Judge Curtis A. Kin, Case 21STCV35298 2023-03-23 Tentative Ruling

Judge: Curtis A. Kin, Case: 21STCV35298, Date: 2023-03-23 Tentative Ruling

Case Number: 21STCV35298 Hearing Date: March 23, 2023 Dept: 72

DEMURRERS AND MOTIONS TO STRIKE (2)

MOTION TO COMPEL DEPOSITION

Date: 3/23/23 (8:30 AM)

Case: Zurich American Ins. Co. v. Mitsubishi Electric US, Inc. (21STCV35298)

TENTATIVE RULING:

Defendant Mitsubishi Electric US, Inc.’s Demurrer to and Motion to Strike Plaintiff Zurich American Insurance Company’s Second Amended Complaint is GRANTED IN PART.

Defendant Mitsubishi Electric US, Inc.’s Demurrer to and Motion to Strike Plaintiff ACE Property & Casualty Insurance Company’s First Amended Complaint is GRANTED IN PART.

Plaintiffs Zurich American Insurance Company and ACE Property & Casualty Insurance Company’s Motion to Compel Deposition is DENIED.

I. DEMURRER AND MOTION TO STRIKE RE: PLAINTIFF ZURICH AMERICAN INSURANCE COMPANY’S SECOND AMENDED COMPLAINT

Defendant Mitsubishi Electric US, Inc.’s requests to take judicial notice of Exhibits A (Zurich’s Second Amended Complaint), B (Complaint in Rayburn v RIM Hospitality), C (Answer in Rayburn v RIM Hospitality), and F (Zurich’s Complaint) are GRANTED, but only for the existence of the documents, not the truth of the matters asserted therein. (See Evid. Code § 452(d); Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-69.)

Defendant Mitsubishi Electric US, Inc.’s requests to take judicial notice of Exhibits D (Request for Dismissal in Rayburn v RIM Hospitality) and E (Good Faith Settlement Determination in Rayburn v RIM Hospitality) are GRANTED, pursuant to Evidence Code § 452(d).

Defendant Mitsubishi Electric US, Inc.’s request to take judicial notice of Exhibit G (Certificate of No Record – Corporation) is GRANTED. (Evid. Code §452(c); Pedus Building Services, Inc. v. Allen (2002) 96 Cal.App.4th 152, 156, fn. 2 [official records of California Secretary of State.)

Defendant Mitsubishi Electric US, Inc. (“MEUS”) demurs to plaintiff Zurich American Insurance Company’s (“Zurich”) Second Amended Complaint and all causes of action therein on the ground that Zurich’s alleged insureds, including RIM Corporation, 120 South Los Angeles Street Hotel Investors, LLC, and 120 South Los Angeles Street Hotel Operator LLC were not liable in the underlying personal injury action from which the instant subrogation action arises.

MEUS argues that Zurich’s insureds, including RIM Corporation, cannot assert that MEUS breached the indemnification clause contained in the Vertical Transportation Maintenance Agreement (“Agreement”) because they were not parties to the Agreement. (See Zurich SAC ¶ 27.)

Zurich alleges that RIM Corporation, as an agent of the owners of the Double Tree Hotel, entered into the Agreement (“Agreement”) with MEUS with respect to the elevators in the hotel. (Zurich SAC ¶ 13 & Ex. A.) The Agreement contains an indemnification clause, whereby the parties to the Agreement agreed to indemnify the other parties for liability arising from negligent acts. (Zurich SAC ¶ 16 & Ex. A at § V.B.) The parties to the attached Agreement are MEUS and “Double Tree.” (Zurich SAC ¶ 16 & Ex. A at p.1.)

The identification of “Double Tree” is ambiguous. “Where a complaint is based on a written contract which it sets out in full, a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.” (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.) Zurich alleges that RIM Corporation operated the subject Double Tree Hotel and that it insured RIM Corporation. (Zurich SAC ¶¶ 3, 10.) Based on these allegations, for pleading purposes, it is reasonable to interpret “Double Tree” as including RIM Corporation. By funding a portion of the settlement to the plaintiff in the underlying action, Zurich allegedly became subrogated to the rights of RIM Corporation. (Zurich SAC ¶ 20.) Zurich sufficiently alleges it is entitled to assert claims for indemnification against MEUS based on the Vertical Transportation Maintenance Agreement.

