CRV
Imperial-Worthington v. KB Home Coastal
Filed
11/12/13 CRV
Imperial-Worthington v. KB Home Coastal CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
CRV IMPERIAL-WORTHINGTON, LP,
Cross-complainant and Respondent,
v.
KB HOME COASTAL, INC.,
Cross-defendant and Appellant.
D062261
(Super. Ct. No. 37-2011-00083091-
CU-CO-CTL)
APPEAL from
an order of the Superior Court
of
County, Luis R. Vargas, Judge.
Reversed and remanded with directions.
Naumann Law Firm and William
H. Naumann, Monnett De La Torre for Cross-complainant and Respondent.
Newmeyer
& Dillion, John E. Bowerbank, Paul L. Tetzloff, C. Kendie Schlecht, Lily N.
Toubi, for Cross-defendant and Appellant.
Appellant
KB Home Coastal, Inc. (KB) appeals from an order denying its special motion to
strike the cross-complaint of respondent CRV Imperial-Worthington, LP (CRV) as
a strategic lawsuit against public participation. (Code Civ. Proc.,
§ 425.16, commonly known as the anti-SLAPP statute.) CRV's cross-complaint alleged that KB, by
suing CRV for indemnity and other causes of action, had breached a written
settlement agreement between CRV and KB containing a broad mutual release of
certain claims.
On appeal,
KB contends its motion should have been granted and CRV's cross-complaint
stricken because (1) it satisfied its burden to show CRV's cause of action was
based upon KB's petitioning activity, putting it under the ambit of the
anti-SLAPP statute and (2) CRV failed to produce
of action for breach of contract and therefore did not meet its burden of
establishing a probability of prevailing on the merits of that claim. We agree that CRV has not met its burden to
establish a probability of prevailing on the merits of its breach of contract
cross-complaint, and therefore reverse.
FACTUAL AND
PROCEDURAL BACKGROUND
The facts
are taken from CRV's cross-complaint for breach
of written contract, as well as the evidence presented by the parties in
connection with KB's anti-SLAPP motion.
In February
2006, KB entered into a purchase agreement with CRV for the purchase of
residential lots within a two-phase subdivision project (at times, the Monterrey
Park project) in the city of Imperial
(City). Under the purchase agreement, KB
purchased the lots in phase 1; KB was granted the option to acquire the lots
within phase 2; KB agreed to take over the subdivision mapping process with
City for both phases; KB agreed to install all City-mandated infrastructure
improvements on both phases; and KB agreed to obtain all City-required security
improvement bonds.
In
conjunction with the purchase agreement, KB and CRV entered into a construction
license agreement giving KB the right to enter the phase 2 lots to construct
infrastructure improvements before acquiring them from CRV. As a condition precedent to the grant of the
license, KB was to obtain all agreements and authorizations required by any
governmental agency for its use of CRV's property. City required KB and also CRV, because CRV
was still a title holder, to enter into a subdivision improvement agreement for
the construction of certain improvements relating to both phases of the
project. The subdivision improvement
agreement provides that CRV and KB are jointly and severally responsible for
complying with the agreement's provisions, however, KB alone provided the
security for performance of the agreement by obtaining a bond.
KB hired a
contractor, TC Construction, to complete the improvements under the subdivision
improvement agreement. KB and TC
Construction, however, ended up in a dispute over payment, resulting in TC
Construction filing a mechanic's lien on the title to the phase 2 lots and instituting
litigation against both KB and CRV.
In October
2009, in an effort to resolve that dispute and remove the contractor's mechanic's
lien, KB and CRV entered into a settlement agreement and mutual release of all
claims (the settlement agreement), in which KB granted a release and waiver of
all claims against CRV and its agents "relating to or arising from . . .
any claim or demand relating to" the purchase agreement and the
construction license agreement. As
consideration for the release, CRV paid to KB $442,400 in funds that KB had
deposited into a "holdback" account.
The settlement agreement provides in part: "[I]t is the intention of CRV and KB
hereto to settle and dispose of, fully and completely, any and all of their
respective claims, demands and cause or causes of action, or litigation
relating to the same, relating to (1) the Purchase Agreement between the
parties; (2) the Construction License Agreement between the parties, and/or (3)
the litigation instituted by TC Construction." It further provides: "This Agreement affects the settlement of
the claims which are denied and contested . . . . KB, for its part, and CRV, for its part,
denies any liability in connection with any of the claims, and in entering into
this Agreement, intends only to avoid further litigation and to buy their
respective peace in regards to the relationship between them as it relates to
the Monterrey Park
project and all agreements and contracts relating thereto."
