Superior Court of New Jersey,

Appellate Division.

SEAN WOOD, L.L.C., Plaintiff–Appellant/Cross–Respondent,

v.

HEGARTY GROUP, INC. and Ken Hegarty, Defendants–Respondents/Cross–Appellants.

 

Submitted Nov. 16, 2010.

Decided April 12, 2011.

 

PAYNE, J.A.D.

In an action filed in the Special Civil Part, plaintiff, Sean Wood, L.L.C., sought payment in the amount of $14,583.25 from defendants, the Hegarty Group, Inc. and Kenneth Hegarty, individually, that it alleged was owed on two contracts for rigging out, loading and delivering industrial machinery and tanks to two of the Hegarty Group’s customers. The Hegarty Group counterclaimed, alleging lost profits in excess of the Special Civil Part’s jurisdictional limit of $15,000 as the result of a breach of contract by Wood, resulting in the Hegarty Group’s inability to completely satisfy a purchase order by its customer, Perry Videx Company.

 

Following a six-day bench trial in the matter, the trial judge issued a written decision in which he awarded Wood a judgment against the Hegarty Group in the sum of $2,500 and dismissed the Hegarty Group’s counterclaim as the result of its failure to mitigate damages. All parties have appealed. We affirm the judgment in favor of Wood, but remand to permit that judgment to be reduced by $500 to reflect a credit given by Wood to the Hegarty Group and to permit the entry of that judgment against Kenneth Hegarty as well as the Hegarty Group. We also affirm the dismissal of the Hegarty Group’s counterclaim.

 

I.

Evidence at trial disclosed that Wood entered into a contract with the Hegarty Group, dated December 26, 2008, that required Wood to rig out of their location in Carlstadt, New Jersey and transport thirteen stainless steel tanks to the facilities of Perry Videx in South Jersey at a price of $16,500 and to pump the oil from and transport three injection molding machines to Perry Videx at a price of $6,083.25 for a total price of $22,583.23. A $10,000 deposit was made on the contract. A second contract with the Hegarty Group, dated January 6, 2009, required Wood to load and transport tanks to a customer in North Collins, New York for a price of $5,000 with a fifty percent deposit.

 

Both contracts were executed on behalf of the Hegarty Group by Kenneth Hegarty, who was understood by Wood’s president, Sean Wood, to be the owner of the company. A business card given by Hegarty to Wood listed his position as Operations Manager. A police report entered in evidence in the matter listed Hegarty as the “owner” of the Hegarty Group. However, at trial, Hegarty denied that he was either a shareholder or employee of the Hegarty Group. Although he said he was assumed to be its vice-president, he was instead merely “helping” the company. Hegarty testified that, in the months of December 2008 through February 2009, he was unemployed and collecting unemployment insurance benefits. Hegarty testified that the Hegarty Group was his wife’s company, but that she authorized him to make deals and sign contracts. He stated that neither he nor his wife received a paycheck from the Hegarty Group, and that its only salaried employee was receptionist Amelia Barone, the niece of Hegarty’s wife. Further, he stated that he had purchased the tanks and machinery that were subsequently sold by the Hegarty Group to Perry Videx by use of his own funds.

 

The second contract was performed in January 2009, but upon performance, the remaining balance of $2,500, which was further reduced by a $500 credit given by Wood, was not paid by Hegarty. At trial, Hegarty and painting contractor Mark Brill stated that discussions had occurred regarding joint marketing, and that Wood had agreed to contribute $2,500 to the endeavor, using for that purpose the remaining balance of the second contract with the Hegarty Group. Thus, nothing was owed on that contract. Wood acknowledged that discussions had occurred, but he stated that he had not agreed to make a monetary contribution to the effort.

 

In connection with the first contract, the drained injection molding machines and five of the tanks were delivered to Perry Videx on January 16, 2009. However, as the result of Sean Wood’s concern that the remaining balance would not be paid, Wood determined that he would only permit the delivery of the remaining tanks COD. Both Hegarty and Perry Videx were informed of this condition; neither manifested assent. On Thursday, January 22, 2009, three tractor trailer trucks carrying the remaining eight tanks were dispatched from Main Trucking, the trucker retained by Wood. On arrival at the Perry Videx facility, one truck bearing two tanks was unloaded. However, Wood insisted that the company be paid prior to permitting the other two trucks to be unloaded. When payment was not forthcoming, Wood directed the trucks to return with their loads to Main Trucking’s facility. According to Linda B. Jacobs, a Perry Videx employee, upon learning of Wood’s COD demand, she called Hegarty to determine whether he would authorize Perry Videx to pay the balance that Hegarty owed to Wood and to subtract that amount from the balance due from Perry Videx to Hegarty. Hegarty refused to authorize that transaction.

 

By letter dated January 22, Sean Wood informed Hegarty that, as the result of his refusal to pay the balance for the work performed, two oversize trailer loads were placed in storage, where they would remain until payment was received. Hegarty was also informed that the cost of storage was $100 each per day, and that he was responsible for that amount, plus the additional shipping charges incurred for the return of the two trailers. Hegarty responded in an undated letter, stating that there was no refusal, as the contract did not specify COD. “After a complete inspection and acceptance from Perry Videx, the contract would have been fulfilled; I would have received payment, and forwarded you the money owed in a timely fashion.” The letter continued:

 

Due to the damage that you caused during rigging and shipment, and lack of shipping the man hatches that you removed, I was penalized $18,069.00 from Perry Videx because they denied the acceptance of the tank. As per the rate of storage at $100.00 per day, that will be paid by you for not fulfilling the contract. I have already filed a police report in Carlstadt, NJ and as of January 25, 2009, the tanks were considered stolen, because there was no correspondence relayed to Hegarty Group as to the location of the tanks after they were removed from final location.

 

According to Sean Wood, on Monday, January 26, he spoke with Al Beck, the Hegarty Group’s “lead man” at the time, who claimed that Hegarty had lost $18,000 as the result of the non-delivery, and that if the money were restored, Wood could do what he wanted with the tanks. On January 27, Wood responded to Hegarty’s letter, stating, in part:

 

Your letter in regards to Fulfillment of Contracts is unacceptable…. I have fulfilled my contract with the only change being placing a COD on the balance of the tanks. This was necessary when I was told of your intent of none [sic] payment for the tank work.

 

I would like for us[ ] both to take a deep breath and examine the following possibility grant me to this Friday Jan 30, 2009 to find another buyer for the remaining tanks. This was your ultimate design to b[u]y and then resell all of the tanks. If I am not successful I will pay the difference on your losses based on the following.

 

A settlement offer was then outlined.

 

Wood spent Monday and Tuesday seeking another purchaser for the remaining tanks obtaining, on Wednesday, January 28, a firm offer for four of the tanks in the amount of $12,500. Beck was informed of the offer, and he agreed to advise Wood of Hegarty’s response to it.

 

Hegarty rejected the offer, testifying that Wood would have kept the purchase price as payment for amounts he claimed were due to him, and that Hegarty would not have received his lost profits. On January 29, Hegarty, accompanied by the Ridgefield police, took possession of the tanks. Hegarty directed Main Trucking to deliver them to a specified lot, where they were unloaded in a fashion that destroyed their commercial value.

