Keystone Construction v. Cabrera

 

 

 

 

 

 

 

 

 

Filed 10/2/13  Keystone Construction v. Cabrera CA2/8

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>NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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  This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115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

 

SECOND
APPELLATE DISTRICT

 

DIVISION
EIGHT

 

 
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KEYSTONE CONSTRUCTION, INC.,               Plaintiff and Appellant,               v.   JUAN BRISENO CABRERA,               Defendant and Respondent.

B241928         (Los Angeles County       Super. Ct. No. BC472943)

 

 

            APPEAL from
a judgment of the Superior Court
of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County.  Ralph W. Dau, Judge.  Affirmed.

 

C. Jeong & Likens, C. Yong
Jeong and Brennan J. Mitch, for Plaintiff and Appellant.

 

            Gibson,
Dunn & Crutcher, Kahn A. Scolnick, Holly A. Jones and Minae Yu for
Defendant and Respondent.

 

__________________________

 

 

            Plaintiff
and appellant Keystone Construction, Inc. (Keystone) appeals from the $1,712.70
default judgment entered in its favor and against defendant and respondent Juan
Briseno Cabrera (Cabrera) on Keystone’s complaint for href="http://www.fearnotlaw.com/">breach of contract, conversion, fraud and
breach of the implied covenant of good faith and fair dealing.  Keystone contends: (1) the undisputed
evidence supported a larger damage award; (2) it was entitled to punitive
damages; and (3) it was entitled to prejudgment interest.  We affirm.

 

>FACTUAL AND PROCEDURAL BACKGROUND

 

            Viewed in
accordance with the usual rules of appeal from a default judgment (>Kim v. Westmoore Partners, Inc. (2011)
201 Cal.App.4th 267, 281 (Kim)
[defendant’s failure to answer has the same effect as an express admission of
the material facts alleged in the complaint, but plaintiff must prove
entitlement to the damages it claims]), the evidence established that Cabrera
was an electrician.  In February 2006,
Keystone hired Cabrera as a foreman.  At
that time, Cabrera signed an acknowledgement that he had received a copy of
Keystone’s “Employee Handbook;” the acknowledgment expressly states that
Cabrera is an at-will employee and neither Cabrera nor Keystone “has entered
into a contract regarding the duration of my [Cabrera’s] employment.  I am free to terminate my employment . . . at
any time, with or without reason.  Likewise,
[Keystone] has the right to terminate my employment . . . with or
without reason . . . .” 
In August 2008, Cabrera used the company credit card to purchase $540.17
worth of tools for himself.  On October 2, 2008, Cabrera signed a
promissory note agreeing to pay Keystone $20 per month until he had reimbursed
Keystone the full $540.17 (the promissory note).  When Cabrera left work that day, he took with
him the tools he had purchased with the company credit card as well as a
company owned walkie-talkie/cell phone and some uniforms.

On October 2, 2008, Cabrera
provided Keystone with the first of a series of doctor’s notes; each note
stated a date certain when Cabrera would return to work but on or about each
scheduled return date, sometimes a few days after that date, Cabrera would
submit a new doctor’s note stating a new return date.  The last doctor’s note, dated December 17, 2008, stated that
Cabrera would be unable to work until January
1, 2009.  Cabrera did not
return to work on January 2, 2009,
and did not provide another doctor’s note. 
During this time, the only communication Cabrera had with Keystone was
through these doctor’s notes; Cabrera did not respond to messages left for him
by representatives of Keystone.  By March
2009, five months after Cabrera’s last day of work, Keystone had still not
formally terminated him.href="#_ftn1"
name="_ftnref1" title="">[1]  Instead, Keystone hired a series of temporary
workers to replace Cabrera, at a higher hourly wage than it was paying
Cabrera.  On April 20, 2009, a representative of Keystone emailed
Cabrera requesting that he return the company property he took with him on October 1, 2008, including the tools
he purchased with the company credit card. 
Cabrera returned the items sometime in 2011, by which time Keystone had
already replaced them, making the returned items of little value. 

