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Thomas Medeiros v. George Hills Company

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)


January 14, 2013

THOMAS MEDEIROS, PLAINTIFF AND APPELLANT,
v.
GEORGE HILLS COMPANY, INC., DEFENDANT AND RESPONDENT.

(Super. Ct. No. 34-2010-00070076-CU-FR-GDS)

The opinion of the court was delivered by: Butz , Acting P. J.

Medeiros v. George Hills Co. 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NOT TO BE PUBLISHED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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

The trial court sustained a demurrer to the previous pleading of plaintiff Thomas Medeiros with leave to amend. It also granted a motion to strike the prayer for punitive damages without leave to amend. Medeiros then filed the present pleading, which again seeks damages for the alleged negligent or intentional misrepresentation of defendant George Hills Company, Inc. (GHC)--the claims adjuster for the City of Palo Alto (the City)--in its processing of his tort claim against the City for malicious prosecution, asserting GHC falsely informed him that his claim was untimely. The trial court again sustained the demurrer of GHC, finding GHC's assertion that the claim was not timely was true in light of the facts contained in the claim form, which had omitted the timely accrual date of Medeiros's cause of action. It denied leave to amend. Medeiros filed a timely notice of appeal from the ensuing judgment of dismissal.

Medeiros contends we must reverse the trial court's ruling, because it implicitly reflects a factual determination of the scienter of GHC in making the representation (which Medeiros had alleged was either intentionally false or not made with a reasonable belief in its truth because GHC's expertise in processing claims for public entities should have led it to the fact making the claim timely). With respect to the reasonability of GHC's belief that his claim was untimely, Medeiros also argues that GHC had an independent obligation to learn of the timely accrual date of his cause of action against the City for malicious prosecution, even though he failed to include this fact in his claim. Finally, Medeiros asserts that it was error to strike his prayer for punitive damages.*fn1 We shall reverse the judgment of dismissal in part.

FACTUAL AND PROCEDURAL BACKGROUND

We assume the truth of the well-pleaded factual averments in the pleading at issue. (Fogarty v. City of Chico (2007) 148 Cal.App.4th 537, 540.) We determine their legal sufficiency de novo. (Id. at p. 542.)

The pertinent allegations are few. GHC has its principal place of business in Sacramento County. It is a licensed insurance adjuster employing those with specialized training in claims against public entities. Among its clients is the City.

In January 2008, Medeiros filed a claim with the City on one of the City's standard claim forms.*fn2 GHC responded on behalf of the City on February 7, 2008, with a letter*fn3 that enclosed a Notice of Late Claim from the City.

Medeiros alleged that GHC made a false representation in telling him that his claim was untimely. The Court of Appeal, Sixth Appellate District, had reversed his judgment of conviction in whole on August 1, 2007, and issued its remittitur on October 2, 2007. (People v. Medeiros (Aug. 1, 2007, H028934) [nonpub. opn.].) Medeiros asserted his cause of action accordingly did not in fact accrue until the latter date, making his claim timely. (White v. Lieberman (2002) 103 Cal.App.4th 210, 217 ["in a reversal" the limitations period for malicious prosecution "first begins running on the issuance of the remittitur"].) However, he relied on the misrepresentation and did not further pursue his claim. This was justifiable because he had only a high school education, he believed GHC was an independent entity that would review his claim fully and fairly, and GHC had failed to include the admonition required by statute (Gov. Code, § 911.3, subd. (a))*fn4 in its letter or the Notice of Late Claim that he should seek the advice of counsel immediately. He stated alternate counts, which he inaccurately denominated "causes of action" (Cullen v. Corwin (2012) 206 Cal.App.4th 1074, 1076, fn. 1 [commenting on the distinction between the two]), of intentional and negligent misrepresentation, both of which are species of fraud (Oakland Raiders v. Oakland-Alameda County Coliseum, Inc. (2006) 144 Cal.App.4th 1175, 1184). In the former, he alleged GHC "knew at the time of making the representation[] . . . that [it was] false because of GHC's superior knowledge in the field of claims administration." In the latter, he asserted GHC "had no reasonable ground" for believing it true for the same reason.

In ruling on GHC's first demurrer, the trial court concluded that the January 2008 claim form on its face had failed to include any facts to show that the claim of false charges was timely, and therefore a representation that the claim was untimely "cannot be considered false." Citing the requirement of factual specificity for pleading an action for fraud (see 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 711, p. 127 (Witkin)), the trial court also ruled the complaint alleged the scienter element (id., §§ 726, 727, pp. 142-143) in too conclusory a manner. Because this was the first challenge to the adequacy of the pleading, the court granted leave to amend.

