Ayu's Global Tire, LLC v. Big O Tires, LLC

Decision Date24 May 2013
Docket NumberB236930
PartiesAYU'S GLOBAL TIRE, LLC et al., Plaintiffs and Appellants, v. BIG O TIRES, LLC, Defendant and Respondent.
CourtCalifornia Court of Appeals Court of Appeals


California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Los Angeles County

Super. Ct. No. BC420725)

APPEAL from a judgment of the Superior Court of Los Angeles, William F. Highberger, Judge. Affirmed.

Hornberger Law Corporation and Nicholas W. Hornberger for Plaintiffs and Appellants.

Bryan Cave, Jonathan Solish, Glenn J. Plattner, Kristy A. Murphy and Nickolas B. Solish for Defendant and Respondent.

In the underlying action, the trial court granted summary judgment against appellants Ayele Hailemariam and Ayu's Global Tire, LLC, in their action against respondent Big O Tires, LLC (Big O). We affirm.


There are no material disputes about the following facts: Hailemariam had been employed at Kaiser Permanente in the information technology business for 16 years and had managed several large projects. He had also completed some of the requirements for a Masters of Business Administration degree. In 2005, he investigated buying a tire store franchise from Big O, after ruling out two competing tire store franchisors. In February 2008, Ayu's Global Tire entered into a franchise agreement with Big O. Hailemariam, a member of Ayu's Global Tire, guaranteed its obligations under the franchise agreement. In May 2008, appellants began operating a Big O store in Hawthorne. In August 2009, they closed the store.

On August 28, 2009, appellants initiated the underlying action against Big O and several other parties, predicated on appellants' purchase of the franchise. In November 2010, the trial court ruled that under the terms of the franchise agreement, Colorado law governed appellants' nonstatutory causes of action.

The third amended complaint (TAC), filed November 30, 2010, alleged that before appellants entered into the franchise agreement, Big O promised to provide many services and benefits to support their franchise, but withheld unfavorable information regarding the franchise's likelihood of success. The TAC further alleged that Big O's promises and omissions induced appellants to enter into the franchise agreement, and that Big O failed to honor its commitments after they did so. Although the TAC asserted numerous claims against Big O and other defendants, following a demurrer by Big O, a stipulation of the parties, and otherdevelopments, the TAC was effectively reduced to asserting claims solely against Big O for declaratory relief, breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud in the inducement of a franchise sale.

In February 2011, Big O filed a motion for summary judgment or adjudication on the operative causes of action in the TAC. In opposing the motion, appellants abandoned their claim for declaratory relief. Following a hearing, the trial court granted the motion, concluding that appellants' remaining claims failed for want of a triable issue of fact.1 On September 14, 2011, judgment was entered in favor of Big O and against appellants. This appeal followed.


Appellants contend the trial court erred in granting summary judgment with respect to their claims for breach of contract and fraud in the inducement. As explained below, we disagree.

A. Standard of Review

"On appeal after a motion for summary judgment has been granted, we review the record de novo, considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained. [Citation.]" (Guz v. Bechtel National Inc. (2000) 24 Cal.4th 317, 334.) Thus, we apply "'the same three-step process required of the trial court. [Citation.]'" (Bostrom v. County of San Bernardino (1995) 35 Cal.App.4th 1654, 1662(Bostrom).) The three steps are (1) identifying the issues framed by the complaint, (2) determining whether the moving party has made an adequate showing that negates the opponent's claim, and (3) determining whether the opposing party has raised a triable issue of fact. (Ibid.)

Generally, "the party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) Furthermore, in moving for summary judgment, "all that the defendant need do is show that the plaintiff cannot establish at least one element of the cause of action for example, that the plaintiff cannot prove element X." (Id. at p. 853.)

