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Harpel v. Spina

California Court of Appeals, First District, Third Division
Apr 29, 2011
No. A127770 (Cal. Ct. App. Apr. 29, 2011)

Opinion


GINA HARPEL et al., Plaintiffs and Appellants, v. CHRIS SPINA et al., Defendants and Appellants. A127770 California Court of Appeal, First District, Third Division April 29, 2011

NOT TO BE PUBLISHED

Contra Costa County Super. Ct. No. C06-02306

Jenkins, J.

The trial court entered judgment against defendants, Chris Spina (Spina) and his corporation Spina General Contracting, Inc. (Corporation) (collectively, defendants) for breach of a home remodeling contract with plaintiffs, Gina and Mitchell Harpel (plaintiffs). Plaintiffs appeal from the judgment, contending the trial court erred: (1) in denying them leave to amend the complaint during trial to add causes of action for rescission, negligence, and breach of implied warranty; (2) in denying civil penalties for certain statutory violations; and (3) in not finding defendants liable for fraud. Defendants also appeal from the judgment, contending the trial court held Spina individually liable under legal theories that were outside of the pleadings, not raised at trial, and not supported by substantial evidence. The judgment is affirmed.

Factual and procedural background

On November 9, 2006, plaintiffs filed an action against defendants and Does 1-40 for breach of oral contract, breach of written contract, and fraud in connection with the renovation of their home. In April 2007, plaintiffs filed a first amended complaint that added factual allegations but did not assert new causes of action or name additional defendants.

Plaintiffs later filed amendments naming as Doe defendants R&S Homes, Inc., and its president, Robert Waal, who provided the plans and specifications for the project. On July 30, 2008, the trial court sustained the demurrer of R&S Homes without leave to amend, and granted judgment on the pleadings to Waal. The underlying facts are set out in the court’s prior opinion affirming this order. (See Harpel v. Spina (Aug. 14, 2009, A123315) [nonpub. opn.].)

The matter proceeded to a jury trial in July 2008. On August 8, 2008, after more than four days of testimony, the trial court notified the parties of its intent to declare a mistrial due to the length of the trial and “some newly raised issues.” The parties agreed to waive a jury trial, and the matter proceeded as a bench trial, with the trial court continuing trial to early October 2008.

A week later, on August 13, 2008, plaintiffs filed a motion for leave to file a second amended complaint that added factual allegations to the existing causes of action and asserted new causes of action for rescission, negligence, and breach of implied warranty of fitness. On September 29, 2008, the trial court denied plaintiffs’ motion to the extent it sought to add new causes of action but allowed them to file a second amended complaint alleging additional facts, to conform to proof, in support of the existing causes of action.

Trial ultimately resumed on December 1, 2008, and the trial court heard a few more days of testimony. In July 2009, it issued its tentative decision finding Spina individually liable for breach of contract. Plaintiffs submitted proposals seeking judgment against defendants jointly and severally to obtain “full satisfaction of the judgment....” Defendants requested “a statement of decision explaining the factual and legal basis for... [t]he finding that [Spina] and not [the Corporation] is liable given [evidence that the Corporation was the contracting party].” In October 2009, the trial court filed a “Proposed Final Decision, ” imposing joint and several liability against defendants. The parties filed objections, with defendants contending: “[T]here is no evidence to support the proposition that both the corporation and the individual [Spina] were parties to the contract and... therefore both cannot be jointly or severally liable for its breach....” On December 23, 2009, the trial court filed its “Final Decision, ” finding defendants jointly and severally liable “for breach of contract” and awarding plaintiffs $104,415 in compensatory damages. The trial court concluded: “[P]laintiffs failed to produce credible evidence of fraud sufficient to satisfy their burden of proof..., ” and denied punitive damages and civil penalties.

The parties promptly filed notices of appeal from the trial court’s December 23, 2009 decision. The trial court later entered judgment against defendants. A statement of decision is not appealable when followed by a formal judgment. (Alan v. American Honda Motor Co., Inc. (2007) 40 Cal.4th 894, 901.) Nonetheless, we treat the parties’ appeals as from the subsequent judgment (Eisenberg, et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2010) ¶ 2:264), deem their notices of appeal as filed immediately after the entry of judgment (Cal. Rules of Court, rule 8.104(d)(1)), and proceed to the merits of their appeals.

