Judge: Michael E. Whitaker, Case: 24SMCV06166, Date: 2025-03-19 Tentative Ruling

Case Number: 24SMCV06166    Hearing Date: March 19, 2025    Dept: 207

TENTATIVE RULING

MOTIONS

On December 17, 2024, Plaintiff RB Remodeling & Construction (“Plaintiff”) brought suit against Defendant Terry Krekorian (“Defendant”) alleging six causes of action for (1) breach of written contract; (2) promissory fraud; (3) account stated; (4) open book account; (5) quantum meruit; and (6) work, labor and services rendered.

Defendant now demurs to all six causes of action on the grounds that they fail to state facts sufficient to constitute a cause of action because they are all barred by the applicable statute of limitations pursuant to Code of Civil Procedure section 430.10, subdivision (e).

Plaintiff opposes the demurrer and Defendant replies.

ANALYSIS

1.     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.)

A.    FAILURE TO STATE A CAUSE OF ACTION

                                                         i.          First, Third, and Fourth Causes of Action Based in Contract

There is a four-year statute of limitations for actions upon a written contract. (Code Civ. Proc., § 337.)  Similarly, there is a four-year statute of limitations for an action to recover on an open book account or an account stated.  (Code Civ. Proc., § 437, subd. (b).) 

The Complaint alleges:

9. In or about July 2017, Krekorian retained RB to construct a single-family home with swimming pool, per architect’s and engineer’s working plans (the “Project”). The initial discussions of the Project commenced around December 2016, an initial budget was circulated in Spring 2017 and signed on or about July 10, 2017.

10. On July 10, 2017, Krekorian and RB executed a written contract where RB agreed to provide construction services for the Project and Krekorian agreed to pay RB the contract price of $3,041,156, subject to additions and deductions (the “Agreement”). A copy of the Agreement is attached hereto as Exhibit 1 and incorporated herein by this reference as though set out in full.

11. Included with the Agreement was a working set of plans provided by Michael Ball Architects; pool engineering plans provided by Executive Engineering; a soils report provided by Grover Hollingsworth and Associates; and a proposed budget dated 5/22/17 (collectively “Contract Documents”).

12. The Project commenced in or around July 2017 and demolition began in or around March 2018. There was an estimated timeframe to substantially complete work within fifteen (15) to eighteen (18) months after commencement of the Project, subject to adjustments.

13. The Agreement included a section titled “Permissible Delays” which states in part “Contractor shall be excused from any delay in the completion of the work to be performed under this contract caused by […] acts or omissions of Owner or of Owner’s agents, employees or independent contractors, material shortages, strikes, or other labor troubles … or changes requested by Owner…”

14. The Agreement included provisions related to contract price which provided that the contract price of $3,041,156 was subject to additions and deductions, and further stated that “If Owner or his agents […] directs any modification or addition to the work covered by the [Agreement], the contract price shall be increased by a written Change Order or by the amount for Time and Materials expended therefore by Contractor plus 15% for overhead and profit.”

15. The Agreement further provided that Krekorian shall pay RB progress payments. Progress payments were due no later than ten (10) days after submission of RB’s invoices.

16. Additionally, the Agreement provides that RB has a right to stop work and specifically states: “Contractor shall have the right to stop work if any payment, including any payment for extra work, is not made to Contractor as agreed in this Contract. If any payment required under this Contract is not made when due, Contractor may keep the Project idle until such time as all payments have been made.”

17. During the course of the Project several significant issues arose, through no fault of RB, that delayed the estimated completion date of the Project. […]

19. All work performed by RB pursuant to the Agreement was completed in a workmanlike manner and was of workmanlike quality, except for work left incomplete at the time of RB’s termination; however, RB stood ready to complete final punchlist items and/or remediate the work but for the termination.

20. In or about August 9, 2020, Krekorian hired Carolyn Kwak (“Kwak”) to serve as financial auditor and project controller of the Project. On information and belief, Krekorian hired Kwak to oversee and control Project finances for the specific purpose of challenging and impeding withdrawals by RB, and to provide pretextual and illegitimate justification for Krekorian’s refusal to pay RB for services rendered and labor performed.

21. In or around March 2018, due to the previously mentioned engineering and architectural issues, as well as Krekorian’s budgetary concerns, the parties entered into a fund control agreement placing $2,789,875.00 into escrow with Dixieline Builders Fund Control, Inc. (“Dixieline”) serving as escrow holder (“Dixieline Agreement”), which was entry required by the bank that issued Krekorian the loan.

22. On August 20, 2020, RB sent an invoice to Krekorian for materials and services totaling $103,864.93 (“Invoice # 16512”).

23. On August 24, 2020, RB sent an invoice to Krekorian for drafting, project management, and outstanding charges for labor and supervision services totaling $171,227.76 (“Invoice # 16511”).

24. After receipt of Invoice # 16512, Krekorian disclosed to RB during a videocall that no additional funding would be provided. Krekorian also halted a fund transfer request that he had previously signed and approved via e-mail on August 14, 2020. After the fund transfer request had been halted and after Krekorian informed RB that no additional funding would be provided, RB stopped work pursuant to Section K of the Agreement.

