Judge Thomas D. Long, Case 21STCV01678 2022-09-07 Tentative Ruling

On May 5, 2021, Plaintiff Tyler Development Corporation filed a first amended complaint (“FAC”) against Defendants Chris Doman Enterprises Inc. dba Doman Pools, alleging (1) breach of contract; (2) express indemnity; (3) implied indemnity; (4) equitable indemnity; (5) comparative negligence; (6) implied warranties; (7) express warranties; and (8) negligence.

On April 7, 2022, Defendant and Cross-Complainant Chris Doman Enterprises Inc. dba Doman Pools filed a first amended cross-complaint (“FACC”) against Cross-Defendants McClean Design & Investments Inc., Tyler Development Corporation, and West Roofing and Waterproofing Consultants, alleging (1) equitable indemnity; (2) negligence; (3) contribution; (4) declaratory relief; and (5) express indemnity.

On July 6, 2022, Cross-Defendant McClean Design & Investments Inc. (“Cross-Defendant”) filed a demurrer and motion to strike. The request for judicial notice is granted.

When considering demurrers, courts read the allegations liberally and in context, accepting the alleged facts as true. (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1406.)

Equitable indemnity “applies only among defendants who are jointly and severally liable to the plaintiff. [Citation.] [J]oint and several liability in the context of equitable indemnity is fairly expansive. We agree it is not limited to ‘the old common term “joint tortfeasor” . . . .’ It can apply to acts that are concurrent or successive, joint or several, as long as they create a detriment caused by several actors.” (BFGC Architects Planners, Inc. v. Forcum/Mackey Construction, Inc. (2004) 119 Cal.App.4th 848, 852.) “With limited exception, there must be some basis for tort liability against the proposed indemnitor.” (Ibid.)

Cross-Defendant argues that there is no allegation that its services injured a person or caused physical damage, so the economic loss rule bars this cause of action. (Demurrer at pp. 7-8.)

“Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort from dissolving one into the other.’” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988.) However, tort damages may be permitted when the breach of contract is accompanied by a tort. (Id. at pp. 989-990.) To plead around the economic loss rule, a party must plead the existence of a duty that arises independent of any contractual duty and independent injury, other than economic loss, that arises from the breach of that duty. (Id. at pp. 988-991.) “[T]he difference between price paid and value received, and deviations from standards of quality that have not resulted in property damage or personal injury, are primarily the domain of contract and warranty law or the law of fraud, rather than of negligence. In actions for negligence, a manufacturer’s liability is limited to damages for physical injuries; no recovery is allowed for economic loss alone.” (Aas v. Superior Court (2000) 24 Cal.4th 627, 636 (Aas).) This bar includes “the cost to repair, or the diminished value attributable to, construction defects that have not caused property damage.” (Id. at p. 635.)

Plaintiff alleges that in 2013, it entered into a contract with the owner of the property to be the general contractor for construction of a custom home. (FAC ¶ 7.) After the property was sold to the current homeowners, in 2019 the homeowners informed Plaintiff that there was deficient and negligent work performed on an exterior water feature that was originally designed and constructed by Defendant/Cross-Complainant pursuant to its subcontract with Plaintiff. (FAC ¶ 8.) Based on the defects, the water feature required complete removal and replacement. (FAC ¶ 9.) Defendant/Cross-Complainant was on notice that it had an absolute obligation to make or pay for necessary repairs that Plaintiff incurred, which totaled $560,578.57. (FAC ¶¶ 10-13.) In its cross-complaint, Cross-Complainant alleges that if it is liable on the FAC, then Cross-Defendant should also pay its proportional liability. (FACC ¶ 16.)

Defendant primarily relies on State Ready Mix, Inc. v. Moffatt & Nichol (2015) 232 Cal.App.4th 1227 (State Ready Mix). (Demurrer at p. 8.) In State Ready Mix, a project manager hired an engineering firm to construct a travel lift pier. (State Ready Mix, supra, 232 Cal.App.4th at p. 1230.) The engineering firm hired a concrete provider. (Ibid.) When the concrete failed to meet the compression strength standard, the engineering firm demolished and rebuilt the affected portion. (Id. at pp. 1230-1231.) It then sued the concrete provider for the cost of removing and replacing the defective concrete. (Id. at p. 1231.) The concrete provider filed a cross-complaint for indemnity against a civil engineering firm who, at the concrete provider’s request, reviewed and approved the concrete mix design. (Ibid.) The civil engineering firm had been hired by the project manager to prepare the plans for the pier, and reviewing the concrete mix design was not part of its job duties. (Id. at p. 1230.) The Court of Appeal found that the economic loss rule barred the concrete provider’s cross-complaint because it did not have a contractual relationship with the civil engineering firm “and no facts are alleged that the concrete injured a person or damaged other property.” (Id. at p. 1232.) Similarly here, the alleged harm is a complete defect to the construction that required demolishment and replacement with no allegations of additional damage to property.

