Judge: Christopher K. Lui, Case: 21STCV12227, Date: 2024-03-07 Tentative Ruling

Case Number: 21STCV12227    Hearing Date: March 7, 2024    Dept: 76

            Plaintiff alleges that Defendants obtained possession of Plaintiff’s 1996 Porsche 933 Turbo Andial pursuant to a Vehicle Consignment Agreement. Plaintiff alleges that Defendants sold the vehicle to a third party with modifications, but have failed to pay Plaintiff the specified purchase price.

            Defendant Canepa Group, Inc. filed a Cross-Complaint alleging that Plaintiff owes sums for goods and services provided to Plaintiff.

Plaintiff/Cross-Defendant Tim Pappas demurs to the Cross-Complaint and move to strike portions thereof.

TENTATIVE RULING

Plaintiff/Cross-Defendant Tim Pappas’s demurrer to the Cross-Complaint is SUSTAINED with leave to amend as to the first, third, sixth and seventh causes of action.

The motion to strike is DENIED as to ¶¶ 8, 9, 10 and GRANTED with leave to amend as to ¶ 14 (“Beyond the goods and service described above, during the time period of June 2017 through…) and the following invoices attached at Exhibit A to the Cross-Complaint: Nos. 36102 (3/12/18, $164,595.34), 36293 (6/21/18, $107,775.63), 38539 (2/27/00 $169,030.69) and 41079 (9/10/19, $11,675.29.

            Cross-Complainant is given 30 days’ leave to amend where indicated.

ANALYSIS

Demurrer

Meet and Confer

The Declaration of Matthew E. Hess reflects that Cross-Defendant’s counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 430.41.

Discussion

            Plaintiff/Cross-Defendant Tim Pappas demurs to the Cross-Complaint as follows:

1.         First Cause of action (Breach of Written Contract).

            Cross-Defendant argues that the Cross-Complaint does not attach a copy of the contract, plead the terms of the contract in haec verba, or expressly allege the substance of the material terms.

Although older case law states that “[i]f the action is based on an alleged breach of a written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written instrument must be attached and incorporated by reference.”  (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal. App. 3d 452, 458-459), the modern view is to permit a plaintiff to plead the legal effect of a written contract rather than its precise language:

The Wise court stated, “where a written instrument is the foundation of a cause of action, it may be pleaded in haec verba by attaching a copy as an exhibit and incorporating it by proper reference.” (Citation omitted.) It is readily apparent that the Otworth court read more into that statement than is actually there. The Wise court was simply stating one available method of pleading the contract—it was not specifying the exclusive means of pleading a contract. The correct rule is that “a plaintiff may plead the legal effect of the contract rather than its precise language.” (Citation omitted.) Because it is apparent that the Otworth court misread Wise , and because, in any event, we are bound by our Supreme Court, we decline to follow Otworth. Accordingly, plaintiff's failure either to attach or to set out verbatim the terms of the contract was not fatal to his breach of contract cause of action.

(Miles v. Deutsche Bank National Trust Co. (2015) 236 Cal.App.4th 394, 402.)

            This argument is persuasive. ¶ 21 of the Cross-Complaint only vague refers to written memorialization of Pappas agreeing to purchase alterations and restorations to vehicles and vehicle parts from Canepa Group. Although ¶¶ 8 – 12 generally allege that work was performed and invoiced, as Cross-Defendant argues, the unsigned invoices do not create a written contract because they are not signed by the party to be charged—Pappas.

Unsigned invoices, however, cannot on their own create a contract or add terms to a contract. “The prevailing rule is that an invoice, standing alone, is not a contract [citations]; and a buyer is ordinarily not bound by statements thereon which are not a part of the original agreement.” (Citation omitted.) “After the orders were placed the seller transmitted certain invoices on which it attempted to place certain additional covenants into the contract. Such additions were mere self-serving declarations on the part of the seller and were not binding on the purchasers.” (Citation omitted.) “An invoice, as such, is no contract.” (Citation omitted.)

(C9 Ventures v. SVC-West, L.P. (2012) 202 Cal.App.4th 1483, 1501.)

            Thus, although Cross-Defendant may be liable for breach of oral contract (second cause of action) or implied contract (see discussion re: unjust enrichment below), the Cross-Complaint does not adequately allege a breach of written contract.

