Judge: Anne Richardson, Case: 23STCV24690, Date: 2024-03-18 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 23STCV24690    Hearing Date: March 18, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

Plaintiff Robert Drummond, as trustee of the Drummond Family Trust of 1991 sues Defendants Armin Monfared, Innovate Realty, Inc. (sued as Innovative Realty, Inc.; hereafter, Innovative), Bye Bye House, Inc. (Bye Bye), Stephen Couig, Paul Hanson, Michael Marshall and Does 1 to 50 pursuant to an October 10, 2023 Complaint alleging claims of (1) Specific Performance, (2) Breach of Contract, (3) Breach of Implied Covenant of Good Faith and Fair Dealing, (4) Fraud - Deception, (5) Business and Professions Code sec. 17200, et seq., and (6) Negligence.

The claims arise from the following allegations. On September 29, 2023, Defendant Paul Hanson and Plaintiff Robert Drummond entered a written contract for the purchase/sale of real property commonly known as 11911 Wagner Street, Los Angeles, California 90230 (the Property). Escrow was opened, Hanson, the buyer, was to deliver the earnest money deposit to Escrow by October 6, 2023, and to wire funds to close escrow by October 9, 2023. These funds were not received by the specified dates. Thus, on October 9, 2023, Plaintiff’s counsel emailed a notice of breach letter to Defendant Hanson and others. None of the recipients responded to the notice of breach letter by the time this action was initiated on October 10, 2023. Neither has Paul Hanson delivered funds to escrow nor closed the escrow. Instead, Defendants misrepresented to Plaintiff Drummond that Defendants would purchase the Property at the escrow price when Defendants knew that they would not purchase the property at the escrow price if they were not able to sell the Property during escrow. When Defendants discovered they would not be able to sell the Property at an adequate profit, Defendants submitted a cancellation of escrow.

B. Motion Before the Court

On November 16, 2023, Defendants Monfared, Innovate, and Couig filed a demurrer challenging the Complaint’s fifth cause of action for unfair business practices. The demurrer was set for hearing on March 18, 2024, and served on Plaintiff Drummond’s counsel via email and certified mail on November 16, 2023. The email and mailing addresses that appear for Plaintiff’s counsel in the demurrer’s proof of service are identical to the email and mailing addresses that appear for Plaintiff’s counsel in the caption page of Plaintiff Drummond’s Complaint.

Plaintiff Drummond failed to oppose Defendants Monfared, Innovate, and Couig’s demurrer, which these Defendants noticed to the Court by filing a notice of non-opposition on March 8, 2024.

Defendants Monfared, Innovate, and Couig’s demurrer is now before the Court.

II. Demurrer

A. Legal Standard

1. Sufficiency

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 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.) Thus, “[t]o 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.)

B. Discussion

1. Demurrer, Complaint, Fifth Cause of Action, Business and Professions Code sec. 17200, et seq.: OVERRULED.

a. Local Standard

Business and Professions Code section 17200 et seq. (the UCL) prohibits “unfair competition,” which is defined as, “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by” the False Advertising Act. (Bus. & Prof. Code, § 17200.)

Despite use of the term “competition,” the Unfair Competition Law is not confined to anticompetitive business practices; it is also directed toward the public’s right to protection from fraud, deceit, and unlawful conduct. (Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499, 519, superseded by statute on other grounds as stated in United Farm Workers of America v. Dutra Farms (2000) 83 Cal.App.4th 1146, 1163-1164.)

An “unlawful” business act is an act that violates some other law or regulation. (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.) Thus, the “unlawful” prong of the UCL borrows violations of other laws and makes those unlawful practices actionable under the UCL. (Ibid.) Virtually any law or regulation—federal or state, statutory or common law—can serve as the predicate for an “unlawful” business act claim under the UCL. (Ibid.) An “unlawful” business act can include inserting a provision in a contract that a party is prohibited from enforcing. (See People v. McKale (1979) 25 Cal.3d 626, 635 [acknowledging potential claim for “unlawful” business practice where mobile home park required tenants to sign rules that the park was prohibited by law from enforcing].)

As for the “unfair” prong of the UCL, there is a split of authority as to the test for determining whether a business act is “unfair.” (See Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 907 [describing split of authority], disagreed with on other grounds in Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 67.) Some cases hold that a practice is “unfair” if it “offends established public policy, that is immoral, unethical, oppressive, unscrupulous, or substantially injurious to consumers, or that has an impact on the victim that outweighs defendant’s reasons, justifications, and motives for the practice.” (Ibid.) Other cases require the public policy that is the predicate to the claim to be tethered to specific constitutional, statutory, or regulatory provisions. (Ibid.)

The “fraudulent” prong of the UCL prohibits conduct that is likely to deceive members of the public. (Prata v. Superior Court (2001) 91 Cal.App.4th 1128, 1144.) Thus, the UCL prohibits, not only advertising that is false, but also advertising that, while true, is actually misleading or has a capacity, likelihood, or tendency to deceive or confuse the public. (Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 226.) The test is objective and based on a reasonable consumer who is neither the most vigilant nor suspicious of advertising claims nor the most unwary and unsophisticated, but instead is the ordinary consumer within the target population. (Ibid.)

b. Analysis

In their demurrer, Defendants Monfared, Innovate, and Couig argue in relevant part: “Here, Plaintiff fails to identify the particular ‘statutory scheme’ that Demurring Parties allegedly violated. The Complaint states only in general conclusory language that ‘Plaintiff brings this action under Business and Professions Code sect 17200, et seq. and section 17500 as individuals who have suffered injury in fact and have lost money as a result of Defendants’ acts and omissions.’ [Complaint, ¶ 55.] This is simply insufficient.” (Demurrer, p. 4.)

No opposition appears in the record.

After review, the Court finds in favor of Plaintiff Drummond.

The argument raised by the demurrer is that the Complaint, like the one in Khoury v. Maly’s of Cal. (1993) 14 Cal.App.4th 612, 619 (Khoury) fails to identify the specific statutory scheme from which the UCL claim arises, making the claim defective, and meriting a court order sustaining a demurrer.

However, in Quelimane Co. v. Stewart Title Guar. Co. (1998) 19 Cal.4th 26, 46 (Quelimane) the California Supreme Court impliedly rejected the “statutory scheme” reasoning of the Khoury court by holding that claims for unfair business practices need not be pleaded specifically. (Quelimane, supra, 19 Cal.4th at p. 46.) Then, in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 182-183 the Supreme Court held that a plaintiff need not show that there is a specific statute prohibiting the conduct, concluding “the Legislature’s mere failure to prohibit an activity does not prevent a court from finding it unfair.” (Id. at p. 184.)

As a result, the sole argument advanced by Defendants Monfared, Innovate, and Couig is legally unsustainable in light of the two subsequent Supreme Court decisions that disapprove the reasoning in Khoury. 

III. Conclusion

Defendants Armin Monfared, Innovate Realty, Inc., and Stephen Couig’s Demurrer to the Complaint is OVERRULED.