Judge: Elaine Lu, Case: 22STCV19727, Date: 2023-09-12 Tentative Ruling

Case Number: 22STCV19727    Hearing Date: September 12, 2023    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background

            On June 16, 2022, Plaintiff Natalie Ann Johnson (“Johnson”) filed the instant action arising out of an alleged breach of a construction contract against Defendants Michael Delahoussaye dba MD Consulting (“Delahoussaye”), Gerardo Alfaro (“Alfaro”) and Pedro Quiroz dba Quiroz Cabinets (“Quiroz”) (collectively “Defendants/Cross-Complainants”).  On September 22, 2022, Plaintiff filed the operative First Amended Complaint (“FAC”) against Defendants.  The FAC asserts seven causes of action for (1) Breach of Implied Covenant of Good Faith and Fair Dealing; (2) Breach of Implied Warranty; (3) Negligence; (4) Violations of Business and Professions Code section 17200;(5) Disgorgement under Business and Professions Code section 7031; (6) Intentional Misrepresentation; and (7) Fraudulent/False Representation under Business and Professions Code section 7160.

            On February 3, 2023, the instant action was consolidated for all purposes with two small claims actions, LASC Case Nos. 22STSC01394 and 22STSC01396, with the instant action (22STCV19727)  as the lead action.  (Minute Order 2/3/23.)

            On March 3, 2023, Cross-Complainants Delahoussaye, Alfaro, and Quiroz filed the instant cross-complaint against Johnson.  The cross-complaint asserts six causes of action for (1) Breach of Contract, (2) Promissory Fraud, (3) Violations of Labor Code §§ 201, 203, (4) Violations of Labor Code § 226, (5) Violation of Business and Professions Code § 17200, and (6) Quantum Meruit. 

            On April 13, 2023, Cross-Defendant Johnson filed the instant demurrer to the cross-complaint.  On September 5, 2023, Cross-Defendant Johnson filed a reply, and on the same day, Cross-Complainants filed an amended cross-complaint.  On September 6, 2023, Cross-Complainants filed a notice of corrective declaration.  On September 6, 2023, Cross-Defendant Johnson filed an objection.

Allegations of the Operative Complaints

            The FAC alleges the following:

            Johnson is the owner of 2307 Virginia Road, Los Angeles, CA 90016 (“Subject Property”).  (FAC ¶ 7.)  In January 2021, Johnson sought to renovate the subject property.  (FAC ¶ 8.)

            “In or around March of 2021, Delahoussaye offered to help Johnson renovate her house. In doing so, he said that he would mobilize a crew of subcontractors who were qualified to do the work.”  (FAC ¶ 9.)  “Delahoussaye then provided Johnson with a bid for his subcontractors’ services that included work on the roof, garage, stucco, windows, and a block wall in the yard. The bid also included work for plumbing and drainage, in addition to the installation of cabinets and an HVAC system. The total price of the bid was $120,994.50.”  (FAC ¶ 10.)  Based on this representation, Johnson entered into an oral contract with Delahoussaye for this work.  (FAC ¶ 11.)

            “Delahoussaye then mobilized his subcontractors, including Alfaro and Quiroz. During the project, Delahoussaye arranged for and set up work schedules for subcontractors. In addition, he maintained oversight of the construction project, which included coordination of the work and payment to the subcontractors.”  (FAC ¶ 12.)  However, Delahoussaye was not a licensed contractor.  (FAC ¶ 13.)

            “Alfaro performed work on the stucco, drainage, block wall, and garage. Alfaro built the garage and the foundation beneath it.”  (FAC ¶ 14.)  “Alfaro did not complete his stucco work. In addition, he did not waterproof the stucco. Consequently, water is leaking through the foundation and into the house.”  (FAC ¶ 15.) With respect to the garage, Alfaro did not completely install the roof shingles; he did not weatherproof the fascia board; and he poured concrete that has begun to crack.”  (FAC ¶ 16.)  Alfaro is not a licensed contractor.  (FAC ¶ 17.)

            “Quiroz installed the cabinets. The cabinets that Quiroz installed were defective.”  (FAC ¶ 18.)  Quiroz was not a licensed contractor.  (FAC ¶ 19.)

