Opinion
B298672
06-17-2020
COLIMA JJ PLAZA, LLC, Plaintiff and Appellant, v. CANTILEVER, INCORPORATED, Defendant and Respondent.
Jung Law and Karen E. Jung for Plaintiff and Appellant. Knez Law Group, Fred J. Knez, Matthew J. Knez; Andrews & Rhodes, Brian W. Rhodes and Benjamin J. Haeck for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BC696797) APPEAL from a judgment of the Superior Court of Los Angeles County, Dennis J. Landin, Judge. Reversed and remanded. Jung Law and Karen E. Jung for Plaintiff and Appellant. Knez Law Group, Fred J. Knez, Matthew J. Knez; Andrews & Rhodes, Brian W. Rhodes and Benjamin J. Haeck for Defendant and Respondent.
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Plaintiff Colima JJ Plaza, LLC, appeals from a judgment entered after the trial court sustained without leave to amend the demurrer filed by defendant Cantilever, Incorporated to Colima's third amended complaint. Colima, which purchased a hotel from Kabir One, LLC, that was undergoing renovation, asserted six contract and two tort causes of action against Cantilever, the general contractor hired by Kabir, alleging defective work resulting in property and economic damages. In sustaining Cantilever's demurrer, the trial court found Cantilever did not owe a duty of care to Colima.
On appeal, Colima contends the trial court erred in dismissing its tort causes of action because the complaint alleged that during performance of the renovation contract Cantilever learned Colima had purchased the hotel, creating a duty of care to Colima under the six-part balancing test applied by the Supreme Court in J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799 (J'Aire). We conclude several of the J'Aire factors favor Colima, including foreseeability of harm, thereby creating a duty of care owed by Cantilever to Colima. We reverse.
On appeal Colima does not challenge dismissal of its breach of contract claims.
FACTUAL AND PROCEDURAL BACKGROUND
A. Colima's Factual Allegations
The factual background is taken from the operative third amended complaint and the attached exhibits.
Kabir was the owner of a hotel located in Hesperia that operated as a Holiday Inn Express franchise. In May 2016 Kabir entered into a contract with Cantilever to renovate the hotel to bring it into compliance with a "Property Improvement Plan" issued in 2015 by the Holiday Inn franchisor (2015 PIP). The renovation contract defined the "Project" as the "Holiday Inn Express PIP-Hesperia." The "main objective" of the renovation contract was for Cantilever to deliver a PIP-compliant hotel so the hotel could continue to operate as a Holiday Inn Express franchise.
On August 29, 2016, while renovations were ongoing, Kabir entered into an agreement with Colima to sell Colima the hotel. The agreement provided, "[Kabir] shall be responsible for making the repairs and improvements required by the Franchisor under the Property Improvement Plan attached hereto . . . at [Kabir's] cost subject to such repairs and improvements being approved by Franchisor and not [Colima]." Kabir agreed to complete all items on the PIP prior to closing. However, Kabir agreed to hold back funds from the purchase in escrow to pay for any remaining PIP items that were not completed by December 5, 2016. Colima also reserved the right to terminate the transaction and recover its deposit.
In October 2016, as renovations continued, the franchisor inspected the hotel and issued an updated PIP (2016 PIP) that included additional renovation items. The 2016 PIP acknowledged that as of October 2016, "75% of the guest room renovation was complete, the exterior painting was 90% complete, public, recreational and heart of house area work had just started—but all FF&E [fixtures, furnishings, and equipment] was already on site." Colima and Kabir agreed that Kabir would pay for some of the additional items while Colima would pay for others, and Cantilever would perform the work. Cantilever agreed to modify its contract with Kabir to expand the scope of the project to include the additional PIP items. In the course of the negotiations, Cantilever learned Colima would be the new owner of the hotel.
Following the modification of the contract, Cantilever became aware of Colima's concerns regarding the ongoing renovations. For example, Cantilever had meetings with Colima in which the blueprints for the renovations were discussed in detail. When Colima complained about specific items of the project, Kabir demanded answers from Cantilever. According to Colima, "If Cantilever failed to deliver a PIP compliant [h]otel, it was Colima that could lose the Holiday Inn & Express license."
