Case Number: 20STCV00805    Hearing Date: April 6, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Plaintiffs JNP Enterprise, Inc., Eileen Panosian, and Armen Panosian (“Plaintiffs”; also Cross-Defendants) sue Defendants Suzanne Yee, Elena Chang, Robert Ip, RT Property Management Services Corp., Am Trust Financial, Inc., Security National Insurance Company, and Does 2 to 20 (“Defendants” or “Landlord Defendants”) pursuant to a First Amended Complaint (“FAC”) alleging claims of (1) Negligence – Premises Liability, (2) Breach of Contract, (3) Negligent Misrepresentation, (4) Fraud in the Inducement, (5) Nuisance, (6) Breach of Contract, and (7) Breach of Covenant of Good Faith and Fair Dealing. The claims are grounded in allegations that Plaintiffs rented from Defendants commercial real property located at 2498 Colorado Blvd., Pasadena, CA 91107 (“Subject Property”), from which Plaintiffs operated a purchased dry cleaning business, and that, due to Defendants’ negligent maintenance of the roof on the Subject Property, during a time of heavy rains, the roof collected and pooled a heavy amount of rainwater, later collapsing on January 17, 2019 and pouring rainwater into the bathroom, attic, and other work areas of Plaintiffs’ business, destroying two pressing machines and causing a significant water damage that led to mold, as well as a total loss of most of Plaintiffs’ equipment and loss of business.

Defendants/Cross-Complainants Susanne Yee, Elena Chang, Robert Ip, and RT Property Management Services Corp. in turn sue Plaintiffs JNP Enterprise and Eileen and Armen Panosian pursuant to a First Amended Cross-Complaint (“FAXC”) alleging claims of (1) Breach of Contract, (2) Breach of Implied Covenant of Good Faith and Fair Dealing, (3) Loss Rents, (4) Negligence – Premises Liability, (5) Equitable Indemnity, (6) Apportionment and Contribution, (7) Comparative Fault of Plaintiff, and (8) Declaratory Relief. The claims are based, in part, on allegations that Plaintiffs made structural alterations or utility installation to the Subject Property—including roof penetrations, installation of equipment on the roof, ceiling punctures, and removal of existing windows—as well as Plaintiffs’ failure to pay rent on the Subject Property between November 2019 and November 2020.

On September 6, 2022, Plaintiffs amended the FAC to name Legacy Realty Advisory, Inc. (“Legacy Realty”) as Defendant Doe 2.

On January 20, 2023, based on sufficiency and uncertainty grounds, Legacy Realty demurred to the FAC’s third cause of action for negligent misrepresentation and fourth cause of action for fraud in the inducement. Legacy Realty also moved to strike allegations and prayers for punitive damages and attorney’s fees from the FAC.

Demurrer: SUSTAINED, in Full.

Demurrer Sufficiency Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).) This device can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “To survive a [general] demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

Demurrer Uncertainty Standard

Uncertainty Standard: A demurrer to a pleading lies where the pleading is uncertain, ambiguous, or unintelligible. (Code Civ. Proc. § 430.10, subd. (f).) “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 616.) As a result, a special demurrer for uncertainty is not intended to reach failure to incorporate sufficient facts in the pleading but is directed only at uncertainty existing in the allegations already made. (People v. Taliaferro (1957) 149 Cal.App.2d 822, 825.) Where complaint is sufficient to state a cause of action and to apprise defendant of issues he is to meet, it is not properly subject to a special demurrer for uncertainty. (See ibid.; see also Gressley v. Williams (1961) 193 Cal.App.2d 636, 643 [“A special demurrer [for uncertainty] should be overruled where the allegations of the complaint are sufficiently clear to apprise the defendant of the issues which he is to meet”].)

FAC, Third Cause of Action, Negligent Misrepresentation: SUSTAINED, With Leave to Amend.

Negligent misrepresentation involves (1) an assertion, as a fact, of that which is not true, (2) by one who has no reasonable ground for believing it to be true, (3) made with intent to induce the recipient to alter his position to his injury or his risk, (4) with justifiable reliance on the representation, and (5) resulting damage. (B.L.M. v. Sabo & Deitsch (1997) 55 Cal.App.4th 823, 834.)

