Latif v. Jack W. Mitchell Construction, Inc.

However, notwithstanding subdivision (b) of Section 143, the court may determine that there has been substantial compliance with licensure requirements under this section if it is shown at an evidentiary hearing that the person who engaged in the business or acted in the capacity of a contractor (1) had been duly licensed as a contractor in

this state prior to the performance of the act or contract, (2) acted reasonably and in good faith to maintain proper licensure, and (3) acted promptly and in good faith to remedy the failure to comply with the licensure requirements upon learning of the failure.”

Plaintiff alleges the following in the First Amended Complaint (FAC):

“Defendant JACK W. MITCHELL CONSTRUCTION, INC., a California corporation (‘JMC’).” (FAC, ¶ 3). “JACK MITCHELL CONSTRUCTION is an unincorporated partnership, organized and existing under the laws of the State of California and doing business in the County of Orange. Plaintiff is further informed and believes, and thereon alleges, that Jack W. Mitchell and Lorie D. Mitchell are partners and/or managing agents of this partnership and that it was used interchangeably with JACK W. MITCHELL CONSTRUCTION, INC. to contract for and perform construction services at the Subject Property. As per information available from the Contractors State License Board (CSLB) website, JACK MITCHELL CONSTRUCTION’s contractor’s license is suspended for failure to comply with an outstanding civil judgment.” (FAC, ¶ 4).

“Defendants Jack W. Mitchell and Lorie D. Mitchell, as officers and managing agents of JACK W. MITCHELL CONSTRUCTION, INC. and as partners and/or managing agents of JACK MITCHELL CONSTRUCTION (the partnership), personally participated in, directed, authorized, and ratified the acts and omissions alleged in this Complaint, including misrepresenting and concealing the suspension of Defendants’ contractor’s license(s).” (FAC, ¶ 10).

“Plaintiff met with Defendant Jack W. Mitchell in person to view the site and discuss the proposed construction project. During those discussions, Mitchell affirmatively represented to Plaintiff that JACK W. MITCHELL CONSTRUCTION, INC. (‘JMC’) was a duly licensed and bonded contractor by the California Contractor’s State License Board.” (FAC, ¶ 16). “On or about June 19, 2023, Defendants presented Plaintiff with a written Construction Agreement (the “Agreement”) for extensive construction work and project management services at the Subject Property, which was executed on or about July 31, 2023.” (FAC, ¶ 17). “Section 1(G) of the Agreement affirmatively represented that JMC was ‘duly licensed in the State of California’ and required that JMC ‘will maintain such licensure for the duration of the project.’” (FAC, ¶ 18).

“On or around August 1, 2023, Defendants presented Plaintiff with a screenshot of a printout from the CSLB website reflecting that Defendants’ CSLB contractor’s license was current and active as of that date.” (FAC, ¶ 19). “In or around June of 2024, Plaintiff learned that the Construction Entity Defendants contractor’s license with the CSLB was suspended and had been suspended for an undetermined amount of time due to the Construction Entity Defendants failure to comply with an outstanding civil judgment.” (FAC, ¶ 20). “On information and belief, the suspension of the Construction Entity Defendants CSLB license occurred around the same timeframe as the parties’ execution of the Agreement— on or about July 31, 2023, or shortly thereafter. As a result, JMC did not hold a valid CSLB license during the vast majority of time construction activities were performed at the Subject Property.” (FAC, ¶ 21).

“From approximately July 2023 through June of 2024, Plaintiff paid Defendants $122,837.65 for work on the Subject Property.” (FAC, ¶ 38).

First, the FAC is uncertain as to which Defendant was contractually required to carry the license. Notably, the FAC alleges that “Defendants presented Plaintiff with a written Construction Agreement” (FAC, ¶ 17), then alleges that the agreement represented that JMC was “duly licensed in the State of California” and required that JMC “will maintain such licensure for the duration of the project.” (FAC, ¶ 18). Plaintiff later alleges that “Plaintiff and Defendants entered into a written Construction Agreement on or about June 19, 2023, executed on July 31, 2023, for construction work at the Subject Property.” (FAC, ¶ 43). However, the only entity that was required to be licensed pursuant to the agreement was JMC, the corporation. (FAC, ¶ 3).

Plaintiff argues that Jack and Lorie Mitchell are responsible under multiple theories, including alter ego theories, Jack Mitchell’s own participation, and partnership liability pursuant to Corp. Code, § 16306(a), which provides: “(a) Except as otherwise provided in subdivisions (b) and (c), all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.”

