Lincoln Pac. Builders, Inc. v. Elecnor Belco Elec.

LINCOLN PACIFIC BUILDERS, INC., Plaintiff and Appellant, v. ELECNOR BELCO ELECTRIC, INC. et al., Defendants and Respondents.

B312873

California Court of Appeals, Second District, Seventh Division

February 9, 2023

NOT TO BE PUBLISHED

APPEAL from judgment of the Superior Court of Los Angeles County No. KC070438, Peter A. Hernandez, Judge. Affirmed.

Law Office of Mark Ravis &Associates and Mark Ravis for Plaintiff and Appellant.

SMTD Law, Marilyn Klinger; Cohen Seglias Pallas Greenhall &Furman, Edward Seglias, Lane F. Kelman and Cody M Wolpert for Defendants and Respondents Elecnor Belco Eletric Inc. and Roger Devito.

PERLUSS, P.J.

Lincoln Pacific Builders, Inc. (LPB) sued Elecnor Belco Electric Inc. (Belco) and its attorneys Roger Devito and Bennett W. Root, Jr. for malicious prosecution after successfully defeating Belco's cross-complaint in a breach of contract action initiated by LPB. The trial court granted motions for summary judgment filed by Belco and Devito and by Root, ruling LPB had failed to produce any evidence creating a triable issue of material fact supporting its claim it had been damaged by the filing and continued prosecution of Belco's cross-complaint. We affirm.^[1]

FACTUAL AND PROCEDURAL BACKGROUND

1. The Parties and Their 2013 Agreements

LPB, founded in 2004, specialized in outside transportation electrical work in Southern California, installing streetlights and traffic signals at intersections and on freeways, primarily as a subcontractor on public works projects. It was certified as a minority business enterprise and disadvantaged business enterprise (MBE/DBE).

By 2012 LPB was in financial trouble, unable to pay all its suppliers, its union trust fund obligations or payroll taxes. In early 2013 its chief executive officer, Lincoln Chan, was considering selling the company or its assets.^[2] Belco, a subsidiary of Elecnor, S.A., a publicly traded Spanish company,^[3] was in the general commercial electric business and wanted to expand into the transportation electrical business.

As alleged in LPB's original complaint for breach of contract, in spring 2013 LPB's directors authorized LPB's purchase by Belco. As a result of the ensuing negotiations, however, rather than acquiring the entire company outright, Belco entered into a series of four contracts with LPB (one dated June 14, 2013, two made on September 10, 2013, and the fourth on September 12, 2013) to buy LPB's outstanding transportation electrical work contracts, equipment and vehicles. In the fourth contract LPB assigned to Belco "certain work in progress previously contracted" to LPB, and Belco agreed to pay LPB for transition expenses LPB incurred in relation to that work. Belco also hired most of LPB's workforce, including senior executives other than Chan.

Belco made payments to LPB on the initial contracts totaling $520,000. It failed to make the payment due September 15, 2013 and made no additional payments prior to the settlement of LPB's lawsuit for breach of contract.

2. The Underlying Litigation

LPB sued Belco on October 27, 2014 for breach of the three contracts executed in September 2013, alleging in its unverified complaint that Belco owed it a total of $513,668. Belco answered the complaint on December 18, 2014, generally denying the allegations in LPB's complaint and asserting 13 affirmative defenses, including that Belco "possesse[d] legal and equitable rights to offset against Plaintiff and, accordingly, any recovery by Plaintiff must be barred or reduced by the amounts of such rights of offset."

Concurrently with its answer Belco also filed a crosscomplaint for breach of oral contract, fraud, breach of fiduciary duty, common counts and breach of written contract. The crosscomplaint was based on Belco's allegations that, in addition to the written contracts, the parties made an oral agreement to form a joint enterprise so that Belco could acquire jobs on which LPB had not started to work and take over additional jobs on which LPB had begun to perform but had not completed the work. Belco contended LPB breached their oral joint venture agreement by receiving payments from general contractors that were owed to Belco and breached its fiduciary duty to Belco by not disclosing it had received those payments. (The common counts cause of action sought to recover the sums paid to LPB.) The fraud cause of action was based on Belco's claim LPB misrepresented the jobs Belco would take over had value but, because LPB had advance billed and was paid for work it had not completed, the projects were not profitable. The breach of written contract cause of action alleged LPB had not transferred all the jobs that were the subject of the initial June 2013 agreement.

