Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC318955, James E. Satt, Judge.
Spellberg Law Offices and Geoffrey Spellberg for Plaintiffs and Appellants.
Kerr & Wagstaffe, H. Sinclair Kerr, Jr., Michael von Loewenfeldt, and Adrian J. Sawyer for Defendant and Appellant and Defendant and Respondent.
SUZUKAWA, J.
Following a jury trial, plaintiff and his wholly-owned company recovered a $1.2 million judgment against defendant, a company he founded, for breach of contract, fraud, and breach of the implied covenant of good faith and fair dealing. Both sides have appealed. We affirm the judgment.
BACKGROUND
Viewed in the light most favorable to the judgment, the evidence at trial established the following.
Plaintiff and cross-appellant James Williams is the sole owner of plaintiff and cross-appellant Infac Management Corp. (IMC), a construction management firm with experience working in Asian countries. In the 1990’s, Williams secured a contract to develop a multi-billion dollar high technology business complex in Tamil Nadu, India (the project). Williams founded defendant and appellant Infac India Group, LLC (IIG or the company) to develop the project.
Given that Williams is the sole owner of IMC, we will not always distinguish in this opinion between them.
As IIG’s founder and president, Williams brought in several investors, including Broadacre India, Inc. (Broadacre), as partners in IIG. When Broadacre sought to withdraw from IIG, Williams replaced Broadacre with defendants Vernon Loucks and his son Charles Loucks as investors and partners. Vernon provided $1.5 million for IIG to repurchase the bulk of Broadacre’s interest in the company, and Williams signed a $224,864 promissory note (the Broadacre note) to cover the balance. Williams also pledged his 600,000 shares in IIG (held in the name of IMC) as security for the Broadacre note. In signing the Broadacre note and security agreement for IMC, Williams relied upon Charles’s and Vernon’s promises that IIG would pay the Broadacre note in full when IIG received its anticipated financing. Williams also relied upon the August 1999 vote by IIG’s board of directors to assume IMC’s obligations under the Broadacre note.
Because they share the same last name, we will refer to Vernon and Charles Loucks by their first names, with no disrespect intended. As no judgment was entered against them, Vernon and Charles have not appealed. Vernon, however, is a respondent to IMC’s cross-appeal.
After Vernon and Charles became partners in IIG, the company was restructured so that Vernon, as majority shareholder, became chairman of the board, Charles became chief executive officer, and Williams, who was formerly president, became executive vice president. The company also reallocated its ownership units so that Williams’s 600,000 shares now represented only a 19.7 percent, rather than 33.3 percent, interest in IIG.
Vernon viewed himself as the project’s owner, and began controlling IIG’s management and finances. Charles’s friend Samuel Halle became IIG’s chief operating officer, despite his lack of international development experience. In Williams’s view, Charles and Halle began mismanaging the project.
Unbeknownst to Williams, Vernon directed IIG not to pay the Broadacre note when it came due, despite knowing that this would harm Williams and IMC because, in Vernon’s words, “it is bad for any company to have an unsatisfied judgment hanging over their head.” Broadacre sued IMC on the note and security agreement, and entered a default judgment against IMC. IIG continued to dishonor its obligation to pay the note, and Williams was served with notice of a judgment debtor examination. Williams fell into financial difficulty, not only because IIG was behind in paying his salary, but because the Broadacre judgment precluded him from securing new construction management bids, which he could only procure by bidding as IMC. Construction clients will not advance funds to management companies with outstanding judgments because any project funds advanced to those companies would become subject to collection. Accordingly, Williams repeatedly asked that IIG honor its obligation to pay the Broadacre judgment, which was accruing interest, but to no avail.
Williams testified that “[i]t’s very difficult as an individual to go out and say: I would like to be your construction manager on a project as an individual.” “[W]hen a company goes out and bids the contracts, whatever the customer that you would be bidding it to wants to make sure that the company they are dealing with is clean, clean from the standpoint of not having any actions against it. They’re going to invest their money in your activities and they want to make sure that you complete those activities without any disruption. For me, the reputation of Infac Management Corporation in Asia was good and I wanted to use Infac Management but I couldn’t use Infac Management” because of the outstanding Broadacre judgment.
On November 14, 2003, Williams sent James Ciardelli, IIG’s chief financial officer, an email stating that the company’s failure to pay the Broadacre judgment was hindering his efforts to restart IMC “as an outsource and management firm to help U.S. companies setup new operations, plus relocate into not only Asia, but India and China. I cannot have this judgment hanging over my head.” Williams further stated, “I know this is a difficult time between IIG and IMC, however, I don’t have deep pockets (Vern) to get financed. I nearly lost the house and have considered filing bankruptcy and now have some opportunities to get moving again. I need to get closure on this situation and need to know what you would like to do going forward.”
In January 2004, Halle informed Williams that IIG no longer needed his services. Halle also told Williams that IIG would pay the Broadacre judgment, but that his 600,000 shares in the company would be seized and redistributed to IIG, Vernon, and Charles.
In March 2004, Williams, faced with the growing Broadacre judgment and the loss of his shares in IIG, sued Vernon, Charles, and IIG. As alleged in the operative second amended complaint, Williams sought damages for: (1) breach of contract to recover his unpaid salary at the rate of $25,000 per month; (2) promissory fraud, including punitive damages, for being fraudulently induced to sign the Broadacre note and security agreement; and (3) breach of the implied covenant of good faith and fair dealing for the fraudulent acts and omissions regarding the Broadacre note that were designed “to improperly obtain control of IMC and Williams’ 19.73% ownership interest” in IIG.
The complaint alleged that Vernon, Charles, and IIG had tricked Williams into pledging IMC’s shares against the Broadacre note, with the intent of not honoring IIG’s obligation to assume the note, so as to seize Williams’s shares after he defaulted on the note. According to the complaint, “Williams and IMC at all times reasonably relied on the representations of the two Loucks that they were acting in the best interests of Williams and IMC and that they were acting in a fashion and would continue to act in a fashion whereby the interests of Williams and IMC in the venture would be protected.”
During discovery, Williams learned not only that Vernon had directed IIG to dishonor its obligation to pay the Broadacre note and judgment, but that IIG had amassed $12 million in investment funds that could have been used to pay the relatively small amount due on the Broadacre note, as IIG had promised. (At trial, the parties stipulated to IIG’s acquisition of $12 million in investment funds.) In April 2005, more than one year after being sued in this lawsuit, Vernon relieved Williams of liability for the outstanding Broadacre judgment by signing a new security agreement with Broadacre. In addition, IIG relinquished its claim to Williams’s 600,000 shares in the company. Accordingly, by the time of trial, Williams’s shares in IIG were no longer in dispute and the Broadacre judgment had been settled.
