Judge Thomas D. Long, Case 21STCV01678 2023-03-28 Tentative Ruling

On May 5, 2021, Plaintiff Tyler Development Corporation filed a first amended complaint (“FAC”) against Defendant 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 October 18, 2022, Defendant and Cross-Complainant Chris Doman Enterprises Inc. dba Doman Pools (“Doman”) filed a second amended cross-complaint (“SACC”) against Cross-Defendants McClean Design & Investments Inc. (“McClean”), Tyler Development Corporation, and West Roofing and Waterproofing Consultants, alleging (1) equitable indemnity; (2) negligence; (3) declaratory relief; and (4) express indemnity.

On November 18, 2022, McClean filed a demurrer to the SACC’s first, second, and third causes of action. The fourth cause of action is not brought against McClean.

Doman did not file an opposition to the demurrer. Instead, on March 14, 2023, Doman attempted to file a third amended cross-complaint (“TACC”). The TACC has been stamped as “Electronically Received” but is not stamped as “Filed.” After McClean filed a notice of Doman’s non-opposition to its demurrer, on March 21, 2023, Doman filed a “Brief as to Why McClean Design’s Demurrer to the Second Amended Cross-Complaint is Moot.”

A plaintiff may amend the complaint once without leave of court before an answer, demurrer, or motion to strike is filed, or after a demurrer or motion to strike is filed but before the hearing. (Code Civ. Proc., § 472, subd. (a).)

Doman already amended its cross-complaint twice. Doman filed its original cross-complaint on June 10, 2021, and one cross-defendant filed an answer on July 30, 2021. Therefore, when Doman attempted to file a first amended cross-complaint on February 22, 2022 without leave of court, the filing was rejected with a Notice of Rejection of Electronic Filing stating “cross-complainant needs permission from court in order to file.” On April 5, 2022, Tyler and Doman stipulated to Doman filing a first amended cross-complaint, and the Court signed the order. Later, the SACC was filed on October 18, 2022, in response to the Court’s September 7, 2022 order sustaining McClean’s demurrer to the first amended cross-complaint with leave to amend. Plaintiff, a cross-defendant in the SACC, has filed an answer to the SACC.

Doman argues that Code of Civil Procedure section 472 “must be read in concert with Code of Civil Procedure section 430.41(e)(1), which allows a plaintiff or cross-complainant to amend its complaint three times, in response to a demurrer.” Nothing in that section authorizes the filing of a subsequent amended complaint without leave of court. Instead, section 430.41 merely limits a party to a total of three amendments after demurrers, and it excludes from the limit “an amendment made without leave of the court pursuant to Section 472, provided the amendment is made before a demurrer to the original complaint or cross-complaint is filed.” (Code Civ. Proc., § 430.41, subd. (e)(1).) In other words, if a plaintiff filed a first amended complaint without leave of court in response to the first demurrer (as authorized by section 472), the plaintiff could still amend three more times (up to a fourth amended complaint) in response to subsequent demurrers, if the court sustained the demurrers with leave to amend. If section 430.41 were intended to authorize up to three amendments following demurrers without leave of court, that would completely contradict section 472, which permits only one amendment without leave of court.

The Court may, in its discretion, strike any pleading not filed in conformity with the law or an order of the court. (Code Civ. Proc., § 436, subd. (b).) Additionally, “[a] court may, by virtue of its inherent power to prevent abuse of its processes, strike an amended complaint which is filed in disregard of established procedural processes.” (Loser v. E. R. Bacon Co. (1962) 201 Cal.App.2d 387, 390.)

Accordingly, the Court STRIKES the TACC received on March 14, 2023 and ORDERS that it not be filed. The operative pleading is the SACC.

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 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.)

A. The Economic Loss Rule Bars the First Cause of Action For Equitable Indemnity.

“A right of equitable indemnity can arise only if the prospective indemnitor and indemnitee are mutually liable to another person for the same injury.” (Fremont Reorganizing Corp. v. Faigin (2011) 198 Cal.App.4th 1153, 1177.) 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 (BFGC Architects Planners).) “With limited exception, there must be some basis for tort liability against the proposed indemnitor.” (Ibid.)

McClean argues that there is no allegation that its services caused an injury to a person or property such that McClean is liable to Plaintiff in tort, so the economic loss rule bars this cause of action. (Demurrer at pp. 8-9.) McClean notes that Doman’s allegations against McClean come from Plaintiff’s FAC, which alleges only economic losses. (Id. at p. 9.)

“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 (Robinson Helicopter).) 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.)

