Case Number: 19STCV27965 Hearing Date: January 21, 2020 Dept: 58

Judge John P. Doyle

Department 58

Hearing Date: January 21, 2020

Case Name: Foster v. Renovate America, Inc., et al.

Case No.: 19STCV27965

Motion: (1) Demurrer

(2) Demurrer

(3) Motion to Strike

Moving Party: (1) Defendant County of Los Angeles

(2) Defendant Renovate America, Inc.

(3) Defendants County of Los Angeles and Renovate America, Inc.

Responding Party: (1) (2) (3) Plaintiff Alma Foster

Tentative Ruling: The County of Los Angeles’ Demurrer is sustained in part.

Renovate America, Inc.’s Demurrer is overruled.

The Motion to Strike is denied.

Plaintiff Alma Foster filed this action on August 9, 2019, and filed the operative First Amended Complaint (“FAC”) on September 20, 2019. The FAC asserts causes of action for (1) financial elder abuse, (2) breach of contract, (3) violations of the UCL, (4) public injunction, (5) cancellation of taxes, (6) violations of the Home Solicitation Act (“HSA”), (7) violations of contractors’ state license law, (8) violations of the Consumers Legal Remedies Act (“CLRA”), (9) negligence, (10) intentional/negligent misrepresentation, (11) intentional interference with contractual relations, (12) recovery of contractor bond, and (13) declaratory relief.

The FAC alleges,

Alma Foster’s experience with the contractor and the Property Assessed Clean Energy (“PACE”) program highlights a growing trend of unscrupulous contractors and PACE providers morphing PACE-related home improvement programs into price-gouging, equity-stripping schemes that have a devastating impact on elderly homeowners.

. . .

Alma was just able to meet her monthly expenses, including her property taxes, until she was defrauded by the Defendants into purchasing unnecessary “improvements” they couldn’t afford.

. . .

Defendants made substantial and material misrepresentations regarding the benefits of these alleged improvements and intentionally suppressed material facts regarding the financing and cost of the work, including: the actual cost of the home improvements; that Alma would be financing them through an annual property tax assessment; that a PACE Lien would be placed on her home to secure the financing; that this lien would be senior to any other encumbrances; and of the legal consequences that the PACE Lien would have.

As a result of Defendants’ predatory and deceptive practices, Alma has been assessed an $83,940.72 PACE Lien payable over 20 years at 9.36% interest, and owes an annual PACE tax assessment of $8,808.42, which has already been assessed for the tax years 2016-2017, 2017-2018, and 2018-2019.

. . .

Unable to keep up with her property taxes, Alma is now in default with her reverse mortgage and was recently served with a notice of foreclosure by Reverse Mortgage Services (“RMS”).

(FAC ¶¶ 1-2, 4-6.)

I. Defendant County of Los Angeles’ Demurrer

Defendant County of Los Angeles demurs to the first, fifth, sixth, eighth, ninth, tenth, and eleventh causes of action for failure to state sufficient facts. Defendant also contends the sixth cause of action is uncertain.

(a) Government Claims Act

Defendant asserts the entirety of the FAC is barred by the Government Claims Act. Specifically, Defendant argues, “Plaintiff alleges that she discovered the facts and injuries giving rise to her claims ‘[o]n or about October 2016.’ (FAC, ¶¶ 78, 209.) Accordingly, Plaintiff was required to present her claim to the County no later than October 2017. (Gov. Code, § 911.2.) Yet, Plaintiff concedes that she did not submit a claim for damages to the County until January 30, 2019. (FAC, ¶ 83, Ex. P.)”

Plaintiff argues her claims are subject to the exceptions set forth in Gov. Code § 905(a), (h).

Under the Government Claims Act, all claims for money or damages against local public entities generally must be presented to those entities before formal legal action may be pursued. (Arntz Builders v. City of Berkeley (2008) 166 Cal.App.4th 276, 279.) The purpose of this general requirement is to provide public entities with notice of claims. (Ibid.) Notice in turn provides the opportunity to settle just claims and to investigate and defend against unjust claims. (Id. at p. 298.)

Gov. Code § 911.2 provides, “(a) A claim relating to a cause of action for death or for injury to person or to personal property or growing crops shall be presented as provided in Article 2 (commencing with Section 915) not later than six months after the accrual of the cause of action. A claim relating to any other cause of action shall be presented as provided in Article 2 (commencing with Section 915) not later than one year after the accrual of the cause of action.”

