Henrietta Mine LLC v. A.M. King Industries Incorporated

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 HENRIETTA MINE, LLC, No. 2:21-cv-00711-JAM-JDP 12 Plaintiff, 13 v. ORDER DENYING DEFENDANT’S MOTION FOR JUDGMENT OF DISMISSAL ON THE 14 A.M. KING INDUSTRIES, INC., PLEADINGS 15 Defendant. 16 17 This dispute involves an agreement for the sale of mining 18 equipment located at the Endako Mine in British Columbia between 19 A.M. King Industries, Inc. (“King” or “Defendant”) and Henrietta 20 Mine, LLC (“Henrietta” or “Plaintiff”). See generally Compl., 21 ECF No. 1-1. Henrietta agreed to purchase the equipment from 22 King for $500,000. Id. ¶¶ 36, 39-41. After Henrietta paid King, 23 King informed Henrietta that Endako Mine would not allow 24 Henrietta to remove the equipment unless it complied with some 25 additional requirements. Id. ¶ 45. Henrietta declined and 26 demanded King return the $500,000 for failing to deliver the 27 equipment as agreed. Id. ¶ 48. King refused, and this lawsuit 28 for breach of contract and unjust enrichment followed. King now 1 moves for judgment on the pleadings. Mot. for J. on the 2 Pleadings (“Mot.”), ECF No. 89. For the reasons sets forth 3 below, this motion is denied.1 4 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND 5 In September 2019, Henrietta and King began communicating 6 about Henrietta’s purchase of mining equipment in British 7 Columbia. Compl. ¶ 20. In November 2019, Henrietta sent King a 8 formal offer to purchase the equipment for $500,000 plus the cost 9 to recertify an overhead crane system at the premises, not to 10 exceed $ 25,000. Id. ¶ 36. In December 2019, King emailed 11 Henrietta an invoice for the equipment which listed the purchase 12 price as $500,000 plus any and all costs and liability associated 13 with certifying and use of the overhead crane. Id. ¶ 41-42. The 14 invoice provided that $50,000 of the purchase price was due 15 immediately and an additional $450,000 was due prior to the 16 dismantling work. Id. ¶ 42. Pursuant to the terms of the 17 invoice, Henrietta wired King $50,000 on December 9, 2019, and 18 another $450,000 thereafter. Id. ¶ 44. 19 In early January 2020, King informed Henrietta that it would 20 not be permitted to disassemble or remove the equipment unless it 21 complied with certain additional requirements not contained in 22 the invoice or previously discussed by the parties. Id. ¶ 45. 23 While not specified in the Complaint, Henrietta in its opposition 24 to the motion elaborates that the additional conditions included: 25 (1) providing portable toilet facilities, potable water, and a 26

27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for August 24, 2021. 1 lunch room; (2) providing generators, compressors, light plants, 2 forklifts, cranes, and manlifts; (3) providing a designated First 3 Aid Medic and ambulance for the duration of the project; 4 (4) submitting a safety plan for review and approval prior to 5 mobilization; (5) providing a certified electrical contractor to 6 wire the generators and project lighting for the equipment 7 removal; (6) providing snow removal as necessary; (7) complying 8 with Endako Mine’s on-site safety procedures; and (8) fabricating 9 structural reinforcement such that all openings were covered or 10 hard barriers placed after removal. Opp’n at 12, ECF No. 92. 11 Complying with the additional requirements would have cost 12 Henrietta an additional $250,000. Compl. ¶ 46. Accordingly, 13 Henrietta informed King it would not move forward with the 14 purchase and demanded King return the $500,000 paid, to which 15 King refused. Id. ¶¶ 49, 51. Henrietta then brought this 16 action in Maricopa County Superior Court in Arizona for 17 (1) declaratory relief; (2) breach of contract; and (3) unjust 18 enrichment. See generally Compl. King removed the action to the 19 District Court of Arizona on diversity grounds. See Notice of 20 Removal, ECF No. 1. The District of Arizona court subsequently 21 transferred the case to this Court, for a lack of personal 22 jurisdiction over King. Order Transferring Case, ECF No. 79. 23 King brought this motion for judgment on the pleadings under 24 Federal Rule of Civil Procedure 12(c), arguing Henrietta failed 25 to state a claim because by contracting to purchase the mills “as 26 is, where is” it became responsible for all costs of disassembly 27 and removal and could not rescind the contract based on such 28 unexpected costs. See generally, Mot. Henrietta opposed the 1 motion, Opp’n, to which King replied. Reply, ECF No. 93. 