Opinion
NOT TO BE PUBLISHED
Contra Costa County Super. Ct. No. C-08-00141
Retired judge of the Superior Court of Marin County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
This appeal follows an order by the trial court which sustained defendant’s demurrer to plaintiff’s first amended complaint for breach of contract, without leave to amend and entered of judgment in favor of defendant. Plaintiff claims that the court erred by finding that the action is barred by the lapse of the one-year statute of limitations to file a government claim. We conclude that plaintiff did not file its government claim with defendant within one year of the accrual of the breach of contract action, and affirm the judgment.
STATEMENT OF FACTS AND PROCEDURAL HISTORY
As this appeal comes to us following a ruling on a demurrer, our recitation of facts is based upon the material allegations properly pleaded in the first amended complaint or any reasonable implications therefrom, the exhibits attached to the pleading, and any matters which may be judicially noticed. We presume all material allegations of the first amended complaint to be true. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966–967; McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1469.)
Plaintiff Kudsk Construction, Inc. (plaintiff or Kudsk), entered into a “Construction Agreement” (the Agreement) with defendant Moraga-Orinda Fire District (defendant or the District) to construct a new “Moraga-Orinda Fire Station No. 44” on Orchard Road in Orinda, for a base contract price of $1,840,400. The stated completion date of the construction project was within 240 calendar days of the notice to proceed, and a liquidated damages provision obligated Kudsk to pay $1,000 per day for any delay in completion of the project beyond 280 days. The District was given the right to order additions, deletions or revisions to the work, with additional compensation to be paid to Kudsk as specified in the Agreement.
The District also had the right to give written notice to Kudsk of the contractor’s failure to supply adequate materials or labor to complete the work on the project. If Kudsk failed or refused to supply “sufficient materials or workmen” to complete the work within 10 calendar days of the written notification, the District was entitled to “furnish such materials and workmen” and deduct the “costs and reasonable expenses” from the contract price.
Payment to Kudsk for work performed on the project was enumerated in sections 7 and 8 of the Agreement: Kudsk was to submit monthly invoices to the District for all work completed during the preceding calendar month; the District was to make payment within 30 calendar days of receipt of the monthly invoices, less a percentage of the amount invoiced (Pub. Contract Code, § 9203) until final completion and acceptance of the work; the District was entitled to withhold any payment for defective or uncompleted work; final payment for the entire amount owed to Kudsk – less amounts withheld – was due 35 days after the District filed a Notice of Completion of the project and Kudsk showed that all claims for labor and materials had been paid, no third party liens, claims, or withhold notices had been filed, and no defective or incomplete work was reasonably indicated.
During the term of the Agreement, Kudsk performed “extra work” on the project as directed by the District. The District failed to pay Kudsk or extend additional time for performance of the extra work. Kudsk’s performance of the Agreement was also substantially delayed by unknown and unforeseeable circumstances: differing site conditions; defective plans and specifications furnished by the District; the County permit and inspection process; improper and ineffective management of the project; and an exceptionally wet rainy season during the construction.
By August of 2005, the District took “beneficial occupancy” of the fire station. The project architect reported to the District on October 18, 2005, that Kudsk had commendably performed all work in conformance with drawings and specifications, if not within the time specified. Kudsk completed “all punch list and warranty work” on the project as of October 30, 2005. Nevertheless, the District “wrongfully” issued a “written notice of intent to terminate,” then “asserted on November 18, 2005, that Kudsk was terminated.” The District asserted that Kudsk would not be paid “any monies” due under the Agreement until the “cost for another contractor to complete the Project” was determined and deducted from the amount owed to Kudsk.
In contrast, the initial complaint alleged that the District “proceeded to terminate Kudsk on November 18, 2005.”
The complaint also alleged that the District unreasonably demanded that Kudsk’s bonding company engage another contractor to complete the work, which severely damaged Kudsk’s “bonding capacity,” but that allegation was deleted from the first amended complaint.
