Vinyl Fence America v. Canyon Gate HOA

 

 

 

 

 

Filed 1/22/14 
Vinyl Fence America v. Canyon Gate HOA CA4/3

 

 

 

 

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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  This opinion has not been
certified for publication or ordered published for purposes of rule 8.1115.

 

 

 

IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

 

FOURTH
APPELLATE DISTRICT

 

DIVISION
THREE

 

 
>

VINYL FENCE AMERICA COMPANY,         Plaintiff and Appellant,               v.   CANYON GATE HOMEOWNERS ASSOCIATION et al.,         Defendants and Respondents.

G048081            (Super. Ct. No. 30-2012-00556010)            O P I N I O N

 

                        Appeal
from a judgment of the Superior Court of
Orange County, Franz E. Miller, Judge. 
Affirmed in part and reversed in part.

                        Gates,
O’Doherty, Gonter & Guy and Victor L. Block for Plaintiff and Appellant.

                        Macrae
& Edrington, Jean Moriarty; Law Office of Priscilla Slocum and Priscilla
Slocum for Defendants and Respondents.

 

*                *                *

                        Plaintiff
Vinyl Fence America Company (Vinyl Fence) appeals from the dismissal of its second
amended complaint after an order sustaining a demurrer.  We reverse the dismissal with respect to
three causes of action alleged against defendant Canyon Gate
Homeowners Association (HOA), namely, breach of contract, account stated, and
open book account.  As to these href="http://www.fearnotlaw.com/">causes of action, Vinyl Fence
sufficiently alleged defendant Diane Simon’s actual or ostensible authority to
bind the HOA to the alleged contract.  We
affirm the dismissal with respect to the other two causes of action alleged
against the HOA, namely, unjust enrichment and quantum meruit.  These causes of action are barred by the
statute of limitations.  We also affirm the
dismissal with respect to the fraud and negligent misrepresentation causes of
action alleged against defendants Future Management Services, Inc. (Future
Management), and Simon.  These causes of
action are likewise barred by the statute of limitations.    

 

FACTS

 

                        According
to Vinyl Fence’s complaint, it agreed to install fencing for the HOA pursuant
to a written contract signed in April of 2008. 
Future Management is the HOA’s property management company, and Simon is
the individual at Future Management who operates as the HOA’s agent.  â€œTo more specifically describe the location of
the fencing work to be done pursuant to the contract, Diane Simon, within the
course and scope of her agency as an employee of Future Management Services,
Inc. and thus, as an agent of the [HOA], provided plaintiff with 2 maps of the
subject property.  In providing the maps,
Diane Simon made the representation that the maps were correctly labeled and
could be relied upon in determining the scope and location of the fencing work.”  Some of the fencing was installed in the
wrong location.  Each party blames the
other for the error.  In July of 2008,
Simon, “acting within the course and scope of her agency . . . told plaintiff
that the Board of the [HOA] had approved a written change order of $11,500.00”
to correct the error.

                        The “written
change order” attached to the second amended complaint is an invoice Vinyl
Fence sent to the HOA (the July invoice).  The July invoice had a signature block, which
stated, “Signed acceptance of this invoice indicates that customer agrees to
payment terms and above description of material ordered.”  The July invoice was not signed.  The invoice also described the services to be
provided, the amount to be paid, and indicated “Full Amount to Be Due in Full
on or Before ________, 2009 . . . .”

                        Vinyl
Fence installed the additional fencing.  Two
months later, the HOA sent Vinyl Fence a letter blaming Vinyl Fence for the
initial error but offering to pay Vinyl Fence either half of the $11,500 asking
price, or the full amount over three years. 
Vinyl Fence apparently did not agree to either, and the HOA never paid
Vinyl Fence.

                        As to
Future Management and Simon, the second amended complaint alleged fraud and
negligent misrepresentation based on allegations that Simon misrepresented her
authority to approve the contract on behalf of the HOA. 

