Judge: Jon R. Takasugi, Case: 21STCV28024, Date: 2024-12-13 Tentative Ruling

Case Number: 21STCV28024    Hearing Date: December 13, 2024    Dept: 17

Superior Court of California

County of Los Angeles

DEPARTMENT 17

TENTATIVE RULING

On 7/29/2021, Plaintiff Niko Home Builders, Inc. (NHB) filed suit against Charles Leatherbury, an individual and co-Trustee of Leatherbury Family Trust (10/30/01), Ann L. Leatherbury, an individual and co-Trustee of Leatherbury Family Trust (10/30/01), and the Leatherbury Family Trust under Declaration of Trust Dates October 30, 2021, alleging: (1) foreclosure of mechanic’s lien; (2) breach of contract; (3) common count for work, labor, and services-agreed price; (4) common count for work, labor, and services-reasonable value; and (5) account stated.

            On 10/8/2021, Cross-Complainant Charles Leatherbury, an individual and co-Trustee of Leatherbury Family Trust (10/30/01) filed a cross-complaint against Paolo A. Schiappa aka Paul Schiappa, Niko Home Builders, Inc., and Suretec Insurance Company, alleging: (1) assault and battery; and (2) negligence.

            On 10/28/2024, the Leatherburys filed this motion for the adjudication of issues.

            The Court takes both parties’ substantive moving papers on these issues to be a waiver of the 75-day notice requirement set forth by CCP section 437c for adjudication of issues.

MIL #1:

            The Leatherburys seek adjudication of the following:

That Niko Home Builders, Inc. (NHB), was required to have a written contract with the Leatherburys for the home improvement work that it performed at the Leatherburys' home, and that the contract was required to have certain statutorily mandated terms.

            The Leatherburys contend that home improvement contracts between an owner and a contractor must be in writing.

Under California law, '"[h]ome improvement' means the repairing, remodeling, altering, converting, or modernizing of, or adding to, residential property ... and shall include, but not be limited to ... improvements of the structures or land which is adjacent to a dwelling home." (Bus. & Prof. Code §7151(a).) A "'[h]ome improvement contract' means an agreement ... between a contractor and an owner ... for the performance of a home improvement as defined in Section 7151, and includes all labor, services, and materials to be furnished or performed thereunder." (Bus. & Prof Code §7151.2.)

Section 7159.5 specifically requires that: "The contract shall be in writing." (Bus. & Prof. Code §7159.5(a)(l).) Home improvement contract and any changes to the contract shall be in writing and signed by the parties to the contract prior to the work covered by the contract or an applicable change order". (Bus & Prof Code §7159(d).) Additional terms are required, including, but not limited to:

-         A statement in at least 12-point boldface type: "You are entitled to a completely filled in copy of this agreement, signed by both you and the contractor, before any work may be started." (Bus & Prof Code §7159(d)(4));

-         The heading "Contract Price," followed by the amount of the contract in dollars and sense (Bus & Prof Code §7 l 59(d)(5));

-         The heading "Description of the Project and Description of the Significant Materials to be Used and Equipment to be Installed," followed by a description of the project and a description of the significant materials to be used and equipment to be installed (Bus & Prof Code §7159(d)(7));

-         Specific language regarding any down-payment and progress payments (Bus & Prof Code §7159(d)(8)-(9));

-         Statements addressing the commencement and completion of work to be performed including the approximate start date and the estimated completion date, with appropriate headings using specific language (Bus & Prof Code §7159(d)(l0)-(11) );

-         A specific statement regarding extra work and change orders (Bus & Prof Code §7l59(d)(l3));

-         Specific notices regarding commercial general liability insurance (Bus & Prof Code §7159(e)(1)), workers' compensation insurance (Bus & Prof Code §7159(e)(2)), the performance of extra or change-order work (Bus & Prof Code §7l59(e)(3)), Mechanic's Liens (Bus & Prof Code §7l59(e)(4)), the Contractors State License Board consumer protections (Bus & Prof Code §7159(e)(5)), and the buyer's right to cancel (Bus & Prof Code §7159(e)(6)).

