Ocean Walk at North Campus Owners Assn vs Stronghold Engineering Inc et al

Case Number

23CV03247

Case Type

Hearing Date / Time

Fri, 01/26/2024 - 10:00

Nature of Proceedings

CMC; Demurrer and Motion to Strike

Tentative Ruling

For the reasons set forth below:

1. Defendant Stronghold Engineering Incorporated’s demurrer to plaintiff’s first amended complaint is overruled.
2. Defendant Stronghold Engineering Incorporated’s motion to strike portions of plaintiff’s first amended complaint is denied.
3. All defendants shall file and serve their answers to plaintiff’s first amended complaint no later than February 16, 2024.

.

Background:

This action was commenced on July 27, 2023, by the filing of the complaint by plaintiff Ocean Walk at North Campus Owners Association (“Ocean Walk”) against defendants Stronghold Engineering Incorporated (“Stronghold”) and Pat McCarthy Construction, Inc., dba McCarthy Companies (“McCarthy”) for: (1) Violation of Standards for Residential Construction; (2) Breach of Implied Warranty; (3) Breach of Contract; and (4) Negligence.

On September 13, 2023, Ocean Walk filed its operative first amended complaint (“FAC”) alleging the same four causes of action.

As alleged in the FAC:

Ocean Walk and its members are responsible for the maintenance and repair of common areas, condominium units, buildings, structures, and other improvements within residential property known as North Campus Faculty Housing at the University of California Santa Barbara, California located in Goleta. (FAC, ¶ 1) This action pertains to projects at several phases of the property including several addresses. (Ibid.)

Stronghold was involved in the building, development, and construction of Phase II of the project. (FAC, ¶ 3.) McCarthy was involved in the building, development, and construction of Phase III of the project. (FAC, ¶ 4.)

“PLAINTIFF is informed and believes and thereon alleges that DEFENDANTS, and each of them, knew or had reason to know that the units and common areas of the PROJECT would be used by ASSOCIATION and its homeowner members and residents who would expect the units and common areas to be habitable and safe and to conform with the terms of the contracts. DEFENDANTS knew or had reason to know that the purchasers of said properties in the PROJECT would rely upon the skill and judgment of said DEFENDANTS in the design, development, construction, installation and mass production of the units and the common areas and improvements thereon and in providing features conforming with the plans and specifications, all applicable building codes, and the Standards for Residential Construction.” (FAC, ¶  17.)

The units and common areas worked on by defendants do not comply with the applicable plans, specifications, industry standards, building codes, and Standards for Residential Construction and are defective. (Complaint, ¶ 18.)

“As a result of investigation and inspection, PLAINTIFF alleges that violations of the building standards for original construction, as enumerated in California Civil Code §§ 896 and 897, defects and deficiencies exist in the development, workmanship, repairs, materials, planning, design, engineering and construction of the PROJECT and buildings, residential units, and improvements related thereto. The construction of the PROJECT is generally inadequate, in violation of the building standards for original construction, as enumerated in California Civil Code §§ 896 and 897, not in accordance with approved plans/specifications, in violation of the Uniform Building Code and below accepted standards for the construction industry. Numerous violations have occurred and are occurring, including, but not limited to, deficiencies in the performance of the following building components, assemblies, and major systems:

Roofing:

Fireplace chase caps and shrouds prematurely corroded.

Headwall Z bar flashing without returns, gaps in wall system.

Headwall flashing improperly installed, lifting.

Shingles improperly installed, lifting.

Exterior Finishes:

Plaster system failure; excessive cracking, spalling.

Separation and cracking of stucco at windows and doors.

Sheet metal flashing inadequate around doors; corrosion and/or potential

water intrusion causing damage to wall framing.

Water intrusion at vent penetrations.

Penetrations in the stucco are not properly sealed or counterflashed.

Building envelope systems installed so as to permit water intrusion,

interfering with the useful life of manufactured products comprising

component parts of building envelope system.

Exterior Doors and Windows:

Sliding glass door and window failures; water intrusion; omitted thresholds,

deterioration of framing and finishes.

Mechanical Systems:

Fire alarm system with error codes.

HVAC condensate pans lack drain provisions resulting in leaks and

water intrusion into interiors.

Utility closets with unsealed drywall provisions.

            Slabs:

Excessive moisture penetrating through slabs causing damage to interior surfaces and finishes.” (Complaint, ¶ 26.)

On October 30, 2023, Stronghold filed the present demurrer to the complaint arguing that the first, second, and third causes of action fail to state claims against Stronghold upon which relief can be granted. On the same date, Stronghold filed a motion to strike the first three causes of action as well as Ocean Walk’s prayer for recovery of attorney’s fees.

