Judge: Michael E. Whitaker, Case: 24SMCV00538, Date: 2024-12-11 Tentative Ruling

Case Number: 24SMCV00538    Hearing Date: December 11, 2024    Dept: 207

TENTATIVE RULING  - NO. 1

MOTION

On February 5, 2024, Plaintiff Sebastian Giefer as Co-Trustee of the Giefer Family Trust (“Plaintiff”) brought suit against Defendants Carolwood Homeowners Association Inc. (“Carolwood”); Coro Community Management and Consulting, LLC (“Coro”); and Reconstruction Experts Inc. (“Reconstruction”) (together, “Defendants”).  Plaintiff’s operative First Amended Complaint (“FAC”) alleges three causes of action for (1) breach of contract; (2) negligence; and (3) breach of fiduciary duty, arising from allegations that Defendants neglected to properly repair and manage a leaking roof that caused damage to Plaintiff’s unit.   

Reconstruction now demurs to the second cause of action for negligence on the grounds that it fails to state facts sufficient to constitute a cause of action.  Plaintiff opposes the Demurrer and Reconstruction replies.

LEGAL STANDARD – DEMURRER

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law.  [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.”  (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.”  (See Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)  

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

ANALYSIS

                I.          FAILURE TO STATE A CAUSE OF ACTION - NEGLIGENCE

“The elements of any negligence cause of action are duty, breach of duty, proximate cause, and damages.”  (Peredia v. HR Mobile Services, Inc. (2018) 25 Cal.App.5th 680, 687.)

Reconstruction demurs to the second cause of action for negligence on the grounds that Reconstruction owes Plaintiff no duty of care, and Plaintiff’s claim for negligence is barred by the Economic Loss Doctrine.   As to Reconstruction’s alleged duty, the FAC alleges:

8. Plaintiff owns the condominium located at 1033 Carol Drive, Apt. 401, West Hollywood, California 90069, the Property.

9. In 2021, Plaintiff noticed water leaking through the roof of his unit and Plaintiff informed the HOA and/or the Management Company accordingly. Plaintiff is informed and believes, and thereon alleges that a rusted drain on the roof needed replacement. After the plumber fixed the rusted drain, Reconstruction Experts were scheduled to follow up to repair the roof surrounding the drain pipe. For reasons unknown to Plaintiff, Reconstruction Experts did not follow up to complete the work and neither the HOA nor the Management Company followed up with Reconstruction Experts to ensure their work was completed. This left a roof gap surrounding the repaired drain open for several weeks.

10. As a result, this lead to significant water intrusion during the rain, causing extensive damage to the Property.

[…]

28. At all times herein mentioned, defendants, and each of them, owed Plaintiff a duty to exercise reasonable skill, care, diligence, and foresight in properly maintaining and repairing the common areas as the average reasonable person and/or business, in order to avoid harm to the owners of condominium units in the common interest development. Additionally, Defendant Reconstruction Experts owed Plaintiff a duty to exercise reasonable skill, care, diligence, and foresight in properly performing the scope of the work that they were retained to do with respect to the roof in a timely manner.

29. Defendants breached their duty of ordinary care when they failed to maintain the common drainage abutting Plaintiff’s unit and to repair the resulting damage to the interior of Plaintiff’s unit subsequent to the loss originating from the common infrastructure.

30. Defendant Reconstruction Experts breached their duty of ordinary care when it failed to timely complete the scope of the work it was contracted and tasked to do. Said negligence caused Plaintiff to sustain serious damage to the Property. Additionally, Plaintiff is informed and believes, and thereon alleges, that previously, Reconstruction Experts had repaired and replaced the roof at the Property. Despite this, they did not repair or replace the roof area surrounding the drain which was within the scope of their work. Plaintiff is informed and believes, and thereon alleges that Reconstruction Experts’ failure to address this critical area also contributed to the issue subject of Plaintiff’s Complaint, and Reconstruction Experts’ should have, at the very least, repaired the roof and flashing and informed the Plaintiff, the HOA, and/or the Management Company about the bad drain.

