Lagunitas Owners Association v. Tri Pointe Homes Holdings, Inc., et al.

Case Number

24CV05427

Case Type

Hearing Date / Time

Mon, 04/14/2025 - 10:00

Nature of Proceedings

(1) Def Tri Pointe Homes Holdings, Inc., And Rescal Lagunitas 73, LLC’s, Demurrer To Plaintiff’s Amended Complaint; and, (2) Def Tri Pointe Homes Holdings, Inc., And Rescal Lagunitas 73, LLC’s, Mtn To Strike Portions Of Plaintiff’s Amended Complaint

Tentative Ruling

Lagunitas Owners Association v. Tri Pointe Homes Holdings, Inc., et al

Case No. 24CV05427

           

Hearing Date: April 14, 2025                                                  

HEARING:              (1) Defendants Tri Pointe Homes Holdings, Inc., And Rescal Lagunitas 73, LLC’s, Demurrer To Plaintiff’s Amended Complaint

                                    (2) Defendants Tri Pointe Homes Holdings, Inc., And Rescal Lagunitas 73, LLC’s, Motion To Strike Portions Of Plaintiff’s Amended Complaint

ATTORNEYS:        For Plaintiff Lagunitas Owners Association: Joseph Kaneda, M. Peter Crinella, Fenton Grant Kaneda & Litt LLP

                             For Defendants Tri Pointe Homes Holdings, Inc., fka Tri Pointe Homes, Inc., and Rescal Lagunitas 73, LLC:  Michael P. Zech, Ethan E. Moos, Kahana & Feld, LLP

                                    For Defendant MD2 Communities Inc.: Stephen M. Sanders, Jeff G. Coyner, Nathanael P. Cade, Sanders Coyner Cade, PC

TENTATIVE RULING:

(1) The demurrer of defendants is sustained, in part, as to the third cause of action for breach of implied warranties alleged in plaintiff’s amended complaint, with leave to amend. Except as herein sustained, the demurrer is otherwise overruled.

(2) The motion of defendants to strike portions of plaintiff’s amended complaint is granted, in part, and with leave to amend. The following matters are stricken from plaintiffs’ amended complaint: “and attorneys’ fees” appearing at page 11, line 27, of the amended complaint. Except as herein granted, the motion to strike is otherwise denied.

(3) Plaintiff shall, on or before April 28, 2025, file and serve an amended pleading, if any, which plaintiff shall label as a second amended complaint.

Background:

On October 1, 2024, plaintiff Lagunitas Owners Association (the Association) filed a complaint against defendants Tri Pointe Homes Holdings, Inc., formerly known as Tri Pointe Homes, Inc., (Tri Pointe), Rescal Lagunitas 73, LLC, (Rescal), and MD2 Communities, Inc. (MD2) (collectively, defendants), alleging four causes of action: (1) violation of Civil Code section 895 et seq.; (2) breach of express warranties; (3) breach of implied warranties; and (4) breach of fiduciary duty.

Court records reflect that on November 15, 2024, Tri Pointe separately filed a demurrer to, and motion to strike portions of, the Association’s complaint.

The record further reflects that on December 4, 2024, Rescal filed demurrer to, and motion to strike portions of, the complaint.

On January 23, 2025, the Association filed an amended complaint (the FAC) against Tri Pointe, Rescal, and MD2, alleging four causes of action: (1) violation of Civil Code section 895 et seq.; (2) breach of express warranties (against Rescal only); (3) breach of implied warranties; and (4) breach of fiduciary duty (against Rescal only).

In response to the filing of the FAC by the Association, Tri Pointe and Rescal withdrew their respective demurrers and motions to strike described above, and requested that the court take these motions off-calendar, which the court granted on February 7, 2025.

As alleged in the FAC, which is the operative pleading:

The Association is a common interest development (the Development) comprised of the owners of condominium units as described in a Declaration of Covenants, Conditions, Restrictions and Reservation of Easements for The Homes at Lagunitas (the CC&Rs). (FAC, ¶ 1.) The CC&Rs were recorded in the official records of the County of Santa Barbara, California. (FAC, ¶ 1 & Exh. 1.)