Williams presented three claims for damages at trial: (1) a breach of contract claim to recover his unpaid salary at the rate of $25,000 per month; (2) a fraud and punitive damages claim that was based, not on the Broadacre note as originally alleged in the complaint, but on a false promise to pay Williams $351,000 if he continued working for the company, for which Williams had signed a $351,000 promissory note in favor of IIG in November 2001, to be forgiven at the rate of $70,000 per year over five years; and (3) a breach of implied covenant claim against Vernon and Charles, based on their wrongful refusal to pay the Broadacre note, which resulted in the default judgment that had impaired Williams’s ability to do business as IMC.
During trial, IIG objected that Williams had switched from a promissory fraud claim based on the Broadacre note allegations that were pleaded in the complaint, to a fraud claim concerning a false promise to pay $351,000. The trial court overruled IIG’s objection, and allowed Williams to present the fraud claim based on the evidence at trial regarding the $351,000 promissory note.
On appeal, IIG contends that the trial court erroneously allowed Williams to present an unpleaded fraud claim.
The trial was held in two phases. After the first phase, the jury returned the following findings: (1) IIG breached its contract to pay Williams his $25,000 monthly salary, resulting in $343,750 in damages to Williams; (2) IIG breached the implied covenant by dishonoring its obligation to pay the Broadacre note, resulting in “$0” damages to Williams and $325,000 in damages to IMC; and (3) Williams reasonably relied on IIG’s material misrepresentations regarding the $351,000 promissory note, resulting in “$0” damages to IMC and $198,000 in damages to Williams. Additionally, the jury found that Williams was entitled to punitive damages for fraud because IIG had acted with malice, fraud, or oppression.
Also after the first phase, the jury returned a defense verdict on IIG’s cross-complaint against Williams for misrepresentation. As IIG has raised no issues on appeal regarding that ruling, we will not discuss it further in this opinion.
After the second phase of trial, the jury awarded Williams $400,000 in punitive damages against IIG. The trial court denied defendants’ motions, oral and written, for judgment notwithstanding the verdict, and entered judgment for Williams on the complaint and cross-complaint. Both sides have appealed.
IIG is not appealing the jury award of Williams’s unpaid salary of $343,750.
DISCUSSION
I. IIG’s Appeal
A. Breach of the Implied Covenant
Based on IIG’s failure to honor its obligation to pay the Broadacre note when it came due, the jury awarded IMC $325,000 in damages for IIG’s breach of the implied covenant of good faith and fair dealing. The damages were based on Williams’s testimony that the Broadacre judgment had impaired his ability to use IMC to obtain new construction management projects from January 2004, when he was ousted from IIG, through April 2005, when Vernon settled the Broadacre judgment. The jury accepted the damages calculation provided by plaintiffs’ counsel during closing argument, which equated IMC’s lost profits between January 2004 and April 2005 with the salary that Williams would have earned at IIG during the same period.
The $325,000 damages award was calculated as follows: In 2004, Williams would have earned $300,000 at IIG ($25,000 monthly salary x 12 months = $300,000; $300,000 - $75,000 in wages earned elsewhere = $225,000); and would have earned an additional $100,000 between January and April 2005 ($25,000 monthly salary x 4 months = $100,000), for a total of $325,000.
On appeal, IIG seeks reversal of the $325,000 damages award on three grounds. For the reasons that follow, we conclude the contentions lack merit.
1. Future Lost Profits
IIG argues that the damages award is “invalid as a matter of law,” because it was impermissibly based on IMC’s lost future profits from unrelated business ventures of which IIG had no notice when it entered into the contract. (Citing Shoemaker v. Acker (1897) 116 Cal. 239, 244-245; Fraser v. Bentel (1911) 161 Cal. 390, 396 [“‘In awarding damages for the non-performance of an existing contract the gains or profits of collateral enterprises . . ., of which no notice has been given the other party, cannot be included’”]; Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 968-978.) IIG contends that the evidence at trial failed to show that IIG was liable for IMC’s future lost profits, as either general or special damages. IIG also argues that damages for future lost profits are precluded by Civil Code section 3300, which codifies the rule enunciated in Hadley v. Baxendale, 9 Exch. 341, that damages for breach of contract may only include such damages “as may reasonably be supposed to have been within the contemplation of the parties at the time of the making of the contract, as the probable result of a breach.Other damages are too remote. In this lies the distinction between damages for breach of contract and damages for tort, the rule as to tort being that the injured person may recover for all detriment proximately caused thereby, ‘whether it could have been anticipated or not.’ (Civ. Code, sec. 3333.) Such, as we understand it, is the rule declared by section 3300 of the Civil Code, as that section has always been construed by this court, and it is the rule enunciated in the leading case of Hadley v. Baxendale, 9 Exch. 341, which has been universally accepted and followed.” (Hunt Bros. Co. v. San Lorenzo etc. Co. (1906) 150 Cal. 51, 56.)
IIG does not mention, however, that the trial court instructed the jury to apply a tort measure of damages to the breach of implied covenant claim. The trial court instructed the jury that if it found the necessary elements of the breach of implied covenant claim had been met under Judicial Council of California Civil Jury Instructions (2008) CACI No. 325, it was to apply the tort measure of damages set forth in CACI No. 3900. The modified version of CACI No. 3900 that was read to the jury stated: “If you decide that the plaintiffs have proved their claim against the defendant, you also must decide how much money will reasonably compensate the plaintiffs for the harm. This compensation is called damages. The amount of damages must include . . . an award for all harm that the defendants were a substantial factor in causing, even if the particular harm could not have been anticipated. [¶] The plaintiffs must prove the amount of their damages; however, the plaintiffs do not have to prove the exact amount of damages that will provide reasonable compensation for the harm. [¶] You must not speculate or guess in awarding damages. To decide the amount of damages you must determine the fair market value of the services that the plaintiff gave, and subtract from that amount the fair market value of what the plaintiff received.” (Italics added.)
The jury received CACI No. 325, which, as modified, stated: “In every contract or agreement there is an implied promise of good faith and fair dealing. This means that each party will not do anything to unfairly interfere with the right of any other party to receive the benefits of the contract. However, the implied promise of good faith and fair dealing cannot create obligations that are inconsistent with the terms of the contract. [¶] Plaintiffs, Infac Management Corporation and Mr. Williams, claim that defendants, Mr. Vernon Loucks and Mr. Charles Loucks, violated the duty to act fairly and in good faith. To establish this claim, plaintiffs must prove all of the following: [¶] One) That the plaintiff and the defendant entered into a contract; [¶] Two) That the plaintiff did all, or substantially all of the significant things that the contract required it to do or that the plaintiff was excused from having to do those things[;] [¶] Three) That all the conditions required for the defendants’ performance had occurred[;] [¶] Four) That the defendant unfairly interfered with the plaintiffs’ right to receive the benefit of the contract, and; [¶] Five) That the plaintiff was harmed by the defendants’ conduct.”
