirmative defense and lack of predominating common questions, were erroneous, “because they rest upon a misreading of Gattuso and do not recognize that Respondents cannot prove their affirmative defense.” We find no abuse of discretion.

1. Section 2802 and Gattuso

Section 2802, subdivision (a) requires “an employer” to “indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer . . . .” “Necessary expenditures or losses” are defined to include “all reasonable costs” incurred by the employee in the discharge of his or duties. (§ 2802, subd. (c).) The purpose of section 2802 is to prevent employers from passing their operating costs onto their employees. (Gattuso, supra, 42 Cal.4th at p. 562.) Section 2804 expressly prohibits employees from waiving the benefits of section 2802. (Id. at p. 561; see also § 2804.)

In Gattuso, the Supreme Court considered whether section 2802 permitted an employer to reimburse its employees for automobile expenses they incurred in performing their work duties by increasing their “overall compensation rather than through a separately identified reimbursement payment.” (Gattuso, supra, 42 Cal.4th at pp. 567-568.) The defendant employer, a corporation that prepared and distributed advertising booklets, employed “inside” sales representatives who sold advertising space via telephone and “outside” sales representatives who sold advertising space via in-person meetings. (Id. at p. 559.) The outside sales representatives used their own automobiles to meet with their customers. (Ibid.) The defendant compensated them for the expenses they incurred in doing so “by paying them higher base salaries and higher commission rates than it pays to inside sales representatives.” (Id. at p. 560.) The plaintiff outside sales representatives alleged that the defendant employer violated section 2802 by reimbursing them in this fashion. (Ibid.)

The Supreme Court ultimately concluded that “[n]othing in the language of section 2802 restricts the methods that an employer may use to calculate reimbursement,” “provided that the amount paid is sufficient to provide full reimbursement for actual expenses necessarily incurred.” (Gattuso, supra, 42 Cal.4th at p. 570.) In reaching that conclusion, the Court discussed three possible methods employers might use to reimburse employees for automobile expenses.

The first, which the parties agreed was permissible under section 2802, was the “actual expense method.” This method “is the most accurate, but it is also the most burdensome for both the employer and the employee” because it requires extensive record keeping of expenditures on fuel, maintenance, repairs, insurance, registration, and depreciation, as well as information needed to apportion those expenses between business and personal use. (Id. at p. 568.) The employee then submits this information to the employer, which may exercise judgment to determine whether the expenses were reasonable and necessary before reimbursing the employee. (Ibid.) The Court recognized that few employers use the actual expense method because of the onerous burdens it imposes. (Id. at p. 569.)

The second method the Court discussed was the “mileage reimbursement method.” (Gattuso, supra, 42 Cal.4th at p. 569.) Under this method, which is “inherently less accurate” than the actual expense method, “the employee need only keep a record of the number of miles driven to perform job duties. The employee submits that information to the employer, who then multiplies the work-required miles driven by a predetermined amount that approximates the per-mile cost of owning and operating an automobile.” (Ibid.) The Supreme Court noted that the “IRS mileage rate is . . . widely used and accepted by private business employers for calculating reimburseable employee automobile expenses.” (Ibid.) It also recognized that, subject to the limitations of section 2804, the per-mile rate “may be a subject of negotiation and agreement between employer and employee.” (Ibid.) Thus, it did not require use of the IRS mileage rate. The Court further noted that the parties in Gattuso agreed that “if an employer uses the mileage reimbursement method, the employee must be permitted to challenge the resulting reimbursement payment,” and if he or she shows “that the reimbursement amount that the employer has paid is less than the actual expenses that the employee has necessarily incurred for work-required automobile use (as calculated using the actual expense method), the employer must make up the difference.” (Id. at p. 569.)

The third reimbursement method the Court discussed was the “lump-sum method.” “Under this method, the employee need not submit any information to the employer about work-required miles driven or automobile expenses incurred. The employer merely pays a fixed amount for automobile expense reimbursement. The fixed amount may take various forms and have various labels, including per diem, car allowance, and gas stipend. The amount is generally based on the employer’s understanding of the employee’s job duties, including the number of miles that the employee typically or routinely must drive to perform those duties.” (Gattuso, supra, 42 Cal.4th at p. 570.) The defendant in Gattuso used a variant of the lump-sum method, which the Supreme Court held was permitted by section 2802, “provided the employer establishes some means to identify the portion of overall compensation that is intended as expense reimbursement, and provided also that the amounts so identified are sufficient to fully reimburse the employees for all expenses actually and necessarily incurred.” (Id. at p. 575.) The Supreme Court also reiterated that “an employee must be permitted to challenge the amount of a lump-sum payment as being insufficient under section 2802,” and explained that the employee “may do so by comparing the payment with the amount that would be payable under either the actual expense method or the mileage reimbursement method. If the comparison reveals that the lump sum is inadequate, the employer must make up the difference.” (Id. at p. 571 .)

2. Analysis

The final two sentences quoted above form the basis of plaintiffs’ theory of liability on their section 2802 claim and derivative claims: that an employee may challenge the adequacy of a lump-sum reimbursement “by comparing the payment with the amount that would be payable under either the actual expense method or the mileage reimbursement method,” (emphasis added) and that “the employer must make up the difference” if “the lump sum is inadequate.” (Gattuso, supra, 42 Cal.4th at p. 571.) Plaintiffs contend that the hourly lump sum defendants paid them as reimbursement for their automobile expenses “was insufficient when compared to what should have been paid under the mileage reimbursement method, using the IRS mileage rate.” Using this method of comparison, plaintiffs contend, absolves them of any need to produce evidence of their actual expenses.

The trial court disagreed. It concluded that omitting evidence of actual expenses from trial would impede defendants’ ability to argue that the reimbursement amounts were “sufficient to fully reimburse the employees for all expenses actually and necessarily incurred.” (Gattuso, supra, 42 Cal.4th at p. 575.) This was not a “misreading of Gattuso” or otherwise an abuse of the trial court’s discretion. Gattuso makes clear that the ultimate question in section 2802 litigation is whether the employees were fully reimbursed. It specifically agreed with the defendant’s assertion that “section 2802 requires only that whatever method is used result in full reimbursement for actual expenses necessarily incurred by the employee.” (Id. at p. 570.) The employee’s actual expenses are thus relevant regardless of the reimbursement method the employer uses, or that the employee thinks the employer should use. Reimbursement is inadequate under section 2802 only if it is “less than the actual expenses that the employee has necessarily incurred for work-required automobile use (as calculated using the actual expense method).” (Id. at p. 569.)

When an employee challenges the adequacy of the reimbursement he or she received under section 2802, he or she bears the burden of showing that the reimbursement was less than the expenses necessarily incurred. The employer likewise may defend against the claim by showing that the employee was adequately reimbursed for the expenses he or she necessarily incurred. “[A] class action trial management plan must permit the litigation of relevant affirmative defenses, even when these defenses turn on individual questions.” (Duran v. U.S. Bank National Association (2014) 59 Cal.4th 1, 25.) Plaintiffs’ trial management plan did not allow for the introduction or exploration of evidence relevant to their actual expenses. The court accordingly did not abuse its discretion in concluding that the plan was inadequate and precluded certification.

Plaintiffs argue that “by not carefully evaluating the nature of the proof that Respondents would have to present to support this affirmative defense, and by not recognizing that evidence does not exist to support such a defense, the trial court conducted an incorrect legal analysis.” We are not persuaded the trial court erred. The court considered the depositions and other evidence the parties attached to their filings, and these documents contained evidence of the types of vehicles plaintiffs drove and the miles they drove each day. Evidence of plaintiffs’ other expenses, such as insurance costs or car payments, may be obtainable through discovery mechanisms. Plaintiffs suggest that defendants “would have to provide evidence of all the information that an employee would have to submit if the employer had used the actual expense reimbursement method,” but the ultimate success of an affirmative defense is a question for the trier of fact, not for the court at the certification stage.

Plaintiffs also argue that their trial plan did not foreclose defendants “from presenting evidence of what they believed would be a more appropriate mileage rate.” This argument ignores Gattuso’s teaching that section 2802 does not restrict the methods that an employer may use to calculate reimbursement (Gattuso, supra, 42 Cal.4th at p. 570), by essentially forcing defendants to use the mileage reimbursement method. Plaintiffs further assert that “the choice of the proper mileage reimbursement rate is a common issue,” because Gattuso does not state that the mileage reimbursement rate “must approximate the per-mile cost of owning and operating the employee’s automobile.” Defendants’ method of reimbursement is not the relevant issue, however; the issue is whether plaintiffs were reimbursed for the expenses they incurred.

The trial court also denied certification of plaintiffs’ section 2802 and related claims because plaintiffs have “not demonstrated that common issues of law and fact predominate.” Specifically, the trial court found that plaintiffs failed to “present any evidence on how many drivers received less than their incurred costs in reimbursement.” Plaintiffs argue that the court’s “focus on drivers’ actual expenses was misplaced,” because “the drivers are expressly permitted to challenge the adequacy of their lump-sum reimbursement by comparing it to what they would be paid under the actual expenses method or the mileage reimbursement method.” As explained above, this argument misconstrues the ultimate holding of Gattuso.

Plaintiffs further contend that “[c]ommon issues do indeed predominate,” listing as examples “whether class members were misclassified as independent contractors,” “Respondents’ status as joint employers, the legality of Respondents’ reimbursement policies, the drivers’ job duties, the mileage- and time-recording procedures mandated by Respondents and practiced by the drivers, the denial of itemized paycheck stubs to the independent contractor drivers, and Respondents’ denial of having reimbursed drivers under the lump-sum method.” These issues are largely irrelevant to plaintiffs’ section 2802 claim and their theory of liability thereon. The court did not abuse its discretion by focusing its predominance analysis on the individualized facts relevant to the section 2802 claim, namely drivers’ actual expenses.

C. Meal Period Claim

Plaintiffs brought their meal period claim under section 512, subdivision (a), which provides that “An employer shall not employ an employee for a work period of more than five hours per day without providing the employee with a meal period of not less than 30 minutes, except that if the total work period per day of the employee is no more than six hours, the meal period may be waived by mutual consent of both the employer and employee.” This statute “requires a first meal period no later than the start of an employee’s sixth hour of work.” (Brinker, supra, 53 Cal.4th at p. 1041.) Relying on Godfrey v. Oakland Port Services Corp. (2014) 230 Cal.App.4th 1267, 1285-1286, and Bradley v. Networkers International, LLC (2012) 211 Cal.App.4th 1129, 1149-1150, Plaintiffs also argued that defendants’ alleged failure to meaningfully or consistently communicate a meal period policy to them violated the statute. They now contend that the court abused its discretion by failing to specifically address these theories when it denied class certification on the basis that the Vazquez and Herrera declarations attesting to a lack of knowledge of defendants’ meal period policies and inability to take meal breaks were atypical of the class. We disagree.

At the class certification stage, plaintiffs bear the burden of showing that the action “is based on conduct not unique to the named plaintiffs,” other class members have been injured by the same conduct as the named plaintiffs, and that the injuries suffered by the named plaintiffs and the rest of the class are the same or similar. (Martinez v. Joe’s Crab Shack Holdings, supra, 231 Cal.App.4th at p. 375.) The trial court found that plaintiffs did not carry this burden of demonstrating typicality, because the declarations from named plaintiffs Vazquez and Herrera were inconsistent with deposition testimony from numerous other class members, including additional named plaintiffs.

The trial court implicitly acknowledged plaintiffs’ theories by pointing to statements in Vazquez’s and Herrera’s declarations and other class members’ depositions relevant to those theories. Substantial evidence supports its conclusion that named plaintiffs Vazquez and Herrera did not have claims typical of the class; each of the numerous depositions the court specifically cited facially contradicted the assertions made by Vazquez and Herrera. Lack of typicality is an appropriate criterion on which to deny class certification, and plaintiffs have not identified any erroneous legal assumptions underlying the trial court’s ruling on the meal break claim. We accordingly conclude the trial court did not abuse its discretion in denying the certification motion as to this claim. (See Brinker, supra, 53 Cal.4th at p. 1022.)

D. Rest Period Claim

Under California law, employers have “a duty to authorize and permit rest breaks; the number of breaks depends on the length of the shift.” (Bradley v. Networkers International, LLC, supra, 211 Cal.App.4th at p. 1149, citing Cal. Code Regs., tit. 8,

§ 11040, subd. 11.) Plaintiffs allege that defendants “are liable for rest period premiums under Labor Code section 226.7 because they failed to meaningfully inform the drivers that they could take rest periods.” They contend the trial court erred by failing to discuss their rest period claim and theory of liability in its order denying class certification. We agree.

In its ruling, the trial court stated that plaintiffs “contend[ ] the drivers also did not receive adequate meal or rest periods. [Plaintiffs have] failed to demonstrate that class treatment of these claims is appropriate. The motion for class certification is denied as to these claims.” The trial court’s ensuing analysis focused exclusively on the meal period claim, however, by highlighting deposition testimony contrary to Vazquez’s and Herrera’s declarations about meal breaks. The trial court did not provide any reason for denying certification of the rest period claim. We accordingly are unable to discern its “actual reasons for granting or denying certification.” (Ayala v. Antelope Valley Newspapers, Inc., supra, 59 Cal.4th at p. 530.)

In most circumstances, “it is judicial action, and not judicial reasoning or argument, which is the subject of review; and, if the former be correct, we are not concerned with the faults of the latter.” (Davey v. Southern Pacific Co. (1897) 116 Cal. 325, 330.) When reviewing an order granting or denying class certification, however, “appellate courts only review the reasons stated by the trial judge in certifying or denying certification, and will not affirm simply because ‘there may be substantial evidence to support the court’s order.’” (Weil et al., Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2020) ¶ 14:107.6; see also Ayala v. Antelope Valley Newspapers, Inc., supra, 59 Cal.4th at p. 530.) When an order denying certification “is devoid of any explanation and nothing in the record of the hearing or anywhere else in the record illuminates the trial court’s thinking,” we “cannot tell if improper criteria were used or erroneous legal assumptions were made.” (Tellez v. Rich Voss Trucking, Inc. (2015) 240 Cal.App.4th 1052, 1064-1065.) Our standard of review “requires that there be some enunciation of a reason or basis for denial of class certification from which we can determine the soundness of the lower court’s decision. To hold otherwise would mean that in every case where there is a denial of class certification without explanation in the order or in the record, appellate courts would be placed in the role of trial courts, in essence, deciding the matter de novo and supplying a rationale not stated by the trial court.” (Id. at p. 1065.) In light of our inability to discern the rationale for the trial court’s denial of class certification on the rest period claim, “we must remand the case to the trial court to reconsider the motion, and in the event that it again denies the motion, articulate its reasoning.” (Ibid.)

III. Dismissal of PAGA Claims

In addition to their class action claims, plaintiffs asserted a cause of action for civil penalties under PAGA. The trial court dismissed plaintiffs’ PAGA claims after finding that plaintiffs failed to demonstrate that trial of the claims would be manageable “on a class-wide basis.” Plaintiffs contend that the trial court “improperly applied the class action requirement of manageability to the PAGA claims when Appellants did not seek certification of the PAGA claims.” They alternatively argue that they demonstrated that trial of their PAGA claims would be manageable, the trial court lacked the authority to dismiss the PAGA claims at the class certification stage of the case, and the trial court violated their due process rights by dismissing the claims on its own initiative. We agree with plaintiffs’ first argument and accordingly reverse the dismissal of their PAGA claims. We need not and do not consider plaintiffs’ alternative arguments.

A. Legal Principles

The Labor Code “contains a number of provisions designed to protect the health, safety, and compensation of workers. Employers who violate these statutes may be sued by employees for damages or statutory penalties.” (Kim v. Reins International California, Inc. (2020) 9 Cal.5th 73, 80 (Kim).) Some Labor Code provisions also provide for additional civil penalties, which are generally paid to the state. (Ibid.) Because the state was “hampered” in its pursuit of civil penalties due to staffing constraints and inadequate funding, “the Legislature enacted PAGA, authorizing ‘aggrieved employees’ to pursue civil penalties on the state’s behalf.” (Id. at p. 81.) PAGA claims are “legally and conceptually different from an employee’s own suit for damages and statutory penalties,” because “[a]n employee suing under PAGA ‘does so as the proxy or agent of the state’s labor law enforcement agencies.’ [Citation.]” (Ibid.) Every PAGA action thus is a representative action on behalf of the state. (Id. at p. 87.) “‘But a representative action under PAGA is not a class action.’ [Citation.]” (Ibid.)

B. Analysis

The Supreme Court has held that class action requirements “need not be met when an employee’s representative action against an employer is seeking civil penalties under” PAGA. (Arias v. Superior Court (2009) 46 Cal.4th 969, 975.) Manageability is a class action requirement. “In considering whether a class action is a superior device for resolving a controversy, the manageability of individual issues is just as important as the existence of common questions uniting the proposed class.” (Duran v. U.S. National Bank Association, supra, 59 Cal.4th at p. 29.) The parties have not cited and we have not located any California authority imposing an analogous requirement in PAGA actions. The trial court relied on Williams v. Superior Court (2017) 3 Cal.5th 531, 547 (Williams) as support for imposing a manageability requirement “on a class-wide basis,” but we agree with plaintiffs that Williams does not support that proposition.

In Williams, the Supreme Court considered the scope of discovery in a representative PAGA action. (See Williams, supra, 3 Cal.5th at pp. 537-538.) The plaintiff, a retail store employee, alleged that his employer failed to provide meal and rest periods and sought to pursue civil penalties for the violations in a representative PAGA action. (Id. at pp. 538-539.) During discovery, the plaintiff sought to discover the names and contact information for all affected employees in the state. (Id. at p. 539.) The store opposed the request as overbroad and unduly burdensome, and the trial court agreed; it ordered the store to provide the requested information for the single store at which the plaintiff worked. (Ibid.) The plaintiff sought writ relief, which the appellate court denied. The Supreme Court “granted review to resolve issues of first impression concerning the appropriate scope of discovery in a PAGA action.” (Id. at p. 540.)

In the course of resolving those issues, the Supreme Court rejected the appellate court’s reasoning that the plaintiff’s broad discovery request could be granted if he demonstrated a “uniform companywide policy.” (Williams, supra, 3 Cal.5th at p. 559.) The Court explained: “A uniform policy may be a convenient or desirable way to show commonality of interest in a case where class certification is sought, but it is not a condition for discovery, or even success, in a PAGA action, where recovery on behalf of the state and aggrieved employees may be had for each violation, whether pursuant to a uniform policy or not. [Citation.] This is not to say uniform policies play no role in PAGA cases; proof of a uniform policy is one way a plaintiff might seek to render trial of the action manageable. But nothing in PAGA or our privacy precedents suggests courts can or should condition disclosure of contact information, which might lead to proof of a uniform or companywide policy, on prior proof of a uniform or companywide policy.” (Ibid.)

The trial court quoted this portion of Williams to support its assertion that “a representative plaintiff in an action under [PAGA] must seek to render trial of the action manageable.” This was error. “Cases are not authority for propositions not considered therein.” (State Farm Fire & Casualty Co. v. Pietak (2001) 90 Cal.App.4th 600, 614.) Williams neither considered nor held that plaintiffs in a PAGA action must demonstrate that trial of their claims is manageable on a class-wide basis.

Defendant Warren points to two unpublished federal trial court decisions that dismissed PAGA claims on manageability grounds: Ortiz v. CVS Caremark Corp. (N.D. Cal., March 18, 2014, No. C-12-05859 EDL) 2014 WL 1117614, and Brown v. American Airlines, Inc. (C.D. Cal., Oct. 5, 2015, No. CV-10-8431-AG (PJWx)) 2015 WL 6735217. “Where California cases have not addressed an issue, they look to federal cases as persuasive authority on class action questions.” (Collins v. Safeway Stores, Inc. (1986) 187 Cal.App.3d 62, 73, fn. 6.) As noted above, however, PAGA claims are not class actions, and Warren has not explained why Ortiz and Brown are persuasive on this question of state law. Nor has it distinguished another unpublished federal case, Plaisted v. Dress Barn, Inc. (C.D. Cal., Sept. 20, 2012, No. 2:12–cv–01679–ODW (SHx)) 2012 WL 4356158, which persuasively reasoned, “To hold that a PAGA action could not be maintained because the individual assessments regarding whether a violation had occurred would make the claim unmanageable at trial would obliterate” the purpose of PAGA, “as every PAGA action in some way requires some individualized assessment regarding whether a Labor Code violation has occurred.”

Defendants SCL and SCT contend that “[i]t is irrational to argue that a trial of PAGA claims does not have to be manageable.” They argue that, “[i]f, after four years of litigation, plaintiffs’ PAGA claims had not been rendered manageable, the court was entitled to dismiss those claims” pursuant to its inherent power to control proceedings and court rules encouraging active management of complex cases. We do not disagree that the trial court has the inherent authority to assess the manageability of claims pending before it, nor that it may dismiss claims that prove unmanageable. However, in this particular instance, the trial court did not rely on that authority but instead expressly imposed “class-wide” manageability requirements on PAGA claims in connection with a class certification motion. That was error, but it does not preclude the trial court from revisiting the issue of the manageability of the PAGA claims pursuant to its inherent authority at some future point in the litigation.

DISPOSITION

The order denying class certification is reversed as to plaintiffs’ rest period claim and dismissal of their PAGA claims. The remainder of the order is affirmed. On remand, the trial court is to reconsider the motion to certify a class on the rest break claim and articulate the reasoning for its decision. The parties are to bear their own costs of appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

COLLINS, J.

We concur:

MANELLA, P. J.

WILLHITE, J.

Filed 7/15/20 Marriage of Boren CA4/2

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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

In re the Marriage of WESLEY R. and STEPHANIE A. BOREN.

WESLEY R. BOREN,

Appellant,

v.

STEPHANIE A. BOREN,

Respondent.

E071999

(Super.Ct.No. FAMVS1601872)

OPINION

APPEAL from the Superior Court of San Bernardino County. Guy Bovée, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.

Thomas E. Shinton for Appellant.

The Haynes Law Firm and Crista Haynes for Respondent.

I. INTRODUCTION

Appellant, Wesley R. Boren, appeals from the September 11, 2018 order of the family court authorizing respondent, Stephanie A. Boren, to move the parties’ three minor children to the state of Washington, where Stephanie had been living since April 2018. (Fam. Code, § 3048.) The move-away order was issued following a September 10-11, 2018 trial on the move-away issue. A May 2018 family court services (FCS) mediation report concerning the move-away issue was admitted at trial.

Wesley claims the court violated his procedural due process rights by issuing the move-away order following the September 10-11, 2018 trial, without requiring Stephanie to file a pretrial request for order (RFO) seeking the move-away order. In April 2018, the court ordered Stephanie to file an RFO on her move-away request, but she never did so. Thus, Wesley claims he is entitled to a reversal of the September 11, 2018 move-away order and a new trial on the move-away issue.

We conclude Wesley forfeited this claim of procedural error by failing to object, during the September 10-11, 2018 trial, to the issuance of any move-away order on the ground that Stephanie did not file an RFO seeking the move-away order. We also conclude that the move-away order cannot be set aside, or a new trial ordered on the move-away request, because Wesley has not shown he was prejudiced by Stephanie’s failure to file her RFO. Thus, we affirm the September 11, 2018 move-away order.

II. FACTS AND PROCEDURE

In June 2016, Wesley petitioned to dissolve his marriage to Stephanie, and in August 2016, the court issued preliminary custody and visitation orders concerning the parties’ minor children. In October 2017, Stephanie filed an at-issue memorandum. In December 2017, the court found that the issues to be determined at trial included child custody and visitation. In March 2018, the court entered a status only judgment dissolving the parties’ marriage.

On April 9, 2018, the parties appeared for what was to be a half-day court trial concerning property issues and the children’s school enrollment. The trial did not proceed, however, because Stephanie was moving to Washington. Pursuant to the parties’ stipulation, the court issued preliminary orders granting the parties joint legal custody, and Wesley sole physical custody, of the parties’ children. Stephanie was to give Wesley seven days’ notice of her intent to visit the children “as she will be living in Washington.” Stephanie was ordered to “file a new request for order re: move away issue” and was authorized to appear by phone on her “move away” RFO. The parties were referred to FCS. Stephanie never filed an RFO on her move away request.

On June 25, 2018, the court set a court trial for September 10, 2018, on several issues including child custody and visitation. The trial was conducted during the afternoons of September 10 and 11, 2018. The parties waived the court reporter. Thus, the record does not contain a reporter’s transcript of the September 10-11 trial. But the record includes a reporter’s transcript of the court’s September 11 oral pronouncement of its order granting Stephanie’s move-away request, made immediately following the unreported September 10-11 trial.

On September 11, 2018, the court explained its decision to grant Stephanie’s move-away request. The court first pointed out that the move-away decision was very difficult for the court to make because both parties were “very good parents” and their children loved them dearly. The court said it had considered the report that the parties’ oldest child, then age 11, had made to FCS, together with the child’s wish to live primarily with Stephanie. The court noted that the parties’ two other children were too young for their wishes to be considered.

The court then pointed out that the prior child custody and visitation orders in the case were temporary orders, and that the standard of proof at trial was therefore the “best interests” standard. The court also said it had considered “all of the move away factors” identified in the FCS report. The register of actions indicates that the FCS report concerned a May 21, 2018 FCS mediation. The register of actions also shows that, at trial, petitioner Wesley presented his case-in-chief, followed by respondent Stephanie’s presentation of her case.

On September 11, 2018, the court further ordered that the children would remain in California with Wesley through their school’s fall semester, but would visit Stephanie during the fall break, then would move to Washington during the Christmas break. Wesley’s counsel then advised the court that Wesley would be moving to Washington to be near his children. The court deferred making a final “visitation/time” order pending Wesley’s and the children’s move to Washington, but noted that “the intention would be to return back to an equal time share.” The court set a status hearing in December 2018 to address visitation.

In October 2018, Wesley filed an RFO to set aside the move-away order and for a new trial on the move-away issue. At a November 14, 2018 hearing on Wesley’s RFO, the court said that its tentative decision was to grant Wesley’s request for a new trial, given that Stephanie did not file an RFO on her move away request as the court had ordered. The court said that Stephanie’s RFO “was the mechanism by which the court was going to address the custody and visitation issues, specifically the move away.” But the court then asked the parties’ counsel whether Wesley had not waived his right to proceed by way of Stephanie’s RFO, given that “we went into the trial knowing that this was going to be a move-away trial.” (Italics added.)

In response, Stephanie’s counsel pointed out that Wesley’s “entire trial brief” had discussed whether the move-away order should be granted. In addition, the FCS mediation report, which was admitted at trial, “was specific to the move away” and “spoke to each one of the individual factors regarding the move away.” Counsel argued that a new trial on the move-away issue would be “a complete waste of time” because “nothing new could possibly be presented.”

Wesley’s counsel argued that Stephanie’s failure to file a pretrial RFO on the move-away issue prejudiced Wesley because it materially affected the manner in which he presented Wesley’s case at trial. Counsel explained that at trial he mistakenly believed that the court had previously issued final orders awarding the parties joint physical and joint legal custody of the children, rather than preliminary custody orders. Thus, he did not present Wesley’s case “as the primary caretaker” or pursuant to a “best interest factors prejudgment analysis.” Rather, he presented it “from really a postjudgment point of view.” He maintained that, if Stephanie had filed an RFO on the move away issue, he would have known that there were only temporary custody orders in place and he would have presented his case “so much differently.”

The court and Stephanie’s counsel pointed out that, before trial, the parties did not agree to any final custody orders. Again, the court asked Wesley’s counsel why it should not deem Wesley to have waived the filing of Stephanie’s RFO on the move-away issue when the parties knew the trial would be about Stephanie’s move-away request. Again, Wesley’s counsel argued that Stephanie’s failure to file her RFO prejudicially affected the way he presented his evidence. He acknowledged, however, that, during closing arguments, he and Stephanie’s counsel stipulated that the best interests standard applied to the move-away determination, and both counsel addressed the best interests standard in their closing arguments. Stephanie’s counsel emphasized that, given the FCS mediation, Wesley had “advance notice” of all of the issues and evidence to be discussed at trial. Stephanie’s counsel also noted that Wesley’s counsel was not claiming he had any new evidence to present, and that all of the relevant evidence concerning the move-away issue was presented at trial.

Near the conclusion of the initial November 14, 2018 hearing on Wesley’s RFO, the court asked the parties to file additional points and authorities on the waiver or forfeiture issue, and the parties did so. Following a continued hearing on December 11, 2108, the court denied Wesley’s RFO to set aside the September 11, 2018 move-away order and for a new trial. Wesley appeals from the September 11, 2018 move-away order.

III. DISCUSSION

In this appeal from the September 11, 2018 move-away order, Wesley claims the court violated his procedural due process rights to notice and an opportunity be heard on Stephanie’s move-away request during the September 10-11, 2018 trial. This procedural error occurred, he claims, because the court granted Stephanie’s move-away request without requiring her to file an RFO on her move-away request before trial, as she was ordered to do in April 2018. He argues this error entitles him to a reversal of the September 11 move-away order and a new trial on the move away issue.

Wesley has forfeited this claim of error by failing to object to Stephanie’s failure to file her RFO at the time of trial, and to request a continuance of the trial, if he was not ready to proceed without Stephanie’s RFO. It is settled that, “where a situation arises which might constitute legal surprise [warranting a new trial], counsel cannot speculate on a favorable verdict. He must act at the earliest possible moment for the ‘right to a new trial on the ground of surprise is waived if, when the surprise is discovered, it is not made known to the court, and no motion is made for a mistrial or continuance of the cause.’ [Citations.]” (Kauffman v. De Mutiis (1948) 31 Cal.2d 429, 432.)

Likewise, or more generally, a party will be deemed to have waived or forfeited a claim of error on appeal, including a claim of procedural error, unless the party raised an appropriate objection to the error in the trial court. (K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc. (2009) 171 Cal.App.4th 939, 948-949.) Thus, in Cushman v. Cushman (1960) 178 Cal.App.2d 492 (Cushman), the defendant waived or forfeited his right to complain on appeal that the lower court erroneously awarded his former spouse, the plaintiff, $1 a month in alimony, when the matter of alimony was neither mentioned nor prayed for in the plaintiff’s complaint. (Id. at pp. 494, 498-499.)

The defendant in Cushman proceeded to trial on the complaint and did not object when the plaintiff’s counsel advised the court that the parties had agreed that the plaintiff would be awarded $1 a month in alimony until further order of court. (Cushman, supra, 178 Cal.App.2d at pp. 494-495.) The Cushman court acknowledged that, “where a divorce decree is entered by default, alimony may not be granted if not prayed for in the complaint.” (Id. at p. 496.) “But when, as here, an appearance has been made by [the] defendant, he and his counsel are both present at the trial and actively participate therein . . . there is no need for his protection against undue advantage . . . . Defendant, present and properly represented, has knowledge of what takes place at the hearing, [and] is in a position to object to that which he deems improper . . . .” (Id. at pp. 496-497.)

Similarly here, Wesley proceeded to the September 2018 trial on Stephanie’s move-away request, knowing full well that the move-away request would be adjudicated during the trial and that Stephanie had not filed an RFO on her move-away request. The parties’ May 2018 FCS mediation focused on the move-away issue, and the mediator’s report was admitted into evidence during trial. By failing to object during trial to Stephanie’s failure to file her RFO, Wesley speculated on a favorable verdict. He gambled that the court would deny Stephanie’s move-away request, but he lost. He has therefore waived or forfeited his right to claim on appeal that he was surprised by Stephanie’s failure to file her RFO and that he is entitled to a new trial. (Kauffman v. De Mutiis, supra, 31 Cal.2d at p. 432; Cushman, supra, 178 Cal.App.2d at pp. 494-499)

Additionally, Wesley has not shown that he was prejudiced by Stephanie’s failure to file her RFO or that a different result was probable had the RFO been filed. Thus, we are required to disregard the procedural error or defect in the proceedings brought about by Stephanie’s failure to file her RFO. (Cal. Const., art. VI, § 13; Code Civ. Proc. § 475. ) Indeed, Wesley has not shown that Stephanie’s failure to file her RFO caused his counsel’s confusion concerning whether the best interests standard applied to the move-away determination. (In re Marriage of LaMusga (2004) 32 Cal.4th 1072, 1087; Fam. Code, §§ 3011, 3020.) To the contrary, the record shows that Wesley’s counsel’s confusion was due to his own unwarranted, mistaken belief that permanent joint custody orders were in place at the time of trial. Stephanie’s failure to file her RFO did not cause that confusion. It is also speculative to argue, and difficult to see how, an RFO on the move-away order would have disabused Wesley’s counsel of his mistaken belief that permanent custody orders were in place at the time of trial.

Wesley has also not shown that Stephanie’s failure to file her RFO caused him any other prejudice, or that a different result was probable had Stephanie filed her RFO. (Code Civ. Proc., § 475.) The record shows that, during closing arguments at trial, the parties’ stipulated that the best interests standard applied to the move-away determination, and each counsel addressed the best interests standard during their closing arguments. The record also shows that all of the relevant evidence concerning the move-away issue, and whether relocating to Washington with Stephanie was in the children’s best interests, was presented during the trial. Wesley does not claim that he would have presented any additional evidence had Stephanie filed her RFO before trial.

Citing Mullane v. Central Hanover Bank & Trust Co. (1950) 339 U.S. 306, Wesley argues: “It is a fundamental concept of due process that a judgment against a defendant cannot be entered unless he was given proper notice and an opportunity to defend.” But as the Mullane court observed: “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. . . . But if with due regard for the practicalities and peculiarities of the case these conditions are reasonably met, the constitutional requirements are satisfied.” (Mullane, at pp. 314-315, italics added.) Here, the record clearly shows that Wesley’s due process rights to notice and an opportunity to be heard on Stephanie’s move-away request were satisfied. As we have discussed, the record indisputably shows that Wesley knew, before trial, that the move-away issue would be adjudicated during the trial. The FCS mediator’s report, which was available to Wesley before trial, also apprised Wesley of the evidence that would be presented and discussed during the trial on the move-away request.

IV. DISPOSITION

The September 11, 2018 order authorizing Stephanie to relocate and move the parties’ three minor children to Washington state is affirmed. Stephanie shall recover her costs on appeal. (Cal. Rules of Court, rule, 8.278.)

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

FIELDS

J.

We concur:

RAMIREZ

P. J.

CODRINGTON

J.

Filed 7/14/20 Rancho Mirage Mobile Home etc. v. Coachella Valley Water Dist. CA4/2

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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

RANCHO MIRAGE MOBILE HOME COMMUNITY, LP,

Plaintiff and Appellant,

v.

COACHELLA VALLEY WATER DISTRICT,

Defendant and Respondent.

E072357

(Super.Ct.No. PSC1705021)

OPINION

APPEAL from the Superior Court of Riverside County. James T. Latting, Judge. Affirmed.

Rudderow Law Group, Andrew M. Sussman, Daniel T. Rudderow and Larissa A. Branes for Plaintiff and Appellant.

Best Best & Krieger, Whitney R. Blackhurst and James B. Gilpin for Defendant and Respondent.

INTRODUCTION

Rancho Mirage Mobile Home Community, LP, plaintiff, sued Coachella Valley Water District (CVWD), defendant, for violations of Proposition 218 and inverse condemnation. Specifically, plaintiff challenges the sewer charges imposed by defendant on plaintiff’s 80 vacant mobile home spaces. CVWD demurred, arguing that plaintiff failed to exhaust all administrative remedies prior to filing suit. After the second amended complaint failed to overcome the pleading defect, the trial court sustained defendant’s demurrer without leave to amend on that ground. Plaintiff appealed.

On appeal, plaintiff argues the trial court erred in sustaining the demurrer without leave to amend because plaintiff adequately pled that it was not required to exhaust its administrative remedies before filing suit because defendant’s administrative remedy was legally inadequate and or it would have been futile to do so. We affirm.

BACKGROUND

1. Historical Facts
2.
Plaintiff is the owner of the mobile home park known as Rancho Mirage Mobile Home Community located in Rancho Mirage, California, in Riverside County. The mobile home park consists of 288 spaces. Eighty of those spaces are uninhabited.

Defendant, CVWD, is a county water district tasked with providing sewer services to those within its service area, including plaintiff’s mobile home park. Specifically, plaintiff’s mobile home park is within defendant’s improvement district number 80. Defendant has provided plaintiff’s mobile home park with sewer services for a monthly sewer service fee per defendant’s regulations for years.

Prior to February 23, 2016, defendant’s monthly sewer services fees were incorporated under ordinance number 1138. However, on February 23, 2016, defendant adopted ordinance number 1427 which superseded ordinance number 1138 and updated its regulations. Under ordinance number 1427, the monthly sewer fee was the number of “equivalent dwelling units” (EDUs) on the particular property multiplied by the designated amount corresponding to the improvement district that the property was within. Different types of dwellings received different numbers; mobile homes counted as one EDU. Since plaintiff’s mobile home park location was within improvement district number 80, it had a monthly sewer fee of $24.50 multiplied by the 288 mobile spaces.

Included in ordinance number 1437, under section 12-1 titled “Hearing and Administrative Procedures,” was the administrative remedy procedure to be followed by customers wishing to appeal “a decision, enforcement of a policy or procedure, rate, fee, charge or penalty.” The relevant parts of section 12-1 provide as follows: the appeal must be in writing and submitted to the general manager within thirty days of the effective date of an enforcement action or decision, other than notice of service discontinuance. It requires that the appeal include the specific decision, policy, procedure, rate, charge or penalty being challenged along with a detailed description of the nature of the challenge, evidence in support of the challenge, and the remedy requested.

In addition to the process by which an appeal can be submitted, section 12-1 also grants customers a hearing on their appeal and details the procedure for such hearings. The hearing will be conducted by either CVWD’s General Manager or a designated representative. It will be held as soon as reasonably possible and in cases of service discontinuance reasonable efforts will be made to hold the hearing within five business days of receipt of the customer’s appeal. The administrative remedy states that customers will be given a reasonable opportunity to present information in support of their appeal and CVWD staff will be given an opportunity to reply. It goes on to require that a written notice of the decision by the general manager or the designated representative be given to the customer within five business days of the close of the hearing, absent any extenuating circumstances. That decision will be final.

The end of section 12-1 states that failure to file a timely appeal that adheres to the process set out therein will be considered a failure to exhaust administrative remedies that may affect the customer’s attempt at judicial review.

3. Procedural History
4.
On September 14, 2017, plaintiffs filed a complaint for declaratory relief, inverse condemnation, and request for injunctive relief against defendants.. The complaint alleged that in adopting ordinance numbers 1138 and 1427, defendant violated Proposition 218. Specifically, the complaint alleged defendant violated Article XIII D’s requirements because (1) the revenues derived from the sewer fees exceed the funds required to provide the service, (2) those revenues are used for impermissible purposes, (3) the sewer fees exceed the proportional costs of providing the service to the mobile home park spaces, with EDUs limited to charges for sewer fees for actually occupied spaces with residents using the service, and (4) the sewer fees impose an unlawful charge based on potential or future sewer uses, as they include charges based on the mobile home park operating at full capacity, which it was not. Essentially arguing that it was “unlawful, invalid, void, and unconstitutional” that defendant was charging plaintiff for uninhabited mobile home spaces.

On November 17, 2017, defendant filed a general demurrer in response to plaintiff’s complaint. Defendant contended that plaintiff failed to exhaust its administrative remedies before filing suit, particularly failing to file an appeal as detailed under section 12-1 of ordinance number 1427. Defendant also contended that the complaint was barred by Government Code section 66022’s statute of limitations and that plaintiff’s complaint failed to allege a compensable taking of plaintiff’s property to support plaintiff’s inverse condemnation cause of action.

On December 27, 2017, plaintiff opposed the demurrer. Plaintiff argued it was not required to exhaust the administrative remedies provided in section 12-1 for they were legally inadequate. Plaintiff also argued Government Code section 66022 was inapplicable because plaintiff’s complaint did not attack the facial validity of ordinance number 1427 but its specific application to plaintiff, which plaintiff argued was outside the scope of Government Code section 66022. It also addressed defendant’s claim that plaintiff failed to adequately plead an inverse condemnation claim.

At the January 10, 2018 hearing, the trial court sustained the demurrer with leave to amend at the hearing.

Plaintiff filed its first amended complaint on February 9, 2018, which alleged the same causes of action as the original complaint. Plaintiff also alleged that defendant was treating it more harshly than others in violation of state and federal law. The first amended complaint also alleged that the plaintiff exhausted its administrative remedies and or it would have been futile to do so. In support of this, plaintiff attached the letter it sent to CVWD’s Director of Engineering and to the City of Rancho Mirage’s City Attorney, dated June 23, 2017. In the letter, plaintiff alleged defendant’s charge for sewer fees of its 80 vacant spaces was a violation of Proposition 218 and requested an abatement of the sewer fees for the eighty vacant spaces and “a full refund for the sewer fees the City has illegally collected for the spaces over the past decade or so.” Plaintiff also attached the response letter it received from defendant’s general counsel, dated July 7, 2017, denying plaintiff’s request. In that response letter, defendant’s counsel explained that the plaintiff’s property only had one connection to the sewer system, not individual connections for each mobile home space, and referred plaintiff to section 12-1 of ordinance number 1427, for appropriate dispute resolution procedures.

On March 16, 2018, defendant filed another demurrer. Defendant argued that the plaintiff still had not exhausted its administrative remedies, and because of it, the trial court had no jurisdiction. Specifically, defendant argued the letters were evidence of plaintiff’s failure to exhaust administrative remedies as it was sent to the director of engineering not the general manager as required. Furthermore, defendant argued plaintiff failed to plead the futility of exhausting administrative remedies with particularity and renewed its previous statute of limitations and failure to adequately plead inverse condemnation arguments.

Plaintiff filed its opposition to the demurrer on April 18, 2018. In it, plaintiff argued that the futility and inadequate remedy exceptions did not require it to exhaust its administrative remedies. It also responded to defendant’s arguments regarding Government Code section 66022 and the inverse condemnation claim.

On May 1, 2018, after hearing oral argument, the trial court sustained defendant’s demurrer to the first amended complaint and granted plaintiff 30 days leave to amend.

On May 31, 2018, plaintiff filed its second amended complaint. The seconded amended complaint added an allegation that section 12-1 was a legally inadequate remedy because it failed to provide the standards for the evaluation of evidence or guidance on how the decisions are made. Plaintiff also added that the response letter from defendant’s general counsel supported its futility argument, as it spoke to the history of plaintiff’s claims and efforts and the specificity of the denial from defendant in response.

On July 5, 2018, the defendant filed its demurrer to the second amended complaint, asserting arguments made in its previous demurrers.

Plaintiff again opposed the demurrer, again arguing it was not required to exhaust the administrative remedies prior to filing suit, that it adequately pled an inverse condemnation claim, and that the statute of limitations from Government Code section 66022 was inapplicable.

On November 8, 2018, the trial court sustained defendant’s demurrer without leave to amend after finding that plaintiff did not exhaust its administrative remedies before filing suit and was required to do so. In making that ruling, the trial court noted that “CVWD’s counsel’s letter specifically stated that ‘if you wish to pursue this matter, the appropriate procedures for dispute are set forth in Part 12 of the Regulations.’ SAC, Ex. D. The clear import of CVWD’s statement that Plaintiff had administrative remedies that remained to be pursued is [proof] that CVWD’s counsel was not communicating a final decision of CVWD.” Plaintiff timely appealed.

DISCUSSION

Plaintiff contends that the trial court erred by sustaining defendant’s demurrer without leave to amend because plaintiff was not required to exhaust its administrative remedies. We disagree.

1. Standards of Review
2.
The standard of review on appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend is well settled. (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) Demurrers raise a question of law, so on appeal the standard of review is de novo. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034.) In reviewing demurrers, “we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]” (Ibid.) Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusion of law.

“When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action.” (City of Dinuba v. County of Tulare, supra, 41 Cal.4th at p. 865.) If the demurrer is sustained without leave to amend, we also ask whether there is a reasonable probability that the defect can be cured by amendment. (Ibid.) “The plaintiff has the burden of proving that an amendment would cure the defect.” (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) Where the defect can be cured by amendment, we find the trial court abused its discretion and reverse. (City of Dinuba v. County of Tulare, supra, 41 Cal.4th at p. 865.) Otherwise, we affirm.

It is proper to sustain a demurrer where a plaintiff failed to comply with the doctrine of exhaustion of administrative remedies. (Parthemore v. Col (2013) 221 Cal.App.4th 1372, 1379.) Whether plaintiff complied with the doctrine of exhaustion of administrative remedies is a question of law that we review de novo. (Plantier v. Ramona Municipal Water Dist. (2019) 7 Cal.5th 372, 380.)

3. The order sustaining the demurrer was proper because plaintiff did not exhaust its administrative remedies, and it cannot avail itself of the claimed exceptions.
4.
Plaintiff concedes that it failed to comply with its administrative remedies before filing suit. However, plaintiff argues that it was not required to comply with the administrative remedy because it was legally inadequate, and that complying with the requirement would have been futile, thereby excepting plaintiff from the need to exhaust of administrative remedies. In this regard, plaintiff asserts that the SAC was not an attack on Government Code section 66022 on its face, such that the exhaustion of remedies requirement applied. We disagree.

Under the doctrine of exhaustion of administrative remedies, “where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted before courts will act.” (Abelleira v. District Court of Appeal (1941) 17 Cal.2d 280, 292.) In fact, “exhaustion of the administrative remedy is a jurisdictional prerequisite to resort to the courts.” (Id. at p. 293.) After all, one of the purposes of the exhaustion doctrine “‘“is to lighten the burden of overworked courts in cases where administrative remedies are available and are as likely as the judicial remedy to provide the wanted relief.” [Citation.]’” (Sierra Club v. San Joaquin Local Agency Formation Com. (1999) 21 Cal.4th 489, 501.) “Exhaustion requires ‘a full presentation to the administrative agency upon all issues of the case and at all prescribed stages of the administrative proceedings.’” (City of San Jose v. Operating Engineers Local Union No. 3 (2010) 49 Cal.4th 597, 609, quoting Bleeck v. State Board of Optometry (1971) 18 Cal.App.3d 415, 432.) Therefore, consideration of whether exhaustion of remedies occurred in a given case depends on the procedures applicable to the public agency in question. (Tahoe Vista Concerned Citizens v. County of Placer (2000) 81 Cal.App.4th 577, 591-592.)