                        Fast
forward to March of 2012.  Vinyl Fence
filed its initial complaint  After two
amendments to the complaint and one demurrer sustained with leave to amend, the
court sustained a demurrer to the second amended complaint without leave to
amend.  It stated, “Defendants’
successful argument is any applicable statute of limitation ha[s] run.  The only possible limitations period that
would save the complaint is the four-year statute found in href="http://www.mcmillanlaw.us/">Code of Civil Procedure section 337 for
actions on written contract, . . . open book account, and account stated.  [¶]  A
written agreement referred to in [Code of Civil Procedure] section 337 need not
be signed by the party to be charged, as it must under the Statute of
Frauds.  [Citation.]  But there must be acceptance.  [Citation.] 
[¶]  Vinyl [Fence]’s complaint
alleges the contrary.  It alleges Simon
lied . . . by saying [the HOA] approved the additional work. . . .  [¶] 
With regard to [the] open book and account stated causes of action, they
may not be used to obtain the four-year limitations period when the claim is
really based on an oral contract. 
[Citation.]  And the causes of
action may not be based merely on an invoice.” 
The court entered judgment in favor of defendants.  Vinyl Fence timely appealed.

 

DISCUSSION

 

                        “On
appeal from a judgment dismissing an action after sustaining a demurrer without
leave to amend, the standard of review is well settled.  The reviewing court gives the complaint a
reasonable interpretation, and treats the demurrer as admitting all material
facts properly pleaded.  [Citations.] 
The court does not, however, assume the truth of contentions, deductions
or conclusions of law.  [Citation.]  The judgment must be affirmed ‘if any one of
the several grounds of demurrer is well taken. [Citations.]’  [Citation.] 
However, it is error for a trial court to sustain a demurrer when the
plaintiff has stated a cause of action under any possible href="http://www.fearnotlaw.com/">legal theory.  [Citation.] 
And it is an abuse of discretion to sustain a demurrer without leave to
amend if the plaintiff shows there is a reasonable possibility any defect
identified by the defendant can be cured by amendment.”  (Aubry
v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) 

                        We
begin by agreeing with the court’s observation that this action survives, if at
all, only under the four-year limitations period of Code of Civil Procedure section
337.  The latest any of the causes of
action could have accrued was in September 2008 when the HOA sent the letter to
Vinyl Fence attributing the error to Vinyl Fence but offering two different
payment plans.  At that point it was
plain the HOA was not going to pay according to the July invoice.  This action was not filed until March of
2012, more than three years later. 

                        This
immediately eliminates four causes of action. 
As to the causes of action alleged against Future Management and Simon,
fraud is governed by a three-year statute. 
(Code Civ. Proc., § 338, subd. (d).)  Negligent misrepresentation is governed by
either a two- or three-year statute, depending on the gravamen of the
claim.  (Smith v. Ben Bennett, Inc. (2005) 133 Cal.App.4th 1507, 1525.)  As to two of the causes of action alleged against
the HOA, the claim for unjust enrichment is governed by a three-year
statute.  (Federal Deposit Ins. Corp. v. Dintino (2008) 167 Cal.App.4th 333,
348.)  And the claim for reasonable value
of work, labor, materials and services (i.e. quantum meruit) is governed by a
two-year statute.  (Iverson, Yoakum, Papiano & Hatch v. Berwald (1999) 76
Cal.App.4th 990, 996.)  What remains is
breach of written contract, account stated, and open book account, which are
governed by a four-year statute.  (Code
Civ. Proc., 337, subds. (1)-(2).)

 

>The Second Amended
Complaint Adequately Alleges Simon’s Actual or Ostensible Authority

                        As we
understand the court’s ruling with respect to breach of a written contract, the
court held not that it was untimely, but that Vinyl Fence failed to adequately
allege that the HOA accepted the offer memorialized in the July invoice. 

