San Francisco CDC LLC v. Webcor Constr. L.P.

• Decision Date: 19 March 2021
• Docket Number: A156669,A157650
• Citation: 62 Cal.App.5th 266,276 Cal.Rptr.3d 552
• Court: California Court of Appeals Court of Appeals
• Parties: SAN FRANCISCO CDC LLC, Plaintiff and Appellant, v. WEBCOR CONSTRUCTION L.P. et al., Defendants and Respondents.

62 Cal.App.5th 266

276 Cal.Rptr.3d 552

SAN FRANCISCO CDC LLC, Plaintiff and Appellant,

v.WEBCOR CONSTRUCTION L.P. et al., Defendants and Respondents.

A156669

A157650

Court of Appeal, First District, Division 1, California.

Filed March 19, 2021

Hennigh Law, Scott E. Hennigh, Mathew R. Troughton, Garrett M. Mott ; Hanson Bridgett, Gary A. Watt, Donnelly Gillen, David Casarrubias, San Francisco, Ashley Marshall; Horovitz & Levy, Lisa Perrochet, Burbank, Christopher Hu, San Francisco, Bradley S. Pauley, Burbank, Justin Volk, Eric S. Boorstin, Burbank, and Millie Cowley for Plaintiff and Appellant.

Gibson, Dunn & Crutcher, Matthew N. Ball, William F. Cole, Julian W. Poon, Los Angeles, Daniel M. Kolkey, San Francisco; Varela, Lee, Metz & Guarino, Bennett J. Lee, Nicholas A. Merrell and Berit L. Elam for Defendant and Respondent.

SANCHEZ, J.

Business and Professions Code section 7031, a provision of the Contractors’ State License Law ( Bus. & Prof. Code, § 7000 et seq. ), deters unlicensed building contractors by allowing any person who utilizes their services to bring an action for disgorgement of all compensation paid for the performance of any act or contract, even when the work performed is free of defects. ( Bus. & Prof. Code, § 7031, subd. (b), hereafter section 7031(b) ). Appellant San Francisco CDC LLC filed an action asserting a section 7031(b) claim for disgorgement against respondents Webcor Construction, L.P. and Obayashi Corporation (Obayashi) in June 2017, more than eight years after respondents completed construction of appellant's InterContinental Hotel (Hotel) in San Francisco in February 2009. The trial court granted respondents’ demurrers to appellant's third amended complaint without leave to amend, finding appellant's claims were barred under Code of Civil Procedure section 340, subdivision (a),¹ the one-year statute of limitations for statutory forfeiture or penalty causes of action.

Appellant contends the trial court erred by applying the one-year limitations period and by misapplying the discovery rule and the doctrines of equitable and judicial estoppel. We disagree. As our colleagues in the Second District Court of Appeal recently held in Eisenberg Village etc. v. Suffolk Construction Co., Inc. (2020) 53 Cal.App.5th 1201, 268 Cal.Rptr.3d 334 ( Eisenberg ), the one-year statute of limitations applies to disgorgement claims brought under section 7031, and the discovery rule and other equitable doctrines do not. Even if such doctrines applied to statutory disgorgement claims, we would find them inapt under the circumstances presented here by appellant's own pleadings and judicially noticed matter properly relied upon by the trial court.

Appellant also challenges the trial court's award of $231,834 in contractual attorney fees to respondents, contending the court erred in its interpretation of the attorney fee provision. We disagree and conclude that the agreement contemplated the recovery of attorney fees for noncontractual causes of action that are initiated because of an alleged breach of the parties’ contract. We affirm the judgement.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Background

In September 2005, appellant, the owner of the InterContinental Hotel (Hotel) in San Francisco, entered into a construction contract (Contract) with Webcor Construction, Inc., dba Webcor Builders, under which the latter would serve as the general contractor for the Hotel. Webcor Construction, Inc. attested that it was duly licensed as a general contractor and would remain licensed through the duration of the Hotel's construction.

In July 2007, Webcor Construction, Inc. merged into respondent Webcor Construction, L.P. The new entity, Webcor Construction, L.P., obtained a license prior to the merger on June 26, 2007, while Webcor Construction Inc.’s license was allowed to expire in December 2007. Webcor Construction, L.P. was acquired by Obayashi Corporation in 2007.²

In February 2009, appellant accepted respondents’ work on the Hotel "as complete" and made its final payment. A Notice of Completion was recorded in which appellant's representative verified that Webcor Construction, L.P., dba Webcor Builders, was the "original contractor" for the Hotel project. Appellant paid respondents approximately $144 million for the construction of the Hotel.

