Judge Ralph C. Hofer, Case Number: 23GDCV02611, Date: 2025-03-07 Tentative Ruling

Plaintiffs Bertram Yuh and Janice Yuh allege that they have a primary residence located in La Canada Flintridge, and that in December of 2020, plaintiffs entered into a written contract with defendant Building Worx, Inc. (Building Worx or Defendant), whereby defendant agreed to provide construction remodeling services for $1,425,223.52 at plaintiffs’ property.

The complaint alleges that it was agreed that the approximate start date of the project was to be in February 2021, and that the project would be completed within twelve months. The completion date was material as plaintiffs rented another house pending completion. The project began in June of 2021, which aligned with a June 2022 completion date. In July of 2021, Building Worx obtained a permit to demolish the existing residence only. Even though it had not applied for, or obtained, a pool demolition permit at the time, defendant nevertheless proceeded to demolish the pool as well and substantially regraded the site without a grading permit, grading plans, or City inspection. It is also alleged that the grading work went well beyond what was called for in the architect’s plans.

Plaintiffs allege that the site grading work resulted in the issuance of a Citation and Stop Work Order by the City in August of 2021, which Citation notes that Building Worx had performed extensive illegal site grading without the benefit of grading plans, grading permits, or inspection as required under the Code. The Citation and subsequent inspection records also note extensive site grading of the building pad, along with the demolition of the pool and backfill, without proper permits or City inspection. Defendant was instructed in writing to obtain proper permits through the City before doing any further work, resulting in significant delay in the project.

Plaintiffs allege that defendant has never provided to plaintiffs any of the City’s original paperwork related to the Citation and Stop Work Order, but instead falsely represented through its owner, defendant Robert Artura, both verbally and in writing, that the reason behind the issuance of the Citation and Stop Work Order related specifically to the pool demolition and related backfill. This work was not a part of the original construction contract but was subsequently added by a written change order. Defendant further represented that a City Public Works crew had observed the unpermitted pool demolition and grading work in progress and alerted the City. Plaintiffs allege that the representations were apparently false and intended to deceive plaintiffs about the true nature of the Citation and Stop Work Order.

The complaint alleges that the true facts were that the City Building inspector was called to site by either defendant or a subcontractor to sign off on a temporary power pole installation, and that the City inspector then alerted a City compliance officer who issued the Citation and Stop Work Order the following morning, and that the reason for the Citation and Stop Work Order goes far beyond the pool work, but relates to the unpermitted grading and compaction work on the site undertaken by defendant without proper plans, permits and inspections. Defendant’s conduct created almost a year long delay in the project, requiring plaintiffs to rent another house during the duration of the delay, and face added interest costs on plaintiffs’ loans. Plaintiffs also allege that instead of revealing the true facts behind the City’s enforcement actions, defendant instructed plaintiffs to engage a civil and soils engineer to resolve the issue, which would allow the work to continue, and then without plaintiffs’ prior knowledge provided a scope of work to an outside engineering firm and advised plaintiffs to hire the firm or that the project would continue to languish, as a result of which plaintiffs engaged the engineering firm and accepted its proposal.

The complaint also alleges that by the time plaintiff discovered the false representations, plaintiffs also discovered that defendant had negligently performed the work they were contracted to do, which was far below industry standards. They also discovered that defendants had breached the contract between the parties in numerous respects. Specifically, it is alleged that, among other things, defendant failed to perform the work in a timely or workmanlike manner and in compliance with the plans and specifications, failed to adequately supervise the project, failed to protect the property from weather, provided unwanted services unnecessary to the project, and demanded payment for those services, failed to obtain required permits, charged for items not required or within the scope of work, charged for services and expenses that were not provided, utilized facilities and resources for which plaintiffs paid for the benefit of other clients, failed to maintain accurate accounting, and issued numerous improper change orders.

