Judge: H. Jay Ford, III, Case: 22SMCV00834, Date: 2023-02-02 Tentative Ruling

Case Number: 22SMCV00834    Hearing Date: February 2, 2023    Dept: O

  Case Name:  Advanced Framing Structures, Inc. v. United El Segundo, Inc.

SUBJECT:                 DEMURRER WITHOUT MOTION TO STRIKE TO Cross-COMPLAINT           

MOVING PARTY:   Plaintiff/Cross-Defendant Advanced Framing Structures, Inc.

RESP. PARTY:         Cross-Complainants United El Segundo, Inc., City Constructors, Inc. d/b/a Reaume Richardson and Rapid Gas, Inc.  

TENTATIVE RULING

            Plaintiff/Cross-Defendant Advanced Framing Structures, Inc.’s Demurrer to Cross-Complaint of City Constructors, Inc. d/b/a Reaume Richardson is SUSTAINED WITHOUT LEAVE TO AMEND to the 2^nd cause of action for equitable indemnification and OVERRULED as to the 1^st cause of action for breach of contract, 3^rd cause of action for express indemnification and 4^th cause of action for negligence. 

            1^st cause of action for breach of contract—OVERRULE.  Advanced demurs to the 1^st cause of action for breach of written contract on grounds that the terms of the contract are not pled in hace verba or by material intendment and effect.  The terms of the agreement, Advanced’s breach of the agreement, City Constructors, Inc.’s performance and City Constructors, Inc.’s damges are sufficiently alleged at ¶¶7-17. 

            2^nd cause of action for equitable indemnification—SUSTAIN WITHOUT LEAVE TO AMEND.  Advanced demurs to the 2^nd cause of action for equitable indemnity on grounds that City Constructors, Inc. fails to allege that Advanced is a joint tortfeasor to a third party.  City Constructors, Inc. alleges that Advanced performed wood framing work on a work of improvement owned by United El Segundo, Inc. pursuant to a subcontract and it performed the work on United El Segundo, Inc.’s work of improvement negligently.  See Cross-Complaint, ¶¶7-21. 

However, an essential element of implied equitable indemnity is the indemnitee’s potential to liability to a third party as a result of the indemnitor’s negligence.  CACI 3801 (implied equitably indemnity requires that (1) indemnitee “may be” required to pay liability to third party and (2) that indemnitor’s conduct be a substantial factor in causing third-party plaintiff’s harm); see also Yamaha Motor Corp. v. Paseman (1990) 219 Cal.App.3d 958, 964 ("Unless the prospective indemnitor and indemnitee are jointly and severally liable to the plaintiff there is no basis for indemnity.")  Indemnification is generally understood to apply to third party liability and not direct liability, the exception being in cases of express contractual indemnification where the provision could be reasonably be interpreted to include direct liability to the plaintiff.  See Hot Rods, LLC v. Northrop Grumman Systems Corp. (2015) 242 Cal.App.4th 1166, 1179. 

Here, City Constructors, Inc. only alleges that it was forced to hire separate subcontractors to complete and correct Advanced’s scope of work.  See Cross-Complaint, ¶20.  City Constructors, Inc. does not allege that it is potentially liable to United El Segundo, Inc. or any other third party due to Advanced’s negligence on the work of improvement.  There is also no allegation that there is a pending legal action by United El Segundo, Inc. or any other third against City Constructors for negligence in connection with the work of improvement.  As such, City Constructors fail to allege a cause of action for equitable indemnification. 

            Finally, City Constructor does not make any showing or claim that it can allege existence of a potential third-party claim against it that would support an equitable indemnification claim.  The burden is on Plaintiff to establish that the defect is reasonably capable of cure with leave to amend. See Hendy v. Losse (1991) 54 Cal.3d 723, 742.

