SUPERIOR COURT OF CALIFORNIA

COUNTY OF SANTA CLARA

THE GLOBE HOMEOWNERS ASSOCIATION, a California non-profit corporation on behalf of itself, and in its representative capacity on behalf of its members,

Plaintiff,

vs.

THE GLOBE AT 2ND AND SANTA CLARA, L.P., a California Limited Partnership; CIM URBAN RE FUND, LLC, a California Limited Liability Company; and DOES 1 through 300, inclusive,

Defendants.

Case No. 17CV318405

TENTATIVE RULING RE: DEMURRER TO AND

MOTION TO STRIKE

FIRST AMENDED COMPLAINT

The above-entitled action comes on for hearing before the Honorable Patricia M. Lucas on January 24, 2020, at 9:00 a.m. in Department 3. The Court now issues its tentative ruling as follows:

I. INTRODUCTION
II.
According to the allegations of the First Amended Complaint (“FAC”), filed on August 15, 2019, this case concerns the construction of a multi-unit residential project (the “Project”). (FAC, ¶ 17.) Plaintiff The Globe Homeowners Association (“Plaintiff”) represents itself and a class of homeowners who own improved real property at the Project. (Id. at ¶ 23.) Plaintiff alleges there are many deficiencies at the Project. (Id. at ¶ 34.)

The FAC sets forth the following causes of action: (1) Breach of Standards of Construction; (2) Breach of Contract and Violation of Equitable Servitudes; (3) Breach of Fiduciary Duty; (4) Breach of Construction Contracts; (5) Strict Liability; (6) Negligence; and (7) Breach of Implied Warranty.

Defendant Swinerton Builders (“Swinerton”) was added to the case as Doe 76 in the Complaint on April 19, 2019. Doe 76 is included in the FAC as one of the “CONTRACTORS.” (FAC, ¶ 16.) The first, fourth, sixth, and seventh causes of action are alleged against the CONTRACTORS. Now before the Court are Swinerton’s demurrer to and motion to strike portions of the FAC.

III. DEMURRER
IV.
A. Requests for Judicial Notice
B.
i. Swinerton’s Request
ii.
Swinerton requests judicial notice of the Complaint filed on October 30, 2017, in this action. The Court can take judicial notice of the Complaint as a court record. (Evid. Code, § 452, subd. (d).) Accordingly, Swinerton’s request for judicial notice is GRANTED.

iii. Plaintiff’s Request
iv.
Plaintiff requests judicial notice of the First Amended Complaint, filed August 15, 2019. Plaintiff’s request is GRANTED. (Evid. Code, § 452, subd. (d).)

C. Discussion
D.
Swinerton demurs to the fourth, sixth, and seventh causes of action on the grounds that they fail to state facts sufficient to constitute causes of action and are uncertain. (Code Civ. Proc., § 430.10, subds. (e) and (f).)

i. Fourth Cause of Action for Breach of Construction Contracts
ii.
Swinerton argues that the fourth cause of action is deficient because Plaintiff, which is not a party to a contract with Swinerton, has not pleaded any express contract terms showing that Plaintiff is a third-party beneficiary. In opposition, Plaintiff contends that it is a third-party beneficiary of Swinerton’s construction contract.

As explained in a somewhat similar case:

A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it. The intent to benefit a third party must appear on the terms of the contract. As explained by well-reasoned case law: A third party should not be permitted to enforce covenants made not for his benefit, but rather for others. He is not a contracting party; his right to performance is predicated on the contracting parties’ intent to benefit him. The fact that the contract, if carried out to its terms, would inure to the third party’s benefit is insufficient to entitle him or her to demand enforcement. Whether a third party is an intended beneficiary or merely an incidental beneficiary to the contract involves construction of the parties’ intent, gleaned from reading the contract as a whole in light of the circumstances under which it was entered.

(Landale-Cameron Court, Inc. v. Ahonen (2007) 155 Cal.App.4th 1401, 1410–1411 (emphasis in original; quotation marks, ellipses, and citations omitted).)

In the fourth cause of action, Plaintiff alleges that Swinerton entered into a written agreement or agreements “to provide services, labor and/or materials for the original design and/or construction of the Project….” (FAC, ¶ 93.) Plaintiff was in existence at the time the written agreements were executed. (Id. at ¶ 96.) Plaintiff is an intended beneficiary of the written agreements. (Id. at ¶ 98.)