Allegations of fraud “must be pled with more detail than other causes of action.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 240.) “Every element of the cause of action for fraud must be alleged … factually and specifically[,] and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[G]eneral and conclusory allegations do not suffice.” (Small v. Fritz Cos., Inc. (2003) 30 Cal.4th 167, 184 [citations omitted].) Fittingly, a plaintiff pleading fraud must plead facts showing “how, when, where, to whom, and by what means” the allegedly fraudulent representations were tendered. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.)

The FAC’s fourth cause of action—pleaded against Defendants Yee, Chang, and Does 2 through 10, with Legacy Realty as Doe 2—alleges that, prior to Plaintiffs leasing the Subject Property and purchasing the dry cleaning business operated therein, Defendants Yee, Chang, and Does 2 through 10 (1) knew the premises were riddled with, among other things, structural issues and a negligently maintained roof, (2) failed to disclose such information to Plaintiffs, (3) Plaintiffs would not have signed the lease had false representations regarding the Subject Property not been made by these Defendants, (4) Plaintiffs relied on the negligent misrepresentations, (5) and Plaintiffs suffered damages therethrough. (FAC, ¶¶ 66-70.)

Legacy Realty demurs to this cause of action on the grounds that, inter alia, “[i]t is unclear which misrepresentations or statements were made by Defendant” Legacy Realty. (Demurrer, 5:7; see Demurrer, 5:7-25.)

In opposition, Plaintiffs argue that (1) they sufficiently pleaded both fraud claims (Combined Opp’n, 3:2-4:9), (2) the fraud pleadings are made with sufficiently particularity (Combined Opp’n, 4:22-5:2), (3) the demurrer should not be made into an examination of the sufficiency of the allegations but rather should be limited to a reading of the pleadings (Combined Opp’n, 5:3-23), and (4) evidence related to the prior property manager for the Subject Property, Defendant Robert Ip—which the Court notes is extrinsic evidence not attached to the FAC—shows that Ip knew that the prior tenant at the property had complained regarding leaks on the property and failed to disclose such information to Plaintiffs, and that Ip was the agent of Legacy Realty, for which reason Legacy Realty is liable for Ip’s concealments (Combined Opp’n, 6:12-7:9).

In reply, Legacy Realty argue Plaintiffs’ opposition (1) improperly relies on extrinsic evidence (Combined Reply, 2:17-3:4), (2) merely repeats the conclusory allegations of the FAC (Combined Reply, 3:7-24), (3) does not explain how the FAC is pleaded with particularity as to fraud (Combined Reply, 3:25-4:4), (4) fails to explain where the false representations were made or why the conclusory allegations in the FAC are sufficient (Combined Reply, 4:5-15), and (5) does not remedy Legacy Realty’s conclusion that the fraud claims are uncertainly pleaded (Combined Reply, 4:16-21).

The Court agrees with Legacy Realty. First, the Court briefly notes that the pleadings in the third cause of action read like a concealment claim (see FAC, ¶¶ 66-68) more than a negligent misrepresentation claim. (See Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 [summarizing concealment elements].) Second, the Court notes that the FAC does not sufficiently allege “how, when, where, to whom, and by what means” the negligent—rather than outright false—misrepresentations regarding the Subject Property and its roof were made to Plaintiffs by Legacy Realty as Doe 2 or an agent of Doe 2 because the allegations in the FAC are generalized and simply state Defendants generally had knowledge of problems with the condition of the Subject Property and negligently did not share this information with Plaintiffs. Last, the Court notes that the extrinsic evidence argued by Plaintiffs in their opposition (Combined Opp’n, 6:12-7:9) is not properly contained in the FAC and would have to be added to any operative pleading in order for the Court to consider them.

Legacy Realty’s demurrer is thus SUSTAINED, With Leave to Amend, as to the FAC’s third cause of action.

FAC, Fourth Cause of Action, Fraud in the Inducement: SUSTAINED, With Leave to Amend.

“The elements of fraud that will give rise to a tort action for deceit are: “‘(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.’” (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 974.)

Allegations of fraud “must be pled with more detail than other causes of action.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, supra, 158 Cal.App.4th at p. 240.) “Every element of the cause of action for fraud must be alleged … factually and specifically[,] and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp., supra, 35 Cal.3d at p. 216, superseded by statute as stated in Branick v. Downey Savings & Loan Assn., supra, 39 Cal.4th at p. 242.) “[G]eneral and conclusory allegations do not suffice.” (Small v. Fritz Cos., Inc., supra, 30 Cal.4th at p. 184 [citations omitted].) Fittingly, a plaintiff pleading fraud must plead facts showing “how, when, where, to whom, and by what means” the allegedly fraudulent representations were tendered. (Lazar v. Superior Court, supra, 12 Cal.4th at p. 645.)

