Builders Bank v. Oreland, LLC et al

Filing 35

ORDER DENYING DEFENDANTS MOTION TO DISMISS 31 by Judge Dean D. Pregerson. (lc) .Modified on 3/24/2015 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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BUILDERS BANK, an Illinois
Bank Corporation,

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Plaintiff,
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v.
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ORELAND, LLC, a California
limited liability company;
TIERRAVIEW, LLC, a
California limited liability
company; RICHARD PAEK, an
individual also known as
RICHARD J. PAEK,

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Defendants.
___________________________

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Case No. CV 14-06548 DDP (SHx)
ORDER DENYING DEFENDANTS’ MOTION
TO DISMISS
[Dkt. No. 31]

Presently before the Court is Defendants’ Motion to Dismiss

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the Case.

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considered the parties’ submissions, the Court adopts the following

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order.

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I.

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(Dkt. No. 31.)

Having heard oral arguments and

BACKGROUND
Plaintiff seeks to enforce a set of environmental indemnity

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contracts concerning certain property on West Colton Street in Los

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Angeles.

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in these contracts to indemnify Plaintiff

(Compl., ¶ 1.)

Plaintiff alleges that Defendants agreed

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against any and all damages (including, without limitation,

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consequential damages), losses of any kind or of any nature

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whatsoever . . . arising directly or indirectly from or out of

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. . . the past, present or future presence, Release or threat

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of Release of any Hazardous Substances on, in, under or

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affecting all or any portion of the Property or any

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surrounding areas, regardless of whether or not caused by or

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within the control of any Indemnitor . . . .

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(Id. at ¶ 9 (ellipses omitted).)
August 22, 2006.

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The contracts were executed on

(Id. at ¶ 7; Reply at 2:9.)

Plaintiff further alleges that these contracts contained

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provisions waiving, “[t]o the extent permitted by law . . . [t]he

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defense of the statute of limitations in any action hereunder.”

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(Compl., Ex. A, § 3(b).)

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Plaintiff alleges that the property in question has, indeed,

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been subjected to the release of “Hazardous Substances,” which has

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caused Plaintiff losses in the form of lowered property value.

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(Compl., ¶¶ 12-13.)

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indemnification under the contracts.

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II.

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It therefore brings this suit for

LEGAL ARGUMENT
In order to survive a motion to dismiss for failure to state a

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claim, a complaint need only include “a short and plain statement

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of the claim showing that the pleader is entitled to relief.”

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Atl. Corp. v. Twombly, 550 U.S. 544, 55 (2007) (quoting Conley v.

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Gibson, 355 U.S. 41, 47 (1957)).

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“sufficient factual matter, accepted as true, to state a claim to

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relief that is plausible on its face.”

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662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

Bell

A complaint must include

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Ashcroft v. Iqbal, 556 U.S.
When

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considering a Rule 12(b)(6) motion, a court must “accept as true

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all allegations of material fact and must construe those facts in

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the light most favorable to the plaintiff.”

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F.3d 443, 447 (9th Cir. 2000).

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III. DISCUSSION

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Resnick v. Hayes, 213

Defendants seek to dismiss the Complaint on two grounds:

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inadequate pleading under Rules 8 and 9, and statute of

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limitations.

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A.

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Rule 8 Pleading
Defendants argue that Plaintiff’s Complaint “cites no cause of

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action at all” and that “[i]t is impossible for Defendants to

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defend” against uncertain claims.

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(Mot. Dismiss at 7:3-4.)

However, the Complaint states that it is an action “to enforce

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certain environmental indemnity agreements.”

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is therefore plainly a contract claim.

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breach of contract has four elements: (1) existence of a contract,

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(2) plaintiff's performance or excuse for nonperformance, (3)

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breach, and (4) damages.

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Cal.App.4th 1226, 1239 (2008).

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allege the existence of the agreements and state their terms.

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at ¶ 9; Id., Exs. A & B.)

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performance – the issuance of a construction loan.

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It states the reason the indemnity provision (that is, Defendants’

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duty to perform) is triggered.

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states the amount that Plaintiff alleges it should be indemnified

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for – i.e., damages.

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(Compl., ¶ 1.)

This

In California a claim for

CDF Firefighters v. Maldonado, 158
The Complaint and its exhibits
(Id.

The Complaint also alleges Plaintiff’s
(Id. at ¶ 7.)

(Id. at ¶¶ 12-13.) Finally, it

(Id. at ¶ 13.)

Plaintiff does not specifically allege that indemnification
has been demanded and refused.

Nonetheless, “[a] claim has facial
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plausibility when the plaintiff pleads factual content that allows

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the court to draw the reasonable inference that the defendant is

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liable for the misconduct alleged.”

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662, 678 (2009).

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indemnify has arisen, and the reasonable inference is that the

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action is being brought because Defendants have not yet indemnified

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Plaintiff.

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Ashcroft v. Iqbal, 556 U.S.

Plaintiff has pled facts showing that a duty to

Plaintiff has alleged sufficient facts to state a plausible
claim, and Defendants are on notice as to the claim against them.

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Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

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B.

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Rule 9(c) Pleading
Defendants also argue, in their Reply, that Plaintiff has not

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satisfied the heightened pleading requirement under Rule 9(c),

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which provides that “[i]n pleading conditions precedent, it

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suffices to allege generally that all conditions precedent have

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occurred or been performed. But when denying that a condition

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precedent has occurred or been performed, a party must do so with

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particularity.”

