Judge Katherine Chilton, Case 21STLC09114 2023-01-11 Tentative Ruling

MOVING PARTY: Plaintiff/Cross-Defendant Labor Commissioner, State of California

Plaintiff/Cross-Defendant Labor Commissioner’s Demurrer to the Cross-Complaint’s cause of action for declaratory relief is SUSTAINED with 20 days’ leave to amend.

On December 29, 2021, Plaintiff Labor Commissioner, State of California (“Plaintiff” or “Labor Commissioner”) filed an action against Defendants Benbaroukh, LLC (“Benbaroukh”), Elias Shokrian (“Shokrian”), and Edward Villegas aka Eduardo Villegas (“Villegas”), (collectively “Defendants”), for (1) foreclosure of mechanic’s lien, (2) unpaid regular wages, (3) overtime wages (Labor Code § 510), (4) liquidated damages (Labor Code § 1194.2), (5) waiting time penalties (Labor Code § 203), (6) unreimbursed business expenses and attorney’s fees (Labor Code § 2802), (7) itemized wage statements (Labor Code § 226), and late payment of wages (Labor Code § 210).

On September 22, 2022, Defendants Benbaroukh, LLC, and Shokrian, filed a joint Answer to the Complaint.

Defendant Benbaroukh also filed a Cross-Complaint for breach of contract against Cross-Defendants Fredy E. Donato Duarte (“Duarte”) and Oscar Antonio Beltran Pineda (“Pineda”) and for declaratory relief against Plaintiff/Cross-Defendant Labor Commissioner and Cross-Defendants Duarte and Pineda.

On October 24, 2022, Plaintiff/Cross-Defendant Labor Commissioner filed a Demurrer (“Demurrer”) to the Cross-Complaint.

On November 30, 2022, pursuant on Defendant/Cross-Complainant’s request to be heard, the Court did not adopt its tentative ruling. ((11-30-22 Minute Order.) The Court continued the hearing on the Demurrer to allow Defendant/Cross-Complainant an opportunity to file an opposition sixteen (16) days before the next scheduled hearing. (Ibid.)

On December 30, 2022, twelve (12) days before the hearing, Defendant/Cross-Complainant Benbaroukh filed an Opposition to the Demurrer (“Opposition”).

A demurrer is a pleading that may be used to test the legal sufficiency of the factual allegations in the complaint. (Code of Civ. Proc. § 430.10.) There are two types of demurrers – general demurrers and special demurrers. (See McKenney v. Purepac Pharmaceutical Co. (2008) 167 Cal.App.4th 72, 77.)

General demurrers can be used to attack pleadings for failure to state facts sufficient to constitute a cause of action or for lack of subject matter jurisdiction. (Code Civ. Proc. § 430.10(e); McKenney, 167 Cal.App.4th at 77.) Such demurrers can be used only to challenge defects that appear on the face of the pleading or from matters outside the pleading that are judicially noticeable; evidence or extrinsic matters are not considered. (Code of Civ. Proc. §§ 430.30, 430.70; Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) For the purpose of testing the sufficiency of the cause of action, the Court admits “all material facts properly pleaded” and “matters which may be judicially noticed,” but does not consider contentions, deductions, or conclusions of fact or law. [Citation].” (Blank, 39 Cal.3d at 318.) It gives these facts “a reasonable interpretation, reading it as a whole and its parts in their context.” (Ibid.). At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) "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.4th 1443, 1447.)

Special demurrers can be used to attack the pleadings on grounds that the pleading is uncertain, ambiguous, and unintelligible, or in a contract case, for failure to allege whether a contract is oral or written. (Code Civ. Proc., § 430.10(f).) However, special demurrers are not allowed in limited jurisdiction civil actions and any grounds for special demurrers must be raised as affirmative defenses in the answer. (Code Civ. Proc., § 92(c).)

Moreover, Code of Civil Procedure § 430.41 requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc., § 430.41(a).) The parties are to meet and confer at least five days before the date the responsive pleading is due. (Code Civ. Proc., § 430.41(a)(2).) Thereafter, the demurring party shall file and serve a declaration detailing their meet and confer efforts. (Code Civ. Proc., § 430.41(a)(3).)

