Filed 2/19/20


                     CERTIFIED FOR PARTIAL PUBLICATION*


                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                     DIVISION ONE

                                STATE OF CALIFORNIA



WANKE, INDUSTRIAL, COMMERCIAL,                     D074392
RESIDENTIAL, INC.,

        Plaintiff and Respondent,
                                                   (Super. Ct.
        v.                                          No. 37-2016-00023774-CU-EN-CTL)

AV BUILDER CORP.,

        Defendant and Appellant.


        APPEAL from a judgment of the Superior Court of San Diego County,

Timothy B. Taylor, Judge. Affirmed.

        Greco Traficante Schulz & Brick and Peter J. Schulz, and Williams Iagmin and

Jon R. Williams for Defendant and Appellant.

        Lindborg & Mazor, Peter F. Lindborg and Irina J. Mazor for Plaintiff and

Respondent.




*      Pursuant to California Rules of Court, rule 8.1110, this opinion is certified for
publication with the exception of the discussion section, part 4.
       Wanke, Industrial, Commercial, Residential, Inc. (Wanke) obtained a judgment

against Scott Keck and WP Solutions, Inc. (WP Solutions). To collect, Wanke filed a

creditor's suit against third party AV Builder Corp. (AVB) to recover $109,327 that AVB

owed WP Solutions in relation to five construction subcontracts. Following a bench trial,

the court entered judgment in Wanke's favor for $83,418.94 after largely rejecting AVB's

setoff claims.

       Invoking assignment principles, AVB contends that Wanke lacked the ability to

sue given judgment debtor WP Solutions's corporate suspension. Next, it claims Wanke's

suit was untimely under section 708.230 of the Code of Civil Procedure.1 Finally, it

challenges the court's denial of its request for warranty setoffs under section 431.70.

Rejecting each of these contentions, we affirm the judgment.

                   FACTUAL AND PROCEDURAL BACKGROUND

       Wanke is a company that installs waterproofing systems. It sued Keck and

another of its former employees in 2008 for trade secret misappropriation after they left

Wanke to form a competing business, WP Solutions.2 The parties entered into a

stipulated settlement and later litigated Keck's alleged breach of that settlement

agreement. (See Wanke, Industrial, Commercial, Residential, Inc. v. Keck (2012) 209

Cal.App.4th 1151, 1156−1162.) In 2013, the court entered judgment in favor of Wanke,

holding Keck and WP Solutions jointly and severally liable for $1,190,929.

1      Further statutory references are to the Code of Civil Procedure unless otherwise
indicated.

2      Keck later bought out his partner and became the sole owner.
                                             2
      Meanwhile, general contractor AVB had hired WP Solutions as a waterproofing

subcontractor on five residential and commercial construction projects.3 Keck completed

his work around June 2014 when, facing the sizable judgment, he declared bankruptcy

and dissolved WP Solutions. Wanke served a writ of execution and notice of levy on

AVB that month. In examination proceedings of AVB's president, Wanke learned that

AVB owed WP Solutions $109,327 under the subcontracts. Wanke filed this creditor's

suit in July 2016 seeking to recover that amount toward its outstanding judgment.

      The case proceeded to a two-day bench trial in June 2018. The parties stipulated

as follows: Wanke obtained a judgment of $1,190,929 against WP Solutions and Keck;

Keck discharged his debts in bankruptcy; and after serving a notice of levy on third-party

AVB, Wanke learned that AVB owed $109,327 to WP Solutions. The sole issues

presented to the court were AVB's setoff claims (§ 431.70) and Wanke's ability to collect

given WP Solutions' incapacity.

      Wanke presented no affirmative evidence, resting on the stipulated facts. AVB

presented four witnesses. Employee Robert Canup described the scope of his repairs at

the Point Loma project, where Keck's waterproofing system failed due to his use of

incompatible materials. Keck testified about warranty obligations built into the




3      WP Solutions entered into the following subcontract agreements with AVB: Point
Loma Tennis Club (June 11, 2012), Oxford Court (December 23, 2013), 133 Promenade
(April 25, 2013); Saratoga West (November 16, 2009); and the Taitz Residence
(September 9, 2013). Four of the subcontracts concerned work for homeowners'
associations, while the fifth was for a private residence.
                                            3
subcontracts that WP Solutions could not perform after its 2014 suspension.4 As AVB

was Keck's largest customer, Keck continued to honor warranty calls through his new

company for minor repairs.

