Case Name: American HVAC & Plumbing, Inc. v. Silicon Valley Homes, LLC, et al.

Case No.: 2014-1-CV-269672

Defendants Silicon Valley Homes, LLC (“SVH”) and Max Keech (“Keech”) (collectively, “Defendants”) demur to the fourth amended complaint (“4AC”) filed by plaintiff American HVAC & Plumbing, Inc. (“Plaintiff” or “American”) and move to strike portions contained therein.

This is an action arising out of failed payments for repair, remodel and renovation work performed on several Bay Area properties owned by Defendants.  Plaintiff entered into a series of written and/or oral agreements with, among others, Defendants, for such work to be performed.  (4AC, ¶¶ 30, 31.)  American fully performed in accordance with each of the foregoing agreements but Defendants, despite conceding that outstanding balances were owed for labor and materials provided pursuant to several of the agreements, failed to pay those amounts.  (Id., ¶ 58.)  On August 3, 2014, SVH and Keech, along with the other defendants, sent an email to American explaining that due to financial difficulties surrounding SVH, “it should be expected that a complete payment of financial obligations with [American] will not be fulfilled.”  (Id.)

On October 7, 2016, Plaintiff filed the 4AC asserting the following causes of action: (1) breach of contract (against SVH, Keech, and Hill); (2) negligence (against SVH, Keech and Hill); (3) imposition of constructive trust (against SVH, Keech and Hill); (4) common counts (against SVH, Keech and Hill); (5) conversion (against SVH, Keech and Hill); (6) quantum meruit (against SVH, Keech and Hill); and (7) negligent misrepresentation (against SVH, Keech and Hill).

On October 28, 2016, Defendants filed the instant demurrer to each of the seven causes of action asserted against them in the 4AC on the ground of failure to state facts sufficient to constitute a cause of action, and to the first on the additional grounds of uncertainty and that it cannot be determined from the pleading whether the subject contract is oral, written, or implied by conduct.  ( Code Civ. Proc., § 430.10, subds. (e), (f) and (g).)  Defendants also filed the instant motion to strike portions of the 4AC.  ( Code Civ. Proc., §§ 435, 436.)

First, with their motion to strike, Defendants move to strike allegations relating to their alleged fraud as well as Plaintiff’s request for attorney’s fees.  All of the fraud allegations are newly added from the TAC and are included in the seventh cause of action for negligent misrepresentation.  While this cause of action existed in preceding versions of Plaintiff’s complaint, the 4AC is the first time that it has been asserted against Defendants.  It is Defendants’ contention that Plaintiff has improperly added these allegations and this claim to the 4AC by doing so without the permission of the Court.

The Court previously considered and ruled on the following motions filed by Defendants: a demurrer to the first amended complaint; and a motion to strike and motion for judgment on the pleadings as to the third amended complaint.  In connection with the disposal of the latter motions, Plaintiff was granted leave to amend with respect to its breach of contract claim (with the Court agreeing with Defendants that the claim was insufficiently pleaded) and its alter ego allegations.  Generally, where a court grants leave to amend after sustaining a demurrer (or granting a motion for judgment on the pleadings), the scope of possible amendment is limited to the cause(s) of action to which the motion has been sustained.  (See People v. Clausen (1967) 248 Cal.App.2d 770, 785-786.)  The leave granted must be construed as permission to the pleader to amend the causes of action to which the demurrer has been sustained, not add entirely new causes of action or allegations.  (See Patrick v. Alacer Corp. (2008) 167 Cal.App.4th 995, 1015.)  The addition of new causes of action and allegations is only proper where they directly respond to the court’s reason for sustaining the earlier motion.  (Id.)  Here, Plaintiff’s claim for negligent misrepresentation and its associated fraud allegations are completely unrelated to the reasons behind the Court’s granting of the preceding motion for judgment on the pleadings.  Consequently, as these items exceed the permissible scope of amendment, they are stricken from the 4AC.

Defendants’ also move to strike Plaintiff’s request for attorney’s fees, which remains in the 4AC despite the Court having previously granted Defendants’ motion to strike the request in the third amended complaint without leave to amend.  This request is accordingly stricken once again.

In accordance with the foregoing, Defendants’ motion to strike is GRANTED WITHOUT LEAVE TO AMEND.

Turning to the demurrer, Defendants first contend that it should be sustained to the first cause of action for breach of contract without leave to amend because despite several opportunities to properly assert this claim, it remains insufficiently pleaded.  In this cause of action, Plaintiff alleges that Defendants breached a series of written and oral agreements between the parties for American’s performance of repair, remodel and renovation work on Defendants’ residential properties by failing to pay the amounts due under those contracts.  (4AC, ¶ 66.)

As articulated above, Defendants demur to this cause of action on three grounds: failure to state facts sufficient to constitute a cause of action, uncertainty, and that it cannot be ascertained from the pleadings whether the agreement(s) at issue is written, oral or implied by conduct.  ( Code Civ. Proc., §§ 430.10, subds. (e), (f) and (g).)  Defendants’ demurrer based on uncertainty can be easily disposed of as it is abundantly clear from the allegations of the 4AC what Defendants are being accused of doing.  A demurrer for uncertainty is disfavored and will be sustained only where the allegations of the complaint are so unintelligible that the defendant cannot reasonably respond to them.  (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.)  The allegations relating to Defendants’ alleged breach of contract are far from unintelligible.  Consequently, Defendants’ demurrer to the first cause of action on this ground is OVERRULED.

Defendants’ demurrer to the first cause of action on the ground that it cannot be ascertained whether the contract sued upon is oral, written or implied by conduct is also OVERRULED.  Per the allegations of the 4AC, Defendants are alleged to have entered into a series of both oral and written agreements with American.  Thus, the types of contracts alleged to be the subject of first cause of action are clear.

Finally, and conversely, Defendants’ demurrer to the first cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.  Where a plaintiff relies upon a written contract, but does not set forth all of the terms of the contract verbatim, nor state the substance of its relevant terms, the complaint is insufficient for failure to plead essential terms.  (See, e.g., Hancock v. Clark (1922) 56 Cal.App. 277.)  Despite having several opportunities to do so, Plaintiff still has not pleaded the essential terms of its purported agreements, both oral and written, with Defendants.  There is still no breakdown of which amounts are owed by Keech and SVH and in connection with which type of contract and which specific property.  Instead, Plaintiff continues to refer to numerous agreements without distinction and alleges that it is owed a total of $177,740.75 from SVH, Keech and Hill without articulating what amounts are owed for particular services or properties.  In contrast to the preceding complaints, Plaintiff now refers to specific agreements having been produced in the discovery process, but oddly does not attach to or incorporate the terms of the those agreement in the 4AC.  Specifics are necessary to adequately plead this cause of action.  Having failed to do so, Defendants’ demurrer is sustained.

Defendants next demur to the second cause of action for negligence on the ground of failure to state facts sufficient to constitute a cause of action.  In this claim, Plaintiff alleges that Defendants owed it duties of care that they breached by failing to accurately and honestly account for and pay Plaintiff all of the amounts owed on the various written and oral agreements.  (4AC, ¶¶ 71-73.)  Defendant asserts that no claim for negligence has been stated because American fails to plead facts showing a duty owed by Keech or SVH to pay the contractual obligations of others.  However, as the Court reads the allegations of this cause of action, Plaintiff is not alleging that Defendants had a duty to pay the contractual debts of others, but rather that they had a duty to pay their own contractual debts.  Consequently, as Defendants’ argument has no application to this cause of action as alleged, their demurrer to this claim on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.

