Judge Bruce G. Iwasaki, Case 22STCV04775 2023-04-14 Tentative Ruling

Tentative Ruling: The demurrer is sustained with leave to amend as to the fifth and sixth causes of action.

The motion to strike is moot.

On February 8, 2022, Plaintiff Steve Martinez dba Agua Dulce Water Trucks & Transportation (“Plaintiff”) filed this action against Southern California Gas Company (“SoCal Gas”), Goldie Productions LLC (“Goldie”), and The Newhall Land and Farming Company, Inc. (“Newhall”) for damages from an incident where Plaintiff’s truck dropped into a sink hole on Newhall’s property, while transporting water for Defendant Goldie.

On February 7, 2023, the Court granted Plaintiff’s request for leave to amend to add two new defendants, Five Point Holdings, LLC and Barnard Construction Company Inc., and numerous causes of action: premises liability, breach of fiduciary duty, promissory estoppel, fraud, constructive fraud, and violation of Public Utilities Code section 2106.

Defendant Newhall now demurs to the fraud causes of action in the First Amended Complaint (“FAC”), arguing that Plaintiff has failed to plead facts with the requisite specificity required under California law. Defendant Newhall also moves to strike the punitive damages allegations.

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law…” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.)

The elements of intentional misrepresentation, or fraud in the inducement, are “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Lazar v. Superior Court (1996) 12 Cal.4th 631.)

“ ‘ [T]he elements of an action for fraud and deceit based on concealment [or nondisclosure] are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.’ ” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 748.)

Fraud must be pleaded specifically, not with “general and conclusory allegations.” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184; Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73 [“This particularity requirement necessitates pleading facts which ‘show how, when, where, to whom, and by what means the representations were tendered.”) Less specificity is required to plead fraud by concealment. (Jones v. ConocoPhillips Co. (2011) 198 Cal.App.4th 1187, 1199; but see Goodman v. Kennedy (1976) 18 Cal.3d 335, 347 [“mere conclusionary allegations that the omissions were intentional and for the purpose of defrauding and deceiving plaintiffs and bringing about the purchase . . . are insufficient [to show fraud by concealment”].) However, “[i]f a fraud claim is based upon failure to disclose, and ‘the duty to disclose arises from the making of representations that were misleading or false, then those allegations should be described.’” (Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1262.)

The FAC alleges that prior to the incident, there were numerous sink holes that collapsed, and Defendant Newhall, along with the other defendants, were familiar with the area and knew that it had many sinkholes. (FAC ¶ 14.) The FAC alleges that before the accident, Defendants had several meetings about the sinkholes on the property, but concealed this information from invitees. (FAC ¶ 16.) The sinkholes were covered by loose dirt, and there were no warning signs. (FAC ¶ 16.) When transporting water for Defendant Goldie, Plaintiff’s truck sank into a concealed sinkhole. (FAC ¶19-20.)

The fraud cause of action against Defendant Newhall is predicated on Newhall’s alleged “intentional creation of sinkholes and the intentionally failing to warn the public of the sinkholes at the accident site.” (FAC ¶ 96.) Allegedly, Defendant Newhall “knew running water from their property was flowing down to the roadway…They knew this condition would create sinkholes around the SUBJECT PROPERTY. They knew there was a substantial risk the sinkholes would collapse. They consciously did not set up sinkhole warnings or warn the public for fear that potential investors of real estate would be spoken to by the sinkholes… They had a duty to disclose the dangerous condition of the subject property to the public and invitees including Plaintiff. They invited the public and Plaintiff to use the roadway of the accident to gain access to their property while concealing sinkholes and the dangerous condition of the property.” (FAC ¶ 95.) Further, Newhall “had actual knowledge of the sinkholes, how they were created, a failure to put up sinkhole warnings, a scheme to keep the sinkholes a secret from the public and government because it would cost an incredible amount of money to properly repair and maintain…” (FAC ¶ 97.)

The FAC does not allege that Newhall made any affirmative misrepresentations. Thus, the fraud cause of action against Defendant Newhall is premised on the theory of fraudulent concealment. Defendant Newhall argues that Plaintiff has not alleged specific facts showing that Newhall knew about the subject sinkhole, alleged a duty to disclose or facts showing that Newhall actively concealed the sinkhole, or alleged facts showing that the sinkhole was concealed with the intent to defraud.

Defendant argues that Plaintiff fails to allege that Defendant Newhall knew about the specific sinkhole. The FAC alleges that “there were numerous sink holes that collapsed” on the property,” and defendant employees had several meetings about the sinkholes, and “knew there would be more sinkholes in the Subject Property.” (FAC ¶ 14, 16.) Plaintiff alleges that he wouldn’t have driven his truck on the property if he was disclosed the dangerous condition of the subject property. (FAC ¶ 95.)

These allegations are sufficient for purposes of demurrer to show Defendant Newhall knew that there would be sinkholes in the property, and that Plaintiff justifiably relied on this alleged concealment. It is not necessary that Defendant Newhall knew of the specific sinkhole that Plaintiff’s truck got stuck in.

For fraudulent concealment to be actionable, a defendant must have been under a duty to disclose the facts to plaintiff. (Hahn, supra, 147 Cal.App.4th at 745.) The duty may arise when (1) defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of a material fact not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material facts.” (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186.)

