Opinion
F061135
10-05-2011
INOVA ENTERPRISES, Plaintiff and Appellant, v. AMANDEEP SINGH, Defendant and Respondent.
Georgeson and Belardinelli, C. Russell Georgeson, Richard A. Belardinelli and Christopher B. Noyes for Plaintiff and Appellant. Smith & Burstein and Jack B. Burstein for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 10CECG00821)
OPINION
APPEAL from a judgment of the Superior Court of Fresno County. Alan M. Simpson, Judge.
Georgeson and Belardinelli, C. Russell Georgeson, Richard A. Belardinelli and Christopher B. Noyes for Plaintiff and Appellant.
Smith & Burstein and Jack B. Burstein for Defendant and Respondent.
In 2007, Amandeep Singh (Singh) and Kulwinder Sandhu (Sandhu) sued Inova Enterprises, LLC (Inova) for breach of contract and fraud on a promissory note. In 2008, Inova filed a separate action against Singh and Sandhu for breach of contract under the promissory note, seeking to recover under the promissory note's acceleration clause. After the two cases were consolidated for trial, the jury returned a special verdict finding all parties had failed to perform their obligations under the promissory note. Accordingly, no one recovered. In 2010, Inova sued Singh and Sandu for damages arising from nonpayment on the same promissory note, again invoking the acceleration clause. Singh demurred under the principles of res judicata. The trial court sustained the demurrer without leave to amend. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
On July 22, 2005, Singh and Sandhu executed a promissory note for $505,004.00 in Inova's favor, secured by personal property located at 5687 East Kings Canyon Road in Fresno (note). Singh and Sandhu were to pay Inova $3,897.70 monthly from December 29, 2005 until November 29, 2012, when the remaining balance would be due. Any installment not received within 10 days of the due date would accrue a 10% late fee. Two principal reduction payments of $25,000 were due on May 29, 2006 and November 29, 2006. The note included an acceleration clause which stated: "Should default be made in payment of any installment when due, the entire sum of principal and accrued interest shall become immediately due, without notice, at the option of the holder of this note."
In 2007, Singh and Sandhu filed an action against Inova for fraud and breach of contract on the note. On August 11, 2008, Inova filed a separate action against Singh and Sandhu for breach of contract on the note based on nonpayment of past-due installments and sought to recover the entire sum of principal and accrued interest totaling $501,892.02 under the acceleration clause. These two cases were consolidated for trial (prior action).
On August 6, 2009, the jury returned special verdicts on all of the claims. On Singh and Sandhu's breach of contract claim against Inova, the jury found that Singh and Sandhu did not do all or substantially all of the things the contract required of them and their nonperformance was not excused. On Singh and Sandhu's fraud claim, the jury found Inova made a false representation to them, but they had not reasonably relied on it. On Inova's breach of contract claim against Singh and Sandhu, the jury found that Singh and Sandhu entered into a contract, Inova did not do all or substantially all of the things the contract required of it, and its nonperformance was not excused. The jury awarded no damages to anyone on any of the claims. Judgment on the jury verdicts was entered on August 24, 2009.
On August 11, 2009, before the judgment in the prior action had been entered, Inova's counsel wrote Singh and Sandhu's counsel, demanding $71,886.99 as payment for sums due under the note. The letter included an attachment detailing how the past due sum had been calculated: Monthly installments of $3,987.70 from March 29, 2008 through July 29, 2009, plus $389.77 (10%) per month in late fees.
On March 5, 2010, Inova filed the present action against Singh and Sandhu on the same note at issue in the prior action, seeking damages of $440,269.25 for nonpayment on the note (present action). A copy of the August 11, 2009, letter was attached to the complaint .
Singh filed a demurrer to Inova's complaint on the ground that res judicata applied to the present action because Inova was suing on the same note and its complaint was basically identical to the complaint in the prior action, only differing in the amount of damages sought in the prior action ($501,892.02) and in the present action ($440,269.25). Inova opposed the demurrer, arguing that res judicata did not apply because its right to future payments on the note was not "at issue" in the prior action. Following oral argument, the trial court sustained the demurrer without leave to amend based on res judicata.