After KB
defaulted under the subdivision improvement agreement, City filed an action
against KB and another party for breach of that agreement and recovery on the
bonds. Thereafter, KB cross-complained
against CRV and others seeking indemnity and other relief, and eventually, in
November 2011, filed its second amended cross-complaint for unjust enrichment,
implied indemnity, contribution, reimbursement, declaratory relief, and breach
of the implied covenant of good faith and fair dealing. In part, KB alleged that it and CRV were
jointly and severally responsible for complying with the subdivision
improvement agreement's terms as joint subdividers of the Monterrey Park
project, and that, if KB were found liable for the improvement work at phase 2
of the project, CRV should pay for the work.
KB also alleged CRV, via the October 2009 settlement agreement, released
KB from any further obligation to construct improvements under the purchase
agreement, and could not compel KB to pay for or complete those improvements.
CRV in turn
cross-complained against KB for breach of the written settlement agreement,
alleging in part that the claims and demands in KB's cross-complaint related to
and arose from their purchase agreement and the construction license
agreement. Eventually, CRV filed a first
amended answer to KB's second-amended indemnity cross-complaint, including an
affirmative defense of settlement and release.
KB moved to
strike CRV's cross-complaint under section 425.16. It argued CRV's breach of contract cross-complaint
and its alleged damages arose solely from KB's filing of its indemnity
cross-complaint. It argued CRV could not
establish a probability of prevailing on the merits of its cross-complaint
because the actions underlying CRV's pleading (KB's filing of its own indemnity
cross-complaint) came squarely within the absolute litigation privilege of
Civil Code section 47, subdivision (b).
According to KB, CRV's cross-complaint was filed in retaliation against
KB for KB's filing of its own lawsuit.
KB further argued CRV's claim that KB had breached the settlement
agreement was an affirmative defense that CRV had the burden to prove; it
maintained CRV's cross-complaint was unnecessary and a waste of judicial
resources. Finally, KB argued it did not
give CRV a broad release as to any claims by third parties, such as City,
relating to the subdivision project; that its release was strictly limited to
claims by TC Construction.
In
opposition, CRV argued that the fact its action was filed after KB's
petitioning activity did not mean it arose from that activity; according to
CRV, its cross-complaint was based on the terms of the parties' October 2009
settlement agreement, which included a general release as well as a waiver of
Civil Code section 1542. KB's indemnity
cross-complaint, CRV argued, was merely evidence that KB did not comply with
the settlement agreement. CRV maintained
KB had waived the right to section 425.16 protections by entering into the
settlement agreement. As for CRV's
ability to demonstrate a probability of prevailing on its breach of contract
cause of action, it submitted the declaration of Thomas Dobron, at the time CRV's
general partner and one of its limited partners. Dobron asserted in part that CRV had "done
all of the significant things that the settlement agreement required it to do
and/or it was excused from having to do those things" due to KB's breach,
and "all conditions required for KB to perform under the settlement
agreement have occurred." (Some
capitalization omitted.) CRV further
argued the Civil Code section 47, subdivision (b) litigation privilege did not
apply to its breach of contract action.
The trial
court tentatively granted KB's motion, ruling CRV's cross-complaint arose
entirely out of petitioning activity and statements made in the course of judicial
proceedings, and CRV did not show a probability of prevailing on the merits of
its action against KB. Granting KB's
request for judicial notice, the court ruled CRV's cross-complaint was
unnecessary as it had pleaded an affirmative defense of settlement agreement
and release in its first amended answer to KB's cross-complaint, and had moved
for summary judgment on that defense.
Following
oral argument, the court denied KB's motion.
Though it did not change its conclusion that CRV's action arose out of
KB's petitioning activity, it ruled CRV established a probability of prevailing
on the merits of its cross-complaint. It
found CRV's cross-complaint was not wholly duplicative of its affirmative
defense of settlement agreement and release set forth in its first amended
answer, in that it sought relief that it could not otherwise recover via its
affirmative defense. It ruled CRV's
claim was legally sufficient and supported by a prima facie showing of facts to
sustain a favorable judgment. KB filed
this appeal.
