Case Name: Wilmer, et al. v. CEM Builders, Inc., et al.
Case No.: 17-CV-315458

This is a construction defect action initiated by plaintiffs Rick Wilmer and Ann Reeves (collectively “Plaintiffs”) against defendant Jeld-Wen, Inc. (“Defendant”), among others.

According to the allegations of the complaint (“Complaint”), defendant CEM Builders, Inc. (“CEM”) entered into a written contract with Plaintiffs to provide construction management services relating to the erection of a home on their property (“Contract”). (Complaint, ¶ 20.)

Defendant manufactured windows, which defendant Argonaut Window & Door Inc. (“Argonaut”) sold to Plaintiffs to install on the property. (Id. at ¶¶ 12, 13.)

Problems with construction quickly arose. Although the Contract provided the work would be complete by the end of 2011, it was not. (Complaint, ¶¶ 21, 29.) In addition, the work that was completed by that time was defective. (Id. at ¶¶ 29-31.) These issues led Plaintiffs to terminate CEM and hire another contractor to rebuild a majority of their property. (Id. at ¶¶ 30, 32.) Even performing significant repairs, some construction was still defective. For instance, a large amount of rain water leaked into the property during the winter of 2016-2017, damaging the sheet rock, wall finishes, and floors. (Id. at ¶ 33.) This leakage was caused by defective windows manufactured by Defendant. (Id. at ¶ 92.)

Plaintiffs assert eleven causes of action for breach of contract, negligence, negligent misrepresentation, intentional misrepresentation, disregard of corporate entity, action on license bonds, products liability, and breach of warranty.

Defendant presently demurs to the third, fifth, and eleventh causes of action on the ground of failure to state sufficient facts to constitute a cause of action.

As a preliminary matter, Plaintiffs assert the demurrer should be overruled on the basis Defendant failed to meet and confer prior to filing the demurrer. Plaintiffs insist Defendant’s lack of meet and confer efforts is evidenced by its failure to file a meet and confer declaration.

Pursuant to Code of Civil Procedure section 430.41, subdivision (a), prior to filing a demurrer, “the demurring party shall meet and confer in person or by telephone with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The demurring party shall file a declaration attesting to his or her meet and confer efforts. (Code Civ. Proc., § 430.41, subd. (a)(2).)

The record reflects Defendant did not meet and confer prior to filing this demurrer. Defendant did not file a meet and confer declaration with its moving papers and Plaintiffs’ counsel attested that opposing counsel never contacted him to meet and confer. In an attempt to remedy this oversight, Defendant’s counsel filed a declaration in support of his client’s reply stating he met and conferred with Plaintiffs’ counsel after receiving the opposition papers on February 9. The statute clearly provides, however, that the moving party must meet and confer before filing the demurrer, not after. (See Code Civ. Proc., § 430.41, subd. (a).) Allowing parties to meet and confer after filing a demurrer would be contrary to the purpose of the meet and confer requirement, which is to determine whether the parties can reach an agreement which would eliminate the need to file a demurrer in the first instance. (See ibid.) Defendant failed to meet and confer as required by statute. With that said, a demurrer may not be overruled for a lack of meet and confer efforts. (Code Civ. Proc., § 430.41, subd. (a)(4).) As such, the Court will reach the merits of the demurrer. Defendant is admonished to comply with the meet and confer requirement in the future.
I. Third and Eleventh Causes of Action

The third cause of action for breach of contract alleges that by “signing the written contracts and undertaking the work, . . . [defendants] agreed to perform their respective scopes of work according to the terms of the contract and according generally accepted standards for homes of Plaintiffs’ quality to industry standard and according to code.” (Complaint, ¶ 54.) Defendants “breached their contracts by improperly manufacturing and/or installing work” and failing to adhere to industry standards. (Id. at ¶ 55.) The eleventh cause of action for breach of warranty alleges Defendant warranted that the windows it furnished were free from defects and would perform as reasonably expected. (Id. at ¶ 97.) The windows were defective because water penetrated them and they were not “water tight.” (Id. at ¶ 98.)

Defendant argues Plaintiffs fail to state a claim relative to both causes of action because they do not allege the existence of a contract.