B. Construction Defect Litigation

In 2013, appellant discovered defects with some of the windows in the Hotel and demanded that respondents remedy the defects pursuant to their warranty obligations under the Contract. The parties entered into a tolling agreement the following year, tolling the running of the limitations period on appellant's potential defect claims, effective from the discovery of the defects on October 4, 2013.

In June 2015, appellant filed a lawsuit against "Webcor Builders, Inc." and other defendants, asserting various claims over the defective windows (Defect Action). According to appellant's complaint, respondents failed to perform their warranty obligations and repair work. It was later determined that Webcor Builders, Inc. is a separate entity that is not affiliated with respondents.

In March 2017, the parties stipulated to the substitution of respondent Webcor Construction, L.P. into the Defect Action in lieu of Webcor Builders, Inc. Suspecting that respondents might have constructed the Hotel while unlicensed, appellant attempted to insert the licensure issue into the trial of the Defect Action. The trial court refused to hear the claim. The parties later settled, and the Defect Action was dismissed in August 2017.

C. The Underlying Action

i. Complaint

In June 2017, appellant filed a complaint alleging a single claim for disgorgement under section 7031(b) against Webcor Builders L.P., Webcor Construction, Inc., dba Webcor Builders, and Obayashi Corporation. Appellant alleged that respondents built the Hotel while unlicensed because Webcor Construction, Inc.’s license (No. 817988) had expired in December 2007, after its merger into Webcor Construction, L.P., "and license number 817988 was never transferred." Respondents demurred and moved to strike. In their pleadings, respondents requested judicial notice of state licensing records showing that Webcor Construction, L.P. was issued its own contractor's license in June 2007, prior to the merger.

ii. First Amended Complaint

Rather than respond to the demurrer, appellant filed a first amended complaint (FAC), which again alleged a statutory claim for disgorgement and added claims for conversion and fraudulent concealment. The causes of action rested on allegations that respondents were not properly licensed during the Hotel's construction and had "executed a series of mergers to conceal their licensing violations." Appellant also alleged that it "had no reasonable basis to know or discover that the contracting party was unlicensed" until Webcor Construction, L.P. was substituted into the Defect Action in March 2017. Respondents again demurred and moved to strike on multiple grounds, including that appellant's claims were barred by the one-year statute of limitations under section 340, subdivision (a).³

In January 2018, the trial court sustained the demurrer with leave to amend. The court found that all three of appellant's claims related to disgorgement and that the one-year limitations period for statutory penalty or forfeiture claims applied. ( § 340, subd. (a) ). Relying on appellant's own allegations that the Hotel was completed in February 2009, and a judicially noticeable declaration by appellant's employee (filed in the Defect Action) that final payment on the Contract was made to Webcor Construction, L.P. in February 2009, the trial court found that appellant's claims had accrued at that time. The court thus held that appellant's claims were time-barred as of March 2010. Even if the four-year catch-all limitations period applied (see § 343 ), appellant's claims would still have been untimely after March 2013. The court also found that appellant had constructive notice of respondents’ licensing status at the time it made final payment because that information was publicly available.

The trial court rejected appellant's arguments that the statute of limitations should be tolled by the parties’ 2014 tolling agreement and by the pendency of the Defect Action, reasoning that both events had occurred long after all potentially applicable statutes of limitation had run. Appellant was given leave to amend if it could allege either that respondents had performed unlicensed work within one year of the filing of the complaint, or if "there was a misrepresentation or concealment with regard to licensing violations that could not be verified through public records."

iii. Second Amended Complaint

In May 2018, appellant filed its second amended complaint (SAC), realleging the same three causes of action. The SAC alleged that appellant had entered into a construction contract with an unidentified "Contractor" and that all payments had been made to "Webcor Builders." It further alleged that "Webcor Builders, Inc." filed an answer in the Defect Action, and that appellant did not learn until March 2017 that Webcor Construction, L.P. was the actual general contractor of the Hotel. The SAC further asserted that Webcor Construction, L.P.’s license had been "automatically terminated during construction when the general partner of Webcor Construction, [L.P.] disassociated from the partnership." The SAC also asserted that "[a]fter June 23, 2016, and through the beginning of 2017, the Contractor, ... performed work related to the Hotel's windows for which a contractor's license was required." Respondents again demurred and moved to strike.

The trial court sustained the demurrers, ruling that appellant had not adequately alleged either of the two circumstances for which it was granted leave to amend. As to allegations of unlicensed work performed in 2016 and 2017, the court noted that the SAC did not identify the "Contractor" who...