Swinerton argues that Plaintiff did not allege in the original Complaint that it existed at the time Swinerton entered into the construction contract. Swinerton asserts that, although Plaintiff has not amended the Complaint to show when Plaintiff was formed, Plaintiff has intentionally omitted facts as to when the contract was executed. Swinerton states that the construction contract was executed in 2005 and that Plaintiff was not formed until 2007.

The Court must accept the allegations of the FAC as true and cannot read new unpleaded facts into the FAC. (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214 [a demurrer admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove the allegations does not concern the reviewing court].) Therefore, for purposes of the demurrer, the Court must accept Plaintiff’s allegation that it existed at the time Swinerton entered into the construction contract.

Swinerton also argues that Plaintiff has not sufficiently pleaded the terms or legal effect of the contract to show Plaintiff is an intended beneficiary. Plaintiff states that it does not have possession of the contract yet, so cannot plead the express terms. Plaintiff argues that it is only required to plead the legal effect of the contract.

“In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.” (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)

This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions, and it involves the danger of variance where the instrument proved differs from that alleged. Nevertheless, it is an established method, although infrequently employed.

(4 Witkin, California Procedure (5th ed. 2008) Pleading, § 519, p. 651.)

Although Plaintiff contends that it has pleaded the legal effect of the subject contract, Plaintiff’s allegation that it and its individual members were “the intended and/or express third party beneficiaries of said written agreements” is just a legal conclusion. Plaintiff alleges no facts to support this conclusion. The Court cannot accept a legal conclusion on demurrer. (Hawkins v. TACA Internat. Airlines, S.A. (2014) 223 Cal.App.4th 466, 478 [on demurrer, a court does not assume the truth of contentions or conclusions of fact or law].)

Plaintiff has not sufficiently alleged that it is a third party beneficiary to Swinerton’s contract. Therefore, Plaintiff has not stated a claim for breach of contract. Swinerton’s demurrer to the fourth cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state facts sufficient to constitute a cause of action.

iii. Sixth Cause of Action for Negligence
iv.
Swinerton argues that Plaintiff’s case falls within the Right to Repair Act and that the allegations of the sixth cause of action are a sham pleading because Plaintiff has changed the facts of the negligence cause of action to circumvent the exclusivity of the Act.

The Right to Repair Act is encompassed by Civil Code sections 895-945.5. (McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, 246-247.) Civil Code section 896 states, in relevant part:

In any action seeking 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 builder, and to the extent set forth in Chapter 4 (commencing with Section 910), a general contractor, subcontractor, material supplier, individual product manufacturer, or design professional, shall, except as specifically set forth in this title, be liable for, and the claimant’s claims or causes of action shall be limited to violation of, the following standards, except as specifically set forth in this title. This title applies to original construction intended to be sold as an individual dwelling unit. As to condominium conversions, this title does not apply to or does not supersede any other statutory or common law.

In both the original Complaint and the FAC, Plaintiff alleged that there were many deficiencies in the Project. (Complaint, ¶ 34; FAC, ¶ 34.) In the Complaint, the sixth cause of action for negligence was based on those alleged defects. (Complaint, ¶¶ 108-112.) The sixth cause of action for negligence in the FAC now alleges it is based on “improvements at the Project, unrelated to and not arising from the original construction, development or design. . . .” (FAC, ¶ 110.) Swinerton contends that this change constitutes a sham pleading.

Generally, a court must assume the truth of the factual allegations of a complaint.

However, an exception exists where a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings. [Citations.] In these circumstances, the policy against sham pleading permits the court to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency. If he fails to do so the court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint.

(Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383-384.)

Plaintiff asserts that because Swinerton’s demurrer was filed after the FAC, the FAC was not filed to avoid the demurrer. Plaintiff argues further that the negligence cause of action does not suppress any facts and that the clarification simply specifies the timing of the construction.

Plaintiff’s contentions are not well taken: the negligence cause of action in the Complaint was based on the main list of alleged defects, while the negligence cause of action in the FAC is based on different “improvements.” Plaintiff has not explained this discrepancy, which appears to be an effort to plead around the exclusivity of the Right to Repair Act. The Court finds the allegations of the negligence cause of action in the FAC are a sham pleading.