 

On January 30, Wood filed suit against the Hegarty Group  alleging breach of contract, the creation of a constructive trust, unjust enrichment, breach of the covenant of good faith and fair dealing, and conversion. Counsel for Wood also prepared a notice to cease and desist, addressed to Hegarty and the Hegarty Group and personally served on February 2, which stated:

 

The complaint was later amended to include Kenneth Hegarty as a defendant.

 

PLEASE TAKE FURTHER NOTICE THAT pursuant to the New Jersey Uniform Fraudulent Transfer Act, N.J.S.A. 25:2–20, et seq. and all other applicable laws of the State of New Jersey and the United States of America, you are hereby placed on notice that you are to jointly and severally cease and desist from the direct or indirect, absolute or conditional, voluntary or involuntary disposal or parting with thirteen (13) aboveground stainless steel tanks which have come into the physical and/or constructive possession of Hegarty Group, Inc. by virtue of rigging and trucking services rendered by Sean Wood, LLC or an interest in the said chattels as well as the payments of money, releases, leases and the creations of liens and other encumbrances involving the said chattels.

 

Hegarty claims to have entered into a contract to sell the tanks for scrap prior to service of the cease and desist order. At some point prior to February 11, they were cut up, and in the period between February 11 and February 20, they were sold to Donjon Recycling for a total price of $4,104.06.

 

Testimony at trial also disclosed that, on March 6, 2009, Linda B. Jacobs, the Manager, Sales Administration, at Perry Videx wrote a letter to Amelia Barone at the Hegarty Group, in which she stated:

 

Re: Tanks covered by our Purchase Order MG9482

 

We did not accept (2) 10,500 gallon tanks as they were received buckled.

 

We did not accept:

 

two (2) 3,000 gallon tanks

 

-one (1) 3,200 gallon tank

 

-one (1) 5,000 gallon tank

 

as they were missing mayways, sight glasses and other important pieces.

 

Jacobs testified at trial that she understood the letter was requested for insurance purposes. She testified further that, contrary to her statement, in which she conceded she had “used the wrong words,” nothing was rejected. Although the tops of the two 10,500 gallon tanks were buckled, she testified regarding the tanks that Perry Videx “would never have sent them back.” Rather, they would have been unloaded and repaired, and a price adjustment would have been sought. Additionally, and contrary to the testimony of Hegarty, Jacobs stated that Perry Videx had never been re-offered the tanks after Hegarty had replevied them.

 

Jacobs testified that damage to the top of tall tanks cannot be detected in situ by the purchaser at the time of initial sale.

 

Amelia Barone, who also testified at trial, stated that she had been instructed by Hegarty to obtain the letter from Jacobs, who sought it as back-up for litigation and for insurance purposes. In this connection, the following exchange occurred:

 

Q Okay. So as far as insurance is concerned, the goods were damaged, correct?

 

A Yes.

 

Q But as far as this litigation is concerned, it was because of COD?

 

A Yes.

 

Evidence was introduced at trial that Perry Videx reduced the purchase price offered for the tanks by $18,069 following the non-delivery of January 22.

 

As we have previously stated, in an extensive written opinion issued following the trial of the matter, the judge awarded damages of $2,500 in favor of Wood and against the Hegarty Group, and he dismissed the Hegarty Group’s counterclaim. In reaching his conclusion to award damages of $2,500 on the January New York contract, the judge rejected the testimony given by Hegarty regarding the set-off for advertising expense, finding Hegarty’s testimony to have been “less than credible.” Otherwise, the judge declined to award damages in Wood’s favor, determining that it had breached its contract with the Hegarty Group by unilaterally seeking to add a COD provision to which the Hegarty Group did not agree and as a result, delivery was not effected. Additionally, the judge found that the record did not support Wood’s claim that the company had a reasonable and justifiable fear of non-payment permitting it to anticipatorily repudiate the contract. He rejected Wood’s claim of a property interest in the goods, and therefore rejected the company’s theories of constructive trust, conversion, and breach of the New Jersey Uniform Fraudulent Transfer Act. The judge found no breach by the Hegarty Group of its covenant of good faith and fair dealing in connection with the Perry Videx contract, determining that its decision to withhold payment arose only after Wood had breached that contract and, because damages were awarded in connection with the other contract, the applicability of the covenant to it need not be determined.

 

 

The order of judgment lists in the caption only the Hegarty Group, Inc. as defendant. “Judgment for Plaintiff” was entered in the body of the order without further specification of the liable party or parties. In his written opinion, the judge designated the Hegarty Group as (“Defendant”), and “Defendant” was ordered to pay plaintiff $2,500 pursuant to the January 2009 contract.

 

With respect to the counterclaim, the judge acknowledged evidence of a net loss of $18,069. He recognized, as well, that the loss had been occasioned by Wood’s breach of contract. However, he found that, once possession of the tanks had been reclaimed, the Hegarty Group sold them as scrap for less than their worth if sold intact. After recognizing the existence of a common law obligation to mitigate damages, the judge found:

 

Defendant–Counterclaimant chose to sell the undelivered tanks for scrap metal, realizing a far less return than they might have had they sold the tanks whole. Due to the speculative nature of calculating the potential return had Defendant proceeded with an alternative means of mitigating loss, the Defendant has failed to establish a concrete measure of damages.

 

This appeal and cross-appeal followed.

 

II.

Wood’s brief in support of its appeal naturally focuses on the December 2008 contract to rig, load and ship equipment and tanks to Perry Videx. In this connection, Wood claims that the trial judge erred in finding that it breached the contract, that it was entitled to quantum meruit damages, and that the judge erred in dismissing its claim pursuant to the Uniform Fraudulent Transfer Act. Wood additionally claims that the judge erred in not specifying the defendant against which damages were assessed and in not rendering a judgment of joint and several liability.

 

With respect to Wood’s quantum meruit claim, its counsel argued on closing and here that the total amount of the Perry Videx delivery contract was $22,583.25. $5,583.25 of that amount was attributable to the undeniably completed work of pumping out and delivering the three pieces of injection molding equipment, leaving a balance of $16,499.75. From that amount, counsel subtracted $8,249.87, which he attributed to the completed rigging operations, leaving a balance of $8,249.87. He then divided that figure by the thirteen tanks for a unit value of $634.60 and, because seven tanks were delivered, he claimed that another $4,442.23 in incurred costs were undisputed, leaving charges in dispute of $3,807.63. It was then Wood’s position that the company was entitled to all sums that were not in dispute and that the total, after the initial deposit had been subtracted was $8,775.62 —the amount of quantum meruit damages claimed.

 

$22,583.25–10,000.00 = 12,583.25–3,807.63 = $8,775.62

 

According to Wood, although the judge recognized, in connection with the judge’s award of damages under the New York contract, the principle that it would be unjust for a party to retain a benefit without payment, citing Dunkin’ Donuts of Am., Inc. v. Middletown Donut Corp., 100 N.J. 166, 184 (1985), he did not apply the same theory to the Perry Videx contract. As a result, the judge essentially transformed the remaining balance on that contract into a liquidated damages clause.

 

Quasi-contractual recovery on the basis of quantum meruit “ ‘rests on the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another.’ “ Weichert Co. Realtors v. Ryan, 128 N.J. 427, 437 (1992) (quoting Callano v. Oakwood Park Homes Corp., 91 N.J.Super. 105, 108 (App.Div.1966)). “Courts generally allow recovery in quasi-contract when one party has conferred a benefit on another, and the circumstances are such that to deny recovery would be unjust .” Ibid.