      Antonio Madureira, AVB's president and founder, testified that any money AVB

owed should be offset by the value of bargained-for warranty work that WP Solutions

could no longer perform. Although AVB had received warranty calls on each project,

Madureira was unsure what repairs were needed or how much AVB had spent. He did

know that AVB spent $57,055.95 to repair damage from Keck's use of incompatible

materials on the Point Loma project.

      AVB's final witness was Jan Bagnall, a Pli-Dek representative. By stipulation of

the parties, the court read deposition excerpts indicating that damage at the Point Loma

project was caused by an installation issue that would not have been covered under its

manufacturer's warranty.

      After AVB rested, Wanke presented one rebuttal witness. Forensic architect Paul

Kushner offered expert testimony on AVB's setoff claims. As relevant here, Kushner

concluded AVB's warranty setoff claims were inflated by an overestimation of the years

remaining on each warranty.

      The court entered judgment in Wanke's favor. In a detailed statement of decision,

it concluded AVB was entitled to offset moneys expended to repair the pool deck at Point




4       To avoid repetition, we discuss specific evidence pertaining to AVB's warranty
setoff claim in the discussion.
                                            4
Loma but otherwise rejected AVB's setoff claims. After offsetting the allowed amount,

the court entered judgment in favor of Wanke and against AVB for $83,418.94.

                                       DISCUSSION

       AVB appeals the entry of judgment in Wanke's creditor's suit. We provide a brief

outline of the legal framework before turning to the standing, statute of limitations, and

setoff claims it raises on appeal.

1.     Enforcement of Judgments Law

       "Detailed statutory provisions govern the manner and extent to which civil

judgments are enforceable. In 1982, following the recommendations of the California

Law Revision Commission, the Enforcement of Judgments Law (EJL) was enacted. The

EJL appears in sections 680.101 through 724.260 and is a comprehensive scheme

governing the enforcement of all civil judgments in California." (Imperial Bank v. Pim

Electric, Inc. (1995) 33 Cal.App.4th 540, 546 (Imperial Bank).)

       After entry of a money judgment, the judgment creditor may obtain a writ of

execution requiring the levying officer to enforce the judgment. (§ 699.510, subd. (a);

Vinyard v. Sisson (1990) 223 Cal.App.3d 931, 939.) If property subject to levy is in a

third party's possession, the levying officer serves a copy of the writ of execution and

notice of levy on that person, who may not refuse to comply absent a showing of good

cause. (§§ 700.040, subd. (a), 701.010.) A third party's failure to deliver property

without good cause renders it directly liable to the judgment creditor for the lesser of the

judgment debtor's interest in the property or debt, and the amount required to satisfy the

money judgment. (§ 701.020, subd. (a).) "[A] judgment creditor may enforce the

                                              5
liability imposed by section 701.020 either pursuant to examination proceedings . . . or by

way of a separate creditor's suit . . . ." (National Financial Lending, LLC v. Superior

Court (2013) 222 Cal.App.4th 262, 271.)

       Examination proceedings (§§ 708.110‒708.205) "permit the judgment creditor to

examine the judgment debtor, or third persons who have property of or are indebted to

the judgment debtor, in order to discover property and apply it toward the satisfaction of

the money judgment." (Imperial Bank, supra, 33 Cal.App.4th at pp. 546‒547; see Evans

v. Paye (1995) 32 Cal.App.4th 265, 280 (Evans).) Pursuant to section 708.120, a

judgment creditor may "discover and specify property of the judgment debtor in the third

person's possession, and [] obtain an order, on motion, determining any claim of

exemption asserted by the judgment debtor." (Ilshin Investment Co., Ltd. v. Buena Vista

Home Entertainment, Inc. (2011) 195 Cal.App.4th 612, 626 (Ilshin).) "When the third

person claims no interest in the property or debt, such a motion procedure may be all that

is required in order for the judgment creditor to obtain satisfaction of its judgment in

whole or in part." (Ibid.)

