Filed 10/16/19 Harb v. Sene CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

CHARLES HARB et al.,

Plaintiffs and Appellants,

v.

DEREK SENE et al.,

Defendants and Respondents.

A153539

(San Francisco County

Super. Ct. No. CGC16555927)

Plaintiffs Charles Harb and the Charles Harb Revocable Living Trust appeal from the trial court’s order dismissing a second action against defendants Derek Sene and State Farm General Insurance Company (State Farm) without leave to amend. In a prior suit, Harb alleged that defendants were negligent in failing to provide appropriate insurance coverage for a renovation project that caused significant damage to his home. Harb’s action was barred by the statute of limitations and judgment against him was affirmed on appeal. (Harb v. Sene (June 30, 2016, A142044) [nonpub. opn.] (Harb I).) In the instant action, plaintiffs allege that defendants intentionally concealed the fact that Sene was not authorized to provide the type of insurance requested, and discovery of this fact tolled the statute of limitations. The trial court concluded the action is barred under the doctrines of res judicata and collateral estoppel and granted defendants’ motion for judgment on the pleadings. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

I. Prior Lawsuit

We summarize the background to the parties’ dispute as discussed in our prior opinion in Harb I, supra, A142044. In 2005, Harb purchased residential property located in Tiburon which consisted of two side-by-side housing units. Harb planned on renovating the duplex to convert the structure into a single family residence. He purchased a State Farm homeowners insurance policy for the property from his long-time insurance broker, Derek Sene. Harb claimed he told Sene’s office the renovation would entail partial demolition of the duplex and he wanted insurance for the risks associated with the demolition phase.

The partial demolition commenced in December 2006, while Harb was away from the Bay Area. During the renovations, his contractors exceeded the scope of their work, resulting in the complete demolition of the structure. After Harb returned to the Bay Area in January 2007, he called Sene’s office to ascertain if his insurance coverage would apply to the loss and to make a claim. He was informed that his insurance policy did not cover the damage caused by demolition work during the renovation. He did not file an insurance claim at that time.

Harb presented a claim to State Farm for the damage caused by the general contractor’s negligence in August 2009. He later confirmed he had not filed any claim with State Farm prior to retaining counsel in 2009. State Farm denied Harb’s claim as untimely. Harb sued Sene and State Farm in 2012, asserting that defendants were negligent in failing to procure a policy with coverage for the risks associated with the partial demolition of the structure. Defendants moved for summary judgment, however the trial court continued the motion to allow further discovery. In December 2013, Sene testified in deposition that he was not authorized to sell the kind of policy that would have covered the demolition activities on the property. On the basis of that testimony, Harb sought leave to amend his complaint. The trial court denied the application and heard defendants’ motion for summary judgment.

The trial court granted defendants’ motion on the ground that the two-year statute of limitations for Harb’s professional negligence claim had expired. We affirmed the judgment. (Harb I, supra, A142044.) In doing so, we rejected Harb’s contention that the statute of limitations did not accrue until December 2013 when Harb learned at Sene’s deposition that Sene could not have sold him the type of insurance he had requested. As we explained: “Plaintiff appears to suggest that Sene’s conduct amounted to a fraudulent concealment such as would toll the statute of limitations. We disagree. Whether plaintiff knew all the facts that could have supported an alternative legal theory is irrelevant. Once a plaintiff is aware of a cause of action, it is expected that further facts will ordinarily be revealed by investigation.” (Harb I, at p. *9.)

II. Current Lawsuit

In December 2016, plaintiffs filed the instant complaint, alleging causes of action for intentional and negligent misrepresentation and suppression of fact. The complaint recites essentially the same factual background as set forth above. It further alleges: “From 2005 until his deposition on December 18, 2013, SENE and his office failed to reveal and suppressed the fact that SENE was unable to provide the first party insurance against the risks involved in the partial demolition of the Property and its subsequent conversion from a duplex to a single family residence. The failure to disclose these facts was likely to mislead, and SENE never disclosed to plaintiff that due to the underwriting guidelines of STATE FARM that SENE had to follow as a captive agent, HARB could not obtain the requested insurance he had requested at the time of his acquisition of the Property.” The complaint further states: “The failure of defendants, SENE and STATE FARM, and each of them, to disclose and the suppression of the information herein alleged was done with the intent to induce plaintiff to act in the manner alleged herein, and in reliance thereon, namely, to place his insurance for the Property with SENE, not to seek insurance with agents other than SENE and insurance carriers, other than STATE FARM.”

