Opinion
San Francisco City & County Super. Ct. No. 445477
NOT TO BE PUBLISHED
Lambden, J.
Prior to this current lawsuit, Air Systems Acquisition, Inc. (Air Systems Acquisition) had filed a lawsuit against Gilbane Building Co. (Gilbane), a general contractor, and Travelers Casualty and Surety Company of America (Travelers), its surety (first lawsuit). Air Systems Acquisition sought to recover amounts due for labor and materials supplied toward a heating, ventilating and air conditioning (HVAC) system in a building constructed by Gilbane (the project). Gilbane failed to respond to discovery requests in the first lawsuit, and the trial court issued evidentiary sanctions. Subsequently, the trial court granted summary judgment in favor of Air Systems Acquisition. Gilbane and Travelers filed a motion for a new trial and attempted to submit additional evidence to contest the validity of Air System’s license. The trial court denied the motion and Gilbane and Travelers appealed. We affirmed in our nonpublished opinion, Air Systems Acquisition, Inc. v. Gilbane Building Co., A112536, filed on October 27, 2006 (Gilbane I.).
While the prior appeal in the first lawsuit was pending, Gilbane filed a lawsuit against Air Systems Acquisition for restitution, fraud, and declaratory relief for the money Gilbane had paid Air Systems Acquisition for work it had done on the project (current lawsuit). Gilbane asserted that Air Systems Acquisition did not have a valid contractor’s license and therefore could not collect money on the subcontract. The trial court granted summary judgment against Gilbane’s complaint, and entered judgment against Gilbane. Gilbane appeals, and we conclude that Gilbane’s current lawsuit is barred under Code of Civil Procedure section 426.30.
All further unspecified code sections refer to the Code of Civil Procedure.
BACKGROUND
First Lawsuit
Many of the facts underlying this lawsuit are set forth in Gilbane I., supra, A112536. The most pertinent facts are as follows: Gilbane had entered into a contract with the Regents of the University at California, San Francisco (university project). On August 8, 2001, Gilbane entered into a written subcontract with Air Systems Acquisition’s predecessor, Air Systems, Inc., for a work of improvement at the property to include HVAC and mechanical systems (subcontract). The original subcontract provided that Gilbane would pay Air Systems, Inc. $10,803,180, but Gilbane needed additional work and materials. Consequently, the amount to be paid on the subcontract was increased by at least $2,129,635.
On November 19, 2002, Encompass Services Corporation (Encompass), Air Systems, Inc.’s former parent corporation, filed on behalf of itself and its subsidiaries for Chapter 11 in the Southern District of Texas. On February 21, 2003, Air Systems, Inc. and Encompass filed an expedited motion to sell certain assets of Air Systems, Inc. to Air Systems Acquisition (purchase and sale agreement). According to Art Williams, the president of Air Systems Acquisition, on February 24, 2003, Air Systems Acquisition sent a letter to Scott Chilcote, Gilbane’s university project executive, notifying him about the pending approval of the sale of Air Systems, Inc. to Air Systems Acquisition. Subsequently, on March 17, 2003, the bankruptcy court approved the purchase and sale agreement. The transaction was completed the following day, on March 18, 2003.
According to Mel Hand, Air Systems, Inc. and Air Systems Acquisition’s project manager for the university project, substantial completion of all of the work on the subcontract was completed as of August 22, 2003. However, Gilbane failed to pay for the additional work completed under the subcontract.
On November 7, 2003, Air Systems Acquisition filed a complaint for breach of contract and common counts against Gilbane and Gilbane’s surety, Travelers. On March 13, 2004, Gilbane filed a cross-complaint against the university for breach of contract and indemnification. Air Systems Acquisition filed a first amended complaint against Gilbane and Travelers for breach of contract, common counts, open book account, enforcement of stop notice, and for recovery on contractor’s payment bond on April 19, 2004. Air Systems Acquisition alleged that it completed the work on the university project and Gilbane still owed it $2,129,635. On June 18, 2004, Gilbane filed an amended cross-complaint against the university.
The University of California (university) was also a defendant in Air Systems Acquisition’s original action. It added the university on the stop notice claim; this claim was dismissed after the university posted a bond.