Discussion

I. Plaintiffs’ Appeal

On appeal, plaintiffs contend the trial court erred: (1) in denying them leave to file an amended complaint adding causes of action for rescission, negligence, and breach of implied warranty; and (2) “in not awarding enough damages, ” specifically, civil penalties and damages for fraud. As we explain below, we conclude that plaintiffs have failed to meet their burden on appeal to demonstrate error.

Plaintiffs attempt to incorporate their trial court briefing into their opening brief by reference, “including [their prior arguments] about amending the claims, statutory violations, evidence of fraud, damages allowed, etc.” We do not consider contentions raised in this way. (Estate of Wiedemann (1964) 228 Cal.App.2d 362, 370-371; Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 294-295 & fn. 20.)

A. Plaintiffs’ Motion for Leave to Amend

An order on a motion for leave to amend is reviewable on appeal from the final judgment. (Fogel v. Farmers Group, Inc. (2008) 160 Cal.App.4th 1403, 1423, fn. 14.)

A trial court has discretion in the furtherance of justice, and “upon any terms as may be just...” to allow amendment of a pleading “at any time before or after commencement of trial.” (Code Civ. Proc., §§ 473, subd. (a)(1), & 576 [“upon such terms as may be proper”.) “ ‘Leave to amend a complaint is thus entrusted to the sound discretion of the trial court. “... The exercise of that discretion will not be disturbed on appeal absent a clear showing of abuse.” ’ ” (Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) Plaintiffs have not shown such abuse here.

The authority plaintiffs cite in seeking de novo review of the trial court’s ruling is inapposite, as it addresses demurrers and judgments on the pleadings. For the same reason, plaintiffs also fail in their attempt to frame the issue before us as whether the operative complaint “states facts sufficient to state... causes of action....” (Compare Code Civ. Proc., §§ 430.10, 472a, & 438 with §§ 473, subd. (a)(1) & 576.)

“ ‘Although courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial [citations], this policy should be applied only “[w]here no prejudice is shown to the adverse party.” ’ ” (Atkinson v. Elk Corp. (2003) 109 Cal.App.4th 739, 761; South Bay Building Enterprises, Inc. v. Riviera Lend-Lease, Inc. (1999) 72 Cal.App.4th 1111, 1124-1125.) In denying leave to amend in this case, the trial court explained it had “exercised its discretion in balancing the need to litigate the actual issues against the prejudice and surprise against defendants to have to face new allegations at this time when we are over 70% through the trial.” Plaintiffs do not expressly address the trial court’s finding of prejudice, concluding without analysis, record citations, or relevant authority: “There was enough time to consider these claims against [Spina] even though some parts of the trial had... started.” This bare conclusion, with no discussion of the claims, the proof they required, or the relevance of the prior trial proceedings, does not show the trial court erred in finding prejudice.

By this time, seven trial witnesses had been excused and were not subject to recall, including a building inspector, the engineer who drafted the plans, and plaintiffs’ expert in residential construction, project management, and forensic investigations of construction defects.

Plaintiffs’ other arguments fare no better. They contend the court must discern the primary right asserted in each cause of action, as “a single primary right [may] state[] ‘multiple grounds of liability’ against [defendants].” They maintain, further, that “the same course of wrongful conduct by [defendants] can give rise to several causes of action.” They fail, however, to delineate the primary rights at issue in their proposed claims and make no attempt to compare their original and proposed causes of action or the evidence required to prove them. Accordingly, to the extent they argue their proposed amendments would have simply added new theories of liability, and not new facts or causes of action, they have not provided analysis and authority permitting such a determination. We therefore find no basis to disturb the trial court’s denial of plaintiffs’ motion to amend.

