Judge: Alison Mackenzie, Case: 22STCV32850, Date: 2024-07-10 Tentative Ruling
Case Number: 22STCV32850 Hearing Date: July 10, 2024 Dept: 55
NATURE OF PROCEEDINGS: Demurrer
of Defendants SIOF 1 PROPERTIES, LLC, MARTIN MUOTO, ARI HORN, and GRAY
LUSK to Second Amended Complaint.
BACKGROUND
This case consists of two
consolidated cases related to a commercial lease dispute between the parties.
In consolidated case number 22STCV38250, SIOF 1 PROPERTIES, LLC alleges claims
against PHOOD
FARMACY 2 LLC, ROBERT ANCILL, and THELMA ANCILL based on allegations that SIOF,
as commercial lessor and lender, agreed to provide over $350,000 for Phood
Farmacy’s improvements to prepare 1000 E. 60th Street, Los Angeles for
occupancy to operate a restaurant, but Phood Farmacy abandoned the premises
after about 7 months of possession and refuses to repay the loan or pay the
rent.
In consolidated case number 22STCV39896, PHOOD FARMACY
2 LLC, ROBERT ANCILL, THELMA ANCILL, and THE NEXT IDEA CONSULTING, LLC filed a Second
Amended Complaint (“SAC”) against SIOF 1 PROPERTIES, LLC; MARTIN MUTO; ARI HORN;
and GRAY LUSK (“Demurring Defendants”) regarding Demurring Defendants’ alleged
failure to perform commercial lease agreements including preparations for the
new restaurant. Those Causes of Action are (1) Breach of Contract, (2)
Violation of California’s Unfair Competition Law, (3) Breach of Fiduciary Duty,
(4) Accounting, (5) Intentional Misrepresentation, (6) Negligent
Misrepresentation, (7) Intentional Interference with Prospective Economic
Advantage, (8) Negligent Interference with Prospective Economic Advantage, (9)
Conversion, (10) Unjust Enrichment, and (11) Promissory Estoppel.
Demurring Defendants demur to the Fifth, Seventh and
Eighth Causes of Action of the SAC. PHOOD FARMACY 2, LLC; THE NEXT IDEA
CONSULTING, LLC; THELMA ANCILL; and ROBERT ANCILL (“Opposing Plaintiffs”) advocate
overruling or leave to amend.
LEGAL STANDARD
Demurrers are to be sustained where a pleading fails
to plead adequately any essential element of the cause of action. Cantu v.
Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879-880. “Because a
demurrer challenges defects on the face of the complaint, it can only refer to
matters outside the pleading that are subject to judicial notice.” Arce ex
rel. Arce v. Kaiser Found. Health Plan, Inc. (2010) 181 Cal.App.4th 471,
556. In
ruling upon demurrers, courts treat as being true “not only the complaint's
material factual allegations, but also facts that may be implied or inferred
from those expressly alleged.” Poseidon Development, Inc. v. Woodland Lane
Estates, LLC (2007) 152 Cal.App.4th 1106, 1111-1112.
ANALYSIS
1. Fifth
Cause of Action- Intentional Misrepresentation
Demurring Defendants contend that, after the Court
sustained the demurrer as to the same claims of the FAC, Plaintiffs’ Cause of Action
for Intentional Misrepresentation still lacks particular descriptions of
misrepresentations and financial statements allegedly made by Demurring
Defendants.
With regard to fraud claims, pleadings must allege
facts as to “‘how, when, where, to whom, and by what means the representations
were tendered.’" Stansfield v. Starkey (1990) 220 Cal.App.3d 59,
73. As to the degree of particularity required to allege fraud,
“‘considerations of practicality enter in.’” Miles v. Deutsche Bank Nat’l
Trust Co. (2015) 236 Cal.App.4th 394, 403. A cause of action for promissory
fraud must include specific factual circumstances from which a contemporaneous
intent not to perform can be inferred. Hills Transportation Co. v. Southwest
Forest Ind., Inc. (1968) 266 Cal.App.2d 702, 707.
Here, the amendments contained in the SAC suffice to
allege that the Demurring Defendants had made the 6/30/20 lease without intent
to perform promises about creating space suitable for restaurant operation.
E.g., SAC, ¶¶ 75, 96-101.