(FAC ¶¶ 8-10; 28-30.)

Reconstruction first argues that it owes Plaintiff no duty of care because (1) the Complaint does not allege a direct contractual relationship between Plaintiff and Reconstruction; and (2) the economic loss doctrine bars Plaintiff’s negligence claim.

A.    Contractual Relationship

“[T]he lack of privity of contract does not preclude imposition of a duty of care.”  (Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc. (2004) 125 Cal.App.4th 152, 164 (hereafter Weseloh).)  Thus, the fact that there was no direct contractual relationship alleged between Reconstruction and Plaintiff does not automatically mean that Reconstruction owed Plaintiff no duty as a matter of law.

“The determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are [1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm.”  (Weseloh, supra, 125 Cal.App.4th at p. 165.)

In Biakanja v. Irving (1958) 49 Cal.2d 647 (hereafter Biakanja), the Supreme Court held a notary public liable for preparing a will (which constituted the unauthorized practice of law), which was found to be invalid because the notary public negligently failed to have the will properly attested, causing the intended beneficiary to inherit only one-eighth of the estate.  In analyzing the first factor, the Supreme Court found that the “end and aim” of the transaction was to pass the entire estate to the plaintiff.  (Id. at p. 650.) 

Similarly, here, the ultimate purpose of Reconstruction’s roof repair work under the leaky drainpipe was to prevent further water intrusion into Plaintiff’s unit.  As such, it was foreseeable that negligent roof repair work over Plaintiff’s unit would cause further water intrusion damage.  Moreover, the FAC adequately alleges a close connection between Reconstruction’s failure to repair that area of the roof, which was in the scope of its work, and additional leaks and water damage from the rain. 

With respect to moral blame, Reconstruction argues that it did not damage the leaky pipe in the first instance.  Notwithstanding, Plaintiff adequately alleges that Reconstruction’s failure to repair the area of the roof under the leaky pipe caused further water intrusion into the unit.

Finally, Reconstruction has pointed to no public policy preventing injured homeowners from bringing suit in negligence against the construction company contracted to perform construction work on the home just because it was the HOA, and not the homeowner, who contracted with the company.

Therefore, the Court declines to sustain the demurrer on the grounds that there was no direct contractual relationship alleged between Plaintiff and Reconstruction.

B.    Economic Loss Doctrine

“[T]he economic loss rule provides: where a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only economic losses.”  (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988 (quoting Neibarger v. Universal Cooperatives, Inc. (1992) 439 Mich. 512, 486 N.W.2d 612, 615, fns. omitted) (quotations omitted).)  “This doctrine hinges on a distinction drawn between transactions involving the sale of goods for commercial purposes where economic expectations are protected by commercial and contract law, and those involving the sale of defective products to individual consumers who are injured in a manner which has traditionally been remedied by resort to the law of torts.”  (Ibid.) 

In construction cases, the economic loss rule has been applied to bar recovery for the costs of repairing minor construction defects and diminution in property value (see Aas v. Superior Court (2000) 24 Cal.4th 627, superseded by statute on other grounds (hereafter Aas), & State Ready Mix, Inc. v. Moffatt & Nichol (2015) 232 Cal. App. 4th 1227 (hereafter State Ready Mix).)  But Aas and State Ready Mix are distinguishable.

In Aas, the homeowners’ association brought claims against developer, contractor, and subcontractors, seeking to cover the cost of repairing minor construction defects and damages for diminution in value.  The Supreme Court held that the association and homeowners could not recover damages on a negligence claim for the cost to repair, or diminished value attributable to, construction defects that had not caused other property damage.  By contrast, here, the damage at issue is not limited to the roof itself, but the failure to repair the roof allegedly caused further property damage when the damaged roof allowed water to intrude into Plaintiff’s unit.

In State Ready Mix, Moffatt, an engineer, at the request of another engineer on the project, reviewed and approved a cement mix design, even though it was not part of Moffatt’s duties or responsibilities on the project.  Technical issues arose when it came time to mix the concrete, and in creating the mix, State added too much of an air-entrainment chemical into the mix, causing the concrete to fall below the calculated compression strength, and fail, resulting in damages associated with replacing the bad concrete.  State is distinguishable for two reasons. 