       However, "[w]hen the claims require a contested adjudication, the parties are

entitled to have the issues determined in an independent creditor's action, rather than by

the motion procedure under section 708.120, subdivision (d)." (Ilshin, supra, 195

Cal.App.4th at p. 626.) Pursuant to section 708.210, "[i]f a third person has possession or

control of property in which the judgment debtor has an interest or is indebted to the

judgment debtor, the judgment creditor may bring an action against the third person to

have the interest or debt applied to the satisfaction of the money judgment." "This action

                                              6
commonly is referred to as a creditor's suit." (Evans, supra, 32 Cal.App.4th at p. 276; see

generally, §§ 708.210‒708.290.) A creditor's suit may be filed in the first instance

without resorting to other procedures. (See Cal. Law Revision Com. com., 17 West's

Ann. Code Civ. Proc. (2009 ed.) foll. § 708.210, p. 348.)

       In this case, Wanke filed a notice of levy on AVB in June 2014. Thereafter it

conducted examination proceedings and learned from AVB's president that AVB owed

WP Solutions $109,327. Both the levy lien and examination lien expired. (§§ 697.710

[two-year lien from issuance of writ of execution], 708.120, subd. (c) [one-year lien from

examination order].) In July 2016, Wanke filed a creditor's suit against AVB, seeking to

recover $109,327. The trial court's judgment for Wanke and its denial of certain setoff

claims form the basis for AVB's appeal.

2.     Standing and Capacity

       AVB argues Wanke lacks standing because it stands in the shoes of WP Solutions,

a suspended corporation. Although AVB did not raise this argument below, a lack of

standing is a jurisdictional defect and may be claimed for the first time on appeal.

(Common Cause of Calif. v. Board of Supervisors of Los Angeles County (1989) 49

Cal.3d 432, 438.)

       "Every action must be prosecuted in the name of the real party in interest, except

as otherwise provided by statute." (§ 367.) "A 'real party in interest' is generally defined

as 'the person possessing the right sued upon by reason of the substantive law.' "

(Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th

1162, 1172.) In other words, it is the person " 'who has title to the cause of action, i.e.,

                                               7
the one who has the right to maintain the cause of action.' " (Ibid.) Section 708.210

confers statutory standing on a "judgment creditor" to bring a creditor's suit against a

"third person [who] has possession or control of property in which the judgment debtor

has an interest or [who] is indebted to the judgment debtor." As the judgment creditor,

Wanke has standing as the entity that "may bring" a creditor's suit.

       Although framed as a lack of standing, AVB's claim instead goes to capacity. " 'A

corporation that has had its powers suspended "lacks the legal capacity to prosecute or

defend a civil action during its suspension." ' " (Casiopea Bovet, LLC v. Chiang (2017)

12 Cal.App.5th 656, 662 (Casiopea); see Rev. & Tax. Code, § 23301.) Such suspension

"results in a lack of capacity to sue, not a lack of standing to sue." (Color-Vue, Inc. v.

Abrams (1996) 44 Cal.App.4th 1599, 1603−1604.) Because WP Solutions was at all

times a suspended corporation, it is undisputed that it lacked capacity to sue.

       Citing the statutory requirement that a third person possess or control property "in

which the judgment debtor has an interest" (§ 708.210), AVB argues Wanke's standing

was derivative of WP Solution's interest. Upon WP Solutions' suspension, AVB

maintains it no longer had the right to payment under its subcontracts. Invoking

assignment principles, AVB argues that Wanke stood in WP Solutions' place and likewise

could not maintain a creditor's suit against AVB.

       AVB relies on two assignment cases in making this argument. In Cal-Western

Business Services, Inc. v. Corning Capital Group (2013) 221 Cal.App.4th 304 (Cal-

Western), Pacific West One held a judgment against Corning Capital. The Franchise Tax

Board suspended Pacific West One for failing to pay taxes. While suspended, Pacific

                                              8
West One assigned its rights to Cal-Western. (Id. at p. 307.) Cal-Western sued to

enforce the judgment. (Ibid.) The trial court struck the complaint, finding Cal-Western

lacked capacity to sue as the assignee of a suspended corporation. (Id. at p. 308.)

