Case Name: Willie Odell Alford II, et al. v. Metaview Wholesale Investments, LP, et al.
Case No.: 2015-1-CV-277856

Demurrer to the First Amended Complaint by Defendant Mitchell Development Enterprises, Inc.
Factual and Procedural Background
This case arises out of the development, design, and construction of a single-family home located at 1593 Cherry Glen Way in San Jose, California (“Residence”). (First Amended Complaint [“FAC”] at ¶ 1.) On March 25, 2013, plaintiffs Willie Odell Alford II and Peggy Marie Abkemeier (collectively, “Plaintiffs”) and defendant Metaview Wholesale Investments, LP (“Metaview”) entered into a written residential purchase agreement. (Id. at ¶ 13, Exhibit A.) Under the agreement, Plaintiffs would purchase the Residence for $1,830,000. (Id. at ¶ 14.) As part of the agreement, Metaview would build an approximately 400 square foot colored stamped concrete patio with a built in barbeque and install approximately 1,500 square feet of lawn below the patio, and line the borders of the lawn with plants. (Ibid.) Plaintiffs allege that Metaview, Mitchell Enterprises, Inc. (“Mitchell”) and other defendants failed to construct the Residence in compliance within the applicable standards and approved plans and specifications or in a good and workmanlike manner. (Id. at ¶¶ 16, 22.)

On March 10, 2015, Plaintiffs filed a Complaint against defendants alleging causes of action for: (1) violation of Civil Code § 896 standards; (2) negligence; (3) breach of implied warranty; (4) breach of contract; (5) negligent misrepresentation; and (6) strict liability.

The case was sent to binding arbitration on March 22 and 23, 2017. The arbitrator ruled in favor of Plaintiffs and awarded damages in the amount of $307,034.15. The order confirming the arbitration award was filed with the Court on August 7, 2017.

On August 7, 2017, Mitchell filed a motion to dismiss and demurrer to the Complaint. The Court denied the motion to dismiss but sustained the demurrer with leave to amend.

On November 15, 2017, Plaintiffs filed the operative FAC against defendants alleging causes of action for: (1) violation of Civil Code § 896 standards; (2) negligence; (3) breach of implied warranty; (4) breach of contract; (5) negligent misrepresentation; (6) strict liability; and (7) third party beneficiary claim for breach of contract.

Demurrer to the FAC

Currently before the Court is the demurrer to the FAC by defendant Mitchell based on the following: (1) the FAC is barred by the doctrine of res judicata; (2) the FAC fails to allege any justiciable controversy; (3) the fourth, fifth, and seventh causes of action fail to state a claim; and (3) the third, fourth, fifth, sixth, and seventh causes of action fail on the ground of uncertainty. (Code Civ. Proc., § 430.10, subds. (e), (f).) Mitchell filed a request for judicial notice in conjunction with the motion. Plaintiffs filed written opposition. Mitchell filed reply papers.

Request for Judicial Notice

In reply, Mitchell requests judicial notice of the following: (1) Plaintiffs’ Notice of Entry of Order Granting Petition to Confirm Contractual Arbitration Award (Reply Declaration of Christian E. Picone at Exhibit E); and (2) Plaintiffs’ Doe Amendment to Complaint Substituting True Names in Place of Fictitious Names filed on March 8, 2016 (Reply Declaration of Christian E. Picone at Exhibit F). The Court may take judicial notice of these documents as they constitute records of the superior court subject to judicial notice under Evidence Code section 452, subdivision (d). (See Stepan v. Garcia (1974) 43 Cal.App.3d 497, 500 [the court may take judicial notice of its own file].) The documents also appear reasonably relevant to issues raised on demurrer. (See Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [judicial notice is confined to those matters which are relevant to the issue at hand].)

