Judge Teresa A. Beaudet, Case Number: 21STCV21935, Date: 2024-11-12 Tentative Ruling

This matter came on for trial on May 29, 2024, June 13, 2024, June 24, 2024 and July 1, 2024, in Department 50 of the above-entitled Court before the Hon. Teresa A. Beaudet, sitting without a jury. The Court, having considered the evidence and read Plaintiff’s Trial Brief and Closing Brief,[1] issues this tentative and proposed Statement of Decision. This tentative and proposed Statement of Decision will become the Statement of Decision unless, within 15 days hereafter, a party serves and files objections to the proposed Statement of Decision.

• Did Defendant defraud Plaintiffs? If so, what amount of damages did Plaintiffs prove

• If Plaintiffs proved fraud, are they entitled to recover punitive damages from Defendant?[2]

4903 S. Van Ness Avenue, Los Angeles, California 90062 (the “Property”) was held in the name of Plaintiffs Edelmira Giron (“Edelmira”) and Diego Ascencio (“Diego”).[3] (Transcript No. 1, dated 5/29/24, Page 9, lines 3-15). Edelmira is Diego’s mother. Plaintiff Celestino Preciado is Diego’s father-in-law (“Celestino”). (Transcript No. 1, dated 5/29/24, Page 8, lines 17-22).

Celestino located an advertisement placed by Defendant in the El Clasificado newspaper, stating that he is a contractor and his contact information. [Plaintiffs’ Exhibits 1 and 1b: Defendant’s Advertisement in “El Clasificado” and the certified translation attached thereto.] Defendant’s advertisement stated that Defendant was able to "To Legalize Rooms Without Permits As Dwellings, General Construction, Remodels And Additions, Painting, Roofing, Windows, In Order To Raise The Value Of The Home.· Roofing And – Roofing Guaranteed." At first, Defendant identified himself as “Jose,” but then later told Plaintiffs that his name was “Epitacio;” specifically when he provided Plaintiffs with the receipt for payment, he indicated his name was Epitacio. (Transcript No. 1, dated 5/29/24, Page 50, line 3 through Page 54, line 3).

Celestino then introduced Defendant to Edelmira and Diego. Edelmira and Diego also authorized Celestino to speak with Defendant regarding the work to be completed on the Property. (Transcript No. 1, dated 5/29/24, Page 58, lines 9-11, 18-21). In or about May 2018, Diego contacted Defendant to legalize the ADU located in the back of the Property. The Defendant said he would do the drawings first because that was the first step. They reached an agreement to do the drawings for $15,000. (Transcript No. 1, dated 5/29/24, Page 10, lines 8-28, page 11, lines 1-5). Diego paid him $5,000 and asked if he was licensed. Defendant said that he was licensed. [Plaintiffs’ Exhibit 7: a copy of the receipt for $5,000 from Defendant to Defendant crossing out the name of “Jose”, the name Defendant originally claimed.] (Transcript No. 1, dated 5/29/24, Page 11, lines 9-25; Page 14, lines 8-16, 24-28; Page 15, lines 1-9, Page 58, lines 12-14).

Thereafter, Defendant told Diego that there was an easement issue with the drawings and that he needed an additional $5,000.00, which Diego paid. [Plaintiffs’ Exhibit 9: Receipt from Defendant to Diego that states it is for the “Plan Easement Process” for $5,000.00.] [Plaintiff’s Exhibit 10: Receipt from Defendant to Diego for $5,000.00 for blueprints.] (Transcript No. 1, dated 5/29/24, Page 17, line 28; Page 18, lines 1-4, 12-16; Page 19, lines 3-8).

After the drawings were approved by the Los Angeles Department of Building and Safety, Diego hired Defendant to complete construction on the Property, and Defendant agreed. (Transcript No. 1, dated 5/29/24, Page 20, line 22 through Page 21, line 13, Page 21, line 28 through Page 22, line 17). [Plaintiffs’ Exhibit 5 and 5b: Contract dated November 11, 2019, and certified translation thereof.] Defendant drafted the Contract, and under the Contract, Defendant was to complete all construction on the Property, except painting. Celestino paid Defendant a down payment of $5,000 on the contract and another $5,000 toward the balance. [Plaintiffs’ Exhibit 21: Bank statement of Celestino listing check number 2957 to Defendant in the amount of $5,000 dated November 16, 2019, and listing check number 2963 to Defendant in the amount of $5,000]. The Defendant did not carry out the terms of the contract, instead complaining that it was too much work. So Diego and Celestino and Defendant then entered into another contract for the foundation and framing. The Contract specified that the work to be completed was to be laying the concrete floor and framing. This Contract was for $21,000, with a deposit of $7,000, another payment of $9,000, and a balance of $5,000 to be paid on the date the inspector signed off on the framing. [Plaintiffs’ Exhibit 6 and 6b: Contract Dated December 24, 2019, and a certified translation thereof]. (Transcript No. 1, dated 5/29/24, Page 24, lines 18-28; Page 25, line 1 through Page 26, line 26).