Affirming this ruling, the appellate court explained that as an assignee, Cal-Western's

rights were derivative of Pacific West One's. (Id. at p. 312.)

       In the second case, this court relied on Cal-Western in deciding whether an

assignee of a suspended corporation could claim that corporation's escheated property

under the Unclaimed Property Law. (Casiopea, supra, 12 Cal.App.5th 656.) The

assignment was made pursuant to section 708.510, a separate procedure within the EJL

that allows a judgment creditor to receive an involuntary assignment of a judgment

debtor's interest. As we explained, although the assignment was an involuntary judicial

assignment, it nevertheless followed the same assignment rules. (Id. at pp. 662−663.) As

the assignee of a right belonging to a suspended corporation, Casiopea lacked capacity to

sue to recover its judgment debtor's unclaimed property. (Ibid.)

       AVB first presented this argument in its trial brief.5 In rejecting it, the trial court

explained:

          "Here, of course, there was no 'assignment' (either while WP
          Solutions was suspended, or at any other time). Beyond this


5       As Wanke argues "where the lack of capacity to sue does not appear on the face of
the complaint, lack of capacity to sue must be raised in the answer or that objection is
waived." (V&P Trading Co. v. United Charter, LLC (2012) 212 Cal.App.4th 126, 134.)
But AVB's claim is not that Wanke lacks capacity to sue but rather that assignment
principles prevent it from maintaining its suit. Such a claim is not forfeited by AVB's
failure to raise incapacity in its answer. (See id. at p. 135 [no forfeiture although statute
of limitations defense turned on plaintiff's alleged incapacity].)
                                               9
          chasmal factual distinction, it also strikes the court that disqualifying
          a judgment creditor on standing or capacity grounds because of an
          action taken solely by a judgment debtor (i.e., failing to remain
          current with the FTB) would frustrate the legislative purpose behind
          [] section 708.210."

Wanke urges us to affirm, arguing against application of assignment principles in a

creditor's suit. AVB responds that there is no practical difference—like section 708.510,

which allows a judicial assignment under the EJL, the statutes pertaining to creditor's

suits (§§ 708.210‒708.290) are akin to an express assignment whereby the judgment

creditor's rights should derive from the judgment debtor's.

       These competing claims present a question of statutory interpretation, subject to

independent review. (Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 724.)

At the outset, provisions applicable in one kind of enforcement mechanism under the EJL

do not necessarily apply to others. (See Ilshin, supra, 195 Cal.App.4th at pp. 628‒630

[no right to attorney's fees in creditor's suit, even though fees are recoverable from

execution of a levy].) To evaluate whether assignment principles apply in the manner

AVB suggests, we start with the language of the governing statutes, " 'giving it a plain

and commonsense meaning.' " (Bruns, at p. 724.)

       The statute at issue in Casiopea was section 708.510, subdivision (a), which

authorizes a court on a noticed motion by the judgment creditor to order the judgment

debtor to assign to it "all or part of a right to payment due or to become due." As

Casiopea explained, a judicial assignment under this procedure was subject to general

principles governing assignments codified in section 368. (Casiopea, supra, 12

Cal.App.5th at p. 664.) Pursuant to section 368, "[i]n the case of an assignment of a thing

                                             10
in action, the action by the assignee is without prejudice to any set-off, or other defense

existing at the time of, or before, notice of the assignment . . . ." The statute codifies the

general rule that an assignee stands in the shoes of its assignor. (Id. at p. 663; Cal-

Western, supra, 221 Cal.App.4th at pp. 310‒311.) Because the judgment creditor in

Casiopea was assigned the rights of a suspended corporation, it could not recover from

the third person through the assignment. We expressly left open whether it "may have

other avenues of relief through other provisions of the Enforcement of Judgments Law."

(Casiopea, at p. 663.)

       The creditor's suit statute is worded differently. "If a third person has possession

or control of property in which the judgment debtor has an interest or is indebted to the

judgment debtor, the judgment creditor may bring an action against the third person to

have the interest or debt applied to the satisfaction of the money judgment." (§ 708.210.)

