Judge: Richard L. Fruin, Case: 24STCV24472, Date: 2025-04-08 Tentative Ruling

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Case Number: 24STCV24472    Hearing Date: April 8, 2025    Dept: 15

# 5     TENTATIVE RULING                9:15 a.m., Tuesday, April 8, 2025

CLAUDIA CORONADO v. BENJAMIN HARRIS, et al. [24STCV24472]

DEMURRER WITH MOTION TO STRIKE TO THE CROSS-COMPLAINT OF PLAINTIFF/CROSS-DEFENDANT CLAUDIA CORONADO

MEET AND CONFER: [DEFECTIVE] (Parties did not meet and confer despite attempts to do so telephonically and by email by Cross-Defendant’s counsel. (Fok Decl., ¶ 8.))

TIMELINE: construction contract dispute; issues: no license; suspended corporation

10/2022: Defendants/Cross-Complainants BH Construction, Inc. and Big Boy Construction, Inc. (“Entity Defendant(s)”)[1] enter into a written agreement to perform work for Plaintiff/Cross-Defendant Claudia Coronado (“Coronado”) at the property located at 223 North Rock River Dr., Diamond Bar, CA 91765 (the “Property”). (XC, ¶ 7.) Defendant/Cross-Complainant Benjamin Harris (“Harris”) is the owner of BH Construction, Inc., which allegedly operates as a “franchise” of Big Boy Construction Inc. (Id., ¶¶ 2-3.) Harris alleges the “franchisor” Big Boy Construction Inc., is a licensed California contractor. (Id., ¶ 9.) Harris also alleges his “business associate,” Mr. Viera, was licensed. Nevertheless, Harris alleges he was the principal for the Entity Defendant(s)’ work on the Property. (Ibid.)

At some point, Coronado stopped making payments under the parties’ contract and did not allow further work on the Property. At the time, Coronado allegedly owed $10,000 under the contract and confiscated Cross-Complainants’ tools and materials. Coronado claimed Cross-Complainants were unlicensed contractors, but Harris informed Coronado that this was merely an “oversight.” (Id., ¶ 12.)

 9/20/2024: Coronado files the Complaint, alleging causes of action for:

1.   Breach of Contract

2.   Disgorgement

3.   Violation of Cal. Bus. & Prof. Code § 17200, et seq.

4.   Fraud

11/8/2024: Harris and the Entity Defendants file the Cross-Complaint (“XC”), alleging causes of action for:

 1.   Fraud

2.   Unjust Enrichment

3.   Restitution in Quasi-Contract

4.   Replevin

11/20/2024: Coronado files this Motion to Strike as to the XC.

11/22/2024: Coronado files this Demurrer to the XC.

No Oppositions filed as of hearing date.

3/13/2025: Harris and the Entity Defendants file a Motion for Change of Venue, which is denied on 4/3/2025 by Dept. 1.

TENTATIVE RULING: DEMURRER TO THE CROSS-COMPLAINT OF PLAINTIFF/CROSS-DEFENDANT CLAUDIA CORONADO is SUSTAINED without leave to amend.

MOTION TO STRIKE TO THE CROSS-COMPLAINT OF PLAINTIFF/CROSS-DEFENDANT CLAUDIA CORONADO is GRANTED.

I.        DEMURRER

Coronado demurs to the 1^st, 2^nd, and 3^rd causes of action in the XC on the grounds of uncertainty and failure to state facts sufficient to constitute the causes of action.

A.   Bus. & Prof. Code § 7031 Precludes Recovery by Unlicensed Contractors

First, Coronado argues Cross-Complainants are statutorily barred from asserting any claim for compensation for the performance of any act or contract without a valid contractor’s license. Indeed, Bus. & Prof. Code, § 7031[2] “states that one may not sue in a California court to recover ‘compensation’ for ‘any act or contract’ that requires a California contractor's license, unless he ‘alleges and proves’ he was duly licensed at all times during his performance.” (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 991–992.) The statute even bars an unlicensed contractor's fraud claim, “when the primary deceit alleged is a false promise to pay, and the damages primarily consist of, or are measured by, the price or value of the work and materials furnished.” (Id., at 992.) As the Supreme Court of California has explained, “[a]ny other result would circumvent the clear statutory policy of deterring unlicensed contract work.” (Ibid.)

