O'Neill v. College Loan Special Purpose Corp.

Filed 6/27/06 O'Neill v. College Loan Special Purpose Corp. CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Linda B. Quinn, Judge. Reversed.

In 2001, defendant College Loan Special Purpose Corporation, Inc. (CLSPC) hired plaintiff E. Duffy O'Neill pursuant to an oral employment contract. After O'Neil's employment was terminated, he filed this action asserting the contract included an agreement to pay him 10,000 shares of CLSPC stock if he completed his probationary period, but that CLSPC failed to convey the stock to him on completion of his probation. CLSPC moved for and obtained summary judgment on O'Neil's complaint. O'Neil asserts there were triable issues of fact precluding summary judgment.

I

FACTUAL AND PROCEDURAL BACKGROUND

A. The Facts

In the summer of 2001, O'Neil was interviewed by Mr. Christich (CLSPC's agent) for potential employment with CLSPC. O'Neil testified that, during those interviews, Christich stated O'Neil would receive 10,000 shares of stock from CLSPC after completion of his 90-day probationary period with the company. O'Neil accepted the position with CLSPC and completed his 90-day probationary period on December 1, 2001. However, despite repeated demands, O'Neil did not receive any stock from CLSPC. O'Neil's employment with CLSPC was terminated on April 2, 2002.

B. The Lawsuit and Summary Judgment

O'Neil filed his action on April 5, 2004. At the time CLSPC moved for summary judgment, O'Neil's complaint contained claims sounding in both contract and tort.^[1] CLSPC's motion sought summary judgment or, in the alternative, summary adjudication as to each of O'Neil's causes of action. CLSPC's motion asserted the undisputed facts showed (1) O'Neil's contract claims were barred by the two-year statute of limitations applicable to oral contracts, (2) his contract claims failed because there was no evidence of a promise sufficiently certain and definite to be enforced, and (3) his fraud claims failed because the evidence did not support his claim CLSPC made a specific promise or representation that O'Neil would receive stock on completion of the probationary period. O'Neil opposed the motion, asserting there were triable issues of fact on when the statute of limitations began to run, and on whether there had been a specific and definite promise that supported both his contract and tort claims.

The trial court granted summary judgment in favor of CLSPC.^[2] O'Neil timely appealed.

II

ANALYSIS

A. Standard of Review

"The summary judgment procedure aims to discover whether there is evidence requiring the fact-weighing procedures of trial. [Citation.] '[T]he trial court in ruling on a motion for summary judgment is merely to determine whether such issues of fact exist, and not to decide the merits of the issues themselves.' [Citation.] The trial judge determines whether triable issues of fact exist by reviewing the affidavits and evidence before him or her and the reasonable inferences which may be drawn from those facts." (Morgan v. Fuji Country USA, Inc. (1995) 34 Cal.App.4th 127, 131.) However, a material issue of fact may not be resolved based on inferences if contradicted by other inferences or evidence. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 856.)

To prevail on a motion for summary judgment, a defendant must show one or more elements of the plaintiff's cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o).) The evidence of the moving party is strictly construed and that of the opponent liberally construed, and any doubts as to the propriety of granting the motion are to be resolved in favor of the party opposing the motion. (Branco v. Kearny Moto Park, Inc. (1995) 37 Cal.App.4th 184, 189.) The trial court does not weigh the evidence and inferences, but instead merely determines whether a reasonable trier of fact could find in favor of the party opposing the motion, and must deny the motion when there is some evidence that, if believed, would support judgment in favor of the nonmoving party. (Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 139.) Consequently, summary judgment should be granted only when a moving party is entitled to judgment as a matter of law. (§ 437c, subd. (c).)

Because a motion for summary judgment raises only questions of law, we independently review the parties' supporting and opposing papers and apply the same standard as the trial court to determine whether there exists a triable issue of material fact. (City of San Diego v. U.S. Gypsum Co. (1994) 30 Cal.App.4th 575, 582; Southern Cal. Rapid Transit Dist. v. Superior Court (1994) 30 Cal.App.4th 713, 723.) In practical effect, we assume the role of a trial court and apply the same rules and standards that govern a trial court's determination of a motion for summary judgment. (Lopez v. University Partners (1997) 54 Cal.App.4th 1117, 1121-1122.)

B. Summary Adjudication on O'Neil's Contract Claims

O'Neil's contract claims are based on an oral employment contract in which CLSPC purportedly promised, as partial consideration for his work, that it would convey 10,000 shares of stock to him upon completion of the probationary period. The probationary period was completed on December 1, 2001.

