Ca Alameda Court Forms Trial De Novo by hnv37644


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									Filed 9/15/10 Cobb v. Berkley CA1/5

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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                                       FIRST APPELLATE DISTRICT

                                                  DIVISION FIVE

PAUL COBB et al.,
         Plaintiffs and Respondents,                                     A124384
VELDA M. BERKLEY,                                                        (Alameda County
                                                                         Super. Ct. No. RG05246424)
         Defendant and Appellant.

         Velda M. Berkley (appellant) sold the stock of “The Alameda Publishing
Corporation” (APC), a newspaper publishing corporation, to “The GoodNews Is..., LLC”
(GNI). Following the sale, GNI, APC, and Paul Cobb, owner of GNI (collectively,
respondents) sued appellant for breach of contract, fraud, concealment, and other causes
of action, contending, among other things, that appellant failed to disclose various
liabilities of APC prior to the sale. Appellant filed a cross-complaint for breach of
contract, alleging she was owed certain monies under the Stock Purchase Agreement
(Agreement). A jury found in favor of respondents on their complaint and appellant’s
cross-complaint. Appellant appeals the denial of her motions for judgment
notwithstanding the verdict (JNOV) and new trial. We conclude the trial court erred, in
part, in denying the JNOV motion because appellant is entitled to damages on her cross-
complaint and because there is no substantial evidence supporting the total amount of
damages awarded to respondents. We reverse and remand for entry of a new judgment.

       APC was incorporated in 1963 by appellant’s late husband. GNI was formed in
fall 2004 for the purpose of purchasing the stock of APC. Cobb and his wife are the
owners of GNI; Cobb is the managing member of GNI. Attorney Jay Pimentel assisted
Cobb in the formation of GNI and purchase of APC.
       On December 6, 2004, appellant sold the stock of APC to GNI for $225,000. In
the Agreement, GNI assumed up to $5,000 of APC’s existing liabilities and disclaimed
any other existing liabilities. GNI took the assets and shares of APC free and clear of any
undisclosed liabilities, and appellant agreed to indemnify and hold GNI harmless against
any undisclosed liabilities. The Agreement required APC to pay appellant one-half of
amounts collected from the $28,829.42 in current accounts receivable, minus collection
costs. As of May 2005, APC had collected $18,371.78 of the receivables. In a separate
“Non-Competition Agreement,” appellant agreed not to compete with APC for three
years in exchange for $66,000, to be paid in 13 monthly installments beginning in June
2005. The $66,000 payment was guaranteed by Cobb’s associate, Barbara Bauer, in a
written Guaranty.
       In May 2006, respondents filed their second amended and operative complaint
(Complaint) asserting 10 causes of action against appellant.1 Respondents alleged that,
after the sale, they discovered a number of undisclosed liabilities. Most significantly, on
December 13, 2004, a criminal complaint was filed against APC and two of its
employees. The criminal complaint alleged that, in August 2003, employees of APC had
unlawfully disposed of hazardous waste, newspaper ink, on the side of a road in San
Francisco. Respondents alleged they incurred substantial legal expenses in defending
APC against the criminal complaint. Respondents also alleged appellant owes them

1  Respondents also asserted four additional causes of action solely against an attorney,
William Taylor, and a law firm, Taylor & Goins, who delivered to GNI, as part of the
purchase of APC, an opinion letter regarding, among other things, the existence of
lawsuits or investigations against APC at the time of the sale. Those causes of action are
not at issue on appeal.

indemnification for undisclosed liabilities relating to a copier lease, lapsed membership in
the National Newspaper Publishers Association (NNPA), employee wage claims, City of
Oakland licenses, and software licenses.2
       In August 2006, appellant filed a cross-complaint against APC, GNI, and Bauer, in
which she alleged breach of the Agreement, the Non-Competition Agreement, and the
Guaranty because she had not been paid the $66,000 she was owed under the Non-
Competition Agreement and because APC had collected a portion of the accounts
receivable, but had not paid her the half to which she was entitled.
       In fall 2008, the case was tried before a jury. The completed special verdict forms
found in favor of respondents on the Complaint and against appellant on her cross-
complaint. The jury awarded respondents $576,369.50 in damages from appellant and
awarded appellant nothing on her cross-complaint. The jury’s award included
$193,869.50 in economic damages, $180,000 in noneconomic damages, and $202,500 in
special damages.3
       Appellant filed motions for JNOV and new trial. The trial court denied appellant’s
JNOV motion. The court granted, in part, appellant’s motion for new trial, concluding
that the jury’s award of damages for noneconomic and special damages was excessive.
The court concluded there was no basis for the special damages award and that only
$50,000 in noneconomic damages was supported by the record. The court ruled that
appellant was entitled to a new trial on damages, unless GNI accepted a reduction in the
judgment against appellant to $245,869.50.4 GNI accepted the reduction and, in March