In opposition, Cross-Complainant argues that Plaintiff’s property damages as pleaded in the FAC are incorporated in the FACC. (Opposition at p. 6.) But Plaintiff does not allege property damage beyond deviations from standards of quality. Here, that deviation required complete replacement, but there is no allegation of additional property damage beyond the defect itself.

Cross-Complainant also argues that it can bring indemnity claims against Cross-Defendant under any theory that was available to Plaintiff even if Plaintiff did not bring its own action based on that theory. (Opposition at p. 6.) Specifically, Cross-Complainant contends that the indemnity claims may be brought pursuant to the Right to Repair Act, as expressed in Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194 (Greystone Homes). (Ibid.; see id. at p. 5.) “While there is generally no duty to prevent economic loss to third parties in negligence actions at common law [citation], the Right to Repair Act creates such a duty.” (Greystone Homes, supra, 168 Cal.App.4th at p. 1215.) The Right to Repair Act permits a claimant seeking damages for construction deficiencies to hold contractors liable for violations of certain standards. (Civ. Code, § 896.) Under the Right to Repair Act, “upon a showing of violation of an applicable standard, a homeowner may recover economic losses from a builder without having to show that the violation caused property damage or personal injury.” (Greystone Homes, supra, 168 Cal.App.4th at p. 1202.) “The Act repeals the economic loss rule for claims that allege a violation of the Act’s standards.” (Id. at p. 1212.)

But before filing an action alleging a violation of the Right to Repair Act, the claimant must provide written notice of the violation. (Civ. Code, § 910.) The FAC expressly states that there was no formal Right to Repair Act Notice submitted or demanded. (FAC ¶ 10.) Accordingly, from the face of the FACC and incorporated FAC, the Right to Repair Act does not apply.

A cause of action for negligence requires (1) a legal duty owed to the plaintiff to use due care, (2) breach of that duty, (3) causation, and (4) damage to the plaintiff. (County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 318.)

Cross-Defendant argues that the FACC does not allege any direct damages. (Demurrer at p. 9.) Cross-Complainant alleges that Cross-Defendant had a duty to supply materials and properly perform its work and services, and Cross-Defendant’s breach of that duty caused “conditions and defects asserted by homeowners of the Residence.” (FACC ¶¶ 19-20.) This alleged harm was caused to the homeowners, not to Cross-Complainant.

Cross-Defendant also argues that the cause of action for negligence is barred by the economic loss rule. (Demurrer at pp. 9-10.) For the reasons discussed with the first cause of action, the demurrer to the second cause of action is also sustained on this ground.

The FACC alleges that Cross-Defendant is entitled to contribution “for the injuries and damages allegedly sustained by Plaintiff as set forth in the Complaint each of them, and because of any judgment or settlement taken against [Cross-Complainant] as a result of the allegations in the Complaint in this action.” (FACC ¶ 22.) But “[a] right of contribution can come into existence only after rendition of a judgment declaring more than one defendant jointly liable to the plaintiff.” (Coca-Cola Bottling Co. v. Lucky Stores, Inc. (1992) 11 Cal.App.4th 1372, 1378; see also General Electric Co. v. State of Cal. ex rel. Dept. Pub. Wks. (1973) 32 Cal.App.3d 918, 925; Code Civ. Proc., § 875, subd. (a).) As no judgment has been entered on the FAC, the demurrer to the third cause of action is sustained without leave to amend.

The fourth cause of action seeks a judicial determination of the parties’ rights and duties with respect to the FAC’s damages, comparative liability, and indemnification.

Cross-Defendant argues that there is no underlying basis for a right to indemnification or contribution. (Demurrer at pp. 11-12.) Because the Court sustains the demurrer to the other causes of action, the demurrer to the fourth cause of action is also sustained.

The demurrer to the first, second, and fourth causes of action is SUSTAINED with 20 days’ leave to amend.

The Court may, upon a motion or at any time in its discretion: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc., § 436, subds. (a)-(b).)

Cross-Defendant moves to strike the first cause of action on page 3 of the FACC as duplicative of the first cause of action on page 2, arguing that “[h]aving identical duplicative First Causes of Action is a recipe for confusion.” (Motion at p. 5.) The allegations are repeated verbatim in two sections both titled “FIRST CAUSE OF ACTION.”

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court