Opinion
B226752
08-16-2011
NAVCOM DEFENSE ELECTRONICS, INC., Plaintiff and Appellant, v. GOULD ELECTRONICS INC., Defendant and Respondent.
Alston & Bird, Ward L. Benshoof, Richard C. Giller and Megan K. Hey for Plaintiff and Appellant. Schnader Harrison Segal & Lewis, Leo J. Murphy, Nicole Reimann, Anne E. Kane; Hoffman & Grantham and Robert A. Grantham for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC 374697)
APPEAL from a judgment of the Superior Court for the County of Los Angeles. Ann I. Jones, Judge. Affirmed.
Alston & Bird, Ward L. Benshoof, Richard C. Giller and Megan K. Hey for Plaintiff and Appellant.
Schnader Harrison Segal & Lewis, Leo J. Murphy, Nicole Reimann, Anne E. Kane; Hoffman & Grantham and Robert A. Grantham for Defendant and Respondent.
Plaintiff NavCom Defense Electronics, Inc. (NDE) brought this action against Gould Electronics Inc. (Gould), the former owner of real property in El Monte, California (the NavCom site), and several insurance companies which had issued policies covering the NavCom site when Gould and its predecessors owned it. NDE, which purchased the NavCom business from Gould in 1988, sought insurance coverage for environmental cleanup costs from the insurers, and alleged that Gould wrongfully converted the benefits of the insurance policies when Gould, unbeknownst to NDE, entered into settlement agreements releasing the insurers during the 1990's. NDE alleged that it was entitled to share in the benefits of those insurance policies by virtue of agreements made when it bought the NavCom business.
Gould sought and obtained summary judgment on several grounds, including that NDE's claims were barred by the statute of limitations. NDE contends there were triable issues of material fact as to when the statute of limitations on its conversion and breach of contract claims began to run. We disagree and conclude NDE's claims are barred by the statute of limitations.
BACKGROUND
This lawsuit and other litigation over the last 18 years stem from attempts to place (or avoid) responsibility for environmental cleanup costs at the NavCom site. The gist of this lawsuit is that, when NDE purchased the NavCom division of Gould's business in 1988, the parties agreed to share Gould's environmental liability insurance; that Gould instead secretly settled with all its insurers during the 1990's; and NDE did not discover Gould's treachery until July 2006.
These are the facts that resulted in summary judgment for Gould and that are relevant to our conclusion summary judgment was proper based on the statute of limitations.
1. Ownership of the NavCom Site
Gould's predecessor, Hoffman Electronics, operated at the NavCom site for many years and discharged hazardous substances during its operations. In 1978, Hoffman merged into Gould, and Gould succeeded to all of Hoffman's liabilities arising from its manufacturing operations, including those at the NavCom site. Gould continued to operate at the NavCom site through a business division known as the NavCom Systems Division of Gould. In 1988, Gould divested itself of its NavCom Systems Division by forming various wholly owned subsidiaries, one of which succeeded to the business and assets, including any liabilities, of the NavCom Systems Division. Then, NCM Holdings, Inc. (a corporation formed by members of the NavCom Systems Division's management, including its president, Clifford Christ), bought all the stock of the subsidiary, which was merged into NCM Holdings and changed its name to NDE. By these transactions, plaintiff NDE first became the owner of the NavCom site in December 1988.
At the time of the negotiations culminating in NDE's ownership, the parties were aware of potential environmental contamination at the NavCom site. The 1988 purchase agreement included provisions on the transfer of assets and liabilities, and allocated responsibility to pay remediation costs, as follows:
First, the purchase agreement between Gould and NCM Holdings stated (paragraph 3.1(f)) that the bill of sale and related documents were intended to transfer "all property rights and interests and all other assets used by, and all the liabilities and obligations of, the NavCom Division of Gould . . . ." Paragraph 3.1(f) further specified that, upon delivery of the bill of sale, all the assets and liabilities of the NavCom Division reflected on its September 30, 1988 balance sheet were intended to become assets and liabilities of the purchaser. The bill of sale shows that Gould transferred all of its rights in the tangible, intangible and real property owned by the NavCom Systems Division. In this lawsuit, NDE has stipulated that paragraph 3.1(f) and the bill of sale are the only provisions on which it relies as constituting a promise by Gould to transfer to NDE the right to benefits under the insurance policies owned by Gould and used by its NavCom Systems Division.
Second, the purchase agreement stated (paragraph 6.7), that Gould would indemnify the purchaser against all damages and expenses, "up to a total of $2,500,000," for "any removal or remediation required by any governmental agency because of the condition of the soil or groundwater" at the NavCom site, and the purchaser would bear all such damages and expenses in excess of $2,500,000.
