Judge Ralph C. Hofer, Case 22GDCV00480 2023-01-06 Tentative Ruling

Plaintiff Shannon Conn alleges that in January of 2016, plaintiff entered into a Residential Purchase/Sale Agreement for the purchase of real property in Magalia, California, and that in February of 2016, the sellers agreed to make repairs to the subject property, including repairing the sinks and windows. Plaintiff was assured that no leaks were found in the master bathroom, but in April of 2016, shortly after plaintiff moved into the subject property, plaintiff discovered leaks and water intrusion.

Plaintiff alleges that in May of 2016 she hired Jim E. Hale dba Jim E. Hale B General Contractor and Plumbing Contractor to inspect and resolve the defects in the subject property. Hale represented that he had repaired the leak, but the leak in fact remained unrepaired, and caused water intrusion and mold growth.

The FAC alleges that at all times mentioned, Hale, as a licensed contractor, was required to be bonded, and was bonded through defendant Hudson Insurance Company. Plaintiff alleges that in July of 2022 plaintiff contacted defendant Hudson Insurance to recover against Hale’s contractor bond, but on July 20, 2022, defendant denied any claim by plaintiff. Plaintiff alleges that she has been harmed by defendant’s unjustified refusal to recognize and pay plaintiff’s asserted claim.

Defendant Hudson Insurance filed a demurrer and motion to strike in response to the initial complaint, which was heard on November 4, 2022. The motion to strike punitive damages was sustained without leave to amend. The demurrer was sustained with leave to amend as to the first cause of action for recovery on a contractor’s license bond and second cause of action for breach of the covenant of good faith and fair dealing. The demurrer was overruled to the third cause of action for intentional interference with contract and fourth cause of action for declaratory relief. Plaintiff was permitted twenty days leave to amend.

(1) On the ground the cause of action appears to be barred by the statutory statute of limitations included in Business & Professions Code section 7071.11. On any further amendment and challenge on this ground, the Court will expect plaintiff to fully meet and confer and brief to this Court the grounds pursuant to which this cause of action is timely under the applicable statutory provisions in connection with contractor’s bonds.

“Plaintiff has failed to establish that there is some act or omission other than those alleged of Hale occurring in 2016 which would have triggered the statutory statute of limitations included in Business & Professions Code section 7071.11, or that there was some delay in accrual recognized by cited legal authority. The demurrer accordingly is sustained with one opportunity to amend to more clearly plead around the bar of the statute of limitations.”

(1) Within two years after the expiration of the license period during which the act or omission occurred. The provisions of this paragraph shall be applicable only if the license has not been inactivated, canceled, or revoked during the license period for which the bond was posted and accepted by the registrar as specified under Section 7071.7.

(2) If the license has been inactivated, canceled, or revoked, an action shall be brought within two years of the date the license of the active licensee would have expired had the license not been inactivated, canceled, or revoked. For the provisions of this paragraph to be applicable, the act or omission for which the action is filed must have occurred prior to the date the license was inactivated, canceled, or revoked….

(d) A claim to recover wages or fringe benefits shall be brought within six months from the date that the wage or fringe benefit delinquencies were discovered, but in no event shall a civil action thereon be brought later than two years from the date the wage or fringe benefit contributions were due.”

Defendant argues that the FAC has added a number of superfluous paragraphs, but the substance has not changed, and that the only act or omission by the contractor in this matter occurred in May of 2016, and plaintiff cannot plead around that date.

Defendant argues that according to paragraphs 19-24 of the complaint, the act/omission occurred on May 25, 2016, and that the license period at issue was from January 1, 2016 to December 31, 2017. Defendant references a Request for Judicial Notice, Ex. A, which is a copy of a license history page from the California Contractors State Licensing Board relating to Hale, which shows a Bond History with Hudson Insurance Company issuing a bond from January 1, 2016 through a cancellation date of August 12, 2017. [RFJN, Ex. A]. Defendant also relies on this same bond history which is purportedly attached to the FAC as exhibit 3. The FAC which was filed with the court, however, does not include any of the exhibits referenced, just tabs with exhibit numbers. Plaintiff will be ordered to file with the court the copies of the exhibits which were evidently in the copy of the FAC which was served.

Defendant argues that a contractor’s license is valid for two-year increments, as reflected in Business & Professions Code section 7140, which provides, in pertinent part, “All licenses issued under the provisions of this chapter shall expire two years from the last day of the month in which the license is issued, or two years from the date on which the renewed license last expired.” Defendant argues that the contractor’s acts or omissions, alleged to have occurred in May of 2016, occurred during the two-year period from license renewal in January of 2016, which license period expired on December 31, 2017. The two-year statute of limitations accordingly expired two years from the end of the two-year license period ending December 31, 2017, which would have been on December 31, 2019. This action was filed on August 3, 2022, long after the expiration of the two-year statute of limitations.