Although we independently assess the grant of summary judgment (Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819), our review is subject to two constraints. Under the summary judgment statute, we examine the evidence submitted in connection with the summary judgment motion, with the exception of evidence to which objections have been appropriately sustained. (Mamou v. Trendwest Resorts, Inc. (2008) 165 Cal.App.4th 686, 711; Code Civ. Proc., § 437c, subd. (c).) Moreover, our review is governed by a fundamental principle of appellate procedure, namely, that "'[a] judgment or order of the lower court is presumed correct,'" and thus, "'error must be affirmatively shown.'" (Denham v. Superior Court (1970) 2 Cal.3d 557, 664, italics omitted, quoting 3 Witkin, Cal. Procedure (1954) Appeal, § 79, pp. 2238-2239.) Appellants thus bear the burden of establishing error on appeal, even though Big O had the burden of proving its right to summary judgment before the trial court. (Frank and Freedus v. Allstate Ins. Co. (1996) 45 Cal.App.4th 461, 474.) For this reason, our review islimited to contentions adequately raised in appellants' briefs. (Christoff v. Union Pacific Railroad Co. (2005) 134 Cal.App.4th 118, 125-126.)

The two constraints narrow the scope of our inquiry. Here, the parties raised numerous evidentiary objections to the showing proffered by their adversary, which the trial court sustained in part and overruled in part. With the exception of the objections discussed below, appellants do not challenge these rulings on appeal, and to that extent, have forfeited any contention of error regarding the rulings.

Appellants have also forfeited contentions that summary judgment was improper with respect to their claims, to the extent they fail to challenge the trial court's determinations regarding those claims. Because appellants do not discuss their claim for breach of the implied covenant, we exclude that claim from our review. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1177; Yu v. Signet Bank/Virginia (1999) 69 Cal.App.4th 1377, 1398; Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6.) Our review is further limited by the narrow scope of appellants' contentions regarding their claims for fraud in the inducement and breach of contract. Although those claims were predicated on numerous specific allegations of misconduct, appellants challenge summary judgment only with respect to some of those allegations. As appellants are required "to point out the triable issues [they] claim[] are present," we restrict our review to those "issues which have been adequately raised and briefed." (Lewis v. County of Sacramento (2001) 93 Cal.App.4th 107, 116.)

B. Governing Principles

At the outset, we examine the principles applicable to appellants' claims for breach of contract and fraud in the inducement, which are governed by Colorado law. The TAC alleges that Big O induced appellants to execute the franchiseagreement by making certain promises and suppressing facts unfavorable to the franchise's viability; the TAC further alleges that Big O breached the franchise agreement by failing to honor its promises. In seeking summary judgment, Big O contended that because the franchise agreement was fully integrated, appellants' claims failed in light of Colorado's parol evidence rule. Big O further maintained that appellants could not establish the element of reasonable reliance required for the claim for fraud in the inducement, and that Colorado's economic loss rule also barred the fraud claim. As we explain below, because Big O's challenges to the claims invoke interrelated doctrines, our inquiry initially focuses on appellants' fraud claim.2

Under Colorado law, the parol evidence and economic loss rules are ordinarily inapplicable to claims for fraud in the inducement. Regarding the former, the Colorado Supreme Court has explained: "Integration clauses generally permit contracting parties to limit future contractual disputes to issues relating to the reciprocal obligations expressly set forth in the executed document. [Citations.] Thus the terms of a contract intended to represent a final and complete integration of the parties' agreement are enforceable and parol evidence offered toestablish the existence of prior or contemporaneous agreements is inadmissible to vary the terms of such contract. [Citation.]" (Keller v. A.O. Smith Harvestore Products (Colo. 1991) 819 P.2d 69, 72-73 (Keller).) The rule thus prevents parties from asserting breach of contract claims predicated on alleged obligations not stated in the relevant integrated agreement. (Nelson v. Elway (Colo. 1995) 908 P.2d 102, 108.) However, claims for fraud in the inducement are generally not subject to the rule. (Keller, supra, 819 P.2d at p. 73; ...

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