2. Previous Litigation and Administrative Action
In 1990, the Environmental Protection Agency (EPA) notified NDE of its potential liability for environmental contamination at "Superfund Sites" that included the NavCom site. The EPA's letter stated that "you may be a PRP [potentially responsible party]" and that PRP's "include current and former owners of property and operators at the Sites . . . ." NDE later sent the EPA's letter to Gould. (Gould was not named a PRP with respect to the NavCom site until July 2001.)
NDE disputes Gould's statement that NDE was named a PRP, observing that the letter was addressed to Clifford Christ (its CEO) at "Gould Inc. Navcom Systems Div." It is undisputed, however, that NDE was on notice as of the date of this letter that NDE, as the owner of the NavCom site, was considered a potentially responsible party.
In 1993, Gould filed a declaratory judgment action in Cook County, Illinois, against 56 insurance companies that had issued policies that potentially provided Gould with coverage for Gould's environmental liabilities at over 100 sites across the country (the Illinois coverage action). Starting in June 1994 and continuing until October 2000, Gould entered into a series of settlement agreements with the insurers in the Illinois coverage action, including CNA in December 1995, under which the insurers paid Gould the aggregate amount of approximately $70 million, and the insurers were released from further liability. The settlement terms were confidential, but the existence of the settlements is reflected in Illinois court records. There is no evidence anyone told NDE about the settlements.
NDE knew that Gould had filed the Illinois coverage action against its insurers, but contends that Gould (through Michael Veysey, general counsel of Gould) assured NDE it could rely on Veysey to keep NDE informed of any developments in the litigation. The evidence for this consists of a telephone conversation and letter from Veysey to NDE's CEO Clifford Christ in November 1994.
In a November 23, 1994 letter, Veysey told Christ:Veysey enclosed with his letter a 1991 tender letter to CNA from Gould, notifying CNA "that Gould Inc. ('Gould') may be liable for the remediation of some or all of the contamination" at the Superfund Site, and listing insurance policies on file from 1977 to 1988. (The 1991 tender letter identified some of the same policies NDE identifies in its complaint in this case.)
"We are involved in a multipartied declaratory judgment action concerning insurance coverage for all our environmental sites. Diana Donaldson of the Schnader, Harrison firm in Philadelphia is the lead attorney. If Bob Badal [NDE's counsel] wants to talk to her, I have no objection. Her telephone number is [redacted]."
Gould used broad language when it tendered its claims relating to the NavCom site to its insurers in 1991, giving notice on behalf of "the Gould Entities," defined as Gould and "its former wholly-owned subsidiaries, and each of these entities' predecessors and successors . . . ."
Veysey was asked at a deposition in 2006 whether he recalled telling Christ in 1994 that he would keep him apprised of the declaratory relief actions, and he replied, "Most likely." Christ remembered a great deal more about the November 1994 conversation. He said that "Mr. Veysey reaffirmed to me both the partnership which existed between Gould and NDE on the subject of insurance, and the steps Gould was undertaking to obtain insurance coverage for both the benefit of Gould and NDE . . . ." The two men discussed the status of the investigation of the groundwater contamination at the NavCom site and the steps Gould was taking to find insurance coverage, including Gould's 1991 delivery of letters to Gould's insurers. Veysey told Christ that Gould was pursuing insurance coverage against all of its carriers to determine if any of its policies covered the cost of investigation and cleanup "at a number of Gould's environmental sites, including the NavCom Site." Christ also said that he and Veysey agreed that obtaining insurance coverage to pay for the cleanup was in both their interests; agreed to continue to cooperate to bring that about; and agreed that Gould should remain in charge of the process, since "it had already sent notice letters to the insurers and maintained all the files on Gould's corporate insurance program."
Christ's recollections of the 1994 conversation appear in his declaration in opposition to Gould's summary judgment motion. Much of Christ's declaration was stricken by the trial court, and NDE asserts those rulings were wrong. We do not determine that point and instead assume, for purposes of this opinion, that Christ's statements were admissible. In addition to the statements described in the text, Christ declared:
1. "When Mr. Michael Veysey told me in November of 1994 that he would keep me advised of any developments with Gould's insurance coverage actions impacting our property, I had no reason to believe that he would not, and continued to rely upon Mr. Veysey's assurances until July of 2006, when NDE learned for the first time of the 1995 Settlement Agreement between Gould and CNA."
2. From his experience as president of a Gould division, he knew that Gould's corporate insurance department was responsible for tendering claims on behalf of the Gould divisions, which were required to allow "Gould corporate" to control the process, and he "understood that this would be the process with NDE, should any claim arise in the future that would be covered by the Gould insurance program that had protected the NavCom Systems Division."
When Christ was deposed in the 2005 federal litigation (see post), he testified that he learned (in November 1994, before the November 23 d letter) that Veysey had already made some claims on behalf of Gould, "and it was clear that he was going to add [NDE] to them." And, in a declaration filed in the federal litigation, Christ described his 1994 telephone conversation with Veysey and the 1991 notice to CNA, and stated: "I agreed with Mr. Veysey that since Gould had physical possession of the policies and had commenced the process, Gould did not need to withdraw the notice. However, I asked Mr. Veysey to keep me 'in the loop' in the future on Gould's efforts and to talk to me before Gould took any final action with respect to policies which may provide coverage to NDE's site. Mr. Veysey readily agreed." Christ "relied on Mr. Veysey's promise and took no direct action with any insurance companies."