 

To recover under this theory, Wood was required to establish: “ ‘(1) the performance of services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefore, and (4) the reasonable value of the services.’ “ Starkey, Kelly, Blaney & White v. Estate of Nicolaysen, 172 N.J. 60, 88 (2002) (quoting Longo v. Shore & Reich, Ltd., 25 F.3d 94, 98 (2d Cir.1994) (internal quotations and citations omitted)). Although Wood has met its burden with respect to the first three factors, we agree with the judge’s implicit finding that it failed to demonstrate the fourth.

 

In this regard, we note that there was no testimonial foundation for counsel’s arbitrary apportionment of half of the contracted-for cost of rigging, loading and shipping the thirteen tanks to the rigging process. Further, we question whether Wood conferred a benefit upon the Hegarty Group in connection with rigging out and loading the six undelivered tanks, when in fact the undertaking with respect to those tanks remained incomplete as the result of failure of delivery. As a final matter, we note that the record contains no evidence that would support counsel’s claim that the shipping costs for the thirteen tanks was susceptible to pro rata apportionment, and we question that method, given the substantial differences in the size and construction of the various tanks. For all we know, payment of the initial $10,000 deposit may have represented adequate compensation for the work performed by Wood. In any case, proofs to the contrary are lacking.

 

III.

Wood claims additionally that it did not breach its contract to deliver the last six tanks because those tanks were rejected by Perry Videx as nonconforming. In light of the testimony of Linda Jacobs that the company would never have sent the tanks back, but would instead have sought a price adjustment in connection with any damage found to exist, and her essential repudiation of the content of the March 6 letter to Amelia Barone, we cannot accept Wood’s argument in this regard. While evidence suggests that Hegarty sought to recast events in a light contrary to fact in order to obtain an insurance recovery, that evidence does not, in the circumstances presented, constitute competent proof of what clearly took place. Wood refused to make delivery when its demand for COD payment was not met.

 

As the judge found, Wood unilaterally inserted the COD provision into its contract with the Hegarty Group without the consent of that entity. Wood claims that it was justified in doing so as the result of reports that Hegarty had stated to others that he was planning on withholding payment on his contracts with Wood. If justified under these circumstances, Wood could have demanded adequate assurance of future performance. In that connection, the Restatement (Second) of Contracts § 251 (1981) provides:

 

(1) Where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach under § 243, the obligee may demand adequate assurance of due performance and may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance. (2) The obligee may treat as a repudiation the obligor’s failure to provide within a reasonable time such assurance of due performance as is adequate in the circumstances of the particular case.

 

“Whether the obligee’s asserted grounds to demand adequate assurance are ‘reasonable,’ and whether the obligor’s response is ‘adequate,’ are ordinarily questions of fact for the jury.” Spring Creek Holding Co., Inc. v. Shinnihon U.S.A., 399 N.J.Super. 158, 179–80 (App.Div.), certif. denied, 196 N.J. 85 (2008).

 

In this case, evidence was introduced that, in response to an interrogatory to Wood requesting the substance of any declarations against interest by Hegarty, Wood responded:

 

Ken Hegarty admitted to Sean Wood circa the 2nd week of January 2009 that the Plaintiff was owed entire amount in dispute, but the Plaintiff was not going to get paid because of the Sun Products contract which the Plaintiff was awarded.

 

Testimony at trial suggested that Wood and Hegarty had competed for Sun Product’s business. However, counsel for the Hegarty Group disputed this statement noting, among other things, that Wood was willing to make a delivery to Perry Videx on January 16, which would have been after Hegarty’s alleged statement and during the period when Wood allegedly felt insecure. Additionally, during Wood’s testimony the following exchange occurred:

Q Now did there ever come a time that Mr. Hegarty declared—or somebody from the Hegarty Group declared that they were not going to pay you?

 

A Yes. That was on or about the 14th of January.

 

Q Okay. And did you [m]ake any efforts to demand assurances that you were going to be paid?

 

A Yes.

 

Q All right.

 

A That’s when I sent the one letter.

 

However, no letter from Wood to Hegarty in this time period was introduced into evidence at trial. The only correspondence by Wood was to Perry Videx, an entity that was not a party to the contract between Wood and Hegarty, and thus not in a position to offer any assurances of payment.

 

Further, there was evidence that the Hegarty Group had not paid the remaining $2,500 on the New York contract, there was evidence of friction between Wood and Hegarty, and there was some direct testimony by independent witness Joseph Iellimo that he had heard Hegarty express an intention not to pay Wood for its work. However, Hegarty consistently testified that, when confronted by Wood with the demand of COD payment, he declined, but that he offered payment, in accordance with contract terms, after delivery had been made and the goods had been accepted.

 

After hearing this disputed evidence, the trial judge ruled that “insufficient evidence ha[d] been submitted to establish a valid reason for the unilateral modification.” We decline to disturb the judge’s factfinding, which could reasonably have been made on the record presented. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). As a consequence, we affirm the judge’s conclusion that Wood’s refusal to deliver the final six tanks without COD payment constituted an unwarranted anticipatory breach of the contract with the Hegarty Group. Spring Creek, supra, 390 N.J.Super. at 178–79 (discussing anticipatory breaches of contract).

 

IV.

Plaintiff Wood next claims that the trial judge erred in dismissing its claim pursuant to the Uniform Fraudulent Transfer Act (UFTA), N.J.S.A. 25:2–20 to –34. We disagree.

 

N.J.S.A. 25:2–25 provides:

 

A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

 

a. With actual intent to hinder, delay or defraud any creditor of the debtor; or

 

b. Without receiving a reasonably equivalent value in exchange for the transfer or obligation; and the debtor:

 

(1) Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

 

(2) Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they become due.

 

(Emphasis supplied.)

 

The evidence demonstrates that the Hegarty Group and Hegarty were served, on January 30, 2009, with a UFTA cease and desist notice, and that the six remaining tanks, which were damaged during unloading by Hegarty, were thereafter cut up and sold for scrap to Donjon Recycling for a total price of $4,104.06. Our prior analysis has established that, as the result of Wood’s breach of the contract for delivery to Perry Videx, it lost its creditor status on that claim. It remained a creditor on the January New York contract as the result of Hegarty’s nonpayment of the remaining $2,000 owed on that contract. However, the amount realized on the sale to Donjon was more than sufficient to permit payment of that amount. As a consequence, the conveyance of the tanks in the form of scrap metal to Donjon did not constitute a fraudulent conveyance.

 

Although as the result of its contract with the Hegarty Group, Wood was a bailee for hire, LaPlace v. Briere, 404 N.J.Super. 585, 598–99 (App.Div.) (discussing bailments), certif. denied, 199 N.J. 133 (2009), at the time that Hegarty repossessed the tanks, a bailee’s lien as the result of nonpayment had not arisen, because the contractual time for payment had not passed. See 8A Am.Jur.2d Bailments § 151 (2009) (“The existence of payment terms in the bailment contract which are inconsistent with the right to a bailee’s lien generally will negate the right to such a lien.”)

 

V.

Wood makes a final argument that the trial judge erred by not entering judgment jointly and severally against the Hegarty Group and Kenneth Hegarty. We agree.

 

Our review of the evidence supports the conclusion that Kenneth Hegarty, despite his protestations, was an owner of the Hegarty Group and used the corporation as his alter ego, thereby abusing the corporate form and advancing his own interests.