However, the partnership was not alleged to be the entity that was required to hold the license. While Plaintiff alleges that the partnership was used “interchangeably” with the corporation (FAC, ¶ 4), the FAC clearly alleges that only the corporation was required to be licensed pursuant to the agreement. If Plaintiff is now alleging that the partnership and/or the individuals were required to perform work under the agreement and, therefore, carry the license, then the FAC does not make this clear.

Finally, with regards to any alter ego theory, “two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.’ [Citations.]” (Hasso v. Hapke (2014) 227 Cal.App.4th 107, 155.)

“Whether a party is liable under an alter ego theory is normally a question of fact. [Citations.] ‘The conditions under which the corporate entity may be disregarded, or the corporation be regarded as the alter ego of the stockholders, necessarily vary according to the circumstances in each case inasmuch as the doctrine is essentially an equitable one and for that reason is particularly within the province of the trial court.’ [Citation.]” (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811.) The court in Zoran Corp., sets forth a multitude of factors to consider. Plaintiff did not allege any facts demonstrating alter ego liability between the individual defendants and the corporation JMC.

Accordingly, the court sustains the demurrer as to the individual defendants for this cause of action.

2nd COA - Breach of Contract

Defendant contends that this claim is insufficiently plead because Plaintiff did not allege that breach was a “substantial” factor in causing Plaintiff’s alleged harm, citing to CACI No. 303. Defendants also contend that his claim is insufficiently plead as to the individual Defendants.

In order to state a cause of action for breach of contract, a Plaintiff must plead as follows: (1) the existence of the contract, (2) plaintiffs’ performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821). “Substantial” factor is not a required element. (Oasis West Realty, LLC, supra, 51 Cal.4th at 821 [elements]).

Plaintiff alleges the following in support of this cause of action: “Plaintiff and Defendants entered into a written Construction Agreement on or about June 19, 2023, executed on July 31, 2023, for construction work at the Subject Property.” (FAC, ¶ 43). “Defendants breached the Agreement by failing to maintain a valid contractor’s license, failing to perform in a good and workmanlike manner, and failing to comply with applicable building codes and standards.” (FAC, ¶ 44). As a direct and proximate result, Plaintiff suffered damages including the $122,837.65 paid and the cost to repair and complete the work. (FAC, ¶ 45). “Plaintiff has performed all obligations required under the Agreement or has been excused from doing so.” (FAC, ¶ 46).

Plaintiff has alleged all of the requisite elements for breach of contract.

As for the individual defendants, the FAC alleges that “Defendants” entered into the agreement with Plaintiff, which includes all four defendants. Accordingly, the demurrer is OVERRULED as to this cause of action.

3rd COA - Fraudulent Inducement/Bus. & Prof. Code § 7160

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 [internal citation omitted]). Facts must be plead with particularity, and this requirement “necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.’” (Id. at 645). “[A]n actionable misrepresentation must be made about past or existing facts ...” (Neu-Visions Sports, Inc. v. Soren/McAdam/Bartells (2000) 86 Cal.App.4th 303, 308).

Bus. & Prof. Code § 7160 provides: “Any person who is induced to contract for a work of improvement, including but not limited to a home improvement, in reliance on false or fraudulent representations or false statements knowingly made, may sue and recover from such contractor or solicitor a penalty of five hundred dollars ($500), plus reasonable attorney's fees, in addition to any damages sustained by him by reason

of such statements or representations made by the contractor or solicitor.”

Plaintiff alleges the following in support of this claim:

“In or about June 2023, prior to executing the Construction Agreement, Defendant Jack W. Mitchell, acting individually and on behalf of JMC, represented to Plaintiff that the Construction Entity Defendants were duly licensed, insured, and authorized to perform residential construction work at the Subject Property.” (FAC, ¶ 48). “These representations were made orally during pre-contract discussions and confirmed in writing through Section 1(G) of the Agreement, which states: ‘The general contractor is duly licensed for the duration of the project. General contractor will maintain general liability insurance throughout the project.’” (FAC, ¶ 49). “At the time these representations were made, Defendants either knew or failed to exercise reasonable care to determine that JMC’s contractor’s license was not active and in good standing.” (FAC, ¶ 50).

However, these allegations are contradicted by other allegations in the FAC. Plaintiff also alleges that on August 1, 2023, Defendants presented Plaintiff with a screenshot printout of the CSLB website reflecting that Defendants’ CSLB contractor’s license was current as of that date (FAC, ¶ 19), and also alleges that: “On information and belief, the suspension of the Construction Entity Defendants CSLB license occurred around the same timeframe as the parties’ execution of the Agreement— on or about July 31, 2023, or shortly thereafter.” (FAC, ¶ 21 [emphasis added]).

Plaintiffs’ allegations create an uncertainty as to whether Jack Mitchell made a representation as to an existing fact. If the suspension occurred after Mr. Mitchell misrepresented that JMC was licensed, then his statement would not have been a misrepresentation.

