34-2017-00221708

Colusa County Office of Education vs. Swank Construction

Nature of Proceeding: Hearing on Demurrer to Complaint (Architecture for Education)

Filed By: Muir, Samuel J.

** If any party requests oral argument, then at the time the request is made, the requesting party shall inform the court and opposing counsel of the specific issue(s) on which oral argument is sought. **

Defendant Architecture for Education, Inc.’s (A4E) demurrer is OVERRULED in part and SUSTAINED in part.

The parties’ requests for judicial notice of court documents are GRANTED.

This case involves plans to construct a school and administrative buildings in Colusa County, California. The plaintiff is Colusa County Office of Education (CCOE). The defendants are A4E and Swank Construction, Inc. (Swank). CCOE filed the case in Colusa County Superior Court, but the case was transferred to this court.

According to CCOE, A4E was its architect, designated representative and project manager. Swank was the builder. CCOE alleges its relationship with each defendant was memorialized in a written contract, each of which is attached to the complaint. CCOE alleges that A4E failed to monitor the construction and prepared some drawings that were defective. The complaint contains causes of action against A4E for breach of written contract, professional negligence, implied contractual indemnity, contribution and declaratory relief. A4E demurs to each cause of action on grounds the allegations fail to state facts sufficient to state a valid cause of action. CCOE opposes.

Discussion

Preliminarily, the court notes CCOE’s argument that the demurrer is untimely. Assuming the demurrer is untimely, the court exercises its discretion to hear it nonetheless. (See Jackson v. Doe (2011) 192 Cal.App.4th 742, 749-750.)

Res Judicata/Collateral Estoppel

First, A4E argues that voluntary dismissals with prejudice entered in a prior action bar CCOE from advancing its current causes of action. The prior action is Swank v. CCOE, Sacramento County Superior Court Case No. 2015-179140 (the “first case”). Swank commenced the first case, again initially in Colusa County Superior Court, in September 2014. At the time the dismissals were entered in late 2016, the operative pleadings were Swank’s complaint against CCOE and CCOE’s first amended cross-complaint (FACC) against Swank.

Swank’s complaint in the first case contained a single cause of action against CCOE for breach of written contract–the same contract on which CCOE predicates its current complaint against Swank. Swank alleged CCOE had breached the contract by inter alia wrongfully denying change order requests, failing to grant extensions of time to perform, and failing to pay sums owed. In the current action, CCOE alleges A4E was contractually obligated to review such change orders and extension requests, and that it was required to provide advice whether such orders and requests should be granted.

In the FACC in the first case, CCOE advanced causes of action against Swank for breach of (the same) construction contract and failure to pay liquidated damages. CCOE alleged the existence of design defects, including defects in windows, roll-up door and canopies above windows and doors. CCOE’s current complaint contains allegations A4E improperly designed roll-up doors and windows. A4E, however, was not a cross-defendant in CCOE’s FACC in the first case.

In September 2016, CCOE moved the court in the first case for leave to add A4E as a “doe” cross-defendant and for leave to add causes of action against A4E for indemnity, contribution and declaratory relief. The court denied the motion because CCOE was long-aware of CCOE’s identity and role in the project, and because trial was set to commence in fewer than 60 days. (See Order of 9/15/16.) The court noted, however, that CCOE was entitled to pursue A4E for indemnity and contribution after any trial in the first case.

Hence, at the time CCOE voluntarily dismissed its FACC against Swank in the first case, A4E was not a party. A4E nonetheless argues that the dismissals in the first case have res judicata effect on CCOE’s current causes of action against it.

Res judicata only bars relitigation of the same claims between the same parties or their privies. (See DKN Holdings LLC v. Faeber (2015) 61 Cal.4th 813, 824, 826.) A4E was not a party in the first case. Nor has A4E demonstrated that Swank was somehow its privy in that case. Consequently, res judicata does not bar CCOE’s causes of action against A4E in this case.

