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Desman, Inc. v. City of San Joaquin

California Court of Appeals, Fifth District
Jul 21, 2008
No. F051863 (Cal. Ct. App. Jul. 21, 2008)

Opinion

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Fresno County No. 05CECG03579, Donald S. Black, Judge.

Law Offices of Carl A. Sundholm and Carl A. Sundholm for Plaintiff and Appellant.

Dowling, Aaron & Keeler, Hilda Cantú Montoy and Lynne Thaxter Brown for Defendants and Respondents.


OPINION

Levy, Acting P.J.

Appellant, Desman, Inc., challenges the trial court’s finding that its complaint for specific performance and declaratory relief filed against respondents, City of San Joaquin and San Joaquin Development Agency, was barred by the statute of limitations. The court concluded that this complaint was subject to the Government Claims Act (GCA) and, accordingly, the shorter two-year statute of limitations applied. Appellant disagrees. According to appellant, the GCA does not apply because the complaint did not contain a claim for money or damages. Rather, the complaint sought specific performance of respondents’ promise to clear or assume appellant’s tax liens.

As discussed below, although couched in terms of specific performance, the complaint seeks money from respondents. If ordered to clear or assume appellant’s tax liability, respondents would, in effect, be making a payment of money to appellant. This procedure simply deletes one step in the process, i.e., appellant physically making its own tax payment. Therefore, appellant’s complaint is subject to the two-year GCA statute of limitations. Since appellant’s complaint was not filed within two years of the accrual of the cause of action, it is time barred. Accordingly, the trial court properly granted summary judgment in respondents’ favor.

BACKGROUND

Respondents leased property to appellant in the City of San Joaquin and loaned appellant money to assist in developing its business. Appellant defaulted and respondents sued to enforce the obligations. In response, appellant filed an action against respondents for fraud.

The parties settled the litigation. Under the written settlement agreement, appellant surrendered all rights and title to the property, including the building, improvements and equipment located on the premises, to respondents and dismissed its claims against respondents. Respondents in turn forgave appellant’s indebtedness and dismissed their claims against appellant. One term of the settlement was that respondents were to “clear or assume any actual or potential liabilities that might have been incurred relating to said property within 30 days of signing this agreement.” The settlement agreement was signed on April 1, 2003, and April 9, 2003.

Appellant received a statement from the Fresno County Tax Assessor dated June 23, 2003, stating that appellant was liable for past overdue and unpaid personal property taxes relating to the leased premises and equipment. Appellant disputed these liabilities in writing. According to appellant, the taxes were erroneously imposed because appellant had not owned the taxed property. Rather, appellant had leased the warehouse, building, and fixtures from the San Joaquin Redevelopment Agency and had leased the equipment from several different entities.

By letter dated October 16, 2003, appellant, through its counsel, reminded respondents of their agreement “‘to clear or assume any actual or potential liabilities that may have been incurred relating to the said property within 30 days of signing this agreement.’” Appellant then informed respondents that it had discovered there were tax liabilities incurred relating to the property that had not been so cleared. Appellant then “tendered” those tax liabilities to respondents for formal assumption, removal of appellant’s name from the tax debt/lien, and clearing.

In a letter dated December 3, 2003, respondents disagreed with appellant’s position. According to respondents, nothing in the settlement agreement obligated them to satisfy appellant’s personal property taxes.

On November 16, 2005, appellant filed the underlying complaint. The complaint alleges that, under the settlement agreement, respondents were obligated to “‘clear or assume any actual or potential liabilities’” within 30 days of signing the agreement and that, by way of the June 2003 tax statement, appellant discovered that respondents had breached this portion of the settlement agreement. In the cause of action for specific performance of this contract obligation, appellant requests that respondents be ordered “to either substitute themselves in place of [appellant] on these tax obligations to the County of Fresno or otherwise cause [appellant’s] name to be removed from those tax obligations and liens.” The complaint also requests the court to issue “declaratory relief and judgment determining that [respondents] are legally responsible for assuming, clearing and removing [appellant] from the aforesaid tax liabilities with the County of Fresno, and for a judgment substituting [respondents’] names for [appellant] on all records and liens relating to those tax obligations.” The complaint prays that respondents be ordered to immediately cause appellant to be removed from the tax liens “by substituting their name thereon, promptly paying the amounts due or by other means.”

Respondents moved for summary judgment/summary adjudication on the ground that the complaint was barred by the statute of limitations contained in the GCA. The trial court agreed and granted the summary judgment motion. The court determined that, although the complaint ostensibly sought specific performance, “the obvious effect of such a result would be to deplete the public treasury by taking ‘money’ away from it and using it to pay the tax debt of [appellant].” The court observed that, in fact, appellant’s prayer expressly requested the court to order respondents to promptly pay the amounts due pursuant to the tax liens. Accordingly, the court held that the complaint was subject to the GCA. The court further found that the cause of action accrued no later than October 16, 2003. Thus, the complaint filed on November 16, 2005, more than two years after the cause of action accrued, was barred by the statute of limitations.

