Judge Daniel M. Crowley, Case Number: 23STCV20564, Date: 2024-01-05 Tentative Ruling

Defendants Torres General Contractors Inc.’s, Thomas Kim’s, Richard Kim’s, Jacob Mullem’s, and Joghwa Won’s demurrer to Plaintiff Goodson Real Estate Co.’s first amended complaint is sustained with 20 days leave to amend as to the 4th cause of action, without leave to amend as to the 8th cause of action, and overruled as to the 1st, 2nd, 5th, 6th, and 7th causes of action.

Defendants Torres General Contractors Inc. (“Torres”), Thomas Kim (“Thomas”), Richard Kim (“Richard”), Jacob Mullem (“Jacob”), and Jonghwa Won (“Won”) (collectively, “Defendants”) demur to the 1st, 2nd, 4th, 5th, 6th, and 7th causes of action in Plaintiff Goodson Real Estate Co.’s (“GRE”) (“Plaintiff”) first amended complaint (“FAC”).[1] (Notice of Demurrer, pgs. 1-3; C.C.P. §430.10(e).)

Before filing a demurrer, the moving party must meet and confer in person, by telephone, or by video conference with the party who filed the pleading to attempt to reach an agreement that would resolve the objections to the pleading and obviate the need for filing the demurrer. (C.C.P. §430.41.)

Plaintiff filed the initial Complaint on August 28, 2023, against Defendants. On January 5, 2024, this Court sustained Torres’, Thomas’, Richards’, and Jacob’s demurrer to the initial complaint in part with 90 days leave to amend and overruled the demurrer in part. (See 1/5/24 Minute Order.) On February 5, 2024, Plaintiff filed the operative FAC alleging eight causes of action: (1) breach of contract; (2) negligence; (3) disgorgement of funds pursuant to Business & Professions Code §7031 fraud; (4) fraud; (5) intentional interference with prospective economic advantage; (6) negligent interference with prospective economic advantage; (7) intentional interference with contractual relations; and (8) negligent interference with contractual relations, arising from Plaintiff’s entry into a Subcontract Agreement with Torres to do electrical work at real property located at 1124-1138 S. Normandie Ave., Los Angeles, CA 90006 (“Property”) that is developed by Plaintiff. (FAC ¶¶10-14, Exh. 1.)

Defendants filed the instant demurrer on March 8, 2024. Plaintiff filed its opposition on March 25, 2024. Defendants filed their reply on April 2, 2024.

Defendants demur on the basis that Plaintiff’s 1st, 2nd, 3rd, 4th, 5th, 6th, 7th, and 8th causes of action fail to state facts sufficient to constitute causes of action. (Demurrer, pgs. 6-13; C.C.P. §430.10(e).)

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) 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. (See Donabedian v. Mercury Insurance Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hospital District (1992) 2 Cal.4th 962, 967.)

A plaintiff must allege the following elements to state a breach of contract: (1) existence of contract; (2) plaintiffs’ performance or excuse for nonperformance; (3) defendants’ breach (or anticipatory breach); and (4) resulting damage to plaintiff. (Reichert v. General Insurance Co. (1968) 68 Cal.2d 822, 830; Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1387.) Although a written contract is usually pleaded by alleging its making and attaching a copy which is incorporated by reference, a written contract can also be pleaded by alleging the making and the substance of the relevant terms. (Construction Protective Services, Inc. v. TIG Specialty Insurance Co. (2002) 29 Cal.4th 189, 198-199; Perry v. Robertson (1988) 201 Cal.App.3d 333, 341.)

Plaintiff alleges GRE and Torres, acting through Thomas, Richard, Jacob and Won, entered into a contract to do electrical work at the Property on or about December 13, 2021 (“Contract”). (FAC ¶31.) Plaintiff alleges on information and belief that Thomas, Richard, Jacob, and Won are all officers, directors, managing employees, and personnel of record of Torres. (FAC ¶32.) Plaintiff alleges Torres, during work on the Property, at one point, had a contractor’s license that was not in good standing. (FAC ¶35.) Plaintiff alleges Thomas, Richard, Jacob, and Won would all have liability under the Contract as both a matter of statute and cause authority based upon their relationships with Torres for the work performed on the Property without Torres having a license in good standing. (FAC ¶36.)