Celestino paid Defendant the down payment of $7,000 and the additional payment of $9,000. [Plaintiffs’ Exhibit 20: Bank statement of Celestino listing check numbers 2965 and 2966 to Defendant in the amounts of $7,000 and $9,000, respectively]. (Transcript No. 1, dated 5/29/24, Page 64, line through Page 65, line 12.) After Defendant received the payment of $16,000, Defendant told Diego and Celestino that the work had passed inspection, so the balance of $5,000 was due on the Contract, and they could move on to the plumbing work. Celestino then paid Defendant the amount of $5,000 on or about January 25, 2020. [Plaintiffs’ Exhibit 11: Copy of check from Celestino to Defendant in the amount of $5,000]. (Transcript No. 1, dated 5/29/24, Page 27, line 23 through Page 29, line 20; Page 59, lines 11-21; Page 63, lines 1-28; Page 64, lines 1-28; Page 67, lines 1-28). After issuing that check, Celestino voided the check and paid Defendant $5,000 in cash. [Plaintiffs’ Exhibit 12: Copy of receipt for payment made in cash from Celestino to Defendant in the amount of $5,000]. (Transcript No. 1, dated 5/29/24, Page 68, lines 4-10, 24-28; Page 69, lines 1-23). Based on Defendant’s representation that the inspector approved the work, Celestino then hired plumbers to complete the work and paid the plumbers $6,000. (Transcript No. 1, dated 5/29/24, Page 70, lines 6-16). Once hired, Celestino asked Defendant to go to the site and look at the work the plumbers were doing. Defendant requested to be paid $200 to do this, and Celestino paid him. [Plaintiffs’ Exhibit 13: Copy of receipt dated June 26, 2020, from Defendant to Celestino for the payment of $200.] (Transcript No. 1, dated 5/29/24, Page 70, lines 17-28; Page 71, lines 1-9). The work was completed by the plumbers and Celestino then called the inspector to complete the final inspection. The inspector advised Celestino that he could not sign off because the wall between the bathroom and kitchen had to be torn down to create two feet of room. The inspector stated that he already explained this to Defendant because it was part of the work that Defendant had to complete. (Transcript No. 1, dated 5/29/24, Page 71, lines 12-17). [Plaintiff’s Exhibit 16: Notice of Violation from the Los Angeles Department of Building and Safety dated December 6, 2019.] The violation notice was for the Footing, Foundation, And Slab, stating the following:

On or about July 21, 2020, the Los Angeles Department of Building and Safety issued

another violation notice stating the following: "Go Back To The Plan Check To Show Site

Notice of Violation from the Los Angeles Department of Building and Safety dated November 19, 2020.] (Transcript No. 1, dated 5/29/24, Page 37, lines 13-16, Page 38, lines 18-19). Despite not passing inspection, the Plaintiffs paid Defendant the remaining balance under the contract of $5,000, based on Defendant’s misrepresentation that all of the work had passed inspection. When Celestino spoke with Defendant about this, Defendant refused to fix the work and stated that he was going to keep the blueprints.[4] (Transcript No. 1, dated 5/29/24, Page 71, lines 18 through Page 72, lines 1-12). The Property remains the same. (Transcript No. 1, dated 5/29/24, Page 72, lines 14-16).

Defendant testified that he completed the blueprints for the construction of the Property and was paid $20,000 by Plaintiffs. (Transcript No. 2, dated 6/13/24, Page 39, lines 1-17). Defendant testified he is not a licensed contractor and he does not have a handyman license. (Transcript No. 2, dated 6/13/24, Page 36, lines 14-28; Page 37, line 1, 12-14). Defendant testified that his brother had a contractor’s license under which he works but that Defendant himself is not licensed. Defendant also testified that he has been self-employed for the last 10 years. Defendant testified that he was in a partnership with his brother; however, at his deposition on May 31, 2024, Defendant denied being in a partnership with anybody. [Plaintiffs’ Exhibit 14: Deposition Transcript of Defendant, dated May 31, 2023, Page 18, Lines 25-end of page, and Page 19, Line 1]. (Transcript No. 2, dated 6/13/24, Page 14, lines 12 through 16, Page 15, lines 1 through 11, Page 37, lines 15-26; Page 38, lines 26-28).

