Judge Audra Mori, Case 20STCV26415 2022-08-03 Tentative Ruling

Plaintiff Vanui Isakhanyan (“Plaintiff”) filed this action against Defendants US Home Pros, Inc. dba Cal Retrofit (“US Home Pros”) and RIFM Properties, LLC (“RIFM”) for injuries Plaintiff sustained after slipping and falling down a set of stairs.

US Home Pros previously demurred to RIFM’s First Amended Cross-Complaint, which was sustained with leave to amend. On April 27, 2022, RIFM filed its Second Amended Cross-Complaint (“SACC”) against US Home Pros for (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, and (3) indemnity.

US Home Pros now demurs to the SACC arguing the first cause of action for breach of contract and second cause of action for breach of the implied covenant of good faith and fair dealing fails to plead whether the alleged contract between RIFM and US Home Pros was oral or written.

This matter was last set for hearing on July 6, 2022, before being continued by US Home Pros. Prior to the previous hearing date, US Home Pros filed a reply on June 30, 2022, indicating that no opposition had been made. That same day, US Home Pros filed a notice of continuance providing that the demurrer was being continued to August 3, 2022. Thereafter, on July 21, 2022, RIFM filed an opposition to the demurrer. US Home Pros then filed a supplemental reply contending the opposition should be considered as untimely because it was not filed prior to the previous hearing date and RIFM’s counsel did not request permission to file the opposition. Nonetheless, in the absence of any prejudice to US Home Pros, the court will consider the opposition. Similarly, the court will consider US Home Pros’ supplemental reply.

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party's pleading (complaint, answer, or cross-complaint). (CCP §§ 422.10, 589; see Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purposes of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true. (Donabedian, 116 Cal.App.4th at 994.)

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. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian, supra, 116 Cal.App.4th at 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881 [error for court to consider facts asserted in memorandum supporting demurrer]; see also Afuso v. United States Fid. & Guar. Co. (1985) 169 Cal.App.3d 859, 862 [disapproved on other grounds in Moradi-Shalal v. Fireman’s Fund Ins. Cos. (1988) 46 Cal.3d 287] [error to consider contents of release not part of court record].)

A demurrer can be utilized where the “face of the complaint” itself is incomplete or discloses some defense that would bar recovery. (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-72.) The “face of the complaint” includes material contained in attached exhibits that are incorporated by reference into the complaint; or in a superseded complaint in the same action. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505 [“[W]e rely on and accept as true the contents of the exhibits and treat as surplusage the pleader’s allegations as to the legal effect of the exhibits.”]).

A demurrer can only be sustained when it disposes of an entire cause of action. (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97,119; Kong v. City of Hawaiian Gardens Redev. Agency (2003) 108 Cal.App.4th 1028, 1046.)

Before filing a demurrer, the demurring party is required to meet and confer with the party who filed the pleading demurred to for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. (CCP § 430.41(a).)

The court finds US Home Pros has fulfilled this requirement prior to filing the demurrer. (Demurrer Stanley Decl. ¶ 2.)

US Home Pros requests the court take judicial notice of a Construction Services Agreement that US Home Pros contends is central to the SACC’s requested relief and is directly referenced in paragraph 4 of the SACC.

However, although the SACC references a standard written form contract between the parties, the Construction Services Agreement is not specifically referenced in or attached to the SACC, and thus, the court will not consider it at the demurrer stage. Moreover, it appears US Home Pros is requesting judicial notice of the agreement to support its contention that the Construction Services Agreement is the governing written agreement between the parties. (See Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal. App. 4th 1137, 1145 [Court cannot take judicial notice of the existence of a written contract, because it is a “fact” that is in dispute; to do so defeats the purpose of judicial notice, which is to notice facts not reasonably subject to dispute and easily verified.].) The request is denied.

The elements of a cause of action for breach of contract are: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.” (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391, internal quotations omitted.)

The elements of breach of implied covenant of good faith and fair dealing are: (1) existence of a contractual relationship; (2) implied duty; (3) breach; and (4) causation of damages. (Smith v. San Francisco (1990) 225 Cal.App.3d 38, 49.) “Every contract imposes on each party an implied duty of good faith and fair dealing.” (Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 818.)

Breach of the covenant of good faith and fair dealing is a form of breach of contract action. The same elements apply, but the breach is not of an express term of the contract but rather an implied term necessary to protect the reasonable expectations and purposes of the contracting parties as to the express terms of the contract. (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 373.)

