Opinion
H043824
11-19-2019
CILKER APARTMENTS, LLC, Plaintiff and Appellant, v. MADERA FRAMING, INC., Defendant, Cross-defendant and Respondent; WESTERN NATIONAL CONSTRUCTION, Defendant, Cross-complainant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Santa Clara County Super. Ct. No. 113CV258281)
I. INTRODUCTION
After the completion of a construction project, the project owner plaintiff Cilker Apartments, LLC (Cilker Apartments) sued the general contractor, defendant Western National Construction; a subcontractor, defendant Madera Framing, Inc. (Madera Framing); and others for construction defects. Western National Construction thereafter filed a cross-complaint alleging that Madera Framing and others caused the damages alleged by Cilker Apartments.
Madera Framing filed motions for summary judgment on Cilker Apartments' complaint and Western National Construction's cross-complaint, contending that all the claims were barred by a release and settlement agreement that the parties had previously entered to resolve prior litigation. Madera Framing also contended that Cilker Apartments' complaint was barred by the statute of limitations. The trial court granted the summary judgment motion in favor of Madera Framing, and against Cilker Apartments and Western National Construction, based on the release and did not reach the issue of the statute of limitations. Cilker Apartments subsequently filed a motion for a new trial, which the court denied.
On appeal, Cilker Apartments contends in its own right, and as an assignee of Western National Construction, that the release and settlement agreement did not encompass the construction defect claims in the complaint or the claims in Western National Construction's cross-complaint. Cilker Apartments argues that the trial court therefore erred in granting summary judgment and in denying the motion for a new trial. Cilker Apartments also contends that its claims were not barred by the statute of limitations.
For reasons that we will explain, we will affirm the judgment.
II. BACKGROUND
Our factual summary is drawn from the parties' separate statements of fact and the evidence they submitted in connection with the motions for summary judgment.
A. The Prior 2003 Action
All three parties were involved in the construction of an approximately 182-unit apartment complex in San Jose. Cilker Apartments was the owner of the project, Western National Construction was the general contractor, and Madera Framing was a subcontractor who performed framing work at the project.
A dispute arose regarding payment for Madera Framing's work, and Madera Framing recorded a claim of mechanic's lien in the amount of $286,675 against the property. On December 1, 2003, Madera Framing filed a complaint against Cilker Apartments, Western National Construction, and others alleging that it was owed at least $286,675. A single cause of action was alleged against Cilker Apartments for foreclosure on the mechanic's lien, and several causes of action were alleged against Western National Construction, including breach of contract.
Western National Construction recorded a mechanic's lien release bond. Based on the existence of the lien release bond, Madera Framing thereafter dropped Cilker Apartments from the action. Specifically, Madera Framing filed a first amended complaint, which amended the cause of action against Cilker Apartments for foreclosure on the mechanic's lien to instead allege a cause of action against Western National Construction and a surety for recovery on the lien release bond.
"A mechanic's lien is a claim against the real property upon which a claimant has bestowed labor or furnished materials." (Kim v. JF Enterprises (1996) 42 Cal.App.4th 849, 854.) Regarding a mechanic's lien release bond, "[t]he purpose of the release bond procedure is to provide a means by which, before a final determination of the lien claimant's rights and without prejudice to those rights, the property may be freed of the lien, so that it may be sold, developed, or used as security for a loan." (Hutnick v. United States Fidelity & Guaranty Co. (1988) 47 Cal.3d 456, 462, fn. omitted.) "The recording of the release bond does not extinguish the lien; rather, the bond is substituted for the land as the object to which the lien attaches." (Id. at p. 463.)
Western National Construction's answer to Madera Framing's first amended complaint included allegations that Madera Framing's work "was not completed pursuant to the terms of [their] contract"; that Madera Framing acted with "carelessness" and "negligence"; that Madera Framing did "not perform[] its work in an acceptable manner"; and that Western National Construction was "entitled to offsets representing the cost to cure any of [Madera Framing's] negligent work, incorrect work, or work which was not completed as specified in [their] contract."
B. The Mutual Release and Settlement Agreement
Madera Framing and Western National Construction attended mediation. At some point, Cilker Apartments was notified that a settlement was reached, but there is no evidence that Madera Framing and Western National Construction reduced the settlement to a signed written agreement between themselves.
Ultimately, Madera Framing, Western National Construction, and Cilker Apartments entered into a release and settlement agreement in July 2004. Cilker Apartments was no longer a party to the action by that time, as it was not named as a defendant in Madera Framing's first amended complaint. However, Cilker Apartments "was in the process of closing permanent financing on the [project]," and it "needed" the action between Madera Framing and Western National Construction "to be resolved quickly" in order "[t]o facilitate that closing." Cilker Apartments agreed to advance $215,000 on behalf of Western National Construction to pay Madera Framing, with the resolution of whether Cilker Apartments or Western National Construction was responsible for the payment to be determined between the two of them at a later date.
The parties' agreement was entitled "Mutual Release and Settlement Agreement" and identified the "Settling Parties" as including Cilker Apartments, Western National Construction, and Madera Framing. All three parties signed the agreement.
The agreement expressly stated that it was "based upon the following understandings: [¶] . . . [¶] . . . Disputes arose between the parties arising out Madera's work on the Project, including but not limited to, Madera's claims for extra work and related costs and subcontract balance and [Western National Construction's] claims that Madera performed Project work in an untimely, deficient and defective manner. With respect to those disputes, Madera filed a complaint against [Western National Construction], Cilker, [and others] on December 1, 2003 . . . . Madera filed a first amended complaint . . . which substituted [a surety] for the Project owners [(Cilker Apartments)], and which amended the cause of action to foreclose on mechanics' lien to an action to foreclose on mechanics' lien release bond. . . . [Western National Construction and the sureties] filed answers asserting general denials, affirmative defenses and offsets to Madera's first amended complaint. The first amended complaint and all responsive pleadings, including all answers and cross-complaints, shall be referred to herein as the 'Action.' [¶] . . . All of the Settling Parties to this Agreement deny any liability in connection with the various claims alleged in the Action and wish to reach full and final settlement of the respective disputes between them and to avoid further litigation."
The agreement provided that, "[i]n consideration of the mutual covenants set forth" in the agreement, the parties agreed to the following. First, "[i]n consideration for all Settling Parties' signatures on this Agreement and dismissal of the entire Action with prejudice," Cilker Apartments agreed to pay Madera Framing $215,000. Madera Framing in turn agreed to execute a release of its mechanic's lien and deliver the release to Cilker Apartments.
The agreement further provided the following general release, exception to the release, and release of unknown claims:
"2. The Settling Parties on behalf of themselves, their heirs, executors, administrators and assigns, hereby release and forever discharge each other, and their respective . . . assigns, . . . from any and all claims, demands, arbitrations, actions, or causes of action, that arise out of or relate to the claims alleged in the Action, or which could have been alleged in the Action, whether known or unknown, and agree that no further litigation will occur with respect to these disputes except as may be provided in paragraph 3 herein. Also, this release does not apply to any claims Cilker and [Western National Construction] have against each other regarding which party is ultimately responsible for this settlement payment.
"3. Notwithstanding the mutual release set forth above, the Settling Parties agree to expressly except from this Agreement, and shall continue to retain any and all claims, rights and defenses concerning, responsibility for future claims by third parties for personal injury, construction defects and/or resultant property damage occurring at the Project or arising out of the work related to the Project, but only to the extent such claims arise out of conditions there were unknown to [Western National Construction] or Cilker and not apparent by reasonable inspection as of the date this Agreement became fully executed. Each of the settling parties represent that they are currently unaware of any such claim(s) or contention(s).
