Judge: Cherol J. Nellon, Case: 23STCV020757, Date: 2025-06-12 Tentative Ruling

Case Number: 23STCV020757    Hearing Date: June 12, 2025    Dept: 14

#7

Case Background

This is an action for breach of contract and common counts. Plaintiff DMG Corporation (Plaintiff) alleges that in October 2015, it executed a written credit application with Defendant Techno-Advanced, Inc. (Techno). In December 2022, Plaintiff provided a quote for materials for use in a construction project. Techno confirmed the order by issuing a purchase order to Plaintiff. Techno promised to pay for the materials within 30 days of the invoice. Despite Plaintiff’s performance under the contract, Techno failed to pay the sum of $713,644.70.

On August 29, 2023, Plaintiff filed its Complaint against Techno.  

On October 24, 2023, Cross-Complainant Techno filed its Cross-Complaint against Westport Construction, Inc. (Westport) and 806 West Adams Property LLC. (806 West Adams), asserting causes of action for (1) implied indemnity, (2) comparative indemnity, (3) declaratory relief, (4) comparative indemnity, and (5) contribution.

On April 16, 2024, Techno filed its First Amended Cross-Complaint (“FACC”) asserting one cause of action for equitable indemnity.

On May 17, 2024, Westport filed a demurrer to the FACC, arguing that Techno’s equitable indemnity claim was barred by (1) the economic loss rule, (2) the express indemnity provision in the subcontract, and (3) the risk-of-loss provision in the subcontract.

On July 11, 2024, the Court sustained Westport’s demurrer to the FACC with leave to amend.

On August 6, 2024, the Court issued its written ruling sustaining the FACC demurrer, finding that Techno’s equitable indemnity claim was barred by the economic loss rule. (July 11, 2024 Minute Order, p. 5.) Having reached that conclusion, the Court found it unnecessary to discuss the arguments Westport had raised in its demurrer to the FACC (e.g., that the risk-of-loss provision in the subcontract barred the equitable indemnity claim). 

On July 30, 2024, Techno filed its Second Amended Cross-Complaint (SACC), asserting one cause of action for breach of oral contract.

On November 12, 2024, the Court sustained Westport’s demurrer to the SACC without leave to amend because Techno failed to obtain leave of court to assert a new cause of action for breach of contract and the Court’s ruling sustaining Westport’s demurrer to the FACC with leave to amend did not discuss or give Techno the right to do so.

On January 21, 2025, Techno filed a motion for leave to amend its cross-complaint. Westport opposed the motion.

On April 8, 2025, the Court granted Techno’s motion for leave to amend and ordered Techno to file its proposed Third Amended Cross-Complaint (TACC).

After the hearing on April 8, 2025, Techno filed the operative TACC, asserting causes of action for (1) breach of written contract and (2) goods sold and delivered against Westport, 806 West Adams, and Roes 1 to 20.

On May 12, 2025, Westport filed the instant demurrer to the TACC.

On May 22, 2025, Westport filed the instant motion to continue trial.

On May 30, 2025, Techno filed its opposition to the demurrer.

On June 5, 2025, Westport filed its reply in support of the demurrer.

As of June 10, 2025, no opposition to the motion to continue trial has been filed.

Instant Pleading

Westport  demurs Techno’s first and second causes of action in the TACC.

Decision:

The demurrer to the Third Amended Cross-Complaint is SUSTAINED IN PART and OVERRULED IN PART as follows. The demurrer to the first cause of action for breach of written contract is OVERRULED. The demurrer to the second cause of action for goods sold and delivered is SUSTAINED, with leave to amend. Cross-Complainant Techno-Advanced, Inc. is ordered to file and serve its Fourth Amended Cross-Complaint within 30 days of this ruling.

Demurrer

As an initial matter, the Court finds that Westport has satisfied the meet and confer requirement. (Demurrer, Declaration of Geoffrey T. Sawyer, ¶¶ 3, 5.)

Westport demurs the TACC’s first cause of action for breach of written contract and second cause of action for goods sold and delivered, arguing: (1) the risk of loss provision in the “Original Subcontract” precludes the TACC claims; (2) the alleged “Second Subcontract” essentially lacks consideration and, therefore, it is not a legally binding contract and cannot support a breach of contract claim; (3) Techno cannot allege its second cause of action for goods sold and delivered, which is based on a quasi-contract theory, if Techno is also alleging there is an enforceable contract between the parties; and (4) Techno concedes by judicial admission that the parties entered into the Original Subcontract and, therefore, that concession is conclusive as to the terms of the Original Subcontract that bar its claims.

In opposition, Techno argues the following. First, the alleged Second Subcontract was not in fact a second contract, but a modification of the Original Subcontract. Second, the risk of loss provision in the Original Subcontract does not apply to this case because there was no “loss” to the HVAC equipment. Third, Techno is allowed to plead alternative causes of action and that is why it asserted a breach of contract claim as well as a good sold and delivered claim. Finally, Techno argues that its judicial admission does not contradict the TACC’s allegations.

By way of background, the TACC alleges the following.

On or about December 27, 2022, Westport and Techno entered into a written subcontract agreement for the furnishing of material, labor, equipment, and Techno’s installation of HVAC equipment in the construction project underlying this case (this is the “Original Subcontract” that Westport is referring to). (TACC, ¶ 5.)