Here, the fifth cause of action for cancellation of taxes per Rev. & Tax. Code § 4986 falls under the claims exception set forth in Gov. Code § 905(a) for “[c]laims under the Revenue and Taxation Code or other statute prescribing procedures for the refund, rebate, exemption, cancellation, amendment, modification, or adjustment of any tax, assessment, fee, or charge or any portion of the charge, or of any penalties, costs, or related charges.”

Plaintiff also contends Gov. Code § 905(a) applies to her HSA claim, but the HSA does not relate to taxes. (Civ. Code §§ 1689.7. 1689.11.) That Plaintiff’s HSA claim—within this action—indirectly pertains to taxes is not persuasive.

Gov. Code § 905(h) provides an exception for “[c]laims that relate to a special assessment constituting a specific lien against the property assessed and that are payable from the proceeds of the assessment, by offset of a claim for damages against it or by delivery of any warrant or bonds representing it.” This provision applies to Plaintiff’s remaining causes of action to the extent she seeks a tax refund.

Defendant argues Plaintiff’s claims are not subject to Gov. Code § 905(h) because they go beyond seeking a refund in that they request generalized damages.

However, a demurrer is not to be directed at a part of a cause of action or a claim for damages. (Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal. App. 4th 1028, 1047; see also Beason v. Griff (1954) 127 Cal.App.2d 382, 387 [“The averment of an improper or wrong measure of damages, or the demand or prayer for items of damage not warranted by the facts alleged is not a ground for general demurrer.”].)

The Demurrer, to the extent premised on the Government Claims Act, is overruled.

(b) Exhaustion

The fifth cause of action for cancellation of taxes is premised on Rev. & Tax. Code §§ 4986, 4990.3. This claim fails to state sufficient facts to constitute a cause of action. This is because Rev. & Tax. Code § 4986 does not relate to court relief, but rather action by the county auditor. (Rev. & Tax. Code §§ 22, 4986.) Further, Rev. & Tax. Code § 4990.3 relates to quieting title to an assessment lien for taxes which have been canceled, which has not yet occurred.

Defendant seems to argue that any claim for a refund or cancellation of taxes in this matter would, in any case, require exhaustion. Specifically, Defendant argues, “The PACE-authorizing statute provides that the collection of a PACE assessment will be in the same manner and time as the general taxes of a city or county on real property. (See Sts. & High. Code § 5898.30.) In turn, the term ‘taxes’ under the Revenue and Taxation Code ‘includes assessments collected at the same time and in the same manner as county taxes.’ (Rev. & Tax. Code § 4801.) As such, the County’s administrative procedures for refunds or cancellation of taxes encompass PACE assessments. (See Hanjin Int’l Corp. v. L.A. Cty. Metro. Transp. Auth. (2003) 110 Cal.App.4th 1109, 1113 [in light of section 4801, claims for tax refunds include taxes as well as assessments levied and collected by the county at the same time and in the same manner as taxes are levied and collected].)”

At first blush, Defendant’s arguments are appealing. But as always, the devil is in the details. Hanjin, cited by Defendant, provides, “[i]n light of section 4801, claims for tax refunds governed by sections 5096 and 5097 include taxes as well as assessments levied and collected by the county at the same time and in the same manner as taxes are levied and collected.” (Hanjin Internat. Corp. v. Los Angeles Cty. Metro. Transportation Auth. (2003) 110 Cal.App.4th 1109, 1113.) Indeed, “[i]n the property tax context, application of the exhaustion principle means that a taxpayer ordinarily may not file or pursue a court action for a tax refund without first applying to the local board of equalization for assessment reduction under section 1603 and filing an administrative tax refund claim under section 5097.” (Steinhart v. Cty. of Los Angeles (2010) 47 Cal.4th 1298, 1308.) “The first step is the filing of an application for assessment reduction under section 1603, subdivision (a), which provides: ‘A reduction in an assessment on the local roll shall not be made unless the party affected or his or her agent makes and files with the county board [of equalization] a verified, written application showing the facts claimed to require the reduction and the applicant’s opinion of the full value of the property.’ ” (Id. at p. 1307.)

Notably, “[t]he statutory procedures associated with assessment appeals connote that the central responsibility of county boards is to decide questions of valuation[] ([e].g., § 1603, subd. (a)[]) [and] inextricably connected . . . issues of fact, such as whether a change in ownership has occurred, whether property has been properly classified, and whether a taxpayer in fact owns assessed property.” (Williams & Fickett v. Cty. of Fresno (2017) 2 Cal.5th 1258, 1269 (emphasis added).)