Plaintiff alleges the Contract called for payments to Torres in the amount of $1,240,000. (FAC ¶¶37-38, Exh. 1.) Plaintiff alleges GRE has paid Torres more than $480,000 pursuant to the Contract. (FAC ¶39.) Plaintiff alleges the Contract called for Torres to prosecute work at “all possible speed,” and in a continuous and uninterrupted manner. (FAC ¶40.)

Plaintiff alleges once Thomas, Richard, and Won were confronted on a string of misstatements which were made including but not limited to a failure to order parts worth more than $250,000, which had a long lead time, Thomas unilaterally indicated that Torres was not being paid enough to perform under the Contract and quit. (FAC ¶41.) Plaintiff alleges Pursuant to ¶4 of the Contract, Defendants are readily in default. (FAC ¶42.) Plaintiff alleges pursuant to ¶4.1 of the Contract, Defendants are liable to GRE for any sums necessary to compensate GRE for damages or losses sustained as a result of the default, including from sums already paid to Torres. (FAC ¶43.) Plaintiff alleges Pursuant to ¶4.2 of the Contract, Defendants are liable for the cost to correct deficiencies and complete the work contracted for. (FAC ¶44.)

Plaintiff alleges GRE has performed all conditions and covenants to be performed on its part under the Contract, except as excused. (FAC ¶46.) Plaintiff alleges Defendants are in breach of the Contract. (FAC ¶47.) Plaintiff alleges as a direct and proximate result of Defendants’ breach of the Contract, GRE has incurred general and special damages, and such other damages are permitted by the Civil Code, in an amount subject to proof at trial, and interest on such sum at the statutory rate, which damages are within the jurisdiction of this Court. (FAC ¶48.)

Pursuant to Business and Professions Code §7028.5, it is unlawful for a person, who is an officer, director, manager, managing employee, member, or any individual who is listed in the personal of record, of a licensed corporation, to engage in the business in the capacity of a contractor in California without having a license in good standing. (Bus. & Prof. Code §7028.5.) Business and Professions Code §7076.2(b) provides, “[w]here the license of the entity is suspended, each person identified within the entity in Section 7028.5 shall be personally liable up to one million dollars ($1,000,000) each for damages resulting to third parties in connection with the company’s performance, during the period of suspension, of any act or contract where a license is required by this chapter. This personal liability shall not apply where there has been substantial compliance with the licensure requirements, as described in subdivision (e) of Section 7031.” (Bus. & Prof. Code §7076.2(b).)

Plaintiff sufficiently alleges Torres is an alter ego of Thomas, Richard, Jacob, and Won. (FAC ¶9.) Plaintiff sufficiently alleges the existence of a contract between Plaintiff and Torres. (FAC ¶¶31, 38, Exh. 1.) Plaintiff sufficiently alleges its performance or excuse for nonperformance. (FAC ¶46.) Plaintiff sufficiently alleges Defendants’ breach. (FAC ¶¶41-42, 47.) Plaintiff sufficiently alleges resulting damages. (FAC ¶¶43-44.)

“The elements of a cause of action for negligence are well established. They are (a) a legal duty to use due care; (b) a breach of such legal duty; [and] (c) the breach as the proximate or legal cause of the resulting injury.” (Ladd v. County of San Mateo (1996) 12 Cal.4th 913, 917, internal quotations omitted.)

Plaintiff alleges Defendants had a duty to reasonably perform the services contracted for with regard to the Property, on behalf of GRE. (FAC ¶51.) Plaintiff alleges Defendants breached their duty to GRE by failing to build as provided for under the Contract, providing defective work, and walking off the job. (FAC ¶52.) Plaintiff alleges on information and belief that Thomas, Richard, Jacob and Won all performed work on the Property, that Thomas, Richard, Jacob and Won were all hired by Torres, that each of them had a duty of care in their actual performance of work on the Property, and each failed by amongst other things providing defective work on the Property. (FAC ¶55.) Plaintiff alleges Thomas, Richard and Won were all on site regularly performing work. (FAC ¶55.)

Plaintiff alleges said defective work included but was not limited to: the failure to follow plans for electrical in the kitchens (running the wrong cables for stoves- by Won and Richard, running outlets in the wrong spots- Won and Richard, not following cabinet plans, ruining the structural integrity of sheer wall), failing to run and/or drill holes for home runs, failing to use fire rated can lights, and using the wrong kind of wiring for the HVAC systems-Jacob. (FAC ¶56.)

