Case Name:    Taisei Construction Corporation v. Palo Alto Unified School District, et al.

Case No.:        1-13-CV-248322

Date:               October 21, 2014

Time:              9:00 a.m.

Dept:               8

 

Defendant Gilbane Building Company (“Gilbane”) demurs to the third and fourth causes of action in the third amended complaint (“TAC”) of plaintiff Taisei Construction Corporation (“Taisei”) on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).)

 

Request for Judicial Notice

 

In support of its opposition to the demurrer, Taisei asks the Court to take judicial notice of the Court’s February 13, 2014 order regarding defendant Deems Lewis McKinley, Inc.’s demurrer to the second amended complaint. A trial court may properly take judicial notice of the records of any state or federal court. (Evid. Code, § 452, subd. (d).) A court may take judicial notice of the existence of each document in a court file, but can only take judicial notice of the truth of facts asserted in documents such as orders, findings of fact and conclusions of law, and judgments. (See Day v. Sharp (1975) 50 Cal.App.3d 904, 914.) Here, as the Court’s order is a record of a state court, it is subject to judicial notice. Accordingly, the request for judicial notice is GRANTED.

 

Third Cause of Action for Negligence

 

Gilbane contends that the third cause of action for negligence fails as a matter of law because, under Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595, a construction manager owes no duty of care to third party contractors. In its opposition, Taisei indicates that under the multi-factor test adopted in Biakanja v. Irving (1958) 49 Cal.2d 647, 650, the Court should find that Gilbane owed it a duty of care.

 

The same considerations identified in Ratliff apply to the present action. Just as the owner in Ratliff, supra, defendant Palo Alto Unified School District (“PAUSD”) retained Gilbane to assist it in negotiating with contractors and reviewing their cost estimates and their payment applications. (See Ratcliff, supra, 88 Cal.App.4th at p. 606; TAC, ¶ 45.) Thus, finding that Gilbane also owes a duty of care to Taisei would constitute a potential conflict. With regard to the factor of foreseeability, the damages sought are for an intangible injury and thus, this factor plays little role in the analysis. (See Ratcliff, supra, 88 Cal.App.4th at p. 606; TAC, ¶ 50.)  With regard to the third, fourth and fifth factors, Taisei was free to contract with PAUSD to protect itself against losses caused by Gilbane, and PAUSD had the ultimate duty to determine the amount and timing of payment (See Ratcliff, supra, 88 Cal.App.4th at pp. 606-607; TAC, ¶ 46). Finally, Taisei relies on the same policy argument rejected in Ratliff, supra, that architects, construction managers and contractors on future projects will be incentivized to act appropriately. (See Ratcliff, supra, 88 Cal.App.4th at pp. 606-607; Opp’n.,          pp. 6:27-28, 7:1.)

 

In light of the foregoing, Taisei fails to establish that Gilbane owes it a duty of care. Thus, Taisei does not state sufficient facts to constitute a cause of action for negligence and, therefore, the demurrer to the third cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

 

Fourth Cause of Action for Tortious Interference with Contract

 

Gilbane contends that Taisei’s fourth cause of action for tortious interference with contractual relations fails as a matter of law because any advice a manager gives to his principal is privileged, including any advice that may induce an alleged breach of contract.

 

In opposition, Taisei first argues that the privilege only applies if Gilbane is an agent of PAUSD. As Taisei expressly alleges that Gilbane is an independent contractor (TAC, ¶ 52), it claims that the privilege does not apply. However, Taisei provides no authority indicating that the manager’s privilege is limited to an agency relationship. To the contrary, the manager’s privilege applies to “one who manages the affairs of another or advises another with respect to the performance of contracts.” (See Shapoff v. Scull (1990) 222 Cal.App.3d 1457, 1468 [emphasis added], overruled on other grounds in Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510.) Thus, whether Gilbane is acting as PAUSD’s agent or an independent contractor does not affect the applicability of the manager’s privilege in the present action.

 

Next, Taisei argues that it alleges facts indicating that, in interfering with Taisei’s contract, Gilbane acted in its own interest rather than PAUSD’s. Thus, it claims that the existence of the manager’s privilege is not clearly established on the face of the complaint.

 

“[W]hen a manager stood to reap a tangible personal benefit from the principal’s breach of contract, so that it is reasonably possible that the manager acted out of self-interest rather than in the interest of a principal, the manager should not enjoy the protection of the manager’s privilege unless the trier of fact concludes that the manager’s predominant motive was to benefit the principal.” (Huynh, supra, 111 Cal.App.4th at     p. 1198.)

 

Here, Taisei alleges the following: “As a means to gain favor with [PAUSD] and to prolong [its] own contract[] with [PAUSD] by delaying the completion of the PROJECT, and to receive additional compensation from [PAUSD] in connection therewith for providing services over a longer period of time, GILBANE … intentionally, and in conscious disregard of TAISEI’s rights interfered with TAISEI’s contract ….” (FAC, ¶ 55.) These allegations indicate that Gilbane’s conduct was contrary both to PAUSD and Taisei’s interests. While other more benign conclusions may also be drawn from these allegations, for the purposes of demurrer, the allegations are viewed in the light most favorable to the plaintiff. (See Olivet, supra, 104 Cal.App.3d at p. 841.) Thus, as it is not clear from the face of the complaint that Gilbane’s predominant motive in inducing the breach of Taisei’s contract was to benefit PAUSD, Gilbane does not establish the existence of the manager’s privilege. Accordingly, the demurrer to the fourth cause of action is OVERRULED.