DISCUSSION
I. Standard
of Review
Section
425.16 provides a procedural remedy to dispose of lawsuits that are brought to chill
or punish a party's valid exercise of constitutional
the government for redress of grievances. (Personal
Court Reporters, Inc. v . Rand
evaluation of an anti-SLAPP motion involves two steps. "[T]he trial court
first determines whether the defendant has made a threshold showing
that the challenged cause of action arises from protected activity. [Citation.]
Under . . . section 425.16 '[a] cause of action against a person arising
from any act of that person in furtherance of
the person's right of petition or free speech . . . shall be subject
to a special motion to strike. . . .' [Citation.] 'A cause of action "arising from"
defendant's litigation activity may appropriately be the subject of a section
425.16 motion to strike.' [Citation.] 'Any act' includes communicative conduct such
as the filing, funding, and prosecution of a civil action. [Citation.]
This includes qualifying acts committed by attorneys in representing
clients in litigation. [Citations.]
finds the defendant
has made the
determines then whether
the plaintiff has
demonstrated
a probability
of prevailing on
the claim. [Citation.]
'In order to
establish a probability
of prevailing
on the claim .
. . , a plaintiff responding
to an anti-
" '
] a legally sufficient
claim.' " [
"must demonstrate
is both legally
sufficient and supported
by a sufficient
prima facie showing
of facts to
judgment if the
evidence submitted by
the plaintiff is
credited." ' "
(2006) 37 Cal.4th 1048, 1055-1056; see also Simpson
Strong-Tie Co. v. Gore (2010) 49 Cal.4th 12, 21;
§ 425.16, subd. (h) [making cross-complaints subject to the
anti-SLAPP statute].) If the moving
party does not satisfy the first step, the court need not address the second
step, and must deny the motion to strike.
(Aguilar v. Goldstein (2012)
207 Cal.App.4th 1152, 1160.)
We review
the trial court's order denying KB's section 425.16 motion de novo. (Oasis
West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 819.) A reviewing court will " 'independently
review the record to determine whether the asserted causes of action arise from
the defendant's free speech or petitioning activity, and, if so, whether the
plaintiff has shown a probability of prevailing. [Citations.]
We consider "the pleadings, and supporting and opposing affidavits
stating the facts upon which the liability or defense is based." [Citations.]
We do not reweigh the evidence, but accept as true all evidence
favorable to the plaintiff and evaluate the defendant's evidence only to
determine if it has defeated the evidence submitted by the plaintiff as a
matter of law. [Citations.] If the trial court's decision denying an
anti-SLAPP motion is correct on any theory applicable to the case, we may
affirm the order regardless of the correctness of the grounds on which the
lower court reached its conclusion.' "
(Personal Court Reporters, Inc. v.
Rand, supra, 205 Cal.App.4th at
pp. 188-189; see Soukup v. Law Offices of
Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3.)
II. KB's
Burden
As
indicated, the trial court ruled KB met its initial burden on its anti-SLAPP
motion. In doing so, it concluded that
KB's act underlying CRV's claim for breach of written agreement was the filing
of its cross-complaint: an act by KB in furtherance of its right of petition. (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78.) In its opening brief, KB maintains the trial
court correctly reached this conclusion.
In its
respondent's brief, CRV argues the trial court erred in that portion of its
ruling, repeating its arguments below.
In part, it argues KB's filing of its indemnity cross-complaint is only "incidental"
to CRV's claim for breach of the settlement agreement; that CRV's breach of
contract claim is "based on the [settlement agreement] terms and KB's
obvious breach of those terms." (Emphasis
omitted.) Assuming CRV is entitled to
challenge this aspect of the trial court's order without itself appealing from
it, we disagree.
The "principal thrust or gravamen" of CRV's cause of
action determines whether section 425.16 applies. (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 188;
accord, Club Members for an Honest Election v. Sierra Club (2008) 45 Cal.4th 309, 319.)
statute, the "gravamen is defined by the acts on which liability is
based, not some philosophical
thrust or legal essence of the cause of action." (Wallace v. McCubbin (2011) 196
Cal.App.4th 1169, 1190; see also Castleman v. Sagaser (2013) 216
Cal.App.4th 481, 490-491 [the focus under the first prong of section 425.16 is the "allegedly wrongful and
injury-producing conduct that provides the foundation for the claims"].)
Under this
test, CRV's breach of contract claim unquestionably arises directly from
activity protected by section 425.16.
