Judge: Margaret L. Oldendorf, Case: 22GDCV00432, Date: 2023-04-21 Tentative Ruling
Case Number: 22GDCV00432 Hearing Date: April 21, 2023 Dept: P
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
NORTHEAST DISTRICT
I. INTRODUCTION
The Blank Family Trust owns two small apartment buildings
in Glendale. They are referred to here as the Geneva Property and the Fischer
Property. In March 2021, it’s then-trustee Murray Blank entered into
construction contracts for repairs to both. The contracts attached to the
pleading provide for $175,890 in repairs to the Geneva Property and $196,600 to
the Fischer Property.
This action is being pursued by the Trust’s successor co-trustees.
The gist of the complaint is expressed in paragraph 11:
“Plaintiff paid Defendants over $400,000 (four hundred
thousand dollars) for work that was either never performed, never completed, or
if completed, not performed in a workmanlike manner. As a direct and proximate
result of the substandard performance, and failures to perform, Plaintiff has
incurred substantial monetary damages, all in an amount to be proven at the
time of trial in this action, but not less than $250,000.”
The pleading sets out the specifics of the alleged
construction defects and alleges the following causes of action: (1) breach of
contract; (2) breach of the implied covenant of good faith and fair dealing;
(3) negligence; (4) accounting; (5) intentional misrepresentation; (6) payment
on bond.
The first five causes of action are alleged against
Defendants Mid Construction, D&H Remodel, and David Hirsch. D&H Remodel
and Hirsch demur to the negligence and fraud causes of action and move to
strike punitive damages. For the reasons that follow the demurrer is sustained.
This order renders the motion to strike moot.
II. DEMURRER
A. Legal Standard
Code
Civ. Proc. §430.10(e) provides for a demurrer on the basis that a complaint
fails to state a cause of action. A demurrer admits, provisionally for purposes
of testing the pleading, all material facts properly pleaded. Tindell v. Murphy (2018) 22 Cal.App.5th
1239, 1247. A demurrer tests the legal sufficiency of a complaint. Donabedian v. Mercury Ins. Co. (2004)
116 Cal.App.4th 968, 994.
B. Demurrer to Negligence and Fraud Causes of Action
Is Sustained
This is not a situation in which identifying the elements
of a cause of action and searching the pleading to find those elements is needed.
The analysis on this demurrer is different. This is so because here, the duties
of the parties are defined by their contracts. When that is the case, breach of
some obligation other than a contractual obligation is needed to support
a negligence claim. And, wrongful breach of contract alone does not support a
fraud claim.
Cases speaking to this concept are plentiful. This is how
our Supreme Court explained it in Applied Equipment Corp. v. Litton Saudi
Arabia Ltd. (1994) 7 Cal.4th 503, 514-516 (bolding added, italics in
original):
“Contract and tort are different branches of law.
Contract law exists to enforce legally binding agreements between parties; tort
law is designed to vindicate social policy. (Citation.) We have described the
essential difference between contract and tort law as follows: ‘As Professor
Prosser has explained: “‘[Whereas] [c]ontract actions are created to protect
the interest in having promises performed,’” “‘[t]ort actions are created to
protect the interest in freedom from various kinds of harm. The duties of
conduct which give rise to them are imposed by law, and are based primarily on
social policy, and not necessarily based upon the will or intention of the
parties.....’ ” ’ (Citation.)
“Conduct amounting to a breach of contract becomes
tortious only when it also violates an independent duty arising from
principles of tort law. ‘The law imposes the obligation that “‘every person is
bound without contract to abstain from injuring the person or property of
another, or infringing upon any of his rights.’” (Sec. 1708, Civ.Code.) This
duty is independent of the contract.... “‘[A]n omission to perform a contract
obligation is never a tort, unless that omission is also an omission of a legal
duty.’ ” ’ (Citation.)
. . .
“Within the different spheres of contract and tort,
motivations for conduct are also treated differently. In an intentional tort
action, motives amounting to malice, oppression, or fraud may justify punitive
damages. (Civ. Code, § 3294.) But the law generally does not distinguish
between good and bad motives for breaching a contract. ‘[I]n traditional
contract law, the motive of the breaching party generally has no bearing
on the scope of damages that the injured party may recover for the breach of
the implied covenant [of good faith and fair dealing]; the remedies are limited
to contract damages.’ (Citation.)”
In Ginsberg
v. Gamson (2012) 205 Cal.App.4th 873, 903 the Second District Court of
Appeal put it this way:
“ ‘ “[C]ourts will generally enforce the breach of a
contractual promise through contract law, except when the actions that
constitute the breach violate a social policy that merits the imposition of
tort remedies.”’ [Citation.]”’ (Erlich v. Menezes (1999) 21 Cal.4th 543,
552, 87 Cal.Rptr.2d 886, 981 P.2d 978.)”
