Judge: H. Jay Ford, III, Case: 22SMCV00974, Date: 2023-02-23 Tentative Ruling

Case Number: 22SMCV00974    Hearing Date: February 23, 2023    Dept: O

  Case Name:  Cavin v. Ederelyi & Associates, Inc., et al.

SUBJECT:                 DEMURRER TO FIRST AMENDED COMPLAINT

MOVING PARTY:   Defendants Peter T. Erderlyi & Associates, Inc., Peter T. Erdelyi and Sayed Attaalia  

RESP. PARTY:         Plaintiff Pauline F. Cavin

TENTATIVE RULING

            Defendants Peter T. Erderlyi & Associates, Inc., Peter T. Erdelyi and Sayed Attaalia’s Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the 2^nd cause of action for fraud and OVERRULED as to the 1^st cause of action for breach of contract, 3^rd cause of action for negligence, 4^th cause of action for violation of B&PC §17200, 5^th cause of action for breach of the implied covenant of good faith and fair dealing and 6^th cause of action for declaratory relief. 

I. 1^st cause of action for breach of contract and 5^th cause of action for breach of the implied covenant of good faith and fair dealing—OVERRULED

            Defendants demur to the 1^st cause of action for breach of contract and 5^th cause of action for breach of the implied covenant of good faith and fair dealing on grounds that they never entered into an agreement with Plaintiff.  However, Plaintiff alleges that she entered into an agreement with Defendants on May 7, 2019 for structural engineering services.  See FAC, ¶10.  Plaintiff also alleges that Defendants entered into a subcontract agreement with Houck Construction, Inc. on 9-5-19.  Id. at ¶11.  These allegations must be accepted as true on demurrer.  See Scmier v. City of Berkeley (2022) 76 Cal.pp.5^th 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”). 

            Defendants argue Exhibits A and B to the complaint do not evidence an agreement between Plaintiff and Defendants.  Exhibit A is an unsigned proposal by Defendants and Exhibit B is a subcontract between Defendants and Houck Construction, Inc.  See FAC, Exhibit A. 

            “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.”  Holland v. Morse Diesel Intern, Inc. (2001) 86 Cal.App.4^th 1443, 1447.  Neither Exhibits A nor B contradict Plaintiff’s allegations at ¶¶10 and 11.  Plaintiff is not required to prove up her breach of contract claims at this juncture.  Plaintiff alleges they are identified on the subcontract as the owner.  Owners have routinely been found third party beneficiaries of subcontracts if they were more than incidentally benefitted by the agreement.  See Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, 69-70 (reversing court’s dismissal of owner’s breach of implied warranty claim on judgment on pleadings based on lack of privity; owner was in privity on the subcontract sued upon as third-party beneficiary of the subcontract). 

            The Court notes there is a discrepancy in the alleged date of contracting.  In ¶10, Plaintiff alleges the structural engineering agreement was entered in May 2019, while she alleges the agreement was entered into in August 2019 in ¶20.  The discrepancy is not raised as grounds for demurrer by Defendants, nor is the discrepancy of any consequence.  Any confusion will be resolved through discovery. 

            Defendants’ demurrer to the 1^st cause of action for breach of contract and 5^th cause of action breach of the implied covenant is OVERRULED. 

II.  2^nd cause of action for fraud, 3^rd cause of action for negligence and 4^th cause of action for violation of B&PC 17200 based on Statute of Limitations: SUSTAINED without leave to amend as to 2^nd cause of action for fraud and OVERRULED as to 3^rd cause of action for negligence and 4^th cause of action for unfair business practices under B&PC 17200

            A “demurrer based on an affirmative defense cannot properly be sustained where the action might be barred by the defense but is not necessarily barred.”  CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 635.  “A general demurrer based on the statute of limitations is only permissible where the dates alleged in the complaint show that the action is barred by the statute of limitations. The running of the statute must appear clearly and affirmatively from the dates alleged. It is not sufficient that the complaint might be barred. If the dates establishing the running of the statute of limitations do not clearly appear in the complaint, there is no ground for general demurrer. The proper remedy is to ascertain the factual basis of the contention through discovery and, if necessary, file a motion for summary judgment.” Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 324-325.

            Defendants argue the fraud, negligence and 17200 claims are barred by the 3-year statute of limitations applicable to fraud claims under CCP §338(d) and the 2-year statute of limitations applicable to professional negligence under CCP §339. 