CRV alleges KB breached the settlement agreement by filing its indemnity
cross-complaint against it. "The
filing of a complaint [or cross-complaint] fits the definition of an act in
furtherance of a person's right of petition because it is a 'written . . .
statement or writing made in
under consideration or review by a . . . judicial body.' " (Mundy
v. Lenc (2012) 203 Cal.App.4th 1401, 1408-1409, quoting § 425.16,
subd. (e)(2) & Navellier v. Sletten (2002) 29 Cal.4th 82, 88-89.)
In Mundy v. Lenc, the Court of
Appeal held the first prong of section 425.16 was met by a claim alleging that
a party breached a settlement agreement by filing a complaint in a second
action. (Mundy v. Lenc, at pp. 1405, 1408-1409.) In Navellier, the court held that the first prong of the anti-SLAPP
statute was satisfied by the filing of federal counterclaims alleged to be in
breach of a general release; "[a] claim for relief filed in federal
district court indisputably is a 'statement or writing made before a . . .
judicial proceeding.' " (
Opportunity (1999) 19 Cal.4th 1106, 1115 [the right to petition protected
under section 425.16 includes the basic act of filing litigation];
Cal.App.4th 267, 272-273 [cause of action for breach of a settlement agreement
fell within anti-SLAPP because it was based on documents submitted to a family
court; Court of Appeal rejected the argument that the action was based on the
fact the defendant "breached a contract that prohibits her from engaging
in certain speech-related conduct"]; Chavez v. Mendoza (2001) 94
Cal.App.4th 1083, 1087 [holding it "well established" that the "
' " 'the basic act of filing litigation' " ' " is an exercise of
a party's constitutional right of petition].)
We reject
CRV's argument that KB waived anti-SLAPP protection via the settlement
agreement's terms. It cites
1484 for the proposition that "[a] defendant who validly contracted not to
speak or petition effectively waives the right to anti-SLAPP protection in the
event he later breaches that contract."
CRV misreads Navellier, which
expressly made the point that though a plaintiff's claim alleging a breach of
an agreement not to sue will come within the anti-SLAPP statute, he or she will
not automatically lose their right to assert such claim as long as the claim
possesses minimal merit under the second
probability of prevailing prong of the statute. (Navellier,
at p. 93.)
III. CRV's
Burden
We turn to
whether CRV met its burden to show a probability of prevailing on the merits of
its breach of contract claim. In meeting
this burden, CRV cannot rely solely on the allegations in its cross-complaint
and must present evidence that would be admissible at trial. (Stewart v. Rolling Stone LLC (2010)
181 Cal.App.4th 664, 679; ComputerXpress, Inc. v. Jackson (2001) 93
Cal.App.4th 993, 1010.) However, CRV's
burden is not high: It " 'need only
establish that [it's] claim has "minimal merit" [citation] to avoid
being stricken as a SLAPP.' " (
256, 274, quoting Soukup v. Law Offices
of Herbert Hafif, supra, 39
Cal.4th at p. 291.) CRV will meet its
burden if any part of its claim has merit. (Oasis
West Realty, LLC v. Goldman,
supra, 51 Cal.4th at p. 820; Mann v. Quality Old Time Service,
Inc. (2004) 120 Cal.App.4th 90,
105-106; Burrill v. Nair (2013) 217 Cal.App.4th 357, 379-382.)
motion if, as a matter of law, KB's evidence supporting the motion defeats CRV's
attempt to establish evidentiary support for the claim. (Taus
v. Loftus (2007) 40 Cal.4th 683, 714.)
To make out
a prima facie case of breach of a contract, CRV must show (1) the existence of
the contract; (2) CRV's performance or excuse for nonperformance; (3) KB's breach;
and (4) resulting damages to CRV. (Oasis
West Realty, LLC v. Goldman, supra,
51 Cal.4th at p. 821.) KB's appellate
challenges relate only to the latter two elements; KB contends CRV did not meet
its burden because it did not produce evidence of KB's breach or CRV's
damages.
Specifically,
with respect to the element of breach, KB argues the settlement agreement
contained only a limited release in CRV's favor as to the claim of TC
Construction; that the settlement agreement did not release CRV from the
indemnity claims made by KB in its cross-complaint arising from other third
parties including City, and thus CRV cannot show action that constitutes KB's
breach of the settlement agreement. As
for the element of damages, KB maintains CRV's claimed damages, the $442,400 in
holdback funds given to KB, are not proper breach of contract damages, but are
only available if CRV were to rescind the contract. Though KB acknowledges the settlement
agreement contains an attorney fees provision, it argues that after the
enactment of Civil Code section 1717, any attorney fees incurred by CRV are not
damages, but are costs of suit.