We conclude summary adjudication was proper on O'Neil's contract-based claims because those claims are barred by the statute of limitations.^[3] A claim for breach of an oral contract must be brought within two years. (Code Civ. Proc., § 339, subd. (1).) A cause of action on an oral contract accrues, and the statute of limitations begins to run, at the time the contract is breached. (Trustees of Capital Wholesale Electric etc. Fund v. Shearson Lehman Brothers, Inc. (1990) 221 Cal.App.3d 617, 627, fn. 4.) When the cause of action alleges the plaintiff was entitled to a payment under an oral contract, the cause of action accrues at the time payment is due and the obligor fails to pay. (Niles v. Louis H. Rapoport & Sons (1942) 53 Cal.App.2d 644, 651.) The statute is not tolled by the plaintiff's ignorance of his legal rights. (Johnston v. Johnson (1954) 127 Cal.App.2d 464, 473.)

O'Neil asserts the cause of action did not accrue on December 1, 2001, the date the stock should have been transferred to him, but instead did not accrue until 2004 when he elected to treat CLSPC's failure to transfer the stock as a breach that terminated the contract. The authorities relied on by O'Neil to support this assertion, however, arose in the context of ongoing bilateral contractual obligations,^[4] and have no application to the claim asserted by O'Neil. Here, O'Neil asserts he has fully performed his contractual obligations and CLSPC's only remaining contractual obligation is to pay to him the contractually-agreed consideration. Because O'Neil asserted the contract provided he was to receive stock subject only to completion of his 90-day probationary period, and the 10,000 shares were "to be received on the 91st day," the cause of action accrued not later than December 2, 2001. Because O'Neil's complaint was filed after December 2, 2003, his contract-based claims are time barred.

C. Summary Adjudication on O'Neil's Intentional Fraud Claims

It is undisputed O'Neil's fraud-based claims are not barred by limitations. The trial court granted the motion for summary adjudication on the fraud-based claims because it concluded there was no evidence raising a triable issue of fact on whether CLSPC made a definite and certain representation O'Neil would receive stock after completing the probationary period.^[5] The trial court noted that (1) other members of the class of probationary employees to which O'Neil belonged averred they were not promised stock (but instead were promised stock options) (2) other members of that class understood these benefits would vest only after a year of employment (and not after completion of the probationary period), and (3) CLSPC's director of Human Resources averred CLSPC has never offered stock to employees in O'Neil's position. The trial court concluded this evidence defeated O'Neil's ability to show CLSPC represented that stock would be conveyed to him.

The Fraud Claims

O'Neil's fifth, seventh and ninth causes of action are variants of his claim asserting CLSPC was liable for actual fraud. " 'The necessary elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.' [Citations.]" (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, fn. omitted.) A claim asserting intentional fraud requires proof both of the misrepresentation and of the defendant's intent to deceive. (Tyler v. Children's Home Society (1994) 29 Cal.App.4th 511, 548.) Fraudulent intent must often be inferred from underlying circumstances because direct evidence is rarely available. (Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 411-412.)

O'Neil's testimony was that Mr. Christich, acting on behalf of CLSPC, promised CLSPC would give 10,000 shares of stock to O'Neil on completion of the probationary period. Although the trial court concluded the fraud claim failed because the other members of the probationary group understood they were not promised stock on completion of the probationary period, the trial court's role on summary judgment is not to weigh the evidence but is instead to decide whether the party opposing summary judgment has evidence that, if accepted by the trier of fact, would support a judgment in the opposing party's favor. O'Neil's evidence, if credited, would support the element of a false representation, and summary adjudication cannot be upheld on this basis.^[6]

CLSPC alternatively asserts there is no evidence to support the "intent" element. A claim alleging the defendant made a promise without intent to perform the promise requires proof that, at the time the promise was made, the defendant had no intent to perform the promise. (Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 30.) To prevent every breach of contract from automatically giving rise to a fraud recovery, the courts have concluded that proof of nonperformance of the promise is, without more, insufficient to prove the defendant had no intent to perform the promise at the time it was made. (Ibid.) However, fraudulent intent is most often shown by circumstantial evidence, and may be "inferred from such circumstances as defendant's . . . hasty repudiation of the promise, his failure even to attempt performance, or his continued assurances after it was clear he would not perform." (Ibid.) Here, there was some additional evidence from which an inference of the requisite intent could have been drawn. It is undisputed CLSPC never attempted to satisfy the alleged promise. Moreover, during the time O'Neil remained employed with CLSPC, his inquiries about the stock were met with silence and delay from CLSPC. Indeed, there is no evidence CLSPC ever expressly informed O'Neil, despite his numerous inquiries, that he was not entitled to the stock. This evidence, although not compelling an inference of the requisite intent, is sufficient at the summary judgment stage to require a trial on the merits.