Plaintiffs also allege a cause of action against defendant American Contractors Indemnity Company, also referred to in the complaint (apparently erroneously) as Old Republic Surety Company (Surety), who allegedly issued a Bond to defendant general contractor Building Worx in the sum of $25,000, inuring to the benefit of any person damaged as a result of a violation of the Business and Professions Code governing licensed general contractors. The complaint alleges that the acts and omissions of defendant Building Worx constitute violations of Business and Professions Code sections 7000 and 7173, so that defendant Surety is indebted to plaintiffs in the full amount of the penal sum of the license bonds issued to defendant Building Worx.

Defendant Building Worx and its principal Robert Artura have filed a cross-complaint for indemnity, contribution, apportionment, and declaratory relief against various subcontractors and others retained by cross-complaints to work on the subject construction project. The First Amended Cross Complaint is brought against various parties, including cross-defendant Grasmick Construction, LLC, substituted for Roe 5.

Moving party CM Advantage Specialty Insurance Company, sometimes referred to in the moving papers as CM “Vantage” Specialty Insurance Company (CM Advantage) is an insurer which indicates it insured cross-defendant Grasmick Construction LLC (Grasmick Construction) under a General Liability Policy, and that based on the allegations in the action cross-defendant Grasmick Construction may qualify as an insured under the policy. CM Advantage argues that it has an interest in defending the action on behalf of Grasmick Construction to refute the claims alleged.

CM Advantage indicates that Grasmick Construction has not appeared in the action to date and is a “terminated” entity on the California Secretary of State website, and that as such, CM Advantage is so situated that the disposition of the action may impair or impede its ability to protect its interests through Grasmick Construction unless those interests are adequately represented in this action.

(c) A nonparty shall petition the court for leave to intervene by noticed motion or ex parte application. The petition shall include a copy of the proposed complaint in intervention or answer in intervention and set forth the grounds upon which intervention rests.

(B) The person seeking intervention claims an interest relating to the property or transaction that is the subject of the action and that person is so situated that the disposition of the action may impair or impede that person's ability to protect that interest, unless that person's interest is adequately represented by one or more of the existing parties.

Traditionally, insurers, although they have an interest in the case, were treated like simple creditors, which had no right to intervene in actions concerning debtors absent some indication that the case was not being adequately pursued. See Fireman’s Fund v. Gerlach (1976) 56 Cal.App.3d 299.

However, in 2000, in response to Insurance Code § 11580, which provides that a judgment creditor may proceed directly against any liability insurance covering the defendant, insurers were permitted to intervene to prevent a default. Reliance Ins. Co. v. Superior Court (2000) 84 Cal.App.4th 383.

“An insurer's right to intervene in an action against the insured, for personal injury or property damage, arises as a result of Insurance Code section 11580. Section 11580 provides that a judgment creditor may proceed directly against any liability insurance covering the defendant, and obtain satisfaction of the judgment up to the amount of the policy limits. (See Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group) P 15:1028 et seq. (rev. # 1, 1999).) Thus, where the insurer may be subject to a direct action under Insurance Code section 11580 by a judgment creditor who has or will obtain a default judgment in a third party action against the insured, intervention is appropriate. ( Clemmer v. Hartford Insurance Co. (1978) 22 Cal. 3d 865, 884-885 [151 Cal. Rptr. 285, 587 P.2d 1098].) The insurer may either intervene in that action prior to judgment or move under Code of Civil Procedure section 473 to set aside the default judgment. (22 Cal. 3d at pp. 884-885.) Where an insurer has failed to intervene in the underlying action or to move to set aside the default judgment, the insurer is bound by the default judgment. ( Id. at p. 886.)”

It appears that CM Advantage here is an insurer which may be subject to direct action under Insurance Code section 11580 by plaintiff if the default of CM Advantage’s insured is taken and a default judgment is ultimately entered against the insured. CM Advantage indicates it has offered to provide a defense to Grasmick Construction pursuant to a reservation of rights, and has a direct and immediate interest in this litigation as CM Advantage may be asked to satisfy a default judgment entered against Grasmick Construction if one is obtained. CM Advantage argues that Grasmick Construction has taken no steps to defend itself from the claims asserted against it because it is a terminated entity.