"4. The releases described above are full and final releases applying to all losses, except as stated in paragraph 2 and 3 above, including but not limited to damages, costs, expenses, and attorneys' fees, incurred by said parties, arising out of or in any way connected with the above-described matters. It is the intention of the releasing parties, in executing this Agreement, that the same shall be effective as a bar to each and every claim, demand, and cause of action, by said parties based upon the above-described matters, except as provided in paragraphs 2 and 3 above, and said Settling Parties knowingly, voluntarily, and expressly waive any and all rights and benefits otherwise conferred by the provisions of section 1542 of the California Civil Code which states at [sic] follows:
"A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release which, if known by him, would have materially affected his settlement with the debtor.
"The parties to this Agreement expressly consent that, notwithstanding section 1542 of the California Civil Code, this Agreement shall be given full and final effect according to each and all of its express terms and conditions, including those related to unknown and unsuspected claims, demands, and cause of action, except as provided in paragraphs 2 and 3 above. The Settling Parties acknowledge and agree that this waiver is an essential and material term of this Agreement and, without such waiver, this Agreement would not have been entered into."
The parties acknowledged in the settlement agreement that it contained "the entire agreement between" them, that they had the opportunity to be advised by counsel regarding its terms, and that each party "cooperated in the drafting and preparation of" the agreement.
C. The Present Action
In 2013, Cilker Apartments filed the instant construction defect action against Western National Construction, Madera Framing, and others. Cilker Apartments alleged causes of action for breach of contract, breach of implied warranty, breach of express warranty, negligence, strict liability, and express contractual indemnity. The operative third amended complaint was filed in 2016.
In the meantime, Western National Construction filed a cross-complaint alleging that Madera Framing and others were responsible for the acts and/or omissions alleged in Cilker Apartments' complaint. Western National Construction alleged causes of action for breach of contract, express indemnity, implied indemnity, equitable indemnity, negligence, contribution, breach of implied warranties, breach of express warranties, and declaratory relief.
Madera Framing filed answers to Cilker Apartments' operative complaint and to Western National Construction's cross-complaint. In the operative answers, Madera Framing pleaded several affirmative defenses, including that the causes of action alleged against it had been released in a settlement agreement and were time-barred.
1. Madera Framing's first set of summary judgment motions
based on the release
Madera Framing filed separate summary judgment motions against Cilker Apartments and Western National Construction. Madera Framing contended that all of the claims against it in Cilker Apartments' operative complaint and Western National Construction's cross-complaint had been released in the prior settlement agreement.
Cilker Apartments and Western National Construction each filed written opposition. First, both parties contended that the settlement agreement only resolved the prior lawsuit by Madera Framing for money it was allegedly owed for work on the project. According to Cilker Apartments and Western National Construction, the settlement agreement did not cover the claims in the instant action regarding Madera Framing's allegedly defective construction work. Second, to the extent the wording of the settlement agreement was ambiguous and susceptible to more than one interpretation, there was a triable issue of fact regarding the proper interpretation of the settlement agreement. Third, Cilker Apartments contended that it had been dismissed as a party to the prior litigation by the time it signed the settlement agreement, and that it did not receive consideration for any release allegedly contained in the agreement.
In reply, Madera Framing contended that the prior litigation included the issue of whether its work at the project was defective. According to Madera Framing, the reason Cilker Apartments and Western National Construction had refused to pay for work on the project was because of their contention that Madera Framing's work was defective. Madera Framing also argued that the evidence concerning negotiation of the settlement agreement or other extrinsic evidence was inadmissible. Lastly, Madera Framing contended that Cilker Apartments received consideration under the agreement.
2. Madera Framing's second motion for summary judgment
based on the statute of limitations
Before the trial court ruled on the summary judgment motion concerning the release, Madera Framing filed a second motion for summary judgment against Cilker Apartments contending that all of Cilker Apartments' causes of action were time-barred. Madera Framing argued that it had completed its work on the project in September 2003, which was more than 10 years prior to Cilker Apartments filing the complaint in December 2013. In opposition, plaintiff Cilker Apartments contended that the complaint was timely filed, because Madera Framing never completed the contract work, and the earliest possible date of substantial completion of work by Madera Framing was 2004.
3. The trial court's order regarding the summary judgment motions
The trial court granted Madera Framing's first set of summary judgment motions based on the release in the parties' prior settlement agreement. The court observed that the agreement referred to disputes between the parties, including Western National Construction's claim that Madera Framing performed defective work, and that the release expressly covered claims that "could have been alleged" in the prior action. The court construed the exception to the release to refer to construction defect claims brought by third parties, and it determined that Cilker Apartments and Western National Construction were not third parties. The court concluded that Cilker Apartments' and Western National Construction's instant claims arising from construction defects were therefore barred by the release contained in the parties' prior settlement agreement. In reaching its determination, the court stated that "the language of the release agreement is not ambiguous and therefore there is no reason for the Court to look at evidence regarding the intent of the parties."
Based on its ruling granting Madera Framing's first set of summary judgment motions, the court determined that Madera Framing's second summary judgment motion based on the statute of limitations was moot.
4. Cilker Apartments' motion for a new trial
After the trial court granted Madera Framing's motion for summary judgment, Cilker Apartments filed a motion for a new trial on the grounds of (1) irregularity in the proceedings, (2) accident or surprise, (3) newly discovered evidence, and (4) error in law. (Code Civ. Proc., § 657, subds. 1, 3, 4 & 7.) The trial court denied the motion.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
III. DISCUSSION
On appeal, Cilker Apartments and Western National Construction (through its assignee Cilker Apartments) contend that the trial court erred in granting Madera Framing's summary judgment motions based on the release and erred in denying Cilker Apartments' motion for a new trial. Cilker Apartments also contends that Madera Framing's motion for summary judgment based on the statute of limitations was without merit.
When a party transfers its interest in a pending action to another, the action "may be continued in the name of the original party, or the court may allow the person to whom the transfer is made to be substituted in the action or proceeding." (§ 368.5; see Casey v. Overhead Door Corp. (1999) 74 Cal.App.4th 112, 121 (Casey), disapproved on another ground in Jimenez v. Superior Court (2002) 29 Cal.4th 473, 481 & fn. 1, 484.) After Western National Construction assigned its rights regarding the cross-complaint to Cilker Apartments, it does not appear from the record that Cilker Apartments either (a) sought an order to substitute itself in the cross-complaint in place of Western National Construction, or (b) filed a substitution of attorney to enable its attorney to represent Western National Construction in the prosecution of the cross-complaint in Western National Construction's name. (See Casey, supra, at p. 122.) Nonetheless, Madera Framing has not raised any objection in this court regarding Cilker Apartments appealing as an assignee of Western National Construction, or regarding counsel for Cilker Apartments appearing for both parties.
We grant Cilker Apartments' motion to augment the record with the judgment filed on October 10, 2017, in favor of Madera Framing on Cilker Apartments' third amended complaint and Western National Construction's cross-complaint. We liberally construe Cilker Apartments' September 9, 2016 notice of appeal to be from the subsequent October 10, 2017 judgment. (See Los Altos Golf & Country Club v. County of Santa Clara (2008) 165 Cal.App.4th 198, 202-203; Levy v. Skywalker Sound (2003) 108 Cal.App.4th 753, 761-762, fn. 7.)