Moreover, the allegation that the improvements at the Project were “unrelated to and not arising from the original construction” is conclusory. A demurrer does not admit conclusions of law or fact. (George v. Automobile Club of Southern California (2011) 201 Cal.App.4th 1112, 1120.) Plaintiff has not alleged facts supporting the assertion that Swinerton worked on separate improvements.

Further, the Court notes Civil Code “section 896 covers a multitude of defects not only in the residence but also in improvements such as driveways, landscaping, and damage to the lot, etc.” (Gillotti v. Stewart (2017) 11 Cal.App.5th 875, 897.) In other words, it is not apparent the “improvements” now alleged in the negligence cause of action in the FAC are not encompassed by the Right to Repair Act.

Accordingly, Swinerton’s demurrer to the sixth cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state facts sufficient to constitute a cause of action.

v. Seventh Cause of Action for Breach of Implied Warranty
vi.
Swinerton argues that the seventh cause of action cannot be maintained because the FAC does not specify the type of warranty at issue and because Plaintiff does not properly allege it is a third party beneficiary.

Plaintiff cites to Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, 69-70 for the proposition that there is an exception to the general rule that an implied warranty can arise only in favor of a party to the contract. Gilbert Financial recognized the right of a third party beneficiary to sue on a contract, but here, as discussed previously, Plaintiff has not sufficiently alleged that it is a third party beneficiary.

Plaintiff also cites to Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th 1162, for the proposition that associations have the requisite privity of contract and standing to sue as real parties in interest in all types of actions for damage to common areas. Windham at Carmel Mountain Ranch Assn. concerned whether an association could sue in its own name without adding individual owners of a common interest development. However, that is not the issue here; the issue is whether Plaintiff has alleged that it is a third party beneficiary to Swinerton’s contract.

As stated in connection with the fourth cause of action, Plaintiff has not sufficiently alleged that it is a third party beneficiary to Swinerton’s contract. Accordingly, Swinerton’s demurrer to the seventh cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state facts sufficient to constitute a cause of action.

V. MOTION TO STRIKE
VI.
A. Plaintiff’s Request for Judicial Notice
B.
Plaintiff requests judicial notice of the following:

(1) Declaration of Andrew M. Baugh in Support of Plaintiff The Globe Homeowners Association’s Opposition to Defendant Swinerton’s Demurrer to the First Amended Complaint, filed January 10, 2019; and
(2)
(3) Plaintiff’s First Amended Complaint, filed August 15, 2019.
(4)
While the Court could take judicial notice of the existence of the declaration and the date it was filed, the Court cannot take judicial notice of the truth of any hearsay statements in the document. (See Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 882 [the Court may not take judicial notice of the truth of hearsay statements in decisions and court files].) The existence of the declaration and the date it was filed are not relevant, so the declaration is not subject to judicial notice. (See Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal. 4th 1057, 1063 [although a court may judicially notice a variety of matters, only relevant material may be noticed].)

With regard to the First Amended Complaint, the Court can take judicial notice of the document as a court record. (Evid. Code, § 452, subd. (d).)

Accordingly, the request for judicial notice is GRANTED as to the FAC and DENIED as to the declaration.

C. Discussion
D.
Swinerton moves to strike all references to attorneys’ fees in the FAC. Specifically, Swinerton moves to strike pages 30, lines 10-15 and 38, line 1.

“In general, a prevailing party may recover attorney’s fees only when a statute or an agreement of the parties provides for fee shifting.” (Kirby v. Immoos Fire Protection, Inc. (2012) 53 Cal.4th 1244, 1248.) Plaintiff alleges in the fourth cause of action of the FAC that it is entitled to attorneys’ fees pursuant to Civil Code section 1717. Section 1717 provides, in relevant part:

In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.

As discussed in connection with the demurrer, Plaintiff cannot maintain the fourth cause of action for breach of contract as alleged and the demurrer to the fourth cause of action is sustained. Therefore, the motion to strike is MOOT as to page 30, lines 10-15. There is no other basis for attorneys’ fees alleged against Swinerton, so the motion to strike is GRANTED WITH 10 DAYS’ LEAVE TO AMEND as to page 38, line 1.

The Court will prepare the final order if this tentative ruling is not contested.

NOTICE: The Court does not provide court reporters for proceedings in the complex civil litigation departments. Parties may arrange for a private court reporter to provide services, but those arrangements must be consistent with the local rules and policies posted on the Court’s website.