Filed 1/4/18 Kapral v. VDC, LLC CA5




NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

ROBERT KAPRAL,

Cross-complainant and Appellant,

v.

VDC, LLC et al.,

Cross-defendants and Respondents.

F073785

(Super. Ct. No. S1500CV281230)


OPINION

APPEAL from a judgment of the Superior Court of Kern County. David R. Lampe, Judge.
Brumfield & Hagan, Christopher J. Hagan; Braun, Harper, Gosling and Craig D. Braun for Cross-complainant and Appellant.
LeBeau-Thelen and Andrew K. Sheffield for Cross-defendants and Respondents.
-ooOoo-
Appellant, Robert Kapral, challenges the judgment on the pleadings on his cross-complaint in favor of respondents, VDC, LLC (VDC) and Gordon Downs. The trial court concluded that retraxit, i.e., res judicata, barred this cross-complaint because Kapral based it on the same primary right as a cross-complaint involving the same cross-defendants filed in a previous action that the parties voluntarily dismissed with prejudice.
According to Kapral, the court erred because it failed to make factual determinations regarding the effect of the settlement agreement that terminated the prior action. Kapral further argues the same primary right was not asserted in both cross-complaints because each alleged a different harm.
The trial court did not err as Kapral claims. Therefore, the judgment will be affirmed.
BACKGROUND
VDC was created in 2011 to develop real property into residential housing tracts in the City of McFarland on land purchased from McFarland Partners, LLC (McFarland Partners). Two companies each owned a 50 percent interest in VDC; CalDev Group, LLC (CalDev) and Skyline Ridge, Inc. (Skyline). Kapral was the sole legal member of CalDev. However, Kapral and Downs both managed CalDev until Downs resigned in November 2013.
Under VDC’s operating agreement and a financial management agreement, the RMK Group (RMK), a corporation owned by Kapral, and Kapral were VDC’s designated managers.
In July 2011, McFarland Partners, Downs Equipment Rentals, Inc. (DER), Downs, and VDC entered into a written financing agreement. Under this agreement, DER agreed to provide financing to VDC for construction of a residential housing development. DER made loans to VDC and VDC promised to pay the loans back to DER.
In January 2014, DER filed a complaint against Kapral (DER action). This action sought damages for fraud alleging that Kapral made false representations to DER regarding the ownership of CalDev and those representations caused DER to loan money to VDC.
Kapral filed a cross-complaint in the DER action against Downs and VDC. In his second amended cross-complaint filed in December 2014, Kapral alleged causes of action for indemnity, declaratory relief, interference with contract, and interference with prospective economic advantage. According to Kapral, Downs formulated a plan to take sole and complete control of VDC and executed this plan in May 2013 by wrongfully accusing Kapral of dishonesty and theft; amending the VDC operating agreement to require only Downs’s signature; and removing RMK and Kapral as VDC’s managers. Kapral alleged that by engaging in this conduct, Downs rendered VDC either unable or unwilling to repay the loans while causing DER to claim that Kapral committed fraud. Kapral further alleged that Downs took improper control of VDC and destroyed Kapral’s reputation among the community and the City of McFarland. Kapral sought damages based on this alleged conduct and the resulting interference with contract and prospective economic advantage.
In February 2014, VDC filed the underlying action against Kapral, Coleen Kapral, and RMK alleging causes of action for breach of fiduciary duty, conversion, embezzlement, breach of contract, receipt of stolen property, and unjust enrichment. According to the complaint, Kapral embezzled over $300,000 from VDC.
In response, Kapral filed a cross-complaint against VDC and Downs in May 2014. Kapral alleged causes of action for quantum meruit, defamation, and indemnity. According to Kapral, he performed management services without compensation that Skyline failed to perform under a management agreement with VDC. Kapral further alleged that Downs made statements attacking Kapral’s competence and accusing him of stealing money. In seeking indemnity from Downs if held liable to VDC, Kapral alleged,
“It was only after Downs decided to move forward with his common plan and scheme to take control of VDC and other business entities in which Kapral has an interest, and destroy Kapral’s reputation among the community and the City of McFarland, that VDC, which is now being controlled by Downs, objected to any conduct of Kapral as it relates to VDC.”
