Judge Lisa K. Sepe-Wiesenfeld, Case Number: 23SMCV04782, Date: 2024-10-08 Tentative Ruling

Judge: Lisa K. Sepe-Wiesenfeld, Case: 23SMCV04782, Date: 2024-10-08 Tentative Ruling

Defendants William Markus Egerman and Lee Egerman request judicial notice of (1) a deed of trust, (2) a permit and application for building permit and certificate of occupancy, (3) a grant deed, (4) a printout from the State Bar of California website, (5) a business tax certificate for Egerman Law Group, LLC, (6) a certificate of occupancy, and (7) a recorded notice of completion. The request is GRANTED pursuant to Evidence Code section 452, subdivisions (c) and (h).

Defendant Lynn Egerman requests judicial notice of (1) a permit and application for building permit and certificate of occupancy, (2) a certificate of occupancy, (3) a recorded notice of completion, (4) a deed of trust, (5) a printout from the State Bar of California website, (6) business tax certificates for Egerman Law Group, LLC, and (7) a grant deed. The request is GRANTED pursuant to Evidence Code section 452, subdivisions (c) and (h).

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967), but the Court does not “assume the truth of contentions, deductions, or conclusions of fact or law” (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125).

Further, the court may, upon motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436, subd. (a).) The court may also strike 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. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike are that the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. (Code Civ. Proc., § 436.) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Code Civ. Proc., § 437.)

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 [“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”]; Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768 [“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.”].) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Defendants William Markus Egerman and Lee Egerman and Defendant Lynn Egerman (collectively “Defendants”) demur to the first cause of action for foreclosure of mechanic’s lien because the mechanic’s lien is invalid. Defendants argue that the lien is void due to lack of preliminary notice to the construction lender and lack of proper service on the owners, and it was recorded prematurely.

First, Civil Code section 8200, subdivision (a), requires that prior to recording a mechanic’s lien, the claimant must provide preliminary notice to the owner and the construction lender, including when the claimant has a direct contractual relationship with the owner. (See Civ. Code, § 8200, subd. (e)(2).) The construction lender, Farmers and Merchants Bank, recorded a construction deed of trust on September 27, 2019 (see Req. for Judicial Notice, Ex. 1), but there are no allegations that preliminary notice was provided to the construction lender, which is a necessary prerequisite to the validity of a lien claim. (Civ. Code, § 8200, subd. (c).) Second, the proof of service of the mechanic’s lien, attached to the complaint as Exhibit 3, shows that the mechanic’s lien was served on July 6, 2023 on Mark Egerman, and it is stated that the address is the owner’s residence, place of business, or address, but the documents attached to the complaint and subject to judicial notice identify Mark Egerman and the other owners as having a different address. (Compl., Exs. 1, 2; Req. for Judicial Notice, Exs. 2-5.) The failure to properly serve the mechanic’s lien makes it unenforceable. (Civ. Code, § 8416, subd. (c).) Third, the mechanic’s lien may have been recorded prior to completion of the contract in violation of Civil Code section 8412, as the lien was recorded on July 6, 2023, the complaint does not identify a completion date, and the notice of completion indicates a recording date of February 2, 2024. (Compl., Ex. 2; Req. for Judicial Notice, Exs. 6-7.)

“The elements of fraud,” including a cause of action for fraudulent inducement, “are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) “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.)

In the second and third causes of action, Plaintiff alleges that Defendants William Markus Egerman and Lee Egerman made representations and promises to Plaintiff regarding the project, but the statements were false. (Compl. ¶¶ 54-59, 61-67.) Plaintiff provides no specific statements made by either defendant, the means by which the statements were communicated, when they were communicated, or to whom they were communicated. It follows that the claims do not rise to the required level of specificity. Insofar as Defendants demur to these claims as being barred by the economic loss rule, the Court is not so convinced. Under the economic loss rule in construction defect cases, a party may not recover for “purely economic losses, i.e., those not accompanied by either property damage or physical injuries.” (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1210.) This action is one for failure to properly pay under a construction agreement; it is not one for construction defect, such that it is not clear that these claims are barred by the economic loss doctrine. The Court declines to consider whether the representations related to opinions and future events, or whether justifiable reliance has been alleged, because Plaintiff has not sufficiently alleged the statements. However, for lack of specificity, Defendants’ demurrer to the second and third causes of action is SUSTAINED with thirty (30) days leave to amend.

“A breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself and it has been held that bad faith implies unfair dealing rather than mistaken judgment.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1394.) “If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated . . . [T]he only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.” (Id. at pp. 1394-1395.) To recover in tort for breach of the implied covenant, the defendant must “have acted unreasonably or without proper cause.” (Id. at p. 1395, citations and italics omitted.)

In the sixth cause of action, Plaintiff alleges that it entered into the agreement and performed under the agreement, but Defendant William Markus Egerman prevented Plaintiff from receiving the benefits under the agreement. (Compl. ¶¶ 80-82.) This complaint is duplicative of Plaintiff’s breach of contract claim and alleges nothing new or different that would justify a tort recovery, i.e., there are no specific allegations that Defendant William Markus Egerman acted unreasonably or without proper cause. Accordingly, Defendant’s demurrer to the sixth cause of action is SUSTAINED without leave to amend.

“Quantum meruit refers to the well-established principle that the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered. To recover in quantum meruit, a party need not prove the existence of a contract, but it must show the circumstances were such that the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made.” (Chodos v. Borman (2014) 227 Cal.App.4th 76, 96, citations and quotation marks omitted.) “[I]n order to recover under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for such services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 248.)

Defendant Lynn Egerman argues that this claim fails because there is no allegation that she requested Plaintiff to perform work on the property, and there is an express contract that governed the actions of the parties. First, whether a contract exists is inapposite for demurrer because Plaintiff can plead an alternative claim of quantum meruit. As to whether it is alleged that Defendant Lynn Egerman requested Plaintiff to perform work on the property, Plaintiff alleges that it performed work for Defendant Lynn Egerman’s benefit and pursuant to a request by Defendant Lynn Egerman. Whether an express or implied request for work was actually made is a question of fact. Thus, Defendant’s demurrer to the seventh cause of action is OVERRULED.

As to paragraphs 72 and 111 and the prayers for punitive damages, punitive damages may be recovered upon a proper showing of malice, fraud, or oppression. (Civ. Code, § 3294, subd. (a).) “Malice” is defined as conduct intended to cause injury to a person or despicable conduct carried on with a willful and conscious disregard for the rights or safety of others. (Turman v. Turning Point of Cent. Cal., Inc. (2010) 191 Cal.App.4th 53, 63.) “Oppression” means despicable conduct subjecting a person to cruel and unjust hardship, in conscious disregard of the person’s rights. (Ibid.) “Fraud” is an intentional misrepresentation, deceit, or concealment of a material fact known by defendant, with intent to deprive a person of property, rights or otherwise cause injury. (Ibid.) Conclusory allegations, devoid of any factual assertions, are insufficient to support a conclusion that parties acted with oppression, fraud, or malice. (Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1042.)

The statements seeking punitive damages are conclusory, i.e., a statement that conduct constitutes oppression, fraud, and/or malice is insufficient to warrant punitive damages. Plaintiff must amend the allegations, claims, and prayers for punitive damages to specifically allege a basis for punitive damages. Accordingly, Defendants’ motion to strike is GRANTED as to paragraphs 72 and 111 and the prayers for punitive damages and otherwise DENIED as MOOT.