Beyond the contract, the SAC alleges specific details
of other promises, as to how, when, where, to whom, and by what means,
representations were tendered. E.g., SAC, ¶¶ 75 (promises were the contract and
oral), 76 (identities), 82 (representations of named parties’ about intent to
remedy issues), 83 (8/1/22 representation by Defendant MARTIN MUOTO about cost
of construction), 84-85 (8/31/22 representation by Defendant GRAY LUSK to
Plaintiff ROBERT ANCILL via a schedule of costs), 86-88 (details of invoice
representations),
While arguably some of the representations are lacking
in detail, the procedural rule applies that a demurrer does not lie as to only
part of a claim. E.g., Poizner v. Fremont General Corp. (2007) 148
Cal.App.4th 97, 119 (“A demurrer must dispose of an entire cause of action to
be sustained.”).
Therefore, the Court overrules the demurrer as to the
misrepresentation claim.
2. Seventh
and Eighth Causes of Action - Intentional and Negligent Interference with
Prospective Economic Advantage
Demurring Defendants contend that the SAC still does not
allege an independently wrongful act and an actual disruption of any
relationship. In response, Opposing Plaintiffs argue that, beyond just the lessors’
privilege to select tenants, the SAC alleges independent, wrongful acts
designed to disrupt a known economic relationship, done by fraudulent promises such
as a promise to lease the shared space, resulting lost economic benefit that
was caused by not having the nearby office.
The elements of a claim for intentional interference
with prospective economic advantage are: (1) economic relationship existing
between the plaintiff and third party, (2) probability of future economic
benefit to the plaintiff, (3) defendant's knowledge of the relationship, (4) defendant's
intentional acts designed to disrupt the relationship, (5) defendant engaged in
an independently wrongful act in disrupting the relationship beyond just
inducing disruption of economic advantage, (6) actual disruption of the
relationship, and (7) economic harm to
the plaintiff caused by the acts. Salma v. Capon (2008) 161 Cal.App.4th
1275, 1290.
The elements of a claim for negligent interference
with prospective economic advantage are (1) economic relationship between the
plaintiff and a third party, (2) that contained a reasonably probable future
economic benefit or advantage to plaintiff, (3) defendant knew of the existence
of the relationship and was aware, or should have been, that if it did not act
with due care, its actions would interfere with the relationship and cause
plaintiff to lose in whole or in part the probable future economic benefit or
advantage, (4) defendant was negligent, (5) negligence caused damage to
plaintiff because of actual interference or disruption, and (6) plaintiff lost
in whole or in part the economic benefits or advantage reasonably expected from
the relationship. North Amer. Chem. Co. v. Superior Court (1997) 59
Cal.App.4th 764, 786.
Specific facts are not required in order to allege
disruption and loss. Cf. J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799,
803 (“court must assume the truth of all material allegations in the
complaint…, including the allegations of negligence and cause in fact. The only
question … is whether a cause of action for negligent loss of expected economic
advantage may be maintained under these facts.”).
Furthermore, a complete disruption of an economic
relationship is not required, but instead the loss may be only partial. See,
e.g., N. Am. Chem. Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786–787
(“the relationship was actually interfered with or disrupted and plaintiff lost
in whole or in part the economic benefits or advantage reasonably
expected from the relationship.”). (Underscoring added.)
First, the SAC sufficiently alleges Demurring
Defendants’ oral promise to allow Opposing Plaintiffs to share commercial real
estate space in relation to a partnership agreement between Plaintiff The Next
Idea Consulting, LLC and LETA. E.g., SAC, ¶¶ 9, 38-42 and 143. Additionally,
the SAC contains allegations inferring the fraudulent nature of the oral
promise, based upon allegations of many other instances of fraudulent promises,
reasonably inferring an ongoing pattern of those. E.g., SAC, ¶¶ 76-79, 82, 93, 106-107,
133 and 149.
Second, the SAC adequately alleges SIOF’s disruption
causing at least a partial loss of benefits due to not being able to locate an
office beside Phood Farmacy, including Robert Ancill’s resultant needing to
travel regularly to different locations, and Opposing Plaintiffs’ inability to
proceed with their partnership as planned. E.g., SAC, ¶¶ 144-148 and 164-168.
In sum, the Court overrules the demurrer as to these
claims.
CONCLUSION
The demurrer is overruled. Twenty days to answer.