Order: BEACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD AND KING LLC et al

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SUPERIOR COURT OF CALIFORNIA
COUNTY OF SAN FRANCISCO

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Nov-23-2011 10:26 am

Case Number: CGC-08-478453
Filing Date: Nov-22-2011 10:25
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ORDER

EACON RESIDENTIAL COMMUNITY ASSOCIATION VS. CATELLUS THIRD AND KING-LL

001C03396401

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Superior Court of California
County of San Francisco

NOV 22 2011
CLERK.OF-FHE COURT
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SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF SAN FRANCISCO
BEACON RESIDENTIAL COMMUNITY ) Case No, CGC 08-478453
ASSOCIATION, }
) ORDER RE DEMURRERS AND
Plaintiff, ) MOTIONS TO STRIKE IN
) REFERENCE TO THE THIRD
vs, ) AMENDED COMPLAINT
)
CATELLUS THIRD AND KING LLC, et}
al., ) Date: October 28, 2011
) Time: 9:30 am,
Defendants, ) Dept: 304
)  Jndge: Hon. Richard A. Kramer

This matter came before the Court for hearing on Friday, October 28, 2013, Before the
Court were the following contested matters:

1, The demurrer of defendants Catellus Third and King LLC, Catetlus Commercial
Development Corp., Cateltus Operating Limited Partnership, Catellus Urban Development
Corporation, Catellus Urban Development Group LLC, Third and King Investors LLC, and
Profogis (hereafter collectively, the “Catellus Parties”) to the Second, Third, Fourth, Sixth and
Eighth Causes of Action in the Third Amended Complaint filed by Plaintiff Beacon Residential
Community Association (hereafter, "Plaintiff’) on April 27, 2011,

2. The motion of the Catellus Parties to strike the entirety of the Second Cause of
Action in the Third Amended Complaint, as well as certain additional sentences in the Third

Page 1
ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN RBFBRENCE
TO THE THIRD AMENDED COMPLAINTAmended Complaint, and the Paragraph of the prayer for rellef that requests punitive damages,

3, The demurrer of defendants Mission Place LLC, Mission Place Mezzanine LLC,
Mission Place Mezz Holdings LLC, Mission Place Partners LLC, Centurion Real Estate Investors
TV, LLC, and Centurion Real Estate Partners, LLC (hereinafter collectively, the “Mission Place
Parties”) to the Second Cause of Action and the Bighth Cause of Action of the Third Amended
Complaint,

4, The demurrer of defendant Skidmore, Owings & Mertll, LLP (hereinafter,
“SOM”) to the First Cause of Action, the Second Cause of Action, and the Fifth Cause of Action
of the Third Amended Complaint, .

5. The motion to strike all portions of the Second Amended Complaint that seek
damages against SOM concerning excessive heat gain, inadequate ventilation, and lack of
compliance with California Code of Regulations Title 24, as found in the First, Second, and Fifth
Causes of Action of the Third Amended Complaint,

6. The demurrer of defendant HKS, Inc., individually and dba HKS Architects, Inc,
(hereinafter, “HKS”) to the First Cause of Action, the Second Cause of Action, and the Fifth
Cause of Action of the Third Amended Complaint,

7 Requests for judicial notice by several of moving parties, as well ag by Plaintiff,

The Court received and considered briefs supporting and opposing each of the above
motions, demurrers and requests, Additionally, in the heating of October 28, all of the above
mentioned parties appeared by counsel, and prosented argument which the Court heard and
considered,

The Court hereby rules on the above listed matters as follows,

1, Requests for Judicial Notice.

Several of the requests for Judicial notice ask the Court to take notice of prior orders of this
Court herein. The Comt automatically takes fudieiel notice of its prior orders on file herein,
There is no need for parties to request such Judicial notice,

The Court grants the requests for judicial notice, to the extent that they ask the Court to
take notice of papers filed in this case, and in the case of Edmund Zucker y, Catellus Development

Page2
ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE
TO THE THIRD AMENDED COMPLAINTCorp, San Francisco Superior Court Case No, C06-455352, The Court takes notice of the fact
that the papers were filed, but as to the exhibits cited, the Court does not consider anything stated
in exhibits to such papers to be established as true, It would be improper for the Court, in ruling
on a demurrer, to engage in any weighing of evidence or to draw any inferences from evidence
that is contained in such exhibits,

