Nicholas Butler v. PODS Enterprises, LLC

The demurrer of defendant PODS Enterprises, LLC to the second, third, and fourth causes of action is overruled.

I.

Background

Plaintiff Nicholas Butler alleges that Defendant delivered a defective portable storage container that permitted water intrusion and mold contamination, resulting in widespread mold damage to his personal property.

II. Legal Standard

“’... A general demurrer will lie where the complaint “has included allegations that clearly disclose some defense or bar to recovery.”’ A demurrer can be used only to challenge defects that appear on the face of the complaint or from matters outside the pleading that are judicially noticeable. ‘To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action.’ The demurrer admits the truth of all material facts properly pleaded, including all ultimate facts alleged, but not contentions, deductions or conclusions of fact or law.” (Simple Avo Paradise Ranch, LLC v. Southern California Edison Co. (2024) 102 Cal.App.5th 281, 288- 289, citations omitted.)

A. Second Cause of Action – Breach of Covenant of Good Faith and Fair Dealing

Defendant argues that, to the extent Plaintiff is asserting this claim in tort, there is no remedy in tort for breach of the covenant of good faith and fair dealing outside the insurer-insured context. In opposition, Plaintiff states that he is not asserting this as a tort cause of action.

To the extent this cause of action is brought as a contract claim, Defendant argues that it is duplicative of the first cause of action for breach of contract. In Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395, the court explained:

...[A]llegations which assert such a claim [for breach of the implied covenant] must show that the conduct of the defendant, whether or not it also constitutes a breach of a consensual contract term, demonstrates a failure or refusal to discharge contractual responsibilities, prompted not by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act, which unfairly frustrates the agreed common purposes and disappoints the reasonable expectations of the other party thereby depriving that party of the benefits of the agreement. Just what conduct will meet this criteria must be determined on a case by case basis and will depend on the contractual purposes and reasonably justified expectations of the parties.

If the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated. Thus, absent those limited cases where a breach of a consensual term is not claimed or alleged, the only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.

The Court finds that the cause of action is not duplicative.

• In the first cause of action, Plaintiff alleges that Defendant breached the contract by providing a defective unit that was not suitable for safely storing and transporting his property. • In the second cause of action, Plaintiff alleges that Defendant provided a unit that it knew had prior water intrusion issues.

The breach alleged in the first cause of action could be prompted by “an honest mistake, bad judgment or negligence,” while in this cause of action Plaintiff alleges that Defendant’s conduct was “conscious and deliberate.”

The demurrer as the second cause of action is OVERRULED.

J. Third Cause of Action – Negligence

Defendant argues that the cause of action is barred by the economic loss rule. The Court disagrees.

Plaintiff alleges Defendant negligently caused damage to his personal property. “...[T]here is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922, citations omitted.) Defendant argues that it owed no duty to Plaintiff aside from its contractual duty. As the Supreme Court explained in Rattagan v. Uber Technologies,

Inc. (2024) 17 Cal.5th 1, 19, “‘”[t]he law imposes the obligation that ‘every person is bound without contract to abstain from injuring the person or property of another...’ [and] [t]his duty is independent of the contract ....”’” As the Court also explained, a failure to perform a contract can be a tort. (Ibid.) In this case, Plaintiff is not seeking financial harm unaccompanied by property damage.

The demurrer to the third cause of action is OVERRULED.

K. Fourth Cause of Action – Breach of Implied Warranty

Defendant argues that this cause of action fails because the transaction did not involve the sale or lease of goods and because PODS expressly disclaimed any implied warranties.

1. No Sale or Lease of Goods

Defendant contends that the transaction involved the lease of real property, not any “good.” Defendant points to the definition of “self-service storage facility” in Business and Professions Code section 21701, subdivision (a), to show that it includes the pod. That section states as relevant:

“Self-service storage facility” means real property designed and used for the purpose of renting or leasing individual storage space to occupants who are to have access to the space for storing and removing personal property or for storing individual storage containers provided to occupants who have exclusive use of the container for the purpose of storing and removing personal property, whether or not the individual storage containers are transported pursuant to Section 21701.1. ...

The Court does not agree with Defendant that this shows that the container itself is real property.

The self-storage facility is real property “designed and used...for storing individual storage containers provided to occupants...” Thus, the real property is the location where the storage container is stored. This conclusion is supported by subdivision (a) of section 21701.1, which provides that “[t]he owner or operator of a self-service storage facility...may, for a fee, transport individual storage containers to and from a self-service storage facility that he or she owns or operates. ...” This makes clear that the container itself is not considered the “self-service storage facility.”

2. Disclaimer

Paragraph 13 of the contract between Plaintiff and Defendant states as relevant: NO REPRESENTATIONS OR WARRANTIES. To the maximum extent allowed by applicable law, Company hereby disclaims any implied or express warranties, guarantees, representations of the nature, condition, safety or security of the Unit and the Facility, including any warranties of merchantability or fitness for a particular

use or purpose.

(Ex. 1 to complaint.) Defendant cites Commercial Code section 2316, subdivision (2) to show that Plaintiff’s claim is barred by a disclaimer in the parties’ contract. In opposition, Plaintiff argues that Civil Code section 1668 precludes Defendant from relying on the disclaimer. The Court finds that Plaintiff’s allegations are sufficient to avoid application of the disclaimer.

In Klein v. Asgrow Seed Co. (1966) 246 Cal.App2d 87, 100-101, the court concluded that section 1668 rendered a limitation of liability provision void where the cross-defendant made an express warranty with knowledge of its falsity. In Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 404, the court held that “a cause of action for negligent misrepresentation is included within the meaning of the word ‘fraud’ in section 1668.”

The Court finds that Plaintiff’s allegations sufficiently allege a negligent fraud forming the basis of his implied warranty claim. Plaintiff alleges that Defendant represented, through its marketing and representations to consumers, that its storage containers are suitable for protecting personal property from weather and moisture. (¶34) The allegations in paragraphs 10-12 (other than the last sentence which the court assumes is what Plaintiff noticed after the unit was returned to him) are sufficient to show that the representation was made “’”without reasonable grounds for believing it to be true.”’” (See Borman v. Brown (2021) 59 Cal.App.5th 1048, 1060.)

The demurrer to the fourth cause of action is OVERRULED.

Parties must comply with Marin County Superior Court Local Rules, Rule 2.10(A), (B), which provides that if a party wants to present oral argument, the party must contact the Court at (415) 444-7046 and all opposing parties by 4:00 p.m. the court day preceding the scheduled hearing. Notice may be by telephone or in person to all other parties that argument is being requested (i.e., it is not necessary to speak with counsel or parties directly.) Unless the Court and all parties have been notified of a request to present oral argument, no oral argument will be permitted except by order of the Court. In the event no party requests oral argument in accordance with Rule 2.10(B), the tentative ruling shall become the order of the court.

IT IS ORDERED that evidentiary hearings shall be in-person in Department L. For routine appearances, the parties may access Department L for video conference via a link on the court website. Kindly turn your camera on when your case is called and make sure the party or lawyer making the appearance is properly identified on the screen.

FURTHER ORDERED that the parties are responsible for ensuring that they have a good connection and that they are available for the hearing while using the virtual remote courtroom. If the connection is inadequate, the Court may proceed with the hearing in the party’s absence. If it is determined that you are diving your car during the hearing, you will be removed from the virtual courtroom. (Yes, this happens).