Judge Bruce G. Iwasaki, Case Number: 24STCV11356, Date: 2024-08-15 Tentative Ruling

Case Name: 4100 Del Rey, LLC, et al. v. Reliant Real Estate Management, Inc., et al.

Moving Party: Defendants Reliant Real Estate Management, Inc.; Sandra Dixon D’Elia; Frank Dietrich Thorp; Jeanette Christine Ruscitti; Leanna Wendy Tevis; and Yong Held

Responding Party: Plaintiffs 4100 Del Rey, LLC; PJ Fig, LLC; WP Fig, LLC; and Neumann Fig, LLC

Tentative Ruling: The Demurrer to the Complaint is sustained with leave to amend. The Motion to Strike is granted.

This action arises from alleged wrongful actions in the management of two apartment complexes. On May 6, 2024, Plaintiffs 4100 Del Rey, LLC; PJ Fig, LLC; WP Fig, LLC; and Neumann Fig, LLC (collectively, “Plaintiffs”) filed a Complaint against Defendants Reliant Real Estate Management, Inc. (“Reliant”); Sara Dixon D’Elia (“D’Elia”); Frank Dietrich Thorp (“Thorp”); Jeanette Christine Ruscitti (“Ruscitti”); Leanna Wendy Tevis (“Tevis”); and Yong Held (“Held”) (collectively, “Defendants”) alleging causes of action for: (1) fraud; (2) breach of contract; (3) breach of fiduciary duty; and (4) declaratory relief.

On July 15, 2024, Defendants filed a demurrer to the first and third causes of action in the complaint. On July 17, 2024, Defendants filed a motion to strike punitive damages allegations from the complaint.

On August 2, 2024, Plaintiffs filed opposition briefs to the demurrer and motion to strike, to which Defendants replied on August 8, 2024.

The Court finds that the meet and confer requirement has been met as to both the demurrer and motion to strike. (CCP §§ 430.41, 435.5.)

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.)¿In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated.¿(Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Ibid.) “If there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245.)

Plaintiffs allege that they are owners of rental properties in Los Angeles County. (Complaint, ¶ 14.) Tribeca Urban Apartments (“Tribeca”) is located at 4108 Del Rey Avenue in Marina Del Rey, California, and is owned by Plaintiff 4100 Del Rey, LLC. (Complaint, ¶ 15.) City Lights on Fig (“City Lights”) is located in Los Angles, California and is owned by Plaintiffs PJ Fig, LLC, WP Fig, LLC, and Neumann Fig, LLC. (Complaint, ¶ 16.) In June of 2021, Plaintiffs entered into separate contracts with Defendant Reliant for Defendant Reliant to serve as manager of Tribeca and City Lights (collectively, the “Contracts”). (Complaint, ¶ 17; Exs. 1-2.)

Under the Contracts, Defendant Reliant agreed to perform all of the necessary property management functions related to Tribeca and City Lights. (Complaint, ¶ 18.) This included, without limitation, functions such as hiring, supervising, training all business managers, leasing agents, maintenance, and other administrative employees, and finding and vetting new applicants for tenancies at the properties. (Complaint, ¶ 18.) While serving as manager of the properties, Defendants acted as an agent and fiduciary for Plaintiffs. (Complaint, ¶ 19.) In or about November of 2023, the Contracts between Plaintiffs and Defendant Reliant were terminated. (Complaint, ¶ 20.)

During the time that Defendant Reliant acted as Plaintiffs’ agent, all Defendants and Plaintiffs had a clear understanding of the minimum qualifications required for any new applicant to be accepted as a tenant at Tribeca and/or City Lights including, but not limited to, those stated in Defendant Reliant’s written Policies and Procedures dated December 1, 2020 (the “Policies”). (Complaint, ¶ 21.) Plaintiff aver that Defendants knowingly and intentionally accepted unqualified applicants as tenants for the properties and failed to follow various state and federal law requirements related to applicant screening. (Complaint, ¶ 22.) Plaintiffs allege that such tenants defaulted on their rental obligations in multiple cases. (Complaint, ¶ 22.) Plaintiffs also allege that Defendants would knowingly and intentionally allow employees of Defendant Reliant who failed to meet applicant criteria to occupy rental units in the properties. (Complaint, ¶ 23.)

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.) The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th153, 157.)

The Court finds that the first cause of action for fraud is insufficiently alleged. (Complaint, ¶¶ 25-30.) Plaintiffs merely allege that Defendants made misrepresentations of fact including, but not limited to, that: (1) the Policies would be followed specifically with regard to applicant screening, communication, maintenance, rekeying locks, verification of renter’s insurance, and safety; and (2) Defendants were capable and prepared to use Plaintiffs preferred property management software known as “RealPage.” (Complaint, ¶ 26.) Plaintiffs allege that they relied on the purported misrepresentations and that Defendants intended to induce reliance. (Complaint, ¶¶ 27, 29.)