 

“The principle is well settled in New Jersey that the doctrine of piercing the corporate veil is employed when fraud or injustice has been perpetrated.”   Tsai v. Buildings by Jamie, Inc. (In re Buildings by Jamie), 230 B.R. 36, 42 (Bankr.D.N.J.1998). An individual may be liable for corporate obligations if he was using the corporation as his alter ego and abusing the corporate form in order to advance his personal interests. Id. Veil piercing is an equitable remedy whereby the court disregards the corporate existence and holds the individual principals liable for the corporation’s debts. In re Blatstein, 192 F.3d 88, 100 (3d Cir.1999); Bd. of Trs. v. Foodtown, Inc., 296 F.3d 164, 171 (3d Cir.2002). Consequently, the individual and the corporation are treated as one for liability purposes.

 

[ Casini v. Graustein, 307 B.R. 800, 811 (Bankr.D.N.J.2004).]

 

See also Marascio v. Campanella, 298 N.J.Super. 491, 502 (App.Div.1997); Walensky v. Jonathan Royce Intern., 264 N.J.Super. 276, 283 (App.Div.), certif. denied, 134 N.J. 480 (1993); Stochastic Decisions v. DiDomenico, 236 N.J.Super. 388, 394 (App.Div.1989), certif. denied, 121 N.J. 607 (1990).

 

Before invoking an alter ego theory to pierce the corporate veil, evidence must first establish an independent basis to hold the corporation liable.   Casini, supra, 307 B.R. at 811. Here, the New York contract was executed by Kenneth Hegarty on behalf of the Hegarty Group, Hegarty testified without contradiction that he was authorized to execute the contract, and it was breached.

 

Further, if Hegarty is to be believed, the Hegarty Group has insufficient assets to satisfy the judgment against it, having, according to him, only $700 in its bank account.

 

There is also ample evidence that Hegarty was using the Hegarty Group as his alter ego in both of the transactions at issue here. In that connection, Hegarty testified that, although purchased in the Hegarty Group’s name, the tanks and other equipment to be delivered to Perry Videx were purchased with his personal funds. In his letter responding to Wood’s correspondence of January 22, Hegarty stated that but for Wood’s breach “I would have received payment”; “I was penalized $18,069.00”; “I will be sending copies of my contract with Perry Videx to your insurance company”; and “I will be requesting $18,069.00 from your insurance company.” In a handwritten instruction to Main Trucking Company, dated January 29, 2009, Hegarty stated: “I Ken Hegarty want my tanks to stay at Main Trucking Ridgefield.” When asked what happened to the money received from Perry Videx, Hegarty testified: “you know, we didn’t get the money because the tanks weren’t delivered, so we only got $26,000 and I used that to pay myself back for buying—purchasing the tanks because I personally purchased the tanks, loaned Hegarty Group the money to buy those, that’s why I’m in such financial problems right now and Hegarty Group only had $700 in the account.”

 

Additionally, Hegarty testified “I fund the company,” and he admitted to generating income for it that benefited his wife, the company’s president. As far as the Hegarty Group was concerned, Hegarty was the “go-to guy.” Even if Hegarty himself did not have an ownership interest in the Hegarty Group, as the result of his wife’s ownership interest and delegation of authority to him, he was able to use that entity as his alter ego and to abuse the corporate form to advance his own personal interests. Accordingly, we conclude that Wood demonstrated a basis for entry of judgment against Kenneth Hegarty as well as the Hegarty Group, and we remand for entry of a judgment that reflects that fact.

 

VI.

We next turn to the cross-appeal from the denial of the counterclaim for damages asserted by the Hegarty Group. In opposition to that cross-appeal, Wood notes that the counterclaim was asserted only by the Hegarty Group. Yet, the uncontroverted evidence that we have just set forth establishes that the tanks and equipment at issue were purchased by Kenneth Hegarty, utilizing his own funds, and such payment as was made by Perry Videx was taken by Kenneth Hegarty as partial repayment of the purchase price paid by him. The evidence thus establishes that Kenneth Hegarty was the real party in interest in connection with the counterclaim and that the Hegarty Group lacked standing to prosecute its counterclaim for lost profits. N.J. Citizen Action v. The Riviera Motel, 296 N .J.Super. 402, 411–13 (App.Div.), certif. granted, 152 N.J. 13 (1997), appeal dismissed, 152 N.J. 361 (1998). Thus, we affirm dismissal of the counterclaim.

 

If we assume that the Hegarty Group had standing to bring the counterclaim, we reach the same conclusion. We have previously recognized

 

that parties injured by a breach of contract have a common law obligation to take reasonable steps to mitigate their damages. McDonald v. Mianecki, 79 N.J. 275, 299 (1979); White v. Twp. of N. Bergen, 77 N.J. 538, 546 (1978). “Damages will not be recovered to the extent that the injured party could have avoided his losses through reasonable efforts ‘without undue risk, burden or humiliation.’ “ Ingraham [v. Trowbridge Builders,] 297 N.J.Super. [72,] 82–83 [ (App.Div.1997) ] (quoting Restatement (Second) of Contracts, § 350(1) (1981)).

 

“Once a party has reason to know that performance by the other party will not be forthcoming, he is ordinarily expected … to take such affirmative steps as are appropriate in the circumstances to avoid loss by making substitute arrangements or otherwise…. The amount of loss that he could reasonably have avoided by … making substitute arrangements … is simply subtracted from the amount that would otherwise have been recoverable as damages.”

 

[Id. at 83 (quoting Restatement (Second) of Contracts, § 350 comment b (1981)).]

 

[ State of N.J. v. Ernst & Young, L.L.P., 386 N.J.Super. 600, 617–18 (App.Div.2006) (footnote omitted).]

 

The party breaching the contract bears the burden of proving the absence of mitigation. Id. at 618.

 

In the present case Wood, having determined not to deliver that six remaining tanks without payment, returned the tanks to Main Trucking’s facility, where they remained on the flatbeds upon which they had been loaded until they were replevied by Hegarty on January 29. There is no competent evidence in the record that would suggest that the tanks could not have been redelivered by Hegarty to Perry Videx, that Perry Videx would have refused them, or that it would have failed to pay a price for the tanks that was less than it would have paid following the first delivery. However, Perry Videx employee Linda Jacobs testified that Hegarty never contacted the company after regaining possession. Hegarty testified to the contrary. However, his statement that Perry Videx rejected his offer of redelivery was hearsay.

 

Because Perry Videx had already determined that the two thirteen-foot tanks were damaged, it would not have paid the full contract price if the tanks had been off-loaded on January 22, but would instead have negotiated a lesser price.

 

Accordingly, we affirm the trial judge’s conclusion that the Hegarty Group failed to mitigate its damages, and as a consequence, recovery on its counterclaim was precluded. We decline to address the parties’ remaining arguments, finding them to lack sufficient merit to warrant discussion in a written opinion. R. 2:11–3(e)(1)(E).

 

Affirmed and remanded to permit entry of an amended judgment of $2,000 against the Hegarty Group and Kenneth Hegarty, jointly and severally.

Court of Appeal, Second District, Division 7, California.

Robert CHRISTOPHER et al., Plaintiffs and Respondents,

v.

RESIDENCE MUTUAL INSURANCE COMPANY et al., Defendants and Appellants.

 

No. B223849.

(Los Angeles County Super. Ct. No. BC429770).