Although in general a litigant must exhaust administrative remedies before resorting to the court, there are exceptions. (City of San Jose v. Operating Engineers Local Union No. 3, supra, 49 Cal.4th 597, 609.) For one, the doctrine of exhaustion of administrative remedies does not apply when the administrative remedy is inadequate. (Ibid.) There is no single general definition that a procedure must satisfy to constitute an adequate administrative remedy. (Plantier v. Ramona Municipal Water Dist., supra, 7 Cal.5th at p. 383.) “Such a question may vary among agencies and legislative schemes.” (Ibid.) However, while there is no specific definition, courts have found that an administrative remedy that has “no procedures regarding how to request a hearing, no timelines for when such a hearing will be held or concluded, and no standards for decision making” is inadequate to trigger a mandatory exhaustion requirement. (City of Oakland v. Oakland Police & Fire Retirement System (2014) 224 Cal.App.4th 210, 237.)

A policy that only provides for the submission of disputes to a decision maker without stating whether the aggrieved party is entitled to an evidentiary hearing or the standard for reviewing the prior decision is generally deemed inadequate. (Plantier v. Ramona Municipal Water Dist., supra, 7 Cal.5th at p. 384.) That is because as a general matter, a remedy is not adequate unless it establishes “‘clearly defined machinery for the submission, evaluation and resolution of complaints by aggrieved parties.’” (Ibid., quoting Rosenfield v. Malcolm (1967) 65 Cal.2d 559, 566.)

Another exception to the doctrine of exhaustion of administrative remedies, is that of futility. (Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th 917, 936.) However, “‘“[f]utility is a narrow exception to the general rule”’ of exhaustion of remedies.” (Steinhart v. County of Los Angeles (2010) 47 Cal.4th 1298, 1313.) The futility exception only applies when a litigant can positively state that the agency it is suing, already declared what the ruling would be in a particular case, assuming that the plaintiff’s request had been timely. (Id. at pp. 1313-1314.) It is not enough that the litigant merely has a preconceived notion of what the ruling would have been if it followed the agency’s procedure. (Abelleira v. District Court of Appeal, supra, 17 Cal.2d at pp. 300-301.) It makes no difference if the preconceived notion was based on similar cases. (Ibid.)

A third exception applies when the administrative procedure is too slow to be effective, or when requiring exhaustion of administrative remedies before seeking judicial relief would result in irreparable harm. (City of San Jose v. Operating Engineers Local Union No. 3, supra, 49 Cal.4th at p. 609.)

In the present case, despite plaintiff’s contentions to the contrary, the claim for relief from the imposition of sewer fees was a direct challenge to the ordinance. That being the case, plaintiff had a legally adequate administrative remedy and procedure in place for customers wishing to appeal “a decision, enforcement of a policy or procedure, rate, fee, charge or penalty.” That procedure is detailed in section 12-1 titled “Hearing and Administrative Procedures.”

Section 12-1 clearly states that customer appeals must be in writing and submitted to the general manager within 30 days of the effective date of the challenged enforcement action or decision. The submission mechanisms do not end there. The procedure also describes that a customer’s appeal should include the specific decision, policy, procedure, rate, charge or penalty being challenged, a detailed description of the nature of the challenge, evidence in supporting the challenge, and the remedy requested.

Section 12-1 states that customers will be granted a hearing as soon as reasonably possible in which the customer will be given the opportunity to present information in support of their appeal. CVWD staff will be given the opportunity to reply. Final resolution of the customer’s appeal will be issued by the general manager within five business days of the close of the hearing, absent extenuating circumstances.

Thus, section 12-1 of ordinance number 1427 establishes a clearly defined machinery for the submission, evaluation and resolution of complaints by aggrieved parties that entitles aggrieved parties to evidentiary hearings. (See Plantier v. Ramona Municipal Water Dist., supra, 7 Cal.5th at p. 384.) Therefore, plaintiff cannot avail itself of the exception to the rule requiring exhaustion of administrative remedies under the legally inadequate remedy exception.

Nor can plaintiff avail itself from the exhaustion requirement under the futility exception. Plaintiff contends that it can amend its complaint to positively state that CVWD has declared it rejects the plaintiff’s claim and that any further appeal will result in a denial and rejection of the plaintiff’s protest. Plaintiff bases this argument on the response the plaintiff received to its letter and the history of the claims made with CVWD. However, in that response, CVWD informed plaintiff of its failure to follow the administrative procedure set out in section 12-1, by sending plaintiff’s appeal to someone other than CVWD’s General Manager, and by submitting it more than 30 days after enforcement of the action or decision plaintiff attempted to challenge.

Moreover, as the trial court reasoned in its order granting the demurrer, “CVWD’s counsel’s letter specifically stated that ‘if you wish to pursue this matter, the appropriate procedures for dispute are set forth in Part 12 of the Regulations.’ SAC, Ex. D. The clear import of CVWD’s statement that Plaintiff had administrative remedies that remained to be pursued is [proof] that CVWD’s counsel was not communicating a final decision of CVWD.” Thus, plaintiff’s futility contention is merely a preconceived notion of what the ruling would have been had it followed the procedure set out in section 12-1. (See Abelleira v. District Court of Appeal, supra, 17 Cal.2d at pp. 300-301.) That is not sufficient to establish futility under the doctrine of exhaustion of administrative remedies. (Ibid.) Therefore, the futility exception does not apply to the exhaustion requirement

Thus, the grant of demurrer was proper because plaintiff did not exhaust its administrative remedies, and it cannot avail itself of any exception to the requirement.

5. The grant of demurrer without leave to amend was proper because plaintiff could not have cured its complaint through amendment.
6.
Plaintiff does not make the specific argument that granting the demurrer without leave to amend was error. Rather, plaintiff asks that we reverse the judgment with the trial court directed to overrule the demurrer, “thereby requiring [defendant] to answer the SAC so that this case can proceed to a trial on the merits.” We note that it is the plaintiff’s burden to show that its complaint could be cured by amendment and failed to do so. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) We disagree with the notion that plaintiff’s complaint could have been cured.

Here, to cure plaintiff’s complaint, plaintiff would have to be able to allege compliance with section 12-1. However, section 12-1 had a 30-day limit on appeals from the day that the enforcement action or decision was adopted, and that time limit has long since passed, where plaintiff had 30 days from February 23, 2016, to submit the written appeal to CVWD’s General Manager before being deemed to have waived its right to appeal per section 12-1. Because the 30-day time limit had passed before bringing the lawsuit, plaintiff cannot comply with the exhaustion requirement under section 12-1. As such, it cannot amend its complaint to overcome the pleading defect. Therefore, the order sustaining the demurrer without leave to amend was proper.

7. Remaining Contentions
8.
Plaintiff also contends that it properly stated a cause of action for declaratory relief where the imposition of sewer fees for unoccupied lots constituted an “as applied” challenge to the ordinance, to which the statute of limitations did not apply. However, where the ordinance in question, ordinance number 1427, has been superseded by a new ordinance, ordinance number 1427.1, the issue is moot. In any event, because any challenge to an ordinance must be made within 120 days of its adoption, the statute of limitation has elapsed on that claim also. (Govt. Code, § 66022.)

As for plaintiff’s cause of action for inverse condemnation, the collection of sewer service fees from property owners does not constitute a constitutional taking. (Utility Audit Co. v. City of Los Angeles (2003) 112 Cal.App.4th 950, 957.)

DISPOSITION

The judgment is affirmed. Respondent is awarded costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

RAMIREZ

P. J.

We concur:

McKINSTER

J.

MILLER

J.

Filed 7/15/20 Hamby v. Hovsepian CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

BARBARA O. HAMBY,

Plaintiff and Appellant,

v.

MICHAEL HOVSEPIAN et al.,

Defendants and Respondents.

F077208

(Super. Ct. No. 14CECG01784)

OPINION

APPEAL from a judgment of the Superior Court of Fresno County. Alan M. Simpson, Judge.

Gilmore Magness Janisse and David M. Gilmore for Plaintiff and Appellant.

Whelan Law Group and Brian D. Whelan for Defendants and Respondents.

-ooOoo-

Plaintiff Barbara O. Hamby sued defendants Michael and Linda Hovsepian for breach of contract. Prior to trial, the breach of contract claim against Linda was dismissed. Following deliberation, as reflected in the special verdict form, three-quarters of the jury agreed Hamby and Michael never entered into a contract. The trial court subsequently denied Hamby’s motion for new trial. On appeal, Hamby contends a contract existed between herself and Michael as a matter of law. She also contends the court erred by admitting certain evidence, instructing the jury on agency, and denying the new trial motion. For the reasons set forth below, we affirm the judgment.

BACKGROUND

I. Trial testimonies
II.
a. Hamby
b.
i. Direct examination
ii.
Hamby and her husband Roger Vehrs were friends with the Hovsepians. Sometime in the spring of 2009, the four “went driving around” after dinner. During the car ride, the Hovsepians showed Hamby and Vehrs several residential properties, including a foreclosed home on Stanford Avenue (hereafter, “Stanford property”). The Hovsepians mentioned they “needed some money” to purchase the Stanford property. Following a conversation in the car, Hamby agreed to loan Michael $102,000 and he agreed to repay her over the next five years with 8-percent interest.

On May 12, 2009, Hamby wrote and signed a check for $102,000 and gave it to Michael. The word “Loan” was jotted down in the lower left-hand corner of the check. On the payee line, Michael’s name alone was listed. The preprinted information in the upper left-hand corner displayed Hamby’s name only as well as the following address: 2300 Tulare Street. Hamby testified the funds in this checking account were her “sole and separate property” and 2300 Tulare Street was Vehrs’s work address, which was used because the couple “didn’t have a mail receptacle at [their] home.”

A few days after the check was handed over, Michael brought Hamby and Vehrs a promissory note and deed of trust, the latter of which identified Hamby as the beneficiary. Ultimately, the Hovsepians only made three separate payments of $8,160.

iii. Cross-examination
iv.
Counsel for the Hovespians asked Hamby, “In this car ride conversation that you had, you don’t remember anything that Michael said during that ride, true?” (Boldface omitted.) Hamby replied, “As I said earlier, they took us around and talked about the homes they were buying or wanted to buy.” Counsel then read aloud the following portion of the transcript of Hamby’s April 8, 2016 deposition:

“ ‘QUESTION. Okay. And did Michael telling you that he’s going to repay you over five years, that was a conversation that took place in the car before you made the loan in May of 2009; is that right?

“ ‘ANSWER. I believe all those terms were conversed in the car.

“ ‘QUESTION. And in the car ride did Michael specifically tell you that he was going to repay – to pay you back over five years?

“ ‘THE WITNESS. It’s going to be the same answer.

“ ‘QUESTION. You don’t remember?

“ ‘ANSWER. The four of us were conversing. There was cross conversation. There was chatting going on in the front seat, the back seat. I don’t recall exactly who said what.

“ ‘QUESTION. Okay. Do you remember, yes or no, if Michael . . . told you . . . I will repay a loan over five years, during that car ride conversation? Did that happen? Yes or no.

“ ‘THE WITNESS. There was a conversation in the car between the four of us. There was chatting in the front seat and the back seat between husbands and wives and cross conversations. And I don’t recall who said what.

“ ‘QUESTION. Or whether Michael said five years or not, true?

“ ‘THE WITNESS. I don’t know who said what. I don’t remember. This was 2009.’ ”

The following exchange occurred:

“[Q.] That was also true of . . . Linda . . . , you don’t remember what . . . Linda . . . said, it was this blur of cross conversation; is that right?

“A. Yes, it was a conversation that had taken [place] years ago. Like I said, there was a cross conversation. I don’t remember who said what, but what I do remember at the end is that there was an agreement.

“Q. Okay. You just don’t know who said what?

“A. No, I can’t quote anybody exactly.” (Boldface omitted.)

Hamby acknowledged her name did not appear on the promissory note. Counsel asked, “When was the first time that you saw [the promissory note]?” (Boldface omitted.) Hamby replied, “I don’t recall exactly.” Counsel stated, “Wasn’t it true that the very first time you actually saw [the promissory note] was in 2016?” (Boldface omitted.) Hamby responded, “No.” Counsel then read aloud the following portion of the deposition transcript:

“ ‘QUESTION. Take a look at Exhibit 3, please. Looking at Exhibit A of Exhibit 3 . . . . This is [the] titled note secured by deed of trust. Do you know – first of all, . . . have you seen Exhibit A before today?

“ ‘ANSWER. No.

“ ‘QUESTION. Today is the first time you have seen this note secured by deed of trust; is that correct?

“ ‘ANSWER. Yes.’ ”

The following exchange occurred:

“[Q.] The truth is that you didn’t see any of these documents, the note or the deed of trust or anything, until you were first deposed last year; isn’t that true? [¶] . . . [¶]

“[A.] They were handed to me by Mi[chael] at the very beginning, and I didn’t look at them because I presumed they were what he said they were. And I handed them to my husband when we didn’t receive that final payment.”

Counsel asked Hamby, “The first time you saw the deed of trust was on April 8th, 2016; isn’t that true?” (Boldface omitted.) Hamby replied, “Not really.” Counsel then read aloud the following portion of the deposition transcript:

“ ‘QUESTION. Looking at Exhibit B to Exhibit 3, it’s titled short form deed of trust and assignment of rents. Before today had you seen this document?

“ ‘ANSWER. No.’ ”

Hamby admitted she herself never contacted the Hovsepians after they defaulted.

c. Michael
d.
Michael and Vehrs were close friends since the early 2000’s. The latter was also the former’s attorney. At trial, Michael testified he borrowed the money from Vehrs. He signed a promissory note, which listed Vehrs’s work address, and deed of trust, which identified Hamby as the beneficiary. Michael delivered the documents to Vehrs at his law office. Shortly thereafter, per Vehrs’s instructions, he went to Vehrs’s residence and retrieved a check from under a doormat. Michael used the funds to purchase the Stanford property on May 15, 2009. He resold the Stanford property on June 30, 2010, for a profit. In 2011, Vehrs surrendered the promissory note and deed of trust to Michael, who believed he was discharged of his obligation to repay the remainder of the loan.

Michael maintained he did not borrow the money from Hamby. He “never had any conversations about anything with [her] about [the Stanford] property ever.” Michael noted “[t]here was a car ride with [Vehrs]” only, during which the men visited the Stanford property but “never discussed anything.” He never gave the promissory note and deed of trust to Hamby. On the payee line of the checks Michael wrote to repay the loan, he listed Hamby’s name “[b]ecause . . . Vehrs . . . asked [him]” to do so.

e. Linda
f.
Linda testified she never asked Hamby or Vehrs for a loan and never conversed with either about purchasing the Stanford property. She also testified the car ride described by Hamby never happened. Linda added Vehrs previously represented her in a property transaction matter.

III. Jury instructions
IV.
At the jury instruction conference, Hamby’s counsel objected to the trial court instructing the jury with CACI Nos. 3700 (Introduction to Vicarious Responsibility), 3705 (Existence of ‘Agency’ Relationship Disputed), and 3709 (Ostensible Agent). The court overruled the objection, stating “there are several things that came out through the evidence that could be argued to support the theory . . . Vehrs was . . . Hamby’s agent and that she gave . . . Vehrs authority to act on her behalf.”

Following closing arguments, the court read CACI Nos. 3700, 3705, and 3709:

“[CACI No. 3700:] One may authorize another to act on his or her behalf in transactions with third persons. This relationship is called agency. The person giving the authority is called the principal. The person to whom authority is given is called the agent. A principal is responsible for harm caused by the wrongful conduct of her agent while acting within the scope of their agency or authority. An agent is always responsible for harm caused by his or her own wrongful conduct, whether or not the principal is also liable.

“[CACI No. 3705:] Michael . . . and Linda . . . claim that . . . Vehrs was . . . Hamby’s agent and that . . . Hamby is, therefore, responsible for . . . Vehrs’ conduct. If Michael . . . and Linda . . . prove that . . . Hamby gave . . . Vehrs authority to act on her behalf, then . . . Vehrs was . . . Hamby’s agent. This authority may be shown by words or may be implied by the party’s conduct. This authority cannot be shown by the words of . . . Vehrs alone.

“[CACI No. 3709:] Michael . . . and Linda . . . claim that . . . Hamby is responsible for . . . Vehrs’ conduct because he was . . . Hamby’s apparent agent. To establish this claim, either Michael . . . or Linda . . . must prove all of the following: One, that . . . Hamby intentionally or carelessly created the impression that . . . Vehrs was [her] agent; two, that Michael . . . and Linda . . . reasonably believed that . . . Vehrs was . . . Hamby’s agent; and, three, that Michael . . . and Linda . . . were harmed because [they] reasonably relied on their belief.”

The court also issued the following instructions, to which neither party objected:

“[CACI No. 5003 (Witnesses):] A witness is a person who has knowledge related to this case. You will have to decide whether you believe each witness and how important each witness’s testimony is to the case. You may believe all, part or none of a witness’s testimony.

“In deciding whether to believe a witness’s testimony, you may consider, among other factors, the following: How well did the witness see, hear or otherwise sense what he or she described in court? How well did the witness remember and describe what happened? How did the witness look, act and speak while testifying? Did the witness have any reason to say something that was not true? . . . What was the witness’s attitude toward this case or about giving testimony?

“Sometimes a witness may say something that is not consistent with something else he or she said. Sometimes different witnesses will give different versions of what happened. People often forget things or make mistakes from what they remember. Also, two people may see the same event but remember it differently.

“You may consider these differences, but do not decide the testimony is untrue just because it may differ from other testimony. However, if you decide that a witness did not tell the truth about something important, you may choose not to believe anything that witness said. On the other hand, if you think the witness did not tell the truth about some things but told the truth about others, you may accept the part you think is true and ignore the rest.

“Do not make any decision simply because there may have been more witnesses called by one side than the other. If you believe that it’s true, the testimony of a single witness is enough to prove a fact. [¶] . . . [¶]

“[CACI No. 208 (Deposition as Substantive Evidence):] . . . During the trial you received deposition testimony that was read from deposition transcripts and shown by video. A deposition is the testimony of a person taken before trial. At a deposition the person is sworn to tell the truth and is questioned by the attorneys. You must consider the deposition testimony that was presented to you in the same way as you consider testimony given live here in court. [¶] . . . [¶]

“[CACI No. 300 (Breach of Contract—Introduction):] . . . Hamby claims that she and Michael . . . entered into a contract for payment of money. . . . Hamby claims that Michael . . . breached this contract by not paying money according to the terms of the promissory note. . . . Hamby also claims that Michael[’s] . . . breach of contract caused harm to . . . Hamby for which Michael . . . should pay.

“Michael . . . denies that he ever entered into a contract with . . . Hamby, and further, that the contract he did enter into was with her husband, . . . Vehrs, and was forgiven when . . . Vehrs returned the original promissory note.

“[CACI No. 302 (Contract Formation—Essential Factual Elements)]: . . . Hamby claims that the parties entered into a contract. To prove that the contract was created, . . . Hamby must prove all of the following: One, that the contract terms were clear enough that the parties could understand what each was required to do; two, that the parties agreed to give each other something of value. A promise to do something or not to do something may have value. And, three, that the parties agreed to the terms of the contract.

“When you examine whether the parties agreed to the terms of the contract, ask yourself if under the circumstances a reasonable person would conclude from the words and the conduct of each party that there was an agreement. You may not consider the parties’ hidden intentions. If . . . Hamby did not prove all of the above, then a contract was not created.

“[CACI No. 303 (Breach of Contract—Essential Factual Elements):] To recover damages from Michael . . . for breach of contract, . . . Hamby must prove . . . [t]hat [she] and Michael . . . entered into a contract[, inter alia]. . . .

“[CACI No. 307 (Contract Formation—Offer):] Both an offer and an acceptance are required to create a contract. Michael . . . contends that a contract was not created because there was never any offer. To overcome this contention, . . . Hamby must prove all of the following: One, that . . . Hamby communicated to Michael . . . that she was willing to enter into a contract with [him]; two, that the communication contains specific terms; and, three, that based on the communication, Michael . . . could have reasonably concluded that a contract with . . . Hamby based on these terms would result if he accepted the offer. If . . . Hamby did not prove all of the above, then a contract was not created.”

DISCUSSION

I. Existence of contract
II.
“ ‘ “Contract formation requires mutual consent, which cannot exist unless the parties ‘agree upon the same thing in the same sense.’ ” ’ [Citation.] ‘The manifestation of mutual consent is generally achieved through the process of offer and acceptance.’ [Citation.]” (Pacific Corporate Group Holdings, LLC v. Keck (2014) 232 Cal.App.4th 294, 309.) “ ‘ “An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” ’ [Citations.]” (City of Moorpark v. Moorpark Unified School Dist. (1991) 54 Cal.3d 921, 930.) “ ‘ “ ‘Mutual assent is determined under an objective standard applied to the outward manifestations or expressions of the parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed intentions or understandings.’ [Citations.]” [Citation.] “Where the existence of a contract is at issue and the evidence is conflicting or admits of more than one inference, it is for the trier of fact to determine whether the contract actually existed.” ’ [Citation.]” (Pacific Corporate Group Holdings, LLC v. Keck, supra, at p. 309.) “But if the material facts are certain or undisputed, the existence of a contract is a question for the court to decide.” (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208.)

The record shows Michael received a check signed by Hamby for $102,000. Her name and Vehrs’s work address constituted the preprinted information in the upper left-hand corner of the check and the word “Loan” was written in the lower-left hand corner. The promissory note listed Vehrs’s work address while the deed of trust identified Hamby as the beneficiary. The checks Michael wrote to repay the loan were made payable to Hamby. At trial, Hamby testified she was the one who agreed to loan Michael the money; he agreed to repay her with interest in installments; they entered into the contract during a car ride in the spring in 2009; and he gave her and Vehrs the promissory note and deed of trust. At her 2016 deposition, however, Hamby could not recall “who said what” during the ride as there were “cross conversations” “between husbands and wives”; could not confirm that Michael specifically told her he would pay her back; and conceded she saw the promissory note and deed of trust for the first time at said deposition. The Hovsepians denied there was even a car ride and Michael asserted he borrowed the money from Vehrs. Contrary to Hamby’s contention “there was a contract as a matter of law” between herself and Michael, the state of the evidence enabled the jury to reasonably infer she was not the individual who communicated a willingness to enter into a contract with him and thus conclude—in the absence of a valid offer—no contract was formed between them. (See Evid. Code, § 312, subd. (b) [“[T]he jury is to determine the effect and value of the evidence addressed to it, including the credibility of witnesses . . . .”]; Kleem v. Chapot (1931) 112 Cal.App. 553, 556 [“It was the province of the jury to pass upon all questions of conflicting evidence or inconsistent statements, or the credibility of witnesses . . . .”].) Accordingly, we reject the notion the court should have advised the jury a contract between Hamby and Michael existed as a matter of law.

III. Evidentiary rulings and jury instructions
IV.
Next, Hamby contends the trial court erred by (1) allowing Michael to testify about Vehrs’s out-of-court statements; (2) allowing the Hovsepians to testify that Vehrs was their attorney; and (3) instructing the jury on agency. According to Hamby, even though “[t]here is no evidence that [she] did anything to even remotely suggest that Vehrs was her agent for purposes of dealing with th[e] promissory note,” “[t]he erroneous instructions combined with the admission of hearsay and statements about Vehrs being [the] Hovsepian[s’] lawyer were . . . used to argue to the jury that Vehrs was [her] agent” and therefore had the authority to forgive the loan.

Assuming, arguendo, the trial court erred in the manner alleged by Hamby, “[n]o judgment shall be set aside . . . in any cause, on the ground of misdirection of the jury, or of the improper admission or rejection of evidence, . . . unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.” (Cal. Const., art. VI, § 13.) “ ‘[A] “miscarriage of justice” should be declared only when the court, “after an examination of the entire cause, including the evidence,” is of the “opinion” that it is reasonably probable that a result more favorable to the appealing party would have been reached in the absence of the error.’ [Citation.]” (Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800.) Here, as reflected in the special verdict form, three-quarters of the jury concluded Hamby and Michael did not enter into a contract. This finding could have been attained without any reference to the contested testimonies and instructions. (See ante, at p. 10.) Moreover, as a result of this finding, the jurors never reached the question of whether Michael’s “performance of the contract was excused or waived,” which then would have required them to resolve whether Vehrs was Hamby’s agent and authorized to cancel the debt. The purported errors were harmless.

V. New trial motion
VI.
“The standard of review of the denial of a motion for new trial is as follows: ‘ “[A] trial judge is accorded a wide discretion in ruling on a motion for new trial and . . . the exercise of this discretion is given great deference on appeal. [Citations.] However, we are also mindful of the rule that on an appeal from the judgment it is our duty to review all rulings and proceedings involving the merits or affecting the judgment as substantially affecting the rights of a party [citation], including an order denying a new trial. In our review of such order denying a new trial, . . . we must fulfill our obligation of reviewing the entire record, including the evidence, so as to make an independent determination as to whether the error was prejudicial.” . . . Prejudice is required: “[T]he trial court is bound by the rule of California Constitution, article VI, section 13, that prejudicial error is the basis for a new trial, and there is no discretion to grant a new trial for harmless error.” [Citation.]’ [Citation.]” (Nazari v. Ayrapetyan (2009) 171 Cal.App.4th 690, 693-694, italics & fn. omitted.)

Hamby states the grounds for her new trial motion are “the same as the grounds for this appeal.” As previously discussed, the state of the evidence enabled the jury to reasonably infer Hamby did not enter into a contract with Michael and the alleged evidentiary and instructional errors by the trial court were not prejudicial. Hence, we uphold the trial court’s denial of the new trial motion.

DISPOSITION

The judgment and order of the superior court is affirmed. Costs are awarded to defendant Michael Hovsepian.

DETJEN, Acting P.J.

WE CONCUR:

SMITH, J.

MEEHAN, J.

Filed 7/17/20 Carter v. Farmers Insurance Group, Inc. CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

RICHARD D. CARTER,

Plaintiff and Appellant,

v.

FARMERS INSURANCE GROUP, INC. et al.,

Defendants and Respondents.

B297020

(Los Angeles County

Super. Ct. No. SC127929)

APPEAL from a judgment of the Superior Court of Los Angeles County, Craig D. Karlan, Judge. Affirmed.

Richard D. Carter, in pro. per.; Carter Sands and Eugene P. Sands for Plaintiff and Appellant.

Tharpe & Howell, Christopher S. Maile and Eric B. Kunkel for Defendants and Respondents.

_________________________

Appellant Richard Carter bought car insurance from respondents Farmers Group, Inc., (FGI) and Farmers Insurance Exchange (FIE) (collectively Farmers). Farmers charged his credit card twice for a premium payment and then refused to refund the payment within 24 hours of being notified of the overcharge. Instead, Farmers refunded the full amount within two weeks. Carter sued Farmers and now appeals from the judgment of dismissal entered after the trial court sustained a demurrer to Carter’s First Amended Complaint (FAC) without leave to amend. Carter alleged causes of action for conversion, unfair competition, and breach of fiduciary duty.

Carter lists 10 separate claims of error. Some of these claims are duplicative and others are not directed at the trial court’s actual ruling sustaining the demurrer. We summarize the relevant claims. With respect to the conversion cause of action, Carter contends the trial court erred in finding 1) the safe harbor provision of the Credit Card Act (Act) (Civ. Code, § 1747 et seq.) applies to respondents; 2) a cause of action for conversion cannot be based on an overcharge as a matter of law; and 3) Carter did not suffer any damages or injury from the duplicate charges. With respect to the unfair competition cause of action, Carter contends the trial court erred in finding 1) he lacked standing to bring the unfair competition cause of action because he had not suffered any injury; and 2) even if the acts alleged in the cause of action were not unlawful, they were unfair and so could support the cause of action. Carter states briefly that his breach of fiduciary cause of action is also viable. We affirm the judgment.

BACKGROUND

Carter filed his original complaint for conversion and unfair competition against FGI alone. FGI answered. Carter filed an amendment to the complaint identifying a doe defendant as FIE. FIE is a reciprocal or inter-insurance exchange, and FGI is FIE’s attorney-in-fact. FGI billed for and collected premiums for FIE.

FIE demurred. Carter filed a motion for leave to file the FAC, which, among other changes, added a new cause of action for breach of fiduciary duty.

The parties intended that FIE’s demurrer and Carter’s motion to file his FAC would be heard on the same day. Due to scheduling difficulties, only the demurrer was heard on December 18, 2018. The trial court sustained the demurrer with leave to amend.

Carter filed the FAC, which had been the subject of his motion for leave to amend. While Carter was entitled to amend his two existing causes of action in response to the court’s ruling on the demurrer, he never obtained a ruling on his motion to file an amended complaint containing the additional cause of action for breach of fiduciary duty.

Both respondents demurred to the FAC. The demurrers were sustained without leave to amend.

Because the trial court sustained the demurrers without leave to amend, the facts of this case are those set out in the FAC (Moore v. Conliffe (1994) 7 Cal.4th 634, 638 (Moore) [in setting forth the relevant facts for purposes of appellate review, we treat all material facts properly pled as true].)

Carter alleged he had maintained automobile insurance with Farmers for three of his vehicles since 1991, and Farmers encouraged its insureds to “pay premiums [online].” Carter set up an online account “to track premium payment due dates and to pay online.”

On August 6, 2014, the premium on a policy covering two of Carter’s automobiles was due. The full amount due to pay the premium was $1,025.71. That same day, the premium for a policy on a third automobile was also due; the full amount due to pay that premium was $119.74.

On August 6, 2014, Carter paid the $1,025.71 and $119.74 premiums online through Farmers. Carter used a Mastercard issued by Wells Fargo Bank. Although Carter’s choice of terminology tends to obscure this fact, the proceedings in this matter show that the Mastercard was a credit, not a debit, card.

On August 11, 2014, Carter reviewed his online Mastercard account with Wells Fargo and discovered that the account had been debited on August 7, 2014 in the amounts of $1,025.71 and $119.74 for payments made to Farmers. These debits duplicated those he had authorized in the same amounts on August 6, 2014. Carter had not authorized the payments made on August 7, 2014.

Carter called Farmers and spoke with a representative who acknowledged that the double payment was their error. Carter asked the representative “to immediately credit his account in the amounts that it had . . . misappropriated from his Wells Fargo account.” The representative replied that his account would be credited in due course. Carter alleged Farmers had “a written policy whereby it holds refunds from 7–14 days.” He also alleged Farmers had the ability to issue a refund the next business day.

On August 14, 2014, Farmers credited Carter’s Mastercard account for in the amount of $119.74.

On August 19, 2014, Carter reviewed his Wells Fargo account and saw Farmers had credited his Mastercard account in the amount of $944.15 (rather than the full remaining amount of $1,025.74). On August 20, 2014, Carter called Farmers to inquire about this discrepancy, but its representative was unsure of the reason for it. Carter asked that the remaining $86.66 be immediately returned to his account. Later that day, Carter received an email from Farmers acknowledging that a double payment was applied to his account in error. The email explained that Farmers had retained $86.66 because it erroneously believed that Carter had not provided it with a required mileage form. However, on August 21, 2014, Farmers credited the $86.66 to Carter’s account.

In his first cause of action, Carter alleged respondents misappropriated $1,025.71 and $119.74 from his account and that the credit balance on his Mastercard constituted “an intangible property right.” Farmers converted that intangible property right by “invading” the balance. Carter alleged three acts of conversion: the initial act of misappropriation, the refusal to immediately credit the monies back to his account, and the withholding of $86.66 until August 21, 2014.

In his second cause of action for unfair competition in violation of former Business and Professions Code section 17200, Carter alleged four acts: the three acts of conversion and a failure to disclose a premium. Carter alleged Farmers’s initial “position” that it was entitled to retain $86.66 for Carter’s failure to return his mileage form constituted the undisclosed premium.

Carter also alleged a third cause of action for breach of fiduciary duty, stating that as the attorney-in-fact for FIE, FGI owed him a fiduciary duty with regard to the insurance contracts executed on his behalf, a duty which required FGI to immediately return the amount of the duplicate charges. Carter, however, never obtained leave of court to add this cause of action.

DISCUSSION

A demurrer tests the legal sufficiency of the complaint. On appeal, “our standard of review is de novo, i.e., we exercise our independent judgment about whether the complaint states a cause of action as a matter of law.” (Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790.) We give “the complaint a reasonable interpretation, and [treat] the demurrer as admitting all material facts properly pleaded.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966–967 (Aubry).) We do not, however, assume the truth of “ ‘contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ ” (Moore, supra, 7 Cal.4th at p. 638.) Although we treat properly pled material facts as true, “we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

“The judgment must be affirmed ‘if any one of the several grounds of demurrer is well taken. [Citations.]’ [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.] And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Aubry, supra, 2 Cal.4th at p. 967.)

I. The Trial Court’s Ruling on Conversion

The trial court found Carter had alleged “nothing more than a simple overcharge, i.e., [Carter] was erroneously double-charged for his premium.” The court emphasized that by plaintiff’s “logic, every erroneous but refunded credit card charge would give rise to tort liability.” The court explained “Civil Code section 1747.60 requires retailers to correct credit card billing errors within 60 days, and a retailer is ‘every person other than a card issuer who furnishes money, goods, services, or anything else of value upon presentation of a credit card by a cardholder.’ (Civ. Code, § 1747.02, subd. (e).) Again, FGI refunded the entire amount within two weeks.”

Carter claims on appeal that the first time he “learned that Farmers was operating within a 60-day safe harbor was in the trial court’s written ruling sustaining the demurrer to the FAC without leave to amend.” He further claims that he had no opportunity to explain to the trial court why section 1747.60 did not apply.

This is not accurate. Respondents cited section 1747.60 in their demurrer. Carter thus was aware of and had the opportunity to address the applicability of that section in his opposition to the demurrer but did not do so, as respondents pointed out in their reply.

Carter’s inaccurate summary of proceedings in the trial court is not helpful. Nevertheless, the general rule is that an appellant may present a new legal theory for the first time on appeal from the trial court’s sustaining of a demurrer without leave to amend. (B & P Development Corp. v. City of Saratoga (1986) 185 Cal.App.3d 949, 959 [“An appellate court may also consider new theories on appeal from the sustaining of a demurrer to challenge or justify the ruling.”]; see Connerly v. State of California (2014) 229 Cal.App.4th 457, 464.) We consider and reject Carter’s belated claims that the Credit Card Act does not apply because, as we discuss in more detail below, this issue is dispositive of the conversion cause of action.

II. The Safe Harbor Provision of Section 1747.60 Defeats the Cause of Action for Conversion.

Carter contends he alleged respondents “without Carter’s consent or authorization, accessed his credit card balance and transferred $1025.74 and $119.15 to its bank account . . . [and] the trial court was required to accept this allegation as true.” He further contends he did not allege there was a “dispute over a charge” and as a matter of law under the facts of the FAC, there was no “overcharge.” He also contends that an overcharge can only occur if the cardholder makes willing use of his credit card.

Carter made many allegations about the transfer of money in addition to the “misappropriation” restated in his brief. We read the complaint “as a whole and its parts in their context.” (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) As we have set forth in our discussion above, Carter’s general factual allegations show a dispute over a charge to his Mastercard credit card.

“The Credit Card Act was enacted in 1971 to ‘impose[ ] fair business practices for the protection of the consumers.’ (Young v. Bank of America (1983) 141 Cal.App.3d 108, 114 [190 Cal.Rptr. 122].) It made ‘major changes in the law dealing with credit card practices by prescribing procedures for billing, billing errors, dissemination of false credit information, issuance and unauthorized use of credit cards.’ (Sen. Song, sponsor of Sen. Bill No. 97 (1971 Reg. Sess.) enrolled bill mem. to Governor Reagan (Oct. 12, 1971) p. 1.)” (Pineda v. Williams-Sonoma Stores, Inc. (2011) 51 Cal.4th 524, 534.) Thus, the Act is concerned with the means of payment used, not the subject of the transaction. Carter has not provided us, nor are we aware of, any authority or reason to exclude insurance policies purchased by consumers by way of credit card transactions.

Carter challenges the application of the Credit Card Act to his lawsuit on two grounds: he argues FGI and FEI are not “retailers” and the error here is not a “billing error” within the meaning of the statute. In discussing definitions under the Credit Card Act, Carter treats FIE and FGI as separate entities, arguing that neither one is a retailer who made a billing error. Ultimately, and confusingly, he discusses FIE first and then states that, for the same reasons, FGI is not a retailer.

The FAC alleges Carter presented his card to FGI for payment for his insurance and FGI accessed his account. FGI did so as the agent of FIE, and so if FGI is not liable FIE cannot be liable. Accordingly, we consider whether FGI meets the definition of a “retailer” who made a “billing error.”

1. “Billing Error”

Carter’s proposed interpretation of the terms “billing error” and “retailer” focuses on his claim that his authorization to FGI to use his credit card was limited to August 6, 2014 only, yet FGI, without his authorization, used the card again on August 7, 2014. Carter characterizes the duplicate set of charges as an invasion of his “intangible property rights.” Carter’s characterization is a contention, deduction and conclusion of law, which we are not required to accept. (Moore, supra, 7 Cal.4th at p. 638.) In common usage, payments made by credit card are called charges, and Carter’s allegations as a whole show a “dispute over a charge.”

The Credit Card Act defines a “billing error” by a retailer as simply “[a]n error by omission or commission in . . . posting any debit or credit.” (§ 1747.02, subd. (j).) Relying on “Investopedia,” Carter claims that “credit card posting is part of the clearing and settlement process that occurs when a cardholder uses their card for a transaction.” He claims that since he did not “use” his credit card on August 7, 2014, no “posting” of the second set of debits/charges occurred, and so those charges cannot be billing errors. Investopedia appears to be a website of unproven reliability which has no value in interpreting long-standing California statutes.

First, this argument is absurd. The very essence of a duplicate charge is that it is never authorized, regardless of when the card was actually presented to the retailer for use. Second, “posting” is not a defined term under the Credit Card Act. We therefore look to the word’s plain meaning, as found in standard dictionaries. (Mt. Hawley v. Lopez (2013) 215 Cal.App.4th 1385, 1396; Merced Irrigation Dist. v. Superior Court (2017) 7 Cal.App.5th 916, 926–927.) We agree with respondents that the dictionary definition most appropriate for “posting” as used in the Act is “to make transfer entries in.” (Merriam-Webster Dict. (2020) [as of July 13, 2020], archived at .) This definition has no temporal associations or other limitations. Nothing in the language of subdivision (j) adds a temporal limitation to posting, nor does the structure or purpose of the Act suggest that an error in posting a debit to a customer’s credit card account cannot be deemed a “billing error” unless the error in posting occurs simultaneously with the cardholder’s actual “use” of that card.

2. “Retailer”

The Credit Card Act defines a retailer as a person other than a card issuer who furnishes “goods, services or anything else of value upon presentation of a credit card.” (§ 1747.02, subd. (c).) Carter contends he did not “present” his credit card on August 7, 2014, so FGI was not acting as a retailer when it made the duplicate charges on that date. This is simply a variation of Carter’s previous argument that a billing error must occur simultaneously with or on the same calendar day that as the cardholder’s presentation or use of his credit card. Neither the structure nor purpose of the Act suggests it imposes such a temporal limitation on billing errors. We agree with respondents that FGI is a retailer because it allowed its customers to pay their premiums with credit cards and then furnished a thing of value, insurance coverage.

Carter relatedly contends FGI is not a retailer because it did not furnish “goods, services, or anything else of value” for the second set of charges on August 7, 2014; Carter’s insurance had already been renewed in exchange for the first set of charges on August 6, 2014. Carter’s interpretation would mean that errors involving duplicate charges or double billing would never fall under the Act, because no card holder receives anything of value for a duplicate billing. Nothing in the text of the Credit Card Act suggests such an arbitrary limitation on billing errors, particularly since it would arise indirectly as a result of a limited definition of “retailer” rather than as a result of the definition of “billing error.”

In his reply brief, Carter contends for the first time FGI never provided anything of value because it was not an insurer and so could not have provided insurance. He has forfeited this claim by failing to raise it in his opening brief and by failing to provide even minimal legal or factual support for his claim in his reply brief. (United Grand Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 158 [appellate court does not normally consider issues raised for first time in reply brief]; Cahill v. San Diego Gas & Electric Co. (2011) 194 Cal.App.4th 939, 956 [claim not supported with reasoned argument and citations to legal authority deemed waived].) We note briefly, however, that nothing in the definition of “retailer” indicates that the person who furnishes a good, service or thing of value must be the exact same person to whom the cardholder presents his credit card. In a typical large store retail transaction, for example, a corporation owns and thus furnishes the goods in the store to the customer but the customer pays for the goods by presenting his credit card to an employee of the corporation who is acting on behalf of the corporation. That is analogous to what happened here: Carter presented his credit card to FGI who was acting on behalf of FIE, the furnisher of the insurance.

Finally, Carter argues for the first time that he never sent an inquiry by mail to FGI and so the provisions of the Act do not apply. This issue, too, is forfeited.

Because we conclude the safe harbor provision of section 1747.60 supports the trial court’s ruling sustaining the demurrer without leave to amend, we do not address appellant’s other arguments about the conversion cause of action.

III. The Cause of Action for Unfair Competition Cannot Be Based on the Piecemeal Refund of the Duplicate Charges.

The court sustained the demurrer to the second cause of action for unfair competition (UCL) on the ground that Carter had failed to allege facts “showing [he] actually lost money or property from the alleged unfair competition” as required by Business and Professions Code section 17204. “Additionally, the Court is unwilling to extend liability under Business and Professions Code section 17200 to these facts, given that doing so would create UCL liability to any retailer that accidentally double charges a customer, even if the retailer were to refund the money immediately.”

Business and Professions Code section 17200 prohibits unfair competition, which is “any unlawful, unfair or fraudulent business act or practice.”

Carter contends that “conversion is unlawful and if this court finds that a cause of action for same has been alleged in the FAC, the UCL count will stand.” As we have explained, Carter has not stated a cause of action for conversion. Thus, the three alleged acts of conversion cannot support the unfair competition cause of action.

Carter alleged a fourth “unlawful” act: Farmers’s initial position that it was retaining the $86.66 to cover an increase in premium due to Carter’s failure to return a mileage form for one his vehicles. Carter contends Insurance Code section 381, subdivision f) mandates that a premium must be stated in a policy and Insurance Code section 383 makes failure to comply with section 381, subdivision (f) a misdemeanor. He alleged Farmers unlawfully and unilaterally increased his insurance premium without first disclosing the amount of the increase and the reason therefor – its non-receipt of the required mileage form.

The duplicate charges had nothing to do with an increase in premiums. Indeed, Carter alleged he had supplied the required form, so the error was just that – a billing error. Whatever Farmers’s “position may have been about its two or three day delay in refunding a small portion of the erroneous charges, it is undisputed it did refund all of the duplicate charges to Carter within two weeks of the billing error and well within the 60-day safe harbor period. Farmers complied with the requirements of the Act and is not liable for its brief retention of a portion of the duplicate charge for a few days regardless of its reasons for that retention. The unfair competition cause of action cannot be premised on Farmers’s lawful piecemeal refund of the duplicate charges by relabeling it an unlawful premium increase.

Carter argues a new theory of unfair competition on appeal, claiming respondents had a duty under Insurance Code sections 330 and 332 to communicate with him about various aspects of the duplicate charges. These sections are found in Division 1, Part 1, Chapter 3 of the Insurance Code, which is entitled “Negotiations Before Execution.” They are part of a statutory scheme which requires “ ‘full disclosure at the inception of the insurance contract and grant[s] a statutory right to rescind based on concealment or material misrepresentation at that time.’ ” (Nieto v. Blue Shield of California Life & Health Ins. Co. (2010) 181 Cal.App.4th 60, 76.) Carter had renewed his insurance before the duplicate charges were made, and he does not explain how a failure to communicate after renewal about duplicate charges could have had any bearing on his already completed decision to renew. This theory cannot save the unfair competition cause of action.

Carter further contends that even if respondents’ acts are not unlawful, they are unfair within the meaning of the UCL. Carter alleged that respondents’ four acts were “both an unlawful and an unfair business practice.” He alleged three of the acts were unlawful acts of conversion and one a misdemeanor violation of the Insurance Code. He did not, however, allege any facts showing that these acts were “unfair” within the meaning of the UCL.

As Carter points out, in consumer cases under the UCL a business practice is unfair if (1) the consumer injury is substantial; (2) the injury is not outweighed by any countervailing benefits to consumers or competition; and (3) it is an injury that consumers themselves could not reasonably have avoided. (Camacho v. Automobile Club of Southern California (2006) 142 Cal.App.4th 1394, 1403.)

Carter contends there “is nothing in the FAC that has established that the consumer harm alleged is not ‘substantial’ or otherwise outweighed by countervailing benefits provided by Farmer[’]s conduct.” Carter has it backwards: he was required to allege facts showing that respondents’ conduct was unfair, including that any injury is not outweighed by a countervailing benefit to consumers. He may argue this as a new theory on appeal, but he is required to show that there is “a reasonable possibility” that he can allege facts to support this theory and cure the defect in his pleading. (See Aubry, supra, 2 Cal.4th at p. 967; Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1163 [plaintiff has the burden of establishing he could amend to cure defect].) He has not made such a showing.

Respondents complied with the Credit Card Act, which was enacted to protect consumers. Even assuming a consumer suffers some injury from billing errors, by enacting the Credit Card Act, the Legislature has necessarily determined any injury suffered within 60 days of the error is outweighed by the countervailing benefit of the safe harbor provision, which gives retailers an incentive to correct billing errors in a timely manner.

IV. The Cause of Action for Breach of Fiduciary Duty is Unauthorized.

As we set forth above, Carter did not obtain leave of court to add his third cause of action for breach of fiduciary duty. He was required to do so. (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) There is an exception to this rule when “the new cause of action directly responds to the court’s reason for sustaining the earlier demurrer. (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.) The exception does not apply here. Accordingly, the trial court properly sustained the demurrer to this cause of action. (Harris, at pp. 1022–1023.)

V. Miscellaneous Claims
VI.
Carter makes several meritless contentions, which we need not address in detail.

Carter contends Insurance Code section 481.5, which allows insurers 25 days to refund premiums to insureds, does not apply to the facts of this case. Although respondents referred to this section in their demurrer, the trial court did not in any way rely on this section to sustain the demurrer.

