Judge: Randy Rhodes, Case: 21CHCV00807, Date: 2023-01-13 Tentative Ruling
Case Number: 21CHCV00807 Hearing Date: January 13, 2023 Dept: F51
DEMURRER
Demurrer without Motion to Strike Filed: 7/1/22 (corrected version filed 12/7/22)
MOVING PARTY: Defendant Business Alliance Insurance Company, a California Corporation (“Defendant”)
RESPONDING PARTY: Plaintiff Eve Sagi, an individual (“Plaintiff”)
NOTICE: OK
RELIEF REQUESTED: Defendant demurs to the second cause of action in Plaintiff’s second amended complaint (“SAC”).
TENTATIVE RULING: The demurrer is sustained with 30 days leave to amend. Defendant’s request for judicial notice is granted as to Exhibits A, C, and D, and denied as to Exhibit B.
The parties are reminded to review the 5/3/19 First Amended General Order Re Mandatory Electronic Filing for Civil. When e-filing documents, parties must comply with the “TECHNICAL REQUIREMENTS” which are set forth at page 4, line 4 through page 5, line 12 of the Court’s 5/3/19 First Amended General Order Re Mandatory Electronic Filing for Civil (particularly bookmarking declarations and exhibits). (CRC 3.1110(f)(4).) Failure to comply with these requirements in the future may result in papers being rejected, matters being placed off calendar, matters being continued so documents can be resubmitted in compliance with these requirements, documents not being considered and/or the imposition of sanctions.
I. BACKGROUND
On 12/29/20, Plaintiff entered into a contract for the provision of labor and materials towards the improvement of certain real property with an unidentified “contractor” party. The total contract price was $100,000. Plaintiff made a $40,000 partial payment, but alleged the contractor defendant abandoned the project, thereby forcing Plaintiff to hire a new contractor. Defendant provided the surety bond to the contractor. Plaintiff allegedly submitted a claim on the bond for $15,000, which Defendant eventually denied.
On 10/13/21, Plaintiff filed her complaint against Defendant, alleging the following causes of action: (1) Recovery on Contractor’s License Bond; (2) Violation of Unfair Competition Law; and (3) Conversion. On 12/27/21, Plaintiff filed her first amended complaint (“FAC”), alleging the following causes of action: (1) Recovery on Contractor’s License Bond; (2) Violation of Unfair Competition Law; (3) Violations of the Racketeer Influenced and Corrupt Organizations Act (RICO); (4) Conversion; and (5) Recovery of Payments Made to Unlicensed Contractors.
On 4/14/22, the Court ruled on Defendant’s 2/22/22 demurrer to the FAC as follows: overruled as to Plaintiff’s first cause of action; sustained with leave to amend as to the second cause of action; sustained without leave to amend as to the third cause of action; and moot/off-calendar as to the fourth and fifth causes of action. On 5/16/22, Plaintiff filed her second amended complaint (“SAC”), alleging the following causes of action: (1) Recovery on Contractor’s License Bond; (2) Violation of Unfair Competition Law; (3) Conversion; and (4) Recovery of Payments Made to Unlicensed Contractors.
On 7/1/22, Defendant filed the instant demurrer, which was corrected by its 12/7/22 errata filing. On 12/30/22, Plaintiff filed her opposition. On 1/6/23, Defendant filed its reply.
II. DEMURRER
Meet-and-Confer
Before filing its demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).) The demurring party must file and serve a meet and confer declaration stating either: “(A) The means by which the demurring party met and conferred with the party who filed the pleading subject to demurrer, and that the parties did not reach an agreement resolving the objections raised in the demurrer;” or “(B) That the party who filed the pleading subject to demurrer failed to respond to the meet and confer request of the demurring party or otherwise failed to meet and confer in good faith.” (Id. at subd. (a)(3).)
Here, Defendant’s counsel declares that on 6/9/22, he sent a letter to Plaintiff’s attorney detailing the issues raised in the instant demurrer via email and U.S. mail. (Decl. of Mazyar Mazarei, ¶ 2.) Later that day, counsel received an response from an attorney with Plaintiff’s counsel’s office, stating that Plaintiff’s counsel was out of the office, and agreeing to extend the filing deadline for the instant demurrer to 7/1/22. (Id. at ¶ 3.) No further meet and confer communication between the parties occurred. (Id. at ¶ 3.)
Therefore, counsel has satisfied the preliminary meet and confer requirements of Code of Civil Procedure section 430.41, subdivision (a).
Analysis
As a general matter, a¿party may respond to a pleading against it by demurrer on the basis of any single or combination of eight enumerated grounds, including¿that¿“the pleading does not state facts sufficient to constitute a cause of action.” (Code Civ. Proc., § 430.10, subd. (e).)
In¿a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co.¿(2004) 116 Cal.App.4th 968, 994.)¿“A demurrer tests the pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc.¿v.¿Accountants, Inc. Servs.¿(2007) 153 Cal.App.4th 1308, 1315.) As such, the court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda¿(2007) 147 Cal.App.4th 740, 747.)