2 II. OPINION 3 A. Legal Standard 4 Federal Rule of Civil Procedure 12(c) states that “[a]fter 5 the pleadings are closed — but early enough not to delay trial — 6 a party may move for judgment on the pleadings.” Fed. R. Civ. 7 P. 12(c). A Rule 12(c) motion is reviewed under the same 8 standard as a Rule 12(b)(6) motion to dismiss. Dworkin v. 9 Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989). 10 The court takes as true the non-moving party’s factual 11 allegations and draws all reasonable inferences in that party’s 12 favor. Hines v. Youseff, 914 F.3d 1218, 1227 (9th Cir. 2019). 13 Judgment under Rule 12(c) “is proper when the moving party 14 clearly establishes on the face of the pleadings that no 15 material issue of fact remains to be resolved and that it is 16 entitled to judgment as a matter of law.” Hal Roach Studios, 17 Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 18 1989). 19 B. Analysis 20 1. Choice of Law 21 In diversity cases, district courts normally apply the 22 substantive law of the forum state, including its choice of law 23 rules. Klaxon Co. v. Sentor Elec. Mfg. Co., 313 U.S. 487, 496 24 (1941). When a case is transferred from one district to another 25 to cure a lack of personal jurisdiction, the law of the 26 transferee district applies. Muldoon v. Tropitone Furniture 27 Co., 1 F.3d 964, 967 (9th Cir. 1993). Because this case was 28 transferred from Arizona to California due to a lack of personal 1 jurisdiction in Arizona, see Order, ECF No. 79, this Court must 2 apply California’s choice of law rules. See Nelson v. Int’l 3 Paint Co., 716 F.2d 640, 643-44 (9th Cir. 1983). 4 In the absence of an agreement on choice of law in a 5 contract, California applies California law to commercial 6 transactions so long as the transaction bears an appropriate 7 relation to the state. Cal. Com. Code § 1301; Barclays Disc. 8 Bank Ltd. v. Levy, 743 F.2d 722, 725 (9th Cir. 1984). Because 9 Defendant is a citizen of California, see Compl. ¶ 6, and the 10 contract was negotiated in part in California, see Order at 8-9, 11 ECF No. 79, the transaction bears an appropriate relation to the 12 state. See Petersen v. Roylin Enters., Inc., 529 F.Supp. 584, 13 586 n.2 (D. Nev. 1982) (finding transaction bore an appropriate 14 relation to Nevada when defendants resided in Nevada and did 15 business there). Thus, California law applies.2 16 2. Subject Matter of the Contract 17 California has adopted the Uniform Commercial Code, see 18 Cal. Com. Code § 1101 et seq., under which Article 2 governs 19 transactions involving goods. Id. § 2102. This section defines 20 goods to mean “all things (including specially manufactured 21 goods) which are movable at the time of identification to the 22 contract for sale [. . .]” Id. § 2105. 23 The parties dispute whether the contract at issue is for 24 the sale of goods and thus governed by the section 2 of the 25 Commercial Code. See Opp’n at 4-6; Reply at 2-3. King, relying 26 on California Commercial Code § 2107(1), argues that the 27 2 Accordingly, the Court denies as moot King’s request to take 28 judicial notice of a British Columbia case. See Mot. at 12. 1 contract for the mining equipment constitutes a sale of real 2 property. Reply at 3. That section states that “[a] contract 3 for the sale of minerals or the like (including oil and gas) or 4 a structure of its materials to be removed from realty is a 5 contract for the sale of goods within this division if they are 6 to be severed by the seller [. . .]”. King argues that because 7 by the terms of the contract, Henrietta, the purchaser, was 8 responsible for removing the equipment and not the seller, the 9 sale does not constitute a sale of goods under this definition. 10 King, however, ignores § 2107(2) which goes on to state 11 that “[a] contract for the sale apart from the land of growing 12 crops or other things attached to realty and capable of 13 severance without material harm thereto [. . .] is a contract 14 for the sale of goods within this division whether the subject 15 matter is to be severed by the buyer or by the seller even 16 though it forms part of the realty at the time of contracting 17 [. . .]” (emphasis added). From the pleadings, it cannot be 18 determined with certainty whether the equipment could be removed 19 without materially harming the land. Viewed in the light most 20 favorable to Henrietta, the equipment could fit into this 21 definition, making section 2 of the Commercial Code applicable. 22 King also relies on California Public Resource Code § 3980 23 to support its argument that the contract was one for real 24 property. Reply at 3. This argument is without merit. That 25 section states that “mills, and all other machinery or tools 26 used in working or developing a mine, are deemed affixed to the 27 mine.” Cal. Pub. Res. Code § 3980. However, this is a 28 rebuttable presumption that the parties may contract around. 