Seth Brindis et al vs E&E Construction

Case Number

23CV04348

Case Type

Hearing Date / Time

Fri, 03/08/2024 - 10:00

Nature of Proceedings

CMC; Demurrer and Motion to Strike

Tentative Ruling

(1) For all reasons discussed herein, the demurrer of defendant to plaintiffs’ complaint is overruled.

(2) For all reasons discussed herein, the motion to strike of defendant is granted, with leave to amend. The following matters shall be stricken from plaintiffs’ complaint: prayer for relief, first cause of action, first paragraph no. 1 (“For disgorgement of all sums paid under the illegal Construction Agreement”); prayer for relief, first cause of action, first paragraph no. 3 (“For attorney’s fees”); and prayer for relief, second cause of action, second paragraph no. 2 (“For attorney’s fees”).

(3) Leave to amend granted herein is limited to providing further allegations relating to any claim for disgorgement and or attorney’s fees. If plaintiffs seek to add any other cause of action, plaintiffs must obtain leave of court either by stipulation or by noticed motion.

(4) Plaintiffs shall file and serve their first amended complaint, if any, on or before March 18, 2024.

Background:

On October 3, 2023, plaintiffs Seth Brindis (Brindis) and Stephanie Reich (Reich) (collectively, plaintiffs) filed a complaint against defendant E&E Construction, Inc., alleging three causes of action: (1) violation of Business and Professions Code section 7159; (2) breach of contract; and (3) negligence – construction defect. As alleged in the complaint:

On January 17, 2022, plaintiffs and defendant entered into a Home Improvement Contract (the contract) for the renovation of residential property (the project) located at 2509 and 1/2 Castillo Street in Santa Barbara, California (the property). (Compl., ¶¶ 1, 2.) The contract did not include a payment schedule, approximate dates for commencement of the work at the project, an approximate date for completion of the project, a specific schedule of progress payments to be made with reference to the completed work, or total or fixed prices. (Id. at ¶¶ 4, 5, 17-19.)

Defendant could not complete the project in the time frame represented to plaintiffs, failed to adequately supervise the project, relied on unskilled and under-skilled laborers to perform the work, and failed to protect and secure the property and the project. (Compl., ¶¶ 6-8, 33.) Though plaintiffs have paid defendant, they will have to hire additional contractors to perform repairs due to damaged caused by defendant’s negligent supervision, construction, and protection of the project. (Id. at ¶¶ 6-9, 34.) Plaintiffs have also lost substantial rental income. (Id. at ¶ 10.)

On December 21, 2023, defendant filed a demurrer to the first and second causes of action alleged in the complaint on the grounds that these causes of action are uncertain and fail to allege facts supporting each cause of action. Defendant also filed a motion to strike from the complaint allegations for disgorgement of sums paid to defendant and for attorney’s fees.

In support of the demurrer and motion to strike, defendant submits identical declarations of its counsel in which counsel declares that she attempted to meet and confer with plaintiff’s counsel in writing and by phone but that counsel failed to respond. (Thwaits Decls., ¶¶ 2.)

Plaintiffs have not filed oppositions or other responses to the demurrer or motion to strike.

Analysis:

(1) The Demurrer

In ruling on a demurrer, the court determines whether the complaint states a cause of action. (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 (Moore).) The complaint is given a reasonable interpretation and read as a whole, with all its parts in their context. (Ibid.) A demurrer assumes the truth of properly pleaded material allegations, but not of contentions, deductions, or conclusions of fact or law. (Ibid.) The court also accepts as true facts that may be inferred from those expressly alleged and facts appearing in exhibits attached to the complaint. (McMahon v. Craig (2009) 176 Cal.App.4th 1502, 1509; Mead v. Sanwa Bank California (1998) 61 Cal.App.4th 561, 567.) “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.” (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38.)

Demurrer to first cause of action for violation of Business and Professions Code section 7159:

In support of the demurrer to the first cause of action alleged in the complaint, defendant contends that plaintiffs have failed to allege that Reich was a party to the contract or that Reich holds any ownership interest in the property. Therefore, defendant argues, plaintiffs have failed to allege facts sufficient to support Reich’s standing in this matter and whether Reich suffered any harm.

Plaintiffs have expressly alleged that both Brindis and Reich are parties to the contract with defendant. (Compl., ¶ 1.) Assuming the truth of this allegation, it is sufficient to establish that Reich has standing and is entitled to assert claims for relief.

Defendant further contends that plaintiffs have failed to include a copy of the contract to permit defendant to inspect and review its terms. Because plaintiffs have not provided any “actual evidence” or proof of any violation of section 7159 of the Business and Professions Code, defendant argues, plaintiffs have failed to sufficiently allege material facts to support the first cause of action.