2   The evidence relating to each of these alleged undisclosed liabilities is described later
in this decision.
3  The jury also awarded respondents $42,500 in damages from defendants Taylor and
Taylor & Goins.
4  It appears the trial court intended to award $193,869.50 in economic damages plus
$50,000 in noneconomic damages, which would have yielded a total judgment of

2009, the judgment against appellant was amended and reduced to $245,869.50.5
Appellant filed a notice of appeal from the amended judgment.6
I.     Standard of Review
       “An appellate court reviews the grant or denial of a motion for JNOV de novo
using the same standard as the trial court. [Citation.] A JNOV must be granted where,
viewing the evidence in the light most favorable to the party securing the verdict, the
evidence compels a verdict for the moving party as a matter of law. [Citations.] In
general, ‘ “[t]he purpose of a motion for [JNOV] is not to afford a review of the jury’s
deliberation but to prevent a miscarriage of justice in those cases where the verdict
rendered is without foundation.” ’ [Citation.]” (Oakland Raiders v. Oakland-Alameda
County Coliseum, Inc. (2006) 144 Cal.App.4th 1175, 1194.) “ ‘A motion for [JNOV] . . .
may properly be granted only if it appears from the evidence, viewed in the light most
favorable to the party securing the verdict, that there is no substantial evidence to support
the verdict. If there is any substantial evidence, or reasonable inferences to be drawn
therefrom, in support of the verdict, the motion should be denied.’ [Citation.]” (Hauter
v. Zogarts (1975) 14 Cal.3d 104, 110.) On the other hand, if the appeal from denial of a
motion for JNOV raises purely legal questions, our review is de novo. (Wolf v. Walt
Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1138.)
       “Substantial evidence is evidence of ponderable legal significance, reasonable,
credible and of solid value. [Citation.] However, ‘[s]ubstantial evidence . . . is not

5  Because respondents accepted the damages reduction and did not file an appeal
contending the trial court erred in eliminating the special damages and reducing the
noneconomic damages, there is no issue on appeal as to those rulings.
   We note that in the Complaint appellant was sued by Cobb, individually and doing
business as GNI and APC. In the amended judgment, judgment is entered in favor of
GNI and APC “by and through its owner and managing partner [Cobb].”
6  Previously, appellant filed a notice of appeal from the order denying her JNOV
motion. On June 2, 2009, this court consolidated appeal No. A124384 with appeal
No. A124844 for purposes of briefing, oral argument, and decision.

synonymous with “any” evidence.’ [Citation.] Instead, the evidence must be
‘ “substantial” proof of the essentials which the law requires.’ [Citation.]” (Oregel v.
American Isuzu Motors, Inc. (2001) 90 Cal.App.4th 1094, 1100 (Oregel).) “Inferences
may constitute substantial evidence as long as they are the product of logic and reason
rather than speculation or conjecture. [Citation.] The testimony of a single witness can
provide substantial evidence. [Citation.]” (Id. at p. 1101.)7
III.      The Damages Awarded to Respondents
          The judgment awards to respondents damages from appellant in the amount of
$245,869.50, which includes $193,869.50 in economic damages and $50,000 in
noneconomic damages.8 Appellant contends the damages award is not supported by
substantial evidence.
          A.      The Components of the Damages Award
          The trial court instructed the jury that respondents sought economic damages
under seven separate categories: (1) “Software Licenses”; (2) “Copier Lease”;
(3) “NNPA Membership Payments”; (4) “Wage Claims”; (5) “Claim by Advertiser”;
(6) “City of Oakland Licenses”; and (7) “SF v. [APC] Attorney fees and costs.” The
special verdict form did not ask the jury to make separate damages findings for each of
those categories; instead, the jury simply awarded $193,869.50 for economic damages as
a lump sum.9