The Negligent Misrepresentation Claim

In addition to O'Neil's claim for actual fraud, his sixth cause of action purported to state a claim for negligent misrepresentation. To be actionable, a negligent misrepresentation must ordinarily be as to past or existing material facts, and not predictions as to future events, or statements as to future action by some third party. For example, in Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, a plaintiff alleged a claim for negligent misrepresentation against the defendant insurer based on the insurer's promise that it would pay for repairs to her car when they were completed and did not do so. The Tarmann court rejected this representation as the basis for a negligent misrepresentation claim, stating:

"The critical alleged misrepresentation as to immediate payment upon completion did not involve a past or existing material fact. Rather, it involved a promise to perform at some future time. [¶] . . . [¶]

"To maintain an action for deceit based on a false promise, one must specifically allege and prove, among other things, that the promisor did not intend to perform at the time he or she made the promise and that it was intended to deceive or induce the promisee to do or not do a particular thing. [Citations.] Given this requirement, an action based on a false promise is simply a type of intentional misrepresentation, i.e., actual fraud. The specific intent requirement also precludes pleading a false promise claim as a negligent misrepresentation . . . . Simply put, making a promise with an honest but unreasonable intent to perform is wholly different from making one with no intent to perform and, therefore, does not constitute a false promise. Moreover, we decline to establish a new type of actionable deceit: the negligent false promise. [Fn. omitted.]" (Id. at pp. 158-159.)

Other courts have agreed that a party cannot maintain a negligent misrepresentation claim based on a promise of future events.^[7] (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481-482.) Here, O'Neil's negligent misrepresentation claim is based on a promise of future conduct--that CLSPC would convey stock to him upon completion of his probationary period. We conclude that representation cannot support recovery under a negligent misrepresentation theory (ibid.), and summary adjudication on the sixth cause of action was therefore proper.

DISPOSITION

The judgment is reversed. On remand, the court shall enter an order denying summary adjudication in favor of CLSPC as to O'Neil's fifth, seventh and ninth causes of action and granting summary adjudication in favor of CLSPC as to O'Neil's remaining causes of action. Each party shall bear its own costs on appeal.

McDONALD, J.

WE CONCUR:

NARES, Acting P. J.

O'ROURKE, J.

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Analysis and review provided by Carlsbad Apartment Manager Lawyers.

^[1] The first and second causes of action of O'Neil's first amended complaint were contractual claims alleging CLSPC had breached its contract by refusing to convey the stock to him; although O'Neil's eighth cause of action also alleged a claim labeled as "promissory estoppel," he does not on appeal contend this claim is distinct from his primary contract claim, and we therefore do not separately evaluate this claim. O'Neil's first amended complaint also pleaded tort claims, all of which sounded in fraud, alleging CLSPC intentionally or negligently misrepresented that it would convey the stock to O'Neil when he completed his probationary period. O'Neil's first amended complaint also pleaded causes of action for conversion, claim and delivery and constructive trust (the 10th, 11th and 12th causes of action, respectively) all of which were derivative of his claim that CLSPC was contractually obligated to convey the stock to him.

^[2] The court's tentative ruling was to grant CLSPC's motion because O'Neil's evidence submitted in opposition to the motion was inadmissible because not authenticated, and therefore the court tentatively granted CLSPC's objections to such evidence. However, O'Neil's attorney cured the defect prior to oral argument on the motion, and the court therefore overruled CLSPC's objections and considered the evidence in ruling on the motion. On appeal, CLSPC asserts that under San Diego Watercrafts, Inc. v. Wells Fargo Bank (2002) 102 Cal.App.4th 308 it was error for the court to consider O'Neil's evidence because CLSPC had no opportunity to rebut this evidence. The San Diego Watercrafts decision merely holds that a party opposing summary judgment has a due process right to receive notice of and opportunity to dispute the facts that allegedly support entry of judgment against that party, and therefore a court may not enter summary judgment based on facts contained in reply papers as to which the nonmoving party has had no opportunity to rebut. (Id. at pp. 312-316.) San Diego Watercrafts is distinguishable because it did not purport to discuss the due process rights of a moving party to file evidence to rebut the opposing party's evidentiary showing, and because the evidence relied on by O'Neil was not new evidence but instead evidence as to which CLSPC did have the opportunity to respond.

