Judge: Anne Richardson, Case: 22STCV16188, Date: 2023-05-17 Tentative Ruling

Case Number: 22STCV16188    Hearing Date: May 17, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

On May 16, 2022, Plaintiff JLJ Extreme Rebar, Inc. (JLJ) initiated this lawsuit against Defendants (1) Sahara Construction Co., Inc. (Sahara), (2) Colonial American Casualty and Surety Co. (Colonial), (3) Hudson Insurance Co. (Hudson), and (4) Does 1 through 100, inclusive. The operative June 23, 2022 First Amended Complaint (FAC) alleges (1) Breach of Contract, (2) Fraudulent Inducement, and (3) Goods and Services Rendered against Sahara Construction and Does 1 through 20 based on allegations that despite entering a construction project contract with JLJ in May 2021, the project was delayed until December 2021, with Sahara Construction inducing JLJ to remain attached to the project through oral promises of compensation for any increased cost of rebar, leading JLJ to begin and complete its work in December 2021 and issue a written change order to Sahara Construction, only for Sahara to breach the parties’ agreement by failing to make timely payments or sign the change order, resulting in owed compensation to JLJ in the amount of $138,529.46. The FAC alleges (4) Recovery on Mechanic’s Lien Released Bond against Colonial and Does 21 through 30 based on allegations that Build Group Construction Company, Inc., the direct contractor for the Project, obtained a Mechanic’s Lien Release Bond (Release Bond), Bond No. 9393033, for the benefit of Plaintiff to pay Plaintiff’s claims that are deemed meritorious in this action, and that Plaintiff thus has a claim against Colonial and the Release Bond based on its claim against Sahara Construction in the amount of $138,529.46. The FAC alleges (5) Recovery on Contractor’s License Bond against Hudson and Does 31 through 40 based on allegations that Hudson and Does 31 through 40 issued and delivered a certain contractors’ surety bond, namely, Contractor’s Bond No. 10054599 (Bond), pursuant to Business and Professions Code Section 7071.5 in favor of the State of California for the benefit of any person damaged as a result of violations by Defendants, and any of them, of Chapter 9, Division 3, of the Business and Professions Code of the State of California, for which reason Plaintiff JLJ has a claim against Hudson in the maximum amount permitted by the bond.

Service of the FAC and its summons was effected on Colonial on June 27, 2022 and on Hudson and Sahara Construction on June 28, 2022, with proofs of service filed with the Court on June 30, 2022.

On July 19, 2022, Hudson filed a Cross-Complaint against JLJ and Sahara pursuant to a single claim of Declaratory Relief based on allegations that an actual controversy has arisen and now exists between Hudson and the Cross-Defendants (JLJ and Sahara) because (1) Plaintiff JLJ contends that it is entitled to recover under the contractor’s license bond issued by Hudson up to the maximum allowed by the Bond and (2) Sahara Construction has opposed payment from Hudson’s bond.

Service of the Cross-Complaint and its summons was effected on Sahara on August 8, 2022. The docket fails to reflect service on JLJ, but JLJ answered the Cross-Complaint on August 26, 2022. Sahara answered the Cross-Complaint on September 28, 2022.

On September 12, 2022, Sahara demurred to the FAC’s second cause of action for Fraudulent Inducement. The demurrer was calendared for hearing on January 10, 2023.

On November 1, 2022, Reza Ghaboosi, Esq. moved to be relieved as Sahara’s counsel.

On November 30, 2022, the Court granted the motion to relieve counsel and set an OSC re Status of New Counsel for January 10, 2023.

On December 22, 2022, the matters calendar for January 10, 2023 were continued to January 24, 2023.

On January 12, 2023, the January 24, 2023 hearings on demurrer and OSC were continued to May 17, 2023.

On April 23, 2023, Sahara filed a substitution of attorney with the Court noticing new counsel Vip Bhola, Esq.

Sahara’s demurrer is now before the Court.

JLJ has failed to oppose the demurrer. There is a facially valid proof of service attached to the demurrer. 

Demurrer

Demurrer Sufficiency Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).) This device 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. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a [general] demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

Demurrer Uncertainty Standard 

A demurrer to a pleading lies where the pleading is uncertain, ambiguous, or unintelligible. (Code Civ. Proc. § 430.10, subd. (f).) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) As a result, a special demurrer for uncertainty is not intended to reach failure to incorporate sufficient facts in the pleading but is directed only at uncertainty existing in the allegations already made. (People v. Taliaferro (1957) 149 Cal.App.2d 822, 825.) Where complaint is sufficient to state a cause of action and to apprise defendant of issues he is to meet, it is not properly subject to a special demurrer for uncertainty. (See ibid.; see also Gressley v. Williams (1961) 193 Cal.App.2d 636, 643 [“A special demurrer [for uncertainty] should be overruled where the allegations of the complaint are sufficiently clear to apprise the defendant of the issues which he is to meet”].)

FAC, Second Cause of Action, Fraudulent Inducement: SUSTAINED, With Leave to Amend.

“Fraud in the inducement is a subset of the tort of fraud … [and] occurs when [1] the promisor knows what he is signing but [2] his consent is induced by fraud, [3] mutual assent is present and [4] a contract is formed, which, by reason of the fraud, is voidable.” (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294-295, quotations and citations omitted.)

Every element of the cause of action for fraud must be alleged … factually and specifically[,] and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.)

JLJ alleges Fraudulent Inducement against Sahara Construction and Does 1 through 20 based on allegations that despite entering a construction project contract with JLJ in May 2021, the project was delayed until December 2021, with Sahara Construction inducing JLJ to remain attached to the project through oral promises of compensation for any increased cost of rebar, leading JLJ begin and complete its work in December 2021 and issue a written change order to Sahara Construction, only for Sahara to breach the parties’ agreement by failing to make timely payments or sign the change order, resulting in owed compensation to JLJ in the amount of $138,529.46. (FAC, ¶¶ 9-11, 19-25.)

In its demurrer, Sahara generally argues that either the Fraudulent Inducement claim is (1) not sufficiently stated or is uncertainly stated for various reasons or (2) is barred by the economic loss rule. (Demurrer, pp. 6-12.)

The Court finds that the second cause of action is not sufficiently stated, though not exactly for the reasons argued by Sahara. A fraudulent inducement claim contemplates the knowing entering of a contract between two parties manifesting mutual assent, with one party inducing the assent of the other through fraudulent misrepresentations or concealment that lead the other to sign the contract to his or her detriment. (See Hinesley v. Oakshade Town Center, supra, 135 Cal.App.4th at pp. 294-295; cf. Julius Castle Restaurant Inc. v. Payne (2013) 216 Cal.App.4th 1423, 1440-1442 [permitting the admission of parol evidence to show that written contract was fraudulently induced].) Here, the parties are alleged to have entered an oral agreement, with Sahara refusing to sign the change order and with the pleadings failing to show that JLJ explicitly signed the change order. (FAC, ¶¶ 11, 20, 22; see FAC generally.) Thus, JLJ appears to bring a fraud cause of action in incorrect form, i.e., alleging fraudulent inducement rather than a fraudulent misrepresentation with reliance thereon causing JLJ damages.

Accordingly, Sahara’s demurrer to the FAC’s second cause of action is SUSTAINED, With Leave to Amend, with the amendment permitted to allege any type of fraud claim. 

Conclusion

 Defendant/Cross-Defendant Sahara Construction’s Demurrer to First Amended Complaint’s Second Cause of Action for Fraudulent Inducement is SUSTAINED, With Leave to Amend. Plaintiff JLJ is ordered to file a Second Amended Complaint within 14 days.