CRV
responds that KB disregards the broad release provisions in the settlement
agreement. It further argues it suffered
harm as a result of KB's breach by losing $442,400, and also by being forced to
bring the present action. According to
CRV, the holdback funds are awardable as damages under a failure of
consideration theory.
name="_ftnref4" title="">[4]
A.
We begin
with KB's contention that CRV presented no evidence that KB breached the
settlement agreement by filing its indemnity cross-complaint. CRV's opposition was supported by a sworn
declaration from Dobron, which we accept as true, authenticating and attaching
various exhibits including the purchase agreement and its amendments, the
construction license agreement, and the settlement agreement. Dobron asserted, without any contrary showing
by KB, that he was directly involved in negotiating the settlement agreement,
and that CRV and KB entered into it to "dispose of and settle all claims,
demands and cause or causes of action, or litigation between CRV and KB related
to the Monterrey Park Property . . . ."
He also asserted that as consideration for the settlement agreement and
mutual release, KB received over $442,400 in holdback funds. There is no dispute that KB filed suit
against CRV, which is the action alleged to have breached the settlement
agreement's terms. Absent conflicting extrinsic
evidence as to the parties' intent, the question of whether KB's release
encompassed its indemnity lawsuit against CRV is a question of law, dependent
upon the release's interpretation. (
Genentech, Inc. (2008) 43 Cal.4th 375, 395.)
The
settlement agreement sets out KB's release in various places: In the recitals section, the settlement
agreement provides: "In
consideration of the Mutual Release given herein by CRV, KB does hereby
release, acquit and forever discharge CRV and its agents, insurance carrier,
employees, officers, directors, attorneys, representatives, successors,
predecessors and assigns, and each of them, of and from any and all claims,
claims for damages, debts, liabilities, demands, obligations, costs, attorney's
fees, expenses, compensation, action and causes of action, of every nature,
character and description, whether known or unknown, which KB now owns or
holds, or at any time prior to the execution of this Agreement, it has owned or
held, whether known or unknown, relating to or arising from (1) the Purchase
Agreement between the parties; (2) the Construction License Agreement between
the parties, and/or (3) the litigation instituted by TC Construction."
Following
the recitals, the settlement agreement states:
"KB hereby agrees to waive and release all claims against CRV now
or in the future, relating to or arising from, in any way shape or form, any
claim or demand relating to (1) the Purchase Agreement between the parties; (2)
the Construction License Agreement between the parties, and/or (3) the claim of
TC Construction arising from or relating to the Monterrey Park project, in
exchange for the release of funds from the Holdback Funds, for a total
distribution of Four Hundred Forty Two Thousand Four Hundred and no/100 Dollars
($442,400.00) from the escrow account currently maintained by Stewart Title."
The release
contains a waiver of all rights under Civil Code section 1542, which provides
in part that "CRV and KB each acknowledge that each may hereafter discover
facts different from, or in addition to, those it now knows, or believes to be
true, with respect to the claims, claims for damages, debts, liabilities,
demands, obligations, costs, attorneys' fees, expenses, compensation, action or
causes of action which are the subject of the release set forth in the action
described in this Agreement, and that CRV and KB hereby expressly agree to
assume the risk of the possible discovery of additional or different facts, and
agree that this Agreement shall be and remain effective in all respects
regardless of such additional or different facts."
"A
release is 'the abandonment, relinquishment or giving up of a right or claim to
the person against whom it might have been demanded or enforced [citations] and
its effect is to extinguish the cause of action . . . .' [Citation.]
Thus, a release 'conclusively estops the parties from reviving and
relitigating the claim released.' " (In re Mission Ins. Co. (1995) 41
Cal.App.4th 828, 838.) Settlement and
release agreements are governed by the ordinary rules of
Cal.4th 516, 528; Benedek v. PLC Santa Monica (2002) 104 Cal.App.4th
1351, 1356; Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.) " ' " 'The fundamental rules of
contract interpretation are based on the premise that the interpretation of a
contract must give effect to the "mutual intention" of the parties. "Under statutory rules of contract
interpretation, the mutual intention of the parties at the time the contract is
formed governs interpretation. [Citation.]