First, the error was State’s in mixing the concrete wrong and using a concrete mixture that was not recommended by Moffatt.  As a result, all the Biakanja factors failed—Moffatt’s advice did not cause the harm, and therefore did not impact State, the harm was not foreseeable, there was no closeness of connection between Moffatt’s conduct and the injury suffered, the moral blame was State’s in mixing the concrete wrong, not Moffatt’s in approving the plan, and holding Moffatt liable would do nothing to prevent future harm.  

Second, the damages at issue in State Ready Mix were solely those required to remove and replace the defective concrete itself; there was no other property damage done.  By contrast, here, in addition to the roof itself being damaged, there was additional damage alleged by virtue of the water intrusion into Plaintiff’s unit.

Therefore, the Court does not find that the economic loss doctrine bars Plaintiff’s negligence claim.

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Reconstruction’s Demurrer to the Second Cause of Action.  Further, the Court orders Reconstruction to file an Answer to the FAC on or before December 27, 2024.

Reconstruction shall provide notice of the Court’s ruling and file the notice with a proof of service. 

DATED:  December 11, 2024                                                ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court

TENTATIVE RULING - NO. 2

MOTIONS

On February 5, 2024, Plaintiff Sebastian Giefer as Co-Trustee of the Giefer Family Trust (“Plaintiff”) brought suit against Defendants Carolwood Homeowners Association Inc. (“Carolwood”); Coro Community Management and Consulting, LLC (“Coro”); and Reconstruction Experts Inc. (“Reconstruction”) (together, “Defendants”).  Plaintiff’s operative First Amended Complaint (“FAC”) alleges three causes of action for (1) breach of contract; (2) negligence; and (3) breach of fiduciary duty, arising from allegations that Defendants neglected to properly repair and manage a leaking roof that caused damage to Plaintiff’s unit.  

Carolwood moves to strike allegations concerning negligence per se (FAC ¶¶ 31-35) and exemplary/punitive damages (FAC ¶¶ 38-39, 45; Prayer at ¶ 4.)  Plaintiff opposes and Carolwood replies.

ANALYSIS

1.     MOTION TO STRIKE

Here, Carolwood moves to strike (1) allegations pertaining to negligence per se; and (2) allegations pertaining to exemplary/punitive damages.

A.    Negligence Per Se

Carolwood first argues that negligence per se is not its own cause of action, but rather an evidentiary presumption.  Here, Plaintiff’s second cause of action is for “negligence” and alleges both ordinary negligence and negligence per se against Carolwood.  Carolwood moves to strike the allegations pertaining to negligence per se on the grounds that the Davis-Sterling Act cannot support an action for negligence per se.  Carolwood claims that the Davis-Sterling Act provides only general principles and is insufficiently specific to allege a cause of action for negligence per se.

As a threshold matter, Carolwood does not cite any legal authority in support of the position that a violation of the Davis-Sterling Act cannot support a claim of negligence or the negligence per se allegations.

Further, the FAC alleges:

31. In 1985, California’s Legislature passed the Davis-Stirling Common Interest Development Act, revised in 2012 and codified as Civil Code section 4000, et seq. (the “Act”). The Act is aimed at establishing homeowners associations, which are self-governing bodies of a common interest development. Under the Act, homeowners’ associations operate pursuant to a constitution set forth in a recorded document known as CC&Rs. The CC&Rs encompass rules of governance, which include the responsibilities of a homeowners association to the owners of units in a common interest development.

32. Additionally, the Act establishes a unified statutory framework that regulates homeowners associations for all types of common interest developments for the benefit of owners of condominiums within a common interest development. Section 4775(a) of the Act assigns responsibility “for repairing, replacing or maintaining the common areas” to the homeowners association.

33. The HOA is the type of homeowners association to which the Act applies, as it is in the business of governing the Carolwood Homeowners Association common interest development for the benefit of owners of units within the common interest development.