With respect to the breach of contract cause of action, the existence of a cause of action is an essential element of such a claim. (Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 228.) Here, the third cause of action is apparently predicated on the existence of a written contract. (See Complaint, ¶ 54.) The existence of a written contract “may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect.” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.) “In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’” (Ibid., quoting McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)

Plaintiffs did not attach a copy of the contract to their Complaint; to plead its existence, they needed to either set out its terms verbatim or plead its legal effect. As aptly argued by Defendant, Plaintiffs did neither. The only allegation relating to the existence of a contract appears in paragraph 54 of the Complaint, which reads as follows: “By signing the written contracts and undertaking the work, said Defendants . . . agreed to perform their respective scopes of work according to the terms of the contract[.]” This is insufficient to plead the existence of a contract because the allegation clearly does not set out its terms. For example, the allegation does not clearly identify with whom Defendant entered into a contract or what it received in return for undertaking the work. As such, Plaintiffs fail to allege the existence of the contract and the demurrer to the third cause of action is sustainable on that basis.
Relative to the breach of warranty cause of action, Defendant asserts Plaintiffs fail to state a claim because they do not allege privity. “Privity of contract is a relationship that is a prerequisite for maintaining certain causes of action.” (Windham at Carmel Mountain Ranch Assn. v. Superior Court (2003) 109 Cal.App.4th 1162, 1176, original italics (“Windham”).) “[It] means that the buyer and seller were parties to the sales contract. ‘[T]here is no privity between the original seller and a subsequent purchaser who is in no way a party to the original sale.’” (Cardinal Health 301, Inc. v. Tyco Electronics Corp. (2008) 169 Cal.App.4th 116, 138–139, citations omitted (“Cardinal Health”).)

Contrary to Defendant’s argument, privity is not always required to state a claim for breach of warranty. There are two types of warranties: express and implied. (See Cardinal Health, supra, 169 Cal.App.4th at pp. 138-139.) “An express warranty ‘is a contractual promise from the seller that the goods conform to the promise. If they do not, the buyer is entitled to recover the difference between the value of the goods accepted by the buyer and the value of the goods had they been as warranted.’” (Dagher v. Ford Motor Company (2015) 238 Cal.App.4th 905, 928, quoting Daugherty v. American Honda Motor Co., Inc. (2006) 144 Cal.App.4th 824, 830.) “Unlike express warranties, which are basically contractual in nature, the implied warranty of merchantability arises by operation of law. ‘Into every mercantile contract of sale the law inserts a warranty that the goods sold are merchantable, the assumption being that the parties themselves, had they thought of it, would specifically have so agreed.’ Consequently, defendants’ liability for an implied warranty does not depend upon any specific conduct or promise on their part, but instead turns upon whether their product is merchantable.” (Hauter v. Zogarts (1975) 14 Cal.3d 104, 117, citations omitted.) In other words, “[i]mplied warranties are based on implied representations rather than on promises.” (Windham, supra, 109 Cal.App.4th at p. 1168.)

“Privity is generally not required for liability on an express warranty because it is deemed fair to impose responsibility on one who makes affirmative claims as to the merits of the product, upon which the remote consumer presumably relies. However, where the subject of the action is an implied warranty—i.e., one that is implied in law and did not originate from the manufacturer’s own statements or conduct—there is no similar justification for imposing liability on a defendant in favor of every remote purchaser.” (Cardinal Health, supra, 169 Cal.App.4th at p. 144, citations omitted, original italics.) There are also several exceptions to the privity requirement, even in cases of implied warranties, such as “cases involving foodstuffs, drugs and pesticides.” (Windham, supra, 109 Cal.App.4th at p. 1169.)
Here, it is not immediately apparent from the face of the pleading whether the cause of action is one for breach of implied or express warranty and Defendant does not distinguish between the two. In opposition, Plaintiffs identify this cause of action as one for breach of implied warranty and do not address express warranties. Thus, the Court will treat this cause of action as one for breach of implied warranty. As such, Plaintiffs must allege facts reflecting privity or that an exception to the privity requirement applies. As discussed above, Plaintiffs fail to allege privity, meaning the existence of a contract between themselves and Defendant.

Plaintiffs argue that even if they do not allege the existence of a contract, they still state a claim because an exception to the privity requirement applies. Specifically, Plaintiffs assert they are third party beneficiaries to a contract between Defendant and Argonaut. While it is true that a third party beneficiary may assert a breach of implied warranty cause of action even if there is a lack of privity (see Gilbert Financial Corp. v. Steelform Contracting Co. (1978) 82 Cal.App.3d 65, 68), it is not evident from the face of the pleading that Plaintiffs are third party beneficiaries.

Whether an individual is a third party beneficiary is “predicated upon the contracting parties’ intent to benefit” him or her. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524.) “Ascertaining this intent is a question of ordinary contract interpretation. Thus, ‘[t]he circumstance that a literal contract interpretation would result in a benefit to the third party is not enough to entitle that party to demand enforcement.’” (Ibid., citations omitted.) “Because third party beneficiary status is a matter of contract interpretation, a person seeking to enforce a contract as a third party beneficiary ‘must plead a contract which was made expressly for his [or her] benefit and one in which it clearly appears that he [or she] was a beneficiary.’ [¶] ‘Expressly,’ [as used in the statute and case law,] means ‘in an express manner; in direct or unmistakable terms; explicitly; definitely; directly.’” (Schauer v. Mandarin Gems of Calif., Inc. (2005) 125 Cal.App.4th 949, 957-958, citations omitted, italics added.)

