Judge: H. Jay Ford, III, Case: SC129440, Date: 2023-03-09 Tentative Ruling

Case Number: SC129440    Hearing Date: March 9, 2023    Dept: O

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SUBJECT:                 MOTION FOR SUMMARY JUDGMENT, OR IN THE ALTERNATIVE, SUMMARY ADJUDICTION

MOVING PARTY:   Cross-Defendant James Hanley

RESP. PARTY:         Cross-Complainants Marc Smith and Nan Rochelle Smith, as trustees for Smith Family Trust dated May 17, 2011

TENTATIVE RULING

            Cross-Defendant James Hanley’s Motion for Summary Judgment, or in the alternative, Summary Adjudication is DENIED.

            A.  Burden on summary judgment based on affirmative defense

Where a defendant seeks summary judgment or adjudication, he must show that either “one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.”  See Code of Civil Procedure §437c(o)(2).)  “The burden on a defendant moving for summary judgment based upon the assertion of an affirmative defense is different than the burden to show that one or more elements of the plaintiff's cause of action cannot be established. Instead of merely submitting evidence to negate a single element of the plaintiff's cause of action or offering evidence such as vague or insufficient discovery responses that the plaintiff does not have evidence to create an issue of fact as to one or more elements of his or her case the defendant has the initial burden to show that undisputed facts support each element of the affirmative defense.  If the defendant does not meet this burden, the motion must be denied.”  Consumer Cause, Inc. v. SmileCare (2001) 91 Cal.App.4^th 454, 468.

“There is no obligation on the opposing party (plaintiffs here) to establish anything by affidavit unless and until the moving party has by affidavit stated facts establishing every element of the affirmative defense necessary to sustain a judgment in his favor.  What this means is that if an affirmative defense has four elements, it does not suffice even if the defendant produces overwhelming evidence as to three of those elements. If the defendant fails to address the fourth element at all or to produce substantial evidence supporting that element, the trial court cannot properly grant summary judgment. Moreover, a summary judgment granted in those circumstances would have to be reversed, even if the plaintiff failed to introduce a scintilla of evidence challenging that element.”  Id.

            In addition, the evidence and affidavits of the moving party are construed strictly, while those of the opponent are liberally read.  See Government Employees Ins. Co. v. Sup. Ct. (2000) 79 Cal.App.4th 95, 100.  “All doubts as to the propriety of granting the motion (whether there is any issue of material fact [Code of Civil Procedure] § 437c) are to be resolved in favor of the party opposing the motion (i.e., a denial of summary judgment).”  Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502. 

I.  Hanley’s request for summary adjudication sufficiently identifies the causes of action to be adjudicated and the basis for the request for adjudication by cause of action

            Hanley’s notice of motion sufficiently identifies the causes of action he would like adjudicated in the alternative.  Hanley seeks adjudication of all causes of action alleged against him in the FAXC.  The only causes of action alleged against him are for fraudulent inducement and negligent misrepresentation. 

For purposes of adjudication, the separate statement fails to comply with CRC Rule 3.1350(b):  “If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.”  However, because there are only two causes of action alleged against Hanley, and Hanley has clearly requested adjudication of all the claims against him on the same grounds (claim preclusion and economic loss rule), Hanley’s failure to comply with CRC Rule 3.1350(b) is not prejudicial. 

II.  Hanley fails to establish that the fraudulent inducement and negligent misrepresentation claims are barred by affirmative defense of claim preclusion

            Hanley only asserts claim preclusion in his brief in support of the MSJ/A.  See Memorandum of Points & Authorities ISO MSJ/A, 2:19-23, 12:14-20, 14:18-19, 9-10.  Hanley does not argue issue preclusion (collateral estoppel), and it is outside the scope of this motion for summary judgment or summary adjudication.

            “Claim and issue preclusion have different requirements and effects. Claim preclusion prevents relitigation of entire causes of action.  Claim preclusion applies only when a second suit involves (1) the same cause of action (2) between the same parties or their privies (3) after a final judgment on the merits in the first suit.  Issue preclusion, by contrast, prevents relitigation of previously decided issues, rather than causes of action as a whole. It applies only (1) after final adjudication (2) of an identical issue (3) actually litigated and necessarily decided in the first suit and (4) asserted against one who was a party in the first suit or one in privity with that party.”  Samara v. Matar (2018) 5 Cal.5^th 322, 326. 

