Blue Mountain Construction etc. v. Professional Assn. Services CA6 ( 2023 )

Filed 6/12/23 Blue Mountain Construction etc. v. Professional Assn. Services CA6
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
BLUE MOUNTAIN CONSTRUCTION H049448
SERVICES, INC., (Santa Clara County
Super. Ct. No. 18CV335385)
Cross-complainant and Appellant,
v.
PROFESSIONAL ASSOCIATION
SERVICES, INC. et al.,
Cross-defendants and Respondents.
This appeal involves a dispute over a repair project. Appellant and cross-
complainant Blue Mountain Construction Services, Inc. (Blue Mountain) contracted with
a homeowners’ association (Tuscany) to perform repair work. After a dispute arose over
the scope of work to which Tuscany and Blue Mountain had agreed, Tuscany terminated
Blue Mountain from the contract and brought suit, alleging breach of contract and other
claims.
Blue Mountain in turn filed a cross-complaint against Tuscany and Tuscany’s
agents. Blue Mountain alleges that Tuscany and its agents knowingly caused Blue
Mountain to enter into a contract that failed to disclose the full scope of work—including
the number of buildings that would be painted and the number of paint coats required.
Blue Mountain’s cross-complaint asserts causes of action based in contract and tort. This
appeal encompasses only the tort-based causes of action against architects, attorneys, and
managers associated with the project.1
The trial court sustained without leave to amend demurrers to the operative cross-
complaint brought by architects, attorneys, and managers and granted the related motions
to strike. The trial court thereafter entered a judgment dismissing those parties from the
civil action.
On appeal from that judgment, Blue Mountain contends the trial court made a
number of legal errors in sustaining the demurrers.
For the reasons explained below, we affirm.
I. FACTS AND PROCEDURAL BACKGROUND
A. Facts
In reviewing whether the trial court erred in sustaining the demurrers, we “take as
true all properly pleaded material facts, but not conclusions of fact or law” that Blue
Mountain asserts in the second amended cross-complaint. (Sheen v. Wells Fargo Bank,
N.A. (2022) 12 Cal.5th 905, 916.) We also consider the cross-complaint’s exhibits. (See
Hoffman v. Smithwoods RV Park, LLC (2009) 179 Cal.App.4th 390, 400.)
1. The Parties
Blue Mountain is a licensed general contractor. In 2015, Blue Mountain
contracted with Tuscany Hills Homeowners Association (Tuscany), the owner of
“Tuscany Hills,” a large condominium complex in San Jose, to perform construction
repair work (the project).
Tuscany used various entities and individuals for architectural, legal, and
management services for the project. Blue Mountain named many of them as cross-
defendants in this action. This appeal involves three sets of cross-defendants and
1 Tuscany is not a party to this appeal.
2
respondents (collectively, cross-defendants or respondents): (1) Richard P. Riley and
Riley Pasek Canty LLP (collectively, attorneys)2 ; (2) Posard Broek + Associates, Adam
Posard, Onne Broek, John Drake, and Lynn Htut (collectively, architects); and
(3) Professional Association Services, Inc. (PAS) and Susan Hoffman (collectively,
managers).
Posard Broek + Associates (PB+A) acted as both Tuscany’s architect of record
and as construction manager for the project. Adam Posard is a licensed architect and
shareholder in PB+A. Onne Broek (Broek) is also a shareholder in PB+A. John Drake
and Lynn Htut were affiliated with PB+A and acted as project managers for PB+A at the
project. Richard P. Riley (Riley), a licensed attorney, represented Tuscany regarding
contract negotiations and legal advice related to the project. Susan Hoffman was the
owner of PAS, “an association manager,” and Tuscany’s agent.
2. Defect Lawsuit and Repair Project
In 2013, Tuscany filed a construction defect lawsuit (defect lawsuit) against an
entity that is not a party to this action.3 Riley represented Tuscany, and Broek served as
an expert consultant. Tuscany intended to fund the repair work that is the subject of this
appeal with funds recovered in the defect lawsuit. Because Riley and Broek were
involved in the defect lawsuit and its settlement negotiations, they knew Tuscany would
only recover funds sufficient for a “limited” scope of repair.
In late 2013, while the defect lawsuit was still pending, Riley began to solicit from
Bill Mann, then president of Blue Mountain’s repair and reconstruction division, an
estimate for the repair project. At that time, Tuscany did not provide Blue Mountain with
2 The operative cross-complaint uses other iterations of the law firm name, but the
judgment uses only Riley Pasek Canty LLP.
3 The cross-complaint alleges that lawsuit as Tuscany Hills Homeowners
Association v. KB Homes South Bay, Inc., filed in Santa Clara County Superior Court.
The details of the defect lawsuit are not relevant here.
3
any repair plans, specifications, or project manual to assist Blue Mountain in drawing up
estimates for the repair work.
In the course of preparing for mediation and settlement in the defect lawsuit, Riley
sent an e-mail to Mann and Broek in October 2013 stating that a Tuscany board meeting
would occur in November 2013. Riley told Broek that Broek needed “to present the
‘bottom line’ repairs to the Board and [Mann] to present his cost estimate to make those
repairs.” It was Riley’s understanding that the scope of repairs would be “limited.”
In July 2014, Tuscany entered into a separate agreement (the “AIA agreement”)
with PB+A to perform architectural and construction management services for the
project. Tuscany engaged PB+A to prepare a project manual.
Blue Mountain alleges it was never shown the terms of the agreement between
Tuscany and PB+A until discovery occurred in this matter. At no time in 2014 did Riley
or Broek inform either Blue Mountain or Mann that PB+A was preparing a project
manual.
3. Precontract Meetings and Alleged Fraud
The cross-complaint alleges a number of oral misrepresentations and omissions
that occurred in 2014 and 2015.
On February 24, 2015, a meeting occurred at Broek’s office that was attended by
Broek, Mann, Riley and one of Riley’s law partners. Mann discussed the scope of work
Blue Mountain would perform under the contract. Mann recalled they agreed at this
meeting that Blue Mountain would fix “all stucco cracks,” prime them, and paint the
elevations containing those cracks “to [a]rchitectural [l]imits.”4 Around that time, Riley
told Mann that a “full paint scope was not part of [the] proposal” and that if Tuscany
wanted such a “full, multiple coat paint application on all exteriors at Tuscany” “such a
job would come by [c]hange [o]rder, and be paid from Tuscany’s reserve accounts.”
4 The cross-complaint does not explain the significance of this term.
4
Following this February 2015 meeting, Mann prepared estimates that totaled over
$4 million. In response, Riley e-mailed Mann stating he “need[ed] much better numbers”
and that Tuscany “will have about a total of $3.5 [million] to spend after both settlements
[in the defect lawsuit] are done.” Riley asked, “What can we do about this?” In
response, Mann revised his estimates for Blue Mountain’s work on the project to a total
of $3,484,313.60 (estimates), which became the basis for the executed contract between
Blue Mountain and Tuscany.
In April 2015, a Tuscany board meeting was held at a Denny’s restaurant near the
project. The meeting’s attendees included Mann and some of the cross-defendants,
including Broek and Hoffman. Blue Mountain’s revised estimates were presented for
approval and the “final ‘scopes of work’ ” were discussed. Shortly after the meeting,
Riley notified Mann that Tuscany’s board had agreed to the estimates.