Defendants are engaged in the mass production of condominiums for sale to and use by the general public. (FAC, ¶ 10.) Defendants participated in the development, design, construction, marketing, manufacturing, and sale of condominium units in the Development as “builders”, as that term is defined under Civil Code section 911. (FAC, ¶¶ 10 & 13.) Defendants knew that the condominium units in the Development were intended to be sold to and used by the public as residential dwellings. (FAC, ¶¶ 11-12.)

Prior to the time the Association’s members took over control and management of the Association, Rescal appointed its own employees, representatives, and agents to the directorship and management of the Association, and managed the Association on behalf of its members which include the owners of record of condominium units in the Development. (FAC, ¶ 32.)

The Development was built with improper, inadequate, and defective conditions which affect building exteriors, roofs, windows, elevated private decks, fire resistive construction, electrical systems, plumbing systems, and mechanical components and systems in the Development. (FAC, ¶ 14.) These defects were caused by deficiencies in the Development’s design, specifications, planning, supervision, construction, and development, and could not have been discovered by the exercise of reasonable diligence prior to the time the Association discovered the defects. (FAC, ¶ 15.)

Defendants inspected and marketed the Development with knowledge of the defects and deficiencies in the construction, design, installation, and supervision of the Development, and their causes. (FAC, ¶ 16.) Defendants engaged in a calculated course of conduct to reduce the costs of development by using substandard, deficient, and inadequate design and construction techniques and materials, by selecting low bidding subcontractors, and by inadequately establishing and funding the Association’s reserve accounts to lower the assessments to make the condominium units more attractive for sale. (FAC, ¶ 16.)

When defendants offered the condominium units in the Development for sale to the general public for use as residences, Rescal, expressly warranted, through an express written limited warranty, sales brochures and other advertising materials, the Development’s governing documents, contracts of sale, disclosure documents, and related sales warranty information, that the Development was designed, manufactured, and constructed free of defects and in a commercially reasonable manner, fit for its intended residential purposes, and in compliance with applicable building codes. (FAC, ¶¶ 20-21 & 27.) Rescal concealed the defects in the Development from the Association, and structured the Association’s finances such that the Association would not have adequate reserves to pay for the maintenance of, or correction of defects in, the Development. (FAC, ¶ 34.)

On February 18, 2025, Tri Pointe and Rescal filed a demurrer which is made on the grounds that the third cause of action alleged in the FAC fails to state facts sufficient to constitute a cause of action and is uncertain, and separately filed a motion to strike allegations as to attorney’s fees and separate interest claims.

On February 26, 2024, MD2 filed a joinder in the demurrer and motion to strike of Tri Pointe and Rescal.

The demurrer and motion to strike are each opposed by the Association.

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.) The pleading subject to demurrer 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 including facts which may be inferred from those expressly alleged, but not of contentions, deductions, or conclusions of fact or law. (Ibid.; McMahon v. Craig (2009) 176 Cal.App.4th 1502, 1509.) “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.)

As grounds for the demurrer, Tri Pointe and Rescal (collectively, moving defendants) contend, generally, that the FAC is uncertain. (Notice & Demurrer at p. 2, l. 4.) A party may object by special demurrer on the grounds that the subject pleading is uncertain. (Code Civ. Proc., § 430.10, subd. (f).) “ ‘[U]ncertain’ includes ambiguous and unintelligible.” (Smith v. Kern County Land Co. (1958) 51 Cal.2d 205, 209.) “A special demurrer on the ground that [a pleading] is (a) ambiguous, (b) unintelligible, or (c) uncertain is insufficient unless the demurrer points out specifically wherein the pleading is ambiguous, uncertain or unintelligible.” (Coons v. Thompson (1946) 75 Cal.App.2d 687, 690.)

