Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Solano County Super. Ct. No. FSC 022532
NEEDHAM, J.
Christopher Herron (Herron) appeals from a judgment entered against him after a jury found him liable to respondent Meyer Corporation U.S. (Meyer) for fraudulent concealment. Herron contends that Meyer’s fraudulent concealment claim was time-barred under Code of Civil Procedure section 338, subdivision (d), and was precluded by res judicata. We will affirm the judgment.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
I. Facts and Procedural History
Herron was an employee and shareholder of Electran Corporation (Electran), a website development company. Electran entered into a service agreement and a software licensing agreement with Meyer on March 23, 2000, by which Electran agreed to design and create a website for Meyer. Electran “intend[ed] to deliver” the website “as a complete, accepted system within ten weeks of commencement of work,” and Meyer was to pay Electran up to $210,000 in progress payments upon completion of specified milestones. Paragraph 15 of the service agreement prohibited Electran from turning the work over to subcontractors: “Electran shall not subcontract or assign this Agreement or any part thereof without the prior written consent of Client.”
The day after Herron signed the service agreement on behalf of Electran, and contrary to the provision precluding use of a subcontractor, Herron signed on Electran’s behalf a contract by which Advanced Graphical Applications (Advanced Graphical) would design and construct Meyer’s website.
In August 2000, with the website still not functioning properly, Herron informed Meyer that Electran could not complete the project due to Electran’s financial difficulties. By that time, Meyer had already paid Electran much of the $210,000 contract price. Meyer hired Electran’s former employee, Rob Wynden, to complete the project.
A. Meyer’s First Lawsuit (Meyer I)
On September 27, 2000, Meyer filed a lawsuit against Electran and Herron (Meyer I). As set forth in its first amended complaint, Meyer alleged that Electran: breached the Service Agreement, by abandoning the project and failing to deliver an operative website, resulting in damages of $572,175; breached the licensing agreement, by failing to provide maintenance and technical support for software delivered in connection with the website construction; breached the implied covenant of good faith and fair dealing in each of the contracts; and was negligent in failing to construct the website with due care. In a separate “SIXTH CAUSE OF ACTION,” Meyer sought to impose personal liability on Herron under an alter ego theory. In this regard, Meyer alleged: Herron was an officer, director, or shareholder of Electran; Electran and Herron had a unity of interest and ownership; Electran was a shell and a sham, “conceived . . . as a device to avoid individual liability and for the purpose of substituting a financially insolvent corporation in place of” Electran, and as a conduit through which Herron conducted his individual business; Herron controlled, dominated and operated Electran such that it conducted business without regard to corporate formalities; and recognizing a separateness between Electran and Herron would promote fraud.
Electran, by then purportedly insolvent, did not answer the first amended complaint. A default judgment was entered against it on November 1, 2000, for $594,316, including damages, attorney fees, costs, and interest.
Herron appeared separately and filed an answer to the first amended complaint. Herron and Meyer, assuming that Electran’s liability was established by Electran’s default, submitted the alter ego claim to judicial arbitration. On December 11, 2001, the arbitrator ruled that “[t]he defendant corporation [Electran] is not the alter ego of the Defendant Herron.” Meyer declined to seek a trial de novo, and judgment was entered in Herron’s favor.
B. This Lawsuit (Meyer II)
On July 30, 2003, Meyer filed a second lawsuit against Electran and Herron (Meyer II). This time, Meyer asserted causes of action against Herron for intentional and negligent misrepresentation, alleging that Herron failed to disclose before entering into the contracts that Electran did not have resources sufficient to fulfill its obligations under the service agreement. Based on this alleged misrepresentation, Meyer also asserted against Herron a claim for unfair business practices under Business and Professions Code section 17200. In addition, Meyer alleged a cause of action against Electran and Herron for fraudulent transfer, claiming that Electran wrongfully transferred intellectual property to Herron after Meyer obtained its judgment against Electran.