Colima also alleged Cantilever on occasion removed blueprints from the construction site in order to avoid disputes with Colima as to whether Cantilever's work conformed to the blueprints.
Because of delays in the renovation project, in November 2016 Colima and Kabir agreed to extend the hotel sale closing date until December 15, 2016. But on December 13, when it became clear the renovations would not be completed in time for the closing date, Colima and Kabir executed a written addendum to the sale agreement under which the closing would go forward, but Kabir would complete approximately 20 outstanding items from the 2016 PIP by January 15, 2017, and $25,000 from the sale proceeds would be held back in escrow until the items were completed. The addendum provided that, other than one PIP item to be completed by Colima, "[Kabir] represents & warrants that all other items in the PIP have been completed."
The addendum required completion by Kabir of specified 2016 PIP items, including refinishing and repainting existing guest room doors and frames; replacement of guest room window treatments; elevator renovations; concealment of exposed wiring and conduits in guest laundry room; renovation of pool area, deck, and storage areas, with replacement of furniture; replacement of exterior dumpster enclosure gates; installation of new refrigerators and freezers in lobby market; renovation of meeting rooms; and replacement of fitness equipment and installation of new wall-mounted televisions in fitness center. The alleged defective construction in the third amended complaint included damage to the guest room doors, missing television mounts, and defective elevator repairs from this list of additional repairs. However, Colima alleged the listed defective conditions were only "some of the problems throughout the [h]otel," which list was provided "without limitation and only for the specific and limited purpose of illustrating the types of negligent or defective work performed by defendants."
By January 15, 2017, Kabir and Cantilever had not completed the agreed-upon work, and the work that was completed was inadequate or defective. According to Colima, ceramic tiles throughout the hotel were laid unevenly with excessive lippage, creating tripping hazards, damage to the doors, and pooling of liquids. In addition, the tiles shifted, cracked, and chipped due to improper installation and heavy traffic during the renovations; carpet seams lifted and separated; windows leaked and damaged the drywall; showers leaked into the rooms below; thermostats broke due to faulty wiring; bathroom counters sagged; television mounts were misplaced; elevator trim panels cracked; shower doors did not roll smoothly; and paints peeled prematurely.
Colima also alleged Cantiliver and Kabir used unlicensed subcontractors for the renovation project.
These defects removed guest rooms from service and resulted in guest complaints. The defects also damaged other hotel fixtures and finishes. Further, hotel guests sued the hotel and franchisor, alleging violations of the Americans with Disabilities Act of 1990 (42 U.S.C. § 12101 et seq.; ADA) (based on the defective tiling) and asserting personal injury claims. B. Colima's Complaints and Cantilever's Demurrers
On March 6, 2018 Colima filed this action against Kabir and Cantilever, asserting causes of action against Kabir for breach of the hotel sale contract, fraud, and conversion; against Cantilever and Kabir for negligence, negligent interference with prospective economic relations, and unfair competition; and against Cantilever for breach of the renovation contract. The trial court subsequently granted Kabir's motion to compel arbitration and to stay the proceedings, but the court ordered Colima's claims against Cantilever to proceed.
Judge Michael Raphael. In August 2018 the case was reassigned to Judge Dennis J. Landin.
On July 24, 2019 Colima settled its claims against Kabir.
In its first amended complaint, Colima asserted seven causes of action against Cantilever for breach of contract, breach of the implied covenant of good faith and fair dealing, negligence, two claims for breach of implied warranties, implied contractual indemnity, and unfair competition. Cantilever demurred, but before the hearing the trial court granted Colima's ex parte application for leave to file a second amended complaint including a cause of action for tort of another based on the lawsuits filed against Colima. Cantilever again demurred, arguing the complaint failed to allege facts showing the renovation contract had been modified to include Colima as a third party beneficiary, and therefore Colima failed to establish Cantilever owed a duty to Colima. The trial court sustained Cantilever's demurrer, finding conclusory Colima's allegation it was an intended third party beneficiary of Cantilever's renovation contract with Kabir. But the court granted leave to amend based on Colima's representation at the hearing there were e-mails showing it was an intended third party beneficiary.
