Judge Michael P. Linfield, Case Number: 22STCV24958, Date: 2023-09-08 Tentative Ruling

Judge: Michael P. Linfield, Case: 22STCV24958, Date: 2023-09-08 Tentative Ruling

Case Number: 22STCV24958 Hearing Date: September 8, 2023 Dept: 34

SUBJECT: Demurrer to First Amended Complaint

Moving Party: Robert Sanati and Ardeshir Shirazi

Resp. Party: Urbane Builders, Inc.

The Demurrer is SUSTAINED in part. The Demurrer is SUSTAINED to the second cause of action (foreclosure of mechanic’s lien) and the sixth cause of action (negligence), without leave to amend the Urbane FAC. The Demurrer is OVERRULED to the third, fourth, fifth, seventh, and eighth causes of actions in the Urbane FAC.

The real property is ORDERED released from the mechanic’s lien described below.

California Mechanic’s Lien, recorded on October 24, 2022 in the Official Records of the Recorder’s Office of Los Angeles County, California, Instrument #20221013729, Page 005, located at 10640 Taranto Way, Los Angeles, California 90077 (BEL AIR LOT EX OF ST COM N 80 2502” W 725.10 FT AND S 49 4630” W 21.70 FT FROM SE COR OF LOT Q TH S 49 4630” W 78 FT TH W ON A CURVE CONCAVE TO N RADIUS EQUALS 55 FT 107.17 FT TH NW ON A LOT/SEC Q. Subdivision: BEL AIR. Municipality / Township of WEST/BEL AIR/HOLMBY H. Legal Lot Q. Book/Page 14052).

BACKGROUND:

On August 2, 2022, Robert Sanati filed his Complaint in this matter (case 22STCV24958) against Urbane Builders, Inc., Gagik Patrick Nazaryan, Amirhosin Ebrahimi, Neda Abousaidi, GCN Properties, LLC, Tyrone Development, LLC, Ehsan Sombolestani, Cynthia Sarkissian, Urbane Design, Inc., and Redwood Inc. The causes of action in this matter arise from contracting work done on Robert Sanati’s real property.

On January 9, 2023, Urbane Builders, Inc. filed its Complaint in another matter (case 23SMCV00130) against Robert Sanati and Ardeshir Shirazi.

On January 23, 2023, Robert Sanati filed his First Amended Complaint (“Sanati FAC”) in this matter.

On January 24, 2023, the Court found related cases 22STCV24958 and 23SMCV00130, and designated 22STCV24958 as the lead case.

On February 16, 2023, the Court consolidated for all purposes cases 22STCV24958 and 23SMCV00130, and designated 22STCV24958 as the new case number for all filings.

On February 22, 2023, Urbane Builders, Inc., Gagik Patrick Nazaryan, Amirhosin Ebrahimi, Neda Abousaidi, GCN Properties, LLC, Tyrone Development, LLC, Black Star Development, LLC, Ehsan Sombolestani, Cynthia Sarkissian, Urbane Design, Inc., and Redwood Inc. filed their Answer to the First Amended Complaint.

On June 2, 2023, Urbane Builders, Inc. filed its First Amended Complaint (“Urbane FAC”).

On July 31, 2023, Urbane Builders, Inc. filed its Notice of Errata re: Urbane FAC.

On August 7, 2023, Robert Sanati and Ardeshir Shirazi filed their Demurrer to the Urbane FAC. In support of their Demurrer, they concurrently filed: (1) Memorandum of Points and Authorities; (2) Declaration of Jessica Galletta; and (3) Proof of Service. For reasons unknown to the Court, these filings are listed in the Court’s systems as having been filed on August 28 and 30, 2023.

On August 25, 2023, Urbane Builders, Inc. filed its Opposition to the Demurrer. In support of its Opposition, Urbane Builders, Inc. concurrently filed its Request for Judicial Notice.

On August 31, 2023, Robert Sanati and Ardeshir Shirazi filed their Reply regarding the Demurrer.

ANALYSIS:

I. Request for Judicial Notice

Urbane Builders, Inc. (“Urbane”) requests that the Court take judicial notice of: (1) the Complaint originally filed by Robert Sanati in this matter; and (2) the Court’s Minute Order dated January 11, 2023, filed in this matter.

The Court DENIES as superfluous judicial notice to these items. Any party that wishes to draw the Court’s attention to a matter filed in this action may simply cite directly to the document by execution and filing date. (See Cal. Rules of Court, rule 3.1110(d).)