MEUS also argues that Zurich lacks standing in subrogation because it did not defend or indemnify RIM Corporation in the underlying action. Rather, RIM Hospitality, Inc. was the named and answering defendant in the underlying action. (RJN Exs. B, C.) RIM Hospitality, Inc. settled the claims in the underlying action. (RJN Exs. D, E.) RIM Hospitality, Inc., however, is not registered with the California Secretary of State. (RJN Ex. G.)

Nevertheless, for pleading purposes, Zurich may assert claims against MEUS as subrogee to RIM Corporation. Although RIM Corporation was not the named defendant in the underlying action, “[t]he law respects form less than substance.” (Civ. Code § 3528.) “While such an argument might find some support in decisions of an earlier day when mere technicalities were deemed important, it is out of harmony with modern enlightened jurisprudence which regards the substance as more important than mere form and will not permit a mere technicality to defeat substantial justice.” (U.S. Fidelity & Guaranty Co. v. Keck (1946) 75 Cal.App.2d 828, 831.)

Zurich alleges that it insured RIM Corporation for damages at the subject hotel because of bodily injury caused by an occurrence. (Zurich SAC ¶¶ 3, 10, 11.) Even if “RIM Hospitality, Inc.” obtained a determination of good faith settlement in the underlying action (RJN Ex. E), Zurich alleges it funded a portion of the settlement on behalf of RIM Corporation and accordingly became subrogated to the rights of The RIM Corporation. (Zurich SAC ¶ 20.) These allegations are taken as true for purposes of demurrer. Even though RIM Hospitality, Inc. was the named defendant, Zurich sufficiently alleges that it defended and indemnified RIM Corporation in reality. “By undertaking to indemnify or pay the principal debtor’s obligation to the creditor or claimant, the ‘subrogee’ is equitably subrogated to the claimant (or ‘subrogor’), and succeeds to the subrogor’s rights against the obligor.” (Fireman's Fund Ins. Co. v. Maryland Cas. Co. (1998) 65 Cal.App.4th 1279, 1291.) Based on the allegation that it funded the settlement on behalf of The RIM Corporation, Zurich sufficiently alleges its right to subrogation.

For the foregoing reasons, the demurrer is not well taken. Further, the motion to strike paragraphs 20 and 24 in Zurich’s Second Amended Complaint concerning Zurich’s defense and indemnification of its insureds, including RIM Corporation, is not well taken.

MEUS also argues that, to the extent Zurich alleges a breach of the Agreement based on MEUS’s services, as opposed to indemnification, such a cause of action is time-barred based on the July 23, 2014 date of incident and the four-year statute of limitations set forth in CCP § 337(a). (Zurich FAC ¶¶ 11, 27.) A demurrer only lies as to an entire cause of action. (Fremont Indemnity Co. v. Fremont Gen. Corp. (2007) 148 Cal.App.4th 97, 119.) Accordingly, because Zurich states a cause of action with respect to MEUS’s alleged refusal to accept the tendered indemnification demand of The RIM Corporation, the first cause of action is not subject to demurrer.

Nevertheless, with respect to MEUS’s motion to strike, it seeks to strike the phrase “failing to provide the services owed under the Contract in a proper and workmanlike manner and fashion” contained in paragraph 27 of Zurich’s Second Amended Complaint. Zurich argues that, on the face of the SAC, the alleged failure to provide services as contracted may extend to a period within the statute of limitations. “In determining the merits of a demurrer, all material facts pleaded in the complaint and those that arise by reasonable implication, but not conclusions of fact or law, are deemed admitted by the demurring party.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) However, on the face of the Second Amended Complaint, the only failure to provide sufficient services was in connection with the elevator incident occurring on July 23, 2014. (Zurich SAC ¶¶ 11, 15.) Four years from this date is July 23, 2018. Zurich did not commence its action until September 24, 2021. Accordingly, Zurich does not sufficiently allege any liability based on MEUS’s provision of services.