Accordingly, the demurrer is SUSTAINED as to this cause of action.

4th COA - Fraudulent Concealment

Next, Defendants contend that the FAC does not plead facts showing a duty to disclose, justifiable reliance, or damages; the alleged license status is a matter of public record and therefore cannot be “exclusively” known to Defendants. Defendants also contend that this cause of action fails as to the individual Defendants.

“The elements of a cause of action for fraud based on concealment are: ‘(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.’” (Kaldenbach v. Mut. of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 850 [internal citations omitted]).

“There are ‘four circumstances in which nondisclosure or concealment may constitute actionable fraud: (1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts. [Citation.]’” (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 335 [citing Heliotis v. Schuman (1986) 181 Cal.App.3d 646, 651].)

“Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.” (LiMandri, supra, 52 Cal.App.4th at 337 [emphasis added]).

With regards to fraudulent concealment, a complaint need not specify information that is uniquely within defendants’ knowledge. (Tenet Healthsystem Desert, Inc. v. Blue Cross of Calif. (2016) 245 Cal.App.4th 821, 840). In Vega v. Jones, Day, Reavis & Pogue (2004) 121 Cal.App.4th 282, the Court of Appeal found that the trial court had improperly sustained a demurrer to a concealment cause of action on the ground the cause of action on the ground plaintiff had failed to allege the cause of action “with the requisite degree of specificity,” noting “The pertinent question in a concealment case is not who said what to whom ....” (Id. at 296).

Here, Plaintiff alleges the following in support of his FAC: “At all relevant times, Defendants had a duty to disclose the true status of JMC’s contractor’s license because (a) they possessed exclusive knowledge of material facts; (b) they made partial representations in Section 1(G) of the Agreement that JMC was duly licensed; and (c) Plaintiff could not have discovered this information on his own.” (FAC, ¶ 57). “Defendants intentionally concealed that JMC’s contractor’s license was not active or in good standing during the project.” (FAC, ¶ 58). “Defendants concealed this information to induce Plaintiff to continue performance and payment under the Agreement.” (FAC, ¶ 59). “Plaintiff did not know of the concealed facts and could not have discovered them through reasonable diligence.” (FAC, ¶ 60). “Had Defendants disclosed the true facts, Plaintiff would have acted differently and would not have hired or paid them.” (FAC, ¶ 62). “Defendants’ concealment was a substantial factor in causing Plaintiff’s harm, including payment of $122,837.65 and other damages.” (FAC, ¶ 63).

Plaintiff has adequately alleged a duty to disclose as Plaintiff has alleged that Defendants entered into a contractual agreement with Plaintiff. Plaintiff alleges that Defendants intentionally concealed that JMC’s license was not active despite the contractual agreement wherein they represented that JMC was licensed, and that Plaintiff was unaware of this fact.

Defendants contend that this information was not exclusively within the knowledge of Defendants as Plaintiff could have discovered this information via the CSLB website. However, Defendants failed to

establish that this information was readily available to Plaintiff, and this fact exists outside of the FAC.

Accordingly, the demurrer is OVERRULED as to this cause of action.

5th COA - Negligence

Next, Defendants contend that this cause of action fails because it seeks only economic losses arising from the parties’ contractual relationship and fails to allege any independent duty or facts showing causation. Defendants also contend that this claim fails as to the individual Defendants.

The elements for a claim of negligence are duty, breach of duty, causation, and damages. (Burgess v. Superior Court (1992) 2 Cal.4th 1064, 1072.) Defendant cites to Erlich v. Menezes (1999) 21 Cal.4th 543, 551, where the court held: “[C]onduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law.” (Erlich v. Menezes (1999) 21 Cal.4th 543, 551; but see (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 774 [“A contract to perform services gives rise to a duty of care which requires that such services be performed in a competent and reasonable manner.”]).

Defendants also cite to Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, where the court held that “there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Id. at 922).

Plaintiff alleges the following in the FAC:

“Defendants undertook to manage, supervise, and perform construction services at the Subject Property, thereby owing a duty of care to exercise reasonable skill and diligence.” (FAC, ¶ 66). “Defendants breached that duty by negligently performing and supervising the work, causing defects and deficiencies including mismeasurements, improper framing, and failure to pay subcontractors.” (FAC, ¶ 67). “As a proximate result, Plaintiff sustained damages, including the cost to repair, replace, and complete the project, as well as loss of use and additional expenses.” (FAC, ¶ 68).

Here, Plaintiffs have alleged an independent tort beyond the contractual duty to perform services. Furthermore, Plaintiffs have alleged property damage by alleging that Defendants caused defects to Plaintiff’s property.

