Judge: Andrew E. Cooper, Case: 22CHCV00297, Date: 2025-02-28 Tentative Ruling

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Case Number: 22CHCV00297    Hearing Date: February 28, 2025    Dept: F51

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F-51

DEMURRER WITH MOTION TO STRIKE

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Demurrer with Motion to Strike filed: 10/30/24

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MOVING PARTY: Defendants Beitler & Associates, Inc.; Bayside Domination, LLC; and 11151 Morrison Street LLC (collectively, “Defendants”)

RESPONDING PARTY: Plaintiff CLC Builders, Inc. (“Plaintiff”)

NOTICE: OK

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RELIEF REQUESTED: Defendants demur against Plaintiff’s entire second amended complaint (“SAC”). Defendants also move to strike Plaintiff’s references to punitive damages from the SAC.

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TENTATIVE RULING: The demurrer is sustained as to Plaintiff’s second cause of action, with 30 days leave to amend, and overruled as to the remainder. The motion to strike is denied.

BACKGROUND¿ 

This is a contract action in which Plaintiff alleges that in October 2019, it entered into a written agreement with Defendants in which Plaintiff agreed to provide construction services to Defendants’ property, located at 5263 N. Cartwright Avenue, North Hollywood, California 91601. (SAC ¶¶ 10, 24.) “The terms of said agreement were revised and amended as reflected in a series of documents wherein Defendants, and each of them, agreed to compensate Plaintiff for the performance of such services in an amount not less than $2,549,808.80, plus all additional charges for extras and change orders subsequently ordered.” (Id. at ¶ 24.) Plaintiff alleges that it performed the services as agreed upon, but Defendants failed to pay Plaintiff. (Id. at ¶¶ 25–28.)

On 4/27/22, Plaintiff filed its original complaint, alleging against Defendants the following causes of action: (1) Breach of Contract; and (2) Foreclosure of Mechanics’ Lien. On 3/2/23, Plaintiff filed its first amended complaint, alleging against Defendants the following causes of action: (1) Breach of Contract; (2) Foreclosure of Mechanics’ Lien; (3) Fraud and Deceit; (4) Work, Labor, and Services (Quantum Meruit); (5) Money Due on an Open Book Account (Quantum Meruit); (6) Reasonable Value of Services Rendered (Quantum Meruit); and (7) Unfair Business Practices.

On 6/10/24, Plaintiff filed its operative SAC, alleging against Defendants the following causes of action: (1) Breach of Contract; (2) Foreclosure of Mechanics’ Lien; (3) Fraud and Deceit; (4) Work, Labor, and Services (Quantum Meruit); (5) Money Due on an Open Book Account (Quantum Meruit); and (6) Reasonable Value of Services Rendered (Quantum Meruit).

On 10/30/24, Defendants filed the instant demurrer and motion to strike. On 2/18/25, Plaintiff filed its opposition. On 2/21/25, Defendants filed their reply.

ANALYSIS

As a general matter, a party may respond to a pleading against it by demurrer on the basis of any single or combination of eight enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).) In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.)¿

“A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the pleading’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the pleading, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 

Here, Defendants demurs to the entire SAC on the basis that Plaintiff fails¿to allege facts sufficient to state any cause of action therein.

A.    Meet-and-Confer

Defendants’ counsel declares that on the parties met and conferred by telephone prior to the filing of the instant demurrer and motion to strike. (Decl. of Mark D. Hurwitz ¶ 2a.) Accordingly, the Court finds that counsel has satisfied the preliminary meet and confer requirements set forth by Code of Civil Procedure section 430.31.

B.     Breach of Contract

Plaintiff’s first cause of action alleges Breach of Contract against Defendants. To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) A written contract may be pleaded either verbatim or generally “according to its legal intendment and effect.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–199.) “An oral contract may be pleaded generally as to its effect, because it is rarely possible to allege the exact words.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Here, Plaintiff alleges that “although Plaintiff executed multiple contract documents at the instance and request of BEITLER, BAYSIDE, 11151 MORRISON, Barry Beitler, REZAK, and their various agents and employees relating to the 5249 Cartwright Property, fully executed copies of such documents were never provided by said Defendants, and each of them, to Plaintiff, and Plaintiff is informed and believes and based thereon alleges that Defendants, and each of them, remain in possession thereof.” (SAC ¶ 24.) Instead, Plaintiff attaches to the SAC “true copies of those contract documents presently in possession of Plaintiff that evidence and/or constitute incomplete and/or not fully-executed portions of the final contract between Plaintiff and BEITLER, BAYSIDE, 11151 MORRISON, and DOES 2 to 200.” (Ibid.)

