Judge: Mark H. Epstein, Case: 24SMCV02488, Date: 2024-10-14 Tentative Ruling

Case Number: 24SMCV02488    Hearing Date: October 14, 2024    Dept: I

The demurrers are OVERRULED.

This is a construction defect case.  Plaintiff, the contractor, sues defendant, the owner, for breach of contract.  The basic allegations are that defendant retained plaintiff to remodel defendant’s residence.  The amount of the original contract was $169,610.  The project evolved, however,  Plaintiff alleges that the resulting change orders increased the contractual amount to be paid to $2,783,983.  Plaintiff alleges that it has demanded payment in full but defendant still owes at least $224,270.  Defendant has demurred to various causes of action and plaintiff opposes. 

At the outset, the demurrers for uncertainty are OVERRULED.  Such demurrers are disfavored and succeed only where the complaint is so vague that no one can really even understand what the operative allegations are.  (Butler v. Sequeira (1950) 100 Cal.App.2d 143.)  That is not this case.

The meat of the demurrer is that the contract fails to comply with Business and Professions Code section 7159, which requires that home improvement contracts be in writing and contain certain terms and statements.  This contract was in writing, but plaintiff concedes that there are at least some aspects of section 7159 that were not strictly followed.  However, that does not mean that the contract is void.  It is merely voidable.  (Asdourian v. Araj (1985) 38 Cal.3d 276;  Arya Group, Inc. v. Cher (2000) 77 Cal.App.4th 610.)  The basic purpose of this statute is to ensure that construction contracts are in writing to protect unsophisticated owners.  Indeed, in the seminal Asdourian case, our Supreme Court noted that it would be unjust to void a construction contract due to a violation of this statute as that would unjustly enrich the homeowner and accordingly, even if a contract was illegal in that it violated the statute, in a “compelling case” it could be enforced to avoid unjust enrichment.  Generally, whether to allow a party to void a construction contract will depend on many factors, including whether the contract was written or oral (written contracts are less likely to be voided out, and the cases decided under this statute almost all involve oral contracts), whether the homeowner is sophisticated, and a myriad of other factors concerning the parties’ relationship.  Here, the violations about which defendant complains are technical—the placement of a warning or the font size of it, for example.  The court has no reason to believe—at the pleading stage—that any statutory violation had any effect on anything.  Thus, as was the case in Arya, the matter is not well tested at this stage.  The court also notes that defendant argues that at best plaintiff is entitled to a quantum meruit recovery rather than contract damages, which, defendants note, is another cause of action (to which there is no demurrer).  The court is not so sure.  That depends on whether the court will void the contract based on the particular violations alleged or whether the court concludes that the violations were trivial and should be overlooked in this case.  Accordingly, the first and fifth causes of action fail (the fifth cause of action being derivative of the first).  The court acknowledges that there is some tension in allowing both a quantum meruit cause of action and a breach of contract action to go forward.  But the court believes that the best way forward is to follow the Arya Court’s lead.  There, the court allowed a breach of contract to go forward even though it violated the statute, but noted (albeit in a footnote) that the contract recovery (if any) would be limited to the amount necessary to prevent unjust enrichment.  This court agrees.  The court will allow the breach of contract action to go forward, but there could well be a limit to the recovery if enforcing the contract in its entirety would do more than avoid unjust enrichment.  There are other reasons to do it this way.  The contract will likely have other provisions that are relevant, for example, the process for change orders, an attorneys’ fee clause, payment timing provisions, and other provisions that might well remain effective.  And if the 7159 breaches are truly trivial (something the court is not now deciding), it could well be that quantum meruit and contract are the same because it would be unjust to reduce the contract by any amount for a trivial issue.  Defendant also contends that the breaches of the contract are not pled adequately because the entire contract is not attached (meaning the change orders are not attached) and neither are they adequately quoted.  The court believes that there is enough here.  Further information can be obtained in discovery.

Defendant also says that there is no cause of action for an account stated because there is no showing that defendant ever agreed that any particular amount was owed.  It is true that there must be an express or implied agreement between the parties as to the amount due and a promise to pay it.  (Leighton v. Forster (2017) 8 Cal.App.5th 467.)  The problem is that plaintiff alleges as much at paragraph 11 of the complaint.  Whether the allegation is true or not is not something that can be decided now.  Therefore, the second cause of action fails.

The third cause of action is for open book.  Defendant claims that there is no allegation that plaintiff kept a “book.”  And, again, it is true that open book requires that the creditor maintain a “book” that shows the amounts owed as they are incurred and payments made on the account.  However, the “book” need not be physical.  It can be a ledger or it can be in electronic form.  The court believes that the complaint, liberally read, alleges such a system, at least by reasonable inference.  Frankly, in today’s world it is hard to imagine that defendant does not have some kind of accounting software, and almost any such software would suffice.  As such, this demurrer fails as well.

The court also notes that these causes of action are pled in the alternative.  In other words, plaintiff understands, and the court agrees, that it cannot recover on all of these causes of action and add the damages together. 

In any event, the court believes that the complaint passes muster.  The demurrer is OVERRULED.  Defendant has 30 days to answer.