Judge: H. Jay Ford, III, Case: 19SMCV01836, Date: 2023-10-31 Tentative Ruling

Case Number: 19SMCV01836    Hearing Date: October 31, 2023    Dept: O

Case Name:  Creditors Adjustment Bureau v. Common Are Maintenance Services, et al.

SUBJECT:                 MOTION FOR SUMMARY JUDGMENT

MOVING PARTY:   Defendant Common Area Maintenance Services, Inc., et al.

RESP. PARTY:         Plaintiff Creditors Adjustment Bureau, Inc.

TENTATIVE RULING

            Defendant Common Area Maintenance Services, Inc., et al.’s Motion for Summary Judgment or in the alternative Summary Adjudication is DENIED. Defendant does not meet their burden of showing that Plaintiff cannot prove one or more elements of Plaintiff’s causes of action. Plaintiff has met their burden of raising a triable issue of material fact as to each of the four causes of action.

Plaintiff’s objections to Herrera Decl., ¶ 6, lines 21–23, Katsuyama Decl., ¶ 2, lines 10–12, ¶ 5, lines 18–19,  and Exhibit 9, February 14, 2023 Audit Chart are OVERRULED.

Defendant’s objections to the Gowery Decl. ¶7, Innis Decl. ¶8) and Larsen Decl. Nos 1-2 (¶18),  3 (¶19) are OVERRULED.  

Where a defendant seeks summary judgment or adjudication, they must show that either “one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to that cause of action.” (See Code of Civil Procedure §437c(o)(2).) A defendant may satisfy this burden by showing that the claim “cannot be established” because of the lack of evidence on some essential element of the claim. (Union Bank v. Superior Court (1995) 31 Cal.App.4th 574, 590.) Once the defendant meets this burden, the burden shifts to plaintiff to show that a “triable issue of one or more material facts exists as to that cause of action or defense thereto.” (Id.) If unable to prove the existence of a triable issue of material fact, summary judgment or summary adjudication in favor of the defendant is proper. (Id.) 

The court's assessment of whether the moving party has carried its burden—and therefore caused a shift in the burden —occurs before the court's evaluation of the opposing party's papers. Therefore, the burden on the motion does not initially shift as a result of what is, or is not, contained in the opposing papers.” (Mosley v. Pacific Specialty Insurance Company (2020) 49 Cal.App.5th 417, 434–435 (landlord’s failure to address issue of whether they were aware of their tenant’s marijuana growing operation was not grounds to grant summary judgment where moving party failed to satisfy its initial burden as to the issue); Thatcher v. Lucky Stores, Inc. (2000) 79 Cal.App.4th 1081, 1086-1087 (court cannot grant summary judgment based merely on lack of opposition; court must first determine if the moving party has satisfied its burden). In addition, the evidence and affidavits of the moving party are construed strictly, while those of the opponent are liberally read. See Government Employees Ins. Co. v. Sup. Ct. (2000) 79 Cal.App.4th 95, 100. Finally, “All doubts as to the propriety of granting the motion (whether there is any issue of material fact [Code of Civil Procedure] § 437c) are to be resolved in favor of the party opposing the motion (i.e., a denial of summary judgment).” (Hamburg v. Wal-Mart Stores, Inc. (2004) 116 Cal.App.4th 497, 502.)

I.                Triable Issues of Fact Remain as to Plaintiff’s First Cause of Action for Breach of Contract

“A cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff as a result of the breach.” (Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 402.) 

Defendants argue Plaintiff cannot establish that Defendant breached the terms of the first, Policy No. 9083976-14, covered January 1, 2014 through January 1, 2015, and the second Policy No. 9083976-15, covered January 1, 2015 through January 1, 2016 (collectively, the “Policies”) because Plaintiff cannot prove their that forty-eight alleged independent contractors should be classified as employees, a classification that would increase the premium amount allegedly owed on the Policies. (Motion, p. 5.)  For this motion, however, the initial burden is on the Defendant employer to produce evidence that shows the forty-eight alleged independent contractors are in fact independent contractors and not employees.  Defendants provided evidence of an alleged independent contractor agreement they require all subcontractors to sign, however, the only signed agreement they submit is from a subcontractor whose payroll is not applicable to the determination of additional premium.  (See Separate Statement (“SS”) ¶ 4; Herrera Decl., ¶, Ex. 2; see also Larson Decl., ¶ 20.)  Defendants have not met their burden to show that all forty-eight alleged independent contractors should be affirmatively classified as independent contractors.  