After resolving any exemption claims by the judgment debtor, the court renders judgment

in the judgment creditor's favor if it establishes its claim against the third person.

(§ 708.280, subds. (a)−(b).)6

       By its plain language, the creditor's suit statute considers solely whether the

judgment debtor has an "interest" in property held by the third person or is owed a debt

by the third person. There is no requirement for the judgment debtor to have present

capacity to collect against the third person. And because no assignment is created,




6      The third person may claim a right to setoff (§ 431.70), as AVB did here.
                                              11
section 368 is not triggered and any incapacity by the judgment debtor does not present a

bar to the judgment creditor's recovery.

       As the trial court suggested, this result makes sense. "The purpose of Revenue

and Taxation Code section 23301 'is to "prohibit the delinquent corporation from

enjoying the ordinary privileges of a going concern" [citation], and to pressure it to pay

its taxes [citation].' " (Cal-Western, supra, 221 Cal.App.4th at p. 310.) This goal is

served by subjecting the assignee to the same incapacity defense as the assignor at the

time of assignment. (Id. at p. 312.) Otherwise, "a suspended corporation simply could

sell its claim to a third party without ever having to cure the default that caused the

suspension," thereby circumventing tax law restrictions and removing the statutory

incentive to make the corporation pay its delinquent taxes. (Id. at p. 314.) Requiring an

assignee to ensure at the time of assignment that its assignor is not a suspended

corporation is not unduly burdensome. (Ibid.) By contrast, these same motivations do

not apply in a creditor's suit. Tax code restrictions serve as a penalty on the suspended

corporation to incentivize payment of delinquent taxes. Foreclosing a creditor's suit

against a third person based on unilateral action taken by a suspended judgment debtor

would not further that goal.

       In short, Wanke could bring a creditor's suit against third party AVB under section

708.210 even though judgment debtor WP Solutions was a suspended corporation that

lacked capacity to sue AVB.




                                             12
3.     Statute of Limitations

       AVB argues next that Wanke's action is untimely. A creditor's suit must be

commenced before the later of the following: "(1) The time when the judgment debtor

may bring an action against the third person concerning the property or debt [¶] [and] (2)

One year after creation of a lien on the property or debt pursuant to this title if the lien is

created at the time when the judgment debtor may bring an action against the third person

concerning the property or debt." (§ 708.230, subd. (a).) The levy and examination liens

expired long before Wanke filed this creditor's suit. (§ 708.230, subd. (a)(2).)

Accordingly, it is undisputed that Wanke's suit is timely only if it was filed within the

time that WP Solutions "may bring an action" against AVB to recover the $109,327.

(§ 708.230, subd. (a)(1).)

       In a creative argument first presented on appeal, AVB contends that the period in

which WP Solutions "may bring an action" expired when its contractor's license was

suspended in July 2014. Thereafter, WP Solutions was statutorily precluded from

pursuing a collection action against AVB.7 Because Wanke sued two years after that

date, AVB maintains Wanke's action is time-barred. Wanke makes several threshold

arguments, which we address first before turning to the merits of AVB's claim.

       First, Wanke contends AVB is precluded from raising a statute of limitations

defense based on its statement in a prior brief that "WANKE has now timely filed suit."



7     Subject to certain limitations, Business & Professions Code section 7031,
subdivision (a) prevents unlicensed contractors from pursuing a collection action for any
work requiring a contractor's license.
                                               13
But as AVB points out, the entire sentence reads, "WANKE has now timely filed suit to

apply its Judgment Debtor's asset to its Judgment but it does so standing in the shoes of

Judgment Debtor (WP Solutions)." This sentence is not wholly inconsistent with AVB's

argument on appeal that the statute of limitations elapsed once WP Solutions lost

capacity to sue. Moreover, the sentence pertained to an unrelated argument in AVB's

motion to strike. It neither constitutes a judicial admission nor triggers judicial estoppel.

(See Bucur v. Ahmad (2016) 244 Cal.App.4th 175, 187−188 [defining and applying both

concepts].)

