Judge Barbara M. Scheper, Case Number: 23STCV07951, Date: 2024-03-25 Tentative Ruling

Judge: Barbara M. Scheper, Case: 23STCV07951, Date: 2024-03-25 Tentative Ruling

Case Number: 23STCV07951 Hearing Date: March 25, 2024 Dept: 30

Dept. 30

Calendar No.

Y.W. Rising Builders, Inc. vs. Bram, et. al., Case No. 23STCV07951

Tentative Ruling re: Cross-Defendants’ Motion to Strike

Cross-Defendants Y.W. Rising Builders Inc. and Andy Su move to strike the fifth cause of action in its entirety from the First Amended Cross-Complaint (“FAXC”), strike language pertaining to the loss of revenue from paragraph 65 of the FAXC, and strike references to the fifth cause of action for negligent interference with prospective economic advantage in the prayer for relief. The motion is granted.

California Code of Civil Procedure, Section 436(a) allows a court to strike out any irrelevant, false, or improper matter inserted in any pleading. California Code of Civil Procedure, Section 436(b) allows a court to strike out 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.

Cross-Defendants seek to strike the entire fifth cause of action for negligent interference

with prospective economic advantage, as well as a portion of the prayer for relief related to such cause of action based on Section 8.1.1 of the contract between the parties. Section 8.1.1 states that “[t]he Contractor AND Owner waive all claims against each other for consequential damages arising out of or relating to this Contract” and that the mutual waiver includes “damages incurred by the Owner for rental expenses, for losses of use, income, profit, financing, business and reputation, and for loss of management or employee productivity or of the services of such persons.” (FAXC, ¶ 7; Exh. A at § 8.1.1.)

The fifth cause of action in the FAXC alleges the following: Cross-Complainants had a reasonable expectancy of profit to be derived as a result of the project which was to be used as an ADU to rent to third parties. (FAXC, ¶ 58.) Cross-Defendants were notified of short-term renters who had attempted to lease the ADU but had to be turned away due to the dangerous and faulty HVAC. (FAXC, ¶ 58.) Cross-Defendants knew of Cross-Complainants’ expectation of profit to be garnered from their ownership and lease of the completed ADU. (FAXC, ¶ 59.) Cross-Defendants had a duty not to interfere with the foregoing expectancy of profit. (FAXC, ¶ 60.) Commencing in September 2021, Cross-Defendants began to take negligent actions which interfered with Cross-Complainants’ expectation of economic advantage including: (1) failing to construct and deliver a safe and habitable ADU according to all applicable regulations and (2) failure to remedy defalcations despite being notified thereof. (FAXC, ¶ 61(a)-(b).)

Here, the fifth cause of action—and the entire FAXC—is based upon the purported breach of contract by Cross-Defendants. As an initial matter, the Court finds that Section 8.1.1 is not violative of public policy. “All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.” (Civ. Code, § 1668.) An “exculpatory provision may stand only if it does not involve the public interest.” (Tunkl v. Regents of University of Cal. (1963) 60 Cal.2d 92, 96.) “[N]o public policy opposes private, voluntary transactions in which one party, for a consideration, agrees to shoulder a risk which the law would have otherwise placed upon the other party.” (Id. at p. 101.) “Nothing . . . shall prevent a party to a construction contract and the owner or other party for whose account the construction contract is being performed from negotiating and expressly agreeing with respect to the allocation, release, liquidation, exclusion, or limitation as between the parties of any liability (a) for design defects, or (b) of the promise to the promisor arising out of or relating to the construction contract.” (Civ. Code § 2782.5.)

A transaction will be deemed in the public interest if the following factors are present: (1) the transaction concerns a business of a type generally thought suitable for public regulation; (2) the party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public; (3) the party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within established standards; (4) the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services; (5) in exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence; and (6) as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents. (CAZA Drilling (California), Inc. v. TEG Oil & Gas U.S.A., Inc. (2006) 142 Cal.App.4th 453, 468.) None of these factors are present in the instant action.

The Court rejects Cross-Complainants’ contention that the clause at issue does not cover a claim for tort damages. “The phrase any controversy . . . arising out of or relating to [a] contract . . . is certainly broad enough to embrace tort as well as contractual liabilities so long as they have their roots in the relationship between the parties which was created by contract.” (Berman v. Dean Witter & Co., Inc. (1975) 44 Cal.App.3d 999, 1003.) “[E]xculpatory clauses are construed against the released party.” (Queen Villas Homeowners Assn. v. TCB Property Management (2007) 149 Cal.App.4th 1, 6.) “The language of an agreement in order to exclude liability for negligence must be clear and explicit and free of ambiguity or obscurity.” (Philippine Airlines, Inc. v McDonnell Douglas Corp. (1987) 189 Cal.App.3d 234, 237, internal quotations omitted.) “The law generally looks with disfavor on attempts to avoid liability or to secure exemption for one’s own negligence.” (Ibid.) “[T]o be effective, a release need not achieve perfection . . . [i]t suffices that a release be clear, unambiguous, and explicit, and that it expresses an agreement not to hold the released party liable for negligence.” (Queens Villas Homeowners Assn. v. TCB Property Management, supra, 149 Cal.App.4th 1, 5-6.) “Whether a release bars recovery against a negligent party turns primarily on contractual interpretation, and it is the intent of the parties as expressed in the agreement that should control.” (Sanchez v. Bally’s Total Fitness Corp. (1998) 68 Cal.App.4th 62, 67-68.)

Here, based on a reading of the waiver clause, it is clear that the parties intended to waive all claims against each other—be it a claim in contract or tort—for consequential damages. The fifth cause of action clearly arises from Cross-Defendants’ alleged actions pursuant to the contract. Moreover, the fifth cause of action alleges that Cross-Complainants’ had an expectation of profit that was interfered with. The Court fails to see how such allegations do not implicate the waiver clause at issue in the contract. Thus, Cross-Complainants’ fifth cause of action in the FAXC is within the scope of the waiver clause under Berman v. Dean Witter & Co., Inc., supra, 44 Cal.App.3d 999, 1003. Such clause is not vague or ambiguous.

As to Cross-Defendants’ request to strike “and loss of revenue” from Paragraph 65 of the FAXC, which is set forth under the sixth cause of action for unfair competition, the Court finds striking such allegation is appropriate. A claim for loss of revenue is barred by the waiver language in the contract between the parties as Cross-Complainants agreed to waive damages for loss of income. (FAXC, ¶ 7; Exh. A at § 8.1.1.)