The Court declines to take judicial notice of claimed inferences from deposition testimony
of Michael Alfaro and John Tashjian, as well as the exhibits to these depositions, Judicial notice
of matters upon demutrer may be dispositive only in those instances where there is not or cannot
be a factual dispute concerning that which is sought to be judicially noticed, (illiams vy,
Southern Cal, Gas Co. (2009) 176 Cal.App.4 591, 599-600.) The disputed inferences from this
deposition testimony are improper for the Court to consider at the demurrer stage,

2 Demurrer of the Catellus Parties,

‘The demurrer of the Catellus Parties is overruled, Plaintiff is entitled to plead inconsistent
altemative claims, (4 Witkin, Cal, Procedure (5"" Bd, 2008) Pleading §§ 402-406, pp. 542-45);
Dubin v, Chesebrough Trust (2002) 96 Cal.App.4"" 465, 477.) Pursuant to this doctrine, Plaintiff
has properly pleaded its Third Cause of Action (for strict liability of developer) and its Fourth
Cause of Action (for negligence) against the Catellus Parties, as alternatives to its First Cause of
Action (for liability under SB 800, Civil Code §§ 895 et seq.), to apply only if SB 800 is found
inapplicable to Plaintiff's claims against the Catellus Parties herein.

As a matter of case management and judicial economy, however, the Court will pormit
discovery to go forward with respect to these causes of action only if responses to Plainitlf?’s initial
wiitten discovery indicate that the applicability of SB 800 to this case is a matter in dispute. ‘The
Coutt’s prior stay on discovery is horeby lifted for the limited purpose of permitting Plaintiff to
Propound written discovery reasonably tailored to determining whether the applicability of SB 800
is a matter in dispute,

The Catellus Parties need not demur to the Sixth Cause of Action (for breach of implied
warranty). This cause of action is not directed to the Catellus Parties,

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ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE
TO THE THIRD AMENDED COMPLAINTCPO WAH Rw wD Ee

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The Catellus Parties’ demurrer to the Bighth Cause of Action is ovenuled. The elements
of Plaintiff's claim for fraudulent concealment have been set out with sufficient particularity to
enable the Catellus Parties to understand and respond to this claim, Plaintiffs allege colorable
claims that the Catellus Parties wore either Joint venturers or partners of the Mission Place parties,
or that the Catellus Parties engaged in concealment that is actionable by a subsequent purchaser
under the doctrine of Geernaert v, Mitchell (1995) 31 Cal,App.4" 601, 605-09, and Barnhouse y,
City of Pinole (1982) 133 Cal.App.3d £71, 191, Purther adjudication of issues as to this claim
must await development through discovery.

The question of whether or not Plaintiffis a proper class representative of the unit owners
who have claims as to which Plaintiff requests standing to proceed as a class representative is not
appropriate for resolution at the demutrer stage, The class certification issue will be handled
through a motion pursuant to California Rules of Court, Rule 3.764, and related procedures,

The demurrer to PlaintifPs Second Cause of Action, for negligence per se, is also
overruled, This portion of Plaintiff's Complaint places the defendants on notice that Plaintiff
intends to proceed under the exception fo SB 800 exclusivity in Civil Code § 943(a). The

specification of the statute involved is adequate, in the Court’s view, to provide notice to the
defendants, under the liberal standard of notice pleading that is applicable here, The Count is
satisfied that under appropriate circumstances, a cause of action may properly be denominated as
“negligence per se.” (E.g., Capri v, L.A, Fitness Int'l (2006) 136 Cal.App.4" 1078, 1085-89.)

3, Motion to Strike of the Catellus Parties,

The motion to strike by the Catellus Parties is denied. As stated above, Plaintiff's pleading
is not Improper insofar as it alleges 4 cause of action for negligence perse, Plaintiff's Third
Amended Complaint is not so inherently contradictory as to require striking an allegation as to a
false representation by defendants be stricken from the Third Amended Complaint, Plaintiff is
permitted to plead in the alternative, even if the allegations are inconsistent, Regarding punitive
damages, there is no basis to strike the prayer based on Plaintiff's pleading in the Third Amended
Complaint. Punitive damages have been held proper for misrepresentations and concealment in
the sale of real estate under some circumstances, (E.g., Godfrey v, Steinpress (1982) 128

. Page 4
ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE
TO THE THIRD AMENDED COMPLAINTCal.App.3d 154, 18 1-82.) The Court does not properly address this issue at the demurrer stage.
4, The Demurrer of the Mission Place Parties,

