Judge Barbara M. Scheper, Case Number: 24STCV02428, Date: 2024-11-22 Tentative Ruling

Judge: Barbara M. Scheper, Case: 24STCV02428, Date: 2024-11-22 Tentative Ruling

Case Number: 24STCV02428 Hearing Date: November 22, 2024 Dept: 30

Dept. 30

Calendar No.

ATI Restoration, LLC vs. CGI+ Manager, LLC, et. al., Case No. 24STCV02428

Tentative Ruling re: Defendant’s Demurrer to First Amended Complaint

CF Brookhaven Bliss I, LLC (Defendant) demurs to ATI Restoration LLC’s (Plaintiff) third and fourth causes of action contained in its first amended complaint (FAC). Defendant’s demurrer is sustained to the third cause of action with ten (10) days leave to amend. The demurrer is overruled as to the fourth cause of action.

A demurrer is sustained where “[t]he pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., 430.10, subd. (e).) “A demurrer tests the legal sufficiency of the factual allegations in a complaint.” (Yalung v. State (2023) 98 Cal.App.5th 71, 80.) In reviewing a complaint’s legal sufficiency, a court will treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of law. (Esparza v. Kaweah Delta Dist. Hospital (2016) 3 Cal.App.5th 547, 552.) It is well settled that a “demurrer lies only for defects appearing on the face of the complaint[.]” (Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.) “We not only treat the demurrer as admitting all material facts properly pleaded, but also give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Guclimane Co. v. Stewart Tit. Guaranty Co. (1998) 19 Cal.4th 26, 38.) For purposes of ruling on a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. (Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 958.)

When ruling on a demurrer, a court may only consider the complaint’s allegations or matters which may be judicially noticed. (Blank, supra, 39 Cal.3d at 318.) The Court may not consider any other extrinsic evidence or judge the credibility of the allegations pleaded or the difficulty a plaintiff may have in proving his allegations. (Ion Equipment Corporation v. Nelson (1980) 110 Cal.App.3d 868, 881.) A demurrer is properly sustained when the complaint, liberally construed, fails to state facts sufficient to constitute any cause of action. (Kramer v. Intuit Inc. (2004) 121 Cal.App.4th 574, 578.) Demurrer is also appropriate where the pleading is uncertain, ambiguous, or unintelligible. (Code Civ. Proc., § 430.10, subd. (f).)

When a demurrer is sustained, the Court determines whether there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318). When a plaintiff “has pleaded the general set of facts upon which his cause of action is based,” the court should give the plaintiff an opportunity to amend his complaint, since plaintiff should not “be deprived of his right to maintain his action on the ground that his pleadings were defective for lack of particulars.” (Reed v. Norman (1957) 152 Cal.App.2d 892, 900.)

Defendant demurs to Plaintiff’s causes of action for unjust enrichment and violation of Civil Code section 8800 on the ground that Plaintiff fails to plead facts sufficient to constitute either cause of action. The Court sustains Defendant’s demurrer as to the third cause of action only.

Plaintiff has not pled facts sufficient to constitute a cause of action for unjust enrichment or restitution.

Defendant demurs to Plaintiff’s third cause of action for unjust enrichment on the ground that Plaintiff does not plead sufficient facts. (Code Civ. Proc., § 430.10, subd. (e).) The causes of action for unjust enrichment and restitution are interchangeable. One who is enriched at the expense of another is required to make restitution. (Prof. Tax Appeal v. Kennedy-Wilson Holdings, Inc. (2018) 29 Cal.App.5th 230, 238 (Kennedy-Wilson).) The elements of a cause of action for unjust enrichment or restitution are “receipt of a benefit and unjust retention of the benefit at the expense of another.” (Ibid.) Importantly, an action for unjust enrichment or restitution does not lie where an express binding agreement exists and defines the parties’ rights. (California Medical Assn., Inc. v. Aetna U.S. Healthcare of California, Inc. (2001) 94 Cal.App.4th 151, 172.)

