Apex Development v. Armand Gonzales, Inc. CA2/5 ( 2014 )

Filed 5/19/14 Apex Development v. Armand Gonzales, Inc. 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication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
APEX DEVELOPMENT, INC., B248737
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. LC098783)
v.
ARMAND GONZALES, INC. et al.,
Defendants and Respondents.
APPEAL from judgments of the Superior Court of Los Angeles County, Frank
Johnson, Judge. Affirmed.
Law Offices of Michael P. Ribons and Michael P. Ribons for Plaintiff and
Appellant.
Sedgwick LLP, Curtis D. Parvin and Hall R. Marston, for Defendants and
Respondents Sedgwick LLP, Jonathan J. Dunn and Andrew C. Harris.
Murchison & Cumming, LLP, Edmund G. Farrell III and Adrian J. Barrio for
Defendants and Appellants Murchison & Cumming, LLP, Dan L. Longo, Jean A.
Dalmore and Nanette G. Reed.
I. INTRODUCTION
Plaintiff, Apex Development, Inc., appeals from two judgments dismissing its
malicious prosecution complaint. Plaintiff sued Armand Gonzales, Inc. doing business as
Gonzales Construction and Armand Gonzales (Armand Gonzales, Inc.). Plaintiff also
sued Armand Gonzales, Inc.’s lawyers: Sedgwick, LLP; two lawyers employed by
Sedgwick, LLP (Jonathon J. Dunn and Andrew C. Harris); Murchison & Cumming, LLP
and three lawyers employed by Murchison & Cumming, LLP (Dan L. Longo, Jean A.
Dalmore and Nanette G. Reed). The judgments were entered after the trial court
sustained defendants’ demurrers without leave to amend. The trial court ruled plaintiff
failed to state a cause of action for malicious prosecution because the prior action did not
terminate in its favor. Plaintiff argues the underlying action terminated favorably.
Plaintiff argues the prior lawsuit was terminated based on the parol evidence rule. We
consider the judgment in the underlying action as a whole and conclude the prior lawsuit
was terminated in material part on the statute of limitations ground. The judgments in the
present case are affirmed.
II. BACKGROUND
A. Underlying Action
On October 30, 2009, Armand Gonzales, Inc. filed a complaint against plaintiff.
On November 5, 2009, Armand Gonzales, Inc. filed an amended complaint for contract
breach and promissory estoppel. Armand Gonzales, Inc. was represented by Sedgwick,
LLP.
The amended complaint alleged Armand Gonzales, Inc. was a general contractor
that bid on a project for the County of Los Angeles Public Works Department (the
department). In July or August 2005, Armand Gonzales, Inc. invited subcontractors to
submit bids for construction of parts of the project. On September 6, 2005, Armand
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Gonzales, Inc. received an offer from plaintiff. The offer was received by Armand
Gonzales, Inc. minutes before the deadline to submit the complete bid to the department.
Plaintiff allegedly offered to furnish labor and materials necessary to complete specified
portions of the project for $1,974,671. Armand Gonzales, Inc. immediately contacted
plaintiff after receiving the last minute offer. Plaintiff’s offer was mistakenly addressed
to Stronghold Engineering, another general contractor. Plaintiff confirmed: it had
submitted identical offers to Stronghold Engineering and Armand Gonzales, Inc.; the
reference to Stronghold Engineering should have referenced Armand Gonzales, Inc.; and
the offer was to perform specified work. Based on plaintiff’s alleged oral and written
representations, Armand Gonzales, Inc. accepted plaintiff’s offer. Armand Gonzales, Inc.
included plaintiff’s figures in the bid submitted to the department. The department and
Armand Gonzales, Inc. entered into a contract for the project on September 21, 2005. On
November 14, 2005, plaintiff allegedly revised its bid offer to $3,100,389. Plaintiff
refused to honor its original bid. Subsequently, Armand Gonzales, Inc. retained a
replacement subcontractor to perform the work plaintiff had originally offered to do for
$1,974,671. Armand Gonzales, Inc. allegedly incurred costs and fees of $1,582,368.89 as
a legal cause of plaintiff’s acts and omissions.
