IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)
July 12, 2011
MONTEREY BAY EQUITY CORPORATION, PLAINTIFF AND APPELLANT,
COMERICA BANK, DEFENDANT AND RESPONDENT.
(Super. Ct. No. 342000800017865CUBCGDS)
The opinion of the court was delivered by: Murray , J.
Monterey Bay Equity v. Comerica Bank CA3
NOT TO BE PUBLISHED
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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Plaintiff Monterey Bay Equity Corporation (MBEC), a general contractor, appeals from the grant of summary judgment in favor of defendant Comerica Bank (Comerica), a construction lender, on MBEC's complaint for damages arising out of the failure of a residential real estate development project. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
We begin with a broad overview of the case history, and then provide more detail in discussing the motion for summary judgment.
In May 2006, MBEC and Dominican Property Company, LLC (Dominican) contracted to build a residential development on a parcel of real property in Sacramento owned by Dominican. MBEC owns 10 percent of Dominican. In August 2006, after work had begun, Dominican obtained a construction loan from Comerica, in return for executing a promissory note and a construction deed of trust.
As a condition of granting the loan, Comerica demanded and obtained a completion guarantee from MBEC, which provided in part: "The Guarantor [MBEC] absolutely and unconditionally guarantees the punctual and complete performance when due of all present and future obligations of the Borrower [Dominican] under the [loan] Agreement to (a) construct and complete the Improvements in accordance with the requirements of the Agreement free and clear of all Lien Claims, (b) pay all costs and expenses relating to such construction, and (c) discharge all Lien Claims arising in connection with the Project or otherwise affecting any of the Collateral[.]" (Italics added.)
Under the terms of the loan agreement and promissory note, the loan became due and payable in September 2007, with the project still far from completion. In February 2008, Comerica determined that Dominican was in default.
On March 6, 2008, Comerica caused a Notice of Default and Election to Sell Under Deed of Trust to be recorded in Sacramento County. On May 6, 2008, MBEC recorded a Notice and Claim of Mechanic's Lien.
On August 1, 2008, MBEC filed a complaint for damages against Comerica.*fn1 MBEC's first amended complaint, filed September 9, 2008, alleged theories of liability (labeled "causes of action") including breach of contract, foreclosure on mechanic's lien, recovery on payment bond, common counts, and fraud and deceit. Because MBEC's opening brief on appeal discusses only the mechanic's lien claim, we focus only on that claim.
In its answer, filed October 31, 2008, Comerica alleged that MBEC waived its mechanic's lien claim by entering into the completion guarantee. Comerica simultaneously filed a cross-complaint for breach of the completion guarantee and declaratory relief.
After filing its answer and cross-complaint, Comerica moved for an order appointing a judicial referee, as provided for in the completion guarantee.*fn2 MBEC opposed the motion.
On March 9, 2009, the superior court granted Comerica's motion. On March 16, 2009, the court appointed the Honorable Fred K. Morrison, retired Associate Justice, as judicial referee to hear and determine all issues between the parties.
On April 30, 2009, the referee issued the following scheduling order: (1) document exchanges in response to production requests previously propounded and service of written responses to the requests were to be completed by May 22, 2009, (2) MBEC was to tender its "person most knowledgeable" for deposition by June 30, 2009, (3) a case management conference would be held on July 15, 2009, (4) dispositive motions were to be heard on or before August 24, 2009, and (5) the discovery cut-off date was September 28, 2009. Comerica proposed this order during a telephonic scheduling conference, at which MBEC, though duly notified, did not appear. On July 6, 2009, MBEC filed a motion in the superior court for expedited proceedings for a judicial determination of liability pursuant to Civil Code section 3260.2.*fn3 The record does not show the disposition of this motion, and MBEC does not raise any appellate claim of error regarding it.
Summary Judgment Proceedings
On July 28, 2009, Comerica filed a motion for summary judgment or summary adjudication as to the amended complaint and summary adjudication of issues on its cross-complaint. Comerica again asserted that MBEC had waived its mechanic's lien claim by binding itself in the completion guarantee to "construct and complete the Improvements 'free and clear of all Lien Claims.'" Comerica's motion included a voluminous separate statement of undisputed facts.