The FAC’s fourth cause of action—pleaded against Defendants Yee, Chang, RT Property Management Services, Ip, and Does 2 through 10, with Legacy Realty as Doe 2—alleges that, prior to Plaintiffs leasing the Subject Property and purchasing the dry cleaning business operated therein, these Defendants (1) made misrepresentations that the Subject Property was in a safe condition, free or any defects or dangers, (2) knew the premises were riddled with, among other things, structural issues and a negligently maintained roof, (3) intended that Plaintiffs rely on the misrepresentations to secure the lease agreement with Plaintiffs, (4) Plaintiffs relied on the false misrepresentations, (5) and Plaintiffs suffered damages therethrough. (FAC, ¶¶ 73-79.)

Legacy Realty demurs to this cause of action on the grounds that, in relevant part, “Plaintiffs’ allegations fail to satisfy the well-established pleading standards required to support any theory of fraud and deceit against Defendant” because “Plaintiff does not allege a single representation made by Defendant Legacy or Defendant Ip [that] constitutes a concealment or nondisclosure of the condition of the roof.” (Demurrer, 8:8-11; see Demurrer 8:8-21.)

In opposition, Plaintiffs repeat the same arguments for both fraud claims: (1) Plaintiffs sufficiently pleaded both fraud claims (Combined Opp’n, 3:2-4:9), (2) the fraud pleadings are made with sufficiently particularity (Combined Opp’n, 4:22-5:2), (3) the demurrer should not be made into an examination of the sufficiency of the allegations but rather should be limited to a reading of the pleadings (Combined Opp’n, 5:3-23), and (4) evidence related to the prior property manager for the Subject Property, Defendant Robert Ip—which the Court notes is extrinsic evidence not attached to the FAC—shows that Ip knew that the prior tenant at the property had complained regarding leaks on the property and failed to disclose such information to Plaintiffs, and that Ip was the agent of Legacy Realty, for which reason Legacy Realty is liable for Ip’s concealments (Combined Opp’n, 6:12-7:9).

In reply, Legacy Realty repeats the same arguments for both fraud claims: Plaintiffs’ opposition (1) improperly relies on extrinsic evidence (Combined Reply, 2:17-3:4), (2) merely repeats the conclusory allegations of the FAC (Combined Reply, 3:7-24), (3) does not explain how the FAC is pleaded with particularity as to fraud (Combined Reply, 3:25-4:4), (4) fails to explain where the false representations were made or why the conclusory allegations in the FAC are sufficient (Combined Reply, 4:5-15), and (5) does not remedy Legacy Realty’s conclusion that the fraud claims are uncertainly pleaded (Combined Reply, 4:16-21).

The Court agrees with Legacy Realty. First, the Court again notes that the FAC does not sufficiently allege “how, when, where, to whom, and by what means” the intentional—rather than negligent—misrepresentations regarding the Subject Property and its roof were made to Plaintiffs by Legacy Realty as Doe 2 or an agent of Doe 2 because the allegations in the FAC are generalized and simply state Defendants generally had knowledge of problems with the condition of the Subject Property and intentionally did not share this information with Plaintiffs. Second, the Court again notes that the extrinsic evidence argued by Plaintiffs in their opposition (Combined Opp’n, 6:12-7:9) is not properly contained in the FAC and should be added to any operative pleading in order to be considered.

Legacy Realty’s demurrer is thus SUSTAINED, With Leave to Amend, as to the FAC’s fourth cause of action.

Motion to Strike: GRANTED, in Full.

Legal Standard

The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (1) strike out any irrelevant, false, or improper matter inserted in any pleading; or (2) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc. § 436, subds. (a)-(b).) For the purposes of a motion to strike pursuant to Sections 435 to 437 of the Code of Civil Procedure, the term “pleading” means a demurrer, answer, complaint, or cross-complaint, (Code Civ. Proc., § 435, subd. (a)), and an immaterial allegation or irrelevant matter in a pleading entails (1) an allegation that is not essential to the statement of a claim or defense, (2) an allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense, or (3) a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint (Code Civ. Proc., § 431.10, subds. (b)(1)-(3).)

Punitive Damages: GRANTED, With Leave to Amend.