We first consider Madera Framing's motions for summary judgment based on the release and Cilker Apartments' motion for a new trial, because we find the issues raised by those motions dispositive of this appeal.
A. Madera Framing's Motion to Strike Reply Briefs
As an initial matter, Madera Framing has filed a motion to strike Cilker Apartments' reply briefs as untimely. Madera Framing contends that it filed its respondent's briefs on July 18, 2017, and that Cilker Apartments' reply briefs were therefore due 20 days later on August 7, 2017, pursuant to California Rules of Court, rule 8.212(a)(3). Cilker Apartments did not file its reply briefs until August 18, 2017.
This court granted the parties' requests to separately brief (1) the summary judgment motion on the release and (2) the summary judgment motion on the statute of limitations.
In opposition to the motion to strike, Cilker Apartments states that originally there was another respondent in this case in addition to Madera Framing, and that Cilker Apartments did not plan to file separate reply briefs as to each respondent. Counsel for Cilker Apartments states that she called this court on or about July 20, 2017, and was informed that the deadline to file a reply brief had not yet run because both respondents had not yet filed briefs. Counsel states that she continued to monitor the court's docket and that a deadline for the reply brief was not scheduled. Cilker Apartments argues that it timely filed reply briefs on August 18, 2017, before any deadline had run.
During this timeframe, Cilker Apartments and the other respondent were apparently trying to finalize a settlement. At Cilker Apartments' request, the appeal as to the other respondent was ultimately dismissed in March 2018.
Under the circumstances, we deny Madera Framing's motion to strike Cilker Apartments' reply briefs.
B. Madera Framing's Motions for Summary Judgment Regarding the Release
On appeal, Cilker Apartments and Western National Construction (through its assignee Cilker Apartments) first contend that the trial court erred in granting Madera Framing's summary judgment motion against each of them, based on a release of claims in the parties' prior settlement agreement. Before addressing the parties' specific contentions in this regard, we set forth the general rules regarding a motion for summary judgment, contract interpretation, and ambiguity in contracts.
1. General rules regarding a motion for summary judgment
A defendant moving for summary judgment has the initial burden of showing that a cause of action lacks merit because an element of the cause of action cannot be established or there is a complete defense to that cause of action. (§ 437c, subds. (o) & (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) If the moving papers make a prima facie showing that justifies a judgment in the defendant's favor, the burden shifts to the plaintiff to make a prima facie showing of the existence of a triable issue of material fact. (§ 437c, subd. (p)(2); Aguilar, supra, at pp. 849, 850.)
In determining whether the parties have met their respective burdens, "the court must 'consider all of the evidence' and 'all' of the 'inferences' reasonably drawn therefrom [citation], and must view such evidence [citations] and such inferences [citations], in the light most favorable to the opposing party." (Aguilar, supra, 25 Cal.4th at p. 843.) "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." (Id. at p. 850, fn. omitted.) Thus, "[a] party cannot avoid summary judgment by asserting facts based on mere speculation and conjecture, but instead must produce admissible evidence raising a triable issue of fact. [Citation.]" (LaChapelle v. Toyota Motor Credit Corp. (2002) 102 Cal.App.4th 977, 981.)
"In reviewing a trial court's grant of summary judgment, . . . ' "[w]e take the facts from the record that was before the trial court when it ruled on that motion" ' and ' " ' "review the trial court's decision de novo . . . ." ' " ' " (Hughes v. Pair (2009) 46 Cal.4th 1035, 1039.) The trial court's stated reasons are not binding on the reviewing court, "which reviews the trial court's ruling, not its rationale. [Citation.]" (Ramalingam v. Thompson (2007) 151 Cal.App.4th 491, 498 (Ramalingam).)
2. Contract interpretation
"In general, a written release extinguishes any obligation covered by the release's terms." (Skrbina v. Fleming Companies (1996) 45 Cal.App.4th 1353, 1366.) Here the parties' release was contained in a settlement agreement. "A settlement agreement is a contract, and the legal principles which apply to contracts generally apply to settlement contracts. [Citation.]" (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 810-811; accord, Winet v. Price (1992) 4 Cal.App.4th 1159, 1165 (Winet) ["the interpretation of a settlement agreement is governed by the same principles applicable to any other contractual agreement"].)
"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. [Citation.] Such intent is to be inferred, if possible, solely from the written provisions of the contract. [Citation.] 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" [citation], controls judicial interpretation. [Citation.]' [Citations.]" (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 (Waller).)
Generally, " '[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.' [Citation.]" (Boghos v. Certain Underwriters at Lloyd's of London (2005) 36 Cal.4th 495, 503 (Boghos).) This "rule's effect, among other things, is to disfavor constructions of contractual provisions that would render other provisions surplusage. [Citation.]" (Ibid.)
3. Ambiguity
Extrinsic evidence "is properly admitted to construe a written instrument when its language is ambiguous." (Winet, supra, 4 Cal.App.4th at p. 1165.) A contractual provision "will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. [Citation.]" (Waller, supra, 11 Cal.4th at p. 18.) "Where the meaning of the words used in a contract is disputed, the trial court must provisionally receive any proffered extrinsic evidence which is relevant to show whether the contract is reasonably susceptible of a particular meaning. [Citations.] . . . Even if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible. [Citations.]" (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912; accord, Winet, supra, at p. 1165.)
By comparison, the parol evidence rule "precludes evidence of a prior agreement or of a contemporaneous oral agreement to contradict terms included in a written instrument which the parties intend as the final expression of their agreement, but it does not exclude 'other evidence of the circumstances under which the agreement was made or to which it relates . . . or to explain an extrinsic ambiguity or otherwise interpret the terms of the agreement . . . .' [Citation.]" (Garcia v. Truck Ins. Exchange (1984) 36 Cal.3d 426, 435, italics added; see Winet, supra, 4 Cal.App.4th at p. 1167 [ "parol evidence is admissible only to prove a meaning to which the language is 'reasonably susceptible' [citation], not to flatly contradict the express terms of the agreement"]; Rosenfeld v. Abraham Joshua Heschel Day School, Inc. (2014) 226 Cal.App.4th 886, 897 ["when parties enter an integrated written agreement, extrinsic evidence may not be relied upon to alter or add to the terms of the writing, but extrinsic evidence is admissible to explain or interpret ambiguous language"].)
"The decision whether to admit [extrinsic] evidence involves a two-step process. First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine 'ambiguity,' i.e., whether the language is 'reasonably susceptible' to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is 'reasonably susceptible' to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—interpreting the contract. [Citation.]" (Winet, supra, 4 Cal.App.4th at p. 1165.)
Competent extrinsic evidence includes the parties' discussions at the time the contract was negotiated, but not a party's "uncommunicated subjective intent as to the meaning of the words of the contract." (Winet, supra, 4 Cal.App.4th at p. 1167; see id. at p. 1166, fn. 3.) Competent extrinsic evidence may also include "the circumstances which attended the making of the agreement, ' ". . . including the object, nature and subject matter of the writing . . ." so that the court can "place itself in the same situation in which the parties found themselves at the time of contracting." [Citations.]' [Citation.]" (Id. at p. 1168.)
