Opinion
A154606
10-31-2019
ANDANTE OWNERS ASSOCIATION, Plaintiff, Cross-defendant, and Respondent, v. SALLY LIU, Defendant, Cross-complainant, and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG13686380)
On appeal, cross-complainant Sally Liu challenges several orders of the trial court, including the denial of a motion to enforce a settlement agreement, the denial of Liu's motion for leave to file a second amended cross-complaint, and the grant of summary judgment against Liu on her first amended cross-complaint. The respondents have filed motions to augment the record and to dismiss the appeal; we grant the former but deny the latter. On the merits of the appeal, we conclude that Liu presents no basis for reversal of the orders denying the enforcement motion and the motion for leave to amend. We hold, however, that the trial court erred in granting summary judgment because Liu raised a triable issue of material fact on her claim of breach of implied warranty of fitness for a particular purpose. Accordingly, the judgment is affirmed in part and reversed in part.
FACTUAL AND PROCEDURAL BACKGROUND
In November 2007, Liu purchased three commercial condominium units in the Andante Condominiums, a development of residential and commercial units developed by SNK Captec Andante and constructed by SNK Construction, Inc.
In July 2013, the Andante Owners Association (Andante) sued Liu for breach of contract and common counts, alleging she failed to pay various assessments and fees. In May 2014, Liu filed a cross-complaint against Andante, SNK Captec, its agents Jon Dickinson and Don Peterson, and SNK Development, Inc. Liu asserted various causes of action including fraud, breach of contract, and negligence.
In June 2015, Liu filed a first amended cross-complaint (FACC) against the same cross-defendants and SNK Construction, Inc. (respondents). Liu alleged that in January 2015, she discovered large cracks on the walls of her units that had not previously been there. Liu further alleged that she had intended to use the units as a restaurant or food service business until she learned that two air shafts in the units could not be used as exhaust vents. In the first cause of action for breach of implied warranties, Liu alleged that Dickinson, Peterson, SNK Captec, SNK Development, Inc. and SNK Construction Inc. (the SNK cross-defendants) breached implied warranties of merchantability and fitness for a particular use by failing to disclose the defects in the walls, floors and air shafts. In the second cause of action for illegal broker fees, Liu alleged that Dickinson and Peterson illegally charged her for brokers' fees of $7,500 in connection with her purchase of the units. In the third cause of action for overstated maintenance fees, Liu alleged that Andante overcharged her for monthly maintenance fees for electricity, water, and utilities.
In December 2016, the parties executed a memorandum of settlement of Andante's claims against Liu. In February 2017, the parties executed a second memorandum of settlement encompassing Liu's cross-claims and requiring Andante to pay Liu $15,000 and to undertake certain repairs to the concrete flooring, wall to floor transitions, and walls, and the sealing of the vertical exhaust vents with the units. The terms of the entire settlement were memorialized in a settlement agreement.
In August 2017, respondents filed a motion to enforce the settlement agreement, claiming Liu had failed to perform certain tasks that were required for respondents to effectuate repairs. The trial court denied the motion, finding that the three memoranda of settlement submitted by respondents were "not sufficiently definite for the entry of the proposed Judgment" directing Liu to perform the acts that respondents claimed were necessary for their performance.
In January 2018, Liu moved for leave to file a second amended cross-complaint (SACC). Liu proposed, in relevant part, to add five new cross-defendants (SNK Andante Emeryville LLC, SNK Pacific Coast Inc., SNK Andante Emeryville LLC, SNK La Playa I LLC, and Hal Watson), alter ego and enterprise liability allegations, and new causes of action for fraud, negligent misrepresentation, negligence, breach of fiduciary duties, constructive fraud, breach of contract/third party beneficiary, and failure to provide notice. The trial court denied Liu's motion, finding that Liu failed to submit a supporting declaration in compliance with California Rules of Court, rule 3.1324(b), that explained when the facts giving rise to the new claims were discovered and why the new claims were not presented earlier. The court further found that the proposed new claims were barred by the applicable statutes of limitations. Finally, the court noted that although the case was not yet set for trial, the court had already set and vacated the trial date three times, and it intended to set the new trial date as early as possible given the approach of the five-year deadline under Code of Civil Procedure section 583.310. The court found that Liu failed to show the proposed amendments would not result in undue prejudice to the existing cross-defendants and proposed new parties. After denying Liu's motion for leave to amend, the court set a trial date for June 2018.
It is unclear whether Liu mistakenly listed "SNK Andante Emeryville LLC" twice or intended to sue two different entities bearing the same name.