Here, the alleged construction contract was entered in October 2022, with work to be performed sometime thereafter. (XC, ¶¶ 7-10.) Cross-Complainants allege in the XC that their “franchisor” Big Boy Construction Inc. is a licensed California contractor and that Harris’s “business associate,” nonparty Mark Viera, is licensed. (Id., ¶ 9.) However, Harris alleges he personally served as the principal for the Entity Defendant(s) while the construction on the Property occurred. (Ibid.) Cross-Complainants also allege Harris informed Coronado that “as a franchise, a corporate office that was not under the control of Harris was responsible for providing the state of California contractor’s license board with the pertinent filings” for the Entity Defendant(s). (Id., ¶ 12.) Harris admits he further informed Coronado that “this was merely an oversight, that could be quickly corrected.” (Ibid.) In other words, the allegations in the XC itself appear to concede that Harris and the “franchisee” (ostensibly the Entity Defendant(s)) were unlicensed while performing at least some portion of the construction on the Property.[3] The burden of proving licensure compliance under these circumstances is on the potential licensee (here, Cross-Complainants). (Bus. & Prof. Code, § 7031(d).) As Cross-Complainants have not opposed this Demurrer, they fail to overcome the burden of establishing they were licensed contractors during their performance of construction services on the Property.

B.    1^st Cause of Action: Fraud

To the extent that Cross-Complainants are not already precluded from recovering for their fraud claim due to Cal. Bus. & Prof. Code § 7031, Coronado also argues the 1^st cause of action is defective based on lack of specificity. “The facts constituting the fraud, including every element of the cause of action, must be alleged factually and specifically.” (Apollo Cap. Fund, LLC v. Roth Cap. Partners, LLC (2007) 158 Cal. App. 4th 226, 240.) “This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “California courts apply the same specificity standard to evaluate the factual underpinnings of a fraudulent concealment claim at the pleading stage, even though the focus of inquiry shifts to the unique elements of the claim.” (Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 43.) Here, the Court finds Cross-Complainants’ fraud claim fails to overcome this heightened pleading requirement. The fraud claim is based on the allegation that at some point after the contract was executed, Coronado “began to complain that the work was taking too long” and developed “a scheme not to pay for all of the work, not to allow all of the work, and to confiscate Cross-Complainants’ tools and work materials.” (XC, ¶ 22.) The XC further alleges Coronado never informed Cross-Complainants of her “scheme,” and instead filed insurance claims which were denied. (Id., ¶ 23.) However, there are no allegations identifying how Coronado intentionally misled Cross-Complainants or indicating that Coronado made any affirmative false statements or omitted material information from Cross-Complainants at any time. For example, there are no allegations indicating Coronado induced Cross-Complainants to perform further work on the Property while covertly intending not to pay them. The XC also fails to state when any such purported fraud occurred. Without more, these allegations at most suggest that Coronado simply refused to make payments upon discovering that Cross-Complainants were unlicensed contractors. (Id., ¶¶ 12-13.) Such allegations are not sufficient to support a cause of action for fraud.

Therefore, Coronado’s Demurrer to the 1^st, 2^nd, and 3^rd causes of action is SUSTAINED without leave to amend. On its face, the XC demonstrates that Cross-Complainants cannot demonstrate compliance with Bus. & Prof. Code § 7031. Cross-Complainants also fail to oppose this Demurrer and thus have not established their ability to cure the above defects, even if given another opportunity to do so. Accordingly, the Court declines to grant leave to amend these causes of action.

C.   Entity Defendant(s) Lack Capacity to Maintain this Action

Finally, Coronado argues the Entity Defendant(s) should be precluded from participating in the instant action. Under Rev. & Tax. Code § 23301, “[t]he ‘corporate powers, rights and privileges’ of any domestic corporate taxpayer may be suspended for failure to pay certain taxes and penalties. (Center for Self-Improvement & Community Development v. Lennar Corp. (2009) 173 Cal.App.4th 1543, 1552.) “This means the suspended corporation cannot sell, transfer or exchange real property in California, and contracts entered into during the time of suspension are voidable by the other party or parties through legal action.” (Id., citing Rev. & Tax.Code, §§ 23302(d), 23304.1(a), 23304.5.) “Nor, during the period of suspension, may the corporation prosecute or defend an action...” (Id., at 1552.)  

Here, while the XC identifies “BH Construction Inc.” as a Cross-Complainant and alleges “BH Construction Inc.” is incorporated in the State of California, the California Secretary of State’s website indicates that all entities with this exact name have either been terminated or suspended by the Franchise Tax Board. (RJN, Exh. 1.) The entity known as “BHConstruction Inc.” (space omitted intentionally) (Entity No. 4045938) is also currently identified as suspended by the Franchise Tax Board as of July 31, 2022. (RJN, Exh. 4.) Coronado argues the latter entity is the intended Cross-Complainant in this action, as evidenced by the fact that Harris is identified as the “Director” and “Chief Financial Officer” on the entity’s Statement of Information filed with the California Secretary of State. (RJN, Exh. 3.) In the Court’s view, the judicially noticed documents support a finding that “BHConstruction Inc.” is both the intended Cross-Complainant in this action is currently suspended in the State of California, and was suspended at both the time of filing the XC and at the execution the parties’ contract. Accordingly, Cross-Complainant “BHConstruction Inc.” Inc.” lacks capacity to maintain the instant action.