IIG does not challenge CACI No. 3900 as erroneous in its opening brief. In the absence of such a challenge, we will review the sufficiency of the evidence to support a verdict under the law stated in the instructions given, “rather than under some other law on which the jury was not instructed. (Null v. City of Los Angeles (1988) 206 Cal.App.3d 1528, 1535.) . . . The jury’s responsibility is to decide factual issues and return a verdict in accordance with the law as instructed by the court. (Null, supra, at p. 1534; Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 877.)” (Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, 675.) In light of the tort damages instruction that was given below, we distinguish cases such as Louis Jorge, supra, 34 Cal.4th 960, in which such an instruction was not given.
In its reply brief, IIG argues for the first time that CACI No. 3900 should have been given with the promissory fraud instruction, but was mistakenly given with the breach of implied covenant instruction (CACI No. 325) because “the instructions got shuffled.” IIG further states “that, read together, it is clear the instructions are out of order and that the breach of contract instruction applies to this claim. If, however, the court’s instructions are interpreted as informing that jury that tort damages were available on this claim, that is reversible error. (See Rakish v. Valerga (1954) 125 Cal.App.2d 274, 278 [adopting wrong measure of damages is reversible error].)”
2. Substantial Evidence
IIG argues that the award is unsupported by the evidence. In determining whether substantial evidence supports the verdict, “[t]he principles of review which must guide us are elementary. . . . [A] ‘reviewing court is without power to substitute its deductions for those of the trial court.’ . . . [‘]“In brief, the appellate court ordinarily looks only at the evidence supporting the successful party, and disregards the contrary showing.” [Citation.] All conflicts, therefore, must be resolved in favor of the respondent.’ [Citation.]” (Campbell v. Southern Pacific Co. (1978) 22 Cal.3d 51, 60.)
“‘When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.’ [Citations.]” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) “Except where additional evidence is required by statute, the direct evidence of one witness who is entitled to full credit is sufficient for proof of any fact.” (Evid. Code, § 411.)
“Furthermore, this court will presume the record contains sufficient evidence to support the finding of fact. [Citations.] The appellant ‘“who contends that some particular finding is not supported is required to set forth in his brief a summary of the material evidence upon that issue.”’ (In re Marriage of Fink[ (1979)] 25 Cal.3d [877,] 887.) The appellant may not simply recite evidence in his favor, but must set forth all material evidence. [Citation.]” (Van de Kamp v. Bank of America (1988) 204 Cal.App.3d 819, 842-843.)
IIG contends that the evidence was insufficient to support the damages award because “[t]here simply is no record evidence that IMC lost even a single job that it otherwise would have received because of the judgment—only evidence that Williams chose not to apply for unspecified jobs ‘as IMC’ because Williams feared he would not get them ‘due to’ the judgment, and that Williams did not get one job he applied for under his own name (but no evidence that was because he applied under his own name instead of ‘as IMC’).” (Record citations omitted.) We are not persuaded. Williams testified that he could not obtain construction management projects either as an individual, because such work typically is not given to individuals, or as IMC, because clients do not want the funds for their project to be subject to collection. The jury reasonably accepted his testimony.
IIG states that “even if lost profits from unspecified future contracts could somehow be claimed as special damages for IIG’s breach of the implied covenant, there is no allegation or evidence of such lost profits here.” IIG contends that there was “no proof of lost work due to the Broadacre judgment,” and no evidence of a “logical connection between what Williams allegedly earned at IIG and how much IMC would have made on other unspecified jobs without the Broadacre judgment.”
The jury, however, adopted the damages calculation provided by plaintiffs’ counsel during closing argument, which equated IMC’s lost profits from January 2004 to April 2005, with the salary that Williams would have earned at IIG during the same period. In doing so, the jury followed the court’s instructions under CACI No. 3900 to determine “the fair market value of the services that the plaintiff gave, and subtract from that amount the fair market value of what the plaintiff received.” As measured against this instruction, the jury could reasonably find that Williams’s salary of $25,000 per month represented the fair market value for his services that could be earned by pursuing development projects through IMC.
Similarly, we reject IIG’s contention that it had no reason to anticipate that “if the note was paid late, IMC would suffer ‘lost profits’ by having a judgment entered against it and then choosing not to bid for work for fear the judgment would render the bids unsuccessful.” According to the jury instruction, “damages must include an award for all harm that the defendants were a substantial factor in causing, even if the particular harm could not have been anticipated.” (CACI No. 3900, italics added.) As measured against this instruction, the jury could reasonably include IMC’s lost profits in the damages award, even if that particular harm could not have been anticipated.
3. IIG Was Added as a Defendant
IIG contends that although the complaint alleged a breach of implied covenant claim against Vernon and Charles, it did not allege such a claim against IIG. IIG argues that it was not subject to a verdict on this claim because, under Tri-Delta Engineering, Inc. v. Insurance Co. of North America (1978) 80 Cal.App.3d 752, 760, a plaintiff may not recover upon a cause of action not pleaded, even if disclosed by the evidence.
As alleged in the complaint, plaintiffs’ theory was that Vernon and Charles, by virtue of having signed subsequent agreements that referred to IIG’s original agreement to assume the Broadacre note, became parties to the original agreement and subject to liability for breach of the implied covenant of good faith and fair dealing. At trial, however, defense counsel for Vernon, Charles, and IIG objected that because Vernon and Charles were not parties to the subsequent agreements, which they signed solely as IIG’s representatives, they were not parties to IIG’s original agreement to assume the Broadacre note. Defense counsel argued below that IIG was the only proper defendant that could be sued under the original agreement for breaching the implied covenant, and submitted a proposed jury verdict form to that effect. Plaintiffs’ counsel, on the other hand, insisted that Vernon and Charles were proper defendants, and submitted a proposed jury verdict form to that effect.
Defense counsel stated that Vernon and Charles “should not be included under the charge concerning breach of [the implied] covenant of good faith and fair dealing[, but that it was] appropriate for IIG to be [included. IIG has] the contractual obligation, and therefore it is appropriate for the jury to determine whether IIG breached its covenant of good faith and fair dealing . . . .”
The trial court selected IIG’s verdict form that named IIG as the sole defendant in the breach of implied covenant claim. This effectively dismissed the claim as to Vernon and Charles, and substituted IIG in their place. As the substitution was made at IIG’s request, we conclude that IIG is judicially estopped to argue inconsistently on appeal that it is immune from liability because of a pleading defect that the substitution, which was proposed by IIG, was intended to cure. (See Gottlieb v. Kest (2006) 141 Cal.App.4th 110, 130-131 [judicial estoppel applies when “‘“(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake”’”].) Given that IIG was added by an amendment to conform to proof, it has failed to show a violation of the rule precluding recovery upon a cause of action not pleaded.