Defendants argue that “since the Purported Contract is not signed by any of the Defendants, either the contract claims are patently defective on their face, or the SAC fails to specify whether the purported contract on which the claims therein are based is written, is oral, or is implied by conduct.” (Dem. 6:10–13.) Defendants argue that the “contract attached as Exhibit 1 to the SAC is incomplete or is not fully executed [SAC, ¶ 24]. Thus, CLC has not alleged the first and most basic element of a claim for breach of contract, i.e., the contract itself, much less can it allege that any of the Defendants breached the contract.” (Id. at 7:10–12.)

The Court disagrees and finds that while the draft agreement attached to the SAC is admittedly incomplete/not fully executed, Plaintiff has sufficiently alleged that Defendants are in exclusive possession of the fully-executed copies of the subject agreement(s). (SAC ¶ 24.) The Court finds it sufficient at the pleading stage that Plaintiff has alleged the existence of “a written agreement pursuant to which Plaintiff agreed to perform certain improvements to and upon the 5249 Cartwright Property, and wherein said Defendants, and each of them, agreed to compensate Plaintiff for the performance of such services.” (Ibid.; Construction Protective Services, Inc., 29 Cal.4th at 198–199.)

Defendant further argues that the draft agreement contains a provision for mediation of Plaintiff’s claims, and “the SAC does not allege that CLC complied with this mediation obligation. Thus, even if the Purported Contract were enforceable (which it is not), CLC cannot plead its performance of its obligations thereunder.” (Dem. 7:24–26.) However, the Court finds it sufficient that Plaintiff has alleged that it “has fully performed all conditions, covenants, and promises required by him [sic] on his [sic] part to be performed in accordance with the terms and conditions of the 5249 Cartwright Agreement through the dates of said Defendants’ material breaches thereof.” (SAC ¶ 27.)

Based on the foregoing, the Court finds that Plaintiff has alleged facts sufficient to constitute a cause of action for Breach of Contract. Accordingly, the demurrer is overruled as to Plaintiff’s first cause of action.

C.    Foreclosure of Mechanics’ Lien

Plaintiff’s second cause of action alleges Foreclosure of Mechanics’ Lien against Defendants. Here, Defendants argue that “the Lien itself shows that BAI was not an owner of the Property and CLC did not provide BAI with notice of the Lien.” (Dem. 8:6–7, citing Ex. 2 to SAC.) In opposition, “Plaintiff acknowledges that Defendant BEITLER & ASSOCIATES, INC. is not named on the Mechanic’s Lien.” (Pl.’s Opp. 6:5–6.)

Based on the foregoing, the Court finds that Plaintiff has failed to allege facts sufficient to constitute a cause of action for Foreclosure of Mechanics’ Lien as against defendant Beitler & Associates, Inc. Accordingly, the demurrer is sustained as to Plaintiff’s second cause of action.

D.    Fraud and Deceit

Plaintiff’s third cause of action alleges Fraud and Deceit against Defendants. “One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.” (Civ. Code § 1709.) The elements that must be pleaded in a cause of action for fraud are: (1) a misrepresentation (false representation, concealment or nondisclosure); (2) knowledge of its falsity (or “scienter”); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage. (Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363.)

1.      Particularity

Fairness requires that allegations of fraud be pled “with particularity” so that the court can weed out nonmeritorious actions before a defendant is required to answer. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The particularity requirement necessitates pleading facts that “show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

Here, Plaintiff alleges that Defendants “falsely promised to execute and return … signed contract documents to CLC to never actually execute or return such signed documents to CLC at all, thereby creating a basis upon which to undermine CLC’s eventual claims against Defendants.” (SAC ¶ 17.) Plaintiff further alleges that Defendants made misrepresentations to their lenders, and “had said Defendants disclosed facts suggesting that the reason for such ‘side agreements’ was to deceive or mislead a financial entity or commit any other illegal, dishonest or unethical act, Plaintiff would never have agreed to such an arrangement, or continued to enter into contracts or do business with BEITLER or any BEITLER-Affiliated Entities at all.” (Id. at ¶¶ 20, 43.)

Defendants argue that “since CLC has failed to allege how, when, where, to whom, and by what means Mr. Beitler, Mr. Rezak, or anyone else made the alleged representations, the demurrer to the Third Cause of Action must be sustained.” (Dem. 9:10–12.) In opposition, Plaintiff argues that it “has set forth specific and precise misrepresentations made by Defendants and their principals spanning multiple commercial construction contracts spanning four lawsuits, which induced Plaintiff to enter into and perform the Agreement and ultimately resulted in damages to Plaintiff – exposing CLC unknowingly to BEITLER’s apparent overall scheme to mislead its own lender. Plaintiff clearly identifies that the fraudulent representations alleged were made by BEITLER’s owner and Chief Executive Officer, Barry Beitler, and by its Chief Operations Officer and de facto in-house counsel, Donald Rezak.” (Pl.’s Opp. 6:17–24, citing SAC ¶¶ 14, 17–20, 40–58.)

Based on the foregoing, the Court agrees with Plaintiff and finds that Plaintiff has alleged facts sufficient to meet the heightened pleading standard for a Fraud and Deceit cause of action.

