Judge: John J. Kralik, Case: 22BBCV00571, Date: 2024-01-26 Tentative Ruling
Case Number: 22BBCV00571 Hearing Date: January 26, 2024 Dept: NCB
North
Central District
|
vision
construction group, inc., Plaintiff, v. hy-max building
corp.,
et al., Defendants. |
Case No.: 22BBCV00571 Hearing Date: January 26, 2024 [TENTATIVE] ORDER: demurrer |
BACKGROUND
A.
Allegations
Plaintiff Vision Construction Group, Inc.
(“Vision”) alleges that it entered into a contract with Defendant Hy-Max
Building Corp. (“Hy-Max”) on June 10, 2020 for certain labor, materials,
supplies, and equipment related to the construction of an apartment complex at
the property located at 12444 Chandler Blvd., Valley Village, CA 91607. The property is allegedly owed by Defendant
Chandler Village, LLC (“Chandler Village”).
Vision alleges that Hy-Max breached the contract by failing to pay
Plaintiff sums payable under the contract, including change orders, in the
amount of $176,281.31.
The first amended complaint (“FAC”), filed
March 9, 2023, alleges causes of action for: (1) breach of contract; (2) work,
labor, and materials furnished; (3) common counts for reasonable value of
materials and services provided; (4) prompt payment (Business & Professions
Code § 7108.5): (5) prompt payment (Civil Code §§ 8814, 8818(; (6) unfair
business practices (Bus. & Profs. Code, § 17200); (7) unjust enrichment;
(8) promissory estoppel; and (9) claim on release of mechanic’s lien bond.
On August 25, 2023, Plaintiff dismissed
with prejudice Defendant Merchants Bonding Company.
B.
Cross-Complaints
On May 3, 2023, Hy-Max filed a
cross-complaint against Vision for: (1) breach of written contract; and (2)
breach of implied covenant of good faith and fair dealing.
On August 8, 2023, Chandler Village, LLC
filed a first amended cross-complaint (“CV FAXC”) against Hy-Max and Vision
for: (1) breach of contract – express indemnity; (2) breach of contract – duty
to defend; (3) breach of contract; and (4) breach of duty of good faith and
fair dealing.
C.
Demurrer on Calendar
On November 2, 2023, Vision filed a
demurrer to the 3rd and 4th causes of action in the CV
FAXC.
On January 12, 2024, Chandler Village
filed an opposition brief.
On January 19, 2024, Vision filed a reply
brief.
REQUEST
FOR JUDICIAL NOTICE
Chandler Village requests judicial
notice of Visions’ FAC in this action. The
request is granted. (Evid. Code, §
452(d).)
DISCUSSION
Vision demurs to the 3rd
and 4th causes of action in Chandler Villages’ FAXC.
A.
3rd cause of action for breach of contract
and 4th cause of action for breach of duty of good faith and fair
dealing
The essential
elements of a cause of action for breach of contract are: “(1) the existence of
the contract, (2) plaintiff's performance or excuse for nonperformance, (3)
defendant's breach, and (4) the resulting damages to plaintiff.” (Oasis
West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) “There is an implied covenant of good faith and fair dealing
in every contract that neither party will do anything which will injure the
right of the other to receive the benefits of the agreement.” (Comunale v. Traders & General
Ins. Co. (1958) 50 Cal.2d 654, 658.) “Without a contractual
underpinning, there is no independent claim for breach of the implied covenant.” (Fireman's
Fund Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1599.)
“The prerequisite for any action for breach of the implied covenant of good
faith and fair dealing is the existence of a contractual relationship between
the parties, since the covenant is an implied term in the contract.” (Smith
v. City & Cnty. of San Francisco (1990) 225 Cal.App.3d 38, 49.)
In considering whether to permit a third
party beneficiary to bring a breach of contract, the court must consider “not
only not only (1) whether the third party
would in fact benefit from the contract, but also (2) whether a motivating
purpose of the contracting parties was to provide a benefit to the third party,
and (3) whether permitting a third party to bring its own breach of contract
action against a contracting party is consistent with the objectives of the
contract and the reasonable expectations of the contracting parties.” (Goonewardene v. ADP,
LLC (2019) 6 Cal.5th 817, 829–830.)
Vision demurs to the 3rd
and 4th causes of action, arguing that there is no contract between
Chandler and Vision, and Chandler is not a third-party beneficiary of the
Hy-Max/Vision subcontracts. In the
demurrer, Vision cites to the contracts attached to the CV FAXC, which include:
(1) the direct/prime contract between Chandler Village (owner) and Hy-Max
(direct/prime contractor); (2) Hy-Max framing subcontract with Vision; and (3)
Hy-Max drywall subcontract with Vision.