MBEC's opposition to the motion, filed on or about August 10, 2009, included legal arguments and exhibits, but no responsive separate statement.
MBEC asserted that the completion guarantee provision at issue was insufficient to defeat its mechanic's lien claim for two reasons: (1) Its purported waiver of the right to enforce a mechanic's lien, which is guaranteed by the California Constitution, was void as against public policy, and (2) It violated section 3262, which provides in part, "(a) Neither the owner nor original contractor by any term of a contract, or otherwise, shall waive, affect, or impair the claims and liens of other persons . . . except by their written consent, and any term of the contract to that effect shall be null and void. Any written consent given by any claimant pursuant to this subdivision shall be null, void, and unenforceable unless and until the claimant executes and delivers a waiver and release" which "follows substantially one of the forms set forth in this section." (Italics added.)
MBEC's points and authorities included a request for continuance. MBEC stated it had not yet deposed Comerica's "person(s) most knowledgeable" and "should be afforded the right" to do so. MBEC further stated it "expect[ed] to notice the depositions of the persons most knowledgeable . . . the week of August 17th, 2009 after conferring with opposing counsel for acceptable dates."
In support of the request, William Hemmer, president of MBEC, declared: "[T]o date [MBEC] has not deposed the person(s) most knowledgeable at Comerica." "[T]he Judicial Referee has determined September 28th, 2009 as the discovery Cut-Off Date. [¶] [A]s President of [MBEC] I believe that discovery must be completed as a necessary requirement to authenticate the documents that will undeniably support the fact that there are triable issues of fact that should be heard at trial." Hemmer did not explain why these depositions had not yet been taken, what documents needed authentication, or what triable issues of fact the authenticated documents would "support."
Comerica pointed out that MBEC's failure to submit a separate statement left all facts alleged in Comerica's separate statement undisputed.*fn4 Comerica also asserted that MBEC's request for continuance of the summary judgment motion did not comply with subdivision (h) of Code of Civil Procedure section 437c.
The Referee's Orders
On August 28, 2009, the referee granted summary judgment in favor of Comerica on the amended complaint and summary adjudication of issues on Comerica's cross-complaint. The referee denied MBEC's continuance request "for failure to comply with the requirements of [Code of Civil Procedure section] 437c[, subdivision] (h)."*fn5 Thereafter, Comerica dismissed its cross-complaint without prejudice.
The referee made the following findings of fact, based on the undisputed facts presented by Comerica:
"In November 2005, MBEC and Dominican entered into a Memorandum of Understanding for the Project[, under which] MBEC agreed to act as general contractor and [to] 'execute a construction completion guarantee agreement as required by the project lender.'
"On or about August 14, 2006, Dominican entered into a Building Loan Agreement (the 'Loan Agreement') with Comerica [to] financ[e] the Project. Concurrently, Dominican made a Promissory Note in the amount of $6,030,000 in favor of Comerica; executed a Construction Deed of Trust . . . dated August 14, 2006, and recorded September 28, 2006 . . . in the Official Records of Sacramento County; executed an Environmental Indemnity, dated August 14, 2006; and executed an Assignment of Architect Agreement And Consent, dated August 14, 2006. [Officers of Dominican] also executed personal guarantees in favor of Comerica, each dated August 14, 2006. Gregory A. Fowler, Trustee of the Gregory A. Fowler Living Trust, who had an existing deed of trust on the subject property, executed a Subordination Agreement with Comerica and Dominican, pursuant to which his deed of trust was subordinated to Comerica's deed of trust.