4. 2015 Contract
In the summer of 2015, Blue Mountain and Tuscany signed a contract titled
“Owner/Contractor Agreement” (contract). The contract provided that Tuscany would
pay Blue Mountain approximately $3.5 million for a defined scope of work. The
contract’s scope of work was contained in two attachments (exhibit A and exhibit B),
which were the two estimates prepared by Blue Mountain (one related to the so-called
“Wrap Homes” and one related to the “Non[-]Wrap Homes”).
The contract contained an integration clause and other standard provisions. It did
not specify the number of coats of paint for the project. The exhibits (i.e., exhibit A and
exhibit B) contain a line item for “Crack repairs and paint buildings” with a specified
price. Other line items indicate that certain work would be done with “Fireteck” paint.
The contract did not mention any forthcoming project manual or plans.
5. Post-contract Events
In August 2016, over a year after execution of the contract, Tuscany’s architect
(PB+A) finalized the project manual and provided it to Blue Mountain, along with the
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plans for the project. In Blue Mountain’s view, the architectural documents “presented
an entirely new and drastically increased scope of work,” including painting all 102
buildings with three coats of paint.
The parties disagreed about the contract’s scope of work. Blue Mountain alleges
that Tuscany demanded work that was far outside the contract’s scope of work,
particularly as to painting. The parties (including all cross-defendants) disputed whether
the contract called for one, two, or three coats of exterior paint.
Blue Mountain started performing work under the contract. It painted five
buildings but ceased exterior painting around June or July of 2017. Riley sent notice of
termination letters in February 2018 and March 2018 asserting Blue Mountain had
breached its contract with Tuscany.
B. Procedural Background
In September 2018, Tuscany filed a complaint against Blue Mountain and later a
first amended complaint for breach of contract and other claims.
Blue Mountain’s original cross-complaint, filed in June 2019, named only
Tuscany as a specific cross-defendant.
The parties engaged in discovery and conducted a number of depositions,
including the depositions of Mann, Riley, Broek, and Hoffman. Asserting it had learned
new information in discovery, Blue Mountain requested leave to file an amended cross-
complaint. The trial court granted Blue Mountain’s request.
On February 19, 2020, Blue Mountain filed a first amended cross-complaint
adding architects, attorneys, and managers as new parties to the lawsuit. It alleged 15
causes of action. Cross-defendants filed demurrers and motions to strike.
In September 2020, the trial court sustained the demurrers, with leave to amend,
and granted the motions to strike, with leave to amend. The trial court observed in its
decision that Blue Mountain had requested leave to add additional facts and to plead a
new cause of action for fraudulent inducement. In addition to giving Blue Mountain
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leave to amend its previously asserted claims, the trial court also permitted Blue
Mountain to add claims related to its theory that it was fraudulently induced to enter into
the contract.
On October 5, 2020, Blue Mountain filed the second amended cross-complaint
(cross-complaint) that is the subject of this appeal.
Blue Mountain alleges in the cross-complaint that Tuscany “contends that [Blue
Mountain] agreed to do nearly $10 million [] of repair work for $3.484 million. In reality
there was no meeting of the minds on multiple, material terms at the time the parties
entered into their contract, and therefore, no valid contract was ever formed between the
parties. Or, as Tuscany’s representative has testified: ‘one person was thinking lemon,
and the other person was thinking banana.’ Worse yet, in addition to the[re] being no
meeting of the minds and/or mutual mistake of fact on material terms, [Blue Mountain]
was fraudulently induced to enter into the contract by Tuscany and its various agents,
including its attorney, property manager, and its architect/construction management
firm.”
The cross-complaint alleges that cross-defendants were Tuscany’s agents for the
project. It also alleges cross-defendants were “acting to advance their own personal
and/or entity interests and/or for their own individual advantage.”
Eleven of the causes of action asserted in the cross-complaint are at issue in this
appeal.5 As to architects and managers, the cross-complaint asserts the following causes
of action: (1) fraud in the inducement (first cause of action); (2) fraud and deceit (ninth
cause of action); (3) negligent misrepresentation (tenth cause of action); (4) negligence
(eleventh cause of action); (5) intentional interference with contractual relations (twelfth
cause of action); (6) intentional interference with prospective economic advantage
(thirteenth cause of action); (7) negligent interference with prospective economic
5
In total, the cross-complaint asserts 19 causes of action. Eight of the 19 causes
of action apply only to Tuscany.
7
advantage (fourteenth cause of action); (8) civil conspiracy to defraud (fifteenth cause of
action); (9) aiding and abetting fraud (sixteenth cause of action); (10) full and/or partial
equitable/implied indemnity (seventeenth cause of action); and (11) apportionment and
contribution (eighteenth cause of action) (capitalization omitted).
As to attorneys, the cross-complaint asserts all of the these causes of action, except
those for intentional interference with contractual relations, intentional interference with
prospective economic advantage, and negligent interference with prospective economic
advantage.
Among other damages, Blue Mountain alleges it was deprived of its benefits under
the contract that included “lost profits and prospective economic advantage exceeding $1
million.” It also seeks punitive damages.
Cross-defendants filed demurrers and motions to strike. Following briefing on
those motions and a hearing, the trial court adopted its tentative order and issued a written
order that sustained cross-defendants’ demurrers to the cross-complaint in their entirety.
In addition to sustaining the cross-defendants’ demurrers in their entirety without
leave to amend, the trial court also sustained cross-defendants’ motions to strike certain
allegations in the cross-complaint. The court observed that the basis for these motions
was the same as in the demurrers. Additionally, the court struck Blue Mountain’s request
for punitive damages based on the court’s finding that Blue Mountain had failed to allege
any viable fraud claims to support that request. It also struck Blue Mountain’s request for
attorney fees asserted against architects.
The trial court entered a judgment of dismissal as to architects, attorneys, and
managers. Blue Mountain timely appealed.
II. DISCUSSION
A. Standard of Review
We review de novo a trial court’s order sustaining a demurrer. (T.H. v. Novartis
Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 162.) In the exercise of our independent
8
judgment, “we accept the truth of material facts properly pleaded in the operative
complaint, but not contentions, deductions, or conclusions of fact or law.” (Yvanova v.
New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 (Yvanova).) In reviewing the
sustaining of a demurrer, we give the cross-complaint a reasonable interpretation and
treat the demurrer as admitting all material facts properly pleaded. (Blank v. Kirwan
(1985) 39 Cal.3d 311, 318.) We must affirm the sustaining of the demurrer “ ‘if any one
of the several grounds of demurrer is well taken.’ ” (Aubry v. Tri-City Hospital Dist.
(1992) 2 Cal.4th 962, 967.) Thus, “ ‘[w]e do not review the validity of the trial court’s
reasoning, and therefore will affirm its ruling if it was correct on any theory.’ ”
(Modisette v. Apple Inc. (2018) 30 Cal.App.5th 136, 142.)
We address each of the causes of action at issue in this appeal in turn.
B. Fraud in the Inducement (First Cause of Action)
1. Legal Principles
Fraud in the inducement is a “subset of the tort of fraud.” (Hinesley v. Oakshade
Town Center (2005) 135 Cal.App.4th 289, 294.) Fraud in the inducement occurs when
“ ‘ “the promisor knows what he is signing but his consent is induced by fraud, mutual
assent is present and a contract is formed, which, by reason of the fraud, is voidable. In
order to escape from its obligations the aggrieved party must rescind .” ’ ” (Rosenthal v.
Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415, italics omitted.)
A cause of action for fraud is stated by pleading that the defendant made a
misrepresentation (or concealed a material fact when there was a duty to disclose the fact)
with knowledge of the statement’s falsity and the intent to defraud, coupled with the
plaintiff’s justifiable reliance and resulting damage. (Lazar v. Superior Court (1996) 12
Cal.4th 631, 638.)
For a misrepresentation to be actionable, it generally “must pertain to past or
existing material facts. [Citation.] Statements or predictions regarding future events are
9
deemed to be mere opinions which are not actionable.” (Cansino v. Bank of America
(2014) 224 Cal.App.4th 1462, 1469 (Cansino).)
Fraudulent concealment requires the “suppression of a fact, by one who is bound
to disclose it.” (Civ. Code, § 1710, subd. 3.) The plaintiff must show that the defendant
had a duty to disclose. (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152
Cal.App.4th 115, 131.) A duty to disclose may arise from a fiduciary or confidential
relationship. Blue Mountain does not allege a fiduciary relationship between itself and
cross-defendants.
As to a confidential relationship, “A confidential relationship can exist even
though, strictly speaking, there is no fiduciary relationship. [Citation.] A confidential
relationship may be founded on moral, social, domestic, or merely a personal
relationship.” (Huy Fong Foods, Inc. v. Underwood Ranches, LP (2021) 66 Cal.App.5th
1112, 1122.) In Huy Fong, for example, the Court of Appeal concluded the contracting
parties had a confidential relationship based on evidence that included a relationship of
over 28 years, sharing of financial information, and a longstanding practice of entering
into transactions involving tens of millions of dollars without formal written contracts.
(Ibid.)
“In transactions which do not involve fiduciary or confidential relations, a cause of
action for non-disclosure of material facts may arise in at least three instances: (1) the
defendant makes representations but does not disclose facts which materially qualify the
facts disclosed, or which render his disclosure likely to mislead; (2) the facts are known
or accessible only to defendant, and defendant knows they are not known to or
reasonably discoverable by the plaintiff; (3) the defendant actively conceals discovery
from the plaintiff. (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285,
294, fns. omitted.)
Fraud allegations must be pleaded with specificity. “General and conclusory
allegations are insufficient. [Citation.] The particularity requirement demands that a
10
plaintiff plead facts which ‘ “ ‘show how, when, where, to whom, and by what means the
representations were tendered.’ ” ’ ” (Cansino, supra, 224 Cal.App.4th at p. 1469.)
2. Application to Cross-Defendants
a. Architects
Blue Mountain alleges that architects6 concealed Tuscany’s intention to impose a
scope of work far more expensive and extensive than that set out in the contract. Blue
Mountain alleges that architects knew Tuscany intended that Blue Mountain perform the
work listed in the project manual rather than the work specified in the contract. Blue
Mountain alleges architects failed during meetings prior to the contract’s execution to
disclose to Blue Mountain that Tuscany intended a larger scope of work. Blue Mountain
alleges that architects had a legal duty to disclose this intention based on Blue Mountain’s
“long-term relationship” with architects.
We are not persuaded that the allegations in the cross-complaint establish any
relationship between Blue Mountain and architects sufficient to trigger a legal duty of
disclosure. The cross-complaint reflects an arms-length commercial relationship between
architects and Blue Mountain related to a large construction project. Blue Mountain fails
to supply facts that would give rise to a duty to disclose under these circumstances.
Blue Mountain’s allegations are comparable to those in Los Angeles Memorial
Coliseum Com. v. Insomniac, Inc. (2015) 233 Cal.App.4th 803 (Memorial Coliseum).
There, the court concluded the allegations only showed a “commercial relationship”
between contracting parties and “there is nothing alleged about that relationship that
would give rise to fiduciary-like duties.” (Id. at p. 832.) The Court of Appeal concluded
6 It is unclear if the cross-complaint asserts the fraud in the inducement cause of
action as to Drake or Htut (the project managers who worked for PB+A at the project).
While the first cause of action is directed generally at all cross-defendants, the cross-
complaint elsewhere states that “Cross-[d]efendants, except Drake and Htut, collectively
conspired to, and did, fraudulently induce Bill Mann/[Blue Mountain] to enter into the
[c]ontract.” (Italics added.)
11
that the plaintiffs failed to state a claim against the defendants for fraud by concealment.
(Ibid.)
Blue Mountain points to the allegations that Mann “had longstanding
business/construction relationships with all [c]ross-[d]efendants prior to the [c]ontract
being entered into,” Blue Mountain “trusted the officers and agents of Tuscany” and
“trusted the licensed architecture/construction manager firm hired by Tuscany to manage
the [p]roject properly according to the terms of the [c]ontract,” and “essentially trusted”
that the “entities/individuals would not be deceitful and/or otherwise commit
wrongdoing.” These conclusory allegations, however, are insufficient to give rise to a
duty to disclose. (See Yvanova, supra, 62 Cal.4th at p. 924.)
It is true that a fiduciary or confidential relationship is not required where there is
some relationship or transaction between the parties that gives rise to a duty to disclose.
(See Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1189 [concluding,
as a matter of law, that plaintiffs who were potential buyers in a pending sale had a
sufficient transactional relationship triggering a duty of disclosure on the part of the
defendant].) LiMandri v. Judkins (1997) 52 Cal.App.4th 326, describes circumstances in
which nondisclosure or concealment may constitute actionable fraud based on a duty to
disclose, including “from the relationship between seller and buyer, employer and
prospective employee, doctor and patient, or parties entering into any kind of contractual
agreement.” (Id. at p. 337.)
None of these circumstances is alleged here. Architects and managers were not
parties to any agreement with Blue Mountain and did not intend to enter into any
agreement with Blue Mountain. Rather, the contract was between Blue Mountain and
Tuscany. We decide the fraud by concealment cause of action against architects fails for
a lack of a cognizable legal relationship with Blue Mountain that would impose upon
architects a duty to disclose the project plans or manual. (See Memorial Coliseum, supra,
233 Cal.App.4th at p. 832, fn. 21.)
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Though the cross-complaint focuses on architects’ failure to disclose, it also
alleges affirmative statements made by Broek during the February 2015 meeting and
April 2015 board meeting to the effect that Blue Mountain “could use ‘Firetek’ paint” for
certain repairs when in fact Broek had no intention of approving that product and would
later insist Blue Mountain use a more expensive paint. Blue Mountain does not provide
any authority for the proposition that these statements, which are related to future events,
constitute actionable fraud. “It is hornbook law that an actionable misrepresentation must
be made about past or existing facts; statements regarding future events are merely
deemed opinions.” (San Francisco Design Center Associates v. Portman Companies
(1995) 41 Cal.App.4th 29, 43–44.) Based on our independent review, we decide that the
cross-complaint’s allegations are insufficient to state a cognizable fraud in the
inducement claim as to architects.
We affirm the trial court’s ruling sustaining architects’ demurrer to this cause of
action without leave to amend.
b. Managers
As with architects, the fraudulent inducement cause of action as to managers fails
because the cross-complaint does not allege facts sufficient to create a duty by managers
to disclose Tuscany’s alleged intent to expand the scope of work from that set out in the
contract.