The court also rejects A4E’s primary rights analysis, which underlies its argument that res judicata applies. In determining which causes of action in a second lawsuit are barred as res judicata, the court considers which primary rights were advanced in the first lawsuit. According to A4E, the current lawsuit against it involves the same primary rights as those litigated in the first case. A4E argues both cases focus on CCOE’s grievances about design and construction of the project. Grievances, however, are not the same as primary rights for purpose of res judicata. Even if Swank and A4E were jointly liable to CCOE under a single construction contract, a judgment as to one would not bar CCOE from litigating against the other. (DKN Holdings LLC, pp. 820, 822-

823.) CCOE is a fortiori entitled to sue A4E now give that CCOE entered into separate contracts with it and Swank. In other words, CCOE’s contractual rights under the contract with Swank are not the same primary rights under contract with A4E.

A4E arguably suggests in the alternative that the doctrine of collateral estoppel–issue preclusion–compels an order sustaining its demurrer. (See Moving Memo. at 6:19-

21.) Unlike res judicata, collateral estoppel may be invoked by one not a party to the first lawsuit. (DKN Holdings LLC, supra, pp. 826-827.) But collateral estoppel only bars relitigation of issues, not necessarily causes of action as a whole. (Id., p. 824.) A demurrer, on the other hand, may only be sustained if an entire cause of action is

defective. Having failed to establish that an issue resolved in the first case bars an entire cause of action in this case, A4E is not entitled to an order sustaining its demurrer.

Statute of Limitations

Next, A4E argues the two-year limitations period in CCP § 339 bars CCOE’s fourth cause of action for professional negligence. A4E reasons that, because CCOE alleged design defects in the first action in 2014, and because it alleges some of the same defects in the current complaint filed in 2017, the two-year period has passed. A4E argues in the alternative that, even if a three-year limitations period applies, the fourth cause of action is time-barred.

In opposition, CCOE argues that the four-year statute of limitations in CCP § 337.1 applies because A4E’s negligence was not discovered until after substantial completion of the project. (See Smith v. Shn Consulting Eng’rs & Geologists (2001) 89 Cal.App.4th 638, 642-643, 647-649.)

Which limitations period applies depends on the point at which construction was substantially completed. (Smith, p. 649.) If CCOE was not on notice of defects until after substantial completion, then the four-year statute applies. Because the pleadings and judicially noticeable materials do not foreclose such a possibility, the court cannot say that the fourth cause of action is time-barred as a matter of law.

Implied Contractual Indemnity

Although the fifth cause of action is denominated “implied contractual indemnity,” CCOE alleges A4E “orally and in writing, expressly and impliedly became obligated to defend” CCOE in the first case. (Compl., ¶ 39, emphasis added.) Hence, the fifth cause of action includes a claim of express contractual indemnity. A4E, however, did not address that claim in its moving papers. CCOE did not address its express indemnity claim in its opposition papers, but it did not disavow the claim either.

For the first time in the reply, A4E argues it does not owe any express contractual duty to indemnify. The court disregards this argument as untimely. It was A4E’s burden as moving party to raise the argument in the moving papers. At this point, CCOE has no opportunity to oppose. Furthermore, because the claim of express contractual indemnity appears on the face of the complaint, A4E cannot argue that it only raised the issue in rebuttal to an argument CCOE raised in the opposition.

Having failed to demonstrate that the fifth cause of action does not state an indemnity cause of action on any theory, A4E’s demurrer to that cause of action is overruled.

Contribution

CCOE concedes that its contribution cause of action against A4E is defective because it is not ripe. A4E’s demurrer to the sixth cause of action for contribution is sustained. If CCOE wishes to replead a contribution cause of action against A4E, it must first obtain leave of court pursuant to CRC 3.1324.

Declaratory Relief

In its seventh cause of action for declaratory relief, CCOE seeks a declaration of A4E’s alleged duties to use reasonable care in performing its contractual and, perhaps, noncontractual duties. A4E’s only argument in support of its demurrer to this cause of action is that the cause of action fails because it derives from other causes of action that are defective. For reasons above, the court disagrees that the other causes of action are all defective. Consequently, the seventh cause of action is not derivatively defective, and A4E’s demurrer is overruled.

Disposition

A4E’s demurrer to the contribution cause of action is sustained.

The balance of the demurrer is overruled.

A4E is directed to file and serve its answer no later than 2/01/18.