Here, Plaintiff alleges no contract between itself and Defendant. Rather, Plaintiff alleges a breached contract between itself and another owner of the at issue property, CGI+ Manager, LLC (CGI). (FAC ¶ 26.) Separately, Plaintiff alleges that Defendant has benefited from the uncompensated work of Plaintiff. (Id. ¶ 27.) It also alleges that it has rendered a performance to third-party CGI and not received compensation. The effect of this performance has conferred a benefit on Defendant. (Id. ¶ 30.) In such cases, a plaintiff is entitled to restitution from the defendant if three conditions are met. (Kennedy-Wilson, supra, 29 Cal.App.5th at p. 239.) First, liability in restitution may not subject the Defendant to a forced exchange; in other words, the benefit realized must save the defendant an otherwise necessary expense. (Ibid.) Second, the plaintiff must not have an opportunity for compensation, while the defendant will retain the benefit free of any liability to pay for it. (Ibid.) Third, liability in restitution may not subject the defendant to an obligation from which the plaintiff and third-party had agreed it would be free. (Ibid.)

The second condition is not met in the present case. Plaintiff has an opportunity for compensation via its breach of contract action against CGI. (FAC ¶ 14–21.) Additionally, Plaintiff does not allege that Defendant has no liability to pay CGI in some capacity for the work done by Plaintiff. Thus, Plaintiff’s third cause of action for unjust enrichment or restitution fails under Kennedy-Wilson.

Plaintiff has pled facts sufficient to state a cause of action under the California Prompt Payment Act.

Defendant demurs to Plaintiff’s cause of action under the California Prompt Payment Act (Civ. Code, §§ 8800 et seq.) on the basis that California law does not apply to the contract alleged in this case. Plaintiff, Defendant, and CGI are all California-based Delaware corporations. (FAC ¶¶ 1, 3–4.) The present dispute arises out of work performed on property owned by Defendant and CGI in Georgia. (Id. ¶ 5.) Defendant argues that Georgia law should apply, while Plaintiff argues in favor of California law.

As the forum state, California applies its own law unless a party timely invokes the law of a foreign state. (Chen v. Los Angeles Truck Centers, LLC (2019) 7 Cal.5th 862, 867.) The governmental interest test determines which jurisdiction’s law will be applied. This test involves a three-step inquiry. First, the court determines whether the relevant law of each jurisdiction regarding the contested issue differs. (Ibid.) If it does, the court examines each jurisdiction’s interest in the application of its own law to determine if a true conflict exists with respect to the case at hand. (Id. at pp. 867–868.) Third, if a true conflict is found, the court “carefully evaluates and compares the nature and strength of the interest of each jurisdiction in the application of its own law ‘to determine which state’s interest would be more impaired if its policy were subordinated to the policy of the other state’ [citation], and then ultimately applies ‘the law of the state whose interest would be the more impaired if its law were not applied.’” (Id. at p. 868.)

Here, Defendant argues for the application of Georgia law. Thus, Defendant has the burden “to identify the applicable foreign law, show that it materially differs from California law, and show that the foreign law furthers an interest of the foreign state” as required in the first step of the governmental interest test. (Frontier Oil Corp. v. RLI Ins. Co. (2007) 153 Cal.App.4th 1436, 1465.) Defendant has not made a showing that Georgia’s prompt payment statute materially differs from California’s. Even if a conflict existed, the present case concerns a dispute regarding payments on a contract likely entered in California and between corporations headquartered in California. Thus, the fact that the contract concerns property in Georgia is of comparatively little importance, and the Court would apply California law. Defendant’s references to a case concerning the public policy rationale behind mechanic’s liens is inapposite.

Additionally, Defendant argues that Civil Code section 8800 does not apply because Plaintiff is not a direct contractor of Defendant. “Except as otherwise agreed in writing by the owner and direct contractor, the owner shall pay the direct contractor, within 30 days after notice demanding payment pursuant to the contract is given, any progress payment due as to which there is no good faith dispute between them.” (Civ. Code, § 8800, subd. (a).) A direct contractor is defined as a contractor with a direct contractual relationship with an owner. (Id., § 8018.)

Here, Plaintiff alleges that Defendant is an owner under section 8800. (FAC ¶ 5.) Plaintiff further alleges that it is a direct contractor, having a direct contractual relationship with an owner of the property in question. (Id. ¶ 5, 7.) Plaintiff further alleges that Defendant has a legal duty to pay Plaintiff the amounts earned under the contract. (Id. ¶ 34.) Thus, Plaintiff has stated a cause of action under Civil Code section 8800. Accordingly, Defendant’s demurrer is overruled as to this cause of action.