Here, the Leatherburys submitted evidence that NHB's contract with the Leatherburys consists of four separate documents: (1) a four-page list of construction items, signed by NHB on November 18, 2017, and by Charles Leatherbury on November 22, 2017 (see Exh. C); (2) a proposal dated November 7, 2018, signed only by NHB (see Exh. D); (3) an amended proposal dated February 12, 2019, signed only by NHB (see Exh. E); and (4) a four-page "Amended Invoice" signed by Charles Leatherbury on February 13, 2019, and by NHB on February 15, 2019.

In opposition, NHB submitted evidence that Mr. Leatherbury was functioning as the owner-contractor for the Building Project, and thus argues that the contract does not fall within the scope of section 7151(a).

In support, NHB cited Hinerfield-Ward, Inc. v. Lipian (2010) 188 Cal.App.4th 86. There, the homeowner purchased a high-end property in Los Angeles for the purpose of remodeling it. Oral negotiations ensured during which the homeowner outlined the scope of the work to be performed. As work progressed, the homeowner was provided with invoices outlining the work to be performed. After a significant portion of the work was completed, Hinerfeld-Ward was terminated by the homeowners who then failed to pay the final invoice. Hinerfeld-Ward sued for the monies owed at the time of termination and the homeowner defended on the basis that there was a failure to provide a section 7159-compliant written agreement, and thus the contract should be deemed void even though the homeowners had an “owners’ representative” make periodic site visitations, coordinated with contractors, and respond to their questions, and review requests for payments from contractors.

The Court concluded that the oral home improvement contract was enforceable. More specifically, the Court found that the statute requiring home improvement contracts to be in writing did not preclude the general contractor from enforcing oral contracts with homeowners, where homeowners were well-educated and had some experience with contracts, the project was a complex high-end remodel on which the design continued to evolve over years of planning and construction, and an architect was involved in the project as homeowners' representative.

Here, NHB submitted evidence that Charles Leatherbury acted as the owner-contractor on this project. In particular, NHB submitted documentation to show that it played a supervisory role over the subcontractors who were hired/contractors by Mr. Leatherbury directly. NHB submitted evidence showing invoices outlining the work to be or already performed, and the significant amount of work that was performed at the time of NHB’s termination. (NHB Decl.)

Moreover, the Leatherburys cited Asdourian v. Araj (1985) 38 Cal.3d 276 to argue that a contractor cannot recover where section 7159-documents were not used. However, in that the case, our Supreme Court expressly stated that “the rule is not an inflexible one to be applied in its fullest rigor under any and all circumstances. A wide range of exceptions has been recognized.” (Id. at p. 291.) The Supreme Court also expressly that “ [n]othing in the statute declares that an oral contract entered into in contravention of section 7159 shall be void.” (Id.)

As such, the Court concludes that, at the very least, triable issues exist as to whether or not the parties entered into an enforceable agreement, based on non-compliance with section 7159.

MIL # 2:

The Leatherburys seek adjudication of the following:

That NHB was terminated from the home improvement project on the Leatherbury's home.

            The Leatherburys argue that the parties mutually agreed to terminate NHB’s involvement in the improvement of the Leatherburys’ home, and that in spite of this, NHB continued to perform work on the Leatherburys' home improvement without a contract after February 27th.

In support of this, the Leatherburys submitted an email correspondence which stated:

This is to confirm that I received your invoice for all outstanding work and materials for our construction project. Also that you advised me during our conversation this past Friday evening that you could no longer help us with our yard construction/remodel. Given the tense circumstances, we agree that you should stop work on our project effective immediately. During the same conversation on Friday evening, I asked you not to come on the property (our home). Please respect my request and do not come on the property for any reason."

            (Exh. J, p. 2.)

NHB then confirmed the November 21, 2020 termination in its November 25, 2020 invoice no. 990.