Such intent is to be inferred, if possible, solely from the written
provisions of the contract. [Citation.] The 'clear and explicit' meaning of these
provisions, interpreted in their 'ordinary and popular sense,' unless 'used by
the parties in a technical sense or a special meaning is given to them by usage'
[citation], controls judicial interpretation." ' " ' " (EFund
Capital Partners v. Pless (2007) 150 Cal.App.4th 1311, 1321, quoting TRB
Investments, Inc. v. Fireman's Fund Ins. Co. (2006) 40 Cal.4th 19, 27.) The parties' undisclosed subjective intent is
irrelevant to determining the meaning of contractual language. (Winet,
at p. 1166, fn. 3.)
Since CRV did not offer
conflicting extrinsic evidence as to the meaning of the settlement agreement,
we construe it independently. (
62 Cal.2d 861, 865-866; Citizens for
Goleta Valley v. HT Santa Barbara (2004) 117 Cal.App.4th 1073, 1076.) Here, the critical question is whether KB's
claims for indemnity and contribution against CRV, filed after City sued KB for
breach of the subdivision improvement agreement, are claims that "relat[e]
to or aris[e] from" either KB and CRV's purchase agreement or their
construction license agreement. The
language "relating to or arising from" is very broad. (See Morales
v. Trans World Airlines, Inc. (1992) 504 U.S. 374, 383-384 [the "ordinary
meaning of ['relating to'] is a broad one—'to stand in some relation; to have
bearing or concern; to pertain; refer; to bring into association with or
connection with' "]; Bono v. David (2007)
147 Cal.App.4th 1055, 1067 [interpreting arbitration clause language " '
broad]; EFund Capital Partners v. Pless,
supra, 150 Cal.App.4th at p. 1322
[describing as "very broad" an arbitration clause providing, " '
arising from or out of this [agreement] shall be submitted to arbitration' "];
see also Medill v. Westport Ins. Corp. (2006)
143 Cal.App.4th 819, 830 [interpreting language in an insurance contract];
California Assn. for Park and Recreation Insurance (2003) 106 Cal.App.4th
293, 301 [same]; Acceptance Ins. Co. v.
Syufy Enterprises (1999) 69 Cal.App.4th 321, 328 [same].) The words "arising out of " or "arising
from," as used in the present settlement agreement "are generally
given their 'commonsense meaning' [citation], which has been
' " 'understood to mean "originating from" "having
its origin in," "growing out of" or "flowing from" or
in short, "incident to, or having connection with" . . . .' " ' "
(Vitton
Construction Co., Inc. v. Pacific Ins. Co. (2003) 110 Cal.App.4th 762, 766-767.)
Here, the
language of the settlement agreement reflected a clear intention on the part of
CRV and KB to effect a global settlement of claims and, as indicated, "to
buy their respective peace in regards to the relationship between them as it
relates to the Monterrey Park project and
all agreements and contracts relating thereto." (Italics added.) The Monterrey Park project gave rise to KB's
obligations pursuant to the subdivision improvement agreement with City, and KB's
obligations sufficiently "relat[e] to" or "aris[e] from"
that project, as well as the parties' purchase agreement, so as to fall within
the broad language of the release. It is
well established that a general release that explicitly
covers unknown claims and specifically waives the provisions of Civil Code
section 1542 is "completely enforceable and act[s] as a complete bar to
all claims (known or unknown at the time of the release)
despite protestations by one of the parties that he [or she] did not intend to
Diego Hospice v. County of San Diego (1995) 31 Cal.App.4th 1048, 1053; see
also In re Mission Ins. Co.,
via Dobron's declaration and the documents attached to KB's motion, of a
probability of prevailing on its claim that KB's indemnity cross-complaint is
barred by reason of the settlement agreement because it includes claims related
to or arising from the parties' purchase agreement concerning the Monterrey
Park project.
B.
KB contends
CRV presented no evidence that it suffered compensable contract damages as a
result of KB's breach.
name="_ftnref6" title="">[6] It first argues that CRV's asserted damages
seek return of the consideration it paid, which is recoverable only if CRV
rescinds the settlement agreement and seeks restitution, not where CRV affirms
the contract and sues for breach. KB
further acknowledges that the settlement agreement contains an attorney fees
provision, and that if CRV were to successfully defend against KB's
cross-complaint, it may be entitled to seek attorney fees. But, citing the passage of Civil Code section
1717 in 1981 as acknowledged by Walker v.