On November 30, 2022, the Court found Labor Commissioner’s Counsel’s declaration sufficient to satisfy the meet and confer requirement. (11-30-22 Minute Order.)

The Cross-Complaint alleges that Benbaroukh, LLC, is a California limited liability company that does business in Los Angeles County, California, and Cross-Defendants Duarte and Pineda are independent contractors doing business in Los Angeles County, California. (Cross-Compl. ¶¶ 1-2.) Around August 2021, Cross-Complainant Benbaroukh, LLC, made an oral contract with Cross-Defendants Duarte and Pineda, “to perform, on an independent contractor basis, independent contract work at a project in Panorama City, California, as allegedly ‘skilled craftsmen’, for a fee (the ‘Agreement’).” (Ibid. at ¶ 4.)

Benbaroukh complied with the terms of the Agreement, “except to the extent that such performance was prevented or excused by the acts or omissions of each of the Cross-Defendants.” (Ibid. at ¶ 5.) However, Duarte and Pineda “breached the Agreement by failing to perform the work competently.” (Ibid. at ¶ 6.) As a result, Benbaroukh had to hire different individuals “to complete or correct the work” at a higher cost than Cross-Defendants had promised to charge for completing the work. (Ibid.) Benbaroukh suffered damages in excess of $5,000 “[a]s a direct, proximate and foreseeable result” of Cross-Defendants’ breach of the oral Agreement. (Ibid. at ¶ 7.)

The Cross-Complaint further alleges that “[a]n actual dispute and controversy has arisen between Cross-Complainant and Cross-Defendants” as Cross-Complainant alleges that Duarte and Pineda were independent contractors and did not earn the wages claimed while Cross-Defendants allege that they were employees, who are entitled to wages. (Ibid. at ¶ 9.) Since the instant case “involves a contractual dispute over the status, roles, and obligations of the parties to this Agreement or arrangement,” Cross-Complainant “seeks a Declaration of the parties’ rights and obligations under the Agreement or arrangement, as of the date of the filing of this Cross-Complaint.” (Ibid. at ¶ 10.)

Labor Commissioner demurs to Benbaroukh’s cause of action for declaratory relief for failure to state facts sufficient to constitute a cause of action because 1) it is not proper to determine the question of whether the Cross-Defendants were employees or independent contractors through declaratory relief, 2) the Cross-Complaint did not overcome the presumption that the Cross-Defendants were employees, and 3) the Cross-Complaint does not allege the contents of the oral contract. (Demurrer p. 3; Memorandum pp. 2-5.)

Counsel for Labor Commissioner adds that the Answer and Cross-Complaint have been served on Cross-Defendants Duarte and Pineda by service to the Labor Commissioner; however, the Labor Commissioner and its counsel do not represent the Cross-Defendants. (Memorandum p. 3, Fn. 1.)

For these reasons, Labor Commissioner seeks an order sustaining the Demurrer without leave to amend.

On November 30, 2022, pursuant on Defendant/Cross-Complainant’s request to be heard, the Court did not adopt its tentative ruling and continued the hearing to allow Defendant/Cross-Complainant an opportunity to file an opposition to the Demurrer sixteen (16) days before the next scheduled hearing. (11-30-22 Minute Order.)

On December 30, 2022, Defendant/Cross-Complainant Benbaroukh filed a late Opposition to the Demurrer (“Opposition”). However, the Court, in its discretion, considers Benbaroukh’s Opposition. (Cal. Rules of Court, rule 3.1300(d).)

In its Opposition, Benbaroukh argues that “declaratory relief is a proper method of resolving a contractual dispute” and cites to Code of Civil Procedure § 1060. (Oppos. p. 2.) It states that “a dispute has arisen, and the dispute is over whether there was a contract for services which created an employment or independent contractor status.” (Ibid. at pp. 2-3.) Benbaroukh also argues that according to Code of Civil Procedure § 86(a)(7), “this Court does not have Jurisdiction to consider this type of Declaratory Relief Action” and thus, it does not have jurisdiction to rule on the Demurrer. (Ibid. at p. 3.)

Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another…may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.

