Judge: Elaine W. Mandel, Case: 23SMCV05070, Date: 2024-02-23 Tentative Ruling
Case Number: 23SMCV05070 Hearing Date: March 15, 2024 Dept: P
Tentative Ruling
Scholer, et al. v.
Bohrer, et al., Case No. 23SMCV05070
Hearing Date March
15, 2024
Defendants Bohrer/Bohrer
Construction, Inc. Demurrer to Complaint
Defendants Mendez
Concrete/Mendez Leon’s Demurrer to Complaint & Motion to Strike
Homeowner
plaintiffs Ryan and Amber Scholer hired general contractor defendants Bohrer
and Bohrer Construction, Inc. (BCI) to remodel their property. Plaintiffs
allege defendants misrepresented how long the project would take and how much
it would cost, causing the project to remain unfinished and go over budget. General
contractor defendants demur, as do subcontractor defendants Mendez Master
Concrete, Inc. and Eduardo Roberto Mendez Leon (collectively “Mendez”), who
also move to strike punitive damages and alter ego allegations.
Bohrer/BCI
Demurrer
Breach of Contract
(First CoA)/Disgorgement (Seventh CoA)
On demurrer, facts
contained in an exhibit attached to a complaint take precedence over and
supersede inconsistent or contrary allegations in the pleading. Jibilian v.
Franchise Tax Bd. (2006) 136 Cal.App.4th 862, 864.
BCI argues it is
not a contracting party; the agreement lists “Ryan and Amber Scholer and
Stephen Bohrer” as the parties. Complaint, Exh. A. Plaintiffs point to exhibit
B, a mechanic’s lien filed by “Bohrer Construction, a California Corporation”
on October 3, 2023. The Scholers argue that by filing this lien, Bohrer
admitted BCI was the contractor.
The agreement (exh.
A) is unambiguous. Under the heading “BETWEEN” it lists “Ryan and Amber Scholer
and Stephen Bohrer.” Exh. A, pg. 1. Under the heading “The Contractor,” it
names Stephen Bohrer only. Id. There are signature lines for Stephen Bohrer,
Ryan Scholer and Amber Scholer only. Id., pg. 2. There is no signature line for
BCI. This language is not susceptible to any other interpretation, regardless
of the later-filed mechanic’s lien. The language of the exhibit controls over
contrary allegations in the complaint. SUSTAINED without leave to amend as to
BCI only.
Fraud and
Negligent Misrepresentation
Under the economic
loss rule, conduct amounting to breach of contract cannot give rise to a tort
claim unless plaintiff pleads and proves harm above and beyond a broken
contractual promise. Robinson Helicopter Co., Inc. v. Dana Corp. (2004)
34 Cal.4th 979, 989. When a contract is fraudulently induced, the economic loss
rule does not bar a cause of action for fraud. Id. at 989- 990.
Defendants argue
the fraud and negligent misrepresentation claims fail because they arise from
the agreement and are barred by the economic loss rule. Id. The complaint
alleges defendants made material misrepresentations which induced plaintiffs to
sign the agreement. Complaint ¶36. The duty to avoid making fraudulent
misrepresentations is independent of duties imposed by contract, so not subject
to the economic loss rule.
Robinson
Helicopter, supra,
specifically exempts tort claims for fraud from the economic loss rule.
Defendants’ interpretation of the rule would effectively abolish the fraudulent
inducement cause of action, since all such claims are essentially built upon a
breach of contract. OVERRULED.
Negligence
The economic loss
rule bars negligence claims based on construction defects where there is no
showing of property damage or physical injury. McMillin Albany LLC v.
Superior Court (2018) 4 Cal.5th 241, 246- 247.
Defendants argue
this claim is barred by the economic loss rule because no physical injury or
property damage is alleged, and no statutory exceptions applies. Plaintiffs
argue the negligence claim is not a claim for construction defect, but rather
alleges failure to adequately supervise the project so it was completed timely.
The project defendants were hired to supervise was a construction project, and
the duty plaintiffs allege was breached arose out of a construction contract.
Complaint ¶¶50-51. The negligence claim is a construction defect claim, subject
to the economic loss rule. SUSTAINED with ten days leave to amend to allege
property damage or a statutory exception.
Conversion
This cause of
action is based on the allegation that Bohrer and BCI “deliberately entered
into the Property and removed items that had been installed on the Property, or
which were at the Property in anticipation of being installed, all of which
Plaintiffs had paid for, and were in the possession of.” Complaint ¶55.
Defendants argue the claim is insufficiently pleaded because it does not
identify specific items that were allegedly removed. This level of specificity
is not required on demurrer. The complaint alleges defendants took plaintiffs’
property. This is sufficient to set forth a cause of action for conversion.
OVERRULED.
Indemnity
The sixth cause of
action for indemnity is alleged against American Contractors Indemnity, not
against demurring parties. OVERRULED.
Disgorgement
Under Cal. Bus.