34. At the time of the incident alleged in this Complaint, Plaintiff was the owner of a condominium unit in the common interest development governed by the HOA. Accordingly, Plaintiff is a member of the group of people whom the Act was created to protect.

35. As fully explained in this Complaint, the HOA failed to use the degree of care that a reasonable person in the same situation, i.e., in the care of a common interest development, would have used in protecting Plaintiff from hazards arising out of losses in the common area. Said protection would include (1) the proper maintenance of the common drainage and roof; (2) the safe and careful repair of the common drainage and roof; and (3) the safe and careful repair of the damage resulting from water intrusion to the interior of Plaintiff’s unit. The HOA failed in each or all of these respects and said failure was a substantial, indeed the singular, cause of Plaintiff’s damages. Defendants’ failure to use reasonable care caused the type of harm that the Act was trying to prevent, subjecting Plaintiff to sustain damages, and thereby violating the provisions of the Act.

(FAC ¶¶ 31-35.)

Thus, Plaintiff specifically alleges that Carolwood violated Section 4775(a) of the Davis-Sterling Act, which requires homeowner associations to repair, replace, or maintain common areas, by failing to properly maintain and the common drainage and roof or the water intrusion damage caused thereby. 

Therefore, Carolwood has not provided a basis for the Court to strike these allegations.

B.    Punitive Damages

With regard to Carolwood’s request to strike exemplary/punitive damages, in ruling on a motion to strike punitive damages, “judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.”  (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.)  To state a prima facie claim for punitive damages, a plaintiff must allege the elements set forth in the punitive damages statute, Civil Code section 3294.  (College Hosp., Inc. v. Superior Court (1994) 8 Cal.4th 704, 721.)  Per Civil Code section 3294, a plaintiff must allege that the defendant has been guilty of oppression, fraud, or malice.  (Civ. Code, § 3294, subd. (a).)   As set forth in the Civil Code,

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.  (2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.  (3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

(Civ. Code, § 3294, subd. (c)(1)-(3), emphasis added.) 

Further, a plaintiff must assert facts with specificity to support a conclusion that a defendant acted with oppression, fraud or malice.  To wit, there is a heightened pleading requirement regarding a claim for punitive damages.  (See Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.)  “When nondeliberate injury is charged, allegations that the defendant’s conduct was wrongful, willful, wanton, reckless or unlawful do not support a claim for exemplary damages; such allegations do not charge malice.  When a defendant must produce evidence in defense of an exemplary damage claim, fairness demands that he receive adequate notice of the kind of conduct charged against him.” (G. D. Searle & Co. v. Superior Court (1975) 49 Cal.App.3d 22, 29 [cleaned up].)  In Anschutz Entertainment Group, Inc. v. Snepp, the Court of Appeal noted that the plaintiffs’ assertions related to their claim for punitive damages were “insufficient to meet the specific pleading requirement.”  (Anschutz Entertainment Group, Inc. v. Snepp (2009) 171 Cal.App.4th 598, 643 [plaintiffs alleged “the conduct of Defendants was intentional, and done willfully, maliciously, with ill will towards Plaintiffs, and with conscious disregard for Plaintiff's rights. Plaintiff's injuries were exacerbated by the malicious conduct of Defendants. Defendants' conduct justifies an award of exemplary and punitive damages”]; see also Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166 [“The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages.  Not only must there be circumstances of oppression, fraud, or malice, but facts must be alleged in the pleading to support such a claim”].) 

Moreover, “the imposition of punitive damages upon a corporation is based upon its own fault.  It is not imposed vicariously by virtue of the fault of others.”  (City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36.)  “Corporations are legal entities which do not have minds capable of recklessness, wickedness, or intent to injure or deceive.  An award of punitive damages against a corporation therefore must rest on the malice of the corporation’s employees.  But the law does not impute every employee’s malice to the corporation.  Instead, the punitive damages statute requires proof of malice among corporate leaders:  the officers, directors, or managing agents.”  (Cruz v. Home Base (2000) 83 Cal.App.4th 160, 167 [cleaned up].) 

