Superior Court of California

County of Los Angeles

Department 50

RE3 RESTORATION LLC, Plaintiff, vs. DANIEL WANG, et al. Defendants.	Case No.:	23STCV06250 [r/w 22STCV03916]
	Hearing Date:	August 4, 2023
	Hearing Time:	2:00 p.m.
	[TENTATIVE] ORDER RE: DEMURRER TO COMPLAINT

Background

Plaintiff RE3 Restoration LLC (“RE3”) filed this action on March 21, 2023 against Defendants Daniel Wang and Grace Lee (jointly, “Defendants”). The Complaint alleges causes of action for (1) reformation of contract and (2) breach of contract.

Defendants now demur to both of the causes of action of the Complaint. Plaintiff opposes.

Requests for Judicial Notice

The Court grants Defendants’ request for judicial notice. The Court notes that it takes judicial notice only of the fact of the filing of the documents attached as Exhibits A-C to Defendants’ request for judicial notice. In addition, the Court overrules Plaintiff’s objections to Defendants’ request for judicial notice.

The Court grants Plaintiff’s request for judicial notice. The Court notes that it takes judicial notice only of the fact of the filing of Exhibit 1 to Plaintiff’s request for judicial notice.

Discussion

A. Legal Standard

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) A demurrer “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.)

B. Allegations of the Complaint

In the Complaint, RE3 alleges that it is a general building contractor that performs various types of construction and engages primarily in single family residences. (Compl., ¶ 9.) Miguel Soltero (“Soltero”) is the principal of RE3, and he works with a business partner, Shane Patel (“Patel”). (Compl., ¶ 9.) Both Soltero and Patel are owners of 360 Capital Ventures, Inc. (“360 Capital”), which conducts administrative functions for RE3, among other things. (Compl., ¶ 9.)

In or about February 2018, Patel was showing the real property located at 4640

Radford Ave, Valley Village, California at an open house where he met Defendants. (Compl., ¶ 11.) Defendants wanted a custom-built home with similar designs and floorplan to the property on Radford Ave. (Compl., ¶ 11.) Patel and Soltero agreed in subsequent discussions to work with Defendants on this new project. (Compl., ¶ 11.)

RE3 alleges that the property that is the subject of this action is located at 15105 Weddington Street, Sherman Oaks, CA 91411 (the “Property”). (Compl., ¶ 8.) The parties agreed that RE3 would take down and build a new home for Defendants at the Property. (Compl., ¶ 12.)

The parties entered into an agreement, with 360 Capital spearheading the administrative aspect of processing paperwork to formalize the arrangement between RE3/360 Capital and Defendants (the “Agreement”). (Compl., ¶ 13.) RE3 alleges that 360 Capital erred and did not include all the relevant names on the Agreement. (Compl., ¶ 13.) Although RE3’s license number was indicated in the paperwork, its name was missing. (Compl., ¶ 13.)

RE3 alleges that “360 Capital and RE3 were notified of the error in the Agreement during subsequent discussions over the Project and only in the context of legal threats to disgorge as Defendants way to leverage 360 Capital into entering settlement.” (Compl., ¶ 14.)

RE3 alleges that Defendants stopped all work done by RE3 at the Property by the end of January, 2021, and that as a result of this stoppage, RE3 has incurred costs and damages related to cancelling subcontractors, for equipment rentals, and other related costs. (Compl., ¶ 16.)

C. First Cause of Action for Reformation

In support of the first cause of action for reformation, RE3 alleges that the “Agreement fails to reflect the true name of the contractor on the Project. The parties intended and agreed to RE3 being the general contractor on the Project.” (Compl., ¶ 19.) RE3 “prays that [sic] Agreement be reformed to reflect the true intent of the parties by including RE3 as the general contractor under the Agreement.” (Compl., ¶ 23.)

In the demurrer, Defendants assert that “RE3 was not named in the contract, so it has no standing to seek reformation.” (Demurrer at p. 5:20.) However, Defendants do not cite to any legal authority in support of this proposition.

Defendants also argue that “[l]aches is an affirmative defense to reformation, provided the defendant can show prejudice from the delay.” (Demurrer at p. 6:9-10.) However, Defendants do not further explain why they contend laches is grounds for demurrer to the Complaint here.

Defendants also cite to Civil Code section 3399, which provides that “[w]hen, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties, it may be revised on the application of a party aggrieved, so as to express that intention, so far as it can be done without prejudice to rights acquired by third persons, in good faith and for value.” Defendants assert that here, they “paid 360 all amounts billed under the contract, so neither 360 nor RE3 is aggrieved.” (Demurrer at p. 5:20-21.) The Court finds that this is a factual argument that is not appropriate on demurrer. The Court notes that “[o]n a demurrer a court’s function is limited to testing the legal sufficiency of the complaint. A demurrer is simply not the appropriate procedure for determining the truth of disputed facts.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374 [internal quotations and citation omitted].)