"[T]he threshold determination of 'ambiguity' . . . is a question of law" and is subject to de novo review. (Winet, supra, 4 Cal.App.4th at p. 1165.) The standard of review for the second step—the construction placed on the ambiguous language—depends on the extrinsic evidence used. If "no [extrinsic] evidence is introduced . . . or when the competent [extrinsic] evidence is not conflicting, construction of the instrument is a question of law, and the appellate court will independently construe the writing. [Citation.]" (Id. at p. 1166.) In contrast, if "the competent [extrinsic] evidence is in conflict, and thus requires resolution of credibility issues" (ibid.), then a triable issue of fact exists and summary judgment may not be granted. (See ibid.; Walter E. Heller Western, Inc. v. Tecrim Corp. (1987) 196 Cal.App.3d 149, 158.) However, "[t]he possibility that conflicting inferences can be drawn from uncontroverted evidence does not relieve the appellate court of its duty independently to interpret the instrument; it is only when the issue turns upon the credibility of extrinsic evidence, or requires resolution of a conflict in that evidence" that a triable issue of fact exists. (Estate of Dodge (1971) 6 Cal.3d 311, 318, italics added.)
We need not decide in this case whether the parties' release and settlement agreement is ambiguous. As we explain in connection with our analysis of Cilker Apartments' specific arguments, the extrinsic evidence relied on by Cilker Apartments is not helpful to Cilker Apartments or otherwise fails to create a triable issue of material fact regarding the proper construction of the release and settlement agreement.
4. Analysis
The parties' prior settlement agreement generally releases "any and all claims, demands, arbitrations, actions, or causes of action, that arise out of or relate to the claims alleged in the Action, or which could have been alleged in the Action, whether known or unknown." (Italics added.) The term "Action" is defined in the settlement agreement as the "first amended complaint and all responsive pleadings, including all answers and cross-complaints" in the prior 2003 litigation. According to the settlement agreement, the prior litigation resulted from disputes between the parties "arising out of Madera's work on the project, including" Madera's "claims" that it was owed money for work on the project, and Western National Construction's "claims that Madera performed Project work in an untimely, deficient and defective manner." Based on the fact that the prior action arose from competing "claims" over whether Madera Framing was owed money for project work that was allegedly "deficient and defective," and the fact that the instant action by Cilker Apartments alleges causes of action for "construction defects" for Madera Framing's work at the same project, we determine that Cilker Apartments' instant action was encompassed by the parties' release, which includes all causes of action that "relate to the claims alleged in the [prior] Action, or which could have been alleged in the [prior] Action, whether known or unknown."
Cilker Apartments makes several arguments as to why its instant action against Madera Framing was not barred by the release of claims in the parties' settlement agreement.
First, relying on extrinsic evidence, Cilker Apartments contends that the prior action by Madera Framing was not a "construction defect lawsuit," and therefore the language of the release did not encompass the instant action by Cilker Apartments.
The release, however, includes "claims . . . that . . . relate to the claims alleged in the [prior] Action, or which could have been alleged in the [prior] Action, whether known or unknown." (Italics added.) In the prior action, Western National Construction alleged in its answer to Madera Framing's first amended complaint that Madera Framing did not complete work pursuant to the terms of their contract and performed work negligently, incorrectly, and in an unacceptable manner. These allegations concerning Madera Framing's deficient work "could have been alleged in the [prior] Action" against Madera Framing by way of a cross-complaint by Western National Construction. (Italics added.) Further, those claims of deficient work that "could have been alleged" by Western National Construction against Madera Framing in a cross-complaint in the prior action "relate to" Cilker Apartments' instant construction defect claims against Madera Framing for work at the same project. (Italics added.)
Second, Cilker Apartments contends that "[t]he release was never intended to waive any claim by Cilker, since Cilker was not a party to the prior Action," as it was no longer named as a defendant in Madera Framing's operative first amended complaint by the time of the settlement.
However, to interpret the release as not applying to any claim by Cilker Apartments at all would require a construction that is directly contrary to the express language of the release. The release expressly states that "[t]he Settling Parties . . . hereby release and forever discharge each other" as specified. (Italics added.) The term "Settling Parties" is defined in the agreement to include Cilker Apartments, Western National Construction, and Madera Framing. In addition, the settlement agreement elsewhere refers to this release as a "mutual release." The express language of the agreement thereby evidences an intent that all the "Settling Parties," including Cilker Apartments and Western National Construction, be bound by the release.
Moreover, in the same paragraph as the release, the settlement agreement contains a provision excepting specified parties from the release for certain claims. In particular, the settlement agreement states that "this release does not apply to any claims Cilker and [Western National Construction] have against each other regarding which party is ultimately responsible for this settlement payment." If the release did not apply to Cilker Apartments at all based on the language of the release itself as Cilker Apartments contends on appeal, such a construction would render surplusage the provision specifically excepting from the release a claim by Cilker Apartments regarding responsibility for the settlement payment. In other words, it would be unnecessary to include an exception to the release for a certain type of claim by Cilker Apartments if the release by its own terms did not apply to Cilker Apartments in the first place. "[C]onstructions of contractual provisions that would render other provisions surplusage" are "disfavor[ed]." (Boghos, supra, 36 Cal.4th at p. 503; see Civ. Code, § 1641.) The only reasonable construction of the release and this exception to the release, which are both contained in the same paragraph, is that the release applies to all "Settling Parties" as specifically defined, including Cilker Apartments and Western National Construction, except to the extent a certain claim by certain parties are expressly excluded from the release. (See Civ. Code, § 1641 [the "whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other"].)
Third, Cilker Apartments contends that "[t]he release was never intended by anyone to constitute an unlimited waiver of the right to sue for unknown, undiscovered, unmanifested latent construction defects."
This contention by Cilker Apartments is again directly contrary to the express language of the release. The release states that it applies to "known or unknown claims." Civil Code section 1542 provides that a general release does not extend to unknown claims. Putting aside the parties' written exception to the release for third party claims which we address below, the parties in their settlement agreement "expressly waive[d]" Civil Code section 1542. Indeed, the parties' agreement immediately thereafter emphasizes the importance of this waiver of Civil Code section 1542 by stating, "The Settling Parties acknowledge and agree that this waiver is an essential and material term of this Agreement and, without such waiver, this Agreement would not have been entered into." The express language of the parties' settlement agreement thus reflects the parties' mutual intent to waive unknown claims.
At the time the parties executed their settlement agreement, former Civil Code section 1542 stated: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." (Code Amends. 1873-1874, ch. 612, § 189, p. 241.) Subsequent amendments to this section are not material to this appeal.
Turning to the exception to the release, the settlement agreement states: "Notwithstanding the mutual release set forth above, the Settling Parties agree to expressly except from this Agreement, and shall continue to retain any and all claims, rights and defenses concerning, responsibility for future claims by third parties for personal injury, construction defects and/or resultant property damage occurring at the Project or arising out of the work related to the Project, but only to the extent such claims arise out of conditions there were unknown to [Western National Construction] or Cilker and not apparent by reasonable inspection as of the date this Agreement became fully executed. Each of the settling parties represent that they are currently unaware of any such claim(s) or contention(s)." (Italics added.)
