Judge Holly J. Fujie, Case Number: 23STCV12951, Date: 2023-11-03 Tentative Ruling

MOVING PARTY: Defendants Maguire Properties – 777 Tower, LLC (“Maguire”); Brookfield DTLA Holdings, LLC, and Brookfield Properties Management (CA), Inc. (collectively, “Brookfield Defendants”)

This is an action arising from a breach of a construction agreement. Plaintiff alleges that Plaintiff and Defendant Maguire entered into a construction agreement but Moving Defendants breached the Agreement by failing and refusing to pay the balance of monies due Plaintiff under the agreement for the labor and materials used on the Project. The Complaint alleges causes of action for: (1) breach of contract; (2) quantum meruit; (3) open book account; (4) account stated; and (5) foreclosure of mechanic’s lien.

Moving Defendants filed a demurrer and motion to strike the Complaint. Moving Defendants demur to the first through fourth causes of action alleged against the Brookfield Defendants on the ground that the causes of action fail to state sufficient facts because the Brookfield Defendants are neither parties to the underlying contract nor owners of the Property at issue. Moving Defendants also demur to the fifth cause of action on the ground that the foreclosure of mechanic’s lien cause of action fails to state facts sufficient to constitute a cause of action against Moving Defendants as the Complaint does not state facts that Plaintiff complied with the statutory requirements, and fails to attach the underlying mechanic’s lien.

Moving Defendants also move to strike Paragraphs 8-11 of the Complaint which contain alter ego allegations.

Moving Defendants request that the Court take judicial notice of the following: (1) a copy of the Los Angeles Zone Information Map Access System (ZIMAS) search results for 777 S. Figueroa Street, Los Angeles, California 90017; and (2) a copy of the Grant Deed, recorded March 17, 2005, as Instrument Number 050615392, whereby 777 SOUTH FIG, LLC, a Delaware limited liability company transferred to MAGUIRE PROPERTIES – 777 TOWER, LLC, a Delaware limited liability company the real property in the City of Los Angeles, County of Los Angeles, State of California, described in the attached Exhibit A, including APN 5144- 009-047.

The Court GRANTS Defendants’ request pursuant to Evidence Code § 452(c) and (h).

Plaintiff requests that the Court take judicial notice of the following: (1) HBC’s Mechanics Lien, recorded April 10, 2023; (2) Plaintiff’s Notice of Lis Pendens, recorded June 12, 2023; (3) Property details report for real property 777 S. Figueroa Street, Los Angeles, CA 90017; (4) Deed of Trust, recorded October 16, 2023; (5) Tax Sheet for year 2023-2024 for 777 S. Figueroa Street, Los Angeles, CA 90017.

The Court GRANTS Plaintiff’s request for judicial notice for Exhibits 1-2 pursuant to Evidence Code § 452(c). However, the Court DENIES Plaintiff’s request for Exhibits 3-5.

“A demurrer tests the sufficiency of a complaint as a matter of law.” (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1358.) “[T]he court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded.” (Id.) “The court accepts as true all material factual allegations, giving them a liberal construction, but it does not consider conclusions of fact or law, opinions, speculation, or allegations contrary to law or judicially noticed facts.” (Shea Homes Limited Partnership v. County of Alameda (2003) 110 Cal.App.4th 1246, 1254.) In the demurrer context a court “may also take notice of exhibits attached to the complain[t].” (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.) “If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence.” (Id.)

Defendants argue that the Complaint fails to state facts sufficient to support any cause of action against the Brookfield Defendants because the Brookfield Defendants are neither parties to the underlying contract, nor owners of the subject Property. Defendants argue that the alter ego allegations in the Complaint are insufficient.

“To recover on an alter ego theory, a plaintiff need not use the words ‘alter ego,’ but must allege sufficient facts to show a unity of interest and ownership, and an unjust result if the corporation is treated as the sole actor.” (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 696.) A showing of inadequate capitalization, commingling of assets, and disregard of corporate formalities are critical facts which may demonstrate that an inequitable result would have followed.¿ (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1285.)

The Complaint alleges that Brookfield Defendants are “owner[s] or reputed owner[s], lender[s]/investor[s] or reputed lender[s]/investor[s] of the [Subject Property].” (Compl. ¶ 3-4.) The Complaint additionally states that Plaintiff entered the construction contract with only Defendant Maguire. (Compl. ¶ 12, Ex. A.) Defendants put forward evidence of the Grant Deed for the Property in their Request for Judicial Notice. The Grant Deed states that Defendant Maguire is the owner of the Subject Property. (RJN Ex. 2.)

The Complaint also alleges that there is a unity of interest and ownership between “Defendants Maguire, Brookfield Holdings and Brookfield Properties as related entities owned and operated by the same individuals/companies… that any individuality and separateness between the Defendants has ceased, and that each of the Defendants are the alter ego of the other Defendants.” (Compl. ¶ 8.) The Complaint further alleges that Defendants have commingled funds and other assets, diverted corporate or limited liability company funds or assets to other uses, treated their assets as if they belonged to the related entities, failed to obtain authority to issue stock membership certificates, held out the limited liability entities as being liable for the debts of the corporations, failed to maintain minutes or adequate corporate records, failed to adequately capitalize the corporations, used the corporation and limited liability companies as mere shells, concealed or misrepresented the identity of the responsible owner, used the corporate entity to procure labor, and diverted assets to other related entities to the detriment of corporation. (Compl. ¶ 9.)

