Judge: Joseph Lipner, Case: 23STCV11836, Date: 2023-11-16 Tentative Ruling
Case Number: 23STCV11836 Hearing Date: April 4, 2024 Dept: 72
SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES
DEPARTMENT 72
TENTATIVE
RULING
|
ROSENDIN ELECTRIC, INC., Plaintiff, v. CORE/RELATED GRAND AVE. OWNER, LLC.,
et al., Defendants. |
Case No: 23STCV11836 Hearing
Date: April 4, 2024 Calendar
Number: 5 |
Plaintiff and Cross-Defendant Rosendin Electric, Inc.
(“Plaintiff”) and Cross-Defendant Rosendin Holdings, Inc. (“Holdings”)
(collectively, “Cross-Defendants”) demur to the second, fourth, sixth, seventh,
eighth, ninth, and tenth causes of action in the First Amended Cross-Complaint
(“FACC”) filed by Defendant and Cross-Plaintiff Core/Related Grand Ave Owner,
LLC (“Core”).
The Court SUSTAINS the demurrer WITHOUT LEAVE TO AMEND as to
the fourth, sixth, eighth and tenth causes of action.
The Court SUSTAINS the demurrer WITH LEAVE TO AMEND as to
the second, seventh and ninth causes of action.
Cross-Defendants shall have 20 days to amend the FACC.
This is a contract dispute concerning electrical work
performed by Plaintiff on a construction project owned by Core. Related is the
parent company of Core.
Plaintiff and Core entered into a contract (the “Trade
Contract”) under which Plaintiff would perform electrical and fire alarm work
for Core’s construction project at 100 South Grand Avenue, Los Angeles,
California 90012 (the “Property”). Plaintiff alleges that Core had the
responsibility for project design and for the coordination of the various
trades. Core alleges that Plaintiff had responsibility for designing the
electrical and fire alarm systems.
Plaintiff alleges in its complaint that Core oversaw major
changes to the design. Core’s general contractor allegedly failed to
consistently manage the construction schedule and provide consistent
supervision over the course of the project. These factors significantly
increased the costs that fell on Plaintiffs as a result of the work. However,
Core refused to issue change orders and make payments for the costs resulting
from the scheduling problems and its alterations.
Core alleges that Cross-Defendants were aware of the design
challenges that they would face and nevertheless performed late and defective
work on the project.
Plaintiff filed a mechanic’s lien against Core, Related, and
several affiliated entities which hold real property interests in the Property.
Plaintiff filed this action against Core, the Related
Companies, L.P. (“Related”), and United States Fire Insurance (“US Fire”)
(collectively, “Defendants”) on May 25, 2023.
Core filed a Cross-Complaint against Plaintiff and Holdings,
Plaintiff’s parent company, on September 28, 2023, raising claims for (1)
breach of contract; (2) breach of fiduciary duty; (3) quasi-contract-unjust
enrichment/restitution; (4) promissory fraud; (5) negligent misrepresentation;
(6) negligence; (7) constructive fraud; and (8) declaratory relief.
On December 28, 2023, the Court sustained, with leave to
amend, Cross-Defendants’ demurrer to the claims for breach of fiduciary duty,
promissory fraud, negligent misrepresentation, negligence, and constructive
fraud.
Core filed the FACC, the operative cross-complaint, against
Cross-Defendants on February 5, 2024. The FACC raises claims for (1) breach of
consultant contract; (2) contractual indemnification; (3) breach of trade
contract; (4) breach of fiduciary duty; (5) quasi-contract-unjust
enrichment/restitution; (6) promissory fraud; (7) concealment; (8) negligent
misrepresentation; (9) negligence; (10) constructive fraud; and (11)
declaratory relief.
Cross-Defendants demurred to the second, fourth, sixth,
seventh, eighth, ninth, and tenth claims on March 27, 2024. Core filed an
opposition and Cross-Defendants filed a reply.
The Court grants
Core’s sixth request for judicial notice as public records of a court.
