Judge: Katherine Chilton, Case: 22STLC05450, Date: 2022-11-07 Tentative Ruling

Case Number: 22STLC05450     Hearing Date: November 7, 2022    Dept: 25

PROCEEDINGS:      DEMURRER WITH MOTION TO STRIKE

MOVING PARTY:   Defendants David S. and Lori N. Peterson

RESP. PARTY:         Plaintiff American Contractors Indemnity Company

DEMURRER WITH MOTION TO STRIKE

(CCP §§ 430.10, 435 et seq.)

TENTATIVE RULING:

Defendants Petersons’ DEMURRER to the Complaint’s breach of contract cause of action is OVERRULED.  Defendants are ordered to file an Answer within ten (10) days’ notice of the Court’s Order.

Defendants Petersons’ MOTION TO STRIKE is DENIED.

SERVICE: 

[ X ] Proof of Service Timely Filed (CRC, rule 3.1300)                 OK

[ X ] Correct Address (CCP §§ 1013, 1013a)                                     OK

[ X ] 16/21 Court Days Lapsed (CCP §§ 12c, 1005(b))                     OK

OPPOSITION:          Filed on October 24, 2022.                                    [   ] Late                      [   ] None

REPLY:                     Filed on October 31, 2022.                                    [   ] Late                      [   ] None

ANALYSIS:

I.                Background

On August 17, 2022, Plaintiff American Contractors Indemnity Company, a California Corporation (“Plaintiff” or “ACIC”) filed an action against David S. Peterson (“David”) and Lori N. Peterson (“Lori”) (collectively “Petersons” or “Defendants”), and Ryan Beck (“Beck”) for breach of contract.  The Complaint is based on two Bond Application/Indemnity Agreements between Plaintiff and Petersons (“Agreement 1”) and Plaintiff and Beck (“Agreement 2”).  (Ibid. at ¶ 3.)

On September 30, 2022, the Petersons filed a Demurrer (“Demurrer”) and Motion to Strike (“Motion to Strike”) to the Complaint.  On October 24, 2022, Plaintiff ACIC filed an Opposition to the Demurrer (“Opposition re: Demurrer”) and an Opposition to the Motion to Strike (“Opposition re: MTS”).  On October 31, 2022, the Petersons filed Replies to both Oppositions.

On October 26, 2022, pursuant to Plaintiff’s request, the Court entered default against Defendant Beck.  (10-26-22 Request for Entry of Default.).

II.              Legal Standard

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).)

III.            Discussion

A.    Meet and Confer Requirement

On September 30, 2022, defense counsel, Nicholas Stahl, filed a declaration demonstrating his attempts to meet and confer with Plaintiff’s counsel regarding the Demurrer and Motion to Strike.  (Stahl Decl.)  On September 23, 2022, defense counsel provided Plaintiff’s counsel with a meet and confer letter outlining the deficiencies in the Complaint.  (Stahl Decl. ¶ 4, Ex. A.)  On the same day, Plaintiff’s counsel responded in an email addressing some of the issues and informed defense counsel that if the issues were not resolved, Defendants Petersons should file the demurrer.  (Ibid. at ¶ 5, Ex. B.)  On September 28, 2022, attorneys for Plaintiff and Defendants exchanged additional emails.  (Ibid. at ¶¶ 6-7, Ex. B.)  Defense counsel states that Plaintiff was unwilling to cure the deficiencies in the Complaint, so Defendants filed the instant Demurrer and Motion to Strike.  (Ibid. at ¶ 8.)

            Plaintiff has not opposed the Demurrer and Motion to Strike on the meet and confer requirement.

The Court finds defense counsel’s declaration and evidence of email communications sufficient to satisfy the meet and confer requirement.

B.    Cause of Action – Breach of Contract

a.     Plaintiff ACIC’s Allegations

Plaintiff American Contractors Indemnity Company (“ACIC”) is a California corporation and surety company.  (Compl. ¶ 1.)  On or about November 13, 2018, Defendants David S. and Lori N. Peterson “executed a Bond Application/Indemnity Agreement (“Agreement 1”) in favor of ACIC.”  (Ibid. ¶¶ 3-4, Ex. A.)  “In consideration of the Defendants’ execution of Agreement 1, and in reliance on the Defendants’ promises to save ACIC harmless from any and all loss, ACIC provided a BMC-84 Freight Broker Bond, No. 1001127216 (“Bond”), which named ASAP EASY SHIPPING LLC as Principal, and the Federal Motor Carrier Safety Administration as obligee.”  (Ibid. at ¶ 5.)  Plaintiff ACIC performed all of its obligations under Agreement 1 and made demands on Defendants for reimbursement and indemnification of “all claims, losses, and expenses incurred.”  (Ibid. at ¶ 7.)  Defendants breached Agreement 1 because they failed and refused to take appropriate actions to resolve the claims made against the Bond and hold ACIC harmless, as agreed, and also failed and refused to reimburse and indemnity ACIC for all payments and claims.  (Ibid. at ¶ 8.)  Defendants’ breach directly and proximately caused ACIC to incur damages in the amount of $15,140.00, plus interest and attorney’s fees and costs.  (Ibid. at ¶¶ 6, 9.)