The demurrer and motion to strike are GRANTED IN PART. The phrase “failing to provide the services owed under the Contract in a proper and workmanlike manner and fashion” contained in paragraph 27 of Zurich’s Second Amended Complaint is STRICKEN. The demurrer and motion to strike are otherwise overruled and denied.

Before deciding whether to allow leave to amend, the Court inquires from plaintiff Zurich American Insurance Company how the Second Amended Complaint can be amended to address the defects set forth above.

II. DEMURRER AND MOTION TO STRIKE RE: PLAINTIFF ACE PROPERTY & CASUALTY INSURANCE COMPANY’S FIRST AMENDED COMPLAINT

Defendant Mitsubishi Electric US, Inc.’s requests to take judicial notice of Exhibits A (Ace’s First Amended Complaint), B (Complaint in Rayburn v RIM Hospitality), C (Answer in Rayburn v RIM Hospitality), and F (Ace’s Complaint) are GRANTED, but only for the existence of the documents, not the truth of the matters asserted therein. (See Evid. Code § 452(d); Sosinsky v. Grant (1992) 6 Cal.App.4th 1548, 1564-69.)

Defendant Mitsubishi Electric US, Inc. (“MEUS”) demurs to plaintiff ACE Property & Casualty Insurance Company’s (“ACE”) First Amended Complaint, or alternatively the second cause of action for breach of contract, on the ground that ACE’s alleged insureds, including RIM Corporation, 120 South Los Angeles Street Hotel Investors, LLC, and 120 South Los Angeles Street Hotel Operator LLC were not liable in the underlying personal injury action from which the instant subrogation action arises.

MEUS argues that ACE’s insureds, including RIM Corporation, cannot assert that MEUS breached the indemnification clause contained in the Vertical Transportation Maintenance Agreement (“Agreement”) because they were not parties to the Agreement. (See ACE SAC ¶ 33.)

ACE alleges that RIM Corporation, as an agent of the owners of the Double Tree Hotel, entered into the Agreement (“Agreement”) with MEUS with respect to the elevators in the hotel. (ACE FAC ¶ 13 & Ex. A.) The Agreement contains an indemnification clause, whereby the parties to the Agreement agreed to indemnify the other parties for liability arising from negligent acts. (ACE FAC ¶ 13 & Ex. A at § V.B.) The parties to the attached Agreement are MEUS and “Double Tree.” (ACE FAC ¶ 13 & Ex. A at p.1.)

The identification of “Double Tree” is ambiguous. “Where a complaint is based on a written contract which it sets out in full, a general demurrer to the complaint admits not only the contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible.” (Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.) ACE alleges that RIM Corporation operated the subject Double Tree Hotel and that it insured RIM Corporation. (ACE FAC ¶¶ 3, 10.) Based on these allegations, for pleading purposes, it is reasonable to interpret “Double Tree” as including RIM Corporation. By funding a portion of the settlement to the plaintiff in the underlying action, ACE allegedly became subrogated to the rights of RIM Corporation. (ACE FAC ¶ 21.) ACE sufficiently alleges it is entitled to assert claims for indemnification against MEUS based on the Vertical Transportation Maintenance Agreement.

MEUS also argues that ACE lacks standing in subrogation because it did not defend or indemnify RIM Corporation in the underlying action. Rather, RIM Hospitality, Inc. was the named and answering defendant in the underlying action. (RJN Exs. B, C.) RIM Hospitality, Inc. settled the claims in the underlying action. (RJN Exs. D, E.) RIM Hospitality, Inc., however, is not registered with the California Secretary of State. (RJN Ex. G.)

Nevertheless, for pleading purposes, ACE may assert claims against MEUS as subrogee to RIM Corporation. Although RIM Corporation was not the named defendant in the underlying action, “[t]he law respects form less than substance.” (Civ. Code § 3528.) “While such an argument might find some support in decisions of an earlier day when mere technicalities were deemed important, it is out of harmony with modern enlightened jurisprudence which regards the substance as more important than mere form and will not permit a mere technicality to defeat substantial justice.” (U.S. Fidelity & Guaranty Co. v. Keck (1946) 75 Cal.App.2d 828, 831.)