There are no allegations here suggesting Plaintiffs are third party beneficiaries. The only mention of any possible agreement between Argonaut and Defendant is that “ARGONAUT sold Plaintiffs windows manufactured by [Defendant] and such windows were installed on the property.” (Complaint, ¶ 13.) This allegation does not reflect that Argonaut and Defendant entered into a contract expressly for Plaintiffs’ benefit. Consequently, Plaintiffs do not allege any exception to the privity requirement applies. Because Plaintiffs fail to allege privity or that an exception to the privity requirement applies, the demurrer to the eleventh cause of action is sustainable.
For the reasons stated above, the demurrer to the third and eleventh causes of action on the ground of failure to state sufficient facts to constitute a cause of action is SUSTAINED with 10 days leave to amend after notice of entry of this signed order.

II. Fifth Cause of Action

The fifth cause of action for negligence alleges Defendant “performed its work in a negligent manner and without inspecting or installing either the materials or the work or to confirm that the work complied with the contract, all industry standards, codes and Plaintiffs’ reasonable expectations.” (Complaint, ¶ 64.)

First, Defendant asserts Plaintiffs fail to state a claim because they do not allege any facts particular to it and only “formulaically recite the elements of Negligence without substantive supporting facts,” such as how each defendant individually breached the duty of care. (Mem. Ps. & As., p. 6:3-4.) Defendant asserts the only allegation specific to it is that it manufactures windows and sold them to Plaintiffs through Argonaut. (See Complaint, ¶ 13.) Defendant contends more facts must be alleged to state a negligence claim against it.

Generally, a pleading need only allege the ultimate facts sufficient to state a cause of action. (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) A plaintiff need not plead evidentiary facts to support an ultimate fact. A plaintiff is not required to plead evidentiary facts supporting the allegation of ultimate fact. (McKell v. Washington Mut., Inc. (2006) 142 Cal.App.4th 1457, 1469.) Additionally, a negligence cause of action may be pleaded in general terms, meaning a plaintiff is not required to identify the specific manner in which his or her injury occurred or allege the exact nature of the wrongful act. (Guilliams v. Hollywood Hosp. (1941) 18 Cal.2d 97, 101.) Instead, “it is sufficient to allege an act was negligently done without stating the particular omission which rendered it negligent.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747 [allegations defendant “negligently cared for, diagnosed and treated” plaintiff were adequate to state a claim].) Plaintiffs satisfy this pleading standard. They allege defendants performed their work negligently and identify Defendant’s particular work as manufacturing windows which were used in their property. (Complaint, ¶¶ 12, 64.) Plaintiffs further plead their property suffered rain damage as a result of all of the defendants’ defective work, which includes the work of Defendant. (Id. at ¶ 35.) Consequently, Defendant fails to substantiate its argument that Plaintiffs inadequately plead the negligence cause of action.

Next, Defendant argues the negligence cause of action is barred by the economic loss rule because Plaintiffs do not adequately plead they suffered any property loss. The economic loss rule provides that “where a purchaser’s expectations in a sale are frustrated because the product he bought is not working properly, his remedy is said to be in contract alone, for he has suffered only economic losses.” (Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 988, internal citations and quotation marks omitted.) Under this rule, a purchaser may recover solely in contract for purely economic loss due to disappointed expectations unless he can demonstrate harm above and beyond a broken contractual promise. (Ibid.) Thus, the economic loss rule does not apply when a plaintiff has suffered physical injury or property damage. (See ibid.; see also County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 325.)

Defendant recognizes that Plaintiffs allege damage was caused to their property in paragraph 35, wherein they allege the various errors and defects caused by all defendants damaged their property. (Complaint, ¶ 35.) Defendant asserts this allegation is inadequate because it does not specify whether it, as opposed to the other defendants, caused the supposed property damage. Defendant additionally contends “the allegation is devoid of any details of the nature of the consequential property damage supposedly sustained.” (Mem. Ps. & As., p. 5:15-17.)

Defendant’s argument is misguided because, as discussed above, Plaintiffs need only plead a negligence cause of action in general terms. (See Guilliams v. Hollywood Hosp., supra, 18 Cal.2d at p. 101.) Alleging that Plaintiffs suffered property damage as a result of the defective windows meets this standard. Further, Plaintiffs allege details about the nature of their property damage; they plead “water penetrated the dining room and living room, causing damage to sheet rock, wall finishes, floors and caused the development of large amounts of mold,” which “made portions of the house uninhabitable.” (Complaint, ¶ 33.) Consequently, the argument that the economic loss rule bars this cause of action because Plaintiffs fail to allege their property was damaged is meritless.

Accordingly, the demurrer to the fifth cause of action on the ground of failure to state sufficient facts to constitute a cause of action is OVERRULED.

The Court shall prepare the Order.