Herron filed a demurrer to Meyer’s first amended complaint on the grounds of res judicata and the statutes of limitation set forth in sections 335.1 and 430.10. The trial court overruled the demurrer, observing that Meyer’s negligent misrepresentation claim was governed by the three-year statute of limitations in section 338, subdivision (d). Herron thereafter answered the first amended complaint, as well as Meyer’s second amended complaint, pleading as affirmative defenses collateral estoppel, res judicata, and numerous limitations periods, including those set forth in section 338.
The matter proceeded to trial before a jury. In support of its fraudulent concealment claim, Meyer’s Chief Information Officer, Stephen Kirk (Kirk), testified that Herron induced Meyer to enter into the service agreement through misrepresentations that the work would be performed exclusively by an in-house team of Electran engineers headed by Rob Wynden. Kirk described Electran’s in-house engineers as the “main reason” Meyer signed the contract. Further, Kirk testified, Meyer would not have entered into the agreements with Electran if it had known that someone other than Wynden and his team would be working on the project.
While Herron was making these representations, Meyer contended, he was also secretly negotiating with Advanced Graphical to construct the website. Herron signed the contract with Advanced Graphical the day after signing the service agreement, and he never disclosed to Meyer his negotiations with Advanced Graphical or his intention to subcontract the work. According to Kirk’s testimony, Advanced Graphical’s incompetence and errors caused the website not to be finished within the 10-week time frame.
Kirk also testified that in June 2000, Meyer discovered that Advanced Graphical, and not Wynden’s team, was doing work on the website: “Q. Did Mr. Herron ever tell you at any time before you executed the Services Agreement that he was going to use Advanced Graphical Applications to build your website? [¶] A. No. [¶] Q. When was the first time that you learned that? And if you don’t mind, I am going to refer to them as ‘AGA’ so I don’t have to say ‘Advanced Graphical Applications’ all the time. [¶] A. Sure. [¶] Q. When was the first time that you learned AGA was building your website and not Rob Wynden and his team? [¶] A. Around the middle of June [2000], one of my staff, a gentleman named Eric Moss, was working on the website, working with Electran. We were in the testing, testing stage, and he had contacted a person at Electran about an error in some part—I don’t remember what part of the website—and the Electran individual—and I don’t know who that person was—told Eric he would have to call Chicago to find out about that, and Eric was a little surprised and tried [to] find out what that meant, and that’s how we found out somebody else was working on the software.” During cross-examination, Kirk confirmed that he knew by June of 2000 that Herron had contracted out “some of the work” to Advanced Graphics.
In regard to damages, Meyer claimed that it was entitled to recover for payments made under the Service Agreement, its cost of assigning its own staff to the project beginning in April 2000, and other expenses incurred before Meyer finally got the website “on line” on October 30, 2000.
C. Verdict and Judgment
The trial court instructed the jury, and special verdict forms were submitted to the jury, on Meyer’s claims for intentional misrepresentation, fraudulent concealment, and fraudulent transfer. Herron did not request a jury instruction with respect to the statute of limitations, and none was given. Nor did the special verdict forms address any defense or require any finding in regard to the statute of limitations.
The jury rendered its verdict on February 3, 2006, awarding Meyer $231,007.50 on the fraudulent concealment claim. The jury also found for Meyer on its claims for intentional misrepresentation and fraudulent transfer, but awarded no damages on those claims.
Herron filed a motion for judgment notwithstanding the verdict and for a new trial on February 15, 2006, contending that the verdict was not supported by sufficient evidence. Judgment was filed against Herron on February 16, 2006. Herron’s motion for judgment notwithstanding the verdict and a new trial was denied in April 2006. Herron then filed his notice of appeal.
According to the notice of appeal, Herron appeals “from the order dated April 15, 2004 denying Herron’s demurrer to the First Amended Complaint and further appeals from the Entry of Judgment dated February 27, 2006 on the grounds that the plaintiff did not prove the elements for intentional misrepresentation, concealment, fraudulent conveyance, and on the grounds that the compensatory damages awarded were excessive and not supported by the evidence.” Herron has not argued in his appellate briefs that the trial court erred in sustaining the demurrer or that the evidence was insufficient. We will nonetheless construe the notice of appeal broadly and consider the issues Herron has raised in his briefs.