                        We
asked the parties to submit supplemental briefing on the issue of whether Simon
had ostensible authority to communicate acceptance on behalf of the HOA, an
issue not considered by the trial court. 
Both parties submitted briefs.  We
now conclude the second amended complaint adequately alleges facts constituting
a claim that Simon had actual, or, at minimum, ostensible authority to accept
the change order on behalf of the HOA.

                        The second
amended complaint expressly alleged Simon had actual authority to communicate
acceptance of Vinyl Fence’s offer of additional work.href="#_ftn1" name="_ftnref1" title="">[1]  The trial court was concerned that, in the
fraud cause of action against Future Management and Simon, Vinyl Fence alleged
Simon falsely claimed the HOA had
accepted the offer of additional work, and that she falsely claimed to have
the authority to accept the offer of additional work.  The allegations appear contradictory.  But “a party may plead in the alternative and
may make inconsistent allegations.”  (>Adams v. Paul (1995) 11 Cal.4th 583, 593.)  Presumably Vinyl Fence does not have direct
evidence of the actual extent of Simon’s authority, and thus it is proper for
Vinyl Fence to make alternative allegations. 


                        Even if
the contradictory allegations had undermined a claim of actual authority,
moreover, they are sufficient to allege ostensible authority.  “Ostensible authority is such as a principal,
intentionally or by want of ordinary care, causes or allows a third person to
believe the agent to possess.”  (Civ.
Code, § 2317.)  “A principal is bound by
acts of his agent, under a merely ostensible authority, to those persons only
who have in good faith, and without want of ordinary care, incurred a liability
or parted with value, upon the faith thereof.”  (Civ. Code, § 2334.)  “‘It is elementary that there are three
requirements necessary before recovery may be had against a principal for the
act of an ostensible agent.  The person
dealing with the agent must do so with belief in the agent’s authority and this
belief must be a reasonable one; such belief must be generated by some act or
neglect of the principal sought to be charged; and the third person in relying
on the agent’s apparent authority must not be guilty of negligence.’”  (Associated
Creditors’ Agency v. Davis (1975) 13 Cal.3d 374, 399.)  In resolving this issue, we are mindful of
the liberal standard of
review:  “The complaint must be
construed liberally by drawing reasonable inferences from the facts pleaded.”  (Rodas
v. Spiegel (2001) 87 Cal.App.4th 513, 517.) 


                        With
respect to the first element, the complaint states Vinyl Fence “justifiably
relied” on Simon’s representation that the HOA had accepted the change order.  In other words, Vinyl Fence believed Simon
had authority to communicate acceptance of the offer of additional work and
performed the work accordingly.  Whether
that belief was reasonable is for a jury to decide.  Given that the HOA appointed Simon as its
agent in dealing with Vinyl Fence concerning the fencing contract, we cannot
say as a matter of law that it was unreasonable. 

                        With
respect to the second element, an act by the principal, the alleged act of the HOA
was to appoint Simon as its agent to interface with Vinyl Fence concerning
implementation of the fencing contract.  Vinyl
Fence alleges the communication of the HOA board’s acceptance was done within
the “course and scope” of Simon’s agency.  


                        With
respect to the third element, absence of negligence, nothing in the second
amended complaint would lead us to conclude Vinyl Fence was negligent as a
matter of law.  The HOA cites >Associated Creditors’ Agency v. Davis, >supra, 13 Cal.3d 374, for the proposition,
“‘When the conduct of the principal warrants further inquiry or when the third
party is dealing with an assumed agent, the third party is bound at his peril,
if he would hold the principal liable, to ascertain not only the fact of the
agency but the nature and extent of the authority.’”  (Id.
at p. 401.)  We note, however, there is
nothing in the complaint suggesting any conduct by the HOA that would warrant
further inquiry into Simon’s authority. 
And we must accept as true that Vinyl Fence was not dealing with an “assumed
agent,” but an actual agent appointed by the HOA.  It would be a matter of defense for the HOA
to prove that Vinyl Fence was on inquiry notice that the extent of Simon’s
authority was limited.  Thus, we cannot conclude
as a matter of law that Vinyl Fence was on inquiry notice that Simon had
surpassed her actual authority in communicating acceptance of the additional
work.  The HOA points out that the
original contract lists the HOA president and director as authorized agents,
but it does not say they are the exclusive agents.  And we must accept the allegation that Simon
was also an agent. 