Despite the purported termination, the District issued a “punch list” and demanded that Kudsk continue to perform additional work or change orders on the project until February 23, 2006. The surety for Kudsk, St. Paul Travelers (St. Paul), declined to complete the project in accordance with the bond, but Kudsk completed part of the additional work demanded by the District, apparently at the behest of the bonding company. By March 3, 2006, the District represented that Kudsk was owed $98,856.37 on the project, and made payment for that amount.
On March 27, 2006, the District issued another “punch list” that contained “extra work items” to be performed by Kudsk, and stated a deadline of April 7, 2006, for completion of the remaining work. The District also asserted that the only disputed amount “still owing to Kudsk was $48,203.43,” which was “decreasing as the costs to complete the Project were continuing.”
Kudsk completed the project on May 12, 2006, and the District recorded a Notice of Completion on June 14, 2006. On June 28, 2006, the District asserted that Kudsk “was not owed any money” under the Agreement after a deduction of $105,000 in liquidated damages from the contract balance. The District advised Kudsk and its surety St. Paul that no further payment under the Agreement was possible due to a recently filed stop notice by BEI Construction, Inc. By July 17, 2006, the District informed Kudsk that $48,203.43 was owed under the Agreement, but only if a stop notice “was cleared.” The District paid Kudsk $41,716.27 in August of 2006. On August 26, 2006, the District proposed to pay Kudsk the additional amount of $6,487.16 in release of all claims, but the proposal was rejected by Kudsk.
Kudsk presented a written Claim for Damages (the Claim) to the District on June 13, 2007, which stated that the total amount due and owing under the Agreement was $191,887. The District approved payment to Kudsk of $6,487, but denied the remainder of the Claim.
On January 18, 2008, Kudsk filed a complaint against the District for breach of contract, monies due, quantum meruit, and account stated. The complaint alleged that pursuant to the Agreement the District was obligated to pay Kudsk any undisputed contract balance due by July 19, 2006 – that is, within 35 days after the Notice of Completion was filed – but breached the Agreement by failing to do so and asserting a claim for liquidated damages of $105,000. The complaint sought damages in the amount of $185,400.
Defendant demurred to the complaint on the ground that the action was barred by the failure of plaintiff to file a government claim within the “one-year presentment deadline” specified in Government Code sections 911.2 and 945.4. Before a hearing on the demurrer occurred, plaintiff filed the first amended complaint, which stated the same causes of action, but added and deleted allegations that related to the date of breach of the Agreement by defendant.
All further statutory references are to the Government Code unless otherwise indicated.
Defendant demurred to the first amended complaint on the same ground, and claimed that plaintiff’s “inconsistent” and “contradictory” addition, deletion, and alteration of allegations in the amended pleading should be disregarded by the trial court. Following a hearing, the court found that the date of the breach of the Agreement by defendant, and hence the accrual of the causes of action, was the alleged termination date of November 18, 2005, despite the attempt of plaintiff to plead in the first amended complaint that the termination was only “asserted” rather than accomplished on that date. The court stated that any effort on the part of plaintiff to contradict the termination date stated in the initial complaint was a “sham” or “inconsistent” pleading. The demurrer to the first amended complaint was granted without leave to amend on the ground that plaintiff filed an untimely government claim with defendant more than one year after the breach of the Agreement.
DISCUSSION
Plaintiff argues that the trial court erred by finding that the breach of contract and associated causes of action stated in the first amended complaint accrued on the termination date of November 18, 2005. Plaintiff’s position is that the causes of action did not accrue until defendant was required under section 8(c) of the Agreement to pay the balance owed to plaintiff 35 days after the Notice of Completion was filed, “on July 19, 2006.” Plaintiff therefore maintains that the Claim filed with defendant on June 13, 2007, was within the one-year period of limitations, and the demurrer should not have been sustained. Plaintiff also complains that in ruling on the demurrer the court improperly found that the first amended complaint “was a sham pleading.”