On September 10, 2004, Air Systems Acquisition served Gilbane and Travelers with special interrogatories, form interrogatories, requests for admission, and requests for production of documents. Additionally, the requests for admission propounded by Air Systems Acquisition asked Gilbane to confirm that Gilbane owed money to Air Systems Acquisition for the additional work. Air Systems Acquisition requested Travelers to admit the facts establishing its obligation to act as a surety for the obligations of Gilbane.
On October 6, 2004, Air Systems Acquisition propounded a second request for production of documents. This request concerned other bids received by Gilbane for the HVAC work on the project.
After providing Gilbane with a number of extensions to respond to the discovery, Gilbane filed a motion to compel discovery responses and for sanctions on January 5, 2005. Gilbane and Travelers admitted to not having responded to the discovery requests and agreed to pay $1,000 in sanctions. They also agreed to supply responses without objections by February 2, 2005, in exchange for Air Systems Acquisition’s removal of the motion to compel from the court’s calendar. The trial court issued an order pursuant to the stipulation that Gilbane shall pay Air Systems Acquisition $1,000 in sanctions and both Gilbane and Travelers “shall” provide responses to the discovery requests by February 2, 2005.
Near the end of January, on January 28, 2005, Gilbane and Travelers informed Air Systems Acquisition that they would not be providing discovery responses by February 2, 2005. On January 31, 2005, Air Systems Acquisition granted one last extension of time; Air Systems Acquisition gave Gilbane and Travelers until February 4, 2005, to respond.
Other than written responses to the document request, Air Systems Acquisition did not receive responses to any of the outstanding discovery. Gilbane did provide a written response to the September 10, 2004 document request, agreeing to produce documents, but it never provided the documents.
Air Systems Acquisition filed a motion on February 7, 2005, for terminating or, alternatively, evidentiary sanctions. Subsequently, on March 30, 2005, the trial court issued its order imposing evidentiary sanctions against Gilbane and terminating sanctions against Travelers.
On February 23, 2005, the university also filed a motion for terminating or evidentiary sanctions against Gilbane as a result of a discovery dispute between them.
On April 1, 2005, Air Systems Acquisition filed a motion for summary judgment on its first amended complaint. On this same date, a new law firm became the counsel of record for Gilbane and Travelers.
Gilbane and Travelers moved for reconsideration of the discovery order on April 14, 2005. On May 17, 2005, the trial court denied the motion for reconsideration as to Gilbane. As to Travelers, the court vacated its order striking its answer and, instead, issued evidentiary sanctions against Travelers “prohibiting the introduction of any evidence of matters designated in the written discovery propounded by [Air Systems Acquisition] to Travelers on September 10, 2004.” Thereafter, Air Systems Acquisition moved for summary judgment on the contractor’s bond claim against Travelers.
After the trial court had issued its evidentiary sanctions order, and seven days after Gilbane filed its answer to the motion for summary judgment, which could not refer to the evidence excluded by the discovery sanction order, Gilbane initiated an adversary proceeding in the bankruptcy court. (In re Encompass Services Corp. (Bankr. S.D. Tex. 2006) 337 B.R. 864, 876.) In that adversary proceeding, Gilbane raised “many of the same issues presented in its losing effort in the California suit.” (Id. at p. 868.) In its complaint, Gilbane argued that Air Systems Acquisition had no standing to sue because the assignment of Air Systems, Inc.’s assets was invalid. (Id. at p. 869.) It sought the following relief from the bankruptcy court: “(i) a declaration that the assignment was invalid; (ii) a declaration that the Subcontract remains in [Encompass’s (the Debtor’s)] estate; and (iii) an injunction against [Air Systems Acquisition] from further prosecuting the Subcontract claims in California state court.” (Ibid.)