Next, Defendants assert that their demurrer to the third cause of action for imposition of a constructive trust should be sustained because there are not sufficient facts pleaded to compel such a remedy.  This argument is unavailing, and was already rejected by the Court in its ruling on SVH’s demurrer to this cause of action as alleged in the first amended complaint.  Defendants contend, as SVH did previously, that American has failed to plead the requisite wrongful act by them necessary to permit the imposition of a constructive trust.  However, as the Court previously explained, Plaintiff has pleaded such wrongdoing; the thrust of the allegations upon which this cause of action is predicated is that Defendants unjustly and/or continue to hold the residential properties improved by Plaintiff’s work and the revenues received from the sale of those properties and refuse to pay the amounts owed for the work performed.  (4AC, ¶¶ 74-77.)  Accordingly, Defendants’ demurrer to the third cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.

Defendants contend that Plaintiff’s fourth cause of action for common counts is based on the same “faulty” allegations as its contract claim and therefore it too must fail.  As a general matter, a common count is not a specific cause of action but rather a simplified form of pleading used to assert the existence of various forms of monetary indebtedness.  (See Zumbrun v. University of Southern California (1972) 25 Cal.App.3d 1, 14-15.)  Critically, “[w]hen a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable.”  (McBride v. Boughton (2004) 123 Cal.App.4th 379, 394.)  Given the fact that the demurrer to the breach of contract claim is sustained without leave to amend, it follows that the demurrer to the fourth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is also SUSTAINED WITHOUT LEAVE TO AMEND on the same grounds.

In the fifth cause of action for conversion, Plaintiff alleges that Defendants “exerted dominion and control over, and intentionally and substantially interfered with, the $177,740.75 balance due to and wrongfully converted by [Defendants].”  (4AC, ¶ 83.)  Defendants first assert that no claim for conversion has been stated because Plaintiff alleges that it consented to the use or disposition of the materials it allegedly delivered to the properties.  The basis of this claim, however, is not Defendants’ conversion of materials purportedly delivered by American to the subject properties, but the amounts owed to them that were not forwarded as they purportedly were supposed to be.  Thus, this argument is without merit.

 

However, Defendants’ second and remaining argument is well-taken.  Defendants persuasively contend that Plaintiff’s claim for “conversion” is in actuality nothing more than a breach of contract claim.  “A mere contractual right of payment, without more, will not suffice” to state a claim for conversion.  (See Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451-452; see also Imperial Valley L. Co. v. Globe G. & M. Co. (1921) 187 Cal. 352.)  Here, this is essentially what Plaintiff has pleaded in alleging that Defendants have not paid the amounts owed for the work it performed on their various properties.  Consequently, Defendants’ demurrer to the fifth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITHOUT LEAVE TO AMEND.

 

Plaintiff’s sixth cause of action for quantum meruit is based on allegations that it provided construction, labor, services and materials for Defendants’ benefit which Defendants have failed and refused to pay for.  (4AC, ¶ 92.)  Citing to two different cases, Rogers v. Whitson (1964) 228 Cal.App.2d 662 and Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal.App.3d 715, Defendants insist that no claim for quantum meruit has been or can be stated because American is a subcontractor who did not have a direct contract with Defendants and thus can only seek redress with the party it actually contracted with- general contractor RPI.  While this may be a correct statement of law, it is not apparent solely from the pleadings that such a factual circumstance exists here.  That is, Defendants are alleged to have directly contracted with American, both orally and in writing, for remodeling and repair work on the subject properties, in contrast to the parties in the authorities cited.  (See, e.g., 4AC, ¶¶ 30-31.)  Whether this is actually the case or American contracted solely with another entity, RPI, is a factual issue not appropriately addressed or resolved on demurrer.  American otherwise sufficiently pleads a claim for quantum meruit based on the services that it allegedly provided to Defendants upon their request and was not fully compensated for.  (See Day v. Alta bates Medical Ctr. (2002) 98 Cal.App.4th 243, 248 [stating elements to recover under quantum meruit theory].)  Consequently, Defendants’ demurrer to this cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.

 

Given the Court’s ruling on Defendants’ motion to strike, their demurrer to the seventh cause of action is MOOT.