In the demurrer at issue, the trial court first ruled that the claim form had been the basis for the prior ruling, and therefore Medeiros could not simply omit it when amending his pleading. Instead, the court could properly consider it in conjunction with the present pleading. (Medeiros does not challenge this aspect of the ruling.) There not being any other changes in the pleading, the court again ruled that GHC's assertion of untimeliness was not a misrepresentation of the facts as they appeared in the claim form. The trial court raised but did not explicitly address "[p]laintiff's theory . . . that Defendant knew or should have known that his claim against the City was based on the fact that he was ultimately exonerated of criminal charges against him." The trial court therefore sustained the demurrer without leave to amend on this ground.

DISCUSSION

I. Adequacy of Allegations of Fraud

Medeiros does not seem to dispute that the trial court was literally correct in finding that there had not been any misrepresentation if GHC's assertion that his claim was untimely was in fact premised only on the facts he included on the claim form. He instead contends this is insufficient of itself to render his pleading defective, because the trial court disregarded his other allegations that GHC's assertion was knowingly false (an abbreviated argument in his briefing), or made without reasonable grounds for believing it to be true (the primary focus in his briefing). He asserts the trial court's ruling cannot stand as a result, because the scienter element of fraud cannot be determined as a matter of law.

This is true only as to intentional fraud. "Because knowledge is a fact, it is sufficiently pleaded by the general averment that [a] defendant knew the representation was false . . . . How the defendant acquired that knowledge . . . would be evidentiary and unnecessary." (5 Witkin, supra, Pleading, § 726, pp. 142-143.) The ruling on the first demurrer, which is not before us, thus erroneously applied the rule of factual specificity to the allegation that GHC actually knew the claim was timely, while the trial court's ruling on the second demurrer never reached the issue explicitly once it found the representation to be truthful based only on the claim form itself. Therefore, Medeiros is entitled to attempt to prove that regardless of the contents of his claim, GHC in fact knew of the issuance of the remittitur in connection with the reversal of his criminal conviction within the six months before his claim, but nonetheless told him the claim was untimely. As a result, the trial court's ruling with respect to the first count is erroneous.

Negligent misrepresentation, on the other hand, requires that a plaintiff "set forth facts showing that the representation was made without reasonable ground for believing it to be true." (5 Witkin, supra, Pleading, § 727, p. 143, italics added.) This implicates the factual basis for the conclusory allegation that a defendant was not reasonable in its belief in the truth of a representation, and the rule of factual specificity imparts a duty both to apprise a defendant of the grounds for this allegation (if the defendant does not have any superior knowledge of them) and provide a court with a basis for determining whether a prima facie case of fraud is stated. (Cf. Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 183-184 [suggesting rule of factual specificity may apply to all causes of action for negligent misrepresentation, and finding allegation of reliance too conclusory in case before it]; City of Industry v. City of Fillmore (2011) 198 Cal.App.4th 191, 211, 213 [finding adequate allegation of reliance].) As a result, Medeiros was obliged to chart the investigatory road GHC did not travel in order to establish that GHC was not reasonable.

Medeiros takes the unquestioned principle that a plaintiff must provide facts in a government tort claim sufficient enough to alert the agency to the need to investigate the merits adequately and determine whether to settle it without litigation (City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 456) and stands it on its head. He contends that once his claim gave GHC notice of some facts (which led GHC to discover in a manner not disclosed that he had in fact been convicted), this imputed GHC with some species of constructive notice obligating it to investigate further through public records to find that he had appealed his conviction and that it had been reversed (on pain of being charged with this knowledge). We disagree. Medeiros does not explain any theory under which GHC had a duty to determine the course of the criminal proceedings when he himself had failed to include any reference to his appeal of his conviction or its outcome. That GHC may be experienced in the specialty of representing public entities in claims against them does not lead to the conclusion that it should have known a claimant would omit the most important aspect of a claim for malicious prosecution: the favorable termination.