7   Because we conclude the trial court erred, in part, in denying the motion for JNOV,
we need not separately consider whether the trial court erred in its ruling on the motion
for new trial. To the extent that we reject appellant’s contentions regarding the motion
for JNOV, we also reject those contentions with respect to the motion for new trial.
8      See footnote 4, ante, at p. 3.
9  Because appellant did not request separate findings regarding each of the categories of
damages, this court would be required to affirm the judgment if the evidence supported
damages totaling $193,869.50, even if some categories of damages lacked support in the
record. (See Gillan v. City of San Marino (2007) 147 Cal.App.4th 1033, 1053.)
However, as explained below, the evidence supported only damages in a lesser amount.
Accordingly, appellant’s failure to request more specific findings on damages does not
preclude her claim on appeal. (See ibid.)

       1.      Software Licenses
       Cobb testified that computer software programs were required to print the
newspaper. Appellant failed to disclose that the software on APC’s computers was
unlicensed and could not be upgraded. On appeal, appellant suggests Cobb should have
been aware that the software was unlicensed due to his presale inspection, but she points
to nothing in the Agreement indicating that such an inspection relieved her of the
obligation to disclose liabilities.
       Cobb further testified the software was replaced, which cost about $15,000.
Pimentel testified that he “obtained a quote for $14,980” to replace the software. Taking
their testimony together, it is reasonable to infer that APC actually paid that amount.
       Appellant points out that respondents did not introduce into evidence the pirated
software, the replacement software, or any documentation of payment of $14,980 for new
software.10 It is true that under Evidence Code section 412, “If weaker and less
satisfactory evidence is offered when it was within the power of the party to produce
stronger and more satisfactory evidence, the evidence offered should be viewed with
distrust.” However, the jury was instructed on that rule and it apparently nevertheless
credited the oral testimony of Cobb and Pimentel. The issue on appeal is whether
substantial evidence—not whether the strongest evidence—was introduced and supports
the jury’s finding. Appellant has not shown that Cobb and Pimentel lacked any basis for
their testimony regarding the cost of replacing the software. The testimony of a single
witness can constitute substantial evidence. (Oregel, supra, 90 Cal.App.4th at p. 1101.)
Substantial evidence supports an award in the amount requested by respondents, $14,980.
       2.      Copier Lease
       Cobb testified that during the course of negotiations with appellant,
representations were made to him that an expensive copier lease would expire at the end
of December 2004, shortly after his purchase of the newspaper. In fact, the lease had

10  Appellant discusses in detail exhibit 41, which is 12 pages of receipts. Appellant
points out that those receipts do not include substantial software purchases. However, the
testimony of Cobb and Pimentel is sufficient to support the verdict.

automatically renewed in September 2004, a fact that appellant failed to disclose. On
appeal, appellant contends Cobb should have discovered the renewal by examining the
lease, but that would not relieve her of liability for the false representation to which Cobb
       Cobb further testified that, to terminate the lease, Pimentel negotiated a settlement
in the amount of approximately $21,000, to be paid at the end of the litigation with
appellant. Pimentel testified that the amount of the “demand” was $21,440.83. Taking
the testimony together, it is reasonable to infer that APC agreed to pay that amount. An
award of $21,440.83 in damages for the lease is supported by substantial evidence.
       3.     Arrears in Membership Dues
       Cobb testified that the NNPA is a national organization that assists African-
American owned newspapers in obtaining advertising. Appellant failed to disclose that,
when GNI bought APC, the newspaper’s membership in the NNPA was in arrears. On
appeal, appellant argues that NNPA membership is optional, but she cites to no evidence
disputing the inference that Cobb was led to believe APC was a member of the NNPA at
the time of the sale.
       Cobb further testified that, at the time of the sale, APC owed the NNPA almost
$6,000 in dues. Pimentel testified the amount was $5,355. An award of $5,355 is
supported by substantial evidence.
       4.     Wage Claims
       Section 3.b.6 of the Agreement provides that GNI does not assume any obligations
“arising out of or based on facts existing on or prior to the Closing Date between [APC]
and any of [APC’s] employees.” Cobb testified there were claims for back wages
presented by two employees, Anthony Rabb and Juan Herrera.11 Pimentel testified that
the “claims totaled from these employees was $29,845.”