The demurrer of the Mission Place Parties is overruled for largely the same reasons stated
above as to the demurer of the Catellus Parties. The Second Cause of Action for “negligence per
se” has potentlal applicability, in the context of this action. ‘The allegations of fraudulent
concealment in the Bighth Cause of Action are sufficient, in the Court’s view, to afford the
Misslon Place Parties adequate notice of Plaintiff's theory,

5. Demurrer of SOM,

The detourrer of SOM is sustained. The Court's ruling is based on the case of Bily v,
Arthur Young & Co, (1992) 3 Cal.4" 370, In which the California Supreme Court held that a third
party could not maintain a cause of action to recover in negligence against an auditor for economic
losses sustained as a result of the latter's work, and held that only those persons or entities with
which the professiona! had directly contracted were owed a duty of cate,

The Court rejects Plaintiff's argument, based on Civil Code 896 and 936, that the
Legislature, in enacting SB 800, intended to provide a cause of action against the architects to the
owners of condominiums, or the condominiuin assoclation, that is independent of the Bily dootrine
regarding limitations on a professional's duty of care. The Court concludes that an SB 800 type
action may be maintained by a plaintiff directly against a design professional only if the design
professional owed the plaintiff a duty of care under the Bily principtes,

The Court is cognizant that in the case of Weseloh v. KL. Wessel Construction Co., Ine.

(2004) 125 Cal. App.4® 152, 164, the Court of Appeal siated that “the lack of privity of contract
docs not preclude the imposition ofa chity of care” ona design engineer, However, the Court does
not view the allegations against SOM in the Third Amended Complaint as rising to the level
sufficient to establish such a duty of care,

Paragraph 87 of the Third Amended Complaint alleges, in substance, that defendant SOM,
and its co-architect, HKS, not only provided original design services in the form of the project
plans and specifications, they also regularly visited and inspected the project throughout
construction, participated in weekly meetings, and made detalled analyses and recommendations

Page 5
ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE
TO THE THIRD AMBNDED COMPLAINT

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!of many detailed aspects of the project. These architects, according to the Third Amended
Complaint, advised the owner as to any work that did not conform to the contract documents, and
recommended revisions to the design of the project to control the perceived quality of the
construction,

Paragraph 88 is even more specific as to the architects* alleged role. According to these
allegations on information and belief, SOM and HKS reviewed and approved the course of action
where the specifications for the exterior windows, contrary to the approved Title 24 submittal for
the project, were changed to a design that inadequately prevented heat gain, which causes a
seriously defective and nonfunctional condition that is also unhealthy. Also, according to
Paragraph 88, Plaintiff alleges on information and belief, SOM and HKS recommended that the
number of Z ducts (for ventilation within units} be reduced by a significant quantity, which is 9
major factor in the nonfunctional, unhealthy condition on the interiors of the units,

The Court concludes that these allegations are insufficient to establish the existence of a
duty of care, under Bily and Weseloh, The allegations do not show that either of the architects
went beyond the typical role of an architect, which is to make recommendations to the owner,
Even if the architect initiated the substitutions, changes, and other elements of design that Plaintiff
alleges to be the cause of serious defects, so long as the final decision rested with the owner, there

is no duty owed by the architect to the future condominium owners, in the Court’s view, The
owner made the final decisions, according to the Third Amended Complaint. Therefore, in the
Court’s view, the holding of Weseloh, finding no duty of care of the engineer in that case, dictates
the result here based on the facts alleged in the Third Amended Complaint, (Weseloh, supra, 125
Cal,App.3th at pp, 166-73.)

At argument, counsel for Plaintiff expressed the view that Plaintiff may, in goed faith, be
able to amend the Third Amended Complaint to state that the role of either SOM, HKS, or both,
went beyond the traditional role of the architect, This needs to be more than & recommendation,
When the architect recommends something, the architect does not cantrol it, But if the architect
actually dictated and controlled the decision to elitninate Z ducts, acting in a manner that was
contrary to the directions of the owner, or that ignored the owner’s directions (rather than merely

Page 6
ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE
TO THE THIRD AMENDED COMPLAINTTecommending such a decision to the owner), then the architect may owe a duty of care under the
test of Biakanja vy. Irving (1958) 49 Cal.2d 647 as further explicated in Weseloh, in the Court’s
view.

