Judge: Barbara M. Scheper, Case: 22STCV21324, Date: 2023-03-24 Tentative Ruling
Case Number: 22STCV21324 Hearing Date: March 24, 2023 Dept: 30
Calendar No.
Lemus, et. al.
vs. Sosa, et. al., Case No. 22STCV21324
Tentative Ruling
re: Defendants’ Demurrer to First
Amended Complaint; Motion to Strike
Defendants Darwin Sosa, Danny
Navarro, and Maxres, Inc. dba Century 21 Allstars (collectively, Defendants)
demur to the First Amended Complaint (FAC) of Plaintiffs Edgardo C. Lemus and
Maria G. Lemus (collectively, Plaintiffs), and move to strike portions of the
FAC. The demurrer is sustained as to all causes of action against Danny
Navarro, and as to the first and third causes of action against Darwin Sosa and
Maxres Inc. dba Century 21 Allstars (Century 21). The demurrer is overruled as
to the second cause of action against Sosa and Century 21. The motion to strike
is granted in part.
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.)
Plaintiffs’ claims in this action
arise from their sale of the real property located at West 66th Street, Los
Angeles (the Property). (FAC ¶ 15.) Defendants Darwin Sosa and Century 21
allegedly agreed to act as Plaintiffs’ agent in the sale of the Property, and
to list the Property on the Multiple Listing Service (MLS). (FAC ¶ 18.)
Plaintiffs informed Sosa that the sale of the Property should include the
current tenants, given the challenge of evicting tenants due to Los Angeles
County’s COVID-19 Eviction Moratorium. (FAC ¶ 17.)
Sosa and Century 21 failed to
properly list the property on the MLS. (FAC ¶ 19.) Instead, they presented
Plaintiffs with a $355,000 offer for the Property from DN Capital Investment,
whose CEO, CFO, and Secretary is another agent at Century 21, Defendant Danny
Navarro. (FAC ¶ 22.) Plaintiffs allegedly signed a disclosure regarding the
dual agency, but those documents were only in English, and Plaintiffs, who
primarily communicate in Spanish, were not offered translated documents or a
translator. (FAC ¶ 21.) The agreement for the sale to DN Capital Investment was
later cancelled by Navarro, through his company. (FAC ¶ 23.)
On May 19, 2020, Sosa presented Plaintiffs
an offer of $310,000 from the buyer EWA Capital LLC (EWA), who was being
represented at Century 21 by Navarro. (FAC ¶ 24.) Plaintiffs told Sosa that
they would sell the Property at $310,000 if it was sold occupied. (FAC ¶ 25.)
However, the purchase agreement between Plaintiffs and EWA provided that the
Property would be delivered vacant. (FAC ¶ 26.) Plaintiffs attempted to cancel
the sale agreement with EWA but were unsuccessful. (FAC ¶ 27.) To resolve the
dispute, Plaintiffs and EWA entered into binding arbitration and settled the
case in a confidential settlement agreement. (FAC ¶ 28.) Plaintiffs allege that
Defendants “conspired amongst themselves to defraud the Plaintiffs and offered
to sell the property to buyer EWA Capital at $310,000 vacant for the purpose of
collecting a broker commission upon closing.” (FAC ¶ 37.)
Plaintiffs assert three causes of
action against Defendants, for (1) Breach of Contract, (2) Fraud, and (3)
Negligence.
First Cause of Action for Breach of Contract
Plaintiffs’ first cause of action
alleges that Sosa and Century 21 breached the Residential Listing Agreement for
the sale of the Property by failing to list the Property on the MLS, and again
“when they intentionally and negligently communicated a material error to sell
the Subject Property at $310,000 vacant.” (FAC ¶¶ 41-42.) Plaintiffs seek
compensatory damages of at least $350,000 for Defendants’ alleged breaches.
(FAC ¶ 43.)
“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. 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.’” (McKell
v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.)
Here, Plaintiffs have not attached
a copy of the relevant contract to the FAC. Though the FAC references an
“Exhibit 1” for the Residential Listing Agreement (FAC ¶ 39), there are no
exhibits attached to the FAC. Plaintiffs have also failed to allege the substance
of the relevant terms of the contract. With respect to Defendants’ first
alleged breach, Plaintiffs allege only that Defendants “agreed to list the
Subject Property on the [MLS] to allow a fair and competitive offer from ready,
willing, and able buyers.” (FAC ¶ 19) There are no allegations indicating which
provision in the Listing Agreement was breached by Defendants’ representation
to EWA that Plaintiffs would sell the Property at $310,000 vacant; Plaintiffs
allege only that they “expressed to [Sosa] that the sale of the Subject
Property will include the current tenants.” (FAC ¶¶ 17, 25.) Accordingly, the
demurrer is sustained as to the first cause of action.
