Filed 4/23/20 Wang v. Miks CA1/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION ONE

RICHARD WANG et al.,

Plaintiffs and Appellants,

v.

KENNETH ALAN MIKS, SR.,

Defendant and Respondent.

A157241

(Contra Costa County

Super. Ct. No. C18–00603)

Plaintiffs Richard, Rose, and Judy Wang (the Wangs) sued more than two dozen named defendants for damages resulting from the faulty design and construction of their home. Among the defendants were a corporate subcontractor, Plate Line Framers, Inc. (Plate Line), and its principal, respondent Kenneth Alan Miks, Sr. After considering two attempts by the Wangs to allege causes of action for negligence and negligence per se against Miks, the trial court granted his demurrer without leave to amend and dismissed the complaint against him with prejudice.

On appeal, the Wangs argue that they asserted, or could assert, allegations against Miks sufficient to state a cause of action against him. We agree. Although most of the Wangs’ asserted or proposed allegations fail to support a claim for negligence against Miks because they are directed to his status as a corporate officer, some allegations proposed for the first time on appeal do state such a claim because they allege that he participated in specific wrongdoing in connection with the Wangs’ construction project. We also conclude, however, that the trial court properly dismissed with prejudice the cause of action for negligence per se. Accordingly, we affirm in part and reverse in part.

I.
FACTUAL AND PROCEDURAL
BACKGROUND

In June 2009, the Wangs entered a contract with a general contractor, Branagh Development (Branagh), for the construction of a home in Moraga. Branagh worked with various subcontractors, including Plate Line, to complete the project.

In several successive complaints, the Wangs alleged that they suffered damages as a result of the home’s faulty design and construction. The original complaint, filed in March 2018, was superseded by a first amended complaint the following October. As to Miks, the first amended complaint alleged that he and “Does 221 through 240 were and/or are owners, principals, officers, directors, managers, members, partners, agents[,] and/or employees of Plate Line. All acts and omissions performed by Plate Line, as described herein, were performed by, under the direction of and/or approved or ratified by Miks and Does 221 through 240.” The first amended complaint did not describe any specific acts by Miks and indicated he was sued because of his status as a corporate principal rather than his participation in specific wrongdoing involving the Wangs’ construction project.

Miks demurred to the first amended complaint, and in January 2019 the trial court sustained the demurrer with leave to amend. In response, the Wangs filed a second amended complaint that alleged two causes of action against Miks, one for negligence and another for negligence per se. This complaint reiterated the first amended complaint’s allegations against Miks while also asserting the following additional allegations, which for the most part still suggested that Miks was being sued because of his status as a corporate principal:

“Miks is Plate Line’s president, CEO, CFO, director, and agent for service of process. Since April 14, 2000, Miks also has been Plate Line’s responsible managing officer (RMO). As RMO, Miks was ‘responsible for exercising that direct supervision and control of . . . [Plate Line’s] construction operations to secure compliance with’ California Business and Professions Code’s rules and regulations for contractors (B&P §7068.1). Consistent with that role, and as attested to in discovery responses served by Plate Line, Miks is the ‘person most knowledgeable’ regarding the work, labor, and services provided by Plate Line. Miks also negotiated and executed Plate Line’s subcontract with Branagh, thus determining the actual work Plate Line would perform.”

The Wangs also alleged that Miks, along with most if not all of the other defendants, “designed, constructed, and provided other services, work[,] and materials for the Property in such a careless and negligent manner as to directly cause and create various defective conditions in the various components of the Property.”

Miks also demurred to the second amended complaint. A hearing was held in March 2019, and the following month the trial court entered a written order sustaining the demurrer without leave to amend and dismissing the complaint with prejudice as to Miks.

II.
DISCUSSION

A. Standards of Review

We review an order sustaining a demurrer de novo. (Hacker v. Homeward Residential, Inc. (2018) 26 Cal.App.5th 270, 276.) In doing so, “[w]e accept as true, and liberally construe, all properly pleaded allegations of material fact, as well [as] those facts which may be implied or reasonably inferred from those allegations.” (O’Grady v. Merchant Exchange Productions, Inc. (2019) 41 Cal.App.5th 771, 776.) Under this standard, “the complaint ‘survives a general demurrer insofar as it[] states, however inartfully, facts disclosing some right to relief.’ ” (Id. at p. 777.)