The cross-complaint alleges Hoffman was at the April 2015 board meeting (prior
to the contract being executed) and concealed the fact that PB+A (the architectural firm)
would demand more work in its “yet to be drafted [p]roject [m]anual.” The cross-
complaint further alleges that Hoffman, in her capacity as “Tuscany’s Association
Manager” in the defect lawsuit, knew that Tuscany was “underfunded for even one coat
of paint” required for even a routine maintenance paint job.
The cross-complaint, however, fails to allege any facts supporting a relationship
between Blue Mountain and managers that would support fiduciary-like duties to disclose
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this information to Blue Mountain. We disregard the conclusory allegations that Blue
Mountain “trusted” managers. Nor does Blue Mountain advance any persuasive
argument for imposing a duty to disclose under other circumstances.
Accordingly, Blue Mountain fails to state a claim against managers for fraud in the
inducement. We affirm the trial court’s ruling sustaining managers’ demurrer to this
cause of action without leave to amend.
c. Attorneys
The cross-complaint alleges that attorney Riley prior to the execution of the
contract made a number of affirmative misrepresentations to Mann. These
misrepresentations were primarily that the contract would not involve a “full paint job” or
an “exterior paint scope” (in addition to statements that other work such as window frame
repairs would be more limited or that Blue Mountain “could” use Firetek paint). Riley
also misrepresented to Mann that Tuscany was “fully funded in reserves sufficient to pay
for a full exterior paint job” and that any painting beyond painting to the “architectural
limits” was not part of the contract and “would come by change order.”
“A fraud claim against a lawyer is no different from a fraud claim against anyone
else. ‘ “If an attorney commits actual fraud in his dealings with a third party, the fact he
did so in the capacity of attorney for a client does not relieve him of liability.” ’
[Citation.] While an attorney’s professional duty of care extends only to his own client
and intended beneficiaries of his legal work, the limitations on liability for negligence do
not apply to liability for fraud. [Citation.] Accordingly, a lawyer communicating on
behalf of a client with a nonclient may not knowingly make a false statement of material
fact to the nonclient [citation], and may be liable to a nonclient for fraudulent statements
made during business negotiations.” (Vega v. Jones, Day, Reavis & Pogue (2004) 121
Cal.App.4th 282, 291 (Vega); see also Cicone v. URS Corp. (1986) 183 Cal.App.3d 194,
202 (Cicone).)
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Whether a statement reflects an actionable misrepresentation of fact depends on
the circumstances. “ ‘A knowing misrepresentation may relate to a proposition of
fact . . . . Certain statements, such as some statements relating to price or value, are
considered nonactionable hyperbole or a reflection of the state of mind of the speaker and
not misstatements of fact . . . . Whether a misstatement should be so characterized
depends on whether it is reasonably apparent that the person to whom the statement is
addressed would regard the statement as one of fact or based on the speaker’s knowledge
of facts reasonably implied by the statement or as merely an expression of the speaker’s
state of mind. Assessment depends on the circumstances in which the statement is made,
including the past relationship of the negotiating persons, their apparent sophistication,
the plausibility of the statement on its face, the phrasing of the statement, related
communication between the persons involved, the known negotiating practices of the
community in which both are negotiating, and similar circumstances. In general, a
lawyer who is known to represent a person in a negotiation will be understood by
nonclients to be making nonimpartial statements, in the same manner as would the
lawyer’s client.’ ” (Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone
(2003) 107 Cal.App.4th 54, 75 (Shafer).)
Attorneys contend that the alleged misrepresentations made by Riley in the
precontract context are “at best, conditional statements of the parties’ future compliance
with the change order provisions” of the contract and are not actionable fraud. We agree.
It is undisputed the alleged misrepresentations made by Riley to Mann prior to the
contract’s execution were about future events. When they were made, the contract had
not yet been executed and performance by Blue Mountain, including any painting or
other repair work, had not yet begun.
As this court stated in Cansino, “the law is well established that actionable
misrepresentations must pertain to past or existing material facts. [Citation.] Statements
or predictions regarding future events are deemed to be mere opinions which are not
15
actionable.” (Cansino, supra, 224 Cal.App.4th at p. 1469.) We recognize that Riley’s
statements are different than those at issue in Cansino, which pertained to statements
about the future of the real estate market. (Ibid.) This court concluded those
representations did not constitute actionable fraud as a matter of law, reasoning that
“[l]ike acts of nature and their consequences, the future state of a financial market is
unknown. Any future market forecast must be regarded not as fact but as prediction or
speculation.” (Id. at p. 1470.) By contrast, Riley’s alleged precontractual statements to
Mann were not about outside forces, but rather were tethered to the anticipated nature of
the contract performance.
Nevertheless, we decide that Riley’s statements do not constitute an actionable
misrepresentation. It is undisputed that the project manual had not yet been prepared
when Riley made the predictive statements. Therefore, even reading the allegations and
inferring all circumstances in favor of Blue Mountain, Riley’s statements about the scope
of the job to be performed and the manner of how Blue Mountain and Tuscany would use
the change order provisions in the contract were speculative. Additionally, the statements
allegedly made by Riley to Mann, as quoted in the cross-complaint, such as the phrase
“full paint job” are predictions about future events related to the performance of the
contract and therefore are not actionable. (See Nibbi Brothers, Inc. v. Home Federal Sav.
& Loan Assn. (1988) 205 Cal.App.3d 1415, 1423 [addressing claims brought by general
contractor against a construction lender and sustaining lender’s demurrer as to unjust
enrichment claim based on fraudulent statements, noting that “[t]he most that we can
derive from the vaguely worded language is that [defendant] optimistically assessed the
developer’s capacity to sustain continued financing. A representation of this sort
constitutes a nonactionable expression of opinion.”].)
The cases upon which Blue Mountain relies are inapposite. In Shafer, the
complaint pleaded that the attorney for an insurer had made a fraudulent statement about
the insurance coverage that the insureds had reasonably viewed as a statement of fact.
16
(Shafer, supra, 107 Cal.App.4th at p. 75.) The court rejected the argument that the
attorney’s statements about coverage under an existing policy were nonactionable legal
opinion. (Id. at p. 74.) The court did not address the nature of a statement made about
future events, such as those at issue here.
Vega is also distinguishable. In Vega, the appellate court decided that a law firm’s
“mere statement that the $10 million financing then being negotiated was ‘standard’ and
‘nothing unusual’ is not itself an actionable misrepresentation. While expressions of
professional opinion are sometimes treated as representations of fact, a ‘casual expression
of belief’ is not similarly treated.” (Vega, supra, 121 Cal.App.4th at p. 291.) On the
other hand, the law firm engaged in actionable concealment by providing a disclosure
schedule that deliberately omitted material facts about the terms of the financing. (Id. at
pp. 288, 294.) The representation or lack thereof in Vega related to existing
circumstances and facts, not future events.
Moreover, Blue Mountain does not argue or assert a promissory fraud claim, such
that Riley’s statements constituted a “promise” about how the contract would be
interpreted (Cf. Cicone, supra, 183 Cal.App.3d at p. 203 [corporate attorney’s statements
made about how a contract would be interpreted effectively alleged “a promise without
any intention to perform”].)
