Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

MOVING PARTY: Defendants 13700 Saticoy, LLC, Greg Fenske and Nygard Foundation 

 

RESPONDING PARTY: Plaintiffs Blusky Restoration Contractors, LLC and Har-Bro West, Inc. 

 

BACKGROUND 

This is a breach of contract and mechanic’s lien foreclosure action arising from work performed on a commercial warehouse property owned by Defendants 13700 Saticoy, LLC, Greg Fenske and Nygard Foundation.  After a fire at the warehouse, Defendants hired Plaintiff Har-Bro West, Inc. to perform restoration services.  Plaintiff Blusky Restoration Contractors LLC alleges that it subsequently took over the work from Har-Bro and in May 2020, acquired all contracts and accounts receivable from Har-Bro.  (First Amended Complaint (“FAC”) ¶9.)  In July 2020, Blusky filed a mechanic’s lien against the Property, claiming it had supplied over $1.8 million in labor, services, equipment and/or material to the Property. (Id., ¶24.)  

Defendants made an insurance claim with Zurich North America (“Zurich”) for indemnity of the losses and damages sustained to the Property.   (Id., ¶37.)  Zurich has paid to Defendants approximately $2,200,000 in coverage of Plaintiffs’ reconstruction services.  (Id., ¶ 39.)  As partial consideration under the parties’ contract, Plaintiffs allege Defendants were required to transfer the Zurich insurance proceeds to Plaintiffs.  (Id.)     

The operative first amended complaint (“FAC”) alleges claims for (1) breach of contract, (2) foreclosure of mechanic’s lien, (3) open book account, (4) account stated, (5) statutory prompt payment penalties, (6) accounting, (7) breach of fiduciary duty, and (8) conversion.   

This hearing is on Defendants’ demurrer and motion to strike.  Defendants demur to all causes of action brought by Har-Bro because Har-Bro assigned all contracts and accounts receivables to Blusky and therefore lacks standing to assert its claims.  Defendants also demur to the statutory prompt penalties claim brought by Blusky because Defendants argue the claim cannot be assigned.  Defendants also move to strike Plaintiffs’ claim for punitive damages because Har-Bro has assigned all of its contracts and accounts receivable to Blusky and therefore has no actual damages on which to base a claim for punitive damages, and Blusky lacks standing to seek punitive damages because such a claim is not assignable under California law.  There is no opposition filed as of the posting of this tentative ruling.    

LEGAL STANDARD 

“[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 Ins. 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 Hosp. Dist. (1992) 2 Cal.4th 962, 967.)  

A demurrer to a complaint may be general or special.  A general demurrer challenges the legal sufficiency of the complaint on the ground it fails to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)  A special demurrer challenges other defects in the complaint, including whether a pleading is uncertain. (Code Civ. Proc., § 430.10, subd. (f).)  The term uncertain means the pleading is “ambiguous and unintelligible.”  (Id.)  A demurrer for uncertainty should be sustained if the complaint is drafted in such a manner that the defendant cannot reasonably respond, i.e., the defendant cannot determine what issues must be admitted or denied, or what counts are directed against the defendant. (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) 

Further, the court may, upon motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading.  (Code Civ. Proc. § 436, subd. (a).)  The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Code Civ. Proc. § 436, subd. (b).)  The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc. § 437.) 

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”).)  The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) 

DISCUSSION 

Demurrer 

Defendants argue that Har-Bro cannot assert any of its claims because it has already assigned all contracts and accounts receivables to Blusky and therefore lacks standing to sue.  The Court agrees. 

Once a claim is properly assigned, the assignee has standing to pursue the assigned claim, and the assignor no longer has standing.  (Searles Valley Mins. Operations Inc. v. Ralph M. Parsons Serv. Co. (2011) 191 Cal.App.4th 1394, 1402 (“Once a claim has been assigned, the assignee is the owner and has the right to sue on it …[and] the assignor lacks standing to sue on the claim.”).) 