Therefore, the request for judicial notice is GRANTED.
Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

Demurrer to the Entire FAC
Mitchell demurs to the entire FAC on the following two grounds: (1) the FAC is barred by the doctrine of res judicata; and (2) the FAC fails to allege any justiciable controversy.
Res Judicata

“Res judicata, or claim preclusion, precludes the relitigation of a cause of action that was litigated in a prior proceeding if three requirements are satisfied: (1) the present action is on the same cause of action as the prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the parties in the present action or parties in privity with them were parties to the prior proceeding. [Citation.] Res judicata not only precludes the relitigation of issues that were actually litigated, but also precludes the litigation of issues that could have been litigated in the prior proceeding. [Citations.]” (Bullock v. Philip Morris USA, Inc. (2011) 198 Cal.App.4th 543, 557.)

Mitchell argues that the FAC is barred by res judicata as the claims were already resolved in the arbitration between Plaintiffs and defendant Metaview. As stated above, res judicata requires that the same parties, or their privies, participate in the prior proceeding and the current action. Mitchell concedes that it did not participate in the arbitration but instead claims that it sits in privity with Metaview.

The concept of privity refers to a mutual or successive relationship to the same rights of property, or to such an identification in interest of one person with another as to represent the same legal rights and, more recently, to a relationship between the party to be estopped and the unsuccessful party in the prior litigation which is “sufficiently close” so as to justify application of the doctrine of collateral estoppel. (Gottlieb v. Kest (2006) 141 Cal.App.4th 110, 149.)

“This requirement of identity of parties or privity is a requirement of due process of law.” (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 874 [overruled in part on different grounds in Ryan v. Rosenfeld (2017) 3 Cal.5th 124].) “[D]ue process requires that the party to be estopped must have had an identity or community of interest with, and adequate representation by, the losing party in the first action as well as that the circumstances must have been such that the party to be estopped should reasonably have expected to be bound by the prior adjudication.” (Id. at p. 875.)

“Privity is not susceptible of a neat definition, and determination of whether it exists is not a cut and dried exercise.” (Aronow v. Lacroix (1990) 219 Cal.App.3d 1039, 1048.) In the final analysis, the determination of privity depends upon the fairness of binding a party with the result obtained in earlier proceedings in which it did not participate. (Citizens for Open Access to Sand and Tide, Inc. v. Seadrift Ass’n (1998) 60 Cal.App.4th 1053, 1070.) “Whether someone is in privity with the actual parties requires close examination of the circumstances of each case.” (Victa v. Merle Norman Cosmetics, Inc. (1993) 19 Cal.App.4th 454, 464.)

Here, Mitchell argues in conclusory fashion that it sits in privity with Metaview and that its liability is merely derivative of Metaview’s liability. (See Memo of P’s & A’s at p. 6:15-18.) Mitchell does not articulate how its interests were adequately represented by Metaview during the arbitration, or why the order by the arbitrator binds Plaintiffs as to Mitchell’s liability. Having failed to do so, the res judicata argument is not sustainable on demurrer.

Therefore, the demurrer to the FAC on the ground of res judicata is OVERRULED.
Justiciable Controversy

Mitchell also asserts the FAC is deficient as it is does not allege any justiciable controversy. This contention however is based on Mitchell’s prior argument with respect to res judicata. Since the res judicata argument fails for the reasons stated above, this argument is not sustainable on demurrer.

Consequently, the demurrer to the FAC on the ground that it fails to allege a justiciable controversy is OVERRULED.

General Demurrer – Failure to State a Cause of Action

Mitchell demurs to the fourth, fifth, and seventh causes of action on the ground that they fail to state a valid claim.

Fourth Cause of Action: Breach of Contract

“A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.” (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.)

Here, Mitchell persuasively argues there are no facts alleged showing that Plaintiffs and Mitchell entered into a contract to support the fourth cause of action. Instead, the FAC clearly alleges that Plaintiffs and defendant Metaview entered into the purchase agreement which is the subject of this action. (See FAC at ¶¶ 13, 47, 48, Exhibit A.) Furthermore, the purchase agreement itself identifies Plaintiffs and Metaview as the parties to the contract. (See FAC at Exhibit A.) Plaintiffs appear to concede this argument as they fail to address it in opposition to the motion.