Defendants also assert that for purposes of Civil Code section 3399, “[t]here’s no hint or proof of fraud, mutual mistake, or a unilateral mistake that [Defendants] were aware of at the time. Nor is there any suggestion that the parties intended to contract between anyone except [Defendants] and 360.” (Demurrer at p. 5:28-6:2.) Defendants contend that “[n]obody defrauded 360 or made a mistake when 360 repeatedly initialed and signed the contract as the sole named ‘Contractor.’” (Demurrer at p. 6:3-4, citing Compl., Ex. A.)

But RE3 alleges that “[t]he Agreement fails to reflect the true name of the contractor on the Project. The parties intended and agreed to RE3 being the general contractor on the Project.” (Compl., ¶ 19.) RE3 alleges that “Defendants knew or suspected the above described mistake at the time of the execution of the Agreement in that they knew that RE3 was the sole party that was going to provide construction related service on the Project.” (Compl., ¶ 20.) RE3 alleges that “360 Capital erred and did not include all the relevant names on the Agreement. Although RE3’s license number was indicated in the paperwork, its name was missing.” (Compl., ¶ 13.)

The Court notes that “¿a demurrer…accept[s] as true all material factual allegations of the challenged pleading, unless contrary to law or to facts of which a court may take judicial notice. The sole issue is whether the complaint, as it stands, states a cause of action as a matter of law.¿” (Mechanical Contractors Assn. v. Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 677¿.)

Defendants also assert that “360 and RE3 argue that RE3 should be considered the contractor because it lent its CSLB number (but not its name) to the contract. Not surprisingly, other unlicensed contractors have made the same argument before without success.” (Demurrer at p. 6:12-14.) The Court notes that RE3 does not appear to allege in the instant Complaint that it should be considered the contractor “because it lent its CSLB number (but not its name) to the contract.” Again, “[o]n a demurrer a court’s function is limited to testing the legal sufficiency of the complaint.” (Joslin v. H.A.S. Ins. Brokerage, supra, 184 Cal.App.3d at p. 374.)

Defendants also assert that the reformation cause of action is time-barred under Code of Civil Procedure section 338, subdividion (d). Defendants assert that the “statute of limitations for reformation is three years from discovery of the alleged mistake.” (Demurrer at p. 7:22.) They cite to Laing v. Occidental Life Ins. Co. (1966) 244 Cal.App.2d 811, 820, where the “Defendant claim[ed] that reformation is barred by sections 338 and 339 of the Code of Civil Procedure, which lay down a three-year statute of limitations in actions for reformation, since the action for reformation (introduced by the first amended complaint) was not instituted until November 21, 1961, over five years after the policy was issued and delivered. The statute, however, does not begin to run until the mistake is discovered, or until the plaintiff, by reasonable diligence could and should have discovered it.”

Defendants assert that “[s]ince the purported mistake was using 360’s name in the contract instead of RE3’s name…RE3 had only until December 8, 2021 to file suit. Instead, RE3 didn’t sue for reformation until March 21, 2023.” (Demurrer at p. 7:23-26.) The Court notes that three years after December 8, 2018 is December 8, 2021, and RE3 alleges in the Complaint that “Plaintiff and Defendants entered into…a lawful and biding contract, the Agreement, on or about December 8, 2018.” (Compl., ¶ 25.) Defendants assert that “RE3 must have known immediately, when the contract was signed, of the supposed error in the name of the party on the contract, because Miguel Soltero, RE3’s principal, is also an owner of 360.” (Demurrer at p. 7:27-8:1, citing Compl., ¶ 9.) In addition, Defendants assert that “Soltero must also have known about the remodeling project, long before 360 signed the contract with Wang and Lee, because Soltero met Wang and Lee in February 2018 and discussed the project with them.” (Demurrer at p. 8:1-3, citing Compl., ¶ 11.)

But RE3 alleges that it “discovered this mistake in early 2022.” (Compl., ¶ 22.) As Defendants acknowledge, “[t]he statute…does not begin to run until the mistake is discovered, or until the plaintiff, by reasonable diligence could and should have discovered it.” (Laing v. Occidental Life Ins. Co., supra, 244 Cal.App.2d at p. 820.) The Court does not find that Defendants have demonstrated that the first cause of action for reformation is time-barred.

In light of the foregoing, the Court overrules the demurrer to the first cause of action.

D. Second Cause of Action for Breach of Contract

In the second cause of action for breach of contract, RE3 alleges that “Defendants breached the Agreement, among other things, by wrongfully terminating the Project and the Agreement.” (Compl., ¶ 27.)

Defendants contend that “[s]ince RE3’s claim for reformation is time-barred, RE3’s claim for breach of the contract to be reformed is likewise time-barred.” (Demurrer at p. 8:4-5.) As set forth above, the Court does not find that Defendants have demonstrated that the first cause of action for reformation is time-barred.

Based on the foregoing, the Court overrules the demurrer to the second cause of action.

Conclusion

For the foregoing reasons, the Court overrules Defendants’ demurrer to the Complaint in its entirety.

The Court orders Defendants to file and serve their answer to the Complaint within 10 days of the date of this Order.¿

RE3 is ordered to give notice of this Order.¿

DATED: August 4, 2023 ________________________________

Hon. Teresa A. Beaudet

Judge, Los Angeles Superior Court