Wholly absent from the demurrer is any factual or legal argument showing, specifically, where the FAC is uncertain, or why moving defendants cannot understand the issues or the nature of the claims alleged by the Association. Moreover, the allegations of the FAC indicate or suggest that, with respect to facts pertaining to the construction and sale of the condominium units in the Development, these facts are presumptively known to moving defendants. (Chen v. Berenjian (2019) 33 Cal.App.5th 811, 822.) In addition, to the extent the FAC is in some respects uncertain as to these matters, any “ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) For these and all reasons discussed above, the court will overrule the special demurrer of the moving defendants on the grounds of uncertainty.

Moving defendants further contend that, because the third cause of action for breach of implied warranties arises from the construction defects alleged in the FAC, the Association’s sole remedy is a cause of action for violation of Civil Code section 895 et seq. For this reason, the moving defendants argue, the third cause of action is not viable or recognized in construction defect lawsuits such as the present action.

Civil Code section 895 et seq., which is commonly known as the Right to Repair Act (the Act), “applies to the original construction of individual homes sold after January 1, 2003.” (KB Home Greater Los Angeles, Inc. v. Superior Court (2014) 223 Cal.App.4th 1471, 1476; McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, 246-247 (McMillin) [general discussion]; Civ. Code, § 938.) (Note: Undesignated code references herein shall be to the Civil Code unless otherwise stated.) As a threshold issue, the court notes that, though the Association does not expressly allege in the FAC any dates on which the allegedly new condominium units at issue in the FAC were sold, it can be inferred from the express allegations of the FAC that the condominium units at issue were sold as new residential units on or after January 1, 2003. (See, e.g., FAC, ¶¶ 9-18 [alleging that moving defendants violated the Act].)

The Act “codifies a comprehensive reform to construction defect litigation applicable to residential dwellings in California” and sets forth “detailed statewide standards that the components of a dwelling must satisfy. It also establishes a prelitigation dispute resolution process that affords builders notice of alleged construction defects and the opportunity to cure such defects, while granting homeowners the right to sue for deficiencies even in the absence of property damage or personal injury.” (State Farm General Insurance Company v. Oetiker, Inc. (2020) 58 Cal.App.5th 940, 944; McMillin, supra, 4 Cal.5th at p. 247.)

Subject to exception, under section 896 of the Act, to the extent an action seeks recovery of damages “arising out of or related to deficiencies in, the residential construction, design, specifications, surveying, planning, supervision, testing, or observation of construction,” a claimant’s “causes of action shall be limited to” violation of the standards set forth in that section. (Civ. Code, § 896, subd. (a).) “This express language of limitation means that a party seeking damages for a construction defect may sue for violation of these standards, and only violation of these standards, unless the Act provides an exception.” (McMillin, supra, 4 Cal.5th at p. 250, original italics.)

In the FAC, the Association expressly alleges that moving defendants, acting as “builders” under Civil Code section 911, participated in, among other things, the construction of the Development, with the intent that moving defendants would, for pecuniary benefit, market and sell the Development as residential dwellings. (FAC, ¶¶ 4-5 & 10-12.) Based on what the Association alleges is moving defendants’ failure to, among other things, construct the Development in conformance with the Act’s standards, including those set forth in sections 896 and 897, the Association alleges that moving defendants violated the Act. (FAC, ¶ 14.)

Information appearing in exhibit 1 to the FAC also indicates or suggests that Rescal was the owner of the property on which the Development was built. (FAC, ¶ 1 & Exh. 1.) The Association also expressly alleges that, prior to the time its members took over its control and management, Rescal controlled and managed the Association whose members included the owners of the condominium units in the Development. (FAC, ¶¶ 5 & 32.) Reading the complaint as a whole, it can be reasonably inferred from these express allegations that moving defendants constructed the Development specifically for the Association.

The Association further alleges that Rescal expressly warranted within, among other things, an express written limited warranty, sales brochures, and contracts of sale, that the Development was free of defects. (FAC, ¶¶ 20-22.) Though the demurrer is not directed to the second cause of action for breach of express warranty by Rescal, these allegations indicate or suggest that, to the extent any claim alleged against Rescal arises from a breach of a contractual promise, that claim may fall within the exception set forth in section 943, subdivision (a), of the Act. (McMillin, supra, 4 Cal.5th at p. 259; Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 830 [an express warranty is a “contractual promise”].) For present purposes, the court makes no findings in this regard.