Defendants moved for judgment on the pleadings under Code of Civil Procedure section 438, subdivision (c)(1)(B)(ii), asserting the complaint failed to state a cause of action because plaintiffs’ claims were barred by Harb I under the doctrines of res judicata and collateral estoppel, and were barred on their face by the statute of limitations. Plaintiffs argued in opposition that res judicata did not bar the present complaint because the prior action had not asserted claims for intentional and negligent misrepresentation or suppression of fact, and the statute of limitations did not accrue until Harb’s discovery that Sene could not have sold the type of insurance policy Harb had requested.

The trial court granted judgment on the pleadings without leave to amend. It held that the doctrines of res judicata and collateral estoppel barred all the claims asserted by plaintiffs because the same primary right at issue in the instant case was conclusively addressed in Harb I, namely, Sene’s wrongful failure to provide Harb with the requested insurance. This appeal followed.

DISCUSSION

I. Standard of Review

“Because a motion for judgment on the pleadings is similar to a general demurrer, the standard of review is the same. [Citation.] We treat the pleadings as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. When leave to amend is not given, we determine whether the complaint states a cause of action and whether the defect can reasonably be cured by amendment. If it can be cured, the trial court has committed reversible error. Otherwise, we affirm. The burden of proof is squarely on the plaintiff. [Citation.] The judgment of dismissal will be affirmed if it is proper on any grounds stated in the motion, whether or not the trial court relied on any of those grounds.” (Baughman v. State of California (1995) 38 Cal.App.4th 182, 187.) A trial court’s application of the res judicata doctrine is reviewed on appeal de novo. (City of Oakland v. Oakland Police & Fire Retirement System (2014) 224 Cal.App.4th 210, 228.)

II. The Complaint is Barred by Res Judicata and Collateral Estoppel

“ ‘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 privity with them. Collateral estoppel, or issue preclusion, ‘precludes relitigation of issues argued and decided in prior proceedings.’ ” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 896 (Mycogen).) “Under the doctrine of res judicata . . . a judgment for the defendant serves as a bar to further litigation of the same cause of action.” (Id. at pp. 896–897.) “Res judicata precludes piecemeal litigation caused by splitting a single cause of action or relitigating the same cause of action on a different legal theory.” (City of Simi Valley v. Superior Court (2003) 111 Cal.App.4th 1077, 1083.) “Claim preclusion arises if a second suit involves (1) the same cause of action (2) between the same parties (3) after a final judgment on the merits in the first suit.” (DKN Holdings LLC v. Faerber (2015) 61 Cal.4th 813, 824.)

“For purposes of identifying a cause of action under the doctrine of res judicata, ‘California has consistently applied the “primary rights” theory, under which the invasion of one primary right gives rise to a single cause of action.’ [Citation.] But ‘. . . the “cause of action” is based upon the harm suffered, as opposed to the particular theory asserted by the litigant. [Citation.] Even where there are multiple legal theories upon which recovery might be predicated, one injury gives rise to only one claim for relief.’ ” (Branson v. Sun-Diamond Growers (1994) 24 Cal.App.4th 327, 340–341.) “Under the primary rights theory . . ., ‘. . . a cause of action consists of 1) a primary right possessed by the plaintiff, 2) a corresponding primary duty devolving upon the defendant, and 3) a delict or wrong done by the defendant which consists in a breach of such primary right and duty. [Citation.] Thus, two actions constitute a single cause of action if they both affect the same primary right.’ ” (Id. at p. 341.)

Based on our review of the record and the operative pleadings, we conclude the instant suit is barred under the doctrine of res judicata. The present complaint contains nearly identical factual allegations to the complaint adjudicated in Harb I. At the heart of both lawsuits is Harb’s contention that he was injured by defendants’ failure to provide him with proper insurance coverage for the demolition work to his property. The issue was fully adjudicated in Harb I in favor of defendants based on Harb’s failure to commence his lawsuit within the applicable statute of limitations period. While plaintiffs now offer a different theory of recovery (fraud) from the negligence theory asserted in Harb I, both actions seek to vindicate the same primary right, namely, Harb’s asserted right to insurance coverage for the losses caused by the demolition.

