Demurrer to First Amended Cross-Complaint (Judge Michael E. Whitaker)

Case Number: 25SMCV01838    Hearing Date: August 21, 2025    Dept: 207

TENTATIVE RULING

DEPARTMENT 207
HEARING DATE August 21, 2025
CASE NUMBER 25SMCV01838
MOTION Demurrer to First Amended Cross-Complaint
MOVING PARTY Plaintiff Jubin Sharifi
OPPOSING PARTY none

MOTION

This case arises from a dispute concerning the construction of a single-family home and an 18-unit apartment building.

On April 10, 2025, Plaintiff Jubin Sharifi (“Plaintiff”) filed suit against Defendants Eskan Builders Corp. (“Eskan”); Mike Tehrani (“Tehrani”); The North River Insurance Company (“North River”); Hudson Insurance Company (“Hudson”) alleging five causes from action for (1) breach of contract; (2) rescission; (3) disgorgement; (4) release of mechanic’s lien; and (5) action on contractor’s license bond.  Plaintiff alleges Eskan and Tehrani were unlicensed contractors for 144 days during the projects.

Eskan and Tehrani have cross-complained against Plaintiff.  The operative verified First Amended Cross-Complaint (“FACC”) alleges three causes of action for (1) foreclosure of mechanic’s lien; (2) breach of written contract; and (3) quantum meruit.

Plaintiff now demurs to the FACC for failure to state facts sufficient to constitute a cause of action and uncertainty, pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f), respectively.  The demurrer is unopposed.

REQUEST FOR JUDICIAL NOTICE

            Plaintiff requests judicial notice of the following documents:

Exhibit 5: the verified license history from the Contractors’ State License Board showing Eskan Builders Corp was suspended for 102 days for its lack of worker’s compensation insurance on March 14, 2024 until the license was reinstated on June 30, 2024.  The license was also suspended for a separate reason from April 24, 2024 to May 30, 2024.  Thereafter, the license expired on October 31, 2024, until it was reinstated and renewed on December 11, 2024.

Exhibit 6: the date the mechanic’s lien at issue was recorded in the office of the recorder of Los Angeles County on January 29, 2025.

Exhibit 7: The date the original Cross-Complaint was filed on May 8, 2025.

Exhibit 8: Exhibit I to the First Amended Cross-Complaint, filed on July 11, 2025 – records from the Court’s file in this case entitled “Notice of Rejection of Electronic Filing” dated May 8, 2025, and the reason listed that the original Cross-Complaint was not accepted on April 28, 2025 was the failure to pay first appearance fees.

            With respect to Exhibit 6, Courts can take judicial notice of the existence and recordation of real property records, if authenticity is not reasonably disputed.  (Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265.)  “The official act of recordation and the common use of a notary public in the execution of such documents assure their reliability, and the maintenance of the documents in the recorder’s office makes their existence and text capable of ready confirmation, thereby placing such documents beyond reasonable dispute.”  (Ibid.)  Moreover, courts can take judicial notice not only of the existence and recordation of recorded documents but also matters that can be deduced from the documents, including the parties, dates, and legal consequences of recorded documents relating to real estate transactions.  (Ibid.)  Therefore, the Court takes judicial notice that the mechanic’s lien was recorded on January 29, 2025.

With respect to Exhibits 7 and 8, Judicial notice may be taken of records of any court in this state.  (Evid. Code, § 452, subd. (d)(1).)  Because the original Cross-Complaint and First Amended Cross-Complaint are part of the Court’s record for this case, the Court may take judicial notice of them.  (Ibid.)   However, “while courts are free to take judicial notice of the existence of each document in a court file, including the truth of results reached, they may not take judicial notice of the truth of hearsay statements in decisions and court files.  Courts may not take judicial notice of allegations in affidavits, declarations and probation reports in court records because such matters are reasonably subject to dispute and therefore require formal proof.”  (Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [cleaned up].)  Accordingly, the Court takes judicial notice that the original Cross-Complaint was filed on May 8, 2025 and that the reason given on the Notice of Rejection of Electronic Filing was failure to pay first appearance fees.

Regarding Exhibit 5, courts may take judicial notice of Contractors’ State License Board records as “official acts of the legislative, executive, and judicial departments of […] any state of the United States” pursuant to Evidence Code, section 452, subd. (c).  (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 518.)  Therefore, the Court takes judicial notice of Exhibit 5, and the dates Eskan’s license was active, suspended, and expired.

ANALYSIS

  1. DEMURRER

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In testing the sufficiency of a cause of action, a court accepts “[a]s true all material facts properly pled and matters which may be judicially noticed but disregard contentions, deductions or conclusions of fact or law.  [A court also gives] the complaint a reasonable interpretation, reading it as a whole and its parts in their context.”  (290 Division (EAT), LLC v. City & County of San Francisco (2022) 86 Cal.App.5th 439, 450 [cleaned up]; Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 280 [“in considering the merits of a demurrer, however, “the facts alleged in the pleading are deemed to be true, however improbable they may be”].)