Here, Plaintiff’s claims do not relate to valuation such that exhaustion is not required. That is, exhaustion is not required where “the remedy is inadequate to resolve a challenger’s dispute. (Glendale City Employees’ Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 342, 124 Cal.Rptr. 513, 540 P.2d 609.) As a general matter, a remedy is not adequate unless it establishes clearly defined machinery for the submission, evaluation and resolution of complaints by aggrieved parties.” (Plantier v. Ramona Mun. Water Dist. (2019) 7 Cal.5th 372, 384.) Indeed, Defendant has failed to point to any administrative procedure in which taxes can be cancelled based on the premise of fraudulent and otherwise predatory lending.

In sum, Defendant’s exhaustion argument fails. However, the Demurrer is sustained as to the fifth cause of action because—to the extent premised on Rev. & Tax. Code §§ 4986, 4990.3—it is not viable. The Court grants twenty days leave to amend.

(c) Immunity

Defendant argues it is immune as to sixth, eighth, ninth, tenth, and eleventh causes of action. (Gov. Code § 815.)

(i) Statutory claims

Defendant argues it cannot be liable under the HSA or CLRA because such laws do not indicate an intent to abrogate government immunity.

Plaintiff argues that governmental immunity is the exception, and that there is nothing to indicate immunity as to the HSA or CLRA. Further, Plaintiff contends that “governmental agencies are generally held subject to legislation that applies to any ‘person,’ so long as the legislation does not impair the government’s sovereign powers.” (People v. Crow (1993) 6 Cal.4th 952, 959.)

Plaintiff’s contentions lack merit. Gov. Code § 815 “amounts to a legislative declaration that governmental immunity from suit is the rule and liability the exception.” (Trinkle v. California State Lottery (1999) 71 Cal.App.4th 1198, 1202.) Further, “[a] traditional rule of statutory construction is that, absent express words to the contrary, governmental agencies are not included within the general words of a statute. . . . [and] the premise that public entities are statutory ‘persons’ unless their sovereign powers would be infringed is simply a maxim of statutory construction. While the ‘sovereign powers’ principle can help resolve an unclear legislative intent, it cannot override positive indicia of a contrary legislative intent.” (Wells v. One2One Learning Found. (2006) 39 Cal.4th 1164, 1192, 1193.) Neither the CLRA nor HSA bear any indication that they apply to public entities. (Cf. Trinkle, supra, 71 Cal.App.4th at p. 1202 [Public entities immune from UCL claims].)

Plaintiff argues that Defendant is liable under the HSA per Gov. Code 815.6 which provides, “Where a public entity is under a mandatory duty imposed by an enactment that is designed to protect against the risk of a particular kind of injury, the public entity is liable for an injury of that kind proximately caused by its failure to discharge the duty unless the public entity establishes that it exercised reasonable diligence to discharge the duty.” Gov. Code § 815.6 imposes liability on a public entity when “[(1)] an enactment . . . impose[s] a mandatory, not discretionary, duty; [(2)] the enactment must intend to protect against the kind of risk of injury suffered by the party asserting the statute as a basis for liability; [(3)] and breach of mandatory duty must be a proximate cause of the injury suffered.” (Ibarra v. California Coastal Com. (1986) 182 Cal. App. 3d 687, 693.) Plaintiff contends that immunity does not apply because the HSA provides for mandatory duties: “providing a notice of cancellation as required by Civil Code § 1689.7(a)(4), providing a copy of the contract during the contract negotiation as required by Civil Code § 1803.7, not including unconscionable provisions in violation of Civil Code § 1804.1, not charging an annual fee on the assessment contract in violation of Civil Code § 1805.1, not charging compound interest on the assessment contract in violation of Civil Code § 1805.7, and complying with the disclosure requirements of 12 C.F.R. §§ 226.17, 226.18, and 226.32. Id. at ¶¶ 145, 148, 151.” (Opposition at p. 17.)

As Defendant’s reply is silent on this point, Plaintiff’s argument based on Gov. Code § 815.6 is conceded.

In sum, the Demurrer is overruled as to Plaintiff’s HSA claim.[1] The Demurrer is sustained as to eighth cause of action for violations of the CLRA. (Gov. Code § 815.) Leave to amend is denied.

(ii) Common Law Claims

Plaintiff contends she may pursue her common law claims for (1) negligence, (2) intentional/negligent misrepresentation, and (3) intentional interference with contractual relations under Gov. Code §§ 815.2, 815.4.

Gov. Code § 815.2(a) provides, “A public entity is liable for injury proximately caused by an act or omission of an employee of the public entity within the scope of his employment if the act or omission would, apart from this section, have given rise to a cause of action against that employee or his personal representative.”