In the third cause of action to which the demurrer is directed, the Association contends that the moving defendants, as “builders and sellers” of the Development, made implied representations that the Development was, among other things, free from the construction defects described in the FAC which the Association contends failed to conform the Development to standards set forth in the Act. (FAC, ¶¶ 27-29.) The Association does not include allegations showing the circumstances under which these implied representations were made.

“ ‘A warranty is a contractual term concerning some aspect of the sale…. The warranty may be express [citation] or implied [citation].’ [Citation.] Implied warranties are based on implied representations rather than on promises. [Citation.] Implied warranties may be created by statute or case law.” (Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th 1162, 1168 (Windham).) Subject to exception, privity between a plaintiff and defendant is required in an action for breach of an implied warranty. (Anthony v. Kelsey-Hayes Co. (1972) 25 Cal.App.3d 442, 448.)

The allegations of the FAC are insufficient to show privity between the Association and the moving defendants as required in an action for breach of implied warranty. For example, though the allegations of the FAC appear to suggest that, as to Rescal, privity of contract may arise from the existence of a contract between Rescal and the Association or its members as alleged in the second cause of action further discussed above, the FAC does not allege expressly or by inference that Tri Pointe, or any other defendant, was a party to any such contract. In addition, the Association contends that “defendants” breached an implied warranty, without differentiating between these parties. This suggests to that the contract giving rise to the claim for breach of an implied warranty is not the same contract giving rise to the claim for breach of an express warranty by Rescal.  

In addition, because the allegations of the FAC are unclear as to the nature of the implied warranty which the Association alleges was breached by all defendants, the court is presently unable to determine whether the Act provides the exclusive means for the Association to recover damages resulting from the breach of any implied warranty. (McMillin, supra, 4 Cal.5th at p. 253.)

The Association relies on the decision in Windham to argue that it is not required to allege privity of contract to maintain its cause of action for breach of implied warranty. The court in Windham noted that, while privity of contract is required, in actions where an association established to manage a common interest development has statutory standing to institute litigation as a real party in interest without joining the individual owners of the development, that association impliedly has the requisite privity to state a cause of action for breach of implied warranty notwithstanding the lack of any contract between the association and the seller. (Windham, supra, 109 Cal.App.4th at pp. 1172-1174.) The court did not, however, hold that a plaintiff is not required to allege privity of contract to maintain a cause of action for breach of an implied warranty.

In addition, unlike the FAC, the allegations of the pleading at issue in Windham demonstrated that defendants who designed, developed, constructed, and marketed the condominiums at issue in that case conveyed to title to each buyer of the individual units. (See Windham, supra, 109 Cal.App.4th at p. 1166.) Noted above, in the present action, the Association has failed to allege the contract, if any, which gives rise to the implied warranty at issue in the third cause of action alleged in the FAC.

For all reasons discussed above, giving the allegations of the FAC as a whole a reasonable interpretation and accepting their truth, the court finds that the Association has failed to allege facts sufficient to state a cause of action for breach of an implied warranty by moving defendants. Therefore, the court will sustain the demurrer, in part.

The Association does not request leave to amend, and offers no reasoned argument showing the manner in which the defects discussed herein may be cured by an amendment to the FAC. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) Though the Association has not requested leave to amend, the FAC does not show on its face that it is not capable of amendment. Therefore, the court will grant the Association an opportunity to amend the FAC to cure the deficiencies noted herein. (Eghtesad v. State Farm General Insurance Company (2020) 51 Cal.App.5th 406, 411.) Any amended pleading that may be filed by the Association must be titled as a second amended 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).) Upon a motion to strike made under Code of Civil Procedure section 435, the 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(a) & (b).) 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).)