            “Johnson paid approximately $174,231.95 for work under the above contact. She made checks payable to Delahoussaye for material and labor.”  (FAC ¶ 21.)

            On April 12, 2022, Delahoussaye and Alfaro filed a small claims lawsuit against Johnson in the Los Angeles Superior Court (Case No. 22STSC01394).  (FAC ¶ 21.)  On April 12, 2022, Quiroz filed a small claims lawsuit against Johnson in the Los Angeles Superior Court (Case No. 22STSC01396).  (FAC ¶ 22.)

            The operative Cross-Complaint alleges:

            Johnson acted as her own general contractor for the work on the Subject Property and represented to the City of Los Angeles that she was the owner-builder.  (Cross-Complaint ¶¶ 5-6, 10.) 

            “Starting in or about March 2021, Cross-Complainant DELAHOUSSAYE agreed to be a consultant on JOHNSON’s Project and provided such services to her for approximately eleven months. DELAHOUSSAYE did not perform any construction work on the Project. DELAHOUSSAYE did not have control or discretion over the performance of the work or the ability to determine the final results of the Project.”  (Cross-Complaint ¶ 7.) 

            “In or about April 2021, Cross-Complainant ALFARO entered into an agreement with JOHNSON to provide remodeling work on the Project. ALFARO worked as Cross-Defendant’s employee, pursuant to Business & Professions Code § 7044(a)(1)(B), for approximately six months.”  (Id. ¶ 8.)  “On or about June 21, 2021, Cross-Complainant QUIROZ entered into an agreement to provide and install semi-custom cabinets on the Project. QUIROZ worked as Cross-Defendant’s employee, pursuant to Business & Professions Code § 7044(a)(1)(B), for approximately two months.”  (Id. ¶ 9.) 

            “JOHNSON was ALFARO and QUIROZ’s employer and owed ALFARO and QUIROZ wages as their sole compensation. JOHNSON did not perform any construction work on the Project. Moreover, none of the improvements made on the Project were intended or offered for sale.”  (Id. ¶ 11.) 

            “Upon QUIROZ’s completion of his specified cabinet job for which he was hired, payment of all owed wages was due immediately. JOHNSON has intentionally withheld unpaid wages owed to QUIROZ.”  (Id. ¶ 12.)  “Upon ALFARO’s completion of his specified remodel assignment for which he was hired, payment of all owed wages was due immediately. JOHNSON has intentionally withheld unpaid wages owed to QUIROZ.”  (Id. ¶ 13.)  “Upon DELAHOUSSAYE’s completion of his consulting for which he was hired, payment of all monies owed was due immediately. JOHNSON has intentionally withheld payment, and DELAHOUSSAYE is owed the reasonable value of his services rendered.”  (Id. ¶ 14.)

            Johnson never intended to pay Cross-Complainants, and the Subject Property has been substantially improved due to the work Cross-Complainants did.  (Id. ¶¶ 15-17.)

Untimely Filing of the Proposed First Amended Cross-Complaint

            “A party may amend its pleading once without leave of the court at any time before the answer, demurrer, or motion to strike is filed, or after a demurrer or motion to strike is filed but before the demurrer or motion to strike is heard if the amended pleading is filed and served no later than the date for filing an opposition to the demurrer or motion to strike. A party may amend the pleading after the date for filing an opposition to the demurrer or motion to strike, upon stipulation by the parties.”  (CCP § 472(a).) 

            “All papers opposing a motion so noticed shall be filed with the court and a copy served on each party at least nine court days, and all reply papers at least five court days before the hearing.”  (CCP § 1005(b).)  This is calculated by counting backwards from the hearing date and excluding holidays and weekends.  (CCP §§ 12-12(c).)

            Here, the proposed First Amended Cross-Complaint was filed on September 5, 2023 – i.e., only five Court days before the hearing.  As noted above, an amended pleading may only be filed and served without leave of court no later than the date for filing an opposition to a pending demurrer.  (CCP § 472(a).)  Any later pleading requires a stipulation of the parties.  (CCP § 472(a).)  Moreover, there was no ex parte application by Cross-Complainants to request permission to file a later opposition.  Thus, the proposed Cross-Complaint is improper because there was no matter of right to amend the FACC after any opposition to the demurrer was due.  Accordingly, as an improper filing the amended answer is stricken pursuant Code of Civil Procedure section 436.  (See Hedwall v. PCMV, LLC (2018) 22 Cal.App.5th 564, 579 [affirming the Court striking an amended complaint “on its own motion because no court order or stipulation of the parties permitted” the amended complaint to be filed].) 