Further, in ruling on a demurrer, a court must “liberally construe” the allegations of the complaint “with a view to substantial justice between the parties.”  (See Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.)

In summary, “[d]etermining whether the complaint is sufficient as against the demurrer on the ground that it does not state facts sufficient to constitute a cause of action, the rule is that if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated, or may be intermingled with a statement of other facts irrelevant to the cause of action shown, or although the plaintiff may demand relief to which he is not entitled under the facts alleged.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

  1. UNCERTAINTY

“[D]emurrers for uncertainty are disfavored.”  (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.)  A demurrer for uncertainty will be sustained only where the pleading is so bad that the responding party cannot reasonably respond – i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what claims are directed against him or her.  (Khoury v. Maly’s of California (1993) 14 Cal.App.4th 612, 616.)  Where a demurrer is made upon the ground of uncertainty, the demurrer must distinctly specify exactly how or why the pleading is uncertain, and where such uncertainty appears by reference to page and line numbers.  (See Fenton v. Groveland Comm. Services Dist. (1982) 135 Cal.App.3d 797, 809.)

Although Plaintiff raises the demurrer in part on the ground of uncertainty, Plaintiff does not demonstrate that any portions of the FACC are so bad that Plaintiff cannot reasonably determine what issues must be admitted or denied, or what claims are directed against Plaintiff.  The Court thus declines to sustain Plaintiff’s demurrer on the basis of uncertainty.

  1. FAILURE TO STATE A CAUSE OF ACTION
  2.           First Cause of Action – Mechanic’s Lien

Plaintiff argues Eskan’s first cause of action for mechanic’s lien is untimely and the FACC fails to state facts sufficient to constitute a cause of action, because an unlicensed contractor may not prosecute an action pursuant to Business & Professions Code section 7031, subdivision (a).

Considering Plaintiff’s first argument, Civil Code section 8460 provides that a claimant “shall commence an action to enforce a lien within 90 days after recordation of the claim of lien.  If the claimant does not commence an action to enforce the lien within that time, the claim of lien expires and is unenforceable.”

Here, the claim of lien was recorded on January 29, 2025.  The first iteration of the Cross-Complaint was filed in this matter on May 8, 2025 and the FACC was filed on July 11, 2025.  However, as alleged in paragraph 27 of the FACC and attached as Exhibit I thereto, Eskan alleges that it originally submitted the Cross-Complaint on April 28, 2025, but it was administratively rejected on May 8, 2025 due to “lack of first appearance fees.”

However, Code of Civil Procedure section 1010.6, subdivision (e)(4)(E) provides:

(E) If the clerk of the court does not file a complaint or cross complaint because the complaint or cross complaint does not comply with applicable filing requirements or the required filing fee has not been paid, any statute of limitations applicable to the causes of action alleged in the complaint or cross complaint shall be tolled for the period beginning on the date on which the court received the document and as shown on the confirmation of receipt described in subparagraph (A), through the later of either the date on which the clerk of the court sent the notice of rejection described in subparagraph (C) or the date on which the electronic filing service provider or electronic filing manager sent the notice of rejection as described in subparagraph (D), plus one additional day if the complaint or cross complaint is subsequently submitted in a form that corrects the errors which caused the document to be rejected. The party filing the complaint or cross complaint shall not make any change to the complaint or cross complaint other than those required to correct the errors which caused the document to be rejected.

(Emphasis added.)

Here, the notice was sent on May 8, 2025, and Eskan filed the operative original Cross-Complaint on May 8, in accordance with the above provision.  Accordingly, the Court determines that the untimeliness due to the administrative rejection for failure to pay first filing fees does not create a basis to sustain the demurrer.

            Regarding Plaintiff’s second argument, Business & Professions Code section 7031 provides, in relevant part:

(a) Except as provided in subdivision (e), no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action, or recover in law or equity in any action, in any court of this state for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that they were a duly licensed contractor at all times during the performance of that act or contract regardless of the merits of the cause of action brought by the person, except that this prohibition shall not apply to contractors who are each individually licensed under this chapter but who fail to comply with Section 7029.

[…]

(e) The judicial doctrine of substantial compliance shall not apply under this section where the person who engaged in the business or acted in the capacity of a contractor has never been a duly licensed contractor in this state. However, notwithstanding subdivision (b) of Section 143, the court may determine that there has been substantial compliance with licensure requirements under this section if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure.