Because the statements Blue Mountain alleges were fraudulent did not relate to
past or existing material facts, we affirm the trial court’s ruling sustaining attorneys’
demurrer to this cause of action without leave to amend.
We conclude the trial court correctly sustained cross-defendants’ demurrers to the
fraud in the inducement cause of action.7
7 Because we agree with respondents that Blue Mountain fails to assert actionable
misrepresentations or failures to disclose as elements of their fraud claims, we need not
address respondents’ other arguments, including the statute of limitations and economic
loss rule, related to the first cause of action.
17
C. Fraud and Deceit (Ninth Cause of Action)
The ninth cause of action for fraud and deceit sets forth many of the same
allegations related to precontract events contained in the first cause of action for fraud in
the inducement. As to the allegations that are the same as those in the first cause of
action, we decide, for the reasons we have explained above, that the cross-complaint fails
to sufficiently plead actionable fraud.
As to the allegations specific to the ninth cause of action, we conclude based on
our independent review of the cross-complaint that they are also insufficient, either
because they are conclusory or because they fail to set forth any factual misstatement
made to Blue Mountain.
For example, as to architects, Blue Mountain does not specifically allege any
specific statements made to it by Posard. Blue Mountain’s general assertion that Posard
made fraudulent statements through PB+A or in the project manual is inadequate to
satisfy the heightened specificity required for fraud causes of action. (Cansino, supra,
224 Cal.App.4th at p. 1469.)
The assortment of statements made by PB+A set forth in the cross-complaint are
not affirmative misstatements of fact. For example, the cross-complaint alleges PB+A
made misrepresentations in the project manual disseminated in August 2016 that the
scope of work included three coats of paint rather than “to architectural limits as [PB+A]
had known was the agreed upon scope.” The contract, however, does not demonstrate
that the statements in the project manual are incorrect. The written contract does not
expressly state or promise that the paint scope would be limited to one coat of paint or to
“architectural limits.” (See Lonely Maiden Productions, LLC v. GoldenTree Asset
Management, LP (2011) 201 Cal.App.4th 368, 375.) Therefore, these statements are not
actionable in fraud.
As to managers, the cross-complaint makes similar allegations involving
representations about contract interpretation rather than any affirmative misstatement of
18
fact. For instance, the cross-complaint alleges that Hoffman committed fraud because
she was still claiming “under oath” that Blue Mountain had agreed to a “three coat paint
scope” in the contract. However, there is no language in the contract that makes her
assertion false, given that the contract does not specify the number of coats of paint.
The alleged misrepresentations by Riley that occurred after the contract’s
execution are likewise not sufficient to establish fraud. These statements relate to Riley’s
interpretation of the contract rather than to any statement of fact. For example, the cross-
complaint alleges fraud in Riley’s statements that, after the contract was signed, he told
others (but not Blue Mountain) that Tuscany had agreed to two coats of paint and that in
his 2018 termination letters he falsely stated that Blue Mountain had violated certain
provisions of the contract. The statements of contract interpretation are not actionable in
fraud.
We decide that the cross-complaint does not state facts sufficient to support a
cause of action for fraud against cross-defendants.
For these reasons, we affirm the trial court’s ruling sustaining the demurrers as to
the ninth cause of action.
D. Negligent Misrepresentation (Tenth Cause of Action)
Blue Mountain’s tenth cause of action asserts negligent misrepresentation, which
is a species of fraud. (Conroy v. Regents of University of California (2009) 45 Cal.4th
1244, 1255.)
“The elements of negligent misrepresentation are (1) the misrepresentation of a
past or existing material fact, (2) without reasonable ground for believing it to be true, (3)
with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance
on the misrepresentation, and (5) resulting damage. [Citation.] In contrast to fraud,
negligent misrepresentation does not require knowledge of falsity. . . . However, a
positive assertion is required; an omission or an implied assertion or representation is not
19
sufficient.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158
Cal.App.4th 226, 243 (Apollo Capital).)
The allegations set forth in this cause of action are largely the same as those
underlying the fraud and deceit cause of action, except that the cross-complaint asserts
cross-defendants acted negligently. We conclude those identical allegations are deficient
for the reasons we have explained above.
In addition to incorporating the prior allegations, the cause of action specifically
alleges that architects failed to disclose that in performing their duties to Tuscany under
the AIA agreement, they “would be specifying scopes of work that were different than
and indeed expanded in scope and price/cost tha[n] the scopes of work set for in
[e]xhibits ‘A’ and ‘B’ ” in the contract. These allegations fail because architects lacked a
duty to disclose this information. (See pt. II.C., ante.) Further, omissions are not
sufficient for a claim of negligent misrepresentation. (Apollo Capital, supra, 158
Cal.App.4th at p. 243.) We affirm the trial court’s ruling on the demurrers on the tenth
cause of action.
E. Civil Conspiracy to Defraud (Fifteenth Cause of Action)
Blue Mountain alleges in the fifteenth cause of action for civil conspiracy to
defraud that cross-defendants were aware the project would involve a different and
expanded scope of work and collectively induced Blue Mountain to enter into the
contract for a price less than $3.5 million with the promise that the contract was for a
limited scope of work. The cross-complaint alleges cross-defendants agreed that they
would assert the work set forth in the project manual was the same work in the contract
and would enforce the work of the project manual. The predicate wrongful acts are the
fraud-based assertions, including fraud in the inducement.
Blue Mountain also alleges that Riley, PB+A (and its employees) and
“PAS/Hoffman” “were not acting solely in their capacities as agents of Tuscany, but
rather were acting to advance their/his/her own personal interests and individual
20
advantages.” The cross-complaint alleges, on information and belief, that these interests
and advantages included PB+A receiving $50,000 to draft plans and construction
documents including the project manual, additional “hundreds of thousands” of dollars
from 2016 to present as construction manager of the project, and potential future work
from Riley and Hoffman. As to Riley, Blue Mountain alleges he had been paid over $1
million in the construction defect lawsuit and was continuing to be paid to assist in
setting the project scope.
“In order to maintain an action for conspiracy, a plaintiff must allege that the
defendant had knowledge of and agreed to both the objective and the course of action that
resulted in the injury, that there was a wrongful act committed pursuant to that
agreement, and that there was resulting damage. [Citation.] Civil conspiracy is not an
independent tort. [Citation.] Rather, it is a ‘ “legal doctrine that imposes liability on
persons who, although not actually committing a tort themselves, share with the
immediate tortfeasors a common plan or design in its perpetration.” [Citation.]’
[Citation.] . . . The essence of the claim is that it is merely a mechanism for imposing
vicarious liability; it is not itself a substantive basis for liability. Each member of the
conspiracy becomes liable for all acts done by others pursuant to the conspiracy, and for
all damages caused thereby.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc.
(2005) 131 Cal.App.4th 802, 823 (Berg & Berg).)
Civil conspiracy claims are subject to the principle “known as the ‘agent’s
immunity rule,’ which establishes that ‘an agent is not liable for conspiring with the
principal when the agent is acting in an official capacity on behalf of the principal.’ ”
(Berg & Berg, supra, 131 Cal.App.4th at p. 817; see also Black v. Bank of America
(1994) 30 Cal.App.4th 1, 4.)