II. Discussion
Meyer’s fraudulent concealment claim was the only cause of action on which Meyer recovered damages at trial. Herron contends: (1) the evidence at trial demonstrated as a matter of law that the fraudulent concealment claim was time-barred; and (2) Meyer II was barred by the res judicata effect of Meyer I. We disagree.
A. Statute of Limitations
The parties do not dispute that the applicable limitations period for Meyer’s fraudulent concealment claim is set forth in section 338, subdivision (d). That section provides a three-year limitations period for “[a]n action for relief on the ground of fraud or mistake,” but notes that the cause of action “is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” A fraud cause of action therefore does not accrue for statute of limitations purposes until the plaintiff “at least suspects, or has reason to suspect, a factual basis for its elements.” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 389; see Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807 [knowledge of one or more element of a cause of action, coupled with suspicion of the other elements, will generally trigger the limitations period]; Debro v. Los Angeles Raiders (2001) 92 Cal.App.4th 940, 950 [limitations period of section 338 commences upon the discovery by the aggrieved party of the fraud or facts that would lead a reasonably prudent person to suspect fraud].)
Meyer filed its original complaint in this lawsuit on July 21, 2003. Herron contends that Meyer’s fraudulent concealment claim accrued more than three years earlier in June 2000, based on Kirk’s testimony at trial to the effect that he learned in June 2000 that Electran was using a subcontractor. Meyer counters that it still had not discovered Herron’s fraud for purposes of commencing the limitations period, because damages were not apparent amidst Electran’s assurances of performance. Meyer also contends that Herron waived the statute of limitations defense by not asserting it at trial.
We agree that Herron waived his statute of limitations defense. He did not propose any jury instruction regarding the limitations period, and none was given. The statute of limitations issue was not addressed in the special verdict forms. Nor did Herron argue it to the jury or point out the issue to the judge. Herron did not even raise the statute of limitations defense in his post trial motion for a judgment notwithstanding the verdict and for a new trial. He cannot now seek reversal of a judgment based on a defense he did not pursue at trial. (North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 28-29 [the “fundamental nature of our adversarial system” requires the parties to call to the trial court’s attention “issues they deem relevant,” and a party is not permitted to take one position at trial and adopt a new and different position on appeal, which is unfair to the trial court and to the opposing party]; Null v. City of Los Angeles (1988) 206 Cal.App.3d 1528, 1535 (Null) [civil litigant may not “withhold a theory from the jury, by failing to request instructions, and then . . . obtain appellate review of the evidence and reversal of the judgment on a theory never tendered . . . to the jury”]; Pacific Gas & E. Co. v. Peterson (1969) 270 Cal.App.2d 434, 439 [party may not assert a new theory on appeal by “pointing to bits and pieces of evidence which were offered on other issues”].)
Herron’s arguments to the contrary are unpersuasive. Primarily, he urges that it was sufficient for him to raise the statute of limitations as an affirmative defense to the second amended complaint, relying on Jones v. Goldtree Bros. Co. (1904) 142 Cal. 383 (Jones). But Jones does not help his cause. There, the defendants had not only pled a statute of limitations defense, they tried the case under a theory that the plaintiff’s action was time-barred. (Id. at p. 384.) The jury rejected their defense and found in favor of the plaintiff. (Ibid.) “In other words, the jury, under the evidence and instructions of the court, found against defendants on their plea of the statute of limitations.” (Ibid.) The trial court then granted the defendants’ motion for a new trial, concluding that the statute of limitations did indeed bar the plaintiff’s claim. (Ibid.) On appeal by the plaintiff, the appellate court held that the statute of limitations applied and upheld the judgment. (Id. at pp. 384-386.) In so doing, the Court of Appeal rejected the plaintiff’s contention that the defendants’ specifications of the insufficiency of the evidence (in their new trial motion) were inadequate because there were many reasons the jury could have concluded the limitations period had not expired. (Id. at p. 387.) The court added: “Nor did defendants waive their plea of the statute of limitations by failing to ask the withdrawal of the question from the jury or an instruction in relation thereto. They had the right to rely upon the presumption that the verdict would be in accord with the law and the facts. As it was erroneous in the respects pointed out, the court below granted the new trial. It would have been better practice for defendants to have asked an instruction as to the bar of the statute from their standpoint. But it would open a wide field if we were to lay down a rule that any defense relied upon in a pleading is waived if a party does not ask an instruction as to the law applicable to the particular facts.” (Id. at pp. 387-388.)