       Next, Wanke asserts that AVB forfeited its defense by not specifically pleading

section 708.230 in its answer. (See § 458; Martin v. Van Bergen (2012) 209 Cal.App.4th

84, 91; Davenport v. Stratton (1944) 24 Cal.2d 232, 246−247.) AVB responds that

section 708.230 incorporates by implied reference code sections it did plead. We have

not located a case addressing whether the failure to specifically plead a code section

number is fatal to a statute of limitations defense when the omitted section refers to a

different section that was specifically pleaded. Assuming AVB did properly plead a

statute of limitations defense, Wanke suggests that it nevertheless forfeited it by failing to

pursue it at trial. Ultimately, we need not decide whether AVB forfeited its defense

based on its pleadings or presentation. Assuming the defense is preserved, AVB does not

meet its burden to establish the merits.

       The foundational premise of AVB's statute of limitations claim is flawed. AVB

misconstrues the "may bring an action" language in section 708.230, subdivision (a)(1).

The statute's language deals with the accrual of a judgment debtor's claim against a third

                                             14
party, not whether the judgment debtor has present capacity to enforce that claim. (See,

e.g., Mays v. City of Los Angeles (2008) 43 Cal.4th 313, 323 ["Limitations statutes

ordinarily establish the period in which an action must be initiated [citations], but the

outcome of the claim or charges generally remains to be adjudicated"].) Reasonably

construed, section 708.230, subdivision (a)(1) requires a creditor's suit to be brought

within the time that the judgment debtor could have brought an action against the third

party, without regard to factors like incapacity or licensure that would prevent it from

bringing suit. The statute effectively borrows the statute of limitations governing a

judgment debtor's underlying claim against a third party.8

       WP Solutions could bring a collection action against AVB within four years of

when AVB failed to meet its payment obligations under the waterproofing subcontracts.

(§§ 337, subd. (a) [four-year limitations period for an "action upon any contract,

obligation, or liability founded upon an instrument in writing"], 343 [four-year catchall

period].) Thus, Wanke's suit is timely under section 708.230, subdivision (a)(1) if it was

filed within four years of when WP Solutions' collection action accrued.

       The problem for AVB is that the record does not establish as a matter of law when

that occurred. Wanke argues the $109,327 due pertained solely to WP Solutions' work

on two projects, Oxford Court and the Taitz residence. Indeed, Keck testified based on

exhibit No. 13 that those were "the only project[s] where there's open money due." The


8       By analogy, section 335 provides: "The periods prescribed for the commencement
of actions other than for the recovery of real property are as follows[.]" The various
limitations periods that follow (§§ 335.1−343) do not depend on whether a party may
commence an action.
                                             15
subcontracts for both projects were signed in 2013, within four years of Wanke's 2016

creditor's suit. Payments were due once certain conditions were met. Even in the

unlikely event that AVB owed WP Solutions the day those subcontracts were signed,

Wanke claims its creditor's suit was timely under section 708.230, subdivision (a)(1).

       AVB responds by challenging whether Wanke's action related solely to Oxford

Court and the Taitz residence. But it cites no evidence that would permit us to find as a

matter of law that Wanke sued more than four years after any actionable nonpayment by

AVB. AVB does not identify which projects had payments due, how much was due per

project, or when those obligations became overdue so as to trigger accrual of the statute

of limitations.

       As the party asserting a statute of limitations defense, AVB bore the burden of

proving what portion of Wanke's claims were time-barred. (Ladd v. Warner Bros.

Entertainment, Inc. (2010) 184 Cal.App.4th 1298, 1310; Evid. Code, § 500.) Even if we

consider its statute of limitations argument first raised on appeal, AVB fails to meet its

burden of proof. "Although [it] faults [Wanke] for not presenting evidence to establish

what portion of damages may have been barred by [AVB's] statute of limitations

. . . defense[], the burden of producing such defense evidence rested with [AVB], not

with [Wanke]." (Ladd, at p. 1310.)

4.     Warranty Setoffs

       We turn finally to AVB's argument that the trial court applied the wrong legal

standard and overlooked undisputed evidence in denying its warranty setoff claim. As



                                             16
we explain, the court gave several independent reasons for its ruling. We affirm based on

one of those stated reasons—AVB's failure to establish the value of those setoffs.

       a.      Legal Principles

       "The right to offset is a long-established principle of equity." (Carmel Valley Fire

Protection Dist. v. State of California (1987) 190 Cal.App.3d 521, 550; see Kruger v.