                        The HOA is free to
challenge these allegations and inferences at later stages of the case, of
course.  But for now, Vinyl Fence’s second
amended complaint sufficiently states a claim that Simon had actual authority,
or at least ostensible authority, to communicate the HOA’s acceptance of the
additional work order. 

 

>According to the
Allegations of the Second Amended Complaint, the Causes of Action for Breach of
Contract, Account Stated, and Open Book Account are Not Barred by the Statute
of Limitations 

                        Next, the
HOA contends we should affirm on statute of limitation grounds because the July
invoice cannot be an “instrument in writing” for purposes of Code of Civil
Procedure section 337.  We disagree.  The HOA relies primarily on >Filmservice Laboratories, Inc. v. Harvey
Bernhard Enterprises, Inc. (1989) 208 Cal.App.3d 1297 (Filmservice), which we find distinguishable.  There, plaintiff entered into an oral
contract to manufacture prints of a certain movie.  (Id.
at p. 1301.)  Plaintiff performed the
work, and three months later, plaintiff sent defendant two invoices for its
work pursuant to the agreement.  (>Id. at p. 1302.)  Plaintiff was not paid and filed suit just
over three years later.  (>Id. at p. 1301.)  To get around the statute of limitations for
oral contracts, plaintiff contended the invoices superseded the oral agreement
and created either an open book account or an account stated.  (Id.
at p. 1307.)  The court disagreed,
stating, “[N]o facts have been alleged which give rise to any reasonable
inference that the oral contract was superseded by an open book account or
account stated agreement.  The mere
existence of two invoices . . . do not evidence such accounts.  Those invoices simply memorialize the oral
contract.”  (Id. at p. 1307.)

                        The HOA
latches onto the latter statement and contends the invoice in question here
simply memorializes an oral agreement. 
The HOA reads too much into Filmservice.  Filmservice
does not stand for the broad proposition that agreements reached orally and
then memorialized in writing by an invoice are per se oral agreements for
purposes of deciding which statute of limitation to apply.  Deals are often struck orally and then
memorialized in writing, and it is precisely because they are memorialized in writing that the four-year statute
applies.  (Amen v. Merced County Title Co. (1962) 58 Cal.2d 528, 532-533 [“A
longer period of limitations applies to actions on written contracts than to
actions on oral contracts, since the writing is clear evidence in permanent
form of the terms of the agreement.  [Citations.] 
When a party has agreed to the writing, there is no reason to invoke the
two-year statute of limitations applicable to oral agreements”].)  The Filmservice
court was simply commenting on the pleading before it, and in particular
the absence of an agreement to convert from an oral agreement to an open book
account or account stated. 

                        Here,
there is no issue of converting from one type of arrangement to another.  Unlike the invoices in Filmservice, the July invoice was prepared the same day the deal
was struck.  Vinyl Fence alleged that the
HOA, by its agent Simon, approved the written invoice (characterized as a
change order) before the work began.  It
was not created after the work had been done pursuant to an earlier oral agreement.  The July invoice contained a signature block,
and also contained all of the terms of the agreement — the nature of the services,
the amount to be paid, and time period in which to pay (“Due on receipt”).  (See Tagus
Ranch Co. v. Hughes (1944) 64 Cal.App.2d 128, 130 [“It is well established
that in order to come within this four-year statute the writing in question
need not contain an express promise to pay. It is sufficient, under the
decisions of this state, if the writing acknowledges the debt and sets forth a
state of facts from which the obligation or liability to pay necessarily and
directly flows”].)  True, the signature
block was unsigned.  But as the trial
court noted, for purposes of deciding which statute of limitations applies, the
written agreement need not be signed.  (>Amen v. Merced County Title Co., >supra, 58 Cal.2d at p. 532 [“The
contract may be ‘in writing’ for purposes of the statute of limitations even
though it was accepted orally or by an act other than signing”].)  Accordingly, under the allegations of the
second amended complaint the July invoice may serve as an “instrument in
writing” under Code of Civil Procedure section 337.