Jones—decided more than a century ago—is obviously not on point. It observed merely that the defendants did not waive their defense by failing to request a jury instruction. Although the jury in Jones was not instructed on the statute of limitations defense, the defendants plainly presented the defense at the trial, sufficient for the appellate court to remark that the jury considered the defense but rejected it. (Jones, supra, 142 Cal. at p. 384.) Here, by contrast, not only did Herron fail to request a jury instruction, he did not argue the statute of limitations defense during trial at all, either to the jury or even to the court. Jones does not hold that a plaintiff can remain silent at trial on a potential defense and then, after losing, claim on appeal that the case should be reversed based on the defense it never presented.
Herron additionally argues that his failure to raise the limitations period as a defense at trial was really Meyer’s fault, because Meyer did not disclose before trial Kirk’s knowledge in June 2000 that a subcontractor was working on the website, and instead maintained that it did not discover the fraud until August 2000. Herron’s argument rings hollow.
Kirk’s trial testimony concerning his June 2000 conversation occurred on January 25, 2006. His testimony did not go unnoticed, since Herron’s counsel cross-examined him on the statement and Kirk confirmed its substance on the same date. At that point, according to Herron’s theory, Herron had a basis for requesting a jury instruction, adding an item in the verdict form, preparing an argument to the jury, or otherwise raising to the court the statute of limitations defense. Herron did not do so, even though substantive jury instructions, closing argument, and commencement of deliberations did not occur until more than a week later on February 2, 2006. Indeed, judgment was not filed until February 16, 2006, after Herron had brought his motion for judgment notwithstanding the verdict and for a new trial—without mentioning the statute of limitations defense.
Herron also argues that “if the issue had been raised at trial, there would have been nothing Meyer could have done to avoid judgment in Herron’s favor.” Thus, he argues, this is a “classic case” for reviewing on appeal an issue not specifically raised at trial. Not so. The fact that Herron believes the statute of limitations defense would have been meritorious does not excuse his failure to raise it. The waiver doctrine applies to potentially meritorious as well as meritless claims.
Lastly, Herron argues that he should be allowed to argue the limitations defense on appeal because it presents a question of pure law to be applied to undisputed facts. (See In re Marriage of Peters (1997) 52 Cal.App.4th 1487, 1490.) We disagree. In the first place, the material facts are not entirely undisputed. The limitations period on Meyer’s fraudulent concealment claim began to run when Meyer had reason to suspect it. While it was uncontested that Kirk learned in June 2000 that an Electran employee had to contact someone outside Electran to address an issue with the website, whether this event gave Meyer notice of fraud, sufficient to commence the limitations period, would have to be considered in light of all the circumstances at the time. Because Herron did not raise the statute of limitations at trial, this question was not addressed by Kirk or anyone else. If Herron had raised his defense, Meyer may have been able to provide additional evidence or, at the least, offered argument on the issue to the trier of fact. Moreover, even if there had been no factual dispute for the jury to resolve, the defense should have been raised to the trial judge for timely adjudication. Finally, while we have discretion in some circumstances to consider legal issues not raised at trial, we must remain mindful that this was not a matter where a party merely failed to object to a legal error: Herron seeks to insulate an entire affirmative defense from the scrutiny of the judge and jury. Such matters are to be addressed in the first instance in the trial court. (See Null, supra, 206 Cal.App.3d at p. 1535.)
Herron also argues that he gave Meyer “clear notice” that he was relying on a statute of limitations defense because he raised it by demurrer and answer. His demurrer did not refer to section 338, subdivision (d). Moreover, whatever “clear notice” he gave in his pleadings, he took away by remaining mute at trial.