In February 2015, the parties settled the DER action. The parties agreed to dismiss their respective pleadings with prejudice in exchange for mutual waivers of litigation costs. The trial court thereafter entered a dismissal with prejudice of the entire action.
In January 2016, respondents moved for judgment on the pleadings on Kapral’s cross-complaint. Respondents argued that the res judicata doctrine barred the cross-complaint as a matter of law.
The trial court granted respondents’ motion. The court concluded that the gravamen of the second amended cross-complaint in the DER action was that “the moving parties here (among others) wrongfully acted to deprive [Kapral] of his rights in an enterprise to profit from stated real estate and construction and also defamed him.” The court explained that the dismissal of the pleadings with prejudice in the DER action operated as a retraxit and thus barred any subsequent litigation as to matters transactionally related. The trial court found the challenged cross-complaint was barred because it asserted the same factual underpinnings as the DER action cross-complaint and the same “primary right,” i.e., “to enjoy the benefits of [Kapral’s] ‘share’ of the prospective enterprise and to also be free from false attacks on reputation.”
DISCUSSION
1. Standard of review.
A motion for judgment on the pleadings challenges defects fully disclosed either on the face of the pleading under attack or by matters that the court may judicially notice. (Code Civ. Proc., § 438, subd. (d).) In ruling on a motion for judgment on the pleadings, the trial court must accept the factual allegations in the pleading as true and give them a liberal construction. The appellate court independently reviews the trial court’s order granting the motion. (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515-516.)
2. The trial court was not required to make factual findings regarding the scope of the settlement agreement.
Kapral argues the trial court was required to make factual findings regarding the terms of the DER action settlement agreement before it could determine what causes of action were barred by the dismissal. Kapral relies on Nakash v. Superior Court (1987) 196 Cal.App.3d 59 (Nakash) and Neil Norman, Ltd. v. William Kasper & Co. (1983) 149 Cal.App.3d 942 (Neil Norman) to support his position. However, in both of these cases, the transactional facts that generated the second complaint occurred after the first judgment. (Nakash, supra, 196 Cal.App.3d at p. 70; Neil Norman, supra, 149 Cal.App.3d at p. 947.)
In contrast, here, the facts giving rise to both cross-complaints occurred before Kapral filed the DER cross-complaint. Further, there is no dispute regarding the terms of the DER action settlement. Both parties agree they dismissed their respective pleadings in the DER action with prejudice in exchange for mutual waivers of costs. There were no issues of fact to resolve. Moreover, because the facts regarding the settlement and the dismissal with prejudice were not in dispute, the trial court could rule on the motion based solely on the pleadings.
3. Kapral’s dismissal of his cross-complaint with prejudice in the DER action bars his cross-complaint in this action.
Where, as here, a cross-complainant voluntarily dismisses his cross-complaint with prejudice, the dismissal operates as a retraxit. (Alpha Mechanical, Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Co. of America (2005) 133 Cal.App.4th 1319, 1330 (Alpha Mechanical).) “In its common law form, a retraxit resulted from a plaintiff’s ‘open and voluntary renunciation of his suit, in court,’ resulting in the loss of his or her action forever.” (Id. at p. 1331.) Thus, it is the equivalent of a final judgment on the merits, barring the entire cause of action. The dismissal with prejudice also bars any future action on the same subject matter. (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 793 (Boeken).) Therefore, in further proceedings occurring between the same parties, a court will apply principles of res judicata to resolve precisely what causes of action or issues the retraxit bars. (Alpha Mechanical, supra, 133 Cal.App.4th at p. 1331.)