On November 4, 2011, Keystone filed this action against
Cabrera.  Although the complaint states
that Cabrera was an at-will employee, the gravamen of the first cause of action
is breach of an “employment contract” arising out of the signed acknowledgement
of receipt of the Employee Handbook.  The
second cause of action is based on Cabrera’s breach of the promissory note to
reimburse Keystone for his unauthorized use of the company credit card.href="#_ftn2" name="_ftnref2" title="">[2]  The third cause of action for conversion is
based on Cabrera failing to timely return the company owned property he took
with him on his last day of work.  The
gravamen of the fourth cause of action for fraud is that Cabrera misrepresented
that he would abide by the terms of employment set out in the Employee Handbook
and the terms of the promissory note, Keystone reasonably relied on those
promises when it hired and/or retained Cabrera and but for those promises,
Keystone would not have hired and/or retained Cabrera.  The fifth cause of action for breach of the
implied duty of good faith and fair dealing is based on breach of the alleged
employment contract and the promissory note. 
The complaint sought unspecified “compensatory, consequential [and]
nominal” damages on each cause of action, as well as punitive damages on the
conversion and fraud causes of action.

After Cabrera failed to respond to
the complaint, his default was entered on January 18, 2012. 
Meanwhile, on December 6, 2011,
Keystone served Cabrera with a Statement Of Damages.  (See Code Civ. Proc., § 425.11, subd.
(c), § 580, subd. (a).) 
Keystone sought $1.6 million dollars in damages comprised of the
following:

$300,000 in
general damages:

$200,000 for damage to “business reputation”; and

$100,000 for “wasted time and inconvenience”;

$700,000 in
special damages:

$200,000 for “loss
of earnings”;

$200,000 for “loss
of future earning capacity”;

$200,000 for
“property damage”; and

$100,000 for
“wasted costs and expenses”;

$600,000 in punitive damages.href="#_ftn3" name="_ftnref3" title="">[3] 

 

In a Request for Entry of Court
Judgment filed on April 27, 2012, Keystone requested a $540,736.68 judgment,
comprised of:

$150,000 in general damages;

$190,050.99 in special damages;

$178.69 in interest;

$507 in costs; and

$200,000 in punitive damages.

 

Keystone detailed its damage claims
in a document entitled Case Summary In Support of Default Judgment, which it
filed along with the request for judgment. 
Keystone maintained it was entitled to the following:

$340,050.99
in general and special damages:

            $1,205.70 in “property expenses”:

                        $500.17 (unpaid balance
on the $540.17 promissory note);

                        $326.24 (cost of
replacing the walkie-talkie/cell phone);

                        $234.29 (personal use of
the cell phone);

                        $145.00 (value of the
company owned uniforms);

$11,995.20 in “additional wage expenses”;

$175,850 in “lost profits”;

$100,000 in “loss of business reputation”; and

$50,000 for “wasted time and inconvenience”;

$178.69 in prejudgment interest on
the unpaid $500.17 promissory note balance;

$200,000 in punitive damages on the
fraud cause of action; and

$507 in costs:

            $395
filing fee; and

            $112
process server fees.

Along with the Case Summary,
Keystone submitted the declaration of its president, Young B. Park, and various
exhibits.  Park stated that by the time
Cabrera returned “the phone, charger, clip, uniforms, and the tool purchased
with the company credit card” sometime in 2011, the company had already
replaced those items, including purchasing a new cell phone for $326.24.  Keystone also incurred charges of $234.29 for
Cabrera’s misuse of the company cell phone; phone company invoices were
attached as an exhibit.  In addition,
Park claimed as damages the difference between Cabrera’s hourly wage and the
higher rate Keystone paid to the temporary employees it hired to replace
Cabrera during the time he claimed to be disabled.  Park also blamed Cabrera’s “unprofessional
behavior and repeated and continuous absenteeism between October 2008 and March
2009” for missed deadlines that caused Keystone to lose business. 

