Judge: Alison Mackenzie, Case: 24STCV01435, Date: 2024-10-29 Tentative Ruling

Case Number: 24STCV01435    Hearing Date: October 29, 2024    Dept: 55

NATURE OF PROCEEDINGS: Hearing on Defendant’s Demurrer with Motion to Strike (CCP 430.10)

Defendant’s Demurrer is overruled and the Motion to Strike is denied.

BACKGROUND

Plaintiffs, Sandra Ayala Venegas and Eugenio A Corona (Plaintiffs), brought this action against General Motors, LLC (Defendant), alleging warranty violations relating to Plaintiffs’ lease of a 2021 Chevrolet Silverado 1500.

The causes of action in the First Amended Complaint (“FAC”) are: (1) Violation of Civil Code section 1793.2, subd. (d); (2) Violation of Civil Code section 1793.2, subd. (b); (3) Violation of Civil Code section 1793.2 subd., (a)(3). (4) Breach of the Implied Warranty of Merchantability; (5) and Fraudulent Inducement – Concealment.

The motion now before the Court is Defendant’s Demurrer as to the fifth cause of action and Defendant’s motion to strike the punitive damages from the FAC. Plaintiffs oppose both motions.

LEGAL STANDARD

When considering demurrers, courts read the allegations liberally and in context. Wilson v. Transit Authority of City of Sacramento (1962) 199 Cal.App.2d 716, 720-21. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994. “A demurrer tests the pleading alone, and not on the evidence or facts alleged.” E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315. As such, courts assume the truth of the complaint’s properly pleaded or implied factual allegations. Ibid. However, it does not accept as true deductions, contentions, or conclusions of law or fact. Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal.App.4th 531, 538.

Further, the court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. Code Civ. Proc., § 436(a). The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. Id., § 436(b). The grounds for a motion to strike are that the pleading has irrelevant, false, or improper matter, or has not been drawn or filed in conformity with laws. Id. § 436. The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. Id. § 437.

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”). The burden is on the complainant to show the Court that a pleading can be amended successfully. Blank v. Kirwan (1985) 39 Cal.3d 311, 318.

ANALYSIS

I. Demurrer

Plaintiffs leased the subject vehicle, a 2021 Chevrolet Silverado 1500, on January 4, 2021. FAC ¶ 6. During the original express warranty period, the car developed numerous defects. Plaintiffs allege that they presented the vehicle to Defendant’s authorized repair facility on two occasions: May 20, 2021, and June 21, 2021. FAC ¶¶ 23, 24.

A. Statute of limitations

First, Defendant argues that Plaintiffs’ claim for fraudulent inducement – concealment is barred by the statute of limitations.

“An action for relief on the ground of fraud or mistake [must be brought within three years]. The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” Code Civ. Proc., § 338.

[S]tatutes of limitation do not begin to run until a cause of action accrues.” Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806. “[A] cause of action accrues at ‘the time when the cause of action is complete with all of its elements.’” Ibid (quoting Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397 (Norgart)). “An exception is the discovery rule, which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.” Norgart, supra 21 Cal.4th at p.389. “Under the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her.” Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110.

“In order to raise the issue of belated discovery, the plaintiff must state when the discovery was made, the circumstances behind the discovery, and plead facts showing that the failure to discover was reasonable, justifiable and not the result of a failure to investigate or act. Once belated discovery is pleaded, the issue of whether plaintiff exercised reasonable diligence in discovering the negligent cause of the injury is a question of fact.” Bastian v. County of San Luis Obispo (1988) 199 Cal.App.3d 520, 527 (citations omitted). “Once properly pleaded, belated discovery is a question of fact.” Ibid. A demurrer may be sustained only where “the trial court could determine as a matter of law that failure to discover was due to failure to investigate or to act without diligence.” Ibid.

Plaintiffs allege that they leased the vehicle on January 4, 2021. Plaintiffs filed their original complaint on January 19, 2024. Therefore, unless the limitations period accrued at least two weeks after the lease date, or was subsequently tolled for at least two weeks, Plaintiffs’ claim is barred by the statute of limitations. 

Defendant argues that Plaintiffs cannot argue that discovery tolled the statute of limitations because they allege that the defects and non-conformities manifested themselves within the warranty period. Demurrer at pp. 7:26-8:1. However, Defendant misstates the discovery rule. Under the discovery rule, the limitations period is tolled until the plaintiff suspects or should suspect wrongdoing. Therefore, if Plaintiffs did not or should not have reasonably suspected Defendant’s wrongdoing until after January 19, 2021, their original complaint was timely. 

The Court finds that Plaintiffs have adequately pleaded facts supporting their theory of delayed discovery. They allege that they made two trips to Defendant’s authorized repair facility in 2021, defects persisted, and that they discovered Defendant’s wrongful conduct shortly before filing their complaint in January 2024, based on the vehicle’s continued defects. FAC ¶¶ 23-26. While a fact finder might dispute the exact date Plaintiffs should have suspected a fraud claim against Defendant, even a finding that they had constructive notice of their claim after the May 2021 visit to the authorized repair facility puts them within the limitations period.

Accordingly, the Court overrules the demurrer as to the fifth cause of action based on the statute of limitations.

B. Specificity

Next Defendant argues that Plaintiffs fail to allege their fraud complaint with sufficient specificity.

“The required elements for fraudulent concealment are (1) concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the fact; (4) the plaintiff was unaware of the fact and would not have acted as he or she did if he or she had known of the concealed or suppressed fact; and (5) plaintiff sustained damage as a result of the concealment or suppression of the fact.” Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 606.