A.  “Between the same parties or their privies”

“Issue preclusion differs from claim preclusion in two ways. First, issue preclusion does not bar entire causes of action. Instead, it prevents relitigation of previously decided issues. Second, unlike claim preclusion, issue preclusion can be raised by one who was not a party or privy in the first suit.”  DKN Holdings LLC v. Faerber (2015) 61 Cal.4^th 813, 825.  “[C]laim preclusion applies only to relitigation of the same cause of action between the same parties or those in privity with them.”  Id. (Court of Appeal erred “when it conflated claim preclusion, which requires identity of parties, and issue preclusion, which does not”)(emphasis in the original). 

 “Under the requirement of privity, only parties to the former judgment or their privies may take advantage of or be bound by it.  A party in this connection is one who is directly interested in the subject matter, and had a right to make defense, or to control the proceeding, and to appeal from the judgment.  A privy is one who, after rendition of the judgment, has acquired an interest in the subject matter affected by the judgment through or under one of the parties, as by inheritance, succession, or purchase.”  Bernhard v. Bank of America Nat. Trust & Savings Ass'n (1942) 19 Cal.2d 807, 811.

Hanley only argues claim preclusion applies to bar Plaintiffs’ claims against him, not issue preclusion.  As the party moving for summary judgment based on an affirmative defense, it was Hanley’s burden to establish each element of that defense.  See Consumer Cause, Inc., supra, 91 Cal.App.4^th at 468.  Hanley fails to satisfy this burden. 

Hanley’s brief in support of the Motion for Summary Judgment is silent on the “same parties” element of claim preclusion.  In fact, Hanley fails to recite or argue any of the specific elements of claim preclusion in his brief. 

Hanley was not a “party” to the arbitration, as defined for purposes of res judicata.  “A party in this connection is one who is directly interested in the subject matter, and had a right to make defense, or to control the proceeding, and to appeal from the judgment.”  DKN Holdings LLC, supra, 61 Cal.4^th at 825.  Hanley was named as a cross-defendant and answered but the claims against him were ultimately dismissed and the Smiths only proceeded against Taconic. Hanley did not have a right to make defense or control the proceeding, nor does he have the right to appeal from the judgment entered on the arbitration award.  Hanley was not “the same party who defendant the cause of action in the first suit.”  Id.

Nor does Hanley argue that he was Taconic’s privy.  Nowhere in the memorandum of points and authorities does Hanley mention the word “privy” or “privity.”  Hanley cites to Sartor v. Superior Court (1982) 136 Cal.App.3d 322, 328.  Hanley argues that he is Taconic’s employee, and with respect to the negligent misrepresentation claim, he is in the “same position as the employees of the general contractor” in Sartor.  Hanley fails articulate how his position as an employee satisfies the “same parties” element of claim preclusion based on Sartor.  See DKN Holdings LLC, supra, 61 Cal.4^th at 825. 

The Court is not required to examine undeveloped claims or make Hanley’s arguments for him.  See Berkley v. Dowds (2007) 152 Cal.App.4^th 518, 527.  The Court is not obligated to “undertake its own search of the record backwards and forwards to try and figure out how the law applies to the facts of the case.”  Quantum Cooking Concepts, Inc. v. LV Assocs, Inc. (2011) 197 Cal.App.4^th 927, 934.  As the Quantum Court pointed out, CRC Rule 3.1113(b) “rests on a policy-based allocation of resources, preventing the trial court from being cast as a tacit advocate for the moving party's theories by freeing it from any obligation to comb the record and the law for factual and legal support that a party has failed to identify or provide.” Id.

Hanley fails to establish the element of “same parties” for purposes of claim preclusion.  Hanley’s motion for summary judgment or adjudication based on claim preclusion is therefore DENIED. 

III.  Hanley fails to establish that the fraud and negligent misrepresentation claims are barred by the economic loss rule

The economic loss rule generally bars tort claims for contract breaches, thereby limiting contracting parties to contract damages.  See Aas v. Superior Court (2000) 24 Cal.4th 627, 643 (“A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.”) As explained in Robinson Helicopter Co., Inc. (2004) 34 Cal.4th 979, “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.”  Robinson Helicopter Co., Inc., supra, 34 Cal.4th at 989.

As clarified in Robinson Helicopter v. Dana Corp. (2004), the economic loss rule does not apply to bar recovery of tort damages in connection with intentional fraud and misrepresentation, even if the intentional acts of fraud were committed in the context of a contractual relationship.  See Robinson Helicopter Co., Inc. (2004) 34 Cal.4th 979, 989, 992-993.  “In each of these cases, the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.”  Id. at 989-991.

Robinson specifically carved out intentional torts, like fraud and conversion, from the purview of the economic loss rule. Id. at 989-992. “Simply put, a contract is not a license allowing one party to cheat or defraud the other.”  Id. at 992 (plaintiff’s fraud claims were not simply part of alleged breach of contract and were properly brought as separate causes of action); Erlich v. Menezes (1999) 21 Cal.4th 543, 551 (recognizing long line of cases in which tort damages were allowed for a breach of contract where the conduct resulted in injury to person or property).

