Filed 10/23/17 Human Potential Consultants v. Dept. of Corrections CA3

NOT TO BE PUBLISHED

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

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Plaintiff and cross-defendant Human Potential Consultants, LLC (HPC) appeals from the trial court’s entry of judgment in favor of defendant and cross-complainant Department of Corrections and Rehabilitation (Corrections) after the trial court granted summary judgment in favor of Corrections on its cross-complaint for breach of contract, money had and received, and declaratory relief.[1] HPC’s arguments reflect a significant misunderstanding of the record on appeal. Based on the actual state of the record, we reject HPC’s belated challenge to Corrections’ separate statement of undisputed facts as well as its mistaken assertion that the trial court relied on the concept of judicial exhaustion to grant summary judgment in Corrections’ favor. Accordingly, we affirm the judgment.

I. BACKGROUND

Corrections moved for summary judgment on its cross-complaint on the basis that an administrative appeal confirmed that Corrections had paid HPC $927,769 in unallowable costs identified in an audit, but HPC had not remitted this amount or obtained relief from the audit findings despite being contractually bound by the audit process.[2]

Corrections filed a separate statement of undisputed material facts setting forth the following facts that were almost entirely undisputed by HPC:

Corrections and HPC entered into three multi-year agreements. Each of the contracts incorporated Corrections’ Line Item Budget Guide for Cost Reimbursement Budgets (Budget Guide), and HPC agreed to be bound by its terms. The Budget Guide authorizes Corrections to conduct audits. It was HPC’s “responsibility to ensure that all expenditures claimed . . . are allowable costs associated in performing the contracted services.” Further, any disputes had to be resolved pursuant to section 22090.7 of Corrections’ Department Operations Manual. The manual provides for an appeal to Corrections’ Administrative Review Committee.

In 2010, Corrections’ Office of Audits and Court Compliance conducted a fiscal compliance audit of the three HPC contracts. In June 2011, it issued a final Auditor’s Report that identified $1,631,445 in unallowable costs that had been charged to Corrections. HPC appealed to the Administrative Review Committee, challenging $1,357,126 of the audit disallowance. After a hearing, the committee issued a final audit decision concluding that HPC was required to return $927,769 in unallowable costs. HPC did not do so. Nor did it seek legal relief from having to repay the $927,769.

HPC’s factual response to Corrections’ motion for summary judgment disputed only that it had yet to challenge the decision finding $927,769 in unallowable costs, and noted that HPC had concurrently filed a petition for writ of mandate.

HPC also advanced two legal arguments in opposition to Corrections’ motion for summary judgment: (1) Corrections relied on unauthorized regulations, and (2) HPC’s petition for writ of mandate “should be heard and determined before [Corrections’] motion for summary judgment. If the writ were granted, the subsequent proceedings requested by the writ could resolve the issues raised in this action.”

In its tentative ruling on the motion, the trial court found there was a triable dispute of material fact that precluded summary judgment regarding whether HPC had challenged the audit decision. But, in its final order granting summary judgment, the trial court granted judicial notice of an order striking HPC’s petition for writ of mandate. The court explained that “[s]ince [HPC] has failed to carry its burden of producing admissible evidence sufficient to establish the existence of a single triable issue of material fact which precludes summary adjudication . . . , [Corrections] is entitled to summary adjudication as a matter of law on all three [causes of action] asserted in [its cross-complaint].”

The trial court entered judgment in favor of Corrections accordingly. HPC timely appealed.

II. DISCUSSION

A. Standard of Review

A motion for summary judgment should be granted where 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).)

A plaintiff or cross-complainant moving for summary judgment “bears the burden of persuasion that ‘each element of’ the ‘cause of action’ in question has been ‘proved,’ and hence that ‘there is no defense’ thereto.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; see also Code Civ. Proc., § 437c, subd. (p)(1).) “[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact.” (Aguilar v. Atlantic Richfield Co., supra, at p. 850.) Once the moving party meets its initial burden, the burden shifts to the opposing party to demonstrate the existence of a triable issue of material fact. (Ibid.) “The defendant or cross-defendant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” (Code Civ. Proc., § 437c, subd. (p)(1).)

“Although we independently assess the grant of summary judgment, our inquiry is subject to two constraints. Under the summary judgment statute, we examine the evidence submitted in connection with the summary judgment motion, with the exception of evidence to which objections have been appropriately sustained. [Citations.] . . . [¶] Furthermore, our review is governed by a fundamental principle of appellate procedure, namely, that ‘ “[a] judgment or order of the lower court is presumed correct,” ’ and thus, ‘ “error must be affirmatively shown.” ’ [Citations.] Under this principle, [the appellant] bear[s] the burden of establishing error on appeal, even though [the respondent] had the burden of proving its right to summary judgment before the trial court. [Citation.] For this reason, our review is limited to contentions adequately raised in the [appellant’s] briefs.” (Paslay v. State Farm General Ins. Co. (2016) 248 Cal.App.4th 639, 644-645.)