Sandhu is not a party to the demurrer. According to Singh, Sandhu filed an answer, but then filed for bankruptcy while the demurrer was pending.
DISCUSSION
Standard of Review
"On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. We give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citations.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions, or conclusions of law. [Citations.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse." (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.)
Since the function of a demurrer is to test a pleading's sufficiency as a matter of law, we apply the de novo standard of review. (California Logistics, Inc. v. State (2008) 161 Cal.App.4th 242, 247.) We must affirm the judgment if it is correct on any ground stated in the demurrer, independent of the trial court's stated reasons. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.) However, it is Inova's burden to demonstrate the trial court sustained the demurrer erroneously. (Smith v. County of Kern (1993) 20 Cal.App.4th 1826, 1829-1830.) It is also Inova's burden to show that further amendment could cure the complaint's defects. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
Judicial Notice
On March 3, 2011, Singh filed a motion to augment the record with the following portions of the reporter's transcript in the prior action: (1) an excerpt from Inova's counsel's opening statement; (2) the testimony of Scott Dye, Inova's expert witness who calculated the total amount due in the prior action; and (3) an excerpt from Inova's counsel's closing argument. Singh alternatively requested that this court take judicial notice of these transcripts. Inova opposed both the motion to augment and the request for judicial notice. On April 1, 2011, we denied Singh's motion to augment the record and deferred his alternative request for judicial notice pending consideration of the appeal on the merits. (People v. Preslie (1977) 70 Cal.App.3d 486, 493-494.) We now grant Singh's request.
First, the request was made by formal noticed motion filed separately from Singh's appellate brief as required by California Rules of Court, rule 8.252(a)(1). Second, as court records, the certified transcripts are proper subjects for judicial notice. (Evid. Code, § 452, subd. (d).) Third, this court may take judicial notice of matters which could have been noticed by the trial court, even when the trial court was not requested to take such notice. (Evid. Code, § 459; Hogen v. Valley Hospital (1983) 147 Cal.App.3d 119, 125.) Finally, the transcripts are relevant to the issue of res judicata. (Mangini v. R.J. Reynolds Tobacco Co. (1994) 7 Cal.4th 1057, 1063, overruled on other grounds in In re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276 [stating that only relevant material may be judicially noticed].)
While we take judicial notice that the trial participants made the statements in the transcripts, we do not take judicial notice of the truth of the statements. (Bach v. McNelis (1989) 207 Cal.App.3d 852, 864-865 [explaining that while a court may take judicial notice in connection with a demurrer, it may not judicially notice the truth of assertions in declarations or affidavits filed in court proceedings]; accord Garcia v. Sterling (1985) 176 Cal.App.3d 17, 21-22.)
Inova contends Singh failed to establish "with some certainty" how the judicially noticed material would be useful on appeal. Singh, however, argues the transcripts are relevant to disprove Inova's claim the accelerated balance of $502,622.68 "was not at issue" in the prior action because the prior action was only based on breaches that occurred prior to the filing of Inova's first complaint. To bar a cause of action under res judicata, an essential requirement is that the same cause of action in a present action be advanced in a prior action. (In re Estate of Redfield (2011) 193 Cal.App.4th 1526, 1534.) Here, the record is unclear regarding the breaches at issue in the prior action, which makes it difficult to determine whether res judicata applies. The transcripts are relevant to this issue, as Dye's testimony shows he calculated the balance due of $502,622.68 based on amounts that were "due, owing, and unpaid as of July 20, 2009," and the opening and closing statements show this is what Inova sought from the jury. On appeal, these documents are clearly relevant to show that res judicata applies.
Res Judicata
Inova argues the present action is not barred by res judicata. Res judicata, or claim preclusion, bars the relitigation of the same cause of action in a subsequent suit between identical parties or parties with whom they are in privity. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897.) Res judicata also bars claims that could have been brought in the prior action. (Planning and Conservation League v. Castaic Lake Water Agency (2009) 180 Cal.App.4th 210, 226.) The purpose of res judicata is to "preserve the integrity of the judicial system, promote judicial economy, and protect litigants from harassment by vexatious litigation." (Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 829.) In essence, it precludes the piecemeal litigation of claims. (Weikel v. TCW Realty Fund II Holding Co. (1997) 55 Cal.App.4th 1234, 1245.)