Plaintiffs purport to identify the causes of action supported by the evidence at trial but provide no discussion of the essential elements of these causes of action and no citations to the record. (See Cal. Rules of Court, rule 8.204(a)(1)(C); Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246 (Nwosu) [failure to support an argument with the necessary record citations will result in waiver of the argument].) The authority on which they rely, Hindin v. Rust (2004) 118 Cal.App.4th 1247, 1257-1258, does not address a trial court’s discretion in deciding a motion for leave to amend.

B. Civil Penalties and Fraud

Plaintiffs also contend the trial court erred “in not awarding enough damages” for: (1) “obvious statutory violations of... [Business and Professions Code section 7150 et seq.] as shown by [Spina’s] non-conforming home-remodeling contract which allows civil penalties”; and (2) “obvious fraud due to [Spina’s] continuing improper activities.” We review the trial court’s factual findings for substantial evidence. (Westfour Corp. v. California First Bank (1992) 3 Cal.App.4th 1554, 1558 (Westfour).

Again, we find that plaintiffs have not met their burden on appeal. An appellant must do more than assert that the judgment is wrong (Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852); he “must affirmatively demonstrate error through reasoned argument and discussion of legal authority.” (Cryoport Systems v. CNA Ins. Cos. (2007) 149 Cal.App.4th 627, 633; see Cal. Rules of Court, rule 8.204 (a)(1)(B).) Moreover, parties asserting a substantial evidence challenge “ ‘ “are required to set forth in their brief all the material evidence on the point....” [Citations.]’ [Citation.]” (Nwosu, supra, 122 Cal.App.4th at p.1246 [error is waived otherwise], italics omitted.) Here, plaintiffs provide no analysis of the elements of fraud or the purported civil penalty statutes and do not cite to relevant evidence in the record in support of their assertion of error. Instead, they ask that we take judicial notice of (1) the contract’s failure to comply with the statutory requirements for home remodeling contracts, and (2) two prior appellate decisions involving these defendants. We deny these requests on procedural and substantive grounds. Plaintiffs have not complied with rule 8.252(a) of the California Rules of Court, which requires a separate motion for judicial notice on appeal. In addition, plaintiffs do not cite any authority for their requests, and we find no legal basis for them. (See Evid. Code, §§ 451, 452; Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1566 [“facts” in an appellate opinion are not subject to judicial notice].)

It is difficult to discern from plaintiffs’ vague requests the matters to be noticed. They assert in their opening brief: “The contract did not remotely comply with the requirements for home-remodeling contracts under Bus. & Prof. Code [§] 7150 et seq., for which judicial notice is requested.” They also contend: “[Defendants] had done this same thing [fraud] to another homeowner...; see [Steele v. Spina (Aug. 28, 2009, A123860) [nonpub. opn.] and Steele v. Spina (Oct. 21, 2010, A127959) [nonpub. opn.]]..., for which judicial notice is requested.”

We note, in any case, that the statutes on which plaintiffs rely do not authorize civil penalties. (See Bus. & Prof. Code, §§ 7159 & 7159.5 [violation is a misdemeanor subject to a fine or imprisonment], § 7159.6 [no consequence noted]; Stats. 1999, ch. 982, § 4; Stats. 2004, ch. 566, §§ 3, 4, 8, 9; Stats. 2005, ch. 48, §§ 6, 7, 11, 12.)

In sum, we find no error in the trial court’s decision not to award civil penalties and damages for fraud.

II. Defendants’ Cross-Appeal

Before proceeding to the merits of defendants’ appeal, we consider plaintiffs’ contention that this appeal is moot “since the existing judgment was paid....” Plaintiffs did not file a motion for dismissal with a memorandum and supporting evidence (Cal. Rules of Court, rule 8.54(a)(2); American Alternative Energy Partners II v. Windridge, Inc. (1996) 42 Cal.App.4th 551, 557); instead, they rely on an unsupported assertion in their reply brief and facts that do not appear in the record. In addition, plaintiffs provide no evidence of the circumstances of payment or indicate which defendant made it, and do not include analysis or authority showing it moots defendants’ appeal. Payment of a judgment does not “ ‘releas[e] errors, [or] depriv[e] the payor of his right to appeal, unless [it is] by way of compromise and settlement or under an agreement not to appeal or under circumstances leaving only a moot question for determination.’ ” (Reitano v. Yankwich (1951) 38 Cal.2d 1, 4.) Thus, we are unable to conclude on the record provided that defendants’ appeal is moot. Having disposed of this jurisdictional question, we turn to the merits of defendants’ contentions on appeal.

