R & B AUTO CENTER, INC v. FARMERS GROUP, INC

Filed 6/9/06 Reposted to correct formatting error; no change to text

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, William M. Monroe, Judge. Reversed and remanded.

Story continue from Part IV …….

The majority opinion holds that a party opposing a motion for nonsuit may incorporate by reference all prior filings in the case, and that it is reversible error for the trial court to decide the case on the evidence before it, rather than dig back through the record to locate evidence unspecified by the party. The majority's holding is breathtaking in its novelty, and it will be devastating to the daily operation of our trial courts and to the normal processes of appellate review. As an appellate court, we cannot reverse a correct trial court decision, based on evidence that was not before the trial court when it made its decision.

As a second, independent reason showing erroneous analysis by the majority, the issues on which the majority opinion bases its conclusions in connection with the misrepresentation claims are not properly before us because R & B has waived them on appeal under basic rules of appellate review. In its opening appellate brief, R & B never addresses the motion for nonsuit filed by Farmers and Truck Underwriters. Any arguments with regard to that issue should be deemed to be waived. (Katelaris v. County of Orange (2001) 92 Cal.App.4th 1211, 1216, fn. 4.) With respect to Truck Insurance's motion for nonsuit, the issue argued to the trial court was R & B's lack of any damages. In its opening appellate brief, R & B does not address the issue of damages (much less any issue regarding the existence or nonexistence of a misrepresentation). When the majority addresses whether R & B waived issues on appeal, it addresses the wrong issue--whether R & B waived its rights by stipulating to the granting of the nonsuit motions, and by failing to offer evidence to counter those motions. Yes, these are serious problems for R & B on appeal, but not as serious a problem as its failure to challenge damages on appeal--a failure which I believe forecloses R & B from raising a challenge to the nonsuit on appeal.

Thus, R & B failed to address the specific issue on which the motion for nonsuit had been based and was decided, namely, the absence of damages. Truck Insurance argued in its respondent's appellate brief that R & B could not recover damages, and its misrepresentation claims were therefore properly dismissed. Even in its reply brief, R & B makes no attempt to point to any evidence of actual, compensatory damages. R & B has repeatedly waived the issue of damages for misrepresentation on appeal, and the issue is not properly before this court.

The majority opinion broadly criticizes the trial court for its rulings on motions in limine. Yet, there are really two key motions in limine in issue, the trial court was right on both, and the majority agrees with the ruling on one of the two. First, the trial court decided one motion in limine on the ground the insurance contract did not provide coverage for new cars. The majority agrees with this ruling. Second, the trial court granted a motion in limine excluding the testimony of three nonparty witnesses who were not identified by R & B in discovery. This ruling was well within the trial court's discretion, based on the record before it.

Procedural History

I set forth here a short summary of the procedural history of this case and highlight those issues on which I agree with the majority, while making it clear where we disagree. First, the trial court granted a motion in limine in which it concluded, as a matter of law, the insurance policy did not provide coverage for R & B's claim, and therefore dismissed R & B's coverage-related claims. The majority agrees the issue of interpretation of the contract was a legal one and the motion was properly granted with respect to two of the claims--for breach of contract and breach of the implied covenant.[1] I agree with the majority's conclusion in this regard. I disagree, however, with the conclusion that the trial court improperly resolved the unfair competition claim, as detailed post. The trial court also granted several other motions in limine. In dicta, the majority reverses these rulings using an incorrect standard of review.

Next, the trial court conducted a bench trial on the existence of a fiduciary duty and on the issue of alter ego. At the conclusion of trial, the court found there was no fiduciary duty owed to R & B, and the majority concludes there was substantial evidence to support the trial court's finding on fiduciary duty. I agree with the majority on this point. The majority then concludes it is moot whether the trial court correctly ruled that Farmers was not the alter ego of Truck Underwriters. I understand the majority's opinion on this issue to finally dispose of the alter ego issue in favor of Farmers and Truck Underwriters. I would expressly state there was substantial evidence to support the trial court's finding that none of the parties was the alter ego of the others.

It was at this point in the proceedings that Farmers and Truck Underwriters, and Truck Insurance separately moved for nonsuit on the remaining claims of negligent and intentional misrepresentation and reformation. I agree with the majority's conclusion that the trial court properly granted Truck Underwriters' motion, but the majority's conclusion that the trial court erred by granting the motions for nonsuit by Farmers and Truck Insurance is wrong, as described post.

R & B Waived Any Challenge to the Order Granting Farmers and Truck Underwriters' Motion for Nonsuit.

In the trial court, two motions for nonsuit were filed. In the first, Farmers and Truck Underwriters sought nonsuit on the remaining causes of action against them. The court granted that motion. In its appellate briefs, R & B never argues the trial court erred in granting Farmers and Truck Underwriters' motion for nonsuit. This issue should have been deemed to be waived. (Katelaris v. County of Orange, supra, 92 Cal.App.4th 1211, 1216, fn. 4.) Nevertheless, the following discussion would apply equally to Farmers and Truck Underwriters' motion. (As noted ante, this is not the same waiver issue addressed in the majority's opinion, ante, at pages 9-14.)

Truck Insurance's Motion for Nonsuit on the Misrepresentation Claims Was Properly Granted.

The motion for nonsuit on the misrepresentation claims was properly granted. The elements of a claim for intentional misrepresentation are a misrepresentation, made with knowledge of its falsity and with an intent to defraud or induce reliance, justifiable reliance, and resulting damage. (5 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 772, p. 1121.) A claim for negligent misrepresentation requires proof of each of the foregoing elements except for knowledge of the falsity of the representation; honest belief in the truth of the statement, without a reasonable ground for that belief, is sufficient. (Id., § 818, p. 1181.)

The absence of any one of these elements warranted granting the nonsuit motion. The trial court correctly concluded R & B suffered no damages and based its decision on that ground. In addition to the absence of damages, the nonsuit motion could have been granted as to each and all of the other elements as well.

R & B could not have proved a claim for intentional or negligent misrepresentation because it suffered no damages. R & B was limited to recovering economic damages. (Templeton Feed & Grain v. Ralston Purina Co. (1968) 69 Cal.2d 461, 468.) The only economic damages R & B could have suffered as a result of the alleged misrepresentations by Westenberger and Lopez (a Farmers field underwriter) were the costs and expenses in defending against and settling the lemon law lawsuit filed against R & B which spawned the present case. Truck Insurance tendered payment to R & B for all its litigation expenses and settlement costs incurred in the Peralta litigation. Therefore, R & B suffered no loss.[2]

R & B admitted it suffered no damages on multiple occasions throughout the litigation and waived the issue on appeal. In its opening brief on appeal, R & B acknowledges, as it did in asking the trial court to reconsider its ruling on the motions in limine: â€