Case Number: BC496292    Hearing Date: November 07, 2014    Dept: A

Morillo Construction v City of Pasadena

MOTION FOR SUMMARY JUDGMENT

Calendar: 1
Case No: BC496292
Date: 11/7/14

MP: Defendant, City of Pasadena
RP: Plaintiff, Morillo Construction, Inc.

RELIEF REQUESTED:
Summary Judgment on Complaint.

ALLEGATIONS IN COMPLAINT:
The Plaintiff entered into a contract with the Defendant under which the Plaintiff was hired as a general contractor on a public works construction project. The Defendant breached the agreement by failing to make progress payments and by failing to deal with the Plaintiff in good faith. The last payment made by the Defendant was received on January 20, 2012. The Plaintiff presented its claim on September 17, 2012. When the Defendant did not respond, the Plaintiff commenced this civil claim.

CAUSES OF ACTION IN COMPLAINT
1) Breach of Contract
2) Recovery of Statutory Penalties

DISCUSSION:
Trial is set for March 9, 2015.

This hearing concerns the Defendant’s motion for summary judgment of the Complaint. Under CCP section 437c, the Defendant has the burden of demonstrating that an essential element cannot be established or that an affirmative defense bars the claims in the Complaint. The Defendant argues that the affirmative defenses of the statute of limitations and res judicata bar the claims in the Plaintiff’s Complaint.

1. Statute of Limitations
The Defendant argues that the statute of limitations bars the Plaintiff’s Complaint because the underlying government claim was not filed within one year after the cause of action began to accrue. Under Government Code section 945.4, no suit for money or damages may be brought against a public entity until a written claim has been presented to the public entity. Government Code section 911.2 requires that a claim relating to a breach of contract must be submitted within one year. The statute that identifies the one year time period for presenting a claim is Government Code section 911.2.
A review of the Defendant’s answer filed on May 20, 2013 reveals that it pleaded the statute of limitations in its twenty-first affirmative defense. It did not plead that Government Code section 911.2 bars the Complaint.
However, the problem is that the Defendant is attempting to apply section 911.2 to assert that the statute of limitations bars the Complaint. The failure to file a timely claim under Government Code section 911.2 does not constitute an affirmative defense for the public entity. Wood v. Riverside General Hospital (1994) 25 Cal. App. 4th 1113, 1119. The timely filing of a claim is an essential element of a cause of action against a public entity and failure to allege compliance renders the complaint subject to general demurrer. Id. A public defendant therefore need not plead lack of compliance with the claims statute, and a failure to so plead does not constitute a waiver. Id.
Accordingly, the Defendant is not seeking summary judgment based on the affirmative defense of statute of limitations. Instead, it is seeking summary judgment on the ground that the Plaintiff cannot establish an essential element of its cause of action, i.e., that the Plaintiff timely filed a claim against the Defendant. Accordingly, the Defendant’s motion cannot be granted on the basis of the affirmative defense that the statute of limitations.

The Defendant presents evidence that the Plaintiff’s cause of action for breach of contract began to accrue on March 24, 2011 because this is when the Defendant sent a letter to the Plaintiff that the City had made a final determination of the amount due on the contract, which was $12,783.873 (Separate Statement of Facts 6, see copy of letter in exhibit G to Wright decl.). Under CCP section 911.2, the Plaintiff would need to present a claim with the Defendant within one year, or by March 24, 2012. Since the Plaintiff alleges in paragraph 6 that it presented its claim on September 17, 2012, the Defendant’s evidence demonstrates that the Plaintiff cannot establish the essential element that it timely filed a claim against the Defendant.

A question of fact arises, however, because the Plaintiff presents evidence that it continued to perform work under the contract and that the Defendant continued to make payments to the Plaintiff under the contract after the March 24, 2011 date.
Under California law, when the defendant repudiates the contract, the plaintiff has an election of remedies: 1) the plaintiff may “treat the repudiation as an anticipatory breach and immediately seek damages for breach of contract, thereby terminating the contractual relation between the parties, or 2) the plaintiff can treat the repudiation as an empty threat, wait until the time for performance arrives and exercise the plaintiff’s remedies for actual breach if a breach does in fact occur at such time. Romano v. Rockwell Internat., Inc. (1996) 14 Cal. 4th 479, 489. In the event the plaintiff disregards the repudiation, the statute of limitations does not begin to run until the time set by the contract for performance. Id. Whether the breach is anticipatory or not, when there are ongoing contractual obligations the plaintiff may elect to rely on the contract despite a breach, and the statute of limitations does not begin to run until the plaintiff has elected to treat the breach as terminating the contract. Id.
The Plaintiff provides evidence that creates a question of fact whether the Plaintiff was electing to rely on the contract despite the Defendant’s March 24, 2011 letter. The Plaintiff’s President, Antoine Morillo, provides letters in exhibits B to F demonstrating that after the March 24, 2011 letter, the Plaintiff sought additional amounts for an elevator inspection and that the Defendant withheld payment of $57,487,50 on the ground that the Plaintiff had to perform repairs on a wall that was leaking water into a telecommunications room.
Further, in a letter dated August 24, 2011, there is evidence in paragraph two that the Defendant made a payment of $568,949.40 on April 19, 2011 and that this reduced the Plaintiff’s total claim amount under the contract (Feldman decl., exhibit B). In addition, there is evidence in the fourth paragraph of this letter of a further payment of $618,294.77.
Also, this letter indicates in paragraph 2 of page 2 that the Plaintiff has taken the position that the Defendant did not terminate the contract because the Defendant did not act in accordance with the contract requirements for termination and because the Plaintiff was instructed to continue its work.
There is further evidence of payments from the Defendant in the Defendant’s responses to the Plaintiff’s special interrogatories. Copies of the responses are in exhibit G to the declaration of the Plaintiff’s attorney, Mark Feldman. On page 33, at lines 12 to 15, there are facts indicating that the Defendant notified the Plaintiff on January 12, 2012 that it would be releasing $108,954.55 held as required by a Civil Wage and Penalty Assessment. On page 33, at lines 21 to 25, the Defendant on October 25, 2012 to release $57,487.50 that had been withheld for disputed/non-conforming work.