Plaintiffs do not address these authorities in their
opposition brief.
1. Negligence
In support of the argument that negligence is a proper
cause of action in a construction defect case, Plaintiffs cite a case in which
a homeowners’ association sued the contractor and a subcontractor hired by the
contractor via oral agreement. Stonegate Homeowners Assn. v. Staben
(2006) 144 Cal.App.4th 740. In other words, the plaintiff there lacked a
contractual agreement with either of the defendants and thus sued in
negligence. The same is not true here. The obligations that contractors have to
comply with the standard of care are not independent of their
contractual duties here, and thus do not give rise to a separate cause of
action.
2. Intentional Misrepresentation
In the 5th cause of action Plaintiffs allege
that from October 13-20, 2021, Defendants, through Hirsch, represented to
Murray Banks that the Trust needed to pay “$26,383.50 and $29,490.00 or the
work would have to stop at the Glendale Properties.” It is alleged that on
October 20, 2021, the Trust paid these amounts but that work never resumed. Plaintiffs
allege that these representations made by Hirsch were false when made (or made
recklessly) and that the Trust relied on the statements in making the payments.
The Trust alleges it was harmed as a result of these alleged false
representations. Complaint, ¶¶29-32.
Accepting these allegations as true and in the context of
the contractual relationship between the parties, fraud is not adequately
alleged. This is so because outside of the insurance context, bad faith breach does
not automatically give rise to tort damages. Defendants cite cases illuminating
this law. In Hunter v. Up-Right, Inc. (1993) 6 Cal.4th 1174, an employer
was alleged to have lied to an employee as part of a ruse to make him resign,
which the employee, in reliance on the lie, did. As the Supreme Court explained
there, the problem with allowing recovery for the fraud is that it is
indistinguishable from ordinary wrongful termination; the employer “used a
falsehood to do what it otherwise could have accomplished directly,” such that
the employee cannot be said to have reasonably relied to his detriment. Id.
at 1184.
Hunter was careful to point out that there could
be facts where a fraud might be alleged in this context: “We note, however,
that a misrepresentation not aimed at effecting termination of
employment, but instead designed to induce the employee to alter detrimentally
his or her position in some other respect, might form a basis for a valid fraud
claim even in the context of a wrongful termination.” Id. at 1185,
italics in original.
“Tort damages have been permitted in contract cases where
a breach of duty directly causes physical injury (Citation); for breach of the
covenant of good faith and fair dealing in insurance contracts (Citation); for
wrongful discharge in violation of fundamental public policy (Citation); or
where the contract was fraudulently induced. (Citation.) In each of these
cases, the duty that gives rise to tort liability is either completely
independent of the contract or arises from conduct which is both intentional
and intended to harm. (Citation.)” Erlich v. Menezes (1999) 21 Cal.4th
543, 551-552. “Focusing on intentional conduct gives substance to the
proposition that a breach of contract is tortious only when some independent
duty arising from tort law is violated. (Citation.) If every negligent breach
of a contract gives rise to tort damages the limitation would be meaningless,
as would the statutory distinction between tort and contract remedies.” Id.
at 554.
“As a general rule, California law does not authorize the
award of general or punitive damages for breach of a commercial contract.” Harris
v. Atlantic Richfield Co. (1993) 14 Cal.App.4th 70, 77.
Here, the parties to the contracts had certain
obligations: the Trust had to pay money and Defendants had to perform.
Requiring payment (or deceiving a party into complying with its contractual
obligation) and then not performing is simply a wrongful breach. There can be
no reasonable reliance in this situation.
Plaintiffs rely on Balfour, Guthrie, & Co. v.
Hansen (1964) 227 Cal.App.2d 173, a case they say allowed fraud claims
against a contractor who intentionally failed to build improvements according
to contract requirements. This case does not help Plaintiffs as there is no
such allegation here. Also, the case predates
Hunter, Erlich, and Harris by decades.
III. MOTION
TO STRIKE
In light of the ruling on demurrer,
the motion to strike is taken off calendar as moot.
IV. CONCLUSION
Defendants’
demurrer to the negligence and intentional misrepresentation causes of action
is sustained for the reasons stated in the moving papers and as set forth above.
Plaintiffs have failed to allege facts relating to a wrong that is independent of
the contract.
If Plaintiffs believe that such facts exist, leave to
amend will be granted.
Dated: _______________________________
MARGARET OLDENDORF
JUDGE
OF THE SUPERIOR COURT