Second Cause of Action for Negligence
Under the cause of action for
negligence, Plaintiffs allege that Sosa and Century 21 owed a duty of care to
Plaintiffs as agents and brokers to act in Plaintiffs’ best interest in the
sale of the Property. (FAC ¶ 45.) Defendants breached this duty when they
failed to list the Property on the MLS and presented Plaintiffs only with an
offer from EWA, and when they represented to EWA that Plaintiffs agreed to sell
the Property for $310,000 vacant. (FAC ¶¶ 46-48.) Plaintiffs seek $350,000 in
compensatory damages on the basis that they “were harmed when they had to sell
the Property to [EWA] at a loss.” (FAC ¶ 52.) Plaintiffs also seek damages for
emotional distress allegedly caused by Defendants’ failure to list the Property
on the MLS. (FAC ¶ 53.)
“Real estate brokers are subject to two sets
of duties: those imposed by regulatory statutes, and those arising from the
general law of agency.” (Greif v. Sanin (2022) 74 Cal.App.5th 412, 426.)
“Despite the absence of privity of contract, a real estate agent is clearly
under a duty to exercise reasonable care to protect those persons whom the
agent is attempting to induce into entering a real estate transaction for the
purpose of earning a commission.” (Holmes v. Summer (2010) 188
Cal.App.4th 1510, 1519.)
As an initial matter, Plaintiffs have failed
to state the cause of action against Navarro, who served as the broker for EWA.
Plaintiffs allege that Navarro “had a duty to the Plaintiffs and to his client,
buyer EWA Capital, to disclose that the Subject Property was to be sold for
$310,000 occupied.” (FAC ¶ 51.) A buyer’s broker may have the duty to inform a
seller of “undisclosed facts known or accessible only to the buyer's
broker, which were ‘not known to, or within the reach of the diligent attention
and observation’ of the seller.”
(Greif, 74 Cal.App.5th at 435.) However, it would make little
sense to impose on Navarro, as the buyer’s broker, a duty to disclose to
Plaintiffs a fact about Plaintiffs’ own wishes for their sale of the Property. Clearly,
Plaintiffs’ alleged desire to sell the property occupied was not an undisclosed
fact known only to Navarro.
As against Sosa and
21 Century, Defendants demur on the basis that Plaintiffs have failed to plead
facts supporting the alleged damages. Defendants request judicial notice of a
Real Property Transaction Record for Plaintiffs’ Property, which shows that
Plaintiffs sold the Property to the buyer Rain Gardens, LLC for $330,000 on
March 18, 2022. (Kulikov Decl., Ex. D.) Given that Plaintiffs sold the Property
for a greater amount than they contracted for with EWA, Defendants argue that
Plaintiffs have failed to support their prayer for at least $350,000 in compensatory
damages. Defendants also argue that emotional distress damages are not
recoverable here.
The Court agrees with
Defendants that Plaintiffs’ alleged injury does not support recovery of damages
for emotional distress. (See Erlich v. Menezes (1999) 21 Cal.4th 543,
554–555 [“a preexisting contractual relationship, without more, will not
support a recovery
for mental suffering where the defendant's tortious conduct has resulted only
in economic injury to the plaintiff”].) However, Defendants’ argument regarding
Plaintiffs’ prayer for compensatory damages is unavailing. While the specific
amount of compensatory damages sought ($350,000) does not appear to be grounded
in any factual allegations, “[a]n averment of improper or wrong measure
of damages,
or a demand or prayer for items of damage not warranted by facts alleged,
is not a ground for a general demurrer.” (23 Cal. Jur. 3d Damages § 218 [citing Watson
v. Aced (1957) 156 Cal.App.2d 87, 91].) Plaintiffs’ allegations are
sufficient to show that they suffered some amount of damages, and so are
sufficient for purposes of pleading.
The demurrer is sustained as to the second
cause of action against Navarro, and overruled as to the second cause of action
against Sosa and Century 21.