            Plaintiff alleges that Defendants made fraudulent misrepresentations regarding their abilities and qualifications before August 2019, when the contract was formed.  See FAC, ¶26.  There are also no allegations of delayed discovery.  Based on the three-year statute of limitations under CCP §338(d), the fraud claim is time-barred on the face of the complaint. 

            Plaintiff’s opposition fails to address the statute of limitations defense.  Plaintiff has the burden of establishing that this defect is reasonably capable of cure with leave to amend.  See Hendy v. Losse (1991) 54 Cal.3d 723, 742.  Plaintiff fails to satisfy that burden.  Defendant’s demurrer to the fraud cause of action is SUSTAINED WITHOUT LEAVE TO AMEND. 

            However, Plaintiff does not allege when Defendants breached their duty of care in support of the negligence cause of action.  Based on the FAC, the negligence claim is not “clearly and affirmatively” barred.  Demurrer to 3^rd cause of action for negligence based on SOL is OVERRULED. 

            Plaintiff’s 17200 claim is based on Defendants’ misappropriation of the initial project payments of $49,500 and $15,000 for their own personal use.  See FAC, ¶39.  Plaintiff’s 17200 claim is also based on Defendants’ use of deceptive practices to induce Plaintiff to enter into an agreement with them.  Id.at ¶40.  Plaintiff’s 17200 claim is also based on Defendants’ failure to perform any of the work agreed to in the contracts.  Id. Plaintiff does not allege any date as to when these acts occurred.  As such, the 17200 claim is not clearly and affirmatively barred by the SOL based on the face of the FAC.  The demurrer based on SOL as to the 4^th cause of action under B&PC §17200 is OVERRULED. 

III.  3^rd cause of action for negligence—OVERRULE

            Defendants demur to the 3^rd cause of action for negligence based on Plaintiff’s failure to allege an agreement with them and Plaintiff’s failure to identify the nature of the breach.  As discussed in connection with the 1^st cause of action for breach of contract and 5^th cause of action for breach of the implied covenant, Plaintiff sufficiently alleges the existence of a contract with Defendants.  Plaintiff also alleges the Defendants actions breached their duty of care.  See FAC, ¶¶34-35 (failure to provide construction work in accordance with industry standards and structural building code guidelines, failure to make proper and diligent research prior to entering into the contract, failure to begin work on the project as agreed despite payment of initial contract price).

IV. 4^th cause of action under B&PC 17200—OVERRULE

            Defendants also demur to the 4^th cause of action for violation of Business and Professions Code §17200 it is not pled with the specificity required of a fraud cause of action.  A cause of action under B&PC 17200 is not subject to the heightened specificity requirements applied to a common law fraud cause of action.  See Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5^th 1234, 1261 (citing Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212).  A plaintiff need only allege “state the with reasonable particularity the facts supporting the statutory elements of the violation.”  Id.  Plaintiff alleges Defendants’ unfair and unlawful business practices with reasonable particularity.  Plaintiff alleges Defendants’ misappropriated funds designated for the project for their own personal use.  See FAC, ¶39. Defendants’ demurrer to the 4^th cause of action based on lack of specificity is OVERRULED. 

            Defendants also demur to the 4^th cause of action on grounds that Plaintiff improperly seeks damages for all profits, benefits and monies and a civil penalty under B&PC §17206.  Defendants argue civil penalties are only available in actions by a public prosecutor. 

            However, demurrer cannot be brought to a part of a cause of action.  “Ordinarily, a general demurrer does not lie as to a portion of a cause of action and if any part of a cause of action is properly pleaded, the demurrer will be overruled.”  Elder v. Pacific Bell Telephone Co. (2012) 205 Cal.App.4th 841, 856. 

            In addition, Plaintiff seeks “restitution” of “profits, benefits and monies” obtained as a result of Defendants’ wrongful conduct, specifically the $64,500 allegedly misappropriated by Defendants.  See FAC, ¶42.  B&PC §17203 expressly provides for restitution of this kind.  B&PC §17203 (“such orders or judgments…as may be necessary to restore to any persona…any money or property…which may have been acquired by means of such unfair competition”).

            Defendants’ demurrer to the 4^th cause of action based on the impropriety of Plaintiff’s request for relief is OVERRULED. 

V. 6^th cause of action for declaratory relief—OVERRULE

            Defendants demur to the 6^th cause of action for declaratory relief on grounds that they never entered into any written agreement with Plaintiff and there are therefore no rights or obligations under a written agreement subject to a declaratory order.  As discussed in connection with the 1^st cause of action for breach of contract and 5^th cause of action for breach of the implied covenant, Plaintiff sufficiently alleges the existence of one or two agreements between the parties.