River Street Marketplace LLC vs. Salem Engineering Group, Inc.

When it is clear, both from a provision that the proposed written contract would become operative only when signed by the parties as well as from any other evidence presented by the parties that both parties contemplated that acceptance of the contract's terms would be signified by signing it, the failure to sign the agreement means no binding contract was created. [Citation.] This is so even though the party later sought to be bound by the agreement indicated a willingness to sign the agreement. [Citation.] On the other hand, if the respective parties orally agreed upon all of the terms and conditions of a proposed written agreement with the mutual intention that the oral agreement should thereupon become binding, the mere fact that a formal written agreement to the same effect has not yet been signed does not alter the binding validity of the oral agreement. [Citation.]

Whether it was the parties' mutual intention that their oral agreement to the terms contained in a proposed written agreement should be binding immediately is to be determined from the surrounding facts and circumstances of a particular case and is a question of fact for the trial court. [Citation.] Evidence as to the parties' understanding and intent in taking what actions they did take is admissible to ascertain when or whether a binding agreement was ever reached. [Citations.]

Mutual intent is determinative of contract formation because there is no contract unless the parties thereto assent, and they must assent to the same thing, in the same sense. [Citation.] “It is essential to the existence of every contract that there should be a reciprocal assent to a definite proposition, and when the parties to a proposed contract have themselves fixed the manner in which their assent is to be manifested, an assent thereto, in any other or different mode, will not be presumed.” (Ibid., italics added.) Thus, the failure to reach a meeting of the minds on all material points prevents the formation of a contract even though the parties have orally agreed upon some of the terms, or have taken some action related to the contract. [Citations.]

Defendant contends that two sections of the written contract indicate that the parties intended that it only become effective if it is signed, sections 16 and 14. Section 16 ends with a statement that the agreement “will become effective on the date signed below.” Section 14 states that “[t]he persona signing this Agreement warrant that they have authority to sign on the behalf of the CLIENT or the CONSULTANT, as applicable.” In opposition, plaintiff cites Vita Planning & Landscape Architecture Inc. v HKS Architects, Inc. (2015) 240 Cal.App.4th 763, 773 and Panterra GP, Inc. v. Superior Court (2022) 74 Cal.App.5th 697. In the first case, the court determined a contract existed between the parties notwithstanding the lack of signatures, stating as follows at p. 773:

The absence of signatures does not render the Contract unenforceable. On appeal, Vita concedes the parties “conducted themselves as though they had an agreement[.]” There is no dispute Vita performed pursuant to the Contract, and HKS accepted Vita's performance. A “voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.” [Citations.] Here, substantial evidence supports the court's conclusion regarding the existence of a contract memorialized by a writing. [Citation.]

Vita's reliance on Banner Entertainment, Inc. v. Superior Court [(1998) 62 Cal.App.4th 348] does not alter our conclusion. Banner held there is no binding contract when “it is clear, both from a provision that the proposed written contract would become operative only when signed by the parties as well as from any other evidence presented by the parties that both parties contemplated that acceptance of the contract's terms would be signified by signing it[.]” [Citation.] Here and in contrast to Banner, there is no such condition precedent in the Contract, nor any evidence the parties contemplated acceptance of the Contract “would be signified by signing it[.]” [Citation.]

(All emphasis in original.)

Here, sections 16 and 14 do not indicate that the contract would only become operative if the contract was signed. Furthermore, the FAC contains allegations showing that the parties performed under the contract.

Defendant also contends that plaintiff lacks standing to enforce the contract. However, this argument assumes that plaintiff is not a party to the contract, which assumption fails.

Defendant contends that plaintiff has not alleged with specificity how it breached the contract. To the contrary, paragraph 57 specifies exactly how defendant breached the contract, including, among other things, by failing to follow the geotechnical recommendations that it adopted for the project.

The first cause of action is sufficiently set forth and the demurrer is overruled.

The second cause of action for breach of implied-in-fact contract. Defendant contends that the second cause of action for breach of implied-in-fact contract fails because it does not allege the conduct by which the contract was formed. It contends that the cause of action is based on the express words of the written contract.

In the opposition, plaintiff contends that this cause of action is pled in the alternative to the first cause of action for breach of written contract,

in the event that the fact finder determines that no written contract was formed.

In addition, the second cause of action alleges that while the written contract was not formally executed by the parties, the parties “thereafter knowingly, voluntarily, and intentionally performed their respective obligations in accordance with the Contract’s material terms, including but not limited to [defendant’s] provision of geotechnical testing services and [plaintiff’s] reliance upon and payment for those services.” (FAC, ¶ 63.)

The second cause of action is sufficiently set forth and the demurrer is overruled.

The third cause of action for professional negligence. Defendant contends that the third cause of action for professional negligence fails because the FAC does not show that defendant owed plaintiff a duty of care. It also makes a passing argument based on the economic loss rule.

Contrary to defendant’s argument, plaintiff has clearly alleged that defendant owed it a duty of care. Specifically, plaintiff alleges that defendant engaged in the business of providing professional geotechnical engineering services and acted as the geotechnical consultant and soils engineer-of-record for the project owned by plaintiff. (FAC, ¶ 71.) Plaintiff alleges that, in this capacity, defendant owed it “a duty to exercise that degree of skill, care, and diligence ordinarily exercised by reasonably prudent geotechnical engineers practicing under similar circumstances in Orange County, California.” (FAC, ¶ 72.)