We review a trial court’s decision whether to grant leave to amend for an abuse of discretion. (Traders Sports, Inc. v. City of San Leandro (2001) 93 Cal.App.4th 37, 43.) It “ordinarily constitutes an abuse of discretion to sustain a demurrer without leave to amend if there is a reasonable possibility that the defect can be cured by amendment.” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 970–971.) “The burden is on the plaintiff to demonstrate how he or she can amend the complaint . . . . [A p]laintiff can make this showing in the first instance to the appellate court.” (Lee v. Los Angeles County Metropolitan Transportation Authority (2003) 107 Cal.App.4th 848, 854.)

B. The Wangs Shall Be Permitted to Amend Their Cause of Action for Negligence Against Miks to State He Personally Participated in Specific Wrongdoing Related to Their Construction Project.

The Wangs argue that the trial court erred in sustaining Miks’s demurrer to the second amended complaint. We agree in part. Although most of the Wangs’ actual and proposed allegations fail to support a negligence cause of action against Miks because they involve his status as a corporate officer, the allegations proposed for the first time on appeal could state a cause because they assert that Miks participated in specific wrongdoing in connection with the Wangs’ construction project. We also conclude, however, that the court properly sustained the demurrer as to the separate cause of action for negligence per se.

1. The applicable law

“The essential elements of a cause of action for negligence are: (1) the defendant’s legal duty of care toward the plaintiff; (2) the defendant’s breach of duty—the negligent act or omission; (3) injury to the plaintiff as a result of the breach—proximate or legal cause; and (4) damage to the plaintiff.” (Leyva v. Garcia (2018) 20 Cal.App.5th 1095, 1103.) Special considerations apply, however, when a claim for negligence is asserted against an owner or officer of a corporation, such as Miks. These considerations are central to this appeal, and we therefore discuss them in some detail.

“Corporate director or officer status neither immunizes a person from personal liability for tortious conduct nor subjects him or her to vicarious liability for such acts.” (PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1379.) Corporate officers and directors generally “do not incur personal liability for torts of the corporation merely by reason of their official position, unless they participate in the wrong or authorize or direct that it be done.” (United States Liability Ins. Co. v. Haidinger-Hayes (1970) 1 Cal.3d 586, 595 (Haidinger-Hayes).) In other words, officers and directors “are not responsible to third persons for negligence amounting merely to nonfeasance, to a breach of duty owing to the corporation alone; the act must also constitute a breach of duty owed to the third person.” (Ibid.)

Haidinger-Hayes explained that the nature of the third person’s injury may be relevant in evaluating whether the officer or director owed a duty to that person. (Haidinger-Hayes, supra, 1 Cal.3d at p. 595.) In that case, the plaintiff insurance company contracted with the defendant corporation, Haidinger-Hayes, to calculate insurance premiums. (Id. at p. 590.) The president of Haidinger-Hayes negligently computed a rate for an insured, which caused the plaintiff company economic loss. (Id. at pp. 592–593.) The Supreme Court held that the president was not personally liable for the loss. In doing so, the Court pointed out that “[l]iability imposed upon agents for active participation in tortious acts of the principal ha[s] been mostly restricted to cases involving physical injury, not pecuniary harm, to third persons.” (Id. at p. 595.)

These principles were revisited by the Supreme Court in Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490 (Frances T.). In that case, the Court allowed a plaintiff who was raped and robbed in her condominium to sue individual directors of the board of her condominium association. She alleged that they had breached a duty of care to her by failing to repair facility lighting and ordering her to remove lighting she had installed. (Id. at pp. 498, 503.) Frances T. reiterated that a corporation, not its owner or officers, is the party that is vicariously liable for torts committed by the corporation’s employees and agents: “[D]irectors are not personally liable to third persons for negligence amounting merely to a breach of duty the officer owes to the corporation alone. . . . [A] distinction must be made between the director’s fiduciary duty to the corporation (and its beneficiaries) and the director’s ordinary duty to take care not to injure third parties.” (Id. at pp. 505–506.)

As to a director’s ordinary duty of care, the Supreme Court held that “directors individually owe a duty of care, independent of the corporate entity’s own duty, to refrain from acting in a manner that creates an unreasonable risk of personal injury to third parties.” (Frances T., supra, 42 Cal.3d at p. 505; see id. at p. 506, fn. 12.) Thus, “[t]o maintain a tort claim against a director in his or her personal capacity, a plaintiff must first show that the director specifically authorized, directed[,] or participated in the allegedly tortious conduct [citation]; or that although [he or she] specifically knew or reasonably should have known that some hazardous condition or activity under [his or her] control could injure [the] plaintiff, [he or she] negligently failed to take or order appropriate action to avoid the harm [citations]. The plaintiff must also allege and prove that an ordinarily prudent person, knowing what the director knew at the time, would not have acted similarly under the circumstances.” (Id. at pp. 508–509.)