Here, the duty allegedly arises from Defendant’s duty as a landowner. Plaintiff has alleged that the sinkhole was on Defendant Newhall’s premises. (FAC ¶ 19.) Plaintiff entered the premises because Defendant Goldie hired Plaintiff’s services to transport water to their filming location on Newhall’s property. (FAC ¶ 18.) Plaintiff alleges that Defendant had a duty to warn of the dangerous condition to the public and invitees. (FAC ¶ 95, 108.) Plaintiff does not allege any fiduciary relationship between the parties.

Although Plaintiff attempts to plead that there was active concealment by Defendant Newhall, this allegation is not pleaded with requisite specificity. Plaintiff alleges that “They consciously did not set up sinkhole warnings or warn the public” and “They invited the public and Plaintiff to use the roadway of the accident to gain access to their property while concealing sinkholes and the dangerous condition of the property.” (FAC ¶ 95.) This is insufficient to allege active concealment because the failure to set up sinkhole warnings is not active concealment, but passive concealment. Further, there are no specific allegations as to who concealed the sinkholes and how they were concealed.

In opposition, Plaintiff states that the duty arose from Defendant Newhall’s exclusive knowledge of the existence of the sinkhole and Defendant Newhall’s contractual obligations. “Where material facts are known to one party and not to the other, failure to disclose them is not actionable fraud unless there is some relationship between the parties which gives rise to a duty to disclose such known facts…. A relationship between the parties is present if there is “some sort of transaction between the parties. [Citations.] Thus, a duty to disclose may arise from the relationship between seller and buyer, employer and prospective employee, doctor and patient, or parties entering into any kind of contractual agreement.” (Hoffman, supra, 228 Cal.App.4th at 1178, citing LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 337.)

No such contract between Defendant Newhall and Plaintiff has been alleged. Plaintiff alleges that Newhall and SoCal Gas had a contract, that Newhall and Goldie had an agreement that Goldie could use its property, and that Plaintiff and Goldie had an agreement that Plaintiff would deliver water. (See FAC ¶ 13, 68.) However, there is no allegation of a direct contractual or transactional relationship between Plaintiff and Newhall besides the fact that Plaintiff was entering Newhall’s property to deliver water to Goldie.

As alleged, this cause of action is equivalent to the premises cause of action that alleges that a landowner owes a duty of care to invitees. Although a landowner has a duty to warn of dangerous conditions, this does not mean that landowners have a duty to disclose these facts for purposes of fraudulent concealment.

The Complaint fails to plead that Defendant Newhall had either a fiduciary or contractual relationship with Plaintiff that creates a duty to disclose.

Plaintiff also has not averred sufficient intent to defraud. A defendant must intend to induce the other party to act in reliance on the false information. (City of Atascadero v. Merrill Lynch (1998) 68 Cal.App.4th 445, 481.) The FAC alleges that Defendants “all had actual knowledge of the sink holes, how they were created, a failure to put up sinkhole warnings, a scheme to keep the sinkholes a secret from the public and government because it would cost an incredible amount of money to properly repair and maintain…” (FAC ¶ 97.) The FAC also alleges that Defendants “did not set up sinkhole warnings or warn the public for fear that potential investors of real estate would be spoken to by the sinkholes in violation of Civ. C. § 1710(3).” (FAC ¶95.)

These allegations are not sufficiently specific to show how the alleged concealment of the sinkholes was intended to cause Plaintiff specifically to act in reliance. The FAC does not allege that Plaintiff is a member of the government or a potential investor of real estate. Further, there are no specific allegations as to how the concealment of the sinkholes was intended to induce reliance upon members of the public. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 347 [“mere conclusionary allegations that the omissions were intentional and for the purpose of defrauding and deceiving plaintiffs. . . are insufficient [to show fraud by concealment”].)

As Plaintiff has not alleged Defendant Newhall’s specific duty to disclose knowledge of sinkholes on the property, and Plaintiff has not pleaded Newhall’s intent to defraud Plaintiff with requisite specificity, Defendant’s demurrer to the fraud cause of action is sustained with leave to amend.

Constructive fraud “is a unique species of fraud applicable only to a fiduciary or confidential relationship.” (Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105.) It arises when there is a breach of duty in a confidential or fiduciary relationship which induces justifiable reliance. (Id.) “Constructive fraud allows conduct insufficient to constitute actual fraud to be treated as such where the parties stand in a fiduciary relationship.” (Estate of Gump (1991) 1 Cal.App.4th 582, 601.)

As discussed above, Plaintiff has alleged no confidential or fiduciary relationship between itself and Defendant Newhall. Thus, the demurrer to the sixth cause of action is sustained with leave to amend.

“The court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”¿ (Code Civ. Proc., § 436.)

Defendants move to strike paragraphs 95, 98, 99, 100, 108, 109, 111, 112, and the prayer for punitive damages. These paragraphs should be stricken, but the motion to strike is moot as to these paragraphs because they are all contained within the fifth and sixth causes of action, to which the demurrer is sustained. The provision in line (b.) of the prayer (First Am. Complaint at p. 37.), regarding punitive damages from Defendant Newhall is stricken.

The demurrer is sustained with leave to amend as to the fifth and sixth causes of action.

Department 58