Defendants seek reversal of the judgment against Spina, contending: (1) that the trial court exceeded its jurisdiction because the theories on which it relied in finding him personally liable were outside the pleadings and not raised at trial; and (2) that no evidence supports these theories. In evaluating these contentions, we defer to the trial court’s factual findings if they are supported by substantial evidence and review its conclusions of law independently. (Westfour, supra, 3 Cal.App.4th at p. 1558.) Considering the trial court’s decision in light of these principles, we affirm the judgment.

We begin our analysis with the trial court’s statement of decision, as it “is our touchstone to determine whether or not the trial court’s decision is supported by the facts and the law.” (Slavin v. Borinstein (1994) 25 Cal.App.4th 713, 718.)

A. The Statement of Decision

Although not expressly so denominated, the trial court’s “Final Decision” is clearly its statement of decision, which defendants requested under the statutory procedure. (Cal. Rules of Court, rule 3.1590.)

In its “Final Decision, ” the trial court made the following finding of fact: “During the contract negotiations[, ] defendant Spina failed to fully inform the plaintiffs that he was entering into the contract as a corporation even though his licensed status was as a corporation. In fact[, ] Spina led them to believe they were contracting with him personally, including signing the contract as ‘Chris Spina Contractor[.]’ His use of an incorrect title ‘SGC, INC’ on his proposed contract did not give the plaintiffs fair notice of the actual licensed corporation. Further[, ] Spina was the primary owner of the corporation and was directly responsible for the wrong doing of the corporation in the breach of the contract with the Harpels. Spina was in complete control of the acts of the corporation in this matter[, ] and he failed to keep the requisite corporate records. The court further finds that the corporation was his alter ego. Accordingly, defendant Spina is personally obligated under the contract as is the corporation. Further, both are liable jointly and severally for the breach of the contract.”

B. Analysis

1. The Legal Grounds for the Trial Court’s Decision

The statement of decision does not specifically identify the legal theories on which the trial court based Spina’s liability; the trial court’s findings of fact indicate, however, that it found Spina entered into the contract as an agent for an undisclosed or unidentified principal—the Corporation. Under California law, an agent who makes a contract on behalf of an undisclosed or unidentified principal is a party to the contract and may be sued individually. (Bank of America v. State Bd. of Equal. (1962) 209 Cal.App.2d 780, 796; Stephan v. Maloof (1969) 274 Cal.App.2d 843, 850; Rest.3d Agency, §§ 6.03(2), 6.02(2) [agent for an unidentified principal is a party “unless the agent and the third party agree otherwise”]; accord, G.W. Andersen Construction Co. v. Mars Sales (1985) 164 Cal.App.3d 326, 331 (Mars Sales) [liability of agent for a “partially disclosed principal” under Rest.2d Agency, §§ 4(2), 321].) “Whether a principal is disclosed, undisclosed, or unidentified depends on the manifestations of the principal and the agent and the notice received by the other party at the time of that party’s transaction with the agent.” (Rest.3d Agency, § 1.04, com. b.) A principal is “undisclosed” if the other party has no notice that the agent is acting for a principal (Rest.3d Agency, § 1.04(2)(b)); a principal is “unidentified” if the other party has notice that the agent is acting for a principal but has no notice of the principal’s identity (id., § 1.04(2)(c)). “The agent can protect himself from personal liability by clearly disclosing the fact of agency and the identity of his principal. Failing that, the other party is entitled to rely on the liability of the person with whom he dealt.” (Mars Sales, p. 332.) The statement of decision supports the judgment against Spina under either theory, depending on how we construe the trial court’s findings. The trial court found that Spina failed “to fully inform the plaintiffs that he was entering into the contract as a corporation..., ” but made no finding as to whether plaintiffs had notice of Spina’s agency. Its finding that Spina led plaintiffs to believe he was entering into the contract personally, and not as a corporation, indicates that it found plaintiffs were not aware he was acting in an agency capacity and held Spina liable on an “undisclosed principal” theory. Nonetheless, in noting Spina’s use of the “title” of another corporation on the proposed contract (“SGC, INC”), the trial court implicitly acknowledged that plaintiffs had notice he was acting for a corporate principal, albeit not the correct one. Such notice warrants a finding of personal liability on an “unidentified principal” theory. Under either theory, the principal is a party to the contract, and the trial court’s findings support the entry of judgment against both defendants. (See Sterling v. Taylor (2007) 40 Cal.4th 757, 773; Mars Sales, at p. 333; Rest.3d Agency, §§ 6.03(1) [undisclosed principal is a party “unless excluded by the contract”], 6.02(1) [unidentified principal is a party].)