April 12, 2011.

 

JACKSON, J.

INTRODUCTION

Defendants Residence Mutual Insurance Company and Western Mutual Insurance Company appeal from an order denying their anti-SLAPP (Code Civ. Proc., § 425.16) against plaintiffs Robert Christopher and Patricia Freiling. We affirm the order in part and vacate it in part.

 

FACTUAL AND PROCEDURAL BACKGROUND

A truck speeding downhill on a road in the Hollywood Hills overturned and crashed into the home of plaintiffs Robert Christopher (Christopher) and Patricia Freiling (Freiling) on January 17, 2008. Christopher and Freiling were inside the home at the time. The impact ignited a fire in the home. Although plaintiffs were briefly trapped in the burning home, they eventually escaped through a bedroom window.

 

At the time, Christopher had a homeowners insurance policy issued by defendants Residence Mutual Insurance Company (Residence Mutual) and Western Mutual Insurance Company (Western Mutual). Christopher’s policy included Coverage A—Dwelling, for $165,000. Residence Mutual had reserves under Coverage A of $163,015.07 but claimed to have paid only $138,034.73 to Christopher. Defendants used $6,920 of that amount to pay the structural engineer defendants hired to investigate the damage to the home on their behalf.

 

The policy included Coverage B—Other Structures, for $11,000. Defendants paid $8,518.84 under Coverage B.

 

Christopher obtained an estimate for restoration of the dwelling and other structures in the sum of $434,942. This amount far exceeded policy limits under Coverages A and B.

 

Christopher’s policy also included Coverage C—Personal Property, for $55,000. On the day of the accident, defendants’ representative presented to Christopher a contract for storage and evaluation of the loss of personal property with Accurate Construction (Accurate). Christopher signed it when the representative told him that he needed to do so immediately. Then Accurate packed the personal property. Accurate charged on a per box basis but packed each box only about 10 percent full. Subsequently, without notice to or consent from Christopher, Accurate had the personal property loss valued by the spouse of defendants’ primary adjustor for Christopher’s claim.

 

According to defendants’ records, defendants assigned the Christopher claim to Accurate. Accurate’s charges totaled $18,966.25 and were paid from Coverage C. In addition, defendants designated the facility for storage of the boxes, but Christopher was required to pay $10,000 for the storage because the applicable benefits under Coverage C had already been depleted by the payment to Accurate.

 

According to Christopher’s calculations, defendants failed to pay him at least an additional $49,522.98 in benefits owed to him.

 

On October 7, 2008, plaintiffs filed suit against the trucking company owner, Jose Antonio Salmeron, and other third-party tortfeasors they alleged were responsible for the accident (Salmeron action). Plaintiffs sought damages not only for property damage but also personal injuries and emotional distress suffered by Christopher and Freiling.

 

Christopher v. Salmeron (Super.Ct.L.A.County, 2010, No. BC399524).

 

On January 21, 2009, Residence Mutual  filed a complaint as “plaintiff-in-intervention.” It alleged that Christopher, their insured, suffered property damage and personal injuries in the accident caused by the third-party tortfeasors’ negligence and that, as a result, Residence Mutual had “expended the sum of $224,533.57 to date pursuant to the terms of the Insured’s homeowners’ insurance policy.” The sum expended did not include monies for emotional distress suffered by Christopher, in that his policy did not cover emotional distress damages. Residence Mutual sought the sum expended “plus unknown additional expenditures for property damage,” costs and attorney’s fees.

 

We refer to only Residence Mutual solely because it was the named intervener. The complaint-in-intervention did not mention Western Mutual, but plaintiffs contend that Residence Mutual was acting on behalf of itself and Western Mutual. Plaintiffs named both companies as defendants and alleged that on the day of the accident, they were insured by the two defendants. While defendants maintain that only Residence Mutual was the insurer, the issue had not been resolved in the trial court at the time the court ruled on the anti-SLAPP motion.

 

In pretrial and trial proceedings in Salmeron, defendants purposely employed litigation tactics aimed at decreasing the amount of any damages ultimately awarded to plaintiffs in order to assure the tortfeasors would have financial resources to satisfy Residence Mutual’s prayer for damages.

 

Defendants admitted they purposely opposed Christopher’s claims for damages against the Salmeron tortfeasors. Defendants’ anti-SLAPP motion papers included a statement that, because the third-party tortfeasors had “limited liability insurance, … [t]o have a practical recovery, Residence Mutual … contest[ed][the] amounts of property damage and the emotional distress claim” made by plaintiffs against the third parties. In another court document, defendants stated that, because they believed there was “a limited amount of money available from the [third-party] defendants …, it made perfect sense for [defendants] to challenge … many of Christopher’s claimed damages.”

 

Residence Mutual claimed that it reached a settlement agreement in connection with a pretrial mediation, but the agreement was not signed by Christopher. The unsigned agreement provided for the trucking company tortfeasor to pay Residence Mutual the sum of $200,000 in exchange for Resident Mutual’s release and dismissal of its complaint-in-intervention with prejudice. It also provided Residential Mutual would pay Christopher $24,980.34 in exchange for Christopher’s release.

 

Residence Mutual moved on behalf of itself and the trucking company to exclude Christopher’s construction expert from testifying regarding the restoration estimate he did for Christopher. On cross-examination after the court denied the motion, Residence Mutual’s attorney “vigorously contested the … expert on the estimate of damages.” Residence Mutual moved to exclude plaintiffs’ claims for emotional distress damages resulting from the property damage rather than from any personal injuries.

 

On January 15, 2010, the Salmeron jury returned a verdict in favor of plaintiffs, finding liability as to all third-party tortfeasors and apportioning fault among them. The jury awarded to Christopher economic damages of $600,000 and noneconomic damages of $280,000; it awarded to Freiling economic damages of $75,000 and noneconomic damages of $280,000. Judgment was entered on February 8, 2010.

 

The trial court denied defendants’ subsequent motion for a new trial. Defendants claimed the awarded noneconomic damages were excessive (Code Civ. Proc., § 657, para. (5)). They also claimed error based upon the court’s refusal to modify the verdict form to specify how Residence Mutual would be paid. In the instant appeal, defendants represent that some of their claims are still pending before the Salmeron trial court, in that the court still has not determined how much of the damages for the residence and property will go to Residence Mutual.

 

On January 13, 2010, plaintiffs filed the instant lawsuit against defendants. In the first cause of action, breach of contract for failure to pay benefits, plaintiffs alleged defendants breached the terms of the homeowners insurance policy by failing to pay the policy limits and by forcing plaintiffs to institute the litigation. The second cause of action alleged defendants breached the implied covenant of good faith and fair dealing by “unreasonably withholding benefits due under the policy, by failing to conduct a fair and objective claims investigation, by intervening in [plaintiffs’] action against third parties and gratuitously seeking to damage [plaintiffs’] claims, by failing to treat Plaintiffs and all other similarly situated insureds consistently, by failing to pay policy benefits, by unreasonably delaying payments and the final resolution of the claim, [ ] by other conduct …,” and by causing plaintiffs to have to expend attorney’s fees and costs “incurred to compel the payment of benefits due under the insurance policy.” The third cause of action alleged that the foregoing conduct by defendants constituted unfair business practices in violation of Business and Professions Code section 17200 et seq.