Back in the state court, one day prior to the hearing on Air Systems Acquisition’s summary judgment motion, Gilbane and Travelers attempted to submit a declaration of counsel with attached exhibits. These documents challenged Air Systems Acquisition’s license with the California State License Board and contested the validity of the assignment of Air Systems, Inc.’s subcontract rights to Air Systems Acquisition. At the hearing on June 17, 2005, the trial court commented that the documents were not timely under the rules for summary judgment. When explaining the reason for delay, counsel for Gilbane and Travelers maintained that they had “only recently found out about what had transpired in the bankruptcy and these issues came up.” The trial court pointed out that the bankruptcy order was issued in March of 2003. Counsel for Gilbane and Travelers protested that the current law firm had only been on the case for two months and that it should not be penalized for the mistakes made by prior legal counsel. The court responded that the current attorneys had “stepped into the shoes of [former counsel], so you’re stuck with wherever you got into the shoes of [former counsel].” The court refused to consider the untimely documents. It concluded that, not only were the documents late, but Gilbane and Travelers could not present this evidence given the discovery order imposing evidentiary sanctions.
Because of the discovery order imposing evidentiary sanctions, the trial court found that Gilbane and Travelers could not present any competent evidence in opposition to the summary judgment motion. It therefore granted Air Systems Acquisition’s summary judgment motion against Gilbane and Travelers.
On October 5, 2005, the trial court entered judgment in favor of Air Systems Acquisition and against Gilbane and Travelers in the amount of $2,215,516.50.
One day later, on October 6, 2005, the bankruptcy court heard competing motions for summary judgment and a motion for abstention by Gilbane and Air Systems Acquisition in In re Encompass Services Corp., supra, 337 B.R. 864. Air Systems Acquisition contended that the bankruptcy court did not have jurisdiction to address Gilbane’s attempt to have the bankruptcy court review the validity of the assignment of the executory contract under Encompass’s confirmed plan. (Id. at p. 868.)
On October 14, 2005, Gilbane and Travelers filed a motion for new trial in the state court; they attempted to submit additional evidence to contest the validity of Air Systems Acquisition’s license. They also challenged the validity of the assignment of Air Systems Inc.’s subcontract rights to Air Systems Acquisition.
On November 14, 2005, Gilbane and Travelers filed a timely notice of appeal from the judgment. A few weeks later, on December 8, 2005, the trial court issued its order denying the motion for new trial by Gilbane and Travelers.
On January 26, 2006, the bankruptcy court issued its memorandum opinion in In re Encompass Services Corp., supra, 337 B.R. 864. The court observed that “[t]his adversary proceeding presents an interesting attempt [by Gilbane] at using the Bankruptcy Code as a mechanism for forum shopping.” (Id. at p. 867.) With regard to Gilbane’s argument that it had no notice of the assignment of the subcontract, the bankruptcy court stated that it did have notice of the assignment “no later than the date of receipt of the original complaint” Air Systems Acquisition filed in California (id. at p. 876), which was on November 7, 2003. The bankruptcy court noted that Gilbane could have brought this adversary proceeding two years earlier, “immediately after the effective date of the Confirmed Plan.” (Id. at pp. 876-877.) However, the bankruptcy court observed: “Gilbane chose to litigate in a California state court, and now that it has lost at the trial level, Gilbane wants this Court to assert jurisdiction over the matter and in effect terminate the ongoing appeal in California. This, the Court will not do. This Bankruptcy Court is not an insurer against the outcome of bad choices.” (Id. at p. 877.) The court concluded: “Gilbane’s attempt to take a second bite at the apple will go unfulfilled. This Court cannot find jurisdiction in a situation where all the claims at issue have been determined in a state court proceeding and the Debtor’s estate no longer exists. Although there are issues raised in this suit that implicate bankruptcy law, a state court will be able to sufficiently determine the effect of the assignment clause in the [purchase and sale agreement] and the Debtor’s Confirmed Plan. Moreover, even if this Court does have jurisdiction over this proceeding, the interest of comity and Gilbane’s blatant attempt at forum shopping dictate that permissive abstention is appropriate.” (Id. at p. 879.) The bankruptcy court therefore granted Air Systems Acquisition’s motion for dismissal. (Ibid.)
Gilbane appealed the bankruptcy court’s dismissal of the adversary proceeding; the district court affirmed the bankruptcy court’s decision. (In re Encompass Services Corp. (S.D. Tex. May 3, 2006, Civ. A. No. H-06-CV-0392, Adv. No. 02-43582-11) 2006 WL 1207743.)