            Here, with respect to punitive damages, Plaintiff alleges:

38. Defendants’ conduct described herein was intended by the defendants to cause injury to the Plaintiff or was despicable conduct carried on by the defendants with willful and conscious disregard of the rights of Plaintiff or subjected Plaintiff to cruel and unjust hardship in conscious disregard of Plaintiff’s rights, or was an intentional misrepresentation, deceit or concealment of a material fact known to the defendants with the intention to deprive Plaintiff of property, legal rights or to otherwise cause injury, such as to constitute malice, oppression or fraud under California Civil Code section 3294, thereby entitling Plaintiff to punitive damages in an amount appropriate to punish or set an example of Defendants, and each of them, and Does 1 to 50.

39. Defendants’ conduct described herein was undertaken by the corporate defendants’ officers or managing agents, identified herein as DOES 1 through 50, who were responsible for claims supervision and operations, underwriting, communications and/or decisions. The aforementioned conduct of said managing agents and individuals was therefore undertaken on behalf of the corporate defendant. Said corporate defendant further had advanced knowledge of the actions and conduct of said individuals whose actions and conduct were ratified, authorized and approved by managing agents whose precise identities are unknown to Plaintiff at this time and are therefore identified and designated herein as Does 1 through 50, inclusive.

[…]

45. Defendants’ conduct described herein was intended by the defendants to cause injury to the Plaintiff or was despicable conduct carried on by the defendants with willful and conscious disregard of the rights of Plaintiff or subjected Plaintiff to cruel and unjust hardship in conscious disregard of Plaintiff’s rights, or was an intentional misrepresentation, deceit or concealment of a material fact known to the defendants with the intention to deprive Plaintiff of property, legal rights or to otherwise cause injury, such as to constitute malice, oppression or fraud under California Civil Code section 3294, thereby entitling Plaintiff to punitive damages in an amount appropriate to punish or set an example of Defendants, and each of them, and Does 1 to 50.

(FAC ¶¶ 38-39; 45.)

            These conclusory allegations are insufficient to satisfy the heightened pleading requirement to allege oppression, fraud, or malice on the part of Carolwood’s corporate leader(s).  Therefore, the Court grants in part Carolwood’s motion to strike, and strikes paragraphs 38-39 and 45 from the FAC and paragraph 4 of the Prayer. 

2.     LEAVE TO AMEND

A plaintiff has the burden of showing in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action. (See The Inland Oversight Committee v. City of San Bernardino (2018) 27 Cal.App.5th 771, 779; PGA West Residential Assn., Inc. v. Hulven Int'l, Inc. (2017) 14 Cal.App.5th 156, 189.) A plaintiff must not only state the legal basis for the amendment, but also the factual allegations sufficient to state a cause of action or claim. (See PGA West Residential Assn., Inc. v. Hulven Int'l, Inc., supra, 14 Cal.App.5th at p. 189.) Moreover, a plaintiff does not meet his or her burden by merely stating in the opposition to a demurrer or motion to strike that “if the Court finds the operative complaint deficient, plaintiff respectfully requests leave to amend.” (See Major Clients Agency v Diemer (1998) 67 Cal.App.4th 1116, 1133; Graham v. Bank of America (2014) 226 Cal.App.4th 594, 618 [asserting an abstract right to amend does not satisfy the burden].)

Here, Plaintiff argues that the HOA knew about the harm, but intentionally delayed the repairs to benefit its insurance carrier, and Plaintiff can add additional facts in this regard.  Therefore, the Court grants Plaintiff’s request for leave to amend to add specific allegations supporting the claim for punitive damages.

CONCLUSION AND ORDER

For the reasons stated, the Court grants in part and denies in part Carolwood’s motion to strike.  The Court orders paragraphs 38-39, 45, and Prayer paragraph 4 stricken from the FAC with leave to amend.  The Court denies Carolwood’s motion to strike in all other respects.

Plaintiff shall file and serve a second amended complaint, in conformance with this Court’s order, on or before December 27, 2024.

Carolwood shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith. 

DATED:  December 11, 2024                                                ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court