On March 20, 2019 Colima filed the operative third amended complaint in which Colima alleged additional facts to support its third party-beneficiary theory, including that Cantilever met with Colima in October 2016, responded to Colima's complaints about the work, and knew Colima would suffer adverse consequences if Cantilever failed to perform. Colima alleged the renovation contract was modified in October 2016 "so as to make Colima an intended third party beneficiary of the [i]nitial [c]ontract made between Kabir and Cantilever . . . as Colima was going to be the owner of the [h]otel upon Cantilever's completion of the Project." Cantilever again demurred on the basis Colima had not adequately alleged Cantilever owed it a duty of care under its contract with Kabir.
Cantilever highlights that the first amended complaint alleged the renovation contract was amended two times, first after Colima agreed to buy the hotel, and a second time in October 2016. This inconsistency with the third amended complaint does not affect our analysis.
On May 9, 2019 the trial court sustained Cantilever's demurrer without leave to amend. As to Colima's contract claims, the court found, "[T]here are no factual allegations showing that the [i]nitial [c]ontract between Kabir . . . and Cantilever was modified for the express benefit of [Colima]. Cantilever's mere knowledge of a new ownership does not itself constitute or prove its intent to benefit [Colima]." The court ruled as to Colima's negligence claim, "[T]here was no showing of intent from the [a]mended [c]ontract to benefit [Colima], and therefore, Cantilever did not owe a legal duty to deliver a PIP-compliant hotel to [Colima]." The court likewise sustained Cantilever's demurrer to Colima's claim for tort of another because the claim was based on Colima's negligence cause of action, which failed. The court denied leave to amend, finding, "[G]iven that [Colima] was given leave to amend twice, the Court finds there is no reasonable possibility that [it] can successfully amend to demonstrate that it is a third party beneficiary." C. Colima's Motion for Reconsideration and Proposed Allegations
On May 17, 2019 Colima filed a motion for reconsideration of the trial court's order sustaining the demurrer without leave to amend, seeking leave to amend its claims for negligence and tort of another. Colima submitted a declaration of its counsel, Karen Jung, and a proposed fourth amended complaint, setting forth asserted facts obtained in interviews with former Kabir employees and Colima's real estate broker. Colima proposed to allege in the fourth amended complaint that in September 2016 Cantilever's president, who had prior dealings with Kabir and knew Kabir often bought and sold hotels, arranged for Colima's principals to visit a secure section of the hotel construction site to check the renovations. Colima's principals again visited the hotel in October 2016 and were introduced by Kabir to Cantilever's president as the hotel's new owners. On October 27, 2016 Colima sent an e-mail to Kabir raising concerns about the guest rooms, which Kabir the next day demanded Cantilever address.
Colima attached as exhibits what it asserts are an e-mail from Colima's principals (the Lees) to Kabir's representatives raising concerns about the rooms and an e-mail from Kabir's chairman to Cantilever's representative asking, "Can you please address this guy's concerns with what can be done/ cannot be done/ or what is causing these issues." Colima contends Cantilever understood "this guy" referred to Colima's principal.
According to Jung, in late January 2017 representatives from Kabir, Cantilever, and Colima met at the hotel. At that meeting, "Kabir and Cantilever again promised Colima that each item pointed out by Colima as inadequate, defective, or unfinished would be addressed." Cantilever continued working through August 2017 for more than nine months after Colima assumed ownership. During this time, Colima communicated to Kabir and Cantilever "regarding Colima's frustration with Kabir's delayed and inadequate job." Colima also complained to Cantilever about the guest rooms that were unfinished or inadequately done because those rooms could not be given to guests.
On June 11, 2019 the trial court denied Colima's motion for reconsideration, finding the proposed allegations did not constitute new facts supporting reconsideration under Code of Civil Procedure section 1008, subdivision (a), and in any event, the allegations only confirmed existing allegations. On August 7, 2019 the trial court entered the judgment of dismissal. Colima timely appealed.