I. The Demurrer Standards.
“ ‘On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.] The judgment must be affirmed “if any one of the several grounds of demurrer is well taken. [Citations.]” [Citation.] However, it is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. [Citation.]’ [Citation.]” (Bagatti v. Department of Rehabilitation (2002) 97 Cal.App.4th 344, 352; see also Lee v. Blue Shield of California (2007) 154 Cal.App.4th 1369, 1377–1378.) “The properly pleaded material allegations in the declaratory relief cause of action” filed by plaintiff “must be accepted as true. [Citations.] In addition, the Supreme Court has held: ‘ “[T]he allegations of the complaint must be liberally construed with a view to attaining substantial justice among the parties.” [Citations.]’ [Citations.]” (C.J.L. Construction, Inc. v. Universal Plumbing (1993) 18 Cal.App.4th 376, 382–383.) Our task as a “reviewing court, therefore, ‘is to determine whether the pleaded facts state a cause of action on any available legal theory.’ [Citation.]” (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 266.) “We may affirm a trial court judgment on any basis presented by the record whether or not relied upon by the trial court.” (State of California ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 412 (Metz).) “On appeal from a judgment of dismissal after a demurrer has been sustained without leave to amend, the plaintiff has the burden of proving error. [Citation.] ‘Because the trial court’s determination is made as a matter of law, we review the ruling de novo.’ [Citation.]” (E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315.)
“The time bar of a statute of limitations may be raised by demurrer ‘[w]here the complaint discloses on its face that the statute of limitations has run on the causes of action stated in the complaint, [for the reason that] it fails to state facts sufficient to constitute a cause of action. [Citation.]’ [Citation.]” (County of Los Angeles v. Commission on State Mandates (2007) 150 Cal.App.4th 898, 912.) “There is an important qualification, however: ‘In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows merely that the action may be barred.’ [Citations.] ‘The ultimate question for review is whether the complaint showed on its face that the action was barred by a statute of limitations, for only then may a general demurrer be sustained and a judgment of dismissal be entered thereon.’ [Citation.]” (E-Fab, Inc. v. Accountants, Inc. Services, supra, 153 Cal.App.4th 1308, 1315–1316, italics omitted; see also Metz, supra, 149 Cal.App.4th 402, 413.)
II. The Finding of a Sham Pleading.
We first consider plaintiff’s claim that the court erred by finding that the first amended complaint contained “inconsistent” allegations and was “a sham pleading” for purposes of the ruling on the demurrer. Plaintiff submits that the “new allegations” of the first amended complaint “merely amplified or embellished what occurred” to correct inadvertent misstatements, and did not contradict the original pleading. Plaintiff particularly points out that the allegation of the termination of “Kudsk on November 15, 2005 was merely an evidentiary fact making the complaint a more easily readable narrative,” not a “fact essential to Kudsk’s breach of contract causes of action,” and thus the addition or omission of alleged facts in the first amended complaint did not constitute a sham pleading that the court was authorized to disregard.
We acknowledge the general rule that “ ‘[a]n amended complaint “supersedes the original and furnishes the sole basis for the cause of action. [Citations.] The original complaint is dropped out of the case and ceases to have any effect as a pleading, or as a basis for a judgment. [Citation.]” ’ [Citation.]” (Roberts v. Los Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 612.) However, “Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment.” (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) “ ‘ “A plaintiff may not avoid a demurrer by pleading facts or positions in an amended complaint that contradict the facts pleaded in the original complaint or by suppressing facts which prove the pleaded facts false. [Citation.]” [Citations.]’ [Citation.]” (Metz, supra, 149 Cal.App.4th 402, 412.) “[W]hen a complaint contains allegations that are fatal to a cause of action, a plaintiff cannot avoid those defects simply by filing an amended complaint that omits the problematic facts or pleads facts inconsistent with those alleged earlier. [Citations.] Absent an explanation for the inconsistency, a court will read the original defect into the amended complaint, rendering it vulnerable to demurrer again.” (Banis Restaurant Design, Inc. v. Serrano (2005) 134 Cal.App.4th 1035, 1044.)
