Judge Alison Mackenzie, Case Number: 24STCV06087, Date: 2024-08-12 Tentative Ruling

Case Name: Gary Michelson v. Conquest General Building Contractors Inc., et al.

Tentative Ruling: The demurrer filed by Conquest General Building Contractors, Inc., and James Michael Korkunis is OVERRULED.

On March 12, 2024, Dr. Gary Michelson (Plaintiff) filed a Complaint alleging six causes of action against Conquest General Building Contractors Inc. (Conquest) and James Michael Korkunis (individually referred to herein after as “Korkunis”, collectively referred to as “Defendants”). The six cause of action are:

The causes of action stem from a home improvement agreement that Plaintiff and Defendants entered into on June 7, 2023. Plaintiff alleges that the initial agreed upon cost for the work was $267,750.00. (Complaint, ¶¶28-29.) Additionally, Plaintiff alleges that no work was to be paid to Defendants prior to completion. (Complaint, ¶26.) However, Defendants allegedly began to ask for payments immediately upon execution of the agreement, including a $39,000.00 deposit (Complaint, ¶¶30 and 37), $30,000.00 on July 24, 2023 for adjustments requested by a soil engineer (Complaint, ¶¶32 and 37), and another $50,000.00 on July 31, 2023. (Complaint, ¶37.)

Plaintiff alleges that during a June 7, 2023 face-to-face meeting between Plaintiff and Defendant Korkunis, on behalf of Defendant Conquest Korkunis orally promised that if Defendants were hired, three trained work crews would be provided each day, no demand for progress payments would be made until specific portions of the project were completed, and that the job would be completed by September of 2023. (Complaint, ¶53.) Plaintiff alleges that work crews were held back deliberately (Complaint, ¶ 38), payments were demanded before progress had been made, (Complaint, ¶ 37) and the project remains uncompleted. (Complaint, ¶49.) Plaintiff then filed suit.

The motion now before the Court is Defendants’ demurrer to Plaintiff’s Complaint. Defendants demur to the first, second, and third causes of action, and additionally argue that Korkunis should not be included in Plaintiff’s first three causes of action. Plaintiff filed an opposition; no reply was filed.

“Before filing a demurrer…the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. §430.41(a).) Although the demurring party attaches emails demonstrating meet and confer efforts, there was no meeting telephonically nor in person. Therefore, the requirements of Code Civ. Proc. §430.41(a) remain unsatisfied. However, per Code Civ. Proc. §430.41(a)(4), “A determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” Therefore, the Court ow turns its attention to the demurrer.

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Defendants’ primary argument upon demurrer is that each of the first three causes of action are uncertain and fail to state facts sufficient to support a cause of action. As explained below, the Court disagrees and overrules the demurrer.

Upon demurrer, Defendants contend Plaintiff has not alleged an intent to defraud on part of Defendants. On the contrary, Plaintiff alleges that exact intention. In the Complaint, Plaintiff alleges that in a face-to-face meeting on June 7, 2023 between Plaintiff and Korkunis – who spoke on behalf of Conquest – Korkunis orally promised that if Defendants were hired, three trained work crews would be provided each day, no demand for progress payments would be made until specific portions of the project were completed, and that the job would be completed by September of 2023. (Complaint, ¶53.) Plaintiff then alleges that work crews were held back deliberately (Complaint, ¶¶ 38, 55), payments were demanded before progress had been made, (Complaint, ¶¶ 37, 55) and the project remains uncompleted. (Complaint, ¶¶ 49, 55.) The Complaint makes clear that not only is the third element of intent sufficiently plead, but so is the first element of a false representation and the second element of scienter. Here, Plaintiff alleges specifically who said what and when, and that what was said later turned out to be false. The intent here was clear, to induce Plaintiff to hire Defendants and enter into the agreement with Defendants for the home improvement project. The fourth element of justifiable reliance is fulfilled because the Complaint shows that Plaintiff performed due diligence by taking bids from two other companies before selecting Defendants. (Complaint, ¶9.) Plaintiff relied on Defendants expertise because Plaintiff knew nothing about construction. (Complaint, ¶7.) With each element of fraud plead with the requisite particularity, the first, second, and third[1] causes of action survive demurrer, and the demurrer is overruled.

Defendants additionally make the contention that Korkunis should not be included in Plaintiff’s first three causes of action because officers of corporation do not incur personal tort liability merely by reason of their official position. (Demurrer, 11:10-11.) In making such a contention, Defendants rely on several cases, including the Supreme Court of California’s Wyatt v. Union Mortgage Co. (1979) 24Cal.3d 773 (Wyatt). However, Defendants’ reliance is misplaced. Our Supreme Court was mindful in their holding and meticulous with their words. Wyatt involved a case where the plaintiffs alleged misrepresentations regarding advertisements by a mortgage company. When plaintiffs approached the company about their supposed debtor friendly loans, further misrepresentations were made to induce plaintiffs into signing, plaintiffs signed, and only later found that the loans they agreed to were on much less favorable terms. (Wyatt, supra, at 779-781.) When the lower court ruled in favor of plaintiffs, the mortgage company appealed to the Supreme Court, arguing that officers of a corporation are typically not rendered personally liable. The Wyatt Court pointed out that this is the general rule, however, directors and officers of a corporation “may become liable if they directly ordered, authorized, or participated in tortious conduct.” (Wyatt, supra, at 785.) That is what Plaintiff is alleging.

This sentiment in Wyatt has been echoed in later cases including those cited by Plaintiff: PMC, Inc. v. Kadisha (2000) 78 Cal.App.4^th 1368, 1379 and Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 505 [“Director status therefore neither immunizes a person from individual liability nor subjects him or her to vicarious liability.”] and those cited by Defendants: People v. Pacific Landmark, LLC (2005) 129 Cal.App.4^th 1203, 1213 and Reynolds v. Bement (2005) 36 Cal.4^th 1075, 1090 (abrogated on other grounds by Martinez v. Combs (2010) 49 Cal.4^th 35).

As the allegations against Conquest are sufficient, so are those against Korkunis. Therefore, the demurrer as to Korkunis’ individual liability is overruled.

The demurrer filed by Conquest General Building Contractors, Inc., and James Michael Korkunis is OVERRULED. Defendants have twenty days to answer the Complaint.

[1] Intentional and negligent misrepresentation possess the same essential elements as Plaintiff’s initial fraud claim, and the Court need not repeat its analysis.