Business and Professions Code section 7159 sets forth specific items that must be included in, or as an attachment to, a home improvement contract. (Bus. & Prof. Code, § 7159, subd. (a)(1).) (Note: Undesignated statutory references shall be to the Business and Professions Code unless otherwise indicated.) Under its provisions, a “home improvement contract” includes a written agreement between a “contractor and an owner … for the performance of a home improvement as defined in Section 7151 … if the aggregate contract price … exceeds five hundred dollars ($500).” (Bus. & Prof. Code, § 7159, subd. (d).) Under section 7151, “home improvement” includes the “repairing, remodeling, altering, converting, or modernizing of” residential property. (Bus. & Prof. Code, § 7151, subd. (a).)

As further discussed above, plaintiffs expressly allege that the contract pertains to the renovation of residential property. (Compl., ¶ 2.) Accepting plaintiffs’ allegations as true and giving the complaint a reasonable interpretation, these allegations are sufficient to show that the contract is a home improvement contract for purposes of sections 7151 and 7159.

In addition, plaintiffs expressly allege that the contract fails to state an approximate date on which the work will commence and an approximate date of completion of the project. (Compl., ¶¶ 17 & 18.) Plaintiffs allege that defendant’s failure to include these items constitutes a violation of subdivisions (d)(10)(C) and (d)(11)(B) of section 7159, which require a home improvement contract to identify the approximate dates of commencement and completion of the work. (Bus. & Prof. Code, § 7159, subds. (d)(10)(C) & (d)(11)(B).) These allegations sufficiently plead material facts regarding the provisions of the contract at issue and do not constitute factual or legal conclusions as defendant contends.

In addition, plaintiffs expressly allege that the contract fails to include required statutory language and fails to include a specific schedule of progress payments to be made by plaintiffs. Plaintiffs assert that the failure by defendant to include these items in the contract constitutes a violation of section 7159, subdivision (d)(9)(C), which requires details of progress payments be expressed in substantially the form described in subdivisions (d)(9)(A) & (B), and that the home improvement contract include the text appearing in subdivision (d)(9)(C) of section 7159. (See Bus. & Prof. Code, § 7159, subd. (d)(9)(A)-(C).) These allegations also assert material facts and not conclusions of law or fact.

The allegations described above allege specific facts describing the purportedly improper provisions of the contract sufficient to state a claim for violation of section 7159, notwithstanding whether plaintiffs have attached a copy of the contract to the complaint. (See Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6 [the court treats the demurrer as admitting all material facts properly pleaded].) Defendant cites no authority requiring plaintiffs to attach a copy of the contract for the purpose of “proving” these allegations. Moreover, on demurrer, the court does not consider whether plaintiffs can prove the allegations. (Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1034.)

Defendant also specially demurs to the first cause of action on the grounds that it is uncertain. Defendant fails to point out specifically where the complaint is uncertain. (Coons v. Thompson (1946) 75 Cal.App.2d 687, 690 [a special demurrer on the ground of uncertainty is insufficient unless the demurrer points out specifically where the pleading is uncertain].)

For all reasons discussed above, plaintiffs have alleged facts sufficient to state a claim for violation of section 7159. Therefore, the court will overrule the demurrer of defendant to the first cause of action alleged in the complaint.

Demurrer to the second cause of action for breach of contract:

The sole grounds for defendant’s demurrer to the second cause of action for breach of contract is that plaintiffs have failed to provide a copy of the contract with the complaint.

“A cause of action for breach of contract requires pleading of a contract, plaintiff’s performance or excuse for failure to perform, defendant’s breach and damage to plaintiff resulting therefrom. [Citation.] A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

As plaintiffs may plead the contract by its legal effect, plaintiffs are not required to attach a copy of the contract as defendant contends. Furthermore, defendant offers no reasoned argument demonstrating that allegations of the second cause of action otherwise fail to sufficiently plead a cause of action for breach of contract or fail to sufficiently plead the contract by its legal effect. In addition, the court finds that plaintiffs have alleged facts sufficient to show a contract between the parties, plaintiffs’ performance by paying defendant for the work completed, defendant’s breach by failing to adequately supervise or complete the project, and damage. (See Compl., ¶¶ 1, 2, 6-10, 25-30.)

For all reasons discussed above, and as defendant asserts no additional grounds for its demurrer to the cause of action for breach of contract apart from those discussed herein, the court will overrule the demurrer to the second cause of action alleged in the complaint.

(2) The Motion to Strike

“Any party, within the time allowed to respond to a pleading may serve and file a notice of motion to strike the whole or any part thereof[.]” (Code Civ. Proc., § 435, subd. (b)(1).) In ruling on a motion to strike, a court may “strike out any irrelevant, false, or improper matter inserted in any pleading” or “strike  all or part of any pleading not filed in conformity with applicable law, court rules, or an order of the court” (Code Civ. Proc., §436.) The grounds for a motion to strike must appear on the face of the pleading or from matters which the court may take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

Defendant moves to strike from plaintiffs’ prayer for relief plaintiffs’ request that the court grant “disgorgement of all sums paid under the illegal [contract]” appearing in the first paragraph no. 1. (Compl. at p. 6, l. 14.) Defendant contends that plaintiffs have failed to allege any facts showing that defendant did not possess a valid contractor’s license for purposes of disgorgement under Business and Professions Code section 7031.