ACE alleges that it insured RIM Corporation for damages at the subject hotel because of bodily injury caused by an occurrence. (ACE FAC ¶¶ 3, 10, 11.) Even if “RIM Hospitality, Inc.” obtained a determination of good faith settlement in the underlying action (RJN Ex. E), ACE alleges it funded a portion of the settlement on behalf of RIM Corporation and accordingly became subrogated to the rights of The RIM Corporation. (ACE FAC ¶ 21.) These allegations are taken as true for purposes of demurrer. Even though RIM Hospitality, Inc. was the named defendant, ACE sufficiently alleges that it defended and indemnified RIM Corporation in reality. “By undertaking to indemnify or pay the principal debtor’s obligation to the creditor or claimant, the ‘subrogee’ is equitably subrogated to the claimant (or ‘subrogor’), and succeeds to the subrogor’s rights against the obligor.” (Fireman's Fund Ins. Co. v. Maryland Cas. Co. (1998) 65 Cal.App.4th 1279, 1291.) Based on the allegation that it funded the settlement on behalf of The RIM Corporation, ACE sufficiently alleges its right to subrogation.

For the foregoing reasons, the demurrer is not well taken. Further, the motion to strike paragraphs 21 and 30 in ACE’s First Amended Complaint concerning ACE’s defense and indemnification of its insureds, including RIM Corporation, is not well taken.

MEUS also argues that, to the extent ACE alleges a breach of the Agreement based on MEUS’s services, as opposed to indemnification, such a cause of action is time-barred based on the July 23, 2014 date of incident and the four-year statute of limitations set forth in CCP § 337(a). (ACE FAC ¶¶ 11, 33.) A demurrer only lies as to an entire cause of action. (Fremont Indemnity Co. v. Fremont Gen. Corp. (2007) 148 Cal.App.4th 97, 119.) Accordingly, because ACE states a cause of action with respect to MEUS’s alleged refusal to accept the tendered indemnification demand of The RIM Corporation, the second cause of action is not subject to demurrer.

Nevertheless, with respect to MEUS’s motion to strike, it seeks to strike the phrase “failing to provide the services owed under the Contract in a proper and workmanlike manner and fashion” contained in paragraph 33 of ACE’s First Amended Complaint. ACE argues that, on the face of the SAC, the alleged failure to provide services as contracted may extend to a period within the statute of limitations. “In determining the merits of a demurrer, all material facts pleaded in the complaint and those that arise by reasonable implication, but not conclusions of fact or law, are deemed admitted by the demurring party.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) However, on the face of the First Amended Complaint, the only failure to provide sufficient services was in connection with the elevator incident occurring on July 23, 2014. (ACE FAC ¶¶ 11, 15.) Four years from this date is July 23, 2018. ACE did not commence its action until September 24, 2021. Accordingly, ACE does not sufficiently allege any liability based on MEUS’s provision of services.

The demurrer and motion to strike are SUSTAINED AND GRANTED IN PART. The phrase “failing to provide the services owed under the Contract in a proper and workmanlike manner and fashion” contained in paragraph 33 of ACE’s First Amended Complaint is STRICKEN. The demurrer and motion to strike are otherwise overruled and denied.

Before deciding whether to allow leave to amend, the Court inquires from plaintiff ACE Property & Casualty Insurance Company how the First Amended Complaint can be amended to address the defects set forth above.

III. MOTION TO COMPEL DEPOSITION

Plaintiffs Zurich American Insurance Company and ACE Property & Casualty Insurance Company move to compel the deposition of Joseph Stabler, a consultant retained by defendant Mitsubishi Electric US, Inc. (“MEUS”). Defendant MEUS argues that there is no basis to allow the deposition of a retained consultant prior to expert disclosures.

Irrespective of whether MEUS is correct with respect to plaintiffs’ ability to depose its retained consultant prior to expert disclosures, “a trial court cannot order a nonresident to appear at a California deposition.” (Toyota Motor Corp. v. Superior Court (2011) 197 Cal.App.4th 1107, 1125; see also CCP § 1989 [“A witness…is not obliged to attend as a witness before any court, judge, justice or any other officer, unless the witness is a resident within the state at the time of service”].) It is undisputed that Stabler is not a resident of California. (Pls. Exs. 6, 8, 9.)

Accordingly, the motion is DENIED.