Third Cause of Action for Fraud
Plaintiffs’ fraud cause of action
alleges that Sosa and Century 21 “made misrepresentations by concealing the
fact that the Subject Property was being sold at $310,000 occupied.” (FAC ¶
57.) Sosa and Century 21 also “intentionally made false statements to buyer EWA
Capital that the Plaintiffs accepted the offer to sale the [sic] the Subject
Property at $310,000 vacant.” (FAC ¶ 58.) “Plaintiffs justifiably relied on
[Sosa and Century 21’s] representations to buyer EWA Capital that the Subject
Property was to be sold at $310,000 occupied because they had previously told
[Sosa] they had no intention of evicting current tenants due to the COVID
eviction moratorium.” (FAC ¶ 60.)
The elements of fraud are: (1) misrepresentation
(false representation, concealment, or nondisclosure); (2) knowledge of falsity
(scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance;
and (5) damages. (See Civil Code §1709.) Fraud actions are subject to strict
requirements of particularity in pleading. (Committee on Children’s
Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216.) “The particularity requirement demands that a plaintiff
plead facts which show how, when, where, to whom, and by what means the
representations were tendered.” (Cansino v. Bank of America (2014) 224
Cal.App.4th 1462, 1469.)
To adequately allege reliance, “[t]he plaintiff must plead
that he believed the representations to be true . . . and that in reliance
thereon (or induced thereby) he entered into the transaction.” (Younan v.
Equifax Inc. (1980) 111 Cal.App.3d 498, 513; see Beckwith, 205
Cal.App.4th at 1063.) “Except in the rare case where the undisputed facts leave
no room for a reasonable difference of opinion, the question of whether a
plaintiff's reliance is reasonable is a question
of fact.” (Alliance Mortgage Co. v. Rothwell
(1995) 10 Cal.4th 1226, 1239.)
These allegations fail to state a
cause of action for fraud. First, Plaintiffs have failed to plead any
misrepresentation with adequate specificity. Furthermore, the allegations fail
to show how Plaintiffs could have justifiably relied on statements made from
Sosa and Century 21 to EWA Capital regarding the sale of the Property. It is
apparent that Plaintiffs could not have relied upon misrepresentations that
were not made to them. Accordingly, the demurrer is sustained as to the third
cause of action.
Motion to Strike
Defendants
move to strike Paragraphs 22, 23, 30-37, 51, 54, 55, 61, and 65, as well as
portions of Paragraphs 67-69. The allegations at issue are those referencing DN
Capital Investments (Paragraphs 22, 23, 51, 61), an alleged “conspiracy”
between the Defendants (Paragraphs 30-37), and references to punitive damages
(Paragraphs 54-55, 65).
Defendants
move to strike the allegations referencing DN Capital Investments as irrelevant.
Because the demurrer is sustained as to all causes of action against Navarro,
the motion is moot as to Paragraphs 51 and 61. The Court agrees with Plaintiffs
that the remaining allegations regarding DN Capital Investments are related to
Plaintiffs’ representation by Sosa and Century 21, and in that respect are relevant.
Paragraphs
30 through 37 allege that Defendants formed a conspiracy to commit negligence
and fraud against Plaintiffs in the sale of the Property. Specifically, Sosa
and Century 21 “agreed with each other to make a secret sale for their own
pecuniary gain.” (FAC ¶ 33.) Defendants ultimately “conspired amongst
themselves to defraud the Plaintiffs and offered to sell the property to buyer
[EWA] at $310,00 vacant for the purpose of collecting a broker commission upon
closing.” (FAC ¶ 37.)
These allegations fail to state a
conspiracy. Sosa was allegedly representing Plaintiffs as an agent of Century
21, the broker. (FAC ¶ 18.) “[A]gents and employees cannot
conspire with their principal or employer where they
act on its
behalf, ‘and not as individuals for their individual
advantage.’ ” (People ex rel. Herrera v. Stender (2012) 212 Cal.App.4th 614, 639.) Sosa could not
have conspired with Century 21 for acts he took as agent of Century 21 in the
representation of Plaintiffs.
Because the
demurrer is sustained as to all causes of action except the second cause of
action for negligence against Sosa and Century 21, Plaintiffs have pled no
grounds for recovery of punitive damages.
The motion
to strike is granted as to the allegations related to conspiracy and punitive
damages, and otherwise denied.