Colima on appeal does not challenge the trial court's denial of its motion for reconsideration, but it filed Jung's declaration containing the proposed allegations with its opening brief to support its request for leave to amend.
Although Colima filed its notice of appeal on June 24, 2019 before the judgment was entered, we deem the premature notice of appeal to have been filed immediately after the subsequently entered judgment. (Cal. Rules of Court, rule 8.104(d)(2); Fuller v. First Franklin Financial Corp. (2013) 216 Cal.App.4th 955, 959.)
DISCUSSION
A. Standard of Review
"'In reviewing an order sustaining a demurrer, we examine the operative complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory.'" (King v. CompPartners, Inc. (2018) 5 Cal.5th 1039, 1050; accord, Lee v. Hanley (2015) 61 Cal.4th 1225, 1230.) When evaluating the complaint, we assume the truth of the allegations. (Lee, at p. 1230; accord, Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100.) We do not, however, take as true conclusions of fact or law. (Southern California Gas Leak Cases (2019) 7 Cal.5th 391, 395; Loeffler, at p. 1100.) B. Colima Alleged Sufficient Facts To Support a Negligence Claim Based on Cantilever's Duty of Care Owed to Colima
1. A contractor's duty to third parties
"'Actionable negligence involves a legal duty to use due care, a breach of such legal duty, and the breach as the proximate or legal cause of the resulting injury.'" (Beacon Residential Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 573; accord, Vasilenko v. Grace Family Church (2017) 3 Cal.5th 1077, 1083.) A duty of care may arise from a statute, a contract, the general character of the activities, or the relationship between the parties. (J'Aire, supra, 24 Cal.3d at p. 803; Lichtman v. Siemens Industry Inc. (2017) 16 Cal.App.5th 914, 920.) "Whether a duty of care exists 'in a particular case is a question of law to be resolved by the court.'" (Beacon, at p. 573; accord, Southern California Gas Leak Cases, supra, 7 Cal.5th at p. 398 [reviewing de novo whether gas utility owed duty of care to businesses suffering only economic losses from gas leak impacting residential neighborhood].) "'"'[D]uty" is not sacrosanct in itself, but only an expression of the sum total of those considerations of policy which lead the law to say that the particular plaintiff is entitled to protection.'" [Citation.] "Courts, however, have invoked the concept of duty to limit generally 'the otherwise potentially infinite liability which would follow from every negligent act.'"'" (Beacon, at p. 573.)
The scope of a building contractor's duty of care to a property owner or occupant with whom the contractor is not in contractual privity falls within "the nebulous and troublesome margin between tort and contract law." (Aas v. Superior Court (2000) 24 Cal.4th 627, 635 (Aas), superseded by statute on other grounds as stated in Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1079-1080.) Historically, "after a builder had completed a structure and the purchaser had accepted it, the builder was not liable to a third party for damages suffered because of the work's condition, even though the builder was negligent." (Aas, at p. 637.)
The Supreme Court has since recognized negligence claims by third parties against contractors based on a special relationship arising from the contract between the contractor and the owner of the property, applying the Supreme Court's six-factor balancing test applied in Biakanja v. Irving (1958) 49 Cal.2d 647 (Biakanja) to determine whether a notary public who drafted a will for the decedent owed a duty of care to an estate beneficiary who was not in contractual privity with the notary public. (See J'Aire, supra, 24 Cal.3d at pp. 802, 804-805 [lessee who operated a restaurant alleged sufficient facts to state a cause of action for negligence to recover lost income from dilatory performance by contractor hired by owner of building to renovate restaurant]; Stewart v. Cox (1961) 55 Cal.2d 857, 859 (Stewart) [upholding homeowner's judgment for property damage against subcontractor who was not in privity with the homeowner for the negligent application of concrete inside a swimming pool, causing a leak that damaged the pool and house]; see generally Aas, supra, 24 Cal.4th at pp. 637-645 [detailing evolving case law].)
