Judge Linda S. Marks, Case 2022-01241401 2022-10-24 Tentative Ruling

Judge: Linda S. Marks, Case: 2022-01241401, Date: 2022-10-24 Tentative Ruling

1. Demurrer to Amended Complaint filed by Gard Acoustic, Inc. on 5/3/22
2. Case Management Conference

Request for Judicial Notice (RJN) is denied.

1st cause of action (c/a) for Breach of Contract [Breach of Implied Covenant of Good Faith and Fair Dealing]

Here, at FAC¶5, Plaintiff pleads that on 12/16/2019 it entered into a written contract with Defendant GARD wherein GARD agreed to supply labor, materials and equipment for the construction and completion of “Acoustic Ceiling” and related work for what was then called the 24 Hour Fitness project located at 6140 Laurel Canyon Blvd, Ste 170, North Hollywood for the sum of $91,850.00. Plaintiff was the general contractor for the project and Defendant Gard was one of many subcontractors. Gard commenced its work. FAC¶6. However, soon thereafter COVID hit, resulting in the closing of gyms. 24 Hour Fitness filed for Bankruptcy (BK) and work on the project ceased. Id. 5/12/2020, GARD recorded a mechanic’s lien contending it completed $46,429.00 of its work. Id¶7. Thereafter, the owner of the property entered into an agreement with Cal Select to pay Cal Select and its subcontractors for the work completed prior to the BK w/ the further agreement that Cal Select would then sign a new contract with the Owner to complete the project. FAC¶8. As part of the agreement GARD represented that they were owed $22,500.00. The Owner paid GARD $22,500.00 for work completed prior to the BK. Id.

Plaintiff has since determined GARD’s representation for work accomplished prior to the BK was not accurate and in fact had a value of $2,000.00. Id¶9.

Plaintiff alleges, “By demanding $22,500.00 for work prior to the 24 hour Fitness bankruptcy, GARD has breached the implied covenant of good faith and fair dealing.” Id¶10. Plaintiff alleges GARD refuses to return the $22,500 and that it has been damaged in the amount of $20,462.50. Id.

All in all, it appears that Defendant Gard made a couple of representations that it was owed $46,429.00 and/or $22,500 for work it performed pre-BK, when it had only performed $2,000 worth of work.

However, it is unclear if these representations constitute a breach of contract. What term of the subcontract has been breached? What contact is at issue? The original subcontract, or the subsequent agreement between Cal Select and the Owner? This is unclear. Furthermore, how is Cal Select damaged in the amount of $20K when it pleads that it was the Owner who actually paid GARD? Thus, the first c/a fails for uncertainty

Tentative Ruling: Demurrer to the 1st c/a for Breach of Contract [Breach of Implied Covenant of Good Faith and Fair Dealing] is SUSTAINED with 20 days leave to amend.

2nd c/a for Breach of Contract/ Estoppel on Bid

As to this c/a Defendant cites to Diede Construction, Inc. v. Monterey Mechanical Co. (2004) 125 Cal.App.4th 380, 385–386, which provides some explanation as to the nature of the cause of action: A general contractor may recover damages incurred as a result of its reasonable reliance on a subcontractors mistaken bid under the theory of promissory estoppel. “A promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise. [Citation.] This principle is applicable to a proposed subcontractor (promisor) who makes a bid (and with it an implied subsidiary promise to keep the bid open for a reasonable time after the awarding of the general contract) to a general contractor (promisee) who in turn bids on a construction contract with a third person in reliance upon the subcontractors bid (and subsidiary promise) and is the successful bidder.” (Saliba–Kringlen Corp. v. Allen Engineering Co. (1971) 15 Cal.App.3d 95, 100, 92 Cal.Rptr. 799 (Saliba–Kringlen ), citing *386 Drennan v. Star Paving Co. (1958) 51 Cal.2d 409, 333 P.2d 757 (Drennan ).) “As between the subcontractor who made the bid and the general contractor who reasonably relied on it, the loss resulting from the mistake should fall on the party who caused it.” (Drennan, supra, 51 Cal.2d at p. 416, 333 P.2d 757.) (Diede Construction, Inc. v. Monterey Mechanical Co. (2004) 125 Cal.App.4th 380, 385–386.)

As to this c/a, Plaintiff pleads that as part of the agreement with the Owner to enter into a new contract to complete the project, Plaintiff sought a bid from GARD. FAC¶13. On 8/30/2021 GARD submitted a bid at the price of $108,895.00 for its scope of work. Id¶14. In reliance on this number, Plaintiff entered into a new contract with the Owner. Id. On 10/26/2021, Plaintiff submitted a written contract to GARD. “However, with GARD having received the $22,500.00 they demanded for work on the First Contract, GARD refused to honor its Bid for the Replacement Contract.” FAC¶15. Plaintiff then had to find a replacement contractor at a price of $29,505.00 greater than the GARD Bid. Id¶16.

Although Defendant’s arguments directed to this c/a rely heavily on facts outside the four corners of the FAC (and impermissible RJN), the c/a is confusing.

From the authority cited by the moving party, the estoppel c/a in general appears to be about a mistaken bid and loss resulting from the mistake. However, it is unclear what part of GARD’s refusing to honor the $108,895.00 bid price was a mistake if GARD refused to honor the price due to having received $22,500.00 from the Owner under the scope of work it had already performed.

This c/a is unclear as to what the loss is, whether the loss resulted from a mistake in the bid process or something else and who caused the mistake.

Tentative Ruling: The Demurrer as to the 2^nd c/a for Breach of Contract/Estoppel on Bid is SUSTAINED, with 20 days leave to amend.

3rd c/a for Negligent Misrepresentation

The elements of negligent misrepresentation are “(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.” (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243, 70 Cal.Rptr.3d 199.) While there is some conflict in the case law discussing the precise degree of particularity required in the pleading of a claim for negligent misrepresentation, there is a consensus that the causal elements, particularly the allegations of reliance, must be specifically pleaded. (E.g., Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184, 132 Cal.Rptr.2d 490, 65 P.3d 1255; Cadlo v. Owens–Illinois, Inc. (2004) 125 Cal.App.4th 513, 519, 23 Cal.Rptr.3d 1.) (National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50 .)

Here, Plaintiff attempts to turn the 2nd c/a for estoppel into a fraud cause of action w/o the required specificity; and given the aspects of the mistaken bid and resulting loss are entirely unclear.

Tentative Ruling: the demurrer is to the 3rd c/a for Negligent Misrepresentation is SUSTAINED.

4th c/a for Common Counts

“To prevail on a common count for money had and received, the plaintiff must prove that the defendant is indebted to the plaintiff for money the defendant received for the use and benefit of the plaintiff.” (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 230.)

Here, Plaintiff alleges that Defendant received money that was intended for the benefit of it. It appears Plaintiff is referring to the money GARD received from the Owner of the project, but which Plaintiff contends GARD should only have kept $2K. This is sufficient to put Defendant on notice of the claim against it.

Tentative Ruling: The Demurrer to the 4th cause of action for Common Counts is OVERRULED..

MP to give notice. [Counsel are reminded to meet and confer pursuant to CCP§430.41 prior to filing an amended pleading or motion attacking any subsequent pleading]