Temblor Petroleum Company, LLC et al. v. California Energy Exchange Corporation

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

Plaintiffs’ separately-filed evidentiary objections are sustained on the basis of hearsay.

Legal Standard

In evaluating a motion for summary adjudication the Court engages in a three-step process. First, the Court identifies the issues framed by the pleadings. The pleadings define the scope of the issues on a motion for summary adjudication. (Lewis v. Chevron (2004) 119 Cal.App.4th 690, 694; FPI Dev. Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381-382.) Thus, all evidence submitted in support of or in opposition to the motion must be addressed to the claims and defenses raised in the pleadings. The Court cannot consider an unpleaded issue in ruling on a motion for summary adjudication. (Roth v.

Rhodes (1994) 25 Cal.App.4th 530, 541.) The papers filed in response to a defendant’s motion for summary adjudication may not create issues outside the pleadings and are not a substitute for an amendment to the pleadings. (Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342.)

Next, the Court must determine whether the moving party has met its burden. A defendant moving for summary adjudication bears the burden of persuasion that one or more elements of the plaintiff’s cause of action cannot be established, or that there is a complete defense. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A defendant is not required to conclusively negate one or more elements of the plaintiff’s cause of action. (Saelzer v Advance, Group 400 (2001) 25 Cal.4th 763, 780-781).

Rather, to meet its burden, the defendant is only required to show that the plaintiff cannot prove an element of its cause of action, i.e., that the plaintiff does not possess and cannot reasonably obtain evidence necessary to show this element. (Aguilar, supra, at 853-855.) Further, the initial burden requires a showing that the plaintiff “could not prevail on any theory raised by the pleadings.” (Hawkins v. Wilton (2006) 144 Cal.App.4th 936, 939-940.)

Once the moving party has met its burden, the burden shifts to the opposing party to show that a material factual issue exists as to the cause of action alleged or a defense to it. (Code Civ. Proc. § 437c(p); see, generally Bush v. Parents Without Partners (1993) 17 Cal.App.4th 322, 326-327.) In ruling on the motion, the Court must consider the evidence and inferences reasonably drawn from the evidence in the light most favorable to the party opposing the motion. (Aguilar, supra, at 843.)

Discussion

Business and Professions Code section 7031(a) states that “no person engaged in the

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

business or acting in the capacity of a contractor, may bring or maintain any action ... for the collection of compensation for the performance of any act or contract where a license is required.” (Bus. & Prof. Code § 7031(a).) Section 7031(b) provides that “persons who utilize the services of an unlicensed contractor” may bring an action to recover “compensation paid to the unlicensed contractor for performance of any act or contract.” (Bus. & Prof. Code § 7031(b).)

“[A] contractor is any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building ... project, development or improvement, or to do any part thereof...” (Bus. & Prof. Code § 7026.) “[B]oth the person who provides construction services himself and one who does so ‘through others’ qualifies as a ‘contractor.’” (Vallejo Development Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 941.) A contractor who is unlicensed for any period of time during the provision of construction services generally forfeits all compensation for the work. (Judicial Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882, 896-897.)

Class Protected by Section 7031

CEE first moves for summary adjudication on the basis that Plaintiffs are not within the protected class because Plaintiffs are not a subcontractors of CEE, did not supply construction material to CEE, are not an employees of CEE, and have no ownership interest in the pipeline or facilities of the pipeline expansion project (“PEP”). (UMFs 2-5.) CEE relies upon Lewis & Queen v. NM Ball Sons (1957) 48 Cal.2d 141, as support for its assertion that Plaintiffs may only bring a Section 7031(b) claim if they were CEE’s subcontractors, materialmen, employees, or owners with CEE because the Lewis & Queen court stated that “[w]hen the person required to have a license [under section 7031] is a general contractor, then the protected class includes subcontractors, materialmen, employees, and owners with the general contractor.” (Lewis & Queen v. NM Ball Sons, supra,at at p.153.)

