Judge: Barbara M. Scheper, Case: 22STCV15416, Date: 2023-02-22 Tentative Ruling

Case Number: 22STCV15416    Hearing Date: February 22, 2023    Dept: 30

Dept. 30

Calendar No.

Friedman vs. Diller, et. al., Case No. 22STCV15416

Tentative Ruling re:  Defendant’s Demurrer to Complaint; Motion to Strike

Defendant Arthur Diller (Defendant) demurs to the second cause of action in the Complaint of Plaintiff Sara Friedman (Plaintiff) and moves to strike portions of the Complaint. The demurrer is overruled and the motion to strike is denied.  Defendant is ordered to answer within ten (10) days of today’s date.

In reviewing the legal sufficiency of a complaint against a demurrer, a court will treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions, or conclusions of law. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank); C & H Foods Co. v. Hartford Ins. Co. (1984) 163 Cal.App.3d 1055, 1062.) It is well settled that a “demurrer lies only for defects appearing on the face of the complaint[.]” (Stevens v. Superior Court (1999) 75 Cal.App.4th 594, 601.) “The rules by which the sufficiency of a complaint is tested against a general demurrer are well settled. We not only treat the demurrer as admitting all material facts properly pleaded, but also give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Guclimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38 (internal quotes omitted).) For purposes of ruling on a demurrer, the complaint must be construed liberally by drawing reasonable inferences from the facts pleaded. (Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 958.)

When ruling on a demurrer, the Court may only consider the complaint’s allegations or matters which may be judicially noticed. (Blank, supra, 39 Cal.3d at 318.) The Court may not consider any other extrinsic evidence or judge the credibility of the allegations plead or the difficulty a plaintiff may have in proving his allegations. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) A demurrer is properly sustained only when the complaint, liberally construed, fails to state facts sufficient to constitute any cause of action. (Kramer v. Intuit Inc. (2004) 121 Cal.App.4th 574, 578.)

            Plaintiff’s claims against Defendant arise from a dispute involving partnership Holiday Villa East (HVE), which owns and operates a senior living facility in Santa Monica, California. (Comp. ¶ 14.) Defendants Arthur Diller and Jerry Ganger are managers of HVE. (Comp. ¶ 15.) Plaintiff is a partner in HVE with 20.83% interest. (Comp. ¶ 1.) Plaintiff alleges that Ganger, in December 2019, executed documents to obtain $926,000 of loans from Citizens Business Bank on behalf of HVE. (Comp. ¶ 16.) Ganger misrepresented to the bank that he had obtained Plaintiff’s authorization and permission for the loan; he and Defendant then “took affirmative steps to secret the fact and existence of the loan from Plaintiff, including omitting that information from disclosures they were obligated to provide to her and by refusing to tell Plaintiff about the loan.” (Comp. ¶ 16.) Plaintiff alleges that the loan resulted in a devaluation of her interest and a reduction in the profitability of HVE. (Comp. ¶ 16.)

            The Complaint also alleges that Diller, in March 2021, executed bank documents to obtain $2,092,569.85 on behalf of HVE. These documents similarly misrepresented Plaintiff’s authorization of the loan, and Diller and Ganger also attempted to conceal the fact of this loan from Plaintiff. (Comp. ¶ 17.) Plaintiff discovered the existence of both loans in June 2021. (Comp. ¶¶ 19-20.)

            Plaintiff’s second cause of action for fraud alleges that Defendant “deliberately concealed from Plaintiff the fact that Diller and Ganger . . . had applied for, sought, and obtained the two loans totaling more than $3 million dollars in the name of Holiday Villa East and using Plaintiff’s assets to secure these loans.” (Comp. ¶ 39.) Additionally, Defendant “deliberately created false financial statements which omitted the existence of the loans when they were obligated to disclose [them].” (Comp. ¶ 40.) Plaintiff relied on Defendant’s false representations by failing to inform the bank of Defendant’s fraud and prevent harm to herself. (Comp. ¶ 43.) Plaintiff seeks punitive damages pursuant to this cause of action. (Comp. ¶ 45, Prayer 8.)

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 (Graham.)

The rule of specificity of pleading is intended to apply only to affirmative representations and not to fraud by concealment. (Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384; Jones, 198 Cal.App.4th at 1199-1200.) In addition, “[l]ess specificity is required when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy....’” (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.)

Defendant demurs to the second cause of action on the basis that Plaintiff has failed to plead the claim with requisite specificity. However, Plaintiff’s claim is primarily one for fraudulent concealment, premised on Defendant’s alleged concealment of the existence of the loans from Plaintiff. (Comp. ¶ 39.) Given this, the requirement of specificity in pleading is relaxed. (Alfaro, 171 Cal.App.4th at 1384.) Additionally, it appears from the allegations that Defendant possesses greater information regarding the facts at issue, such as the procuring of the loans and the financial documents executed. The Court therefore finds the allegations sufficient to state a cause of action for fraud.

Defendant also moves to strike the allegations in the Complaint seeking recovery of punitive damages and attorney’s fees.

Punitive damages may be imposed where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice. (Civ. Code, § 3294, subd. (a).) Because the demurrer is overruled as to the fraud cause of action, Plaintiff has pled grounds for recovery of punitive damages.

With respect to the prayer for attorney’s fees, the Complaint alleges that “Attorneys fees are proper pursuant to the agreement of the parties” (Comp. p. 12:10), though pleads no facts in support. But, as Plaintiff points out, “[t]here is no requirement that a party plead that it is seeking attorney fees, and there is no requirement that the ground for a fee award be specified in the pleadings.” (Yassin v. Solis (2010) 184 Cal.App.4th 524, 533.) Accordingly, the motion to strike is denied.