Although IMC’s cross-appeal challenges the dismissal of Vernon, it does not challenge the implied amendment that added IIG as a defendant.
B. Fraud
As previously mentioned, the complaint originally stated a promissory fraud claim based on the Broadacre note allegations, and sought to recover the value of Williams’s lost shares in IIG. Before trial, however, IIG restored Williams’s shares, and Vernon settled the Broadacre judgment. Accordingly, Williams did not seek promissory fraud damages based on the Broadacre note allegations at trial. Instead, he sought damages for fraud based on the $351,000 promissory note that he was induced to sign in November 2001 as part of a loan forgiveness plan. Based on this theory, the jury awarded Williams $198,000 in fraud damages against IIG, as well as an additional $400,000 in punitive damages against IIG based on fraud.
On appeal, IIG argues that the $198,000 fraud award must be reversed because: (1) “there simply was no evidence presented on the elements of the supposed fraud”; (2) “the fraud claim is based on an alleged statement by Charlie Loucks, but the jury expressly found that Loucks did not commit fraud”; and (3) the fraud claim based on the $351,000 promissory note was never pleaded in the complaint, and “was invented by plaintiffs on the fifth day of trial.”
1. Elements of Fraud
“Actionable deceit exists where a promise is made ‘without any intention of performing it.’ (Civ. Code, § 1710, subd. (4).) In a promissory fraud action, ‘the essence of the fraud is the existence of an intent at the time of the promise not to perform it.’ (Benson v. Hamilton (1932) 126 Cal.App. 331, 334.) ‘To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing.’ (Tarmann v. State Farm Mutual Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 159.) ‘The mere failure to perform a promise made in good faith does not constitute fraud.’ (Merciful Saviour v. Volunteers of America, Inc.[ (1960)] 184 Cal.App.2d 851, 859.)” (Building Permit Consultants, Inc. v. Mazur (2004) 122 Cal.App.4th 1400, 1414.)
2. Jury Instructions on Fraud and Punitive Damages
On the fraud claim, the trial court instructed the jury that Vernon, Charles, and IIG were alleged to have “made a false representation that harmed plaintiffs. [¶] To establish this claim, plaintiffs must prove all of the following: [¶] One) That the defendant represented to the plaintiff that an important fact was true. [¶] Two) That the defendants’ representation was false. [¶] Three) That the defendant knew that the representation was false when he made it and that he made the representation recklessly and without regard for [its] truth. [¶] Four) That the plaintiff relied on the representation. [¶] Five) That the plaintiff reasonably relied on the representation. [¶] Six) That the plaintiff was harmed, and; [¶] Seven) That the plaintiffs’ reliance on the representation was a substantial factor in causing the plaintiffs’ harm.”
The trial court also instructed the jury that if it found that Vernon or Charles had “caused the plaintiffs’ harm, you must decide whether that conduct justifies an award of punitive damages against Mr. Vernon Loucks and/or Mr. Charles Loucks. The amount, if any, of punitive damages will be an issue decided later. You may award punitive damages against defendants only if the plaintiff proves by clear and convincing evidence that the defendants engaged in that wrongful conduct with malice, oppression, or fraud.”
The trial court further informed the jury that it could award punitive damages against IIG only if there was clear and convincing evidence that either: (1) Vernon, Charles, or Halle was an officer, director, or managing agent of IIG who was acting on behalf of IIG at the time of the conduct constituting malice, oppression, or fraud; or (2) that an officer, director, or managing agent of IIG knew of the conduct constituting malice, oppression, or fraud and adopted or approved that conduct after it occurred. The instructions defined managing agent as one who exercises substantial independent authority and judgment such that the agent’s decisions ultimately determine company policy.
3. Verdict Form
Unlike the jury instructions, the fraud verdict form did not mention Vernon, Halle, or IIG’s officers, directors, or managing agents. The fraud verdict form asked the jury to record its findings as to IIG and Charles, but did not mention or request findings for Vernon, Halle, or IIG’s officers, directors, or managing agents.
The jury recorded its findings as to IIG and Charles, and found IIG to be liable for fraud, but not Charles. As the verdict form contained no questions regarding Vernon, Halle, and IIG’s officers, directors, or managing agents, the jury expressed no findings regarding them.
On appeal, IIG argues that the jury’s exoneration of Charles necessarily exonerated IIG, both as to fraud and punitive damages, because Charles was the only person who had spoken with Williams about the $351,000 promissory note. We are not persuaded. The jury instructions, which we presume were followed (Roberts v. Del Monte Properties Co. (1952) 111 Cal.App.2d 69, 78), directed the jury to consider whether Vernon had made material misrepresentations regarding the $351,000 promissory note, or had known about them when they were made, or had adopted or approved of them, and whether Vernon had acted with malice, oppression, or fraud. As will be discussed below, the jury had sufficient evidence to infer that even though Charles was not guilty of fraud, Vernon, who had financial control of the company, did not intend to pay Williams $351,000 in connection with the promissory note when the promise was made.
4. Sufficiency of the Evidence
IIG argues that at trial Williams “clearly only identified Charlie Loucks as the person who discussed the $351,000 note with him before he signed it.” It asserts that the evidence establishes that no other promise relating to the note was made to Williams. As a result, IIG contends that the jury’s exoneration of Charles leads to the inescapable conclusion that Williams’s fraud claim is not supported by the evidence. We disagree.
“A promise made without any intention of performing it constitutes fraud. (Civ. Code, § 1710, subd. 4.) ‘“A promise to do something necessarily implies the intention to perform, and, where such an intention is absent, it is an implied misrepresentation of fact, which is actionable fraud.”’ (Joanaco Projects, Inc. v. Nixon & Tierney Constr. Co.[ (1967]) 248 Cal.App.2d 821, 831; [citations].)” (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 133.)
Viewing the evidence in the light most favorable to the judgment, as we must, the jury was presented with the picture of a company that routinely made promises to Williams that it never intended to keep. The officers of the company denied that certain promises were made, and were impeached with IIG’s corporate documents. The officers attempted to justify their conduct by making factual claims that were belied by other evidence. From there, it was hardly a stretch for the jury to conclude that IIG’s practice was to promise everything while possessing the intent to deliver nothing.
From the beginning, when Vernon and Charles became partners in IIG, illusory promises were made. As we have discussed, the IIG board of directors agreed to assume the Broadacre note. Williams was told this prior to his signing the note. Nonetheless, although the company had the financial means to pay the note, Vernon decided not to do so. As a result, judgment was entered against IMC.