 

Shortly after filing a demurrer and a motion to strike portions of the complaint, defendants filed an anti-SLAPP motion, i.e., a special motion to strike plaintiffs’ complaint pursuant to Code of Civil Procedure section 425.16 (section 425.16). On March 29, 2010, the trial court sustained the demurrer as to Freiling on all causes of action without leave to amend. The court sustained the demurrer as to Christopher on the third cause of action with leave to amend and overruled the demurrer on the other causes of action.

 

A SLAPP (strategic lawsuit against public participation) is a lawsuit containing one or more causes of action “against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue.” (§ 425.16, subd. (b)(1); Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1109, fn. 1.) Section 425.16, the anti-SLAPP statute, authorizes and sets forth requirements for a special motion to strike a SLAPP cause of action. ( Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1055–1056.)

 

The court did not enter its judgment of dismissal as to Freiling until after ruling on the anti-SLAPP motion. However, the anti-SLAPP motion proceeded only as to Christopher.

 

Christopher filed his opposition to the anti-SLAPP motion, including his supporting declaration. He also filed the declaration of his Salmeron trial counsel, Pat Harris, with records of defendants’ payments under the policy as exhibits.

 

At the anti-SLAPP motion hearing on April 9, 2009, the trial court gave its tentative ruling denying the motion, which the court ultimately adopted as its final decision. The court ruled that the anti-SLAPP statute did not apply to the first cause of action for breach of contract. The court found that defendants made the required showing that the second and third causes of action for breach of the implied covenant of good faith and fair dealing and unfair business practices arose from defendants’ conduct in furtherance of their rights of petition and free speech, in that they were partially based on defendants’ conduct as an intervener in Salmeron.

 

The court denied the motion as to the second and third causes of action, however, on the basis of the court’s determination that Christopher made the required showing of a probability of prevailing on the causes of action. In making the determination, the trial court ruled that the litigation privilege under Civil Code section 47, subdivision (b), did not bar the claims in the second and third causes of action. In its written decision, the court stated that Christopher’s “claim is based on Defendants’ course of conduct to further their own economic interests at the expense of Plaintiff. See White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 888 …,” and, as White held, the litigation privilege does not apply to bar the use of a communication in a cause of action “based upon an underlying course of conduct evidenced by the communication.”

 

According to the trial court, as to the second cause of action for breach of the implied covenant of good faith and fair dealing, Christopher showed that the restoration estimate he obtained far exceeded the policy limits, and defendants had not paid out the policy limits but rather had “low-balled” his claim. In addition, the court found that Christopher showed that defendants reduced the partial benefits they paid by costs for their own structural engineer’s investigation and for the packing of plaintiff’s personal property by a company to which defendants assigned plaintiff’s claim for such services. The court also acknowledged that “Defendants admit that they took an adverse position to the insured by contesting Plaintiff’s claims of damages in order to preserve the availability of the third party liability insurance.”

 

As to the third cause of action based on unfair business practices, the trial court acknowledged that previously, it sustained defendants’ demurrer with leave to amend and plaintiff had not yet amended the complaint. The court found that the complaint could be amended to plead a cause of action for, and that Christopher submitted sufficient evidence to establish both unfair and fraudulent business practices.

 

DISCUSSION

A. Anti–SLAPP Principles and Standard of Review

On appeal, we review the denial of an anti-SLAPP motion de novo, employing the same two-step process as the trial court. ( Rusheen v. Cohen, supra, 37 Cal.4th at pp. 1055–1056.) In the first step, we determine if defendants made a threshold showing that plaintiff’s cause of action arises from acts of defendants which are protected activities as defined in section 425.16.  ( Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) A protected activity includes, inter alia, “any written or oral statement or writing made before … any … official proceeding authorized by law” or “made in connection with an issue under consideration or review by … any … official proceeding authorized by law.” (§ 425.16, subd. (e).) If defendants have met their burden, we proceed with the second step of the process to determine if plaintiff has demonstrated a probability of prevailing on any claim in the cause of action. (Equilon Enterprises, supra, at p. 67; Mann v. Quality Old Time Service, Inc. (2004) 120 Cal.App.4th 90, 106.) If any such claim has “even minimal merit,” we must affirm the denial of defendants’ anti-SLAPP motion as to the cause of action. (Mann, supra, at p. 106.)

 

The anti-SLAPP statute provides that “[a] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (§ 425.16, subd. (b)(1).)

 

In making our determinations, we consider “the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (§ 425.16, subd. (b)(2); Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 67.) We must accept as true the evidence favorable to plaintiff, and we do not weigh the evidence or determine credibility. ( Blanchard v. DIRECTV, Inc. (2004) 123 Cal.App.4th 903, 918.)

 

B. Defendants’ Anti–SLAPP Motion

Defendants contend that the trial court should have granted their anti-SLAPP motion primarily on two grounds. First, according to defendants, the only reason Christopher brought the instant lawsuit was to chill defendants’ right to petition and right of free speech in litigating the Salmeron action. Thus, they claim, the instant action is precisely the type of lawsuit the Legislature intended to thwart by enacting the anti-SLAPP statute, in that it arose from protected activity.

 

Second, defendants contend Christopher cannot demonstrate a probability of prevailing on his causes of action because their participation in Salmeron was protected by the absolute litigation privilege in Civil Code section 47, subdivision (b), and Christopher is barred from using it as evidence to support his claims.

 

1. First Cause of Action—Breach of Contract

Defendants contend that the trial court erred in ruling that the first cause of action, breach of contract, did not arise from protected activity and, therefore, was not subject to the anti-SLAPP statute. They argue that all of Christopher’s causes of action, including the first cause of action, arose from protected conduct, in that the “gist” of the complaint was that defendants, as an intervener in the Salmeron action, “ ‘sought to damage Plaintiffs’ claims against third parties’ and to ‘sabotage’ those claims.” Defendants argue that, while Christopher alleged other conduct, that conduct occurred long before their intervention, and if such conduct were the real reason for the instant suit, “[t]here was no reason to wait until January 2010” to file it. Defendants’ arguments miss the mark.

 

Defendants were not required to show that plaintiffs brought the instant action, or any of the three causes of action, primarily to chill defendants’ First Amendment rights with respect to their participation in Salmeron. A plaintiff’s subjective intent is irrelevant to the determination of whether section 425.16 applies. ( Navellier v. Sletten (2002) 29 Cal.4th 82, 88; Fox Searchlight Pictures, Inc. v. Paladino (2001) 89 Cal.App.4th 294, 305–306.)

 

Rather, in determining whether a cause of action arises from protected activity, “the critical point is whether the plaintiff’s cause of action itself was based on an act in furtherance of the defendant’s right of petition or free speech. [Citations.]” ( City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78, italics omitted.) The defendant’s act must have been an act in furtherance of the right of petition or free speech. (Ibid.) A cause of action does not “arise from” protected activity simply because the underlying complaint was filed after the defendant engaged in protected activity or even if, arguably, the protected activity triggered the cause of action or the lawsuit as a whole. ( Navellier v. Sletten, supra, 29 Cal.4th at p. 89; City of Cotati, supra, at pp. 76–78.)

 

To determine the act or acts upon which Christopher’s first cause of action was based, we look to the allegations. Christopher alleged that “[d]efendants breached the terms of the contract by failing to fully pay monies due under the contract and by forcing Plaintiffs to institute this litigation.” Thus, defendants’ act was failure to pay all the benefits owed under the policy. Failure to pay money due under a contract between private parties bears no reasonable resemblance to an act “in furtherance of [defendants’] right of petition or free speech … in connection with a public issue.” (§ 425.16, subd. (b)(1).)