On May 16, 2012, the trial court
entered default judgment against Cabrera in the amount of $1,712.70, comprised
of special damages of $1,205.70 (the amount Keystone claimed as “property
expense”) and $507 in costs.  In a four
page written order, the trial court did not specify upon which cause of action
or causes of action its special damage award was based, but stated that
Keystone failed to meet its burden to establish that it was entitled to the
additional special and general damages it sought.  Regarding Keystone’s request for punitive
damages, the trial court found Keystone failed to prove malice, oppression or
fraud, and failed to prove Cabrera’s financial condition.  Without explanation, the trial court found
Keystone had failed to establish that it was entitled to prejudgment
interest.  Keystone timely appealed.

 

>DISCUSSION

> 

            At the outset we observe that
the essence of Keystone’s complaint – aside from the conversion of specific
property for which the judgment compensated Keystone – is that  Cabrera breached his at-will employment
contract by leaving his job.  Remarkably,
in Keystone’s five pages of its opening brief on the breach of contract claims,
Keystone cites no authority for the proposition that an employer can sue an
at-will employee for deciding no longer to work for the employer.  Generally, unlike an independent contractor
who may be liable in breach of contract for breaching his agreement, “an
employee may quit his work.”  (>Greenaway v. Workers’ Comp. Appeals Board
(1969) 269 Cal.App.2d 49, 55; see Baugh
v. Rogers (1944) 24 Cal.2d 200, 207.)  This fatal flaw infects in some manner all of
the arguments that Keystone has offered in its appellate briefs.  Nevertheless, we address the points in the
manner in which Keystone has presented them.

 

A.                
General
And Special Damages

 

Keystone contends the damage award
was not adequate.  As we understand its
argument, it is that substantial evidence
established that Cabrera’s absences from work caused Keystone the hundreds of
thousands of general and special damages it claims.  The contention is without merit.href="#_ftn4" name="_ftnref4" title="">[4]

To establish entitlement to
damages, a plaintiff must prove a causal connection between the damages it
seeks and the defendant’s wrongful conduct, and that the detriment it suffered
was a natural and probable consequence of the defendant’s conduct.  (Chaparkas
v. Webb (1960) 178 Cal.App.2d 257, 260.)  For example, to establish a claim for lost profits, the
plaintiff must show a reasonable probability that profits would have been
earned but for the defendant’s conduct. 
(S. C. Anderson, Inc. v. Bank of
America (1994) 24 Cal.App.4th 529, 536.)  And to be entitled to special damages for
breach of contract, the plaintiff must prove that those damages were actually
foreseen or were reasonably foreseeable when the contract was formed.  (Lewis
Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004)
34 Cal.4th 960, 970)  Likewise,
fraud damages must follow “the act complained of as a legal certainty” and may
not be based on mere speculation.  (>Ferguson v. Lieff, Cabraser, Heimann &
Bernstein (2003) 30 Cal.4th 1037, 1048.)  The plaintiff at a default prove-up
hearing has the burden of proving he is entitled to the damages claimed.  (Kim,
supra, 201 Cal.App.4th at p. 288.)  As such, the plaintiff has the burden of
proving that the defendant’s wrongful conduct caused its claimed damages and
that those damages were reasonably foreseeable to the defendant.

In both breach of contract and tort cases, a plaintiff
“ â€˜has a duty to take reasonable steps to mitigate those damages and will
not be able to recover for any losses which could have been thus
avoided.’ â€  (Valle de Oro Bank v. Gamboa (1994) 26 Cal.App.4th 1686,
1691.)  The burden of proving facts in
mitigation of damages rests upon the defendant. 
(Jackson v. Yarbray (2009)
179 Cal.App.4th 75, 97; Carnation
Co. v. Olivet Egg Ranch (1986) 189 Cal.App.3d 809, 817-818, and cases
cited therein.)

