Judge Virginia Keeny, Case Number: 23STCV30151, Date: 2025-01-08 Tentative Ruling

Judge: Virginia Keeny, Case: 23STCV30151, Date: 2025-01-08 Tentative Ruling

Case Number: 23STCV30151 Hearing Date: January 8, 2025 Dept: 45

ONESOURCE DISTRIBUTORS, LLC v. DEREK KIMBALL, et al.

deMURRER WITH MOTION TO STRIKE

Date of Hearing: 1/8/25 Trial Date: None Set

Department: 45 Case No.: 23STCV30151

Moving Parties: Defendants Derek Kimball and Allison Kimball

Responding Party: Plaintiff Onesource Distributors, LLC

BACKGROUND

This is a mechanic’s lien action. Plaintiff Onesource Distributors, LLC (“Plaintiff”), an electrical wholesale distributor, alleges that it entered into a contract with nonparty, Treeium, Inc. (“Treeium”), whereby it allowed Treeium to purchase electrical materials, equipment, and services from Plaintiff using credit extended to it by Plaintiff. Treeium then used the purchased items for projects in some properties. One of those properties was the real property owned by Defendants Derek Kimball and Allison Kimball located at 24112 Lance Place, West Hills, CA 91307 (the “Kimball Property”). Treeium failed to pay Plaintiff for the materials, equipment, and services that it purchased and used on the Kimball Property. Therefore, Plaintiff recorded a mechanic’s lien claim of $32,174.07 against the Kimball Property.

On December 11, 2023, Plaintiff filed this action against Defendants Derek Kimball and Allison Kimball, Bennett Cole McCord, Sarah Louise McCord, Doe Surety 1 through 4, and Does 1 through 70, inclusive, asserting causes of action for (1) foreclosure of mechanic’s lien, (2) quantum meruit/valebant, and (3) recovery against mechanic’s lien release bond.

On March 25, 2024, Derek Kimball and Allison Kimball (collectively, the “Defendants”) filed the instant demurrer and motion to strike.

On June 17, 2024, Plaintiff dismissed Bennett Cole McCord and Sarah Louise McCord without prejudice.

On December 20, 2024, Plaintiff filed its oppositions to the demurrer and motion to strike.

As of January 6, 2024, no reply had been filed.

[Tentative] RulingS

The Demurrer to the Complaint is OVERRULED and SUSTAINED IN PART as follows. The demurrer to the first cause of action for foreclosure of mechanic’s lien and third cause of action for recovery against mechanic’s lien release bond is OVERRULED. The demurrer to the second cause of action for quantum meruit/valebant is SUSTAINED, with leave to amend. Plaintiff is ordered to file and serve its First Amended Complaint within 30 days of this ruling.

The Motion to Strike is DENIED.

LEGAL STANDARD

Generally, a party may demur a pleading on several enumerated grounds, including that “the pleading does not state facts sufficient to constitute a cause of action” and is uncertain, meaning “ambiguous and unintelligible.” (Code Civ. Proc., § 430.10, subds. (e) and (f).)

In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.¿(Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) The court “‘assume[s] the truth of the complaint’s properly pleaded or implied factual allegations.’ [Citation.]” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.)

With regard to a motion to strike, “[t]he court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: ¶ (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. ¶ (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” (Code Civ. Proc., § 436, subds. (a)-(b).)

“‘Where the defect raised by a motion to strike or by demurrer is reasonably capable of cure, “leave to amend is routinely and liberally granted to give the plaintiff a chance to cure the defect in question.” [Citations.] A pleading may be stricken only upon terms the court deems proper [citation], that is, terms that are just. [Citations.] It is generally an abuse of discretion to deny leave to amend, because the drastic step of denial of the opportunity to correct the curable defect effectively terminates the pleader’s action.’ [Citation.]” (Velez v. Smith (2006) 142 Cal.App.4th 1154, 1174–1175.)

DEMURRER

Meet and Confer

Before filing a demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” (Code Civ. Proc. § 430.41, subd. (a).)

Here, the Defendants have satisfied the meet and confer requirement. (See Declaration of Stephen D. Wegman, filed on March 25, 2024, ¶¶ 4-5 [testifying that the parties met and conferred but were unable to reach an agreement].)

