Judge: William D. Claster, Case: 23-01309001, Date: 2023-08-11 Tentative Ruling

Defendant Anil Desai's Notice of Demurrer and Demurrer to Plaintiff Alex Eidelstein's Complaint   (ROA #36)

Defendant Anil Desai’s demurrer to the complaint of Plaintiff Alex Eidelstein is SUSTAINED WITH LEAVE TO AMEND. The deadline for filing an amended complaint is August 28, 2023.

Desai’s request for judicial notice is GRANTED

This matter arises from the construction of Eidelstein’s home in Laguna Beach. Desai contracted with Eidelstein to provide civil and structural engineering services for the project. Eidelstein contends the project was defectively constructed in various ways, and he has brought suit against several parties involved in the construction. As against Desai, he brings claims for breach of contract (the fourth cause of action) and professional negligence (the fifth cause of action). Desai demurs to the negligence claim.

Desai’s argument is straightforward. Eidelstein’s negligence claim alleges Desai “had a duty to perform services pursuant to [his] contractual obligations,” that Desai’s performance of that duty was “inadequate,” and that Desai’s “performance of the contract has resulted in significant monetary and property damage.” (Compl., ¶¶ 59-62.) Desai contends Eidelstein cannot recover in tort for a mere breach of contract.

As explained in Erlich v. Menezes (1999) 21 Cal.4th 543: “[C]onduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” (Id., at p. 551.) Put another way, a tort claim based on a breach of contract lies when “the duty that gives rise to tort liability is either completely independent of the contract or arises from conduct which is both intentional and intended to harm.” (Id., at p. 552.) “[O]utside the insurance context, ‘a tortious breach of contract . . . may be found when (1) the breach is accompanied by a traditional common law tort, such as fraud or conversion; (2) the means used to breach the contract are tortious, involving deceit or undue coercion or; (3) one party intentionally breaches the contract intending or knowing that such a breach will cause severe, unmitigable harm in the form of mental anguish, personal hardship, or substantial consequential damages.’” (Id., at pp. 553-54.)

Here, the only allegation is that Desai negligently performed his contractual duties. Eidelstein does not allege that Desai breached an independent duty, that the means used to breach the contract were themselves tortious, or that Desai intentionally breached the contract knowing it would cause unmitigable harm to Edelstein.

In opposition, Eidelstein relies principally on three cases: Eads v. Marks (1952) 39 Cal.2d 807, North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, and Miller v. Uni-Pixel, Inc. (N.D.Cal. 2017) 2017 WL 3007082. (Eidelstein’s other cases concern the general pleading standard for negligence, not the relationship between contract and tort claims.)

Eads states: “Even where there is a contractual relationship between the parties, a cause of action in tort may sometimes arise out of the negligent manner in which the contractual duty is performed, or out of a failure to perform such duty.” (Eads, supra, 39 Cal.2d at p. 810.) But in Eads, the defendant allegedly caused physical injury to the plaintiff, not simply property damage or economic loss. Erlich recognizes that a breach of contract may give rise to a tort claim when the plaintiff suffers physical injury. (Erlich, supra, 21 Cal.4th at p. 551 [“Tort damages have been permitted in contract cases where a breach of duty directly causes physical injury . . . .”].) Here, there is no allegation that Eidelstein has been physically injured. He claims only economic loss and property damage.

North American Chemical states: “[T]he same wrongful act may constitute both a breach of contract and an invasion of an interest protected by the law of torts.” (North American Chemical, supra, 59 Cal.App.4th at p. 774.) This does not conflict with Erlich, which quotes North American Chemical approvingly. (Erlich, supra, 21 Cal.4th at p. 551.) Rather, Erlich draws a distinction between act and duty. As North American Chemical states, the same wrongful act may breach both contract and tort duties. But under Erlich, the tort duty must arise independently of the contract.

Miller states: “[U]nder California law, a plaintiff’s contractual negligence claim may sound in contract or tort.” (Miller, supra, 2017 WL 3007082 at *3 [noting difference between Texas and California law for choice-of-law purposes].) In support of this statement, Miller cites Eads. Again, Eads involves physical injury, not economic loss and property damage.

Furthermore, as Desai points out in reply, Erlich was a construction defect case with no allegations of physical injury to the plaintiffs, and the Supreme Court held the plaintiffs could not recover in negligence as a result. Because the same outcome holds here, Desai’s demurrer to the fifth cause of action is sustained.

Since this is the first time this defect has been identified, Eidelstein is given leave to amend.