Following a prove-up hearing, the
trial court must render judgment in the plaintiff’s favor “as appears by the
evidence to be just.”  (Code Civ. Proc.,
§ 585, subd. (b); see also Civ. Code, § 3359 [no more than
reasonable damages can be recovered].) 
Because the plaintiff in a default case has no motive to be conservative
in its demands, and there is no “opposing party to point out the excesses, it
is the duty of the court to act as gatekeeper, ensuring that only the
appropriate claims get through. 
[Citation.]”  (>Electronic Funds Solutions, LLC v. Murphy (2005)
134 Cal.App.4th 1161, 1179.)

Here, even assuming the complaint
states causes of action for breach of contract and fraud,  Keystone has failed to prove damages greater
than those awarded by the court.  First,
Keystone did not show that its business losses were caused by Cabrera’s
wrongful conduct – i.e., his persistent absenteeism – much less that those
damages were reasonably foreseeable.  It
simply defies logic to believe the success or failure of Keystone’s business
rested on the absence of one at-will employee who Keystone claims was
demonstrably unreliable.  Thus, Keystone
failed to prove Cabrera’s conduct was the cause of its losses, or that those
losses were the natural and probable consequence of Cabrera’s conduct.

Second, Keystone’s failure to
mitigate its damages appears on the face of the complaint and Park’s
declaration submitted for the prove-up hearing. 
The complaint alleges
that Cabrera was an at-will employee.  In
his declaration, Park characterizes the Employee Handbook signed
acknowledgement as an “agreement to conform to [Keystone’s] company policy in
exchange for at-will employment . . . .”  As an at-will employee, Cabrera had no duty
to continue working for Keystone and Keystone had no duty to continue employing
him.  Keystone has not shown why it could
not have terminated Cabrera for his failure to comply with company policy and
hired a permanent replacement. 
Not doing so for approximately six months constitutes a failure to
mitigate its damages.

 

B.                
Punitive
Damages

 

            Keystone
contends the trial court erred in denying its claim for punitive damages.  It argues that (1) evidence Keystone paid
Cabrera $51.38 per hour, from which it could be inferred that Cabrera had
earned over $1 million in the past decade, was sufficient to establish
Cabrera’s financial condition; and (2) the finding that Cabrera converted
Keystone’s property was sufficient to support a finding of fraud.  Keystone is incorrect.

            “ â€˜In
a civil case not arising from the breach of a contractual obligation, the jury
may award punitive damages “where it is proven by clear and convincing evidence
that the defendant has been guilty of oppression, fraud, or malice.”  (Civ. Code, § 3294,
subd. (a).)’  [Citation.]  ‘Under California law, a punitive damages
award must be based on three factors: 
(1) the reprehensibility of the defendant’s conduct; (2) the amount of
compensatory damages awarded to or actual harm suffered by the plaintiff; and
(3) the defendant’s financial condition.’ 
[Citations.]”  (>Behr v. Redmond (2011)
193 Cal.App.4th 517, 535 (Behr).)  “ â€˜Something more than the mere
commission of a tort is always required for punitive damages.  There must be circumstances of aggravation or
outrage, such as spite or “malice,” or a fraudulent or evil motive on the part
of the defendant, or such a conscious and deliberate disregard of the interests
of others that his conduct may be called willful or wanton.’  [Citation.]” 
(Taylor v. Superior Court of Los
Angeles (1979) 24 Cal.3d 890, 894–895, italics omitted.)

A punitive damage award “must bear
some reasonable relationship to the net worth of the defendant
. . . .”  (>Dumas v. Stocker (1989)
213 Cal.App.3d 1262, 1267.)  It is
the plaintiff’s burden to produce evidence of the defendant’s net worth and
failure to do so is reason enough to deny punitive damages.  (Id.
at p. 1268.)  We review a punitive
damage award for substantial evidence, viewing the record in the light most
favorable to the judgment.  (>Behr, supra, 193 Cal.App.4th at
p. 535.)