"On or about August 14, 2006, Mr. Hemmer . . . executed the Completion Guarantee on behalf of MBEC. The Completion Guarantee recites that, subject to the terms of a Building Loan Agreement between Comerica and Dominican, Comerica has agreed to make a loan to Dominican in the amount of $6,030,000 to finance the Project, and that the Completion Guarantee was made and agreed to by MBEC '[t]o induce the Bank to make the Loan.' At Section 1 of the Completion Guarantee, MBEC 'absolutely and unconditionally guarantees the punctual and complete performance when due of all present and future obligations of the Borrower [Dominican] under the [Building Loan] Agreement to (a) construct and complete the Improvements in accordance with the requirements of the Agreement free and clear of all Lien Claims, (b) pay all costs and expenses relating to such construction, and (c) discharge all Lien Claims arising in connection with the project or otherwise affecting any of the Collateral . . .[ .]' [Fn. omitted.]
"MBEC agreed to indemnify Comerica from and against, and pay on demand, any and all losses, liabilities, damages, costs, expenses and charges suffered or incurred by Comerica as a result of any failure of Dominican to pay and perform any Guaranteed Obligations in accordance with the terms of the Guaranteed Obligations, as well as, pay to Comerica on demand all costs, expenses and charges of Comerica in connection with the enforcement of the Guarantee, including reasonable attorney's fees and expenses. MBEC also agreed that no supplement to, modification or amendment of any provision of the Guarantee shall be effective unless in writing and signed by Comerica.
"MBEC also executed a written Assignment of Construction Contract and Consent agreement (the 'Consent') on August 14, 2006, pursuant to which MBEC and Dominican assigned to Comerica the May 1, 2006 Construction Contract as additional collateral for the Loan.
"MBEC did not enter into any written agreements with Comerica other than the Completion Guarantee and Consent.
"[¶] . . . [¶]
"In March 2007, Comerica determined that the Project Costs exceeded or could reasonably be expected to exceed . . . Dominican's Line Item Budget and that the undisbursed portion of the Loan was insufficient to pay all Project Costs. As authorized by the Loan Agreement, Comerica notified Dominican [on] March 19, 2007 that further loan disbursements would not be made until Dominican deposited funds with Comerica to cover the shortfall. Dominican never deposited those funds.
"Pursuant to the terms of the Loan Agreement and Promissory Note, on September 27, 2007, the Loan matured and became due and payable. Both because of the shortfall described in the March 19, 2007 letter and the loan maturity, Dominican was not eligible to receive loan disbursements. Comerica and Dominican engaged in negotiations about the possibility of extending the Loan and allowing additional loan disbursements[;] however[,] Dominican was not eligible to receive disbursements unless and until Comerica and Dominican reached an agreement allowing them. Between August and November 2007, Comerica advised MBEC that Dominican was 'working through their loan doc [sic] restructuring with Comerica.' [However, this restructuring did not occur.]
"On November 30, 2007, Hemmer met with representatives of Comerica, Mr. Lardner . . . , Mr. Barclay . . . and Ms. Kirchoff . . . (telephonically), regarding possible payment of the contractors for services previously rendered in connection with the Project. . . . [This meeting did not resolve that issue.]
"On December 7, 2007, MBEC filed a Mechanic's Lien in the amount of $587,522.48 and sent a Stop Notice to Dominican and Comerica. Because the Stop Notice was unbonded, Lardner sent Hemmer a letter stating that Comerica would not withhold funds unless the Stop Notice was accompanied by a bond, as required by . . . [section] 3162.[*fn6 ] At or around this time, Hemmer contacted Kirchoff to inquire as to the status of the Dominican Loan. Hemmer claims that Kirchoff told him that Comerica was still 'working on the loan with Dominican.'
"On December 19, 2007, Mr. Wiese . . . , on behalf of Dominican, sent Hemmer an e-mail message [stating that Comerica could not legally extend its loan without a secondary loan extension from Fowler, which it did not wish to grant.]
"On December 20, 2007, Wiese [e-mailed] Hemmer, [stating that the legal issues with funding further loan draws would not be resolved before the end of the year.]
"MBEC was thus aware in December 2007 that . . . issues between Comerica and Dominican . . . needed to be worked out prior to any further loan disbursement. Comerica and Dominican never reached agreement for the disbursement of additional funds.