In Aas, the Supreme Court distinguished the holding in J'Aire, supra, 24 Cal.3d at pages 804-805, which allowed recovery for economic damages in the absence of property damage, concluding the third party homeowners in Aas could not recover for economic harm caused by the negligence of the developers and contractors who built the homes where there was no physical damage to the property or bodily injury. (Aas, supra, 24 Cal.4th at pp. 627, 635.) However, shortly after the Supreme Court decided Aas, the legislature adopted the Right to Repair Act, Civil Code section 895 et seq., giving homeowners a statutory cause of action against developers and contractors of new residential construction for economic damages attributable to a variety of defects. (See Rosen v. State Farm General Ins. Co., supra, 30 Cal.4th at p. 1079.) In Southern California Gas Leak Cases, supra, 7 Cal.5th at page 400, the Supreme Court again distinguished the holding in J'Aire, finding the gas utility could not be held liable for the economic injury suffered by local businesses as a result of evacuations caused by a gas leak, noting J'Aire involved an exception to the general rule barring recovery of economic damages, relying on the "'special relationship'" between the parties. Here, Colima alleges both property and economic damages.
Under the Biakanja balancing test, in determining whether there is a duty of care, the Supreme Court considered "[1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered, [5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm." (Biakanja, supra, 49 Cal.2d at p. 650; accord, Southern California Gas Leak Cases, supra, 7 Cal.5th at p. 401; Aas, supra, 24 Cal.4th at p. 644; J'Aire, supra, 24 Cal.3d at p. 804; Stewart, supra, 55 Cal.2d at p. 863.)
The Supreme Court in Southern California Gas Leak Cases, supra, 7 Cal.5th at page 401, explained the Biakanja and J'Aire balancing tests apply a subset of the factors first established in Rowland v. Christian (1968) 69 Cal.2d 108, 113 to determine whether a defendant owes a duty of care to the plaintiff.
Like Aas and most appellate decisions, we refer to the six factors as the "J'Aire factors" instead of the "Biakanja factors."
In J'aire, the Supreme Court concluded as to the first factor that because the purpose of the contract between the property owner and contractor was to renovate the heating and ventilation systems at the lessee's business premises (the restaurant), the work "could not have been performed without impinging" on the lessee's business, and therefore the contractor's "performance was intended to, and did, directly affect [the plaintiff]." (J'Aire, supra, 24 Cal.3d at p. 804.) With respect to the second factor, the J'aire court held "it was clearly foreseeable that any significant delay in completing the construction would adversely affect [the lessee's] business beyond the normal disruption associated with such construction. [The lessee] alleges this fact was repeatedly drawn to [the contractor's] attention." (Id. at pp. 804-805.) As to the third and fourth factors, the complaint "[left] no doubt" the lessee suffered harm as a direct result of the contractor's negligence because it was unable to open its restaurant for a month because of delayed construction, and it operated without heat and air conditioning for even longer. (Id. at pp. 802, 805.) As to the fifth factor, the contractor's "lack of diligence in the present case was particularly blameworthy since it continued after the probability of damage was drawn directly to [its] attention." (Id. at p. 805.) With respect to the sixth factor, the court reasoned there is a public policy to discourage construction delays, which policy would be advanced by recognizing a duty of care. (Ibid.) The J'Aire court concluded, "[T]his court holds that a contractor owes a duty of care to the tenant of a building undergoing construction work to prosecute that work in a manner which does not cause undue injury to the tenant's business, where such injury is reasonably foreseeable." (Id. at p. 808.)
2. Colima has pleaded facts sufficient to allege a duty of care owed by Cantilever to Colima
Colima contends its third amended complaint alleged facts establishing Cantilever owed it a duty of care under J'Aire and Stewart, and that each of the six J'Aire factors weighs in its favor. We agree Colima has sufficiently alleged facts to support a claim based on a duty of care owed by Cantilever based principally on the second factor of foreseeability of harm to Colima.
a. The first J'Aire factor: whether the renovation contract was intended to affect Colima
The factual allegations of the third amended complaint do not establish Cantilever's agreement with Kabir to renovate the hotel was intended to affect Colima. Kabir hired Cantilever to renovate the hotel in May 2016, more than three months before Colima agreed to buy the hotel. Colima alleged the main objective of the renovation contract was for Cantilever to deliver a hotel that complied with the 2015 PIP issued by the franchisor so the hotel could continue to operate as a Holiday Inn Express.