In December 1994, Gould's counsel (Diana Donaldson) sent NDE's counsel (Bob Badal) "a chart of Gould's excess coverage," and stated:
"In return for our cooperation with respect to the CNA policies, Gould requests that [NDE] provide copies of any insurance policies it might have that might provide coverage to Gould. Those policies could include any Hoffman policies or any [NDE] policies that could provide coverage in light of the agreement between Gould and [NDE]."Donaldson stated she gave Badal the information "because apparently he had requested it, and my client [Gould] had advised me to cooperate with him." Donaldson did not tell NDE about Gould's settlement discussions or the December 1995 settlement with CNA.
Meanwhile, also in 1994, the EPA sent to some 17 PRP's, including NDE, a notice requesting that they present a good faith offer to perform a remedial investigation and feasibility study. Fifteen of the PRP's (including NDE) formed a task force to facilitate investigation and remediation and to negotiate allocation of responsibility among the task force members. Kenneth Russo, vice-president of NDE, was the head of the task force for four years.
In February 1995, Christ advised Veysey that NDE was about to sign an "Administrative Order on Consent" with the EPA that would commit signatories to incur costs, and stated: "[T]his information is being provided to you because of insurance policies that Gould Inc. has and under which it is making claims for coverage. [NDE] requests that you give notice to all carriers of [NDE's] intention to enter into this agreement for the benefit of both Gould, Inc. and [NDE]." Gould did so a few days later.
In March 1995, Gould's counsel wrote to Christ listing insurance policies issued to Hoffman and asking NDE to locate any policy information NDE may have retained with respect to Hoffman. (An October 1999 memorandum from NDE to Gould, apparently resulting from a discussion of the Hoffman insurance policies, attaches the March 1995 request from Gould and states that the 1995 search was "[a]ll to no avail.")
In June 2001, Russo (of NDE) wrote an interoffice memorandum stating that the projected cost of remediation was estimated at more than $22.5 million; that the NavCom site was one of the more contaminated sites in the area; and that NDE's share of the cost "could approximate 20% ($4,528,000)."
From this time forward, the evidence reflects escalating disagreements between Gould and NDE. In August 2001, Veysey wrote to Christ, asserting that NDE was in anticipatory breach of its 1988 agreement to indemnify Gould for environmental contamination in excess of $2.5 million. (Veysey's letter was based on an alleged statement by Christ that NDE had no obligation to pay for remediation expenses, even if those expenses exceeded $2.5 million.) Christ disagreed with Veysey's characterization and asserted that, were it not for Gould's interference (and Gould's intention to accept a larger allocation of responsibility for the NavCom site, to NDE's detriment, in order to reduce Gould's exposure at other sites in the area), NDE could manage the liability below the $2.5 million figure. Correspondence expressing NDE's disagreement with Gould's position on the allocation of responsibility among the PRP's continued in 2001 and 2002, with Christ stating that Gould waived its protection under the $2.5 million cap when it "chose . . . to take responsibility for the site and made an offer that [NDE] totally disagreed with to the other PRPs . . . ."
Evidence Gould filed in reply to NDE's opposition to Gould's motion for summary judgment shows that Veysey left Gould as of December 31, 2001, and NDE was advised of his departure in April 2002.
On March 27, 2003, NDE's outside counsel wrote to Gould's counsel, again declining to participate in negotiations with the EPA. The letter continued, "[o]n a related subject":
"[I]t has come to [NDE's] attention that Gould has tendered its defense in the Adler litigation [an environmental litigation] to several insurance companies which Gould has identified as 'former insurers of Defendant's predecessor, Hoffman Electronics Corporation.' [NDE] is concerned that Gould may also be relying on insurance policies related to the former Hoffman and NavCom Systems Division property in the EPA CERCLA matter. All such insurance coverage, and the supporting policies, are assets of [ NDE ]. Please identify all such tenders, insure that action is taken immediately to reverse all such tenders, and provide copies of all policies to [ NDE ]." (Italics and boldface added.)
On April 10, 2003, NDE's counsel wrote again, and again referred to Gould's conduct in the EPA negotiations as "irreversible." On the subject of insurance, NDE's letter stated:
"[Y]ou [Gould] did not respond to [NDE's] request that Gould refrain from the misuse of insurance policy assets, which belong to [NDE]. Neither Gould's litigation strategy, nor its attempted tender of the Adler case to [NDE] after Gould had elected to appear, respond to [NDE's]
concerns about Gould's misuse of [NDE's] insurance assets. Since you have failed to provide the policies, [NDE] has no choice but to conclude that the policies are [NDE's] property, and are being misused by Gould. Unless Gould provides the requested assurances, as well as copies of all insurance policies belonging to the former Hoffman company, or to Gould (for the benefit of the NavCom Systems Division) by April 21, 2003, [NDE] will contact the identified insurance companies directly to advise them that the policies belong to [NDE]." (Italics and boldface added.)