In addition, the economic loss rule only applies to preclude tort recovery where the harm is purely financial, unaccompanied by any physical or property damage.  “The economic loss rule provides that, in general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.”  Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 837 ((economic loss rule bars recovery for negligently inflicted economic losses “unaccompanied by…property damage); See Erlich v. Menezes (1999) 21 Cal.4th 543, 551 (recognizing long line of cases in which tort damages were allowed for a breach of contract where the conduct resulted in injury to person or property); Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 989-990 (economic loss rule does not bar tort damages where conduct is also a breach of contract where intentional tort is involved, where conduct violates duty independent of contractual duties, or in contract cases where breach of duty directly causes physical injury).

Hanley’s request for summary judgment or adjudication of the fraud claim based on the economic loss rule is denied.  The economic loss rule does not apply to intentional torts, including fraud.  The Smiths have alleged intentional fraud based on fraud in the inducement.  Hanley does not argue the fraud claim is insufficiently plead.  Whether the Smiths can prove fraud is another question irrelevant to the applicability of the economic loss rule.   

            Hanley’s request for summary judgment or adjudication of the negligent misrepresentation claim is denied based on his failure to (1) identify which of the facts in the separate statement establish that the negligent misrepresentation claim is barred by the economic loss rule and (2) present any evidence or facts that the Smiths suffered purely financial harm unaccompanied by physical damage or injury as a result of Hanley’s negligent misrepresentation.  Hanley was required to establish each and every element of the economic loss rule to obtain summary adjudication of the negligent misrepresentation claim.  Hanley fails to do so.

            Hanley fails to establish that the fraud in the inducement and negligent misrepresentation causes of action are barred by the economic loss rules.  Hanley’s Motion for Summary Judgment or Adjudication of these claims based on the economic loss rule is DENIED. 

IV.  The Smiths’ assertion that their contract with Taconic was void under B&PC 7159   

            Hanley argues the Smiths erroneously assert in the FAXC that the contract with Taconic was illegal and therefore void under B&PC §7159.  Hanley fails to establish the relevance of this argument to his request for summary judgment or adjudication of the fraud in the inducement and negligent misrepresentation claims. 

 

Case Name:   Taconic Builders, Inc. v. Smith, et al.

SUBJECT:                 MOTION FOR SUMMARY ADJUDICATION

MOVING PARTY:   Cross-Defendant Taconic Builders, Inc.

RESP. PARTY:         Cross-Complainants Marc Smith and Nan Rochelle Smith, as trustees for Smith Family Trust dated May 17, 2011

TENTATIVE RULING

            Cross-Defendant Taconic’s Motion for Summary Adjudication is DENIED.

            Taconic moves for “summary adjudication of the First Amended Cross-Complaint.”  However, adjudication can only be sought as to causes of action, affirmative defenses, punitive damages and the existence of duty.  CCP §437c(f)(1). Taconic’s motion fails to comply with CRC Rule 3.1350(b):  “If summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.”  Taconic only intended to move for summary adjudication, not summary judgment, because the motion would admittedly not resolve all issues between the parties.  See Memorandum of Points and Authorities, p. 3, fn. 1. 

            “A motion for summary adjudication tenders only those issues or causes of action specified in the notice of motion, and may only be granted as to the matters thus specified. The movant must state specifically in the notice of motion and repeat, verbatim, in the separate statement of undisputed material facts, the specific cause of action, affirmative defense, claims for damages, or issues of duty as to which summary adjudication is sought.  The motion must be denied if the movant fails to establish an entitlement to summary adjudication of the matters thus specified; the court cannot summarily adjudicate other issues or claims, even if a basis to do so appears from the papers.”  Schmidlin v. City of Palo Alto (2007) 157 Cal.App.4th 728, 743–744 (request to adjudicate seventh cause of action in complaint was properly denied where (1) moving party failed entirely to comply with requirement that separate statement specify issue to be adjudicated and organize supporting facts by issue and (2) moving party failed to establish entirety of allegations in seventh cause of action were subject to adjudication)(in dicta).  “If a party desires adjudication of particular issues or subissues, that party must make its intentions clear in the motion.”  Gonzalez v. Supr. Ct. (1987) 189 Cal.App.3d 1542, 1546. 

Taconic motion does not identify the specific cause of action, affirmative defense, claims of damages or issues of duty within the FAXC that it seeks to adjudicate, nor does Taconic request summary judgment. Taconic has completely failed to meet its burden.