Wells Fargo Bank (1974) 11 Cal.3d 352, 363.) As early as the 17th century, English

chancery courts permitted a defense of setoff "founded on the equitable principle that

'either party to a transaction involving mutual debts and credits can strike a balance,

holding himself owing or entitled only to the net difference.' " (Granberry v. Islay Inv.

(1995) 9 Cal.4th 738, 743–744; Jess v. Herrmann (1979) 26 Cal.3d 131, 142 (Jess).)

Codifying this principle, section 431.70 provides, in part:

            "Where cross-demands for money have existed between persons at
            any point in time when neither demand was barred by the statute of
            limitations, and an action is thereafter commenced by one such
            person, the other person may assert in the answer the defense of
            payment in that the two demands are compensated so far as they
            equal each other, notwithstanding that an independent action
            asserting the person's claim would at the time of filing the answer be
            barred by the statute of limitations."

       Traditional setoff rules "operate as an accounting mechanism to avoid a payment

and repayment from one party to another," "simply eliminat[ing] a superfluous exchange

of money between the parties." (Jess, supra, 26 Cal.3d at pp. 134, 137.) Section 431.70

"permits a defendant in a civil action to assert a claim for relief in its answer and allege,

in effect, that the defense claim constituted prior payment for the plaintiff's claim and

therefore should be set off against any award in the plaintiff's favor." (Construction


                                              17
Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 192.) "[R]elief

by way of a section 431.70 setoff is limited to defeating the plaintiff's claim." (Id. at

p. 195.) "[A] defendant may not obtain an award of affirmative relief against a plaintiff

by way of section 431.70" and may instead "only assert the setoff defensively to defeat

the plaintiff's claim in whole or in part." (Id. at p. 198.)

       Section 431.70 requires "cross-demands for money." Mutuality is key—the

demands must exist "between the same parties in the same right." (Harrison v. Adams

(1942) 20 Cal.2d 646, 649‒650.) Although the statute refers to demands "for money,"

such demands need not be liquidated. (See Legis. Com., com. 14C West's Ann. Code

Civ. Proc. (2009 ed.) foll. § 431.70, p. 226 ["It is not necessary under Section 431.70, as

it was not necessary under [former] Section 440, that the cross-demands be liquidated."],

citing Hauger v. Gates (1954) 42 Cal.2d 752, 755 ["[Former] [s]ection 440 does not

require that the cross-demands be liquidated."].) Likewise, the fact that a demand has not

been reduced to judgment is not an obstacle to setoff. (Harrison, at p. 649.)

       From these authorities we derive a general rule. A setoff may be applied pursuant

to section 431.70 between parties who owed each other mutual debts or credits at a time

when neither claim was time-barred. By reducing or eliminating a defendant's obligation,

setoff serves as an "innocuous accounting mechanism" to eliminate a superfluous

exchange between the parties. (Jess, supra, 26 Cal.3d at pp. 137−138.)

       b.     Additional Background

       AVB sought a total setoff of $179,230 against the amount it owed WP Solutions.

This amount was allegedly attributable the lost value of warranty work ($43,929), a resin

                                               18
layer not installed at two project sites ($78,246), and necessary pool deck repairs at the

Point Loma site ($57,055). The trial court accepted a smaller setoff of $25,908 for pool

deck repair at Point Loma but otherwise rejected AVB's setoff claims. AVB challenges

only the denial of its warranty setoff on appeal, so we limit our summary to that claim.

       Each of WP Solutions' subcontracts required it to perform ongoing warranty

repairs for a given number of years after it received final payment. As Keck explained at

trial, WP Solutions built the warranty obligation into its bid price for each subcontract.

The warranties covered miscellaneous repairs of cracks, nicks, or chips of coating, as

well as inspections and water tests. Once WP Solutions went insolvent in 2014, it could

no longer do warranty work. AVB argues it was entitled to withhold funds necessary to

cover anticipated warranty work from that point forward.

