Judge: Mark A. Young, Case: 22STCV02410, Date: 2023-11-29 Tentative Ruling

Case Number: 22STCV02410    Hearing Date: November 29, 2023    Dept: M

CASE NAME:           BMC West LLC v. Visionary Construction Mgmt. Part. Co., et al.

CASE NO.:                22STCV02410

MOTION:                  Demurrer to the First Amended Cross-Complaint

HEARING DATE:   11/29/2023

Legal Standard

            A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. (CCP §§ 430.30, 430.70.) 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.) A “demurrer does not, however, admit contentions, deductions or conclusions of fact or law alleged in the pleading, or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen (1964) 226 Cal.App.2d 725, 732, internal citations omitted.)

            A special demurrer for uncertainty is disfavored and will only be sustained where the pleading is so bad that defendant cannot reasonably respond—i.e., cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Ibid.)

            Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule 3.1322(b).) The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

            “Liberality in permitting amendment is the rule, if a fair opportunity to correct any defect has not been given.” (Angie M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of discretion for the court to deny leave to amend where there is any reasonable possibility that plaintiff can state a good cause of action. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to show in what manner plaintiff can amend the complaint, and how that amendment will change the legal effect of the pleading. (Id.)

Analysis

Defendant/ Cross-Defendant Horizon Mesa LLC demurs to the First Amended Cross Complaint (FACC) filed by Defendant/Cross-Complainant Visionary Construction Management Partnership Co. and Shahik Baghdasian. The FACC states four causes of action against Horizon for 1. Breach of Contract; 2. Implied Indemnity; 3. Contribution; and 4. Declaratory Relief.

First Cause of Action: Breach of Contract

The elements of a cause of action for breach of contract are as follows: (1) the existence of a contract; (2) a plaintiff's performance or excused non-performance; (3) a defendant's breach; and (4) resulting damage to a plaintiff. (Reichert v. General Ins. Co. (1968) 68 Cal.2d 822, 830.)"If an action is based on a breach of written contract, the terms must be set forth verbatim in the body of the complaint or a copy of the contract must be attached and incorporated by reference." (Id. at 459.) Alternatively, if the claim is based on a written contract then "a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

Regarding the breach of contract cause of action, the FACC alleges the following:

12. On or about April 19, 2021 Cross-Complainant and Cross-Defendants entered into a contract to complete construction services at the Property. Cross-Complainant agreed to, and did provide, labor, materials and services pursuant to that contract and Cross-Defendants agreed to pay for the same including payments for Cross-Complainants’ “[S]ubcontractors of Any Tier and agents as well as all costs and/or expenses of any kind.” The contract is attached hereto as Exhibit “1” and incorporated herein by reference.

13. Cross-Defendants have breached the contract by failing and refusing to pay for said labor and/or materials provided by Cross-Complainant pursuant to the contract.

14. As a direct and proximate result of the Cross-Defendants’ breach of the contract, Cross-Complainant has suffered damages in the sum of $152,764.54 (as claimed by Plaintiff in the First Amended Complaint), together with interest at the rate of ten percent (10%) per annum from the balance due date, until paid.

Each element of breach of contract is alleged above. The parties entered into a construction services contract, where Cross-Defendants agreed to pay for labor, materials and services, including payments for Cross-Complainants’ subcontractors and costs/expenses. Cross-Complainants performed the contract by providing such services. Cross-Defendants breached the agreement by failing to pay for said labor/materials. As a result, Cross-Complainant has suffered damages in the sum of $152,764.54.

Horizon argues that the alleged damages are Plaintiff's alleged damages in the Complaint, merely repackaged. Horizon argues that Cross-Complainants have failed to allege independent damages that they have suffered as a result of the alleged breach. Horizon points to no authority for their proffered “independent damages” rule.

Accordingly, the demurrer is OVERRULED as to this cause of action.

Second/Third Causes of Action: Implied Indemnity/Contribution

Cross-Defendant Horizon demurs to the second and third causes of action on the grounds that there is no joint obligation between Visionary and Horizon.

In general, indemnity refers to “the obligation resting on one party to make good a loss or damage another party has incurred.” (Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, 628.) Historically, the obligation of indemnity took three forms: (1) indemnity expressly provided for by contract (express indemnity); (2) indemnity implied from a contract not specifically mentioning indemnity (implied contractual indemnity); and (3) indemnity arising from the equities of particular circumstances (traditional equitable indemnity). (Ibid.; see PPG Industries, Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th 310, 318.) Although the foregoing categories of indemnity were once regarded as distinct, California courts now recognize only two basic types of indemnity: express indemnity and equitable indemnity. (Bay Development, Ltd. v. Superior Court (1990) 50 Cal.3d 1012, 1029–1030, fn. 10.) Though not extinguished, implied contractual indemnity is viewed as “a form of equitable indemnity.” (Id. at 1029; see E.L. White, Inc. v. City of Huntington Beach (1978) 21 Cal.3d 497, 506–507.) 