As to the promissory estoppel cause of action, the amended complaint alleged
plaintiff promised to perform part of the project scope of work for a fixed price. Plaintiff
made the promise with deliberate intent to induce Armand Gonzales, Inc. to accept the
offer which was later withdrawn. Armand Gonzales, Inc. relied on plaintiff’s promise
and entered into a contract with the department to work on the project. Armand
Gonzales, Inc. was damaged when plaintiff refused to perform its promise.
On September 23, 2010, Murchison & Cumming, LLP began representing
Armand Gonzales, Inc. On February 1, 2012, plaintiff moved to sever issues at trial. On
February 27, 2012, Armand Gonzales, Inc. dismissed its contract breach cause of action
at the final status conference. Trial of the underlying action was later bifurcated. The
first phase of trial was to determine plaintiff’s affirmative defenses of statute of
limitations, laches, and failure to state a cause of action. The parties presented testimony
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and documents at the bench trial on June 19 and 20, 2012. After evidence was presented,
counsel for Armand Gonzales, Inc. moved for a directed verdict. The trial court
continued the trial to July 20, 2012, to receive additional briefing on the statute of
limitations issue. Both the 2012 trial and the 2013 demurrer proceedings were litigated
before the same judge, the Honorable Frank Johnson.
B. The Decision In The Underlying Action
At the July 20, 2012 hearing, the trial court found plaintiff’s offer was
unambiguous. The trial court stated: “The proposal, which was, I believe, Exhibit 11 in
the trial, the bifurcated trial that we started, is not in any way ambiguous. I read the
entire thing together. It’s clear that the latter part of the proposal, the second half of it,
qualifies the first half. [¶] That’s important because when you read that language, it’s
clear that the work that is the subject of this lawsuit was not included in the proposal. It’s
not included on the breakout sheets that are attached. And for what it’s worth, it’s just
not unclear to the court. It’s clear that’s what was intended at the time.”
The trial court continued; “Now, it is alleged that a conversation occurred shortly
thereafter which would have the effect of, if it occurred, of adding additional work, which
is the subject matter of this lawsuit. And the question is what is the legal effect of that
conversation? [¶] The court is of the opinion that we cannot use that oral conversation
for anything other than essentially a brand new contact. It is too different than what is
contained in the proposal. It is an entirely new proposal in which they -- if the evidence
is to be believed that the conversation occurred -- and that’s not part of the trial. . . . [S]o
that’s why I keep saying allegedly. [¶] If that conversation occurred and if it was
represented that this additional work would be covered, that is an entirely new contract.
It is not a modification of the first proposal. It is not an explanation of any ambiguous
term in the first proposal. It is an entirely new proposal. [¶] That is obviously
significant, as you both noted in your briefs and recognized, because it’s an oral proposal.
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And if it’s anything at all, it’s obviously barred by the three -- two-year, rather, statute of
limitations. I don’t see a way around that.”
After argument, the trial court again reiterated plaintiff’s bid was unambiguous.
The trial court added: “To go behind this bid requires the court to essentially throw it out
and rewrite a new contract, an oral contract, which is fine. I mean, that’s -- you know,
I’d be happy to do that except for the fact that we’re way past the two-year statute of
limitations for that. I just don’t see any way around it.”
Judgment for plaintiff was entered on July 20, 2012. The judgment states: “After
reviewing the evidence, the briefs and considering the oral arguments of the parties, the
Court denied [Armand Gonzales, Inc.’s] motion. The Court then ruled that the action
was not based upon a writing as the subject writing was unambiguous and not susceptible
to two reasonable interpretations as advocated by [Armand Gonzales, Inc.]. Furthermore,
any alleged simultaneous or subsequent oral conversation would have created a new and
separate oral promise which was barred by the statute of limitations, Code of Civ. Pro.