Second, the Leatherburys submitted evidence that their daughter Rachel obtained a Restraining Order against Mr. Schiappa, NHB’s principal, on November 23, 2020, thereby making it impossible for Mr. Schiappa to perform any work on the Leatherbury home improvement project.

            In opposition, NHB argues that the email has not been authenticated. However, this ignores the fact that even without the email, the invoice issued by NHB on 11/25/2020 clearly states: “hardscape supervision fee due on subcontractors contract for loss profit due to owner removing me from project on 11/21/2020.” (Exhibit V, emphasis added.)

            Accordingly, the Court concludes that the only reasonable inference supported by the evidence is that NHB was terminated from the home improvement project by the Leatherburys on 11/21/2020.  

MIL #3:

The Leatherburys seek adjudication of the following:

That the Mechanic's Lien recorded by NHB was untimely.

The Leatherburys argue that NHB failed to record its mechanic’s lien within 90 days after being terminated.     

A direct contractor may not enforce a lien unless the contractor records a claim of lien after the contractor completes the direct contract, and before the earlier of either of the following times:

(a) Ninety days after completion of the work of improvement;

(b) Sixty days after the owner records notice of completion or cessation.

(Civ. Code §8412.)

Completion of a work of improvement occurs upon the actual completion of the work of improvement or the cessation of labor for a continuous period of 60 days. (Civ. Code §8180(a)(J), (3).)

Here, the Leatherburys submitted evidence that NHB engaged in two phases of work at the Property. The first phase was completed by no later than February 2, 2019, when NHB executed a Certificate of Contract Completion, which expressly stated:

That the work pending under the above named contract, including all amendments thereto, has been satisfactorily completed; that all charges or bills for labor or service performed or materials furnished, and other charges against the project, including those incurred by Subcontractors, have been paid in full an in accordance with the terms of the contract, that no liens have attached against the property and improvements of Owner; that no notice of intention to claim liens is outstanding, that no suits are pending by reasons of work on the project under the contract; that all Workmen's Compensation claims have been settled and that no public liability claims are pending.

(See Exh. G.)

The second phase of work ended when NHB and the Leatherburys mutually agreed that NHB would stop working on the project. (See Exhs. J, K.)

Work ceased on November 21, 2020; and thus NHB was required to record any Mechanics Lien by no later than April 20, 2021 (90 days after completion by cessation, any cessation occurred as a matter of law 60 days after November 21, 2020). NHB did not record its ostensible Mechanic's Lien until April 30, 2021. (See Exh. L.)

In opposition, NHB argues that “the Defendants apparently submit that they are entitled to unilaterally fix the date of completion and the date of cessation without ever providing the Court with any evidence or legal support whatsoever relative to how a date of completion or a date of cessation is calculated or what those terms mean in the construction context.” However, first, as set forth above, the Court concluded there was no triable issue as to the date of cessation. Moreover, the Leatherburys’ motion clearly sets forth the legal authority and facts relied upon to calculate the April 20, 2021 date. Notably, NHB does not set forth any argument of an alternative calculation.  

 MIL #4

The Leatherburys seek adjudication of the following:

                        That NHB's lawsuit seeks damages to which it is not entitled.

            The Leatherburys argue that NHB is claiming damages based on work for which it certified that nothing was owed by the Leatherburys. In support, the Leatherburys submitted evidence that on February 27, 2019,

NHB certified that all of the work on its contract - including amendments thereto - had been completed, that all charges or bills for labor, services, and materials - including those incurred by subcontractors, had been paid in full, and no liens had attached to the Leatherburys' property, there were no notices of intention to claim liens outstanding, and that no suits relating to the work on the project were pending.

            (See Exh. G.)

            This evidence supports a reasonable inference that NHB has admitted that the Leatherburys have already paid all sums that NHB claimed, or could have claimed, prior to February 27, 2019.

            In opposition, NHB argues that the Leatherburys have “failed to set forth any evidence from which the Court can readily determine that a signed Certificate of Completion is tantamount to an absolution of the duty to pay amounts owed to the Plaintiff.” (Opp., 7: 7-9.)