11  At trial, Herrera was frequently referred to by the last name Nava; he subsequently
testified and clarified that his full name is Juan Nava Herrera and that his last name is

        On appeal, appellant argues there is no substantial evidence of any liability arising
from the wage claims. We agree. The evidence in the record only indicates that claims
of some nature were made against APC. There is no credible evidence regarding the
validity of the claims and, most importantly, any resolution of the claims. Cobb testified
he believed some money was paid to settle the wage claims, but he admitted he did not
know anything about the payments and stated “[y]ou would have to get the controller to
answer to that.”12 Cobb also testified that Herrera actually owed APC money; Herrera
testified he did not have any kind of dispute with APC at the time of the sale of the
newspaper. Appellant testified APC had sued Rabb to collect on a debt; exhibit 44
suggests that money levied from Rabb’s bank account to satisfy the debt may have been
returned to Rabb.
        Finally, Pimentel’s testimony about the amount of the wage claims does not
provide a basis for damages because he did not testify that APC paid or agreed to make
any payment on the claims. On cross-examination, he testified he did not know whether
APC had paid on the claims. Absent evidence that APC paid or is obligated to pay any
amount to the claimants, there is no basis for an award of damages. No substantial
evidence supports an award of damages for the wage claims.
        5.     Claim by Albertson’s
        Cobb testified that the grocery store chain, Albertson’s, was an advertiser in the
newspaper. APC had agreed with Albertson’s to print a minimum of 114,000 copies of
the paper, and Albertson’s threatened to sue APC because it was not printing enough
copies. APC agreed to hire Verified Auditing Services to provide ongoing weekly
verification of the circulation and to print 55,000 copies of the paper, which is the
number APC had actually been printing. It cost around $35,000 for the verification
services. Also, Albertson’s reduced the advertising rate it paid by at least 50 percent.
Albertson’s had been paying “more than” $50,000 a year.

12   The APC controller never testified.

       As appellant points out, Cobb admitted on cross-examination that, although the
Albertson’s claim required him to “redouble [his] efforts,” he would have had to incur the
verification expenses in any event “because [he] marketed the paper as being [able] to
guarantee circulation numbers.” Accordingly, substantial evidence does not support a
finding that the payment for ongoing verification services was a liability resulting from
any nondisclosure by appellant.
       On the other hand, appellant has not shown that GNI could not recover for the
reduction in advertising revenue from Albertson’s. The trial court’s reduced damages
award included $50,000 in noneconomic damages due to “the misrepresentation of the
circulation of the paper.”13 Appellant contends that this amount did not reflect “[m]oney
expended to correct any undisclosed liabilities,” as the trial court defined “noneconomic
damages.” However, regardless of how the damages should be categorized, appellant has
not shown that the damages are not recoverable under any of respondents’ causes of
action, under the theory that appellant failed to disclose that APC was not complying
with its agreement with Albertson’s. Because the judgment is for a total sum and does
not list the damages by category, it is unnecessary to determine whether the trial court
properly characterized the damages as noneconomic.
       6.     City of Oakland Licenses
       Cobb testified that when GNI filed for a city license to do business under the name
“The Post,” Cobb was informed the name was being used by appellant and her license
fees were delinquent. There were also delinquencies for toxic substance and public
health licenses. However, Cobb did not remember how much it cost to resolve the city
license issues, and Pimentel did not testify regarding the license issue when he testified
regarding the other damages claims. In his closing argument, respondents’ counsel
asserted that the cost was $20,000, and respondents repeat that assertion on appeal

13  It is not clear how the trial court reached the $50,000 figure for damages for
misrepresentation of the circulation numbers, but appellant has not argued on appeal that
the figure lacks support in the record as damages for the decrease in revenue from