In isolation, the reference to "third parties" could be construed to mean entities that were not a party to the prior action, including Cilker Apartments which was no longer named as a defendant in Madera Framing's operative first amended complaint. (See Fireman's Fund Ins. Co. v. Sparks Construction, Inc. (2004) 114 Cal.App.4th 1135, 1142 [amended complaint omitting a defendant named in original complaint operates as a dismissal as to that defendant].) However, the settlement agreement includes Cilker Apartments as a party and signatory and expressly identifies Cilker Apartments as one of several "Settling Parties," even though Cilker Apartments was no longer a party to the prior action based on the operative first amended complaint. Significantly, the term "third parties" at issue here is used in the same sentence as the term "Settling Parties." Given this context, it appears that "third parties" in this sentence means parties other than the "Settling Parties," that is, parties other than Cilker Apartments, Western National Construction, and Madera Framing which are specifically defined in the agreement as "Settling Parties." Reasonably construed in this context, the release excludes claims regarding responsibility for specified claims by "third parties," that is, by parties other than Cilker Apartments, Western National Construction, or Madera Framing.
Fourth, Cilker Apartments contends that, in the release's exception for "responsibility for future claims by third parties for personal injury, construction defects and/or resultant property damage" (italics added), the term "third parties" applies only to personal injury claims, and that therefore, claims for construction defects and resultant property damage by any of the "Settling Parties," including Cilker Apartments and Western National Construction, are excepted from the release. Cilker Apartments argues that this provision "is at least ambiguous" and raises a triable issue of fact.
We are not persuaded by Cilker Apartments' argument. As we have explained, the settlement agreement expressly states that the prior litigation resulted from disputes between the parties "arising out of Madera's work on the project, including" Madera's "claims" that it was owed money for work on the project, and Western National Construction's "claims that Madera performed Project work in an untimely, deficient and defective manner." The settlement agreement states that the "Settling Parties . . . wish to reach full and final settlement of the respective disputes between them to avoid further litigation." The settlement agreement further provides that, although Madera Framing originally claimed it was owed $286,675 for its work on the project, it agreed to settle for $215,000. It is not reasonable to infer that Madera Framing would have settled its claim for a lesser amount while leaving open the possibility that it could still be sued for construction defects, particularly where Western National Construction was already disputing the quality of Madera Framing's work at the time of the prior action. Indeed, the expressed intent of the settlement agreement was "to reach full and final settlement of the respective disputes between [the Settling Parties]," where those "[d]isputes" included Western National Construction's "claims that Madera performed Project work in an untimely, deficient and defective manner." Construing the exception to the release to allow construction defect claims by a settling party such as Western National Construction is directly contrary to the expressed intent of the parties. The only reasonable interpretation of the release's exception for "responsibility for future claims by third parties for personal injury, construction defects and/or resultant property damage" is that responsibility for such claims are excepted from the release only if the claim is brought by a third party to the settlement agreement, not by one of the "Settling Parties" to the agreement. (Italics added.)
We further observe that the settlement agreement states that the "Settling Parties" entered into the agreement based on the "understanding[]" that "[Western National Construction] claims that Madera performed Project work in an untimely, deficient and defective manner." (Italics added.) Later in the agreement, immediately after the release exception for "responsibility for future claims by third parties for personal injury, construction defects and/or resultant property damage," the following sentence appears: "Each of the settling parties represent that they are currently unaware of any such claim(s) or contention(s)." (Italics added.) The only way to construe these two provisions harmoniously—(1) that the settling parties "understand[]" that Western National Construction "claims" Madera Framing performed "defective" construction work, and (2) that the settling parties represent that they are "unaware" of any "construction defect" "claim(s) or contention(s)"—is to construe the latter provision and the associated release exception as referring to construction defect claims by third parties to the settlement agreement, not construction defect claims by the settling parties.
Cilker Apartments contends that the exception for third party claims requires a different construction based on (1) the placement of a comma after the word "concerning" in that sentence, (2) the reference to "such claims" in the latter part of the sentence regarding unknown conditions, (3) the use of the term "Project" in the sentence, and (4) the restriction under the law on construction defect claims brought by third parties in the absence of personal injury or property damage. Cilker Apartments argues that these circumstances raise at least a triable issue regarding the proper construction of the exception. We disagree. Given the expressed intent of the settling parties to resolve the disputes between them, including Western National Construction's dispute over whether Madera Framing's work was defective, the only reasonable interpretation is that only claims regarding third parties to the settlement agreement are excepted from the release.
Fifth, Cilker Apartments refers to extrinsic evidence reflecting negotiations over the language of the settlement agreement. According to Cilker Apartments, the extrinsic evidence reflects the settling parties' mutual intent "to exclude from the release any claims relating to construction deficiencies that were not known, or discoverable, upon reasonable inspection."
Having carefully considered the extrinsic evidence, we do not believe it is helpful to Cilker Apartments, or that it otherwise creates a triable issue of material fact regarding the proper construction of the release and settlement agreement, for the following reasons.
Cilker Apartments' declaration from its former counsel
Cilker Apartments first refers to a declaration from its former counsel who received the "proposed final draft of the Settlement Agreement." After receiving the proposed final draft, Cilker Apartments' former counsel told Western National Construction's counsel that "any and all future disputes that Cilker may have against [Western National Construction] would need to be expressly excluded from and not covered by the releases in the Agreement." (Italics added.) Significantly, however, nothing in the former counsel's declaration indicates that any changes were thereafter made to the proposed final draft of the settlement agreement in response to his statement. In the final signed settlement agreement, the only express exclusion from the release pertaining to future disputes between Cilker Apartments and Western National Construction states: "[T]his release does not apply to any claims Cilker and [Western National Construction] have against each other regarding which party is ultimately responsible for this settlement payment." We are therefore not persuaded that the declaration from Cilker Apartments' former counsel evidences a mutual intent by the parties to exclude from the release any claims by Cilker Apartments for unknown construction defects.
E-mails between counsel for Western National Construction and Madera Framing
Cilker Apartments next refers to an exchange of e-mails between counsel for Western National Construction and Madera Framing in which they negotiated the language of the exception to the release.
Counsel for Western National Construction states in an e-mail to counsel for Madera Framing: "[I]t seems to me that the release exception [in one paragraph] should be removed in its entirety. [Western National Construction] has no intention of suing your client absent some claim by a third party. [The subsequent paragraph] should remain, therefore, but it needs to include situations for substandard workmanship which do not result in text book 'resultant non-economic' damage. A provision to the contrary would prevent [Western National Construction] from filing an indemnity or contribution claim against your client in the event it was later discovered that [Western National Construction] was being sued by a third party for improper nailing of shear walls. That would make no sense in my opinion." (Italics added.) Counsel for Western National Construction proposed two alternatives for the third party exception to the release: (1) claims "concerning responsibility for future claims by third parties for personal injury and/or property damage (economic or non-economic) occurring at the Project," or (2) claims "concerning responsibility for future claims by third parties for personal injury, substandard workmanship, and/or resulting property damage occurring at the Project." (Italics added.) Under either proposal, the settlement agreement would also include the following statement, "Each of the settling parties represent that they are currently unaware of any such claim(s) or of any contention(s) by any third party."
In response, Madera Framing's counsel e-mailed: "The changes you suggest are not acceptable. Any defects which your client knows or could know by reasonable investigation are being settled and must be released. That is why our client is agreeing to accept less than what it would otherwise be entitled to recover. Only those unknown claims or those claims not discoverable by reasonable investigation, or claims by third parties for personal injury or property damage are excepted. This is standard language in construction settlement agreements where there are claims of defects or substandard work and must be included in the settlement agreement here."