25. On September 2, 2020, Kwak sent RB a letter indicating that she was in receipt of RB’s recent draw request, which included Invoice # 16512, and that Krekorian was disputing Invoice # 16512. In this correspondence Kwak incorrectly asserts that the contract price estimate of $3,041,156.00 was a fixed fee. (It was incorrect amount because it contained a clause for change orders billed at time plus materials plus 15% fee). Kwak further indicated that Krekorian would not be making additional payments to RB until she had received certain documents and had completed an audit of the Project. RB provided the requested documents, but additional payments were not received from Plaintiff.

26. Krekorian halted all remaining funding for the Project as of August 25, 2020, and Krekorian froze further fund disbursements for payment to RB. In good faith, RB continued to work on the project for ten (10) days after August 14, 2020, expecting and awaiting a release of funds by Krekorian, which RB reasonably expected. The work performed by RB and its subcontractors during August 2020, and through the period where Krekorian refused to release funds, totaled $42,841.11 and is indicated in Invoice # 16513 (“Invoice # 16513”). Invoice # 16513 was sent to Krekorian on September 29, 2020.

27. Krekorian never released said funds and each of RB’s Invoices # 16511, #16512, and # 16513 went unpaid. […]

(Complaint ¶¶ 9-27.)

Defendant contends that the last invoice was allegedly sent on September 29, 2020, and payment was due ten (10) days after the submission of each invoice.  (Complaint ¶¶ 15, 26.)  As such, payment was due by October 9, 2020.  Yet, Plaintiff did not file the instant lawsuit until December 17, 2024, more than four years later.

Plaintiff counters that Emergency Rule 9 automatically tolled the statute of limitations for all civil causes of action from April 6, 2020 to October 1, 2020.  Because April 6, 2020 to October 1, 2020 encompasses 178 days, adding 178 days to October 9 means the last day to timely file the lawsuit is April 5, 2025.

The Court disagrees.  Emergency rule 9 provides, “the statutes of limitations and repose for civil causes of action that exceed 180 days are told from April 6, 2020, until October 1, 2020.”  Thus, the statute of limitations was tolled during the time period from April 6, 2020 through October 1, 2020. 

However, Plaintiff’s claim did not accrue until October 9, after the tolling period had already expired.  As such, based on the plain language of Emergency rule 9, Plaintiff would not get the benefit of a tolling period that occurred entirely before Plaintiff’s claim accrued, because Plaintiff had nothing to toll during the tolling period. 

Plaintiff would only get the benefit of the full 178 days of tolling if the claim accrued on or before April 6, 2020.  Otherwise, the statute of limitations on any claim that ripens during the tolling period would only be tolled from the date the claim ripens until October 1, 2020.  Plaintiff has not provided any contrary authority standing for the proposition that the emergency rule somehow requires that the full 178 days be added to the statute of limitations for every claim involving underlying conduct that occurred during the tolling period, regardless of when the claim actually ripened.  Because the tolling period is from April 6, 2020 to October 1, 2020, and Plaintiff did not have a ripe claim until October 9, 2020, no Emergency rule 9 tolling applies to Plaintiff’s claims.

                                                       ii.          Fifth and Sixth Causes of Action for Quantum Meruit/Services Rendered

The parties disagree about whether a 2-year or a 4-year statute of limitations applies to Plaintiff’s fifth and sixth causes of action for quantum meruit.  Defendant contends the statute of limitations is two years, under Section 339 (“an action upon a contract, obligation or liability not founded upon an instrument in writing”) whereas Plaintiff argues the statute of limitations is four years under Section 337, subdivision (b) (“an action upon any contract, obligation, or liability founded upon an instrument in writing”).    

Given that the Complaint alleges quantum meruit/services rendered as an alternative to a cause of action for breach of written contract, the Court agrees with Plaintiff that a four-year statute of limitations applies. 

However, for the same reasons discussed above, Plaintiff’s quantum meruit based causes of action similarly accrued by October 9, 2020.  As such, the Complaint was still filed more than four years later. 

                                                     iii.          Second Cause of Action

Plaintiff concedes in opposition that the second cause of action is time-barred.

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 contends that it could add facts that on December 31, 2020, Defendant’s agent sent Plaintiff an email asking for all supporting documentation for Invoice 16335 dated 08/08/19.  From January 5-11, 2021, Plaintiff and Defendant’s agent exchanged emails regarding the supporting documentation.

To the extent these additional facts demonstrate that Defendant had not clearly and conclusively indicated an intent not to pay any further on the invoices, as of early January 2021, then the Complaint would be timely as to any causes of action with a four-year statute of limitations.

Therefore, the Court grants Plaintiff’s request for leave to amend the complaint to add these allegations.

CONCLUSION AND ORDER

For the reasons stated, the Court sustains Defendant’s demurrer to the Complaint in its entirety with leave to amend the first, third, fourth, fifth, and sixth causes of action.  The Court sustains the demurrer as to the second cause of action without leave to amend.

Plaintiff shall file and serve an amended complaint in conformance with this order on or before April 2, 2025.

Further, on the Court’s own motion, the Court continues the Case Management Conference from May 8, 2025 to July 24, 2025 at 8:30 A.M. in Department 207.  All parties shall comply with California Rules of Court, rules 3.722, et seq., regarding Initial and Further Case Management Conferences.  In particular, all parties shall adhere to the duty to meet and confer (Rule 3.724) and to the requirement to prepare and file Case Management Statements (Rule 3.725). 

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

DATED:  March 19, 2025                                                      ___________________________

                                                                                          Michael E. Whitaker