Request for Judicial Notice

Defendants ask the Court to take judicial notice of the following documents.

1. Treeium’s Petition for Chapter 11 bankruptcy, filed on October 20, 2023, in Case No. 1:23-bk-11515, U.S. Bankruptcy Court California Central District. (RJN, Exhibit B.) The petition lists Plaintiff as one of the creditors with property claims.

2. Copies of five checks totaling $74,925.00 allegedly paid to Treeium by Defendants’ lender, nonparty Nuvision Credit Union. (RJN, Exhibit C.) The checks allegedly represent the full amount Defendants owed under their contract with Treeium.

3. Nuvision Credit Union’s contract with Borrower and Defendant Derek Kimball (titled “Federal Disclosure Statement, Note and Security Agreement”), showing the loan proceeds will go to Treeium. (RJN, Exhibit D.)

Defendants’ request for judicial notice of Exhibit A, Treeium’s bankruptcy case, is GRANTED. (Evid. Code, 452, subd. (d) [stating that a court can take judicial notice of any court record of the United States].)

The request for judicial notice of the rest of the documents (i.e., Exhibits C and D) is DENIED because Plaintiff disputes the contents of those documents, and the Court cannot resolve factual disputes on a demurrer. (Plaintiff’s Objection to Evidence Submitted in Support of the Demurrer, filed December 20, 2024, p. 3; see Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374 [“On a demurrer a court’s function is limited to testing the legal sufficiency of the complaint. [Citation.] ‘A demurrer is simply not the appropriate procedure for determining the truth of disputed facts.’ [Citation.] The hearing on demurrer may not be turned into a contested evidentiary hearing through the guise of having the court take judicial notice of documents whose truthfulness or proper interpretation are disputable”].)

First Cause of Action – Foreclosure of Mechanic’s Lien

A. Whether Plaintiff Has a Right to Claim and Enforce a Mechanic’s Lien

Defendants demur to the first cause of action for foreclosure of mechanic’s lien, arguing that fails to state a claim because Plaintiff is an unlicensed contractor and, therefore, does not any to claim or enforce a mechanic’s lien.

The Court disagrees. As Plaintiff argues, material suppliers have the right to record a mechanic’s lien. (Civ. Code, § 8400, subd. (c) [“A person that provides work authorized for a work of improvement, including, but not limited to, the following persons, has a lien right under this chapter: ¶ (a) Direct contractor. ¶ (b) Subcontractor. ¶ (c) Material supplier. ¶ (d) Equipment lessor. ¶ (e) Laborer. ¶ (f) Design professional” (emphasis added)]; see also RGC Gaslamp, LLC v. Ehmcke Sheet Metal Co., Inc. (2020) 56 Cal.App.5th 413, 422 (“RGC”) [“A mechanic’s lien gives a contractor, supplier, or laborer a security interest in real property to secure the right to payment for work performed or materials delivered. [Citation.] …. Mechanic’s liens … are available only in private works of improvement. [Citation.] ¶ The [mechanic’s lien] statutory scheme reflects a balancing of interests between property owners and claimants. The primary goal of the statutes is to protect a laborer or material supplier who improves an owner's property by assuring payment for the value of work done”].) Here, the Complaint alleges that Plaintiff provided the materials, equipment, and services that Treeium used at the Kimball Property. (Compl., ¶¶ 3, 4, 9.) That is sufficient.

B. Preliminary Notice

Next, Defendants argue that the first cause of action fails to state a claim because it fails to allege whether Plaintiff served Defendants with a preliminary notice. Civil Code section 8410 states “[a] claimant may enforce a lien only if the claimant has given preliminary notice to the extent required by Chapter 2 (commencing with Section 8200) and made proof of notice.” In opposition, Plaintiff points out that the Complaint alleges that Plaintiff “complied with all requirements under the Civil Code relating to the work to be provided to the … [Kimball Property], or was excused from doing so.” (Compl., ¶ 11.) Plaintiff argues that allegation means that it complied with all requirements, including the preliminary notice requirement.

The Court finds the Complaint is uncertain with regard to whether Plaintiff complied with the preliminary notice requirement. (See Code Civ. Proc., § 430.10 [stating that the definition of uncertainty includes “ambiguous”].)

However, Defendants have not cited (and the Court has not found) any law holding that a foreclosure of mechanic’s lien claim must be pleaded with specificity.