The trial court granted LPB's motion for summary judgment on the cross-complaint on June 29, 2016, ruling the integration clauses in the parties' contracts barred any claim resting on breach of an oral contract relating to matters covered in the written contracts; Belco offered no proof of a joint venture and, thus, no proof that LPB owed Belco any fiduciary duties; the undisputed evidence established Belco had worked on and received the full benefit of the seven jobs assigned in the June 14, 2013 agreement; and quasi-contract claims for unjust enrichment were not properly asserted when express agreements defined the parties' rights. (See Lincoln Pacific Builders, Inc. v. Elecnor Belco Electric, Inc. (Aug. 22, 2017, B276956) [nonpub. opn.].)

On August 5, 2016 Belco made a Code of Civil Procedure section 998 offer to compromise, apparently limited to LPB's breach of contract claims, which LPB accepted on August 9, 2016. Pursuant to the terms of their settlement, Belco paid LPB $513,750, the amount LPB asserted was unpaid under the parties' agreements, plus $141,904.07 in interest and $63,814.69 for attorney fees and costs.

Notwithstanding settlement of LPB's affirmative claims, Belco appealed the adverse summary judgment granted by the trial court on its cross-complaint. The court of appeal affirmed the judgment on August 22, 2017. (See Lincoln Pacific Builders, Inc. v. Elecnor Belco Electric, Inc., supra, B276956.) Belco paid LPB $11,327.00 in July 2018 for LPB's attorney fees and costs incurred in connection with Belco's appeal.

3. LPB's Malicious Prosecution Action

LPB filed the instant action for malicious prosecution on July 5, 2018, naming as defendants in its unverified complaint Belco; Root, who LPB alleged represented Belco in its acquisition of LPB's assets and drafted and filed the cross-complaint; and Devito, who LPB alleged worked as Belco's in-house counsel and advised Root regarding the cross-complaint.^[4] The complaint alleged Belco lacked a factual or legal basis to assert any of the five causes of action in its cross-complaint and had filed the pleading to punish LPB for bringing the breach of contract action and to obtain a negotiating advantage, forcing LPB to abandon its complaint or "agree to a minuscule and unjust settlement." According to LPB, at a mediation session shortly after filing its cross-complaint Belco offered to settle the breach of contract claim for approximately 10 cents on the dollar, taking the position its cross-complaint was so strong it owed LPB nothing.

LPB alleged, on information and belief, that Belco failed to present full and accurate information to Root and Devito and that the attorneys failed to adequately investigate the factual and legal bases for the cross-complaint.

Describing the damages claimed, LPB alleged it was "deprived of the monies due under the contracts due to the initial breach of contract and the subsequent litigation which was unduly prolonged due to litigating the cross-complaint, including an appeal filed by Belco." As a result, LPB alleged, it "was unable to pay its corporate debts and maintain its good credit, suffered reputational injury, and was unable to restructure and competitively bid for new contracts as a minority subcontractor in the electrical transportation industry. As a consequence, Lincoln lost profits amounting to millions of dollars." As made clear in subsequent proceedings in the trial court, LPB was not seeking recovery of the attorney fees and costs it had incurred in the underlying action, as Belco had already paid LPB for those items.

The trial court denied Belco and Devito's special motion to strike (Code Civ. Proc., § 425.16), and they answered the complaint in July 2019.

4. The Motions for Summary Judgment

a. The moving papers

Belco and Devito moved for summary judgment or, in the alternative, summary adjudication on November 12, 2020.^[5] In their motion Belco and Devito argued LPB's claim of lost profit damages was purely speculative and, in any event, any purported lost profits were not caused by the filing and prosecution of Belco's cross-complaint but by Belco's failure to make timely payments pursuant to the September 2013 agreements or by the suspension of LPB's contractor's license in mid-2013. They also argued LPB had not suffered any injury to its reputation as a result of the cross-complaint. Separately, Devito contended LPB lacked evidence he had acted with malice.

In support of their motion Belco and Devito presented evidence from LPB's financial statements that the company had been largely unsuccessful prior to the sale of all its hard assets in 2013: It had sustained losses in six of its nine years in operation and had generated only minimal profits in the other three years. Additional evidence presented with the motion showed that LPB's contractor's license had been suspended on June 23, 2013 because its statutorily required contractor's bond had been cancelled-events occurring nearly 18 months before Belco filed its...