Carter contends the trial court concluded that his three causes of action could not be stated because Farmers “accidentally” double charged Carter. He contends intent is not relevant to these causes of action. It is not reasonable to understand that the trial court concluded as a matter of law that respondents “accidentally” double charged Carter. The court repeatedly used the word “erroneous” when discussing respondents’ double charge. The court used the phrase “accidentally” only once, when it noted that Carter’s theory would extend “UCL liability to any retailer that accidentally double charges a customer, even if the retailer were to refund the money immediately.”

Carter contends he has alleged “an identifiable trifle of an injury” and so has standing under the UCL. We have not based our affirmance of the demurrer on lack of standing, due to lack of injury or otherwise.

Carter contends the trial court erred in finding that respondents were “absolved” of their tortious conduct because they “ ‘refunded the entire sum [converted] within two weeks.’ ” Carter does not provide a citation to the record for this “finding.” We do not conclude the trial court found respondents committed tortious conduct but were absolved of it. We certainly have not affirmed the trial court’s ruling on that ground.

DISPOSITION

The judgment is affirmed. Costs are awarded to respondents Farmers Group, Inc. and Farmers Insurance Exchange.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

STRATTON, J.

We concur:

BIGELOW, P. J

WILEY, J.

Filed 7/17/20 Thompson v. C.L. Knox, Inc. CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

JACKIE THOMPSON et al.,

Plaintiffs and Appellants,

v.

C.L. KNOX, INC.,

Defendant and Respondent.

F077511

(Super. Ct. No. S-1500-CV-278751)

OPINION

APPEAL from a judgment of the Superior Court of Kern County. David R. Lampe, Judge.

Gaines & Gaines, Alex Paul Katofsky, Miriam Leigh Schimmel; Kabateck Brown Kellner, Kabateck, Brian S. Kabateck, and Christopher B. Noyes for Plaintiffs and Appellants.

Muzi & Associates, Andrew C. Muzi and Nida L. Henderson; Hagan Law Group and Joseph A. Werner for Defendant and Respondent.

-ooOoo-

This is an appeal from an April 18, 2018 judgment of the Kern County Superior Court entered on an order granting summary judgment in favor of defendant C.L. Knox, Inc., doing business as Advanced Industrial Services (“AIS”). For the reasons set forth below, we affirm the judgment.

FACTUAL AND PROCEDURAL HISTORY

I. AIS
II.
AIS is a Bakersfield-based tank cleaning and services company. Its personnel consists of approximately 110 to 120 employees, 90 percent of whom work in the field and perform the following principal activities: oil tank and vessel cleaning, hydro excavation, high pressure water blasting, industrial painting and coating, and specialty material vacuuming. On occasion, the company receives temporary employees from local temporary staffing agencies.

AIS held safety meetings at its office every Thursday until February 5, 2015, and on the first Thursday of each month thereafter. They began at 5:15 a.m. and typically lasted between 20 minutes and an hour.

III. The class action
IV.
Three separate lawsuits were consolidated into a single class action. The operative complaint defined the class as “[a]ll individuals who (1) work or have worked for [AIS] as a non-exempt employee and all individuals who work or have worked for Continental Labor Resources, Inc. [(Continental) ] [and were] placed at [AIS] as a non-exempt employee and (2) who attended one or more safety meetings between February 25, 2009 and the present.” Plaintiffs Kevin Fritz, George Montoya, Jackie Thompson, Keith Aurthur, and Manuel Macias were appointed as the class representatives.

In the operative complaint, plaintiffs alleged AIS violated Labor Code sections 510, 1194, 1194.2, and 1198. They specified:

“32. During the liability period, [AIS] failed to pay Plaintiffs and members of the Class all minimum wages and overtime wages. Once every week for the entire Class Period (usually Thursday mornings at 5:00 a.m.), [AIS] held a mandatory safety meeting at its Bakersfield headquarters. The base rate for these safety meetings was the minimum wage. However, [AIS] did not properly pay overtime . . . to those employees who attended safety meetings. For example, if an employee attended the safety meeting (one hour for $8) then worked for eight hours on a job site (eight hours at their regular hourly rate, typically far greater than $8), the overtime hour was paid on the safety meeting’s lower $8 rate, not on the weighted average of all hours worked, as required by California law. This is a uniform companywide policy which results in substantial underpaid overtime.

“33. In addition, following the one-hour safety meetings on Thursday mornings, Class member-comprised work crews went to their [AIS]-owned crew trucks (or their own cars or trucks) and drove (or rode) to the off-site job locations, and then returned back at the end of the work day. Those who were passengers (rather than drivers) in [AIS]-owned vehicles, and those who drove themselves to the off-site locations using their personal vehicles, were never paid for the travel time to the offsite location. Plaintiffs allege that this travel time to the job site location after the mandatory safety meetings must be compensated. . . .”

Plaintiffs also alleged AIS furnished inaccurate wage statements (see Lab. Code, § 226, subds. (a), (e)); failed to promptly pay wages to former employees (see id., §§ 201-203); engaged in unfair competition (see Bus. & Prof. Code, § 17200 et seq.); and was subject to civil penalties under the Labor Code Private Attorneys General Act of 2004 (see Lab. Code, § 2699, subd. (f)).

V. The summary judgment proceeding
VI.
a. AIS’s motion
b.
On October 26, 2017, AIS filed a motion for summary judgment or, in the alternative, summary adjudication. It argued:

“AIS is entitled to judgment as a matter of law on the [claim] for [f]ailure to [p]ay [a]ll [w]ages because . . . travel time from AIS’[s] [office] to employees’ job sites following Thursday morning meetings at AIS’[s] [office] was not compensable time for non-driver employees; employees did not go ‘off the clock’ during their drive time following Thursday morning meetings; and AIS overpaid overtime compensation to its employees.”

Furthermore, AIS asserted it “is entitled to judgment in its favor on” the remaining causes of action because they “ ‘piggy back’ off of Plaintiffs’ unpaid wage claim[],” which “has no merit.”

In support of its motion, AIS presented the following evidence:

i. Deposition testimony
ii.
Leslie Knox, AIS’s president, was deposed on April 14, 2015. The transcript of the deposition read in part:

“Q. Now, there’s mandatory training sessions that [AIS] has for its employees; correct?

“A. Mandatory training sessions?

“Q. Right. I think I heard – in the morning I heard that it was on Thursday.

“A. Those aren’t training sessions.

“Q. What do you call them?

“A. Safety meetings.

“Q. Are they mandatory meetings?

“A. No.

“Q. Do employees have to attend?

“A. No.

“Q. They are voluntary?

“A. Yes.

“Q. A hundred percent?

“A. Yes. [¶] . . . [¶]

“Q. Are temporary employees required to attend the Thursday morning safety meetings?

“A. Nobody is required. I mean, they can show up, yes. [¶] . . . [¶]

“Q. Why not make those meetings mandatory?

“A. Because they don’t need to be mandatory. They are every day in the field.”

iii. Declarations
iv.
1. Knox
2.
In a declaration dated October 25, 2017, Knox attested:

“7. Up until February 5, 2015, every Thursday, AIS held weekly safety meetings at its office . . . in Bakersfield. After February 5, 2015 and continuing through to the present, the meetings have been held on the first Thursday of every month. The meetings have never been mandatory. Because the meetings are not mandatory, not all employees attend them. Further, because the meetings are not mandatory, employees are not reprimanded or otherwise disciplined for not attending them. . . . The declarations of [11] employees show that the Thursday morning safety meetings are not mandatory, that not all employees attend them, that employees are not reprimanded or disciplined for not attending them, and that employees are paid continuously from the start of the meetings to the end of their workday.

“8. At the Thursday morning safety meetings, employees participate in and share their thoughts about their jobs and safety. Employees ask questions, crews are recognized, and hats and t-shirts are passed out. Even though the meetings are not mandatory and no work is performed at them, AIS pays employees to attend. The rate that AIS pays employees to attend the non-mandatory meetings is the applicable minimum wage. [¶] . . . [¶]

“10. Nearly every week, employees work overtime hours. . . . [R]ecords show that Fritz and Macias accrued overtime hours nearly every week and that the vast majority of their overtime compensation in any given week was calculated and paid at the legal overtime rate based on their normal, regular wage rate rather than the minimum wage.

“11. Aurthur was only employed by AIS for a 12-day period. As such, AIS issued him only two paychecks and wage statements. Prior to that, all of Aurthur’s paychecks and wage statements were issued by Continental . . . . Thompson was employed only by Continental . . . ; he never became an AIS employee. As such, none of his paychecks and/or wage statements were issued by AIS. . . . Montoya was only a Work Force Staffing[ ] employee, so his paychecks and wage statements came only from Work Force Staffing and not from AIS. . . .

“12. For the convenience of employees, AIS provides them the opportunity to park their cars at its office . . . and to be driven to their job sites in AIS’[s] trucks. This transportation is optional, and employees are free to travel to job sites using other transportation of their own choosing. While most employees avail themselves of this option, many do not and, instead choose to drive themselves directly to their job sites for the day. [¶] . . . [¶]

“14. Employees who ride in the trucks as passengers or who transport themselves to the job sites are generally not paid for their travel time from the [office] to job sites; however, on Thursdays, following the non-mandatory meetings, as a practical matter, they do not go ‘off the clock,’ i.e., they are continually on the clock from the time of the beginning of the non-mandatory meeting until the end of their workday, including during their travel time. They are therefore paid for their travel time on Thursdays.”

2. Melvin Hale
3.
In a declaration dated October 7, 2015, Hale attested:

“1. I have worked as a Driver, Safety Tech, and Project Manager at [AIS]. My statements below are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for approximately six (6) years.

“3. I am paid by AIS on an hourly basis.

“4. The Thursday Morning Safety Meetings at AIS are optional. If an employee misses a Thursday Morning Safety Meeting, nothing happens to that employee.

“5. Everyone is welcome to attend the Thursday Morning Safety Meetings. I usually try and attend the Thursday Morning Safety Meetings. When I do attend those meetings, I am paid at the flat rate when attending the Thursday Morning Safety Meetings.

“6. The Thursday Morning Safety Meetings usually start at 5:10 am. There is a sign in sheet at these meetings so that AIS can pay those who attend the meeting. I get paid from the time I attend the Thursday Morning Safety Meeting until I complete my work for the day. I do not go ‘off the clock’ after the Safety Meetings.

“7. I usually work about 5 hours overtime per week, paid at my regular rate. I believe that AIS pays me accurately for my overtime hours. I have never come up short.”

4. Chris Uresti
5.
In a declaration dated October 7, 2015, Uresti attested:

“1. I am a Person Leading Work . . . – Crew Supervisor for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 4-5 years. I am an hourly employee.

“3. I usually attend 80-90% of the Thursday Morning Safety Meetings. These meetings are optional.

“4. I have never been penalized or disciplined for missing a Thursday Morning Safety Meeting. I don’t get paid for the meeting if I don’t attend.

“5. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings so I can get paid for attending.

“6. I get paid the minimum wage rate for attending the Thursday Morning Safety Meeting.

“7. The Thursday Morning Safety Meetings usually start at 5:15 am and at every meeting, different topics are discussed.

“8. I am paid continuously from the time I attend the Thursday Morning Safety Meeting until I complete my work for the day. I do not go ‘off the clock’ after these safety meetings.

“9. I work more overtime hours at my regular wage rate than at the minimum wage rate. On average, 95% of my overtime hours are at my regular wage overtime rate and 5% is at the minimum wage overtime rate.

“10. On a typical week, I work 5-10 hours overtime. Mostly I am paid at the regular . . . overtime rate for the overtime hours I work.

“11. I believe that AIS pays me accurately for my overtime hours.”

6. Ernie Rosas
7.
In a declaration dated October 7, 2015, Rosas attested:

“1. I am a Person Leading Work . . . for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 10 years. I am an hourly employee.

“3. I usually attend about 80% of the Thursday Morning Safety Meetings. These meetings are optional.

“4. I have never seen any employees penalized or disciplined for missing a Thursday Morning Safety Meeting.

“5. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings.

“6. At the Thursday Morning Safety Meetings, they present whatever they want to show us.

“7. I am paid continuously from the time I attend the Thursday Morning Safety Meeting until I complete my work for the day. I do not go ‘off the clock’ after these safety meetings.

“8. For my overtime hours, 90% are paid based on my regular wage rate and 10% is paid based on the minimum wage rate.

“9. I believe that AIS pays me accurately for my overtime hours.”

8. Robert Montoya
9.
In a declaration dated October 7, 2015, Robert attested:

“1. I am a Supervisor for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 4 years. I am an hourly employee.

“3. The Thursday Morning Safety Meetings are optional to attend. I typically attend the Safety Meetings.

“4. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings.

“5. The Thursday Morning Safety Meetings usually start at 5:15 am. Different topics are discussed such as . . . what’s going on with the company, employee of the month is recognized, and training class updates.

“6. For the time I attend the Thursday Morning Safety Meetings, I am paid the minimum rate for attending.

“7. I am paid continuously from the time I attend the Thursday Morning Safety Meeting until I complete my work for the day. I do not go ‘off the clock’ after these safety meetings.

“8. I work more overtime hours at my regular wage rate than at the minimum wage rate.”

10. Andrew Palafox
11.
In a declaration dated October 7, 2015, Palafox attested:

“1. I am a Person Leading Work . . . for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 9 years. I am an hourly employee.

“3. I usually attend Thursday Morning Safety Meetings. These meetings are optional.

“4. I have never been penalized or disciplined for missing a Thursday Morning Safety Meeting.

“5. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings so I can get paid for attending.

“6. At the Thursday Morning Safety Meetings, there are presentations and recognitions. The things that go on at the Thursday Morning Safety Meetings are different from my normal duties.

“7. I am paid continuously from the time I attend the Thursday Morning Safety Meeting until I complete my work for the day. I do not go ‘off the clock’ after these safety meetings.

“8. I work more overtime hours at my regular wage rate than at the minimum wage rate.

“9. I usually work 4 hours of overtime a week. Most of all my overtime hours are based on the regular wage rate.

“10. I believe that AIS pays me accurately for my overtime hours.”

12. Felix Marrufo
13.
In a declaration dated October 7, 2015, Marrufo attested:

“1. I am a Person Leading Work . . . for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 3 ½ years. I am an hourly employee.

“3. I usually attend about 90% of the Thursday Morning Safety Meetings because you get paid for attending.

“4. When I first worked at AIS, the [Person Leading Work] that I worked for, told me about the Thursday Morning Safety Meetings.

“5. There is no penalty or discipline against an employee who does not attend the Thursday Morning Safety Meetings.

“6. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings.

“7. After the Thursday Morning Safety Meetings, I am paid continuously until I stop work for the day. I do not go ‘off the clock’ after these safety meetings.

“8. When I work overtime, 95% of the time I get paid overtime based upon my regular wage rate. The other 5% of the time, I get paid at the minimum overtime wage rate.

“9. I usually work about 5-6 hours of overtime per week.

“10. I believe that AIS pays me accurately for my overtime hours.”

14. Christy Duran
15.
In a declaration dated October 7, 2015, Duran attested:

“1. I am a Field Safety Technician for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for almost 2 years. I am paid hourly.

“3. I usually always attend the Thursday Morning Safety Meetings because I am in the Safety Department. For other employees not in the safety department, this meeting is optional.

“4. When I first worked at AIS, Jake Farias told me about the Thursday Morning Safety Meetings.

“5. There is no penalty or discipline against an employee who does not attend the Thursday Morning Safety Meetings. [¶] . . . [¶]

“7. I am paid at the flat rate when attending the Thursday Morning Safety Meetings because I am in the Safety Dept.

“8. The Thursday Morning Safety Meetings usually start at around 5:15 am.

“9. We have a sign in sheet at the Thursday Morning Safety Meetings so AIS can pay those who attend the meeting.

“10. After the Thursday Morning Safety Meetings, I am paid continuously until I stop work for the day. I do not go ‘off the clock’ after these safety meetings.

“11. When I do work overtime, it is almost always at the regular wage rate. I believe that AIS pays me accurately for my overtime hours and I have never had any discrepancies.”

16. Abel Sanchez Gonzalez
17.
In a declaration dated October 7, 2015, Gonzalez attested:

“1. I am a field safety technician for [AIS]. The allegations set forth herein are within my personal knowledge and[,] if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS since September 2011. . . . I am an hourly paid employee.

“3. I always attend the Thursday Morning Safety Meetings because I am in the Safety Department. However, for other employees, this meeting is optional.

“4. The Safety Department sets out a sign in sheet at the Thursday Morning Safety Meetings so that all the employees who attend the meeting can be paid.

“5. There is no penalty or discipline against an employee who does not attend the Thursday Morning Safety Meetings. [¶] . . . [¶]

“7. I am paid at the regular rate when attending the Thursday Morning Safety Meetings because that is part of my regular job.

“8. The Thursday Morning Safety Meetings usually start at around 5:15 am.

“9. I usually talk about a safety topic at the Thursday Morning Safety Meetings.

“10. After the Thursday Morning Safety Meetings, I am paid continuously until I stop work for the day. I do not go ‘off the clock’ after these safety meetings.

“11. I believe that AIS pays me accurately for my overtime hours since I am paid for the hours that I turn in.”

18. Johnnie Smith
19.
In a declaration dated October 7, 2015, Smith attested:

“1. I am a Driver for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 1 year. I am an hourly employee.

“3. I usually attend all of the Thursday Morning Safety Meetings. These meetings are optional.

“4. I have never been penalized or disciplined for missing a Thursday Morning Safety Meeting[].

“5. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings so I can get paid for attending.

“6. I get paid the minimum wage rate for attending the Thursday Morning Safety Meetings. [¶] . . . [¶]

“8. I am paid continuously from the time I attend the Thursday Morning Safety Meeting until I complete my work for the day. I do not go ‘off the clock’ after these safety meetings.

“9. I work more overtime hours at my regular wage rate than at the minimum wage rate.

“10. I believe that AIS pays me accurately for my overtime hours.”

20. Jessica Stumbaugh
21.
In a declaration dated October 7, 2015, Stumbaugh attested:

“1. I am a Lean Sigma Manager for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 10 months. I am an hourly employee.

“3. I usually attend about 50% of the Thursday Morning Safety Meetings. These meetings are optional.

“4. If I miss a Thursday Morning Safety Meeting, I do not call in[] to notify anyone at AIS since the meeting is optional.

“5. I have never been penalized or disciplined for missing a Thursday Morning Safety Meeting[]. . . .

“6. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings so I can get paid for attending.

“7. At the Thursday Morning Safety Meetings, there are presentations and recognitions.

“8. I am paid continuously from the time I attend the Thursday Morning Safety Meeting until I complete my work for the day. I do not go ‘off the clock’ after these safety meetings.

“9. I believe that AIS pays me accurately for my overtime hours.”

22. Jason Harding
23.
In a declaration dated October 7, 2015, Harding attested:

“1. I am a Person Leading Work . . . for [AIS]. The statements set forth herein are within my personal knowledge and, if called as a witness, I could and would competently swear to them.

“2. I have been employed by AIS for 2 years. I am an hourly employee.

“3. I usually try and attend the Thursday Morning Safety Meetings unless I need to leave early for a job assignment.

“4. I have never been penalized or disciplined for missing a Thursday Morning Safety Meeting[].

“6. I sign in on a sign in sheet when I attend the Thursday Morning Safety Meetings so I can get paid for attending.[ ]

“7. The Thursday Morning Safety Meetings usually start at 5:15 am and at every meeting, different topics are discussed about safety concerns.

“8. For the time I attend the Thursday Morning Safety Meetings, I am paid the minimum rate for attending.

“9. I am paid continuously from the time I attend the Thursday Morning Safety Meetings until I complete my work for the day. I do not go ‘off the clock’ after these safety meetings.

“10. I work more overtime hours at my regular wage rate than at the minimum wage rate. [¶] On average, 80% of my overtime hours are at my regular wage overtime rate and 20% is at the minimum wage overtime rate.

“11. I believe that AIS pays me accurately for my overtime hours.”

v. Plaintiffs’ wage records
vi.
1. Fritz
2.
An AIS “EMPLOYEE EARNINGS RECORD” for Fritz covering the period between June 1, 2011, and July 31, 2012, listed three different hourly rates: $18; $12; and $8. For each hour of overtime worked, Fritz was paid $25.50 prior to May 2012 and $27 thereafter.

3. Macias
4.
An AIS “EMPLOYEE EARNINGS RECORD” for Macias covering the period between September 1, 2011, and October 31, 2013, listed three different hourly rates: $16; $12; and $8. Macias received $12,873 for 605 hours of overtime worked, an hourly rate of $21.28.

5. Aurthur
6.
There were two wage statements issued by AIS to Aurthur. For the period between November 12, 2012, and November 18, 2012, Aurthur earned $723: (1) $612 for working 36 “Regular” hours at an hourly rate of $17; (2) $102 for working four “Overtime” hours at an hourly rate of $25.50; and (3) $9 for working 0.75 “Regular” hours at an hourly rate of $12. For the period between November 19, 2012, and November 25, 2012, he earned $1,043: (1) $629 for working 37 “Regular” hours at an hourly rate of $17; (2) $255 for working 10 “Overtime” hours at an hourly rate of $25.50; (3) $6 for working 0.75 “Regular” hours at an hourly rate of $8; and (4) $153 for working 4.5 “Premium Time” hours at an hourly rate of $34.

c. Plaintiffs’ opposition
d.
On January 5, 2018, plaintiffs filed an opposition to AIS’s motion. It argued “each of the material issues which [AIS] purports is undisputed in this case is actually in dispute: Whether attendance at Thursday Morning Safety Meetings . . . was mandatory; whether employees were paid for their travel time from [AIS]’s [office] following [said meetings] to [their] respective job sites; whether employees were paid properly for their travel time; and whether employees were properly paid overtime wages.”

In support of their opposition, plaintiffs presented the following evidence:

i. Deposition testimony
ii.
Kimberly Morgan, AIS’s office manager, was designated as the person most knowledgeable to testify on the company’s behalf. She was deposed on April 14, 2015. The transcript of the deposition read in part:

“Q. . . . . [A]re there training meetings before the shift starts?

“A. Some days.

“Q. Okay. And those are mandatory meetings; correct?

“A. If you’re not working. [¶] . . . [¶]

“Q. Those are mandatory safety meetings that occur at [AIS]’s [office]; correct? [¶] . . . [¶]

“[A.] There is one safety meeting on a Thursday morning that is approximately for 30 or 45 minutes that would start before the start . . . of their job that they would report to the [office] or report to the field. [¶] . . . [¶]

“Q. And that’s a mandatory meeting; correct?

“A. If they’re not working.

“Q. Right. But most of them are not working at that hour before 6:00; correct?

“A. It just depends on . . . what they’re working on. We have night crews that work. We have crews that work twelve-hour shifts that might not be off for the safety meeting . . . . [¶] . . . [¶] . . . If the crews are working then they obviously will not go to the safety meeting, but if they are starting their job at 6:00 in the morning in the field, they would report to the office for the five o’clock safety meeting on Thursday mornings. [¶] . . . [¶]

“Q. So everybody attending the mandatory safety meeting on Thursday is being paid at minimum wage, although their regular wage is higher?

“A. Yes.”

iii. Aurthur’s wage records
iv.
Plaintiffs furnished the wage statement issued by AIS to Aurthur for the period between November 12, 2012, and November 18, 2012. A document already offered by AIS. They also furnished Aurthur’s timesheet for that period, which indicated Aurthur worked 36 regular hours and four overtime hours and attended a Thursday morning meeting that lasted 45 minutes. Based on the clock-in and clock-out times registered, however, plaintiffs calculated Aurthur worked 35.25 regular hours and 4.75 overtime hours as well as attended a 45-minute Thursday morning meeting. They allege Aurthur, who received $723 during this pay period, should have received $725.04 under the proper blended rate.

e. AIS’s reply
f.
In its reply filed on January 12, 2018, AIS maintained “there is no dispute that employee attendance at Thursday morning safety meetings is not mandatory, that employees never went off the clock on Thursdays following the non-mandatory safety meetings, that employees [were] paid continuously from the time the safety meetings began until the end of their workday, and that employees were overpaid their compensation.”

In support of its reply, AIS presented the following evidence:

i. Morgan’s declaration
ii.
In a declaration dated June 5, 2017, which was submitted “in support of [AIS’s] opposition to [Plaintiffs’] motion for class certification” (boldface & capitalization omitted) and preceded AIS’s filing of the summary judgment motion by a few months, Morgan attested:

“7. As it pertains to safety meetings, in my deposition on April 14, 2015, there was testimony regarding AIS’[s] safety meetings which occur at the job sites, away from the office on the oil leases, and regarding the Thursday morning Safety Meetings at AIS’[s] office.

“8. I know that the onsite safety meetings at the oil leases are mandatory for all employees. This is where the Supervisors and Foremen explain the work to be performed and the associated safety rules and regulations to make sure that the job is performed properly and safely.

“9. In reference to the Thursday morning Safety Meetings, as AIS’[s] Office Manager, I do not have personal knowledge of those meetings, and I am not the person most knowledgeable regarding those Safety Meetings. I have never attended one of those Thursday morning meetings which I am informed start around 5:15 a.m. at our office.

“10. AIS’[s] Safety Manager, Jacob Farias conducts those Thursday morning Safety Meetings, and he is supervised by the President of AIS, Leslie Knox. All inquiries regarding the Thursday Safety Meetings should be directed to those individuals and others in the Safety Department.”

On the basis of this declaration, AIS argued:

“Plaintiffs and the Court may not rely on Ms. Morgan’s deposition testimony on the matter of the Thursday morning safety meetings, because her testimony on this matter is not admissible at trial. Ms. Morgan’s deposition testimony on this matter is not admissible at trial, because she lacks personal knowledge on the topic of Thursday morning safety meetings and she lacked such knowledge when she testified about the meetings during her deposition.”

iii. Deposition testimonies
iv.
During Knox’s April 14, 2015 deposition, the following exchange occurred:

“Q. Do you know Kim Morgan?

“A. Yeah.

“Q. If she testified this morning that . . . those Thursday safety meetings attendance was mandatory, was she just incorrect?

“A. She has never been to one, to my knowledge. I mean, if she has, it was to get a timecard signed.

“Q. So you disagree with her on that point? [¶] . . . [¶]

“A. I don’t know why she would say that they’re mandatory when they’re not.”

At depositions conducted on December 19, 2017, and December 20, 2017, AIS employees Duran, Gonzalez, Hale, Marrufo, Uresti, and Ernest Davison each testified attendance at the Thursday morning meetings was not mandatory.

g. Ruling
h.
Motion hearings were held on January 19, 2018, and February 16, 2018. On March 26, 2018, the superior court granted AIS’s summary judgment motion. It reasoned:

“The disposition of this motion and this Class Action litigation hinges upon whether certain ‘Thursday morning’ safety meetings held by [AIS] at its [office] for employees were ‘mandatory.’ Plaintiffs allege that the meetings were mandatory. [AIS] denies that the meetings were mandatory. . . . Plaintiffs contend as a class that they were not paid all wages due in that they (as non-drivers) were not paid for travel to their worksite after attending the Thursday meetings, and that, since the meetings were mandatory, their travel time was compensable. [AIS] claims that wages were not required to be paid since the meetings were not mandatory, but that, in any case, the employees were paid. Plaintiffs dispute both that all were paid or that they were paid a proper rate. [¶] . . . [¶]

“Here, [AIS] has met its summary judgment burden by its evidence that the Thursday morning meetings were not mandatory . . . . From this essential fact [AIS] argues that it is entitled to summary judgment. If this fact is established to a summary judgment standard, then [AIS] argues that all other disputed facts become immaterial.

“Plaintiffs offer excerpts from the deposition of . . . Morgan, [AIS]’s office manager and designated Person Most Knowledgeable or Qualified at the deposition, to establish by her admission that the Thursday morning meetings were mandatory. . . .

“[AIS] objects to the deposition excerpts of . . . Morgan on the grounds that the testimony lacks foundation. In support of its objection, [AIS] offers a previous declaration of Morgan dated June 5, 2017 disclaiming personal knowledge of the Thursday safety meetings. The declaration was not offered for the first time in summary judgment, but pre-dated the summary judgment motion by months. [AIS] also offers the deposition testimony of . . . Knox, to the effect that Morgan has no knowledge of the meetings, thereby disclaiming Morgan’s personal knowledge.

“The issue presented is whether [AIS] can object to the testimony of its own [Person Most Knowledgeable] on the grounds of lack of foundation, and whether [AIS] may contradict prior deposition testimony of its [Person Most Knowledgeable] in support of granting summary judgment.

“Summary judgment requires that the evidence provided in declarations or discovery be admissible at trial. [Citation.] [AIS] does not offer Morgan’s testimony. Plaintiff[s] offer[] Morgan’s testimony. A party may object to the foundation of personal knowledge of any witness. [AIS] is not offering Morgan’s declaration to impeach her testimony by a contrary assertion. [AIS] is objecting to its foundation. Even though Morgan was a [Persons Most Knowledgeable], her testimony does not have the same binding effect as a response to a Request for Admissions. [Person Most Knowledgeable]’s may be confronted with some questions that are unexpected, even after the designation of categories of questions contemplated by the discovery statutes. The ‘lack of personal knowledge’ objection is not to the form of the question, and is therefore preserved.

“Generally speaking, concessions or admissions made during the course of discovery control over contrary affidavits or declarations filed in connection with a motion for summary judgment. The issue is most frequently confronted when a party opposes summary judgment with a contrary declaration. . . . [¶] . . . [¶]

“The true issue before the court in light of the objection made is whether Morgan’s testimony would be admissible at trial over the objection, creating an issue of her credibility or an issue upon a material fact that would need to be determined by the court or jury as a trier of fact. Presumably at trial her testimony would be offered in an Evidence Code section 776 examination. [AIS] would object. The court would likely conduct a[n Evidence Code] section 402 hearing upon the foundational fact. Morgan has disclaimed personal knowledge that the meetings were mandatory. Plaintiff[s] offer[] no other admissible evidence that they were. Based upon the objection and evidence offered regarding the lack of personal knowledge, the court would sustain the objection. [¶] . . . [¶]

“Once the court has determined that there is no triable issue of material fact over the question of the non-mandatory nature of the Thursday safety meetings, the issue remains if there are any other triable issues.

“If the Thursday meetings are not mandatory, then any dispute of material fact over whether employees were paid for their ‘drive time’ after the meetings may be moot. [AIS] claims that its evidence establishes that employees were paid for that time. Even if some were not, the voluntary safety meetings were neither required nor the employees’ principal activities such that their ‘drive time’ was compensable. Nevertheless, the court finds that [AIS] has met its burden that this ‘drive time’ was compensated. The evidence in opposition to this point is insufficient to meet Plaintiffs’ burden to raise a triable issue.

“The princip[al] issue raised by Plaintiffs on the point of whether there remains a triable issue if the Thursday meetings are deemed voluntary is that, whether voluntary or not, the meetings began the employees’ workday, typically resulting in overtime, and that there is a triable issue that [AIS] failed to pay a proper blended rate for overtime, because the time at safety meetings was calculated at a minimum rate, and the minimum rate was used to calculate overtime rather than at a rate blended for the pay period based upon the employees’ higher wage rates.

“[AIS]’s motion meets its burden to establish that the majority of employees’ overtime hours were paid at their higher wage rate. If the weighted average rate advocated by Plaintiffs was applied to the employees’ work hours during the week, [AIS]’s evidence establishes that [AIS] actually paid employees in excess of this ‘weighted average’ minimum, and [AIS] have proven to a summary judgment standard that Plaintiffs have suffered no damages. . . . [¶] . . . [¶]

“[Plaintiffs counter this evidence] with a single wage statement of Aurthur which demonstrates that, if Aurthur had been paid under Plaintiffs’ blended rate theory, he was underpaid for the period by $2.04. Does this proof by Plaintiffs establish that there is a triable material fact upon the issue?

“It does not. To be material for summary judgment purposes, the fact must be essential to judgment, that is, if proved, it would change the outcome of the case. Here, although counsel argues that the Aurthur wage statement is exemplary, there is no competent evidence that it is exemplary sufficient to overcome [AIS]’s evidence. In other words, if plaintiff[s] offered evidence that the deficient wage statement was of a type that predominated for the Plaintiffs or for the class, there might be a material issue. A deficiency of $2.04 per week for all employees over the period in question might be material, but there is no such evidence. The court is left with proof of a $2.04 deficiency for Aurthur under Plaintiffs’ blended rate theory, which is insufficient to overcome [AIS]’s evidence . . . . The triable fact posited is de mini[mi]s and therefore immaterial.”

DISCUSSION

I. Overview of summary judgment law
II.
Summary judgment “provide[s] courts with a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar).) “[Code of Civil Procedure] section 437c was significantly changed when amendments in 1992 and 1993 brought it closer to its federal counterpart, ‘in order to liberalize the granting of [summary judgment] motions.’ ” (Perry v. Bakewell Hawthorne, LLC (2017) 2 Cal.5th 536, 542 (Perry), quoting Aguilar, supra, at p. 848.) “Summary judgment is now seen as ‘a particularly suitable means to test the sufficiency’ of the plaintiff’s or defendant’s case. [Citations.]” (Perry, supra, at p. 542.)

A motion for summary judgment “shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining if the papers show that there is no triable issue as to any material fact, the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).)

A defendant seeking summary judgment bears an initial burden to produce evidence demonstrating either one or more elements of the cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, 25 Cal.4th at pp. 849-850, 854-855.) If the motion is made against a plaintiff who would bear the burden of proof by a preponderance of evidence at trial, the defendant “must present evidence that would require a reasonable trier of fact not to find any underlying material fact more likely than not—otherwise, he would not be entitled to judgment as a matter of law, but would have to present his evidence to a trier of fact.” (Aguilar, supra, at p. 851, italics & fn. omitted.) If the defendant makes a prima facie showing, then the burden of production “shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).) “The plaintiff . . . shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Ibid.) “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar, supra, at p. 850, fn. omitted.)

“[F]rom commencement to conclusion, the party moving for summary judgment bears the burden of persuasion[ ] that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.” (Aguilar, supra, 25 Cal.4th at p. 850, fn. omitted.)

III. Analysis
IV.
a. Sustention of AIS’s objection to Morgan’s deposition testimony
b.
In general, “we review the trial court’s final rulings on evidentiary objections by applying an abuse of discretion standard.” (Powell v. Kleinman (2007) 151 Cal.App.4th 112, 122; see Alexander v. Scripps Memorial Hospital La Jolla (2018) 23 Cal.App.5th 206, 226 [weight of authority holds appellate courts review rulings on evidentiary objections made in connection with summary judgment motion for abuse of discretion]; Howard Entertainment, Inc. v. Kudrow (2012) 208 Cal.App.4th 1102, 1122-1123 (conc. opn. of Turner, P.J.) [same].) “[E]videntiary objections based on lack of foundation, qualification of experts, and conclusory and speculative testimony are traditionally left to the sound discretion of the trial court.” (Alexander v. Scripps Memorial Hospital La Jolla, supra, at p. 226.) “As the parties challenging the court’s decision, it is plaintiffs’ burden to establish such abuse, which we will find only if the trial court’s order exceeds the bounds of reason.” (DiCola v. White Brothers Performance Products, Inc. (2008) 158 Cal.App.4th 666, 679.)

“[Code of Civil Procedure] section 437c has always required the evidence relied on in supporting or opposing papers to be admissible.” (Perry, supra, 2 Cal.5th at p. 542, italics omitted; see Hayman v. Block (1986) 176 Cal.App.3d 629, 638 [“The motion [for summary judgment] must be decided upon admissible evidence in the form of affidavits, declarations, admissions, answers to interrogatories, depositions and matters of which judicial notice shall or may be taken.”].) Here, plaintiffs offered Morgan’s deposition testimony on April 14, 2015, to prove employee attendance at AIS’s Thursday morning meetings was mandatory. AIS objected to this testimony, providing a declaration dated June 5, 2017, in which Morgan attested she “d[id] not have personal knowledge of those meetings,” “[was] not the person most knowledgeable regarding those . . . [m]eetings,” and “never attended one of those . . . meetings.” In view of this declaration, the superior court found Morgan’s deposition testimony inadmissible and sustained AIS’s objection. (See Evid. Code, § 702 [“[T]he testimony of a witness concerning a particular matter is inadmissible unless he [or she] has personal knowledge of the matter. Against the objection of a party, such personal knowledge must be shown before the witness may testify concerning the matter.”].)

The court recognized the general rule that “concessions or admissions made during the course of discovery control over contrary affidavits or declarations filed in connection with a motion for summary judgment.” (See Minish v. Hanuman Fellowship (2013) 214 Cal.App.4th 437, 459-460 [“[A] party may not defeat summary judgment by means of declarations or affidavits which contradict that party’s deposition testimony or sworn discovery responses.”].) As pointed out by the court, however: (1) Morgan’s deposition testimony “d[id] not have the same binding effect as a response to a Request for Admissions” because, even though Morgan was designated as the person most knowledgeable to testify on AIS’s behalf, she “may be confronted with some questions that are unexpected, even after the designation of categories of questions contemplated by the discovery statutes” (cf. Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1522 [“[Deposition answers] do not constitute incontrovertible judicial admissions as do, for example, concessions in a pleading [citation], or answers to requests for admissions, which are specially designed to pare down disputed issues in a lawsuit.”]); (2) Morgan’s declaration “was not offered for the first time in summary judgment, but pre-dated the summary judgment motion by months”; and (3) AIS “[did] not offer[] Morgan’s declaration to impeach her testimony by a contrary assertion.” Instead, “[t]he true issue before the court in light of [AIS’s] objection made [wa]s whether Morgan’s testimony would be admissible at trial over the objection.”

We conclude the superior court’s ruling did not exceed the bounds of reason.

c. Existence of triable issues of material fact
d.
“[A]s the reviewing court, we determine de novo whether an issue of material fact exists and whether the moving party was entitled to summary judgment as a matter of law. [Citation.] In other words, we must assume the role of the trial court and reassess the merits of the motion. [Citation.] In doing so, we will consider only the facts properly before the trial court at the time it ruled on the motion. [Citation.]” (Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1601.) “We apply the same three-step analysis required of the trial court. First, we identify the issues framed by the pleadings since it is these allegations to which the motion must respond. Second, we determine whether the moving party’s showing has established facts which negate the opponent’s claim and justify a judgment in the moving party’s favor. When a summary judgment motion prima facie justifies a judgment, the third and final step is to determine whether the opposition demonstrates the existence of a triable issue of material fact.” (Hutton v. Fidelity National Title Co. (2013) 213 Cal.App.4th 486, 493-494.)

Plaintiffs contend “there remained triable issues of fact” “[i]rrespective of Morgan’s testimony.” (Boldface omitted.) Specifically, (1) “[w]hether non-drivers should have been compensated for their drive time was still a triable issue”; and (2) “[t]he trial court misapplied the de minimis doctrine.” (Boldface omitted.)

i. Drive-time compensation
ii.
Plaintiffs assert non-drivers who rode from the Thursday morning meetings to their respective job sites must be compensated and cite to Burnside v. Kiewit Pacific Corp. (9th Cir. 2007) 491 F.3d 1053 (employees’ claims, brought under state law, are not preempted by § 301 of the Labor Management Relations Act (29 U.S.C.S. § 185(a)), and California state law recognizes an employee’s right to be compensated for time spent traveling from a designated meeting point to the jobsite when the employer requires this travel). Plaintiffs reason that their evidence showed the Thursday morning safety meetings were mandatory and related to the employees’ job duties.

AIS concedes employer-mandated travel time is compensable under Burnside but argue that, since attendance at the Thursday morning safety meetings was not mandatory, the travel from those meetings was not compensable. AIS cites to Rutti v. Lojack Corp. (9th Cir. 2010) 596 F.3d 1046, in which the Ninth Circuit referenced its holding in Lindow v. U.S. (9th Cir. 1984) 738 F.2d 1057 that held “pre-shift activities are compensable if they are an ‘integral and indispensable part of the principal activities for which covered workmen are employed,’ [citation] . . . .” (Ruttie, supra, at p. 1055.) “The test . . . to determine which activities are ‘principal’ and which are ‘an integral and indispensable part’ of such activities, is not whether the activities in question are uniquely related to the predominant activity of the business, but whether they are performed as part of the regular work of the employees in the ordinary course of business.” (Ibid.) Plaintiffs, in their reply brief, do not challenge AIS’s reliance on Rutti.

AIS asserts the Thursday morning safety meetings were “not . . . part of the regular work of AIS’[s] employees in the ordinary course of business.” The business involved cleaning tanks; the meetings involved employee recognition. Regardless, AIS compensated the employees who attended the meetings for their drive time as those employees did not “go off the clock” after the meetings.

“All employer-mandated travel that occurs after the first location where the employee’s presence is required by the employer shall be compensated at the employee’s regular rate of pay . . . .” (Cal. Code Regs., tit. 8, § 11160, subd. 5(A), italics added.)

AIS provided the deposition testimonies and declarations of Knox and various AIS employees to prove attendance at the Thursday morning safety meetings was optional and the activities at said meetings—e.g., presentations and discussions about job safety, recognition given to certain employees, distribution of corporate apparel, announcements and updates—were not part of non-safety employees’ regular work in the ordinary course of business. (See ante, at p. 2.) These deposition testimonies and declarations were also provided to prove employees that attended a Thursday morning safety meeting were not taken off the clock after the meeting ended and while they traveled from the office to their worksite.

Plaintiffs relied on either evidence that was not admitted (see fn. 8, ante), inadmissible evidence (see Perry, supra, 2 Cal.5th at p. 543 [“A party may not raise a triable issue of fact at summary judgment by relying on evidence that will not be admissible at trial.”]), or evidence insufficient to allow a reasonable trier of fact to find the Thursday morning safety meetings were mandatory and/or involved integral and indispensable components of plaintiffs’ principal activities.

Hence, on this matter, plaintiffs did not provide evidence demonstrating the existence of a triable issue of material fact.

iii. De minimis doctrine
iv.
Plaintiffs alleged AIS did not pay the proper amount of overtime compensation to employees who attended the Thursday morning safety meetings, i.e., the company utilized “[the] meeting’s lower $8 rate” rather than “the weighted average of all hours worked,” resulting in “substantial underpaid overtime.” (See 29 C.F.R. § 778.115 (2008) [“Where an employee in a single workweek works at two or more different types of work for which different nonovertime rates of pay (of not less than the applicable minimum wage) have been established, his regular rate for that week is the weighted average of such rates.”].) In support of its summary judgment motion, AIS provided declarations from numerous employees who attested their overtime pay was chiefly based on their regular wage rates and occasionally based on the minimum wage rate. Wage records provided by AIS demonstrated Fritz, Macias, and Aurthur were paid well above $12 for each hour of overtime worked. In their opposition, plaintiffs provided Aurthur’s wage statement and timesheet for the period between November 12, 2012, and November 18, 2012, as proof Aurthur was entitled to an additional $2.04 had his overtime pay been based on the “weighted average” rate. The superior court concluded AIS established “the majority of employees’ overtime hours were paid at their higher wage rate,” which was “in excess of th[e] ‘weighted average’ minimum,” and “prove[d] to a summary judgment standard that Plaintiffs have suffered no damages.” It considered “de mini[mi]s” and immaterial Aurthur’s purported underpayment.

On appeal, plaintiffs assert the court “misappl[ied] . . . the de minimis doctrine” with respect to the underpayment. “ ‘The function of the “de minimis” doctrine . . . is to place “outside the scope of legal relief the sorts of intangible injuries, normally small and invariably difficult to measure, that must be accepted as the price of living in society.” The maxim signifies “that mere trifles and technicalities must yield to practical common sense and substantial justice” so as “to prevent expensive and mischievous litigation, which can result in no real benefit to complainant, but which may occasion delay and injury to other suitors.” ’ [Citation.]” (Troester v. Starbucks Corp. (2018) 5 Cal.5th 829, 842-843.) Recently, our Supreme Court observed:

“[T]he modern availability of class action lawsuits undermines to some extent the rationale behind a de minimis rule with respect to wage and hour actions. The very premise of such suits is that small individual recoveries worthy of neither the plaintiff’s nor the court’s time can be aggregated to vindicate an important public policy.” (Troester v. Starbucks Corp., supra, 5 Cal.5th at p. 846.)

Assuming, arguendo, the court should not have invoked the de minimis doctrine, the $2.04 deficiency remained immaterial. “A fact is material when, under the governing substantive law, it could affect the outcome of the case.” (Wi-LAN Inc. v. LG Electronics, Inc. (S.D.Cal. 2019) 421 F.Supp.3d 911, 920, citing Anderson v. Liberty Lobby, Inc. (1986) 477 U.S. 242, 248.) The record shows Aurthur worked at AIS for 12 days. As noted by the court, plaintiffs could only demonstrate AIS underpaid Aurthur $2.04 during a single pay period. They did not offer any evidence “[Authur’s] deficient wage statement was of a type that predominated for the Plaintiffs or for the class.” Thus, plaintiffs’ evidence could not establish the existence of a triable issue of material fact.

DISPOSITION

The judgment of the superior court entered on an order granting summary judgment is affirmed. Costs on appeal are awarded to defendant C.L. Knox, Inc.

DETJEN, Acting P.J.

WE CONCUR:

SMITH, J.

MEEHAN, J.

Filed 7/17/20 Gonzales v. Superior Court 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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

DANTE DANIEL GONZALES,

Petitioner,

v.

THE SUPERIOR COURT OF ORANGE COUNTY,

Respondent;

THE PEOPLE OF THE STATE OF CALIFORNIA,

Real Party in Interest.

G059052

(Super. Ct. No. 18CF1823)

O P I N I O N

Original proceedings; petition for a writ of mandate to challenge an order of the Superior Court of Orange County, Michael F. Murray, Judge. Petition granted.

Sharon Petrosino, Public Defender, Sara Ross and Matthew Darling, Deputy Public Defenders for Petitioner.

No appearance for Respondent.

Todd Spitzer, District Attorney and Deputy District Attorney David R. Gallivan for Real Party in Interest.

THE COURT:*

Respondent court denied petitioner’s motion to reduce bail. Petitioner contends the court abused its discretion when it denied his motion and failed to reduce his bail according to the Emergency Bail Schedule. We agree, and therefore grant the petition.

FACTS

In June 2018 petitioner, Dante Daniel Gonzales, was arrested and charged in a felony complaint with human trafficking a minor (Pen. Code, § 236.1, subd. (c)(1)), pimping a minor (§ 266h subd. (b)(1)), pandering with a minor by procuring

(§ 266i subd. (a)(1) & (b)(1)), pandering (§ 266i subd. (a)), and misdemeanor destroying or concealing evidence.