In addition, “[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) Therefore, ambiguity regarding whether Plaintiff served Defendants with a preliminary notice can be resolved through discovery. Indeed, Plaintiff argues that during the meet and confer process, it provided Defendants with the preliminary notice that it allegedly served Defendants before filing this lawsuit, along with proof of service. (Opposition, p. 1:12-15; Exhibit A – a copy of the Preliminary Notice.)

For those reasons, the Court finds Defendants’ preliminary notice argument unpersuasive.

C. Stop Notice

Defendants also demur to the first cause of action for foreclosure of mechanic’s lien, arguing that Plaintiff failed to allege that it served them with a stop notice. (Demurrer, p. 10:24.) Defendants argue that “[a]bsent a direct contract right, service and enforcement of a stop notice provides the only remedy available to the unpaid subcontractor to reach the funds held by the construction lender.” (Demurrer, p. 11:3-5.)

“A stop notice, or ‘notice to withhold’ as it is sometimes called, is a notice by one who has furnished materials or labor for the construction of improvements, given to the owner of the property, or to a lender of funds to be used for payment of claims against such property, for the purpose of withholding money in the hands of such owner or lender from the contractor so that the materialman or laborer may be paid for his material or services.” (Flintkote Co. v. Presley of Northern California (1984) 154 Cal.App.3d 458, 462.)

“Stop notices are different from mechanics’ liens in that they attach to the funds of the owner of the property, or the construction loan proceeds from a lender, rather than to the real property being improved. [Citation.]” (Mechanical Wholesale Corp. v. Fuji Bank, Ltd. (1996) 42 Cal.App.4th 1647, 1654 (“Mechanical Wholesale”).) Therefore, “[b]y recording a mechanics’ lien, [a] claimant obtains a lien upon a property owner’s land; by serving a stop notice, a priority claim is obtained upon monies.” (Ibid.)

“[T]he right to serve and enforce a stop notice is limited to subcontractors, laborers and materialmen who are entitled to file a mechanics’ lien [citation], whether or not they actually do so.” (Mechanical Wholesale, supra, 42 Cal.App.4th at p. 1658 [italics removed]; See Civ. Code § 8520, subd. (a) [“A person that has a lien right under Chapter 4 (commencing with Section 8400), other than a direct contractor, may give the owner a stop payment notice”].)

However, as Plaintiff argues in its opposition (Opposition, p. 7:19-25) and Defendants acknowledge in their demurrer (Demurrer, p. 11:2-3), “[s]top notices are independent of and cumulative to mechanics’ liens rights; they are ‘an additional remedy.’ [Citation.]” (Mechanical, supra, 42 Cal.App.4th at p. 1654.)

“[T]hat simply means that an entitled party may assert either or both remedies; and a party entitled to record a mechanics' lien need not have recorded one in order to serve a valid stop notice.” (Mechanical, supra, 42 Cal.App.4th at p. 1658 [original italics removed; emphasis added].)

Therefore, Plaintiff was not required to serve a stop notice in order to claim and enforce a mechanic’s lien.

For those reasons, the Court finds Defendants’ stop notice argument unpersuasive.

D. Statute of Limitations

Finally, Defendants demur to the first cause of action for foreclosure of mechanic’s lien, arguing that it fails to state a claim because “the Complaint is completely devoid of any dates for when the work on Defendants property was completed or ceased its work, which would show whether it filed its mechanic’s lien timely.” (Demurrer, p. 11:26-28.)

“Under the Civil Code provisions relating to mechanic’s liens, a timely-recorded mechanic’s lien binds the property against which it is recorded for only 90 days, unless within that time an action is commenced to foreclose it.” (Solit v. Tokai Bank, Ltd. New York Branch (1999) 68 Cal.App.4th 1435, 1442 (“Solit”) [emphasis added] [discussing former Civil Code section 3144]; id. at p. 1442 [noting that the mechanics’ lien statutes were (previously) set out in the Civil Code commencing at section 3109]; RGC, supra, 56 Cal.App.5th at p. 422 [“Civil Code sections 8000 to 9566 [now] set[s] forth a comprehensive statutory scheme to resolve payment disputes in public and private construction projects”].)