"On February 4, 2008, Comerica sent a Notice of Default and Demand for Payoff to Dominican and MBEC requesting immediate payment of the principal balance and interest, totaling $3,796,275.26. On March 6, 2008, Comerica caused a Notice of Default and Election to Sell Under Deed of Trust . . . to be recorded in the Official Records of Sacramento County. . . . On May 6, 2008, MBEC filed a Notice of Claim and Mechanic's Lien in the amount of $821,693.71.
"Comerica made demand to MBEC to discharge all mechanic['s] liens and otherwise perform its obligations under the Completion Guarantee. MBEC has failed and refused to pay all costs relating to construction of the Project and discharge all lien claims arising in connection with the project, as required by the Completion Guarantee."
In his conclusions of law, the referee found MBEC had not established a triable issue of material fact as to any cause of action. With respect to MBEC's mechanic's lien claim, the referee found:
"MBEC's Second Cause of Action for foreclosure of its mechanic['s] lien fails . . . because MBEC waived any right to assert any mechanic['s] lien by, among other things, promising in the Completion Guarantee to construct and complete the Improvements 'free and clear of all Lien Claims.' Such a waiver is valid and enforceable. Santa Clara Land Title v. Nowack & Assoc. (1991) 226 Cal.App.3d 1558. Under . . . section 3268, parties may waive or release the benefits of the mechanic['s] lien laws unless otherwise prohibited by statute or public policy. Id. at 1566, 1568; see also, Aetna Cas. & Sur. Co. v. United States (Ct. Cl. 1981) 655 F.2d 1047, 1058-1059.)"
MBEC's Motion for Reconsideration
On September 21, 2009, MBEC requested reconsideration of the referee's ruling as to the mechanic's lien claim. On October 5, 2009, the referee denied MBEC's request.
The Referee's Statement of Decision and Several Judgment
On October 5, 2009, the referee entered a statement of decision which stated that Comerica had dismissed its cross-complaint without prejudice and ordered, adjudged and decreed that Comerica was the prevailing party. Simultaneously, the referee entered the statement of decision as the several judgment of the superior court. (Code Civ. Proc., § 644, subd. (a); see id. at § 579.)
I. Standard of review
A defendant moving for summary judgment must show that the plaintiff cannot establish one or more elements of its cause of action or cannot refute an affirmative defense established by the defendant. (Code Civ. Proc., § 437c, subd. (o).) "From commencement to conclusion, the moving party bears the burden of persuasion that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law. There is a genuine issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 845, fn. omitted.)
Once the defendant has met the burden of production on summary judgment, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to a cause of action or a defense. The plaintiff may not do this by resting on the allegations of his complaint, but must set forth the specific facts showing that such a triable issue exists. (Parsons v. Crown Disposal Co. (1997) 15 Cal.4th 456, 464 & fn. 4.)
"In opposing a defendant's motion for summary judgment, the plaintiff must submit a separate statement setting forth the specific facts showing that a triable issue of material fact exists. [Citations.] Without a separate statement of undisputed facts with references to supporting evidence in the form of affidavits or declarations, it is impossible for the plaintiff to demonstrate the existence of disputed facts. [Citation.] When a fact upon which plaintiff relies is not mentioned in the separate statement, it is irrelevant that such fact might be buried in the mound of paperwork filed with the trial court; the court does not have the burden to conduct a search for facts that counsel failed to bring out. [Citation.]" (Lewis v. County of Sacramento (2001) 93 Cal.App.4th 107, 116 (Lewis).)
Our review is de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.) "But this de novo review does not obligate us to cull the record for the benefit of the appellant in order to attempt to uncover the requisite triable issues. As with an appeal from any judgment, it is the appellant's responsibility to affirmatively demonstrate error and, therefore, to point out the triable issues the appellant claims are present by citation to the record and any supporting authority. In other words, review is limited to issues which have been adequately raised and briefed. [Citations.]" (Lewis, supra, 93 Cal.App.4th at p. 116.)