            However, NHB did not submit any evidence which could show that there was, in fact, an unpaid balance remaining from “supervision fees.” As such, NHB is claiming, without any evidence which could support a reasonable inference, that there are unpaid fees. By contrast, the Leatherburys submitted evidence that NHB provided them a Certificate of Completion which expressly certified “that all charges or bill for labor or service performed or materials furnished, and other charges against the project, including those incurred by Subcontractors, have been paid in full an in accordance with the terms of the contract." (Motion, 9: 7-9.)

            Thus, the only reasonable inference supported by evidence is that NHB has been paid in full for all charges or bills.

MIL #5

The Leatherburys seek adjudication of the following:

That the damages claimed by NHB are res judicata based upon prior unsuccessful small claim actions.

            The Leatherburys argue that NHB’s damages claim is barred by res judicata because it seeks to recover damages identical to those it lost in a Small Claims action against Charles Leatherbury.

"[I]t is well-settled that the claim preclusion aspect of the doctrine of res judicata applies to small claims actions." (Bailey v. Brewer (2011) 197 Cal.App4th 781, 791.) "A small claims plaintiff is collaterally estopped from relitigating the same issue in superior court where the record is sufficiently clear to determine the issue was litigated and decided against plaintiff in the small claims action." (Id.; see also 40A Cal. Jur. 3d Judgments, §203 [same].)

            In support, the Leatherburys submitted evidence that:

-         On October 24, 2022, while the instant suit was pending, Paolo Schiappa filed a small claims action, entitled Schiappa v. Leatherbury, LASC Case No. 22IWSC01490. (See Exh. R.)

-         In that Small Claims action, Schiappa claimed "$10,000" for " [r]eimbursement for payments to electrical, plumbing and low voltage subcontractor and Misc [sic] work done in backyard hardscape and 15% supervision fee on invoices." (See Exh. R at p. 2.)

-         Schiappa claims that the period within which this sum was earned was from "7/11/2020" through "12/30/2020". (See Exh. R at p. 3.)

-         The matter went to trial on April 18, 2023, wherein judgment was rendered as follows: "Defendant Chuck Leatherbury does not owe the plaintiff Paul Schiappa any money on plaintiffs claim." (See Exh. S.)

-         Notice of the entry of the judgment in favor of Charles Leatherbury and against Paolo Schiappa was given on April 19, 2023. (See Exh. T.)

In opposition, NHB contends that the Leatherburys have not provided sufficient information to conclude that collateral estoppel applies. The Court disagrees.

While NHB was not formally a party to the small claims action, NHB is solely own and run by Schiappa and shares a community of interest—NHB has no employees and it operates under Schiappa’s license. Therefore, given that Schiappa’s suit was on behalf of the damages incurred by NHB, there appears to be privity of parties, a conclusion reinforced by the fact that NHB’s invoices refer to “me”, i.e., Schiappa, thereby reinforcing the unity of interest between NHB and Schiappa. There was a final judgment on the merits and is for the same cause of action, i.e., the claims for construction work, services, and supervision fees which are identical, duplicative, and fall within the period between NHB's Certificate of Contract Completion and NHB/Schiappa's termination from the home improvement. As such, the elements for claim preclusion are met. (See Samara v. Matar (2018) 5 Cal. 5th 322, 327.)

Based on the foregoing, the Court concludes as a matter of law that NHB’s entire claim is barred by res judicata. 

It is so ordered.

Dated:  December    , 2024

   Hon. Jon R. Takasugi
   Judge of the Superior Court

Parties who intend to submit on this tentative must send an email to the court at smcdept17@lacourt.org by 4 p.m. the day prior as directed by the instructions provided on the court website at www.lacourt.org.  If a party submits on the tentative, the party’s email must include the case number and must identify the party submitting on the tentative.  If all parties to a motion submit, the court will adopt this tentative as the final order.  If the department does not receive an email indicating the parties are submitting on the tentative and there are no appearances at the hearing, the motion may be placed off calendar.  For more information, please contact the court clerk at (213) 633-0517.