without citing to any evidence supporting that amount. Because no evidence cited to this
court or uncovered by this court in its own review supports the $20,000 figure, an award
in that amount is not supported by substantial evidence. On the other hand, exhibit 47, a
letter from the City of Oakland billing APC for delinquent fees under the Hazardous
Materials Management Program, is substantial evidence of liability in the amount of
       7.     Attorney Fees in the Criminal Case
       Cobb testified that APC tendered to appellant the defense of the December 2004
criminal case arising out of the 2003 improper ink disposal. Appellant agreed to
indemnify APC and provide legal defense, as required by the Agreement. Appellant
hired attorney Ron Carter to represent APC and one of its employees, Victor Martinez.
Carter was also representing appellant, and Cobb was concerned that Carter had a conflict
of interest and could not represent APC, appellant, and Martinez. APC retained separate
counsel to seek its dismissal from the case, which it contended should have been directed
at appellant. Another attorney retained by APC negotiated a settlement whereby the
company agreed to pay a $40,000 fine in exchange for dismissal of the criminal
complaint against APC. Carter objected to that resolution of the case on behalf of
appellant and the settlement did not go forward at that time. In October 2005, the district
attorney’s office obtained removal of Carter as counsel for APC in the criminal case, on
the ground that Carter had conflicts of interest. Appellant refused to retain new counsel
for APC. Ultimately, in April 2007, the district attorney’s office dropped the criminal
case against APC. Cobb testified that APC retained five different attorneys to represent
the company in the criminal case. He negotiated flat rates for each of the attorneys,
totaling $140,000. The attorneys all agreed to postpone payment until completion of the
litigation with appellant.
       Appellant contends she was not required to provide a defense for APC under the
Agreement because there is no evidence the company had been threatened with the
criminal case prior to sale of the newspaper. Appellant misreads the Agreement, which
requires her to assume all liability for “Any litigation, arbitration or administrative

proceedings pending, threatened or commenced after the Closing Date . . . that directly or
indirectly arise out of or are based on facts existing on or prior to the Closing Date . . . .”
       Appellant also contends there was no actual conflict of interest justifying retention
of separate counsel because she had agreed to indemnify APC without any reservation of
rights. She also contends Cobb’s refusal to cooperate with Carter relieved her of the
obligation to provide indemnification for defense costs. However, appellant cites only
cases regarding an insurer’s obligation to provide independent “Cumis” counsel to an
insured following a reservation of rights.14 Appellant fails to provide any reasoned
argument with citations to authority that a reservation of rights is the only sort of conflict
that will justify retention of independent counsel. And this case does not involve a
traditional insurance contract; instead it involves an indemnification obligation arising
out of a purchase agreement, and the “insurer” (here, appellant) was actually involved in
the events underlying the criminal complaint. Moreover, Cobb and two of APC’s
attorneys testified that Carter’s loyalty to appellant undermined the interests of APC.
Pimentel testified that “there was kind of a conflict as to whether to pay fines and resolve
the matter or whether to have the matter dragged out [over] a longer period. Dragging
out was not in the best interest of [APC].” The trial court instructed the jury that APC
was not required to cooperate with Carter if the jury found “that a conflict of interest
exists between Ron Carter as Velda Berkley, the insurer’s attorney, and APC, the
insured.” During closing argument, respondents’ counsel argued that Carter had such a
conflict of interest. Appellant has not shown that APC was not entitled to recover under
the Agreement for the cost of independently-retained counsel.
       Appellant also contends there is no substantial evidence that APC incurred
$140,000 in attorney fees related to the criminal case. She asserts that any fees should be

14 San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d
358, concluded that an insurer is responsible to pay the reasonable cost for hiring
independent counsel for the insured when the insured and insurer have divergent interests
due to the insurer’s reservation of its right to deny coverage. (See also Novak v. Low,
Ball & Lynch (1999) 77 Cal.App.4th 278, 282.)