Plaintiffs argue that the two actions are distinct because Harb I was based on a professional negligence theory and the instant action raises theories of fraud and misrepresentation and is based on plaintiffs’ discovery that Sene was not authorized to sell the type of insurance Harb had requested and failed to disclose that fact. Plaintiffs’ argument is unavailing. “[T]he determinative factor is the harm suffered” in a primary rights analysis, not the “legal theories upon which recovery might be predicated.” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 798; see Gillies v. JPMorgan Chase Bank, N.A. (2017) 7 Cal.App.5th 907, 914 [res judicata bars a claim based on the same injury litigated in a prior action even where the new action presents new legal theories of recovery].) That Sene failed to disclose he was unable to procure the requested policy is not a wrong separate and apart from the wrong caused by his actual failure to provide the requested coverage. Both asserted wrongs give rise to the same injury: losses sustained by the failure to provide insurance coverage.

Moreover, collateral estoppel bars the litigation of issues that were actually litigated in the prior proceeding. (Mycogen, supra, 28 Cal.4th at p. 896.) As discussed above, Harb advanced a similar fraudulent concealment theory on appeal in Harb I in discussing the trial court’s failure to allow amendment to his complaint. Plaintiff argued then that “Harb has a separate claim for material non-disclosure” arising from Sene’s allegedly fraudulent failure to disclose. We concluded that “regardless of whether Sene failed to inform plaintiff that his office could not have provided the appropriate policy, plaintiff knew by January 2007 that his loss was not covered. Plaintiff cannot plead around the statute of limitations using his belated discovery theory.” (Harb I, supra, A142044, at p. *10.) Plaintiffs may not relitigate issues that were conclusively adjudicated in our prior opinion.

Allied Fire Protection v. Diede Construction, Inc. (2005) 127 Cal.App.4th 150 does not support plaintiffs’ arguments. In Allied, the defendant contractor received damages from the United States Department of the Air Force when the Air Force caused a construction project to be delayed. The defendant agreed to pay the plaintiff subcontractor a portion of those damages, and the parties settled for $90,000. (Id. at p. 152.) The plaintiff later sued the defendant in federal court for breach of the subcontract, and in the course of discovery learned that the defendant had received more damages from the Air Force than it had previously disclosed. (Ibid.) The plaintiff brought a fraud action against the defendant in state court alleging the defendant had falsely represented the amount of delay damages it had received in order to induce the plaintiff to accept an inadequate settlement. (Id. at p. 153.) The trial court’s dismissal of the action on the basis of res judicata was reversed. The Court of Appeal held that res judicata is not a bar to a second action that is based on facts that arose or were discovered (and could only have been discovered) after the filing of the complaint in the first action. (Id. at p. 155.) Allied concerned the vindication of two separate rights—the right to be paid pursuant to a contract, and the separate right to be free from tortious misrepresentations when entering an agreement. (Id. at p. 153.) In this case, Harb’s discovery that Sene could not have provided the requested insurance did not give rise to a new wrong. Rather, this was simply a new fact that supported the claim that his insurance needs were mishandled. This fact, like the others alleged, sought redress of the same harm or primary right — the wrongful failure to cover the damages incurred during the demolition.

As a final matter, plaintiffs contend they should be allowed leave to amend their complaint to allege a violation of Business and Professions Code section 17200’s unfair and fraudulent prongs. It appears that the factual allegations underpinning a section 17200 claim would be indistinguishable from plaintiffs’ present allegations of fraudulent concealment and misrepresentation. Because we conclude that such claims are barred by res judicata, and the same issue was conclusively determined in Harb I, further amendment would be futile. (See Rakestraw v. California Physicians’ Service (2002) 81 Cal.App.4th 39, 43.)

DISPOSITION

The judgment is affirmed.

_________________________

Sanchez, J.

WE CONCUR:

_________________________

Humes, P. J.

_________________________

Margulies, J.

A153539 Harb et al. v. Sene et al.