Judge: Anne Richardson, Case: 23STCV23099, Date: 2024-05-15 Tentative Ruling

Case Number: 23STCV23099    Hearing Date: May 15, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

Plaintiff Fred C. Stalley sues Defendants Laleh H. Azad, Peter Geoffrey Bullen, Sean Ramann, State Farm General Insurance Company (State Farm), and Does 1 through 10 pursuant to a September 25, 2023, Complaint alleging claims of: (1) Breach of Contract, (2) Conversion, (3) Trespass to Chattels, and (4) Negligence against Defendants Azad, Bullen, and Does 1-5; and (5) Breach of Contractual Duty to Pay a Covered Claim, (6) Breach of Implied Duty of Good Faith and Fair Dealing, and (7) Bad Faith (First Party) against Defendant State Farm and Does 6-10.

The claims arise from the following allegations. Plaintiff Stalley as an individual owns the real property known as 1242 Piedra Morada Drive, Pacific Palisades, California 90272 (the subject property). Title to the property is held by the Stalley Living Trust, for which Plaintiff Stalley acts as trustee. From April 2015 to July 2022, Plaintiff Stalley rented the subject property to Defendants Azad and Bullen. After Defendants Azad and Bullen vacated the subject property, Plaintiff Stalley discovered that items had been stolen from the property and that the property had been damaged by Defendants Azad and Bullen. Plaintiff Stalley calculated damages of $149,176.72 and made a claim for insurance benefits under the policy issued by State Farm for the subject property. State Farm issued a payment in the amount of $47,785.23, well under the claimed damages of $149,176.72. The deficiency payment breached the policy issued to Plaintiff Stalley by failing to completely cover Plaintiff’s damages. This suit followed.

B. Defendant State Farm’s Demurrer and Motion to Strike

On November 1, 2023, Defendant State Farm filed a demurrer challenging the sufficiency of the three claims alleged against it in the Complaint.

That same day, State Farm filed a motion to strike challenging the Complaint’s prayer for punitive damages as against State Farm.

On February 14, 2024, Plaintiff Stalley filed oppositions to the demurrer and motion to strike.

On May 7, 2024, Defendant State Farm filed replies to Plaintiff Stalley’s opposition.

Defendant State Farm’s demurrer and motion to strike are now before the Court.

C. Defendant Bullen’s Demurrer

On December 30, 2023, Defendant Bullen filed a demurrer to the Complaint’s first cause of action for breach of contract.

On April 12, 2024, Plaintiff Stalley filed an opposition to Defendant Bullen’s demurrer.

On May 7, 2024, Defendant Bullen filed a reply to Plaintiff Stalley’s opposition.

Defendant Bullen’s demurrer is now before the Court.

II. Defendant State Farm’s Demurrer

A. Legal 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).)

To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) “[E]ach 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.) 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.) 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.)

A demurrer may only be used 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.) 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.)

B. Analysis

1. Demurrer, Complaint, Fifth Cause of Action, Breach of Contractual Duty to Pay a Covered Claim: SUSTAINED, with leave to amend.

a. Relevant Law

“A contract is a voluntary and lawful agreement, by competent parties, for a good consideration, to do or not to do a specified thing.” (Robinson v. Magee (1858) 9 Cal. 81, 83.) “To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff’s performance of the contract or excuse for nonperformance, (3) the defendant’s breach, and (4) the resulting damage to the plaintiff.” (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186 (Richman).) Implicit in the element of damage is that the defendant’s breach caused the plaintiff’s damage.” (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1352, italics omitted.)

““A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms. This is more difficult, for it requires a careful analysis of the instrument, comprehensiveness in statement, and avoidance of legal conclusions.’ [Citation.]” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993 [citation omitted].)

b. Court’s Determination

The Court finds in favor of Defendant State Farm.

As argued by State Farm, the Complaint’s fifth cause of action fails to allege that Plaintiff has performed or has been excused from performing his obligations under the contract with State Farm. All that the Complaint alleges in this regard is that “Defendants STATE FARM and DOES 6-10 were notified of the loss as required by the policy.” (Complaint, ¶ 65.) Such allegations fail to plead this necessary element of a breach of contract claim. Moreover, Plaintiff failed to allege the terms of the contract that are alleged to have been breached by State Farm. Both of these failures are in marked distinction to the first cause of action for breach of contract against Azad, Bullen, and Ramann, in which Plaintiff not only alleges that he performed substantially under the contract but also quotes the relevant portions of the lease (Complaint, ¶¶39-40.)