Request for Judicial Notice

            In conjunction with the moving papers, Cross-Defendant Johnson requests that the Court take judicial notice of:

1.     Complaint in the small claims division entitled Delahoussaye, et al. v. Johnson, Case No. 22STSC01394

2.     Complaint in the small claims division entitled Quiroz  v. Johnson, Case No. 22STSC01396

3.     Cross-Complaint in the instant action

4.     The Contractors State License Board’s Certificate of Records for Gerardo Alfaro

5.     The Contractors State License Board’s Certificate of Records for Pedro Quiroz

As the Court may take judicial notice of court records and actions of the State, (See Evid. Code, § 452(c)(d)), Johnson’s unopposed request for judicial notice is GRANTED.  However, the Court does not take judicial notice of the truth of any assertions within. (See Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.) 

Legal Standard

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. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

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 Dep’t of Water & Power (2006) 144 Cal. App. 4th 1216, 1228.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.  (Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.)  “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.) 

Meet and Confer Requirement

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer¿in person or by telephone¿with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension.  (CCP § 430.41(a)(2).)  The demurring party must also file and serve a declaration detailing the meet and confer efforts.  (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading.  (Id.¿at (a).)

Cross-Defendant Johnson has satisfied the meet and confer requirement.  (Kupfer Decl. ¶¶ 2-3.)

Discussion

Failure to Allege Contractor’s Licensure

            Cross-Defendant Johnson asserts that the cross-complaint fails to allege that Cross-Complainants Alfaro and Quiroz were licensed or fall within an exception of licensure.

            Business and Professions Code “Section 7031 is part of the Contractors' State License Law (§ 7000 et seq.). It ‘imposes strict and harsh penalties for a contractor's failure to maintain proper licensure. Among other things, the [Contractors' State License Law] states a general rule that, regardless of the merits of the claim, a contractor may not maintain any action, legal or equitable, to recover compensation for “the performance of any act or contract” unless he or she was duly licensed “at all times during the performance of that act or contract.” (§ 7031, subd. (a).)’ [Citation.]”  (Kim v. TWA Construction, Inc. (Cal. Ct. App., May 13, 2022, No. H045900) -- Cal.Rptr.3d -- 2022 WL 1515516, at *6.)  “[S]ection 7031 bars all actions, regardless of the equities and however they are characterized, which effectively seek ‘compensation’ for illegal unlicensed contract work. [Citation.] Thus, if the primary ‘relief sought is compensation’ for the unlicensed work, then ‘section 7031 bars the action.’ [Citation.]”  (Id. at *7.)

Further, pursuant to Business and Professions Code section 7031(b), “[e]xcept as provided in subdivision (e), a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract.”  (Alatriste v. Cesar's Exterior Designs, Inc. (2010) 183 Cal.App.4th 656, 664.) 

            In sum, Business and Professions Code section 7031 acts as both a shield and a sword preventing any recovery for those who do unlicensed construction work and “ ‘allow[ing] persons who utilize unlicensed contractors to recover compensation paid to the contractor for performing unlicensed work.’ [Citations.]”  (Id. at p.666.)

            A “ ‘Contractor,’ … is synonymous with ‘builder’ and, … is any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, parking facility, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, … ‘Contractor’ includes subcontractor and specialty contractor.”  (Bus. & Prof. Code, § 7026.)

            The Contractors Law exempts from the requirement to use licensed contractors “owner-builders” under certain circumstances. (See Bus. & Prof. Code, § 7044.)  “[U]nder section 7044, a licensing requirement exemption [exists] for owners doing their own work or hiring licensed subcontractors, etc.”  (Ranchwood Communities Limited Partnership v. Jim Beat Construction Co. (1996) 49 Cal.App.4th 1397, 1415.)  For example, the Homeowner’s exemption applies to “(1) An owner who builds or improves a structure on his or her property, provided that both of the following conditions are met: [¶] (A) None of the improvements are intended or offered for sale. [¶] (B) The property owner personally performs all of the work or any work not performed by the owner is performed by the owner's employees with wages as their sole compensation.”  (Bus. & Prof. Code, § 7044(a)(1).) 