In attempting to explain to the jury why the note was not paid, Vernon testified that it was the IIG board’s decision to spend its capital elsewhere. Although he described IIG as “his company” at his deposition, Vernon denied that he was the person who decided how IIG’s money was spent. Specifically, he denied making the decision not to pay the Broadacre note. He acknowledged that James Ciardelli, IIG’s chief financial officer, should know who made the decisions regarding the use of IIG funds. Vernon recognized that an unsatisfied judgment was bad for any company but he claimed there were no funds to pay salaries or the note.
In contrast, Ciardelli testified that Vernon made the decisions as to how IIG’s money would be allocated. Although he tried to convince the jury that at times Vernon would merely put money into the company and leave individual allocation decisions to Charles and him, Ciardelli acknowledged the final authority with regard to major financial decisions rested with Vernon. As to whether IIG had the money to pay the Broadacre note, the parties stipulated that the company had received $12 million in income, which Charles testified was received in 2003 and 2004. However, IMC remained saddled with the unsatisfied judgment against it until Vernon arranged for the note to be paid in April 2005.
With regard to Williams’s claim for unpaid salary (IIG chose not to appeal that award), he testified that his salary was $25,000 per month. IIG’s principals, including Vernon, Charles, and Ciardelli, tried to convince the jury that IIG had not agreed to pay Williams any particular salary. However, IIG’s financial documents reflected under “Accounts Payable” that Williams was owed $250,000 for 10 months of work. In March 2002, Williams received a check for $50,000 as compensation for January and February. Ciardelli admitted that he signed the check to Williams and that the voucher indicated it was compensation for two months of work. Ciardelli attempted to explain the clear correlation between Williams’s claimed salary and the amount of the check by labeling the voucher as a “blunder” on his part.
Williams testified that after he received the March compensation check, money continued to flow into IIG’s coffers. Williams said that during one period $1 million was raised, and Charles told him a number of times the money was being transferred into an account that would be used to pay back salaries. Despite Charles’s promises, Williams did not receive any other compensation.
That brings us to the $351,000 promissory note. IIG tried to persuade the jury that the note did not obligate it to pay Williams anything. Indeed, Charles testified that the $351,000 promissory note actually reflected a loan to Williams from IIG. The jury believed Williams’s testimony to the contrary that the note was intended to reimburse him for $51,000 in past expenses and $300,000 in partial back wages, and that he was told that if he wanted the money, he had to sign the note. (IIG admitted no other employee was required to sign such a note.) Further, Williams understood that he had to continue working at IIG to accrue the benefits of the note, thus inducing him to stay.
Vernon claimed that he was unaware that Williams had signed the $351,000 note. This testimony flies in the face of the evidence that Vernon was responsible for IIG’s spending decisions. The jury could rationally have concluded that Vernon’s attempt to feign ignorance was a ploy designed to minimize the fact that Vernon had the financial power to either honor or ignore the note, the same authority he wielded when he chose not to keep the promise to pay the Broadacre note.
Although we agree that certain promises made to Williams did not specifically reference the $351,000 promissory note, they provide evidence of IIG’s overall scheme to induce Williams to remain with the company despite the intent not to pay him. The evidence is undisputed that with the exception of the payment of two months of salary, Williams received none of the monies he was promised. This was despite Charles’s promises that the income received by IIG would be used to pay Williams’s back salary and Vernon’s assurances throughout the entire project that Williams would be paid what he was owed. Williams also testified that Sam Halle constantly made promises to pay past salaries and debts.
On this record, we conclude that the jury’s exoneration of Charles was not fatally inconsistent with its imposition of liability against IIG. Given that the jury was instructed to consider the conduct of IIG’s officers, in particular Vernon, the jury’s finding that Charles had not committed fraud does not rule out the possibility that it imposed liability against IIG based on Vernon’s malice, oppression, or fraud. The jury received substantial evidence that IIG’s officers made three substantive promises to Williams—to pay the Broadacre note, to pay him a salary, and to pay him pursuant to the terms of the $351,000 promissory note—that they never intended to keep. Williams was induced to stay at IIG as a result. The string of broken promises later made by Vernon, Charles, and Halle that Williams would be paid what he was owed is further circumstantial evidence that IIG did not intend to pay Williams at all. In the end, the jury could reasonably have concluded that Vernon, who tried and failed to convince it that he did not have the ultimate authority over the disbursement of IIG funds, never intended to pay Williams the benefits to which he was entitled.
IIG relies on the rule that “a verdict exonerating the agent is a declaration that the agent has done no wrong and necessarily exonerates the principal, since the principal cannot be held liable under the doctrine of respondeat superior if the agent has committed no tort.” (Hendriksen v. Young Men’s Christian Assn. (1959) 173 Cal.App.2d 764, 770.) The rule does not apply, however, where the conduct of the principal or, as in this case, another agent, is the proximate cause of the injury. We have concluded that the jury could reasonably find that Vernon was guilty of fraud, although Charles was not.
5. Damages
IIG argues that the $198,000 damage award was “simply invented out of thin air,” and “has no relationship to the anticipated loan, the repayment and/or forgiveness schedule for the loan, or anything else.” We disagree.
In promissory fraud cases, “the plaintiff’s claim does not depend upon whether the defendant’s promise is ultimately enforceable as a contract. ‘If it is enforceable, the [plaintiff] . . . has a cause of action in tort as an alternative at least, and perhaps in some instances in addition to his cause of action on the contract.’ (Rest.2d Torts, § 530, subd. (1), com. c., p. 65, cited with approval in Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 29.) Recovery, however, may be limited by the rule against double recovery of tort and contract compensatory damages. (Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1159.)” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) Where appropriate, plaintiffs in promissory fraud cases may recover the benefit of their bargain so that they are placed, as much as possible, in the same position that they would have been had the defendant performed the contract. (Pepitone v. Russo (1976) 64 Cal.App.3d 685, 688-689.)
In this case, Williams requested in closing argument to recover the benefit of the two-year, five-month loan forgiveness period that he would have enjoyed under the promissory note, had he continued working at IIG from when the note was signed in November 2001, to when the Broadacre judgment was settled in April 2005, or “some lesser percentage.” The jury awarded Williams $198,000, which Williams surmises was based on a longer loan forgiveness period of two years and 10 months, because “$70,000 per year x 2 years = $140,000, plus $58,000 for ten additional months = $198,000.” IIG, on the other hand, argues that because Williams only remained at IIG until January 2004, which was two years and two months after he signed the promissory note in November 2001, neither Williams’s explanation nor the jury’s award makes any sense.
There is a third possibility that neither party mentions. In this case, it is possible that the $198,000 award, reasonably construed, gave Williams not only the benefit of a two-year two-month loan forgiveness period, but also a portion of his past expenses of $51,000.