            The demurrer to the first cause of action is SUSTAINED with leave to amend.

2.         Third Cause of Action (Unjust Enrichment).

            Cross-Defendant argues that there is no cause of action for unjust enrichment.

“We find “there is no cause of action in California for unjust enrichment.” (Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793 [131 Cal. Rptr. 2d 347].)” (Everett v. Mountains Recreation & Conservation Authority (2015) 239 Cal.App.4th 541, 553.)

“Unjust enrichment is not a cause of action, however, or even a remedy, but rather ‘ “ ‘a general principle, underlying various legal doctrines and remedies’ ” … . [Citation.] It is synonymous with restitution.’ ” (McBride v. Boughton (2004) 123 Cal.App.4th 379, 387 [20 Cal. Rptr. 3d 115].) Like the trial court, we will construe the cause of action as a quasi-contract claim seeking restitution.

“[A]n action based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter.” (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 203 [51 Cal. Rptr. 2d 622].) However, “restitution may be awarded in lieu of breach of contract damages when the parties had an express contract, but it was procured by fraud or is unenforceable or ineffective for some reason.” (McBride v. Boughton, supra, 123 Cal.App.4th at p. 388.) Thus, a party to an express contract can assert a claim for restitution based on unjust enrichment by “alleg[ing in that cause of action] that the express contract is void or was rescinded.” (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. supra, at p. 203.) A claim for restitution is permitted even if the party inconsistently pleads a breach of contract claim that alleges the existence of an enforceable agreement. (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1389 [137 Cal. Rptr. 3d 293].)

(Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 231.)

           
            Thus, the allegation that Pappas breached the agreement bars a claim for implied-in-fact or quasi-contract (as an underlying theory because there is no cause of action for unjust enrichment). (Cross-Complaint, ¶¶ 31, 32.) However, Cross-Complainant will be given an opportunity to pled why any express contract is void or rescinded.

            The demurrer to the third cause of action is SUSTAINED with leave to amend.

3.         Sixth Cause of Action (Fraud).

            Cross-Defendant argues that this cause of action is not pled with the requisite specificity.

            Moreover, Cross-Defendant argues, the specific allegations regarding what Pappas said in July 2021, occurred after the work had already been performed prior to July 2021.

            The elements of a cause of action for a false promise constituting fraud or deceit are: “(1) a promise made regarding a material fact without any intention of performing it; (2) the existence of the intent at the time of making the promise; (3) the promise was made with intent to deceive or with intent to induce the party to whom it was made to enter into the transaction; (4) the promise was relied on by the party to whom it was made; (5) the party making the promise did not perform; (6) the party to whom the promise was made was injured.” (Regus v. Schartkoff (1957) 156 Cal.App.2d 382, 389.)

          As stated in Service By Medallion v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816:

"An action for promissory fraud may lie where a defendant fraudulently induces the plaintiff to enter into a contract." (Lazar v. Superior Court (1996) 12 Cal. 4th 631, 638 [49 Cal. Rptr. 2d 377, 909 P.2d 981].) The action is one of deceit, which requires proof that the defendant made a misrepresentation of fact or a promise without any intention of performing it. (Civ. Code, § 1710.) A complaint for fraud must allege the following elements: (1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages. (Croeni v. Goldstein (1994) 21 Cal. Cal. App. 4th 754, 758 [26 Cal. Rptr. 2d 412].) Every element must be specifically pleaded. (Tarmann v. State Farm  Mut. Auto. Ins. Co. (1991) 2 Cal. Cal. App. 4th 153, 157 [2 Cal. Rptr. 2d 861].)

            “Consequently, in pleading the tort it is indispensable to set forth the falsity of the promise at the time it was tendered. (Citation omitted.) In so differentiating a false promise from the great bulk of broken promises, the allegations necessary to show contemporaneous intention not to perform should be clear, specific, and unequivocal. (Citations omitted.)” (Hills Transp. Co. v. Southwest Forest Industries, Inc. (1968) 266 Cal.App.2d 702, 708.)

            “The mere failure to carry out a promise is not a tort, and it is therefore essential, in pleading fraud consisting of a false promise, to allege the elements of fraud.” (Maynes v. Angeles Mesa Land Co. (1938) 10 Cal.2d 587, 589.)