Therefore, the demurrer to the fourth cause of action is SUSTAINED WITHOUT LEAVE TO AMEND for failure to state a claim. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading].)
Fifth Cause of Action: Negligent Misrepresentation

“The elements of negligent misrepresentation are (1) the defendant made a false representation; (2) without reasonable grounds for believing it to be true; (3) with the intent to deceive the plaintiff; (4) justifiable reliance on the representation; and (5) resulting harm.” (Rufini v. CitiMortgage, Inc. (2014) 227 Cal.App.4th 299, 308.)

Mitchell argues the fifth cause of action is deficient as Plaintiffs fail to allege any misrepresentations to support the claim. This contention lacks merit as Plaintiffs identify the subject misrepresentations in paragraph 54 of the FAC. In particular, Plaintiffs allege that Mitchell and other defendants represented that the subject Residence would be constructed in accordance with approved plans; would be designed and constructed in strict compliance with various codes, regulations, and ordinances, and would be constructed free from construction defects and fit for ordinary residential purposes. (See FAC at ¶ 54.) Such allegations are sufficient to state a claim and must be accepted as true for purposes of demurrer.

Accordingly, the demurrer to the fifth cause of action on the ground that it fails to state a claim is OVERRULED.

Seventh Cause of Action: Third-Party Beneficiary Claim for Breach of Contract

“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.” (Civ. Code, § 1559.) “A third party may qualify as a beneficiary under a contract where the contracting parties must have intended to benefit that third party and such intent appears on the terms of the contract.” (Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1724.)

Mitchell claims the seventh cause of action fails as Plaintiffs do not plead facts establishing the existence of contracts between Mitchell and Metaview or between Mitchell and other entities or individuals. (See Memo of P’s & A’s at p. 8:7-13.) This argument is not persuasive as Plaintiffs clearly allege that Mitchell entered into various written agreements with other defendants to provide labor and materials in connection with construction of the Residence. (See FAC at ¶ 69.) Plaintiffs allege they are intended and/or express third-party beneficiaries of these written agreements between defendants. (Id. at ¶ 70.) Such allegations are sufficient to state a claim and must be accepted as true on demurrer. In addition, Mitchell fails to cite any legal authority to support its contention that the cause of action cannot be pled on information and belief. (See Quantum Cooking Concepts, Inc. v. LV Associates, Inc. (2011) 197 Cal.App.4th 927, 934 [trial court not required to “comb the record and the law for factual and legal support that a party has failed to identify or provide”].)

Therefore, the demurrer to the seventh cause of action on the ground that it fails to state a claim is OVERRULED.

Special Demurrer – Uncertainty
Mitchell demurs to the third, fourth, fifth, sixth, and seventh causes of action on the ground that these claims fail for uncertainty.
“[D]emurrers for uncertainty are disfavored,” and are generally “granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.) Therefore, “[a] demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Mitchell demurs to these claims on the basis of uncertainty pointing to the fact that Plaintiffs employ a “chain letter” or “shotgun” approach to pleading whereby the first paragraph of each cause of action incorporates by reference all prior allegations.
In support, Mitchell cites to International Billing Services, Inc. v. Emigh (2000) 84 Cal.App.4th 1175, 1179 where the appellate court stated “[t]he relevant complaint employs the disfavored shotgun (or ‘chain letter’) style of pleading, wherein each claim for relief incorporates by reference all preceding paragraphs, which often masks the true causes of action.” Similarly, Mitchell relies on Kelly v. General Telephone Co. (1982) 136 Cal.App.3d 278, 285, where the appellate court stressed that “chain letter” type pleading should be avoided as it causes ambiguity and redundancy. Despite these authorities, Mitchell fails to explain how these claims are so incomprehensible that it cannot reasonably respond. Also, given the arguments raised on general demurrer to the fourth, fifth, and seventh causes of action, Mitchell seems to be sufficiently aware of the issues raised in the FAC.

Accordingly, the demurrer to the third, fourth, fifth, sixth, and seventh causes of action on the ground of uncertainty is OVERRULED.

The Court will prepare the Order.