IIG bears the burden on appeal of showing that the evidence is insufficient to support the amount of the damages award. “The court in Grand v. Griesinger (1958) 160 Cal.App.2d 397, 403 . . . said it: ‘“It is incumbent upon appellants to state fully, with transcript references, the evidence which is claimed to be insufficient to support the findings. The reviewing court is not called upon to make an independent search of the record where this rule is ignored. [Citation.]” [Citation.] “A claim of insufficiency of the evidence to justify findings, consisting of mere assertion without a fair statement of the evidence, is entitled to no consideration, when it is apparent, as it is here, that a substantial amount of evidence was received on behalf of the respondents. Instead of a fair and sincere effort to show that the trial court was wrong, appellant’s brief is a mere challenge to respondents to prove that the court was right. And it is an attempt to place upon the court the burden of discovering without assistance from appellant any weakness in the arguments of the respondents. An appellant is not permitted to evade or shift his responsibility in this manner.”’” (People v. Dougherty (1982) 138 Cal.App.3d 278, 283.) We conclude that IIG has failed to meet its burden.
6. Amendment to Conform to Proof
IIG argues that the fraud verdict must be reversed because the $351,000 promissory note was not mentioned in the complaint. The contention lacks merit.
As IIG repeatedly informed the jury, Williams had forgotten about the $351,000 note until it was shown to him by defense counsel at his deposition. Following his deposition, Williams mentioned the $351,000 note in opposition to IIG’s summary judgment motion, stating that “Defendants induced Williams to sign a $351,000 note and never provided any of that money.” Williams also mentioned the $351,000 promissory note as a breach of contract claim in his trial brief, which drew no objection from IIG. But when Williams sought fraud damages at trial based on the $351,000 note, IIG objected that the $351,000 note was not mentioned in the complaint. The trial court overruled the objection, stating “I’ve heard testimony on that. I will give it.”
The videotaped excerpt of Williams’s deposition testimony was played at trial by IIG, in an effort to discredit Williams’s trial testimony that he had detrimentally relied upon the false promise to pay him $351,000 under a loan forgiveness plan.
In the order denying the summary judgment motion, the trial court (Judge Ferns) mentioned the nonpayment of $351,000 as an issue in the case. Judge Ferns stated that there were “material issues of disputed fact regarding whether or not he was induced by fraud to sign those agreements and was damaged thereby as he did not receive compensation to which he was entitled and he signed Exhibit N [the $351,000 promissory note], but did not receive the $351,000 which defendant had agreed to provide. . . . Plaintiff may seek compensation for any damages which flowed from his signing the Broadacre note and the releases as a result of the alleged fraud in the inducement, or for damages plaintiff was caused because it entered into the agreements.”
“‘Every element of the cause of action for fraud must be alleged in the proper manner and the facts constituting the fraud must be alleged with sufficient specificity to allow defendant to understand fully the nature of the charge made.’ (Roberts v. Ball, Hunt, Hart, Brown & Baerwitz (1976) 57 Cal.App.3d 104, 109; [citations.)” (Tarmann v. State Farm Mut. Auto. Ins. Co., supra, 2 Cal.App.4th at p. 157.)However, “the requirement of specificity is relaxed when the allegations indicate that ‘the defendant must necessarily possess full information concerning the facts of the controversy’ (Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825, disapproved on another ground in Silberg v. Anderson (1990) 50 Cal.3d 205, 212-213) or ‘when the facts lie more in the knowledge of the opposite party[.]’ (Turner v. Milstein (1951) 103 Cal.App.2d 651, 658.)” (Tarmann, supra, 2 Cal.App.4that p. 158.)
IIG, having drafted and retained the note, knew more about it than did Williams. Accordingly, it was appropriate to relax the specificity requirements for pleading fraud. (Tarmann v. State Farm Mut. Auto. Ins. Co., supra, 2 Cal.App.4th at p. 158.) By instructing on fraud, the trial court essentially amended the complaint to conform to proof and added IIG as a defendant to the amended claim. We find no abuse of discretion.
IIG also argues that because it was not named as a defendant in the punitive damages claim that was alleged in the complaint against only Vernon and Charles, it was not subject to punitive damages at trial. As stated above, however, IIG was added to the claim when the complaint was amended at trial to conform to proof. Moreover, the jury was correctly instructed that under California law, IIG may be held liable for punitive damages based on the malice, oppression, or fraud of its officer, director, or managing agent, if IIG authorized or ratified the wrongful conduct or was personally guilty of malice, oppression, or fraud. (Civ. Code, § 3294; Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1154.) IIG does not challenge the instruction as erroneous.
“The California courts have been extremely liberal in allowing amendments to conform to proof. [Citations.]” (5 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 1143, p. 599.) “A pleading may be amended at the time of trial unless the adverse party can establish prejudice. (United Farm Workers of America v. Agricultural Labor Relations Bd. (1985) 37 Cal.3d 912, 915.) Where a party is allowed to prove facts to establish one cause of action, an amendment which would allow the same facts to establish another cause of action is favored, and a trial court abuses its discretion by prohibiting such an amendment when it would not prejudice another party. [Citations.] A variance between pleading and proof does not justify the denial of an amendment to conform pleading to proof unless the unamended pleading ‘misled the adverse party to his prejudice in maintaining his action or defense upon the merits.’ (Code Civ. Proc., § 469; Stearns v. Fair Employment Practice Com. (1971) 6 Cal.3d 205, 212-213.)” (Brady v. Elixir Industries (1987) 196 Cal.App.3d 1299, 1303, disapproved on other grounds in Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1248.)
Although IIG contends that it was prejudiced by the “unfair surprise” of being “ambush[ed]” with a made-up fraud claim at trial, IIG knew from the trial brief that plaintiffs were alleging a contract claim based on the $351,000 promissory note. The fraud damages award essentially provided Williams with the benefit of his bargain, which is a contract measure of damages. As for the punitive damages award, IIG knew from the complaint’s punitive damages claim regarding the Broadacre note allegations that it would have to defend against a punitive damages claim, albeit on a different factual theory. When IIG sought to reopen its defense at trial in order to respond to the fraud and punitive damages claims based on the $351,000 promissory note allegations, its stated reason was to play Williams’s videotaped deposition excerpts in which he could not recall the $351,000 promissory note or any discussions concerning the note. Playing those deposition excerpts would, defense counsel stated, “undo the prejudice to us which we have incurred by trying to streamline the case.” When plaintiffs’ counsel correctly pointed out that the relevant deposition excerpts previously had been played, defense counsel withdrew the request. In any event, defense counsel replayed the deposition excerpts during closing argument, and argued that Williams “purposely forgot about” the $351,000 note because “[t]here was no promise to loan him any funds, nothing that actually prompted his memory at all. . . . This was frankly a made-up claim for this lawsuit, just like there was a made-up claim of the $25,000 a month” salary. The jury, however, found otherwise, and IIG has failed to establish that it was prejudiced by the implied amendment of the complaint to conform to proof.