Defendant testified that as to the second contract, the services to be provided by him were the concrete foundation and framing. Defendant testified that he charged Plaintiff Celestino $200 to check on the work of the plumbers. Defendant testified that he personally received $20,000 under the first contract and issued receipts to Plaintiffs. Defendant testified that there was a second contract for $35,000 that was canceled, and another contract was drafted in its place. Defendant testified that he drafted and signed both of these contracts. As to the pending contract, Defendant testified that he was paid $16,000 upfront by Plaintiffs, and that the remaining $5,000 was due when the work that includes the framing passed inspection. (Transcript No. 2, dated 6/13/24, Page 23, line 17 through Page 24, line 7, Page 39, lines 2 through Page 40, line 28).

The Inspector, Enrique Preza (“Inspector”) testified that the initial violation notice dated December 6, 2019, was more or less a kind of pre-inspection, and they needed to expose everything that was built without a permit. [Plaintiffs’ Exhibit 16: Notice of Violation from the Los Angeles Department of Building and Safety dated December 6, 2019.] The Inspector testified that the reason he would have issued the violation notice dated July 21, 2020, would be because the site did not match the plans, there were corrections that needed to be done, the site needed to match what the approved plans had or they had to go back to plan check and do a revision to show the site conditions on the plan. He would not have issued the notice of violation if the framing had been “okay.” [Plaintiff’s Exhibit 17: Notice of Violation from the Los Angeles Department of Building and Safety dated July 21, 2020.] (Transcript No. 3, dated 6/24/24, Page 12, line 1 through Page 15, line 1). The Inspector further testified that due to the fact that the wall was going to be inside the restroom, the restroom had to be relocated and the plans had to reflect this change and the plumbing had to move according to the plans. As of July 21, 2020, the framing was not approved. (Transcript No. 3, dated 6/24/24, Page 15, lines 2-28, Page 21, line 28; Page 22, lines 1-9).

Defendant’s Brother, Gerardo Flores (“Gerardo”) refused to answer directly whether Defendant is his employee and whether he gave him a W-2 at the end of the year. He testified that Defendant files his own taxes based on the earnings he received from his jobs. He described Defendant as “not fully an employee” and he gives him bonuses when he helps him out. He did not testify that Defendant works under a license he may have. [Transcript No. 4, dated 07/01/24, Page 22, Line 12 through Page 23, line 24 19-26; Page 25, Lines 15-20]. Gerardo testified that he has never met with any of the Plaintiffs. [Transcript No. 4, dated 07/01/24, Pages 23, Lines 27-28; Page 24, Lines 1-9].

a) Plaintiffs and Defendant stipulated that the ADU (additional dwelling unit) on the Property was previously unpermitted and that was the reason Plaintiffs hired Defendant to legalize the ADU. [Transcript No. 2, dated 06/13/24), Page 31, Line 17 through Page 32, line 11].

b) Plaintiffs stipulated that they paid Defendant $20,000 to complete the drawings for the ADU legalization. The drawings were completed by Defendant and were approved and they have the drawings. [Transcript No. 3, dated 06/24/24, Page 28, Lines 12-16].

A. Did Defendant Breach His Contract With Plaintiffs? If So, What Amount Of Damages Did Plaintiffs Prove?

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the

contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” ((Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

Here, there were three contracts between Plaintiffs and Defendant: the first for the Defendant to complete and provide the blueprints for legalizing the ADU on the Property; the second for the construction of the ADU, which was later cancelled by the parties because of Defendant’s complaint that it involved too much work; and the third contract for Defendant to provide the concrete foundation and framing for the ADU. The payment of the remaining balance on the third contract of $5,000 was contingent on the framing passing inspection.

Plaintiffs paid $20,000 to Defendant for the blueprints for legalizing the ADU. [Plaintiffs’ Exhibits 7, 8, 9 and 10.] Plaintiffs paid $31,200 for Defendant’s performance under the aborted second contract and the third contract for the concrete foundation and framing and for reviewing the work of the plumbers.

It was undisputed that Plaintiffs paid, and Defendant received, the total amount of $51,200.