Gould responded on April 16, 2003, again urging NDE to participate in the EPA negotiations. With respect to the Hoffman insurance policies, Gould stated:
"[Y]ou [NDE] are free to contact whatever insurers you wish. Given [NDE's] refusal to accept its responsibility in the Adler cases, Gould will continue to decline to share any details of Gould's strategy. I can tell you, however, that no Hoffman insurer has accepted a tender of defense from Gould under a Hoffman insurance policy."
In 2004, certain PRP's (including Gould) entered into a consent decree with the EPA.
In June 2005, Gould sued NDE and others in federal court (the federal litigation), seeking to recover remediation costs for the NavCom site in excess of the $2.5 million Gould agreed to pay in the purchase agreement. (Gould also sought contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA; 42 U.S.C. § 9601 et seq.) for the cleanup costs.) NDE resisted, contending it had not assumed liability for the NavCom site contamination. Among other things, NDE argued that the only liabilities transferred to it were the liabilities reflected in the September 1988 balance sheet attached to the purchase agreement (which apparently did not list remediation costs as a liability).
Under CERCLA, a landowner may be liable or potentially liable to contribute to the costs of cleaning property that was environmentally damaged long before the landowner had any involvement with the site. (42 U.S.C. § 9607(a); Western Properties Service Corp.v. Shell Oil Co. (9th Cir. 2004) 358 F.3d 678, 688.) The federal court held NDE liable under CERCLA, as the current owner of the NavCom site, to pay 60 percent of the future cleanup costs.
In the federal litigation, NDE sought the production of insurance policies issued to Hoffman and Gould that might cover environmental contamination at the NavCom site. The federal court ordered Gould to produce the policies. In April 2006, NDE tendered the defense and indemnification of Gould's claim in the federal litigation to CNA. On July 21, 2006, CNA denied NDE's tender, telling NDE that its December 28, 1995 settlement with Gould "extinguish[ed] all potential obligations that the insurers may have had to defend or indemnify [NDE] in this litigation." NDE says this was how it learned of the December 1995 settlement with CNA, and it learned of the other settlements with other insurers when the federal court ordered Gould to produce all of its insurance settlements.
After it learned of the settlements, NDE sought (in September 2006) to file a counterclaim against Gould in the federal litigation for conversion of the insurance assets. The federal court denied NDE's motion, observing that it "disagree[d] that [NDE] has been 'diligent' in its attempts to discover the facts underlying its proposed claim for conversion . . . ."
The federal district court held that NDE was liable for remediation costs for the NavCom site in excess of $2.5 million. Judgment was entered for Gould in April 2007 and was affirmed on appeal.
3. This Lawsuit
In July 2007, NDE filed this lawsuit against Gould and several insurers. The third amended complaint alleged four causes of action against Gould: conversion, breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. The substance of plaintiff's claim against Gould was this: By the terms of the purchase agreement and bill of sale, NDE was entitled to share in the benefits of the insurance policies issued to Hoffman and Gould when they owned the NavCom site. Gould breached those agreements and converted the policies to its own use by settling with the insurers in the Illinois coverage action, after promising (but failing) to keep NDE informed of any developments in the Illinois action. NDE did not discover this until July 2006, during the federal litigation.
The trial court granted summary judgment to Gould on several grounds, finding that (1) the conversion claim was barred because it was not diligently asserted as a compulsory counterclaim in the federal action, (2) the entire complaint was time-barred, and (3) NDE could not claim a right to indemnification and defense benefits exceeding those to which Gould was entitled. (The court reasoned that Gould's liability was capped at $2.5 million, a fact of which the insurers were aware before they settled, and NDE was not an insured and had no right to a defense under the policies.) The trial court did not reach Gould's contention that NDE's claims to shared rights in the insurance policies were precluded under the doctrine of collateral estoppel.
DISCUSSION
1. Standard of Review
The standard of review of an order granting summary judgment is well-established. Our review is de novo. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) We independently review the entire record, except as to evidence to which objections were timely made and sustained, in the same manner as the trial court. (Ibid.)
"In performing our de novo review, we must view the evidence in a light favorable to plaintiff as the losing party [citation], liberally construing [his or] her evidentiary submission while strictly scrutinizing [defendant's] own showing, and resolving any evidentiary doubts or ambiguities in plaintiff's favor." (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768; accord, Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) "The trial judge's stated reason for granting summary judgment is not binding on us because we review its ruling, not its rationale." (Reliance Nat. Indemnity Co. v. General Star Indemnity Co. (1999) 72 Cal.App.4th 1063, 1074.)