Judgment was entered on November 17, 2006. Appellant filed its notice of appeal from the November 17 judgment on December 7, 2006.

On December 1, 2006, respondents filed a motion to determine that they were the prevailing parties on the contract and were entitled to an award of attorney fees pursuant to Civil Code section 1717. The trial court granted respondents’ motion by order filed February 23, 2007.

DISCUSSION

Appellant contends the trial court erred in several respects. First, appellant argues that the complaint was not subject to the GCA because it did not seek “money or damages.” Appellant further asserts that the GCA may not be applied to an action to enforce a settlement agreement. Appellant also argues that the trial court applied incorrect rules in determining when the causes of action accrued.

Appellant additionally asserted in its opening brief that the GCA does not apply to liability based on contract. However, after appellant’s opening brief was filed, the California Supreme Court held otherwise in City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 734. Appellant concedes this issue.

1. Standard of review.

The appellate court reviews a summary judgment independently. (Schaefer Dixon Associates v. Santa Ana Watershed Project Authority (1996) 48 Cal.App.4th 524, 531.) When summary judgment is granted in favor of the defendants, the court must determine whether the defendants either negated a necessary element of the plaintiff’s cause of action or established a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o)(2); Brantley v. Pisaro (1996) 42 Cal.App.4th 1591, 1594.) Where, as here, the salient facts are essentially undisputed, the only dispute is over the legal effect and significance of the undisputed facts, a pure matter of law. (Schaefer Dixon Associates v. Santa Ana Watershed Project Authority, supra, 48 Cal.App.4th at p. 531.)

2. The complaint is subject to the GCA.

Under the GCA, no suit for “money or damages” may be brought against a public entity until a written claim has been presented to the public entity and the claim either has been acted upon or is deemed to have been rejected. (Gov. Code, §§ 905, 945.4; Hart v. County of Alameda (1999) 76 Cal.App.4th 766, 778.) If the claim is deemed to have been rejected, i.e., no written notice is given, the claimant is allowed two years from the accrual date of the cause of action to file the suit. (Gov. Code, § 945.6, subd. (a)(2); Chalmers v. County of Los Angeles (1985) 175 Cal.App.3d 461, 464.) “A suit for ‘money or damages’ includes all actions where the plaintiff is seeking monetary relief, regardless whether the action is founded in ‘“tort, contract or some other theory.”’” (Hart v. County of Alameda, supra, 76 Cal.App.4th at p. 778.)

As noted above, the complaint seeks an order compelling respondents to specifically perform their obligation to clear or assume the tax liens. Appellant concedes that one way respondents could do so is pay the face amount of the liens. Nevertheless, appellant argues that its complaint is not a suit for money or damages and thus is not subject to the GCA.

The label on a complaint is not determinative. It is the substance or gravamen of the action that controls, not the form of the action or relief demanded. (Edwards v. Fresno Community Hospital (1974) 38 Cal.App.3d 702, 704; Giffen v. United Transportation Union (1987) 190 Cal.App.3d 1359, 1362.) Here, Fresno County has assessed taxes on appellant and appellant is attempting to have respondents either pay or assume this debt. As noted by the trial court, the “obvious effect of such a result would be to deplete the public treasury by taking ‘money’ away from it and using it to pay the tax debt of [appellant].” In fact, appellant’s prayer includes a request for an order requiring respondents to “promptly [pay] the amounts due.” Thus, contrary to appellant’s position, appellant filed a suit for money.

In seeking to be relieved of its tax debt, appellant is not requesting the return of specific property. Thus, appellant’s reliance on specific property return cases such as Minsky v. City of Los Angeles (1974) 11 Cal.3d 113 to support its claim that the complaint is not subject to the GCA is misplaced.

Further, the complaint does not allege, and appellant has not shown, that appellant does not have an adequate remedy at law, i.e., that money will not adequately compensate appellant for the alleged breach of the agreement. A plaintiff is not entitled to specific performance unless that plaintiff demonstrates that the breach cannot be adequately compensated in damages. (Korabek v. Weaver Aircraft Corp. (1944) 65 Cal.App.2d 32, 39.) Appellant has not met its burden of demonstrating entitlement to equitable relief and thus, specific performance is not available. (Morrison v. Land (1915) 169 Cal. 580, 588-589.)

Similarly, appellant cannot couch its claim as declaratory relief and escape the GCA. In its declaratory relief cause of action, appellant is requesting the court to determine that respondents are legally responsible for assuming, clearing and removing appellant from the tax liabilities. This is merely incidental to the monetary relief appellant seeks and thus is subject to the GCA. (Hart v. County of Alameda, supra, 76 Cal.App.4th at p. 782.) Moreover, there is no controversy that cannot be determined by the breach of contract claim. Accordingly, appellant’s declaratory relief cause of action is unnecessary and superfluous. (Hood v. Superior Court (1995) 33 Cal.App.4th 319, 324.)