Here, the first amended complaint filed in response to the demurrer omitted the allegation that the District unreasonably insisted that Kudsk’s bonding company engage another contractor to complete the work, which severely damaged Kudsk’s “bonding capacity.” The unequivocal language that the District “proceeded to terminate” Kudsk on November 18, 2005, was tempered to allege an “asserted” termination by the District on that date. Plaintiff also added allegations that following the termination Kudsk performed additional work on the project.
The trial court only questioned the alteration of the termination allegation, not the addition of allegations of further work performed for the District by Kudsk thereafter. Plaintiff attempted to explain the modification by stating that the intent of the insertion of the term “asserted” to refer to the termination was to “let everybody know that the termination on this date, November 2005, was bogus,” and the “parties continued to perform under the contract.” The court observed that the pleading of termination in the original pleading was “really clear,” and an attempt to “contradict it” would render the pleading “a sham.” The court thus denied plaintiff leave to further amend the pleading.
Plaintiff’s counsel also explained that paragraph 9 of the original complaint was deleted because plaintiff discovered no damage had been caused by impairment of its bonding capacity.
We conclude that the trial court did not err by considering the allegation of termination on November 18, 2005, to be definitive rather than merely “asserted” by the District. While plaintiff was free to suggest that the termination did not operate as a breach of the Agreement, the trial court was correct in finding that the termination date as originally alleged was not subject to amendment or retraction by plaintiff. “[T]he trial court has discretion to deny leave to amend when the proposed amendment omits or contradicts harmful facts pleaded in a prior pleading unless a showing is made of mistake or other sufficient excuse for changing the facts. Absent such a showing, the proposed pleading may be treated as a sham. [Citations.] ‘The well-established rule is that a proposed amendment which contradicts allegations in an earlier pleading will not be allowed in the absence of “very satisfactory evidence” upon which it is “clearly shown that the earlier pleading is the result of mistake or inadvertence.” ’ (American Advertising & Sales Co. v. Mid-Western Transport (1984) 152 Cal.App.3d875, 879 [199 Cal.Rptr. 735]; see Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 836 [69 Cal.Rptr. 321, 442 P.2d 377] [‘ “Where a verified complaint contains allegations destructive of a cause of action, the defect cannot be cured in subsequently filed pleadings by simply omitting such allegations without explanation.” [Citations.] “In such a case the original defect infects the subsequent pleading so as to render it vulnerable to a demurrer.” [Citation.]...’].)” (Sanai v. Saltz (2009) 170 Cal.App.4th 746, 768–769.) Plaintiff did not demonstrate that the allegation of termination was mistaken or inadvertent, but rather argued that the legal effect of the termination was not a breach of the Agreement. The trial court did not abuse its discretion by declining to allow plaintiff to amend or disavow the allegation that a termination occurred on November 18, 2005. Nothing in the record suggests to us that the court either disregarded the remaining allegations added to the first amended complaint by plaintiff, or refused to consider the contention by plaintiff that in light of those additional allegations the termination did not result in a breach of contract.
III. The Government Claim Filing Requirements.
We turn to the issue of plaintiff's compliance with the government claims filing requirements, and specifically the time deadline for filing a claim with the District. All of the causes of action of the first amended complaint are predicated on a breach of the Agreement by the District, which plaintiff acknowledges is a local public entity. “Section 905 of the Government Claims Act provides that, with certain specified exceptions, ‘all claims for money or damages against local public entities’ must be presented in accordance with the claim presentation statutes.” (Lozada v. City and County of San Francisco (2006) 145 Cal.App.4th 1139, 1150–1151 (Lozada).) “Claims for personal injury and property damage must be presented within six months after accrual; all other claims must be presented within a year. (§ 911.2.) ‘[N]o suit for money or damages may be brought against a public entity on a cause of action for which a claim is required to be presented... until a written claim therefor has been presented to the public entity and has been acted upon... or has been deemed to have been rejected....’ (§ 945.4.)” (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 738; see also Sofranek v. County of Merced (2007) 146 Cal.App.4th 1238, 1246.)
