Judge: Cherol J. Nellon, Case: 22STCLC08525, Date: 2024-01-31 Tentative Ruling


Case Number: 22STCLC08525    Hearing Date: January 31, 2024    Dept: 14

 

HEARING DATE:                 Wednesday, January 31, 2024

 Selby vs. Butler

Case Background

 

Plaintiffs allege that Defendant subleased part of her unit to them, falsely representing that she did not need the consent of the landlord to do so. Defendant alleges that Plaintiffs broke their sublease because she would not let them make unpermitted modifications to the building.

 

Complaint

 

            On December 24, 2022, Plaintiffs filed their Complaint for (1) Rescission (Fraud), (2) Rescission (Mistake), (3) Rescission (Failure of Consideration), (4) Constructive Trust, and (5) Declaratory Relief against Defendants Lori Butler aka Sammy Butler (“Butler”) and DOES 1-20.

 

            On March 27, 2023, Judge Katherine Chilton ordered the case reclassified to unlimited civil. The case was assigned to Judge Stephanie Bowick, sitting in Department 19. On April 24, 2023, pursuant to a peremptory challenge filed by Defendant Butler, the case was assigned to this department.

 

            On August 11, 2023, Plaintiffs filed their First Amended Complaint for (1) Rescission (Fraud), (2) Rescission (Mistake), and (3) Rescission (Failure of Consideration) against Defendant Butler and DOES 1-20.

 

            On September 19, 2023, Defendant Butler filed her General Denial.

 

Cross-Complaint

 

            On September 19, 2023, Defendant Butler filed her Cross-Complaint for (1) Breach of Contract, (2) Breach of the Implied Covenant, (3) Fraudulent Inducement, (4) Interference with Contract, and (5) Attempted Civil Extortion against Plaintiffs/Cross-Defendants.

 

Trial Date

 

            Jury Trial is currently set for October 7, 2024.

 

(1)        Demurrer

 

            Cross-Defendants now demur, per Code of Civil Procedure §§ 430.10(e)-(f), to the Cross-Complaint, on the grounds that it fails to state facts sufficient to constitute a cause of action and is uncertain.

 

Evidentiary Rulings

 

            Defendant’s Request for Judicial Notice (“RJN”) is GRANTED.

 

Decision

 

            The demurrer to the first and third causes of action is OVERRULED.

 

            The demurrer to the second, fourth, and fifth causes of action is SUSTAINED, with 20 days leave to amend.

 

First Cause of Action: Breach of Contract

 

            “’A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.’ (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 C.A.3d 1371, 1388).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 228.

 

            Cross-Complainant has alleged the existence of two contracts – a sublease and a non-disclosure agreement concerning the sublease. (Cross-Complaint ¶¶ 8, 13). She has alleged her own performance. (Cross-Complaint ¶ 8). Cross-Complainant claims that Cross-Defendants breached that sublease by terminating it without proper notice (Cross-Complaint ¶¶ 11-12), and breached the non-disclosure agreement by discussing terms of the sublease with the landlord (Cross-Complaint ¶ 13). Finally, Cross-Complainant has alleged damages in the form of lost rent, physical damage to the apartment, and failure to pay contractual fees. (Cross-Complaint ¶ 14).

 

Breach of contract has been properly pled. Cross-Defendants argue that the contracts are unenforceable, as their original complaint is one for rescission of those contracts. But that defense does not appear on the face of the allegations in the cross-complaint. The court cannot resolve the enforceability of the contracts on demurrer; it is sufficient for present purposes that they exist and both parties know what they are.

 

Second Cause of Action: Breach of the Implied Covenant

 

Breach of the implied covenant may be either a tort or a contract claim. See Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395. If it is pled in tort, it is a claim that the defendant had an improper motive for breaching some express provision of the contract. If it is pled in contract, it is a claim that the defendant did something was not (in and of itself) a violation of their contract but which did prevent Cross-Complainant from reaping the benefit of the contract.

 

To plead the claim as a tort, Cross-Complainant must identify a legally recognized “special relationship” between the parties. Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395. To plead the claim in contract, Plaintiffs must identify the conduct that frustrated the purpose of the contract without breaching it. Id.

 

Cross-Complainant has not made clear whether this claim is pled in tort or in contract. She has not identified a legally recognized “special relationship” between herself and Defendants that would allow a tort claim – she submits no authority to suggest that the sublessor-sublessee relationship qualifies. Nor has Cross-Complainant identified any conduct which has deprived her of the benefit of the contract without actually breaching the contract.

 

Third Cause of Action: Fraudulent Inducement

 

            “Fraudulent inducement” is a descriptive label used to refer to fraud that occurs in the formation of a contract. See Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294-295. The elements and pleading requirements are the same ones that apply to any other fraud claim. See Id. In this case, Cross-Complainant is asserting concealment rather than affirmative misrepresentation. (Cross-Complaint ¶ 21).