Colima contends the modification of the renovation contract in October 2016 was intended to benefit Colima because at this point Cantilever was aware Colima was going to own the hotel, and Cantilever's focus changed for it "to specifically understand and address the concerns or complaints that Colima had regarding the Project." As alleged, Cantilever met and discussed with Colima the blueprints for the project, and Kabir demanded Cantilever respond to complaints raised by Colima. Further, Colima alleged Cantilever continued to carry out the renovation contract after Colima assumed ownership in January 2017.
Although Cantilever learned in October 2016 that Colima was going to own the hotel, this did not change the purpose of Cantilever's initial contract—to comply with the franchisor's PIP requirements. The October 2016 amendment to the renovation contract, as alleged, required Cantilever to provide the additional changes needed to comply with the 2016 PIP. Further, under the sale agreement, Kabir had to complete the renovations and provide a PIP-compliant hotel as a condition precedent to the sale, and pursuant to the addendum, Kabir held back a portion of the sale proceeds in escrow to cover these expenses. Colima also reserved the right to terminate the contract and recover its deposit if Kabir did not deliver a PIP-compliant hotel. Although Colima alleged generally the risk of loss from Cantilever's negligence was on Colima because it could lose the franchise if Cantilever failed to deliver a PIP-compliant hotel, under the sale agreement it was Kabir that could lose the sale (or a portion of the sale proceeds) if the hotel was not rendered PIP compliant. The fact Colima complained about the renovations to Kabir, which demanded answers from Cantilever, reinforces the conclusion the purpose of the renovation contract was to deliver a PIP-compliant hotel to Kabir. The conclusory allegation the modification "ma[de] Colima an intended third party beneficiary of the [i]nitial [c]ontract" is insufficient to provide the factual underpinning for the first factor.
In J'Aire and Stewart, by contrast, the specific purpose of the defendants' engagements, from the inception, was to deliver a benefit to the plaintiff. In J'Aire, supra, 24 Cal.3d at page 804, the plaintiff was operating its restaurant in the leased premises at the time the building owner hired the contractor to renovate the heating and ventilation system in the restaurant, and therefore the contractor's performance under the contract "was intended to, and did, directly affect" the lessee. In Stewart, supra, 55 Cal.2d at page 860, the plaintiff homeowners hired a general contractor to install a pool, and the defendant subcontractor poured the cement. Thus, the contract with the subcontractor "was intended to specially affect plaintiffs." (Id. at p. 863; cf. Ott v. Alfa-Laval Agri, Inc. (1995) 31 Cal.App.4th 1439, 1455 (Ott) [judgment on the pleadings properly granted against plaintiff dairy farmers on their claim for lost profits against the manufacturer of a defective milking system the farmers had purchased from a distributor 15 years earlier because "neither the pleadings nor the evidence suggests the [defendant's] milking system was 'intended to affect' the plaintiffs in any way particular to the plaintiffs, as opposed to all potential purchasers of the equipment"].)
b. The second J'Aire factor: foreseeability of harm to Colima
In J'Aire and Stewart, the first two J'Aire factors operated in tandem—because the underlying contracts were intended to affect the plaintiffs, the harm to the plaintiffs as a result of the defendants' negligence was a fortiori foreseeable. (See J'Aire, supra, 24 Cal.3d at pp. 804-805 [where defendant's performance was intended to directly affect the lessee, "it was clearly foreseeable that any significant delay in completing the construction would adversely affect [the lessee's] business beyond the normal disruption associated with such construction"]; Stewart, supra, 55 Cal.2d at p. 863 [because the concrete work was intended for plaintiffs, the property damage to them "was foreseeable in the event the work was . . . negligently done"]; see also Chameleon Engineering Corp. v. Air Dynamics, Inc. (1980) 101 Cal.App.3d 418, 422-423 [general contractor alleged sufficient facts to state negligence claim against supplier of component parts to subcontractor for delay in provision of parts where supplier knew intent of its contract with subcontractor was to provide essential parts general contractor needed, and therefore it was foreseeable a delay in supplying the parts would harm general contractor].) Conversely, where a transaction is not intended to affect the plaintiff, this fact may show the harm to the plaintiff was not reasonably foreseeable. (See, e.g., Mega RV Corp. v. HWH Corp. (2014) 225 Cal.App.4th 1318, 1341 [because repair of plaintiff's mobile home by retailer was not intended to affect manufacturer of component part for mobile home, it was not reasonably foreseeable the component part manufacturer would be sued by plaintiff; therefore, retailer did not owe duty to component part manufacturer]; Ott, supra, 31 Cal.App.4th at pp. 1455-1456 [where milking system was not intended to affect plaintiff, defect in system manifesting 15 years later was not reasonably foreseeable].)