The Court denies
Core’s remaining requests for judicial notice of various law treatises and law
journal articles. Core argues that these materials constitute common knowledge
or indisputable facts. The materials in question are articles discussing the
state of the law. Thus, while the Court can take judicial notice of their
existence, it cannot use judicial notice as a means to backend their
contentions of law into the record where they would not otherwise be
appropriate. Core may cite to these articles in its papers where it is
appropriate to do so, but this is not a viable means to, for example, bring in
unpublished cases.
As a general matter, in a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial
notice. (Donabedian v. Mercury Ins.
Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleading
alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants,
Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) The court assumes the truth
of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is
concerned with is whether the complaint, as it stands, states a cause of
action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)
Where a demurrer is sustained, leave to amend must be
allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335,
348.) The burden is on the plaintiff to show the court that a pleading can be
amended successfully. (Ibid.;
Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f
there is any reasonable possibility that the plaintiff can state a good cause
of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist.
(1969) 70 Cal.2d 240, 245).
The elements for
equitable indemnity are (1) a showing of fault on the part of the indemnitor
and (2) resulting damages to the indemnitee for which the indemnitor is
contractually or equitably responsible. (Gouvis Engineering v. Superior
Court (1995) 37 Cal.App.4th 642, 646.) “To state a claim for equitable
indemnity, a defendant must allege the same harm for which he may be held
liable is properly attributable—at least in part—to the cross-defendant.” (Platt v. Coldwell Banker Residential Real
Estate Services (1990) 217 Cal.App.3d 1439, 1445, fn.7.)
“An indemnitee
seeking to recover on an agreement for indemnification must allege the parties’
contractual relationship, the indemnitee’s performance of that portion of the
contract which gives rise to the indemnification claim, the facts showing a
loss within the meaning of the parties’ indemnification agreement, and the
amount of damages sustained.” (Four Star
Electric, Inc. v. F & H Construction (1992) 7 Cal.App.4th 1375, 1380.)
Cross-Defendants
argue that Core has not alleged the existence of a third-party claim triggering
liability. Cross Defendants are correct, as the definition of “Claims” in the
contract is a third-party claim.
Section 7.1 of the
Preconstruction Consultant Contract executed by the parties states, in relevant
part, that: “To the fullest extent permitted by law, [Plaintiff] shall
indemnify, protect, defend, and hold harmless the Client and its employees,
Client's contract agents assigned to the Project, all parties listed on Exhibit
"D", and any and all of their partners, members, successors and
assigns (collectively, “Indemnitees”) from and against any claims, damages,
losses, liabilities, costs, actions, causes of action, suits, penalties, fines
and expenses, including but not limited to reasonable attorneys’ fees
(“Claims”), arising out of, resulting from and occurring in connection with
the performance of [Plaintiff’s] Services under this Contract …. [Plaintiff’s]
duty to defend Client shall be triggered by the presentation of any Claim to [Plaintiff]
which results from, arises out of or occurs in connection with Consultant's or
any of its subconsultant's work or services.” (Complaint, Exh. A at p. 6-7, ¶
7.1, emphasis added.)
Section 7.2
provides that: “In addition to the indemnity provided in Section 7.1 above
intended to cover third party general liability claims under [Plaintiff’s]
commercial general liability policy, with respect to claims and liabilities
relating to [Plaintiff’s] professional errors and omissions, [Plaintiff]
agrees, to the fullest extent permitted by law, to indemnify and hold the Indemnitees
harmless against Claims that are caused by the negligent acts, errors or
omissions of Consultant in the performance of professional services under this
Contract[.]” (Complaint, Exh. A at p. 7, ¶ 7.2.)
Core argues that
the definition of “Claims” in Section 7.1, which broadly includes any damages
and losses suffered by Core, does not limit itself to third-party claims, and
rather covers any losses that Core suffers. Section 7.2 belies this argument,
however, clarifying that Section 7.1 is “intended to cover third party general
liability claims under [Plaintiff’s] commercial general liability policy[.]” (Complaint, Exh. A at p. 7, ¶ 7.2.) Thus,
although the language of Section 7.1 implicitly gives rise to a broader reading
of the term “Claims,” the express language of Section 7.2 limits the scope of
Section 7.2, and therefore the scope of the term “Claims,” to third-party
liability.