Respondents then moved for summary judgment, or alternatively summary adjudication, on the FACC. They argued the first cause of action for breach of implied warranties failed as a matter of law because: (1) there are no implied warranties in the sale of commercial properties; and (2) the subject units were sold "as is," which voided any implied warranties regarding the units. Respondents further submitted that Dickinson "specifically told [Liu] on more than one occasion that the spaces could not be used as a restaurant as there was no grease trap or property HVAC system." Respondents argued the second cause of action for illegal broker fees was untimely, and the third cause of action for excessive maintenance fees was moot in light of Liu's settlement with Andante.
Liu conceded the motion as to the second and third causes of action, but argued as to the first cause of action that commercial developers can be liable on an implied warranty theory, and that her declaration supported her claim for breach of the implied warranties of merchantability and fitness for a particular purpose. Liu further argued that she could prove fraud, negligence, and breach of fiduciary duty if given the opportunity to amend. In her declaration, Liu stated she made it clear to Dickinson and Peterson that she intended to use the units for a restaurant, that Dickinson "affirmatively stated" and "made an oral warranty" that the units were fit for such use, and that she had relied upon statements made by Dickinson and Peterson regarding the suitability of the space for a restaurant in purchasing the units. Liu also provided details about the alleged defects in the units and stated, "[t]he sheer number of problems with the project generally must have made Peterson and Dickinson aware of the likelihood of potential problems with construction and ventilation in [her] unit."
The trial court found the SNK cross-defendants were entitled to summary judgment as a matter of law on the first cause of action because they submitted admissible evidence that the units were purchased in as-is condition and that they did not give Liu any implied or express warranties about the condition of the units or their suitability for any particular purpose. The court concluded Dickinson and Peterson were entitled to summary judgment on the second and third causes of action based on Liu's concessions. The court refused to consider Liu's proposed new claims for fraud, negligence, and breach of fiduciary, noting Liu's motion for leave to file a SACC had already been denied. The court sustained numerous objections by respondents to Liu's evidence and granted summary judgment in their favor.
After final judgment was entered, Liu timely appealed from the orders on respondents' enforcement motion, her motion for leave to amend, and the motion for summary judgment.
DISCUSSION
A. Respondents' Motions to Augment the Record and Dismiss the Appeal
Respondents move to augment the record with various lower court records that were missing from Liu's appendix. Respondents also move to dismiss the appeal on the grounds that Liu did not pay for the clerk's transcript, provide reporter's transcripts for any of the hearings, or consult with them on the appendix.
These documents, attached to the motion papers, consist of the trial court's order denying Liu's motion to file a SACC; a notification of default from the trial court clerk to Liu regarding her failure to designate whether she elected to proceed with or without a record of the oral proceedings in the trial court (Cal. Rules of Court, rule 8.121(b)(1)(C)); and respondents' request for judicial notice in support of their summary judgment motion.
We previously deferred ruling on these motions for consideration in conjunction with our review of the appeal. We now grant the motion to augment (Cal. Rules of Court, rule 8.155), but deny the motion to dismiss. Although an appeal may be dismissed where the appellant fails to timely do acts required to procure the record on appeal (Cal. Rules of Court, rule 8.140(a)(1)), Liu did not ultimately fail to procure a record, as she prepared a separate appendix, which was permissible under California Rules of Court, rule 8.124(a)(3). And although the failure to provide a reporter's transcript generally results in a conclusive presumption by the reviewing court that the unreported testimony would demonstrate the absence of error (Estate of Fain (1999) 75 Cal.App.4th 973, 992), Liu's appeal does not turn on any hearing testimony, evidence, or statements.
B. Motion to Enforce the Settlement Agreement
In appealing from the denial of respondents' enforcement motion, Liu argues the overall enforceability of the agreement "was not clearly adjudicated," and she now seeks "a final determination as to whether her settlement agreement with Andante as to the Cross-Complaint is enforceable."
This is not an appropriate subject for appeal, as it appears the trial court was not called upon to determine the overall enforceability of the settlement agreement. Rather, it was asked to determine whether Liu had to perform certain tasks as a condition for respondents to complete their repair obligations. Liu presents no basis for us to reverse the trial court's order on the only issue actually raised in the motion, and it is not the role of this court to make an advisory opinion in the first instance as to issues not presented in the motion, i.e., the overall enforceability of the agreement. (See Wilson v. Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1573 [courts will not issue purely advisory opinions].) Accordingly, we affirm the order, but express no opinion on matters beyond the issue presented in the enforcement motion.
C. Liu's Motion for Leave to File a SACC
Liu argues the trial court erred in denying her leave to file a SACC. We disagree.