“In an action based on a written contract, the plaintiff may plead the legal effect of the contract rather than its precise language.” (Ochs v. PacifiCare of Cal. (2004) 115 Cal.App.4th 782, 795; accord Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.) Terms of an oral contract may be pleaded generally as to its effect because it is rarely possible to allege the exact words. (Scolinos v. Kolts (1995) 37 Cal.App.4th 635, 640; Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) In pleading the existence of a contractual relationship, “the complaint must indicate on its face whether the contract is written, oral, or implied by conduct. (Code Civ. Proc., § 430.10, subd. (g).)” (Otworth v. Southern Pac. Transportation (1985) 166 Cal.App.3d 452, 458-59.)

Here, US Home Pros demurs to the first cause of action for breach of contract and second cause of action for breach of the implied covenant of good faith and fair dealing in the SACC on the ground that the SACC fails allege whether the alleged contact between US Home Pros and RIFM was written or oral. US Home Pros asserts that it and RIFM entered into a written contract for certain work to be performed at the property owned by RIFM.

2. RIFM Properties contracted with Cross-Defendant US Home Pros, Inc. d/b/a Cal Retrofit ("US Home Pros") on March 18, 2018, to perform earthquake retrofitting work on the Building.

3. The contract was reached during an oral negotiation in which the parties agreed on all material terms, including without limitation the price and that US Home Pros would name Mr. Tsvilik and RIFM Properties as additional named insureds on US Home Pros' $1,000,000 comprehensive general liability insurance ("CGL") policy to protect Mr. Tsvilik and RIFM Properties from claims arising out of US Home Pros' work.

4. After the parties orally agreed on the terms, US Home Pros asked Mr. Tsvilik to execute its standard form written contract. Mr. Tsvilik was told that it included all the material terms in the parties' agreement. When he noticed that the boilerplate language appended to the contract contained a provision purportedly requiring RIFM Properties to provide US Home Pros with $1,000,000 in CGL coverage to insure it against claims arising out of its work, Mr. Tsvilik objected that the term was contrary to the parties' agreement. US Home Pros then told Mr. Tsvilik, "You are correct" and promised to make sure that Mr. Tsvilik and RIFM Properties were named as additional insureds on its CGL policy.

5. In purported satisfaction of its obligation to provide CGL coverage to Mr. Tsvilik and RIFM Properties, US Home Pros caused its insurance broker, Daniel Francke of Benveniste & Francke Insurance Services to issue a Certificate of Liability Insurance under US Home Pros' CGL policy naming Michael Tsvilik and RIFM Properties as additional insureds and providing coverage of $1,000,000 per claim.

6. When Isakhanyan brought the action in chief alleging that she suffered personal injury owing to US Home Pros' failure to clean up at the end of a day's work, the insurer denied that it had ever approved the naming of RIFM Properties as an additional insured…

The SACC thus alleges that after the parties orally agreed on all material terms, US Home Pros presented a written contract to RIFM, but RIFM objected to a term that was contrary to the parties’ agreement. The term concerned US Home Pros’ purported promise to name RIFM as an additional insured on US Home Pros’ general liability insurance. After RIFM objected to the subject term in the written agreement, US Home Pros promised to make sure RIFM was listed an additional insured on US Home Pros’ general liability insurance policy. US Home Pros then allegedly caused its insurance broker to issue a certificate of liability insurance naming RIFM as additional insureds, but when Plaintiff filed this action, the insurer denied that it ever approved naming RIFM as an additional insured.

Although not a model of clarity, the SACC sufficiently alleges that after US Home Pros presented a written contract to RIFM and RIFM objected to a term in the written agreement, US Home Pros orally told RIFM it was correct and promised to make sure RIFM was named as an additional insured. Further, US Home Pros allegedly caused its insurance broker to issue a certificate of liability insurance naming RIFM as an additional insured, as the parties allegedly had orally agreed. Liberally construed, the allegations are sufficient to infer the subject agreement was allegedly oral and plead the legal effect, existence, and breach of an agreement between US Home Pros and RIFM.

US Home Pros’ demurrer is overruled as to the first cause of action for breach of contract and second cause of action for breach of the implied covenant of good faith and fair dealing.

Hon. Audra Mori

Judge of the Superior Court