II. The Mechanic's Lien
As it did in the trial court, MBEC contends that its agreement to complete performance "free and clear of all [l]ien [c]laims" and to "discharge all [l]ien [c]laims arising in connection with the [p]roject" is void for two reasons: (1) This provision violates public policy because it purports to waive a constitutionally guaranteed right and (2) It also violates a statutory bar on waiver or impairment of mechanic's liens (§ 3262). We are not persuaded.
The mechanic's lien is constitutionally protected. (Cal. Const., art. XIV, § 3.) However, a party to a construction contract may waive any right provided by construction law for his or her benefit, and the Legislature has not excepted constitutionally protected rights from this waiver rule. (§ 3268;*fn7 Santa Clara Land Title Co. v. Nowack & Associates, Inc. (1991) 226 Cal.App.3d 1558, 1566 (Nowack).) The court in Nowack specifically held that section 3268 permits the contractor to waive or release his own claim, when doing so does not affect or impair the claims or liens of other laborers or subcontractors. (Nowack, supra, 226 Cal.App.3d at pp. 1566, 1568.) MBEC cites no contrary authority. If MBEC means to argue that the waiver of a constitutionally protected right ipso facto violates public policy, that argument must fail. As this court has said, duly enacted statutes codify public policy. (In re Mark B. (2007) 149 Cal.App.4th 61, 79.)
MBEC's argument based on section 3262 is equally unavailing. Section 3262 bars owners and general contractors from waiving or impairing the mechanic's liens of subcontractors and materialmen, but does not bar general contractors from waiving their own mechanic's liens if doing so does not impair or affect others' rights. (Nowack, supra, 226 Cal.App.3d at p. 1568.) MBEC was both a part owner of Dominican and the general contractor for the project. As Nowack was empowered to release its own lien rights, so too is MBEC. Indeed, as in Nowack, the release was necessary to induce funding for the loan and that funding would not have been forthcoming without the contractor's release of lien.
Nothing in the completion guarantee here violates section 3262. The provision at issue does not bar subcontractors and materialmen on the project from filing mechanic's lien claims; it speaks only to MBEC. If MBEC means to argue that the provision indirectly impaired or affected others' rights because subcontractors and materialmen could recover on their mechanic's lien claims only if MBEC could recover on its own claim, it has cited no authority to support this premise. Moreover, as we previously noted, MBEC offered no separate statement of facts in opposition to the motion for summary judgment and summary adjudication. And MBEC cites no facts in Comerica's separate statement that support this theory. Thus, its attempt to distinguish Nowack on the ground that the court there found the appellant's waiver of its mechanic's lien did not impair others' rights, is unsuccessful. Given the undisputed facts in the record, we must make the same finding here.
Lastly, MBEC asserts that the completion guarantee is invalid because its waiver does not follow any of the standard forms set out in section 3262. As we have noted, MBEC was both a part owner and a general contractor, not a subcontractor or materialman. Since the completion guarantee releases only MBEC's lien, the forms required by section 3262 do not apply.
MBEC's remaining arguments in its opening brief likewise fail to show any error.
MBEC asserts that, "Comerica['s] . . . form construction loan agreement failed to incorporate California statutes that resulted in their [sic] loss of priority." Under this heading, MBEC argues: (1) mechanic's liens in general have priority over construction deeds of trust (§§ 3112, 3137), (2) Comerica did not procure and record a payment bond in an amount not less than 50 percent of the principal of its deed of trust, which would have given the deed priority (§ 3139), (3) therefore, MBEC's mechanic's lien retained priority over Comerica's deed of trust. However, since MBEC validly waived its mechanic's lien claim by entering into the completion guarantee, general rules on the priority of mechanic's liens over construction deeds of trust are immaterial.
MBEC also asserts that, "All liens share in priority when a single lump sum contract is used to construct the works of improvement." This abstract legal proposition is also immaterial given the waiver.