Fraud must be pleaded with specificity rather than with “ ‘general and conclusory allegations.’ ” (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 184 [132 Cal. Rptr. 2d 490, 65 P.3d 1255].)  The specificity requirement means a plaintiff must allege facts showing how, when, where, to whom, and by what means the representations were made, and, in the case of a corporate defendant, the plaintiff must allege the names of the persons who made the representations, their authority to speak on behalf of the corporation, to whom they spoke, what they said or wrote, and when the representation was made. (Lazar v. Superior Court, supra, 12 Cal.4th at p. 645.)

We enforce the specificity requirement in consideration of its two purposes. The first purpose is to give notice to the defendant with sufficiently definite charges that the defendant can meet them. (Committee on Children's Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216 [197 Cal. Rptr. 783, 673 P.2d 660].) The second is to permit a court to weed out meritless fraud claims on the basis of the pleadings; thus, “the pleading should be sufficient ‘ “to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.” ’ ” (Id. at pp. 216–217.)

(West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.) 

Here, the Cross-Complaint alleges in general terms that Pappas agreed to timely pay for all work invoiced by Canepa Group. (Cross-Complaint, ¶ 47). The Cross-Complaint does not allege exactly what Pappas said, when and in what matter (orally or in writing), and why such representation was known to be false when made. Moreover, the Cross-Complaint does not allege that such representations were made before Cross-Complainant performed services. 

The allegation that Pappas misrepresented his intention on July 14, 2021 to have Canepa Group perform future work in order to obtain possession of the Porsche to have a third party perform interim mechanical work could constitute actionable fraud, but it is not pled with sufficient specificity, as the exact misrepresentation is not specifically pled. (Cross-Complaint, ¶¶ 48, 49, 50.) The amount of out-of-pocket damages to Cross-Complainant would be the amount of parts of labor which Cross-Complainant provided to Pappas’ 1995 Porsche, of which Cross-Complainant allowed Pappas to take possession in expectation the vehicle would be returned to Canepa Group’s possession.

            The demurrer to the sixth cause of action is SUSTAINED with leave to amend.

4.         Seventh Cause of Action (Receipt of Stolen Property).

            Cross-Defendant argues that this is a garden-variety civil dispute which does not violate Penal Code, § 496. First, the 1995 Porshe was Pappas’ own car, not the property of another. Second, the fraud claim fails, so the property was not obtained by defrauding Canepa Group.

            Penal Code § 496 provides in pertinent part:

(a) Every person who buys or receives any property that has been stolen or that has been obtained in any manner constituting theft or extortion, knowing the property to be so stolen or obtained, or who conceals, sells, withholds, or aids in concealing, selling, or withholding any property from the owner, knowing the property to be so stolen or obtained, shall be punished by imprisonment in a county jail for not more than one year, or imprisonment pursuant to subdivision (h) of Section 1170. However, if the value of the property does not exceed nine hundred fifty dollars ($950), the offense shall be a misdemeanor, punishable only by imprisonment in a county jail not exceeding one year, if such person has no prior convictions for an offense specified in clause (iv) of subparagraph (C) of paragraph (2) of subdivision (e) of Section 667 or for an offense requiring registration pursuant to subdivision (c) of Section 290.

 A principal in the actual theft of the property may be convicted pursuant to this section. However, no person may be convicted both pursuant to this section and of the theft of the same property.

. . .

(c) Any person who has been injured by a violation of subdivision (a) or (b) may bring an action for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and reasonable attorney's fees.

            The Court finds to be persuasive Cross-Defendant’s argument that he cannot violate Penal Code, § 496 for taking his own property. At most, he took his own property subject to a mechanic’s lien, but this does not violate § 496. However, Cross-Defendant can violate § 496 by obtaining labor by false or fraudulent representation, which constitutes theft.

            Penal Code, § 484(a) defines theft as follows:

(a) Every person who shall feloniously steal, take, carry, lead, or drive away the personal property of another, or who shall fraudulently appropriate property which has been entrusted to him or her, or who shall knowingly and designedly, by any false or fraudulent representation or pretense, defraud any other person of money, labor or real or personal property, . . ., is guilty of theft. . . . For the purposes of this section, any false or fraudulent representation or pretense made shall be treated as continuing, so as to cover any money, property or service received as a result thereof, and the complaint, information or indictment may charge that the crime was committed on any date during the particular period in question. The hiring of any additional employee or employees without advising each of them of every labor claim due and unpaid and every judgment that the employer has been unable to meet shall be prima facie evidence of intent to defraud.