We agree with the trial court’s conclusion that the agent’s immunity rule is fatal to
this cause of action. Blue Mountain argues the agent’s immunity rule does not apply to
defeat its conspiracy to defraud claim as pleaded, because agents remain liable for their
21
own torts. Blue Mountain focuses on Riley’s alleged conduct, given that “there is an
exception to the general rule for ‘claims against an attorney [who] conspir[es] with his or
her client to cause injury by violating the attorney’s own duty to the plaintiff.’ ” (Shafer,
supra, 107 Cal.App.4th 54, 84; see also Pavicich v. Santucci (2000) 85 Cal.App.4th 382,
392.)
However, for the reasons we have explained above, we reject Blue Mountain’s
contention that it has sufficiently pleaded fraud against the agents of Tuscany, including
Riley. We therefore affirm the trial court’s rulings sustaining cross-defendants’
demurrers as to the conspiracy cause of action.
F. Aiding and Abetting Fraud (Sixteenth Cause of Action)
Blue Mountain alleges a cause of action for aiding and abetting fraud (sixteenth
cause of action). It alleges cross-defendants aided and abetted Tuscany in committing
fraud in the inducement of the contract. It repeats the allegations set forth in the
conspiracy cause of action that cross-defendants acted both as agents for Tuscany and for
their own personal benefit and advantages.
“Despite some conceptual similarities, civil liability for aiding and abetting the
commission of a tort, which has no overlaid requirement of an independent duty, differs
fundamentally from liability based on conspiracy to commit a tort. [Citations.] ‘Aiding-
abetting focuses on whether a defendant knowingly gave “substantial assistance” to
someone who performed wrongful conduct, not on whether the defendant agreed to join
the wrongful conduct. [¶] . . . [W]hile aiding and abetting may not require a defendant
to agree to join the wrongful conduct, it necessarily requires a defendant to reach a
conscious decision to participate in tortious activity for the purpose of assisting another in
performing a wrongful act. A plaintiff’s object in asserting such a theory is to hold those
who aid and abet in the wrongful act responsible as joint tortfeasors for all damages
ensuing from the wrong.’ ” (Berg & Berg, supra, 131 Cal.App.4th at p. 823, fn. 10.)
22
The agent’s immunity rule is equally applicable where the theory of liability is
aiding and abetting. That is, just as a principal cannot conspire with itself, a principal
cannot aid and abet itself. (See Berg & Berg, supra, 131 Cal.App.4th at p. 835 [noting
that the agency immunity rule protects employees and agents of a principal against the
imposition of vicarious liability for aiding and abetting or conspiracy].)
Here, there is no dispute that the cross-complaint alleges cross-defendants were
Tuscany’s agents related to the project. As a matter of law, they could not aid and abet
their principal (Tuscany) and thus the allegations fail. We therefore affirm the trial
court’s rulings sustaining the demurrers to the aiding and abetting fraud cause of action as
to cross-defendants.
G. Cause of Action for Negligence (Eleventh Cause of Action)
Blue Mountain contends the trial court erred in sustaining demurrers to the
eleventh cause of action, alleging negligence. Blue Mountain argues that even in the
absence of privity of contract, the cross-complaint alleges sufficient facts to establish a
duty of care owed by architects, attorneys, and managers based on the framework
articulated in Biakanja v. Irving (1958) 49 Cal.2d 647, 650–651 (Biakanja) for
ascertaining a duty of care. Blue Mountain contends the allegations of the cross-
complaint were sufficient to satisfy the six factors enumerated in Biakanja, thereby
establishing a “duty of care” owed by cross-defendants as a matter of law.
Although the cross-complaint does not clearly articulate the duty owed, we
understand Blue Mountain to generally assert that cross-defendants owed a duty to guard
against negligently causing Blue Mountain’s economic losses flowing from the contract.
The cross-complaint alleges architects acted negligently by failing to compare the
contract’s scope of work with the plans and project manual they prepared and failing to
ensure the project manual contained the same scopes of work as set forth in the contract.
Blue Mountain also alleges architects acted negligently in failing to inform Blue
Mountain that they were preparing the plans and project manual. Blue Mountain alleges
23
managers were negligent by demanding, for example, that Blue Mountain “perform a 3
coat paint application when they know that it could have been a 1 or 2 coat application
that had actually been agreed to” and, after a dispute arose in July 2017, failing to
“research” the question of how many “coats of paint was entailed in the exterior paint
scope described in the [c]ontract.” The cross-complaint does not make specific
allegations in the negligence cause of action directed at attorneys. 8
1. Legal Principles
“Recovery in a negligence action depends as a threshold matter on whether the
defendant had ‘ “a duty to use due care toward an interest of [the plaintiff’s] that enjoys
legal protection against unintentional invasion.” ’ ” (Southern California Gas Leak
Cases (2019) 7 Cal.5th 391, 397.) We review “de novo whether this ‘ “essential
prerequisite” ’ to recover is satisfied.” (Id. at p. 398.)
“Biakanja set forth a list of factors that inform whether a duty of care exists
between a plaintiff and defendant in the absence of privity: ‘the extent to which the
transaction was intended to affect the plaintiff, the foreseeability of harm to him, the
degree of certainty that the plaintiff suffered injury, the closeness of the connection
between the defendant’s conduct and the injury suffered, the moral blame attached to the
defendant’s conduct, and the policy of preventing future harm.’ ” (Beacon Residential
Community Assn. v. Skidmore, Owings & Merrill LLP (2014) 59 Cal.4th 568, 578
(Beacon).)
“Ultimately, duty is a question of public policy.” (The Ratcliff Architects v. Vanir
Construction Management, Inc. (2001) 88 Cal.App.4th 595, 605 (Ratcliff), citing Bily v.
8 The cause of action for negligence does not specifically mention attorneys other
than incorporating the general allegations by reference. In response to the demurrers to
the first amended cross-complaint, Blue Mountain indicated it would voluntarily dismiss
the negligence cause of action (as well as the interference with contract and
intentional/negligent interference claims) against attorneys. Nonetheless, it does not
appear any dismissal was filed, and the second amended complaint lists “all cross-
defendants” for the negligence cause of action.
24
Arthur Young & Co. (1992) 3 Cal.4th 370, 398–399 (Bily).) “Recognition of a duty to
manage business affairs so as to prevent purely economic loss to third parties in their
financial transactions is the exception, not the rule, in negligence law.” (Quelimane Co.
v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 58.)
2. Analysis
Applying these principles, we reject Blue Mountain’s contention that a duty of
care exists under the circumstances alleged here.
There is no real dispute that the first three Biakanja factors favor imposing a duty,
because the contract affected Blue Mountain (who was a party to it), it was foreseeable
that it would suffer economic losses if the project went awry, and it suffered actual
injury. (Biakanja, supra, 49 Cal.2d at p. 650.) Regarding the fourth factor of “the
closeness of the connection between the defendant’s conduct and the injury suffered” this
factor also favors imposing a duty. (Ibid.)
Nevertheless, we conclude these factors are insufficient to find a duty here. In
particular, “foreseeability” does not counsel toward imposition of a duty for purely
economic harm. “ ‘ “Although [foreseeability] may set tolerable limits for most types of
physical harm, it provides virtually no limit on liability for nonphysical harm.” ’ ”
(Ratcliff, supra, 88 Cal.App.4th at p. 606.)