^[3] The trial court granted summary adjudication on the contract claims on a different ground, concluding there was no evidence raising a triable issue of fact on whether CLSPC made a definite and certain promise O'Neil would receive stock after completing the probationary period. Although we disagree with this conclusion, we may nevertheless affirm the summary adjudication on O'Neil's contract-based claims on the alternative ground of statute of limitations because the parties fully briefed the issue below and on appeal. (See California School of Culinary Arts v. Lujan (2003) 112 Cal.App.4th 16, 22; Shamsian v. Atlantic Richfield Co. (2003) 107 Cal.App.4th 967, 975-976, fn. 6.)

^[4] For example, O'Neil cites McMillan Process Co. v. Brown (1939) 33 Cal.App.2d 279 as holding a plaintiff need not treat a contract as abandoned on the first breach by the defendant, but may instead affirm the contract and continue to demand performance, and the cause of action for breach will not accrue until the plaintiff elects to treat the contract as terminated. (Id. at p. 285.) However, that case involved a defendant leasing machinery from the plaintiff who ceased making monthly royalty payments but continued to use the machines. The court ruled that because the plaintiff continued to perform his obligations, the plaintiff could elect to continue to rely on the contract notwithstanding defendant's failure to make the monthly payments, and the claim for breach would not accrue until the plaintiff elected to treat defendant's ongoing failure to pay as grounds for terminating the contract. (Id. at pp. 281-282.) Indeed, as our Supreme Court explained in Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 489-490, "when there are ongoing contractual obligations the plaintiff may elect to rely on the contract despite a breach, and the statute of limitations does not begin to run until the plaintiff has elected to treat the breach as terminating the contract. [Citation.] In the context of successive breaches of a continuing contractual obligation, we have explained: ' "In such a contract, where the parties did not mutually abandon or rescind it upon a breach or successive breaches, the injured party could wait until the time arrived for a complete performance by the other party and then bring an action for damages for such breaches. [Citation.] Respondent was not bound to treat the contract as abandoned on the first breach of it, or on any particular breach, but had his election to still rely on it, and the statute of limitations could not begin to run until it had made its election." ' [Quoting Lambert v. Commonwealth Land Title Ins. Co. (1991) 53 Cal.3d 1072, 1078.]" However, those cases have no application where, as here, the plaintiff asserts the time for complete performance has ripened.

^[5] The trial court also stated the evidence showed, as a matter of law, that O'Neil could not have justifiably relied on Christich's representations because O'Neil purportedly admitted in his deposition that Christich was just "one of the guys" and the "messenger" and O'Neil did not hold Christich responsible. However, in the deposition passages cited by the trial court, O'Neil was explaining that after the probationary period was satisfied, O'Neil asked Christich about the stock but Christich responded he did not know the timing or status of the stock and would check into it. O'Neil understood Christich was a conduit for information and O'Neil held no animosity toward Christich. This evidence is irrelevant to whether O'Neil could have justifiably relied on the promise of stock at the time he accepted employment.

^[6] CLSPC asserts on appeal that the element of justifiable reliance is also absent. Justifiable reliance is another essential element of any claim for intentional fraud, and "exists when the misrepresentation or nondisclosure was an immediate cause of the plaintiff's conduct which altered his or her legal relations, and when without such misrepresentation or nondisclosure he or she would not, in all reasonable probability, have entered into the contract or other transaction. [Citations.]" (Alliance Mortgage Co., supra, 10 Cal.4th at p. 1239.) The question of whether a plaintiff's reliance is reasonable is a question of fact, except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion. (Ibid.) We do not believe this is one of those rare cases, and decline CLSPC's invitation to uphold summary adjudication of the intentional fraud causes of action on this basis.

^[7] In Muraoka v. Budget Rent-A-Car, Inc. (1984) 160 Cal.App.3d 107, the court held a promise made with no reasonable grounds for believing it would be fulfilled will support a negligent misrepresentation claim. However, Muraoka was decided before Tenzer v. Superscope, Inc., supra, 39 Cal.3d 18, in which the Supreme Court clarified that a fraud claim based on a false promise requires proof the promise was made without any intent to perform the promise at the time it was made, and therefore Muraoka had no occasion to decide whether the requisite intent for "false promise fraud" was mutually exclusive with the honest but negligent intent associated with ordinary forms of negligent misrepresentations. We conclude that, after Tenzer, the analysis in Muraoka of the law of negligent misrepresentations in the context of false promises is no longer good law.