     (Pen. Code § 484(a)[bold emphasis added].)

            As discussed above, Cross-Complainant will be given an opportunity to sufficiently plead fraud upon which Cross-Complainant relied in performing services.

            The demurrer to the seventh cause of action is SUSTAINED with leave to amend.

Motion To Strike

Meet and Confer

The Declaration of Matthew E. Hess reflects that Cross-Defendant’s counsel satisfied the meet and confer requirement set forth in Civ. Proc. Code, § 435.5.

Discussion

Cross-Defendant Tim Pappas moves to strike the following portions of the Cross-Complaint as barred by the two-year statute of limitations for breach of oral agreements entered into prior to April 11, 2020 (the date on which the Complaint was filed, as to which the filing of the Cross-Complaint would relate back because based on the same series of transactions—Luna Records Corp. v. Alvarado (1991) 232 Cal.App.3d 1023, 1028.)

¿        ¶ 8 – “Beginning on or about June of 2017…” - DENIED

¶ 8 alleges that the cost of work which began in June 20167 was finished in April 2022, with a final progress invoice date of May 1, 2022. As such, it is a question of fact as to whether this claim for breach did not accrue until that date because Plaintiff could not refuse to pay the invoice until it was issued.

“Resolution of the statute of limitations issue is normally a question of fact.” (Fox, supra, 35 Cal.4th at p. 810.) More specifically, as to accrual, “once properly pleaded, belated discovery is a question of fact.” (Bastian v. County of San Luis Obispo, supra, 199 Cal. App. 3d at p. 527.)  As our state's high court has observed: “There are no hard and fast rules for determining what facts or circumstances will compel inquiry by the injured party and render him chargeable with knowledge. [Citation.] It is a question for the trier of fact.” (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc., supra, 1 Cal.3d at p. 597 [reversing judgment after demurrer].) “However, whenever reasonable minds can draw only one conclusion from the evidence, the question becomes one of law.” (Snow v. A. H. Robins Co. (1985) 165 Cal. App. 3d 120, 128 [211 Cal. Rptr. 271] [reversing summary judgment].) Thus, when an appeal is taken from a judgment of dismissal following the sustention of a demurrer, “the issue is whether the trial court could determine as a matter of law that failure to discover was due to failure to investigate or to act without diligence.” (Bastian v. County of San Luis Obispo, at p. 527.)

(E-Fab, Inc. v. Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1320.)   

¿        ¶ 9 – “Beginning on or about June of 2018…” - DENIED

¶ 9 alleges that the work which began in December 2017 was completed in February 2020, with a final invoice date of March 22, 2021. As such, it is a question of fact as to whether this claim for breach did not accrue until that date because Plaintiff could not refuse to pay the invoice until it was issued.

¿        ¶ 10 – “On or about October of 2018….” - DENIED

            ¶ 10 alleges that the work which began in October 2018 was completed in August of 2021, with a final invoice date of September 21, 2021. As such, it is a question of fact as to whether this claim for breach did not accrue until that date because Plaintiff could not refuse to pay the invoice until it was issued.

¿        ¶ 14 –  “Beyond the goods and service described above, during the time period of June 2017 through…”  - GRANTED with leave to amend.

As to goods and services purchased from June 2017 for other vehicles and vehicle parts, to the extent Pappas did not pay for these when provided, it would depend upon whether the purchase was done pursuant to written contract or orally, Cross-Complainant must specifically allege each purchase in this regard.

¿        The following invoices attached at Exhibit A to the Cross-Complaint: Nos. 36102 (3/12/18, $164,595.34), 36293 (6/21/18, $107,775.63), 38539 (2/27/00 $169,030.69) and 41079 (9/10/19, $11,675.29) – GRANTED with leave to amend.

            As discussed above re: the demurrer, unsigned invoices do not themselves constitute written contracts and, at most, memorialize oral or implied-in-fact contracts, which are subject to the two-year statute of limitations set forth in Civ. Proc. Code, § 339(1)(action upon a contract, obligation or liability not founded upon an instrument of writing). As such, the amounts reflected in the above invoices are time-barred, as pled.          

            Cross-Complainant is given 30 days’ leave to amend where indicated.