Plaintiff alleges the license of Torres was not in good standing at some point during the performance by Torres, Thomas, Richard, Jacob and Won, while they were working on the Property. (FAC ¶57.) Plaintiff alleges pursuant Business and Professions Code §7028.5, it is unlawful for a person, who is an officer, director, manager, managing employee, member, or any individual who is listed in the personal of record, of a licensed entity, to engage in the business in the capacity of a contractor in California without having a license in good standing. (FAC ¶57.) Plaintiff alleges Business and Professions Code §7076.2(b) readily provides that where the license of the entity is suspended, each person identified within the entity in §7028.5, shall be personally liable. (FAC ¶57.)

Plaintiff alleges as a direct and proximate result of Defendants’ breach of their duty, GRE has been injured as outlined herein. (FAC ¶58.) Plaintiff alleges as a result of Defendants’ behavior GRE has been damaged in an amount according to proof at trial. (FAC ¶59.)

Plaintiff sufficiently alleges a cause of action for negligence. Plaintiff sufficiently alleges Torres is an alter ego of Thomas, Richard, Jacob, and Won. (FAC ¶9.) Plaintiff alleges Defendants had a legal duty to use due care. (FAC ¶51.) Plaintiff alleges a breach of such legal duty. (FAC ¶¶52, 55-56, 57.) Plaintiff alleges the breach as the proximate or legal cause of the resulting injury. (FAC ¶¶27, 58.)

Accordingly, Defendants’ demurrer to Plaintiff’s 2nd cause of action for negligence is overruled.

Fraud actions are subject to strict requirements of particularity in pleading. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Fraud must be pleaded with specificity rather than with general and conclusory allegations. (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184.) The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)

Plaintiff alleges Torres, acting through Thomas, Richard, Jacob and Won have compounded on this fraud, by actively lying and concealing a failure to order more than $250,000, worth of parts, with a very long lead time, which were imperative to moving the work they were doing in a timely manner, and making additional misrepresentations with regards to timing. (FAC ¶71.) Plaintiff alleges in July of 2023, Thomas through numerous emails, text messages and phone calls with GRE, actively lied about a supplier (American Ace), not accepting a check for the purchase of switch gears, that there would be a “10 day hold,” on said check, and that a supplier would not “deal with joint checks.” (FAC ¶72.) Plaintiff alleges Thomas never presented American Ace with said check and that clearly American Ace never made any of the other statements, but rather Thomas simply was lying and never arranged for the purchase. (FAC ¶72.) Plaintiff alleges in June and July of 2023 (June 20th-July 27th) Thomas made numerous representations to GRE both orally and in writing about the specifications of switchgears, indicating that he was waiting on specifications, that the supplier was finishing them, and that the “person in charge was not in.” (FAC ¶72.) Plaintiff alleges GRE later found out that said statements were untrue and that Thomas had the specifications and was previously provided with them the entire time that he was fabricating excuses. (FAC ¶72.)

Plaintiff alleges Won verbally stated to the principal of GRE on multiple occasions throughout June and July of 2023, in person, at the Property, that he already did the home runs, and when called out, would immediately be doing the home runs that day. (FAC ¶73.) Plaintiff alleges said statements were a fabrication for which he was called out. (FAC ¶73.)

Plaintiff alleges Richard verbally stated to the principal of GRE on multiple occasions in June and July of 2023, in person, at the Property, first that the home runs were done and then that he would be doing them, along with other items later that day. (FAC ¶74.) Plaintiff alleges said statements were a fabrication for which he was called out. (FAC ¶74.)

Plaintiff alleges it reasonably relied on said misrepresentations. (FAC ¶75.) Plaintiff alleges it has readily been harmed by said misrepresentations as provided for herein. (FAC ¶76.) Plaintiff alleges its reliance on said misrepresentations was a substantial factor in causing said harm. (FAC ¶77.) Plaintiff alleges said active misstatements and concealments were done with the intention of ensuring Plaintiff would not terminate the Contract and immediately fire Defendants. (FAC ¶78.)

Plaintiff fails to allege with the requisite specificity when each of the representations on behalf of Torres were made by Thomas, Richard, Jacob, and Won. (See FAC ¶¶68-74; See Lazar, 12 Cal.4th at pg. 645; West, 214 Cal.App.4th at pg. 793.) Further, Plaintiff fails to allege any specific representations made by Jacob.

“Intentional interference with prospective economic advantage has five elements: (1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512.)