Therefore, the Court grants Plaintiff leave to amend paragraph 88 of the Third Amended
Complaint to state a claim that the architect affirmatively controlled the decision to eliminate Z
duets, if Plaintiff can make such allegation consistent with counsel's ethical duties, Any such
amendment need not restate the remainder of the complaint (Le., may be made in the form of a
First Amendment to the Third Amended Complaint), atid must be filed within ten days of this
Ordet, In such amendment, Plaintiff may also incorporate by reference the amendment within its
First Cause of Action (under SB 800), again, if this may be done in good faith,

If Plaintiff files an amendment to the limited extent permitted herein, and if SOM again
demurs to the amendment, the demurrer shall be heard on Thursday, January 12, 2012, at 1:30
pan, in this Department, If Piaintiff does not file an amendment within the time permitted, then
SOM’s demurrer shall be sustained without leave to amend,

6. Motion to Strike of SOM,

In view of the Court’s ruling on SOM’s demurrer, it is unnecessary for the Court to
consider SOM’s motion to strike at this time, If Plaintiff does not amend to the limited extent as
permitted herein, the motion to strike is moot, If Plaintiff does amend, the motion to strike shall
be deemed refiled upon SOM’s filing ofa demurrer; shall be deemed to include a motion to strike
any amended text, and shall be heard on January 12, 2012 along with the demurrer, No additional
briefs shal! be filed by either party as to the SOM motion to strike, Since HKS joined in SOM’s
motion fo strike, this Order is equally applicable to HKS.

7 Demurrer of HKS,

The Court’s ruling on the SOM demurrer is equally applicable to the demurrer of HKS,
The HKS demurrer is sustained in its entirety, for the identical reasons stated above, The Court’s
reasoning as stated above applies equally to any design professional, although it would not apply
to other project participants who are not design professionals. Leave to amend is granted to the
limited extent stated above, as to SOM, Such amendment shall be filed within ten days of this

Page?
ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE.
TO THE THIRD AMENDED COMPLAINTOrder, and any demurrer by HKS shall be heard on January 12, 2012, at 1:30 pm, If Plaintiff
does not file an amendment within the time permitted, then HKS* demurrer shall be sustained
without leave to amend,
7 Answers by the Catellus Parties and the Mission Place Parties,

The Catellus Parties and the Mission Place Parties are ordered to file answers and any
other permissible responsive pleadings on or before Nov. 22, 2011,

ITIS SO ORDERED,
pata: (t=(7 = Cl ( ( LAA ae

Hon, Richard A. Kramer
Judge of the Superior Court

APPROVED AS TO FORM:

WOOD, SMITH, HENNING & BERMAN

By:
David Webster

Counsel for Catellus Third and King, LLC,
Catellus Commercial Development Corp.,
Catellus Operating Limited Partnership,
Catellus Urban Development Corporation,
Catellus Urban Development Group, LLC,
Third and King Investors, LLC, and Prologis

HAIGHT, BROWN & BONESTEEL

By:
Steven Cvitanovic

Counsel for Mission Place, LLC; Mission
Place Mezzanine LLC, Mission Place Mezz
Holdings, LLC; Mission Place Partners LLC;
Centurion Real Estate Investors IV, LLC and
Centurion Real Estate Partners, LLC

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ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE
TO THE THIRD AMENDED COMPLAINTOo Oe SM DN YU BR ww

Ss

i

WENDEL, ROSEN, BLACK. & DEAN, LLP

By:

Peter Laufenberg

Counsel for Mission Place, LLC; Mission
Place Mezzanine LLC, Mission Place Mezz
Holdings, LLC; Mission Place Partners LLC;
Centurion Real Estate Investors TV, LLC and
Centurion Real Estate Partners, LLC

ROBLES, CASTLE & DITH

By:
Richard Young
Counsel for Skidmore, O ings & Merrill, LLP

BK

Weft

SCHWARTZ & JANZEN

By:
Steven Schwartz
Counsel for HKS Archifecis, Inc.
And for HKS, Inc,

SELLAR HAZARD MANNING FICENEC &
LUCIA

By:

Denao M. Olivieri

Counsel for Cupertino Electric, Inc; Creative
Masonry, Inc; Carefree Toland Pools, Inc; JW.
McClenahan, Inc.; Van-Mulder Sheet Metal, Inc.;
N.V. Heathorn, Inc; Critchfield Mechanical, Inc.
Blue’s Roofing Company; West Coast Protective
Coatings, Inc Allied Fire Protection; F. Rodgers
Cotporation and Western Roofing Service

Page 9

ORDER RE DEMURRERS AND MOTIONS TO STRIKE IN REFERENCE
TO THE THIRD AMENDED COMPLAINT: