Stephen Harding vs Thomas Lutz Construction et al

Case Number

Case Type Civil Law & Motion Hearing Date / Time Fri, 08/21/2026 - 10:00 Nature of Proceedings CMC; Demurrer Tentative Ruling For all reasons stated herein, the demurrer by defendant American Contractor's Indemnity Company to the fourth cause of action in the complaint for violation of Business and Professions Code section 17200 is sustained without leave to amend.

Background: On December 11, 2025, plaintiff Stephen Harding (Harding) initiated this action by filing a verified complaint against defendants Tom Lutz Construction, Inc. (TLC), Thomas Lutz (Lutz) (collectively, TLC and Lutz as Lutz Defendants), and American Contractor's Indemnity Company (American) [note, the name of American appears to have a typo in the complaint in that there is no apostrophe according to American's filings], setting forth four causes of action for (1) recovery of all compensation paid to unlicensed contractor (against Lutz Defendants), (2) breach of contract (against Lutz Defendants), (3) claim on contractor's state license board (against American only), and (4) violation of Business and Professions code section 17200 (UCL) (against American only).

As alleged in the complaint: Harding hired the Lutz Defendants (Contract) to remodel (Project) his home at 110 North Soledad Street in Santa Barbara (Residence). (Compl., P. 1.) American issued a $25,000 surety bond, No. ACSC1025599 (Surety Bond), in favor of TLC. (Compl., P.P. 11, 48.) The Contract called for completion of the Project in accordance with plans within 150 days in exchange for payment of $217,694. (Compl., P. 1.) The Lutz Defendants required Harding to pay $264,044, significantly more than the agreed upon Contract price. (Compl., P.P. 3, 13.) By June 3, 2025, Harding paid all invoices submitted to him and other costs he was directed to pay. (Compl., P. 13.) The Lutz Defendants required Harding to hire three subcontractors (Subcontractors) directly--Alex Figueroa, Douglas Justus, and Antonio (Tony) Becchio--to whom Harding paid $2,605, $5,430, and $5,520, respectively.

(Compl., P. 21.) These Subcontractors were also employees of the Lutz Defendants. (Compl., P. 22.) The Lutz Defendants were unlicensed contractors by operation of law as a result of their failure to obtain worker's compensation insurance for these Subcontractors. (Compl., P.P. 23-26.) After several months of threatening Harding for payment of additional amounts, the Lutz Defendants recorded a mechanics lien against the Residence for "just under $20,000." (Compl., P. 15.) The Lutz Defendants released the mechanics lien after being informed of its legal deficiencies and then initiated a lawsuit against Harding. (Compl., P. 16.) This lawsuit was then dismissed after discovery was served. (Compl., P. 17.)

In this action Harding seeks reimbursement of all amounts paid to the Lutz Defendants. Harding seeks to recover from American the full $25,000 Surety Bond.

On February 18, 2026, the Lutz defendants filed a general denial answer to the complaint and cross-complaint against Harding for indemnity and contribution, among other claims. On April 24, 2026, American filed a notice of deposit of bond funds. American filed this demurrer to the fourth cause of action for violation of the UCL on the basis that the complaint fails to state facts to support this cause of action against American. Harding did not file an opposition. American filed and served a notice of non-opposition, and Harding still did not respond to the demurrer. The Lutz Defendants did not file an opposition or response to the demurrer.

Analysis: "Because the function of a demurrer is to test the sufficiency of a pleading as a matter of law, we ... assume the truth of the allegations in the complaint, but do not assume the truth of contentions, deductions, or conclusions of law. [Citation.] It is error for the trial court to sustain a demurrer if the plaintiff has stated a cause of action under any possible legal theory, and it is an abuse of discretion for the court to sustain a demurrer without leave to amend if the plaintiff has shown there is a reasonable possibility a defect can be cured by amendment." (California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247).

"The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded." (Payne v. National Collection Systems, Inc. (2001) 91 Cal.App.4th 1037, 1043.) "[I]n ruling on a demurrer the trial court may take into account in addition to the complaint itself any matter that may be properly considered under the doctrine of judicial notice." (Cruz v. County of Los Angeles (1985) 173 Cal.App.3d 1131, 1133-1134.)

The UCL prohibits "any unlawful, unfair or fraudulent business act or practice." (Bus. & Prof. Code, Sec. 17200.) "Any person who engages, has engaged, or proposes to engage in unfair competition may be enjoined in any court of competent jurisdiction. The court may make such orders or judgments, including the appointment of a receiver, as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition, as defined in this chapter, or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition." (Bus. & Prof. Code, Sec. 17203.)

However, "a plaintiff may not bring an action under the unfair competition law if some other provision bars it.... In other words, courts may not use the unfair competition law to condemn actions the Legislature permits." (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 184.)

Here, Harding's UCL claim is based on American's alleged violation of the fair settlement practices in title 10, section 2695.10 of the Code of Regulations (Section 2695.10). (Compl., P.P. 50-53.) Harding alleges that American failed to "make a determination" of his claim against the Surety Bond as required under Section 2695.10. (Compl., P.P. 53-60.) As alleged, "[American's] repeated non-compliance with Section 2695.10 has deprived Harding, a homeowner and consumer, of his right to a swift resolution of Defendants' violations of contractor's state license law, thereby undermining the public policy behind license bonds." (Compl., P. 61.)

The settlement claims practices in Section 2695.10 were promulgated to implement Insurance Code section 790.03 and related code sections "[t]o delineate certain minimum standards for the settlement of claims." (See Cal. Code Regs., tit. 10, Sec.Sec. 2695.1, subd. (a)(1), 2695.10.) "Neither section 790.03 nor section 790.09 was intended to create a private civil cause of action against an insurer ...." (Moradi-Shalal v. Fireman's Fund Ins. Companies (1988) 46 Cal.3d 287, 304.)

"While insurance companies are subject to California laws generally applicable to other businesses, including laws governing unfair business practices ... parties cannot plead around Moradi-Shalal 's holding by merely relabeling their cause of action as one for unfair competition." (Zhang v. Superior Court (2013) 57 Cal.4th 364, 378.) "[W]hile insurers are subject to administrative sanctions for violating statutory prohibitions against unfair and deceptive claims settlement practices ... statutory violations do not give rise to a private right of action for tort damages." (Cates Construction, Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 50-51.)

Harding did not file any opposition or response to this demurrer. American filed and served a notice of non-opposition. Based on the arguments and legal citations by American, the demurrer to the fourth cause of action for violation of the UCL has merit. There is no private right of action under Section 2695.10 against American for violation of the UCL or in tort. It does not appear that this cause of action can be amended to state a claim against American and no request for leave to amend was made by Harding. For all these reasons, the court will sustain the demurer by American to the fourth cause of action for violation of the UCL without leave to amend.

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