The elements of a cause of action for indemnity are: (1) a showing of fault on the part of the indemnitor; and (2) resulting damages to the indemnitee for which the indemnitor is contractually or equitably responsible. (Great Western Drywall, Inc. v. Interstate Fire & Gas Co. (2008) 161 Cal.App.4th 1033, 1041.) In order for the doctrine of equitable indemnity to apply, there must be some basis for tort liability against the proposed indemnitor, which generally is based on a duty owed to the underlying plaintiff; although vicarious liability, strict liability, and implied contractual indemnity between the indemnitor and the indemnitee can provide a basis for equitable indemnity. (BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848, 852 [equitable indemnity “applies only among defendants who are jointly and severally liable to the plaintiff.”].) Unless the prospective indemnitor and indemnitee are jointly and severally liable to the plaintiff there is no basis for indemnity. (Columbus Line Inc. v. Gray Line Sight-Seeing Companies Associated Inc. (1981) 120 Cal.App.2d 622, 628.)

Where "a co-obligor has not paid his respective share of the obligation, there exists an independent cause of action for equitable contribution under Civil Code section 1432." (Great Western Bank v. Kong (2001) 90 Cal.App.4th 28, 33.) Under equitable contribution principles a defendant who pays all of a judgment for which another defendant is jointly and severally liable may make a claim for equitable contribution. (Coca-Cola Bottling Company v. Lucky Stores, Inc. (1992) 11 Cal.App.4th 1372, 1378-1379.)

Cross-Complainant generally alleges the required elements as ultimate facts. The FACC alleges that if Cross-Complainants are held liable to Plaintiff, such liability will “be based on the primary or active negligence or fault of” or the “contribution” of Horizon, thus entitling Cross-Complainants to indemnification from Horizon. (FACC ¶¶ 18, 20.) Such issues of fact and equity are taken to be true on demurrer. Cross-Defendants argue that since the FAC shows that the credit application and the invoices are only between Visionary and Plaintiff, there is no joint obligation between Plaintiff and Defendant. However, this disregards the above allegations which show Horizon would be contractually or equitably responsible, or jointly and severally liable, for damages to Plaintiff. The Complaint’s allegation that the basis of the claims are credit applications and invoices only between Plaintiff and Cross-Complainants would not contradict the FACC’s allegations of responsibility.

Accordingly, the demurrer is OVERRULED as to these causes of action.

Fourth Cause of Action: Declaratory Relief

Horizon argues that the declaratory relief cause of action fails for the same reasons discussed infra. As discussed, the causes of action do not fail on their face. Accordingly, the demurrer is OVERRULED as to this cause of action.

Motion to Strike: Civil Code Section 8800

The FACC refers to Civil Code section 8800, alleging that the contract is governed by that code section, and requesting interest pursuant to that code section. Horizon contends that these references are improper, as the contract does not allegedly involve any progress payments.

Civil Code section 8800 provides:

(a) Except as otherwise agreed in writing by the owner and direct contractor, the owner shall pay the direct contractor, within 30 days after notice demanding payment pursuant to the contract is given, any progress payment due as to which there is no good faith dispute between them. The notice given shall comply with the requirements of Chapter 2 (commencing with Section 8100) of Title 1.

(b) If there is a good faith dispute between the owner and direct contractor as to a progress payment due, the owner may withhold from the progress payment an amount not in excess of 150 percent of the disputed amount.

(c) An owner that violates this section is liable to the direct contractor for a penalty of 2 percent per month on the amount wrongfully withheld, in place of any interest otherwise due. In an action for collection of the amount wrongfully withheld, the prevailing party is entitled to costs and a reasonable attorney's fee.

(d) This section does not supersede any requirement of Article 2 (commencing with Section 8810) relating to the withholding of a retention.

Indeed, this section only refers to payments and disputes of “progress payment[s].” The FACC does not make any reference to progress payments. Thus, the motion to strike is well taken. Further, Cross-Complainants fail to address this motion in opposition.

Accordingly, the motion to strike is GRANTED as to the references to section 8800, including interest based on that section.

Motion to Strike: Damages

Horizon requests the Court strike all references to, and prayers for, damages in the amount of $152,764.54. Horizon reiterates that Cross-Complainants have improperly alleged that they suffered damages in the amount of $152,764.54. Horizon reasons that they have not alleged damages to themselves, but repackaged Plaintiff's claim for damages. As noted, Horizon points to no authority for their proffered “independent damages” rule. Thus, this request is not well-taken.

Accordingly, the motion is DENIED as to the remainder.