Judge: Blaine K. Bowman, Case: 37-2022-00050178-CU-MC-NC, Date: 2023-08-25 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - August 24, 2023

08/25/2023  01:30:00 PM  N-31 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Blaine K. Bowman

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Civil - Unlimited  Misc Complaints - Other Demurrer / Motion to Strike 37-2022-00050178-CU-MC-NC LIFE CARE RESIDENCIES VS. TORREY PINES DEVELOPMENT [IMAGED] CAUSAL DOCUMENT/DATE FILED: Demurrer, 05/26/2023

The hearing on this matter is ADVANCED to the morning calendar and will be heard on Friday, August 25, 2023 at 10:00 a.m. in Department N-31.

The Demurrer to First Amended Complaint brought by defendants Torrey Pines Development Group LLC (the Investigator), Matthew Parks (Mr. Parks), and Scott Kirby (Mr. Kirby) is disposed as follows: 1. First Cause of Action (Breach of Contract) – OVERRULED 2. Second Cause of Action (Money Had and Received) – OVERRULED 3. Third Cause of Action (Implied Indemnity) – OVERRULED 4. Fourth Cause of Action (Comparative Contribution) – OVERRULED 5. Fifth Cause of Action (Total Equitable Indemnity) – OVERRULED 6. Sixth Cause of Action (Indemnity – Tort of Another) – OVERRULED The Investigator, Mr. Parks, and Mr. Kirby (collectively, Defendants) time to answer or otherwise plead shall be as set forth in California Rules of Court, rule 3.1320.

On its own motion, the Court takes judicial notice of the entire publicly-available record and files in the case of Life Care Residences, Inc. v. Affordable Senior Housing Foundation (S.D. Sup. Ct. No.

18-58858), a case that is referenced in both the operative complaint (ROA 21, ¶ 29) and the moving papers (ROA 15, p. 5:16-18).

Background This is a breach of contract and indemnity case. Plaintiff Life Care Residences Inc. (Plaintiff) was the seller in an underlying business transaction to sell a nursing home business. According to the allegations and the judicially-noticeable documents, a dispute arose between the buyer and the seller in that underlying transaction over the profitability and status of the business. It is alleged that as part of the sale transaction the Investigator was hired to perform a due diligence investigation and make a report to the buyer. It is also alleged that the proceeds to pay for said report came out of money provided by the seller. The seller, Plaintiff, having been sued (or countersued) by the buyer in the underlying litigation is now claiming that the Investigator breached its contractual obligations by providing an inadequate due diligence report – on a theory that the buyer would not have completed the transaction (and thus would not have sued the seller) if a more robust and accurate due diligence report had been prepared and provided to the buyer.

Procedural History Calendar No.: Event ID:  TENTATIVE RULINGS

2976301 CASE NUMBER: CASE TITLE:  LIFE CARE RESIDENCIES VS. TORREY PINES DEVELOPMENT  37-2022-00050178-CU-MC-NC The underlying case was filed in November 2018. It is presently set for trial before Judge Enright on October 20, 2023. The instant case was filed in December 2022. After an amendment, Defendants demurred to all six of the pending causes of action, which are for: 1. breach of contract 2. money had and received 3. implied indemnity 4. comparative contribution 5. total equitable indemnity 6. indemnity – tort of another Defendants demur on essentially three grounds: (1) failure to state a claim, (2) uncertainty, and (3) alter ego.

Merits of Motion – Failure to State a Claim Defendants argue that Plaintiff cannot sue for breach of contract because Plaintiff was not a party to the contract for the due diligence investigation. Plaintiff alleges, however, that it paid for the service provided by Defendants and was a beneficiary under the contract that existed between the Investigator and the buyer. On demurrer, factual allegations must be accepted and even inferences therefrom must be drawn in favor of the complaining party. As such, Plaintiff has made sufficient allegations from which inferences can be drawn that a contract existed, that Plaintiff made payment for the services provided under that contract, and that Plaintiff was a third-party beneficiary under that contract. Thus, as to the first three contract-based causes of action, the arguments on demurrer lack merit.