On October 27, 2006, we affirmed the judgment in the state court in our nonpublished opinion. (Gilbane I, supra, A112536.) We concluded that Air Systems Acquisition met its burden of establishing that it received a legal assignment of all the assets, including the rights under the subcontract, of Air Systems, Inc. (Id. at pp. 13-14.) With regard to Gilbane’s untimely evidence that Air Systems Acquisition was not properly licensed, we concluded that Gilbane had “produced no [timely] evidence of nonlicensure and [had] failed to allege improper licensure as an affirmative defense[; therefore,] the question of licensure was not controverted.” (Id. at p. 20.)
Current Lawsuit
While the appeal in the first lawsuit was pending, Gilbane filed on October 5, 2005, this current lawsuit against Air Systems Acquisition. Gilbane filed its first amended complaint, the operative complaint, on February 21, 2006.
Gilbane alleged in its first amended complaint that it “unwittingly paid” Air Systems Acquisition money for work that Air Systems Acquisition “illegally performed without a license on a construction project[.]” Gilbane asserted that it did not learn until June 2005 that the payments it made to Air Systems Acquisition between March and August 2003 were “to an illegal contractor . . . .” Gilbane alleged two separate claims for restitution under Business and Professions Code sections 7031 and 17200 based on Air Systems Acquisition’s having an invalid license. Gilbane set forth a third cause of action for fraud, alleging that Air Systems Acquisition concealed or misrepresented its alleged non-licensure and/or the bankruptcy assignment. The final cause of action was for declaratory relief and related to the validity of the assignment of Air Systems, Inc.’s subcontract rights to Air Systems Acquisition.
On September 29, 2006, Air Systems Acquisition moved for summary judgment on Gilbane’s first amended complaint. On March 8, 2007, the trial court granted Air Systems Acquisition’s motion for summary judgment “on the ground that all of the claims in [Gilbane’s] first amended complaint are barred by the compulsory cross-complaint rule of [section] 426.30.” Judgment was entered on the same date.
Gilbane filed a timely notice of appeal from the judgment.
DISCUSSION
I. Standard of Review
Gilbane is appealing from the judgment against it following the lower court’s grant of summary judgment against its first amended complaint. The court properly grants summary judgment if the record establishes no triable issue as to any material fact and the moving party is entitled to a judgment as a matter of law. (§ 437c, subd. (c).) “[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact. . . . A prima facie showing is one that is sufficient to support the position of the party in question. [Citation.]” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850-851, fns. omitted.) Although the burden of production shifts, the moving party always bears the burden of persuasion. (Id. at p. 850.) “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.” (Ibid.) We review the record de novo. (Id. at p. 860.)
II. The Compulsory Cross-Complaint Rule
Air Systems Acquisition persuaded the lower court that Gilbane’s current lawsuit is barred under the compulsory cross-complaint rule of section 426.30, because the first and current lawsuits involve the same parties and relate to money owed or paid under the same subcontract. We agree that the compulsory cross-complaint rule bars the current lawsuit.
Section 426.30, subdivision (a) provides: “Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.” The compulsory cross-complaint rule serves the ends of judicial efficiency by requiring parties to litigate all conflicting claims between them that arise out of the same transaction in one single action. (Flickinger v. Swedlow Engineering Co. (1955) 45 Cal.2d 388, 393.)
Subdivision (b) of section 426.30 specifies that “[t]his section does not apply if either of the following are established: [¶] (1) The court in which the action is pending does not have jurisdiction to render a personal judgment against the person who failed to plead the related cause of action. [¶] (2) The person who failed to plead the related cause of action did not file an answer to the complaint against him.” It is undisputed that neither of the exceptions set forth in section 426.30, subdivision (b) pertains to the present case.