C. Punitive Damages
IIG argued against a punitive damages award, but alternatively argued that any punitive damages award should not exceed $99,000, or one-half of the $198,000 fraud damages award. Plaintiffs, on the other hand, argued for $600,000 in punitive damages, or three times the fraud damages award. The jury awarded $400,000, which was twice the damages award.
IIG contends on appeal that the $400,000 punitive damages award must be reversed because: (1) reversal of the fraud verdict negates the punitive damages award; (2) “[t]he jury’s exoneration of Charlie Loucks eliminates any basis for the punitive damages award against IIG”; (3) the evidence fails to support a punitive damages award; and (4) the amount of the award is unconstitutionally excessive. For the reasons that were previously discussed, we reject the first three contentions. We therefore turn to the last contention.
“Where the defendant’s oppression, fraud or malice has been proven by clear and convincing evidence, California law permits the recovery of punitive damages ‘for the sake of example and by way of punishing the defendant.’ (Civ. Code, § 3294, subd. (a).) As we explained in Neal v. Farmers Ins. Exchange[ (1978)] 21 Cal.3d [910,] 928, and Adams v. Murakami[ (1991)] 54 Cal.3d [105,] 110-112, the defendant’s financial condition is an essential factor in fixing an amount that is sufficient to serve these goals without exceeding the necessary level of punishment. ‘[O]bviously, the function of deterrence . . . will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort.’ (Neal v. Farmers Ins. Exchange, supra, at p. 928.) ‘[P]unitive damage awards should not be a routine cost of doing business that an industry can simply pass on to its customers through price increases, while continuing the conduct the law proscribes.’ (Lane v. Hughes Aircraft Co. (2000) 22 Cal.4th 405, 427 (conc. opn. of Brown, J.).) On the other hand, ‘the purpose of punitive damages is not served by financially destroying a defendant.’ (Adams v. Murakami, supra, at p. 112.)” (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1184.)
Punitive damages awards generally may not exceed 10 percent of a defendant’s net worth. (Grassilli v. Barr (2006) 142 Cal.App.4th 1260, 1291; Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1596.) “We are convinced that in most cases there must be evidence of the defendant’s net worth in order to support the punitive damage award. [Fn. omitted.] An award based solely on the alleged ‘profit’ gained by the defendant, in the absence of evidence of net worth, raises the potential of its crippling or destroying the defendant, focusing as it does solely on the assets side of the balance sheet without examining the liabilities side of the balance sheet. Without evidence of the entire financial picture, an award based on ‘profit’ could leave a defendant devoid of assets with which to pay his other liabilities.” (Kenly v. Ukegawa (1993) 16 Cal.App.4th 49, 57.)
In this case, the defense presented evidence that IIG’s net worth was $2,074,804. IIG contends that because this amount was the only evidence of net worth presented at trial, the jury was required to accept it. IIG asserts that the $400,000 punitive damages award, as measured against the sole evidence of net worth, was excessive in that it amounts to 19.3 percent of $2,074,804. Williams, on the other hand, argues that the award was not excessive because the jury reasonably concluded that IIG had overstated its liabilities and undervalued its assets by as much as $12 million, resulting in a net worth much higher than $2,074,804.
As will be discussed, the jury, however, was instructed that it was not required to accept IIG’s expert’s opinion on net worth, and IIG does not challenge the instruction as erroneous.
It was undisputed at trial that IIG is “an asset holding company” whose primary asset was the project’s development site in India (the property), which in 2002 and 2004 had an appraised value of $41 million. IIG contended that the property recently had suffered a severe decline in value when the Indian government issued a restriction that prevents developers from selling land in special economic zones such as the one in which the property is located, subject to “exemptions, concessions and drawbacks.” Sid Luckenbach, IIG’s expert witness on valuation, testified that the restriction had a negative effect on the property’s value “[b]ecause any buyer would prefer an unrestricted asset over a restricted asset.” Without referring to any comparable sales of properties in special economic zones, Luckenbach testified that, as a result of the restriction, the property’s value had declined by 50 percent from $41 million to $20,750,000. Based on IIG’s stated liabilities of $18,675,196, Luckenbach testified that, as a result of the restriction, IIG’s net worth at trial was only $2,074,804 ($20,750,000 - $18,675,196 = $2,074,804).
On cross-examination, Luckenbach conceded that he had simply accepted IIG’s liability figures without examining them. When asked whether, given the joint venture with the Indian government, he had determined if the restriction’s stated “exemptions, concessions and drawbacks” were applicable, Luckenbach admitted he had not considered that possibility. Luckenbach conceded that this omission in his analysis could be significant to the valuation of the property because “if they are able to work around” the restriction, the property value could be much higher than $20,750,000.
In closing argument, plaintiffs’ counsel argued that Luckenbach had undervalued IIG’s assets by failing to include the $12 million in investment funds that were stipulated to during the first phase of trial, resulting in an understated net worth calculation. In addition, counsel argued that Luckenbach’s net worth calculation was not trustworthy because it was based on IIG’s untested statement of its liabilities. Plaintiffs’ counsel also argued that Luckenbach’s testimony regarding the loss of property value caused by the restriction was inadequate because the restriction, which applied to developers, might not apply to this project, which was a joint venture with the Indian government, and the restriction contained exemptions and exceptions that Luckenbach had not even considered.
The trial court instructed the jury that in awarding punitive damages, it was not required to accept an expert’s opinion, and that it was to decide whether to believe and use an expert’s testimony as a basis for its decision. Among other factors, the jury was told to consider the reasons for an expert’s opinion in deciding whether to believe his testimony.
On appeal, “[t]he standards for review of an award of punitive damages are well established. Reversal of an award is appropriate only where the record as a whole, viewed most favorably to the judgment, indicates the award was the result of passion and prejudice. (Neal v. Farmers Ins. Exchange[, supra,] 21 Cal.3d 910, 927.) Although a trial court’s approval of the punitive damage award (by denial of a motion for new trial) is entitled to significant weight (see Roemer v. Retail Credit Co. (1975) 44 Cal.App.3d 926, 937), deference is not abdication. It is the duty and responsibility of an appellate court to intervene where the award is so grossly disproportionate or palpably excessive as to raise a presumption that it was the product of passion and prejudice. (Rosener v. Sears, Roebuck & Co. (1980) 110 Cal.App.3d 740, 749-750, citing numerous cases.) We are also guided by the recognition that punitive damages constitute a windfall, create the anomaly of excessive compensation, and are therefore not favored in the law. (Id. at p. 750.) [Fn. omitted.]” (Dumas v. Stocker (1989) 213 Cal.App.3d 1262, 1266.)