Further, moral blameworthiness and the prevention of future harm strongly
militate against finding a duty here. “We have previously assigned moral blame, and we
have relied in part on that blame in finding a duty, in instances where the plaintiffs are
particularly powerless or unsophisticated compared to the defendants or where the
defendants exercised greater control over the risks at issue.” (Kesner v. Superior Court
(2016) 1 Cal.5th 1132, 1151.) Those circumstances for finding a duty are not at issue on
these facts. In contrast to scenarios that involve a powerless or unsophisticated party or
the exercise of greater control by the defendant, this dispute involves a contract for a
large construction project and the scope of work Blue Mountain was to perform. The
25
cross-complaint reflects a business transaction between sophisticated parties, and Blue
Mountain itself prepared the estimates that were incorporated in the contract and that are
at the heart of the dispute related to the scope of work.
Blue Mountain could have protected itself from the harm caused by the agents’
alleged negligence, such as by specifying the scope of work more precisely or otherwise
including language limiting its obligations in the event that future plans did not conform
with its contractual expectations. “Courts are reluctant to impose duties to prevent
economic harm to third parties because ‘[a]s a matter of economic and social policy, third
parties should be encouraged to rely on their own prudence, diligence and contracting
power, as well as other informational tools.’ ” (Ratcliff, supra, 88 Cal.App.4th at p. 605.)
Blue Mountain does not supply any authority to support the imposition of a duty
under similar business circumstances. The case law it points to does not support
imposition of a duty on agents of a contracting party to guard against economic loss to
the party with which their principal has contracted, and where the allegedly negligent acts
are directly related, indeed inexorably intertwined, with contractual interpretation.
For example, J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, involved a
construction project undertaken by the owner of the building to renovate the business
premises leased by the plaintiff. (Id. at p. 804.) Although the parties to the contract were
the owner and the contractor, the subject matter of that transaction, i.e., the construction,
was intended to and did directly affect the plaintiff lessee. (Ibid.) That the injury was
suffered by a third party was a major factor in the court’s conclusion the contractor had a
“special relationship” with the lessee and therefore owed the lessee a duty of care to
avoid harm to the lessee’s business. (Ibid.) Those are not the facts and circumstances
alleged in this case. Although J’Aire involved a construction project, it did not address
the question of duty in the context of an agent’s duty in tort to another party with whom
the agent’s principal was in privity.
26
In Beacon, our high court concluded “significant moral blame” attached to the
defendants’ conduct. (Beacon, supra, 59 Cal.4th at p. 586.) The court reasoned that
because “of defendants’ unique and well-compensated role in the Project as well as their
awareness that future homeowners would rely on their specialized expertise in designing
safe and habitable homes, significant moral blame attaches to defendants’ conduct.”
(Ibid.) However, in this case, Blue Mountain is not a homeowner impacted financially by
the project or contract but rather is one of the contracting parties.
Likewise, Bily does not assist Blue Mountain. In that case, our high court
emphasized the importance of encouraging “third parties” to “rely on their own prudence,
diligence, and contracting power, as well as other informational tools.” (Bily, supra, 3
Cal.4th at p. 403.) These economic and social policies apply with even more force to a
party such as Blue Mountain (a general contractor) negotiating and performing a
construction contract. Under the facts as alleged in the cross-complaint, Blue Mountain
chose to execute the contract before architectural plans or any project manual were in
place for the project.
We are not persuaded that imposing upon agents of a principal a duty to inform a
party on the other side of a business transaction about the nature of the contract or to
guard against economic losses of that other party represents a sound policy that should be
legally protected in tort. To the contrary, imposing such a duty may interfere with the
agents’ duty to their principal as well as discourage or impede commerce. Our Supreme
Court has cautioned, “ ‘[c]ourts should be careful to apply tort remedies only when the
conduct in question is so clear in its deviation from socially useful business practices that
the effect of enforcing such tort duties will be . . . to aid rather than discourage
commerce.’ ” (Erlich v. Menezes (1999) 21 Cal.4th 543, 554.)
27
We decide the trial court did not err in sustaining cross-defendants’ demurrers to
the negligence cause of action.9
H. Intentional Interference with Contract (Twelfth Cause of Action)
Blue Mountain contends the trial court improperly sustained the demurrers as to
the intentional interference with contractual relations cause of action asserted against
architects and managers. Blue Mountain bases its contractual interference claim on the
alleged interference of architects and managers in the contract between Blue Mountain
and Tuscany. The cross-complaint alleges Hoffman’s name is “on the [c]ontract” as
Tuscany’s “representative” and that she was aware of the contract when it was signed by
Tuscany. As to architects, the cross-complaint alleges PB+A “was presented with the
fully executed copy of the contract” by “at least” October 2015. Blue Mountain alleges
architects and managers interfered with the contract by, inter alia, causing “long delays”
at the beginning of construction, demanding Blue Mountain employees apply three coats
of paint, and wrongfully demanding Blue Mountain perform other work not contained in
the contract.
The trial court sustained the demurrers to the intentional and negligent business
interference causes of action on the ground that Blue Mountain failed to allege facts
sufficient to satisfy the element of the existence of “a valid contract between [the]
plaintiff and a third party” because Tuscany was not a third party. The trial court noted
that Blue Mountain has not “identified a third party” and rejected its argument that it
satisfied this requirement by alleging that managers “acted for their own individual
interests.”
Blue Mountain contends the trial court erred because it pleaded “alternative
allegations” that cross-defendants were acting to advance their own personal advantage.
9 Respondents object to the negligence cause of action on a number of grounds,
including the statute of limitation. In light of our conclusion that respondents did not owe
a duty to Blue Mountain, we need not address these contentions.
28
Blue Mountain points to, for example, its allegations that, in addition to receiving
“hundreds of thousands of additional dollars” for being the construction manager of the
project, PB+A had worked with Riley and Hoffman on prior projects and was involved as
an expert for Tuscany in the defect lawsuit. Blue Mountain suggests PB+A was
motivated to demand the more extensive scope of work by the “likelihood of future work
from Riley and PAS” and this “personal interest” led PB+A to help Tuscany terminate
Blue Mountain from the contract.
1. Legal Principles
“Tortious interference with contractual relations requires ‘(1) the existence of a
valid contract between the plaintiff and a third party; (2) the defendant’s knowledge of
that contract; (3) the defendant’s intentional acts designed to induce a breach or
disruption of the contractual relationship; (4) actual breach or disruption of the
contractual relationship; and (5) resulting damage.’ ” (Ixchel Pharma, LLC v. Biogen,
Inc. (2020) 9 Cal.5th 1130, 1141 (Ixchel).)
“[O]nly ‘a stranger to [the] contract’ may be liable for interfering with it.” Mintz
v. Blue Cross of California (2009) 172 Cal.App.4th 1594, 1603 (Mintz).) A contracting
party or its agent are not strangers to a contract and therefore cannot be held liable for
tortious interference. (See id. at p. 1604.) A stranger to the contract could be a defendant
that has an economic or social interest in the contractual relationship but “who is not a
party to the contract or an agent of a party to the contract.” (Caliber Paving Company,
Inc. v. Rexford Industrial Realty and Management, Inc. (2020) 54 Cal.App.5th 175, 177.)
The Caliber court concluded “that a defendant who is not a party to the contract or an
agent of a party to the contract is not immune from liability for intentional interference
with contract by virtue of having an economic or social interest in the contract.” (Id. at
p. 187.)
