Appellant construction company sought review of a judgment from the Superior Court of Los Angeles County (California), which found in favor of appellee chemical company on a claim for negligence and breach of contract involving damage to real property. A critical issue was undetermined because one party’s employment attorney San Diego was not present during evidentiary hearing.

Overview

Appellee chemical company contended that appellant construction company was negligent and breached a contract involving damage to real property. The trial court found in favor of appellee. On review, appellant contended that the statutes of limitations barred appellee’s claims and that the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C.S. §9601 et seq., was not applicable because the discovery rule applied to appellee’s claims. The court held that regardless of whether the claims were timely under Cal. Civ. Proc. Code §§ 337 and 338, Cal. Civ. Proc. Code § 337.15 required that they be brought no later than 10 years after the construction project was substantially completed. The court continued that section 309 of CERCLA, 42 U.S.C.S. §9658, preempted the requirement of Cal. Civ. Proc. Code § 337.15. The court held that appellee brought its claims within the proper time of discovering the cause of the property. Accordingly the court affirmed the holding of the trial court.

Outcome

The court affirmed the judgment of the trial count in favor of appellee chemical company on their claim arising out of damage to real property. The court held that the Comprehensive Environmental Response, Compensation, and Liability Act did apply, preempting the requirement that a claim be brought no later than 10 years after the construction project was substantially completed.

Procedural Posture

Plaintiff shareholders appealed the decision of the Superior Court of San Diego County (California) which, after a special jury verdict, entered a judgment for defendant bank on plaintiffs’ complaint for breach of contract, fraud, conspiracy to defraud, intentional infliction of emotional distress, and negligence as a result of defendant’s failure to honor its alleged promise to release plaintiffs from certain guarantees.

Overview

Plaintiff shareholders filed suit against defendant bank, alleging that a bank officer had promised to release plaintiffs from their guarantees of corporate indebtedness if plaintiffs caused that corporation to merge with a third party corporation and that defendant bank failed to honor that promise. The trial court bifurcated the liability and damage phases, rejected plaintiffs’ proposed instructions on negligence, breach of contract, constructive fraud, and conspiracy, and submitted the liability phase to the jury through a special verdict form. The trial court interpreted the special verdict form to definitively rule out the scienter required for fraud and to find that there was no oral promise by defendant to modify the guarantees. After noting that the jury’s answers to the special verdict form were inconsistent, the court reversed because there was sufficient evidence to instruct the jury on constructive fraud. The court advised the trial court and plaintiffs that the burden of proof for oral modification of a written contract was by a preponderance of the evidence and not by the clear and convincing standard set forth in plaintiffs’ instruction request.

Outcome

The court reversed the trial court’s judgment for defendant bank, finding error in the decision not to instruct the jury on plaintiff shareholders’ constructive fraud theory. The court also advised that, upon retrial, the proper burden or proof for establishing modification of a written contract would be the preponderance of the evidence standard and that the clear and convincing standard was not appropriate.