1 See Teater v. Good Hope Dev. Corp., 14 Cal.2d 196, 207 (1939) 2 (“the parties themselves may, in their dealings with chattels 3 annexed to or used in connection with real estate, fix upon them 4 whatever character, as realty or as personalty, they desire and 5 the courts will give to the property the character which the 6 parties themselves have fixed upon”); Fry v. Lost Key Mines, 108 7 Cal.App.2d 568, 571-574 (Ct. App. 1952); see also Nead v. 8 Specimen Hill Mining Co., 52 Cal.App.2d 475, 481 (1942). Here, 9 the parties clearly meant to contract for the equipment itself 10 as personal property not for the land, as the contract specifies 11 it is for the sale of the equipment and specifically 12 contemplates it being removed off the property. See Ex. 1 to 13 Compl. (listing equipment included in sale and stating “[b]uyer 14 is responsible for safely dealing with any and all chemicals 15 related to the removal of the purchased equipment.”) 16 Accordingly, viewed in the light most favorable to Henrietta, 17 the non-moving party, it is plausible that the contract is 18 governed by section 2 of the Commercial Code. 19 3. Breach of Contract Claim 20 King argues that Henrietta’s breach of contract claim must 21 fail because it agreed to purchase the equipment “as is, where 22 is.” Mot. at 10-14. King argues that this clause made 23 Henrietta responsible for any additional requirements to remove 24 the equipment off the property. Id. The Court disagrees. Such 25 an “as is” clause “calls the buyer’s attention to the exclusion 26 of the warranties and makes plain that there is no implied 27 warranty”, Cal. Com. Code § 2316(3)(a), which “in ordinary 28 commercial usage [is] understood to mean that the buyer takes 1 the entire risk as to the quality of the goods involved.” 2 U.C.C. § 2-316 cmt. 7 (emphasis added). The contract, in fact, 3 later confirms this interpretation stating that: “[a]ll property 4 in ‘as is condition’ [. . .] do[es] not warrant that the goods 5 are merchantable or fit for any purpose.” Ex. 1 to Compl. 6 Thus, the “as is” provision meant Henrietta bore the risk in 7 regards to the quality and operation of the equipment. It does 8 not support King’s argument that Henrietta risked being subject 9 to additional requirements for its removal. Nor does the “where 10 is” provision, which refers to the place of delivery. See 11 Herrmann v. Fireman’s Fund Ins. Co., 127 Cal.App.2d 560, 571 12 (Ct. App. 1954). 13 That the contract specifically listed three matters 14 Henrietta was responsible for in connection with the disassembly 15 and removal of the mining equipment further supports its 16 position that it could not be subject to additional requirements 17 pertaining to the equipment removal. See Ex. 1 to Compl. 18 (stating buyer was to be responsible for (1) properly handling 19 and disposing of any cyanide residue associated with any of said 20 purchased mills; (2) safely dealing with any and all chemicals 21 related to the removal of the purchased equipment; and (3) for 22 any and all costs and liability associated with certifying and 23 use of the overhead crane); see also Murphy v. DirectTV, Inc., 24 724 F.3d 1218, 1234 (9th Cir. 2013) (“mention of one matter 25 implies the exclusions of all others”). Accordingly, King has 26 failed to demonstrate Henrietta’s claims fail as a matter of law 27 and its motion for judgment on the pleadings is denied. See 28 Gold Mining & Water Co. v. Swinerton, 23 Cal.2d 19, 28 (1943) nee nn enn enn nnn ne nn nnn nn on nn ne on nw NO NE

1 (finding a refusal to perform unless the other party agrees to 2 an additional condition is a repudiation). 3 4, Leave to Amend 4 Henrietta in opposition also relies on a new theory to 5 support its breach of contract claim — that King did not 6 actually own the mine at the time Henrietta paid the purchase 7 || price. Opp’n at 9-11. Because this theory was not pled in the 8 operative complaint, the Court does not address it. See 9 Provencio v. Vazquez, 258 F.R.D. 626, 639 (E.D. Cal. July 29, 10 2009) (finding Plaintiffs could not raise additional theories of 11 liability in an opposition to a motion to dismiss and instead 12 had to file a motion for leave to amend if they wanted to pursue 13 those claims). Plaintiff requests leave to amend in its 14 opposition. See Opp’n at 14 n.7. The Court denies this request 15 | without prejudice as Defendant has not been given a proper 16 | chance to respond. If Plaintiff seeks to amend its complaint, 17 it must file a separate motion to amend. 18 Til. ORDER 19 For the reasons set forth above, the Court DENIES 20 Defendant’s Motion for Judgment on the Pleadings. 21 IT IS SO ORDERED. 22 Dated: October 21, 2021 23 kA 24 Geren aaa pebrsacr 00k 25 26 27 28