Judge Bruce G. Iwasaki, Case Number: 23STCV04316, Date: 2024-08-28 Tentative Ruling

Case Name: American Videogram, Inc. a California corporation v. Fane Joseph, an individual

Tentative Ruling: Defendant’s Demurrer to the first and second causes of action is sustained with leave to amend. Defendant’s Demurrer to the third, fourth, and fifth causes of action is overruled.

On February 27, 2023, Plaintiff American Videogram Inc. (“AV”) filed an action against Defendants Fane Joseph (“Joseph”) and Does 1-25 for (1) breach of contract, (2) promissory fraud, (3) quantum meruit, (4) unjust enrichment, and (5) accounting. Plaintiff alleges that Plaintiff and Defendant entered into a written agreement (“Agreement”) for the development of books and an online course to teach individuals how to flip houses. (Compl. ¶ 6.) Plaintiff alleges that Joseph refused to sign the Agreement; however, both parties worked in accordance with the Agreement’s requirements for about a year, until the books and two promotional videos were completed. (Ibid. at ¶ 7.) During this process, Plaintiff performed its obligations, including assembling and supervising a team of independent contractors to assist Plaintiff in carrying out the project. (Ibid. at ¶¶ 8-14.) After Plaintiff expended all the efforts listed in the Complaint, Joseph informed the Plaintiff’s president that his services were no longer required and failed and refused to compensate Plaintiff for its services. (Ibid. at ¶¶ 7-16.)

On July 9, 2024, Defendant demurred to the Complaint. Plaintiff filed an Opposition on August 15, 2024, and Defendant filed a Reply on August 21, 2024.

A demurrer is a pleading that may be used to test the legal sufficiency of the factual allegations in the complaint. (Code of Civ. Proc., § 430.10.) There are two types of demurrers – general demurrers and special demurrers. (See McKenney v. Purepac Pharmaceutical Co. (2008) 167 Cal.App.4th 72, 77.)

General demurrers can be used to attack pleadings for failure to state facts sufficient to constitute a cause of action or for lack of subject matter jurisdiction. (Code Civ. Proc., § 430.10, subd. (e); McKenney, 167 Cal.App.4th at 77.) Such demurrers can be used only to challenge defects that appear on the face of the pleading or from matters outside the pleading that are judicially noticeable; evidence or extrinsic matters are not considered. (Code of Civ. Proc., §§ 430.30, 430.70; Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) For the purpose of testing the sufficiency of the cause of action, the Court admits “all material facts properly pleaded” and “matters which may be judicially noticed,” but does not consider contentions, deductions, or conclusions of fact or law. [Citation].” (Blank, 39 Cal.3d at 318.) It gives these facts “a reasonable interpretation, reading it as a whole and its parts in their context.” (Ibid.) At the pleading stage, a plaintiff need only allege ultimate facts sufficient to apprise the defendant of the factual basis for the claim against him. (Semole v. Sansoucie (1972) 28 Cal. App. 3d 714, 721.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) "If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence." (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447.)

Special demurrers can be used to attack the pleadings on grounds that the pleading is uncertain, ambiguous, and unintelligible, or in a contract case, for failure to allege whether a contract is oral or written. (Code Civ. Proc., § 430.10, subd. (f).) A demurrer for uncertainty will be sustained only where the pleading is so unclear that the responding party cannot reasonably determine what issues to admit or deny or what counts and claims are directed toward the responding party. (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.)

Defense counsel indicates that he contacted Plaintiff’s counsel regarding Defendant’s intention to file a Demurrer due to the deficiencies in the Complaint. (Tamborelli Decl. ¶ 3.) However, Plaintiff’s counsel never responded, and the parties did not reach an agreement. (Ibid. at ¶¶ 3-4.)

The Court finds defense counsel’s declaration to be sufficient evidence of its efforts to meet and confer prior to filing the instant Demurrer.

Defendant demurs to all five causes of action on the basis that the allegations fail to state facts sufficient to constitute a cause of action, and the pleading is uncertain, ambiguous, and unintelligible, as the attached contract is not signed. (Mot. pp. 3-4.) Moreover, it cannot be ascertained from the pleading whether the contract is written, oral, or implied by conduct. (Ibid.)

Defendant argues that all the causes of action are based on an attached contract which was not signed by Plaintiff or Defendant; hence it is not enforceable. (Mot. pp. 6-8; 9-11.)