Trial courts have wide discretion to allow the amendment of pleadings and the exercise of that discretion will not be disturbed on appeal absent a showing of " ' "manifest or gross abuse of discretion." ' " (Melican v. Regents of University of California (2007) 151 Cal.App.4th 168, 175 (Melican).) While courts should permit amendment to the complaint at any stage of the proceedings, up to and including trial, an exception to this rule exists where the opposing party will be prejudiced by the amendment. (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487 (Magpali).) A long-deferred presentation of a proposed amendment without a showing of excuse for the delay is a significant factor to uphold the denial of leave to amend. (Leader v. Health Industries of America (2001) 89 Cal.App.4th 603, 613.)
We find no manifest or gross abuse of discretion by the trial court in denying leave to amend. Liu sought to add five new cross-defendants and several new bases for liability more than three-and-a-half years after the original cross-action commenced and only three months before trial, without a clear explanation for the delay. In a supporting declaration, Liu's counsel, Glen Broemer, made only vague and conclusory statements about the prior unavailability of online access to corporate statements of information, and about Liu's recent acquisition of a complaint by Andante against the SNK corporate entities for construction violations. This did not comport with the requirement that specific facts be provided about when the amended allegations were discovered and why the request for amendment was not made earlier. (Cal. Rules of Court, rule 3.1324(b)(3), (4).) That is, the Broemer declaration did not offer any facts from which to determine how and when the corporate information or Andante complaint were discovered and whether Liu had exercised diligence in obtaining them.
Furthermore, the proposed SACC would have greatly enlarged the scope of the cross-action. Liu sought to allege breaches of legal and contractual duties related to the construction of the subject units, Andante's breach of its bylaws, and a fraudulent scheme involving the SNK entities. These new allegations would have significantly "changed the tenor and complexity of the [FACC] from its original focus" on the SNK cross-defendants' mere failure to disclose information about the units to Liu prior to the sale, and Andante's charging of excessive maintenance fees. (Magpali, supra, 48 Cal.App.4th at pp. 487-488.) The addition of new cross-defendants and new theories of liability would have necessitated further discovery and continuance of a trial date that had already been continued several times. Thus, the trial court did not abuse its discretion in denying leave based on its determination that respondents and the proposed new cross-defendants would be prejudiced by the proposed amendments.
In light of this conclusion, we need not address the trial court's additional finding that the proposed new claims were time-barred.
D. Motion for Summary Judgment, or Alternatively, Summary Adjudication
Liu argues the trial court erred in granting summary judgment to the SNK cross-defendants. We agree.
In reviewing an order granting summary judgment, we review the entire record de novo in the light most favorable to the nonmoving party to determine whether there is a triable issue of material fact. (Addy v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 214.) A defendant moving for summary judgment or adjudication has the initial burden of submitting evidence that shows an action or cause of action lacks merit because one or more elements cannot be established or the existence of a complete defense. (Jones v. Wachovia Bank (2014) 230 Cal.App.4th 935, 945.) If the defendants' moving papers make a prima facie showing that justifies a judgment in its favor, the burden of production shifts to the plaintiff to make a prima facie showing of the existence of a triable issue of material fact. (Ibid.) A summary adjudication motion "shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty." (Code Civ. Proc., § 437c, subd. (f)(1).)
The focus here is on the first cause of action for breach of implied warranties, which alleged that the SNK cross-defendants breached implied warranties of fitness for a particular purpose (because the air shafts were inadequate for running a restaurant or food service business) and merchantability (because the cracks in the walls and floors caused water leaks). "In the normal sale of land and buildings, courts have traditionally applied the doctrine of caveat emptor, with the buyer assuming the risk on quality—absent express warranty, fraud, or misrepresentation." (Pollard v. Saxe & Yolles Dev. Co. (1974) 12 Cal.3d 374, 377 (Pollard).) However, this doctrine "has been eroded in the context of the sale of new construction." (Shapiro v. Hu (1986) 188 Cal.App.3d 324, 332 (Shapiro).) In Pollard, our Supreme Court ruled that builders and sellers of new constructions are held to implied warranties of quality and fitness of purpose. (Pollard, supra, 12 Cal.3d at p. 380.)
While the SNK cross-defendants submitted evidence that Dickinson told Liu the units could not be used as a restaurant, Liu squarely disputed this material fact with her own declaration regarding her discussions with Dickinson and Peterson, and the trial court overruled the objections to these portions of the Liu declaration. "An implied warranty of fitness for a particular purpose arises where (1) the purchaser at the time of contracting intends to use the goods for a particular purpose, (2) the seller at the time of contracting has reason to know of this particular purpose, (3) the buyer relies on the seller's skill or judgment to select or furnish goods suitable for the particular purpose, and (4) the seller at the time of contracting has reason to know that the buyer is relying on such skill and judgment." (Keith v. Buchanan (1985) 173 Cal.App.3d 13, 25.) The evidence of Liu's discussions with Dickinson and Peterson, acting as alleged agents of the SNK corporate entities, raised a triable issue that the SNK cross-defendants had reason to know of Liu's particular intended use for the units, and that she was relying on their skill and judgment to furnish a property suitable for that particular purpose. Thus, Liu raised a triable issue of material fact concerning whether the SNK cross-defendants breached an implied warranty of fitness for a particular purpose.