Finally, MBEC asserts, "The right to stop work is protected by statute ([section] 3260.2) and public policy."*fn8 Under this heading, MBEC argues (as best we can make out): (1) section 3260.2, subdivision (e), provides that "[i]t shall be against public policy to waive the provisions of this section in any written contract for private work of improvement"; (2) MBEC was not paid for all work done and posted notice in accordance with section 3260.2; (3) however, the completion guarantee required MBEC "to construct the project without payment"; (4) therefore, the completion guarantee unlawfully required MBEC to waive the provisions of section 3260.2. This argument fails because MBEC does not explain how the completion guarantee's waiver of mechanic's liens barred MBEC from invoking its remedies for nonpayment under section 3260.2. In fact, as noted above, MBEC filed a motion for an "expedited proceeding" under this provision -- but over a year after it purportedly filed its 10-day stop notice, and after the entire matter had already been assigned to the judicial referee.
III. Issues Raised for the First Time in MBEC's Reply Brief
Although MBEC discusses only the mechanic's lien claim in its opening brief, it attempts to raise other issues in its reply brief.*fn9 MBEC belatedly asserts in its reply brief: (1) "The completion guarantee became void when the terms were materially changed without MBEC's knowledge or consent," (2) "[t]he summary judgment motion heard and ruled upon on August 21, 2009 was premature," and (3) "[a]n offer to complete exonerates the surety of their [sic] guaranteed obligations." For the reasons that follow, we will not address those issues.
It is unfair to the respondent for an appellant to raise issues for the first time in the reply brief unless good cause is shown for not raising them in the opening brief, and appellate courts will not consider such issues. (Hibernia Savings and Loan Society v. Farnham (1908) 153 Cal. 578, 584-585; Taylor v. Roseville Toyota, Inc. (2006) 138 Cal.App.4th 994, 1001, fn. 2, 3d par. (Taylor); Reichardt v. Hoffman (1997) 52 Cal.App.4th 754, 764-765.) MBEC has not attempted to show good cause for its failure to include these new issues in its opening brief. Therefore, we refuse to consider them.*fn10
Nor will we consider any theory of liability raised by MBEC before the referee other than its claim for foreclosure on mechanic's lien, because that is the only claim argued in its opening brief. Although MBEC asserts in its reply brief that it has not "waived" its other causes of action, it is settled that unless good cause is shown to raise an issue first in the reply brief, an issue not raised and briefed in the opening brief is deemed forfeited. (Taylor, supra, 138 Cal.App.4th at p. 1001, fn. 2, 3d par.)
During oral argument, MBEC argued for the first time that the referee abused his discretion by not continuing the motion for summary judgment so MBEC could complete discovery. We need not address that argument either. Nevertheless, we observe that MBEC was not present at the scheduling conference. After the conference, the referee ordered, among other things, that dispositive motions were to be heard on or before August 24, 2009, and the discovery cut-off date was September 28, 2009. MBEC did not object to the schedule. Nor did MBEC make a formal motion for continuance under Code of Civil Procedure section 437c, subdivision (h), prior to filing its opposition to the summary judgment motion. Nor, as MBEC concedes, did it ever notice the depositions. MBEC asserted at oral argument that it relied on the discovery cut-off date, but it is clear that dispositive motions were scheduled before the cut-off date. The need to have facts establishing triable issues could not have been a surprise to MBEC.
Finally, the showing MBEC made for continuance in its argument in opposition to the summary judgment motion was inadequate. As we have noted, the declaration by Hemmer supporting the request did not explain why the depositions MBEC "expected" to take had not yet been taken, what documents needed authentication, or what triable issues of fact the authenticated documents would support. As this court has previously noted, a party seeking a continuance of a summary judgment motion to engage in discovery must show "(1) the facts to be obtained are essential to opposing the motion; (2) there is reason to believe such facts may exist; and (3) the reasons why additional time is needed to obtain these facts." (Ace American Ins. Co. v. Walker (2004) 121 Cal.App.4th 1017, 1023.) We apply an abuse of discretion standard of review to the denial of a continuance under Code of Civil Procedure section 437c, subdivision (h). (Ibid.) Under the circumstances of this case, the referee acted well within his discretion in denying the request for a continuance.
The judgment is affirmed. Comerica shall receive its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)
BLEASE , Acting P.J.