Ticor Title Co. of California (2012) 204 Cal.App.4th 363, 372, KB argues
that contractual attorney fees are not damages, but an element of costs of
suit.
KB's
contention pertaining to attorney fees as damages ignores the context of this
breach of contract action. CRV has sued
KB for its alleged breach of a release of claims, the entire purpose of which
is to avoid litigation. Thus, the
natural consequence of such a breach is the hiring of counsel and incurring
fees and costs of litigation to enforce the settlement agreement and defend
against the released, wrongfully-brought, claim. As long as the settlement agreement provides
for the recovery of attorney fees, such fees (as well as litigation costs) can
constitute recoverable damages for breach of a release. (Civ. Code, § 3300.) This was the implicit holding in
Cal.App.4th 763, decided after the enactment of Civil Code section 1717, in
which the appellate court pointed out respondents had not shown the parties'
settlement agreement had an attorney fees provision, and for that reason held attorney fees incurred in connection with
appellant's alleged breach of a settlement agreement were not an element of
recoverable damages, and the respondents did not establish a probability of
prevailing on their breach of contract claim so as to meet their burden on
appellants' anti-SLAPP motion. (
v. Arnett (1980) 113 Cal.App.3d 59, 67-68.)
Here, as KB points out, the parties' settlement agreement contains an
attorney fee provision.
Nevertheless,
we are compelled to conclude CRV did not meet its burden to demonstrate a
probability of prevailing on its breach of contract cross-complaint. Nowhere in his declaration does Dobron state
or suggest that CRV has incurred or will incur attorney fees or costs in
connection with or as a result of KB's filing of its indemnity
cross-complaint. The possibility of CRV
incurring attorney fees and costs is not addressed in CRV's opposing
papers. In its opposing papers, CRV
argued only that "[a]s a result of KB's breach of the Settlement Agreement
CRV did not obtain what it paid $442,400 and bargained for which was a release
of all claims related to the Monterrey Park Property." Where, as here, a special motion to strike
under section 425.16 meets the "arising from" prong, CRV must satisfy
the second prong of the test and establish evidentiary
support for its claim. (
not relieve CRV of its burden "of presenting a sufficient 'showing of
facts to sustain a favorable judgment' " (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811,
821) via competent admissible evidence.
(McGarry v. University of San Diego
(2007) 154 Cal.App.4th 97, 108; City
of Costa Mesa v. D'Alessio Investments, Inc. (2013) 214 Cal.App.4th 358,
376.) CRV cannot rely solely on its
cross-complaint (City of Costa Mesa,
at p. 376), it must present proof sufficient to demonstrate it sustained a
proper contract measure of damages. (
Nor can CRV
establish that it suffered compensable breach of contract damages by evidence
that it agreed to turn over the holdback funds as consideration for KB's
release. Damages are a necessary element
to a successful breach of contract action.
(Navellier v. Sletten,
breach of contract 'seek to approximate the agreed-upon performance.' [Citation.] The goal is to put the plaintiff 'in as good a
position as he or she would have occupied' if the defendant had not breached
the contract. [Citation.] In other words, the plaintiff is entitled to
damages that are equivalent to the benefit of the plaintiff's contractual
bargain." (Lewis Jorge
Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34
Cal.4th 960, 967-968, quoting Applied Equipment Corp. v. Litton Saudi Arabia
Ltd. (1994) 7 Cal.4th 503, 515 & 24 Williston on Contracts (4th
ed.2002)
§ 64:1, p. 7.) "
'Contractual damages are "the amount which will compensate the party
aggrieved for all the detriment proximately caused thereby, or which, in the
ordinary course of things, would be likely to result therefrom." ' " (Emerald Bay Community Assn. v. Golden
Eagle Ins. Corp. (2005) 130 Cal.App.4th 1078, 1088; see Civ. Code,
§ 3300.)