2.      Economic Loss Doctrine

“In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 20.) “A party alleging fraud or deceit in connection with a contract must establish tortious conduct independent of a breach of the contract itself, that is, violation of some independent duty arising from tort law.” (Food Safety Net Servs. v. Eco Safe Sys. USA, Inc. (2012) 209 Cal.App.4th 1118, 1130.)

Here, Defendants argue that the “fraud claim is effectively a dressed-up version of the contract claim. Not only are the alleged damages the same, but the deficiently pleaded representations boil down to statements that CLC’s invoices would timely be paid.” (Dem. 9:18–20, citing SAC ¶ 41.)

Plaintiff argues in opposition that it has sufficiently alleged “not only a breach of the underlying contract, but that Plaintiff was fraudulently induced by Defendants’ multiple misrepresentations to enter into and perform many hundreds of thousands of dollars of commercial construction work by virtue of the misrepresentations made by Defendants to the effect that Defendants were and would remain solvent and able to pay for Plaintiff’s services, when Defendants’ efforts to use Plaintiff to deceive their own lender – a matter independent from the contract sued upon – clearly establishes the falseness of this representation.” (Pl.’s Opp. 7:28–8:6.) Plaintiff therefore asserts that it “was clearly and deliberately lied to and deceived by Defendants in inducing Plaintiff to enter into and perform the contract in the first place.” (Id. at 8:21–22.)

As the Court finds that Plaintiff has alleged facts sufficient to constitute a cause of action for Fraud and Deceit, as outlined above, the Court likewise finds that this tort is independent from any alleged breach of the underlying contract itself. Furthermore, Plaintiff has alleged damages resulting from this cause of action, in addition to the contract damages. (SAC ¶ 58.) Accordingly, the Court finds that the economic loss rule does not apply to bar Plaintiff’s third cause of action.

Based on the foregoing, the demurrer to Plaintiff’s third cause of action is overruled.

E.     Quantum Meruit

Plaintiff’s fourth, fifth, and sixth causes of action respectively allege (4) Work, Labor, and Services; (5) Money Due on an Open Book Account; and (6) Reasonable Value of Services Rendered against Defendants based on Quantum Meruit.

“Quantum meruit refers to the well-established principle that the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered. To recover in quantum meruit, a party need not prove the existence of a contract, but it must show the circumstances were such that the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made.” (Chodos v. Borman (2014) 227 Cal.App.4th 76, 96 [citations and quotation omitted].) “[I]n order to recover under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for such services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 248.)

Here, Defendants argue that since the Second, Fourth, Fifth and Sixth Causes of Action for quantum meruit all incorporate the Purported Contract and the allegations with respect thereto … those claims must fail as well.” (Dem. 7:27–8:1.) In opposition, Plaintiff argues that “Defendants fail to cite any controlling authority to the effect that alternatively plead common counts are inherently defeated if a demurrer is sustained as to a cause of action for breach of contract.” (Pl.’s Opp. 9:1–3.)

As the Court finds that Plaintiff has alleged facts sufficient to constitute a cause of action for Breach of Contract, as outlined above, the Court likewise finds that Plaintiff has alleged facts sufficient to constitute its Quantum Meruit causes of action. Accordingly, the demurrer to Plaintiff’s fourth, fifth, and sixth causes of action is overruled.

F.     Motion to Strike

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436, subd. (b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id., § 437.)

Punitive damages may be recovered upon a proper showing of malice, fraud, or oppression by clear and convincing evidence. (Civ. Code § 3294, subd. (a).) “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others. (Id. at subd. (c); Turman v. Turning Point of Cent. Cal., Inc. (2010) 191 Cal.App.4th 53, 63.) “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights. (Ibid.) “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury. (Ibid.) Punitive damages must be supported by factual allegations. Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud or malice. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042; Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643.)

Here, Defendants argue that “for the reasons set forth in the accompanying Demurrer, the SAC fails to state a cause of action for fraud, and no other tort claim has been pled, the allegation and prayer for punitive damages are improper.” (MTS 3:10–12.) The Court disagrees and reiterates its finding that Plaintiff has sufficiently alleged a cause of action for Fraud and Deceit against Defendants. Accordingly, the motion to strike Plaintiff’s prayer for punitive damages is denied.

G.    Leave to Amend

Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

Here, the Court notes that this is the first demurrer and motion to strike brought against Plaintiffs’ operative pleading, and Plaintiff requests leave to amend in the event the Court finds merit to any of Defendants’ arguments. (Pl.’s Opp. 9:2124.) Therefore, under the Court’s liberal policy of granting leave to amend, Plaintiff is granted 30 days leave to amend the complaint to cure the defects set forth above.

CONCLUSION¿ 

The demurrer is sustained as to Plaintiff’s second cause of action, with 30 days leave to amend, and overruled as to the remainder. The motion to strike is denied.