Case Name: Top Gun Drywall Supply, Inc. v. Layton Construction Co., Inc., et al.
Case No.: 1-14-CV-265278
Defendants Layton Construction Co., Inc. (“Layton”), Cupertino Property Development 1, LLC (“Cupertino”) and Liberty Mutual Insurance Company (“Liberty Mutual”) (collectively, “Defendants”) demur to the first amended complaint (“FAC”) filed by plaintiff Top Gun Drywall Supply, Inc. (“Plaintiff”).
In October 2012, Plaintiff entered into a series of written and verbal agreements with defendant Champion Construction Company, Inc. (“Champion”) wherein Plaintiff agreed to furnish labor, materials, services and/or equipment to Champion for the purpose of making improvements on the property located at 19800 Vallco Parkway in Cupertino (the “Property”), which is owned by defendant Cupertino. (FAC at ¶¶ 2, 14.) Champion and Layton, the general contractor, subsequently failed to pay Plaintiff all sums due for the labor and materials provided. (Id. at ¶ 18.) Champion was one of Layton’s subcontractors.
On January 17, 2014, Plaintiff served a verified stop notice and accompanying bond upon Layton. (FAC at ¶ 40 and Exhibit C.) Liberty Mutual, as surety, provided a “Bond to Release Money Withheld on Claims” (“Stop Notice Release Bond”) for the purposes of releasing and acting as a substitute for the bonded stop notice. (Id. and Exhibit D.)
On February 21, 2014, Plaintiff recorded a verified claim of Mechanic’s Lien in the amount of $230,262.03. (FAC at ¶ 35 and Exhibit A.) On March 5, 2014, Layton, as principal, and Liberty Mutual, as surety, executed a Mechanic’s Lien Release Bond (the “Release Bond”). (Id. at ¶ 36.)
On June 9, 2014, Plaintiff filed the FAC asserting the following causes of action: (1) breach of contract (against Champion); (2) quantum meruit (against Cupertino, Layton and Mission Drywall Systems (“Mission”)); (3) open book account (against Champion and Mission); (4) recovery on Mechanic’s Lien Release Bond (against Layton and Liberty Mutual)’ (5) recovery on Stop Notice Release Bond (against Layton and Liberty Mutual); (6) unjust enrichment (against Layton, Cupertino, Mission and Champion); (7) negligent misrepresentation (against Champion and Mission); (8) intentional misrepresentation (against Champion and Mission); and (9) violation of Business & Professions Code § 17200 (against Champion and Mission).
On July 16, 2014, Defendants filed the instant demurrer to the second and sixth causes of action on the ground of uncertainty and to the second, fourth and sixth causes of action on the ground of failure to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subds. (e) and (f).)
Defendants’ demurrer to the second (quantum meruit) and sixth (unjust enrichment) causes of action on the ground of uncertainty is OVERRULED. A demurrer based on uncertainty is disfavored and will be sustained only where the allegations of the complaint are so unintelligible that they cannot be responded to. (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616 [demurrers for uncertainty are strictly construed].) The Court finds nothing ambiguous or uncertain about these claims to support a demurrer for uncertainty. To the extent that Defendants believe there are any uncertainties with respect to these causes of action, they can be resolved in the discovery process. (Id.)
Defendants’ demurrer to the second and sixth causes of action on the ground of failure to state facts sufficient to constitute a cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND as to Cupertino and SUSTAINED WITHOUT LEAVE TO AMEND as to Layton.
As an initial matter, Defendants are correct that generally, there “is no cause of action California for unjust enrichment.” (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793.) However, unjust enrichment is synonymous with restitution (see Dinosaur Development, Inc. v. White (1989) 216 Cal.App.3d 1310, 1314), and courts will overlook the label of a cause of action to determine whether a claim warranting restitution has been stated. (See McBride v. Houghton (2004) 123 Cal.App.4th 379, 387-388.) There are several potential bases for a cause of action seeking restitution; for example, restitution “may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason. [Citation.] Alternatively, restitution may be awarded where the defendant obtained a benefit from the plaintiff by fraud, duress, conversion, or “similar conduct” and the plaintiff elects not to sue in tort but seek restitution on a quasi-contractual theory. (McBride, 123 Cal.App.4th at 388.) A party may also obtain a quasi-contractual recovery where he or she has provided services to a third party at that party’s request and failed to received compensation in return. (See, e.g., Earhart v. Low Co. (1979) 25 Cal.3d 158.) Thus, Defendants’ argument that no cause of action for unjust enrichment exists in California does not provide a basis upon which to sustain the demurrer.
Defendants also assert that these claims are barred by the California Mechanic’s Lien Law, specifically Civil Code section 8500. However, Defendants’ reliance on this code section for the proposition that Plaintiff’s quantum meruit and unjust enrichment claims are barred is misplaced. Civil Code section 8500 relates to claims against the lender of construction funds and not the owner, contractor or subcontractors, the targets of Plaintiff’s claims here. Stated differently, with the second and sixth causes of action, Plaintiff’s are not seeking to recover from a construction loan fund or from the general assets of the lender, which is what Civil Code section 8500 effectively prohibits. Consequently, these claims are not barred by this code section.[1]
Defendants next assert that these claims fail for a lack of privity between Plaintiff and Cupertino and Plaintiff and Layton. This assertion is well-taken, to a degree. With respect to Layton, a general contractor is not liable for the sums due to a material supplier of a subcontractor or a sub-sub contractor in the absence of privity. (See Neptune Gunite Co. v. Monroe Enterprises, Inc. (1964) 229 Cal.App.2d 439, 445.) There is not allegation of privity between Plaintiff and Layton in the FAC. Consequently, no claim for recovery based on a quasi-contractual theory is stated against Layton.
With respect to Cupertino, both of the cases primarily relied upon by Defendants, Truestone, Inc. v. Simi West Industrial Park II (1984) 163 Cal.App.3d 715 and Rogers v. Whitson (1964) 228 Cal.App.2d 662, provide support for Defendants’ contention that a subcontractor may not recover from a property owner on a quasi-contractual theory where there is no privity of contract between the parties. However, neither case rejected the subcontractor’s claim for equitable relief based solely on the lack of contractual privity; instead, the courts in each case also considered whether there was any allegation or evidence of unjust enrichment to the property owner, either because the owner promised to pay the subcontractor directly or failed to pay the general contractor for the subcontractor’s work. (Rogers, 228 Cal.App.2d at 676; Truestone, 163 Cal.App.3d at 723.) In short, these cases suggest that while a subcontractor who has no direct contractual relationship with a property owner ordinarily many not recover against them on a quasi-contractual theory, there may be circumstances where the nature of the parties’ dealings can give rise to a cause of action for equitable relief. Here, however, as currently pleaded, Plaintiff has not pleaded such circumstances with respect to Cupertino and therefore has not stated claims against it for quantum meruit and unjust enrichment.
Defendants’ demurrer to the fourth cause of action (recovery on Mechanic’s Lien Release Bond) on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED. While it is true, as Defendants contend, that the failure to provide a preliminary notice as required by Civil Code section 8200 is fatal to a claim to enforce a mechanic’s lien, and Plaintiff does not plead the filing of such a notice in the fourth cause of action, Plaintiff does plead service of preliminary notice of its furnishing of services and labor within the fifth cause of action. (FAC at ¶ 39.) Reviewing the FAC as a whole (see Quelimane Company, Inc. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38), Plaintiff’s filing of the preliminary notice necessary to enforce a mechanic’s lien to all necessary parties is clear and thus the fourth cause of action is sufficiently stated.
[1]The Court also rejects Defendants’ argument regarding duplicity; the fact that this cause of action may be duplicative of the second does not provide a basis upon which to sustain the demurrer. (See McDonell v. American Trust Co. (1955) 130 Cal.App.2d 296, 302-303 [redundancy is not a ground for demurrer].)
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