Nor do GHC's obligations with respect to "claims as presented" have any effect with respect to Medeiros's present pleading. This term of art refers to a document that does not comply with the requirements for presenting claims in sections 910 (prescribing contents of claim, which include providing the circumstances of the occurrence that gives rise to the asserted liability) and 910.2 (requirement of signature) but nonetheless discloses the existence of a claim that will result in a lawsuit against the agency if not resolved to the satisfaction of the claimant. This triggers the notice-and-forfeiture provisions in sections 910.8 (requiring notice to claimant of such defects, stated with particularity), 911 (in absence of section 910.8 notice to claimant, cannot assert such defects as a defense), and 911.3 (prescribing contents of notice of late claim to a claimant--including admonition to consult with lawyer immediately--noncompliance with which forfeits defense of untimeliness). (Green v. State Center Community College Dist. (1995) 34 Cal.App.4th 1348, 1354-1355.)

Medeiros asserts we should apply these forfeiture provisions in the present litigation. But this is not an action on a government claim against a public entity; it is a fraud action against the entity's agent. Medeiros does not supply any authority for transplanting a forfeiture of a defense to a government tort claim into an ordinary civil action for fraud. To the extent Medeiros is also suggesting that section 910.8 defines the scope of GHC's reasonable investigation of the claim against the City, he does not provide any authority that section 910.8 requires a public entity or its agent to engage in an exercise of issue-spotting with respect to the facts included in a claim as presented and then send a letter inquiring whether the claimant simply forgot to include an element of a cause of action. (Cf. Nelson v. County of Los Angeles (2003) 113 Cal.App.4th 783, 797 [public entity's duty to notify claimant about defects in claim "necessarily presumes the defect is disclosed on the face of the form"].)

Medeiros thus fails to establish that his allegation of an unreasonable belief in the truth of the representation was sufficient. The demurrer is properly sustainable to the second count on this basis. (Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1031 [may affirm order sustaining demurrer on any ground, whether or not it was basis for trial court's ruling].)

II. Punitive Damages Improperly Stricken

The trial court granted the motion to strike the prayer for punitive damages because a public entity cannot be liable for them (§ 818), and therefore an agent performing the entity's functions cannot be liable. In support for its ruling, it cited Gruner v. Barber (1962) 207 Cal.App.2d 54 (Gruner).

But Gruner upheld an award of compensatory and punitive damages against a county contractor for his peremptory and indifferent behavior toward the plaintiffs during the installation of a county sewer line along the edge of their property. It rejected the contractor's invocation of the principle that he was immune from suit for the performance of work specified in his contract with the county, which Gruner held was limited to incidental injuries in the course of contracted work and did not extend to damages that were the proximate result of the negligent performance of contractual duties or willful torts. (Gruner, supra, 207 Cal.App.2d at pp. 59-60; accord, Pacific Tel. & Tel. Co. v. Granite Constr. Co. (1964) 225 Cal.App.2d 765, 769 [adopting opinion of trial court (Hon. Lowell L. Sparks) rejecting claim of immunity for negligent or intentional injury in performance of contract].) Although Gruner cited a section of Cal.Jur.2d that spoke in terms of a contractor being entitled to " 'share the immunity of the public from liability for incidental injuries' " (Gruner, supra, 207 Cal.App.2d at p. 59), the principle at issue is based on the fact that it is the public entity and not the contractor that is responsible for incidental damages resulting from the exercise of governmental powers. (Gay v. Engebretsen (1910) 158 Cal. 21, 24; DeBaker v. Southern Cal. Ry. Co. (1895) 106 Cal. 257, 284-285 [cited in Gruner].) Therefore, Gruner does not have anything to do with sharing a public entity's immunity from suit. (See Annot., Public Contractor--Tort Immunity (1966) 9 A.L.R.3d 382, 387 [criticizing use of concept of "shared immunity" where public entity is not immune from suit and contractor is simply not liable under principles of general law].)

In any event, to the extent the principle of shared immunity can be drawn from this body of law and can be applied in the context of immunity from punitive damages (although it is difficult to conjure a set of facts in which acts giving rise to exemplary damages would be within the scope of contractual work), the limitation excluding immunity for the damages from a contractor's own tortious conduct must come along for the ride. Therefore, the principle of shared immunity cannot apply to GHC's alleged intentional fraud.*fn5 As a result, the trial court erred in striking the prayer for punitive damages.

DISPOSITION

The judgment of dismissal is reversed with respect to count one of the pleading, as to which the order striking the prayer for punitive damages is vacated. Neither party shall recover costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)

We concur: MURRAY , J. DUARTE , J.


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