& Profs. Code §7031(b), “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[.]” For purposes of the
statute, “contractor” is “synonymous with builder” and includes work done
“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, railroad, excavation or other structure, project, development or
improvement, or to do any part thereof[.]” Cal. Bus. & Profs. Code §7026.
BCI argues the
same grounds as against the breach of contract claim: it was not a party to the
construction agreement. The definition of “contractor” does not require privity
of contract. A “contractor” is one who acts as a builder or performs construction,
demolition or remodeling work on a structure. Under the facts alleged, BCI
meets this definition, regardless of whether it contracted directly with the
Scholers.
The complaint
alleges BCI performed contractor work, Bohrer directed payments be made to BCI,
and BCI lacked a contractor’s license. Complaint ¶¶63-64. The allegations–
which much be treated as true on demurrer- are that BCI acted as a contractor
(though not named in the Agreement) and received payment despite being
unlicensed. That BCI did not directly contract with the Scholers is not
dispositive on demurrer. OVERRULED.
Mendez Demurrer
Objection
Mendez defendants object
because the opposition filed one day late, on March 5, 2024. Though the
opposition was untimely by one day, there is no claimed prejudice; the court
will exercise its discretion and consider the opposition.
Breach of Contract
Mendez defendants argue
plaintiff has not alleged a contract. The complaint alleges “[i]n regard to
MMCI and Leon, each of said defendants expressly promised and agreed that upon
receipt of further payment from Plaintiffs that they would return to the
Property and complete their scope of work. In compliance with said agreements,
Plaintiffs did make, in full, the demanded payments to said Defendants as
hereinabove alleged.” Complaint ¶27. This sets forth all elements required for
formation of a contract. Mendez’s assertion that “[t]here is no contract” is
not a valid basis for demurrer. The allegations in the complaint must be
treated as true on demurrer. E.g., Brakke v. Economic Concepts, Inc. (2013)
213 Cal.App.4th 761, 767.
Mendez argues the
contract allegations are ambiguous. Plaintiffs allege defendants promised to
finish their work in exchange for payment, plaintiffs paid, but defendants
failed to perform. Complaint ¶¶27-29. This is not ambiguous and alleges the
elements of breach of contract.
Finally, Mendez
argues the complaint does not set forth the terms of a written contract
verbatim or attach a copy. This cause of action is based on an alleged oral
contract. Mendez provided no authority that the type of contract alleged must
be written. In reply, Mendez argues breach of contract liability is unavailable
because the contract attached to the complaint does not name them. The breach
of contract cause of action against Mendez, however, is not based on that
document, but upon a separate oral agreement. OVERRULED.
Fraud
Fraud must be
pleaded with particularity – the liberal pleading standard does not apply. Lazar
v. Superior Court (1996) 12 Cal.4th 631, 645. General pleading of legal
conclusions is insufficient to set forth a claim for fraud. Committee on
Children’s Television, Inc. v. General Food Corp. (1983) 35 Cal. 3d. 197,
216.
Mendez argues the
complaint does not allege fraud with the required specificity. The complaint
alleges Mendez agreed to return the property and complete work but failed to do
so. It alleges conversations between plaintiffs and Mendez Leon “[i]n September
and October,” with representations made by defendant Mendez Leon. Complaint
¶¶19-20, 33-35. The complaint alleges he did not intend to complete the work
when he made this promise. Id. ¶¶19-21. This is sufficiently specific for
purposes of pleading fraud.
Finally, Mendez argues
the complaint fails to plead the elements of fraud. The complaint alleges a
promise made without intent to perform and plaintiffs’ reliance on that promise
by paying money. Complaint ¶¶ 19, 34. For purposes of pleading, this is enough
to set forth a cause of action for promissory fraud. Mendez’s arguments that
the complaint has a “gap in [its] reasoning,” or that plaintiffs owed money are
factual contentions not proper on demurrer. At the pleading stage, allegations
must be treated as true and, if legally sufficient, the demurrer must be
overruled. OVERRULED.
Negligent
Misrepresentation
The cause of
action for negligent misrepresentation against Mendez tracks the factual
allegations underlying the fraud cause of action. Complaint at ¶¶43-44.
Plaintiff alleges Mendez falsely promised work would be completed in exchange
for payment, but Mendez failed to do so. However, there is no cause of action
for negligent false promise. E.g., Tarmann v. State Farm Mutual Automobile
Insurance Co. (1991) 2 Cal.App.4th 153, 159. Since there is no cause of
action for negligent false promise, the demurrer succeeds. SUSTAINED without
leave to amend.
Motion to Strike
Punitive Damages
Mendez moves to
strike the request for punitive damages, arguing it is not supported by
sufficient facts to show malice. Plaintiffs adequately pleaded a fraud cause of
action, which is a sufficient basis to award punitive damages under Cal. Civ.
Code §3294(c)(1). DENIED.
Alter Ego
Mendez moves to
strike the alter ego allegations as conclusory. The court agrees. Plaintiff
merely alleges the elements of alter ego liability, without setting forth
specific facts. Complaint at pg. 3. These conclusions of law are insufficient
to support alter ego liability and must be struck. GRANTED with ten days leave
to amend.