A plaintiff must show that the defendant engaged in “intentionally wrongful acts designed to disrupt the plaintiff’s relationship” in an act independently wrongful in violation of some constitutional, statutory, regulatory, common law, or other determinable legal standard. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1164.)

Plaintiff alleges it has a prospective economic relationship with Southebys International Realty, in that Southebys sells finished properties on behalf of Plaintiff, and this Property is 84 units with an expected to have a market value in excess of $30,000,000. (FAC ¶83.) Plaintiff alleges Defendants were readily aware of this and of the economic opportunities which are available in the sale of 84 units within Los Angeles, as they were hired to be paid more than $1.2M to work on the Property on behalf of GRE. (FAC ¶84.)

Plaintiff alleges within the year last past Defendants interfered with GRE’s prospective economic relationship by failing to provide the entirety of the contracted for services, by failing to order necessary parts with a long lead time, and when being called out on lies, simply quitting. (FAC ¶85.) Plaintiff alleges said failures have both delayed development of the Property and have significantly increased the cost of developing the Property and has made it so that Southebys could not timely go forward and sell the finished units which would benefit Plaintiff. (FAC ¶86.)

Plaintiff alleges Torres and its officers/shareholders, Thomas, Richard, Jacob and Won, all partook in wrongful conduct in addition to the interference by way of working on the Property without a contractor’s license in good standing, as pursuant to CA B&P § 7028.5, it is unlawful for a person, who is an officer, director, manager, managing employee, member, or any individual who is listed in the personal of record, of a licensed entity, to engage in the business in the capacity of a contractor in California without having a license in good standing. (FAC ¶88.) Plaintiff alleges B&P §7076.2(b) readily provides that where the license of the entity is suspended, each person identified within the entity in §7028.5, shall be personally liable. (FAC ¶88.) Plaintiff alleges that is not only was conduct engaged in by Defendants wrongful, but it was also statutorily unlawful. (FAC ¶88.) Plaintiff alleges this is in addition to the other wrongful actions as stated above. (FAC ¶88.)

Plaintiff sufficiently alleges Defendants engaged in an independently wrongful act and that Plaintiff has an actual relationship with a third party with which there is a probable future economic benefit to Plaintiff. (FAC ¶¶83, 88; Korea Supply Co., 29 Cal.4th at pg. 1164.)

Accordingly, Moving Defendants’ demurrer to Plaintiff’s 5th of action for intentional interference with prospective economic relations is overruled.

“The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship.” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786.)

“The fact that the defendant’s conduct was independently wrongful is an element of the interference cause of action itself. In addition, the wrongful interfering act can be independently tortious only as to a third party; it need not be independently wrongful as to the plaintiff. Accordingly, . . . to state a cause of action for intentional or negligent interference with prospective economic advantage, it is not necessary to also plead a separate, stand-alone tort cause of action.” (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1006, internal citations omitted.)

Plaintiff alleges it has a prospective economic relationship with Southebys International Realty in that Southebys sells finished properties on behalf of GRE, and this Property is 84 units with an expected market value in excess of $30,000,000. (FAC ¶93.) Plaintiff alleges Defendants were readily aware of this, of said relationship, and of the economic opportunities which are available in the sale of 84 units within Los Angeles, as they were hired to be paid more than $1.2M to work on the Property on behalf of GRE. (FAC ¶94.)

Plaintiff alleges Defendants had a duty to act reasonably in providing services to GRE and not injure their business relationships or potential profits, and said duty was created pursuant to the hiring of Defendants and by each of Defendants individually performing work on the Property. (FAC ¶95.)

Plaintiff alleges Torres and its officers/shareholders, Thomas, Richard, Jacob and Won, all partook in wrongful conduct in addition to the interference by way of working on the Property without a contractor’s license in good standing, as pursuant to B&P § 7028.5, it is unlawful for a person, who is an officer, director, manager, managing employee, member, or any individual who is listed in the personal of record, of a licensed entity, to engage in the business in the capacity of a contractor in California without having a license in good standing. (FAC ¶96.) Plaintiff alleges B&P §7076.2(b) readily provides that where the license of the entity is suspended, each person identified within the entity in §7028.5, shall be personally liable. (FAC ¶96.) Plaintiff alleges that is not only was conduct engaged in by Defendants wrongful, but it was also statutorily unlawful. (FAC ¶96.) Plaintiff alleges this in addition to the other wrongful actions as stated above. (FAC ¶96.)