II. Legal Standard

A demurrer is a pleading used to test the legal sufficiency of other pleadings. It raises issues of law, not fact, regarding the form or content of the opposing party’s pleading. It is not the function of the demurrer to challenge the truthfulness of the complaint; and for purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be. (Code Civ. Proc., §§ 422.10, 589.)¿

¿¿¿

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). A demurrer is brought under Code of Civil Procedure section 430.10 (grounds), section 430.30 (as to any matter on its face or from which judicial notice may be taken), and section 430.50(a) (can be taken to the entire complaint or any cause of action within).¿¿

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A demurrer may be brought under Code of Civil Procedure section 430.10, subdivision (e) if insufficient facts are stated to support the cause of action asserted. A demurrer for uncertainty (Code of Civil Procedure section 430.10, subdivision (f)), 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. (Khoury v. Maly's of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if the pleading is somewhat vague, “ambiguities can be clarified under modern discovery procedures.” (Id.)¿¿¿

III. Discussion

Robert Sanati (“Sanati”) and Ardeshir Shirazi (“Shirazi”) demur to the second cause of action (foreclosure of mechanic’s lien), the third cause of action (open book account), the fourth cause of action (account stated), the fifth cause of action (breach of contract [third party beneficiary]), the sixth cause of action (negligence), the seventh cause of action (fraudulent/intentional misrepresentation), and the eighth cause of action (negligent misrepresentation).

A. Foreclosure of Mechanic’s Lien

1. Legal Standard

“Our state Constitution provides: ‘Mechanics, persons furnishing materials, artisans, and laborers of every class, shall have a lien upon the property upon which they have bestowed labor or furnished material for the value of such labor done and material furnished; and the Legislature shall provide, by law, for the speedy and efficient enforcement of such liens.’ (Cal. Const., art. XIV, § 3.) As this court has said, ‘The mechanic’s lien is the only creditors’ remedy stemming from constitutional command and our courts ‘have uniformly classified the mechanics’ lien laws as remedial legislation, to be liberally construed for the protection of laborers and materialmen.’ [Citation.]’ (Hutnick v. United States Fidelity & Guaranty Co. (1988) 47 Cal.3d 456, 462 [253 Cal. Rptr. 236, 763 P.2d 1326].) ‘[S]tate policy strongly supports the preservation of laws which give the laborer and materialman security for their claims.’ (Connolly Development, Inc. v. Superior Court (1976) 17 Cal. 3d 803, 827 [132 Cal. Rptr. 477, 553 P.2d 637].)” (Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal.4th 882, 888–89.)

“Subject to Section 8442, a lien attaches to the work of improvement and to the real property on which the work of improvement is situated, including as much space about the work of improvement as is required for the convenient use and occupation of the work of improvement.” (Civ. Code, § 8440.)

“A direct contractor may not enforce a lien unless the contractor records a claim of lien after the contractor completes the direct contract, and before the earlier of the following times: (a) Ninety days after completion of the work of improvement. (b) Sixty days after the owner records a notice of completion or cessation.” (Civ. Code, § 8412.)

“For the purpose of this title, completion of a work of improvement occurs upon the occurrence of any of the following events: (1) Actual completion of the work of improvement. (2) Occupation or use by the owner accompanied by cessation of labor. (3) Cessation of labor for a continuous period of 60 days. (4) Recordation of a notice of cessation after cessation of labor for a continuous period of 30 days.” (Civ. Code, § 8180, subd. (a).)

“A notice of completion in otherwise proper form, verified and containing the information required by this title, shall be accepted by the recorder for recording and is deemed duly recorded without acknowledgment.” (Civ. Code, § 8184.)

“A court order dismissing a cause of action to enforce a lien or releasing property from a claim of lien, or a judgment that no lien exists, shall include all of the following information: (1) The date of recordation of the claim of lien. (2) The county in which the claim of lien is recorded. (3) The book and page or series number of the place in the official records where the claim of lien is recorded. (4) The legal description of the property.” (Civ. Code, § 8490, subd. (a).)

“If judgment is in favor of the petitioner, the court shall order the property released from the claim of lien.” (Civ. Code, § 8488, subd. (b).)

“The prevailing party is entitled to reasonable attorney’s fees.” (Civ. Code, § 8488, subd. (c).)

2. Discussion

Sanati demurs to the second cause of action for foreclosure of mechanic’s lien, arguing that the lien was untimely recorded. (Demurrer, p. 6:3–7.)

Urbane disagrees, arguing that the mechanic’s lien is not untimely because the definition of the word “completion” in Civil Code section 8412 means that the time for recorded the mechanic’s lien had not yet expired at the time that Urbane recorded it. (Opposition, p. 4:5–22.)