The res judicata doctrine “describes the preclusive effect of a final judgment on the merits.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896.) This doctrine has two aspects, claim preclusion and issue preclusion. (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824 (DKN Holdings).) Generally, courts use the term “res judicata” to describe claim preclusion and reserve the term “collateral estoppel” for issue preclusion. (Ibid.)
“Claim preclusion ‘prevents relitigation of the same cause of action in a second suit between the same parties or parties in privity with them.’ [Citation.] Claim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit.” Claim preclusion bars relitigation of the claim altogether. It also bars claims that were not, but should have been, advanced in the previous suit. (DKN Holdings, supra, 61 Cal.4th at p. 824.)
“To determine whether claim preclusion bars another action or proceeding, courts look to whether the two proceedings involve the same cause of action.” (Alpha Mechanical, supra, 133 Cal.App.4th at pp. 1326-1327.) In California, a “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty” of the defendant, and a wrongful act by the defendant constituting a breach of that duty. (Crowley v. Katleman (1994) 8 Cal.4th 666, 681 (Crowley).) A primary right is indivisible. Thus, the violation of a single primary right gives rise to a single cause of action. (Ibid.)
In deciding what the cause of action is, the court considers the harm suffered, not the particular theory asserted by the litigant. (Boeken, supra, 48 Cal.4th at p. 798.) One injury gives rise to only one claim for relief despite there being multiple legal theories upon which to recover for that harm. (Ibid.) “‘Hence a judgment for the defendant is a bar to a subsequent action by the plaintiff based on the same injury to the same right, even though he presents a different legal ground for relief.’” (Slater v. Blackwood (1975) 15 Cal.3d 791, 795.) In sum, the primary right is simply the plaintiff’s right to be free from the particular injury suffered. (Crowley, supra, 8 Cal.4th at p. 681.) “When two actions involving the same parties seek compensation for the same harm, they generally involve the same primary right.” (Boeken, supra, 48 Cal.4th at p. 798.)
Kapral characterizes the primary right he asserted in the DER action as his right to be free from cross-defendants’ interference with contracts and loans. According to Kapral, based on this primary right, he alleged that cross-defendants were liable for interfering with his management contracts resulting in VDC’s breach of those agreements. Regarding this action, Kapral contends he asserted separate and distinct primary rights, his right to be compensated for work performed for which he was not paid and his right to not have his reputation tarnished.
Contrary to Kapral’s position, the harm he suffered in both actions stemmed from Downs’s alleged scheme as set forth in the DER action to “take sole and complete control of VDC and McFarland, thereby effectively controlling both the unimproved property” as well as the home construction. In the DER action, Kapral accused Downs of wrongfully accusing Kapral “of dishonesty and theft in relation to the business of VDC,” removing Kapral and RMK as VDC’s managers, and making Skyline VDC’s manager. Kapral sought damages based on VDC’s breach of the management contracts and the loss of the economic benefit from his relationship with VDC. Thus, as the trial court concluded, the harm suffered by Kapral in the DER action was the deprivation of his rights to profit from the real estate construction enterprise and damage to his reputation.
Kapral bases the cross-complaint in the underlying action on the same subject matter, i.e., the harm suffered due to Downs’s scheme to take control of VDC and the other business entities in which Kapral had an interest and to destroy Kapral’s reputation. Kapral merely seeks different remedies. Instead of damages for breach of the management contracts and the loss of economic benefit, Kapral seeks damages based on one specific management activity and the damage to his reputation inflicted by Downs as part of Downs’s scheme. However, the theories of recovery asserted by Kapral or remedies he seeks do not define the primary right. (Boeken, supra, 48 Cal.4th at p. 798.) Rather, it is the harm suffered.
Here, both actions state the same primary right, i.e., Kapral’s right to continue managing, and profit from, the business of building homes in McFarland. Therefore, Kapral’s cross-complaint is barred.
DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.


LEVY, J.
WE CONCUR:



HILL, P.J.



PEÑA, J.