Thus, Core must
plead the existence of a third-party claim. It has not done so.
The Court sustains
the demurrer to this claim with leave to amend.
“The elements of a cause of action for breach of fiduciary
duty are the existence of a fiduciary relationship, breach of fiduciary duty,
and damages.” (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal.4th 811, 820.)
Core argues Plaintiff owed it fiduciary duties because
Plaintiff was a designer-builder under the Trade Contract. The primary case
that Core cites in support of its proposition that a designer-builder is a
fiduciary is Edward Barron Estate Co. v. Woodruff Co. (1912) 163 Cal.
561. There, the California Supreme Court held that the defendant, who acted as
the architect, engineer, superintendent, and general contractor for the
plaintiff, owed the plaintiff fiduciary duties. (Id. at pp. 566-567, 575-576.)
A court of appeal later reaffirmed Edward Barron, stating that “[a]n architect
owes to his client a fiduciary duty of loyalty and good faith.” (Palmer v.
Brown (1954) 127 Cal.App.2d 44, 59.)
The Court previously sustained the demurrer to this claim
because this case contains a crucial distinction: Plaintiff did not act as an
architect, nor did it act as a general contractor or superintendent of
construction. At most, Core alleges that Plaintiff had responsibility for
designing the electrical systems. Plaintiff’s role is simply nowhere near the
all-encompassing role contemplated in Edward Barron, nor is it the role
of architect as contemplated in Palmer. McCauley v. Dennis (1963)
220 Cal.App.2d 627, also cited by Core, explicitly stated that it “[does] not
establish that a fiduciary relationship exists between a contractor and a
person who engages his services simply on the basis of the engagement nor is it
so on the basis of the contract.” (Id. at p. 636.) The Court stated that
it saw no reason to create new law by holding that any construction contractor
who plays a design role becomes a fiduciary of the project owner.
Core largely repeats its arguments against the previous
demurrer, adding only citations to unpublished federal cases and secondary
sources – and not binding authority. Nor has Core supplied additional facts
that would allow the Court to find that Plaintiff took on duties comparable to
the defendants in Edward Barron or Palmer.
The Court has already permitted amendment to this claim
once, and Core has failed to allege facts that would remedy its defects. The
Court therefore sustains the demurrer to this claim without leave to amend.
“Promissory fraud is a subspecies of the action for fraud
and deceit. A promise to do something necessarily implies the intention to
perform; hence, where a promise is made without such intention, there is an
implied misrepresentation of fact that may be actionable fraud. The elements of
promissory fraud (i.e., of fraud or deceit based on a promise made without any
intention of performing it) are: (1) a promise made regarding a material fact
without any intention of performing it; (2) the existence of the intent not to
perform at the time the promise was made; (3) intent to deceive or induce the
promisee to enter into a transaction; (4) reasonable reliance by the promisee;
(5) nonperformance by the party making the promise; and (6) resulting damage to
the promise.” (Behnke v. State Farm
General Insurance Co. (2011) 196 Cal.App.4th 1443, 1453 [citation and
quotation marks omitted].) The facts constituting the alleged fraud must be
alleged factually and specifically as to every element of fraud, as the policy
of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12
Cal.4th 631, 645.) To properly allege fraud against a corporation, the
plaintiffs must plead the names of the persons allegedly making the false
representations, their authority to speak, to whom they spoke, what they said
or wrote, and when it was said or written. (Tarmann
v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)
Plaintiff contends that Core cannot show fraud because it
has failed to plead facts showing Plaintiff’s intent not to perform and because
Core has alleged performance by Plaintiff in the Cross-Complaint.
“[S]omething more than nonperformance is required to prove
the defendant's intent not to perform his promise.” (Magpali v. Farmers
Group, Inc. (1996) 48 Cal.App.4th 471, 481.) “[F]raudulent intent must
often be established by circumstantial evidence …. for example … such
circumstances as defendant's insolvency, his hasty repudiation of the promise,
his failure even to attempt performance, or his continued assurances after it
was clear he would not perform.” (Tenzer v. Superscope, Inc. (1985) 39
Cal.3d 18, 30.)