Western National Construction's counsel responded with the following proposed exception to the release: "Notwithstanding the mutual releases set forth above, the settling parties agree to expressly except from this Agreement, and shall continue to retain any and all claims, rights and defenses concerning responsibility for future claims by third parties for personal injury, substandard workmanship, and/or resulting property damage occurring at the Project . . . , but only to the extent such claims arise out of alleged conditions that were unknown to [Western National Construction] at the time of entering into this Agreement. Each of the settling parties represent that they are currently unaware of any such claim(s) or of any contention(s) by any third party." (Italics added.)
Madera Framing's counsel then replied with the following proposed language for the release exception: "Notwithstanding the mutual releases set forth above, the Settling Parties agree to expressly except from this Agreement, and shall continue to retain any and all claims, rights and defenses concerning, responsibility for future claims by third parties for personal injury, construction defects, and/or resultant property damage occurring at the Project . . . , but only to the extent such claims arise out of conditions that were unknown to [Western National Construction] and not apparent by reasonable inspection as of the date this Agreement became fully executed. Each of the Settling Parties represent that they are currently unaware of any such claim(s) or of any contention(s) by any third party." (Italics added.)
Western National Construction's counsel expressed disagreement with the language regarding "not apparent by reasonable inspection" but indicated he would leave the issue to his client to decide.
It is apparent from the initial e-mail by Western National Construction's counsel, in which he told Madera Framing's counsel that Western National Construction "ha[d] no intention of suing [Madera Framing] absent some claim by a third party," that Western National Construction sought to only retain claims that would arise if it was sued by a third party, such as indemnity and contribution claims. The e-mail indicates that Western National Construction did not intend to retain the right to sue Madera Framing for construction defects in the first instance. Regarding Madera Framing's response thereafter, and the subsequent proposed revisions between the parties, we do not interpret those communications to reflect an intent to broaden the release exclusion to preserve the right of the settling parties to sue for construction defects. Indeed, in view of Western National Construction's proposal to limit its right to sue Madera Framing to situations involving responsibility for third party claims, it would make no sense that Madera Framing would make a counterproposal broadening the circumstances under which it could be sued by Western National Construction to include direct claims for construction defects. Given these negotiations, the only reasonable interpretation of the release exclusion for third party claims in the final signed settlement agreement is that the exclusion is intended to permit claims for contribution, indemnity, and the like between the settling parties concerning their "responsibility for" third party claims, "but only to the extent" the third party's claim "arise[s] out of conditions that were unknown to [Western National Construction] or Cilker and not apparent by reasonable inspection" at the time the agreement was executed. We thus reject Cilker Apartments' contention on appeal that the e-mail exchange reflects a "communicated intent of the parties not to release any future and unknown claims for construction defects" brought by the settling parties.
Sixth, Cilker Apartments contends that Madera Framing's delay in alleging the release as an affirmative defense in this action demonstrates that the parties never intended the release to cover Cilker Apartments' construction defect claims. In support of this argument, Cilker Apartments quotes Sterling v. Taylor (2007) 40 Cal.4th 757, for the proposition that " ' when a contract is ambiguous or uncertain the practical construction placed upon it by the parties before any controversy arises as to its meaning affords one of the most reliable means of determining the intent of the parties.' " (Id. at pp. 772-773.) However, any delay alone by Madera Framing to assert the defense in this case does not reflect "the practical construction placed upon" the release and settlement by Madera Framing. (Id. at p. 772.) Ultimately, Madera Framing did assert the release as an affirmative defense in this action in response to Cilker Apartments' construction defect claims.
Seventh, Cilker Apartments contends that there is a triable issue of material fact regarding whether it received consideration for releasing Madera Framing from unknown, latent construction defect claims.
"A written instrument is presumptive evidence of consideration." (Civ. Code, § 1614.) Here, moreover, the parties' settlement agreement expressly states that, "[i]n consideration of the mutual covenants set forth below, the Settling Parties agree and stipulate as follows: [¶] In consideration for all Settling Parties' signatures on this Agreement and the dismissal of the entire Action with prejudice, Cilker has agreed to pay to Madera the sum of" $215,000. (Italics added.) The "mutual covenants" between the settling parties included the "mutual release" of claims. Thus, according to the express language of the settlement agreement, the consideration that Cilker Apartments received included (1) Madera Framing's signature on the settlement agreement containing a general release of claims by Madera Framing, and (2) Madera Framing's dismissal of the prior action with prejudice.
Cilker Apartments contends that the "[l]ack of consideration may . . . be shown by extrinsic evidence even though a contract recites consideration." (See Evid. Code, § 622 ["facts recited in a written instrument are conclusively presumed to be true as between the parties thereto, or their successors in interest; but this rule does not apply to the recital of a consideration"].) Cilker Apartments argues that Madera Framing had no pending claim against it, that Cilker Apartments "was added to the Settlement Agreement only because it had committed to advance the settlement monies that Western [National Construction] already had promised to pay," and that Cilker Apartments "received nothing from Madera Framing . . . for [the] contribution to Western's settlement."
We are not persuaded that Cilker Apartments' extrinsic evidence created a triable issue of fact regarding a lack of consideration. Cilker Apartments' extrinsic evidence included a declaration from its former counsel stating that, although Cilker Apartments was no longer a defendant in the prior action at the time the settlement agreement was entered, it still "needed" the action between Madera Framing and Western National Construction "to be resolved quickly" in order "[t]o facilitate" Cilker Apartments' "closing [of] permanent financing on the [project]." Consistent with this extrinsic evidence presented by Cilker Apartments, the express language of the settlement agreement reflects that Cilker Apartments bargained for (1) Madera Framing's "dismissal" of the prior action against Western National Construction, and (2) Madera Framing's "signature[]" on the settlement agreement, which generally released all claims by Madera Framing, including claims that it was owed money for work on the project.
Consideration may consist of "benefit received by the promisor" or "detriment to the promisee." (Flojo Internat., Inc. v. Lassleben (1992) 4 Cal.App.4th 713, 719 (Flojo).) Madera Framing's forbearance to sue on a claim, or to release a claim, is sufficient consideration. (See Louisville Title Ins. Co. v. Surety Title & Guar. Co. (1976) 60 Cal.App.3d 781, 793.) Moreover, "one promise in a contract 'may be consideration for several counter promises.' [Citations.]" (Martin v. World Savings & Loan Assn. (2001) 92 Cal.App.4th 803, 809.) Thus, Madera Framing's forbearance, including dismissal of the prior action and agreeing not to bring a future action regarding nonpayment for its work, was sufficient consideration for Cilker Apartments' promise to pay and release of claims regarding Madera Framing. There is no evidence that, at the time the settlement agreement was entered, Madera Framing had a preexisting duty to undertake either of these acts. (See US Ecology, Inc. v. State of California (2001) 92 Cal.App.4th 113, 129 ["promise to perform a preexisting legal duty is not supported by consideration"].)
"[Cilker Apartments] in this case is the promisor—promising to pay [and release claims regarding] . . . [Madera Framing]. The consideration to [Cilker Apartments] for this promise is the agreement by [Madera Framing to release all claims and] to [dismiss the prior action with respect] to [Western National Construction]." (Flojo, supra, 4 Cal.App.4th at p. 719.) Significantly, " '[i]f the promisee parts with something at the promisor's request, it is immaterial whether the promisor receives anything, and necessarily involves the conclusion that the consideration given by the promisee for a promise need not move to the promisor, but may move to anyone requested by the offer.' [Citation.]" (Ibid., italics added.) In other words, Cilker Apartments' request to Madera Framing—that the prior action against Western National Construction be dismissed and that Madera Framing agree to a release of claims—was sufficient consideration for Cilker Apartments' release of claims and promise to pay money to Madera Framing.