29
2. Analysis
We have reviewed the cross-complaint, including those portions of the complaint
Blue Mountain asserts support its view that it sufficiently pleaded that architects and
managers were strangers to the contract. We reject these arguments. We agree with the
trial court’s conclusion that cross-defendants, as agents of Blue Mountain, could not as a
matter of law interfere with their principal’s (Tuscany) contract with Blue Mountain.
(See Mintz, supra, 172 Cal.App.4th at p. 1606.)
Blue Mountain alleges both that architects and managers were agents of Tuscany
and had economic interests or advantages in the contract. The allegations of economic
interests, however, do not render the cause of action legally valid. As stated in Mintz,
“there is no ‘financial advantage’ exception to the rule that a corporate agent cannot be
liable for interfering with its principal’s contract.” (Mintz, supra, 172 Cal.App.4th at
p. 1606.) The Mintz court explained this rule “makes good sense” because “[e]very
agent, in one way or another, acts for its own financial advantage when it acts for its
principal, because the agent is compensated by its principal, and conduct in furtherance
of the principal’s interest will necessarily serve the agent’s interests as well.” (Ibid.)
Furthermore, a “ ‘financial advantage’ exception to the sound rule that the contracting
party’s agent, like the contracting party, cannot be liable for interference with the
contract, would entirely swallow up the rule.” (Ibid.)
Blue Mountain does not offer any pertinent authority supporting its conclusion
that the trial court erred in sustaining the demurrer to this cause of action. For example,
while it points to Caliber, that decision involved a non-agent (a subcontractor) that had
an economic interest in the contract at issue. The decision did not discuss allegations of
agency and therefore does not assist Blue Mountain. Similarly unavailing is its reliance
on Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, which involved an
alleged interference by a corporate shareholder with a contract between the corporation
and another person or entity. (Id. at p. 353.) The shareholder was not an agent of the
30
corporation, and the appellate court thus distinguished the situation from cases where “it
was clear that the defendant was either a contracting party or its agent who could not be
liable for interference.” (Id. at p. 352.) Thus, because Blue Mountain alleges architects
and managers were agents of Tuscany, the trial court correctly sustained architects’ and
managers’ demurrers to this cause of action.
I. Tortious Interference with Prospective Economic Advantage Causes of Action
(Thirteenth and Fourteenth Causes of Action)
Blue Mountain alleges causes of action for both intentional interference with
prospective economic advantage (thirteenth cause of action) and negligent interference
with prospective economic advantage (fourteenth cause of action) (collectively, business
interference causes of action).
A plaintiff asserting the tort of intentional interference with prospective economic
advantage must plead the following elements: “ ‘ “(1) an economic relationship between
the plaintiff and some third party, with the probability of future economic benefit to the
plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the
part of the defendant designed to disrupt the relationship; (4) actual disruption of the
relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the
defendant.” ’ ” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134,
1153; see also Ixchel, supra, 9 Cal.5th at pp. 1140–1141.) The elements for negligent
interference with prospective economic advantage are the same, except a plaintiff need
only show negligence. (See Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1077.)
The trial court sustained managers’ demurrers as to the business interference
causes of action on the basis that Blue Mountain failed to identify any “third party”
economic relationship that cross-defendants disrupted. It rejected Blue Mountain’s
argument that Tuscany was a third party, noting that Tuscany was not a third party
because managers and architects were acting as its agents and at its behest. Additionally,
the trial court sustained architects’ demurrer as to these causes of action on the basis that
31
PB+A acted as Tuscany’s agent and Blue Mountain had failed to show any underlying
wrongful conduct.
Blue Mountain argues it had the right to plead alternative allegations and “the
agency allegations do not preclude the alternative allegation” that architects and
managers “acted in their own self-interest and in doing so are not immune from liability.”
We agree with the proposition that “ ‘[M]odern rules of pleading generally permit
plaintiffs to “set forth alternative theories in varied and inconsistent counts.” ’ ”
(Travelers Indemnity Co. of Connecticut v. Navigators Specialty Ins. Co. (2021) 70
Cal.App.5th 341, 360, fn. 15.) Yet this general principle does not assist Blue Mountain,
because it has not made such alternative allegations on the critical issue of agency.
Rather, Blue Mountain unequivocally alleges cross-defendants were acting as agents for
Tuscany. The cross-complaint details the ways in which cross-defendants represented
Tuscany in the project. While Blue Mountain supplies additional allegations that cross-
defendants had ongoing interests in the contract and ongoing business relationships with
Tuscany, these statements do not amount to alternative allegations.
We agree with the trial court that Blue Mountain’s business interference causes of
action are legally invalid. The trial court properly sustained cross-defendants’ demurrers
as to these causes of action.10
J. Additional Causes of Action for Indemnity or Apportionment/Contribution
(Seventeenth and Eighteenth Causes of Action)
The cross-complaint sets forth a cause of action for full and/or partial equitable or
implied indemnity (seventeenth cause of action) and apportionment and contribution
(eighteenth cause of action). The indemnity causes of action seek indemnity from cross-
10 Architects argue that Blue Mountain’s “ ‘negligence-based, non-intentional tort
and interference claims’ ” are time-barred under the two-year statute of limitations. In
light of our conclusion that these claims fail on other grounds, we need not address this
argument.
32
defendants if Blue Mountain is found liable to Tuscany based on Tuscany’s first amended
complaint or otherwise pays any amount to Tuscany by way of “settlement, judgment or
otherwise.” Blue Mountain alleges cross-defendants were negligent and caused delays in
the project which ultimately caused Tuscany to terminate the contract and led to
Tuscany’s complaint for damages against Blue Mountain. The apportionment and
contribution cause of action also seeks reimbursement from cross-defendants if Tuscany
“or others recover any amount against” Blue Mountain. Blue Mountain alleges cross-
defendants are joint tortfeasors.
Blue Mountain maintains there are predicate torts to support its claims for
indemnity and contribution, stating that “if this Court reverses the demurrers as to fraud,
misrepresentation or other tort based causes of action, there is a predicate tort.”
“ ‘[T]here can be no indemnity without liability.’ ” (Western Steamship Lines,
Inc. v. San Pedro Peninsula Hospital (1994) 8 Cal.4th 100, 114.) Given our conclusion
that reversal is not warranted as to any of Blue Mountain’s claims before us, we affirm
the trial court’s ruling sustaining managers’ demurrer to this cause of action without
leave to amend.
K. Motions to Strike
Blue Mountain contends the trial court’s order granting cross-defendants’ motions
to strike must be reversed. However, its contention depends on this court ruling in its
favor as to the other causes of action asserted against cross-defendants. For example, it
argues that the trial court should not have stricken its punitive damages claims against
managers because the court made an “erroneous ruling on fraud.”
As we have affirmed the trial court’s rulings granting the demurrers without leave
to amend on the various tort theories of liability, we likewise affirm its rulings as to the
related motions to strike.
33
III. DISPOSITION
The judgment is affirmed. Respondents are entitled to recover their reasonable
costs on appeal. (Cal. Rules of Court, rule 8.278(a)(2).)
34
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Danner, J.
WE CONCUR:
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Bamattre-Manoukian, Acting P.J.
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Wilson, J.
H049448
Blue Mountain Construction Services, Inc. v. Professional Association Services et al.