Judge: Barbara M. Scheper, Case: 22STCV21324, Date: 2023-06-22 Tentative Ruling
Case Number: 22STCV21324 Hearing Date: June 22, 2023 Dept: 30
Calendar No.
Lemus, et. al.
vs. Sosa, et. al., Case No. 22STCV21324
Tentative Ruling
re: Defendants’ Demurrer to Second
Amended Complaint; Motion to Strike
Defendants Darwin Sosa and Maxres,
Inc. dba Century 21 Allstars (collectively, Defendants) demur to the Second
Amended Complaint (SAC) of Plaintiffs Edgardo C. Lemus and Maria G. Lemus
(collectively, Plaintiffs), and move to strike portions of the SAC. The
demurrer is sustained as to the third cause of action, without leave to amend,
and otherwise overruled. The motion to strike is granted. Defendants are 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.)
Plaintiffs’ claims in this action
arise from their sale of the real property located at West 66th Street, Los
Angeles (the Property). (SAC ¶ 14.) 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). (SAC ¶ 17.)
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. (SAC ¶ 16.)
Sosa and Century 21 failed to properly list
the property on the MLS. (SAC ¶ 18.) Instead, on February 2, 2020, Sosa 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. (SAC ¶ 19.) 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. (SAC ¶ 20.) However, the agreement for the sale to DN Capital
Investment was later cancelled by Navarro through his company. (FAC ¶ 22.)
On May 19, 2020, Sosa presented Plaintiffs
an offer of $310,000 from the buyer EWA Capital LLC (EWA Capital). (SAC ¶ 24.)
Plaintiffs told Sosa that they would sell the Property at $310,000 if it was
sold occupied. (SAC ¶ 25.) However, the purchase agreement between Plaintiffs
and EWA provided that the Property would be delivered vacant. (SAC ¶ 26, Ex. 2.)
Plaintiffs later attempted to
cancel the sale agreement with EWA but were unsuccessful. (SAC ¶ 26.) To
resolve the dispute, Plaintiffs and EWA entered into binding arbitration and
settled the case in a confidential settlement agreement. (SAC ¶ 27.)
Plaintiffs assert three causes of
action against Defendants, for (1) Breach of Contract, (2) Negligence, and (3) Fraud.
First Cause of Action for Breach of Contract
Plaintiffs’ claim for breach of
contract alleges two separate breaches of two contracts. First, Plaintiffs
allege that Defendants breached the parties’ Residential Listing Agreement (Listing
Agreement) by failing to list the Property on the MLS. (SAC ¶ 43, Ex. 1.)
Second, Plaintiffs allege that Defendants breached the Purchase Agreement “when
they intentionally and negligently communicated a material error to sell the
Subject Property at $310,000 vacant.” (SAC ¶ 44.) Plaintiffs “were harmed when
they had to sell the Subject Property to the Buyer EWA Capital at a loss,”
below the Property’s fair market price of $650,000. (SAC ¶ 45.)
Defendants
argue that Plaintiffs have not pled breach of the Listing Agreement because the
Listing Agreement expired by the time that EWA Capital made its offer. The
Listing Agreement provided Century 21 the right to sell or exchange the
Property from February 2, 2020, through April 30, 2020 (SAC, Ex. 1, p. 1), whereas
Sosa presented the offer from EWA Capital to Plaintiffs on May 19, 2020. (SAC ¶
23.) Defendants’ argument is unavailing, as the timing of EWA Capital’s alleged
offer is irrelevant to Defendants’ duty under the Listing Agreement to list the
Property on the MLS during the Listing Period. (SAC ¶ 43.)
Defendants also
argue that Plaintiffs have failed to allege separate damages resulting from the
breach of the Listing Agreement. The Court disagrees. The allegations that
Plaintiffs were forced to sell the Property below market value to EWA Capital
are sufficient to plead damages resulting from Defendants’ failure to solicit
alternative offers through the MLS. (SAC ¶ 45.)
Plaintiffs’
claim for breach of contract based on the Purchase Agreement fails simply because
the Purchase Agreement was not between Plaintiffs and Defendants, but between
Plaintiffs and EWA Capital. (SAC, Ex. 2.) The parties dispute whether
Plaintiffs have pled that the Purchase Agreement’s provision that the Property
was to be “delivered vacant” was altered. (SAC ¶¶ 25, 44; Ex. 2, p. 2 [24].)
Regardless, that provision did not impose any obligation upon Defendants, and
so they cannot be liable for its breach.