The first lawsuit, filed on March 13, 2004, involved claims by Air Systems Acquisition against Gilbane and its surety for money owed on the subcontract between Air Systems, Inc. and Gilbane. Gilbane filed its answer on March 18, 2004. Air Systems Acquisition filed its first amended complaint for breach of contact, common counts, open book account, enforcement of stop notice, and for recovery on contractor’s payment bond on April 19, 2004. Gilbane filed its answer on June 11, 2004. Gilbane in the second lawsuit sued Air Systems Acquisition for restitution on the grounds that the money it paid under the subcontract was improperly collected because Air Systems Acquisition did not have a valid license. Thus, unless Gilbane can establish that the compulsory cross-complaint rule does not apply, the second lawsuit is barred.
Gilbane does not dispute that it was a defendant in the first lawsuit or that its causes of action in the present lawsuit relate to Air Systems Acquisition’s claims in the first lawsuit. Gilbane, however, declares that section 426.30, subdivision (a) does not apply (1) because its claims in the current lawsuit did not accrue until after it had filed its answer in the first action; (2) because Air Systems Acquisition is estopped from relying on this provision; and (3) because a restitution claim based on Business and Professions Code section 7031 is an exception to the compulsory cross-complaint rule. We examine each of these contentions.
“ ‘Related cause of action’ means a cause of action which arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.” (§ 426.10, subd. (c).)
A. The Date When Gilbane’s Claims Accrued
Gilbane acknowledges that the license issue existed at the time it filed its original answer in March 2004 in the first lawsuit. However, it maintains that it did not discover until June 2005 the facts essential to its claims regarding nonlicensure. Gilbane contends that its claims regarding the nonlicensure issue were not ripe until June 2005 under the delayed discovery rule. (See Gutierrez v. Mofid (1985) 39 Cal.3d 892, 897 [explains the delayed discovery rule as it pertains to statute of limitations cases].)
Air Systems Acquisition disputes that the delayed discovery rule applies in the present case. Section 426.30, subdivision (a) specifies that a cross-complaint in any related cause of action that the defendant “has” against the plaintiff at the time of serving the answer is barred from being raised in any later action. (§ 426.30, subd. (a).) Air Systems Acquisition insists that the use of the word “has” in this statute means that the claim must be brought when it exists, not when it is discovered.
Gilbane does not cite any case that has applied the delayed discovery rule to the application of section 426.30. Rather, the cases it cites concern the delayed discovery rule and when the statute of limitations begins to run. We, however, need not address whether the delayed discovery rule has any application to the compulsory cross-complaint rule because, even if we presume the delayed discovery rule should be applied, Gilbane’s current lawsuit is still barred under section 426.30, subdivision (a).
In statute of limitations cases, courts have held that the delayed discovery rule “postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.) The plaintiff has reason to discover the cause when the plaintiff “has reason at least to suspect a factual basis for its elements.” (Id. at p. 398.) The plaintiff “has reason to suspect when [the plaintiff] has ‘ “ ‘ “notice or information of circumstances to put a reasonable person on inquiry” ’ ” ’ [citation]; [the plaintiff] need not know the ‘specific “facts” necessary to establish’ the cause of action; rather, [the plaintiff] may seek to learn such facts through the ‘process contemplated by pretrial discovery’; but, . . . [the plaintiff] must indeed seek to learn the facts necessary to bring the cause of action in the first place––[the plaintiff] ‘cannot wait for’ them ‘to find’ [the plaintiff] and ‘sit on’ [the plaintiff’s] ‘rights’; [the plaintiff] ‘must go find’ them . . . .” (Ibid.)
Here, Air Systems Acquisition alleged in its original complaint, filed in March 2004, that it had acquired the rights to the subcontract from Air Systems, Inc. and that it was licensed. Indeed, Gilbane received notice of the bankruptcy proceeding in 2003. According to Art Williams, the president of Air Systems Acquisition, Air Systems Acquisition sent a letter to Scott Chilcote, Gilbane’s university project executive, on February 24, 2003, notifying him about the pending approval in the bankruptcy court of the sale of Air Systems, Inc. to Air Systems Acquisition. Subsequently, on March 17, 2003, the bankruptcy court approved the purchase and sale agreement. The transaction was completed the following day, on March 18, 2003. Gilbane admitted that it became aware that Air Systems, Inc. had filed for bankruptcy in late 2002 to early 2003. Thus, Gilbane was on inquiry notice regarding any license issues with regard to Air Systems Acquisition and its purchase of Air Systems, Inc. in 2003, when it received notice of the assignment in the bankruptcy court. Accordingly, Gilbane was required to file a cross-complaint or assert the defense of nonlicensure in the first lawsuit when responding to Air Systems Acquisition’s claims for money due under the subcontract.