“A claimant other than a direct contractor may not enforce a lien unless the claimant records a claim of lien within the following times:

(a) After the claimant ceases to provide work.

(b) Before the earlier of the following times.

(1) Ninety days after completion of the work of improvement.

(2) Thirty days after the owner records a notice of completion or cessation.”

(Civ. Code, § 8414; Solit, supra, 68 Cal.App.4th at p. 1442 [“A lien is timely recorded and potentially enforceable if it is recorded within a statutorily-prescribed period of time after the claimant has finished supplying labor or materials, or after a stop notice or notice of completion has been filed”].)

“If the claimant fails to commence an action to foreclose a timely-recorded lien within 90 days, the lien ‘automatically shall be null and void and of no further force and effect.” (Solit, supra, 68 Cal.App.4th at p. 1442; Civ. Code, § 8460, subd. (a) [“The claimant shall commence an action to enforce a lien within 90 days after recordation of the claim of lien. If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable”].)

Here, accepting well-pleaded facts alleged in the Complaint as true, the lawsuit appears to be timely. (See Compl., Exhibit 1 – a copy of the alleged mechanic’s lien [showing that the lien was recorded on September 15, 2023. Plaintiff filed this lawsuit within 90 days of that date, on December 11, 2023. Therefore, the lawsuit appears to be timely on the face of the Complaint].)

However, Plaintiff has not pleaded facts showing the mechanic’s lien was also timely. For example, the Complaint does not allege that the lien was recorded within 90 days after completion of the work of improvement, or within 30 days after the Defendants recorded a notice of completion or cessation.

Nevertheless, “‘for a demurrer based on the statute of limitations to be sustained, the untimeliness of the lawsuit must clearly and affirmatively appear on the face of the complaint and matters judicially noticed. [Citation.]’ [Citation.]” (Austin v. Medicis (2018) 21 Cal.App.5th 577, 585.)

Here, it does not clearly and affirmatively appear on the face of the Complaint that the mechanic’s lien was untimely recorded. To the extent Defendants are arguing that the Complaint is uncertain with regard to that issue, that uncertainty can be resolved through discovery.

For those reasons, the Court finds Defendants’ statute of limitations argument unpersuasive.

Accordingly, the demurrer to the first cause of action for foreclosure of mechanic’s lien is OVERRULED.

Second Cause of Action – Quantum Meruit/Valebant

Defendants demur the second cause of action, arguing that it fails to state a claim for quantum meruit because (1) the Complaint does not allege any contract between Defendants and Plaintiff, or Plaintiff and Treeium that bound Defendants, and (2) contractual privity is a necessary element of quantum meruit.

In opposition, Plaintiff argues the second cause of action is sufficiently pleaded and the Complaint could also be amended to add other theories, for example, that Plaintiff was a third-party beneficiary under the contract between Treeium and Defendants.

“‘“Quantum meruit refers to the well-established principle that ‘the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered.’ [Citation.]”’” (Strong v. Beydoun (2008) 166 Cal.App.4th 1398, 1404 (“Strong”).)

“To recover in quantum meruit, a party need not prove the existence of a contract [citations], but it must show the circumstances were such that ‘the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made.’” [Citation.]’ [Citation.]” (Strong, supra, 166 Cal.App.4th at p. 1404 [emphasis added].)

Here, the Complaint alleges that “Defendants knew that electrical materials, equipment and services were being provided for their projects and/or Properties, and while they ordered, accepted, used, and enjoyed the materials, equipment and services - ONESOURCE was not paid in full for them.” (Compl., ¶ 14.)

However, the Complaint does not allege facts showing that both parties (i.e., Plaintiff and Defendants) understood or expected that Plaintiff would be paid for the materials, equipment, and services that Treeium allegedly purchased from Plaintiff.

For that reason, the Court finds that the second cause of action for quantum meruit has failed to state facts sufficient to constitute a cause of action.

Accordingly, the demurrer to the second cause of action for quantum meruit/valebant is SUSTAINED, with leave to amend.

Third Cause of Action – Recovery Against Mechanic’s Lien Release Bond

Defendants demur the third cause of action, arguing that Plaintiff does not have standing to bring the third cause of action because it has no right to a lien.

However, as explained above, material suppliers like Plaintiff have the right to claim and enforce a mechanic’s lien.