A “ ‘partially disclosed principal’ ” is synonymous with an “ ‘unidentified principal.’ ” (Rest.3d Agency, § 1.04, com. b, para. 2.)

Having identified a viable theory on which the trial court relied, we consider it in light of defendants’ assertions of error.

2. The Complaint Adequately Raises These Theories.

We reject defendants’ contention that the trial court exceeded its jurisdiction in holding Spina personally liable, as we conclude the theories discussed above are within the scope of the pleadings. “ ‘A court is limited in its determination to the matters properly before it. Ordinarily it has no authority to pass upon questions not involved and in respect to which its jurisdiction has not been invoked. For courts... [do not have] power to decide questions except such as are presented by the parties in their pleadings.... A judgment outside the issues is... extrajudicial and invalid....’ ” (Baar v. Smith (1927) 201 Cal. 87, 101.) The operative complaint in this case does not include a separate cause of action expressly asserting Spina’s liability under an undisclosed/ unidentified principal theory. Nonetheless, “the nature and character of a pleading is to be determined from its allegations, regardless of what it may be called, and... the subject matter of an action and issues involved are determined from the facts alleged....” (McDonald v. Filice (1967) 252 Cal.App.2d 613, 622.) The operative complaint alleges facts that fairly present the question of Spina’s liability as an agent for an undisclosed or unidentified principal. It asserts breach of contract causes of action against both defendants and alleges specifically:

Our use of the term “operative complaint” includes the First Amended Complaint, which was operative when trial began, and the Second Amended Complaint filed during trial, as there is no significant difference in the allegations relevant to our analysis.

that Spina entered into oral and written contracts to remodel plaintiffs’ home and signed the written contract as “Chris Spina/Contractor”;

that “[i]n the alternative to... and/or in addition to [these] allegations, ” the Corporation “was the entity that entered into [these oral and written] contract(s), even though the full name of [the Corporation] does not appear on the contract(s), and even though the contract(s) are not signed by a person with his position or authority so designated” (italics added); and

that “the designation ‘SGC, INC.’ appeared at the top of a page [of the contract]” and “is the name of a separate and distinct corporation in California... which has nothing to do with [Spina] or [the Corporation].” These allegations clearly present issues for the trial court regarding Spina’s liability for breach of the contract, the capacity in which he purported to sign it, and whether he disclosed the Corporation’s identity during the transaction—the determinative facts in establishing the liability of an agent for an undisclosed/unidentified principal. We therefore find plaintiffs’ contentions unavailing.

To the extent defendants raise a due process challenge to the trial court’s decision, these factual allegations also put Spina on notice: (1) that plaintiffs sought to hold him personally liable for breach of contract, and (2) that the capacity in which he signed the contract and the sufficiency of his disclosures to plaintiffs were at issue.