Plaintiffs first oppose on the basis that any judicial finding related to their Section 7031(b) claim inherently implicates section 7031(a), which is one of the affirmative defenses raised by cross-defendants to CEE’s Cross-Complaint. Plaintiffs assert that CEE’s attempt to summarily adjudicate the reimbursement claim is inappropriate because “CEE has not presented this motion in a manner that allows for a full and fair adjudication of [CEE’s licensure] issue as it pertains to the affirmative defense of all cross-defendants under Bus. & Prof. Code § 7031.” (Opposition at 8:22-24.) Summary adjudication must completely dispose of a cause of action, affirmative defense, claim for

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

damages, or issue of duty. (Code Civ. Proc. § 437c(f)(1); Hood v. Super. Court (United Chambers Administrators, Inc.) (1995) 33 Cal.App.4th 319, 321.) Plaintiffs’ argument is rejected. CEE’s motion properly seeks to completely dispose of Plaintiffs’ ninth cause of action for reimbursement. That cross-defendants may also be asserting an affirmative defense under section 7031(a) to CEE’s cross-claims does not prohibit this Court from adjudicating Plaintiffs’ ninth cause of action. There is no requirement that a motion for summary adjudication completely dispose of both a cause of action and a related affirmative defense.

Next, Plaintiffs assert that CEE’s attempt to narrow the scope of the protected class under Section 7031(b) is without merit and inconsistent with the statute. This argument is well taken. As noted by Plaintiffs, the Lewis & Queen decision predates the 2001 adoption of Section 7031(b) and, importantly, the decision does not suggest that the enumerated list was by any means exclusive. In Lewis & Queen, the California Supreme Court was evaluating whether an unlicensed subcontractor could maintain an action against the general contractor for compensation.

The Court concluded that because the subcontractor was unlicensed, it could not and stated: “[t]he class protected by the statute includes those who deal with a person required by the statute to have a license. When the person required to have a license is a general contractor, then the protected class includes subcontractors, materialmen, employees, and owners dealing with the general contractor. However, when the person who was required to have a license but did not have one is himself a subcontractor, such as plaintiff in the present case, he of course is not to be protected from his own unlicensed activities.

To allow him to recover would in fact destroy the protection of those who dealt with him, and they are in the class the Legislature intended to protect whether they are owners or general contractors.” (Lewis & Queen, supra, at 153.)

CEE cites to no other case law supporting its argument that a reimbursement claim against a general contract is limited to a finite protected class, rather than anyone who has utilized the services of an unlicensed contractor. Many years after the Lewis & Queen decision, “[i]n 2001, the Legislature complemented the shield created by subdivision (a) of section 7031 by adding a sword that allows persons who utilize unlicensed contractors to recover compensation paid to the contractor for performing unlicensed work.

Section 7031(b) provides that ‘a person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the unlicensed contractor for performance of any act or contract’ unless the substantial compliance doctrine applies.” (White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 519.) The statutory language on its face does not present the limitations as argued by CEE and, instead, refers more generally to “[a] person who utilizes the services of an unlicensed contractor.” (Bus. & Prof.

Code §

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

7031(b).)

In addition, California Jury Instructions, CACI 4560 (Recovery of Payments to an Unlicensed Contractor) provides that to establish a claim and recover compensation paid for unlicensed services, Plaintiffs must prove:

1. That Plaintiffs engaged, hired, or contracted with CEE to perform services for them; 2.That a valid contractor’s license was required to perform these services; and 3.That Plaintiffs paid CEE for services that CEE performed.

While Plaintiffs cite to Judicial Council of California v. Jacobs Facilities, Inc., supra, as support for their contention that ownership is not required to bring a reimbursement claim, there is no discussion in that case about whether the Judicial Council of California had an ownership interest in the Court facilities that were the subject of the lawsuit. Nonetheless, the case is not necessary for the Court’s evaluation. The limitations suggested by CEE are simply not supported by the clear statutory language or any subsequent case law.

Accordingly, the Court finds CEE has failed to meet its initial burden to demonstrate Plaintiffs’ claim fails as a matter of law because Plaintiffs are “not within the protected class” and the motion on this ground is, therefore, DENIED.

Statute of Limitations

CEE next moves for summary adjudication on the ground that Plaintiffs’ reimbursement claim is barred by the applicable one-year statute of limitations.