Applying these principles to the claim before it, Frances T. explained that it “would be insufficient to allege that because the directors had a duty as agents of the [condominium association] to manage its property and conduct its affairs, that they also necessarily owed a personal duty of care to plaintiff regardless of their special knowledge of the allegedly dangerous condition that led to her injury. . . . [S]uch a broad application of agency principles to corporate decision-makers would not adequately distinguish the directors’ duty of care to third persons, which is quite limited, from their duty to supervise broad areas of corporate activity. Virtually any aspect of corporate conduct can be alleged to have been explicitly or implicitly ratified by the directors. But their authority to oversee broad areas of corporate activity does not, without more, give rise to a duty of care with regard to third persons who might foreseeably be injured by the corporation’s activities.” (Frances T., supra, 42 Cal.3d at pp. 506–507, some italics added.)

Against the backdrop of Haidinger-Hayes and Frances T., the Second District Court of Appeal in Michaelis v. Benavides (1998) 61 Cal.App.4th 681 (Michaelis) permitted a claim by two homeowners to proceed against the defendant, who was the president, director, and 50-percent stockholder of a construction company, for negligently constructing a driveway and patio. (Id. at p. 683.) The homeowners alleged that the defendant personally bid for the job and “personally made the construction decisions for the patio and driveway.” (Ibid.) Crucially, the parties also stipulated that the defendant “was individually negligent in building . . . [the] patio and driveway.” (Id. at p. 686.) The appellate court characterized the stipulation as an acknowledgement that “a breach of duty owed to [the homeowners as] third parties [occurred], rather than merely a breach of duty [the defendant] owed” to the corporation. (Ibid.) In permitting the suit to proceed, the court rejected as “artificial” a distinction urged by the defendant that property damages, unlike personal-injury damages, were insufficient to support a finding of a duty to the homeowners. (Id. at p. 687.) The parties disagree about the implications of Michaelis here, but Miks does not challenge the decision’s conclusion that the defendant could be held liable for property damage resulting from breach of a duty he owed to the homeowners specifically.

2. Discussion

Most of the second amended complaint’s allegations against Miks continued to suggest he was sued as a corporate principal—in which capacity he did not owe a duty to the Wangs—rather than because he personally participated in specific wrongdoing in connection with their construction project—in which capacity he did. The second amended complaint repeated the first amended complaint’s allegations that “[a]ll acts and omissions performed by Plate Line, as described herein, were performed by, under the direction of and/or approved or ratified by Miks and Does 221 through 240.” The second amended complaint also asserted that Miks was Plate Line’s agent for service of process and responsible managing officer, in which role he failed to direct, control, and supervise Plate Line’s construction operations.

Under Haidinger-Hayes and Frances T., these allegations do not state a claim for negligence against Miks because they fail to assert that he actively participated in tortious activity that breached a duty he owed to the Wangs. Allegations that a corporate officer failed to direct, control, or supervise corporate operations are, without more, insufficient to establish that the officer breached a duty of care owed to a third party. (See Frances T., supra, 42 Cal.3d at pp. 506–507.) Not “every corporate supervisor [is] personally liable without fault for the unlawful act of every corporate employee whom he or she has the right to supervise.” (Meyer v. Holley (2003) 537 U.S. 280, 290; Haidinger-Hayes, supra, 1 Cal.3d at p. 595.) The second amended complaint’s allegations are wanting because they lack sufficient specificity to establish, if proven, that Miks breached a duty to the Wangs by failing to direct, control, or supervise a specific activity in connection with their project.

The proceedings below reveal that the Wangs did not fully understand the need to be more specific. At the hearing on the demurrer, the Wangs’ counsel focused on Miks’s status as a supervisor for Plate Line without explaining what Miks’s supervisory duties entailed or how they were breached in connection with the Wangs’ construction project. Counsel argued that “it was implicit in [the Wangs’] allegations that Plate Line’s work was defective and had caused harm to plaintiff[s], and that [Miks] was the supervisor of Plate Line’s work[,] . . . [and] that Miks’[s] failure to properly supervise Plate Line’s work is what caused the defects.” Counsel requested leave to amend if necessary, stating, “Now, we can prepare a third amended complaint and connect the dots, I mean, we can allege more specifically if granted leave to amend that it was [Miks’s] duty to supervise Plate Line’s work and that it was his lack of supervision of that work that resulted in the defects that have caused harm to plaintiff[s].”

The trial court was not persuaded that the Wangs could amend the complaint to be sufficiently specific. Its order stated,

“This is the second demurrer to these causes of action by Miks. The Court must now decide whether [the Wangs] should be given leave to amend a second time. When deciding whether to give leave to amend ‘it is the plaintiff—not the court—who has the burden of showing that an amendment will [change the legal effect of a complaint]. As the Rutter practice guide states: “It is not up to the judge to figure out how the complaint can be amended to state a cause of action. . . .” ’ Here, [the Wangs] have not offered any additional facts they can allege and therefore, the demurrer is sustained without leave to amend.”

We sympathize with the trial court’s frustration. Counsel’s proposed allegation that Miks had a “duty to supervise Plate Line’s work” remained ambiguous as to Miks’s actual participation in any wrongdoing involving the Wangs’ construction project. To the extent the proffer might be understood as an allegation that Miks had a duty to supervise the Wangs’ actual construction project and neglected that duty (by, for example, not showing up on the job site or taking other actions to ensure Plate Line workers’ proper performance on that project), it suggested the Wangs could sufficiently state a cause of action. But to the extent the proffer reiterated Miks’s alleged failure to supervise general Plate Line operations, it did not.

For the first time in their appellate briefing, the Wangs also claim they can allege that Miks “had a duty [to the Wangs] to directly supervise and control Plate Line’s framing and window installation” but failed to satisfy that duty. They further claim they can allege that Miks’s “negligent acts and omissions in making the construction decisions for the job, and in supervising Plate Line’s installation of the framing and window fenestration products, were substantial factors” in causing water infiltration and further damage to the home. (Italics added.)

We conclude that these proposed allegations sufficiently demonstrate the ability to plead a cause of action for negligence against Miks, because they are based on his active participation in specific wrongdoing regarding the Wangs’ construction project. (See Lee v. Los Angeles County Metropolitan Transportation Authority, supra, 107 Cal.App.4th at p. 854.) Thus, we reverse the trial court’s order to the extent it dismissed with prejudice the Wangs’ negligence claim against Miks. We do so with some reluctance, however, as the Wangs have already had numerous chances to allege Miks’s specific tortious conduct in connection with their project, and we remind them that “there is a limit to which the patience of the trial court may be extended in the matter of allowing repeated attempts to amend a faulty pleading.” (Consolidated Concessions Co. v. McConnell (1919) 40 Cal.App. 443, 446; see Ruinello v. Murray (1951) 36 Cal.2d 687, 690 [trial court can reasonably conclude that plaintiff is unable to amend complaint to fix identified deficiencies after several unsuccessful attempts to do so].) We also remind the Wangs that should they file another amended complaint, their attorney will be “certifying that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances,” any new factual allegations “have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.” (Code Civ. Proc., § 128.7, subd. (b)(3).)

We separately affirm the trial court’s sustaining of the demurrer as to the Wangs’ second cause of action against Miks, for negligence per se. The Wangs claim on appeal that they could add allegations to this claim based on Business and Professions Code section 7068.1 (section 7068.1), which requires contractors to have a responsible managing officer. (See generally Acosta v. Glenfed Development Corp. (2005) 128 Cal.App.4th 1278, 1298–1299.) These proposed allegations would change nothing. “[T]he doctrine of negligence per se is not a separate cause of action, but creates an evidentiary presumption that affects the standard of care in a cause of action for negligence.” (Millard v. Biosources, Inc. (2007) 156 Cal.App.4th 1338, 1353, fn. 2.) Thus, although the Wangs might appropriately include section 7068.1 allegations in their negligence cause of action, “[t]he doctrine of negligence per se does not provide a private right of action for violation of a statute.” (Johnson v. Honeywell Internat., Inc. (2009) 179 Cal.App.4th 549, 556.) Moreover, “[s]ection 7068.1 has long been interpreted to create a duty by the responsible managing employee to the corporate employer, but not to a third party client of the corporate employer.” (Sandler v. Sanchez (2012) 206 Cal.App.4th 1431, 1441; Swickheimer v. King (1971) 22 Cal.App.3d 220, 224–225.) Thus, the Wangs do not have any other stand-alone cause of action under section 7068.1 either. (See Johnson, at p. 556.)

III.
DISPOSITION

The trial court’s order sustaining the demurrer and dismissing the complaint against Miks is affirmed in part and reversed in part. The trial court is directed to vacate the order and enter a new order sustaining the demurrer as to the negligence cause of action with leave to amend and sustaining the demurrer as to the negligence per se cause of action without leave to amend. (See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047–1048.) The parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3).)

 

_________________________

Humes, P.J.

We concur:

_________________________

Margulies, J.

_________________________

Sanchez, J.

Wang et al. v. Miks A157241