CM Advantage submits the declaration of the claims professional responsible for the claim to CM Advantage for the defense of Grasmick Construction in the current action, Sarah Arneson. She indicates that based on Arneson’s personal knowledge or information and belief based on her review of CM Advantage’s file, “Navigators” issued a general liability policy to Grasmick Construction, effective from March 18, 2023 through March 18, 2024. [Arneson Decl., para. 2]. The court assumes this is a typographical error, unless advised otherwise. Arneson also states that “Upon tender of the litigation, CM Advantage agreed to defend Grasmick Construction pursuant to a reservation of rights,” and appointed a law firm to defend it. [Arneson Decl., para. 3].

“I am informed that Grasmick Construction LLC (entity number 202028610627) was a California limited liability company that was terminated on January 30, 2024. The file number for the California Secretary of State is BA20240192564. The certificate of termination is attached to the Motion to Intervene as Exhibit B.”

Ordinarily, an insurer would submit a copy of the subject policy, and a copy of documentation confirming the status of the corporation rendering it unable to appear itself in the action. While the court is inclined to credit the testimony of the claims professional with respect to the existence of a policy, the court requires the insurer to submit, before or at the hearing on the motion, a copy of the documentation represented to be included in Exhibit B confirming the current status of Grasmick Construction LLC. Otherwise, the motion hearing will be continued for the submission of further proof.

The court is also concerned that there is no indication from the court file that Grasmick Construction has been served, as there is no proof of service with respect to this cross-defendant, so it is not clear that the insured is in a position where its default will be taken. However, the court will also credit the testimony of the claims professional that the litigation was tendered to CM Advantage, and assume that the insured by tendering the litigation, had some reason to be aware of this lawsuit. [See Arneson Decl., para. 3]. The file reflects that Grasmick Construction has not been dismissed from the action, and the file contains no indication that cross-complainants intend to dismiss their claims against Grasmick Construction or decline to pursue them. There has been no opposition to this motion filed by any party to call into question the current posture of the proceedings against the insured.

If satisfactory proof is submitted by the hearing concerning the status of Grasmick Construction with the Secretary of State rendering that party unable to defend the action on its own behalf, the court will find that the showing by CM Advantage is sufficient to establish recognized grounds for CM Advantage to be permitted to intervene in this matter. The motion will then be granted.

(B) A party who has appeared in the action or proceeding, whether represented by an attorney or not represented by an attorney, shall be served in the same manner for service of summons pursuant to Article 3 (commencing with Section 415.10) of Chapter 4 of Title 5 of Part 2, or in the manner provided by Chapter 5 (commencing with Section 1010) of Title 14 of Part 2.

(f) Within 30 days after service of a complaint in intervention or answer in intervention, a party may move, demur, or otherwise plead to the complaint in intervention or answer in intervention in the same manner as to an original complaint or answer.”

The moving papers make reference to a proposed Answer in Intervention accompanying this motion. As noted above, there have been no exhibits submitted with the moving papers, and the court is unable to locate a proposed Answer in Intervention in the file. Intervenor nevertheless is permitted to file any required pleadings, and is expected to fully comply with the procedural requirements set forth above once it has been permitted leave to intervene.

The moving papers do not include a copy of Exhibit B, referenced in the Declaration of Sarah Arneson. Moving part is ordered to file a copy of the missing exhibit with the Court at or before the hearing on this matter. If such documentation is not submitted, the motion will be CONTINUED for submission of satisfactory proof of the current corporate status of cross-defendant Grasmick Construction, LLC or DENIED WITHOUT PREJUDICE.

The Court finds that CM Advantage Specialty Insurance Company has sufficiently established pursuant to CCP § 387 that it claims an interest relating to the property or transaction that is the subject of this action and that it is so situated that the disposition of the action may impair or impede its ability to protect that interest. See also Reliance Ins. Co. v. Superior Court (2000) 84 Cal.App.4th 383.

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