Plaintiff alleges within the last year Defendants breached their duty to GRE by acting in such a manner as to injure GRE as described above. (FAC ¶97.) Plaintiff alleges it was readily foreseeable by Defendants that by failing to provide the entirety of the contracted for services, by failing to order materials with a long lead time, by working without a license in good standing, by each of the Defendants individually and collectively negligently performing work on the Property and actively lying about what had been done and what would be done, and when, and by simply quitting, that they would cause injury to Plaintiff. (FAC ¶98.) Plaintiff alleges Defendants did in fact cause harm to Plaintiff. (FAC ¶99.) Plaintiff alleges as a direct and proximate result of Defendants’ breach of duty to Plaintiff, it has been injured and has lost prospective economic advantages as described above. (FAC ¶100.) Plaintiff alleges as a result of Defendants’ conduct, it has been damaged in an amount according to proof at trial. (FAC ¶101.)

Plaintiff sufficiently alleges a cause of action for negligent interference with prospective economic relations. Plaintiff sufficiently alleges Defendants engaged in an independently wrongful act and that Plaintiff has an actual relationship with a third party with which there is a probable future economic benefit to Plaintiff. (FAC ¶¶93, 96; Korea Supply Co., 29 Cal.4th at pg. 1164.)

Accordingly, Moving Defendants’ demurrer to Plaintiff’s 6th of action for negligent interference with prospective economic relations is overruled.

“The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126, internal citations omitted.)

“Because interference with an existing contract receives greater solicitude than does interference with prospective economic advantage, it is not necessary that the defendant’s conduct be wrongful apart from the interference with the contract itself.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55, internal citations omitted.)

“Plaintiff need not allege an actual or inevitable breach of contract in order to state a claim for disruption of contractual relations. We have recognized that interference with the plaintiff’s performance may give rise to a claim for interference with contractual relations if plaintiff’s performance is made more costly or more burdensome. Other cases have pointed out that while the tort of inducing breach of contract requires proof of a breach, the cause of action for interference with contractual relations is distinct and requires only proof of interference.” (Pacific Gas & Electric Co., 50 Cal.3d at pg. 1129, internal citations omitted.)

Plaintiff alleges it contracted with HIMR Normandie JV, LCC, (the owner of the Property), to serve as the developer of the Property. (FAC ¶103.) Plaintiff alleges Umpqua Bank, contracted to be the lender for the development of the Property. (FAC ¶103.) Plaintiff alleges each of the Defendants knew of said contracts. (FAC ¶104.)

Plaintiff alleges Defendants’ conduct as described throughout this complaint, including performing work without a contractor’s license in good standing, negligently performing work, failing to order materials of paramount import with long lead times (and lying about it), actively lying about items that were alleged to have been done or when they would be done, and walking off a job, prevented the timely performance of the contracts, made performance more expensive (and increased carrying costs), and made performance more difficult as new electrical contractors needed to be hired. (FAC ¶105.)

Plaintiff alleges Defendants knew disruption of Plaintiff’s performance of obligations to the Property owner and the bank was substantially certain to occur by way of Defendants’ conduct as described herein, and it was. (FAC ¶106.) Plaintiff alleges it was harmed by Defendants’ conduct. (FAC ¶107.) Plaintiff alleges Defendants’ conduct was a substantial factor in causing its harm. (FAC ¶108.) Plaintiff alleges as a result of Defendants’ conduct, Plaintiff has been damaged in an amount according to proof at trial. (FAC ¶109.)

Plaintiff sufficiently alleges a cause of action for intentional interference with contractual relations. (FAC ¶¶103-109.)

Accordingly, Defendants’ demurrer to Plaintiff’s 7th cause of action is overruled.

There is no cognizable cause of action for negligent interference with contractual relations. While there exists a cause of action for negligent interference with prospective economic, the California Supreme Court has rejected a cause of action for negligent interference with contract. (Davis v. Nadrich (2009) 174 Cal.App.4th 1, 9.)

Accordingly, Defendants’ demurrer to Plaintiff’s 8th cause of action is sustained without leave to amend.

Hon. Daniel M. Crowley

Judge of the Superior Court

[1] The Court notes Defendants do not demur to Plaintiff’s 3rd cause of action for disgorgement of funds pursuant to Business and Professions Code §7031.