As to the Fourth Cause of Action for Comparative Contribution, while claims of comparative fault, comparative negligence, or comparative contribution are 'typically' brought in the underlying action where fault is determined in the first instance, they do not necessarily need to be. (See 5 Witkin, Summary of California Law (11th ed., 2023) Torts § 216, quoting Coca-Cola Bottling Co. v. Lucky Stores (1992) 11 Cal.App.4th 1372, 1378.) While it is true that Plaintiff cannot maintain both a cause of action for indemnity and a cause of action for contribution (see 5 Witkin, Summary of California Law (11th ed., 2023) Torts § 216, quoting Coca-Cola Bottling Co. v. Lucky Stores (1992) 11 Cal.App.4th 1372, 1378), a plaintiff is permitted to plead in the alternative, which is what Plaintiff appears to be doing here. At some point Plaintiff may have to elect between indemnity and contribution, but at this juncture there is no need to make that election. A claim for comparative contribution is permissible.

As to the Fifth Cause of Action for Equitable Indemnity, Defendants admit in their briefing that '[a] derivative equitable indemnity action is based on an indemnitee's joint legal obligation with an indemnitor to a third party, not the indemnitor's direct liability to the indemnitee.' (Demurrer, p. 16, quoting Greystone Homes, Inc. v. Medtec, Inc. (2008) 168 Cal.App.4th 1194, 1208.) Plaintiff is alleging here that if it owed a 'legal obligation' to the buyer, the Investigators owed a 'legal obligation' to the buyer as well.

To the extent that both may have breached their 'legal obligations,' Plaintiff is claiming that Defendants must indemnify Plaintiff. This is sufficiently pled on demurrer.

As to the Sixth Cause of Action for Indemnity – Tort of Another, Plaintiff is alleging that the Investigators breached fiduciary duties that they owed to the buyer. Plaintiff is further alleging that because of that breach of fiduciary duty (which is the tort committed by another), Plaintiff has had to defend itself against claims made by the buyer against Plaintiff in the underlying lawsuit. Defendants appear to argue that their only duties to the buyer were contractual and thus cannot give rise to a claim for a 'tort of another.' However, Plaintiff's allegations reference breach of fiduciary duty, which is a tort-based cause of action.

On demurrer, this reference must be indulged and taken as true. As such, Plaintiff's demurrer to the Sixth Cause of Action lacks merit.

Merits of Motion – Uncertainty 'A demurrer for uncertainty will be sustained only where the complaint is so bad that defendant cannot reasonably respond – i.e., he or she cannot reasonably determine what issues must be admitted or Calendar No.: Event ID:  TENTATIVE RULINGS

2976301 CASE NUMBER: CASE TITLE:  LIFE CARE RESIDENCIES VS. TORREY PINES DEVELOPMENT  37-2022-00050178-CU-MC-NC denied, or what counts or claims are directed against him or her.' (Weil and Brown, California Practice Guide: Civil Procedure Before Trial (The Rutter Group, 2023) ¶ 7:85, citing Khoury v. Maly's of Calif., Inc. (1993) 14 Cal.App.4th 612, 616, also citing A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695 (emphasis in original).) While Plaintiff might be able to state its status as a third-party beneficiary more clearly, a demurrer for uncertainty does not lie unless the defendant cannot make heads or tails of what the claim is alleging. (Weil and Brown, California Practice Guide: Civil Procedure Before Trial (The Rutter Group, 2023) ¶ 7:86 ('...judges usually make short shrift of demurrers for uncertainty.').) Ultimately, none of the causes of action are so poorly pled as to rise to the kind of uncertainty that would render demurrer appropriate.

Merits of Motion – Alter Ego Where a third party seeks to hold a shareholder liable for corporate wrongdoing, an 'alter ego' theory is an appropriate way to impose liability on the shareholder. But cases are unclear whether facts supporting the alter ego theory must be pleaded.

(Weil and Brown, California Practice Guide: Civil Procedure Before Trial (The Rutter Group, 2023) ¶ 6:58.2, citing Leek v. Cooper (2011) 194 Cal.App.4th 399, 411, also citing Auer v. Frank (1964) 227 Cal.App.2d 396, 401-403 (bold added).) Plaintiff's allegations contain a fairly standard allegation that each of the defendants was acting on behalf of the other. (First Amended Complaint, ¶ 7.) The Court finds these allegations sufficient to plead alter ego at this stage of the litigation.

Unless the ruling(s) above indicate that an appearance is necessary, parties who wish to submit, who are satisfied with the above tentative ruling(s), and/or who do not otherwise wish to argue the motion(s) are encouraged to give notice to the Court and each other of their intention not to appear.

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