“The custom in the construction industry is to order and acquire HVAC equipment and materials when the project commences and the installation of HVAC equipment and materials are ready to be installed.” (TACC, ¶ 6.)

However, on or about January 26, 2023, to prevent price increase of the HVAC equipment, Westport “and plaintiff” (presumably DMG) entered into a written agreement, compromised of emails, for Techno’s purchase of HVAC equipment earlier than planned (this is the “Second Subcontract” that Westport is referring to). (TACC, ¶ 8; Exhibit B – a copy of the emails Techno alleges shows Westport asking for an earlier purchase of the HVAC equipment, p. 1 – email from Tim Coop of Westport to Techno’s Alfred Babayans [“Alfred ¶ Get with Geovanni on the submittal for the LG and other items that we need to get approved quickly and ordered in January to avoid increases. We can submit these critical items as a separate package to avoid any hold up from the engineer. Kristen mentioned that you should have the submittal ready this week”]; p. 2-3 – email from Geovanni Munoz of Westport to “Techno Advanced team” [“We also will need you to send over the invoices for the Mechanical Equipment to avoid the price increase, this will be included in the January billing”].)

“Pursuant to the written agreement alleged herein, TECHNO purchased the HVAC equipment and materials from plaintiff prior to commencement of construction of THE PROJECT.” (TACC, ¶ 9.)

Techno “has performed all conditions required of it under the written agreement, except for conditions for which [its] performance was excused.” (TACC, ¶ 10.)

“On or about May 11, 2023, cross-defendant, WESTPORT CONSTRUCTION,. INC., gave notice to TECHNO that THE PROJECT had been cancelled. Such cancellation occurred before construction of THE PROJECT commenced. Plaintiff [DMG] has refused to accept return of the HVAC equipment and is demanding full payment for cross-complainant’s purchase of the equipment. Storage fees are being incurred for the storage of the HVAC equipment.” (TACC, ¶ 11.)

For the purposes of this demurrer, the Court finds that Westport has failed to show that the risk-of-loss provision in the Original Subcontract (i.e., Section 4.2 Work Storage in the contract) bars Techno’s claims. “[J]udicial interpretation is controlled by the clear and explicit meaning of the language of a contract, interpreted in its ordinary and popular sense, unless the parties intended a technical sense or a special meaning by usage.” (Pardee Const. Co. v. Insurance Co. of the West (2000) 77 Cal.App.4th 1340, 1352.) Here, Westport argues that the risk of loss provision states: “Subcontractor is responsible for the receipt, delivery, unloading, storage, warehousing, protection ..., transportation, insurance …, and all risk of loss to its materials, tools, and equipment, whether stored in a designated or secured area at the Job site or off the Job site.” (Demurrer, p. 9:11-15 [emphasis removed].) However, nothing in that language shows that Techno agreed to assume the risk of the cost and storage fees of the HVAC equipment if the project was cancelled before it commenced. In addition, Techno argues that “risk of loss” in the context of construction materials means damage or loss of materials during the construction process. Since the meaning of the phrase “risk of loss” is disputed, and Westport has not presented extrinsic evidence to support its interpretation of that phrase, the Court declines to find on this demurrer that the risk of loss provision bars Techno’s claims. For those same reasons, the Court finds Westport’s judicial admission argument unpersuasive.

The Court also declines to sustain the demurrer on the ground that the alleged “Second Subcontract” lacks consideration. Indeed, Techno has argued that the alleged Second Subcontract is merely a modification of the Original Subcontract and not a second “contract.” In its reply, Westport has neither addressed that argument nor argued that Techno has failed to state facts sufficient to show modification. Instead, Westport argues in its reply that Section 3.2 of the Original Subcontract, which is titled “Early Contract Termination,” precludes any claims where the job has been cancelled within six months. However, Westport did not make that argument in its moving papers and, therefore, the Court declines to consider it.

As for Westport’s argument that Techno cannot assert both its breach of written contract claim and goods sold and delivered claim, the Court agrees. “A plaintiff may not … pursue or recover on a quasi-contract claim if the parties have an enforceable agreement regarding a particular subject matter.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388.) However, “if a plaintiff was uncertain as to whether the parties had entered into an enforceable agreement, the plaintiff would be entitled to plead inconsistent claims predicated on both the existence and absence of such an agreement.” (Ibid.) Here, Techno alleges the parties entered into the Original Subcontract and then a subsequent modification or contract. (TACC, ¶¶ 5, 8.) Since Techno does not deny the existence or enforceability of those agreements in its second cause of action for goods sold and delivered, Techno is precluded from asserting that claim alongside its breach of written contract claim.

Therefore, the demurrer to the first cause of action for breach of written contract is overruled, but the demurrer to the second cause of action for goods sold and delivered is sustained, with leave to amend.

Conclusion

Westport’s demurrer to the Third Amended Cross-Complaint is SUSTAINED IN PART and OVERRULED IN PART as follows. The demurrer to the first cause of action for breach of written contract is OVERRULED. The demurrer to the second cause of action for goods sold and delivered is SUSTAINED, with leave to amend. Cross-Complainant Techno-Advanced, Inc. is ordered to file and serve its Fourth Amended Cross-Complaint within 30 days of this ruling.