Herron waived or forfeited his potential defense under section 338, subdivision (d).
B. Res Judicata
“ ‘Res judicata’ describes the preclusive effect of a final judgment on the merits. Res judicata, or claim preclusion, prevents relitigation of the same cause of action in a second suit between the same parties or parties in privy with them . . . . [A] judgment for the defendant serves as a bar to further litigation of the same cause of action.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896-897 (Mycogen).) The elements of res judicata are: (1) the prior proceeding reached a final valid judgment on the merits; (2) the present proceeding is on the same cause of action as the prior proceeding; and (3) the parties in the present proceeding were parties to the prior proceeding or in privy with them. (Federation of Hillside & Canyon Assns. v. City of Los Angeles (2004) 126 Cal.App.4th 1180, 1202 (Federation).)
Herron contends that the final judgment in Meyer I precluded the Meyer II lawsuit under the doctrine of res judicata. The parties do not dispute the first and third elements of res judicata: Meyer I concluded with a final judgment against Herron in January 2002, based on the arbitrator’s decision, and Meyer and Herron were parties in both Meyer I and Meyer II. The question is therefore whether the second res judicata element is met: that is, whether the fraudulent concealment claim against Herron in Meyer II is the same cause of action litigated against Herron in Meyer I. It is not.
To determine what constitutes the same cause of action for res judicata purposes, California courts invoke the primary right theory, which holds that there is just one cause of action for a single injury incurred by reason of a particular wrongful act. (Mycogen, supra, 28 Cal.4th at p. 904; Slater v. Blackwood (1975) 15 Cal.3d 791, 795.) What constitutes a primary right—the adjudication of which in one case may be res judicata as to all other legal claims based on the same primary right—turns on the harm the plaintiff allegedly suffered, rather than the legal theory he asserts or the remedy he seeks. (Mycogen, at pp. 904-907; Lincoln Property Company, N.C. Inc. v. Travelers Indemnity Co. (2006) 137 Cal.App.4th 905, 912-913.) As our Supreme Court has stated: “[The primary right theory] provides that a ‘cause of action’ is comprised of a ‘primary right’ of the plaintiff, a corresponding ‘primary duty’ of the defendant, and a wrongful act by the defendant constituting a breach of that duty. . . . [¶] As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered.” (Crowley v. Katleman (1994) 8 Cal.4th 666, 681-682; see Federation, supra, 126 Cal.App.4th at p. 1202 [“plaintiff’s primary right is the right to be free from a particular injury, regardless of the legal theory on which liability for the injury is based”]; Mycogen, at p. 908 [the primary right is the right to be free from all of the injuries arising from a particular breach of contract; separate and distinct contract covenants breached at different times are distinguishable].)
In Meyer I, Meyer sued Herron under an alter ego theory to make him liable for Electran’s breach of contract because, Meyer alleged, justice required the corporate veil to be pierced. Thus, the primary right underlying Meyer’s cause of action against Herron was Meyer’s right to be free from the harm caused by the fraud of using a sham corporate entity to insulate Herron from individual liability and to frustrate recovery of a judgment against the corporation. Here in Meyer II, by contrast, Meyer sued Herron for inducing Meyer’s entry into the service agreement, by failing to disclose that a subcontractor rather than Electran would be doing the work. Thus, this case, Meyer II, involves Meyer’s right to be free from the harm caused by entering into a contract induced by Herron’s antecedent misrepresentations and deceit. The right to be free of alter ego fraud is distinct from the right not to be fraudulently induced into a contract. As we shall explain, even where the damages are the same, the harm for res judicata purposes is different.