Further, Gilbane filed a general denial to all of Air Systems Acquisition’s claims in the first lawsuit in March 2004. Brad Gordon, the person Gilbane designated as the most qualified to testify on topics related to the issue regarding Air Systems Acquisition’s license, testified at his deposition that Gilbane’s denial in its answer included a denial to the allegation of licensure. He stated: “Based upon that denial and the requirements of the Business and Professions Code in California, Gilbane had no obligation to investigate [whether Air Systems Acquisition had a valid license] because the burden had shifted to Air Systems to prove [licensure]. So there was no reason why they would have gone further.” When asked if Gilbane failed to investigate the licensure issue earlier than June 2005 because of its belief that it had no obligation to investigate, Gordon responded: “Correct.”
Gilbane maintains that Gordon’s statements and its general denial of the facts alleged in Air Systems Acquisition’s complaint do not support a finding that it was on inquiry notice regarding Air Systems Acquisition’s license. It claims: “Gilbane’s denial was warranted because at the time it did not have evidence that [Air Systems Acquisition] was licensed, and the law did not impose a duty on Gilbane to search out whether [Air Systems Acquisition] was licensed.” It contends that it was entitled to presume that Air Systems Acquisition had complied with the licensing law.
It is true that Air Systems Acquisition had the burden of establishing that it was properly licensed in the first lawsuit in order to collect the money it claimed was owed under the subcontract. However, the question presented here relates to the delayed discovery rule, not to the burden of proof under Business and Professions Code section 7031. In order to apply the equitable remedy of the delayed discovery rule Gilbane must establish that it was not under inquiry notice at the time it responded to Air Systems Acquisition’s pleading.
Gilbane argues that the evidence establishes that it did not have actual notice that Air Systems Acquisition did not have a proper license until June 15, 2005. However, Gilbane misconstrues its obligation under the delayed discovery rule. Gilbane had a duty to investigate once it was on inquiry notice, which is defined as reason for suspicion, as opposed to knowledge. (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110-1111; Norgart v. Upjohn Co., supra, 21 Cal.4th at pp. 397-398.) In Norgart, our Supreme Court stressed that a plaintiff is on inquiry notice when the plaintiff “suspect[s] a factual basis for the elements of a cause of action.” (Norgart v. Upjohn Co., supra, at p. 410, fn. 8.)
The record unequivocally establishes that Gilbane was on inquiry notice at the time it filed its answer in the first lawsuit. Gilbane clarified that its answer filed in March 2003 denied Air Systems Acquisition’s allegation that it had a legal license. Despite suspecting in March 2003 that Air Systems Acquisition’s license was not valid, Gilbane admitted it did no further research regarding the license issue until June 2005. The question of a contractor’s license is a matter of public record and the validity of the license could have been easily investigated. Thus, even if we presume the delayed discovery rule provides an exception to the mandate of section 426.30, subdivision (a), Gilbane’s claims in this lawsuit are barred. Gilbane was on inquiry notice when it filed its answer in the first lawsuit.
B. Equitable Estoppel
Gilbane contends that Air Systems Acquisition is estopped to assert the bar of section 426.30, subdivision (a), because Air Systems Acquisition alleged in its pleadings and discovery responses in the first lawsuit that it was licensed. This argument borders on being frivolous and merits little discussion.
“The doctrine of equitable estoppel is founded on concepts of equity and fair dealing. It provides that a person may not deny the existence of a state of facts if he intentionally led another to believe a particular circumstance to be true and to rely upon such belief to his detriment. The elements of the doctrine are that (1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel has a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.” (Strong v. County of Santa Cruz (1975) 15 Cal.3d 720, 725.)