 

Defendants assert that, even if the first cause of action arises in part from non-protected activity, the fact that it also arises in part from protected activity is sufficient to render the cause of action subject to an anti-SLAPP motion. They point out that “[t]he apparently unanimous conclusion of published appellate cases is that ‘where a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 425.16 unless the protected conduct is “merely incidental” to the unprotected conduct.’ [Citations.]” ( Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 672.)

 

Defendants’ litigation tactics during the intervention may serve as evidence that defendants’ failure to pay was in bad faith, but that issue is incidental to whether defendants paid plaintiff the full amount required by the policy. Thus, even if defendants’ intervention may be deemed to be a protected activity under section 425.16, its role in the first cause of action, if any, is “ ‘ “merely incidental” to the unprotected conduct.’ “ ( Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP, supra, 133 Cal.App.4th at p. 672.) The anti-SLAPP statute thus does not apply to the first cause of action and the trial court properly denied defendants’ motion as to that cause of action. (§ 425.16, subd. (b)(1); Peregrine Funding, Inc., supra, at p. 672.)

 

2. Second Cause of Action—Breach of Implied Covenant of Good Faith and Fair Dealing

The trial court found that defendants met their burden to show that the second cause of action arose from protected activity. With regard to the second step of the anti-SLAPP process, however, defendants contend that the trial court erred in ruling plaintiff had made the requisite showing of a probability of prevailing.

 

“A covenant of good faith and fair dealing is implied in every insurance contract.” ( White v. Western Title Ins. Co., supra, 40 Cal.3d at p. 885.) The covenant requires the insurer and the insured “to refrain from doing anything to injure the right of the other to receive the benefits of the agreement.” ( Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818.) “[W]hen benefits are due an insured, ‘delayed payment[,] … inadequate or tardy investigations, oppressive conduct by claims adjusters seeking to reduce the amounts legitimately payable and numerous other tactics may breach the implied covenant because’ they frustrate the insured’s right to receive the benefits of the contract in ‘prompt compensation for losses.’ [Citation.]” ( Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 36; see, e.g., Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 461–462; Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co. (2001) 90 Cal.App.4th 335, 348–349.)

 

Defendants mistakenly claim that Christopher made no showing of a breach of the insurance contract, and there can be no liability for bad faith without a breach of contract. When, as in this case, it is undisputed that the insured’s claim is for a covered loss, the insured may recover for the insurer’s bad faith conduct “whether or not it also constitutes a breach of a consensual contract term.” ( Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395.)

 

Defendants’ primary contention, however, is that the litigation privilege bars Christopher’s use of evidence of Residence Mutual’s trial tactics in Salmeron to meet his burden of demonstrating a probability of prevailing on the second cause of action. Defendants contend the trial court erred in ruling the privilege did not apply. We disagree.

 

Civil Code section 47 provides that “[a] privileged publication or broadcast is one made: [¶] … [¶] (b) in any … (2) judicial proceeding [or] (3) in any other official proceeding authorized by law …,” subject to certain to specified limitations not relevant here. “The usual formulation is that the [litigation] privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.” ( Silberg v. Anderson (1990) 50 Cal.3d 205, 212.) The principal purpose of the litigation privilege is to afford litigants and witnesses “the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions.”   (Id. at p. 213.) The litigation privilege may, in effect, serve as a substantive defense to a plaintiff’s evidence of the probability of prevailing as required in the second step of anti-SLAPP analysis. ( Flatley v. Mauro (2006) 39 Cal.4th 299, 323.)

 

Defendants claim that the trial court mistakenly relied on White v. Western Title Ins. Co., supra, 40 Cal.3d 870 to find that their litigation tactics in Salmeron were evidence of a course of bad faith conduct and, thus, were not protected by the litigation privilege. (Id. at pp. 885, 889.) Defendants assert that, in the subsequent decision in Silberg v. Anderson, supra, 50 Cal.3d 205, the Supreme Court broadened its interpretation of the scope of the litigation privilege to apply to all litigation. According to defendants, “[t]his obviously extends to [a litigant’s] argument to defeat or limit another litigant’s claims,” as was the case in California Physicians’ Service v. Superior Court (1992) 9 Cal.App.4th 1321, 1330 and footnote 7. Defendants are correct in their assertions to an extent, but defendants have not gone far enough in their analysis. In White, the Supreme Court explained that determination of whether the litigation privilege applies requires inquiry beyond whether the questioned action was a communication in the course of a judicial proceeding. The White court drew “a careful distinction between a cause of action based squarely on a privileged communication … and one based upon an underlying course of conduct evidenced by the communication.” ( White v. Western Title Ins. Co., supra, 40 Cal.3d at p. 888.) According to the court, “[i]t is obvious … that even if liability cannot be founded upon a judicial communication, it can be proved by such a communication….” (Ibid.) The court further explained that an “entire pattern of conduct” can be sufficient evidence “to permit the jury to find a breach of the covenant of good faith and fair dealing.” (Id. at p. 889.)

 

The analysis and holding in California Physicians’ Service v. Superior Court, supra, 9 Cal.App.4th 1321 do not support the application of the litigation privilege to evidence of defendants’ trial tactics. In California Physicians’ Service, the plaintiffs used the defendant’s initial responsive pleading as the basis for a supplemental complaint in the same action. The court held that the litigation privilege barred the supplemental causes of action. The court distinguished the case from White’s holding that the litigation privilege did not apply when the communications at issue were utilized as evidence of the prior course of tortious conduct, rather than used as the basis for a cause of action. The court stated: “The effort here [in California Physicians’ Service ] is not to use trial tactics as evidence of prior bad faith, but to mount a new cause of action for severable damages on the theory of an action for bad faith defense.” (Id. at p. 1327.) In the instant case, Christopher is not claiming that defendants’ litigation tactics in Salmeron warrant additional, severable damages for bad faith. Rather, the litigation tactics are one more piece of evidence of defendants’ bad faith conduct in performing their contractual duty to pay policy benefits to Christopher.

 

Also contrary to defendants’ claim, Silberg v. Anderson, supra, 50 Cal.3d 205 is not inconsistent with White. The Supreme Court stated: “Although originally enacted with reference to defamation [citations], the [litigation] privilege is now held applicable to any communication … [citations], and all torts except malicious prosecution. [Citations.]” (Id. at p. 212.) The plaintiffs in White advanced a similar theory that liability cannot be based upon a communication in a judicial proceeding, supporting their argument with decisions which had extended the absolute privilege beyond defamation to bar other types of actions. ( White v. Western Title Ins. Co., supra, 40 Cal.3d at pp. 887–888.) The White court acknowledged that the litigation privilege barred a cause of action “based squarely on” a judicial communication. But the court held that the litigation privilege did not bar the plaintiffs’ use of the defendant’s judicial communications to “show that defendant was not evaluating and seeking to resolve their claim fairly and in good faith.” (Id . at p. 888.)

 

As defendants note, Silberg disapproved the use of an “interest of justice” standard for determining the litigation privilege did not apply and the cases that had used the standard. ( Silberg v. Anderson, supra, 50 Cal.3d at pp. 212–213.) However, Silberg did not reject or otherwise disapprove the standard applied in White. Silberg did not even cite the White case.