3. Substantial Evidence Supports Spina’s Liability Under Either Theory.

We also conclude substantial evidence supports a finding that Spina acted as an agent for either an undisclosed or unidentified principal. There was evidence at trial that Spina’s sister, a personal friend of Gina Harpel, referred plaintiffs to him and that he signed the remodeling contract above a signature line that reads: “Chris Spina/ Contractor, ” without identifying the corporation or indicating that he was signing as an agent. This evidence reasonably permits an inference that plaintiffs had no notice at the time of the transaction that Spina was acting for the Corporation. A corporation with the same initials, “SGC, INC, ” is listed with the Corporation’s address and license number at the top of the contract, above plaintiffs’ names. These notations are insufficient under California law to identify the Corporation—Spina General Contracting, Inc.—as the contracting principal. “ ‘It is not the third person’s duty to seek out the identity of the principal....’ ” (W.W. Leasing Unlimited v. Commercial Standard Title Ins. Co. (1983) 149 Cal.App.3d 792, 795-796; Mars Sales, supra, 164 Cal.App.3d at p. 331 [“The duty is on the agent to disclose, not on the other party to investigate”].) To avoid personal liability, an agent must disclose his principal’s true name and corporate status. (See Mars Sales, at pp. 331-332 [finding use of a trade name, “Mars Sales, ” insufficient to identify “Mars Sales Company, Inc.”]; W.W. Leasing, at p. 796 [trade name is not in itself sufficient identification].) As noted above, however, the contract’s identification of “SGC, INC” as a party is sufficient to support a finding that plaintiffs had notice Spina was acting as an agent for a corporate principal and that the Corporation was an unidentified principal.

Plaintiffs did not argue an undisclosed/unidentified principal theory in their briefs below, which refer to defendants collectively throughout, as “SPINA.” Defendants’ contentions turn entirely on whether the trial court acted outside the pleadings; they cite no authority showing plaintiffs’ failure to raise these theories in their briefing requires reversal, and we do not consider that question.

Defendants maintain that plaintiffs cannot obtain a judgment against both Spina and the Corporation, contending: “[O]nce both the [undisclosed] principal and the agent are known to the third party, the third party must make an election as between the two.” This contention does not alter our conclusion for several reasons. First, to the extent the trial court found the Corporation was an unidentified principal, no election was required. (Clifton Cattle Co. v. Thompson (1974) 43 Cal.App.3d 11, 16-17, relying upon Rest.2d Agency, § 184, com. a [“there is no room for a doctrine of election in the case of the... partially disclosed principal”]; Rest.3d Agency, § 6.09, com. c.) Second, even if an election was required, defendants have waived the right to compel one by failing to request it below. When an agent and an undisclosed principal permit judgment to be entered against both of them, “without raising the question of an election by demurrer, motion, demand or otherwise, ” they have waived the right to compel an election and may not seek one for the first time on appeal. (Klinger v. Modesto Fruit Co, Inc. (1930) 107 Cal.App. 97, 105; Standard Oil Co. of Cal. v. Doneux (1961) 192 Cal.App.2d 608, 613.) Finally, we note that the Restatement no longer requires an election when the principal is undisclosed. (3 Witkin, Summary of Cal. Law (2010 supp.) Agency, § 160, p. 38; see Rest.3d Agency, § 6.09(2) [an agent or principal’s liability is discharged only to the extent a judgment against the other is satisfied].) Having concluded that substantial evidence supports a determination of individual liability on the theories at issue, we reject defendants’ assertion of error on this ground.

Defendants had an opportunity to request an election after the trial court issued its proposed final decision imposing joint and several liability based on findings supporting an undisclosed/unidentified principal analysis. They objected only to a lack of evidence showing they both were contracting parties.

As we conclude that the trial court relied on a theory that is within the issues raised by the pleadings and supported by substantial evidence, we do not address its reliance on an alter ego theory of liability, and we do not consider defendants’ other contentions.

Disposition

For the reasons outlined above, the judgment is affirmed. The parties shall bear their own costs on appeal.

We concur: McGuiness, P. J., Pollak, J.


Summaries of

Harpel v. Spina

California Court of Appeals, First District, Third Division
Apr 29, 2011
No. A127770 (Cal. Ct. App. Apr. 29, 2011)
Case details for

Harpel v. Spina

Case Details

Full title:GINA HARPEL et al., Plaintiffs and Appellants, v. CHRIS SPINA et al.…

Court:California Court of Appeals, First District, Third Division

Date published: Apr 29, 2011

Citations

No. A127770 (Cal. Ct. App. Apr. 29, 2011)