As noted above, the bond history shows that the bond covering the act or omissions in May of 2016 appears to be a bond issued with an effective date of 01/01/2016, which was cancelled on 08/12/17. [RFJN, Ex. A, Complaint, Ex. 3]. This bond was issued by defendant. [Id.]. However, according to the statute, and as indicated in the moving papers, it appears that the two-year licensing period applies regardless of any cancellation, so that a license renewed in January of 2016, although cancelled in August 2017, would have expired according to statute two years later, in December 2017 or January of 2018, with two years from that date being in 2019 or 2020, well before this action was filed in 2022.

Plaintiff argues that the FAC, at paragraphs 39 to 59, now alleges that plaintiff contacted Jim Hale numerous times to repair the leaking and water intrusion, to no avail, and so, on May 25, 2017, within the time frame of any statute of limitations, plaintiff filed a complaint for damages against Hale, in the Superior Court of California, County of Butte. [FAC, paras. 31-33]. The FAC alleges that on May 23, 2022, the court entered judgment against Jim Hale, and in favor of plaintiff, in the sum of $15,000. [FAC, para. 35]. The FAC alleges that at all relevant times Jim Hale was bonded through defendant Hudson Insurance. [FAC, para. 35, 45]. It is also alleged that Jim Hale was required to and did notify defendant Hudson Insurance of the claim back in 2017, so that Hudson Insurance had actual notice of the pending claim against the bond. [FAC, paras. 47-52].

The doctrine of equitable tolling has developed primarily to avoid the harsh results of the rule that statutes of limitations are considered mandatory where an injured person has several legal remedies and reasonably and in good faith pursues one, and the defendant is not prejudiced thereby. Nichols v. Canoga Industries (1978) 83 Cal.App.3d 956, 962. In Nichols, the Second District reversed the dismissal of a complaint on statute of limitations ground where the complaint had alleged the filing of a complaint within the statute of limitations in another forum, in that case, the federal courts.

Plaintiff relies on McDonald v. Antelope Valley Community College Dist. (2008) 45 Cal.4th 88, in which the California Supreme Court determined that equitable tolling applied to public defendants as well as private defendants and noted that the judicially created equitable tolling rule required “a showing of three elements: “timely notice, and lack of prejudice, to the defendant, and reasonable and good faith conduct on the part of the plaintiff.” McDonald, at 102, quoting Addison v. State of California (1978) 21 Cal.3d 313, 319.

“The purpose of equitable tolling is to “ease[ ] the pressure on parties ‘concurrently to seek redress in two separate forums with the attendant danger of conflicting decisions on the same issue.’ ” It is intended to benefit the court system “by reducing the costs associated with a duplicative filing requirement, in many instances rendering later court proceedings either easier and cheaper to resolve or wholly unnecessary.””

The FAC now alleges that plaintiff pursued an alternate remedy by timely pursuing the contractor directly, that defendant Hudson Insurance was notified of the claim in 2017, so had actual knowledge of the pending claim against the bond, and was not prejudiced, and that plaintiff’s conduct was reasonable. [FAC, paras. 31, 32, 34, 35, 45, 47-58]. It is alleged, in fact that Hudson Insurance’s actual identity was affirmatively concealed from plaintiff, suggesting a remedy in equity would be appropriate. [FAC, para.55].

Defendant argues in the meet and confer correspondence that the cases cited by plaintiff relate to the judicially created concept of equitable tolling, and that neither case arose in a surety bond context with the statutory mandates of the Business & Professions Code at issue.

Plaintiff cites to CACI 457, which sets forth the elements for equitable tolling, and provides, in the “Directions for Use,” that “Equitable tolling, including any disputed issue of fact, is to be decided by the court, even if there are disputed issues of fact. This instruction is for use if the court submits the issue to the jury for advisory findings.” CACI 457, Directions for Use, citations omitted.

The Directions also indicate, by citation to specific case law, that equitable tolling is not available for legal malpractice, nor for medical malpractice with regard to the three-year limitation period (although the one-year period may be tolled on other grounds). CACI 457, Directions for Use, citations omitted. There is no indication that any other statutory period is not subject to an equitable tolling argument.

Moreover, it is generally held with respect to a statute of limitations defense that a demurrer on the ground a cause of action is barred by the statute of limitations should be sustained only where the facts alleged on the face of the complaint “clearly and affirmatively” show that the cause of action is barred. It is not enough that the complaint might be barred. Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.

Accordingly, given that the matter is at the pleading stage, and plaintiff has now sufficiently alleged facts which could support a claim that the statute of limitations should be subject to equitable tolling, the demurrer on statute of limitations grounds now is overruled.

The demurrer does not demur to the pleading on grounds other than statute of limitations grounds, either in the notice or in the memorandum of points and authorities. The demurrer accordingly is overruled as to all causes of action in its entirety.

The Court notes that the copy of the First Amended Complaint filed with the Court on eCourt does not include copies of the Exhibits referenced, Exhibits 1-3. Plaintiff is ordered to file with the Court the exhibits by close of business this date.

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