This review of the Plaintiff’s opposition reveals that the Plaintiff has evidence that it chose to rely on the contract by continuing to perform corrective work required under the contract and by continuing to await payment. Since there is evidence that the Plaintiff did repair work under the contract and that the Defendant made additional payments to the Plaintiff after March 24, 2011, there is evidence that creates a question of fact whether the accrual of the action began on March 24, 2011.

Therefore, the Defendant is not entitled to summary judgment on the ground that the affirmative defense of statute of limitations bars the claim or on the ground that the Plaintiff cannot establish that it presented a timely claim with the Defendant under Government Code section 911.2.

2. Res Judicata
The Defendant argues that the affirmative defense of res judicata also bars the Plaintiff’s Complaint. An affirmative defense based on the doctrine of res judicata must be specially pleaded or it is waived. Hulsey v. Koehler (1990) 218 Cal. App. 3d 1150, 1158.
A review of the Defendant’s answer and its thirty-one affirmative defenses reveals that the Defendant did not specially plead that the doctrine of res judicata bars the Plaintiff’s Complaint.
As noted above, since the pleadings delimit the issues, summary judgment cannot be granted or denied on grounds not raised by the pleadings. Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1663.
Here, the Defendant’s motion cannot be granted on the basis of the affirmative defense of res judicata because the Defendant did not specially plead this defense in its answer.

Further, even if the Defendant had specially pleaded the defense of res judicata, the Defendant is not entitled to summary judgment. The defense of res judicata applies when the following is shown:

1) the issue decided in the prior adjudication is identical with the one presented in the action in question;
2) there a final judgment on the merits; and
3) the party against whom the plea is asserted a party or in privity with a party to the prior adjudication.
Columbus Line, Inc. v. Gray Line Sight-Seeing Companies Associated, Inc. (1981) 120 Cal. App. 3d 622, 628.

The Defendant’s argument is based on a judgment of dismissal entered against Morillo Construction, Inc. on its Cross-Complaint in GC046088. Ordinarily a judgment of dismissal is not a judgment on the merits and therefore does not operate as a bar to another action on the same cause of action. Olwell v. Hopkins (1946) 28 Cal. 2d 147, 149. The Court must consider the basis of the dismissal. The following indicates that the dismissal was based on the statute of limitations, which is not an adjudication on the merits. Instead, termination of an action by a statute of limitations is deemed a technical or procedural, rather than a substantive, termination. Mid-Century Ins. Co. v. Superior Court (2006) 138 Cal. App. 4th 769, 776. The purpose served by dismissal on the statute of limitations is in no way dependent on nor reflective of the merits in the underlying action. Id.

When Morillo Construction, Inc. filed its Cross-Complaint, it did not name the City of Pasadena as a named Cross-Defendant. After it amended its Cross-Complaint to add the City of Pasadena as a DOE Defendant on October 20, 2011, the City of Pasadena filed a demurrer and argued that Morillo Construction, Inc. could not use the DOE Defendant statute, CCP section 474, because it had not been ignorant of the City of Pasadena’s identity. The trial court overruled the demurrer. The Court of Appeal issued a writ of mandate directing the trial court to reverse itself and to enter an order sustaining the demurrer without leave to amend. The trial court did so.
Morillo Construction, Inc. then sought reconsideration so that it could amend its Cross-Complaint. The trial court denied the motion and entered a judgment of dismissal.
Morillo Construction, Inc. filed an appeal. The Court of Appeal affirmed the trial court because Morillo Construction, Inc. had improperly attempted to use CCP section 474 to name the City of Pasadena after the statute of limitations had run (copy of opinion in exhibit K to the Defendant’s request for judicial notice).
This indicates that the basis for the judgment of dismissal was that the statute of limitations had run on its claim and that Morillo Constructions, Inc. could not circumvent the statute of limitations by amending its Cross-Complaint to add the City of Pasadena as a DOE Defendant. Since the basis for the judgment of dismissal was the statute of limitations, it was not an adjudication on the merits. Accordingly, the Defendant has not established the essential element in its affirmative defense of res judicata that there was a final judgment on the merits in the prior action.

Therefore, the Defendant is not entitled to summary judgment based on the affirmative defense of res judicata because the Defendant did not specially plead res judicata in its answer and because the Defendant has not established an essential element of its res judicata defense.

RULING:
Deny motion for summary judgment