Core argues that it is sufficient to plead in conclusory
fashion the falsity of the promise, citing to Beckwith v. Dahl (2012)
205 Cal.App.4th 1039, 1062 [“[B]y sufficiently pleading [the defendant’s]
promise was false at the time she made it, [the plaintiff] also sufficiently
pled the element of scienter.”]. However, a full reading of the Beckwith
analysis of the plaintiff’s promissory fraud claim indicates that it was the
element of misrepresentation, and not knowledge of falsity, that the parties
intensely litigated. (Id. at pp. 1060-1062.) In fact, the Beckwith
court reiterated that “[e]ach element [of fraud] must be alleged with
particularity.” (Id. at p. 1060.)
Core
has not provided additional facts showing Plaintiff’s intent not to perform at
the time of the promise.
The Court has already permitted amendment to this claim
once, and Core has failed to allege facts that would remedy its defects. The
Court therefore sustains the demurrer to this claim without leave to amend.
“[T]he elements of
an action for fraud and deceit based on concealment are: (1) the defendant must
have concealed or suppressed a material fact, (2) the defendant must have been
under a duty to disclose the fact to the plaintiff, (3) the defendant must have
intentionally concealed or suppressed the fact with the intent to defraud the
plaintiff, (4) the plaintiff must have been unaware of the fact and would not
have acted as he did if he had known of the concealed or suppressed fact, and
(5) as a result of the concealment or suppression of the fact, the plaintiff
must have sustained damage.” (Lovejoy v. AT&T Corp. (2004) 119
Cal.App.4th 151, 157–158.)
The facts
constituting the alleged fraud must be alleged factually and specifically as to
every element of fraud, as the policy of “liberal construction” of the
pleadings will not ordinarily be invoked. (Lazar
v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege
fraud against a corporation, the plaintiffs must plead the names of the persons
allegedly making the false representations, their authority to speak, to whom
they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co.
(1991) 2 Cal.App.4th 153, 157.)
The only basis that Core pleads to establish that Plaintiff
had a duty of disclosure was that Plaintiff was a fiduciary to Core. As
discussed under the breach of fiduciary duty claim, Core has not adequately
alleged such a fiduciary relationship. Core has therefore failed to plead the
second element.
The Court sustains the demurrer to this claim with leave to
amend.
“California courts
have recognized a cause of action for negligent misrepresentation, i.e., a duty
to communicate accurate information, in two circumstances. The first situation
arises where providing false information poses a risk of and results in physical
harm to person or property. The second situation arises where information is
conveyed in a commercial setting for a business purpose.” (Friedman v. Merck & Co. (2003) 107 Cal.App.4th 454, 477.)
The Court previously sustained a demurrer where core alleged
that Plaintiff’s misrepresentations include: “[Plaintiff] had the necessary
skill, experience and ability to act as design-builder”; [Plaintiff] was “fully
familiar with and would and could comply with the applicable building and
safety codes”; “all design and construction work was being performed and would
and could be performed to the satisfaction of [Core] and applicable
governmental officials and in a workmanlike manner without defects or delays”;
“that the electrical and fire alarm systems work for the Project would be
designed and built in a timely manner that would and could be completed in
accordance with the Project schedule; and that [Plaintiff] was “financially
responsible and capable to fully and timely pay for all labor, work, and
materials furnished by their subcontractors and suppliers for the Project and
account to Related for the costs incurred at the Project.” (Cross-Complaint ¶
61.)
On amendment, Core once again alleges only very general
representations regarding Plaintiff’s ability to complete the work – such as
that Plaintiff was highly qualified, had a good working relationship with local
regulators, and would be able to work well with the architect Core had hired,
who allegedly has a difficult personality.
These allegations fail to meet the heightened pleading
standard for fraud because they only plead general statements of qualification
and not specific representations of fact.