Thus, action for declaratory relief under § 1060 requires two things: “(1) a proper subject of declaratory relief and (2) an actual controversy involving justiciable questions relating to the rights or obligations of a party. [Citation.]” (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546; Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.) The requirement that an “actual controversy” exists “concerns the existence of present controversy relating to the legal rights and duties of the respective parties pursuant to contract (Code Civ. Proc. § 1060), statute, or order,” instead of a controversy that is “conjectural, anticipated to occur in the future, or an attempt to obtain an advisory opinion from the court.” (Brownfield, 208 Cal.App.3d at 410.) “One test of the right to institute proceedings for declaratory judgment is the necessity of present adjudication as a guide for plaintiff's future conduct in order to preserve his legal rights.” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners, LLC (2010) 191 Cal.App.4th 357, 364-365.) In Osseous, the Court notes that “when there is accrued cause of action for an actual breach of contract or other wrongful act,” the court may exercise its discretion under Code of Civil Procedure § 1061 to deny declaratory relief.” (Osseous, 191 Cal.App.4th at 366.) Code of Civil Procedure § 1061 states that “[t]he court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.” The Court in Osseous found that the demurrer was properly sustained because there were “no allegations of an ongoing contractual relationship” between the parties and “[t]he future impact of any declaratory relief on the parties’ behavior is speculative.” (Osseous, 191 Cal.App.4th at 376-77.)

Here, the Court finds that the allegations stated in the Cross-Complaint are not sufficient to show that declaratory relief is proper. The allegations do not show that an actual and present controversy exists relating to the rights and obligations of the parties and that declaratory relief would impact the future conduct of the parties. The Cross-Complainant merely states that an alleged breach of an oral agreement occurred in the past and seeks declaratory relief regarding the past conduct of the parties. As in Osseous, the Court has discretion under Code of Civil Procedure § 1061, to dismiss a cause of action for declaratory relief when the allegations do not demonstrate the existence of an actual and present controversy. The Court does not find that Defendant/Cross-Complainant’s citation to § 1060 is sufficient to show that both requirements for declaratory relief have been satisfied: that the instant contractual dispute is “(1) a proper subject of declaratory relief” and the existence of an “(2) an actual controversy involving justiciable questions relating to the rights or obligations of a party. [Citation.]” (Lee v. Silveira (2016) 6 Cal.App.5th 527, 546; Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.)

The Court also disagrees with Defendant/Cross-Defendant’s assessment that it does not have jurisdiction over the instant case pursuant to Code of Civil Procedure § 86(a)(7). Section 86(a)(7) states that limited civil cases include actions for declaratory relief brought through “a cross-compliant in an action or proceeding that is otherwise a limited civil case.” Given that here, declaratory relief is sought through the Cross-Complaint in a limited civil case, the Court has jurisdiction to rule on the instant Demurrer.

For these reasons, the Court sustains Plaintiff/Cross-Defendant Labor Commissioner’s Demurrer to the Cross-Complaint’s cause of action for declaratory relief.

When a demurrer is sustained, the Court determines whether there is a reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) When a plaintiff “has pleaded the general set of facts upon which his cause of action is based,” the court should give the plaintiff an opportunity to amend his complaint, since plaintiff should not “be deprived of his right to maintain his action on the ground that his pleadings were defective for lack of particulars.” (Reed v. Norman (1957) 152 Cal.App.2d 892, 900.) Generally, the court will allow leave to amend on at least the first try, unless there is absolutely no possibility of overcoming the issue. (See Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227 ("Denial of leave to amend constitutes an abuse of discretion unless the complaint shows on its face it is incapable of amendment. [Citation.] Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.").)

Here, Cross-Complainant has not had an opportunity to amend the Cross-Complaint and cure any deficiencies in the pleadings. The Court finds that there is a reasonable possibility that an amendment may cure the defect in the pleadings. Therefore, Plaintiff/Cross-Defendant’s Demurrer is SUSTAINED with 20 days’ leave to amend.

Plaintiff/Cross-Defendant Labor Commissioner’s Demurrer to the Cross-Complaint’s cause of action for declaratory relief is SUSTAINED with 20 days’ leave to amend.

[1] Plaintiff/Cross-Defendant has not served all Defendants and Cross-Defendants in the case. It has only served Defendant/Cross-Complainant Benbaroukh, LLC.