       In its trial brief, AVB valued the warranty setoffs at five to seven cents per square

foot multiplied by the square footage for each project and the number of years remaining

on each warranty.9 As AVB's president Madureira would testify at trial, those per-

square-foot cost benchmarks derived from Keck's estimates in 2014, when AVB received

Wanke's notice of levy and investigated possible setoff claims. However, Keck offered a

different benchmark at trial, upwards of 12 cents per square foot. Wanke's rebuttal expert




9      AVB used a five-cents-per-square-foot benchmark for Oxford Court, and a seven-
cents benchmark for each of the remaining four projects.

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Paul Kushner did not challenge the per-square-foot benchmarks but testified that AVB

had overestimated the years remaining under each warranty.10

       The trial court rejected AVB's warranty setoff claim on multiple grounds. First, it

determined that AVB did not carry its burden to establish the value of the warranty

setoffs. It rejected the simplistic calculation based on the square footage and years

because: (1) it lacked confidence in Keck's testimony providing the basis for his five to

seven cents benchmark, and (2) Wanke's rebuttal expert revealed errors in the years

estimated under each warranty. The court faulted AVB for failing to do an actuarial

analysis of the warranty claims or discount the claimed amounts to their net present

value. Moreover, it agreed with Kushner that as to one property, any warranty obligation

had expired when WP Solutions went insolvent.

       In articulating other grounds, the trial court stated the warranty setoffs were

"unmatured, inchoate, speculative and contingent" and failed for lack of mutuality. As a

factual matter, the court believed any warranty claims were unlikely to arise in practice

because Keck was addressing calls through his successor company.

       c.     Analysis

       AVB takes issue with the court's finding that the claimed setoffs "were unmatured,

inchoate, speculative and contingent." It argues the court applied the wrong standard in


10     Kushner explained that depending on the project, even 12 cents per square foot
could be reasonable. For purpose of analysis, Kushner further assumed that AVB had
complied with maintenance requirements under the warranties, though only one project
had such documentation. Nevertheless, because there were fewer years left on each
warranty than alleged in AVB's trial brief, Kushner believed the warranty setoff claims
were overstated.
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requiring the value of warranty work to be liquidated and certain. AVB also claims the

court erred in rejecting undisputed evidence estimating the value of those warranties at

seven cents per square foot.

       Even if AVB is correct that the court applied the wrong standard in articulating

one stated ground, any error does not affect the court's independent factual basis for

rejecting AVB's warranty setoff claim—i.e., that AVB did not carry its burden to prove

the value of those setoffs. AVB offered conflicting valuation evidence. At trial, Keck

based his estimates off a benchmark of 12 cents per square foot. But AVB's president

relied on Keck's earlier benchmark of five to seven cents per square foot. Wanke's

rebuttal expert applied the five-to-seven-cents benchmark solely for purposes of analysis

to highlight a separate calculation error.

       Ultimately, the trial court did not find any of Keck's benchmarks credible, citing

"the lack of confidence the court had in Mr. Keck's testimony generally, and specifically

the testimony which provided the basis for the 5-7 cents figure." It explained that

"inasmuch as AVB has the burden of proof, it was required to offer sufficient evidence

for the court not only to conclude that there were valid warranty offsets, but also to form

an evidence-based, non-speculative determination of the value of those claims. This

AVB failed to do."

       A defendant seeking setoff pursuant to section 431.70 bears the burden to establish

a nonspeculative value of its demand. (See Evid. Code, § 500.) AVB asks us to adopt

the seven-cents benchmark that the court specifically found not credible. But "it is not

our role to reweigh the evidence, redetermine the credibility of the witnesses, or resolve

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conflicts in the testimony, and we will not disturb the judgment if there is evidence to

support it." (Morgan v. Imperial Irrigation Dist. (2014) 223 Cal.App.4th 892, 916.) And

we cannot simply pick a different number. Absent any other basis to evaluate how much

the warranty setoffs were worth, we uphold the trial court's conclusion that AVB failed to

meet its burden.

                                      DISPOSITION

       The judgment is affirmed. Wanke is entitled to its costs on appeal.




                                                                                  DATO, J.

WE CONCUR:



BENKE, Acting P. J.



O'ROURKE, J.




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