            Here, the FACC alleges substantial compliance as follows:

  1. Sharifi filed a complaint on April 10, 2025, accusing Eskan of not being licensed during the pendency of the Benecia Property contract. However, Eskan was in substantial compliance in accordance with Business and Profession code section 7031(e) which states in relevant part: “… the court may determine that there has been substantial compliance with licensure requirements … Shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed …prior to the …contract, (2) acted reasonably and in good faith to maintain proper licensure, (3) did not know or reasonably should not have known that he or she was not duly licensed when performance of the act or contract commenced, and (4) acted promptly and in good faith to reinstate his or her license upon learning it was invalid.”
  2. Eskan was a licensed contractor when the Benecia Property contract was signed and prior to commencement of the construction.
  3. In March 2024, Eskan’s worker’s compensation insurance unexpectedly increased from $8,000 to $40,000 after Eskan acquired a new policy that same month. Eskan had secured a Certificate of Worker’s Compensation Insurance on March 14, 2024, attached hereto and incorporated herein as Exhibit E, but it was revoked on short notice due to the premium increase.
  4. When learning of the increase, Eskan tried to come up with the funds as quickly as possible and ensure a proper workers compensation insurance policy was active. Eskan diligently worked with both an underwriter for the State Compensation Insurance Fund and a private Insurance Broker to secure a new Certificate of Insurance. Please see attached hereto and incorporated herein as Exhibit F. Eskan’s policy was effective June 25, 2024 and its license was concurrently reinstated.
  5. Once Eskan became aware of the policy revocation in March 2024, it acted reasonably, promptly, and in good faith to maintain proper licensure and to reinstate its license upon learning it was invalid.
  6. Meanwhile, as Eskan was engaged in previous litigation, Eskan settled a bond claim for that previous lawsuit based on construction contract from 2021. Due to the initial bond claim payment, Eskan’s license was suspended on this basis under Business and Profession code section 7071.11 on April 24, 2024.
  7. Eskan settled this bond claim immediately and the section 7071.11 suspension was lifted on May 30, 2024. Once Eskan became aware of this bond claim and the section 7071.11 suspension, it acted reasonably, promptly, and in good faith to maintain proper licensure and to reinstate its license upon learning of the suspension. Please see attached hereto and incorporated herein as Exhibit G.
  8. As stated previously, Eskan’s license was in good standing as of June 25, 2024.
  9. On October 31, 2024, Eskan merely missed its license renewal fee due date. It was completed immediately.
  10. On November 20, 2024, the same bond involved in the previous lawsuit based on construction contract from 2021 paid another claim, leading to a section 7071.11 suspension. Eskan settled this bond claim immediately and the section 7071.11 suspension was lifted on December 4, 2024. Once Eskan became aware of this bond claim and the section 7071.11 suspension, it acted reasonably, promptly, and in good faith to maintain proper licensure and to reinstate its license upon learning of the suspension.
  11. Eskan’s license was fully renewed and reinstated as of December 11, 2024, and has been in good standing since.

(FACC ¶¶ 14-24.)

Plaintiff argues that Eskan cannot avail itself of the doctrine of substantial compliance because the license suspension was not an avoidable event beyond Eskan’s control.  In support, Plaintiff cites to American Building Innovation LP v. Balfour Beatty Constr., LLC (2024) 104 Cal.App.5th 954, 958, where there was no substantial compliance where the contractor chose not to pay the premiums, as it disputed the billings.  Plaintiff also cites to Construction Financial v. Perlite Plastering Co. (1997) 53 Cal.App.4th 170, 182, which held the doctrine applies only in situations where the contractor is not at fault.

Plaintiff also cites to Pacific Caisson & Shoring, Inc. v. Bernards Bros. Inc. (2015) 236 Cal.App.4th 1246, 1257, which held that a contractor must act reasonably and in good faith to maintain proper licensure prior to suspension, not just once the contractor’s license becomes suspended, and to Pacific Custom Pools, Inc. v. Turner Constr. Co. (2000) 79 Cal.App.4th 1254, 1265, where the appellate court held, on a motion for summary judgment, that the contractor could not establish it acted reasonably and in good faith to maintain its licensure where the license was ineffective for seven months, and a check that was later dishonored was not submitted until the fourth month of suspension.

However, all of Plaintiff’s cited cases were decided at the summary judgment stage, or following trial.  Ultimately, whether Eskan substantially complied with the licensure requirements requires the resolution of facts to be introduced at later stages of the litigation.  At the pleadings stage, the FACC sufficiently alleges Eskan’s substantial compliance.

Therefore, the Court overrules Plaintiff’s demurrer to the first cause of action.

  1.           Second and Third Causes of Action for Breach of Contract and Quantum Meruit

Plaintiff reiterates the same argument above, that Eskan cannot maintain any cause of action because Eskan was not licensed.  But as discussed above, Eskan has adequately alleged substantial compliance to withstand demurrer.  Whether Eskan actually substantially complied involves the resolution of factual issues, to be determined at later stages of the litigation

CONCLUSION AND ORDER

For the foregoing reasons, the Court overrules Plaintiff’s demurrer to the First Amended Cross-Complaint in its entirety.

Further, the Court orders Plaintiff to file an Answer to the First Amended Cross-complaint on or before September 12, 2025.

Plaintiff shall provide notice of the Court’s ruling and file the notice with a proof of service forthwith.

DATED:  August 21, 2025                                                     ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court