Here, the record does not support the equitable remedy of estoppel. No party, least of all one represented by counsel, can assert that he or she relied on allegations set forth in a pleading by an adversary in a lawsuit. Gilbane contends that it relied, not simply on the allegations, but also on the discovery responses. However, Air Systems Acquisition maintained––and still asserts––that it was always properly licensed. Clearly, Gilbane could have investigated the veracity of these statements by examining the public records. Gilbane complains that the public records are not straight forward because of the similarity in names between Air Systems Acquisition and Air Systems, Inc. However, once Gilbane examined the public records in June 2005, it was able to garner information that allegedly established that Air Systems Acquisition did not have a proper license. Accordingly, the record establishes that the licensure information was plainly discoverable and estoppel has no application to this case.
Gilbane cites, with no analysis, the following quote from Estate of Pieper (1964) 224 Cal.App.2d 670: “A person, by his conduct, may be estopped to rely on the statute [of limitations]; where the delay in commencing an action is induced by the conduct of the defendant, it cannot be availed of by him as a defense; one cannot justly or equitably lull his adversary into a false sense of security and thereby cause him to subject his claim to the bar of the statute of limitations, and then be permitted to plead the very delay caused by his conduct as a defense to the action when brought; actual fraud in the technical sense, bad faith or intent to mislead are not essential to the creation of an estoppel, but it is sufficient that the defendant made misrepresentations or so conducted himself that he misled a party, who acted thereon in good faith, to the extent that such party failed to commence the action within the statutory period; a party has a reasonable time in which to bring his action after the estoppel has expired, not exceeding the period of limitation imposed by the statute for commencing the action; and that whether an estoppel exists—whether the acts, representations or conduct lulled a party into a sense of security preventing him from instituting proceedings before the running of the statute, and whether the party relied thereon to his prejudice—is a question of fact and not of law.” (Id. at pp. 690-691.)
Further, equitable estoppel must be pleaded either as part of a cause of action or as a defense. (Central National Ins. Co. v. California Ins. Guarantee Assn. (1985) 165 Cal.App.3d 453, 460; see Ard v. County of Contra Costa (2001) 93 Cal.App.4th 339, 347.) Gilbane failed to file any pleading asserting estoppel.
C. Business and Professions Code Section 7031
Gilbane contends that Business and Professions Code section 7031, which prevents unlicensed contractors to benefit from performing unlicensed work, creates an exception to the application of section 426.30, subdivision (a). Gilbane cites the public policy underlying Business and Professions Code section 7031 as demanding this exception. Additionally, Gilbane extracts the following language from section 426.30, subdivision (a)––“[e]xcept as otherwise provided by statute”––to argue that its claims fall under this narrow exception.
Certain statutes do expressly provide that the compulsory cross-complaint rule does not apply under these provisions. (See, e.g., §§ 426.60, 426.30, subd. (b).) In contrast, Business and Professions Code section 7031 does not mention the compulsory cross-complaint rule. Accordingly, Business and Professions Code section 7031 does not fall under the exception set forth in section 426.30, subdivision (a).
Further, this current lawsuit exemplifies the public policy reasons for applying section 426.30, subdivision (a). This provision is intended to avoid piecemeal litigation and it codifies “ ‘the policy in favor of hearing all related claims in a single action . . . .’ ” (Carroll v. Import Motors, Inc. (1995) 33 Cal.App.4th 1429, 1435.) Thus, “the public policy served by the enactment of section 426.30 is the law’s abhorrence of a multiplicity of lawsuits.” (Hulsey v. Koehler (1990) 218 Cal.App.3d 1150, 1157.)
Gilbane has wasted this court’s resources in an attempt to avoid the consequences of its own actions in the first lawsuit. After repeatedly failing to respond to discovery requests, the trial court in the first action issued evidentiary sanctions and, subsequently, granted summary judgment against it. After the trial court issued its evidentiary sanctions order, and seven days after Gilbane had filed its answer to Air Systems Acquisition’s motion for summary judgment, Gilbane initiated an adversary proceeding in the bankruptcy court. (In re Encompass Services Corp., supra, 337 B.R. at p. 876.) In that adversary proceeding, Gilbane raised “many of the same issues presented in its losing effort in the California suit.” (Id. at p. 868.) The bankruptcy court observed that “[t]his adversary proceeding presents an interesting attempt [by Gilbane] at using the Bankruptcy Code as a mechanism for forum shopping.” (Id. at p. 867.) The court noted that Gilbane was now trying to litigate the same issues after it lost in the state court. However, the court stated that it was “not an insurer against the outcome of bad choices.” (Id. at p. 877.) Gilbane appealed the bankruptcy court’s dismissal of the adversary proceeding; the district court affirmed the bankruptcy court’s decision. (In re Encompass Services Corp., supra, 2006 WL 1207743.)