The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. Lazar v. Superior Court (1996) 12 Cal.4th 631, 645. As concealment is a species of fraud, it must also be pled with specificity. Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 878. However, less specificity is required where the defendant necessarily possesses the information. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) Moreover, it is not practical to allege facts showing how, when and by what means something did not happen. Alfaro v. Community Housing Improvement Sys. Planning Assn. (2009) 171 Cal.App.4th 1356, 1384.) But, if the concealment is based on providing false or incomplete statements, the pleading must at least set forth the substance of the statements at issue. Id.

In this case, Plaintiffs have sufficiently alleged all the elements of a fraudulent inducement —concealment cause of action in the FAC. The FAC alleges that Plaintiffs entered into a warranty contract with Defendant on 1/4/2021 (¶¶ 6-7); that Defendant knew of the defects posed by the subject vehicle prior to Plaintiffs’ lease of the vehicle and withheld such information from Plaintiffs (¶¶ 63-64, 67-70, 72); that Defendant had exclusive/superior knowledge of the defects (¶¶ 65-70, 73a-73b); that the defects presented a safety hazard (¶¶ 25, 64); that Plaintiffs would not have leased the subject vehicle had they known about the defects (¶¶ 66, 70, 75, 78); and that Plaintiffs suffered damages (¶ 78).

At the pleading stage, these allegations are sufficient to assert a cause of action for fraudulent inducement — concealment.

C. Duty to Disclose

Next, Defendant argues that because Plaintiffs did not lease the vehicle directly from Defendant but from the dealership, Defendant had no duty to disclose material facts. 

A duty to disclose a material fact can arise “(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.” LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 336. The latter three require a transactional relationship between the parties. Id. at 336-337.

Defendant’s argument is similar to one the court rejected in Dhital v. Nissan North America, Inc. (2022) 84 Cal.App.5th 828 (“Dhital”), rev. granted Feb. 1, 2023, S277568, which the Court finds persuasive.[1] In Dhital, the court held that at the pleadings stage, it was sufficient for plaintiff to allege “that they bought the car from the Nissan dealership, that Nissan backed the car with an express warranty, and that Nissan’s authorized dealerships are its agents for the purposes of the sale of Nissan vehicles to consumers.” Dhital, supra, 84 Cal.App.5th 828

Defendant relies on Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276 (Bigler-Engler), which held a medical device manufacturer had no duty to disclose. However, the facts of Bigler-Engler are distinguishable. In Bigler-Engler, the plaintiff rented a medical device from her doctor, which she claimed caused serious injury to her knee. Bigler-Engler, supra, 7 Cal.App.5th at 286-292. The court, evaluating the plaintiff’s claim against the device manufacturer for fraudulent concealment, held that because there was no transactional or other relationship between the plaintiff and the medical device manufacturer, there was no duty to disclose. Id. at 312. However, the circumstances of buying a car are widely different from renting a medical device. Doctors are not franchisees of medical device companies, and patients generally do not choose their doctor based on their desired model of medical device. People go to a Chevrolet dealer to buy a Chevrolet, and they generally expect that the dealer is significantly under the manufacturer’s control. See Daniel v. GM Motor Co. (9th Cir. 2015) 806 F.3d 1217, 1226-27 (noting auto manufacturers communicate with their consumers through their dealerships). Moreover, unlike the medical device manufacturer in Bigler-Engler, Defendant had a direct transactional relationship with Plaintiff insofar as it made express warranties regarding the car.

Based on the automaker-dealership relationship and Defendant’s express warranties, the Court concludes that Defendant had a transactional relationship with Plaintiff, imposing a duty to disclose material facts.

Accordingly, the Court overrules Defendant’s demurrer to the fraudulent inducement – concealment claim.

II. Motion to Strike

Defendant further moves to strike the Plaintiffs’ request for punitive damages because they fail to plead sufficient facts to support the allegations of “oppression, fraud, or malice.”

To state a prima facie claim for punitive damages, a complaint must set forth the elements as stated in the general punitive damage statute, Civil Code Section 3294. College Hospital, Inc. v. Superior Court (1994) 8 Cal.4th 704, 721. These statutory elements include allegations that the defendant has been guilty of oppression, fraud, or malice. Civ. Code § 3294, subd. (a). “Fraud,” for purposes of punitive damages, “means an intentional misrepresentation, deceit or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” Civil Code §3294(c).

“In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff. In passing on the correctness of a ruling on a motion to strike, judges read allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume their truth. In ruling on a motion to strike, courts do not read allegations in isolation.” Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255. (citations omitted). “The mere allegation an intentional tort was committed is not sufficient to warrant an award of punitive damages. Not only must there be circumstances of oppression, fraud or malice, but facts must be alleged in the pleading to support such a claim.” Grieves v. Superior Ct. (1984) 157 Cal.App.3d 159, 166 (fn. omitted) (citations omitted).

Since this Court has overruled Defendant’s demurrer to the fraud cause of action, the Court must also deny Defendant’s motion to strike the claim for punitive damages. Moreover, as pleaded, the FAC includes allegations that Defendant had exclusive knowledge of the vehicle's defects before Plaintiffs leased it and intentionally withheld that knowledge from Plaintiffs. FAC ¶¶ 63-64, 67-70, 72 -74.

Accordingly, the Court denies the motion to strike.

CONCLUSION

Defendant’s demurrer is overruled. Defendant’s motion to strike is denied. Defendant has 20 days to answer.