Respondents counter that Pollard's holding of implied warranties in new constructions applies only to new residential properties, not commercial ones. We are not persuaded. While Pollard involved newly-constructed apartment buildings, the court phrased its holding generally to apply to "new construction" (Pollard, supra, 12 Cal.3d at p. 379), and respondents point to nothing in the court's rationale suggesting the rule is logically limited to residences. While the Shapiro court held that no warranty of quality or condition was implied in the commercial building sale at issue there, the commercial nature of the property was not the reason for distinguishing Pollard. Rather, the court held that Pollard did not apply because "the construction at issue was not new; and the sale was expressly on an 'as is' basis." (Shapiro, supra, 188 Cal.App.3d at p. 332.)
There appears to be no dispute that the subject condominium units were new constructions when Liu purchased them.
Respondents nevertheless argue that Pollard's holding should be limited to the residential context because homebuyers have a standard set of expectations—i.e., non-leaking roof and windows, running hot and cold water, working electrical outlets—that purchasers of new commercial buildings may not, given the wide range of possible commercial uses of property. We seriously question whether purchasers of new commercial buildings would not ordinarily expect the properties to have functioning roofs, windows, plumbing, and electricity. But in any event, the record before us contains evidence raising a triable issue that the SNK cross-defendants knew about Liu's particular intent to use the space as a restaurant or food business. Nothing in Pollard or Shapiro precludes a claim for breach of implied warranty of fitness for a particular purpose under these facts.
Nor does the as-is provision bar Liu's implied warranty claim as a matter of law. The sale of the units in as-is condition means they were sold "in [their] present observable state and condition and with no implied warranties as to quality or condition whatsoever." (Shapiro, supra, 188 Cal.App.3d at p. 332, italics added.) But Shapiro did not hold that an as-is clause voids an implied warranty of fitness for a particular purpose where, as here, the sale concerns new construction and there is evidence the sellers knew of the buyer's intended purpose for the property and affirmed the property's fitness for that use.
Because Liu raised a triable issue of material fact on her claim for breach of implied warranty of fitness for a particular purpose, the entire action was not without merit, and respondents' motion failed to completely dispose of the first cause of action for breach of implied warranties. (Code Civ. Proc., § 437c, subds. (a), (f)(1).) Accordingly, summary judgment, or alternatively summary adjudication, was improperly granted on Liu's first cause of action.
However, we reject Liu's contention that the trial court additionally erred in refusing to consider her proposed "unpled" claims. Liu argues that because an as-is clause does not relieve sellers of liability for fraud (Lingsch v. Savage (1963) 213 Cal.App.2d 729, 740-742) and there was evidence that the SNK cross-defendants knew or should have known of the defects in the units, the trial court should have allowed her to amend her pleading to conform to proof. However, Liu's evidence on this issue was ruled inadmissible on various grounds, and Liu fails to demonstrate any abuse of discretion or legal error in the trial court's evidentiary rulings. (Morales-Simental v. Genentech, Inc. (2017) 16 Cal.App.5th 445, 451 [weight of authority holds that evidentiary rulings are reviewed for abuse of discretion].) Furthermore, where a motion for summary judgment is pending, leave to amend should only be granted to allow for repair of legally insufficient claims, not to allow for the assertion of a different theory of recovery, as this would unfairly allow plaintiffs to defeat the motion by presenting "a 'moving target' unbounded by the pleadings." (Melican, supra, 151 Cal.App.4th at p. 176.) Because Liu attempted to defeat the pending motion by presenting a wholly different, fraud-based theory of recovery, the trial court properly denied leave to amend.
DISPOSITION
Respondents' motion to augment the record is granted and their motion to dismiss the appeal is denied. The trial court's orders granting respondents' motion to enforce the settlement agreement and denying leave to amend are affirmed. The trial court's grant of summary judgment, or alternatively, summary adjudication on Liu's first cause of action is reversed, and the matter is remanded for further proceedings consistent with this opinion. Each side shall bear its own costs.
/s/_________
Fujisaki, J. WE CONCUR: /s/_________
Siggins, P.J. /s/_________
Petrou, J.