(CV FAXC, Exs. 1-3.) Vision
argues that these contracts were not entered between Vision and Chandler
Village. Vision also argues that
Chandler Village only alleges that the subcontracts were entered for its
benefit, but does not allege that it was the intended third-party
beneficiary.
In the Framing Subcontract, the
contractor is identified as Hy-Max, the subcontractor is identified as Vision,
and the owner is identified as Chandler Village. (CV FAXC, Ex. 2 [Framing Subcontract at
p.1].) The Framing Subcontract
references the “Owner Contract” (or Prime Contract, which was entered between
Hy-Max and Chandler Village). (Framing
Subcontract at p.2.) In opposition,
Chandler Village cites to various provisions in the Framing Subcontract showing
that the contract was intended to benefit Chandler Village: (a) section 4.1.5
states that Subcontractor Vision agrees that Contractor Hy-Max and Owner
Chandler Village each have authority to reject Vision’s work if it does not
conform to the Prime Contract; (b) section 4.1.8 states that Vision shall
cooperate with Hy-Max, subcontractors, and Chandler Villages’ own forces whose
work might interfere with Vision’s work; (c) section 4.5.1 states that Vision
warrants to Chandler Village, the architect, and Hy-Max that the materials and
equipment furnished will be of good quality and new; (d) section 4.6.1 states
that vision shall defend, indemnify, and hold harmless Hy-Max, Chandler
Village, and others against all claims, demands, liability, or injury arising
out of or connected with Vision’s performance of the subcontract; (e) section
5.1 states that Chandler Village may make changes to the work by issuing
modifications to the Prime Contract; (f) section 7.2.2 states that Chandler
Village may terminate the subcontract by written notice to Vision; (g) Article
13 states that Vision shall provide insurance, which Chandler Village may
request copies of; and (h) Attachment D names Chandler Village as an additional
insured. (See Framing Subcontractor at
§§ 4.1.5, 4.1.8, 4.5.1, 4.6.1, 4.6.2, 5.1, and 7.2.2, Article 13, and
Attachment D.) The Drywall Subcontract
also includes the same parties and similar provisions. (CV FAXC, Ex. 3 [Drywall Subcontract at
pp.1-2, §§ 4.1.5, 4.1.8, 4.5.1, 4.6.1, 4.6.2, 5.1, and 7.2.2, and Article 13].)
Vision argues that Chandler Village
cannot satisfy the 2nd and 3rd elements of showing that
it is a third-party beneficiary because there was no objective manifestation
that the motivating purpose of entering the subcontracts was to benefit
Chandler Village and it argues that Chandler Village’s interest are fully
protected in case of a breach because it has already alleged a claim against
Hy-Max and Hy-Max has asserted cross-claims against Vision.
While the phrase “intended
third-party beneficiary” is not included in the Framing Subcontract or Drywall
Subcontract, Chandler Village is clearly named and identified in the
subcontracts as the owner of the premises and that the project is being done in
conformity with the Prime Contract.
Throughout the subcontracts, Vision agreed to numerous provisions
regarding the work performed, warranties, indemnification, termination of the
subcontracts, insurance, etc., wherein the owner Chandler Village is named and
has rights under the subcontracts. The
attached agreements sufficiently show that the motivating purpose of the
contracting parties (Vision and Hy-Max) was to provide a benefit to Chandler
Village. In particular, the work
performed by Vision was to improve property owned Chandler Vision. Further, Chandler Village had the right to
reject Vision’s work if it did not conform to Prime Contract, Chandler Village
may make changes to Vision’s work by issuing modifications to the Prime Contract,
and Chandler Village could terminate Vision with written notice. (Subcontracts at §§ 4.1.5, 5.1, and
7.2.2.)
Finally, at this time, the Court
finds that permitting Chandler Village to bring its own breach of contract claim
against Vision is consistent with the objections of the Subcontracts and the
reasonable expectation of the contracting parties. The fact that Vision has sued Hy-Max and
Chandler Village and Hy-Max has filed its own cross-complaint against Vision
does not necessarily mean that Chandler Village’s interests will be adequately
protected by Hy-Max. Hy-Max is the prime
contractor, whereas Chandler Village is the property owner—each have their own
interests to protect in this action and the parties’ claims are in part opposed
to each other (as shown by Chandler Village’s FAXC against Hy-Max).
For these reasons, the demurrer to
the 3rd and 4th causes of action is overruled.
CONCLUSION AND ORDER
Plaintiff/Cross-Defendant
Vision Construction Group, Inc.’s demurrer to Cross-Complainant Chandler
Village, LLC’s first amended cross-complaint is overruled. Cross-Defendant is ordered to answer the
FAXC.
Cross-Defendant
shall provide notice.
DATED: January 26, 2024 ______________________
John
J. Kralik
Judge
of the Superior Court