Here, Plaintiffs allege in their original Complaint that “[i]n May of 2020, all contracts and accounts receivable were assigned from Har-Bro to Blusky.”  (Compl. ¶9.)  The FAC revised paragraph 9 to allege that in May 2020, all contracts and accounts receivable were “acquired” from Har-Bro by Blusky.  (FAC ¶9.)  But whether the contracts and accounts were acquired or assigned, only Blusky, as Har Bro’s assignee, has standing to pursue causes of actions based on Har-Bro’s contract and accounts.  Har-Bro lacks standing to pursue its claims which are all based on the contracts and accounts it assigned to Blusky.   

In addition, Blusky’s fifth cause of action for prompt payment penalties fails because a claim for statutory penalties cannot be assigned.  The prompt progress payment statute on which the claim relies is based on a property owner’s failure to make prompt progress payment to a contractor.  (Civ. Code § 8800.)  Section 8800 expressly provides for a “penalty” interest rate on the contract amount, and therefore it gives rise to a statutory penalty claim.  A statutory penalty claim cannot be assigned.  (Amalgamated Transit Union Local 1756 AFL-CIO v. Superior Court (2009) 46 Cal.4th 993, 1003 (“the right to recover a statutory penalty may not be assigned”).)    Accordingly, Blusky lacks standing to pursue its prompt payment penalties claim because Har-Bro could not have assigned the claim to it. 

Motion to Strike 

Defendants move to strike Plaintiffs’ claim for punitive damages.  They argue that Har-Bro’s claim should be stricken because it assigned its claim for compensatory damages and therefore cannot have a punitive damages claim.  They argue that Blusky’s claim for punitive damages should be stricken because the claim cannot be assigned.  They also argue that Plaintiffs’ claim for a specified amount of punitive damages should be stricken as California law prohibits a plaintiff from stating the amount of the punitive damages sought.  The Court agrees. 

“The foundation for the recovery of punitive or exemplary damages rests upon the fact that substantial damages have been sustained by the plaintiff.  Punitive damages are not given as a matter of right, nor can they be made the basis of recovery independent of a showing which would entitle the plaintiff to an award of actual damages.  Actual damages must be found as a predicate for exemplary damages.”  (Mother Cobb’s Chicken Turnovers, Inc. v. Fox (1937) 10 Cal.2d 203, 205; see also Kizer v. County of San Mateo (1991) 53 Cal.3d 139, 147 (“In California, as at common law, actual damages are an absolute predicate for an award of exemplary or punitive damages.”)    

Here, Har-Bro has no claim for compensatory damages because it assigned all such claims to Blusky.  Once a claim is assigned, the assignee has standing to pursue the assigned claim and the assignor no longer has standing.  (Searles, 191 Cal.App.4th at 1402.)  By assigning its contracts and accounts receivables to Blusky, Har-Bro forfeited its rights to sue for damages on the assigned contracts and accounts receivables.  (Id.)  Without a claim for actual damages, Har-Bro may not recover punitive damages.  (Mother Cobb’s, 10 Cal.2d at 205.)   

Moreover, California law is clear that claims for punitive damages are not assignable.  (Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 942; Essex Ins. Co. v. Fire Star Dye House, Inc. (2006) 38 Cal.4th 1252, 1263.)  Here, Blusky alleges in paragraph 54 of the FAC and paragraph 6 of the prayer for relief that it should receive exemplary damages in addition to actual damages for the alleged conversion of the insurance proceeds.  While Har-Bro could assign to Blusky its alleged contractual rights, title and interest in the insurance proceeds, it could not assign any claim for related punitive damages.  Accordingly, Blusky’s claim for punitive damages is stricken as contrary to law.     

Finally, California law prohibits a plaintiff from stating the amount of punitive damages sought.  (Civ. Code § 3295(e).)  Here, Plaintiffs’ complaint demands in addition to actual damages, “damages of $1,500,000 to $13,500,000 to make an example of and to punish defendants.”  FAC ¶ 54, and Prayer ¶ 6.  Such allegations are contrary to Civ. Code § 3295(e).   

CONCLUSION 

Based on the foregoing, the Court SUSTAINS the demurrer and GRANTS the motion to strike with 20 days’ leave to amend.     

   

IT IS SO ORDERED. 

 

DATED: September 6, 2023 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court