Res judicata applies if "(1) the decision in the prior proceeding is final and on the merits; (2) the present proceeding is on the same cause of action as the prior proceeding; and (3) the parties in the present proceeding or parties in privity with them were parties in the prior proceeding." (Federation of Hillside Canyon Assns. v. City of Los Angeles (2004) 126 Cal.App.4th 1180, 1202.) Here, the last element is undisputed, because Inova and Singh were both parties in the prior and present action, but Inova contends the other two requirements are not satisfied.
Inova contends the second element is not satisfied because, in the prior action, it sued for breaches that occurred before the filing of its original complaint, while in the present action, it is suing on new breaches not at issue in the prior action. We disagree. Both complaints are based on Singh and Sandhu's nonpayment on the July 2005 note, and the complaints are basically identical except for the amounts requested. The August 2009 letter from Inova's counsel to Singh's counsel demands $71,886.99 for breaches that occurred from March 29, 2008 through July 29, 2009, which is included in the $440,269.25 requested in the present action. The items judicially noticed show that Inova sued on those same breaches in the prior action. In the prior action, both Inova's counsel and Inova's expert witness, an accountant who calculated the amount due, confirmed at trial that there was $502,622.68 due as of July 20, 2009. The expert explained that as of July 25, 2008 the balance due would have been $457,499.44. According to those calculations, the balance grew by $45,123.24 from July 25, 2008 to July 20, 2009, due to Singh and Sandhu's continued nonpayment. Therefore, in its request for $502,622.68, Inova clearly sought damages from breaches which occurred up until July 2009. In the present action, Inova also seeks damages accrued from breaches from March 2008 through July 2009, as noted on the letter attached to the complaint. These breaches were at issue in the prior action. Therefore, the present action is based on the same breaches as the prior action.
Inova argues that it has a right to sue on successive breaches based on the note, as each month's failure to pay that has not been adjudicated constitutes a new cause of action. We need not decide whether Inova is precluded from suing on new breaches that were not included in the prior action, the viability of the acceleration clause if it is invoked due to new breaches, or any other cause of action that might arise from the contractual relationship, as Inova did not sue solely on subsequent breaches or claim any new breach. Instead, Inova sued solely on the same breaches which occurred from March 2008 through July 2009.
We note that the trial court, in sustaining the demurrer, stated in its written decision that "once Inova accelerated the entire amount due under the note in the prior action and was awarded nothing at trial, there is nothing left to sue upon now." We question whether this statement is correct, given Code of Civil Procedure section 1047, which provides that "[s]uccessive actions may be maintained upon the same contract or transaction, whenever, after the former action, a new cause of action arises therefrom." We need not decide this issue, however, since we affirm the trial court's ruling on another ground, i.e. that Inova is suing in the present action for the same breaches it sued on in the prior action. "In reviewing the granting of a demurrer, we review the trial court's result for error, and not its legal reasoning." (Davies v. Sallie Mae, Inc. (2008) 168 Cal.App.4th 1086, 1090.)
Inova contends that in the prior action, the jury "expressly refrained from any finding ascertaining breach and damages," and therefore did not determine those issues. This leads us to the issue of whether the prior action is final and on the merits. (Bernhard v. Bank of America Nat. Trust & Savings Ass'n (1942) 19 Cal.2d 807, 813.) Inova asserts the jury did not fully adjudicate the breach of contract claim because it did not answer questions in the special verdict form regarding Singh and Sandhu's breach of contract and Inova's damages. In support, Inova cites Stark v. Coker (1942) 20 Cal.2d 839, which states, "And when it affirmatively appears that an issue was not determined by the judgment, it obviously is not res judicata upon that issue. A judgment is not an adjudication as to matters which the court expressly refrains from determining." (Id. at p. 843.) Inova argues that the jury expressly refrained from ascertaining breach and damages. We are not convinced. Stark v. Coker does not require a jury to complete a special verdict form to fully adjudicate an issue.