McCarthy has joined in the demurrer, as to the second and third causes of action, and the motion to strike, as to the second and third causes of action as well as the prayer for recovery of attorney’s fees.

Ocean Walk opposes the demurrer and the motion to strike.

Analysis:

            Demurrer

“When any ground for objection to a complaint, cross-complaint, or answer appears on the face thereof, or from any matter of which the court is required to or may take judicial notice, the objection on that ground may be taken by a demurrer to the pleading.” (Code Civ. Proc., § 430.30, subd. (a).) “Our consideration of the facts alleged includes ‘those evidentiary facts found in recitals of exhibits attached to [the] complaint.’ [Citation.]” (Alexander v. Exxon Mobil (2013) 219 Cal.App.4th 1236, 1250.)

“[A] court must treat a demurrer as admitting all material facts properly pleaded, it does not, however, assume the truth of contentions, deductions or conclusions of law.” (Travelers Indem. Co. of Connecticut v. Navigators Specialty Ins. Co. (2021) 70 Cal.App.5th 341, 358, citing Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)

“If the complaint states a cause of action under any theory, regardless of the title under which the factual basis for relief is stated, that aspect of the complaint is good against a demurrer. “ ‘[W]e are not limited to plaintiffs’ theory of recovery in testing the sufficiency of their complaint against a demurrer, but instead must determine if the factual allegations of the complaint are adequate to state a cause of action under any legal theory. The courts of this state have . . . long since departed from holding a plaintiff strictly to the ‘form of action’ he has pleaded and instead have adopted the more flexible approach of examining the facts alleged to determine if a demurrer should be sustained.’ ” [Citations.]” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38-39.)

1. First Cause of Action for Violation of Standards for Residential Construction

Stronghold argues that Ocean Walk has: (1) Failed to plead sufficient facts demonstrating that Stronghold is a builder under the definition of Civil Code section 911; (2) Failed to plead sufficient facts that Civil Code section 936 is applicable; and (3) Fails to allege that the construction issues were new construction. (Demurrer, p. 5, ll. 6-17.)

Civil Code section 911, subdivision (a) defines “builder” as “any entity or individual, including, but not limited to a builder, developer, general contractor, contractor, or original seller, who, at the time of sale, was also in the business of selling residential units to the public for the property that is the subject of the homeowner’s claim or was in the business of building, developing, or constructing residential units for public purchase for the property that is the subject of the homeowner's claim.”

Whether or not Stronghold is a builder pursuant to the definition contained in Civil Code section 911 is a question of fact, not properly decided by demurrer, rather than a defect that appears on the face of the complaint or a complete defense to the cause of action. To accept Strongholds argument that it is not in the business of selling residential units to the public would be to improperly consider extrinsic matters that fall outside the pleading itself. If, in fact, Stronghold’s representation is true, a demurrer is not the proper procedure for disposing of the cause of action.

Civil Code section 936 provides: “Each and every provision of the other chapters of this title apply to general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals to the extent that the general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract. In addition to the affirmative defenses set forth in Section 945.5, a general contractor, subcontractor, material supplier, design professional, individual product manufacturer, or other entity may also offer common law and contractual defenses as applicable to any claimed violation of a standard. All actions by a claimant or builder to enforce an express contract, or any provision thereof, against a general contractor, subcontractor, material supplier, individual product manufacturer, or design professional is preserved. Nothing in this title modifies the law pertaining to joint and several liability for builders, general contractors, subcontractors, material suppliers, individual product manufacturer, and design professionals that contribute to any specific violation of this title. However, the negligence standard in this section does not apply to any general contractor, subcontractor, material supplier, individual product manufacturer, or design professional with respect to claims for which strict liability would apply.”

Stronghold’s second argument suffers from the same problems as its first. To determine whether Civil Code section 936 applies would require the improper consideration of extrinsic evidence that is not contained in the pleading itself or matters of which the court may take judicial notice. The facts, as alleged in the FAC, are sufficient to overcome demurrer based on Stronghold’s second argument.

Stronghold’s third argument, in addition to suffering from the same problems as its first and second, fails because a reasonable inference from reading the complaint as a whole, and its subparts in context, do indicate that the projects were at least partially related to new construction. “[A] demurrer cannot rightfully be sustained to part of a cause of action or to a particular type of damage or remedy.” (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047.)

Stronghold’s demurrer to Ocean Walk’s first cause of action will be overruled.

2. Second Cause of Action for Breach of Implied Warranty and Third Cause of Action for Breach of Contract

Typically, in a breach of contract action, plaintiffs either set out the terms of a contract verbatim, or, more frequently, include a copy of the contract as an exhibit to the complaint. Stronghold implicitly argues that plaintiff is required to either set out the terms of the contract verbatim or attach a copy of the contract to the complaint.

