Judge: H. Jay Ford, III, Case: 22SMCV00489, Date: 2023-03-02 Tentative Ruling

Case Number: 22SMCV00489    Hearing Date: March 2, 2023    Dept: O

  Case Name:  2834 Colorado Avenue LLC v. ABM Industry Groups, LLC

SUBJECT:                 DEMURRER TO FIRST AMENDED COMPLAINT

MOVING PARTY:   Defendant ABM Industry Groups, LLC

RESP. PARTY:         Plaintiff 2834 Colorado Avenue LLC

TENTATIVE RULING

            Defendant ABM Industry Groups, LLC’s Demurrer to the FAC is OVERRULED.  Defendant to answer in 10 days.

I.  1^st cause of action for breach of contract—OVERRULE

Defendant ABM argues the contracts will disprove Plaintiff’s allegations of breach, because they do not impose the obligations alleged by Plaintiff in ¶¶10 and 13 of the FAC. However, a demurrer does not test the Plaintiff’s ability to prove the complaint allegations.  See Scmier v. City of Berkeley (2022) 76 Cal.pp.5th 549, 553, fn 4 (under “well-established” standard of review on demurrer, court “must accept as true even the most improbable alleged facts and we do not concern ourselves with the plaintiff’s ability to prove its factual allegations”). A demurrer tests the sufficiency of the pleadings assuming the truth of the complaint’s factual allegations.  Id. 

Plaintiff’s allegations regarding the terms of the agreement must be accepted as true.  Accepting those allegations as true, Plaintiff alleges breach of contract. 

II.  2^nd cause of action for negligence—OVERRULE

            Defendant argues Plaintiff cannot state a claim for negligence based on the same conduct as alleged in the breach of contract cause of action. Defendant argues doing so violates the economic loss rule.

            A party may not convert a broken promise into a tort by simply pleading breach of a duty of care. See Erlich v. Menezes (1999) 21 Cal.4th 543, 553 (courts must avoid “converting every contract breach into a tort”); Stop Loss Ins. Brokers, Inc. v. Brown & Toland Medical Group (2006) 143 Cal.App.4th 1036, 1041 (“Despite the cross-complaint's use of negligence terminology, the alleged misconduct by [defendant] describes, at most, a breach of contract, not a breach of a legal duty of care”.) 

The Supreme Court in Erlich v. Menezes discussed North American by noting that “conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.  An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty.  Erlich, supra, 21 Cal.4th at 551.  The mere negligent breach of a contract is insufficient to state a claim for damages sounding in tort.  Id.   The remedy for a breach of contract is generally limited to contract law, and recovery in tort is not permitted unless: (1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or undue coercion or; (3) one party intentionally breaches the contract intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages.”  Id. at pp. 553–554.

In North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 774, the Court of Appeal described the common law duty contracting parties have to perform with reasonable care, skill, expedience and faithfulness, and stated that the same wrongful act may constitute both a breach of contract and an invasion of an interest protected by the law of torts.  Negligent performance of a contract entitles the aggrieved party to sue in tort or contract, distinguishing failure to perform, which gives rise only to a contract action. As the court explained: “A contract to perform services gives rise to a duty of care which requires that such services be performed in a competent and reasonable manner. A negligent failure to do so may be both a breach of contract and a tort.”  Id. at p. 774; see also Michaelis v. Benavides (1998) 61 Cal.App.4^th 681, 688; 3 Witkin, Cal. Proc. (5^th ed. 2020) Actions §145.

Conduct that qualifies as a breach of contract can form the basis of a tort claim if accompanied by a traditional common law tort such as fraud or conversion or where physical injury to property or person results from that conduct. See Erlich v. Menezes (1999) 21 Cal.4th 543, 551 (recognizing long line of cases in which tort damages were allowed for a breach of contract where the conduct resulted in injury to person or property); Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 989-990 (economic loss rule does not bar tort damages where conduct is also a breach of contract where intentional tort is involved, where conduct violates duty independent of contractual duties, or in contract cases where breach of duty directly causes physical injury).  “The economic loss rule provides that, in general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.”  Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828, 837. 

Plaintiff alleges that Defendant’s negligent performance of its contractual duties caused physical damage to the premises.  The Court must accept the truth of this factual allegation no matter how improbable on demurrer.  Under these alleged facts, the same conduct that qualifies as a breach of contract can also form the basis for a tort cause of action for negligence.  See Erlich v. Menezes (1999) 21 Cal.4th 543, 551 (recognizing long line of cases in which tort damages were allowed for a breach of contract where the conduct resulted in injury to person or property); Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 989-990 (economic loss rule does not bar tort damages where conduct is also a breach of contract where intentional tort is involved, where conduct violates duty independent of contractual duties, or in contract cases where breach of duty directly causes physical injury); Dhital, supra, 84 Cal.App.5th at 837 (economic loss rule bars recovery for negligently inflicted economic losses “unaccompanied by…property damage). 

III.  3^rd cause of action for common counts—OVERRULE

Plaintiff’s common count claims are not subject to general demurrer in light of the sufficiency of the breach of contract claim.  See McBride v. Boughton (2004) 123 Cal.App.4th 379, 394; see also 4 Witkin, Cal. Proc. (4th ed 1997) Plead, §529.  The common count claims are also sufficiently pled.  See Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 460.