Summary judgment is appropriate where "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. . . ." (Code Civ. Proc., § 437c, subd. (c).)
2. The Statute of Limitations Bars NDE's Claims
Before turning to the particulars of NDE's contentions on appeal, we summarize a few principles relevant to our analysis of the statute of limitations.
a. The legal principles
The statute of limitations for conversion claims is three years. (Code Civ. Proc., § 338, subd. (c)(1).) The general rule is that the statute of limitations for conversion " 'is triggered by the act of wrongfully taking property.' " (AmerUS Life Ins. Co. v. Bank of America, N.A. (2006) 143 Cal.App.4th 631, 639 (AmerUS).)Under this general rule, NDE's conversion action accrued at various dates between 1995 and 2000, when Gould settled with its various insurers and extinguished any obligation the insurers had to indemnify Gould (or anyone else) under those policies. This action, filed in 2007, would be barred under the general rule. There are exceptions, but they are limited: "To the extent our courts have recognized a 'discovery rule' exception to toll the statute, it has only been when the defendant in a conversion action fraudulently conceals the relevant facts or where the defendant fails to disclose such facts in violation of his or her fiduciary duty to the plaintiff. In those instances, 'the statute of limitations does not commence to run until the aggrieved party discovers or ought to have discovered the existence of the cause of action for conversion.' " (Ibid.)
The statute of limitations for an action on a written contract is four years. (Code Civ. Proc., § 337.) The general California rule is that contract causes of action accrue on the date of injury -- usually when the breach of contract occurs. Here, the alleged breaches occurred when the alleged conversion occurred, at various times between 1995 and 2000. Again, however, there is an exception for breach of contract cases with "unusual facts." (April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 832 (April Enterprises).) Specifically, the discovery rule "may be applied to breaches which can be, and are, committed in secret and, moreover, where the harm flowing from those breaches will not be reasonably discoverable by plaintiffs until a future time." (Ibid.; see also Gryczman v. 4550 Pico Partners, Ltd. (2003) 107 Cal.App.4th 1, 5-6 (Gryczman)["application of the discovery rule [is] not governed by the presence of deliberate concealment or a heightened level of duty to the plaintiff but by two overarching principles: '[P]laintiffs should not suffer where circumstances prevent them from knowing they have been harmed' and 'defendants should not be allowed to knowingly profit from their injuree's ignorance' "].)
Thus, "[w]here as here a defendant moving for summary judgment shows, as an affirmative defense, the applicable limitations period ran out before the complaint was filed and the plaintiff relies on the delayed discovery rule the plaintiff has the burden 'to show that a triable issue of one [or] more material facts exists as to that . . . defense . . . .' The issue which must be shown to be triable is whether plaintiff exercised due diligence in discovering the breach of the [contract provision]." (Gryczman, supra, 107 Cal.App.4th at pp. 6-7, fn. omitted; see also April Enterprises, supra, 147 Cal.App.3d at p. 833 [" '[i]t is plaintiff's burden to establish "facts showing that he was not negligent in failing to make the discovery sooner and that he had no actual or presumptive knowledge of facts sufficient to put him on inquiry" ' "]; cf. Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808 ["[i]n order to rely on the discovery rule for delayed accrual of a cause of action," the plaintiff whose claim would otherwise be barred must specifically plead facts showing the time and manner of discovery and " 'the inability to have made earlier discovery despite reasonable diligence' "].)
Statute of limitations issues normally raise questions of fact for trial, but "where the uncontradicted facts . . . are susceptible of only one legitimate inference, summary judgment is proper." (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112.)
b. This case
The principles we have just recited, applied to the facts presented by the parties, lead us to the ineluctable conclusion that NDE has shown no triable issue of fact as to whether it exercised due diligence in discovering the insurance settlements that allegedly breached the 1988 purchase contract. (Gryczman, supra, 107 Cal.App.4th at pp. 6-7.) Nor has it shown, with respect to its conversion claim, any facts from which one could legitimately infer that Gould "fraudulently conceal[ed]" the settlements or failed to disclose them in circumstances where it had a fiduciary duty to do so. (AmerUS, supra, 143 Cal.App.4th at p. 639.)
Viewing the evidence in the light most favorable to NDE, we see this:
In 1994, Gould told NDE about Gould's 1991 notices to the insurance companies and about its 1993 filing of the Illinois coverage action against the insurers. Christ asked Veysey to "keep him 'in the loop' " on Gould's efforts "and to talk to me before Gould took any final action with respect to the policies," and Veysey "readily agreed." It was clear to Christ that Veysey "was going to add [NDE] to them [Gould's claims against the insurers]." The two agreed that Gould would remain in charge, and Gould and NDE would continue to cooperate to obtain insurance coverage to pay for the cleanup, for the benefit of both companies.