Moreover, as to the promissory fraud claim, Defendant argues that the Complaint does not present specific allegations, as required for a fraud cause of action, regarding “how, when, where, to whom, and by what means the purported material facts were made.” (Ibid. at pp. 6, 11-13.)

Defendant also argues that representations regarding a future fact “are considered to be opinions or predictions, not statements of fact, and are not actionable.” (Ibid. at pp. 13-14.)

Plaintiff opposes Defendant’s argument that the parties are not bound by the Agreement because they did not sign it. (Oppos. p. 4.) Here, Defendant’s acceptance of the benefits provided by Plaintiff under the Agreement constituted Defendant’s acceptance of the Agreement. (Ibid.)

Moreover, Plaintiff argues that the false statements were promises made via the Agreement around March 8, 2021, to the President of Plaintiff, by transmission of the final Agreement to Plaintiff’s address. (Ibid.) The allegations in the Complaint demonstrate that Defendant made the promises in the Agreement without intending to perform them. (Ibid.)

Plaintiff also opposes Defendant’s argument that representations regarding future facts are not actionable. (Ibid. at p. 5.) Plaintiff argues that the application of this argument would suggest that no bilateral contract would be enforced.

Furthermore, Plaintiff argues that the third cause of action for quantum meruit is sufficiently pleaded and enforceable even if the contract is not. (Ibid.) The fourth and fifth causes of action are also properly pleaded. (Ibid. at pp. 5-6.)

Defendant reiterates that there was no signature under the following statement in the attached contract: “Signature below indicates acceptance of the terms above and warrants that they are within their authority in accepting the terms herein.” (Reply p. 2.) Plaintiff cannot enforce a contract that neither Plaintiff nor Defendant signed. (Ibid.) The third, fourth, and fifth causes of action are also based on this unsigned contract and fail for the same reason. (Ibid., Fn. 1.)

Defendant also reiterates that the promissory fraud claim does not allege the elements of fraud with the required specificity. (Reply pp. 3-5.)

Finally, Defendant states that no statements made to the Plaintiff regarding what he could expect to receive in the future are actionable. (Ibid. at p. 5.) If courts were to accept all such statements are facts, “then every person who ever received less than they were told in a business transaction would have grounds for bringing a negligent misrepresentation and fraud claim.” (Ibid.)

“‘[T]he vital elements of a cause of action based on a contract are mutual assent (usually accomplished through the medium of an offer and acceptance) and consideration. As to the basic elements, there is no difference between an express and an implied[-in-fact] contract.” (Pacific Bay Recovery Inc. v. California Physicians’ Services, Inc. (2017) 12 Cal.App.5th 200, 215.) “The existence of mutual consent is determined by objective rather than subjective criteria, the test being what the outward manifestations of consent would lead a reasonable person to believe.” (Meyer v. Benko (1976) 55 Cal.App.3d 937, 942.)

“To prevail on a cause of action for breach of contract, the plaintiff must prove (1) the contract, (2) the plaintiff's performance of the contract or excuse for nonperformance, (3) the defendant's breach, and (4) the resulting damage to the plaintiff. (Richman v. Hartley (2014) 224 Cal.App.4th 1182, 1186.)

“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. [Citations.] 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.’ [Citation.]” (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1489.) “The elements of a breach of oral contract are the same as those for breach of a written contract. [Citations.]” (Stockton Mortgage, Inc. v. Tope (2014) 223 Cal.App.4th 437, 453.)

“‘While an express contract is defined as one, the terms of which are stated in words (Civil Code, § 1620), an implied [in fact] contract is an agreement, the existence and terms of which are manifested by conduct (Civ. Code, § 1621)…[B]oth types of contract are identical in that they require a meeting of minds or an agreement [citation]. Thus, it is evident that both the express contract and contract implied in fact are founded upon an ascertained agreement or, in other words, are consensual in nature, the substantial difference being in the mode of proof by which they are established [citation].’ [Citation.]” (Pacific Bay Recovery, supra, 12 Cal.App.5th at 215-16.)

Here, the written contract attached to the Complaint is not signed by either party. While the absence of a signature does not invalidate a contract, the Court agrees that the lack of the parties’ signatures is evidence that the parties did not mutually assent to its terms. Therefore, the Cmplaint fails to allege breach of a written contract. Moreover, although an implied-in-fact contract may exist in the absence of a written agreement, Plaintiff has not alleged sufficient facts for a breach of implied-in-fact contract because the Complaint fails to allege conduct of the parties that would give rise to the existence of such a contract.