Gov. Code § 815.4 states, “A public entity is liable for injury proximately caused by a tortious act or omission of an independent contractor of the public entity to the same extent that the public entity would be subject to such liability if it were a private person. Nothing in this section subjects a public entity to liability for the act or omission of an independent contractor if the public entity would not have been liable for the injury had the act or omission been that of an employee of the public entity.”

The Demurrer is sustained—without leave to amend—as to the tenth cause of action for intentional/negligent misrepresentation. This is because a public entity cannot be liable for a misrepresentation made by an employee or independent contractor. (Gov. Code § 818.8)

As to Plaintiff’s claims for negligence and intentional interference, such claims may be pursued per Gov. Code § 815.4. “At common law, a person who hired an independent contractor generally was not liable to third parties for injuries caused by the contractor’s negligence in performing the work. . . . Over time, the courts have, for policy reasons, created so many exceptions to this general rule of nonliability that the rule is now primarily important as a preamble to the catalog of its exceptions.” (Privette v. Superior Court (1993) 5 Cal.4th 689, 693.) One such exception involves a nondelegable duty, which is an “affirmative obligation to ensure the protection of the person to whom the duty runs.” (General Building Contractors Assn., Inc. v. Pennsylvania (1982) 458 U.S. 375, 396) “The nondelegable duties doctrine prevents a party that owes a duty to others from evading responsibility by claiming to have delegated that duty to an independent contractor hired to do the necessary work. The doctrine applies when the duty preexists and does not arise from the contract with the independent contractor.” (SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal.4th 590, 600–01.) Here, the FAC alleges that Defendant Renovate America, Inc. was an independent contractor of Defendant County of Los Angeles; further, Plaintiff’s negligence and intentional interference claims are premised on nondelegable duties such as those arising from the elder abuse laws. (Welf. & Inst. Code § 15600, et seq.)

Thus, the Demurrer is overruled as to Plaintiff’s negligence and intentional interference claims.

(d) Statute of Limitations

Lastly, Defendant argues that the eleventh cause of action for intentional interference with contractual relations is time-barred under a two-year period of limitations (Code Civ. Proc. § 339(1)), because the FAC alleges Plaintiff’s home equity conversion mortgage contract with Bank of America, N.A. was first disrupted in 2016.

While Defendant is correct that a claim for disruption of contract would be time-barred, the eleventh cause of action can be interpreted as a claim for inducing breach of contract. (Pac. Gas & Elec. Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1129 [“Other cases have pointed out that while the tort of inducing breach of contract requires proof of a breach, the cause of action for interference with contractual relations is distinct and requires only proof of interference.”] (emphasis added).) Further, the FAC alleges breach occurred in June 2019 when a notice of default was recorded (FAC ¶ 224), such that the eleventh cause of action is timely. The Demurrer is overruled.

(e) Summary

The Demurrer is overruled as to the first, sixth, ninth, and eleventh causes of action.

The Demurrer is sustained as to the fifth cause of action, with twenty days leave to amend.

The Demurrer is sustained as to the eighth and tenth causes of action, without leave to amend.

II. Renovate America, Inc.’s Demurrer

Defendant Renovate America, Inc. demurs to the fourth, sixth, and eleventh causes of action for uncertainty and failure to state sufficient facts.

Defendant first argues the fourth cause of action for public injunction is improperly pled as a stand-alone claim when it is a remedy for Plaintiff’s UCL claim. However, courts are not to sustain demurrers based on labels. (McBride v. Boughton (2004) 123 Cal.App.4th 379, 385.)

Defendant also argues the fourth and sixth causes of action are fatally uncertain. The Court respectfully rejects this contention. (See Khoury v. Maly’s of California Inc. (1993) 14 Cal.App.4th 612, 616 [“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.”].)

Finally, Defendant argues the eleventh cause of action is time-barred. However, this has already been rejected in ruling on the County of Los Angeles’ demurrer.

In sum, the Demurrer is overruled.

III. Motion to Strike

Defendants Renovate America, Inc. and the County of Los Angeles argue (1) Plaintiff’s allegations that her PACE assessments violate the CLRA or HSA should be stricken because PACE assessments are not contracts for the sale of goods or services and (2) Plaintiff’s allegations relying on Regulation Z, TILA, HOEPA, and the Unruh Act should be stricken because PACE assessments are cot covered consumer credit transactions.

The use of motions to strike in which a component of a cause of action is attacked should be “cautious and sparing.” (PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1683.) The Court, in the exercise of its discretion, denies the Motion as an improper “line item veto.” (Ibid.)

[1] Defendant’s uncertainty argument is also rejected. (See Khoury v. Maly’s of California Inc. (1993) 14 Cal.App.4th 612, 616 [“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.”].)