The mechanic’s lien was recorded on October 24, 2022 in the Official Records of the Recorder’s Office for Los Angeles County. (Urbane FAC, Exh. C.) Urbane alleges that labor and materials were furnished until May 4, 2022. (Urbane FAC, ¶ 22.) As the allegation is that the work ceased on May 4, 2022 without “actual completion,” and as there does not appear to be recordation of a notice of cessation, the work was “completed” 60 days after May 4, 2022, with recordation of a mechanic’s lien due 90 days after the 60-day period had run. (Civ. Code, §§ 8180, subd. (a), 8412.) This 150-day period ended on October 1, 2022. Therefore, the mechanic’s lien recorded on October 1, 2022 was late recorded and is unenforceable.

The Court SUSTAINS the Demurrer to the second cause of action for foreclosure of mechanic’s lien, without leave to amend the Urbane FAC.

Pursuant to Civil Code sections 8488 and 8490, subdivision (a), the Court ORDERS the real property released from the mechanic’s lien described below.

B. Open Book Account

1. Legal Standard

“The term ‘book account’ means a detailed statement which constitutes the principal record of one or more transactions between a debtor and a creditor arising out of a contract or some fiduciary relation, and shows the debits and credits in connection therewith, and against whom and in favor of whom entries are made, is entered in the regular course of business as conducted by such creditor or fiduciary, and is kept in a reasonably permanent form and manner and is (1) in a bound book, or (2) on a sheet or sheets fastened in a book or to backing but detachable therefrom, or (3) on a card or cards of a permanent character, or is kept in any other reasonably permanent form and manner.” (Code Civ. Proc., § 337a.)

“A book account is ‘open’ where a balance remains due on the account. (Eloquence Corp. v. Home Consignment Ctr. (2020) 49 Cal.App.5th 655, 664–65, citation omitted.)

“An express contract, which defines the duties and liabilities of the parties, whether it be oral or written, is not, as a rule, an open account.” (Durkin v. Durkin (1955) 133 Cal.App.2d 283, 290, citations omitted.)

“The foregoing general rule is subject to the exception that an open book account cause of action may lie where the parties had agreed to treat money due under an express contract as items under an open book account.” (Eloquence, supra, 49 Cal.App.5th at p. 665, citation omitted, emphasis in original.)

2. Discussion

Sanati demurs to the third cause of action for open book account, arguing: (1) Urbane did not allege that it kept an account of debits and credits; and (2) this cause of action fails because there is an express contract between the Parties. (Demurrer, pp. 6:26–28, 7:1.)

The Court disagrees with these arguments.

Among other things, Urbane alleges that Sanati “became indebted to [Urbane] on an open book account in the amount of $185,933.46.” (Urbane FAC, ¶ 29.)

For the purposes of a demurrer, the Court must assume the truth of this allegation. Further, such an allegation is sufficient to withstand demur.

The Court OVERRULES the Demurrer to the third cause of action for open book account.

C. Account Stated

1. Legal Standard

“The essential elements of an account stated are: (1) previous transactions between the parties establishing the relationship of debtor and creditor; (2) an agreement between the parties, express or implied, on the amount due from the debtor to the creditor; (3) a promise by the debtor, express or implied, to pay the amount due.” (Zinn v. Fred R. Bright Co. (1969) 271 Cal.App.2d 597, 600, citations omitted; see also Leighton v. Forster (2017) 8 Cal.App.5th 467, 491.)

2. Discussion

Sanati demurs to the fourth cause of action for account stated, arguing that there was no agreement on the final balance due. (Demurrer, p. 7:17–18.)

The Court disagrees with this argument.

Exhibit A to the Urbane FAC is a contract signed by Sanati and Urbane regarding the work at issue in this matter. This contract sufficiently shows that these Parties have a creditor/debtor relationship, that there is an agreed-upon amount due (listed in the contract as $234,000.00), and that there is an express promise to pay that amount upon completion of the work. The existence of this contract is sufficient for this cause of action to withstand demur.

The Court OVERRULES the Demurrer to the fourth cause of action for account stated.

D. Breach of Contract by Third Party Beneficiary

1. Legal Standard

To state a cause of action for breach of contract, a plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis W. Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

If a breach of contract claim “is based on alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 307.)

“In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Constr. Protection Servs., Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198–99.)

