Judge: Daniel S. Murphy, Case: 22STCV34170, Date: 2023-02-24 Tentative Ruling

Case Number: 22STCV34170    Hearing Date: February 24, 2023    Dept: 32

BACKGROUND

            On October 24, 2022, Plaintiff Ascot Ave LLC filed this action against Defendant Clean Energy Solutions Inc. The operative First Amended Complaint was filed January 4, 2023. The FAC asserts (1) breach of contract, (2) intentional misrepresentation, (3) negligent representation, (4) negligence per se, (5) disgorgement, and (6) violation of Business and Professions Code section 17200.

            Plaintiff is the owner of a two-story apartment building in Los Angeles. Around March 2020, Plaintiff contracted with Defendant, a contractor, to perform remodeling work on the building. This action arises from Defendant’s alleged failure to complete the work in a proper manner according to industry standards.

            On January 27, 2023, Defendant filed the instant demurrer to the sixth cause of action and also moves to strike references to Business and Professions Code section 7159.

LEGAL STANDARD

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. (SKF Farms v. Superior Court (1984) 153 Cal.App.3d 902, 905.) Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (Ibid.) The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action. (Hahn, supra, 147 Cal.App.4th at 747.) A complaint will survive demurrer if it sufficiently apprises the defendant of the issues, and specificity is not required where discovery will clarify the ambiguities. (See Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608.) All reasonable inferences are drawn in favor of the complaint. (Kruss v. Booth (2010) 185 Cal.App.4th 699, 713.)

MEET AND CONFER

Before filing a demurrer or a motion to strike, the demurring or moving party is required to meet and confer with the party who filed the pleading demurred to or the pleading that is subject to the motion to strike for the purposes of determining whether an agreement can be reached through a filing of an amended pleading that would resolve the objections to be raised in the demurrer. (Code Civ. Proc., §§ 430.41, 435.5.) The Court notes that Defendant has complied with the meet and confer requirement. (Cade Decl. ¶¶ 6-7.)

DISCUSSION

I. Demurrer

Business and Professions Code section 17200 prohibits unlawful, unfair, or fraudulent business acts or practices. Each of the three prongs is an independent basis for relief. (Smith v. State Farm Mutual Automobile Insurance Co. (2001) 93 Cal.App.4th 700, 718.) Unlawful conduct is defined as any practice forbidden by law. (Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 377, 383.) UCL actions alleging unlawful conduct “borrow” from other statutes or common law causes of action outside Section 17200. (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.) The UCL has a broad scope and sweeping coverage regarding unfair conduct. (See In re Tobacco Cases II (2015) 240 Cal.App.4th 779, 789.)

Defendant argues that Plaintiff cannot state a UCL claim based on the individualized harm resulting from this specific construction contract. Defendant points out that Plaintiff has not identified any other consumer or competitor that has suffered alleged harm from Defendant’s business practices. However, at the pleading stage, such factual disputes do not render the complaint defective. Plaintiff sufficiently alleges that Defendant “allowed an improperly qualified individual, David Gomez, to operate its construction business with no oversite in violation of” various statutes. (FAC ¶ 59.) Plaintiff alleges that Defendant’s conduct “has been perpetrated during its business” and violates statutes “intended to protect consumers.” (Id., ¶ 61.) “Plaintiff seeks injunctive relief to prevent Contractor from continuing to engage in the conduct alleged.” (Ibid.)

Read together, these allegations lead to a reasonable inference that Defendant has engaged in conduct that harms consumers generally. Allowing an unqualified individual to operate its construction business without oversight is a general business practice that is not necessarily limited to one transaction. There is no indication on the face of the complaint that the potential harm from this is necessarily limited to Plaintiff. At the pleading stage, Plaintiff cannot be expected to identify specific consumers that have also been harmed by Defendant’s actions. The FAC sufficiently places Defendant on notice of the nature of the claim.

II. Motion to Strike

            Business and Professions Code section 7159 “identifies the projects for which a home improvement contract is required, outlines the contract requirements, and lists the items that shall be included in the contract, or may be provided as an attachment.” (Bus. & Prof. Code, § 7159(a).) A “home improvement contract” is defined as follows:

“[A]n agreement, whether oral or written, or contained in one or more documents, between a contractor and an owner or between a contractor and a tenant, regardless of the number of residence or dwelling units contained in the building in which the tenant resides, if the work is to be performed in, to, or upon the residence or dwelling unit of the tenant, for the performance of a home improvement, as defined in Section 7151, and includes all labor, services, and materials to be furnished and performed thereunder, if the aggregate contract price specified in one or more improvement contracts, including all labor, services, and materials to be furnished by the contractor, exceeds five hundred dollars ($500).    

(Bus. & Prof. Code, § 7159(b).)

Defendant argues that Section 7159 does not apply here because Plaintiff is a corporate investor that owns the building but does not reside in it, meaning the alleged contract is not a home improvement contract. However, Defendant cites no authority for the proposition that a plaintiff suing under Section 7159 must reside in the subject property. “[E]ven experienced real estate investors will benefit from the protection offered by section 7159. Contractors should be encouraged to utilize written contracts for all home improvement jobs, precisely to avoid the kind of dispute which arose here.” (Asdourian v. Araj (1985) 38 Cal.3d 276, 290-291.) If the contract fits within the statutory definition of a home improvement contract, then Section 7159 applies. (Id. at p. 291.)

Defendant points out that Section 7159 has been amended since Asdourian was decided. However, Defendant does not adequately explain how the change results in a requirement for a property owner to reside in the property or negates the logic in Asdourian. Defendant cites no authority reading an occupancy requirement into the statute. Even without Asdourian, Section 7159 as currently written defines “home improvement contract” as simply an agreement “between a contractor and an owner or between a contractor and a tenant . . . for the performance of a home improvement . . . .” (Bus. & Prof. Code, § 7159(b).) In this case, the alleged agreement is between a contractor (Defendant) and an owner (Plaintiff). If the contract instead involves a tenant, the statute specifies that it applies “regardless of the number of residence or dwelling units contained in the building in which the tenant resides, if the work is to be performed in, to, or upon the residence or dwelling unit of the tenant . . . .” (Ibid.) The act of “home improvement” is defined as, inter alia, “the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property . . . .” (Id., § 7151(a).) Here too, there is no requirement that an owner of residential property must personally reside in the property. It is undisputed that the property at issue here is a “residential property” and that Defendant was contracted to repair, remodel, alter, convert, etc.

Defendant claims that Plaintiff’s interpretation of Section 7159 leads to an absurd result. Under Plaintiff’s interpretation, Defendant argues, “a contractor bidding on a one-hundred-story, 2000-unit, skyscraper would have to comply with the HIC laws provided every unit was a residential dwelling.” (Mtn. 5:18-20.) Defendant fails to articulate how this is an absurd result. The Legislature has defined “home improvement” and “home improvement contract” in specific ways. The contract alleged here fits within these definitions. Therefore, the statute applies. The Legislature imposed no residency requirement for building owners and did not distinguish between large skyscrapers or four-unit apartments. If Defendant disagrees with the scope of Section 7159, its issue is with the Legislature. The Court cannot impose a requirement that does not appear from the plain language of the statute.

CONCLUSION

            Defendant’s demurrer is OVERRULED, and its motion to strike is DENIED.