Here, Defendant demurs to the second cause of action in Plaintiff’s SAC pursuant to Code of Civil Procedure section 430.10, subdivision¿(e),¿arguing that the cause of action fails¿to allege facts sufficient to¿state¿a cause of action for violation of the Unfair Competition Law.
1. Violation of Business and Professions Code section 17200 et seq.
Plaintiff’s second cause of action alleges that Defendant violated Business and Professions Code section 17200 et seq. (the “UCL”). To set forth a claim for unfair business practices in violation of the UCL, a plaintiff must establish that the defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.)
“In essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice ‘borrows’ violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 515.) A plaintiff alleging an “unfair” business practice under the UCL must show that the defendant's conduct is “tethered to an underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 613.) “‘Fraudulent,’ as used in the statute, does not refer to the common law tort of fraud but only requires a showing members of the public ‘are likely to be deceived.’” (Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 618.)
Here, Plaintiff alleges that Defendant has “engaged in unlawful, unfair, and fraudulent business acts,” and has “engaged in a pattern and practice of unfair, deceptive, untrue, and misleading business practices” by enforcing bond terms that contradict with statutory intent, and by “in bad faith denying bond claims made by consumers including Plaintiff.” (SAC ¶ 31.) Plaintiff later asserts that her “second cause of action is based on Defendant’s unlawful denial of Plaintiff’s bond claim” (2:1–2 [emphasis added].)
Defendant argues that its denial of Plaintiff’s claim alone cannot support a cause of action for a violation of the UCL. (Dem. 5:25–26.) Plaintiff argues in opposition that Defendant’s basis for denying Plaintiff’s claim, namely that the contractor’s license was suspended as opposed to “inactivated, canceled, or revoked,” is an inaccurate interpretation of the statute and terms of the bond, thereby making the denial unlawful. (Pl.’s Opp., 4:6–27.) Defendant argues in reply that Plaintiff’s own pleadings concede that the contractor was unlicensed, as opposed to suspended, as documented by Plaintiff’s fourth cause of action for Recover of Payments to Unlicensed Contractors. (Def.’s Reply, 3:8–18.) Under her fourth cause of action, Plaintiff seeks to recover payments made to the contractors to whom she refers as “not properly licensed” and “unlicensed.” (SAC ¶ 56.) The Court agrees with Defendant, and finds that Plaintiff’s argument that Defendant unlawfully denied her claim when the contractor’s license was merely suspended lacks merit in light of the contradicting assertions in her SAC.
As Defendant observes, the Court, in sustaining Defendant’s demurrer to Plaintiff’s UCL cause of action in her FAC, found that “the bond was issued to the contractor defendant, rather than any personal policy or representation to Plaintiff. The mere denial of the claim on the bond in no way supports a finding of an unlawful or deceptive business practice. A disagreement in the interpretation of the terms and circumstances will not support a deceptive business practice. Plaintiff’s proposed argument of a grand scheme of deception requires a finding whereby bonds are knowingly issued to contractors that regularly abandon their jobs and said bonds therefore constitute a sham act due to the intention of nonpayment from said contractor conduct. The court declines to entertain this hypothetical.” (4/14/22 Minute Order, pp. 4–5.)
Plaintiff’s lengthy amendments to this cause of action include the addition of statutory text and allegations that Defendant has a “pattern and practice” of unilaterally denying claims and failing to comply with statutory procedures for cancelling bonds, amounting to “a massive fraud scheme.” (SAC ¶¶ 39–44.) However, these allegations continue to lack factual support, and are once again insufficient to support a cause of action for a violation of the UCL. The Court notes that the parties do not address the “unfair” or “fraudulent” prongs of the UCL, and accordingly declines to include these issues in ruling on the instant demurrer.
Plaintiff additionally argues that Defendant is the only surety who has a policy of denying homeowners’ claims based on suspended contractor’s licenses, while later arguing that only one statutory violation is needed to bring a claim alleging an unlawful business practice under the UCL. (Pl.’s Opp., 5:1–28.) The Court therefore finds this argument irrelevant to Plaintiff’s allegation that Defendant engaged in an unlawful business practice in violation of the UCL.
As such, Plaintiff has failed to successfully allege facts sufficient to support a cause of action for a violation of Business and Professions Code section 17200 et seq., and Defendant’s demurrer is sustained.
III. LEAVE TO AMEND
Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Id.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).
Here, the Court notes that Plaintiff has previously been granted leave to amend his complaint after it sustained Defendant’s previous demurrer to this cause of action. Nevertheless, Plaintiff makes no request for leave to amend nor any accompanying showing that she is capable of further amending the SAC to cure the defects argued by Defendant.
Notwithstanding the foregoing, the Court exercises its discretion under its liberal policy of granting leave to amend, and grants Plaintiff 30 days leave to amend the SAC to cure the defects set forth above.
CONCLUSION
The demurrer is sustained with 30 days leave to amend. Defendant’s request for judicial notice is granted as to Exhibits A, C, and D, and denied as to Exhibit B.