Gould did not keep NDE "in the loop" after this 1994 conversation and letter, except, later in 1994, to send NDE a chart of its excess coverage and to ask NDE for copies of any policies that might provide coverage for Gould, and, in March 1995, to ask NDE to locate any information it might have on Hoffman insurance policies. Despite the complete dearth, for the next 11 years, of any communications about the Illinois coverage action (and only one letter, in 1999, requesting a further search for insurance information), NDE continued to rely upon Mr. Veysey's 1994 telephonic assurances until July 2006, when it learned for the first time of the 1995 settlement between Gould and CNA. What is more, NDE relied on Veysey's November 1994 verbal assurances in the face of these facts:
1. Gould and NDE were in active disagreement over the allocation of responsibility for remediation costs at the NavCom site since at least as early as August 2001, when Veysey (who left Gould at the end of 2001) asserted NDE was in anticipatory breach of its agreement to indemnify Gould for remediation costs over $2.5 million.Despite all this, NDE did not contact the insurers and made no inquires with respect to the status of the Illinois coverage action during the ensuing four years.
2. In March 2003, NDE expressly stated it was "concerned that Gould may also be relying on insurance policies related to the [NavCom site] in the EPA CERCLA matter," and that "[a]ll such insurance coverage, and the supporting
policies, [were] assets of [NDE]." Indeed, NDE demanded in that letter that Gould "reverse all such tenders, and provide copies of all policies to [NDE]."
3. When Gould did not provide the policies, NDE again stated in April 2003 that the policies belonged to NDE, were being misused by Gould, and that unless Gould "provide[d] the requested assurances," NDE would contact the insurers directly.
These uncontradicted facts admit of only one legitimate inference: that plaintiff did not exercise due diligence in discovering the acts constituting the alleged breach of the purchase agreement. (See Gryczman, supra, 107 Cal.App.4th at pp. 6-7.) Nor do the facts support NDE's claim that Gould fraudulently concealed the settlements, thus tolling the statute of limitations on its conversion claim. The settlements with the insurers were a matter of public record, and NDE's reliance on an eight-year-old (as of 2003) verbal promise to keep NDE "in the loop" about the coverage litigation, in the face of NDE's own belief in 2003 that Gould was misusing those policies, is unreasonable as a matter of law.
NDE nonetheless insists that Christ's declaration presented triable issues of fact as to when the statute of limitations began to run.
First, NDE argues, based on Christ's evidence (see fn. 3, ante, and accompanying text), that the statute could not begin to run until NDE suffered "appreciable and actual harm," and it suffered no such harm until July 2006, when CNA refused to defend NDE in the federal litigation. NDE misapprehends the legal authorities and their application to the facts.
NDE relies on Davies v. Krasna (1975) 14 Cal.3d 502 (Davies). In Davies, the Supreme Court held that "although a right to recover nominal damages will not trigger the running of the period of limitation, the infliction of appreciable and actual harm, however uncertain in amount, will commence the statutory period," and "neither uncertainty as to the amount of damages nor difficulty in proving damages tolls the period of limitations." (Id. at pp. 514, 513 ["we generally now subscribe to the view that the period cannot run before plaintiff possesses a true cause of action, by which we mean that events have developed to a point where plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages"].)
But Davies -- and other cases finding that the statute of limitations did not begin to run until the plaintiff suffered an injury (appreciable and actual harm) -- do not help NDE. NDE did suffer an injury when Gould entered into the settlements in the 1990's and deprived NDE of the benefits of those settled policies. These acts certainly caused injury no later than when NDE knew its liability for remediation costs would exceed the $2.5 million that Gould undertook to pay. That was known no later than the summer of 2001, when Russo of NDE reported internally that NDE's share of the cost "could approximate . . . $4,528,000," while Gould was claiming "anticipatory breach" of NDE's agreement to pay costs over $2.5 million. In short, NDE could have sued Gould for breach of contract and conversion by the summer of 2001, had it known about the settlements. The only issue here is whether NDE should have discovered its injury or whether Gould fraudulently concealed the settlements.
To support its claim that it suffered no injury until CNA refused to defend it in July 2006, NDE relies on Butcher v. Truck Ins. Exchange (2000) 77 Cal.App.4th 1442. Butcher involved the accrual of the statute of limitations on causes of action by insureds against their insurer for negligence and reformation. (Id. at p. 1468.) In Butcher, the insurer's agent misled the insureds into believing their policy contained personal injury coverage that it did not contain. The court found that, while the nonconforming policy was delivered in 1986, "the fact of any damage at all was completely uncertain until [the insurer] told [the insureds] it would not defend them" in a malicious prosecution lawsuit in 1993. (Id. at pp. 1469-1470.) Until that lawsuit was filed and the insured was required to defend, "whether the omission of personal injury coverage would harm them at all was a mere possibility," and "[t]hat remained the case until [the insurer] refused to defend [the lawsuit] . . . ." (Id. at p. 1470.) Butcher has no application to this case. This is not a negligence action and this is not a suit between insurer and insured. NDE was injured when Gould converted the insurance policies to its exclusive use, in contravention of its agreement to share the benefits with NDE, and the insurers' later refusal to defend NDE under the settled policies has nothing at all to do with NDE's claim against Gould for entering into those settlements. Walker v. Pacific Indemnity Co. (1960) 183 Cal.App.2d 513, upon which NDE also relies, is to like effect; the insured was not harmed by an insurance broker's negligence in securing automobile liability insurance in an amount less than the insured ordered until a judgment was entered against the insured in excess of that amount. (Id. at pp. 514-516.) The significant point in these cases is that the plaintiff could not bring a cause of action earlier because "the fact of damage, rather than its amount," was uncertain and "negative[d] the existence of a cause of action." (Id. at p. 517.) That is not this case.