Legacy Realty moves to strike punitive damages allegations and prayers in the FAC on the grounds that (1) such damages are only available in limited circumstances where specific allegations of malicious, oppressive, or fraudulent conduct are pleaded and (2) the FAC fails to allege sufficient facts supporting an award of punitive damages because (a) “the FAC does not plead any facts – much less specific facts – that would have a tendency to show that Defendant Legacy acted with the necessary intent required for punitive damages,” (b) “Plaintiffs have failed to allege that Defendant intended to deprive [them] of property or legal rights or otherwise cause them injury pursuant to Code of Civil Procedure Section 3294(c)(3),” (c) “Plaintiffs fail to make any specific allegations against Defendant to warrant an award for punitive damages,” and (d) “punitive damages against a corporate entity still require affirmative factual allegations demonstrating ratification and authorization” where “Plaintiffs fail entirely to make such allegations” and no “allegations at all are ple[ade]d with respect to advance knowledge and conscious disregard, authorization, ratification.”

In opposition, Plaintiffs argue—without addressing advance knowledge and conscious disregard, authorization, and ratification—that because the fraud claims survive demurrer, the punitive damages must survive as well. (Combined Opp’n, 7:10-20.)

In reply, Legacy Realty does not address punitive damages. (See Combined Reply, 2:15-4:27.)

The Court agrees with Legacy Realty. First, the FAC does not plead proper grounds to find that Doe 2 acted with maliciousness, oppressiveness, or fraudulent intent as to Plaintiffs. Second, the FAC fails to plead how punitive damages are appropriate against a company like Legacy Realty based on the conduct of its agents through doctrines like ratification.

Legacy Realty’s motion to strike is thus GRANTED, With Leave to Amend, as to punitive damages allegations and prayers.

Attorney’s Fees: GRANTED, With Leave to Amend.

Legacy Realty moves to strike allegations and prayers for attorney’s fees in the FAC on the grounds that “[a]ttorneys’ fees are not recoverable unless expressly authorized by statute or contract,” “[Legacy Realty] is not a party or signatory to the Lease identified in Paragraph 63 of the FAC,” “Plaintiffs’ do not attach a copy of the Lease or Assignment to the FAC,” “[Legacy Realty] is not a landlord or tenant,” and “[t]here is no statute or contract which permits Plaintiffs’ to request or recover attorney’s fees against … [Legacy Realty],” for which reasons
“[t]he claim for attorneys’ fees as to … [Legacy Realty] should be stricken, without leave to amend.” (Strike Mot., 5:7-15.)

In opposition, Plaintiffs limit their arguments to punitive damages being properly supported in the FAC and fail to address attorney’s fees.

The Court agrees with Legacy Realty. First, the FAC simply does not plead with any clarity the grounds for attorney’s fees against Doe 2, i.e., Legacy Realty. Second, while the FAC pleads that section 14(b) of the lease agreement for the Subject Property entitles Plaintiff to attorney’s fees (FAC, ¶¶ 63), the FAC does not adequately plead Doe 2 as a party thereto. Last, while the FAC alleges attorney’s fees are recoverable through its Breach of Covenant of Good Faith and Fair Dealing claim and case law in Brandt v. Superior Court (1985) 37 Cal.3d 813 (FAC, ¶¶ 103-13), such a claim is not made against Legacy Realty as Doe 2, but rather, only against Am Trust Financial, Inc., Security National Insurance Company, and Does 11-20 (FAC, 17:24-26).

Legacy Realty’s motion to strike is thus GRANTED, With Leave to Amend, as to attorney’s fees allegations and prayers.

Conclusion

Defendant [Doe 2] Legacy Realty Advisory, Inc.’s Demurrer to Plaintiffs’ First Amended Complaint is SUSTAINED, With Leave to Amend, as to the FAC’s third and fourth causes of action because neither claim sufficiently pleads with particularity how Legacy Realty Advisory, Inc., as Doe 2, made negligent or intentional misrepresentations to Plaintiffs related to the Subject Property.

Defendant [Doe 2] Legacy Realty Advisory, Inc.’s Motion to Strike Portions of Plaintiffs’ First Amended Complaint is GRANTED, With Leave to Amend, as to punitive damages and attorney’s fees pleaded in the FAC because the FAC does not provide proper grounds to award such relief against Legal Realty Advisory, Inc. as Doe 2.

Plaintiffs are given TEN (10) DAYS TO AMEND the operative pleading in conformity with this order.