b.     Defendants Petersons’ Demurrer to the Complaint

Defendants demur to ACIC’s Complaint for failure to state facts sufficient to constitute a cause of action for breach of contract against Defendants and for “a cause of action that are stated ambiguously and unintelligibly.”  (Demurrer p. 2.)  Defendants argue that the allegations in the Complaint simply state the amount of damages but do not show how the damages were calculated or how Defendants’ actions were the cause of these damages.  (Ibid. at p. 4.)  Since the “damage amount plead by Plaintiff lacks specificity and (pursuant to California Civil Code § 3301) is not clearly ascertainable in both their nature and origin, the cause of action for breach of contract fails as plead.”  (Ibid.)

c.      Plaintiff’s Opposition to Demurrer

In its Opposition to the Demurrer, Plaintiff argues that “ACIC has properly alleged the necessary elements for its cause of action against Defendants PETERSONS for breach of contract.”  (Oppos. re: Demurrer p. 3.)  Plaintiff alleges that “Defendants PETERSONS personally agreed to ‘save ACIC harmless from any and all loss’” and has attached the Indemnity Agreement signed by the Defendants.  (Ibid., citing to Compl. ¶¶ 3, 5.)  ACIC performed its obligations by issuing the Bond, as agreed, on behalf of Defendants, and paying the claim that was made against the Bond.  (Ibid., citing Compl. ¶¶ 5-6.)  Defendants failed to perform their obligations because they failed and refused to reimburse and indemnity Plaintiff for all claims and payments made.  (Ibid. at pp. 3-4, citing to Compl. ¶¶ 7-8.)  Plaintiff argues that the complaint must state the amount of money or damages demanded; however, the pleading does not have to state how damages have been calculated.  (Ibid. at p. 4.)  Here, ACIC has stated the amount of money damages requested as $15,140.00 for claims paid, plus interest, and attorney’s fees and costs.  (Ibid.; citing to Compl. ¶¶ 6-9.)

Plaintiff adds that “none of these deficiencies are fatal and instead can be remedied by an amendment” if the Court sustains the Demurrer.  (Ibid. at pp. 4-5.)

d.     Defendants’ Reply to Opposition to Demurrer

In their Reply to the Opposition, Defendants reiterate that the Complaint fails to plead damages with the required specificity.  (Reply re: Demurrer p. 2.)  Defendants state that the case cited by Plaintiff, Hartzell v. Myall (1953) 115 Cal.App.2d 670, for the contention that the complaint does not have to state the manner by which damages have been calculated, involves an action for fraud and deceit, not a breach of contract.  (Ibid.)  The Court in Hartzell specifically states that its findings do not apply to a breach of contract action and is not applicable to this action.  (Hartzell, 115 Cal.App.2d at 676.)  Defendants reiterate that Civil Code § 3301 requires for damages in a breach of contract action to be “clearly ascertainable in both their nature and origin.”  Here, there are no allegations regarding how the damages were calculated and caused by Defendants’ actions.  (Ibid. at p. 3.)

e.      Analysis

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff's performance of the contract or excuse for nonperformance, (3) the defendant's breach, and (4) the resulting damage to the plaintiff.  (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)  “A written contract may be pleaded either by its terms – set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference – or by its legal effect. [Citations.]  In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’ [Citation.]”  (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

            The Court notes that special demurrers on the ground that allegations for a cause of action are ambiguous and unintelligible are not permitted in limited jurisdiction civil cases.  Thus, the Court will analyze the general demurrer on the ground that the Complaint fails to state facts sufficient to constitute a cause of action for breach of contract.

There does not seem to be a dispute regarding Plaintiff’s allegations regarding the existence of an agreement between Plaintiff and Defendants.  Plaintiff has included the Bond Application/Indemnity Agreement signed by Defendants as Exhibit A to the Complaint.  It also appears that the allegations regarding Plaintiff’s performance of its obligations under the Agreement 1 are not in dispute.  Defendants’ demurrer is based on the argument that Plaintiff has not alleged sufficient facts to show the nature and origin of the damages and how Defendants’ actions caused Plaintiff to incur these damages.

“For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom.”  (Civil Code § 3300; Erlich v. Menezes (1999) 21 Cal.4th 543, 550.)  These damages must be “clearly ascertainable in both their nature and origin.”  (Civil Code § 3301;

Erlich, 21 Cal.4th at 550.)  “Contract damages are generally limited to those within the contemplation of the parties when the contract was entered into or at least reasonably foreseeable by them at that time; consequential damages beyond the expectation of the parties are not recoverable. This limitation on available damages serves to encourage contractual relations and commercial activity by enabling parties to estimate in advance the financial risks of their enterprise.”  (Erlich, 21 Cal.4th at 550, citing to Applied Equipment Corp. v. Litton Saudi Arabia Ltd (1994) 7 Cal.4th 503, 515.). Generally, Courts have found that “[a] general allegation of damages with a prayer for a stated amount is sufficient to authorize the recovery of all damages that necessarily result from the act complained of."  (Olds v. Stoller, Inc. v. Seifert (1927) 81 Cal.App. 423, 427; Ruiz v. Bank of America Nat'l Trust & Sav. Assos. (1955) 135 Cal.App.2d Supp. 860, 863.)  Finally, “the fact that the amount of damage may not be susceptible to exact proof or may be uncertain, contingent or difficult of ascertainment does not bar recovery.”  (Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 486-87.)