limited to those incurred after October 2005, when the trial court in the criminal case
concluded Carter had a conflict of interest. However, she fails to provide any reasoned
argument that recovery of fees under the Agreement is so limited, especially where Cobb
testified that the specified fees were for work on the criminal case and he explained why
he was uncomfortable with representation by Carter from the beginning. Neither does
appellant provide support for her argument that the jury had to employ the lodestar
method in determining any recovery for attorney fees under the Agreement. (See Badie
v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 [Court of Appeal does not
consider arguments unsupported by reasoned argument with citations to authority].)
Appellant has not shown it was improper for the jury to award damages based on the
actual amounts APC is liable to pay its attorneys, as shown in Cobb’s testimony.
       On the other hand, there is insufficient evidence to include in the award $50,000
for the work of Pimentel on the criminal case. Pimentel was the attorney retained by
Cobb to handle the negotiations for the purchase of APC by GNI. Cobb testified he
negotiated a $50,000 flat rate for Pimentel to represent APC, but he did not expressly
testify that the amount was solely for work on the criminal case, and he only described
Pimentel’s involvement in negotiations at the very end of the criminal case. Pimentel
repeatedly testified that he did not represent anybody in the criminal case. He only
received reports on the case as counsel for Cobb and GNI and “got involved a couple of
times” to “try to get the thing settled.” Accordingly, there is no substantial evidence that
Pimentel is owed $50,000 for his work on the criminal case. Neither is there any
substantial evidence supporting an award in a lesser amount for fees paid or owing to
Pimentel.15 Thus, the evidence supported damages of only $90,000 for attorney fees in
the criminal case.

15  Exhibit 46 is a summary of Pimentel hours spent on “Cobb—Claims Against Seller of
the Post.” The grand total for all tasks is 186 hours, for fees totaling $46,500. The
exhibit contains a number of entries which appear to relate to the criminal case, but the
time spent on those tasks is not differentiated from the time spent on other tasks for Cobb
and APC. Thus, there was no basis for the jury to determine what number of hours
Pimentel spent on the criminal case.
       B.     Conclusion Regarding Respondents’ Damages
       As explained above, the evidence before the jury supported “economic” damages
for software in the amount of $14,980, for the copier lease in the amount of $21,440.83,
for the NNPA membership in the amount of $5,355, for city fees relating to hazardous
materials in the amount of $679.64, and for attorney fees in the criminal case in the
amount of $90,000, for a total of $132,455.47. The jury awarded “economic” damages in
the amount of $193,869.50. The trial court erred in denying the JNOV motion with
respect to that portion of the damages award, which should have been reduced by
$61,414.03.16 On the other hand, the trial court did not err in reducing the noneconomic
damages award to $50,000.
II.    Appellant’s Cross-Complaint
       Appellant’s cross-complaint sought damages under the Non-Competition
Agreement in the amount of $66,000, and $9,185.89 representing her half of the
receivables referenced in the Agreement that had been collected by APC. Appellant
contends the undisputed evidence at trial showed she was entitled to those amounts and
the trial court erred in denying her JNOV motion.
       At the outset, we note the jury’s special verdict failed to include any findings
regarding appellant’s claim for a share of the receivables; the questions in the special
verdict related only to the Non-Competition Agreement. A special verdict must include
findings on all material factual issues so that nothing remains for the trial court to do
other than to draw conclusions of law. (Code Civ. Proc., § 624; Falls v. Superior Court
(1987) 194 Cal.App.3d 851, 854-855.) The court cannot infer additional findings.
(Frank v. County of Los Angeles (2007) 149 Cal.App.4th 805, 827.) Accordingly, it
would have been improper for the trial court to enter a judgment in appellant’s favor on

16  Appellant also contends she is entitled to a $5,000 credit toward any award because
GNI agreed to assume $5,000 of APC’s liabilities. However, that promise was subject to
the other terms of the Agreement, including appellant’s promise to indemnify GNI for all
undisclosed liabilities. Because the liabilities at issue on appeal were undisclosed,
appellant is fully liable for them.

the receivables aspect of the cross-complaint. (Saxena v. Goffney (2008) 159
Cal.App.4th 316, 324, fn. 3.) The trial court did not err in denying the JNOV motion
with respect to the receivables.17
       On the other hand, we conclude the trial court should have granted the JNOV
motion with respect to the payment under the Non-Competition Agreement. The
evidence on the issue is uncontroverted. Appellant testified that, after the sale, she retired
from the newspaper business and did not compete with APC. Nevertheless, she was
never paid any of the $66,000 she was due under the Non-Competition Agreement.
Respondents do not argue on appeal, and did not argue below in opposition to the JNOV
motion, that appellant has already been paid any portion of the $66,000 at issue or that
she violated the Non-Competition Agreement. Instead, respondents argue that, because
appellant breached the Agreement by failing to disclose liabilities and provide
indemnification, she is not entitled to recover the $66,000. Respondents cite no
analogous cases and rely exclusively on the elements of the breach of contract cause of
action, to wit: (1) the contract, (2) the plaintiff’s (here appellant’s) performance or excuse
for nonperformance, (3) defendant’s (here, respondents’) breach, and (4) the resulting
damages. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d
1371, 1388.) However, appellant was not required to show that she had not breached the
Agreement in any respect in order to recover for respondents’ failure to comply with the
Non-Competition Agreement.
       The determinative issue is whether appellant’s performance under the Agreement
was a condition precedent to the obligation to pay appellant the $66,000 under the Non-
Competition Agreement, or whether the promises exchanged by appellant and GNI were