Contract claims fall within the plain meaning of the requirement that all claims for money or damages “must be presented to the public entity within one year of accrual of the cause of action. (Gov. Code, § 911.2.)” (Westcon Construction Corp. v. County of Sacramento (2007) 152 Cal.App.4th 183, 190; see also City of Stockton v. Superior Court, supra, 42 Cal.4th 730, 738.) Failure to properly allege compliance with the statutory requirements for timely filing a claim for money or damages to a public entity bars a plaintiff from filing a lawsuit against that entity and subjects a claim against a public entity to a demurrer for failure to state a cause of action. (City of Stockton v. Superior Court, supra, at p. 738; State of California v. Superior Court (2004) 32 Cal.4th 1234, 1239; Lozada, supra, 145 Cal.App.4th 1139, 1150–1151.) If Kudsk has failed to allege presentation of its claim to the District within one year of accrual of the contract cause of action, the pleading is vulnerable to a demurrer. (Watson v. State of California (1993) 21 Cal.App.4th 836, 843–844.)
IV. The Accrual Date of the Causes of Action.
Thus, the crucial inquiry in the present case is when plaintiff’s breach of contract action accrued. “ ‘[T]he date of the accrual of a cause of action to which a claim relates is the date upon which the cause of action would be deemed to have accrued within the meaning of the statute of limitations which would be applicable thereto if there were no [claim] requirement.’ (Gov. Code, § 901.)” (Fantazia v. County of Stanislaus (1996) 41 Cal.App.4th 1444, 1449–1450; see also Zuniga v. Housing Authority (1995) 41 Cal.App.4th 82, 101; Lundeen Coatings Corp. v. Department of Water & Power (1991) 232 Cal.App.3d816, 827.)
“As a general rule, a cause of action accrues and a statute of limitations begins to run when a controversy is ripe – that is, when all of the elements of a cause of action have occurred and a suit may be maintained.” (Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th 1375, 1388; see also Cleveland v. Internet Specialties West, Inc. (2009) 171 Cal.App.4th 24, 31–32.) “Under a contractual theory of liability, the ‘wrong’ that is an essential element of the claim is the defendant’s breach. [Citations.] As a result, a breach of contract claim does not accrue until there has been a breach of the contract.” (Church v. Jamison (2006) 143 Cal.App.4th 1568, 1582–1583; see also Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1042; Cochran v. Cochran (1997) 56 Cal.App.4th 1115, 1120.) “A cause of action for breach of contract does not accrue before the time of breach.” (Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 488.)
Had defendant not terminated the Agreement, the causes of action would have accrued as plaintiff maintains when the District failed to make payment to Kudsk on July 19, 2006, as specified in section 8(c) of the contract – that is, 35 days after the Notice of Completion was filed. If a contract remains in effect, “ ‘There can be no actual breach of a contract until the time specified therein for performance has arrived.’ [Citation.]” (Romano v. Rockwell Internat., Inc., supra, 14 Cal.4th 479, 488–489, italics omitted.)
The pleading explicitly alleges in paragraph 8, however, that “Kudsk was terminated” by the District on November 18, 2005, and that the termination “action was wrongfully taken.” (Italics added.) According to paragraph 9 of the pleading, the District also affirmed that Kudsk would thereafter not be paid “any monies owed to it” until the cost to hire another contractor to complete the project was known. As of November 18, 2005, Kudsk knew that its employment as contractor was terminated and it would not be paid the full amount due under the Agreement. The additional allegation that the termination was wrongful indicates that Kudsk considered the action to be a breach of the Agreement. Thus, the statute of limitations began to run when plaintiff’s employment was wrongfully terminated by defendant. (See Romano v. Rockwell Internat., Inc., supra, 14 Cal.4th 479, 491; Colores v. Board of Trustees (2003) 105 Cal.App.4th 1293, 1320.) “The breach of contract alleged is the termination of employment without good cause.” (Mullins v. Rockwell Internat. Corp. (1997) 15 Cal.4th 731, 738, italics omitted.)