Though the
alleged breach of the Purchase Agreement fails, because Plaintiffs have
sufficiently pled breach of the Listing Agreement, the demurrer is overruled as
to the first cause of action.
Second Cause of Action for Negligence
Under their second
cause of action, Plaintiffs allege that Sosa and Century 21 negligently failed
to list the Property on the MLS, failed to act in Plaintiffs’ best interests by
presenting an offer only to EWA Capital, and negligently informed EWA Capital
that Plaintiffs had agreed to sell the Property vacant. (SAC ¶¶ 48-52.) Plaintiffs
seek $350,000 in compensatory damages, based on the difference between the
Property’s sale price and fair market price of $650,000. (SAC ¶ 54.)
“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.)
Defendants demur to Plaintiffs’ negligence
claim on the basis that the Listing Agreement expired prior to EWA Capital’s
offer to Plaintiffs. However, Defendants’ duty to Plaintiffs as “persons whom
the agent is attempting to induce into entering a real estate transaction for
the purpose of earning a commission” did not depend on the Listing Agreement
being in effect. (Holmes, supra, 188 Cal.App.4th at 1519.) Defendants’
alleged failures to list the Property on the MLS and solicit alternative offers
are sufficient to show breach of their duty as brokers. Defendants have presented
no other argument, and so the demurrer is overruled as to this cause of action.
Third Cause of Action for Fraud
Plaintiffs’ fraud claim is based on
allegations that Sosa and Century 21, on May 25, 2020, misrepresented the terms
of EWA Capital’s offer to Plaintiffs, by telling them that the offer was for
$310,000 “unoccupied,” when it was actually for $310,000 “occupied.” (SAC ¶
58.) Plaintiffs relied upon the misrepresentation by accepting the offer. (SAC
¶ 59.) Additionally, Defendants failed to disclose the insider relationship
between Sosa, Century 21, and Navarro, and their failure to list the Property
on the MLS. (SAC ¶ 63.)
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.)
Defendants argue that Plaintiffs’
reliance on the allegedly misrepresented offer is contradicted by the attached
Purchase Agreement, which states under Paragraph 6 (“Other Terms”), “Delivered
vacant.” (SAC, Ex. 2, p. 2 [24].) Plaintiffs’ signatures, dated May 25, 2020,
are on the Purchase Agreement, and their initials also appear on each page of
the agreement. However, Plaintiffs allege that “portions of paragraph 8 [sic]
have been whited-out” (SAC ¶ 25), and that the “whited-out portion [ ] deleted
the wording of ‘will not be “delivered vacant” ’ after [Plaintiffs] signed the
agreement.” (SAC ¶ 44.)
The Court agrees with Defendants that the
allegations are insufficient to state a cause of action for fraud. Plaintiffs’
alleged reliance on the Defendants’ misrepresentation of EWA Capital’s offer
was unreasonable given that Plaintiffs were presented with, and agreed to, the
actual terms of the offer in the Purchase Agreement. (SAC ¶ 25, Ex. 2.)
It is unnecessary to determine whether
Plaintiffs have sufficiently pled alteration of the “whited-out” term in the
Purchase Agreement. (SAC ¶¶ 22, 45.) If, as Plaintiffs allege, the Purchase
Agreement originally provided that the Property “will not be delivered vacant” (i.e.,
delivered occupied), Defendants’ alleged misrepresentation that the offer was
for $310,000 “unoccupied” would have been contradicted by the plain terms of
the written agreement later signed by Plaintiffs, and so could not have induced
their reasonable reliance. If there was no alteration to the provision
“delivered vacant,” Defendants’ representations regarding the offer would have
been true. The demurrer is therefore sustained as to the third cause of action.
Motion to Strike
Defendants
move to strike Paragraphs 29-38, 75-80, and 85. The allegations at issue refer
to a “conspiracy” between the Defendants (Paragraphs 29-38), and to Plaintiffs’
claim for punitive damages.
As the
Court previously found, Plaintiffs’ allegations fail to state a conspiracy
because “agents
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 was allegedly representing Plaintiffs as an agent of
Century 21, the broker, and so could not have conspired with Century 21 for acts
he took as agent of Century 21 in the representation of Plaintiffs. (SAC ¶ 15.)
The SAC contains no factual allegations suggesting that Sosa was acting as “an
individual for his individual advantage,” rather than for Century 21.
Because the
demurrer is sustained as to the cause of action for fraud, Plaintiffs have pled
no basis for recovery of punitive damages. Accordingly, the motion to strike is
granted.