17  Appellant does not argue on appeal that the special verdict was erroneous in this
respect; any such contention has been forfeited. (See Badie v. Bank of America, supra,
67 Cal.App.4th at pp. 784-785.) In any event, appellant had the obligation to ensure that
the special verdict elicited all findings necessary to address the claims in the cross-
complaint. (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13
Cal.App.4th 949, 961-962.)

independent covenants.18 In bilateral contracts, where performance by one party is in
exchange for performance by the other, and the duties are to be performed at the same
time and place, the law will ordinarily imply concurrent conditions making each party’s
obligation dependent upon performance or tender of performance by the other.
(McDorman v. Moody (1942) 50 Cal.App.2d 136, 142.) But where the promises are to be
performed at different times, they are generally deemed independent covenants and not
concurrent conditions. (Starr v. Davis (1930) 105 Cal.App. 632, 634-635 (Starr); see
also 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 810, p. 902.) When
covenants are independent, each party has the obligation to continue to perform the
contract even in the face of a breach. (Verdier v. Verdier (1955) 133 Cal.App.2d 325,
334 (Verdier).)
       Generally, the determination of whether promises are independent depends on the
intent of the parties. (Medico-Dental etc. Co. v. Horton & Converse (1942) 21 Cal.2d
411, 419; Verdier, supra, 133 Cal.App.2d at p. 334.) Construing a contract provision as a
condition precedent is disfavored, and a contract will be strictly construed against the
party claiming that the term imposes a condition precedent. (Helzel v. Superior Court
(1981) 123 Cal.App.3d 652, 663; Yamanishi v. Bleily & Collishaw, Inc. (1972) 29
Cal.App.3d 457, 463.) Provisions will not be construed as conditions precedent unless
the language of the contract plainly requires it. (Rubin v. Fuchs (1969) 1 Cal.3d 50, 53-
54.) In making this determination, courts search for words such as “ ‘subject to’ ” or
“ ‘conditioned on’ ” in relation to the contractual obligation in question. (In re Marriage
of Hasso (1991) 229 Cal.App.3d 1174, 1181.)
       For example, in Starr, the buyer purchased a florist business, and paid in part with
a promissory note. When the buyer stopped paying on the note, the seller sued the buyer
to recover the balance due. The buyer admitted he owed a balance on the note, but
argued the seller’s violation of a noncompetition provision in the purchase agreement

18Appellant does not contend that the Agreement and Non-Competition Agreement are
wholly separate contracts.

excused any further obligation on the note. (Starr, supra, 105 Cal.App. at p. 633.) The
Starr court rejected the argument. (Id. at pp. 634-636.) First, the court noted that the
effect of the seller’s argument “would be to say that as a penalty for [the seller’s] breach,
[the buyer] might keep the business without paying therefor. . . . Such is not the law.”
(Id. at pp. 634-635.) The court additionally found the fact that the promises were to be
performed at different times (one year for the payment on the note; two years for the
promise not to compete) reflected that the parties did not intend that a breach of the
noncompete agreement would excuse the buyer’s obligations on the note. (Id. at pp. 634-
636.) The Starr court stated, “ ‘Where the covenants of the respective parties are to be
performed at different times they are held to be independent and the breach by one party
of his covenant does not excuse the performance by the other of his covenant or relieve
him of liability for damages for a breach thereof.’ ” (Starr, at p. 635, quoting Fresno
Canal Co. v. Perrin (1915) 170 Cal. 411, 416.)
       In the present case, no language in the Non-Competition Agreement conditions the
obligation to pay appellant $66,000 on anything other than her promise not to compete
for three years after the sale. The Non-Competition Agreement states that appellant is
entitled to the $66,000 “[i]n consideration for the restriction on competition.” Moreover,
the promises at issue were to be performed at different times: the $66,000 was to be paid
in 13 monthly payments starting in June 2005; on the other hand, appellant’s disclosures
of liabilities were made in the Agreement itself, and the indemnification obligation arose
whenever an undisclosed liability came to light. Finally, to deny appellant the agreed-
upon $66,000 for not competing would amount to a penalty to appellant and a windfall to
GNI. (Starr, supra, 105 Cal.App. at pp. 634-635.) There is even less basis to deny
recovery against cross-defendant Bauer on the Guaranty, in which Bauer “absolutely and
unconditionally” guaranteed payment of the $66,000 to appellant.
       The jury instructions and special verdict form facilitated the error in this case. The
court modeled its instruction on CACI No. 303 and instructed the jury that appellant was
required to show (1) she and the cross-defendants entered into a contract, (2) she did
substantially all of the things the contract required her to do, (3) “all conditions required