2. Discussion

Shirazi demurs to the fifth cause of action for breach of contract (third party beneficiary), arguing: (1) the cause of action is insufficiently pled; (2) Urbane was not a third-party beneficiary of the Shirazi contract; (3) Urbane cannot demonstrate breach; and (4) Urbane cannot demonstrate damages. (Demurrer, pp. 8:17, 8:9–10, 10:15.)

Urbane disagrees, arguing: (1) that Urbane is a beneficiary of the contract between Shirazi and Sanati; (2) that the motivating purpose of the contract was to make plans, directions, and documents for Urbane (as the contractor) to follow; and (3) that Shirazi’s failure to provide on a timely basis complete designs damaged Urbane. (Opposition, pp. 7–9.)

To be a third-party beneficiary, the Court must consider: “(1) whether the third party¿would in fact benefit from the contract, but also (2) whether a motivating purpose of the contracting parties was to provide a benefit to the third party, and (3) whether permitting a third party¿to bring its own breach of contract action against a contracting party¿is consistent with the objectives of the contract and the reasonable expectations of the contracting parties. All three elements must be satisfied to permit the third party¿action to go forward.” (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 830.)

“With regard to the second element . . . the contracting parties must have a motivating purpose to benefit the third party, and not simply knowledge that a benefit to the third party may follow from the contract.” (Goonewardene, supra, at p. 830.)

Among other things, Urbane alleges: (1) that there is a contract (“the Shirazi contract”); (2) that Urbane was the intended beneficiary of the contract; (3) that Shirazi breached the contract; and (4) that Urbane was damaged by this breach.

For the purposes of a demurrer, the Court must assume the truth of the allegations. These allegations are sufficient to withstand demur.

The Court OVERRULES the Demurrer to the fifth cause of action for breach of contract (third party beneficiary).

E. Negligence

1. Legal Standard

In order to state a claim for negligence, Plaintiff must allege the elements of (1) “the existence of a legal duty of care,” (2) “breach of that duty,” and (3) “proximate cause resulting in an injury.” (McIntyre v. Colonies-Pacific, LLC (2014) 228 Cal.App.4th 664, 671.)

2. Discussion

Shirazi demurs to the sixth cause of action for negligence, arguing: (1) the cause of action is insufficiently pled; (2) the economic loss rule bars the cause of action; (3) Shirazi did not owe Urbane a duty of care; and (4) Shirazi did not damage Urbane. (Demurrer, pp. 11:6, 11:16, 12:2–3.)

“We begin with a review of the contours of the economic loss rule. The rule itself is deceptively easy to state: in general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damages.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905 [citations omitted].)

Here, there are no allegations of physical or property damages. Rather, the allegations made regard misrepresentations, untimely responding to requests for information and change orders, failing to provide plans and designs, failing to provide buildable plans and designs, and preventing timely completion of a project. (Urbane FAC, ¶¶ 38–39.)

The Court SUSTAINS the Demurrer to the sixth cause of action for negligence, without leave to amend the Urbane FAC.

F. Intentional and Negligent Misrepresentation

1. Legal Standard

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.)

The elements of a cause of action for negligent misrepresentation include “[m]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154, quotation marks omitted.)

The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 645.)

To properly allege fraud against a corporation, the plaintiff must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

2. Discussion

Sanati demurs to the seventh and eighth causes of action for fraudulent/intentional misrepresentation and negligent misrepresentation, respectively, arguing: (1) the causes of action are inadequately pled; (2) the allegations do not sufficiently demonstrate justifiable reliance; (3) there are no allegations that Sanati owed Urbane a duty of care; and (4) the causes of action are barred by the economic loss rule. (Demurrer, pp. 14:9–10, 14:26–27, 15:10–11, 16:10, 16:19–20.)

The Court disagrees with these arguments.

Among other things, Urbane allege: (1) that Sanati made various representations to Urbane regarding the project, including representations about providing certain materials; (2) that Sanati had no intention of providing the promised materials; (3) that Sanati intended to induce and deceive Urbane into signing the contract based on these false representations; (4) that Urbane reasonably relied on these representations; and (5) that Urbane was thus damaged, including by purchasing material that Sanati kept but never paid for. (Urbane FAC, ¶¶ 43–52.)

These allegations are sufficient to plead the elements for these causes of action.

Further, fraud claims are allowed despite the economic loss rule where there has been fraud in the performance or inducement of a contract. (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 991–93.) That is the situation here, and thus these causes of action withstand demur.

The Court OVERRULES the Demurrer to the seventh and eighth causes of action for fraudulent/intentional misrepresentation and negligent misrepresentation, respectively.

IV. Conclusion

The real property is ORDERED released from the mechanic’s lien described below.