            Here, the cross-complaint does not allege that Alfaro or Quiroz were licensed.  Instead, the cross-complaint alleges that “[i]n or about April 2021, Cross-Complainant ALFARO entered into an agreement with JOHNSON to provide remodeling work on the Project. ALFARO worked as Cross-Defendant’s employee, pursuant to Business & Professions Code § 7044(a)(1)(B), for approximately six months.”  (Cross-Complaint ¶ 8.)  “On or about June 21, 2021, Cross-Complainant QUIROZ entered into an agreement to provide and install semi-custom cabinets on the Project. QUIROZ worked as Cross-Defendant’s employee, pursuant to Business & Professions Code § 7044(a)(1)(B), for approximately two months.”  (Id. ¶ 9.) 

            Alleging that Cross-Complainants were employees of Cross-Defendant pursuant to Business & Professions Code § 7044(a)(1)(B) is insufficient because this is merely a conclusion of law.  (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967, [“The court does not … assume the truth of contentions, deductions or conclusions of law.”].)  Rather, facts must be alleged showing that Cross-Complainants were Johnson’s employees for the project on the Subject Property and that their sole compensation was wages.

            Accordingly, Cross-Defendant’s demurrer to Cross-Complainants Quiroz and Alfaro’s claims is SUSTAINED.

First Cause of Action: Failure to Allege Form of Alleged Contracts

            Cross-Defendant Johnson further asserts that the first cause of action as to Cross-Complainants Alfaro and Quiroz fails because there is no allegation as to whether their contracts were written, oral, or implied.

“The elements of a cause of action for breach of contract are: ‘(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.’”  (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391 [internal citations omitted].) A demurrer lies if “[i]n an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct.”  (CCP § 430.10(g).) 

            As the cross-complaint fails to allege whether Cross-Complainants Alfaro’s and Quiroz’s contracts were written, oral, or implied by conduct and also fails to allege the terms of the contract clearly, Johnson’s demurrer to the first cause of action is SUSTAINED on this additional ground.

Second Cause of Action: Promissory Fraud

            Johnsons asserts that the second cause of action is conclusory and is not pled with sufficient specificity.  The Court agrees.

“The elements of promissory fraud . . . are: (1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent not to perform at the time the promise was made; (3) intent to deceive or induce the promise to enter into a transaction; (4) reasonable reliance by the promisee; (5) nonperformance by the party making the promise; and (6) resulting damage to the promisee.”  (Rossberg v. Bank of America, N.A. (2013) 219 Cal.App.4th 1481, 1498.)  Promissory fraud as a fraud claim must be alleged with specificity. (Id.)  “Fraud allegations ‘involve a serious attack on character’ and therefore are pleaded with specificity.  [Citation.]  General and conclusory allegations are insufficient.  [Citation.]  The particularity requirement demands that a plaintiff plead facts which ‘‘‘show how, when, where, to whom, and by what means the representations were tendered.’’’  [Citation.]”  (Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) 

Here, no facts have been alleged to show how, when, where, to whom, or by what means, the alleged misrepresentations by Johnson were made.  Accordingly, Johnson’s demurrer to the first cause of action is SUSTAINED on this additional ground.

Leave to Amend

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Goodman v. Kennedy, supra, 18 Cal.3d at p.348; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) 

            This is the first time that a complaint has been sustained against Cross-Complainants’ cross-complaint.  Accordingly, the court finds it is proper to allow Cross-Complainants an opportunity to cure the defects discussed in this order. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037.)  

Conclusion and ORDER

Based on the foregoing, Cross-Defendant Natalie Ann Johnson’s demurrer to the cross-complaint is SUSTAINED WITH LEAVE TO AMEND.

Cross-Complainants are to file an amended cross-complaint within twenty (20) days of notice of this order.

The case management conference is CONTINUED to November 21, 2023 at 8:30 am.

Moving Party to give notice and file proof of service of such.

DATED:  September ___, 2023                                                        ___________________________

Elaine Lu

                                                                                          Judge of the Superior Court