While Section 7031(b) reimbursement claims are subject to a one-year statute of limitations, CEE also contends Emergency Rule 9(a) provides an additional six month extension to the statute of limitations, providing a total of 18 months in which Plaintiffs had to file their claims. (Eisenberg Village of Los Angeles Jewish Home for the Aging v. Suffolk Construction Company, Inc. (2020) 53 Cal.App.5th 1201, 1203.) Moreover, “a section 7031(b) claim accrues upon the completion or cessation of the performance of the act or contract at issue.” (Eisenberg Village, supra, at p. 1203.)

Plaintiffs assert CEE is barred from raising this defense because CEE’s Answer only addresses the statutes of limitation under Code of Civil Procedure sections 337, 338, 339, and 343, which impose limitations periods of 4 years, 3 years, 2 years, and 4 years respectively, and the pleadings frame the issues on a motion for summary adjudication.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

Plaintiffs cite to Gerlach v. K. Hovnanian’s Four Seasons at Beaumont (2022) 82 Cal.App.5th 303, 364, and Code of Civil Procedure section 458 in support. The portion of the Gerlach decision relied upon by Plaintiffs is not certified for publication and therefore not citable. However, Plaintiffs are correct that when pleading pursuant to section 458, failure to allege the specific section and subdivision waives the defense. (See Martin v. VanBergen (2012) 209 Cal.App.4th 84, 91; Coy v. County of L.A. (1991) 235 Cal.App.3d 1077, 1086, fn. 5.)

In Coy, the Court explained that while section 458 has in the past been “strictly construed as requiring that the relevant statute and subdivision, if applicable, be pleaded” and the failure to do so will result in the answer failing to raise the statute of limitations defense, “[e]nforcement of that rule ... depends upon the diligence with which the opposing party objects to the pleading defect by way of demurrer or otherwise. (Davenport v. Stratton [(1944)] 24 Cal.2d [232,] 247-248.)” (Coy, supra, at 1087, fn.5.)

In Coy, although the defendant County’s answer merely alleged “This action is barred by the Statute of Limitations,” the Second District reversed the judgment in favor of the plaintiff and directed the trial court to enter summary judgment in favor of the defendant County based on the statute of limitations primarily because the plaintiff did not object to the pleading of the statute of limitations defense by demurrer or otherwise until after trial had begun. Moreover, the County had asserted its statute of limitations defense based on section 338, subdivision (c), in its summary judgment motion without objection by plaintiff based on the failure to specifically plead that defense.

The statute of limitations issue was subsequently submitted to and decided by the jury. (Id.)

The circumstances here are distinguishable from Coy because Plaintiffs have been diligent and specifically objected to the statute of limitations defense raised by CEE in this motion on the basis that CEE’s Answer does not plead a one-year statute of limitations.

CEE does not contest that its Answer does not specifically cite to a one-year statute of limitations, but counters that summary adjudication is still appropriate because it is not seeking adjudication of its affirmative defense. Rather, CEE is seeking summary adjudication of Plaintiffs’ ninth cause of action. The motion may be framed as seeking summary adjudication of Plaintiffs’ ninth cause of action, but there is no dispute that the substance and entire basis of CEE’s argument here is that the claim is barred by a statute of limitations that CEE has failed to specifically pled in its answer pursuant to section 458.

To adjudicate the cause of action on this basis, the Court is inherently ruling upon an affirmative defense. Accordingly, the Court agrees with Plaintiffs that CEE has waived the statute of limitations defense argued in this motion. The motion on this ground is DENIED and because this is dispositive, the Court need not evaluate the

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

parties’ additional arguments regarding the statute of limitations.

CEE’s Status as a Contractor

Next, CEE seeks summary adjudication on the ground that section 7031 is not applicable to it because CEE merely facilitated construction services. CEE also argues that even if it did construct the pipeline and facilities, the exemption under Business & Professions Code section 7043 applies because construction was performed incidental to the production of gas by an owner or lessee. Section 7043 states that the contractor licensing laws do “not apply to any construction, repair or operation incidental to the discovering or producing of petroleum or gas, or the drilling, testing, abandoning or other operation of any petroleum or gas well, when performed by an owner or lessee.” (Bus. & Prof. Code § 7043.) Incidental means “necessary to the main purpose.” (Currie v. Stolowitz (1959) 169 21 Cal.App.2d 810, 814.)