                        Because we conclude the
allegations of the second amended complaint do not establish that the breach of
contract cause of action is barred by the four-year statute of limitations, we
do not address Vinyl Fence’s alternative argument in support of its pleading
that the September 2008 letter constituted a written acknowledgement of
indebtedness pursuant to Code of Civil Procedure section 360.    

 

>The Allegations of the
Second Amended Complaint do not Establish as a Matter of Law That the Contract
Is Unenforceable Under Business and Professions Code Section 7159

                        The HOA
alternatively contends that even if the invoice is a written contract, it is
unenforceable because it did not comply with the home-improvement contract
requirements of Business and Professions Code section 7159 (section 7159).  We join the trial court in rejecting that
argument.  Section 7159 is a consumer
protection statute requiring, among other things, that home improvement
contracts be signed by the owner.  (>Id., subd. (c)(3).)  The July invoice was not.  Thus it did not comply with section
7159.  Nonetheless, assuming, without
deciding, that the HOA qualifies as an “owner” or “tenant” such that section
7159 applies, that section affords no basis for concluding the contract is
unenforceable. 

                        Our
high court has held there is “no indication that the Legislature intended that all
contracts made in violation of section 7159 are void.”  (Asdourian v. Araj (1985) 38 Cal.3d
276, 292.)  “A wide range of exceptions
has been recognized.”  (>Id. at p. 291.)  In particular, where the owner is
sophisticated, and thus “not [a member] of the group primarily in need of the
statute’s protection,” the contract will be enforced.  (Id.
at p. 292.)  Importantly, because
noncompliance with section 7159 is an affirmative defense, it is the HOA’s
burden to prove it is the sort of unsophisticated consumer the statute was
meant to protect.  (Hinerfeld-Ward, Inc. v. Lipian (2010) 188 Cal.App.4th 86, 93.)  We have no evidence to consider at this stage,
however, and according to the second amended complaint the HOA operates through
a property management company, and is thus presumably sophisticated.  At the demurrer stage, therefore, there is no
basis for finding the written agreement unenforceable.

 

>The Second Amended
Complaint Adequately Alleges Common Counts for an Account Stated and an Open
Book Count

                        Finally
we address the remaining common counts for account stated and open book account.  “A common count is not a specific cause of
action . . . ; rather, it is a simplified form of pleading normally used to
aver the existence of various forms of monetary indebtedness, including that
arising from an alleged duty to make restitution under an assumpsit theory.  [Citations.]  When a common count is used as an alternative
way of seeking the same recovery demanded in a specific cause of action, and is
based on the same facts, the common count is demurrable if the cause of action
is demurrable.”  (McBride v. Boughton
(2004) 123 Cal.App.4th 379, 394.)  Here,
the common counts seek the same relief as the contract count.  Since the demurrer was improperly sustained as
to Vinyl Fence’s contract count, therefore, it was improperly sustained as to
the common counts.    

 

DISPOSITION

 

                        The judgment is reversed
as to the causes of action for breach of written contract, account stated, and
open book count.  The judgment is
affirmed as to the causes of action for unjust enrichment, quantum meruit,
fraud, and negligent misrepresentation.  Vinyl
Fence shall recover its costs on appeal. 


 

 

 

                                                                                    IKOLA,
J.

 

WE CONCUR:

 

 

 

FYBEL, ACTING P. J.

 

 

 

THOMPSON, J.