B. HPC Has Waived Its Challenge to Corrections’ Separate Statement

HPC argues that summary judgment should not have been granted in favor of Corrections because Corrections’ separate statement of undisputed material facts did not assert that HPC failed to perform any contractual duty. Specifically, HPC contends that to establish breach of contract, Corrections had to establish that each of the challenged costs were unallowable under the contract. We disagree with HPC’s claim that the current challenge to Corrections’ separate statement “necessarily was raised by [Corrections’] motion.” Moreover, HPC did not raise this argument in opposition to Corrections’ motion for summary judgment. “When an argument is not asserted below in opposition to a motion for summary judgment, it is deemed waived and will not be considered for the first time on appeal to reverse an order granting summary judgment.” (California Restaurant Management Systems v. City of San Diego (2011) 195 Cal.App.4th 1581, 1593, fn. 7.) HPC relies on an exception to the general rule that an issue not raised in the trial court may not be presented for the first time on appeal that applies “when the issue involves purely a legal question which rests on an uncontroverted record which could not have been altered by the presentation of additional evidence.” (In re Marriage of Broderick (1989) 209 Cal.App.3d 489, 501.)

The exception for pure questions of law involving an uncontroverted record is inapplicable here because HPC is essentially attempting to raise a belated factual dispute. In the trial court, HPC did not dispute that it agreed to audits of its contracts and to follow certain dispute resolution procedures, and that the result of the audit and appeal was a determination that HPC was required to return $927,769 in unallowable costs. Similarly, HPC did not to dispute that it had failed to remit payment. Hence, Corrections made a prima facie showing of the non-existence of a triable issue of fact with respect to the breach of a contractual duty.[3] If HPC was contending that the costs were not in fact unallowable, then it was required to “set forth the specific facts showing that a triable issue of material fact exists as to” breach of contract in the trial court. (Code Civ. Proc., § 437c, subd. (p)(1).) It did not do so. Instead, it merely set forth facts demonstrating that it had filed a petition for writ of mandate, which was stricken prior to the hearing on Corrections’ motion for summary judgment. Without deciding whether filing a petition for writ of mandate would have created a triable issue of fact regarding the audit findings, that possibility vanished when the writ was stricken. HPC failed to set forth any other facts showing that a triable issue of material fact existed regarding the validity of the audit findings. Accordingly, HPC has waived the opportunity to do so on appeal and the issue cannot be reached under the exception for purely legal questions.

C. The Trial Court Neither Relied On Exhaustion of Judicial Remedies Nor Required HPC to File a Writ.

In its opening brief, HPC argued that the trial court “may have” or “implicitly” based its decision on a failure to exhaust judicial remedies, but the brief acknowledges that the trial court “did not discuss exhaustion of judicial remedies in its judgment.” By oral argument, however, counsel for HPC changed positions and argued instead that the trial court “expressly” decided HPC was required to challenge the audit by writ of mandate within a particular time period. These assertions certainly overstate and appear to misrepresent the record.[4] The trial court’s order granting Corrections’ motion for summary judgment on the cross-complaint neither discussed exhaustion of judicial remedies nor stated that a timely petition for writ of mandate was required. And we may not presume this was the basis for the court’s decision. The judgment of a lower court is presumed to be correct and error must be affirmatively shown. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)

We recognize that HPC’s opposition to Corrections’ motion for summary judgment argued that HPC’s petition for writ of mandate “should be heard and determined before [Corrections’] motion for summary judgment.” And the trial court did grant judicial notice of an order striking HPC’s petition for writ of mandate. But the court’s ultimate conclusion emphasized only that “[s]ince [HPC] has failed to carry its burden of producing admissible evidence sufficient to establish the existence of a single triable issue of material fact which precludes summary adjudication . . . , [Corrections] is entitled to summary adjudication as a matter of law on all three [causes of action] asserted in [its cross-complaint].”

Whether HPC was required to exhaust judicial remedies or specifically challenge the audit by a petition for writ of mandate was not part of the trial court’s decision. Rather, summary judgment was granted because of the more fundamental point that HPC failed to create a triable issue of fact. HPC’s arguments miss this point entirely. Accordingly, we find no error in the court’s conclusion.

III. DISPOSITION

The judgment is affirmed. The Department of Corrections and Rehabilitation shall recover its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (2).)

/S/

RENNER, J.

We concur:

/S/

BLEASE, Acting P. J.

/S/

DUARTE, J.