Petitioning Activity Can Be the Essence of a Contract

Anti-SLAPP Motion Fails When Plaintiff Makes a Showing That the Petitioning Activity Was a Breach of Contract

Midland Pacific Building Corp. v. King (11/28/07, 2d Civil No. B192017, Second Dist.)
12 p. opinion
Rehearing Opinion

157 Cal.App.4th 264

A developer brought suit against a landowner for breach of contract and fraud. The contract had provided that the landowner would obtain City approval of a draft tract map.

After the landowner presented a different, higher density tract map for approval at a planning commission hearing, the developer sued for breach of contract and fraud. The landowner brought an anti-SLAPP motion, arguing the suit was brought in response to the landowner's statements at an official proceeding in furtherance of his right of petition and free speech.

The Court of Appeal found that the breach of contract cause of action arose out of the petitioning activity. Indeed, the petitioning activity was the primary obligation of the landowner under the contract. However, it also found that the developer had shown a probability of prevailing.

The fraud cause of action was based upon private communications between the parties and therefore not based upon protected activity.

The anti-SLAPP motion had been correctly denied.

Presiding Justice Gilbert wrote the opinion. Justices Yegan and Coffee concurred.

Sad Song

Illegal and Legal Provisions of a Contract Are Too Intertwined to Sever

Chiba v. Greenwald (Oct. 16, 2007, B193173, Second Dist.)
23 p. opinion (11 p. majority, 12 p. dissent)

This case stands out primarily because it concerns the estate of singer-songwriter Elliott Smith. While never a major commercial success he had, and despite his death on Oct. 21, 2003, continues to have, a devoted fan base. Outside of the world of indie music, he is probably best know for his Oscar-nominated song Miss Misery from the movie Good Will Hunting.

In this action Smith's live-in girlfriend sued the administrator of his estate for breach of an oral contract containing a provision that she would manage his music career in exchange for a 15% commission, and a Marvin agreement to provide household services in exchange for support. The provision that she would manage his career in exchange for compensation was illegal because the plaintiff was not a licensed talent agent as required by the Talent Agencies Act. (Labor Code section 1700 et seq.)

The question then became whether the legal Marvin agreement could be severed from the illegal management provision. The trial court concluded that the provisions were too intertwined to be severed and therefore the entire contract was void. A majority of the Court of Appeal agreed. Justice Johnson dissented, arguing that the complaint clearly alleged two separate promises made for two separate considerations.

Justice Zelon wrote the opinion. Justice Woods concurred. Acting Presiding Judge Johnson wrote a dissenting opinion.

Right to Contractual Attorney Fees is Independent of Cost Award

An Appellate Court's Order that Each Side Was to Bear Their Own Costs on Appeal Had No Effect Upon the Right to Contractual Attorney Fees

Butler-Ripp v. Lourdeaux (Aug. 28, 2007, A114667, First District, Division One)
11 p. opinion

This action began as a commercial lease dispute between the appellants, Rosanna and Wallace Lourdeaux, and the respondents, Lili Butler-Rupp and Lili Butler-Rupp Studio, Inc. In a previous appeal this Court of Appeal affirmed an award of contract damages to the respondents and stated that the parties would bear their own costs on appeal.

The lease that was the subject of the contract dispute contained an attorney fee provision. After the first appeal, the respondents brought a successful motion in the trial court for an award of the attorney fees they incurred for the first appeal. The appellant brought this second appeal arguing that the trial court lacked jurisdiction to award the appellate attorney fees because the appellate court had ordered each side to bear their own costs on appeal.

Under contractual attorney fee provisions the party who prevails on the contract portion of a mixed action is entitled to attorney fees. Awards of costs on appeal are authorized by costs statutes. A contractual right to attorney fees is completely independent of any costs statute. The appellate court's order concerning the costs of appeal had no effect upon respondents' right to contractual attorney fees. The trial court retained jurisdiction to determine the prevailing party under the contract and to make an award of all attorney fees, whether incurred during the trial or on appeal, based upon that determination.
Justice Swager wrote the opinion. Acting Presiding Justice Stein and Justice Margulies concurred.