Given that there is a reasonable possibility that the deficiency can be cured through amendment of the Complaint, the Court sustains Defendant’s demurrer to the first cause of action for breach of contract with leave to amend.

The elements of promissory fraud are: 1) a promise made regarding a material fact; 2) promisor’s lack of any intention of performing at the time of making the promise, based upon: a) specific factual circumstances beyond contract breach; or b) inferring a contemporaneous intent not to perform; 3) the promise was made with an intent to induce action by plaintiff; 4) plaintiff reasonably relied on the promise; 5) defendant did not perform the promised act; 6) plaintiff was injured/harmed; and 7) plaintiff’s reliance on defendant’s promise was a substantial factor in causing the harm. (CACI 1902.)

“‘An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a [written] contract. [Citations.] In such cases, the plaintiff’s claim does not depend upon whether the defendant’s promise is ultimately enforceable as a contract.’ [Citation.]” (Austin v. Medicis (2018) 21 Cal.App.5th 577, 588; Lazar v. Superior Court (1996) 12 Cal.4th 631, 638; Restatement (Second) of Torts § 530, comment C.)

Moreover, “[a] promise of future conduct is actionable as fraud only if made without a present intent to perform. ‘‘A declaration of intention, although in the nature of a promise, made in good faith, without intention to deceive, and in the honest expectation that it will be fulfilled, even though it is not carried out, does not constitute a fraud.’ ‘ Moreover, ‘¿“something more than nonperformance is required to prove the defendant’s intent not to perform his promise.” … [I]f plaintiff adduces no further evidence of fraudulent intent than proof of nonperformance of an oral promise, he will never reach a jury.’¿” (Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 481, internal citations omitted.)

Thus, even in the absence of an enforceable contract, specific factual allegations regarding promises made by Defendant and Defendant’s lack of intention to perform such promises are sufficient to assert a cause of action for promissory fraud.

Here, the Complaint alleges that the parties reached an agreement around March 8, 2021, whereby Plaintiff was to provide services for the development of books and an online course to teach individuals how to flip houses. (Compl. ¶ 6.) Plaintiff performed its obligations, including assembling and supervising a team of independent contractors to assist Plaintiff in carrying out the project. (Ibid. at ¶¶ 8-14.) After Plaintiff expended all the efforts listed in the Complaint, Joseph informed the Plaintiff’s President, John B. Berzner, that his services were no longer required and failed and refused to compensate Plaintiff for its services. (Ibid. at ¶¶ 7-16.) Plaintiff alleges that in entering into the Agreement, Defendant “made a promise to engage Plaintiff in marketing the Project to the public on a world wide basis.” (Ibid. at ¶ 23.) Defendant intended Plaintiff to rely on this promise, but did not intend to perform it. (Ibid. at ¶¶ 24-25.). Plaintiff reasonably relied on it and rendered its services, but Defendant terminated the Agreement as soon as Plaintiff delivered the work product, as a result of which Plaintiff suffered damages. (Ibid. at ¶¶ 26-27.)

As discussed previously, a claim for promissory fraud claim does not require the existence of a contract. However, the Court finds that other elements of this cause of action are not alleged with the requisite specificity. For example, Plaintiff does not allege specific promises Defendant made to induce reliance.

Given that there is a reasonable possibility that the deficiency can be cured through amendment of the Complaint, the Court sustains Defendant’s demurrer to the second cause of action for promissory fraud with leave to amend.

“Quantum meruit refers to the well-established principle that the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered. To recover in quantum meruit, a party need not prove the existence of a contract, but it must show the circumstances were such that the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made.” (Chodos v. Borman (2014) 227 Cal.App.4th 76, 96, citations and quotation marks omitted.) “[I]n order to recover under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for such services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 248.) Thus, the plaintiff must show that (1) the plaintiff performed services pursuant to the defendant’s express or implied request, (2) both parties understood that the plaintiff would be compensated for the services, (3) the services benefitted the defendant, and (4) the claim was made within the applicable statute of limitations. (Day v. Alta Bates Medical Ctr. (2002) 98 Cal.App.4th 243, 248.) The statute of limitations for a quantum meruit claim is two years and begins to run when the cause of action accrues or when the last essential element is satisfied. (Code of Civ. Proc. § 339; Spear v. California State Auto. Assn. (1992) 2 Cal.4th 1035, 1040.)