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 Doman pursuant to its subcontract with Plaintiff. (FAC ¶ 8.) Based on the defects, the water feature required complete removal and replacement. (FAC ¶ 9.) Doman 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, Doman alleges that if it is liable on the FAC, then McClean should also pay its proportional liability. (SACC ¶ 16.)

Doman’s liability to Plaintiff arises from a subcontract that, in part, required Doman to immediately correct any work that the homeowner rejected. (See FAC ¶¶ 12, 18, 22.) Doman failed to do so and failed to indemnify Plaintiff for the repairs that Plaintiff performed. (E.g., FAC ¶¶ 12-13, 26, 30, 34, 36.) Plaintiff also alleges that Doman negligently designed or constructed the water feature, requiring Plaintiff to make the repairs. (FAC ¶¶ 53-55.) However, this is duplicative of the FAC’s contract-based causes of action and seeks the same damages for Plaintiff’s costs incurred in making the repairs. (See FAC ¶¶ 28, 31, 44, 51, 55.) No additional harm or damages are alleged in connection with Plaintiff’s negligence claim. Accordingly, the FAC does not allege the existence of a duty that arises independent of any contractual duty or any independent injury to Plaintiff, other than economic loss, that arises from the breach of that duty. (See Robinson Helicopter, supra, 34 Cal.4th at pp. 988-991.) The economic loss rule therefore prevents the recovery of tort damages on the FAC.

The SACC contends, “That Plaintiff has alleged it paid for the repairs and is now demanding to be reimbursed for the paid amount from DOMAN POOLS, does not transform the damages at issue in this case, which include the cost of repairing resulting property damage, into to economic loss. Had the homeowner paid for the repair of resulting property damage and then demanded same from Plaintiff and Defendant DOMAN POOLS, the homeowner’s claims would not be characterized as economic only.” (SACC ¶ 13.) But that is not the situation here. The underlying FAC alleges that Plaintiff contracted with the homeowner for construction, and Doman designed and constructed the defective water feature pursuant to a subcontract with Plaintiff. (FAC ¶¶ 7-8.) Under that subcontract, Doman “had an absolute obligation to make necessary repairs and/or pay for repairs of damages incurred by Tyler for its work.” (FAC ¶ 12; see FAC, Ex. 1 at p. 5, ¶ 6.13.) Doman’s potential liability on the FAC arises from this contractual agreement with Plaintiff and its failure to perform under a provision that Doman agreed to—not from its negligence that caused harm to the homeowners’ property.

In the absence of tort damages in the underlying FAC, there is no basis for McClean to be liable to Plaintiff in tort, and thus no basis for McClean to equitably indemnify Doman based on the claims in the FAC. (See BFGC Architects Planners, supra, 119 Cal.App.4th at p. 852.)

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.)

McClean argues that the second cause of action does not allege any direct damages and instead alleges derivative harm in the form of Doman’s liability for Plaintiff’s economic damages. (Demurrer at pp. 9-10.) McClean contends that the economic loss rule also bars this cause of action. (Id. at p. 11.)

Doman alleges that McClean negligently performed construction or design work, causing harm to the homeowners’ property. (SACC ¶¶ 21-23.) As a result, Doman is being harmed though Plaintiff’s action against it. (See SACC ¶¶ 23-24.)

“In general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.) It is not the underlying negligent construction and damage to the non-party’s property that is at issue in the FAC. Rather, it is Doman’s subsequent failure to repair the defects or indemnify Plaintiff, as required by the subcontract, that give rise to Plaintiff’s claims against Doman. (FAC ¶¶ 22, 26, 30.) Additionally, any claim for negligent construction causing property damage would belong to the property owner, not Doman. Doman has not, and cannot, allege physical or property damage to itself that was caused by McClean’s conduct. Accordingly, the economic loss rule also bars this cause of action.

D. There Is No Basis For the Relief Sought in the Third Cause of Action For Declaratory Relief.

The third cause of action (erroneously labeled as 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.

McClean argues that there is no underlying basis for tort recovery or indemnification. (Demurrer at p. 11.) For the reasons stated above with respect to the other causes of action, the demurrer to the third cause of action is also sustained.

Doman did not file an opposition, so it did not show how it can amend the complaint to remedy the deficiencies. Additionally, the attempted TACC does not contain any amendments that would fix the deficiencies identified above. Accordingly, the Court concludes that further amendments would be futile, so no leave to amend is granted.

The Court ORDERS that Cross-Defendant McClean Design & Investments Inc. be dismissed from the SACC without prejudice.

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