            3^rd cause of action for express contractual indemnification—OVERRULE.  As with the 2^nd cause of action for equitable indemnification, Advanced demurs to the 3^rd cause of action for express contractual indemnity on grounds that indemnification requires that City Constructors allege a third-party claim against it.  However, express contractual indemnification does not necessarily require a third party claim. “Although indemnity generally relates to third party claims, this general rule does not apply if the parties to a contract use the term ‘indemnity’ to include direct liability as well as third party liability.  Each indemnity agreement is interpreted according to the language and contents of the contract as well as the intention of the parties as indicated by the contract.  When indemnity is expressly provided by contract, the extent of the duty to indemnify must be determined from the contract itself.”  Hot Rods, LLC v. Northrop Grumman Systems Corp. (2015) 242 Cal.App.4th 1166, 1179.

Depending on the parties’ intent and the language of the express indemnification provision, an indemnity clause can reasonably be interpreted to encompass first party claims.  Id. at 1179-1180 (parties’ express indemnification provision obligated indemnitee to pay for both first party (indemnitee) and third party claims).  An express indemnification provision was interpreted as covering direct, first party claims by the indemnitee where (1) the indemnification provision failed to specify that only third party claims were covered; (2) the express indemnification provision covered “any claims, demands, fees, fines, liability, damages, costs, losses, or other expenses” was deemed broad enough to encompass first party claims; (3) “claims” was defined as “any claim or demand by any Person for any alleged liabilities”; and (4) “person” was defined as “any person, employee, individual, corporation….”  Id. at 1181-1182. 

Advanced fails to establish that the express indemnification cannot reasonably interpreted to cover first party, direct claims by City Constructor for its own damages due to Advanced’s negligence.  The portion of the express indemnification provision pled in the complaint requires Advanced to “indemnify, defend, hold harmless” City Constructor “from any loss…damage or liability for…damage or destruction to any property, arising out of or in connection with any actual or alleged act or omission of” Advanced.  See Cross-Complaint, ¶23. 

Based on the alleged excerpt, City Constructor’s interpretation of the clause as encompassing direct, first party claims is reasonable and must be accepted on demurrer.  See Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 229 (plaintiff who failed to allege its own “reasonable interpretation” should be given opportunity to amend complaint to do so); Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239 (general demurrer to complaint admits not only contents of the instrument but also any pleaded meaning to which the instrument is reasonably susceptible and “[s]o long as the pleading does not place a clearly erroneous construction upon the provisions of the contract, in passing upon the sufficiency of the complaint, we must accept as correct plaintiff's allegations as to the meaning of the agreement.”)

However, Advanced is not precluded from challenging the reasonableness of this interpretation later based on the full agreement and evidence of the parties’ intent.  For now, at the demurrer stage, City Constructor has pled a claim for express equitable indemnification. 

City Constructor also sufficiently alleges the terms of the agreement by material intended and effect.  The text of the relevant clause is alleged at ¶23 and City Constructor alleges it is part of the Advanced Subcontract.  The terms of the Advanced Subcontract is alleged at ¶¶7-8.

4^th cause of action for negligence—OVERRULE.  Advanced argues the negligence claim fails to sufficiently identify the negligent conduct, i.e. what work was deficient, how the work was deficient and what property damage did the deficient work cause.  “Ordinarily, negligence may be alleged in general terms, without specific facts showing how the injury occurred, but there are limits to the generality with which a plaintiff is permitted to state his cause of action, and the plaintiff must indicate the acts or omissions which are said to have been negligently performed. He may not recover upon the bare statement that the defendant's negligence has caused him injury.”  Berkley v. Dowds (2007) 152 Cal.App.4th 518, 527.

The negligence claim is sufficiently pleaded.  City Constructor alleges more than a bare statement that Advanced’s negligence caused it injury.  City Constructor alleges that Advanced provided wood framing services on the project, the services were performed without reasonable care, the negligently performed wood framing caused damage to the areas of the Project outside of Advanced’s scope of work.  See Cross-Complaint, ¶¶8-10, 29-31.  As a result of Advanced’s negligence, City Constructor was forced to hire other subcontractors to replace and repair the damage done by Advanced’s work.  Id. at ¶¶25, 27.