Even if Defendants could affirmatively show that the forty-eight alleged independent contractors were in fact independent contractors, Plaintiff has met its burden of raising a trial issue of material fact as to the alleged independent contractor’s status under Borello.  Under Borello, "the principal test of an employment relationship [was] whether the person to whom service is rendered ha[ d] the right to control the manner and means of accomplishing the result desired." (Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 531, quoting Borello, supra, 48 Cal.3d at p. 350.) Borello set forth several "secondary indicia" which inform the task of classifying workers as employees including: “(a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee.” Ayala, supra, 59 Cal.4th at p. 532; see Borello, supra 48 Cal.3d at p. 351.)

These "individual factors cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations." (Borello, supra 48 Cal.3d at p. 351; Ayala, supra, 59 Cal.4th at p. 539 [the hirer's right of control, together with the skill which is required in the occupation, is often of almost conclusive weight.”].) “Significantly, what matters under the common law is not how much control a hirer exercises, but how much control the hirer retains the right to exercise. (Ayala, supra, 59 Cal.4th at p. 533.) “[S]trong evidence in support of an employment relationship is the right to discharge at will, without cause.” (Borello, supra, 48 Cal.3d at p. 350; see also Ayala, supra, 59 Cal.4th at p. 533 [“Perhaps the strongest evidence of the right to control is whether the hirer can discharge the worker without cause, because [t]he power of the principal to terminate the services of the agent gives him the means of controlling the agent's activities.” (internal cites omitted)].)

Plaintiff points to Defendants’ Maintenance Subcontracts which Defendants required each of its alleged independent contractors to sign prior to commencing work. (SS, ¶ 4; Herrera Decl., ¶ 6, Ex. 2.)  The Maintenance Subcontracts provide multiple examples of how Defendant retains control over the alleged independent contractors including:

1.     “Upon expiration of the Initial Term, this Agreement shall continue on a month-to-month basis . . .” (Larson Decl., ¶¶ 18–19, Ex. 5, Art. 2.)

2.     “Any request for extras which appears to be based either on the lack of specific details in the plans or specific reference in the specifications will not be approved as an extra if in the sole opinion of CAM the work in question is a required item under the Work." (Larson Decl., ¶¶ 18–19, Ex. 5, Art. 3(e).)

3.     "PROSECUTION OF THE WORK.[ ... ] (b) Subcontractor shall proceed with the performance of the Work as directed by CAM. [ ... ]" (Larson Decl., ¶¶ 18–19, Ex. 5, Art. 6(b).)

4.     Subcontractor acknowledges and guarantees that it is not permitted to directly perform any of the Work described herein or related services similar to those described in this Agreement to Owner without prior written consent of CAM." (Larson Decl., ¶¶ 18–19, Ex. 5, Art. 13(c).)

5.     CAM shall have the authority and discretion to terminate this Agreement with forty-eight (48) hours advance notice for any cause whatsoever." (Larson Decl., ¶¶ 18–19, Ex. 5, Art. 17(i).)

These provisions show Defendant retained enough control over the work relationship as to consider each alleged independent contractor as an employee. Plaintiff points to evidence of Defendants inability to establish the forty-eight alleged independent contractors had valid workers compensation coverage during the 2014 and 2015 policy years. (Larson Decl., ¶ 15.) Plaintiff argues there are various irregularities with the certificates of insurance including falsified or fabricated policy numbers submitted by Defendants leading Plaintiff to believe they were either “forged, falsified, or fabricated in an attempt to show worker’s compensation coverage that did not exist.” (Id., ¶ 16, Ex. 4.)

