Judge Lee W. Tsao, Case 21NWCV00501 2023-03-02 Tentative Ruling

Judge: Lee W. Tsao, Case: 21NWCV00501, Date: 2023-03-02 Tentative Ruling

Case Number: 21NWCV00501 Hearing Date: March 2, 2023 Dept: C

GUTIERREZ v. NEKOLA

CASE NO.: 21NWCV00501

HEARING: 03/02/23

TENTATIVE ORDER

I. Plaintiff/Cross-Defendant JENNIFER GUTIERREZ’s Demurrer to Defendant/Cross-Complainant HANY NEKOLA’s Second Amended Cross-Complaint is OVERRULED in part and SUSTAINED without leave to amend.

II. Plaintiff/Cross-Defendant JENNIFER GUTIERREZ’s Motion to Strike Portions of Defendant/Cross-Complainant HANY NEKOLA’s Second Amended Cross-Complaint is DENIED.

Opposing Party to give Notice.

Plaintiff/Cross-Defendant JENIIFER GUTIERREZ’s Request for Judicial Notice is GRANTED. (Cal. Ev. Code §452.)

This is a contract action filed by Plaintiff JENNIFER GUTIERREZ (“Gutierrez”) against Defendant HANY NEKOLA (“Nekola”). Gutierrez employed Nekola to perform construction and improvement to her home in December 2020. Nekola represented that he possessed a general contractor’s license in another state, but there was no application to obtain a license in California. Nekola stated that he would conduct construction in accordance with city and zoning code requirements.

On September 6, 2022, Nekola filed the subject Second Amended Cross-Complaint (“SAXC”), alleging that Gutierrez had prior knowledge of the Code requirements and called themselves “owner builders” in prior projects and knew they were not required to have a contractor’s license. (SAXC ¶14.)

The 2AXC asserts the following causes of action: (1) Breach of Oral Contract; (2) Breach of Surety Agreement; (3) Common Counts – Open Book; (4) Fraud; (5) Failure to Pay Minimum Wages; (6) Failure to Pay Overtime Wages; (7) Failure to Provide Rest Periods; (8) Failure to Provide Meal Periods; (9) Willful Failure to Pay Wages; (10) Failure to Provide Itemized Wage Statements; and (11) Reasonable Value of Services – Quantum Meruit.

Gutierrez argues that every cause of action is defective because Nekola was not a licensed contractor; and because Nekola has failed to name indispensable parties. Further, Gutierrez generally demurs to each cause of action.

First through Fourth Causes of Action – B&P §7031(a)

B&P §7031(a) provides, “Except as provided in subdivision (e), no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action… for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that they were a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are individually licensed under this chapter but who fail to comply with Section 7029.” “[B]oth the person who provides construction services himself and one who does so ‘through others’ qualifies as a ‘contractor’…. The California courts have also long held that those who enter into construction contracts must be licensed, even when they themselves do not do the actual work under the contract.” (Currie v. Stolowitz (1959) 169 Cal.App.2d 810, 815-816; Hollywood TC. Co. v. Structural P.C. Bd. (1949) 95 Cal.App.2d 56, 58-59.)

Here, Nekola was unlicensed, but is seeking compensation for the work performed. The SAXC now alleges that Nekola performed construction management services. As pled, Nekola “is not a contractor, never represented himself as a contract and pursuant to exceptions carved in the law 1) assigned Plaintiff/Cross-Defendants in coordinating activities of various workers so they could complete assigned tasks in an organized and efficient manner, on time and under budget; 2) maintained records such as financial books and records for Plaintiff/Cross-Defendant’s project; 3) kept Cross-Defendants apprised of the status of the project; 4) remained on side as the ‘point person’ to respond to issues as they arose; and 5) acted as Cross-Defendant’s agent with respect to the various parties connected with Cross-Defendants’ remodel.” (SAXC ¶9.)

Gutierrez now argues that Plaintiff’s allegations are barred by the sham pleading doctrine wherein Nekola has omitted certain allegations showing that he acted as an unlicensed general contractor. The “sham pleading doctrine” provides that “[i]f a party files an amended complaint and attempts to avoid the defects of the original complaint by either omitting facts which made the previous complaint defective or by adding facts inconsistent with those of previous pleadings, the court may take judicial notice of prior pleadings and may disregard any inconsistent allegations.” (emphasis added.) (Colapinto v. County of Riverside (1991) 230 Cal.App.3d 147, 151-152.) Plaintiffs can only “avoid the effect of the sham pleading doctrine by alleging an explanation for the conflicts between the pleadings. [Citation.]. (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 426.) While the sham pleading rule “is a good rule to defeat abuses of the privilege to amend and to discourage sham and untruthful pleadings” … "[i]t is not a rule…which is intended to prevent honest complainants from correcting erroneous allegations…or to prevent correction of ambiguous facts.” (Avalon Painting Co. v. Alert Lumber Co. (1965) 234 Cal.App.2d 178, 185.)

The demurrer is not sustained under the sham pleading doctrine. In its’ July 13, 2022 Order, this Court expressly granted Nekola leave to amend his claims and allege additional facts to support Nekola’s allegations that he was performing construction managing services. This Court does not find the added facts to be inconsistent with the prior pleadings, and to the extent that some inconsistencies exist, the Court finds that Nekola has adequately explained the conflicts—Nekola discovered new facts after hiring new counsel. (See SAXC ¶3.) Nekola’s allegations are sufficient to withstand demurrer.

The demurrer to the first through fourth causes of action is OVERRULED.

Fifth through Eleventh Causes of Action

“Following an order sustaining a demurrer… with leave to amend, the plaintiff may amend his or her complaint only as authorized by the court’s order.” (Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1023.) The leave is construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes of action. (Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015; People ex. Rel. Dept. of Pub. Wks. v. Clausen (1967) 248 Cal. 2d 770, 785.).

Without leave of Court, Nekola added in the fifth through eleventh causes of action. These amendments go beyond the scope of the previous order granting leave to amend, and Nekola did not seek leave to amend prior to adding these new claims. The demurrer to the fifth, sixth, seventh, eighth, ninth, tenth, and eleventh causes of action is SUSTAINED without leave to amend.

Motion to Strike

The majority of the Motion to Strike duplicates the arguments raised in the Demurrer, and is DENIED for reasons stated above.

Moreover, the Court declines to strike Nekola’s factual allegations pertaining to the fraud claim. The Court cannot make factual determinations in response to a Motion to Strike. (See Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-967.) The Court must accept the factual allegations set forth in the Complaint as true at this stage in the litigation. The Motion to Strike is DENIED.