Gilbane appealed the judgment following the state trial court’s grant of summary judgment against it, and belatedly attempted to submit evidence regarding the licensure issue. We refused to consider the untimely evidence and affirmed the judgment in Gilbane I., supra, A112536. Gilbane petitioned the Supreme Court for review, which the court denied on January 17, 2007.
Undeterred, Gilbane filed this current lawsuit while the appeal in the first lawsuit was pending. This current lawsuit concerns the same transaction at issue in the first lawsuit. Indeed, proof that Air Systems Acquisition did not have a valid license would have been a defense in the first lawsuit to Air Systems Acquisition’s claims against Gilbane for money owed under the subcontract. Applying the compulsory cross-complaint rule, the lower court found that the current lawsuit is barred. Gilbane has appealed, raising arguments that border on being frivolous. This current lawsuit, which is usurping valuable court time and resources, is Gilbane’s attempt to avoid the consequences of its dilatory actions during discovery and its failure to conduct a prompt investigation of significant facts in the first lawsuit. Accordingly, public policy demands that we apply section 426.30, subdivision (a) to the present lawsuit.
Since we are affirming on the basis that section 426.30, subdivision (a) bars this current lawsuit, we need not address the other grounds for affirming the judgment urged by Air Systems Acquisition.
DISPOSITION
The judgment is affirmed. Air Systems Acquisition is awarded the costs of appeal.
We concur: Kline, P.J. Haerle, J.
In Estate of Pieper, supra, 224 Cal.App.2d 670, the reviewing court held that a defendant may be estopped from raising a statute of limitations defense when the fiduciary “made misrepresentations or so conducted himself that he misled a party, who acted thereon in good faith, to the extent that such party failed to commence the action within the statutory period.” (Id. at p. 690.) The court held that it was a factual issue whether the administrator of the estate, a fiduciary, who had kept the administration of the estate open for a period in excess of 13 years, was thereby forestalling “the institution of any action which would test the validity of the deed, and whether he was thereby lulling the heirs into a sense of security by causing them to believe that the estate was being properly administered.” (Id. at p. 693.) The facts in the present case are completely dissimilar. The present case involves an adversarial, not fiduciary relationship, and Gilbane cannot claim that it relied in good faith on allegations in an adversary’s pleading or assertions made by the adversary during the discovery process.
Gilbane also cites Benner v. Industrial Acc. Com. (1945) 26 Cal.2d 346. In Benner, the plaintiff delayed filing her claim because the defendants stated that they wanted to settle with her and specifically requested that she delay filing a claim so that they could have time to investigate the claim and make a settlement offer. In finding that the defendants were equitably estopped from raising the statute of limitations as a defense, the court held that where “the delay in commencing action was induced by the conduct of the party sought to be charged the latter may not invoke such conduct to defeat recovery.” (Id. at p. 349.) The situation in Benner represents “the usual context for an estoppel argument[,]” which “is a history of negotiations between the parties that lead one side to believe that claims will be settled.” (DeRose v. Carswell (1987) 196 Cal.App.3d 1011, 1026, superseded by statute on another issue.) Thus, the typical estoppel situation, which involves the defendant inducing the other party to wait while negotiations ensue, clearly does not apply to the facts in the present case.
Gilbane does not cite any case that holds that a party can justifiably rely on allegations made by an adversary in a pleading and on the adversary’s assertions made in response to discovery requests. Indeed, such a rule would eviscerate the entire adversarial proceeding and would relieve the defendant from the obligation of conducting any investigation regarding the allegations made by the adversary. Allegations in a pleading or assertions made in response to discovery requests cannot “induce” a defendant to postpone investigation of a claim.