 

Also defendants point out that, in California Physicians’ Service v. Superior Court, supra, 9 Cal.App.4th 1321, the court expressed its “doubt as to the current vitality of White.” (Id. at p. 1328.) Other authority attests, however, to the continuing effectiveness of White. The California Physicians’ Service court also acknowledged that, as of September 1992, the “Supreme Court has … not reexamined White ” and that the “Legislature has apparently recognized the rule established by White, but has not attempted to modify its central principle.” (Id. at p. 1328 & fn. 6.) As recently as 2007, the Supreme Court has acknowledged the “ ‘careful distinction’ “ the court drew in White with respect to the applicability of the litigation privilege. ( Action Apartment Assn., Inc. v. City of Santa Monica (2007) 41 Cal.4th 1232, 1248–1249.)

 

Defendants point out that the filing of a legal action has been held to be protected by the litigation privilege. ( Action Apartment Assn., Inc. v. City of Santa Monica, supra, 41 Cal.4th at pp. 1248–1249.) They argue that, accordingly, their filing a complaint in intervention is absolutely privileged under Civil Code section 47, subdivision (b), and the privilege applies to all of their participation in the Salmeron litigation. The application of the privilege to the complaint is not the issue here. Rather, the question is whether the litigation privilege bars plaintiff from using as evidence of bad faith the fact that Residence Mutual intentionally used tactics to decrease the amount of damages plaintiffs would recover from the tortfeasors in the Salmeron litigation.

 

It is undisputed that Residence Mutual had a right to file the complaint. In order to recover subrogated property losses, an insurer may intervene in an insured’s lawsuit against third-party tortfeasors. ( Bright v. American Termite Control Co. (1990) 220 Cal.App.3d 1464, 1468.) The purpose of permitting intervention is “ ‘to avoid delay and multiplicity of actions when claims are the same or substantially similar and arise out of the same facts.’ “ (Id. at p. 1469.) Although an intervener is theoretically independent as a separate party, in the context of an insurer’s intervention, there is a “mutuality of interests between the plaintiff [insured] and [the insurer as] the plaintiff in intervention vis-à-vis the defendants.” (Id. at p. 1470.) That Residence Mutual purposely employed litigation tactics against the interests of plaintiff is not only inconsistent with the purposes of intervention but also with Residence Mutual’s duty of good faith and fair dealing with respect to plaintiff. “The litigation privilege was never meant to spin out from judicial action a party’s performance and course of conduct under a contract.” ( Stacy & Witbeck, Inc. v. City and County of San Francisco (1996) 47 Cal.App.4th 1, 8.)

 

Other than their global argument on the applicability of the litigation privilege, defendants offer only brief conclusory statements to challenge the trial court’s ruling that plaintiff showed a probability of prevailing on his second cause of action for breach of the implied covenant of good faith and fair dealing. They offer no citations to supporting authority or to the record in either their opening brief or their reply brief with respect to their additional arguments. When an appellant raises a contention, “but fails to support it with reasoned argument and citations to authority, we treat the point as waived.” ( Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784–785.) Therefore, we treat defendants’ additional conclusory contentions as waived.

 

 

In any event, we agree with the trial court that Christopher made the requisite showing of probability of prevailing on his second cause of action by presenting evidence of a course of bad faith conduct. Defendants admit they did not pay policy limits, notwithstanding the estimate plaintiff obtained which was well in excess of policy limits. They claimed, in part, that their policy was to withhold some benefits until the insured completed restoration of the property. This claim is similar to the insurer’s excuse for delayed payment which was rejected in Silberg. (Silberg v. California Life Ins. Co., supra, 11 Cal.3d at pp. 461–462.) According to Christopher, defendants charged costs of their own, supposedly independent investigation of Christopher’s claim, against Christopher’s policy benefits and had part of the claim evaluated by a person married to the adjustor for Christopher’s claim. Similar conduct was cited as bad faith conduct by an insurer in Chateau Chamberay Homeowners Assn. v. Associated Internat. Ins. Co., supra, 90 Cal.App.4th at pages 348–349.

 

The fact that defendants took a position and engaged in related litigation tactics for the admitted purpose of decreasing Christopher’s recovery from the third-party tortfeasors in Salmeron is simply one more act by defendants that is inconsistent with their duty of good faith and fair dealing to Christopher. “The implied promise [of good faith and fair dealing] requires each contracting party to refrain from doing anything to injure the right of the other to receive the benefits of the agreement. [Citations.]” ( Egan v. Mutual of Omaha Ins. Co., supra, 24 Cal.3d at p. 818.) The insurer “must give at least as much consideration to the [insured’s] interests as it does to its own.” (Id. at pp. 818–819; see also Waller v. Truck Insurance Exchange, Inc., supra, 11 Cal.4th at p. 36.) “[T]he contractual relationship between insurer and the insured does not terminate with commencement of litigation,” but rather the insurer’s contractual duties to the insured and its obligation to perform them fairly and in good faith remain in effect. ( White v. Western Title Ins. Co., supra, 40 Cal.3d at p. 885.) For example, where an insurer has notice of the insured’s intent to pursue the insured’s rights against the tortfeasor, the insurer has “a duty of good faith and fair dealing, by virtue of its fiduciary relationship, to do nothing to interfere with those rights,” including to refrain from employing litigation tactics injurious to the insured’s rights to recover from the tortfeasor. ( Barney v. Aetna Casualty & Surety Co. (1986) 185 Cal.App.3d 966, 981; see also Rothrock v. Ohio Farmers Ins. Co. (1965) 233 Cal.App.2d 616, 622–623.)

 

Assuming these facts proffered by Christopher are true, as we must on review of an anti-SLAPP motion, there is a probability that a trier of fact would find that defendants’ course of conduct has frustrated Christopher’s “right to receive the benefits of the contract in ‘prompt compensation for losses.’ “ ( Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 36.) Given that Christopher has shown that his claims have at least “minimal merit,” the trial court properly denied the anti-SLAPP motion as to the second cause of action. ( Mann v. Quality Old Time Service, Inc., supra, 120 Cal.App.4th at p. 106.)

 

3. Third Cause of Action—Unfair Business Practices

Defendants assert that there was no viable third cause of action for the trial court to rule upon, in that the court had previously granted defendants’ demurrer to the third cause of action with leave to amend and Christopher had not yet submitted an amended version. We agree with defendants. The trial court had no jurisdiction to act with regard to any third cause of action. Therefore, defendants’ anti-SLAPP motion could not properly be either granted or denied as to the third cause of action. The trial court’s denial of defendants’ anti-SLAPP motion as to the third cause of action must be vacated.

 

On March 29, 2010, the trial court had sustained defendants’ demurrer to plaintiffs’ third cause of action, unfair business practices under Business and Professions Code section 17200 et seq., with leave to amend. In its written decision on the anti-SLAPP motion, the trial court noted that fact, as well as the fact that Christopher had not yet amended the complaint, in the court’s analysis of Christopher’s probability of prevailing on the third cause of action. The trial court denied defendants’ anti-SLAPP motion to the ineffective third cause of action on April 9, but Christopher did not file an amended complaint until 10 days later.

 

DISPOSITION

The order is affirmed as to the first and second causes of action. The order is vacated as to the third cause of action. Plaintiffs shall recover their costs on appeal.

 

We concur: PERLUSS, P.J., and WOODS, J.