Courts have held that a contractor’s license is not required if a person or entity merely contracts to coordinate construction services performed by others. (The Fifth Day, LLC v. Bolotin (2009) 172 17 Cal.App.4th 939, 947-950 (“Fifth Day”).) In Fifth Day, the defendant, a construction manager, performed a variety of consulting functions, including coordinating with design professionals, advising on the budget, working on the schedule, coordinating with contractors, inspecting the site and reporting to the owner. (Fifth Day, supra, at 943-946). The Court found that such activities did not require a contractor’s license. (Fifth Day, supra, at 949.)

CEE presents UMFs 26 through 45 in support of this final issue, the majority of which concern the language of the Purchase and Sale Agreement (“PSA”). Plaintiffs do not dispute what is stated in the PSA, but do claim that some facts are irrelevant. In addition to the PSA terms, CEE asserts that it did not perform any construction, that it assigned its facilitation responsibilities to its affiliate CGG who contracted with licensed contractors to perform all construction, and that CEE advised on cost assessment, identified contractors, and coordinated with design and engineer professionals. (UMFs 32, 36, 39-41.) Assuming this is sufficient to meet its initial burden, the Court finds Plaintiffs have presented sufficient evidence to create a triable issue of material fact.

In opposition, Plaintiffs maintain that there is a triable issue of fact as to whether CEE acted as a “contractor” under the Code. Plaintiffs present evidence that CEE presented an estimate for construction of $3.43 million. (AUMF 46.) CEE then received payment for construction of the facilities. (AUMFs 49-53.) CEE’s Vice President of Operations testified he “oversaw” the entities constructing the facilities (AUMFs 57-58), that CEE provided construction updates (AUMF 59), that CEE, by its own admission, was paid to

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

select contractors and construct the PEP (UMF 29, AUMF 61) and solicited costs for the construction (AUMF 48). Plaintiffs also aver that CEE seeking compensation of 10 percent of the total cost of building the facilities demonstrates CEE was acting as a contractor by charging an overhead. (AUMF 55.) The PSA itself states CEE will “select construction contractor(s), and construct the PEP.” (UMF 29.) CEE’s own verified Cross-Complaint alleges, “In November 2017, CEE began construction of facilities for the Five Points PEP.” (Cross-Complaint ¶ 44; AUMF 56.) CEE further alleges it “lost their original pipeline contractor due to permit and land delays[, but] CEE was able to secure a new contractor for $1,000,000 more than the original pipeline contractor.” (Cross-Complaint ¶ 45.)

Indeed, the definition of a “contractor” under Section 7026 is plainly “any person who undertakes to or offers to undertake to, or purports to have the capacity to undertake to, or submits a bid to, or does himself or herself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building ... project, development or improvement, or to do any part thereof...” (Bus. & Prof. Code § 7026 (emphasis added).) “Unlicensed persons may not finesse the statute by drafting contracts calling solely for unlicensed services where in reality other services requiring a license will be performed.” (Exec.

Landscape Corp. v. San Vicente County Villas IV Assn. (1983) 145 Cal.App.3d 496, 501.) CEE’s attempt to cast the PSA as only one for the sale of gas is simply not persuasive given the evidence presented by Plaintiffs in opposition, which creates a triable issue of material fact as to whether CEE was acting as a “contractor” pursuant to the PSA. All of the foregoing creates a triable issue of material fact regarding whether or not licensure was required by CEE.

On reply, CEE asserts that the motion should be granted because Plaintiffs did not address CEE’s argument that a license was not required under section 7043. However, even if Plaintiffs did not specifically address this argument, Plaintiffs have sufficiently created a triable issue as to the material facts CEE has presented in support of this final issue, which supports denial of the motion on this ground.

CEE’s motion for summary adjudication on this ground is DENIED.

Conclusion

CEE’s motion for summary adjudication is DENIED.

The minute order is effective immediately. No formal order pursuant to California Rules of Court, Rule 3.1312, or further notice is required.

SUPERIOR COURT OF CALIFORNIA COUNTY OF SACRAMENTO

34-2020-00278366-CU-BC-GDS: Temblor Petroleum Company, LLC a Delaware Limited Liability Company vs. California Energy Exchange Corporation 01/23/2025 Hearing on Motion for Summary Adjudication on Cause of Action for Reimbursement in Department 54

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