Gardella v. Torres

Filed 4/7/10 Gardella v. Torres CA3

NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(San Joaquin)

This case arises from a failed commercial real estate transaction between plaintiff Joseph P. Gardella, the buyer, and John Escove, the seller. Plaintiff offered to purchase a commercial office building from Escove for $1,650,000. The offer required Escove to carry back $1,150,000 in seller financing. Escove accepted the offer, subject to his approval of plaintiffs financial condition. After reviewing plaintiffs credit report and other financial documentation provided by plaintiff, Escove rejected plaintiffs application for financing and cancelled the purchase agreement.

Plaintiff sued Escove for breach of contract and breach of the implied covenant of good faith and fair dealing. Among other things, plaintiff claimed Escove, through his real estate agent B. Katherine Torres,[1] breached the implied covenant by failing to provide plaintiff with a loan application form, thereby preventing plaintiff from complying with the terms of the purchase agreement and causing Escove to cancel the purchase agreement. Plaintiff did not, however, name Torres as a defendant. Plaintiff and Escove participated in a binding arbitration, and the arbitrator found Escove properly cancelled the purchase agreement based on the financial information provided by plaintiff. The arbitrator explained that whether [Escove] provided the plaintiff with a loan application form does not negate the fact that the plaintiff did supply [Escove] with financial information which [Escove] had the right to disapprove of and cancel the contract.

Thereafter, plaintiff initiated the instant action against Torres and her employer, Edward G. Somerville, individually and doing business as Approved Financial & Real Estate (collectively defendants), for general negligence and promissory estoppel. Both causes of action were based upon Torres failure to provide plaintiff with a loan application form, which plaintiff again alleged precluded him from complying with the terms of the purchase agreement and resulted in Escove cancelling the purchase agreement.

Defendants moved for summary judgment, contending, among other things, that the arbitrators award in Escoves favor was res judicata on the causes of action asserted in plaintiffs complaint against Torres and Somerville. Defendants also argued plaintiffs third amended complaint does not state a viable cause of action.

The trial court rejected defendants claim that the action was barred by the doctrine of res judicata, but concluded plaintiff could not establish the elements of his causes of action, and entered summary judgment in defendants favor. Plaintiff appeals.

We shall conclude the elements of the claim preclusion component of res judicata are present, and thus, the trial court properly entered summary judgment in defendants favor. Accordingly, we shall affirm the judgment.[2]

FACTUAL AND PROCEDURAL BACKGROUND

Torres worked as a real estate agent for defendant Somerville. In August 2004, Torres listed for sale a two-story commercial office building owned by Escove. Plaintiff, a licensed real estate broker, offered to purchase the property for $1,650,000. Plaintiffs offer was subject to Escove carrying back a promissory note and first deed of trust in the amount of $1,150,000. Escove accepted plaintiffs offer, subject to various conditions, including Escoves approval of plaintiffs financial condition.

The terms of the sale were set forth in a standardized California Association of Realtors (CAR) form entitled COMMERCIAL PROPERTY PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (purchase agreement). The purchase agreement incorporated the provisions of the standardized CAR form entitled, Seller Financing Addendum and Disclosure (SFA), which provided: Within 5 Days After Acceptance: (a) Buyer [plaintiff] shall provide Seller [Escove] a completed loan application on a form acceptable to Seller. . . and (b) Buyer authorizes Seller and/or Agent to obtain, at Buyers expense, a copy of Buyers credit report. Buyer shall provide any supporting documentation reasonably requested by Seller. Seller, after first giving Buyer a Notice to Buyer to Perform, may cancel this Agreement in writing and authorize return of Buyers deposit if Buyer fails to provide such documents within that time, or if Seller disapproves any above item within 5 Days After receipt of each item.

Torres agreed to provide plaintiff with a loan application form but failed to do so. Plaintiff did not submit a completed loan application within five days of Escoves acceptance of the offer. Plaintiff did, however, provide Escove with a credit report and other financial documentation.

Escove cancelled the purchase agreement on the ground that [plaintiffs] application for financing has been rejected by [Escove].