Notably, Cilker Apartments did not provide competent extrinsic evidence in opposition to the summary judgment motion reflecting that it did not receive the consideration stated in the settlement agreement, such as evidence that Madera Framing did not dismiss the prior action. To the extent Cilker Apartments relies on declarations from its former attorneys who state that Cilker Apartments "did not receive any" consideration for its payment to Madera Framing or for signing the settlement agreement, Madera Framing objected in writing in the trial court on the ground that these statements were legal conclusions. That objection is well-taken, and those statements are insufficient to raise a triable issue of fact. (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1120 [on summary judgment, declarations must provide evidentiary facts, not legal conclusions].)
Lastly, Western National Construction, through its assignee Cilker Apartments, contends that its claims for indemnity in its cross-complaint against Madera Framing are not barred by the release. This contention is premised on Cilker Apartments being a third party within the meaning of the exception to the release. As we have explained, the parties' settlement agreement is not reasonably susceptible to this interpretation.
Accordingly, the trial court properly granted summary judgment in favor of Madera Framing on Cilker Apartments' operative complaint and Western National Construction's cross-complaint. Having reached this conclusion, we need not address whether Madera Framing was also entitled to summary judgment against Cilker Apartments on the ground that Cilker Apartments' operative complaint was time-barred.
C. Cilker Apartments' Motion for New Trial
On appeal, Cilker Apartments challenges the trial court's denial of its motion for a new trial on the ground of error in law (§ 657, subd. 7). In denying the new trial motion on this ground, the trial court acknowledged that it erroneously stated in its summary judgment order that there was no reason to look at extrinsic evidence regarding the intent of the parties. The trial court determined, however, that Cilker Apartments was not prejudiced by this erroneous statement because, after considering the extrinsic evidence in connection with the new trial motion, the court determined that the extrinsic evidence did not establish ambiguity in the settlement agreement or otherwise raise a triable issue of material fact.
1. General principles regarding a motion for a new trial
A party may move for a new trial after an order granting summary judgment. (Aguilar, supra, 25 Cal.4th at p. 858.) "The authority of a trial court in this state to grant a new trial is established and circumscribed by statute. [Citation.] Section 657 sets out seven grounds for such a motion: (1) 'Irregularity in the proceedings'; (2) 'Misconduct of the jury'; (3) 'Accident or surprise'; (4) 'Newly discovered evidence'; (5) 'Excessive or inadequate damages'; (6) 'Insufficiency of the evidence'; and (7) 'Error in law.' " (Oakland Raiders v. National Football League (2007) 41 Cal.4th 624, 633.)
On appeal Cilker Apartments only challenges the trial court's denial of the motion on the ground of "[e]rror in law" (§ 657, subd. 7). A party moving for a new trial based on an error in law must show that the trial court's "original ruling, as a matter of law, was erroneous. [Citation.]" (Ramirez v. USAA Casualty Ins. Co. (1991) 234 Cal.App.3d 391, 397.) The party must also show that the trial court's error was prejudicial. (Bristow v. Ferguson (1981) 121 Cal.App.3d 823, 826; see People v. Ault (2004) 33 Cal.4th 1250, 1272, fn. 15.) For example, "[t]he new trial motion may seek reversal of the summary judgment on the ground that there are triable issues of fact. [Citation.]" (Doe v. United Air Lines, Inc. (2008) 160 Cal.App.4th 1500, 1504-1505.)
2. The standard of review
In general, a trial court's order on a motion for a new trial is reviewed for abuse of discretion. (Aguilar, supra, 25 Cal.4th at p. 859.) However, the "determination underlying any order is scrutinized under the test appropriate to such determination. [Citations.]" (Ibid.)
In this case, Cilker Apartments' motion for a new trial required a determination of whether Madera Framing's summary judgment motion was properly granted based on the release and settlement agreement. "An order granting summary judgment . . . is reviewed independently. [Citations.]" (Aguilar, supra, 25 Cal.4th at p. 860.) Likewise, "the threshold determination of ambiguity [in a written instrument] is subject to independent review." (Winet, supra, 4 Cal.App.4th at p. 1165.) Further, an "appellate court will independently construe the writing" where, as here, "the competent [extrinsic] evidence is not conflicting." (Id. at p. 1166.) Under these circumstances, we "apply the independent standard of review to the superior court's order [denying] a new trial." (Aguilar, supra, at p. 859; accord, Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1176 (Wall Street Network).)
3. Analysis
Cilker Apartments contends that its motion for a new trial should have been granted because: (1) the trial court in analyzing the new trial motion acknowledged that it erred in failing to consider extrinsic evidence in ruling on the summary judgment motion, (2) upon considering the extrinsic evidence in connection with the new trial motion the court improperly rejected some of the evidence as irrelevant, (3) the court did not properly construe the release in the settlement agreement, (4) the court erroneously treated the recitation of consideration in the settlement agreement as conclusive, and (5) the existence of the remedy of reformation precluded summary judgment based on the release and settlement agreement as written.
Regarding Cilker Apartments' first four arguments concerning extrinsic evidence, construction of the release and settlement agreement, and whether there was consideration, based on our de novo review we have determined that the trial court properly granted summary judgment. (See Ramalingam, supra, 151 Cal.App.4th at p. 498 [when the appellate court conducts de novo review, the trial court's stated reasons for granting the motion "are not binding" on the appellate court, which "reviews the trial court's ruling, not its rationale"].) Where, as here, the "underlying order granting . . . summary judgment was not erroneous," a motion for a new trial is properly denied. (Aguilar, supra, 25 Cal.4th at p. 860.)
Cilker Apartments contends that it submitted "additional evidence . . . in support of the motion for new trial" that "demonstrates prejudicial error" by the trial court in its ruling on the summary judgment motion regarding the release. Cilker Apartments' additional evidence included drafts of the settlement agreement, deposition testimony by Madera Framing's former counsel, and subsequent conduct by Cilker Apartments, Western National Construction, and Madera Framing.
We decline to consider the additional evidence presented by Cilker Apartments with its motion for a new trial. In determining whether an error in law occurred (§ 657, subd. 7), a court is limited to considering the evidence that was "properly before the trial court when it ruled on [the] summary judgment motion." (Wall Street Network, supra, 164 Cal.App.4th at p. 1192.) Specifically, a motion for a new trial on the ground of an error in law (§ 657, subd. 7) "must be made on the minutes of the court" (§ 658). The minutes of the court include "any depositions and documentary evidence offered at the trial and . . . the report of the proceedings on the trial taken by the phonographic reporter, or to any certified transcript of the report." (§ 660, subd. (a), italics added.) The minutes of the court also include "the records of the proceedings entered by the judge or courtroom clerk, showing what action was taken and the date it was taken [citation]." (Lauren H. v. Kannappan (2002) 96 Cal.App.4th 834, 839, fn. 4.) The trial court may also consider "the pleadings and orders of the court on file." (§ 660, subd. (a).) In determining whether an error in law occurred (§ 657, subd. 7), a court may not consider evidence that was not before the court when it granted the motion for summary judgment. (Wall Street Network, supra, at pp. 1192-1193.)
Regarding its fifth argument concerning the new trial motion, Cilker Apartments contends that summary judgment should not have been granted and that the trial court should have granted a new trial because the remedy of reformation remained available with respect to the release and settlement agreement. (See Civ. Code, § 3399.)