Unlike J'Aire and Stewart, the renovation contract here was not intended to affect Colima, but similar to those cases, at least as of October 2016, the potential harm to Colima was foreseeable because Cantilever had learned Colima would be the new owner of the hotel, and during the last nine months of renovations, Colima was in possession of the hotel. The foreseeability factor therefore supports finding a duty of care owed by Cantilever to Colima at least beginning in October 2016.
Colima argues this duty attached as early as the initial renovation contract in May 2016 because it was foreseeable Kabir would sell the hotel to a third party, relying on Huang v. Garner (1984) 157 Cal.App.3d 404, 410 (Huang), disapproved in Aas, supra, 24 Cal.4th at pages 648-649. In Huang, the Court of Appeal reversed the grant of a nonsuit as to the plaintiff real estate investors' negligence claims for construction defects against the developer and contractor of apartment buildings the investors had purchased. The Court of Appeal concluded that although the property developer was not aware at the time of construction that the plaintiffs would later purchase the apartments as investments, it was "reasonable to assume that as a developer of numerous housing projects, [the developer] intended eventually to sell the apartments and must have foreseen that the property would be purchased by individuals or entities for investment purposes. It was certainly foreseeable that defects in construction of the types asserted by plaintiffs in this case would damage subsequent purchasers of the property as well as subsequent residents." (Huang, at p. 424.)
In Aas, the Supreme Court disapproved Huang to the extent Huang recognized the homeowners' right to recover purely economic damages. (See Aas, supra, 24 Cal.4th at p. 649.)
However, after the First Appellate District decided Huang, Division Four of this appellate district in Keru Investments, Inc. v. Cube Co. (1998) 63 Cal.App.4th 1412, 1422-1423 (Keru) concluded the contractor responsible for a seismic retrofit of an apartment building did not owe a duty of care to a subsequent owner of the building (Keru Investments), distinguishing Huang and a case following Huang, Sumitomo Bank v. Taurus Developers, Inc. (1986) 185 Cal.App.3d 211, 215. The Keru court explained, "Although Huang and Sumitomo Bank stand for the proposition that under some circumstances subsequent purchasers can assert claims for negligence that occurred prior to their ownership, they are not necessarily supportive of [Keru Investments'] position. In those cases, the defendants were builder/developers who had constructed projects for purposes of resale. In that sense, they were similar to manufacturers who place dangerously defective products into the stream of commerce—they were expected to foresee the potential for injury to 'consumers' from the defective 'product.' [The defendant contractor] was not a developer, and had not retrofitted the building with the expectation that it would be transferred by the [prior owner] to a third party." (Keru, at pp. 1422-1423.)
The same court that decided Huang later rejected the reasoning of Keru in Krusi v. S.J. Amoroso Construction Co. (2000) 81 Cal.App.4th 995, 1004, explaining, "[W]e suggest that, in this day and age, it is next to impossible to predict with any degree of certainty what sort of property is constructed principally for resale and what is not. . . . We are highly dubious as to the ability of either a court or a jury to declare which [type] of improved real property is more or less likely to be intended for resale. We are equally dubious regarding the proposition, implicit if not explicit in Keru, that different rules of law should apply depending on that fact and also depending on the nature of the defendant, i.e., whether it is a builder/developer, a contractor, or an engineer or architect." (Id. at pp. 1004-1005.)