Plaintiff sued Escove for breach of contract and breach of the implied covenant of good faith and fair dealing. Plaintiff and Escove participated in a binding arbitration as required under the purchase agreement. The arbitrator, Thomas D. Zeff, found in Escoves favor, concluding Escove timely and properly cancelled the purchase agreement. With respect to plaintiffs assertion that Escove, though his agent Torres, failed to provide plaintiff with a loan application form, the arbitrator found that while [i]t is undisputed that [Escove] did not provide a loan application form to the plaintiff[,] . . . the plaintiff did make available to [Escove] a credit report and other financial information. [Citation.] Upon receipt and review of the financial information [Escove], through his agent, cancelled the contract within five days from receipt of the information. [Citation] The language [contained in paragraph 2 of the SFA], specifically allowed [Escove] to cancel the agreement if [he] disapproved of any of the financial information provided by the plaintiff. The arbitrator further observed that plaintiffs arguments seem[ed] to be directed more at what [Escove] failed to do as opposed to whether [Escove] had the right to cancel and explained that whether [Escove] provided the plaintiff with a loan application form does not negate the fact that the plaintiff did supply [Escove] with financial information which [Escove] had the right to disapprove of and cancel the contract. Plaintiff dismissed the action before the arbitrators award was confirmed by the court.

Thereafter, plaintiff initiated the instant action against Torres, Escoves real estate agent, and Somerville, Torres employer, for general negligence and promissory estoppel. Both causes of action are premised on allegations Torres failed to provide plaintiff with a loan application form, and that her failure caused Escove to cancel the purchase agreement and otherwise prevented plaintiff from purchasing the property.

Defendants moved for summary judgment, or in the alternative, summary adjudication, arguing the action was barred by the doctrine of res judicata, and plaintiffs third amended complaint does not state a viable cause of action. The trial court rejected defendants assertion that the action was barred by the doctrine of res judicata but ruled that plaintiff [could not] establish the elements of his causes of action and granted defendants motion for summary judgment.

DISCUSSION

Plaintiff contends the trial court erred in granting defendants motion for summary judgment because (1) he successfully raised a triable issue of material fact as to the first cause of action for negligence, and (2) defendants motion failed to challenge the second cause of action for promissory estoppel. Defendants first respond that the trial court properly entered summary judgment in their favor because the arbitrators decision in Escoves favor barred plaintiffs present action under the doctrine of res judicata. We agree the action is barred under the claim preclusion component of the res judicata doctrine.

Summary judgment is properly granted when there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., 437c, subd. (c); Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142.) A defendant seeking summary judgment bears the initial burden of proving the cause of action has no merit by showing that one or more elements of the plaintiffs cause of action cannot be established or there is a complete defense. (Code Civ. Proc., 437c, subds. (a), (p)(2); Addy v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 213.) Once the defendants burden is met, the burden shifts to the plaintiff to show that a triable issue of fact exists as to that cause of action. (Ibid.)

We independently review the trial courts decision, viewing the evidence in the light most favorable to plaintiffs as the losing party. (Wiener v. Southcoast Childcare Centers, Inc., supra, 32 Cal.4th at p. 1142.) In resolving any evidentiary doubts or ambiguities, we liberally construe the plaintiffs evidence and strictly construe the defendants evidence. (Ibid.) We are not bound by the trial courts stated reasons or rationale. (Kids Universe v. In2Labs (2002) 95 Cal.App.4th 870, 878.) If there is any legitimate basis in the moving papers that requires the granting of the summary judgment motion, the order must be affirmed. (See Peart v. Ferro (2004) 119 Cal.App.4th 60, 70.)

Res judicata describes the preclusive effect of a final judgment on the merits. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) The doctrine has two components --strict res judicata or claim preclusion and collateral estoppel or issue preclusion. (Id. at pp. 896-897.) The claim preclusion component of res judicata prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them. (Id. at p. 896.)[3]

Claim preclusion applies not only to judicial proceedings but also to arbitration proceedings. (Thibodeau v. Crum (1992) 4 Cal.App.4th 749, 755.) Moreover, an arbitration award, even one that is unconfirmed, may bar a subsequent lawsuit on the same cause of action. (Thibodeau v. Crum, supra, 4 Cal.App.4th at p. 761.)[4]

California employs the primary rights theory to determine if two successive proceedings involve the same cause of action. [Citations.] Under the primary rights theory, . . . the invasion of one primary right gives rise to a single cause of action. [Citations.] [Citation.] [A] cause of action consists of 1) a primary right possessed by the plaintiff, 2) a corresponding primary duty devolving upon the defendant, and 3) a delict or wrong done by the defendant which consists in a breach of such primary right and duty. . . . [Citation.] The existence of a cause of action is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. [Citations.] (Brinton v. Bankers Pension Servs. (1999) 76 Cal.App.4th 550, 557.) Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief. [Citation.] (Weikel v. TCW Realty Fund II Holding Co. (1997) 55 Cal.App.4th 1234, 1246.)