The Court finds no merit to the opposition argument that “Plaintiff sufficiently pled the formation of a contract and his performance by stating it was a policy he ‘purchase[d] from STATE FARM.’ (Complaint, page 10, line 2.)” (Opp’n, p. 4.) This argument lacks merit. Alleging that a person purchased an insurance policy does not amount to the same thing as alleging that the person complied with their contractual obligations under the policy or was excused from doing so, and what the particular terms are that were breached.

Defendant State Farm’s demurrer is thus SUSTAINED as to the Complaint’s fifth cause of action, with leave to amend.

The Court does not reach Defendant State Farm’s other arguments based on this result.

2. Demurrer, Complaint, Sixth Cause of Action, Breach of Implied Duty of Good Faith and Fair Dealing: SUSTAINED, with leave to amend.

a. Relevant Law

To prevail on a cause of action for breach of the implied covenant of good faith and fair dealing, the plaintiff must prove: (1) the existence of a contract between plaintiff and defendant; (2) plaintiff performed his contractual obligations or was excused from performing them; (3) the conditions requiring defendant’s performance had occurred; (4) the defendant unfairly interfered with the plaintiff’s right to receive the benefits of the contract; and (5) the plaintiff was harmed by the defendant’s conduct. (Merced Irr. Dist. v. County of Mariposa (E.D. Cal. 2013) 941 F.Supp.2d 1237, 1280 (Merced Irr.) [discussing California law].) Allegations must demonstrate defendant’s conduct for failure or refusal to discharge contractual responsibilities was a conscious and deliberate act, not an honest mistake, bad judgment or negligence. (Ibid.) “‘[T]he implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract and cannot be extended to create obligations not contemplated by the contract.’” (Ragland v. U.S. Bank Nat. Assn. (2012) 209 Cal.App.4th 182, 206 [quoting Pasadena Live v. City of Pasadena (2004) 114 Cal.App.4th 1089, 1094].)

b. Court’s Determination

The Court finds in favor of Defendant State Farm.

Performance or excusal of contractual obligations is an element equally applicable to breach of contract and breach of implied duty of good faith and fair dealing claims. (Richman, supra, 224 Cal.App.4th at p. 1186 [breach of contract]; Merced Irr., supra, 921 F.Supp.2d at p. 1280 [good faith and fair dealing].)

The Court thus adopts its discussion in Section II.B.1.b. to SUSTAIN Defendant State Farm’s demurrer to the Complaint’s sixth cause of action, with leave to amend.

3. Demurrer, Complaint, Seventh Cause of Action, Bad Faith (First Party): OVERRULED.

a. Relevant Law

A general demurrer for sufficiency may be sustained against duplicative claims. (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290 [“a cause of action for breach of governing documents [that] appear[ed] to be duplicative of [a] cause of action for breach of fiduciary duty” is “recognized … as a basis for sustaining a demurrer”]; Rodrigues v. Campbell Industries (1978) 87 Cal.App.3d 494, 501 [finding demurrer was properly sustained without leave to amend as to cause of action that contained allegations of other causes and “thus add[ed] nothing to the complaint by way of fact or theory of recovery”]; see also Award Metals, Inc. v. Superior Court (1991) 228 Cal.App.3d 1128, 1135, opn. mod. Apr. 10, 1991 [demurrer should have been sustained as to duplicative causes of action].)

b. Court’s Determination

The Court finds in favor of Defendant State Farm.

As argued by Defendant State Farm, the Complaint’s seventh cause of action is duplicative of the Complaint’s sixth cause of action because “[a]n improper denial of benefits resulting from a failure to investigate is just one way to support a breach of the implied covenant cause of action, but it is the same tortious conduct which allows for the same remedies.” (Mot., p. 9.)

Plaintiff Stalley argues that the seventh cause of action is not duplicative of the sixth because the seventh cause of action sounds in tort and the sixth cause of action sounds in contract. (Opp’n, p. 5.) While a claim for violation of the covenant of good faith and fair dealing can sound in tort in an insurance case, here Plaintiff contends that he is only bringing such claim (the sixth cause of action) for contract damages; such a claim is different from a breach of contract claim. (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1393). Thus, he seeks to also state a tortious claim for bad faith in his seventh cause of action. (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1072.) Obviously, there are additional remedies for such a tortious bad faith claim, including punitive damages. Thus, while arguably the seventh cause of action sets forth a tortious breach of the implied covenant claim, the Court understands Plaintiff to be distinguishing this from the contractual breach of the implied covenant claim. There is little to be gained by sustaining a demurrer, where Plaintiff can state such a claim, whatever the label.