The Court also finds that Plaintiff has stated a claim for recovery against a mechanic’s lien release bond.

By way of background, “[a]n owner of real property or an owner of any interest in real property subject to a recorded claim of lien, or a direct contractor or subcontractor affected by the claim of lien, that disputes the correctness or validity of the claim may obtain release of the real property from the claim of lien by recording a lien release bond.” (Civ. Code, § 8424, subd. (a).)

“The purpose of the release bond procedure is to provide a means by which, before a final determination of the lien claimant’s rights and without prejudice to those rights, the property may be freed of the lien, so that it may be sold, developed, or used as security for a loan.” (Hutnick v. U.S. Fidelity & Guaranty Co. (1988) 47 Cal.3d 456, 462 (“Hutnick”).)

“[A] mechanic’s lien release bond ‘shall be … the payment of any sum which the claimant may recover on the claim together with his costs of suit in the action, if he recovers therein.’ The ‘claim’ for which the principal and surety assume liability in the bond is the ‘claim of lien.’ [Citation.]” (Hutnick, supra, 47 Cal.3d at p. 463 [emphasis added].)

“The release bond procedure thus protects the lien claimant by providing an alternate source of recovery on the claim of lien.” (Hutnick, supra, 47 Cal.3d at p. 463.)

“The recording of the release bond does not extinguish the lien; rather, the bond is substituted for the land as the object to which the lien attaches.” (Hutnick, supra, 47 Cal.3d at p. 463.)

According to the California Supreme Court, recovery on a bond claim is the same cause of action as a claim to enforce a mechanic’s lien. (Hutnick, supra, 47 Cal.3d at p. 463 [“In seeking to enforce their mechanics’ lien first against the liened property and subsequently against the release bond plaintiffs have pursued a single cause of action”].)

Therefore, “when a mechanic’s lien foreclosure action is commenced and a release bond is thereafter recorded, the lien claimant may obtain recovery against the bond’s surety in the pending action without having to plead a new cause of action or comply with an additional limitations period.” (Hutnick, supra, 47 Cal.3d at p. 467.)

Here, the Complaint alleges the following under the third cause of action. “In the event a mechanic’s lien release bond has been, or will be, issued releasing an above referenced Property from the mechanic’s lien recorded against it, then ONESOURCE shall be entitled to receive from DOE SURETY 1 through 4, pursuant to such mechanic’s lien release bond, the value of the materials, equipment, and services ONESOURCE furnished to the Property for which the mechanic’s lien release bond was issued, plus accrued and accruing interest in an amount according to law.” (Compl., ¶ 18.)

The Court finds those facts sufficient in light of the law cited above.

Accordingly, the demurrer to the third cause of action for recovery against mechanic’s lien release bond is OVERRULED.

Motion to Strike

Meet and Confer

“Before filing a motion to strike …, the moving party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to the motion to strike for the purpose of determining if an agreement can be reached that resolves the objections to be raised in the motion to strike.” (Code Civ. Proc., § 435.5, subd. (a).)

Here, Defendants have satisfied the meet and confer requirement. (Declaration of Stephen D. Wegman in Support of Defendants’ Motion to Strike, filed on March 25, 2024, ¶¶ 4-5 [testifying that the parties met and conferred but were unable to reach an agreement].)

Request to Strike Request for Attorney’s Fees and Costs

Defendants move to strike the following prayer in the Complaint: “For

attorneys’ fees and all costs of this suit as allowed by contract and/or law ….” (Compl., p. 7:13.) Defendants argue that there is no contract or statute that entitles Plaintiff to recover attorney’s fees.

However, with regard to costs, the Court has found that Plaintiff has stated a claim for recovery against a mechanic’s lien release bond, which according to the California Supreme Court entitles Plaintiff to recover costs of suit if Plaintiff recovers from the release bond. (Hutnick, supra, 47 Cal.3d at p. 463.)

With regard to attorney’s fees, the Complaint does not allege that Plaintiff is entitled to them; the Complaint prays for recovery of attorney’s fees “as allowed” by contract and/or law. This means if no contract or law allows Plaintiff to recover attorney’s fees, Plaintiff will not recover those fees.

Therefore, the motion to strike is DENIED.

CONCLUSION

The Motion to Strike is DENIED.