Regarding reformation, Civil Code section 3399 states: "When, through . . . a mutual mistake of the parties, or 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 a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value." "In reforming the written agreement, a court may 'transpose[], reject[], or suppl[y]' words [citation], but has " 'no power to make new contracts for the parties' " [citation]. Rather, the court may only reform the writing to conform with the mutual understanding of the parties at the time they entered into it, if such an understanding exists. [Citation.]" (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524.)
In ruling on Cilker Apartments' motion for a new trial, the trial court rejected Cilker Apartments' argument that it was entitled to reformation of the settlement agreement. The trial court stated that, "[a]s urged by [Madera Framing], any such request is beyond the scope of the pleadings, the issues raised in the prior summary judgment motions, and consequently, the present motion for a new trial." The trial court also determined that a claim for reformation must be supported by specific factual allegations, which Cilker Apartments failed to provide.
On appeal, Cilker Apartments contends that "the release was not a 'complete defense' " by Madera Framing to Cilker Apartments' complaint, that the "remedy of reformation remained available to Cilker and Western [National Construction] even if the release as drafted applied to their claims in this action," and that therefore Madera Framing was not entitled to summary judgment as a matter of law.
In moving for summary judgment based on the release in the parties' settlement agreement, Madera Framing had the initial burden of establishing the affirmative defense of the release, which it alleged in its answers to the operative complaint and cross-complaint. (§ 437c, subds. (o)(2) & (p)(2); Melendrez v. Ameron Internat. Corp. (2015) 240 Cal.App.4th 632, 638; City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747, 780, fn. 58 ["the defendant bears the burden of raising the defense [that is provided by a release] and establishing the validity of a release as applied to the case at hand"]; Aguilar, supra, 25 Cal.4th at p. 843 [the issues in a summary judgment motion are framed by the pleadings].) We understand Cilker Apartments to contend on appeal that Madera Framing was required to address the issue of reformation of the settlement agreement as part of Madera Framing's initial burden of establishing the defense of the release. We are not persuaded that the cases cited by Cilker Apartments support this contention. For example, of the cases Cilker Apartments cites in this context, only one involved a defendant moving for summary judgment on a release—Jimenez v. 24 Hour Fitness USA, Inc. (2015) 237 Cal.App.4th 546. In that case, the appellate court determined that, based on the evidence presented by the plaintiffs, the plaintiffs had created triable issues of fact. (Id. at pp. 557, 562-566.) Nothing in that case suggests that a defendant moving for summary judgment based on a release is required to negate the remedy of reformation as part of the defendant's initial burden.
Upon Madera Framing meeting its initial burden of establishing the defense of the release, the burden shifted to Cilker Apartments to show a triable issue of material fact regarding that defense. (§ 437c, subd. (p)(2).) At that point Cilker Apartments could have "raised the reformation issue as a defense to [Madera Framing's] summary judgment motion[] seeking to enforce the written [release and settlement agreement]." (Appalachian Ins. Co. v. McDonnell Douglas Corp. (1989) 214 Cal.App.3d 1, 18, fn. 8.) Cilker Apartments, however, did not raise the issue of reformation of the agreement in opposition to Madera Framing's summary judgment motion and instead waited to raise the theory for the first time in its new trial motion.
For the first time in its reply brief on appeal, Cilker Apartments contends that "[a] motion for a new trial is not confined to the legal arguments raised in summary judgment." In support of this contention, Cilker Apartments cites Hoffman-Haag v. Transamerica Ins. Co. (1991) 1 Cal.App.4th 10 (Hoffman-Haag).
In Hoffman-Haag, the appellate court held that a new trial motion under section 657, subdivision 6, "may be made on the . . . ground the judgment or verdict is legally erroneous," and a legal challenge under this subdivision is "not limited to those raised before verdict or judgment." (Hoffman-Haag, supra, 1 Cal.App.4th at pp. 14-15.) The appellate court observed that "on appeal a party may change the legal theory he relied upon at trial, so long as the new theory presents a question of law to be applied to undisputed facts in the record. [Citations.]" (Id. at pp. 15-16.) The appellate court reasoned that, "in ruling on a new trial motion section[] 657 . . . give[s] a trial court no less power to consider new legal theories. [Citations.]" (Id. at p. 16.) The appellate court concluded that the defendant insurance company could therefore properly argue in its new trial motion that a particular statute, "as applied to the stipulated facts, barred coverage." (Ibid.)
We are not persuaded by Cilker Apartments' reliance on Hoffman-Haag. Cilker Apartments' new trial motion was not based on subdivision 6 of section 657, which authorizes a new trial for "[i]nsufficiency of the evidence to justify the verdict or other decision" or when "the verdict or other decision is against law." (Italics added.) Instead, Cilker Apartments stated in its notice of intent to move for a new trial that the motion was based on subdivisions 1 [irregularity in the proceedings], 3 [accident or surprise], 4 [newly discovered evidence], and 7 [error in law] of section 657. "A new trial order 'can be granted only on a ground specified in the motion.' [Citation.]" (Collins v. Sutter Memorial Hospital (2011) 196 Cal.App.4th 1, 16-17 (Collins).) Cilker Apartments never identified subdivision 6 of section 657 as the basis for its new trial motion, let alone as the basis for its specific argument that it was entitled to a new trial on the issue of reformation. (Cf. Collins, supra, at pp. 17-21 [party moving for a new trial identified the correct ground in briefing supporting the motion, and opposing party provided opposition to that ground].) Indeed, in its new trial motion, Cilker Apartments' argument regarding reformation of the settlement agreement was not tethered to any subdivision of section 657 concerning the grounds for a new trial motion, and it was not until its reply brief on appeal that Cilker Apartments first appeared to rely on subdivision 6 of section 657 by citing Hoffman-Haag. Appellate courts ordinarily will not consider a new issue—here, the applicability of section 657, subdivision 6—raised for the first time in the reply brief. (Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3; Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764-765.)
Moreover, unlike in Hoffman-Haag, in which the new theory presented in the motion for a new trial involved a question of law on undisputed facts, Cilker Apartments' theory of reformation in its new trial motion did not present a pure question of law. (Hoffman-Haag, supra, 1 Cal.App.4th at pp. 15-16; see City of San Diego v. Rider (1996) 47 Cal.App.4th 1473, 1493 [a party forfeits a new theory on appeal when the underlying facts are not included in the separate statement opposing summary judgment and when the new theory involves a controverted factual situation not put in issue below].) For example, under its theory of reformation, Cilker Apartments suggests that there was a misunderstanding (apparently by one or more parties) about the legal effect of the release and settlement agreement. Whether there was a misunderstanding by any party is a factual question that was not put in issue in the summary judgment motion. Rather, Cilker Apartments' opposition and separate statement were premised on facts purportedly showing the mutual intent of the parties that was consistent with the language of the release and settlement agreement to exclude unknown latent construction defect claims.
We conclude that the trial court did not err in denying Cilker Apartments' motion for a new trial. In view of our conclusion, we do not reach Cilker Apartments' additional arguments in its reply brief that it was not required to plead the remedy of reformation in its complaint, that the complaint could be amended to allege reformation, and that the trial court did not consider the excessive length of Cilker Apartments' memorandum supporting its new trial motion as an additional basis for denying the motion.
IV. DISPOSITION
The judgment is affirmed.
/s/_________
BAMATTRE-MANOUKIAN, J. WE CONCUR: /s/_________
GREENWOOD, P.J. /s/_________
DANNER, J.