Here, the trial court’s finding
that Keystone failed to introduce sufficient evidence of Cabrera’s net worth
and also failed to establish that Cabrera’s conduct was so reprehensible as to
satisfy the “malice, oppression, or fraud” element is supported by the
record.  The misconduct alleged in the
complaint simply did not rise to the level of reprehensibility necessary to
support an award of punitive damages.

Even if this were not the case,
Keystone failed to establish Cabrera’s net worth. The only evidence probative
of Cabrera’s net worth was Keystone’s claim that it paid Cabrera $51.38 per
hour, from which Keystone extrapolates that Cabrera must have earned in excess
of $1 million dollars over the past 10 years. 
Keystone’s calculation is speculative, to say the least.  Further, a calculation based on gross
earnings has very little to do with actual net worth at the time of the
prove-up hearing.  Keystone’s
calculations do not account for Cabrera’s expenses over the years, including
but not limited to the cost of food and housing, taxes, medical expenses or
expenses associated with supporting a family. 
Thus, Keystone failed to meet its burden of proving Cabrera’s net worth.

 

C.                
Prejudgment
Interest

 

Keystone contends the trial court
erred in denying its request for prejudgment interest of $178.20 on the $500.17
unpaid balance of the promissory note, to which it argues it was entitled as a
matter of law pursuant to Civil Code section 3287,
subdivision (a).  We disagree.

Prejudgment interest may be recovered in a conversion
action.  (Moreno v. Greenwood Auto Center (2001) 91 Cal.App.4th 201,
203.)  Civil Code section 3287,
subdivision (a) provides:  “Every person
who is entitled to recover damages certain, or capable of being made certain by
calculation, and the right to recover which is vested in him upon a particular
day, is entitled also to recover interest thereon . . . .”  Where the amount of damages cannot be
ascertained except by verdict or judgment, prejudgment interest is not
appropriate.  (Wisper Corp. v. California Commerce Bank (1996) 49 Cal.App.4th
948, 960.)  A claim is not certain just
because it is possible to determine a single element in the mathematical
calculations.  (Id. at pp. 960-961, citing Chesapeake
Industries, Inc. v. Togova Enterprises, Inc. (1983) 149 Cal.App.3d
901, 914; but see Gourley v. State Farm
Mut. Auto. Ins. Co. (1991) 53 Cal.3d 121, 384 [“When a case involves
multiple types of damages, a plaintiff who recovers judgment should be
permitted to recover prejudgment interest as to each type if warranted under
the statutory provisions.”].)  But, “[a]
large discrepancy between the amount demanded and the amount awarded indicates
that damages were not ascertainable if the discrepancy results from the
resolution of factual disputes arising from conflicting evidence or the lack of
factual information needed to readily calculate damages.  [Citations.]” 
(Uzyel v. Kadisha (2010)
188 Cal.App.4th 866, 920.)

Here, each cause of action alleged
that Cabrera took company owned property with him when he left work on October
1, 2008; Park’s declaration makes clear that this includes the tools Cabrera
bought with the company credit card.href="#_ftn5" name="_ftnref5" title="">>[5]  One element of Keystone’s requested
$190,050.99 in special damages was $500.17, which was alleged to be the unpaid
balance on the promissory note Cabrera executed to reimburse Keystone for the
$540.17 unauthorized credit card purchase. 
But the complaint also alleged that Cabrera returned the tools to
Keystone, albeit three years after he took them.  Because it was undisputed that Cabrera
returned the tools, Keystone’s damages were not necessarily the unpaid balance
on the promissory note, but could arguably have been the difference between the
$540.17 unauthorized credit card charge to purchase the tools and the value of
the returned tools – an amount that required calculation.  Even assuming the $500.17 was calculable, we
conclude that the large discrepancy between the $190,050.99 Keystone demanded
as special damages and the actual award, was a sufficient reason to deny
Keystone prejudgment interest.

 

DISPOSITION

 

The judgment is affirmed.  Cabrera shall recover his costs on appeal.

 

 

 

                                                                                    RUBIN,
J.

WE CONCUR:

 

 

 

                        BIGELOW,
P. J.

 

 

 

                        FLIER,
J.