            Additionally, Plaintiff points out all other Borello factors point to employment status for the forty-eight alleged independent contractors including:

1.     Borello Factor (a): Defendants provide “cleaning, janitorial, landscaping, and other maintenance services.” Defendants hired the forty-eight alleged independent contractors as gardeners, janitors and handymen thus they were hired to perform, the same services as the regular business of the employer. (Plaintiff’s Additional Facts in the Separate Statement (“PAF”) ¶ 35.)

2.     Borello Factor (c): Cleaning, janitorial and landscaping work which Defendant provides falls into the unskilled workers category.

3.     Borello Factor (e): Defendant provided steady full-time employment for many of their alleged independent contractors, several of which worked for Defendant for decades. (Id.)

4.     Borello Factor (f): Defendants paid alleged independent contractors on a monthly basis. (Id.)

5.     Borello Factor (g): Defendants admit that “most of the cleaning, janitorial, landscaping, and other maintenance services are provided by subcontractors.” (Herrera Decl., ¶ 4.)

Thus, Plaintiff has met their burden of raising a triable issue of material fact as to the employment status of the alleged independent contractors. Defendant’s motion for summary adjudication of the first cause of action for breach of contract is DENIED.

II.             Triable Issues of Fact Remain as to Plaintiff’s Second Cause of Action for Open Book Account

The elements of an open book account cause of action are: (1) that plaintiff and defendant had financial transactions; (2) that plaintiff kept an account of the debits and credits involved in the transactions; (3) that defendant owes plaintiff money on the account; and (4) the amount of money that defendant owes plaintiff.  (State Compensation Insurance Fund v. ReadyLink Healthcare, Inc. (2020) 50 Cal.App.5th 422, 449.)

Defendant argues that Plaintiff cannot meet the third element because Plaintiff cannot prove that the alleged independent contractors were employees. This argument fails, as analyzed above, because Defendants provided no affirmative evidence showing the alleged independent contractors were in fact independent contractors.

Defendant argues Plaintiff cannot meet the second and fourth elements since Plaintiff did not keep an “account of debits and credits involved,” and there is no finalized amount owed. (SS, ¶ 13.)  However, Plaintiff issued Defendants Final Audit Statements for the Policies detailing all charges, payments and credits on the account on 12-17-18 and 12-18-18. (Innis Decl., ¶¶ 6–8 Ex. 3, 4.) Plaintiff argues Defendant has failed or refused to make any payments toward either of the outstanding balances for the 2014 and 2015 policy years (Id., ¶ 8.) Thus, Plaintiff has met their burden of raising a triable issue of material fact as to the second cause of action for Open Book Account.

III.           Triable Issues of Fact Remain as to Plaintiff’s Third Cause of Action for Account Stated

The essential elements of an account stated are: (1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due. (Zinn v. Fred R. Bright Co. (1969) 271 Cal.App.2d 597, 600, internal citation omitted)

Defendants argue Plaintiff cannot prove the second or third elements for Account Stated because “at no time has there been any agreement about the amount of premiums owed for the polices,” and no promise to pay an amount due since Plaintiff continuously changed the amount owed after multiple audits. (SS, ¶¶ 2, 11, 22, 25.) However, Plaintiff provided evidence of the signed 2014 Policy showing an agreement between the parties to pay an amount due, specifically an amount due determined after the policy ends by using “the actual premium basis and proper classifications, rates, and rating plans that lawfully apply to the business and work covered by the policy.” (Innis Decl., ¶¶ 5, Ex. 2 at p. 4, Sections C, D. and E.) This signed agreement is therefore an express promise to pay an amount owed after the policy ends upon Plaintiff’s determination of the actual premium.  Thus, Plaintiff has met their burden of raising a triable issue of material fact as to the third cause of action for Account Stated.

IV.           Triable Issues of Fact Remain as to Plaintiff’s Fourth Cause of Action for Reasonable Value or Quantum Meruit

“To recover on a claim for the reasonable value of services under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 794, internal citation omitted.)