Defendant failed to correctly complete the concrete foundation and framing for the ADU as

contracted and in accordance with the approved blueprints. [Plaintiffs’ Exhibits 16, 17 and 18]

Plaintiffs have proven that they have been damaged for breach of contract in the amount of $31,000 representing Defendant’s failure to deliver the concrete foundation and framing in compliance with the blueprints and the City requirements, despite having been paid $31,000.

B. Did Defendant Defraud Plaintiffs? If So, What Amount Of Damages Did Plaintiffs Prove Resulted From The Fraud?

Civil Code Section 1572 provides that actual fraud “consists … of the following act[] committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: …The suggestion, as a fact, of that which is not true, by one who does not believe it to be true…”

Here, Defendant intentionally misrepresented that he was a licensed contractor when he was not, and that the work he was contracted to complete, passed inspection, when it did not. Defendant admitted in his testimony that he was not licensed. Defendant’s brother, Gerardo, did not testify that Defendant worked under any license that Gerardo had and he never met the Plaintiffs. It was clear from the evidence in this case, that Defendant fraudulently held himself out as having a contractor license, both in advertising and in person when meeting with the Plaintiffs.

Additionally, Defendant did not complete the construction work competently on January 20, 2020, as he informed the Plaintiff. The framing did not pass inspection as indicated by the Inspector’s testimony. Defendant knowingly lied to Plaintiffs about passing inspection in order to wrongfully get paid in full.

At the time the above representations were made by Defendant, they were known to be false by Defendant. These fraudulent representations were made for the purpose of deceiving and inducing the Plaintiffs to enter into the contract and to pay the amounts described above, which they did in reliance upon Defendant’s representations.

Under Business and Professions Code section 7031, subdivision (d), when a license is controverted, proof of the license shall be made by producing a verified certificate of licensure from the Contractor State License Board. Here, Defendant has admitted that he is not licensed, and failed to provide any evidence of having a license. Business and Professions Code Section 7031(b), provides that “a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract.”

Defendant admitted to receiving the total amount of $51,200 from Plaintiffs. Consequently, under Business and Professions Code Section 7031(b), Plaintiffs are entitled to recover the $51,200 paid to Defendant. In addition, after being told by Defendant that the Inspector approved the framing and it had passed inspection, Plaintiff Celestino Preciado paid $6,000 for plumbers to complete the plumbing work on the ADU in reliance upon the statements of Defendant. Plaintiffs are entitled to recover the additional $6,000 for a total of $57,200.

C. If Plaintiffs Proved Fraud, Are They Entitled To Recover Punitive Damages From Defendant?

Plaintiffs did not put on any evidence of Defendant’s ability to pay punitive damages. Facts

relevant to an assessment of punitive damages include the defendant’s ability to pay. Bigler-Engler v Breg, Inc. (2017) 7 Cal. App. 5^th 276, 307. Without evidence of the defendant’s ability to pay, the Court cannot determine if the amount requested is excessive and therefore inappropriate. (Ibid.) Consequently, Plaintiffs are not entitled to an award of punitive damages from Defendant.

The Court finds in favor of Plaintiffs on their breach of contract and fraud causes of action. Because Plaintiffs cannot recover on both causes of action, the Court assumes that Plaintiffs elect to recover under their fraud cause of action, including the remedy provided by Business and Professions Code section 7031(b) of recovering the $51,200 paid to Defendant. Additionally, Plaintiffs are entitled to recover the $6,000 they paid for plumbers to complete the plumbing work on the ADU in reliance upon the false statements made by Defendant. The total amount Plaintiffs are entitled to recover against Defendant is $57,200.

In their Closing Brief, Plaintiffs have requested prejudgment interest on the $51,200, but they have not provided any authority for the awarding of such prejudgment interest.

Plaintiffs also have requested attorney fees in their Closing Brief. The basis for awarding such fees is not identified. Plaintiffs may seek attorney fees if they have a basis therefor by filing a regularly noticed motion.

Within ten days after this Statement of Decision becomes final, Plaintiffs are ordered to file and serve a proposed judgment in accordance with this Statement of Decision (with a courtesy copy delivered to Dept. 50).

Plaintiffs are ordered to give notice of this Tentative and Proposed Statement of Decision.

[1] Defendant did not file a trial brief or a closing brief.

[2] At the hearing on October 24, 2024, Plaintiffs dismissed their causes of action for constructive trust, unjust enrichment, accounting and declaratory relief.

[3] The Court has adopted the defined terms used by Plaintiffs; ordinarily, the Court does not refer to parties by their first names.

[4] Defendant returned the blueprints to Plaintiffs during the discovery process in this case.

Superior Court of California

County of Los Angeles

Department 50