An Excess Judgment Can Be Recovered as Damages in a Contract Action Based Upon a Breach of the Covenant of Good Faith in an Insurance Policy

The Statute of Limitations is Equitably Tolled During the Time Between Entry of a Judgment and the Date That it Becomes Final

Archdale v. American International Specialty Lines Insurance Co. (Aug. 22, 2007, B188432, Second Appellate District, Division Three)
Opinion on Rehearing
43 page opinion

There is extensive case law concerning tort liability for breach of the covenant of good faith and fair dealing in insurance contracts but considerably less about contract actions based upon breach of the covenant. Fewer plaintiffs elect to pursue a contract claim because a tort claim permits recovery of greater damages. Emotional distress damages, punitive damages and Brandt fee awards are available in tort claims but do not qualify as contract damages. This opinion discusses a contract cause of action based upon breach of the covenant.

In the underlying action a multi-vehicle collision led to a lawsuit by the Archdales (the appellants here) against the driver of the truck that caused the accident and his employer. American International Specialty Lines Insurance Company (AIS), the company's insurer provided a defense and apparently acknowledged coverage. The policy limits were $500,000. Before trial the Archdales offered to settle for policy limits but AIS rejected the settlement offer. The trial resulted in a judgment of $1,292,495 in favor of the Archdales. After it rejected the Archdales settlement offer, AIS settled with another claimant from the same accident for $142,500. Following an unsuccessful appeal of the underlying judgment, AIS paid the Archdales the $357,500 remaining on the policy.

In this action the Archdales pursued the truck driver's contract causes of action against AIS (breach of express policy provisions and breach of the implied covenant) which had been assigned to them by the truck driver. The truck driver himself pursued his unassignable purely personal tort claim for emotional distress.

Statute of Limitations, Equitable Tolling and Assignment
The trial court granted AIS summary judgment based upon the statute of limitations because the judgment in the underlying action had been entered on May 3, 1999 and this action was filed on Sept. 12, 2003.

The Court of Appeal upheld the summary judgment against the truck driver because the two year statute on his tort action had run before this action was filed. However, the court concluded that the Archdales' contract claims were timely because the statute of limitations had been equitably tolled between the May 3, 1999 entry of the judgment and Nov. 27, 2001, when the judgment became final after remittur issued following the appeal.

There was evidence that although the Archdales' Sept. 12, 2003 complaint was based upon the assignment to them of the truck driver's contract claims, those claims were not actually assigned to them until Sept., 2004. However, the four year limitations period still had not run by Sept., 2004 which meant that the retroactive assignment did not prejudice AIS and therefore it was not barred by Civil Code section 2313.

Contract Action for Breach of the Covenant of Good Faith and Fair Dealing
The Court found that the Archdales' cause of action for breach of an express contract provision failed because there were no allegations of such a breach. AIS had provided a defense and had paid out the policy limits. The cause of action for breach of the implied covenant, however, stated a valid cause of action.

An insurer's failure to accept a reasonable settlement offer to resolve a third party claim against its insured constitutes a breach of the covenant of good faith and fair dealing. If the failure to settle leads to an excess judgment, that excess judgment is a consequential of the breach within the meaning of Civil Code 3300 and therefore is recoverable in a contract action.

An insurer has a duty to accept a reasonable offer to settle a claim against its insured. The Court quoted the following language from Johansen v. California State Auto. Assn. Inter-Ins Bureau (1975) 15 Cal.3d 9, 16 as the standard for determining if a settlement offer is reasonable: "the only permissible consideration in evaluating the reasonableness of the settlement offer becomes whether, in light of the victim's injuries and the probable liability of the insured, the ultimate judgment is likely to exceed the amount of the settlement offer. Such factors as [1] the limits imposed by the policy, [2] a desire to reduce the amount of future settlements, or [3] a belief that the policy does not provide coverage should not affect a decision as to whether the settlement offer in question is a reasonable one."
Justice Croskey wrote the opinion. Presiding Justice Klein and Justice Kitching concurred.

Comment: The Court here was dealing with a summary judgment based upon a statute of limitations defense. The merits of the contract action had not been litigated. The issue of the reasonableness (and the associated evidence) of the Archdales' settlement offer was not before it. In footnote 23 the Court noted the existence of case law stating that the size of the judgment furnishes an inference of the value of the claim. A question not before the court, but perhaps on the minds of practitioners, is how to ensure that an insurance company fulfills its good faith duty to its insured when there are multiple claimants, as there were here after the multi-vehicle collision? Even if a claimant's damages indisputably exceed the policy limits, can the insurance company pay the full policy amount when there are other claims? That leaves the insured exposed for the complete amount of those other claims, a very serious situation for the insured if those claims are also substantial. In addition, once the policy limits have been paid there is no additional coverage and when there is no possibility of coverage can there be any duty to defend? These are questions that the trial court will may have to address during the trial of this action.