Instructive in this regard is Brenelli Amedeo, S.P.A. v. Bakara Furniture, Inc. (1994) 29 Cal.App.4th 1828 (Brenelli Amedeo), which examined the nature of an alter ego claim in the res judicata context. In Brenelli Amedeo, the plaintiff first obtained a judgment against a corporation for claims related to a breach of contract. (Id. at p. 1833.) After the defendant corporation filed for bankruptcy, the plaintiff filed a new lawsuit against the corporation and its individual shareholders, alleging alter ego liability and related causes of action to recover the judgment amount. (Id. at p. 1833.) Construing the alter ego claim to be based on the “separate and independent right to execute on the judgment,” the Second Appellate District held that res judicata did not preclude the second suit because “the right to have contractual obligations performed is distinct from the right to be free from tortious behavior preventing collection of a judgment.” (Id. at pp. 1837-1838, 1839 fn. 3.) The court also observed that the proof required at trial in the lawsuit would differ considerably from the evidence in the prior suit. (Id. at p. 1837.)
The trial court in Brenelli Amedeo had held that res judicata barred the plaintiff’s claims for intentional misrepresentation of fact, suppression of fact, conspiracy to defraud, and conversion, while disposing of the alter ego claim on the ground it should have been raised in a joint debtor proceeding under section 989. (Brenelli Amedeo, supra, 29 Cal.App.4th at pp. 1833-1834.) The appellate court held the latter ruling incorrect (id. at p. 1841) and also necessarily addressed the respondents’ argument that the alter ego claim, as well as the rest of their eight causes of action, was barred by res judicata as well. The appellate court expressly held that res judicata “does not preclude any of the eight theories pleaded by appellant,” including the alter ego claim. (Id. at pp. 1838-1839 & fn. 3, italics added.) In regard to the alter ego claim in particular, the court stated: “The present suit also involves claims related to the separate and independent right to execute on the judgment, for example, appellant’s claim of alter ego liability. The right to have contractual obligations fulfilled is clearly distinct from the right to execute on a judgment, an entirely different type of obligation.” (Id. at p. 1839 fn. 3.)
In reaching its decision, the Brenelli Amedeo court relied in part on the Fourth Appellate District’s conclusion in Sawyer v. First City Financial Corp. (1981) 124 Cal.App.3d 390 (Sawyer). In Sawyer, the plaintiffs brought suit against defendants for breach of contract on a note, deed of trust, and loan and development agreement. After judgment was entered for the defendants, the plaintiffs filed a second lawsuit against them for conspiracy to conduct a sham foreclosure sale. The court held the two actions involved distinct primary rights: “one’s breach of contract by failing to pay a note violates a ‘primary right’ which is separate from the ‘primary right’ not to have the note stolen.” (Id. at p. 402.)
Here, Herron’s purported creation of a sham corporation for purposes of avoiding liability is distinct from the harm of Herron fraudulently inducing Meyer to sign a contract. The former cause of action (Meyer I) was based on conduct Herron allegedly performed with others, at some point in time, to avoid liability with respect to creditors generally. The latter cause of action (Meyer II) is based on a different representation Herron made specifically to Meyer, for the purpose of luring Meyer into a particular contractual relationship, by which Meyer paid for a website it never obtained. While Meyer I sought to hold Herron liable for Electran’s wrongdoing that proximately caused the loss, Meyer II sought to hold him liable for his own conduct that proximately caused the loss. (See Flynn v. Gorton (1989) 207 Cal.App.3d 1550, 1555 [adjudication of negligence claim by plaintiff against defendant did not bar defendant’s later indemnity cross-complaint against plaintiff when defendant was sued by a third party, because the primary right to be free from personal injury is distinct from the right to equitable indemnity].)
Furthermore, based on the allegations in Meyer I, the evidence to establish the alter ego claim would include proof that Electran and Herron had a unity of interest and ownership, Electran was a shell and a sham, Electran was a conduit through which Herron conducted his individual business, Herron controlled and operated Electran such that it conducted business without regard to corporate formalities, these matters were fraudulently intended to avoid liability to creditors, and it would be equitable to hold Herron liable for Electran’s debt. (See Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538 [“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.”].) None of this was at issue in Meyer II.