Contrary to plaintiffs assertion, the record clearly establishes that both his prior action against Escove and his present action against Torres and Somerville sought recovery for the same harm. In both actions, plaintiff alleged he suffered financial losses as a result of Escoves cancellation of the purchase agreement, which he attributed to Torres failure to provide him with a loan application form. In each action plaintiff sought to hold Escove and defendants liable on the theory that Torres was acting as Escoves agent when she promised to provide plaintiff a loan application form and later failed to do so.

The arbitrators finding that Escove properly cancelled the purchase agreement based upon the financial information that plaintiff did provide eviscerates his causes of action in this action, both of which are premised on allegations that Escove cancelled the agreement based upon information that was not provided.

Because defendants liability is merely derivative of Escoves, it is unnecessary for defendants to have been a party to the prior action to assert a claim preclusion defense in this case. (See Sartor v. Superior Court (1982) 136 Cal.App.3d 322, 326-328 [arbitration award finding corporation liable only for defective solar panel gaskets barred subsequent action against corporations employees alleging fraud and negligence for other alleged construction defects].)[5]

Under these circumstances, the trial court properly granted summary judgment in defendants favor.

DISPOSITION

The judgment is affirmed. Defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)

BLEASE , Acting P. J.

We concur:

RAYE , J.

CANTIL-SAKAUYE , J.

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[1] B. Katherine Torres was erroneously sued as Bonnie K. Torres.

[2] Because we conclude plaintiffs action is barred by the claim preclusion component of the res judicata doctrine, we need not address plaintiffs remaining contentions on appeal.

[3] Collateral estoppel, or issue preclusion, precludes relitigation of issues argued and decided in prior proceedings. (Mycogen Corp. v. Monsanto Co.,supra, 28 Cal. 4th at p. 896.) As plaintiff correctly points out, in Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 833-834, our Supreme Court declared, the policies underlying the doctrine of collateral estoppel must yield to the contractual basis of private arbitration, and concluded, a private arbitration award, even if judicially confirmed, can have no collateral estoppel effect in favor of third persons unless the arbitral parties agreed, in the particular case, that such a consequence should apply. The prior proceeding involved in this case was a contractually authorized arbitration between plaintiff and Escove. Their arbitration agreement did not provide that a decision issued by the arbitrators would preclude the relitigation of issues in a subsequent proceeding involving another party. Accordingly, the issue preclusion aspect of the res judicata doctrine cannot support the trial courts grant of summary judgment in this case. However, in a footnote Vandenberg stated its holding is narrowly circumscribed, and [n]othing in the decision imposes or implies any limitations on the strict res judicata, or claim preclusive, effect of a California law private arbitration award. [Citations.] (21 Cal.4th at p. 824, fn. 2.)

[4] An unconfirmed arbitration award may have preclusive effect where, as here, the parties to the purchase agreement (plaintiff and Escove) anticipated the involvement of third parties, i.e. Escoves real estate agent and her employer, at the time the purchase agreement was executed, and the arbitration was intended to resolve disputes arising out of the work of such third parties. (Thibodeau v. Crum, supra, 4 Cal.App.4th at p. 761.)

[5] Plaintiffs assertion that defendants are precluded from relying on the arbitrators decision to support their contention that the claims adjudicated in the arbitration are the same as those raised in the present action is misplaced. An arbitrators written decision may be used to ascertain what matters were decided by the arbitrator. (See Sartor v. Superior Court, supra, 136 Cal.App.3d at p. 327 [An arbitrators affidavit is admissible to show what matters were submitted for decision and considered by the arbitrator.]) In the trial court, plaintiff objected to the trial courts consideration of the arbitrators findings and opinions on relevance grounds. He argued the trial court had previously agreed that he was not precluded from relitigating issues decided by the arbitrator, and thus, determined the conclusions and opinions of the arbitrator would have no bearing and/or any applicability to this action. However, he did not argue, and the trial court did not decide, that the arbitrators findings and opinions were inadmissible for purposes of determining what matters were submitted for decision and considered by the arbitrator.