The same appears to be true for Cross-Complainant Big Boy Construction, Inc. As discussed above in footnote 1, the “Preliminary Construction Contract Agreement” attached to the XC suggests BHConstruction Inc. and Big Boy Construction Inc. are not separate contracting entities, but rather, BH Construction Inc. was doing business as “Big Boy Construction Inc.” (XC, Exh. A.) Even further, this Court has taken judicial notice of the California Secretary of State’s website search records, which indicate there is no entity registered to do business in California as “Big Boy Construction, Inc.” even though the XC alleges Big Boy Construction, Inc. is a corporation which operates franchises in California. (RJN, Exh. 5; XC, ¶ 3.) Taken together, these documents support an inference that “Big Boy Construction, Inc.” is merely a fictitious business name for Cross-Complainant BH Construction Inc. “Use of a fictitious business name does not create a separate legal entity.” (The Rossdale Group, LLC v. Walton (2017) 12 Cal.App.5th 936, 940.) Accordingly, the Entity Defendant(s) are collectively subject to the same capacity issues.

Notwithstanding, lack of capacity to sue is a legal disability and is a plea in abatement that can be cured. (Washington Mut. Bank v. Blechman (2007) 157 Cal.App.4th 662, 669; See also Center for Self-Improvement, supra, 173 Cal.App.4th at 1552, internal quotations and citations omitted (“A plea that a corporation lacks capacity to maintain an action because its corporate powers have been suspended for nonpayment of taxes is a plea in abatement which is not favored in law, is to be strictly construed and must be supported by facts warranting the abatement’ at the time of the plea. Pleas in abatement do not challenge the justness or merits of a plaintiff's claim, but rather object to the place, mode, or time of asserting a claim.”) Thus, the proper procedure with respect to the remaining 4^th cause of action is to abate the proceedings to allow the Entity Defendant(s) to obtain capacity. (The Rossdale Group, LLC v. Walton (2017) 12 Cal.App.5th 936, 943 (“[A] plea in abatement such as lack of capacity to sue ‘must be raised by defendant at the earliest opportunity or it is waived.... The proper time to raise a plea in abatement is in the original answer or by demurrer at the time of the answer.’”))

II.       MOTION TO STRIKE – GRANTED

Coronado moves to strike the request for punitive damages from the XC. Given the above ruling, there is no basis to support a claim for punitive damages. The only remaining cause of action in the XC is for Replevin, which does not allege the requisite malice, oppression, or fraud to entitle Cross-Complainants to punitive damages. Accordingly, the Motion to Strike is GRANTED.

III.      REQUEST FOR JUDICIAL NOTICE

Coronado seeks judicial notice of the following documents:

1.   Certified Copy of Verified Certificate of Non-Licensed Status for “Benjamin Harris d/b/a BH Construction, Inc. or Big Boy Construction, Inc.” issued by the Contractors State License Board for California. (RJN, Exh. 1.)

2.   The “Business— Search Entity Detail” results obtained from the California Secretary of State for “BH Construction,” “BHConstruction Inc.,” and “Big Boy Construction” (dated November 11, 2024). (RJN, Exhs. 2, 3, 5.)

3.   The “Statement of Information” for BHConstruction, Inc. from the California Secretary of State (filed May 22, 2021). (RJN, Exh. 4.)

The Court takes judicial notice of Exhibit 1 pursuant to Evid. Code § 452(c), only to the extent that it reflects that the Contractors State License Board of California’s found no records indicating licensure of Benjamin Harris d/b/a BH Construction Inc or d/ab/a Big Boy Construction Inc. located at 12001 Ventura Place Studio City, CA 91604. (Fowler v. Howell (1996) 42 Cal.App.4th 1746, 1750 (“Evidence Code section 452, subdivision (c) permits the trial court to take judicial notice of the records and files of a state administrative board.”))

The Court takes judicial notice of Exhibits 2-5 pursuant to Evid. Code § 452(c), as records of the California Secretary of State. (Belen v. Ryan Seacrest Productions, LLC (2021) 65 Cal.App.5th 1145, 1161, fn. 2 (Per Evid. Code § 452(c), a statement of information filed with the California Secretary of State is a document for which a court can properly take judicial notice); (Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2016) 6 Cal.App.5th 1207, 1215, aff'd (2018) 4 Cal.5th 637 (business entity information from the California Secretary of State website reflecting that an entity’s status was suspended as of a particular date is properly subject to judicial notice.))

Plaintiff/Cross-Defendant Claudia Coronado to serve notice of ruling.  This tentative ruling (“TR”) shall be the order of the Court unless changed at the hearing and shall by this reference be incorporated into the Minute Order.

TR emailed to counsel on 4/8/25 at 8:30 a.m.