The record supports a finding that Luckenbach’s net worth calculation was based on a single asset, the property in India, and did not include the $12 million in investment income that was shown, by stipulation, to have been acquired by IIG. Assuming in favor of the judgment that the jury considered the $12 million as an omitted asset, it reasonably could have found IIG’s net worth to be as high as $14,074,804 rather than $2,074,804. Assuming a net worth of $14 million, the $400,000 punitive damages award would have been less than three percent of IIG’s net worth, which IIG does not argue was excessive.
We also assume in favor of the judgment that the jury found Luckenbach’s valuation testimony, including his use of the untested liability figures provided by IIG, to be lacking. Once a jury discredits a party’s evidence as to one aspect of a case—in this case, the jury previously rejected, for example, IIG’s evidence that it had no contractual obligation to pay Williams a salary of $25,000 per month—the jury may distrust other portions of the party’s evidence. (Cf. Vallbona v. Springer (1996) 43 Cal.App.4th 1525, 1537 [if a witness is knowingly false in one part of his testimony, the jury may distrust other portions as well].) “Moreover, the jury could properly view with distrust the weak evidence of liabilities presented by [IIG] since it was within [IIG’s] power to produce stronger and more satisfactory evidence. (Evid. Code, § 412.) [Fn. omitted.]” (Vallbona v. Springer, supra, at p. 1537.)
IIG contends that plaintiffs, who had the burden below to produce evidence of IIG’s net worth, failed to carry their burden. We find this to be a moot argument, however, given that IIG provided expert testimony on this topic. This is not a case where the jury had no evidence of net worth. On the contrary, the jury had ample evidence of net worth, but rejected some of it as untrustworthy.
We conclude that IIG has failed to show that the $400,000 punitive damages award, when viewed in light of the evidence and the instructions, was so grossly disproportionate or palpably excessive as to raise a presumption that it was the product of passion or prejudice.
II. Plaintiffs’ Cross-Appeal
A. Attorney Fees
Williams argued below that in order to relieve himself of the Broadacre judgment, he was forced to hire an attorney to prosecute this action against IIG, Vernon, and Charles. Williams contended that because his attorney fee agreement required him to pay his attorney 40 percent of the value of Williams’s interest in the project, he was entitled to recover that amount from IIG. Williams relies upon the “tort of another” exception to the general rule (described by the parties as the “American Rule”) that requires each party to bear its own fees in the absence of an agreement or statute providing otherwise.
Defendants filed a successful motion in limine to exclude any evidence of attorney fees barred by the American Rule. In his cross-appeal, Williams challenges the order as erroneous. We disagree.
“Although as a general rule attorneys’ fees incurred by a plaintiff in an action for damages for fraud are nonrecoverable [citations], an exception is recognized where a plaintiff, as a proximate result of defendant’s fraud, is required to prosecute or defend an action against a third party for the protection of his interest. (Prentice v. North Amer. Title Guar. Corp., 59 Cal.2d 618, 620.) In such cases reasonable attorneys’ fees incurred in connection with the third party lawsuit are recoverable as damages caused by defendant’s tortious act. (Prentice v. North Amer. Title Guar. Corp., supra; Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 57 Cal.App.3d 104, 112.)” (Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co., supra, 66 Cal.App.3d at p. 149.)
As stated above, the tort of another exception applies when the plaintiff incurs reasonable attorney fees, as a proximate result of the defendant’s tortious act, in a third party lawsuit. (Glendale Fed. Sav. & Loan Assn., supra, 66 Cal.App.3d at p. 149.) This was a direct lawsuit, not against a third party, but against the alleged tortfeasors. Accordingly, the “tort of another” exception does not apply.
B. Vernon’s Liability
A breach of implied covenant claim can be asserted only against a party to the contract. (Smith v. City and County of San Francisco (1990) 225 Cal.App.3d 38, 49.) In this case, plaintiffs contend that they should have been allowed to litigate their breach of implied covenant claim against Vernon, even though he was not an original party to IIG’s agreement to assume IMC’s obligations under the Broadacre note (the original agreement). Plaintiffs contend that Vernon subsequently became a party to the original agreement when he signed, in a personal capacity, two subsequent agreements that referred to the original agreement: (1) the January 10, 2000 Master Agreement; and (2) the January 10, 2000 Second Amended and Restated Operating Agreement. Both subsequent agreements contained recitals that, in relevant part, described IIG’s original agreement to “assume[] the obligations of [IMC] under the Broadacre Note.”
Vernon signed the subsequent agreements above a printed signature line that contained just his name but not his position or title with IIG. Based on the omission of his position or title, plaintiffs contend that Vernon signed the subsequent agreements strictly in his personal capacity, which, as a result of the recitals regarding the Broadacre note, made him a party to IIG’s original agreement to assume IMC’s obligations under the Broadacre note.
Reasonably construed, we conclude the subsequent agreements did not make Vernon a party to the original agreement. The recitals in the subsequent agreements showed no intention to bind Vernon to IIG’s prior assumption of the Broadacre note, nor did they impose upon him a separate obligation to assume the note. Accordingly, we deem the capacity in which Vernon signed the subsequent agreements to be irrelevant to our determination of their meaning. We conclude that the evidence was insufficient, as a matter of law, to show that Vernon was a party to the original agreement.
In a supplemental letter brief, Williams contends that in limine motions should not be used to determine questions that properly should go to the jury, or that should be resolved by nonsuit or directed verdict. (Citing Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582 [improper use of in limine motion procedure was harmless error].) The relevant issue, however, is not whether Vernon participated in IIG’s breach of the implied covenant, as IIG argues in its brief, but whether Vernon was a party to the original agreement to assume the Broadacre note, which we decided as a legal issue. “[N]ormally the meaning of contract language . . . is a legal question, not a factual question. [Citation.]” (Solis v. Kirkwood Resort Co. (2001) 94 Cal.App.4th 354, 360.) Accordingly, the procedural propriety of the in limine motions was rendered moot by our legal determination that Vernon was not a party to the original agreement.
DISPOSITION
The judgment is affirmed. The parties are to bear their own costs.
We concur: WILLHITE, Acting P. J., MANELLA, J.
We decline to reach the instructional error issue because IIG has failed to show good cause for not raising it in the opening brief. Issues raised for the first time in a reply brief need not be entertained in the absence of a showing of good cause why such issues were not raised in the opening brief. (Scott v. CIBA Vision Corp. (1995) 38 Cal.App.4th 307, 322; 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 616, pp. 647-648.)