Second, NDE asserts that the March 2003 letter -- stating NDE's "concern[] that Gould may also be relying on insurance policies related to the [NavCom site] in the EPA CERCLA matter" -- involved a "wholly separate controversy" from the claims it asserts in this action. According to NDE, the 2003 claim of misuse of Hoffmann policies "did not involve any charge by NDE that these policies had been secretly settled -- a fact that NDE simply did not know then." This argument entirely misses the point. The issue is not whether NDE knew of the settlements; it is whether it exercised due diligence in discovering them. NDE effectively ignores the body of law that is applicable to the discovery rule in a breach of contract action. As Gryczman and April Enterprises tell us, the discovery rule may be applied to breaches of contract "which can be, and are, committed in secret," and plaintiffs "should not suffer where circumstances prevent them from knowing they have been harmed." (April Enterprises, supra, 147 Cal.App.3d at pp. 832, 831; Gryczman, supra, 107 Cal.App.4th at pp. 4-5.)
NDE has produced no evidence of such circumstances. The settlements were not "committed in secret"; they were noted in public records and NDE, knowing about the Illinois coverage action since 1994, could easily have discovered them. The March 2003 letter, and the April 2003 followup letter, demonstrate that this is so. These letters show NDE's concern about Gould's reliance on insurance policies "in the EPA CERCLA matter" that were "assets of [NDE]" and state NDE's suspicion that Gould was misusing the policies. In this correspondence, NDE states its intent to contact the insurers directly if Gould did not cooperate (which it did not). These letters speak for themselves, and NDE's failure to take any action for the next four years tellingly illustrates its lack of diligence in discovering Gould's alleged breach of contract.
NDE points out that in Gryczman, the court applied the delayed discovery rule despite the existence of a recorded document showing that the defendant had conveyed property to another in violation of the plaintiff's contractual right of first refusal. The circumstances in Gryczman were entirely different from those here. The court "[could not] say as a matter of law plaintiff had a duty to continually monitor public recordings to determine whether defendant . . . had accepted an offer on the property inconsistent with the terms of the first-refusal contract . . . ." (Gryczman, supra, 107 Cal.App.4th at p. 6.) But in Gryczman, the defendant breached the very provision which caused the plaintiff injury: it failed to give plaintiff notice of a third party's offer to purchase the property; this failure was "both the act causing the injury and the act that caused plaintiff not to discover the injury," and was an act "'difficult for the plaintiff to detect.'" (Ibid.)This is not such a case.
Third, NDE contends its evidence established "an abundance of triable issues as to whether it had, or reasonably could have, discovered Gould's secret insurance settlements before 2006 . . . ." This consists -- in addition to the evidence already recited -- of evidence that, in the federal litigation that began in June 2005, Gould resisted NDE's discovery efforts relating to the insurance policies, and did not disclose the settlements to the federal court during an August 2005 scheduling hearing. Further, NDE was "lull[ed] into a false sense of security that Gould was complying with its obligation to share benefits" of the insurance policies. This was because of (1) the broad language of Gould's 1991 notice to its insurers on behalf of "the Gould entities," and (2) a Gould statement in September 2002, when Gould tendered an asbestos claim to NDE (as a liability NDE had agreed to assume under the purchase agreement), and told NDE it had "no objection to Royal [a Hoffman insurer] representing NDE in this matter . . . ."
NDE cites a September 2006 letter from NDE's counsel to CNA, stating that Gould "actively resisted" NDE's discovery efforts relating to Gould's and Hoffman's insurance. And, Gould did not disclose the settlements to the federal court at an August 2005 scheduling hearing, when the court said, "What about a settlement conference," and "seems to me you ought to get the carriers involved." When NDE's counsel said, "we don't have the insurance policies," and the court said, "[s]eems to me somebody should get 'em," Gould's counsel responded that "[t]hey've had that discussion now for approximately four years," and "our understanding" was that "the documents were kept at the division [NDE]" and "[i]t's been a dispute for some time."
NDE also mentions efforts by Gould's counsel in 1996-1997 to keep the terms of the settlements confidential vis-a-vis a third party.
