Judge: Daniel S. Murphy, Case: 22STCV14536, Date: 2023-08-18 Tentative Ruling

Case Number: 22STCV14536    Hearing Date: August 18, 2023    Dept: 32

BACKGROUND

            On May 2, 2022, Plaintiff Azad Steel, Inc. (Plaintiff) filed this action against Defendants Renaissance Construction Group (RCG) and Youssef Mikhail (Mikhail), asserting causes of action for (1) breach of contract, (2) quantum meruit, (3) account stated, and (4) open book account.

            Plaintiff was the subcontractor on a construction project in which RCG was the primary contractor. Plaintiff and RCG entered into a written agreement whereby Plaintiff would complete a portion of the project relating to the fabrication and installation of structural steel. RCG also allegedly ordered additional work from Plaintiff and promised to pay for it. Mikhail is allegedly RCG’s alter ego. Plaintiff filed this action to recover unpaid compensation.

            On June 2, 2023, Defendants filed the instant motion for summary judgment or adjudication in the alternative. Plaintiff filed its opposition on August 4, 2023. Defendants replied on August 11, 2023

LEGAL STANDARD

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code of Civil Procedure section 437c, subdivision (c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 67, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal. App. 3d 367, 381-382.)

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1520.) Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 166.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

DISCUSSION

I. Attorneys’ Fees

“Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .” (Code Civ. Proc., § 1021.) Thus, a plaintiff must set forth a statutory or contractual basis for attorney’s fees in order to recover such fees.

            It is undisputed that the contract between the parties does not contain an attorneys’ fees provision. (Def.’s Stmnt. of Undisputed Facts (UF) 4.) However, Plaintiff seeks attorneys’ fees on a statutory basis, specifically the prompt payment statute embodied in Business and Professions Code section 7108.5.

            Section 7108.5 provides: “A prime contractor or subcontractor shall pay to any subcontractor, not later than seven days after receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor’s interest therein.” (Bus. & Prof. Code, § 7108.5(a).) “Any violation of this section shall constitute a cause for disciplinary action and shall subject the licensee to a penalty, payable to the subcontractor, of 2 percent of the amount due per month for every month that payment is not made.” (Id., subd. (b).) “In any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to his or her attorney’s fees and costs.” (Id., subd. (c).)

            Defendants argue that this section does not apply because it only applies to progress payments, and Plaintiff has no evidence that Defendants received progress payments. Defendants also argue that Plaintiff is not claiming a progress payment as damages but is instead seeking a lump sum owed under the contract, or a final payment. (See Murray’s Iron Works, Inc. v. Boyce (2008) 158 Cal.App.4th 1279, 1299.) Defendants point to the allegations that “Plaintiff has performed each and every obligation on its part to be performed under the Contract except those obligations excused by the action or inaction of RENAISSANCE” and that Plaintiff seeks “the balance due under the Contract.” (Compl. ¶¶ 14, 16.)

            As discussed in the Court’s order denying Defendants’ motion to strike attorneys’ fees, those allegations are not dispositive on whether Plaintiff seeks progress payments or one final payment. (Nov. 7, 2022 Order re Mtn. to Strike 3:23-4:10.) The Court held that this is a factual dispute to be resolved through evidence. (Id. at 4:11-12.)  

            Defendants do not present any evidence to satisfy their initial burden on summary judgment. Instead, Defendants attempt to prematurely shift the burden to Plaintiff, arguing that “at no point has Plaintiff shown that the owner of the Property ever paid Defendants a progress payment which included payment for work performed by the Plaintiff, triggering a duty to pay Plaintiff.” (Mtn. 3:23-25.) Plaintiff is not required to make any showing until Defendants do so first. (See Consumer Cause, Inc. v. Smilecare (2001) 91 Cal.App.4th 454, 468-69.) Defendants have no evidence that RCG was not paid any progress payments by the owner, thereby leaving open a triable issue. Defendants claim that the declaration of Mikhail shows RCG never received a progress payment from the owner. Mikhail’s declaration shows no such thing.

            Mikhail’s declaration only avers that the contract did not provide for RCG to receive progress payments from the owner. (UF 2.) However, as Defendants acknowledge, Section 7108.5 is “not triggered by whether the general contractor ‘should have’ received a payment from the owner. Rather, they begin to run upon the general contractor actually receiving a progress payment.” (Mtn. 3:25-28, quoting Tesco Controls, Inc. v. Monterey Mech. Co. (2004) 124 Cal.App.4th 780, 803-04.) Whether the contract required progress payments only addresses whether RCG “should have” received a progress payment. But the statute depends on whether RCG “actually received” a progress payment. The fact that the contract did not require progress payments does not mean it prohibited progress payments. The contract does not preclude the possibility that the owner paid RCG progress payments. Defendants have not presented evidence that RCG never received progress payments. Therefore, Defendants have not satisfied their initial burden on summary judgment.  

II. Payment to Plaintiff

            Defendants argue that “[t]he undisputed facts show that Plaintiff was paid for all services it performed on the Project.” (Mtn. 5:3-4.) For support, Defendants rely on Mikhail’s declaration, averring that “[a]fter terminating Plaintiff, I fully paid Plaintiff for all the work it performed on the Project. There is no outstanding balance due Plaintiff for work or services it completed on the Project.” (Mikhail Decl. ¶ 5.) However, Plaintiff avers that it is owed $81,489.50 for unpaid fabrication and installation, plus $8,800 for shop drawings. (Ghadimian Decl. ¶ 22, Ex. G.) Additionally, Mikhail himself admitted in a text message that Plaintiff was owed $95,000. (Id., Ex. A.) This conflicting evidence raises a triable issue and precludes summary judgment.

Defendants argue that Plaintiff’s supporting documentation is insufficient to justify Plaintiff’s calculation of the amount owed. Defendants also argue that it is unclear what the text about $95,000 was referring to. However, this goes to the weight of the evidence, which is a matter for the jury.

III. Mikhail as a Defendant

            Lastly, Defendants argue that “Mikhail should be dismissed from this action. The Subcontract was between two parties: Plaintiff and Defendant Renaissance.” (Mtn. 5:14-15.) Defendants again place the burden on Plaintiff instead of satisfying their own initial burden. Defendants cite no evidence supporting their contention that the subcontract was only between Plaintiff and RCG. Additionally, Plaintiff alleges that Mikhail is the alter ego of RCG. (Compl. ¶ 8.) Defendants cite no evidence precluding an alter ego theory against Mikhail. Therefore, there is a triable issue over whether Mikhail is liable to Plaintiff.

            Defendants argue that the alter ego theory was not properly pleaded in the first place, claiming that Plaintiff merely alleges in conclusory fashion that RCG is a mere shell. However, the complaint alleges more than that, including that Mikhail used RCG assets for personal use, transferred RCG funds to himself without adequate consideration, solely controls RCG without any director or shareholder meetings, did not maintain records of corporate meetings, and entered into transactions with RCG without director or shareholder approval. (Compl. ¶ 8.) These facts are sufficient to infer alter ego liability. On summary judgment, it is Defendants’ burden to negate the allegations with evidence, which Defendants have not done.  

CONCLUSION

            Defendants’ motion for summary judgment or adjudication is DENIED. Plaintiff’s request for a continuance under Code of Civil Procedure section 437c(h) is denied as moot because the motion fails on the merits based on existing evidence.