The Court, however, finds that the first cause of action is much too conclusory. Plaintiffs only set forth the purported misrepresentations in a conclusory manner as Plaintiffs have failed to plead the names of the persons allegedly making the false representations on behalf of Defendant Reliant and the facts surrounding such misrepresentations. (Complaint, ¶ 6.) Additionally, Plaintiffs have failed to allege justifiable reliance or that Defendants knew that the alleged misrepresentations were false. (Complaint, ¶¶ 25-30.) Plaintiffs must assert their fraud cause of action with the required specificity.

Thus, the first cause of action for fraud in the complaint does not state sufficient facts to constitute a cause of action.

“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.) “Whether a fiduciary duty exists is generally a question of law.” (Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 441 [citation omitted].) “Any agent is also a fiduciary, whose obligation of diligent and faithful service is the same as that of a trustee.” (Duffy v. Cavalier (1989) 215 Cal.App.3d 1517, 1534.) “California law is that parties to a contract, by that fact alone, have no fiduciary duties toward one another.” (Rickel v. Schwinn Bicycle Co. (1983) 144 Cal.App.3d 648, 654.)

Initially, the Court finds that Plaintiffs’ reliance on Duffy, supra, 215 Cal.App.3d 1517 is inapposite as such case concerned the fiduciary duties of stockbrokers. Here, however, Plaintiffs are alleging that a residential property management company and its employees have a fiduciary duty. Thus, Duffy, supra, 215 Cal.App.3d 1517 is factually distinguishable from the instant action.

Here, the Court finds that the third cause of action is insufficiently alleged. (Complaint, ¶¶ 39-46.) Plaintiffs make a conclusory allegation that Defendants were the agents of Plaintiffs; however, the Court does not accept conclusions of fact or law on demurrer. The third cause of action is premised on Defendants repeatedly approving applicants who did not meet Plaintiffs’ qualifications or the standards in the Policies. (Complaint, ¶ 41.) Plaintiffs have asserted a cause of action for breach of contract, which Defendants do not challenge on demurrer. (Complaint, ¶¶ 31-38.) The second cause of action for breach of contract is premised on Defendants failing to follow the Policies and breaching the Contracts. (Complaint, ¶¶ 31-38.)

Although not raised as an argument by Defendants, the Court finds that the third cause of action for breach of fiduciary duty—which incorporates the preceding allegations of the complaint therein—appears to be a slightly recast cause of action for breach of contract. (Palm Springs Villas II Homeowners Assn., Inc. v. Parth (2016) 248 Cal.App.4th 268, 290.) The third cause of action does not add anything to the complaint “by way of fact or theory of recovery.” (Rodrigues v. Campbell Industries (1978) 87 Cal.App.3d 494, 501.)

Therefore, the Court finds that the third cause of action for breach of fiduciary duty is insufficiently alleged.

“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.) “Immaterial” or “irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc. § 431.10, subds. (b)(1)-(3).)

“In order to survive a motion to strike an allegation of punitive damages, the ultimate facts showing an entitlement to such relief must be pled by a plaintiff.” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253, 1255.) Civ. Code § 3294 authorizes punitive damages upon a showing of malice, fraud, or oppression. Malice is defined as either “conduct which is intended by the defendant to cause injury to the plaintiff,” or “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.” (Civ. Code, § 3294, subd. (c)(1).) “Despicable conduct is conduct which is so vile, base, contemptible, miserable, wretched or loathsome that it would be looked down upon and despised by ordinary decent people.” (Mock v. Michigan Millers Mutual Ins. Co. (1992) 4 Cal. App. 4th 306, 331.) Fraud under Civ. Code § 3294(c)(3) “means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.” Civ. Code § 3294(c)(2) defines oppression as “despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.” Specific facts must be alleged in support of punitive damages. (Hillard v. A.H. Robins Co. (1983) 148 Cal.App.3d 374, 391-392.) Facts must be pled to show that a defendant “act[ed] with the intent to vex, injure or annoy, or with a conscious disregard of the plaintiff’s rights.” (Silberg v. California Life Ins. Co. (1974) 11 Cal.3d 452, 462.) Conduct that is merely negligent will not support a claim for punitive damages. (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1288.)

Defendants move to strike Plaintiffs’ request for exemplary damages. The Court references its recital of the allegations of the complaint from above and incorporates such recitation herein. The Court finds that the complaint does not set forth sufficient facts to show entitlement to punitive damages. Plaintiffs have not alleged specific facts showing fraud, oppression, or malice.

Department 58