Contrary to appellant’s position, the pleadings frame the issue of whether appellant stated causes of action for specific performance and declaratory relief.

Finally, the fact that appellant is claiming respondents breached a settlement agreement, as opposed to a contract, is of no consequence. A settlement agreement is a contract. (Roe v. State of California (2001) 94 Cal.App.4th 64, 73.)

In sum, despite appellant’s appellation, the complaint seeks money or damages. Accordingly, the complaint is subject to the GCA.

3. Appellant’s cause of action accrued more than two years before the complaint was filed.

As noted above, the applicable statute of limitations required appellant to file the complaint no later than two years after the cause of action accrued. (Gov. Code, § 945.6, subd. (a)(2).) The trial court concluded that the cause of action accrued no later than October 16, 2003, and thus the complaint filed on November 16, 2005, was untimely.

Appellant contends the trial court erred in applying the breach of contract accrual rules to the specific performance and declaratory relief causes of action. However, as discussed above, despite the form of the causes of action, the substance of the complaint is a claim for “money or damages” based on an alleged breach of contract. Appellant did not effectively state causes of action for either specific performance or declaratory relief. Thus, the trial court applied the correct accrual rule.

Appellant further argues that, even if the breach of contract rules apply, the statute of limitations did not begin to run until appellant learned that respondents had not taken any action to clear or assume the liens. According to appellant, this information was not discovered until respondents made it clear by letter dated December 3, 2003, that they disagreed with appellant’s claim that respondents were obligated to assume appellant’s tax liability.

A cause of action accrues at “‘the time when the cause of action is complete with all of its elements.’” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806.) In other words, it accrues when the wrongful act is done and the obligation or the liability arises so long as the plaintiff is entitled to prosecute an action on such obligation or liability. (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 596.)

Here, the settlement agreement required respondents “to clear or assume any actual or potential liabilities” within 30 days of signing this agreement, i.e., within 30 days of April 9, 2003. When respondents failed to clear or assume appellant’s tax liabilities by May 9, 2003, they were allegedly in breach of the settlement agreement and the cause of action accrued.

An exception to the general accrual rule is the “‘discovery rule.’” (Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at p. 807.) That rule postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action. (Ibid.)

Here, appellant discovered respondents’ failure to pay or assume the tax liabilities within 30 days of execution of the settlement agreement when it received the June 23, 2003, statement from Fresno County. Accrual of the cause of action did not require respondents to refuse appellant’s October 16, 2003, “tender” of the tax liability. Respondents were allegedly in breach of the agreement in May 2003 and appellant discovered this alleged breach in June 2003. Therefore, the complaint, filed on November 16, 2005, was not filed within two years of the accrual of the cause of action. Accordingly, the trial court correctly granted respondents’ summary judgment motion on the ground that the complaint was time barred.

4. Attorney fees award.

Appellant contends the trial court erroneously granted attorney fees to respondents under Civil Code section 1717. However, this court lacks jurisdiction to review that award. Accordingly, that portion of the appeal is dismissed.

Appellant filed its notice of appeal from the November 17 judgment on December 7, 2006. The order granting respondents attorney fees was filed on February 23, 2007. No appeal was taken from this subsequent order.

An order awarding attorney fees, if made after judgment, is separately appealable. (DeZerega v. Meggs (2000) 83 Cal.App.4th 28, 43.) When several judgments and/or orders are separately appealable, each appealable judgment and order must be expressly specified, in either a single notice of appeal or multiple notices of appeal, to be reviewable on appeal. (Ibid.)

Here, the judgment appealed from said nothing about attorney fees. The entitlement to fees was not adjudicated by the original judgment. Thus, an appeal challenging the attorney fees award had to be taken from the order granting the motion for fees. (DeZerega v. Meggs, supra, 83 Cal.App.4th at p. 44.)

DISPOSITION

The judgment from which the appeal was taken is affirmed. Insofar as the appeal purports to embrace the subsequent order awarding attorney fees, the appeal is dismissed. Costs on appeal are awarded to respondents.

WE CONCUR: Cornell, J., Dawson, J.


Summaries of

Desman, Inc. v. City of San Joaquin

California Court of Appeals, Fifth District
Jul 21, 2008
No. F051863 (Cal. Ct. App. Jul. 21, 2008)
Case details for

Desman, Inc. v. City of San Joaquin

Case Details

Full title:DESMAN, INC., Plaintiff and Appellant, v. CITY OF SAN JOAQUIN et al.…

Court:California Court of Appeals, Fifth District

Date published: Jul 21, 2008

Citations

No. F051863 (Cal. Ct. App. Jul. 21, 2008)