Here, the Court finds that the enforceability of the written Agreement is immaterial to Plaintiff’s allegations for a quantum meruit cause of action. Furthermore, the Court finds that Plaintiff has presented sufficient allegations to show that it performed the services requested as part of the project to develop books and an online course to teach individuals how to flip houses premised on the understanding that such services would be compensated. Plaintiff delivered the work product to Defendant, thus, conferring a benefit, and filed the action on February 27, 2023, within the applicable statute of limitations. Moreover, this cause of action does not fail due to uncertainty because the pleading is not “so unclear that the responding party cannot reasonably determine what issues to admit or deny or what counts and claims are directed toward the responding party.” (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.)

Accordingly, Defendant’s Demurrer to the third cause of action for quantum meruit is overruled.

While unjust enrichment is not a cause of action, courts have stated that unjust enrichment is synonymous with restitution and allowed recovery where the plaintiff asserts a proper basis for recovering restitution.¿ (See¿Durrell v. Sharp Healthcare¿(2010) 183 Cal.App.4th 1350, 1370;¿McBride v.¿Boughton¿(2004) 123 Cal.App.4th 379, 387-88.) Under the law of restitution, an individual may be required to make restitution if he is unjustly enriched at the expense of another. (Ghirardo v. Antonioli (1996) 14 Cal.4th 39, 51.) A person is enriched if he receives a benefit at another's expense. (Ibid.) The term “benefit” denotes any form of advantage; thus, a benefit is conferred not only when one adds to the property of another, but also when one saves the other from expense or loss. (Ibid.) Yet, even when a person has received a benefit from another, he is required to make restitution only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. (Ibid.)

As discussed in the previous section, the Court finds that Plaintiff has presented sufficient allegations to show that it performed the services requested as part of the project to develop books and an online course to teach individuals how to flip houses. Plaintiff delivered the work product to Defendant, thus, conferring a benefit on Defendant. Moreover, this cause of action does not fail due to uncertainty because the pleading is not “so unclear that the responding party cannot reasonably determine what issues to admit or deny or what counts and claims are directed toward the responding party. (A.J. Fistes Corp. v. GDL Best Contractors, Inc. (2019) 38 Cal.App.5th 677, 695.)

Accordingly, Defendant’s Demurrer to the fourth cause of action for unjust enrichment is overruled.

The Supreme Court of California addressed an action for accounting in 2020 and clearly stated:

“An action for an accounting has two elements: (1) ‘that a relationship exists between the plaintiff and defendant that requires an accounting’ and (2) ‘that some balance is due the plaintiff that can only be ascertained by an accounting.’ (Teselle, supra, 173 Cal.App.4th at p. 179; see also 5 Witkin, Cal. Procedure, supra, Pleading, § 820.) The action carries with it an inherent limitation; an accounting action ‘is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.’ (Teselle, at p. 179; see also St. James Church of Christ Holiness v. Superior Court of Los Angeles County (1955) 135 Cal.App.2d 352, 359 [287 P.2d 387].)”

(Sass v. Cohen (2020) 10 Cal.5th 861, 869.) The Supreme Court explains that an action for accounting is used as a discovery device when there is some imbalance in the knowledge so that defendant possesses information unknown to the plaintiff which is relevant to the plaintiff computing the money owed. (Sass, supra, 10 Cal.5th at p. 869.)

Plaintiff alleges that pursuant to the parties’ agreement, Plaintiff was entitled to fifty percent of the revenues generated by the work product delivered to Defendant. (Compl. ¶ 37.) Following termination of the Agreement, Plaintiff does not know what revenues Defendant has received from this work product and the precise amount of money due cannot be ascertained without an accounting of such revenues. (Ibid. at ¶¶ 38-39.)

The Court finds that the allegations are sufficient to show that a relationship existed between the parties and there is an unknown balance due related to the revenues generated by Plaintiff’s work product.

Accordingly, Defendant’s demurrer to the fifth cause of action for accounting is overruled.

Defendant American Videogram Inc.’s Demurrer is sustained as to the first and second causes of action with leave to amend. The Demurrer is overruled as to the third, fourth, and fifth causes of action. Plaintiff’s complaint shall be served and filed on or before September 18, 2024.

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