§ 339, as more particularly stated on the record.”
C. Plaintiff’s Malicious Prosecution Complaint
On October 20, 2012, plaintiff filed the present complaint for wrongful use of civil
proceedings. Plaintiff alleges: the underlying action terminated in its favor on July 20,
2012; defendants acted without probable cause in prosecuting the actions; and
defendants’ conduct was malicious, wanton, willful, oppressive and in disregard of
plaintiff’s rights. Plaintiff sought damages of no less than $200,000, cost of suit,
exemplary and punitive damages and prejudgment interest.
D. Defendants’ Demurrers
Defendants demurred to the complaint. They argued plaintiff failed to state a
cause of action for malicious prosecution because the underlying action was terminated
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based on the statute of limitations. In opposition, plaintiff argued the underlying matter
was terminated favorably based on the parol evidence rule. On February 27, 2013, the
trial court heard the demurrers and sustained them without leave to amend. The trial
court believed plaintiff could not satisfy the favorable termination requirement for the
malicious prosecution claim. The trial court, which had entered the July 20, 2012
judgment, reasoned the prior action was terminated based on the statute of limitations.
Plaintiff timely filed its notice of appeal on May 10, 2013.
III. DISCUSSION
A. Standard Of Review
On appeal from an order sustaining demurrer, we assume all the facts alleged in
the complaint are true. (Sheehan v. San Francisco 49ers, Ltd. (2009) 45 Cal. 4th 992,
998; Evans v. City of Berkeley (2006) 38 Cal. 4th 1, 6.) In addition, we consider judicially
noticed matters. (Committee for Green Foothills v. Santa Clara County Bd. of
Supervisors (2010) 48 Cal. 4th 32, 42; Evans v. City of Berkeley, supra, 38 Cal.4th at p.
6.) We accept all properly pleaded material facts but not contentions, deductions or
conclusions of fact or law. (Evans v. City of Berkeley, supra, 38 Cal.4th at p. 6; Serrano
v. Priest (1971) 5 Cal. 3d 584, 591.) We determine de novo whether the complaint
alleges facts sufficient to state a cause of action under any legal theory. (Committee for
Green Foothills v. Santa Clara County Bd. of Supervisors, supra, 48 Cal.4th at p. 42;
McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal. 4th 412, 415.) We read the complaint as
a whole and its parts in their context to give the complaint a reasonable interpretation.
(Evans v. City of Berkeley, supra, 38 Cal.4th at p. 6; Blank v. Kirwan (1985) 39 Cal. 3d
311, 318.) We may affirm an order sustaining demurrer only if the complaint fails to
state a claim under any possible legal theory. (Sheehan v. San Francisco 49ers, Ltd.,
supra, 45 Cal.4th at p. 998; Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal. 4th 797,
810.)
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When a trial court sustains demurrer without leave to amend, we determine
whether there is a reasonable possibility that the defect can be cured by amendment.
(City of Dinuba v. County of Tulare (2007) 41 Cal. 4th 859, 865; Zelig v. County of Los
Angeles (2002) 27 Cal. 4th 1112, 1126.) The trial court abuses its discretion if there is
reasonable possibility the plaintiff could cure the defect by amending the complaint.
(City of Dinuba v. County of Tulare, supra, 41 Cal.4th at p. 865; Campbell v. Regents of
University of California (2005) 35 Cal. 4th 311, 320.) The plaintiff has the burden of
proving the defect would be cured by an amendment. (Campbell v. Regents of University
of California, supra, 35 Cal.4th at p. 320; Schifando v. City of Los Angeles (2003) 31
Cal. 4th 1074, 1081.)
B. Malicious Prosecution
To establish a malicious prosecution claim, plaintiff must show the prior action:
was legally terminated in its favor; brought without probable cause; and initiated with
malice. (Siebel v. Mittlesteadt (2007) 41 Cal. 4th 735, 740; Casa Herrera, Inc. v.