The California Supreme Court has held: “In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189 (Construction Protective Services).)

In Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394 (Miles), the “plaintiff alleged the basic elements of a breach of contract claim. ‘A cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.’ (citation.) Plaintiff alleged an express contract to refinance his loan, including the loan balance, the interest rate, and the monthly payment. He alleged he performed by making payments under the agreement. He alleged defendants breached that contract by repudiating it and refusing to accept payments under it. And he alleged he was damaged by various fees he was charged and by being evicted from his home.” (Id., at p. 402.) The court found those allegations sufficient and held that “plaintiff’s failure either to attach or to set out verbatim the terms of the contract was not fatal to his breach of contract cause of action.” (Ibid.)

Ocean Walk pleads:

“PLAINTIFF is informed and believes, and thereon alleges, that the DESIGN PROFESSIONAL DEFENDANTS, the CONTRACTOR DEFENDANTS, and the SUPPLIER DEFENDANTS entered into written agreements with the Developer and with each other to provide services, labor, and materials for the original design and construction of the PROJECT (collectively the “CONSTRUCTION CONTRACTS”) wherein the DESIGN PROFESSIONAL DEFENDANTS, the CONTRACTOR DEFENDANTS, and the SUPPLIER DEFENDANTS warranted and agreed that their services for or work on the PROJECT would be, and was at all relevant times, in conformance with all applicable building codes and standards, and plans and specifications for the work, free from defects in workmanship and materials and fit for its intended use by the ASSOCIATION and its members. PLAINTIFF is informed and believes, and thereon alleges, that the ASSOCIATION and its members as purchasers of the units are the intended or express third-party beneficiaries of the CONSTRUCTION CONTRACTS.” (FAC, ¶ 40.)

“At no time did DEFENDANTS, or the individual members of the ASSOCIATION, or the ASSOCIATION itself, rescind the CONSTRUCTION CONTRACTS, and neither the individual members of the ASSOCIATION, nor the ASSOCIATION breached any conditions, covenants and promises under the CONSTRUCTION CONTRACTS on their part to be performed, nor did they interfere in or with the performance of these parties in carrying out the obligations they undertook to one another and for the benefit of the ASSOCIATION.” (FAC, ¶ 42.)

“During the approximate period from substantial completion of construction to the date of this Complaint, the DEFENDANTS breached and continue to breach the terms of the CONSTRUCTION CONTRACTS by refusing, neglecting or otherwise failing to improve, maintain, repair or replace the PROJECT DEFECTS in accordance with the terms and conditions of the CONSTRUCTION CONTRACTS, and this conduct was and is a material breach of the terms of the CONSTRUCTION CONTRACTS. The work was not designed, supplied or constructed in accordance with the terms of the CONSTRUCTION CONTRACTS and has never functioned properly, requires replacement, repair and reconstruction, and has resulted in consequential damage to the improvements and separate property within the PROJECT.” (FAC, ¶ 43.)

Ocean Walk alleges it has suffered damages. (FAC, ¶ 44.) Ocean Walk alleges that the contracts provide that the prevailing party in any litigation or other legal action shall be entitled to recover reasonable attorneys’ fees and costs. (FAC, ¶ 45.)

Ocean Walk has pled the legal effect of the contracts as well as all the necessary elements of breach of contract. “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.)

The demurrer to Ocean Walk’s second and third causes of action will be overruled.

            Motion to Strike

“The 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.” (Code Civ. Proc., § 436.) “Irrelevant matter” includes a “demand for judgment requesting relief not supported by the allegations of the complaint.” (Code Civ. Proc., § 431.10, subds. (b)(3), (c).) “The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (Code Civ. Proc., § 437, subd. (a).)

“[J]udges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.)

As noted above, Stronghold seeks to strike Ocean Walk’s first, second, and third causes of action. Stronghold’s argument is the same as was presented relative to its demurrer. The motion to strike will be denied for the same reasons.

Further, a motion to strike is not the proper procedure for attacking an entire cause of action. That is the function of a demurrer. “[I]t is improper for a court to strike a whole cause of action of a pleading under Code of Civil Procedure section 436. . . . Where a whole cause of action is the proper subject of a pleading challenge, the court should sustain a demurrer to the cause of action rather than grant a motion to strike.” (Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1281.)

Finally, Stronghold moves to strike Ocean Walk’s prayer for recovery of attorney fees based on the assertion that there is no proper cause of action for breach of contract. As the demurrer to Ocean Walk’s cause of action for breach of contract was overruled, the motion to strike the prayer for attorney’s fees will be denied.