Moving defendants request that the court strike “Prayer for Relief No. 2, page 11, line 18, … ‘For cost of suit and attorneys’ fees incurred by Plaintiff herein[.]’ ” (Notice at p. 2, ll. 4-5.) Moving defendants contend that the Association has failed to allege a statutory or contractual basis for an award of attorney’s fees or costs. In its opposition to the motion to strike, the Association contends that it is entitled as a matter of right to recover its costs of suit under Code of Civil Procedure section 1032, and that it is authorized to recover an award of attorney’s fees on its contract causes of action under Civil Code section 1717.

The court’s review of the prayer for relief stated in the FAC shows that the request for costs of suit and attorney’s fees appears at page 11 of the FAC, as to the fourth cause of action for breach of fiduciary duty alleged against Rescal.

Generally, the party who prevails in a civil lawsuit is entitled to recover all of its costs unless another statute provides otherwise, and absent such statutory authority, the court has no discretion to deny costs to the prevailing party. (Code Civ. Proc., § 1032, subd. (b); Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 798; Nelson v. Anderson (1999) 72 Cal.App.4th 111, 129.) Moving defendants offer no reasoned argument explaining why the face of the FAC shows that an exception to this general rule exists. Therefore, the court will deny the motion to strike as to the Association’s prayer for recovery of its costs.

As to the Association’s prayer for recovery of attorney’s fees, 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).) Code of Civil Procedure section 1021 codifies this rule, and provides that “[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.) For these reasons, the Association may not recover attorney’s fees absent statutory authorization or an express or implied agreement of the parties.

Though the Association contends that it is entitled to recover attorney’s fees pursuant to a contract, the FAC includes no allegations showing that the Association and Rescal have expressly or impliedly agreed to an allocation of attorney’s fees, or the existence of a contract which specifically provides that attorney’s fees shall be awarded to a party, including the prevailing party, in this action. (Trope, supra, 11 Cal.4th at p. 279.) For these reasons, the Association has failed to allege in the FAC a basis on which it may recover attorney’s fees in this action, including whether such fees are permitted by statute or contract. As the attorney’s fees requested in the FAC are not supported by its allegations, the court will grant the motion to strike, in part as to the Association’s prayer for attorney’s fees, with leave to amend.

Moving defendants also request that the court strike the terms “and Code of Civil Procedure section 382 and Civil Code sections 4775 and 5980” appearing in paragraph 2, lines 15 through 66, of the FAC. To support this request, moving defendants contend that, though the Association may have standing to assert claims which relate to common areas of the Development or other interests that the Association is required to maintain or repair, the Association does not have standing to maintain any claims which relate to any interests or components of the Development which are owned by individual homeowners, whether as a real party in interest or in a representative capacity.

The Association “has standing to bring claims for damages to the common areas pursuant to Civil Code sections 945 and 5980” provided the Association “at least nominally alleged such damages.” (River’s Side at Washington Square Homeowners Association v. Superior Court of Yolo County (2023) 88 Cal.App.5th 1209, 1218 (River’s Side).) Further, the Association “may have standing to bring claims for damages to the residential units that sound in contract or fraud if it can meet the requirements for bringing a representative action pursuant to Code of Civil Procedure section 382.” (Ibid.)
 

Wholly absent from the motion to strike is any reasoned argument showing why the Association has failed to nominally allege on the face of the FAC defects in the common areas of the Development, has alleged only defects in individual units in the Development, or has failed to show on the face of the FAC that it meets the requirements of Code of Civil Procedure section 382. Further, moving defendants fail to explain why the second cause of action for breach of express warranty and the fourth cause of action for breach of fiduciary duty are subject to the Act. (River’s Side, supra, 88 Cal.App.5th at p. 1238.)

For all reasons discussed above, moving defendants have failed to meet their burden to show that, on the face of the FAC, the Association has alleged matters relating to the Association’s standing to maintain this action which are irrelevant, false, or improper, or that the terms appearing in paragraph 2 and described above are not drawn in conformity with state law. (Corns v. Miller (1986) 181 Cal.App.3d 195, 200.) Therefore, the court will deny the motion to strike these terms.