Defendants argue that these alter ego allegations lack any factual support and are rather “a recitation of factors that may be considered when a party desires to impose alter ego liability.” (Mot., p. 6:16-17.)

The Court finds that these alter ego allegations are sufficient. The alter ego allegations contained in Paragraph 9 of the Complaint are factual allegations, not legal conclusions such as “Defendants are the alter ego of one another.” Nor are these allegations stated as “factors” in the Complaint; rather, these statements are allegations against particular Defendants. Defendants cite to no authority that alter ego allegations need to be pled with more specificity. In fact, Plaintiff was required to allege only “ultimate rather than evidentiary facts” necessary to support alter ego theory. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 236; Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) Moreover, the “less particularity [of pleading] is required where the defendant may be assumed to possess knowledge of the facts at least equal, if not superior, to that possessed by the plaintiff,” which is the case here. (Burks v. Poppy Construction Co. (1962) 57 Cal.2d 463, 474.) Additionally, at the pleading stage, Plaintiff is not required to provide “proof” of these allegations, as any factual allegation is accepted as true. (See Durell, supra, 183 Cal.App.4th at 1358.)

The Court notes that Plaintiff includes additional facts relating to the alter ego allegations in its opposition brief, including allegations that Brookfield Defendants directed the construction work, handled the finances, and had employees that worked with Plaintiff. These facts are improper for the Court to consider in demurrer; however, as Plaintiff has alleged sufficient facts in the Complaint to withstand demurrer, the Court need not consider these additional allegations.

Defendant further argues that Plaintiff was a sophisticated party and thus cannot expand the Agreement to include unrelated parties to the Agreement. The case that Defendants cite to dealt with a situation where the court found that the defendant was not the alter ego of a codefendant. As the Court addresses, Plaintiff has provided sufficient alter ego allegations to survive demurrer.

Moving Defendants’ demurrer to all causes of action as to the Brookfield Defendants is overruled.

Issue 2: Demurrer to Fifth Cause of Action for Foreclosure of Mechanic’s Lien

Moving Defendants argue that Plaintiff fails to state facts sufficient to support a fifth cause of action for foreclosure of mechanic’s lien because the Complaint fails to state facts that Plaintiff served Defendants with the requisite preliminary lien notices, and the Complaint is uncertain because it fails to include a copy of the mechanic’s lien.

“A claimant may enforce a lien only if the claimant has given preliminary notice to the extent required by Chapter 2 (commencing with Section 8200) and made proof of notice.” (Civ. Code, § 8410.) Except as otherwise provided by statute, before recording a lien claim, a claimant must give preliminary notice to the “owner or reputed owner” of the property on which a lien will be claimed for work performed or materials used. (Id. at § 8200 (a)(1).) Statutory compliance is strictly required to enforce a lien claim. (See, e.g., Kim v. JF Enterprises (1996) 42 Cal.App.4th 849, 854—855; see also e.g., Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal.App.3d 715, 721.) Civil Code section 8200(e)(2) provides exceptions to this preliminary notice requirement for “claimant[s] with a direct contractual relationship with an owner or reputed owner,” who are required to only provide notice to the construction lender.

The Complaint states that “Plaintiff was excused from giving written notice, pursuant to Section 8200 et seq. of the Civil Code of the State of California, to Defendant since Plaintiff was the direct contractor for the Work of Improvement.” (Compl. ¶ 35.) The Complaint alleges that Plaintiff had a construction contract with Maguire. (Compl. ¶ 14.) The Complaint additionally asserts sufficient alter ego allegations between Maguire and Brookfield Defendants. (Compl. ¶ 8-11.) As such, Plaintiff has properly pled that it was excused from giving preliminary notice to Moving Defendants.

Defendants additionally argue that the Complaint is uncertain because the Complaint fails to include the mechanic’s lien, arguing that the specific property is uncertain. A demurrer for uncertainty may lie if the failure to label the parties and claims renders the complaint so confusing defendant cannot tell what he or she is supposed to respond to. (Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139.) The Court does not find that the fifth cause of action is uncertain. Defendants cite to no authority that the mechanic’s lien needs to be attached to the Complaint. Further, the Complaint states the address of the property that Plaintiff provided work on throughout the Complaint. (See Compl. ¶¶ 12, 14, 31, 32.)

Defendants move to strike Paragraphs 8-11, which are the paragraphs containing the alter ego allegations. Defendants make the same arguments as they did in the demurrer, arguing that the alter ego allegations are improper and irrelevant. However, as discussed above, Defendants’ arguments fails, and the alter ego allegations are sufficiently pled. As such, the motion to strike is DENIED.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court