Accordingly, the demurrer is OVERRULED as to this cause of action.

6th COA - Negligent Misrepresentation

Defendants allege that this claim fails for the same reasons as those set forth in the fraudulent inducement cause of action.

The elements for a claim for negligent misrepresentation are: “1. The defendant must have made a representation as to a past or existing

material fact. [¶] 2. The representation must have been untrue; [¶] 3. Regardless of his actual belief the defendant must have made the representation without any reasonable ground for believing it to be true; [¶] 4. The representation must have been made with the intent to induce plaintiff to rely upon it; [¶] 5. The plaintiff must have been unaware of the falsity of the representation; he must have acted in reliance upon the truth of the representation and he must have been justified in relying upon the representation. [¶] 6. And, finally, as a result of his reliance upon the truth of the representation, the plaintiff must have sustained damage.” (Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 402).

“Causes of action for intentional and negligent misrepresentation sound in fraud and, therefore, each element must be pleaded with specificity.” (Daniels v. Select Portfolio Servicing, Inc. (2016) 246 Cal.App.4th 1150, 1166, overruled on other grounds, Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 919-920, 948, fn.12.)

The court finds that this claim fails for the same reason as the fraudulent inducement cause of action. Plaintiff failed to allege “a representation as to a past or existing material fact”, as his own allegations are contradictory and uncertain as to when the license was suspended, and whether the license was current at the time Defendants made the representation.

Accordingly, the demurrer is SUSTAINED as to this cause of action.

7th COA - Negligent Failure to Disclose Material Facts

Defendants contend that this cause of action fails for the same reasons as the other fraud and misrepresentation causes of action. Defendants also contend that this cause of action is redundant.

Neither Plaintiff nor Defendants set forth the elements for a cause of action for “Negligent Failure to Disclose Material Facts.” Rather, Plaintiff cited to the following: “In transactions which do not involve fiduciary or confidential relations, a cause of action for non-disclosure of material facts may arise in at least three instances: (1) the defendant makes representations but does not disclose facts which materially qualify the facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known or accessible only to defendant, and defendant knows they are not known to or reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery from the plaintiff.” (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 294 [footnotes omitted]).

Plaintiff alleges the following in the FAC: “Defendants breached their duty of care by negligently failing to disclose that the Construction Entity Defendants’ contractor’s license was suspended and not in good standing during the time Defendants performed construction work at the Subject Property.” (FAC, ¶ 80). “Defendants either knew or, through the exercise of reasonable diligence, should have known that their contractor’s license was suspended and that their failure to disclose such information would likely mislead Plaintiff and cause him economic harm.” (FAC, ¶ 81). “As a direct and proximate result of Defendants’

negligence, Plaintiff entered into and continued performing under the Construction Agreement, made payments totaling approximately $122,837.65, and sustained additional damages including the cost to repair, replace, and complete the project, as well as other consequential losses.” (FAC, ¶ 82).

As with the fraudulent concealment cause of action, Plaintiff alleged that all Defendants had a duty to disclose by way of the contractual relationship, the previous representation that JMC was licensed and would be licensed for the duration of the project, and the failure to disclose the license suspension during the project.

Accordingly, the demurrer is OVERRULED as to this cause of action.

Defendants shall give notice.

2 Kono v. R+H Defendants Alpine Aesthetic Medicine dba R+H Aesthetic Medicine, West Aesthetic Sac, P.C., Rei Young, D.O., and Katie Aguilar, NP demur to the Second Medicine Amended Complaint (SAC) filed by Plaintiff Katarina Kono. For the following reasons, the demurrer is OVERRULED.

In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.) A demurrer is limited to the “four corners” of the pleading (which includes exhibits attached and incorporated therein) or from matters outside the pleading which are judicially noticeable under Evidence Code §§ 451 or 452.

The SAC asserts causes of action for 1) medical malpractice, 2) breach of express warranty, 3) breach of implied warranty, 4) fraud/violation of California unfair competition statute, Bus. & Prof. Code § 17200 et seq., 5) fraud/violation of California false advertising law, Bus. & Prof. Code § 17500 et seq., 6) common law fraud, 7) negligence, negligence per se, gross negligence, and 8) strict product liability.

Defendants argue that Plaintiff has failed to sufficiently allege that any statute of limitations was tolled.

Code Civ. Proc. § 340.5 is the statute of limitations for medical provider’s professional negligence. It provides that:

the time for the commencement of action shall be three years after the date of injury or one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the injury, whichever occurs first. In no event shall the time for commencement of legal action exceed three years unless tolled for any of the following: (1) upon proof of fraud, (2) intentional concealment, or (3) the presence of a foreign body, which has no therapeutic or diagnostic purpose or effect, in the person of the injured person. ....

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