            Here, Plaintiff has sufficiently pleaded the elements for a breach of contract cause of action: Agreement 1 was signed, Plaintiff performed its obligations by issuing the Bond and paying for claims against the Bond, and Defendants failed to reimburse and indemnify Plaintiff for these payments in the amount of $15,140.00.  (Compl. ¶ 6, 9.)  The Court finds that the nature and origin of these damages can be clearly ascertained from the allegations.

Accordingly, Defendants’ Demurrer to the Complaint’s breach of contract cause of action is OVERRULED.

C.    Motion to Strike

a.     Defendants’ Motion to Strike

In their Motion to Strike, Defendants move to strike the following portions from the Complaint:

1. Request for "attorney's fees and costs" (Paragraph 9, line 25, Page 2)

2. Request for "attorney's fees and costs of suit" (Paragraph 1, Line 5, Page 4)

3. Request for "costs of suit herein incurred" (Line 11, Page 4)

4. Request for "reasonable attorney's fees" (Line 12, Page 4)

(MTS p. 2.)  Defendants argue that “Plaintiffs provide no facts or references to any express statute or contractual provision which would allow them to recover” attorney’s fees and costs as requested in the Complaint.  (MTS p. 3.)

b.     Plaintiff’s Opposition to Motion to Strike

In its Opposition to the Motion to Strike, Plaintiff states that the recovery of reasonable attorney’s fees is permitted when provided for in the contract.  (Oppos. re: MTS, p. 2, citing to Code of Civ. Proc. § 1717.)  Here, Agreement 1, attached to the Complaint, provides for attorney’s fees and costs as Defendants have agreed to “indemnity Surety against all losses, liabilities, costs, damages, attorney’s fees and consultants’ fees…”  (Ibid. at pp. 2-3.)  Attorney’s fees may also be awarded to the prevailing party.  (Ibid. at p. 2, citing to Code of Civ. Proc. § 1032.)

Plaintiff adds that “none of these deficiencies are fatal and instead can be remedied by an amendment” if the Court sustains the Demurrer.  (Ibid. at p. 3.)

c.      Defendants’ Reply to Opposition to Motion to Strike

In their Reply to the Demurrer, Defendants state that “Plaintiff makes no specific reference to any specific language within the specific allegations/paragraphs in their complaint that allows the recovery of attorney fees.”  (Reply re: MTS, p. 2.)  They argue that there are “no facts or reference within their complaint to express statute or contractual provision which would allow them to recover” attorney’s fees and costs.  (Ibid.)

d.     Analysis

According to Code of Civil Procedure § 436:

The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper:

(a) Strikeout any irrelevant, false, or improper matter inserted in any pleading.

(b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.

However, motions to strike in limited jurisdiction courts may only challenge pleadings on the basis that “the damages or relief sought are not supported by the allegations of the complaint.” (Code Civ. Proc. § 92(d).)  The Code of Civil Procedure also authorizes the Court to act on its own initiative to strike matters, empowering the Court to enter orders striking matter “at any time in its discretion, and upon terms it deems proper.”  (Code Civ. Proc. § 436.)  Furthermore, § 435.5 requires that “[b]efore filing a motion to strike pursuant to this chapter, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining whether an agreement can be reached that resolves the objections to be raised in the motion to strike.”  (Code Civ. Proc. § 435.5(a).)

As discussed above, Defendants have satisfied the meet and confer requirement through their Counsel’s declarations.

The Court finds that Plaintiff has presented facts sufficient to show that it is entitled to attorney’s fees in this action.  Parties cannot recover attorney’s fees unless expressly authorized by a statute or contract.  (Hom v. Petrou (2021) 67 Cal.App.5th 459, 464.)  Here, Plaintiff has attached a copy of the Bond Application/Indemnity Agreement which expressly authorizes recovery of attorney’s fees and other costs.  Although this language is not expressly stated in the allegations listed in the Complaint, the face of the complaint includes exhibits attached to the complaint.  (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) 

Accordingly, Defendants’ Motion to Strike portions of the Complaint requesting attorney’s fees and costs is DENIED.

IV.           Conclusion & Order

For the foregoing reasons,

Defendants Petersons’ DEMURRER to the Complaint’s breach of contract cause of action is OVERRULED.  Defendants are ordered to file an Answer within ten (10) days’ notice of the Court’s Order.

Defendants Petersons’ MOTION TO STRIKE is DENIED.

Moving party is ordered to give notice.