Defendant State Farm’s demurrer is thus OVERRULED as to the Complaint’s seventh cause of action.

III. Defendant State Farm’s Motion to Strike

A. Legal Standard

The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (a) strike out any irrelevant, false, or improper matter inserted in any pleading; or (b) 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); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

For the purposes of a motion to strike pursuant to Sections 435 to 437 of the Code of Civil Procedure, the term “pleading” generally 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), (c)).

B. Analysis

1. Motion to Strike, Complaint, Punitive Damages: DENIED.

a. Relevant Law

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a); College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725 (College Hospital) [explaining amendments requiring “despicable” conduct for malice and oppression].)

When the defendant is a corporation, ‘[a]n award of punitive damages … must rest on the malice of the corporation’s employees’” specifically, “the oppression, fraud, or malice perpetrated, authorized, or knowingly ratified by an officer, director, or managing agent of the corporation,” where a managing agent “include[s] only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy.’” (Wilson v. Southern California Edison Co. (2015) 234 Cal.App.4th 123, 164, citations omitted.)

b. Court’s Determination

The Court finds in favor of Defendant State Farm.

As the Court has overruled State Farm’s demurrer to the seventh cause of action, a claim for which punitive damages may be alleged, there is no basis to strike punitive damages. Obviously, Plaintiff will only be entitled to obtain punitive damages on tortious claims.

Defendant State Farm’s motion to strike punitive damages alleged against it in the Complaint is thus DENIED.

IV. Defendant Bullen’s Demurrer

A. Legal Standard

See Section II.A. above.

B. Analysis

1. Demurrer, First Cause of Action, Breach of Contract: SUSTAINED, with leave to amend.

a. Relevant Law

See Section II.B.1.a. above.

b. Court’s Determination

The Court finds in favor of Defendant Bullen.

As argued by Defendant Bullen, the lease agreement attached to the Complaint contradicts the allegations in the body of the Complaint to the effect that Defendant Bullen was a party to the lease agreement for the subject property. More specifically, the Complaint alleges that “[o]n or about April 1, 2015, [Plaintiff] STALLEY contracted with [Defendants] AZAD and BULLEN for the rental of a single-family residence” and that “[t]he written contract was a residential lease for the subject property[] … [and is] attached to th[e] [C]omplaint as Exhibit A.” (Complaint, ¶ 9.) However, Exhibit A shows that only Defendant Azad initialed and signed the lease agreement for the subject property. (Complaint, Ex. A, pp. 1-6.) And even though the lease agreement contains a term stating that if there is more than one “Tenant,” all tenants are jointly responsible for payment obligations (Complaint, Ex. A, ¶ 22), only Defendant Azad is identified as a tenant in the Complaint. (See, e.g., Complaint, Ex. A, ¶ 36.) Thus, no contractual relationship is alleged between Plaintiff Stalley and Defendant Bullen.

The Court finds insufficient merit to Plaintiff’s argument that because Defendant Bullen was a resident of the subject property, Defendant Bullen was also a “Tenant” of the property. Bullen does not appear to be specifically defined as “Tenant” in the lease agreement.

Moreover, the Court finds insufficient merit to Plaintiff’s argument that because Defendant Bullen is alleged to be Defendant Azad’s spouse, the community is liable for all debts incurred for the necessities of life, making Defendant Bullen liable for community debts. While there is merit in this argument, it is unclear whether the claim should sound in breach of contract or some other legal theory that allows Plaintiff Stalley to recover damages from Defendant Bullen.

Defendant Bullen’s demurrer is thus SUSTAINED, with leave to amend. 

V. Conclusion

A. Defendant State Farm’s Demurrer

Defendant State Farm General Insurance Company’s Demurrer to Plaintiff’s Complaint is SUSTAINED as to the fifth and sixth causes of action, with leave to amend, and OVERRULED as to the seventh cause of action.

B. Defendant State Farm’s Motion to Strike

Defendant State Farm General Insurance Company’s Motion to Strike Portions of Plaintiff’s Complaint is DENIED.

C. Defendant Bullen’s Demurrer

Defendant Peter Geoffrey Bullen’s Demurrer to Verified Complaint is SUSTAINED, with leave to amend.

Plaintiff is to file any amended pleading within 14 calendar days.