The fact that the damages Meyer ultimately recovered in Meyer II were essentially the same as the damages Meyer would have recovered from Herron in Meyer I is not the point. As the court in Sawyer observed: “While the monetary loss may be measurable by the same promissory note amount, and hence in a general sense the same ‘harm’ has been done in both cases, theoretically the plaintiffs have been ‘harmed’ differently by tortious conduct destroying the value of the note, than by the contractual breach of simply failing to pay it.” (Sawyer, supra, 124 Cal.App.3d at p. 403.) Here as well, Meyer was harmed differently by representations inducing entry into a contract, than it was by conduct that would have rendered it appropriate to render Herron responsible for Electran’s liability.
Unlike here, the first lawsuits in Brenelli Amedeo and Sawyer were in contract and the second lawsuits were in tort. The distinction between contract and tort theories, however, could not have been the basis for holding res judicata inapplicable because—as stated in Brenelli Amedeo—“ ‘if two actions involve the same injury to the plaintiff and the same wrong by the defendant then the same primary right is at stake even if in the second suit the plaintiff pleads different theories of recovery.’ ” (Brenelli Amedeo, supra, 29 Cal.App.4th at p. 1837, italics added.) Nor can Brenelli Amedeo be distinguished merely because in that case the alter ego claim was asserted after a judgment against the corporation had been obtained, while here the alter ego claim was asserted in the first lawsuit. The essential point is that the nature of an alter ego claim—asserting an individual is liable for corporate obligations—is distinct from the wrongdoing that gave rise to a particular corporate obligation. From its inception the alter ego claim in Meyer I sought to hold Herron liable for wrongdoing of another. In addition, by the time the alter ego claim was adjudicated in Meyer I, a judgment had already been entered against Electran, which was then insolvent. As a result, the adjudicated alter ego claim in Meyer I was effectively the same as the alter ego claim asserted in Brenelli Amedeo.
Because the claim against Herron in Meyer I and the claims against him in Meyer II involved different primary rights, including different duties and different wrongs, they were not the same cause of action for res judicata purposes.
Herron’s reliance on Steiner v. Thomas (1949) 94 Cal.App.2d 655 is misplaced. There, the plaintiff first sued the executor of a decedent’s estate to recover real property that the plaintiff had transferred to the decedent. Specifically, the plaintiff sought rescission of an agreement by which the plaintiff conveyed the property to the decedent, based on a theory of fraudulent inducement. (Id. at p. 657.) Final judgment was entered against the plaintiff and in favor of the decedent’s executor. (Ibid.) Two years later, the plaintiff sued the decedent’s executor again, this time alleging that the decedent had breached her agreement to devise the property back to the plaintiff by will. (Ibid.) The court held the second lawsuit was barred by res judicata. (Id. at p. 659.) Steiner is distinguishable from the matter before us, because in Steiner the earlier fraudulent inducement claim and the subsequent breach of contract claim were brought against the same party. Here, Electran was first sued for breach of contract, and Herron was later sued for fraudulent concealment. As established in the Meyer I arbitration, Electran and Herron are not the same.
Herron also argues that both Meyer I and Meyer II were based on the allegation that the website was not timely or properly developed, arose simultaneously and from the same transaction, and were supported by the same evidence. For several reasons, his observations do not compel reversal. First, Herron’s analysis is faulty, because he attempts to compare the causes of action against Electran in Meyer I with the causes of action against Herron in Meyer II. Second, even if we looked at the respective lawsuits in their entirety, rather than the claims against Herron only, the two lawsuits were not based on the same allegations or supported by identical evidence: allegations and evidence of a breach of contract (and alter ego liability for that breach) are not the same as the allegations and evidence necessary to establish fraudulent inducement of the contract. Third, as we have stated, it has long been established that a cause of action is determined under California law based on the primary right theory, not solely on whether the claim arises from the same transaction or occurrence or involves overlapping facts and evidence. (Federation, supra, 126 Cal.App.4th at p. 1203 [“The California Supreme Court has rejected the transactional theory of res judicata.”].) The current causes of action against Herron do not pertain to the same primary right as the cause of action adjudicated against him previously, and the judgment in Meyer I is not res judicata of the claims against Herron in Meyer II.
III. Disposition
The judgment is affirmed.
We concur. JONES, P. J., GEMELLO, J.