Giving the complaint a reasonable interpretation, plaintiffs seek disgorgement of all monies paid by plaintiffs to defendant under the contract, which plaintiffs allege is illegal. (Compl., ¶ 22.) Though plaintiffs generally assert that the contract violated “other requirements” of Business and Professions Code section 7150 et seq., plaintiffs do not allege facts demonstrating what “other requirements” were violated. (See Compl., ¶¶ 20-21.) Wholly absent from the complaint are any factual allegations showing what “other requirements” were violated with respect to the contract. Therefore, it can be inferred from the express allegations of the complaint that plaintiffs seek disgorgement based on defendant’s purported violations of section 7159 as further discussed above. (See Moore, supra, 51 Cal.3d at p. 125 [the court does not assume the truth of deductions or conclusions of fact or law on demurrer].)

Under section 7159, a “[f]ailure by the licensee, their agent or salesperson, or by a person subject to be licensed under this chapter, to provide the specified information, notices, and disclosures in the contract, or to otherwise fail to comply with any provision of this section, is cause for discipline.” (Bus. & Prof. Code, § 7159, subd. (a)(5).) Though Business and Professions Code section 7090 et seq. describe disciplinary proceedings which may be taken against a contractor, which may include suspension or permanent revocation of the contractor’s license under certain circumstances (see, e.g., Bus. & Prof. Code, § 7090), it is unclear on what factual basis plaintiffs seek disgorgement of monies paid to defendant under the contract. (See, e.g., Davenport & Co. v. Spieker (1988) 197 Cal.App.3d 566, 570 [noncompliance with section 7159 does not in all circumstances preclude recovery for work performed or render the contract void].)

As plaintiffs have not alleged facts sufficient to demonstrate an entitlement to disgorgement of sums paid to defendant under section 7159, the court will grant the motion to strike plaintiffs’ request which appears in the first paragraph no. 1 of plaintiffs’ prayer for relief. As this is plaintiffs’ original complaint which does not necessarily show on its face that it is incapable of amendment, the court will grant plaintiffs leave to amend. (Eghtesad v. State Farm General Insurance Company (2020) 51 Cal.App.5th 406, 411-412.)

Defendant also moves to strike from plaintiffs’ prayer for relief the request for attorney’s fees appearing in the first paragraph no. 3. A reasonable interpretation of the complaint demonstrates that plaintiffs seek recovery of attorney’s fees based on defendant’s purported violations of section 7159 further discussed above. (See Compl. at p. 6, ll. 13 & 16.)  

California follows the “American rule” regarding recovery of attorney’s fees in litigation, “which provides that each party to a lawsuit must ordinarily pay his own attorney fees.” (Trope v. Katz (1995) 11 Cal.4th 274, 278 (Trope).) Under Code of Civil Procedure section 1021, which codifies the rule, “[e]xcept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties[.]” (Code Civ. Proc., § 1021.) Therefore, unless statutorily authorized or provided for by an express or implied agreement of the parties, the parties to a lawsuit may not recover attorney’s fees.

The same analysis applies. The express language of section 7159 does not authorize recovery of attorney’s fees for violations of its provisions. Therefore, the court will grant the motion to strike the request for attorney’s fees appearing in prayer for relief, first paragraph no. 3. For the same reasons discussed above, the court will grant plaintiffs leave to amend.

Defendants further move to strike plaintiffs’ request for attorney’s fees under prayer for relief, second paragraph no. 2. Based on the allegations of the complaint, plaintiffs also seek recovery of attorney’s fees for defendant’s purported breach of the contract. (See Compl., at p. 6, ll. 19 & 21.)

An exception to the general rule codified in Code of Civil Procedure section 1021, further discussed above, exists where the parties to a lawsuit have expressly or impliedly agreed to an allocation of attorney’s fees. (See Trope, supra, 11 Cal.4th at p. 279; Larson v. City and County of San Francisco (2011) 192 Cal.App.4th 1263, 1298 (Larson).) In such cases, Civil Code section 1717 applies. (Larson, supra, 192 Cal.App.4th at p. 1298.)

Civil Code section 1717 provides that “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” (Civ. Code, § 1717, subd. (a).)

On its face, the complaint does not allege that the contract provides for an award of attorney’s fees incurred to enforce its provisions. Therefore, plaintiffs have failed to allege any basis on which attorney’s fees are recoverable under the contract at issue. As the attorney’s fees requested by plaintiffs in connection with the second cause of action for breach of contract are not supported by the allegations of the complaint, the court will grant the motion to strike the attorney’s fees requested under plaintiffs’ prayer for relief, second paragraph no. 2, also with leave to amend.

Leave to amend granted herein will be limited to providing further allegations relating to a claim for disgorgement and a claim for attorney’s fees. If plaintiffs seek to add any other cause of action, plaintiffs will need to obtain leave of court either by stipulation or by noticed motion.