 

            To plead fraud on a concealment theory, Cross-Complainant must plead that Cross-Defendants (1) concealed a material fact (2) which they had a duty to disclose (3) with intent to deceive, (4) that Cross-Complainant was unaware of the fact, and (5) resulting damage. Lovejoy v. AT & T Corp. (2004) 119 Cal.App.4th 151, 157-158. While fraud must ordinarily be pled with specificity, a concealment claim need not be. Alfaro v. Community Housing Improvement System & Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1384. Concealment is sufficiently pled when the complaint as a whole provides sufficient notice of the particular claims against defendants. Jones v. ConocoPhillips (2011) 198 Cal.App.4th 1187, 1200.

 

            The Cross-Complaint alleges, at paragraphs 9-11 and 19-22, that Cross-Defendants planned to modify the apartment to include a sauna, but did not tell Cross-Complainant about these plans until after the contracts had been executed. It further alleges that Cross-Complainant would not have entered into the contracts had she known about these plans, thereby losing the chance to rent to someone else. (Cross-Complaint ¶ 22). Fraudulent inducement, on a concealment theory, has been properly pled.

 

Fourth Cause of Action: Interference with Contract

           

            The elements of a claim for interference with contract are: “(1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.

 

            Cross-Complainant’s theory is that Cross-Defendants have caused a disruption in her relationship with the landlord. The Cross-Complaint does not plead “actual breach” of Cross-Complainant’s lease. But neither does it identify what the disruption is. A “disruption” may include the termination of a contract according to its terms, or, more broadly, anything that makes enjoyment of the benefits of the contract more expensive or burdensome. Pacific Gas, supra, 50 Cal.3d at 1126-27. However, it may only include litigation if the litigation was brought without probable cause and has terminated in the cross-complainant’s favor. Id. at 1137.

 

            Insofar as she alleges a disruption, Cross-Complainant claims that Cross-Defendants “caused the landlord to take an adverse position against her in this matter.” (Cross-Complaint ¶ 26). It is not clear what exactly this means, as the landlord is not a party to this case. But legal action by the landlord cannot be a basis for this claim, until and unless Cross-Complainant not only wins, but can allege that the claim had no reasonable basis.

 

Fifth Cause of Action: Attempted Civil Extortion

 

            There is no civil cause of action for “attempted extortion.” Neither Penal Code § 519, nor Penal Code § 524, authorize any sort of civil action for extortion. And the common law of torts does not permit a person to be sued for the mere attempt to do harm. Even the law of civil conspiracy requires the actual completion of the underlying tort. Thompson v. California Fair Plan Assn. (1990) 221 Cal.App.3d 760, 767.

 

            It is not clear, in fact, that there is even a civil cause of action for completed extortion, as such. Nor is it clear what the elements of such a claim would be. State and federal courts have grappled with the issue over the years, producing a potpourri of conflicting precedents. See Tran v. Eat Club (2020) 2020 WL 4812634 at *13-20 (cited only for its comprehensive identification and summary of the relevant decisions). Plaintiff may be able to state an actionable claim of some type under these facts, but she cannot base that claim on Penal Code sections that do not expressly authorize civil actions.

 

Conclusion

 

            Cross-Complainant has properly pled claims for breach of contract and fraudulent inducement. The claims for breach of implied covenant and interference with contract are not clear. And attempted extortion is not a civil tort.

 

            The demurrer to the first and third causes of action is OVERRULED.

 

            The demurrer to the second, fourth, and fifth cause of action is SUSTAINED, with 20 days leave to amend.

 

(2)        Motion to Strike

 

            Cross-Defendants now move this court for orders striking (1) the claims for punitive damages and (2) the claims for consequential damages.

 

Decision

 

            The motion is GRANTED, in part and DENIED, in part, without prejudice.

 

The request for punitive damages in paragraph 14 of the Cross-Complaint is STRICKEN.

 

The motion is MOOT as directed to allegations contained in the fourth and fifth causes of action.

 

Discussion

 

            Punitive damages are not available on contract claims. Purcell v. Schweitzer (2014) 224 Cal.App.4th 969, 976. Therefore, Cross-Complainant may not recover them in connection with the first cause of action. However, Cross-Complainant has properly pled the third cause of action for fraud, and may recover punitive damages based on that claim. Civil Code 3294(c).

 

            Cross-Defendants argue that consequential damages must be pled with particularity. But their two citations do not direct the court to any specific page number within the cases cited. Neither case appears to address consequential damages, or offer any helpful discussion for this case beyond the general need to plead damages as an element of a contract claim. Cross-Defendants have failed to meet their burden of persuasion with respect to this issue.