CRV's
claimed damages do not give it what it bargained for in entering into the
settlement agreement, simply because CRV would not expect return of its
$442,400 if KB performed its contractual obligations. We are not persuaded by CRV's assertion that
its action (and presumably its claim for $442,400 in damages) is based on a "failure
of consideration" theory, which permits an action for breach of
contract. CRV cites Munoz v. MacMillan (2011) 195 Cal.App.4th 648, Habitat Trust for Wildlife, Inc. v. City of Rancho Cucamonga (2009)
175 Cal.App.4th 1306, 1336 (Habitat Trust),
and Wilson v. Corrugated Kraft (1953)
117 Cal.App.2d 691, for the propositions that (1) failure of consideration can
result in an action for either rescission or breach of contract; (2) when a
party's default in performance goes to the very root of the consideration
bargained for, the breach amounts to a failure of consideration; and (3) a
party is liable for a breach of contract under that theory when that party
causes the failure by withholding its performance of the contract terms. According to CRV, KB's breach, i.e., its
refusal to perform the terms of the settlement agreement by suing CRV in its
cross-complaint,
" 'goes to the very root of the consideration bargained
for' and thus amounts to a failure of consideration."
None of
these cases purport to address whether a party may seek breach of contract
damages from a failure of consideration theory.
Wilson v. Corrugated Kraft
Containers involved a defendant who had rescinded a sales contract between
it and the plaintiff; the Court of Appeal affirmed the judgment for the
defendant on the plaintiffs' action for breach of contract brought after the defendant
v. Corrugated Kraft Containers, supra,
117 Cal.App.2d at pp. 692-693.) The
Court of Appeal observed that the plaintiffs failed to submit all of their
orders to the defendant, as the contract bound them to do, and their failure
amounted to a material violation of the contract. (Id.
at pp. 695-696.) This default by the
plaintiffs, the court held, entitled the defendant to rescind the
contract. (Id. at p. 696.) "The
occurrence of a failure of consideration resulting from the willful failure of
plaintiffs to perform an integral part of an entire contract is sufficient to
entitle defendant to cancel." (
court merely concluded the defendant was justified in considering itself
discharged from further performance under the agreement. (Id.
at pp. 697-698.) Likewise, in Habitat
Trust, a case involving multiple appeals, the defendants sought to cancel
the contract at issue; they successfully moved for summary judgment on both
their affirmative defense of failure of consideration (seeking to cancel the
agreement to, inter alia, convey certain property to plaintiffs for
conservation purposes in exchange for plaintiff's agreement not to object to a
development project) as well as on their cross-complaint for rescission. (Habitat
Trust, supra, 175 Cal.App.4th at
pp. 1314, 1319, 1333, 1337.)
Specifically, in moving for summary judgment, the defendants argued a
material failure of consideration to them (the failure of a city to approve the
plaintiff to receive the land) was a sufficient ground to cancel the contract
under Civil Code section 1689, subd. (b)(4).
(Habitat Trust,
contract action, or breach of contract damages, on a theory of failure of
consideration.
addresses a claim of failure of consideration; it held in the summary judgment
context that a tenant could sue for expectancy damages based on an alleged
breach of lease by her landlord if she could prove nonspeculative damages with
reasonable certainty, and that the existence of a remedy in restitution did not
preclude her from seeking a contract remedy.
(Id. at pp. 660-662.) We fail to see Munoz's relevance to the question of whether CRV has submitted
competent evidence that it suffered some form of compensable contract damages
under a failure of consideration theory.
Because CRV
did not demonstrate, prima facie, that it had suffered compensable
make a showing that it would probably prevail on the merits of its breach of
contract action. The purpose of section
425.16 is to screen out meritless claims, and a claim is just as meritless when
a plaintiff or cross-complainant cannot prove damages as when it cannot prove
liability.
DISPOSITION
The order
is reversed. The matter is remanded and
the superior court directed to grant KB Home Coastal, Inc.'s motion to strike
CRV Imperial-Worthington, LP's cross-complaint for breach of contract. The parties shall bear their own costs on
appeal.
O'ROURKE, J.
WE CONCUR:
McCONNELL, P. J.
McDONALD, J.
Code of Civil Procedure unless otherwise indicated.
name="_ftn2" title="">[2] Section 425.16 specifies the type of acts included within
the statute's ambit. An " 'act in
furtherance of a person's right of petition or free speech . . . in connection
with a public issue' includes: (1) any
written or oral statement or writing made before a legislative, executive, or
judicial proceeding, or any other official proceeding authorized by law, (2)
any written or oral statement or writing made in connection with an issue under
consideration or review by a legislative, executive, or judicial body, or any
other official proceeding authorized by law, (3) any written or oral statement
or writing made in a place open to the public or a public forum in connection
with an issue of public interest, or (4) any other conduct in furtherance of
the exercise of the constitutional right of petition or the constitutional
right of free speech in connection with a public issue or an issue of public
interest." (§ 425.16, subd. (e).)