But neither Gould's resistance to discovery in litigation with NDE nor Gould's desire to keep settlement terms confidential has anything to do with whether NDE acted diligently to discover Gould's alleged perfidy, which it easily could have done --indeed, Gould's resistance to discovery, if it is evidence of anything, further reflects NDE's lack of diligence in failing to check the status of the Illinois coverage action against the insurers. Moreover, NDE fails to address the law as it applies to conversion claims: those claims accrue when the property is wrongfully taken, and the discovery rule applies "only . . . when the defendant in a conversion action fraudulently conceals the relevant facts" or fails to disclose those facts in violation of his or her fiduciary duty to the plaintiff. (AmerUS, supra, 143 Cal.App.4th at p. 639.) The evidence clearly shows Gould did not disclose the settlements, but it does not support an inference Gould fraudulently concealed them. Promising to keep NDE "in the loop" and failing to do so simply is not evidence of fraudulent concealment, and the settlements were reflected in public records. Nor did Gould have any fiduciary duty to NDE.
NDE contends otherwise, arguing that "when Gould agreed to share its insurance with NDE; to handle any claims on its behalf; and in fact proceeded to do just that, Gould stepped into the clear role as NDE's fiduciary with respect to insurance." The evidence cited for this is, once again, the November 1994 conversation, which "reaffirmed to [Christ] the partnership which existed between Gould and NDE on the subject of insurance . . . ." (See text accompanying fn. 3, ante.) Thus, NDE contends, "the fact that Gould agreed that it would handle communication with the insurers . . . creat[ed] a fiduciary relationship with NDE." For this proposition, NDE cites Vai v. Bank of America (1961) 56 Cal.2d 329, 338, which stated that "[t]he key factor in the existence of a fiduciary relationship lies in control by a person over the property of another." Vai held that a husband's fiduciary duties in respect to his wife's interest in community property continue as long as his control of that property continues, notwithstanding the termination of the confidential relationship between husband and wife. (Ibid.) Nothing in Vai supports the notion that a fiduciary relationship may be formed between two commercial entities by virtue of a telephone conversation in which they agreed "to continue to cooperate" to obtain insurance coverage to pay for remediation costs, and NDE cites no other authority that would support such a proposition.
Finally, NDE relies in its reply brief on our decision in Cleveland v. Internet Specialties West, Inc. (2009) 171 Cal.App.4th 24 (Cleveland),contending it is "virtually identical to the instant case." It is not.
We will not burden this opinion with a recitation of the facts in Cleveland, which involved a claim for breach of contract and fraud in connection with an investment by the plaintiff in an internet service provider business. We held in that case that the trial court erred in granting summary judgment, "as the question whether and when a reasonably prudent person would have suspected his injury and some wrongful cause was for the trier of fact to decide." (Cleveland, supra, 171 Cal.App.4th at p. 26.) The same principles that applied in Cleveland apply here. As we said, "the issue is whether the only reasonable inference to be drawn from those facts that are undisputed is that [the plaintiff] should have learned the facts essential to his claims by [a date outside the statute of limitations] . . . ." (Id. at p. 31.) In Cleveland, the answer was no. Here, the answer is yes. Further, NDE claims Cleveland shows that the statute of limitations does not begin to run until the plaintiff has been injured. Of course that is so. But in Cleveland, the plaintiff's causes of action could not have accrued when the trial court held they did because there had not yet been any breach of contract: "if [the plaintiff] had sued [defendant] in mid-1996, or investigated the possibility of suit . . . , he would have found nothing." (Id. at p. 32.) This is not such a case.
NDE makes a one-line claim that Veysey's promise to keep NDE informed "[e]stopped Gould from asserting the statute of limitations." NDE cites (without any argument or analysis) Lagomarsino v. San Jose etc. Title Ins. Co. (1960) 178 Cal.App.2d 455, 461-462, which found that principles of estoppel applied where the conduct of an insurer in holding out the hope of an amicable adjustment of the insured's claim induced the insured's delay in filing suit. NDE makes no attempt to explain how or why estoppel principles (or Lagomarsino) apply here, and the argument (which has no merit in any event) is for that reason waived. (See In re S.C. (2006) 138 Cal.App.4th 396, 408 ["[t]o demonstrate error, appellant must present meaningful legal analysis"].)
In sum, it was NDE's burden to raise a triable issue of fact as to its exercise of reasonable diligence in discovering its breach of contract cause of action (Gryczman, supra, 107 Cal.App.4th at pp. 6-7), or as to Gould's fraudulent concealment of the settlements with the insurers. This it has not done. Because only one legitimate inference may be drawn from the evidence presented in this case (including Christ's declaration), NDE's claims were barred by the statute of limitations.
DISPOSITION
The judgment is affirmed. Gould Electronics Inc. is to recover its costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
GRIMES, J.
I concur:
BIGELOW, P. J.
I concur in the judgment:
RUBIN, J.