The change in the language of the pleading from the allegation that the District “proceeded to terminate Kudsk” on November 18, 2005, in the original complaint, to the allegation in the first amended complaint that the District “asserted” Kudsk was terminated, is of no real consequence to the substance and effect of the termination allegation. According to either pleading, the District effectively declared that the Agreement was terminated.
Plaintiff claims that the trial court erred by interpreting the contract to find “that Section 8 was inapplicable,” and thereby ruling on a demurrer on the basis of facts that may be disputed. The court did not interpret the Agreement to find the date of breach. Rather, the court properly determined an issue of law, the date of running of the statute of limitations, from the undisputed allegations of the pleading and the attached documents. Where, as here, the underlying facts are not in dispute, the question when a statute of limitations begins to run is one of law. (See Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 814; Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., supra, 116 Cal.App.4th 1375, 1388.)
Plaintiff also complains that actions of the parties subsequent to the termination demonstrate that additional work was performed by Kudsk and the final amount of damages was not known until the District failed to make full payment of “the balance of the Contract Price” on July 19, 2006. We agree that the performance of additional work by Kudsk after the termination date, and the alleged partial payment by the District for the work performed, indicates that plaintiff was not aware of the full amount of damages suffered until after November 18, 2005. But upon the termination of the Agreement, plaintiff suffered cognizable injury in the nature of a deduction from its compensation of the cost to hire another contractor to complete the project and ultimate payment of less than the full contract price.
A “cause of action accrues for purposes of the statute of limitations, and the applicable limitations period begins to run, when the plaintiff has suffered damages from a wrongful act.” (Lyles v. State of California (2007) 153 Cal.App.4th 281, 286.) Once the damage is such that the cause of action accrues, additional damage from the same wrong does not alter the accrual of the cause of action or otherwise extend the limitations period. (Id. at p. 290; see also Davies v. Krasna (1975) 14 Cal.3d 502, 514.) “ ‘[A]lthough 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.... [N]either uncertainty as to the amount of damages nor difficulty in proving damages tolls the period of limitations.’ [Citation.]” (Engstrom v. Kallins (1996) 49 Cal.App.4th 773, 783; see also Grisham v. Philip Morris U.S.A., Inc. (2007) 40 Cal.4th 623, 640.) Even if we run the statute of limitations from the date the cause of action was complete, including injury, the first injury plaintiff should have known about is the one that starts the statute of limitations. (Grisham v. Philip Morris U.S.A., Inc., supra, at p. 640.) That injury occurred on the date of termination as alleged in the pleading, November 18, 2005. That Kudsk may have subsequently performed additional work and received compensation for it from the District does not alter the fact that plaintiff incurred appreciable and actual harm when it was terminated as contractor and received notice of a deduction in compensation for work performed by another contractor. This is also not a case in which the accrual date may be extended because the contract is divisible, or performance of the contractual obligations is severed into intervals, or there was a continuing wrong. (Cf. Howard Jarvis Taxpayers Assn. v. City of La Habra, supra, 25 Cal.4th 809, 815; Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., supra, 116 Cal.App.4th 1375, 1388–1389.) The termination of plaintiff as contractor is the genesis and basis of the entire breach of contract action. Therefore, the first amended complaint shows on its face the Claim filed with the District on June 13, 2007, did not comply with the one-year limitations period of section 911.2.
DISPOSITION
Accordingly, the demurrer was properly sustained without leave to amend and the judgment in favor of defendant is affirmed. Costs on appeal are awarded to defendant
We concur: Marchiano, P. J., Margulies, J.