Beydoun (2004) 32 Cal. 4th 336, 341.) To determine whether a plaintiff received a
favorable termination in the prior action, we consider the judgment as a whole. (Siebel v.
Mittlesteadt, supra, 41 Cal.4th at p. 741; Casa Herrera, Inc. v. Beydoun, supra, 32
Cal.4th at p. 341.) Favorable termination does not occur merely when a plaintiff prevails
in the underlying action. (Casa Herrera, Inc. v. Beydoun, supra, 32 Cal.4th at p. 341;
Lackner v. LaCroix (1979) 25 Cal. 3d 747, 751.) The termination must reflect the merits
of the underlying action and plaintiff’s innocence of the misconduct alleged in the prior
case. (Siebel v. Mittlesteadt, supra, 41 Cal.4th at p. 741; accord Casa Herrera, Inc. v.
Beydoun, supra, 32 Cal.4th at p. 342.) If there is some doubt as to a plaintiff’s innocence
or liability, it is not a favorable termination. (StaffPro, Inc. v. Elite Show Services, Inc.
(2006) 136 Cal. App. 4th 1392, 1399-1400; Eells v. Rosenblum (1995) 36 Cal. App. 4th
1848, 1855.) A technical or procedural termination is not a favorable termination for
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purposes of a malicious prosecution claim. (Casa Herrera, Inc. v. Beydoun, supra, 32
Cal.4th at p. 342; Lackner v. LaCroix, supra, 25 Cal.3d at p. 751.)
Plaintiff argues the trial court erred in sustaining the demurrers. Plaintiff asserts
the trial court found its offer was clear and unambiguous and parol evidence was not
admissible to support Armand Gonzales, Inc.’s interpretation of the offer. Plaintiff
contends it obtained a favorable termination in the underlying action because termination
was based on the parol evidence rule relying on Casa Herrera, Inc. v. Beydoun, supra, 32
Cal.4th at pages 344-349. We disagree.
As explained, in determining whether plaintiff received a favorable termination in
the prior action, we consider the judgment as a whole. (Siebel v. Mittlesteadt, supra, 41
Cal.4th at p. 741; Casa Herrera, Inc. v. Beydoun, supra, 32 Cal.4th at p. 341.) In the
underlying action, the trial court ruled plaintiff’s offer was clear and unambiguous. But
the trial court also decided plaintiff’s statute of limitations defense. The trial court ruled
the oral conversations alleged in the underlying complaint constituted “an entirely new
contract” that was barred by the two-year statute of limitations. Termination of an action
based on a statute of limitations defense is a procedural termination. (Lackner v.
LaCroix, supra, 25 Cal.3d at p. 751; Eells v. Rosenblum, supra, 36 Cal.App.4th at pp.
1855-1856.) Because a technical or procedural termination is not a favorable
termination, the trial court properly sustained defendants’ demurrers.
In its reply brief, plaintiff argues it should be given leave to amend its malicious
prosecution complaint. Plaintiff seeks to amend its complaint to allege defendants
prosecuted the underlying case knowing the statute of limitations had run on the alleged
oral representations. But plaintiff’s proposed amendment does not satisfy the favorable
termination requirement for malicious prosecution. The statute of limitations defense
which plaintiff successfully raised in the prior action is a procedural bar that does not
reflect on the merits of that lawsuit. Thus, plaintiff cannot meet the favorable termination
requirement for purposes of the subsequent malicious prosecution action.
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IV. DISPOSITION
The judgments are affirmed. Defendants, Sedgwick, LLP, Jonathon J. Dunn,
Andrew C. Harris, Murchison & Cumming, LLP, Dan L. Longo, Jean A. Dalmore and
Nanette G. Reed, shall recover their appeal costs from plaintiff, Apex Development, Inc.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
TURNER, P. J.
We concur:
KRIEGLER, J.
MINK, J.

Retired Judge of the Los Angeles Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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