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breach of contract claim, that pleading breach itself is a

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“condition precedent” within the meaning of the rule, and that

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Plaintiff has not alleged a breach with sufficient particularity.

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Defendant argues that Plaintiff is asserting a

Defendants misunderstand the meaning of “condition precedent”

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in the rule.

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breach of contract cases to generally aver the performance of all

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‘conditions precedent,’ including all terms and obligations

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(promissory conditions) that plaintiffs must perform when suing for

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breach of bilateral contracts.”

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Rogers III, The Flawed Nexus Between Contract Law and the Rules of

Rule 9(c) is “intended to . . . allow[] claimants in

William V. Dorsaneo III & C. Paul

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Procedure: Why Rules 8 and 9 Must Be Changed, 31 Rev. Litig. 233,

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240 (2012).

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fulfillment of conditions that trigger the defendant’s duty under

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the contract.

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rule; rather, it is the fulfillment of conditions precedent which

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gives rise to the duty which is then breached.

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In other words, Rule 9 refers to pleading the

Breach is not a “condition precedent” under the

Rule 9(c) therefore simply does not apply to allegations of

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breach.

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Defendants’ alleged duty to indemnify – the release of “Hazardous

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Substances” on the relevant property – which is all it must do to

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satisfy Rule 9(c).

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C.

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Plaintiff has generally alleged the condition precedent to

Statute of Limitations
In California, the statute of limitations for contract claims

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is four years.

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allegedly executed on August 22, 2006, and Defendant argues, based

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on Plaintiff’s own exhibits, that a “Phase I Environmental Site

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Assessment” would have put Plaintiff on notice as to the release of

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the hazardous substances when the contracts were signed.

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Dismiss at 8-9.)

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started the same day the agreements were signed.

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action was brought eight years after that day, Plaintiff’s action

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is barred.

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Cal. Code Civ. Proc. § 337.

The agreements were

(Mot.

Thus, Defendants argue, the clock would have
Because the

Plaintiff, on the other hand, points out that the agreements

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contain a clause waiving the defense of statute of limitations

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“[t]o the extent permitted by law.”

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parties agree that “permanent waiver of the statute of limitations

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is not permitted under California law.”

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Code of Civil Procedure provides that “[n]o waiver executed prior
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(Compl., Ex. A, § 3(b).)

(Opp’n at 7:14-15.)

The

The

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to the expiration of the time limited for the commencement of the

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action by this title shall be effective for a period exceeding four

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years from the date of expiration of the time limited for

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commencement of the action by this title . . . .”

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Proc. § 360.5.

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provision, however.

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unlawful and unenforceable in its entirety, because it attempts to

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extend the waiver past four years.

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merely acts to limit the waiver’s length to four years after the

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Cal. Code Civ.

The parties disagree about the effect of this
Defendants argue that an open-ended waiver is

Plaintiff argues that § 360.5

expiration of statute of limitations.
A California court has ruled on a nearly identical waiver

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provision.

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guarantors of a loan under a contract that included the following

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provision: “[g]uarantors waive the benefit of any limitations

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affecting their liability hereunder or the enforcement thereof to

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the extent permitted by law.”

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1989).

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§ 360.5, concluded that the bank had an additional four years after

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the expiration of the statute of limitations in which to file its

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claim, notwithstanding that the waiver was general in nature and

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did not specify a time frame beyond that “permitted by law.”

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at 676-77.

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says that no waiver “shall be effective for a period exceeding four

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years,” rather than saying that written waivers may not be general

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in scope.

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In California First Bank v. Braden, a bank sued

216 Cal. App. 3d 672, 674 (Ct. App.

The court, citing multiple authorities as to the effect of

Id.

This accords with the statute’s plain language, which

Defendants quote Hatfield v. Halifax PLC, which states that §

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360.5 “permits waivers of the California statute of limitations

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defense provided that such a waiver is in writing and does not
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extend the limitations period for more than four years at a time.”

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564 F.3d 1177, 1183 (9th Cir. 2009).

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ruling on a case involving § 360.5 and mentioned it only in

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passing.

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than dictum, the agreements do not “extend the limitations period

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for more than four years.”

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the waiver in this case implicitly incorporate § 360.5's four-year

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provision by limiting their reach to that “permitted by law.”1

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The Hatfield court was not

But even assuming its statement of the rule is law rather

Rather, both the waiver in Braden and

Plaintiff therefore had four years to file under the usual

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statute of limitations, plus four years provided by the waiver

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provision, for a total of eight years from the date it was on

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notice of the release of the hazardous substances.

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(without deciding) that Plaintiff had notice when the contracts

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were signed, it would have had until August 21, 2014 to file a

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claim for indemnification.

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and thus it is not barred by the statute of limitations or § 360.5.

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IV.

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Assuming

This action was filed August 20, 2014,

CONCLUSION
The motion to dismiss is DENIED.

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IT IS SO ORDERED.

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Dated: March 23, 2015
DEAN D. PREGERSON
United States District Judge

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Even if compliance with the law were not stated explicitly,
the waiver provision would be assumed to comply with applicable
law. “[A]ll contracts necessarily and implicitly incorporate all
applicable laws in existence when the contract is entered.” 300
DeHaro St. Investors v. Dep't of Hous. & Cmty. Dev., 161 Cal. App.
4th 1240, 1256 (2008).
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