The underlying facts are not set forth in the petition, but according to the arresting officer’s declaration filed pursuant to section 1269c in support of a motion to increase bail in an amount above the county bail schedule, police were called to a hotel where the occupants of a room refused to allow a woman to reenter to obtain her belongings. When police arrived they made contact with the occupants of the room, which included petitioner, his codefendant, and the victim. When interviewed, the victim, a minor, said she had been prostituting herself since December 2017 with a pimp in San Francisco when she was referred to petitioner for protection. The victim said she had been with petitioner since December 2017 and in the last six months she had earned approximately $30,000, of which she paid petitioner approximately $12,000. According to the officer’s declaration, the “[victim] stated [petitioner] has never harmed her, threatened to harm her or taken all of her money.”

The officer’s declaration states further that after petitioner received Miranda warnings, he said he didn’t know the victim “and that he arrived to the hotel drunk and does not remember anything.” In addition to explaining the circumstances of the offense, the declaration seeking an increase in bail also states petitioner is from the San Francisco bay area and therefore “it is possible for him to flee California.” Based on these facts, the officer recommended that petitioner’s bail be set at $500,000.

Not reflected in the docket, but according to the People, prior to petitioner’s arraignment on the complaint, the Pretrial Services Unit approved the officer’s declaration in support of the motion to increase bail and the request for a section 1275.1 hold, which requires petitioner to demonstrate that no portion of consideration used for posting bail was feloniously obtained. Thereafter, petitioner was arraigned in custody on a felony complaint and at the time of his arraignment, the officer’s declaration was filed and the magistrate set provisional bail at $500,000.

A preliminary hearing was conducted on August 23-24, 2018, and before petitioner was held to answer, the magistrate denied petitioner’s oral motion to reduce bail and release the section 1275.1 hold.

On April 8, 2020, petitioner filed a motion for bail review, waiver of the section 1275.1 hold, and request for an order releasing petitioner on his own recognizance or reasonable bail “due to the global pandemic known as the coronavirus, or COVID-19.”

The People opposed the motion, and in addition to the facts in the officer’s declaration, the opposition states, “Defendant has dual citizenship. If the court reduces his bail and lifts the section 1275.1 hold, there is a substantial likelihood defendant will leave the United States for Peru, where he is also a citizen. California Constitution, Article I, Section 28, subdivision (f)(3) specifically requires the court consider the probability of a defendant’s appearing at his trial in setting or denying bail. Moreover, Emergency Rule of Court 4, subdivision (d) states that the constitutional provision in subdivision (f)(3) is still in force during the pandemic. [¶] ‘Nothing in the Emergency Bail Schedule restricts the ability of the court to deny bail as authorized by article I, section 12, or 28(f)(3) of the California Constitution. (Emergency Rule of Court, 4, subd. (d).)’”

In his reply, petitioner alleged that he is “suffering from breathing issues that have plagued him for years.” In response to the People’s claim that petitioner failed to allege a changed circumstance to justify a bail hearing, petitioner explained that his medical vulnerability constitutes a change in circumstances and because COVID-19 is a respiratory illness, “[a] person with pre-existing respiratory illnesses is more likely to suffer more serious symptoms, requiring hospitalization, intubation, and even death. Thus, he is medically at risk for contracting the virus and suffers a greater chance of serious complications or death should he get it.”

In response to the claim that he represents a flight risk, petitioner stated that “his maximum exposure is 12 years in jail, which would be served at 50%. His offer from the prosecution was low-term of 5 years, [5, 8, 12] which would be served at half. He has almost 2 years of actual credits in jail awaiting trial. The idea that he is more likely to flee to avoid a prison term which he has almost completed, is farcical.”

On April 14, 2020, respondent court conducted a hearing on the motion for bail review, waiver of the section 1275.1 hold, and request for an order releasing petitioner on his own recognizance or reasonable bail. The court denied the motion, and presumably in reference to the Emergency Bail Schedule adopted as a result of the COVID-19 pandemic, the court said, “The charges in this case are the kind of charges that are specifically exempted from the new bail schedule, and so I don’t find that this is the type of offense that should be reduced according to the new bail schedule. I find that this is one of the excepted cases that falls outside of the new bail schedule.”

Petitioner filed a petition for writ of mandate in this court and he contends that respondent court abused its discretion when it failed to reduce his bail, or failed to exercise its discretion to reduce his bail, erred when it failed to vacate the section 1275.1 hold, and he was denied equal protection and due process of law as a result of respondent court’s errors. Citing Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 180, this court ordered the People to file opposition to the petition solely on petitioner’s claim that respondent court abused its discretion when it denied his motion to reduce bail.

In their opposition, the People urge this court to summarily deny the petition and state, “[t]he issue is not whether the order fixing the amount of petitioner’s bail above the countywide bail schedule was an abuse of discretion. This order was never challenged. The issue now before this Court is whether [respondent court] abused [its] discretion on April 14, 2020 when [it] denied petitioner’s motion to reduce the amount of bail. [Respondent court] neither increased nor reduced the amount of bail set for petitioner.”

Based on the facts in this case, respondent court abused its discretion when it failed to comply with the Emergency Bail Schedule in effect at the time of petitioner’s bail hearing.

DISCUSSION

According to the 2020 Orange County Uniform Bail Schedule, “For all offenses and enhancements for which no presumptive bail is specified . . . the presumptive bail shall be set according to state prison top term potential for the offense plus enhancement.” Based on the offenses alleged in the complaint and the information, 12 years is the top term for human trafficking a minor in section 236.1(c)(1), and as such, the current Orange County bail schedule indicates the bail amount in this case is $70,000.

However, section 1269c allows the magistrate or commissioner to set bail above the amount dictated by the bail schedule and states, “If a defendant is arrested without a warrant for a bailable felony offense . . . and a peace officer has reasonable cause to believe that the amount of bail set forth in the schedule of bail for that offense is insufficient to ensure the defendant’s appearance or to ensure the protection of a victim

. . . the peace officer shall prepare a declaration under penalty of perjury setting forth the facts and circumstances in support of his or her belief and file it with a magistrate . . . requesting an order setting a higher bail. . . . The magistrate or commissioner to whom the application is made is authorized to set bail in an amount that he or she deems sufficient to ensure the defendant’s appearance or to ensure the protection of a victim . . . and to set bail on the terms and conditions that he or she, in his or her discretion, deems appropriate, or he or she may authorize the defendant’s release on his or her own recognizance.” (§1269c.)

Relying on the facts alleged in the officer’s declaration to increase bail, the magistrate followed the officer’s recommendation and increased petitioner’s bail to $500,000. To give context to the amount of petitioner’s bail, which is set over 600 percent higher than the amount set in the bail schedule, presumptive bail for violent offenses such as voluntary manslaughter (§ 192 subd. (a)), rape in concert with force and violence (§ 264.1), kidnapping (§ 207), and carjacking (§ 215) are set at $100,000.

Once a defendant has been arraigned in the trial court and he has been admitted to bail, the trial court in which the case is pending “may, upon good cause shown, either increase or reduce the amount of bail.” (§ 1289.)

While petitioner remained incarcerated pending trial, on March 4, 2020, the Governor declared a State of Emergency as a result of the threat of COVID-19. The day after the Governor signed shelter in place Executive Order N-33-20 on March 19, 2020, the Chief Justice of California issued a second advisory to superior court presiding judges and court executive officers and recommended courts “Revise, on an emergency basis, the countywide bail schedule to lower bail amounts significantly for the duration of the coronavirus emergency, including lowering the bail amount to $0 for many lower level offenses – for all misdemeanors except for those listed in Penal Code section 1270.1 and for lower-level felonies.”

On March 27, 2020, the Governor signed Executive Order N-38-20 as a vehicle for the Judicial Council to implement the Chief Justice’s recommendations. The order states that “In the event that the Judicial Council or its Chairperson, in the exercise of rulemaking authority consistent with Paragraph 2, wishes to consider a rule that would otherwise be inconsistent with any statute concerning a civil or criminal practice or procedure, the relevant statute is suspended, subject to the following conditions: [¶] a) The statute is suspended only to the extent it is inconsistent with the proposed rule; [¶] b) The statute is suspended only if the proposed rule is adopted; and [¶] c) The statute is suspended only when the adopted rule becomes effective.” The executive order explains, “The purpose of this paragraph is to afford the Judicial Council and its Chairperson maximum flexibility to adopt any rules concerning civil or criminal practice or procedure they may deem necessary to respond to the COVID-19 pandemic, while ensuring that the rules adopted ‘shall not be inconsistent with statute,’ as provided in Article VI, section 6 of the California Constitution.”

On April 6, 2020, the Judicial Council adopted 11 “Emergency Rules Related to COVID-19.” Emergency Rule 4, the Emergency Bail Schedule at issue in this case states, “Notwithstanding any other law, this rule establishes a statewide Emergency Bail Schedule, which is intended to promulgate uniformity in the handling of certain offenses during the state of emergency related to the COVID-19 pandemic.” (Rule 4(a).)

In contrast to the Chief Justice’s recommendation that presiding judges “[r]evise” their countywide bail schedule on an emergency basis, the Judicial Council required “Mandatory application” of the Emergency Bail Schedule in Rule 4 by the superior courts “[n]o later than 5 p.m. on April 13, 2020.” The rule states the Emergency Bail Schedule will “remain in effect until 90 days after the Governor declares that the state of emergency related to the COVID-19 pandemic is lifted, or until amended or repealed by the Judicial Council.” (Rule 4(b), (g).)

According to the Emergency Bail Schedule, “each superior court must apply the statewide Emergency Bail Schedule: [¶] (1) To every accused person arrested and in pretrial custody [and] [¶] (2) To every accused person held in pretrial custody.” (Rule 4(b), emphasis added.) Rule 4(c) states, “Under the statewide Emergency Bail Schedule, bail for all misdemeanor and felony offenses must be set at $0, with the exception of only the [13] offenses listed below[.]” (Rule 4(c), emphasis added.)

With respect to the 13 offenses or class of offenses excepted from $0 bail in Rule 4(c), Rule 4(e) states, “The current countywide bail schedule of each superior court must remain in effect for all offenses listed in exceptions (1) through (13) of the Emergency Bail Schedule, including any count-specific conduct enhancements and any status enhancements.” (Rule 4 (e)(1).)

The Emergency Bail Schedule describes three circumstances when setting bail at $0 does not apply. First is the list of 13 excepted offenses or class of offenses referenced in Rule 4(e)(1). With respect to bail set for the 13 offenses, the Emergency Bail Schedule states that “Each superior court retains the authority to reduce the amount of bail listed in the court’s current countywide bail schedule for offenses in exceptions (1) through (13), or for any offenses not in conflict with the Emergency Bail Schedule.” (Rule 4(e)(2), emphasis added.)

The second exception, not relevant to this proceeding, provides for bail for violations of felony parole, post-release community supervision, or mandatory supervision. The third circumstance in Rule 4(d) reminds the superior court of the constitutional authority to deny bail and states, “Nothing in the Emergency Bail Schedule restricts the ability of the court to deny bail as authorized by article I, section 12, or 28(f)(3) of the California Constitution.” (Rule 4(d).)

Because human trafficking a minor in subdivision (c)(1) of section 236.1 is an offense listed in subdivision (c) of section 290, it is exempt from the requirement that bail be set at $0. (Rule 4(c)(10).) Petitioner contends that even though he is not entitled to have his bail reduced to $0, it was an abuse of discretion when respondent court failed to comply with the Emergency Bail Schedule and reduce his bail to the amount reflected in the current countywide bail schedule.

We agree. According to the Emergency Bail Schedule respondent court had only three options when it considered petitioner’s bail motion; set bail at the current countywide bail schedule, reduce bail below the countywide bail schedule, or deny bail pursuant to article I, section 12, or 28(f) subdivision (3) of the California Constitution.

The People contend however that respondent court was right to deny petitioner’s motion, and this petition should be denied for three reasons. Citing to section 1289, which states that after the defendant has been admitted to bail on the information, “the Court in which the charge is pending may, upon good cause shown, either increase or reduce the amount of bail,” the People argue petitioner failed to establish good cause to justify bail reduction because good cause must be founded on a changed circumstance. (In re Alberto (2002) 102 Cal.App.4th 421, 430.) According to the People, respondent court correctly denied petitioner’s bail motion because “[t]he only changed circumstance cited by petitioner was the onset of the COVID-19 pandemic. Petitioner failed to state how the pandemic affects any of his individualized bail factors,” and as such, “[p]etitioner’s motion to reduce bail was properly considered and denied by the superior court pursuant to Penal Code section 1289.”

We disagree. Petitioner remained in custody from 2018 to 2020 without issue until the pandemic caused his preexisting condition to become a health risk if he remained in custody, and thus a changed circumstance and good cause for the court to reconsider the issue of bail. Presumably respondent court reached the same conclusion because it considered the merits of petitioner’s motion when it said, “The charges in this case are the kind of charges that are specifically exempted from the new bail schedule, and so I don’t find that this is the type of offense that should be reduced according to the new bail schedule. I find that this is one of the excepted cases that falls outside of the

new bail schedule.”

We also disagree with the People’s first claim for two additional reasons. First, to the extent that section 1289 limits a bail hearing based on a showing of “good cause,” the statute is inconsistent with the Emergency Bail Schedule which states it applies “To every accused person held in pretrial custody,” and according to Executive Order N-38-20, a rule that would otherwise be inconsistent with any statute concerning a civil or criminal practice or procedure, the relevant statute is suspended, subject to three exceptions not relevant in this context.

Second, petitioner did not seek a reduction of bail pursuant to section 1289, but a reduction pursuant to the Emergency Bail Schedule. Respondent court understood this to be the case and instead of considering the bail factors in section 1275, when respondent court denied petitioner’s motion it said, “The charges in this case are the kind of charges that are specifically exempted from the new bail schedule, and so I don’t find that this is the type of offense that should be reduced according to the new bail schedule. I find that this is one of the excepted cases that falls outside of the new bail schedule.” (Emphasis added.)

We also find no merit to the People’s second contention that the petition should be denied because “[p]etitioner misunderstands this provision [Rule 4(c)].” The People explain that “[b]y its plain reading, Emergency Rule 4 did not mandate that bail on all 13 excepted offenses must revert to a bail schedule.” According to the People, “[i]f that were the case, any defendant whose bail was previously reduced from the bail schedule for any of the listed 13 offenses would have his or her bail automatically increased without regard for a change in circumstances. Emergency Rule 4, subdivision (e)(1) merely states the bail schedule previously relied upon for the listed offenses remains unchanged.”

This argument sets up a straw man for no other purpose than to knock it down. Petitioner never claimed that bail set below the bail schedule would revert to the bail schedule, and no interpretation of the Emergency Bail Schedule suggests that bail already reduced for defendants charged with one of the 13 excepted offenses would “revert to a bail schedule,” or that bail previously reduced would “automatically increase without regard [of] a change in circumstances.” The argument is especially specious given that the Emergency Bail Schedule specifically states, “Each superior court retains the authority to reduce the amount of bail listed in the court’s current countywide bail schedule for offenses in exceptions (1) through (13) . . . .” (Rule 4(e)(2).)

Last, the People contend that “nothing in Emergency Rule 4, or in the Orange County Superior Court’s adoption thereof, eliminated the magistrate’s Penal Code section 1269c authority to increase bail above a scheduled amount[, n]or did it eliminate the court’s ability to set, increase, or reduce a defendant’s bail pursuant to Penal Code sections 1275 and 1289.” Again, we disagree because this interpretation is inconsistent with the plain language in Rule 4.

“The Judicial Council . . . is the entity charged by the California Constitution with adopting statewide rules for court administration, practice, and procedure. [Citations.] The California Rules of Court ‘“have the force of statute to the extent that they are not inconsistent with legislative enactments and constitutional provisions.”’ [Citation.] The rules applicable to interpretation of the rules of court are similar to those governing statutory construction. [Citation.] Under those rules of construction, our primary objective is to determine the drafters’ intent. [Citation.]” (Silverbrand v. County of Los Angeles (2009) 46 Cal.4th 106, 125.) “We independently review interpretations of California Rules of Court, applying the usual rules of statutory construction.” (In re William M.W. (2019) 43 Cal.App.5th 573, 583.)

“‘In determining such intent, we begin with the language of the statute itself. [Citation.] That is, we look first to the words the Legislature used, giving them their usual and ordinary meaning.’ [Citation.]” (People v. Standish (2006) 38 Cal.4th 858, 869.) “The plain meaning controls if there is no ambiguity in the statutory language.” (People v. Cornett (2012) 53 Cal.4th 1261, 1265.) “Ordinarily, the term ‘shall’ is interpreted as mandatory and not permissive. [ ] ‘[T]he presumption [is] that the word “shall” in a statute is ordinarily deemed mandatory and “may” permissive.’ [Citation.]” (People v. Standish, supra, 38 Cal.4th at p. 869.) “If, however, ‘the statutory language may reasonably be given more than one interpretation, “ ‘ “courts may consider various extrinsic aids, including the purpose of the statute, the evils to be remedied, the legislative history, public policy, and the statutory scheme encompassing the statute.” ’ ” ’ ” (People v. Cornett, supra, 53 Cal.4th at p. 1265.)

In order to reduce the incarcerated population, the Chief Justice recommended the superior court “[r]evise” its countywide bail schedule to reduce jail population. In response to this concern, the Judicial Council adopted the Emergency Bail Schedule in Rule 4. Rule 4 did not mandate that superior courts “[r]evise” their countywide bail schedule as recommended by the Chief Justice or later outlined in Rule 4. Instead, the Emergency Bail Schedule required mandatory application of Rule 4. As Executive Order N-38-20 explained, the Judicial Council was afforded “maximum flexibility to adopt any rules concerning civil or criminal practice or procedure they may deem necessary to respond to the COVID-19 pandemic,” and “a rule that would otherwise be inconsistent with any statute concerning a civil or criminal practice or procedure, the relevant statute is suspended . . . .”

If the superior court retained its discretion to deviate from the Emergency Bail Schedule to increase bail as suggested by the People, then naturally it also retained its discretion to reduce bail as well. But if the People’s interpretation of Rule 4 is correct, then the entirety of Rule 4(e)(2) which states, “[e]ach superior court retains the authority to reduce the amount of bail,” is redundant because according to the People, the court already had the authority to depart from the bail schedule to reduce bail. The People’s interpretation of Rule 4 would violate the rule of statutory construction that “‘[c]ourts should give meaning to every word of a statute if possible, and should avoid a construction making any word[s] surplusage.’ [Citation.]” (People v. Franco (2018) 6 Cal.5th 433, 437.) As a general rule of construction, “We also generally avoid [interpretations] that render any part of a statute superfluous.” (People v. Aguilar (1997) 16 Cal.4th 1023, 1030.)

We also find merit in the application of the tenet expressio unius est exclusio alterius in this context. As People v. Standish, supra, 38 Cal.4th 858, explains, “the presence of express exceptions ordinarily implies that additional exceptions are not contemplated. ‘[W]here exceptions to a general rule are specified by statute, other exceptions are not to be implied or presumed’ unless a contrary legislative intent is evident. [Citation.]” (Id. at p. 870.)

In this case, the Emergency Bail Schedule specifically states the superior court “retains the authority,” as in it keeps, holds on to, or preserves its authority to deviate from the Emergency Bail Schedule to reduce bail, which suggests the court did not automatically retain its discretion to deviate from the Emergency Bail Schedule until stated by the Judicial Council in Rule 4(e)(2). The fact that the rule omits the same express language to allow the superior court to increase bail suggests that its omission was purposeful under the circumstances because upward departure from the countywide bail schedule is inconsistent with the purpose of the Emergency Bail Schedule to reduce the jail population and “promulgate uniformity in the handling of certain offenses during the state of emergency related to the COVID-19 pandemic.”

Bail is reviewed for an abuse of discretion. (In re Christie (2001) 92 Cal.App.4th 1105, 1107.) “‘Although mandamus does not generally lie to control the exercise of judicial discretion, the writ will issue “where, under the facts, that discretion can be exercised in only one way.” [Citations.]’ [Citation.] ‘Mandate lies to control judicial discretion when that discretion has been abused. [Citations.]’” (Richardson v. Superior Court (2008) 43 Cal.4th 1040, 1047-1048; Babb v. Superior Court (1971) 3 Cal.3d 841, 850-851; Code of Civ. Proc., §1085.) At the conclusion of the bail hearing in this case, respondent court had three options: to set bail in the amount of the current bail schedule, reduce bail under the amount listed in the bail schedule, or deny bail pursuant to article I, sections 12, or 28(f) subdivision (3) of the California Constitution. Not only did the respondent court not comply with the Emergency Bail Schedule in effect at the time of petitioner’s hearing, the court believed petitioner’s charges were “exempted from the new bail schedule,” and therefore the order denying petitioner’s motion to reduce bail constitutes an abuse of the court’s discretion. Although the Judicial Council has since repealed the Emergency Bail Schedule effective June 20, 2020, petitioner is nonetheless entitled to relief and a new bail hearing.

DISPOSITION

Inasmuch as real parties were given notice pursuant to Palma v. U.S. Industrial Fasteners, Inc., supra, 36 Cal.3d 171, 180, the petition is GRANTED. Let a peremptory writ of mandate issue ordering respondent court to vacate its ruling entered on April 14, 2020, and conduct a hearing no later than 10 days from the date of this order at which respondent court sets bail according to the current 2020 Orange County Bail Schedule, reduces bail to an amount below the Orange County Bail Schedule, or denies bail pursuant to article I, sections 12, or 28(f) subdivision (3) of the California Constitution.

In the interest of justice, the opinion in this matter is deemed final as to this court and the clerk is directed to issue the remittitur forthwith. (Cal. Rules of Court, rule 8.490(b)(2)(A).)

Filed 7/24/20 Pryor v. Nelson Shelton & Associates CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FIVE

WILL PRYOR,

Plaintiff and Appellant,

v.

NELSON SHELTON & ASSOCIATES,

Defendant and Respondent. B293071

(Los Angeles County

Super. Ct. No. SC114123)

APPEAL from an order of the Superior Court of Los Angeles County, Mitchell L. Beckloff, Judge. Affirmed.

Will Pryor, self-represented, for Plaintiff and Appellant.

No appearance by Respondent.

__________________________

Plaintiff Will Pryor appeals from an adverse judgment in an action for fraud against his former real estate broker. He argues that, because defendant did not appear at trial, the trial court erred in finding plaintiff had not proved causation. He also argues the court erred in finding he waived his right to a jury trial, and in admitting defendant’s evidence. We conclude plaintiff has not shown error, and affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On September 14, 2011, plaintiff filed this action against Nelson Shelton & Associates, a licensed real estate broker. In the operative second amended complaint, he alleged defendant committed fraud by failing to disclose that it had terminated one of its real estate agents, Ronald Nelson (Nelson), for misrepresenting to clients that he was the owner of defendant. Plaintiff alleged that after the termination, he contracted to sell his property to Nelson who then deposited forged checks into escrow, moved into the property without permission, and vandalized the property, causing substantial damage.

Defendant successfully demurred to the complaint on statute of limitations grounds, and we reversed. (See Pryor v. Nelson Shelton & Assocs. (Nov. 8, 2013, B243989 [nonpub. opn.]). Defendant then unsuccessfully moved for summary judgment. Prior to trial, defendant filed a notice stating it would not appear. Defendant had filed for bankruptcy, no creditor had filed a claim against it, and the bankruptcy case had been dismissed with a finding that defendant had no assets. The trial proceeded without defendant, and plaintiff presented his own testimony and documentary evidence in a court trial.

Based on plaintiff’s evidence, the court found as follows: Defendant was plaintiff’s real estate broker up until September 23, 2005 and acted through its agent Nelson to sell plaintiff’s property. Defendant learned sometime prior to plaintiff’s termination of the listing agreement that Nelson had been falsely representing himself as one of the owners of defendant to some of his clients. Despite such knowledge and its fiduciary obligation to plaintiff, defendant took no action to inform plaintiff of Nelson’s misrepresentations or inquire of plaintiff whether he had been similarly misinformed.

The facts of this case sail on a 15-year odyssey. On September 23, 2005, plaintiff cancelled his listing agreement with defendant. Plaintiff thereafter listed his property for sale with Nelson. After plaintiff was unable to sell his property, plaintiff agreed to sell the property to Nelson. Nelson moved into the property and presented plaintiff with a series of forged checks. Plaintiff filed an unlawful detainer action to remove Nelson from the property. When plaintiff finally regained possession of the property, he discovered it had been vandalized and appliances removed from it. According to the complaint, the property was foreclosed in 2010, and plaintiff filed this complaint in 2011. The first appeal from the sustaining of the demurrer then added to the delay. Prior to trial, Nelson was prosecuted and convicted of forgery. The criminal court ordered him to pay $388,000 of restitution to plaintiff, but plaintiff was unable to collect more than $300 of this amount.

In the civil action, plaintiff sought almost $400,000 in damages from defendant under the theory that if defendant had disclosed it had fired Nelson for fraudulent acts, plaintiff would not have continued doing business with him. However, the trial court found that defendant’s conduct was not a substantial factor in causing plaintiff’s harm: the damages sustained by plaintiff were “too attenuated from defendant’s failure to inquire of and advise plaintiff of any misrepresentation Mr. Nelson may have made to plaintiff about his ownership interest in defendant. . . . Plaintiff’s damages stem from his decision to enter into a real estate purchase agreement with Mr. Nelson . . . eight months after he terminated his relationship with defendant. Mr. Nelson’s criminal activity – forgery, theft and vandalism – is not related to Mr. Nelson’s claim he was an owner of defendant.”

Judgment was entered for defendant.

DISCUSSION

Plaintiff pursues three principal arguments on appeal: the trial court erred in (1) concluding that plaintiff’s damages were not caused by defendant’s conduct, (2) finding plaintiff had waived his right to a jury trial, and (3) admitting defendant’s evidence at trial. Defendant did not file a respondent’s brief on appeal. We conclude plaintiff has not met his burden of showing error.

Causation. Plaintiff first argues the court erred in finding “no proximate causal connection, because the defendant failed to defend the case.” Even though defendant did not appear at trial, plaintiff still bore the burden of proof as to each element of his cause of action. (See Evid. Code, § 500.) The trial court concluded that plaintiff had failed to meet his burden on causation because his damages — from forgery, vandalism and theft, and failure to sell the property to another buyer—were not caused by defendant’s failure to disclose that Nelson had been fired for misrepresenting his position within the company. While plaintiff argues the undisputed evidence showed defendant took no action to inform him of Nelson’s misrepresentations in the summer of 2005, it does not follow that this nondisclosure was a substantial factor in causing Nelson’s fraud upon plaintiff the following year. He has not shown that the trial court finding is not supported by substantial evidence.

Also as part of his causation argument, plaintiff contends the trial court failed to follow the law of the case, citing to our prior opinion reversing the trial court’s sustaining of defendant’s demurrer to the first amended complaint. However, our prior opinion was “limited to the statute of limitations ruling,” and expressed “no opinion as to how the trial court should react to any second amended complaint.” (Pryor v. Nelson Shelton & Assocs., supra, B243989, at p. *15.)

Finally on causation, plaintiff argues there was no substantial evidence supporting the court’s finding that defendant terminated Nelson on September 23, 2005. Plaintiff refers to evidence the court relied on in making this finding—Elsa Nelson’s deposition—but does not cite to where in the record on appeal this evidence is located. Although plaintiff cites to evidence he filed in his opposition to the motion for summary judgment and his motion for new trial, the record does not show this evidence was admitted at trial. Plaintiff has not provided the exhibits admitted at trial in the record on appeal and has therefore not provided an adequate record from which we can review the alleged error. (See Hernandez v. California Hospital Medical Center (2000) 78 Cal.App.4th 498, 502 [“Failure to provide an adequate record on an issue requires that the issue be resolved against plaintiff.”].) In any event, we fail to see that defendant’s failure to terminate Nelson, even if true, would have affected the adverse causation finding made by the trial court.

Jury trial. Plaintiff next argues that the trial court erroneously denied him a jury trial. Plaintiff acknowledges that the “court advised Plaintiff’s new attorney that the previous attorney had waived the jury trial,” and argues the court was mistaken. In support of this argument, plaintiff cites only to his request to waive court fees in the record on appeal. He does not cite to where in the record he made a timely demand for a jury trial. (See Code Civ. Proc., § 631, subd. (f)(4) [a party waives trial by jury by failing to announce that a jury is required].) Plaintiff has not met his burden as the appellant of establishing error. (Hernandez v. First Student, Inc. (2019) 37 Cal.App.5th 270, 277 [“ ‘ “[A]n appealed judgment is presumed correct, and appellant bears the burden of overcoming the presumption of correctness.” ’ ”].)

Admission of “defendant’s” evidence. Lastly, plaintiff contends the trial court erred in admitting into evidence “unverifiable documents and depositions” that defendant filed, thereby violating his “right to cross-examine witnesses.” As we have previously mentioned, this entire argument appears to contradict the uncontroverted fact that defendant did not appear at trial. Plaintiff does not identify the documents or depositions to which he is refers, does not show that he objected to the admission of that evidence, and does not argue how he was prejudiced by its admission. (See Evid. Code, § 353; County of Los Angeles v. Nobel Ins. Co. (2000) 84 Cal.App.4th 939, 945 [“ ‘appellant bears the duty of spelling out in his brief exactly how the error caused a miscarriage of justice.’ ”].) He has not shown error.

DISPOSITION

The judgment is affirmed.

RUBIN, P. J.

WE CONCUR:

MOOR, J.

KIM, J.

Parties and Attorneys
Pryor v. Nelson Shelton & Assoc.
Division 5
Case Number B293071
Party Attorney

Will Pryor : Plaintiff and Appellant
P.O. Box 4781
Lancaster, CA 93539 Pro Per

Nelson Shelton & Assoc. : Defendant and Respondent
Glenn E. Stevens
355 North Canon Drive
Beverly Hills, CA 90210

Filed 7/24/20 Butler v. Fifteen Morton LLC CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

NOAH BUTLER et al.,

Plaintiffs and Appellants,

v.

FIFTEEN MORTON LLC et al.,

Defendants and Respondents.

B299135

(Los Angeles County

Super. Ct. No. BC700193)

APPEAL from a judgment of the Superior Court of Los Angeles County. Richard A. Rico, Judge. Reversed and remanded with directions.

Colleen O’Brien for Plaintiffs and Appellants.

Joseph Oliva & Associates, Joseph L. Oliva and Shervin Golshani for Defendants and Respondents.

_________________________________

Appellants Noah Butler and Colleen O’Brien (Appellants) are a married couple who purchased a residential lot from a developer, respondent Fifteen Morton LLC. Appellants’ lot was subject to an easement for several parking spaces belonging to a neighbor. The easement had some associated premises liability obligations.

Appellants told Fifteen Morton that they would not buy the lot if they had to assume these liability obligations. Fifteen Morton purported to fix this problem by enacting an amendment (the First Amendment) to the development’s covenants, conditions, restrictions and reservation of easements (CC&R’s). The First Amendment obligated the development’s homeowners association (Association) to defend and indemnify Appellants for losses relating to the easement. Fifteen Morton also included a provision in its purchase agreement with Appellants warranting that the Association “is obligated to indemnify” Appellants from liability relating to the easement “in accordance with” the First Amendment.

After Appellants purchased their lot, the Association denied any indemnification responsibility and then changed the CC&R’s to revoke the First Amendment. Appellants sued Fifteen Morton for breach of the warranty and for fraud. Fifteen Morton successfully demurred; Appellants filed a First Amended Complaint (FAC); and Fifteen Morton demurred again.

The trial court sustained Fifteen Morton’s demurrer without leave to amend. The trial court concluded that Appellants did not allege facts showing that Fifteen Morton was responsible for the Association’s revocation of the First Amendment, and that Appellants’ fraud claim lacked specificity.

We reverse. The warranty that Fifteen Morton provided is reasonably susceptible to the interpretation that the Association would be permanently obligated under the CC&R’s to indemnify Appellants for liability relating to the parking easement. Contrary to that warranty, the Association actually had the right under the CC&R’s to revoke the First Amendment, and later did so. Thus, Appellants have sufficiently alleged claims based upon breach of the warranty.

While we agree with the trial court that Appellants’ fraud claim is not pleaded with sufficient particularity, Appellants have identified facts that, if pleaded, would be sufficient to support that claim. Appellants must therefore be given an opportunity to amend the fraud claim on remand.

BACKGROUND

1. Appellants’ Allegations

Appellants purchased a residential lot (Lot 18) from Fifteen Morton in a residential development known as Morton Village.

After Appellants had entered into a purchase agreement for the lot in March 2015 (the Purchase and Sale Agreement), they discovered that Lot 18 and all the other lots in the development were subject to a parking easement in favor of a neighboring property (the Easement). The Easement was for a two car parking space located entirely on Lot 18. The parking and access agreement establishing the Easement (the P/A Agreement) also created various premises liability obligations that Appellants would be required to assume.

After discovering the existence of the P/A Agreement, Appellants told Fifteen Morton that they “could not complete the purchase of Lot 18 if [Appellants] had to assume the successor liabilities and premises liability obligations” that the agreement established. In response, Fifteen Morton first told Appellants that the Easement owner was willing to amend the P/A Agreement to relieve Appellants from any obligations. Shortly before closing escrow on Lot 18 in late 2015 or early 2016, Appellants discovered that representation was false.

Appellants remained concerned about possible premises liability associated with the Easement and repeatedly expressed their concerns to Fifteen Morton. In response to those concerns, Fifteen Morton added the First Amendment to the CC&R’s to create a “Defense and Indemnity” provision. The First Amendment promised that “[t]o the fullest extent permitted by law, Association shall defend, indemnify, and hold each Owner, harmless from and against any and all loss, expense, liens, claims, liabilities, obligations, judgments, demands, and causes of action of every kind and character whatsoever, including, but not limited to, death, personal injury, damage to property, repairs and third party fines or penalties, including costs, attorneys’ fees, and settlements (hereinafter collectively referred to as ‘Claims’), arising out of or in any way connected with, or alleged to be arising out of or connected with, or related to the [Easement], whether or not Association is proven to be at fault or is negligent, in whole or in part, or whether such Claims are as a result of acts or omissions of Association, including work which is performed by Association, or by any independent contractor, or by any agent, employee, invitee, or licensee of the Association.”

Fifteen Morton also amended its Purchase and Sale Agreement with Appellants to provide its own indemnification warranty (the Warranty). Fifteen Morton’s Warranty stated that “Seller represents and warrants that the homeowners association for Morton Village is obligated to indemnify Buyer from any liability relating to the Easement Agreement . . . in accordance with the first amendment to the CC&R’s for Morton Village.” In this same amendment, Fifteen Morton agreed to reduce Appellants’ purchase price for Lot 18 by $10,000 and to reimburse Appellants $8,000 for “rent, storage and legal expenses.”

Without the Warranty, Appellants would not have closed their purchase of Lot 18. After receiving the Warranty, Appellants agreed to the deal and they acquired Lot 18 on February 26, 2016.

About five weeks after the closing, a moving van that was using the parking spaces on Lot 18 struck Appellants home, causing damage. Appellants reported this event to the Association. The Association’s Board “informed [Appellants] the Association did not know about and would not honor the First Amendment to the CC&Rs.” Then, on or around June 20, 2017, the Association revoked the First Amendment.

2. Proceedings in the Trial Court

Appellants filed their initial complaint on April 2, 2018. Fifteen Morton demurred on a number of grounds, including that Appellants’ claims were premature and therefore not ripe.

The trial court sustained the demurrer on that ground. The court reasoned that the crux of Appellants’ complaint was that Appellants were denied indemnification rights, but the complaint failed to allege “any claim or suit or that [Appellants] have incurred damages.” The trial court gave leave to amend.

Appellants filed their FAC on October 24, 2018, alleging causes of action for (1) declaratory relief; (2) breach of contract; (3) breach of the implied covenant of good faith and fair dealing; (4) breach of warranty; (5) unjust enrichment; and (6) fraud. Fifteen Morton again demurred to each of these causes of action, except for Appellants’ first cause of action for declaratory relief.

The trial court sustained the demurrer, this time without leave to amend. The court concluded that Appellants’ breach of contract claim “alleges insufficient facts and remains confused.” The court explained that the wrongful conduct that Appellants alleged appeared to be the revocation of the First Amendment, but the “FAC does not explain how Defendants were responsible for this action or how this resulted in damages to [Appellants].” The court found that Appellants’ causes of action for breach of the covenant of good faith and fair dealing and breach of warranty simply mirrored the breach of contract claim and were insufficient to state a claim for that reason. With respect to the remaining claims, the court ruled that there is no separate cause of action for unjust enrichment under California law and found that Appellants’ fraud claim lacked specificity.

Following this ruling, Appellants dismissed their first cause of action for declaratory relief “without prejudice” to obtain the equivalent of a final judgment for purposes of appeal. (See Gutkin v. University of Southern California (2002) 101 Cal.App.4th 967, 974–975.) Appellants then appealed.

DISCUSSION

1. Standard of Review

We review de novo the trial court’s ruling sustaining Fifteen Morton’s demurrer. (King v. CompPartners, Inc. (2018) 5 Cal.5th 1039, 1050.) We “ ‘treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.’ ” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

The allegations in the FAC “must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) “We have the power, as a reviewing court, to disregard the ‘mislabeling’ of causes of action, where supported by the record.” (Hernandez v. Lopez (2009) 180 Cal.App.4th 932, 938 (Hernandez).)

We review the court’s decision not to permit further amendment for abuse of discretion. (Code Civ. Proc., § 472c, subd. (a); Ellenberger v. Espinosa (1994) 30 Cal.App.4th 943, 947.) If the FAC does not state facts sufficient to constitute a cause of action, we must determine whether there is a reasonable possibility that the defect can be cured by amendment. (Ellenberger, at p. 947.)

2. Appellants’ Causes of Action are Ripe for Adjudication

Echoing the trial court’s ruling in sustaining Fifteen Morton’s demurrer to Appellants’ original complaint, Fifteen Morton contends that Appellants’ causes of action are not ripe for adjudication because there has not yet been any claim against Appellants relating to the Easement. In essence, Fifteen Morton argues that Appellants do not have an actionable claim because they have not been injured, and may never be injured, by the conduct described in their FAC. (See Jaffe v. Albertson Co. (1966) 243 Cal.App.2d 592, 616 [“the rights of the parties must be judged by conditions existing at the time the suit is commenced”].)

In response, Appellants claim that they have suffered injury in a number of ways, including: (1) diminished value of Lot 18; (2) more expensive insurance; and (3) attorney fees they incurred in asserting their contractual right to be indemnified by the Association before the Association revoked the First Amendment. We need not consider all of these various claimed elements of loss, as we agree that Appellants have adequately alleged that the absence of an indemnification obligation by the Association has decreased the value of their Lot 18. (See Saunders v. Cariss (1990) 224 Cal.App.3d 905, 908 [“Our task is to determine whether the pleaded facts state a cause of action on any available legal theory”].)

Appellants allege that they purchased Lot 18 in reliance on an enforceable commitment by the Association to indemnify them for claims that might be asserted against them relating to the Easement. One may reasonably infer from the allegations in the FAC that such a commitment has value to the owner of the lot. Indeed, Appellants allege that they were not willing to purchase Lot 18 if they had to assume the premises liability obligations in the P/A Agreement. If the Association’s indemnification commitment had value, it is reasonable to conclude that its absence diminished Lot 18’s worth.

Fifteen Morton argues that this claimed loss of value is “speculative.” But Appellants were not required to allege evidentiary facts in their FAC. Appellants allege that Fifteen Morton’s “breaches and fraud” diminished the value of their property and stated facts in the FAC sufficient to support that allegation. Nothing more was necessary to overcome Fifteen Morton’s demurrer. (See Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496 [a general demurrer admits the truth of all material factual allegations in the complaint, and “the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court”].)

Fifteen Morton also argues that whether the value of Lot 18 has actually decreased depends upon the outcome of Appellants’ declaratory relief cause of action. Fifteen Morton reasons that, if Appellants were to prevail in their interpretation of the Warranty, they would “obtain the indemnification they seek from Fifteen Morton.” If Fifteen Morton were to prevail, the issue would be moot.

The argument is unpersuasive. Fifteen Morton is correct that, if Appellants were to prevail on their declaratory relief claim, they would establish the right to seek compensation from Fifteen Morton based on the Warranty in the event of a claim against them relating to the Easement. However, that right does not have the same value as a binding indemnification commitment by the Association in the CC&R’s.

Fifteen Morton’s Warranty was a contractual commitment given by a developer to Appellants personally. In contrast, the First Amendment was an obligation assumed by the Association and recorded in the CC&R’s. That obligation would also allegedly be owed to future owners of the lot. Thus, the First Amendment would have some value to a future purchaser of the lot; Fifteen Morton’s Warranty to Appellants would not. A purchaser would not pay for value that he or she did not receive. Thus, Appellants have plausibly alleged that Fifteen Morton’s breach of its Warranty decreased the value of Lot 18 even if Appellants would have the right to seek indemnification from Fifteen Morton in the event of future claims against them.

Fifteen Morton is also correct in claiming that, in the event Appellants do not prevail on their interpretation of the Warranty, their claim for damages would be moot. But that is the same as saying that Appellants will not be entitled to recover if they lose. Fifteen Morton does not cite to any authority establishing that Appellants are required to prevail on a declaratory relief claim before seeking damages for breach or fraud. Such a rule would be both inefficient and inconsistent with res judicata principles.

3. The FAC Adequately Alleges Causes of Action Arising from Fifteen Morton’s Alleged Breach of the Warranty

a. The language of the Warranty can reasonably be interpreted to support Appellants’ claims

Fifteen Morton’s primary argument concerning each of Appellants’ contract-related claims (Appellants’ second through fifth causes of action) is that Fifteen Morton could not control the future conduct of the Association. Fifteen Morton argues that, consistent with its Warranty, the First Amendment did obligate the Association to indemnify Appellants at the time Fifteen Morton executed the Warranty. That obligation continued until the Association later revoked the First Amendment. Fifteen Morton claims that, pursuant to the CC&R’s and the governing law, it had lost control over the Association by that time.

Fifteen Morton argues that it made no contractual commitments concerning what the Association might do after Fifteen Morton no longer controlled it. Thus, the Association’s subsequent decision to revoke the First Amendment was not Fifteen Morton’s responsibility, and Appellants’ remedy, if any, must be against the Association.

However, the relevant question is not what Fifteen Morton could control, but rather what it warranted. Fifteen Morton’s argument assumes that the parties meant to limit the Warranty only to the time period during which Fifteen Morton controlled the Association. While possible, that is not the only reasonable interpretation of the Warranty.

In reviewing an order sustaining a demurrer to a contract claim, we must accept any alleged interpretation of the contract that is reasonable. “Where a complaint is based on a written contract which it sets out in full, a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.” (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239; see Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 229.) In considering whether an alleged interpretation of a contract is reasonable, a reviewing court must also consider allegations concerning the parol evidence that would be relevant to interpreting the contract. (George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1128.)

The FAC pleads that the parties intended the Warranty to mean that “the Association was obligated to indemnify and defend [Appellants] in perpetuity.” In light of the allegations in the FAC, that interpretation is reasonable.

The FAC alleges that Appellants repeatedly told Fifteen Morton that they were seeking complete protection against the possibility of claims against them relating to the Easement. For example, Appellants allege that “over the course of 2015, [Appellants] had multiple conversations with agents and employees of [Fifteen Morton], including but not limited to Joanna Sanchez (‘Sanchez’) and Craig Smith (‘Smith’). During these conversations [Appellants] repeatedly emphasized they could not complete the purchase of Lot 18 if [Appellants] had to assume the successor liabilities and premises liability obligations under the existing P/A Agreement.” Appellants allegedly told Smith and Sanchez that they “did not want to assume any obligations as a result of [Fifteen Morton] having devised and entered into the P/A Agreement.” (Italics added.) The FAC alleges that Fifteen Morton recorded the First Amendment “in direct response to [Appellants’] concern about the P/A Agreement.”

The FAC also alleges that Appellants’ continuing concern about liability relating to the Easement led to the Warranty. “As the prospective owners of Lot 18 and the fee interest underlying the P/A Agreement’s . . . Easement, [Appellants] were justifiably concerned about premises liability and other types of liabilities and harms that could befall them and their Property as a result of the permanent and exclusive . . . Easement being located entirely on their lot. [Appellants] repeatedly expressed those concerns to [Fifteen Morton].” (Italics added.) Appellants claim that, “in direct response to this concern, and for valuable consideration,” Fifteen Morton provided the Warranty.

Because the Easement is permanent, it was logical that Appellants would seek a permanent indemnification obligation. The FAC alleges that Appellants told Fifteen Morton that they would not purchase the lot without complete protection from potential liability related to the Easement. Fairly understood in light of the FAC’s allegations, complete protection meant permanent protection. It is therefore reasonable to conclude that Appellants understood that is what the Warranty provided.

The language of the Warranty is susceptible to that interpretation. The Warranty does not impose any temporal limitation on its guarantee and does not mention the possibility that the Association could later decide to revoke its indemnification commitment. The Warranty does use the present tense in stating that the Association “is obligated” to indemnify under the First Amendment. But the First Amendment itself uses contract language in stating that “[t]o the fullest extent permitted by law, Association shall defend, indemnify, and hold each Owner, harmless from and against any and all loss . . . .” Ordinarily, a party that enters into a contract expects that, absent an explicit term in the contract to the contrary, the other contracting party will be bound by its contractual commitment and will not have the unilateral power to abrogate that commitment.

A careful analysis of the entire CC&R’s in light of the controlling law would have revealed that, under article XII, the Association had the right to amend the CC&R’s through a sufficient vote by the owners. Such an analysis would also have disclosed that Fifteen Morton’s control over the Association would end, at the latest, three years “after completion of the project evidenced by the first conveyance of a Lot to a purchaser.”

However, the CC&R’s contain a long, complicated set of provisions. For example, as explained in the FAC, the CC&R’s state that “[a]ll of the limitations, covenants, conditions, restrictions, and easements shall constitute equitable servitudes in accordance with Civil Code Section 5975 and shall be binding upon Declarant and its successors and assignees, and all parties having or acquiring any right, title or interest in or to any part of the Property.” Civil Code section 5975 states that “[t]he covenants and restrictions in the declaration [i.e., the CC&R’s] shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development.” On their face, and without considering the CC&R’s amendment procedures, these provisions seem to suggest that the Association’s indemnification obligation would be permanent and would run with the land.

The governing law is just as complicated. The CC&R’s state that the property to which the CC&R’s restrictions apply is not subject to the Davis-Sterling Common Interest Development Act (the Act, § 4000 et seq.), of which section 5975 is a part. However, the CC&R’s also state that because the property is governed by a homeowners association, the “Declaration,” (i.e., the CC&R’s) therefore “incorporates or cites many of the provisions of that Act pertaining to the operation of homeowners associations.” Section 4270, which is also part of the Act, states that a declaration may be amended “pursuant to the declaration or this act.” (§ 4270, subd. (a).) But article XII of the CC&R’s, which contains the amendment provisions, does not refer to section 4270.

In light of this complicated collection of governing rules, and under the allegations in the FAC, it is reasonable to conclude that Appellants bargained for the Warranty to obtain assurance from Fifteen Morton (the drafter of the First Amendment) that it had bound the Association to a permanent indemnification obligation. It is also reasonable to conclude that Fifteen Morton understood that it was warranting such a permanent obligation to indemnify and that it accepted the risk that the Association might later seek to revoke that obligation.

Even if Fifteen Morton intended to warrant the Association’s indemnification obligation only during the time that it controlled the Association, the allegations of the FAC are sufficient to support a theory that Fifteen Morton knew that Appellants had a different understanding. A party who enters into a contract knowing that the other party has a particular understanding of its meaning may be required to accept the other party’s interpretation. (See § 3399 [“When, through . . . a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of the party aggrieved, so as to express that intention”]; Stare v. Tate (1971) 21 Cal.App.3d 432, 438 [“The law . . . estops the party who knows of the plaintiff’s mistake from claiming that his intent differs from what he leads the other to believe it is”].) Although Appellants have not requested the remedy of contract reformation, the alleged facts could support such a theory. (See Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1162 [“we exercise our independent judgment as to whether a cause of action has been stated under any legal theory when the allegations are liberally construed”].)

b. Fifteen Morton’s arguments concerning Appellants’ specific contract claims do not support reversal

In addition to its control argument, Fifteen Morton makes several specific arguments concerning Appellants’ contract-related causes of action. None of those arguments shows that Appellants have failed to state a claim.

First, Fifteen Morton argues that Appellants’ third cause of action for breach of the covenant of good faith and fair dealing is “merely a restatement of the breach of contract claims” and therefore does not state a separate claim. “ ‘Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.’ ” (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 371, quoting Rest.2d Contracts, § 205.) This covenant of good faith “finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith.” (Marathon, at p. 372.) A claim based upon the breach of the covenant of good faith and fair dealing is “superfluous” when it does no more than allege the breach of an actual contract term. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 352.)

Appellants’ claim for breach of the covenant does not simply allege a breach of contract. Rather, Appellants allege that Fifteen Morton engaged in bad faith conduct that made loss of the Association’s indemnification commitment more likely.

Appellants allege that Fifteen Morton: (1) failed to “timely disclose the liabilities and obligations of the P/A Agreement to the Association, and its members;” and (2) failed to “take reasonable and necessary steps within Developer Defendants’ exclusive control to ensure [Appellants] received the benefits of [the Warranty] and the First Amendment to the CC&Rs.” Although these allegations are general, when read liberally they support a theory that Fifteen Morton acted in bad faith in failing to timely and completely disclose the risks associated with the Easement and the First Amendment’s indemnification obligations to new lot owners who would have a vote in the Association. The allegations also are sufficient to support a theory that Fifteen Morton failed to draft the First Amendment in a manner that would preclude future revocation by the Association.

Second, with respect to Appellant’s fifth cause of action, Fifteen Morton argues that unjust enrichment is a remedy rather than a claim, and that, in any event, Appellants’ unjust enrichment claim asserts no separate theory of recovery. However, unjust enrichment can be synonymous with the remedy of restitution. (Hernandez, supra, 180 Cal.App.4th at pp. 938–939.) Unjust enrichment may therefore constitute an alternative remedy when breach of a valid contract cannot be proved. (Id. at p. 939.)

Appellants allege fraud that induced them to enter into the Purchase and Sale Agreement. Thus, their cause of action for unjust enrichment can fairly be read to allege an alternative claim for restitution following rescission of the Purchase and Sale Agreement for fraud.

4. Appellants Must Be Given An Opportunity to Amend to State a Claim for Fraud

a. Appellants’ cause of action for fraud is not pleaded with sufficient particularity

As the trial court noted, a claim for fraud must be pleaded with specific facts supporting each element of the claim. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216–217.) Thus, a cause of action for fraud must be supported by factual allegations showing that the defendant made a knowing misrepresentation with the intention to induce reliance. (Seeger v. Odell (1941) 18 Cal.2d 409, 414.) And the plaintiff must have justifiably relied on that misrepresentation. (Ibid.)

Appellants have not sufficiently alleged facts supporting these elements of their fraud claim. Appellants allege that Fifteen Morton made several false statements that Appellants discovered were false before they relied upon them. For example, Appellants allege that Fifteen Morton offered an indemnity through Fifteen Morton LLC during a time that entity was “canceled.” But Appellants do not allege that they relied on this offer; indeed, they claim that they “pointed out this deceit” to Fifteen Morton. Appellants also allege that Fifteen Morton made false statements concerning the Easement owner’s willingness to execute an amendment to the P/A Agreement relieving Appellants from any obligations relating to the Easement. But Appellants allege that they discovered those statements were false before escrow closed.

Appellants’ primary fraud theory is that Fifteen Morton’s representation in the Warranty was false. However, as pleaded, the Warranty alone cannot support Appellants’ fraud claim.

As discussed, Fifteen Morton warranted that the Association “is obligated” to indemnify Appellants for liability related to the Easement. At the time Fifteen Morton made that representation, the First Amendment was in effect. Appellants have not alleged that the First Amendment was unenforceable. Thus, Fifteen Morton’s representation that the Association was obligated to indemnify Appellants was true at the time it was made.

As discussed above, the FAC generally alleges communications supporting the conclusion that Fifteen Morton represented that the Association’s indemnification obligation would be permanent. However, specific alleged facts concerning these communications are necessary to support a claim for fraud.

Appellants suggest that such facts exist. For example, Appellants claim in their briefs that respondent Van Daele and his agent “stated on several occasions that the First Amendment . . . ‘is sufficient to protect you.’ ” Appellants also assert that Fifteen Morton made similar representations to them at “various times throughout 2015 and 2016.”

Appellants claim that these representations occurred in a context in which Fifteen Morton intended to mislead them. Appellants assert that, on several occasions in late 2015/early 2016 prior to the closing, “Respondents, having been made aware of Appellants’ concerns, represented to Appellants that the First Amendment to the CC&Rs was sufficient to protect Appellants from their liability and diminution in value concerns . . . . Respondents did not inform Appellants the First Amendment to the CC&Rs was revocable at any time by the Association . . . . At the time of closing, Appellants believed Respondents had the ability to warranty [sic] the First Amendment to the CC&Rs in perpetuity . . . . Respondents did not inform Appellants they instead believed they did not have that ability, and instead believed the [Warranty] was worthless after the Association assumed control.” In their briefing in the trial court, Appellants further explained that the persons making these alleged statements were Respondent Van Daele and Fifteen Morton employee Eric Scheck.

If, as Appellants have represented to this court and the trial court, authorized agents of Fifteen Morton told Appellants that the First Amendment was sufficient to meet their concerns for a reliably permanent solution to the problem of liability relating to the Easement, Appellants can state a claim for fraud. Appellants must support their claim with alleged facts showing “how, when, where, to whom, and by what means” these statements were made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

If there is a “reasonable possibility” that a defect in a complaint can be cured by amendment, a demurrer should not be sustained without leave to amend. (Minsky v. L.A. (1974) 11 Cal.3d 113, 118.) Because the trial court sustained Fifteen Morton’s demurrer to the original complaint on ripeness grounds only, Appellants were not apprised of the need to amend their fraud claim before it was dismissed. Appellants have represented that facts exist that will support that claim. Under these circumstances, Appellants must be given an opportunity to amend the FAC to attempt to state a claim for fraud.

DISPOSITION

The judgment of dismissal is reversed. The trial court’s order sustaining Respondents’ demurrer without leave to amend the first amended complaint is reversed. The matter is remanded to the trial court with directions to (1) enter an order overruling the demurrer to the second, third, fourth, and fifth causes of action, and (2) enter an order sustaining the demurrer to the sixth cause of action (fraud) with leave to amend. Appellants are entitled to their costs on appeal.

NOT TO BE PUBLISHED.

LUI, P. J.

We concur:

ASHMANN-GERST, J.

HOFFSTADT, J.

Filed 7/24/20 Shackelford v. Valley Soil and Forest Products CA5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

RON SHACKELFORD et al.,

Plaintiffs and Appellants,

v.

VALLEY SOIL AND FOREST PRODUCTS et al.,

Defendants and Respondents.

F078046

(Super. Ct. No. 18CECG00360)

OPINION

APPEAL from a judgment of the Superior Court of Fresno County. Mark W. Snauffer, Judge.

Asvar Law, Christopher A. Asvar and Jonathan J. Perez for Plaintiffs and Appellants.

Weakley & Arendt, James D. Weakley and Ashley N. Reyes for Defendant and Respondent County of Fresno.

No appearance for Defendants and Respondents Valley Soil and Forest Products, Steve Soria, Richard Ward Oh, and Nathan Zyle Finnell.

-ooOoo-

Appellants Ron Shackelford, Ruth Shackelford, Kristi Shafer, and Sherry Guadarrama (collectively, “appellants”) are the alleged successors-in-interest of three individual passengers (“decedents”) who died in a tragic motor vehicle collision on February 2, 2016. Appellants assert that respondent County of Fresno (“County” or “respondent”) bears some liability for the collision due to allegedly dangerous conditions of the roadway where the collision occurred. Appellants petitioned the superior court for relief from a statute requiring the timely presentation of government tort claims to County. (See Gov. Code, § 945.4.) The trial court denied appellants’ petition for relief.

Appellants contend on appeal that their claims against County did not accrue until the conclusion of criminal proceedings against the driver. If accrual was delayed as appellants argue, then their filings with County would have been timely. However, we conclude that appellants failed to adduce competent evidence establishing the factual predicates of their delayed accrual claim. As a result, there is “a complete lack of relevant and competent evidence” (Rodriguez v. County of Los Angeles (1985) 171 Cal.App.3d 171, 176) to support appellants’ claim for relief from the claims presentation requirement. We affirm the trial court’s order denying appellants’ petition for relief.

FACTS

A major motor vehicle collision occurred in Fresno County on February 2, 2016. Rhonda Shackelford, Justin Vanmeter, and Serena Guadarrama perished in the collision, and plaintiff Ronnie Cruz suffered a severe brain injury. Appellants allege that the collision was caused, at least in part, by County’s negligence with respect to the design, control, and maintenance of the intersection.

On appeal, appellants claim that in the days following the collision, they consulted with several attorneys who each told them they could only pursue workers compensation death benefits. Appellants further assert that the California Highway Patrol (CHP) released a supplemental report concerning the collision on July 15, 2016. The report allegedly concluded Nathan Finnell violated the Vehicle Code. The report also apparently concluded the traffic controls at the intersection were in good condition.

Appellants say they consulted with current counsel, Asvar Law, P.C., in “early 2018.” Appellants filed claims for damages with County on February 1, 2018. County responded with a letter dated February 12, 2018, stating County was not taking action on the claims because they were not presented within six months after the event. The letter further stated that appellants’ “only recourse at this time is to apply without delay to the Fresno County Board of Supervisors for leave to present a late claim.”

On February 27, 2018, appellants filed applications with the Fresno County Board of Supervisors seeking leave to present a late claim. County effectively denied the applications.

On April 13, 2018, appellants petitioned the trial court for relief from the statutory claims presentation requirement. The petition alleged that decedents Rhonda Shackelford, Justin Vanmeter, and Serena Guadarrama did not present a timely claim “because they passed away prior to the expiration of the time specified in Section 911.2 for the presentation of a claim.” The petition also alleged that County suffered no prejudice from the delayed filing of appellants’ claims.

At the hearing on the petition, both sides’ counsel offered argument. Appellants’ counsel told the court that the traffic collision report placed blame for the collision on the driver of the decedents’ vehicle, Nathan Finnell. Counsel further informed the court that the district attorney’s office pursued “potential criminal charges” against Finnell “to the point that an arrest warrant was issued.” Counsel said that Finnell “allegedly” said he was “getting away with the murder of three people.” Finally, counsel related that Finnell pled no contest to three counts of vehicular manslaughter without gross negligence on November 7, 2017.

Counsel contended that County’s negligence was not “legally established as the proximate cause of the deaths . . . until we could deal with whether there was a criminal act here and an intervening cause.” Counsel argued it was reasonable for a plaintiff to wait for the conclusion of the criminal investigation on November 7, 2017, and only then “look about and say, okay, we’re now going to look at who else may have been negligent in this case.”

The court asked appellants’ counsel what the claim against County was in this case, and counsel replied, “it’s a bad intersection, it’s failure to install traffic lights.”

County argued that appellants’ causes of action accrued on the date of the collision (Feb. 2, 2016) and therefore the last day to file a late claim was February 2, 2017. (See § 911.4, subd. (b).)

On July 2, 2018, the court issued an order denying appellants’ petition. The court concluded appellants had provided no legal basis for tolling the deadline under section 911.4, subdivision (b).

DISCUSSION

I. Appellants Failed to Adduce Competent Evidence to Support Invocation of Discovery Rule
II.
A. The Law
B.
1. Government Tort Claims Procedure and Deadlines
2.
With limited exceptions, section 945.4 prohibits the filing of certain “suit[s] for money or damages” against a public entity “until a written claim therefor has been presented to the public entity and has been acted upon by the board, or has been deemed to have been rejected by the board . . . .” (Ibid.) If the written claim relates to a cause of action for death or injury to a person, it must be presented to the public entity “not later than six months after the accrual of the cause of action.” (§ 911.2, subd. (a).)

If the claimant misses the six-month deadline, they may apply to the public entity for leave to present a late claim. (§ 911.4, subd. (a).) Applications for leave to present a late claim have a deadline of their own. They must be presented to the public entity within a reasonable time “not to exceed one year after the accrual of the cause of action.” (Id., subd. (b).) This deadline is jurisdictional. (Lincoln Unified School Dist. v. Superior Court (2020) 45 Cal.App.5th 1079, 1093.)

If the public entity denies, or fails to respond to, the application for leave to present a late claim, the claimant may petition the superior court for an order relieving the claimant from the claims filing requirement of section 945.4. (§ 946.6, subd. (a).) The petition must (1) show that the petitioner applied for leave to present a late claim, and the application was denied or deemed denied; (2) explain why the claim was not presented on time; and (3) provide information related to the claim as set forth in section 910. (§ 946.6, subd. (b).)

The court shall grant the relief requested in the petition if (1) the application to present a late claim was submitted within a reasonable time “not to exceed one year after the accrual of the cause of action” (§ 911.4, subd. (b)), and (2) one or more of the four circumstances described in section 946.6, subdivision (c)(1) through (4) are present. (§ 946.6, subd. (c).) The four circumstances are: (1) the failure to present the claim was through mistake, inadvertence, surprise, or excusable neglect unless the public entity established that it would be prejudiced in the defense of the claim; (2) the person who sustained the alleged injury, damage, or loss was a minor during the entire six-month period following the accrual of the cause of action; (3) the person who sustained the alleged injury, damage, or loss was physically or mentally incapacitated during the entire six-month period following the accrual of the cause of action and the disability was the cause of the failure to present the claim; or (4) the person who sustained the alleged injury, damage, or loss died before the expiration of the six-month period following the accrual of the cause of action. (§ 946.6, subd. (c)(1)-(4).)

In ruling on the petition, the superior court must base its decision on “the petition, any affidavits in support of or in opposition to the petition, and any additional evidence received at the hearing on the petition.” (§ 946.6, subd. (e).) Thus, the statutory scheme imposes an evidentiary burden on petitioners, which must be satisfied before the petition may be granted. (El Dorado Irrigation Dist. v. Superior Court (1979) 98 Cal.App.3d 57, 62 (El Dorado Irrigation Dist.).) Petitioners must supply an evidentiary basis for the court to grant relief otherwise the grant of relief will be reversed on appeal. (See id. at pp. 62-63.) “Argument of counsel of course is not evidence.” (Id. at p. 62.)

This petition to the superior court also has a deadline; it must be filed “within six months after” the application for leave to present a late claim was denied. (§ 946.6, subd. (b).) If this deadline is missed, “ ‘the court is without jurisdiction to grant relief under . . . section 946.6.’ ” (Lincoln Unified School Dist. v. Superior Court, supra, 45 Cal.App.5th at p. 1093.)

3. Accrual of Causes of Action and the Discovery Rule
4.
Because the deadlines for filing a timely claim and for seeking leave to present a late claim are both based on the accrual of the underlying cause of action (see §§ 911.2, subd. (a), 911.4, subd. (b)), we address when causes of action “accrue.”

Generally, “a cause of action accrues at ‘the time when the cause of action is complete with all of its elements.’ ” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806 (Fox).) “An important exception to the general rule of accrual is the ‘discovery rule,’ which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Id. at p. 807.)

A plaintiff has “reason to discover” the cause of action if there is “reason to at least suspect that a type of wrongdoing has injured them.” (Fox, supra, 35 Cal.4th at p. 807.) The plaintiff need not know the identity of the defendant, or even “the specific ‘facts’ necessary to establish the claim.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1111, see id. at p. 1114.) All that is needed is a suspicion that someone has done something wrong to the victim. (Id. at pp. 1110-1111.)

C. Analysis
D.
Respondent argues appellants’ causes of action accrued on February 2, 2016 – the date of the collision. If true, appellants’ applications for leave to present late claims on February 27, 2018, were filed over a year after the one-year jurisdictional deadline for submitting such an application had lapsed. (See § 911.4, subd. (b).)

In contrast, appellants argue their causes of action against County did not accrue until November 7, 2017, when Finnell pled no contest to the criminal charges arising out of the collision. Appellants argue that from the date of the collision (Feb. 2, 2016) to the date Finnell entered his plea (Nov. 7, 2017), “there was no reason for Appellants to suspect that there existed a dangerous condition or that it caused or contributed to their harm.” Until that time, appellants say they were “rightly focused on the criminal actions of Mr. Finnell.” “During the entire course of the criminal investigation into Mr. Finnell’s actions, the question of a superseding cause, i.e., the unexpected and unforeseeable criminal and intentional act of another, remained unanswered.” If, as appellants argue, their causes of action did not accrue until November 7, 2017, then the claims they presented to County on February 1, 2018, would arguably have been timely.

While we are skeptical of appellants’ invocation of the discovery rule here, they actually face a more fundamental problem. Appellants presented no competent evidence to support the discovery rule.

The unverified petition does not allege facts concerning the criminal proceedings against Finnell. Nor is any evidence concerning Finnell’s criminal proceedings contained in counsel’s declaration accompanying the petition. Instead, to establish the facts of their claim under the discovery rule, appellants rely on (1) counsel’s argument at the hearing on the petition and (2) a document appearing in the record that was clearly prepared after the trial court ruled on the petition. We address each in turn.

First, counsel was not sworn in before offering his remarks and the record does not reflect that counsel offered any documentary evidence of the criminal proceedings at the hearing. In ruling on the petition, the court was limited to considering the petition itself, supporting or opposing affidavits and any additional evidence received at the hearing on the petition. (§ 946.6, subd. (e).) As previously stated, “[a]rgument of counsel of course is not evidence.” (El Dorado Irrigation Dist., supra, 98 Cal.App.3d at p. 62.)

Second, appellants rely heavily on a document in appellants’ appendix captioned, “APPEAL FROM DENIAL OF PETITION FOR ORDER RELIEVING PLAINTIFFS FROM SECTION 945.4 AND/OR LEAVE TO FILE ACTION AGAINST DEFENDANT COUNTY OF FRESNO [¶] **NOTICE OF PETITION AND PETITION FOR ORDER RELIEVING PLAINTIFFS FROM SECTION 945.4 AND/OR LEAVE TO FILE ACTION AGAINST DEFENDANT COUNTY OF FRESNO; MEMORANDUM OF POINTS AND AUTHORITIES (Government Code §946.6)**” This document has no file stamp, no signature, and is not dated. Moreover, the document itself references “the July 2, 2018 order of the Fresno County Superior Court denying Plaintiffs relief from Section 945.4 of the Government Code that was heard on June 27, 2018 . . . .” Therefore, it was clearly prepared after the trial court issued the order that is being challenged on appeal.

We do not consider documents prepared after the trial court entered the order being appealed. Appellate courts review the correctness of a lower court’s decision “ ‘as of the time of its rendition, upon a record of matters which were before the trial court for its consideration.’ ” (In re Zeth S. (2003) 31 Cal.4th 396, 405.)

Even if this document had been submitted before the trial court made its ruling, it would not constitute competent evidence. The document was not signed, much less sworn under penalty of perjury. Argument of counsel in a memorandum of points and authorities is not evidence. (See El Dorado Irrigation Dist., supra, 98 Cal.App.3d at p. 62.)

There is “a complete lack of relevant and competent evidence to support the petition.” (Rodriguez v. County of Los Angeles, supra, 171 Cal.App.3d at p. 176.) The trial court simply had “no evidentiary basis upon which to base [a] grant of the judicial relief requested.” (El Dorado Irrigation Dist., supra, 98 Cal.App.3d at p. 62.) The court did not err in denying appellants’ petition.

DISPOSITION

The order denying the petition for relief from section 945.4 as to appellants is affirmed. Respondent County of Fresno is awarded costs on appeal.

DETJEN, Acting P.J.

WE CONCUR:

FRANSON, J.

PEÑA, J.

Filed 8/3/20 Marriage of Word 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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

In re Marriage of JOHN and DAWN PELSZYNSKI WORD.

JOHN M. WORD III,

Appellant,

v.

DAWN PELSZYNSKI WORD,

Respondent.

G056862

(Super. Ct. No. 14D005050)

O P I N I O N

Appeal from an order of the Superior Court of Orange County, Julie A. Palafox, Judge. Affirmed in part, reversed in part.

Law Offices of Patrick A. McCall and Patrick A. McCall; Law Offices of Gregory R. Ellis and Gregory R. Ellis for Appellant.

Hughes & Hughes, Lisa Hughes and James Brenner for Respondent.

* * * 

This appeal involving a complex divorce proceeding begins with a fundamental disagreement about the type of judgment at issue. Appellant John Word argues the judgment on the reserved issue of spousal support awarded temporary support only, while respondent Dawn Word contends the judgment awarded permanent spousal support. There is no dispute over the amount the court ordered John to pay, which is $185,000 per month before taxes.

John does not dispute his ability to pay, only the amount ordered, asserting the court improperly attributed certain expenditures to the marital standard of living, which he argues was an abuse of discretion. Further, even if the court’s judgment was for permanent spousal support, he contends, the court should not have made a permanent award before the division of property. We agree on that point and therefore reverse that part of the order, deeming the judgment to apply to temporary support only.

With respect to the amount ordered, we conclude, based on ample authority, that the marital standard of living is merely one factor for the court to take into account. Given the facts of this case, we find no abuse of discretion in setting the amount of temporary support at $185,000 per month, and we affirm that part of the judgment.

I

FACTS

John and Dawn met in 1994 and were married on August 14, 1999. Prior to their marriage, John was 50 percent owner of Word & Brown Insurance Administrators, Inc. (Word & Brown). John, according to the court, built “his company into an industry . . . leader,” as a health care administration company that provided large-scale health insurance programs to large companies and government entities. Dawn, a high school graduate, worked briefly in retail and then as a nail technician. John had three children from a prior marriage, who were adults by the date of separation.

On August 10, 1999, four days before they were married, the parties executed a premarital agreement stating that John’s net worth exceeded $19 million while Dawn’s was $32,500. The agreement stated that John’s ownership and future monetary interests in Word & Brown, along with other assets, were to be his separate property. Certain property was designated as community property, and the agreement stated John was to provide $50,000 per month for joint living expenses, increasing by three percent per year.

The couple separated in June 2014, a few months before their 15th anniversary, and John filed for dissolution a few days later. Dawn filed a response. Shortly thereafter, John filed a request for order “for property control, property restraint, and spousal support for Dawn.” John alleged his monthly income was $80,000 and the parties’ joint expenses exceeded $107,000 per month; he requested the court set spousal support based on his income. Dawn disagreed, arguing the parties “lived an extraordinarily extravagant lifestyle” which included her personal expenditure of $60,000 to $80,000 per month during the prior eight to 10 years. She asked for $208,397 per month in temporary support based on John’s alleged income of $6.6 million per year.

At a hearing in 2014, the court determined John’s monthly income was $80,000, finding the parties were living on an “artificial” marital standard because their expenses exceeded John’s income. The court ordered spousal support of $25,000 per month as of August 15, 2014. Dawn was ordered to pay her own vehicle and living expenses, assuming she was residing at a home owned by the parties.

“On September 30, 2014, Dawn filed a motion for reconsideration of the temporary support order,” which John opposed and the court denied. While the motion was pending, Dawn filed her own request for order to modify the temporary support order, arguing $25,000 per month did not meet the marital standard of living. She argued her needs were $125,000 per month, separate from housing expenses. Thereafter, Dawn retained a new attorney, and continuances were obtained via stipulation.

In a bifurcated proceeding in May 2016, the court deemed the premarital agreement valid and enforceable, and judgment on that issue was entered thereafter.

At a trial readiness conference in June 2016, the parties jointly requested the court bifurcate the issue of spousal support. The court agreed and issued a number of orders, including confirming that it would consider Dawn’s request for order regarding modification of spousal support at the time of trial.

The parties appeared for trial in September 2016. At that time, the court stated: “Today starts the bifurcated trial on permanent spousal support. It also includes [Dawn’s] Request for Orders to modify temporary support, which was filed on October 3rd, 2014 . . . .”

The court heard evidence on the relevant issues, which we shall discuss in greater detail below. The court ultimately issued an 80-page judgment with detailed findings. With respect to temporary support, the court determined, based on its findings, that an appropriate amount of temporary support was $185,000 per month, retroactive to the date of filing, October 3, 2014.

With regard to permanent support, the court noted that because “the parties are still legally married, the Court has no authority to make a permanent spousal support award” and that “[u]ntil a Status Judgment is entered, the temporary order of the Court as

modified herein will be the only spousal support order of the Court.” But the court went on to say that once the parties terminate their marital status and a judgment of dissolution is entered, the temporary order would end by operation of law. “Given the parties answered ready for trial on a permanent spousal support award on the day the trial began and the Court sat through sixteen days of evidence consisting of testimony from seven witnesses and having received thousands of pages of documentary evidence and neither party asked to reserve or re-open evidence, the Court finds the issue of permanent support is submitted.” The absence of a property division, however, was “crucial” to determining “what would be a just and reasonable permanent support award.” “Given the unusual facts and circumstances of the parties’ marriage without a property division once the marital status terminates, the Court finds it is just and equitable to make the temporary order of the Court as modified herein the permanent order of the Court.”

Further, once a property division occurred, “the Court will consider evidence of a property division to be a change in circumstances.” But “[w]hether the property division will be found to be a material change of circumstances warranting . . . a modification of the permanent support award will depend on the facts and circumstances surrounding the property division to be presented to the Court.”

The court went on to state that in accordance with general principles applying to dissolution cases, the parties had the right to start new, financially independent lives. “However, in this case their financial independence is premature given the parties answered ready for trial on support before they completed a property division.” The court went on to state: “Notwithstanding the absence of a critical statutory factor, over sixteen days of trial the Court had sufficient time and multiple opportunities to consider the parties’ marital standard of living and all of the other circumstances specified in Family Code [section] 4320 and is prepared to make a permanent support order.” Presumably, the “critical statutory factor” was the assets of each party. (Fam. Code, § 4320, subd. (e).) After reviewing the statutory factors and the marital standard of living, the court found that “without a property division, this Court finds the only just and reasonable permanent order it can make is to maintain the temporary order in the amount of $185,000 per month. Once a property division has been made, whether by settlement or trial, the Court will have the necessary evidence it currently lacks and needs to further nuance a permanent support award for Dawn.”

In the court’s summary of orders, it stated that John was to pay Dawn $185,000 per month. “Given the absence of a property division weighted [sic] heavily and was critical to the Court’s determination of permanent support, once the parties have completed a property division whether by way of settlement or trial, the Court will consider a property division to be a limited material change of circumstances for purposes of modification.”

John now appeals.

II

DISCUSSION

Scope of the Judgment

John argues that the court only awarded temporary support. Dawn contends the court decided both temporary and permanent support. It is clear from the court’s judgment and findings that it intended to decide both, with the court specifically deeming the final property settlement as “a limited material change of circumstances for purposes of modification.” If the court did issue a judgment on both temporary and permanent support, John claims, it is reversible error.

While we note the judgment is somewhat self-contradictory, we concur with the court that the assets of the parties is “a critical statutory factor” in determining a final spousal support award, and we agree with the court’s initial statement that in the absence of this information, the right call was that “the temporary order of the Court as modified herein will be the only spousal support order of the Court.” Accordingly, to the extent the judgment purports to address the issue of permanent spousal support, it is reversed. The court’s determination was of temporary support, reviewable and amendable after property division.

Marital Standard of Living

The rest of John’s appeal relates to the amount of the temporary spousal support award. He contends the court erroneously included various expenses that were not properly part of the marital standard.

Our review of a temporary spousal support award is for abuse of discretion. (In re Marriage of Kerr (1999) 77 Cal.App.4th 87, 93; see In re Marriage of Wittgrove (2004) 120 Cal.App.4th 1317, 1327.) The same standard applies to a modification of temporary spousal support. (In re Marriage of Samson (2011) 197 Cal.App.4th 23, 28-29.) We determine whether factual findings are supported by substantial evidence, and if so, affirm if any reasonable judge could have made such an award. (In re Marriage of Alter (2009) 171 Cal.App.4th 718, 730-731.)

The purpose of temporary spousal support is to maintain the parties’ standards of living as closely as possible to the status quo as it existed prior to separation. (In re Marriage of Ciprari (2019) 32 Cal.App.5th 83, 103-104.) “Trial courts may properly look to the parties’ accustomed marital lifestyle as the main basis for a temporary support order.” (In re Marriage of Wittgrove, supra, 120 Cal.App.4th at p. 1327.)

At trial, Dawn described the marital standard of living as “luxury upper class” while John described it as “upper class,” also describing himself as a “simple country boy.” John maintained that during “the last two years of the marriage, the marital standard of living was based on $50,000” a month in community expenses.

The court made the following factual findings with respect to the marital standard of living. With respect to marital homes, it determined the parties had for their use or the use of their family and friends six residences, the total market value of which exceeded $17 million. They had access to 11 luxury vehicles, the total market value of which exceeded $2.4 million, and a yacht and mooring in Catalina Island that together exceeded $550,000.

The parties took trips together and with family and friends on the Word & Brown corporate jet, or flew commercial first class. “This luxury afforded the parties regular trips to Las Vegas, Mexico (Puerto Vallarta, Cancun, Cabo), Florida (to see Dawn’s parents), Cincinnati (to see John’s daughter), and New Orleans (John’s annual birthday trip). [¶] The parties also took vacations to the Cayman lslands, Australia, New

Zealand, Europe, American Samoa, Bora Bora, Costa Rica, Hawaii, Montana,

Mammoth, Puerto Rico and Colorado” as well as to “AMG race events in Monterrey.”

With respect to Dawn’s spending, the court found that Dawn did not work outside the home, and she was assisted by a housekeeper and a house manager/personal assistant. She frequently purchased designer clothing, shoes, and accessories, “owned a fur coat and regularly bought herself a nice piece of jewelry every month,” and “regularly had her hair and nails done and received facials.”

Other luxuries included a race horse the parties owned at one point during their marriage, season tickets to various local professional sports teams, and memberships to bay, golf and country clubs. Both parties had elective dental work and cosmetic surgery. “When Dawn’s beloved cat died in 2010, the parties sent the cat’s DNA to a facility where the cat was cloned at a cost of $25,000.” An injury to Dawn’s dog was treated with ACL surgery.

Additionally, the parties were involved in charitable endeavors, generous with extended family members, hosted large annual Christmas parties, spent over $1 million remodeling one of their homes and purchased another because John wanted a swimming pool, and added to their savings and investment portfolios. The parties agreed the marital estate was worth between $100 and $200 million. Based on these facts, the court characterized the parties’ marital standard of living as an extraordinarily lavish lifestyle.

With regard to spending, Dawn contended she personally spent $60,000 to $80,000 per month independent of housing expenses. John, however, maintained that with the exception of the marriage’s last two years, they lived on $50,000 a month. Both parties offered expert testimony on the marital standard of living. The court noted: “Like all other factors considered by the court, standard of living circumstances must be established by competent evidence. In determining the marital standard of living, the actual standard (i.e. actual expenditures) will normally control. Ordinarily, to the extent marital expenses reflect marital lifestyle, the focus should be on actual expenditures during the marriage – not on the applicant spouse’s ‘estimated’ expenses based on ‘wishes and desires’ for a particular lifestyle.”

The parties’ experts reviewed bank and credit card statements during slightly different periods shortly before the end of the marriage. John’s expert found the parties’ average expenditures were “$262,522 a month or $131,261 per party in monthly marital spending closest in time to the date of separation,” while Dawn’s expert found an average of “$244,336 a month or $122,168 per party in monthly marital spending.” The experts then allocated a percentage of the spending between the parties, with John’s expert allocating $107,000 per month before taxes and $60,344 per month after taxes. Dawn’s expert allocated $260,068 and $137,836 per month before and after taxes, respectively.

The differences, the court found, were apparently because John’s expert excluded certain “non-standard of living” expenses, including “gifts, advances to family members for real property owned by family members, personal loans, investments and misc. cash advances.” The court declined “to give the experts’ allocated expense opinions significant weight, finding it is the Court’s function to make allocations given the amount of discretion involved.” The court noted, however, that the premarital agreement defined “the parties[’] joint living expenses to include everything Dawn’s expert included in his allocation opinion with the exception of investments,” and observed the parties regularly invested $10,000 per month. Finding that regular savings were part of the marital standard of living, the court concluded they should be considered “an element of ‘need’ for support.” The court further found that Dawn’s expert’s allocation was “closer” to the marital standard of living and the definitions in the premarital agreement than John’s expert’s allocation.

Based on the opinions of both experts, the court found it was “clear to the Court the parties were spending significantly more than the $50,000 a month John claims was the marital standard in the two years closest to their date of separation,” and found that the parties were actually spending $250,000 per month. John, the court found, failed to offer independent evidence of his claim that the couple lived on $50,000 a month at any time during their marriage, which “left this Court doubting his credibility as to the parties’ marital standard of living.” The experts’ analysis, the court stated, was “more reliable than John’s memory.” The differences between the two experts, the court noted, were “de minimis given they were within seven percent of each other.” Thus, the court concluded the marital standard of living based on spending was $250,000 per month, and Dawn’s personal spending was $125,000 per month.

Ultimately, in arriving at the amount of temporary support, the court considered “the ‘big picture’ and what it will reasonably take for Dawn to maintain the status quo” pending a division of assets. Including taxes, the court found that amount was between $180,000 and $190,000 per month, and ultimately settled on the figure of $185,000.

John’s complaint in this appeal is that the court, in arriving at the $250,000 per month marital standard of living figure, should “have excluded a variety of other expenses which did not contribute to or reflect the marital standard. These included John’s use of his separate property funds for his separate property interests, with no involvement from Dawn and with no resulting benefit to the community.” John lists specific amounts he believes should have been excluded from the marital standard of living calculation.

What John misses in this argument, however, is what the trial court specifically pointed out in its discussion at arriving at an amount of temporary support, which is that marital standard of living “is not an ‘absolute’ measure of reasonable need but merely a ‘basis or reference point’ for determining need and support.” The court was correct. Further, “[t]he ‘marital standard of living,’ . . . is ‘a general description of the station in life the parties had achieved by the date of separation,’ rather than a ‘mathematical standard.’” (In re Marriage of Ciprari, supra, 32 Cal.App.5th at p. 110.) The marital standard of living “‘is merely a threshold or reference point . . . . [Citation.] It is neither a floor nor a ceiling for a spousal support award.’” (Ibid.)

But John claims the error here was precisely that – failing to apply a rigid mathematical standard and subtracting everything he claims should have been excluded from that calculation. First, as the case law makes clear, such rigid calculations are not required, and second, even if the court had done so, it was not obligated to reach his desired amount of temporary support, nor is there any indication it would have done so. The court stated it was examining the “big picture” in terms of the parties’ lifestyle and Dawn’s needs. Even if John’s enumerated expenses had been deducted, the court still could have reasonably found that “‘the station in life the parties had achieved by the date of separation’” (In re Marriage of Ciprari, supra, 32 Cal.App.5th at p. 110) was, by any measure, “extraordinarily lavish.”

This was a completely permissible finding well-supported by substantial evidence. “[I]n exercising its broad discretion, the court may properly consider the ‘big picture’ concerning the parties[’] assets and income available for support in light of the marriage standard of living. [Citation.] Subject only to the general ‘need’ and ‘the ability to pay,’ the amount of a temporary spousal support award lies within the court’s sound discretion, which will only be reversed on appeal on a showing of clear abuse of discretion.” (In re Marriage of Wittgrove, supra, 120 Cal.App.4th at p. 1327.) Moreover, “the trial court may fix spousal support at an amount greater than, equal to or less than what the supported spouse may require to maintain the marital standard of living, in order to achieve a just and reasonable result under the facts and circumstances of the case.” (In re Marriage of Smith, supra, 225 Cal.App.3d at p. 475.)

Given the court’s findings about the parties’ lifestyle prior to separation, as well as its additional findings about Dawn’s needs and John’s ability to pay, we conclude the trial court did not err in setting temporary support at $185,000 per month. This amount was well within the trial court’s discretion.

III

DISPOSITION

The portion of the order awarding permanent spousal support is reversed. In all other respects, the order is affirmed. Each party shall pay its own costs on appeal.

MOORE, J.

WE CONCUR:

BEDSWORTH, ACTING P. J.

GOETHALS, J.

Filed 8/3/20 Rojas v. Glenair CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

ROXANA ROJAS,

Plaintiff and Appellant,

v.

GLENAIR, INC.,

Defendant and
Respondent.

B302402

(Los Angeles County

Super. Ct. No. BC505602)

APPEAL from an order of the Superior Court of Los Angeles County. John Shepard Wiley, Jr., and Amy D. Hogue, Judges. Reversed with directions.

Matern Law Group, Matthew J. Matern, Andrew Sokolowski, Tagore Subramanian and Debra J. Tauger for Plaintiff and Appellant.

Gibson, Dunn & Crutcher, Jesse A. Cripps and Elizabeth A. Dooley for Defendant and Respondent.

Almost four years after overruling a demurrer to appellant Roxana Rojas’s only viable cause of action, the trial court reversed course, sua sponte reconsidered its earlier order, sustained the demurrer without leave to amend, and dismissed Rojas’s complaint. The trial court determined Rojas’s first amended complaint did not relate-back to her original complaint and, therefore, Rojas’s claim was time-barred. Rojas appeals the trial court’s order dismissing her complaint with prejudice.

We conclude the trial court erred when it determined the relation-back doctrine did not apply here. Based on our independent review of the original complaint, we conclude application of the relation-back doctrine is proper here and saves Rojas’s one cause of action against respondent Glenair, Inc. (Glenair). Consequently, we reverse.

BACKGROUND

1. Complaint

On April 11, 2013, Maria Perez filed a putative class action complaint against Glenair (complaint) alleging a variety of wage and hour causes of action. The complaint is a “form” type complaint that plaintiff’s counsel has used in other wage and hour actions. The complaint did not allege whether Perez was employed by Glenair at the time she filed the complaint. However, the complaint alleged Perez and all potential class members were either at the time of filing or within the preceding four years employed by Glenair. The complaint also specified the alleged injuries Perez and the putative class members suffered as well as the requested relief.

The complaint alleged the following ten causes of action: (i) failure to provide required meal periods, (ii) failure to provide required rest periods, (iii) failure to pay overtime wages, (iv) failure to pay minimum wage, (v) failure to pay all wages due to discharged and quitting employees, (vi) failure to maintain required records, (vii) failure to furnish accurate itemized statements, (viii) failure to indemnify employees for necessary expenditures incurred in discharge of duties, (ix) unfair and unlawful business practices, and (x) penalties under the Private Attorneys General Act of 2004 (PAGA).

For each cause of action, the complaint specified the Labor Code sections and Industrial Welfare Commission Wage Orders (wage orders) or Business and Professions Code section Glenair allegedly violated. Each cause of action included examples or other specifics as to how Glenair as the defendant allegedly violated the applicable code sections and wage orders. Rather than recite verbatim all of the causes of action here, we highlight a few examples of the complaint’s factual allegations.

The first cause of action for failure to provide required meal periods alleged Glenair “required, permitted or otherwise suffered [Perez] and CLASS MEMBERS to take less than the 30-minute meal period, or to work through them, and have failed to otherwise provide the required meal periods to [Perez] and CLASS MEMBERS” and Glenair failed “to compensate [Perez] and CLASS MEMBERS who were not provided with a meal period . . . one additional hour of compensation at each employee’s regular rate of pay for each workday that a meal period was not provided.”

The third cause of action for failure to pay overtime wages alleged Glenair failed to pay overtime wages “by, among other things: failing to pay overtime at one and one-half (1½) or double the regular rate of pay as provided by [the applicable code sections and wage orders]; requiring, permitting or suffering [Perez] and CLASS MEMBERS to work off the clock; requiring, permitting or suffering [Perez] and CLASS MEMBERS to work through meal and rest breaks; illegally and inaccurately recording time in which [Perez] and CLASS MEMBERS worked; failing to properly maintain [Perez’s] and CLASS MEMBERS’ records; failing to provide accurate itemized wage statements to [Perez] for each pay period; and other methods to be discovered.”

The fourth cause of action for failure to pay minimum wages alleged similar examples of Glenair’s alleged wrongdoing as those alleged in the third cause of action.

The ninth cause of action for unfair and unlawful business practices under Business and Professions Code section 17200 (section 17200) incorporated all of the preceding allegations and further alleged Glenair “repeatedly over a significant period of time, and in a systematic manner, to the detriment of [Perez] and CLASS MEMBERS” violated the specified Labor Code sections and wage orders thus constituting an unfair and unlawful business practice under section 17200. The remaining causes of action similarly included examples (some with more detail than others) as to how Glenair allegedly violated the code sections and wage orders.

2. First Amended Complaint and the Court’s August 29, 2014 Order

As it turned out, Perez had filed for bankruptcy before filing the complaint. Consequently, she lacked standing to bring the lawsuit. The trial court granted leave to amend the complaint and, on February 14, 2014, plaintiffs’ counsel filed a first amended complaint naming Rojas as plaintiff (first amended complaint). The parties agree that other than substituting in Rojas as the plaintiff, the first amended complaint was the same as the complaint.

Glenair filed a demurrer, arguing the first amended complaint failed to state facts sufficient to constitute any cause of action. In particular, Glenair explained Rojas had not worked at Glenair during the four years preceding the filing of the first amended complaint and, therefore, all her causes of action were time-barred. In opposition, Rojas argued among other things the relation-back doctrine applied such that the first amended complaint was deemed to have been filed as of the date the complaint was filed. Using the complaint’s filing date, Rojas argued her causes of action were timely.

On August 29, 2014, the trial court ruled on Glenair’s demurrer (August 29 order). The court held the relation-back doctrine applied, stating the first amended complaint “rests on the same general set of facts, involves the same injury, and refers to the same instrumentality of injury as the original complaint. The substitution of Rojas for Perez as the named Plaintiff does not enlarge the time period covered by the original complaint or Glenair’s potential liability. The relation-back doctrine is thus applicable.”

However, as the trial court noted, that did not end the inquiry. The court concluded further that even with application of the relation-back doctrine, most of Rojas’s causes of action were time-barred because her employment with Glenair ended more than three years before the complaint was filed. A three-year statute of limitations applied to the first through eighth causes of action and a one-year statute of limitations applied to the tenth cause of action, thus barring those claims as to Rojas. However, a four-year statute of limitations applied to the ninth cause of action for unfair and unlawful business practices under section 17200. Therefore, the ninth cause of action was timely.

The trial court overruled the demurrer as to the ninth cause of action, sustained the demurrer as to the first through eighth and the tenth causes of action, and granted Rojas leave to amend to add additional named plaintiffs who had worked at Glenair during the relevant time periods.

3. Second Amended Complaint

Shortly after the trial court’s August 29 order, Rojas filed a second amended complaint adding as plaintiffs Andrew Castillo and David Castillo, both of whom had worked at Glenair during the relevant time periods. In addition to adding the Castillos as plaintiffs, the second amended complaint deleted three earlier causes of action (failure to maintain required records, failure to furnished accurate itemized statements, and PAGA penalties). Otherwise, the second amended complaint was the same as the first amended complaint. It did not clarify that Rojas was a party only to the section 17200 cause of action.

4. Third Amended Complaint

Following the filing of the second amended complaint, the parties stipulated, and the trial court granted leave, to allow plaintiffs to file a third amended complaint. The third amended complaint was filed on January 7, 2015, and clarified Rojas was a party only to the section 17200 cause of action. Otherwise and for present purposes the third amended complaint was effectively the same as the second amended complaint.

Glenair filed a motion to strike portions of the third amended complaint. In part, Glenair sought to strike Rojas from the third amended complaint entirely, claiming the relation-back doctrine did not apply and did not save the one cause of action to which Rojas was still a party (i.e., the section 17200 claim). On March 25, 2015, the trial court (Judge Wiley) rejected Glenair’s argument, noting the court had already considered and rejected the relation-back argument in its August 29 order. The court stated, “We are done with that issue at the pleading stage. If the Court’s reasoning on August 29, 2014 erred, the remedy was appellate recourse.”

Glenair filed its answer on April 2, 2015.

5. Glenair’s Motion for Judgment on the Pleadings and the Trial Court’s Sua Sponte Motion to Reconsider its August 29 Order

In November 2017, Glenair filed a motion for judgment on the pleadings, arguing new case law supported the position that the relation-back doctrine did not apply and Rojas’s one cause of action was time-barred. In particular, Glenair claimed the Third District’s decision in Scholes v. Lambirth Trucking Co. (2017) 10 Cal.App.5th 590, 599 (Scholes) compelled the conclusion that the first amended complaint could not relate back to the complaint. Following the reasoning of Scholes, supra, at pages 598–599, Glenair claimed the complaint was “devoid of any factual allegations specific to Glenair or its wage and hour practices” and the “ ‘totality of these material deficiencies leave nothing to which the first amended complaint can be compared to or to which they can relate back.’ ” Glenair sought judicial notice of 33 complaints Rojas’s counsel had filed in other lawsuits that alleged identical allegations, only changing the plaintiff’s and defendant’s names. If, as Glenair argued, the relation-back doctrine did not apply, Rojas’s one remaining claim was time-barred. Glenair urged the trial court to reconsider its earlier August 29 order and instead find Rojas’s one cause of action barred.

In February 2018, the trial court denied Glenair’s motion, finding Scholes was not new law. Rather, the court determined Scholes “reiterated” and “applied existing law” set forth in Davaloo v. State Farm Insurance Co. (2005) 135 Cal.App.4th 409, 414 (Davaloo).

Nonetheless, on its own motion, the trial court announced it would “reconsider its relation-back ruling in light of the Davaloo rule.” The court was concerned its earlier ruling on the relation-back doctrine “might have been erroneous.” The court stated the complaint “contained no factual allegations specific to Glenair. Instead, it is rote boilerplate.” The court took judicial notice of the 33 complaints submitted by Glenair, concluding the “complaint was a generic form” and “[t]his routine pleading practice amounts to saying, ‘We are suing you now. We (and you) will find out why later.’ ”

6. Order Reversing the August 29 Order

On May 15, 2018, after receiving briefing from the parties and hearing argument from counsel, the trial court concluded the relation-back doctrine did not apply. The court, therefore, vacated and reversed its August 29 order. The court found the complaint contained “no factual allegations specific to Glenair. Rather the author cast it in entirely generic terms, applicable to any employee working for any employer.” The court stated the complaint did not “elaborate on the nature of [plaintiffs’] claims. Did Glenair prohibit employees from taking any meal breaks at all? Did Glenair fail to relieve its employees of all duties during meal breaks? Did Glenair provide meal breaks that were shorter than 30 minutes? Did Glenair fail to adopt an appropriate policy on meal breaks, or did Glenair pressure employees to work during meal breaks in spite of a lawful meal break policy? [The] complaint lacks all explanation.” The trial court stated further, “The vacuity of [the] complaint makes it versatile. By saying nothing particular to a case, this language becomes a form document to use in every wage-and-hour case. Perez’s attorneys could use, and have used, the same language against any defendant employer. . . . [¶] It is as though [the] complaint said, ‘I am suing you because, on information and belief, you did wrong. To find out how, you must commence discovery.’ ” The court considered this case more akin to Davaloo and Scholes than to the case on which Rojas relied, Pointe San Diego Residential Community, L.P. v. Procopio, Cory, Hargreaves & Savitch, LLP (2011) 195 Cal.App.4th 265, 274 (Pointe San Diego). The court concluded the complaint’s “generic allegations did not put Glenair on meaningful notice of the nature of [the] claims.”

The trial court held because the “complaint is free of content,” the first amended complaint “does not relate back to the date on which Perez filed her complaint.” Without application of the relation-back doctrine, all of Rojas’s causes of action were untimely. Thus, on its own motion to reconsider the August 29 order, the trial court sustained Glenair’s demurrer to the first amended complaint without leave to amend.

7. Order of Dismissal and Appeal

On October 28, 2019, the trial court entered its order dismissing the first amended complaint with prejudice. This appeal followed.

DISCUSSION

1. Standard of Review

“On appeal from an order dismissing a complaint after the sustaining of a demurrer, we independently review the pleading to determine whether the facts alleged state a cause of action under any possible legal theory. [Citations.] We give the complaint a reasonable interpretation, ‘treat[ing] the demurrer as admitting all material facts properly pleaded,’ but do not ‘assume the truth of contentions, deductions or conclusions of law.’ ” (Davaloo, supra, 135 Cal.App.4th at p. 414.) “In reviewing the complaint, we must assume the truth of all facts properly pleaded by the plaintiff and matters properly judicially noticed.” (Pointe San Diego, supra, 195 Cal.App.4th at p. 274.) “We liberally construe the pleading with a view to substantial justice between the parties.” (Davaloo, at p. 414.)

2. Relevant Legal Principles

Code of Civil Procedure section 425.10 requires civil complaints to contain “[a] statement of the facts constituting the cause of action, in ordinary and concise language.” (§ 425.10, subd. (a)(1).) “This fact-pleading requirement obligates the plaintiff to allege ultimate facts that ‘as a whole apprise[] the adversary of the factual basis of the claim.’ ” (Davaloo, supra, 135 Cal.App.4th at p. 415.)

“The requirement that the complaint allege ultimate facts forming the basis for the plaintiff’s cause of action is central to the relation-back doctrine and the determination whether an amended complaint should be deemed filed as of the date of the original pleading. [Citation.] An amended complaint relates back to a timely filed original complaint, and thus avoids the bar of the statute of limitations, only if it rests on the same general set of facts and refers to the same ‘offending instrumentalities,’ accident and injuries as the original complaint.” (Davaloo, supra, 135 Cal.App.4th at p. 415.) “An amended complaint relates back to an earlier complaint if it is based on the same general set of facts, even if the plaintiff alleges a different legal theory or new cause of action.” (Pointe San Diego, supra, 195 Cal.App.4th at p. 277.) “However, the doctrine will not apply if the ‘plaintiff seeks by amendment to recover upon a set of facts entirely unrelated to those pleaded in the original complaint.’ ” (Ibid.)

Similarly, “[j]ust as a plaintiff who changes the essential facts upon which recovery is sought is not entitled to the benefits of the relation-back doctrine, so too a plaintiff who files a complaint containing no operative facts at all cannot subsequently amend the pleading to allege facts and a theory of recovery for the first time and claim the amended complaint should be deemed filed as of the date of the original, wholly defective complaint: Going from nothing to something is as much at odds with the rationale for allowing an amended pleading to relate back to the filing of the original documents as changing from one set of facts to a different set.” (Davaloo, supra, 135 Cal.App.4th at p. 416.) Courts have eschewed a bright-line rule as to when an original complaint is so deficient that the relation-back doctrine cannot apply. (Scholes, supra, 10 Cal.App.5th at p. 599, aff’d. on other grounds in Scholes v. Lambirth Trucking Co. (2020) 8 Cal.5th 1094; Davaloo, at pp. 417–418.) Instead, courts considered the “totality of the deficiencies in the original complaint, rather than any single defect. The totality of these material deficiencies leave nothing to which the . . . amended complaint can be compared to or to which they can relate back.” (Scholes, at p. 599; Davaloo, at p. 417.)

Thus, the relation-back doctrine “requires courts to compare the factual allegations in the original and amended complaints.” (Davaloo, supra, 135 Cal.App.4th at p. 416.) “In determining whether the amended complaint alleges facts that are sufficiently similar to those alleged in the original complaint, the critical inquiry is whether the defendant had adequate notice of the claim based on the original pleading. ‘The policy behind statutes of limitations is to put defendants on notice of the need to defend against a claim in time to prepare a fair defense on the merits. This policy is satisfied when recovery under an amended complaint is sought on the same basic set of facts as the original pleading.’ ” (Pointe San Diego, supra, 195 Cal.App.4th at p. 277.) Put another way, “ ‘[t]he criterion of relation-back is whether the original complaint gave the defendant enough notice of the nature and scope of the plaintiff’s claim that he shouldn’t have been surprised by the amplification of the allegations of the original complaint in the amended one.’ ” (Id. at p. 279.)

Finally, when considering a relation-back claim, “courts should consider the ‘strong public policy in this state that cases should be decided on their merits.’ ” (Pointe San Diego, supra, 195 Cal.App.4th at p. 277.)

3. The relation-back doctrine applies here.

Rojas argues the complaint adequately described the claims alleged as well as the requested relief, thus putting “Glenair on notice of the essential nature of Perez’s claims.” Rojas further argues that, rather than Davaloo and Scholes, this case is most akin to Pointe San Diego, where the relation-back doctrine applied to save an amended complaint. Glenair counters the complaint did not give adequate notice of the claims alleged. Rather, according to Glenair, the complaint was a “ ‘generic form’ complaint,” the allegations of which did not pertain specifically to Glenair but were “ ‘rote boilerplate.’ ” As such, Glenair argues, there was nothing to which the first amended complaint could relate back, and Rojas’s claim is time-barred. Glenair argues this case is like Davaloo, where the relation back doctrine did not apply.

We agree with Rojas. Applying our independent review, we conclude the complaint satisfies the relation-back standard articulated by Davaloo and followed by both Scholes and Pointe San Diego. The complaint here is unlike the clearly deficient complaints at issue in Davaloo and Scholes and more akin to the complaint at issue in Pointe San Diego, where the relation-back doctrine was held to apply.

Despite Glenair’s efforts to convince us otherwise, the complaint here simply is not comparable to the complaints at issue in Davaloo, supra, 135 Cal.App.4th 409. Davaloo involved two complaints simultaneously filed against the plaintiffs’ insurance company seeking relief for alleged property damage caused by the Northridge earthquake. (Id. at p. 411.) Neither of the original complaints in Davaloo included ultimate facts, such as the address of the property at issue (other than stating it was in California), the policy number or terms of the relevant insurance policy, whether a claim had been made on the policy, or whether the defendant insurance company had taken any action on a claim if one had been made. (Id. at pp. 412, 417.) In addition, the allegations of the original complaints were contradictory. For example, on the one hand, each complaint alleged the defendant insurance company had denied the existence of an insurance policy but, on the other hand, also alleged the insurance company withheld money it agreed was owed and altered reports so as to pay less damages. (Id. at p. 418.) Finally, the complaints stated the plaintiffs’ names in the caption only and in the body of each complaint actually alleged uncertainty as to the identity of the plaintiffs. (Id. at p. 412, fn. 6.)

The defendant insurance company demurred, arguing the complaints were uncertain and failed to state a cause of action. (Id. at p. 412.) Before the trial court ruled on the demurrers, the Davaloo plaintiffs filed first amended complaints, which added property addresses and insurance policy numbers. (Id. at p. 413.) The insurance company again demurred, claiming the amended complaints did not relate-back to the original complaints and, therefore, were time-barred. (Ibid.) The trial court agreed, sustained the demurrers without leave to amend, and dismissed the actions. (Ibid.)

The Court of Appeal affirmed. (Davaloo, supra, 135 Cal.App.4th at p. 421.) The Davaloo court described the original complaints as “the functional equivalent of no complaint at all,” “alleg[ing] nothing more than the Northridge earthquake caused harm to a resident or residents of Los Angeles County.” (Id. at p. 417.) The court noted the “pleading inconsistencies in the original complaints highlight the absence of sufficient factual allegations to apprise [the defendant] of the nature of the disputes at issue.” (Id. at p. 418.) Considering the “totality of the deficiencies in the original complaints, rather than any single defect alone,” the court explained “the complete lack of factual allegations in the original complaints [made it] impossible to conclude the first amended complaints are based on the same general set of facts as the original complaints.” (Id. at p. 417.) “Although there can be no bright-line rule as to when a complaint is so deficient to preclude relation back . . . , the original complaints here—with all their deficiencies—are plainly insufficient.” (Id. at pp. 417–418.)

The original complaint in Scholes, supra, 10 Cal.App.5th 590, was similarly devoid of factual allegations and plainly insufficient. In Scholes, the plaintiff Vincent Scholes sued his neighbor and his neighbor’s insurance company after a fire at the neighbor’s property caused damage to Scholes’s property. (Id. at p. 592.) Scholes’s original complaint alleged “a cause of action for ‘[d]ispute compensation on insurance claim’ ” and sought relief for “ ‘compensation for property loss.’ ” (Id. at p. 598.) The original complaint alleged “ ‘[d]efendants have accepted liability, dispute amount of damages from fire.’ Nothing else [was] listed in or attached to the original complaint.” (Ibid.) Over time, Scholes filed a first, second, and third amended complaint. In his second amended complaint, Scholes alleged for the first time a trespass cause of action, which he expanded into three trespass-related causes of action in his third amended complaint. (Id. at pp. 594, 597.) Scholes’s trespass causes of action were untimely unless the second amended complaint related back to the original complaint. (Id. at p. 597.) The trial court held it did not and dismissed the action. (Id. at p. 595.)

The Court of Appeal affirmed. (Scholes, supra, 10 Cal.App.5th at p. 603.) The court explained Scholes’s original complaint was “devoid of factual allegations” and failed to allege ultimate facts. (Id. at p. 598.) The court stated, “The original complaint does not identify the property at issue or specify the damages suffered; it merely lists ‘loss of use of property’ and ‘property damage.’ The complaint fails to specify the date, origin, or scope of the fire. The original complaint does not set forth the relationship between the parties or any duties owed to Scholes by [his neighbor]. Nor does the original complaint specify any causes of action except for checking the box for ‘Property Damage.’ Nothing in the original complaint sets forth any factual basis for Scholes’s subsequent claims for negligent trespass, intentional trespass, or unnatural activity trespass. It is impossible even to infer the nature of any dispute between Scholes and [his neighbor].” (Ibid.) Following Davaloo, the Scholes court relied “on the totality of the deficiencies in the original complaint, rather than any single defect” (id. at p. 599) and held Scholes’s original complaint failed to put the defendant “on notice of any cause of action against it” (id. at p. 601). The court concluded, “This void prevents the amended complaint from relating back to the original complaint.” (Ibid.)

We do not disagree with the legal principles of the relation-back doctrine as stated and applied in Davaloo or Scholes. However, we cannot agree the case before us is similar to either Davaloo or Scholes. Here, there is no dispute the first amended complaint “rests on the same general set of facts and refers to the same ‘offending instrumentalities,’ accident and injuries as the original complaint.” (Davaloo, supra, 135 Cal.App.4th at p. 415.) Indeed, other than Rojas replacing Perez as the named plaintiff, the first amended complaint is, in Glenair’s words, “identical to” the complaint. That fact alone distinguishes this case from both Davaloo and Scholes.

As the parties agree, the relevant inquiry then is whether the complaint included sufficient “ultimate facts” (Davaloo, supra, 135 Cal.App.4th at p. 415) such that Glenair “had adequate notice of the claim[s] based on the original pleading” (Pointe San Diego, supra, 195 Cal.App.4th at p. 277). We conclude the complaint adequately notified Glenair of the claims alleged against it. Contrary to the complaints in both Davaloo and Scholes—which were utterly devoid of relevant factual allegations—the complaint here included the required ultimate facts. For example, the complaint alleged Glenair had violated a variety of clearly specified statutes and wage orders, gave examples of how Glenair allegedly violated those laws and wage orders, defined the parameters of the putative class, alleged Perez had worked for Glenair within the relevant time frame, and articulated the alleged injuries suffered and the damages sought. Given the specificity of the allegations, we cannot agree with the trial court’s assessment of the complaint as in effect alleging only, “ ‘I am suing you because, on information and belief, you did wrong. To find out how, you must commence discovery.’ ” It is not reasonable to believe Glenair was in the dark as to what was being alleged.

According to Glenair, it is significant the complaint included boilerplate language and was used repeatedly as a form complaint by plaintiff’s counsel. Echoing the trial court’s assessment below, Glenair claims the “ ‘generic form’ complaint ‘contained no factual allegations specific to Glenair.’ ” We disagree. First, the allegations are specific to Glenair. As explained above, the complaint repeatedly alleged “DEFENDANTS” violated the specified laws and wage orders and gave concrete examples how those alleged violations occurred. Glenair is a defendant. Thus, each allegation referencing “DEFENDANTS” is specific to Glenair. Second, we are unaware of a rule that the relation-back doctrine does not or cannot apply when a form complaint is involved. The relevant inquiry is not how often a complaint is or has been used, but rather whether the complaint—form or otherwise—alleges ultimate facts adequate to put the defendant on notice of the claims made against it. (Davaloo, supra, 135 Cal.App.4th at p. 415; Pointe San Diego, supra, 195 Cal.App.4th at p. 277.) Glenair seems to equate “form” complaints with “generic” and uninformative complaints. But, as this case illustrates, the two are not always the same. Thus, although the complaint suffered deficiencies (not the least of which was Perez having been in bankruptcy), employed boilerplate language in parts, and was a form complaint used repeatedly by counsel, it is simply not possible to describe the complaint as “the functional equivalent of no complaint at all.” (Davaloo, at p. 417.)

Finally, we agree with Rojas that this case presents a stronger argument for application of the relation-back doctrine than that presented in Pointe San Diego, where the Court of Appeal reversed the trial court and found the relation-back doctrine applied to save an otherwise untimely amended complaint. (195 Cal.App.4th at p. 268.) The original complaint there was a form complaint on which plaintiffs had checked the box next to “ ‘General Negligence’ ” and claimed “ ‘within the last year’ ” the named defendants, “ ‘as Plaintiffs’ attorneys, failed to use due care in the handling of Pointe San Diego Residential Community, L.P. et al. v. Palomba Weingarten, et al. litigation.’ ” (Id. at pp. 271, 277.) No further factual detail was given regarding the alleged legal malpractice. In subsequent amended complaints, however, the plaintiffs added “substantially more detail with respect to the nature of the malpractice claims.” (Id. at p. 271.) Relying on Davaloo, the trial court sustained the defendant law firm’s demurrer without leave to amend, finding the relation-back doctrine inapplicable “because the original complaint did not contain sufficient factual allegations.” (Id. at p. 273.)

The Court of Appeal reversed. Although the Pointe San Diego court agreed with the reasoning of Davaloo, it found the cases distinguishable. (Pointe San Diego, supra, 195 Cal.App.4th at pp. 280–281.) Despite the “ ‘bare bones’ nature” of the Pointe San Diego original complaint, the court concluded the “complaint placed [the law firm] on notice of the identity of the plaintiffs and the nature of their claims. The complaint referred to the specific litigation in which [the law firm] had represented plaintiffs and alleged that [the law firm] had failed to use due care in the handling of that litigation. Although the complaint did not detail the specifics of the claim, [the law firm] had superior knowledge of its conduct and the manner in which it may have breached the standard of care. [The law firm] had sufficient information to be apprised of the factual basis for the claim–its acts and omissions during its representation of plaintiffs in the [subject] litigation—and to take steps to preserve the necessary relevant information for defense of this claim and timely notify its malpractice carrier of the claim.” (Id. at p. 281.)

The same if not more can be said about the sufficiency of the complaint here, which as discussed above included significantly more factual allegations than the original complaint in Pointe San Diego. Similarly, Glenair like the law firm defendant in Pointe San Diego has “superior knowledge of its conduct and the manner in which it may have [violated the specified laws and wage orders].” (Pointe San Diego, supra, 195 Cal.App.4th at p. 281.)

Because we conclude the relation-back doctrine applies here, we need not and do not address the parties’ arguments regarding leave to amend.

DISPOSITION

The October 28, 2019 order is reversed. The trial court is directed to reinstate the cause of action for unlawful business practices under Business and Professions Code section 17200 and to conduct further proceedings in accordance with the views expressed herein. Appellant Roxana Rojas is entitled to her costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3), (5).)

NOT TO BE PUBLISHED.

LUI, P. J.

We concur:

CHAVEZ, J.

HOFFSTADT, J.

Filed 8/3/20 Running v. City of Azusa CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

PRAXEDES E. RUNNING, individually and as Trustee, etc.,

Plaintiff and Appellant,

v.

CITY OF AZUSA et al,

Defendants and Respondents

B293638

(Los Angeles County

Super. Ct. No. BC623542)

APPEAL from a judgment of the Superior Court of Los Angeles County, Teresa A. Beaudet, Judge. As to the City of Azusa and Azusa Valley Water Company, the judgment is reversed and remanded with directions. As to George Morrow, Chet Anderson, Fran Delach, Canyon Water Company, Andrew M. McIntyre and William L. McIntyre, Jr. the judgment is affirmed.

Marlene Thomason for Plaintiff and Appellant Praxedes E. Running, in her individual capacity and as trustee of the Praxedes E. Running Trust.

Best Best & Krieger, Christopher M. Pisano and Gregg W. Kettles for Defendants and Respondents City of Azusa, Azusa Valley Water Company, George Morrow, Chet Anderson and Fran Delach.

Larson O’Brien, Stephen G. Larson, Paul A. Rigali and Lauren S. Wulfe for Defendants and Respondents Canyon Water Company, William L. McIntyre, Jr. and Andrew M. McIntyre.

__________________

Praxedes E. Running, individually and as trustee of the Praxedes E. Running Trust, appeals the judgment entered after the trial court sustained without leave to amend the demurrer by the City of Azusa, Azusa Valley Water Company (AVWC), George Morrow, Chet Anderson and Fran Delach (collectively the City defendants) to several tort causes of action alleged in Running’s third amended complaint and granted the motions for summary judgment by the City defendants and their codefendants Canyon Water Company (Canyon) and Canyon’s directors William L. McIntyre, Jr. and Andrew M. McIntyre (collectively Canyon defendants) on all remaining causes of action. We reverse the judgment as to the City and AVWC because they failed to carry their burden on summary judgment as to Running’s causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing based on the diversion of irrigation water and her cause of action for financial elder abuse. In all other respects we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Operative Third Amended Complaint

Running filed this action in June 2016 against the City defendants, the Canyon defendants, Covina Irrigation Company (CICO) and San Gabriel River Water Committee (SGRWC), alleging a cause of action for financial elder abuse against all of them and against all but the Canyon defendants causes of action for negligence, breach of contract, breach of the implied covenant of good faith and fair dealing and trespass. The gravamen of the complaint was that each defendant, acting in concert with, and/or as the agent of, each other and without notice to Running, diverted water belonging to Running on which she had relied for nearly 60 years to irrigate her seven-acre property in Azusa. As a result, several mature trees on Running’s property died; and the land deteriorated.

a. The parties

Running’s revocable living trust holds the property involved in this lawsuit. Running is the trustee; but Patricia Beecham, her daughter and court-appointed guardian ad litem, filed this action on Running’s behalf because Running suffers from advanced Alzheimer’s disease and lacks the mental capacity to proceed on her own.

According to the third amended complaint, AVWC is a California corporation operating as a publicly regulated water company. The City is the controlling shareholder of AVWC; the City and AVWC “combine and comingle [sic] their activities such that one acts as the agent and alter ego of the other.” The City and AVWC are members of SGRWC, a nonprofit unincorporated association established to manage the water rights, or “flow rights,” of users of San Gabriel River water. Since its acquisition of AVWC, the City has paid AVWC’s share of SGRWC assessments from City’s treasury; and City’s officials overlap with AVWC’s such that City’s treasurer is also the treasurer of AVWC.

Delach is the City of Azusa’s city manager and supervised operations of AVWC; Morrow is City’s director of utilities; and Anderson is City’s assistant director of utilities.

Canyon is a private corporation. William McIntyre, Jr. is the president of Canyon, a director of CICO and a board member of SGRWC. Andrew McIntyre is a principal manager at Canyon and a director of CICO.

b. Allegations against the City defendants

As alleged in the third amended complaint, Running and her husband purchased property on North San Gabriel Canyon Road in 1950. They recorded their grant deed in April 1963. A cement-lined canal, part of a system of canals that transported water from the San Gabriel River to the cities of Covina and Azusa, traversed a portion of Running’s property and continued through an underground tunnel, part of which ran beneath Running’s house. CICO owned the canal; SGRWC members, including CICO and the City, possessed an easement on Running’s property to operate and maintain the canal.

For nearly 60 years Running used the water that flowed through the canal to irrigate her property. Running claimed a property right in that water as a successor-in-interest to J.T. and Emma Gordon, the original owners of the property, who had entered into agreements in the late 19th and early 20th centuries that recognized their “old user” rights to a specified amount of water from the San Gabriel River as rights that were appurtenant to, and ran with, the land. Running attached to the third amended complaint three agreements: (1) The Old User Agreement of 1888, (2) the Compromise Agreement of 1889 and (3) the Indenture of 1920. The Indenture, the result of a settlement of a lawsuit between the Gordons and SGRWC, was recorded in 1921 and referred to, and incorporated by reference in, Running’s grant deed, which was also attached to the complaint.

In 2009 Running, then 85 years old and suffering from advanced Alzheimer’s disease, relocated to Yuba County to be near Beecham. In 2010 the City, AVWC, CICO and SGRWC diverted the water that had flowed through the canal to a newly constructed underground pipeline. While the City, CICO and SCRWC (the complaint failed to distinguish among them) notified other property owners of the plan to divert water from the canal to the underground pipeline, and CICO paid neighboring property owners “to release” them from the maintenance easement, none of the defendants notified Running of the pipeline project, nor did they connect her property to the pipeline. As a result, more than 15 mature trees on Running’s property, along with substantial vegetation, died from lack of water.

In 2015 the City posted on Running’s property a notice of hearing for abatement of a nuisance—dead trees and brush that riddled the property and made it an eyesore—and warned that failure to remediate the nuisance could result in a lien imposed in the amount of $200,000 for anticipated clean-up costs. Beecham responded to the notice by paying more than $100,000 to clear the property, after which the City cancelled the scheduled hearing. During the cleanup Beecham discovered the diversion of the canal water to the underground pipeline. Beecham also learned the defendants (again failing to distinguish among them) had closed the underground tunnel in 2011 with cement plugs and, when doing so, ignored engineering reports that indicated substantial reinforcement of the structure was required to ensure it remained sound. As a result, the tunnel collapsed and damaged Running’s property. Anderson, Delach, and Morrow were alleged to have “approved and ratified” the City’s conduct.

In paragraph 60 of the third amended complaint Running alleged all defendants, acting as the agents of one another, failed to maintain the canal in accordance with the terms of the easement granted in the Compromise Agreement and Indenture and wrongfully permitted an uphill property owner to construct a sewer line and septic runoff pipe on her property without her knowledge or consent, all of which “result[ed] in a taking of the equity value” of Running’s property.

c. Allegations against the Canyon defendants

Running asserted her first cause of action for elder abuse against “all defendants,” including the Canyon defendants, alleging generally that all defendants committed the wrongful conduct alleged in the complaint. As to the McIntyres specifically, the third amended complaint alleged they had abused their roles as CICO directors by using confidential information obtained from CICO to solicit and obtain Running’s three CICO shares for themselves and their friends and family members at prices that were detrimental to CICO and to Running as a CICO shareholder.

2. The City Defendants’ Demurrer to the Third Amended Complaint
3.
The City defendants jointly demurred to the third amended complaint. (Prior demurrers had been sustained with leave to amend.) The City argued, as to all tort claims with the exception of elder abuse (to which it did not demur), it was immune from liability under the Government Claims Act. Morrow, Anderson and Delach argued the complaint failed to state a cause of action against them; and AVWC argued the complaint failed to allege any wrongdoing by AVWC.

The trial court sustained the demurrer without leave to amend. The court ruled the City was immune from tort liability under the Government Claims Act. Citing Running’s allegations that AVWC and the City were alter egos, the court ruled AVWC was similarly immune. As to Delach, Morrow and Anderson, the court ruled the allegations in the third amended complaint that these individuals “directed, approved and ratified” the City’s wrongful conduct, without more, were insufficient as a matter of law to state facts constituting a cause of action against them or subject the City and AVWC to vicarious liability for their employees’ torts.

4. The City Defendants’ Motion for Summary Judgment/Summary Adjudication
5.
The City defendants moved for summary judgment or, in the alternative, summary adjudication, directed to the remaining claims for breach of contract, breach of the implied covenant of good faith and fair dealing and financial elder abuse. Together with CICO and SGRWC, they filed a joint memorandum of points and authorities that began with a history of the canal and the contracts that are at the heart of Running’s claims.

a. The “old users’” rights

The history of the canal was detailed in Gordon v. [CICO] (1912) 164 Cal. 88 (Gordon), a case involving Running’s predecessors-in-interest. As related in Gordon, prior to the 1880’s farmers on the east side of the San Gabriel River, known as the “old users,” relied on water from the San Gabriel River to irrigate their properties. In the early 1880’s CICO, then known as the Azusa Water Development & Irrigation Company, was formed as a private mutual water company for the purpose of distributing to its stockholders their pro rata share of river water. Any surplus beyond each stockholder’s pro rata share was to be sold for the benefit of the stockholders. To facilitate delivery of the water to its stockholders, CICO began construction of a cement ditch (the canal). Many of the old users, including the Gordons, were interested in using CICO’s canal to transport river water to their lands and granted CICO easements on their properties to permit the canal to be constructed for that purpose. The cement canal was completed in 1885 or 1886. (Gordon, at p. 90.)

i. The Old User Agreement

In June 1888 CICO and 70 or 80 old users, including the Gordons, entered into the Old User Agreement, which recited the rights of each old user to his or her pro rata share of the water that flowed in the canal. Under that agreement the old users agreed to deliver to the mouth of CICO’s canal their pro rata share of water. CICO agreed for a fee to “receive at the mouth of its water [canal]” all the water belonging to the old users and permit that water to flow through its canal to the old users’ lands. (Gordon, supra, 164 Cal. at p. 91.) The agreement acknowledged the water delivered by CICO through the canal “belong[ed] in whole” to the old users as “appurtenant to said lands.” (Ibid.)

ii. The Compromise Agreement

In January 1889 a number of parties claiming rights to San Gabriel River water signed the Compromise Agreement, which purported to provide for the division of “all” the waters of the San Gabriel Canyon. (Gordon, supra, 164 Cal. 92.) The Compromise Agreement was signed by five distinct groups of parties claiming water rights, including CICO, the City (through its predecessor-in-interest) and most of the old users, but not the Gordons. (Id. at p. 95.) The Compromise Agreement designated the place from which each of the parties could take water belonging to them and required payment to CICO relating to each old user’s proportional expenses. In addition, the Compromise Agreement established the Committee of Nine (now called SGRWC) to “represent all the parties and to have full charge” of the distribution and delivery of water from the San Gabriel River through the canal. (Id. at p. 93.)

iii. The Gordon litigation

In 1905 the Gordons sued CICO, alleging CICO was obligated under the Compromise Agreement to supply them with water in excess of the amount they were otherwise entitled to under the Old User Agreement. Observing that the Gordons were not parties to the Compromise Agreement, the Supreme Court held they had no standing to enforce it. However, the Court recognized that conclusion also meant the Gordons’ rights under the Old User Agreement could not be affected by the Compromise Agreement. (Gordon, supra, 164 Cal. at p. 95.) The Court further explained that CICO’s obligation to the Gordons under the Old User Agreement was merely to receive at its canal and deliver, for a fee, the Gordons’ pro rata share of old user river water. It remained the obligation of the Gordons, as old users, to ensure that water was delivered to CICO’s canal and to pay CICO for its delivery of water from that canal to their land. The Court held there was no obligation for CICO to provide any of its own water to the Gordons. (Id. at p. 97.)

iv. The Indenture

Nearly a decade after the Supreme Court’s decision in Gordon, CICO and other members of SGRWC filed a complaint in superior court seeking to enjoin the Gordons from taking more than their allotted amount of water from the canal and from interfering with CICO’s easement on their properties to maintain the canal. (A copy of this complaint was attached as Exhibit C to Running’s third amended complaint.) The litigation was dismissed after the parties entered into a written settlement agreement, the Indenture (attached as Exhibit D to the third amended complaint).

The Indenture, which was recorded and referred to in Running’s grant deed, purported to settle not only the matters at issue in the litigation between the Gordons and members of SGRWC, but also to “settle all matters in dispute with reference to” the canal, whether or not they were part of the litigation, including the amount of water to be taken by the Gordons, or either of them, from the canal, the manner of taking the water and the use of the water. The Indenture granted SGRWC and its members an easement on the Gordons’ properties for the canal and its maintenance and operation and identified the amount of water the Gordons could take from the canal for domestic purposes and for irrigation purposes. The parties to the Indenture agreed the water rights “described herein” were “the only water rights” the Gordons had to the water in the canal or to the waters of the San Gabriel River and identified the Gordons’ right to “receive and use for irrigating purposes” water from the canal as “appurtenant to,” and running with, the land.

b. The City defendants’ supporting declarations

Morrow explained in his declaration supporting the City defendants’ motion for summary judgment that the City owns and operates a public water system through a network of pipelines and related infrastructure. The City obtains water for that system from multiple sources, including the San Gabriel River. Running’s home has always been connected to that public water system. The pipeline did not deprive Running of access to water.

In 1993 the City acquired AVWC, including AVWC’s rights to San Gabriel River water. While AVWC continues to exist as a legal entity, a decision the City made to avoid altering numerous contracts involving AVWC, it has not operated independently from the City since 1993. According to Morrow, “The City manages, operates and maintains all of AVWC’s past water facility assets and water rights as part of the City’s public municipal water system. AVWC does not hold regular meetings, and the Board of Directors is comprised of the members of the City Council. The offices of AVWC are . . . held in conjunction with those in certain City positions at any given time.” Morrow’s predecessor, Brent Hale, provided a similar explanation of AVWC’s relationship with the City.

David DeJesus, President and Chief Executive Officer of CICO and a board member of SGRWC, explained that CICO owns the canal and SGRWC manages it on behalf of SGRWC members, including the City. In 2005 CICO decided to replace the open canal with an underground pipeline because the exposed water flowing through the canal was vulnerable to contamination from a variety of sources and there was a risk of bioterrorism and drowning. After the project was approved by the City’s Department of Health, construction on the pipeline began and, according to DeJesus, was visible from Running’s home. Construction of the pipeline was completed, and the pipeline began service, “in or about 2010.” By that time the canal was no longer being used to transport water, and the absence of water flowing through the canal was open and obvious. In 2011 CICO decided to plug the underground tunnel to address health and safety hazards. DeJesus also explained that CICO continues to hold an easement on Running’s property to maintain the canal.

Donald Berry, the administrator and “sole employee” of SGRWC, averred that SGRWC’s role is to divert water owned by its member entities to the canal and to maintain the canal and manage the flow of the members’ water. According to Berry, the “water that flows through the canal belongs to the members of the SGRWC.” Each member of SGRWC pays assessments to SGRWC to manage and operate the canal. The City stopped paying assessments for the canal in 2008, when it no longer diverted its own water through the canal. In the 34 years he has been employed by SGRWC, Berry stated, Running had never been a member of SGRWC, paid assessments to SGRWC or requested that SGRWC divert river water to the canal for her retrieval.

Tara Biddle, CICO’s office administrative assistant and the person designated by CICO as most knowledgeable about CICO’s administrative operations, provided the articles of incorporation from Contract Water Company of Azusa (Contract Water Company), formed in 1895, a few years after the Compromise Agreement. According to those articles, the purpose of the company was “[t]o hold in trust for the stock-holders of the corporation, all the water rights and waters now belonging to them, and that may hereafter be acquired by them, and to manage and control the distribution of such waters, for irrigation purposes and domestic uses; to acquire, construct and lay down pipes and other conduits, ditches and flumes for the distribution of such additional waters; to acquire by purchase, development, or otherwise, additional water rights and waters for the use and benefit of the stockholders . . . .” The articles list both J.T. Gordon and Emma Gordon as shareholders of the company.

DeJesus explained that in 1964 Contract Water Company conveyed to CICO in exchange for $2,500 “all the assets of Contract, both real and personal,” with the exception of its capital stock, “said stock interest to be retained by Contract.” Under that agreement, attached to DeJesus’s declaration, CICO agreed to continue to deliver water to Contract Water Company shareholders in accordance with the Old User Agreement until December 31, 1979 and after that, “upon demand made therefor, upon the same rates, rules and regulations and terms and conditions applicable to all other users of [CICO] water.”

c. The City defendants’ arguments

i. Statute of limitations

The City defendants asserted Running should have known about the pipeline plan as early as 2004 when CICO first identified the plan in its 2004-2005 annual report sent to all CICO shareholders, including Running; by 2008 when construction of the pipeline began; and most certainly by 2010 when the pipeline was completed and the canal ran dry. In addition, they argued, Running’s son, Steven Running, resided on the property after Running moved in 2009. In September 2010 Steven Running, along with neighboring property owners, signed a letter demanding CICO clear and repair the canal. The letter asserted the “unannounced stoppage of water and thus its use ma[d]e it a dangerous area to both people and animals” and insisted that after restoration of the canal CICO return the easement to all appropriate property owners. Beecham testified in her deposition that she frequently relied on her brother, Steven, to alert her when property matters needed to be addressed.

ii. Contract-based claims

The City and AVWC observed that neither of them or any of their predecessors-in-interest was a party to the Old User Agreement. Accordingly, that agreement could not be enforced against them. Conversely, although City and AVWC were in privity with each other and with parties to the Compromise Agreement, the Gordons were not parties to that agreement. Accordingly, Running, as the Gordons’ successor-in-interest, lacked standing to enforce the Compromise Agreement.

The City acknowledged, as successor-in-interest to AVWC and to others who were parties to the Indenture, it was bound by the terms of the Indenture. However, the City and AVWC argued, the Indenture merely clarified and confirmed the rights of the parties under the Compromise Agreement; it did not grant the Gordons any rights other than those they had obtained under the Old User Agreement. More importantly, they argued, in 1895 the Gordons transferred their old user rights to Contract Water Company. Accordingly, by the time of the Indenture, the Gordons did not own any water rights appurtenant to their (now Running’s) land.

As for allegations that the City breached the Indenture by failing to maintain the canal, the City argued the maintenance provision of the easement was permissive, not mandatory. Finally, because the claim for breach of the implied covenant of good faith and fair dealing was premised on the same allegations as the breach of contract claim, that claim too, the City argued, failed as a matter of law.

iii. Financial elder abuse

The City defendants characterized the financial elder abuse claim as rooted in allegations the City (including AVWC) and its employees had deceived a mentally incompetent nonagenarian widow by stealing her water. Because Running had no contractual right to water that had flowed through the canal, Running’s financial elder abuse claim necessarily failed. In addition, Morrow, Anderson and Delach attested they had never met Running and had no knowledge of her age or mental infirmity.

6. The Canyon Defendants’ Motion for Summary Judgment/Summary Adjudication
7.
The Canyon defendants separately moved for summary judgment/summary adjudication. Like their codefendants, the Canyon defendants argued all claims were time-barred, and Running’s claim for financial elder abuse against them failed as a matter of law because she had no old user rights to water from the San Gabriel River and hence could not establish any wrongful conduct relating to the alleged diversion of water. As to the allegations they had usurped a corporate opportunity to CICO’s detriment in violation of their fiduciary duties to CICO, the Canyon defendants argued that claim belonged to CICO. Running had no standing to assert that claim in a direct action and had not pleaded a derivative action.

8. Running’s Opposition to the Summary Judgment/Summary Adjudication Motions
9.
a. Statute of limitations

In her opposition papers Running argued all statutes of limitations were tolled due to her undisputed mental incompetence, which had disabled her since at least 2009. (Code Civ. Proc., § 352, subd. (a) [if a person entitled to bring an action is at the time the cause of action accrued “either under the age of majority or lacking the legal capacity to make decisions, the time of the disability is not part of the time limited for the commencement of the action”].) In addition, although Running’s mail was forwarded to Beecham, Beecham never received any annual report from CICO. Moreover, those reports announcing the pipeline project did not alert Running that her water would be diverted without being replaced. Running also provided evidence that Steven Running suffers from schizophrenia and bipolar disorder. At his deposition Steven Running testified he did not read the letter to CICO that his neighbor had given him to sign. He signed the letter because his neighbor told him it was about restoring the broken cement canal to its original condition and protecting animals and he trusted his neighbor. Beecham averred water in the canal was routinely turned off, and the canal dry, due to maintenance. Therefore it would not have been unusual to see the canal dry. Finally, Beecham and her sister stated the canal was obscured from view by several trees and not visible from the house.

b. Financial elder abuse and contract claims

Running asserted all defendants (again without differentiating among them) had limited their arguments to the “wrongful taking of water” and had failed in their motions to address numerous other allegations of wrongful conduct that supported her claim for elder abuse: (1) the diversion of water from the canal to the pipeline without notice to her, resulting in the death of mature trees and vegetation and diminution of the value of her property; (2) the City’s issuance of a notice of abatement for a nuisance the City caused; (3) and CICO’s refusal to connect Running to the pipeline unless she paid $50,000. Accordingly, she argued, even if she did not have a legal right to the irrigation water under the Indenture or Old User Agreement (a matter she disputed), she was the owner of three shares of CICO stock that entitled her to some water for irrigation purposes; and the diversion of all her irrigation water without any notice was itself a “wrongful act” that supported a cause of action for financial elder abuse.

Running also argued the City had failed to carry its burden to demonstrate she lacked any entitlement to water under the Indenture. According to Running, the Indenture unambiguously granted the Gordons rights to water in the San Gabriel River that ran with the Gordons’ land. Running, as successor-in-interest to the Gordons, enjoyed the same appurtenant rights, which were transferred to Contract Water Company to hold in trust only and could not have been sold to CICO in 1964 without her consent. At the very least, she argued, any ambiguity about the effect of the Indenture or the sale of Contract Water Company’s assets to CICO raised a triable issue of material fact that precluded summary judgment.

Finally, Running argued the obligation to maintain the canal and tunnel were not permissive; and the defendants (again, without distinguishing among them) failed to comply with those contractual obligations.

As to the Canyon defendants specifically, Running argued they were liable for elder abuse as directors of CICO. Moreover, Andrew McIntyre was a board member of SGRWC and, therefore, responsible for its wrongful conduct.

10. The Court’s Ruling on the Summary Judgment/Summary Adjudication Motions
11.
The court granted the City defendants’ and the Canyon defendants’ motions for summary judgment. Although it found triable issues of material fact as to whether Running’s claims were time-barred, the court concluded Running had no contractual right to receive irrigation water from the canal based on old user rights. On this issue the court found the Gordons had transferred their old user rights to Contract Water Company in 1895, which, in turn, sold all water rights it held to CICO in 1964 under an agreement that extinguished old user rights on January 1, 1980. In addition, any right to irrigation water that Running possessed by virtue of her three CICO shares required that Running make a demand for water and payment to CICO for delivery and Running did neither, thereby excusing CICO’s performance.

The court continued, because Running “ha[d] no claim to any old user rights,” she could not establish a right to the “property allegedly taken from her (her water rights),” which was central to her elder abuse claim. Alternatively, “[a]s to wrongful use, Defendants submit that CICO’s decision to take the canal out of service was motivated solely by health and safety concerns and not for any purpose, wrongful or not, related to Plaintiff. Plaintiff presents no evidence that sufficiently refutes that fact. There is also insufficient evidence that Defendants harbored an intent to defraud or unduly influence Plaintiff by any of the other alleged actions taken or not taken by Defendants. . . . Accordingly, the [c]ourt finds that there is no triable issue of material fact as to the elder abuse cause of action, and summary adjudication is therefore granted.”

As for Running’s claims for breach of contract based on the Indenture’s easement requirements, the court ruled the plain language of the Indenture imposed a permissive duty to maintain the canal, not a mandatory one.

The court also ruled the claim against the McIntyres was derivative rather than direct and Running had failed to plead a derivative claim as a CICO shareholder.

The court entered judgment in favor of the City defendants and the Canyon defendants. Running filed a timely notice of appeal.

DISCUSSION

1. The Trial Court Properly Sustained the City Defendants’ Demurrer Without Leave To Amend
2.
a. Standard of review

“In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory.” (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162.) “In making this determination, we must accept the facts pleaded as true and give the complaint a reasonable interpretation.” (Mathews v. Becerra (2019) 8 Cal.5th 756, 762; accord, Summer J. v. United States Baseball Federation (2020) 45 Cal.App.5th 261, 268.) “If the demurrer was sustained without leave to amend, we consider whether there is a ‘reasonable possibility’ that the defect in the complaint could be cured by amendment.” (King v. CompPartners, Inc. (2018) 5 Cal.5th 1039, 1050.) The burden is on the plaintiff to prove that amendment could cure the defect. (Ibid.; Summer J., at p. 268.)

b. Governing law

Under the Government Claims Act a public entity may not be held directly liable for torts “[e]xcept as otherwise provided by statute.” (Gov. Code, § 815; see State ex rel. Dept. of California Highway Patrol v. Superior Court (2015) 60 Cal.4th 1002, 1008 (Alvarado) [“[i]f the Legislature has not created a statutory basis for it, there is no government tort liability”].) A public entity may be held vicariously liable for injuries proximately caused by an act or omission of an employee within the scope of employment only when “the act or omission would, apart from this section, have given rise to a cause of action against that employee . . . .” (Gov. Code, § 815.2, subd. (a).)

A public employee is immune from liability for discretionary acts within the course and scope of employment, even when that discretion has been abused. (Gov. Code, § 820.2.) Nonetheless, except as otherwise provided by statute, including Government Code section 820.2, public employees are liable for their torts “to the same extent” as private persons. (Gov. Code, § 820, subd. (a); Alvarado, supra, 60 Cal.4th at p. 1008; see Yee v. Superior Court (2019) 31 Cal.App.5th 26, 39-40.)

c. The City was immune from tort liability; and Running failed to allege facts to support Morrow, Anderson or Delach’s direct liability and the City’s vicarious liability for their acts
d.
Running argues the court erred in sustaining the City’s demurrer, observing Government Code section 815.6 authorizes imposition of liability for the City’s violation of a mandatory duty: “Where a public entity is under a mandatory duty imposed by an enactment that is designed to protect against the risk of a particular kind of injury, the public entity is liable for an injury of that kind proximately caused by its failure to discharge the duty unless the public entity establishes that it exercised reasonable diligence to discharge the duty.” Because Government Code section 810.6 defines “enactment” as “a constitutional provision, statute, charter provision, ordinance or regulation” and her complaint alleged a violation of a mandatory duty created by the due process clauses of the state and federal Constitutions, Running contends the court erred in finding the City immune from liability for its tortuous conduct.

The elements of liability under Government Code section 815.6 are well established. “‘First and foremost, application of section 815.6 requires the enactment at issue be obligatory, rather than merely discretionary or permissive, in its directions to the public entity; it must require, rather than merely authorize or permit, that a particular action be taken or not taken. [Citation.] It is not enough, moreover, that the public entity or officer have been under an obligation to perform a function if the function itself involves the exercise of discretion. [Citation.]’ [Citation.] Courts have construed this first prong rather strictly, finding a mandatory duty only if the enactment ‘affirmatively imposes the duty and provides implementing guidelines.’ [Citations.] [¶] ‘Second, but equally important, section 815.6 requires that the mandatory duty be “designed” to protect against the particular kind of injury the plaintiff suffered. The plaintiff must show the injury is “‘one of the consequences which the [enacting body] sought to prevent through imposing the mandatory duty.’” [Citation.] Our inquiry in this regard goes to the legislative purpose of imposing the duty. That the enactment “confers some benefit” on the class to which plaintiff belongs is not enough; if the benefit is “incidental” to the enactment’s protective purpose, the enactment cannot serve as a predicate for liability under section 815.6.’” (Guzman v. County of Monterey (2009) 46 Cal.4th 887, 898; accord, B.H. v. County of San Bernardino (2015) 62 Cal.4th 168, 179.)

Without question the due process clauses require governmental entities to provide notice and an opportunity to be heard before they deprive a person of property. (Customer Co. v. City of Sacramento (1995) 10 Cal.4th 368, 400.) Had Running alleged a claim for inverse condemnation—the taking by a public entity of private property for a public purpose without just compensation—we would agree the immunity provisions of the Government Claims Act would not apply. (See Baldwin v. State of California (1972) 6 Cal.3d 424, 438 [government immunity does not insulate a public entity from liability for inverse condemnation; the constitutional provisions requiring compensation for property taken or damaged by a public use override the Government Claims Act and its statutory immunities]; Pacific Bell v. City of San Diego (2000) 81 Cal.App.4th 596, 603 [same].)

Running, however, did not attempt to plead a cause of action for inverse condemnation. Any possible ambiguity on this point was resolved when the trial court granted Running leave to amend her second amended complaint specifically to clarify whether she was pleading an inverse condemnation claim and, in response, Running filed her third amended complaint that repeated the negligence and other tort causes of action without adding allegations that would support a cause of action for inverse condemnation. Nor does Running assert on appeal that she has alleged an inverse condemnation claim. The court did not err in sustaining the City’s demurrer to the challenged tort claims on immunity grounds. (See Customer Co. v. City of Sacramento, supra, 10 Cal.4th at p. 381 [distinguishing between a cause of action for negligence against a public entity and a claim for inverse condemnation; the former is subject to government immunity while the latter constitutional claim is not].)

Running’s alternative contention that the statutory immunity afforded public entities does not apply when the entity engages in proprietary conduct, such as operating a mutual water company, is also without merit. The common law distinction that historically existed between a public entity’s governmental and nongovernmental (proprietary) conduct (see, e.g., Sanders v. City of Long Beach (1942) 54 Cal.App.2d 651, 653-654) was eliminated in 1963 with the passage of the Government Claims Act. (Cabell v. State of California (1967) 67 Cal.2d 150, 152, overruled on other grounds in Baldwin v. State of California, supra, 6 Cal.3d at pp. 438-439; see Puskar v. City and County of San Francisco (2015) 239 Cal.App.4th 1248, 1252-1254 [“[u]nder current law, there is no distinction between governmental and proprietary activities in applying the government tort liability statutes”]; Strongman v. County of Kern (1967) 255 Cal.App.2d 308, 310 [same].)

Running also failed to state facts constituting a cause of action based on the City’s vicarious liability for the acts of its employees. The third amended complaint alleged only that Morrow, Anderson and Delach “directed, approved, and ratified” the City’s conduct. However, neither Running’s third amended complaint nor any of her three prior pleadings included allegations that would make any of those individuals liable for negligence, destruction of timber or trespass. Absent allegations supporting these employees’ liability, the allegations against the City based on a theory of vicarious liability cannot stand.

Finally, Running contends the court erred in sustaining the demurrer of Morrow and Anderson since they also committed wrongs on behalf of SGRWC, a private, nonprofit entity. Whether SGRWC, which is not a party to this appeal, is vicariously liable for purportedly wrongful acts committed by Morrow and Anderson is not before us. The question here is whether Running’s third amended complaint stated a claim against these individuals personally and, as discussed, there are no allegations in the complaint of specific wrongdoing by any of them, whether on behalf of the City or SGRWC.

d. The court did not err in sustaining the demurrer without leave to amend as to AVWC

Emphasizing allegations in the third amended complaint that AVWC was the City’s alter ego, the trial court ruled that, if the City were immune, so too was AVWC. Running contends this was error. According to Running, the third amended complaint alleged AVWC is a private mutual water company and thus not subject to government immunity.

The alter ego doctrine recognizes that in certain circumstances the corporate form is properly disregarded when it would be inequitable to recognize it. (See Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 300 [there are two general requirements that must be satisfied before alter ego liability may be imposed: (1) unity of interest and ownership; and (2) an inequitable result will follow, such as perpetration of a fraud, unless the corporate form is disregarded]; Eleanor Licensing LLC v. Classic Recreations LLC (2018) 21 Cal.App.5th 599, 615 [same].) Typically, the doctrine is employed by plaintiffs to impose liability on a defendant that would otherwise be shielded from liability by the separate corporate form. (See Mesler, at p. 300; Eleanor Licensing, at p. 615.) The doctrine has also been applied, albeit less frequently, as a defense when necessary to avoid a fraud or an inequitable result. (Cf. H.A.S. Loan Service, Inc. v. McColgan (1943) 21 Cal.2d 518, 521-522 [in action by taxpayer to recover taxes it alleged were unlawfully collected, defendant argued, and court found, plaintiff was alter ego of nonparty corporation and the two entities, considered as a unit, engaged in a single business, precluding plaintiff’s recovery]; see generally Wenban Estate, Inc. v. Hewlett (1924) 193 Cal. 675, 696.)

The situation in the case at bar is unusual. We are not aware of any case, nor have the parties cited any, in which a private defendant has relied on its status as an alter ego of a public entity to obtain the government immunity protection afforded to that entity. Nevertheless, the allegations of the third amended complaint support that result. The complaint alleges the City engaged in tortious conduct through its alter ego AVWC. It further alleges, and all parties agree, AVWC no longer exists independently from the City. It is owned, operated and run by the City; AVWC employees are City employees; and the City pays all AVWC assessments. (The evidence in connection with the parties’ summary judgment motion confirms that AVWC, once a private mutual water company, has existed in name only since the City acquired it in 1993; and for all purposes, AVWC is City.) For their part, the parties also agree that the City and AVWC should be treated similarly; they simply disagree on whether immunity applies. (Running insists neither the City nor AVWC is immune; the City and AVWC assert both are immune). Here, where AVWC and the City are one and the same, holding AVWC liable would circumvent the legislative grant of immunity for what is indisputably alleged to be City conduct. Under these unique circumstances, we have no difficulty concluding the court properly sustained the demurrer as to AVWC.

3. The Court Erred in Granting Summary Judgment for the City and AVWC; Summary Judgment Was Proper as to Morrow, Anderson and Delach
4.
a. Standard of review
b.
A motion for summary judgment is properly granted only when “all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c); see Regents of University of California v. Superior Court (2018) 4 Cal.5th 607, 618.) When a defendant moves for summary judgment in a situation in which the plaintiff would have the burden of proof at trial by a preponderance of the evidence, the defendant may, but need not, present evidence that conclusively negates an element of the plaintiff’s cause of action. Alternatively, the defendant may present evidence to “‘show[] that one or more elements of the cause of action . . . cannot be established’ by the plaintiff.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 853; see Code Civ. Proc., § 437c, subd. (p)(2).) “‘“‘The moving party bears the burden of showing the court that the plaintiff “has not established, and cannot reasonably expect to establish,”’ the elements of his or her cause of action.”’” (Ennabe v. Manosa (2014) 58 Cal.4th 697, 705; accord, Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 720; Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003 [“the defendant must present evidence that would preclude a reasonable trier of fact from finding that it was more likely than not that the material fact was true [citation], or the defendant must establish that an element of the claim cannot be established, by presenting evidence that the plaintiff ‘does not possess and cannot reasonably obtain, needed evidence’”].)

Once the defendant carries its initial burden, the plaintiff must demonstrate, by reference to specific facts, not just allegations in the pleadings, there is a triable issue of material fact as to the cause of action. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.)

We review a grant of summary judgment de novo and decide independently whether the facts not subject to triable dispute warrant judgment for the moving party as a matter of law. (Hampton v. County of San Diego (2015) 62 Cal.4th 340, 347; Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 286.) “‘“We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”’” (Hampton, at p. 347; accord, Ennabe v. Manosa, supra, 58 Cal.4th at p. 703.) “‘“[S]ummary judgment cannot be granted when the facts are susceptible to more than one reasonable inference . . . .”’” (Grossman v. Santa Monica-Malibu Unified School Dist. (2019) 33 Cal.App.5th 458, 465; accord, Husman v. Toyota Motor Credit Corp. (2017) 12 Cal.App.5th 1168, 1180.)

c. The City and AVWC did not carry their initial burden on Running’s contract claims based on the diversion of irrigation water
d.
Running alleged the Indenture, a settlement agreement between the Gordons, on the one hand, and members of SGRWC, including the City’s predecessors in interest, on the other hand, granted the Gordons water rights for irrigation purposes that ran with the land, property rights Running contends she acquired as the Gordons’ successor-in-interest. By diverting her irrigation water from the canal to the pipeline without connecting her to the pipeline, the City and AVWC deprived her of those water rights in breach of the Indenture.

The Indenture described the Gordons’ flow rights for irrigation purposes as “appurtenant to parcel three,” the land Running claimed she acquired when she purchased her property in 1950. The City and AVWC did not address, let alone dispute, this language of the Indenture in their motions for summary judgment/summary adjudication. Rather, insisting the Gordons had transferred their water rights to Contract Water Company in exchange for shares in that company in 1895, the City and AVWC argued the Gordons possessed no water rights they could have ultimately transferred to Running by virtue of the Indenture and her purchase of the Gordon property. At most, the City argued, the Gordons possessed shares in Contract Water Company, giving them a right to receive water, but not a property interest in that water. That right ended when Contract Water Company sold its assets to CICO in 1964 under an agreement that allowed old users to continue to receive water until December 31, 1979 and thereafter only by paying the same prices as other CICO shareholders.

The City and AVWC’s argument rests on a faulty premise. The articles of incorporation the City and AVWC relied on to support their argument state the Gordons (and other old users) formed Contract Water Company in 1895 to “hold in trust” for the stockholders of that corporation “all the water rights and waters now belonging to them and that may hereafter be acquired by them” and to manage, control, defend and “promote the interests of the stock-holders in the matter of the ownership, control and management of such water rights and waters.” The Gordons did not transfer ownership of their water rights in 1895 to Contract Water Company; they entrusted those rights to Contract Water Company to hold as trustee while they retained beneficial ownership. (See Erwin v. Gage Canal Company (1964) 226 Cal.App.2d 189, 192 [observing the difference between a transfer of title to water to a mutual water company in exchange for the right to receive water from the company, on the one hand, and entrustment of that property right to the water company to hold as trustee for owner, who holds stock; the former transfers title to the water but the latter does not]; see also 63 Cal.Jur.3d, Water, § 781 [when private mutual water company is formed to hold water rights as a trustee only, “its holding does not change the nature of the water right or divest the beneficial interest therein of the landowner”].)

e. A triable issue of fact exists as to whether Running performed under the Indenture
f.
The City and AVWC alternatively contend Running cannot establish a breach of the Indenture because the Indenture merely capped the amount of water the Gordons could take from the canal. It did not alter the obligations in the Old User Agreement that the Gordons move their water from the river to the mouth of the canal and pay CICO for delivering the water from the canal to their land. Because Running did not arrange to get her water to the mouth of the canal or pay CICO to transport the water from the canal to her land, the City and AVWC argue, she did not perform under the old User Agreement and cannot enforce it. (See Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821 [to establish a breach of contract, the plaintiff must demonstrate not only the defendant’s breach of the contract, but also that plaintiff performed under the contract or that such performance was excused]; Darbun Enterprises, Inc. v. San Fernando Community Hospital (2015) 239 Cal.App.4th 399, 409 [same].)

Running, however, does not seek to enforce the Old User Agreement against the City and AVWC, neither of which was a party to that agreement. She seeks to enforce the Indenture. And even if the Indenture contains an implied obligation that the Gordons bring their own water to the canal and pay CICO for it as required under the Old User Agreement, an interpretation of the Indenture that is by no means clear, the City and AVWC provided no evidence that delivery arrangements had not been made. Indeed, the water had flowed through the canal to Running’s property for nearly 60 years and had only ceased flowing once the canal was closed. While the City provided declarations attesting that Running had not demanded CICO deliver her irrigation water to her or that SGRWC divert water to her, the City and AVWC failed to present evidence that Running needed to make any additional arrangements for water delivery. Similarly, while CICO provided declarations, which also supported the City and AVWC’s motion, that Running had never paid it for the delivery of irrigation water, the City and AVWC did not submit any evidence CICO (or any of the defendants) had ever charged Running for any water that flowed through the canal. For her part, Running provided evidence she had paid every assessment and charge CICO had applied to her. While Running will have to prove at trial she performed under the Indenture, Running has, at the very least, raised a triable issue of material fact on that question sufficient to preclude summary judgment.

City and AVWC argued in their moving papers, and reiterate on appeal, that Running’s claims for breach of the implied covenant and good faith and fair dealing fail on the same grounds as her contract claims, reasoning it was similarly premised on a water right that no longer existed. In light of our holding the City failed to carry its burden on the contract claim to the extent that claim was based on Running’s right to irrigation water, her claim for breach of the implied covenant of good faith and fair dealing, although duplicative of her express contract claim on this ground, similarly survives summary judgment.

g. The City and AVWC did not direct their motion to the other bases for Running’s contract claims; accordingly summary adjudication is improper
h.
Running’s causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing were also based on allegations the City, AVWC (and all defendants) failed to maintain the canal and tunnel. Citing language from the Indenture granting the City, AVWC (and others) “the right . . . to maintain, repair, operate and conduct water through the open cement ditch and tunnel across the real property above mentioned,” the City and AVWC argued, and the trial court ruled, the Indenture did not mandate maintenance of the canal or the tunnel; it afforded only permissive right to enter the property for that purpose.

Running does not identify any language in the Indenture creating a mandatory duty (rather than a permissive right) of the City and AVWC (and others) to maintain the easement. Rather, she argues the mandatory duty to maintain the canal and the tunnel arise from the Compromise Agreement. The Gordons, however, were not parties to the Compromise Agreement (see Gordon, supra, 164 Cal. at p. 95), leaving Running without standing to enforce that agreement as their successor-in-interest. Accordingly, whatever cause of action may exist against CICO or SGRWC for failing to maintain the canal or tunnel (see, e.g., Civ. Code, § 845 [creating legal duty for private easement holder to maintain easement in safe condition]), Running failed to demonstrate the existence of City or AVWC’s contractual obligation to do so.

Nevertheless, the City and AVWC did not direct their notice of motion and motion for summary judgment/summary adjudication to this potentially independent cause of action for breach of contract or breach of the implied covenant. (See Mathieu v. Norrel Corp. (2004) 115 Cal.App.4th 1174, 1188 [two separate and distinct grounds for liability based on distinct primary rights, even though combined in a single cause of action, can be separately addressed in summary adjudication motion pursuant to Code of Civil Procedure section 437c, subdivision (f)(1)]; Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848, 1854 [“the clearly articulated legislative intent of section 437c, subdivision (f), is effectuated by applying the section in a manner which would provide for the determination on the merits of summary adjudication motions involving separate and distinct [primary rights] which are combined in the same cause of action”].) As a result, there is no basis for this court to affirm summary adjudication of the contract and implied covenant claims on this ground. (See Cal. Rules of Court, rule 3.1350(b) [each cause of action that is target of summary adjudication must be stated specifically in notice of motion and separate statement].)

i. Triable issues of material fact exist as to financial elder abuse based on allegations the City and AVWC took, or assisted others in taking, Running’s water
j.
The Elder Abuse and Dependent Adult Civil Protection Act (Elder Abuse Act) (Welf. & Inst. Code, § 15600 et seq.) was enacted in 1982 to “protect a particularly vulnerable portion of the population from gross mistreatment in the form of abuse and custodial neglect.” (Delaney v. Baker (1999) 20 Cal.4th 23, 33; accord, Covenant Care, Inc. v. Superior Court (2004) 32 Cal.4th 771, 779.) Among other things, the Elder Abuse Act provides that any person who takes, secretes, appropriates, obtains real or personal property of “an elder”—a person residing in this state who is 65 years or older (see Welf & Inst. Code, § 15610.27)—or who assists in taking, secreting, appropriating or retaining real or personal property of the elder for a wrongful use or with the intent to defraud or by undue influence is liable for elder financial abuse. (Welf. & Inst. Code, § 15610.30, subd. (a)(1), (2).) “A person or entity shall be deemed to have taken, secreted, appropriated, obtained, or retained property for a wrongful use if, among other things, the person or entity takes, secrets, appropriates, obtains, or retains the property and the person or entity knew or should have known that this conduct is likely to be harmful to the elder or dependent adult.” (Welf. & Inst. Code, § 15610.30, subd. (b).)

In support of her elder abuse cause of action, Running alleged each of the City defendants, acting together with CICO as part of a “joint enterprise,” took her property for a wrongful use by (1) diverting her water to the pipeline and destroying mature trees; (2) plugging the underground tunnel beneath her home without reinforcing the structure, causing it to collapse and damage her property; (3) authorizing and allowing sewer and drainage lines to be installed on her property absent her consent; (4) issuing the notice of abatement that resulted in Beecham spending more than $100,000 in clean-up costs for a nuisance the City defendants, together with CICO and SGRWC, created by diverting her water.

In seeking summary judgment, the City defendants argued Running could not show she had any property right to water. Even if she had such a property right, they argued, Running could not show the City took, or assisted CICO in taking, her water for a wrongful purpose. The court agreed with both points and granted the City defendants’ motion with respect to the financial elder abuse claim. In light of our conclusion regarding Running’s contractual right to water in the canal, her purported lack of ownership of any of the water as a matter of law cannot support the court’s ruling.

The City’s undisputed evidence the canal was closed for health and safety reasons, not to hurt Running, was also insufficient to support judgment on the elder abuse claim as a matter of law. It was not simply the diversion of irrigation water from the canal to the pipeline that Running alleged constituted a taking of her property, but the failure to ensure she continued to receive the irrigation water to which she was entitled, whether by connecting her to the pipeline or making some other arrangement for her irrigation water. The City and AVWC failed to present any evidence to rebut this argument. The fact that Running had access to water if she paid for it did not address her claim to title to the irrigation water.

The City and AVWC contend, as a matter of law, that none of the conduct Running alleged amounts to financial elder abuse because the City and AVWC did not “obtain” any water rights from Running for their own benefit and did not assist CICO or SGRWC in taking that property. That may ultimately prove to be true. But the City and AVWC did not present evidence establishing as a matter of law they did not take Running’s property rights to the water or assist others in doing so. Accordingly, the court erred in dismissing this elder abuse claim against the City and AVWC.

k. The court did not err in granting the motion as to Morrow, Anderson and Delach on the elder abuse claim
l.
Morrow, Anderson and Delach argued in their motion for summary judgment that Running could not show any of them had engaged in wrongful conduct amounting to financial elder abuse. In her opposition to the motion, Running reiterated the allegations in her complaint while providing no evidence to support her assertion that any of these individuals took, secreted or otherwise deprived her of a property interest for a wrongful purpose. (See Roman v. BRE Properties, Inc. (2015) 237 Cal.App.4th 1040, 1054 [“[i]t is fundamental that to defeat summary judgment a plaintiff must show ‘specific facts’ and cannot rely on allegations of the complaint”]; Regional Steel Corp. v. Liberty Surplus Ins. Corp. (2014) 226 Cal.App.4th 1377, 1388 [same].) Accordingly, the court did not err in granting the motion directed to the elder abuse claim against Morrow, Anderson and Delach.

5. Running Has Not Demonstrated the Court Erred in Granting Summary Judgment for the Canyon Defendants
6.
The Canyon defendants moved for summary judgment, asserting they did not take, or assist in taking, Running’s water rights and thus Running could not prevail on her elder abuse action as a matter of law. They also argued, even if Running had owned a property right in some of the water that flowed through the canal, none of the Canyon defendants ever met Running. They had no knowledge of her age or mental impairment or that she claimed a right to the water in the canal. The court ruled for the Canyon defendants on the first argument and did not reach the second.

Running does not challenge the order granting the motion as to Canyon. Moreover, apart from asserting in general the court erred in granting summary judgment in favor of the “defendants,” she does not identify in her opening brief any error made by the trial court in granting the motion as to the McIntyres. In her reply brief Running belatedly argues summary judgment as to the McIntyres was improper because, as directors of CICO (and, with respect to William, as a member of the board of SGRWC) the McIntyres authorized and participated in the wrongful acts committed by one or both of those entities, including diverting her water without notice and plugging the tunnel despite warnings it could collapse without substantial reinforcement. Because the McIntyres did not address their involvement in these wrongs in their motion for summary judgment, she argues, they failed to carry their initial burden.

The third amended complaint alleged a number of tortious acts purportedly committed by CICO and SGRWC. However, as to the McIntyres specifically, the pleading alleged only that, as directors of CICO and members of SGRWC, they were liable for those entities’ misconduct. In their motion for summary judgment/summary adjudication, the McIntyres provided evidence CICO made the decision to close the canal and argued they could not be held liable for that decision merely by virtue of their positions as CICO directors. (See Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 508 [“[t]o maintain a tort claim against a director in his or her personal capacity, a plaintiff must first show that the director specifically authorized, directed or participated in the allegedly tortious conduct [citation]; or that although they specifically knew or reasonably should have known that some hazardous condition or activity under their control could injure plaintiff, they negligently failed to take or order appropriate action to avoid the harm”]; Balsam v. Trancos, Inc. (2012) 203 Cal.App.4th 1083, 1110 [directors “‘“do not incur personal liability for torts of the corporation merely by reason of their official position, unless they participate in the wrong or authorize or direct that it be done”’”].) William’s membership on SGRWC’s board, without more, is similarly insufficient to impose personal liability on him. (See Corp. Code, § 18605 [“[a] member, director, or agent of a nonprofit association is not liable for a debt, obligation, or liability of the association solely by reason of being a member, director, officer or agent”]; Corp. Code, § 18620, subd. (a)(1), (2) [member, director, officer, or agent of nonprofit association liable if he or she expressly assumes liability or engages in tortuous conduct that causes the injury or harm].) Running presented no evidence in opposition and cites none on appeal to support the McIntyres’ liability apart from their status as directors of CICO or William’s SGRWC board membership. Accordingly, even if the court erred in granting summary judgment on the ground the Canyon defendants had established Running owned no right to water in the canal as a matter of law, she has not demonstrated, in either argument or with relevant authority, how the order granting them summary judgment was error. (See AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 934 [appellate court reviews trial court’s ruling, not its rationale]; Young v. Horizon West, Inc. (2013) 220 Cal.App.4th 1122, 1127 [same]; see generally People v. Zapien (1993) 4 Cal.4th 929, 976 [“‘“a ruling or decision, itself correct in law, will not be disturbed on appeal merely because given for a wrong reason”’”].)

7. Triable Issues of Material Fact Exist as to Whether Running Timely Filed Her Damage Claims with the City
8.
The City urges we affirm the judgment in its favor, even if we reject the trial court’s reasoning, because the court erred in finding triable issues of material fact as to whether Running had timely filed her claims for damages as required under the Government Claims Act. (See Gov. Code, § 911.2, subd. (a) [claim seeking damages against public entities must be presented to public entity “not later than one year after the accrual of the cause of action”]; Rubenstein v. Doe No. 1 (2017) 3 Cal.5th 903, 906 [“‘[b]efore suing a public entity, the plaintiff must present a timely written claim for damages to the entity’”]; City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 454 [“failure to timely present a claim to the public entity bars the claimant from filing a lawsuit against that public entity”].) Insisting both the breach of contract and financial elder abuse causes of action accrued in 2010 when the canal was closed and canal water diverted to the pipeline, the City contends Running needed to file her claim with the City no later than 2011, several years before she did.

For purposes of the Government Claims Act, a cause of action accrues on the same date a similar action against a nonpublic entity would be deemed to accrue for purposes of applying the relevant statute of limitations. (Gov. Code, § 901; Rubenstein v. Doe No. 1, supra, 3 Cal.5th at p. 906.) Traditionally, a claim accrues “‘“when [it] is complete with all of its elements”—those elements being wrongdoing, harm, and causation.’” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191; accord, Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 815.) “This is [known as] the ‘last element’ accrual rule . . . .” (Aryeh, at p. 1191.)

An exception to the general rule of accrual is the delayed discovery rule, “which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.) “Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her.” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110.) In other words, the limitations period begins “‘once the plaintiff has notice or information of circumstances to put a reasonable person on inquiry. [Citation.] Subjective suspicion is not required. If a person becomes aware of facts which would make a reasonably prudent person suspicious, he or she has a duty to investigate further and is charged with knowledge of matters which would have been revealed by such an investigation.’” (McCoy v. Gustafson (2009) 180 Cal.App.4th 56, 108; accord, Fox, at pp. 807-808 [“plaintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation”]; Alexander v. Exxon Mobil (2013) 219 Cal.App.4th 1236, 1251 [explaining application of delayed discovery rule requires two-part inquiry: whether plaintiff has become aware of facts that would cause a reasonable person to suspect his or her injuries were the result of wrongdoing, thereby triggering duty to investigate and, then, if so, whether such an investigation would have disclosed a factual basis for a cause of action].) “When a plaintiff reasonably should have discovered facts for purposes of the accrual of a cause of action or application of the delayed discovery rule is generally a question of fact, properly decided as a matter of law only if the evidence . . . can support only one reasonable conclusion.” (Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 193; accord, Broberg v. The Guardian Life Ins. Co. of America (2009) 171 Cal.App.4th 912, 921.)

The City contends the breach of contract and financial elder abuse causes of action, each based on the diversion of water from the canal to the pipeline, accrued no later than September 27, 2010, when Steven Running signed a petition acknowledging water had stopped flowing through the canal. It was Running’s obligation (or Beecham’s, as the holder of her mother’s general power of attorney), the City argues, to maintain the property. Beecham, who did not live on the property, testified she did so by relying on Steven Running to inform her when things on the property needed to be addressed, such as plumbing or maintenance issues. Steven Running lived on the property and must have realized the canal was dry for years before the City issued its notice of abatement of nuisance in 2015. Thus, the City argues, Steven Running knew or should have known at the latest by September 2010 of the diversion of water and, accordingly, so should have Running (or Beecham). Had Running investigated, she would have discovered the canal closure and the plugged tunnel, as well as other wrongs asserted as the bases for her elder abuse action against the City. CICO also mailed annual reports to Running announcing the pipeline project. Because the time to file a claim for damages with the City expired in September 2011, the City argues, the elder abuse and contract-based causes of action against the City are barred.

In response, Running insisted the City had provided no evidence that Steven Running, who suffered from schizophrenia, had told Running or Beecham the canal was dry; both Steven Running and Beecham testified they did not know the canal had run dry; Steven Running explained he had not read or understood the petition he signed in 2010; and Running provided evidence the canal was not visible from Running’s house. In addition, CICO’s annual reports announcing the pipeline project did not state property owners would be deprived of irrigation water as a result. Moreover, after 2009, Beecham testified, neither she nor Running received any annual reports from CICO, even though Beecham had informed CICO she was trustee and/or held Running’s power of attorney. In fact, Beecham claimed, while CICO had contacted her about other matters, including leasing CICO shares, it did not inform her of the pipeline or its effect on her mother’s property.

The trial court concluded triable issues of material fact existed as to whether the claim for damages against the City accrued in 2010, when the pipeline was completed and the canal ran dry, or in 2015 when the City issued its notice of abatement of nuisance, prompting investigation and discovery of the water diversion. Liberally construing all the evidence in favor of Running and resolving all doubts in her favor (see Ennabe v. Manosa, supra, 58 Cal.4th at p. 703; Grossman v. Santa Monica-Malibu Unified School Dist., supra, 33 Cal.App.5th at p. 465), the trial court did not err in finding Running had raised a triable issue of material fact as to whether her claims accrued in 2015 or earlier.

DISPOSITION

The judgment in favor of the City and AVWC is reversed. On remand the trial court is directed to vacate its order granting summary judgment for the City and AVWC and enter a new and different order denying their motion for summary judgment/summary adjudication. The order sustaining the City defendants’ demurrer without leave to amend is affirmed. Accordingly, as to the City and AVWC, Running’s causes of action for breach of written contract, breach of the implied covenant of good faith and fair dealing and Running’s cause of action for financial elder abuse are revived. The judgment in favor of Morrow, Anderson, Delach, Canyon Water Company, William McIntyre and Andrew McIntyre is affirmed. Morrow, Anderson, Delach, Canyon Water Company, William McIntyre and Andrew McIntyre are to recover their costs on appeal. All other parties are to bear their own costs on appeal.

PERLUSS, P. J.

We concur:

SEGAL, J.

FEUER, J.

Filed 8/4/20 Haskayne v. Meyers 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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

DEREK HASKAYNE,

Plaintiff,

v.

KATHERINE L. MEYERS et al.,

Defendants and Appellants;

CLARA RAMIREZ et al.,

Interveners and Respondents.

G058177

(Super. Ct. No. 30-2015-00792311)

O P I N I O N

Appeal from an order of the Superior Court of Orange County, Sheila Fell, Judge. Request for judicial notice denied. Order affirmed.

Huston McCaffrey, Shawn P. K. Huston for Defendants and Appellants.

Cottle Keen Lopiccolo & Heyde, Julie M. Lopiccolo and Dana M. Heyde for Interveners and Respondents.

Defendants Katherine Meyers (Meyers) and Robert Stanley (Stanley; collectively defendants) appeal from an order awarding interveners Clara Ramirez and Lee Valdez (interveners) attorney fees and costs in the approximate amount of $36,200. Defendants argue interveners were not the prevailing parties under Civil Code section 1717 (section 1717) or Code of Civil Procedure section 1032 (section 1032) because interveners dismissed their complaint in intervention and prevailed only based on an “improper” order. They further contend that even if interveners were the prevailing parties, they are not entitled to attorney fees because they failed to mediate or arbitrate their claims as required and they could not have prevailed on their intervention complaint. Finally, they assert the amount of fees and costs awarded was excessive.

We find none of these arguments persuasive and affirm the order.

Defendants request we take judicial notice of a portion of the register of actions (ROA) in Ramirez v. Meyers (Super. Ct. Orange County, 2017, No. 30-2017-00898102), a related case (Related Case). Defendants claim the ROA is relevant because it shows the relative timing of events, intervention was precluded in the instant case, and defendants were the prevailing party in the Related Case. We deny the request because the ROA is not relevant. We do not need the ROA to show the timing of events. Further, even if we were to grant the request, we would only take judicial notice of the existence of the documents listed, not the truth of their contents. “‘A matter ordinarily is subject to judicial notice only if the matter is reasonably beyond dispute.’” (Unruh-Haxton v. Regents of University of California (2008) 162 Cal.App.4th 343, 364.) We do not have the documents before us and have no way of knowing their contents or whether we could properly take judicial notice of the truth of their contents. “‘Although the existence of a document may be judicially noticeable, the truth of statements contained in the document and its proper interpretation are not subject to judicial notice if those matters are reasonably disputable.’” (Ibid., italics omitted.)

FACTS AND PROCEDURAL HISTORY

This dispute arises out of the partition, sale, and purchase of residential real property in Orange (Property). In 1999 plaintiff Derek Haskayne (plaintiff) and Meyers entered into a written purchase agreement (Haskayne Contract) for the Property. The Haskayne Contract stated only Meyers initially would be on title for purposes of obtaining a loan to purchase the Property. Plaintiff, who paid half the down payment, was to be put on title “at the earliest possible time.” Eventually a dispute arose between plaintiff and Meyers, and, according to Meyers, plaintiff “walked away” from the Property. Plaintiff was never put on title.

In February 2015 defendants listed the Property. When plaintiff learned of this he recorded the Haskayne Contract and filed this partition action (Partition Action); defendants filed a cross-complaint. In September 2015 Meyers and interveners entered into a residential purchase agreement (Purchase Agreement) for interveners to purchase the Property for $560,000 The Purchase Agreement contained an attorney fees provision awarding fees to the prevailing party in a dispute or action arising out of the agreement. Shortly after escrow opened defendants disclosed to interveners escrow could not close due to the pendency of the Partition Action.

After a bench trial in the Partition Action, in June 2016 the court ruled in favor of plaintiff, ordering the Property to be partitioned. In August the court amended its ruling by adding: “The court was advised during trial that the [P]roperty is in escrow for the sale thereof. The [c]ourt further confirms that the sale should be completed consistent with this Amended Judgment.” Judgment (Judgment) was entered in December 2016. The court retained jurisdiction of the case to ensure compliance with the terms.

In January 2017 pursuant to an order to show cause as to why escrow should not be ordered to be closed, the court ordered plaintiff and defendants to cooperate to expedite closing the escrow.

At the same time interveners filed the complaint in the Related Action for damages and specific performance. When a notice of related action was filed, the judge to which the instant Partition Action was assigned removed the Related Action from the judge to whom it had been assigned. Subsequently, based on a peremptory challenge filed by Stanley under Code of Civil Procedure section 170.6, the Related Action was transferred back to the judge to whom it had originally been assigned.

In May 2017, the sale not completed, interveners filed an ex parte application to intervene in the Partition Action and sought specific performance. The court granted only the application to intervene (Intervention Order). It ruled “[f]urther relief may be sought by different procedure.”

In April 2018, escrow still not having closed, the court appointed a partition referee to conclude the sale and disburse the proceeds. Subsequently, when the partition referee petitioned for instructions as to whether he could have the Property sold to interveners, the court asked the parties to brief the issue. Defendants argued the Judgment should be stricken. Plaintiff argued the Property should be sold to the highest bidder. The judge advised she would confer with the judge handling the Related Action to determine which case should proceed.

In July 2018 interveners filed a complaint in intervention (Intervention Complaint) in this Partition Action. In November 2018 the court ruled the partition referee was to comply with the Judgment and complete the sale to interveners. A few days late r the court ordered escrow to close (2019 Order). In January 2019 sale of the Property to interveners was completed.

In March 2019, defendants filed a demurrer and motion to strike the Intervention Complaint. Before the hearing, interveners dismissed the Intervention Complaint.

Interveners then filed a motion for attorney fees and costs (Interveners’ Attorney Fees Motion) accompanied by a declaration of counsel in support, which set out the time spent, attorney rates, fees charged, and costs incurred. The motion was brought pursuant to section 1717 and section 1032 and the provision for attorney fees in the Purchase Agreement. Interveners argued they prevailed because the 2019 Order to close escrow was a final judgment in their favor on the merits.

Defendants opposed Interveners’ Attorney Fees Motion, arguing interveners were not prevailing parties because they dismissed the Intervention Complaint, the 2019 Order was not a final judgment, and interveners were required to mediate the dispute before filing the Intervention Complaint and to arbitrate the dispute.

The court issued a tentative ruling, a copy of which is not in the record, granting Interveners’ Attorney Fees Motion. After a hearing, in June 2019 the court confirmed the tentative ruling, awarding interveners $36,206.02 in attorney fees and costs against defendants, finding the time spent and rates were reasonable.

After the Interveners’ Attorney Fees Motion was filed and argued but before the court ruled, defendants filed their own motion for attorney fees and costs (Defendant’s Attorney Fees Motion), claiming they were the prevailing parties under the terms of the Purchase Agreement because interveners dismissed the Intervention Complaint and did not recover any monetary damages. Interveners filed an opposition. Defendants also filed a motion for reconsideration of the ruling granting Interveners’ Attorney Fees Motion, to which interveners filed an opposition. Before the motions were heard, defendants filed their notice of appeal and the court, finding the motions were “‘embraced’” or “‘affected by’” the appeal, stayed the matter.

DISCUSSION

1. Appellate Procedure and Standard of Review

“[I]t is a fundamental principle of appellate procedure that a trial court judgment is ordinarily presumed to be correct and the burden is on appellant to demonstrate, on the basis of the record presented to the appellate court, that the trial court committed an error that justifies reversal of the judgment.” (Jameson v. Desta (2018) 5 Cal.5th 594, 608-609 (Jameson).) An adequate record is required to show error. (Parker v. Harbert (2012) 212 Cal.App.4th 1172, 1178.) “‘Failure to provide an adequate record on an issue requires that the issue be resolved against [the appellants].’” (Jameson, at p. 609.)

Since defendants seek to raise issues that require “consideration of the oral proceedings in the superior court,” they were required to provide a reporter’s transcript. (Cal. Rules of Court, rule 8.120(b); all further references to rules are to the California Rules of Court.) When there is no reporter’s transcript we have no idea what occurred during the hearing, and we cannot determine the sufficiency of the evidence or whether the court abused its discretion. (Oliveira v. Kiesler (2012) 206 Cal.App.4th 1349, 1362 (Oliveira.) “[N]or can we assess the merits of [any] contentions about certain rulings or statements made by the trial court during the hearings in question.” (Rhule v. WaveFront Technology, Inc. (2017) 8 Cal.App.5th 1223, 1228-1229, fn. omitted (Rhule).) Where there is no court reporter present for a hearing, the proper method to provide a record of oral proceedings is a settled statement. (Rules 8.120(b)(3), 8.137.)

We review the legal basis for an award of attorney fees and costs de novo based on the applicable statutes and the contract’s provisions. (J.B.B. Investment Partners Ltd. v. Fair (2019) 37 Cal.App.5th 1, 21, fn. 18; Berkeley Cement, Inc. v. Regents of University of California (2019) 30 Cal.App.5th 1133, 1139.) We review the prevailing party determination and the amount of fees and costs awarded for abuse of discretion. (Pont v. Pont (2018) 31 Cal.App.5th 428, 440 [attorney fees]; Berkeley, at p. 1139 [costs].) We give the court’s ruling considerable deference. (Ibid.) Where the record is silent we indulge all intendments and presumptions and resolve any ambiguities in favor of affirmance (Ellis v. Toshiba America Information Systems, Inc. (2013) 218 Cal.App.4th 853, 882 (Ellis)) and we presume the court applied the law correctly and exercised its discretion properly unless the appellant affirmatively shows the contrary (Pont, at p. 440). We do not reverse absent “‘“a manifest abuse of discretion, a prejudicial error of law,”’” or lack of substantial evidence to support the factual findings. (Medina v. South Coast Car Co., Inc. (2017) 15 Cal.App.5th 671, 683.)

2. Prevailing Parties

Section 1717, subdivision (a) provides: “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract . . . , shall be entitled to reasonable attorney’s fees in addition to other costs.”

Section 1032 provides: “(a) As used in this section, unless the context clearly requires otherwise: [¶] . . . [¶] (4) ‘Prevailing party’ includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court . . . .”

Defendants argue interveners are not the prevailing parties because they dismissed their Intervention Complaint. And the result, they assert, is a final judgment in defendants’ favor. Defendants contend, based on the dismissal, they are the prevailing parties under sections 1717 and 1032. These arguments fail.

It is well established the analysis of who prevailed under section 1717 is different from the analysis under section 1032. (Zintel Holdings, LLC v. McClean (2012) 209 Cal.App.4th 431, 438 (Zintel).) Under section 1717, subdivision (b)(1), the prevailing party is the party who obtained greater relief on the contract. Section 1032 deals with an award of costs and “the definition of ‘prevailing party’ in section 1032 ‘is particular to that statute and does not necessarily apply to attorney fees statutes or other statutes that use the prevailing party concept.’” (Marina Pacifica Homeowners Assn. v. Southern California Financial Corp. (2018) 20 Cal.App.5th 191, 208.) Because neither the reporter’s transcript from the hearing nor the tentative ruling on the Interveners’ Attorney Fees Motion is in the record and the minute order granting the award of attorney fees merely states fees are awarded based on the tentative ruling, we do not know on which statute the court relied to award fees. Therefore, we must indulge all presumptions in favor of interveners (Ellis, supra, 218 Cal.App.4th at p. 882) and presume the court correctly applied the law (Pont, supra, 31 Cal.App.5th at p. 440). And, as we will explain, interveners are the prevailing parties under both section 1717 and section 1032 in any event.

As to section 1717, when one party obtains a “‘simple, unqualified win’” on the contract claims, the court must award attorney fees to that party. (Hsu v. Abbara (1995) 9 Cal.4th 863, 876.) Such is the case here. Interveners’ primary litigation objective was to purchase the Property pursuant to the Purchase Agreement. They achieved that objective when the sale of the Property to them was consummated. Thus, we conclude they prevailed on their primary litigation objective.

Even if the result here could be classified as mixed, it was not an abuse of discretion for the court to find interveners realized their litigation objective. When there is a mixed result, the court uses “a pragmatic definition of the extent to which each party has realized its litigation objectives, whether by judgment, settlement, or otherwise.” (Santisas v. Goodin (1998) 17 Cal.4th 599, 622.) The court has broad discretion on this point, and we do not disturb it unless there has been a clear abuse of such discretion. (Zintel, supra, 209 Cal.App.4th at p. 439.) No such abuse of discretion appears.

In their reply brief and at oral argument defendants asserted intervenors could not be the prevailing parties because section 1717, subdivision (b)(2), provides, “Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”

But we do not consider arguments made for the first time in a reply brief unless good cause for the delay is shown. (Mansur v. Ford Motor Co. (2011) 197 Cal.App.4th 1365, 1387-1388.) Defendants have not shown any cause at all, let alone good cause. Thus, the section 1717, subdivision (b)(2) argument is forfeited.

Even on the merits, however, the section 1717, subdivision (b)(2) claim would fail. The Intervention Complaint was dismissed after the purchase of the Property was consummated. Interveners had achieved their litigation goal and there was no need for the Intervention Complaint to go forward. So dismissal of the Intervention Complaint was not the typical dismissal of an action before judgment is rendered, thereby relieving defendants of liability. Here defendants were liable to sell the Property to Interveners. The subsequent dismissal of the Intervention Complaint was merely a cleanup of the litigation, a ministerial act. The litigation was over by the time the dismissal was filed.

Defendants next rely on section 1032, subdivision (a)(4), which defines a prevailing party as “a defendant in whose favor a dismissal is entered.” They argue they were the prevailing parties under this section as well because interveners dismissed the Intervention Complaint. Not so.

Again, defendants’ argument impermissibly elevates form over substance. As noted above, the Intervention Complaint was dismissed after interveners achieved their litigation goal and the case was over. Section 1032, subdivision (a)(4) gives the court discretion to determine the prevailing party when a party recovers nonmonetary relief “and in situations other than as specified.” Such is the case here.

Besides, defendants could not be the prevailing parties. They did not achieve their litigation objectives. Contrary to their claim, dismissal of the Intervention Complaint was not a “clear victory” for them. They won nothing.

In a related argument, defendants contend interveners could not be the prevailing parties under the Intervention Complaint because interveners “benefitted from an ancillary order” before they intervened. To be clear, we presume defendants mean the Judgment when they refer to an ancillary order. The argument has no merit.

Although the Judgment ordered the sale of the Property to be completed, defendants did not comply. The Judgment was entered in June 2016. Six months later escrow had not closed and the court entered an order for plaintiff and defendants to cooperate to close it. Five months after that interveners moved to intervene. A year later, in April 2018, the court appointed a partition referee to conclude the sale. During this time defendants sought to overturn the Judgment, and plaintiff sought to sell the Property to the highest bidder. In July 2018 interveners filed the Intervention Complaint. In November 2018 the sale had still not closed and the court issued an order to close escrow. It was not until January 2019 that the sale finally closed. Plainly, interveners did not get the relief they sought merely from issuance of the Judgment.

Nor did they obtain relief from the Intervention Order. The court denied the accompanying request for specific performance, noting interveners had to seek further relief using a “different procedure.” Thus, interveners were forced to file the Intervention Complaint to protect their right to purchase the Property.

In sum, interveners were the prevailing parties, notwithstanding their dismissal of the Intervention Complaint, and they are entitled to recover attorney fees and costs pursuant to the provision in the Purchase Agreement. The court did not err.

3. Other Arguments Re Propriety of Award

a. Failure to Arbitrate

Defendants contend interveners lacked standing because they failed to arbitrate pursuant to the arbitration provision in the Purchase Agreement, and as a result they could never have prevailed. On that basis, defendants claim they are the prevailing parties and ask us to dismiss the Intervention Complaint. These claims have no merit.

First, assuming without deciding whether interveners were required to arbitrate, standing is not implicated by the failure to do so. “‘A person who invokes the judicial process lacks standing if he, or those whom he properly represents, “does not have a real interest in the ultimate adjudication because [he] has neither suffered nor is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented.”’” (Blumhorst v. Jewish Family Services of Los Angeles (2005) 126 Cal.App.4th 993, 1001.) Interveners had an interest in adjudicating their claim to the Property. Whether or not arbitration was required goes to the forum where the dispute should be decided, not whether interveners had standing.

Second, even if interveners were not the prevailing parties, that does not mean defendants were. There is not a prevailing party in every case. (Civ. Code, § 1717, subd. (b)(1).) And the only issue before us is whether interveners were prevailing parties and entitled to attorney fees and costs, not whether defendants are prevailing parties. And, as discussed above, there is no way defendants could be the prevailing parties.

Third, even when arbitration is ordered, the complaint is stayed, not dismissed. (Code Civ. Proc., § 1281.4; Muao v. Grosvenor Properties, LTD. (2002) 99 Cal.App.4th 1085, 1093.) Finally, we could not dismiss the Intervention Complaint because it has already been dismissed.

b. Failure to Mediate

In the Purchase Agreement the parties agreed to mediate a dispute or claim arising therefrom. The Purchase Agreement stated a prevailing party would not be entitled to an award of attorney fees due to failure to mediate before commencing an action. Defendants argue interveners failed to mediate prior to filing the Intervention Complaint, thereby disqualifying them from an award of fees. We disagree.

Interveners contend the mediation provision was never triggered because they did not commence the action, plaintiff did when he filed the Partition Action. Defendants respond by asserting interveners commenced the intervention action. But in the trial court, interveners argued they needed to file the Intervention Complaint so they could file a lis pendens, an exception to the mediation requirement. Defendants argue the lis pendens was filed in connection with the Related Action, not the Partition Action. None of these arguments matter.

As noted above, neither the tentative ruling nor a reporter’s transcript for the hearing on Interveners’ Attorney Fees Motion is in the record. Thus, we cannot determine how the court ruled on the mediation issue. (Rhule, supra, 8 Cal.App.5th at pp. 1228-1229, fn. omitted.) Due to lack of an adequate record, we must resolve the issue against defendants. (Jameson, supra, 5 Cal.5th at pp. 608-609.)

c. Demurrer

Defendants assert interveners could not be the prevailing parties because the Intervention Complaint could not have withstood a demurrer. The argument is pure speculation. The court did not rule on the demurrer and we will not decide it on appeal.

d. Alleged “Improper Order”

Defendants contend the alleged “improper order” should be stricken as void. Again, we presume defendants are referring to the Judgment ordering completion of the sale. None of the reasons defendants advance warrant striking the Judgment as a whole or that portion ordering completion of the sale.

Defendants challenge the language in the Judgment stating the Property is in escrow, claiming neither the minute order after trial nor the trial transcript from the Partition Action mention an escrow. We are not persuaded.

First, this argument is factually incorrect. The amended minute order after trial did state the Property was in escrow. Further, the trial transcript in the Partition Action is not in the record and we cannot consider any claim about what was said during trial. (Rhule, supra, 8 Cal.App.5th at pp. 1228-1229, fn. omitted.) Again, with nothing in the record to the contrary we presume all necessary evidence in support of the minute order and Judgment. (Ellis, supra, 218 Cal.App.4th at p. 882.)

Defendants’ contention the Judgment was an improper final ruling in the Related Action. has several flaws. At the time of the Judgment, the Related Action had not even been filed, so there is no possibility the Judgment interfered with any ruling in that case. Plus, the Related Action was stayed. The implication is the court in the Related Action was waiting for a decision in the Partition Action. (Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 724-725 [“‘stay is a temporary suspension of a procedure in a case until the happening of a defined contingency’”].) Thus, the Judgment did not infringe on or usurp any authority in the Related Action.

The cases defendants cite in support of this argument correctly state the general proposition that a judge may not change an interim ruling by another judge in the same case. But that is not the situation here. Defendants cite no authority that a judge may not make a ruling in one case that conflicts with a ruling in another case.

Also, defendants have not identified a conflicting ruling in the Related Action. Documents from that case are not in the record before us. The ROA, of which we declined to take judicial notice, would not have helped in any event. It merely lists documents, not their contents.  

Finally, no rulings in the Related Action are challenged or properly before us in this appeal, so we could not consider them even if they had been identified. (Escobar v. Flores (2010) 183 Cal.App.4th 737, 753.)

e. Due Process

Likewise, defendants’ due process claims have no merit. Defendants contend that, as a result of the Judgment ordering the sale to close, they did not have the opportunity “to prove that they were not laible [sic] to [interveners] for anything.” But as stated, there is no reporter’s transcript for the trial of the Partition Action, and we presume all evidence necessary to support the Judgment. (Ellis, supra, 218 Cal.App.4th at p. 882.) Similarly, we reject defendants’ contention no evidence or arguments were presented at the trial “as to who the Property should be sold to and why.” Again, the transcript from the trial in the Partition Action is not in the record and we cannot consider any claim about what was or was not said during trial. (Rhule, supra, 8 Cal.App.5th at pp. 1228-1229, fn. omitted.) Defendants did not meet their burden to show error based on an adequate record. (Jameson, supra, 5 Cal.5th at pp. 608-609.)

f. Escrow

We also find no merit in defendants’ claim the Judgment was based on an open escrow, which interveners allegedly cancelled. Defendants contend the “lapse” of the escrow was a material change in the facts, allowing them to object to the sale.

Defendants did not include this argument in their opposition to the Interveners’ Attorney Fees Motion and thus did not preserve the issue. (Environmental Law Foundation v. Beech-Nut Nutrition Corp. (2015) 235 Cal.App.4th 307, 325.) Further, even on the merits, the record is not clear escrow was actually cancelled. The few documents on which defendants rely do not show cancellation. Had this argument been raised in the opposition, the trial court could have made a factual determination. But it had no opportunity to do so. Thus, the argument is forfeited. (Sacramentans for Fair Planning v. City of Sacramento (2019) 37 Cal.App.5th 698, 717.)

More importantly, the sale closed. This casts doubt on defendants’ claim escrow was cancelled, and in any event the argument is irrelevant. This is an appeal from an award of attorney fees and costs, not a challenge to the Judgment. The validity and enforceability of the Judgment are not before us and have no bearing on the challenged award of attorney fees and costs.

4. Amount of Fees Awarded

Trial judges have discretion to set the amount of attorney fees “‘“because they are in the best position to assess the value of the professional services rendered in their courts.”’” (McKenzie v. Ford Motor Co. (2015) 238 Cal.App.4th 695, 703.) We will not reverse or modify an award unless it is “‘“clearly wrong.’”’” (Id. at p. 704.) “Indulging all inferences in favor of the trial court’s order, as we are required to do, we presume the trial court’s attorney fees award is correct.” (Ibid.) We also review cost awards for abuse of discretion. (Charton v. Harkey (2016) 247 Cal.App.4th 730, 739.)

Defendants claim the $36,200 attorney fees and costs award is “outrageous” and challenge specific items for which attorney fees were awarded, asking they be “stricken.” These arguments lack merit.

“‘In challenging attorney fees as excessive because too many hours of work are claimed, it is the burden of the challenging party to point to the specific items challenged, with a sufficient argument and citations to the evidence. General arguments that fees claimed are excessive, duplicative, or unrelated do not suffice. Failure to raise specific challenges in the trial court forfeits the claim on appeal.’” (Lunada Biomedical v. Nunez (2014) 230 Cal.App.4th 459, 488.)

The only mention of the amount of fees in their opposition to the Interveners’ Attorney Fees Motion was in the one-paragraph conclusion, where defendants argued only that the Intervention Complaint was a copy and paste of the complaint in the Related Action, and interveners’ counsel merely attended hearings “without adding substantive motions or work.”

This was insufficient to challenge the amount of attorney fees, and as a result, defendants forfeited this claim. (Lunada Biomedical v. Nunez, supra, 230 Cal.App.4th at p. 488.) Defendants make no argument as to the amount of costs awarded and thus have also forfeited this claim. (Rule 8.204(a)(1)(B); Laboratory Specialists Internat., Inc. v. Shimadzu Scientific Instruments, Inc. (2017) 17 Cal.App.5th 755, 764.)

5. Attorney Fees on Appeal

Interveners requested we award attorney fees incurred on appeal. Because the Purchase Agreement provided for attorney fees, interveners are entitled to recover them on appeal as well as in the trial court. (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 250.) Upon remittitur, the trial court shall determine the amount of appellate attorney fees to be awarded to interveners.

DISPOSITION

The order is affirmed. The request for judicial notice is denied. Interveners are entitled to costs and attorney fees on appeal. The trial court shall determine the amount of attorney fees to be awarded.

THOMPSON, J.

WE CONCUR:

ARONSON, ACTING P. J.

IKOLA, J.

Filed 8/4/20 Elkins v. Haire CA1/2

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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

JOHN ELKINS,

Plaintiff and Appellant,

v.

JUDITH ANN HAIRE,

Defendant and Respondent.

A156416

(Sonoma County

Super. Ct. No. SCV261668)

This is the third lawsuit attorney John Elkins has filed against his former client, respondent Judith Haire, seeking to recover a contingency fee he claims to be owed, under the same retention agreement and for the same legal work as in the two prior cases. The work was concluded more than fifteen years ago, in 2003. Haire prevailed in the two prior lawsuits, both in the trial court and on appeal, and Elkins recovered nothing. (See Elkins v. Haire (July 16, 2009, A120845) [2009 WL 2095950] (Elkins 1); Elkins v. Haire (Aug. 19, 2013, A137342) [2013 WL 4451049] (Elkins 2).) In the first suit, after the close of plaintiff’s evidence in a bench trial, the trial court held Elkins had failed to establish the damages element of his breach of contract claim. In the second suit, it sustained a demurrer, holding his claims were barred by res judicata. We affirmed both decisions.

At the outset of this third case, the trial court granted a motion by Haire pursuant to Code of Civil Procedure section 391.1, declared Elkins to be a vexatious litigant and ordered him to furnish security before the suit could proceed. The statute provides that such a motion “shall be based upon the ground, and supported by a showing, that the plaintiff is a vexatious litigant and that there is not a reasonable probability that he or she will prevail in the litigation against the moving defendant.” (§ 391.1, italics added.) Elkins did not post a bond, and now appeals the dismissal of his lawsuit.

On appeal, he contends the trial court erred in requiring him to post security because Haire’s evidence did not satisfy either statutory requirement. He maintains there is insufficient evidence he is a vexatious litigant under either statutory definition of that term that the trial court found he satisfied (see § 391, subd. (b)(2) & (3)), and that even if the vexatious litigant determination is sustained, Haire did not show there is no reasonable probability he will prevail in this case.

Haire not only urges us to affirm the trial court’s ruling but has moved (1) for an award of contractual attorney fees on appeal, and (2) for a pre-filing order prohibiting Elkins from filing any new litigation in any court of this state without leave of court.

We affirm the trial court’s order requiring Elkins to post security as a vexatious litigant and, since he failed to do so, affirm the dismissal. We address Haire’s motions by separate orders, filed concurrently herewith.

BACKGROUND

We presume the parties’ familiarity with the facts stated in our prior opinions and summarize them here only briefly, amplified where necessary by the record in this case.

A. The Contingent Fee Dispute
B.
In September 2002, Haire hired Elkins to represent her in a real estate dispute with her brother concerning a Sonoma County property, the Haire Ranch, that had been gifted to them jointly by their mother. (Elkins 1, supra, 2009 WL 2095950, at p. *1.) The previous year, Haire had accepted her brother’s offer to buy her half-interest in the ranch for a little over $200,000. She hired Elkins to help her rescind that transaction, after discovering her brother had been in secret negotiations to sell the property to a third-party intermediary (Wildlands) for resale to the San Francisco Airport Authority, (enabling the airport to convert the Haire Ranch into wetlands and, in consideration of that action, be allowed to expand its runways further into San Francisco Bay). (Ibid.)

Elkins’ 2002 retention agreement with Haire contained a contingency fee provision that stated in relevant part (italics added):

“12. That all fees to be paid to the attorney by the client . . . shall be contingent upon the amount of recovery in the matter described in paragraph 1. Those fees shall be determined by one of the following methods: [¶] a. The attorney shall receive 10% (TEN PERCENT) of all cash recovered from the matter for the benefit of the client, accomplished by settlement prior to the filing of litigation in a court, and further shall receive 7.5% (SEVEN AND ONE–HALF PERCENT) of the value of all land and personalty recovered for the benefit of the client, accomplished by settlement prior to the filing of litigation in a court; . . . [¶]

“14. That the attorney shall have an attorney’s lien on all property of any kind, whether cash or land or personalty, recovered for the benefit of the client in the matter described in paragraph 1, and that lien shall be to the extent necessary to cover all fees and expenses due to be paid by the client under this agreement.

“15. That for purposes of paragraph 12, the phrase ‘value of all land and personalty’ shall be defined to mean that reasonable and fair market value which is the highest determinable at time of payment of the fee due the attorney under paragraph 12. The fair market value shall be determined either by qualified appraisal, the averaging of any disputed qualified appraisals, or actual bona fide offers to purchase any such land or personalty, which offers are current and pending at the time of payment, whatever method shall render the highest land value; provided that any bona fide offer to purchase such land by the San Francisco Airport Authority must be active and available to the client at the time of payment of the fee and cannot be contingent upon the occurrence of further events beyond the control of the client. The attorney shall at his unilateral option be able to delay payment of any portion of his fee to any time which he desires, provided that this period of time does not extend beyond four years from the date the fee initially accrues and does not act as a cloud on title of any such land which might adversely affect the sale thereof. No interest of any kind shall run on this fee because of any such unilateral delay by the attorney of the election for the client to pay the fee. Client shall have a minimum of one year from the date of accrual of any such fee or portion thereof based on value of land or personalty to pay such fee in any event, except that such payment, if so elected by the attorney, must be made by the client as part of any bona fide sale of the land or personalty at the time of close of escrow in any such transaction. The attorney shall maintain an attorney’s lien on any such land or personalty recovered until payment of the due fee is satisfied, and the due contingency fee percentage as specified under paragraph 12, above, shall determine the percentage of the undivided land or personalty to which said lien shall apply. At the expiration of four years from the date of accrual of any fee based on the value of recovered land or personalty, the fee shall be deemed due and shall be paid by the client whether previously elected by the attorney to be paid or not. The fee based on the value of any land or personalty shall in any event, after one year from date of accrual of said fee, be paid to the attorney within six months of his giving to the client written notice of election to be paid the fee.”

In October 2003, Elkins negotiated a settlement on Haire’s behalf that involved the transfer back to her of a 45.25 percent interest in the ranch. (Elkins 1, supra, 2009 WL 2095950, at p. *1.)

The following year, the Haires entered into a one-year option agreement with Wildlands, giving it the option to buy the ranch for between $9 and $12 million. (Elkins 1, supra, 2009 WL 2095950, at p. *2.)

In December 2004, a little over a year after Elkins had secured the return of Haire’s ranch interest through the brother/sister settlement, Elkins gave six months’ written notice demanding to be paid a portion of his fee under the 2002 retention agreement by June 28, 2005, claiming the 2004 option agreement with Wildlands had effectively set the value of the ranch at between $9 million and $12 million. (Elkins 1, supra, 2009 WL 2095950, at pp. *2-*3].) Based on that valuation range, he calculated the value of his contingency fee at between $305,437 and $407,250, less $17,000 of previously agreed upon adjustments. His letter demanded $285,000, “representing that portion of the fee equal to 7.5% of the minimal . . . assessed . . . value under the Option Agreement,” and stated that “[a]ny remaining portion of my fee would be paid at actual sale of the property based on the sales price.”

Several months later, in March 2005, Haire responded through newly retained counsel, acknowledging that the 2002 retention agreement gave Elkins the right to elect to be paid his fee within six months of giving notice, but disputing his valuation. Haire asserted the option agreement was not a valid basis to compute Elkins’ fee because it was not a bona fide offer to purchase the property but merely an option. She wrote that “[t]he only determined market value of the property at this point of time” was a $2.245 million appraisal; “Based on this value, the fee due you under the fee agreement is $76,189.69.” Her lawyer also added that Haire “is more than willing to pay you 7.5 percent of what she receives on the property. However, that cannot be done until the property is sold.”

About a month later, the option agreement expired. (Elkins 1, supra, 2009 WL 2095950, at p. *2.)

C. Elkins’ First Lawsuit Against His Former Client
D.
In July 2006, Elkins sued Haire for breach of contract and fraud, seeking payment of his contingency fee. Prior to trial, the parties entered into a “Partial Settlement Agreement” dismissing the fraud claim, limiting the scope of trial to “the amount of the fee due to Elkins pursuant to the contract of employment” (and to one ancillary additional issue not relevant here), and specifying that “Elkins has no other or future claims against Haire for any damages or fee claimed to be due, arising out of the employment contract at issue in the Action, other than those claimed in the first cause of action [for breach of contract].”

The matter then proceeded to a bench trial in 2007, and Elkins lost. (Elkins 1, supra, 2009 WL 2095950, at p. *3.) At the close of his case, Haire brought a motion for judgment under section 631.8, arguing Elkins had failed to establish the market value of the ranch and thus could not prove damages, an essential element of a claim for breach of contract. (Ibid.) The trial court agreed and granted the motion. (Ibid.) It ruled that the testimony offered by Elkins’ expert appraiser about the value of the ranch was not supported by the evidence. (Id., at p. *6.) Judgment was entered against Elkins, he appealed and we affirmed the judgment. (Id., at p. *12.) We agreed with Haire’s argument that Elkins had “fail[ed] . . . to adduce probative evidence of the ‘market value’ of the property sufficient to trigger an obligation on the part of [Haire] to pay [Elkins] any more attorney fees than she already had.” (Id., at p. *8.)

E. Elkins’ Second Lawsuit Against His Former Client
F.
About two years later, in October 2011, Elkins again sued Haire, alleging three causes of action for breach of contract. (Elkins 2, supra, 2013 WL 4451049, at p. *1.) As relevant here, the first and second causes of action asserted that Haire had breached the 2002 retention agreement—the same agreement he sued on in 2007. (Id., at p. *4.) Elkins alleged that she breached the retention agreement by failing to pay him his “due fee of 7.5% of the value of Haire Ranch as proceeds of [the] settlement” obtained four years earlier, which paragraph 15 of the 2002 retention agreement “requires . . . that [Haire] pay . . . within four years of the settlement.” The third cause of action alleged Elkins had breached the 2007 partial settlement agreement he and Haire had entered during the 2007 trial, by exceeding the contractual limitations on the scope of issues to be tried and by failing to comply with its confidentiality provision. Elkins also sought declaratory relief that “any release of claims by [Haire] under said agreement is void.”

Elkins’ second lawsuit against his former client was resolved against him on demurrer at the pleading stage based on the 2007 judgment entered against him in the first lawsuit, under principles of res judicata and related issues of collateral estoppel. And again, we affirmed the judgment. (Elkins 2, supra, 2013 WL 4451049, at p. *1.) We held that Elkins’ new complaint “is an attempt to litigate the same issues decided by the superior court in 2007 and affirmed by this court in 2009, i.e., whether Haire owed [Elkins] any monies pursuant to the terms of the 2002 retention agreement.” (Id., at p. *5.)

We specifically rejected Elkins’ contention that his new complaint was based on a new and different breach of contract than that alleged in the first lawsuit and explained our reasons at great length. (See Elkins 2, supra, 2013 WL 4451049, at pp. *6-*9.) The trial court’s statements in support of its ruling against Elkins in the first lawsuit, we observed, “make crystal clear that the trial court was, on October 5, 2007, determining what, if any, monies were due [Elkins] under the 2002 retention agreement. . . . Its answer was, clearly: none.” (Id., at p. *7.) The new claims for breach of the retention contract were therefore barred by res judicata. We rejected Elkins’ claim under the partial settlement agreement, too, concluding it was barred by res judicata as well because any breach that occurred during trial of the first lawsuit was subsumed by the 2007 judgment. (Id. at p. *10.) Elkins’ “proper remedy was to appeal on that specific basis in 2007, and not to file another lawsuit against [Haire] four years later.” (Ibid.)

In upholding the trial court’s rejection of a proposed amended complaint from Elkins, we specifically concluded our opinion with an admonition: Elkins “should not and cannot be permitted to assert in three successive complaints his right to recover monies from [Haire] under the commitments made in paragraphs 12a and 15 of the 2002 retention agreement between those parties. . . . [A]ll of the theories and alleged bases of recovery from [Haire] regarding the 2002 retention agreement ‘could have been litigated’ in the 2007 trial. [Citation.] [Elkins] should not and cannot be permitted to relitigate them multiple times.” (Elkins 2, supra, 2013 WL 4451049, at p. *10.)

G. This Litigation: Elkins’ Third Lawsuit Against His Former Client
H.
Our prior opinion in Elkins 2 was filed in August 2013.

Undeterred, Elkins filed this action about four and a half years later, in December 2017, claiming yet again that Haire still owes him his contingency fee under the 2002 retention agreement.

Alleging a single cause of action for breach of contract, along with related claims for enforcement of an attorney lien, quantum meruit, and common counts, he seeks $238,681 in damages. This time, Elkins alleges Haire owes him his contingency fee because she sold the ranch in December 2013 and received approximately $3.7 million “but has not paid to Plaintiff anything in satisfaction of the contingency fee based on that sales price.” The basic theory alleged, in 21 dense pages of pleading (most of them single-spaced), is that the 2002 retention agreement requires Haire to pay him a 7.5 percent contingency fee whenever she sells the ranch based on the sales price, no matter when a sale takes place, even if a sale is beyond four years from the date of the settlement by which he procured the return of her ranch interest. He alleges the agreement calls for multiple payments over time, with a final accounting due at the time of actual sale and contemplates that multiple collection actions might be necessary.

Haire then filed her motion pursuant to section 391.1 for an order requiring Elkins to post security as a vexatious litigant. As noted, that section provides for such relief “upon the ground, and supported by a showing, that the plaintiff is a vexatious litigant and that there is not a reasonable probability that he or she will prevail in the litigation against the moving defendant.”

Haire argued Elkins qualified as a “vexatious litigant,” a term defined in section 391, on two grounds: under subdivision (b)(2), which defines a vexatious litigant as someone who “[a]fter a litigation has been finally determined against the person, repeatedly relitigates or attempts to relitigate, in propria persona, either (i) the validity of the determination against the same defendant or defendants as to whom the litigation was finally determined or (ii) the cause of action, claim, controversy, or any of the issues of fact or law, determined or concluded by the final determination against the same defendant or defendants as to whom the litigation was finally determined,” and under subdivision (b)(3), which defines a vexatious litigant as someone who “[i]n any litigation while acting in propria persona, repeatedly files unmeritorious motions, pleadings, or other papers, conducts unnecessary discovery, or engages in other tactics that are frivolous or solely intended to cause unnecessary delay.” (Id., subd. (b)(3).) She further argued Elkins had no reasonable probability of prevailing in this third lawsuit because all his claims were barred by res judicata based on the 2007 judgment against him in the first case.

At the hearing, Haire disputed Elkins’ construction of the contract as calling for successive payments or installments which was “simply an inaccurate reading of the contract” that had been addressed in her reply brief. Her reply brief, listed in the register of actions, has not been included in the record on appeal. Haire also disputed Elkins’ very narrow view of what the two prior lawsuits were all about, including his contention the issues they involved—damages based on the property’s fair market value—were totally different than the issues here. In a nutshell, she argued: “The Court [in the first lawsuit] did not say, you cannot value a property until it is sold. The Court said, you failed to put on evidence of value and, therefore, you do not take anything from Defendant Haire.”

The trial court granted Haire’s motion in a six-and-a-half-page written order and ordered Elkins to furnish security in the amount of $25,000. The court ruled that Elkins was a vexatious litigant on both grounds asserted. In relevant part, it wrote: “The court finds that Plaintiff fits at least category (b)(2) of [the statutory definition of a] ‘vexatious litigant’ since he has unequivocally now for the second time tried to relitigate the same claim and controversy, already twice before finally and fully adjudicated against him.

“Moreover, in each of the prior cases he has shown a pattern of repeatedly challenging each decision in the same manner, on the same grounds, up through the court of appeal. He thus appears to fit category (b)(3) as well, while at the very least this merely further supports the propriety of finding him to be a vexatious litigant.

“Plaintiff argues that there was no finding in the first lawsuit that he had filed the action ‘frivolously’ and that he had established a prima facie claim. These points are material but not dispositive and they do not change the fact that Plaintiff at least in the two prior actions relitigated the same cause. He also asserts that the appeals and other motions do not mean that he has ‘relitigated’ the same claims. Plaintiff ignores the fact that each of these three successive lawsuits counts as ‘relitigating.’ ”

The court also concluded Elkins had no reasonable probability of prevailing, because “it is almost certain” that his claims were barred by both res judicata and collateral estoppel. In relevant part, it reasoned: “Despite his attempts to word his way around it, Plaintiff raises the same cause of action adjudicated against him in the two prior actions—the claim that Defendant owes him money for the legal services he provided and specifically from a value of the Property. Moreover, both the specific issues of the obligation under the Contract or for the work performed and Plaintiff’s claim of entitlement to an interest in, or money from, the Property, were litigated and adjudicated against Plaintiff, all the way through trial in the 2006 Action and through appeal in both actions.

“Plaintiff is correct that the sale of the Property is a ‘new’ or ‘different’ event that had not yet taken place at the time of the two prior actions, but it is an immaterial one. Plaintiff only has a basis for recovering payment from this sale if he has a claim for payment. That claim for payment is based on the Contract and the services he rendered to Defendant in the Original Action. This court, affirmed on appeal, found in the 2006 Action that Defendant owed Plaintiff no money under the Contract or for his services and both this court and the court of appeal repeated that determination in the 2011 Action. Plaintiff’s complaint makes it expressly clear that the basis for obtaining payment from the sale of the Property now is his claim that Defendant owes him money under the Contract for the legal services he provided, an issue and claim now twice adjudicated finally, and affirmed on appeal, against Plaintiff.”

Elkins did not post the security, and now appeals the resulting dismissal of his lawsuit.

DISCUSSION

Our review of the court’s ruling on Haire’s motion under section 391.1 is highly deferential. “ ‘A court exercises its discretion in determining whether a person is a vexatious litigant. [Citation.] We uphold the court’s ruling if it is supported by substantial evidence. [Citations.] On appeal, we presume the order declaring a litigant vexatious is correct and imply findings necessary to support the judgment. [Citation.]’ [Citations.] Similarly, a court’s decision that a vexatious litigant does not have a reasonable probability of success is based on an evaluative judgment in which the court is permitted to weigh evidence. [Citation.] A trial court’s conclusion that a vexatious litigant must post security does not, as with a demurrer, terminate the action or preclude a trial on the merits. Rather, it merely requires the party to post security. Accordingly, if there is any substantial evidence to support a trial court’s conclusion that a vexatious litigant had no reasonable probability of prevailing in the action, it will be upheld.’ [Citations.] [¶] To the extent we are called upon to determine the proper interpretation of a statutory provision, we do so independently under a de novo review [standard.]” (Garcia v. Lacey (2014) 231 Cal.App.4th 402, 407-408.)

I.

The Trial Court Did Not Err in Declaring Elkins a Vexatious Litigant Under Section 391, Subdivision (b)(2).

Elkins maintains there is insufficient evidence that he is a vexatious litigant under section 391, subdivision (b)(2) because, at most, this is only the second time he has attempted to relitigate a matter that has been finally adjudicated against him, and under Holcomb v. U.S. Bank Nat. Assn. (2005) 129 Cal.App.4th 1494, twice is not enough. We do not agree. He misreads both the law and this record.

Holcomb reversed a finding the plaintiff was a vexatious litigant under section 391, subdivision (b)(2) where the plaintiff had engaged in two attempts to relitigate final adjudications in prior, unrelated matters against different parties. (See Holcomb, supra, 129 Cal.App.4th at pp. 1502-1506.) After filing an unsuccessful motion in federal district court to vacate an arbitration decision in favor of the National Association of Securities Dealers (NASD) resulting in a judgment that had become final, the plaintiff filed (1) a motion for reconsideration of the order, and then (2) initiated a state court lawsuit against the NASD and related parties and against the arbitrator, seeking to recover the same damages he’d been denied in the arbitration. (Id. at pp. 1503-1504.) He then brought an unrelated lawsuit against different parties, suing a bank and others for placing a hold on one of his checks. The defendants moved successfully for an order requiring him to furnish security as a vexatious litigant, and Holcomb reversed. (See id. at p. 1498.) “[B]ased on the record before us,” Holcomb held, the plaintiff’s two attempts at relitigation alone in the unrelated NASD matters were not sufficient to satisfy the requirement a party “repeatedly” relitigate a matter that has been finally determined against him. (Id. at p. 1504.)

Holcomb rejected a purely numerical standard to assess whether a litigant satisfies the “repeated relitigation” definition of a vexatious litigant under section 391, subdivision (b)(2). In construing the statute, it found the Legislature’s use of the word “repeatedly” rather than a specific number in subdivision (b)(2) significant. (Holcomb, supra, 129 Cal.App.4th at p. 1505.) Contrasting that choice of words with the Legislature’s use of “specific numerical benchmarks, such as ‘five cases,’ ‘seven years,’ and ‘two years’ ” in subdivision (b)(1), it concluded that “[g]iven the specificity in subdivision (b)(1), we may safely presume if the Legislature intended the term ‘repeatedly” to simply mean ‘more than one time,’ the Legislature would have said so.” (Ibid.) Instead, construing that subdivision in light of the overall purpose of the vexatious litigant statutory framework, which “seek[s] to prevent future harm based on a litigant’s past behavior,” Holcomb concluded that the word “repeatedly,” as used in subdivision (b)(2), “ refer[s] to a past pattern or practice on the part of the litigant that carries the risk of repetition in the case at hand.” (Ibid., italics added.)

Holcomb elaborated: “Of course, the risk of repetition is fairly easy to demonstrate in situations where the defendant seeking security has been the target of previous relitigation attempts or the case involves facts or circumstances similar to those in which the plaintiff sought to relitigate.” (Holcomb, supra, 129 Cal.App.4th at p. 1505, italics added.) It explained that “a connection between the previous relitigation attempts and the movant or action in which security is sought . . . would militate heavily in favor of requiring the plaintiff to provide security.” (Ibid.)

Holcomb found no risk of relitigation on the record before it. (See Holcomb, supra, 129 Cal.App.4th at p. 1505.) The present lawsuit against the bank for the check hold “shar[ed] no connection” with the arbitration matter that previously had been relitigated, nor had the defendant “demonstrated that [plaintiff] has threated to relitigate the current case, or would likely do so if he does not prevail.” (Ibid.) For these reasons, Holcomb concluded that “based on the record before us,” the plaintiff’s previous motion for reconsideration and superior court action in the arbitration matter were not sufficient evidence to sustain a finding the plaintiff was a vexatious litigant under section 391, subdivision (b)(2) in the present unrelated matter. (Holcomb, at pp. 1505-1506.)

By contrast, the “risk of repetition” standard announced in Holcomb was held to be satisfied in Goodrich v. Sierra Vista Regional Medical Center (2016) 246 Cal.App.4th 1260 (Goodrich), which upheld a finding the plaintiff met the definition of a vexatious litigant under section 391, subdivision (b)(2) on a record somewhat similar to this one. Haire relies on Goodrich, claiming it is controlling.

The plaintiff in Goodrich was a doctor who had filed an administrative mandamus action challenging the defendant’s termination of her medical staff privileges, and her petition was denied. (Goodrich, supra, 246 Cal.App.4th at p. 1263.) After the judgment against her had become final, she filed two motions in the same case attempting to challenge the trial court’s decision. (Id. at p. 1264.) Both were denied. (Ibid.) After the second motion, the trial court declined to declare her a vexatious litigant but admonished her the issue could be renewed if she made another attempt to file an unsubstantiated motion attacking the judgment. (Ibid.) She then filed a third motion, seeking injunctive relief based on a claim of changed circumstances and attempting to file a cross-complaint. (Ibid.) The trial court denied that motion, too; it also rejected her contention she was not trying to relitigate the writ petition, because it was clear that her new motion was “ ‘seeking once again to overturn the denial of her reappointment [to the medical staff] and related relief.’ ” (Ibid.) At that point, the trial court declared her a vexatious litigant and ordered her to post security. It found the matter “ ‘has reached the point at which [plaintiff] is “repeatedly” relitigating her claims against [defendant], especially in light of this [c]ourt’s multiple prior admonitions.’ The court determined that her ‘actions are unreasonably impacting [defendant] and the [c]ourt, as contemplated by . . . [section] 391[, subdivision] (b)(2) and (3).’ ” (Ibid.)

The appellate court held the trial court’s ruling was supported by substantial evidence. (Goodrich, supra, 246 Cal.App.4th at p. 1263.) It said there was “no question” that, by the time the court declared the plaintiff a vexatious litigant, she satisfied the standard announced in Holcomb, i.e., that “there was ‘a past pattern or practice’ on her part that carried the risk of repetition.” (Id. at p. 1267.) “She already had made two prior relitigation attempts, causing the trial court to admonish that any further attempt could result in a vexatious litigant finding. As Holcomb aptly observed, ‘the risk of repetition is fairly easy to demonstrate in situations where the defendant seeking security has been the target of previous relitigation attempts.’ ” (Ibid.) Goodrich also reasoned that, unlike in Holcomb, the present matter (i.e., the plaintiff’s third motion) and her previous relitigation attempts were connected, which is a factor Holcomb said “ ‘would militate heavily in favor of requiring the plaintiff to provide security.’ ” “In each instance,” the court explained, “Goodrich attempted to relitigate the same issues against the same defendant.” (Ibid.) Also significant was the fact the plaintiff had ignored the court’s prior warning. (Ibid.) Stressing that “[p]arties are entitled to rely on the finality of a judgment,” Goodrich observed there is “no bright-line test” to determine whether a litigant is vexatious and, instead, courts must evaluate the question in light of the underlying statutory purpose. (Ibid.) It thus concluded that the trial court did not err in finding the plaintiff a vexatious litigant under section 391, subdivision (b)(2), because it “logically determined that [plaintiff’s] actions in repeatedly relitigating issues previously decided in the judgment unreasonably burdened both [defendant] and the court, which had to expend time and other resources addressing the motions and appearing at unnecessary hearings.” (Id. at pp. 1267-1268.)

Judged by these standards, substantial evidence supports the trial court’s finding that Elkins is a vexatious litigant. In one sense—that is, from a strictly numerical standpoint—this case falls somewhere between Holcomb (involving two relitigation attempts) and Goodrich (three). Elkins has only attempted to relitigate the “controversy” over payment of his contingency fee under the 2002 retention agreement twice after we affirmed the judgment in his first lawsuit. (§ 391, subd. (b)(2).) He did so in the second lawsuit, and now does so again here. But unlike in Holcomb, his past relitigation attempt is connected to this lawsuit, which “militate[s] heavily in favor of requiring the plaintiff to provide security.” (Holcomb, supra, 129 Cal.App.4th at p. 1505.) Moreover, unlike in Holcomb, Elkins’ relitigation consists of arguing issues already adjudicated in suits against the same party. And unlike in Goodrich, both of Elkins’ relitigation attempts are independent lawsuits, each pursued through appeal, not merely repeated motions in a single suit. While not to minimize the burden and expense that repeated motion practice imposes, the burden and expense of having to defend a lawsuit through judgment and appeal (or as in this case, three lawsuits through judgment and appeal), is usually greater. As is the consumption of judicial resources.

Furthermore, the “repeated relitigator” definition of a vexatious litigant is not limited to just “cause[s] of action,” “claim[s]” or “controvers[ies],” it also applies to repeated relitigation of “any . . . issues of fact or law.” (§ 391, subd. (b)(2).) So while Elkins is only relitigating the same “controversy” (his right to a contingent fee based on the value of the Haire property) now for a second time after the matter was first finally adjudicated, he’s also relitigating at least two specific issues—the meaning of the parties’ contract, which was already adjudicated in the first and second actions, and the application of res judicata, which was adjudicated in the second.

Specifically, the first two lawsuits were predicated on an interpretation of the 2002 retention agreement—advanced by Elkins himself—pursuant to which Elkins’ contingency fee was due and payable based on an estimate of the property’s value within various specified timeframes and a maximum deadline of four years after the settlement. This court’s opinion in Elkins 1 was expressly premised on that interpretation of the contract. And so was this court’s opinion in Elkins 2. (See Elkins 2, supra, 2013 WL 4451049, at p. *8.)

The present lawsuit is predicated on a totally different interpretation of the retention agreement: that the contract is analogous to an installment contract, involving multiple different points in time for payment, and that Elkins’ final contingency fee is due and payable only upon sale of the property, whenever that might occur no matter how far into the future. In order to prevail on this new contractual theory, he would have to contradict the meaning of the 2002 retention agreement that he advanced and that the trial court adopted, and this court affirmed in both Elkins 1 and Elkins 2.

Elkins also is attempting to relitigate the scope of the 2007 trial, as articulated by this court in Elkins 2. Without belaboring the point, we said in Elkins 2 that it was “crystal clear that the trial court was, on October 5, 2007, determining what, if any, monies were due [Elkins] under the 2002 retention agreement. . . . Its answer was, clearly: none.” (See Elkins 2, supra, 2013 WL 4451049, at p. *7.) We could go on; there are undoubtedly subsidiary issues he’s seeking to relitigate too, but these examples suffice.

However one tallies the number of Elkins’ relitigation attempts under section 391, subdivision (b)(2), this case, which is the third lawsuit litigated through judgment and the third appeal after repeated adjudication of multiple issues all against the same defendant, is well past the facts of Holcomb (and, indeed, even Goodrich). And, this court previously admonished Elkins that he “should not be permitted to assert in three successive complaints his right to recover monies from [Haire] under the commitments made in paragraphs 12a and 15 of the 2002 retention agreement . . . .” (Elkins 2, supra, 2013 WL 4451049, at p. *10; see Goodrich, supra, 246 Cal.App.4th at p. 1267.)

In these circumstances, whether or not the trial court was compelled as a matter of law to declare Elkins a vexatious litigant, it clearly had the discretion to do so even if reasonable minds could differ. The discretion the Legislature has afforded courts in making these assessments cannot be reduced to a simple, “three strikes and you’re out” but “two strikes and you’re safe” formula, as Elkins posits. Under Holcomb, “[w]hat constitutes ‘repeatedly’ . . . , in any given case, is left to the sound discretion of the trial court.” (Morton v. Wagner (2007) 156 Cal.App.4th 963, 971 [construing § 391, subd. (b)(3) and citing Holcomb by analogy].) As Goodrich explained, Holcomb “based its decision on the record before it and not on the number of relitigation attempts. It determined that since the purpose of the vexatious litigant statutes is to prevent future harm based on a litigant’s past behavior, the Legislature’s use of the adverb ‘repeatedly’ refers ‘to a past pattern or practice on the part of the litigant that carries the risk of repetition in the case at hand,’ ” and such a risk was not present on the record in Holcomb. (Goodrich, supra, 246 Cal.App.4th at p. 1267.) Here, as in Goodrich, there is substantial evidence that Elkins’ past actions “carr[y] the risk of repetition in the case at hand.” (Holcomb, supra, 129 Cal.App.4th at p. 1505.)

Elkins tries to avoid this result, and bring himself within the result in Holcomb, by assuring us in his appellate brief that there is no danger he would seek to relitigate the issue of his contingency fee again if he loses this third lawsuit. No matter that he executed a partial settlement agreement two lawsuits ago, in 2007, promising in black and white that he “has no other or future claims against Haire for any damages or fee claimed to be due, arising out of the employment contract at issue in the Action, other than those claimed in the first cause of action [for breach of contract].” Since then his words have not been matched by his actions, which demonstrate his seemingly limitless capacity to invent new legal theories in unrelenting, and seemingly endless, pursuit of his contingency fee. Simply put, as in Goodrich, the trial court on this record “logically determined that [Elkins’] actions in repeatedly relitigating issues previously decided in the [2007] judgment unreasonably burdened both [Haire] and the court . . . .” (Goodrich, supra, 246 Cal.App.4th at pp. 1267-1268.) This was well within its discretion.

Because the court did not err in finding Elkins met the definition of a vexatious litigant under section 391, subdivision (b)(2), it is unnecessary to address Elkins’ challenge to the court’s alternative ruling that he also met the definition under subdivision (b)(3).

II.

The Trial Court’s Ruling That Elkins Has No Reasonable Probability of Prevailing Is Supported by Substantial Evidence.

Elkins contends the trial court’s finding on the second prerequisite to requiring a bond under section 391.1—that there is no reasonable probability he will prevail—is not supported by substantial evidence. The reason, he contends, is because the court erroneously concluded that this third lawsuit is barred under res judicata principles.

Elkins argues (as he did in Elkins 2, where we rejected a very similar argument) that res judicata, claim preclusion and issue preclusion do not apply because the present lawsuit is based on a different, subsequent breach of the 2002 retention than the breaches at issue in the prior lawsuits. This time, he maintains, “a new breach took place” in 2013 when Haire failed to pay him his fee out of the sale proceeds. He says that is “the breach of a different obligation, expressly stated under the Contract, arising subsequent to the prior two lawsuits, the payment due at the sale of the land, based on a different measure of damages, 7.5 percent of the proceeds from sale paid to [Haire].” He maintains that Haire did not introduce any evidence to contradict the evidence he introduced to prove the 2002 retention agreement calls for multiple payments, and therefore the trial court was required to accept his interpretation when ruling on Haire’s motion. He argues this case involves a different primary right than was at issue previously. Analogizing to caselaw involving installment contracts, he contends that the contract creates “severable” obligations and thus res judicata does not bar this subsequent lawsuit because, in effect, the time for payment had not come due by the time of the two prior lawsuits. (He also says the prior lawsuits were brought “prematurely,” due to the “failed condition precedent” of his “inability to show the ‘fair market value’ to prove damages as of the date of breach in the first lawsuit.”) There are a number of difficulties with his contentions, but we address only one.

Elkins’ analogy to installment contracts, on which his res judicata argument depends, is based on an interpretation of the contract that he is conclusively foreclosed from relitigating. He cannot for a third time relitigate the meaning of the 2002 retention agreement and advance an entirely new and different interpretation of how and when his contingency fee is to be valued than he advanced in the two prior actions. (See pp. 19-21, ante.) The meaning of paragraphs 12 and 15 has been conclusively adjudicated not once, but twice.

In Elkins 1, the key issue, resolved adversely to Elkins, was “whether [Haire] breached her obligation to pay [Elkins’] any attorney fees owed him under paragraphs 12 and 15 of the retention agreement and, more specifically, whether at the time of [Elkins’] demand letter of December 2004, there had been—or even was thereafter—any determination of the ‘fair market value’ of her interest in the Haire Ranch.” (Elkins 1, supra, 2009 WL 2095950, at p. *8, italics added, fn. omitted.) We affirmed the trial court, agreeing with “the premise of its ruling” that Elkins “produced no credible expert testimony establishing the ‘fair market value’ of [Haire’s] interest in the Haire Ranch at the critical point in time (2004 or 2005).” (Id., at p. *11, second italics added.) Elkins did not claim in Elkins 1 that Haire had any additional and continuing obligation to him in the event she sold the property in the future. On the contrary, in the partial settlement agreement, he disclaimed that he had any “other or future claims against Haire for any damages or fee claimed to be due” under the retention agreement besides the claim that went to trial.

Notwithstanding the disclaimer, in Elkins 2 he invoked the same provisions of the retention agreement to argue the then-new theory that Haire breached the contract in 2007, alleging the retention agreement required Haire to pay the contingency fee four years after the date of settlement of the underlying case. (Elkins 2, supra, 2013 WL 4451049, at p. * 7 & fn. 6.) The trial court and this court rejected the contract claims and the new theory on grounds of res judicata because they were based on the same provisions of the same agreement, involved the same controversy and could have been raised in the prior action. (Id., at pp. *6-*9.) As we explained in Elkins 2: “[A]ny and all payments possibly due from [Haire] to [Elkins] under the key paragraphs of the 2002 retention agreement were based on, and only on, the ‘value of all land and personalty recovered for the benefit of the client’ (paragraph 12a) which is later defined to mean ‘the reasonable and fair market value’ of that property, to be determined by whichever of several possible methods ‘shall render the highest land value’ (paragraph 15). But, as noted in the trial court’s 2007 decision, affirmed by us in 2009, in the 2007 trial appellant failed to produce any credible evidence regarding the ‘fair market value’ of the Haire Ranch or any portion of it. It would totally undermine the core philosophy of res judicata to allow [Elkins] to sue [Haire] under the same provisions of the same contract (albeit on allegedly different provisions or clauses thereof) when any cause of action he could allege under any clause or provision of paragraphs 12a and 15 must be premised on the ‘fair market value’ of the Haire Ranch, a very specific factual issue which he failed to establish at the 2007 trial.” (Id., at p. *8, italics added; see also, e.g., Law Offices of Stanley J. Bell v. Shine, Browne & Diamond (1995) 36 Cal.App.4th 1011, 1025–1026 [prior judgment denying attorney’s quantum meruit lien claim for attorney fees for failure of proof bars relitigation of fee dispute in separate lawsuit].)

Elkins’ latest interpretation of the contract is contrary to both interpretations he previously asserted. Instead of payment of fair market value being due in June 2005 as he asserted in Elkins 1, or in October 2007 as he asserted in Elkins 2, he now claims Haire was required to pay him a percentage of the proceeds of any sale of the property whenever it was sold, which it ultimately was in 2013, even though that sale did not occur until nine years after the settlement of the underlying action. Given our holding in Elkins 2 that it was too late for Elkins to advance a new and different interpretation of the contract in 2009, a fortiori it was too late for him to do so when he filed this suit in 2017, in his third bid to recover compensation under the same provisions of the same agreement.

“ ‘If the . . . construction of a contract . . . has been adjudicated in one action it is res judicata when it comes again in issue in another action between the same parties’ ” even if the subject matter of the two actions are different. (Price v. Sixth Dist. Agricultural Assn. (1927) 201 Cal. 502, 510.) Thus, regardless of the fact Elkins argues there is a timing issue that prevented him from bringing suit earlier (i.e., because there had yet been no sale), Elkins is barred from relitigating the meaning of this contract. (See, e.g., Sutphin v. Speik (1940) 15 Cal.2d 195, 205 (per curium) (denying rehearing) [prior judgment that determined defendant’s contractual royalty obligations to plaintiff in two oil wells held conclusive, and precluded defendant from asserting in subsequent suit for later-accrued royalties that plaintiff had no contractual right to royalties from a portion of the wells because of events transpiring after conclusion of the first lawsuit; “defendant’s contention is that though the prior judgment determined that plaintiff had a right to a specified percentage of the production of oil from any wells on certain land, plaintiff may be compelled to relitigate that right whenever defendant can discover a new theory upon which to attack it. This proposition is without support in principle or authority”]; 7 Witkin, Cal. Procedure, Judgment (5th ed. 2020) § 419 [discussing Sutphin]; see also Murdock v. Eddy (1940) 38 Cal.App.2d 551, 554 [determination in prior suit about meaning of marital settlement agreement held conclusive in later suit between same parties]; Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 1516-1518 [party held collaterally estopped from recovering contractual contingency fee because contract was held illegal and unenforceable in prior suit].) As in the above-cited cases, the determination in Elkins 1, reiterated in Elkins 2—that under the retention agreement Elkins was required to show the fair market value of the Haire Ranch property at the time he demanded payment in 2004 or 2005, and that absent such a showing there could be no claim for breach—bars Elkins from now claiming that Haire’s obligation under the contract continued indefinitely up until she sold the property.

Because we agree with the trial court that Elkins’ third lawsuit is barred by res judicata, we need not decide whether his current interpretation would otherwise be meritorious.

DISPOSITION

The judgment is affirmed. Respondent shall recover her appellate costs.

STEWART, J.

We concur.

RICHMAN, Acting P.J.

MILLER, J.

Elkins v. Haire (A156416)