Plaintiff further alleges that defendant also owed it “a duty to perform its services in accordance with applicable industry standards, governing geotechnical reports, Project requirements, and applicable provisions of the California Building Code.” (FAC, ¶ 73.) The third cause of action is sufficiently set forth and the demurrer is overruled.

The fourth and fifth causes of action for negligent misrepresentation and concealment and intentional misrepresentation. The fourth and fifth causes of action both sound in fraud. The fourth is for negligent misrepresentation and concealment and the fifth is for intentional misrepresentation.

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. Tenet Healthsystem Desert, Inc. v. Blue Cross of California (2016) 245 Cal.App.4th 821, 837.

In California, fraud must be pled specifically; general and conclusory allegations do not suffice. Tenet Healthsystem Desert, Inc. v. Blue Cross of California, supra, 245 Cal.App.4th at p. 837. Therefore, the policy

of liberal construction of the pleadings will not ordinarily be invoked to sustain a pleading defective in any material respect. Ibid. In addition, this requirement necessitates pleading facts that “show how, when, where, to whom, and by what means the representations were tendered.” Id. at pp. 837-383.

In addition, a plaintiff is held to a higher standard in asserting a fraud claim against a corporate defendant. Tenet Healthsystem Desert, Inc. v. Blue Cross of California, supra, 245 Cal.App.4th at p. 838. In such a case, the plaintiff must allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. Ibid.

The specificity requirement serves two purposes. Tenet Healthsystem Desert, Inc. v. Blue Cross of California, supra, 245 Cal.App.4th at p. 838. The first is to give notice to the defendant, i.e., to furnish the defendant with certain definite charges that can be intelligently met. Ibid. But also the pleading of fraud is the last remaining habitat of the common law notion that a complaint should be sufficiently specific that the court can weed out nonmeritorious actions on the basis of the pleadings. Ibid. Thus the pleading should be sufficient to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud. Ibid.

Here, defendant contends that the fourth and fifth causes of action are not only not pled with specificity but that they do not set forth all of the elements, particularly the elements of misrepresentation, knowledge of falsity, and justifiable reliance.

To the contrary, plaintiff alleges in the fourth cause of action that, between April 2020 and March 2022, defendant “made material misrepresentations of fact to [plaintiff] concerning the testing, suitability, and regulatory compliance of soils for use on the Project, and concealed material facts relating to the absence of required testing.” (FAC, ¶ 79.) Plaintiff alleges three specific misrepresentations that defendant made to it, detailing the names and titles of the persons making the representations, the means by which the representations were made, the dates of the representations, the person to whom the misrepresentations, and the substance of the representations. (FAC, ¶ 80.)

Plaintiff also alleges that the representations were false because, at the time of their making, defendant “had not conducted the required corrosivity and pH testing, and therefore lacked any reasonable factual basis to certify that the soil was suitable for unrestricted use or compliant with Project requirements.” (FAC, ¶ 81. See also ¶ 82.)

Plaintiff also alleges that it reasonably relied on defendant’s representations and omissions in approving and importing the soil and proceeding with the soil importation and construction. (FAC, ¶ 85.) It alleges that, had it known the true facts, it would not have authorized the importation of soil and would have required appropriate testing and remediation before proceeding with construction. (FAC, ¶ 86.)

Plaintiff’s fifth cause of action is based on the same three representations as the fourth cause of action, but it also alleges here that defendant either knew that they were false when they made them or made them with reckless disregard for their truth because it had not done the underlying testing. (FAC, ¶¶ 89 and 90.) Plaintiff also alleges that defendant made these representations and omissions with the intent to induce its reliance, which included approving the importation of the soil, proceeding with construction, and retaining defendant’s services. (FAC, ¶ 93.) The fourth and fifth causes of action are sufficiently set forth and the demurrer is overruled.

The sixth causes of action for express contractual indemnity. The sixth cause of action is for express contractual indemnity and is based on the written contract that is attached to the FAC as Exhibit A.

Defendant contends that this cause of action fails because the written contract is unenforceable, referencing its arguments in support of the demurrer to the first cause of action for breach of contract. However, as previously discussed, defendant’s challenge to the first cause of action fails.

The sixth cause of action is sufficiently set forth and the demurrer is overruled.

The seventh cause of action for equitable indemnity. The seventh cause of action is for equitable indemnity, and plaintiff alleges that it is an alternative to the sixth cause of action for express contractual indemnity.

Equitable indemnity requires no contractual relationship between the parties and is premised on a joint legal obligation to another for damages. C.W. Howe Partners Inc. v. Mooradian (2019) 43 Cal.App.5th 688, 700. The claim is subject to allocation of fault principles and comparative equitable apportionment of loss. Ibid.

The elements of a cause of action for equitable indemnity are (1) a showing of fault on the part of the indemnitor and (2) resulting damages to the indemnitee for which the indemnitor is equitably responsible. C.W. Howe Partners Inc. v. Mooradian, supra, 43 Cal.App.5th at p. 700.

Here, in the seventh cause of action, plaintiff alleges that it has been “exposed to or liable for claims and liability arising out of the Project, including claims asserted by third-parties, which are alleged to have resulted from the acts, errors, and omissions of [defendant].” (FAC, ¶ 105.) It alleges that, to the extent that is “found liable to any third party for damages arising out of the Project, such liability, if any, was caused in whole or in part by the wrongful acts, omissions, negligence, misrepresentations, or the fault of [defendant].” (FAC, ¶ 106.)

The seventh cause of action is sufficiently set forth and the demurrer is overruled.