by the contracts for [cross-defendants’] performance had occurred,” (4) cross-defendants
failed to perform, and (5) appellant suffered damages. The third element was superfluous
because it is relevant only where there is a condition precedent to the defendant’s
performance and, as explained above, in this case there was no condition precedent as a
matter of law. (See Directions for Use foll. CACI No. 303 (2010 ed.) [“Element 3 is
intended for cases in which conditions for performance are at issue. Not every contract
has conditions for performance.”].) The special verdict form mirrored the instruction.
First it asked whether appellant did “all, or substantially all, of the significant things that
the Non-Competition Agreement and Consulting Agreement required her to do?” The
jury answered “Yes.” Next the jury was asked “Did all the conditions occur that were
required for [GNI’s] performance?” The jury answered “No.” The jury made identical
findings with respect to Bauer and the Guaranty. In both instances, the second question
was superfluous because, as a matter of law, appellant’s performance under the
Agreement was not a condition precedent to her right to receive $66,000 for not
competing with APC. We conclude the trial court should have granted appellant’s JNOV
motion with respect to the cross-complaint, because the jury’s findings that appellant
performed her obligations under the Non-Competition Agreement and Guaranty dictate a
finding in favor of appellant on the cross-complaint.
       In concluding that appellant is entitled to recover under the cross-complaint, it is
important to note that GNI did not seek to rescind the contract based on a material
breach. A rescission action is “an action to recover any money or thing owing to him by
any other party to the contract” (Civ. Code, § 1692), and is dependent on a showing that
the plaintiff restored the benefits received under the contract (Civ. Code, § 1691, subd.
(b)). A rescission extinguishes the contract. (Civ. Code, §§ 1688, 1691.) “Rescission
not only terminates further liability but restores the parties to their former position by
requiring each to return whatever he or she received as consideration under the contract,
or, where specific restoration cannot be had, its value. [Citations.]” (1 Witkin, Summary
of Cal. Law, supra, Contracts, § 926, p. 1023; see Nmsbpcsldhb v. County of Fresno
(2007) 152 Cal.App.4th 954, 959; Joshua Tree T. Co. v. Joshua Tree L. Co. (1950) 100

Cal.App.2d 590, 596.) Thus, if GNI had proved a rescission claim, it would have been
entitled to terminate its payment obligation, but it would not have any continuing right to
the business. GNI did not seek this relief; instead it sought to affirm and enforce the
Agreement by obtaining damages for appellant’s breaches of the Agreement. Because
the contract was not cancelled, GNI is legally obligated to comply with its promises to
pay appellant for not competing with APC.19
       The judgment is reversed and the matter is remanded with directions to enter a
new judgment reducing the damages awarded to GNI, APC, and Cobb by $61,414.03 to
reflect the reduction in economic damages. The court shall also enter judgment in the
amount of $66,000 in favor of appellant on her cross-claims against GNI, APC, and
Cobb, and on her claim against Bauer under the Guaranty. The judgment is otherwise
affirmed. The parties shall bear their own costs on appeal.

                                                  SIMONS, J.

We concur.



19 The record also contains a consulting agreement that provides for payments totaling
$66,000, and the Agreement refers to “consulting and non-compete fees.” However, the
Non-Competition Agreement does not obligate appellant to provide any consulting
services. In any event, the jury found that appellant had performed under “the Non-
Competition Agreement and the Consulting Agreement.”


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