The Court has already permitted amendment to this claim
once, and Core has failed to allege facts that would remedy its defects. The
Court therefore sustains the demurrer to this claim without leave to amend.
In order to state a claim for negligence, Plaintiff must
allege the elements of (1) “the existence of a legal duty of care,” (2) “breach
of that duty,” and (3) “proximate cause resulting in an injury.” (McIntyre v. Colonies-Pacific, LLC (2014)
228 Cal.App.4th 664, 671.)
“[C]ourts will generally enforce
the breach of a contractual promise through contract law, except when the
actions that constitute the breach violate a social policy that merits the
imposition of tort remedies.” (Erlich v. Menezes (1999) 21 Cal.4th 543,
552.) “Generally, outside the insurance context, “a tortious breach of contract
... may be found when (1) the breach is accompanied by a traditional common law
tort, such as fraud or conversion; (2) the means used to breach the contract
are tortious, involving deceit or undue coercion or; (3) one party
intentionally breaches the contract intending or knowing that such a breach
will cause severe, unmitigable harm in the form of mental anguish, personal
hardship, or substantial consequential damages.” (Id. at pp. 553-554,
quoting Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th
85, 105.) “Focusing on intentional conduct gives substance to the
proposition that a breach of contract is tortious only when some independent
duty arising from tort law is violated. If every negligent breach of a contract
gives rise to tort damages the limitation would be meaningless, as would the
statutory distinction between tort and contract remedies. (Id. at p. 554
[emphasis added] [citation omitted].)
Here, there was contractual privity
between Plaintiff and Core. Core has not identified a violation of social
policy meriting the imposition of tort remedies, nor has Core adequately pled
fraud, conversion, deceit, coercion, intentional breach, or any other
intentional tort that would give rise to parallel contractual liability.
Furthermore, Erlich appears to explicitly limit parallel tort liability
to intentional torts, excluding negligence as a matter of law.
“Speaking very generally, tort law
provides a remedy for construction defects that cause property damage or
personal injury.” (Aas v. Superior Court (2000) 24 Cal.4th 627, 635.) “But
the difference between price paid and value received, and deviations from
standards of quality that have not resulted in property damage or personal
injury, are primarily the domain of contract and warranty law or the law of
fraud, rather than of negligence.” (Id. at p. 636.)
Here, Core alleges that “there have
been significant design and construction defects, incomplete work, property
damage and other losses” without any further clarification. The mere allegation
of the words “property damage” without stating what damage actually occurred is
conclusory. Core need not plead evidentiary facts showing property damage, but
it must still plead the ultimate fact of the damage that occurred.
Further, Core pleads the exact same
amount in damages for negligence that it seeks in its breach of contract
claims, creating an appearance that Core is improperly seeking economic
damages.
The Court therefore sustains the
demurer with leave to amend.
“Constructive fraud is a unique species of fraud applicable
only to a fiduciary or confidential relationship.” (Prakashpalan v.
Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1131 [citation
and quotation marks omitted].) “Constructive fraud arises on a breach of duty
by one in a confidential or fiduciary relationship to another which induces
justifiable reliance by the latter to his prejudice.” (Ibid. [citation
and quotation marks omitted].) “Constructive fraud exists in cases in which
conduct, although not actually fraudulent, ought to be so treated—that is, in
which such conduct is a constructive or quasi fraud, having all the actual
consequences and all the legal effects of actual fraud.” (Ibid.
[citation and quotation marks omitted].)
The elements of a constructive fraud cause of action are (1)
a fiduciary duty or confidential relationship, (2) nondisclosure (breach of
fiduciary duty); (3) intent to deceive, and (4) reliance resulting in injury. (Younan
v. Equifax Inc. (1980) 111 Cal.App.3d 498, 516, fn. 14.)
Core still relies on its allegations that the “design/build”
relationship between the parties establishes a fiduciary duty. As discussed
under the breach of fiduciary duty claim, Core has not adequately pled the
existence of a fiduciary relationship.
The Court has already permitted amendment to this claim
once, and Core has failed to allege facts that would remedy its defects. The
Court therefore sustains the demurrer to this claim without leave to amend.