Moreover, the jury did not "expressly" refrain from adjudging the issues of breach and damages. In order to recover on a cause of action for breach of contract, the plaintiff must prove: (1) existence of a contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages the plaintiff incurs due to defendant's breach. CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) The jury found Inova did not perform its obligations under the contract and its nonperformance was unexcused. Because Inova did not satisfy the second element necessary to prevail on its breach of contract claim, the jury was not required to address the other elements of breach of contract in the special verdict form. Inova's breach of contract claim certainly was before the jury and decided by it. Moreover, the jury was presented with evidence of Singh and Sandhu's breach of contract due to nonpayment during the trial, so it clearly was at issue. The jury decided the issue of damages when it chose not to award any to Inova. Therefore, this matter was fully adjudicated and Inova's argument is without merit.
Since the breach of contract cause of action asserted in the present action was adjudicated in the prior action, with a final decision on the merits, and the parties in both actions are identical, res judicata applies.
Leave to Amend
Inova contends the trial court abused its discretion in sustaining Singh's demurrer without leave to amend. Inova has the burden of showing how the complaint can be amended to state a cause of action. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) This showing, however, need not be made to the trial court; Inova may make this showing for the first time on appeal. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386; Code Civ. Proc., § 472c, subd. (a).) To meet this burden, Inova must show in what manner the pleadings can be amended and how such amendments will change the legal effect of its complaint. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)
Inova must show factual allegations that sufficiently state required elements of a cause of action. (McMartin v. Children's Institute International (1989) 212 Cal.App.3d 1393, 1408.) Allegations must be factual and specific, not vague or conclusory. (Cooper v. Equity Gen. Insurance (1990) 219 Cal.App.3d 1252, 1263-1264.) Where a plaintiff offers no allegations to support the possibility of amendment, there is no basis for finding the trial court abused its discretion when it sustained the demurrer without leave to amend. (New Plumbing Contractors, Inc. v. Nationwide Mutual Ins. Co. (1992) 7 Cal.App.4th 1088, 1098.) "Although there is a strong policy in favor of liberal allowance of amendments, the trial court's discretion will not be disturbed on appeal unless it clearly has been abused." (Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 230.)
During oral argument on the demurrer, Inova orally moved for leave to amend its complaint to allege "waiver, estoppel, revival, [and] agency". The asserted factual basis for these new legal theories was the payment of two checks to Inova by Sandhu, which Inova received on March 5, 2010, the same day it filed the present action. Inova, however, never requested leave to amend in its May 2010 opposition to Singh's demurrer. Instead, Inova requested leave to amend for the first time at the June 2010 oral argument on the demurrer. In response to Inova's new argument, Singh's counsel explained that it was difficult for him to respond to Inova's request for leave to amend, because it had never been addressed before. Without stating its reasoning, the court denied Inova leave to amend its complaint.
Inova alleges that Singh was in agency on the note with Sandhu, who signed the checks.
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On appeal, Inova requests leave to amend due to Sandhu's payment and again claims the legal theories of waiver, estoppel, revival, and agency. Aside from broadly stating these new legal theories, it does not explain their significance, nor does it show how the amendment will change the legal effect of its complaint. It cites no legal authority to support the new theories it alleges. It is clear that Inova does not properly show how it could cure its complaint with the new information. Instead it asserts an abstract right to amend, which is insufficient. (McKelvey v. Boeing North American, Inc. (1999) 74 Cal.App.4th 151, 161, superseded by statute on another point, as stated in Grisham v. Philip Morris USA, Inc. (2007) 40 Cal.4th 623, 637 fn. 8.)
Inova does not meet its burden of showing how the amendment will change the legal effect of its pleadings. Instead, by its proposed amendments, it seeks to resurrect the claim the jury resolved in the prior action. The trial court did not abuse its discretion by denying Inova leave to amend its complaint.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent.
Gomes, Acting P.J.
WE CONCUR:
Poochigian, J.
Franson, J.