The Krusi court agreed with the alternative reasoning in Keru, however, that the subsequent owner could not be liable for the negligent work of the contractor because the damage was discovered by the prior owner, and therefore the cause of action for negligence accrued before the purchase and was not transferred to the new owner. (Krusi, supra, 81 Cal.App.4th at pp. 1005-1007.) That issue is not before us on appeal.
The nature of Cantilever's initial engagement with Kabir is fundamentally different from that of the builder of new homes in Huang in that Kabir hired Cantilever to address the specific items identified by the franchisor in the 2015 PIP to bring the hotel into compliance with the franchisor's requirements for the Holiday Inn Express marquee. But we need not decide whether we agree with the reasoning in Keru or Huang and Krusi because at least as of October 2016 Cantilever could have reasonably foreseen Colima would be damaged by Cantilever's negligent performance. For purposes of Cantilever's demurrer, Colima has alleged some damages arising from Cantilever's renovation work after October 2016. Further, it may well be as the facts are developed in this case that Cantilever had reason to believe Kabir would sell the hotel. As discussed, Colima proposed to allege in the fourth amended complaint that Cantilever's president had prior dealings with Kabir and knew Kabir often bought and sold hotels. Accordingly, this factor favors Colima.
The third amended complaint does not specifically allege which of Colima's damages resulted from Cantilever's performance after October 2016. The third amended complaint alleged damages to the elevators, guest room doors, and television mounts that were arguably included in the addendum.
c. The third and fourth J'Aire factors: the degree of certainty of Colima's injury and the closeness of connection to Cantilever's conduct
As alleged, the injuries to Colima's property are highly certain, including the defective tiling, leaks, pooling of water, broken doors, cracked walls, and damaged electronics. Although Colima's economic injuries are less certain, Colima alleged its rooms became unavailable because of the leaks. This third factor therefore weighs heavily in favor of Colima. (See Stewart, supra, 55 Cal.2d at p. 863 ["no doubt" plaintiff suffered "serious damage" from the leaking pool]; see also J'Aire, supra, 24 Cal.3d at p. 808 [economic damages not speculative where restaurant could not operate for a month during renovations]; Huang, supra, 157 Cal.App.3d at p. 424 [certainty of damages shown where plaintiffs received notice of abatement requiring them to make specified repairs].) As to the fourth factor, Colima has sufficiently pleaded the close connection between Colima's damages and Cantilever's conduct in light of the scope of the renovation contract, which included tile work, replacement of window fixtures, wiring, and bathroom renovations.
d. The fifth and sixth J'Aire factors: Cantilever's moral blame and the policy of preventing future harm
With respect to Cantilever's moral culpability, Colima contends three of its allegations demonstrate Cantilever was a bad actor. First, the complaint alleged "Cantilever at times took the blueprints away from the site of the Project (which was illegal) for weeks, to at least temporarily avoid a dispute with Colima." This allegation only states in a conclusory way that the removal of blueprints from the project site was illegal, and further, the alleged removal to avoid disputes with Colima does not place significant moral blame on Cantilever. Second, the complaint alleged "defendants hired and used unlicensed (sub)contractors for the Project." This allegation is conclusory and lacks detail as to whether the allegedly unlicensed contractors or subcontractors performed defective work on the project. Third, the complaint alleged "defendants failed to complete the Project by January 15, 2017," causing harm to Colima. (Italics omitted.) As to the sixth factor, Colima argues Cantilever's failure to complete the project with diligence and compliance with applicable laws supports liability as a matter of policy. Although placing liability on a contractor for defective work would generally further the policy of preventing future harm, neither the fifth nor sixth factor strongly favors Colima.
Because we conclude Colima has adequately alleged Cantilever owed it a duty of care, the trial court also erred in dismissing this claim for tort of another.
DISPOSITION
We reverse the judgment and remand for the trial court to issue a new order overruling the demurrer to the third amended complaint as to the tort causes of action and sustaining the demurrer to the contract causes of action without leave to amend. Colima is to recover its costs on appeal.
FEUER, J. We concur:
PERLUSS, P. J.
SEGAL, J.